A. O. Smith (AOS) 10-K risk factor changes: FY2021 vs FY2020

[removed: ■*The] [added: ■*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*

- 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, [added: workforce disruptions,] 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 [removed: 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.

[removed: 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.

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 [removed: is highly] [added: remains] uncertain and will depend on future developments.

Such developments may include the geographic spread and duration of the virus, [added: periodic surges of] the [added: 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.

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

A [removed: continuation] [added: decline in economic activity, such as recession] or [removed: deepening of the global] economic [removed: downturn] [added: downturn, in the U.S. and other regions in the world in which we do business,] 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 high-quality water treatment products, which could negatively impact our profitability and cash flows.

[removed: In addition, a] [added: Such] deterioration in [removed: current] economic conditions [removed: due to] [added: could arise from] many factors or fears including public health crises [added: or political instability.]

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[removed: or political instability,] [added: A deterioration in economic conditions also] 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.

■*Because approximately [removed: 24] [added: 26] percent of our net sales in [removed: 2020] [added: 2021] were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business*

Further expansion of the gas tankless portion of the North America market, which we believe was approximately [removed: ten] [added: 12] percent of the residential market segment in [removed: 2020,] [added: 2021,] could have an impact on our operating results.

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

Our ability to timely develop and successfully market new products and to develop, acquire, [removed: and] retain [added: and protect] necessary intellectual property rights is essential to our continued success, but cannot reasonably be assured.

Extraordinary events, including natural [removed: disasters,] [added: disasters resulting from but not limited to climate change,] political disruptions, terrorist attacks, public health issues, such as the current COVID-19 pandemic, and acts of war may disrupt our business and 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: One] [added: Two] of our manufacturing plants [removed: is] [added: are] located within a floodplain that has experienced past flooding events.

[added: 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.

Approximately [removed: 33] [added: 36] percent of our net sales in [removed: 2020] [added: 2021] 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: 7,500] [added: 6,800] of our [removed: 13,900] [added: 13,700] employees as of December 31, [removed: 2020] [added: 2021] were located in China.

At December 31, [removed: 2020,] [added: 2021,] approximately [removed: $524] [added: $608] million of cash and marketable securities were held by our foreign subsidiaries, substantially all of which were located in China.

Net sales to our five largest customers represented approximately [removed: 43] [added: 41] percent of our sales in [removed: 2020.][added: 2021.]

[removed: The loss of one or more of our largest customers, any material reduction or delay in sales to these customers, or our inability to successfully develop] relationships with additional customers could have a material adverse effect on our financial position, results of operations and cash flows.

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

Commercial construction activity in North America [removed: declined] [added: grew] in [removed: 2020] [added: 2021] after [removed: growing modestly] [added: declining] in [removed: 2019.][added: 2020.]

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: 2020.][added: 2021.]

We engage in ongoing communications with our suppliers to identify and mitigate risk of potential disruptions and to manage [added: our material and component] inventory levels.

Significant increases in the cost of any of the key materials and components we purchase [added: or delays in their delivery] 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.

Historically, there has been a lag in our ability to recover increased material costs from customers, and that [removed: lag] [added: lag, particularly for the price increases that we implemented in 2021,] could negatively impact our profitability.

Our information [removed: systems, like those of other companies,] [added: systems] 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, malicious actors or breaches of security.

[removed: However, any operations failure or breach of security which are occurring] [added: We may experience them in the future, potentially] with increasing frequency from increasingly sophisticated cyber threats [added: that] could [added: result in operations failure or breach of security that 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 actions, litigation and have a material adverse effect on our financial condition, results of operations and cash flows and our reputation.

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: $385] [added: $492] 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.

The majority of our foreign currency transaction risk results from sales of our products in [removed: Canada] [added: Canada, a portion of] which we manufacture in the U.S, and to a lesser extent from component purchases in Europe and payroll in Mexico.

[removed: If we complete any future acquisitions, we] [added: We] may not be able to successfully integrate [removed: the] [added: Giant or any future] acquired businesses or operate them profitably or accomplish our strategic objectives for those acquisitions.

If we complete any future acquisitions in new geographies, our unfamiliarity with [removed: local] [added: relevant] regulations and market [removed: customs] [added: conditions] may impact our ability to operate them profitably or achieve our strategic objectives for those acquisitions.

[added: While we believe our products are] currently efficient, safe and environment-friendly, federal, foreign, state and local governments [removed: are adopting] [added: may adopt] 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.

The projected benefit obligation liability of our defined benefit pension plans of [removed: $870] [added: $842] million exceeded the fair value of the plan assets of [removed: $859] [added: $826] million by approximately [removed: $11] [added: $16] million at December 31, [removed: 2020.][added: 2021.]

U.S. employees hired after January 1, [removed: 2010] [added: 2010,] have not participated in our defined benefit plan, and benefit accruals for the majority of current salaried and hourly employees ended on December 31, 2014.

We forecast that we will not be required to make a contribution to the plan in [removed: 2021,] [added: 2022,] and we do not plan to make any voluntary contributions.

[added: Certain members of the founding family of our company and trusts for] their benefit (Smith Family) have entered into a voting trust agreement with respect to shares of our Class A Common Stock and shares of our Common Stock they own.

U.S. steel index prices alone increased over 100 percent in 2021.

We have also experienced inflation related increases in our transportation costs.

Disruptions to the commercial transportation network, including limited container and trucking capacity and port congestion, have increased supplier delivery times for materials and components to our facilities and, in some cases, our ability to timely ship to customers.

As a response to cost inflation in materials and components, we announced price increases on water heaters in North America in 2021 that compound to approximately 50 percent.

In addition, there is risk that the

In addition, an increase in price levels generally or in particular industries (such as the recent inflation in steel prices and logistics costs), could result in a consumer shift away from the products we offer, which could adversely affect our revenues and, at the same time, increase our costs.

Our sales in China increased 24 percent in local currency in 2021 compared to 2020.

Our sales in China were significantly impacted by the COVID-19 pandemic in 2020.

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Our customers may experience financial instability, affecting their ability to pay or make future purchases.

The loss of one or more of our largest customers, any material reduction or delay in sales to these customers, or our inability to successfully develop

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Like many companies, we, and some third parties upon which we rely, have experienced cybersecurity attacks on information technology networks and systems, products and services in the past but, to date, none have resulted in any material adverse impact to our financial condition, results of operations, or cash flows.

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We acquired Giant, a Canada-based manufacturer of residential and commercial water heaters, on October 19, 2021, for $199 million subject to customary adjustments using a combination of cash and debt.

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In 2021 our Board of Directors approved the termination of the previously sunset pension plan, with a termination date of December 31, 2021.

We filed a determination letter with the IRS regarding the qualification of the plan termination.

In 2022, we plan to annuitize the plan's remaining pension liability.

Global economic growth remains volatile and could stall or reverse course.

Our sales in China decreased in 2020 compared to 2019.

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,

Other customers may experience financial instability.

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

While we believe our products are

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

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

[removed: In] [added: Since] March [removed: 2020, COVID-19 was declared a global pandemic] [added: 2020] and [added: continuing into 2021,] we experienced impacts to our business and other markets worldwide.

As we [added: continue to] receive guidance from governmental authorities, we adjust our safety measures to meet or exceed those guidelines.

In our North America segment, [added: after approximately eight percent growth each year in 2021 and 2020,] we expect [removed: industry] residential [added: industry] water heater volumes will be down approximately two percent in [removed: 2021] [added: 2022] compared with [removed: 2020, which is driven by our belief] [added: 2021 as we believe] that [removed: customers may have added inventory in 2020 due to] industry [removed: extended lead times.][added: demand will normalize to more historical growth rates.]

We expect to see a [removed: mid-single digit] [added: ten percent] increase [removed: to] [added: in] our [removed: boiler] sales [added: of boilers] in [removed: 2021] [added: 2022] compared to [removed: 2020] [added: 2021] due to industry growth of three to four [removed: percent driven by pandemic-related pent up demand] [added: percent, our expectation that the transition to higher-efficiency boilers will continue] as well as our new product introductions.

We [removed: expect] [added: anticipate] sales of our North America water treatment products [removed: to] [added: will] increase [removed: by] 13 to 14 percent in [removed: 2021,] [added: 2022,] compared to [removed: 2020,] [added: 2021,] primarily driven by consumer demand for our point of use and point of entry water treatment systems.

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Combining all of these factors, we expect our consolidated sales to increase [removed: approximately ten] [added: between 16 and 18] percent in [removed: 2021.][added: 2022.]

We [removed: will] seek to continue to grow our core residential and commercial water heating, boiler and water treatment businesses throughout the world.

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

In addition, our sales in China were favorably impacted by [removed: currency translation of] approximately [removed: $9] [added: $58] million in [removed: 2020] [added: 2021] compared to [removed: 2019,] [added: 2020,] due to the appreciation of the Chinese currency compared to the U.S. dollar.

Our gross profit margin in [removed: 2020] [added: 2021] of [removed: 38.3] [added: 37.0] percent declined compared to [removed: our gross profit margin of 39.5] [added: 38.3] percent in [removed: 2019 primarily due to the lower sales volumes.][added: 2020.]

Selling, general, and administrative (SG&A) expenses were [removed: $660.3] [added: $701.4] million in [removed: 2020] [added: 2021] or [removed: $55.3] [added: $41.1] million [removed: lower] [added: higher] than [removed: 2019.][added: 2020.]

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

[removed: Charges recognized] [added: The charges] were comprised of $6.8 million severance costs and $0.9 million of other restructuring expenses.

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

We believe that the [removed: measures] [added: measure] of adjusted [removed: earnings, adjusted EPS, and adjusted segment earnings provide] [added: EPS provides] useful information to investors about our performance and [removed: allow] [added: allows] management and our investors to better understand our performance between periods without regard to items we do not consider to be a component of our core operating performance.

Interest expense was [removed: $7.3] [added: $4.3] million in [removed: 2020,] [added: 2021,] compared to [removed: $11.0 million in 2019 and $8.4] [added: $7.3] million in [removed: 2018.][added: 2020.]

The decrease in interest expense in [removed: 2020] [added: 2021] was primarily due to lower [added: average] debt [removed: levels and lower interest rates than the prior year.][added: levels.]

Other income was [removed: $11.0] [added: $20.4] million in [removed: 2020] [added: 2021] compared to [removed: $18.0 million in 2019 and $21.2] [added: $11.0] million in [removed: 2018.][added: 2020.]

The [removed: decrease] [added: increase] in other income in [removed: 2020 compared to 2019] [added: 2021] was primarily due to [removed: lower] [added: higher pension and] interest income.

Pension income in [removed: 2020] [added: 2021] was [removed: $5.1] [added: $12.0] million compared to [removed: $6.2 million in 2019 and $8.7] [added: $5.1] million in [removed: 2018.][added: 2020.]

Our effective income tax rate was [removed: 22.3] [added: 22.1] percent in [removed: 2020,] [added: 2021,] compared with [removed: 21.6 percent in 2019 and 20.4] [added: 22.3] percent in [removed: 2018.][added: 2020.]

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

Sales in our North America segment were [removed: $2,118] [added: $2,529.5] million in [removed: 2020] [added: 2021] or [removed: $34] [added: $411.2] million higher than sales of [removed: $2,084] [added: $2,118.3] million in [removed: 2019.][added: 2020.]

North America segment earnings were [removed: $503.5] [added: $590.8] million in [removed: 2020] [added: 2021, an increase of 17 percent] compared to segment earnings of [removed: $488.9 million and $464.1] [added: $503.5] million in [removed: 2019 and 2018, respectively.][added: 2020.]

Segment margins were [removed: 23.8 percent, 23.5] [added: 23.4] percent and [removed: 22.7] [added: 23.8] percent in [removed: 2020, 2019] [added: 2021] and [removed: 2018,] [added: 2020,] respectively.

[removed: During 2020,] [added: In 2020] segment earnings and margin were adversely impacted by certain costs related to the pandemic.

[removed: These] [added: Those] costs included temporarily moving production from Mexico to the U.S., paying employees during temporary plant shutdowns, proactively deep cleaning facilities, paying benefits during employee furloughs, and other costs, which were approximately $6.6 million in 2020.

We estimate our [removed: 2021] [added: 2022] North America segment margin will be between [removed: 23] [added: 22.25] and [removed: 23.5] [added: 22.75] percent.

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

Sales in our Rest of World segment were [removed: $800] [added: $1,036.5] million in [removed: 2020] [added: 2021] or [removed: $136] [added: $236.2] million [removed: lower] [added: higher] than sales of [removed: $936] [added: $800.3] million in [removed: 2019.][added: 2020.]

[removed: Compared to 2019, our sales] [added: Sales] in China [removed: decreased] [added: increased] by [removed: 15] [added: 32] percent in U.S. dollar terms and [removed: 16] [added: 24] percent in local currency in [added: 2021 compared to] 2020.

In addition, our [removed: 2020] sales in China were favorably impacted by [removed: currency translation of] approximately [removed: $9] [added: $58] million [added: in 2021] compared to [removed: 2019,] [added: 2020,] due to the appreciation of the Chinese currency compared to the U.S. dollar.

We expect full-year segment margin to be [removed: between seven percent and eight] [added: approximately 10] percent in [removed: 2021.][added: 2022.]

Our working capital was [removed: $731.7] [added: $633.8] million at December 31, [removed: 2020] [added: 2021] compared with [removed: $733.9 million and $853.2] [added: $731.7] million at December 31, [removed: 2019 and December 31, 2018, respectively.][added: 2020.]

We repatriated approximately [removed: $190] [added: $168] million [removed: in] [added: of] foreign cash and marketable securities in [removed: 2020] [added: 2021] and utilized it to [removed: repay floating rate debt.][added: repurchase shares of our common stock.]

[removed: The decline in cash, cash equivalents] [added: A majority of the change to working capital was driven by higher accounts payable, payroll related accruals] and [removed: marketable securities] [added: lower cash balances than 2020, which were partially offset by higher inventory] and sales related [removed: decreases in] accounts receivable [removed: partially offset by lower accounts payable balances led to the majority of the decline in working capital in 2019.][added: balances.]

We expect to repatriate approximately [removed: $190] [added: $100] million in [removed: 2021] [added: 2022] and use the proceeds for common stock repurchases.

Cash provided by operating activities in [removed: 2020] [added: 2021] was [removed: $562.1] [added: $641.1] million compared with [removed: $456.2 million during 2019 and $448.9] [added: $562.1] million during [removed: 2018.][added: 2020.]

In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in Wuhan, China, which by March 2020 had spread throughout the world and was declared a global pandemic.

Our global supply chain management team continued to navigate through supply chain and logistics challenges in 2021.

We have seen supply constraints for certain components and raw materials used in our operations, as well as limited container and trucking capacity, and port congestion and delays.

While supply chain issues moderated as we moved into 2022, we remain in close contact with our suppliers and logistics providers to troubleshoot, manage and resolve bottlenecks, as the environment remains unpredictable, particularly with the surge in the Omicron variant of COVID-19.

This includes focusing on acquisitions that are related to our core business.

Consistent with this strategy, we acquired Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters, on October 19, 2021, for $199 million, subject to customary adjustments, using a combination of debt and cash.

The acquisition fits squarely in our core capabilities, supplements our presence in Canada and enhances our capacity and distribution in the region.

Giant contributed $22.9 million of sales and approximately $0.01 in earnings per share (EPS) to our results in 2021 and we expect Giant will contribute approximately $0.06-$0.08 to our EPS in 2022.

We believe that commercial water heater industry volumes will be flat to slightly down in 2022 compared to 2021 as new construction and replacement installations level off.

We expect sales in 2022 will benefit from our 2021 price increases, which had a cumulative effect on our water heater prices of approximately 50 percent.

In our Rest of World segment, after strong growth in 2021, we expect 2022 sales in China to increase approximately five percent in local currency compared with 2021 driven by demand for our residential and commercial water treatment products, including our replacement filters, as well as rangehoods and cooktops.

We assume China currency rates will stay at levels similar to 2021.

Our guidance excludes the potential impacts from future acquisitions and assumes the recent surge of the Omicron variant subsides during the first quarter of 2022 and does not have a significant impact on our productivity or significantly impact the end markets that we serve.

In this section, we discuss the results of our operations for 2021 compared with 2020.

We discuss our cash flows and current financial condition under “Liquidity and Capital Resources.” For a discussion related to 2020 compared with 2019, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended December 31, 2020, which was filed with the United States Securities and Exchange Commission (SEC) on February 12, 2021, and is available on the SEC's website at www.sec.gov.

| (dollars in millions) | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

| Net sales | | | $ | 3,538.9 | | | | | $ | 2,895.3 | | | | | $ | 2,992.7 | |

| Cost of products sold | | | 2,228.0 | | | | | | 1,787.1 | | | | | | 1,812.0 | | |

| Gross Margin | | | 1,310.9 | | | | | | 1,108.2 | | | | | | 1,180.7 | | |

| *Gross margin %* | | | *37.0* | | *%* | | | | *38.3* | | *%* | | | | *39.5* | | *%* |

| Selling, general and administrative expenses | | | 701.4 | | | | | | 660.3 | | | | | | 715.6 | | |

| Interest expense | | | 4.3 | | | | | | 7.3 | | | | | | 11.0 | | |

| Other income - net | | | (20.4) | | | | | | (11.0) | | | | | | (18.0) | | |

| Earnings before provision for income taxes | | | 625.6 | | | | | | 443.9 | | | | | | 472.1 | | |

| Provision for income taxes | | | 138.5 | | | | | | 99.0 | | | | | | 102.1 | | |

Our sales in 2021 were $3,538.9 million, or 22.2 percent higher than 2020 sales of $2,895.3 million.

