aos-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-475

________________________________

A. O. Smith Corporation

(Exact name of registrant as specified in its charter)

________________________________

Delaware

(State of Incorporation)

11270 West Park Place, Milwaukee, Wisconsin

(Address of Principal Executive Office)

39-0619790

(I.R.S. Employer

Identification No.)

53224-9508

(Zip Code)

(414) 359-4000

(Registrant’s telephone number, including area code)

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading
Symbol

Name of Each Exchange
on Which Registered

Common Stock (par value $1.00 per share)

AOS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) ☐ Yes ☒ No

Class A Common Stock Outstanding as of April 24, 2024 - 25,886,364 shares

Common Stock Outstanding as of April 24, 2024 - 120,783,753 shares

Index

A. O. Smith Corporation


		Page
Part I.	FINANCIAL INFORMATION

	Condensed Consolidated Statements of Earnings - Three Months Ended March 3 1 , 202 4 and 202 3	3

	Condensed Consolidated Statements of Comprehensive Earnings - Three Months Ended March 3 1 , 202 4 and 202 3	3

	Condensed Consolidated Balance Sheets - March 3 1 , 202 4 and December 31, 20 2 3	4

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 3 1 , 202 4 and 202 3	5

	Condensed Consolidated Statements of Stockholders’ Equity - Three Months Ended March 3 1 , 202 4 and 202 3	6

	Notes to Condensed Consolidated Financial Statements - March 3 1 , 202 4	7-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25-26

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	26

Item 5.	Other Information	26

Item 6.	Exhibits	26

Index to Exhibits		27

Signatures		28


	Three Months Ended March 31,
	2024		2023
Net sales	$	978.8	$	966.4
Cost of products sold	594.1		592.3
Gross profit	384.7		374.1
Selling, general and administrative expenses	192.2		187.2
Impairment expense	—		15.6
Interest expense	1.0		4.0
Other income, net	(1.2)		(4.0)
Earnings before provision for income taxes	192.7		171.3
Provision for income taxes	45.1		44.4
Net Earnings	$	147.6	$	126.9
Basic Net Earnings Per Share of Common Stock	$	1.00	$	0.84
Diluted Net Earnings Per Share of Common Stock	$	1.00	$	0.84
Dividends Per Share of Common Stock	$	0.32	$	0.30


	(unaudited) March 31, 2024		December 31, 2023
Assets
Current Assets
Cash and cash equivalents	$	251.6	$	339.9
Marketable securities	51.5		23.5
Receivables	584.6		596.0
Inventories	522.3		497.4
Other current assets	51.5		43.5
Total Current Assets	1,461.5		1,500.3
Property, plant and equipment	1,429.9		1,418.6
Less accumulated depreciation	(830.9)		(821.1)
Net property, plant and equipment	599.0		597.5
Goodwill	651.5		633.4
Other intangibles	333.5		336.7
Operating lease assets	35.7		37.3
Other assets	101.0		108.7
Total Assets	$	3,182.2	$	3,213.9
Liabilities
Current Liabilities
Trade payables	$	557.7	$	600.4
Accrued payroll and benefits	54.3		92.2
Accrued liabilities	197.1		177.4
Product warranties	64.3		65.3
Debt due within one year	10.0		10.0
Total Current Liabilities	883.4		945.3
Long-term debt	109.7		117.3
Product warranties	120.7		122.8
Long-term operating lease liabilities	26.4		27.9
Other liabilities	160.2		156.2
Total Liabilities	1,300.4		1,369.5
Stockholders’ Equity
Class A Common Stock (shares issued, 26,017,732 and 26,023,132 as of March 31, 2024 and December 31, 2023, respectively)	130.1		130.1
Common Stock (shares issued 164,689,862 and 164,684,460 as of March 31, 2024 and December 31, 2023, respectively)	164.7		164.7
Capital in excess of par value	589.5		578.2
Retained earnings	3,358.6		3,258.1
Accumulated other comprehensive loss	(87.9)		(84.2)
Treasury stock at cost	(2,273.2)		(2,202.5)
Total Stockholders’ Equity	1,881.8		1,844.4
Total Liabilities and Stockholders’ Equity	$	3,182.2	$	3,213.9


(dollars in millions)	Three Months Ended March 31,
	2024		2023
North America
Water heaters and related parts	$	648.3	$	637.3
Boilers and related parts	58.7		58.4
Water treatment products and related parts	59.3		57.0
Total North America	766.3		752.7
Rest of World
China	$	200.6	$	190.2
All other Rest of World	26.3		28.9
Total Rest of World	226.9		219.1
Inter-segment sales	(14.4)		(5.4)
Total Net Sales	$	978.8	$	966.4


(dollars in millions)	March 31, 2024		December 31, 2023
Finished products	$	196.8	$	177.7
Work in process	44.2		44.2
Raw materials	325.6		322.6
Inventories, at FIFO cost	566.6		544.5
LIFO reserve	(44.3)		(47.1)
Inventories, at LIFO cost	$	522.3	$	497.4


