A.O. Smith investors may receive additional information about the case by clicking the link "Submit Your Information" above.
According to the complaint, A.O. Smith is a Milwaukee-based manufacturer of gas and electric water heaters, boilers, tanks and water treatment products. It maintains two primary operating segments: (1) North America; and (2) Rest of World. The Rest of World segment primarily consists of A.O. Smith’s operations in China, which accounted for approximately one-third of its total sales in 2018 and almost the entirety of its Rest of World segment sales. Between 2015 and 2018, A.O. Smith’s net sales in China grew by over 36%, but A.O. Smith fueled this growth through an undisclosed partner in China, Jiangsu UTP Supply Chain (“UTP”).
The Class Period commences on July 26, 2016, when A.O. Smith issued a press release announcing “record second quarter” net earnings of $87.1 million. The press release claimed that the strong results were driven in large part by the success of A.O. Smith’s China operations.
The complaint alleges that, on April 30, 2019, A.O. Smith reported disappointing financial results for its fiscal quarter of 2019. Following this news, the price of A.O. Smith common stock fell 6% to $52.57 per share.
Then, on May 16, 2019, J Capital Research USA LLC issued a 66-page report on A.O. Smith’s China operations and undisclosed relationship with UTP. The report charged A.O. Smith with inflating its sales and earnings figures and concealing adverse business trends in China through its undisclosed distributor relationship with UTP. The report also stated that A.O. Smith’s purported $539 million in cash in China had been tied up in the scheme. Following this news, the price of A.O. Smith common stock fell 6% to $45.12 per share.
The complaint alleges that, throughout the Class Period, the defendants failed to disclose to investors that: (a) A.O. Smith had undisclosed business connections and entanglements with UTP through which it funneled up to 75% of its China product sales; (b) A.O. Smith had used UTP to engage in channel stuffing by artificially inflating inventories purportedly sold through distributors that were not based on consumer demand, thereby approximately doubling the normal level of inventory at such distributors; (c) A.O. Smith had used its UTP relationship to artificially inflate the sales figures it reported to investors by as much as 8% and to conceal worsening sales trends that A.O. Smith was experiencing in China; (d) A.O. Smith’s sales growth had been primarily in lower margin products as its higher priced products were being undercut by competition in “second-tier” Chinese cities, causing A.O. Smith to experience significant margin pressures; (e) A.O. Smith had increased its cash reserves in China to over $530 million in furtherance of its channel stuffing and sales manipulation scheme, encumbering A.O. Smith’s ability to repatriate the cash or use it for capital expenditures; and (f) as a result of the above, A.O. Smith’s business, operations, and prospects were significantly worse than publicly represented.
If you are a member of the class described above, you may no later than July 29, 2019 move the Court to serve as lead plaintiff of the class, if you so choose.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of their choice, or may choose to do nothing and remain an inactive class member.
Kessler Topaz Meltzer & Check, LLP has not filed a complaint in this matter. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP toll free at 1-844-887-9500 or 1-610-667-7706, or via e-mail at firstname.lastname@example.org. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.
Kessler Topaz Meltzer & Check, LLP
James Maro, Esq. or Adrienne Bell, Esq.
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Radnor, PA 19087
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