A. O. Smith (AOS) 10-K risk factor changes: FY2022 vs FY2021

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

Significant increases in the cost of any of the key materials and components we purchase [removed: or delays in their delivery could] [added: would] 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 lag, [removed: particularly for the price increases that we implemented in 2021,] could negatively impact our profitability.

[removed: ■*The global coronavirus (COVID-19) pandemic, or other global public health pandemics,] [added: However, the COVID-19 pandemic and efforts to manage it, including those by governmental authorities,] could have a material adverse effect on our [removed: business,] [added: financial condition,] results of operations and [removed: financial condition*][added: cash flows.]

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[added: As a result of the COVID-19 pandemic, businesses and] commercial [removed: sector,] [added: spaces have experienced and may experience in the future, fluctuation in demand and in occupancy that may reduce demand for our products, and commercial sectors,] such as the restaurant and hospitality industries in which we have customers, [removed: will] [added: may] experience long-term shifts in consumer behavior which could negatively impact demand or capacity and may not return to pre-pandemic levels.

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

A decline in economic activity, such as [added: a] recession or economic 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, [removed: 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.

Such deterioration in economic conditions could arise from many factors or fears including public health [removed: crises or] [added: crises,] political [removed: instability.][added: instability or risk of government default.]

In addition, an increase in price levels generally or in particular industries (such as the [removed: recent] inflation in steel prices [added: in 2021] and [added: the recent inflation in other material 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.

■*Because approximately [removed: 26] [added: 22] percent of our [removed: net] sales in [removed: 2021] [added: 2022] were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business*

Our sales in China [removed: increased 24] [added: decreased five] percent in local currency in [removed: 2021] [added: 2022] compared to [removed: 2020.][added: 2021.]

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

Further expansion of the gas tankless portion of the North America market, which we believe was approximately [removed: 12] [added: 11] percent of the residential market segment in [removed: 2021,] [added: 2022,] could have an impact on our operating results.

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

Consumer preferences for products and the methods in which they purchase products are constantly changing based on, among other factors, cost, [added: performance,] convenience, environmental and social concerns and perceptions.

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

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

It is possible that we will not be able to develop new technologies, products or distribution [removed: channels] [added: channels, or do so on a timely basis,] to align with consumer purchasing behavior and consumer preferences, which could materially and adversely affect our financial condition, results of operations and cash flows.

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 [removed: 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: Two] [added: For example, two] of our manufacturing plants are located within a floodplain that has experienced past flooding events.

[removed: In addition,] [added: Apart from the potential impact on our operations,] 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: 36] [added: 34] percent of our [removed: net] sales in [removed: 2021] [added: 2022] 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: 6,800] [added: 5,200] of our [removed: 13,700] [added: 12,000] employees as of December 31, [removed: 2021] [added: 2022] were located in China.

At December 31, [removed: 2021,] [added: 2022,] approximately [removed: $608] [added: $472] million of cash and marketable securities were held by our foreign subsidiaries, substantially all of which were located in China.

International operations generally are subject to various risks, including: political, religious, and economic instability; local labor market conditions; new or increased tariffs or other trade restrictions, or changes to trade agreements; the impact of foreign government regulations, actions or policies; the effects of income taxes; governmental expropriation; the [added: changes or] imposition [added: of statutory restrictions which prohibit repatriation of cash; the imposition] or increases in withholding and other taxes on remittances and other payments by foreign subsidiaries; labor relations problems; the imposition of environmental or employment laws, or other restrictions or actions by foreign governments; and differences in business practices.

[removed: Net sales] [added: Sales] to our five largest customers represented approximately [removed: 41] [added: 39] percent of our sales in [removed: 2021.][added: 2022.]

Our customers may experience financial instability, affecting their ability to [removed: pay or] make [added: or pay for] 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 [added: 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 [added: further] decline in North American new residential [removed: construction, a decline in] [added: or] commercial construction or a decline in replacement-related volume of water heaters and [removed: boilers*][added: boilers, including a decline in demand for commercial spaces*]

Residential new construction activity in North America and industry-wide replacement-related volume of water heaters [removed: have shown] [added: had] growth [removed: which could decline] in [removed: the future.][added: 2020 and 2021, and then declined in 2022.]

Commercial construction activity in North America grew in [added: 2022 and] 2021 after declining in 2020.

We believe that the significant majority of the markets we serve are for [added: the] replacement of existing products, and residential water heater replacement volume was strong in [added: 2022 and] 2021.

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

[removed: We may experience them] [added: A successful attack] in the [removed: future, potentially with increasing frequency from increasingly sophisticated cyber threats that] [added: future] could 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 response plan in place in the event of a data breach and we [removed: continue to take steps] [added: have an active program] to maintain and improve data security and address these risks and uncertainties by implementing and improving internal controls, security technologies, insurance programs, network and data center resiliency and recovery processes.

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: $492] [added: $377] million of cash and marketable securities denominated in Chinese renminbi, incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar.

As a result, we are subject to risks associated with operating in foreign [removed: countries] [added: countries,] including fluctuations in currency exchange rates and interest rates, hyperinflation in some foreign countries [added: such as Turkey, where we currently have minor operations,] or global exchange rate instability or volatility that strengthens the U.S. dollar against foreign currencies.

[removed: As a result, an] [added: An] increase in the value of the U.S. dollar relative to the local currencies of our foreign [removed: markets] [added: markets, as experienced globally in the second half of 2022,] has [removed: had] [added: negatively affected our sales, profitability,] and [added: cash and cash equivalents balances and] could have [removed: a negative effect on our profitability.][added: such effects in the future.]

In addition to currency translation risks, we incur a currency transaction risk whenever one of our subsidiaries enters into [removed: either] a purchase or sale transaction using a currency different from the operating subsidiaries’ functional currency.

The COVID-19 pandemic continues to cause disruption to the global economy.

We continue to monitor the pandemic, and while periodic local increases and decreases in COVID-19 cases are likely, generally the restrictions due to and in response to the pandemic continue to relax in most locations.

Natural disasters and extreme weather conditions may disrupt the productivity of our facilities.

We maintain insurance coverage and have taken steps to mitigate these physical risks related to natural disasters and extreme weather conditions.

Pricing for our insurance program has remained at the prevailing market rate with no significant change in the current year’s premium rates from the prior year.

Also, to mitigate the risk of flooding, we recently completed an approximately 7,000-foot-long berm, flood gates, and pumping stations around our Ashland City, Tennessee facility, our largest manufacturing facility.

Despite our mitigation efforts, there is still the potential for natural disasters and extreme weather conditions to disrupt the productivity of our facilities.

Consumer preferences and broader trends, such as decarbonization and electrification efforts in response to climate change, may result in increased demand for higher efficiency products and/or more electric powered products.

Our 2022 sales in China were impacted by lower consumer demand driven by COVID-19 related disruptions.

Certain COVID-19 restrictions were lifted at the end of 2022 but could return.

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New residential housing starts in the U.S. are projected to decrease further in 2023 compared to 2022.

In addition, the acceptance of remote work arrangements could negatively impact demand for commercial construction.

We may experience them in the future, potentially with increasing frequency from increasingly

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sophisticated cyber threats.

In addition, as a result of the COVID-19 pandemic, remote work and remote access to our systems have increased, which may heighten these risks.

In 2022, the change in foreign currencies negatively impacted our sales and cash and cash equivalents by approximately $61 million and $21 million, respectively.

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We believe our products are currently efficient, safe and environment-friendly.

■*Our Environmental, Social, and Governance (ESG) commitments could result in additional costs, and our inability to achieve them could have an adverse impact on our reputation and performance*

We periodically communicate our strategies, commitments and targets related to ESG matters, including carbon emissions, diversity and inclusion, and human rights through the issuance of our ESG report.

Although we intend to meet these strategies, commitments and targets and are committed to advancing sustainable innovations in our industry, we may be unable to achieve them due to impacts on resources, operational costs, and technological advancements.

Failure to meet these sustainability requirements or targets could adversely impact our reputation as well as the demand for our products and adversely affect our business, financial condition and results of operations.

In addition, standards and processes for measuring and reporting carbon emissions and other sustainability metrics may change over time, result in inconsistent data, or result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.

Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related strategies, commitments and targets could negatively impact our reputation or performance.

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

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

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.

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

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.

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

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

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

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

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

- Failure of third parties on which we rely, including our suppliers, distributors, contractors and commercial banks, to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, 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 reduce demand for our products, resulting from actions taken by governments, businesses, and/or the general public in an effort to limit exposure to and spreading of such infectious diseases, such as travel restrictions, quarantines, and business shutdowns or slowdowns.

In addition, there is risk that the

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

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

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

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

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

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

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

relationships with additional customers could have a material adverse effect on our financial position, results of operations and cash flows.

*■Our pension plans may require future pension contributions which could limit our flexibility in managing our company*

The projected benefit obligation liability of our defined benefit pension plans of $842 million exceeded the fair value of the plan assets of $826 million by approximately $16 million at December 31, 2021.

U.S. employees hired after January 1, 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.

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.

We forecast that we will not be required to make a contribution to the plan in 2022, and we do not plan to make any voluntary contributions.

However, we cannot provide any assurance that contributions will not be required in the future.

Among the key assumptions inherent in our actuarially calculated pension plan obligation and pension plan expense are the discount rate and the expected rate of return on plan assets.

If interest rates and actual rates of return on invested plan assets were to decrease significantly, our pension plan obligations could increase materially.

The size of future required pension contributions could result in us dedicating a significant portion of our cash flows from operations to making contributions which could negatively impact our flexibility in managing our company.

In our North America segment, after approximately eight percent growth each year in 2021 and 2020, we [removed: expect] [added: believe that the wholesale] residential [removed: industry] water heater [removed: volumes will be down approximately two percent in 2022 compared with 2021 as we believe that] industry [removed: demand will normalize] [added: is returning] to [added: a] more historical growth [removed: rates.][added: rate following a channel inventory destocking that occurred primarily in the third quarter of 2022, which resulted in a decrease in industry demand of 12 percent compared to 2021.]

We believe that commercial water heater industry volumes will be flat to slightly [removed: down] [added: up] in [removed: 2022] [added: 2023] compared to [removed: 2021] [added: 2022] as [removed: new construction and replacement installations level off.][added: supply chain constraints continue to ease.]

We expect to see a [removed: ten] [added: 10 to 12] percent increase in our sales of boilers in [removed: 2022] [added: 2023] compared to [removed: 2021] [added: 2022] due to industry growth of [added: approximately] three to four [removed: percent,] [added: percent and] our expectation that the transition to higher-efficiency boilers will [removed: continue as well as our new product introductions.][added: continue.]

We anticipate sales of our North America water treatment products will increase [removed: 13] [added: approximately five] to [removed: 14] [added: seven] percent in [removed: 2022,] [added: 2023,] compared to [removed: 2021,] [added: 2022,] primarily driven by [removed: consumer demand for our point of use] [added: pricing] and [removed: point of entry water treatment systems.][added: consumer demand.]

Our guidance excludes the [removed: potential] impacts from [added: potential] future acquisitions and assumes the [removed: recent surge of the Omicron variant subsides during] [added: COVID-19-related impacts in China improve in] the [removed: first quarter] [added: second half] of [removed: 2022] [added: the year] and [removed: does] [added: do] not have a significant impact on our productivity or significantly impact the end markets that we serve.

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In this section, we discuss the results of our operations for [removed: 2021] [added: 2022] compared with [removed: 2020.][added: 2021.]

We discuss our cash flows and current financial condition under “Liquidity and Capital Resources.” For a discussion related to [removed: 2020] [added: 2021] compared with [removed: 2019,] [added: 2020,] 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, [removed: 2020,] [added: 2021,] which was filed with the United States Securities and Exchange Commission (SEC) on February [removed: 12, 2021,] [added: 11, 2022,] and is available on the SEC's website at www.sec.gov.

| (dollars in millions) | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Net sales | | | $ | [removed: 3,538.9] [added: 3,753.9] | | | | | $ | [removed: 2,895.3] [added: 3,538.9] | | | | | $ | [removed: 2,992.7] [added: 2,895.3] | |

| Cost of products sold | | | [removed: 2,228.0] [added: 2,424.3] | | | | | | [removed: 1,787.1] [added: 2,228.0] | | | | | | [removed: 1,812.0] [added: 1,787.1] | | |

| Gross [removed: Margin] [added: profit] | | | [removed: 1,310.9] [added: 1,329.6] | | | | | | [removed: 1,108.2] [added: 1,310.9] | | | | | | [removed: 1,180.7] [added: 1,108.2] | | |

| *Gross [added: profit] margin %* | | | [removed: *37.0*] [added: *35.4*] | | *%* | | | | [removed: *38.3*] [added: *37.0*] | | *%* | | | | [removed: *39.5*] [added: *38.3*] | | *%* |

| Selling, general and administrative expenses | | | [removed: 701.4] [added: 670.9] | | | | | | [removed: 660.3] [added: 701.4] | | | | | | [removed: 715.6] [added: 660.3] | | |

| Severance and restructuring expenses | | | — | | | | | | [removed: 7.7] [added: —] | | | | | | [removed: —] [added: 7.7] | | |

| Interest expense | | | [removed: 4.3] [added: 9.4] | | | | | | [removed: 7.3] [added: 4.3] | | | | | | [removed: 11.0] [added: 7.3] | | |

| Other [removed: income - net] [added: expense (income)-net] | | | [removed: (20.4)] [added: 425.6] | | | | | | [removed: (11.0)] [added: (20.4)] | | | | | | [removed: (18.0)] [added: (11.0)] | | |

| Earnings before provision for income taxes | | | [removed: 625.6] [added: 223.7] | | | | | | [removed: 443.9] [added: 625.6] | | | | | | [removed: 472.1] [added: 443.9] | | |

| [removed: Provision] [added: (Benefit from) provision] for income taxes | | | [removed: 138.5] [added: (12.0)] | | | | | | [removed: 99.0] [added: 138.5] | | | | | | [removed: 102.1] [added: 99.0] | | |

| Net Earnings | | | $ | [removed: 487.1] [added: 235.7] | | | | | $ | [removed: 344.9] [added: 487.1] | | | | | $ | [removed: 370.0] [added: 344.9] | |

Our sales in [removed: 2021] [added: 2022] were [removed: $3,538.9] [added: $3,753.9] million, or [removed: 22.2] [added: 6.1] percent higher than [removed: 2020] [added: 2021] sales of [removed: $2,895.3] [added: $3,538.9] million.

[removed: Compared to 2020, which was negatively impacted by the COVID-19 pandemic, our] [added: Higher] sales [removed: increase] in [removed: 2021 was] [added: 2022 were] primarily driven by [added: the impacts of] inflation-related pricing actions [removed: and higher water heater, boiler, and] [added: partially offset by lower residential] water [removed: treatment] [added: heater] volumes in North America [removed: as well as higher] [added: and lower] sales in China.

Our acquisition of Giant added [removed: $22.9] [added: $94.3] million of [added: incremental] sales in [removed: 2021.][added: 2022.]

In addition, our sales [removed: in China] were [removed: favorably] [added: negatively] impacted by approximately [removed: $58] [added: $61] million [removed: in 2021] compared to [removed: 2020,] [added: last year] due to the [removed: appreciation] [added: depreciation] of [removed: the Chinese currency compared to] [added: foreign currencies against] the U.S. dollar.

Our gross profit margin in [removed: 2021] [added: 2022] of [removed: 37.0] [added: 35.4] percent declined compared to [removed: 38.3] [added: 37.0] percent in [removed: 2020.][added: 2021.]

The lower gross margin in [removed: 2021] [added: 2022] was primarily due to higher steel and other material costs [added: and production inefficiencies,] which outpaced [added: the impact of] our pricing actions.

Selling, general, and administrative (SG&A) expenses were [removed: $701.4] [added: $670.9] million in [removed: 2021] [added: 2022,] or [removed: $41.1] [added: $30.5] million [removed: higher] [added: lower] than [removed: 2020.][added: in 2021.]

[removed: The increase in SG&A expenses in 2021 was primarily due] [added: Compared] to [added: 2021,] higher [added: segment earnings and margin were primarily driven by lower engineering,] advertising, [removed: engineering] and selling expenses [removed: and higher management incentive expenses related to higher earnings compared to 2020.][added: in China.]

Interest expense was [removed: $4.3] [added: $9.4] million in [removed: 2021,] [added: 2022,] compared to [removed: $7.3] [added: $4.3] million in [removed: 2020.][added: 2021.]

Other [removed: income] [added: expense (income)-net in 2022] was [removed: $20.4] [added: $425.6] million in [removed: 2021] [added: expense] compared to [removed: $11.0] [added: income of $20.4] million in [removed: 2020.][added: 2021.]

The increase in [removed: other income] [added: interest expense] in [removed: 2021] [added: 2022] was primarily due to higher [removed: pension] [added: debt levels] and interest [removed: income.][added: rates.]

All other components of our pension [removed: income] [added: expense (income)] are reflected in other [removed: income.][added: expense (income)-net.]

Our [added: effective income tax rate in 2022 was] lower [added: than our] effective income tax rate in 2021 [removed: was] primarily due to [removed: a change in geographic earnings mix as well as] [added: the tax effects of the pension settlement expense associated with the termination of the Plan,] a [added: non-recurring $4.2 million] favorable tax impact [added: recorded in the prior year periods] related to amending a previously filed tax [removed: return.][added: return and a change in geographic earnings mix.]

We estimate that our annual effective income tax rate for the full year of [removed: 2022] [added: 2023] will be [removed: between 23.5 and] [added: approximately] 24 percent.

| Years ended December 31 (dollars in millions) | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Net Sales | | | $ | [removed: 2,529.5] [added: 2,819.1] | | | | | $ | [removed: 2,118.3] [added: 2,529.5] | |

| Segment Earnings | | | [removed: 590.8] [added: 266.0] | | | | | | [removed: 503.5] [added: 590.8] | | |

| *Segment Margin* | | | [removed: *23.4*] [added: *9.4*] | | *%* | | | | [removed: *23.8*] [added: *23.4*] | | *%* |

Sales in our North America segment were [removed: $2,529.5] [added: $2,819.1] million in [removed: 2021] [added: 2022,] or [removed: $411.2] [added: $289.6] million higher than sales of [removed: $2,118.3] [added: $2,529.5] million in [removed: 2020.][added: 2021.]

The increased sales in [removed: 2021] [added: 2022 compared to the prior year] were [removed: driven] primarily [added: driven] by [added: the] price [removed: increases,] [added: increases implemented in 2021,] largely on water heaters, [removed: which were implemented] in response to rising material and [removed: transportation costs.][added: other input costs and more than offset lower residential water heater volumes and unfavorable currency translation impact of approximately $12 million.]

Our sales in China in 2022 were impacted by lower consumer demand driven by COVID-19-related lockdowns.

Certain COVID-19 restrictions were lifted in China at the end of 2022 and we believe that economic activity there will improve in 2023 as a result.

While supply chain and logistics challenges lingered in 2022, we saw improvement, particularly in the second half of the year.

We remain in close contact with our suppliers and logistics providers to resolve supply chain constraints as they arise.

We continue to seek acquisitions that enable geographic growth, expand our core business, and establish adjacencies.

Giant contributed incremental sales of $94.3 million and $22.9 million in 2022 and 2021, respectively.

Refer to Note 3, “Acquisitions” for additional information.

We believe the majority of our customers exited 2022 with near normal inventory levels.

While we believe that new home construction is in a deficit, we project it will be a headwind in 2023 and therefore, we project 2023 industry residential unit volumes will decrease approximately two to five percent from 2022.

In our Rest of World segment, we see the recent change to certain COVID-19 restrictions in China as a positive step to an improved economic environment.

We project our sales in China will grow three to five percent in 2023 in local currency compared to 2022.

Our guidance assumes volume will improve sequentially through out the year.

We assume that the currency translation impact on sales will be similar to the 2022 and negatively impact sales by approximately four percent.

Combining all of these factors, we expect our 2023 consolidated sales to be flat to 2022, with a range of plus or minus three percent.

The decrease in SG&A expenses was primarily due to the recognition of a gain from an $11.5 million judgment against a competitor related to its infringement of one of our patents, lower management incentive expenses, and lower engineering costs in China.

In the second quarter of 2022, we received a determination letter from the Internal Revenue Service (IRS) that allowed us to proceed with the termination process.

In the fourth quarter of 2022, the settled Plan liabilities resulted in $417.3 million of pretax pension settlement expense, of which, $346.8 million was recorded in the North America segment and $70.5 million in Corporate Expense, and included $167.7 million in related tax benefits.

For additional information, refer to the Critical Accounting Policies section under “Pensions” below.

In 2022, Other expense (income)-net reflected the $417.3 million pension settlement expense related to the termination of the Plan and $13.9 million in pension expenses compared to $12.0 million of pension income in 2021.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

We are providing non-U.S. Generally Accepted Accounting Principles (GAAP) measures (adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expense) that exclude the impact of the pension settlement expense as well as the income from the legal judgment, the expenses associated with a terminated acquisition and non-operating pension income and expenses.

Reconciliations from GAAP measures to non-GAAP measures are provided in the *Non-GAAP Measures* section below.

In addition, our acquisition of Giant added $94.3 million of incremental sales in 2022.

Lower segment earnings and margin in 2022 were primarily due to the Plan settlement expense of $346.8 million, lower residential water heater volumes, higher material costs, and production inefficiencies, partially offset by price increases and the $11.5 million patent infringement judgment referenced above.

Adjusted segment earnings and adjusted segment margin in 2022 were $611.0 million and 21.7 percent, respectively.

Adjusted segment earnings and adjusted segment margin in 2021 were $580.3 million and 22.9 percent, respectively.

Adjusted segment earnings and adjusted segment margin in 2022 exclude the pension settlement expense of $346.8 million, pension expense of $9.7 million and the recognition of the $11.5 million patent infringement judgment.

Adjusted segment earnings and adjusted segment margin in 2021 exclude pension income of $10.5 million.

| Years ended December 31 (dollars in millions) | | | 2022 | | | | | | 2021 | | |

Rest of World sales of $965.8 million decreased seven percent year-over-year, including an unfavorable currency translation impact of approximately $49 million, of which $36 million related to sales in China.

In local currency, segment sales decreased by approximately two percent year-over-year.

The decrease in sales in 2022 was primarily driven by lower consumer demand in China due to COVID-19-related disruptions and lockdowns.

Sales in India increased 28 percent in local currency in 2022 due to strong demand for our water heater and water treatment products.

Segment margins were 10.0 percent and 8.8 percent in 2022 and 2021, respectively.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

In addition, cash balances as of December 31, 2022 were negatively impacted by $20.8 million due to the effects of changes in foreign currency during the year.

In 2022, we repatriated approximately $120 million of cash from our foreign subsidiaries to the U.S. We used the proceeds to pay down outstanding debt balances.

| Years ended December 31 (dollars in millions) | | | 2022 | | | | | | 2021 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

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.

Since March 2020 and continuing into 2021, we experienced impacts to our business and other markets worldwide.

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

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

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.

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

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

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 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.

Combining all of these factors, we expect our consolidated sales to increase between 16 and 18 percent in 2022.

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

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

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.

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

The charges were comprised of $6.8 million severance costs and $0.9 million of other restructuring expenses.

These activities are reflected in "severance and restructuring expenses" in the accompanying financial statements.

The decrease in interest expense in 2021 was primarily due to lower average debt levels.

Pension income in 2021 was $12.0 million compared to $5.1 million in 2020.

Our effective income tax rate was 22.1 percent in 2021, compared with 22.3 percent in 2020.

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

Higher segment earnings in 2021 were primarily due to inflation-related price increases and higher volumes, partially offset by higher material and logistics costs.

Segment margin was lower in 2021 primarily due to the rise in costs outpacing pricing actions.

In 2020 segment earnings and margin were adversely impacted by certain costs related to the pandemic.

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.

Sales in our Rest of World segment were $1,036.5 million in 2021 or $236.2 million higher than sales of $800.3 million in 2020.

Sales in China increased by 32 percent in U.S. dollar terms and 24 percent in local currency in 2021 compared to 2020.

The increase in 2021 sales was primarily due to growth in our major product categories in China, including electric and gas tankless water heaters, and residential and commercial water treatment products, including replacement filters.

Sales in China were also positively impacted by lower channel inventory reductions in 2021 compared to 2020.

Channel inventory levels in China at the end of 2021 were at their lowest level in the last five years.

Products with higher selling prices, including super-quiet gas tankless water heaters and water treatment products that deliver filtered water at a faster flow rate, contributed to sales gains.

Sales in India increased approximately 31% compared to 2020, which was significantly impacted by the pandemic.

Segment margin was 8.8 percent in 2021.

Compared to 2020, which was significantly impacted by the pandemic, earnings in 2021 increased primarily due to higher volumes in China, which was partially offset by higher employee incentives and brand-building-related advertising costs, as well as the absence of the social insurance waivers received in 2020 that did not repeat in 2021.

Higher segment operating margin of 8.8% was primarily a result of increased operating leverage from higher volumes.

We repatriated approximately $168 million of foreign cash and marketable securities in 2021 and utilized it to repurchase shares of our common stock.

We expect to repatriate approximately $100 million in 2022 and use the proceeds for common stock repurchases.

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The following discussion should be read in conjunction with our consolidated financial statements and notes thereto under “Item [removed: 8.][added: 8 Financial Statements and Supplementary Data” in this annual report on Form 10-K.]

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

[removed: We serve] [added: This segment serves] residential and commercial end markets [removed: in North America] with a broad range of products including:

Our residential and commercial water [removed: heaters] [added: heaters, primarily] come in sizes ranging from [added: 40 to 80 gallon models, however, we also offer sizes as low as] 2.5 gallon (point-of-use) [removed: models to] [added: and as high as] 2,500 gallon products with varying efficiency ranges.

