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Stock Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock Based Compensation | Stock 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 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 units at September 30, 2024 was 2,289,392. 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 September 30, 2024 and 2023 was $2.3 million and $1.5 million, respectively. Total stock based compensation expense recognized in the nine months ended September 30, 2024 and 2023 was $12.7 million and $10.1 million, respectively. Stock Options Beginning in 2023, the Company no longer grants stock options. Stock options previously granted have a three year pro-rata vesting from the date of grant. Stock options were 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 expire ten years after the date of grant. The Company’s stock options are expensed ratably over the three year vesting period. Stock based compensation expense attributable to stock options in the three months ended September 30, 2024 and 2023 was $0.2 million and $0.3 million, respectively. Stock based compensation expense attributable to stock options in the nine months ended September 30, 2024 and 2023 was $0.5 million and $0.9 million, respectively. Changes in options, all of which relate to the Company’s Common Stock, were as follows for the nine months ended September 30, 2024:
| Weighted- Avg. Per Share Exercise Price |  | Number of Options |  | Average Remaining Contractual Life |  | Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2024 | $ | 52.93 |  |  | 1,872,553 |  |  |  |  |
Exercised | 46.48 |  |  | (455,409) |  |  |  |  |
Forfeited | 74.27 |  |  | (3,260) |  |  |  |  |
Outstanding at September 30, 2024 | 54.96 |  |  | 1,413,884 |  |  | 6 years |  | $ | 49.3 |
Exercisable at September 30, 2024 | 53.49 |  |  | 1,313,104 |  |  | 6 years |  | $ | 47.7 |
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 195,363 and 168,688 share units under the Incentive Plan in the nine months ended September 30, 2024 and 2023, respectively. The share units were valued at $16.1 million and $11.3 million at the date of issuance in 2024 and 2023, 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 and nine months ended September 30, 2024 and 2023 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 $1.7 million and $1.1 million was recognized in the three months ended September 30, 2024 and 2023, respectively. Stock based compensation expense attributable to share units of $10.9 million and $8.7 million was recognized in the nine months ended September 30, 2024 and 2023, 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 nine months ended September 30, 2024:
| Number of Units |  | Weighted-Average Grant Date Value
Issued and unvested at January 1, 2024 | 381,189 |  |  | $ | 63.33 |
Granted | 195,363 |  |  | 82.03 |
Vested | (96,337) |  |  | 61.22 |
Forfeited | (9,011) |  |  | 73.20 |
Issued and unvested at September 30, 2024 | 471,204 |  |  | 71.29 |
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 date of the grant. Performance stock units vest under a set of measurement criteria which are based upon achievement of certain Environmental, Social, and Governance 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 29,475 and 24,580 performance stock units under the Incentive Plan in the nine months ended September 30, 2024 and 2023, respectively. The performance stock units were valued at $2.4 million and $1.7 million at the date of issuance in 2024 and 2023, 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 $0.4 million and $0.2 million was recognized in the three months ended September 30, 2024 and 2023, respectively. Stock based compensation expense attributable to performance stock units of $1.3 million and $0.5 million was recognized in the nine months ended September 30, 2024 and 2023, 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 nine months ended September 30, 2024:
| Number of Units |  | Weighted-Average Grant Date Value
Issued and unvested at January 1, 2024 | 34,758 |  |  | $ | 67.14 |
Granted | 29,475 |  |  | 82.19 |
Forfeited | (3,426) |  |  | 75.33 |
Performance adjustments | 16,289 |  |  | 80.76 |
Issued and unvested at September 30, 2024 | 77,096 |  |  | 75.41 |

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