What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-27 · 97 added, 420 removed, 790 unchanged (40% of the section changed)

13 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 26, 2020 expressed an adverse opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 25, 2021 expressed an unqualified opinion.

Basis for opinion

6 unchanged sentences

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

5 unchanged sentences

Inventory – manual inventory adjustments

As described in Note 3 to the Company’s financial statements, the Company reports inventory using the first in, first out (“FIFO”) method, which involves manual adjustments recorded to the general ledger such as inventory variance, inventory allowance and labor and overhead adjustments.

As described in Note 2 to the Company’s financial statements, the Company reports inventory using the first in, first out (“FIFO”) method, which involves manual adjustments recorded to the general ledger such as inventory variance, inventory allowance and labor and overhead adjustments, which had the potential to be larger or require more judgement during the year ended December 31, 2020, where the Company experienced changes in the prices of certain raw materials due to the COVID-19 pandemic.

These manual adjustments have been identified as a critical audit matter.

16 unchanged sentences

Restricted cash 3,263 17,576

Accounts receivable, net 67,399 54,078

Accounts receivable, net of allowance for credit losses of $ 506 and $ 353 , respectively

47,387 67,399

Income tax receivable 4,587 772

44 unchanged sentences

Selling, general and administrative expenses 60,491 52,077 48,194

Loss (gain) on disposal of assets 337 ( 12 ) 45

(Gain) loss on disposal of assets and insurance recoveries ( 6,478 ) 337 ( 12 )

Income from operations 101,836 67,011 55,351

51 unchanged sentences

Amortization of debt issuance costs 43 7 —

Provision for losses on accounts receivable, net of adjustments 91 174 179

Provision for credit losses on accounts receivable, net of adjustments 153 91 174

Provision for excess and obsolete inventories 1,108 1,454 152

Share-based compensation 11,342 11,799 7,862

Loss (gain) on disposition of assets 337 ( 12 ) 45

(Gain) loss on disposition of assets ( 6,478 ) 337 ( 12 )

Foreign currency transaction (gain) loss ( 12 ) ( 27 ) 55

14 unchanged sentences

Proceeds from sale of property, plant and equipment 60 69 13

Insurance proceeds 6,417 — —

Investment in certificates of deposits — ( 6,000 ) ( 7,200 )

11 unchanged sentences

Employee taxes paid by withholding shares ( 1,169 ) ( 1,207 ) ( 1,097 )

Cash dividends paid to stockholders ( 16,645 ) ( 16,728 ) ( 13,663 )

Dividends paid to stockholders ( 19,815 ) ( 16,645 ) ( 16,728 )

Net cash used in financing activities ( 29,626 ) ( 18,500 ) ( 39,684 )

11 unchanged sentences

We are engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom, and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls.

Error Correction

We have corrected herein our consolidated financial statements at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

The unaudited interim financial information for the quarterly periods ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, has also been corrected and is included in Note 25, Quarterly Results (Unaudited) .

The 2019 quarterly corrections will be reflected in the filing of our future 2020 unaudited interim consolidated financial statement filings in Quarterly Reports on Form 10-Q.

Error Correction Background

The Company noted errors in previously issued financial statements relating to share-based compensation expense for stock options and restricted stock awards held by retirement eligible employees and directors.

As defined by our Long-Term Incentive Plans (Note 16), stock options and restricted stock awards are fully vested when an active employee or director meets certain retirement eligibility requirements.

We corrected the financial statements to recognize all share-based compensation, related to retirement eligible employees or directors, by the earlier of the grant date (if retirement eligible on grant date) or ratably from grant date to retirement eligible date.

The corrected financial statements also include corrections for the tax effect of the share-based compensation corrections as well as the corrections' impact on our prior periods' employees profit sharing bonus plan (Note 17).

We do not believe that the errors are quantitatively material to any period presented in our prior financial statements.

However, due to the qualitative nature of the matters identified in our review, including the number of years over which the errors occurred, we determined that it would be appropriate to correct the errors in our previously issued consolidated financial statements.

Accordingly, we have corrected our consolidated financial statements and the impacted amounts within the accompanying footnotes thereto.

Description of Tables

The following tables represent our corrected consolidated statements of income, statements of stockholders' equity, and statements of cash flows for the years ended December 31, 2018 and December 31, 2017, as well as our corrected consolidated balance sheet at December 31, 2018.

The values as previously reported for years ended 2018 and 2017 were derived from our Annual Report on Form 10-K for the year ended December 31, 2018 filed on February 28, 2019.

Consolidated Statements of Income

Year Ended December 31, 2018 Year Ended December 31, 2017

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

(in thousands, except per share data)

Net sales $ 433,947 $ — $ 433,947 $ 405,232 $ — $ 405,232

Cost of sales 330,414 — (a) 330,414 281,835 ( 254 ) (a) 281,581

Gross profit 103,533 — 103,533 123,397 254 123,651

Selling, general and administrative expenses 47,755 439 (b) 48,194 49,249 122 (b) 49,371

(Gain) loss on disposal of assets ( 12 ) — ( 12 ) 45 — 45

Income from operations 55,790 ( 439 ) 55,351 74,103 132 74,235

Interest income, net 196 — 196 298 — 298

Other (expense) income, net ( 47 ) — ( 47 ) 91 — 91

Income before taxes 55,939 ( 439 ) 55,500 74,492 132 74,624

Income tax provision 13,367 ( 196 ) (c) 13,171 19,994 800 (c) 20,794

Net income $ 42,572 $ ( 243 ) $ 42,329 $ 54,498 $ ( 668 ) $ 53,830

Earnings per share:

Basic $ 0.81 $ — $ 0.81 $ 1.04 $ ( 0.02 ) $ 1.02

Diluted $ 0.81 $ ( 0.01 ) $ 0.80 $ 1.03 $ ( 0.02 ) $ 1.01

Cash dividends declared per common share:

$ 0.32 $ — $ 0.32 $ 0.26 $ — $ 0.26

Weighted average shares outstanding:

Basic 52,284,616 — 52,284,616 52,572,496 — 52,572,496

Diluted 52,667,939 — 52,667,939 53,078,734 — 53,078,734

(a) The share-based compensation correction to cost of sales for the year ended December 31, 2017 was approximately$ 0.3 million.

There was no correction required for the year ended December 31, 2018 for cost of sales.

(b) The share-based compensation correction to selling, general and administrative expenses for the years ended December 31, 2018 and 2017 was approximately $ 0.5 million and $ 0.1 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $ 0.1 million and $ 0.1 million for the years ended December 31, 2018 and 2017, respectively.

Consolidated Balance Sheets

December 31, 2018

Previously Reported Corrections As Corrected

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

Current assets:

Cash and cash equivalents $ 1,994 $ — $ 1,994

Accounts receivable, net 54,078 — 54,078

Income tax receivable 6,104 ( 203 ) (a) 5,901

Note receivable 27 — 27

Inventories, net 77,612 — 77,612

Prepaid expenses and other 1,046 — 1,046

Total current assets 140,861 ( 203 ) 140,658

Property, plant and equipment:

Land 3,114 — 3,114

Buildings 97,393 — 97,393

Machinery and equipment 212,779 — 212,779

Furniture and fixtures 16,597 — 16,597

Total property, plant and equipment 329,883 — 329,883

Accumulated depreciation 166,880 — 166,880

Property, plant and equipment, net 163,003 — 163,003

Intangible assets, net 506 — 506

Goodwill 3,229 — 3,229

Note receivable, long-term 598 — 598

Total assets $ 308,197 $ ( 203 ) $ 307,994

Liabilities and Stockholders’ Equity

Current liabilities:

Revolving credit facility $ — $ — $ —

Accounts payable 10,616 — 10,616

Accrued liabilities 37,455 ( 580 ) (b) 36,875

Total current liabilities 48,071 ( 580 ) 47,491

Deferred tax liabilities 10,826 ( 1,567 ) (a) 9,259

Other long-term liabilities 1,801 — 1,801

Commitments and contingencies

Stockholders’ equity:

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

Common stock, $ .004 par value, 100,000,000 shares authorized, 51,991,242 and 52,422,801 issued and outstanding at December 31, 2018 and 2017, respectively

Additional paid-in capital — — —

Retained earnings 247,291 1,944 (c) 249,235

Total stockholders’ equity 247,499 1,944 249,443

Total liabilities and stockholders’ equity $ 308,197 $ ( 203 ) $ 307,994

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

(b) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction.

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

(c) See descriptions of the stockholders' equity in the consolidated statements of stockholders' equity for the year ended December 31, 2018 in sections below.

Consolidated Statements of Stockholders’ Equity

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

As Previously Reported (in thousands)

Balance at December 31, 2017 52,422 $ 210 $ — $ 237,016 $ 237,226

Net income — — — 42,572 42,572

Stock options exercised and restricted 353 1 4,986 — 4,987

stock awards granted

Share-based compensation — — 7,374 — 7,374

Stock repurchased and retired ( 784 ) ( 3 ) ( 12,360 ) ( 15,580 ) ( 27,943 )

Dividends — — — ( 16,717 ) ( 16,717 )

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

Correction Impacts

Balance at December 31, 2017 — — — 1,699 1,699

Net income — — — ( 243 ) ( 243 )

Stock options exercised and restricted — — — — —

stock awards granted

Share-based compensation — — 488 — 488

Stock repurchased and retired — — ( 488 ) 488 —

Dividends — — — — —

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

As Corrected —

Balance at December 31, 2017 52,422 210 — 238,715 238,925

Net income — — — 42,329 42,329

Stock options exercised and restricted 353 1 4,986 — 4,987

stock awards granted

Share-based compensation — — 7,862 — 7,862

Stock repurchased and retired ( 784 ) ( 3 ) ( 12,848 ) ( 15,092 ) ( 27,943 )

Dividends — — — ( 16,717 ) ( 16,717 )

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

See descriptions of net income in the consolidated statement of income for the year ended December 31, 2018 in the section above.

Consolidated Statements of Stockholders’ Equity

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

As Previously Reported (in thousands)

Balance at December 31, 2016 52,651 $ 211 $ — $ 205,687 $ 205,898

Net income — — — 54,498 54,498

Stock options exercised and restricted 293 1 2,258 — 2,259

stock awards granted

Share-based compensation — — 6,458 — 6,458

Stock repurchased and retired ( 522 ) ( 2 ) ( 8,716 ) ( 9,516 ) ( 18,234 )

Dividends — — — ( 13,653 ) ( 13,653 )

Balance at December 31, 2017 52,422 210 — 237,016 237,226

Correction Impacts

Balance at December 31, 2016 — — — 2,512 2,512

Net income — — — ( 668 ) ( 668 )

Stock options exercised and restricted — — — — —

stock awards granted

Share-based compensation — — ( 145 ) — ( 145 )

Stock repurchased and retired — — 145 ( 145 ) —

Dividends — — — — —

Balance at December 31, 2017 — — — 1,699 1,699

Balance at December 31, 2016 52,651 211 — 208,199 208,410

Net income — — — 53,830 53,830

Stock options exercised and restricted 293 1 2,258 — 2,259

stock awards granted

Share-based compensation — — 6,313 — 6,313

Stock repurchased and retired ( 522 ) ( 2 ) ( 8,571 ) ( 9,661 ) ( 18,234 )

Dividends — — — ( 13,653 ) ( 13,653 )

Balance at December 31, 2017 52,422 $ 210 $ — $ 238,715 $ 238,925

See descriptions of net income in the consolidated statement of income for the year ended December 31, 2017 in the section above.

Consolidated Statements of Cash Flows

Year Ended December 31, 2018 Year Ended December 31, 2017

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

Operating Activities (in thousands)

Net income $ 42,572 $ ( 243 ) $ 42,329 $ 54,498 $ ( 668 ) $ 53,830

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 17,655 — 17,655 15,007 — 15,007

Amortization of bond premiums 13 — 13 47 — 47

Provision for losses on accounts receivable, net of adjustments 174 — 174 179 — 179

Provision for excess and obsolete inventories 152 — 152 264 — 264

Share-based compensation 7,374 488 7,862 6,458 ( 145 ) 6,313

(Gain) loss on disposition of assets ( 12 ) — ( 12 ) 45 — 45

Foreign currency transaction loss (gain) 55 — 55 ( 59 ) — ( 59 )

Interest income on note receivable ( 27 ) — ( 27 ) ( 25 ) — ( 25 )

Deferred income taxes 2,849 ( 208 ) 2,641 ( 1,554 ) 805 ( 749 )

Changes in assets and liabilities:

Accounts receivable ( 2,832 ) — ( 2,832 ) ( 7,516 ) — ( 7,516 )

Income tax receivable ( 4,461 ) 13 ( 4,448 ) 4,596 ( 5 ) 4,591

Inventories ( 5,598 ) — ( 5,598 ) ( 23,698 ) — ( 23,698 )

Prepaid expenses and other ( 528 ) — ( 528 ) 98 — 98

Accounts payable ( 1,176 ) — ( 1,176 ) 3,043 — 3,043

Deferred revenue 412 — 412 258 — 258

Accrued liabilities and donations ( 1,766 ) ( 50 ) ( 1,816 ) 6,353 13 6,366

Net cash provided by operating activities 54,856 — 54,856 57,994 — 57,994

Investing Activities

Capital expenditures ( 37,268 ) — ( 37,268 ) ( 41,713 ) — ( 41,713 )

Cash paid in business combination ( 6,377 ) — ( 6,377 ) — — —

Proceeds from sale of property, plant and equipment 13 — 13 10 — 10

Investment in certificates of deposits ( 7,200 ) — ( 7,200 ) ( 5,280 ) — ( 5,280 )

Maturities of certificates of deposits 10,080 — 10,080 7,912 — 7,912

Purchases of investments held to maturity ( 9,001 ) — ( 9,001 ) ( 13,241 ) — ( 13,241 )

Maturities of investments held to maturity 14,570 — 14,570 19,700 — 19,700

Proceeds from called investments 495 — 495 1,500 — 1,500

Principal payments from note receivable 53 — 53 60 — 60

Net cash used in investing activities ( 34,635 ) — ( 34,635 ) ( 31,052 ) — ( 31,052 )

Financing Activities

Stock options exercised 4,987 — 4,987 2,259 — 2,259

Repurchase of stock ( 26,846 ) — ( 26,846 ) ( 16,620 ) — ( 16,620 )

Employee taxes paid by withholding shares ( 1,097 ) — ( 1,097 ) ( 1,614 ) — ( 1,614 )

Cash dividends paid to stockholders ( 16,728 ) — ( 16,728 ) ( 13,663 ) — ( 13,663 )

Net cash used in financing activities ( 39,684 ) — ( 39,684 ) ( 29,638 ) — ( 29,638 )

Net decrease in cash and cash equivalents ( 19,463 ) — ( 19,463 ) ( 2,696 ) — ( 2,696 )

Cash and cash equivalents, beginning of year 21,457 — 21,457 24,153 — 24,153

Cash and cash equivalents, end of year $ 1,994 $ — $ 1,994 $ 21,457 $ — $ 21,457

No corrections impacted the classifications between net operating, net investing, or net financing cash flow activities.