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

Our boilers are primarily used in [removed: space heating] applications [added: in commercial settings] for [removed: residences,] hospitals, schools, hotels and other large commercial [removed: buildings.][added: buildings while residential boilers are used in homes, apartments and condominiums.]

We expanded our product offerings with the acquisitions of Hague Quality Water International (Hague) in 2017, Water-Right, Inc. (Water-Right) in [removed: 2019 and] [added: 2019,] Master Water Conditioning Corporation (Master Water) in [removed: 2021.][added: 2021 and Atlantic Filter Corporation (Atlantic Filter) in 2022.]

We also offer a [removed: complete] [added: comprehensive] line of [removed: food] [added: commercial water treatment] and [removed: beverage] filtration products.

Our wholesale distribution channel, where we sell our products primarily under the A. O. Smith and State brands, includes more than [removed: 1,100] [added: 1,000] 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: 45] [added: 40] percent of Lochinvar branded sales consist of residential and commercial water heaters while the remaining [removed: 55] [added: 60] percent of Lochinvar branded sales consist primarily of boilers and related parts.

Our commercial boiler distribution channel is primarily comprised of manufacturer representative [removed: firms,] [added: firms with] the remainder of our Lochinvar branded products [removed: are] [added: being] distributed through wholesale channels.

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

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

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

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

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

In addition, during 2021 we launched a commercial heat pump water heater to align with greenhouse gas emission reduction trends across the [removed: country.][added: U.S.]

We have operated in China for [removed: more than 25] [added: nearly 30] years.

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

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

We sell our products in approximately [removed: 13,000] [added: 12,000] points of sale in China, [added: of which] approximately [removed: 5,800] [added: 5,400] are retail outlets in tier one [removed: and] [added: through] tier [removed: two] [added: three] cities [removed: of which over] [added: and approximately] 2,000 exclusively sell our products.

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

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

[removed: In addition, we] [added: We also] sell water heaters in the European and Middle [added: and Far] Eastern markets and water treatment products in Hong Kong, [removed: Turkey] and Vietnam, all of which combined comprised less than [removed: 11] [added: 13] percent of total Rest of World sales in [removed: 2021.][added: 2022.]

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

A portion of our customers have contractual pricing tied to a steel [added: price] index.

Our total expenditures for research and development in [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] were [removed: $94.2] [added: $89.0] million, [removed: $80.7] [added: $94.2] million and [removed: $87.9] [added: $80.7] million, respectively.

We [added: invest,] own and use in our businesses various trademarks, trade names, patents, trade secrets and licenses.

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 [added: trademark, trade name, patent, trade secret, license] or [added: any] group of related [removed: trademarks, trade names, patents, trade secrets, or licenses.][added: such rights.]

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

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

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

[added: *Culture and Employee Engagement.*] We conduct a Global Employee Engagement Survey on a biannual basis.

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

Survey participation in [removed: 2020] [added: 2022] was [removed: 96] [added: 97] percent, which we believe [removed: indicates] [added: reflects] our [removed: employees' willingness] [added: employees’ desire] to share their perspectives and a commitment to continuous improvement.

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

Globally, all office and professional employees [added: also] have [removed: a] formal performance [removed: review] [added: reviews] and development plans with a focus on learning by doing.

[removed: It is expected that] [added: We expect our] managers [added: to] work closely with their employees to ensure performance feedback and [added: to conduct] development discussions [removed: take place] on a regular basis.

[added: *Safety.*] The safety of our people is always at the forefront of what we do.

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

Sales in our North America segment accounts for 74% of our total sales in 2022.

In 2022, we continued our integration activities of Giant Factories, Inc., (Giant) a Canada-based manufacturer of residential and commercial water heaters, which we acquired in late 2021.

Boilers are closed loop water heating systems used primarily for space heating or hydronic heating.

Sales in our Rest of World segment accounts for 26% of our total sales in 2022, a majority of which is in China.

We continue to expand our product offerings and sales in this country, primarily through wholesale, e-commerce and retail channels.

We use a wide range of raw materials in our manufacturing operations.

While supply chain and logistics challenges lingered in 2022, we saw improvement, particularly in the second half of the year.

Our primary raw material input is steel which has experienced volatility in costs over the last several years.

We monitor our intellectual property for infringement and in 2022 received a judgment of $11.5 million against a competitor related to one of our patents.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

We employed approximately 12,000 employees as of December 31, 2022 with approximately 6,200 in North America and 5,800 in Rest of World.

A small portion of our workforce in the U.S. is represented by a labor union, while outside the U.S., we have employees in certain countries that are represented by employee representative organizations, such as an employee association, union, or works council.

*Our Guiding Principles and Values*.

Survey results help shape action plans to further improve our culture and we will conduct the survey again in 2024.

*Diversity and Inclusion.* As reflected in our Guiding Principles, we strive to create a workplace where people from diverse backgrounds can thrive and achieve their fullest potential.

A. O. Smith’s commitment to this objective starts at the top with its Board of Directors, which is 50% diverse.

A. O. Smith monitors the gender and racial composition of its workforce in the U.S. at various levels within the organization, and also tracks pay equity on an ongoing basis.

All of of our salaried employees are given formal development plans.

In 2022, we partnered with a third party provider to deliver diversity and inclusive leadership training to enhance the capability of our workforce with a program that aligns with our Guiding Principles, Values, and overall leadership approach.

In 2022, we provided this training to our senior leadership team globally and senior management in the U.S., and we intend to expand that training program in 2023.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

In recent years, a limited number of states and local authorities have proposed or implemented bans on gas-fired products in new construction in an effort to address greenhouse gas emissions.

We offer a complete line of water and hydronic heating products, including electric-powered water heaters and boilers, and we believe that any reduction in fossil fuel-powered products would be counterbalanced by the demand for our non-fossil fuel powered products.

We are confident that our continued emphasis on product design and innovation will keep us well positioned to deliver products demanded by customers, regardless of fuel source.

We issued our third report, the 2022 Environmental, Social and Governance ("ESG") Report in December 2022, documenting our ESG activities over the past two years.

This report details the positive impact of our highly efficient products, highlights our company’s commitment to employees and the communities in which we operate, and reports on our progress toward our greenhouse gas emissions reduction goal of 10% by 2025.

We have made significant progress toward our ESG emission reduction goal and prevented almost 500,000 metric tons of carbon emissions in 2021 through the sale of our high efficiency water heaters and boilers.

Our scorecard reflecting our progress is available on our website.

We have also achieved WAVE water stewardship verification and achieved our fourth consecutive Energy Star Partner of the Year Award.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

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.

There has been volatility in steel costs over the last several years, particularity in 2021 as the steel price index increased over 100 percent compared to the prior year.

We employed approximately 13,700 employees as of December 31, 2021, primarily non-union.

We will conduct the survey again in 2022.

Our CRS report is available on our website.

A more detailed discussion of certain of these matters appears in Note [removed: 16] [added: 16, “Commitments and Contingencies”] of Notes to [added: the] Consolidated Financial Statements.

For the fiscal year ended December 31, [removed: 2021][added: 2022]

| Title of Each Class | | | | | | Trading Symbol(s) | | | | | | Shares of Stock Outstanding January 31, [removed: 2022] [added: 2023] | | | | | | Name of Each Exchange on Which Registered | | |

| Class A Common Stock (par value $5.00 per share) | | | | | | None | | | | | | [removed: 25,973,661] [added: 25,905,276] | | | | | | Not listed | | |

| Common Stock (par value $1.00 per share) | | | | | | AOS | | | | | | [removed: 131,414,105] [added: 124,974,017] | | | | | | New York Stock Exchange | | |

The aggregate market value of voting stock held by non-affiliates of the registrant was [removed: $61,120,355] [added: $41,779,676] for Class A Common Stock and [removed: $9,439,335,980] [added: $6,733,262,366] for Common Stock as of June 30, [removed: 2021.][added: 2022.]

| 1. | | | Portions of the company’s definitive Proxy Statement for the [removed: 2022] [added: 2023] 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: 2021][added: 2022]

| [Item [removed: 1.](#ib082370cb4864a2aaf9bf91ded690616_13)] [added: 1.](#i967b644b84594bfcbd2435a3423d2106_13)] | | | [removed: [Business](#ib082370cb4864a2aaf9bf91ded690616_13)] [added: [Business](#i967b644b84594bfcbd2435a3423d2106_13)] | | | [removed: [3](#ib082370cb4864a2aaf9bf91ded690616_13)] [added: [3](#i967b644b84594bfcbd2435a3423d2106_13)] | | |

