SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________________ to
_______________
Commission File Number 1-475
A.O. SMITH CORPORATION
Delaware 39-0619790
(State of Incorporation) (IRS Employer ID Number)
P. O. Box 23972, Milwaukee, Wisconsin 53223-0972
Telephone: (414) 359-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Class A Common Stock Outstanding as of October 31, 1998: 8,705,835 shares
Common Stock Outstanding as of October 31, 1998: 14,585,751 shares
Exhibit Index Page 15
<PAGE>
Index
A. O. Smith Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Earnings and Retained Earnings
- Three and nine months ended September 30, 1998 and 1997 3
Condensed Consolidated Balance Sheet
- September 30, 1998 and December 31, 1997 4
Condensed Consolidated Statement of Cash Flows
- Nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements
- September 30, 1998 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
<TABLE>
A.O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
AND RETAINED EARNINGS
Three and Nine months ended September 30, 1998 and 1997
(000 omitted except for per share data)
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
EARNINGS 1998 1997 1998 1997
- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Electric Motor Technologies $ 135,309 $ 94,081 $ 360,913 $ 298,779
Water Systems Technologies 71,685 68,872 220,534 211,218
Storage & Fluid Handling Technologies 36,260 43,011 111,442 117,153
--------------- ---------------- ---------------- ----------------
NET SALES 243,254 205,964 692,889 627,150
Cost of products sold 196,232 167,060 552,245 496,806
--------------- ---------------- ---------------- ----------------
Gross profit 47,022 38,904 140,644 130,344
Selling, general and administrative expenses 26,324 25,013 80,605 82,251
Interest expense 1,974 1,913 5,191 6,602
Interest income (258) (3,010) (3,279) (6,370)
Other expense - net 927 394 2,341 2,085
--------------- ---------------- ---------------- ----------------
18,055 14,594 55,786 45,776
Provision for income taxes 6,356 4,918 19,587 16,003
--------------- ---------------- ---------------- ----------------
Earnings before equity in loss of joint ventures 11,699 9,676 36,199 29,773
Equity in loss of joint ventures (725) (667) (2,418) (1,965)
--------------- ---------------- ---------------- ----------------
EARNINGS FROM CONTINUING OPERATIONS 10,974 9,009 33,781 27,808
EARNINGS FROM DISCONTINUED OPERATIONS
Earnings (less related income tax provisions
of $548 and $7,698) - 980 - 15,231
Gain on disposition (less related income
tax provision of $58,056) - - - 94,616
--------------- ---------------- ---------------- ----------------
NET EARNINGS 10,974 9,989 33,781 137,655
RETAINED EARNINGS
Balance at beginning of period 483,896 446,229 466,514 325,361
Cash dividends on common shares (2,832) (2,988) (8,257) (9,786)
--------------- ---------------- ---------------- ----------------
BALANCE AT END OF PERIOD $ 492,038 $ 453,230 $ 492,038 $ 453,230
=============== ================ ================ ================
BASIC EARNINGS PER COMMON SHARE (note 5)
Continuing Operations $.47 $.34 $1.43 $.98
Discontinued Operations - .04 - 3.86
--------------- ---------------- ---------------- ----------------
NET EARNINGS $.47 $.38 $1.43 $4.84
--------------- ---------------- ---------------- ----------------
DILUTED EARNINGS PER COMMON SHARE (note 5)
Continuing Operations $.46 $.33 $1.39 $.96
Discontinued Operations - .04 - 3.79
--------------- ---------------- ---------------- ----------------
NET EARNINGS $.46 $.37 $1.39 $4.75
--------------- ---------------- ---------------- ----------------
DIVIDENDS PER COMMON SHARE (note 5) $.12 $.11 $.35 $.34
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
<TABLE>
A.O. SMITH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1998 and December 31, 1997
(000 omitted)
<CAPTION>
(unaudited)
September 30, 1998 December 31, 1997
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (note 2) $ 26,191 $145,896
Receivables 146,769 126,232
Inventories (note 3) 86,985 79,049
Deferred income taxes 11,487 11,849
Other current assets 12,863 2,702
----------------- ----------------
TOTAL CURRENT ASSETS 284,295 365,728
Property, plant and equipment 488,471 450,147