Compared to 2020, which was negatively impacted by the COVID-19 pandemic, our sales increase in 2021 was primarily driven by inflation-related pricing actions and higher water heater, boiler, and water treatment volumes in North America as well as higher sales in China.

Our acquisition of Giant added $22.9 million of sales in 2021.

The lower gross margin in 2021 was primarily due to higher steel and other material costs which outpaced our pricing actions.

The increase in SG&A expenses in 2021 was primarily due to higher advertising, engineering and selling expenses and higher management incentive expenses related to higher earnings compared to 2020.

Higher SG&A expenses in 2021 were partially offset by lower spending in China associated with headcount reductions, store closures and other cost-saving measures implemented during 2020.

Our lower effective income tax rate in 2021 was primarily due to a change in geographic earnings mix as well as a favorable tax impact related to amending a previously filed tax return.

We estimate that our annual effective income tax rate for the full year of 2022 will be between 23.5 and 24 percent.

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

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

| Net Sales | | | $ | 2,529.5 | | | | | $ | 2,118.3 | |

| *Segment Margin* | | | *23.4* | | *%* | | | | *23.8* | | *%* |

The increased sales in 2021 were driven primarily by price increases, largely on water heaters, which were implemented in response to rising material and transportation costs.

Higher sales were also driven by increased volumes across all product lines, including $22.9 million of incremental sales from Giant.

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.

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

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.

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.

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.

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

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 stated acquisition strategy includes a number of our water-related strategic initiatives.

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.

Our sales in 2019 were $2,993 million, a decline of 6.1 percent compared to our 2018 sales of $3,188 million.

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 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.

Excluding the unfavorable impact from currency translation, China sales declined 19 percent in 2019.

The sales reduction in China 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 Water-Right acquisition, and water heater pricing actions related to steel and freight cost increases.

The increase in North America sales in 2019 compared to 2018, was 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 2018, primarily due to the lower sales volumes in China and a higher mix of mid-price products, which have lower margins, in that region.

SG&A expenses were $715.6 million in 2019 or $38.2 million lower than in 2018.

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

On March 21, 2018, we announced a plan to transfer water heater, boiler and storage tank production from our Renton, Washington plant to our other U.S. plants.

The majority of the consolidation of operations occurred in the second quarter of 2018.

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 severance, building lease exit costs, and the impairment of assets.

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

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

We expanded our product offerings with the acquisitions of Hague Quality Water International (Hague) in [removed: 2017 and] [added: 2017,] Water-Right, Inc. (Water-Right) in [removed: 2019.][added: 2019 and Master Water Conditioning Corporation (Master Water) in 2021.]

Our wholesale distribution channel, where we sell our products primarily under the A. O. Smith and State brands, includes more than [removed: 1,200] [added: 1,100] 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 [removed: 40] [added: 45] percent of Lochinvar branded sales consist of residential and commercial water heaters while the remaining [removed: 60] [added: 55] percent of Lochinvar branded sales consist primarily of boilers and related parts.

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

Our water softener branded products and problem well water solutions, which include Hague, [removed: WaterBoss,] Water-Right, [removed: WaterCare,] and [removed: Evolve,] [added: Master Water] are sold through water quality dealers.

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

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

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

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

We believe we are one of the leading suppliers of water heaters [added: and reverse osmosis water treatment products] to the residential market in China in dollar terms.

We manufacture and market [added: residential] water treatment products, primarily [removed: residential] [added: incorporating] reverse osmosis [added: technology, and commercial water treatment] products.

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

We sell our products in [removed: over] [added: approximately] 13,000 points of sale in China, approximately [removed: 6,400] [added: 5,800] are retail outlets in tier one and tier two cities of which over 2,000 exclusively sell our products.

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: 13] [added: 11] percent of total Rest of World sales in [removed: 2020.][added: 2021.]

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

There has been volatility in steel costs over the last several years, [removed: including an increase] [added: particularity] in [added: 2021 as the] steel [removed: costs in] [added: price index increased over 100 percent compared to] the [removed: second half of 2020.][added: prior year.]

Our total expenditures for research and development in [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] were [removed: $80.7] [added: $94.2] million, [removed: $87.9] [added: $80.7] million and [removed: $94.0] [added: $87.9] million, respectively.

[removed: However, our] [added: Our] trade name is important with respect to our products, particularly in China, [removed: India] [added: India,] and the U.S.

We employed approximately [removed: 13,900] [added: 13,700] employees as of December 31, [removed: 2020,] [added: 2021,] primarily non-union.

These principles [added: and values] help to shape how we hire, train and treat our [removed: employees.][added: employees, emphasizing teamwork and promoting diversity in seeking our objectives.]

We believe that the critical elements of [removed: the] [added: our] effort to [added: attract,] retain and develop talent are employee engagement, talent development, a focus on employee safety, and market competitive compensation.

We provide all employees with a wide range of professional development experiences, both formal and [removed: informal.][added: informal, to help them achieve their full potential.]

Some of the formal development programs that employees have access to include early-career leadership development programs, [added: front-line leadership development programs,] continuous improvement skill-building programs, [added: core process technology councils] and tuition reimbursement for degree programs or trade schools.

In addition to salaries, these programs, which vary by country, can include annual [added: performance-based] bonuses, stock-based compensation awards, retirement plans with employee matching opportunities, [added: health benefits, health savings] and [removed: other benefits.][added: flexible spending accounts, paid time off, family leave, tuition assistance, among others.]

As used in this annual report on Form 10-K, references to the “Company,” “A. O. Smith,” “AOS,” “we,” “us,” and “our” refer to A. O. Smith and its consolidated subsidiaries.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto under “Item 8.

Financial Statements and Supplementary Data” in this annual report on Form 10-K.

In 2021, we further expanded our market presence and product offerings with our acquisition of Giant Factories, Inc., (Giant) a Canada-based manufacturer of residential and commercial water heaters.

with a short payback period through energy savings.

In addition, during 2021 we launched a commercial heat pump water heater to align with greenhouse gas emission reduction trends across the country.

A portion of our customers have contractual pricing tied to a steel index.

Although we believe our trademarks, trade names, patents, trade secrets, and licenses to constitute a valuable asset in the aggregate, we do not regard our business as being materially dependent on any single or group of related trademarks, trade names, patents, trade secrets, or licenses.

The foundation of how we conduct business and interact with our employees is outlined in the A. O. Smith Corporation Guiding Principles, which were refreshed in 2021, and our Statement of Values.

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

We will conduct the survey again in 2022.

Globally, all office and professional employees have a formal performance review and development plans with a focus on learning by doing.

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

A portion of our customers are contractually obligated to accept price changes based on fluctuations in steel prices.

We do not believe that our business as a whole is materially dependent upon any such trademark, trade name, patent, trade secret or license.

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.

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.

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.

For the fiscal year ended December 31, [removed: 2020][added: 2021]

| Title of Each Class | | | | | | [added: Trading Symbol(s) | | | | | |] Shares of Stock Outstanding January [removed: 29, 2021] [added: 31, 2022] | | | | | | Name of Each Exchange on Which Registered | | |

| Class A Common Stock (par value $5.00 per share) | | | | | | [removed: 26,034,457] [added: None] | | | | | | [added: 25,973,661 | | | | | |] Not listed | | |

| Common Stock (par value $1.00 per share) | | | | | | [removed: 135,747,632] [added: AOS] | | | | | | [added: 131,414,105 | | | | | |] New York Stock Exchange | | |

Indicate by check mark whether the registrant has submitted [added: electronically] every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation 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 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 [removed: report ☒][added: report.]

The aggregate market value of voting stock held by non-affiliates of the registrant was [removed: $42,461,387] [added: $61,120,355] for Class A Common Stock and [removed: $6,241,019,639] [added: $9,439,335,980] for Common Stock as of June 30, [removed: 2020.][added: 2021.]

| 1. | | | Portions of the company’s definitive Proxy Statement for the [removed: 2021] [added: 2022] 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). | | |

Year Ended December 31, [removed: 2020][added: 2021]

| [Item [removed: 1.](#i676b45a27cba4e218c06e3ebb543b54c_13)] [added: 1.](#ib082370cb4864a2aaf9bf91ded690616_13)] | | | [removed: [Business](#i676b45a27cba4e218c06e3ebb543b54c_13)] [added: [Business](#ib082370cb4864a2aaf9bf91ded690616_13)] | | | [removed: [3](#i676b45a27cba4e218c06e3ebb543b54c_13)] [added: [3](#ib082370cb4864a2aaf9bf91ded690616_13)] | | |

| [Item [removed: 1A.](#i676b45a27cba4e218c06e3ebb543b54c_16)] [added: 1A.](#ib082370cb4864a2aaf9bf91ded690616_16)] | | | [Risk [removed: Factors](#i676b45a27cba4e218c06e3ebb543b54c_16)] [added: Factors](#ib082370cb4864a2aaf9bf91ded690616_16)] | | | [removed: [6](#i676b45a27cba4e218c06e3ebb543b54c_16)] [added: [7](#ib082370cb4864a2aaf9bf91ded690616_16)] | | |

| [Item [removed: 1B.](#i676b45a27cba4e218c06e3ebb543b54c_19)] [added: 1B.](#ib082370cb4864a2aaf9bf91ded690616_19)] | | | [Unresolved Staff [removed: Comments](#i676b45a27cba4e218c06e3ebb543b54c_19)] [added: Comments](#ib082370cb4864a2aaf9bf91ded690616_19)] | | | [removed: [11](#i676b45a27cba4e218c06e3ebb543b54c_19)] [added: [12](#ib082370cb4864a2aaf9bf91ded690616_19)] | | |

| [Item [removed: 2.](#i676b45a27cba4e218c06e3ebb543b54c_22)] [added: 2.](#ib082370cb4864a2aaf9bf91ded690616_22)] | | | [removed: [Properties](#i676b45a27cba4e218c06e3ebb543b54c_22)] [added: [Properties](#ib082370cb4864a2aaf9bf91ded690616_22)] | | | [removed: [11](#i676b45a27cba4e218c06e3ebb543b54c_22)] [added: [13](#ib082370cb4864a2aaf9bf91ded690616_22)] | | |

| [Item [removed: 3.](#i676b45a27cba4e218c06e3ebb543b54c_25)] [added: 3.](#ib082370cb4864a2aaf9bf91ded690616_25)] | | | [Legal [removed: Proceedings](#i676b45a27cba4e218c06e3ebb543b54c_25)] [added: Proceedings](#ib082370cb4864a2aaf9bf91ded690616_25)] | | | [removed: [11](#i676b45a27cba4e218c06e3ebb543b54c_25)] [added: [13](#ib082370cb4864a2aaf9bf91ded690616_25)] | | |

| [Item [removed: 4.](#i676b45a27cba4e218c06e3ebb543b54c_28)] [added: 4.](#ib082370cb4864a2aaf9bf91ded690616_28)] | | | [Mine Safety [removed: Disclosures](#i676b45a27cba4e218c06e3ebb543b54c_28)] [added: Disclosures](#ib082370cb4864a2aaf9bf91ded690616_28)] | | | [removed: [12](#i676b45a27cba4e218c06e3ebb543b54c_28)] [added: [13](#ib082370cb4864a2aaf9bf91ded690616_28)] | | |

| [Item [removed: 5.](#i676b45a27cba4e218c06e3ebb543b54c_34)] [added: 5.](#ib082370cb4864a2aaf9bf91ded690616_34)] | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i676b45a27cba4e218c06e3ebb543b54c_34)] [added: Securities](#ib082370cb4864a2aaf9bf91ded690616_34)] | | | [removed: [16](#i676b45a27cba4e218c06e3ebb543b54c_34)] [added: [17](#ib082370cb4864a2aaf9bf91ded690616_34)] | | |

| [Item [removed: 6.](#i676b45a27cba4e218c06e3ebb543b54c_37)] [added: 6.](#ib082370cb4864a2aaf9bf91ded690616_37)] | | | [Selected Financial [removed: Data](#i676b45a27cba4e218c06e3ebb543b54c_37)] [added: Data](#ib082370cb4864a2aaf9bf91ded690616_37)] | | | [removed: [18](#i676b45a27cba4e218c06e3ebb543b54c_37)] [added: [18](#ib082370cb4864a2aaf9bf91ded690616_37)] | | |

| [Item [removed: 7.](#i676b45a27cba4e218c06e3ebb543b54c_40)] [added: 7.](#ib082370cb4864a2aaf9bf91ded690616_40)] | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i676b45a27cba4e218c06e3ebb543b54c_40)] [added: Operations](#ib082370cb4864a2aaf9bf91ded690616_40)] | | | [removed: [19](#i676b45a27cba4e218c06e3ebb543b54c_40)] [added: [19](#ib082370cb4864a2aaf9bf91ded690616_40)] | | |

| [Item [removed: 7A.](#i676b45a27cba4e218c06e3ebb543b54c_55)] [added: 7A.](#ib082370cb4864a2aaf9bf91ded690616_55)] | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i676b45a27cba4e218c06e3ebb543b54c_55)] [added: Risk](#ib082370cb4864a2aaf9bf91ded690616_55)] | | | [removed: [27](#i676b45a27cba4e218c06e3ebb543b54c_55)] [added: [27](#ib082370cb4864a2aaf9bf91ded690616_55)] | | |

| [Item [removed: 8.](#i676b45a27cba4e218c06e3ebb543b54c_58)] [added: 8.](#ib082370cb4864a2aaf9bf91ded690616_58)] | | | [Financial Statements and Supplementary [removed: Data](#i676b45a27cba4e218c06e3ebb543b54c_58)] [added: Data](#ib082370cb4864a2aaf9bf91ded690616_58)] | | | [removed: [28](#i676b45a27cba4e218c06e3ebb543b54c_58)] [added: [28](#ib082370cb4864a2aaf9bf91ded690616_58)] | | |

| [Item [removed: 9.](#i676b45a27cba4e218c06e3ebb543b54c_175)] [added: 9.](#ib082370cb4864a2aaf9bf91ded690616_142)] | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i676b45a27cba4e218c06e3ebb543b54c_175)] [added: Disclosure](#ib082370cb4864a2aaf9bf91ded690616_142)] | | | [removed: [57](#i676b45a27cba4e218c06e3ebb543b54c_175)] [added: [58](#ib082370cb4864a2aaf9bf91ded690616_142)] | | |

| [Item [removed: 9A.](#i676b45a27cba4e218c06e3ebb543b54c_178)] [added: 9A.](#ib082370cb4864a2aaf9bf91ded690616_145)] | | | [Controls and [removed: Procedures](#i676b45a27cba4e218c06e3ebb543b54c_178)] [added: Procedures](#ib082370cb4864a2aaf9bf91ded690616_145)] | | | [removed: [57](#i676b45a27cba4e218c06e3ebb543b54c_178)] [added: [58](#ib082370cb4864a2aaf9bf91ded690616_145)] | | |

| [Item [removed: 9B.](#i676b45a27cba4e218c06e3ebb543b54c_181)] [added: 9B.](#ib082370cb4864a2aaf9bf91ded690616_148)] | | | [Other [removed: Information](#i676b45a27cba4e218c06e3ebb543b54c_181)] [added: Information](#ib082370cb4864a2aaf9bf91ded690616_148)] | | | [removed: [58](#i676b45a27cba4e218c06e3ebb543b54c_181)] [added: [58](#ib082370cb4864a2aaf9bf91ded690616_148)] | | |

| [Item [removed: 10.](#i676b45a27cba4e218c06e3ebb543b54c_190)] [added: 10.](#ib082370cb4864a2aaf9bf91ded690616_157)] | | | [Directors, Executive Officers and Corporate [removed: Governance](#i676b45a27cba4e218c06e3ebb543b54c_190)] [added: Governance](#ib082370cb4864a2aaf9bf91ded690616_157)] | | | [removed: [60](#i676b45a27cba4e218c06e3ebb543b54c_190)] [added: [60](#ib082370cb4864a2aaf9bf91ded690616_157)] | | |

| [Item [removed: 11.](#i676b45a27cba4e218c06e3ebb543b54c_193)] [added: 11.](#ib082370cb4864a2aaf9bf91ded690616_160)] | | | [Executive [removed: Compensation](#i676b45a27cba4e218c06e3ebb543b54c_193)] [added: Compensation](#ib082370cb4864a2aaf9bf91ded690616_160)] | | | [removed: [60](#i676b45a27cba4e218c06e3ebb543b54c_193)] [added: [60](#ib082370cb4864a2aaf9bf91ded690616_160)] | | |

| [Item [removed: 12.](#i676b45a27cba4e218c06e3ebb543b54c_196)] [added: 12.](#ib082370cb4864a2aaf9bf91ded690616_163)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i676b45a27cba4e218c06e3ebb543b54c_196)] [added: Matters](#ib082370cb4864a2aaf9bf91ded690616_163)] | | | [removed: [61](#i676b45a27cba4e218c06e3ebb543b54c_196)] [added: [61](#ib082370cb4864a2aaf9bf91ded690616_163)] | | |

| [Item [removed: 13.](#i676b45a27cba4e218c06e3ebb543b54c_199)] [added: 13.](#ib082370cb4864a2aaf9bf91ded690616_166)] | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#i676b45a27cba4e218c06e3ebb543b54c_199)] [added: Independence](#ib082370cb4864a2aaf9bf91ded690616_166)] | | | [removed: [61](#i676b45a27cba4e218c06e3ebb543b54c_199)] [added: [61](#ib082370cb4864a2aaf9bf91ded690616_166)] | | |

| [Item [removed: 14.](#i676b45a27cba4e218c06e3ebb543b54c_202)] [added: 14.](#ib082370cb4864a2aaf9bf91ded690616_169)] | | | [Principal Accounting Fees and [removed: Services](#i676b45a27cba4e218c06e3ebb543b54c_202)] [added: Services](#ib082370cb4864a2aaf9bf91ded690616_169)] | | | [removed: [61](#i676b45a27cba4e218c06e3ebb543b54c_202)] [added: [61](#ib082370cb4864a2aaf9bf91ded690616_169)] | | |

| [Item [removed: 15.](#i676b45a27cba4e218c06e3ebb543b54c_208)] [added: 15.](#ib082370cb4864a2aaf9bf91ded690616_175)] | | | [Exhibits, Financial Statement [removed: Schedules](#i676b45a27cba4e218c06e3ebb543b54c_208)] [added: Schedules](#ib082370cb4864a2aaf9bf91ded690616_175)] | | | [removed: [62](#i676b45a27cba4e218c06e3ebb543b54c_208)] [added: [62](#ib082370cb4864a2aaf9bf91ded690616_175)] | | |

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

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

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

| [Part I](#ib082370cb4864a2aaf9bf91ded690616_10) | | | | | | | | |

| [Part II](#ib082370cb4864a2aaf9bf91ded690616_31) | | | | | | | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#ib082370cb4864a2aaf9bf91ded690616_1632) | | | [58](#ib082370cb4864a2aaf9bf91ded690616_1632) | | |

| [Part III](#ib082370cb4864a2aaf9bf91ded690616_154) | | | | | | | | |

| [Part IV](#ib082370cb4864a2aaf9bf91ded690616_172) | | | | | | | | |

| | | | | | | | | |

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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 10-K or any amendment to this Form 10-K.

| [Part I](#i676b45a27cba4e218c06e3ebb543b54c_10) | | | | | | | | |

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

| [Part III](#i676b45a27cba4e218c06e3ebb543b54c_187) | | | | | | | | |

| [Part IV](#i676b45a27cba4e218c06e3ebb543b54c_205) | | | | | | | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

Properties utilized by us at December 31, [removed: 2020] [added: 2021] were as follows:

In this segment, we have [removed: 16] [added: 19] manufacturing plants located in [removed: eight] [added: nine] states and two non-U.S. countries, of which [removed: 14] [added: 17] are owned directly by us or our subsidiaries and two are leased from outside parties.

The terms of leases in effect at December 31, [removed: 2020] [added: 2021,] expire between [removed: 2021] [added: 2023] and 2025.

The terms of leases in effect at December 31, [removed: 2020] [added: 2021,] expire between 2022 and 2025.

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

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 [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

| [removed: Paul R. Dana (58)] [added: Samuel M. Carver (53)] | | | | | | Senior Vice President – Global Operations | | | | | | [removed: 2019] [added: 2021] to Present | | |

| [added: Anindadeb V. DasGupta (56)] | | | | | | Senior Vice President [removed: – Global Manufacturing] | | | | | | [removed: 2016 to] 2018 [added: to Present] | | |

| [removed: Anindadeb V. DasGupta (55)] [added: Wallace E. Goodwin (66)] | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

| [removed: Wallace E. Goodwin (65)] [added: D. Samuel Karge (47)] | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

| Robert J. Heideman [removed: (54)] [added: (55)] | | | | | | Senior Vice President – Chief Technology Officer | | | | | | 2013 to Present | | |

| [removed: D. Samuel Karge (46)] [added: David R. Warren (58)] | | | | | | Senior Vice President | | | | | | [removed: 2018] [added: 2017] to Present | | |

| Daniel L. Kempken [removed: (48)] [added: (49)] | | | | | | Senior Vice President – Strategy and Corporate Development | | | | | | 2019 to Present | | |

| Charles T. Lauber [removed: (58)] [added: (59)] | | | | | | Executive Vice President and Chief Financial Officer | | | | | | 2019 to Present | | |

| Mark A. Petrarca [removed: (57)] [added: (58)] | | | | | | Senior Vice President – Human Resources and Public Affairs | | | | | | 2006 to Present | | |

| Jack Qiu [removed: (48)] [added: (49)] | | | | | | Senior Vice President - A. O. Smith China | | | | | | 2020 to Present | | |

| S. Melissa Scheppele [removed: (58)] [added: (59)] | | | | | | Senior Vice President - Chief Information Officer | | | | | | 2020 to Present | | |

| James F. Stern [removed: (58)] [added: (59)] | | | | | | Executive Vice President, General Counsel and Secretary | | | | | | 2007 to Present | | |

| | | | | | | Managing Director – [removed: A.O.] [added: A. O.] Smith Water Products Company B.V. | | | | | | 2004 to 2008 | | |

| Kevin J. Wheeler [removed: (61)] [added: (62)] | | | | | | Chairman | | | | | | 2020 to Present | | |

| | | | | | | Vice President – North America Manufacturing | | | | | | 2011 to 2021 | | |

| | | | | | | Director - Operations | | | | | | 2007 to 2011 | | |

| | | | | | | Plant Manager | | | | | | 2006 to 2007 | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

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| 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 | | |

| | | | | | | 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 | | |

| David R. Warren (57) | | | | | | Senior Vice President | | | | | | 2017 to Present | | |

As of January [removed: 29, 2021,] [added: 31, 2022,] the approximate number of stockholders of record of Common Stock and Class A Common Stock were [removed: 568] [added: 552] and [removed: 155,] [added: 146,] respectively.

Dividends declared on the common stock are shown in Note [removed: 18] [added: 11] of Notes to Consolidated Financial Statements appearing elsewhere herein.

In [added: 2021,] the [removed: second quarter of 2019, our] Board of Directors approved adding [removed: 3,000,000] [added: 7,000,000] shares of Common Stock to an existing discretionary share repurchase authority.

In [removed: 2020,] [added: 2021,] we repurchased [removed: 1,348,391] [added: 5,087,467] shares at an average price of [removed: $42.02] [added: $72.03] per share and at a total cost of [removed: $56.7] [added: $366.5] million.

As of December 31, [removed: 2020,] [added: 2021,] there were [removed: 1,613,824] [added: 3,526,357] shares remaining on the existing repurchase authorization.

On January [removed: 27, 2021,] [added: 25, 2022,] the Board of Directors approved adding [removed: 7,000,000] [added: 3,500,000] shares of common stock to the existing discretionary share repurchase authority.

Including the additional shares, we have approximately [removed: 8.6] [added: 6.8] million shares available for [removed: repurchase.][added: repurchase as of the date of the Board of Directors' approval.]

We [removed: currently] intend to spend approximately $400 million to repurchase [removed: common stock] [added: Common Stock] in [removed: 2021] [added: 2022] through a combination of 10b5-1 plans and open market purchases.

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

[removed: ][added: ]

| Company/Index | | | [removed: 12/31/15] [added: 12/31/16] | | | | | | [removed: 12/31/16] [added: 12/31/17] | | | | | | [removed: 12/31/17] [added: 12/31/18] | | | | | | [removed: 12/31/18] [added: 12/31/19] | | | | | | [removed: 12/31/19] [added: 12/31/20] | | | | | | [removed: 12/31/20] [added: 12/31/21] | | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | | | [removed: 118.9] [added: 121.0] | | | | | | [removed: 143.9] [added: 104.9] | | | | | | [removed: 124.7] [added: 135.8] | | | | | | [removed: 161.4] [added: 150.7] | | | | | | 179.2 | | |

After a blackout period on share repurchase activity in the third quarter of 2021 related to the Giant acquisition, we resumed our repurchases in early November.

From December 31, 2016 to December 31, 2021

| A. O. Smith Corporation | | | 100.0 | | | | | | 130.8 | | | | | | 92.3 | | | | | | 104.9 | | | | | | 123.2 | | | | | | 196.0 | | |

| S&P 500 Index | | | 100.0 | | | | | | 121.8 | | | | | | 116.5 | | | | | | 153.2 | | | | | | 181.4 | | | | | | 233.4 | | |

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

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 | | |

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

This item is no longer required as we have adopted the changes to Item 301 of Regulation S-K contained in the Securities and Exchange Commission's Release No. 33-10890.

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| (dollars in millions, except per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017(1) | | | | | | 2016(2) | | |

| Net sales | | | $ | 2,895.3 | | | | | $ | 2,992.7 | | | | | $ | 3,187.9 | | | | | $ | 2,996.7 | | | | | $ | 2,685.9 | |

| Net earnings(1) | | | $ | 344.9 | | | | | $ | 370.0 | | | | | $ | 444.2 | | | | | $ | 296.5 | | | | | $ | 326.5 | |

| Basic earnings per share of common stock(1,2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net earnings | | | $ | 2.13 | | | | | $ | 2.24 | | | | | $ | 2.60 | | | | | $ | 1.72 | | | | | $ | 1.87 | |

| Diluted earnings per share of common stock(1,2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net earnings | | | $ | 2.12 | | | | | $ | 2.22 | | | | | $ | 2.58 | | | | | $ | 1.70 | | | | | $ | 1.85 | |

| Cash dividends per common share(2) | | | $ | 0.98 | | | | | $ | 0.90 | | | | | $ | 0.76 | | | | | $ | 0.56 | | | | | $ | 0.48 | |

| | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | 2016 | | |

| Total assets | | | $ | 3,160.7 | | | | | $ | 3,058.0 | | | | | $ | 3,071.5 | | | | | $ | 3,197.4 | | | | | $ | 2,891.0 | |

| Long-term debt(3) | | | 106.4 | | | | | | 277.2 | | | | | | 221.4 | | | | | | 402.9 | | | | | | 316.4 | | |

| Total stockholders’ equity | | | 1,848.3 | | | | | | 1,666.8 | | | | | | 1,717.0 | | | | | | 1,644.9 | | | | | | 1,511.4 | | |

(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.

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.

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.

(3)Excludes the current portion of long-term debt.

We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: 2020,] [added: 2021,] 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: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] 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: 2020,] [added: 2021,] based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 12, 2021] [added: 11, 2022] expressed an unqualified opinion thereon.

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

| *Description of the Matter* | | | | | | At December 31, [removed: 2020,] [added: 2021,] the Company’s product warranty liability was [removed: $142.3] [added: $184.4] 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. | | |

| *How We Addressed the Matter in our Audit* | | | | | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s product warranty liability calculation. For example, we tested controls over management’s review of the product warranty liability calculation, including the significant assumptions and the data inputs to the calculation. To test 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 [removed: product.] [added: product and assessed the impact of projected changes in significant product costs.] 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: 2021 | | | | | |] 2020 | | | | | | 2019 | | |

| Cash and cash equivalents | | | $ | [removed: 573.1] [added: 443.3] | | | | | $ | [removed: 374.0] [added: 573.1] | |

| Marketable securities | | | [removed: 116.5] [added: 188.1] | | | | | | [removed: 177.4] [added: 116.5] | | |

| Receivables | | | [removed: 585.0] [added: 634.4] | | | | | | [removed: 589.5] [added: 585.0] | | |

| Inventories | | | [removed: 300.1] [added: 447.7] | | | | | | [removed: 303.0] [added: 300.1] | | |

| Other current assets | | | [removed: 43.3] [added: 39.1] | | | | | | [removed: 56.5] [added: 43.3] | | |

| Total Current Assets | | | [removed: 1,618.0] [added: 1,752.6] | | | | | | [removed: 1,500.4] [added: 1,618.0] | | |

| Net property, plant and equipment | | | [removed: 541.3] [added: 606.7] | | | | | | [removed: 545.4] [added: 541.3] | | |

| Goodwill | | | [removed: 546.8] [added: 627.8] | | | | | | [removed: 546.0] [added: 546.8] | | |

| Other intangibles | | | [removed: 323.9] [added: 364.8] | | | | | | [removed: 338.4] [added: 323.9] | | |

| Operating lease assets | | | [removed: 41.6] [added: 32.5] | | | | | | [removed: 46.9] [added: 41.6] | | |

| Other assets | | | [removed: 89.1] [added: 90.0] | | | | | | [removed: 80.9] [added: 89.1] | | |

| Total Assets | | | $ | [removed: 3,160.7] [added: 3,474.4] | | | | | $ | [removed: 3,058.0] [added: 3,160.7] | |

| Trade payables | | | $ | [removed: 595.2] [added: 745.9] | | | | | $ | [removed: 509.6] [added: 595.2] | |

| Accrued payroll and benefits | | | [removed: 74.6] [added: 113.4] | | | | | | [removed: 64.6] [added: 74.6] | | |

| Accrued liabilities | | | [removed: 161.9] [added: 181.8] | | | | | | [removed: 143.7] [added: 161.9] | | |

| Product warranties | | | [removed: 47.8] [added: 70.9] | | | | | | [removed: 41.8] [added: 47.8] | | |

| Total Current Liabilities | | | [removed: 886.3] [added: 1,118.8] | | | | | | [removed: 766.5] [added: 886.3] | | |

| Long-term debt | | | [removed: 106.4] [added: 189.9] | | | | | | [removed: 277.2] [added: 106.4] | | |

| Product warranties | | | [removed: 94.5] [added: 113.5] | | | | | | [removed: 92.4] [added: 94.5] | | |

| Pension liabilities | | | [removed: 13.6] [added: 15.9] | | | | | | [removed: 27.8] [added: 13.6] | | |

| Long-term operating lease liabilities | | | [removed: 34.4] [added: 22.3] | | | | | | [removed: 38.7] [added: 34.4] | | |

| Other liabilities | | | [removed: 177.2] [added: 181.8] | | | | | | [removed: 188.6] [added: 177.2] | | |

| Total Liabilities | | | [removed: 1,312.4] [added: 1,642.2] | | | | | | [removed: 1,391.2] [added: 1,312.4] | | |

| Class A Common Stock (shares issued [removed: 26,168,513] [added: 26,104,441] and [removed: 26,180,885)] [added: 26,168,513)] | | | [removed: 130.8] [added: 130.5] | | | | | | [removed: 130.9] [added: 130.8] | | |

| Common Stock (shares issued [removed: 164,539,081] [added: 164,603,153] and [removed: 164,526,709)] [added: 164,539,081)] | | | [removed: 164.6] [added: 164.7] | | | | | | [removed: 164.5] [added: 164.6] | | |

| Capital in excess of par value | | | [removed: 520.4] [added: 545.2] | | | | | | [removed: 509.0] [added: 520.4] | | |

| Retained earnings | | | [removed: 2,509.6] [added: 2,826.6] | | | | | | [removed: 2,323.4] [added: 2,509.6] | | |

| Accumulated other comprehensive loss | | | [removed: (321.2)] [added: (331.4)] | | | | | | [removed: (348.3)] [added: (321.2)] | | |

| Treasury stock at cost | | | [removed: (1,155.9)] [added: (1,503.4)] | | | | | | [removed: (1,112.7)] [added: (1,155.9)] | | |

| Total Stockholders’ Equity | | | [added: $ | 1,832.2 | | | | | $ |] 1,848.3 | | | | | [added: $] | 1,666.8 | | [removed: |]

| Total Liabilities and Stockholders’ Equity | | | $ | [removed: 3,160.7] [added: 3,474.4] | | | | | $ | [removed: 3,058.0] [added: 3,160.7] | |

| | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Net sales | | | $ | [removed: 2,895.3] [added: 3,538.9] | | | | | $ | [removed: 2,992.7] [added: 2,895.3] | | | | | $ | [removed: 3,187.9] [added: 2,992.7] | |

February 11, 2022

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

| | | | 2021 | | | | | | 2020 | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

| Acquisitions of businesses | | | (207.6) | | | | | | — | | | | | | (107.0) | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

| Foreign currency translation adjustments | | | 3.4 | | | | | | 18.1 | | | | | | (1.3) | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

The increase in our reserve for product warranties in 2021 compared to the prior year was primarily due to increased steel prices and the acquisition of Giant Factories, Inc. (Giant).

Refer to Note 3, "Acquisitions", for additional information regarding the acquisition of Giant.

| Years ended December 31 (dollars in millions) | | | 2021 | | | | | | 2020 | | |

| Acquired obligations | | | 12.2 | | | | | | — | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

In November 2021, the Financial Accounting Standards Board (FASB) amended ASC 832, *Government Assistance* (issued under Accounting Standards Update (ASU) 2021-10, "Disclosures by Business Entities about Government Assistance").

This amendment requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements.

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

quality dealers as well as directly to consumers including through internet sales channels.

(1)Includes the results of Giant from October 19, 2021, the date of acquisition.

Acquisitions

*2021 Acquisitions*

On October 19, 2021, the Company acquired 100 percent of the shares and related assets of Giant, a Canada-based manufacturer of residential and commercial water heaters.

The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities.

Giant is included in the North America segment.

In addition, the Company incurred acquisition costs of approximately $1.3 million.

The cash purchase price is preliminary and subject to customary adjustments.

The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date.

The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition.

Of the $53.8 million of acquired identifiable intangible assets, $43.9 million has been assigned to trademarks that are not subject to amortization and $9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $0.7 million has been assigned to non-compete agreements which are amortized over five years.

The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.

| October 19, 2021 (dollars in millions) | | | | | |

| Current assets, net of cash acquired | | | $ | 60.1 | |

| Property, plant and equipment | | | 55.8 | | |

| Intangible assets | | | 53.8 | | |

| Goodwill | | | 77.6 | | |

| Total assets acquired | | | 247.3 | | |

| Current liabilities | | | (39.2) | | |

| Long Term liabilities | | | (9.5) | | |

| | | | | | | | | |

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

February 12, 2021

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

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

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

This amendment simplifies the test for goodwill impairment by only requiring an entity to perform an annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount that the carrying amount exceeds the reporting unit’s fair value.

Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

In June 2016, the FASB issued ASC 326, *Financial Instruments – Credit Losses* (issued under ASU 2016-13) which modifies the measurement of expected credit losses on certain financial instruments.

The Company adopted ASU 2016-13 on January 1, 2020 and the adoption did not have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

performance obligations that are material in the context of the contract.

to water heater products and related parts.

During 2020, the Company released $3.9 million of the escrow to the previous owners of Water-Right.

The remaining balance of $0.1 million is scheduled to be disbursed in the second quarter of 2021.

Includes variable lease cost of $1.6 million for the year ended December 31, 2020.

Includes short-term lease expense of $2.0 million for the year ended December 31, 2019.

Includes variable lease cost of $2.1 million for the year ended December 31, 2019.

Rent expense, including payments under operating leases was $24.0 million in 2018.

| 2021 | | | $ | 12.4 | |

| 2022 | | | 10.2 | | |

| 2023 | | | 5.6 | | |

| 2024 | | | 4.6 | | |

| 2025 | | | 2.9 | | |

| After 2025 | | | 21.0 | | |

The Company’s severance and restructuring actions were completed in 2020.

On March 21, 2018, the Company announced a move of manufacturing operations from its Renton, Washington facility to other U.S. facilities.

The Company recognized $6.7 million of restructuring and impairment expenses, comprised of $4.0 million of severance and compensation related costs, lease exit costs of $2.1 million and impairment charges related to long-lived assets totaling $0.6 million, as well as a corresponding $1.7 million tax benefit related to the charges.

As of December 31, 2019, the consolidation of the Renton facility to other U.S. facilities was complete.

The following table presents an analysis of the Company’s restructuring reserve for the years ended December 31, 2020, 2019, and 2018:

| (dollars in millions) | | | Severance Costs | | | | | | Restructuring Expenses | | | | | | Fixed Assets Impairment | | | | | | Total | | |

| Charges | | | 4.0 | | | | | | 2.1 | | | | | | 0.6 | | | | | | 6.7 | | |

| Cash payments and disposals | | | (3.8) | | | | | | (0.8) | | | | | | (0.6) | | | | | | (5.2) | | |

| Balance at December 31, 2018 | | | 0.2 | | | | | | 1.3 | | | | | | — | | | | | | 1.5 | | |

| Cash payments and disposals | | | (0.2) | | | | | | (0.8) | | | | | | — | | | | | | (1.0) | | |

| Charges | | | 6.8 | | | | | | 0.9 | | | | | | — | | | | | | 7.7 | | |

| Cash payments and disposals | | | (5.1) | | | | | | (1.4) | | | | | | — | | | | | | (6.5) | | |

| | | | $ | 300.1 | | | | | $ | 303.0 | |

The Company recognized after-tax LIFO income of $(0.2) million, $(0.7) million and $(0.4) million in 2020, 2019 and 2018, respectively.

| | | | 1,222.6 | | | | | | 1,156.9 | | |

| | | | $ | 541.3 | | | | | $ | 545.4 | |

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework [added: (2013)] issued by the Committee of Sponsoring Organizations of the Treadway [removed: Commission (2013 framework).][added: Commission.]

Based on this evaluation, our management has concluded that, as of December 31, [removed: 2020,] [added: 2021,] 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: 2020] [added: 2021] as stated in their report which is included herein.

There have been no changes in the [removed: company’s] [added: Company’s] internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the year ended December 31, [removed: 2020] [added: 2021] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Consistent with guidance issued by the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting in the year of acquisition, management excluded an assessment of the effectiveness of the Company’s internal control over financial reporting related to Giant Factories, Inc. The acquisition constituted 7.1 percent and 10.9 percent of total assets and net assets, respectively, as of December 31, 2021 and 0.6 percent and 0.5 percent of net sales and net earnings, respectively.

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

[Table of Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

A. O. Smith Corporation

Opinion on Internal Control over Financial Reporting

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

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 12, 2021

PART III

None.

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

A. O. Smith Corporation

Opinion on Internal Control over Financial Reporting

We have audited A. O. Smith Corporation’s internal control over financial reporting as of December 31, 2021, 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, 2021, based on the COSO criteria.

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 Giant Factories, Inc., which are included in the 2021 consolidated financial statements of the Company and constituted 7.1 percent and 10.9 percent of total assets and net assets, respectively, as of December 31, 2021 and 0.6 percent and 0.5 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 Giant Factories, Inc.

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, 2021 and 2020, 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, 2021, and the related notes and financial statement schedule listed in the index at Item 15(a) and our report dated February 11, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 11, 2022

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

PART III

The information included under the headings “Election of Directors” and “Board Committees” in our definitive Proxy Statement for the [removed: 2021] [added: 2022] 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.

We have a separately designated Audit Committee on which [removed: Gene C.][added: Idelle K.]

Smith and [removed: Idelle K.][added: Gene C.]

[removed: Wolf] [added: Wulf] serve, with [removed: Mr. Wulf,] [added: Ms. Wolf,] as Chairperson.

All members are independent under applicable SEC and New York Stock Exchange rules; the Board of Directors of the [removed: company] [added: Company] has concluded that [added: Mr. Larsen,] Ms. Wolf and Mr. Wulf are “audit committee financial experts” in accordance with SEC rules.

The information included under the heading “Compliance with Section 16(a) of the Securities Exchange Act” in our definitive Proxy Statement for the [removed: 2021] [added: 2022] 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.

Wolf, Michael M.

Larsen, Mark D.

Wulf, Ronald D.

Brown, Mark D.

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 [removed: company’s] [added: Company’s] definitive Proxy Statement for the [removed: 2021] [added: 2022] 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.

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

The information included under the headings “Principal Stockholders” and “Security Ownership of Directors and Management” in our definitive Proxy Statement for the [removed: 2021] [added: 2022] 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 following table provides information about our equity compensation plans as of December 31, [removed: 2020.][added: 2021.]

(1)Consists of [added: 2,252,498] shares subject to stock options, [removed: 2,785,654] [added: 363,054] shares subject to employee share units and [removed: 365,661] [added: 285,214] shares subject to director share units.

| Equity compensation plans approved by security holders | | | 2,615,552 | | | (1) | | | | | | $ | 47.73 | | (2) | | | | | | 2,962,559 | | | (3) | | |

| Total | | | 2,615,552 | | | | | | | | | 47.73 | | | | | | | | | 2,962,559 | | | | | |

| Equity compensation plans approved by security holders | | | 3,151,315 | | | (1) | | | | | | 43.01 | | | (2) | | | | | | 3,395,216 | | | (3) | | |

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

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 [removed: 2021] [added: 2022] 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 [removed: 2021] [added: 2022] 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 [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

Our principal accountant is Ernst & Young, LLP (PCAOB ID: 42).

| [Consolidated Balance Sheets at December 31, [removed: 2020 and 2019](#i676b45a27cba4e218c06e3ebb543b54c_61)] [added: 202](#ib082370cb4864a2aaf9bf91ded690616_61)[1](#ib082370cb4864a2aaf9bf91ded690616_61) [and](#ib082370cb4864a2aaf9bf91ded690616_61) [20](#ib082370cb4864a2aaf9bf91ded690616_61)[20](#ib082370cb4864a2aaf9bf91ded690616_61)] | | | [removed: [30](#i676b45a27cba4e218c06e3ebb543b54c_61)] [added: [30](#ib082370cb4864a2aaf9bf91ded690616_61)] | | |

| For each of the three years in the period ended December 31, [removed: 2020:] [added: 2021:] | | | | | |

| [‑ Consolidated Statement of [removed: Earnings](#i676b45a27cba4e218c06e3ebb543b54c_67)] [added: Earnings](#ib082370cb4864a2aaf9bf91ded690616_64)] | | | [removed: [31](#i676b45a27cba4e218c06e3ebb543b54c_67)] [added: [31](#ib082370cb4864a2aaf9bf91ded690616_64)] | | |

| [‑ Consolidated Statement of Comprehensive [removed: Earnings](#i676b45a27cba4e218c06e3ebb543b54c_70)] [added: Earnings](#ib082370cb4864a2aaf9bf91ded690616_67)] | | | [removed: [31](#i676b45a27cba4e218c06e3ebb543b54c_70)] [added: [31](#ib082370cb4864a2aaf9bf91ded690616_67)] | | |

| [‑ Consolidated Statement of Cash [removed: Flows](#i676b45a27cba4e218c06e3ebb543b54c_76)] [added: Flows](#ib082370cb4864a2aaf9bf91ded690616_70)] | | | [removed: [32](#i676b45a27cba4e218c06e3ebb543b54c_76)] [added: [32](#ib082370cb4864a2aaf9bf91ded690616_70)] | | |

| [‑ Consolidated Statement of Stockholders’ [removed: Equity](#i676b45a27cba4e218c06e3ebb543b54c_79)] [added: Equity](#ib082370cb4864a2aaf9bf91ded690616_73)] | | | [removed: [33](#i676b45a27cba4e218c06e3ebb543b54c_79)] [added: [33](#ib082370cb4864a2aaf9bf91ded690616_73)] | | |

| [Notes to Consolidated Financial [removed: Statements](#i676b45a27cba4e218c06e3ebb543b54c_85)] [added: Statements](#ib082370cb4864a2aaf9bf91ded690616_76)] | | | [removed: [34](#i676b45a27cba4e218c06e3ebb543b54c_85)\-57] [added: [34](#ib082370cb4864a2aaf9bf91ded690616_76)\-57] | | |

| [Schedule II—Valuation and Qualifying [removed: Accounts](#i676b45a27cba4e218c06e3ebb543b54c_214)] [added: Accounts](#ib082370cb4864a2aaf9bf91ded690616_181)] | | | [removed: [66](#i676b45a27cba4e218c06e3ebb543b54c_214)] [added: [66](#ib082370cb4864a2aaf9bf91ded690616_181)] | | |

3.Exhibits - see the Index to Exhibits on pages [removed: 62-63] [added: 63-64] 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 [removed: 10(m)] [added: 10(n)] in the Index to Exhibits.

[Table of [removed: Contents](#i676b45a27cba4e218c06e3ebb543b54c_7)][added: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)]

| | | | [removed: (e)] [added: (f)] | | | [A. O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit [removed: 4.5] [added: 10] of [removed: Form S-8 Registration Statement filed by] the [removed: corporation] [added: quarterly report] on [removed: July 30, 2007 (Reg. No. 333-144950).](https://www.sec.gov/Archives/edgar/data/91142/000119312507165182/dex45.htm)] [added: Form 10-Q for the quarter ended March 31, 2016 (for grants between February 2016 and January 2021).](https://www.sec.gov/Archives/edgar/data/91142/000119312516583538/d156476dex10.htm)] | | |

| | | | [removed: (f)] [added: (e)] | | | [A. O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended March 31, [removed: 2012.](https://www.sec.gov/Archives/edgar/data/91142/000119312512214980/d338089dex101.htm)] [added: 2012 (for grants between February 2012 and January 2016).](https://www.sec.gov/Archives/edgar/data/91142/000119312512214980/d338089dex101.htm)] | | |

| | | | [removed: (g)] [added: (l)] | | | [removed: [A.] [added: [Form of A.] O. Smith Corporation [removed: Executive Incentive Compensation] [added: Special Retention] Award Agreement, incorporated by reference to Exhibit [removed: 10] [added: 10.1] of the quarterly report on Form 10-Q for the quarter ended March 31, [removed: 2016.](https://www.sec.gov/Archives/edgar/data/91142/000119312516583538/d156476dex10.htm)] [added: 2011.](https://www.sec.gov/Archives/edgar/data/91142/000119312511133654/dex101.htm)] | | |

| | | | [removed: (h)] [added: (i)] | | | [removed: [A.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10h.htm)[O.] [added: [A.O.] Smith Corporation Executive Incentive Compensation Award [removed: Agreement](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10h.htm)[](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10h.htm)] [added: Agreement (for grants after February 2022).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10i.htm)] | | |

| | | | [removed: (i)] [added: (j)] | | | [removed: [A.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10i.htm)[O.] [added: [A.O.] Smith Corporation Executive Incentive Compensation Award Agreement [removed: (International)](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10i.htm)[](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex10i.htm)] [added: (International) (for grants after February 2022).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10j.htm)] | | |

| | | | [removed: (j)] [added: (k)] | | | [A. O. Smith Corporation Senior Leadership Severance Plan, incorporated by reference to Exhibit 10.1 of the quarterly report for Form 10-Q for the quarter ended June 30, 2009.](https://www.sec.gov/Archives/edgar/data/91142/000119312509163445/dex101.htm) | | |

| | | | [removed: (k)] [added: (n)] | | | [removed: [Form] [added: [Summary] of [removed: A. O. Smith Corporation Special Retention Award Agreement,] [added: Directors’ Compensation] incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended [removed: March 31, 2011.](https://www.sec.gov/Archives/edgar/data/91142/000119312511133654/dex101.htm)] [added: June 30, 20](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000131/aos-20210630xex101.htm)[21](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000131/aos-20210630xex101.htm)[.](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000131/aos-20210630xex101.htm)] | | |

| | | | [removed: (l)] [added: (m)] | | | [Stockholder Agreement dated as of December 9, 2008, between A. O. Smith Corporation and each Smith Investment Company stockholder who becomes a signatory thereto, incorporated by reference to Exhibit 10.3 of the current report on Form 8-K dated December 9, 2008.](https://www.sec.gov/Archives/edgar/data/91142/000119312508250700/dex103.htm) | | |

| (21) | | | | | | [removed: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex21.htm)] [added: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex21.htm)] | | |

| (23) | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex23.htm)] | | |

| (31.1) | | | | | | [Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February [removed: 12, 2021.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex311.htm)] [added: 11, 2022.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex311.htm)] | | |

| (31.2) | | | | | | [Certification by the Executive Vice-President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February [removed: 12, 2021.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex312.htm)] [added: 11, 2022.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex312.htm)] | | |

| (32.1) | | | | | | [Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C. Section [removed: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex321.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex321.htm)] | | |

| (32.2) | | | | | | [Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C. Section [removed: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000025/aos-20201231xex322.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex322.htm)] | | |

| (101) | | | | | | The following materials from A. O. Smith Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2020] [added: 2021] are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] (ii) the Consolidated Statement of Earnings for the three years ended December 31, [removed: 2020,] [added: 2021,] (iii) the Consolidated Statement of Comprehensive Earnings for the three years ended December 31, [removed: 2020,] [added: 2021,] (iv) the Consolidated Statement of Cash Flows for the three years ended December 31, [removed: 2020,] [added: 2021,] (v) the Consolidated Statement of Stockholders’ Equity for the three years ended December 31, [removed: 2020] [added: 2021] and (vi) the Notes to Consolidated Financial Statements. | | |

| Date: February [removed: 12, 2021] [added: 11, 2022] | | | By: | | | | | | /s/ Kevin J. Wheeler | | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of February [removed: 12, 2021] [added: 11, 2022] by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| Vice President and Controller | | | | | | [removed: Helen E. Gurholt] [added: Benjamin A. Otchere] | | |

Years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018][added: 2019]

| Valuation allowance for trade and notes receivable | | | $ | [removed: 5.3] [added: 5.6] | | | | | $ | [removed: 1.5] [added: 4.2] | | | | | $ | [removed: —] [added: 0.8] | | | | | $ | [removed: (0.4)] [added: (1.1)] | | | | | $ | [removed: 6.4] [added: 9.5] | |

| Valuation allowance for deferred tax assets | | | [removed: 15.0] [added: 13.0] | | | | | | — | | | | | | — | | | | | | [removed: (1.9)] [added: (5.9)] | | | | | | [removed: 13.1] [added: 7.1] | | |

| | | | (g) | | | [A.O. Smith Corporation Executive Incentive Compensation Award Agreement, incorporated by reference to Exhibit 10(h) of the annual report on Form 10-K for the fiscal year ended December 31, 2020 (for grants between February 2021 and January 2022).](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000025/aos-20201231xex10h.htm) | | |

| | | | (h) | | | [A.O. Smith Corporation Executive Incentive Compensation Award Agreement (International), incorporated by reference to Exhibit 10(i) of the annual report on Form 10-K for the fiscal year ended December 31, 2020 (for grants between February 2021 and January 2022).](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000025/aos-20201231xex10i.htm) | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

| BENJAMIN A. OTCHERE | | | | | | /s/ Benjamin A. Otchere | | |

| VICTORIA M. HOLT | | | | | | /s/ Victoria M. Holt | | |

| Director | | | | | | Victoria M. Holt | | |

| MICHAEL M. LARSEN | | | | | | /s/ Michael M. Larsen | | |

| Director | | | | | | Michael M. Larsen | | |

| | | | | | | | | |

[Table of Contents](#ib082370cb4864a2aaf9bf91ded690616_7)

| 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | (m) | | | [Summary of Directors’ Compensation incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended June 30, 2019.](https://www.sec.gov/Archives/edgar/data/91142/000119312519216951/d19237dex101.htm) | | |

| HELEN E. GURHOLT | | | | | | /s/ Helen E. Gurholt | | |

| WILLIAM P. GREUBEL | | | | | | /s/ William P. Greubel | | |

| Director | | | | | | William P. Greubel | | |

| PAUL W. JONES | | | | | | /s/ Paul W. Jones | | |

| Director | | | | | | Paul W. Jones | | |

| 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |