What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 232 added, 113 removed, 641 unchanged (35% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Assets (in thousands, except share and per share data)

25 unchanged sentences

Accounts payable 19,698 11,759

Dividends payable 9,930 —

Accrued liabilities 46,992 44,269

6 unchanged sentences

Preferred stock, $ .001 par value, 5,000,000 shares authorized, no shares issued

Common stock, $ .004 par value, 100,000,000 shares authorized, 52,044,110 and 52,078,515 issued and outstanding at March 31, 2020 and December 31, 2019, respectively

Common stock, $ .004 par value, 100,000,000 shares authorized, 52,234,119 and 52,078,515 issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 6,451 3,631

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

(in thousands, except share and per share data)

3 unchanged sentences

Selling, general and administrative expenses 15,939 12,912 31,153 26,589

(Gain) loss on disposal of assets ( 62 ) 284

Loss (gain) on disposal of assets — 6 ( 62 ) 290

Income from operations 22,192 17,286 49,987 28,755

Interest income, net 19 31 80 40

Other (expense) income, net ( 27 ) ( 26 )

Other income (expense), net 32 17 5 ( 9 )

Income before taxes 22,243 17,334 50,072 28,786

4 unchanged sentences

Diluted $ 0.34 $ 0.25 $ 0.75 $ 0.42

Cash dividends declared per common share:

$ 0.19 $ 0.16 $ 0.19 $ 0.16

Weighted average shares outstanding:

4 unchanged sentences

Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Common Stock Paid-in Retained

7 unchanged sentences

Stock repurchased and retired ( 335 ) ( 1 ) ( 17,045 ) — ( 17,046 )

Dividends — — — ( 9,923 ) ( 9,923 )

Balances at June 30, 2020 52,234 $ 209 $ 6,451 $ 316,035 $ 322,695

Three Months Ended June 30, 2020

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

(in thousands)

Balances at March 31, 2020 52,044 $ 208 $ — $ 306,115 $ 306,323

Three Months Ended March 31, 2019

Net income — — — 17,804 17,804

Stock options exercised and restricted 278 1 9,675 — 9,676

stock awards granted

Share-based compensation — — 3,343 — 3,343

Stock repurchased and retired ( 88 ) — ( 6,567 ) 2,039 ( 4,528 )

Dividends — — — ( 9,923 ) ( 9,923 )

Balances at June 30, 2020 52,234 $ 209 $ 6,451 $ 316,035 $ 322,695

Six Months Ended June 30, 2019

Common Stock Paid-in Retained

1 unchanged sentence

(in thousands)

Balance at December 31, 2018 51,991 $ 208 $ — $ 249,235 249,443

Balances at December 31, 2018 51,991 $ 208 $ — $ 249,235 249,443

Net income — — — 22,148 22,148

3 unchanged sentences

Stock repurchased and retired ( 257 ) ( 1 ) ( 11,170 ) — ( 11,171 )

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

Three Months Ended June 30, 2019

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

(in thousands)

Balances at March 31, 2019 52,099 $ 208 $ 4,346 $ 257,992 $ 262,546

Net income — — — 13,391 13,391

Stock options exercised and restricted 147 1 3,674 — 3,675

stock awards granted

Share-based compensation — — 2,379 — 2,379

Stock repurchased and retired ( 128 ) — ( 6,100 ) — ( 6,100 )

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

Operating Activities (in thousands)

22 unchanged sentences

Proceeds from sale of property, plant and equipment 61 59

Investment in certificates of deposits — ( 6,000 )

Maturities of certificates of deposits — 2,000

Principal payments from note receivable 25 28

33 unchanged sentences

Actual results could differ materially from those estimates.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.

Our manufacturing operations are considered a critical infrastructure industry, as defined by the U.S.

Department of Homeland Security, as such, the decrees issued by national, state, and local governments in response to the COVID-19 pandemic have had minimal impact on our operations except for higher employee absenteeism in our manufacturing facilities.

We had continuous operations during the six months ended June 30, 2020.

For the most part, our workers are able to socially distance themselves during the manufacturing process.

Additional precautions have been taken to social distance workers that work in close environments.

The Company utilizes sanitation stations, requires the use of a facial covering, performs daily temperature scanning, and performs additional cleaning and sanitation throughout the day and deep cleaning overnight.

The Company did see significant employee absenteeism in the latter part of June.

These unexpected employee absences resulted in reduced shipments and longer lead times.

The magnitude of the impact of COVID-19 remains unpredictable and we, therefore, continue to anticipate potential supply chain disruptions, employee absenteeism and additional health and safety costs related to the COVID-19 pandemic that could unfavorably impact our business.

Although these disruptions and costs are expected to be temporary, there is significant uncertainty around the duration and overall impact to our business operations.

We believe it is possible that the impact of the COVID-19 pandemic could have a material adverse effect on the results of our operations, financial position and cash flows as of and for the year ended December 31, 2020.

However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations and cash flows.

Accounting Policies

21 unchanged sentences

Goodwill represents the excess of the consideration paid for the acquired businesses, in our February 2018 business combination, over the fair value of the individual assets acquired, net of liabilities assumed.

Goodwill at March 31, 2020 is deductible for income tax purposes.

Goodwill at June 30, 2020 is deductible for income tax purposes.

Goodwill is not amortized, but instead is evaluated for impairment at least annually.

12 unchanged sentences

Disaggregated net sales by major source:

Three months ended

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

8 unchanged sentences

Disaggregated units sold by major source:

Three months ended

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Rooftop units 3,746 3,797 7,807 7,559

3 unchanged sentences

Water source heat pumps 1,645 2,377 3,262 4,666

The Company recognizes revenue when it satisfies the performance obligation in its contracts.

6,344 7,200 12,950 14,236

The Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts.

The primary performance obligation in our contract is delivery of the requested manufactured equipment.

Most of the Company’s products are highly customized, cannot be resold to other customers and the cost of rework to be resold is not economical.

5 unchanged sentences

Sales of our products are moderately seasonal with the peak period being July - November of each year.

In addition, the Company presents revenues net of sales tax and net of certain payments to our independent manufacturer representatives (“Representatives”).

Representatives are national companies that are in the business of providing HVAC units and other related products and services to customers.

We are responsible for billings and collections resulting from all sales transactions, including those initiated by our independent manufacturer representatives (“Representatives”).

Representatives are national companies that are in the business of providing

HVAC units and other related products and services to customers.

The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order.

These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”).

All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party.

Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order.

We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price that is negotiated by the Representative with the end user customer.

We are responsible for billings and collections resulting from all sales transactions, including those initiated by our Representatives.

The Representatives submit the total order price to us for invoicing and collection.

The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer.

These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”).

All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party.

The Company is under no obligation related to Third Party Products.

The Company is considered the principal for the equipment we design and manufacture and records that revenue gross.

The Company has no control over the Third Party Products to the end customer and the Company is under no obliagtion related to the Third Party Products.

Amounts related to Third Party Products are not recognized as revenue but are recorded as a liabilitiy and are included in accrued liabilities on the consolidated balance sheet.

The Representatives’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts associated with the order are collected from the customer.

The amount of payments to our Representatives were $ 12.6 million and $ 11.5 million for the three months ended March 31, 2020 and 2019, respectively.

The amount of payments to our Representatives were $ 14.9 million and $ 10.2 million for the three months ended June 30, 2020 and 2019, respectively.

The amount of payments to our Representatives were $ 27.5 million and $ 21.7 million for the six months ended June 30, 2020 and 2019, respectively.

The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years.

10 unchanged sentences

The standard did not materially impact our consolidated net earnings or cash flows.

As of March 31, 2020, our right of use assets and lease liabilities are approximately $ 1.6 million.

As of June 30, 2020, our right of use assets and lease liabilities are approximately $ 1.7 million.

Accounts Receivable

5 unchanged sentences

$ 56,394 $ 67,399

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Allowance for doubtful accounts:

1 unchanged sentence

Balance, beginning of period $ 647 $ 379 $ 353 $ 264

Provisions for losses on accounts receivables, net of adjustments 294 115

Provisions (recoveries) for losses on accounts ( 218 ) 13 76 128

receivables, net of adjustments

Balance, end of period $ 429 $ 392 $ 429 $ 392

11 unchanged sentences

$ 85,411 $ 73,601

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Allowance for excess and obsolete inventories:

