What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-01 · 221 added, 191 removed, 796 unchanged (34% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

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

8 unchanged sentences

Total current assets 427,836 408,954

Property, plant and equipment:

Land 16,018 15,438

Buildings 240,317 205,841

Machinery and equipment 403,664 391,366

Furniture and fixtures 41,128 40,787

Total property, plant and equipment 701,127 653,432

Accumulated depreciation 287,893 283,485

Property, plant and equipment, net 427,652 369,947

Intangible assets, net 75,560 68,053

Goodwill 81,892 81,892

Intangible assets, net and goodwill 158,838 149,945

Right of use assets 15,505 11,774

12 unchanged sentences

16,074 12,194

Commitments and contingencies

Commitments and contingencies (Note 18 )

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 2 , 80,950,856 and 81,508,381 issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Common stock, $ .004 par value, 200,000,000 shares authorized 2 , 81,246,902 and 81,508,381 issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 59,398 122,063

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

4 unchanged sentences

Selling, general and administrative expenses 48,637 51,470 139,820 123,684

(Gain) loss on disposal of assets — 6 ( 16 ) 12

Loss (gain) on disposal of assets 1 ( 25 ) ( 15 ) ( 13 )

Income from operations 65,520 64,664 179,689 163,610

5 unchanged sentences

Earnings per share:

$ 0.64 $ 0.56 $ 1.12 $ 1.02

$ 0.62 $ 0.55 $ 1.09 $ 0.99

Basic $ 0.65 $ 0.59 $ 1.77 $ 1.61

Diluted $ 0.63 $ 0.58 $ 1.72 $ 1.57

Cash dividends declared per common share:

1 unchanged sentence

Weighted average shares outstanding:

81,791,792 81,439,691 81,339,153 81,263,523

83,786,222 83,469,581 83,527,717 83,478,498

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

Basic 81,089,476 81,418,800 81,448,413 81,140,473

Diluted 83,107,077 83,393,054 83,579,989 83,275,208

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, 2024

Nine Months Ended September 30, 2024

Common Stock Paid-in Retained

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

Capital Earnings 1

Shares Amount Capital Earnings Total

(in thousands)

9 unchanged sentences

Dividends — — — ( 19,571 ) ( 19,571 )

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

Three Months Ended June 30, 2024

Balance at September 30, 2024 81,247 $ 325 $ 59,398 $ 737,133 $ 796,856

Nine Months Ended September 30, 2023

Common Stock Paid-in Retained

Capital Earnings 1

Shares Amount Capital Earnings Total

(in thousands)

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

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

Net income — — — 130,574 130,574

4 unchanged sentences

Dividends — — — ( 19,946 ) ( 19,946 )

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

Six Months Ended June 30, 2023

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

Three Months Ended September 30, 2024

Common Stock Paid-in Retained

Capital Earnings 1

Shares Amount Capital Earnings Total

(in thousands)

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

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

Net income — — — 52,625 52,625

3 unchanged sentences

Stock repurchased and retired ( 46 ) — ( 3,962 ) — ( 3,962 )

Contingent Consideration — — — — —

Dividends — — — ( 6,492 ) ( 6,492 )

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

Three Months Ended June 30, 2023

Balance at September 30, 2024 81,247 $ 325 $ 59,398 $ 737,133 $ 796,856

Three Months Ended September 30, 2023

Common Stock Paid-in Retained

Capital Earnings 1

Shares Amount Capital Earnings Total

(in thousands)

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

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

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

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)

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

Share-based compensation 12,814 12,102

(Gain) loss on disposition of assets

Foreign currency transaction loss (gain)

Gain on disposition of assets

( 15 ) ( 13 )

Foreign currency transaction loss

Interest income on note receivable

( 14 ) ( 15 )

Deferred income taxes ( 4,112 ) ( 3,917 )

27 unchanged sentences

Cash dividends paid to stockholders ( 19,571 ) ( 19,946 )

Net cash (used in) provided by financing activities

Net cash used in financing activities

( 80,297 ) ( 7,827 )

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

Net (decrease) increase in cash, cash equivalents and restricted cash ( 2,358 ) 16,586

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

29 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, inventory valuation, inventory reserves, warranty accrual, workers' compensation accrual, medical insurance accrual, income taxes, useful lives of property, plant, and equipment, estimated future use of leased property, share-based compensation, revenue percentage of completion and estimated costs to complete.

The most significant estimates include, but are not limited to, inventory valuation, inventory reserves, warranty accrual, medical insurance accrual, income taxes, useful lives of property, plant, and equipment, estimated future use of leased property, share-based compensation, revenue percentage of completion and estimated costs to complete.

Actual results could differ materially from those estimates.

39 unchanged sentences

Internal-use software development costs are capitalized during the application development stage.

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.

These capitalized costs are reflected in intangible assets, net and goodwill 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 one to six years .

3 unchanged sentences

We perform our annual assessment of impairment during the fourth quarter of our fiscal year, and more frequently if circumstances warrant.

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

Six Months Ended June 30,

(in thousands)

Balance, beginning of period

$ 81,892 $ 81,892

Additions (decreases) during the period

Balance, end of period $ 81,892 $ 81,892

Recent Accounting Pronouncements

5 unchanged sentences

The following tables show disaggregated net sales by reportable segment (Note 20) by major source, net of intercompany sales eliminations.

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

AAON Oklahoma AAON Coil Products BASX Total

9 unchanged sentences

$ 228,887 $ 35,232 $ 63,133 $ 327,252

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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, 2024

Nine Months Ended September 30, 2024

AAON Oklahoma AAON Coil Products BASX Total

9 unchanged sentences

$ 664,754 $ 90,852 $ 147,311 $ 902,917

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

19 unchanged sentences

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.

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.

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

For certain manufactured equipment contracts and part sales, the primary performance obligation is delivery.

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.

14 unchanged sentences

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.

Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use a Company 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.

5 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 $ 10.2 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 amount of payments to our Representatives were $ 10.7 million and $ 20.1 million for the three months ended September 30, 2024 and 2023, respectively, and $ 31.7 million and $ 46.4 million for the nine months ended September 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 June 30, 2024.

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

Currently, all leases are classified as operating leases.

The following table presents the balances by lease type:

Balance Sheet Classification June 30, 2024 December 31, 2023

Operating Leases

Operating Leases Balance Sheet Classification September 30, 2024 December 31, 2023

(in thousands)

Right of use assets Right of use assets $ 15,505 $ 11,774

17 unchanged sentences

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

September 30,

2024 December 31,

3 unchanged sentences

$ 143,806 $ 138,108

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Allowance for credit losses:

5 unchanged sentences

Accounts receivable written off, net of recoveries

( 5 ) — ( 5 ) —

Balance, end of period $ 1,138 $ 385 $ 1,138 $ 385

3 unchanged sentences

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

September 30,

2024 December 31,

6 unchanged sentences

$ 177,731 $ 213,532

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Allowance for excess and obsolete inventories:

1 unchanged sentence

Balance, beginning of period $ 6,801 $ 5,281 $ 6,160 $ 4,527

Provision for (recoveries of) excess and 968 794 1,928 1,458

obsolete inventories

Provision for excess and obsolete inventories 2,075 1,521 4,003 2,979

Inventories written off ( 868 ) ( 2,014 ) ( 2,155 ) ( 2,718 )

Balance, end of period $ 8,008 $ 4,788 $ 8,008 $ 4,788

Property, Plant and Equipment

Our property, plant and equipment consist of the following:

September 30,

2024 December 31,

Property, plant and equipment:

(in thousands)

Land $ 15,918 $ 15,438

Buildings 257,253 205,841

Machinery and equipment 409,160 391,366

Furniture and fixtures 43,786 40,787

Total property, plant and equipment 726,117 653,432

Accumulated depreciation 298,465 283,485

Property, plant and equipment, net $ 427,652 $ 369,947

Depreciation expense is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

(in thousands)

Depreciation expense $ 14,636 $ 11,301 $ 39,104 $ 30,734

Intangible Assets and Goodwill

Intangible Assets

Our intangible assets consist of the following:

September 30,

2024 December 31,

8 unchanged sentences

Total intangible assets, net $ 76,946 $ 68,053

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Amortization expense is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

(in thousands)

6 unchanged sentences

Total $ 62,375

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

Nine Months Ended

September 30,

2024 September 30,

(in thousands)

Balance, beginning of period

$ 81,892 $ 81,892

Additions (decreases) during the period

Balance, end of period $ 81,892 $ 81,892

Supplemental Cash Flow Information

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Supplemental disclosures:

10 unchanged sentences

Changes in the warranty accrual are as follows:

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Warranty accrual:

6 unchanged sentences

Accrued liabilities were comprised of the following:

September 30,

2024 December 31,

16 unchanged sentences

Other long-term liabilities were comprised of the following:

September 30,

2024 December 31,

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, 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.

As of September 30, 2024, and December 31, 2023 we had $ 55.7 million and $ 38.3 million outstanding under the Revolver, respectively.

We have one standby letter of credit totaling $ 0.3 million as of September 30, 2024, and two standby letters of credit totaling $2.3 million as of December 31, 2023.

Borrowings available under the Revolver at September 30, 2024 were $ 144.0 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 % 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.

The weighted average interest rate on borrowings outstanding on the Revolver was 6.6 % for both the three and nine months ended September 30, 2024 as compared to 6.5 % and 6.3 % for the three and nine months ended September 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 nine months ended September 30, 2024 and 2023.

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

At September 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 June 30, 2024, our leverage ratio was 0.3 to 1.0, which meets the requirement of not being above 3 to 1.

At September 30, 2024, our leverage ratio was 0.19 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

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 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

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

12 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.

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.

As of September 30, 2024, we have investment tax credit carryforwards of approximately $ 0.6 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 approximately $ 1.0 million and $ 1.5 million for the three and six months ended June 30, 2024, respectively.

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 $ 1.2 million and $ 2.6 million for the three and nine months ended September 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.

10 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 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.

9 unchanged sentences

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 :

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

Nine months ended

September 30,

2024 September 30,

Senior Leadership 1 :

Expected (annual) dividend rate $ 0.32 $ 0.32

6 unchanged sentences

Expected life (in years) 3.0 3.0

1 SLT consists of officers and key members of management.

1 Senior Leadership consists of officers and key members of management.

The expected term of the options is based on evaluations of historical and expected future employee exercise behavior.

2 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, 2024:

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

Prices Number

15 unchanged sentences

( 44,816 ) 52.50

Outstanding at June 30, 2024

Outstanding at September 30, 2024

3,168,608 $ 39.34

Exercisable at June 30, 2024

Exercisable at September 30, 2024

2,133,466 $ 30.84

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 total pre-tax compensation cost related to unvested stock options not yet recognized as of September 30, 2024, is $ 10.8 million and is expected to be recognized over a weighted average period of approximately 2.0 years.

The total intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023, was $ 45.7 million and $ 27.6 million, respectively.

The cash received from options exercised during the nine months ended September 30, 2024 and 2023, was $ 25.6 million and $ 25.3 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, 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.

At September 30, 2024, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 5.9 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.

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

4 unchanged sentences

( 5,560 ) 56.41

Unvested at June 30, 2024

Unvested at September 30, 2024

150,039 $ 60.53

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, 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,

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of September 30, 2024, is $ 6.0 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, 2024 and 2023, using a Monte Carlo Model:

Nine months ended

September 30,

2024 September 30,

Expected (annual) dividend rate $ 0.32 $ 0.32

11 unchanged sentences

47,965 106.24

Additional target payout 1

Additional payout 1

( 21,919 ) 58.53

( 5,957 ) 69.81

Unvested at June 30, 2024 2

Unvested at September 30, 2024 2

174,260 $ 68.09

7 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 weighted average grant date fair value of the key awards was $53.45.

All pre-tax compensation cost has been recognized as of December 31, 2023, and all 39,899 awards vested in March 2024.

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

Shares Weighted

Unvested at December 31, 2023

39,899 $ 53.45

( 39,899 ) 53.45

Unvested at June 30, 2024

Share-Based Compensation

A summary of share-based compensation is as follows:

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Grant date fair value of awards during the period:

36 unchanged sentences

Administrative expenses are paid for by Plan participants.

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

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

The Company matches 175.0 % up to 6.0 % 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

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

(in thousands)

7 unchanged sentences

This incentive program ended December 31, 2023.

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

(in thousands)

12 unchanged sentences

This healthcare coverage ended December 31, 2023.

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 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 six months ended June 30, 2024 and 2023:

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

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

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 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 16)

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

Stockholders’ Equity

1 unchanged sentence

The Board authorizes the stock repurchase programs for the Company.

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

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

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.

9 unchanged sentences

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 and are repurchased at current market prices.

stock related to our LTIP plans (Note 13) at current market prices.

Our repurchase activity is as follows:

Six Months Ended

June 30, 2024 June 30, 2023

Nine Months Ended

September 30, 2024 September 30, 2023

(in thousands, except share and per share data)

Program Shares 1

Total $ $ per share 1

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

Open market 1,353,564 $ 100,034 $ 73.90 402,873 $ 25,009 $ 62.08

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

LTIP shares 1

87,981 7,455 84.73 20,218 1,202 59.45

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

1,441,545 $ 107,489 $ 74.57 423,091 $ 26,211 $ 61.95

1 Includes stock repurchased for payment of statutory tax withholding and/or stock repurchased to cover the strike price of stock options.

Cash Dividends

3 unchanged sentences

Declaration Date Record Date Payment Date Dividend

Annualized Dividend

per Share Annualized Dividend

March 1, 2023 March 13, 2023 March 31, 2023 $ 0.08 $ 0.32

4 unchanged sentences

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

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

August 15, 2024 September 6, 2024 September 27, 2024 $ 0.08 $ 0.32

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.

27 unchanged sentences

The 2019 Investor may exercise its put option or the Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt.

The 2019 Investor's interest of $ 6.5 million is recorded in New market tax credit obligation on the consolidated balance sheets.

The 2019 Investor's interest of $ 6.5 million is recorded in New markets tax credit obligations on the consolidated balance sheets.

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.

1 unchanged sentence

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 %.

4 unchanged sentences

The 2023 Investor may exercise its put option or the Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt.

The 2023 Investor's interest of $ 5.7 million is recorded in New market tax credit obligation on the consolidated balance sheets.

The 2023 Investor's interest of $ 5.7 million is recorded in New markets tax credit obligations on the consolidated balance sheets.

The Company incurred approximately $ 0.4 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.

8 unchanged sentences

The Investor may exercise its put option or the Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt.

The 2024 Investor's interest of $ 3.8 million is recorded in New market tax credit obligations on the consolidated balance sheets.

The 2024 Investor's interest of $ 3.8 million is recorded in New markets tax credit obligations on the consolidated balance sheets.

The Company incurred approximately $ 0.4 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.

11 unchanged sentences

AAON, Inc., et al.

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

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

The First Amended Complaint asserts that the Company improperly terminated Plaintiffs and seeks damages alleged to be no less than $ 48.6 million, plus fees and costs.

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

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

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

8 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, 2024, except as noted below.

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

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

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.

Payments made in satisfaction of the purchase commitment were approximately $ 3.1 million and $ 9.7 million the three and nine months ended September 30, 2024, respectively, as compared to $ 2.4 million and $ 7.5 million for the three and nine months ended September 30, 2023, respectively.

Estimated minimum future payments are $ 2.2 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 June 30, 2024.

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

In November 2024, the Company entered into a definitive agreement to purchase a new 787,000 square foot facility in Memphis, Tennessee, which will accommodate incremental demand from the data center market over the next several years, at the same time providing more geographic diversification across our manufacturing footprint.

The purchase price for the facility is approximately $ 63.0 million.

Related Parties

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

(in thousands)

1 unchanged sentence

Payments to affiliates 368 90 1,488 872

September 30,

2024 December 31,

8 unchanged sentences

• The Company periodically rents space partially owned by the CEO for various Company meetings.

• The Company leases flight time of an aircraft partially owned by our COO and Vice President.

• The Company leases flight time of an aircraft partially owned by our President/COO and Vice President.

The Company has determined that it has three reportable segments for financial reporting purposes.

16 unchanged sentences

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Net Sales (in thousands)

13 unchanged sentences

Gross profit $ 114,158 $ 116,109 $ 319,494 $ 287,281

June 30, 2024 December 31, 2023

Long-lived assets (in thousands)

September 30,

2024 December 31,

Long-lived assets 1

(in thousands)

AAON Oklahoma $ 252,732 $ 248,556

2 unchanged sentences

Total long-lived assets $ 443,157 $ 381,721

Intangible assets and goodwill

1 Property, plant and equipment, net & right of use assets

Intangible assets, net and goodwill

AAON Oklahoma $ 21,880 $ 10,282

1 unchanged sentence

BASX 136,958 139,663

Total intangible assets and goodwill $ 157,452 $ 149,945

Total intangible assets, net and goodwill $ 158,838 $ 149,945

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