	Weighted- Avg. Per Share Exercise Price		Number of Options	Average Remaining Contractual Life	Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2024	$	52.93	1,872,553

Exercised	44.72		(242,687)
Forfeited	74.27		(1,167)
Outstanding at March 31, 2024	54.14		1,628,699	6 years	$	57.5
Exercisable at March 31, 2024	52.77		1,523,932	6 years	$	55.9


	Number of Units	Weighted-Average Grant Date Value
Issued and unvested at January 1, 2024	381,189	$	63.33
Granted	189,792	82.22
Vested	(92,582)	60.78
Forfeited	(776)	68.16
Issued and unvested at March 31, 2024	477,623	71.16


Fair Value Measurement Using	Balance Sheet Location	March 31, 2024		December 31, 2023
Quoted prices in active markets for identical assets (Level 1)	Marketable Securities	$	51.5	$	23.5
Significant other observable inputs (Level 2)	Other current assets / (Accrued liabilities)	3.1		(4.1)


(dollars in millions)	March 31, 2024				December 31, 2023
	Buy		Sell		Buy		Sell

Canadian dollar	$	—	$	60.3	$	—	$	80.5
Euro	25.1		—		24.1		—
Mexican peso	16.1		—		14.2		—
Total	$	41.2	$	60.3	$	38.3	$	80.5


Derivatives in ASC 815 cash flow hedging relationships	Amount of gain recognized in other comprehensive loss on derivatives				Location of gain reclassified from accumulated other comprehensive loss into earnings	Amount of gain reclassified from accumulated other comprehensive loss into earnings
	2024		2023			2024		2023
Foreign currency contracts	$	1.8	$	1.7	Cost of products sold	$	0.6	$	1.9


Derivatives not designated as hedging instruments:	Location within the consolidated statements of earnings	2024		2023
Foreign exchange contracts	Other income - net	$	4.0	$	(0.1)


	Three Months Ended March 31,
	2024		2023
Operating Activities
Net earnings	$	147.6	$	126.9
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	19.6		19.2
Stock based compensation expense	8.3		7.0
Deferred income taxes	2.9		—
Non-cash impairment	—		15.6


Net changes in operating assets and liabilities:
Current assets and liabilities	(73.7)		(50.6)
Noncurrent assets and liabilities	1.9		1.8
Cash Provided by Operating Activities	106.6		119.9
Investing Activities
Capital expenditures	(22.0)		(10.7)
Acquisition of business	(21.1)		—
Investments in marketable securities	(48.1)		(14.7)
Net proceeds from sale of marketable securities	20.0		15.6
Cash Used in Investing Activities	(71.2)		(9.8)
Financing Activities
Long-term debt repaid	(6.8)		(3.7)
Common stock repurchases	(74.5)		(53.1)

Net proceeds from stock option activity	8.0		4.7
Dividends paid	(47.3)		(45.4)
Cash Used in Financing Activities	(120.6)		(97.5)
Effect of exchange rate changes on cash and cash equivalents	(3.1)		2.4
Net (decrease) increase in cash and cash equivalents	(88.3)		15.0
Cash and cash equivalents - beginning of period	339.9		391.2
Cash and Cash Equivalents - End of Period	$	251.6	$	406.2


	Three Months Ended March 31,
	2024	2023
Denominator for basic earnings per share - weighted average shares	147,178,955	150,897,302
Effect of dilutive stock options and share units	1,118,526	1,003,545
Denominator for diluted earnings per share	148,297,481	151,900,847


	Three Months Ended March 31,
	2024		2023
Earnings Before Provision for Income Taxes (GAAP)	$	192.7	$	171.3
Add: Corporate expense(1)		21.9		18.6
Add: Interest expense		1.0		4.0
Total Segment Earnings (non-GAAP)	$	215.6	$	193.9

North America	$	198.7	$	188.6
Rest of World(2)		17.2		5.3
Inter-segment earnings elimination		(0.3)		—
Total Segment Earnings (non-GAAP)	$	215.6	$	193.9

Additional Information
(1)Corporate expense	$	(21.9)	$	(18.6)

Impairment expense, before tax		—		3.1
Adjusted Corporate expense (non-GAAP)	$	(21.9)	$	(15.5)







(2)Rest of World	$	17.2	$	5.3
Impairment expense, before tax		—		12.5
Adjusted Rest of World (non-GAAP)	$	17.2	$	17.8


	2024 Guidance		2023
Diluted EPS (GAAP)	$	3.90 - 4.15	$	3.69
Restructuring and impairment expense		—		0.12	(1)
Adjusted EPS (non-GAAP)	$	3.90 - 4.15	$	3.81

SEC Form 10-Q filed by A.O. Smith Corporation