Press Releases
<< BackJanuary 19, 1999 at 12:00 AM EST
A.O. Smith Earnings of $1.84 Per Share Set Record; Fourth Quarter Earnings Increase 18 Percent to $.45 Per Share
A.O. Smith Earnings of $1.84 Per Share Set Record; Fourth Quarter Earnings Increase 18 Percent to $.45 Per Share
Per share earnings were more than 38 percent higher than the $1.33 per share earned in 1997. Earnings from continuing operations increased nearly $7 million from 1997's total of $37.6 million. Sales for the year were $917.6 million, more than 10 percent higher than 1997 sales of $832.9 million.
For the fourth quarter, earnings from continuing operations were $10.7 million or $.45 per share, compared with fourth quarter 1997 earnings of $9.7 million or $.38 per share. Fourth quarter sales of $224.7 million were more than nine percent higher than fourth quarter 1997 sales of $205.8 million.
"Our Electric Motor Technologies platform achieved record sales and profits for the fourth consecutive year, while Water Systems Technologies' sales and profits improved over the prior year," Robert J. O'Toole, chairman and chief executive officer, observed. "Their performance enabled the company to overcome the difficulties we faced in our storage and fiberglass pipe markets in 1998."
Electric Motor Technologies, A.O. Smith's largest platform, benefited from the resurgence of the domestic air conditioning market in 1998, a full year of sales and profits from its UPPCO operations, acquired in March of 1997, and six months' sales and profits from its hermetic motor operations in Scottsville, Ky., acquired July 1, 1998. The platform's sales of $480 million were more than $89 million higher than the prior year, and operating profits increased more than 20 percent over the prior year.
A.O. Smith's sales of hermetic motors grew more than 48 percent over the prior year, benefiting from the record-setting performance of the domestic air conditioning industry as well as six months' sales from the Scottsville operation. Sales of fractional horsepower motors for the pump market segment and subfractional horsepower motors also grew over the prior year.
Water Systems Technologies' 1998 sales reached a record $294.8 million, approximately three percent higher than the prior year. Operating profits improved over the prior year, as higher volumes in the commercial water heating segment of the market and cost reductions helped to overcome pricing pressure in the residential segment and losses associated with the start-up of the company's operation in China.
A.O. Smith strengthened its leading position in the commercial water heating segment in 1998, with sales of commercial water heaters and boilers increasing more than eight percent. Water Systems Technologies took advantage of increased demand for replacement water heaters and a strong commercial construction market, as well as benefiting from continued growth of new products such as the Cyclone XHE® water heater.
Weakness in the petroleum production, chemical, and agricultural markets contributed to lower sales and profits for the Storage & Fluid Handling Technologies Platform in 1998. Low oil and chemical prices had an adverse impact on capital spending, resulting in reduced demand for storage tanks and fiberglass pipe. Sales declined more than seven percent in 1998 to $142.8 million. Operating profits were significantly lower than the prior year.
1999 Outlook
"Our outlook for the coming year remains the same as we have described it in prior public announcements," O'Toole said. "We believe the Electric Motors Technologies platform will have another good year, due to a full year of sales and profits from the Scottsville acquisition, the new Tier I agreement with York International, and the overall condition of the domestic air conditioning, heating, and refrigeration industry. We are cautiously optimistic about the domestic water heating market. The anticipated performance of these two units should help offset continued difficulties in Storage & Fluid Handling.
"We will continue to aggressively pursue acquisitions such as UPPCO and Scottsville in 1999 and consider that effort to be a very important element in our growth strategy. Although we believe 1999 per share earnings, excluding acquisitions, will increase over 1998, accretive acquisitions will be required to get us to our target of 15 percent annual growth in earnings per share," O'Toole concluded.
Forward-looking statements
This press release contains 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 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 world-wide air conditioning, heating, and refrigeration 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, and chemical markets; and the successful development of the company's business venture in China.
A.O. Smith Corporation is a diversified manufacturer with headquarters in Milwaukee, Wis. Its major product line include: fractional horsepower, hermetic, and subfractional horsepower electric motors; residential and commercial water heaters; municipal, industrial, and agricultural storage tanks; and fiberglass reinforced plastic pipe.
A.O. SMITH CORPORATION AND SUBSIDIARIES
(condensed consolidated financial statements --
$000 omitted except per share data)
Statement of Earnings
Three Months ended Year ended
Continuing December 31 December 31
Sales 1998 1997 1998 1997
Electric Motor
Technologies $119,043 $91,970 $479,956 $390,749
Water Systems
Technologies 74,298 76,240 294,832 287,458
Storage & Fluid
Handling
Technologies 31,339 37,577 142,781 154,730
Net Sales 224,680 205,787 917,569 832,937
Costs and Expenses
Cost of Products
Sold 178,298 165,421 730,543 662,227
Selling, General and
Administrative 26,017 24,748 106,622 106,999
Interest Expense 1,696 1,160 6,887 7,762
Interest Income (549) (2,665) (3,828) (9,035)
Other Expense 2,041 1,243 4,382 3,328
Tax Provision 5,696 5,356 25,283 21,359
Total Costs and
Expenses 213,199 195,263 869,889 792,640
Earnings Before Equity in
Loss of Joint Ventures 11,481 10,524 47,680 40,297
Equity in Loss of
Joint Ventures (771) (779) (3,189) (2,744)
Earnings from Continuing
Operations 10,710 9,745 44,491 37,553
Continuing Earnings Per Share
of Common Stock (Diluted) $.45 $.38 $1.84 $1.33
Average Common Shares
Outstanding
(000's omitted) 23,791 25,918 24,184 28,191
A.O. SMITH CORPORATION
Balance Sheet
December 31 December 31
1998 1997
ASSETS:
Cash and cash equivalents $37,666 $145,896
Receivables 133,764 126,232
Inventories 99,984 79,049
Deferred income taxes 11,376 11,849
Other current assets 4,599 2,702
Total Current Assets 287,389 365,728
Net property, plant and equipment 248,770 207,756
Investments in and advances to
joint ventures 2,449 25,605
Goodwill 146,901 51,783
Other assets 81,923 65,644
Total Assets $767,432 $716,516
LIABILITIES AND STOCKHOLDERS' EQUITY:
Trade payables $57,429 $61,299
Accrued payroll and benefits 31,385 26,397
Product warranty 7,892 7,972
Income taxes 6,786 6,607
Long-term debt due within one year 4,629 5,590
Other current liabilities 24,036 20,017
Total Current Liabilities 132,157 127,882
Long-term debt 131,203 100,972
Other liabilities 60,636 59,515
Deferred income taxes 42,343 28,442
Stockholders' equity 401,093 399,705
Total Liabilities and Stockholders'
Equity $767,432 $716,516
A.O. SMITH CORPORATION
STATEMENT OF CASH FLOWS
Year ended
December 31
1998 1997
Operating Activities
Continuing
Net earnings $44,491 $37,553
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation & amortization 30,105 26,286
Equity in loss of joint ventures 3,189 2,744
Net change in current assets and liabilities (3,564) 7,212
Net change in noncurrent assets and liabilities 1,719 4,958
Other 1,659 1,495
Cash Provided by Operating Activities 77,599 80,248
Investing Activities
Capital expenditures (27,876) (44,886)
Capitalized purchased software costs (2,139) (1,295)
Investment in joint ventures (7,138) (13,719)
Acquisition of business (126,273) (60,918)
Cash Used by Investing Activities (163,426) (120,818)
Cash Used by Continuing Operations
before Financing Activities (85,827) (40,570)
Discontinued
Cash Provided / (Used) by Discontinued Operations
before Financing Activities (2,941) 508,463
Financing Activities
Long-term debt incurred 30,028 --
Long-term debt retired (5,590) (143,816)
Purchase of common stock held in treasury (33,288) (176,550)
Proceeds from common stock options exercised 271 3,757
Tax benefit from exercise of stock options 168 884
Dividends paid (11,051) (12,677)
Cash Used by Financing Activities (19,462) (328,402)
Net increase/(decrease)
in cash and cash equivalents (108,230) 139,491
Cash and cash equivalents - beginning of period 145,896 6,405
Cash and Cash Equivalents - End of Period $37,666 $145,896