MILWAUKEE, July 17 -- Electric motor and water heater manufacturer A.O. Smith Corporation (NYSE: AOS) 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.

Forward-Looking Statements

Certain statements in this report are "forward-looking statements." These forward-looking statements can generally be identified as such because the context of the statement will include words such as the company "believes," "anticipates," "expects," "projects," or words of similar import.

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. The company considers most important among such factors, the stability in its electric motor and water products markets, the timely and proper integration of the MagneTek motors acquisition, and the implementation of associated cost reduction programs.

All subsequent written and oral forward-looking statements attributable to the company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements.