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MILWAUKEE, Oct. 13 -- A. 0. Smith Corporation (NYSE: AOS;
Amex: SMCA) today announced record third quarter earnings per share of $.46, a
39 percent increase over 1997 third quarter earnings of $.33.
Third quarter earnings increased nearly 22 percent to $11.0 million
compared with the $9.0 million earned in last year's third quarter.
Sales totaled more than $243 million in the 1998 third quarter, an 18
percent increase over 1997 third quarter sales of $206 million.
"Improved demand for air conditioning compressor motors combined with
sales and profits from our recent compressor motor acquisition had a positive
impact on third quarter performance and allowed us to overcome the downturn in
the fiberglass pipe and storage tank markets," commented Robert J. O'Toole,
chairman and chief executive officer.
For the first nine months of 1998, the Milwaukee-based manufacturer earned
$33.8 million or $1.39 per share, compared with $27.8 million or $.96 per
share for the first nine months of 1997. Sales for the first nine months of
this year were $693 million, more than 10 percent higher than sales of $627
million for the same period in 1997.
Third quarter sales for the Electric Motor Technologies platform increased
nearly 44 percent to approximately $135 million. The motors segment benefited
from approximately $30 million in third quarter sales from its new
Scottsville, Ky., operation acquired on July 1. In addition, improved demand
for air conditioning and subfractional horsepower motors also contributed to
the higher sales achieved in the third quarter.
Operating profit improved significantly compared with the third quarter of
1997, reflecting the higher volumes and the impact of the Scottsville
business.
Sales for the Water Systems Technologies platform increased 4 percent in
the third quarter, due primarily to better commercial business. Operating
profits for the Water Systems segment were higher than the third quarter of
1997.
Third quarter sales of the Storage & Fluid Handling Technologies platform
were 16 percent lower than the same period in 1997, due to lower demand for
fiberglass pipe and storage tanks in the chemical and petroleum production
markets. The soft demand continues to be attributed to weak prices in the oil
and chemical markets and the impact of those weak prices on capital spending.
Third quarter operating profits declined significantly as a result of the
lower volumes.
Company Discusses Outlook
"We are comfortable with the range of analyst estimates for 1998," O'Toole
commented. "For 1999, we expect the difficulties at Storage and Fluid Handling
to persist. We are cautiously optimistic about the Water Systems market and
believe the Electric Motors business should have another good year especially
considering the incremental business of the Scottsville acquisition and the
new tier one contract with York International.
"We continue to aggressively pursue accretive acquisitions such as UPPCO
and Scottsville and consider the pursuit of such acquisitions to be a very
important element in our growth strategy considering the slower near term
prospects of our non-motor businesses. Although we believe 1999 earnings,
excluding acquisitions, will increase over 1998 levels, accretive acquisitions
will be required to get us to our target of 15 percent annual growth in
earnings per share."
Forward-Looking Statements
Certain statements in this press release are 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 may 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 worldwide heating, ventilating and air conditioning 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.0. Smith Corporation is a diversified manufacturer with headquarters in
Milwaukee, Wis. Its major product lines include fractional horsepower,
hermetic, and subfractional horsepower electric motors; residential and
commercial water heaters; municipal, industrial, and agricultural storage
tanks; and fiberglass reinforced piping systems.
A. 0. SMITH CORPORATION AND SUBSIDIARIES
(condensed consolidated financial statements -
$000 omitted except per share data)
Statement of Earnings
Three Months ended Nine Months ended
Continuing September 30 September 30
Sales 1998 1997 1998 1997
Electric Motor
Technologies $135,309 $94,081 $360,913 $298,779
Water Systems
Technologies 71,685 68,872 220,534 211,218
Storage & Fluid
Handling Technologies 36,260 43,011 111,442 117,153
Net Sales 243,254 205,964 692,889 627,150
Costs and Expenses
Cost of Products Sold 196,232 167,060 552,245 496,806
Selling, General and
Administrative 26,324 25,013 80,605 82,251
Interest Expense 1,974 1,913 5,191 6,602
Interest Income (258) (3,010) (3,279) (6,370)
Other Expense 927 394 2,341 2,085
Tax Provision 6,356 4,918 19,587 16,003
Total Costs and
Expenses 231,555 196,288 656,690 597,377
Earnings Before Equity
In Loss of Joint
Ventures 11,699 9,676 36,199 29,773
Equity in Loss of
Joint Ventures (725) (667) (2,418) (1,965)
Earnings from Continuing
Operations 10,974 9,009 33,781 27,808
Continuing Earnings Per
Share of Common Stock
(Diluted) $0.46 $0.33 $1.39 $0.96
Average Common Shares
Outstanding
(000's omitted) 23,958 26,982 24,316 28,959
A. 0. SMITH CORPORATION
Balance Sheet
September 30 December 31
1998 1997
ASSETS:
Cash and cash equivalents $26,191 $ 145,896
Receivables 146,769 126,232
Inventories 86,985 79,049
Deferred income taxes 11,487 11,849
Other current assets 12,863 2,702
Total Current Assets 284,295 365,728
Net property, plant and
equipment 232,611 207,756
Investments in and advances
to joint ventures 31,253 25,605
Goodwill 141,493 51,783
Other assets 72,913 65,644
Total Assets $762,565 $ 716,516
LIABILITIES AND STOCKHOLDERS' EQUITY:
Trade payables $74,869 $61,299
Accrued payroll and benefits 30,639 26,397
Product warranty 8,002 7,972
Income taxes 883 6,607
Long-term debt due within
one year 4,629 5,590
Other current liabilities 23,478 20,017
Total Current Liabilities 142,500 127,882
Long-term debt 126,933 100,972
Other liabilities 55,291 59,515
Deferred income taxes 44,708 28,442
Stockholders' equity 393,133 399,705
Total Liabilities and
Stockholders' Equity $762,565 $716,516
A. 0. SMITH CORPORATION
STATEMENT OF CASH FLOWS
Nine Months ended
September 30
1998 1997
Operating Activities
Continuing
Net earnings $33,781 $27,808
Adjustments to reconcile
net earnings
to net cash provided by
operating activities:
Depreciation & amortization 21,751 19,390
Equity in loss of joint
ventures 2,418 1,965
Net change in current
assets and liabilities (6,963) 4,679
Net change in noncurrent
assets and liabilities 2,751 432
Other 702 1,042
Cash Provided by Operating
Activities 54,440 55,316
Investing Activities
Capital expenditures (20,116) (33,460)
Capitalized purchased
software costs (1,308) (1,094)
Investment in joint ventures (8,066) (10,281)
Acquisition of business (126,456) (60,918)
Cash Used by Investing
Activities (155,946) (105,753)
Cash Used by Continuing
Operations before
Financing Activities (101,506) (50,437)
Discontinued
Cash Provided/(Used) by
Discontinued Operations
before Financing Activities (2,095) 503,754
Financing Activities
Long-term debt incurred 30,590 --
Long-term debt retired (5,590) (143,768)
Purchase of common stock
held in treasury (33,244) (125,168)
Proceeds from common
stock options exercised 232 3,455
Tax benefit from exercise
of stock options 165 571
Dividends paid (8,257) (9,786)
Cash Used by Financing
Activities (16,104) (274,696)
Net increase/(decrease)
in cash and cash
equivalents (119,705) 178,621
Cash and cash equivalents -
beginning of period 145,896 6,405
Cash and Cash Equivalents -
End of Period $26,191 $185,026