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| [Item [removed: 7A.](#ib082370cb4864a2aaf9bf91ded690616_55)] [added: 7A.](#i967b644b84594bfcbd2435a3423d2106_55)] | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#ib082370cb4864a2aaf9bf91ded690616_55)] [added: Risk](#i967b644b84594bfcbd2435a3423d2106_55)] | | | [removed: [27](#ib082370cb4864a2aaf9bf91ded690616_55)] [added: [28](#i967b644b84594bfcbd2435a3423d2106_55)] | | |

| [Item [removed: 8.](#ib082370cb4864a2aaf9bf91ded690616_58)] [added: 8.](#i967b644b84594bfcbd2435a3423d2106_58)] | | | [Financial Statements and Supplementary [removed: Data](#ib082370cb4864a2aaf9bf91ded690616_58)] [added: Data](#i967b644b84594bfcbd2435a3423d2106_58)] | | | [removed: [28](#ib082370cb4864a2aaf9bf91ded690616_58)] [added: [28](#i967b644b84594bfcbd2435a3423d2106_58)] | | |

| [Item [removed: 9.](#ib082370cb4864a2aaf9bf91ded690616_142)] [added: 9.](#i967b644b84594bfcbd2435a3423d2106_133)] | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#ib082370cb4864a2aaf9bf91ded690616_142)] [added: Disclosure](#i967b644b84594bfcbd2435a3423d2106_133)] | | | [removed: [58](#ib082370cb4864a2aaf9bf91ded690616_142)] [added: [57](#i967b644b84594bfcbd2435a3423d2106_133)] | | |

| [Item [removed: 9A.](#ib082370cb4864a2aaf9bf91ded690616_145)] [added: 9A.](#i967b644b84594bfcbd2435a3423d2106_136)] | | | [Controls and [removed: Procedures](#ib082370cb4864a2aaf9bf91ded690616_145)] [added: Procedures](#i967b644b84594bfcbd2435a3423d2106_136)] | | | [removed: [58](#ib082370cb4864a2aaf9bf91ded690616_145)] [added: [57](#i967b644b84594bfcbd2435a3423d2106_136)] | | |

| [Item [removed: 9B.](#ib082370cb4864a2aaf9bf91ded690616_148)] [added: 9B.](#i967b644b84594bfcbd2435a3423d2106_139)] | | | [Other [removed: Information](#ib082370cb4864a2aaf9bf91ded690616_148)] [added: Information](#i967b644b84594bfcbd2435a3423d2106_139)] | | | [removed: [58](#ib082370cb4864a2aaf9bf91ded690616_148)] [added: [57](#i967b644b84594bfcbd2435a3423d2106_139)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#ib082370cb4864a2aaf9bf91ded690616_1632)] [added: Inspections](#i967b644b84594bfcbd2435a3423d2106_142)] | | | [removed: [58](#ib082370cb4864a2aaf9bf91ded690616_1632)] [added: [57](#i967b644b84594bfcbd2435a3423d2106_142)] | | |

| [Item [removed: 10.](#ib082370cb4864a2aaf9bf91ded690616_157)] [added: 10.](#i967b644b84594bfcbd2435a3423d2106_151)] | | | [Directors, Executive Officers and Corporate [removed: Governance](#ib082370cb4864a2aaf9bf91ded690616_157)] [added: Governance](#i967b644b84594bfcbd2435a3423d2106_151)] | | | [removed: [60](#ib082370cb4864a2aaf9bf91ded690616_157)] [added: [59](#i967b644b84594bfcbd2435a3423d2106_151)] | | |

| [Item [removed: 11.](#ib082370cb4864a2aaf9bf91ded690616_160)] [added: 11.](#i967b644b84594bfcbd2435a3423d2106_154)] | | | [Executive [removed: Compensation](#ib082370cb4864a2aaf9bf91ded690616_160)] [added: Compensation](#i967b644b84594bfcbd2435a3423d2106_154)] | | | [removed: [60](#ib082370cb4864a2aaf9bf91ded690616_160)] [added: [59](#i967b644b84594bfcbd2435a3423d2106_154)] | | |

| [Item [removed: 12.](#ib082370cb4864a2aaf9bf91ded690616_163)] [added: 12.](#i967b644b84594bfcbd2435a3423d2106_157)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#ib082370cb4864a2aaf9bf91ded690616_163)] [added: Matters](#i967b644b84594bfcbd2435a3423d2106_157)] | | | [removed: [61](#ib082370cb4864a2aaf9bf91ded690616_163)] [added: [60](#i967b644b84594bfcbd2435a3423d2106_157)] | | |

| [Item [removed: 13.](#ib082370cb4864a2aaf9bf91ded690616_166)] [added: 13.](#i967b644b84594bfcbd2435a3423d2106_160)] | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#ib082370cb4864a2aaf9bf91ded690616_166)] [added: Independence](#i967b644b84594bfcbd2435a3423d2106_160)] | | | [removed: [61](#ib082370cb4864a2aaf9bf91ded690616_166)] [added: [60](#i967b644b84594bfcbd2435a3423d2106_160)] | | |

| [Item [removed: 14.](#ib082370cb4864a2aaf9bf91ded690616_169)] [added: 14.](#i967b644b84594bfcbd2435a3423d2106_163)] | | | [Principal Accounting Fees and [removed: Services](#ib082370cb4864a2aaf9bf91ded690616_169)] [added: Services](#i967b644b84594bfcbd2435a3423d2106_163)] | | | [removed: [61](#ib082370cb4864a2aaf9bf91ded690616_169)] [added: [60](#i967b644b84594bfcbd2435a3423d2106_163)] | | |

| [Item [removed: 15.](#ib082370cb4864a2aaf9bf91ded690616_175)] [added: 15.](#i967b644b84594bfcbd2435a3423d2106_169)] | | | [Exhibits, Financial Statement [removed: Schedules](#ib082370cb4864a2aaf9bf91ded690616_175)] [added: Schedules](#i967b644b84594bfcbd2435a3423d2106_169)] | | | [removed: [62](#ib082370cb4864a2aaf9bf91ded690616_175)] [added: [61](#i967b644b84594bfcbd2435a3423d2106_169)] | | |

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

| [Part I](#i967b644b84594bfcbd2435a3423d2106_10) | | | | | | | | |

| [Part II](#i967b644b84594bfcbd2435a3423d2106_31) | | | | | | | | |

| [Part III](#i967b644b84594bfcbd2435a3423d2106_148) | | | | | | | | |

| [Part IV](#i967b644b84594bfcbd2435a3423d2106_166) | | | | | | | | |

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

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

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

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

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

Properties utilized by us at December 31, [removed: 2021] [added: 2022] were as follows:

In this segment, we have [removed: 19] [added: 20] manufacturing plants located in [removed: nine] [added: ten] states and two non-U.S. countries, of which 17 are owned directly by us or our subsidiaries and [removed: two] [added: three] are leased from outside parties.

The terms of leases in effect at December 31, [removed: 2021,] [added: 2022,] expire between 2023 and 2025.

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

[removed: The] [added: Our] manufacturing plants operate at varying levels of utilization depending on the type of operation and market conditions.

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_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: 2022] [added: 2023] Annual Meeting of Stockholders.

| Samuel M. Carver [removed: (53)] [added: (54)] | | | | | | Senior Vice President – Global Operations | | | | | | 2021 to Present | | |

| [removed: Anindadeb V. DasGupta (56)] [added: D. Samuel Karge (48)] | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

| [removed: Wallace E. Goodwin (66)] [added: Jack Qiu (50)] | | | | | | Senior Vice President | | | | | | [removed: 2018] [added: 2020] to Present | | |

| Robert J. Heideman [removed: (55)] [added: (56)] | | | | | | Senior Vice President – Chief Technology Officer | | | | | | 2013 to Present | | |

| [removed: D. Samuel Karge (47)] [added: David R. Warren (59)] | | | | | | Senior Vice President | | | | | | [removed: 2018] [added: 2017] to Present | | |

| Daniel L. Kempken [removed: (49)] [added: (50)] | | | | | | Senior Vice President – Strategy and Corporate Development | | | | | | 2019 to Present | | |

| Charles T. Lauber [removed: (59)] [added: (60)] | | | | | | Executive Vice President and Chief Financial Officer | | | | | | 2019 to Present | | |

| Mark A. Petrarca [removed: (58)] [added: (59)] | | | | | | Senior Vice President [removed: –] [added: -] Human Resources and Public Affairs | | | | | | 2006 to Present | | |

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

| S. Melissa Scheppele [removed: (59)] [added: (60)] | | | | | | Senior Vice President - Chief Information Officer | | | | | | 2020 to Present | | |

| James F. Stern [removed: (59)] [added: (60)] | | | | | | Executive Vice President, General Counsel and Secretary | | | | | | 2007 to Present | | |

| Kevin J. Wheeler [removed: (62)] [added: (63)] | | | | | | Chairman | | | | | | 2020 to Present | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 2006 to 2011 | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 2002 to 2011 | | |

| Parag Kulkarni (55) | | | | | | Senior Vice President, International; President - A. O. Smith India Water Products Private Limited | | | | | | 2022 to Present | | |

| | | | | | | Managing Director - A. O. Smith India Water Products Private Limited | | | | | | 2015 to 2022 | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 1999 to 2006 | | |

| Stephen D. O'Brien (54) | | | | | | Senior Vice President; President - Lochinvar, LLC | | | | | | 2022 to Present | | |

| | | | | | | Chief Operating Officer – Lochinvar, LLC | | | | | | 2021 to 2022 | | |

| | | | | | | Senior Vice President - Mitsubishi Electric Trane US | | | | | | 2015 to 2021 | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 1999 to 2005 | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 2003 to 2012 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 1989 to 2008 | | |

| | | | | | | Various A.O. Smith Officer and Management Positions | | | | | | 1999 to 2013 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

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

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

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

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

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

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

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

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

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

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

| | | | | | | Senior Vice President – Corporate Technology | | | | | | 2010 to 2011 | | |

| | | | | | | Vice President – Corporate Technology | | | | | | 2007 to 2010 | | |

| | | | | | | Director – Materials | | | | | | 2005 to 2007 | | |

| | | | | | | Section Manager | | | | | | 2002 to 2005 | | |

| | | | | | | Vice President & Platform Leader – Pentair Residential Filtration (water solutions manufacturer) | | | | | | 2012 to 2016 | | |

| | | | | | | Vice President – Global Finance – A. O. Smith Electrical Products Company | | | | | | 2004 to 2006 | | |

| | | | | | | Vice President and Controller – A. O. Smith Electrical Products Company | | | | | | 2001 to 2004 | | |

| | | | | | | Director of Audit and Tax | | | | | | 1999 to 2001 | | |

| | | | | | | Vice President – Human Resources – A. O. Smith Water Products Company | | | | | | 1999 to 2004 | | |

| | | | | | | General Manager of Residential Gas SBU - A. O. Smith China | | | | | | 2008 to 2012 | | |

| | | | | | | Deputy General Manager, Engineering - A. O. Smith China | | | | | | 2003 to 2008 | | |

| | | | | | | Engineering Manager - York (Guangzhou) Air Conditioner and Refrigeration Equipment, Co., Ltd. | | | | | | 2000 to 2003 | | |

| | | | | | | Vice President and Chief Information Officer - Ascend Performance Materials (specialty chemical manufacturer) | | | | | | 2013 to 2016 | | |

| David R. Warren (58) | | | | | | Senior Vice President | | | | | | 2017 to Present | | |

| | | | | | | Managing Director – A. O. Smith Water Products Company B.V. | | | | | | 2004 to 2008 | | |

| | | | | | | Director, Reliance Sales | | | | | | 2002 to 2004 | | |

| | | | | | | Regional Sales Manager | | | | | | 1999 to 2002 | | |

| | | | | | | District Sales Manager | | | | | | 1990 to 1996 | | |

| | | | | | | Sales Coordinator | | | | | | 1989 to 1990 | | |

| | | | | | | Senior Vice President and General Manager – North America, India and Europe – A. O. Smith Water Products Company | | | | | | 2011 to 2012 | | |

| | | | | | | Senior Vice President and General Manager – U.S. Retail – A. O. Smith Water Products Company | | | | | | 2007 to 2011 | | |

| | | | | | | Vice President – International – A. O. Smith Water Products Company | | | | | | 2004 to 2007 | | |

| | | | | | | Managing Director – A. O. Smith Water Products Company B.V. | | | | | | 1999 to 2004 | | |

As of January 31, [removed: 2022,] [added: 2023,] the approximate number of stockholders of record of Common Stock and Class A Common Stock were [removed: 552] [added: 526] and [removed: 146,] [added: 144,] respectively.

Dividends declared on the common stock are shown in Note [removed: 11] [added: 11, “Stockholders' Equity”] of Notes to [added: the] Consolidated Financial Statements appearing elsewhere herein.

In [removed: 2021,] [added: 2022,] the Board of Directors approved adding [removed: 7,000,000] [added: 3,500,000] shares of Common Stock to an existing discretionary share repurchase authority.

In [removed: 2021,] [added: 2022,] we repurchased [removed: 5,087,467] [added: 6,647,895] shares at an average price of [removed: $72.03] [added: $60.70] per share and at a total cost of [removed: $366.5] [added: $403.5] million.

As of December 31, [removed: 2021,] [added: 2022,] there were [removed: 3,526,357] [added: 378,462] shares remaining on the existing repurchase authorization.

On January [removed: 25, 2022,] [added: 27, 2023,] the Board of Directors approved adding [removed: 3,500,000] [added: 7,500,000] shares of common stock to the existing discretionary share repurchase authority.

Including the additional shares, we have approximately [removed: 6.8] [added: 7.6] million shares available for repurchase as of the date of the Board of Directors' approval.

We intend to spend approximately [removed: $400] [added: $200] million to repurchase Common Stock in [removed: 2022] [added: 2023] through a combination of 10b5-1 plans and [removed: open market] [added: open-market] purchases.

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

[removed: ][added: ]

| Company/Index | | | [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] | | | | | | [removed: 12/31/21] [added: 12/31/22] | | |

From December 31, 2017 to December 31, 2022

| A. O. Smith Corporation | | | 100.0 | | | | | | 70.6 | | | | | | 80.2 | | | | | | 94.2 | | | | | | 149.9 | | | | | | 101.7 | | |

| S&P 500 Index | | | 100.0 | | | | | | 95.6 | | | | | | 125.7 | | | | | | 148.9 | | | | | | 191.6 | | | | | | 156.9 | | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | | | 86.7 | | | | | | 112.2 | | | | | | 124.5 | | | | | | 150.8 | | | | | | 142.6 | | |

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 | | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | | | 121.0 | | | | | | 104.9 | | | | | | 135.8 | | | | | | 150.7 | | | | | | 179.2 | | |

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

Not applicable.

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM (PCAOB ID: 42)]

We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] 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: 2021,] [added: 2022,] 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: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] 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: 2021,] [added: 2022,] 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: 11, 2022] [added: 14, 2023] expressed an unqualified opinion thereon.

Such procedures [removed: include] [added: included] examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

| *Description of the Matter* | | | | | | At December 31, [removed: 2021,] [added: 2022,] the Company’s product warranty liability was [removed: $184.4] [added: $182.5] 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 [removed: ten] [added: twelve] 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 [added: and accuracy] of the claims [removed: data against the Company’s claim log.] [added: data.] We recalculated the historical failure rates using actual claims data. We compared the estimated cost of replacement included in the product warranty liability with the current costs to manufacture a comparable product and assessed the impact of projected changes in significant product costs. We also analyzed [removed: subsequent] [added: current year] 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: 2022 | | | | | |] 2021 | | | | | | 2020 | | |

| Cash and cash equivalents | | | $ | [removed: 443.3] [added: 391.2] | | | | | $ | [removed: 573.1] [added: 443.3] | |

| Marketable securities | | | [removed: 188.1] [added: 90.6] | | | | | | [removed: 116.5] [added: 188.1] | | |

| Receivables | | | [removed: 634.4] [added: 581.2] | | | | | | [removed: 585.0] [added: 634.4] | | |

| Inventories | | | [removed: 447.7] [added: 516.4] | | | | | | [removed: 300.1] [added: 447.7] | | |

| Other current assets | | | [removed: 39.1] [added: 54.3] | | | | | | [removed: 43.3] [added: 39.1] | | |

| Total Current Assets | | | [removed: 1,752.6] [added: 1,633.7] | | | | | | [removed: 1,618.0] [added: 1,752.6] | | |

| Net property, plant and equipment | | | [removed: 606.7] [added: 590.7] | | | | | | [removed: 541.3] [added: 606.7] | | |

| Goodwill | | | [removed: 627.8] [added: 619.7] | | | | | | [removed: 546.8] [added: 627.8] | | |

| Other intangibles | | | [removed: 364.8] [added: 347.9] | | | | | | [removed: 323.9] [added: 364.8] | | |

| Operating lease assets | | | [removed: 32.5] [added: 29.8] | | | | | | [removed: 41.6] [added: 32.5] | | |

| Other assets | | | [removed: 90.0] [added: 110.5] | | | | | | [removed: 89.1] [added: 90.0] | | |

| Total Assets | | | $ | [removed: 3,474.4] [added: 3,332.3] | | | | | $ | [removed: 3,160.7] [added: 3,474.4] | |

| Trade payables | | | $ | [removed: 745.9] [added: 625.8] | | | | | $ | [removed: 595.2] [added: 745.9] | |

| Accrued payroll and benefits | | | [removed: 113.4] [added: 75.7] | | | | | | [removed: 74.6] [added: 113.4] | | |

| Accrued liabilities | | | [removed: 181.8] [added: 159.1] | | | | | | [removed: 161.9] [added: 181.8] | | |

| Product warranties | | | [removed: 70.9] [added: 63.6] | | | | | | [removed: 47.8] [added: 70.9] | | |

| Long-term debt due within one year | | | [removed: 6.8] [added: 10.0] | | | | | | 6.8 | | |

| Total Current Liabilities | | | [removed: 1,118.8] [added: 934.2] | | | | | | [removed: 886.3] [added: 1,118.8] | | |

| Long-term debt | | | [removed: 189.9] [added: 334.5] | | | | | | [removed: 106.4] [added: 189.9] | | |

| Product warranties | | | [removed: 113.5] [added: 118.9] | | | | | | [removed: 94.5] [added: 113.5] | | |

| Pension liabilities | | | [removed: 15.9] [added: 9.9] | | | | | | [removed: 13.6] [added: 15.9] | | |

| Long-term operating lease liabilities | | | [removed: 22.3] [added: 22.4] | | | | | | [removed: 34.4] [added: 22.3] | | |

| Other liabilities | | | [removed: 181.8] [added: 164.7] | | | | | | [removed: 177.2] [added: 181.8] | | |

| Total Liabilities | | | [removed: 1,642.2] [added: 1,584.6] | | | | | | [removed: 1,312.4] [added: 1,642.2] | | |

| Class A Common Stock (shares issued [added: 26,035,656 and] 26,104,441 [added: as of December 31, 2022] and [removed: 26,168,513)] [added: 2021, respectively)] | | | [removed: 130.5] [added: 130.2] | | | | | | [removed: 130.8] [added: 130.5] | | |

| Common Stock (shares issued [added: 164,671,938 and] 164,603,153 [added: as of December 31, 2022] and [removed: 164,539,081)] [added: 2021, respectively)] | | | 164.7 | | | | | | [removed: 164.6] [added: 164.7] | | |

| Capital in excess of par value | | | [removed: 545.2] [added: 555.9] | | | | | | [removed: 520.4] [added: 545.2] | | |

| Retained earnings | | | [removed: 2,826.6] [added: 2,885.0] | | | | | | [removed: 2,509.6] [added: 2,826.6] | | |

| Accumulated other comprehensive loss | | | [removed: (331.4)] [added: (82.4)] | | | | | | [removed: (321.2)] [added: (331.4)] | | |

| Treasury stock at cost | | | [removed: (1,503.4)] [added: (1,905.7)] | | | | | | [removed: (1,155.9)] [added: (1,503.4)] | | |

| Total Stockholders’ Equity | | | [added: $ | 1,747.7 | | | | | $ |] 1,832.2 | | | | | [added: $] | 1,848.3 | | [removed: |]

February 14, 2023

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| | | | 2022 | | | | | | 2021 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

(1)Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| Pension settlement expense | | | 417.3 | | | | | | — | | | | | | — | | |

| Pension settlement non-cash taxes | | | (167.7) | | | | | | — | | | | | | — | | |

| Effect of exchange rate changes on cash and cash equivalents | | | (20.8) | | | | | | — | | | | | | — | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| Foreign currency translation adjustments | | | (39.4) | | | | | | 3.4 | | | | | | 18.1 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

The Company records a liability for the expected cost of warranty-related claims

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| Years ended December 31 (dollars in millions) | | | 2022 | | | | | | 2021 | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

The Company paid $2.5 million of the purchase price in the second quarter of 2022 as a result of final working capital adjustments.

The Company expects to pay out the escrow during the second quarter of 2023.

The allocation of the purchase price to goodwill decreased by $4.3 million in 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

During the third quarter of 2022, the Company incurred $4.3 million of expenses and related income tax benefit of $1.1 million associated with a terminated acquisition.

These expenses were related to the due diligence of a prospective acquisition target and recorded within selling, general and administrative expenses in the consolidated statement of earnings.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| (dollars in millions) | | | December 31, 2022 | | |

| 2023 | | | $ | 10.6 | |

| 2024 | | | 7.9 | | |

| 2025 | | | 5.3 | | |

| 2026 | | | 3.2 | | |

| 2027 | | | 1.7 | | |

| After 2027 | | | 7.5 | | |

In addition cash interest paid during the years ended December 31, 2022, 2021 and 2020 were $9.3 million, $4.2 million, and $7.6 million, respectively.

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| Inventories, at LIFO cost | | | $ | 516.4 | | | | | $ | 447.7 | |

| | | | 1,364.8 | | | | | | 1,343.2 | | |

| Balance at December 31, 2022 | | | $ | 561.1 | | | | | $ | 58.6 | | | | | $ | 619.7 | |

| | | | 2022 | | | | | | | | | | | | | | | | | | 2021 | | | | | | | | | | | | | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| Commercial paper, average year-end interest rate of 4.6% for 2022 | | | 22.6 | | | | | | — | | |

February 11, 2022

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

| Payment of contingent consideration | | | — | | | | | | — | | | | | | (1.0) | | |

rates and estimated costs of product replacement.

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.

This amendment requires adoption by the Company in 2022.

In December 2019, the (FASB) amended (ASC) 740, *Income Taxes* (issued under ASU 2019-12, “Simplifying the Accounting for Income Taxes”).

This amendment removed certain exceptions to the general principles of ASC 740 and clarified and amended existing guidance to improve consistent application.

The Company adopted the amendment on January 1, 2021, and the adoption of ASU 2019-12 did not have an impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

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

(2)Includes the results of Water-Right, Inc. and its affiliated entities (Water-Right) from April 8, 2019, the date of acquisition.

*2021 Acquisitions*

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.

| | | | | | |

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

Revenues and pre-tax earnings associated with Giant included in the consolidated statement of earnings for the year ended December 31, 2021 totaled $22.9 million and $2.1 million, respectively, which included $3.4 million of operating earnings, less $1.3 million of acquisition-related costs incurred by the Company, resulting from the acquisition.

The Company paid aggregate cash purchase prices of $9.0 million, net of cash acquired.

*2019 Acquisition*

On April 8, 2019, the Company acquired 100 percent of the shares of Water-Right, a Wisconsin-based water treatment company for an aggregate cash purchase price of $107.0 million, net of cash acquired.

The addition of Water-Right, grew the Company's North America water treatment platform.

Water-Right is included in the Company’s North America segment.

Significant assumptions used to estimate the fair value of intangible assets acquired include discount rates and certain assumptions that form the basis of the forecasted results, including revenue growth rates, attrition rates and royalty rates.

The $60.4 million of acquired identifiable intangible assets was comprised of the following: $40.2 million of customer relationships being amortized over 20 years, $19.0 million of trademarks not subject to amortization, and $1.2 million of non-compete agreements being amortized over 7.5 years.

| April 8, 2019 (dollars in millions) | | | | | |

| Current assets, net of cash acquired | | | $ | 9.7 | |

| Intangible assets | | | 60.4 | | |

| Goodwill | | | 31.0 | | |

| Total assets acquired | | | 109.7 | | |

| Net assets acquired | | | $ | 107.0 | |

| 2022 | | | $ | 11.6 | |

| 2023 | | | 6.8 | | |

| 2024 | | | 5.5 | | |

| 2025 | | | 3.5 | | |

| 2026 | | | 1.8 | | |

| After 2026 | | | 9.0 | | |

| | | | $ | 447.7 | | | | | $ | 300.1 | |

| | | | 1,343.2 | | | | | | 1,222.6 | | |

| | | | $ | 606.7 | | | | | $ | 541.3 | |

Based on this evaluation, our management has concluded that, as of December 31, [removed: 2021,] [added: 2022,] 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: 2021] [added: 2022] as stated in their report which is included herein.

There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the year ended December 31, [removed: 2021] [added: 2022] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

We have audited A. O. Smith Corporation’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, A. O. Smith Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of A. O. Smith Corporation as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes and financial statement schedule listed in the index at Item 15(a) and our report dated February [removed: 11, 2022] [added: 14, 2023] expressed an unqualified opinion thereon.

February 14, 2023

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

As indicated in the accompanying Management Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of 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.

February 11, 2022

The information included under the headings “Election of Directors” and “Board Committees” in our definitive Proxy Statement for the [removed: 2022] [added: 2023] 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.

[removed: Smith] [added: Larsen] and Gene C.

The information included under the heading “Compliance with Section 16(a) of the Securities Exchange Act” in our definitive Proxy Statement for the [removed: 2022] [added: 2023] 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, Earl E.

Exum, Michael M.

Wolf, Michael M.

Larsen, 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 Company’s definitive Proxy Statement for the [removed: 2022] [added: 2023] 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 [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

The information included under the headings “Principal Stockholders” and “Security Ownership of Directors and Management” in our definitive Proxy Statement for the [removed: 2022] [added: 2023] 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: 2021.][added: 2022.]

(1)Consists of [removed: 2,252,498] [added: 2,481,606] shares subject to stock options, [removed: 363,054] [added: 345,775] shares subject to employee share units and [removed: 285,214] [added: 272,212] shares subject to director share units.

If any awards lapse, expire, terminate or are [removed: cancelled] [added: canceled] without issuance of shares, or shares are forfeited under any award, then such shares will become available for issuance under the A. O. Smith Combined Incentive Compensation Plan, hereby increasing the number of securities remaining available.

| Equity compensation plans approved by security holders | | | 3,073,707 | | | (1) | | | | | | $ | 51.22 | | (2) | | | | | | 2,613,804 | | | (3) | | |

| Total | | | 3,073,707 | | | | | | | | | 51.22 | | | | | | | | | 2,613,804 | | | | | |

| 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 | | | | | |

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: 2022] [added: 2023] 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: 2022] [added: 2023] 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](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

| [Consolidated Balance Sheets at December 31, [removed: 202](#ib082370cb4864a2aaf9bf91ded690616_61)[1](#ib082370cb4864a2aaf9bf91ded690616_61) [and](#ib082370cb4864a2aaf9bf91ded690616_61) [20](#ib082370cb4864a2aaf9bf91ded690616_61)[20](#ib082370cb4864a2aaf9bf91ded690616_61)] [added: 2022 and 2021](#i967b644b84594bfcbd2435a3423d2106_61)] | | | [removed: [30](#ib082370cb4864a2aaf9bf91ded690616_61)] [added: [30](#i967b644b84594bfcbd2435a3423d2106_61)] | | |

| For each of the three years in the period ended December 31, [removed: 2021:] [added: 2022:] | | | | | |

| [‑ Consolidated Statement of [removed: Earnings](#ib082370cb4864a2aaf9bf91ded690616_64)] [added: Earnings](#i967b644b84594bfcbd2435a3423d2106_64)] | | | [removed: [31](#ib082370cb4864a2aaf9bf91ded690616_64)] [added: [31](#i967b644b84594bfcbd2435a3423d2106_64)] | | |

| [‑ Consolidated Statement of Comprehensive [removed: Earnings](#ib082370cb4864a2aaf9bf91ded690616_67)] [added: Earnings](#i967b644b84594bfcbd2435a3423d2106_67)] | | | [removed: [31](#ib082370cb4864a2aaf9bf91ded690616_67)] [added: [31](#i967b644b84594bfcbd2435a3423d2106_67)] | | |

| [‑ Consolidated Statement of Cash [removed: Flows](#ib082370cb4864a2aaf9bf91ded690616_70)] [added: Flows](#i967b644b84594bfcbd2435a3423d2106_70)] | | | [removed: [32](#ib082370cb4864a2aaf9bf91ded690616_70)] [added: [32](#i967b644b84594bfcbd2435a3423d2106_70)] | | |

| [‑ Consolidated Statement of Stockholders’ [removed: Equity](#ib082370cb4864a2aaf9bf91ded690616_73)] [added: Equity](#i967b644b84594bfcbd2435a3423d2106_73)] | | | [removed: [33](#ib082370cb4864a2aaf9bf91ded690616_73)] [added: [33](#i967b644b84594bfcbd2435a3423d2106_73)] | | |

| [Notes to Consolidated Financial [removed: Statements](#ib082370cb4864a2aaf9bf91ded690616_76)] [added: Statements](#i967b644b84594bfcbd2435a3423d2106_76)] | | | [removed: [34](#ib082370cb4864a2aaf9bf91ded690616_76)\-57] [added: [34](#i967b644b84594bfcbd2435a3423d2106_76)\-57] | | |

| [Schedule II—Valuation and Qualifying [removed: Accounts](#ib082370cb4864a2aaf9bf91ded690616_181)] [added: Accounts](#i967b644b84594bfcbd2435a3423d2106_175)] | | | [removed: [66](#ib082370cb4864a2aaf9bf91ded690616_181)] [added: [65](#i967b644b84594bfcbd2435a3423d2106_175)] | | |

3.Exhibits - see the Index to Exhibits on pages [removed: 63-64] [added: 62-63] of this report.

Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report on Form 10-K are listed as Exhibits 10(a) through [removed: 10(n)] [added: 10(o)] in the Index to Exhibits.

[Table of [removed: Contents](#ib082370cb4864a2aaf9bf91ded690616_7)][added: Contents](#i967b644b84594bfcbd2435a3423d2106_7)]

| | | | (a) | | | [A. O. Smith Combined Incentive Compensation Plan, incorporated by reference to Exhibit A of the Proxy Statement filed on [removed: March 5, 2012 for] [added: March](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm) [6](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm)[, 20](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm)[20](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm) [for] the [removed: 2012 Annual] [added: 20](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm)[20](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm) [Annual] Meeting of [removed: Stockholders.](https://www.sec.gov/Archives/edgar/data/91142/000119312512095470/d282230ddef14a.htm#toc282230_39)] [added: Stockholders.](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm)] | | |

| | | | (i) | | | [A.O. Smith Corporation Executive Incentive Compensation Award Agreement [added: incorporated by reference to exhibit 10(i) of the annual report on Form 10-K for the fiscal year ended December 31, 2021] (for grants [removed: after] [added: between] February [removed: 2022).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10i.htm)] [added: 2022 and January 2023).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10i.htm)] | | |

| | | | (j) | | | [A.O. Smith Corporation Executive Incentive Compensation Award Agreement [added: incorporated by reference to exhibit 10(j) of the annual report on Form 10-K for the fiscal year ended December 31, 2021] (International) (for grants [removed: after] [added: between] February [removed: 2022).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10j.htm)] [added: 2022 and January 2023).](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex10j.htm)] | | |

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

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

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

| | | | [removed: (n)] [added: (o)] | | | [Summary of Directors’ Compensation incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q for the quarter ended June 30, [removed: 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)] [added: 2021.](https://www.sec.gov/Archives/edgar/data/0000091142/000009114221000131/aos-20210630xex101.htm)] | | |

| (21) | | | | | | [removed: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex21.htm)] [added: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex21.htm)] | | |

| (23) | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex23.htm)] | | |

| (31.1) | | | | | | [Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February [removed: 11, 2022.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex311.htm)] [added: 1](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex311.htm)[4](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex311.htm)[, 202](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex311.htm)[3](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex311.htm)[.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex311.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: 11, 2022.](https://www.sec.gov/Archives/edgar/data/91142/000009114222000028/aos-20211231xex312.htm)] [added: 1](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex312.htm)[4](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex312.htm)[, 202](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex312.htm)[3](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex312.htm)[.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex312.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/91142/000009114222000028/aos-20211231xex321.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex321.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/91142/000009114222000028/aos-20211231xex322.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex322.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: 2021] [added: 2022] are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] (ii) the Consolidated Statement of Earnings for the three years ended December 31, [removed: 2021,] [added: 2022,] (iii) the Consolidated Statement of Comprehensive Earnings for the three years ended December 31, [removed: 2021,] [added: 2022,] (iv) the Consolidated Statement of Cash Flows for the three years ended December 31, [removed: 2021,] [added: 2022,] (v) the Consolidated Statement of Stockholders’ Equity for the three years ended December 31, [removed: 2021] [added: 2022] and (vi) the Notes to Consolidated Financial Statements. | | |

| Date: February [removed: 11, 2022] [added: 14, 2023] | | | 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: 11, 2022] [added: 14, 2023] by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019][added: 2020]

| Valuation allowance for trade and notes receivable | | | $ | [removed: 6.4] [added: 9.5] | | | | | $ | [removed: 0.3] [added: 0.6] | | | | | $ | — | | | | | $ | [removed: (0.1)] [added: (0.6)] | | | | | $ | [removed: 6.6] [added: 9.5] | |

| Valuation allowance for deferred tax assets | | | [removed: 13.1] [added: 7.1] | | | | | | [removed: —] [added: 1.2] | | | | | | — | | | | | | [removed: (1.2)] [added: —] | | | | | | [removed: 11.9] [added: 8.3] | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| | | | (k) | | | [A.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm)[O.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [Smith](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm)[Corporation Executive I](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm)[ncentive Compensation Award Agreement (Acceptance Certificat](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm)[es](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [and Terms and Conditions) (for grants after](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [February 2023).](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| EARL E. EXUM | | | | | | /s/ Earl E. Exum | | |

| Director | | | | | | Earl E. Exum | | |

| | | | | | | | | |

[Table of Contents](#i967b644b84594bfcbd2435a3423d2106_7)

| 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| BRUCE M. SMITH | | | | | | /s/ Bruce M. Smith | | |

| Director | | | | | | Bruce M. Smith | | |

| 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |