A. O. Smith(AOS) - 2025 Q1 - Quarterly Report

Financial Performance - In Q1 2025, the company reported net sales of $963.9 million, a decrease of 1.0$978.8 million in Q1 2024, primarily due to lower residential and commercial water heater volumes in North America and lower sales in China [79]. - The gross profit margin for Q1 2025 was 38.9%, down from 39.3% in Q1 2024, attributed to lower sales volumes [80]. - The North America segment's net sales were $748.7 million in Q1 2025, a decline of 2.3$766.3 million in Q1 2024, driven by lower water heater volumes [83]. - The Rest of World segment's net sales were $226.7 million in Q1 2025, essentially flat compared to$226.9 million in Q1 2024, impacted by lower volumes in China [85]. - The company expects consolidated sales in 2025 to be flat to up 2% compared to 2024, with projected earnings per share between $3.60 and$3.90 [87]. Cash Flow and Debt - Cash provided by operating activities in Q1 2025 was $38.7 million, significantly lower than$106.6 million in Q1 2024, primarily due to lower accounts receivable collections [89]. - Free cash flow for Q1 2025 was $17.4 million, down from$84.6 million in Q1 2024 [96]. - Total debt increased by $76.6 million in Q1 2025, with a leverage ratio of total debt to total capitalization at 12.7$125 million, contributing $12 million to sales in Q1 2025 and expected to generate annual sales of about$50 million in 2025 [72]. - The company recognized restructuring and impairment expenses of $17.6 million in 2024, including$11.3 million in severance expenses in China [74]. - Restructuring and impairment expenses for 2024 include $11.3 million in the Rest of World segment and$6.3 million in the North America segment [97]. Guidance and Risks - 2025 diluted EPS guidance is projected to be between $3.60 and$3.90, with 2024 adjusted EPS reported at $3.73 [97]. - Forward-looking statements highlight risks including international tariffs, inflationary pressures, and potential recession impacts on demand for products [100]. - The company is exposed to market risks such as currency and commodity risks, with ongoing monitoring and use of forward and futures contracts to mitigate these exposures [101]. Accounting Policies - The company emphasizes the importance of critical accounting policies that may significantly affect reported results, as detailed in the Annual Report for the year ended December 31, 2024 [98].