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 stock based compensation at March 31, 2025 was 2,079,233. Upon vesting or exercise of stock based compensation, shares are issued from treasury stock.

Participants in the Incentive Plan may be awarded share units. Share units vest three years after the date of grant. The Company granted 209,366 and 189,792 share units under the Incentive Plan in the three months ended March 31, 2025 and 2024, respectively.

The share units were valued at $13.7 million and $15.6 million at the date of issuance in 2025 and 2024, 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 in the three months ended March 31, 2025 and 2024 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 $5.5 million and $7.8 million was recognized in the three months ended March 31, 2025 and 2024, 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.


	Number of Units	Weighted-Average Grant Date Value
Issued and unvested at January 1, 2025	469,269	$	71.50
Granted	209,366	65.51
Vested	(82,177)	74.17
Forfeited	(3,935)	72.66
Issued and unvested at March 31, 2025	592,523	68.83

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% of the target awards and changes from target amounts are reflected as performance adjustments. The Company granted 35,365 and 28,390 performance stock units under the Incentive Plan in the three months ended March 31, 2025 and 2024, respectively.

The performance stock units were valued at $2.3 million and $2.3 million at the date of issuance in 2025 and 2024, 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 $0.5 million and $0.3 million was recognized in the three months ended March 31, 2025 and 2024, 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.