Kevin J. Wheeler
Chairman, President, and Chief Executive Officer at A. O. Smith
Thank you, Helen, and good morning, everyone. Thank you for joining us today. I'm on Slide four and our first quarter results. Our team performed extremely well throughout the quarter, despite a turbulent macro environment, and delivered strong sales and EPS performance. First quarter sales improved 27% year-over-year, driven by our 2021 inflation-related price increases and acquisition of Giant Factories late last year and international volume growth. Excluding acquisitions, first quarter sales grew 23%. Our Rest of World segment performance was strong, with margins improvement over 440 basis points year-over-year, driven by China improving its operating margins to over 11%.
We delivered strong results despite supply chain challenges and component shortages throughout the quarter. Weather challenges and Omicron-related labor constraints impacted our North American production in the first half of the quarter. However, shipments improved sequentially in the second half of February and in March, especially our residential water heater production, where we saw supply chain improvement and, as a result, improved our lead times to customers.
The acquisition of Giant added $32 million to the quarter sales and $0.02 to EPS. We are pleased with the performance of the team, and the integration is on track. Please turn to Slide five. Our global A. O. Smith team delivered first quarter 2022 adjusted EPS of $0.77, a 31% increase that was driven in part by a 27% increase in sales compared with the first quarter of 2021. Our strong first quarter performance resulted from our team's outstanding operational and sales execution, despite the challenging environment of component shortages, continued materials and transportation cost inflation, weather impacts and surges in COVID-19.
I continue to take pride in how my fellow A. O. Smith employees are working together to overcome these challenges to meet market demand and deliver for our valued customers. Excluding the impact of Giant, North America water heater sales grew 28% in the first quarter of 2022 due to pricing actions implemented in '21 in response to rising material and logistic costs. Our full year outlook of the residential water heater industry remains unchanged as demand continues to track to our expectations.
Our full year outlook for the commercial water heater industry is to be flat to slightly down. The commercial industry started the year weaker than expected, primarily due to a regulatory change that temporarily impacted orders of large electric commercial products greater than 55 gallons. Our first quarter commercial sales were also impacted by component shortages for certain gas products. We have seen demand for our large electric product improving since early in the quarter, and we expect component availability to improve in the second quarter.
Our North America boiler sales grew 24% in the quarter, primarily driven by price increases to offset higher material and transportation costs and demand for our energy-efficient products. We ended the quarter with a record backlog, largely composed of commercial condensing boilers, and April continues to generate strong order rates for these market-leading, energy-efficient boilers, providing confidence in our outlook for the year.
Our strategy to focus on innovation and decarbonization contributed to strong demand for our high-efficiency condensing boilers. North America water treatment sales grew 17% in the first quarter as we continued to pursue additional market share in this attractive market with a total addressable market value that we estimate to be $2.6 billion. Taking an omnichannel approach, our strategy is to grow our market share through innovation, product development and acquisition opportunities. Our independent water quality dealers continue to play an important role in our growth by outperforming the market and gaining market share.
In China, sales increased 12% in local currency compared to the first quarter of 2021, primarily due to favorable mix as our new product offerings continue to be well received as well as higher sales of commercial water treatment products and replacement filters. During the first quarter, we proactively worked with our distributors to ship product into the market in advance of potential COVID-19 disruptions, which most recently is impacting transportation in certain regions.
While our customers have ample inventory in place, our tracking of consumer demand in April across our portfolio and geographies is indicating a year-over-year reduction of 35% to 40%. Our outlook assumes the COVID-19-related shutdowns in China subside during the second quarter of 2022. Despite the economic headwinds to our business in China, I'm very pleased with the quarterly performance of our China team, who are taking great steps to rightsize the business, manage discretionary spend while investing in new product development.
On Slide six, please. I'd like to highlight two of our products in China that demonstrate our continued focus on innovation and product development. At the Red-Top award ceremony in Tianjin, China, A. O. Smith earned two of the coveted High-End Appliance Awards for the QuietFresh Range Hood and Soft Water Heating/Hot Water Boiler. Under the guidance of China Household Electric Appliances Association, our products were among hundreds of products evaluated for the awards every year with a focus on advanced technology, industrial design, market influence, energy conservation, environmental protection and user experience. We take great pride in this recognition as yet another example of how our products set us apart as the innovative leader in the market.
I'll now turn the call over to Chuck, who will provide more details on our first quarter performance.