Less accumulated depreciation 255,860 242,391
----------------- ----------------
Net property, plant and equipment 232,611 207,756
Investments in and advances to joint ventures 31,253 25,605
Other assets 72,913 65,644
Goodwill 141,493 51,783
----------------- ----------------
TOTAL ASSETS $ 762,565 $ 716,516
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables $ 74,869 $ 61,299
Accrued payroll and benefits 30,639 26,397
Product warranty 8,002 7,972
Accrued income taxes 883 6,607
Long-term debt due within one year 4,629 5,590
Other current liabilities 23,478 20,017
----------------- ----------------
TOTAL CURRENT LIABILITIES 142,500 127,882
Long-term debt (note 4) 126,933 100,972
Other liabilities 55,291 59,515
Deferred income taxes 44,708 28,442
STOCKHOLDERS' EQUITY: (note 5)
Class A common stock, $5 par value: authorized
14,000,000 shares; issued 8,753,889 43,769 29,192
Common stock, $1 par value: authorized 60,000,000
shares; issued 23,795,473 23,795 15,861
Capital in excess of par value 51,066 72,542
Retained earnings (note 4) 492,038 466,514
Cumulative foreign currency translation adjustments (1,525) (1,579)
Treasury stock at cost (216,010) (182,825)
----------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 393,133 399,705
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 762,565 $ 716,516
================= ================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
4
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
<TABLE>
A.O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1998 and 1997
(000 omitted)
(unaudited)
<CAPTION>
Nine Months Ended
September 30
1998 1997
---- ----
OPERATING ACTIVITIES
CONTINUING
<S> <C> <C>
Net earnings $ 33,781 $ 27,808
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 21,751 19,390
Equity in loss of joint ventures 2,418 1,965
Net change in current assets and liabilities (6,963) 4,679
Net change in noncurrent assets and liabilities 2,751 432
Other - net 702 1,042
--------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES 54,440 55,316
--------- ---------
INVESTING ACTIVITIES
Capital expenditures (20,116) (33,460)
Capitalized purchased software costs (1,308) (1,094)
Investment in joint ventures (8,066) (10,281)
Acquisition of business (126,456) (60,918)
---------- ---------
CASH USED BY INVESTING ACTIVITIES (155,946) (105,753)
---------- ---------
CASH USED BY CONTINUING OPERATIONS
BEFORE FINANCING ACTIVITIES (101,506) (50,437)
DISCONTINUED
Cash provided / (used) by discontinued operations
before financing activities (2,095) 503,754
FINANCING ACTIVITIES
Long-term debt incurred 30,590 -
Long-term debt retired (5,590) (143,768)
Purchase of common stock held in treasury (33,244) (125,168)
Proceeds from common stock options exercised 232 3,455
Tax benefit from exercise of stock options 165 571
Dividends paid (8,257) (9,786)
---------- ---------
CASH USED BY FINANCING ACTIVITIES (16,104) (274,696)
---------- ---------
Net increase / (decrease) in cash and cash equivalents (119,705) 178,621
Cash and cash equivalents-beginning of period (note 2) 145,896 6,405
---------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,191 $ 185,026
========== =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(unaudited)
1. Basis of Presentation
The financial statements presented herein are based on interim figures and
are subject to audit. In the opinion of management, all adjustments
consisting of normal accruals considered necessary for fair presentation of
the results of operations and of financial position have been made. The
results of operations for the nine-month period ended September 30, 1998 are
not necessarily indicative of the results expected for the full year. The
consolidated balance sheet as of December 31, 1997 is derived from the
audited financial statements but does not include all disclosures required
by generally accepted accounting principles. Certain prior year amounts have
been reclassified to conform to the 1998 presentation.
2. Statement of Cash Flows
For purposes of the Consolidated Statement of Cash Flows, cash and cash
equivalents include short-term investments held primarily for cash
management purposes. These investments normally mature within three months
from the date of acquisition.
3. Inventories
(000 omitted) September 30, 1998 December 31, 1997
------------- ------------------ -----------------
Finished products $ 52,919 $ 45,091
Work in process 16,202 19,656
Raw materials 46,690 42,870
Supplies 1,563 1,634
--------- ---------
117,374 109,251
Allowance to state inventories
at LIFO cost 30,389 30,202
-------- --------
$ 86,985 $ 79,049
======== ========
4. Long-Term Debt
On July 1, 1998 the company issued $30 million in senior notes under a loan
facility with The Prudential Insurance Company of America. The notes mature
in 2018 and carry an interest rate of 6.66%.
6
<PAGE>
The company's long-term credit agreements contain certain conditions and
provisions which restrict the company's payment of dividends. Under the most
restrictive of these provisions, retained earnings of $63.2 million were
unrestricted as of September 30, 1998 for cash dividends and treasury stock
purchases.
5. Stockholders' Equity
On June 9, 1998 the company's Board of Directors declared a three-for-two
stock split of the company's Class A Common Stock and Common Stock to be
effected in the form of a stock dividend to shareholders of record on July
31, 1998 and payable on August 17, 1998. All earnings and dividend per share
calculations presented in this report include the impact of the stock split.
At September 30, 1998, 31,740 and 9,228,731 shares of Class A Common Stock
and Common Stock, respectively, were held as Treasury Stock.
6. Comprehensive Earnings
Statement of Financial Accounting Standards (SFAS) No. 130 - "Reporting
Comprehensive Income" requires the company to disclose comprehensive
earnings, consisting of net earnings and all other non-owner changes in
equity during the period. The company's comprehensive earnings for the third
quarter 1998 and 1997 were $11,202,000 and $10,239,000, respectively.
Comprehensive earnings for the first nine months of 1998 and 1997 were
$33,814,000 and $136,893,000, respectively. Comprehensive earnings, for all
periods presented, was comprised of net earnings and foreign currency
translation adjustments, net of any related income tax expense.
7. New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No.133,
"Accounting for Derivative Instruments and Hedging Activities", which is
required to be adopted in years beginning after June 15, 1999. Early
adoption of the Statement is permitted. The Statement will require the
company to recognize all derivatives in the balance sheet at fair value. The
company has not yet determined what the effect of Statement No. 133 will be
on earnings and the financial position of the company.
7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST NINE MONTHS OF 1998 COMPARED TO 1997
Sales totaled $243.3 million in the third quarter of 1998, an 18 percent
increase over 1997 third quarter sales of $206.0 million. Significantly higher
sales at Electric Motor Technologies primarily due to the July 1, 1998
acquisition of General Electric's compressor motor facility in Scottsville, KY.,
coupled with modestly higher sales at Water Systems Technologies more than
offset a 16 percent decline in sales at Storage & Fluid Handling Technologies.
Sales for the first nine months of 1998 were $692.9 million or more than 10
percent higher than the $627.2 million of sales in the same period last year.
Acquisitions contributed approximately $50 million of the nearly $66 million
increase in sales.
Third quarter earnings from continuing operations increased nearly 22 percent to
$11.0 million compared with the $9.0 million earned in last year's third
quarter. Significantly higher operating profits at Electric Motors and
moderately higher profits at Water Systems more than offset lower interest
income and a significant decline in operating profit at Storage & Fluid
Handling. Earnings from continuing operations for the first nine months of 1998
were $33.8 million compared with $27.8 million for the first nine months of
1997. On a per share basis, third quarter diluted earnings from continuing
operations increased from $0.33 in 1997 to $0.46 in 1998. Diluted earnings per
share for the first nine months of 1998 were $1.39 compared with $0.96 in the
same period last year. Earnings per share for the 1998 third quarter and nine
months also benefited from the company's stock repurchase program.
On June 9, 1998 the company's Board of Directors declared a three-for-two stock
split of the company's Class A Common Stock and Common Stock. The stock split
was effected in the form of a stock dividend to stockholders of record on July
31, 1998 and was paid on August 17, 1998. All earnings and dividend per share
calculations presented in this report include the impact of the stock split.
The company's third quarter gross profit margin increased to 19.3 percent
compared with the 18.9 percent rate generated in the third quarter of 1997, as
higher motor manufacturing volumes generated improvement in operating
efficiencies. The gross profit margin for the first nine months of 1998 declined
to 20.3 percent from 20.8 percent in the prior year as a result of lower pricing
for motors and declines in profitability in the Storage and Fluid Handling
business segment.
Third quarter sales of $135.3 million for the Electric Motor Technologies
platform were nearly 44 percent higher than sales in the third quarter of 1997.
On July 1, 1998 the company acquired the Scottsville, KY compressor motor
business for $126.5 million, subject to final adjustment. The compressor motor
operation manufactures
8
<PAGE>
one-half through six horsepower motors used primarily in residential and light
commercial unitary air conditioning applications. The acquisition contributed
approximately $30 million to the segment's sales during the third quarter. An
improvement in demand for air conditioning and subfractional horsepower motors
also contributed to higher sales in the third quarter. Year-to-date sales for
the electric motor segment were $360.9 million in 1998, compared with $298.8
million in 1997. The 21 percent increase in sales for the first nine months of
1998 reflects both internally generated growth as well as the company's ongoing
electric motor acquisition activities.
Operating profit for the Electric Motor Technologies segment improved
significantly compared with the third quarter of 1997, reflecting the
aforementioned volume-related improvement in operating efficiencies as well as
the acquisition of the Scottsville operation. Acquisition activities also
contributed to a significant increase in profits for the nine months ending
September 30, 1998.
Third quarter sales for Water Systems Technologies were $71.7 million or 4
percent higher than 1997's third quarter sales of $68.9 million, due primarily
to improved pricing and stronger commercial unit volumes. Sales for the first
nine months of 1998 were $220.5 million, compared with $211.2 million for the
first nine months of 1997. Operating profits for the third quarter and first
nine months of 1998 were higher than the same periods last year due to the
increased volume and stronger pricing of commercial product.
Third quarter sales for the Storage & Fluid Handling segment were $36.3 million,
or 16 percent lower than the $43.0 million generated in the same period in 1997.
Sales declined more than 30 percent in the segment's fiberglass pipe business
and less than 10 percent in the storage tank operation. The decline in third
quarter sales was primarily the result of lower demand for fiberglass pipe and
storage tanks in the chemical, food processing and petroleum production markets.
The soft demand is attributed to weak prices in the oil and chemical markets and
the corresponding lower capital spending by the segment's customers. Sales for
the first nine months of 1998 were $111.4 million compared with $117.2 million
for the comparable period in 1997.
Third quarter operating profits for the Storage & Fluid Handling business were
significantly lower than the third quarter of 1997 as a result of the
substantial decline in sales of fiberglass product. Operating profits were
slightly lower for the nine months ending September 30, 1998, than the
comparable period in 1997, as cost reduction programs partially offset the
impact of the lower volumes.
Selling, general and administrative (SG&A) expenses for the third quarter were
$1.3 million higher than the third quarter of 1997, while year-to-date SG&A
expenses were $1.6 million less than the first nine months of 1997. The 1998
third quarter increase was partially due to additional costs associated with the
recent acquisition. The year-to-date comparison reflects the cost reduction
activities taken at mid-year 1997
9
<PAGE>
associated with the divestiture of the company's automotive business and general
cost reduction programs in the company's remaining operations in the latter part
of 1997.
The company recognized year-to-date net interest expense of $1.9 million in
1998, compared with net interest expense of $0.2 million in the same period of
1997. The year-to-year increase in net interest expense was the result of
acquisition activities as well as the company's use of funds for its stock
repurchase program.
The effective tax rates for the third quarter of 1998 and year to date periods
for both 1997 and 1998 were approximately 35 percent, as the company continues
to benefit from its foreign sales corporation and research and development tax
credits.
After-tax equity in losses of the company's Chinese joint ventures were $0.7
million in both the third quarter of 1998 and 1997. Losses for the nine months
ending September 30, 1998 were approximately $2.4 million compared with $2.0
million in 1997 as the company experienced start up costs associated with its
new manufacturing operation.
The company is currently negotiating to acquire the minority interests in its
two Chinese joint ventures and could complete these negotiations as early as the
fourth quarter of 1998. If the buyout is completed, these entities will be fully
consolidated in the company's financial statements.
For 1999, the company expects the difficulties at its Storage and Fiberglass
Products businesses to persist and therefore is continuing to review numerous
alternatives to improve the operations of this business. The company is
cautiously optimistic about the market for the products of its Water Systems
business segment. The company believes the Electric Motors business will improve
over 1998 as it benefits from the incremental business of the Scottsville
acquisition as well as the "Tier One" supply agreement signed with York
International on July 6, 1998.
The company continues to aggressively pursue accretive acquisitions such as the
Uppco C-Frame motor business (March 1997), and the previously discussed
Scottsville compressor motor business. The company considers the pursuit of
acquisitions to be a very important element in its strategy for growth. Although
the company believes 1999 earnings, excluding acquisitions, will increase over
1998 levels, accretive acquisitions will be required to achieve its target of 15
percent annual growth in earnings per share.
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which is effective for the company for the
year ended December 31, 1998. Implementation of this statement will not have any
impact on A.O. Smith Corporation's results of operations, financial position or
cash flows.
During the first nine months of 1998, the company was a party to futures
contracts for the purposes of hedging a portion of certain raw material
purchases. The company was
10
<PAGE>
also a party to forward foreign exchange contracts to hedge foreign currency
transactions consistent with its committed exposures. Had these contracts not
been in place, the net earnings of the company would not have been materially
affected. As discussed in Note 7 to the financial statements, the Financial
Accounting Standards Board has issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The company has not yet determined what the
effect of SFAS No. 133 will be on earnings and the financial position of the
company.
Liquidity & Capital Resources
The company's working capital was $141.8 million at September 30, 1998 compared
to $237.8 million at the end of December 1997, a decline of $96 million. The
reduction was primarily a result of a decline in cash and cash equivalents in
the amount of $119.7 million as the company completed the acquisition of the
Scottsville compressor motor business for $126.5 million during the third
quarter. The majority of the increase in the remaining working capital accounts
was due to the acquisition.
Capital expenditures during the first nine months of 1998 were $20.1 million
compared to $33.5 million through September 30, 1997. Primarily as a result of
lower capital expenditures, cash flow from continuing operations for the first
nine months of 1998 was $14.5 million higher than for the same period last year
when adjusted for acquisitions. The company expects lower capital spending in
1998 compared with 1997, and it expects capital expenditures to be covered by
1998 cash flow.
The company repurchased 1,188,450 shares of its common stock during the first
nine months of 1998 under its stock repurchase program. Since the program's
inception in January 1997, approximately 8.4 million shares have been
repurchased. As of the end of September 1998, $24.2 million remained of the $50
million authorization granted in December 1997.
At its October 6, 1998 meeting, A. O. Smith's Board of Directors declared a
regular quarterly dividend of $.12 per share on its common stock (Classes A and
Common). The dividend is payable on November 16, 1998 to shareholders of record
October 30, 1998.
Year 2000
A.O. Smith continues the efforts begun several years ago, addressing potential
problems related to the Year 2000. It has organized its activities to prepare
for the Year 2000 under a company-wide plan that involves: Assessment,
Modification or Replacement, and Testing.
The company has completed the assessment phase which included an inventory of
all information technology (IT) systems (computer hardware, operating systems,
and application software); all non-information technology systems (equipment,
machinery, and telephone systems); and the identification of key vendors,
service providers, and business
11
<PAGE>
partners considered to have a material relationship with the company. Risks on
all IT and non-IT systems or relationships have been assessed and plans to
remedy potential problems have been formulated. The testing and implementation
phases for renovated Information Technology (IT) systems are underway.
Implementation of Year 2000-ready systems will be completed in early 1999. Costs
specifically associated with renovating software for Year 2000 readiness are
funded through operating cash flows and expensed as incurred. Year 2000-related
costs have not had a material effect on the Company's financial position or
results of operations. The Company expects to incur total Year 2000-related
costs of approximately $2.0 million of which remaining costs are estimated to be
$750,000.
The Company believes there is a high probability that all critical information
and non-information technology systems and processes will be substantially Year
2000 ready and allow the Company to continue operations beyond the Year 2000
without a material impact on its financial position or results of operations.
Unanticipated problems, primarily external issues, may be identified, and could
result in an undetermined financial risk. No contingency plans have been
developed for such possibilities.
Forward Looking Statements
Certain statements in this report are 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 may 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 worldwide
heating, ventilating and air conditioning market; the weather and its impact on
the heating and air conditioning market; the pricing environment for residential
water heaters; capital spending trends in the oil, petrochemical, chemical, and
food processing markets; the successful execution of its acquisition strategy;
and the successful development of the company's business venture in China.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The company is involved in various unresolved legal actions, administrative
proceedings and claims in the ordinary course of its business involving product
liability, property damage, insurance coverage, patents and environmental
matters including the disposal of hazardous waste. Although it is not possible
to predict with certainty the outcome of these unresolved legal actions or the
range of possible loss or recovery, the company believes these unresolved legal
actions will not have a material effect on its financial position or results of
operations.
There have been no material changes in the environmental matters previously
reported in Part 1, Item 3 in the company's annual report on Form 10-K for the
year ended December, 1997 which is incorporated herein by reference.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
On August 11, 1998 the Board of Directors elected two new directors, William F.
Buehler and Robert N. Pokelwaldt. Mr. Buehler is executive vice
president-business operations with Xerox Corporation in Stamford, Connecticut.
Mr. Pokelwaldt is chairman and chief executive officer of York International
Corporation, York, Pennsylvania.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K Report was filed by the corporation on July 15, 1998. The
Form 8-K stated that on July 1, 1998 the corporation acquired
substantially all of the assets of the General Electric Industrial
Control Systems Division of General Electric Company ("GE") that
related to GE's hermetic electric motors operations located in
Scottsville, Kentucky.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. O. SMITH CORPORATION
November 13, 1998 ________________________
John J. Kita
Vice President,
Treasurer and Controller
November 13, 1998 ________________________
G. R. Bomberger
Executive Vice President
and Chief Financial Officer
14
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
(27) Financial Data Schedule
(27.1) Restated Financial Data Schedule
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated financial statements of A.O.SMITH CORPORATION as and for the period
ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,091
<SECURITIES> 23,100
<RECEIVABLES> 146,769
<ALLOWANCES> 0
<INVENTORY> 86,985
<CURRENT-ASSETS> 284,295
<PP&E> 488,471
<DEPRECIATION> (255,860)
<TOTAL-ASSETS> 762,565
<CURRENT-LIABILITIES> 142,500
<BONDS> 126,933
67,564
0
<COMMON> 0
<OTHER-SE> 325,569
<TOTAL-LIABILITY-AND-EQUITY> 762,565
<SALES> 692,889
<TOTAL-REVENUES> 692,889
<CGS> 552,245
<TOTAL-COSTS> 552,245
<OTHER-EXPENSES> 79,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,191
<INCOME-PRETAX> 55,786
<INCOME-TAX> 19,587
<INCOME-CONTINUING> 33,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,781
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.39
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated financial statements of A.O.SMITH CORPORATION as and for the period
ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,938
<SECURITIES> 181,088
<RECEIVABLES> 130,865
<ALLOWANCES> 0
<INVENTORY> 84,366
<CURRENT-ASSETS> 416,739
<PP&E> 440,407
<DEPRECIATION> (238,416)
<TOTAL-ASSETS> 768,888
<CURRENT-LIABILITIES> 150,287
<BONDS> 100,985
45,055
0
<COMMON> 0
<OTHER-SE> 385,051
<TOTAL-LIABILITY-AND-EQUITY> 768,888
<SALES> 627,150
<TOTAL-REVENUES> 627,150
<CGS> 496,806
<TOTAL-COSTS> 496,806
<OTHER-EXPENSES> 77,966
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,602
<INCOME-PRETAX> 45,776
<INCOME-TAX> 16,003
<INCOME-CONTINUING> 27,808
<DISCONTINUED> 109,847
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,644
<EPS-PRIMARY> 4.84
<EPS-DILUTED> 4.75
</TABLE>
