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, 2002
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
99 Certification
TABLE OF CONTENTS
A. O. SMITH PROFIT SHARING RETIREMENT PLAN:
Page
----
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 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,
2002 and 2001, 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 auditing standards generally
accepted in the United States of America. 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, 2002 and 2001, and the changes in its net assets
available for benefits for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
April 4, 2003
Milwaukee, Wisconsin REILLY, PENNER & BENTON LLP
1
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
---- ----
Assets:
Investments in Master Trust:
Investment options at fair value $ 184,984,747 $ 206,647,774
Participant loans receivable 2,221,264 2,474,030
--------------------------------
Total investments 187,206,011 209,121,804
Receivables:
Company contributions 2,504,973 1,413,020
Due from brokers for securities transactions 2,150 549,521
--------------------------------
Total receivables 2,507,123 1,962,541
--------------------------------
Net assets available for benefits $ 189,713,134 $ 211,084,345
================================
The accompanying notes to the financial statements
are an integral part of this statement.
2
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2002 and 2001
2002 2001
---- ----
Increases:
Net loss from the Master Trust:
Investments $ (15,753,393) $ (17,388,229)
Interest income from participant loans 174,180 264,639
------------------------------------------
Net loss (15,579,213) (17,123,590)
Contributions:
Company 2,492,418 1,413,047
Participants 5,416,220 5,450,562
Rollovers 181,356 221,449
------------------------------------------
Total contributions 8,089,994 7,085,058
------------------------------------------
Total decreases (7,489,219) (10,038,532)
Decreases:
Benefit and withdrawal payments 13,886,502 25,040,817
------------------------------------------
Change in net assets before transfers (21,375,721) (35,079,349)
Transfers from other plans 4,510 16,161,390
------------------------------------------
Change in net assets available for benefits (21,371,211) (18,917,959)
Net assets available for benefits:
Beginning of year 211,084,345 230,002,304
------------------------------------------
End of year $ 189,713,134 $ 211,084,345
==========================================
The accompanying notes to the financial statements
are an integral part of this statement.
3
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Notes to Financial Statements
December 31, 2002 and 2001
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 25% 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 $11,000 and $10,500 for
tax-deferred contributions that may be excluded for any individual participant
in 2002 and 2001, respectively. 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
-------
4
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.
5
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Notes to Financial Statements
December 31, 2002 and 2001
(Continued)
1. Basis of Presentation and Significant Accounting Policies (Continued)
--------------------------------------------------------------
Administrative Expense
----------------------
Administrative expenses are paid by the Plan and are included as part of
the net income (loss) from investments.
Participant Account Provisions
------------------------------
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 2002 and 2001 amounted to $38,435 and $13,129,
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 non-vested 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.
6
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.
7
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Notes to Financial Statements
December 31, 2002 and 2001
(Continued)
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 nine
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, 2002, are the A. O. Smith Profit Sharing Retirement Plan, the A. O.
Smith Corporation Savings Plan and the A. O. Smith Retirement Savings Plan. At
December 31, 2002, the Plan was allocated 86.852% and 88.356%, respectively, of
the Master Trust assets.
Significant information related to the investments in the Master Trust as
of and for the year ended December 31, 2002, is as follows:
2002
December 31, Income 2002 Change
2002 Balance (Loss) in Value
------------ ------ --------
a. Registered Investment Company Mutual Funds:
American EuroPacific Growth Fund $ 3,731,120 $ (462,015) $ (1,314,976)
First American Growth and Income Fund --- 2,354,707 (14,445,928)
First American Equity Income Fund 9,361,745 (5,148,615) 9,361,745
Fidelity Aggressive Equity Portfolio 47,699,558 (13,047,153) (19,077,193)
Vanguard Institutional Index Trust Fund 12,412,008 (4,044,497) (7,065,202)
American Balanced Fund 12,133,883 (1,172,014) (3,391,785)
First American Bond Fund 6,903,623 494,353 1,883,032
Marshall Mid Cap Value Fund 7,283,591 (1,278,029) 7,283,591
-----------------------------------------------
Subtotal 99,525,528 (22,303,263) (26,766,716)
b. Common/Collective Trusts:
A. O. Smith Stock Fund 3,649,039 1,110,203 602,092
A. O. Smith Stable Asset Income Fund 108,509,361 5,346,794 5,356,309
-----------------------------------------------
Subtotal 112,158,400 6,456,997 5,958,401
c. Participant Loans Receivable 3,846,046 279,838 (251,645)
d. Cash 16,263 --- (74,686)
-----------------------------------------------
Total $ 215,546,237 $ (15,566,428) $ (21,134,646)
===============================================
8
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Notes to Financial Statements
December 31, 2002 and 2001
(Continued)
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, 2001, is as follows:
2001
December 31, Income 2001 Change in
2001 Balance (Loss) Value
------------ ------ -----
a. Registered Investment Company Mutual Funds:
American EuroPacific Growth Fund $ 5,046,096 $ (754,831) $ (1,848,069)
First American Growth and Income Fund 14,445,928 (3,320,668) 14,445,928
Firstar Growth and Income Fund --- 168,465 (21,534,277)
Fidelity Aggressive Equity Portfolio 66,776,751 (17,812,882) 42,993,512
Vanguard Institutional Index Trust Fund 19,477,210 (2,958,526) (4,306,029)
American Balanced Fund 15,525,668 981,747 5,220,255
First American Bond Fund 5,020,591 74,261 5,020,591
Firstar Bond Fund --- 218,245 (4,852,367)
-------------------------------------------------
Subtotal 126,292,244 (23,404,189) 35,139,544
b. Common/Collective Trusts:
A. O. Smith Stock Fund 3,046,947 467,377 (937,110)
A. O. Smith Stable Asset Income Fund 103,153,052 5,577,829 29,258,473
-------------------------------------------------
Subtotal 106,199,999 6,045,206 28,321,363
c. Participant Loans Receivable 4,097,691 394,656 (105,430)
d. Cash 90,949 --- 85,888
-------------------------------------------------
Total $ 236,680,883 $ (16,964,327) $ 63,441,365
=================================================
3. Investments
----------------
Investments held by the Plan, that represents 5% or more of the Plan's net
assets are as follows:
December 31,
-------------------------------
2002 2001
---- ----
Fidelity Aggressive Equity Fund, 86,936.220 $ 46,655,192 $ 65,443,687
and 112,230.530 shares, respectively
Vanguard Institutional Index Fund, 131,525.576 10,581,233 16,746,650
and 175,458.466 shares, respectively
A. O. Smith Stable Asset Income Fund, 4,861,098.529 86,815,438 83,351,313
and 4,157,779.835 shares, respectively
American Balanced Fund, 799,051.042 11,522,316 14,780,397
and 932,517.173 shares, respectively
9
A. O. SMITH PROFIT SHARING RETIREMENT PLAN
Milwaukee, Wisconsin
Notes to Financial Statements
December 31, 2002 and 2001
(Continued)
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.
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.
10
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: 06/25/2003 By: /s/ Duane R. Carlson
------------------------------------
Duane R. Carlson
Manager, Pension and Savings Plan