A.O. Smith has water on the brain. Controlled by the founding Smith family, the company makes water heating equipment for residential and commercial users. Its products include home gas and electric water heaters and large-scale commercial water heating systems. Its Lochinvar subsidiary specializes in high efficiency water heaters, boilers, pool heaters, and storage tanks. A.O. Smith sells its products in North America and China through a network of more than 1,000 wholesale distributors, as well as retailers such as Lowe's and Sears. A.O. Smith has operations in the U.S., Canada, Mexico, China, India, the UK, and the Netherlands.
Weak demand for residential and commercial water heaters in the US drove down sales for A.O. Smith during the economic recession. Residential construction remained at historically low levels, unemployment was high, and raw material costs were volatile through 2011. However, the company managed to overcome those challenges to report strong growth. Sales increased by about 15% in 2011 and net income soared thanks to growing international demand and increases in pricing for systems, as well as strength in sales of high-efficiency products.
The US represents more than 60% of sales, but foreign markets are becoming more important for A. O. Smith. The company has been investing in growing markets in China and India, where the problems of the economic recession haven't been as severe. Sales of A.O. Smith products in China increased by more than 29% in 2011 and operating profit in that country was up 15%. The company is increasing its presence in China, which is becoming a more urbanized nation. More than 5,400 retail outlets throughout the country sell A.O. Smith branded water heating and water treatment products.
Sales in India more than doubled in 2011. A.O. Smith continues to expand distribution there. The company also plans to expand its plant in Bangalore in order to meet growing demand for its products in India.
A. O. Smith isn't ignoring its US business. In 2011 it bought Tennessee-based boiler manufacturer Lochinvar for some $418 million. The addition of Lochinvar gave A.O. Smith entry into the growing residential and commercial condensing boiler markets. Strong client demand to improve efficiency of hot water delivery and hydronic heating systems is expected to help increase sales in that segment.
Also in 2011 the company also sold its electric motors segment, Electric Products Company, to Regal Beloit. The deal included $700 million in cash in addition to stock in Regal Beloit. A. O. Smith plans to use proceeds from the sale to continue to grow in emerging markets.
The Smith Family Voting Trust controls about 87% of the company.
▲ Show Less▼ Show Full Description