1 unchanged sentence

Balance, beginning of period $ 2,365 $ 1,567 $ 2,644 $ 1,210

Provisions for excess and obsolete inventories ( 274 ) 357

Provisions (recoveries) for excess and 81 796 ( 193 ) 1,153

obsolete inventories

Inventories written off ( 73 ) ( 13 ) ( 78 ) ( 13 )

8 unchanged sentences

Amortization expense recorded in cost of sales is as follows:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

1 unchanged sentence

Supplemental Cash Flow Information

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Supplemental disclosures:

3 unchanged sentences

Non-cash capital expenditures $ 6,046 $ ( 1,232 ) $ 5,046 $ ( 164 )

Dividends declared 9,930 $ 8,355 $ 9,930 $ 8,355

The Company has product warranties with various terms ranging from one year from the date of first use or 18 months for parts to 25 years for certain heat exchangers.

2 unchanged sentences

Changes in the warranty accrual are as follows:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Warranty accrual:

19 unchanged sentences

Donations 604 354

Income tax payable 2,346 —

Employee vacation time 3,645 3,804

4 unchanged sentences

Under the line of credit, there is one standby letter of credit totaling $ 1.7 million.

Borrowings available under the revolving credit facility at March 31, 2020 were $ 28.3 million.

Borrowings available under the revolving credit facility at June 30, 2020 were $ 28.3 million.

Interest on borrowings is payable monthly at LIBOR plus 2.0 %.

No fees are associated with the unused portion of the committed amount.

We had no outstanding balance under the revolving credit facility at March 31, 2020 and December 31, 2019.

We had no outstanding balance under the revolving credit facility at June 30, 2020 and December 31, 2019.

The revolving credit facility expires on July 26, 2021.

As of March 31, 2020, we were in compliance with our financial covenants.

As of June 30, 2020, we were in compliance with our financial covenants.

These covenants require that we meet certain parameters related to our tangible net worth and total liabilities to tangible net worth ratio.

At March 31, 2020, our tangible net worth was $ 306.3 million and met the requirement of being at or above $ 175.0 million.

At June 30, 2020, our tangible net worth was $ 322.7 million and met the requirement of being at or above $ 175.0 million.

Our total liabilities to tangible net worth ratio was 0.3 to 1, and met the requirement of not being above 2 to 1.

The provision (benefit) for income taxes consists of the following:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

1 unchanged sentence

Deferred 5,228 2,409 5,061 3,318

$ 5,976 $ 2,695

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before the provision for income taxes.

Income tax provision $ 4,439 $ 3,943 $ 10,415 $ 6,638

The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate before the provision for income taxes.

The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

19 unchanged sentences

We don't expect these additional adjustments to materially impact the provision for income taxes and effective tax rate in the period in which the adjustments are made.

We expect the final accounting for the tax effects of the CARES Act to be completed by the second quarter in 2020.

We expect the final accounting for the tax effects of the CARES Act to be completed by the third quarter in 2020.

Share-Based Compensation

On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (“LTIP”) which provided an additional 3.3 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units and performance awards, in addition to the shares from the previous plan, the 1992 Plan.

Since inception of the LTIP, non-qualified stock options and restricted stock awards have been granted with a five years vesting schedule.

Since inception of the LTIP, non-qualified stock options and restricted stock awards have been granted with a five year vesting schedule.

Under the LTIP, the exercise price of shares granted could not be less than 100 % of the fair market value at the date of the grant.

On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan ("2016 Plan") which provides for approximately 6.4 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan, approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, and an additional 2.6 million shares that were approved by the stockholders on May 15, 2018.

On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan ("2016 Plan") which provides for approximately 8.9 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan, approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, approximately 2.6 million shares that were approved by the stockholders on May 15, 2018, and an additional 2.5 million shares that were approved by the stockholders on May 12, 2020.

Under the 2016 Plan, shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards.

4 unchanged sentences

The Committee will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the 2016 Plan, establish and revise rules and regulations relating to the 2016 Plan and make any other determinations that it believes necessary for the administration of the 2016 Plan.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of March 31, 2020 is $ 28.3 million and is expected to be recognized over a weighted average period of 3.6 years.

The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during the three months ended March 31, 2020 and 2019 using a Black Scholes-Merton Model:

Three months ended

March 31, 2020 March 31, 2019

The total pre-tax compensation cost related to unvested stock options not yet recognized as of June 30, 2020 is $ 26.5 million and is expected to be recognized over a weighted average period of 3.4 years.

