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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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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: 06/13/2000 By: /s/ Duane R. Carlson
---------------------------------------
Duane R. Carlson
Manager Pension and Savings Plan
CONTENTS
A. O. Smith Profit Sharing Retirement Plan:
Independent Auditors' Report
Financial Statements
Statement of Net Assets Available for Benefits 1
Statement of Changes in Net Assets Available for Benefits 2
Notes to Financial Statements 3-8
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 Profit Sharing Retirement Plan as of December 31, 1999 and
1998, and the related statement of changes in net assets available for benefits
for the years then ended. 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.
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.
In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
/s/ Reilly, Penner & Benton LLP
May 24, 2000 REILLY, PENNER & BENTON LLP
Milwaukee, Wisconsin
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------------------------
Assets: 1999 1998
------------- -------------
Investment in Master Trust (Note 2):
Investment options at fair value $ 235,844,783 $ 174,643,787
Participant loans at estimated fair value 3,405,828 3,113,126
------------- -------------
Total investments 239,250,611 177,756,913
Receivables:
Interest income - 19,494
Company contribution 3,706,428 3,495,846
Participant contribution - 173,362
------------- -------------
Total receivables 3,706,428 3,688,702
------------- -------------
Total Assets 242,957,039 181,445,615
Liabilities:
Due to broker for securities purchased - 221,370
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Net assets available for benefits $ 242,957,039 $ 181,224,245
============= =============
The accompanying notes to the financial statements
are an integral part of this statement.
1
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years ended December 31
------------------------------
Increases: 1999 1998
------------- -------------
Net income from the Master Trust:
Investment options $ 64,878,431 $ 26,672,558
Interest income from participant loans 261,218 182,271
------------- -------------
Total investment income 65,139,649 26,854,829
Contributions:
Company 3,706,428 3,495,846
Participants 5,140,076 5,096,618
Rollovers 2,288,542 255,310
------------- -------------
Total contributions 11,135,046 8,847,774
Total increases 76,274,695 35,702,603
Decreases:
Benefit and withdrawal payments 14,635,647 14,102,221
------------- -------------
Net increase before transfers 61,639,048 21,600,382
Transfers from other plans 93,746 484,494
------------- -------------
Change in net assets
available for benefits 61,732,794 22,084,876
Net assets available for benefits:
Beginning of the year 181,224,245 159,139,369
------------- -------------
End of the year $ 242,957,039 $ 181,224,245
============= =============
The accompanying notes to the financial statements
are an integral part of this statement.
2
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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 employees of the A. O. Smith
Corporation, its subsidiaries and affiliates. Employees are 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. Participants direct the investment of their
contributions into various investment options offered by the Plan (see Note
2).
Participant Loans - Participants may borrow from their fund accounts a
minimum of $1,000 up to a maximum of $50,000 or 50 percent of their account
balance, whichever is less. The loans are secured by the balance in the
participant's account and bear interest at rates which are commensurate
with local prevailing rates as determined by the Plan's Trustee.
Investment valuation - All of the Plan's assets are held in the A. O. Smith
Profit Sharing Retirement Master Trust (Master Trust) (Note 2) which are
recorded at fair value. The financial statements of the Master Trust are
presented separately and are incorporated by reference to the financial
statements of this Plan.
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 $10,000 for
tax-deferred contributions that may be excluded for any individual
participant in both 1999 and 1998. 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.
3
1. Basis of presentation and significant accounting policies (continued)
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 fair
value of Plan assets.
d. The accounts are periodically adjusted for forfeitures, which are
reallocated to participants in the same manner as if they were a
Company matching contribution for the Plan year. Forfeiture
allocations for 1999 and 1998 amounted to $181,268 and $113,350,
respectively.
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.
At age 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.
4
1. Basis of presentation of significant accounting policies (continued)
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 $5,000 will be made
without the consent of the participant.
f. Daily for investment allocation changes made by participants.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
2. A. O. Smith Profit Sharing Retirement Master Trust
The Plan assets are held in the A. O. Smith Profit Sharing Retirement
Master Trust at the Marshall and Ilsley Trust Company. The Plan offers
eight investment vehicles in which participants may invest their account
balances. Shares of mutual funds are valued at the net asset value of
shares held at year end. Shares of common/collective trust funds are valued
at the redemption price established by the Trustee at year end. Participant
loans receivable are valued at cost which approximates fair value.
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 at December 31, 1999, are the A. O. Smith Profit Sharing
Retirement Plan and the A. O. Smith Corporation Savings Plan. At December
31, 1999 and 1998, the Plan was allocated 94.118% and 95.701%,
respectively, of the Master Trust assets.
5
2. A. O. Smith Profit Sharing Retirement Master Trust (continued)
Significant information related to the investments in the Master Trust as
of and for the year ended December 31, 1999, is as follows:
December 31, 1999 1999 Change
1999 Balance Income in Value
------------ ------------ -----------
a. Registered Investment Company Mutual Funds:
American EuroPacific
Growth Fund $ 8,388,150 $ 2,623,382 $ 5,244,190
Firstar Growth and
Income Fund 21,287,337 647,129 (3,640,873)
Fidelity Aggressive
Equity Portfolio 104,135,897 55,570,475 49,326,473
Vanguard Institutional
Index Trust Fund 25,379,725 4,610,828 2,785,594
Vanguard Fixed Income
Short-term Corp. Fund 189 (53) (3,934,177)
American Balanced Fund 9,532,883 295,085 (219,441)
Firstar Bond Fund 3,554,669 (61,324) 3,554,669
------------ ----------- -----------
Subtotal 172,278,850 63,685,522 53,116,435
b. Common/Collective Trusts:
A. O. Smith Stock Fund 3,464,622 (202,512) 259,773
A. O. Smith Stable
Asset Income Fund 74,098,438 3,820,971 13,925,386
------------ ----------- -----------
Subtotal 77,563,060 3,618,459 14,185,159
c. Participant Loans
Receivable 4,164,558 301,577 632,510
d. Cash 195,046 - 261,112
------------ ----------- -----------
Total $254,201,514 $67,605,558 $68,195,216
============ =========== ===========
6
2. A. O. Smith Profit Sharing Retirement Master Trust (continued)
Significant information related to the investments in the Master Trust as
of and for the year ended December 31, 1998, is as follows:
December 31, 1998 1998 Change
1998 Balance Income in Value
------------ ------------ -----------
a. Registered Investment Company Mutual Funds:
American EuroPacific
Growth Fund $ 3,143,960 $ 483,112 $ (164,779)
Firstar Growth and
Income Fund 24,928,210 4,805,025 3,724,128
Fidelity Aggressive
Equity Portfolio 54,809,424 13,350,136 6,005,498
Vanguard Institutional
Index Trust Fund 22,594,131 4,849,448 6,801,280
Vanguard Fixed Income
Short-term Corp. Fund 3,934,366 217,164 1,030,319
American Balanced Fund 9,752,324 954,398 917,960
------------ ----------- -----------
Subtotal 119,162,415 24,659,283 18,314,406
b. Common/Collective Trusts:
A. O. Smith Stock Fund 3,204,849 (553,467) 740,063
A. O. Smith Stable
Asset Income Fund 60,173,052 3,050,555 29,558,769
A. O. Smith Income Fund - 269,178 (21,267,664)
------------ ----------- -----------
Subtotal 63,377,901 2,766,266 9,031,168
c. Participant Loans Receivable 3,532,048 202,098 1,010,850
d. Cash (66,066) - (66,066)
------------ ----------- -----------
Total $186,006,298 $27,627,647 $28,290,358
============ =========== ===========
7
3. Investments
Investments held by the Plan at December 31, that represents 5% or more of
the Plan's net assets are as follows:
December 31,
-----------------------------
1999 1998
------------ ------------
Firstar Growth and Income Fund,
469,180.186 and 533,138.760 shares,
respectively $ 20,324,886 $ 24,647,005
Fidelity Aggressive Equity Fund,
115,623.460 and 128,422.928 shares,
respectively 100,873,375 53,470,170
Vanguard Institutional Index Fund,
170,341.449 and 185,218.660 shares,
respectively 22,827,458 20,901,926
American Balanced Fund,
568,245.869 shares N/A 8,955,555
A. O. Smith Stable Asset Income Fund,
4,541,454.475 and 3,978,903.294 shares,
respectively 53,791,788 56,495,726
4. Income tax status
The Plan obtained its latest determination letter on October 21, 1999, 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 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, no provision for
income taxes has been included in the Plan's financial statements.
8
5. 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.
6. 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.
9
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 May 24, 2000, 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, 1999
/s/ Reilly, Penner & Benton LLP
Milwaukee, Wisconsin REILLY, PENNER & BENTON LLP
June 8, 2000
10