Continued strong performance by its Water Systems business and cost reductions at its Electrical Products unit enabled A.O. Smith Corporation to earn $12.1 million or $.50 per share in the first quarter of 2002.
Sales in the first quarter, ended March 31, were $371.9 million, an increase of $53.7 million or 16.9 percent over sales of $318.2 million in the first quarter of 2001. An $83.7 million increase in year-over-year sales for the company's Water Systems segment more than offset a $30.0 million decline in sales for the Electrical Products segment.
The significant increase in first-quarter sales for Water Systems was attributed to the $84.1 million of sales associated with State Industries, which was acquired on Dec. 28, 2001. The decline in Electrical Products sales reflected the continued softness in the electric motor market.
First quarter 2002 net earnings were $12.1 million or $3.6 million higher than net earnings of $8.5 million in the first quarter of 2001. On a per-share basis, net earnings were $.50, compared with $.36 in the first quarter of 2001. The company attributed the increased earnings to improved operating earnings in its Water Systems segment, the elimination of goodwill amortization of $1.6 million, and a decrease in interest expense of $0.6 million. The increased operating earnings for Water Systems were due to additional volume from State Industries and benefits of the State integration.
"We significantly improved our earnings as a result of the acquisition of State Industries and cost reduction initiatives, despite an absence of growth in our served markets," Robert J. O'Toole, chairman and chief executive officer, observed. "We made very good progress during the quarter integrating the State operations into our existing water heater business, and this also contributed to our improved earnings performance."
First quarter sales for the Water Systems segment were $175.7 million, an increase of $83.7 million over first quarter 2001 sales of $92.0 million. First-quarter 2002 sales included $84.1 million of sales associated with State Industries, which was acquired on Dec. 28, 2001.
First quarter operating earnings for Water Systems were $13.6 million, including $3.8 million of earnings associated with the State Industries acquisition. The net $9.8 million of operating earnings for the base water systems business compared with first-quarter 2001 operating earnings for the segment of $9.9 million and included a $1.7 million non-recurring charge associated with the consolidation of Water Systems' management staff.
"Our previously issued forecast for 2002 called for earnings in the range of $1.40 to $1.60," O'Toole commented. "Although we continue to be cautious about the timing and magnitude of the market recovery in 2002, we have improved our earnings projection to a range of $1.60 to $1.70 per share. This is based on the early and projected continued success of our cost-reduction programs and the integration of State Industries and is based on share levels currently outstanding. On the same bases, we expect second quarter earnings per share to be similar to first quarter levels."