Share-Based Compensation |
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| Share-Based Compensation | Share-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 share-based compensation at June 30, 2026 was 1,890,715. Upon vesting or exercise of share-based compensation, shares are issued from treasury stock. Share Units Participants in the Incentive Plan may be awarded share units. Share units vest three years after the date of grant. The Company granted 199,163 and 211,010 share units under the Incentive Plan in the six months ended June 30, 2026 and 2025, respectively. The share units were valued at $15.5 million and $13.8 million at the date of issuance in 2026 and 2025, 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. Included in share unit expense in the six months ended June 30, 2026 and 2025 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. Share-based compensation expense attributable to share units of $2.0 million and $1.8 million was recognized in the three months ended June 30, 2026 and 2025, respectively. Share-based compensation expense attributable to share units of $7.7 million and $7.3 million was recognized in the six months ended June 30, 2026 and 2025, 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 for the six months ended June 30, 2026:
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 grant date. Performance stock units vest under a set of measurement criteria that 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 30,015 and 35,365 performance stock units under the Incentive Plan in the six months ended June 30, 2026 and 2025, respectively. The performance stock units were valued at $2.4 million and $2.3 million at the date of issuance in 2026 and 2025, 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. Share-based compensation expense attributable to performance stock units of $0.7 million and $0.7 million was recognized in the three months ended June 30, 2026 and 2025, respectively. Share-based compensation expense attributable to performance stock units of $1.6 million and $1.2 million was recognized in the six months ended June 30, 2026 and 2025, 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 performance stock unit activity under the Incentive Plan is as follows for the six months ended June 30, 2026:
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