Summer 2015 Analyst Presentation

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,” “anticipate,” “believe,” “continue,” “guidance”, “outlook”, or words of similar meaning. All statements regarding 2015 outlook are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this presentation. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: uncertain costs, savings and timeframes associated with the planned implementation of the ERP system; potential weakening in the high efficiency boiler industry in the U.S.; the ability to execute our acquisition strategy; significant volatility in raw material prices; competitive pressures on the company’s businesses; inability to implement or maintain pricing actions; instability in the company’s replacement markets; strength or duration of any recoveries in U.S. residential and commercial construction; a slowdown in the growth rate of the Chinese economy; foreign currency fluctuations and adverse general economic conditions and capital market deterioration.

Forward-looking statements included in this presentation are made only as of the date of this presentation, and the company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the company, or persons acting on its behalf, are qualified entirely by these cautionary statements. This presentation contains certain non-GAAP financial measures as that term is defined by the SEC. Non-GAAP financial measures are generally identified by “Adjusted” (Adj.), “Non-GAAP” or “Before Restructuring”.

3

Investment Case

► Market share leader in major businesses

► Stable/Growing North American replacement market; operating leverage as new construction recovers

► Strong balance sheet and cash flow to support future growth & share repurchase

► Strength of our brand, distribution, manufacturing and innovation provide clear market advantage in China

► Organic growth of 8 + percent for next several years

4

Sales & Adjusted Operating Margin*

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$500

$1,000

$1,500

$2,000

$2,500

2009 2010 2011 2012 2013 2014

Sales Adj EBIT Margin

Sale

s in

milli

ons

* excludes corporate expenses

5

Adjusted EBITDA Growth

$137$158

$197

$270

$333

$374

$464

$100

$150

$200

$250

$300

$350

$400

$450

$500

2009 2010 2011 2012 2013 2014 Forecast2015

* Analyst consensus

Adjusted EBITDA2009 10.0% of Sales2015* 17.7% of Sales

6

Adjusted Earnings Per Share

$0.68 $0.85

$1.07

$1.56

$2.06

$2.43

$3.07

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

2009 2010 2011 2012 2013 2014 2015GuidanceMidpoint

7

ROW►China/India = 91%►Europe/Middle East = 9%

NA►Water heaters

growing Lochinvar 10% expected growth in 2015

Segment Revenue

North America

68%Rest of World32%

2014 full year

8

U.S. Water Heater Market Segment

Residential Market

0%

10%

20%

30%

40%

50%

Other2014 market share data

AHRI data + tankless:AOS actual shipments

and AOS estimatesof competitors’

shipments

9

Wholesale Retail

U.S. Residential Water Heater Market Segment

2014 – 9.2 mm Units

Wholesale channel is

~“50%” of the market

Retail channel

is ~“50%” of the market

A. O. Smith’s Customers

Large Regional Distributors

10

Water HeatersStrong Replacement Sales

0

2,000

4,000

6,000

8,000

10,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

New ConstructionReplacement

thou

sand

s of

uni

ts

Peak housing starts: 2.1 million

North American Residential Water Heaters

Note: Includes tankless

11

U.S. Water Heater Market SegmentCommercial Market*

0%

10%

20%

30%

40%

50%

60%

Other

2014 market share data

AHRI data:AOS actual shipments

and AOS estimatesof competitors’

shipments

* Commercial water heater segment as defined by AHRI, total 2014 commercial units as reported by AHRI = 167,700

12

Energy Efficient Cyclone

►Game changing energy efficient commercial product launched in 1997 and recently upgraded

►Up to 96% thermal efficiency dramatically lowers operating costs offering short payback

► Represents 24% of AOS commercial units

13

U.S. Commercial Gas Market: Energy Efficient Units Double in Five Years

-

20,000

40,000

60,000

80,000

100,000

2009 2010 2011 2012 2013 2014

Com

mer

cial

Gas

Indu

stry

Uni

ts

<90% Efficiency >90% Efficiency

Source: AHRI Industry Data

2009:19,000 units

2014:38,000 units

14

Lochinvar End Markets

Hydronic Space Heating

48%

Water Heating 40%

Parts/Other 12%

2/3 commercial end markets; 1/3 residential end markets

15

Trend to Higher Efficiency, Condensing Boilers

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Non-Condensing Commercial Boilers Condensing Commercial Boilers

