A. O. Smith Corp. announced third quarter net earnings of $24.7 million or $0.79 per share compared with $17.0 million or $0.55 per share in the third quarter of 2006. Earnings in the current quarter included a tax benefit of $3.1 million or $0.10 per share. Third quarter sales were $553.5 million, 2% lower than the same period in 2006.
For the first nine months of 2007 the company earned $71.2 million or $2.29 per share compared with $57.6 million or $1.86 per share in 2006. Nine-month sales were $1.74 billion, 8% higher than nine-month sales of $1.62 billion in 2006, including the impact of GSW.
The company also announced plans to close two of its North American motor manufacturing operations as well as its motor facility in Budapest, Hungary. The company will record after-tax restructuring charges estimated to be $8 million, or $.25 per share, in the fourth quarter and $9 million, or $.30 per share, in 2008.
The company narrowed its previous earnings forecast for 2007 to $2.85 -$2.95 per share before the estimated $.25 per share fourth quarter charge, or $2.60 - $2.70 per share including the charge.
"Although we are pleased with our operating results in the third quarter and the first nine months of the year, we are concerned about the outlook as we enter 2008," Paul W. Jones, chairman and chief executive officer, said. "The weaker-than-expected housing market has negatively impacted existing plant utilization rates in our residential hermetic motor businesses." Therefore, he said, the company will accelerate the closing of operations in Scottsville, KY., and Mebane, NC, and are relocating production to other North American plants, including Juarez and Acuna, Mexico. In addition, the company will close a smaller operation in Hungary and transfer production to China.
Third quarter sales for water products of $334.5 million declined approximately 3% compared with the third quarter of 2006 primarily as a result of lower sales in the residential market, partially offset by increased sales in other market segments including a nearly 20 percent increase in China.
Despite the lower residential volumes and higher costs for raw materials and components, operating profit of $33.6 million increased 15% compared with the third quarter of 2006, as a result of acquisition synergies, higher profits in China, and lower SG&A expense. Operating profit margin was 10% compared with 8.5% last year. For electrical products, third quarter sales of $220.1 million were essentially flat compared with the same period last year. Modest increases in the distribution and commercial hermetic motor market segments offset lower volumes in the hermetic, pump, and home appliance market segments. Operating profit of $12.7 million was $4 million higher than the third quarter of 2006 which included higher restructuring expense of $2.5 million. Third quarter operating profit margin was 5.8%.