The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during the six months ended June 30, 2020 and 2019 using a Black Scholes-Merton Model:

Six months ended

June 30, 2020 June 30, 2019

Directors and Officers:

11 unchanged sentences

Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.

The following is a summary of stock options vested and exercisable as of March 31, 2020:

The following is a summary of stock options vested and exercisable as of June 30, 2020:

Prices Number

1 unchanged sentence

Contractual Life

(in years) Weighted

Price Intrinsic

4 unchanged sentences

Total 859,166 6.51 $ 32.09 $ 19,077

The following is a summary of stock options vested and exercisable as of March 31, 2019:

The following is a summary of stock options vested and exercisable as of June 30, 2019:

Prices Number

1 unchanged sentence

Contractual Life

(in years) Weighted

Price Intrinsic

12 unchanged sentences

( 110,352 ) 40.49

Outstanding at March 31, 2020

Outstanding at June 30, 2020

4,122,276 $ 38.52

Exercisable at March 31, 2020

Exercisable at June 30, 2020

859,166 $ 32.09

The total intrinsic value of options exercised during the three months ended March 31, 2020 and 2019 was $ 3.9 million and $ 2.1 million, respectively.

The cash received from options exercised during the three months ended March 31, 2020 and 2019 was $ 4.5 million and $ 4.0 million, respectively.

The total intrinsic value of options exercised during the six months ended June 30, 2020 and 2019 was $ 8.8 million and $ 5.0 million, respectively.

The cash received from options exercised during the six months ended June 30, 2020 and 2019 was $ 14.2 million and $ 7.7 million, respectively.

The impact of these cash receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows.

2 unchanged sentences

common stock on the respective grant dates, reduced for the present value of dividends.

At March 31, 2020, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 6.5 million, which is expected to be recognized over a weighted average period of 3.1 years.

At June 30, 2020, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 6.2 million, which is expected to be recognized over a weighted average period of 3.2 years.

A summary of the unvested restricted stock awards is as follows:

4 unchanged sentences

( 3,590 ) 40.11

Unvested at March 31, 2020

Unvested at June 30, 2020

233,347 $ 38.15

1 unchanged sentence

A summary of share-based compensation is as follows:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Grant date fair value of awards during the period:

25 unchanged sentences

Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses during the three months ended March 31, 2020 and 2019.

The Company paid no administrative expenses during the three and six months ended June 30, 2020 and 2019.

The Company matches 175 % up to 6 % of employee contributions of eligible compensation.

Additionally, Plan participant forfeitures are used to reduce the cost of the Company contributions.

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

3 unchanged sentences

Eligible employees are regular full-time employees who are actively employed and working on the first and last days of the calendar quarter and who were employed full-time for at least three full months prior to the beginning of the calendar quarter, excluding the Company's senior leadership team.

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

5 unchanged sentences

We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience.

In addition, the Company matches 175 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with our heath insurance plan deductibles.

Three months ended

2020 March 31,

In addition, the Company matches 175 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with our health insurance plan deductibles.

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

6 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per share:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands, except share and per share data)

34 unchanged sentences

Our repurchase activity is as follows:

Three months ended

Six Months Ended

June 30, 2020 June 30, 2019

(in thousands, except share and per share data)

5 unchanged sentences

Our repurchase activity since Company inception, including our current authorized stock repurchase programs, are as follows:

Inception to date

Inception to June 30, 2020

(in thousands, except share and per share data)

4 unchanged sentences

13,885,674 $ 226,360 $ 16.30

Subsequent to March 31, 2020 and through May 5, 2020, the Company repurchased 23,305 shares for $ 1.1 million from our 401(k) savings and investment plan.

Subsequent to June 30, 2020 and through August 4, 2020, the Company repurchased 45,615 shares for $ 2.6 million from our 401(k) savings and investment plan.

At the discretion of the Board, we pay semi-annual cash dividends.

4 unchanged sentences

November 6, 2019 November 27, 2019 December 18, 2019 $ 0.16

May 15, 2020 June 3, 2020 July 1, 2020 $ 0.19

New Markets Tax Credit

23 unchanged sentences

These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption.

At March 31, 2020, we had one material contractual purchase obligation for approximately $ 1.8 million that expires in December 2020.

We had no material contractual purchase obligations as of June 30, 2020.

Related Parties

The Company purchases some supplies from an entity controlled by the Company’s CEO.

The Company sometimes makes sales to the CEO for parts.

Additionally, the Company sells units to an entity owned by a member of the President's immediate family.

The Company purchases some supplies from an entity controlled by the Company’s Executive Chairman.

The Company sometimes makes sales to the Executive Chairman for parts.

Additionally, the Company sells units to an entity owned by a member of the CEO's immediate family.

This entity is also one of the Company’s Representatives and as such, the Company makes payments to the entity for third party products.

1 unchanged sentence

The following is a summary of transactions and balance with affiliates:

Three months ended

2020 March 31,

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

12 unchanged sentences

As such, this information is not included below.

Three Months Ended

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

(in thousands)

12 unchanged sentences

Error Correction

We have corrected herein our consolidated financial statements as of March 31, 2019 and for the three months ended March 31, 2019, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

We have corrected herein our consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

Error Correction Background

4 unchanged sentences

Description of Tables

The following tables represent our corrected consolidated statements of income, statements of stockholders' equity, and statements of cash flows for the three months ended March 31, 2019, as well as our corrected consolidated balance sheet at March 31, 2019.

The values as previously reported for March 31, 2019 were derived from our Quarterly Report on Form 10-Q for the three month ended March 31, 2019 filed on May 2, 2019.

The following tables represent our corrected consolidated statements of income and statements of stockholders' equity for the three and six months ended June 30, 2019 and statements of cash flows for the six months ended June 30, 2019, as well as our corrected consolidated balance sheet data at June 30, 2019.

The values as previously reported for June 30, 2019 were derived from our Quarterly Report on Form 10-Q for the three and six month ended June 30, 2019 filed on August 1, 2019.

Consolidated Statements of Income

Three Months Ended March 31, 2019

Previously Reported Corrections As Corrected

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

(in thousands, except share and per share data)

Net sales $ 119,437 $ — $ 119,437 $ 233,259 $ — $ 233,259

Cost of sales 88,029 363 (a) 88,392

Cost of sales 89,262 ( 29 ) (a) 89,233 177,291 334 (a) 177,625

Gross profit 30,175 29 30,204 55,968 ( 334 ) 55,634

Selling, general and administrative expenses 11,001 2,676 (b) 13,677

Selling, general and administrative expenses 13,481 ( 569 ) (b) 12,912 24,482 2,107 (b) 26,589

Loss (gain) on disposal of assets 6 — 6 290 — 290

3 unchanged sentences

Income before taxes 16,736 598 17,334 31,227 ( 2,441 ) 28,786

Income tax provision 3,589 ( 894 ) (c) 2,695

Income tax provision 3,775 168 (c) 3,943 7,364 ( 726 ) (c) 6,638

Net income $ 12,961 $ 430 $ 13,391 $ 23,863 $ ( 1,715 ) $ 22,148

2 unchanged sentences

Diluted $ 0.25 $ — $ 0.25 $ 0.45 $ ( 0.03 ) $ 0.42

Cash dividends declared per common share:

$ 0.16 $ — $ 0.16 $ 0.16 $ — $ 0.16

Weighted average shares outstanding:

6 unchanged sentences

Deferred income taxes 14,938 ( 2,361 ) (c) 12,577

Other long-term liabilities 3,442 — 3,442

Total stockholders' equity $ 264,569 $ 2,942 (e) $ 267,511

(a) The share-based compensation correction to cost of sales for the quarter ended March 31, 2019 was approximately $ 0.4 million.

(b) The share-based compensation correction to selling, general and administrative expenses for the quarter ended March 31, 2019 was approximately $ 3.0 million.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 13) of approximately $ 0.4 million for the quarter ended March 31, 2019.

(a) The share-based compensation correction to cost of sales for the three and six months ended June 30, 2019 was approximately $ 0.1 million and $ 0.3 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the three and six months ended June 30, 2019 was approximately $ 0.6 million and $ 2.4 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to reduce our employee profit sharing bonus plan (Note 13) of approximately $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2019, respectively.

(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation correction.

1 unchanged sentence

The prior period costs were recovered through our estimated 2019 fourth quarter payment which was paid in early 2020.

(e) This is the cumulative effect on stockholders' equity as result of the share-based compensation correction.

See table below for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the quarter ended March 31, 2019.

(e) This is the cumulative effect on stockholders' equity as a result of the share-based compensation correction.

See table below for a description of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the three and six months ended June 30, 2019, respectively.

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2019

Common Stock Paid-in Retained

1 unchanged sentence

As Previously Reported (in thousands)

Balance at December 31, 2018 51,991 $ 208 $ — $ 247,291 $ 247,499

Balances at December 31, 2018 51,991 $ 208 $ — $ 247,291 $ 247,499

Net income — — — 23,863 23,863

3 unchanged sentences

Stock repurchased and retired ( 257 ) ( 1 ) ( 11,170 ) — ( 11,171 )

Balance at March 31, 2019 52,099 208 969 258,193 259,370

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 209 1,586 262,774 264,569

Correction Impacts

Balance at December 31, 2018 — — — 1,944 1,944

Balances at December 31, 2018 — — — 1,944 1,944

Net income — — — ( 1,715 ) ( 1,715 )

3 unchanged sentences

Stock repurchased and retired — — — — —

Balance at March 31, 2019 — — 3,377 ( 201 ) 3,176

Balance at December 31, 2018 51,991 $ 208 $ — $ 249,235 $ 249,443

Dividends — — — — —

Balances at June 30, 2019 — — 2,713 229 2,942

Balances at December 31, 2018 51,991 $ 208 $ — $ 249,235 $ 249,443

Net income — — — 22,148 22,148

3 unchanged sentences

Stock repurchased and retired ( 257 ) ( 1 ) ( 11,170 ) — ( 11,171 )

Balance at March 31, 2019 52,099 $ 208 $ 4,346 $ 257,992 $ 262,546

See descriptions of changes to net income in the consolidated statement of income for the three months ended March 31, 2019 in the table above.

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

See descriptions of changes to net income in the consolidated statement of income for the six months ended June 30, 2019 in the table above.

Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2019

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

As Previously Reported (in thousands)

Balances at March 31, 2019 52,099 $ 208 $ 969 $ 258,193 $ 259,370

Net income — — — 12,961 12,961

Stock options exercised and restricted 147 1 3,674 — 3,675

stock awards granted

Share-based compensation — — 3,043 — 3,043

Stock repurchased and retired ( 128 ) — ( 6,100 ) — ( 6,100 )

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 209 1,586 262,774 264,569

Correction Impacts

Balances at March 31, 2019 — — 3,377 ( 201 ) 3,176

Net income — — — 430 430

Stock options exercised and restricted — — — — —

stock awards granted

Share-based compensation — — ( 664 ) — ( 664 )

Stock repurchased and retired — — — — —

Dividends — — — — —

Balances at June 30, 2019 — — 2,713 229 2,942

Balances at March 31, 2019 52,099 $ 208 $ 4,346 $ 257,992 $ 262,546

Net income — — — 13,391 13,391

Stock options exercised and restricted 147 1 3,674 — 3,675

stock awards granted

Share-based compensation — — 2,379 — 2,379

Stock repurchased and retired ( 128 ) — ( 6,100 ) — ( 6,100 )

Dividends — — — ( 8,380 ) ( 8,380 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

See descriptions of changes to net income in the consolidated statement of income for the three months ended June 30, 2019 in the table above.

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Previously Reported Corrections As Corrected

22 unchanged sentences

Proceeds from sale of property, plant and equipment 59 — 59

Investment in certificates of deposits ( 6,000 ) — ( 6,000 )

Maturities of certificates of deposits 2,000 — 2,000

Principal payments from note receivable 28 — 28

9 unchanged sentences

See descriptions of changes to net income and the balance sheet in the tables above.

Subsequent Event

In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.

In view of the rapidly changing business environment, unprecedented market volatility and heightened degree of uncertainty resulting from COVID-19, we are currently unable to fully determine its future impact on our business.

However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations and cash flows.

On April 22, 2020, our plant and office facilities in Tulsa, Oklahoma experienced hail related weather damage and we have filed a property insurance claim which carries a $ 500,000 deductible.

We did not experience any operational interruption as a result of this weather event.

In May 2020, we entered into three material purchase agreements that total approximately $ 5.1 million.

The purchase agreement periods are from September 2020 to January 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements