<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement Confidential, for the Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
A. O. Smith Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction
applies: ______________________
2) Aggregate number of securities to which transaction applies:
______________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
_____________________
4) Proposed maximum aggregate value of transaction:
____________________
5) Total fee paid: __________________
<PAGE> 2
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid _________________________
2) Form, Schedule or Registration Statement No.:_________________
3) Filing Party:____________________
4) Date Filed: _____________________
<PAGE> 3
[AO SMITH CORPORATION LOGO]
P.O. BOX 245009
MILWAUKEE, WI 53224-9509
NOTICE AND PROXY STATEMENT
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
PLEASE TAKE NOTICE that the annual meeting of the stockholders of A. O.
SMITH CORPORATION will be held on Wednesday, April 5, 2000, at 10:30 A.M.,
Eastern Time, at the Hotel du Pont, 11th and Market Streets, Wilmington,
Delaware for the following purposes:
(1) To elect six directors chosen by the holders of Class A Common Stock.
(2) To elect two directors chosen by the holders of Common Stock.
(3) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 2000.
(4) To transact such other business and act upon such other matters which
may properly come before the meeting or any adjournments thereof.
Only holders of record of the Class A Common Stock and the Common Stock of
the Company at the close of business on February 23, 2000, will be entitled to
notice of and to vote at the meeting. The list of stockholders entitled to vote
at the meeting will be available as of March 24, 2000, for examination by
stockholders for purposes related to the meeting at the offices of Morris,
Nichols, Arsht & Tunnell, 1201 North Market Street, Wilmington, Delaware.
YOU ARE INVITED TO ATTEND THE MEETING IN PERSON; HOWEVER, EVEN IF YOU PLAN
TO ATTEND THE MEETING IN PERSON, PLEASE TAKE A FEW MINUTES TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU
ARE A SHARE OWNER OF RECORD (YOUR SHARES ARE IN YOUR NAME), YOU ALSO MAY VOTE
YOUR SHARES VIA THE INTERNET BY ACCESSING THE WORLDWIDE WEBSITE INDICATED ON
YOUR PROXY CARD. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON. YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT
ENCLOSED WITHIN.
W. David Romoser
Secretary
March 2, 2000
<PAGE> 4
[AO SMITH CORPORATION LOGO]
----------------------------------------------
P. O. BOX 245009
MILWAUKEE, WI 53224-9509
----------------------------------------------
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to stockholders of A. O. Smith
Corporation (the "Company") in connection with the solicitation by its Board of
Directors of proxies for use at the annual meeting of stockholders of the
Company to be held on April 5, 2000, at 10:30 A.M., Eastern Time, at Wilmington,
Delaware.
The record date for stockholders entitled to notice of and to vote at the
meeting is the close of business on February 23, 2000 (the "Record Date"). As of
the Record Date, the Company had issued 8,722,720 shares of Class A Common
Stock, par value $5 per share, 8,690,125 shares of which were outstanding and
entitled to one vote each for Class A Common Stock directors and other matters.
As of the Record Date, the Company had issued 23,826,642 shares of Common Stock,
par value $1 per share, 14,710,752 shares of which were outstanding and entitled
to one vote each for Common Stock directors and one-tenth (1/10) vote each for
other matters.
The Notice of 2000 Annual Meeting of Stockholders, this proxy statement,
form of proxy card and the Company's 1999 Annual Report are being mailed on or
about March 2, 2000, to each stockholder of the Company at the holder's address
of record.
Under the Company's Restated Certificate of Incorporation, as long as the
number of outstanding shares of Common Stock is at least 10% of the aggregate
number of outstanding shares of Class A Common Stock, the holders of the Class A
Common Stock and holders of the Common Stock vote as separate classes in the
election of directors. The holders of the Common Stock are entitled to elect as
a class 25% of the entire board of directors of the Company. Stockholders are
entitled to one vote per share in the election of directors for their class of
stock.
A majority of the outstanding shares entitled to vote must be represented
in person or by proxy at the meeting in order to constitute a quorum for
purposes of holding the annual meeting. The voting by stockholders at the
meeting is conducted by the inspectors of election. Abstentions and broker
nonvotes are counted as present in determining whether the quorum requirement is
met.
Directors are elected by a plurality of the votes cast, by proxy or in
person, with the holders voting as separate classes. A plurality of votes means
that the nominees who receive the greatest number of votes cast are elected as
directors. Consequently, any shares which are not voted, whether by abstention,
broker nonvotes or otherwise, will have no effect on the election of directors.
For all other matters considered at the meeting, both classes of stock vote
together as a single class, with the Class A Common Stock entitled to one vote
per share and the Common Stock entitled to 1/10th vote per share. All such other
matters are decided by a majority of the votes cast. On such other matters, an
abstention will have the same effect as a "no" vote but, because shares held by
brokers will not be considered to vote on matters as to which the brokers
withhold authority, a broker nonvote will have no effect on the vote.
<PAGE> 5
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company. A proxy may be revoked by the person giving it at any time
before the exercise thereof by written notice of revocation or a duly executed
proxy bearing a later date to the Secretary of the Company or by attending the
meeting and voting in person. All valid proxies not revoked will be voted unless
marked to abstain. Where a choice is specified on a proxy, the shares
represented by such proxy will be voted in accordance with the specification
made. If no instruction is indicated, the shares will be voted FOR proposals (1)
through (3) set forth in the accompanying notice.
