Media Relations: Investor Relations:
Media Relations: Investor Relations: Curt Selby Helen Gurholt 414-359-4191 414-359-4157 curt.selby@aosmith.com hgurholt@aosmith.com
(Comparisons are year-over-year (“YoY”), unless otherwise noted) • Sales of $941 million; net earnings of $126 million and diluted earnings per share (EPS) of $0.93
• North America segment sales of $761.6 million increased 3% driven by Leonard Valve acquisition sales, 13% boiler sales growth and the benefits of pricing actions, partially offset by lower residential water heater volumes
• Rest of World segment sales of $192.8 million decreased 7%, reflecting continued weakness in China's consumer appliance market
• Year-to-date operating cash flow was $429 million and free cash flow increased 4% to $396 million
• Concluded China strategic assessment with definitive agreements, announced October 27, under which CPE will acquire an 81% interest in the Company's China business; with A. O. Smith retaining a 19% stake and long-term brand license
• 2026 full year guidance has been updated to exclude the China business for all of 2026:
1 Excludes full year North America water treatment estimated pre-tax restructuring and impairment expenses of approximately $20 million
Global water technology company A. O. Smith Corporation ("A. O. Smith" or “the Company”) (NYSE: AOS) today announced its third quarter 2026 results. Key Financial Metrics
“Disciplined execution across our businesses remained a priority in the third quarter as we navigated persistent inflationary pressures, softer residential water heater demand in North America, and ongoing market challenges in China,” said Steve Shafer, chairman and chief executive officer. “Our teams adapted to changing market conditions, managed costs and stayed focused on meeting our customers’ needs. Supported by our leading market positions and financial strength, we believe we remain well positioned to address near-term headwinds and deliver long-term, profitable growth.”
"Separately, earlier this week we announced definitive agreements with CPE to acquire an 81% interest in our China business," Shafer continued. "Our team in China has built a leading premium brand over more than three decades, and CPE is well positioned to lead that business forward. For A. O. Smith, this transaction completes our strategic assessment and enables us to focus our capital and resources on our highest-return opportunities and sustainable value creation. At the same time, our retained 19% stake and long-term brand license give our shareholders the opportunity to benefit from future growth in China under CPE's leadership."
Third quarter sales increased 3% to $761.6 million, driven by higher boiler volumes, pricing benefits and a $15 million sales contribution from Leonard Valve, acquired in January 2026, partially offset by lower residential water heater volumes. Excluding Leonard Valve, organic sales increased 1%.
Segment earnings were $179.9 million, and segment margin was 23.6% in the third quarter of 2026, compared to segment earnings of $179.7 million and segment margin of 24.2% in the same period of 2025. The 60-basis-point decline in segment margin was primarily due to lower residential water heater volumes and higher input costs, including steel and freight, more than offsetting the benefits of higher boiler volumes, International Emergency Economic Powers Act (IEEPA) tariff refunds, the benefits of pricing actions and the earnings contribution from Leonard Valve.
Rest of World sales of $192.8 million decreased 7% compared to the prior year period and included a favorable currency translation impact of $5 million primarily related to sales in China. China sales decreased 17% in local currency, reflecting continued weak consumer demand and disruption related to the recently concluded strategic assessment process.
Segment earnings were $10.5 million, and segment margin was 5.4% in the third quarter of 2026, compared to segment earnings of $15.4 million and segment margin of 7.4% in the same period of 2025. The lower segment earnings and segment margin compared to the prior year were primarily due to lower China sales volumes, partially offset by continued cost management.
On October 27, 2026, the Company announced definitive agreements with CPE, a leading alternative asset manager, to acquire an 81% interest in A. O. Smith’s China business. A. O. Smith will retain a 19% stake and enter into a long-term brand license agreement, both of which allow it to participate in the business's future growth. The transaction values the China business at approximately $400 million on a cash-free, debt-free basis, before taking into account the long- term brand licensing royalty stream. The total value, including the net present value of the ongoing licensing economics payable to A. O. Smith over the multi- decade period, is expected to exceed $500 million. In addition, the transaction structure will enable A. O. Smith to repatriate approximately $80 million in cash that is currently being held in China. Consistent with its commitment to returning capital to shareholders, the Company intends to prioritize share repurchases as a use of the after-tax proceeds and repatriated cash following the closing of the transaction.
The agreements follow a comprehensive review of strategic alternatives for the China business, announced in July 2025. After evaluating a broad range of options, A. O. Smith’s Board of Directors concluded that a strategic transaction with CPE is the best path forward for the China business, the Company and its shareholders. The transaction is expected to close in the first half of 2027, subject to regulatory approvals and other customary closing conditions.
As of September 30, 2026, cash balances totaled $234.5 million and debt totaled $673.1 million, resulting in a leverage ratio of 27.0% as measured by total debt-to-total capitalization. The increased leverage ratio compared to 2025 was due to cash borrowed under a new term loan used to acquire Leonard Valve in January 2026.
Cash provided by operations was $429.4 million in the first nine months of 2026, slightly lower than the same period in 2025. Free cash flow in the first nine months of 2026 increased 4% to $396.2 million, supported by lower capital expenditures of $33.2 million compared with $53.2 million in the prior year period. Higher non-cash expense adjustments and improved working capital offset lower earnings.