Source: BRG Building Solutions

North American Commercial Boiler Volume (Units)

Actual Forecast

16

Lochinvar Branded Sales DollarsCondensing vs. Non-Condensing*

2004

8%

92%

2014

19%

81%Condensing

*Residential Boilers, Commercial Boilers & Commercial Water Heaters

Non-Condensing

Condensing Non-Condensing

17

China now 30% of Sales & GrowingChina sales have grown 28% (CAGR) over the last 10 years

US$

milli

ons

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

18

Nanjing

AOS China Built on:► Premium Brand

► Extensive Distribution and Service Network

► Innovative New Products & World Class Manufacturing

► Local Management Team and Organizational Development

19

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Mar

ket S

hare

Year

Haier

Midea

Macro

Wanhe

Rinnai

Noritz

Ariston

Sakura

Siemens

A.O.Smith

Ten-Year + Market Share Trend

Leading residential brands measured in currency; Tier One Market: GFK - CMM data sampling several thousand largest retail stores, May 2015

20

Electric Market Share Gas Market Share

Market Share by Price Category

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

＞=400 300-400 200-300 ＜200

Valu

e M

arke

t Sha

re

Retail Price(USD)

Others

Siemens

Ariston

Midea

Haier

A.O.Smith

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

＞=400 300-400 200-300 ＜200

Valu

e M

arke

t Sha

re

Retail Price(USD)

OthersHaierAristonWanheMacroSakuraNoritzRinnaiA.O.Smith

Data Source :CMM Retail Survey 2014-150 Best Selling Models

21

Broad Distribution Channel

► Over 7,000 outlets in China

► 35% of outlets in Tier 1 cities; 65% in Tier 2/3 citiesPercentage of Sales

0%

20%

40%

60%

80%

100%

2007 2010 2012 2013 2014

1% 3%8%

10%22%

26% 25% 25%

36% 33% 35% 35% 36%

Regional StoresAOS Specialty StoresSuning/GuomeiE-Commerce

22

Product Line developed in China

Wall-hungElectric

GasTankless

WaterPurifier

Gas & Electric

Commercial

Residential &

CommercialHeat Pump

PressurizedSolar

CombiBoiler

AirPurifier

23

Professional Team of Local Management

24

Mega Trends - China

Significant growth in AOS target demographic

Source: McKinsey Insights China – April 2012

A. O. Smith customer

demographic continues to grow rapidly

Growth of 10 times

during this decade

2010: 18 mmhouseholds

2020: 180 mmhouseholds

25

China Consumers Prefer Foreign Brands

Higher: Annual income >= $20,000 / yearLower: Annual income <$20,000 / year

26

► Leverage the A. O. Smith brand in our existing water heater channels Over 4,500 retail stores at Dec 2014

► Reverse osmosis main focus

A. O. Smith Branded Water Treatment Systems:

China Water Treatment Market

Data: CMM

► Product development focused at customer needs and technical improvements

► Fast growing, highly fragmented market Industry studies we have seen indicate almost

40% CAGR during next five years

27

Sediment & Colloids

Bacterium & Organics

Rust Removal

Active Carbon - improves taste (for good incoming water areas as in the US and Europe)

Heavy Metals, Virus & Salts

Micro-Filtration - removes sediment and colloids (can correct basic water pollution problem)

Ultra-Filtration - removes bacterium, large organics and other pollutants resulting from water transport)Reverse Osmosis - the ultimate filtration technology; removes nearly all substances, particularly most heavy metals prevalent in China and India water supply

Pore Size 5000 nm

Pore Size 1000 nm

Pore Size 50 nm

Pore Size 0.2 nm

Carbon

MF

UF

RO

Different Water Treatment Technologies

28

Reverse Osmosis Is Gaining Market Share

Data: CMM

CMM Water Treatment Market by Technology

29

Side stream Membrane Technology

►Unique patented design

► Increases RO membrane life

► Reduces waste water up to 50 percent

► Provides market place differentiation

30

Tankless water treatment – enabled by side-stream membrane technology► Provides immediate

freshwater

► Minimizes risk of post RO membrane contamination No storage tank needed

► Leverages membrane rolling capabilities to produce hi-flow RO products Constant flow rates up to

0.9 gallons per minute

31Data Source: CMM-GFK April-2015

Major Brands CMM Market Share By Value Water Purifier

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

2011 2012 2013 2014 2015

Midea

A.O.Smith

Qinyuan

Angel

Litree

3M

Haier

Echwater

32

Air purifiers - the market need is clearly visible

45PM 2.5 PM 2.5

Bird’s Nest – Beijing: a healthy day (left) and a very unhealthy day (right)

453

33

China Air Purifier Market Growth OpportunityUnit sales per 1000 Urban Households for China and its neighbors

China’s air pollution may drive urban penetration closer to Japanese levels

Source: Euromonitor, January 2015Note: For calculating penetration rate for China: assumed no replacement in the period

Projection by Euromonitor

3.4% household penetration overall; 14% penetration in top 23 (‘first tier’) cities

Urban household penetration rates in Japan and Korea are 60% and 19%, respectively ;China will tackle coal consumption, coal type and combustion technology

34

Middle and affluent classes are growing

theUrbanization in China projected to drive 29%

of all global growth!

• A. O. Smith has manufacturing capacity and channel footprint to capitalize

• Our Premium Consumer brand is positioned for the middle and affluent classes

• A. O. Smith is a strong foreign brand

• We are positioned to reach consumers using the internet

China Mega Trends Driving GrowthInternet

Middle and affluent class trade up and value foreign brands

35

Mega Trends - India

Significant growth in AOS target demographic

SOURCE: India Urbanization Econometric Model Updated 2010

Millions of households, percent, 2000 prices

A. O. Smith targetdemographic:

upper middle class

36

A cities (pop >1.5 mm)Distribution in all 23 Class

Class B cities (pop .5 to 1.5 mm)Distribution in 61 of 67

Class C cities (pop .1 to .5 mm)Distribution 314 of 400

Building Distribution

National Retailers

Regional Retailers

Headquarters and Manufacturing (Bengaluru)

Major Distribution Locations

37

Business Model In India Similar to China

► Attractive Growth Demographics

► Leveraging Global Capabilities with Products Designed for the Indian Market

► Building Brand & Expanding our Distribution

► Introducing New Product Categories with Water Treatment

► Local Management

38

Energy Efficiency

39

Energy Efficient Products

VoltexTM EffexTM CirrexTM

Tankless

CycloneTM

Acquisition Strategy

41

Adjacencies Water-themed platforms for growth New technologies beyond water for China

Growth Strategy: Acquisitions

Adjacencies

Geography

Expand/ Grow the Core New Products & New

Technologies Water Heating Water Treatment

Geographic Growth China India High Growth GDP markets

Core

42

Investment Criteria

► Value creation opportunities

► ROIC in excess of cost of capital by second or third year

► Meet risk adjusted IRR hurdle rates

► Margin accretion with growth rates higher than U.S. GDP

► Accretive to earnings in the first year

2015 Outlook

44

A. O. Smith’s Capital Allocation Options

► Organic growth (capital expenditures)► Acquisitions

$270 million net cash 16 percent leverage ratio (debt/total

capital)► Return cash to shareholders: approximately

$170 million projected in 2015Dividends

• Increased 27 percent in first quarter 2015

Share repurchase• Expect to repurchase approximately $125 million* in

2015 to maintain net cash position level similar to year-end 2014: approximately $320 million

*subject to price, alternative investments and working capital requirements

45

2015 Outlook

► China revenue grows at two times China GDP► North America

Price increase effective in April NAECA III transition complete Residential and commercial water heater volumes

improve year over year ► Lochinvar branded annual sales growth of 10 percent

Transition in North America to higher efficiency boilers continues

► Leverage brand and distribution in China Introduce A. O. Smith air purifiers

► Continued commitment to India Focused water treatment launch July 23, 2015

46

Growth Strategy: Organic Growth

• 4.5%• 4.5%

China: 30% of sales growing 15%

• 1.2%• 1.2%

Lochinvar: 12% of sales growing 10%

• 2.3%• 2.3%

NA water heaters: 58% of sales growing 4%

• 8.0%• 8.0%

Total annual sales growth

Note: NA water heater growth expected to exceed 4 percent in 2015, is a result of higher priced NAECA III products, and result in total company sales growth of approximately 11 percent in 2015

47

China Growth Model : 2X GDP

2X China GDP

Water Heater Market Growth

Market Share Gains & Average Selling Price

Increases

Fast Growing Ancillary Products

48

Growth and Stability

Offense► Organic growth of 8 + % China growing

approximately 2X GDP in 2015 Lochinvar branded

products grow at 10% in 2015

► Call option on NA new construction

► Significant cash and borrowing capacity for “value creating” acquisitions and share buyback

Defense► NA water heaters 90%+

replacement► Market share leader in NA,

China and path to become leader in India

► Strong balance sheet; net cash position approximately $320 million (target)

► Small exposure to Europe ($50 million in revenues)

Vice President, Investor Relations and Treasurer

Direct: 414-359-4130Email: packerman@aosmith.com

Investor Contact

49

Appendix

Second Quarter 2015 Resultsand

2015 Full Year Guidance

52

Second Quarter Results

2015 2014 change % chg.

($ in millions)

Sales 653.5$ 595.4$ 58.1$ 10%

Net Earnings 71.1 57.3

Non-operating Pension (after-tax) 3.0

Adjusted Earnings 71.1$ 60.3$ 10.8$ 18%

53

Second Quarter EPS

EPS $ 0.79 $ 0.63Non-operating Pension 0.03

Adjusted EPS $ 0.79 $ 0.66 $ 0.13 20%

2015 2014 change % chg.

54

North America 442.7$ 410.1$ 32.6$ 8%

Rest of World 221.3 193.6 27.7$ 14%

Intersegment (10.5) (8.3) (2.2)$

Total 653.5$ 595.4$ 58.1$ 10%

($ in millions)

Second Quarter Sales

2015 2014 change % chg.

55

North America 86.0$ 67.1$ * 18.9$ 28%Rest of World 30.9 29.3 1.6 5%Total Operating 116.9 96.4 20.5 21%

Corporate (11.2) (11.4) ** 0.2 2%Interest Expense (2.5) (1.4) (1.1) -79%Pre-tax Earnings 103.2 83.6 19.6 23%Income Tax Expense (32.1) (23.3) (8.8) -38%Earnings 71.1$ 60.3$ 10.8$ 18%Operating MarginNorth America 19.4% 16.4% *Rest of World 14.0% 15.1%

Second Quarter Operating Earnings

2015 2014 change % chg.

* Excludes $3.9 million non-operating pension costs in 2014** Excludes $1.1 million non-operating pension costs in 2014

($ in millions, except margins)

56

59

91

0102030405060708090

100

Operating Cash Flow from Continuing Operations

►Cash flow of $59 million

►Debt to capital ratio of 16%

►Cash balance: $552 million

►Net cash position: $273 million

►Stock repurchase: 730,000 shares totaling $47 million

6/30/2015 6/30/2014

First Half 2015 UpdateFirst Half 2015 Update($ in millions)

57

Relevant Data Points

2015 Projections

As of July 23, 2015

($ in millions)

Operating Cash Flow $300

Capital Expenditures $100 to $110

Depreciation and Amortization $65

ERP Implementation Expense $19 to $20

Tax Rate 30.5%

Corporate/Other Expense $45

58

2015 EPS Guidance and Adjusted 2014 EPS

Diluted EPS (GAAP) $3.04- $3.09 $ 2.29

Non-operating pension costs per diluted share 0.14

Adjusted EPS $ 2.43

2015Guidance 2014

The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax):

As of July 23, 2015