A.o. Smith Corporation · NYSE:AOS
A.o. Smith — Smith A O — Baird 2009 Industrial Conference
47 slides from A.o. Smith's conference presentation, Nov 10, 2009
Slide 1: Baird 2009 Industrial Conference
Baird 2009 Industrial Conference Exhibit 99.1
Slide 2: Forward Looking Statements
This presentation contains statements that we believe are “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anti
Slide 3: Investment Case
Investment Case • Leader in Commercial and Residential Water Heaters • 2009 Margin Expansion, in spite of Significant Volume Declines • Strong Balance Sheet and Cash Flow • China/Asia • Energy Efficient Products
Slide 4: 2009 EPS Forecast
$1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 $3.25 2009 GAAP Forecast 2009 Non- GAAP forecast 2009 EPS Forecast $2.70 $2.85 $.15 Range $2.60 - $2.75 $2.95 - $3.13 $.18 Range
Slide 5: Financial Results – YTD
2009 2008 change % chg. Sales 1,481.9 $ 1,796.3 $ (314.4) $ -18% Net Earnings 67.0 $ 75.2 $ (8.2) $ -11% EPS 2.21 $ 2.48 $ (0.27) $ -11% (in millions, except per share) Financial Results – months YTD Earnings and EPS are Non-GAAP
Slide 6: Segment Sales – YTD
2009 2008 change % chg. Water Products 1,012.8 $ 1,105.0 $ (92.2) $ -8% Electrical Products 472.0 694.9 (222.9) -32% Intersegment (2.9) (3.6) 0.7 Total Sales 1,481.9 $ 1,796.3 $ (314.4) $ -18% Segment Sales – months YTD (in millions)
Slide 7: Operating Profit – YTD
2009 2008 change % chg. Water Products 104.3 $ 105.1 $ (0.8) $ -1% Electrical Products 27.4 44.3 (16.9) -38% Corporate (35.8) (36.9) 1.1 3% Total Operating Profit 95.9 $ 112.5 $ (16.6) $ -15% Margin Water Products 10.3% 9.5% Electrical Products 5.8% 6.4% Operating Profit – months YTD (in millions, e
Slide 8: Nine Month Cash Flow from Operations
• Operating cash flow of $198 million • Expect operating cash flow of approximately $190 to $200 million in • Balance Sheet remains strong • Debt to Capital ratio of 24% 197. 8 75.0 Nine Month Cash Flow from Operations 9/30/08 9/30/09
Slide 9: A. O. Smith Sales and EBITDA Mix
Sales EBITDA 31% A. O. Smith *EBITDA Excludes $8.7M for restructuring $1.4B $.9B Water Products Electrical Products* 69%
Slide 10: Water Products – Sales & Earnings
2009 thru Sept 0% 2% 4% 6% 8% 10% 12% Sales EBIT Margin Water Products – Sales & Earnings
Slide 11: U.S. Water Heater Market Segment
Residential Market Commercial Market U. S. Water Heater Market Segment 0% 10% 20% 30% 40% 50% Tankless 0% 10% 20% 30% 40% 50% 60% Standard Commercial
Slide 12: Water Products End Markets
NA Commercial 11% NA Residential 74% China 15% Water Products End Markets
Slide 13: Electrical Products – Sales & Earnings
2009 thru Septmber 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Sales EBIT Margin Electrical Products–Sales & Earnings EBIT Margin shown is Non-GAAP
Slide 14: Electrical Products Market Segments and Major Customers
HVAC & R 17% Pump 16% Distribution 23% General Industries 10% China/Asia 9% Hermetic 25% Trane Carrier Scroll Tech York Copeland Pentair Waterway Hayward Broan Grainger Johnstone SCP Major Customers Electrical Products Market Segments Served
Slide 15: Electrical Products End Markets
Electrical Products End Markets China 9% NA Residential 61% NA Commercial 30%
Slide 16: China/Asia now 13% of Sales and Growing
China/Asia now 13% of Sales and Growing Electrical Products Water Products Sales have grown 35% (CAGR) over the last 5 years
Slide 17: Mega Trends – China
Mega Trends - China Data: (The Value of China's Emerging Middle Class) Share of Chinese Urban Households, %
Slide 18: Suzhou Yueyang China Motor Manufacturing
Suzhou Yueyang China Motor Manufacturing Commercial hermetic motors for air conditioning & refrigeration $0 $20 $40 $60 $80 $100 $120
Slide 19: 1%
1%
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Slide 25: Since 1995
• Since 1995 • Products designed for Chinese consumers • Experienced Chinese managers • Double digit margin • Strong retail presence • Consistent strong growth • Doubled capacity to 2M units - Nanjing, China
Slide 26: China Residential Share
> 100 Others 30% A. O. Smith 20% Haier 19% Makro 7% Wanhe 7% Ariston 6% Rinnai 5% Noritz 4% Siemens 2% > 100 Others 30% Leading Electric Brands: A.O. Smith, Haier, Ariston, Siemens Leading Gas Instantaneous Brands: Makro, Wanhe, Rinnai, Noritz Source: GFK-2009 (by Value) Leading residential brands m
Slide 27: Retail Channel Expansion
Retail channel Expansion 2008 to 2010 2009P 2010P Distribution Channel Expansion • Suning currently has 800 stores and plans to reach 900 stores by year end • Guomei is down sizing for store efficiencies • We have been assisting distributors opening specialty stores, and developing service oriented
