A.O. Smith Second Quarter Earnings
16 July 1999
A.O. Smith Second Quarter Earnings Increase 13 Percent To $.59 Per Share
MILWAUKEE, Wis., July 16 -- Record-setting performance by the
company's Electric Motor Technologies platform enabled A.O. Smith Corporation
(Amex: SMC) to earn $.59 per share in the second quarter.
Net earnings for the Milwaukee-based manufacturer increased to $13.9
million compared with 1998 second quarter net earnings of $12.6 million or
$.52 per share. Sales for the three-month period ending June 30 were $263
million, a 16 percent increase over sales of $227 million for the same period
in 1998.
"Good growth in nearly all of our electric motor markets was instrumental
in the company's second quarter performance," Robert J. O'Toole, chairman and
chief executive officer, observed. "In addition, Water Systems Technologies
contributed improved sales and profits over last year."
"Another important accomplishment during the quarter was the definitive
agreement to purchase MagneTek's world-wide motor operations, a strategic
acquisition that will significantly strengthen our presence in the fractional
horsepower motor market," O'Toole pointed out. "We intend to close this sale
on August 2 and project a neutral effect on earnings during the second half of
1999. We expect earnings to benefit by between $.30 and $.35 per share next
year."
For the first six months of 1999, A.O. Smith sales were $520 million,
compared with first-half 1998 sales of $450 million. Net earnings for the
same period in 1999 were $25.3 million compared with $22.8 million during the
first six months of 1998. Earnings per share increased 15 percent to $1.07
per share, compared with $.93 per share earnings during the first half of
1998.
Second quarter sales for Electric Motor Technologies, A.O. Smith's largest
operating unit, were a record $157 million, a more than $40 million increase
over second quarter 1998 sales of $114 million. Strong performance in the
pump and the heating, ventilating, and air conditioning (HVAC) markets
contributed to the sales increase.
Sales of hermetic motors more than doubled during the quarter, as the
company benefited from strong demand from air conditioning compressor
manufacturers as well as the GE hermetic motor operations acquired in July,
1998.
Operating profits improved significantly when compared with the second
quarter of 1998 due to higher volumes and improved operating efficiencies.
Continued strength in the residential and commercial water heating markets
and progress in the company's Chinese water heater operation contributed to
Water Systems Technologies' second quarter sales of $79 million, a six percent
increase over the 1998 second quarter. The Chinese operations contributed
approximately $3 million to second quarter sales. Operating profits increased
over the second quarter of 1998, primarily due to the higher sales volume.
Persistent weakness in the petroleum production, chemical processing, dry
bulk storage and agricultural markets resulted in significatnly lower second
quarter sales and profits for the Storage & Fluid Handling Technologies
platform.
Forward-Looking Statements
This press release contains forward-looking statements. Although the
company believes that its expectations are based upon reasonable assumptions
within the bounds of its knowledge of its business, there can be no assurance
that its financial goals will be realized. Although a significant portion of
the company's sales are derived from the replacement of previously installed
product, and such sales are therefore less volatile, numerous factors may
affect actual results and cause results to differ materially from those
expressed in forward-looking statements made by or on behalf of the company.
Among such numerous factors, the company includes the continued growth of the
world-wide air conditioning, heating, and refrigeration market; the weather
and its impact on the HVAC, pool and spa pump markets; and the timely and
proper implementation of future cost reduction programs.
A.O. Smith Corporation is a diversified manufacturer with headquarters in
Milwaukee, Wis. Its major product lines include: fractional horsepower,
hermetic, and subfractional horsepower electric motors; commercial and
residential water heaters; municipal, industrial, and agricultural storage
tanks; and fiberglass piping systems.
A.O. SMITH CORPORATION
STATEMENT OF CASH FLOWS
Six Months ended
June 30
1999 1998
Operating Activities
Continuing
Net earnings $25,317 $22,807
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation & amortization 18,242 13,977
Equity in loss of joint ventures -- 1,693
Net change in current assets
and liabilities (10,298) (26,407)
Net change in noncurrent assets
and liabilities (8,904) (7,619)
Other (302) 3
Cash Provided by Operating Activities 24,055 4,454
Investing Activities
Capital expenditures (19,375) (12,367)
Capitalized purchased software costs (824) (547)
Investment in joint ventures -- (5,748)
Acquisition of business (531) --
Cash Used by Investing Activities (20,730) (18,662)
Cash Used by Continuing Operations
before Financing Activities 3,325 (14,208)
Discontinued
Cash Used by Discontinued Operations
before Financing Activities (1,156) (1,196)
Financing Activities
Long-term debt incurred 1,609 819
Long-term debt retired (1,600) (1,625)
Purchase of common stock held in treasury (2,691) (24,860)
Proceeds from common stock options exercised 78 202
Tax benefit from exercise of stock options 50 69
Dividends paid (5,578) (5,425)
Cash Used by Financing Activities (8,132) (30,820)
Net decrease in cash and cash equivalents (5,963) (46,224)
Cash and cash equivalents -
beginning of period 37,666 145,896
Cash and Cash Equivalents - End of Period $31,703 $99,672
A.O. SMITH CORPORATION
Balance Sheet
June 30 December 31
1999 1998
ASSETS:
Cash and cash equivalents $ 31,703 $ 37,666
Receivables 165,335 133,764
Inventories 102,392 99,984
Deferred income taxes 10,343 11,376
Other current assets 5,932 4,599
Total Current Assets 315,705 287,389
Net property, plant and equipment 254,482 248,770
Goodwill 145,551 146,901
Other assets 92,250 84,372
Total Assets $ 807,988 $ 767,432
LIABILITIES AND STOCKHOLDERS' EQUITY:
Trade payables $ 83,223 $ 57,429
Accrued payroll and benefits 28,255 31,385
Product warranty 7,749 7,892
Income taxes 6,063 6,786
Long-term debt due within one year 4,629 4,629
Other current liabilities 23,609 24,036
Total Current Liabilities 153,528 132,157
Long-term debt 131,212 131,203
Other liabilities 58,347 60,636
Deferred income taxes 47,286 42,343
Stockholders' equity 417,615 401,093
Total Liabilities and
Stockholders' Equity $ 807,988 $ 767,432
A.O. SMITH CORPORATION AND SUBSIDIARIES
(condensed consolidated financial statements -
$000 omitted except per share data)
Statement of Earnings
Three Months ended Six Months ended
June 30 June 30
Sales 1999 1998 1999 1998
Electric Motor Technologies $156,664 $113,765 $304,539 $225,604
Water Systems Technologies 78,751 74,295 160,739 148,849
Storage & Fluid Handling
Technologies 27,355 38,620 54,828 75,182
Net Sales 262,770 226,680 520,106 449,635
Costs and Expenses
Cost of Products Sold 208,844 178,827 415,847 356,013
Selling, General and
Administrative 28,456 26,381 56,966 54,281
Interest Expense 2,168 1,593 4,499 3,217
Interest Income (214) (1,309) (554) (3,021)
Other Expense 1,584 692 3,539 1,414
Tax Provision 8,017 7,193 14,492 13,231
Total Costs and Expenses 248,855 213,377 494,789 425,135
Earnings Before Equity in
Loss of Joint Ventures 13,915 13,303 25,317 24,500
Equity in Loss of Joint
Ventures -- (674) -- (1,693)
Net Earnings $13,915 $12,629 $25,317 $22,807
Net Earnings Per Share of
Common Stock (Diluted) $.59 $.52 $1.07 $.93
Average Common Shares
Outstanding (000's omitted) 23,727 24,285 23,734 24,498