ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Table of Contents ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Our company is comprised of two reporting segments: North America and Rest of World. Our Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas, heat pump and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective region of the world. Consistent with our stated strategic priorities, we continue to seek acquisitions that enable growth, expand our core business, and establish adjacencies. In November 2025, we announced that we signed a definitive agreement to acquire LVC Holdco LLC (Leonard Valve) for $470 million, subject to customary adjustments, and was funded with cash borrowed under a new term loan with a group of eight banks. The transaction was completed in January 2026. Leonard Valve is a leading manufacturer of water temperature and flow solutions and we believe it represents a compelling strategic fit and a meaningful advancement into our presence in the water management market. Leonard Valve is projected to contribute approximately $70 million in sales in 2026 in the North America segment. On November 1, 2024, we acquired Pureit from Unilever for approximately $125 million, subject to customary adjustments. Pureit, a leading water purification business in South Asia, offers a broad range of residential water purification solutions. Pureit contributed $54 million to sales in 2025 in the Rest of World segment. The acquisition fits squarely in our core capabilities and doubled our market penetration in the South Asia region. We continue to look for opportunities to add to our existing product portfolio in high growth regions demonstrated by our previous introductions of kitchen products and connected product technologies in China. We also recently introduced our internally designed and manufactured gas tankless water heaters in North America. In addition, we are expanding our commercial water heater capacity in North America in preparation for the new efficiency rule for commercial water heaters that the Department of Energy (DOE) has adopted that will take effect in October 2026. In our North America segment, water heater sales increased one percent in 2025 compared to 2024 as pricing benefits and higher commercial volumes were partially offset by lower wholesale residential volumes. We estimate that 2025 residential industry unit volumes were approximately flat compared to the prior year and we project 2026 industry residential unit volumes will be flat to down, driven by softness in new construction. We anticipate that commercial water heater industry volumes will increase mid-single digits in 2026 after growing approximately five percent in 2025. We believe that the 2026 growth will come from the buy ahead of products that will be eliminated as a part of the DOE regulatory change for commercial water heaters that will take effect in October 2026. In response to higher steel and other input costs, including tariffs, we announced price increases on most of our water heater and boiler products in the first half of 2025. In addition to pricing, we continue to mitigate the impact of tariffs through footprint optimization, strategic sourcing actions and other cost containment initiatives. Our boiler sales grew eight percent in 2025 primarily due to higher volumes and pricing benefits. We expect our boiler sales to grow between six and eight percent in 2026 due to carryover pricing benefits and continued demand for our commercial high efficiency condensing gas boilers. We anticipate sales of our North America water treatment products will grow between 10 and 12 percent primarily due to tariff-related pricing benefits and as we continue to expand our dealer network. In our Rest of World segment, China third-party sales declined 12 percent in local currency in 2025 due to continued weak consumer demand and the cessation of the government appliance subsidy programs in the second half of the year. For the full year 2026, we project our third-party sales in China to decrease mid-single digits in local currency compared to 2025 due to continued softness in consumer demand. In the third quarter of 2025, we initiated an assessment of strategic opportunities for our China business, including strategic partnerships and other alternatives. We believe the China market has substantial long-term prospects and are committed to realizing the potential upside inherent in our China business. The assessment is ongoing. Combining all of these factors, we expect our 2026 consolidated sales to grow between two and five percent compared to 2025. Our guidance excludes the impacts from potential future acquisitions, any potential outcomes of the assessment of the China business and changes to tariffs. 20 Table of Contents RESULTS OF OPERATIONS In this section, we discuss the results of our operations for 2025 compared with 2024. We discuss our cash flows and current financial condition under “Liquidity and Capital Resources.” For a discussion related to 2024 compared with 2023, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended December 31, 2024, which was filed with the United States Securities and Exchange Commission (SEC) on February 11, 2025, and is available on the SEC's website at www.sec.gov. Years Ended December 31, (dollars in millions) 2025 2024 2023 Net sales $ 3,830.2  $ 3,818.1  $ 3,852.8 Cost of products sold 2,342.8  2,362.0  2,368.0 Gross profit 1,487.4  1,456.1  1,484.8 Gross profit margin % 38.8  % 38.1  % 38.5  % Selling, general and administrative expenses 759.4  739.3  727.4 Restructuring and impairment expenses —  17.6  18.8 Interest expense 13.5  6.7  12.0 Other income-net (0.6) (8.5) (6.9) Earnings before provision for income taxes 715.1  701.0  733.5 Provision for income taxes 168.9  167.4  176.9 Net Earnings $ 546.2  $ 533.6  $ 556.6 Our sales in 2025 were $3,830.2 million, an increase of $12.1 million compared to 2024 sales of $3,818.1 million. Our net sales increase was mainly due to implementing price increases to address rising input costs, including tariffs, as well as higher sales volumes of commercial water heaters and boilers. Additionally, the acquisition of Pureit in late 2024 contributed incremental sales of $54 million in 2025. These positive factors outweighed the impact of decreased volumes in China, lower residential water heater sales in North America, and an unfavorable currency translation of approximately $7 million due to the depreciation of foreign currencies compared to the U.S. dollar. Our 2025 gross profit margin of 38.8 percent increased compared to 38.1 percent in 2024. The higher gross profit margin in 2025 compared to 2024 was primarily driven by the benefits of pricing actions implemented early in 2025 to address increased input costs in North America and higher mix of commercial water heaters and boilers. Selling, general, and administrative (SG&A) expenses were $759.4 million in 2025, or $20.1 million higher than in 2024. The increase in SG&A expenses in 2025 compared to the prior year was primarily due to higher employee costs, partially offset by benefits of our 2024 China restructuring actions. We recognized $17.6 million of restructuring and impairment expenses during the year ended December 31, 2024. Of these expenses, $6.3 million was related to our water treatment business in the North America segment and was a result of a profitability improvement strategy that prioritizes improving our cost structure and emphasizes more profitable channels. In the Rest of World segment, restructuring included severance costs in China of $11.3 million and was related to the right sizing of that business for current market conditions. Restructuring and impairment expenses in 2023 were $18.8 million, of which $15.7 million was recorded in the Rest of World segment and $3.1 million was recorded in Corporate Expense and related primarily to the sale of our business in Turkey. Interest expense was $13.5 million in 2025, compared to $6.7 million in 2024. The increase in interest expense in 2025 compared to the prior year was primarily due to higher average debt levels throughout 2025. Other income - net for 2025 was income of $0.6 million, compared to income of $8.5 million in 2024. The decrease in other income - net was driven by lower foreign currency translation losses compared to the prior year and lower interest income from lower average cash balances. Our effective income tax rate in 2025 and 2024 was 23.6 percent and 23.9 percent, respectively. The change in the effective income tax rate in 2025 compared to the prior year was primarily due to reductions in US cross-border tax. We estimate that our annual effective income tax rate for the full year of 2026 will be approximately 24 to 24.5 percent. 21 Table of Contents We are providing non-U.S. Generally Accepted Accounting Principles (GAAP) measures (adjusted earnings, adjusted earnings per share (EPS), total segment earnings, and adjusted segment earnings) that exclude the impact of restructuring and impairment expenses. Reconciliations from GAAP measures to non-GAAP measures are provided in the Non-GAAP Measures section below. We believe that the measures of adjusted earnings, adjusted EPS, total segment earnings, adjusted segment earnings, and free cash flow provide useful information to investors about our performance and allow management and our investors to better understand our performance between periods without regard to items that we do not consider to be a component of our core operating performance or recurring in nature. North America Segment Years ended December 31 (dollars in millions) 2025 2024 Net Sales $ 2,984.2  $ 2,950.1 Segment Earnings 727.9  707.5 Segment Margin 24.4  % 24.0  % Sales in our North America segment were $2,984.2 million in 2025, or $34.1 million higher than sales of $2,950.1 million in 2024. Our net sales increase in 2025 was driven by pricing actions and higher commercial water heater and boiler volumes, which were partially offset by lower residential water heater volumes and unfavorable currency translation of approximately $6 million. North America segment earnings were $727.9 million in 2025, or $20.4 million higher than segment earnings of $707.5 million in 2024. Segment margins were 24.4 percent and 24.0 percent in 2025 and 2024, respectively. Higher segment earnings and segment margin in 2025 compared to 2024 were primarily driven by pricing benefits, higher boiler and commercial water heater volumes that more than offset lower residential water heater volumes and higher input costs, including tariffs. Segment earnings and margin in 2024 included restructuring and impairment expenses of $6.3 million related to our water treatment business and a result of a profitability improvement strategy that prioritizes improving our cost structure and emphasizes our more profitable channels. Adjusted segment earnings and adjusted segment margin in 2024 were $713.8 million and 24.2 percent, respectively, which excludes $6.3 million of pre-tax restructuring and impairment expenses. We estimate our 2026 North America segment margin will be approximately 24.0 to 24.5 percent. Rest of World Segment Years ended December 31 (dollars in millions) 2025 2024 Net Sales $ 880.4  $ 918.6 Segment Earnings 76.4  64.5 Segment Margin 8.7  % 7.0  % Sales in our Rest of World segment were $880.4 million in 2025, or $38.2 million lower than sales of $918.6 million in 2024. Our net sales decrease in 2024 was due to lower volumes of our residential water treatment and water heater products in China that were partially offset by incremental sales of approximately $53 million related to our 2024 acquisition of Pureit. Rest of World segment earnings were $76.4 million in 2025 and higher compared to $64.5 million in 2024. Segment margins were 8.7 percent and 7.0 percent in 2025 and 2024, respectively. The higher segment earnings and segment margin in 2025 compared to 2024 were primarily driven by the benefits of restructuring actions taken at the end of 2024 and other cost saving measures that more than offset lower sales in China. Segment earnings and margin in 2024 included restructuring and impairment expenses of $11.3 million. Restructuring and impairment expenses in 2024 were severance costs in China related to the right sizing of that business for current market conditions. Adjusted segment earnings and adjusted segment margin in 2024 were $75.8 million and 8.3 percent, respectively. Adjusted segment earnings and adjusted segment margin in 2024 exclude $11.3 million of restructuring and impairment expenses. We estimate our 2026 Rest of World segment margin will be approximately eight to nine percent. 22 Table of Contents Outlook As we begin 2026, we expect our consolidated sales to be up approximately two to five percent compared to 2025. Our projection is driven by the additional sales expected from our Leonard Valve acquisition, as well as boiler sales growth of six to eight percent compared to 2025 due to the carryover of pricing benefits and the continuation of the transition to energy-efficient boilers. In our Rest of the World segment, after a challenging 2025, we expect consumer demand softness will persist in 2025 in China and a decline in third-party sales of mid-single digits compared to 2025. Our 2025 full year earnings was $3.85 per share and we expect 2026 full-year earnings of between $3.85 and $4.15 per share. Our guidance excludes the impacts of potential future acquisitions, any potential outcomes of the assessment of the China business, and changes to tariffs. LIQUIDITY AND CAPITAL RESOURCES Our working capital was $429.0 million at December 31, 2025, compared with $495.7 million at December 31, 2024. The decrease in working capital was primarily related to lower inventory, cash balances, and increased short term debt maturities. As of December 31, 2025, cash balances were positively impacted by changes in foreign currency during the year of $4.2 million. Cash and cash equivalents used to fund our operations are primarily generated through operating activities and our existing credit facilities. We believe our available cash and existing credit facilities are sufficient to cover our cash needs for the foreseeable future. We use a global cash pooling arrangement, intercompany borrowing, and some local credit lines to meet funding needs and allocate capital resources among various entities. We have historically made and anticipate future cash repatriations from certain foreign subsidiaries. In 2025, we repatriated approximately $109 million of cash from our foreign subsidiaries and used the proceeds to pay down outstanding debt balances. Years ended December 31 (dollars in millions) 2025 2024 Cash provided by operating activities $ 616.8  $ 581.8 Cash used in investing activities (53.0) (267.1) Cash used in financing activities (633.1) (408.4) Cash provided by operations in 2025 was $616.8 million and higher than $581.8 million in 2024, primarily as a result of higher earnings and a one-time tax adjustment related to a tax law change that benefited 2025. Our free cash flow in 2025 and 2024 was $546.0 million and $473.8 million, respectively. We expect cash provided by operating