AAON
Annual Report 2019

Plain-text annual report

Company Profile 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 outdoor mechanical rooms, air handling units, condensing units, makeup air units, energy recovery units, geothermal/water-source heat pumps, coils and controls. Since the founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver innovative heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our customers. Water-Source Heat Pumps (½ - 230 tons) WV SERIES & WH SERIES SB SERIES RQ SERIES RN SERIES SA SERIES RZ/RL SERIES M2 SERIES Rooftop Units (2-240 tons) RQ SERIES Product Family Indoor Air Handling Units (800 - 100,000 + cfm) F1 SERIES V3 SERIES RZ/RL SERIES RN SERIES SA SERIES M3 SERIES H3 SERIES M2 SERIES Packaged Outdoor Mechanical Rooms (4-540 tons) LF SERIES LN SERIES BOILER MECHANICAL ROOM Outdoor Air Handling Units (800 - 100,000 + cfm) RQ SERIES FLUID COOLER RZ/RL SERIES RN SERIES Condensing Units (2-230 tons) CL SERIES Self-Contained Units (3-70 tons) SA SERIES CB SERIES CF SERIES LZ SERIES CN SERIES SB SERIES M2 SERIES BOOSTER, HYDRONIC, Coils and DX Touchscreen Controller Controls (WSHP, RTU, Self-Contained Unit, Split System and Chiller) Pioneer Gold VCC-X Pioneer Silver Water-Source Heat Pumps (½ - 230 tons) WV SERIES & WH SERIES SB SERIES RQ SERIES RN SERIES SA SERIES RZ/RL SERIES M2 SERIES Rooftop Units (2-240 tons) RQ SERIES Product Family Indoor Air Handling Units (800 - 100,000 + cfm) F1 SERIES H3 SERIES M2 SERIES SA SERIES Outdoor Air Handling Units (800 - 100,000 + cfm) V3 SERIES RZ/RL SERIES RN SERIES Packaged Outdoor Mechanical Rooms (4-540 tons) M3 SERIES LF SERIES LN SERIES BOILER MECHANICAL ROOM RQ SERIES FLUID COOLER RZ/RL SERIES RN SERIES Condensing Units (2-230 tons) CL SERIES Self-Contained Units (3-70 tons) SA SERIES CB SERIES CF SERIES LZ SERIES CN SERIES SB SERIES M2 SERIES Coils BOOSTER, HYDRONIC, and DX Touchscreen Controller Controls (WSHP, RTU, Self-Contained Unit, Split System and Chiller) Pioneer Gold VCC-X Pioneer Silver NAIC Research and Development Laboratory Grand Opening Ribbon Cutting with AAON Leadership and Local Dignitaries October 29, 2019 Financial Highlights Income Data ($000 except per share data) Net Sales Gross Profit Operating Income Interest Income (Expense), Net Depreciation and Amortization Pre-Tax Income Net Income Earnings per Share Basic Diluted Balance Sheet ($000 except per share data) Working Capital2 Current Assets2 Net Fixed Assets Accumulated Depreciation Cash and Cash Equivalents Total Assets2 Current Liabilities Long-Term Debt Stockholders’ Equity Stockholders’ Equity per Diluted Share Funds Flow Data ($000) Operations Investments Financing Net Increase (Decrease) in Cash Ratio Analysis Gross Profit Return on Average Equity Return on Average Assets Pre-Tax Income on Sales Net Income on Sales Total Liabilities to Equity Quick Ratio1 Current Ratio Year-End Price Earnings Ratio 2019 2018 2017 2016 2015 469,333 119,425 67,011 66 22,766 67,031 53,711 433,947 103,533 55,351 196 17,655 55,500 42,329 405,232 123,651 74,235 298 15,007 74,624 53,830 383,977 118,165 78,998 292 13,035 79,395 53,020 358,632 108,455 69,969 161 11,741 70,006 44,932 1.03 1.02 0.81 0.80 1.02 1.01 1.00 0.99 0.83 0.82 131,521 187,549 178,094 179,242 26,797 371,424 56,028 6,320 290,140 5.51 97,925 (37,046) (18,500) 42,379 25.4% 19.9% 15.8% 14.3% 11.4% 28.0% 2.0 3.3 48.4 93,167 140,658 163,003 166,880 1,994 307,994 47,491 - 249,443 4.74 54,856 (34,635) (39,684) (19,463) 23.9% 17.3% 14.0% 12.8% 9.8% 23.5% 1.3 3.0 43.8 104,002 153,537 142,375 149,963 21,457 296,590 49,535 - 238,925 4.50 57,994 (31,052) (29,638) (2,696) 30.5% 24.1% 19.5% 18.4% 13.3% 24.1% 1.7 3.1 36.3 102,287 140,786 114,892 137,146 24,153 256,335 38,499 - 208,410 3.90 63,923 (16,925) (30,753) 16,245 30.8% 27.2% 21.7% 20.7% 13.8% 23.0% 2.4 3.7 33.4 81,106 124,042 101,061 124,348 7,908 232,683 42,936 - 181,124 3.32 55,355 (23,194) (46,205) (14,044) 30.2% 25.2% 19.6% 19.5% 12.5% 28.5% 2.0 2.9 28.3 1 = (Cash & cash equivalents + investments + receivables)/current liabilities 2 = Reflects retrospective adoption of ASU 2015-17 7 Gary Fields President Norm Asbjornson CEO and Founder Gary Fields President Letter from the CEO and President Letter from the CEO and President Letter from the CEO and President Dear Fellow Stockholder, Dear Fellow Stockholder, Dear Fellow Stockholder, In 2019, we posted another year of record sales and earnings growth despite a number of challenges and internal changes. Beginning in mid-2018, our order backlog level grew significantly. Due primarily to constrained sheet metal production capacity and a significant shortage of effective labor, finished goods during 2019 experienced increased lead-times. We took important steps during 2019 to alleviate these problems. We accelerated our machinery purchases and completely reformed our equipment maintenance program. In addition, we embarked upon a number of important managerial changes including a new sales manager, a new director of engineering, a new head of production control, a new head of purchasing and a new director of manufacturing. It was the largest management shift in the Company’s history and we are pleased to say that all of the people promoted were advanced from our existing workforce. By the end of the third quarter of 2019, we started to overcome these problems. The 2019 fourth quarter sales and margin performance was an indication of these improvements. We believe the significant efforts undertaken during 2019 have strengthened our position in the marketplace