Sale of Electrical Products business propels A.O. Smith

A.O. Smith Corp. reported third quarter net earnings of $182.3 million, or $3.91 per share, up from $32.0 million, or 69 cents per share, in the same period a year ago.
The Milwaukee-based company’s quarterly net sales grew to $412.0 million from $377.4 million a year earlier.
Third quarter results included sales of $20.8 million from the Lochinvar business acquired on Aug. 26 and an increase in China water heater sales of 17 percent.
In addition, the company recorded a net pre-tax gain of $16.4 million related to shares of Regal Beloit Corp. hedged with an equity collar. The company closed the sale of its Electrical Products business to Regal Beloit on Aug. 19 and received approximately $730 million in cash, including working capital adjustments, and 2.83 million Regal Beloit shares.
Additionally, higher sales in India and of gas instantaneous water heaters in North America as well as global pricing actions related to higher steel costs helped to offset volume declines of residential and commercial water heaters in the United States.
"We believe many of our customers took a very conservative approach to replenishing inventories during the quarter," chairman and chief executive officer Paul Jones said. "Fears of a double-dip recession throughout the summer along with the ongoing softness in the new housing and commercial construction markets had an adverse effect on our U.S. water heater business."
Jones added, “We continue to pursue water heating and water treating investments all over the world, and we are committed to investments that increase shareholder value. Evaluating a stock buyback is part of our overall investment strategy. We have substantial amounts of cash from the sale of Electrical Products Company and debt capacity to make investments as well as buy back our shares."