A. O. Smith Reports 2024 Results and Introduces 2025 Guidance
2024 Highlights
(Comparisons are year-over-year ("YoY"), unless otherwise noted)
- Sales of
$3.8 billion , a decrease of 1% primarily driven by lower sales inChina - Net earnings of
$533.6 million and diluted earnings per share (EPS) of$3.63 , a 2% decrease, primarily due to lower sales as well as a$0.10 reduction to EPS for restructuring and impairment expenses to right size the businesses inChina andNorth America water treatment - Adjusted earnings of
$548.0 million resulted in adjusted EPS of$3.73 , a decrease of 2% - Returned
$496 million of capital to shareholders through dividend and share repurchases - Pureit acquisition, which closed in the fourth quarter, had a minimal impact on 2024 results
Key Financial Metrics
Full Year
(in millions, except per share amounts)
|
2024 |
2023 |
% Change YoY |
Net sales |
|
|
-1 % |
Net earnings |
|
|
-4 % |
Adjusted earnings |
|
|
-5 % |
Diluted earnings per share |
$ 3.63 |
$ 3.69 |
-2 % |
Adjusted earnings per share |
$ 3.731 |
$ 3.812 |
-2 % |
|
|
|
|
1 |
Excludes restructuring and impairment expenses. See accompanying GAAP to Non-GAAP reconciliations |
2 |
Excludes restructuring and impairment expenses and pension settlement income. See accompanying GAAP to Non-GAAP reconciliations |
Fourth Quarter
(in millions, except per share amounts)
|
Q4 2024 |
Q4 2023 |
% Change YoY |
Net sales |
|
|
-8 % |
Net earnings |
|
|
-20 % |
Adjusted earnings |
|
|
-14 % |
Diluted earnings per share |
$ 0.75 |
$ 0.92 |
-18 % |
Adjusted earnings per share |
$ 0.85 3 |
$ 0.974 |
-12 % |
|
|
3 |
Excludes restructuring and impairment expenses. See accompanying GAAP to Non-GAAP reconciliations |
4 |
Excludes restructuring and impairment expenses and pension settlement expense. See accompanying GAAP to Non-GAAP reconciliations |
"After three years of record sales,
Full year and fourth quarter 2024 adjusted earnings exclude pre-tax restructuring and impairment expenses of
Segment-level Performance
Full Year 2024
2024 sales of
Segment earnings were
Fourth Quarter 2024
Fourth quarter sales of
Segment earnings were
Rest of World
Full Year 2024
Rest of World sales of
Segment earnings were
Fourth Quarter 2024
Rest of World sales of
Segment earnings were
Balance Sheet, Liquidity and Capital Allocation
As of
Cash provided by operations was
As part of its commitment to return capital to shareholders, the Company repurchased 3.8 million shares at a cost of
On
Outlook
2025 Outlook
(in millions, except per share amounts)
|
2024 |
|
2025 Outlook |
|
|
Actual |
|
Low End |
High End |
Net sales |
$ 3,818 |
|
$ 3,800 |
$ 3,900 |
Diluted earnings per share |
$ 3.63 |
|
$ 3.60 |
$ 3.90 |
Adjusted earnings per share |
$ 3.73 5 |
|
$ 3.60 |
$ 3.90 |
|
|
5 |
Excludes restructuring and impairment expenses. See accompanying GAAP to Non-GAAP reconciliations |
"Our outlook for 2025 projects our consolidated sales to be flat to up 2% compared to 2024. We expect our full-year EPS to be between
"We believe our strong balance sheet and free cash flow continue to provide us the liquidity to focus on our capital allocation priorities of organic growth, acquisitions, dividends and share repurchases, which we believe will enable us to execute our strategy to invest and grow profitably."
The Company's guidance excludes the potential impacts from future acquisitions.
To provide improved transparency into the operating results of its business, the Company is providing non-GAAP measures. Free cash flow is defined as cash provided by operations less capital expenditures. Adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expenses exclude the impact of restructuring and impairment charges and pension settlement income and expenses. Reconciliations from GAAP measures to non-GAAP measures are provided in the financial information included in this news release.
