Charles T. Lauber
Executive Vice President and Chief Financial Officer at A. O. Smith
Thank you, Kevin, and good morning, everyone. I'm on slide six. First quarter sales in the North America segment were $766 million, a 2% increase compared with 2023 driven by higher commercial volumes and the benefits of mix shift towards high-efficiency water heaters, including heat pumps. North America segment earnings of $199 million increased 5% compared with 2023. Segment margin was 25.9%, an increase of 80 basis points year-over-year. The higher segment earnings and margin were primarily driven by positive mix and lower material costs, partially offset by selling and advertising expenses in support of higher sales. Moving to slide seven.
Rest of the World segment sales of $227 million increased 4% year-over-year, including unfavorable currency translation of $9 million primarily related to China. Segment third-party sales of $219 million increased 4% on a constant currency basis. The increase was primarily driven by higher sales of kitchen and HVAC products in China. India sales increased 16% in local currency in the quarter, driven by growth in both water heating and water treatment with particular strength in our e-commerce and commercial end markets. Rest of the World segment earnings of $17 million decreased slightly compared to adjusted segment earnings in 2023, primarily due to sales promotions associated with new product introductions and product mix in China.
Third-party segment operating margin was 7.9%, a decrease of 20 basis points compared to adjusted segment margins in 2023. Please turn to slide eight. We generated free cash flow of $85 million during the first three months of 2024, a decrease from the same period last year, primarily as a result of higher incentive payments associated with record sales and profits last year and higher inventory levels that more than offset higher earnings and lower accounts payable balances. Capital expenditures increased $11 million year-over-year, driven by expansion projects. Our cash balance totaled $303 million at the end of March, and our net cash position was $183 million.
Our leverage ratio was 6% as measured by total debt to total capital. Let's now turn to slide nine. In addition to returning capital to shareholders, we continue to see opportunities for investment in organic growth, innovation and new product development across all of our product lines and geographies. We target strategic acquisitions that meet our financial metrics as accretive to earnings in the first year and return our cost of capital in three years. In the first quarter, we welcomed Impact Water Products to the A. O. Smith family. Impact supports our growth strategy by expanding the West Coast presence of our water treatment business. Please turn to slide 10 in our 2024 earnings guidance and outlook. We reaffirm our 2024 EPS outlook of an expected range of $3.90 to $4.15 per share. The midpoint of our EPS range represents an increase of 6% compared with 2023 adjusted EPS.
Our outlook is based on a number of key assumptions, including our guidance assumes that our steel costs in the full year 2024 will be a slight headwind compared to 2023. We project an increase in steel input costs in the second quarter of approximately 20% over the first quarter. Our full year steel input cost projection includes a slight decline in the steel price index in the second half of the year. Our outlook assumes non-steel material costs are similar in 2024 as they were in 2023. Our guidance also assumes a relatively stable supply chain environment, similar to what we've experienced throughout 2023. We introduced our internally designed and manufactured gas tankless products earlier this year. These products will be manufactured in our China facility until our North America capacity is completed in 2025.
We expect customer shipments to begin later in the second quarter. Associated import tariffs and other launch costs will negatively impact North America margins by approximately 50 basis points when we begin to ship product. We are investing in manufacturing of Juarez, Mexico that will eliminate the tariff in the future. For the year, capex should be between $105 million and $115 million, an increase year-over-year due to capital -- the capacity expansion projects related to our gas tankless manufacturing facility at Juarez, expansion of our engineering capabilities in Lebanon, Tennessee, and adding high-efficiency commercial water heating manufacturing capacity to align with regulatory changes coming in 2026.
We expect to generate strong free cash flow of between $525 million and $575 million. Corporate and other expenses are expected to be approximately $65 million. Our effective tax rate is estimated to be between 24% to 24.5% and we continue to expect to repurchase approximately $300 million of our shares of stock, resulting in our outstanding diluted shares of $147 million at the end of the year.
I will now turn the call back over to Kevin, who will provide more color on key markets and top line growth outlook and segment expectations for 2024, staying on slide 13. Kevin?
