Water-heating company A.O. Smith makes 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 1,300 wholesale distributors, as well as large hardware and home center retail chains, such as Lowe's. A.O. Smith generates the majority of its revenue from the US and China.
A. O. Smith operates two segments, based on geography.
The North America segment generates around 65% of revenue and makes and sells specialty commercial water heating equipment, condensing and non-condensing boilers, and water system tanks.
The Rest of World segment carries out similar activities in China, India, and Europe. Additionally, it markets water treatment and in-home air purification units products, primarily in China. The segment accounts for more than 35% of sales.
A.O. Smith is a global company, with manufacturing operations in the US, Canada, Mexico, China, France, India, Turkey, Vietnam, and the Netherlands. It boasts sales and distribution offices in more than 60 countries. More than 55% of its revenue is generated in the US, while China contributes about 35%.
Of A.O. Smith's 20-plus manufacturing plants, about 15 are located in North America (in seven US states plus Canada and Mexico) and six are in four other countries outside the US.
Sales and Marketing
A.O. Smith sells its products in North America, India, and China through a network of wholesale distributors that serve both residential and commercial customers. It also sells its residential water heaters through retailers, such as
In China alone, A.O. Smith sells water heaters through more than 8,000 retail outlets, of which 2,900 exclusively sell the company's products. Its water treatment products and air purification products are also sold in over 7,400 and 3,500 retail outlets respectively in China.
A.O. Smith's client base is fairly concentrated -- its top five customers generate more than 35% of its total sales.
A.O. Smith has enjoyed rising revenue and profits for the past few years thanks to new home building in the US and its aggressive growth strategy in China.
In fiscal 2017 sales increased 12% to $3.0 billion thanks to strong growth in both the US and the Rest of the World segments. In the US, revenue increased 9% as A. O. Smith sold higher volumes of residential and commercial water heaters and boilers; revenue also benefited from pass-through effects of the increasing cost of steel. Contributions from recently acquired businesses also added around $40 million to sales in the US. In the Rest of the World segment, sales grew 15% on the back of strong sales in China as it aggressively expands its presence and brand recognition in the country.
A. O. Smith's net income fell 9% to $296.5 million, largely as a result of a one-time charge totaling $81.8 million relating to the 2017 US Tax Cuts and Jobs Act. The law impacted the company's overseas earnings. Net income was also pressurized by higher steel prices, which ate into margins, and higher selling expenses due to a ramp-up in marketing activities.
Cash inflow from operating activities in 2017 was $326.4 million, a 27% decrease, due to higher outlays for working capital compared to a below-normal level in 2016.
A. O. is intent on rapid expansion outside the US, particularly in China. Non-US sales are growing as a proportion of total sales every year, reaching 45% in 2017; sales to China alone grew 16% in 2017, surpassing $1 billion in sales for the first time. The company is aggressively expanding its presence and building brand recognition in China and has become one of its leading suppliers of water heaters to residential customers. A. O. Smith continually adds new retail outlets to its distribution network, including nearly 2,000 new water treatment and air purification retail outlets in 2017.
Mergers and Acquisitions
A.O. Smith has been using select acquisitions to enhance its product portfolio (mainly its water treatment business) and attract additional customers.
The company purchased Wisconsin-based water treatment company Water-Right in 2019 for $107 million. Water-Right's residential and commercial product brands include Evolve, WaterCare, Sanitizer Series, Impression Series, and CustomCare.
In late 2017 it purchased Ohio-based William R. Hague, Inc. (known as Hague Quality Water International) for $45 million in cash. Hague manufactures a line of water softener products sold through both retailer and water quality dealer channels under the Hague, WaterBoss, and WaterMax brands. The deal augmented A.O. Smith's global water treatment platform with a line of well-known brands in the marketplace.
500 TENNESSEE WALTZ PKWY
Ashland City, TN 37015-1299
Phone: 1 (615) 792-4371
Employer Type: Privately Owned
Sales Manager: Brad Curtis
National Sales Manager: Tom Jackson
Employees (This Location): 1,800
Employees (All Locations): 1,811
Ashland City, TN
Ashland City, TN