Forward-looking Statements
This release contains statements that the Company believes 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," "forecast," "continue," "guidance," "outlook" or words of similar meaning. All 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 release. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: further softening in
About
|
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
(unaudited) |
|
(unaudited) |
|
|
|
|||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Net sales |
$ |
912.4 |
|
$ |
988.1 |
|
$ |
3,818.1 |
|
$ |
3,852.8 |
Cost of products sold |
|
574.3 |
|
|
618.3 |
|
|
2,362.0 |
|
|
2,368.0 |
Gross profit |
|
338.1 |
|
|
369.8 |
|
|
1,456.1 |
|
|
1,484.8 |
Selling, general and administrative expenses |
|
182.0 |
|
|
185.0 |
|
|
739.3 |
|
|
727.4 |
Restructuring and impairment expenses |
|
17.6 |
|
|
3.2 |
|
|
17.6 |
|
|
18.8 |
Interest expense |
|
2.4 |
|
|
1.1 |
|
|
6.7 |
|
|
12.0 |
Other (income) expense |
|
(9.0) |
|
|
3.6 |
|
|
(8.5) |
|
|
(6.9) |
Earnings before provision for income taxes |
|
145.1 |
|
|
176.9 |
|
|
701.0 |
|
|
733.5 |
Provision for income taxes |
|
35.4 |
|
|
39.6 |
|
|
167.4 |
|
|
176.9 |
Net earnings |
$ |
109.7 |
|
$ |
137.3 |
|
$ |
533.6 |
|
$ |
556.6 |
Diluted earnings per share of common stock(1) |
$ |
0.75 |
|
$ |
0.92 |
|
$ |
3.63 |
|
$ |
3.69 |
Average common shares outstanding (000's omitted) |
|
145,758 |
|
|
149,436 |
|
|
147,084 |
|
|
151,016 |
|
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding. |
|
|||||
|
|||||
|
(Unaudited) |
|
|
||
ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
$ |
239.6 |
|
$ |
339.9 |
Marketable securities |
|
36.5 |
|
|
23.5 |
Receivables |
|
541.4 |
|
|
596.0 |
Inventories |
|
532.1 |
|
|
497.4 |
Other current assets |
|
43.3 |
|
|
43.5 |
Total Current Assets |
|
1,392.9 |
|
|
1,500.3 |
Net property, plant and equipment |
|
628.7 |
|
|
597.5 |
|
|
1,082.8 |
|
|
970.1 |
Operating lease assets |
|
32.8 |
|
|
37.3 |
Other assets |
|
102.8 |
|
|
108.7 |
Total Assets |
$ |
3,240.0 |
|
$ |
3,213.9 |
LIABILITIES AND STOCKHOLDERS' EQUITY: |
|
|
|
|
|
Trade payables |
$ |
588.7 |
|
$ |
600.4 |
Accrued payroll and benefits |
|
78.5 |
|
|
92.2 |
Accrued liabilities |
|
153.0 |
|
|
177.4 |
Product warranties |
|
67.0 |
|
|
65.3 |
Debt due within one year |
|
10.0 |
|
|
10.0 |
Total Current Liabilities |
|
897.2 |
|
|
945.3 |
Long-term debt |
|
183.2 |
|
|
117.3 |
Pension liabilities |
|
11.0 |
|
|
10.5 |
Operating lease liabilities |
|
23.5 |
|
|
27.9 |
Other liabilities |
|
241.6 |
|
|
268.5 |
Stockholders' equity |
|
1,883.5 |
|
|
1,844.4 |
Total Liabilities and Stockholders' Equity |
$ |
3,240.0 |
|
$ |
3,213.9 |
|
|||||
|
|||||
|
Twelve Months Ended |
||||
|
(unaudited) |
|
|
|
|
|
2024 |
|
2023 |
||
Operating Activities |
|
|
|
|
|
Net earnings |
$ |
533.6 |
|
$ |
556.6 |
Adjustments to reconcile net earnings to net cash provided by (used in) operating |
|
|
|
|
|
Depreciation & amortization |
|
78.8 |
|
|
78.3 |
Stock based compensation expense |
|
14.9 |
|
|
11.5 |
Deferred income taxes |
|
(4.6) |
|
|
(3.8) |
Non-cash impairments |
|
4.7 |
|
|
15.6 |
Pension settlement (income) expense |
|
— |
|
|
(0.9) |
Pension settlement non-cash taxes |
|
— |
|
|
0.2 |
Net changes in operating assets and liabilities: |
|
|
|
|
|
Current assets and liabilities |
