Company: AOS
Filing Date: 2025-07-24
Form Type: 10-Q
Source: 0000091142-25-000100
Chunk: 27

Company: SMITH A O CORP
Filing Date: 2025-07-24
Form: 10-Q
Item: Part I, Item 8
Chunk 27
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 June 30, 2025 was 24.5 percent. The Company estimates that its annual effective income tax rate for the full year 2025 will be approximately between 24.0 and 24.5 percent. The effective income tax rate for the three and six months ended June 30, 2024 was 24.4 percent and 23.9 percent, respectively. The change in the effective income tax rate for the three and six months ended June 30, 2025 compared to the effective income tax rate for the three and six months ended June 30, 2024 was primarily due to the geographical earnings mix.As of June 30, 2025, the Company had $16.2 million of unrecognized tax benefits of which $4.3 million would affect its effective income tax rate if recognized. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company’s U.S. federal income tax returns and its U.S. state and local income tax returns are subject to audit for the years 2018-2025 and 2006-2025, respectively. The Company is subject to examinations in foreign tax jurisdictions for the years 2019-2025.

17

13. Commitments and Contingencies

The Company maintains a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offers order-entry, warehousing and logistics support. The Provider also offers asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider has collateralized lending facilities in place with multiple Chinese banks under which the Company has agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes.

The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of the product plus costs incurred in the process, less related distributor rebates. The Company’s reserves for estimated losses under these repurchase arrangements were immaterial as of June 30, 2025 and December 31, 2024. 

14. Changes in Accumulated Other Comprehensive Loss by Component

Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions