SMITH A O CORP 10-K

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of A. O. Smith Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of A. O. Smith Corporation (the Company) as of December 31, 2025 and 2024, 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, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, 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, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 29 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. Product Warranty Liability Description of the Matter At December 31, 2025, the Company’s product warranty liability was $209.7 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. Auditing the Company’s product warranty liability for certain of its products was complex due to the judgmental nature of the warranty loss experience assumptions, including the estimated product failure rate and the estimated cost of product replacement. In particular, it is possible that future product failure rates may not be reflective of actual historical product failure rates, or that a product quality issue has not yet been identified. Additionally, the cost of product replacement could differ from estimates due to fluctuations in the replacement cost of the product. 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 certain products of the Company’s product warranty liability calculation, 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 completeness and accuracy of the claims settled data. We recalculated the historical failure rates using actual claims settled 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 settled data to identify changes in failure trends and assessed the historical accuracy of the prior year liability. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1917. Milwaukee, Wisconsin February 10, 2026 30 Table of Contents CONSOLIDATED BALANCE SHEETS December 31 (dollars in millions) 2025 2024 Assets Current Assets Cash and cash equivalents $ 174.5 $ 239.6 Marketable securities 18.7 36.5 Receivables 582.3 541.4 Inventories 479.3 532.1 Other current assets 36.7 43.3 Total Current Assets 1,291.5 1,392.9 Net property, plant and equipment 635.1 628.7 Goodwill 710.6 761.7 Other intangibles 362.3 321.1 Operating lease assets 46.3 32.8 Other assets 97.0 102.8 Total Assets $ 3,142.8 $ 3,240.0 Liabilities Current Liabilities Trade payables $ 504.1 $ 588.7 Accrued payroll and benefits 93.6 78.5 Accrued liabilities 147.5 153.0 Product warranties 75.0 67.0 Long-term debt due within one year 42.3 10.0 Total Current Liabilities 862.5 897.2 Long-term debt 112.7 183.2 Product warranties 134.7 123.4 Pension liabilities 7.4 11.0 Long-term operating lease liabilities 37.1 23.5 Other liabilities 130.4 118.2 Total Liabilities 1,284.8 1,356.5 Commitments and contingencies — — Stockholders’ Equity Preferred Stock — — Class A Common Stock (shares issued 25,993,539 and 26,014,825 as of December 31, 2025 and 2024, respectively) 130.0 130.1 Common Stock (shares issued 164,714,053 and 164,692,769 as of December 31, 2025 and 2024, respectively) 164.7 164.7 Capital in excess of par value 614.4 601.3 Retained earnings 3,951.8 3,601.3 Accumulated other comprehensive loss ( 98.6 ) ( 111.9 ) Treasury stock at cost ( 2,904.3 ) ( 2,502.0 ) Total Stockholders’ Equity 1,858.0 1,883.5 Total Liabilities and Stockholders’ Equity $ 3,142.8 3,240.0 See accompanying notes which are an integral part of these statements. 31 Table of Contents CONSOLIDATED STATEMENTS OF EARNINGS Years ended December 31 (dollars in millions, except per share amounts) 2025 2024 2023 Net sales $ 3,830.2 $ 3,818.1 $ 3,852.8 Cost of products sold 2,342.8 2,362.0 2,368.0 Gross profit 1,487.4 1,456.1 1,484.8 Selling, general and administrative expenses 759.4 739.3 727.4 Restructuring and impairment expenses — 17.6 18.8 Interest expense 13.5 6.7 12.0 Other income, net ( 0.6 ) ( 8.5 ) ( 6.9 ) Earnings before provision for income taxes 715.1 701.0 733.5 Provision for income taxes 168.9 167.4 176.9 Net Earnings $ 546.2 $ 533.6 $ 556.6 Net Earnings Per Share of Common Stock (1) $ 3.87 $ 3.65 $ 3.71 Diluted Net Earnings Per Share of Common Stock (1) $ 3.85 $ 3.63 $ 3.69 (1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS Years ended December 31 (dollars in millions) 2025 2024 2023 Net Earnings $ 546.2 $ 533.6 $ 556.6 Other comprehensive earnings (loss) Foreign currency translation adjustments 13.1 ( 24.0 ) 3.8 Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $( 0.4 ) in 2025, $ 0.7 in 2024 and $ 1.4 in 2023 1.3 ( 2.2 ) ( 4.2 ) Change in pension liability less related income tax benefit of $ 0.4 in 2025, $ 0.5 in 2024 and $ 0.5 in 2023 ( 1.1 ) ( 1.5 ) ( 1.4 ) Comprehensive Earnings $ 559.5 $ 505.9 $ 554.8 See accompanying notes which are an integral part of these statements. 32 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31 (dollars in millions) 2025 2024 2023 Operating Activities Net earnings $ 546.2 $ 533.6 $ 556.6 Adjustments to reconcile earnings to cash provided by (used in) operating activities: Depreciation and amortization 85.1 78.8 78.3 Stock based compensation expense 13.8 14.9 11.5 Deferred income taxes 8.9 ( 4.6 ) ( 3.8 ) Non-cash impairments — 4.7 15.6 Pension settlement income — — ( 0.9 ) Pension settlement non-cash taxes — — 0.2 Net changes in operating assets and liabilities, net of acquisitions: Current assets and liabilities ( 55.7 ) ( 22.6 ) 20.0 Noncurrent assets and liabilities 18.5 ( 23.0 ) ( 7.2 ) Cash Provided by Operating Activities 616.8 581.8 670.3 Investing Activities Capital expenditures ( 70.8 ) ( 108.0 ) ( 72.6 ) Acquisitions — ( 145.9 ) ( 16.8 ) Investments in marketable securities ( 42.7 ) ( 73.7 ) ( 63.1 ) Net proceeds from sales of marketable securities 60.5 60.5 128.4 Cash Used in Investing Activities ( 53.0 ) ( 267.1 ) ( 24.1 ) Financing Activities Proceeds from debt 1,087.3 1,100.1 688.0 Repayments of debt ( 1,124.9 ) ( 1,030.4 ) ( 906.1 ) Common stock repurchases ( 400.8 ) ( 305.8 ) ( 306.5 ) Net proceeds from stock option activity 1.0 18.1 23.4 Dividends paid ( 195.7 ) ( 190.4 ) ( 183.5 ) Cash Used in Financing Activities ( 633.1 ) ( 408.4 ) ( 684.7 ) Effect of exchange rate changes on cash and cash equivalents 4.2 ( 6.6 ) ( 12.8 ) Net decrease in cash and cash equivalents ( 65.1 ) ( 100.3 ) ( 51.3 ) Cash and cash equivalents-beginning of year 239.6 339.9 391.2 Cash and Cash Equivalents-End of Year $ 174.5 $ 239.6 $ 339.9 See accompanying notes, which are an integral part of these statements. 33 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years ended December 31 (dollars in millions) 2025 2024 2023 Class A Common Stock Balance at the beginning of the year $ 130.1 $ 130.1 $ 130.2 Conversion of Class A Common Stock ( 0.1 ) — ( 0.1 ) Balance at the end of the year $ 130.0 $ 130.1 $ 130.1 Common Stock Balance at the beginning of the year $ 164.7 $ 164.7 $ 164.7 Conversion of Class A Common Stock — — — Balance at the end of the year $ 164.7 $ 164.7 $ 164.7 Capital in Excess of Par Value Balance at the beginning of the year $ 601.3 $ 578.2 $ 555.9 Conversion of Class A Common Stock 0.1 — 0.1 Issuance of share units ( 16.7 ) ( 15.0 ) ( 10.3 ) Vesting of share units ( 2.5 ) ( 2.5 ) ( 3.7 ) Stock based compensation expense 13.2 13.1 10.4 Exercises of stock options 1.3 11.4 14.5 Issuance of share based compensation 17.7 16.1 11.3 Balance at the end of the year $ 614.4 $ 601.3 $ 578.2 Retained Earnings Balance at the beginning of the year $ 3,601.3 $ 3,258.1 $ 2,885.0 Net earnings 546.2 533.6 556.6 Dividends on stock ( 195.7 ) ( 190.4 ) ( 183.5 ) Balance at the end of the year $ 3,951.8 $ 3,601.3 $ 3,258.1 Accumulated Other Comprehensive Loss Balance at the beginning of the year $ ( 111.9 ) $ ( 84.2 ) $ ( 82.4 ) Foreign currency translation adjustments 13.1 ( 24.0 ) 3.8 Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $( 0.4 ) in 2025, $ 0.7 in 2024 and $ 1.4 in 2023 1.3 ( 2.2 ) ( 4.2 ) Change in pension liability less related income tax benefit of $ 0.4 in 2025, $ 0.5 in 2024 and $ 0.5 in 2023 ( 1.1 ) ( 1.5 ) ( 1.4 ) Balance at the end of the year $ ( 98.6 ) $ ( 111.9 ) $ ( 84.2 ) Treasury Stock Balance at the beginning of the year $ ( 2,502.0 ) $ ( 2,202.5 ) $ ( 1,905.7 ) Exercise of stock options, net of 32,203 , 36,300 and 61,605 shares surrendered as proceeds and to pay taxes in 2025, 2024 and 2023, respectively ( 0.2 ) 6.6 8.8 Stock incentives and directors’ compensation 0.3 0.2 0.3 Shares repurchased ( 400.8 ) ( 305.8 ) ( 306.5 ) Excise tax on repurchases of common stock ( 4.0 ) ( 3.0 ) ( 3.1 ) Vesting of share units 2.4 2.5 3.7 Balance at the end of the year $ ( 2,904.3 ) $ ( 2,502.0 ) $ ( 2,202.5 ) Total Stockholders’ Equity $ 1,858.0 $ 1,883.5 $ 1,844.4 See accompanying notes which are an integral part of these statements. 