activities to be between $605 million and $655 million in 2026. We expect free cash flow to be between $525 million and $575 million in 2026. Free cash flow is a non-GAAP measure described in more detail in the Non-GAAP Measures section below. Capital expenditures totaled $70.8 million in 2025 compared with $108.0 million in 2024. Lower capital expenditures compared to the prior year were primarily due to our capacity expansion projects in Juarez, Mexico and McBee, South Carolina and our new engineering facility in Lebanon, Tennessee in 2024. We project that 2026 capital expenditures will be between $70 million and $80 million and full-year depreciation and amortization expense will be approximately $100 million. In 2024, we renewed and amended our $500 million revolving credit facility ("renewed facility") which now expires on August 23, 2029. The renewed facility is with a group of nine banks and has an accordion provision that allows it to be increased up to $1 billion if certain conditions (including lender approval) are satisfied. Borrowing rates under the renewed facility are determined by our leverage ratio. The renewed facility requires us to maintain two financial covenants, a leverage ratio test and an interest coverage test, and we were in compliance with the covenants as of December 31, 2025, and expect to be in compliance for the foreseeable future. The renewed facility backs up commercial paper and credit line borrowings. At December 31, 2025, we had no borrowings outstanding under the renewed facility and an available borrowing capacity of $500.0 million. We believe the combination of available borrowing capacity and operating cash flows will provide sufficient funds to finance our existing operations for the foreseeable future. Our total debt decreased by $38.2 million in 2025 as we used available cash to pay down outstanding debt balances. Our leverage, as measured by the ratio of total debt to total capitalization, was 7.7 percent at December 31, 2025, compared with 9.3 percent at December 31, 2024. On January 6, 2026, we completed the acquisition of Leonard Valve for $470 million. The acquisition was funded under a new three-year, $470 million term loan with a group of eight banks. The Company borrowed the full available amount on January 5, 2026 and used the proceeds to finance the purchase. In 2025, our Board of Directors approved adding 5,000,000 shares of common stock to our existing discretionary share repurchase authority. Under our share repurchase program, we may purchase our common stock through a combination of a Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The stock 23 Table of Contents repurchase authorization remains effective until terminated by our Board of Directors, which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. During 2025, we repurchased 5,942,601 shares of our stock at a total cost of $400.8 million. As of December 31, 2025, we had 803,524 shares remaining on the share repurchase authority. On January 28, 2026, the Board of Directors approved adding 5,000,000 shares of common stock to the existing discretionary share repurchase authority. Including the additional shares, we had 5,545,241 shares available for repurchase as of the date of the Board of Directors' approval. We intend to repurchase approximately $200 million of our common stock in 2026 through a combination of 10b5-1 plans and open-market purchases. We paid dividends of $1.38 per share in 2025 compared with $1.30 per share in 2024. We increased our dividend by six percent in the fourth quarter of 2025, and the five-year compound annual growth rate of our dividend payment is approximately seven percent. We have paid dividends for 86 consecutive years with annual amounts increasing each of the last 34 years. Recent Accounting Pronouncements Refer to Recent Accounting Pronouncements in Note 1, “Organization and Significant Accounting Policies” of Notes to the Consolidated Financial Statements. Critical Accounting Policies Our accounting policies are described in Note 1, “Organization and Significant Accounting Policies” of Notes to the Consolidated Financial Statements. Also as disclosed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires the use of estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with the evaluation of the impairment of goodwill and indefinite-lived intangible assets and significant estimates used in the determination of the liability related to product warranties. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact-specific and takes into account factors such as historical experience and trends, and in some cases, actuarial techniques. We monitor these significant factors and adjustments are made as facts and circumstances dictate. Historically, actual results have not significantly deviated from those determined using the estimates described above. Goodwill and Indefinite-lived Intangible Assets In conformity with GAAP, goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. We perform impairment reviews for our reporting units using a fair-value method based on management’s judgments and assumptions. The fair value represents the estimated amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. We are subject to financial statement risk to the extent that goodwill and indefinite-lived intangible assets become impaired. Any impairment review is, by its nature, highly judgmental as estimates of future sales, earnings and cash flows are utilized to determine fair values. However, we believe that we conduct a thorough and competent annual quantitative analysis of goodwill and indefinite-lived intangible assets. Based on the annual goodwill impairment test, we determined there was no impairment of our goodwill as of December 31, 2025. The fair value of each of our reporting units significantly exceeded its carrying value. Based on the annual indefinite-lived assets impairment test, we determined there was no impairment of our indefinite-lived assets as of December 31, 2025. Product Warranty Our products carry warranties that generally range from one to 12 years and are based on terms that are generally accepted in the market. We provide for the estimated cost of product warranty at the time of sale. The product warranty provision is estimated based on warranty loss experience using actual historical failure rates and estimated costs of product replacement. The variables used in the calculation of the provision are reviewed at least annually. At times, warranty issues may arise which are beyond the scope of our historical experience. We provide for any such warranty issues as they become known and estimable. While our warranty costs have historically been within calculated estimates, it is possible that future warranty costs could differ significantly from those estimates. The allocation of the warranty liability between current and long-term is based on the expected warranty liability to be paid in the next year as determined by historical product failure rates. At December 31, 2025 and 2024, our reserve for product warranties was $209.7 million and $190.4 million, respectively. 24 Table of Contents Non-GAAP Measures We are providing non-U.S. Generally Accepted Accounting Principles (GAAP) measures (adjusted earnings, adjusted EPS, total segment earnings, and adjusted segment earnings) that exclude the impact of restructuring and impairment expenses. Reconciliations from GAAP measures to non-GAAP measures are provided below. We believe that the measures of adjusted earnings, adjusted EPS, adjusted segment earnings and free cash flow provide useful information to investors about our performance and allow management and our investors to better understand our performance between periods without regard to items that we do not consider to be a component of our core operating performance or recurring in nature. A. O. SMITH CORPORATION Adjusted Earnings and Adjusted Earnings Per Share (dollars in millions, except per share data) (unaudited) The following is a reconciliation of net earnings and diluted earnings per share to adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP): Twelve Months Ended December 31, 2025 2024 Net Earnings (GAAP) $ 546.2  $ 533.6 Restructuring and impairment expenses, before tax —  17.6 Tax effect on above items —  (3.2) Adjusted Earnings (non-GAAP) $ 546.2  $ 548.0 Diluted Earnings Per Share (GAAP) (1) $ 3.85  $ 3.63 Restructuring and impairment expenses, per diluted share, before tax —  0.12 Tax effect on above items per diluted share —  (0.02) Adjusted Earnings Per Share (non-GAAP) (1) $ 3.85  $ 3.73 (1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding. 25 Table of Contents A. O. SMITH CORPORATION Adjusted Segment Earnings (dollars in millions) (unaudited) The following is a reconciliation of reported earnings before provision for income taxes to total segment earnings (non-GAAP) and adjusted segment earnings (non-GAAP): Twelve Months Ended December 31, 2025 2024 Earnings Before Provision for Income Taxes (GAAP) $ 715.1  $ 701.0 Add: Corporate expense 75.5  63.9 Add: Interest expense 13.5  6.7 Total Segment Earnings (non-GAAP) $ 804.1  $ 771.6 North America (1) $ 727.9  $ 707.5 Rest of World (2) 76.4  64.5 Inter-segment earnings elimination (0.2) (0.4) Total Segment Earnings (non-GAAP) $ 804.1  $ 771.6 Additional Information (1) North America $ 727.9  $ 707.5 Restructuring and impairment expenses, before tax —  6.3 Adjusted North America (non-GAAP) $ 727.9  $ 713.8 (2) Rest of World $ 76.4  $ 64.5 Restructuring and impairment expenses, before tax —  11.3 Adjusted Rest of World (non-GAAP) $ 76.4  $ 75.8 26 Table of Contents A. O. SMITH CORPORATION Free Cash Flow (dollars in millions) (unaudited) The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP): Twelve Months Ended December 31, 2025 2024 Cash provided by operating activities (GAAP) $ 616.8  $ 581.8 Less: Capital expenditures (70.8) (108.0) Free cash flow (non-GAAP) $ 546.0  $ 473.8 OTHER MATTERS Environmental Our operations are governed by a number of federal, foreign, state, local and environmental laws concerning the generation and management of hazardous materials, the discharge of pollutants into the environment and remediation of sites owned by the Company or third parties. We have expended financial and managerial resources complying with such laws. Expenditures related to environmental matters were not material in 2025 and we do not expect them to be material in any single year. We have reserves associated with environmental obligations at various facilities and we believe these reserves together with available insurance coverage are sufficient to cover reasonably anticipated remediation costs. Although we believe that our operations are substantially in compliance with such laws and maintain procedures designed to maintain compliance, there are no assurances that substantial additional costs for compliance will not be incurred in the future. However, since the same laws govern our competitors, we should not be placed at a competitive disadvantage. Risk Management We evaluate risk to our business in a number of ways, primarily through our Enterprise Risk Management (ERM) process, which we conduct enterprise-wide on a periodic basis, and seeks to identify and address significant and material risks. Our ERM process assesses, manages, and monitors risks consistent with the integrated risk framework in the Enterprise Risk Management-Integrated Framework (2017) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We believe that risk-taking is an inherent aspect of the pursuit of our strategy. Our goal is to manage risks prudently rather than avoid risks. We can mitigate risks and their impact on our company only to a limited extent. A team of senior executives prioritizes identified risks, including decarbonization, new technologies and cyber threats among others, and assigns an executive to address each major identified risk area and lead action plans to manage risks. Our Board of Directors provides oversight of the ERM process and reviews significant identified risks. The Audit Committee of the Board of Directors also reviews significant financial risk exposures and the steps management has taken to monitor and manage them. Our other Board committees also play a role in risk management, as set forth in their respective charters. Our goal is to proactively manage risks using a structured approach in conjunction with strategic planning, with the intent to preserve and enhance shareholder value. However, the risks set forth in Item 1A - Risk Factors and elsewhere in this Annual Report on Form 10-K and other risks and uncertainties could adversely affect us and cause our results to vary materially from recent results or from our anticipated future results. Market Risk We are exposed to various types of market risks, primarily currency. We monitor our risks in such areas on a continuous basis and generally enter into forward contracts to minimize such exposures. We do not engage in speculation in our derivatives strategies. Further discussion regarding derivative instruments is contained in Note 1, “Organization and Significant Accounting Policies” of Notes to Consolidated Financial Statements. We enter into foreign currency forward contracts to minimize the effect of fluctuating foreign currencies. At December 31, 2025, we had net foreign currency contracts outstanding with notional values of $93.3 million. Assuming a hypothetical ten percent movement in the respective currencies, the potential foreign exchange gain or loss associated with the change in exchange rates would amount to $9.3 million. However, gains and losses from our forward contracts will be offset by gains and losses in the underlying transactions being hedged. 27 Table of Contents Forward-Looking Statements This filing 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 filing. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: further weakening in North American residential or commercial construction or instability in the Company’s replacement markets; failure to realize the expected benefits of acquisitions or expected synergies; difficulties in predicting results of operations of an acquired business; negative impact to the Company’s businesses from international tariffs, including any new or increased tariffs that could also trigger retaliatory responses from other countries, as well as trade disputes and geopolitical differences, including the conflicts in Ukraine and the Middle East; further softening in U.S. residential and commercial water heater demand; negative impacts to the Company, particularly the demand for its products, resulting from global inflationary pressures or a potential recession in one or more of the markets in which the Company participates; the Company’s ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supply chain and at expected costs; inability of the Company to implement or maintain pricing actions; inconsistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housing sales in China; the availability, timing or effects of China stimulus programs; uncertain outcomes and costs and other potential impacts of the Company’s assessment relating to the Company’s China business; potential weakening in the high-efficiency gas boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; foreign currency fluctuations; failure to realize the expected benefits, timing and extent of regulatory changes; competitive pressures on the Company’s businesses, including new technologies and new competitors; the impact of potential information technology or data security breaches; negative impact of changes in government regulations or regulatory requirements; the inability to respond to secular trends toward decarbonization and energy efficiency; and adverse developments in general economic, political and business conditions in key regions of the world. A more detailed description of these risks is contained under the heading "Risk Factors" in Item 1A above. Forward-looking statements included in this filing are made only as of the date of this filing, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements. Forward-looking and other statements in this Form 10-K regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or are required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking social, environmental and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Any such forward-looking statements made herein are based on information currently available to us as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Market Risk” above. 28 Table of Contents ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of A. O. Smith Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, 2025 and 2024, the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 29 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. Product Warranty Liability Description of the Matter At December 31, 2025, the Company’s product warranty liability was $209.7 million. As discussed in Note 1 of the consolidated financial statements, the Company records a liability for the expected cost of warranty-related claims at the time of sale. The product warranty liability is estimated based upon warranty loss experience using actual historical failure rates and estimated cost of product replacement. Products generally carry warranties from one to twelve years. The Company performs separate warranty calculations based on the product type and the warranty term and aggregates them. Auditing the Company’s product warranty liability for certain of its products was complex due to the judgmental nature of the warranty loss experience assumptions, including the estimated product failure rate and the estimated cost of product replacement. In particular, it is possible that future product failure rates may not be reflective of actual historical product failure rates, or that a product quality issue has not yet been identified. Additionally, the cost of product replacement could differ from estimates due to fluctuations in the replacement cost of the product. How We Addressed the Matter in our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s product warranty liability calculation. For example, we tested controls over management’s review of the product warranty liability calculation, including the significant assumptions and the data inputs to the calculation. To test certain products of the Company’s product warranty liability calculation, our audit procedures included, among others, evaluating the methodology used, and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We tested the completeness and accuracy of the claims settled data. We recalculated the historical failure rates using actual claims settled data. We compared the estimated cost of replacement included in the product warranty liability with the current costs to manufacture a comparable product and assessed the impact of projected changes in significant product costs. We also analyzed current year claims settled data to identify changes in failure trends and assessed the historical accuracy of the prior year liability. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1917. Milwaukee, Wisconsin February 10, 2026 30 Table of Contents CONSOLIDATED BALANCE SHEETS December 31 (dollars in millions) 2025 2024 Assets Current Assets Cash and cash equivalents $ 174.5   $ 239.6 Marketable securities 18.7   36.5 Receivables 582.3   541.4 Inventories 479.3   532.1 Other current assets 36.7   43.3 Total Current Assets 1,291.5   1,392.9 Net property, plant and equipment 635.1   628.7 Goodwill 710.6   761.7 Other intangibles 362.3   321.1 Operating lease assets 46.3   32.8 Other assets 97.0   102.8 Total Assets $ 3,142.8   $ 3,240.0 Liabilities Current Liabilities Trade payables $ 504.1   $ 588.7 Accrued payroll and benefits 93.6   78.5 Accrued liabilities 147.5   153.0 Product warranties 75.0   67.0 Long-term debt due within one year 42.3   10.0 Total Current Liabilities 862.5   897.2 Long-term debt 112.7   183.2 Product warranties 134.7   123.4 Pension liabilities 7.4   11.0 Long-term operating lease liabilities 37.1   23.5 Other liabilities 130.4   118.2 Total Liabilities 1,284.8   1,356.5 Commitments and contingencies —   — Stockholders’ Equity Preferred Stock —   — Class A Common Stock (shares issued 25,993,539 and 26,014,825 as of December 31, 2025 and 2024, respectively) 130.0   130.1 Common Stock (shares issued 164,714,053 and 164,692,769 as of December 31, 2025 and 2024, respectively) 164.7   164.7 Capital in excess of par value 614.4   601.3 Retained earnings 3,951.8   3,601.3 Accumulated other comprehensive loss ( 98.6 ) ( 111.9 ) Treasury stock at cost ( 2,904.3 ) ( 2,502.0 ) Total Stockholders’ Equity 1,858.0   1,883.5 Total Liabilities and Stockholders’ Equity $ 3,142.8   3,240.0 See accompanying notes which are an integral part of these statements. 31 Table of Contents CONSOLIDATED STATEMENTS OF EARNINGS Years ended December 31 (dollars in millions, except per share amounts) 2025 2024 2023 Net sales $ 3,830.2   $ 3,818.1   $ 3,852.8 Cost of products sold 2,342.8   2,362.0   2,368.0 Gross profit 1,487.4   1,456.1   1,484.8 Selling, general and administrative expenses 759.4   739.3   727.4 Restructuring and impairment expenses —   17.6   18.8 Interest expense 13.5   6.7   12.0 Other income, net ( 0.6 ) ( 8.5 ) ( 6.9 ) Earnings before provision for income taxes 715.1   701.0   733.5 Provision for income taxes 168.9   167.4   176.9 Net Earnings $ 546.2   $ 533.6   $ 556.6 Net Earnings Per Share of Common Stock (1) $ 3.87   $ 3.65   $ 3.71 Diluted Net Earnings Per Share of Common Stock (1) $ 3.85   $ 3.63   $ 3.69 (1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS Years ended December 31 (dollars in millions) 2025 2024 2023 Net Earnings $ 546.2   $ 533.6   $ 556.6 Other comprehensive earnings (loss) Foreign currency translation adjustments 13.1   ( 24.0 ) 3.8 Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $( 0.4 ) in 2025, $ 0.7 in 2024 and $ 1.4 in 2023 1.3   ( 2.2 ) ( 4.2 ) Change in pension liability less related income tax benefit of $ 0.4 in 2025, $ 0.5 in 2024 and $ 0.5 in 2023 ( 1.1 ) ( 1.5 ) ( 1.4 ) Comprehensive Earnings $ 559.5   $ 505.9   $ 554.8 See accompanying notes which are an integral part of these statements. 32 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31 (dollars in millions) 2025 2024 2023 Operating Activities Net earnings $ 546.2   $ 533.6   $ 556.6 Adjustments to reconcile earnings to cash provided by (used in) operating activities: Depreciation and amortization 85.1   78.8   78.3 Stock based compensation expense 13.8   14.9   11.5 Deferred income taxes 8.9   ( 4.6 ) ( 3.8 ) Non-cash impairments —   4.7   15.6 Pension settlement income —   —   ( 0.9 ) Pension settlement non-cash taxes —   —   0.2 Net changes in operating assets and liabilities, net of acquisitions: Current assets and liabilities ( 55.7 ) ( 22.6 ) 20.0 Noncurrent assets and liabilities 18.5   ( 23.0 ) ( 7.2 ) Cash Provided by Operating Activities 616.8   581.8   670.3 Investing Activities Capital expenditures ( 70.8 ) ( 108.0 ) ( 72.6 ) Acquisitions —   ( 145.9 ) ( 16.8 ) Investments in marketable securities ( 42.7 ) ( 73.7 ) ( 63.1 ) Net proceeds from sales of marketable securities 60.5   60.5   128.4 Cash Used in Investing Activities ( 53.0 ) ( 267.1 ) ( 24.1 ) Financing Activities Proceeds from debt 1,087.3   1,100.1   688.0 Repayments of debt ( 1,124.9 ) ( 1,030.4 ) ( 906.1 ) Common stock repurchases ( 400.8 ) ( 305.8 ) ( 306.5 ) Net proceeds from stock option activity 1.0   18.1   23.4 Dividends paid ( 195.7 ) ( 190.4 ) ( 183.5 ) Cash Used in Financing Activities ( 633.1 ) ( 408.4 ) ( 684.7 ) Effect of exchange rate changes on cash and cash equivalents 4.2   ( 6.6 ) ( 12.8 ) Net decrease in cash and cash equivalents ( 65.1 ) ( 100.3 ) ( 51.3 ) Cash and cash equivalents-beginning of year 239.6   339.9   391.2 Cash and Cash Equivalents-End of Year $ 174.5   $ 239.6   $ 339.9 See accompanying notes, which are an integral part of these statements. 33 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years ended December 31 (dollars in millions) 2025 2024 2023 Class A Common Stock Balance at the beginning of the year $ 130.1   $ 130.1   $ 130.2 Conversion of Class A Common Stock ( 0.1 ) —   ( 0.1 ) Balance at the end of the year $ 130.0   $ 130.1   $ 130.1 Common Stock Balance at the beginning of the year $ 164.7   $ 164.7   $ 164.7 Conversion of Class A Common Stock —   —   — Balance at the end of the year $ 164.7   $ 164.7   $ 164.7 Capital in Excess of Par Value Balance at the beginning of the year $ 601.3   $ 578.2   $ 555.9 Conversion of Class A Common Stock 0.1   —   0.1 Issuance of share units ( 16.7 ) ( 15.0 ) ( 10.3 ) Vesting of share units ( 2.5 ) ( 2.5 ) ( 3.7 ) Stock based compensation expense 13.2   13.1   10.4 Exercises of stock options 1.3   11.4   14.5 Issuance of share based compensation 17.7   16.1   11.3 Balance at the end of the year $ 614.4   $ 601.3   $ 578.2 Retained Earnings Balance at the beginning of the year $ 3,601.3   $ 3,258.1   $ 2,885.0 Net earnings 546.2   533.6   556.6 Dividends on stock ( 195.7 ) ( 190.4 ) ( 183.5 ) Balance at the end of the year $ 3,951.8   $ 3,601.3   $ 3,258.1 Accumulated Other Comprehensive Loss Balance at the beginning of the year $ ( 111.9 ) $ ( 84.2 ) $ ( 82.4 ) Foreign currency translation adjustments 13.1   ( 24.0 ) 3.8 Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $( 0.4 ) in 2025, $ 0.7 in 2024 and $ 1.4 in 2023 1.3   ( 2.2 ) ( 4.2 ) Change in pension liability less related income tax benefit of $ 0.4 in 2025, $ 0.5 in 2024 and $ 0.5 in 2023 ( 1.1 ) ( 1.5 ) ( 1.4 ) Balance at the end of the year $ ( 98.6 ) $ ( 111.9 ) $ ( 84.2 ) Treasury Stock Balance at the beginning of the year $ ( 2,502.0 ) $ ( 2,202.5 ) $ ( 1,905.7 ) Exercise of stock options, net of 32,203 , 36,300 and 61,605 shares surrendered as proceeds and to pay taxes in 2025, 2024 and 2023, respectively ( 0.2 ) 6.6   8.8 Stock incentives and directors’ compensation 0.3   0.2   0.3 Shares repurchased ( 400.8 ) ( 305.8 ) ( 306.5 ) Excise tax on repurchases of common stock ( 4.0 ) ( 3.0 ) ( 3.1 ) Vesting of share units 2.4   2.5   3.7 Balance at the end of the year $ ( 2,904.3 ) $ ( 2,502.0 ) $ ( 2,202.5 ) Total Stockholders’ Equity $ 1,858.0   $ 1,883.5   $ 1,844.4 See accompanying notes which are an integral part of these statements. 34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies Organization. A. O. Smith Corporation (A. O. Smith or the Company) is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of intercompany transactions. Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S.) requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and notes. Actual results could differ from those estimates. Fair value of financial instruments. The carrying amounts of cash, cash equivalents, marketable securities, receivables, floating rate debt and trade payables approximated fair value as of December 31, 2025 and 2024, due to the short maturities or frequent rate resets of these instruments. The fair value of term notes with financial institutions included in Long-term debt within the consolidated balance sheets was approximately $ 139.0 million as of December 31, 2025 compared with the carrying amount of $ 155.0 million for the same date. The fair value of term notes with financial institutions was approximately $ 143.6 million as of December 31, 2024 compared with the carrying amount of $ 163.2 million. Foreign currency translation. For all subsidiaries outside the U.S., with the exception of its Barbados, Hong Kong and Mexican companies and its non-operating companies in the Netherlands, the Company uses the local currency as the functional currency. For those operations using a functional currency other than the U.S. dollar, assets and liabilities were translated into U.S. dollars at year-end exchange rates, and revenues and expenses were translated at weighted-average exchange rates. The resulting translation adjustments were recorded as a separate component of stockholders’ equity. The Barbados, Hong Kong, Mexican and non-operating Netherlands companies use the U.S. dollar as the functional currency. Gains and losses from foreign currency transactions were included in net earnings and were not significant in 2025, 2024, or 2023. Cash and cash equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Marketable securities. The Company considers all highly liquid investments with maturities greater than 90 days when purchased to be marketable securities. At December 31, 2025, the Company’s marketable securities consisted of bank time deposits with original maturities ranging from 180 days to 12 months and were primarily located at investment grade rated banks in China and Hong Kong. Inventory valuation. Inventories are carried at lower of cost or net realizable value. Cost is determined on the last-in, first-out (LIFO) method for a certain portion of the Company’s domestic inventories, which comprised 40 percent and 43 percent of the Company’s total inventory at December 31, 2025 and 2024, respectively. The inventories of foreign subsidiaries and the remaining domestic inventories and supplies were determined using the first-in, first-out (FIFO) method. Property, plant and equipment. Property, plant and equipment are stated at cost. Depreciation is computed primarily by the straight-line method. The estimated service lives used to compute depreciation are generally 25 to 50 years for buildings, three to 20 years for equipment and three to 15 years for software. Maintenance and repair costs are expensed as incurred. Goodwill and other intangibles. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment on an annual basis. Separable intangible assets, primarily comprised of customer relationships, that are not deemed to have an indefinite life are amortized on a straight-line basis over their estimated useful lives which range from two to 25 years. Impairment of long-lived and amortizable intangible assets. Property, plant and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such analyses involves significant judgment. Product warranties. The Company’s products carry warranties that generally range from one to twelve years and are based on terms that are consistent with the market. The Company records a liability for the expected cost of warranty-related claims 35 Table of Contents
