# SMITH A O CORP (AOS) Informational only - not investment advice. CIK: 0000091142 SIC: 3630 Household Appliances SIC breadcrumb: [Manufacturing](/division/D/) > [Electronic And Other Electrical Equipment And Components, Except Computer Equipment](/major-group/36/) > [SIC 3630 Household Appliances](/industry/3630/) Latest 10-K filed: 2026-02-10 SEC page: https://www.sec.gov/edgar/browse/?CIK=91142 Filing source: https://www.sec.gov/Archives/edgar/data/91142/000009114226000008/aos-20251231.htm ## Selected Fundamentals | Metric | Value | Unit | FY | Filed | | --- | ---: | --- | ---: | --- | | Revenue | 3830200000 | USD | 2025 | 2026-02-10 | | Net income | 546200000 | USD | 2025 | 2026-02-10 | | Assets | 3142800000 | USD | 2025 | 2026-02-10 | ## Financials Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-10. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000091142.json. Derived margins are computed from the extracted annual SEC facts. | Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Revenue | 2,685,900,000 | 2,996,700,000 | 3,187,900,000 | 2,992,700,000 | 2,895,300,000 | 3,538,900,000 | 3,753,900,000 | 3,852,800,000 | 3,818,100,000 | 3,830,200,000 | | Net income | 326,500,000 | 296,500,000 | 444,200,000 | 370,000,000 | 344,900,000 | 487,100,000 | 235,700,000 | 556,600,000 | 533,600,000 | 546,200,000 | | Operating income | 515,000,000 | 577,900,000 | 613,400,000 | 529,100,000 | 503,200,000 | 682,000,000 | 362,000,000 | 745,500,000 | 707,700,000 | 728,600,000 | | Gross profit | 1,114,200,000 | 1,232,400,000 | 1,305,500,000 | 1,180,700,000 | 1,108,200,000 | 1,310,900,000 | 1,329,600,000 | 1,484,800,000 | 1,456,100,000 | 1,487,400,000 | | Diluted EPS | 1.85 | 1.70 | 2.58 | 2.22 | 2.12 | 3.02 | 1.51 | 3.69 | 3.63 | 3.85 | | Assets | 2,891,000,000 | 3,197,400,000 | 3,071,500,000 | 3,058,000,000 | 3,160,700,000 | 3,474,400,000 | 3,332,300,000 | 3,213,900,000 | 3,240,000,000 | 3,142,800,000 | | Liabilities | 1,375,700,000 | 1,552,500,000 | 1,354,500,000 | 1,391,200,000 | 1,312,400,000 | 1,642,200,000 | 1,584,600,000 | 1,369,500,000 | 1,356,500,000 | 1,284,800,000 | | Stockholders' equity | 1,511,400,000 | 1,644,900,000 | 1,717,000,000 | 1,666,800,000 | 1,848,300,000 | 1,832,200,000 | 1,747,700,000 | 1,844,400,000 | 1,883,500,000 | 1,858,000,000 | | Cash and cash equivalents | 330,400,000 | 346,600,000 | 259,700,000 | 374,000,000 | 573,100,000 | 443,300,000 | 391,200,000 | 339,900,000 | 239,600,000 | 174,500,000 | | Net margin | 12.16% | 9.89% | 13.93% | 12.36% | 11.91% | 13.76% | 6.28% | 14.45% | 13.98% | 14.26% | | Operating margin | 19.17% | 19.28% | 19.24% | 17.68% | 17.38% | 19.27% | 9.64% | 19.35% | 18.54% | 19.02% | ## Macro Cross-References - [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average - [UNRATE](/indicator/UNRATE/): Unemployment Rate - [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate - [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private - [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit - [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit - [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity - [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity - [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity - [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity - [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity - [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy - [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food - [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy - [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter - [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index - [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index - [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities - [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate - [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons - [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm - [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate - [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio - [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed - [CE16OV](/indicator/CE16OV/): Employment Level - [ICSA](/indicator/ICSA/): Initial Claims - [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm - [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm - [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product - [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period - [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index - [TCU](/indicator/TCU/): Capacity Utilization: Total Index - [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units - [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units - [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade - [PCE](/indicator/PCE/): Personal Consumption Expenditures - [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income - [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate - [M2SL](/indicator/M2SL/): M2 - [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance ## Latest 10-K MD&A Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high 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.