|
(22.6) |
|
|
20.0 |
Noncurrent assets and liabilities |
|
(23.0) |
|
|
(7.2) |
Cash Provided by Operating Activities |
|
581.8 |
|
|
670.3 |
Investing Activities |
|
|
|
|
|
Capital expenditures |
|
(108.0) |
|
|
(72.6) |
Acquisitions |
|
(145.9) |
|
|
(16.8) |
Investment in marketable securities |
|
(73.7) |
|
|
(63.1) |
Net proceeds from sale of marketable securities |
|
60.5 |
|
|
128.4 |
Cash Used in Investing Activities |
|
(267.1) |
|
|
(24.1) |
Financing Activities |
|
|
|
|
|
Long-term debt incurred (repaid) |
|
69.7 |
|
|
(218.1) |
Common stock repurchases |
|
(305.8) |
|
|
(306.5) |
Net proceeds from stock option activity |
|
18.1 |
|
|
23.4 |
Dividends paid |
|
(190.4) |
|
|
(183.5) |
Cash Used In Financing Activities |
|
(408.4) |
|
|
(684.7) |
Effect of exchange rate changes on cash and cash equivalents |
|
(6.6) |
|
|
(12.8) |
Net decrease in cash and cash equivalents |
|
(100.3) |
|
|
(51.3) |
Cash and cash equivalents - beginning of period |
|
339.9 |
|
|
391.2 |
Cash and Cash Equivalents - End of Period |
$ |
239.6 |
|
$ |
339.9 |
|
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|
|||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
(unaudited) |
|
(unaudited) |
|
|
|
|||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
689.8 |
|
$ |
738.0 |
|
$ |
2,950.1 |
|
$ |
2,922.9 |
Rest of World |
|
236.6 |
|
|
260.2 |
|
|
918.6 |
|
|
956.9 |
Inter-segment sales |
|
(14.0) |
|
|
(10.1) |
|
|
(50.6) |
|
|
(27.0) |
|
$ |
912.4 |
|
$ |
988.1 |
|
$ |
3,818.1 |
|
$ |
3,852.8 |
Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
147.9 |
|
$ |
169.0 |
|
$ |
707.5 |
|
$ |
726.7 |
Rest of World (2) |
|
7.8 |
|
|
26.6 |
|
|
64.5 |
|
|
83.4 |
Inter-segment earnings elimination |
|
— |
|
|
(0.5) |
|
|
(0.4) |
|
|
(0.5) |
|
|
155.7 |
|
|
195.1 |
|
|
771.6 |
|
|
809.6 |
Corporate expense (3) |
|
(8.2) |
|
|
(17.1) |
|
|
(63.9) |
|
|
(64.1) |
Interest expense |
|
(2.4) |
|
|
(1.1) |
|
|
(6.7) |
|
|
(12.0) |
Earnings before income taxes |
|
145.1 |
|
|
176.9 |
|
|
701.0 |
|
|
733.5 |
Provision for income taxes |
|
35.4 |
|
|
39.6 |
|
|
167.4 |
|
|
176.9 |
Net earnings |
$ |
109.7 |
|
$ |
137.3 |
|
$ |
533.6 |
|
$ |
556.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Additional Information |
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
includes restructuring and impairment expense of: |
|
6.3 |
|
|
— |
|
|
6.3 |
|
|
— |
includes pension settlement expense (income) of: |
$ |
— |
|
$ |
4.3 |
|
$ |
— |
|
$ |
(0.7) |
(2) Rest of World |
|
|
|
|
|
|
|
|
|
|
|
includes restructuring and impairment expense of: |
|
11.3 |
|
|
3.2 |
|
|
11.3 |
|
|
15.7 |
(3) Corporate expense |
|
|
|
|
|
|
|
|
|
|
|
includes pension settlement expense (income) of: |
|
— |
|
|
0.8 |
|
|
— |
|
|
(0.2) |
includes impairment expense of: |
|
— |
|
|
— |
|
|
— |
|
|
3.1 |
|
|||||||||||
|
|||||||||||
The following is a reconciliation of net earnings and diluted earnings per share to adjusted earnings (non-GAAP) |
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Net Earnings (GAAP) |
$ |
109.7 |
|
$ |
137.3 |
|
$ |
533.6 |
|
$ |
556.6 |
Restructuring and impairment expenses, before tax |
|
17.6 |
|
|
3.2 |
|
|
17.6 |
|
|
18.8 |
Pension settlement expense (income), before tax |
|
— |
|
|
5.1 |
|
|
— |
|
|
(0.9) |
Tax effect on above items |
|
(3.2) |
|
|
(1.2) |
|
|
(3.2) |
|
|
0.3 |
Adjusted Earnings (non-GAAP) |
$ |
124.1 |
|
$ |
144.4 |
|
$ |
548.0 |
|
$ |
574.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share (GAAP)(1) |
$ |
0.75 |
|
$ |
0.92 |
|
$ |
3.63 |
|
$ |
3.69 |
Restructuring and impairment expenses, per diluted share, before tax |
|
0.12 |
|
|
0.02 |
|
|
0.12 |
|
|
0.12 |
Pension settlement expense (income) per diluted share, before tax |
|
— |
|
|
0.04 |
|
|
— |
|
|
— |
Tax effect on above items per diluted share |
|
(0.02) |
|
|
(0.01) |
|
|
(0.02) |
|
|
— |
Adjusted Earnings Per Share (non-GAAP)(1) |
$ |
0.85 |
|
$ |
0.97 |
|
$ |
3.73 |
|
$ |
3.81 |
|
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding. |
|
|||||||||||
|
|||||||||||
The following is a reconciliation of reported earnings before provision for income taxes to total segment earnings (non-GAAP) |
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Earnings Before Provision for Income Taxes (GAAP) |
$ |
145.1 |
|
$ |
176.9 |
|
$ |
701.0 |
|
$ |
733.5 |
Add: Corporate expense(1) |
|
8.2 |
|
|
17.1 |
|
|
63.9 |
|
|
64.1 |
Add: Interest expense |
|
2.4 |
|
|
1.1 |
|
|
6.7 |
|
|
12.0 |
Total Segment Earnings (non-GAAP) |
$ |
155.7 |
|
$ |
195.1 |
|
$ |
771.6 |
|
$ |
809.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
147.9 |
|
$ |
169.0 |
|
$ |
707.5 |
|
$ |
726.7 |
Rest of World(3) |
|
7.8 |
|
|
26.6 |
|
|
64.5 |
|
|
83.4 |
Inter-segment earnings elimination |
|
— |
|
|
(0.5) |
|
|
(0.4) |
|
|
(0.5) |
Total Segment Earnings (non-GAAP) |
$ |
155.7 |
|
$ |
195.1 |
|
$ |
771.6 |
|
$ |
809.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Additional Information |
|
|
|
|
|
|
|
|
|
|
|
(1)Corporate expense |
$ |
(8.2) |
|
$ |
(17.1) |
|
$ |
(63.9) |
|
$ |
(64.1) |
Pension settlement expense (income), before tax |
|
— |
|
|
0.8 |
|
|
— |
|
|
(0.2) |
Impairment expense, before tax |
|
— |
|
|
— |
|
|
— |
|
|
3.1 |
Adjusted Corporate expense (non-GAAP) |
$ |
(8.2) |
|
$ |
(16.3) |
|
$ |
(63.9) |
|
$ |
(61.2) |
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
$ |
147.9 |
|
$ |
169.0 |
|
$ |
707.5 |
|
$ |
726.7 |
Restructuring and impairment expenses, before tax |
|
6.3 |
|
|
— |
|
|
6.3 |
|
|
— |
Pension settlement expense (income), before tax |
|
— |
|
|
4.3 |
|
|
— |
|
|
(0.7) |
|
$ |
154.2 |
|
$ |
173.3 |
|
$ |
713.8 |
|
$ |
726.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(3)Rest of World |
$ |
7.8 |
|
$ |
26.6 |
|
$ |
64.5 |
|
$ |
83.4 |
Restructuring and impairment expenses, before tax |
|
11.3 |
|
|
3.2 |
|
|
11.3 |
|
|
15.7 |
Adjusted Rest of World (non-GAAP) |
$ |
19.1 |
|
$ |
29.8 |
|
$ |
75.8 |
|
$ |
99.1 |
|
|||||
|
|||||
The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP): |
|||||
|
|||||
|
Twelve Months Ended |
||||
|
2024 |
|
2023 |
||
Cash provided by operating activities (GAAP) |
$ |
581.8 |
|
$ |
670.3 |
Less: Capital expenditures |
|
(108.0) |
|
|
(72.6) |
Free cash flow (non-GAAP) |
$ |
473.8 |
|
$ |
597.7 |
|
||||||
|
||||||
The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax): |
||||||
|
||||||
|
2025 |
|
2024 |
|
||
Diluted EPS (GAAP) |
$ |
3.60 - 3.90 |
|
$ |
3.63 |
|
Restructuring and impairment expenses |
|
— |
|
|
0.10 |
(1) |
Adjusted EPS (non-GAAP) |
$ |
3.60 - 3.90 |
|
$ |
3.73 |
|
|
(1) Includes pre-tax restructuring and impairment expenses of |
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