What changed in this filing

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Item 1. Business

2025-02-27 compared with 2024-02-28 · 101 added, 85 removed, 173 unchanged (52% of the section changed)

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Unless the context otherwise requires, references in this Annual Report to “AAON”, the “Company”, “we”, “us”, “our”, or “ours” refer to AAON Nevada and our subsidiaries.

AAON is a lead producer in heating, ventilation, and air conditioning ("HVAC") systems for commercial and industrial indoor environments.

We are engaged in the engineering, manufacturing, and selling of premium heating, ventilation, and air conditioning equipment consisting primarily of semi-custom and custom rooftop units, data center cooling solutions, cleanroom systems, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls.

AAON is a leader in heating, ventilation, and air conditioning (“HVAC”) solutions for commercial and industrial indoor environments.

The Company’s unique approach to designing and manufacturing highly configurable equipment to meet exact needs creates a premier ownership experience with greater efficiency, performance, and long-term value.

AAON is headquartered in Tulsa, Oklahoma, where its world-class innovation center and testing capabilities enable continuous advancement toward a cleaner and more sustainable future.

Business Segments

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AAON Oklahoma:

AAON Oklahoma engineers, manufactures, and sells, semi-custom, and custom HVAC systems, designs and manufactures controls solutions, and sells retail parts to customers through retail part stores and online.

AAON Oklahoma includes the operations of our Tulsa, OK and Parkville, MO manufacturing facilities, two retail locations, and the Norman Asbjornson Innovation Center ("NAIC") research and development laboratory accredited by the Air Movement and Control Association International, Inc.

With the NAIC, a world-class research and development ("R&D") laboratory in Tulsa, OK, our products are continuously tested under a variety of extreme environmental conditions to ensure they deliver the ultimate performance, efficiency, and value.

Also located in Tulsa, OK, our cutting-edge Customer Exploration Center showcases the engineering, design attributes and premium build quality of our equipment side-by-side the market alternatives.

AAON Oklahoma engineers, manufactures and sells semi-custom and custom HVAC systems, designs and manufactures controls solutions, and sells aftermarket parts to customers through retail part stores and online.

AAON Oklahoma includes the operations of our Tulsa, Oklahoma, Memphis, Tennessee and Parkville, Missouri manufacturing facilities, two retail locations, and the Norman Asbjornson Innovation Center (“NAIC”) research and development laboratory accredited by the Air Movement and Control Association International, Inc.

With the NAIC, a world-class research and development (“R&D”) laboratory in Tulsa, Oklahoma, our products are continuously tested under a variety of extreme environmental conditions to ensure they deliver the ultimate performance, efficiency, and value.

Also located in Tulsa, Oklahoma, our cutting-edge Exploration Center showcases the engineering, design attributes, and premium build quality of our equipment side-by-side the market alternatives.

AAON Coil Products:

AAON Coil Products engineers and manufactures a selection of our semi-custom, and custom HVAC systems as well as a variety of heating and cooling coils to be used in HVAC systems, mostly for the benefit of AAON Oklahoma, AAON Coil Products, and BASX.

AAON Coil Products consists of operations at our Longview, TX manufacturing facilities.

AAON Coil Products consists of operations at our Longview, Texas manufacturing facilities.

BASX branded products are also manufactured in Longview.

BASX engineers, manufactures, and sells an array of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market, ventilation solutions for cleanroom environments in the bio-pharmaceutical, semiconductor, medical and agriculture markets, and highly custom, air handlers and modular solutions for a vast array of markets.

BASX consists of operations at our Redmond, OR manufacturing facilities.

BASX consists of operations at our Redmond, Oregon manufacturing facilities.

For more information on our business segments’ financial position and results of operations, refer to Note 23, “Segments,” of the Notes to Consolidated Financial Statements.

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Our products serve the commercial, industrial, data center, and cleanroom markets within the HVAC equipment industry.

Our business strategy involves mass semi-customization leveraging flexible computer-aided manufacturing systems to produce highly configurable equipment.

