MILWAUKEE, April 12 /PRNewswire/ -- A.O. Smith Corporation (NYSE: AOS) (Amex: SMCA) today announced first quarter net earnings of $8.5 million or $.36 per share on sales of $318 million.

This performance represented significant improvement from the fourth quarter of 2000 and exceeded analysts' first-quarter estimates.

Sales of $318.2 million increased 17 percent from the 2000 fourth quarter, influenced by stabilizing heating and air conditioning inventories, firmness in water heater demand, and seasonal trends in a number of markets. The first-quarter profit of $8.5 million exceeded fourth-quarter profit by $6 million.

Compared with the record first quarter of 2000, sales decreased 7.6 percent. Profits were lower than the $.60 per share reported during the comparable period last year.

"Earnings showed a notable turnaround compared with the fourth quarter of 2000," Robert J. O'Toole, chairman and chief executive officer, noted. "Our operating units are adjusting to lower demand levels, and, during the first quarter, we began to experience the benefits of the cost reduction activities initiated last year."

Sales for Electric Motor Technologies, the company's largest operating unit, were $226.3 million. This was substantially improved from sales of $185.1 million in the fourth quarter of 2000, due to seasonal buying patterns of customers and decreased inventory levels in the market channels. Compared with the first quarter of 2000, sales were down $26.3 million, primarily due to the higher level of demand for heating and air conditioning products in early 2000.

Electric Motors' operating profit improved to $14 million, substantially higher than the $5.4 million earned in the 2000 fourth quarter, due to higher sales volume and the resulting improved absorption of fixed cost. First quarter operating profit was $26.1 million in 2000. Year-over-year profits declined principally due to lower sales volume, with increased utility costs and Mexican labor inflation also having an impact.

First-quarter sales of $92.0 million for the Water Systems Technologies Platform were essentially unchanged when compared with the same quarter in 2000. Lower sales of commercial water heaters were offset by higher sales in the China market.

Operating profit for the quarter ended March 31 was moderately higher due to improved performance in China.

Company discusses 2001 outlook

"We anticipate further improvement in sales and profit in the second quarter," O'Toole said. "This is traditionally the strongest season for HVAC sales, and inventories appear to be trending down from the higher levels last summer and fall. We expect second-quarter earnings to be in the range of $.45 to $.50 per share."

"For the full year, we continue to anticipate 2001 earnings will exceed the 2000 results of $1.76 per share. We recognize that the economy is currently very volatile, making market and sales projections more difficult. However, we believe that our ongoing cost reduction efforts and capacity rationalization will continue to contribute to profitability as the year progresses."

A.O. Smith Corporation will broadcast a live conference call this morning to discuss first-quarter 2001 results. The call can be heard on the company's website, http://www.aosmith.com beginning at 10:00 a.m. (eastern time).

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 approximately 14,000 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," "estimates," "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 the results expressed in forward-looking statements will be realized. Although a significant portion of the company's sales are derived from the replacement of previously installed product, and such sales are therefore less volatile, numerous factors may affect actual results and cause results to differ materially from those expressed in forward-looking statements made by, or on behalf of, the company. Among such factors are the stability in its electric motor and water products markets, the state of the domestic economy, and the successful implementation of 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.

                    A.O.  SMITH CORPORATION AND SUBSIDIARIES
                 (condensed consolidated financial statements --
                       $000 omitted except per share data)

                              Statement of Earnings
                                                       Three Months ended
    Continuing Operations                                   March 31
    Net Sales                                         2001              2000
       Electric Motor Technologies                $226,253          $252,343
       Water Systems Technologies                   91,982            92,223
                                                   318,235           344,566
    Costs and Expenses
       Cost of products sold                       259,440           271,195
       Selling, general and
        administrative                              38,123            42,991
       Interest expense                              4,801             5,431
       Amortization of intangibles                   1,733             1,727
       Other expense                                   599               843
       Tax provision                                 5,010             8,224
          Total costs and expenses                 309,706           330,411
    Earnings from Continuing Operations              8,529            14,155
    Discontinued operations less related
     income tax of $297                                 --               456
    Net Earnings                                    $8,529           $14,611
    Net Earnings Per Share of Common
     Stock (Diluted)
       Continuing Operations                         $0.36             $0.60
       Discontinued Operations                        $--              $0.02
            Net Earnings                             $0.36             $0.62
       Average Common Shares Outstanding
        (000's omitted)                             23,828            23,698

                             A.O. SMITH CORPORATION
                                  Balance Sheet

                                                  March 31        December 31
                                                    2001              2000

    ASSETS:

        Cash and cash equivalents                  $13,058           $15,287
        Receivables                                202,718           169,117
        Inventories                                169,809           169,630
        Deferred income taxes                        6,488             7,215
        Other current assets                        22,431            22,199
        Net current assets-discontinued
         operations                                     --            22,651
           Total Current Assets                    414,504           406,099
        Net property, plant and equipment          282,305           282,835
        Goodwill and other intangibles             243,088           244,821
        Other assets                               112,254           107,928
        Net long-term assets --
         discontinued operations                        --            17,493
        Total Assets                            $1,052,151        $1,059,176

    LIABILITIES AND STOCKHOLDERS' EQUITY:

        Trade payables                             $97,682           $91,780
        Accrued payroll and benefits                23,615            27,388
        Product warranty                            12,130            11,574
        Income taxes                                 2,301             1,695
        Long-term debt due within one
         year                                       11,129            11,129
        Other current liabilities                   29,630            26,865
           Total Current Liabilities               176,487           170,431
        Long-term debt                             295,706           316,372
        Other liabilities                           62,509            61,856
        Deferred income taxes                       64,742            62,122
        Stockholders' equity                       452,707           448,395
        Total Liabilities and
         Stockholders' Equity                   $1,052,151        $1,059,176

                            A.O.  SMITH CORPORATION
                             STATEMENT OF CASH FLOWS

                                                        Three Months ended
                                                             March 31
                                                     2001              2000
    Operating Activities
    Continuing
         Net earnings                               $8,529           $14,155
         Adjustments to reconcile net
          earnings
           to net cash provided by
            operating activities:
              Depreciation & amortization           11,411            11,320
              Net change in current
               assets and liabilities              (29,185)          (25,677)
              Net change in noncurrent
               assets and liabilities               (4,258)           (3,890)
              Other                                    307               414
    Cash Used in Operating Activities              (13,196)           (3,678)
    Investing Activities
         Capital expenditures                       (9,520)          (11,660)
         Capitalized purchased software
          costs                                        (88)             (360)
    Cash Used in Investing Activities               (9,608)          (12,020)

    Cash Flow before Financing                     (22,804)          (15,698)

    Financing Activities
         Debt incurred                                  --            14,178
         Debt retired                              (20,666)               --
         Other stock transactions                      101                38
         Dividends paid                             (3,061)           (2,807)
    Cash Provided by (Used in) Financing
     Activities                                    (23,626)           11,409
    Discontinued
    Cash Provided by (Used in)
     Discontinued Operations                        44,201            (5,340)
         Net decrease in cash and cash
          equivalents                               (2,229)           (9,629)
         Cash and cash equivalents --
          beginning of period                       15,287            14,761
    Cash and Cash Equivalents -- End of
     Period                                        $13,058            $5,132

SOURCE  A.O. Smith Corporation




    CONTACT:  Media, Edward O'Connor, 414-359-4100, or Analysts and
Investors, Craig Watson, 414-359-4009, both for A.O. Smith Corporation/