As part of its commitment to return capital to shareholders, the Company deployed $260.6 million to repurchase 4.2 million shares in the first nine months of 2026. As of September 30, 2026, authority remained to repurchase approximately 1.6 million additional shares. The Company projects its full-year 2026 share repurchases to total approximately $300 million.
On October 12, 2026, the Company’s board of directors approved a 6% increase in the dividend rate, resulting in a five-year compound annual dividend growth rate of approximately 7%. The Company has increased its dividend for more than 30 consecutive years. For the full release, click here.
As a result of the announced sale of a majority interest in the China business, which represents a strategic shift in the Company’s portfolio, the Company expects to classify the China business as held for sale and report it as discontinued operations beginning in the fourth quarter of 2026, with prior periods recast accordingly. Third quarter 2026 results presented in this release include the China business. Upon closing of the transaction, the Company expects to deconsolidate the China business and account for its retained 19% interest under the equity method. The Company will also review its segment reporting structure during the fourth quarter of 2026.
Accordingly, the Company has updated its full-year 2026 guidance to exclude the China business for all of 2026. (in millions, except per share amounts)
20251 2026 Outlook2 Actual Low End High End Net sales excluding China $3,155 $3,270 $3,290 Adjusted EPS excluding China $3.42 $3.42 $3.52
1 Excludes Information presented represents unaudited information that excludes the China business. See accompanying GAAP to Non-GAAP reconciliations
2 Information presented represents unaudited information that excludes the China business and full year North America water treatment estimated pre-tax restructuring and impairment expenses of approximately $20 million.
Shafer concluded, “Our updated guidance reflects a more focused A. O. Smith, and our teams are committed to finishing the year strong. Looking ahead, we are excited about the opportunities in front of us, from our leading North American water heating and boiler franchise to our growth platforms in water treatment, water management and India. By concentrating on where we win, we are well positioned to drive profitable growth and create long-term value for our shareholders.”
The Company’s guidance also excludes the potential impact from future acquisitions.
A. O. Smith will host a webcasted conference call at 10:00 a.m. (Eastern Daylight Time) today. The call can be heard live on the Company’s website. An audio replay of the call, along with the related presentation, will be available on the Company’s website after the live event. To access the archived audio replay and related presentation, go to the “Investors” page and select the Third Quarter 2026 Earnings Call link.
To provide improved transparency into the operating results of its business, the Company is providing non-GAAP measures. Free cash flow is defined as cash provided by operations less capital expenditures. North America segment organic growth excludes the impact of Leonard Valve. Adjusted earnings, adjusted EPS, total segment earnings, adjusted segment earnings and adjusted segment margin exclude the impact of restructuring and impairment charges. Reconciliations from GAAP measures to non-GAAP measures are provided in the financial information included in this news release.
We provide guidance for net sales excluding China and adjusted EPS excluding China, which are non-GAAP financial measures, on a forward-looking basis. We do not provide a reconciliation of these measures to the most directly comparable GAAP measures, net sales and diluted earnings per share because we cannot predict or estimate certain reconciling items without unreasonable efforts. These items include forecasted China sales and a forecast of China’s contribution to earnings per share. These items are uncertain, depend on factors outside our control, and could have a significant impact on our GAAP results for the guidance period.
This release contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “continue,” “guidance,” “outlook”, “confident” or words of similar meaning. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: further softening in U.S. residential and commercial water heater demand; further weakening in North American residential or commercial construction or instability in the Company’s replacement markets; the timing and effects of the China business transaction, including the possibility that the parties will fail to obtain necessary regulatory approvals or to satisfy any of the other conditions to the transaction; potential negative effects relating to the announcement of the China business transaction; failure to realize the expected benefits of the China business transaction; failure to realize the expected benefits of acquisitions or expected synergies; difficulties in predicting results of operations of an acquired business; negative impact to the Company’s businesses from international tariffs, including any new or increased tariffs that could also trigger retaliatory responses from other countries, as well as trade disputes and geopolitical differences, including the conflicts in Ukraine and the Middle East; negative impacts to the Company, particularly the demand for its products, resulting from global inflationary pressures or a potential recession in one or more of the markets in which the Company participates; the Company’s ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supply chain and at expected costs, including the recent volatility in fuel and other material prices; inability of the Company to implement or maintain pricing actions; inconsistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housing sales in China; the availability, timing or effects of China stimulus programs; the failure to realize the expected benefits of restructuring actions; further weakening in the high-efficiency gas boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; foreign currency fluctuations; failure to realize the expected benefits, timing and extent of regulatory changes; competitive pressures on the Company’s businesses, including new technologies and new competitors; the impact of potential information technology or data security breaches; negative impact of changes in government regulations or regulatory requirements; the inability to respond to secular trends toward decarbonization and energy efficiency; and adverse developments in general economic, political and business conditions in key regions of the world. Additional factors are discussed in the Company’s filings with Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, quarterly reports on Form 10-Q and current reports on Form 8-K. Forward-looking statements included in this news release are made only as of the date of this release, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements.
A. O. Smith Corporation, with headquarters in Milwaukee, Wisconsin, is a global leader applying innovative technology and energy-efficient solutions to products manufactured and marketed worldwide. Listed on the New York Stock Exchange (NYSE: AOS), the Company is one of the world’s leading manufacturers of residential and commercial water heating equipment and boilers, as well as a manufacturer of water treatment and water management products. For more information, visit www.aosmith.com. SOURCE: A. O. Smith Corporation ###
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.
(Unaudited) September 30, December 31, 2026 2025 ────────────────────────────────────────────────────────────────────────────── ASSETS: Cash and cash $ 234.5 $ 174.5 equivalents Marketable — 18.7 securities Receivables 612.9 582.3 Inventories 509.3 479.3 Other current 54.3 36.7 assets Total Current 1,411.0 1,291.5 Assets Net property, 614.5 635.1 plant and equipment Goodwill and other 1,496.2 1,072.9 intangibles Operating lease 51.3 46.3 assets Other 82.0 97.0 assets Total $ 3,655.0 $ 3,142.8 Assets LIABILITIES AND STOCKHOLDE… EQUITY: Trade $ 516.6 $ 504.1 payables Accrued payroll and 79.6 93.6 benefits Accrued 153.6 147.5 liabilities Product 71.2 75.0 warranties Debt due within one 41.0 42.3 year Total Current 862.0 862.5 Liabilities Long-term 632.1 112.7 debt Pension 7.5 7.4 liabilities Operating lease 41.7 37.1 liabilities Other 288.6 265.1 liabilities Stockholde… 1,823.1 1,858.0 equity Total Liabilities and $ 3,655.0 $ 3,142.8 Stockholde… Equity
Nine Months Ended Operating September 30, Activities 2026 2025 ────────────────────────────────────────────────────────────────────────────── Net earnings $ 369.2 $ 420.8 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation & 72.5 62.8 amortization Share based compensation 12.7 11.3 expense Deferred income 26.0 9.7 taxes Non cash 12.4 — impairment Net changes in operating assets and liabilities: Current assets -79.6 -83.6 and liabilities Noncurrent assets 16.2 12.7 and liabilities Cash Provided by Operating 429.4 433.7 Activities Investing Activities Capital -33.2 -53.2 expenditures Acquisitions -469.5 — Investment in marketable — -42.7 securities Net proceeds from sale of 18.7 59.2 marketable securities Cash Used in Investing -484.0 -36.7 Activities Financing Activities Proceeds from 995.1 670.4 debt Repayments of -473.9 -677.2 debt Common stock -260.6 -335.4 repurchases Net payments from stock option 0.3 0.7 activity Dividends paid -148.7 -145.1 Cash Provided by (Used in) 112.2 -486.6 Financing Activities Effect of exchange rate changes on cash 2.4 2.7 and cash equivalents Net increase (decrease) in 60.0 -86.9 cash and cash equivalents Cash and cash equivalents - 174.5 239.6 beginning of period Cash and Cash Equivalents - End $ 234.5 $ 152.7 of Period
We are providing the following non-U.S. Generally Accepted Accounting Principles (GAAP) measures. Reconciliations from GAAP measures to non-GAAP measures are provided in the section below. We believe that these measures provide useful information to investors about our performance and allow management and our investors to better understand our performance between periods without regard to items that we do not consider to be a component of our core operating performance or recurring in nature.
(unaudited) The following is a reconciliation of net earnings and diluted earnings per share to adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP):
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.
(1) The acquisition effect includes the sales impact of the Leonard Valve acquisition in 2026.
(unaudited) The following is a reconciliation of reported earnings before provision for income taxes to total segment earnings (non-GAAP), adjusted segment earnings (non-GAAP), and adjusted segment margin (non-GAAP):
(unaudited) The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP):
(unaudited) The following is a reconciliation of 2025 GAAP net sales to 2025 net sales excluding the results of the China business (non-GAAP):
(unaudited) The following is a reconciliation of diluted EPS to adjusted diluted EPS excluding the results of the China business (non-GAAP) (all items are net of tax):
Nine Months Ended Year Ended September 30, December 31, 2026 2025 ────────────────────────────────────────────────────────────────────────────── Diluted EPS $ 2.68 $ 3.85 (GAAP) Restructuring and impairment expenses, 0.12 — per diluted share, net of tax Adjusted EPS 2.80 3.85 (non-GAAP) China business impact, per diluted -0.20 -0.43 share, net of tax Adjusted EPS excluding the results of $ 2.60 $ 3.42 China business (non-GAAP)
Full Year 2025 Net sales and Earnings before interest and taxes (EBIT) and EBIT margin
(unaudited) The following is a reconciliation of 2025 GAAP net sales to 2025 net sales excluding the results of the China business (non-GAAP) and 2025 net earnings (GAAP) to 2025 EBIT margin (non-GAAP) and 2025 EBIT margin excluding the results of China business (non-GAAP):
2025 ────────────────────────────────────────────────────────────────── Net Sales (GAAP) $ 3,830.2 China business impact (net of -674.9 inter-segment sales of $14.6 million) Net Sales excluding the results of China $ 3,155.3 business (non-GAAP) Net Earnings (GAAP) $ 546.2 Provision for income taxes 168.9 Interest expense 13.5 EBIT (non-GAAP) $ 728.6 EBIT Margin % (non-GAAP) 19% Net Earnings impact from China business -60.4 EBIT excluding the results of China $ 668.2 business (non-GAAP) EBIT Margin % excluding the results of 21% China business (non-GAAP)
Full text with the tables
Exhibit 99.1
Media Relations: Investor Relations:
Curt Selby Helen Gurholt
414-359-4191 414-359-4157
