A. O. Smith Announces First Quarter Earnings of $.63 Per Share



    MILWAUKEE, April 18 /CNW/ -- A. O. Smith Corporation (NYSE:   AOS) today
announced first quarter earnings of $19.5 million or $.63 per share on record
sales of $577.2 million.
    Net earnings for the quarter ended March 31 increased $4.0 million or
$.13 per share compared with $15.5 million or $.50 per share in the first
quarter of 2006.  First quarter 2006 net earnings included an after-tax loss
of approximately $3.1 million or $.10 per share from foreign currency
contracts related to the GSW acquisition in April 2006.  First quarter 2006
sales were $459.2 million.
    "The improvement in first quarter performance resulted from the addition
of GSW and a lower tax rate, which more than offset weak customer demand,
primarily in the domestic residential HVAC and water heating markets," Paul W.
Jones, chairman and chief executive officer, commented.
    The decline in the company's effective tax rate resulted from the
inclusion of proportionately higher income from lower taxed operations in
China and Mexico.

    
    Water Products
    
    First quarter sales of $355.4 million reflected a $128.2 million
contribution from the GSW water heater business acquired in April 2006 as well
as a 36 percent or $8.7 million increase in sales in China.  The company's
legacy water heater business declined slightly due to a sluggish performance
in the residential market segment related to the slowdown in new housing
construction.
    Operating profit of $34.2 million was $8.3 million higher than the same
period last year.  The contribution from the GSW acquisition more than offset
the modest decline in the legacy business resulting from the softer
residential marketplace.  Operating profit margin was 9.6 percent compared
with 11.2 percent last year.  The lower operating margin was due to an
increase in SG&A and the additional sales of GSW, which are primarily to the
lower-margin residential market.
    Since 2002, the company's water heater operation in Nanjing, China, will
see its sales multiply fivefold from approximately $30 million to an expected
$150 million this year.  The company expects to complete the second phase of
its current capacity expansion by the end of May, bringing annual capacity to
1.1 million units, more than double the capacity at the inception of the
project in 2005.  The company recently initiated another expansion project to
double its productive capacity again by the end of 2008.

    
    Electrical Products
    
    Sales in the electric motor business declined approximately three percent
in the first quarter to $223.0 million compared with last year, primarily the
result of a more than 10 percent decline in the HVAC market segment.
    Asian motor sales increased more than 20 percent during the first quarter
and, in connection with that growth, the company initiated plans to expand its
commercial hermetic motor operation in Yueyang, acquired in November 2005.
    First quarter operating profit declined to $10.2 million from $13.6
million last year.  Improved pricing and repositioning savings were more than
offset by the lower volume and higher costs for raw materials.  First quarter
operating profit margin was 4.6 percent compared with 5.9 percent last year.

    
    2007 Outlook
    
    "We continued to experience reduced demand in a number of housing-related
market segments," Jones said.  "And the soft markets and continued high raw
material costs have overshadowed ongoing productivity improvements and cost
reduction actions."
    "Though we are concerned that the weak housing market may linger into the
second half of the year, we remain confident we will achieve our previously
announced earnings forecast for 2007 of between $2.75 and $2.95 per share," he
added.
    A. O. Smith will broadcast a live conference call at 10:00 a.m. (Eastern
Daylight Time) today.  The call can be heard on the company's web site,
http://www.aosmith.com.  An audio replay of the call will be available on the
company's web site after the live event.

    
    Forward-looking statements
    
    This release contains statements that the company believes 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," "intend,"
"estimate," "anticipate," "believe," "continue," or words of similar meaning
and include earnings accretion and synergy forecasts.  These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated as of the date of this
release.  Factors that could cause such a variance include the following:
significant volatility in raw material prices; competitive pressures on the
company's businesses; instability in the company's electric motor and water
products markets; difficulties associated with attaining projected synergies
from acquired businesses; adverse changes in general economic conditions; and
the potential that assumptions on which the company based its expectations,
including those regarding the impact of purchase accounting, are inaccurate or
will prove to be incorrect.
    Forward-looking statements included in this press release are made only
as of the date of this release, and the company is under no obligation to
update these statements to reflect subsequent events or circumstances.  All
subsequent written and oral forward-looking statements attributed to the
company, or persons acting on its behalf, are qualified entirely by these
cautionary statements.

    A. O. Smith Corporation, with headquarters in Milwaukee, Wis., is a
diversified manufacturer serving customers worldwide.  The company is one of
the world's leading manufacturers and marketers of residential and commercial
water heating equipment, offering a comprehensive line featuring the
best-known brands in the industry.  It is also one of North America's largest
manufacturers of electric motors, with an extensive line of hermetic,
fractional horsepower, and integral horsepower motors for residential,
commercial, and industrial applications.  A. O. Smith employs approximately
19,500 people at facilities in the United States, Mexico, China, Canada, and
Europe.



