What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-03 · 186 added, 166 removed, 798 unchanged (31% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

4 unchanged sentences

160,108 127,158

Income tax receivable 2,699 —

Inventories, net 214,507 198,939

28 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, 54,379,324 and 53,425,184 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock, $ .004 par value, 100,000,000 shares authorized, 81,231,513 and 80,137,776 issued and outstanding at September 30, 2023 and December 31, 2022, respectively 2

Additional paid-in capital 109,874 98,735

Retained earnings 2

572,285 461,657

Total stockholders' equity 682,484 560,714

1 unchanged sentence

1 Held by variable interest entities (Note 16)

2 Reflects three-for-two stock split effective August 16, 2023.

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

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

12 unchanged sentences

Earnings per share:

Basic $ 0.84 $ 0.30 $ 1.52 $ 0.64

Diluted $ 0.82 $ 0.30 $ 1.48 $ 0.63

$ 0.59 $ 0.34 $ 1.61 $ 0.77

$ 0.58 $ 0.34 $ 1.57 $ 0.76

Cash dividends declared per common share 1 :

1 unchanged sentence

Weighted average shares outstanding:

Basic 54,293,127 53,095,286 54,175,682 52,992,439

Diluted 55,646,387 53,661,876 55,652,332 53,944,616

81,418,800 79,777,987 81,140,473 79,543,925

83,393,054 80,938,074 83,275,208 80,882,798

1 Reflects three-for-two stock split effective August 16, 2023.

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

1 unchanged sentence

Consolidated Statements of Stockholders' Equity

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

1 Reflects three-for-two stock split effective August 16, 2023

Capital Earnings 1

(in thousands)

7 unchanged sentences

Dividends — — — ( 19,946 ) ( 19,946 )

Balances at June 30, 2023 54,379 $ 218 $ 128,636 $ 531,257 $ 660,111

Three Months Ended June 30, 2023

Balances at September 30, 2023 81,232 $ 325 $ 109,874 $ 572,285 $ 682,484

Three Months Ended September 30, 2023

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

Capital Earnings 1

(in thousands)

Balances at March 31, 2023 54,202 $ 217 $ 117,077 $ 492,120 $ 609,414

Balances at June 30, 2023 81,569 $ 326 $ 128,636 $ 531,149 $ 660,111

Net income — — — 48,078 48,078

4 unchanged sentences

Dividends — — — ( 6,942 ) ( 6,942 )

Balances at June 30, 2023 54,379 $ 218 $ 128,636 $ 531,257 $ 660,111

Six Months Ended June 30, 2022

Balances at September 30, 2023 81,232 $ 325 $ 109,874 $ 572,285 $ 682,484

Nine Months Ended September 30, 2022

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

Capital Earnings 1

(in thousands)

8 unchanged sentences

Dividends — — — ( 10,088 ) ( 10,088 )

Balances at June 30, 2022 53,127 $ 213 $ 82,078 $ 408,215 $ 490,506

Three Months Ended June 30, 2022

Balances at September 30, 2022 79,823 $ 321 $ 87,949 $ 435,588 $ 523,858

Three Months Ended September 30, 2022

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

Capital Earnings 1

(in thousands)

Balances at March 31, 2022 53,065 $ 212 $ 77,574 $ 402,370 $ 480,156

Balances at June 30, 2022 79,691 $ 321 $ 82,078 $ 408,107 $ 490,506

Net income — — — 27,473 27,473

4 unchanged sentences

Dividends — — — 8 8

Balances at June 30, 2022 53,127 $ 213 $ 82,078 $ 408,215 $ 490,506

Balances at September 30, 2022 79,823 $ 321 $ 87,949 $ 435,588 $ 523,858

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

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Operating Activities (in thousands)

Net income $ 82,496 $ 34,005

$ 130,574 $ 61,478

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

5 unchanged sentences

Share-based compensation 12,102 10,229

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

Foreign currency transaction (gain) loss ( 13 ) 9

Gain on disposition of assets

( 13 ) ( 12 )

Foreign currency transaction loss

Interest income on note receivable

( 15 ) ( 17 )

Deferred income taxes ( 3,917 ) ( 563 )

9 unchanged sentences

Accrued liabilities and other long-term liabilities 21,405 12,857

Net cash provided by (used in) operating activities 59,940 ( 1,580 )

Net cash provided by operating activities

107,145 43,414

Investing Activities

5 unchanged sentences

Net cash used in investing activities

( 82,732 ) ( 63,782 )

Financing Activities

8 unchanged sentences

Cash dividends paid to stockholders ( 19,946 ) ( 10,096 )

Net cash provided by financing activities 22,273 65,740

Net cash (used in) provided by financing activities

( 7,827 ) 28,149

Net increase in cash, cash equivalents and restricted cash 16,586 7,781

15 unchanged sentences

Our financial statements consolidate all of our affiliated entities in which we have a controlling financial interest.

Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 16) 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.

Because we hold certain rights that give us the power to direct the activities of five variable interest entities ("VIEs") (Note 16) 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.

These financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet at December 31, 2022 is derived from audited consolidated financial statements.

32 unchanged sentences

This determination was based on recent and estimated future production levels as well as management’s knowledge of the equipment and historical and future use of the equipment.

The change in estimate was made prospectively and resulted in a decrease to depreciation expense within cost of sales on our consolidated statements of income of $ 1.8 million during the six months ended June 30, 2022.

WH Series and WV Series Water Source Heat Pump Units

31 unchanged sentences

The changes in the carrying amount of goodwill were as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

12 unchanged sentences

The following tables show disaggregated net sales by reportable segment (Note 19) by major source, net of intercompany sales eliminations.

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

10 unchanged sentences

$ 246,454 $ 25,769 $ 39,747 $ 311,970

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

AAON Oklahoma AAON Coil Products BASX Total

11 unchanged sentences

1 Other sales include freight, extended warranties and miscellaneous revenue.

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

10 unchanged sentences

$ 666,670 $ 89,262 $ 105,948 $ 861,880

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

AAON Oklahoma AAON Coil Products BASX Total

20 unchanged sentences

For all other products that are part sales or standardized units, the Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts.

As the primary performance obligation in such a contract is

delivery of the requested manufactured equipment, we satisfy the performance obligation when the control is passed to the customer, generally at time of shipment.

As the primary performance obligation in such a contract is delivery of the requested manufactured equipment, we satisfy the performance obligation when the control is passed to the customer, generally at time of shipment.

Final sales prices are fixed based on purchase orders.

22 unchanged sentences

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 $ 13.0 million and $ 11.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 26.3 million and $ 17.9 million for the six months ended June 30, 2023 and 2022, respectively.

The amount of payments to our Representatives were $ 20.1 million and $ 10.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 46.4 million and $ 28.7 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company has various lease arrangements for certain manufacturing and warehousing facilities, equipment rental, as well as administrative facilities.

1 unchanged sentence

The following table presents the balances by lease type:

Balance Sheet Classification June 30, 2023 December 31, 2022

Balance Sheet Classification September 30, 2023 December 31, 2022

Operating Leases

10 unchanged sentences

The lease term is approximately five years with additional renewal options.

This lease will be classified as an operating lease starting in third quarter of 2023.

Accounts Receivable

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

September 30,

2023 December 31, 2022

3 unchanged sentences

$ 160,108 $ 127,158

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Allowance for credit losses:

1 unchanged sentence

Balance, beginning of period $ 306 $ 563 $ 477 $ 549

(Recoveries of) provisions for expected credit ( 115 ) ( 107 ) ( 171 ) 181

Provisions for (recoveries of) expected credit

79 119 ( 92 ) 300

losses, net of adjustments

6 unchanged sentences

The components of inventories and related changes in the allowance for excess and obsolete inventories account are as follows:

September 30,

2023 December 31, 2022

6 unchanged sentences

$ 214,507 $ 198,939

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Allowance for excess and obsolete inventories:

7 unchanged sentences

Our intangible assets consist of the following:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Definite-lived intangible assets (in thousands)

6 unchanged sentences

Total intangible assets, net $ 61,901 $ 64,606

Amortization expense recorded in cost of sales is as follows:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Amortization expense recorded in selling, general and administrative expenses is as follows:

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

2 unchanged sentences

Supplemental Cash Flow Information

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Supplemental disclosures:

4 unchanged sentences

Non-cash capital expenditures $ ( 1,536 ) $ 306 $ 35 $ 985

Dividends declared $ — $ 10,096 $ — $ 10,096

The Company has product warranties with various terms from one year from the date of first use or 18 months for parts, data center cooling solutions, and cleanroom systems to 25 years for certain heat exchangers.

2 unchanged sentences

Changes in the warranty accrual are as follows:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Warranty accrual:

6 unchanged sentences

Accrued liabilities were comprised of the following:

September 30,

2023 December 31, 2022

8 unchanged sentences

Donations, short-term 419 637

Litigation settlement (Note 17 )

Accrued income taxes 113 12,472

6 unchanged sentences

Other long-term liabilities were comprised of the following:

September 30,

2023 December 31, 2022

6 unchanged sentences

On May 27, 2022, we amended our $ 100.0 million Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Revolver”), to provide for maximum borrowings of $ 200.0 million.

As of June 30, 2023 and December 31, 2022, we had $ 78.5 million and $ 71.0 million outstanding under the Revolver, respectively.

We have one standby letter of credit totaling $ 0.3 million as of June 30, 2023.

Borrowings available under the Revolver at June 30, 2023 were $ 121.2 million.

As of September 30, 2023 and December 31, 2022, we had $ 78.4 million and $ 71.0 million outstanding under the Revolver, respectively.

We have two standby letters of credit totaling $ 2.3 million as of September 30, 2023.

Borrowings available under the Revolver at September 30, 2023 were $ 119.3 million.

The Revolver expires on May 27, 2027.

4 unchanged sentences

The applicable fee percentage is determined quarterly based on the Company's leverage ratio.

The weighted average interest rate on borrowings outstanding on the Revolver was 6.3 % and 6.2 % for the three and six months ended June 30, 2023, respectively, as compared to 1.9 % and 1.7 % for the three and six months ended June 30, 2022, respectively.

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and six months ended June 30, 2023 and 2022.

The weighted average interest rate on borrowings outstanding on the Revolver was 6.5 % and 6.3 % for the three and nine months ended September 30, 2023, respectively, as compared to 3.5 % and 2.5 % for the three and nine months ended September 30, 2022, respectively.

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and nine months ended September 30, 2023 and 2022.

If SOFR cannot be determined pursuant to the definition, as defined by the Revolver agreement, any outstanding affected loans will be deemed to have been converted into alternative base rate ("ABR") loans.

ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50 %, or (c) daily simple SOFR for a one-month tenor in effect on such day plus 1.00 %.

At June 30, 2023, we were in compliance with our covenants, as defined by the Revolver.

At September 30, 2023, we were in compliance with our covenants, as defined by the Revolver.

Our financial covenants require that we meet certain parameters related to our leverage ratio.

At June 30, 2023, our leverage ratio was 0.37 to 1.0, which meets the requirement of not being above 3 to 1.

At September 30, 2023, our leverage ratio was 0.33 to 1.0, which meets the requirement of not being above 3 to 1.

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

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

4 unchanged sentences

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

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

12 unchanged sentences

The Company had investment tax credit carryforwards with a valuation allowance reserved against them as we did not have sufficient taxable income to utilize the carryforwards, in part because we generated more credit each year than we were able to utilize.

Because the Company will not generate additional excess credits after our 2022 tax year, we will be able to use our credit carryforwards against future taxable income and the related valuation allowance was reversed resulting in a one-time benefit of $ 3.1 million to the income tax provision for the three and six months ended June 30, 2023.

As of June 30, 2023, we have investment tax credit carryforwards of approximately $ 4.9 million.

As of September 30, 2023, we have investment tax credit carryforwards of approximately $ 3.8 million.

These credits have estimated expirations from the year 2039 through 2043.