curt.selby@aosmith.com hgurholt@aosmith.com
FOR IMMEDIATE RELEASE
October 29, 2026
A. O. Smith Reports Third Quarter 2026 Results
Third Quarter 2026 Highlights
(Comparisons are year-over-year (“YoY”), unless otherwise noted)
• Sales of $941 million; net earnings of $126 million and diluted earnings per
share (EPS) of $0.93
• North America segment sales of $761.6 million increased 3% driven by Leonard
Valve acquisition sales, 13% boiler sales growth and the benefits of pricing
actions, partially offset by lower residential water heater volumes
• Rest of World segment sales of $192.8 million decreased 7%, reflecting
continued weakness in China's consumer appliance market
• Year-to-date operating cash flow was $429 million and free cash flow increased
4% to $396 million
• Concluded China strategic assessment with definitive agreements, announced
October 27, under which CPE will acquire an 81% interest in the Company's China
business; with A. O. Smith retaining a 19% stake and long-term brand license
• 2026 full year guidance has been updated to exclude the China business for all
of 2026:
◦ Net sales growth, excluding China, of approximately 4%
◦ Adjusted EPS 1 , excluding China, of between $3.42 and $3.52
1 Excludes full year North America water treatment estimated pre-tax
restructuring and impairment expenses of approximately $20 million
Milwaukee, Wis.—
Global water technology company A. O. Smith Corporation ("A. O. Smith" or “the
Company”) (NYSE: AOS) today announced its third quarter 2026 results.
Key Financial Metrics
Third Quarter
(in millions, except per share amounts)
Q3 2026 Q3 2025 % Change YoY
Net sales $940.5 $942.5 -%
Net earnings $126.3 $132.0 -4%
Diluted earnings per share $0.93 $0.94 -1%
“Disciplined execution across our businesses remained a priority in the third
quarter as we navigated persistent inflationary pressures, softer residential
water heater demand in North America, and ongoing market challenges in China,”
said Steve Shafer, chairman and chief executive officer. “Our teams adapted to
changing market conditions, managed costs and stayed focused on meeting our
customers’ needs. Supported by our leading market positions and financial
strength, we believe we remain well positioned to address near-term headwinds
and deliver long-term, profitable growth.”
"Separately, earlier this week we announced definitive agreements with CPE to
acquire an 81% interest in our China business," Shafer continued. "Our team in
China has built a leading premium brand over more than three decades, and CPE is
well positioned to lead that business forward. For A. O. Smith, this transaction
completes our strategic assessment and enables us to focus our capital and
resources on our highest-return opportunities and sustainable value creation. At
the same time, our retained 19% stake and long-term brand license give our
shareholders the opportunity to benefit from future growth in China under CPE's
leadership."
Segment-level Performance
North America
Third quarter sales increased 3% to $761.6 million, driven by higher boiler
volumes, pricing benefits and a $15 million sales contribution from Leonard
Valve, acquired in January 2026, partially offset by lower residential water
heater volumes. Excluding Leonard Valve, organic sales increased 1%.
Segment earnings were $179.9 million, and segment margin was 23.6% in the third
quarter of 2026, compared to segment earnings of $179.7 million and segment
margin of 24.2% in the same period of 2025. The 60-basis-point decline in
segment margin was primarily due to lower residential water heater volumes and
higher input costs, including steel and freight, more than offsetting the
benefits of higher boiler volumes, International Emergency Economic Powers Act
(IEEPA) tariff refunds, the benefits of pricing actions and the earnings
contribution from Leonard Valve.
Rest of World
Rest of World sales of $192.8 million decreased 7% compared to the prior year
period and included a favorable currency translation impact of $5 million
primarily related to sales in China. China sales decreased 17% in local
currency, reflecting continued weak consumer demand and disruption related to
the recently concluded strategic assessment process.
Segment earnings were $10.5 million, and segment margin was 5.4% in the third
quarter of 2026, compared to segment earnings of $15.4 million and segment
margin of 7.4% in the same period of 2025. The lower segment earnings and
segment margin compared to the prior year were primarily due to lower China
sales volumes, partially offset by continued cost management.
Announced Sale of 81% Interest in China Business
On October 27, 2026, the Company announced definitive agreements with CPE, a
leading alternative asset manager, to acquire an 81% interest in A. O. Smith’s
China business. A. O. Smith will retain a 19% stake and enter into a long-term
brand license agreement, both of which allow it to participate in the business's
future growth. The transaction values the China business at approximately $400
million on a cash-free, debt-free basis, before taking into account the long-
term brand licensing royalty stream. The total value, including the net present
value of the ongoing licensing economics payable to A. O. Smith over the multi-
decade period, is expected to exceed $500 million. In addition, the transaction
structure will enable A. O. Smith to repatriate approximately $80 million in
cash that is currently being held in China. Consistent with its commitment to
returning capital to shareholders, the Company intends to prioritize share
repurchases as a use of the after-tax proceeds and repatriated cash following
the closing of the transaction.
The agreements follow a comprehensive review of strategic alternatives for the
China business, announced in July 2025. After evaluating a broad range of
options, A. O. Smith’s Board of Directors concluded that a strategic transaction
with CPE is the best path forward for the China business, the Company and its
shareholders. The transaction is expected to close in the first half of 2027,
subject to regulatory approvals and other customary closing conditions.
Balance Sheet, Liquidity and Capital Allocation
As of September 30, 2026, cash balances totaled $234.5 million and debt totaled
$673.1 million, resulting in a leverage ratio of 27.0% as measured by total
debt-to-total capitalization. The increased leverage ratio compared to 2025 was
due to cash borrowed under a new term loan used to acquire Leonard Valve in
January 2026.
Cash provided by operations was $429.4 million in the first nine months of 2026,
slightly lower than the same period in 2025. Free cash flow in the first nine
months of 2026 increased 4% to $396.2 million, supported by lower capital
expenditures of $33.2 million compared with $53.2 million in the prior year
period. Higher non-cash expense adjustments and improved working capital offset
lower earnings.
As part of its commitment to return capital to shareholders, the Company
deployed $260.6 million to repurchase 4.2 million shares in the first nine
months of 2026. As of September 30, 2026, authority remained to repurchase
approximately 1.6 million additional shares. The Company projects its full-year
2026 share repurchases to total approximately $300 million.
On October 12, 2026, the Company’s board of directors approved a 6% increase in
the dividend rate, resulting in a five-year compound annual dividend growth rate
of approximately 7%. The Company has increased its dividend for more than 30
consecutive years. For the full release, click here.
2026 Outlook
As a result of the announced sale of a majority interest in the China business,
which represents a strategic shift in the Company’s portfolio, the Company
expects to classify the China business as held for sale and report it as
discontinued operations beginning in the fourth quarter of 2026, with prior
periods recast accordingly. Third quarter 2026 results presented in this release
include the China business. Upon closing of the transaction, the Company expects
to deconsolidate the China business and account for its retained 19% interest
under the equity method. The Company will also review its segment reporting
structure during the fourth quarter of 2026.
Accordingly, the Company has updated its full-year 2026 guidance to exclude the
China business for all of 2026.
(in millions, except per share amounts)
20251 2026 Outlook2
Actual Low End High End
Net sales excluding China $3,155 $3,270 $3,290
Adjusted EPS excluding China $3.42 $3.42 $3.52
1 Excludes Information presented represents unaudited information that excludes
the China business. See accompanying GAAP to Non-GAAP reconciliations
2 Information presented represents unaudited information that excludes the China
business and full year North America water treatment estimated pre-tax
restructuring and impairment expenses of approximately $20 million.
Shafer concluded, “Our updated guidance reflects a more focused A. O. Smith, and
our teams are committed to finishing the year strong. Looking ahead, we are
excited about the opportunities in front of us, from our leading North American
water heating and boiler franchise to our growth platforms in water treatment,
water management and India. By concentrating on where we win, we are well
positioned to drive profitable growth and create long-term value for our
shareholders.”
The Company’s guidance also excludes the potential impact from future
acquisitions.
A. O. Smith will host a webcasted conference call at 10:00 a.m. (Eastern
Daylight Time) today. The call can be heard live on the Company’s website. An
audio replay of the call, along with the related presentation, will be available
on the Company’s website after the live event. To access the archived audio
replay and related presentation, go to the “Investors” page and select the Third
Quarter 2026 Earnings Call link.
To provide improved transparency into the operating results of its business, the
Company is providing non-GAAP measures. Free cash flow is defined as cash
provided by operations less capital expenditures. North America segment organic
growth excludes the impact of Leonard Valve. Adjusted earnings, adjusted EPS,
total segment earnings, adjusted segment earnings and adjusted segment margin
exclude the impact of restructuring and impairment charges. Reconciliations from
GAAP measures to non-GAAP measures are provided in the financial information
included in this news release.
We provide guidance for net sales excluding China and adjusted EPS excluding
China, which are non-GAAP financial measures, on a forward-looking basis. We do
not provide a reconciliation of these measures to the most directly comparable
GAAP measures, net sales and diluted earnings per share because we cannot
predict or estimate certain reconciling items without unreasonable efforts.
These items include forecasted China sales and a forecast of China’s
contribution to earnings per share. These items are uncertain, depend on factors
outside our control, and could have a significant impact on our GAAP results for
the guidance period.
Forward-looking Statements
This release contains statements that the Company believes are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements generally can be identified by the use of
words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,”
“believe,” “forecast,” “continue,” “guidance,” “outlook”, “confident” or words
of similar meaning. All forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
anticipated as of the date of this release. Important factors that could cause
actual results to differ materially from these expectations include, among other
things, the following: further softening in U.S. residential and commercial
water heater demand; further weakening in North American residential or
commercial construction or instability in the Company’s replacement markets; the
timing and effects of the China business transaction, including the possibility
that the parties will fail to obtain necessary regulatory approvals or to
satisfy any of the other conditions to the transaction; potential negative
effects relating to the announcement of the China business transaction; failure
to realize the expected benefits of the China business transaction; failure to
realize the expected benefits of acquisitions or expected synergies;
difficulties in predicting results of operations of an acquired business;
negative impact to the Company’s businesses from international tariffs,
including any new or increased tariffs that could also trigger retaliatory
responses from other countries, as well as trade disputes and geopolitical
differences, including the conflicts in Ukraine and the Middle East; negative
impacts to the Company, particularly the demand for its products, resulting from
global inflationary pressures or a potential recession in one or more of the
markets in which the Company participates; the Company’s ability to continue to
obtain commodities, components, parts and accessories on a timely basis through
its supply chain and at expected costs, including the recent volatility in fuel
and other material prices; inability of the Company to implement or maintain
pricing actions; inconsistent recovery of the Chinese economy or a further
decline in the growth rate of consumer spending or housing sales in China; the
availability, timing or effects of China stimulus programs; the failure to
realize the expected benefits of restructuring actions; further weakening in the
high-efficiency gas boiler segment in the U.S.; substantial defaults in payment
by, material reduction in purchases by or the loss, bankruptcy or insolvency of
a major customer; foreign currency fluctuations; failure to realize the expected
benefits, timing and extent of regulatory changes; competitive pressures on the
Company’s businesses, including new technologies and new competitors; the impact
of potential information technology or data security breaches; negative impact
of changes in government regulations or regulatory requirements; the inability
to respond to secular trends toward decarbonization and energy efficiency; and
adverse developments in general economic, political and business conditions in
key regions of the world. Additional factors are discussed in the Company’s
filings with Securities and Exchange Commission, including the Company’s Annual
Report on Form 10-K for the year ended December 31, 2025, quarterly reports on
Form 10-Q and current reports on Form 8-K. Forward-looking statements included
in this news release are made only as of the date of this release, and the
Company is under no obligation to update these statements to reflect subsequent
events or circumstances. All subsequent written and oral forward-looking
statements attributed to the Company, or persons acting on its behalf, are
qualified entirely by these cautionary statements.
About A. O. Smith
A. O. Smith Corporation, with headquarters in Milwaukee, Wisconsin, is a global
leader applying innovative technology and energy-efficient solutions to products
manufactured and marketed worldwide. Listed on the New York Stock Exchange
(NYSE: AOS), the Company is one of the world’s leading manufacturers of
residential and commercial water heating equipment and boilers, as well as a
manufacturer of water treatment and water management products. For more
information, visit www.aosmith.com.
SOURCE: A. O. Smith Corporation
###
A. O. SMITH CORPORATION
Condensed Consolidated Statement of Earnings
(dollars in millions, except share data)
(unaudited)
Th… N…
Mo… M…
En… E…
Se… S…
30, 3…
20… 20… 2… 2…
──────────────────────────────────────────────────────────────────────────────
N… $ 94… $ 94… $ 2,… $ 2,…
s…
C…
of 57… 57… 1,… 1,…
p…
s…
G… 36… 36… 1,… 1,…
p…
S…
g…
a… 18… 18… 59… 57…
a…
e…
R…
a… — — 22… —
i…
e…
I… 7.7 3.6 22… 11…
e…
O…
e… 0.8 0.2 2.2 -1…
(…
n…
E…
b…
p… 16… 17… 47… 55…
f…
i…
t…
P…
f… 40… 39… 11… 13…
i…
t…
N… $ 12… $ 13… $ 36… $ 42…
e…
D…
e…
p…
s… $ 0.… $ 0.… $ 2.… $ 2.…
of
c…
s…
A…
c…
s… 13… 14… 13… 14…
o…
(…
o…
(1) Earnings per share amounts are calculated discretely and, therefore, may not
add up to the total due to rounding.
A. O. SMITH CORPORATION
Condensed Consolidated Balance Sheet
(dollars in millions)
(Unaudited)
September 30, December 31,
2026 2025
──────────────────────────────────────────────────────────────────────────────
ASSETS:
Cash and
cash $ 234.5 $ 174.5
equivalents
Marketable — 18.7
securities
Receivables 612.9 582.3
Inventories 509.3 479.3
Other
current 54.3 36.7
assets
Total
Current 1,411.0 1,291.5
Assets
Net
property, 614.5 635.1
plant and
equipment
Goodwill
and other 1,496.2 1,072.9
intangibles
Operating
lease 51.3 46.3
assets
Other 82.0 97.0
assets
Total $ 3,655.0 $ 3,142.8
Assets
LIABILITIES
AND
STOCKHOLDE…
EQUITY:
Trade $ 516.6 $ 504.1
payables
Accrued
payroll and 79.6 93.6
benefits
Accrued 153.6 147.5
liabilities
Product 71.2 75.0
warranties
Debt due
within one 41.0 42.3
year
Total
Current 862.0 862.5
Liabilities
Long-term 632.1 112.7
debt
Pension 7.5 7.4
liabilities
Operating
lease 41.7 37.1
liabilities
Other 288.6 265.1
liabilities
Stockholde… 1,823.1 1,858.0
equity
Total
Liabilities
and $ 3,655.0 $ 3,142.8
Stockholde…
Equity
A. O. SMITH CORPORATION
Condensed Consolidated Statement of Cash Flows
(dollars in millions)
(unaudited)
Nine Months Ended
Operating September 30,
Activities 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net earnings $ 369.2 $ 420.8
Adjustments to
reconcile net
earnings to
net cash provided
by (used in)
operating
activities:
Depreciation & 72.5 62.8
amortization
Share based
compensation 12.7 11.3
expense
Deferred income 26.0 9.7
taxes
Non cash 12.4 —
impairment
Net changes in
operating assets
and
liabilities:
Current assets -79.6 -83.6
and liabilities
Noncurrent assets 16.2 12.7
and liabilities
Cash Provided by
Operating 429.4 433.7
Activities
Investing
Activities
Capital -33.2 -53.2
expenditures
Acquisitions -469.5 —
Investment in
marketable — -42.7
securities
Net proceeds from
sale of 18.7 59.2
marketable
securities
Cash Used in
Investing -484.0 -36.7
Activities
Financing
Activities
Proceeds from 995.1 670.4
debt
Repayments of -473.9 -677.2
debt
Common stock -260.6 -335.4
repurchases
Net payments from
stock option 0.3 0.7
activity
Dividends paid -148.7 -145.1
Cash Provided by
(Used in) 112.2 -486.6
Financing
Activities
Effect of
exchange rate
changes on cash 2.4 2.7
and cash
equivalents
Net increase
(decrease) in 60.0 -86.9
cash and cash
equivalents
Cash and cash
equivalents - 174.5 239.6
beginning of
period
Cash and Cash
Equivalents - End $ 234.5 $ 152.7
of
Period
A. O. SMITH CORPORATION
Business Segments
(dollars in millions)
(unaudited)
Th… N…
Mo… M…
En… E…
Se… S…
N… 30, 3…
s… 20… 20… 2… 2…
──────────────────────────────────────────────────────────────────────────────
N… $ 76… $ 74… $ 2,… $ 2,…
A…
R…
of 19… 20… 58… 67…
W…
I… -1… -8… -3… -2…
s…
$ 94… $ 94… $ 2,… $ 2,…
E…
N… $ 17… $ 17… $ 53… $ 56…
A…
R…
of 10… 15… 33… 60…
W…
I…
e… — — — -0…
e…
19… 19… 56… 62…
C… -1… -1… -6… -5…
e…
I… -7… -3… -2… -1…
e…
E…
b… 16… 17… 47… 55…
i…
t…
P…
f… 40… 39… 11… 13…
i…
t…
N… $ 12… $ 13… $ 36… $ 42…
e…
A…
I…
(…
N…
A…
i…
r…
a… $ — $ — $ 22… $ —
i…
o…
Non-GAAP Financial Measures
We are providing the following non-U.S. Generally Accepted Accounting Principles
(GAAP) measures. Reconciliations from GAAP measures to non-GAAP measures are
provided in the section below. We believe that these measures provide useful
information to investors about our performance and allow management and our
investors to better understand our performance between periods without regard to
items that we do not consider to be a component of our core operating
performance or recurring in nature.
A. O. SMITH CORPORATION
Adjusted Earnings and Adjusted Earnings Per Share
(dollars in millions, except per share data)
(unaudited)
The following is a reconciliation of net earnings and diluted earnings per share
to adjusted earnings (non-GAAP) and adjusted earnings per share (non-GAAP):
Three Nine
Mont… Months
Ended Ended
Sept… Septe…
30, 30,
2026 2025 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net
Earn… $ 126.3 $ 132.0 $ 369.2 $ 420.8
(GAA…
Rest…
and
impa… — — 22.6 —
expe…
befo…
tax
Tax
effe…
on — — -5.5 —
above
items
Adju…
Earn… $ 126.3 $ 132.0 $ 386.3 $ 420.8
(non…
Dilu…
Earn…
Per $ 0.93 $ 0.94 $ 2.68 $ 2.95
Share
(GAA…
Rest…
and
impa…
expe…
per — — 0.16 —
dilu…
shar…
befo…
tax
Tax
effe…
on
above — — -0.04 —
items
per
dilu…
share
Adju…
Earn…
Per $ 0.93 $ 0.94 $ 2.80 $ 2.95
Share
(non…
(1) Earnings per share amounts are calculated discretely and, therefore, may not
add up to the total due to rounding.
A. O. SMITH CORPORATION
Sales Growth (Decline)
(unaudited)
The following table provides the components of net sales growth (decline):
Three Months
Ended
September 30,
2026
──────────────────────────────────────────────────────────────────────────────
North America Rest of World Total
Sales Growth 3 % -7 % — %
(Decline)
Acquisition 2 % — 2 %
Impact(1)
Foreign
Exchange — % 2 % — %
Impact
Organic Sales
Growth 1 % -9 % -2 %
(Decline)
(non-GAAP)
Nine Months
Ended
September 30,
2026
──────────────────────────────────────────────────────────────────────────────
North America Rest of World Total
Sales Growth 3 % -13 % -1 %
(Decline)
Acquisition 2 % — 2 %
Impact(1)
Foreign
Exchange — % 3 % — %
Impact
Organic
Sales Growth 1 % -16 % -3 %
(Decline)
(non-GAAP)
(1) The acquisition effect includes the sales impact of the Leonard Valve
acquisition in 2026.
A. O. SMITH CORPORATION
Total Segment Earnings, Adjusted Segment Earnings, and Adjusted Segment Margin
(dollars in millions)
(unaudited)
The following is a reconciliation of reported earnings before provision for
income taxes to total segment earnings (non-GAAP), adjusted segment earnings
(non-GAAP), and adjusted segment margin (non-GAAP):
Thr… Nine
Mon… Mon…
End… End…
Sep… Sep…
30, 30,
2026 2025 2026 2025
──────────────────────────────────────────────────────────────────────────────
Ea…
Be…
Pr…
for $ 166… $ 17… $ 47… $ 55…
In…
Ta…
(G…
Ad…
Co… 16.0 19… 63… 57…
ex…
Ad…
In… 7.7 3.6 22… 11…
ex…
To…
Se… $ 190… $ 19… $ 56… $ 62…
Ea…
(n…
No… $ 179… $ 17… $ 53… $ 56…
Am…
Re…
of 10.5 15… 33… 60…
Wo…
In…
ea… — — — -0…
el…
To…
Se… $ 190… $ 19… $ 56… $ 62…
Ea…
(n…
Ad…
In…
(1…
Am… $ 179… $ 17… $ 53… $ 56…
Se…
Ea…
Re…
and
im… — — 22… —
ex…
be…
tax
Ad…
No…
Am… $ 179… $ 17… $ 55… $ 56…
Se…
Ea…
(n…
Net
Sa… $ 761… $ 74… $ 2,… $ 2,…
No…
Am…
Ad…
No…
Am… 23.6 % 24… % 23… % 24… %
Se…
Ma…
(n…
A. O. SMITH CORPORATION
Free Cash Flow
(dollars in millions)
(unaudited)
The following is a reconciliation of reported cash flow from operating
activities to free cash flow (non-GAAP):
Nine Months Ended
September 30,
2026 2025
──────────────────────────────────────────────────────────────────────────────
Cash provided by
operating $ 429.4 $ 433.7
activities
(GAAP)
Less: Capital -33.2 -53.2
expenditures
Free cash flow $ 396.2 $ 380.5
(non-GAAP)
A. O. SMITH CORPORATION
2026 Year to Date and Full Year 2025 Net Sales
(dollars in millions)
(unaudited)
The following is a reconciliation of 2025 GAAP net sales to 2025 net sales
excluding the results of the China business (non-GAAP):
Nine Months
Ended September Year Ended,
30, December 31,
2026 2025
──────────────────────────────────────────────────────────────────────────────
Net Sales $ 2,890.4 $ 3,830.2
(GAAP)
China business
impact (net of
inter-segment
sales of $20.0 -434.6 -674.9
and $14.6
million in 2026
and 2025
respectively)
Net Sales
excluding the
results of $ 2,455.8 $ 3,155.3
China
business
(non-GAAP)
A. O. SMITH CORPORATION
2026 Year to Date and Full Year 2025 EPS
(unaudited)
The following is a reconciliation of diluted EPS to adjusted diluted EPS
excluding the results of the China business (non-GAAP) (all items are net of
tax):
Nine Months Ended Year Ended
September 30, December 31,
2026 2025
──────────────────────────────────────────────────────────────────────────────
Diluted EPS $ 2.68 $ 3.85
(GAAP)
Restructuring
and impairment
expenses, 0.12 —
per diluted
share, net of
tax
Adjusted EPS 2.80 3.85
(non-GAAP)
China business
impact, per
diluted -0.20 -0.43
share, net of
tax
Adjusted EPS
excluding the
results of $ 2.60 $ 3.42
China business
(non-GAAP)
A. O. SMITH CORPORATION
Full Year 2025 Net sales and Earnings before interest and taxes (EBIT) and EBIT
margin
(dollars in millions)
(unaudited)
The following is a reconciliation of 2025 GAAP net sales to 2025 net sales
excluding the results of the China business (non-GAAP) and 2025 net earnings
(GAAP) to 2025 EBIT margin (non-GAAP) and 2025 EBIT margin excluding the results
of China business (non-GAAP):
2025
──────────────────────────────────────────────────────────────────
Net Sales (GAAP) $ 3,830.2
China business impact (net of -674.9
inter-segment sales of $14.6 million)
Net Sales excluding the results of China $ 3,155.3
business (non-GAAP)
Net Earnings (GAAP) $ 546.2
Provision for income taxes 168.9
Interest expense 13.5
EBIT (non-GAAP) $ 728.6
EBIT Margin % (non-GAAP) 19%
Net Earnings impact from China business -60.4
EBIT excluding the results of China $ 668.2
business (non-GAAP)
EBIT Margin % excluding the results of 21%
China business (non-GAAP)