aos-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-475

________________________________

A. O. Smith Corporation

(Exact name of registrant as specified in its charter)

________________________________

Delaware

(State of Incorporation)

11270 West Park Place, Milwaukee, Wisconsin

(Address of Principal Executive Office)

39-0619790

(I.R.S. Employer

Identification No.)

53224-9508

(Zip Code)

(414) 359-4000

(Registrant’s telephone number, including area code)

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading
Symbol

Name of Each Exchange
on Which Registered

Common Stock (par value $1.00 per share)

AOS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) ☐ Yes ☒ No

Class A Common Stock Outstanding as of April 28, 2022 - 25,971,005 shares

Common Stock Outstanding as of April 28, 2022 - 130,035,911 shares

Index

A. O. Smith Corporation


		Page
Part I.	FINANCIAL INFORMATION

	Condensed Consolidated Statements of Earnings - Three Months Ended March 31, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Earnings - Three Months Ended March 31, 2022 and 2021	3

	Condensed Consolidated Balance Sheets - March 31, 2022 and December 31, 2021	4

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity - Three Months Ended March 31, 2022 and 2021	6

	Notes to Condensed Consolidated Financial Statements - March 31, 2022	7-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25-26

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26-27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6.	Exhibits	27

Index to Exhibits		28

Signatures		29

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions, except for per share data)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Net sales	$	977.7	$	769.0
Cost of products sold	636.1		480.4
Gross profit	341.6		288.6
Selling, general and administrative expenses	179.8		166.5

Interest expense	1.5		1.0
Other expense (income), net	3.7		(5.0)
Earnings before provision for income taxes	156.6		126.1
Provision for income taxes	36.8		28.4
Net Earnings	$	119.8	$	97.7
Net Earnings Per Share of Common Stock	$	0.76	$	0.60
Diluted Net Earnings Per Share of Common Stock	$	0.76	$	0.60
Dividends Per Share of Common Stock	$	0.28	$	0.26

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(dollars in millions)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Net earnings	$	119.8	$	97.7
Other comprehensive earnings (loss)
Foreign currency translation adjustments	0.6		(1.4)
Unrealized losses on cash flow derivative instruments, less related income tax benefit of $0.2 in 2022, $0.7 and in 2021	(0.6)		(2.0)
Adjustment to pension liability, less related income tax provision of ($1.2) in 2022 and ($1.3) in 2021	3.8		3.8
Comprehensive Earnings	$	123.6	$	98.1

See accompanying notes to unaudited condensed consolidated financial statements.

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A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)


	(unaudited) March 31, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	405.8	$	443.3
Marketable securities	173.6		188.1
Receivables	608.3		634.4
Inventories	488.7		447.7
Other current assets	45.0		39.1
Total Current Assets	1,721.4		1,752.6
Property, plant and equipment	1,354.1		1,343.2
Less accumulated depreciation	(751.3)		(736.5)
Net property, plant and equipment	602.8		606.7
Goodwill	628.8		627.8
Other intangibles	360.4		364.8
Operating lease assets	33.9		32.5
Other assets	87.6		90.0
Total Assets	$	3,434.9	$	3,474.4
Liabilities
Current Liabilities
Trade payables	$	658.7	$	745.9
Accrued payroll and benefits	61.4		113.4
Accrued liabilities	207.0		181.8
Product warranties	68.2		70.9
Debt due within one year	6.8		6.8
Total Current Liabilities	1,002.1		1,118.8
Long-term debt	288.6		189.9
Product warranties	114.7		113.5
Long-term operating lease liabilities	24.6		22.3
Other liabilities	196.0		197.7
Total Liabilities	1,626.0		1,642.2
Stockholders’ Equity
Class A Common Stock, $5 par value: authorized 27,000,000 shares; issued, 26,103,785 and 26,104,441	130.5		130.5
Common Stock, $1 par value: authorized 240,000,000 shares; issued 164,603,809 and 164,603,153	164.7		164.7
Capital in excess of par value	550.9		545.2
Retained earnings	2,902.2		2,826.6
Accumulated other comprehensive loss	(327.6)		(331.4)
Treasury stock at cost	(1,611.8)		(1,503.4)
Total Stockholders’ Equity	1,808.9		1,832.2
Total Liabilities and Stockholders’ Equity	$	3,434.9	$	3,474.4

See accompanying notes to unaudited condensed consolidated financial statements.

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A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Operating Activities
Net earnings	$	119.8	$	97.7
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	20.3		19.5
Stock based compensation expense	7.6		7.4
Net changes in operating assets and liabilities:
Current assets and liabilities	(137.8)		(13.2)
Noncurrent assets and liabilities	6.6		(7.0)
Cash Provided by Operating Activities	16.5		104.4
Investing Activities
Capital expenditures	(12.9)		(17.1)

Investments in marketable securities	(16.9)		(24.4)
Net proceeds from sale of marketable securities	31.9		54.0
Cash Provided by Investing Activities	2.1		12.5
Financing Activities
Long-term debt incurred (repaid)	98.7		(6.8)
Common stock repurchases	(107.9)		(67.0)

Net (payments) proceeds from stock option activity	(2.7)		4.5
Dividends paid	(44.2)		(42.2)
Cash Used in Financing Activities	(56.1)		(111.5)
Net (decrease) increase in cash and cash equivalents	(37.5)		5.4
Cash and cash equivalents - beginning of period	443.3		573.1
Cash and Cash Equivalents - End of Period	$	405.8	$	578.5

See accompanying notes to unaudited condensed consolidated financial statements.

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A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in millions)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Class A Common Stock
Balance at the beginning of period	$	130.5	$	130.8
Conversion of Class A Common Stock	—		(0.2)
Balance at end of period	$	130.5	$	130.6
Common Stock
Balance at the beginning of period	$	164.7	$	164.6
Conversion of Class A Common Stock	—		$	0.1
Balance at end of period	$	164.7	$	164.7
Capital in Excess of Par Value
Balance at the beginning of period	$	545.2	$	520.4
Conversion of Class A Common Stock	—		0.2
Issuance of share units	(5.8)		(5.3)
Vesting of share units	(2.4)		(1.7)
Stock based compensation expense	7.7		7.2
Exercises of stock options	0.4		2.6
Stock incentives	5.8		5.3
Balance at end of period	$	550.9	$	528.7
Retained Earnings
Balance at the beginning of period	$	2,826.6	$	2,509.6
Net earnings	119.8		97.7
Cash dividends on stock	(44.2)		(42.2)
Balance at end of period	$	2,902.2	$	2,565.1
Accumulated Other Comprehensive Loss (see Note 16)	$	(327.6)	$	(320.8)
Treasury Stock
Balance at the beginning of period	$	(1,503.4)	$	(1,155.9)
Exercise of stock options	(2.9)		1.9

Shares repurchased	(107.9)		(67.0)
Vesting of share units	2.4		1.7
Balance at end of period	$	(1,611.8)	$	(1,219.3)
Total Stockholders’ Equity	$	1,808.9	$	1,849.0

See accompanying notes to unaudited condensed consolidated financial statements.

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A. O. SMITH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year. It is suggested the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 11, 2022.

Recent Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (FASB) amended ASC 832, Government Assistance (issued under Accounting Standards Update (ASU) 2021-10, "Disclosures by Business Entities about Government Assistance"). This amendment requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company adopted the amendment on January 1, 2022, and the adoption of ASU 2021-10 is not expected to materially impact its annual disclosures, consolidated balance sheets, statements of earnings or statements of cash flows.

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 $118.2 million and $155.2 million at March 31, 2022 and December 31, 2021, respectively. Customer deposit liabilities are short term in nature and deposits are 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 doubtful accounts, 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 doubtful accounts was $10.1 million at March 31, 2022 and $9.5 million at December 31, 2021.

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.

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2. Revenue Recognition (continued)

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, Europe and India. 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.

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 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 and motels, 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 more than 1,100 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 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 and 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 heater products and related parts. The Company’s water treatment products are also sold through independent water quality dealers as well as directly to consumers including through internet 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:


(dollars in millions)	Three Months Ended March 31,
	2022		2021
North America
Water heaters and related parts	$	615.8	$	457.7
Boilers and related parts	57.5		46.5
Water treatment products	56.8		48.7
Total North America	730.1		552.9
Rest of World
China	$	228.3	$	199.2
All other Rest of World	27.7		23.1
Total Rest of World	256.0		222.3
Inter-segment sales	(8.4)		(6.2)
Total Net Sales	$	977.7	$	769.0

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3. Acquisition

On October 19, 2021, the Company acquired 100 percent of the shares and related assets of Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters. The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities. Giant is included in the North America segment. The Company paid an aggregate cash purchase price of $198.6 million net of cash acquired. In addition, the Company incurred acquisition costs of approximately $1.3 million. Under the purchase agreement for the Giant acquisition, an escrow of approximately $8 million was set aside from the purchase price to satisfy any potential obligations of the former owners of Giant, should they arise. The cash purchase price is preliminary and subject to customary adjustments. The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date.

The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $53.8 million of acquired identifiable intangible assets, $43.9 million has been assigned to trademarks that are not subject to amortization and $9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $0.7 million has been assigned to non-compete agreements which are amortized over five years. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.


October 19, 2021 (dollars in millions)
Current assets, net of cash acquired	$	60.1
Property, plant and equipment	55.8
Intangible assets	53.8
Goodwill	77.6
Total assets acquired	247.3
Current liabilities	(39.2)
Long Term liabilities	(9.5)
Net assets acquired	$	198.6

As required under ASC 805 Business Combinations, Giant's results of operations have been included in the Company’s consolidated financial statements from October 19, 2021, 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 condensed 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 material residual value guarantees or material restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the condensed consolidated statement of earnings.

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4. Leases (continued)

Supplemental balance sheet information related to leases is as follows:


(dollars in millions)	March 31, 2022		December 31, 2021
Liabilities
Short term: Accrued liabilities	$	10.8	$	11.7
Long term: Operating lease liabilities	24.6		22.3
Total operating lease liabilities	$	35.4	$	34.0
Less: Rent incentives and deferrals	(1.5)		(1.5)
Assets
Operating lease assets	$	33.9	$	32.5


Lease Term and Discount Rate						March 31, 2022
Weighted-average remaining lease term						6.7 years
Weighted-average discount rate						2.82%

The components of lease expense were as follows:


(dollars in millions)		Three months ended March 31,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	1.0	$	1.0
	Selling, general and administrative expenses	3.9		4.0

(1)2022 includes short-term and variable lease expenses of $0.5 million and $0.8 million, respectively.

(2)2021 includes short-term and variable lease expenses of $0.5 million and $0.6 million, respectively.

Maturities of lease liabilities were as follows:


(dollars in millions)	March 31, 2022
2022	$	9.2
2023	7.8
2024	6.4
2025	4.4
2026	2.8
After 2026	9.4
Total lease payments	40.0
Less: Imputed interest	(4.6)
Present value of operating lease liabilities	$	35.4

5. Inventories

The following table presents the components of the Company’s inventory balances:


(dollars in millions)	March 31, 2022		December 31, 2021
Finished products	$	199.2	$	190.2
Work in process	51.4		42.0
Raw materials	315.3		286.3
Inventories, at FIFO cost	565.9		518.5
LIFO reserve	(77.2)		(70.8)
	$	488.7	$	447.7

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6. Product Warranties

The Company offers warranties on the sales of certain of its products with terms that are consistent with the market and records an accrual for the estimated future claims. The increase in our reserve for product warranties as of the first quarter ended 2022 compared to the prior year period was primarily due to increased steel prices and the acquisition of Giant. Refer to Note 3, "Acquisition", for additional information regarding the acquisition of Giant.

The following table presents the Company’s warranty liability activity:


(dollars in millions)	Three Months Ended March 31,
	2022		2021
Balance at January 1,	$	184.4	$	142.3
Expense	13.9		12.6
Claims settled	(15.4)		(13.3)
Balance at March 31,	$	182.9	$	141.6

7. Debt

In 2021, the Company renewed and amended its $500 million multi-year multi-currency revolving credit agreement with a new expiration date of April 1, 2026. The facility has an accordion provision that allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied. Borrowings under bank credit lines and commercial paper borrowings are supported by a $500 million revolving credit agreement. As a result of the long-term nature of this facility, the Company’s commercial paper and credit line borrowings are classified as long-term debt at March 31, 2022. At its option, the Company either maintains cash balances or pays fees for bank credit and services. The facility requires the Company to maintain two financial covenants, a leverage ratio test and an interest coverage test. The Company was in compliance with the covenants as of March 31, 2022.

8. Earnings per Share of Common Stock

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:


	Three Months Ended March 31,
	2022	2021
Denominator for basic earnings per share - weighted average shares	157,018,566	161,526,733
Effect of dilutive stock options and share units	1,299,133	1,258,590
Denominator for diluted earnings per share	158,317,699	162,785,323

9. Stock Based Compensation

The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Incentive Plan) effective January 1, 2007. 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 March 31, 2022 was 7,117,740. Upon stock option exercise or share unit vesting, shares are issued from treasury stock. Total stock based compensation expense recognized in the three months ended March 31, 2022 and 2021 was $7.6 million and $7.4 million, respectively.

Stock Options

The stock options granted in the three months ended March 31, 2022 and 2021 have three year pro rata vesting from the date of grant. Stock options are issued at exercise prices equal to the fair value of the Company’s Common Stock on the date of grant. For active employees, all options granted in 2022 and 2021 expire ten years after the date of grant. The Company’s stock options are expensed ratably over the three year vesting period; however, included in the stock option expense for the three months ended March 31, 2022 and 2021 was expense associated with the accelerated vesting of stock option awards for certain employees who either are retirement eligible or become retirement eligible during the vesting period. Stock based compensation

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9. Stock Based Compensation (continued)

expense attributable to stock options in the three months ended March 31, 2022 and 2021 was $3.9 million and $3.6 million, respectively.

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2022:


	Weighted- Avg. Per Share Exercise Price		Number of Options	Average Remaining Contractual Life	Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2022	$	47.73	2,252,498
Granted	74.23		318,520
Exercised	37.22		(19,532)
Forfeited	59.09		(8,269)
Outstanding at March 31, 2022	51.09		2,543,217	7 years	$	35.8
Exercisable at March 31, 2022	46.75		1,719,597	6 years	$	29.5

The weighted-average fair value per option at the date of grant during the three months ended March 31, 2022 and 2021 using the Black-Scholes option-pricing model was $17.59 and $14.01, respectively.

SEC Form 10-Q filed by A.O. Smith Corporation