8 unchanged sentences

Share-Based Compensation

As discussed in Note 15, the Company declared a three-for-two stock split effective August 16, 2023.

All share and per share information has been updated to reflect the effect of this stock split.

On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (“LTIP”) which provided an additional 5.0 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units and performance awards.

7 unchanged sentences

The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the 2016 Plan, establishes and revises rules and regulations relating to the 2016 Plan and makes any other determinations that it believes necessary for the administration of the 2016 Plan.

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, 2023 and 2022 using a Black Scholes-Merton Model:

Six months ended

June 30, 2023 June 30, 2022

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 nine months ended September 30, 2023 and 2022 using a Black Scholes-Merton Model:

Nine months ended

September 30, 2023 September 30, 2022

Directors and SLT 1 :

12 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 June 30, 2023:

The following is a summary of stock options vested and exercisable as of September 30, 2023:

Prices Number

15 unchanged sentences

( 106,291 ) 33.90

Outstanding at June 30, 2023

Outstanding at September 30, 2023

3,916,211 $ 32.83

Exercisable at June 30, 2023

Exercisable at September 30, 2023

2,273,691 $ 28.32

The total pre-tax compensation cost related to unvested stock options not yet recognized as of June 30, 2023 is $ 13.1 million and is expected to be recognized over a weighted average period of approximately 1.6 years.

The total intrinsic value of options exercised during the six months ended June 30, 2023 and 2022 was $ 25.3 million and $ 3.5 million, respectively.

The cash received from options exercised during the six months ended June 30, 2023 and 2022 was $ 23.2 million and $ 6.4 million, respectively.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of September 30, 2023 is $ 10.7 million and is expected to be recognized over a weighted average period of approximately 1.3 years.

The total intrinsic value of options exercised during the nine months ended September 30, 2023 and 2022 was $ 27.6 million and $ 6.7 million, respectively.

The cash received from options exercised during the nine months ended September 30, 2023 and 2022 was $ 25.3 million and $ 11.0 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 June 30, 2023, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 6.6 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.

At September 30, 2023, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 5.7 million, which is expected to be recognized over a weighted average period of approximately 1.5 years.

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

4 unchanged sentences

( 4,846 ) 38.52

Unvested at June 30, 2023

Unvested at September 30, 2023

192,978 $ 43.64

4 unchanged sentences

At the end of the measurement period, each award will be converted into common stock at 0 % to 200 % of the PSUs held, depending on overall TSR as compared to the S&P SmallCap 600 Index benchmark companies.

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of June 30, 2023 is $ 5.7 million and is expected to be recognized over a weighted average period of approximately 2.0 years.

The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the six months ended June 30, 2023 and 2022 using a Monte Carlo Model:

Six months ended

June 30, 2023 June 30, 2022

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of September 30, 2023 is $ 5.0 million and is expected to be recognized over a weighted average period of approximately 1.7 years.

The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the nine months ended September 30, 2023 and 2022 using a Monte Carlo Model:

Nine months ended

September 30, 2023 September 30, 2022

Expected (annual) dividend rate $ 0.32 $ 0.25

10 unchanged sentences

93,982 $ 36.62

38,759 126.61

Unvested at June 30, 2023 1

Unvested at September 30, 2023 1

152,112 $ 54.88

6 unchanged sentences

The fair value of Key Employee Awards is based on the fair market value of AAON common stock on the grant date.

The total pre-tax compensation cost related to unvested Key Employee Awards not yet recognized as of June 30, 2023 is $ 0.5 million and is expected to be recognized over a weighted average period of approximately 0.5 years.

The total pre-tax compensation cost related to unvested Key Employee Awards not yet recognized as of September 30, 2023 is $ 0.3 million and is expected to be recognized over a weighted average period of approximately 0.3 years.

A summary of the unvested Key Employee Awards is as follows:

2 unchanged sentences

39,899 $ 53.45

Unvested at June 30, 2023

Unvested at September 30, 2023

39,899 $ 53.45

1 unchanged sentence

A summary of share-based compensation is as follows:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Grant date fair value of awards during the period:

38 unchanged sentences

Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses during the six months ended June 30, 2023 and 2022.

The Company paid no administrative expenses during the nine months ended September 30, 2023 and 2022.

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 Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

5 unchanged sentences

Eligible employees are regular full-time and part-time employees who have worked during the year and are still employed when the EIP payment is made following the end of the fiscal year, excluding members of BASX's senior leadership team and any employee paid commissions or royalties.

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

10 unchanged sentences

In addition, the Company contributes certain amounts for BASX's employees enrolled in a high deductible plan to a qualified health savings account to assist employees with health insurance plan deductibles.

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

5 unchanged sentences

Dilutive common shares consist primarily of stock options and restricted stock awards.

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands, except share and per share data)

15 unchanged sentences

2 Dilutive shares related to contingent shares issued to the former owners of BASX (Note 15)

3 Reflects three-for-two stock split effective August 16, 2023.

Stockholders’ Equity

9 unchanged sentences

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

2 As of September 30, 2023, there is approximately $ 25.0 million remaining under the current stock repurchase program.

The Company repurchases shares of AAON, Inc.

7 unchanged sentences

Our repurchase activity is as follows:

Six Months Ended

June 30, 2023 June 30, 2022

Nine Months Ended

September 30, 2023 September 30, 2022

(in thousands, except share and per share data)

Program Shares Total $ $ per share Shares Total $ $ per share

Program Shares 1

Total $ $ per share 1

Open market 402,873 $ 25,009 $ 62.08 53,218 $ 2,030 $ 38.14

2 unchanged sentences

423,091 $ 26,211 $ 61.95 234,011 $ 8,921 $ 38.12

1 Reflects three-for-two stock split effective August 16, 2023.

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

Inception to June 30, 2023

Inception to September 30, 2023

(in thousands, except share and per share data)

Program Shares Total $ $ per share

Program Shares 1

Total $ $ per share 1

Open market 6,893,924 $ 106,625 $ 15.47

2 unchanged sentences

22,444,127 $ 302,976 $ 13.50

1 Reflects three-for-two stock split effective August 16, 2023.

Cash Dividends

4 unchanged sentences

Record Date Payment Date Dividend

per Share Annualized Dividend

Annualized Dividend

May 18, 2022 June 3, 2022 July 1, 2022 $ 0.13 $ 0.26

2 unchanged sentences

May 18, 2023 June 9, 2023 June 30, 2023 $ 0.08 $ 0.32

August 18, 2023 September 8, 2023 September 29, 2023 $ 0.08 $ 0.32

1 Effective with the cash dividend declared on March 1, 2023 (paid on March 31, 2023), the Company moved from semi-annual cash dividends to quarterly cash dividends.

2 Reflects three-for-two stock split effective August 16, 2023.

On July 7, 2023, the Board of Directors declared a three-for-two stock split of the Company's common stock to be paid in the form of a stock dividend.

Stockholders of record at the close of business on July 28, 2023 will receive one additional share for every two shares they hold as of that date on August 16, 2023 (ex-dividend date August 17, 2023).

Pro Forma Results of Stock Split

The retroactive effect of the stock split, which will occur in the third quarter of 2023, will result in an insignificant (less than $ 0.1 million) reclass between common stock and retained earnings within stockholders' equity on the consolidated balance sheet.

The following table sets forth the pro forma computation of basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

(in thousands, except share and per share data)

$ 45,682 $ 15,946 $ 82,496 $ 34,005

Basic weighted average shares

81,439,691 79,642,930 81,263,523 79,488,659

Effect of dilutive shares related to stock based compensation 1

2,029,890 849,885 2,002,199 1,121,997

Effect of dilutive shares related to contingent consideration 2

— — 212,776 306,269

Diluted weighted average shares

83,469,581 80,492,815 83,478,498 80,916,925

Earnings per share:

$ 0.56 $ 0.20 $ 1.02 $ 0.43

$ 0.55 $ 0.20 $ 0.99 $ 0.42

Anti-dilutive shares:

347,368 1,319,331 263,905 987,893

1 Dilutive shares related to stock options, restricted stock, PSUs and Key Employee Awards (Note 12)

2 Dilutive shares related to contingent shares issued to the former owners of BASX (Note 15)

The unaudited pro forma financial information was prepared in accordance with GAAP and is not necessarily indicative of the results of operations that would have occurred if the stock split had been effective before the date indicated above, nor is it indicative of the future operating results of the Company.

Stockholders of record at the close of business on July 28, 2023 received one additional share for every two shares they held as of that date on August 16, 2023 (ex-dividend date August 17, 2023).

Cash was paid in lieu of fractional shares (approximately $ 0.5 million).

All share and per share information has been updated to reflect the effects of this stock split.

The retroactive effect of the stock split resulted in an approximately $ 0.1 million reclass between common stock and retained earnings within stockholders' equity on the consolidated balance sheet.

Contingent Shares Issued in BASX Acquisition

As discussed above, the Company declared a three-for-two stock split effective August 16, 2023.

All share and per share information has been updated to reflect the effect of this stock split.

In December 2021, we closed on the acquisition of BASX.

3 unchanged sentences

Based on the final allocation of the consideration paid, we estimated the fair value of contingent consideration related to these shares to be approximately $ 60.0 million, which is included in additional paid-in capital on the consolidated balance sheets.

As of June 30, 2023, 0.39 million shares and 0.49 million shares related to the earn-out milestones for the years ended 2022 and 2021, respectively, have been issued to the former owners of BASX as private placements exempt from registration with the SEC under Rule 506(b), which are included in common stock on the consolidated statements of stockholders' equity.

As of September 30, 2023, 0.58 million shares and 0.73 million shares related to the earn-out milestones for the years ended 2022 and 2021, respectively, have been issued to the former owners of BASX as private placements exempt from registration with the SEC under Rule 506(b), which are included in common stock on the consolidated statements of stockholders' equity.

New Markets Tax Credit

37 unchanged sentences

The Company filed its Answer to First Amended Complaint on January 31, 2023.

The Company believes that Plaintiffs’ claims are without merit and intends to vigorously defend itself.

On September 28, 2023, the parties attended a court ordered settlement conference and agreed to resolve the case for $ 7.5 million.

A settlement agreement was entered into on October 25, 2023 and the case has been dismissed with prejudice.

The settlement of $ 7.5 million has been included in accrued liabilities on our consolidated balance sheets and selling, general and administrative expenses on our consolidated statement of income.

The final payment was made on October 26, 2023.

Other Matters

5 unchanged sentences

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

We had no material contractual purchase obligations as of June 30, 2023, except as noted below.

We had no material contractual purchase obligations as of September 30, 2023, except as noted below.

On April 27, 2022, the Company entered into a purchase and sale agreement with a third-party manufacturer to purchase certain assets to design and manufacture fan wheels for the purchase price of $ 6.5 million.

As of June 30, 2023, we have paid approximately $ 3.5 million related to this agreement, which is included in other long-term assets and property, plant and equipment, with the remaining $ 3.0 million included in accounts payable and other long-term assets on our consolidated balance sheets.

The final payment is expected to be made in 2023.

As of September 30, 2023, we have paid approximately $ 3.5 million related to this agreement, which is included in other long-term assets and property, plant and equipment, with the remaining $ 3.0 million included in accounts payable and other long-term assets on our consolidated balance sheets.

The final payment was made on October 30, 2023.

Related Parties

The following is a summary of transactions and balances with related parties:

Three Months Ended Six Months Ended

2023 June 30,

2022 June 30,

2023 June 30,

Three Months Ended Nine Months Ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

(in thousands)

1 unchanged sentence

Payments to affiliates 90 30 872 1,033

September 30,

2023 December 31,

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The Gross Profit amounts shown below are presented after elimination entries.

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Net Sales (in thousands)

13 unchanged sentences

Gross profit $ 116,109 $ 65,591 $ 287,281 $ 159,031

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Long-lived assets (in thousands)

9 unchanged sentences

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