SMITH A O CORP

“We enter into foreign currency forward contracts to minimize the effect of fluctuating foreign currencies. At December 31, 2025, we had net foreign currency contracts outstanding with notional values of $93.3 million. Assuming a hypothetical ten percent movement in the respective currencies, the potential foreign exchange gain or loss associated with the change in exchange rates would amount to $9.3 million. However, gains and losses from our forward contracts will be offset by gains and losses in the underlying transactions being hedged.”

“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 Co…”

“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.”

“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.”

“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 p…”