A. O. Smith(US:AOS)2025-10-28 19:39Acquisition and Sales - The company acquired Pureit from Unilever for approximately $125 million, contributing $45 million to sales in the first nine months of 2025 and expected to generate $55 million in sales for the full year 2025[73]. - Net sales for the third quarter of 2025 were $942.5 million, an increase of 4.4% from $902.6 million in the same quarter of 2024; year-to-date sales reached $2,917.7 million, slightly up from $2,905.7 million[79]. - North America segment sales increased to $742.8 million in Q3 2025, up from $703.3 million in Q3 2024, with segment earnings rising to $179.7 million from $162.5 million[85][86]. - Rest of World segment sales decreased by 1.1% to $207.9 million in Q3 2025 compared to $210.3 million in Q3 2024, with segment earnings increasing to $15.4 million from $13.6 million[87][88]. - The company expects consolidated sales in 2025 to be flat to up 1% compared to 2024, driven by projected growth in boiler sales of 4-6% and low single-digit growth in commercial industry volumes[89]. Financial Performance - Gross profit margin improved to 38.7% in Q3 2025 from 37.4% in Q3 2024, and to 39.0% for the first nine months of 2025 compared to 38.5% in the same period last year[80]. - The effective income tax rate for Q3 2025 was 23.2%, slightly down from 23.3% in Q3 2024, with an estimated annual effective tax rate of approximately 24% for 2025[84]. - The company anticipates full-year earnings per share between $3.70 and $3.85 for 2025, excluding impacts from potential future acquisitions and outcomes of the assessment of the China business[89]. - Diluted EPS guidance for 2025 is projected to be between $3.70 and $3.85, compared to an adjusted EPS of $3.73 for 2024[101]. Cash Flow and Capital Management - Cash provided by operating activities for the first nine months of 2025 was $433.7 million, up from $359.9 million in the same period of 2024, primarily due to lower inventory balances[91]. - Free cash flow for the first nine months of 2025 was $380.5 million, compared to $282.5 million in 2024, with expectations of approximately $500 million for the full year 2025[91][99]. - Capital expenditures totaled $53.2 million in the first nine months of 2025, down from $77.4 million in the same period last year, with projections of approximately $75 million for the full year 2025[92]. - Total debt decreased by $7.4 million in the first nine months of 2025, resulting in a leverage ratio of 9.2% as of September 30, 2025, compared to 9.3% at the end of 2024[94]. - The company repurchased 4,976,377 shares at an average price of $67.39 per share for a total cost of $335.4 million during the first nine months of 2025, with an expected total repurchase expenditure of approximately $400 million for the full year[95]. - The company declared a regular quarterly cash dividend of $0.36 per share, payable on November 17, 2025[96]. - The company expects cash provided by operating activities to be approximately $600 million in 2025[91]. - The company has a renewed $500 million revolving credit facility expiring on August 23, 2029, with an available borrowing capacity of $470 million as of September 30, 2025[93]. - The company is in compliance with financial covenants related to its credit facility and expects to maintain compliance in the foreseeable future[93]. Restructuring and Expenses - The company recognized restructuring and impairment expenses of $17.6 million in 2024, including $11.3 million in severance expenses in China[75]. - Working capital decreased to $463.6 million as of September 30, 2025, from $495.7 million at the end of 2024, primarily due to lower inventory and cash balances[90].