A. O. Smith (AOS) 10-K risk factor changes: FY2020 vs FY2019

You should carefully consider the risk factors set forth below and all other information contained in this Annual Report on Form [added: 10-K, including the documents incorporated by reference, before making an investment decision regarding our common stock.]

If any of the events contemplated by the following risks [added: were to] actually [removed: occurs,] [added: occur,] then our business, financial condition, or results of operations could be materially adversely affected.

[removed: | | • | The] [added: *■The] effects of a global economic downturn could have a material adverse effect on our [removed: business |][added: business*]

Global economic growth remains [removed: uneven] [added: volatile] and could stall or reverse course.

[removed: If this was to occur it] [added: A continuation or deepening of the global economic downturn] could adversely affect consumer confidence and spending patterns which could result in decreased demand for the products we sell, a delay in purchases, increased price competition, or slower adoption of energy-efficient water heaters and boilers, or [removed: high quality] [added: high-quality] water treatment products, which could negatively impact our profitability and cash flows.

[removed: In addition, a deterioration in current economic conditions due to many factors] or [removed: fears including public health crises, such as the current coronavirus concerns originating in China,] [added: political instability,] could negatively impact our vendors and customers, which could result in an increase in bad debt expense, customer and vendor bankruptcies, interruption or delay in supply of materials, or increased material prices, which could negatively impact our ability to distribute, market and sell our products and our financial condition, results of operations and cash flows.

Our sales in China decreased in [removed: 2019] [added: 2020] compared to [removed: 2018 and 2017.][added: 2019.]

Changes in consumer [removed: preferences,] [added: preferences and purchasing behaviors including preferences for e-commerce,] weakening consumer confidence and sentiment as well as economic uncertainty, [removed: including] [added: socio-political risks, increased competition from Chinese based companies, and] the [removed: unknown] [added: potential future] impact [removed: from] [added: of] the [removed: coronavirus,] [added: COVID-19 pandemic,] may prompt [added: Chinese] consumers [removed: there] to postpone purchases, choose lower-priced products or different alternatives, or lengthen the cycle of replacement purchases.

[removed: | | • | Because] [added: *■Because] we participate in markets that are highly competitive, our revenues and earnings could decline as we respond to [removed: competition |][added: competition*]

Further expansion of the gas tankless portion of the North America market, which we believe was approximately [removed: nine] [added: ten] percent of the residential market segment in [removed: 2019,] [added: 2020,] could have an impact on our operating results.

[removed: | | • | Our] [added: *■Our] business could be adversely impacted by changes in consumer purchasing behavior, consumer preferences and technological [removed: changes |][added: changes*]

Consumer purchasing behavior may shift the product mix in the markets we participate in or result in a shift to new distribution channels, including [added: e-commerce, which continues to expand.]

For example, consumer preferences may shift toward more efficient gas products or electric powered products due to the increased attention on the impact of greenhouse gas emissions on the [removed: environment.][added: environment in response to utility incentive programs, or the emergence of state or federal incentives.]

[removed: | | • | The] [added: *■The] occurrence or threat of extraordinary events, including natural disasters, political disruptions, terrorist attacks, public health issues, and acts of war, could significantly disrupt production, or impact consumer [removed: spending |][added: spending*]

As a global company with a large international footprint, we are subject to increased risk of damage or disruption to [removed: us,] [added: us and] our employees, facilities, suppliers, distributors, or customers.

Extraordinary events, including natural disasters, political disruptions, terrorist attacks, public health issues, [added: such as the current COVID-19 pandemic,] and acts of war may disrupt our business and [removed: operations,] [added: operations and] impact our supply chain and access to necessary raw materials or could adversely affect the economy generally, resulting in a loss of sales and customers.

[removed: In addition,] these types of events also could negatively impact consumer spending in the impacted regions or depending on the severity, globally, which could materially and adversely affect our financial condition, results of operations and cash flows.

[removed: | | • | We] [added: *■We] sell our products and operate outside the U.S., and to a lesser extent, rely on imports and exports, which may present additional risks to our [removed: business |][added: business*]

Approximately [removed: 36] [added: 33] percent of our net sales in [removed: 2019] [added: 2020] were attributable to products sold outside of the U.S., primarily in China and Canada, and to a lesser extent in Europe and India.

Approximately [removed: 8,800] [added: 7,500] of our [removed: 15,100] [added: 13,900] employees as of December 31, [removed: 2019] [added: 2020] were located in China.

At December 31, [removed: 2019,] [added: 2020,] approximately [removed: $549] [added: $524] million of cash and marketable securities were held by our foreign subsidiaries, substantially all of which were located in China.

[removed: | | • | A] [added: *■A] material loss, cancellation, reduction, or delay in purchases by one or more of our largest customers could harm our [removed: business |][added: business*]

Net sales to our five largest customers represented approximately [removed: 39] [added: 43] percent of our sales in [removed: 2019.][added: 2020.]

[removed: | | • | A] [added: *■A] portion of our business could be adversely affected by a decline in North American new residential [removed: and] [added: construction further decline in] commercial construction or a decline in replacement related volume [removed: |][added: of water heaters and boilers*]

Residential [removed: and commercial] [added: new] construction activity in North America [removed: has] [added: and industry-wide replacement-related volume of water heaters have] shown [removed: modest] growth which could decline in the future.

We believe that the significant majority of the markets we serve are for replacement of existing products, and residential water heater replacement volume was strong in [removed: 2017 and 2018 before declining in 2019.][added: 2020.]

[removed: | | • | Our] [added: *■Our] international operations are subject to risks related to foreign [removed: currencies |][added: currencies*]

We have a significant presence outside of the U.S., primarily in China and Canada and to a lesser extent Europe, Mexico, and India, and therefore, hold assets, including [removed: $443] [added: $385] million of cash and marketable securities denominated in Chinese renminbi, incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar.

As a result, an increase in the value of the U.S. dollar relative to the local currencies of our foreign markets has had and [removed: would continue to] [added: could] have a negative effect on our profitability.

[removed: | | • | Changes] [added: *■Changes] in regulations or standards could adversely affect our [removed: business |][added: business*]

[removed: While we believe our products are currently efficient, safe and environment-friendly, a] [added: A] significant change to regulatory requirements [removed: (whether federal, foreign, state or local) such as] [added: that promote] a transition to alternative energy sources as a replacement for [removed: gas combustion,] [added: gas,] or [removed: to] [added: a significant shift in] industry standards, could substantially increase manufacturing costs, impact the size and timing of demand for our products, affect the types of products we are able to offer or put us at a competitive disadvantage, any of which could harm our business and have a material adverse effect on our financial condition, results of operations and cash flow.

[removed: | | • | Our] [added: *■Our] business may be adversely impacted by product [removed: defects |][added: defects*]

[removed: | | • | Our] [added: *■Our] operations could be adversely impacted by material [added: and component] price volatility and [added: availability, as well as] supplier [removed: concentration |][added: concentration*]

The market prices for certain [removed: raw] materials [added: and components] we purchase, primarily steel, have been volatile.

Significant increases in the cost of any of the key materials [added: and components] we purchase could increase our cost of doing business and ultimately could lead to lower operating earnings if we are not able to recover these cost increases through price increases to our customers.

In [removed: addition, in] some [removed: cases] [added: cases,] we are dependent on a limited number of suppliers for some of the raw materials and components we require in the manufacturing of our products.

[removed: | | • | An] [added: *■An] inability to adequately maintain our information systems and their security, as well as to protect data and other confidential information, could adversely affect our business and [removed: reputation |][added: reputation*]

[added: In the ordinary course of business, we utilize information systems for day-to-day] operations, to collect and store sensitive data and information, including our proprietary and regulated business information and personally identifiable information of our customers, suppliers and business partners, as well as personally identifiable information about our employees.

Our information systems, like those of other companies, are susceptible to outages due to system failures, cybersecurity threats, failures on the part of third-party information system providers, natural disasters, power loss, telecommunications failures, viruses, fraud, theft, [added: malicious actors or breaches of security.]

However, any operations failure or breach of security [added: which are occurring with increasing frequency] from increasingly sophisticated cyber threats could lead to disruptions of our business activities, the loss or disclosure of both our and our customers’ financial, product and other confidential information and could result in regulatory [removed: actions] [added: actions, litigation] and have a material adverse effect on our financial condition, results of operations and cash flows and our reputation.

In the ordinary course of our business, we face various strategic, operating, compliance and financial risks.

These risks could have an impact on our business, financial condition, operating results and cash flows.

The risks set forth below are not an exhaustive list of potential risks but reflect those that we believe to be material.

Economic and Industry Risks

■*The global coronavirus (COVID-19) pandemic, or other global public health pandemics, could have a material adverse effect on our business, results of operations and financial condition*

Our business, results of operations and financial condition may be adversely affected if a global public health pandemic, including the current COVID-19 pandemic, interferes with the ability of our employees, suppliers, and customers to perform our and their respective responsibilities and obligations relative to the conduct of our business and operations.

The COVID-19 pandemic has significantly impacted economic activity and markets around the world, and it could have a material negative impact on our business and operations in numerous ways, including but not limited to those outlined below:

- The risk that we, or our employees, suppliers or customers may be prevented from conducting business activities for an indefinite period of time, including shutdowns that may be requested or mandated by governmental authorities.

- Restrictions on shipping products from certain jurisdictions where they are produced or into certain jurisdictions where customers are located.

- Inability to meet our customers’ needs and achieve cost targets due to increased logistics costs, longer shipment times, and disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements, such as raw materials or other finished product components, transportation, workforce or other manufacturing and distribution capability.

- Failure of third parties on which we rely, including our suppliers, distributors, contractors and commercial banks, to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, or mandated shutdowns by governmental authorities, may adversely impact our operations.

- Significant reductions in demand, particularly for our commercial products, or significant volatility in demand and a global economic recession that could further reduce demand for our products, resulting from actions taken by governments, businesses, and/or the general public in an effort to limit exposure to and spreading of such infectious diseases, such as travel restrictions, quarantines, and business shutdowns or slowdowns.

In addition, there is risk that the commercial sector, such as the restaurant and hospitality industries in which we have customers, will experience long-term shifts in consumer behavior which could negatively impact demand or capacity and may not return to pre-pandemic levels.

- Manufacturing plant inefficiencies due to safety and preventative health measures that we have implemented in our plants to prevent the spread of COVID-19.

- Deterioration of worldwide capital, credit, and financial markets that could limit our ability to obtain external financing to fund our operations and capital expenditures.

The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, results of operations and financial condition is highly uncertain and will depend on future developments.

Such developments may include the geographic spread and duration of the virus, the severity of the virus and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak.

In addition, we cannot predict how quickly, and to what extent, normal economic and operating conditions can resume, and the resumption of normal business operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on our suppliers, third-party service providers, and/or customers.

In addition, a deterioration in current economic conditions due to many factors or fears including public health crises

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■*Because approximately 24 percent of our net sales in 2020 were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business*

We believe the decrease was due to business closures and restrictions associated with the COVID-19 pandemic, weaker end-market demand, a higher sales mix of mid-price products versus premium price products and further reductions to previously elevated channel inventory levels.

In addition,

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Business, Operational, and Strategic Risks

Other customers may experience financial instability.

Further, a customer may be acquired by a customer of a competitor which could result in our loss of that customer.

Commercial construction activity in North America declined in 2020 after growing modestly in 2019.

In addition, some components are subject to long lead times.

We engage in ongoing communications with our suppliers to identify and mitigate risk of potential disruptions and to manage inventory levels.

Limited component availability and long lead times could make it difficult for us to meet customer demand.

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Legal, Regulatory, and Governance Risks

While we believe our products are

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currently efficient, safe and environment-friendly, federal, foreign, state and local governments are adopting laws, regulations and codes that will require a transition to non-fossil fuel based sources of energy production as well as significantly reducing or eliminating the on-site combustion of fossil fuels in the building sector, such as limiting or prohibiting the delivery of natural gas in new construction.

Certain members of the founding family of our company and trusts for

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10-K,

including the documents incorporated by reference, before making an investment decision regarding our common stock.

The risks and uncertainties below are not the only risks facing our company.

| --- | --- | --- |

| | • | A portion of our business could be affected by further weakening of the Chinese economy |

Approximately 28 percent of our net sales in 2019 were attributable to China.

We believe that decrease was due to weaker

end-market

demand as a result of a weakening Chinese economy, elevated channel inventory levels, and a higher mix of

mid-price

products versus premium price products.

e-commerce,

which continues to expand.

For example, a strain of coronavirus surfaced in Wuhan, China and has led to store closures and a decrease of consumer traffic in China.

While not yet quantifiable, we expect the effects of the coronavirus to have a material adverse impact on our operating results for the first quarter of 2020 and we continue to assess the financial impact for the remainder of 2020.

In the ordinary course of business, we utilize information systems for

day-to-day

malicious insiders or breaches of security.

non-U.S.

government, including but not limited to the Foreign Corrupt Practices Act and the U.S. Export Administration Act.

| | • | Our success is dependent on developing and retaining highly qualified personnel |

Attracting and retaining talented employees is important to the continued success and growth of our business.

Failure to retain key personnel, particularly on the leadership team, could have a material effect on our business and our ability to execute our business strategies in a timely and effective manner.

| | • | Sales growth of our boilers could stall resulting in lower than expected revenues and earnings |

The compound annual growth rate of our boiler sales has been approximately eight percent per year since our acquisition of Lochinvar in 2011, largely due to the transition in the boiler industry in the U.S. from lower efficiency,

non-condensing

boilers to higher efficiency, higher priced, condensing boilers, as well as new product introductions.

We expect the transition to condensing boilers to continue, but if the transition to higher efficiency, higher priced, condensing boilers stalls as a result of lower energy costs, a U.S. recession occurs, or our competitors’ technologies surpass our technology, our growth rate could be lower than expected and have a material adverse effect on our financial condition, results of operations and cash flows.

non-cash

charges to operating results for goodwill or indefinite-lived intangible asset impairments.

debt-to-capital

ratio required under our existing debt arrangements.

10-K.

one-third

of our board of directors.

Due to the differences in the voting rights between shares of our Common Stock

(one-tenth

ITEM

1B - UNRESOLVED STAFF COMMENTS

None.

[removed: OVERVIEW][added: OVERVIEW]

Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, [removed: tanks] [added: tanks,] and water treatment products.

Both segments primarily manufacture and market in their respective [removed: regions] [added: region] of the world.

We expect sales of [added: our] North America water treatment products to increase by [removed: 20] [added: 13] to [removed: 25] [added: 14] percent in [removed: 2020,] [added: 2021,] compared to [removed: 2019,] [added: 2020,] primarily [removed: due to volume growth] [added: driven by consumer demand for our point of use] and [removed: a full year] [added: point] of [removed: Water-Right sales.][added: entry water treatment systems.]

[removed: In our Rest of World segment, we] [added: We believe the Chinese economy will improve in 2021 and] expect [removed: 2020 China] [added: that] sales [removed: to grow] [added: in China will increase] by [removed: approximately one] [added: 20 to 21] percent in U.S. dollar terms and [removed: approximately 2.5] [added: 14 to 15] percent in local currency [removed: compared with 2019, as we believe the Chinese economy will continue to be weak.][added: terms.]

Combining all of these factors, we expect our consolidated sales to [removed: grow 4.5 to 5.5] [added: increase approximately ten] percent in [removed: 2020.][added: 2021.]

We will also continue to look for opportunities to add to our existing operations in high growth regions demonstrated by our introduction of water treatment products in India and Vietnam and [removed: air purification products as well as] range hoods and cooktops in China.

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

The decrease in 2019 sales was primarily due to a 23 percent decline in China sales in U.S. dollar terms, which was largely a result of weaker [added: end-market demand in the region, year over year channel inventory shifts, and a higher mix of sales of mid-price products versus premium price products than in the prior year.]

The sales reduction in China [added: in 2019 compared to 2018,] more than offset the benefits of higher sales in North America, which were primarily a result of higher sales of water treatment products, including incremental sales from our [added: Water-Right] acquisition, [removed: Water-Right,] and water heater pricing actions related to steel and freight cost increases.

The increase in North America sales [added: in 2019 compared to 2018,] was partially offset by lower residential water heater volumes.

The increase in sales in [added: 2019 compared to] 2018 was primarily due to [added: the incremental Water-Right sales of $44 million, water heater] pricing actions related to [removed: higher] steel [removed: costs] and [removed: higher sales of boilers] [added: freight cost increases,] and [removed: residential water heaters in the U.S. as well as] higher sales of water treatment [removed: products in China.][added: products, which were partially offset by lower residential water heater volumes.]

Our gross profit margin in 2019 of 39.5 percent declined compared to our gross profit margin of 41.0 percent in [removed: 2018] [added: 2018,] primarily due to the lower sales volumes in China and a higher mix of [added: mid-price products, which have lower margins, in that region.]

[removed: Selling, general and administrative (SG&A)] [added: SG&A] expenses were $715.6 million in 2019 or $38.2 million lower than in 2018.

The decrease in SG&A expenses in [added: both 2020 and] 2019 was primarily due to lower [removed: advertising and] selling [added: and advertising] expenses in China.

[added: As a result of the relocation of production, we incurred pre-tax] restructuring and impairment expenses of $6.7 million in the first quarter of 2018, primarily related to employee [removed: severance and compensation-related costs,] [added: severance,] building lease exit [removed: costs] [added: costs,] and the impairment of assets.

These activities are reflected in [removed: “restructuring] [added: "severance, restructuring,] and impairment [removed: expenses”] [added: expenses"] in the accompanying financial statements.

[added: We provide non-U.S.] Generally Accepted Accounting Principles (GAAP) measures (adjusted earnings, adjusted earnings per share, and adjusted segment earnings) that exclude [removed: restructuring] [added: severance, restructuring,] and impairment expenses.

Interest expense was [removed: $11.0] [added: $7.3] million in [removed: 2019] [added: 2020,] compared to [removed: $8.4] [added: $11.0] million in [removed: 2018] [added: 2019] and [removed: $10.1] [added: $8.4] million in [removed: 2017.][added: 2018.]

The increase in interest expense in 2019 [added: compared to 2018] was primarily due to higher debt levels [added: utilized] to fund the acquisition of Water-Right and share repurchase activity.

Other income was [removed: $18.0] [added: $11.0] million in [removed: 2019] [added: 2020] compared to [removed: $21.2] [added: $18.0] million in [removed: 2018] [added: 2019] and [removed: $21.3] [added: $21.2] million in [removed: 2017.][added: 2018.]

The decrease in other income in [removed: 2019] [added: 2020] compared to [removed: 2018] [added: 2019] was primarily due to lower [added: interest income.]

[removed: cost related] [added: The decrease in other income in 2019 compared to 2018 was primarily due to lower non-service cost-related] pension income and lower interest income.

Pension income in [removed: 2019] [added: 2020] was [removed: $6.2] [added: $5.1] million compared to [removed: $8.7] [added: $6.2] million in [removed: 2018] [added: 2019] and [removed: $9.1] [added: $8.7] million in [removed: 2017.][added: 2018.]

Our effective income tax rate was [removed: 21.6] [added: 22.3] percent in [removed: 2019,] [added: 2020,] compared with [removed: 20.4] [added: 21.6] percent in [removed: 2018] [added: 2019] and [removed: 43.1] [added: 20.4] percent in [removed: 2017.][added: 2018.]

Our effective income tax rate in [added: 2020 and] 2019 was higher [removed: than 2018] [added: compared to the prior years] primarily due to a change in geographic earnings mix.

[removed: North America][added: North America]

Sales in our North America segment were [removed: $2,045] [added: $2,118] million in [removed: 2018] [added: 2020] or [removed: $140] [added: $34] million higher than sales of [removed: $1,905] [added: $2,084] million in [removed: 2017.][added: 2019.]

North America segment earnings were [removed: $488.9] [added: $503.5] million in [removed: 2019] [added: 2020] compared to segment earnings of [removed: $464.1] [added: $488.9] million and [removed: $428.6] [added: $464.1] million in [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Segment margins were [removed: 23.5] [added: 23.8] percent, [removed: 22.7] [added: 23.5] percent and [removed: 22.5] [added: 22.7] percent in [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] respectively.

Adjusted segment earnings and [added: adjusted] segment [removed: margin in 2018,] [added: margin,] which exclude [removed: restructuring] [added: severance, restructuring,] and impairment expenses, were [added: $506.2 million and 23.9 percent, respectively, in 2020, and] $470.8 million and 23.0 percent, [removed: respectively.][added: respectively, in 2018.]

The higher segment earnings and segment margin in 2019 compared to 2018 adjusted segment earnings and adjusted segment margin were primarily a result of pricing actions, lower steel costs, and higher sales of water treatment products, [removed: that included] [added: including] incremental volumes from our acquisition, Water-Right.

We estimate our [removed: 2020] [added: 2021] North America segment margin will be between [removed: 23.25] [added: 23] and [removed: 24.25] [added: 23.5] percent.

[removed: Rest] [added: Rest] of [removed: World][added: World]

Lower sales in 2019 compared to 2018 [removed: was] [added: were] largely a result of decreased China [removed: sales] [added: sales,] which declined 23 percent in U.S. dollar terms and 19 percent in local currency terms.

[added: The decline in China sales was primarily due to weaker end-market] demand, elevated channel inventory levels for the first three quarters of 2019 that returned to a more normal range of two to three months by the end of 2019, and a higher mix of [added: mid-price products versus premium-priced products.]

In addition, the weaker Chinese currency [added: unfavorably impacted translated sales by approximately $39 million.]

[added: The] Rest of World segment [removed: earnings were $40.2 million] [added: was breakeven] in [removed: 2019] [added: 2020] compared to segment earnings of [added: $40.2 million and] $149.3 million in [removed: both 2018] [added: 2019] and [removed: 2017.][added: 2018, respectively.]

Segment margins were 4.3 percent [removed: in 2019 compared to 12.7 percent] and [removed: 13.4] [added: 12.7] percent in [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

The decline in 2019 segment earnings and margin compared to 2018 was primarily due to lower sales in China and a higher mix of [added: mid-price products, which have lower margins, that when combined, more than offset benefits to profits from lower SG&A expenses and material costs in that region.]

In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in Wuhan, China.

As a result of the outbreak, the Chinese government required businesses to close and restricted certain travel within the country.

In cooperation with the government authorities, our operations in China closed for approximately four weeks before resuming production before the end of the first quarter.

In March 2020, COVID-19 was declared a global pandemic and we experienced impacts to our business and other markets worldwide.

To date, our global manufacturing operations of essential water heating and water treatment products continue without material disruption to our operations.

As a result of the COVID-19 pandemic and in support of continuing our manufacturing efforts, we have undertaken numerous and meaningful steps to protect our employees, suppliers, and customers.

These important steps, which in certain cases reduce efficiency, include continuous communication and training to our employees on living and working safely in a COVID-19 environment, plant accommodations and reconfigurations to maintain social distancing, masks for all employees, implementation of sanitizing stations, temperature taking and regular, proactive deep cleaning and sanitization of our facilities, among others.

As we receive guidance from governmental authorities, we adjust our safety measures to meet or exceed those guidelines.

The majority of our customers in the U.S. are also deemed essential under Cybersecurity and Infrastructure Security Agency (CISA) guidance and are operating their businesses under varying state and local governmental guidance.

Our global supply chain management team continues to monitor and manage our ability to operate effectively during the COVID-19 pandemic.

To date, we have not seen any material disruptions to our supply chain, although we have seen an increase in logistics costs and shipment times as a result of pandemic-related capacity reductions.

Ongoing communications with our suppliers to identify and mitigate risk of potential disruptions and to manage inventory levels continue.

Our U.S. water heater manufacturing lead times, which were extended in the second and third quarters due to self-quarantine absenteeism mandated by our COVID-19 prevention measures, stabilized in the fourth quarter of 2020 as a result of adding manufacturing shifts, hiring temporary workers and shifting some production.

While we believe our balance sheet and capital position are strong, proactive management of discretionary spending and cost structure will continue.

On May 1, 2020, the members of our Board of Directors voluntarily reduced the cash component of their board compensation by 25 percent and our chairman and chief executive officer (CEO) voluntarily reduced his base salary by 25 percent.

Our CEO’s staff, which includes our other named executive officers, also volunteered a 15 percent reduction in base salary.

Full compensation of our Board of Directors, our CEO and our CEO’s staff was reinstated on October 1, 2020.

We estimate that between 80 to 85 percent of our water heater and boiler units sold in the U.S. relate to replacement business.

While we expect that our replacement business in both water heating and boilers will provide a buffer in any economic downturn resulting from COVID-19 in a similar manner to what we have seen historically, the impacts of the pandemic on consumer spending are difficult to predict.

In our North America segment, we expect industry residential water heater volumes will be down approximately two percent in 2021 compared with 2020, which is driven by our belief that customers may have added inventory in 2020 due to industry extended lead times.

We believe that some de-stocking by our customers will occur in early 2021 as our lead times have improved and continue to improve.

We believe that commercial water heater industry volumes will further decline approximately four percent in 2021 as COVID-19 pandemic-impacted businesses delay or defer new construction and discretionary replacement installations.

We expect to see a mid-single digit increase to our boiler sales in 2021 compared to 2020 due to industry growth of three to four percent driven by pandemic-related pent up demand as well as our new product introductions.

In our Rest of World segment, we expect China sales in 2021 to increase 14 to 15 percent in local currency compared with 2020 due to increased consumer demand.

We assume China currency rates will stay at current levels and which would add approximately $47 million and $3 million to sales and earnings in 2021, respectively.

In addition, we project that our mix of products sold in China is shifting to more mid-price range products from our historical mix of higher priced products.

We also continue to focus on aligning our cost structure in China through headcount reductions, store closures, cuts in advertising

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and other cost saving measures.

Our 2020 headcount reductions and restructuring actions we took were largely completed as of the end of the third quarter of 2020.

Our guidance excludes the potential impacts from future acquisitions and assumes the conditions of our business environment and that of our suppliers and customers are similar in 2021 to what we are experienced in recent months and does not deteriorate as a result of further restrictions or shutdowns due to the COVID-19 pandemic.

Our sales in 2020 were $2,895 million, a decline of 3.3 percent compared to our 2019 sales of $2,993 million.

Compared to 2019, our sales decline in 2020 was primarily driven by lower sales in China and lower commercial water heater volumes, and reduced boiler sales in North America.

The decreased sales in 2020 compared to the prior year more than offset higher water treatment volumes including incremental sales of $16 million from Water-Right, acquired on April 8, 2019 and higher residential water heater volumes in North America.

In addition, our sales in China were favorably impacted by currency translation of approximately $9 million in 2020 compared to 2019, due to the appreciation of the Chinese currency compared to the U.S. dollar.

Our gross profit margin in 2020 of 38.3 percent declined compared to our gross profit margin of 39.5 percent in 2019 primarily due to the lower sales volumes.

Selling, general, and administrative (SG&A) expenses were $660.3 million in 2020 or $55.3 million lower than 2019.

To align our business to current market conditions, we recognized $7.7 million of pre-tax severance and restructuring expenses in 2020.

Charges recognized were comprised of $6.8 million severance costs and $0.9 million of other restructuring expenses.

The decrease in interest expense in 2020 was primarily due to lower debt levels and lower interest rates than the prior year.

Our Rest of World segment also manufactures and markets

in-home

air purification products in China.

In our North America segment, we project our sales in the U.S. will grow approximately six percent in 2020 compared to 2019 due to higher water heater and boiler volumes resulting from expected industry-wide new construction growth and expansion of replacement demand.

We continued to expand our North America water treatment platform in 2019 by acquiring Water-Right, Inc. and its affiliated entities (Water-Right) in April 2019.

In addition, we expect our sales in India to grow between 15 and 20 percent in 2020 from approximately $39 million in 2019.

Our 2020 guidance introduced on January 28, 2020, excludes the potential impact to our businesses from the coronavirus originating in China.

As of the date of this filing, while not yet quantifiable, we now expect the coronavirus will have a material adverse impact on our operating results in the first quarter of 2020 and we continue to assess the financial impact for the remainder of 2020.

end-market

demand in the region, year over year channel inventory shifts, and a higher mix of sales of

mid-price

products versus premium price products than in the prior year.

Our sales in 2018 were a company record $3,188 million surpassing 2017 sales of $2,997 million by 6.4 percent.

Our global water treatment sales grew to approximately $400 million in 2018.

Total sales in China grew four percent in 2018.

Excluding the impact of the appreciation of the Chinese currency against the U.S. dollar, our sales in China increased almost two percent in 2018.

products, which have lower margins, in that region.

Our gross profit margin in 2018 of 41.0 percent was essentially flat compared to our gross profit margin of 41.1 percent in 2017.

SG&A expenses were $31.0 million higher in 2018 than in 2017.

The increase in SG&A expenses in 2018 to $753.8 million was primarily due to higher advertising expenses related to brand building and higher product development engineering expenses in China.

As a result of the relocation of production, we incurred

pre-tax

We are providing

non-U.S.

The decline in interest expense in 2018 compared to 2017 was a result of lower debt levels, primarily due to the repatriation of approximately $312 million of cash from outside of the U.S, which was primarily used to pay down floating rate debt, as well as to fund our share repurchase activity and dividend payments.

This decline was partially offset by higher interest rates in 2018.

non-service

Our effective income tax rates in 2019 and 2018 were lower than our adjusted effective income tax rate in 2017 due to lower federal income taxes related to the U.S. Tax Cuts and Jobs Act of 2017 (U.S. Tax Reform).

The effective income tax rate in 2017 was significantly higher due to

one-time

charges associated with U.S. Tax Reform of $81.8 million, primarily related to the mandatory repatriation tax on undistributed foreign earnings that we are required to pay over eight years.

Excluding the impact of the U.S. Tax Reform

charges, our adjusted effective income tax rate was 27.4 percent in 2017.

We estimate our annual effective income tax rate for the full year 2020 will be approximately 21.5 to 22.0 percent.

The increase in segment sales was primarily due to the incremental Water-Right sales of $44 million, water heater pricing actions related to steel and freight cost increases, and higher sales of water treatment products, which were partially offset by lower residential water heater volumes.

The increase in sales in 2018 compared to 2017 was primarily due to pricing actions related to higher steel costs and higher volumes of boilers and residential water heaters in the U.S. North America water treatment sales, including a full year of sales from Hague, which we purchased in 2017, and the launch of products at Lowe’s commencing in August 2018, incrementally added approximately $29 million of sales in 2018.

The higher adjusted segment earnings and adjusted segment margin in 2018 compared to 2017 were primarily due to the favorable impact from higher sales of residential water heaters and boilers and pricing actions in the U.S. that were partially offset by higher steel costs and

expenses associated with the launch of water treatment products at Lowe’s.

The decline in China sales was primarily due to weaker

products versus premium priced products.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

[removed: NORTH AMERICA][added: NORTH AMERICA]

[removed: Water heaters][added: *Water heaters*.]

Our residential and commercial water heaters come in sizes ranging from 2.5 gallon [added: (point-of-use) models to 2,500 gallon products with varying efficiency ranges.]

Typical applications for our water heaters include residences, restaurants, hotels and motels, office buildings, laundries, car [removed: washes] [added: washes, schools] and small businesses.

[added: *Boilers.*] Our residential and commercial boilers range in size from 45,000 British Thermal Units (BTUs) to 6.0 million BTUs.

[added: *Water treatment products.*] With the acquisition of Aquasana, Inc. (Aquasana) in 2016 we entered the water treatment market.

[added: Our] water [added: treatment products range from point-of-entry water] softeners, solutions for problem well water, and whole-home water filtration products to [added: on-the-go filtration bottles and point-of-use carbon and reverse osmosis products.]

[added: *Other.*] In our North America segment, we also manufacture expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, related products and parts.

We believe we are the largest manufacturer and marketer of water heaters in North America with a leading share in both the residential and commercial [removed: markets.][added: portions of the market.]

In the commercial [removed: markets] [added: portions of the market] for both water heating and space heating, we believe our comprehensive product lines and our high-efficiency products give us a competitive [removed: advantage in these portions of the markets.][added: advantage.]

Our wholesale distribution channel, where we sell our products primarily under the A. O. Smith and State brands, includes more than [removed: 1,300] [added: 1,200] independent wholesale plumbing distributors serving residential and commercial end markets.

Our Lochinvar brand is one of the leading residential and commercial boiler brands in the U.S. Approximately 40 percent of Lochinvar branded sales consist of residential and commercial water heaters while the remaining 60 percent of [removed: Lochinvar-branded] [added: Lochinvar branded] sales consist primarily of boilers and related parts.

We sell our Aquasana branded products primarily directly to consumers through [added: e-commerce as well as on-line retailers including Amazon and through other retail chains.]

Our A. O. Smith branded water treatment products are sold through [removed: Lowe’s] [added: Lowe’s, Amazon,] and our wholesale distribution channels.

Our commercial water heaters and our condensing boilers continue to be an option for commercial customers looking for [removed: high efficiency] [added: high-efficiency] water and space heating with a short payback period through energy savings.

We sell our [removed: water heating] products in highly competitive markets.

Our principal water treatment competitors in the U.S. are [removed: Brita,] Culligan, Kinetico, Pentair and Ecowater as well as numerous regional assemblers.

[removed: REST] [added: REST] OF [removed: WORLD][added: WORLD]

We have operated in China for more than [removed: 20] [added: 25] years.

In that time, we have [removed: been aggressively expanding our presence while building] [added: established] A. O. Smith brand recognition in the residential and commercial markets.

We also manufacture and market air purification products as well as [added: design and market] range hoods and cooktops in China.

We sell [removed: water heaters] [added: our products] in [added: over 13,000 points of sale in China,] approximately [removed: 9,000] [added: 6,400 are] retail outlets in [removed: China,] [added: tier one and tier two cities] of which over [removed: 2,600] [added: 2,000] exclusively sell our products.

Our primary competitors in China in the [removed: electric] water heater market segment are Haier and Midea, which are Chinese [removed: companies.][added: companies, as well as Rinnai.]

Our principal competitors in the water treatment market are [removed: Qinyuan,] Angel, [removed: Midea] [added: Midea, Truliva,] and Xiaomi.

In India, we compete with [added: Racold,] Bajaj and [removed: Havels] [added: Havells] in the water heater market and Eureka Forbes, Kent and Hindustan Unilever in the water treatment market.

In addition, we sell water heaters in the European and Middle Eastern markets and water treatment products in Hong Kong, Turkey and Vietnam, all of which combined comprised less than [removed: eight] [added: 13] percent of total Rest of World sales in [removed: 2019.][added: 2020.]

[removed: RAW MATERIALS][added: RAW MATERIALS]

Raw materials for our manufacturing operations, primarily consisting of steel, are generally available in adequate [removed: quantities.][added: quantities, however the current COVID-19 pandemic has periodically stressed the availability of certain raw materials.]

There has been volatility in steel costs over the last several [removed: years.][added: years, including an increase in steel costs in the second half of 2020.]

[removed: RESEARCH] [added: RESEARCH] AND [removed: DEVELOPMENT][added: DEVELOPMENT]

To improve our competitiveness by generating new products and processes, we conduct research and development at our [removed: newly constructed] Corporate Technology Center in Milwaukee, Wisconsin, our Global Engineering Center in Nanjing, China, and our operating locations.

Our total expenditures for research and development in [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] were [removed: $87.9] [added: $80.7] million, [removed: $94.0] [added: $87.9] million and [removed: $86.4] [added: $94.0] million, respectively.

[removed: PATENTS] [added: PATENTS] AND [removed: TRADEMARKS][added: TRADEMARKS]

We employed approximately [removed: 15,100] [added: 13,900] employees as of December 31, [removed: 2019,] [added: 2020,] primarily [added: non-union.]

[removed: BACKLOG][added: BACKLOG]

[removed: Our operations are governed by a variety of] [added: Whether at the] federal, [removed: foreign, state and] [added: state, or] local [added: level, these] laws [added: are] intended to [added: improve energy efficiency and product safety, and] protect [added: public health and] the environment.

Compliance with [added: government regulations and] environmental laws has not had and is not expected to have a material effect upon the capital expenditures, earnings, or competitive position of our company.

[removed: AVAILABLE INFORMATION][added: AVAILABLE INFORMATION]

The information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form [added: 10-K.]

Other than an investor’s own internet access charges, we make available free of charge through our website our Annual Report on Form [added: 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports as soon as reasonably practical after we have electronically filed such material with, or furnished such material to, the Securities and Exchange Commission (SEC).]

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

We also sell our products through e-commerce channels.

HUMAN CAPITAL

We have a set of values for conducting our business and interacting with our employees as outlined in the A. O. Smith Corporation Guiding Principles.

These principles help to shape how we hire, train and treat our employees.

We believe that the critical elements of the effort to retain and develop talent are employee engagement, talent development, a focus on employee safety, and market competitive compensation.

We conduct a Global Employee Engagement Survey on a biannual basis.

This third-party-managed survey measures employees' level of engagement against external norms and provides us with actionable feedback that drives improvement priorities.

Survey participation in 2020 was 96 percent, which we believe indicates our employees' willingness to share their perspectives and a commitment to continuous improvement.

We provide all employees with a wide range of professional development experiences, both formal and informal.

Some of the formal development programs that employees have access to include early-career leadership development programs, continuous improvement skill-building programs, and tuition reimbursement for degree programs or trade schools.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

It is expected that managers work closely with their employees to ensure performance feedback and development discussions take place on a regular basis.

The safety of our people is always at the forefront of what we do.

We provide safety training in our production facilities, designed to empower our employees with the knowledge and tools they need to make safe choices and mitigate risks.

In addition to traditional training, we use standardized signage and visual management throughout our facilities.

Since 1954, we have awarded annually the Lloyd B.

Smith President's Safety Award, which acknowledges an A. O. Smith facility that demonstrates the most improvement over one year in the area of workplace safety.

Specific to the COVID-19 pandemic, we have undertaken numerous and meaningful steps to protect our employees, suppliers, and customers.

See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K for additional information.

We provide what we believe is a robust total compensation program designed to be market-competitive and internally equitable to attract, retain, motivate and reward a high-performance workforce.

Regular internal and external analysis is performed to ensure this market alignment.

In addition to salaries, these programs, which vary by country, can include annual bonuses, stock-based compensation awards, retirement plans with employee matching opportunities, and other benefits.

GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS

Our operations, including the manufacture, packaging, labeling, storage, distribution, advertising and sale of our products, are subject to various federal, state, local and foreign laws and regulations.

In the U.S., many of our products are regulated by the Department of Energy, the Consumer Product Safety Commission, and the Federal Trade Commission.

State and local governments, through laws, regulations, and building codes, also regulate our water heating and water treatment products.

Similar laws and regulations have been adopted by government authorities in other countries in which we manufacture, distribute, and sell our products.

In addition, our operations are subject to federal, state and local environmental laws.

We are subject to regulations of the U.S. Environmental Protection Agency and the Occupational Health and Safety Administration and their counterpart state agencies.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

\- BUSINESS

Our Rest of World segment also manufactures and markets

in-home

air purification products in China.

(point-of-use)

models to 4,000 gallon products with varying efficiency ranges.

Boilers.

Water treatment products.

Our water treatment products range from

point-of-entry

on-the-go

filtration bottles and

point-of-use

carbon and reverse osmosis products.

A portion of our sales of water treatment products is comprised of replacement filters.

Other.

e-commerce

as well as

on-line

retailers including Amazon and through other retail chains.

Our water treatment products and air purification products are sold in over 8,100 and 3,300 retail outlets in China, respectively.

We compete with Rinnai and Noritz in the gas tankless water heater market segment.

Our principal competitors in the China air purification market are Phillips, Panasonic and Sharp.

EMPLOYEES

non-union.

ENVIRONMENTAL LAWS

10-K.

10-K,

quarterly reports on Form

10-Q,

current reports on Form

8-K

and amendments to these reports as soon as reasonably practical after we have electronically filed such material with, or furnished such material to, the Securities and Exchange Commission (SEC).

To further demonstrate our commitment, in 2019, our company appointed Patricia K.

Ackerman, to the role of Senior Vice President, Investor Relations, Treasurer, and Corporate Responsibility and Sustainability with specific responsibility for our CRS efforts.

We are involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of our business involving product liability, property damage, insurance coverage, exposure to asbestos and other substances, patents and environmental matters, including the disposal of hazardous waste.

Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, we believe, based on past experience, adequate reserves and insurance availability, that these unresolved legal actions will not have a material effect on our financial position or results of operations.

A more detailed discussion of certain of these matters appears in Note 16 of Notes to Consolidated Financial Statements.

On May 28, 2019, a putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of Wisconsin against the Company and certain of its current or former officers.

Subsequently, on November 22, 2019, a consolidated amended complaint was filed by the lead plaintiff.

This action, captioned as City of Birmingham Retirement and Relief System v.

A. O. Smith Corporation, et al., asserted securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and sought damages and other relief based upon the allegations in the complaint.

On January 24, 2020, A. O. Smith and the other defendants moved to dismiss the consolidated amended complaint

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

for failure to state a claim.

On June 24, 2020, the U.S. District Court granted defendants’ motion to dismiss in its entirety.

Based on its June 24, 2020 order, on August 3, 2020, the District Court entered final judgement for the defendants and dismissed the lawsuit.

A shareholder derivative lawsuit, captioned as Pierce v.

A. O. Smith Corporation, et al.

and based on similar allegations as the putative class action, was filed on August 20, 2019, also in the U.S. District Court for the Eastern District of Wisconsin.

On November 6, 2019, the plaintiff in the derivative action moved to dismiss his lawsuit, and the plaintiff re-filed it in the U.S. District Court for the District of Delaware on November 12, 2019.

The derivative action asserted claims under Sections 14(a) and 20(a) of the Exchange Act, as well as for breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and sought damages and other relief based upon the allegations in the complaint.

On February 12, 2020, the parties filed a stipulation seeking to stay the derivative lawsuit pending resolution of the City of Birmingham lawsuit.

On February 13, 2020, a second shareholder derivative suit, captioned as Jarozewski v.

A. O. Smith Corporation, et al., was filed in the U.S. District Court for the District of Delaware, to assert claims under Sections 10(b), 14(a) and 20(a) of the Exchange Act, as well as for breach of fiduciary duty, unjust enrichment, and insider trading, and sought damages and other relief based upon the allegations in the complaint.

On April 1, 2020, the U.S. District Court for the District of Delaware, upon a joint stipulation filed by the parties, consolidated both the Pierce and Jarozewski derivative lawsuits and stayed the consolidated actions pending resolution of the City of Birmingham lawsuit.

On October 7, 2020, following dismissal of the City of Birmingham lawsuit and upon a joint stipulation filed by the parties, the District Court dismissed the consolidated derivative lawsuits.

A. O. Smith and the other defendants paid no settlement consideration to achieve these dismissals.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM][added: FORM 10-K]

| ☒ | [removed: ANNUAL] [added: | | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | |]

For the fiscal year ended December 31, [removed: 2019][added: 2020]

| ☐ | [removed: TRANSITION] [added: | | TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | |]

For the transition period from [added: to]

Commission File Number [added: 1-475]

[removed: A.] [added: A.] O. Smith [removed: Corporation][added: Corporation]

[removed: | Delaware | | 39-0619790 |][added: Delaware]

[removed: | (State of Incorporation) | |] (I.R.S. Employer Identification No.) [removed: |]

[removed: |] 11270 West Park Place, Milwaukee, Wisconsin [removed: | | 53224-9508 |]

[removed: |] (Address of Principal Executive Office) [removed: | | (Zip Code) |]

[added: (414)] 359-4000

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | | [removed: Shares] [added: | | | | Shares] of Stock Outstanding January [removed: 31, 2020] [added: 29, 2021] | | [removed: Name] [added: | | | | Name] of Each Exchange on Which [removed: Registered] [added: Registered] | [added: | |]

| Class A Common Stock (par value $5.00 per share) | | [removed: 26,044,733] | | [added: | | 26,034,457 | | | | | |] Not listed | [added: | |]

| Common Stock (par value $1.00 per share) | | [removed: 135,926,301] | | [added: | | 135,747,632 | | | | | |] New York Stock Exchange | [added: | |]

[added: ☒] Yes [added: ¨ No]

[added: ☒ Yes ¨] No.

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation [added: S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).]

[added: Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K] (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form [added: 10-K or any amendment to this Form 10-K.]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a [added: non-accelerated filer or a smaller reporting company, or emerging growth company.]

[added: | Large accelerated] filer [removed: or a smaller reporting company, or emerging] [added: | | | ☒ | | | Accelerated filer | | | ☐ | | | Emerging] growth [removed: company.][added: company | | | ☐ | | |]

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule [added: 12b-2 of the Exchange Act.]

| Non-accelerated filer | | [added: |] ☐ | | [added: |] Smaller reporting company | | [added: |] ☐ | [added: | | | | | | | |]

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

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

| [removed: |] 1. | [added: | |] Portions of the company’s definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of the registrant’s fiscal year and, upon such filing, to be incorporated by reference in Part III). | [added: | |]

[removed: Table] [added: [Table] of [removed: Contents][added: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)]

[removed: Index] [added: Index] to Form [added: 10-K]

[removed: Year] [added: Year] Ended December 31, [removed: 2019][added: 2020]

| | | | | [removed: Page] | | [added: Page] | [added: | |]

[removed: | [Part I](#tx846284_1) | | | | | | |][added: PART 1]

| [removed: Item 1.] [added: [Item 1.](#i676b45a27cba4e218c06e3ebb543b54c_13)] | | [removed: [Business](#tx846284_2)] | [added: [Business](#i676b45a27cba4e218c06e3ebb543b54c_13)] | | [removed: 1] | [added: [3](#i676b45a27cba4e218c06e3ebb543b54c_13)] | [added: | |]

| [removed: Item 1A.] [added: [Item 1A.](#i676b45a27cba4e218c06e3ebb543b54c_16)] | | [added: |] [Risk [removed: Factors](#tx846284_3)] [added: Factors](#i676b45a27cba4e218c06e3ebb543b54c_16)] | | | [removed: 4] [added: [6](#i676b45a27cba4e218c06e3ebb543b54c_16)] | | [added: |]

| [removed: Item 1B.] [added: [Item 1B.](#i676b45a27cba4e218c06e3ebb543b54c_19)] | | [added: |] [Unresolved Staff [removed: Comments](#tx846284_4)] [added: Comments](#i676b45a27cba4e218c06e3ebb543b54c_19)] | | | [removed: 9] [added: [11](#i676b45a27cba4e218c06e3ebb543b54c_19)] | | [added: |]

| [removed: Item 2.] [added: [Item 2.](#i676b45a27cba4e218c06e3ebb543b54c_22)] | | [removed: [Properties](#tx846284_5)] | [added: [Properties](#i676b45a27cba4e218c06e3ebb543b54c_22)] | | [removed: 9] | [added: [11](#i676b45a27cba4e218c06e3ebb543b54c_22)] | [added: | |]

| [removed: Item 3.] [added: [Item 3.](#i676b45a27cba4e218c06e3ebb543b54c_25)] | | [added: |] [Legal [removed: Proceedings](#tx846284_6)] [added: Proceedings](#i676b45a27cba4e218c06e3ebb543b54c_25)] | | | [removed: 9] [added: [11](#i676b45a27cba4e218c06e3ebb543b54c_25)] | | [added: |]

| [removed: Item 4.] [added: [Item 4.](#i676b45a27cba4e218c06e3ebb543b54c_28)] | | [added: |] [Mine Safety [removed: Disclosures](#tx846284_7)] [added: Disclosures](#i676b45a27cba4e218c06e3ebb543b54c_28)] | | | [removed: 9] [added: [12](#i676b45a27cba4e218c06e3ebb543b54c_28)] | | [added: |]

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OR

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(State of Incorporation)

39-0619790

53224-9508

(Zip Code)

| | | | | | | | | | | | | | | |

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¨ Yes ☒ No

☒ Yes ¨ No

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒

The aggregate market value of voting stock held by non-affiliates of the registrant was $42,461,387 for Class A Common Stock and $6,241,019,639 for Common Stock as of June 30, 2020.

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| [Part II](#i676b45a27cba4e218c06e3ebb543b54c_31) | | | | | | | | |

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10-K

| --- | --- |

OR

to

1-475

| | | |

| --- | --- | --- |

(414)

| | | | | |

| --- | --- | --- | --- | --- |

No

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation

S-K

or any amendment to this Form

10-K.

non-accelerated

12b-2

of the Exchange Act.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |

| | | | | Emerging growth company | | ☐ |

of the Act.)

The aggregate market value of voting stock held by

non-affiliates

of the registrant was $42,999,781 for Class A Common Stock and $6,432,921,438 for Common Stock as of June 30, 2019.

| [Part II](#tx846284_8) | | | | | | |

| [Part IV](#tx846284_23) | | | | | | |

None.

Properties utilized by us at December 31, 2020 were as follows:

North America

In this segment, we have 16 manufacturing plants located in eight states and two non-U.S. countries, of which 14 are owned directly by us or our subsidiaries and two are leased from outside parties.

The terms of leases in effect at December 31, 2020 expire between 2021 and 2025.

Rest of World

In this segment, we have six manufacturing plants located in four non-U.S. countries, of which four are owned directly by us or our subsidiaries and two are leased from outside parties.

The terms of leases in effect at December 31, 2020 expire between 2022 and 2025.

Corporate and General

We consider our plants and other physical properties to be suitable, adequate, and of sufficient productive capacity to meet the requirements of our business.

The manufacturing plants operate at varying levels of utilization depending on the type of operation and market conditions.

The executive offices of the company, which are leased, are located in Milwaukee, Wisconsin.

Not applicable.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

EXECUTIVE OFFICERS OF THE COMPANY

Pursuant to General Instruction of G(3) of Form 10-K, the following is a list of our executive officers which is included as an unnumbered Item in Part I of this report in lieu of being included in our Proxy Statement for our 2021 Annual Meeting of Stockholders.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Name (Age) | | | | | | Positions Held | | | | | | Period Position Was Held | | |

| Patricia K. Ackerman (60) | | | | | | Senior Vice President – Investor Relations, Treasurer and Corporate Responsibility and Sustainability | | | | | | 2019 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | Vice President – Investor Relations & Treasurer | | | | | | 2008 to 2018 | | |

| | | | | | | | | | | | | | | |

| | | | | | | Vice President and Treasurer | | | | | | 2006 to 2008 | | |

| | | | | | | | | | | | | | | |

| | | | | | | Assistant Treasurer | | | | | | 1995 to 2006 | | |

| | | | | | | | | | | | | | | |

| Paul R. Dana (58) | | | | | | Senior Vice President – Global Operations | | | | | | 2019 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | Senior Vice President – Global Manufacturing | | | | | | 2016 to 2018 | | |

| | | | | | | | | | | | | | | |

| | | | | | | Vice President – Global Manufacturing | | | | | | 2015 | | |

| | | | | | | | | | | | | | | |

| | | | | | | President – APCOM, a division of State Industries, LLC, a subsidiary of the Company | | | | | | 2011 to 2017 | | |

| | | | | | | | | | | | | | | |

| | | | | | | Vice President – Product Engineering | | | | | | 2006 to 2010 | | |

| | | | | | | | | | | | | | | |

| | | | | | | Plant Manager – Productos de Agua, S. de R.L. de C.V. | | | | | | 1998 to 2005 | | |

| | | | | | | | | | | | | | | |

| Anindadeb V. DasGupta (55) | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | President – A. O. Smith Holdings (Barbados) SRL | | | | | | 2018 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | Vice President, Global Head Strategic Marketing; Global Head e-commerce; Global GM Flex & Signage Business Lines – OSRAM GmbH, Munich and Hong Kong (lighting manufacturer) | | | | | | 2014 to 2018 | | |

| | | | | | | | | | | | | | | |

| Wallace E. Goodwin (65) | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | President and General Manager – Lochinvar, LLC | | | | | | 2018 to Present | | |

| | | | | | | | | | | | | | | |

| | | | | | | Senior Vice President and General Manager – Lochinvar, LLC | | | | | | 2011 to 2017 | | |

| | | | | | | | | | | | | | | |

| | | | | | | President – APCOM, a division of State Industries, LLC | | | | | | 1999 to 2011 | | |

[removed: | (a) | Market Information . Our Common Stock is listed on the New York Stock Exchange under the symbol AOS. Our Class A Common Stock is not listed.] EQ Shareowner Services, P.O. Box 64874, St. Paul, Minnesota, 55164-0874 serves as the registrar, stock transfer agent and the dividend reinvestment agent for our Common Stock and Class A Common Stock. [removed: |]

[removed: | (b) | Holders . As of January 31, 2020, the approximate number of stockholders of record of Common Stock and Class A Common Stock were 592 and 160, respectively.] The actual number of stockholders is greater than this number of holders of record, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. [removed: This number of stockholders of record also does not include stockholders whose shares may be held in trust by other entities. |]

[removed: | (c) |] Dividends [removed: . Dividends] declared on the common stock are shown in Note 18 of Notes to Consolidated Financial Statements appearing elsewhere herein. [removed: |]

[removed: | (e) | Performance Graph .] The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing. [removed: |]

[removed: ][added: ]

| | | [added: |] Base Period | | | | [added: | |] Indexed Returns | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| Company/Index | | [removed: 12/31/14] | [removed: |] [added: 12/31/15] | | [removed: 12/31/15] | | | | 12/31/16 | | | | [added: | |] 12/31/17 | | | | [added: | |] 12/31/18 | | | | [added: | |] 12/31/19 | | | [added: | | | 12/31/20 | | |]

(a)Market Information.

Our Common Stock is listed on the New York Stock Exchange under the symbol AOS.

Our Class A Common Stock is not listed.

(b)Holders.

As of January 29, 2021, the approximate number of stockholders of record of Common Stock and Class A Common Stock were 568 and 155, respectively.

This number of stockholders of record also does not include stockholders whose shares may be held in trust by other entities.

(c)Dividends.

(d)Stock Repurchases.

In the second quarter of 2019, our Board of Directors approved adding 3,000,000 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 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.

Due to the uncertainty surrounding the impact of the global COVID-19 pandemic, we suspended our share repurchases on March 18, 2020.

In 2020, we repurchased 1,348,391 shares at an average price of $42.02 per share and at a total cost of $56.7 million.

As of December 31, 2020, there were 1,613,824 shares remaining on the existing repurchase authorization.

On January 27, 2021, the Board of Directors approved adding 7,000,000 shares of common stock to the existing discretionary share repurchase authority.

Including the additional shares, we have approximately 8.6 million shares available for repurchase.

We currently intend to spend approximately $400 million to repurchase common stock in 2021 through a combination of 10b5-1 plans and open market purchases.

(e)Performance Graph.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

From December 31, 2015 to December 31, 2020

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| A. O. Smith Corporation | | | 100.0 | | | | | | 125.0 | | | | | | 163.5 | | | | | | 115.4 | | | | | | 131.1 | | | | | | 154.0 | | |

| S&P 500 Index | | | 100.0 | | | | | | 112.0 | | | | | | 136.4 | | | | | | 130.4 | | | | | | 171.5 | | | | | | 203.1 | | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | | | 118.9 | | | | | | 143.9 | | | | | | 124.7 | | | | | | 161.4 | | | | | | 179.2 | | |

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

\-

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

| --- | --- |

| (d) | Stock Repurchases . In the second quarter of 2019, our Board of Directors approved adding three million shares of Common Stock to an existing discretionary share repurchase authority. Under the share repurchase program, we may purchase our Common Stock 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 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. In 2019, we repurchased 6,113,038 shares at an average price of $47.06 per share and at a total cost of $287.7 million. As of December 31, 2019, there were 2,962,215 shares remaining on the existing repurchase authorization. |

The following table sets forth the number of shares of common stock we repurchased during the fourth quarter of 2019:

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| ISSUER PURCHASES OF EQUITY SECURITIES | | | | | | | | | | | | | | | | |

| Period | | Total Number of Shares Purchased | | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | Maximum Number of Shares that may yet be Purchased Under the Plans or Programs | | |

| October 1 – October 31, 2019 | | | 414,700 | | | $ | 48.17 | | | | 414,700 | | | | 3,739,015 | |

| November 1 – November 30, 2019 | | | 370,800 | | | | 50.20 | | | | 370,800 | | | | 3,368,215 | |

| December 1 – December 31, 2019 | | | 406,000 | | | | 47.02 | | | | 406,000 | | | | 2,962,215 | |

From December 31, 2014 to December 31, 2019

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| A. O. Smith Corporation | | | 100.0 | | | | 137.3 | | | | 171.6 | | | | 224.5 | | | | 158.5 | | | | 180.1 | |

| S&P 500 Index | | | 100.0 | | | | 101.4 | | | | 113.5 | | | | 138.3 | | | | 132.2 | | | | 173.8 | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | 95.8 | | | | 115.1 | | | | 142.8 | | | | 123.8 | | | | 160.2 | |

| (dollars in millions, except per share amounts) | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | |]

| | | [added: |] Years ended December 31, | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| | | [added: | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017 (1)] | | [added: 2017(1)] | | [removed: 2016 (2)] | | | | [removed: 2015] [added: 2016(2)] | | |

| Net sales | | [added: |] $ | [removed: 2,992.7] [added: 2,895.3] | | | [added: | |] $ | [removed: 3,187.9] [added: 2,992.7] | | | [added: | |] $ | [removed: 2,996.7] [added: 3,187.9] | | | [added: | |] $ | [removed: 2,685.9] [added: 2,996.7] | | | [added: | |] $ | [removed: 2,536.5] [added: 2,685.9] | |

| Net [removed: earnings (1)] [added: earnings(1)] | | [added: |] $ | [removed: 370.0] [added: 344.9] | | | [added: | |] $ | [removed: 444.2] [added: 370.0] | | | [added: | |] $ | [removed: 296.5] [added: 444.2] | | | [added: | |] $ | [removed: 326.5] [added: 296.5] | | | [added: | |] $ | [removed: 282.9] [added: 326.5] | |

| Basic earnings per share of common [removed: stock (1,2)] [added: stock(1,2)] | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | |]

| Net earnings | | [added: |] $ | [removed: 2.24] [added: 2.13] | | | [added: | |] $ | [removed: 2.60] [added: 2.24] | | | [added: | |] $ | [removed: 1.72] [added: 2.60] | | | [added: | |] $ | [removed: 1.87] [added: 1.72] | | | [added: | |] $ | [removed: 1.59] [added: 1.87] | |

| Diluted earnings per share of common [removed: stock (1,2)] [added: stock(1,2)] | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | |]

| Net earnings | | [added: |] $ | [removed: 2.22] [added: 2.12] | | | [added: | |] $ | [removed: 2.58] [added: 2.22] | | | [added: | |] $ | [removed: 1.70] [added: 2.58] | | | [added: | |] $ | [removed: 1.85] [added: 1.70] | | | [added: | |] $ | [removed: 1.58] [added: 1.85] | |

| Cash dividends per common [removed: share (2)] [added: share(2)] | | [added: |] $ | [removed: 0.90] [added: 0.98] | | | [added: | |] $ | [removed: 0.76] [added: 0.90] | | | [added: | |] $ | [removed: 0.56] [added: 0.76] | | | [added: | |] $ | [removed: 0.48] [added: 0.56] | | | [added: | |] $ | [removed: 0.38] [added: 0.48] | |

| | | [added: | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| Total assets | | [added: |] $ | [removed: 3,058.0] [added: 3,160.7] | | | [added: | |] $ | [removed: 3,071.5] [added: 3,058.0] | | | [added: | |] $ | [removed: 3,197.4] [added: 3,071.5] | | | [added: | |] $ | [removed: 2,891.0] [added: 3,197.4] | | | [added: | |] $ | [removed: 2,629.2] [added: 2,891.0] | |

| Long-term [removed: debt (3)] [added: debt(3)] | | | [added: 106.4 | | | | | |] 277.2 | | | | [added: | |] 221.4 | | | | [removed: 402.9] | | [added: 402.9] | | [removed: 316.4] | | | | [removed: 236.1] [added: 316.4] | | [added: |]

| Total stockholders’ equity | | | [added: 1,848.3 | | | | | |] 1,666.8 | | | | [added: | |] 1,717.0 | | | | [removed: 1,644.9] | | [added: 1,644.9] | | [removed: 1,511.4] | | | | [removed: 1,442.3] [added: 1,511.4] | | [added: |]

[removed: | (1) | Due] [added: (1)Due] to the enactment of the U.S. Tax Cuts & Jobs Act in December 2017, we recorded a one-time charge of $81.8 million in 2017, our estimate of the costs primarily associated with the repatriation of undistributed foreign earnings. [removed: These charges reduced 2017 earnings per share by $0.47. |]

[removed: | (2) | In September 2016, we declared a 100 percent stock dividend to holders of Common Stock and Class A Common Stock which is not included in cash dividends.] Basic and diluted earnings per share are calculated using the weighted average shares outstanding which were restated for all periods presented to reflect the stock dividend. [removed: |]

[removed: | (3) | Excludes] [added: (3)Excludes] the current portion of long-term debt. [removed: |]

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | Years ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | |

These charges reduced 2017 earnings per share by $0.47.

(2)In September 2016, we declared a 100 percent stock dividend to holders of Common Stock and Class A Common Stock which is not included in cash dividends.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| --- | --- |

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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, [removed: 2019,] [added: 2020,] 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, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] 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, [removed: 2019,] [added: 2020,] based on criteria established in Internal [removed: Control—Integrated] [added: Control - Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 24, 2020] [added: 12, 2021] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Critical] [added: Critical] Audit [removed: Matters][added: Matter]

The critical audit [removed: matters] [added: matter] communicated below [removed: are matters] [added: is a matter] arising from the current period audit of the financial statements that [removed: were] [added: was] communicated or required to be communicated to the audit committee and that: (1) [removed: relate] [added: 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 [added: the] critical audit [removed: matters] [added: 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 [removed: matters] [added: matter] below, providing [added: a] separate [removed: opinions] [added: opinion] on the critical audit [removed: matters] [added: matter] or on the [removed: accounts] [added: account] or [removed: disclosures] [added: disclosure] to which [removed: they relate.][added: it relates.]

| | | [removed: Product] [added: | | | | Product] Warranty Liability [removed: Valuation] [added: Valuation] | [added: | |]

| [removed: Description] [added: *Description] of the [removed: Matter] [added: Matter*] | | [added: | | | |] At December 31, [removed: 2019,] [added: 2020,] the Company’s product warranty liability was [removed: $134.3] [added: $142.3] 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 ten years. The Company performs separate warranty calculations based on the product type and the warranty term and aggregates them. [removed: Auditing the product warranty liability 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 historical product failure rates, or that a product quality issue has not yet been identified as of the financial statement date. Additionally, the cost of product replacement could differ from estimates due to fluctuations in the replacement cost of the product.] | [added: | |]

| [removed: How] [added: *How] We Addressed the Matter in our [removed: Audit] [added: Audit*] | | [added: | | | |] 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 the Company’s calculation of the product warranty liability, 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 validity and categorization of claims by product type and warranty period within the calculation and tested the completeness of the claims data against the Company’s claim log. We recalculated the historical failure rates using actual claims data. We compared the estimated cost of replacement included in the product warranty liability with the current costs to manufacture a comparable product. We also analyzed subsequent claims data to identify changes in failure trends and assessed the historical accuracy of the prior year liability. Further, we inquired of operational and quality control personnel regarding quality issues and trends. | [added: | |]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

| December 31 (dollars in millions) | | | | | | | | | [added: | | |]

| | | [added: | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | |

| [removed: Assets] [added: Assets] | | | | | | | | | [added: | | |]

| [removed: Current Assets] [added: Current Assets] | | | | | | | | | [added: | | |]

| Cash and cash equivalents | | [added: |] $ | [removed: 374.0] [added: 573.1] | | | [added: | |] $ | [removed: 259.7] [added: 374.0] | |

| Marketable securities | | | [removed: 177.4] [added: 116.5] | | | | [removed: 385.3] | | [added: 177.4 | | |]

| Receivables | | | [removed: 589.5] [added: 585.0] | | | | [removed: 647.3] | | [added: 589.5 | | |]

| Inventories | | | [removed: 303.0] [added: 300.1] | | | | [removed: 304.7] | | [added: 303.0 | | |]

| Other current assets | | | [removed: 56.5] [added: 43.3] | | | | [removed: 41.5] | | [added: 56.5 | | |]

| [removed: Total] [added: Total] Current [removed: Assets] [added: Assets] | | | [removed: 1,500.4] [added: 1,618.0] | | | | [removed: 1,638.5] | | [added: 1,500.4 | | |]

| Net property, plant and equipment | | | [removed: 545.4] [added: 541.3] | | | | [removed: 540.0] | | [added: 545.4 | | |]

| Goodwill | | | [removed: 546.0] [added: 546.8] | | | | [removed: 513.0] | | [added: 546.0 | | |]

| Other intangibles | | | [removed: 338.4] [added: 323.9] | | | | [removed: 293.1] | | [added: 338.4 | | |]

| Operating lease assets | | | [removed: 46.9] [added: 41.6] | | | | [removed: —] | | [added: 46.9 | | |]

| Other assets | | | [removed: 80.9] [added: 89.1] | | | | [removed: 86.9] | | [added: 80.9 | | |]

| [removed: Total Assets] [added: Total Assets] | | [added: |] $ | [removed: 3,058.0] [added: 3,160.7] | | | [added: | |] $ | [removed: 3,071.5] [added: 3,058.0] | |

| [removed: Liabilities] [added: Liabilities] | | | | | | | | | [added: | | |]

| [removed: Current Liabilities] [added: Current Liabilities] | | | | | | | | | [added: | | |]

| Trade payables | | [added: |] $ | [removed: 509.6] [added: 595.2] | | | [added: | |] $ | [removed: 543.8] [added: 509.6] | |

| Accrued payroll and benefits | | | [removed: 64.6] [added: 74.6] | | | | [removed: 79.4] | | [added: 64.6 | | |]

| Accrued liabilities | | | [removed: 143.7] [added: 161.9] | | | | [removed: 120.4] | | [added: 143.7 | | |]

| Product warranties | | | [removed: 41.8] [added: 47.8] | | | | [removed: 41.7] | | [added: 41.8 | | |]

| Long-term debt due within one year | | | 6.8 | | | | [removed: —] | | [added: 6.8 | | |]

| [removed: Total] [added: Total] Current [removed: Liabilities] [added: Liabilities] | | | [removed: 766.5] [added: 886.3] | | | | [removed: 785.3] | | [added: 766.5 | | |]

| Long-term debt | | | [removed: 277.2] [added: 106.4] | | | | [removed: 221.4] | | [added: 277.2 | | |]

| Product warranties | | | [removed: 92.4] [added: 94.5] | | | | [removed: 97.7] | | [added: 92.4 | | |]

| Pension liabilities | | | [removed: 27.8] [added: 13.6] | | | | [removed: 49.4] | | [added: 27.8 | | |]

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

| | | | | | | Auditing the product warranty liability 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 historical product failure rates, or that a product quality issue has not yet been identified as of the financial statement date. Additionally, the cost of product replacement could differ from estimates due to fluctuations in the replacement cost of the product. | | |

February 12, 2021

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 2020 | | | | | | 2019 | | |

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Acquisition of business | | | — | | | | | | (107.0) | | | | | | — | | |

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net earnings | | | 344.9 | | | | | | 370.0 | | | | | | 444.2 | | |

| Foreign currency translation adjustments | | | 18.1 | | | | | | (1.3) | | | | | | (38.4) | | |

| Unrealized net gain on cash flow derivative instruments, less related income tax provision of $(0.1) in 2020 $(0.3) in 2019 and $(0.1) in 2018 | | | 0.4 | | | | | | 0.9 | | | | | | 0.2 | | |

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

1.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

1.

rates and estimated costs of product replacement.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Years ended December 31 (dollars in millions) | | | 2020 | | | | | | 2019 | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

1.

Organization and Significant Accounting Policies (continued)

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

In January 2017, the FASB amended ASC 350, *Intangibles – Goodwill and Other* (issued under ASU 2017-4, “Simplifying the Test for Goodwill Impairment”).

2.

The Company’s sales arrangements do not include other

| | | |

| --- | --- | --- |

| | | Accounting for Acquisitions – Valuation of Water-Right, Inc. Intangible Assets |

| Description of the Matter | | During 2019, the Company completed its acquisition of Water-Right, Inc. for consideration of $107.0 million, net of cash acquired, as discussed in Note 3 to the consolidated financial statements. The transaction was accounted for using the purchase method of accounting. Auditing the Company’s accounting for its acquisition of Water-Right, Inc. was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of identified intangible assets of $60.4 million, which principally consisted of customer relationships and trademarks. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (including revenue growth rates, attrition rates and royalty rates). These significant assumptions are forward looking and could be affected by future economic and market conditions. |

| How We Addressed the Matter in our Audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over its accounting for acquisitions. For example, we tested controls over the estimation process supporting the measurement of customer relationships and trademark intangible assets, including management’s review of the significant assumptions used in the valuation models. To test the estimated fair value of the customer relationship and trademark intangible assets, our audit procedures included, among others, evaluating the Company’s valuation methodology, and testing the significant assumptions discussed above including the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We compared the revenue growth rates to third-party industry projections for the water treatment and purification market and to the historical performance of the acquired business. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. For example, we evaluated the discount rates by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable peers. We also compared the customer attrition rates to historical customer retention rates and the royalty rate to relevant comparable licensing agreements. |

February 24, 2020

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| U.S. Tax Reform income tax expense | | | — | | | | — | | | | 81.8 | |

| Acquisitions of businesses | | | (107.0 | ) | | | — | | | | (43.1 | ) |

1.

Organization.

The Rest of World segment also manufactures and markets

in-home

air purification products in China.

Consolidation.

Use of estimates

122.1

million as of December 31, 2019 compared with the carrying

amount of

120.0

million

for the same date.

non-operating

companies in the Netherlands, the Company uses the local currency as the functional currency.

exchange rates, and revenues and expenses were translated at weighted-average exchange rates.

Cash and cash equivalents

Marketable securities

Inventory valuation.

Cost is determined on the

last-in,

first-out

first-in,

(FIFO) method.

straight-line

method.

Impairment of long-lived and amortizable intangible assets.

If the sum of the expected

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: 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 [added: 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.]

[removed: Management] [added: Management] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule [added: 13a-15(f)).]

Based on this evaluation, our management has concluded that, as of December 31, [removed: 2019,] [added: 2020,] our internal control over financial reporting was effective.

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, [removed: 2019] [added: 2020] as stated in their report which is included herein.

[removed: Changes] [added: Changes] in Internal Control Over Financial [removed: Reporting][added: Reporting]

There have been no changes in the company’s internal control over financial reporting (as defined in Exchange Act Rule [added: 13a-15(f)) during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.]

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

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.

13a-15(f)).

As allowed by Securities and Exchange Commission guidance, management excluded from its assessment Water-Right, which was acquired in 2019 and constituted 3.6 percent and 6.3 percent of total assets and net assets, respectively, as of December 31, 2019 and 1.5 percent and 1.4 percent of net sales and net earnings, respectively, for the year then ended.

13a-15(f))

during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited A. O. Smith Corporation’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] 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, [removed: 2019,] [added: 2020,] 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 A. O. Smith Corporation as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and 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, [removed: 2019,] [added: 2020,] and the related notes and financial statement schedule listed in the index at Item 15(a) and our report dated February [removed: 24, 2020] [added: 12, 2021] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: |] /s/ Ernst & Young LLP [removed: |]

[removed: |] Milwaukee, Wisconsin [removed: |]

[removed: PART III][added: PART III]

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

February 12, 2021

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

As indicated in the accompanying Management Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Water-Right, Inc., which is included in the 2019 consolidated financial statements of the Company and constituted 3.6 percent and 6.3 percent of total assets and net assets, respectively, as of December 31, 2019 and 1.5 percent and 1.4 percent of net sales and net earnings, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Water-Right, Inc.

| |

| --- |

| February 24, 2020 |

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 2020 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 Gene C.

Wulf, Dr. Ilham Kadri, Mark D.

Smith and Idelle K.

Wolf serve, with Mr. Wulf, 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 Ms. Wolf and Mr. Wulf 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

The information included under the heading “Compliance with Section 16(a) of the Securities Exchange Act” in our definitive Proxy Statement for the 2020 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.

11—EXECUTIVE COMPENSATION

The information included under the headings “Executive Compensation,” “Director Compensation,” “Report of the Personnel and Compensation Committee” and “Compensation Committee Interlocks and Insider Participation” in the company’s definitive Proxy Statement for the 2020 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.

The information included under the headings “Election of Directors” and “Board Committees” in our definitive Proxy Statement for the 2021 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 Gene C.

Wulf, Ronald D.

Brown, Mark D.

Smith and Idelle K.

Wolf serve, with Mr. Wulf, 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 Ms. Wolf and Mr. Wulf 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 2021 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.

The information included under the headings “Executive Compensation,” “Director Compensation,” “Report of the Personnel and Compensation Committee” and “Compensation Committee Interlocks and Insider Participation” in the company’s definitive Proxy Statement for the 2021 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.

The information included under the headings “Principal Stockholders” and “Security Ownership of Directors and Management” in our definitive Proxy Statement for the [removed: 2020] [added: 2021] 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.

[removed: Equity] [added: Equity] Compensation Plan [removed: Information][added: Information]

The following table provides information about our equity compensation plans as of December 31, [removed: 2019.][added: 2020.]

| Plan Category | | [added: |] Number of securities to be issued upon the exercise of outstanding options, warrants and rights | | | | [added: | | | | |] Weighted-average exercise price of outstanding options, warrants and rights | | | | [added: | | | | |] Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | | | [added: | | |]

| Equity compensation plans [added: not] approved by security holders | | | [removed: 3,321,472] [added: —] | [removed: (1)] | | [removed: $] | [removed: 37.64] | [removed: (2)] | | | [removed: 1,855,560] | [removed: (3)] [added: —] | [added: | | | | | | | | — | | | | | |]

| Equity compensation plans [removed: not] approved by security holders | | | [removed: —] [added: 3,151,315] | | | [added: (1)] | [removed: —] | | | | [removed: —] | [added: 43.01] | [added: | | (2) | | | | | | 3,395,216 | | | (3) | | |]

[removed: | (1) | Consists] [added: (1)Consists] of [removed: 2,728,350] shares subject to stock options, [removed: 313,763] [added: 2,785,654] shares subject to employee share units and [removed: 279,359] [added: 365,661] shares subject to director share units. [removed: |]

[removed: | (2) | Represents] [added: (2)Represents] the weighted average exercise price of outstanding options and does not take into account outstanding share units. [removed: |]

[removed: | (3) | Represents securities remaining available for issuance under the A. O. Smith Combined Incentive Compensation Plan.] If any awards lapse, expire, terminate or are cancelled 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. [removed: |]

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total | | | 3,151,315 | | | | | | | | | 43.01 | | | | | | | | | 3,395,216 | | | | | |

(3)Represents securities remaining available for issuance under the A. O. Smith Combined Incentive Compensation Plan.

STOCKHOLDER MATTERS

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total | | | 3,321,472 | | | $ | 37.64 | | | | 1,855,560 | |

| --- | --- |

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 2020 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.

14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information included under the heading “Report of the Audit Committee” in our definitive Proxy Statement for the 2020 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.

PART IV

\- EXHIBITS, FINANCIAL STATEMENT SCHEDULES

| | (a) | The following documents are filed as part of this Annual Report on Form 10-K: |

| --- | --- | --- |

| | 1. | 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, 2019 and 2018](#tx846284_25) | | | 26 | |

| For each of the three years in the period ended December 31, 2019: | | | | |

| [\- Consolidated Statement of Earnings](#tx846284_26) | | | 27 | |

| [\- Consolidated Statement of Comprehensive Earnings](#tx846284_27) | | | 27 | |

| [\- Consolidated Statement of Cash Flows](#tx846284_28) | | | 28 | |

| [\- Consolidated Statement of Stockholders’ Equity](#tx846284_29) | | | 29 | |

| [Notes to Consolidated Financial Statements](#tx846284_30) | | | 30 - 56 | |

| | 2. | Financial Statement Schedules |

| [Schedule II—Valuation and Qualifying Accounts](#tx846284_31) | | | 65 | |

Schedules not included have been omitted because they are not applicable.

| | 3. | Exhibits - see the Index to Exhibits on pages 64—65 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(m) 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.

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.](http://www.sec.gov/Archives/edgar/data/91142/000119312516583538/d156476dex3ib.htm) |

| | (3)(ii) | | | | | [By-laws of A. O. Smith Corporation as amended October 13, 2015, incorporated by reference to Exhibit 3.1 in the current report on Form 8-K dated October 16, 2015.](http://www.sec.gov/Archives/edgar/data/91142/000119312515345565/d27877dex31.htm) |

| | (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.](http://www.sec.gov/Archives/edgar/data/91142/000119312516583538/d156476dex3ib.htm) |

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 2021 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.

The information included under the heading “Report of the Audit Committee” in our definitive Proxy Statement for the 2021 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.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

PART IV

(a)The following documents are filed as part of this Annual Report on Form 10-K:

1.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, 2020 and 2019](#i676b45a27cba4e218c06e3ebb543b54c_61) | | | [30](#i676b45a27cba4e218c06e3ebb543b54c_61) | | |

| | | | | | |

| For each of the three years in the period ended December 31, 2020: | | | | | |

| [‑ Consolidated Statement of Earnings](#i676b45a27cba4e218c06e3ebb543b54c_67) | | | [31](#i676b45a27cba4e218c06e3ebb543b54c_67) | | |

| [‑ Consolidated Statement of Comprehensive Earnings](#i676b45a27cba4e218c06e3ebb543b54c_70) | | | [31](#i676b45a27cba4e218c06e3ebb543b54c_70) | | |

| [‑ Consolidated Statement of Cash Flows](#i676b45a27cba4e218c06e3ebb543b54c_76) | | | [32](#i676b45a27cba4e218c06e3ebb543b54c_76) | | |

| [‑ Consolidated Statement of Stockholders’ Equity](#i676b45a27cba4e218c06e3ebb543b54c_79) | | | [33](#i676b45a27cba4e218c06e3ebb543b54c_79) | | |

| | | | | | |

| [Notes to Consolidated Financial Statements](#i676b45a27cba4e218c06e3ebb543b54c_85) | | | [34](#i676b45a27cba4e218c06e3ebb543b54c_85)\-57 | | |

2.Financial Statement Schedules

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| [Schedule II—Valuation and Qualifying Accounts](#i676b45a27cba4e218c06e3ebb543b54c_214) | | | [66](#i676b45a27cba4e218c06e3ebb543b54c_214) | | |

Schedules not included have been omitted because they are not applicable.

3.Exhibits - see the Index to Exhibits on pages 62-63 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(m) 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.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

INDEX TO EXHIBITS

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Exhibit Number | | | Description | | | | | |

| | | | | | | | | |