A.O. Smith Corporation

Good day, and thank you for standing by. Welcome to the second quarter 2021 A.O. Smith Earnings Hall. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I will now like to hand the conference over to your speaker today, Ms. Patricia Ackerman. Thank you. Please go ahead, ma'am.

Good morning, ladies and gentlemen, and welcome to the A.O. Smith Second Quarter Results Conference Call. I am Pat Ackerman, Senior Vice President of Investor Relations, Corporate Responsibility and Sustainability, and Treasurer. Joining me today are Kevin Wheeler, Chairman and Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. Before we begin with Kevin's remarks, I would like to remind you that 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. Also, as a courtesy to others in the question queue, please limit yourself to one question and one follow-up per turn. If you have multiple questions, please rejoin the queue. I will now turn the call over to Kevin, who will begin our prepared remarks on slide three.

Thank you, Pat, and good morning, everybody. Our global A.O. Smith team delivered second quarter EPS of 73 cents on a 30% increase in sales, demonstrating solid execution and operational agility despite supply chain and logistic challenges, along with rapidly rising material costs. I am thankful for my fellow A.O. Smith employees who tirelessly navigated through the pandemic, followed by weather-related production disruptions, and continue to navigate supply chain constraints. I appreciate the creativity and the collaboration of our team to find solutions to keep our customers supplied with water heating and water treatment products. Boiler sales grew 35%, driven by strong demand as a result of completed projects carried over from 2020, as well as an active education in-market. For reference, our boiler sales were down 15% in the second quarter of 2020, which was negatively impacted by the pandemic. North America water treatment grew 17%, driven by continued consumer demand for home improvement products, which provide safe drinking water in the home. Our water quality dealers performed particularly well in the quarter, and online promotional shopping days also boosted sales. Consistent with our strategy to build out distribution for North America water treatment, we acquired Master Water Conditioning Corporation. The acquisition supplements our presence in the Northeast, and we are excited to add expertise in local water condition and solutions in this region to our families. Our North America water treatment sales, including this acquisition, are expected to be over $200 million in 2021. Our volumes of U.S. tank residential water heaters increased in the second quarter. We believe the strong demand is a continued result of extended lead times caused by production constraints due to strain in the supply chain, finding advance of price increases, and incremental new home construction. After our weather-related disruptions in production, which we talked about on our first quarter call, we have seen month-over-month sequential improvement, and certain of our suppliers recently noted they see moderation of demand and supply imbalances. But we remain diligent as the imbalances are spotty, and we expect supply chain challenges to be with us through the remainder of the year. In response to continued material and logistic cost increases, we recently announced a fourth price increase of between 10% and 12% effective August 1st. In China, sales increased over 26% in local currency, driven by growth in each of our major product categories, including electric and gas tankless water heaters and water treatment products, including commercial and replacement filters. I will now turn the call over to Chuck, who will provide more details on the second quarter, beginning on slide four.