The cost of soliciting proxies, including preparing, assembling and mailing
the notice of meeting, proxy statement, form of proxy and other soliciting
materials, as well as the cost of forwarding such material to the beneficial
owners of stock, will be paid by the Company. In addition to solicitation by
mail, directors, officers, regular employees of the Company and others may also,
but without compensation other than their regular compensation, solicit proxies
personally or by telephone or other means of electronic communication. The
Company may reimburse brokers and others holding stock in their names or in the
names of nominees for their reasonable out-of-pocket expenses in sending proxy
material to principals and beneficial owners.
PRINCIPAL STOCKHOLDERS
The following table shows persons who may be deemed to be beneficial owners
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of
more than 5% of any class of the Company's stock. Unless otherwise noted, the
table reflects beneficial ownership as of December 31, 1999.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C>
Class A Smith Investment Company* 8,067,252(1) 92.83%
Common Stock P.O. Box 245011
Milwaukee, WI 53224-9511
Common Stock Smith Investment Company 1,559,076(2) 10.60%(2)
P.O. Box 245011
Milwaukee, WI 53224-9511
Common Stock Dimensional Fund Advisors Inc. 979,050(3) 6.66%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Common Stock T. Rowe Price Associates Inc. 1,801,300(4) 12.25%
100 East Pratt Street
Baltimore, MD 21202
</TABLE>
- ---------------
(1) On December 31, 1999, Arthur O. Smith owned beneficially 230,740 shares, and
his wife owned of record and beneficially 6,970 shares of the outstanding
common stock of SICO; various trusts held 404,410 shares for the benefit of
the wife and issue of Arthur O. Smith. On December 31, 1999, Lloyd B. Smith
owned beneficially 1,924 shares of the outstanding common stock of SICO;
various trusts held 624,086 shares for the benefit of the wife and issue of
Lloyd B. Smith. In addition, Messrs. Smith were trustees of various trusts
for the benefit of persons other than themselves, their wives and issue,
which trusts held on December 31, 1999, an aggregate of 1,003,520 shares of
the outstanding common stock of SICO. The shares of SICO held beneficially
by Messrs. Smith and their wives, together with shares held by Messrs. Smith
in trust for others comprised 68.5% of the 3,317,066 outstanding shares of
common stock of SICO on December 31, 1999. Messrs. Smith
2
<PAGE> 6
have shared investment and voting power on all trusts for which they are
co-trustees. On all other trusts, one or the other shares trust powers with
at least one other person. Messrs. Smith disclaim that any of the foregoing
interests in the common stock of SICO constitute beneficial ownership of any
common stock of the Company.
(2) Pursuant to the Company's Restated Certificate of Incorporation, Class A
Common Stock is convertible at any time at the option of the holder into
Common Stock on a share-for-share basis. For purposes of computing
beneficial ownership of SICO's Common Stock, assuming that all Class A
Common Stock held by SICO was converted into Common Stock, SICO's beneficial
ownership of the Common Stock is 9,626,328 shares, which represents 42.3% of
the class of Common Stock.
(3) Dimensional Fund Advisors Inc. has sole voting power and sole dispositive
power with respect to 979,050 shares.
(4) These securities are owned by various individual and institutional
investors, including T. Rowe Small-Cap Fund, Inc. (which owns 1,055,000
shares, representing 7.18% of the shares outstanding). T. Rowe Price
Associates, Inc. (Price Associates) serves as investment adviser with power
to direct investments and/or sole power to vote the securities. For purposes
of the reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities.
* Throughout the balance of the proxy statement Smith Investment Company is
referred to as "SICO".
Information on beneficial ownership is based upon Schedules 13D or 13G
filed with the Securities and Exchange Commission and any additional information
which may have been provided to the Company by any beneficial owners.
ELECTION OF DIRECTORS
Eight directors are to be elected to serve until the next succeeding annual
meeting of stockholders and thereafter until their respective successors shall
be duly elected and qualified. Owners of Class A Common Stock are entitled to
elect six directors and owners of Common Stock are entitled to elect the two
remaining directors.
It is intended that proxies hereby solicited will be voted for the election
of the nominees named below. Proxies will not be voted for a greater number of
persons than the eight nominees named below. All nominees have consented to
being named in the proxy statement and to serve if elected. If any nominee for
election as a director shall become unavailable to serve as a director, proxies
will be voted for such substitute nominee as may be nominated by the Board of
Directors.
The following information has been furnished to the Company by the
respective nominees for director. Each nominee has been principally engaged in
the employment indicated for the last 5 years unless otherwise stated.
NOMINEES -- CLASS A COMMON STOCK
TOM H. BARRETT -- Partner in American Industrial Partners -- Private
investment partnership.
Mr. Barrett is 69 years of age and has been a director of the Company since
1981. He is the chairperson of the Personnel and Compensation Committee of the
Board. He retired as chairman of the board and chief executive officer of The
Goodyear Tire & Rubber Company in 1991. He is also a director of Air Products
and Chemicals, Inc., MONY Group Inc. and Newell Rubbermaid Incorporated.
3
<PAGE> 7
GLEN R. BOMBERGER -- Executive Vice President and Chief Financial Officer.
Mr. Bomberger, 62, became a director and executive vice president and chief
financial officer in 1986. He is a member of the Investment Policy Committee of
the Board. Mr. Bomberger joined the Company in 1960. He is currently a director
of SICO. He is a director of Firstar Funds, Inc.
ROBERT J. O'TOOLE -- Chairman of the Board, President and Chief Executive
Officer.
Mr. O'Toole, 59, became chairman of the board in 1992. He is a member of
the Investment Policy Committee of the Board. He was elected chief executive
officer in March, 1989. He was elected president, chief operating officer and a
director in 1986. Mr. O'Toole joined the Company in 1963. He is a director of
Briggs & Stratton Corporation and Factory Mutual Insurance Company.
DR. AGNAR PYTTE -- President Emeritus, Case Western Reserve University.
Dr. Pytte, 67, was elected a director of the Company in 1991. He is a
member of the Audit Committee of the Board. He became the president of Case
Western Reserve University in July, 1987 and retired on June 30, 1999. Prior to
July, 1987, Dr. Pytte was the provost at Dartmouth College where he held other
academic positions since 1958. He is now adjunct professor at Dartmouth College.
Dr. Pytte is also a director of The Goodyear Tire & Rubber Company.
ARTHUR O. SMITH -- Director of Smith Investment Company.
Mr. Smith is 69 years of age and has been a director of the Company since
1960. He is a member of the Personnel and Compensation Committee and the
chairperson of the Investment Policy Committee of the Board. He is retired
chairman and chief executive officer of SICO and the retired chairman of ASI
Technologies, Inc. Mr. Smith is the uncle of Bruce M. Smith, a director of the
Company.
BRUCE M. SMITH -- Chairman of the Board, President and Chief Executive
Officer of Smith Investment Company.
Mr. Smith is 51 years of age and has been a director of the Company since
1995. He is a member of the Investment Policy Committee and the Personnel and
Compensation Committee of the Board. He was elected chairman and chief executive
officer of SICO on January 29, 1999, and was elected president of SICO in 1993.
Prior to that time, he was executive vice president of A. O. Smith Water
Products Company, a division of the Company, from 1991 through June, 1993 and
managing director of A. O. Smith Electric Motors (Ireland) Ltd., a subsidiary of
the Company, from 1988 to 1991. Mr. Smith originally joined the Company in 1978.
He is a director of SICO. He is the nephew of Arthur O. Smith, a director of the
Company.
NOMINEES -- COMMON STOCK
WILLIAM F. BUEHLER -- Vice Chairman of the Board of Directors and President
- - Industry Solutions Operations, Xerox Corporation.
Mr. Buehler, 60, was elected a director of the Company in 1998. He is a
member of the Personnel and Compensation Committee of the Board. In April of
1999, he was named vice chairman of the board of directors and president -
Industry Solutions Operations of Xerox Corporation. Mr. Buehler joined Xerox
Corporation in 1991 as executive vice president and chief staff officer. Prior
to joining Xerox, he spent 27 years with AT & T Corporation. Mr. Buehler is a
director of Xerox Corporation, Fuji Xerox Co., Ltd., Xerox's Japanese affiliate,
and Quest Diagnostics.
4
<PAGE> 8
KATHLEEN J. HEMPEL -- Former Vice Chairman and Chief Financial Officer,
Fort Howard Corporation.
Ms. Hempel, 49, was elected a director of the Company in 1998. She is the
chairperson of the Audit Committee of the Board. Ms. Hempel was vice chairman
and chief financial officer of Fort Howard Corporation from 1992 until its
merger into Fort James Corporation in 1997. Ms. Hempel joined Fort Howard
Corporation in 1973. She is also a director of Oshkosh Truck Corporation and
Whirlpool Corporation.
BOARD COMMITTEES
The Board of Directors of the Company serves as a committee of the whole
for designating nominees for election as director. The Board of Directors will
consider written recommendations directed to the Chairman from stockholders
concerning nominees for Director. The Board of Directors has 3 standing
committees, the Personnel and Compensation Committee, the Investment Policy
Committee and the Audit Committee. In 1999, the Personnel and Compensation
Committee held 3 meetings, the Investment Policy Committee held 4 meetings and
the Audit Committee met 3 times. The Personnel and Compensation Committee is
responsible for establishing and administering the Company's compensation and
benefit plans for officers, executives and management employees, including the
determination of eligibility for participation in such plans. It determines the
compensation to be paid to officers and certain other selected executives. The
Investment Policy Committee is responsible for investment policy and certain
other matters for all Company retirement funds and other employee benefit funds.
The Audit Committee recommends the firm which will act as independent auditors
for the Company and has the responsibility to review audit procedures and the
internal controls of the Company.
DIRECTOR COMPENSATION
With respect to fiscal 1999, directors received an annual retainer, paid
quarterly, in the amount of $20,000 and the award of shares of Common Stock with
a market value of $10,000 on the date of its award. Directors also received
$1,000 for attendance at each board meeting, plus expenses. Each Audit and
Personnel and Compensation Committee member received $3,000 and the chairperson
of each received $4,000 annually; committee members also received $1,000 per
meeting, plus expenses. Each Investment Policy Committee member received $3,000
and the chairperson received $4,000 annually; committee members also received
$2,000 per meeting, plus expenses. Directors who are employees of the Company
are not compensated for service as directors or committee members or for
attendance at board or committee meetings. During 1999, a total of 6 regular
meetings and 1 special meeting of the Board of Directors were held; all
directors attended at least 75% of the number of board meetings and committee
meetings, in the aggregate, on which the director served as a member.
