AO Smith Corp. (NYSE:AOS) Q4 2014 Earnings Conference Call - Final Transcript

Jan 27, 2015 • 10:00 am ET


AO Smith Corp. (NYSE:AOS) Q4 2014 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the A.O. Smith Corporation Fourth Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. As a reminder, today's conference is being recorded.

Now, I would like to introduce your host for today's conference call, Ms. Patricia Ackerman, you may begin, ma'am.

Patricia Ackerman

Thank you, Kevin. Good morning, ladies and gentlemen and thank you for joining us on our 2014 results conference call.

With me participating in the call are Ajita Rajendra, Chairman and Chief Executive Officer; and John Kita, Chief Financial Officer. Before we begin with Ajita's remarks, I would like to remind you some of the comments that will be made during this conference call including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others matters that we have described in this morning's press release.

In order to provide improved transparency into the operating results of our business we have provided non-GAAP measures, adjusted earnings, adjusted EPS and adjusted segment operating earnings, for 2013 and 2014, that exclude certain items, as well as non-operating pension costs, consisting of interest costs, expected return on plan assets, amortization of actuarial gains and losses and curtailment. Reconciliations from GAAP measures to non-GAAP measures are provided in the appendix at the end of this presentation, and also on our website.

Ajita, I will now turn the call over to you.

Ajita Rajendra

Thank you, Pat. And good morning ladies and gentlemen.

2014 was another excellent year for A.O. Smith. We continued to see the benefits in our performance from an improving economy in the US and our expanding consumer business in China. Here are a few highlights. Our organic growth drove sales 9% higher to a record $2.36 billion. China sales were up 18% with gas tankers and water treatment products growing faster than the business as a whole.

Our adjusted earnings of $2.43 were 18% higher than the $2.06 per share recorded in 2013 and were primarily driven by higher sales which more than offset approximately $9 million in incremental ERP implementation costs which were incurred in 2014. We continue to review our capital allocation and dedicate a portion to return to shareholders. We repurchased approximately 2.2 million shares for $104 million in 2014. We increased our dividend by 25% last January and last evening we announced a 27% increase to our dividend.

In 2014 we returned approximately $160 million to shareholders. In 2014, we celebrated 140 years of serving our customers with honesty and integrity. These values lie at the heart of our success and longevity, and they will continue to underpin our culture well into the future.

John will now describe our results in more detail.

John Kita

Thank you, Ajita.

Sales for the full year of $2.36 billion were 9% higher than the previous year,