Our strategy involves mass semi-customization leveraging flexible computer-aided manufacturing systems to produce highly configurable equipment.

We differentiate from other HVAC manufacturers by combining the low unit costs of mass production processes with the flexibility of individual customization.

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Our go-to-market strategy is centered around customers and markets that demand HVAC equipment with extraordinary performance and durability, greater energy efficiency, and best overall value.

We manufacture equipment with more configurability than other "standard" offerings found in the HVAC equipment industry and we do not manufacture equipment that has not been pre-specified by our customers with an emphasis on high customer satisfaction and reduced product delivery channel time.

Since day one, AAON has been dedicated to manufacturing and product leadership with innovation through research and development with a specific emphasis on energy performance, durability, efficiency, and indoor air quality.

We manufacture equipment with more configurability than other “standard” offerings found in the HVAC equipment industry and we do not manufacture equipment that has not been pre-specified by our customers.

Since day one, AAON has been dedicated to manufacturing and product leadership with innovation through R&D with a specific emphasis on energy performance, durability, efficiency, and indoor air quality.

As a result of our strategy to engineer and manufacture innovative HVAC products of the highest performance, efficiency, and value, we are naturally committed to meeting regulatory and certification standards of the relevant standard setting bodies, including the Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”);

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American Society of Heating, Refrigeration and Air-Conditioning Engineers (“ASHRAE”);

the AMCA and the International Organization for Standardization ("ISO").

the Air Movement and Control Association (“AMCA”) and the International Organization for Standardization (“ISO”).

To date, our sales have been primarily derived from the domestic market.

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As a percentage of net sales, foreign sales accounted for approximately 2.5%, 3.4%, and 3.1% of our net sales in each of those years, respectively.

Products - AAON Oklahoma and AAON Coil Products

Our rooftop and condensing units are primarily installed on commercial or industrial structures.

Our air handling units, self-contained units, geothermal/water-source heat pumps, and coils are suitable for all sizes of commercial and industrial buildings.

The size of these markets is determined primarily by the number of commercial and industrial building completions and replacement demand from existing buildings.

The replacement market consists of products installed to replace existing units/components that are worn or damaged and products to upgrade certain components, such as low leakage dampers, high efficiency heat exchangers and modern controls components.

Products - AAON Brand

AAON branded products are manufactured for, and installed on or beside, commercial and industrial buildings of all sizes.

The total addressable market for AAON branded products is determined primarily by the number of new commercial and industrial building projects and the replacement demand from existing commercial and industrial buildings.

The commercial and industrial new construction markets are subject to cyclical fluctuations in that they generally lag behind the housing market.

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The ratio of sales for new construction versus replacement is related to various factors.

Generally, the cyclicality of the new construction market impacts this ratio the most over an economic cycle.

We purchase certain components, fabricate sheet metal and tubing and then assemble and test the finished products.

Our primary finished product consists of a single unit system that generates heating and cooling in a self-contained cabinet, referred to in the industry as “unitary product”.

Our other finished products are coils, air handling units, condensing units, makeup air units, energy recovery units, rooftop units, geothermal/water-source heat pumps, and controls.

We offer three groups of rooftop units:

the RQ Series, consisting of five cooling sizes ranging from two to six tons;

Generally, the cyclical nature of the new construction market impacts this ratio the most over an economic cycle.

Our flagship products consist of a single-unit system that generates heating and cooling in a self-contained cabinet, referred to in the industry as “unitary product.” The majority of our unitary products are installed on the rooftop of commercial and industrial buildings and structures.

These are known in the industry as "rooftop units," or (“RTUs”).

Other finished products include air-source heat pumps, air handling units, condensing units, makeup air units, energy recovery units, geothermal/water-source heat pumps, coils, and controls.

All AAON branded products are created by assembling a combination of sheet metal and tubing fabrication components and pre-manufactured/purchased components such as coils, compressors, fans, and control systems.

All products undergo rigorous end-of-line testing and inspection prior to being shipped to customers.

