18 slides from A.o. Smith's earnings presentation, Jan 23, 2009
Slide 1: Fourth Quarter 2008
Fourth Quarter 2008 January 22, 2009 Filed by A. O. Smith Corporation pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended. Subject Company: A. O. Smith Corporation Subject Company’s Commissi
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “i
Slide 3: 2008 Highlights
2008 Highlights Sales of $2.3 billion; flat with 2007 GAAP EPS of $2.70 or $2.89 adjusted for restructuring Operating cash flow of $107 million Debt to Capital ratio of 34% China water heaters still growing strong: $185 million in sales, up 26% Restructuring activities at motors on track; $5 million
Slide 4: 2009 Challenges
2009 Challenges Headwinds Soft housing market throughout 2009; recession continues Commercial demand expected to be down substantially Slower growth in China Increased pension expense Tailwinds Water heater pricing Restructuring benefits
Slide 5: 2008 Results
2008 Results 2008 2007 change % chg. Sales 2,304.9 2,312.1 (7.2) -0.3% Net Earnings (GAAP) 81.9 88.2 (6.3) -7% EPS (reported) 2.70 $ 2.85 $ (0.15) $ -5% Restructuring 0.19 $ 0.33 $ (0.14) $ Tax Benefit - (0.16) 0.16 Adjusted EPS 2.89 $ 3.02 $ (0.13) $ -4% (in millions, except per share)
Slide 6: Fourth Quarter Results
Fourth Quarter Results 2008 2007 change % chg. Sales 508.6 569.9 (61.3) -11% Net Earnings (GAAP) 6.6 17.0 (10.4) -61% EPS (reported) 0.22 $ 0.55 $ (0.33) $ -60% Restructuring 0.07 $ 0.26 $ (0.19) Tax Benefit - (0.06) 0.06 Adjusted EPS 0.29 $ 0.75 $ (0.46) $ -61% (in millions, except per share)
Slide 7: 2008 Segment Sales
2008 Segment Sales 2008 2007 change % chg. Water Products 1,451.3 1,423.1 28.2 2% Electrical Products 858.1 894.0 (35.9) -4% Intersegment (4.5) (5.0) 0.5 Total Sales 2,304.9 2,312.1 (7.2) -0.3% (in millions)
Slide 8: Q4 Segment Sales
Q4 08 Segment Sales 2008 2007 change % chg. Water Products 346.2 379.0 (32.8) -9% Electrical Products 163.2 192.4 (29.2) -15% Intersegment (0.8) (1.5) 0.7 Total Sales 508.6 569.9 (61.3) -11% (in millions)
Slide 9: 2008 Operating Profit
2008 Operating Profit 2008 2007 change % chg. Water Products 134.7 150.0 (15.3) -10% Electrical Products 39.1 23.1 16.0 EPC Restructuring 8.7 22.8 (14.1) EPC - adjusted O.P. 47.8 45.9 1.9 4% Corporate (44.7) (46.3) 1.6 Total operating profit 137.8 149.6 (11.8) -8% Margin Water Products 9.3% 10.5% El
Slide 10: Q4 Operating Profit
Q4 08 Operating Profit 2008 2007 change % chg. Water Products 29.5 45.1 (15.6) -35% Electrical Products (5.2) (18.0) 12.8 EPC Restructuring 2.9 21.2 (18.3) EPC - adjusted O.P. (2.3) 3.2 (5.5) Corporate (10.7) (12.6) 1.9 Total operating profit 16.5 35.7 (19.2) -54% Margin Water Products 8.5% 11.9% El
Slide 11: Operating Cash Flow
Operating Cash Flow Operating Cash Flow of $107M Cash cycle days of 66 vs. 57 last year 8 more inventory days D&A $66M vs. CAPX $66M Debt/Capital 34% Expect operating cash flow of $150 million in 0.0 40.0 80.0 120.0 160.0 200.0 12/31/08 12/31/07
Slide 12: A. O. Smith - Innovation has a name.
(SSmith Innovation has a name.
Slide 13: Slide 13
Slide 14: But exposure to economic slowdown is limited
But exposure to economic slowdown is limited Replacement 72% China 10% New Construction 18% New Construction 22% China 18% Replacement 60% Water Products Electrical Products
Slide 15: Water Heaters Strong Replacement Markets
Water Heaters Strong Replacement Markets 40,000 80,000 120,000 160,000 2,000 4,000 6,000 8,000 10,000 New Construction Replacement Residential (N.A.) Commercial (N.A.)
Slide 16: Outlook
Outlook Volume declines, particularly higher margin commercial business Higher pension expense at approximately $10 million Water heater pricing China growth Water Heaters – 2008 sales increase to $185 M – Sales projected to be up mid-teens in 2009 Commercial hermetic motor business – 2009 sales pro
Slide 17: 2009 Forecast
2009 Forecast $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 2009 Forecast $2.70 $2.40 - $2.60
Slide 18: Additional information about the proposed transaction
In connection with the proposed transaction between A. O. Smith and SICO, the parties intend to file a registration statement on Form S-4 with the SEC containing a joint proxy statement/prospectus. Such documents, however, are not currently available. The joint proxy statement/prospectus will be mai