Summary of Significant Accounting Policies

5 unchanged sentences

Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 18) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in those VIEs.

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 year ended December 31, 2020 except for a planned (unrelated to COVID-19) shut down at out Tulsa, OK facility during the last week of December 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 when unable to socially distance, 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 2020.

These unexpected employee absences resulted in reduced shipments and longer lead times in the second quarter 2020.

During the third quarter and fourth quarter 2020, employee attendance levels were stronger than previously anticipated.

Additionally, our work force has adapted well to school and childcare related issues.

Furthermore, COVID-19 has had no significant impact on our planned cash outflow for raw materials, dividend payments, or capital expenditure including our Longview, Texas expansion project.

The magnitude of the impact of COVID-19 remains unpredictable and we, therefore, continue to anticipate potential supply chain disruptions, increased 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 are continually monitoring the progression of the pandemic and its potential effect on our financial position, results of operations and cash flows.

Cash and Cash Equivalents

14 unchanged sentences

Accounts and Note Receivable

Accounts and note receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.

We adopted ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326) , as amended, as of January 1, 2020.

The ASU requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected, which would include accounts receivable.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount.

The adoption of this ASU did not have a material effect on our financial statements.

Accounts and note receivable are stated at amounts due from customers, net of an allowance for credit losses.

We generally do not require that our customers provide collateral.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the credit risk of specific customers, the customer’s ability to pay current obligations, historical trends, economic and market conditions and the age of the receivable.

The Company determines its allowance for credit losses by considering a number of factors, including the credit risk of specific customers, the customer’s ability to pay current obligations, historical trends, economic and market conditions, and the age of the receivable.

Accounts are considered past due when the balance has been outstanding for ninety days past negotiated credit terms.

Past due accounts are generally written-off against the allowance for doubtful accounts only after all collection attempts have been exhausted.

Past due accounts are generally written-off against the allowance for credit losses only after all collection attempts have been exhausted.

Concentration of Credit Risk

1 unchanged sentence

To date, our sales have been primarily to the domestic market, with foreign sales accounting for approximately 2 %, 3 %, and 3 % of revenues for the years ended December 31, 2020, 2019, and 2018, respectively.

One customer, Texas AirSystems, accounted for approximately 10% of our sales during 2019, 2018 and 2017.

One customer, Texas AirSystems LLC, accounted for more than 10% of our sales during 2020, 2019, and 2018.

No other customer accounted for more than 10% of our sales during 2020, 2019, and 2018.

One customer, Texas AirSystems, accounted for approximately 10% of our accounts receivable balance at December 31, 2019.

No other customer accounted for 5% or more of our accounts receivable balance at December 31, 2019 and 2018.

Two customers, Texas AirSystems LLC and Johnson Borrow Inc., accounted for more than 10% of our accounts receivable balance at December 31, 2020.

One customer, Texas AirSystems LLC, accounted for more than 10% of our accounts receivable balance at December 31, 2019.

No single customer accounted for more than 15% of our sales during 2020, 2019, and 2018 or more than 15% of our accounts receivable balance at December 31, 2020 and 2019.

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method.

8 unchanged sentences

Furniture and fixtures 3 - 7 years

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

We did not experience any significant structural damage or any operational interruption as a result of this weather event.

In November 2020, we reached a final settlement with our insurance carrier, resulting in a net cumulative gain of $ 6.4 million, which is included in the Consolidated Statements of Income.

The received proceeds will be used in future periods to make improvements to the current roof at our plant and office facilities in Tulsa, Oklahoma to extend the overall useful life.

Business Combinations

3 unchanged sentences

The carrying amount of the Company’s revolving line of credit, and other payables, approximate their fair values either due to their short term nature, the variable rates associated with the debt or based on current rates offered to the Company for debt with similar characteristics.

We adopted ASU No.

2018-13, Fair Value Measurements (Topic 820), as amended, as of January 1, 2020.

The ASU includes additional disclosure requirements for unrealized gains and losses for Level 3 fair value measurements and significant observable inputs used to develop Level 3 fair value measurements.

There was not a material impact to financial statements upon adoption.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

2 unchanged sentences

Quoted prices in active markets for identical assets and liabilities that we have the ability to access at the measurement date.

Inputs (other than quoted prices included within Level 1) that are either directly or indirectly observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means.

markets, (ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means.

Unobservable inputs for the asset or liability including situations where there is little, if any, market activity for the asset or liability.

Items categorized in Level 3 include the estimated business combination fair values of property, plant and equipment, intangible assets and goodwill.

Items categorized in Level 3 include the estimated fair values of property, plant and equipment, intangible assets and goodwill acquired in a business combination.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3).

46 unchanged sentences

Restricted stock awards granted to directors historically vest one-third each year or, if granted on or after May 2019, vest over the shorter of directors' remaining elected term or one-third each year.

If the employee or director is retirement eligible (as defined by the Long Term Incentive Plans) or becomes retirement eligible during service period of the related share-based compensation award, the service period is the lesser of 1) the grant date, if retirement eligible on grant date, or 2) the period between grant date and retirement eligible date.

Historically, if the employee or director is retirement eligible (as defined by the Long Term Incentive Plans) or becomes retirement eligible during service period of the related share-based compensation award, the service period is the lesser of 1) the grant date, if retirement eligible on grant date, or 2) the period between grant date and retirement eligible date.

All share-based compensation awards granted on or after March 1, 2020 to retirement eligible employees or directors contain a one -year employment requirement (minimum service period) or the entire award is forfeited.

Forfeitures are accounted for as they occur.

7 unchanged sentences

The new accounting policy provides results substantially consistent with prior revenue recognition policies.

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

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.

The Company has a formal cancellation policy and generally does not accept returns on these units.

As a result, many of the Company’s products do not have an alternative use and therefore, for these products

we recognize revenue over the time it takes to produce the unit.

As a result, many of the Company’s products do not have an alternative use and therefore, for these products we recognize revenue over the time it takes to produce the unit.

For all other products that are part sales or standardized units, we satisfy the performance obligation when the control is passed to the customer, generally at time of shipment.

1 unchanged sentence

Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates.

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.

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

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 heating, ventilation, and air conditioning (“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 obligation related to the Third Party Products.

Amounts related to Third Party Products are not recognized as revenue but are recorded as a liability 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.

15 unchanged sentences

We reevaluate our estimates and assumptions as needed, but at a minimum on a quarterly basis.

The most significant estimates include, but are not limited to, the allowance for doubtful accounts, inventory reserves,

warranty accrual, workers compensation accrual, medical insurance accrual, share-based compensation and income taxes.

The most significant estimates include, but are not limited to, the allowance for credit losses, inventory reserves, warranty accrual, workers compensation accrual, medical insurance accrual, share-based compensation, and income taxes.

Actual results could differ materially from those estimates.

52 unchanged sentences

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

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

Accounts Receivable

Accounts receivable and the related allowance for doubtful accounts are as follows:

Accounts receivable and the related allowance for credit losses are as follows:

(in thousands)

Accounts receivable $ 47,893 $ 67,752

Allowance for doubtful accounts ( 353 ) ( 264 )

Allowance for credit losses ( 506 ) ( 353 )

Total, net $ 47,387 $ 67,399

1 unchanged sentence

2020 2019 2018

Allowance for doubtful accounts:

Allowance for credit losses:

(in thousands)

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$ 353 $ 264 $ 119

Provisions for losses on accounts receivable, net of adjustments

Provisions (recoveries) for expected credit losses, net of adjustments

Accounts receivable written off, net of recoveries

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Our total liabilities to tangible net worth ratio was 0.3 to 1.0, which meets the requirement of not being above 2 to 1.

On October 24, 2019 we amended the BOK Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transaction (Note 19).

This amendment also removed section 8.1.4 which required our Chief Executive Officer, Norman Asbjornson, to maintain ownership of 25 % of the Company.

Norman Asbjornson does not currently, and has not for several years maintained this level of ownership, a limited waiver of default was also added to the amendment.

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

The provision for income taxes consists of the following:

Years Ended December 31,

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State income taxes, net of federal benefit 5.3 % 5.2 % 6.0 %

Remeasurement of deferred taxes — % — % ( 5 ) %

Domestic manufacturing deduction — % — % ( 3 ) %

Excess tax benefits ( 3.2 ) % ( 2.6 ) % ( 2.0 ) %

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22.5 % 20.0 % 24.0 %

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

Major changes under the Act include the following:

• Reducing the corporate rate to 21 percent

• Doubling bonus depreciation to 100 percent for five years

• Further limitations on executive compensation deductions

• Eliminating the domestic manufacturing deduction

As a result of these changes, the Company adjusted its deferred tax assets and liabilities in 2017 using the newly enacted rates for the periods when they are expected to be realized.

The remeasurement in 2017 resulted in a benefit to income taxes of $ 3.7 million.

The new bonus depreciation provisions resulted in the Company taking $ 3.2 million of bonus depreciation in 2017.

The Company also has historically taken the domestic manufacturing deduction.

The Company will no longer receive the benefit of this deduction which typically has lowered our effective tax rate by 3.0 %.

The Company sometimes has executive compensation that exceeds the $ 1.0 million limitation.

Typically the limit is exceeded due to the volume of stock activity performed by the executives during the year.

The limit could also be exceeded by the Chief Executive Officer receiving the maximum amount under our executive annual cash incentive bonus plan.

Any compensation that exceeded this limitation in 2018 and in the future will be a permanent difference and cause an increase to our income tax provision.