Certain directors have elected to defer payment of their fees and receipt
of Common Stock shares under the Corporate Directors' Deferred Compensation Plan
(the "Directors' Plan"). The Directors' Plan allows directors to defer all or a
portion (not less than 50%) of their fees until any date, but not later than the
year in which age 71 is attained. Payments can be made in a lump sum or in not
more than 10 annual installments.
5
<PAGE> 9
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of December 31, 1999, the Class A Common
Stock and Common Stock of the Company and the Class A Common Stock and Common
Stock options exercisable on or before March 1, 2000, beneficially owned by each
director, each nominee for director, each named executive officer in the Summary
Compensation Table and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME TYPE OF STOCK** BENEFICIAL OWNERSHIP(1) OF CLASS
---- --------------- ----------------------- --------
<S> <C> <C> <C>
Tom H. Barrett Common Stock 5,689 shares *
John A. Bertrand Common Stock 116,650 shares(2) *
Glen R. Bomberger Common Stock 309,210 shares(2) 1.89%
William F. Buehler Common Stock 2,687 shares *
Kathleen J. Hempel Common Stock 2,351 shares *
Ronald E. Massa Common Stock 75,981 shares(2) *
Robert J. O'Toole Common Stock 1,042,620 shares(2) 6.37%
Dr. Agnar Pytte Common Stock 6,119 shares *
W. David Romoser Common Stock 108,766 shares(2) *
Arthur O. Smith(3) Common Stock 4,189 shares
Bruce M. Smith(3) Common Stock 1,199 shares
All 20 Directors, Nominees and Executive
Officers as a Group Common Stock 2,074,256 shares(2) 12.67%
</TABLE>
- ---------------
* Represents less than one percent.
** None of the directors, nominees and executive officers have beneficial
ownership of Class A Common Stock.
(1)Except as otherwise noted, all securities are held with sole voting and sole
dispositive power.
(2)Includes 786,050; 284,550; 99,850; 69,375; 75,600 and 1,661,500 shares of
Common Stock subject to options exercisable on or before March 1, 2000,
respectively for Messrs. O'Toole, Bomberger, Bertrand, Massa, and Romoser and
for all directors and executive officers as a group. Please refer to the
Option Grants and Option Exercise Tables for additional stock option
information.
(3)Excludes shares beneficially owned by SICO.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The SUMMARY COMPENSATION TABLE reflects all compensation awarded to, earned
by or paid to each of the Company's five most highly compensated executive
officers, including the chief executive officer, during fiscal year 1999, as
well as all compensation awarded, earned or paid in the two previous fiscal
years.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
- ------------------------------------------------------------------------------------------ ------------
AWARDS
------------
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ($)(2) (#)(3) ($)(4)
- ------------------ ---- ------------ -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. O'Toole 1999 693,000 955,000 84,038 59,500 230,726
Chairman, President and 1998 660,000 881,000 40,581 91,700 93,908
Chief Executive Officer 1997 625,000 881,000 22,914 59,850 97,440
Glen R. Bomberger 1999 375,000 360,000 67,078 18,300 55,221
Executive Vice President and 1998 357,000 330,000 28,274 28,200 30,301
Chief Financial Officer 1997 340,000 330,000 27,261 24,300 36,114
John A. Bertrand 1999 255,000 250,000 42,245 15,200 33,610
Senior Vice President & 1998 220,000 220,000 22,606 15,100 19,427
President of A. O. Smith 1997 200,000 180,000 22,484 7,950 20,328
Electrical Products Company,
a division of the Company
Ronald E. Massa 1999 262,583 200,000 22,919 15,200 65,433
Senior Vice President & 1998 249,583 195,000 21,088 23,400 46,504
President of A. O. Smith 1997 237,000 195,000 19,102 15,300 43,084
Water Products Company,
a division of the Company
W. David Romoser 1999 245,000 185,000 24,539 10,500 46,563
Vice President, General 1998 233,000 170,000 19,962 16,200 20,495
Counsel and Secretary 1997 221,333 170,000 18,128 10,650 19,925
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes amounts earned during 1999 even if deferred.
(2) Includes amounts of tax reimbursements for the following: Company car,
country club, financial counseling and executive term life insurance
premiums and reimbursement of executive payments for term life insurance
premiums.
(3) See footnote (1) in Option Grants Table.
(4) All Other Compensation includes the amounts of: (a) Company contributions
under the Profit Sharing Retirement Plan (a 401(k) plan) and contributions
under the Supplemental Benefit Plan for the 401(k) plan and (b) the value
of the non-term portion of the premiums paid by the Company (arrived at by
treating the payment as an interest-free loan to the earliest possible date
the payment can be refunded and calculating its present value) for the
benefit of the named executive officers pursuant to the Executive Life
Insurance Plan, a split-dollar insurance plan. The amounts paid in 1999 are
as follows: Mr. O'Toole -- (a) $47,975 and (b) $182,751; Mr.
Bomberger -- (a) $25,960 and (b) $29,261; Mr. Bertrand -- (a) $17,653 and
(b) $15,957; Mr. Massa -- (a) $18,178 and (b) $47,255; and Mr. Romoser --
(a) $16,961 and (b) $29,602.
7
<PAGE> 11
STOCK OPTION GRANTS
The table below reflects the stock option grants made under the Long-Term
Executive Incentive Compensation Plan to the five named executive officers
during 1999.
- --------------------------------------------------------------------------------
OPTION GRANTS TABLE
- --------------------------------------------------------------------------------
Option Grants in 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ----------------------------------------------------------------------------------- -----------------------------------
% OF
TOTAL
OPTIONS
OPTIONS GRANTED EXERCISE
GRANTED(1) TO ALL PRICE EXPIRATION 0% 5% 10%
NAME (#) EMPLOYEES ($/SH) DATE ($) ($) ($)
---- ---------- --------- -------- ---------- --- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. O'Toole
Chairman, President and
Chief Executive Officer 59,500 34.2% $29.031 10/13/09 $0 $ 1,086,318 $ 2,752,942
Glen R. Bomberger 18,300 10.5% $29.031 10/13/09 0 $ 334,111 $ 846,703
John A. Bertrand 15,200 8.7% $29.031 10/13/09 0 $ 277,513 $ 703,273
Ronald E. Massa 15,200 8.7% $29.031 10/13/09 0 $ 277,513 $ 703,273
W. David Romoser 10,500 6.0% $29.031 10/13/09 0 $ 191,703 $ 485,813
------- ----- -- ------------ --------------
Totals 118,700 68.3% N/A N/A 0 $ 2,167,158 $ 5,492,004
======= ===== == ============ ==============
All Stockholders
(23,394,127 shares of Class A
Common Stock and Common Stock) N/A N/A N/A N/A 0 $427,867,588 $1,079,856,292
Named Executive Officers' % of
Total Outstanding Shares N/A .51% N/A N/A $0 .51% .51%
</TABLE>
- --------------------------------------------------------------------------------
(1) All options were granted under the Long-Term Executive Incentive
Compensation Plan. The options were granted on 10/13/99 as options to
acquire Common Stock and are first exercisable on 10/13/00. All options
were granted at the average of market value on the date of grant and have a
10-year term.
(2) The dollar values in these columns represent assumed rates of appreciation
only, over the 10-year option term, at the 5% and 10% rates of appreciation
set by the Securities and Exchange Commission rules as well as a 0%
increase in value. These amounts are not intended to predict or represent
possible future appreciation of the Company's Common Stock value. Actual
gains, if any, on stock option exercises and Common Stock holdings depend
on future performance of the Company's Common Stock and overall stock
market conditions.
8
<PAGE> 12
OPTION EXERCISES AND YEAR-END VALUES
The table includes information related to options exercised by the five
named executive officers during fiscal year 1999 and the number and value of
options held at the end of the fiscal year.
- --------------------------------------------------------------------------------
OPTION EXERCISES AND YEAR-END VALUE TABLE
- --------------------------------------------------------------------------------
Aggregated Option Exercises in Fiscal Year 1999, and December 31, 1999, Option
Values
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 (#) DECEMBER 31, 1999($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. O'Toole
Chairman, President
and Chief Executive
Officer 129,000 $2,543,725 786,050 59,500 $7,696,358 0
Glen R. Bomberger 45,000 $1,154,037 284,550 18,300 $3,109,214 0
John A. Bertrand 20,700 $ 482,993 99,850 15,200 $ 957,844 0
Ronald E. Massa 0 $ 0 69,375 15,200 $1,002,253 0
W. David Romoser 0 $ 0 75,600 10,500 $ 838,639 0
</TABLE>
- --------------------------------------------------------------------------------
(1) Based on the difference between the option exercise price and the closing
price on the New York Stock Exchange of $21.875 for the Common Stock on
December 31, 1999.
- --------------------------------------------------------------------------------
PENSION PLAN TABLE(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF SERVICE(3)
------------------------------------------------------------
REMUNERATION(2)(4) 10 20 25 30 35 40
- ------------------ ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
150,000 $22,444 $44,887 $56,109 $ 67,331 $ 78,553 $ 89,774
175,000 23,541 47,336 59,233 71,130 83,027 94,924
200,000 24,966 52,322 66,000 79,678 93,356 107,033
225,000 26,390 57,308 72,766 88,225 103,684 119,142
250,000 27,757 62,090 79,257 96,423 113,590 130,000*
275,000 28,528 64,788 82,918 101,048 119,178 130,000*
300,000 and above 28,663 65,262 83,561 101,860 120,159 130,000*
</TABLE>
- --------------------------------------------------------------------------------
(1) The Pension Plan Table shows estimated annual benefits payable to an
executive officer upon retirement under the A. O. Smith Retirement Plan,
assuming retirement at December 31, 1999, at age 65 and based upon the final
compensation and years of service set forth in the Table. Benefit amounts
were computed on a straight-life annuity basis.
(2) The compensation covered by the Plan is based on the average of the highest
5 years of annual compensation out of the last 10 years prior to retirement.
The amount included in the calculation of compensation, as reflected in the
Summary
9
<PAGE> 13
Compensation Table, is Salary and 50% of Bonus; but does not include Other
Annual Compensation, Long Term Compensation or All Other Compensation
amounts.
(3) Messrs. O'Toole, Bomberger, Bertrand, Massa, and Romoser had 36, 39, 32, 22,
and 7 years of service, respectively, at year-end.
(4) Maximum allowable salary that can be used in benefit calculation through
1993 is $235,840; in 1994, 1995 and 1996 is $150,000; and in 1997, 1998 and
1999 is $160,000.
* Maximum annual benefit payment in 1999 is $130,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. O. Smith Corporation had sales of $188.6 million in 1999 to York
International Corporation. Mr. Pokelwaldt is a director of the Company and was
Chairman and Chief Executive Officer of York International Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The directors who served as members of the Personnel and Compensation
Committee during fiscal year 1999 were Tom H. Barrett, William F. Buehler,
Robert. N. Pokelwaldt, Arthur O. Smith and Bruce M. Smith.
Mr. Arthur O. Smith is a director of SICO, and Mr. Bruce M. Smith is
chairman, president and chief executive officer of SICO. During 1999, the
Company provided SICO consulting services; office space; directors', officers'
and group insurance coverage and other miscellaneous services. The Company was
reimbursed by SICO in the amount of $90,680 for the Company's costs relating to
such services. Mr. Glen R. Bomberger, an executive officer and a director of the
Company, is also a director of SICO and served as a member of the Compensation
Committee of SICO.
BOARD PERSONNEL AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee (the "Committee") of the Board of
Directors is responsible for establishing an executive compensation program and
for administering the executive compensation policies and plans of the Company.
The Committee also determines the amount of compensation which the Company's
chief executive officer and other executive officers receive annually.
The Committee consists of five members, each of whom is an outside director
of the Company. This report was prepared by the Committee to provide the
Company's stockholders with a summary of its executive compensation policies and
practices.
The Committee has two primary objectives relating to the Company's
executive compensation program. The first is to recruit and retain high quality
executive leadership which is committed to achieving the current and long term
successful and profitable operations of the Company's businesses. The other is
to maintain an incentive compensation program which links executive pay to the
Company's return on investment.
In order to achieve these objectives, the Committee provides an executive
compensation program competitive with other comparably sized manufacturing
companies. The Committee believes that return on investment currently provides
the best measure of performance because it closely correlates the benefits to
the stockholders with the financial incentives for the executives. The Committee
has established ranges for financial
10
<PAGE> 14
incentives based upon return on investment, with smaller incentive payments for
a modest return on investment and larger incentive payments for greater returns.
The Company's executive compensation program consists of three components:
base salary, short term incentive (bonus) compensation and long term incentive
(stock options) compensation. In determining the executive compensation
practices, the Committee compares the Company's executive compensation program
with other companies' compensation programs for executives with similar
management responsibilities. The companies surveyed include comparable
manufacturing businesses. The Committee reviews executive compensation data
bases and also from time to time uses independent compensation consultants for
purposes of evaluating and reviewing the Company's executive compensation
program.
The Committee has designated certain executives, including the chief
executive officer ("CEO"), for compensation under the executive compensation
program in accordance with the performance criteria and standards described
below.
BASE SALARY
The Committee establishes competitive salary ranges for the executive
officers, generally at the median level of the salary ranges in the survey
referred to above. In addition, the Committee reviews each executive's
performance and accomplishments during the prior year as well as experience and
service with the Company in determining the annual base salary level for the
executive within the applicable salary range. In 1999, this methodology was
followed in establishing base salaries for the executive officers.
SHORT TERM INCENTIVE COMPENSATION
Short term incentive compensation is provided under the Executive Incentive
Compensation Plan ("EICP"). The EICP, consistent with the Company's philosophy
of linking compensation to the Company's return on investment, provides an
opportunity for executives to earn a cash bonus, the amount of which is based
upon the Company's and/or the operating unit's return on investment. Each year
the Committee sets minimum and maximum financial objectives for each of the
business units and the corporation. Achievement of these financial objectives by
the business or corporate units determines the amount of the Incentive
Compensation Fund available for the award of individual executive bonuses.
Incentive compensation, while predicated on the executive's unit meeting
its financial objective, is also based upon achievement of strategic objectives
established each year for the executive. In determining the amount of the
incentive compensation award to be paid to an individual executive, the
Committee considers the executive's scope of responsibility, contributions to
profit improvement and attainment of the individual's strategic objectives.
Approximately half of the incentive compensation award distributed to the
individual executive is based on the return on investment of the executive's
business unit and is formula-based between maximum and minimum target
achievement. The other half of the award is based upon accomplishment of the
executive's strategic objectives, such as development of personnel, planning,
maintenance of product leadership, continuous improvement programs and product
and process research and development. In 1999 the Committee made incentive
compensation awards to the participating executives based on these factors.
The maximum amount of incentive compensation payable to an executive during
any year is 200% of base salary. In order to be eligible for incentive
compensation, executives are required to enter into annual contracts (standard
incentive plan contracts required for all plan participants) which obligate them
to remain in the employment of the Company for the year.
11
<PAGE> 15
LONG TERM INCENTIVE COMPENSATION
The Committee utilizes the shareholder approved Long Term Executive
Incentive Compensation Plan ("LTEICP") as another key component in carrying out
the Company's philosophy of linking the executive compensation program to the
stockholders' interests. The LTEICP consists of stock options which are granted
annually to the executives at the current market price of the stock on the date
of the grant. The size of the option grant to the executive is established at a
level commensurate with the median level of grants for the executive's position
as reported in the aforementioned survey data and studies by independent
compensation consultants. Pursuant to the LTEICP, executives enter into standard
plan contracts each year which reflect the specific terms of the stock option
grants and terms of forfeiture should the executive leave the employment of the
Company.
CEO COMPENSATION
The Committee, in establishing the 1999 compensation program for the Chief
Executive Officer, Robert J. O'Toole, employed the methodology and surveys
previously described in this report. In setting Mr. O'Toole's base salary for
1999, the Committee reviewed his accomplishments during the prior year,
experience, and service with the Company and determined to position it at the
median level of salaries of chief executive officers of comparable manufacturing
companies. Mr. O'Toole's bonus compensation for 1999 was directly related to the
Company's return on investment earned by the Company and reflected Committee set
minimum and maximum objectives. The maximum amount of bonus compensation payable
to Mr. O'Toole is 200% of base salary. The Committee made stock option grants to
Mr. O'Toole under the LTEICP consistent with the methodology utilized in making
grants to the other participating executives.
CONCLUDING REMARKS
The Committee reviewed executive compensation during 1999 and concluded
that the stockholders' interests were well served by the executive compensation
program. The Committee will continue to monitor and evaluate its executive
compensation program and make any adjustments determined to be appropriate. The
Committee has and intends to preserve the deductibility of executive
compensation paid by the Company in accordance with the provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended.
PERSONNEL & COMPENSATION COMMITTEE
TOM H. BARRETT, CHAIRMAN
WILLIAM F. BUEHLER, MEMBER
ROBERT N. POKELWALDT, MEMBER
ARTHUR O. SMITH, MEMBER
BRUCE M. SMITH, MEMBER
12
<PAGE> 16
PERFORMANCE GRAPH
The graph below shows a five-year comparison of the cumulative shareholder
return on the Company's common stock with the cumulative total return of
companies on the S&P Smallcap 600 and the S&P 600 Electrical Equipment Index,
all of which are published indices.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FROM DECEMBER 31, 1994 TO DECEMBER 31, 1999
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COMPANY/INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMITH (A O) CORP 100 86.82 128.48 185.15 164.38 149.18
- -----------------------------------------------------------------------------------------------------------------------
S&P SMALLCAP 600 INDEX 100 129.96 157.67 198.01 195.42 219.66
- -----------------------------------------------------------------------------------------------------------------------
S&P 600 ELECTRICAL EQUIPMENT 100 125.59 143.17 176.28 178.23 274.59
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSUMES $100 INVESTED WITH REINVESTMENT OF DIVIDENDS
13
\
<PAGE> 17
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York and American Stock Exchanges. Executive officers, directors and
greater than ten percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) Forms 3, 4 and 5 which they file.
Based solely on its review of the copies of such forms received by the
Company and written representations from certain reporting persons during fiscal
year 1999, the Company believes that all filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were met.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Ernst & Young LLP,
Certified Public Accountants, as the Company's independent auditors for 2000.
The action of the Board of Directors was taken upon the recommendation of its
Audit Committee.
Although not required to be submitted to a vote of the stockholders, the
Board of Directors believes it appropriate to obtain stockholder ratification of
the Board's action in appointing Ernst & Young LLP as the Company's independent
auditors. Should such appointment not be ratified, the Board of Directors will
reconsider the matter.
OTHER BUSINESS
Management is not aware of any matters other than those stated above which
may be presented for action at the meeting, but should any matter requiring a
vote of the stockholders arise, it is intended that proxies solicited will be
voted in respect thereof in accordance with the discretion of the person or
persons voting the proxies.
DATE FOR STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 annual
meeting of stockholders must be received by the Company no later than November
7, 2000, to be included in the materials for the 2001 meeting.
March 2, 2000
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, OR VOTE YOUR
SHARES VIA THE INTERNET. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY
AND VOTE YOUR SHARES IN PERSON.
14
<PAGE> 18
[AO SMITH CORPORATION LOGO]
<PAGE> 19
A. O. SMITH CORPORATION
PROXY - COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT J. O'TOOLE, GLEN R. BOMBERGER
and W. DAVID ROMOSER, or any one of them, with full power of substitution, as
proxy or proxies of the undersigned to attend the annual meeting of stockholders
of A. O. Smith Corporation to be held on April 5, 2000, at 10:30 a.m. Eastern
Time, at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, or at
any adjournment thereof, and there to vote all shares of Common Stock which the
undersigned would be entitled to vote if personally present as specified upon
the following matters and in their discretion upon such other matters as may
properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
A. O. Smith Corporation encourages you to take advantage of a
convenient way to vote your proxy via the Internet.
To vote via the Internet, log on to the Internet and go to the website:
https://www.css2.sungard.com/Firstar/InterLink?pbProxyVoting=1
Your electronic vote authorizes the named proxies in the same manner as
if you marked, signed, dated and returned the proxy card. If you choose
to vote your shares electronically, there is no need for you to mail
back your proxy card.
IF VOTING BY MAIL
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
A. O. SMITH CORPORATION 2000 ANNUAL MEETING
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. If no direction is made, this proxy will be voted FOR proposals
1 and 2.
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS: 1. William F. Buehler 2. Kathleen J. Hempel /__/ FOR all nominees /__/ WITHHOLD AUTHORITY
listed to the left to vote for all
(except as specified nominees listed
below). to the left.
(Instructions: To withhold authority to vote for any individual nominee,
write number(s) of nominee(s) in the box provided to the right.)
----------------> -------------------
2. Proposal to approve the ratification of Ernst & Young LLP as the independent /__/FOR /__/ AGAINST /__/ ABSTAIN
auditors of the corporation:
DIRECTORS RECOMMEND A VOTE FOR.
Check appropriate box Date ______________________ NO. OF SHARES
Indicate changes below:
Address change? /__/ Name Change? /__/
-----------------------------------------
Signature(s) in Box
Please sign exactly as your name appears on this proxy.
When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
</TABLE>
<PAGE> 20
A. O. SMITH CORPORATION
PROXY - CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT J. O'TOOLE, GLEN R. BOMBERGER
and W. DAVID ROMOSER, or any one of them, with full power of substitution, as
proxy or proxies of the undersigned to attend the annual meeting of stockholders
of A. O. Smith Corporation to be held on April 5, 2000, at 10:30 a.m. Eastern
Time, at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, or at
any adjournment thereof, and there to vote all shares of Class A Common Stock
which the undersigned would be entitled to vote if personally present as
specified upon the following matters and in their discretion upon such other
matters as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
A. O. Smith Corporation encourages you to take advantage of a
convenient way to vote your proxy via the Internet.
To vote via the Internet, log on to the Internet and go to the website:
https://www.css2.sungard.com/Firstar/InterLink?pbProxyVoting=1
Your electronic vote authorizes the named proxies in the same manner as
if you marked, signed, dated and returned the proxy card. If you choose
to vote your shares electronically, there is no need for you to mail
back your proxy card.
IF VOTING BY MAIL
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
A. O. SMITH CORPORATION 2000 ANNUAL MEETING
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. If no direction is made, this proxy will be voted FOR proposals
1 and 2.
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS: 1. Tom H. Barrett 2. Glen R. Bomberger 3. Robert J. O'Toole
4. Dr. Agnar Pytte 5. Arthur O. Smith 6. Bruce M. Smith /__/FOR all nominees /__/WITHHOLD AUTHORITY
listed to the left to vote for all
(except as specified nominees listed
below). to the left.
(Instructions: To withhold authority to vote for any individual nominee,
write number(s) of nominee(s) in the box provided to the right.)
------------------> ----------------------
2. Proposal to approve the ratification of Ernst & Young LLP as the independent /__/FOR /__/ AGAINST /__/ ABSTAIN
auditors of the corporation:
DIRECTORS RECOMMEND A VOTE FOR.
Check appropriate box Date ______________________ NO. OF SHARES
Indicate changes below:
Address change? /__/ Name Change? /__/
------------------------------------------------
Signature(s) in Box
Please sign exactly as your name appears on this proxy.
When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
</TABLE>
<PAGE> 21
A. O. SMITH CORPORATION
VOTING INSTRUCTIONS TO THE MARSHALL & ILSLEY TRUST COMPANY
TRUSTEE OF THE A. O. SMITH PROFIT
SHARING RETIREMENT PLAN
THIS VOTING INSTRUCTION IS SOLICITED ON BEHALF OF THE TRUSTEE
The undersigned hereby directs the Marshall & Ilsley Trust Company,
Trustee of the A. O. Smith Profit Sharing Retirement Plan, to vote the shares of
A. O. Smith Corporation Common Stock allocated to the undersigned's account in
said Trust at the Annual Meeting to be held on April 5, 2000, and all
adjournments.
VOTING INSTRUCTIONS TO THE TRUSTEE: IF NO CHOICES ARE MARKED BELOW, THE
TRUSTEE WILL VOTE FOR PROPOSALS 1 AND 2.
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
A. O. SMITH CORPORATION 2000 ANNUAL MEETING
Voting Instructions to the Trustee: If no choices are marked below, the Trustee
will vote FOR proposals 1 and 2.
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS: 1. William F. Buehler 2. Kathleen J. Hempel /__/ FOR all nominees /__/ WITHHOLD AUTHORITY
listed to the left to vote for all
(except as specified nominees listed
below). to the left.
(Instructions: To withhold authority to vote for any individual nominee, write
number(s) of nominee(s) in the box provided to the right.)
---------------> -----------------------
2. Proposal to approve the ratification of Ernst & Young LLP as the independent /__/FOR /__/ AGAINST /__/ ABSTAIN
auditors of the corporation:
DIRECTORS RECOMMEND A VOTE FOR.
Check appropriate box Date ______________________ NO. OF SHARES
Indicate changes below:
Address change? /__/ Name Change? /__/
------------------------------------------------
Signature(s) in Box
Please sign exactly as your name appears on this proxy.
When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
</TABLE>
