AAON
Annual Report 2012

Plain-text annual report

2012 AnnuAl RepoRt Reaching New HeightsA n n uAl R e p oR t 2012Reaching New Heights With a dedication to constant improvement and innovation our company achieved another milestone year. Net sales in 2012 soared over $300 million. By continuing to invest in our capabilities we are committed to capitalizing on future opportunities and ascending even higher. A n n uAl R e p oR t 2012CoMpAny proFile rooFtop UnitS oUtdoor Air HAndling UnitS CondenSing UnitS rl SerieS rn SerieS rQ SerieS pACkAged oUtdoor MeCHAniCAl rooMS SelF ContAined UnitS rl SerieS Cl SerieS Bl SerieS Boiler ll SerieS Air-Cooled CHiller SA SerieS rn SerieS CC SerieS lC SerieS Air-Cooled CHiller ll SerieS eVAporAtiVe-Cooled CHiller SB SerieS rQ SerieS CB SerieS indoor Air HAndling UnitS F1 SerieS H3 SerieS V3 SerieS SA SerieS M2 SerieS M3 SerieS AAON is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units and coils. Since the founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our customers. FinAnCiAl HigHligHtS 2012 2011 2010 2009 2008 Income Data ($000) Net Sales Gross Profit Operating Income Interest Expense Interest Income Depreciation Pre-Tax Income Net Income Earnings Per Share (Basic)1 (Diluted)1 Balance Sheet ($000) Working Capital Current Assets Net Fixed Assets Accumulated Depreciation Cash & Cash Equivalents Total Assets Current Liabilities Long-Term Debt Stockholders’ Equity Stockholders’ Equity per Diluted Share1 Funds Flow Data ($000) Operations Investments Financing Net Increase (Decrease) in Cash Ratio Analysis Return on Average Equity Return on Average Assets Pre-Tax Income on Sales Net Income on Sales Total Liabilities to Equity Quick Ratio2 Current Ratio Year-End Price Earnings Ratio1 1 = Reflects 3-for-2 stock split June 2011 2 = Cash, cash equivalents + receivables/current liabilities. $ 303,114 $ 266,220 $ 244,552 $ 245,282 $ 279,725 $ 70,499 $ 44,234 $ 44 $ 86 $ 13,407 $ 44,317 $ 27,449 $ 46,281 $ 22,169 $ 277 $ 98 $ 11,397 $ 21,513 $ 13,986 $ 55,188 $ 32,715 $ 45 $ 258 $ 9,886 $ 32,693 $ 21,894 $ 67,545 $ 43,754 $ 9 $ 71 $ 9,061 $ 43,892 $ 27,721 $ 67,176 $ 43,388 $ 71 $ 27 $ 9,412 $ 44,068 $ 28,589 $ 1.12 $ 1.11 $0.57 $0.56 $0.87 $0.87 $ 1.07 $ 1.07 $ 1.09 $ 1.07 $ 51,921 $ 45,700 $ 55,502 $ 65,354 $ 40,600 $ 91,546 $ 90,695 $ 96,929 $ 3,159 $ 84,387 $ 93,502 $ 85,935 $ 13 $ 91,748 $ 67,418 $ 86,307 $ 2,393 $ 96,240 $ 59,896 $ 80,567 $ 25,639 $ 80,118 $ 60,550 $ 72,269 $ 269 $ 193,493 $ 178,981 $ 160,277 $ 156,211 $ 140,743 $ 39,625 $ 38,687 $ 36,246 $ 30,886 $ 39,518 - - - - $ 121 $ 138,136 $ 122,504 $ 116,739 $ 117,999 $ 96,522 $ 5.59 $ 4.92 $ 4.61 $ 4.54 $ 3.60 $ 51,167 $ 26,484 $ 32,152 $ 45,205 $ 33,447 $ (30,335) $ (24,538) $ (28,276) $ (9,639) $ (9,593) $ (17,686) $ (4,326) $ (27,200) $ (10,101) $ (24,460) $ 3,146 $ (2,380) $ (23,246) $ 25,370 $ (610) 21.1% 14.2% 14.6% 9.1% 0.4 1.4 2.3 19 11.7% 7.8% 8.1% 5.3% 0.5 1.1 2.2 37 18.7% 13.7% 13.4% 9.0% 0.4 1.2 2.5 22 25.8% 17.7% 17.9% 11.3% 0.3 1.9 3.1 12 29.8% 20.3% 15.8% 10.2% 0.5 1.0 2.0 13 2012AnnuAl RepoRt preSident’S letter Dear ShareholDer,We are exceedingly pleased to report our sales climbed 13.9% in the past year, surpassing the $300 million mark for the first time in the Company’s 24-year history. This milestone was achieved despite an economy which exhibited sub par growth for most of the year. Consequently, construction activity was uneven with modest increases in the commercial (private) sector, while spending in the institutional (public) segment was slightly negative.“sales climbed 13.9% in the past year, surpassing the $300 million mark for the first time in the company’s 24-year history.” Our sales performance was influenced by a number of factors which include the continuing gain in our share of the market as we witnessed growing acceptance of our technologically innovative product line. Furthermore, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act signed into law in December 2010, allowing 100% depreciation for qualified capital expenditures put in service in calendar 2011, was extended into 2012 but at a rate of 50%. This extension had a beneficial impact on our replacement business which contributed more than 55% of our total sales. In addition, we continued to improve and expand our sales force through increased training, the addition of personnel and replacement of underperforming offices. Sales for the year ended December 31, 2012, reached $303.1 million as compared with $266.2 million in 2011. Gross profit climbed to $70.5 million (23.3% of sales) from $46.3 million (17.4% of sales), or a gain of 52.3%. It should be noted that the gross profit performance in 2011 was negatively impacted by a number of factors, many non-recurring in nature. Nonetheless, our improved gross margins this past year reflect not only our increase in sales but also our significantly improved manufacturing productivity discussed later in this letter. SG&A expenses, including substantially higher “profit sharing” costs, climbed 17.7% to $26.3 million (8.7% of sales) from $22.3 million (8.4% of sales). Operating income benefiting from both the higher sales and improved operating efficiencies surged 100.0% to $44.2 million (14.6% of sales) from $22.2 million (8.3% of sales). Included in the 2011 operating income was a $1.8 million loss on the sale of equipment. Pre-tax income gained 106.0% from $21.5 million (8.1% of sales) to $44.3 million (14.6% of sales). Our 2011 pre-tax income was negatively impacted by the payment of a $500,000 insurance deductible due to the storm damages caused by February 2011 snow storms in Tulsa, as well as other charges previously reported. Net income in 2012 increased to $27.4 million (9.1% of sales) or $1.11 per share from $14.0 million (5.3% of sales) or $0.56 per share in 2011. The 2012 tax rate was 38.0% versus 35.0% a year ago. Our per share calculations are based upon 24.7 million fully diluted shares outstanding in 2012 and 24.9 million fully diluted shares in 2011. 2012AnnuAl RepoRtStrong FinAnCiAl Condition The remainder of our expenditures was directed toward Our financial condition at December 31, 2012, was additional plant expansion and machinery. The capacity quite strong. Cash and investments totaled $19.3 mil- of our Tulsa and Longview, Texas, plants has increased to lion (including $16.1 million of short-term certificates $800 million of annual production, while our machinery of deposit and corporate bonds, all maturing within capacity can accommodate approximately $500-$600 two years). Total current assets were $91.5 million with million of sales. a current ratio of 2.3:1. Our capital expenditures in 2012 were $14.1 million and we paid dividends of $8.9 million (including a special $0.12 per share dividend paid in December 2012 amounting to $3.0 million). Once again, we operated with no long-term debt. Total shareholders’ equity increased to $138.1 million or $5.59 per diluted share from $122.5 million or $4.92 For 2013, we have budgeted capital expenditures in the vicinity of $9-10 million. We anticipate approximately 20% of these expenditures will be directed toward plant expansion and renovation with the remainder going to additional machinery. per diluted share a year ago. Our return on average A MASter diStriBUtor shareholders’ equity was 21.1%. CApitAl expenditUreS During the past year we began to reap the benefits of our aggressive capital expenditure program undertaken in 2011 which totaled $35.9 million. In the 2011 letter to shareholders, we discussed the relocation and expansion of three assembly lines and the rearrangement of two others in anticipation of growing demand in our 2-6 ton, 16-30 ton and 26-70 ton product lines, which contributed approximately 65% of the Company’s total volume. In addition, we replaced 50% of our sheet metal fabricating equipment with more reliable and efficient machinery, thus improving the overall efficiency of our manufacturing process. We witnessed significant productivity improvement in 2012 derived from the enlarged assembly lines and the installation of new Our new 200,000 square foot warehouse was completed at the end of 2012. This new facility will house production and replacement parts and a wide variety of products, all of which will be sold to our manufacturer’s representatives for resale to their customers. The replacement parts inventory will be made up of coils manufactured at our Longview facility, as well as component parts such as compressors, motors, fans and electrical items which will be purchased from various manufacturers. By taking this “supermarket” approach, the Company can take advantage of wholesale pricing available to large purchasers while offering its representatives a wide selection of parts and quick delivery (24-48 hours) to accommodate their customers. equipment. We believe that further gains will continue Our replacement parts business contributed approx- throughout this year. Our capital expenditures in 2012 were $14.1 million. We completed the construction of a 200,000 square foot warehouse and office building at a cost of $4.0 million (bringing the total cost of this building to $11.0 million). imately $12 million of sales in 2012 and we expect this segment to experience excellent growth over the intermediate and longer term as more of our representatives seek to augment their sales via this incremental business. reCognitionS In July, AAON’s SB Series water-source/geothermal heat pump system was recognized for excellence in product design as a Gold Award Winner in the “our HVAC Light Commercial Equipment category sponsored by the Air Conditioning Heating and Refrigeration News Magazine (ACHR News) in their Dealer Design Awards Program. An independent panel of 29 contractors acted as judges in the contest that had 81 entries. The ACHR News is distributed nationally to over replacement parts business 33,000 HVAC/R contractors, wholesalers and other industry professionals. In September, the Company announced that its RN Series packaged rooftops unit (55-140 tons) had been named a 2012 Product of the Year winner in the HVAC/R category by Consulting-Specifying Engineer magazine. The RN series won the bronze award for its efficiency and energy savings at full and partial loads. Consulting-Specifying Engineer is a monthly publication with a circulation of over 46,000 mechanical, electrical and plumbing (MEP) engineers. indUStry oUtlook contributed approximately $12 million of sales in 2012 and we expect This past February, a news article appeared in the HVAC&R Industry Newsletter that sighted a recent study published by the American Institute of Architects this segment (AIA) forecasting healthy gains this year in nonresidential construction activity. AIA projects construction spending for this type of buildings rising by 5% in 2013 and 7.2% in 2014. The construction of commercial facilities is expected to lead the upturn, with spending gains of almost 9% this year and nearly 11% next year. Industrial (factories) construction spending is projected to increase modestly, while institutional construction activity should lag behind. AIA expects the healthcare industry to be the strongest institutional sector. to experience excellent growth over the At the date of this letter, we had not yet completed our first quarter of 2013. Through the first two months of this year, our incoming order rate remained firm intermediate and a polling of our manufacturer’s representatives suggests a continuation of this trend over the near and intermediate terms. While we are pleased by the upbeat tone of the AIA’s recent findings, we remain mindful of the fact that this survey is just an indicator of the outlook for future nonresidential construction activity. An increase in the index may foretell the mood for new construction projects and HVAC sales over the intermediate and longer terms. However, ar- chitectural work does not always translate into new construction or HVAC sales. and longer term” 2012AnnuAl RepoRt“we have been and will remain committed to expend the necessary capital and manpower to produce the most technologically advanced, energy efficient products in the industry.” We have begun to see some strengthening in raw material and component costs. If this trend continues there is little doubt that we will incur some near term margin restriction, since there is a lag period between increases in our cost of sales and our reaction time to implement pricing increases. SAleS repreSentAtiVe perForMAnCe Once again we want to commend our manufacturer’s representatives who enabled the Company to post a significant gain in sales to all-time record levels this last year. The sales representative network is made up of 93 reps which operate 108 offices (some reps have multiple offices) in all 50 states and Canada. This network contributed over 95% of our total sales in 2012. AAON encountered good growth in end markets such as education, healthcare, government, the military, and retailing, while the lethargic atmosphere surrounding the commercial and industrial sectors continued throughout the year. Our replacement business showed good growth aided by the continuation of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, as well as the excellent response to a number of our newly revised, innovative energy efficient products which create significant cost savings for our customers. The new construction segment, which constitutes the remainder of sales, was understandably impacted by the continuing slowdown in economic activity. In 2011 we enhanced our extensive training program for our representatives so they could better communicate the features and benefits of AAON products. The results were excellent. We took further steps to improve and enlarge the representatives’ force by replacing some underperforming offices and encouraging the addition of personnel in other offices. We anticipate continuing growth in our market share through the greater acceptance of our product lines. We believe our manufacturer’s representatives will continue to play a most important role in AAON’s future growth. oUr eMployeeS We strive to retain and motivate employees in a manner consistent with shareholder interests. An initial step in this process is to share the profitability of the company. Over the years we have distributed 10% of pre-tax profits equally to all personnel. As of January We view our employees as a long-term investment 1, 2012, we changed this incentive to be calculated in skills, talent and knowledge. We believe that our on a consolidated basis (vs. separate subsidiaries) and approach to personnel matters increases shareholder added the requirement that personnel remain with the value by creating an ownership perspective while company an additional two and one-half months. helping employees meet their personal financial, health To encourage a longer-term focus, employees own nearly 4% of the company’s outstanding stock through our 401(k) plan which allows employees to benefit, along with other shareholders, from share appreciation. Employees (as a group), through the 401(k) plan, are the fourth largest shareholder of AAON. In 2012, we contributed 1.5% of each employee's pre-tax earnings to the 401(k) plan, along with a matching contribution, to ensure some level of retirement preparation and corporate ownership. All company contributions are used to purchase AAON stock on the open market, while no employee contributions are allowed to be invested in company stock. Shares of AAON stock are later sold to and development goals. oUtlook Our record sales and strong earnings gains in 2012 were undoubtedly the result of a number of factors, not the least of which was the extraordinary effort put forth by all of our employees and manufacturer’s representatives. We have been and will remain committed to expend the necessary capital and manpower to produce the most technologically advanced, energy efficient products in the industry. Our strong financial condition and free cash flow will enable us to continue to pursue a solid growth policy and remain debt free. the company if participants diversify their holdings, as There are many challenges before us and new heights to they are permitted to do immediately, or leave the plan. be scaled. We believe we can achieve our goals of further The 401(k) plan encourages employee longevity through sales and earnings gains, aided by the continuing support a six-year benefit vesting structure and provides for the of our customers, sales representatives and shareholders, redistribution of participant forfeitures. as well as the commitment of our employees, all of whose We are in our fifth year of offering only a high-deductible health plan, along with contributions to health savings accounts, wellness incentives and on-site clinics that are focused on preventative care. We believe that direct control over their healthcare dollars has made our employees more conscious of their health and medical costs. Following a U.S. Supreme Court ruling, we have focused on ensuring that our plan meets the requirements of the health reform regulations in the most cost effective manner possible. names appear at the end of this report. Sincerely, Norman H. Asbjornson President & CEO March 29, 2013 2012AnnuAl RepoRtSpring AAON purchased, renovated and moved into a 184,000 square foot plant in Tulsa, Oklahoma. September Purchase of John Zink Air Conditioning Division. Introduced a new product line of rooftop heating and air conditioning units 2-140 tons. September One-for-four reverse stock split. Retired $1,927,000 of subordinated debt. December Formed AAON Coil Products, a Texas Corporation, as a subsidiary to AAON, Inc. (Nevada) and purchased coil making assets of Coils Plus. March Purchase of property with 26,000 square foot building adjacent to AAON Coil Products plant in Longview, Texas. Issued a 10% stock dividend. September Completed expansion of the Tulsa facility to 332,000 square feet. November AAON yearly shipments exceed $100 million. Received U.S. patent for Dimpled Heat Exchanger Tube. April AAON received U.S. patent for Blower Housing assembly. Fall Expanded rooftop product line to 230 tons Introduced evaporative condensing energy savings feature. October AAON listed in Forbes’ 200 Best Small Companies 1987 1988 August AAON, an Okalhoma Corporation was founded. 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 December Listed on NASDAQ Small Cap - Symbol “AAON.” Summer Became a publicly traded company with the reverse acquisition of Diamond Head Resources (now “AAON, Inc.”), a Nevada corporation. Spring AAON Coil Products purchased, renovated and moved into a 110,000 square foot plant in Longview, Texas. November Listed on the NASDAQ National Market System. January Introduced a desiccant heat recovery wheel option available on all AAON rooftop units. Fall Industry introduction of the modular air handler and chiller products. October AAON listed in Forbes’ 200 Best Small Companies. May Purchase of the assets of Air Wise, of Mississauga, Ontario, Canada. September AAON received U.S. Patent for DPAC. April AAON introduces factory engineered and assembled packaged mechanical room, which includes a boiler and all piping and pumping accessories. December AAON rings closing bell at NASDAQ June Initiation of a semi-annual cash dividend for AAON shareholders. August 3-for-2 stock split 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 October AAON, listed in Forbes Magazine’s “Hot Shots 200 Up & Comers.” AAON listed in Forbes’ 200 Best Small Companies. April AAON received U.S. Patent for the De-Superheater for Evaporative Air Conditioning. August AAON received U.S. Patent for Plenum Fan Banding. October AAON Listed in Forbes’ 200 Best Small Companies’ October AAON rings opening bell at NASDAQ July AAON products receive Dealer Design Awards from ACHR News. July AAON RQ Series Rooftop Unit wins ACHR News Dealer Design Award. June 3-for-2 stock split. July Started production of polyurethane foam-filled double-wall construction panels for rooftop and chiller products using newly purchased manufacturing equipment. November Introduction of light commercial/ residential product lines. March Modular air handler product extended to 50,000 cfm. AAON voted “Most Valuble Product” and “Product of the Year” by Consulting-Specifying Engineer Magazine AAON listed in Forbes’ 200 Best Small Companies October AAON listed in Forbes’ 200 Best Small Companies. November AAON donates high efficiency equipment to ABC’s Extreme Makeover: Home Edition July Geothermal RQ Series wins Silver in ACHR News Dealer Design Competition Single Zone VAV rooftop units win Honorable Mention in ACHR News Dealer Design Competition. 2012 October Consulting-Specifying Engineer magazine awards Geothermal RQ Series Product of the Year - Silver 2013 December AAON yearly shipments exceed $300 million July AAON SB Series Self Contained Unit wins ACHR News Dealer Design Award - Gold December Purchased 40 acres with 457,000 square foot plant and 22,000 square foot office space located across from Tulsa facility. October U.S. patent granted to AAON for air conditioner with energy recovery heat wheel. June AAON named to the Fortune 40: Best Stocks to Retire On. National Society of Professional Engineers Award AAON 2009 Product of the Year. October RN series rooftop unit names 2010 Product of the Year - Silver by Consulting-Specifying Engineer Magazine LC series chiller product named 2010 Product of the Year - Bronze by Consulting-Specifying Engineer Magazine AAON listed in Forbes’ 200 Best Small Companies. July AAON added as a member of the Russell 2000® Index. Spring Completed Tulsa, Oklahoma, and Longview, Texas, plant additions yielding a total exceeding one million square feet. September 3-for-2 stock split. Spring Industry introduction of light commercial geothermal heat pump self contained unit product line. June National Society of Professional Engineers awards RQ Series High Efficiency Rooftop Unit "Product of the Year." August AAON added to Standard & Poor’s SmallCap 600 Index. May AAON increases dividend payment by 13%. 3-for-2 stock split January Outdoor mechanical room extended to 540 tons of capacity September Consulting-Specifying Engineer magazine awards RN Series E Cabinet Product of the Year - Bronze Spring AAON purchased, renovated and moved into a 184,000 square foot plant in Tulsa, Oklahoma. September Purchase of John Zink Air Conditioning Division. Introduced a new product line of rooftop heating and air conditioning units 2-140 tons. 1987 1988 August AAON, an Okalhoma Corporation was founded. A tiMeline oF SUCCeSS September One-for-four reverse stock split. Retired $1,927,000 of subordinated debt. December Formed AAON Coil Products, a Texas Corporation, as a subsidiary to AAON, Inc. (Nevada) and purchased coil making assets of Coils Plus. March Purchase of property with 26,000 square foot building adjacent to AAON Coil Products plant in Longview, Texas. Issued a 10% stock dividend. September Completed expansion of the Tulsa facility to 332,000 square feet. April AAON received U.S. patent for Blower Housing assembly. November AAON yearly shipments exceed $100 million. Received U.S. patent for Dimpled Heat Exchanger Tube. Fall Expanded rooftop product line to 230 tons Introduced evaporative condensing energy savings feature. October AAON listed in Forbes’ 200 Best Small Companies 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 December Listed on NASDAQ Small Cap - Symbol “AAON.” Spring AAON Coil Products purchased, renovated and moved into a 110,000 square foot plant in Longview, Texas. November Listed on the NASDAQ National Market System. January Introduced a desiccant heat recovery wheel option available on all AAON rooftop units. Summer Became a publicly traded company with the reverse acquisition of Diamond Head Resources (now “AAON, Inc.”), a Nevada corporation. April AAON introduces factory engineered and assembled packaged mechanical room, which includes a boiler and all piping and pumping accessories. Fall Industry introduction of the modular air handler and chiller products. October AAON listed in Forbes’ 200 Best Small Companies. May Purchase of the assets of Air Wise, of Mississauga, Ontario, Canada. September AAON received U.S. Patent for DPAC. December AAON rings closing bell at NASDAQ June Initiation of a semi-annual cash dividend for AAON shareholders. August 3-for-2 stock split December Purchased 40 acres with 457,000 square foot plant and 22,000 square foot office space located across from Tulsa facility. October U.S. patent granted to AAON for air conditioner with energy recovery heat wheel. July AAON added as a member of the Russell 2000® Index. Spring Completed Tulsa, Oklahoma, and Longview, Texas, plant additions yielding a total exceeding one million square feet. September 3-for-2 stock split. June AAON named to the Fortune 40: Best Stocks to Retire On. National Society of Professional Engineers Award AAON 2009 Product of the Year. August AAON added to Standard & Poor’s SmallCap 600 Index. May AAON increases dividend payment by 13%. October RN series rooftop unit names 2010 Product of the Year - Silver by Consulting-Specifying Engineer Magazine LC series chiller product named 2010 Product of the Year - Bronze by Consulting-Specifying Engineer Magazine June National Society of Professional Engineers awards RQ Series High Efficiency Rooftop Unit "Product of the Year." 3-for-2 stock split AAON listed in Forbes’ 200 Best Small Companies. January Outdoor mechanical room extended to 540 tons of capacity Spring Industry introduction of light commercial geothermal heat pump self contained unit product line. September Consulting-Specifying Engineer magazine awards RN Series E Cabinet Product of the Year - Bronze 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 April AAON received U.S. Patent for the De-Superheater for Evaporative Air Conditioning. August AAON received U.S. Patent for Plenum Fan Banding. October AAON Listed in Forbes’ 200 Best Small Companies’ October AAON rings opening bell at NASDAQ July AAON products receive Dealer Design Awards from ACHR News. July AAON RQ Series Rooftop Unit wins ACHR News Dealer Design Award. 2012 October Consulting-Specifying Engineer magazine awards Geothermal RQ Series Product of the Year - Silver 2013 December AAON yearly shipments exceed $300 million AAON voted “Most Valuble Product” and “Product of the Year” by Consulting-Specifying Engineer Magazine AAON listed in Forbes’ 200 Best Small Companies October AAON listed in Forbes’ 200 Best Small Companies. November AAON donates high efficiency equipment to ABC’s Extreme Makeover: Home Edition July AAON SB Series Self Contained Unit wins ACHR News Dealer Design Award - Gold July Geothermal RQ Series wins Silver in ACHR News Dealer Design Competition Single Zone VAV rooftop units win Honorable Mention in ACHR News Dealer Design Competition. October AAON, listed in Forbes Magazine’s “Hot Shots 200 Up & Comers.” AAON listed in Forbes’ 200 Best Small Companies. June 3-for-2 stock split. July Started production of polyurethane foam-filled double-wall construction panels for rooftop and chiller products using newly purchased manufacturing equipment. November Introduction of light commercial/ residential product lines. March Modular air handler product extended to 50,000 cfm. 2012AnnuAl RepoRtUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [P] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 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 (State or other jurisdiction of incorporation or organization) 2425 South Yukon, Tulsa, Oklahoma (Address of principal executive offices) 87-0448736 (IRS Employer Identification No.) 74107 (Zip Code) Registrant’s telephone number, including area code: (918) 583-2266 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.004 (Title of Class) Rights to Purchase Series A Preferred Stock (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [P ] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. [ ] Yes [ P ] No 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. [ P ] Yes [ ] No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ P ] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Large accelerated filer Non-accelerated filer Accelerated filer [ P ] Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.) [ ] Yes [ P ] No The aggregate market value of the common equity held by non-affiliates computed by reference to the closing price of registrant’s common stock on the last business day of registrant’s most recently completed second quarter June 30, 2012 was $346.1 million. As of February 28, 2013, registrant had outstanding a total of 24,497,978 shares of its $.004 par value Common Stock. Portions of registrant's definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders to be held DOCUMENTS INCORPORATED BY REFERENCE May 21, 2013, are incorporated into Part III. tABle oF ContentS iteM nUMBer And CAption pAge nUMBer pArt i 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 pArt ii 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . 5 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 14 8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 pArt iii 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . 17 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 pArt iV 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 FoRwARD-lookInG StAtementS This Annual Report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “should”, “will”, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligations to update publicly any forward- looking statements, whether as a result of new information, future events or otherwise. Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general economic, market or business conditions. pArt i Item 1. BuSIneSS GeneRAl Development AnD DeScRIptIon oF BuSIneSS AAON, Inc., a Nevada corporation, was incorporated on August 18, 1987. We have two operating subsidiaries, AAON, Inc., an Oklahoma corporation and AAON Coil Products, Inc., a Texas corporation. Unless the context otherwise requires, references in this Annual Report to “AAON,” the “Company”, “we”, “us”, “our”, or “ours” refer to AAON, Inc., and our subsidiaries. We are engaged in the manufacture and sale of air-condition- ing and heating equipment. Our products consist of rooftop units, chillers, air-handling units, make-up air units, heat recovery units, condensing units, commercial-self contained units and coils. pRoDuctS AnD mARketS Our products serve the commercial and industrial new construction and replacement markets. To date, our sales have been primarily to the domestic market. Foreign sales accounted for approximately 5% of our sales in 2012. Our rooftop and condenser markets consist of units installed on commercial or industrial structures of generally less than 10 stories in height. Our air-handling units, commercial self- contained units, chillers, and coils are applicable to all sizes of commercial and industrial buildings. The size of these markets is determined primarily by the number of commercial and industrial building completions. The replacement market consists of products installed to replace existing units/components that are worn or damaged. Currently, slightly over half of the industry's market consists of replacement units. starts, in turn, are affected by such factors as interest rates, the state of the economy, population growth and the relative age of the population. When new construction is down, we emphasize the replacement market. Based on our 2012 level of sales of $303.1 million, we estimate that we have approximately a 14% share of the rooftop market and a 1-3% share of other markets. Approximately 55% of our sales were generated from the sale to the renovation and replacement markets and 45% from new construction. The percentage of sales for new construction vs. replacement to particular customers is related to the customer’s stage of development. We purchase certain components, fabricate sheet metal and tubing and then assemble and test the finished products. Our primary finished products consist of a single unit system containing heating, cooling and/or heat recovery components in a self-contained cabinet, referred to in the industry as "unitary products”. Our other finished products are chillers, coils, air-handling units, condensing units, make-up air units, heat recovery units and commercial self-contained units. We offer four groups of rooftop units. The RQ Series consisting of six cooling sizes ranging from one to six tons; the RN Series offered in 18 cooling sizes ranging from six to 70 tons, and an expansion of the RN series introduced in 2012 that increased the cooling range up to 140 tons and the number of cooling sizes from 18 to 26. The RL Series, which is offered in 15 cooling sizes ranging from 40 to 230 tons; and the HA Series, which is a horizontal discharge package for either rooftop or ground installation offered in eight sizes ranging from seven and one-half to 50 tons. We also offer the SA and SB models as an indoor package water cooled units with cooling capacities of 3 to 70 tons. We manufacture a Model LC Chiller, air cooled, and a Model LL chiller, which is available in both air-cooled condensing and evaporative cooled configurations covering a range of 3 to 540 tons. The commercial and industrial new construction market is subject to cyclical fluctuations in that it is generally tied to housing starts, but has a lag factor of 6-18 months. Housing Our air-handling units consist of the F1 and H3/V3 Series and the modular (M2 and M3) Series as well as air handling unit versions of the RN, RL and SA units. 1 Our heat recovery option applicable to our RQ, RN and RL units, as well as our M2 and M3 Series air handlers, respond to the U.S. Clean Air Act mandate to increase fresh air in commercial structures. Our products are designed to compete on the higher quality end of standardized products. Performance characteristics of our products range in cooling capacity from 1½ to 540 tons and in heating capacity from 69,000 - 9,000,000 BTU's. All of our products meet the Department of Energy's (“DOE”) minimum efficiency standards, which define the maximum amount of energy to be used in producing a given amount of cooling. Many of our units far exceed these minimum standards and are among the highest efficiency units currently available. A typical commercial building installation requires a ton of air- conditioning for every 300-400 square feet or, for a 100,000 square foot building, 250 tons of air-conditioning, which can involve multiple units. mAjoR cuStomeRS No customer accounted for 10% of our sales during 2012, 2011 or 2010. SouRceS AnD AvAIlABIlIty oF RAw mAteRIAlS The most important materials we purchase are steel, copper and aluminum, which are obtained from domestic suppliers. We also purchase from other domestic manufacturers certain components, including compressors, electric motors and electrical controls used in our products. We attempt to obtain the lowest possible cost in our purchases of raw materials and components, consistent with meeting specified quality standards. We are not dependent upon any one source for raw materials or the major components of our manufactured products. By having multiple suppliers, we believe that we will have adequate sources of supplies to meet our manufacturing requirements for the foreseeable future. We attempt to limit the impact of increases in raw materials and purchased component prices on our profit margins by negotiating with each of our major suppliers on a term basis from six months to one year. To support and service our customers and the ultimate consumer, we provide parts availability through our sales offices and have factory service organizations at each of our plants. Also, a number of the Representatives we utilize have their own service organizations, which, in connection with us, provide the necessary warranty work and/or normal service to customers. Our product warranty policy is: the earlier of one year from the date of first use or 18 months from date of shipment for parts only; an additional four years for compressors (if applicable); 15 years on aluminized steel gas-fired heat exchangers (if applicable); 25 years on stainless steel heat exchangers (if applicable); and 10 years on gas-fired heat exchangers in RL products (if applicable). Our warranty policy for the RQ series covers parts for two years from date of unit shipment and labor for one year from date of unit shipment. ReSeARch AnD Development Our products are engineered for performance, flexibility and serviceability. This has become a critical factor in competing in the heating, ventilation and air conditioning (“HVAC”) equipment industry. We must continually develop new and improved products in order to compete effectively and to meet evolving regulatory standards in all of our major product lines. All of our R&D activities are self-sponsored, rather than customer-sponsored. R&D has involved the RQ, RN and RL (rooftop units), F1, H/V, M2 and M3 (air handlers), LC and LL (chillers), CB and CC (condensing units), SA (commercial self-contained units) and BL (boilers), as well as component evaluation and refinement, development of control systems and new product development. We incurred research and development expenses of approximately $3.6 million, $4.8 million, and $3.6 million in 2012, 2011 and 2010, respectively. BAckloG Our current backlog as of March 1, 2013 was approximately $51.1 million compared to approximately $55.3 million as of March 1, 2012. The current backlog consists of orders considered by management to be firm and generally are filled on average within approximately 60 days to 92 days after an order is deemed to become firm; however, the orders are subject to cancellation by the customers. DIStRIButIon individuals and utilize We employ a sales staff of 20 approximately 93 independent manufacturer representatives' organizations (“Representatives”) having 108 offices to market our products in the United States and Canada. We also have international sales organization, which utilizes 12 one distributors in other countries. Sales are made directly to the contractor or end user, with shipments being made from our Tulsa, Oklahoma and Longview, Texas plants to the job site. Our products and sales strategy focus on niche markets. The targeted markets for our equipment are customers seeking products of better quality than offered, and/or options not offered, by standardized manufacturers. woRkInG cApItAl pRActIceS Working capital practices in the industry center on inventories and accounts receivable. Our management regularly reviews our working capital with a view of maintaining the lowest level consistent with requirements of anticipated levels of operation. Our greatest needs arise during the months of July - November, the peak season for inventory (primarily purchased material) and accounts receivable. Our working capital requirements are generally met by cash flow from operations and a bank revolving credit facility, which currently permits borrowings up to $30 million (currently unused). We believe that we will have sufficient funds available to meet our working capital needs for the foreseeable future. 2 2012AnnuAl RepoRtSeASonAlIty Sales of our products are moderately seasonal with the peak period being July - November of each year. Item 1A. RISk FActoRS The following risks and uncertainties may affect our perfor- mance and results of operations. competItIon In the standardized market, we compete primarily with Lennox International, Inc., Trane (Ingersoll Rand Limited), York (Johnson Controls Inc.) and Carrier (United Technologies Corporation). All of these competitors are substantially larger and have greater resources than we do. Our products compete on the basis of total value, quality, function, serviceability, efficiency, availability of product, product line recognition and acceptability of sales outlet. However, in new construction where the contractor is the purchasing decision maker, we are often at a competitive disadvantage because of the emphasis placed on initial cost. In the replacement market and other owner-controlled purchases, we have a better chance of getting the business since quality and long-term cost are generally taken into account. employeeS As of March 1, 2013, we employed 1,392 permanent employees and 4 temporary employees. Our employees are not currently represented by unions. Management considers its relations with our employees to be good. pAtentS, tRADemARkS, lIcenSeS AnD conceSSIonS We do not consider any patents, trademarks, licenses or concessions to be material to our business operations, other than patents issued regarding our heat recovery wheel option, blower, gas-fired heat exchanger and evaporative condenser desuperheater which have terms of twenty years with expiration dates ranging from 2016 to 2022. envIRonmentAl mAtteRS Laws concerning the environment that affect or could affect our domestic operations include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, regulations promulgated under these Acts, and any other federal, state or local laws or regulations governing environmental matters. We believe that we are in compliance with these laws and that future compliance will not materially affect our earnings or competitive position. AvAIlABle InFoRm AtIon Our Internet website address is http://www.aaon.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 will be available through our Internet website as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. ouR BuSIneSS cAn Be huRt B y economIc conDItIonS . Our business is affected by a number of economic factors, in- cluding the level of economic activity in the markets in which we operate. Since 2008, the state of the United States economy has negatively impacted the commercial and industrial new construction markets. The decline in economic activity in the United States has materially affected our financial condition and results of operations. Sales in the commercial and indus- trial new construction markets correlate to the number of new homes and buildings that are built, which in turn is influenced by cyclical factors such as interest rates, inflation, consumer spending habits, employment rates and other macroeconomic factors over which we have no control. In the HVAC business, a decline in economic activity as a result of these cyclical or other factors typically results in a decline in new construction and replacement purchases; but, thus far, has not resulted in a decrease in our sales volume and profitability. we mAy Be ADveRSely AFFecteD By pRoBlemS In the AvAIlABIlIty, oR IncReASeS In the pRIceS , oF RAw mAteRIAlS AnD componentS. Problems in the availability, or increases in the prices, of raw materials or components could depress our sales or increase the costs of our products. We are dependent upon components purchased from third parties, as well as raw materials such as steel, copper and aluminum. Occasionally, we enter into cancelable and noncancelable contracts on terms from six months to one year for raw materials and components at fixed prices. However, if a key supplier is unable or unwilling to meet our supply requirements, we could experience supply interruptions or cost increases, either of which could have an adverse effect on our gross profit. we RISk hAvInG loSSeS ReSultInG FRom the uSe oF non-cAncelABle FIxeD pRIce contRActS. Historically, we attempted to impact of price fluctuations on commodities by entering into non-cancelable fixed price contracts with our major suppliers for periods of 6 - 18 months. We expect to receive delivery of raw materials from our fixed price contracts for use in our manufacturing operations. These fixed price contracts are not accounted for as derivative instruments since they meet the normal purchases and sales exemption. limit the 3 we mAy not Be ABle to SucceSSFully Develop AnD mARket new pRoDuctS. Our future success will depend upon our continued investment in research and new product development and our ability to continue to realize new technological advances in the HVAC industry. Our inability to continue to successfully develop and market new products or our inability to achieve technological advances on a pace consistent with that of our competitors could lead to a material adverse effect on our business and results of operations. we mAy IncuR mAteRIAl coStS AS A ReSult oF wARRAnty AnD pRoDuct lIABIlIty clAImS thAt woulD neGAtIvely AFFect ouR pRoFItABIlIty. The development, manufacture, sale and use of our products involve a risk of warranty and product liability claims. Our product liability insurance policies have limits that, if exceeded, may result in material costs that would have an adverse effect on our future profitability. In addition, warranty claims are not covered by our product liability insurance and there may be types of product liability claims that are also not covered by our product liability insurance. we mAy not Be ABle to compete FAvoRABly In the hIGhly competItIve hvAc BuSIneSS . Competition in our various markets could cause us to reduce our prices or lose market share, or could negatively affect our cash flow, which could have an adverse effect on our future financial results. Substantially all of the markets in which we participate are highly competitive. The most significant competitive factors we face are product reliability, product performance, service and price, with the relative importance of these factors varying among our product line. Other factors that affect competition in the HVAC market include the development and application of new technologies and an increasing emphasis on the development of more efficient HVAC products. Moreover, new product introductions are an important factor in the market categories in which our products compete. Several of our competitors have greater financial and other resources than we have, allowing them to invest in more extensive research and development. We may not be able to compete successfully against current and future competition and current and future competitive pressures faced by us may materially adversely affect our business and results of operations. the loSS oF noRmAn h. ASBjoRnSon coulD ImpAIR the GRowth oF ouR BuSIneSS. Norman H. Asbjornson, our founder, has served as our President and Chief Executive Officer from inception to date. He has provided the leadership and vision for our growth. Although important responsibilities and functions have been delegated to other highly experienced and capable management personnel, and our products are technologically advanced and well positioned for sales into the future, his death, disability or retirement could impair the growth of our business. We do not have an employment agreement with Mr. Asbjornson. It should be noted, however, that the Board of Directors is in the process of evolving a succession plan relating to Mr. Asbjornson and the positions currently held by him. information technology ouR BuSIneSS IS SuBject to the RISkS oF InteRRuptIonS By pRoBlemS Such AS computeR vIRuSeS. We depend upon infrastructure, including network, hardware and software systems to conduct our business. Despite our implementation of network and other cyber security measures, our information technology system and networks could be disrupted or experience a security breach from computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business. expoSuRe to envIRonmentAl lIABIlItIeS coulD ADveRSely AFFect ouR ReSultS oF opeRAtIonS. Our future profitability could be adversely affected by current or future environmental laws. We are subject to extensive and changing federal, state and local laws and regulations designed to protect the environment in the United States and in other parts of the world. These laws and regulations could impose liability for remediation costs and result in civil or criminal penalties in case of non-compliance. Compliance with environmental increases our costs of doing business. Because these laws are subject to frequent change, we are unable to predict the future costs resulting from environmental compliance. laws extReme GoveRnmentAl ReGul AtIonS. We always face the possibility of new governmental regulations which could have a substantial or even extreme negative effect on our operations and profitability. Specifically, Final Rule, Regulatory Identification No. 1904-AC23, published on March 7, 2011, which, if fully implemented subsequent to the current extension to the implementation date of January 1, 2014, would have highly detrimental consequences to all industries involving sales of energy using products by imposing burdensome, excessive and, impossible testing requirements. in part, In addition, several other intrusive component part regulations have been proposed recently. If these proposals become final rules, the effect would be the regulation of compressors andfans in products for which the DOE does not have current authority. This could affect equipment we currently manufacture and could have an impact on our product design, operations and profitability. 4 2012AnnuAl RepoRtwe ARe SuBject to AD veRSe chAnGeS In tAx lAwS. Our tax expense or benefits could be adversely affected by changes in tax provisions, unfavorable findings in tax examinations or differing interpretations by tax authorities. We are unable to estimate the impact that current and future tax proposals and tax laws could have on our results of operations. We are currently subject to state and local tax examinations for which we do not expect any major assessments. Item 3. leGAl pR oceeDInGS. We are not a party to any pending legal proceeding which management believes is likely to result in a material liability and no such action is contemplated by or, to the best of our knowledge, has been threatened against us. Item 4. mIne SAFety DIScloSuRe. Not applicable. Item 1B. unReSolveD StAFF commentS. None. Item 2. pRopeRtIeS . As of December 31, 2012, we own approximately 1.5 million square feet of space for office, manufacturing, warehouse and assembly operations in Tulsa, Oklahoma and Longview, Texas. We believe that our facilities are well maintained and are in good condition and suitable for the conduct of our business. Our plant and office facilities in Tulsa, Oklahoma, consist of a 342,000 sq. ft. building (327,000 sq. ft. of manufacturing/ warehouse space and 15,000 sq. ft. of office space) located on a 12-acre tract of land at 2425 South Yukon Avenue (the “original facility”), and a 861,000 sq. ft. manufacturing/warehouse building and a 70,000 sq. ft. office building (the “expansion facility”) located on a 40-acre tract of land across the street from the original facility (2440 South Yukon Avenue). We own the original facility and the expansion facility. Both plants are of sheet metal construction. Our manufacturing area is in heavy industrial type buildings, with total coverage by bridge cranes, containing manufacturing equipment designed for sheet metal fabrication and metal stamping. The manufacturing equipment contained in the facilities consists primarily of automated sheet metal fabrication equipment, supplemented by presses. Assembly lines consist of seven cart-type conveyor lines with variable line speed adjustment, which are motor driven. Subassembly areas and production line manning are based upon line speed. Our operations in Longview, Texas, are conducted in a plant/ office building at 203-207 Gum Springs Road, containing 258,000 sq. ft. on 14 acres. The manufacturing area (approximately 251,000 sq. ft.) is located in three 120-foot wide sheet metal buildings connected by an adjoining structure. The remaining 7,000 square feet are utilized as office space. The facility is built for light industrial manufacturing. An additional, contiguous 15 acres were purchased in 2004 and 2005 for future expansion. We own both the existing plant/office building, and the 15 acres designated for future expansion. pArt ii Item 5. mARket FoR ReGIStRAnt'S common equIty, Rel AteD StockholDeR mAtteRS AnD ISSueR puRchASeS oF equIty SecuRItIeS . Our common stock is quoted on the NASDAQ Global Select Market under the symbol "AAON". The table below summarizes the high and low reported sale prices for our common stock for the past two fiscal years. As of the close of business on February 28, 2013, there were 1,011 holders of record, and approximately 4,144 beneficial owners, of our common stock. QUArter ended March 31, 2011 June 30, 2011 September 30, 2011 December 31, 2011 March 31, 2012 June 30, 2012 September 30, 2012 December 31, 2012 HigH $ 21.98 $ 23.44 $ 24.23 $ 22.98 $ 22.04 $ 20.99 $ 20.81 $ 22.41 low $ 17.51 $ 20.07 $ 14.91 $ 14.64 $ 17.75 $ 18.00 $ 17.55 $ 18.34 At the discretion of the Board of Directors we pay semi-annual cash dividends. Board approval is required to determine the date of declaration and amount for each semi-annual dividend payment. The Board of Directors approved dividend payments of $0.12 per share related to the 3-for-2 stock split effective June 13, 2011. 5 We declared dividends to shareholders of record at the close of business on June 11, 2012, which were paid on July 2, 2012. At a meeting of the Board of Directors on November 7, 2012, the Board declared a regular semi-annual cash dividend of $0.12 per share, and, in view of our strong financial position, the Board also declared a one-time special cash dividend of $0.12 per share. Both dividends were paid to shareholders of record at the close of business on December 3, 2012 and paid on December 24, 2012. We paid cash dividends of $8.8 million, $5.9 million, and $9.2 million in 2012, 2011, and 2010, respectively. On November 6, 2007, our Board of Directors authorized a stock buyback program, targeting repurchases of up to approximately 10% (2.7 million shares) of our outstanding stock from time to time in open market transactions. On May 12, 2010, we completed the stock buyback program. Through May 12, 2010, we repurchased a total of 2.7 million shares under this program for an aggregate price of $36.1 million, or an average price of $13.36 per share. We purchased the shares at current market prices. On May 17, 2010, the Board authorized a new stock buyback program, targeting repurchases of up to approximately 5% (1.3 million shares) of our outstanding stock from time to time in open market transactions. Through June 28, 2010, we repurchased a total of approximately 0.718 million shares under this program for an aggregate price of $11.5 million, or an average price of $16.04 per share. We purchased the shares at current market prices. We did not repurchase any of our equity securities during 2012. On July 1, 2005, we entered into a stock repurchase arrange- ment by which employee-participants in our 401(k) savings and investment plan are entitled to have shares of AAON stock in their accounts sold to us to provide diversification of their investments. The maximum number of shares to be repurchased is contingent upon the number of shares sold by employees. Through December 31, 2012, we repurchased approximately 1.9 million shares for an aggregate price of $25.1 million, or an average price of $13.38 per share. We purchased the shares at current market prices. On November 7, 2006, the Board of Directors authorized us to repurchase shares from certain directors and officers following their exercise of stock options. The maximum number of shares to be repurchased is contingent upon the number of shares sold. Through December 31, 2012, we repurchased approximately 0.734 million shares for an aggregate price of $11.2 million, or an average price of $15.25 per share. We purchased the shares at current market prices. Repurchases during the fourth quarter of 2012 were as follows: iSSUer pUrCHASeS oF eQUity SeCUritieS (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid Per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approxi- mate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs $ 18,347 $ 24,458 $ 67,253 $ 110,058 $ 19.69 $ 19.99 $ 21.26 $ 20.72 $ 18,347 $ 24,458 $ 67,253 $ 110,058 - - - - period October 2012 November 2012 December 2012 Total 6 2012AnnuAl RepoRtcompARAtIve Stock peRFoRm Ance GRAph The following performance graph compares our cumulative total shareholder return, the NASDAQ Composite and a peer group of U.S. industrial manufacturing companies in the air conditioning, ventilation, and heating exchange equipment markets from December 31, 2007 through December 31, 2012. The graph assumes that $100 was invested at the close of trading December 31, 2007, with reinvestment of dividends. Our peer group includes Lennox International, Inc., Ingersoll Rand Limited, Johnson Controls Inc., and United Technologies Corporation. This table is not intended to forecast future performance of our Common Stock. CoMpUlSion oF 5 yeAr CUMUlAtiVe totAl retUrn Assumes Initial Investment of $100 December 2012 200.00 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 2007 2008 2009 2010 2011 2012 AAON Inc. S&P 500 Index - Total Returns Peer Group This stock performance Graph is not deemed to be “soliciting material” or otherwise be considered to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (Exchange Act) or to the liabilities of Section 18 of the Exchange Act, and should not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing. 7 Item 6. SelecteD FInAncIAl D AtA. The following selected financial data should be read in conjunction with our Consolidated Financial Statements and Notes thereto included under Item 8 of this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7. results of operations: 2012 2011 2010 2009 2008 yeArS ended deCeMBer 31, Net sales Net income Earnings per share: Basic Diluted Dividends per share Weighted average shares outstanding: Basic Diluted (in thousands, except per share data) $ 303,114 $ 266,220 $ 244,552 $ 245,282 $ 279,725 $ 27,449 $ 13,986 $ 21,894 $ 27,721 $ 28,589 $ 1.12 $ 1.11 $ 0.36 24,550 24,699 $ 0.57 $ 0.56 $ 0.24 24,690 24,881 $ 0.87 $ 0.87 $ 0.24 25,198 25,339 $ 1.07 $ 1.07 $ 0.24 25,780 25,963 $ 1.09 $ 1.07 $ 0.21 26,340 26,782 Financial position at end of Fiscal year: 2012 2011 2010 2009 2008 deCeMBer 31, Working capital Total assets Long-term and current debt Total stockholders’ equity (in thousands) $ 51,922 $ 45,700 $ 55,502 $ 65,354 $ 40,600 193,493 - 138,136 178,981 4,575 122,504 160,277 156,211 140,743 - 76 116,739 117,999 3,113 96,522 Item 7. mAnAGement'S DIScuSSIon AnD AnAlySIS oF FInAncIAl c onDItIon AnD ReSultS oF opeRAtIonS. oveRvIew We engineer, manufacture and market air-conditioning and heating equipment consisting of rooftop units, chillers, air-handling units, make-up air units, heat recovery units, condensing units, commercial self-contained units and coils. These products are marketed and sold to retail, manufacturing, educational, medical and other commercial industries. We market our products to all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately 5% of our 2012 sales. Our business can be affected by a number of economic factors, including the level of economic activity in the markets in which we operate. The recent state of the economy has negatively impacted the commercial and industrial new construction markets. A further decline in economic activity could result in a decrease in our sales volume and profitability. Sales in the commercial and industrial new construction markets correlate closely to the number of new homes and buildings that are built, which in turn is influenced by cyclical factors such as interest rates, inflation, consumer spending habits, employment rates and other macroeconomic factors over which we have no control. We sell our products to property owners and contractors through a network of manufacturers’ representatives and our internal sales force. The demand for our products is influenced by national and regional economic and demographic factors. The commercial and industrial new construction market is subject to cyclical fluctuations in that it is generally tied to housing starts, but has a lag factor of 6-18 months. Housing starts, in turn, are affected by such factors as interest rates, the state of the economy, population growth and the relative age of 8 2012AnnuAl RepoRtthe population. When new construction is down, we emphasize the replacement market. The following are key highlights and events that impacted our results of operations, cash flows, and financial condition in 2012: The principal components of cost of goods sold are labor, raw materials, component costs, factory overhead, freight and engineering expense. The principal high volume raw materials used in our manufacturing processes are steel, copper and aluminum and are obtained from domestic suppliers. We also purchase from domestic manufacturers certain components, including compressors, motors and electrical controls. The price levels of our raw materials have moderated from the high prices we experienced a year ago, but the market continues to be volatile and unpredictable as a result of the uncertainty related to the U.S. economy, a weakening global economy, and November 2012’s presidential election. For the year ended December 31, 2012, the price for copper increased by approximately 0.5% and the cost for steel and aluminum decreased approximately 2.5% and 8.0% respectively, from a year ago. For the year ended December 31, 2011 prices for copper and steel increased approximately 3% and 10%, respectively from prior year, while the cost of aluminum decreased ap- proximately 2%. We attempt to limit the impact of price fluctuations on these materials by entering into cancelable and non-cancelable fixed price contracts with our major suppliers for periods of 6 to 18 months. We expect to receive delivery of raw materials from in our manufacturing our fixed price contracts for use operations. In addition, from time to time we use derivative contracts to partially mitigate the volatility in the prices for some of these commodities. We did not enter into a derivative contract for any of our key raw materials during the years ended December 31, 2012 and 2011. • Net sales for 2012 were $303.1 million, the highest in the Company’s history, compared to $266.2 million in 2011. The increase in net sales can be attributed to gains in market share in the non-residential and replacement markets along with price increases introduced earlier in the year. • We estimate that we have captured approximately 14% share of the rooftop market and a 1% share of the coil market. Approximately 55% of our sales were generated from the sale to the renovation and replacement markets and 45% from new construction markets. • Income from operations was $44.2 million compared to $22.2 million in 2011. The increase in operational income can be attributed to higher sales and improved productivity during the year. • Net income for 2012 was $27.4 million, up by $13.4 million, compared to $14.0 million in 2011. • We paid $14.1 million in capital expenditures, a decrease of $21.8 million from 2011. • We paid cash dividends of $8.8 million in 2012 compared to $5.9 million in 2011. The 2012 dividends included a one- time special dividend of $0.12, in addition to the regular semi-annual dividend of $0.12, declared by the Board on November 7, 2012, due to our strong financial position. ReSultS oF opeRAtIonS The following is a summary of the income statement information as a percentage of net sales: Net sales Cost of sales Gross profit Selling, general and administrative expenses Loss (gain) on disposal of assets Income from operations Interest expense Interest income Other income (expense), net Income before income taxes Income tax provision Net income yeArS ending deCeMBer 31, 2012 2011 2010 $ 303,114 100.0% $ 266,220 100.0% $ 244,552 100.0% 232,615 70,499 26,261 4 44,234 (44) 86 41 44,317 16,868 $ 27,449 76.7% 23.3% 8.7% 0.0% 14.6% (0.0)% 0.0% 0.0% 14.6% 5.5% 9.1% 219,939 46,281 22,310 1,802 22,169 (277) 98 (477) 21,513 7,527 $ 13,986 82.6% 17.4% 8.4% 0.7% 8.3% (0.1)% 0.0% (0.2)% 8.1% 2.8% 5.3% 189,364 55,188 22,546 (73) 32,715 (45) 258 (235) 32,693 10,799 $ 21,894 77.4% 22.6% 9.2% 0.0% 13.4% (0.02)% 0.1% (0.1)% 13.4% 4.4% 9.0% 9 yeAR enDeD DecemBeR 31, 2012 vS. yeAR enDeD DecemBeR 31, 2011 net SAleS Net sales for the year ended December 31, 2012 increased by 13.9%, or $36.9 million to $303.1 million, compared with the same period in 2011. The increase in net sales was the result of the favorable reception to our new products, increased market share along with price increases introduced earlier in the year. GRoSS pRoFIt Gross profit increased by 52.3%, or $24.2 million, to $70.5 million in 2012 compared to 2011. As a percentage of sales, gross profit was 23.3% and 17.4% in 2012 and 2011, respectively. The improvement in gross profit can be attributed to cost savings in raw materials, increased product prices, product mix and improved productivity. The principal components of cost of goods sold are labor, raw materials, component costs, factory overhead, freight out and engineering expense. The principal high volume raw materials used in our manufacturing processes are steel, copper and aluminum, which are obtained from domestic suppliers. For the year ended December 31, 2012, the price for copper increased by approximately 0.5% and the cost for steel and aluminum decreased approximately 2.5% and 8.0% respectively, from a year ago. SellInG, GeneRAl AnD ADmInIStRAtIve expenSeS (“SG&A”) expenses Selling, General and Administrative increased by 17.7%, or $4.0 million, to $26.3 million in 2012 compared to 2011, and as a percentage of net sales, SG&A expenses increased to 8.7% in 2012 from 8.4% in 2011. The increase in SG&A is primarily due to higher profit sharing expense as a result of higher operating income before income taxes of approximately $2.5 million and higher employee salaries of approximately $2.1 million as a result of salary pay increases and management discretionary bonus incentive plan, partially offset by decreases in our warranty expenses of $0.6 million and advertising expenses of approximately $0.3 million. InteReSt expenSe Interest expense was approximately $0.044 million and $0.277 million in 2012 and 2011, respectively. The decrease in interest expense of $0.233 million in 2012 from prior year was due to decreased borrowings on the revolving credit facility. During 2012 we borrowed $34.8 million from the revolving credit facility as compared to $82.1 million in 2011. Interest on borrowings is payable monthly at LIBOR plus 2.5%. For the year ended December 31, 2012, we paid a weighted average interest rate of approximately 2.8%. InteReSt Income Interest income decreased by approximately $0.012 million to $0.086 million in 2012 compared to the same period in 2011. The decrease was due primarily to the fact that we held investments from January of 2011 until November 2011, when the investments fully matured, and we did not purchase additional interest bearing investments until May of 2012. otheR Income (expenSe) Other income, net was $0.041 million for the year ended 2012, an increase of $0.518 million from $0.477 million of expense in 2011. The higher 2011 expense was primarily due to repair expenses related to roof damages to one of our manufacturing facilities in Tulsa, Oklahoma caused by a severe snowstorm in February 2011. yeAR enDeD DecemBeR 31, 2011 vS. yeAR enDeD DecemBeR 31, 2010 net SAleS Net sales for the year ended December 31, 2011 increased by 9%, or $21.7 million to $266.2 million, compared with the same period in 2010. The increase in net sales was the result of the favorable reception to our new products, a significant increase in the replacement market of approximately 10% over prior year, and increased market share. GRoSS pRoFIt Gross profit decreased by 16.1%, or $8.9 million, to $46.3 million in 2011 compared to 2010. As a percentage of sales, gross profit was 17.4% and 22.6% in 2011 and 2010, respectively. The decrease in gross profit was caused by increases in raw material and component part costs of approximately 6% that we were unable to neutralize completely with price increases for some of our product lines, and increased labor costs and freight cost of 8% and 1%, respectively. The principal components of cost of goods sold are labor, raw materials, component costs, factory overhead, freight out and engineering expense. The principal high volume raw materials used in our manufacturing processes are steel, copper and aluminum, which are obtained from domestic suppliers. For the year ended December 31, 2011 we experienced price increases in copper and steel of approximately 3% and 10%, and an overall price decrease in aluminum of approximately 2% as compared to 2010. SellInG, GeneRAl AnD ADmInIStRAtIve expenSeS Selling, General and Administrative (“SG&A”) expenses decreased by $0.236 million, or 1.0% to $22.3 million in 2011 compared to 2010, and as a percentage of net sales, SG&A expenses declined to 8.4% in 2011 from 9.2% in 2010. The decrease was primarily due to lower profit sharing expense of approximately $1.4 million as a result of lower operating income before income tax offset by increases in salaries and employee benefits of $0.6 million, and advertising expense and professional fees of approximately $0.6 million. 10 2012AnnuAl RepoRtInteReSt expenSe Interest expense was approximately $0.277 million and $0.045 million in 2011 and 2010, respectively. The increase in interest expense of $0.232 million in 2011 from prior year was due to increased borrowings on the revolving credit facility. During 2011 we borrowed $82.1 million from the revolving credit facility as compared to $20.8 million in 2010. Interest on borrowings is payable monthly at LIBOR plus 2.5%. For the year ended December 31, 2011, we paid a weighted average interest rate of approximately 3.4%. InteReSt Income Interest income decreased by approximately $0.160 million to $0.098 million in 2011 compared to the same period in 2010. The decreased was due primarily to all of our investments maturing and no additional funds invested in 2011. otheR Income (expenSe) Other expense, net increased by $0.242 million to $0.477 million in 2011 from $0.235 million in 2010 due to repair expenses related to the snowstorm in February of 2011, as noted above. lIquIDIty AnD cApItAl ReSouRceS Our working capital and capital expenditure requirements are generally met through net cash provided by operations and the occasional use of the revolving bank line of credit based on our current liquidity at the time. GeneRAl On July 29, 2012 we renewed the line of credit with the Bank of Oklahoma, National Association. The revolving line of credit matures on July 28, 2013. We expect to renew our line of credit in July 2013 with favorable terms as we do not anticipate a tightening of funds in the financial markets. Under the line of credit, there is one standby letter of credit of $0.9 million. At December 31, 2012 we have approximately $29.1 million of borrowings available under the revolving credit facility. No fees are associated with the unused portion of the committed amount. As of December 31, 2012, there was no outstanding balance under the revolving credit facility and $4.6 million borrowings were outstanding at December 31, 2011. Interest on borrowings is payable monthly at LIBOR plus 2.5%. The weighted average interest rate was 2.8% and 3.4% for the years ended December 31, 2012 and 2011, respectively. At December 31, 2012 we were in compliance with all of the covenants under the revolving credit facility. We are obligated to comply with certain financial covenants under the revolving credit facility. These covenants require that we meet certain parameters related to our tangible net worth, total liabilities to tangible net worth ratio and working capital. At December 31, 2012 our tangible net worth was $138.1 million, which meets the requirement of being at or above $95.0 million. Our total liabilities to tangible net worth ratio was 0.4 to 1.0 which meets the requirement of not being above 2 to 1. Our working capital was $51.9 million, which meets the requirement of being at or above $40.0 million. We repurchased shares of stock under our authorized stock buyback programs, employees’ 401(k) savings, investment plan, and from option exercises of our directors and officers in the open market in the amount of $6.7 million for 0.336 million shares, $3.7 million for 0.212 million shares and $19.5 million for approximately 1.2 million shares of stock in 2012, 2011 and 2010, respectively. For the year ended December 31, 2012, 2011 and 2010 we paid cash dividends of $8.8 million, $5.9 million, and $9.2 million respectively. Based on historical performance and current expectations, we believe our cash and cash equivalents balance, the projected cash flows generated from our operations, our existing committed revolving credit facility (or comparable financing) and our expected ability to access capital markets will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations in 2013 and the foreseeable future. Statement of Cash Flows The table below reflects a summary of our net cash flows provided by operating activities, net cash flows used in investing activities, and net cash flows used in financing activities for the years indicated. 2012 2011 2010 (in millions) $ 51.2 $ 26.5 $ 32.2 (30.3) (24.5) (28.3) (17.7) (4.3) (27.2) Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Cash Flows from Operating Activities Net cash provided by operating activities was $51.2 million in 2012 compared to $26.5 million in 2011. This increase was due to higher net income and a favorable change in working capital. For the year ended December 31, 2012, net income increased by $13.5 million. For 2011, net income decreased by $7.9 million from 2010. Significant fluctuations in working capital were as follows: • Inventory - less cash was used in 2012 as we experienced decreases in raw materials prices from the prior year end. Overall, inventories decreased $2.3 million to $32.6 million at December 31, 2012 compared to $34.9 million the previous year. More cash was used in 2011 as improved demand 11 resulted in increased volume and higher prices for raw materials, component, and parts in our inventory balance as compared to 2010 resulting in decreased cash flows of $1.3 million. • Accounts receivable – increased by approximately $9.6 million from the prior year primarily as a result of increased sales. In 2011, we experienced improved collection rates as a result of targeted sales discounts for some of our selected customers. This resulted in a decrease in our accounts receivable balance of approximately $6.1 million from 2010. • Accrued liabilities – accrued liabilities increased cash flows by approximately $6.6 million due to an increase in customer product pre-payments and credits of approximately $2.1 million, an increase in payroll and employee benefit accruals of approximately $3.0 million and an increase in the accrual of amounts due to our representatives of approximately $1.5 million. Accrued liabilities decreased cash flows by approximately $3.0 million in 2011 due to changes in certain reserves estimates as a result of better and improved experience and a decreased in amounts due to our representatives offset by a slight increase in accrued payroll and employee benefits. Cash Flows from Investing Activities Net cash used in investing activities was $30.3 million for the year ended December 31, 2012 compared with net cash used in investing activities of $24.5 million in 2011. The change is primarily attributable to 2012 investments of $6.5 million in certificates of deposit and $11.7 million in corporate notes and bonds, proceeds from investments in 2012 of $1.3 million compared to approximately $10.9 million in 2011, offset by a decrease in capital expenditures of $21.7 million from the prior year. Net cash used in investing activities was $24.5 million for the year ended December 31, 2011 compared with $28.3 million in 2010. The change in investing activities is primarily attributable to the net proceeds from investments in 2011 that were offset by an increase in capital expenditures during 2011. in 2012 were primarily Capital expenditures were $14.1 million, $35.9 million and $17.5 million in 2012, 2011 and 2010, respectively. Capital in our expenditures manufacturing and production equipment to support our growth and improve efficiencies with equipment which combines the latest advancement in automation and laser technology. investments The capital expenditure program for 2013 is estimated to be approximately $10 million. Many of these projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring substantial charges. Cash Flows from Financing Activities Net cash used in financing activities during the year ended December 31, 2012 was $17.7 million, compared with $4.3 million during 2011. The change in financing activities is primarily related to approximately $6.7 million of share repurchases as well as dividend payments of $8.8 million, and reduced borrowings and increased payments on our credit facility resulting in no outstanding borrowings at December 31, 2012. Net cash used in financing activities during the year ended December 31, 2011 was $4.3 million, compared with $27.2 million during 2010. The change in financing activities is primarily related to approximately $3.7 million of share repurchases as well as dividend payments of $5.9 million, partially offset by an increase in net borrowing of approximately $4.6 million and stock options and restricted stock awards exercised. oFF-BAlAnce Sheet ARRAnGement S We are not party to any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. commItmentS AnD contRActuAl AGReementS We have no material contractual agreements as of December 31, 2012. contInGencIeS We are subject to various claims and legal actions that arise in the ordinary course of business. 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 or results of operations. While we are unable to estimate the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals as warranted. We believe that we have adequately provided in our consolidated financial statements for the potential impact of these contingencies. We also believe that the outcomes will not significantly affect the long-term results of operations, our financial position or our cash flows. cRItIcAl AccountInG polIcIeS The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated financial statements and related notes. We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared. However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material. We believe the following critical accounting policies affect our more significant estimates, assumptions and judgments used in the preparation of our consolidated financial statements. 12 2012AnnuAl RepoRtRevenue Recognition – We recognize revenues from sales of products when the products are shipped and the title and risk of ownership pass to the customer. Final sales prices are fixed and based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates. (“Representatives”). Representatives In addition, the Company presents revenues net of sales tax and net of certain payments to our independent manufacturer are representatives national companies that are in the business of providing HVAC units and other related products and services to customers. The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order. Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order. We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price which is negotiated by the Representative with the end user customer. We are responsible for billings and collections resulting from all sales transactions, including those initiated by our Representatives. The Representatives submit the total order price to us for invoicing and collection. The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer. These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”). All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party. The Company is under no obligation related to Third Party Products. The Representatives do not provide us with a break-out of the amount of the total order price over the minimum sales price which includes the Representatives’ fee and Third Party Product amounts (“Due to Representatives”). The Due to Representatives amount is paid only after all amounts associated with the order are collected from the customer. The amount of payments to our Representatives was $57.1 million, $51.6 million and $51.4 million for the years ended December 31, 2012, 2011, and 2010, respectively. Allowance for Doubtful Accounts - Our allowance for doubtful accounts is estimated to cover the risk of loss related to accounts receivable. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends in collections and write-offs, current customer status, the age of the receivable, economic conditions and other information. Aged receivables are reviewed on a monthly basis to determine if the reserve is adequate and adjusted accordingly at that time. The evaluation of these factors involves subjective judgments. Thus, changes in these factors or changes in economic circumstances may significantly impact our Consolidated Financial Statements. Inventory Reserves – We establish a reserve for inventories based on the change in inventory requirements due to product line changes, the feasibility of using obsolete parts for upgraded part substitutions, the required parts needed for part supply sales, replacement parts and for estimated shrinkage. Warranty – A provision is made for estimated warranty costs at the time the product is shipped and revenue is recognized. The warranty period is: the earlier of one year from the date of first use or 18 months from date of shipment for parts only; an additional four years on compressors (if applicable); 15 years on aluminized steel gas-fired heat exchangers (if applicable); 25 years on stainless steel heat exchangers (if applicable); and 10 years on gas-fired heat exchangers in RL products (if appli- cable). With the introduction of the RQ product line in 2010, our warranty policy for the RQ series was implemented to cover parts for two years from date of unit shipment and labor for one year from date of unit shipment. Warranty expense is estimated based on the warranty period, historical warranty trends and as- sociated costs, and any known identifiable warranty issue. Due to the absence of warranty history on new products, an additional provision may be made for such products. Our estimated future warranty cost is subject to adjustment from time to time depending on changes in actual warranty trends and cost experience. Should actual claim rates differ from our estimates, revisions to the estimated product warranty liability would be required. Medical Insurance – A provision is made for medical costs associated with our Medical Employee Benefit Plan, which is primarily a self-funded plan. A provision is made for estimated medical costs based on historical claims paid and potential significant future claims. The plan is supplemented by employee contributions and any claim over $125,000 is covered by insurance. Stock Compensation – We measure and recognize com- pensation expense for all share-based payment awards made to our employees and directors, including stock options and restricted stock awards, based on their fair values at the time of grant. Compensation expense, net of estimated forfeitures, is recognized on a straight-line basis during the service period of the related share-based compensation award. Forfeitures are estimated based on the Company’s historical experience. The fair value of each option award and restricted stock award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The use of the Black-Scholes option valu- ation model requires the input of subjective assumptions such as: the expected volatility, the expected term of the options granted, expected dividend yield, and the risk free rate. new AccountInG pRonouncementS In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income and the update to this standard was issued December 2011. This standard eliminates the option to report other comprehensive income and its components in the statement of changes in equity. The amendment requires that all 13 non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendment must be applied retrospectively and is effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The adoption of this standard did not have a material effect on our consolidated financial statements. Item 7A. quAntItAtIve AnD quAlItAtIve DIScloSuReS ABout mARket RISk. We experience various market risks, primarily from commodity prices and interest rates. We do not use derivative financial instruments to hedge our interest rate risk. However, occasionally we use financial derivatives to economically hedge our commodity price risk. We do not use financial derivatives for speculative purposes. InteReSt R Ate RISk We are exposed to interest rate risk on our revolving credit facility, which bears a variable interest rate of LIBOR plus 2.5%. At December 31, 2012 we had no borrowings outstanding under the revolving credit facility. The weighted average interest rate was 2.8% and 3.4% for the years ended December 31, 2012 and 2011, respectively. commoDIty pRIce RISk We are exposed to volatility in the prices of commodities used in some of our products and occasionally we use fixed price cancellable and non-cancellable contracts with our major suppliers for periods of 6 to 18 months to manage this exposure. From time to time we use financial derivatives to economically hedge our commodity price risk. We do not have committed commodity derivative instruments in place at December 31, 2012. Item 8. FInAncIAl StAtementS AnD SupplementARy DAtA. The financial statements and supplementary data are included commencing at page 22. Item 9. chAnGeS In AnD DISAGReementS wIth AccountAntS on AccountInG AnD FInAncIAl DIScloSuRe. Not Applicable. Item 9A. contRolS AnD pRoceDuReS . (a) evaluation of Disclosure controls and procedures As of the end of the period covered by this Annual Report on Form 10-K (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer with the oversight of the Audit Committee, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this Annual Report, that our disclosure controls and procedures were not effective as a result of the identified material weakness in internal control over financial reporting, the nature of which is summarized below. is (b) management's Annual Report on Internal control over Financial Reporting Our management for establishing and responsible maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f ). Our 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. 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. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, we concluded that our internal control over financial reporting was not effective as of December 31, 2012 due to a material weakness in the review procedures associated with key financial statement elements related to intercompany activities, income taxes and inventory. In light of the material weakness, the Company performed additional analysis and other post-closing procedures to ensure that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles and accurately reflect the results for the year ended December 31, 2012. As a result, notwithstanding the material weakness as described above, management concluded that the consolidated financial statements included in this Form 10-K present fairly in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented. 14 2012AnnuAl RepoRtA material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 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) Remediation of material weakness To remediate the material weakness described above and improve the operational effectiveness of our internal control over financial reporting, management is in the process of implementing the following items: • Hire a new Chief Accounting Officer with requisite technical and financial reporting skills to help address the identified matters. • Create a better model for analyzing inventory variances and automating this process to help eliminate errors. • Verify the accuracy of reports and data used in critical calculations. • Design a process and controls to ensure a more precise review is performed for manual journal entries relating to critical calculations and estimates. The Company began implementing these items in the fourth quarter of 2012. However, not all items have been implemented yet and some items will be implemented subsequent to the filing of this Form 10-K. The material weakness will be fully remediated when, in the opinion of management, the revised control processes have been operating for a sufficient period of time to provide reasonable assurance as to their effectiveness. The remediation and ultimate resolution of our material weakness will be reviewed by the Audit Committee of our Board of Directors. (d) changes in Internal control over Financial Reporting Except as discussed in item (c) above, there have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 15 RepoRt oF InDepenDent ReGISteReD puBlIc AccountInG FIRm Board of Directors and Stockholders AAON, Inc. We have audited the internal control over financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. 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 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. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment: • As indicated in the accompanying Management’s Report, management has identified a material weakness in the review procedures associated with key financial statement elements related to intercompany activities, income taxes and inventory. In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2012, based on criteria established in 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), the consolidated financial statements of the Company as of and for the year ended December 31, 2012. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2012 consolidated financial statements, and this report does not affect our report dated March 14, 2013, which expressed an unqualified opinion on those financial statements. /s/ GRANT THORNTON LLP Tulsa, Oklahoma March 14, 2013 16 2012AnnuAl RepoRt 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 shareholders scheduled to be held on May 21, 2013. 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 Kathy I. Sheffield, or by calling (918) 382-6204. 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 shareholders scheduled to be held on May 21, 2013. Item 12. SecuRIty owneRShIp oF ceRtAIn BeneFIcIAl o wneRS 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 21, 2013. 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 2013 annual meeting of shareholders scheduled to be held May 21, 2013. 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 related party transactions and have no preexisting related party transactions in 2012, 2011 or 2010. 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 21, 2013. 17 pArt iV Item 15. exhIBItS AnD FInAncIAl StAtement ScheDuleS. (a) Financial statements. See Index to Consolidated Financial Statements on page 20. (b) Exhibits: (3) (4) Articles of Incorporation (i) (A) (A-1) Article Amendments (ii) (B) (B-1) Amendments of Bylaws (iii) Bylaws (i) Third Restated Revolving Credit and Term Loan Agreement and related documents (iv) (A) (A-1) Amendment Seven to Third Restated Revolving Credit Loan Agreement (v) (B) Rights Agreement dated February 19, 1999, as amended (vi) (10.1) AAON, Inc. 1992 Stock Option Plan, as amended (vii) (10.2) AAON, Inc. 2007 Long-Term Incentive Plan, as amended (viii) (21) List of Subsidiaries (ix) (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 __________ (i) Incorporated herein by reference to the exhibits to our Form S-18 Registration Statement No. 33-18336-LA. (ii) Incorporated herein by reference to the exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and to our Forms 8-K dated March 21, 1994, March 10, 1997, and March 17, 2000. (iii) Incorporated herein by reference to our Forms 8-K dated March 10, 1997, May 27, 1998 and February 25, 1999, or exhibits thereto. (iv) Incorporated by reference to exhibit to our Form 8-K dated July 30, 2004. (v)( Incorporated herein by reference to exhibit to our Form 8-K dated July 29, 2012 (vi) Incorporated by reference to exhibits to our Forms 8-K dated February 25, 1999, and August 20, 2002, and Form 8-A Registration Statement No. 000-18953, as amended. (vii) 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. 33-78520, as amended. (viii) Incorporated herein by reference to Appendix B to our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders filed April 23, 2007. (ix) Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004. 18 2012AnnuAl RepoRt 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: March 14, 2013 By: /s/ Norman H. Asbjornson Norman H. Asbjornson, President 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: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 Dated: March 14, 2013 19 /s/ Norman H. Asbjornson Norman H. Asbjornson President and Director (principal executive officer) /s/ Scott M. Asbjornson Scott M. Asbjornson Chief Financial Officer (principal financial officer) /s/ Rebecca A. Thompson Rebecca A. Thompson Chief Accounting Officer (principal accounting officer) /s/ John B. Johnson, Jr. John B. Johnson, Jr. Director /s/ Jack E. Short Jack E. Short Director /s/ Paul K. Lackey, Jr. Paul K. Lackey, Jr. Director /s/ A.H. McElroy II A.H. McElroy II Director /s/ Jerry R. Levine Jerry R. Levine Director /s/ Joseph E. Cappy Joseph E. Cappy Director InDex to conSolIDAteD FInAncIAl StAtementS pAGe Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 20 2012AnnuAl RepoRt21 RepoRt oF InDepenDent ReGISteReD puBlIc AccountInG FIRm Board of Directors and Stockholders AAON, Inc. We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada Corporation) and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AAON, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2013, expressed an adverse opinion on the effectiveness of internal control over financial reporting. /s/ GRANT THORNTON LLP Tulsa, Oklahoma March 14, 2013 22 2012AnnuAl RepoRt AAon, Inc. AnD SuBSIDIARIeS ConSolidAted BAlAnCe SHeetS opeRAtInG ActIvItIeS ASSetS Current assets: Cash and cash equivalents Certificates of deposit Investments held to maturity at amortized cost Accounts receivable, net Income tax receivable Note receivable Inventories, net Prepaid expenses and other Deferred tax assets Total Current Assets Property, plant and equipment: Land Buildings Machinery and equipment Furniture and fixtures Total property, plant and equipment Less: Accumulated depreciation Property, plant and equipment, net Certificates of deposit Investments held to maturity at amortized cost Note receivable, long-term Total assets lIABIlItIeS AnD StockholDeRS’ equIty Current liabilities: Revolving credit facility Accounts payable Accrued liabilities Total current liabilities Deferred tax liabilities Commitments and contingencies Stockholders’ equity: Preferred stock, $.001 par value, 11,250,000 shares authorized, no shares issued Common stock, $.004 par value, 112,500,000 shares authorized, 24,517,749 and 24,618,324 issued and outstanding at December 31, 2012 and 2011, respectively Additional paid-in capital Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity deCeMBer 31, 2012 2011 (in thousands, except share and per share data) $ 3,159 3,120 2,832 43,866 694 28 32,614 740 4,493 91,546 1,340 59,761 117,617 8,906 187,624 96,929 90,695 2,120 8,041 1,091 $ 193,493 - 13,047 26,578 39,625 15,732 $ 13 - - 34,137 10,016 27 34,948 723 4,523 84,387 1,340 56,057 114,256 7,784 179,437 85,935 93,502 - - 1,092 $ 178,981 $ 4,575 14,118 19,994 38,687 17,790 - - 98 - 138,038 138,136 $ 193,493 98 - 122,406 122,504 $ 178,981 The accompanying notes are an integral part of these consolidated financial statements. 23 AAon, Inc. AnD SuBSIDIARIeS ConSolidAted StAteMentS oF inCoMe Net sales Cost of sales Gross profit Selling, general and administrative expenses Loss (gain) on disposal of assets Income from operations Interest expense Interest income Other income (expense), net Income before taxes Income tax provision Net income Earnings per share: Basic Diluted Cash dividends declared per common share Weighted average shares outstanding: Basic Diluted yeArS ending deCeMBer 31, 2012 2011 2010 (in thousands, except share and per share data) $ 303,114 $ 266,220 $ 244,552 232,615 219,939 189,364 70,499 26,261 4 44,234 (44) 86 41 44,317 16,868 46,281 22,310 1,802 22,169 (277) 98 (477) 21,513 7,527 $ 27,449 $ 13,986 $ 1.12 $ 1.11 $ 0.36 24,550 24,699 $ 0.57 $ 0.56 $ 0.24 24,690 24,881 55,188 22,546 (73) 32,715 (45) 258 (235) 32,693 10,799 $ 21,894 $ 0.87 $ 0.87 $ 0.24 25,198 25,339 The accompanying notes are an integral part of these consolidated financial statements. 24 2012AnnuAl RepoRt AAon, Inc. AnD SuBSIDIARIeS ConSolidAted StAteMentS oF CoMpreHenSiVe inCoMe yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 Net income $ 27,449 $ 13,986 $ 21,894 Other comprehensive income, net of tax: Foreign currency translation adjustments Other comprehensive income Comprehensive income - - - - (1,077) (1,077) $ 27,449 $ 13,986 $ 20,817 The accompanying notes are an integral part of these consolidated financial statements. 25 AAon, Inc. AnD SuBSIDIARIeS ConSolidAted StAteMentS oF StoCkHolderS’ eQUity ASSetS CoMMon StoCk SHAreS AMoUnt pAid-in CApitAl ACCUMUlAted otHer CoMpreHenSiVe inCoMe (in thousands) retAined eArningS totAl Balance at December 31, 2009 25,821 $ 102 $ 644 $ 1,077 $ 116,176 $ 117,999 Net income Foreign currency translation adjust- ment (net of taxes of $0.6 million) Stock options exercised and restricted stock awards vested, including tax benefits Share-based compensation Stock repurchased and retired Dividends Balance at December 31, 2010 Net income Stock options exercised and restricted stock awards vested, including tax benefits Share-based compensation Stock repurchased and retired Dividends Balance at December 31, 2011 Net income Stock options exercised and restricted stock awards vested, including tax benefits Share-based compensation Stock repurchased and retired Dividends - - 170 - (1,233) - 24,758 - 72 - (212) - 24,618 236 - (336) - - - - - (3) - 99 - - - (1) - 98 1 - (1) - Balance at December 31, 2012 24,518 $ 98 - - 1,524 791 (2,959) - - - 705 680 (1,375) (10) - 2,388 1,294 (3,682) - - - 21,894 21,894 (1,077) 1,155 78 - - - - - - - - - - - - - - - - - - 1,524 791 (16,518) (19,480) (6,067) (6,067) 116,640 116,739 13,986 13,986 - - (2,295) (5,925) 705 680 (3,671) (5,935) 122,406 122,504 27,449 27,449 - - (2,977) (8,840) 2,389 1,294 (6,660) (8,840) $ 138,038 $ 138,136 The accompanying notes are an integral part of these consolidated financial statements. 26 2012AnnuAl RepoRtAAon, Inc. AnD SuBSIDIARIeS ConSolidAted StAteMentS oF CASH FlowS opeRAtInG ActIvItIeS Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of bond premiums Provision for losses on accounts receivable, net of adjustments Provision for excess and obsolete inventories Share-based compensation Excess tax benefits from stock options exercised and restricted stock awards vested (Gain)loss on disposition of assets Unrealized gain on financial derivative asset Foreign currency transaction gain Interest income on note receivable Deferred income taxes Changes in assets and liabilities: Accounts receivable Income tax receivable Inventories Prepaid expenses and other Financial derivative asset Accounts payable Accrued liabilities Net cash provided by operating activities InveStInG ActIvItIeS Proceeds from sale of property, plant and equipment Investment in certificates of deposits Maturities of certificates of deposits Purchases of investments held to maturity Maturities of investments Proceeds from assets held for sale Proceeds from called investment Capital expenditures Principal payments from note receivable Net cash used in investing activities yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 $ 27,449 $ 13,986 $ 21,894 13,407 155 (83) 63 1,294 (393) 4 - (27) (42) 11,397 156 (289) (50) 680 (211) 1,802 - (8) - (2,028) 10,122 (9,646) 9,715 2,271 (17) - 2,461 6,584 51,167 11 (6,540) 1,300 (11,654) - - 626 6,053 (10,016) (1,296) (67) - (2,751) (3,024) 26,484 482 - 1,503 - 9,364 - - 9,886 379 (117) - 791 (356) (73) (14) - - (558) (6,403) - (4,814) 431 2,214 6,522 2,370 32,152 136 (2,745) 1,242 (12,018) 2,119 460 - (14,147) (35,914) (17,470) 69 27 - (30,335) (24,538) (28,276) 27 (Continued on next page) AAon, Inc. AnD SuBSIDIARIeS ConSolidAted StAteMentS oF CASH FlowS (ContinUed) FInAncInG ActIvItIeS Borrowings under revolving credit facility Payments under revolving credit facility Payments of long-term debt Stock options exercised Excess tax benefits from stock options exercised and restricted stock awards vested Repurchase of stock Cash dividends paid to stockholders Net cash used in financing activities yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 34,847 (39,422) - 1,996 393 (6,660) (8,840) (17,686) 82,078 (77,503) - 494 211 (3,671) (5,935) (4,326) 20,839 (20,839) (76) 1,168 356 (19,480) (9,168) (27,200) eFFeCtS oF exCHAnge rAte on CASH - - 78 net inCreASe (deCreASe) in CASH And CASH eQUiVAlentS CASH And CASH eQUiVAlentS, Beginning oF yeAr CASH And CASH eQUiVAlentS, end oF yeAr 3,146 (2,380) (23,246) 13 2,393 25,639 $ 3,159 $ 13 $ 2,393 The accompanying notes are an integral part of these consolidated financial statements. 28 2012AnnuAl RepoRtAAon, Inc. AnD SuBSIDIARIeS noteS to ConSolidAted FinAnCiAl StAteMentS December 31, 2012 1. BUSineSS deSCription AAON, Inc. is a Nevada corporation which was incorporated on August 18, 1987. Our operating subsidiaries include AAON, Inc., an Oklahoma corporation and AAON Coil Products, Inc., a Texas corporation. The Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. Unless the context otherwise requires, references in this Annual Report to “AAON,” the “Company”, “we,” “us,” “our” or “ours” refer to AAON, Inc., and our subsidiaries. We are engaged in the manufacture and sale of air conditioning and heating equipment consisting of rooftop units, chillers, air-handling units, make-up air units, heat recovery units, condensing units and coils. 2. SUMMAry oF SigniFiCAnt ACCoUnting poliCieS Principles of Consolidation These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter- company accounts and transactions have been eliminated. Cash and Cash Equivalents We consider all highly liquid temporary investments with original maturity dates of three months or less to be cash equivalents. Cash and cash equivalents consist of bank deposits and highly liquid, interest-bearing money market funds. The Company’s cash and cash equivalents are held in a few financial institutions in amounts that exceed the insurance limits of the Federal Deposit Insurance Corporation. However, management believes that the Company’s counterparty risks are minimal based on the reputation and history of the institutions selected. Investments Certificates of Deposit We invested $6.5 million in certificates of deposit for the year ending December 31, 2012 with various maturities ranging from two months to two years. The certificates of deposit bear interest ranging from 0.3% to 0.85% per annum. We did not invest in any certificates of deposit in 2011. Investments Held to Maturity Our investments held to maturity are comprised of $10.9 million of corporate notes and bonds with various maturities ranging from two months to 25 months. The investments have moderate risk with S&P ratings ranging from A+ to BBB-. We did not invest in any investments held to maturity in 2011. We record the amortized cost basis and accrued interest of the corporate notes and bonds in the Consolidated Balance Sheets. We record the interest and amortization of bond premium to interest income in the Consolidated Statements of Income. The following summarizes the amortized cost and estimated fair value of our investments held to maturity at December 31, 2012: AMortized CoSt groSS UnreAlized gAin groSS UnreAlized loSS FAir VAlUe cuRRent ASSet S: Investments held to maturity non cuRRent ASSet S: Investments held to maturity Total $ 2,832 8,041 $ 10,873 (in thousands) - - - $ (1) $ 2,831 (9) 8,032 $ (10) $ 10,863 We evaluate these investments for other-than-temporary impairments on a quarterly basis. We do not believe that any of the unrealized losses represent an other-than-temporary impairment. 29 Accounts and Notes Receivable Accounts and notes receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. We generally do not require that our customers provide collateral. The Company determines its allowance for doubtful accounts by considering a number of factors, including the credit risk of specific customers, the customer’s ability to pay current obligations, historical trends, economic and market conditions and the age of the receivable. Accounts are considered past due when the balance has been outstanding for greater than ninety days. Past due accounts are generally written-off against the allowance for doubtful accounts only after all collection attempts have been exhausted. in Concentration of Credit Risk Our customers are concentrated primarily the domestic commercial and industrial new construction and replacement markets. To date, our sales have been primarily to the domestic market, with foreign sales accounting for approximately 5% of revenues for the years ended December 31, 2012, 2011 and 2010. No customer accounted for 10% of our sales during 2012, 2011 or 2010. Other than one customer who placed an exceptionally large order with an invoice date of 12/27/12 and a payment date of 1/17/13, no customer accounted for more than 5% of our accounts receivable balance at December 31, 2012, 2011 or 2010. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, liabilities receivables, accounts payable and accrued approximate fair value because of the short-term maturity of the items. The carrying amount of the Company's revolving line of credit, and other payables, approximate their fair values either due to their short term nature, the variable rates associated with the debt or based on current rates offered to the Company for debt with similar characteristics. Inventories Inventories are valued at the lower of cost or market using the first-in, first-out (“FIFO”) method. Cost in inventory includes purchased parts and materials, direct labor and applied manufacturing overhead. We establish an allowance for excess and obsolete inventories based on product line changes, the feasibility of substituting parts and the need for supply and replacement parts. Property, Plant and Equipment including significant Property, plant and equipment, improvements, are recorded at cost, net of accumulated depreciation. Repairs and maintenance and any gains or losses on disposition are included in operations. Depreciation is computed using the straight-line method over the following estimated useful lives: Buildings Machinery and equipment Furniture and fixtures 3-40 years 3-15 years 3-7 years Impairment of Long-Lived Assets We review long-lived assets for possible impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset or asset group to its estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the undiscounted cash flows are less than the carrying amount of the asset or asset group, an impairment loss is recognized for the amount by which the carrying amount of the asset or asset group exceeds its fair value. Research and Development The costs associated with research and development for the purpose of developing and improving new products are expensed as incurred. For the years ended December 31, 2012, 2011, and 2010 research and development costs amounted to approximately $3.6 million, $4.8 million, and $3.6 million, respectively. Advertising Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2012, 2011, and 2010 was approximately $0.9 million, $1.2 million, and $0.9 million, respectively. Shipping and Handling We incur shipping and handling costs in the distribution of products sold that are recorded in cost of sales. Shipping charges that are billed to the customer are recorded in revenues and as an expense in cost of sales. For the years ended December 31, 2012, 2011 and 2010 shipping and handling fees amounted to approximately $8.6 million, $8.7 million, and $8.6 million, respectively. Income Taxes Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. We establish accruals for uncertain tax positions when it is more likely than not that our tax return positions may not be fully sustained. The Company records a valuation allowance for deferred tax assets when, in the opinion of management, it is more likely than not that deferred tax assets will not be realized. 30 2012AnnuAl RepoRtStock Compensation The Company recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The Company’s share-based compensation plans provide for the granting of stock options, and restricted stock. The fair values of stock options are estimated at the date of grant using the Black-Scholes option valuation model. The use of the Black-Scholes option valuation model requires the input of subjective assumptions. Measured compensation cost, net of estimated forfeitures, is recognized ratably over the vesting period of the related share-based compensation award. Forfeitures are estimated based on the Company’s historical experience. The fair value of restricted stock awards is determined based on the market value of the Company’s shares on the grant date and the compensation expense is recognized on a straight-line basis during the service period of the respective grant. Financial Derivatives The Company occasionally uses derivative financial instruments to reduce its exposure to the risk of increasing commodity prices. Contract terms of the hedging instrument closely mirror those of the hedged forecasted transaction providing for the hedge relationship to be highly effective both at inception and continuously throughout the term of the hedging relationship. The Company does not engage in speculative transactions, nor does the Company hold or issue financial instruments for trading purposes. The Company recognizes all derivatives on the balance sheets at fair value. Derivatives that do not meet the criteria for hedge accounting are adjusted to fair value through income. If the derivative is designated as a cash flow hedge, changes in the fair value are recognized in accumulated other comprehensive income (loss) until the hedged transaction is recognized in income. If a hedging instrument is terminated, any unrealized gain (loss) at the date of termination is carried in accumulated other comprehensive income (loss) until the hedged transaction is recognized in income. The ineffective portion of a derivative’s change in fair value is recognized in income in the period of change. Revenue Recognition We recognize revenues from sales of products when the products are shipped and the title and risk of ownership pass to the customer. Final sales prices are fixed and based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates. In addition, the Company presents revenues net of sales tax and net of certain payments to our independent (“Representatives”). manufacturer Representatives are national companies that are in the business of providing HVAC units and other related representatives products and services to customers. The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order. Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order. We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price which is negotiated by the Representative with the end user customer. We are responsible for billings and collections resulting from all sales transactions, including those initiated by our Representatives. The Representatives submit the total order price to us for invoicing and collection. The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer. These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”). All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party. The Company is under no obligation related to Third Party Products. The Representatives do not provide us with a break-out of the amount of the total order price over the minimum sales price which includes the Representatives’ fee and Third Party Product amounts (“Due to Representatives”). The Due to Representatives amount is paid only after all amounts associated with the order are collected from the customer. The amount of payments to our representatives was $57.1 million, $51.6 million, and $51.4 million for each of the years ended December 31, 2012, 2011, and 2010, respectively. Insurance Reserves Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected losses related primarily to workers’ compensation and medical liability. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Product Warranties A provision is made for the estimated cost of maintaining product warranties to customers at the time the product is sold based upon historical claims experience by product line. The Company records a liability and an expense for estimated future warranty claims based upon historical experience and management's estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the liability and expense in the current year. 31 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because these estimates and assumptions require significant judgment, future actual results could differ from those estimates and could have a significant impact on our results of operations, financial position and cash flows. We reevaluate our estimates and assumptions on a monthly basis. The most significant estimates include the allowance for doubtful accounts, inventory reserves, warranty accrual, workers compensation accrual, medical insurance accrual, share-based compensation and the fair value of derivative financial instruments. Actual results could differ materially from those estimates. 3. ACCoUntS reCeiVABle Accounts receivable and the related allowance for doubtful accounts are as follows: Accounts receivable Less: Allowance for doubtful accounts Total, net Allowance for doubtful accounts: Balance, beginning of period Provision for losses on accounts receivable Accounts receivable written off, net of recoveries Balance, end of period deCeMBer 31, 2012 2011 (in thousands) $ 43,918 (52) $ 43,866 $ 34,405 (268) $ 34,137 yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 $ 268 (83) (133) $ 52 $ 600 $ 776 (289) (117) (43) $ 268 (59) $ 600 32 2012AnnuAl RepoRt4. inVentorieS The components of inventories and the related changes in the allowance for excess and obsolete inventories are as follows: Raw materials Work in process Finished goods Less: Allowance for excess and obsolete inventories deCeMBer 31, 2012 2011 (in thousands) $ 28,155 $ 31,746 2,757 2,065 32,977 (363) 1,979 1,523 35,248 (300) Total, net $ 32,614 $ 34,948 Allowance for doubtful accounts: Balance, beginning of period Provision for excess and obsolete inventories Inventories written off Balance, end of period yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 $ 300 63 - $ 363 $ 350 (50) - $ 300 $ 760 - (410) $ 350 5. note reCeiVABle In connection with the closure of our Canadian facility on May 18, 2009 we sold land and a building in September 2010 and assumed a note receivable from the borrower secured by the property. The $1.1 million, fifteen-year note has an interest rate of 4.0% and is payable to us monthly, and has a $0.6 million balloon payment due in October 2025. Interest payments are recognized in interest income. We evaluate the note for impairment on a quarterly basis. We determine the note receivable to be impaired if we are uncertain of its collectability based on the contractual terms. At December 31, 2012 and 2011 there was no impairment. 33 6. SUppleMentAl CASH Flow inForMAtion Supplemental disclosures: Interest paid Income taxes paid Non-cash investing and financing activities: Non-cash capital expenditures Trade-in of equipment yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 $ 44 15,128 (3,670) 300 $ 277 6,377 3,852 1,802 $ 45 7,800 - 14 7. wArrAntieS 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. Warranty expense was $3.5 million, $4.2 million and $4.5 million for the years ended December 31, 2012, 2011 and 2010, respectively. Changes in the warranty accrual are as follows: yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 Warranty accrual: Balance, beginning of period Payments made Provisions Adjustments related to changes in estimates $ 6,093 (3,861) 3,304 240 $ 7,300 (5,387) 5,146 (966) Balance, end of period $ 5,776 $ 6,093 $ 7,200 (4,405) 3,987 518 $ 7,300 8. ACCrUed liABilitieS At December 31, accrued liabilities were comprised of the following: Warranty Due to Representatives Payroll Workers’ compensation Medical self-insurance Customer prepayments Employee benefits and other Total 2012 2011 (in thousands) $ 5,776 $ 6,093 9,439 3,852 928 420 3,933 2,230 7,891 1,736 886 326 1,784 1,278 $ 26,578 $ 19,994 34 2012AnnuAl RepoRtAt December 31, 2012, we were in compliance with our financial covenants. These covenants require that we meet certain parameters related to our tangible net worth, total liabilities to tangible net worth ratio and working capital. At December 31, 2012 our tangible net worth was $138.1 million, which meets the requirement of being at or above $95.0 million. Our total liabilities to tangible net worth ratio was 0.4 to 1.0, which meets the requirement of not being above 2 to 1. Our working capital was $51.9 million which meets the requirement of being at or above $40.0 million. 9. reVolVing Credit FACility Our revolving credit facility provides for maximum borrowings of $30.0 million which is provided by the Bank of Oklahoma, National Association. Under the line of credit, there is one standby letter of credit totaling $0.9 million. Borrowings available under the revolving credit facility at December 31, 2012, were $29.1 million. Interest on borrowings is payable monthly at LIBOR plus 2.5%. No fees are associated with the unused portion of the committed amount. As of December 31, 2012, we had no balance outstanding under our revolving credit facility and $4.6 million was outstanding at December 31, 2011. At December 31, 2012 and 2011, the weighted average interest rate was 2.8% and 3.4%, respectively. 10. inCoMe tAxeS The provision for income taxes consists of the following: Current Deferred yeArS ending deCeMBer 31, 2012 2011 (in thousands) 2010 $ 18,896 (2,028) $ 16,868 $ (2,595) 10,122 $ 7,527 $ 11,357 (558) $ 10,799 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: Federal statutory rate State income taxes, net of federal benefit Other yeArS ending deCeMBer 31, 2012 2011 2010 35% 5% (2)% 38 % 35% 4 % (4)% 35% 35% 4% (6)% 33% 35 Other primarily relates to the domestic production activity credit, certain domestic credits and a change in rate applied to deferred taxes. 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: Net current deferred assets and (liabilities) relating to: Valuation reserves Warranty accrual Other accruals Other, net Net long-term deferred assets and (liabilities) relating to: Depreciation Share-based compensation Other net deCeMBer 31, 2012 2011 (in thousands) $ 164 2,287 1,996 46 $ 4,493 $ 221 2,376 1,216 710 $ 4,523 $ (16,659) $ (18,802) 653 274 648 364 $ (15,732) $ (17,790) We file income tax returns in the U.S., state and foreign income tax returns jurisdictions. We are subject to U.S. examinations for tax years 2010 through 2012, and to non-U.S. income tax examinations for the tax years of 2007 through 2010. In addition, we are subject to state and local income tax examinations for the tax years 2009 through 2012. The Company evaluates uncertain tax positions for in the consolidated recognition and measurement financial statements. To recognize a tax position, the Company determines whether it is more likely than not that the tax positions will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the consolidated financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Company had no uncertain tax positions that required recognition in the consolidated financial statements at December 31, 2012 and 2011. Any interest or penalties would be recognized as a component of income tax expense. The year ended December 31, 2011 resulted in a net operating loss (NOL) of $4.6 million. The full amount of the NOL is expected to be utilized with the filing of the 2012 federal tax return. On January 2, 2013 the American Taxpayer Relief Act (ATRA) of 2012 was signed into law. Some of the provisions were retroactive to January 1, 2012, including the extension of certain tax credits. The tax rate above reflects the tax law that was in place as of December 31, 2012. Had the ATRA had been enacted prior to January 1, 2013, our overall tax expense would have been approximately $0.53 million lower at an overall effective rate of 37%. This $0.53 million difference will be reflected as a reduction in expense in the first quarter of 2013. 36 2012AnnuAl RepoRt11. SHAre-BASed CoMpenSAtion We have historically maintained a stock option plan for key employees, directors and consultants (“the 1992 Plan”). The 1992 Plan provided for 6.6 million shares to be issued under the plan in the form of stock options. Under the terms of the plan, the exercise price of shares granted may not be less than 85% of the fair market value at the date of the grant. Options granted to directors prior to May 25, 2004, vest one year from the date of grant and are exercisable for nine years thereafter. Options granted to directors on or after May 25, 2004, vest one-third each year, commencing one year after the date of grant. All other options granted vest at a rate of 20% per year, commencing one year after date of grant, and are exercisable during years 2-10. On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (“LTIP”) which provides an additional 1,125,000 shares that can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units and performance awards. Since inception of the Plan, non-qualified stock options and restricted stock awards have been granted with the same vesting schedule as the previous plan. 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. The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2012 is $2.4 million and is expected to be recognized over a weighted-average period of 2.4 years. 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 December 31, 2012, 2011 and 2010 using a Black Scholes Model: direCtorS And oFFiCerS 2012 2011 2010 Expected dividend yield Expected volatility Risk-free interest rate Expected life (in years) eMployeeS Expected dividend yield Expected volatility Risk-free interest rate Expected life (in years) 1.22% 47.54% 1.19% 7% 1.22% 45.99% 1.19% 8 N/A N/A N/A N/A 1.19% 45.22% 1.41% 8 1.53% 45.37% 2.63% 7% 1.53% 45.29% 2.44 % 8 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. 37 The following is a summary of stock options vested and exercisable as of December 31, 2012: rAnge oF exerCiSe priCeS nUMBer oF SHAreS weigHted AVerAge reMAining ContrACtUAl liFe weigHted AVerAge exerCiSe priCe* $7.21 - 9.71 $10.21 - 12.97 $13.70 - 18.30 Total 66,350 135,050 50,100 251,500 2.86 5.22 7.86 5.12 The following is a summary of stock options vested and exercisable as of December 31, 2011: rAnge oF exerCiSe priCeS nUMBer oF SHAreS weigHted AVerAge reMAining ContrACtUAl liFe weigHted AVerAge exerCiSe priCe* $6.45 - 7.21 $7.53 - 10.66 $10.75 - 13.79 $15.51 - 18.30 Total 81,850 153,900 114,200 16,200 366,150 2.42 5.00 5.13 8.50 4.62 intrinSiC VAlUe (in thousands) $ 851 1,362 263 $ 8.04 10.78 15.63 $ 11.03 $ 2,476 intrinSiC VAlUe (in thousands) $ 1,111 1,682 957 74 $ 6.91 9.56 12.12 15.91 $ 10.05 $ 3,824 The following is a summary of stock options vested and exercisable as of December 31, 2010: rAnge oF exerCiSe priCeS nUMBer oF SHAreS weigHted AVerAge reMAining ContrACtUAl liFe weigHted AVerAge exerCiSe priCe* $6.45 - 7.21 $7.53 - 10.66 $10.75 - 14.28 Total 103,350 138,300 77,700 319,350 3.18 5.57 5.93 4.89 $ 6.83 9.29 12.16 $ 9.19 intrinSiC VAlUe (in thousands) $ 1,238 1,317 516 $ 3,071 38 2012AnnuAl RepoRtA summary of option activity under the plan is as follows: optionS SHAreS Outstanding at December 31, 2011 Granted Exercised Forfeited or Expired Outstanding at December 31, 2012 Exercisable at December 31, 2012 653,050 301,575 (197,950) (13,000) 743,675 251,500 weigHted AVerAge exerCiSe priCe $ 11.77 19.47 10.08 18.54 15.23 $ 11.03 The total intrinsic value of options exercised during December 31, 2012, 2011 and 2010 was $4.0 million, $1.1 million and $2.4 million, respectively. The cash received from options exercised during December 31, 2012, 2011 and 2010 was $2.0 million, $0.5 million and $1.2 million, respectively. The impact of these cash receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows. During 2007, the Compensation Committee of the Board of Directors authorized and issued restricted stock awards to directors and key employees. The restricted stock award program offers the opportunity to earn shares of AAON Common Stock over time, rather than options that give the right to purchase stock at a set price. Restricted stock awards granted to directors vest one-third each year. All other restricted stock awards vest at a rate of 20% per year. Restricted stock awards are grants that entitle the holder to shares of common stock subject to certain terms. 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. These awards are recorded at their fair value on the date of grant and compensation cost is recorded using straight-line vesting over the service period. At December 31, 2012, unrecognized compensation cost related to unvested restricted stock awards was approximately $0.837 million which is expected to be recognized over a weighted average period of 2.2 years. A summary of the unvested restricted stock awards is as follows: reStriCted StoCk SHAreS Unvested at December 31, 2011 Granted Vested Forfeited Unvested at December 31, 2012 37,350 45,550 (18,825) - 64,075 weigHted AVerAge exerCiSe priCe $ 20.65 18.21 19.20 - $ 18.16 39 A summary of share-based compensation is as follows for the years ending December 31, 2012, 2011 and 2010: grAnt dAte FAir VAlUe oF AwArdS dUring tHe period 2012 2011 2010 yeArS ending deCeMBer 31, Options Restricted stock Total $ 2,569 830 $ 3,399 (in thousands) $ 632 325 $ 957 $ 799 330 $ 1,129 SHAre-BASed CoMpenSAtion expenSe 2012 2011 2010 Options Restricted stock Total inCoMe tAx BeneFit relAted to SHAre-BASed CoMpenSAtion Options Restricted stock Total $ 958 336 $ 1,294 (in thousands) $ 389 291 $ 680 $ 446 345 $ 791 2012 2011 2010 (in thousands) $ 154 57 $ 211 $ 370 23 $ 393 $ 334 22 $ 356 12. 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), effective July 2010, eligible employees were given the option of making an after-tax contribution to a Roth 401(k) or a combination of both. Effective May 30, 2005, the Plan was amended to provide for automatic enrollment and provided for an automatic increase to the deferral percentage at January 1st of each year and each year thereafter, unless the employee elects to decline the automatic increase and enrollment. Beginning with pay periods after May 30, 2005, the one year enrollment waiting period was waived. Under the plan the Company contributes a specified percentage of each eligible employee’s compensation. In addition, the Company contributes 1.5% of eligible payroll to the 401(k) plan each year. We contribute in the form of cash and direct the investment to shares of AAON stock. Employees are 100% vested in salary deferral contributions and vest 20% per year at the end of years two through six of employment in employer matching contributions. For the year ended December 31, 2012, 2011 and 2010 we made matching contributions of $2.4 million, $2.2 million and $1.7 million, respectively. Administrative expenses remained consistent at approximately $0.1 million for the years ended 2012, 2011 and 2010, respectively. Profit Sharing Bonus Plan - We maintain a discretionary profit sharing bonus plan under which 10% of pre-tax profit is paid to eligible employees on a quarterly basis in order to reward employee productivity. Eligible employees are regular full-time employees who are actively employed and working on the first day of the calendar quarter and remain continuously, actively employed and working through the 15th of the third month following the calendar quarter and who work at least 80% of the five and one-half month period. Profit sharing expense was $4.9 million, $2.4 million and $3.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. 13. SHAreHolderS’ eQUity Stockholder Rights Plan - During 1999, the Board of Directors adopted a Stockholder Rights Plan (the “Plan”), which was amended in 2002. Under the Plan, stockholders of record on March 1, 1999, received a dividend of one right per share of our Common Stock. Stock issued after March 1, 1999, contains a notation incorporating the rights. Each right entitles the holder to purchase one one-thousandth (1/1,000) of a share of Series A Preferred Stock at an exercise price of $90. The rights are traded with our Common Stock. The rights become exercisable after a person has acquired, or a tender offer is made for, 15% or more of our Common Stock. If either of these events occurs, upon exercise the holder (other than a holder owning more than 15% of the 40 2012AnnuAl RepoRtoutstanding stock) will receive the number of shares of our Common Stock having a market value equal to two times the exercise price. The rights may be redeemed by us for $0.001 per right until a person or group has acquired 15% of our Common Stock. The rights expired on August 20, 2012. Stock Repurchase - On May 12, 2010, we completed a stock buyback program under a Board of Directors authorization dated November 6, 2007. As authorized we repurchased a total of 2.7 million shares under this program for an aggregate price of approximately $36.1 million, or an average price of $13.36 per share. We purchased these shares at current market prices. On May 17, 2010, the Board authorized a new stock buyback program, targeting repurchases of up to approximately 5% (approximately 1.3 million shares) of our outstanding stock from time to time in open market transactions. Through June 28, 2010, we repurchased a total of approximately 0.718 million shares for an aggregate price of $11.5 million, or an average price of $16.04 per share. We purchased the shares at current market prices. No purchases were made for the years ended December 31, 2012 and 2011. On July 1, 2005, we entered into a stock repurchase arrangement by which employee-participants in our 401(k) savings and investment plan are entitled to have shares of AAON stock in their accounts sold to us to provide diversification of their investments. The maximum number of shares to be repurchased is contingent upon the number of shares sold by employees. Through December 31, 2012, we repurchased approximately 1.9 million shares for an aggregate price of $25.1 million, or an average price of $13.38 per share. We purchased the shares at current market prices. On November 7, 2006, the Board of Directors authorized us to repurchase shares from certain directors and officers following their exercise of stock options. The maximum number of shares to be repurchased is contingent upon the number of shares sold. Through December 31, 2012, we repurchased approximately 0.734 million shares for an aggregate price of $11.2 million, or an average price of $15.25 per share. We purchased the shares at current market prices. Dividends - At the discretion of the Board of Directors we pay semi-annual cash dividends. Board approval is required to determine the date of declaration and amount for each semi-annual dividend payment. The Board of Directors approved dividend payments of $0.12 per share related to the 3-for-2 stock split effective on June 13, 2011. We declared dividends to shareholders of record at the close of business on June 11, 2012, which were paid on July 2, 2012. At a meeting of the Board of Directors on November 7, 2012, the Board declared a regular semi- annual cash dividend of $0.12 per share, and, in view of our strong financial position, the Board also declared a one-time special cash dividend of $0.12 per share. Both dividends were paid to shareholders of record at the close of business on December 3, 2012 and paid on December 24, 2012. We paid cash dividends of $8.8 million, $5.9 million and $9.2 million in 2012, 2011 and 2010, respectively. 14. CoMMitMentS And ContingenCieS We are subject to various claims and legal actions that arise in the ordinary course of business. 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 or results of operations and accrue and/or disclose loss contingencies as appropriate. We are party to several short-term, cancelable and occasionally non-cancelable, 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. 15. new ACCoUnting pronoUnCeMentS In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income and the update to this standard was issued December 2011. This standard eliminates the option to report other comprehensive income and its components in the statement of changes in equity. The amendment requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendment must be applied retrospectively and is effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The adoption of this standard did not have a material effect on our consolidated financial statements. 41 16. 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: numeRAtoR: Net Income DenomInAtoR: Basic weighted average shares yeArS ending deCeMBer 31, 2012 2011 2010 (in thousands except share and per share data) $ 27,449 $ 13,986 $ 21,894 24,550,113 24,689,852 25,198,166 Effect of dilutive stock options and restricted stock 149,104 191,294 141,227 Diluted weighted average shares 24,699,217 24,881,146 25,339,393 eARnInGS peR ShARe: Basic Diluted $ 1.12 $ 1.11 $ 0.57 $ 0.56 $ 0.87 $ 0.87 AntI-DIlutIve ShAReS : Shares Weighted average exercise price of anti-dilutive shares 413,275 $ 18.54 171,250 $ 16.35 121,500 $ 15.23 42 2012AnnuAl RepoRt17. QUArterly reSUltS (UnAUdited) The following is a summary of the quarterly results of operations for the years ending December 31, 2012 and 2011: 2012 Net sales Gross profit Net income Earnings per share: Basic Diluted 2011 Net sales Gross profit Net income Earnings per share: Basic Diluted QUArter FirSt SeCond tHird FoUrtH (in thousands except share and per share data) $ 64,957 $ 83,333 $ 76,816 $ 78,008 13,518 4,567 0.19 0.18 21,103 9,297 0.38 0.38 17,149 6,007 0.24 0.24 18,729 7,578 0.31 0.31 $ 59,913 $ 69,076 $ 73,829 $ 63,402 11,638 3,650 0.15 0.15 11,737 3,839 0.16 0.15 14,259 5,626 0.23 0.23 8,647 871 0.04 0.04 Higher component prices adversely affected both gross margins and profits in the fourth quarter of 2011. Also, the Company experienced the negative effect of manufacturing inefficiencies due to the introduction of new products and, quite significantly, a $1.8 million charge to earnings caused by our decision to replace approximately 50% of AAON’s heavily-used sheet metal equipment to benefit from a Federal law allowing 100% depreciation (for tax purposes) of qualified capital expenditures put in service in calendar year 2011 and to gain greatly improved manufacturing efficiencies in 2012 and beyond. The charge to earnings was caused by a pre-tax loss of $1.8 million on the trade in of the old equipment. The new equipment is state of the art and combines the latest advancements in automation and laser technology, in furtherance of our strategic vision to improve manufacturing efficiencies. A number of additional one-time charges were incurred in the fourth quarter of 2011: • Inefficient sheet metal production due to the changing out of approximately 50% of our capacity in a short period of time in order to have our new equipment operable by the end of the year. • Numerous costs expensed during the change out of the equipment. • Inefficiencies in production due to lack of sheet metal parts in a timely fashion. • Costs associated with relocating three assembly lines and rearranging two other assembly lines. 43 conSent oF InDepenDent ReGISteReD puBlIc AccountInG FIRm We have issued our reports dated March 14, 2013, with respect to the consolidated financial statements and internal control over financial reporting in the Annual Report of AAON, Inc. on Form 10-K for the year ended December 31, 2012. We hereby consent to the incorporation by reference of said reports in the Registration Statements of AAON, Inc. on Forms S-8 (File No. 333-52824 and File No. 333-151915). ExHIBIT 23 /s/ GRANT THORNTON LLP Tulsa, Oklahoma March 14, 2013 44 2012AnnuAl RepoRt ExHIBIT 31.1 ceRtIFIc AtIon I, Norman H. Asbjornson, certify that: 1. I have reviewed this Annual Report on Form 10-K of AAON, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f )) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including our consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; c) d) disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Dated: March 14, 2013 /s/ Norman H. Asbjornson Norman H. Asbjornson Chief Executive Officer 45 I, Scott M. Asbjornson, certify that: ceRtIFIc AtIon 1. I have reviewed this Annual Report on Form 10-K of AAON, Inc. ExHIBIT 31.2 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f )) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including our consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Dated: March 14, 2013 /s/ Scott M. Asbjornson Scott M. Asbjornson Chief Financial Officer 46 2012AnnuAl RepoRt ceRtIFIc AtIon puRSuAnt to 18 u.S.c. SectIon 1350, AS Adopted pUrSUAnt to SeCtion 906 oF tHe SArBAneS-oxley ACt oF 2002 ExHIBIT 32.1 In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman H. Asbjornson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and our results of operations. Dated: March 14, 2013 /s/ Norman H Asbjornson Norman H. Asbjornson Chief Executive Officer 47 ExHIBIT 32.2 ceRtIFIc AtIon puRSuAnt to 18 u.S.c. SectIon 1350, AS Adopted pUrSUAnt to SeCtion 906 oF tHe SArBAneS-oxley ACt oF 2002 In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott M. Asbjornson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and our results of operations. Dated: March 14, 2013 /s/ Scott M. Asbjornson Scott M. Asbjornson Chief Financial Officer 48 2012AnnuAl RepoRt oFFiCerS norMAn H. ASBjornSon has served as President, CEO and a director of the Company since 1988. Mr. Asbjornson has been in senior management positions in the heating and air conditioning industry for over 40 years. kAtHy i. SHeFField has served as Senior Vice President, Admin- istration, of the Company since 2012 and Treasurer of the Company since 1999. Ms. Sheffield previously served as Vice President of the Company from 2002 to 2012, and Accounting Manager of the Com- pany from 1988 to 1999. dAVid e. kneBel has served as Senior Vice President, Sales and Technology, of the Company since 2012. Mr. Knebel previously served as Vice President of the Company from 2005 to 2012, Director of Sales and Technology of the Company from 2002 to 2005 and Manager of Technology and Training of the Company from 2001 to 2002. Mr. Knebel has been in the heating and air conditioning industry for over 40 years, holding positions in design, research, software development, engineering, teaching, sales and senior management. roBert g. FergUS has served as Vice President, Manufacturing, of the Company since 1988. Mr. Fergus has been in senior management positions in the heating and air conditioning industry for over 40 years. SCott M. ASBjornSon has served as Vice President, Finance, and CFO of the Company since 2012. Mr. Asbjornson began work at the Company in 1988 and previously served as President of AAON Coil Products from 2010 to 2012, Vice President of AAON Coil Products from 2000 to 2010 and General Manager of AAON Coil Products from 1996 to 2010. joHn B. joHnSon, jr. has served as Secretary and a director of the Company since 1988. Mr. Johnson is a member of the firm of Johnson & Jones which serves as General Counsel of the Company. 49 BoArd oF direCtorS Back row (from left to right): Jerry R. Levine, A.H. McElroy, II, Joseph E. Cappy, Paul K. Lackey, Jr. Front row (from left to right): Jack E. Short, Norman H. Asbjornson, John B. Johnson, Jr. norMAn H. ASBjornSon President/CEO joHn B. joHnSon, jr. Secretary joSepH e. CAppy was elected a director of the Company in 2010. From 1997 to 2003, Mr. Cappy served as the Chairman, President and CEO of DollarThrifty Automotive Group. From 1987 to 1997 he was Vice President of Chrysler Corporation. From 1982 to 1987 he was President and CEO of American Motors Corporation. jACk e. SHort was elected to the Board in July 2004 and is the Chairman of the Audit Committee. Mr. Short was employed by PriceWaterhouseCoopers for 29 years and retired as the managing partner of the Oklahoma practice in 2001. A.H. MCelroy, ii was elected as a dir- ector of the Company in 2007. From 1997 to present, Mr. McElroy has served as President and CEO of McElroy Manufacturing, Inc., a manufacturer of fusion equipment and fintube machines. pAUl k. lACkey, jr. was elected as a director of the Company in 2007. From 2001 to present, Mr. Lackey has served as CEO and president of NORDAM, a privately held aerospace company. jerry r. leVine has served as a director of the Company since 2008. Since 1999, Mr. Levine has provided investor and shareholder relations services and advice to the Company. CorporAte dAtA Transfer Agent and Registrar Progressive Transfer Company, 1981 East Murray-Holladay Road, Suite 200, Salt Lake City, Utah 84117 Auditors Grant Thornton LLP, 2431 East 61st Street, Suite 500, Tulsa, Oklahoma 74136 General Counsel Johnson & Jones, 2200 Bank of America Center, 15 West Sixth Street, Tulsa, Oklahoma 74119 Investor Relations Jerry Levine, 105 Creek Side Road, Mt. Kisco, New York 10549, Ph: 914-244-0292, Fax: 914-244-0295, jrladvisor@yahoo.com Executive Offices 2425 South Yukon Avenue, Tulsa, Oklahoma 74107 Common Stock NASDAQ-AAON 50 Thanks to oUr eMployeeS Mohammad Abdallah Maria Acosta Andres Acosta-Lujan Enriqueta Adame Derrick Adams Gary Adams Rodney Adams Ryan Adams Timothy Adams Brian Adkins Maria Aguayo Arturo Aguilar Miguel Aguilera Daniel Alagdon Frankie Alagdon Martha Alanis Javier Alba Julio Albino James Alexander Shannon Alford Nader Al-Hashmi Donald Allen Kevin Allen Earl Alston Luis Alvarado De La Cruz Michael Amburgey Sarah Andersen Sarah Andersen Elbert Anderson Jose Andrada Fannie Andrews Margarito Angeles Wesley Anselme Price Anson Latisha Anthony Alfredo Antonio Daniel Aponte Lorenzo Aragon Nohemi Aranda Clyde Archer Uriel Arellano Guerra Jose Arguelles Jose Argumedo Ruiz Thomas Armer, Jr. Rondell Armstrong Maria Arredondo Gerardo Arroyo Norman Asbjornson Scott Asbjornson David Ashlock Gary Ashmore Dwight Austin Joseph Avila Orlando Ayala William Ayers Nora Backus Richard Backus Dwight Baker Eric Baker John Baldwin Miguel Barajas Carolyn Barber Ray Barber Candy Barbosa Gregory Barker, Jr. Justin Barlett David Barnett Ana Barragan De Alteneh Nereyda Barrios De Perez Rosa Barro Teresa Barron Phillip Basham Michael Bass Stuart Baugh Aaron Beavers * Daniel Beck Lionel Beckman Bonnie Benson James Berden Ida Bermudez Sergio Beserra John Bia Timothy Bingham Christopher Birdsong Vickie Black Steven Blackbird Brian Blackmon Debbie Blackmon Trever Blakney Maria Blanco David Blevins Justin Blevins Nicholas Bobbitt Gene Boese Kim Boih Michael Boney Dale Booher Rosendo Botello Lewis Bovee, Jr. Dujuan Bowie Tomandre Bowman Demetrius Boyd John Boyd Brian Bradford Myoshia Bradley Christopher Brantley Arlando Brewer Shahani Britt Kwynce Brookins Arlunda Brooks David Brown Timonthy Brown Johnny Brown, Jr. Christopher Bryant William Bryant Jason Bunnell Scott Burgess Trevor Burke Kelli Burkes Monica Burns Lavar Burton Wayne Bush Verenice Bustos Beatrice Butler Rosa Butler Konnor Buxton David Bya Scott Byrd Michael Cable Janibal Cabudoy Alejandro Cadena Jesus Cadenas Cleveland Cage, Jr. Margarito Calderon Jorge Calixto Elizabeth Calvillo Lazaro Cama Maria Camacho David Campbell Arthur Candler Don Canterbury Yong Cantrell Refugio Carachure Billy Carder Justin Cardoza Lisa Carriero Vincent Carson Larry Carter, Jr. Sulma Castaneda Hector Cazares Nicolas Ceballos Trujillo Elvis Cerda Francisco Cervantes Guadalupe Chairez- Galan Jonathan Chapman Patrick Chapman Joshua Chattillon Francisco Chavero Edgar Chavez Gregory Chavez Ramiro Chavez Jose Chavez Perez Dale Cherry Daniel Cherry Adan Chicas Clifton Childers Awi Ciang Man Ciin Hau Cin Kam Cin Kham Cin Sian Cin Thang Cin Tg Cin Za Khai Cing Cing Dim Cing Man Cing Nem Cing Justin Claiborne George Clark John Clark Samuel Clark, Jr. Stephanie Cleveland Troy Cleveland Brenda Coats David Cochran Kenneth Cochran Troy Cockrum Michael Coffelt Arthur Cole Ronald Collins Tim Collinsworth Aaron Columbus Dale Conkwright Michael Conley Jude Connolly 51 Mark Cook Timothy Cook Michael Coolidge Scott Coon Donna Coonfield Allen Cooper * James Cooper Alvis Copeland Pablo Cordova Cordova Elaine Corkhill Roberto Corona Genoveva Corona De Rivera Rosa Cortez Jonathan Coti Billy Cox Jerry Cox Robert Cox Adrian Crabtree Richard Craite Steven Crase Juan Crespo-Maisonet Mikel Crews Darrell Crow Carolyn Crutchfield Victory Cullom, II Robert Cummings Christopher Cunneen Gene Curtis Kevin Cyrus Hau K. Dal Hau S. Dal Gwendolyn Daniels John Daniels Justin Daniels Charles Dauster Jenifur Davidson Byron Davis Cameron Davis Carolyn Davis Cathy Davis Chester Davis Darryl Davis Eric Davis Jerry Davis Marleitta Davis Rhonda Davis Richard Davis Samuel Davis Susan Davis Trenton Davis Cookie Davison Yoana De La Torre Alvaro De Leon Mendoza Pedro De Los Santos, Jr. Freddie Deboe Pong Dee Bobby Degraffenreid Ismael Delapaz Martha Delarosa Molina Eva Delatorre Juana Delobo Andres Delos Santos Raquel Deluna Shiira Demery Demario Dennis Bruce Derr Jermein Devers Audencia Devilla Roy Deville Charles Deweese Anthony Diaz Ciin Dim Hau Dim Lakeitra Dixon Rickey Dodson Edreys Dominguez Sol Dominguez Thang Dop Mui Shundrika Draper Thomas Dreadfulwater Esmeralda Duarte Cathryn Dubbs Linda Dunec Charles Dunn Ralph Durbin Randy Dwiggins Wendell Easiley Jeffrey Easter Harvey Ellis Austin Embry * Carlos Encarnacion Gregory English Tinisha English John Enochs Eva Enriquez Benjamin Epp Steven Ervin Daisy Escalante Teresa Escobedo Norberto Esparza-Torres Leonardo Espinoza Flores Jesus Estrada-Gonzalez Benjamin Estrelles Stephen Etter Gilda Etumudor Gareth Evans Joshua Everett Reginald Everidge, Jr. Chad Evers Shawn Fairley Blake Faluotico Keith Farmer Jeffrey Fath Richard Faust Amy Fehnel Robert Fergus Catalina Fernandez Fabiola Fernandez Samuel Fields Thomas Fierros Jesse Figueroa Christian Figueroa Mauras Sterlyn Finch Anthony Fisher Bruce Fisher Chad Fisher Anthony Fizer Copotenia Fletcher, Jr. Carolina Flores Efigenia Flores Juana Flores Laura Flores Ruby Floyd Vicky Floyd Mark Fly Sharon Fontenot Eric Ford Gregory Foreman Sheila Forrest Alex Foster Bradley Foster Christopher Foster Frederick Foster Ramon Fourshey Loretta Fowlkes Kenneth Foyil Phillip Frank Damion Franklin Warren Franklin Revonda Franks Matthew Frederick Olga French Angel Frias Brandon Frick Berry Friend Eric Friend Wade Fuller Rony Gadiwalla Curtiss Gaines Ranulfo Galicia Maria Galindo John Gall Shayla Galland Josue Gallegos Belinda Galvan Ma Galvan Andrez Garcia Angel Garcia Jose Garcia Roger Garcia Wuilson Garcia Alvarado Isidro Garcia Arriaga Yesica Garcia Barreto Norma Garibay James Garrison Michael Geeter James George Gaspar Gerena Petr Getmanenko Aaron Gilbert Jaimon Gilstrap Penny Glossinger Celia Gomez Jose Gomez Maria Gomez Raquel Gomez Maria Gomez Medina Daniel Gomez-Sigala Adrian Gonzalez Consuela Gonzalez Imelda Gonzalez Marisela Gonzalez Raul Gonzalez Scott Goodson Dale Graham Hasson Granado Buenaventura Granados- Rubios Michael Gray Ba Great John Griffin Kevin Griffin Ronald Grimes Daniel Groff Jackie Grubb Rodolfo Guevara Carolina Guillen Ronald Guinn Georgina Guzman Jack Hagan * Joshua Halfpap * Dennis Hall Jack Hall Kelly Hall Koren Hall Stephen Hall Scott Hamilton Otis Hamilton Jeffrey Hammer Sam Hammoud Joseph Hampton, Jr. Mung Hang Natasha Harris Stacey Harris Marcus Harry * Robi Hartmann Heather Haskins Troy Hatfield Neng Hau Lian Kevin Hawkins Willie Hawkins Billy Hawley, Jr. Justin Heck Bret Hedrick Tim Hefflin Cody Helscel Antonio Henderson * Daniel Henderson Kyle Hendrick Kevin Henson Edith Heredia De Birrueta Armando Hernandez Blanca Hernandez Corcina Hernandez Josue Hernandez Lily Hernandez Luis Hernandez Maria Hernandez Mariano Hernandez Jahel Herrera Christopher Herrin * Mark Heston Brandon Hicks Ronald Hicks Takeo Higa Brenda Higgins Larry Highfield Dewayne Hightower Cortez Hill Latasha Hill Marcus Hill Alberto Hinojosa Juan Hinojosa Tyson Hinther Bon Hoang Samuel Hobson Donna Holloway Lawrence Honel Stephen Hoover Kevin Horn * 52 Terri Horn Stanley Horton David Howard Larry Howard James Howell, II Do Ngaih Huai Nuam Huai Kaitlynn Hubbs Lydia Hudson Philip Hudson Anthony Huffman Jimmy Hughes Fiona Humphrey Larry Humphrey Jade Hurst Ronald Hutchcraft Gary Hutchins Cindi Hutton * Tan Huynh Okechukwu Ibeh Alexander Ignatenkov * Samuel Ingram Tim Ingram, Sr. Belinda Jackson Jeff Jackson Levita Jackson Demetrica Jacobs Jose Jamaica Joseph Jelinek, Jr. Genelle Jimboy Pedro Jimenez-Delfin Samuel Jimison Frederick Jimmerson Aaron Johnson Ashley Johnson Ed Johnson Holly Johnson Mark Johnson Cheryl Jones Danny Jones David Jones Dean Jones Demareo Jones Djuan Jones Henry Jones Jeremy Jones Karrington Jones Raymon Jones Remia Jones Rose Jones Timothy Jones James Jones, Jr. Jason Jordan Rodney Jordan Sean Jordan Jaime Juarez Leandro Jumelles Nunez Garrett Kaiser Patrick Kaiser Do Kam Hau Kam Khual Kam Ngin Kam Thawng Kam Dal Khan Kap Dal Suan Kap Gin Kap Lian Kap Thang Kap Brian Kastl Adam Kauffman Eryn Kavanaugh Tuang Kawi Kenneth Kawuma Aaron Kelly Brian Kelsey Gregg Kennedy Sean Kennedy Ronald Kenney Antony Khai En Khai John Khai Kham Khai Mang Khai Nang Khai Pau Khai Peter Khai Peter Khai Thang H. Khai Thang S. Khai Thawng Khai Vuum Khai Go Kham Mung Kham Ngun Kham Cin Khin Niang Khoi Hau Khual Khai Khual Mung Khual Thang L. Khual Thang S. Khual Za Khual Cin Khup Dai Khup Deih Khup Kap Khup Kham Khup Lang Khap Lian Khap Nang Khap Ngin Khup Pau Khup Thang Sian Khup Thang Suan Khup Tuan Khup Alan Kilgore Andrew Kilgore Cin Kim Cing Kim Hau Kim Kap Kim Thang D. Kim * Thang T. Kim Thang Z. Kim Dennis Kimbrough Gene King Joseph King Lori King Randy King Russell King Roger Kinkade, Jr. David Knebel Stephanie Knight Christian Knox Robert Knuth Scott Koscheski James Koss Robert Krafjack Larry Kreps Mikhail Krupenya Thu Kun Hen Ricky Kurin Laura Kyle * Phillip Lafond Giang Lai Do Lal Sei Lal Thang Lal George Lam Mang Lam Cole Lambert Deborah Lane Donald Laney Gin Lang Kap Lang Pum Lang Kap Langh Thawng Langh Martin Larsen Michael Lavallee Bill Lawson Jeffrey Lawson Ronald Lawson Walter Lazcano Anh Le Lai Le Rickey Leatch Jules Lebel Michel Lebel Jose Lebron David Lee Gralind Lee Jacqueline Lee Rhonda Lee Kevin Lee, Jr. Matthew Leeper * Hugo Lerma Boy Let Cynthia Leyva Awi Lian Dal Lian Do Lian Gin Lian Hau Lian Kam Lian Sang Lian Sing Lian Tha Lian Thang C. Lian Thang D. Lian Thang K. Lian Tuan Lian Ping Lin Israel Linares Jerry Lincoln Thomas Lincoln William Lindsay Jerome Linwood John Livingston * Jonathan Lockmiller John Lopez Margarito Lopez Rafael Lopez Rebecca Lopez Thomas Lopez Jason Lovett Paul Lowery Oscar Lozano Ralph Lucas Jarrod Ludlow Quannah Ludlow Cing N. Lun Cing Ngai Lun Dim Lun Lu Lun Mariana Luna Ryan Luna Joshua Lundy Kelly Lybarger * Jimmy Mabry Gregory Mack Sherenda Mack Keith Mackey, Jr. Jorge Madrigal Tam Mai David Main Carlos Malone Jeffrey Maly Ciin Man Cing Man Maria Mancilla Dai Mang Dal Khan Mang Dal Kim Mang En Mang Gin Mang Kam Mang Kham Mang Kham L. Mang Khup Mang Lian Mang Nang Mang Ngin Mang Sian Mang Thang Kim Mang Thang Lian Mang Vung Mang Ngam Manlun Adam Mansfield Zacchary Marinis William Markwardt Ma Marquez De-Gilbreath Ana Marroquin Errol Marshall * Parker Martel Cassandra Martin Jerrad Martin Juan Martinez Karen Martinez Miguel Martinez Mosses Martinez Obdulia Martinez Hector Martinez Molina Florentino Martin-Romo Timothy Marvin Timothy Marvin, Jr. Thomas Masengale, Jr. Beverley Mason James Mason 53 Charles Mattocks, IV Ron Mauch Antonio Mauricio Leonard Maxwell Duane Mayfield Marcus Mayfield Latoya Mays Courtney McAfee Deborah McAteer Tina McBeath Robert McBowman Shemaal McCain Robert McCleary Dirk McClellan Daniel McClure Michael McConnell Roy McConnell Corey McCowan Debra McCowan Wesley McCowan, Jr. Paula McCrary Michael McCuin Kathy McCulloch Vickie McCullum Loyd McDaniel Randall McDaniel Sharon McDaniel Karen McDow James McElroy Deborah McFarlin Lacy McGrew Mark McIllwain Michael McIllwain Domingo McKnight Gina Means J Medina Olvera Angel Medrano Jericho Melendez James Melton Silvestre Mendez Gonzales Edwin Mendez Orozco Kevin Merideth Dale Michelson Glenn Milam Michael Miles Ranulfa Milian Chris Miller Mykea Miller Brian Mingle Scarlett Miranda Orlando Mitchell Wayne Mitchell Johnny Mize, Ii Jay Modisette Ronald Modlin Irma Moguel Tammy Mohaupt Braulio Moises-Lee Biasney Mojica Castaneda Jose Molina Jose Monreal Enoc Montes Mario Montes Avina Jerome Montgomery, Jr. Jon Moody Herbert Moore James Moore Kashonda Moore Marc Moore Maria Moore Tony Moore Alfonso Moran Tony Morehead Berta Moreno Erasmo Moreno Medina Jason Moretz Matthew Morgan Myron Morgan Desron Morrow Marcus Morrow * Phillip Moss, Jr. Clayton Mote Stephanie Mounce Seth Mowery Do Muang Cleve Mulder Eric Mulliniks Dal Mung En Mung Gin L. Mung Gin S. Mung Hau Mung Kai Mung Khai Mung Khup Mung Lang Mung Lian Mung Suaan Mung Suan G. Mung Suan S. Mung Thang K. Mung Thang S. Mung Vum Mung Vung Mung Gabriel Muniz Gonzalez Jesus Munoz Eduardo Murillo-Munoz David Myers LaHarry Myers Krystal Nail Sing Nang * Thomas Nang Marcus Naranjo Jose Nava Maria Nava Abel Navejas Clayton Neal Mark Neal Samuel Neale Natalie Neilson Ronald Nelson Ciin Neu Robert Neu Cing Ngaih Tha Nge Haunung Ngin Pi Duong Nguyen Gam Nguyen Hoang-Chi Nguyen Phuoc Nguyen Thanh Nguyen Cing Niang Dim L. Niang Dim N. Niang Go Niang Karen Niles-Blayer Thang No Christopher Norfleet Willie Norfleet Robert Norfleet, Jr. Eric Norris Debra Nothnagel Tumai Npawt Ning Nuam Zen Nuam Let Nung John Nutt Deangelo Oakley Joey O’brien Thomas O’brien Alexander Ofosu Rickey Ogans John Ogle Maria Olivas De Torres Kejuan Oliver Scotty Oliver Anthony Oliveras Eric Olson Sunday Omasere John Ondinyo James O’Neill, Jr. Benjamin Orme Christina Orona Leticia Orona Margarita Orona Maria Orona Margarita Orozco Dehuizar Carlos Orozco-Torres David Osborne Ofelia Osuna Jennifer Overmeyer Martin Ozura-Carrillo Gerard Pacheco Guillermo Pacheco Luis Pacheco Mark Page Edmundo Paiz Julianne Palmer Michael Palmer Candido Palomo J Paniagua Corey Parten Jason Pate Jeanetta Pate Cesar Patino Corry Patterson Kenneth Pattinson Chin Pau Cia Pau Ciang Pau Dal Pau Gin S. Pau Gin Sian Pau Gin Suan Pau Go Pau Kam L. Pau Kam S. Pau Kam Sian Pau Langh Pau Lian Pau Liang Pau Nang Pau Neng Pau Thang Pau Zam Pau Justin Paulson Travis Pearson Vladimir Peniaz Cesar Perez Rudy Perez Sergio Perez Ma Lourdes Perez Perez 54 John Peters Ladrue Peters Michael Peterson Daniel Peurifoy Kinh Pham Randy Phelps Alexander Phillips Brandon Phillips Lance Phillips Michael Phillips Ronnie Phillips Alexander Phomprida Thang Pi Tuang Pi Goh Piang Khup Piang Thang K. Piang Thang L. Piang Thang Lamp Piang Van Piang Zam Piang Christopher Pickens Shedrica Pickett Wanda Pickett James Pierson, Jr. Pedro Pina-Valles Jose Pineda Clifford Pitchford Susanne Poindexter * Ashish Pokhrel Basant Pokhrel Renu Pokhrel * Mark Pool Timothy Pool Javorus Poole Richard Porter Rudy Powell Greg Powers Jeffery Powers Jose Prado Kenneth Prentice, Jr. Eric Prickett Markiese Propes Joshua Pruett Lian Pu Sian Pu Alma Puga Daniel Puga, Jr. Thang Puno Darrell Purser Javier Quezada Jesus Quinones Nimalakirthi Rajasinghe Adrian Ramirez Antonia Ramirez Raymon Ramirez Samuel Ramirez William Ramirez Nandy Ramirez B Gemma Rangeloff Robert Ratliff Kyle Ratzlaff Charles Ratzloff Terry Ratzloff Robert Rayno Thomas Read Sandra Reader Diego Rebollar-Marin Peggy Redden Stephen Redman James Reed Freeman Reed, Jr. Cameron Reese Tiffany Reese Margaret Reeves Lloyd Reichert Alberto Rendon Parra Rodolfo Renteria Svyatoslav Reshetov Thomas Reynolds Daniel Rhoades Gene Rice James Rice Robert Riddell Angela Rideout Brett Riegel Brian Riggs Delmecio Riser Stephen Riser James Ritchie Hillary Rite Jesus Rivera, Jr. John Roberts Markus Robinson William Robinson, Jr. Alex Rodriguez Diana Rodriguez Francisco Rodriguez Gilberto Rodriguez Hector Rodriguez Maria Rodriguez Martin Rodriguez Rebecca Rodriguez Rivelino Rodriguez Jesus Rodriguez Santibanez J Rodriguez-Flores Don Rogers Jake Rogers Samantha Rogers * Tony Rogers Lidia Rojas Nelson Rojas Marvin Rolland Terry Rombach Oscar Rose Catherine Ross Lane Ross Richard Rowe, Jr. Wendell Rowland Thomas Royal Ricardo Ruiz Vicente Ruiz Ava Russell * Jimmy Russell John Russell Kimberly Russell Maverick Sadler Adan Salazar Alberto Salazar Nora Salazar Walter Salazar David Saldivar Maria Saldivar Miguel Saldivar Victor Saldivar Jose Saldivar Orepeza Alejandro Salinas Diana Salinas Jessica Samaroo Beatriz Sanchez Hector Sanchez Tara Sanchez Esperanza Sanchez Ruiz Luis Sanchez-Lopez Christina Sanders Tanisha Sanders Michael Sandor, Jr. Cin Sang Thiam Sang Agustin Santana Jorge Santana Francis Wenceslao Santiago Harold Santiago Torres Carlos Santiago Torrez Ignacio Santillan Pedro Santillan Angela Santillano Rebecca Sar Erick Sawyer Frank Scanlon William Scharosch Brummett Scott Kenneth Scott Donald Scott, Sr. Vivian Scroggins Ku Sei Let Sei Maria Serrano De Torres Carrol Shackelford Douglas Sheehan Kathy Sheffield Terry Shelly Brandon Shelton Vasiliy Shemereko Kathleen Shepard Jackie Shephard Lynnda Shepherd Todd Shook Nelson Sierra Cory Simmons Dwayne Simpson James Simpson, II Daai Sing Kap Sing Mang Sing Nang Sing Thang Sing Thawn Sing Amy Siviero * Michael Skinner Ian Slattery Debi Sloan Mekissa Sloan Larry Slone Raymond Slovacek Brett Smith David Smith Emily Smith Jordan Smith Owen Smith Renaldo Smith Ricardo Smith Ryan Smith Sweetie Smith Billy Smith, II Robert Smith, II Wilbert Smith, Jr. Robert Smithson Kap So Te Showe Soe Jose Solares Malcolm Soles Maria Solis 55 Nemisia Solis Kevin Souvannasing Denney Sowder John Spain, III Ronnie Sparks Elda Spears Jameson Spires Michael Sportel Michael Srader Lawana Stane Daniel Stanislawski Larry Stanton Vincent Steadman Shannon Sterns Crystal Stevens Brent Stockton Harvey Stoddard Kevin Stoddard Scott Stoltzfus Chase Stone Edwin Stone Michael Straub Daniel Strelow Billy Strength Hau Suan Khup Suan Thang Suan Zen Suan Nang Sum Victor Sum Pau Sut Jack Sweet Eric Sypert Kam Ta James Taber Go Tang Ryan Tankersley William Tankersley Joe Tart Larry Tate Mark Tate * Tenna Tatum Mung Tawng Charles Taylor Deborah Taylor Eric Taylor Michael Taylor Andrea Teakell Kevin Teakell Robert Teis Ngin Teng Xien Thach Cin Thang Cin L. Thang Cin Lian Thang Cin M. Thang Dai Thang Dal Thang Go Thang Go C. Thang Go Z. Thang Hau Thang Kam K. Thang Kam S. Thang Kam Suan Thang Kham Thang Let Thang Lian Thang Mang Thang Ngo Thang Pau K. Thang Pau S. Thang Pau Z. Thang Suan Thang Thawng Thang Tual Thang Tuan L. Thang Tuan S. Thang Lian Thang Lam Lal Thari Kham Thawn Suan Thawn Thang Thawn Lang Thawng Zam Thawng Gerald Thomas John Thomas Lee Thomas Pastasia Thomas Richard Thomas Cheryl Thomason Archie Thompson Rebecca Thompson Michael Thornton Tuan Thung * Jessica Thurber Ted Tiger Go Tin Gabriela Tirado William Tobar Christopher Toles Breny Tornes Reinaldo Torres Travis Traeger Heip Tran Tuong Tran Marisol Trejo Martin Trevino-Saldana Mark Tribble Ha Trinh Juanito Tronzon Kam Tuang Kham Tuang Sing Tuang Suum Tuang Thang Tuang Thang L. Tuang Thang Z. Tuang Tun Tuang Vung Tuang Zam Tun Gin Tung Kaam Tung Thang Tung Thawng Tung Paul Turbe David Turley Charles Turner Phyllis Tyiska James Tyler Jacob Tzang Jesus Tzul Ni Uk Pernell Underwood Colton Upchurch Tony Urich Maria Urquiza Yadira Urquiza Allen Vang Sua Vang John Vanness Shawn Vawter Juan Vazquez Mercedes Vela Casanova Antonio Velasco James Velde Juan Vences Angel Venegas Salome Vera Laura Vergara James Verhamme George Verrett Timothy Vetting Teresa Victory Efrain S. Villa Efrain Sanchez Villa Selina Viramontes Cuong Vo Suong Vo Tong Vo Thu Vu Nguyen Jovan Vucovich Houa Vue Lian Vum Mary Vung Ning Vung Kayla Wadding Joseph Wahl Stephen Wakefield Whitney Wakefield Diana Walker Joshua Walker Patrick Walker Roderick Walker David Walkup Barry Wall Dale Wallace Gary Wallace Kim Wallace Todd Wallingford Leslie Wallis, Jr. Darius Walters Joseph Walton Gayle Ward Perry Warner Anthony Washington Donna Washington Joseph Washington, IV Steven Watkins Kyle Webb Anthony Welch Jerremy Welch Sharon West Deborah Whitaker Mike Whitaker Sheila Whitaker Johnny Whitaker, Jr. Allyn White James White Randy White Timothy White David Whitlock Steven Whorton Christopher Wiles Jackie Wiles Jerry Wiles Michael Wiles Richard Wilkerson Matthew Wilkins * Sherri Wilkins Stanley Wilkins Duane Wilkinson James Wilkinson Barbara Williams Chante Williams Cheray Williams Jaboriece Williams Kristy Williams Latrenia Williams Robert Williams Rodney Williams Billy Williams, II Aaron Williamson James Williamson Jeremy Williamson Brandi Wilson Daniel Wilson Isaac Wilson James Wilson Jonathan Wilson Thomas Wingo Wanda Winkfield Micah Wisdom Jack Witt, Jr. Stanley Womack, Jr. Brandon Wood Curtis Wood * Ronald Wood Kasey Worthington Westley Wright Berry Wyers Jim Wyrick Linda Wyrick Ector Yancey, Jr. Patrial Yarbrough Buel York, II Eddie Young Keith Young Marc Young Patricia Young Nikolay Zagorodniy Lang Zah Lang Aurora Zavaleta Luis Zepeda Juan Zermeno Virginia Zermeno * Pictured The ongoing success of our company can be directly attributed to our employees. 56 AAon, Inc. 2425 South Yukon Avenue • Tulsa, OK 74107 918.583.2266 • Fax: 918.583.6094 AAon coil products, Inc. 203 Gum Springs Road • Longview, TX 75602 903.236.4403 • Fax: 903.236.4463 www.AAon.com 

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