Sidoti Conference

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• Sidoti Conference
• April 7, 2005

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Forward-Looking Statements
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A. O. Smith 1.7 billion in sales
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Water Systems

• Residential gas and electric
• Standard and specialty commercial
• High efficiency copper-tube boilers
• Water systems tanks

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Water Systems Served Markets
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U.S. Water Heater Market
2004 competitor sales are estimated
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Electrical Products Company
? Hermetic ? Fractional horsepower ? Integral
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Electrical ProductsServed Markets
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Electrical ProductsPartnerships
Many strong, long-term relationships
HVACR Carrier Scroll Tech Trane York
Pump Hayward Pentair Sta-Rite
Other Genie Broan Grainger SCP
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Industry Leaders
Top motor manufacturers - sales

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The transformation of A. O. Smith
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Built Scale in two Platforms
Divested automotive and smaller businesses to
concentrate build scale in two segments

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Electrical Products Company
Built critical mass with four acquisitions

• Motor Acquisitions
• UPPCO (1997)
• GE hermetic (1998)
• MagneTek (1999)
• Athens Products (2002)

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Water Systems
State Acquisition
Provides access to the retail channel
Doubles size and scale

Provides profitable parts business
Commercial
Commercial
Residential Wholesale
Commercial
Residential Wholesale
Retail
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Repositioning - Motors
2001 2002
2003
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Low-Cost ManufacturingEfficiency of Foreign
Sourcing
Hourly wage and fringe benefits - Electrical
Products
Acquisitions Integration
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Globally Competitive
Best Value Proposition in the Industry
High
China
Mexico
Volume
SKUs
High
Low
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China Motor Manufacturing

• Shenzen - Q4/2001
• Subfractional motors - 50K/day
• Changheng Group - Q4/2002
• Fractional power motors
• Suzhou - Q4/2003
• Hermetic motors
• Addressing the entire product line

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Low-Cost Manufacturing Strategy
15 Million Incremental Benefit in 2004
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Water SystemsConversion Programs

• Product standardization
• Information systems
• New products
• Efficiency mandate
• Repositioned manufacturing

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RepositioningWater Systems
Residential
Ashland City
McBee
Commercial
Juarez
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Water HeaterRegulatory Changes
15 Million Incremental Benefit in 2004

• 2003 2004 2005
• Quarter when effective 1 2 3 4 1 2 3
  4 1 2 3 4
• Flammable vapor
• resistance
• New NAECA
• minimum efficiencies

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China Water Heater Business

• Since 1995 - opened new facility in 1998
• Products designed for Chinese consumers
• Experienced Chinese Managers

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China Sales
35 CAGR
(US millions)
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China WaterHeater Market
11 Million Unit Market
RED - Gas Instantaneous BLUE - Electric
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China Water Heater Market
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Leading residential brands measured in currency
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2004 Objectives - Achieved

• 15 Million - EPC Repositioning Benefit
• 15 Million - new water heater products
• 5 Million - WPC Standardization

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2004 Objectives - Achieved

• 15 Million - EPC Repositioning Benefit
• 15 Million - new water heater products
• 5 Million - WPC Standardization

Offset by Steel Copper Freight Aluminum Packag
ing Resins
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EPS
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Steel
Source American Metal Market
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Copper
Inventory vs Monthly Average Price January 1973 -
February 2005
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Electrical Products EBIT Margin
Goal
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Water SystemsEBIT Margin
Goal
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2005

• Contract costs
• Steel
• Copper
• Significant pricing actions
• Pricing variability
• Working capital management

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Positioned for the future

• Scale - 1.7 billion company
• Global manufacturing low cost footprint
• Customer relationships
• Financial Position
• Strong balance sheet
• Commitment to leadership in our markets

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A. O. Smith Corporation