A.O. Smith Reports Earnings of $17.6 Million or $.74 Per Share
17 July 2000
Discusses Outlook for Remainder of 2000
MILWAUKEE - Electric motor and water heater manufacturer A.O. Smith
Corporation today reported second quarter earnings from continuing operations of
$17.6 million or $.74 per share compared with second quarter 1999 earnings of
$14.2 million or $.60 per share.
Revenues for the quarter ended June 30 were $331.2 million, compared with
second quarter 1999 revenues of $235.4 million.
"Our two platforms performed well during the second quarter in spite of
some weakening in certain key markets," Robert J. O'Toole, chairman and chief
executive officer, observed. "We remain pleased with the progress being made
in integrating the former MagneTek electric motor operations as well as the
continued growth of the water heater operation in China."
For the first six months of 2000, sales grew more than $200 million to
$666.3 million. Net earnings from continuing operations during the same
period were $31.7 million or $1.34 per share compared with $26.2 million or
$1.11 per share in 1999.
Second quarter sales for Electric Motor Technologies, A.O. Smith's largest
platform, were nearly $250 million, compared with 1999 second quarter sales of
$156.7 million. The higher second quarter sales were principally due to the
contribution of approximately $90 million from the former MagneTek motor
operations. Operating profits increased in the second quarter due to the
higher volume.
Continued international growth, most notably in China and the Far East,
contributed to the increase in Water Systems Technologies' second quarter
sales to $83.0 million. Sales in the second quarter of 1999 were
$78.8 million. Operating profits were higher compared with the second quarter
of 1999.
Company discusses outlook for remainder of 2000
"While it may be premature to talk about a 'soft landing,' we are seeing
signs in our markets that the economy is beginning to moderate," O'Toole
pointed out.
"The heating and air conditioning industry, as a whole, is very cautious
right now, sales growth is beginning to slacken after two years of record
sales," O'Toole said, "as customers cut back on output to keep their
inventories in line.
"Demand is also sluggish in the domestic water heater industry,
principally due to the slowdown in residential and commercial construction
which in part has been brought on by higher interest rates," O'Toole noted.
"We expect these conditions to continue through at least the third quarter of
this year. Our international businesses are performing as projected and will
contribute to favorable full year results for our Water Systems business
compared with 1999."
"As a result of the weaker air conditioning industry and the softer market
for housing and new construction, we are now cautious about the outlook for
the balance of the year," O'Toole continued. "Accordingly, we believe the
current analyst earnings estimate of approximately $2.50 per share for the
full year 2000 may prove difficult to achieve."
A.O. Smith Corporation, with headquarters in Milwaukee, Wis., is a leading
marketer and manufacturer of electric motors and water heaters, serving
customers world wide. It is one of North America's largest manufacturers of
electric motors, with a comprehensive line of fractional horsepower, integral
horsepower, and hermetic motors. The company also is North America's largest
manufacturer of commercial water heating equipment and a leading supplier of
residential water heaters and hydronic boilers. The company has facilities in
the United States, Mexico, Canada, England, Ireland, Hungary, the Netherlands,
and China and employs more than 15,000 people.
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
Continuing June 30 June 30
Sales 2000 1999 2000 1999
Electric Motor
Technologies $ 248,245 $ 156,664 $ 496,121 $ 304,539
Water Systems
Technologies 83,036 78,751 170,203 160,739
Net Sales 331,281 235,415 666,324 465,278
Costs and Expenses
Cost of products sold 264,323 185,952 531,971 369,888
Selling, general and
administrative 32,782 23,847 68,434 47,599
Interest expense 5,733 2,007 11,164 3,985
Interest income (307) (196) (404) (520)
Other expense 1,523 1,397 5,553 3,177
Tax provision 9,634 8,191 17,858 14,980
Total costs and
expenses 313,688 221,198 634,576 439,109
Earnings from
Continuing Operations 17,593 14,217 31,748 26,169
Discontinued
Earnings (loss) from
operations less related
income tax (benefit)-
(2000-$(777) & $(1,074);
1999-$175 & $488) 1,190 (302) 1,646 (852)
Loss on disposition less
related tax benefit
of $798 (1,222) -- (1,222) --
Net Earnings $ 17,561 $ 13,915 $ 32,172 $ 25,317
Net Earnings (Loss)
Per Share of Common
Stock (Diluted)
Continuing
Operations $ 0.74 $ 0.60 $ 1.34 $ 1.11
Discontinued
Operations $ -- $ (0.01) $ 0.02 $ (0.04)
Net Earnings $ 0.74 $ 0.59 $ 1.36 $ 1.07
Average Common Shares
Outstanding
(000's omitted) 23,734 23,727 23,716 23,734
A.O. SMITH CORPORATION
Balance Sheet
June 30 December 31
2000 1999
ASSETS:
Cash and cash equivalents $ 8,308 $ 14,761
Receivables 221,247 183,442
Inventories 165,745 163,443
Deferred income taxes 10,560 11,323
Other current assets 7,534 5,253
Net current assets-discontinued operations 16,665 10,405
Total Current Assets 430,059 388,627
Net property, plant and equipment 283,698 283,493
Goodwill and other intangibles 248,040 251,085
Other assets 99,655 88,990
Net long-term assets - discontinued
operations 49,332 51,791
Total Assets $ 1,110,784 $ 1,063,986
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $ -- $ --
Trade payables 103,296 81,221
Accrued payroll and benefits 30,708 32,272
Product warranty 11,513 10,847
Income taxes 4,112 7,170
Long-term debt due within one year 9,629 9,629
Other current liabilities 30,514 27,301
Total Current Liabilities 189,772 168,440
Long-term debt 344,800 351,251
Other liabilities 63,279 64,536
Deferred income taxes 56,330 48,675
Stockholders' equity 456,603 431,084
Total Liabilities and Stockholders'
Equity $ 1,110,784 $ 1,063,986
A.O. SMITH CORPORATION
Statement of Cash Flows
Six Months ended
June 30
2000 1999
Operating Activities
Continuing
Net earnings $ 31,748 $ 26,169
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation & amortization 22,769 15,817
Net change in current assets
and liabilities (18,671) (9,437)
Net change in noncurrent assets
and liabilities (6,306) (9,285)
Other 662 229
Cash Provided by Operating Activities 30,202 23,493
Investing Activities
Capital expenditures (20,733) (15,978)
Capitalized purchased software costs (558) (782)
Cash Used in Investing Activities (21,291) (16,760)
Cash Flow before Financing 8,911 6,733
Discontinued
Cash Used in Discontinued Operations (3,377) (4,564)
Financing Activities
Debt incurred -- 1,609
Debt retired (6,451) (1,600)
Purchase of treasury stock -- (2,691)
Other stock transactions 81 128
Dividends paid (5,617) (5,578)
Cash Used in Financing Activities (11,987) (8,132)
Net decrease in cash and cash equivalents (6,453) (5,963)
Cash and cash equivalents - beginning of
period 14,761 37,666
Cash and Cash Equivalents - End of Period $ 8,308 $ 31,703