34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Organization. A. O. Smith Corporation (A. O. Smith or the Company) is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of intercompany transactions. Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S.) requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and notes. Actual results could differ from those estimates. Fair value of financial instruments. The carrying amounts of cash, cash equivalents, marketable securities, receivables, floating rate debt and trade payables approximated fair value as of December 31, 2025 and 2024, due to the short maturities or frequent rate resets of these instruments. The fair value of term notes with financial institutions included in Long-term debt within the consolidated balance sheets was approximately $ 139.0 million as of December 31, 2025 compared with the carrying amount of $ 155.0 million for the same date. The fair value of term notes with financial institutions was approximately $ 143.6 million as of December 31, 2024 compared with the carrying amount of $ 163.2 million. Foreign currency translation. For all subsidiaries outside the U.S., with the exception of its Barbados, Hong Kong and Mexican companies and its non-operating companies in the Netherlands, the Company uses the local currency as the functional currency. For those operations using a functional currency other than the U.S. dollar, assets and liabilities were translated into U.S. dollars at year-end exchange rates, and revenues and expenses were translated at weighted-average exchange rates. The resulting translation adjustments were recorded as a separate component of stockholders’ equity. The Barbados, Hong Kong, Mexican and non-operating Netherlands companies use the U.S. dollar as the functional currency. Gains and losses from foreign currency transactions were included in net earnings and were not significant in 2025, 2024, or 2023. Cash and cash equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Marketable securities. The Company considers all highly liquid investments with maturities greater than 90 days when purchased to be marketable securities. At December 31, 2025, the Company’s marketable securities consisted of bank time deposits with original maturities ranging from 180 days to 12 months and were primarily located at investment grade rated banks in China and Hong Kong. Inventory valuation. Inventories are carried at lower of cost or net realizable value. Cost is determined on the last-in, first-out (LIFO) method for a certain portion of the Company’s domestic inventories, which comprised 40 percent and 43 percent of the Company’s total inventory at December 31, 2025 and 2024, respectively. The inventories of foreign subsidiaries and the remaining domestic inventories and supplies were determined using the first-in, first-out (FIFO) method. Property, plant and equipment. Property, plant and equipment are stated at cost. Depreciation is computed primarily by the straight-line method. The estimated service lives used to compute depreciation are generally 25 to 50 years for buildings, three to 20 years for equipment and three to 15 years for software. Maintenance and repair costs are expensed as incurred. Goodwill and other intangibles. Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment on an annual basis. Separable intangible assets, primarily comprised of customer relationships, that are not deemed to have an indefinite life are amortized on a straight-line basis over their estimated useful lives which range from two to 25 years. Impairment of long-lived and amortizable intangible assets. Property, plant and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such analyses involves significant judgment. Product warranties. The Company’s products carry warranties that generally range from one to twelve years and are based on terms that are consistent with the market. The Company records a liability for the expected cost of warranty-related claims 35 Table of Contents 1. Organization and Significant Accounting Policies (continued) at the time of sale and is estimated based on the warranty period, product type and loss experience using actual historical failure rates and estimated costs of product replacement. The variables used in the calculation of the provision are reviewed by the Company at least annually. At times, warranty issues may arise which are beyond the scope of the Company’s historical experience. The Company provides for any such warranty issues as they become known and estimable. The allocation of the warranty liability between current and long-term is based on expected warranty claims to be settled in the next year as determined by historical product failure rates. The following table presents the Company’s product warranty liability activity in 2025 and 2024: Years ended December 31 (dollars in millions) 2025 2024 Balance at beginning of year $ 190.4 $ 188.1 Expense 84.2 81.1 Claims settled ( 66.0 ) ( 78.8 ) Acquired obligations 1.1 — Balance at end of year $ 209.7 $ 190.4 Derivative instruments. The Company utilizes certain derivative instruments to enhance its ability to manage currency as well as raw materials price risk. The Company does not enter into contracts for speculative purposes. The fair values of all derivatives are recorded in the consolidated balance sheets. The change in a derivative’s fair value is recorded each period in current earnings or accumulated other comprehensive loss (AOCL), depending on whether the derivative is designated as part of a hedge transaction and if so, the type of hedge transaction. See Note 13, “Derivative Instruments” for disclosure of the Company’s derivative instruments and hedging activities. Fair Value Measurements. Accounting Standards Codification (ASC) 820 Fair Value Measurements , defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring basis or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on the market approach which are prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Assets (liabilities) measured at fair value on a recurring basis are as follows (dollars in millions): Fair Value Measurement Using Balance Sheet Location December 31, 2025 December 31, 2024 Quoted prices in active markets for identical assets (Level 1) Marketable Securities $ 18.7 $ 36.5 Significant other observable inputs (Level 2) Accrued liabilities — ( 1.9 ) There were no changes in the valuation techniques used to measure fair values on a recurring basis. Revenue recognition. Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. See Note 2, “Revenue Recognition” for disclosure of the Company’s revenue recognition activities. Advertising. The majority of advertising costs are charged to operations as incurred and totaled $ 101.1 million, $ 100.3 million and $ 93.9 million during 2025, 2024 and 2023, respectively. Included in total advertising costs are expenses associated with store displays for water heater, water treatment products, and kitchen products in China that are amortized over 12 to 48 months which totaled $ 24.0 million, $ 21.1 million and $ 15.2 million during 2025, 2024 and 2023, respectively. 36 Table of Contents 1. Organization and Significant Accounting Policies (continued) Research and development. Research and development costs are charged to operations as incurred and amounted to $ 95.0 million, $ 101.7 million and $ 97.5 million during 2025, 2024 and 2023, respectively. Environmental costs. The Company accrues for costs associated with environmental obligations when such costs are probable and reasonably estimable. Costs of estimated future expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded as assets when their receipt is considered probable. The accruals are adjusted as facts and circumstances change. Stock-based compensation. Compensation cost is recognized using the straight-line method over the vesting period of the award and forfeitures are recognized as they occur. In accordance with amended ASC 718 Compensation-Stock Compensation , the Company recognized $ 0.6 million, $ 4.1 million, and $ 3.2 million of discrete income tax benefits on settled stock based compensation awards during 2025, 2024, and 2023 respectively. Income taxes. The provision for income taxes is computed using the asset and liability method, in accordance with ASC 740 Income Taxes , under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled and are classified as noncurrent in the consolidated balance sheet. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. Earnings per share of common stock. The Company is not required to use the two-class method of calculating earnings per share because its Class A Common Stock and Common Stock have equal dividend rights. The numerator for the calculation of basic and diluted earnings per share is net earnings. The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations: 2025 2024 2023 Denominator for basic earnings per share - weighted-average shares outstanding 141,029,845 145,997,584 149,952,679 Effect of dilutive stock options, restricted stock and share units 884,995 1,086,496 1,062,895 Denominator for diluted earnings per share 141,914,840 147,084,080 151,015,574 Recent Accounting Pronouncements In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which modernizes the accounting guidance for internal-use software costs by eliminating the requirement to assess software development stages and introduces a new capitalization threshold. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of reviewing the guidance and evaluating its impact on its financial statements. In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 “Income Statement - Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses.” The ASU requires additional disclosures by disaggregating the costs and expense line items that are presented on the face of the income statement. The ASU is effective for the Company beginning with its 2027 annual disclosures and subsequent interim periods. Early adoption is permitted. This ASU requires a public company to apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its disclosures. In December 2023, the FASB amended ASC 740 (issued under ASU 2023-09, “Improvements to Income Tax Disclosures”). This ASU requires added disclosures related to the tax rate reconciliation and income taxes paid and includes other amendments intended to improve effectiveness and comparability. The update is effective for the Company beginning with its 2025 annual disclosures and interim periods beginning in 2026. As a result of adoption, income tax disclosures for prior periods presented have been revised to conform to the new disclosure requirements. The adoption of ASU 2023-09 did not affect the Company’s financial position or its results of operations. Refer to Note 14, Income Taxes, for additional disclosures. 37 Table of Contents 2. Revenue Recognition Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. Each unit sold is considered an independent, unbundled performance obligation. The Company’s sales arrangements do not include other performance obligations that are material in the context of the contract. The nature, timing and amount of revenue for a respective performance obligation are consistent for each customer. The Company measures the sales transaction price based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Sales and value added taxes are excluded from the measurement of the transaction price. The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment. Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $ 34.2 million and $ 54.4 million at December 31, 2025 and December 31, 2024, respectively. Customer deposit liabilities are short term in nature, recognized into revenue within one year of receipt. The Company assesses the collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for credit losses, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for credit losses, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for credit losses was $ 14.1 million and $ 12.9 million at December 31, 2025 and December 31, 2024, respectively. Rebates and incentives are based on pricing agreements and are tied to sales volume. The amount of revenue is reduced for variable consideration related to customer rebates which are calculated using expected values and are based on program specific factors such as expected rebate percentages based on expected volumes. In situations where the customer has the right to return eligible products, the Company reduces revenue for its estimates of expected product returns, which are primarily based on an analysis of historical experience. Changes in such accruals may be required if actual sales volume differs from estimated sales volume or if future returns differ from historical experience. Shipping and handling costs billed to customers are included in net sales and the related costs are included in cost of products sold and are activities performed to fulfill the promise to transfer products. Disaggregation of Net Sales The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas, heat pump and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. As each segment manufactures and markets products in its respective region of the world, the Company has determined that geography is the primary factor in reporting its sales. The Company further disaggregates its North America segment sales by major product line as each of North America’s major product lines is sold through distinct distribution channels and these product lines may be impacted differently by certain economic factors. Within the Rest of World segment, particularly in China and India, the Company’s major customers purchase across the Company’s product lines, utilizing the same distribution channels regardless of product type. In addition, the impact of economic factors is unlikely to be differentiated by product line in the Rest of World segment. The North America segment's major product lines are defined as the following: Water heaters The Company’s water heaters are open water heating systems that heat potable water. Typical applications for water heaters include residences, restaurants, hotels, office buildings, laundries, car washes and small businesses. The Company sells residential and commercial water heater products and related parts through its wholesale distribution channel, which includes approximately 800 independent wholesale plumbing distributors. The Company also sells residential water heaters and related parts through retail and maintenance, repair and operations (MRO) channels. A significant portion of the Company’s water heater sales in the North America segment is derived from the replacement of existing products. Boilers The Company’s boilers are closed loop water heating systems used primarily for space heating or hydronic heating. The Company’s boilers are primarily used in applications in commercial settings for hospitals, schools, hotels and other large 38 Table of Contents 2. Revenue Recognition (continued) commercial buildings while residential boilers are used in homes, apartments and condominiums. The Company’s boiler distribution channel is comprised primarily of manufacturer representative firms, with the remainder of its boilers distributed through wholesale channels. The Company’s boiler sales in the North America segment are derived from a combination of replacement of existing products and new construction. Water treatment products The Company’s water treatment products range from point-of-entry water softeners, solutions for problem well water, and whole-home water filtration products to on-the-go filtration bottles, point-of-use carbon, and reverse osmosis products. Typical applications for the Company’s water treatment products include residences, restaurants, hotels and offices. The Company sells water treatment products through its retail and wholesale distribution channels, similar to water heaters. The Company’s water treatment products are also sold through independent water quality dealers as well as directly to consumers including through e-commerce sales channels. A portion of the Company’s sales of water treatment products in the North America segment is comprised of replacement filters. The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World. Years ended December 31 (dollars in millions) 2025 2024 2023 North America Water heaters and related parts $ 2,460.1 $ 2,441.7 $ 2,456.9 Boilers and related parts 281.0 260.0 240.1 Water treatment products 243.1 248.4 225.9 Total North America 2,984.2 2,950.1 2,922.9 Rest of World China $ 689.5 $ 791.9 $ 835.1 All other Rest of World (1) 190.9 126.7 121.8 Total Rest of World 880.4 918.6 956.9 Inter-segment sales ( 34.4 ) ( 50.6 ) ( 27.0 ) Total Net Sales $ 3,830.2 $ 3,818.1 $ 3,852.8 (1) Includes the results of Pureit from the fourth quarter 2024, the period of acquisition. 3. Acquisitions 2024 Acquisitions During the fourth quarter of 2024, the Company acquired Pureit, a residential water purification business in South Asia, from Unilever for an aggregate purchase price of $ 124.6 million. The acquired company is included in the Rest of World segment. The purchase price consists of an initial cash payment of $ 117.9 million upon the closing of the transaction and a separate payment of $ 6.7 million made under a transitional supply agreement with Unilever. The Company incurred acquisition costs of approximately $ 1.4 million. The following table summarizes the final allocation of the fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $ 56.4 million of acquired identifiable intangible assets, $ 48.5 million was assigned to trademarks that are not subject to amortization, $ 3.7 million was assigned to patents which are amortized over 15 years, and the remaining $ 4.2 million million was assigned to customer relationships which are amortized over two to three years . The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The allocation of the purchase price to goodwill decreased by $ 0.8 million in 2025 due to valuation adjustments related to identifiable intangible assets. 39 Table of Contents 3. Acquisitions (continued) (dollars in millions) Current assets $ 5.6 Property, plant and equipment 0.6 Intangible assets 56.4 Goodwill 63.9 Total assets acquired 126.5 Current liabilities ( 1.9 ) Net assets acquired $ 124.6 During the first quarter of 2024, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $ 21.3 million, net of cash acquired. The Company also agreed to make contingent payments based on the amount by which sales of products increase over the next three years . The addition of the acquired company expanded the Company's water treatment footprint in North America. The acquired company is included in the North America segment. 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. As required under ASC 805, results of operations have been included in the Company’s consolidated financial statements from the date of acquisition. 4. Leases The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes. Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year . The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any arrangements related to material residual value guarantees, restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the consolidated statement of earnings. Supplemental balance sheet information related to leases is as follows: (dollars in millions) December 31, 2025 December 31, 2024 Liabilities Short term: Accrued liabilities $ 10.8 $ 11.3 Long term: Operating lease liabilities 37.1 23.5 Total operating lease liabilities $ 47.9 $ 34.8 Less: Rent incentives and deferrals ( 1.6 ) ( 2.0 ) Assets Operating lease assets $ 46.3 $ 32.8 40 Table of Contents 4. Leases (continued) Lease Term and Discount Rate December 31, 2025 Weighted-average remaining lease term 7.1 years Weighted-average discount rate 5.40 % The components of lease expense were as follows: (dollars in millions) Lease Expense (1) Classification Year ended December 31, 2025 Year ended December 31, 2024 Operating lease expense Cost of products sold $ 6.4 $ 7.0 Selling, general and administrative expenses 16.8 15.9 (1) Includes short-term lease expense of $ 1.8 million and variable lease expenses of $ 5.8 million for the year ended December 31, 2025 and short-term lease expense of $ 1.7 million and variable lease expenses of $ 6.0 million for the year ended December 31, 2024, respectively. Maturities of lease liabilities were as follows: (dollars in millions) December 31, 2025 2026 $ 14.3 2027 9.4 2028 7.1 2029 5.7 2030 4.9 After 2030 15.3 Total lease payments 56.7 Less: Imputed interest ( 8.8 ) Present value of operating lease liabilities $ 47.9 5. Restructuring and Impairment Expenses 2024 Restructuring and Impairment Expenses The Company recognized $ 17.6 million of restructuring and impairment expenses during the year ended December 31, 2024. These expenses were comprised of $ 12.1 million in severance costs, $ 0.8 million of other restructuring expenses, and asset impairments of $ 4.7 million, as well as a corresponding $ 3.2 million tax benefit. Of the $ 17.6 million expense recognized during the year ended December 31, 2024, $ 6.3 million was related to the Company’s water treatment business in the North America segment and was a result of a profitability improvement strategy that prioritizes improving its cost structure. In the Rest of World segment, severance costs in China of $ 11.3 million was related to the right sizing of that business for current market conditions. 2023 Restructuring and Impairment Expenses In 2023, the Company determined that its business in Turkey (disposal group) included in the Rest of World segment met the criteria to be classified as held for sale. The Company determined the fair value of the disposal group, less cost to sell, was lower than its carrying amount. As a result the Company recorded an impairment expense of $ 15.6 million, of which $ 12.5 million was recorded in the Rest of World segment, and $ 3.1 million was recorded in Corporate Expense. The impairment was recorded as a net reduction of $ 4.5 million to the assets and liabilities and $ 11.1 million for the anticipated liquidation of the cumulative foreign currency translation adjustment associated with the disposal group. The remaining carrying value of the disposal group was $ 0.6 million and classified as held for sale. During 2023, the Company sold the disposal group for an amount that approximated the carrying value of the net assets. Upon closing of the sale in the second quarter of 2023, the Company released $ 11.0 million of foreign currency translation losses from accumulated other comprehensive loss. Also in 2023, the Company recorded $ 3.2 million of restructuring expense related to the exit of a business within the Far East region. 41 Table of Contents 5. Restructuring and Impairment Expenses (continued) The following table presents an analysis of the Company’s restructuring reserve for the years ended December 31, 2025, 2024, and 2023: (dollars in millions) Severance Costs Other Restructuring Expenses Non-cash Impairments Total Balance at December 31, 2023 $ 0.3 $ 2.9 $ — $ 3.2 Charges 12.1 0.8 4.7 17.6 Cash payments ( 3.5 ) ( 2.2 ) — ( 5.7 ) Non-cash and other adjustments — — ( 4.7 ) ( 4.7 ) Balance at December 31, 2024 8.9 1.5 — 10.4 Charges — — — — Cash payments ( 8.9 ) ( 0.8 ) — ( 9.7 ) Non-cash and other adjustments — — — — Balance at December 31, 2025 — 0.7 — 0.7 6. Statements of Cash Flows Supplemental cash flow information is as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 Net change in current assets and liabilities, net of acquisitions: Receivables $ ( 36.4 ) $ 49.0 $ ( 16.4 ) Inventories 56.9 ( 40.5 ) 18.1 Other current assets 8.3 7.1 7.2 Trade payables ( 97.9 ) ( 5.9 ) ( 21.4 ) Accrued liabilities, including payroll and benefits 16.5 ( 32.9 ) 28.4 Income taxes ( 3.1 ) 0.6 4.1 $ ( 55.7 ) $ ( 22.6 ) $ 20.0 In addition, cash interest paid during the years ended December 31, 2025, 2024 and 2023 was $ 13.5 million, $ 6.7 million, and $ 12.3 million, respectively. Total cash and cash equivalents and marketable securities at December 31, 2025 and 2024 was $ 193.2 million and $ 276.1 million, respectively, of which $ 140.1 million and $ 205.7 million were held by the Company’s foreign subsidiaries, at December 31, 2025 and 2024, respectively. 7. Inventories The following table presents the components of the Company’s inventory balances: December 31 (dollars in millions) 2025 2024 Finished products $ 180.1 $ 196.1 Work in process 43.7 42.4 Raw materials 311.3 343.0 Inventories, at FIFO cost 535.1 581.5 LIFO reserve ( 55.8 ) ( 49.4 ) Inventories, at LIFO cost $ 479.3 $ 532.1 42 Table of Contents 8. Property, Plant and Equipment December 31 (dollars in millions) 2025 2024 Land $ 30.4 $ 30.0 Buildings 424.9 408.5 Equipment 961.8 911.8 Software 147.3 145.6 1,564.4 1,495.9 Accumulated depreciation and amortization ( 929.3 ) ( 867.2 ) Net property, plant, and equipment $ 635.1 $ 628.7 9. Goodwill and Other Intangible Assets Changes in the carrying amount of goodwill during the years ended December 31, 2025 and 2024 consisted of the following: (dollars in millions) North America Rest of World Total Balance at December 31, 2023 $ 574.9 $ 58.5 $ 633.4 Currency translation adjustment ( 8.7 ) ( 1.4 ) ( 10.1 ) Acquisitions 20.5 117.9 138.4 Balance at December 31, 2024 586.7 175.0 761.7 Currency translation adjustment 4.8 ( 2.0 ) 2.8 Acquisition adjustments (1) — ( 53.9 ) ( 53.9 ) Balance at December 31, 2025 $ 591.5 $ 119.1 $ 710.6 (1) Measurement period adjustments related to the 2024 acquisitions which impacted the amount of goodwill originally reported. The carrying amount of other intangible assets consisted of the following: 2025 2024 December 31 (dollars in millions) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Amortizable intangible assets: Patents $ 7.4 $ ( 4.2 ) $ 3.2 $ 3.7 $ ( 3.7 ) $ — Customer lists 291.7 ( 201.6 ) 90.1 287.5 ( 187.3 ) 100.2 Total amortizable intangible assets 299.1 ( 205.8 ) 93.3 291.2 ( 191.0 ) 100.2 Indefinite-lived intangible assets: Trade names 269.0 — 269.0 220.9 — 220.9 Total intangible assets $ 568.1 $ ( 205.8 ) $ 362.3 $ 512.1 $ ( 191.0 ) $ 321.1 Amortization expenses of other intangible assets of $ 14.8 million, $ 12.7 million, and $ 12.6 million were recorded in 2025, 2024 and 2023, respectively. In the future, excluding the impact of any future acquisitions, the Company expects amortization expense of approximately $ 14.5 million annually and the intangible assets will be amortized over a weighted-average period of 9 years. The Company concluded that no goodwill impairment existed at the time of the annual impairment tests which were performed in the fourth quarters of 2025, 2024 and 2023. No impairments of other intangible assets were recorded in 2025, 2024 and 2023. 43 Table of Contents 10. Debt The Company was obligated under the following debt instruments: December 31 (dollars in millions) 2025 2024 Revolving credit agreement borrowings, average year-end interest rates of 5.3 % for 2024 $ — $ 30.0 Variable rate agreements, expiring 2029, average year-end interest rates of 7.4 % for 2025 and 8.0 % for 2024 46.6 49.0 Fixed rate agreements, expiring 2026-2034, average year-end interest rates of 3.3 % for 2025 and 3.1 % for 2024 108.4 114.2 155.0 193.2 Long-term debt due within one year ( 42.3 ) ( 10.0 ) Long-term debt $ 112.7 $ 183.2 In 2024, the Company renewed and amended its $ 500 million multi-year multi-currency revolving credit agreement with a new expiration date of August 23, 2029. The facility has an accordion provision which allows it to be increased up to $ 1 billion if certain conditions (including lender approval) are satisfied. Borrowings under the Company’s bank credit lines and commercial paper borrowings are supported by the $ 500 million revolving credit agreement. As a result of the long-term nature of this facility, the Company’s credit line borrowings are classified as long-term debt at December 31, 2024 (no credit line borrowings existed at December 31, 2025). At its option, the Company either maintains cash balances or pays fees for bank credit and services. The Company has interest expense obligations of $ 15.3 million on outstanding debt as of December 31, 2025. Scheduled maturities of long-term debt within each of the five years subsequent to December 31, 2025 are as follows: Years ending December 31 (dollars in millions) Amount 2026 $ 42.3 2027 39.9 2028 24.9 2029 24.9 2030 10.0 11. Stockholders’ Equity The Company’s authorized capital consists of three million shares of Preferred Stock $ 1 par value, 27 million shares of Class A Common Stock $ 5 par value, and 240 million shares of Common Stock $ 1 par value. The Common Stock has equal dividend rights with Class A Common Stock and is entitled, as a class, to elect one-third of the Board of Directors and has 1/10th vote per share on all other matters. Class A Common Stock is convertible to Common Stock on a one for one basis. There were 21,286 shares during 2025, 8,307 shares during 2024 and 12,524 shares during 2023, of Class A Common Stock converted into Common Stock. Regular dividends paid on the A. O. Smith Corporation Class A Common Stock and Common Stock amounted to $ 1.38 , $ 1.30 and $ 1.22 per share in 2025, 2024 and 2023, respectively. In 2025, the Board of Directors approved adding 5,000,000 shares of Common Stock to an existing discretionary share repurchase authority. Under the share repurchase program, the Common Stock may be purchased through a combination of Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as working capital requirements, general business conditions and other factors, including alternative investment opportunities. The stock repurchase authorization remains effective until terminated by the Company's Board of Directors which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. In 2025, the Company repurchased 5,942,601 shares at an average price of $ 67.44 per share and at a total cost of $ 400.8 million. As of December 31, 2025, there were 803,524 shares remaining on the existing repurchase authorization. In 2024, the Company repurchased 3,755,337 shares at a cost of $ 305.8 million. In 2023, the Company repurchased 4,377,000 shares at a cost of $ 306.5 million. At December 31, 2025, a total of 130,380 and 52,034,704 shares of Class A Common Stock and Common Stock, respectively, were held as treasury stock. At December 31, 2024, a total of 130,380 and 46,257,599 shares of Class A Common Stock and Common Stock, respectively, were held as treasury stock. 44 Table of Contents 11. Stockholders’ Equity (continued) Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Years ended December 31, 2025 2024 Cumulative foreign currency translation Balance at beginning of period $ ( 104.3 ) $ ( 80.3 ) Other comprehensive gain (loss) before reclassifications 13.1 ( 24.0 ) Balance at end of period ( 91.2 ) ( 104.3 ) Unrealized net (loss) gain on cash flow derivatives Balance at beginning of period ( 1.5 ) 0.7 Other comprehensive gain (loss) before reclassifications 2.5 ( 0.5 ) Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $ 0.4 in 2025 and $ 0.5 in 2024, respectively) (1) ( 1.2 ) ( 1.7 ) Balance at end of period ( 0.2 ) ( 1.5 ) Pension liability Balance at beginning of period ( 6.1 ) ( 4.6 ) Other comprehensive loss before reclassifications ( 1.4 ) ( 1.8 ) Amounts reclassified from accumulated other comprehensive loss (1) 0.3 0.3 Balance at end of period ( 7.2 ) ( 6.1 ) Total accumulated other comprehensive loss, end of period $ ( 98.6 ) $ ( 111.9 ) (1) Amounts reclassified from accumulated other comprehensive loss: Realized gains on derivatives reclassified to cost of products sold $ ( 1.6 ) $ ( 2.2 ) Tax provision 0.4 0.5 Reclassification net of tax $ ( 1.2 ) $ ( 1.7 ) Amortization of pension items: Actuarial losses $ 0.3 $ 0.3 Prior year service cost 0.1 0.1 0.4 0.4 Tax benefit ( 0.1 ) ( 0.1 ) Reclassification net of tax $ 0.3 $ 0.3 12. Stock Based Compensation The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Incentive Plan) effective January 1, 2007, and the Incentive Plan was most recently reapproved by stockholders on April 15, 2020. The Incentive Plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options or share units at December 31, 2025, was 2,028,442 which includes 2,400,000 additional shares that were authorized on April 15, 2020 at the Company's annual meeting of stockholders. Upon stock option exercise or share unit vesting, shares are issued from treasury stock. Total stock based compensation expense recognized in 2025, 2024 and 2023 was $ 13.8 million, $ 14.9 million and $ 11.5 million, respectively. 45 Table of Contents 12. Stock Based Compensation (continued) Stock Options Beginning in 2023, the Company no longer grants stock options. For active employees, all options granted expire ten years after the date of grant. Stock based compensation expense attributable to stock options for 2025, 2024 and 2023 was $ 0.1 million, $ 0.6 million and $ 1.2 million, respectively. Changes in options, all of which relate to the Company’s Common Stock, were as follows: Years Ended December 31 2025 2024 2023 Number of Options Weighted Avg. Per Share Exercise Price Number of Options Weighted Avg. Per Share Exercise Price Number of Options Weighted Avg. Per Share Exercise Price Number of shares under options: Outstanding at beginning of year 1,395,841 $ 55.07 1,872,553 $ 52.93 2,481,606 $ 51.22 Exercised (1) ( 83,712 ) 39.60 ( 473,452 ) 46.46 ( 600,344 ) 45.68 Forfeited ( 15,300 ) 53.00 ( 3,260 ) 74.27 ( 8,709 ) 66.96 Outstanding at end of year (2) 1,296,829 56.10 1,395,841 55.07 1,872,553 52.93 Exercisable at end of year (3) 1,296,829 56.10 1,295,061 53.59 1,549,749 49.51 (1) The total intrinsic value of options exercised in 2025, 2024 and 2023 was $ 2.0 million, $ 18.0 million and $ 15.0 million, respectively. (2) The weighted average remaining contractual life of options outstanding was 5 years at December 31, 2025, 6 years at December 31, 2024 and 7 years at December 31, 2023, respectively. The aggregate intrinsic value of options outstanding at December 31, 2025 was $ 16.0 million. (3) The weighted average remaining contractual life of options exercisable was 5 years at December 31, 2025, and 6 years at December 31, 2024 and December 31, 2023, respectively. The aggregate intrinsic value of options exercisable at December 31, 2025 was $ 16.0 million. Number of Options Weighted Avg. Per Share Exercise Price Nonvested options at beginning of year 100,780 $ 74.10 Vested ( 100,780 ) 74.10 Nonvested options at end of year — — 46 Table of Contents 12. Stock Based Compensation (continued) Share Units Participants in the Incentive Plan may also be awarded share units. Share units vest three years after the date of grant. The Company granted 269,545 , 195,497 and 168,807 share units under the Incentive Plan in 2025, 2024 and 2023, respectively. The share units were valued at $ 17.9 million, $ 16.1 million and $ 11.3 million at the date of issuance in 2025, 2024 and 2023, respectively, based on the price of the Company’s Common Stock at the date of grant. The share units are recognized as compensation expense ratably over the three-year vesting period; however, included in share unit expense was expense associated with accelerated vesting of share unit awards for certain employees who are retirement eligible or will become retirement eligible during the vesting period. Stock based compensation expense attributable to share units of $ 11.2 million, $ 12.5 million and $ 9.6 million was recognized in 2025, 2024 and 2023, respectively. Certain non-U.S.-based employees receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period. A summary of share unit activity under the Incentive Plan is as follows: Number of Units Weighted-Average Grant Date Value Issued and unvested at January 1, 2025 469,269 $ 71.50 Granted 269,545 66.28 Vested ( 87,790 ) 72.78 Forfeited ( 19,717 ) 70.21 Issued and unvested at December 31, 2025 631,307 68.92 Performance Stock Units Beginning in 2023, certain executives may be awarded performance stock units under the Incentive Plan. Performance stock units vest over three years following the date of the grant. Performance stock units vest under a set of measurement criteria which are based upon achievement of certain Sustainability targets. Potential payouts range from zero to 150 percent of the target awards and changes from target amounts are reflected as performance adjustments. The Company granted 38,435 , 29,475 and 24,580 performance stock units under the Incentive Plan in 2025, 2024 and 2023, respectively. The performance stock units were valued at $ 2.5 million, $ 2.4 million and $ 1.7 million at the date of issuance in 2025, 2024 and 2023, respectively, based on the price of the Company’s Common Stock at the date of grant. The performance stock units are recognized as compensation expense ratably over the three-year vesting period. Stock based compensation expense attributable to performance stock units of $ 2.5 million, $ 1.8 million and $ 0.7 million was recognized in 2025, 2024 and 2023, respectively. Certain non-U.S.-based executives receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period. A summary of stock unit activity under the Incentive Plan is as follows: Number of Units Weighted-Average Grant Date Value Issued and unvested at January 1, 2025 74,398 $ 75.40 Granted 38,435 65.68 Forfeited ( 3,131 ) 70.78 Issued and unvested at December 31, 2025 109,702 72.12 47 Table of Contents 13. Derivative Instruments The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform. Cash Flow Hedges With the exception of its net investment hedges, the Company designates all of its hedging instruments as cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Foreign Currency Forward Contracts The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro and Mexican peso. Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year . The combined fair value of the foreign currency forward contracts was an asset balance of $ 1.0 million as of December 31, 2025 which was recorded in Other current assets within the consolidated balance sheet. The combined fair value of the foreign currency forward contracts was a liability balance of $ 1.4 million as of December 31, 2024 and recorded in Accrued liabilities within the consolidated balance sheet. The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges: December 31 (dollars in millions) 2025 2024 Buy Sell Buy Sell Canadian dollar $ — $ 57.8 $ — $ 28.9 Euro 16.8 — 14.0 — Mexican peso 18.7 — 27.2 — Total $ 35.5 $ 57.8 $ 41.2 $ 28.9 Interest Rate Swaps The Company is exposed to interest rate risk as a result of its floating rate borrowings. The Company entered into a forward interest rate swap agreement with an independent counterparty to hedge the variability in cash flows due to changes in Secured Overnight Financing Rate (SOFR) benchmark interest rate associated with variable rate borrowings. The interest rate swap has a maturity date of September 30, 2029 and effectively converts the Company’s variable interest rate obligation to a fixed interest rate obligation. The interest rate swap had an aggregate notional amount of 4.2 billion rupees as of December 31, 2025 and December 31, 2024. The aggregate effective interest rate of the swap as of December 31, 2025 and December 31, 2024 was 8.25 %. The fair value of the interest rate swap contract was a liability balance of $ 1.0 million as of December 31, 2025 which was recorded in Accrued liabilities within the consolidated balance sheet. The fair value of the interest rate swap contract was $ 0.5 million as of December 31, 2024 which was recorded in Accrued liabilities within the consolidated balance sheet. 48 Table of Contents 13. Derivative Instruments (continued) The effect of cash flow hedges on the consolidated statement of earnings: Years ended December 31 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) recognized in other comprehensive loss on derivatives Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings 2025 2024 2025 2024 Foreign currency contracts $ 4.0 $ ( 0.7 ) Cost of products sold $ 1.6 $ 2.2 Interest rate swaps ( 0.5 ) ( 0.5 ) Interest Expense ( 0.4 ) ( 0.1 ) $ 3.5 $ ( 1.2 ) $ 1.2 $ 2.1 Net Investment Hedges The Company uses foreign currency denominated intercompany debt and third-party foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. The Company recognized $ 8.8 million of after-tax losses and $ 2.3 million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in 2025 and 2024, respectively. The contractual amount of the Company’s foreign currency denominated intercompany debt that are designated as net investment hedge was 1.5 billion RMB as of both December 31, 2025 and December 31, 2024. The fair value of the net investment hedges was zero as of both December 31, 2025 and December 31, 2024. 14. Income Taxes The components of the provision for income taxes consisted of the following: Years ended December 31 (dollars in millions) 2025 2024 2023 Current: Federal $ 99.8 $ 124.3 $ 124.9 State 25.4 25.2 28.3 International 34.8 22.5 27.5 Deferred: Federal 11.9 ( 4.4 ) ( 4.8 ) State 2.1 ( 0.5 ) ( 1.8 ) International ( 5.1 ) 0.3 2.8 $ 168.9 $ 167.4 $ 176.9 49 Table of Contents 14. Income Taxes (continued) The provision for income taxes differs from the U.S. federal statutory rate due to the following items: Years ended December 31 2025 2024 2023 Dollars Percentages Dollars Percentages Dollars Percentages U.S. federal statutory tax rate $ 150.2 21.0 % $ 147.2 21.0 % $ 154.0 21.0 % State and local income tax, net of federal (national) benefit (1) 21.0 2.9 18.1 2.6 21.0 2.9 Foreign tax effects China Tax benefit from research and development expenditures ( 8.5 ) ( 1.2 ) ( 7.9 ) ( 1.1 ) ( 10.1 ) ( 1.4 ) Other 4.2 0.6 3.2 0.5 5.3 0.7 Other foreign jurisdictions 6.8 1.0 1.5 0.2 6.2 0.9 Other Adjustments ( 4.8 ) ( 0.7 ) 5.3 0.7 0.5 0.0 $ 168.9 23.6 % $ 167.4 23.9 % $ 176.9 24.1 % (1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Florida, Illinois, Massachusetts, Maryland, New Jersey, New York and New York City for 2025, California, Illinois, Maryland, Michigan, New Jersey, New York, Pennsylvania and Tennessee for 2024 and California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Tennessee for 2023. Components of earnings before income taxes were as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 U.S. $ 586.0 $ 577.2 $ 596.4 International 129.1 123.8 137.1 $ 715.1 $ 701.0 $ 733.5 The cash taxes paid by the Company were as follows: Years ended December 31 (dollars in millions) 2025 2024 2023 Federal $ 119.2 $ 136.1 $ 134.8 State 21.7 28.2 25.7 International Canada 11.4 11.4 11.6 China 9.3 8.3 15.0 Other foreign jurisdictions 3.6 3.7 2.4 $ 165.2 $ 187.7 $ 189.5 Undistributed earnings of the Company’s foreign subsidiaries amounted to $ 633.1 million at December 31, 2025. The Company had $ 4.8 million accrued for its estimate of withholding taxes due upon repatriation of approximately $ 93.0 million of foreign earnings it considers not permanently reinvested as of December 31, 2025. The Company considers $ 540.1 million of the total undistributed earnings to be permanently reinvested as a result of various factors including imposition of statutory restrictions at certain jurisdictions that prohibit the repatriation of a portion of the earnings. Accordingly, no provision for state, local and foreign withholding income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to state and local taxes, and withholding taxes payable to the various foreign countries. The Company expects to be able to take a 100 percent dividend received deduction to offset any US federal income tax liability. Determination of the amount of unrecognized state and local deferred income tax liability and associated foreign withholding taxes is not practicable due to the complexities associated with its hypothetical calculation. 50 Table of Contents 14. Income Taxes (continued) The tax effects of temporary differences of assets and liabilities between income tax and financial reporting are as follows: December 31 (dollars in millions) 2025 2024 Assets Liabilities Assets Liabilities Employee benefits $ 18.7 $ — $ 16.7 $ — Product liability and warranties 55.9 — 51.6 — Inventories 3.1 — 2.0 — Accounts receivable 12.4 — 12.0 — Property, plant and equipment — 51.9 — 49.8 Intangibles — 80.9 — 58.6 Environmental liabilities 1.3 — 1.4 — Undistributed foreign earnings — 4.8 — 3.5 Tax loss and credit carryovers 22.7 — 9.7 — All other 11.2 — 11.0 — Valuation allowance ( 10.4 ) — ( 6.1 ) — $ 114.9 $ 137.6 $ 98.3 $ 111.9 Net liability $ 22.7 $ 13.6 The Company believes it is more likely than not that it will realize its net deferred tax assets through the reduction of future taxable income. The Company considered historical operating results in determining the probability of the realization of the deferred tax assets. A reconciliation of the beginning and ending amounts of tax loss carryovers, credit carryovers and valuation allowances is as follows: Net Operating Losses and Tax Credits Valuation Allowances December 31 (dollars in millions) 2025 2024 2025 2024 Beginning balance $ 9.7 $ 12.3 $ 6.1 $ 11.7 Change in balance 13.0 ( 2.6 ) 4.3 ( 5.6 ) Ending balance $ 22.7 $ 9.7 $ 10.4 $ 6.1 The Company has foreign net operating loss carryovers that expire in 2026 through 2031, with some net operating losses being carried forward indefinitely and state and local net operating loss carryovers that are carried forward indefinitely. A reconciliation of the beginning and ending amount of unrecognized benefits is as follows: (dollars in millions) 2025 2024 Balance at January 1 $ 16.2 $ 17.2 Change to tax positions from prior years ( 3.2 ) ( 1.0 ) Balance at December 31 $ 13.0 $ 16.2 The amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is $ 4.9 million. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 31, 2025, there was an immaterial amount of interest and penalties accrued. The Company anticipates that there will not be a material decrease in the total amount of unrecognized tax benefits in 2026. The Company’s U.S. federal income tax returns and its U.S. state and local income tax returns are subject to audit for the years 2022-2025 and 2010-2025, respectively. The Company is subject to examinations in foreign tax jurisdictions for the years 2019-2025. If the examinations at certain foreign tax jurisdictions are resolved unfavorably, there could be additional assessments imposed by the relevant authorities. 51 Table of Contents 15. Commitments and Contingencies Environmental Contingencies The Company is a potentially responsible party in judicial and administrative proceedings seeking to clean up sites which have been environmentally impacted. In each case, the Company has established reserves, insurance proceeds and/or a potential recovery from third parties. The Company believes any environmental claims will not have a material effect on its financial position or results of operations. Product Liability The Company is subject to various claims and pending lawsuits for product liability and other matters arising out of the conduct of the Company’s business. For product liability claims, the Company self insures a portion of its product liability loss exposure. The Company has established reserves and insurance coverage that it believes are adequate to cover incurred claims. For the years ended December 31, 2025 and 2024, the Company had $ 125 million of product liability insurance for individual losses in excess of $ 7.5 million. At December 31, 2025 and 2024, the reserve for product liability was $ 26.6 million and $ 26.3 million, respectively. The Company periodically reevaluates its exposure on claims and lawsuits and makes adjustments to its reserves as appropriate. The Company believes, based on current knowledge, consultation with counsel, adequate reserves and insurance coverage that the outcome of such claims and lawsuits will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Purchase Obligations The Company utilizes blanket purchase orders to communicate expected annual requirements to certain suppliers. Requirements under blanket purchase orders generally do not become committed until several weeks prior to the scheduled unit production. The purchase obligations the Company considers firm as of December 31, 2025, is $ 211.7 million, most of which will be ordered in 2026. Inventory Repurchase Arrangements The Company maintained a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offered order-entry, warehousing and logistics support. The Provider also offered asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider collateralized lending facilities in place with multiple Chinese banks under which the Company agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes. The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates. As of December 31, 2025, the Company terminated the arrangement with the Provider. Existing loan balances will be paid down throughout 2026 with no new loans offered. Before considering any reduction of distributor rebate accruals of $ 1.9 million and $ 2.0 million as of December 31, 2025 and December 31, 2024, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $ 2.1 million and $ 2.9 million as of December 31, 2025 and December 31, 2024, respectively. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of December 31, 2025 and December 31, 2024. 52 Table of Contents 16. Operations by Segment The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, India, and Europe. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Company’s Chief Executive Officer (CEO) is the Chief Operating Decision Maker (CODM). The CODM allocates resources and makes operating decisions based on the financial information presented by the two reporting segments. The measures regularly reviewed by our CODM include segment sales, earnings, and segment margin. Segment earnings, defined by the Company as earnings before interest expense, taxes, corporate expense, and corporate research and development expenses, were used to measure the performance of the segments. Our CODM uses these financial measures to evaluate and allocate capital and company resources as critical determinants of segment performance. The accounting policies of the reportable segments are the same as those described in the “Summary of Significant Accounting Policies” outlined in Note 1 - Organization and Significant Accounting Policies. December 31, 2025 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,964.4 $ 865.8 $ — $ 3,830.2 $ — $ 3,830.2 Inter-segment sales 19.8 14.6 — 34.4 — 34.4 2,984.2 880.4 — 3,864.6 — 3,864.6 Elimination of Inter-segment sales ( 19.8 ) ( 14.6 ) — ( 34.4 ) — ( 34.4 ) Net Sales 2,964.4 865.8 — 3,830.2 — 3,830.2 Cost of products sold 1,792.2 550.6 — 2,342.8 — 2,342.8 Gross Profit 1,172.2 315.2 — 1,487.4 — 1,487.4 Inter-segment Profit — 0.2 ( 0.2 ) — — — Selling, general and administrative expenses 444.3 235.9 — 680.2 79.2 759.4 Other expense (income), net (1) — 3.1 — 3.1 ( 3.7 ) ( 0.6 ) Earnings $ 727.9 $ 76.4 $ ( 0.2 ) $ 804.1 $ ( 75.5 ) $ 728.6 Interest expense ( 13.5 ) Earnings before provision for income taxes $ 715.1 (1) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. 53 Table of Contents 16. Operations by Segment (continued) December 31, 2024 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,928.1 $ 890.0 $ — $ 3,818.1 $ — $ 3,818.1 Inter-segment sales 22.0 28.6 — 50.6 — 50.6 2,950.1 918.6 — 3,868.7 — 3,868.7 Elimination of Inter-segment sales ( 22.0 ) ( 28.6 ) — ( 50.6 ) — ( 50.6 ) Net Sales 2,928.1 890.0 — 3,818.1 — 3,818.1 Cost of products sold 1,780.1 581.9 — 2,362.0 — 2,362.0 Gross Profit 1,148.0 308.1 — 1,456.1 — 1,456.1 Inter-segment Profit — 0.4 ( 0.4 ) — — — Selling, general and administrative expenses 433.2 235.0 — 668.2 71.1 739.3 Restructuring and impairment expense 6.3 11.3 — 17.6 — 17.6 Other expense (income), net (2) 1.0 ( 2.3 ) — ( 1.3 ) ( 7.2 ) ( 8.5 ) Earnings $ 707.5 $ 64.5 $ ( 0.4 ) $ 771.6 $ ( 63.9 ) $ 707.7 Interest expense ( 6.7 ) Earnings before provision for income taxes $ 701.0 (2) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. December 31, 2023 (dollars in millions) North America Rest of World Inter-segment Elimination Total Segments Less: Corporate Expenses Total Sales from external customers $ 2,904.3 $ 948.5 $ — $ 3,852.8 $ — $ 3,852.8 Inter-segment sales 18.6 8.4 — 27.0 — 27.0 2,922.9 956.9 — 3,879.8 — 3,879.8 Elimination of Inter-segment sales ( 18.6 ) ( 8.4 ) — ( 27.0 ) — ( 27.0 ) Net Sales 2,904.3 948.5 — 3,852.8 — 3,852.8 Cost of products sold 1,761.1 607.0 — 2,368.1 ( 0.1 ) 2,368.0 Gross Profit 1,143.2 341.5 — 1,484.7 0.1 1,484.8 Inter-segment Profit — 0.5 ( 0.5 ) — — — Selling, general and administrative expenses 411.6 243.0 — 654.6 72.8 727.4 Restructuring and impairment expense — 15.7 — 15.7 3.1 18.8 Other expense (income), net (3) 4.9 ( 0.1 ) — 4.8 ( 11.7 ) ( 6.9 ) Earnings $ 726.7 $ 83.4 $ ( 0.5 ) $ 809.6 $ ( 64.1 ) $ 745.5 Interest expense ( 12.0 ) Earnings before provision for income taxes $ 733.5 (3) Other expense (income), net consists primarily of interest income that is located within Corporate Expenses. In 2025, sales to the Company's North America segment’s two largest customers were $ 599.7 million and $ 467.8 million which represented 16 percent and 12 percent of the Company’s net sales, respectively. In 2024, sales to the Company's North America segment’s two largest customers were $ 586.6 million and $ 495.8 million which represented 15 percent and 13 percent of the Company’s net sales, respectively. In 2023, sales to the Company's North America segment’s two largest customers were $ 604.5 million and $ 509.0 million which represented 16 percent and 13 percent of the Company’s net sales, respectively. 54 Table of Contents 16. Operations by Segment (continued) Assets, depreciation and capital expenditures by segment Total Assets (December 31) Depreciation and Amortization (Years Ended December 31) Capital Expenditures (Years Ended December 31) (dollars in millions) 2025 2024 2023 2025 2024 2023 2025 2024 2023 North America $ 2,325.7 $ 2,315.2 $ 2,297.4 $ 64.1 $ 60.4 $ 58.6 $ 60.6 $ 100.3 $ 58.4 Rest of World 547.3 592.1 475.0 19.6 17.0 18.3 10.2 7.6 11.0 Total Segments 2,873.0 2,907.3 2,772.4 83.7 77.4 76.9 70.8 107.9 69.4 Corporate (1) 269.8 332.7 441.5 1.4 1.4 1.4 — 0.1 3.2 Total $ 3,142.8 $ 3,240.0 $ 3,213.9 $ 85.1 $ 78.8 $ 78.3 $ 70.8 $ 108.0 $ 72.6 (1) The majority of corporate assets consist of cash, cash equivalents, marketable securities, and deferred income taxes. Net sales and long-lived assets by geographic location The following data by geographic area includes net sales based on product shipment destination and long-lived assets based on physical location. Long-lived assets include net property, plant and equipment, operating lease assets and other long-term assets. Long-lived Assets (December 31) Net Sales (Years Ended December 31) (dollars in millions) 2025 2024 2023 2025 2024 2023 United States $ 447.7 $ 441.4 $ 422.6 United States $ 2,619.1 $ 2,573.7 $ 2,547.1 China 193.6 193.8 210.6 China 672.8 760.0 827.4 Canada 56.7 54.0 58.1 Canada 326.5 331.2 335.3 Other Foreign 80.4 75.1 52.1 Other Foreign 211.8 153.2 143.0 Total $ 778.4 $ 764.3 $ 743.4 Total $ 3,830.2 $ 3,818.1 $ 3,852.8 17. Subsequent Events On January 6, 2026, the Company completed the acquisition of LVC Holdco LLC (“Leonard Valve”). The transaction was completed for $ 470.0 million, subject to customary adjustments. The all-cash transaction is valued at approximately $ 412.0 million after adjusting for estimated tax benefits and was funded with cash borrowed under a new credit agreement. The Company has not completed the analysis of identifying and estimating the fair value of identifiable intangible assets acquired. We anticipate preparing a preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the second quarter of fiscal 2026. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined. On January 29, 2026, the Company identified a compromise to a portion of the Ashland City, Tennessee facility roof structure due to a severe ice and snow weather event. For safety purposes, production has been halted temporarily in the area of the facility impacted while remediation activities are underway. The Company has shifted certain production activities to other facilities to address the temporary impact. The Company has insurance coverage for the repair of the assets that were impacted and is working closely with its insurance carrier and claims adjusters to ensure financial recovery due to the event. The Company’s insurance policies also provide business interruption coverage, including lost profits, and the reimbursement of other expenses and costs to be incurred relating to the damages and losses suffered. The Company’s evaluation of the situation and associated remediation activities is ongoing. As of the date of this filing, the Company does not expect the event to result in a material impact on its financial results. 55 Table of Contents ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.