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 options or share units at December 31, 2024, was 2,291,099 which includes 2,400,000 additional shares that were authorized on April 15, 2020 at the Company's annual meeting of stockholders. Upon stock option exercise or share unit vesting, shares are issued from treasury stock. Total stock based compensation expense recognized in 2024, 2023 and 2022 was $14.9 million, $11.5 million and $11.1 million, respectively.

Beginning in 2023, the Company no longer grants stock options. The stock options previously granted in 2022 have 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 in 2022 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 recognized in 2022 is 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 expense attributable to stock options for 2024, 2023 and 2022 was $0.6 million, $1.2 million and $5.5 million, respectively.


Years Ended December 31	2024			2023			2022
	Number of Options	Weighted Avg. Per Share Exercise Price		Number of Options	Weighted Avg. Per Share Exercise Price		Number of Options	Weighted Avg. Per Share Exercise Price
Number of shares under options:
Outstanding at beginning of year	1,872,553	$	52.93	2,481,606	$	51.22	2,252,498	$	47.73
Granted	—	—		—	—		322,460	74.11
Exercised(1)	(473,452)	46.46		(600,344)	45.68		(66,697)	39.77
Forfeited	(3,260)	74.27		(8,709)	66.96		(26,655)	61.46
Outstanding at end of year(2)	1,395,841	55.07		1,872,553	52.93		2,481,606	51.22
Exercisable at end of year(3)	1,295,061	53.59		1,549,749	49.51		1,675,552	46.88

(2)The weighted average remaining contractual life of options outstanding was 6 years at December 31, 2024, and 7 years at December 31, 2023 and December 31, 2022, respectively. The aggregate intrinsic value of options outstanding at December 31, 2024 was $20.0 million.

(3)The weighted average remaining contractual life of options exercisable was 6 years at December 31, 2024, December 31, 2023, and December 31, 2022, respectively. The aggregate intrinsic value of options exercisable at December 31, 2024 was $20.0 million.


	Number of Options	Weighted Avg. Per Share Exercise Price
Nonvested options at beginning of year	322,804	$	69.33
Vested	(219,931)	67.09
Forfeited	(2,093)	74.27
Nonvested options at end of year	100,780	74.10

The expected lives of options for purposes of these models are based on historical exercise behavior. The risk-free interest rates for purposes of these models are based on the U.S. Treasury yield in effect on the date of grant for the respective expected lives of the option. The expected dividend yields for purposes of these models are based on the dividends paid in the preceding four quarters divided by the grant date market value of the Common Stock. The expected volatility for purposes of these models is based on the historical volatility of the Common Stock.

Participants in the Incentive Plan may also be awarded share units. Share units vest three years after the date of grant. The Company granted 195,497, 168,807 and 94,731 share units under the Incentive Plan in 2024, 2023 and 2022, respectively.

The share units were valued at $16.1 million, $11.3 million and $7.0 million at the date of issuance in 2024, 2023 and 2022, 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 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 $12.5 million, $9.6 million and $5.6 million was recognized in 2024, 2023 and 2022, 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, 2024	381,189	$	63.33
Granted	195,497	82.31
Vested	(98,216)	60.32
Forfeited	(9,201)	73.49
Issued and unvested at December 31, 2024	469,269	71.50

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 percent 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 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 $1.8 million and $0.7 million was recognized in 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.


	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	(6,124)	75.48
Performance adjustments	16,289	80.76
Issued and unvested at December 31, 2024	74,398	75.40