Slide 28: Specialty Stores
Specialty Stores
Slide 29: Hierarchy of Global Drinking Water Needs
Hierarchy of Global Drinking Water Needs Source: AO Smith/MBK/2008 Availability Desalinization, Well drilling, Pumping, Point-of-Egress Security, Health, Hygiene Chlorination, Heating/Boiling, Point of Entry Access Infrastructure, Home Plumbing Taste /Convenience Filtration , Bottled water, POU Afri
Slide 30: China Water Purification Landscape
China Water Purification Landscape • Economic Growth – GDP growth of 8-10% – Retail and appliance sales +20% YOY – Water Purification sales +10-15%/year – Reverse Osmosis and Point of Use sales forecasted at +30% • Improvement of Living Standards – “Feature rich” apartment options – Growing awarenes
Slide 31: Chinese Water Purification Terminology
Chinese Water Purification Terminology • Water Dispenser – free standing unit, dispenses purchased water from jugs, may dispense either hot or cold • Drinking Machines – free standing units that filters tap water and may dispense either hot or cold • Water Jugs – carafe units, typically counter top,
Slide 32: Tianlong Acquisition
Tianlong Acquisition • Acquire leading product in China water purification market • Leverage A. O. Smith brand and water heater presence in appliance stores and building centers • Other benefits: – Existing parallel channels and brands for distribution sales in China – Existing quality manufacturing
Slide 33: Tianlong Profile
Tianlong Profile • Leading supplier of RO systems to the China market – Domestic market share leader – Exports to 30 countries • Market channels – 3200 franchise shops – 8000 mom and pop stores • Product Types – Residential RO machines, RO membranes, filters, water softeners, Commercial/Industrial e
Slide 34: India: Currently Made in China
• Bangalore • Establish brand & position product • Develop manufacturing capability – Greenfield manufacturing facility – Indian management team • Focus on storage electric water heaters • Focus on top metropolitan cities India: Currently “Made in China”
Slide 35: Energy Efficiency
Energy Efficiency
Slide 36: Cyclone Sales Growth
CAGR = 20.8% Cyclone Sales Growth 20% of commercial revenues in 2008
Slide 37: A. O. Smith Tankless Gas Water Heaters
A. O. Smith Tankless Gas Water Heaters • A comprehensive line of tankless water heaters • Residential and Commercial designs • Indoor and Outdoor installation options • Available in Natural Gas or Propane • Energy Efficient – up to 84% thermal efficiency
Slide 38: Heat Pump Water Heating
Heat Pump Water Heating • Acquisition of AERS – Specialty commercial manufacturer • Additional, new distribution channel • Introducing heat pump water heater in China
Slide 39: Solar Water Heating
Solar Water Heating • Balcony mount system for China • Commercial system for Europe • Residential water heater for North America
Slide 40: New Centurion Pro Pump Motor
New Centurion Pro Pump Motor • Single-Speed, Two-Speed, Three Phase • Improved cooling longer life • Better bearing protection longer life • Better wiring access easier installation • Business – Won 12,000 units ($1.2M) at Hayward – Working with Pentair and Jandy for 2010 season
Slide 41: Energy Efficiency Strategy
Energy Efficiency Strategy * Average Selling Price Premium 2 Speed Efficiency Gains of 12% running longer on Low Speeds Operating Savings of 30~65% over Single Speed Motors Variable Speed 90% over Single Speed Flexible – Can be run at Optimum Speed Efficiency range 80% Operating Savings of 30- Motor
Slide 42: Comfort Select
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Slide 43: Residential Hermetic Variable Speed
Residential Hermetic Variable Speed • 59 frame IPM for Bristol – Completed in just weeks and delivered March – Seeking IP protection on design – Preliminary tests found 2 SEER point improvement nd
Slide 44: Energy Efficient Products
Energy Efficient Products • 40% of China water heater sales are highest energy efficiency rating! • 25% of water products sales exceed minimum energy efficiency standards • 9% of electrical products sales exceed minimum energy efficiency standards
Slide 45: Investment Case
Investment Case • Leader in Commercial and Residential Water Heaters • Margin Expansion, in spite of Significant Volume Declines • Strong Balance Sheet and Cash Flow • China/Asia • Energy Efficient Products
Slide 46: Thank you!
Thank you!
Slide 47: Investor Contact
Investor Contact Patricia Ackerman Vice President, Investor Relations and Treasurer 414-359-4130 packerman@aosmith.com