    
                            A. O.  SMITH CORPORATION
                 (condensed consolidated financial statements -
                   dollars in millions, except per share data)

                              Statement of Earnings
                                   (unaudited)

                                                        Three Months ended
                                                            March 31
                                                     2007              2006

    Net sales                                       $577.2            $459.2
    Cost of products sold                            454.4             360.3
       Gross profit                                  122.8              98.9

    Selling, general and administrative               88.3              68.5
    Restructuring and other charges                    1.2               1.5
    Interest expense                                   6.8               3.0
    Other expense                                      0.2               4.4
                                                      26.3              21.5
    Tax provision                                      6.8               6.0

    Net Earnings                                     $19.5             $15.5

    Diluted Net Earnings Per Share of
     Common Stock                                     0.63              0.50

        Average Common Shares Outstanding
         (000's omitted)                            31,005            30,924



                             A. O. SMITH CORPORATION
                                  Balance Sheet
                              (dollars in millions)

                                                 (unaudited)
                                                   March 31        December 31
                                                     2007              2006
    ASSETS:

        Cash and cash equivalents                    $21.1             $25.8
        Receivables                                  425.2             378.7
        Inventories                                  298.1             297.3
        Deferred income taxes                         22.4              22.3
        Other current assets                          39.1              35.9

           Total Current Assets                      805.9             760.0

        Net property, plant and equipment            423.4             427.2
        Goodwill and other intangibles               587.1             587.5
        Other assets                                  65.1              65.2

        Total Assets                              $1,881.5          $1,839.9


    LIABILITIES AND STOCKHOLDERS' EQUITY:

        Trade payables                              $286.7            $286.6
        Accrued payroll and benefits                  35.8              43.5
        Product warranties                            33.4              32.0
        Long-term debt due within one
         year                                          6.9               6.9
        Other current liabilities                     66.3              68.3

           Total Current Liabilities                 429.1             437.3

        Long-term debt                               459.5             432.1
        Other liabilities                            172.5             166.8
        Pension liabilities                          101.3              98.5
        Deferred income taxes                         13.5              20.6
        Stockholders' equity                         705.6             684.6

        Total Liabilities and
         Stockholders' Equity                     $1,881.5          $1,839.9



                            A. O.  SMITH CORPORATION
                             STATEMENT OF CASH FLOWS
                              (dollars in millions)
                                   (unaudited)

                                                        Three Months ended
                                                             March 31
                                                      2007              2006

    Operating Activities
         Net earnings                                $19.5             $15.5

         Adjustments to reconcile net
          earnings to net cash provided
          by (used in) operating activities:
              Depreciation & amortization             16.1              12.4
          Net changes in operating
           assets and liabilities,
           net of acquisitions:
              Current assets and
               liabilities                           (59.0)            (32.5)
              Noncurrent assets and
               liabilities                             5.5              (0.8)
              Other                                    0.9               0.7
    Cash Used in Operating Activities                (17.0)             (4.7)

    Investing Activities
         Acquisition of business                       ---              (1.4)
         Capital expenditures                        (11.0)             (8.9)
    Cash Used in Investing Activities                (11.0)            (10.3)

    Financing Activities
         Long-term debt incurred                      27.9              31.2
         Long-term debt retired                       (2.1)             (2.1)
         Other stock transactions                      2.7               4.1
         Dividends paid                               (5.2)             (4.9)
    Cash Provided by Financing Activities             23.3              28.3

         Net increase / (decrease) in
          cash and cash equivalents                   (4.7)             13.3
         Cash and cash equivalents --
          beginning of period                         25.8              24.0

    Cash and Cash Equivalents -- End of
     Period                                          $21.1             $37.3



                               A. O.  SMITH CORPORATION
                                  Business Segments
                                (dollars in millions)
                                     (unaudited)



                                                        Three Months ended
                                                             March 31
                                                      2007              2006
        Net sales
            Water Products                           $355.4            $231.3
            Electrical Products                       223.0             229.2
            Inter-Segment Sales                        (1.2)             (1.3)
                                                     $577.2            $459.2

        Operating earnings
            Water Products                            $34.2             $25.9
            Electrical Products (1)                    10.2              13.6
            Inter-Segment earnings                     (0.1)             (0.1)
                                                       44.3              39.4

        Corporate expenses (2)                        (11.2)            (14.9)
        Interest expense                               (6.8)             (3.0)

        Earnings before income taxes                   26.3              21.5

        Tax provision                                   6.8               6.0
        Net earnings                                  $19.5             $15.5

        (1) includes pretax restructuring
                and other charges of:                  $1.2              $1.2

        (2) includes pretax restructuring
                and other charges of:                  $---              $0.3

    




For further information:

For further information: Media Inquiries, Mark A. Petrarca, 
+1-414-359-4100, or Analyst-Investor Inquiries, Craig Watson, +1-414-359-4009,
 both of A. O. Smith Corporation Web Site: http://www.aosmith.com

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A. O. SMITH CORPORATION

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