2. Organization and Significant Accounting Policies (continued) at the time of sale and is estimated based on the warranty period, product type and loss experience using actual historical failure rates and estimated costs of product replacement. The variables used in the calculation of the provision are reviewed by the Company at least annually. At times, warranty issues may arise which are beyond the scope of the Company’s historical experience. The Company provides for any such warranty issues as they become known and estimable. The allocation of the warranty liability between current and long-term is based on expected warranty claims to be settled in the next year as determined by historical product failure rates. The following table presents the Company’s product warranty liability activity in 2025 and 2024: Years ended December 31 (dollars in millions) 2025 2024 Balance at beginning of year $ 190.4   $ 188.1 Expense 84.2   81.1 Claims settled ( 66.0 ) ( 78.8 ) Acquired obligations 1.1   — Balance at end of year $ 209.7   $ 190.4 Derivative instruments. The Company utilizes certain derivative instruments to enhance its ability to manage currency as well as raw materials price risk. The Company does not enter into contracts for speculative purposes. The fair values of all derivatives are recorded in the consolidated balance sheets. The change in a derivative’s fair value is recorded each period in current earnings or accumulated other comprehensive loss (AOCL), depending on whether the derivative is designated as part of a hedge transaction and if so, the type of hedge transaction. See Note 13, “Derivative Instruments” for disclosure of the Company’s derivative instruments and hedging activities. Fair Value Measurements. Accounting Standards Codification (ASC) 820 Fair Value Measurements , defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring basis or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on the market approach which are prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Assets (liabilities) measured at fair value on a recurring basis are as follows (dollars in millions): Fair Value Measurement Using Balance Sheet Location December 31, 2025 December 31, 2024 Quoted prices in active markets for identical assets (Level 1) Marketable Securities $ 18.7   $ 36.5 Significant other observable inputs (Level 2) Accrued liabilities —   ( 1.9 ) There were no changes in the valuation techniques used to measure fair values on a recurring basis. Revenue recognition. Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. See Note 2, “Revenue Recognition” for disclosure of the Company’s revenue recognition activities. Advertising. The majority of advertising costs are charged to operations as incurred and totaled $ 101.1 million, $ 100.3 million and $ 93.9 million during 2025, 2024 and 2023, respectively. Included in total advertising costs are expenses associated with store displays for water heater, water treatment products, and kitchen products in China that are amortized over 12 to 48 months which totaled $ 24.0 million, $ 21.1 million and $ 15.2 million during 2025, 2024 and 2023, respectively. 36 Table of Contents
3. Organization and Significant Accounting Policies (continued) Research and development. Research and development costs are charged to operations as incurred and amounted to $ 95.0 million, $ 101.7 million and $ 97.5 million during 2025, 2024 and 2023, respectively. Environmental costs. The Company accrues for costs associated with environmental obligations when such costs are probable and reasonably estimable. Costs of estimated future expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded as assets when their receipt is considered probable. The accruals are adjusted as facts and circumstances change. Stock-based compensation. Compensation cost is recognized using the straight-line method over the vesting period of the award and forfeitures are recognized as they occur. In accordance with amended ASC 718 Compensation-Stock Compensation , the Company recognized $ 0.6 million, $ 4.1 million, and $ 3.2 million of discrete income tax benefits on settled stock based compensation awards during 2025, 2024, and 2023 respectively. Income taxes. The provision for income taxes is computed using the asset and liability method, in accordance with ASC 740 Income Taxes , under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled and are classified as noncurrent in the consolidated balance sheet. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. Earnings per share of common stock. The Company is not required to use the two-class method of calculating earnings per share because its Class A Common Stock and Common Stock have equal dividend rights. The numerator for the calculation of basic and diluted earnings per share is net earnings. The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations: 2025 2024 2023 Denominator for basic earnings per share - weighted-average shares outstanding 141,029,845   145,997,584   149,952,679 Effect of dilutive stock options, restricted stock and share units 884,995   1,086,496   1,062,895 Denominator for diluted earnings per share 141,914,840   147,084,080   151,015,574 Recent Accounting Pronouncements In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which modernizes the accounting guidance for internal-use software costs by eliminating the requirement to assess software development stages and introduces a new capitalization threshold. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of reviewing the guidance and evaluating its impact on its financial statements. In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 “Income Statement - Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses.” The ASU requires additional disclosures by disaggregating the costs and expense line items that are presented on the face of the income statement. The ASU is effective for the Company beginning with its 2027 annual disclosures and subsequent interim periods. Early adoption is permitted. This ASU requires a public company to apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its disclosures. In December 2023, the FASB amended ASC 740 (issued under ASU 2023-09, “Improvements to Income Tax Disclosures”). This ASU requires added disclosures related to the tax rate reconciliation and income taxes paid and includes other amendments intended to improve effectiveness and comparability. The update is effective for the Company beginning with its 2025 annual disclosures and interim periods beginning in 2026. As a result of adoption, income tax disclosures for prior periods presented have been revised to conform to the new disclosure requirements. The adoption of ASU 2023-09 did not affect the Company’s financial position or its results of operations. Refer to Note 14, Income Taxes, for additional disclosures. 37 Table of Contents
4. Revenue Recognition Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. Each unit sold is considered an independent, unbundled performance obligation. The Company’s sales arrangements do not include other performance obligations that are material in the context of the contract. The nature, timing and amount of revenue for a respective performance obligation are consistent for each customer. The Company measures the sales transaction price based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Sales and value added taxes are excluded from the measurement of the transaction price. The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment. Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $ 34.2 million and $ 54.4 million at December 31, 2025 and December 31, 2024, respectively. Customer deposit liabilities are short term in nature, recognized into revenue within one year of receipt. The Company assesses the collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for credit losses, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for credit losses, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for credit losses was $ 14.1 million and $ 12.9 million at December 31, 2025 and December 31, 2024, respectively. Rebates and incentives are based on pricing agreements and are tied to sales volume. The amount of revenue is reduced for variable consideration related to customer rebates which are calculated using expected values and are based on program specific factors such as expected rebate percentages based on expected volumes. In situations where the customer has the right to return eligible products, the Company reduces revenue for its estimates of expected product returns, which are primarily based on an analysis of historical experience. Changes in such accruals may be required if actual sales volume differs from estimated sales volume or if future returns differ from historical experience. Shipping and handling costs billed to customers are included in net sales and the related costs are included in cost of products sold and are activities performed to fulfill the promise to transfer products. Disaggregation of Net Sales The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas, heat pump and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. As each segment manufactures and markets products in its respective region of the world, the Company has determined that geography is the primary factor in reporting its sales. The Company further disaggregates its North America segment sales by major product line as each of North America’s major product lines is sold through distinct distribution channels and these product lines may be impacted differently by certain economic factors. Within the Rest of World segment, particularly in China and India, the Company’s major customers purchase across the Company’s product lines, utilizing the same distribution channels regardless of product type. In addition, the impact of economic factors is unlikely to be differentiated by product line in the Rest of World segment. The North America segment's major product lines are defined as the following: Water heaters The Company’s water heaters are open water heating systems that heat potable water. Typical applications for water heaters include residences, restaurants, hotels, office buildings, laundries, car washes and small businesses. The Company sells residential and commercial water heater products and related parts through its wholesale distribution channel, which includes approximately 800 independent wholesale plumbing distributors. The Company also sells residential water heaters and related parts through retail and maintenance, repair and operations (MRO) channels. A significant portion of the Company’s water heater sales in the North America segment is derived from the replacement of existing products. Boilers The Company’s boilers are closed loop water heating systems used primarily for space heating or hydronic heating. The Company’s boilers are primarily used in applications in commercial settings for hospitals, schools, hotels and other large 38 Table of Contents
5. Revenue Recognition (continued) commercial buildings while residential boilers are used in homes, apartments and condominiums. The Company’s boiler distribution channel is comprised primarily of manufacturer representative firms, with the remainder of its boilers distributed through wholesale channels. The Company’s boiler sales in the North America segment are derived from a combination of replacement of existing products and new construction. Water treatment products The Company’s water treatment products range from point-of-entry water softeners, solutions for problem well water, and whole-home water filtration products to on-the-go filtration bottles, point-of-use carbon, and reverse osmosis products. Typical applications for the Company’s water treatment products include residences, restaurants, hotels and offices. The Company sells water treatment products through its retail and wholesale distribution channels, similar to water heaters. The Company’s water treatment products are also sold through independent water quality dealers as well as directly to consumers including through e-commerce sales channels. A portion of the Company’s sales of water treatment products in the North America segment is comprised of replacement filters. The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World. Years ended December 31 (dollars in millions) 2025 2024 2023 North America Water heaters and related parts $ 2,460.1   $ 2,441.7   $ 2,456.9 Boilers and related parts 281.0   260.0   240.1 Water treatment products 243.1   248.4   225.9 Total North America 2,984.2   2,950.1   2,922.9 Rest of World China $ 689.5   $ 791.9   $ 835.1 All other Rest of World (1) 190.9   126.7   121.8 Total Rest of World 880.4   918.6   956.9 Inter-segment sales ( 34.4 ) ( 50.6 ) ( 27.0 ) Total Net Sales $ 3,830.2   $ 3,818.1   $ 3,852.8 (1) Includes the results of Pureit from the fourth quarter 2024, the period of acquisition.
6. Acquisitions 2024 Acquisitions During the fourth quarter of 2024, the Company acquired Pureit, a residential water purification business in South Asia, from Unilever for an aggregate purchase price of $ 124.6  million. The acquired company is included in the Rest of World segment. The purchase price consists of an initial cash payment of $ 117.9  million upon the closing of the transaction and a separate payment of $ 6.7  million made under a transitional supply agreement with Unilever. The Company incurred acquisition costs of approximately $ 1.4  million. The following table summarizes the final allocation of the fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $ 56.4 million of acquired identifiable intangible assets, $ 48.5 million was assigned to trademarks that are not subject to amortization, $ 3.7 million was assigned to patents which are amortized over 15 years, and the remaining $ 4.2 million million was assigned to customer relationships which are amortized over two to three years . The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The allocation of the purchase price to goodwill decreased by $ 0.8 million in 2025 due to valuation adjustments related to identifiable intangible assets. 39 Table of Contents
7. Acquisitions (continued) (dollars in millions) Current assets $ 5.6 Property, plant and equipment 0.6 Intangible assets 56.4 Goodwill 63.9 Total assets acquired 126.5 Current liabilities ( 1.9 ) Net assets acquired $ 124.6 During the first quarter of 2024, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $ 21.3  million, net of cash acquired. The Company also agreed to make contingent payments based on the amount by which sales of products increase over the next three years . The addition of the acquired company expanded the Company's water treatment footprint in North America. The acquired company is included in the North America segment. 2023 Acquisitions During the third quarter of 2023, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $ 16.8  million, net of cash acquired. The addition of the acquired company expands the Company's water treatment platform. The acquired company is included in the North America segment. As required under ASC 805, results of operations have been included in the Company’s consolidated financial statements from the date of acquisition.
8. Leases The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes. Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year . The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any arrangements related to material residual value guarantees, restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the consolidated statement of earnings. Supplemental balance sheet information related to leases is as follows: (dollars in millions) December 31, 2025 December 31, 2024 Liabilities Short term: Accrued liabilities $ 10.8   $ 11.3 Long term: Operating lease liabilities 37.1   23.5 Total operating lease liabilities $ 47.9   $ 34.8 Less: Rent incentives and deferrals ( 1.6 ) ( 2.0 ) Assets Operating lease assets $ 46.3   $ 32.8 40 Table of Contents
9. Leases (continued) Lease Term and Discount Rate December 31, 2025 Weighted-average remaining lease term 7.1 years Weighted-average discount rate 5.40 % The components of lease expense were as follows: (dollars in millions) Lease Expense (1) Classification Year ended December 31, 2025 Year ended December 31, 2024 Operating lease expense Cost of products sold $ 6.4   $ 7.0 Selling, general and administrative expenses 16.8   15.9 (1) Includes short-term lease expense of $ 1.8 million and variable lease expenses of $ 5.8 million for the year ended December 31, 2025 and short-term lease expense of $ 1.7 million and variable lease expenses of $ 6.0 million for the year ended December 31, 2024, respectively. Maturities of lease liabilities were as follows: (dollars in millions) December 31, 2025 2026 $ 14.3 2027 9.4 2028 7.1 2029 5.7 2030 4.9 After 2030 15.3 Total lease payments 56.7 Less: Imputed interest ( 8.8 ) Present value of operating lease liabilities $ 47.9
10. Restructuring and Impairment Expenses 2024 Restructuring and Impairment Expenses The Company recognized $ 17.6  million of restructuring and impairment expenses during the year ended December 31, 2024. These expenses were comprised of $ 12.1  million in severance costs, $ 0.8  million of other restructuring expenses, and asset impairments of $ 4.7  million, as well as a corresponding $ 3.2  million tax benefit. Of the $ 17.6  million expense recognized during the year ended December 31, 2024, $ 6.3  million was related to the Company’s water treatment business in the North America segment and was a result of a profitability improvement strategy that prioritizes improving its cost structure. In the Rest of World segment, severance costs in China of $ 11.3  million was related to the right sizing of that business for current market conditions. 2023 Restructuring and Impairment Expenses In 2023, the Company determined that its business in Turkey (disposal group) included in the Rest of World segment met the criteria to be classified as held for sale. The Company determined the fair value of the disposal group, less cost to sell, was lower than its carrying amount. As a result the Company recorded an impairment expense of $ 15.6  million, of which $ 12.5  million was recorded in the Rest of World segment, and $ 3.1  million was recorded in Corporate Expense. The impairment was recorded as a net reduction of $ 4.5  million to the assets and liabilities and $ 11.1  million for the anticipated liquidation of the cumulative foreign currency translation adjustment associated with the disposal group. The remaining carrying value of the disposal group was $ 0.6  million and classified as held for sale. During 2023, the Company sold the disposal group for an amount that approximated the carrying value of the net assets. Upon closing of the sale in the second quarter of 2023, the Company released $ 11.0  million of foreign currency translation losses from accumulated other comprehensive loss. Also in 2023, the Company recorded $ 3.2  million of restructuring expense related to the exit of a business within the Far East region. 41 Table of Contents
11. Restructuring and Impairment Expenses (continued) The following table presents an analysis of the Company’s restructuring reserve for the years ended December 31, 2025, 2024, and 2023: (dollars in millions) Severance Costs Other Restructuring Expenses Non-cash Impairments Total Balance at December 31, 2023 $ 0.3   $ 2.9   $ —   $ 3.2 Charges 12.1   0.8   4.7   17.6 Cash payments ( 3.5 ) ( 2.2 ) —   ( 5.7 ) Non-cash and other adjustments —   —   ( 4.7 ) ( 4.7 ) Balance at December 31, 2024 8.9   1.5   —   10.4 Charges —   —   —   — Cash payments ( 8.9 ) ( 0.8 ) —   ( 9.7 ) Non-cash and other adjustments —   —   —   — Balance at December 31, 2025 —   0.7   —   0.7
12. Statements of Cash Flows Supplemental cash flow information is as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 Net change in current assets and liabilities, net of acquisitions: Receivables $ ( 36.4 ) $ 49.0   $ ( 16.4 ) Inventories 56.9   ( 40.5 ) 18.1 Other current assets 8.3   7.1   7.2 Trade payables ( 97.9 ) ( 5.9 ) ( 21.4 ) Accrued liabilities, including payroll and benefits 16.5   ( 32.9 ) 28.4 Income taxes ( 3.1 ) 0.6   4.1 $ ( 55.7 ) $ ( 22.6 ) $ 20.0 In addition, cash interest paid during the years ended December 31, 2025, 2024 and 2023 was $ 13.5 million, $ 6.7 million, and $ 12.3 million, respectively. Total cash and cash equivalents and marketable securities at December 31, 2025 and 2024 was $ 193.2 million and $ 276.1 million, respectively, of which $ 140.1 million and $ 205.7 million were held by the Company’s foreign subsidiaries, at December 31, 2025 and 2024, respectively.
13. Inventories The following table presents the components of the Company’s inventory balances: December 31 (dollars in millions) 2025 2024 Finished products $ 180.1   $ 196.1 Work in process 43.7   42.4 Raw materials 311.3   343.0 Inventories, at FIFO cost 535.1   581.5 LIFO reserve ( 55.8 ) ( 49.4 ) Inventories, at LIFO cost $ 479.3   $ 532.1 42 Table of Contents
14. Property, Plant and Equipment December 31 (dollars in millions) 2025 2024 Land $ 30.4   $ 30.0 Buildings 424.9   408.5 Equipment 961.8   911.8 Software 147.3   145.6 1,564.4   1,495.9 Accumulated depreciation and amortization ( 929.3 ) ( 867.2 ) Net property, plant, and equipment $ 635.1   $ 628.7
15. Goodwill and Other Intangible Assets Changes in the carrying amount of goodwill during the years ended December 31, 2025 and 2024 consisted of the following: (dollars in millions) North America Rest of World Total Balance at December 31, 2023 $ 574.9   $ 58.5   $ 633.4 Currency translation adjustment ( 8.7 ) ( 1.4 ) ( 10.1 ) Acquisitions 20.5   117.9   138.4 Balance at December 31, 2024 586.7   175.0   761.7 Currency translation adjustment 4.8   ( 2.0 ) 2.8 Acquisition adjustments (1) —   ( 53.9 ) ( 53.9 ) Balance at December 31, 2025 $ 591.5   $ 119.1   $ 710.6 (1) Measurement period adjustments related to the 2024 acquisitions which impacted the amount of goodwill originally reported. The carrying amount of other intangible assets consisted of the following: 2025 2024 December 31 (dollars in millions) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Amortizable intangible assets: Patents $ 7.4   $ ( 4.2 ) $ 3.2   $ 3.7   $ ( 3.7 ) $ — Customer lists 291.7   ( 201.6 ) 90.1   287.5   ( 187.3 ) 100.2 Total amortizable intangible assets 299.1   ( 205.8 ) 93.3   291.2   ( 191.0 ) 100.2 Indefinite-lived intangible assets: Trade names 269.0   —  269.0   220.9   —  220.9 Total intangible assets $ 568.1   $ ( 205.8 ) $ 362.3   $ 512.1   $ ( 191.0 ) $ 321.1 Amortization expenses of other intangible assets of $ 14.8 million, $ 12.7 million, and $ 12.6 million were recorded in 2025, 2024 and 2023, respectively. In the future, excluding the impact of any future acquisitions, the Company expects amortization expense of approximately $ 14.5 million annually and the intangible assets will be amortized over a weighted-average period of 9 years. The Company concluded that no goodwill impairment existed at the time of the annual impairment tests which were performed in the fourth quarters of 2025, 2024 and 2023. No impairments of other intangible assets were recorded in 2025, 2024 and 2023. 43 Table of Contents
16. Debt The Company was obligated under the following debt instruments: December 31 (dollars in millions) 2025 2024 Revolving credit agreement borrowings, average year-end interest rates of 5.3 % for 2024 $ —   $ 30.0 Variable rate agreements, expiring 2029, average year-end interest rates of 7.4 % for 2025 and 8.0 % for 2024 46.6   49.0 Fixed rate agreements, expiring 2026-2034, average year-end interest rates of 3.3 % for 2025 and 3.1 % for 2024 108.4   114.2 155.0   193.2 Long-term debt due within one year ( 42.3 ) ( 10.0 ) Long-term debt $ 112.7   $ 183.2 In 2024, the Company renewed and amended its $ 500 million multi-year multi-currency revolving credit agreement with a new expiration date of August 23, 2029. The facility has an accordion provision which allows it to be increased up to $ 1 billion if certain conditions (including lender approval) are satisfied. Borrowings under the Company’s bank credit lines and commercial paper borrowings are supported by the $ 500 million revolving credit agreement. As a result of the long-term nature of this facility, the Company’s credit line borrowings are classified as long-term debt at December 31, 2024 (no credit line borrowings existed at December 31, 2025). At its option, the Company either maintains cash balances or pays fees for bank credit and services. The Company has interest expense obligations of $ 15.3 million on outstanding debt as of December 31, 2025. Scheduled maturities of long-term debt within each of the five years subsequent to December 31, 2025 are as follows: Years ending December 31 (dollars in millions) Amount 2026 $ 42.3 2027 39.9 2028 24.9 2029 24.9 2030 10.0
17. Stockholders’ Equity The Company’s authorized capital consists of three million shares of Preferred Stock $ 1 par value, 27  million shares of Class A Common Stock $ 5 par value, and 240 million shares of Common Stock $ 1 par value. The Common Stock has equal dividend rights with Class A Common Stock and is entitled, as a class, to elect one-third of the Board of Directors and has 1/10th vote per share on all other matters. Class A Common Stock is convertible to Common Stock on a one for one basis. There were 21,286 shares during 2025, 8,307 shares during 2024 and 12,524 shares during 2023, of Class A Common Stock converted into Common Stock. Regular dividends paid on the A. O. Smith Corporation Class A Common Stock and Common Stock amounted to $ 1.38 , $ 1.30 and $ 1.22 per share in 2025, 2024 and 2023, respectively. In 2025, the Board of Directors approved adding 5,000,000 shares of Common Stock to an existing discretionary share repurchase authority. Under the share repurchase program, the Common Stock may be purchased through a combination of Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as working capital requirements, general business conditions and other factors, including alternative investment opportunities. The stock repurchase authorization remains effective until terminated by the Company's Board of Directors which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. In 2025, the Company repurchased 5,942,601 shares at an average price of $ 67.44 per share and at a total cost of $ 400.8  million. As of December 31, 2025, there were 803,524 shares remaining on the existing repurchase authorization. In 2024, the Company repurchased 3,755,337 shares at a cost of $ 305.8 million. In 2023, the Company repurchased 4,377,000 shares at a cost of $ 306.5 million. At December 31, 2025, a total of 130,380 and 52,034,704 shares of Class A Common Stock and Common Stock, respectively, were held as treasury stock. At December 31, 2024, a total of 130,380 and 46,257,599 shares of Class A Common Stock and Common Stock, respectively, were held as treasury stock. 44 Table of Contents
18. Stockholders’ Equity (continued) Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Years ended December 31, 2025 2024 Cumulative foreign currency translation Balance at beginning of period $ ( 104.3 ) $ ( 80.3 ) Other comprehensive gain (loss) before reclassifications 13.1   ( 24.0 ) Balance at end of period ( 91.2 ) ( 104.3 ) Unrealized net (loss) gain on cash flow derivatives Balance at beginning of period ( 1.5 ) 0.7 Other comprehensive gain (loss) before reclassifications 2.5   ( 0.5 ) Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $ 0.4 in 2025 and $ 0.5 in 2024, respectively) (1) ( 1.2 ) ( 1.7 ) Balance at end of period ( 0.2 ) ( 1.5 ) Pension liability Balance at beginning of period ( 6.1 ) ( 4.6 ) Other comprehensive loss before reclassifications ( 1.4 ) ( 1.8 ) Amounts reclassified from accumulated other comprehensive loss (1) 0.3   0.3 Balance at end of period ( 7.2 ) ( 6.1 ) Total accumulated other comprehensive loss, end of period $ ( 98.6 ) $ ( 111.9 ) (1) Amounts reclassified from accumulated other comprehensive loss: Realized gains on derivatives reclassified to cost of products sold $ ( 1.6 ) $ ( 2.2 ) Tax provision 0.4   0.5 Reclassification net of tax $ ( 1.2 ) $ ( 1.7 ) Amortization of pension items: Actuarial losses $ 0.3   $ 0.3 Prior year service cost 0.1   0.1 0.4   0.4 Tax benefit ( 0.1 ) ( 0.1 ) Reclassification net of tax $ 0.3   $ 0.3
19. Stock Based Compensation The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Incentive Plan) effective January 1, 2007, and the Incentive Plan was most recently reapproved by stockholders on April 15, 2020. The Incentive Plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options or share units at December 31, 2025, was 2,028,442 which includes 2,400,000 additional shares that were authorized on April 15, 2020 at the Company's annual meeting of stockholders. Upon stock option exercise or share unit vesting, shares are issued from treasury stock. Total stock based compensation expense recognized in 2025, 2024 and 2023 was $ 13.8 million, $ 14.9 million and $ 11.5 million, respectively. 45 Table of Contents
20. Stock Based Compensation (continued) Stock Options Beginning in 2023, the Company no longer grants stock options. For active employees, all options granted expire ten years after the date of grant. Stock based compensation expense attributable to stock options for 2025, 2024 and 2023 was $ 0.1 million, $ 0.6 million and $ 1.2 million, respectively. Changes in options, all of which relate to the Company’s Common Stock, were as follows: Years Ended December 31 2025 2024 2023 Number of Options Weighted Avg. Per Share Exercise Price Number of Options Weighted Avg. Per Share Exercise Price Number of Options Weighted Avg. Per Share Exercise Price Number of shares under options: Outstanding at beginning of year 1,395,841   $ 55.07   1,872,553   $ 52.93   2,481,606   $ 51.22 Exercised (1) ( 83,712 ) 39.60   ( 473,452 ) 46.46   ( 600,344 ) 45.68 Forfeited ( 15,300 ) 53.00   ( 3,260 ) 74.27   ( 8,709 ) 66.96 Outstanding at end of year (2) 1,296,829   56.10   1,395,841   55.07   1,872,553   52.93 Exercisable at end of year (3) 1,296,829   56.10   1,295,061   53.59   1,549,749   49.51 (1) The total intrinsic value of options exercised in 2025, 2024 and 2023 was $ 2.0 million, $ 18.0 million and $ 15.0 million, respectively. (2) The weighted average remaining contractual life of options outstanding was 5 years at December 31, 2025, 6 years at December 31, 2024 and 7 years at December 31, 2023, respectively. The aggregate intrinsic value of options outstanding at December 31, 2025 was $ 16.0 million. (3) The weighted average remaining contractual life of options exercisable was 5 years at December 31, 2025, and 6 years at December 31, 2024 and December 31, 2023, respectively. The aggregate intrinsic value of options exercisable at December 31, 2025 was $ 16.0 million. Number of Options Weighted Avg. Per Share Exercise Price Nonvested options at beginning of year 100,780   $ 74.10 Vested ( 100,780 ) 74.10 Nonvested options at end of year —   — 46 Table of Contents
21. Stock Based Compensation (continued) Share Units Participants in the Incentive Plan may also be awarded share units. Share units vest three years after the date of grant. The Company granted 269,545 , 195,497 and 168,807 share units under the Incentive Plan in 2025, 2024 and 2023, respectively. The share units were valued at $ 17.9 million, $ 16.1 million and $ 11.3 million at the date of issuance in 2025, 2024 and 2023, respectively, based on the price of the Company’s Common Stock at the date of grant. The share units are recognized as compensation expense ratably over the three-year vesting period; however, included in share unit expense was expense associated with accelerated vesting of share unit awards for certain employees who are retirement eligible or will become retirement eligible during the vesting period. Stock based compensation expense attributable to share units of $ 11.2 million, $ 12.5 million and $ 9.6 million was recognized in 2025, 2024 and 2023, respectively. Certain non-U.S.-based employees receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period. A summary of share unit activity under the Incentive Plan is as follows: Number of Units Weighted-Average Grant Date Value Issued and unvested at January 1, 2025 469,269   $ 71.50 Granted 269,545   66.28 Vested ( 87,790 ) 72.78 Forfeited ( 19,717 ) 70.21 Issued and unvested at December 31, 2025 631,307   68.92 Performance Stock Units Beginning in 2023, certain executives may be awarded performance stock units under the Incentive Plan. Performance stock units vest over three years following the date of the grant. Performance stock units vest under a set of measurement criteria which are based upon achievement of certain Sustainability targets. Potential payouts range from zero to 150 percent of the target awards and changes from target amounts are reflected as performance adjustments. The Company granted 38,435 , 29,475 and 24,580 performance stock units under the Incentive Plan in 2025, 2024 and 2023, respectively. The performance stock units were valued at $ 2.5 million, $ 2.4 million and $ 1.7 million at the date of issuance in 2025, 2024 and 2023, respectively, based on the price of the Company’s Common Stock at the date of grant. The performance stock units are recognized as compensation expense ratably over the three-year vesting period. Stock based compensation expense attributable to performance stock units of $ 2.5 million, $ 1.8 million and $ 0.7 million was recognized in 2025, 2024 and 2023, respectively. Certain non-U.S.-based executives receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period. A summary of stock unit activity under the Incentive Plan is as follows: Number of Units Weighted-Average Grant Date Value Issued and unvested at January 1, 2025 74,398   $ 75.40 Granted 38,435   65.68 Forfeited ( 3,131 ) 70.78 Issued and unvested at December 31, 2025 109,702   72.12 47 Table of Contents
22. Derivative Instruments The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform. Cash Flow Hedges With the exception of its net investment hedges, the Company designates all of its hedging instruments as cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Foreign Currency Forward Contracts The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro and Mexican peso. Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year . The combined fair value of the foreign currency forward contracts was an asset balance of $ 1.0 million as of December 31, 2025 which was recorded in Other current assets within the consolidated balance sheet. The combined fair value of the foreign currency forward contracts was a liability balance of $ 1.4 million as of December 31, 2024 and recorded in Accrued liabilities within the consolidated balance sheet. The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges: December 31 (dollars in millions) 2025 2024 Buy Sell Buy Sell Canadian dollar $ —   $ 57.8   $ —   $ 28.9 Euro 16.8   —   14.0   — Mexican peso 18.7   —   27.2   — Total $ 35.5   $ 57.8   $ 41.2   $ 28.9 Interest Rate Swaps The Company is exposed to interest rate risk as a result of its floating rate borrowings. The Company entered into a forward interest rate swap agreement with an independent counterparty to hedge the variability in cash flows due to changes in Secured Overnight Financing Rate (SOFR) benchmark interest rate associated with variable rate borrowings. The interest rate swap has a maturity date of September 30, 2029 and effectively converts the Company’s variable interest rate obligation to a fixed interest rate obligation. The interest rate swap had an aggregate notional amount of 4.2 billion rupees as of December 31, 2025 and December 31, 2024. The aggregate effective interest rate of the swap as of December 31, 2025 and December 31, 2024 was 8.25 %. The fair value of the interest rate swap contract was a liability balance of $ 1.0 million as of December 31, 2025 which was recorded in Accrued liabilities within the consolidated balance sheet. The fair value of the interest rate swap contract was $ 0.5 million as of December 31, 2024 which was recorded in Accrued liabilities within the consolidated balance sheet. 48 Table of Contents
23. Derivative Instruments (continued) The effect of cash flow hedges on the consolidated statement of earnings: Years ended December 31 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) recognized in other comprehensive loss on derivatives Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings 2025 2024 2025 2024 Foreign currency contracts $ 4.0   $ ( 0.7 ) Cost of products sold $ 1.6   $ 2.2 Interest rate swaps ( 0.5 ) ( 0.5 ) Interest Expense ( 0.4 ) ( 0.1 ) $ 3.5   $ ( 1.2 ) $ 1.2   $ 2.1 Net Investment Hedges The Company uses foreign currency denominated intercompany debt and third-party foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. The Company recognized $ 8.8 million of after-tax losses and $ 2.3 million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in 2025 and 2024, respectively. The contractual amount of the Company’s foreign currency denominated intercompany debt that are designated as net investment hedge was 1.5 billion RMB as of both December 31, 2025 and December 31, 2024. The fair value of the net investment hedges was zero as of both December 31, 2025 and December 31, 2024.
24. Income Taxes The components of the provision for income taxes consisted of the following: Years ended December 31 (dollars in millions) 2025 2024 2023 Current: Federal $ 99.8   $ 124.3   $ 124.9 State 25.4   25.2   28.3 International 34.8   22.5   27.5 Deferred: Federal 11.9   ( 4.4 ) ( 4.8 ) State 2.1   ( 0.5 ) ( 1.8 ) International ( 5.1 ) 0.3   2.8 $ 168.9   $ 167.4   $ 176.9 49 Table of Contents
25. Income Taxes (continued) The provision for income taxes differs from the U.S. federal statutory rate due to the following items: Years ended December 31 2025 2024 2023 Dollars Percentages Dollars Percentages Dollars Percentages U.S. federal statutory tax rate $ 150.2   21.0   % $ 147.2   21.0   % $ 154.0   21.0   % State and local income tax, net of federal (national) benefit (1) 21.0   2.9   18.1   2.6   21.0   2.9 Foreign tax effects China Tax benefit from research and development expenditures ( 8.5 ) ( 1.2 ) ( 7.9 ) ( 1.1 ) ( 10.1 ) ( 1.4 ) Other 4.2   0.6   3.2   0.5   5.3   0.7 Other foreign jurisdictions 6.8   1.0   1.5   0.2   6.2   0.9 Other Adjustments ( 4.8 ) ( 0.7 ) 5.3   0.7   0.5   0.0 $ 168.9   23.6   % $ 167.4   23.9   % $ 176.9   24.1   % (1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Florida, Illinois, Massachusetts, Maryland, New Jersey, New York and New York City for 2025, California, Illinois, Maryland, Michigan, New Jersey, New York, Pennsylvania and Tennessee for 2024 and California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Tennessee for 2023. Components of earnings before income taxes were as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 U.S. $ 586.0   $ 577.2   $ 596.4 International 129.1   123.8   137.1 $ 715.1   $ 701.0   $ 733.5 The cash taxes paid by the Company were as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 Federal $ 119.2   $ 136.1   $ 134.8 State 21.7   28.2   25.7 International Canada 11.4   11.4   11.6 China 9.3   8.3   15.0 Other foreign jurisdictions 3.6   3.7   2.4 $ 165.2   $ 187.7   $ 189.5 Undistributed earnings of the Company’s foreign subsidiaries amounted to $ 633.1 million at December 31, 2025. The Company had $ 4.8 million accrued for its estimate of withholding taxes due upon repatriation of approximately $ 93.0 million of foreign earnings it considers not permanently reinvested as of December 31, 2025. The Company considers $ 540.1 million of the total undistributed earnings to be permanently reinvested as a result of various factors including imposition of statutory restrictions at certain jurisdictions that prohibit the repatriation of a portion of the earnings. Accordingly, no provision for state, local and foreign withholding income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to state and local taxes, and withholding taxes payable to the various foreign countries. The Company expects to be able to take a 100 percent dividend received deduction to offset any US federal income tax liability. Determination of the amount of unrecognized state and local deferred income tax liability and associated foreign withholding taxes is not practicable due to the complexities associated with its hypothetical calculation. 50 Table of Contents
26. Income Taxes (continued) The tax effects of temporary differences of assets and liabilities between income tax and financial reporting are as follows: December 31 (dollars in millions) 2025 2024 Assets Liabilities Assets Liabilities Employee benefits $ 18.7   $ —  $ 16.7   $ — Product liability and warranties 55.9   —  51.6   — Inventories 3.1   —  2.0   — Accounts receivable 12.4   —  12.0   — Property, plant and equipment —  51.9   —  49.8 Intangibles —  80.9   —  58.6 Environmental liabilities 1.3   —  1.4   — Undistributed foreign earnings —  4.8   —  3.5 Tax loss and credit carryovers 22.7   —  9.7   — All other 11.2   —  11.0   — Valuation allowance ( 10.4 ) —  ( 6.1 ) — $ 114.9   $ 137.6   $ 98.3   $ 111.9 Net liability $ 22.7   $ 13.6 The Company believes it is more likely than not that it will realize its net deferred tax assets through the reduction of future taxable income. The Company considered historical operating results in determining the probability of the realization of the deferred tax assets. A reconciliation of the beginning and ending amounts of tax loss carryovers, credit carryovers and valuation allowances is as follows: Net Operating Losses and Tax Credits Valuation Allowances December 31 (dollars in millions) 2025 2024 2025 2024 Beginning balance $ 9.7   $ 12.3   $ 6.1   $ 11.7 Change in balance 13.0   ( 2.6 ) 4.3   ( 5.6 ) Ending balance $ 22.7   $ 9.7   $ 10.4   $ 6.1 The Company has foreign net operating loss carryovers that expire in 2026 through 2031, with some net operating losses being carried forward indefinitely and state and local net operating loss carryovers that are carried forward indefinitely. A reconciliation of the beginning and ending amount of unrecognized benefits is as follows: (dollars in millions) 2025 2024 Balance at January 1 $ 16.2   $ 17.2 Change to tax positions from prior years ( 3.2 ) ( 1.0 ) Balance at December 31 $ 13.0   $ 16.2 The amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is $ 4.9 million. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 31, 2025, there was an immaterial amount of interest and penalties accrued. The Company anticipates that there will not be a material decrease in the total amount of unrecognized tax benefits in 2026. The Company’s U.S. federal income tax returns and its U.S. state and local income tax returns are subject to audit for the years 2022-2025 and 2010-2025, respectively. The Company is subject to examinations in foreign tax jurisdictions for the years 2019-2025. If the examinations at certain foreign tax jurisdictions are resolved unfavorably, there could be additional assessments imposed by the relevant authorities. 51 Table of Contents
27. Commitments and Contingencies Environmental Contingencies The Company is a potentially responsible party in judicial and administrative proceedings seeking to clean up sites which have been environmentally impacted. In each case, the Company has established reserves, insurance proceeds and/or a potential recovery from third parties. The Company believes any environmental claims will not have a material effect on its financial position or results of operations. Product Liability The Company is subject to various claims and pending lawsuits for product liability and other matters arising out of the conduct of the Company’s business. For product liability claims, the Company self insures a portion of its product liability loss exposure. The Company has established reserves and insurance coverage that it believes are adequate to cover incurred claims. For the years ended December 31, 2025 and 2024, the Company had $ 125 million of product liability insurance for individual losses in excess of $ 7.5 million. At December 31, 2025 and 2024, the reserve for product liability was $ 26.6 million and $ 26.3 million, respectively. The Company periodically reevaluates its exposure on claims and lawsuits and makes adjustments to its reserves as appropriate. The Company believes, based on current knowledge, consultation with counsel, adequate reserves and insurance coverage that the outcome of such claims and lawsuits will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Purchase Obligations The Company utilizes blanket purchase orders to communicate expected annual requirements to certain suppliers. Requirements under blanket purchase orders generally do not become committed until several weeks prior to the scheduled unit production. The purchase obligations the Company considers firm as of December 31, 2025, is $ 211.7  million, most of which will be ordered in 2026. Inventory Repurchase Arrangements The Company maintained a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offered order-entry, warehousing and logistics support. The Provider also offered asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider collateralized lending facilities in place with multiple Chinese banks under which the Company agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes. The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates. As of December 31, 2025, the Company terminated the arrangement with the Provider. Existing loan balances will be paid down throughout 2026 with no new loans offered. Before considering any reduction of distributor rebate accruals of $ 1.9 million and $ 2.0 million as of December 31, 2025 and December 31, 2024, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $ 2.1 million and $ 2.9 million as of December 31, 2025 and December 31, 2024, respectively. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of December 31, 2025 and December 31, 2024. 52 Table of Contents
28. Operations by Segment The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Company’s Chief Executive Officer (CEO) is the Chief Operating Decision Maker (CODM). The CODM allocates resources and makes operating decisions based on the financial information presented by the two reporting segments. The measures regularly reviewed by our CODM include segment sales, earnings, and segment margin. Segment earnings, defined by the Company as earnings before interest expense, taxes, corporate expense, and corporate research and development expenses, were used to measure the performance of the segments. Our CODM uses these financial measures to evaluate and allocate capital and company resources as critical determinants of segment performance. The accounting policies of the reportable segments are the same as those described in the “Summary of Significant Accounting Policies” outlined in Note 1 - Organization and Significant Accounting Policies. December 31, 2025 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,964.4   $ 865.8   $ —  $ 3,830.2   $ —   $ 3,830.2 Inter-segment sales 19.8   14.6   —  34.4   —   34.4 2,984.2   880.4   —  3,864.6   —   3,864.6 Elimination of Inter-segment sales ( 19.8 ) ( 14.6 ) —  ( 34.4 ) —   ( 34.4 ) Net Sales 2,964.4   865.8   —  3,830.2   —   3,830.2 Cost of products sold 1,792.2   550.6   —  2,342.8   —   2,342.8 Gross Profit 1,172.2   315.2   —  1,487.4   —   1,487.4 Inter-segment Profit —  0.2   ( 0.2 ) —  —  — Selling, general and administrative expenses 444.3   235.9   —  680.2   79.2   759.4 Other expense (income), net (1) —   3.1   —  3.1   ( 3.7 ) ( 0.6 ) Earnings $ 727.9   $ 76.4   $ ( 0.2 ) $ 804.1   $ ( 75.5 ) $ 728.6 Interest expense ( 13.5 ) Earnings before provision for income taxes $ 715.1 (1) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. 53 Table of Contents
29. Operations by Segment (continued) December 31, 2024 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,928.1   $ 890.0   $ —  $ 3,818.1   $ —   $ 3,818.1 Inter-segment sales 22.0   28.6   —  50.6   —   50.6 2,950.1   918.6   —  3,868.7   —   3,868.7 Elimination of Inter-segment sales ( 22.0 ) ( 28.6 ) —  ( 50.6 ) —   ( 50.6 ) Net Sales 2,928.1   890.0   —  3,818.1   —   3,818.1 Cost of products sold 1,780.1   581.9   —  2,362.0   —   2,362.0 Gross Profit 1,148.0   308.1   —  1,456.1   —   1,456.1 Inter-segment Profit —  0.4   ( 0.4 ) —  —  — Selling, general and administrative expenses 433.2   235.0   —  668.2   71.1   739.3 Restructuring and impairment expense 6.3   11.3   —  17.6   —   17.6 Other expense (income), net (2) 1.0   ( 2.3 ) —  ( 1.3 ) ( 7.2 ) ( 8.5 ) Earnings $ 707.5   $ 64.5   $ ( 0.4 ) $ 771.6   $ ( 63.9 ) $ 707.7 Interest expense ( 6.7 ) Earnings before provision for income taxes $ 701.0 (2) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. December 31, 2023 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,904.3   $ 948.5   $ —  $ 3,852.8   $ —   $ 3,852.8 Inter-segment sales 18.6   8.4   —  27.0   —   27.0 2,922.9   956.9   —  3,879.8   —   3,879.8 Elimination of Inter-segment sales ( 18.6 ) ( 8.4 ) —  ( 27.0 ) —   ( 27.0 ) Net Sales 2,904.3   948.5   —  3,852.8   —   3,852.8 Cost of products sold 1,761.1   607.0   —  2,368.1   ( 0.1 ) 2,368.0 Gross Profit 1,143.2   341.5   —  1,484.7   0.1   1,484.8 Inter-segment Profit —  0.5   ( 0.5 ) —  —  — Selling, general and administrative expenses 411.6   243.0   —  654.6   72.8   727.4 Restructuring and impairment expense —   15.7   —  15.7   3.1   18.8 Other expense (income), net (3) 4.9   ( 0.1 ) —  4.8   ( 11.7 ) ( 6.9 ) Earnings $ 726.7   $ 83.4   $ ( 0.5 ) $ 809.6   $ ( 64.1 ) $ 745.5 Interest expense ( 12.0 ) Earnings before provision for income taxes $ 733.5 (3) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. In 2025, sales to the Company's North America segment’s two largest customers were $ 599.7 million and $ 467.8 million which represented 16 percent and 12 percent of the Company’s net sales, respectively. In 2024, sales to the Company's North America segment’s two largest customers were $ 586.6 million and $ 495.8 million which represented 15 percent and 13 percent of the Company’s net sales, respectively. In 2023, sales to the Company's North America segment’s two largest customers were $ 604.5 million and $ 509.0 million which represented 16 percent and 13 percent of the Company’s net sales, respectively. 54 Table of Contents
30. Operations by Segment (continued) Assets, depreciation and capital expenditures by segment Total Assets (December 31) Depreciation and Amortization (Years Ended December 31) Capital Expenditures (Years Ended December 31) (dollars in millions) 2025 2024 2023 2025 2024 2023 2025 2024 2023 North America $ 2,325.7   $ 2,315.2   $ 2,297.4   $ 64.1   $ 60.4   $ 58.6   $ 60.6   $ 100.3   $ 58.4 Rest of World 547.3   592.1   475.0   19.6   17.0   18.3   10.2   7.6   11.0 Total Segments 2,873.0   2,907.3   2,772.4   83.7   77.4   76.9   70.8   107.9   69.4 Corporate (1) 269.8   332.7   441.5   1.4   1.4   1.4   —   0.1   3.2 Total $ 3,142.8   $ 3,240.0   $ 3,213.9   $ 85.1   $ 78.8   $ 78.3   $ 70.8   $ 108.0   $ 72.6 (1) The majority of corporate assets consist of cash, cash equivalents, marketable securities, and deferred income taxes. Net sales and long-lived assets by geographic location The following data by geographic area includes net sales based on product shipment destination and long-lived assets based on physical location. Long-lived assets include net property, plant and equipment, operating lease assets and other long-term assets. Long-lived Assets (December 31) Net Sales (Years Ended December 31) (dollars in millions) 2025 2024 2023 2025 2024 2023 United States $ 447.7   $ 441.4   $ 422.6   United States $ 2,619.1   $ 2,573.7   $ 2,547.1 China 193.6   193.8   210.6   China 672.8   760.0   827.4 Canada 56.7   54.0   58.1   Canada 326.5   331.2   335.3 Other Foreign 80.4   75.1   52.1   Other Foreign 211.8   153.2   143.0 Total $ 778.4   $ 764.3   $ 743.4   Total $ 3,830.2   $ 3,818.1   $ 3,852.8
31. Subsequent Events On January 6, 2026, the Company completed the acquisition of LVC Holdco LLC (“Leonard Valve”). The transaction was completed for $ 470.0 million, subject to customary adjustments. The all-cash transaction is valued at approximately $ 412.0 million after adjusting for estimated tax benefits and was funded with cash borrowed under a new credit agreement. The Company has not completed the analysis of identifying and estimating the fair value of identifiable intangible assets acquired. We anticipate preparing a preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the second quarter of fiscal 2026. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined. On January 29, 2026, the Company identified a compromise to a portion of the Ashland City, Tennessee facility roof structure due to a severe ice and snow weather event. For safety purposes, production has been halted temporarily in the area of the facility impacted while remediation activities are underway. The Company has shifted certain production activities to other facilities to address the temporary impact. The Company has insurance coverage for the repair of the assets that were impacted and is working closely with its insurance carrier and claims adjusters to ensure financial recovery due to the event. The Company’s insurance policies also provide business interruption coverage, including lost profits, and the reimbursement of other expenses and costs to be incurred relating to the damages and losses suffered. The Company’s evaluation of the situation and associated remediation activities is ongoing. As of the date of this filing, the Company does not expect the event to result in a material impact on its financial results. 55 Table of Contents ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A – CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period our disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act, and that information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. Management Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that, as of December 31, 2025, our internal control over financial reporting was effective. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements and the effectiveness of internal controls over financial reporting as of December 31, 2025 as stated in their report which is included herein. Changes in Internal Control Over Financial Reporting There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B – OTHER INFORMATION During the three months ended December 31, 2025, none of our directors or Section 16 officers adopted or terminated a “Rule 10b5-1trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 56 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of A. O. Smith Corporation Opinion on Internal Control Over Financial Reporting We have audited A. O. Smith Corporation’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, A. O. Smith Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 10, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Milwaukee, Wisconsin February 10, 2026 57 Table of Contents PART III ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information included under the headings “Election of Directors” and “Board Committees” in our definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission (SEC) under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference. The information required regarding Executive Officers of the Company is included in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Company.” We have a separately designated Audit Committee on which Michael M. Larsen, Todd W. Fister, Christopher L. Mapes, and Lois M. Martin serve, with Mr. Larsen, as Chairperson. All members are independent under applicable SEC and New York Stock Exchange rules; the Board of Directors of the Company has concluded that Mr. Larsen, Mr. Fister and Ms. Martin are “audit committee financial experts” in accordance with SEC rules. We have adopted a Financial Code of Ethics applicable to our principal executive officer, principal financial officer and principal accounting officer. As a best practice, this code has been executed by key financial and accounting personnel as well. In addition, we have adopted a general code of business conduct for our directors, officers and all employees, which is known as the A. O. Smith Guiding Principles. The Financial Code of Ethics, the A. O. Smith Guiding Principles and other company corporate governance matters are available on our website at www.aosmith.com. We are not including the information contained on our website as a part of or incorporating it by reference into, this Form 10-K. We intend to disclose on this website any amendments to, or waivers from, the Financial Code of Ethics or the A. O. Smith Guiding Principles that are required to be disclosed pursuant to SEC rules. There have been no waivers of the Financial Code of Ethics or the A. O. Smith Guiding Principles. Stockholders may obtain copies of any of these corporate governance documents free of charge by writing to the Corporate Secretary at the address on the cover page of this Form 10-K. The information included under the heading “Compliance with Section 16(a) of the Securities Exchange Act” in our definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference. ITEM 11 – EXECUTIVE COMPENSATION The information included under the headings "Executive Compensation," "Director Compensation," and "Report of the Personnel and Compensation Committee" in the Company's Definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference. 58 Table of Contents ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information included under the headings “Principal Stockholders” and “Security Ownership of Directors and Management” in our definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference. Equity Compensation Plan Information The following table provides information about our equity compensation plans as of December 31, 2025. Plan Category Number of securities to be issued upon the exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 2,194,320 (1) $ 56.10 (2) 2,028,442 (3) Equity compensation plans not approved by security holders —  —  — Total 2,194,320  56.10  2,028,442 (1) Consists of 1,296,829 shares subject to stock options, 585,887 shares subject to employee share units, 201,903 shares subject to director share units and 109,701 shares subject to performance stock units. (2) Represents the weighted average exercise price of outstanding options and does not take into account outstanding share units. (3) Represents securities remaining available for issuance under the A. O. Smith Combined Incentive Compensation Plan. If any awards lapse, expire, terminate or are canceled without issuance of shares, or shares are forfeited under any award, then such shares will become available for issuance under the A. O. Smith Combined Incentive Compensation Plan, hereby increasing the number of securities remaining available. ITEM 13 – CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information included under the headings “Director Independence and Financial Literacy”, “Compensation Committee Interlocks and Insider Participation” and “Procedure for Review of Related Party Transactions” in our definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference. ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES Our principal accountant is Ernst & Young, LLP (PCAOB ID: 42 ). The information included under the heading “Report of the Audit Committee” in our definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) required by this Item 14 is incorporated herein by reference. 59 Table of Contents PART IV ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Annual Report on Form 10-K:
32. Financial Statements of the Company Form 10-K Page Number The following consolidated financial statements of A. O. Smith Corporation are included in Item 8: Consolidated Balance Sheets at December 31, 202 5 and 20 24 31 For each of the three years in the period ended December 31, 2025: ‑ Consolidated Statement of Earnings 32 ‑ Consolidated Statement of Comprehensive Earnings 32 ‑ Consolidated Statement of Cash Flows 33 ‑ Consolidated Statement of Stockholders’ Equity 34 Notes to Consolidated Financial Statements 35 -55
33. Financial Statement Schedules Schedule II—Valuation and Qualifying Accounts 64 Schedules not included have been omitted because they are not applicable.
34. Exhibits - see the Index to Exhibits on pages 61-62 of this report. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report on Form 10-K are listed as Exhibits 10(a) through 10(p) in the Index to Exhibits. Pursuant to the requirements of Rule 14a-3(b)(10) of the Securities Exchange Act of 1934, as amended, we will, upon request and upon payment of a reasonable fee not to exceed the rate at which such copies are available from the SEC, furnish copies to our security holders of any exhibits listed in the Index to Exhibits. 60 Table of Contents INDEX TO EXHIBITS Exhibit Number Description (3)(i) Restated Certificate of Incorporation of A. O. Smith Corporation as amended through April 11, 2016, incorporated by reference to Exhibit 3i(b) in the quarterly report on Form 10-Q for the quarter ended March 31, 2016. (3)(ii) By-laws of A. O. Smith Corporation as amended October 10, 2019, incorporated by reference to Exhibit 3.1 in the current report on Form 8-K dated October 16, 2019. (4) (a) Restated Certificate of Incorporation of A. O. Smith Corporation as amended through April 11, 2016, incorporated by reference to Exhibit 3i(b) in the quarterly report on Form 10-Q for the quarter ended March 31, 2016. (b) Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O. Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 4.1 in the current report on Form 8-K dated December 12, 2012. (c) Amendment No. 1 dated as of December 15, 2016, to the Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 4(c) in the annual report on Form 10-K for the fiscal year ended December 31, 2016. (d) Amendment No. 2 dated as of April 1, 2021, to the Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 10.1 in the quarterly report on Form 10-Q for the quarter ended March 31, 2021. (e) Amendment No. 3 dated as of May 1, 2023, to the Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 10.1 in the quarterly report on Form 10-Q for the quarter ended September 30, 2023. (f) Amendment No. 4 dated as of August 23, 2024, to the Amended and Restated Credit Agreement dated as of December 12, 2012, among A. O. Smith Corporation, A. O. Smith Enterprises Ltd., A.O. Smith International Holdings B.V. and the financial institutions and agents party thereto, incorporated by reference to Exhibit 10.01 in the quarterly report on Form 10-Q for the quarter ended September 30, 2024. (g) Credit Agreement dated as of January 5, 2026, among A. O. Smith Corporation, the various lenders party thereto, and Bank of America, N.A., as administrative agents, incorporated by reference to Exhibit 4.1 in the current report on Form 8-K dated January 6, 2026. (h) The corporation has instruments that define the rights of holders of long-term debt that are not being filed with this Registration Statement in reliance upon Item 601(b)(4)(iii) of Regulation S-K. The Registrant agrees to furnish to the SEC, upon request, copies of these instruments. (10) Material Contracts (a) A. O. Smith Combined Incentive Compensation Plan, incorporated by reference to Exhibit A of the Proxy Statement filed on March 6, 2020 for the 2020 Annual Meeting of Stockholders. (b) A. O. Smith Corporation Executive Life Insurance Plan, as amended January 1, 2009, incorporated by reference to Exhibit 10(b) of the annual report on Form 10-K for the fiscal year ended December 31, 2008. (c) A. O. Smith Nonqualified Deferred Compensation Plan, adopted December 1, 2008, incorporated by reference to Exhibit 10(c) of the annual report on Form 10-K for the fiscal year ended December 31, 2008. (d) A. O. Smith Corporation Executive Supplemental Pension Plan, as amended January 1, 2009, incorporated by reference to Exhibit 10(d) of the annual report on Form 10-K for the fiscal year ended December 31, 2008. (e) A. O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended March 31, 2012 (for grants between February 2012 and January 2016). 61 Table of Contents Exhibit Number Description (f) A. O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit 10 of the quarterly report on Form 10-Q for the quarter ended March 31, 2016 (for grants between February 2016 and January 2021). (g) A.O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit 10(h) of the annual report on Form 10-K for the fiscal year ended December 31, 2020 (for grants between February 2021 and January 2022). (h) A.O. Smith Corporation Executive Incentive Compensation Award Agreement (International), incorporated by reference to Exhibit 10(i) of the annual report on Form 10-K for the fiscal year ended December 31, 2020 (for grants between February 2021 and January 2022). (i) A.O. Smith Corporation Executive Incentive Compensation Award Agreement incorporated by reference to exhibit 10(i) of the annual report on Form 10-K for the fiscal year ended December 31, 2021 (for grants between February 2022 and January 2023). (j) A.O. Smith Corporation Executive Incentive Compensation Award Agreement incorporated by reference to exhibit 10(j) of the annual report on Form 10-K for the fiscal year ended December 31, 2021 (International) (for grants between February 2022 and January 2023). (k) A. O. Smith Corporation Executive Incentive Compensation Award Agreement (Acceptance Certificates and Terms and Conditions) incorporated by reference to exhibit 10(k) of the annual report on Form 10-K for the fiscal year ended December 31, 2022 (for grants after February 2023). (l) A. O. Smith Corporation Senior Leadership Severance Plan, incorporated by reference to Exhibit 10.1 of the quarterly report for Form 10-Q for the quarter ended June 30, 2009. (m) Form of A. O. Smith Corporation Special Retention Award Agreement, incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended March 31, 2011. (n) Stockholder Agreement dated as of December 9, 2008, between A. O. Smith Corporation and each Smith Investment Company stockholder who becomes a signatory thereto, incorporated by reference to Exhibit 10.3 of the current report on Form 8-K dated December 9, 2008. (o) Summary of Directors’ Compensation incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended June 30, 2021. (p) Recoupment Policy for Incentive Compensation dated October 9, 2023 (“Clawback”). (19) A. O. Smith Corporation Insider Trading Compliance Policy. (21) Subsidiaries. (23) Consent of Independent Registered Public Accounting Firm. (31.1) Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February 1 0 , 202 6 . (31.2) Certification by the Executive Vice-President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February 1 0 , 202 6 . (32.1) Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. (32.2) Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. (101) The following materials from A. O. Smith Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2025 and 2024, (ii) the Consolidated Statement of Earnings for the three years ended December 31, 2025, (iii) the Consolidated Statement of Comprehensive Earnings for the three years ended December 31, 2025, (iv) the Consolidated Statement of Cash Flows for the three years ended December 31, 2025, (v) the Consolidated Statement of Stockholders’ Equity for the three years ended December 31, 2025 and (vi) the Notes to Consolidated Financial Statements. 62 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned, thereunto duly authorized. A. O. SMITH CORPORATION Date: February 10, 2026 By: /s/ Stephen M. Shafer Stephen M. Shafer President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of February 10, 2026 by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name and Title Signature STEPHEN M. SHAFER /s/ Stephen M. Shafer Director Stephen M. Shafer President and Chief Executive Officer CHARLES T. LAUBER /s/ Charles T. Lauber Executive Vice President and Chief Financial Officer Charles T. Lauber BENJAMIN A. OTCHERE /s/ Benjamin A. Otchere Vice President and Controller Benjamin A. Otchere RONALD D. BROWN /s/ Ronald D. Brown Director Ronald D. Brown TODD W. FISTER /s/ Todd W. Fister Director Todd W. Fister VICTORIA M. HOLT /s/ Victoria M. Holt Director Victoria M. Holt DR. ILHAM KADRI /s/ Dr. Ilham Kadri Director Dr. Ilham Kadri MICHAEL M. LARSEN /s/ Michael M. Larsen Director Michael M. Larsen CHRISTOPHER L. MAPES /s/ Christopher L. Mapes Director Christopher L. Mapes LOIS M. MARTIN /s/ Lois M. Martin Director Lois M. Martin MARK D. SMITH /s/ Mark D. Smith Director Mark D. Smith KEVIN J. WHEELER /s/ Kevin J. Wheeler Executive Chairman of the Board Kevin J. Wheeler 63 Table of Contents A. O. SMITH CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions) Years ended December 31, 2025, 2024 and 2023 Description Balance at Beginning of Year Charged to Costs and Expenses Acquisition of Businesses Deductions Balance at End of Year 2025: Valuation allowance for trade and notes receivable $ 12.9   $ 1.9   $ —   $ ( 0.7 ) $ 14.1 Valuation allowance for deferred tax assets 6.1   4.3   —   —   10.4 2024: Valuation allowance for trade and notes receivable 10.1   3.1   —   ( 0.3 ) 12.9 Valuation allowance for deferred tax assets 11.7   —   —   ( 5.6 ) 6.1 2023: Valuation allowance for trade and notes receivable 9.5   1.1   —   ( 0.5 ) 10.1 Valuation allowance for deferred tax assets 8.3   3.4   —   —   11.7 64