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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2022
2021
Definite-lived intangible assets
(in thousands)
Intellectual property
6,295
6,479
Customer relationships
47,547
48,684
Less: Accumulated amortization
(3,807)
(208)
Total, net
50,035
54,955
Indefinite-lived intangible assets
Trademarks
14,571
15,166
Total intangible assets, net
64,606
70,121
Amortization expense recorded in cost of sales is as follows:
Years Ended December 31,
2022
2021
2020
(in thousands)
Amortization expense
3,599
246
234
Excluding the impact of any future acquisitions, the Company anticipates amortization expense to be approximately $3.6 million for each of the years ended 2023 through 2027.
9.
Supplemental Cash Flow Information
Years Ended December 31,
2022
2021
2020
Supplemental disclosures:
(in thousands)
Interest paid
2,412
Income taxes paid, net
19,293
7,891
13,754
Non-cash investing and financing activities:
Non-cash capital expenditures
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the Company anticipates amortization expense to be approximately $3.6 million for each of the years ended 2023 through 2027.
9.
Supplemental Cash Flow Information
Years Ended December 31,
2022
2021
2020
Supplemental disclosures:
(in thousands)
Interest paid
2,412
Income taxes paid, net
19,293
7,891
13,754
Non-cash investing and financing activities:
Non-cash capital expenditures
1,919
(3,714)
2,843
53
10. Warranties
AAON, INC. 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. AAON, INC. has an obligation to replace parts if conditions under the warranty are met. A provision is made for estimated warranty costs at the time the related products are sold based upon the warranty period, historical trends, new products, and any known identifiable warranty issues.
Changes in the warranty accrual are as follows:
Years Ended December 31,
2022
2021
2020
Warranty accrual:
(in thousands)
Balance, beginning of period
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
25 years for certain heat exchangers. AAON, INC. has an obligation to replace parts if conditions under the warranty are met. A provision is made for estimated warranty costs at the time the related products are sold based upon the warranty period, historical trends, new products, and any known identifiable warranty issues.
Changes in the warranty accrual are as follows:
Years Ended December 31,
2022
2021
2020
Warranty accrual:
(in thousands)
Balance, beginning of period
13,769
13,522
12,652
Payments made
(6,584)
(6,734)
(5,751)
Provisions
8,497
6,351
6,621
Assumed in business combination (Note 4)
630
Balance, end of period
15,682
13,769
13,522
Warranty expense:
8,497
6,351
6,621
54
11. Accrued Liabilities and Other Long-Term Liabilities
Accrued liabilities were comprised of the following:
December 31,
2022
2021
(in thousands)
Warranty
15,682
13,769
Due to representatives
15,545
7,995
Pay
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
630
Balance, end of period
15,682
13,769
13,522
Warranty expense:
8,497
6,351
6,621
54
11. Accrued Liabilities and Other Long-Term Liabilities
Accrued liabilities were comprised of the following:
December 31,
2022
2021
(in thousands)
Warranty
15,682
13,769
Due to representatives
15,545
7,995
Payroll
11,901
8,423
Profit sharing
5,451
1,489
Workers' compensation
367
308
Medical self-insurance
1,178
1,943
Customer prepayments
3,750
5,931
Donations, short-term
637
438
Accrued income taxes
12,472
Employee vacation time
6,329
4,362
Extended warranties, short-term
1,330
1,593
Lease liability, short-term
1,254
1,580
Other
2,734
2,375
Total
78,630
50,206
Other long-term liabilities were comprised of the following:
December 31,
2022
2021
(in
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, short-term
637
438
Accrued income taxes
12,472
Employee vacation time
6,329
4,362
Extended warranties, short-term
1,330
1,593
Lease liability, short-term
1,254
1,580
Other
2,734
2,375
Total
78,630
50,206
Other long-term liabilities were comprised of the following:
December 31,
2022
2021
(in thousands)
Lease liability
5,993
15,467
Extended warranties
4,539
3,042
Donations and other
976
334
Total
11,508
18,843
12. Revolving Credit Facility
55
If SOFR cannot be determined pursuant to the definition, as defined by the Revolver agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate ("ABR") loans. ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50%, or (c) daily simple SOFR for a one-month tenor in effect on
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
cannot be determined pursuant to the definition, as defined by the Revolver agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate ("ABR") loans. ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50%, or (c) daily simple SOFR for a one-month tenor in effect on such day plus 1.00%.
At December 31, 2022, we were in compliance with our financial covenants, as defined by the Revolver. These covenants require that we meet certain parameters related to our leverage ratio. At December 31, 2022, our leverage ratio was 0.46 to 1.0, which meets the requirement of not being above 3 to 1.
The previous revolving credit facility, prior to November 24, 2021, allowed for maximum borrowings of $30.0 million with an interest rate of LIBOR plus 2.0%. There were no fees associated with the unused portion of committed amounts under the previous revolving credit facility.
13. Income Taxes
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, 2022, our leverage ratio was 0.46 to 1.0, which meets the requirement of not being above 3 to 1.
The previous revolving credit facility, prior to November 24, 2021, allowed for maximum borrowings of $30.0 million with an interest rate of LIBOR plus 2.0%. There were no fees associated with the unused portion of committed amounts under the previous revolving credit facility.
13. Income Taxes
The provision for income taxes consists of the following:
Years Ended December 31,
2022
2021
2020
(in thousands)
Current
37,489
6,755
9,939
Deferred
(13,332)
3,669
13,027
Income tax provision
24,157
10,424
22,966
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:
Years Ended December 31,
2022
2021
2020
Federal statutory rate
21.0
21.0
21.0
State income taxes, net of Federal benefit
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Income tax provision
24,157
10,424
22,966
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:
Years Ended December 31,
2022
2021
2020
Federal statutory rate
21.0
21.0
21.0
State income taxes, net of Federal benefit
4.1
1.8
5.3
Change in valuation allowance
1.0
Excess tax benefits related to share-based compensation (Note 14)
(2.4)
(7.8)
(3.2)
Return to provision
(0.3)
0.1
Research and development tax credits
(2.1)
(1.1)
(0.9)
Other
(0.9)
0.2
0.2
Effective tax rate
19.4
15.1
22.5
On May 21, 2021, the State of Oklahoma enacted House Bill 2960, effectively reducing the corporate income tax rate in Oklahoma from 6% to 4%. This resulted in
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
0.3)
0.1
Research and development tax credits
(2.1)
(1.1)
(0.9)
Other
(0.9)
0.2
0.2
Effective tax rate
19.4
15.1
22.5
On May 21, 2021, the State of Oklahoma enacted House Bill 2960, effectively reducing the corporate income tax rate in Oklahoma from 6% to 4%. This resulted in a benefit of $0.8 million included in the table above under State income taxes, net of Federal benefit, for the year ending December 31, 2021.
We earn investment tax credits from the state of Oklahoma’s investment tax credit program. We use the flow-through method of accounting for the investment tax credits earned on eligible tangible asset expenditures. Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used. As of December 31, 2022, we have credit carryforwards totaling $3.1 million that have estimated expirations starting in 2035.
We also earn research and development tax credits as defined under Section 41 of the Internal Revenue Code. To qualify for
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
-through method of accounting for the investment tax credits earned on eligible tangible asset expenditures. Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used. As of December 31, 2022, we have credit carryforwards totaling $3.1 million that have estimated expirations starting in 2035.
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 identifies, documents, and
56
supports eligible expenses related to qualified research and development activities. Eligible expenses include but are not limited to supplies, material and internal wages. With the addition of BASX in December 2021 (Note 4), we identified additional eligible expenses related to qualified research and development activities.
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.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
2022
2021
(in thousands)
Deferred income tax assets (liabilities):
Allowance for credit losses and inventory reserves
1,
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2021 (Note 4), we identified additional eligible expenses related to qualified research and development activities.
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.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
2022
2021
(in thousands)
Deferred income tax assets (liabilities):
Allowance for credit losses and inventory reserves
1,337
625
Warranty accrual
4,184
3,675
Other accruals
4,814
1,406
Share-based compensation
7,440
7,568
Research & development expenses
11,265
Oklahoma investment credit carryforward
3,115
3,404
Other, net
2,339
4,112
34,494
20,790
Valuation allowance
(3,115)
(3,404)
Net deferred income tax assets
31,379
17,386
Property & equipment
(50,040)
(49,379)
Total deferred income tax liabilities
(50,040)
(49,379)
Net deferred income tax liabilities
(18,661)
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
carryforward
3,115
3,404
Other, net
2,339
4,112
34,494
20,790
Valuation allowance
(3,115)
(3,404)
Net deferred income tax assets
31,379
17,386
Property & equipment
(50,040)
(49,379)
Total deferred income tax liabilities
(50,040)
(49,379)
Net deferred income tax liabilities
(18,661)
(31,993)
In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021 are required to be capitalized and amortized over 5 years. 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 4 years, and 10% in the final year. Estimated Section 174 research and developments costs for the year ended December 31, 2022 were $46.8 million. This resulted in a reduction of our deferred tax liability of approximately $11.3 million for the year ended December 31, 2022
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
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 4 years, and 10% in the final year. Estimated Section 174 research and developments costs for the year ended December 31, 2022 were $46.8 million. This resulted in a reduction of our deferred tax liability of approximately $11.3 million for the year ended December 31, 2022.
Realization of deferred tax assets, including the associated credit carryforwards, is dependent upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we may not realize the benefit of our Oklahoma investment tax credit carryforward and, accordingly, have established a valuation allowance against this deferred tax asset.
The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.
We file income tax returns in the U.S., state and foreign income tax jurisdictions. We are subject to U.S. income tax examinations for the tax years 2018
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, have established a valuation allowance against this deferred tax asset.
The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.
We file income tax returns in the U.S., state and foreign income tax jurisdictions. We are subject to U.S. income tax examinations for the tax years 2018 to present, and to non-U.S. income tax examinations for the tax years 2017 to present. In addition, we are subject to state and local income tax examinations for tax years 2017 to present. AAON, INC. continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.
57
14. Share-Based Compensation
On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (as amended, “LTIP”) which provided an additional 3.3 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units, and performance awards. Under the LTIP, the
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.
57
14. Share-Based Compensation
On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (as amended, “LTIP”) which provided an additional 3.3 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units, and performance awards. Under the LTIP, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant.
On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan (“2016 Plan”) which provides for approximately 8.9 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan, approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, approximately 2.6 million shares that were approved by the stockholders on May 15, 2018, and an additional 2.5 million shares that were approved by the stockholders
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
for approximately 8.9 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan, approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, approximately 2.6 million shares that were approved by the stockholders on May 15, 2018, and an additional 2.5 million shares that were approved by the stockholders on May 12, 2020.
Under the 2016 Plan, shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards. Under the 2016 Plan, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant. The 2016 Plan is administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”). Membership on the Committee is limited to independent directors. The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan. The Committee determines the
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of shares granted may not be less than 100% of the fair market value at the date of the grant. The 2016 Plan is administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”). Membership on the Committee is limited to independent directors. The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan. The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the 2016 Plan, establishes and revises rules and regulations relating to the 2016 Plan and makes any other determinations that it believes necessary for the administration of the 2016 Plan.
Options
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, 2022, 2021, and 2020 using a Black Scholes-Merton Model:
2022
2021
2020
Directors and SLT1:
Expected dividend yield
0.38
0.38
0.33
Expected volatility
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2016 Plan.
Options
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, 2022, 2021, and 2020 using a Black Scholes-Merton Model:
2022
2021
2020
Directors and SLT1:
Expected dividend yield
0.38
0.38
0.33
Expected volatility
36.07
35.78
31.63
Risk-free interest rate
2.31
0.51
0.64
Expected life (in years)
4.0
4.0
5.0
Employees:
Expected dividend yield
0.39
0.38
0.32
Expected volatility
37.49
38.67
31.39
Risk-free interest rate
2.35
0.32
0.67
Expected life (in years)
3.0
3.0
5.0
1 Senior Leadership Team ("SLT") consists of officers and key members of management.
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
0.38
0.32
Expected volatility
37.49
38.67
31.39
Risk-free interest rate
2.35
0.32
0.67
Expected life (in years)
3.0
3.0
5.0
1 Senior Leadership Team ("SLT") consists of officers and key members of management.
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.
58
The following is a summary of stock options vested and exercisable as of December 31, 2022:
WeightedAverage
Weighted
Range of
Number
Remaining
Average
Exercise
of
Contractual
Exercise
Intrinsic
Prices
Shares
Life
Price
Value
(in thousands)
$20.92 - 41.37
1,031,134
5.14
36.60
39,926
$42.42 - 54.20
247
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
is a summary of stock options vested and exercisable as of December 31, 2022:
WeightedAverage
Weighted
Range of
Number
Remaining
Average
Exercise
of
Contractual
Exercise
Intrinsic
Prices
Shares
Life
Price
Value
(in thousands)
$20.92 - 41.37
1,031,134
5.14
36.60
39,926
$42.42 - 54.20
247,535
7.03
44.68
7,583
$54.29 - 79.92
98,344
8.10
72.38
294
Total
1,377,013
5.69
40.61
47,803
A summary of option activity under the plans is as follows:
WeightedAverageExercise
Options
Shares
Price
Outstanding at December 31, 2021
3,365,469
42.88
Granted
465,515
55.40
Exercised
(597,761)
38.71
Forfeited or Expired
(192,876)
49.56
Outstanding at December 31, 2022
3,040
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,803
A summary of option activity under the plans is as follows:
WeightedAverageExercise
Options
Shares
Price
Outstanding at December 31, 2021
3,365,469
42.88
Granted
465,515
55.40
Exercised
(597,761)
38.71
Forfeited or Expired
(192,876)
49.56
Outstanding at December 31, 2022
3,040,347
45.20
Exercisable at December 31, 2022
1,377,013
40.61
The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2022 is $12.9 million and is expected to be recognized over a weighted-average period of 1.6 years.
59
Restricted Stock
The fair value of restricted stock awards is based on the fair market value of AAON common stock on the respective grant dates, reduced for the present value of dividends.
At December 31, 2022, unrecognized compensation cost related to unvested restricted stock awards was approximately $4.4 million which is expected to be recognized over a weighted average period
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
12.9 million and is expected to be recognized over a weighted-average period of 1.6 years.
59
Restricted Stock
The fair value of restricted stock awards is based on the fair market value of AAON common stock on the respective grant dates, reduced for the present value of dividends.
At December 31, 2022, unrecognized compensation cost related to unvested restricted stock awards was approximately $4.4 million which is expected to be recognized over a weighted average period of 1.6 years.
A summary of the unvested restricted stock awards is as follows:
WeightedAverageGrant Date
Restricted stock
Shares
Fair Value
Unvested at December 31, 2021
161,225
46.08
Granted
68,020
53.97
Vested
(72,936)
45.31
Forfeited
(11,483)
48.23
Unvested at December 31, 2022
144,826
50.00
PSUs
We have awarded performance restricted stock units ("PSUs") to certain officers and employees under our 2016 Plan. Unlike our restricted stock awards, these PSUs are not considered legally outstanding and do not accrue dividends
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
68,020
53.97
Vested
(72,936)
45.31
Forfeited
(11,483)
48.23
Unvested at December 31, 2022
144,826
50.00
PSUs
We have awarded performance restricted stock units ("PSUs") to certain officers and employees under our 2016 Plan. Unlike our restricted stock awards, these PSUs are not considered legally outstanding and do not accrue dividends during the vesting period. These PSUs vest based on the level of achievement with respect to the Company's total shareholder return ("TSR") benchmarked against similar companies included in the capital goods sector of the S&P Smallcap 600 Index. The TSR measurement period is three years. At the end of the measurement period, each award will be converted into AAON common stock at 0% to 200% of the PSUs held, depending on overall TSR as compared to the S&P SmallCap 600 Index benchmark companies.
The total pre-tax compensation cost related to unvested PSUs not yet recognized as of December 31, 2022 is $2.0 million and is expected to be recognized over a weighted average period of approximately 2.
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
years. At the end of the measurement period, each award will be converted into AAON common stock at 0% to 200% of the PSUs held, depending on overall TSR as compared to the S&P SmallCap 600 Index benchmark companies.
The total pre-tax compensation cost related to unvested PSUs not yet recognized as of December 31, 2022 is $2.0 million and is expected to be recognized over a weighted average period of approximately 2.0 years.
The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the years ended December 31, 2022 and 2021, using a Monte Carlo Model:
2022
2021
Expected dividend rate
0.38
0.38
Expected volatility
37.60
39.10
Risk-free interest rate
2.00
0.28
Expected life (in years)
2.80
2.80
The expected term of the PSUs is based on their remaining performance period. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2
2021
Expected dividend rate
0.38
0.38
Expected volatility
37.60
39.10
Risk-free interest rate
2.00
0.28
Expected life (in years)
2.80
2.80
The expected term of the PSUs is based on their remaining performance period. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.
60
A summary of the unvested PSUs is as follows:
Shares
Weighted Average Grant Date Fair Value
Unvested at December 31, 2021
16,851
87.78
Granted
50,839
44.74
Vested
Forfeited
(5,031)
62.14
Unvested at December 31, 20221
62,659
54.92
1 Consists of 14,817 PSUs cliff vesting December 31, 2024 and 47,842 PSUs cliff vesting December 31, 2025.
Key Employee
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
31, 2021
16,851
87.78
Granted
50,839
44.74
Vested
Forfeited
(5,031)
62.14
Unvested at December 31, 20221
62,659
54.92
1 Consists of 14,817 PSUs cliff vesting December 31, 2024 and 47,842 PSUs cliff vesting December 31, 2025.
Key Employee Awards
Subject to the MIPA Agreement (Note 4), the Company granted awards to key employees of BASX ("Key Employee Awards"). Unlike our restricted stock awards under the 2016 Plan, the Key Employee Awards are not considered legally outstanding and do not accrue dividends during the vesting period. The potential future issuance of the Key Employee Awards is contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ending 2021, 2022, and 2023 as defined by the MIPA Agreement and continued employment with the Company. At the end of the earn-out period, ending December 31, 2023, each eligible Key Employee Award will vest and be converted into AAON common stock.
The fair value of
Key Employee
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the vesting period. The potential future issuance of the Key Employee Awards is contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ending 2021, 2022, and 2023 as defined by the MIPA Agreement and continued employment with the Company. At the end of the earn-out period, ending December 31, 2023, each eligible Key Employee Award will vest and be converted into AAON common stock.
The fair value of
Key Employee Awards
was based on the fair market value of AAON common stock on the grant date.
The total pre-tax compensation cost related to unvested Key Employee Awards not yet recognized as of December 31, 2022 is $1.0 million and is expected to be recognized over a weighted average period of approximately 1.0 year.
A summary of the unvested Key Employee Awards is as follows:
Shares
Weighted Average Grant Date Fair Value
Unvested at December 31, 2021
26,599
80.18
Granted
Vested
Forfeited
Unvested at December 31, 2022
26,599
80.18
61
Summary of Share-based Compensation
A summary of share
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
be recognized over a weighted average period of approximately 1.0 year.
A summary of the unvested Key Employee Awards is as follows:
Shares
Weighted Average Grant Date Fair Value
Unvested at December 31, 2021
26,599
80.18
Granted
Vested
Forfeited
Unvested at December 31, 2022
26,599
80.18
61
Summary of Share-based Compensation
A summary of share-based compensation is as follows for the years ended December 31, 2022, 2021, and 2020:
2022
2021
2020
Grant date fair value of awards during the period:
(in thousands)
Options
6,522
7,010
12,615
Restricted stock
3,671
2,517
3,316
PSUs
2,275
1,622
Key employee awards
1,572
Total
12,468
12,721
15,931
2022
2021
2020
Share-based compensation expense:
(in thousands)
Options
8,585
8,724
8,312
Restricted stock
3,105
2,519
3,030
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
010
12,615
Restricted stock
3,671
2,517
3,316
PSUs
2,275
1,622
Key employee awards
1,572
Total
12,468
12,721
15,931
2022
2021
2020
Share-based compensation expense:
(in thousands)
Options
8,585
8,724
8,312
Restricted stock
3,105
2,519
3,030
PSUs
958
525
Key employee awards
1,052
44
Total
13,700
11,812
11,342
2022
2021
2020
Income tax benefit related to share-based compensation:
(in thousands)
Options
2,715
4,571
2,698
Restricted stock
241
837
519
Total
2,956
5,408
3,217
15. Employee Benefits
Defined Contribution Plan - 401(k
We sponsor a defined contribution plan (the “Plan”). Eligible employees may make contributions in accordance with the Plan and IRS guidelines. In addition to the traditional 401(k), eligible employees are given the option of making an after-tax contribution to a Roth 401(k)
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
715
4,571
2,698
Restricted stock
241
837
519
Total
2,956
5,408
3,217
15. Employee Benefits
Defined Contribution Plan - 401(k
We sponsor a defined contribution plan (the “Plan”). Eligible employees may make contributions in accordance with the Plan and IRS guidelines. In addition to the traditional 401(k), eligible employees are given the option of making an after-tax contribution to a Roth 401(k) or a combination of both. The Plan provides for automatic enrollment and for an automatic increase to the deferral percentage at January 1st of each year and each year thereafter. Eligible employees are automatically enrolled in the Plan at a 6.0% deferral rate and currently contributing employees deferral rates will be increased to 6.0% unless their current rate is above 6.0% or the employee elects to decline the automatic enrollment or increase. Administrative expenses are paid for by Plan participants. AAON, INC. paid no administrative expenses for the years ended 2022, 2021, and 2020.
AAON, INC. matches 175.0% up to 6.0% of employee contributions of eligible compensation. Additionally, Plan participant forfeitures are used
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
contributing employees deferral rates will be increased to 6.0% unless their current rate is above 6.0% or the employee elects to decline the automatic enrollment or increase. Administrative expenses are paid for by Plan participants. AAON, INC. paid no administrative expenses for the years ended 2022, 2021, and 2020.
AAON, INC. matches 175.0% up to 6.0% of employee contributions of eligible compensation. Additionally, Plan participant forfeitures are used to reduce the cost of the Company contributions.
Years Ended December 31,
2022
2021
2020
(in thousands)
Contributions, net of forfeitures, made to the defined contribution plan
15,475
9,724
9,091
62
Profit Sharing Bonus Plans
We maintain a discretionary profit sharing bonus plan under which approximately 10.0% of pre-tax profit from AAON Oklahoma and AAON Coil Products is paid to eligible employees on a quarterly basis in order to reward employee productivity. Eligible employees are regular full-time employees of AAON Oklahoma or AAON Coil Products who are actively employed and working on the first and last days of the calendar quarter and who were employed full-time for at least three full months prior to
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Profit Sharing Bonus Plans
We maintain a discretionary profit sharing bonus plan under which approximately 10.0% of pre-tax profit from AAON Oklahoma and AAON Coil Products is paid to eligible employees on a quarterly basis in order to reward employee productivity. Eligible employees are regular full-time employees of AAON Oklahoma or AAON Coil Products who are actively employed and working on the first and last days of the calendar quarter and who were employed full-time for at least three full months prior to the beginning of the calendar quarter, excluding the Company's senior leadership team.
BASX has a separate employee incentive program (EIP), under which 5.0% of BASX's pre-tax profit, plus certain add backs, is 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.
Years Ended December 31,
2022
2021
2020
(in thousands)
Profit sharing bonus plan and employee incentive plan expense
14,009
8,526
11
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
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.
Years Ended December 31,
2022
2021
2020
(in thousands)
Profit sharing bonus plan and employee incentive plan expense
14,009
8,526
11,593
Employee Medical Plan
At AAON Oklahoma and AAON Coil Products, we self-insure for our employees' health insurance, and make medical claim payments up to certain stop-loss amounts. We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience. 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 Plan. In addition, the Company matches 175.0% of a participating AAON Oklahoma and AAON Coil Products employee's allowed contributions to a qualified health saving account to assist employees with our heath insurance plan deductibles.
BASX is insured for healthcare coverage through a third party. Eligible
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
our historical claims experience. 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 Plan. In addition, the Company matches 175.0% of a participating AAON Oklahoma and AAON Coil Products employee's allowed contributions to a qualified health saving account to assist employees with our heath insurance plan deductibles.
BASX is insured for healthcare coverage through a third party. 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.
Years Ended December 31,
2022
2021
2020
(in thousands)
Medical claim payments
10,459
9,640
9,060
Health saving account contributions
3,862
3,482
3,476
16. Stockholders’ Equity
Stock Repurchase
The Board has authorized two active stock repurchase programs for the Company. AAON, INC. may purchase shares on the open market
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
health savings account to assist employees with health insurance plan deductibles.
Years Ended December 31,
2022
2021
2020
(in thousands)
Medical claim payments
10,459
9,640
9,060
Health saving account contributions
3,862
3,482
3,476
16. Stockholders’ Equity
Stock Repurchase
The Board has authorized two active stock repurchase programs for the Company. AAON, INC. may purchase shares on the open market from time to time. The Board must authorize the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.
63
Our open market repurchase programs are as follows:
Agreement Execution Date
Authorized Repurchase $
Expiration Date
March 5, 2019 1
$20 million
March 4, 2020
March 13, 2020
$20 million
November 9, 2022
November 3, 2022
$50 million
*2
1 The 2018 and 2019 purchase authorizations were executed under 10b5-1 programs.
2 Expiration Date is at Board's
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
reement Execution Date
Authorized Repurchase $
Expiration Date
March 5, 2019 1
$20 million
March 4, 2020
March 13, 2020
$20 million
November 9, 2022
November 3, 2022
$50 million
*2
1 The 2018 and 2019 purchase authorizations were executed under 10b5-1 programs.
2 Expiration Date is at Board's discretion. AAON, INC. is authorized to effectuate repurchases of the Company's common stock on terms and conditions approved in advance by the Board.
AAON, INC. repurchases shares of AAON stock from employees for payment of statutory tax withholdings on stock transactions. All other repurchases from directors or employees are contingent upon Board approval. All repurchases are done at current market prices.
Lastly, the Company also had a stock repurchase arrangement by which employee-participants in our 401(k) 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.
Our repurchase activity is
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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or employees are contingent upon Board approval. All repurchases are done at current market prices.
Lastly, the Company also had a stock repurchase arrangement by which employee-participants in our 401(k) 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.
Our repurchase activity is as follows:
2022
2021
2020
(in thousands, except share and per share data)
Program
Shares
Total $
$ per share
Shares
Total $
$ per share
Shares
Total $
$ per share
Open market
122,112
6,823
55.87
103,689
4,987
48.10
401(k)
103,936
5,913
56.89
297,772
20,876
70.11
438,921
25,073
57.12
Directors & employees
17,228
1,019
59.15
22,526
1,590
70.59
23,272
1,169
50.23
Total
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,823
55.87
103,689
4,987
48.10
401(k)
103,936
5,913
56.89
297,772
20,876
70.11
438,921
25,073
57.12
Directors & employees
17,228
1,019
59.15
22,526
1,590
70.59
23,272
1,169
50.23
Total
243,276
13,755
56.54
320,298
22,466
70.14
565,882
31,229
55.19
Our repurchase activity since Company inception, including our current authorized stock repurchase programs are as follows:
Inception to Date
(in thousands, except share and per share data)
Program
Shares
Total $
$ per share
Open market
4,327,367
81,616
18.86
401(k)
8,308,368
171,789
20.68
Directors & employees
2,044,955
23,360
11.42
Total
14,680,690
276,765
18.85
Dividends
At
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
:
Inception to Date
(in thousands, except share and per share data)
Program
Shares
Total $
$ per share
Open market
4,327,367
81,616
18.86
401(k)
8,308,368
171,789
20.68
Directors & employees
2,044,955
23,360
11.42
Total
14,680,690
276,765
18.85
Dividends
At the discretion of the Board of Directors, we pay cash dividends. Board approval is required to determine the date of declaration and amount for each cash dividend payment.
64
Our cash dividends for the three years ended December 31, 2022 are as follows:
Declaration Date
Record Date
Payment Date
Dividend per Share
May 15, 2020
June 3, 2020
July 1, 2020
$0.19
November 10, 2020
November 27, 2020
December 18, 2020
$0.19
May 17, 2021
June 3, 2021
July 1, 2021
$0.19
November 9
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Date
Payment Date
Dividend per Share
May 15, 2020
June 3, 2020
July 1, 2020
$0.19
November 10, 2020
November 27, 2020
December 18, 2020
$0.19
May 17, 2021
June 3, 2021
July 1, 2021
$0.19
November 9, 2021
November 26, 2021
December 17, 2021
$0.19
May 18, 2022
June 3, 2022
July 1, 2022
$0.19
November 8, 2022
November 28, 2022
December 16, 2022
$0.24
We paid cash dividends of $22.9 million, $19.9 million, and $19.8 million in 2022, 2021, and 2020, respectively.
Contingent Shares Issued in BASX Acquisition
On December 10, 2021, we closed on the acquisition of BASX (Note 4).
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
8, 2022
November 28, 2022
December 16, 2022
$0.24
We paid cash dividends of $22.9 million, $19.9 million, and $19.8 million in 2022, 2021, and 2020, respectively.
Contingent Shares Issued in BASX Acquisition
On December 10, 2021, we closed on the acquisition of BASX (Note 4). Under the MIPA Agreement, we committed to $78.0 million in the aggregate of contingent consideration to the former owners of BASX, which is payable in approximately 1,037,000 shares of AAON stock, par value $0.004 per share. The shares do not accrue dividends.
Under the MIPA Agreement, the potential future issuance of the shares is contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ended 2021, 2022, and 2023. We estimated the fair value of contingent consideration related to these shares to be approximately $60.0 million, which is included in additional paid-in capital on the consolidated balance sheets. As of December 31, 2022, 486,
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
shares do not accrue dividends.
Under the MIPA Agreement, the potential future issuance of the shares is contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ended 2021, 2022, and 2023. We estimated the fair value of contingent consideration related to these shares to be approximately $60.0 million, which is included in additional paid-in capital on the consolidated balance sheets. As of December 31, 2022, 486,286 shares related to the 2021 earn-out milestone have been issued to the former owners of BASX as part of a private placement exempt from registration with the SEC under Rule 506(b), which are included in common stock on the consolidated statements of stockholders' equity. No additional shares have been issued as of February 22, 2023.
17. New Markets Tax Credit
On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
additional shares have been issued as of February 22, 2023.
17. New Markets Tax Credit
On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “Project”). In connection with the NMTC transaction, the Company received a $23.0 million NMTC allocation for the Project and secured low interest financing and the potential for future debt forgiveness related to the Project.
Upon closing of the NMTC transaction, the Company provided an aggregate of approximately $15.9 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $15.9 million in proceeds plus capital contributed from the Investor was used to make an aggregate $22.5 million loan to a subsidiary of the Company. This financing arrangement is secured by equipment at the Company's
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Project.
Upon closing of the NMTC transaction, the Company provided an aggregate of approximately $15.9 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $15.9 million in proceeds plus capital contributed from the Investor was used to make an aggregate $22.5 million loan to a subsidiary of the Company. This financing arrangement is secured by equipment at the Company's Longview, Texas facilities and a guarantee from the Company, including an unconditional guarantee of NMTCs.
This transaction also includes a put/call feature that either of which can be exercised at the end of the seven-year compliance period. The Investor may exercise its put option or the Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt. The value attributable to the put/call is nominal. The Investor's interest of $6.4 million is recorded in New market tax credit obligation on the consolidated balance sheets. AAON, INC. incurred approximately $0.3 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.
The Investor is subject to 100 percent recapture
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt. The value attributable to the put/call is nominal. The Investor's interest of $6.4 million is recorded in New market tax credit obligation on the consolidated balance sheets. AAON, INC. incurred approximately $0.3 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.
The Investor is subject to 100 percent recapture of the NMTC it receives for a period of seven years, as provided in the Internal Revenue Code and applicable U.S. Treasury regulations in the event that the financing facility of the Borrower under the transaction (AAON Coil Products, Inc.) becomes ineligible for NMTC treatment per the Internal Revenue Code requirements. AAON, INC. is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Noncompliance with applicable requirements could result in the Investor’s projected tax benefits not being realized and, therefore, require the Company to indemnify the Investor for any loss or recapture of the NMTC related to the financing until such time as the recapture provisions have expired
65
under the applicable statute of limitations. AAON, INC. does not anticipate any credit rec
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the Internal Revenue Code requirements. AAON, INC. is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Noncompliance with applicable requirements could result in the Investor’s projected tax benefits not being realized and, therefore, require the Company to indemnify the Investor for any loss or recapture of the NMTC related to the financing until such time as the recapture provisions have expired
65
under the applicable statute of limitations. AAON, INC. does not anticipate any credit recapture will be required in connection with this financing arrangement.
The Investor and its majority owned community development entity are considered VIEs and the Company is the primary beneficiary of the VIEs. This conclusion was reached based on the following:
the ongoing activities of the VIEs, collecting and remitting interest and fees and NMTC compliance, were all considered in the initial design and are not expected to significantly affect performance throughout the life of the VIE;
contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various other guarantees to the Investor and community development entity;
the Investor lacks a material interest in the underling economics of the project; and
the Company is obligated to absorb losses of the VIEs.
Because the Company is the primary beneficiary
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
collecting and remitting interest and fees and NMTC compliance, were all considered in the initial design and are not expected to significantly affect performance throughout the life of the VIE;
contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various other guarantees to the Investor and community development entity;
the Investor lacks a material interest in the underling economics of the project; and
the Company is obligated to absorb losses of the VIEs.
Because the Company is the primary beneficiary of the VIEs, they have been included in the consolidated financial statements. There are no other assets, liabilities or transaction in these VIEs outside of the financing transactions executed as part of the NMTC arrangement.
18. Commitments and Contingencies
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. AAON, Inc., et al.
). The Complaint challenged the Company’s termination of its business relationship with Plaintiffs
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
avtech 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. AAON, Inc., et al.
). The Complaint challenged the Company’s termination of its business relationship with Plaintiffs. AAON, INC. removed the action to the United States District Court for the District of Maryland (Northern Division) and moved to dismiss the Complaint. Plaintiffs’ First Amended Complaint (“First Amended Complaint”) was entered by the court on July 28, 2022. The First Amended Complaint asserts that the Company improperly terminated Plaintiffs and seeks damages alleged to be no less than $48.6 million, plus fees and costs. AAON, INC. filed its Answer to First Amended Complaint on January 31, 2023. AAON, INC. believes that Plaintiffs’ claims are without merit and intends to vigorously defend itself.
Other Matters
AAON, INC. is involved from time to time in claims and lawsuits incidental to our business arising from various matters, including alleged violations of contract
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
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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. AAON, INC. filed its Answer to First Amended Complaint on January 31, 2023. AAON, INC. believes that Plaintiffs’ claims are without merit and intends to vigorously defend itself.
Other Matters
AAON, INC. 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. 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. These contracts are not accounted
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
position, results of operations or cash flows and we accrue and/or disclose loss contingencies 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. These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption. We had no material contractual purchase obligations as of December 31, 2022, except as noted below.
On April 27, 2022, the Company entered into a purchase and sale agreement with a third-party manufacturer to purchase certain assets to design and manufacture fan wheels for the purchase price of $6.5 million. As of December 31, 2022, we have paid approximately $3.5 million related to this agreement, which is included in other long-term assets and property, plant and equipment, with the remaining $3.0 million included in accounts payable and other long-term assets on our consolidated balance sheets. The final payment will be made in 2023
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
a third-party manufacturer to purchase certain assets to design and manufacture fan wheels for the purchase price of $6.5 million. As of December 31, 2022, we have paid approximately $3.5 million related to this agreement, which is included in other long-term assets and property, plant and equipment, with the remaining $3.0 million included in accounts payable and other long-term assets on our consolidated balance sheets. The final payment will be made in 2023.
66
19. 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.
20. 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
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Us. 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.
20. 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:
2022
2021
2020
Numerator:
(in thousands, except share and per share data)
Net income
100,376
58,758
79,009
Denominator:
Basic weighted average shares
53,054,986
52,404,199
52,168,679
Effect of dilutive shares related to stock based compensation1
842,783
1,301,698
892,490
Effect of dilutive shares related contingent consideration2
199,303
23,092
Diluted weighted average shares
54,097,
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
per share data)
Net income
100,376
58,758
79,009
Denominator:
Basic weighted average shares
53,054,986
52,404,199
52,168,679
Effect of dilutive shares related to stock based compensation1
842,783
1,301,698
892,490
Effect of dilutive shares related contingent consideration2
199,303
23,092
Diluted weighted average shares
54,097,072
53,728,989
53,061,169
Earnings per share:
Basic
1.89
1.12
1.51
Dilutive
1.86
1.09
1.49
Anti-dilutive shares:
Shares
605,480
304,029
364,787
1 Dilutive shares related to stock options, restricted stock, PSUs and Key Employee Awards (Note 14)
2 Dilutive shares related to contingent shares issued to former owners of BASX (Note 4)
21.
Related Parties
AAON, INC. sells units to an entity owned by a member of the CEO/President's immediate family. This entity is also one of the Company’s Representatives and as such, the Company makes payments to
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
605,480
304,029
364,787
1 Dilutive shares related to stock options, restricted stock, PSUs and Key Employee Awards (Note 14)
2 Dilutive shares related to contingent shares issued to former owners of BASX (Note 4)
21.
Related Parties
AAON, INC. sells units to an entity owned by a member of the CEO/President'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. Additionally, the Company purchases some supplies from entities controlled by two of the Company’s board members and a member of the Company's executive management team. AAON, INC. also periodically makes sales to a board member for parts. From December 10, 2021 through May 31, 2022 (Note 4
, the Company leased a manufacturing and office facility in Redmond, Oregon from an entity in which certain members of BASX management have an ownership interest. This facility was purchased 100% by the Company on May 31, 2022.
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Following is a summary of transactions and balances with affiliates:
Years Ended December 31,
2022
2021
2020
(in thousands)
Sales to affiliates
5
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2021 through May 31, 2022 (Note 4
, the Company leased a manufacturing and office facility in Redmond, Oregon from an entity in which certain members of BASX management have an ownership interest. This facility was purchased 100% by the Company on May 31, 2022.
67
Following is a summary of transactions and balances with affiliates:
Years Ended December 31,
2022
2021
2020
(in thousands)
Sales to affiliates
5,789
3,752
3,475
Payments to affiliates
1,318
185
256
December 31,
2022
2021
(in thousands)
Due from affiliates
432
547
22. Segments
AAON, INC. has determined that it has three reportable segments for financial reporting purposes. Management evaluates the performance of its business segments primarily on gross profit. AAON, INC.'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 and income from operations. The CODM does not evaluate operating segments using asset or liability information.
AAON Oklahoma:
AAON Oklahoma designs, manufactures, sells, and services standard, semi-custom, and custom heating, ventilation
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
three reportable segments for financial reporting purposes. Management evaluates the performance of its business segments primarily on gross profit. AAON, INC.'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 and income from operations. The CODM does not evaluate operating segments using asset or liability information.
AAON Oklahoma:
AAON Oklahoma designs, manufactures, sells, and services standard, semi-custom, and custom heating, ventilation, and air conditioning ("HVAC") systems, designs and produces controls solutions for all of our HVAC units, and sells retail parts to customers through our two retail part stores in Tulsa, Oklahoma as well as online. Through our Norman Asbjornson Innovation Center ("NAIC") research and development laboratory facility in Tulsa, Oklahoma, the Company is able to test units under various environmental conditions. AAON Oklahoma includes the operations of our Tulsa, Oklahoma and Parkville, Missouri facilities, our NAIC research and development laboratory facility and two retail parts locations.
AAON Coil Products:
AAON Coil Products designs and manufactures a selection of our standard, semi-custom, and custom HVAC systems. AAON Coil Products also designs and manufactures various heating and cooling coils to be used in HVAC systems,
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ticker:AAON
name:AAON, INC.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
research and development laboratory facility in Tulsa, Oklahoma, the Company is able to test units under various environmental conditions. AAON Oklahoma includes the operations of our Tulsa, Oklahoma and Parkville, Missouri facilities, our NAIC research and development laboratory facility and two retail parts locations.
AAON Coil Products:
AAON Coil Products designs and manufactures a selection of our standard, semi-custom, and custom HVAC systems. AAON Coil Products also designs and manufactures various heating and cooling coils to be used in HVAC systems, mostly for the benefit of AAON Oklahoma and AAON Coil Products. AAON Coil Products consists of operations at our Longview, Texas facilities.
BASX:
BASX provides product development design and manufacturing of custom engineered air handling systems including high efficiency data center cooling solutions, cleanroom HVAC systems, commercial/industrial HVAC systems, and modular solutions. Additionally, BASX designs and manufactures cleanroom environmental control systems to support hospital surgical suites, pharmaceutical process facilities, semiconductor and electronics manufacturing, laboratory and isolation and modular cleanrooms for facility flexibility. BASX consists of operations at our Redmond, Oregon facility.
68
The following table summarizes certain financial data related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. The Gross Profit amounts shown below
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
cleanroom HVAC systems, commercial/industrial HVAC systems, and modular solutions. Additionally, BASX designs and manufactures cleanroom environmental control systems to support hospital surgical suites, pharmaceutical process facilities, semiconductor and electronics manufacturing, laboratory and isolation and modular cleanrooms for facility flexibility. BASX consists of operations at our Redmond, Oregon facility.
68
The following table summarizes certain financial data related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. The Gross Profit amounts shown below are presented after elimination entries.
Years Ended December 31,
2022
2021
2020
(in thousands)
Net Sales
AAON Oklahoma
External sales
663,845
463,845
458,957
Inter-segment sales
3,251
2,504
2,683
AAON Coil Products
External sales
107,290
66,589
55,594
Inter-segment sales
30,932
24,250
21,552
BASX1
External sales
117,653
4,083
Inter-segment sales
79
Eliminations
(34,262)
(26,754)
(24,235)
Net sales
888,788
534,517
514,551
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ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,504
2,683
AAON Coil Products
External sales
107,290
66,589
55,594
Inter-segment sales
30,932
24,250
21,552
BASX1
External sales
117,653
4,083
Inter-segment sales
79
Eliminations
(34,262)
(26,754)
(24,235)
Net sales
888,788
534,517
514,551
Gross Profit
AAON Oklahoma
172,983
126,868
140,099
AAON Coil Products
33,311
10,075
15,750
BASX1
31,278
887
Gross profit
237,572
137,830
155,849
December 31,
2022
2021
(in thousands)
Long-lived assets
AAON Oklahoma
213,731
183,840
AAON Coil Products
68,013
62,534
BASX
35,578
28,662
Total long-lived assets
317,322
275,036
Intangible assets and goodwill
AAON Oklahoma
3,229
3,229
AAON Coil Products
BAS
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
137,830
155,849
December 31,
2022
2021
(in thousands)
Long-lived assets
AAON Oklahoma
213,731
183,840
AAON Coil Products
68,013
62,534
BASX
35,578
28,662
Total long-lived assets
317,322
275,036
Intangible assets and goodwill
AAON Oklahoma
3,229
3,229
AAON Coil Products
BASX
143,269
152,619
Total intangible assets and goodwill
146,498
155,848
1 BASX was acquired on December 10, 2021. We have included the results of BASX's operations in our consolidated financial statements beginning December 11, 2021.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
69
Item 9A. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
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name:AAON, INC.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
11, 2021.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
69
Item 9A. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022.
Based upon the evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective at December 31, 2022 to ensure the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
(b)
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(e) and 15d
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YOU are a financial analyst. You are reading a report of a company.
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file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
(b)
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In making our assessment of internal control over financial reporting, management has used the criteria issued by the
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ticker:AAON
name:AAON, INC.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In making our assessment of internal control over financial reporting, management has used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013
Internal Control—Integrated Framework
. Based on our assessment, our management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2022.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Grant Thornton LLP, our independent registered public accounting firm, as stated in their report which is included in this Item 9A of this report on Form 10-K.
(c)
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2022 that have materially affected, or are reasonably
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Grant Thornton LLP, our independent registered public accounting firm, as stated in their report which is included in this Item 9A of this report on Form 10-K.
(c)
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
70
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
AAON, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013
Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in
cik:824142
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YOU are a financial analyst. You are reading a report of a company.
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financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013
Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013
Internal Control—Integrated Framework
issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 27, 2023 expressed an unqualified opinion on those financial statements.
Basis for opinion
AAON, INC.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ended December 31, 2022, and our report dated February 27, 2023 expressed an unqualified opinion on those financial statements.
Basis for opinion
AAON, INC.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
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ticker:AAON
name:AAON, INC.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 27, 2023
71
Item 9B. Other Information.
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information required by Items 401, 405,
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name:AAON, INC.
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filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 27, 2023
71
Item 9B. Other Information.
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated by reference to the information contained in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held on May 16, 2023.
Code of Ethics
We adopted a code of ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer or persons performing similar functions, as well as other employees and directors. Our code of ethics can be found on our website at www.aaon.com. We will also provide any person without charge, upon request, a copy of such code of ethics. Requests may be directed to AAON,
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
to be held on May 16, 2023.
Code of Ethics
We adopted a code of ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer or persons performing similar functions, as well as other employees and directors. Our code of ethics can be found on our website at www.aaon.com. We will also provide any person without charge, upon request, a copy of such code of ethics. Requests may be directed to AAON, Inc., 2425 South Yukon Avenue, Tulsa, Oklahoma 74107, attention Rebecca A. Thompson, or by calling (918) 382-6216.
Item 11.
Executive Compensation.
The information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K is incorporated by reference to the information contained in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held on May 16, 2023.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 403 and Item 201(d) of Regulation S-K is incorporated by reference to the information contained in our
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
and (e)(5) of Regulation S-K is incorporated by reference to the information contained in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held on May 16, 2023.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 403 and Item 201(d) of Regulation S-K is incorporated by reference to the information contained in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held May 16, 2023.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information required to be reported pursuant to Item 404 of Regulation S-K and paragraph (a) of Item 407 of Regulation S-K is incorporated by reference in our definitive proxy statement relating to our annual meeting of stockholders scheduled to be held May 16, 2023.
Our Code of Conduct guides the Board of Directors in its actions and deliberations with respect to related party transactions. Under the Code, conflicts of interest, including any involving the directors or any Named Officers, are prohibited except under any guidelines approved by the Board of
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
404 of Regulation S-K and paragraph (a) of Item 407 of Regulation S-K is incorporated by reference in our definitive proxy statement relating to our annual meeting of stockholders scheduled to be held May 16, 2023.
Our Code of Conduct guides the Board of Directors in its actions and deliberations with respect to related party transactions. Under the Code, conflicts of interest, including any involving the directors or any Named Officers, are prohibited except under any guidelines approved by the Board of Directors. Only the Board of Directors may waive a provision of the Code of Conduct for a director or a Named Officer, and only then in compliance with all applicable laws, rules and regulations. We have not entered into any new material related party transactions and have no preexisting material related party transactions in 2022, 2021, or 2020.
Item 14.
Principal Accountant Fees and Services.
This information is incorporated by reference in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held May 16, 2023.
72
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a)
Financial statements.
(1)
The consolidated financial statements
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
material related party transactions in 2022, 2021, or 2020.
Item 14.
Principal Accountant Fees and Services.
This information is incorporated by reference in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held May 16, 2023.
72
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a)
Financial statements.
(1)
The consolidated financial statements and the report of independent registered public accounting firm are included in Item 8 of this Form 10-K.
(2)
The consolidated financial statements other than those listed at item (a)(1) above have been omitted because they are not required under the related instructions or are not applicable.
(3)
The exhibits listed at item (b) below are filed as part of, or incorporated by reference into, this Form 10-K.
(b)
Exhibits:
(3)
(A)
Amended and Restated Articles of Incorporation (ii)
(B)
Amended and Restated Bylaws (i)
(4.1)
Amended and Restated Loan Agreement (dated November 24, 2021) and related documents (iii)
(4.2)
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
applicable.
(3)
The exhibits listed at item (b) below are filed as part of, or incorporated by reference into, this Form 10-K.
(b)
Exhibits:
(3)
(A)
Amended and Restated Articles of Incorporation (ii)
(B)
Amended and Restated Bylaws (i)
(4.1)
Amended and Restated Loan Agreement (dated November 24, 2021) and related documents (iii)
(4.2)
First Amendment to the Amended and Restated Loan Agreement (dated May 27, 2022) and related documents (viii)
(4.16)
Description of Securities
(10.1)
AAON, Inc. 1992 Stock Option Plan, as amended (v)
(10.2)
AAON, Inc. 2007 Long-Term Incentive Plan, as amended (vi)
(10.3)
AAON, Inc. 2016 Long-Term Incentive Plan (iv)
(21)
List of Subsidiaries
(23)
Consent of Grant Thornton LLP
(31.1)
Certification of CEO
(31.2)
Certification of CFO
(32.1)
Section 135
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
(v)
(10.2)
AAON, Inc. 2007 Long-Term Incentive Plan, as amended (vi)
(10.3)
AAON, Inc. 2016 Long-Term Incentive Plan (iv)
(21)
List of Subsidiaries
(23)
Consent of Grant Thornton LLP
(31.1)
Certification of CEO
(31.2)
Certification of CFO
(32.1)
Section 1350 Certification – CEO
(32.2)
Section 1350 Certification – CFO
(99.1)
Membership Interest Purchase Agreement - Acquisition of BASX, LLC (dated November 18, 2021) (vii)
(101)
(INS)
Inline XBRL Instance Document
(101)
(SCH)
Inline XBRL Taxonomy Extension Schema
(101)
(CAL)
Inline XBRL Taxonomy Extension Calculation Linkbase
(101)
(DEF)
Inline XBRL Taxonomy Extension Definition Linkbase
(101)
(LAB)
Inline XBRL Taxonomy Extension Label Linkbase
(101)
(PRE)
Inline XBRL Taxonomy Extension Presentation Linkbase
(104)
Cover Page Interactive Data File (embedded within the Inline XBRL Document and included
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
RL Instance Document
(101)
(SCH)
Inline XBRL Taxonomy Extension Schema
(101)
(CAL)
Inline XBRL Taxonomy Extension Calculation Linkbase
(101)
(DEF)
Inline XBRL Taxonomy Extension Definition Linkbase
(101)
(LAB)
Inline XBRL Taxonomy Extension Label Linkbase
(101)
(PRE)
Inline XBRL Taxonomy Extension Presentation Linkbase
(104)
Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)
(i)
Incorporated herein by reference to the exhibits to our Form 8-K dated May 15, 2020.
(ii)
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
(iii)
Incorporated herein by reference to exhibit to our Form 8-K dated November 24, 2021.
73
(iv)
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-212863 dated August 2, 2016, our Form S-8 Registration Statement No. 333-226512 dated August 2, 2018, and our Form S-8
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ended December 31, 2014.
(iii)
Incorporated herein by reference to exhibit to our Form 8-K dated November 24, 2021.
73
(iv)
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-212863 dated August 2, 2016, our Form S-8 Registration Statement No. 333-226512 dated August 2, 2018, and our Form S-8 Registration Statement No. 333-241538 dated August 6, 2020.
(v)
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and to our Form S-8 Registration Statement No. 333-52824.
(vi)
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-151915, Form S-8 Registration Statement No. 333-207737.
(vii)
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
(viii)
Incorporated herein by reference to the exhibits to
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
-8 Registration Statement No. 333-52824.
(vi)
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-151915, Form S-8 Registration Statement No. 333-207737.
(vii)
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
(viii)
Incorporated herein by reference to the exhibits to our Form 8-K dated May 27, 2022.
74
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
AAON, INC.
Dated:
February 27, 2023
By:
/s/ Gary D. Fields
Gary D. Fields, Chief Executive Officer
75
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated:
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
to be signed on its behalf by the undersigned, hereunto duly authorized.
AAON, INC.
Dated:
February 27, 2023
By:
/s/ Gary D. Fields
Gary D. Fields, Chief Executive Officer
75
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated:
February 27, 2023
/s/ Gary D. Fields
Gary D. FieldsChief Executive Officer, President, and Director(principal executive officer)
Dated:
February 27, 2023
/s/ Rebecca A. Thompson
Rebecca A. ThompsonChief Financial Officer(principal financial officer)
Dated:
February 27, 2023
/s/ Christopher D. Eason
Christopher D. EasonChief Accounting Officer(principal accounting officer)
Dated:
February 27, 2023
/s/ Norman H. Asbjornson
Norman H. Asbjornson Director
Dated:
February 27, 2023
/s/ Angela E. Kouplen
Angela E. Kouplen Director
Dated
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Financial Officer(principal financial officer)
Dated:
February 27, 2023
/s/ Christopher D. Eason
Christopher D. EasonChief Accounting Officer(principal accounting officer)
Dated:
February 27, 2023
/s/ Norman H. Asbjornson
Norman H. Asbjornson Director
Dated:
February 27, 2023
/s/ Angela E. Kouplen
Angela E. Kouplen Director
Dated:
February 27, 2023
/s/ Caron A. Lawhorn
Caron A. Lawhorn Director
Dated:
February 27, 2023
/s/ Stephen O. LeClair
Stephen O. LeClairDirector
Dated:
February 27, 2023
/s/ A.H. McElroy II
A.H. McElroy IIDirector
Dated:
February 27, 2023
/s/ David R. Stewart
David R. StewartDirector
Dated:
February 27, 2023
/s/ Bruce Ware
Bruce WareDirector
Dated:
February 27, 2023
/s/ Luke A. Bomer
Luke A. BomerSecretary
76
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
:
February 27, 2023
/s/ A.H. McElroy II
A.H. McElroy IIDirector
Dated:
February 27, 2023
/s/ David R. Stewart
David R. StewartDirector
Dated:
February 27, 2023
/s/ Bruce Ware
Bruce WareDirector
Dated:
February 27, 2023
/s/ Luke A. Bomer
Luke A. BomerSecretary
76
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
____________________
to
____________________
Commission file number: 0-18953
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada
87-0448736
(State or other jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
2425 South Yukon Ave.,
Tulsa,
Oklahoma
74107
(Address of principal executive offices) (Zip Code)
(918) 583-2266
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.004 par
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
2425 South Yukon Ave.,
Tulsa,
Oklahoma
74107
(Address of principal executive offices) (Zip Code)
(918) 583-2266
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.004 par value per share
AAON
NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "small reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
accelerated filer", "small reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
As of May 2, 2023, registrant had outstanding a total of 54,252,713 shares of its $.004 par value Common Stock.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31, 2023
December 31, 2022
Assets
(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents
2,515
5,451
Restricted cash
465
498
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
252,713 shares of its $.004 par value Common Stock.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31, 2023
December 31, 2022
Assets
(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents
2,515
5,451
Restricted cash
465
498
Accounts receivable, net of allowance for credit losses of $421 and $477, respectively
160,954
127,158
Inventories, net
199,579
198,939
Contract assets
15,126
15,151
Prepaid expenses and other
5,540
1,919
Total current assets
384,179
349,116
Property, plant and equipment:
Land
8,904
8,537
Buildings
177,119
169,156
Machinery and equipment
360,628
342,045
Furniture and fixtures
31,868
30,033
Total property, plant and equipment
578,519
549,771
Less: Accumulated depreciation
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
and other
5,540
1,919
Total current assets
384,179
349,116
Property, plant and equipment:
Land
8,904
8,537
Buildings
177,119
169,156
Machinery and equipment
360,628
342,045
Furniture and fixtures
31,868
30,033
Total property, plant and equipment
578,519
549,771
Less: Accumulated depreciation
253,953
245,026
Property, plant and equipment, net
324,566
304,745
Intangible assets, net
63,704
64,606
Goodwill
81,892
81,892
Right of use assets
7,166
7,123
Other long-term assets
6,407
6,421
Total assets
867,914
813,903
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
29,561
45,513
Accrued liabilities
86,173
78,630
Contract liabilities
22,137
21,424
Total current liabilities
137,871
145,567
Revolving credit facility, long-term
83,664
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
166
7,123
Other long-term assets
6,407
6,421
Total assets
867,914
813,903
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
29,561
45,513
Accrued liabilities
86,173
78,630
Contract liabilities
22,137
21,424
Total current liabilities
137,871
145,567
Revolving credit facility, long-term
83,664
71,004
Deferred tax liabilities
19,582
18,661
Other long-term liabilities
10,923
11,508
New market tax credit obligation (a)
6,460
6,449
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued
Common stock, $.004 par value, 100,000,000 shares authorized, 54,201,863 and 53,425,184 issued and outstanding at March 31, 2023 and December 31, 2022, respectively
217
214
Additional paid-in capital
117,077
98,735
Retained earnings
492,120
461
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued
Common stock, $.004 par value, 100,000,000 shares authorized, 54,201,863 and 53,425,184 issued and outstanding at March 31, 2023 and December 31, 2022, respectively
217
214
Additional paid-in capital
117,077
98,735
Retained earnings
492,120
461,765
Total stockholders' equity
609,414
560,714
Total liabilities and stockholders' equity
867,914
813,903
(a) Held by variable interest entities (Note 16)
The accompanying notes are an integral part of these consolidated financial statements.
1 -
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31,
2023
2022
(in thousands, except share and per share data)
Net sales
265,953
182,771
Cost of sales
188,799
136,707
Gross profit
77,154
46,064
Selling, general and administrative expenses
32,942
23,
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
statements.
1 -
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31,
2023
2022
(in thousands, except share and per share data)
Net sales
265,953
182,771
Cost of sales
188,799
136,707
Gross profit
77,154
46,064
Selling, general and administrative expenses
32,942
23,056
Loss (gain) on disposal of assets
(2)
Income from operations
44,206
23,010
Interest expense, net
(1,150)
(190)
Other income, net
114
21
Income before taxes
43,170
22,841
Income tax provision
6,356
4,782
Net income
36,814
18,059
Earnings per share:
Basic
0.69
0.34
Diluted
0.67
0.33
Cash dividends declared per common share:
0.12
Weighted average shares outstanding:
Basic
53,640,598
52,613,232
Diluted
55,240,638
53,950,995
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
22,841
Income tax provision
6,356
4,782
Net income
36,814
18,059
Earnings per share:
Basic
0.69
0.34
Diluted
0.67
0.33
Cash dividends declared per common share:
0.12
Weighted average shares outstanding:
Basic
53,640,598
52,613,232
Diluted
55,240,638
53,950,995
The accompanying notes are an integral part of these consolidated financial statements.
2 -
AAON, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
Three Months Ended March 31, 2023
Common Stock
Paid-in
Retained
Shares
Amount
Capital
Earnings
Total
(in thousands)
Balances at December 31, 2022
53,425
214
98,735
461,765
560,714
Net income
36,814
36,814
Stock options exercised, restricted stock awards
789
15,853
15,856
granted, and contingent shares issued (Note 15)
Share-based compensation
3,519
3,519
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
-in
Retained
Shares
Amount
Capital
Earnings
Total
(in thousands)
Balances at December 31, 2022
53,425
214
98,735
461,765
560,714
Net income
36,814
36,814
Stock options exercised, restricted stock awards
789
15,853
15,856
granted, and contingent shares issued (Note 15)
Share-based compensation
3,519
3,519
Stock repurchased and retired
(12)
(1,030)
(1,030)
Dividends
(6,459)
(6,459)
Balances at March 31, 2023
54,202
217
117,077
492,120
609,414
Three Months Ended March 31, 2022
Common Stock
Paid-in
Retained
Shares
Amount
Capital
Earnings
Total
(in thousands)
Balances at December 31, 2021
52,528
210
81,654
384,306
466,170
Net income
18,059
18,059
Stock options exercised, restricted stock awards
605
2,890
2,892
gr
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,120
609,414
Three Months Ended March 31, 2022
Common Stock
Paid-in
Retained
Shares
Amount
Capital
Earnings
Total
(in thousands)
Balances at December 31, 2021
52,528
210
81,654
384,306
466,170
Net income
18,059
18,059
Stock options exercised, restricted stock awards
605
2,890
2,892
granted, and contingent shares issued (Note 15)
Share-based compensation
3,112
3,112
Stock repurchased and retired
(68)
(4,082)
(4,082)
Contingent consideration
(6,000)
(6,000)
Dividends
Balances at March 31, 2022
53,065
212
77,574
402,370
480,156
The accompanying notes are an integral part of these consolidated financial statements.
3 -
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
2023
2022
Operating Activities
(in thousands)
Net income
36,814
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
)
Dividends
Balances at March 31, 2022
53,065
212
77,574
402,370
480,156
The accompanying notes are an integral part of these consolidated financial statements.
3 -
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
2023
2022
Operating Activities
(in thousands)
Net income
36,814
18,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
10,274
7,076
Amortization of debt issuance cost
11
11
Amortization of right of use assets
29
67
(Recoveries of) provision for credit losses on accounts receivable, net of adjustments
(56)
288
Provision for excess and obsolete inventories, net of write-offs
221
220
Share-based compensation
3,519
3,112
Loss (gain) on disposition of assets
(2)
Foreign currency transaction gain
(2)
(9)
Interest income on note receivable
(6)
(6)
Deferred income taxes
921
973
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
67
(Recoveries of) provision for credit losses on accounts receivable, net of adjustments
(56)
288
Provision for excess and obsolete inventories, net of write-offs
221
220
Share-based compensation
3,519
3,112
Loss (gain) on disposition of assets
(2)
Foreign currency transaction gain
(2)
(9)
Interest income on note receivable
(6)
(6)
Deferred income taxes
921
973
Changes in assets and liabilities:
Accounts receivable
(33,740)
(43,244)
Income taxes
5,262
3,631
Inventories
(861)
(16,041)
Contract assets
25
(4,252)
Prepaid expenses and other long-term assets
(3,613)
(3,588)
Accounts payable
(16,318)
6,325
Contract liabilities
713
17,998
Extended warranties
777
68
Accrued liabilities and other long-term liabilities
847
2,511
Net cash provided by (used in) operating activities
4,823
(6,803)
Investing Activities
Capital expenditures
(28,935)
(14,031)
Cash paid
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
expenses and other long-term assets
(3,613)
(3,588)
Accounts payable
(16,318)
6,325
Contract liabilities
713
17,998
Extended warranties
777
68
Accrued liabilities and other long-term liabilities
847
2,511
Net cash provided by (used in) operating activities
4,823
(6,803)
Investing Activities
Capital expenditures
(28,935)
(14,031)
Cash paid in business combination, net of cash acquired
(249)
Proceeds from sale of property, plant and equipment
102
Principal payments from note receivable
14
14
Net cash used in investing activities
(28,819)
(14,264)
Financing Activities
Borrowings under revolving credit facility
105,172
25,000
Payments under revolving credit facility
(92,512)
Stock options exercised
15,856
2,890
Repurchase of stock
(3,278)
Employee taxes paid by withholding shares
(1,030)
(804)
Cash dividends paid to stockholders
(6,459)
Net cash provided by financing activities
21,027
23,808
Net (decrease) increase in cash
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Borrowings under revolving credit facility
105,172
25,000
Payments under revolving credit facility
(92,512)
Stock options exercised
15,856
2,890
Repurchase of stock
(3,278)
Employee taxes paid by withholding shares
(1,030)
(804)
Cash dividends paid to stockholders
(6,459)
Net cash provided by financing activities
21,027
23,808
Net (decrease) increase in cash, cash equivalents and restricted cash
(2,969)
2,741
Cash, cash equivalents and restricted cash, beginning of period
5,949
3,487
Cash, cash equivalents and restricted cash, end of period
2,980
6,228
The accompanying notes are an integral part of these consolidated financial statements.
4 -
AAON, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
1. General
Basis of Presentation
AAON, Inc. is a Nevada corporation which was incorporated on August 18, 1987. Our operating subsidiaries include AAON, Inc. ("AAON Oklahoma"), an Oklahoma corporation, AAON Coil Products, Inc., a Texas corporation, and BasX
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
The accompanying notes are an integral part of these consolidated financial statements.
4 -
AAON, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
1. General
Basis of Presentation
AAON, Inc. is a Nevada corporation which was incorporated on August 18, 1987. Our operating subsidiaries include AAON, Inc. ("AAON Oklahoma"), an Oklahoma corporation, AAON Coil Products, Inc., a Texas corporation, and BasX, Inc. ("BASX"), an Oregon corporation (collectively, the “Company”). The accompanying unaudited consolidated financial statements of AAON, Inc. and our operating subsidiaries, all of which are wholly-owned, have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”).
Our financial statements consolidate all of our affiliated entities in which we have a controlling financial interest. Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 16) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
accounting principles (“U.S. GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”).
Our financial statements consolidate all of our affiliated entities in which we have a controlling financial interest. Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 16) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in those VIEs.
These financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet at December 31, 2022 is derived from audited consolidated financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The financial statements reflect all adjustments (all of which are of a normal recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for a full year. Certain disclosures have been condensed in or omitted from
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
derived from audited consolidated financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The financial statements reflect all adjustments (all of which are of a normal recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for a full year. Certain disclosures have been condensed in or omitted from these consolidated financial statements. The accompanying unaudited financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. All intercompany balances and transactions have been eliminated in consolidation.
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 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management
cik:824142
ticker:AAON
name:AAON, INC.
exchange:Nasdaq
filing_type:10-Q
|
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