We offer three groups of RTUs:

the RQ Series, consisting of five cooling sizes ranging from two to five tons;

the RN Series, offered in 26 cooling sizes ranging from six to 140 tons;

and the RZ Series, which is offered in 15 cooling sizes ranging from 45 to 261 tons.

When configured as Air-Source Heat Pumps ("ASHP"), the RQ and RN Series (2 to 50 tons), are capable of operating in ambient outside temperatures as low as zero degrees Fahrenheit.

Known as the AAON Alpha Class, our omni-climate ASHPs are a critical solution that meet the increasing demand for building decarbonization.

Utilizing variable speed technology, these innovative ASHPs provide energy-efficient heating and cooling throughout the year in virtually any climate.

In addition to our legendary RTUs, we offer the SA, SB and M2 Series as indoor packaged, water-cooled or geothermal/water-source heat pump self-contained units with cooling capacities of three to 70 tons.

When configured as Air-Source Heat Pumps (“ASHP”), the RQ and RN Series (two to 50 tons), are capable of operating in ambient outside temperatures as low as zero degrees Fahrenheit.

This class of products, known as AAON Alpha Class™, is a critical, industry-leading solution that meets the increasing demand for commercial building decarbonization.

Utilizing unrivaled engineering prowess and cutting-edge compressor technology, AAON Alpha Class™ provides energy-efficient heating and cooling throughout the year in virtually any climate.

In addition to our flagship packaged RTUs, we offer a variety of products to meet various market needs:

Our SA, SB, and M2 Series consist of indoor packaged, water-cooled or geothermal/water-source heat pump self-contained units with cooling capacities of three to 70 tons.

Our condensing unit, the CF Series, is available from two to 70 tons and can be configured as an Alpha Class ASHP.

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Our products are designed to compete on the higher quality end of standardized products.

Our RN, RQ, M2, and SB Series, are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.

Our unitary products (RQ and RN Series) are certified with AHRI and the US Department of Energy to ANSI/AHRI 210/240 up to five tons capacity and ANSI/AHRI 340/360 up to 63 tons capacity.

Our RN, RQ, M2, and SB Series geothermal/water-source heat pumps are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.

Our unitary air conditioners and heat pumps (RQ and RN Series) are certified with AHRI and the US Department of Energy (“DOE”) to ANSI/AHRI 210/240 up to five tons capacity and ANSI/AHRI 340/360 from five to 63 tons capacity.

Performance characteristics of our products range in cooling capacity from two to 261 tons and in heating capacity from 24,000 to 4,500,000 British Thermal Units (“BTUs”).

Many of our products far exceed these minimum standards and are among the highest efficiency products currently available in the market.

Many of our products far exceed DOE minimum efficiency standards and are among the highest efficiency products currently available in the market.

A typical commercial building installation requires one ton of air conditioning for every 300-400 square feet or, for a 100,000 square foot building, 250 tons of air conditioning, which can involve multiple units.

Our packaged RTUs with two stage or variable speed compressors are optimized with high efficiency evaporator and condenser coils and variable speed fans, leading to an AHRI Certified performance up to 20.3 seasonal energy efficiency ratio ("SEER") and 22.5 integrated energy efficiency ratio ("IEER").

Our packaged RTUs with two stage, digital, or variable speed compressors are optimized with high-efficiency evaporator and condenser coils and variable speed fans, leading to an AHRI Certified performance up to 18.0 Seasonal Energy Efficiency Ratio 2 (“SEER2”) and 22.8 integrated energy efficiency ratio (“IEER”).

AAON H3/V3 Series energy recovery wheel air handling units provide energy-efficient 100% outside air ventilation by recovering energy that would otherwise be exhausted from a building.

In addition to the equipment we manufacture, we design and produce high-performance controls solutions that enhances our equipment’s unique features and capabilities.

In addition to the equipment we manufacture, we design and produce high-performance controls solutions that enhance our equipment’s unique features and capabilities.

Our controls division provides factory-developed and tested control options for Variable Air Volume, Make-Up Air, Single Zone VAV, Constant Volume, and Zoning systems associated with our products and other HVAC-related equipment.

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Out of the box, our controls are user-friendly and configurable to provide a variety of HVAC unit application options, in addition, we are able to customize our controls to meet customers’ unique requirements.

Products - BASX

The products BASX manufactures are highly engineered and customized products, fully complementing our legacy business.

BASX data center cooling solutions are focused on providing highly configurable, purpose-built equipment with a focus on efficiency, speed of deployment, and quality.

High-performance air-cooled chiller solutions are provided with indirect airside economization and optional adiabatic assisted cooling, and are designed to integrate with high performance computing systems requiring direct to chip cooling.

White space process cooling solutions include fan coil walls, computer room air handling ("CRAH") units, overhead fan coils, in-row coolers, and chilled water air handlers.

Packaged solutions include coupled economizing chillers with integrated air handling units, direct evaporative coolers, and packaged direct expansion ("DX") solutions with airside economizers.

BASX cleanroom products are built to provide environmental control serving critical processes and high-fidelity control for precise industry requirements.

Process cooling solutions include recirculation air handling units and make up air handling units including integration of piping systems and controls.

Products - BASX Brand

As a full complement to our AAON branded products, our BASX branded products are highly customized to meet the expectations of even the most discerning customers.

Our data center cooling solutions are focused on providing highly configurable, purpose-built equipment with an emphasis on efficiency, performance, speed of deployment, and build-quality.

High-performance air-cooled heat rejection solutions are provided with waterside economizers (with optional adiabatic assisted cooling) and are designed to integrate with high-density computing systems requiring direct to chip liquid cooling.

Additionally, our perimeter gallery thermal management solutions include direct evaporative coolers, fan coil walls, and computer room air handling (“CRAH”) units.

White space solutions for a close-coupled IT load management approach include overhead fan coils and in-row coolers.

Packaged solutions include coupled economizing chillers with integrated air handling and packaged direct expansion (“DX”) solutions with airside economizers.

Our cleanroom products are built to provide environmental control serving critical processes and high-fidelity control for precise industry requirements.

Process cooling solutions include recirculation air handling units and make up air handling units, including the integration of piping systems and controls.

Environmental control solutions include modular cleanroom environments, fan filter units, filtered ceiling grids with integral flush mount lighting, pressurized plenums with integral ceiling grids, and hospital surgical suites.

BASX custom air handling products are primarily used in commercial, industrial, healthcare, and institutional facilities employing chilled water cooling, packaged direct expansion, heating hot water, indirect gas direct heat, humidification, dehumidification, filtration, and integrated controls.

BASX manufactures plenum fans for integration into air handling units as well as for replacement applications.

Our BASX branded custom air handling products are primarily used in commercial, industrial, healthcare, and institutional facilities employing chilled water cooling, packaged direct expansion, hydronic heating, indirect gas direct heat, humidification, dehumidification, filtration, and integrated controls.

BASX manufactures plenum fans for integration into air handling units and replacement applications.

BASX also offers integrated sound performance solutions.

Air Quality Products

The ASHRAE, a professional association with a goal of advancing HVAC systems designs and construction, established an Epidemic Task Force in 2020 and determined several recommendations to mitigate the spread of the virus, including humidity control, air filtration, increased outdoor air ventilation, and air disinfection.

ASHRAE, a professional association with a goal of advancing HVAC systems designs and construction, established an Epidemic Task Force in 2020 and determined several recommendations to mitigate the spread of the virus, including humidity control, air filtration, increased outdoor air ventilation, and air disinfection.

Humidity control - We continue to lead the market in developing energy-efficient humidity control with the use of variable capacity compressors and modulating hot gas reheat.

Designing HVAC systems with superior humidity control allows building management to maintain ASHRAE’s recommended ambient relative humidity levels of 40%-60%, the ideal level to inactivate viruses in the air and on surfaces.

Air Filtration - We standardized a design that uses a backward curved fan wheel, which can accommodate higher airflow and static pressure required for the ASHRAE recommended MERV 13 filtration, the minimum filter level for virus mitigation, with very little reconfiguration.

Prior to 2020, a vast majority of commercial buildings used

filtration levels of MERV 4 to MERV 8, which has always been acceptable for filtering out typical particulates in the air stream.

Air Filtration - Our standard design uses a backward curved fan wheel, which can accommodate higher airflow and static pressure required for the ASHRAE recommended MERV 13 filtration, the minimum filter level for virus mitigation, with very little reconfiguration.

Prior to 2020, a vast majority of commercial buildings used filtration levels of MERV 4 to MERV 8, which has always been acceptable for filtering out typical particulates in the air stream.

Outdoor Air Ventilation - Our innovative use of energy recovery wheels and energy recovery plates combined with its superior humidity control design can help building management follow outdoor ventilation air recommendations while limiting an increase of energy usage and maintaining recommended humidity levels.

AAON has been the leader in Dedicated Outdoor Air Systems ("DOAS") for many years.

On October 31st, 2022, the US Department of Energy ("DOE") released their final ruling concerning DX-DOAS.

AAON’s Delta Class™ products provide industry leading cooling, dehumidification, and heating options for high percentage outdoor air applications to promote better indoor air quality while minimizing energy consumption.

On October 31st, 2022, the DOE released its final ruling concerning direct expansion-dedicated outdoor air systems (“DX-DOAS”).

These are systems that condition primarily fresh outside air streams to maintain space comfort and air quality.

Starting May 1, 2024 the DOE will begin regulating the efficiency of dedicated outdoor air units separately from other comfort cooling systems.

On May 1, 2024, the DOE began regulating the efficiency of dedicated outdoor air units separately from other comfort cooling systems.

AHRI will begin certifying the performance of DX-DOAS equipment in 2025.

AAON perceives this as an advantage because our equipment is designed for higher energy efficiency and superior part load and dehumidification performance than competitors who focus on the initial sale price of their equipment or do not participate in the certification programs offered by AHRI.

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As of December 31, 2024, we employ a sales staff of 81 individuals and utilize approximately 55 independent manufacturer representatives’ organizations (“Representatives”) having 132 offices to market our products primarily in the United States and Canada.

Sales are made directly to the contractor or end user, with shipments being made from our Tulsa, Oklahoma, Longview, Texas, Parkville, Missouri, or Redmond, Oregon facilities to the job site.

Sales are made directly to the contractor or end user, with shipments made from our Tulsa, Oklahoma, Longview, Texas, Parkville, Missouri, or Redmond, Oregon facilities to the job site.

Shipments from our new Memphis, Tennessee plant are expected to start in early 2025.

Historically, our products and sales strategy focused on niche markets and applications.

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Additionally, a number of the Representatives we utilize have their own service organizations, which, in connection with us, provide the necessary warranty work and/or normal service to customers.

We have a program focused on increasing service capabilities across our North America Representative network, by assisting Representatives with business plans, providing training, and creating a cohesive network of service organizations to better meet the operational and maintenance needs of our customer base.

Our product warranty policy is the earlier of one year from the date of first use or 18 months from date of shipment for parts only, including controls;

We have a program focused on increasing service capabilities across our North America Representative network, to ensure we collectively support our customers across North America.

We work closely with our Representatives to develop and support business plans, develop leadership capabilities, and provide technician training to our representatives and selected contractors.

All of which creates a cohesive network of service organizations to better meet the operational and maintenance needs of our customer base.

Our product warranty policy is the earlier of one year from the date of first use or 18 months from the date of shipment for parts only, including controls;

18 months for data center cooling solutions and cleanroom systems;

five years for compressors (if applicable);

15 years on aluminized steel gas-fired heat exchangers (if applicable);

25 years on stainless steel heat exchangers (if applicable);

and ten years on gas-fired heat exchangers in our historical RL products (if applicable).

Our warranty policy for the RQ series covers parts for two years from date of unit shipment.

five years for compressors;

15 years on aluminized steel gas-fired heat exchangers;

25 years on stainless steel heat exchangers;

and ten years on gas-fired heat exchangers in our historical RL products.

Our warranty policy for the RQ series covers parts for two years from the date of unit shipment.

Our warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for five years from the date of installation.

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The aggregate sales percentages through Meriton-affiliated groups that are in addition to Texas AirSystems’ sales for the years-ended December 31, 2024, 2023, and 2022 accounted for an additional 8.0%, 2.3%, and 1.4%, respectively.

Two other similar groups, Ambient and Hobbs/Insight, share common ownership of some of our other sales representatives through portfolio groups and for the year-ended December 31, 2023, aggregate sales through their portfolio groups accounted for approximately 11.5% and 10.2% of our sales, respectively.

Sales through the portfolio groups of either Ambient or Hobbs/Insight did not account for 10% or more of our sales for any years-ended prior to December 31, 2023.

Two other similar groups, Ambient and AIR Control Concepts, share common ownership of some of our other sales representatives through portfolio groups and for the year-ended December 31, 2024, aggregate sales through their portfolio groups accounted for approximately 14.9% and 9.2% of our sales, respectively.

In 2023, aggregate sales for Ambient and AIR Control Concepts accounted for approximately 11.5% and 10.2% of our sales, respectively.

Sales through the portfolio groups of either Ambient or AIR Control Concepts did not account for 10% or more of our sales for any years-ended prior to December 31, 2023.

No other customers or portfolio groups accounted for more than 10% or more of our sales for the years ended December 31, 2024, and 2023, respectively.

Our backlog as of February 1, 2025 was approximately $842.3 million.

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Nonetheless, orders are subject to cancellation, in which case, cancellation charges apply up to the full price of the equipment.

After an order is deemed firm and is entered into the backlog, lead times to fulfill orders for AAON Oklahoma and AAON Coil Products is generally around 11 weeks.

Orders for BASX product, including orders built at AAON Coil Products' Longview location are typically placed months in advance of requested delivery to secure production for those projects.

As a result, portions of the backlog do not turn over within our 11 week lead time.

Our AAON Oklahoma and AAON Coil Products product offerings primarily compete with Lennox (Lennox International, Inc.), Trane (Trane Technologies plc), York International (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries).

Our BASX product offerings primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters, Silent Aire (Johnson Controls International PLC), Nortek (Nortek Air Solutions), and Engineered Air.

After an order is deemed firm and is entered into the backlog, lead times to fulfill orders for AAON branded products is generally around 10 - 12 weeks.

Orders for BASX branded product, including orders built at AAON Coil Products’ Longview location, are typically placed months in advance of requested delivery to secure production for those projects.

As a result, portions of the BASX branded product backlog do not turn over within typical lead times for AAON branded products.

Our AAON branded products primarily compete with Lennox (Lennox International, Inc.), Trane (Trane Technologies plc), York International (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries).

Our BASX branded products primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters, Silent Aire (Johnson Controls International PLC), Nortek (Nortek Air Solutions), Modine (Modine Manufacturing Co.) and Engineered Air.

All of our publicly traded competitors are substantially larger and have greater resources than we do.

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This has become a critical factor in competing in the HVAC equipment industry.

We must continually develop new and improved products in order to compete effectively and to meet evolving regulatory standards in all of our major product lines.

We self-sponsor our R&D activities, rather than needing to be customer-sponsored.

We must continually develop new and improved products in order to compete effectively and meet evolving regulatory standards in all of our major product lines.

R&D activities have involved the RQ, RN, and RZ (rooftop units), H3, SA, V3, and M2 (air handling units), CF (condensing units), and the SA and SB (self-contained units), as well as component evaluation and refinement, development of control systems and new product development.

R&D expenses incurred were approximately $43.7 million, $46.8 million, and $16.6 million in 2023, 2022, and 2021, respectively.

The significant increase for the year ended December 31, 2022 was related to the inclusion of a full year of operations of BASX (Note 4) as well as our commitment to product performance and innovation.

Our NAIC research and development laboratory facility includes many unique capabilities, which, to our knowledge, exist nowhere else in the world.

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The NAIC carries accreditation from AMCA for standards AMCA 210 (aerodynamic performance rating) & AMCA 300 (reverberant room sound testing).

Environmental application testing capabilities include -20 to 130°F testing conditions, up to 8 inches per hour rain testing, up to 2 inches per hour snow testing, and up to 50 mph wind testing.

Environmental application testing capabilities include -20 to 130°F testing conditions, up to eight inches per hour rain testing, up to two inches per hour snow testing, and up to 50 mph wind testing.

We believe we have the largest sound-testing chamber in the world for testing heating and air conditioning equipment and are not aware of any similar labs that can conduct this testing while putting the equipment under full environmental load.

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This capability is vital for critical facilities where the units must perform properly and allows our customers to verify the performance of our units in advance, rather than after installation.

These same capabilities have allowed AAON to develop low ambient air source heat pump products that are unique in being able to address the growing need for these type units that address electrification initiatives and commitments.

Our Parkville, Missouri location is home to our new Electronics Prototyping Lab ("Lab") featuring a fully functional SMD (Surface Mount Device) production line.

The production line incorporates automated pick-and-place equipment able to quickly and accurately place devices as small as 0.1mm by 0.2mm, the same technology scale used in cell phones.

The production line also includes a profiled reflow oven to assure reliability in the finished prototypes.

The Lab has allowed us to increase our speed to market and incorporate cutting-edge technology into our control designs.

In addition, it allows our Controls Engineering team to utilize their hardware and software development skills to outpace our competitors in responding to market changes and upsets.

These same capabilities have allowed AAON to develop low ambient air source heat pump products that are unique in being able to address the growing need for these type of units that address electrification initiatives and commitments.

The R&D activities at the BASX Redmond, Oregon facility is focused on developing and validating high-performance solutions paired to customers’ unique specifications.

First-of-kind configuration of HVAC components that are both fabricated within the Company's facilities, as well as outsourced suppliers, are modeled, fabricated, and assembled based upon best engineering practices.

Their performance is then validated through testing in a comprehensive simulation environment in conjunction with the customer to assure compliance expectations.

This unique and synergistic collaboration is distinctive to the BASX solutions development approach and is a primary driver of customer value.

Typical performance testing includes:

airflow, consumed power, air-leakage rates, control integration, thermal cooling/heating, fluid flow rates, sound, vibration and recovery rates based on simulated failures.

Our Parkville, Missouri location features our new Electronics Prototyping Lab (“Lab”), which includes a fully functional SMD (“Surface Mount Device”) production line.

This production line incorporates automated pick-and-place equipment capable of quickly and accurately placing devices as small as 0.1mm by 0.2mm, utilizing the same technology scale found in cell phones.

Additionally, the production line is equipped with a profiled reflow oven to ensure reliability in the finished prototypes.

The Lab enables us to speed up our time to market and integrate cutting-edge technology into our control designs.

Furthermore, it allows our Controls Engineering team to leverage their hardware and software development skills to outpace our competitors in adapting to market changes and disruptions.

We have also increased our investment in Controls by developing cutting-edge communication systems that enable our products to share information with both internal and external customers.

We have partnered with industry leaders to create our Internet of Things (“IoT”) solution and are beginning to utilize artificial intelligence tools to enhance efficiencies when developing our control algorithms and sequences of operation.

Additionally, we are developing new controls that leverage machine learning to continuously provide our customers with the most innovative solutions in the industry.

R&D expenses incurred were approximately $47.3 million, $43.7 million, and $46.8 million in 2024, 2023, and 2022, respectively.

Patents, Trademarks, Licenses, and Concessions

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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 increase in demand of our products and increase in our backlog, sales has become more constant throughout the year.

However, in recent years, given the increase in demand of our products and increase in our backlog, sales have become more constant throughout the year.

Environmental & Regulatory Matters

Laws concerning the environment that affect or could affect our operations include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, regulations promulgated under these Acts and any other federal, state or local laws or regulations governing environmental matters.

Laws concerning the environment that affect or could affect our operations include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, the AIM Act, regulations promulgated under these Acts and any other federal, state or local laws or regulations governing environmental matters.

We believe that we are in compliance with these laws and that future compliance will not materially affect our earnings or competitive position.

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We comply with industry regulations and requirements while pursuing responsible economic growth and profitability.

In 2023, we published our fifth annual environmental, social, and governance ("ESG") report sharing our approach in the material areas of stakeholder engagement, innovation and efficiency, environmental responsibility, climate change, occupational health and safety, talent attraction and retention, diversity and inclusion, community engagement and investment, corporate governance and ethics and compliance.

The report also highlights achievements and long-term targets related to greenhouse gas emissions, hazardous waste recycling, and non-fossil fuel consuming products.

In 2024, we published our sixth annual Sustainability report sharing our approach in the material areas of stakeholder engagement, innovation and efficiency, environmental responsibility, climate change, occupational health and safety, talent attraction and retention, diversity and inclusion, community engagement and investment, corporate governance and ethics and compliance.

The report also highlights achievements and long-term targets related to greenhouse gas emissions, paint byproduct material recycling, and non-fossil fuel-consuming products.

We participate in a sustainability benchmarking initiative, the Sustainability Alliance Scor3card, through which we monitor and report in the material areas of energy, material management, water, community stewardship, transportation, communication, and health.

We achieved Platinum level in this program in 2024 and 2023.

Our ESG committee provides oversight for ESG activities, ESG report development and an internal grassroots sustainability committee provides education opportunities, communications and recommendations to the Company on a regular basis.

Our Environmental, Social and Governance (“ESG”) committee provides oversight for ESG and sustainability activities, sustainability report development and an internal grassroots sustainability committee provides education opportunities, communications and recommendations to the Company on a regular basis.

We are committed to environmental responsibility and continue to make progress toward reducing greenhouse gas (“GHG”) emissions, increasing paint byproduct recycling from our facilities and increasing the percentage of non-fossil fuel-powered units we produce.

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Approximately 36% of our energy portfolio is currently derived from renewable sources, and the Company’s Scope 1 and 2 emissions (emissions that occur from sources that are controlled or owned by an organization and emissions associated with the purchase of electricity, steam, heat, or cooling) are being tracked.

We opted into an additional percentage of renewable energy at our Tulsa, Oklahoma facilities in 2022, continued to invest and partner on projects that reduce GHG emissions globally and have begun the transition to the lower global warming potential R-454B refrigerant.

We opted into additional renewable energy at our Tulsa, Oklahoma, and Redmond, Oregon facilities in 2024, continued to invest and partner on projects that reduce GHG emissions globally and have transitioned to the lower global warming potential R-454B refrigerant.

We continue to develop and manufacture non-fossil fuel-consuming units to provide the most sustainable commercial HVAC equipment in the market and announced the zero-degree cold air-source heat pump in 2023 as a critical solution that meets the increasing demand for building decarbonization in cold climates.

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Our Redmond, Oregon facilities are installing LED lights into any new fixtures in their current facility and working towards retrofitting old fixtures to LED.

We participate in an energy demand response program through

the public utility provider to reduce demand during peak hours.

We participate in an energy demand response program through the public utility provider to reduce demand during peak hours.

Energy efficiency has been a priority not only in product development, but also in overall capital investments which include the acquisition of new, energy-efficient equipment for the production floor, new high-speed overhead facility doors, the installation of new HVAC equipment, building control systems, the application of heat and light reflective material to production facilities, along with other behavioral-based energy efficiency changes.

We are tracking our energy usage intensity before and after these updates.

We also opened the Customer Exploration Center in 2023, a net-zero facility powered by solar and geothermal energy.

We are tracking our energy usage intensity before and

after these updates.

We also opened the Exploration Center in 2024, a net-zero facility powered by solar and geothermal energy.

In the area of material management, we focus on recycling, reducing, reusing and sourcing more environmentally friendly materials into our processes.

35 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-K

Item 1. Business