What changed in this filing

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Item 1. Financial Statements

2024-08-01 compared with 2024-05-02 · 208 added, 126 removed, 779 unchanged (30% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

3 unchanged sentences

Accounts receivable, net 149,149 138,108

Income tax receivable 4,969 —

Inventories, net 182,988 213,532

29 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, 82,117,680 and 81,508,381 issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Common stock, $ .004 par value, 100,000,000 shares authorized 2 , 80,950,856 and 81,508,381 issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 49,174 122,063

3 unchanged sentences

1 Held by variable interest entities (Note 16)

2 Effective July 9, 2024, our authorized common shares increased from 100,000,000 to 200,000,000 (Note 15)

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

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

(in thousands, except share and per share data)

22 unchanged sentences

Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Common Stock Paid-in Retained

12 unchanged sentences

Dividends — — — ( 13,079 ) ( 13,079 )

Balance at March 31, 2024 82,118 $ 329 $ 139,184 $ 645,295 $ 784,808

Three Months Ended March 31, 2023

Balance at June 30, 2024 80,951 $ 324 $ 49,174 $ 691,000 $ 740,498

Three Months Ended June 30, 2024

Common Stock Paid-in Retained

1 unchanged sentence

(in thousands)

Balances at March 31, 2024 82,118 $ 329 $ 139,184 $ 645,295 $ 784,808

Net income — — — 52,228 52,228

Stock options exercised and restricted 192 1 5,976 — 5,977

stock awards granted

Share-based compensation — — 4,494 — 4,494

Stock repurchased and retired ( 1,359 ) ( 6 ) ( 100,480 ) — ( 100,486 )

Dividends — — — ( 6,523 ) ( 6,523 )

Balance at June 30, 2024 80,951 $ 324 $ 49,174 $ 691,000 $ 740,498

Six Months Ended June 30, 2023

Common Stock Paid-in Retained

Capital Earnings 1

(in thousands)

Balances at December 31, 2022 80,138 $ 322 $ 98,735 $ 461,657 560,714

4 unchanged sentences

Stock repurchased and retired ( 20 ) — ( 1,162 ) — ( 1,162 )

Contingent Consideration — — — — —

Dividends — — — ( 13,004 ) ( 13,004 )

Balance at March 31, 2023 81,303 $ 325 $ 117,077 $ 492,012 $ 609,414

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

Three Months Ended June 30, 2023

Common Stock Paid-in Retained

Capital Earnings 1

(in thousands)

Balances at March 31, 2023 81,303 $ 325 $ 117,077 $ 492,012 $ 609,414

Net income — — — 45,682 45,682

Stock options exercised and restricted 268 1 7,387 — 7,388

stock awards granted

Share-based compensation — — 4,304 — 4,304

Stock repurchased and retired ( 2 ) — ( 132 ) — ( 132 )

Dividends — — — ( 6,545 ) ( 6,545 )

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

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

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

Operating Activities (in thousands)

5 unchanged sentences

Provision for (recoveries of) credit losses on accounts receivable, net of adjustments

1,169 ( 171 )

Provision for excess and obsolete inventories, net of write-offs

15 unchanged sentences

Net cash provided by operating activities

127,912 59,940

Investing Activities

11 unchanged sentences

Stock options exercised 15,821 23,244

Repurchase of stock ( 100,034 ) —

Employee taxes paid by withholding shares ( 3,493 ) ( 1,162 )

2 unchanged sentences

( 49,460 ) 22,273

Net increase (decrease) in cash, cash equivalents and restricted cash 19,344 ( 2,969 )

Net increase in cash, cash equivalents and restricted cash 3,055 21,716

Cash, cash equivalents and restricted cash, beginning of period 9,023 5,949

44 unchanged sentences

Despite efforts to mitigate the impact of inflation, supply chain issues and the tight labor market, future disruptions, while temporary, could negatively impact our consolidated financial position, results of operations and cash flows.

WH Series and WV Series Water Source Heat Pump Units

As part of the normal course of business, management continually monitors the profitability of the Company's various product series offerings.

During the third quarter of 2022, management made the decision to no longer produce our small packaged geothermal/water-source heat pump units consisting of the WH Series horizontal configuration and WV Series vertical configuration, from one-half to 12 1/2 tons ("WH/WV").

These WH/WV units were produced solely out of the AAON Oklahoma facility.

Production of the remaining WH/WV backlog was completed during the second quarter 2023.

Accounting Policies

26 unchanged sentences

These capitalized costs are reflected in intangible assets, net on the consolidated balance sheets and are amortized over the estimated useful life of the software.

The useful life of our internal-use software development costs is generally 1 - 6 years.

The useful life of our internal-use software development costs is generally one to six years .

Goodwill and Indefinite-Lived Intangible Assets

3 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

10 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 March 31, 2024

Three Months Ended June 30, 2024

AAON Oklahoma AAON Coil Products BASX Total

3 unchanged sentences

Air handlers — 12,496 2,371 14,867

Cleanroom systems — — 11,227 11,227

Data center cooling solutions — 926 41,907 42,833

Water-source heat pumps — 1,574 — 1,574

Part sales 17,974 — 906 18,880

4,111 944 55 5,110

$ 225,727 $ 31,373 $ 56,466 $ 313,566

Three Months Ended June 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 196,065 $ — $ — $ 196,065

Condensing units 61 11,329 — 11,390

Air handlers — 12,610 2,600 15,210

Outdoor mechanical rooms — 61 — 61

5 unchanged sentences

$ 218,214 $ 30,081 $ 35,662 $ 283,957

Three Months Ended March 31, 2023

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

Six Months Ended June 30, 2024

AAON Oklahoma AAON Coil Products BASX Total

3 unchanged sentences

Air handlers — 22,474 4,558 27,032

Cleanroom systems — — 18,540 18,540

Data center cooling solutions — 1,132 59,580 60,712

Water-source heat pumps — 3,155 — 3,155

Part sales 33,291 6 1,184 34,481

7,669 1,587 316 9,572

$ 435,867 $ 55,620 $ 84,178 $ 575,665

Six Months Ended June 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 376,091 $ — $ — $ 376,091

Condensing units 61 26,607 — 26,668

Air handlers — 24,831 5,638 30,469

Outdoor mechanical rooms 208 212 — 420

13 unchanged sentences

Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income, and are estimated and recognized by the Company throughout the life of the contract.

The aggregate of costs incurred and income recognized on uncompleted contracts in excess of billings is shown as a contract asset within our consolidated

balance sheets, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a contract liability within our consolidated balance sheets.

The aggregate of costs incurred and income recognized on uncompleted contracts in excess of billings is shown as a contract asset within our consolidated balance sheets, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a contract liability within our consolidated balance sheets.

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.

3 unchanged sentences

Historically, sales of our products were moderately seasonal with the peak period being May-October of each year due to timing of construction projects being directly related to warmer weather.

However, in recent years, given the increases in demand of our product and increases in our backlog, sales has become more constant throughout the year.

However, in recent years, given the increases in demand of our product, changes in product mix and increases in our backlog, sales have become more constant throughout the year.

Product Warranties

18 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 $ 10.8 million and $ 13.3 million for the three months ended March 31, 2024 and 2023, respectively.

The amount of payments to our Representatives were $ 10.2 million and $ 13.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 21.0 million and $ 26.3 million for the six months ended June 30, 2024 and 2023, respectively.

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

Lease expiration dates, including expected renewal options, range from April 2025 to November 2033.

The discount rates used to calculate the present value of lease payment range from 1.3% to 6.6% as of March 31, 2024.

The discount rates used to calculate the present value of lease payment range from 1.3 % to 6.6 % as of June 30, 2024.

Currently, all leases are classified as operating leases.

The following table presents the balances by lease type:

Balance Sheet Classification March 31, 2024 December 31, 2023

Balance Sheet Classification June 30, 2024 December 31, 2023

Operating Leases

23 unchanged sentences

$ 149,149 $ 138,108

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Allowance for credit losses:

2 unchanged sentences

Provisions for (recoveries of) expected credit

1,062 ( 115 ) 1,174 ( 171 )

losses, net of adjustments

Accounts receivable written off, net of recoveries

( 5 ) — ( 5 ) —

Balance, end of period $ 1,492 $ 306 $ 1,492 $ 306

11 unchanged sentences

$ 182,988 $ 213,532

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Allowance for excess and obsolete inventories:

7 unchanged sentences

Our intangible assets consist of the following:

March 31, 2024 December 31, 2023

2024 December 31, 2023

Definite-lived intangible assets (in thousands)

8 unchanged sentences

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

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands)

4 unchanged sentences

Total future amortization expense 54,375

Internal-use software projects in process 4,838

Internal-use software projects not in service 6,614

Total $ 60,989

Supplemental Cash Flow Information

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Supplemental disclosures:

5 unchanged sentences

Contingent shares issued (Note 15)

$ — $ — $ 6,364 $ —

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

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Warranty accrual:

32 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 March 31, 2024 we had no amounts outstanding under our Revolver.

As of December 31, 2023, we had $ 38.3 million outstanding under the Revolver.

We have two standby letters of credit totaling $ 2.3 million as of March 31, 2024.

Borrowings available under the Revolver at March 31, 2024 were $ 197.7 million.

As of June 30, 2024, and December 31, 2023 we had $ 85.9 million and $ 38.3 million outstanding under the Revolver, respectively.

We have two standby letters of credit totaling $ 2.3 million as of June 30, 2024.

Borrowings available under the Revolver at June 30, 2024 were $ 111.8 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 6.6 % and 6.0 % for the three months ended March 31, 2024 and 2023, 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 months ended March 31, 2024 and 2023, respectively.

The weighted average interest rate on borrowings outstanding on the Revolver was 6.6 % for both the three and six months ended June 30, 2024, respectively, as compared to 6.3 % and 6.2 % for the three and six months ended June 30, 2023, 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, 2024 and 2023, respectively.

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 March 31, 2024, we were in compliance with our covenants, as defined by the Revolver.

At June 30, 2024, 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 March 31, 2024, our leverage ratio was 0.01 to 1.0, which meets the requirement of not being above 3 to 1.

At June 30, 2024, our leverage ratio was 0.3 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

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 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

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

5 unchanged sentences

Research and development credits ( 1.2 ) ( 1.2 ) ( 1.2 ) ( 1.3 )

Change in valuation allowance (Oklahoma Investment Credit) — ( 5.8 ) — ( 3.2 )

Other ( 0.6 ) ( 0.4 ) ( 0.4 ) ( 0.3 )

4 unchanged sentences

As part of our expansion projects in Oklahoma, we identified a separate, more advantageous Oklahoma credit program (not income tax related) which resulted in us discontinuing our accumulation of credits for Oklahoma’s manufacturing property investment program after the 2022 tax year.

As of March 31, 2024, we have investment tax credit carryforwards of approximately $ 2.3 million.

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, 2024, we have investment tax credit carryforwards of approximately $ 1.1 million.

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

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual.

Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of $ 0.5 million for the three months ended March 31, 2024.

Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of approximately $ 1.0 million and $ 1.5 million for the three and six months ended June 30, 2024, respectively.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021 are required to be capitalized and amortized over 5 years.

5 unchanged sentences

income tax examinations for the tax years 2019 to present.

In addition, we are subject to state and local income tax examinations for the tax years 2019 to present.

In addition, we are subject to

state and local income tax examinations for the tax years 2019 to present.

The Company continues to evaluate its need to file returns in various state jurisdictions.

3 unchanged sentences

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.

On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (“LTIP”) which provided 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.

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

On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan ("2016 Plan") which provides for approximately 13.4 million shares, comprised of 5.1 million new shares provided for under the 2016 Plan, approximately 0.6 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, approximately 3.9 million shares that were approved by the stockholders on May 15, 2018, and an additional 3.8 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.

Under the 2016 Plan, the exercise price of shares granted may not be less than 100 % of the fair market value at the date of the grant.

The 2016 Plan is administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”).

On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan ("2016 Plan") which provides for approximately 13.4 million shares, comprised of 5.1 million new shares provided for under the 2016 Plan, approximately 0.6 million shares that were available for issuance under the previous LTIP that were then authorized for issuance under the 2016 Plan, approximately 3.9 million shares that were approved by the stockholders on May 15, 2018, and an additional 3.8 million shares that were approved by the stockholders on May 12, 2020.

On May 21, 2024, our stockholders adopted the 2024 Long-Term Incentive Plan ("2024 Plan") which provides for approximately 2.7 million new shares and approximately 3.7 million shares that were issued and outstanding under the 2016 Plan (as of May 21, 2024) that are now authorized for issuance under the 2024 Plan.

The 3.7 million shares issued and outstanding under the 2016 Plan are only eligible for issuance under the 2024 Plan upon forfeiture, expiration, or cancellation.

Under the 2024 Plan and previously under the 2016 Plan (collectively, the "Plans"), shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards.

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

The Plans are administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”).

Membership on the Committee is limited to independent directors.

The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan.

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 three months ended March 31, 2024 and 2023 using a Black Scholes-Merton Model:

Three months ended

March 31, 2024 March 31, 2023

The Committee may delegate certain duties to one or more officers of the Company as provided in the Plans.

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

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, 2024 and 2023, using a Black Scholes-Merton Model:

Six months ended

2024 June 30,

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 March 31, 2024:

The following is a summary of stock options vested and exercisable as of June 30, 2024:

Prices Number

15 unchanged sentences

( 26,288 ) 56.65

Outstanding at March 31, 2024

Outstanding at June 30, 2024

3,521,735 $ 38.25

Exercisable at March 31, 2024

Exercisable at June 30, 2024

2,451,284 $ 30.42

The total pre-tax compensation cost related to unvested stock options not yet recognized as of March 31, 2024 is $ 14.7 million and is expected to be recognized over a weighted average period of approximately 2.3 years.

The total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was $ 14.2 million and $ 16.7 million, respectively.

The cash received from options exercised during the three months ended March 31, 2024 and 2023 was $ 9.8 million and $ 15.9 million, respectively.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of June 30, 2024, is $ 12.8 million and is expected to be recognized over a weighted average period of approximately 2.1 years.

The total intrinsic value of options exercised during the six months ended June 30, 2024 and 2023, was $ 23.8 million and $ 25.3 million, respectively.

The cash received from options exercised during the six months ended June 30, 2024 and 2023, was $ 15.8 million and $ 23.2 million, respectively.

The impact of these cash receipts is included in financing activities in the accompanying consolidated statements of cash flows.

2 unchanged sentences

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

At March 31, 2024, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 7.6 million, which is expected to be recognized over a weighted average period of approximately 2.1 years.

At June 30, 2024, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 7.2 million, which is expected to be recognized over a weighted average period of approximately 2.0 years.

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

4 unchanged sentences

( 2,704 ) 56.01

Unvested at March 31, 2024

Unvested at June 30, 2024

155,176 $ 60.07

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 March 31, 2024 is $ 8.5 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 three months ended March 31, 2024 and 2023 using a Monte Carlo Model:

Three months ended

March 31, 2024 March 31, 2023

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of June 30, 2024, is $ 7.4 million and is expected to be recognized over a weighted average period of approximately 1.8 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, 2024 and 2023, using a Monte Carlo Model:

Six months ended

2024 June 30,

Expected (annual) dividend rate $ 0.32 $ 0.32

14 unchanged sentences

( 2,362 ) 58.53

Unvested at March 31, 2024 2

Unvested at June 30, 2024 2

177,489 $ 68.20

13 unchanged sentences

( 39,899 ) 53.45

Unvested at March 31, 2024

Unvested at June 30, 2024

Share-Based Compensation

A summary of share-based compensation is as follows:

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Grant date fair value of awards during the period:

6 unchanged sentences

Options $ 2,046 $ 2,311 $ 4,253 $ 4,376

PSUs 1,227 716 1,851 1,083

Restricted stock 1,221 1,024 2,347 1,850

1 unchanged sentence

Total $ 4,494 $ 4,304 $ 8,451 $ 7,823

Income tax benefit related to share-based compensation:

Income tax benefit (deficiency) related to share-based compensation:

Options $ 2,081 $ 1,840 $ 5,228 $ 5,161

PSUs — — 169 —

Restricted stock 163 199 971 664

6 unchanged sentences

Forfeitures are accounted for as they occur.

Historically, if the employee or director is retirement eligible (as defined by the applicable LTIP or 2016 Plan) or becomes retirement eligible during the service period of the related share-based compensation award, the service period (and compensation expense recognition) 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 applicable LTIP, 2016 Plan or 2024 Plan) or becomes retirement eligible during the service period of the related share-based compensation award, the service period (and compensation expense recognition) 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 stock options and restricted stock 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.

12 unchanged sentences

Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses during the three months ended March 31, 2024 and 2023.

The Company paid no administrative expenses during the six months ended June 30, 2024 and 2023.

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

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands)

7 unchanged sentences

This incentive program ended December 31, 2023.

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands)

12 unchanged sentences

This healthcare coverage ended December 31, 2023.

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 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 months ended March 31, 2024 and 2023:

Three Months Ended

2024 March 31,

The following table sets forth the computation of basic and diluted earnings per share for the six months ended June 30, 2024 and 2023:

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands, except share and per share data)

18 unchanged sentences

Stock Repurchases

The Board has authorized one active stock repurchase program for the Company.

The Board authorizes the stock repurchase programs for the Company.

The Company may purchase shares on the open market from time to time.

The Board must authorize the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.

Our open market repurchase programs are as follows:

Our authorized open market repurchase programs during the periods presented are as follows:

Effective Date Authorized Repurchase $ Expiration Date

November 3, 2022 $ 50 million February 27, 2024

November 3, 2022 $ 50 million 1

February 27, 2024

February 27, 2024 $ 50 million 1

1 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.

2 As of March 31, 2024, there is approximately $50.0 million remaining under the current stock repurchase program.

The remaining amount available is subject to a Board authorized 10b5-1 plan requiring certain market conditions and requirements.

The Company repurchases shares of AAON, Inc.

June 4, 2024 $ 50 million 2

June 14, 2024

1 Repurchases made in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

2 Repurchases made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The Company also repurchases shares of AAON, Inc.

stock from employees for payment of statutory tax withholdings on stock transactions.

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

All repurchases are done at current market prices.

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

stock in their accounts sold to the Company.

The 401(k) Plan was amended in June 2022 to discontinue this program.

No additional shares have been purchased by the Company under this arrangement since June 2022.

All other repurchases from directors or employees are contingent upon Board approval and are repurchased at current market prices.

Our repurchase activity is as follows:

Three Months Ended

March 31, 2024 March 31, 2023

Six Months Ended

June 30, 2024 June 30, 2023

(in thousands, except share and per share data)

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Total $ $ per share 1

Employees 36,860 3,041 82.50 17,509 1,030 58.83

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 March 31, 2024

(in thousands, except share and per share data)

Program Shares 1

Total $ $ per share 1

Open market 1,353,564 $ 100,034 $ 73.90 — $ — $ —

401(k) 12,462,552 171,789 13.78

Directors and employees 3,126,197 27,703 8.86

Employees 42,573 3,493 82.05 19,624 1,162 59.21

1,396,137 $ 103,527 $ 74.15 19,624 $ 1,162 $ 59.21

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March 5, 2024 March 18, 2024 March 29, 2024 $ 0.08 $ 0.32

May 24, 2024 June 7, 2024 June 28, 2024 $ 0.08 $ 0.32

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

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All shares have been issued as private placements exempt from registration with the SEC under Rule 506(b) and are included in common stock on the consolidated statements of stockholders' equity.

Authorized Shares Outstanding

An amendment to the Company's Articles of Incorporation to increase its total authorized common shares from 100,000,000 to 200,000,000 was approved by our stockholders on May 21, 2024 at the Company's Annual Meeting.

On July 9, 2024, a Certificate of Amendment was filed with the Nevada Secretary of State to effectuate the increase in authorized shares.

New Markets Tax Credit

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On April 25, 2023, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2023 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2023 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “2023 Project”).

In connection with the 2023 NMTC transaction, the Company received a $ 23.0 million NMTC allocation for the 2023 Project and secured low interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.

In connection

with the 2023 NMTC transaction, the Company received a $ 23.0 million NMTC allocation for the 2023 Project and secured low interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.

Upon closing of the 2023 NMTC transaction, the Company provided an aggregate of approximately $ 16.7 million to the Investor, in the form of a loan receivable, with a term of twenty-five years , bearing an interest rate of 1.0 %.

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The 2019 Investor, 2023 Investor, and 2024 Investor and its majority owned community development entity are considered VIEs and the Company is the primary beneficiary of the VIEs.

Because the Company is the primary beneficiary of the VIEs,

they have been included in the consolidated financial statements.

Because the Company is the primary beneficiary of the VIEs, they have been included in the consolidated financial statements.

There are no other assets, liabilities or transactions in these VIEs outside of the financing transactions executed as part of the 2019 NMTC, 2023 NMTC, or 2024 NMTC arrangements, respectively.

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The Complaint challenged the Company’s termination of its business relationship with Plaintiffs.

The Company removed the action to the United States District Court for the District of Maryland (Northern Division) and moved to dismiss the Complaint.

The Company removed the action to the United States District Court for the District of

Maryland (Northern Division) and moved to dismiss the Complaint.

Plaintiffs’ First Amended Complaint (“First Amended Complaint”) was entered by the court on July 28, 2022.

3 unchanged sentences

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.

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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 March 31, 2024, except as noted below.

We had no material contractual purchase obligations as of June 30, 2024, except as noted below.

In 2023, the Company executed a five-year purchase commitment for refrigerants.

For the three months ended March 31, 2024 and 2023, the Company made payments of $ 3.6 million and $ 2.4 million, respectively, on this contract.

Payments made in satisfaction of the purchase commitment were approximately $ 3.0 million and $ 6.6 million the three and six months ended June 30, 2024, respectively, as compared to $ 2.7 million and $ 5.1 million for the three and six months ended June 30, 2023, respectively.

Estimated minimum future payments are $ 5.3 million, $ 9.1 million, $ 10.5 million, and $ 11.2 million for 2024, 2025, 2026, and 2027, respectively.

We had no other material contractual purchase obligations as of March 31, 2024.

We had no other material contractual purchase obligations as of June 30, 2024.

Related Parties

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

Three Months Ended

2024 March 31,

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands)

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

Three Months Ended

March 31, 2024 March 31, 2023

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Net Sales (in thousands)

AAON Oklahoma

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Gross profit $ 113,094 $ 94,018 $ 205,336 $ 171,172

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Long-lived assets (in thousands)

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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-Q

Item 1. Financial Statements