What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-02 compared with 2025-02-27 · 309 added, 303 removed, 890 unchanged (41% of the section changed)

13 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 27, 2025 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 2, 2026 expressed an unqualified opinion.

Basis for opinion

4 unchanged sentences

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

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

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

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

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

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described further in Notes 2 and 3 to the consolidated financial statements, the Company recognized net sales of $1,201 million for the year ended December 31, 2024.

Revenue from certain contracts to design and manufacture highly customized units is recognized on an over time basis, as progress is made toward satisfying the performance obligations of each contract.

Changes in job performance, job conditions, and estimated profitability may result in revisions to cost and income, and are estimated and recognized by the Company throughout the life of certain contracts.

We identified revenue recognized over time related to certain of the Company’s contracts with customers as a critical audit matter.

The principal consideration for our determination that revenue recognized over time related to certain of the Company’s contracts with customers is a critical audit matter is the high degree of auditor effort in performing procedures and evaluating audit evidence related to over time contracts with customers.

Our audit procedures related to revenue recognized over time related to certain of the Company’s contracts with customers included the following, among others.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition from BASX-Branded Products

As described further in Notes 2 and 3 to the consolidated financial statements, the Company recognized net sales of $547.8 million for the year ended December 31, 2025 for BASX-branded products.

Revenue to design and manufacture highly customized units is recognized on an over time basis, as progress is made toward satisfying the performance obligations of each contract.

Changes in job performance, job conditions, and estimated profitability may result in revisions to cost and income, and are estimated and recognized by the Company throughout the life of contracts.

We identified revenue recognized over time related to BASX-branded products as a critical audit matter.

The principal consideration for our determination that revenue recognized over time related to the Company’s contracts for BASX-branded products is a critical audit matter is the high degree of auditor effort in performing procedures and evaluating audit evidence related to over time contracts.

Our audit procedures related to revenue recognized over time related to the Company’s contracts for BASX-branded products included the following, among others.

• We tested the effectiveness of controls over revenue recognition, including management’s determination of the estimated cost to complete and recorded progress toward fulfillment of the performance obligation.

• We tested the appropriateness of over-time revenue recognition for a sample of contracts with customers.

• We tested the appropriateness of revenue recognition for certain over-time contracts, including agreeing cost inputs to source documents, such as purchase orders, third-party invoices, and shipping documents, and evaluating the estimated costs to complete.

• We tested the appropriateness of over time revenue recognition for a sample of contracts.

• We tested the appropriateness of revenue recognition for over time contracts, including agreeing cost inputs to source documents, such as purchase orders, third-party invoices, and shipping documents, and evaluating the estimated costs to complete.

• We evaluated estimates made by the Company by analyzing the gross margin on completed contracts compared to historical estimates for those contracts to test the Company’s estimation process.

2 unchanged sentences

Tulsa, Oklahoma

February 27, 2025

March 2, 2026

and Subsidiaries

7 unchanged sentences

Inventories, net 261,151 187,420

Contract assets 135,421 45,194

Contract assets, net 247,037 135,421

Prepaid expenses and other 17,921 7,308

9 unchanged sentences

Debt, short-term $ — $ 16,000

Short-term obligations of NMTC 7,535 —

Accounts payable 110,437 44,645

5 unchanged sentences

Other long term liabilities 23,299 20,743

New markets tax credit obligations 1

16,113 12,194

New market tax credit obligations 1

Commitments and contingencies (Note 20)

12 unchanged sentences

2025 2024 2023

(in thousands, except share and per share data)

(in thousands, except per share data)

Net sales $ 1,442,076 $ 1,200,635 $ 1,168,518

4 unchanged sentences

Income from operations 146,248 209,118 227,494

Interest expense, net ( 2,905 ) ( 4,843 ) ( 2,627 )

Interest expense ( 17,726 ) ( 2,905 ) ( 4,843 )

Other income, net 230 378 503

3 unchanged sentences

Earnings per share:

Basic $ 2.07 $ 2.19 $ 1.26

Diluted $ 2.02 $ 2.13 $ 1.24

Basic EPS $ 1.32 $ 2.07 $ 2.19

Diluted EPS $ 1.29 $ 2.02 $ 2.13

Cash dividends declared per common share:

6 unchanged sentences

Consolidated Statements of Stockholders Equity

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

Common Stock Paid-in Capital Retained Earnings

Shares Amount Total

(in thousands)

1 unchanged sentence

Net income — — — 177,623 177,623

Stock options exercised and restricted 1,711 5 23,135 — 23,140

stock awards granted

Stock options exercised and restricted stock awards granted 1,795 7 33,252 — 33,259

Share-based compensation — — 16,384 — 16,384

Stock repurchased and retired ( 425 ) ( 3 ) ( 26,308 ) — ( 26,311 )

Contingent consideration (Note 2)

— — ( 6,000 ) — ( 6,000 )

Dividends — — — ( 26,445 ) ( 26,445 )

1 unchanged sentence

Net income — — — 168,559 168,559

Stock options exercised and restricted 1,795 7 33,252 — 33,259

stock awards granted

Stock options exercised and restricted stock awards granted 1,132 5 31,856 — 31,861

Contingent shares issued 243 1 6,363 — 6,364

Share-based compensation — — 16,729 — 16,729

3 unchanged sentences

Net income — — — 107,593 107,593

Stock options exercised and restricted 1,132 5 31,856 — 31,861

stock awards granted

Contingent shares issued (Note 17)

243 1 6,363 — 6,364

Stock options exercised and restricted stock awards granted 724 3 17,141 — 17,144

Share-based compensation — — 17,994 — 17,994

1 unchanged sentence

Dividends — — — ( 32,603 ) ( 32,603 )

Balance at December 31, 2024 $ 81,437 $ 326 $ 68,946 $ 755,310 $ 824,582

Balances at December 31, 2025 $ 81,691 $ 327 $ 64,358 $ 830,300 $ 894,985

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

3 unchanged sentences

2025 2024 2023

Operating Activities (in thousands)

$ 168,559 $ 177,623 $ 100,376

Operating Activities

Net income $ 107,593 $ 168,559 $ 177,623

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

2 unchanged sentences

Amortization of right of use assets 166 189 324

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

715 ( 154 ) ( 72 )

Provision for credit losses on contract assets, net of adjustments

(Recoveries of) provision for excess and obsolete inventories, net of write-offs

( 968 ) 1,633 2,740

Provision for (recoveries of) losses on accounts receivable, net of adjustments 70 715 ( 154 )

Provision for losses on contract assets, net of adjustments 200 399 —

Provision for (recoveries of) excess and obsolete inventories, net of write-offs 152 ( 968 ) 1,633

Share-based compensation 17,994 16,729 16,384

3 unchanged sentences

Accounts receivable ( 167,023 ) ( 10,041 ) ( 9,978 )

Income taxes ( 5,285 ) ( 11,302 ) 18,195

Income tax receivable ( 23,330 ) ( 5,285 ) ( 11,302 )

Inventories ( 73,883 ) 27,080 ( 16,226 )

6 unchanged sentences

Net cash provided by operating activities 534 192,532 158,895

192,532 158,895 61,318

Investing Activities

Capital expenditures ( 190,563 ) ( 195,660 ) ( 104,294 )

Cash paid in business combination, net of cash acquired — — ( 249 )

Proceeds from government incentive grant 12,000 — —

Proceeds from sale of property, plant and equipment 40 25 129

2 unchanged sentences

Net cash used in investing activities ( 192,417 ) ( 213,075 ) ( 109,311 )

( 213,075 ) ( 109,311 ) ( 76,213 )

Financing Activities

2 unchanged sentences

Proceeds from financing obligation, net of issuance costs — 4,186 6,061

Payments related to financing costs ( 664 ) ( 398 ) —

Principal payments on financing lease — — ( 115 )

Payment related to financing costs ( 1,395 ) ( 664 ) ( 398 )

Stock options exercised 17,144 31,861 33,259

Repurchase of stock ( 100,034 ) ( 25,009 ) ( 12,737 )

Employee taxes paid by withholding shares ( 8,037 ) ( 1,302 ) ( 1,018 )

Dividends paid to stockholders ( 26,084 ) ( 26,445 ) ( 22,917 )

Repurchase of stock - open market ( 29,995 ) ( 100,034 ) ( 25,009 )

Repurchases of stock - LTIP plans (Note 18) ( 9,730 ) ( 8,037 ) ( 1,302 )

Cash dividends paid to stockholders ( 32,603 ) ( 26,084 ) ( 26,445 )

Net cash provided by (used in) financing activities 186,608 18,034 ( 46,510 )

18,034 ( 46,510 ) 17,357

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 5,275 ) ( 2,509 ) 3,074

( 2,509 ) 3,074 2,462

Cash, cash equivalents, and restricted cash, beginning of year 6,514 9,023 5,949

9 unchanged sentences

We are engaged in the engineering, manufacturing, marketing, and sale of premium air conditioning and heating equipment consisting of standard, semi-custom, and custom rooftop units, data centers 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.

Inflation and Labor Market

In 2022, raw material and component prices rose, but by 2023, inflation slowed, leading to some stabilization in these prices.

Due to our favorable liquidity position, we continue to make strategic purchases of materials when we see opportunities.

We continue to manage the increase in the cost of raw materials through price increases for our products.

We have also experienced supply chain challenges related to specific manufacturing parts, which we have managed through our strong vendor relationships as well as expanding our list of vendors.

Additionally, we continue to experience challenges in a tight labor market, especially the hiring of both skilled and unskilled production labor.

We have implemented the following wage increases to remain competitive and to attract and retain employees:

• In March 2022, we awarded annual merit raises for an overall 3.0 % increase to wages.

• In October 2022, we implemented a cost of living increase of 3.5 % in place for all employees

below the SLT level.

• In March 2023, we awarded annual merit raises for an overall 3.9 % increase to wages.

• In March 2024, we awarded annual merit raises for an overall 3.3 % increase to wages.

We continue to implement human resource initiatives to retain and attract labor to further increase production capacity.

Beginning in 2023, initiatives included changing our employee paid time off policy, historically awarded in arrears at the beginning of each quarter, to accrue ratably over each pay period.

Additionally, we enhanced our benefits for short-term disability, life insurance, paid parental leave, and paid military leave.

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 of 2023.

Change in Estimate

During the first quarter of 2022, a review of the Company’s useful lives for certain sheet metal manufacturing equipment at our Longview, Texas facilities resulted in a change in estimate that increased the useful lives from between 10 and 12 years to 15 years.

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

The change in estimate was made prospectively and resulted in a decrease in depreciation expense within cost of sales on our consolidated statements of income of $ 1.8 million during the year ended December 31, 2022.

We do not believe the impact of these events had a material adverse effect on our consolidated financial position, results of operations and cash flows.

Summary of Significant Accounting Policies

5 unchanged sentences

Because we hold certain rights that give us the power to direct the activities of eight variable interest entities (“VIEs”) (Note 19) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in those VIEs.

C ash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid temporary investments with original maturity dates of three months or less to be cash equivalents.

14 unchanged sentences

Concentration of Credit Risk

Our customers are concentrated primarily in the domestic commercial and industrial new construction and replacement markets.

To date, our sales have been primarily to the domestic market, with foreign sales accounting for approximately 2.5 %, 3.4 %, and 3.1 % of revenues for the years ended December 31, 2024, 2023, and 2022, respectively.

For the years-ended December 31, 2024, 2023, and 2022, Texas AirSystems accounted for approximately 16.4 %, 13.8 %, and 12.4 % of our sales, respectively.

Through portfolio groups, Meriton has an ownership interest in Texas AirSystems and certain other of our sales representatives.

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 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.

As of December 31, 2024, and 2023, Texas AirSystems accounted for approximately 10.3 % and 13.5 %, of our accounts receivable balance, respectively.

The aggregate percentages through Meriton-affiliated groups that are in addition to Texas AirSystems’ accounts receivable as of December 31, 2024, and 2023, accounted for an additional 6.3 % and 2.0 %, respectively.

Two other similar groups, Ambient and AIR Control Concepts, aggregate percentages through their portfolio groups accounted for approximately 19.3 % and 6.6 % of our accounts receivable as of December 31, 2024, respectively, and 16.8 % and 11.5 % as of December 31, 2023.

Additionally, one customer accounted for 21.1 % of our accounts receivable balance as of December 31, 2024.

No other customers or portfolio groups accounted for more than 10% or more of our accounts receivable as of December 31, 2024, and 2023, respectively.

Our top customers operate primarily in the data center cooling and commercial air conditioning markets.

Data centers are purpose-built facilities that enable the processing, storage and distribution of data across both traditional workloads and high-density compute, including AI training and inference.

Examples of companies in this space include Microsoft, Amazon Web Services, Google Cloud, QTS and Applied Digital.

The commercial air conditioning market includes the design and manufacturing of HVAC systems for non-residential buildings such as offices, hospitals, schools, data centers, warehouses and manufacturing facilities.

Our channel partners and customers support the design, construction and service of such facilities including independent sales representatives like Texas AirSystems and related portfolio groups through sole or common ownership like Meriton, Ambient and Air Control Concepts.

For the years ended December 31, 2025, 2024, and 2023, the Company had three, two and three customers, respectively, that were 10 percent or greater concentrations of revenue.

We have earned the trust and business of these significant customers over many years of performing to their needs, which they have supported with long-standing multi-year programs.

The remaining majority of our business is comprised of thousands of customers and transactions through our extensive network of independent representatives.

This mitigates our concentration risk as we also continue expanding our customer base through targeted growth in adjacent end markets, new customer acquisitions and expanding share with existing customers.

At December 31, 2025 and December 31, 2024, the Company had three customers that were 10 percent or greater concentrations of accounts receivable.

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

34 unchanged sentences

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 between one to six years .

The useful life of our internal-use software development costs is generally between one to 10 years.

Definite-Lived Intangible Assets

70 unchanged sentences

In the course of normal operations, the Company occasionally enters into contracts such as forward priced physical contracts for the purchase of raw materials that qualify for and are designated as normal purchase or normal sale contracts.

Such contracts are exempted from the fair value accounting requirements and are accounted for at the time product is purchased or sold under the related contract.

Such contracts are exempted from the fair value accounting requirements and are accounted for at the time the product is purchased or sold under the related contract.

The Company does not engage in speculative transactions, nor does the Company hold or issue financial instruments for trading purposes.

14 unchanged sentences

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

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.

Historically, AAON-branded sales 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 have become more constant throughout the year.

26 unchanged sentences

At December 31, 2025, and 2024, all of our leases are classified as operating leases.

We have entered into various short-term operating leases with an initial term of twelve months or less.

We have entered into various short-term operating leases with an initial term of 12 months or less.

These leases are not recorded on our consolidated balance sheets as of December 31, 2025, and 2024, and the rent expense for these short-term leases is not significant.

14 unchanged sentences

Actual results could differ materially from those estimates.

Disaggregated Revenue Disclosures

Revenue Recognition

The following tables show disaggregated net sales by reportable segment (Note 23) by major product brand, net of intercompany sales eliminations.

6 unchanged sentences

(in thousands)

AAON Products $ 858,711 $ 116,931 $ — $ 975,642

BASX Products — 26,940 198,053 224,993

$ 858,711 $ 143,871 $ 198,053 $ 1,200,635

AAON-branded Products $ 798,207 $ 96,075 $ — $ 894,282

BASX-branded Products 3,002 229,278 315,514 547,794

Total $ 801,209 $ 325,353 $ 315,514 $ 1,442,076

Year Ended December 31, 2024

1 unchanged sentence

(in thousands)

AAON Products $ 897,919 $ 104,073 $ — $ 1,001,992

BASX Products — 8,247 158,279 166,526

$ 897,919 $ 112,320 $ 158,279 $ 1,168,518

AAON-branded Products $ 858,711 $ 116,931 $ — $ 975,642

BASX-branded Products — 26,940 198,053 224,993

Total $ 858,711 $ 143,871 $ 198,053 $ 1,200,635

Year Ended December 31, 2023

1 unchanged sentence

(in thousands)

AAON Products $ 663,845 $ 107,290 $ — $ 771,135

BASX Products — — 117,653 117,653

$ 663,845 $ 107,290 $ 117,653 $ 888,788

AAON-branded Products $ 897,919 $ 104,073 $ — $ 1,001,992

BASX-branded Products — 8,247 158,279 166,526

Total $ 897,919 $ 112,320 $ 158,279 $ 1,168,518

Aftermarket part sales were $ 80.2 million, $ 76.9 million, $ 67.7 million for each of the years ended December 31, 2025, 2024, and 2023, respectively.

1 unchanged sentence

Opening and closing balances of contract assets and contract liabilities are as follows:

2024 2023 2022

(in thousands)

8 unchanged sentences

Estimated earnings 209,344 97,074

230,667 158,674

Total 463,743 230,667

Contract billings to date 311,274 112,786

6 unchanged sentences

The Company has lease arrangements for certain administrative, manufacturing and warehousing facilities and equipment.

Lease expiration dates, including expected renewal options, range from February 2025 to November 2033, with the weighted average remaining term being 6.6 years.

Lease expiration dates, including expected renewal options, range from January 2029 to April 2033, with the weighted average remaining term being 6.0 years.

The discount rates used to calculate the present value of lease payments range from 1.3 % to 6.6 % as of December 31, 2025.

All leases are classified as operating leases.

Balance Sheet Classification 2024 2023

(in thousands)

3 unchanged sentences

Since 2018, the Company has leased the manufacturing, engineering and office space used by our operations in Parkville, Missouri.

The lease term is through December 2032.

The lease term is through January 2029.

In May 2025, the Company added approximately 17,000 additional square feet and extended the lease term through April 2033.

Additionally, in May 2025, the Company added approximately 22,300 square feet with a lease term through April 2030.

The Company’s total leased space in Parkville, Missouri is approximately 125,300 square feet.

In November 2022, the Company entered into a lease arrangement for additional storage facilities in Tulsa, Oklahoma to support our operations.

1 unchanged sentence

In January 2024, we amended the lease for an additional 157,550 square feet for operations and parts distribution.

The amended lease term will expire January 2039.

The amended lease term will expire April 2033.

In July 2023, the Company entered into a lease agreement with a start date of September 2023, for land and approximately 72,000 square feet of facilities in Redmond, Oregon to support our manufacturing operations.

2 unchanged sentences

In the aggregate, these leases contain approximately 83,000 square feet of additional warehouse space, office space, as well as outside storage.

These leases have expiring terms from February 2025 to May 2028.

Total undiscounted future lease payments are as follows:

These leases have expiring terms from May 2027 to October 2030.

In October 2025, the Company entered into a lease agreement in Bend, OR with a start date of November 2025, for approximately 34,000 square feet of additional warehouse and office space.

The lease term will expire October 2030.

Total future lease payments as of December 31, 2025 are as follows:

(in thousands)

Thereafter 5,013

Total minimum lease obligations $ 22,341

present value of minimum lease payments 3,550

current portion 3,262

Lease obligations, long-term $ 15,529

Accounts Receivable

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

2024 2023 2022

(in thousands)

7 unchanged sentences

Balance, beginning of period $ 1,038 $ 323 $ 477

$ 323 $ 477 $ 549

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

720 ( 142 ) 359

Accounts receivable written off, net of recoveries

( 5 ) ( 12 ) ( 431 )

Provisions for expected credit losses, net of adjustments 283 720 ( 142 )

Accounts receivable recoveries (write offs) ( 13 ) ( 5 ) ( 12 )

Balance, end of period $ 1,308 $ 1,038 $ 323

12 unchanged sentences

Balance, beginning of period $ 5,192 $ 6,160 $ 4,527

Provisions for excess and obsolete inventories 4,540 5,480 2,852

Provision for excess and obsolete inventories 962 4,540 5,480

Inventories written off ( 810 ) ( 5,508 ) ( 3,847 )

Balance, end of period $ 5,344 $ 5,192 $ 6,160

We continuously evaluate our inventory parts and write off inventory when no alternative use can be found.

During the third quarter of 2022, we 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.

As a result, we have increased our provision for excess and obsolete inventory and written off certain related components and parts that cannot be used in other products or sold through our parts business.

Property, Plant and Equipment

4 unchanged sentences

Buildings 366,919 315,854

Machinery and equipment 436,891 391,366

Machinery & equipment 555,801 436,891

Furniture and fixtures 63,909 50,105

15 unchanged sentences

Accumulated amortization 25,463 18,573

Total, net 63,689 53,482

Definite-lived intangible assets, net 69,336 63,689

Indefinite-lived intangible assets

18 unchanged sentences

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

Years Ended December 31,

2025 2024 2023

3 unchanged sentences

Decreases due to acquisition adjustments — — —

— — ( 3,835 )

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

The acquisition adjustments were recorded during the first quarter of 2022.

The revisions were the result of the finalization of our preliminary estimates and third-party valuation models related to the acquisition of BASX (Note 17) in 2021.

The impact of such revisions on consolidated net income was not significant.

Supplemental Cash Flow Information

4 unchanged sentences

Interest paid $ 16,605 $ 2,811 $ 4,817

Income taxes paid, Federal 39,394 50,200 15,742

Income taxes paid, State 10,530 13,176 3,551

Operating activities - other:

Gain on disposition of assets

$ ( 23 ) $ ( 13 ) $ ( 12 )

Gain on disposal of assets $ ( 4 ) $ ( 23 ) $ ( 13 )

Foreign currency transaction loss (gain) 3 37 ( 10 )

Interest income on note receivable

( 18 ) ( 21 ) ( 22 )

Interest loss on note receivable ( 14 ) ( 18 ) ( 21 )

Total, other $ ( 15 ) $ ( 4 ) $ ( 44 )

2 unchanged sentences

Contingent shares issued (Note 18) $ — $ 6,364 $ —

Income taxes paid during the years December 31, 2025, 2024, and 2023 disaggregated by jurisdiction:

Years Ended December 31,

2025 2024 2023

Federal $ 9,854 $ 39,394 $ 50,200

U.S State and local — — —

California 140 596 1,353

Illinois 160 1,223 886

Indiana 673 —

Louisiana — 598 —

Minnesota — — 677

New Jersey — 533 829

New York 356 695 803

Pennsylvania 515 — 1,376

Texas 201 — —

Virginia 311 — —

Other States 720 6,884 6,481

Total $ 12,930 $ 49,923 $ 63,376

Jurisdictions where income taxes paid were equal to or exceeded 5% of total income taxes paid are disclosed individually.

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.

28 unchanged sentences

Customer prepayments 6,856 7,714

Donations, short-term 599 381

Accrued income taxes — 1,170

Donations 57 599

Employee vacation time 15,408 12,084

Extended warranties, short-term 3,153 2,387

Lease liability, short-term 2,481 2,021

Extended warranties, ST 3,365 3,153

Operating lease liability ST 3,262 2,481

Property tax 143 —

Other 11,762 3,885

4 unchanged sentences

Extended warranties 7,770 7,151

Donations and other — 524

Total $ 23,299 $ 20,743

On December 16, 2024, we amended our Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”), to include an $ 80.0 million term loan (“Term Loan”).

The Amended Loan Agreement provides for a $ 200.0 million revolving credit facility (the “Revolver”) and an option to increase the maximum borrowings to $ 300.0 million.

On December 16, 2024, we entered into the Third Amendment to the Amended and Restated Loan Agreement dated November 24, 2021, to include an $ 80.0 million term loan payable in equal monthly installments, plus interest, over 60 months, expiring December 16, 2029.

The agreement provided for a $ 200.0 million revolving credit facility and an option to increase the maximum borrowings to $ 300.0 million.

In April 2025, we increased our available Revolver to $ 230.0 million, an increase of $ 30.0 million, to fund our additional working capital needs.

On May 29, 2025, we entered into the Fifth Amendment to the Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) whereby the remaining balance of the term loan, approximately $ 72.0 million, was rolled into the amended Revolving Loan (“Amended Revolver”), the capacity of which was increased from $ 230.0 million to $ 500.0 million.

On December 29, 2025, we entered into the Sixth Amendment to the Amended and Restated Loan Agreement.

The terms of the Amendment increased the amount of the borrowing capacity on the Revolver from $ 500.0 million to $ 600.0 million by exercising the $ 100.0 million accordion feature.

The Amended Revolver is prepayable without penalty.

The Revolver expires on May 27, 2030.

(in thousands)

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Borrowings available under the Revolver $ 201,026 $ 123,233

The Revolver expires on May 27, 2027.

The Term Loan was fully repaid during the year and is no longer outstanding as of December 31, 2025

(in thousands)

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Total Term Loan $ — $ 78,424

The Term Loan is payable in equal monthly installments, plus interest, over 60 months, expiring December 16, 2029.

Interest Rates

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

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income and were not material for the years ended December 31, 2024, 2023, and 2022, respectively.

Weighted average interest rate of our borrowings outstanding are as follows:

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Revolver 5.7 % 6.3 % 6.3 %

Term loan * 1

1 Funds were borrowed on December 16, 2024.

No borrowings outstanding during the years ended December 31, 2023 and 2022

No borrowings outstanding during the year ended December 31, 2025.

If SOFR cannot be determined pursuant to the definition, as defined by the Amended Loan Agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate (“ABR”) loans.

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At December 31, 2025, our leverage ratio was 1.77 to 1.0, which meets the requirement of not being above 3 to 1.

Income Tax Provision (Benefit)

The provision for income taxes consists of the following:

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(in thousands)

Current $ 44,638 $ 52,058 $ 37,489

Deferred ( 6,606 ) ( 6,527 ) ( 13,332 )

Current Federal $ ( 10,449 ) $ 36,571 $ 40,759

Current State 459 8,067 11,299

Deferred Federal 26,221 ( 8,182 ) ( 4,064 )

Deferred State 4,928 $ 1,576 $ ( 2,463 )

Income tax provision $ 21,159 $ 38,032 $ 45,531

The provision for income taxes differs from the amount computed by applying the statutory Federal income tax rate before the provision for income taxes.

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

Rate Reconciliation

The following table reconciles the U.S federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2025, 2024, and 2023:

Years Ended December 31,

2025 2024 2023

Amount % Amount % Amount %

Federal statutory rate $ 27,007 21.0 % $ 43,384 21.0 % $ 46,862 21.0 %

State income taxes, net of Federal benefit 5,485 4.3 % 11,105 5.4 % 12,740 5.7 %

Change in valuation allowance — % ( 1.4 ) % — %

Excess tax benefits related to share-based compensation (Note 15)

( 7.9 ) % ( 4.0 ) % ( 2.4 ) %

State tax credits ( 1,997 ) ( 1.6 ) % ( 1,396 ) ( 0.7 ) % ( 3,926 ) ( 1.8 ) %

Changes in tax laws in current period 782 0.6 % — — % — — %

Excess tax benefits related to ( 11,501 ) ( 8.9 ) % ( 16,393 ) ( 7.9 ) % ( 8,858 ) ( 4.0 ) %

share-based compensation (Note 15)

Work opportunity tax credit ( 181 ) ( 0.1 ) ( 218 ) ( 0.1 ) % ( 241 ) ( 0.1 ) %

Return to provision 1,309 1.0 % ( 269 ) ( 0.1 ) % 455 0.2 %

OK Amended Returns — — — — % ( 3,121 ) ( 1.4 ) %

Non-deductible executive compensation 3,479 2.7 % 4,281 2.1 % 3,785 1.7 %

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Effective tax rate 21,159 16.4 % 38,032 18.4 % 45,531 20.4 %

The Company’s effective tax rate differs from the statutory rate primarily due to the excess tax benefits of stock transactions and state taxes.

Pretax income is all domestic and there are no foreign income effects.

No state jurisdictions individually meet the 5% disaggregation threshold.

State taxes in Oregon, Oklahoma, Iowa, and Virginia (2025), Oklahoma, California, Illinois, Pennsylvania, and Minnesota (2024), Oklahoma, California, Pennsylvania, New Jersey, and New York (2023) contributed to the majority (greater than 50%) of the tax effect in the state/local income tax category.

As of December 31, 2025, the Company has Federal and State net operating loss carryforwards for tax of approximately $ 57.0 million and $ 22.5 million, respectively, which are anticipated to offset a portion of taxable income in 2026 and be fully reversed.

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

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These credits have estimated expirations from the year 2040 through 2041.

The Company recorded an excess tax benefit of $ 16.4 million for the year ended December 31, 2024, as compared to $ 8.9 million and $ 3.0 million during the same periods in 2023 and 2022, respectively.

The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the year ended December 31, 2024.

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 $ 4.3 million and $ 3.8 million for the years ended December 31, 2024, and 2023, respectively.

We also earn research and development tax credits as defined under Section 41 of the Internal Revenue Code.

To qualify for the research and development tax credits, we perform annual studies that identify, document, and support eligible expenses related to qualified research and development activities.

Eligible expenses include but are not limited to supplies, materials, contractor expenses and internal employee wages.

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

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Oklahoma investment credit carryforward 1,925 689

Tennessee Investment credit carryforward 1,067 —

Federal Net Operating Loss 11,968 —

State Net Operating Loss 1,118 —

Other, net 5,578 3,079

Net deferred income tax assets 49,677 57,922

Valuation allowance — —

Net deferred income tax assets 49,677 57,922

Intangible assets ( 6,719 ) —

Property & equipment ( 73,271 ) ( 57,086 )

Total deferred income tax liabilities ( 79,990 ) ( 57,086 )

Net deferred income tax asset (liabilities) $ 836 $ ( 12,134 )

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 five years.

The amortization requirements for tax purposes is a mid-year convention, meaning that the tax amortization is 10% in the year of acquisition, 20% in the following four years, and 10% in the final year.

Net deferred income tax assets (liabilities) $ ( 30,313 ) $ 836

We also earn research and development tax credits as defined under Section 41 of the Internal Revenue Code.

To qualify for the research and development tax credits, we perform annual studies that identify, document, and support eligible expenses related to qualified research and development activities.

Eligible expenses include but are not limited to supplies, materials, contractor expenses and internal employee wages.

The amortization requirements for tax purposes is a mid-year convention, meaning that the tax amortization is 3.33% in the year of acquisition, 6.67% in the following fourteen years, and 3.33% in the final year.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions.

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Any interest or penalties would be recognized as a component of income tax expense.

Tax Law Changes

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing significant amendments to the Internal Revenue Code.

In accordance with ASC 740, Income Taxes, the Company recognized the tax effects of the enacted legislation in the period that includes the enactment date.

Impact of Tax Law Changes

The Company measured the effects of the tax law change using the enactment date approach, with a measurement date of June 30, 2025 from the Q2 2025 tax provision calculation as the closest date of measurement for deferred and current values.

The measurement resulted in an increase in DTLs of $ 35.4 million, a decrease in current income tax payable of $ 36.2 million, and an increase in provision expense of $ 0.8 million due to the bonus depreciation change effect on Texas Franchise tax and the reduced R&D Tax Credit allowed with the §174A change.

Significant provisions of OBBBA affecting the Company include:

• 100% Bonus Depreciation:

Effective for qualified property acquired after January 19, 2025, including manufacturing equipment, which reverses the previously scheduled phase-down of the bonus depreciation deduction to 40% for 2025 under prior law.

This provision increased DTLs by $ 7.0 million, decreased current payable by $ 7.0 million, and increased provision expense due to the accelerated tax deductions for capital expenditures made in 2025 and the small provision effect from the change in Texas Franchise Tax and state bonus depreciation.

This adjustment also decreased the DTL for the UNICAP inventory calculation by $ 0.6 million, offset against current income tax payable.

• Permanent Expensing of Domestic R&E Costs (Section 174A):

Retroactive to January 1, 2025, resulting in decreased DTAs due to immediate tax deductibility of qualified domestic R&E costs as incurred.

This provision decreased DTAs by $ 3.4 million, decreased current payables by $ 4.2 million, and increased provision expense by $ 0.8 million due to the reduction in the R&D tax credit (the Company will revert to the reduced credit method for calculation of the tax credit under the new law).

• Accelerated Deduction of Unamortized Domestic R&E Cost Originally Capitalized in Tax Years 2022, 2023, and 2024 (Section 174A):

The Company has elected to deduct the unamortized amounts of Section 174 Costs as of December 31, 2024, fully in tax year 2025, which decreased DTAs and current payables by $ 25.5 million.

The impact of OBBBA enactment increased the Company’s effective tax rate by 0.7% for the year ended December 31, 2025.

Net Operating Loss

Due to the favorable changes in tax law related to the OBBBA, as of December 31, 2025, the Company generated Federal and State net operating loss (“NOL”) carryforwards of approximately $ 57.0 million and $ 22.5 million, respectively.

The Federal NOLs have an indefinite carryforward period but are limited to offsetting 80% of taxable income in any given year under current tax law.

The State NOLs have varying expiration dates.

The Company has recorded deferred tax assets of $ 12.5 million (Federal) and $ 1.1 million (State) related to these NOL carryforwards.

Management has evaluated the positive and negative evidence in assessing the need for a

valuation allowance (historical operating results, cumulative losses in recent years, and projected future taxable income) and we believe it is more likely than not that we will recognize the DTA reversals in tax year 2026.

Share-Based Compensation

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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 “LTIP 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 2024 Plan and previously under the 2016 Plan (collectively, the “LTIP 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 LTIP Plans, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant.

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The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the LTIP Plans, establishes and revises rules and regulations relating to the LTIP Plans and makes any other determinations that it believes necessary for the administration of the LTIP 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 years ended December 31, 2024, 2023, and 2022 using a Black Scholes-Merton Model:

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 years ended 2025, 2024, 2023 using a Black Scholes-Merton Model:

2025 2024 2023

Directors and SLT 1 :

Expected dividend yield $ 0.32 $ 0.32 $ 0.25

Senior Leadership 1 :

Expected (annual) dividend rate $ 0.40 $ 0.32 $ 0.32

Expected volatility 39.29 % 37.89 % 37.89 %

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Expected life (in years) 4.0 4.0 4.0

Expected dividend yield $ 0.32 $ 0.32 $ 0.25

Expected (annual) dividend rate $ 0.40 $ 0.32 $ 0.32

Expected volatility 42.66 % 33.59 % 38.25 %

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The following is a summary of stock options vested and exercisable as of December 31, 2025:

Average Weighted

Range of Number Remaining Average

Exercise of Contractual Exercise Intrinsic

Prices Shares Life Price Value

Prices Number

Shares Weighted

Contractual Life

Price Intrinsic

( in thousands )

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37.09 - 140.76 479,173 6.48 58.20 9,069

442,471 5.79 31.60 38,089

$ 37.09 - 140.76

316,087 6.72 50.72 21,164

Total 2,073,346 4.20 $ 35.18 $ 85,567

A summary of option activity under the plans is as follows:

Options Shares Price

Outstanding at December 31, 2023 3,619,585 $ 33.09

Granted 418,669 80.17

Exercised ( 1,016,515 ) 31.34

Stock Options Shares Weighted

Outstanding at Outstanding at December 31, 2024 2,957,871 $ 39.83

472,476 83.63

( 509,996 ) 33.61

Forfeited or Expired

Outstanding at December 31, 2024 2,957,871 $ 39.83

Exercisable at December 31, 2024 1,956,935 $ 30.91

( 83,238 ) 74.77

Outstanding at Outstanding at December 31, 2025 2,837,113 $ 47.21

Exercisable at Exercisable at December 31, 2025 2,073,346 $ 35.18

The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2025, is $ 11.6 million and is expected to be recognized over a weighted average period of 2.0 years.

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

Restricted stock Shares Fair Value

Unvested at December 31, 2023 187,084 $ 44.07

Granted 65,661 78.54

Vested ( 100,236 ) 41.05

Forfeited ( 8,217 ) 58.87

Unvested at December 31, 2024 144,292 $ 61.01

Shares Weighted

Unvested at Unvested at December 31, 2024 144,292 $ 61.01

( 83,133 ) 53.03

( 9,799 ) 76.50

Unvested at Unvested at December 31, 2025 139,708 $ 80.36

We have awarded PSUs to certain officers and employees under our LTIP Plans.

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The total pre-tax compensation cost related to unvested PSUs not yet recognized as of December 31, 2025, is $ 3.5 million and is expected to be recognized over a weighted average period of approximately 1.5 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 years ended December 31, 2024, 2023, and 2022, using a Monte Carlo Model:

2025 2024 2023

Expected dividend rate $ 0.32 $ 0.32 $ 0.25

Expected (annual) dividend rate $ 0.40 $ 0.32 $ 0.32

Expected volatility 41.91 % 33.99 % 32.71 %

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A summary of the unvested PSUs is as follows:

Shares Weighted Average Grant Date Fair Value

Shares Weighted

Unvested at December 31, 2024 169,348 $ 68.12

Additional target payout 1

( 135,209 ) 29.83

Granted 48,181 106.24

Additional payout 1

Vested ( 21,919 ) 58.53

Forfeited ( 11,085 ) 69.38

( 4,098 ) 89.84

Unvested at December 31, 2025 2, 3

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1 The additional number of PSUs earned based on a 196.4 % achievement at December 31, 2024 for awards vesting in 2025.

2 Consists of 68,850 PSUs cliff vesting December 31, 2024, 54,761 PSUs cliff vesting December 31, 2025, and 45,737 PSUs cliff vesting December 31, 2026.

3 The 68,850 PSUs cliff vesting December 31, 2024 were approved by the Compensation Committee and issued to holders in January 2025.

2 Consists of 53,657 PSUs cliff vesting in 2025, 44,163 PSUs cliff vesting in 2026, and 46,940 PSUs cliff vesting in 2027.

3 The 53,657 PSUs cliff vesting in 2025 were approved by the Compensation Committee and issued to holders in January 2026.

Key Employee Awards

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Summary of Share-based Compensation

A summary of share-based compensation is as follows for the years ended December 31, 2024, 2023, and 2022:

A summary of share-based compensation is as follows:

Years Ended December 31,

2025 2024 2023

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PSUs 3,671 5,119 4,907

Restricted stock 5,157 4,505 2,275

Restricted tock 7,582 5,157 4,505

Total $ 24,098 $ 19,772 $ 14,671

Years Ended December 31,

2025 2024 2023

Share-based compensation expense:

Stock-based compensation expense:

(in thousands)

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PSUs 4,461 4,010 2,561

Restricted stock 4,634 3,977 3,105

Restricted tock 5,350 4,634 3,977

Key employee awards — — 1,036

Total $ 17,994 $ 16,729 $ 16,384

Years Ended December 31,

2025 2024 2023

Income tax benefit related to share-based compensation:

(in thousands)

Income tax benefit related to share-based compensation (in thousands)

Options $ 7,345 $ 14,878 $ 8,138

Restricted stock 1,064 720 241

PSUs 3,405 169 —

Restricted tock 751 1,064 720

Key employee awards — 282 —

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Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses for the years ended 2024, 2023, and 2022.

The Company paid no administrative expenses during the years ended 2025, 2024, 2023.

The Company matches 175.0 % up to 6.0 % of employee contributions of eligible compensation.

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Profit Sharing Bonus Plans

We maintain a discretionary profit sharing bonus plan under which approximately 8.5 % of pre-tax profit ( 10 % prior to January 1, 2024) from the Company is paid to eligible employees on a quarterly basis in order to reward employee productivity.

We maintain a discretionary profit sharing bonus plan under which approximately 8.5 % of pre-tax profit from the Company is paid to eligible employees on a quarterly basis in order to reward employee productivity.

Eligible employees are regular full-time non-exempt employees of the Company who are actively employed and working on the first and last day of the calendar quarter.

BASX employees are eligible to participate in the discretionary profit sharing bonus plan on January 1, 2024.

Prior to January 1, 2024, BASX had a separate employee incentive program (“EIP”) under which 5.0 % of BASX’s pre-tax profit, plus certain add backs, was paid ratably to eligible employees based on days-of-pay during the fiscal year.

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

This incentive program ended December 31, 2023.

Years Ended December 31,

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(in thousands)

Profit sharing bonus plan and employee incentive plan expense $ 19,948 $ 24,590 $ 14,009

Profit sharing bonus plan $ 12,851 $ 19,948 $ 24,590

Employee Medical Plan

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Participants are expected to pay a portion of the premium costs for coverage of the benefits provided under the Plans.

In addition, the Company matches 175.0 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with our health insurance plan deductibles.

BASX employees joined the Company's medical plan and benefits on January 1, 2024.

BASX was insured for healthcare coverage through a third party through December 31, 2023.

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

Participants are expected to pay a portion of the premium costs for coverage of the benefits provided under the Plans.

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

This healthcare coverage ended December 31, 2023.

In addition, the Company matches 175.0 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with health insurance plan deductibles.

Years Ended December 31,

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(in thousands)

Medical claim payments $ 18,471 $ 14,759 $ 10,459

Medical premium payments $ 25,141 $ 18,471 $ 14,759

Health saving account contributions 11,711 9,248 4,961

Earnings Per Share

Basic net income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

Diluted net income per share assumes the conversion of all potentially dilutive securities and is calculated by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus all potentially dilutive securities.

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:

Years Ended December 31,

2025 2024 2023

(in thousands, except share and per share data)

$ 107,593 $ 168,559 $ 177,623

Basic weighted average shares

81,529,140 81,473,131 81,156,114

Effect of dilutive shares related to stock based compensation 1

1,576,398 2,109,206 1,972,380

Effect of dilutive shares related to contingent consideration 2

— 47,165 166,796

Diluted weighted average shares

83,105,538 83,629,502 83,295,290

Earnings per share:

$ 1.32 $ 2.07 $ 2.19

$ 1.29 $ 2.02 $ 2.13

Anti-dilutive shares:

523,387 235,188 314,108

1 Dilutive shares related to stock options, restricted stock, PSUs and Key Employee Awards (Note 15)

2 Dilutive shares related to contingent shares issued to the former owners of BASX (Note 18)

Stockholders' Equity

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Agreement Execution Date Authorized Repurchase $ Expiration Date

March 13, 2020 $ 20 million 1

November 9, 2022

November 3, 2022 $ 50 million 1

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

Company also had a stock repurchase arrangement by which employee-participants in our 401(k) Plan were entitled to have shares of AAON 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.

Lastly, the Company repurchases shares of AAON, Inc.

As of December 31, 2025, approximately $30 million of shares have been repurchased, and approximately $70.0 million remains under the current board authorization.

The Company repurchases shares of AAON, Inc.

stock related to the LTIP Plans (Note 15) at current market prices.

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Open market 371,139 $ 29,992 $ 80.81 1,353,564 $ 100,034 $ 73.90 402,873 $ 25,009 $ 62.08

401(k) — — — — — — 155,904 5,913 37.93

Employees 92,444 8,037 86.94 21,904 1,302 59.44 25,842 1,019 39.43

LTIP Shares 98,134 9,730 99.15 92,444 8,037 86.94 21,904 1,302 59.44

Total 469,273 $ 39,722 $ 84.65 1,446,008 $ 108,071 $ 74.74 424,777 $ 26,311 $ 61.94

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

Cash Dividends

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Dividend Annualized Dividend

Declaration Date 1

Record Date Payment Date per Share per Share

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

Declaration Date Record Date Payment Date per Share per Share

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

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

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

November 10, 2023 November 29, 2023 December 18, 2023 $ 0.08 $ 0.32

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November 10, 2025 November 26, 2025 December 18, 2025 $ 0.10 $ 0.40

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

We paid cash dividends of $ 32.6 million, $ 26.1 million, and $ 26.4 million in 2025, 2024, and 2023, respectively.

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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 markets tax credit obligations on the consolidated balance sheets.

The 2019 Investor’s interest of $7.5 million is recorded as short-term debt 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.

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Havtech Litigation

On January 24, 2022, one of the Company’s former independent sales representative firms, Havtech, LLC (and its affiliate, Havtech Parts Division, LLC, collectively “Plaintiffs”), filed a complaint (the “Complaint”) in the Circuit Court for Howard County, Maryland ( Havtech, LLC, et al., v.

On January 24, 2022, on of the Company’s former independent sales representative firms, Havtech, LLC (and its affiliate, Havtech Parts Division, LLC, collectively “Plaintiffs”), filed a compliant (the “Complaint”) in the Circuit Court for Howard County, Maryland (Havtech, LLC, et al., v.

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.

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

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

Plaintiffs’ First Amended Compliant (“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.

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The Company is involved from time to time in claims and lawsuits incidental to our business arising from various matters, including alleged violations of contract, product liability, warranty, environmental, regulatory, personal injury, intellectual property, employment, tax and other laws.

We closely monitor these claims and legal actions and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position, results of operations or cash flows and we accrue and/or disclose loss contingencies as appropriate.

as appropriate.

We do not believe these matters will have a material adverse effect on our business, financial position, results of operations or cash flows.

We are occasionally party to short-term, cancellable and occasionally non-cancellable, fixed-price contracts with major suppliers for the purchase of raw material and component parts.

We expect to receive delivery of raw

materials for use in our manufacturing operations.

We expect to receive delivery of raw materials for use in our manufacturing operations.

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

2 unchanged sentences

In 2025 and 2024, the Company made payments of $ 5.6 million and $ 11.7 million on this contract, respectively.

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

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

In 2025, the Company executed three one-year purchase commitments for raw materials.

Estimated minimum future payments are $ 27.4 million for 2026.

We had no other material contractual purchase obligations as of December 31, 2025.

New Accounting Pronouncements

Changes to U.S.

GAAP are established by the FASB in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs.

ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative.

The new guidance is intended to update a variety of disclosure requirements.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective.

Early adoption is prohibited.

Upon adoption, this ASU is not expected to have a material impact on the Company’s financial statements and related disclosures.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280).

The new guidance improves reportable segment disclosures primarily through enhanced disclosures about significant segment expenses and by requiring current annual disclosures to be provided in interim periods.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We adopted this standard for fiscal year ended 2024.

Upon adoption, this ASU did not have a material impact on the Company’s financial statements and related disclosures.

Newly Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

The new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this ASU are effective for annual periods beginning after December 15, 2024.

Upon adoption, this ASU is not expected to have a material impact on the Company’s financial statements and related disclosures.

We adopted this standard in the fourth quarter of 2025.

Upon adoption, this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In November 2024, the FASB issued ASU No.

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Upon adoption, this ASU is not expected to have a material impact on the Company's financial statements and related disclosures.

Earnings Per Share

Basic net income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

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:

2024 2023 2022

(in thousands, except share and per share data)

Net income $ 168,559 $ 177,623 $ 100,376

Basic weighted average shares 81,473,131 81,156,114 79,582,480

Effect of dilutive shares related to stock based compensation 1

2,109,206 1,972,380 1,264,175

Effect of dilutive shares related contingent consideration 2

47,165 166,796 298,955

Diluted weighted average shares 83,629,502 83,295,290 81,145,610

Earnings per share:

Basic $ 2.07 $ 2.19 $ 1.26

Dilutive $ 2.02 $ 2.13 $ 1.24

Anti-dilutive shares:

Shares 235,188 314,108 908,221

1 Dilutive shares related to stock options, restricted stock, PSUs and Key Employee Awards (Note 15)

2 Dilutive shares related to contingent shares issued to former owners of BASX (Note 17)

In July 2025, the FASB issued ASU 2025‑05, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

The new guidance provides a practical expedient that allows entities, when estimating expected credit losses on current accounts receivable and current contract assets, to assume that economic conditions as of the balance sheet date will not change over the remaining life of those assets.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods, with early adoption permitted, and are required to be applied prospectively.

Upon adoption, this ASU is not expected to have a material impact on the Company's financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025‑06, Intangibles – Goodwill and Other – Internal‑Use Software (Subtopic 350‑40):

Targeted Improvements to the Accounting for Internal‑Use Software.

The new guidance modernizes and simplifies the accounting for internal‑use software, including eliminating the existing three‑stage (preliminary project, application development, and post‑implementation/operation) model, and introduces revised criteria for capitalization that better reflect current agile and iterative software development practices, including considerations for software with significant development uncertainty.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, with various transition alternatives and early adoption permitted.

We are currently evaluating the impact of this ASU on the Company’s financial statements and related disclosures and do not expect it to have a material impact.

In December 2025, the FASB issued ASU 2025‑10, Government Grants (Topic 832):

Accounting for Government Grants Received by Business Entities.

The new guidance provides authoritative recognition, measurement, presentation, and disclosure requirements for government grants to business entities in the form of monetary assets or tangible nonmonetary assets, largely leveraging the recognition and measurement framework in IAS 20, and

reduces diversity in practice that had arisen from analogies to other GAAP.

For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2028, including interim periods within those annual periods;

for all other entities, the guidance is effective for annual periods beginning after December 15, 2029, including interim periods within those annual periods, with early adoption permitted.

We are currently evaluating the impact of this ASU on the Company’s financial statements and related disclosures and do not expect it to have a material impact.

Related Parties

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The nature of our related party transactions is as follows:

• The Company sells units to an entity owned by a member of the CEO’s immediate family.

• The Company sells units to an entity managed by a board member’s immediate family.

This entity is also one of the Company’s Representatives and as such, the Company makes payments to the entity for third party products.

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• The Company periodically makes part sales and made payments to a board member related to a consulting agreement.

• 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 President/COO and Vice President.

• From December 10, 2021 through May 31, 2022, the Company leased a manufacturing and office facility in Redmond, Oregon from an entity in which certain members of BASX management had an ownership interest.

This facility was purchased 100% by the Company on May 31, 2022.

• The Company periodically rents space partially owned by a Director for various Company meetings.

These transactions ceased in the fourth quarter of 2025.

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

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

AAON Oklahoma:

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 Oklahoma engineers, manufactures, and sells highly configurable HVAC systems, designs and manufactures controls solutions, and sells aftermarket parts to customers through retail part stores and online.

AAON Oklahoma includes operations at the Company’s manufacturing facilities in Tulsa, Oklahoma;

Memphis, Tennessee;

and Parkville, Missouri, as well as two retail locations, the Norman Asbjornson Innovation Center (“NAIC”), and the Gary D.

Fields Customer Exploration Center.

The NAIC is a world-class research and development laboratory accredited by the Air Movement and Control Association International, Inc.

("AMCA"), where our products are continuously tested under extreme environmental conditions to ensure optimal performance, efficiency, and value.

Fields Customer Exploration Center showcases the engineering, design attributes, and premium build quality of our equipment alongside 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, 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, Oregon manufacturing facilities.

AAON Coil Products engineers and manufactures and sells semi-custom and custom HVAC systems as well as heating and cooling coils for use in HVAC systems, primarily for AAON Oklahoma, AAON Coil Products, and BASX.

AAON Coil Products operates from our Longview, Texas manufacturing facilities, which also produce BASX-branded products.

BASX engineers, manufactures, and sells a wide range of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market;

ventilation solutions for cleanroom environments in the biopharmaceutical, semiconductor, medical, and agricultural sectors;

and highly customized air handlers and modular solutions for a variety of markets.

BASX operates from our manufacturing facilities in Redmond, Oregon, with additional support from facilities in Memphis, Tennessee, and Longview, Texas.

The Company’s chief decision maker (“CODM”), our CEO, allocates resources and assesses the performance of each operating segment using information about the operating segment’s net sales, cost of sales, and gross profit directly attributable to our segments.

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The following table summarizes certain financial data related to our segments and significant segment expenses and other segment items regularly reviewed by our CODM.

Transactions between segments are recorded based on prices negotiated between the segments.

During the fourth quarter of 2025, the Company modified sales of coils from AAON Coil Products to AAON Oklahoma to show at cost to be consistent with our other intercompany sales between segments.

The revised methodology is intended to better reflect the manner in which the CODM evaluates segment performance and makes resource allocation decisions.

As a result of this change, prior period segment results have been recast to conform to the current period presentation.

The change did not affect consolidated net sales, cost of sales or gross profit.

The cost of sales and gross profit amounts shown below are presented after elimination entries.

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The following table presents long-lived assets by reportable segment, which includes property and equipment, net and operating lease assets:

(in thousands)

Long-lived assets

Long-lived assets (in thousands)

AAON Oklahoma $ 400,316 $ 321,597

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The following table presents intangible assets and goodwill, net, by reportable segment:

(in thousands)

Intangible assets and goodwill

Intangible assets and goodwill (in thousands)

AAON Oklahoma $ 25,600 $ 22,966

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data