Upon completion of the Company's 2018 tax return in 2019, the Company recorded additional benefit due to higher than expected research and development credit of $ 0.6 million.

Additionally in 2019, the Company determined it could take advantage of an additional 1 % tax credit in Oklahoma for years in which the Company's location was deemed to be within an enterprise zone.

The additional OK Credit for being in an enterprise zone, or otherwise allowable under Oklahoma law, resulted in a benefit of $ 1.2 million.

The additional Oklahoma credit for being in an enterprise zone, or otherwise allowable under Oklahoma law, resulted in a benefit of $ 1.2 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.

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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.

On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (as amended, “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 year vesting schedule.

Under the LTIP, the exercise price of shares granted may 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 (as amended, “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.

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(in thousands)

Contributions made to the defined contribution plan $ 7.0 $ 8.1 $ 6.1

Contributions, net of forfeitures, made to the defined contribution plan $ 9,091 $ 7,034 $ 8,127

Profit Sharing Bonus Plan

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Employee Medical Plan

We self-insure for our employee's health insurance.

We self-insure for our employees' health insurance.

Eligible employees are regular full-time employees who are actively employed and working.

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Medical claim payments $ 9,060 $ 5,898 $ 5,915

Heath saving account payments 3.3 2.9 2.5

Health saving account payments 3,476 3,265 2,948

Stockholders’ Equity

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Agreement Execution Date Authorized Repurchase $ Expiration Date

June 2, 2016 $ 25 million April 15, 2017

May 16, 2018 $ 15 million March 1, 2019

March 5, 2019 $ 20 million March 4, 2020

The Company also has a stock repurchase arrangement by which employee-participants in our 401(k) savings and investment plan are entitled to have shares in AAON, Inc.

May 16, 2018 1

$ 15 million March 1, 2019

March 5, 2019 1

$ 20 million March 4, 2020

March 13, 2020 $ 20 million ** 2

1 The 2018 and 2019 purchase authorizations were executed under 10b5-1 programs.

2 Expiration Date is at Board's discretion.

The Company is authorized to effectuate repurchases of the Company's common stock on terms and conditions approved in advance by the Board.

The Company also has a stock repurchase arrangement by which employee-participants in our 401(k) savings and investment plan are entitled to have shares of AAON, Inc.

stock in their accounts sold to the Company.

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Lastly, the Company repurchases shares of AAON, Inc.

stock from certain of its directors and employees for payment of statutory tax withholdings on stock transactions.

stock from certain of its directors and employees for

payment of statutory tax withholdings on stock transactions.

All other repurchases from directors or employees are contingent upon Board approval.

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The value attributable to the put/call is nominal.

Investor's interest of $ 6.3 million is recorded in New market tax credit obligation on the consolidated balance sheet.

The Investor's interest of $ 6.3 million is recorded in New market tax credit obligation on the consolidated balance sheet.

The Company incurred approximately $ 0.3 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.

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

At December 31, 2019, we had one material contractual purchase obligation for approximately $ 2.5 million that expires in December 2020.

We had no material contractual purchase obligations as of December 31, 2020.

New Accounting Pronouncements

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In December 2019, the FASB issued ASU 2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes.

The ASU includes simplification of accounting for income taxes for franchise taxes, step up in tax basis for goodwill as part of a business combination and interim reporting of enacted changes in tax laws.

The ASU is effective for the

Company beginning after December 15, 2020.

We do not expect ASU 2019-12 will have a material effect on our consolidated financial statements and notes thereto.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements:

Changes to the Disclosure Requirement for Fair Value Measurements.

The ASU includes additional disclosure requirements for unrealized gains and losses for Level 3 fair value measurement and significant observable inputs used to develop Level 3 fair value measurements.

Simplifying the Accounting for Income Taxes (Topic 740) .

The ASU includes simplification of accounting for income taxes for franchise taxes, step up in tax

basis for goodwill as part of a business combination and interim reporting of enacted changes in tax laws.

The ASU is effective for the Company beginning after December 15, 2020.

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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/President'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.

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Subsequent to December 31, 2020 and through February 22, 2021, the Company repurchased 9,172 shares for $ 0.6 million from employees for payment of statutory tax withholdings on stock transactions and 41,712 shares for $ 3.0 million from our 401(k) savings and investment plan.

Quarterly Results (Unaudited) (As Corrected)

Quarterly Results (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2020 and 2019:

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Diluted $ 0.17 $ 0.26 $ 0.26 $ 0.33

The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended March 31, 2019 and 2018.

Three Months Ended March 31, 2019 Three Months Ended March 31, 2018

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

(in thousands, except share and per share data)

Net sales $ 113,822 $ — $ 113,822 $ 99,082 $ — $ 99,082

Cost of sales 88,029 363 (a) 88,392 83,692 194 (a) 83,886

Gross profit 25,793 ( 363 ) 25,430 15,390 ( 194 ) 15,196

Selling, general and administrative expenses 11,001 2,676 (b) 13,677 10,219 1,432 (b) 11,651

Loss (gain) on disposal of assets 284 — 284 ( 7 ) — ( 7 )

Income from operations 14,508 ( 3,039 ) 11,469 5,178 ( 1,626 ) 3,552

Interest income, net 9 — 9 68 — 68

Other (expense) income, net ( 26 ) — ( 26 ) ( 6 ) — ( 6 )

Income before taxes 14,491 ( 3,039 ) 11,452 5,240 ( 1,626 ) 3,614

Income tax provision 3,589 ( 894 ) (c) 2,695 980 ( 520 ) (c) 460

Net income $ 10,902 $ ( 2,145 ) $ 8,757 $ 4,260 $ ( 1,106 ) $ 3,154

Earnings per share:

Basic $ 0.21 $ ( 0.04 ) $ 0.17 $ 0.08 $ ( 0.02 ) $ 0.06

Diluted $ 0.21 $ ( 0.04 ) $ 0.17 $ 0.08 $ ( 0.02 ) $ 0.06

Weighted average shares outstanding:

Basic 51,992,150 — 51,992,150 52,433,902 — 52,433,902

Diluted 52,369,660 — 52,369,660 52,910,223 — 52,910,223

Balance Sheet Data (at end of period):

Current assets $ 146,798 $ ( 287 ) (c) $ 146,511 $ 154,687 $ ( 237 ) (c) $ 154,450

Total assets 319,525 ( 287 ) (c) 319,238 306,945 ( 237 ) (c) 306,708

Current liabilities 44,000 ( 918 ) (d) 43,082 57,292 ( 711 ) (d) 56,581

Deferred income taxes 12,713 ( 2,545 ) (c) 10,168 8,397 ( 1,926 ) (c) 6,471

Other long-term liabilities 3,442 — 3,442 1,645 — 1,645

Total stockholders' equity $ 259,370 $ 3,176 (e) $ 262,546 $ 239,611 $ 2,400 (e) $ 242,011

(a) The share-based compensation correction to cost of sales for the quarters ended March 31, 2019 and 2018 was approximately $ 0.4 million and $ 0.2 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended March 31, 2019 and 2018 was approximately $ 3.0 million and $ 1.6 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $ 0.4 million and $ 0.2 million for the quarters ended March 31, 2019 and 2018, respectively.

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

(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction.

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

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

See Note 2, Error Correction , for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.

The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended June 30, 2019 and 2018.

Three Months Ended June 30, 2019 Three Months Ended June 30, 2018

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

(in thousands, except share and per share data)

Net sales $ 119,437 $ — $ 119,437 $ 109,588 $ — $ 109,588

Cost of sales 89,262 ( 29 ) (a) 89,233 82,003 ( 76 ) (a) 81,927

Gross profit 30,175 29 30,204 27,585 76 27,661

Selling, general and administrative expenses 13,481 ( 569 ) (b) 12,912 13,086 67 (b) 13,153

Loss (gain) on disposal of assets 6 — 6 ( 4 ) — ( 4 )

Income from operations 16,688 598 17,286 14,503 9 14,512

Interest income, net 31 — 31 67 — 67

Other (expense) income, net 17 — 17 12 — 12

Income before taxes 16,736 598 17,334 14,582 9 14,591

Income tax provision 3,775 168 (c) 3,943 2,891 3 (c) 2,894

Net income $ 12,961 $ 430 $ 13,391 $ 11,691 $ 6 $ 11,697

Earnings per share:

Basic $ 0.25 $ 0.01 $ 0.26 $ 0.22 $ — $ 0.22

Diluted $ 0.25 $ 0.01 $ 0.26 $ 0.22 $ — $ 0.22

Cash dividends declared per common share:

$ 0.16 $ — $ 0.16 $ 0.16 $ — $ 0.16

Weighted average shares outstanding:

Basic 52,120,272 — 52,120,272 52,383,842 — 52,383,842

Diluted 52,474,199 — 52,474,199 52,717,787 — 52,717,787

Balance Sheet Data (at end of period):

Current assets $ 168,630 $ ( 270 ) (c) $ 168,360 $ 154,665 $ ( 237 ) (c) $ 154,428

Total assets 342,251 ( 270 ) (c) 341,981 320,271 ( 237 ) (c) 320,034

Current liabilities 58,953 ( 851 ) (d) 58,102 71,673 ( 711 ) (d) 70,962

Deferred income taxes 14,938 ( 2,361 ) (c) 12,577 8,415 ( 1,922 ) (c) 6,493

Other long-term liabilities 3,791 — 3,791 1,746 — 1,746

Total stockholders' equity $ 264,569 $ 2,942 (e) $ 267,511 $ 238,437 $ 2,396 (e) $ 240,833

(a) The share-based compensation correction to cost of sales for the quarters ended June 30, 2019 and 2018 was approximately $ 0.1 million and $ 0.1 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended June 30, 2019 and 2018 was approximately $ 0.6 million and $ 0.1 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $ 0.1 million and $ 0.1 million for the quarters ended June 30, 2019 and 2018, respectively.

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

(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction.

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

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

See Note 2, Error Correction , for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.

The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended September 30, 2019 and 2018.

Three Months Ended September 30, 2019 Three Months Ended September 30, 2018

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

(in thousands, except share and per share data)

Net sales $ 113,500 $ — $ 113,500 $ 112,937 $ — $ 112,937

Cost of sales 86,115 ( 25 ) (a) 86,090 80,174 ( 67 ) (a) 80,107

Gross profit 27,385 25 27,410 32,763 67 32,830

Selling, general and administrative expenses 12,994 ( 620 ) (b) 12,374 13,190 ( 523 ) (b) 12,667

Loss (gain) on disposal of assets 6 — 6 2 — 2

Income from operations 14,385 645 15,030 19,571 590 20,161

Interest income, net 9 — 9 36 — 36

Other (expense) income, net ( 7 ) — ( 7 ) 5 — 5

Income before taxes 14,387 645 15,032 19,612 590 20,202

Income tax provision 560 182 (c) 742 5,527 161 (c) 5,688

Net income $ 13,827 $ 463 $ 14,290 $ 14,085 $ 429 $ 14,514

Earnings per share:

Basic $ 0.27 $ — $ 0.27 $ 0.27 $ 0.01 $ 0.28

Diluted $ 0.26 $ — $ 0.26 $ 0.27 $ — $ 0.27

Weighted average shares outstanding:

Basic 52,111,444 — 52,111,444 52,238,796 — 52,238,796

Diluted 52,722,127 — 52,722,127 52,627,541 — 52,627,541

Balance Sheet Data (at end of period):

Current assets $ 170,536 $ ( 252 ) (c) $ 170,284 $ 144,696 $ ( 220 ) (c) $ 144,476

Total Assets 352,152 ( 252 ) (c) 351,900 314,024 ( 220 ) (c) 313,804

Current liabilities 53,882 ( 779 ) (d) 53,103 53,716 ( 645 ) (d) 53,071

Deferred income taxes 15,034 ( 2,161 ) (c) 12,873 8,841 ( 1,744 ) (c) 7,097

Other long-term liabilities 3,669 — 3,669 1,838 — 1,838

Total stockholders' equity $ 279,567 $ 2,688 (e) $ 282,255 $ 249,629 $ 2,169 (e) $ 251,798

(a) The share-based compensation correction to cost of sales for the quarters ended September 30, 2019 and 2018 was approximately $ 0.1 million and $ 0.1 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended September 30, 2019 and 2018 was approximately $ 0.7 million and $ 0.6 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $ 0.1 million and $ 0.1 million for the quarters ended September 30, 2019 and 2018, respectively.

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

(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction.

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

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

See Note 2, Error Correction , for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.

The following table reconciles our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended December 31, 2018.

Three Months Ended December 31, 2018

Previously Reported Corrections As Corrected

(in thousands, except share and per share data)

Net sales $ 112,340 $ — $ 112,340

Cost of sales 84,545 ( 51 ) (a) 84,494

Gross profit 27,795 51 27,846

Selling, general and administrative expenses 11,260 ( 537 ) (b) 10,723

Loss (gain) on disposal of assets ( 3 ) — ( 3 )

Income from operations 16,538 588 17,126

Interest income, net 25 — 25

Other (expense) income, net ( 58 ) — ( 58 )

Income before taxes 16,505 588 17,093

Income tax provision 3,969 160 (c) 4,129

Net income $ 12,536 $ 428 $ 12,964

Earnings per share:

Basic $ 0.24 $ 0.01 $ 0.25

Diluted $ 0.24 $ 0.01 $ 0.25

Cash dividends declared per common share:

$ 0.16 $ — $ 0.16

Weighted average shares outstanding:

Basic 52,086,247 — 52,086,247

Diluted 52,420,529 — 52,420,529

Balance Sheet Data (at end of period):

Current assets $ 140,861 $ ( 203 ) (c) $ 140,658

Total Assets 308,197 ( 203 ) (c) 307,994

Current liabilities 48,071 ( 580 ) (d) 47,491

Deferred income taxes 10,826 ( 1,567 ) (c) 9,259

Other long-term liabilities 1,801 — 1,801

Total stockholders' equity $ 247,499 $ 1,944 (e) $ 249,443

(a) The share-based compensation correction for cost of sales for the quarter ended December 31, 2018 was approximately $ 0.1 million.

(b) The share-based compensation correction to selling, general and administrative expenses for the quarter ended December 31, 2018 was approximately $ 0.6 million.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $ 0.1 million for the quarter ended December 31, 2018.

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

(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction.

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

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

See Note 2, Error Correction , for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2018.

1 The Company had a gain of $ 4.1 million, net of profit sharing and taxes, associated with insurance proceeds (Note 2) related to a damaged roof incurred by adverse weather earlier in the year, which impacted our basic and diluted EPS by $ 0.08 .

The following table summarizes certain financial data related to our segments.

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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-K

Item 8. Financial Statements and Supplementary Data