FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission file number 1-475
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
A. O. Smith Profit Sharing Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
A. O. Smith Corporation
11270 West Park Place
Milwaukee, WI 53224
REQUIRED INFORMATION
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. The A. O. Smith Profit Sharing Retirement Plan (the "Plan") is
subject to the requirements of the Employee Retirement Income
Security Act of 1974 ("ERISA"). Attached hereto is a copy of the
most recent financial statements and schedules of the Plan prepared
in accordance with the financial reporting requirements of ERISA.
Exhibits
23.1 Consent of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed by the undersigned thereunto duly authorized.
A. O. Smith Profit Sharing
Retirement Plan
Date: July 15, 1997 By: /S/ Duane R. Carlson
Duane R. Carlson
Manager Pension and Savings Plan
CONTENTS
A. O. Smith Profit Sharing Retirement Plan:
Independent Auditors' Report
Page
Financial statements
Statement of net assets available for benefits 1
Statement of changes in net assets available
for benefits 2
Notes to financial statements 3-11
Supplementary information
A schedule of party-in-interest transactions has not been presented
because there were no party-in-interest transactions which are
prohibited by ERISA Section 406 and for which there is no statutory
or administrative exemption.
INDEPENDENT AUDITORS' REPORT
Benefits Committee
A. O. Smith Profit Sharing
Retirement Plan
Milwaukee, Wisconsin
We have audited the accompanying statements of net assets available for
benefits of the A. O. Smith Corporation Profit Sharing Retirement Plan as
of December 31, 1996 and 1995, and the related statement of changes in net
assets available for benefits for the year ended December 31, 1996. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
Except as discussed in the following paragraph, we conducted our audits in
accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974, investment assets held by M&I Trust Company,
Milwaukee, Wisconsin, the trustee of the Plan, and transactions in those
assets were excluded from the scope of our audit of the Plan's 1995
financial statements, except for comparing the information provided by the
trustee, which is summarized in Note 4, with the related information
included in the financial statements.
Because of the significance of the information that we did not audit, we
are unable to, and do not, express an opinion on the Plan's financial
statements as of December 31, 1995. The form and content of the
information included in the 1995 financial statements, other than that
derived from the information certified by the trustee, have been audited
by us and, in our opinion, are presented in compliance with the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974.
In our opinion, the financial statements, referred to above, of the A. O.
Smith Corporation Profit Sharing and Retirement Plan as of December 31,
1996, and for the year then ended present fairly, in all material
respects, the financial status of the A. O. Smith Corporation Profit
Sharing and Retirement Plan as of December 31, 1996, and the changes in
its financial status for the year then ended in conformity with generally
accepted accounting principles.
July 14, 1997 Reilly, Penner & Benton LLP
Milwaukee, Wisconsin
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
1996 1995
Assets:
Investment in A. O. Smith Master
Trust at fair market value
(Notes 2 and 3) $172,613,605 $144,663,057
Participant loans at estimated
fair market value 3,815,476 3,548,289
------------ -----------
Total 176,429,081 148,211,346
Receivables:
Due from broker for securities
sold 119,773 --
Interest income 123,846 126,587
Company contribution 5,261,788 5,147,600
----------- -----------
Total receivables 5,505,407 5,274,187
----------- -----------
Net assets available
for benefits $181,934,488 $153,485,533
=========== ===========
The accompanying notes to financial statements
are an integral part of this statement.
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31
Additions: 1996 1995
Investment in A. O. Smith Master
Trust at fair market value:
Net investment income $ 2,388,593 $ 2,327,642
Realized gain on
investment transactions 16,191,765 10,131,498
Unrealized appreciation on
investments 4,085,625 15,127,258
------------ -----------
Total 22,665,983 27,586,398
Interest income from participant
loans at estimated
fair market value 291,769 239,510
------------ -----------
Total investment income 22,957,752 27,825,908
------------ -----------
Contributions:
Company 5,261,788 5,147,600
Participants 8,682,069 7,244,964
------------ -----------
Total contributions 13,943,857 12,392,564
------------ -----------
Total additions 36,901,609 40,218,472
Decreases:
Benefit and withdrawal payments 9,007,833 7,904,107
----------- -----------
Net increase before transfers 27,893,776 32,314,365
Transfers from (to) other plans 555,179 (98,289)
----------- -----------
Increase in net assets
available for benefits 28,448,955 32,216,076
Net assets available for
benefits:
Beginning of the year 153,485,533 121,269,457
----------- -----------
End of the year $181,934,488 $153,485,533
=========== ===========
The accompanying notes to financial statements
are an integral part of this statement.
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. Basis of presentation and significant accounting policies
General - The A. O. Smith Profit Sharing Retirement Plan was established
in 1956 to cover salaried or commissioned nonunion employees of the A. O.
Smith Corporation, its subsidiaries and affiliates. Employees will be
eligible to participate in the Plan if they are scheduled to complete
1,000 hours of service in a Plan year. Employees elect to participate by
designating a portion of their salary to be contributed to an account
maintained on behalf of the participant.
Investment valuation - All of the Plan's investments are invested in the
A. O. Smith Corporation Profit Sharing Retirement Master Trust (Master
Trust) (Note 2) which are valued at market price. The financial
statements of the Master Trust are presented separately and are
incorporated by reference to the financial statements of this Plan. The
investments in the A. O. Smith Income Fund and the A. O. Smith Stable
Asset Income Fund are valued at the redemption price established by the
trustee. Participant loans receivable are valued at cost which
approximates fair market value.
Contributions and benefit and withdrawal payments - The Plan is a defined
contribution plan to which participants may make contributions of not less
than 1% or more than 16% of their compensation. The Plan provides for all
participant contributions to be made with tax-deferred dollars under
Section 401(k) of the Internal Revenue Code. These contributions are
excluded from the participant's current wages for federal income tax
purposes. The Internal Revenue Code has set a maximum of $9,500 for tax-
deferred contributions that may be excluded for any individual participant
in 1996. No federal income tax is paid on the tax-deferred contributions
and growth thereon until the participant withdraws them from the Plan.
Contributions from participants are recorded when A. O. Smith Corporation
(the Company) makes payroll deductions from Plan participants.
Contributions from the Company are accrued in the period in which they
become obligations of the Company in accordance with terms of the Plan.
For each $1.00 of 401(k) Tax-Deferred contributions, up to 6% of a
participant's salary, the Company guarantees a contribution of $.35.
Additional Company contributions in excess of $.35 will be based on the
Company's return on net worth. The additional Company matching
contribution amount is $.05 times the return on net worth between 5% and
10%, plus $.10 times the return on net worth in excess of 10% up to a
maximum of 18%. Therefore, the guaranteed and additional contributions
can combine for a maximum Company contribution of $1.40 of participant
contributions up to 6% of salary.
Vesting - Participants of the Plan are 0% vested in employer contributions
with less than two years of participation, 40% vested after two years, 60%
after three years, 80% after four years and fully vested after five years
of participation. Participants are always fully vested in their own
contributions.
A separate account is maintained for each participant. The separate
account balances are adjusted periodically as follows:
a. Semi-monthly for participant's contributions.
b. Annually for Company contributions.
c. Daily for a proportionate share of increases and decreases in the
market value of Plan assets.
d. The accounts are periodically adjusted for forfeitures which are
used to pay plan expenses by an equivalent amount.
e. Daily for benefit and withdrawal payments which consist of the
following:
i. Upon retirement, death, disability, or termination of
employment resulting from permanent reduction of personnel,
an employee may withdraw any amount or the entire account
balance for any reason. One withdrawal of this type is
allowed per calendar year, up to age 70 1/2. At 70 1/2 an
account distribution election must be made.
ii. Upon termination of employment for other reasons,
the balance in the separate account (reduced for
nonvested company contributions and growth
thereon based on years of service) may be paid in
a lump sum.
iii. An active participant age 59 1/2 or older may withdraw the
balance in the separate account. The balance in the
separate account is paid to the participant in a lump sum.
iv. A participant may withdraw all or any portion of the
principal balance attributable to after-tax contributions
and earnings and rollover contributions and earnings. All
or any portion of the balance attributable to Company
contributions and earnings may also be withdrawn if the
participant has five full years of employment with the
Company.
v. A participant may withdraw at any time any amount
attributable to participant contributions and growth to
purchase, prevent eviction from or foreclosure on, a
principal residence or to pay certain expenses (namely
post-secondary education and unreimbursed medical
expenses). Withdrawals may not include earnings on 401(k)
contributions posted to a participant's account after 1988.
vi. No lump sum cash distribution in excess of $3,500 will be
made without the consent of the participant.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
Realized gains and losses - The realized gains and losses recognized on
the financial statements are calculated by comparing the sales proceeds to
the original cost of the investment as prescribed by generally accepted
accounting principals. The realized gains and losses recognized in the
Form 5500 (annual federal filing) are recalculated by comparing the sales
proceeds to the value of the investment at the beginning of the plan year.
If the investment is purchased in the same year as the sale, the gain or
loss is calculated by comparing the sales proceeds to the purchase price.
2. A. O. Smith Corporation Profit Sharing Retirement Master Trust
The Plan assets are held in the A. O. Smith Corporation Profit Sharing
Retirement Master Trust at the Marshall and Ilsley Trust Company. The
Plan offers nine investment vehicles in which participants may invest
their account balances. The amount of Master Trust assets, income and
change in value which is allocated to the Plan is determined by the ratio
of participant account balances in the Plan to the total participant
account balances of all participating plans. The defined contribution
plans participating in the Master Trust are the A. O. Smith Profit Sharing
Retirement Plan, the A. O. Smith Employee Savings Plan, the A. O. Smith
Employee 401(k) Savings Plan, the A. O. Smith Saving and Investment Plan
and the A. O. Smith Savings and Security Plan.
Significant information related to the investments in the Master Trust as
of and for the year ended December 31, 1996 is as follows:
a. Registered Investment Company Mutual Funds:
December 31, 1996 1996 Change
1996 Balance Income in Value
American EuroPacific
Growth Fund $ 7,100,668 $ 916,381 $ 4,624,948
Portico Growth and
Income Fund 30,048,024 5,460,381 11,419,672
Fidelity Aggressive Equity
Portfolio 96,212,023 18,300,687 16,257,499
Vanguard Institutional Index
Trust Fund 21,674,023 4,139,955 4,471,527
Vanguard Fixed Income
Short-term Corp. Fund 7,440,943 352,530 (834,561)
American Balanced Fund 16,146,773 1,848,768 1,454,649
----------- ----------- ----------
Sub-total 178,622,454 31,018,702 37,393,734
----------- ----------- ----------
b. Common/Collective Trusts:
A. O. Smith Stock Fund 1,049,076 54,462 1,049,076
A. O. Smith Stable Asset
Income Fund 50,029,586 2,611,898 5,486,903
----------- ---------- ---------
Sub-total 51,078,662 2,666,360 6,535,979
----------- ---------- ---------
c. Short-term, High quality
liquid securities:
A. O. Smith Income Fund 62,301,690 3,295,061 (157,519)
----------- ---------- ----------
Total $292,002,806 $ 36,980,123 $43,772,194
=========== ========== ==========
Significant information related to the investments in the Master Trust as
of and for the year ended December 31, 1995 is as follows:
a. Registered Investment Company Mutual Funds:
December 31, 1995 1995 Change
1995 Balance Income in Value
American EuroPacific
Growth Fund $ 2,475,721 $ 317,793 $ 2,475,721
Portico Growth and Income
Fund 18,628,351 4,386,363 7,937,150
Fidelity Aggressive Equity
Portfolio 79,954,524 25,193,614 31,270,200
Vanguard Institutional Index
Trust Fund 17,202,495 3,990,634 9,593,710
Vanguard Fixed Income Short-
term Corp. Fund 8,275,505 877,389 1,626,901
American Balanced Fund 14,692,124 2,533,453 6,970,196
------------ ------------ ----------
Sub-total 141,228,720 37,299,246 59,873,878
------------ ------------ ----------
b. Common/Collective Trusts:
A. O. Smith Stable Asset
Income Fund 44,542,683 2,861,853 (3,633,702)
------------ ----------- ----------
c. Short-term, High quality
liquid securities:
A. O. Smith Income Fund 62,459,209 3,797,254 (1,581,077)
------------ ---------- ----------
Total $248,230,612 $43,958,353 $54,659,099
============ ========== ==========
At December 31, 1996 and 1995 the Plan was allocated 59.114% and 58.278%,
respectively, of the Master Trust assets.
3. Investments
Investments held by the Plan at December 31, are as follows:
1996 1995
Fair Fair
Market Market
Investments: Cost Value Cost Value
A. O. Smith Corporation
Profit Sharing Retirement
Master Trust:
American EuroPacific
Growth Fund $ 4,086,625 $ 4,335,674 $ 1,229,332 $ 1,281,247
A.O. Smith Stock Fund 985,871 1,049,076 -- --
A. O. Smith Income Fund 27,080,989 27,080,989(1) 26,174,241 26,174,241(1)
Portico Growth and
Income Fund 17,376,824 20,503,275(1) 11,216,735 13,592,574(1)
Fidelity Aggressive
Equity Portfolio 39,597,934 59,954,423(1) 32,573,846 50,608,538(1)
Vanguard Institutional
Index Trust Fund 9,590,937 12,094,566(1) 7,293,196 8,911,078(1)
Vanguard Fixed Income
Short-Term Corp. Fund 4,578,329 4,592,607 4,645,506 4,732,120
American Balanced Fund 9,164,987 9,494,758(1) 7,594,638 8,048,622(1)
A. O. Smith Stable
Asset Income Fund 31,164,037 33,508,237(1) 29,034,115 31,314,637(1)
----------- ------------- ----------- -------------
Total $143,626,533 $172,613,605 $119,761,609 $144,663,057
=========== ============= ============ =============
(1) - Investments representing at least 5% of the net assets available for benefits.
During 1996 and 1995, the Plan's investments appreciated (depreciated)
in value by $4,085,625 and $15,127,258, respectively, as follows:
1996 1995
Investments:
A. O. Smith Corporation
Profit Sharing Retirement
Master Trust:
American EuroPacific
Growth Fund $ 197,135 $ 51,915
A.O. Smith Stock Fund 63,205 --
A.O. Smith Income Fund -- --
Portico Growth and
Income Fund 750,612 2,080,322
Fidelity Aggressive
Equity Portfolio 2,321,797 10,495,489
Vanguard Institutional
Index Trust Fund 885,748 1,471,100
Vanguard Fixed Income
Short-Term Corp. Fund (72,336) 220,844
American Balanced Fund (124,214) 653,459
A. O. Smith Stable
Asset Income Fund 63,678 154,129
------------ -----------
Total $ 4,085,625 $15,127,258
============ ===========
The Plan provides that contributions to the plan will be invested in
certain individual programs as directed by each participant. Amounts
included in net assets and changes in net assets in the accompanying
financial statements by investment programs at December 31, are as
follows:
1996
Investment Benefits
at Fair Investment Paid to
Market Value Income Contributions Participants
American EuroPacific Growth Fund $ 4,335,674 $ 538,426 $ 290,930 $ 28,152
A.O. Smith Stock Fund 1,049,076 54,462 575,866 4,893
Vanguard Fixed Income Short-term
Corp. Fund 4,592,607 221,195 356,823 404,969
Fidelity Aggressive Equity
Portfolio 59,954,423 11,788,511 4,759,650 2,106,926
A. O. Smith Stable Asset
Income Fund 33,508,237 1,782,890 1,351,102 2,420,236
Vanguard Institutional Index
Trust Fund 12,094,566 2,230,077 1,001,804 471,728
A. O. Smith Income Fund 27,080,989 1,457,976 3,350,083 2,162,579
American Balanced Fund 9,494,758 1,071,662 859,542 380,968
Portico Growth and Income
Fund 20,503,275 3,812,553 1,398,057
1,027,382
------------ ------------ ----------- -----------
Total $172,613,605 $22,957,752 $13,943,857 $9,007,833
============ =========== =========== ===========
1995
Investment Benefits
at Fair Investment Paid to
Market Value Income Contributions Participants
American EuroPacific Growth
Fund $ 1,281,247 $ 145,383 $ 151,486 $ 5,529
Vanguard Fixed Income Short-
term Corp. Fund 4,732,120 486,639 389,453 156,232
Fidelity Aggressive Equity
Portfolio 50,608,538 16,739,241 3,933,586 1,453,354
A. O. Smith Stable Asset
Income Fund 31,314,637 1,975,779 1,942,057 2,524,803
Vanguard Institutional
Index Trust Fund 8,911,078 2,112,976 694,970 143,842
A. O. Smith Income Fund 26,174,241 1,701,063 3,443,933 2,780,799
American Balanced Fund 8,048,622 1,373,941 719,771 426,777
Portico Growth and Income
Fund 13,592,574 3,290,886 1,117,308 412,771
------------ ------------ ----------- -----------
Total $144,663,057 $27,825,908 $12,392,564 $7,904,107
============ ============ =========== ===========
4. Information certified by trustee
The plan administrator has elected the method of annual reporting
compliance permitted by Section 2520-103.8 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. Accordingly, the Plan's
independent public accountants, Reilly, Penner & Benton LLP, did not
perform any generally accepted auditing procedures with respect to the
Plan's funds on deposit with Marshall and Ilsley Trust Company, Milwaukee,
Wisconsin, the Plan's Trustee, or the interest credited to that deposit.
5. Income tax status
The Plan obtained its latest determination letter on April 27, 1995, in
which the Internal Revenue Service stated the Plan as then designed, was
in compliance with the applicable requirements of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the plan administrator and the Plan's tax counsel believe that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was tax-exempt
as of the financial statement date.
6. Plan termination
While the Company has not expressed any intent to terminate the Plan, it
is free to do so at any time. In the event of termination, each
participant automatically becomes vested to the extent of the balance in
his separate account.
7. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
8. Subsequent event
On January 27, 1997, the Company reached a definitive agreement to sell its
automotive products operations. Closing occurred in the second quarter and
is subject to customary conditions. As soon as administratively feasible,
the account balances of employees affected by this transaction will be
directly transferred to the purchaser's defined contribution plan.
EXHIBIT INDEX
Exhibit No. Name
23.1 Consent of Independent Auditors
EXHIBIT 23.1
CONSENT OF REILLY, PENNER & BENTON LLP
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-05799) pertaining to the A.O. Smith Profit Sharing
Retirement Plan (the Plan) of our report dated July 14, 1997, with respect
to the financial statements and schedules of the Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 1996.
Milwaukee, Wisconsin REILLY, PENNER & BENTON LLP
July 15, 1997
