A. O. Smith (AOS) 10-K risk factor changes: FY2023 vs FY2022

A decline in economic activity, such as a recession or economic downturn, in the U.S. and other regions in the world in which we do business, could [added: further] 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, slower adoption of energy-efficient water heaters and boilers, or high-quality water treatment products, which could negatively impact our profitability and cash flows.

[removed: Also, to mitigate the risk of flooding,] [added: Although] we [removed: recently completed] [added: installed] an approximately 7,000-foot-long berm, flood gates, and pumping stations around our Ashland City, Tennessee facility, our largest manufacturing [removed: facility.][added: facility, to mitigate the risk of flooding, there is still the potential for natural disasters and extreme weather conditions to disrupt the productivity of our facilities.]

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Consumer preferences and broader trends, such as decarbonization and electrification efforts in response to climate change, may result in [added: reduced demand for gas or fossil fuel-powered products and] increased demand for higher efficiency products and/or more electric powered products.

[removed: We] [added: In recent years we] have also experienced [removed: inflation related] [added: inflation-related] increases in our transportation [added: and other] costs.

■*Because approximately 22 percent of our sales in [removed: 2022] [added: 2023] were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business*

Our sales in China [removed: decreased five] [added: increased four] percent in local currency in [removed: 2022] [added: 2023] compared to [removed: 2021.][added: 2022.]

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

Approximately [removed: 34] [added: 33] percent of our sales in [removed: 2022] [added: 2023] 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: 5,200] [added: 5,000] of our 12,000 employees as of December 31, [removed: 2022] [added: 2023] were located in China.

At December 31, [removed: 2022,] [added: 2023,] approximately [removed: $472] [added: $292] million of cash and marketable securities were held by our foreign subsidiaries, substantially all of which were located in China.

Sales to our five largest customers represented approximately [removed: 39] [added: 42] percent of our sales in [removed: 2022.][added: 2023.]

*■A portion of our business could be adversely affected by a [removed: further] decline in North American new residential or commercial construction or a decline in replacement-related volume of water heaters and 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 had growth in [removed: 2020 and 2021, and then declined] [added: 2023 after a decline] in 2022.

New residential housing starts in the U.S. are projected to [removed: decrease further] [added: be approximately flat] in [removed: 2023] [added: 2024] compared to [removed: 2022.][added: 2023.]

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

We may experience [removed: them] [added: such incidents and attacks] in the future, potentially with increasing frequency [removed: from increasingly]

[added: from increasingly] sophisticated cyber threats.

[removed: A] [added: Although we have a response plan in place in the event of a data breach and we 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, a] successful attack in the future could result in operations failure or breach of security that could lead to disruptions of our business [removed: activities,] [added: activities and] the loss or disclosure of both our and our customers’ financial, product and other confidential information and could result in regulatory actions, [added: significant expense and] litigation and have a material adverse effect on our financial condition, results of operations and cash flows and our reputation.

We have a significant presence outside of the U.S., primarily in China and Canada and to a lesser extent Europe, Mexico, and India, and therefore, hold assets, including [removed: $377] [added: $197] 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 countries, including fluctuations in currency exchange rates and interest rates, [removed: hyperinflation in some foreign countries 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.

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

In [removed: 2022,] [added: 2023,] the change in foreign currencies negatively impacted our sales and cash and cash equivalents by approximately [removed: $61] [added: $56] million and [removed: $21] [added: $13] million, respectively.

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

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

Our products are subject to a wide variety of statutory, [removed: regulatory] [added: regulatory, codes] and industry standards and requirements related to, among other items, energy and water efficiency, environmental emissions, labeling and safety.

[removed: However,] [added: There are also] a [removed: limited] number of federal, foreign, state and local governments [removed: are] adopting laws, regulations and codes in response to climate change that require a transition to non-fossil fuel based sources of energy production as well as significantly reducing or eliminating the on-site combustion of fossil fuels in the building sector, such as limiting or prohibiting the delivery of natural gas in new construction.

[removed: A] [added: However, a] significant change to regulatory [added: or code] requirements that promote a transition to alternative energy sources as a replacement for gas, or a significant shift in industry standards, could substantially increase manufacturing costs, capital expenditures, transportation costs and raw material costs, [added: alter distribution channels, attract new competitors,] impact the size and timing of demand for our products, affect the types of products we are able to offer or put us at a competitive disadvantage, any of which could harm our business and have a material adverse effect on our financial condition, results of operations and cash flow.

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

If future operating performance at our businesses does not meet expectations, we may be required to reflect non-cash charges to operating results for goodwill or [removed: indefinite-lived intangible asset impairments.]

As of December 31, [removed: 2022,] [added: 2023,] through the voting trust, these members of the Smith Family own approximately [removed: 65.6] [added: 66.2] percent of the total voting power of our outstanding shares of Class A Common Stock and Common Stock, taken together as a single class, and approximately [removed: 96.8] [added: 96.9] percent of the voting power of the outstanding shares of our Class A Common Stock, as a separate class.

New technologies and new competitors have developed and continue to develop in certain markets in which we participate, such as gas tankless and heat pump technologies in North America.

While we design and manufacture these and other products, we cannot assure that our products will continue to compete successfully with those of our current competitors and new market participants and it is possible that we will not be able to retain our customer base or improve or maintain our profit margins on sales to our customers.

There is also increasing use of data analytics, machine learning, and artificial intelligence software, which our competitors may be able to use more effectively or implement more successfully than we are able to do.

Failure to adapt to the evolving competitive environment could materially and adversely affect our financial condition, results of operations and cash flows.

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Commercial construction activity in North America grew in 2023, although at a slower rate than 2022.

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Use of artificial intelligence software may also create risks from unintentional disclosure of proprietary, confidential, personal or otherwise sensitive information.

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For example, the Department of Energy (DOE) has adopted a new efficiency rule for commercial water heaters that will take effect in 2026.

In addition, there are proposed federal rule makings that would require our residential water heater product line to be more energy efficient as well as the establishment of a national drinking water standard regulating per- and poly-fluoroalkyl substances (PFAS), which could affect the demand for our water filtration products.

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indefinite-lived intangible asset impairments.

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.

However, the COVID-19 pandemic and efforts to manage it, including those by governmental authorities, could have a material adverse effect on our financial condition, results of operations and cash flows.

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.

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

In North America, the gas tankless portion of the water heating market has for many years increased as a percentage of the overall market.

While we have many gas tankless products, our market share for gas tankless products is lower than our market share for the remainder of the water heating market.

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

We cannot assure that our products will continue to compete successfully with those of our competitors.

There could be new market participants that change the dynamics of those markets and it is possible that we will not be able to retain our customer base or improve or maintain our profit margins on sales to our customers, all of which could materially and adversely affect our financial condition, results of operations and cash flows.

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

Commercial construction activity in North America grew in 2022 and 2021 after declining in 2020.

We have a response plan in place in the event of a data breach and we 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 acquired Giant, a Canada-based manufacturer of residential and commercial water heaters, on October 19, 2021, for $199 million subject to customary adjustments using a combination of cash and debt.

[removed: While] [added: We saw improvement in our] supply chain [removed: and logistics challenges lingered in] [added: during] 2022, [removed: we saw improvement,] particularly in the second half of the [removed: year.][added: year, which continued through 2023.]

We will also continue to look for opportunities to add to our existing operations in high growth regions demonstrated by our previous introductions of water treatment products in India and [removed: range hoods] [added: kitchen products including our recently introduced dishwashers] and [removed: cooktops] [added: steam ovens,] in China.

We expect to see [removed: a 10] [added: an eight] to [removed: 12] [added: ten] percent increase in our sales of boilers in [removed: 2023] [added: 2024] compared to [removed: 2022 due to industry growth of approximately three] [added: 2023 as we continue] to [removed: four percent and our expectation that] [added: benefit from] the transition to [removed: higher-efficiency boilers will continue.][added: higher efficiency boilers.]

We anticipate sales of our North America water treatment products will increase approximately [removed: five] [added: ten] to [removed: seven] [added: 12] percent in [removed: 2023,] [added: 2024,] compared to [removed: 2022, primarily driven by pricing and consumer demand.][added: 2023, as we expect our sales to grow at approximately two times the market.]

We project our sales in China will grow three to five percent in [removed: 2023] [added: 2024] in local currency compared to [removed: 2022.][added: 2023 driven by innovative new products and resilient demand for our core products.]

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In this section, we discuss the results of our operations for [removed: 2022] [added: 2023] compared with [removed: 2021.][added: 2022.]

We discuss our cash flows and current financial condition under “Liquidity and Capital Resources.” For a discussion related to [removed: 2021] [added: 2022] compared with [removed: 2020,] [added: 2021,] 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: 2021,] [added: 2022,] which was filed with the United States Securities and Exchange Commission (SEC) on February [removed: 11, 2022,] [added: 14, 2023,] and is available on the SEC's website at www.sec.gov.

| (dollars in millions) | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Net sales | | | $ | [removed: 3,753.9] [added: 3,852.8] | | | | | $ | [removed: 3,538.9] [added: 3,753.9] | | | | | $ | [removed: 2,895.3] [added: 3,538.9] | |

| Cost of products sold | | | [removed: 2,424.3] [added: 2,368.0] | | | | | | [removed: 2,228.0] [added: 2,424.3] | | | | | | [removed: 1,787.1] [added: 2,228.0] | | |

| Gross profit | | | [removed: 1,329.6] [added: 1,484.8] | | | | | | [removed: 1,310.9] [added: 1,329.6] | | | | | | [removed: 1,108.2] [added: 1,310.9] | | |

| *Gross profit margin %* | | | [removed: *35.4*] [added: *38.5*] | | *%* | | | | [removed: *37.0*] [added: *35.4*] | | *%* | | | | [removed: *38.3*] [added: *37.0*] | | *%* |

| Selling, general and administrative expenses | | | [removed: 670.9] [added: 727.4] | | | | | | [removed: 701.4] [added: 670.9] | | | | | | [removed: 660.3] [added: 701.4] | | |

| [removed: Severance] [added: Restructuring] and [removed: restructuring] [added: impairment] expenses | | | [removed: —] [added: 18.8] | | | | | | — | | | | | | [removed: 7.7] [added: —] | | |

| Interest expense | | | [removed: 9.4] [added: 12.0] | | | | | | [removed: 4.3] [added: 9.4] | | | | | | [removed: 7.3] [added: 4.3] | | |

| Other [removed: expense (income)-net] [added: (income) expense-net] | | | [removed: 425.6] [added: (6.9)] | | | | | | [removed: (20.4)] [added: 425.6] | | | | | | [removed: (11.0)] [added: (20.4)] | | |

| Earnings before provision for income taxes | | | [removed: 223.7] [added: 733.5] | | | | | | [removed: 625.6] [added: 223.7] | | | | | | [removed: 443.9] [added: 625.6] | | |

| [removed: (Benefit from) provision] [added: Provision] for [added: (benefit from)] income taxes | | | [removed: (12.0)] [added: 176.9] | | | | | | [removed: 138.5] [added: (12.0)] | | | | | | [removed: 99.0] [added: 138.5] | | |

| Net Earnings | | | $ | [removed: 235.7] [added: 556.6] | | | | | $ | [removed: 487.1] [added: 235.7] | | | | | $ | [removed: 344.9] [added: 487.1] | |

Our sales in [removed: 2022] [added: 2023] were [removed: $3,753.9] [added: $3,852.8] million, or [removed: 6.1] [added: 2.6] percent higher than [removed: 2021] [added: 2022] sales of [removed: $3,538.9] [added: $3,753.9] million.

[removed: Higher] [added: The increased] sales in [removed: 2022] [added: 2023 compared to the prior year] were primarily driven by [removed: the impacts of inflation-related pricing actions] [added: higher residential and commercial water heater volumes,] partially offset by lower [removed: residential water heater] volumes [removed: in North America] [added: of boilers] and [removed: lower sales in China.][added: unfavorable pricing.]

Our gross profit margin in [removed: 2022] [added: 2023] of [removed: 35.4] [added: 38.5] percent [removed: declined] [added: increased] compared to [removed: 37.0] [added: 35.4] percent in [removed: 2021.][added: 2022.]

Selling, general, and administrative (SG&A) expenses were [removed: $670.9] [added: $727.4] million in [removed: 2022,] [added: 2023,] or [removed: $30.5] [added: $56.5] million [removed: lower] [added: higher] than in [removed: 2021.][added: 2022.]

[removed: The decrease in] [added: In 2022] SG&A [removed: expenses was primarily due to] [added: included] the recognition of [removed: a gain from] an $11.5 million [added: favorable] judgment against a competitor related to its infringement of one of our patents, [removed: lower management incentive] [added: which reduced SG&A] expenses, and [removed: lower engineering costs in China.][added: was partially offset by a $4.3 million expense associated with a terminated acquisition.]

Interest expense was [removed: $9.4] [added: $12.0] million in [removed: 2022,] [added: 2023,] compared to [removed: $4.3] [added: $9.4] million in [removed: 2021.][added: 2022.]

The increase in interest expense in [removed: 2022] [added: 2023] was primarily due to higher debt levels and interest rates.

[removed: The] [added: In 2022, we recorded a $417.3 million pension settlement expense related to the termination of the] Plan [added: which] represented over 95 percent of our pension plan liability.

Other [removed: expense (income)-net in 2022] [added: (income) expense, net] was [removed: $425.6] [added: income of $6.9] million in [removed: expense] [added: 2023] compared to [removed: income] [added: expense] of [removed: $20.4] [added: $425.6] million in [removed: 2021.][added: 2022.]

The service cost component of our pension [removed: income] [added: expense] is reflected in cost of products sold and SG&A expenses.

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

Our effective income tax rate in [removed: 2022] [added: 2023] was [removed: lower] [added: higher] than our effective income tax rate in [removed: 2021] [added: 2022] primarily due to the tax effects of the pension settlement expense associated with the termination of the [removed: Plan, a non-recurring $4.2 million favorable tax impact recorded in the prior year periods related to amending a previously filed tax return] [added: Plan] and a change in geographic earnings mix.

We estimate that our annual effective income tax rate for the full year of [removed: 2023] [added: 2024] will be approximately 24 [added: to 24.5] percent.

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

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

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

| Years ended December 31 (dollars in millions) | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| Net Sales | | | $ | [removed: 2,819.1] [added: 2,922.9] | | | | | $ | [removed: 2,529.5] [added: 2,819.1] | |

| Segment Earnings | | | [removed: 266.0] [added: 726.7] | | | | | | [removed: 590.8] [added: 266.0] | | |

| *Segment Margin* | | | [removed: *9.4*] [added: *24.9*] | | *%* | | | | [removed: *23.4*] [added: *9.4*] | | *%* |

We also launched our internally designed and manufactured gas tankless water heaters in early 2024.

In addition we are expanding our commercial water heater capacity in preparation for the 2026 commercial regulatory change.

In our North America segment, we saw resilient demand in the residential water heater industry in 2023 after three years of uneven growth, primarily related to the impacts of COVID-19-related supply chain constraints.

Proactive replacement remained above historical levels in 2023 and we project that will continue in 2024.

We believe that new home construction remains in a deficit and we expect it will be flat in 2024 compared to 2023.

Considering these factors, we project 2024 industry residential unit volumes will be approximately flat after approximately six percent growth in 2023.

We believe that commercial water heater industry volumes will grow low single digits in 2024 compared to 2023 as demand for commercial electric water heaters greater than 55 gallon continues a positive trend toward pre-2022 levels.

Sales of our boilers and water treatment products were negatively impacted by elevated channel inventories in 2023.

We believe that channel inventories were at near normal levels at the end of 2023 for both product categories.

In our Rest of World segment, we saw a return to growth in China as our sales increased four percent in local currency in 2023.

Our guidance assumes that the currency translation impact on sales will be minimal in 2024.

Combining all of these factors, we expect our 2024 consolidated sales to increase between three and five percent compared to 2023.

Our guidance excludes the impacts from potential future acquisitions.

Higher sales in 2023 were driven by higher volumes of residential and commercial water heaters, which more than offset unfavorable foreign currency impacts of approximately $56 million, lower boiler sales and unfavorable pricing in our North America segment.

The higher gross profit margin in 2023 was primarily due to lower material costs.

The increase in SG&A expenses was primarily due to higher employee costs, which includes management incentive expenses related to higher earnings, and compensation increases.

Restructuring and impairment expenses in 2023 were $18.8 million, of which $15.6 million related to the sale of our business in Turkey which was included in our Rest of World segment.

Of the $18.8 million restructuring and impairment expenses, $15.7 million was recorded in the Rest of World segment and $3.1 million in Corporate Expense.

The change in Other (income) expense, net was primarily due to a reduction in pension expenses and pension settlement expense associated with the termination of our defined benefit pension plan (the Plan).

Reconciliations from GAAP measures

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North America segment earnings were $726.7 million in 2023, or $460.7 million higher than segment earnings of $266.0 million in 2022.

Higher segment earnings and margins in 2023 were primarily due to higher volumes of residential and commercial water heaters and lower material costs that were partially offset by higher SG&A expenses.

Additionally in 2022, we realized pre-tax pension settlement expense of $346.8 million.

Adjusted segment earnings and adjusted segment margin in 2023 were $726.0 million and 24.8 percent, respectively which exclude $0.7 million of pension settlement income.

| Years ended December 31 (dollars in millions) | | | 2023 | | | | | | 2022 | | |

Sales in our Rest of World segment were $956.9 million in 2023, or $8.9 million lower than sales of $965.8 million in 2022.

The decrease in sales in 2023 was primarily driven by the approximately $44 million unfavorable impact of foreign currency translation, partially offset by favorable volumes in China, particularly in our water treatment and kitchen products.

Lower segment earnings and segment margin in 2023 were primarily driven by restructuring and impairment expenses of $15.7 million, of which $12.5 million was associated with the sale of our business in Turkey.

We estimate our 2024 Rest of World segment margin will be approximately 10 percent.

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Movements in working capital consisted of lower Cash and cash equivalents, and Marketable securities due to the paydown of our Long-term debt and Trade payables.

Cash and cash equivalents used to fund our operations are primarily generated through operating activities and provided by our existing credit facilities.

We believe our available cash and existing credit facilities are sufficient to cover our cash needs for the foreseeable future.

We use a global cash pooling arrangement, intercompany borrowing, and some local credit lines to meet funding needs and allocate capital resources among various entities.

We have historically made and anticipate future cash repatriations to the United States from certain foreign subsidiaries.

In 2023, we repatriated approximately $100 million of cash from our foreign subsidiaries through dividends and approximately $200 million through our global cash pooling arrangement.

| Years ended December 31 (dollars in millions) | | | 2023 | | | | | | 2022 | | |

The increase in operating cash flows in 2023 compared with the prior year is due to increased earnings and a more favorable working capital contribution primarily related to lower inventory levels and incentive payments.

We expect cash provided by operating activities to be between $640 million and $690 million in 2024.

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.

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

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

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

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

In our North America segment, after approximately eight percent growth each year in 2021 and 2020, we believe that the wholesale residential water heater industry is returning to a more historical growth 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 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.

We believe that commercial water heater industry volumes will be flat to slightly up in 2023 compared to 2022 as supply chain constraints continue to ease.

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.

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.

Our guidance excludes the impacts from potential future acquisitions and assumes the COVID-19-related impacts in China improve in the second half of the year and do not have a significant impact on our productivity or significantly impact the end markets that we serve.

In addition, our sales were negatively impacted by approximately $61 million compared to last year due to the depreciation of foreign currencies against the U.S. dollar.

Our acquisition of Giant added $94.3 million of incremental sales in 2022.

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

In 2021, our Board of Directors approved the termination of our defined benefit pension plan (the Plan) with a termination date of December 31, 2021.

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.

To protect the Plan's funded status, the Plan transferred a significant portion of its assets to lower-risk investments in 2021.

The impact of this transition resulted in a lower expected rate of return on pension investments and, accordingly, higher pension expenses in 2022 compared to the previous year.

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

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

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

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

North America segment earnings were $266.0 million in 2022, a decrease of 55 percent compared to segment earnings of $590.8 million in 2021.

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 2021 were $580.3 million and 22.9 percent, respectively.

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.

Compared to 2021, higher segment earnings and margin were primarily driven by lower engineering, advertising, and selling expenses in China.

We expect the full-year segment margin to be approximately 10 percent in 2023.

A majority of the increase in working capital was driven by lower accounts payable and payroll-related accruals and higher inventory balances than at December 31, 2021, due to higher levels of safety stock which were partially offset by lower accounts receivable, and cash balances.

The decrease in operating cash flows in 2022 was primarily due to lower customer deposits in China, higher 2021-related incentive payments made in 2022 and additional working capital cash outlays primarily related to higher cost inventories that more than offset lower accounts receivable balances.

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

Sales in our North America segment [removed: accounts] [added: accounted] for [removed: 74%] [added: approximately 75 percent] of our total sales in [removed: 2022.][added: 2023.]

[removed: In 2022, we continued] [added: We expanded] our [removed: integration activities] [added: presence in North America with our acquisition] of Giant Factories, Inc., (Giant) a Canada-based manufacturer of residential and commercial water heaters, which we acquired in late 2021.

We expanded our product offerings [added: and geographic footprint] with the acquisitions of Hague Quality Water International (Hague) in 2017, Water-Right, Inc. (Water-Right) in 2019, Master Water Conditioning Corporation (Master Water) in [removed: 2021 and] [added: 2021,] Atlantic Filter Corporation (Atlantic Filter) in [removed: 2022.][added: 2022 and Water Tec of Tucson, Inc (Water Tec) in 2023.]

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

Our wholesale distribution channel, where we sell our products primarily under the A. O. Smith and State brands, includes more than [removed: 1,000] [added: 900] independent wholesale plumbing distributors serving residential and commercial end markets.

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

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

We offer residential heat [removed: pump,] [added: pumps,] condensing tank-type and tankless water heaters in North America, as well as other higher efficiency water heating solutions to round out our energy-efficient product offerings.

[removed: In addition, during 2021 we] [added: We recently] launched [removed: a] [added: our newly designed ADAPT condensing gas tankless water heater and VERITUS air source] commercial heat pump water heater to align with greenhouse gas emission reduction trends across the U.S.

Sales in our Rest of World segment [removed: accounts] [added: accounted] for [removed: 26%] [added: approximately 25 percent] of our total sales in [removed: 2022,] [added: 2023,] a majority of which [removed: is] [added: was] in China.

We also design and market [removed: range hoods] [added: kitchen products (range hoods, cooktops, steam ovens,] and [removed: cooktops] [added: dishwashers)] in China.

We sell our products in approximately [removed: 12,000] [added: 9,900] points of sale in China, of which approximately [removed: 5,400] [added: 4,600] are retail outlets in tier one through tier three cities and approximately [removed: 2,000] [added: 1,800] exclusively sell our products.

We also sell water heaters in the European and Middle and Far Eastern markets and water treatment products in [removed: Hong Kong, and] Vietnam, all of which combined comprised less than 13 percent of total Rest of World sales in [removed: 2022.][added: 2023.]

[removed: Our primary raw material input is steel which] [added: There] has [removed: experienced] [added: been] volatility in [added: steel] costs over the last several years.

Our total expenditures for research and development in [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020] [added: 2021] were [removed: $89.0] [added: $97.5] million, [removed: $94.2] [added: $89.0] million and [removed: $80.7] [added: $94.2] million, respectively.

We employed approximately 12,000 employees as of December 31, [removed: 2022] [added: 2023] with approximately [removed: 6,200] [added: 7,000] in North America and [removed: 5,800] [added: 5,000] in Rest of World.

[removed: Survey participation] [added: Participation] in [added: our most recent survey in] 2022 was 97 percent, which we believe reflects our employees’ desire to share their perspectives and a commitment to continuous improvement.

A. O. Smith’s commitment to this objective starts at the top with its Board of Directors, which is [removed: 50%] [added: 44 percent] diverse.

All of [removed: of] our salaried employees are given formal development plans.

Since 1954, we have [removed: awarded] annually [added: awarded] the Lloyd B.

In recent years, a [removed: 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 [removed: the] [added: a corresponding increase in] demand for our non-fossil fuel powered products.

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

Any waiver of or amendments to the Financial Code of Conduct or the A. O. Smith Guiding Principles [removed: also] would be posted on this website; to date there have been none.

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 [removed: 10%] [added: 10 percent] by 2025.

Our ESG report [removed: is] [added: and ESG scorecard are] available on our website and not included as part of, or incorporated by reference into, this Annual Report on Form 10-K.

Raw materials for our manufacturing operations, primarily consisting of steel, are generally available in adequate quantities.

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

We monitor our intellectual property for infringements.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

To encourage additional career development, in 2023, all our salaried employees worldwide had at least one career conversation with their manager.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

Our scorecard also provides information on our employee diversity, product stewardship, and recordable incident rate, among other items.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

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

These raw materials are generally available in adequate quantities, however, the COVID-19 pandemic and disruptions in the commercial transportation network have stressed the availability of certain raw materials.

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

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

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.

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.

For the fiscal year ended December 31, [removed: 2022][added: 2023]

| Title of Each Class | | | | | | Trading Symbol(s) | | | | | | Shares of Stock Outstanding January 31, [removed: 2023] [added: 2024] | | | | | | Name of Each Exchange on Which Registered | | |

| Class A Common Stock (par value $5.00 per share) | | | | | | None | | | | | | [removed: 25,905,276] [added: 25,887,352] | | | | | | Not listed | | |

| Common Stock (par value $1.00 per share) | | | | | | AOS | | | | | | [removed: 124,974,017] [added: 121,307,743] | | | | | | New York Stock Exchange | | |

The aggregate market value of voting stock held by non-affiliates of the registrant was [removed: $41,779,676] [added: $60,137,459] for Class A Common Stock and [removed: $6,733,262,366] [added: $8,915,599,927] for Common Stock as of June 30, [removed: 2022.][added: 2023.]

| 1. | | | Portions of the company’s definitive Proxy Statement for the [removed: 2023] [added: 2024] 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: 2022][added: 2023]

| [Item [removed: 1.](#i967b644b84594bfcbd2435a3423d2106_13)] [added: 1.](#i69ead51464fb48f3add5240f00d8931c_13)] | | | [removed: [Business](#i967b644b84594bfcbd2435a3423d2106_13)] [added: [Business](#i69ead51464fb48f3add5240f00d8931c_13)] | | | [removed: [3](#i967b644b84594bfcbd2435a3423d2106_13)] [added: [3](#i69ead51464fb48f3add5240f00d8931c_13)] | | |

| [Item [removed: 1A.](#i967b644b84594bfcbd2435a3423d2106_16)] [added: 1A.](#i69ead51464fb48f3add5240f00d8931c_16)] | | | [Risk [removed: Factors](#i967b644b84594bfcbd2435a3423d2106_16)] [added: Factors](#i69ead51464fb48f3add5240f00d8931c_16)] | | | [removed: [7](#i967b644b84594bfcbd2435a3423d2106_16)] [added: [7](#i69ead51464fb48f3add5240f00d8931c_16)] | | |

| [Item [removed: 1B.](#i967b644b84594bfcbd2435a3423d2106_19)] [added: 1B.](#i69ead51464fb48f3add5240f00d8931c_19)] | | | [Unresolved Staff [removed: Comments](#i967b644b84594bfcbd2435a3423d2106_19)] [added: Comments](#i69ead51464fb48f3add5240f00d8931c_19)] | | | [removed: [12](#i967b644b84594bfcbd2435a3423d2106_19)] [added: [12](#i69ead51464fb48f3add5240f00d8931c_19)] | | |

| [Item [removed: 2.](#i967b644b84594bfcbd2435a3423d2106_22)] [added: 2.](#i69ead51464fb48f3add5240f00d8931c_22)] | | | [removed: [Properties](#i967b644b84594bfcbd2435a3423d2106_22)] [added: [Properties](#i69ead51464fb48f3add5240f00d8931c_22)] | | | [removed: [13](#i967b644b84594bfcbd2435a3423d2106_22)] [added: [14](#i69ead51464fb48f3add5240f00d8931c_22)] | | |

| [Item [removed: 3.](#i967b644b84594bfcbd2435a3423d2106_25)] [added: 3.](#i69ead51464fb48f3add5240f00d8931c_25)] | | | [Legal [removed: Proceedings](#i967b644b84594bfcbd2435a3423d2106_25)] [added: Proceedings](#i69ead51464fb48f3add5240f00d8931c_25)] | | | [removed: [13](#i967b644b84594bfcbd2435a3423d2106_25)] [added: [14](#i69ead51464fb48f3add5240f00d8931c_25)] | | |

| [Item [removed: 4.](#i967b644b84594bfcbd2435a3423d2106_28)] [added: 4.](#i69ead51464fb48f3add5240f00d8931c_28)] | | | [Mine Safety [removed: Disclosures](#i967b644b84594bfcbd2435a3423d2106_28)] [added: Disclosures](#i69ead51464fb48f3add5240f00d8931c_28)] | | | [removed: [13](#i967b644b84594bfcbd2435a3423d2106_28)] [added: [14](#i69ead51464fb48f3add5240f00d8931c_28)] | | |

| [Item [removed: 5.](#i967b644b84594bfcbd2435a3423d2106_34)] [added: 5.](#i69ead51464fb48f3add5240f00d8931c_34)] | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i967b644b84594bfcbd2435a3423d2106_34)] [added: Securities](#i69ead51464fb48f3add5240f00d8931c_34)] | | | [removed: [16](#i967b644b84594bfcbd2435a3423d2106_34)] [added: [17](#i69ead51464fb48f3add5240f00d8931c_34)] | | |

| [Item [removed: 6.](#i967b644b84594bfcbd2435a3423d2106_37)] [added: 6.](#i69ead51464fb48f3add5240f00d8931c_37)] | | | [Selected Financial [removed: Data](#i967b644b84594bfcbd2435a3423d2106_37)] [added: Data](#i69ead51464fb48f3add5240f00d8931c_37)] | | | [removed: [17](#i967b644b84594bfcbd2435a3423d2106_37)] [added: [18](#i69ead51464fb48f3add5240f00d8931c_37)] | | |

| [Item [removed: 7.](#i967b644b84594bfcbd2435a3423d2106_40)] [added: 7.](#i69ead51464fb48f3add5240f00d8931c_40)] | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i967b644b84594bfcbd2435a3423d2106_40)] [added: Operations](#i69ead51464fb48f3add5240f00d8931c_40)] | | | [removed: [18](#i967b644b84594bfcbd2435a3423d2106_40)] [added: [19](#i69ead51464fb48f3add5240f00d8931c_40)] | | |

| [Item [removed: 7A.](#i967b644b84594bfcbd2435a3423d2106_55)] [added: 7A.](#i69ead51464fb48f3add5240f00d8931c_55)] | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i967b644b84594bfcbd2435a3423d2106_55)] [added: Risk](#i69ead51464fb48f3add5240f00d8931c_55)] | | | [removed: [28](#i967b644b84594bfcbd2435a3423d2106_55)] [added: [28](#i69ead51464fb48f3add5240f00d8931c_55)] | | |

| [Item [removed: 8.](#i967b644b84594bfcbd2435a3423d2106_58)] [added: 8.](#i69ead51464fb48f3add5240f00d8931c_58)] | | | [Financial Statements and Supplementary [removed: Data](#i967b644b84594bfcbd2435a3423d2106_58)] [added: Data](#i69ead51464fb48f3add5240f00d8931c_58)] | | | [removed: [28](#i967b644b84594bfcbd2435a3423d2106_58)] [added: [28](#i69ead51464fb48f3add5240f00d8931c_58)] | | |

| [Item [removed: 9.](#i967b644b84594bfcbd2435a3423d2106_133)] [added: 9.](#i69ead51464fb48f3add5240f00d8931c_133)] | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i967b644b84594bfcbd2435a3423d2106_133)] [added: Disclosure](#i69ead51464fb48f3add5240f00d8931c_133)] | | | [removed: [57](#i967b644b84594bfcbd2435a3423d2106_133)] [added: [58](#i69ead51464fb48f3add5240f00d8931c_133)] | | |

| [Item [removed: 9A.](#i967b644b84594bfcbd2435a3423d2106_136)] [added: 9A.](#i69ead51464fb48f3add5240f00d8931c_136)] | | | [Controls and [removed: Procedures](#i967b644b84594bfcbd2435a3423d2106_136)] [added: Procedures](#i69ead51464fb48f3add5240f00d8931c_136)] | | | [removed: [57](#i967b644b84594bfcbd2435a3423d2106_136)] [added: [58](#i69ead51464fb48f3add5240f00d8931c_136)] | | |

| [Item [removed: 9B.](#i967b644b84594bfcbd2435a3423d2106_139)] [added: 9B.](#i69ead51464fb48f3add5240f00d8931c_139)] | | | [Other [removed: Information](#i967b644b84594bfcbd2435a3423d2106_139)] [added: Information](#i69ead51464fb48f3add5240f00d8931c_139)] | | | [removed: [57](#i967b644b84594bfcbd2435a3423d2106_139)] [added: [59](#i69ead51464fb48f3add5240f00d8931c_139)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i967b644b84594bfcbd2435a3423d2106_142)] [added: Inspections](#i69ead51464fb48f3add5240f00d8931c_142)] | | | [removed: [57](#i967b644b84594bfcbd2435a3423d2106_142)] [added: [59](#i69ead51464fb48f3add5240f00d8931c_142)] | | |

| [Part [removed: III](#i967b644b84594bfcbd2435a3423d2106_148)] [added: III](#i69ead51464fb48f3add5240f00d8931c_148)] | | | | | | | | |

| [Item [removed: 10.](#i967b644b84594bfcbd2435a3423d2106_151)] [added: 10.](#i69ead51464fb48f3add5240f00d8931c_151)] | | | [Directors, Executive Officers and Corporate [removed: Governance](#i967b644b84594bfcbd2435a3423d2106_151)] [added: Governance](#i69ead51464fb48f3add5240f00d8931c_151)] | | | [removed: [59](#i967b644b84594bfcbd2435a3423d2106_151)] [added: [61](#i69ead51464fb48f3add5240f00d8931c_151)] | | |

| [Item [removed: 11.](#i967b644b84594bfcbd2435a3423d2106_154)] [added: 11.](#i69ead51464fb48f3add5240f00d8931c_154)] | | | [Executive [removed: Compensation](#i967b644b84594bfcbd2435a3423d2106_154)] [added: Compensation](#i69ead51464fb48f3add5240f00d8931c_154)] | | | [removed: [59](#i967b644b84594bfcbd2435a3423d2106_154)] [added: [61](#i69ead51464fb48f3add5240f00d8931c_154)] | | |

| [Item [removed: 12.](#i967b644b84594bfcbd2435a3423d2106_157)] [added: 12.](#i69ead51464fb48f3add5240f00d8931c_157)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i967b644b84594bfcbd2435a3423d2106_157)] [added: Matters](#i69ead51464fb48f3add5240f00d8931c_157)] | | | [removed: [60](#i967b644b84594bfcbd2435a3423d2106_157)] [added: [62](#i69ead51464fb48f3add5240f00d8931c_157)] | | |

| [Item [removed: 13.](#i967b644b84594bfcbd2435a3423d2106_160)] [added: 13.](#i69ead51464fb48f3add5240f00d8931c_160)] | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#i967b644b84594bfcbd2435a3423d2106_160)] [added: Independence](#i69ead51464fb48f3add5240f00d8931c_160)] | | | [removed: [60](#i967b644b84594bfcbd2435a3423d2106_160)] [added: [62](#i69ead51464fb48f3add5240f00d8931c_160)] | | |

| [Item [removed: 14.](#i967b644b84594bfcbd2435a3423d2106_163)] [added: 14.](#i69ead51464fb48f3add5240f00d8931c_163)] | | | [Principal Accounting Fees and [removed: Services](#i967b644b84594bfcbd2435a3423d2106_163)] [added: Services](#i69ead51464fb48f3add5240f00d8931c_163)] | | | [removed: [60](#i967b644b84594bfcbd2435a3423d2106_163)] [added: [62](#i69ead51464fb48f3add5240f00d8931c_163)] | | |

| [Part [removed: IV](#i967b644b84594bfcbd2435a3423d2106_166)] [added: IV](#i69ead51464fb48f3add5240f00d8931c_166)] | | | | | | | | |

| [Item [removed: 15.](#i967b644b84594bfcbd2435a3423d2106_169)] [added: 15.](#i69ead51464fb48f3add5240f00d8931c_169)] | | | [Exhibits, Financial Statement [removed: Schedules](#i967b644b84594bfcbd2435a3423d2106_169)] [added: Schedules](#i69ead51464fb48f3add5240f00d8931c_169)] | | | [removed: [61](#i967b644b84594bfcbd2435a3423d2106_169)] [added: [63](#i69ead51464fb48f3add5240f00d8931c_169)] | | |

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by a check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

| [Part I](#i69ead51464fb48f3add5240f00d8931c_10) | | | | | | | | |

| [Item 1](#i69ead51464fb48f3add5240f00d8931c_1602)[C](#i69ead51464fb48f3add5240f00d8931c_1602)[.](#i69ead51464fb48f3add5240f00d8931c_1602) | | | [Cybersecurity](#i69ead51464fb48f3add5240f00d8931c_1602) | | | [13](#i69ead51464fb48f3add5240f00d8931c_1602) | | |

| [Part II](#i69ead51464fb48f3add5240f00d8931c_31) | | | | | | | | |

| | | | | | | | | |

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

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

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

*Cybersecurity Governance*

We recognize the importance of maintaining the safety and security of our systems and data and have a holistic process for overseeing and managing cybersecurity and related risks.

This process is supported by both our management and our Board of Directors.

Our Chief Information Officer (CIO) oversees our information systems and cybersecurity function and reports to our Chief Executive Officer (CEO).

She has over 30 years of experience in leading information systems management, strategy, and operational execution, including incident management, prevention, and response.

Our Senior Director of Global Information Security (ISD) reports to our CIO and is responsible for the protection and defense of our networks and systems and managing cybersecurity risk.

He has over 20 years of experience in managing cybersecurity and related risks, including threat identification, incident response, and defense strategies.

Our CIO and ISD are supported by a direct and a cross-functional team of professionals with broad experience and expertise in threat assessment and detection, mitigation technologies, training, incident response, and regulatory compliance.

Our Board of Directors is responsible for overseeing our enterprise risk management activities in general, which includes our management of information and cybersecurity risk.

The full Board receives an update on our cyber risk management process and trends related to cybersecurity at least annually.

The Audit Committee of the Board assists the full Board in its oversight of cybersecurity risks and as part of its oversight, the Audit Committee receives reports from management on information systems and security at each meeting, including metrics and controls, and other items from time to time such as risk assessments, security software, and incident response plans.

We have also established a committee of our executive leadership team to consider cybersecurity risk, mitigation strategies, and to consider trends and developments in managing the risk.

Our CIO and ISD participate on this committee, which meets regularly.

We have an established incident response plan led by our CIO and ISD to assess, respond, and report in the event of a cybersecurity incident.

Depending on the nature and severity of the incident, the plan requires escalating notifications up to our CEO and our Board.

*Cybersecurity Risk Management*

Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program in a similar fashion to other legal, compliance, strategic, operational, and financial risk areas.

Our program is guided by cybersecurity frameworks, such as the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF), although we also look to other standards to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our approach to cybersecurity risk management includes:

- Periodic risk assessments designed to help identify significant or potentially material cybersecurity risks to our critical systems, information, and our broader enterprise information technology (IT) environment;

- The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;

- A multi-layered defense and continuous monitoring strategy employing various tools and testing, and incorporating lessons learned from our defense and monitoring efforts to help prevent future attacks;

- Cybersecurity awareness training, including interactive simulations and tabletop exercises for our employees, incident response personnel, senior management, and our Board;

- Regular testing by our Internal Audit function of controls related to our financial information systems; and

- Information security assessments conducted on third parties with whom we share sensitive electronic data against established cybersecurity frameworks;

While we have experienced cybersecurity incidents in the past, to-date none have materially affected the Company or our financial position, results of operations and/or cash flows.

We continue to invest in cybersecurity and the resiliency of our networks, including our controls and processes, all of which are designed in an effort to protect our IT systems and infrastructure, and the information they contain.

For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors – Business, Operational, and Strategic Risks.”

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

Properties utilized by us at December 31, [removed: 2022] [added: 2023] were as follows:

In this segment, we have [removed: 20] [added: 22] manufacturing plants located in [removed: ten] [added: 12] states and two non-U.S. countries, of which [removed: 17] [added: 18] are owned directly by us or our subsidiaries and [removed: three] [added: four] are leased from outside parties.

The terms of leases in effect at December 31, [removed: 2022,] [added: 2023,] expire between [removed: 2023] [added: 2025] and [removed: 2025.][added: 2028.]

In this segment, we have [removed: six] [added: five] manufacturing plants located in [removed: four] [added: three] non-U.S. countries, of which four are owned directly by us or our subsidiaries and [removed: two are] [added: one is] leased from outside parties.

The terms of leases in effect at December 31, [removed: 2022,] [added: 2023,] expire in [removed: 2025.][added: 2035.]

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_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: 2023] [added: 2024] Annual Meeting of Stockholders.

| Samuel M. Carver [removed: (54)] [added: (55)] | | | | | | Senior Vice President – Global Operations | | | | | | 2021 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 2006 to 2011 | | |

| Robert J. Heideman [removed: (56)] [added: (57)] | | | | | | Senior Vice President – Chief Technology Officer | | | | | | 2013 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 2002 to 2011 | | |

| D. Samuel Karge [removed: (48)] [added: (49)] | | | | | | Senior Vice President | | | | | | 2018 to Present | | |

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

| Charles T. Lauber [removed: (60)] [added: (61)] | | | | | | Executive Vice President and Chief Financial Officer | | | | | | 2019 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 1999 to 2006 | | |

| Stephen D. O'Brien [removed: (54)] [added: (55)] | | | | | | Senior Vice [removed: President;] President [removed: - Lochinvar, LLC] | | | | | | 2022 to Present | | |

| Mark A. Petrarca [removed: (59)] [added: (60)] | | | | | | Senior Vice President - Human Resources and Public Affairs | | | | | | 2006 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 1999 to 2005 | | |

| Jack Qiu [removed: (50)] [added: (51)] | | | | | | Senior Vice President | | | | | | 2020 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 2003 to 2012 | | |

| S. Melissa Scheppele [removed: (60)] [added: (61)] | | | | | | Senior Vice President - Chief Information Officer | | | | | | 2020 to Present | | |

| James F. Stern [removed: (60)] [added: (61)] | | | | | | Executive Vice President, General Counsel and Secretary | | | | | | 2007 to Present | | |

| David R. Warren [removed: (59)] [added: (60)] | | | | | | Senior Vice President | | | | | | 2017 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 1989 to 2008 | | |

| Kevin J. Wheeler [removed: (63)] [added: (64)] | | | | | | Chairman | | | | | | 2020 to Present | | |

| | | | | | | Various [removed: A.O.] [added: A. O.] Smith [removed: Officer and] Management Positions | | | | | | 1999 to 2013 | | |

| Parag Kulkarni (56) | | | | | | Senior Vice President, International | | | | | | 2022 to Present | | |

| | | | | | | President - Lochinvar, LLC | | | | | | 2022 to Present | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| Daniel L. Kempken (50) | | | | | | Senior Vice President – Strategy and Corporate Development | | | | | | 2019 to Present | | |

| | | | | | | Vice President and Controller | | | | | | 2011 to 2019 | | |

As of January 31, [removed: 2023,] [added: 2024,] the approximate number of stockholders of record of Common Stock and Class A Common Stock were [removed: 526] [added: 503] and [removed: 144,] [added: 136,] respectively.

In [removed: 2022,] [added: 2023,] the Board of Directors approved adding [removed: 3,500,000] [added: 7,500,000] shares of Common Stock to an existing discretionary share repurchase authority.

In [removed: 2022,] [added: 2023,] we repurchased [removed: 6,647,895] [added: 4,377,000] shares at an average price of [removed: $60.70] [added: $70.03] per share and at a total cost of [removed: $403.5] [added: $306.5] million.

As of December 31, [removed: 2022,] [added: 2023,] there were [removed: 378,462] [added: 3,501,462] shares remaining on the existing repurchase authorization.

On January [removed: 27, 2023,] [added: 26 2024,] the Board of Directors approved adding [removed: 7,500,000] [added: 2,000,000] shares of common stock to the existing discretionary share repurchase authority.

Including the additional shares, we have [removed: approximately 7.6 million] [added: 5,202,462] shares available for repurchase as of the date of the Board of Directors' approval.

We intend to spend approximately [removed: $200] [added: $300] million to repurchase Common Stock in [removed: 2023] [added: 2024] through a combination of 10b5-1 plans and open-market purchases.

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

[removed: ][added: ]

| Company/Index | | | [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] | | | | | | [removed: 12/31/22] [added: 12/31/23] | | |

From December 31, 2018 to December 31, 2023

| A. O. Smith Corporation | | | 100.0 | | | | | | 113.6 | | | | | | 133.4 | | | | | | 212.3 | | | | | | 144.0 | | | | | | 211.4 | | |

| S&P 500 Index | | | 100.0 | | | | | | 131.5 | | | | | | 155.7 | | | | | | 200.4 | | | | | | 164.1 | | | | | | 207.2 | | |

| S&P 500 Select Industrial Index | | | 100.0 | | | | | | 129.4 | | | | | | 143.6 | | | | | | 174.0 | | | | | | 164.4 | | | | | | 194.3 | | |

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 | | |

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

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

[removed: The] [added: To the Stockholders and the] Board of Directors [removed: and Stockholders][added: of A. O. Smith Corporation]

We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] 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: 2022,] [added: 2023,] and the related notes and financial statement schedule listed in the [removed: index] [added: 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: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2022,] [added: 2023,] 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: 2022,] [added: 2023,] based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework)] [added: framework),] and our report dated February [removed: 14, 2023] [added: 13, 2024] expressed an unqualified opinion thereon.

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

| *Description of the Matter* | | | | | | At December 31, [removed: 2022,] [added: 2023,] the Company’s product warranty liability was [removed: $182.5] [added: $188.1] million. As discussed in Note 1 of the consolidated financial statements, the Company records a liability for the expected cost of warranty-related claims at the time of sale. The product warranty liability is estimated based upon warranty loss experience using actual historical failure rates and estimated cost of product replacement. Products generally carry warranties from one to twelve years. The Company performs separate warranty calculations based on the product type and the warranty term and aggregates them. | | |

| *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 [removed: and categorization] of claims [removed: by product type and warranty period] within the calculation and tested the completeness and accuracy of the claims [added: settled] 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 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. | | |

We have served as [removed: A. O. Smith Corporation’s] [added: the Company’s] auditor since 1917.

| | | | [added: | | | | | |] 2022 | | | | | | 2021 | | |

| Cash and cash equivalents | | | $ | [removed: 391.2] [added: 339.9] | | | | | $ | [removed: 443.3] [added: 391.2] | |

| Marketable securities | | | [removed: 90.6] [added: 23.5] | | | | | | [removed: 188.1] [added: 90.6] | | |

| Receivables | | | [removed: 581.2] [added: 596.0] | | | | | | [removed: 634.4] [added: 581.2] | | |

| Inventories | | | [removed: 516.4] [added: 497.4] | | | | | | [removed: 447.7] [added: 516.4] | | |

| Other current assets | | | [removed: 54.3] [added: 43.5] | | | | | | [removed: 39.1] [added: 54.3] | | |

| Total Current Assets | | | [removed: 1,633.7] [added: 1,500.3] | | | | | | [removed: 1,752.6] [added: 1,633.7] | | |

| Net property, plant and equipment | | | [removed: 590.7] [added: 597.5] | | | | | | [removed: 606.7] [added: 590.7] | | |

| Goodwill | | | [removed: 619.7] [added: 633.4] | | | | | | [removed: 627.8] [added: 619.7] | | |

| Other intangibles | | | [removed: 347.9] [added: 336.7] | | | | | | [removed: 364.8] [added: 347.9] | | |

| Operating lease assets | | | [removed: 29.8] [added: 37.3] | | | | | | [removed: 32.5] [added: 29.8] | | |

| Other assets | | | [removed: 110.5] [added: 108.7] | | | | | | [removed: 90.0] [added: 110.5] | | |

| Total Assets | | | $ | [removed: 3,332.3] [added: 3,213.9] | | | | | $ | [removed: 3,474.4] [added: 3,332.3] | |

| Trade payables | | | $ | [removed: 625.8] [added: 600.4] | | | | | $ | [removed: 745.9] [added: 625.8] | |

| Accrued payroll and benefits | | | [removed: 75.7] [added: 92.2] | | | | | | [removed: 113.4] [added: 75.7] | | |

| Accrued liabilities | | | [removed: 159.1] [added: 177.4] | | | | | | [removed: 181.8] [added: 159.1] | | |

| Product warranties | | | [removed: 63.6] [added: 65.3] | | | | | | [removed: 70.9] [added: 63.6] | | |

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

| Total Current Liabilities | | | [removed: 934.2] [added: 945.3] | | | | | | [removed: 1,118.8] [added: 934.2] | | |

| Long-term debt | | | [removed: 334.5] [added: 117.3] | | | | | | [removed: 189.9] [added: 334.5] | | |

| Product warranties | | | [removed: 118.9] [added: 122.8] | | | | | | [removed: 113.5] [added: 118.9] | | |

| Pension liabilities | | | [removed: 9.9] [added: 10.5] | | | | | | [removed: 15.9] [added: 9.9] | | |

| Long-term operating lease liabilities | | | [removed: 22.4] [added: 27.9] | | | | | | [removed: 22.3] [added: 22.4] | | |

| Other liabilities | | | [removed: 164.7] [added: 145.7] | | | | | | [removed: 181.8] [added: 164.7] | | |

| Total Liabilities | | | [removed: 1,584.6] [added: 1,369.5] | | | | | | [removed: 1,642.2] [added: 1,584.6] | | |

| Class A Common Stock (shares issued [removed: 26,035,656] [added: 26,023,132] and [removed: 26,104,441] [added: 26,035,656] as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively) | | | [removed: 130.2] [added: 130.1] | | | | | | [removed: 130.5] [added: 130.2] | | |

| Common Stock (shares issued [removed: 164,671,938] [added: 164,684,460] and [removed: 164,603,153] [added: 164,671,938] as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively) | | | 164.7 | | | | | | 164.7 | | |

| Capital in excess of par value | | | [removed: 555.9] [added: 578.2] | | | | | | [removed: 545.2] [added: 555.9] | | |

| Retained earnings | | | [removed: 2,885.0] [added: 3,258.1] | | | | | | [removed: 2,826.6] [added: 2,885.0] | | |

| Accumulated other comprehensive loss | | | [removed: (82.4)] [added: (84.2)] | | | | | | [removed: (331.4)] [added: (82.4)] | | |

| Treasury stock at cost | | | [removed: (1,905.7)] [added: (2,202.5)] | | | | | | [removed: (1,503.4)] [added: (1,905.7)] | | |

February 13, 2024

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| | | | 2023 | | | | | | 2022 | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| Deferred Income Taxes | | | (3.8) | | | | | | — | | | | | | — | | |

| Non-cash impairment | | | 15.6 | | | | | | — | | | | | | — | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| Issuance of share based compensation | | | 11.3 | | | | | | 7.0 | | | | | | 6.6 | | |

| Foreign currency translation adjustments | | | 3.8 | | | | | | (39.4) | | | | | | 3.4 | | |

| Excise tax on repurchases of common stock | | | (3.1) | | | | | | — | | | | | | — | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| Years ended December 31 (dollars in millions) | | | 2023 | | | | | | 2022 | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

This ASU requires added disclosures related to the rate reconciliation, income taxes paid and other amendments intended to improve effectiveness and comparability.

The amendment is effective for the Company beginning with its 2025 annual disclosures with early adoption permitted and should be applied on a prospective basis.

The Company is currently evaluating the impact the adoption of ASU 2023-09 will have on its annual disclosures.

In November 2023, the FASB issued ASU 2023-07, “*Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures*.” The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods.

The update is effective for the Company beginning with its 2024 annual disclosures and interim periods beginning in 2025, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements.

The Company is currently evaluating the impact the adoption of ASU 2023-07 will have on its annual and interim disclosures.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

shipment.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

*2023 Acquisitions*

During the third quarter of 2023, the Company acquired a privately-held water treatment company.

The Company paid an aggregate cash purchase price of $16.8 million, net of cash acquired.

The addition of the acquired company expands the Company's water treatment platform.

The acquired company is included in the North America segment.

*2022 Acquisitions*

*2021 Acquisitions*

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| (dollars in millions) | | | December 31, 2023 | | |

| 2024 | | | $ | 13.0 | |

| 2025 | | | 9.5 | | |

| 2026 | | | 5.4 | | |

| 2027 | | | 3.6 | | |

A. O. Smith Corporation

February 14, 2023

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

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

| Stock incentives | | | 7.0 | | | | | | 6.6 | | | | | | 7.3 | | |

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

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

The Company adopted the amendment on January 1, 2022, and the adoption of ASU 2021-10 did not impact its annual disclosures, consolidated balance sheets, statements of earnings or statements of cash flows.

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

| 2023 | | | $ | 10.6 | |

| 2024 | | | 7.9 | | |

| 2025 | | | 5.3 | | |

| 2026 | | | 3.2 | | |

| 2027 | | | 1.7 | | |

| After 2027 | | | 7.5 | | |

During the year ended December 31, 2020, to align its business to market conditions, the Company recognized $7.7 million of pre-tax severance and restructuring expenses.

These expenses were comprised of $6.8 million in severance costs, as well as a corresponding $1.4 million tax benefit and were completed in 2020.

$2.7 million of the expense was related to the North America segment and $5.0 million was related to the Rest of World segment.

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

9.

| Balance at December 31, 2020 | | | $ | 487.7 | | | | | $ | 59.1 | | | | | $ | 546.8 | |

| Currency translation adjustment | | | (1.3) | | | | | | (0.2) | | | | | | (1.5) | | |

| Acquisitions | | | 82.5 | | | | | | — | | | | | | 82.5 | | |

Goodwill and Other Intangible Assets (continued)

| Bank credit lines, average year-end interest rates of 5.0% for 2021 | | | $ | — | | | | | $ | 0.8 | |

| | | | 344.5 | | | | | | 196.7 | | |

| 2023 | | | $ | 10.0 | |

| 2026 | | | 236.5 | | |

plan that we may then have in effect.

In 2020, the Company repurchased 1,348,391 shares at a cost of $56.7 million.

| | | | 436.8 | | | | | | | | | 19.9 | | | | | |

The Incentive Plan was most recently reapproved by stockholders on April 15, 2020.

The number of shares available for granting of options or share units at December 31, 2022, was

| Granted | | | 322,460 | | | | | | 74.11 | | |

| Vested | | | (559,150) | | | | | | 48.73 | | |

| Forfeited | | | (17,959) | | | | | | 61.83 | | |

| Granted | | | 94,731 | | | | | | 73.40 | | |

| Vested | | | (126,631) | | | | | | 49.49 | | |

| Forfeited | | | (9,319) | | | | | | 56.28 | | |

| Plan amendments | | | — | | | | | | — | | | | | | — | | | | | | — | | |

Based on this evaluation, our management has concluded that, as of December 31, [removed: 2022,] [added: 2023,] 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: 2022] [added: 2023] 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: 2022] [added: 2023] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

During the three months ended December 31, 2023, none of our directors or Section 16 officers adopted or terminated a “Rule 10b5-1trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

None.

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

[removed: The] [added: To the Stockholders and the] Board of Directors [removed: and Stockholders][added: of A. O. Smith Corporation]

We have audited A. O. Smith Corporation’s internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] 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: 2022,] [added: 2023,] 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 [removed: A. O. Smith Corporation] [added: the Company] as of December 31, [removed: 2022 and 2021,] [added: 2023] and [added: 2022,] 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: 2022,] [added: 2023,] and the related notes and financial statement schedule listed in the [removed: index] [added: Index] at Item 15(a) and our report dated February [removed: 14, 2023] [added: 13, 2024] expressed an unqualified opinion thereon.

February 13, 2024

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

A. O. Smith Corporation

February 14, 2023

The information included under the headings “Election of Directors” and “Board Committees” in our definitive Proxy Statement for the [removed: 2023] [added: 2024] 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.

Larsen and [removed: Gene C.][added: Christopher L.]

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

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

The information included under the heading “Compliance with Section 16(a) of the Securities Exchange Act” in our definitive Proxy Statement for the [removed: 2023] [added: 2024] Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the registrant’s fiscal year) is incorporated herein by reference.

Wolf, Michael M.

Wolf, Earl E.

Exum, Michael M.

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: 2023] [added: 2024] 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](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

The information included under the headings “Principal Stockholders” and “Security Ownership of Directors and Management” in our definitive Proxy Statement for the [removed: 2023] [added: 2024] 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: 2022.][added: 2023.]

(1)Consists of [removed: 2,481,606] [added: 1,872,553] shares subject to stock options, [removed: 345,775] [added: 345,407] shares subject to employee share units and [removed: 272,212] [added: 232,260] shares subject to director share units.

| Equity compensation plans approved by security holders | | | 2,450,220 | | | (1) | | | | | | $ | 52.93 | | (2) | | | | | | 2,479,897 | | | (3) | | |

| Total | | | 2,450,220 | | | | | | | | | 52.93 | | | | | | | | | 2,479,897 | | | | | |

| 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 | | | | | |

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: 2023] [added: 2024] 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: 2023] [added: 2024] 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](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

| [Consolidated Balance Sheets at December 31, [removed: 2022 and 2021](#i967b644b84594bfcbd2435a3423d2106_61)] [added: 202](#i69ead51464fb48f3add5240f00d8931c_61)[3](#i69ead51464fb48f3add5240f00d8931c_61) [and 20](#i69ead51464fb48f3add5240f00d8931c_61)[2](#i69ead51464fb48f3add5240f00d8931c_61)[2](#i69ead51464fb48f3add5240f00d8931c_61)] | | | [removed: [30](#i967b644b84594bfcbd2435a3423d2106_61)] [added: [30](#i69ead51464fb48f3add5240f00d8931c_61)] | | |

| For each of the three years in the period ended December 31, [removed: 2022:] [added: 2023:] | | | | | |

| [‑ Consolidated Statement of [removed: Earnings](#i967b644b84594bfcbd2435a3423d2106_64)] [added: Earnings](#i69ead51464fb48f3add5240f00d8931c_64)] | | | [removed: [31](#i967b644b84594bfcbd2435a3423d2106_64)] [added: [31](#i69ead51464fb48f3add5240f00d8931c_64)] | | |

| [‑ Consolidated Statement of Comprehensive [removed: Earnings](#i967b644b84594bfcbd2435a3423d2106_67)] [added: Earnings](#i69ead51464fb48f3add5240f00d8931c_67)] | | | [removed: [31](#i967b644b84594bfcbd2435a3423d2106_67)] [added: [31](#i69ead51464fb48f3add5240f00d8931c_67)] | | |

| [‑ Consolidated Statement of Cash [removed: Flows](#i967b644b84594bfcbd2435a3423d2106_70)] [added: Flows](#i69ead51464fb48f3add5240f00d8931c_70)] | | | [removed: [32](#i967b644b84594bfcbd2435a3423d2106_70)] [added: [32](#i69ead51464fb48f3add5240f00d8931c_70)] | | |

| [‑ Consolidated Statement of Stockholders’ [removed: Equity](#i967b644b84594bfcbd2435a3423d2106_73)] [added: Equity](#i69ead51464fb48f3add5240f00d8931c_73)] | | | [removed: [33](#i967b644b84594bfcbd2435a3423d2106_73)] [added: [33](#i69ead51464fb48f3add5240f00d8931c_73)] | | |

| [Notes to Consolidated Financial [removed: Statements](#i967b644b84594bfcbd2435a3423d2106_76)] [added: Statements](#i69ead51464fb48f3add5240f00d8931c_76)] | | | [removed: [34](#i967b644b84594bfcbd2435a3423d2106_76)\-57] [added: [34](#i69ead51464fb48f3add5240f00d8931c_76)\-58] | | |

| [Schedule II—Valuation and Qualifying [removed: Accounts](#i967b644b84594bfcbd2435a3423d2106_175)] [added: Accounts](#i69ead51464fb48f3add5240f00d8931c_175)] | | | [removed: [65](#i967b644b84594bfcbd2435a3423d2106_175)] [added: [67](#i69ead51464fb48f3add5240f00d8931c_175)] | | |

3.Exhibits - see the Index to Exhibits on pages [removed: 62-63] [added: 64-65] of this report.

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

[Table of [removed: Contents](#i967b644b84594bfcbd2435a3423d2106_7)][added: Contents](#i69ead51464fb48f3add5240f00d8931c_7)]

| (3)(ii) | | | | | | [By-laws of A. O. Smith Corporation as amended October [removed: 13, 2015,] [added: 10, 2019,] incorporated by reference to Exhibit 3.1 in the current report on Form 8-K dated October 16, [removed: 2015.](https://www.sec.gov/Archives/edgar/data/91142/000119312515345565/d27877dex31.htm)] [added: 2019.](https://www.sec.gov/ix?doc=/Archives/edgar/data/0000091142/000119312519268564/d818575d8k.htm)] | | |

| | | | [removed: (d)] [added: (f)] | | | The corporation has instruments that define the rights of holders of long-term debt that are not being filed with this Registration Statement in reliance upon Item 601(b)(4)(iii) of Regulation S-K. The Registrant agrees to furnish to the SEC, upon request, copies of these instruments. | | |

| | | | (a) | | | [A. O. Smith Combined Incentive Compensation Plan, incorporated by reference to Exhibit A of the Proxy Statement filed on [removed: 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] [added: March 6, 2020 for] the [removed: 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] [added: 2020 Annual] Meeting of Stockholders.](https://www.sec.gov/Archives/edgar/data/91142/000119312520063749/d845660ddef14a.htm) | | |

| | | | (k) | | | [removed: [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] [added: [A. O. Smith Corporation] Executive [removed: I](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm)[ncentive] [added: Incentive] Compensation Award Agreement (Acceptance [removed: 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] [added: Certificates and] Terms and Conditions) [added: incorporated by reference to exhibit 10(k) of the annual report on Form 10-K for the fiscal year ended December 31, 2022] (for grants [removed: after](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) [February] [added: after February] 2023).](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex10k.htm) | | |

| (21) | | | | | | [removed: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex21.htm)] [added: [Subsidiaries.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex21.htm)] | | |

| (23) | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000025/aos-20221231xex23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex23.htm)] | | |

| (31.1) | | | | | | [Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act, dated February [removed: 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)] [added: 1](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex311.htm)[3](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex311.htm)[, 202](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex311.htm)[4](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex311.htm)[.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex311.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: 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)] [added: 1](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex312.htm)[3](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex312.htm)[, 202](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex312.htm)[4](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex312.htm)[.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex312.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/91142/000009114223000025/aos-20221231xex321.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex321.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/91142/000009114223000025/aos-20221231xex322.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos-20231231xex322.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: 2022] [added: 2023] are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] (ii) the Consolidated Statement of Earnings for the three years ended December 31, [removed: 2022,] [added: 2023,] (iii) the Consolidated Statement of Comprehensive Earnings for the three years ended December 31, [removed: 2022,] [added: 2023,] (iv) the Consolidated Statement of Cash Flows for the three years ended December 31, [removed: 2022,] [added: 2023,] (v) the Consolidated Statement of Stockholders’ Equity for the three years ended December 31, [removed: 2022] [added: 2023] and (vi) the Notes to Consolidated Financial Statements. | | |

| Date: February [removed: 14, 2023] [added: 13, 2024] | | | 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: 14, 2023] [added: 13, 2024] by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Years ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020][added: 2021]

| Valuation allowance for trade and notes receivable | | | $ | [removed: 6.6] [added: 9.5] | | | | | $ | [removed: 0.8] [added: 1.1] | | | | | $ | — | | | | | $ | [removed: (1.8)] [added: (0.5)] | | | | | $ | [removed: 5.6] [added: 10.1] | |

| Valuation allowance for deferred tax assets | | | [removed: 11.9] [added: 8.3] | | | | | | [removed: 1.1] [added: 3.4] | | | | | | — | | | | | | — | | | | | | [removed: 13.0] [added: 11.7] | | |

| | | | (d) | | | [Amendment No. 2 dated as of April 1, 2021, to the Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 10.1 in the quarterly report on Form 10-Q for the quarter ended March 31, 2021.](https://www.sec.gov/Archives/edgar/data/91142/000009114221000085/aos-20210331xex101.htm) | | |

| | | | (e) | | | [Amendment No. 3 dated as of May 1, 2023, to the Amended and Restated Credit Agreement, dated as of December 12, 2012, among A. O. Smith Corporation, A. O Smith Enterprises Ltd., A. O. Smith International Holdings B.V., and the financial institutions and agents party thereto, incorporated by reference to Exhibit 10.1 in the quarterly report on Form 10-Q for the quarter ended September 30, 2023.](https://www.sec.gov/Archives/edgar/data/91142/000009114223000099/aos-20230930xex101.htm) | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| | | | (p) | | | [Recoupment Policy for Incentive Compensation dated October 9, 2023 (“Clawback”).](https://www.sec.gov/Archives/edgar/data/91142/000009114224000041/aos2023123110p.htm) | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| CHRISTOPHER L. MAPES | | | | | | /s/ Christopher L. Mapes | | |

| Director | | | | | | Christopher L. Mapes | | |

| | | | | | | | | |

| | | | | | | | | |

[Table of Contents](#i69ead51464fb48f3add5240f00d8931c_7)

| 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

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

| GENE C. WULF | | | | | | /s/ Gene C. Wulf | | |

| Director | | | | | | Gene C. Wulf | | |

| 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |