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About State Industries, LLC

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. Some of A.O. Smith's most prominent brands include American Water Heaters, Aquasana, and GSW. A.O. Smith sells its products in North America and China, where it generates the majority of its revenue, through a network of more than 1,300 wholesale distributors, as well as large hardware and home center retail chains, such as Lowe's.

Operations

A. O. Smith operates two segments, based on geography – North America and Rest of the World.

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.

Geographic Reach

Milwaukee, Wisconsin-based A.O. Smith is a global company, with manufacturing operations in the North America, China, Europe, and India. More than 60% of its revenue is generated in the US, while China contributes more than 25%.

Of A.O. Smith's 20-plus manufacturing plants, more than 15 are located in North America (in nine US states plus two non-U.S. countries) and six are in four other countries outside the US.

Sales and Marketing

A.O. Smith sells its products through a network of wholesale distributors that serve both residential and commercial customers. It also sells its residential water heaters through retailers, such as Lowe's.

In China alone, A.O. Smith sells water heaters through approximately 9,000 retail outlets, of which more than 2,600 exclusively sell the company's products. Its water treatment products and air purification products are also sold in over 8,100 and 3,300 retail outlets respectively in China.

A.O. Smith's client base is fairly concentrated. Its top five customers account for roughly 40% of its total sales.

The company advertising costs were $110.7 million, $132.1 million and $126.9 million during 2019, 2018 and 2017, respectively.

Financial Performance

In 2019 the company's sales fell 6% to $3.0 billion. The decrease in 2019 sales was primarily due to a 23 percent decline in China sales in U.S. dollar terms, which was largely a result of weaker end-market demand in the region, year over year channel inventory shifts, and a higher mix of sales of mid-price products versus premium price products than in the prior year.

Net income fell 17% to $370.2 due to the fall to their sales even though they didn't have U.S. Tax Reform income tax expense and Restructuring and impairment expenses, before tax.

A. O. Smith's cash on hand increased $114.3 million during 2019, ending the year at $374 million. The company's operations generated $456.2 million, offset by $33.9 million used in its investing activities and $375.8 million used in financing. A. O. Smith's main cash uses were capital expenditures, dividends, share repurchases, and long-term debt repayments.

Strategy

In their North America segment, the project their sales in the U.S. will grow approximately six percent in 2020 compared to 2019 due to higher water heater and boiler volumes resulting from expected industry-wide new construction growth and expansion of replacement demand. The company continued to expand their North America water treatment platform in 2019 by acquiring Water-Right, Inc. and its affiliated entities (Water-Right) in April 2019.

A. O. Smith also uses acquisitions to expand its product portfolio and broaden its customer base.

Mergers and Acquisitions

In 2019, Water Technologies company A.O. Smith Corporation announced that it has acquired Water-Right, Inc., a Wisconsin-based water treatment company, for $107 million in cash, subject to customary adjustments. The acquisition includes all Water-Right subsidiaries, real estate, and sister company Mineral-Right, Inc. The acquisition of Water-Right squarely supports A.O. Smith's growth trajectory in water treatment and enables A.O. Smith expand beyond its strong presence in the direct-to-consumer and retail spaces with Water-Right's capabilities in the wholesale and independent water quality dealers channel.

State Industries, LLC

500 Tennessee Waltz Pkwy
Ashland City, TN 37015-1299
Phone: 1 (615) 792-4371

Firm Stats

Employer Type: Privately Owned
Information Technology Technical Systems Manager: Rick Graham
Director Global Talent Management: Mary Sue Handel
National Sales Manager: Tom Jackson
Employees (This Location): 1,800
Employees (All Locations): 1,811

Major Office Locations

Ashland City, TN

Other Locations

Charlotte, NC
Ashland City, TN
Cookeville, TN