and have placed the Company on a path of long-term growth and profitability. Norm Asbjornson CEO and Founder STRONG FINANCIAL CONDITION Our financial condition at December 31, 2019 remained strong. The current ratio was 3.3:1 with unrestricted cash and cash equivalents of $26.8 million. Our capital expenditures in the past year were $37.2 million and for the current year we estimate these expenditures to be in the vicinity of $72-$74 million, a record for the Company. The 2020 capital expenditure program deserves some discussion. We estimate approximately 60% of these expenditures will be devoted to our Tulsa facilities with almost half of that total devoted to the purchase of sheet metal fabrication equipment. The remaining amount expected to be spent on our Tulsa facilities will be for the renovation of assembly lines and other facility renovations. In addition, the Company will make a capital investment of $28 million at our Longview, Texas operations, including the construction of a new facility adjacent to our existing Longview facility and the purchase of equipment. The current Longview facility expansion, which will add 220,000 square feet to our Longview operations, is expected to be completed by the fourth quarter of this year. Total stockholders’ equity was $290.1 million or $5.51 per diluted share and our return on average stockholders’ equity was 19.9%. Throughout 2019, we implemented two price increases. Aided by these increases, our backlog at December 31, 2019 was $142.7 million. SALES REPRESENTATIVES NETWORK We continue to possess the strongest and most respected sales representative network in the industry. During the past year they proved most resilient by operating with the hardship of significantly extended lead-times. Despite these less than ideal lead-times, bookings remained firm throughout the year. Our current roster of representative firms consists of 63 individual companies, 55 in the United States and 8 in Canada, with 105 individual offices, 94 in the United States and 11 in Canada. In 2019 we increased our efforts to enlist our sales representatives to focus on parts sales. These sales not only enhance the service of our customers, but also prove to be an additional profit center for the representatives. The representative network has responded very well, and many are currently stocking parts and our water-source heat pump products to best serve our customers. During 2019 the representatives added 5 parts stores to the roster, bringing the total number of representative parts stores to 31. We expect they will add 3 to 5 more stores during 2020. In 2019, parts sales gained 24.5% to approximately $35.4 million and for 2020 we estimate sales for this segment to gain 20.0% to $42.5 million. Our independent sales representatives are key contributors to AAON’s success and were responsible for more than 90% of our total sales during 2019. Armed with our expanded and improved product line, we expect this sales network to once again have excellent sales performance this year. Drawing of Longview Facility Expansion 10 New AAON Parts Store in Tulsa COMMITMENT TO RESEARCH AND DEVELOPMENT We remain dedicated to deploy the necessary financial and human capital to maintain our well-earned reputation as one of the most technologically innovative producers of the highest quality, most efficient products in the HVAC industry. In October 2019, the Company officially opened the Norman Asbjornson Innovation Center (NAIC) research and development laboratory at our Tulsa facilities. This state-of-the-art laboratory, representing a total investment of $33.0 million, has been met with acclaim from both our customers and sales representatives. Its capabilities have already resulted in multiple large-scale orders for AAON equipment, where the customer required testing that was not possible anywhere else. In addition, our product development activities are already benefiting from the unique capabilities afforded by the NAIC lab. Customer Equipment in NAIC Sound Test Chamber WATER-SOURCE HEAT PUMPS In 2019, this product line continued to witness strong demand as unit sales increased from 5,334 in 2018 to 7,716 in 2019, or a gain of 44.6%. Sales during that same period grew to $25.5 million from $14.7 million, or a gain of 73.6%. We introduced this technically advanced product in 2016 and we were plagued with in-house production problems for the first two years after its introduction. With these problems now behind us, we have enlarged the size of this product line from the originally introduced series of one-half to 5 tons, to 5 through 12 tons of capacity. For the current year we estimate sales in this product line to increase 25.0% to the area of $31.9 million. The Company will make a capital investment of $28 million at our Longview, Texas operations, including the construction of a new facility adjacent to our existing Longview facility and the purchase of equipment. AWARDS AND RECOGNITIONS AAON was recognized for excellence in product design in the 16th annual Dealer Design Awards Program sponsored by The Air Conditioning Heating & Refrigeration News magazine. An independent panel of contractors acted as judges in the contest, which had 79 entries. The AAON V3 Series high efficiency gas heater air handling unit was the Bronze Award Winner in the HVAC Commercial Equipment category and the H3 Series energy recovery wheel air handling unit was the Bronze Award Winner in the Ventilation Products category. The ACHR News is the leading trade magazine in the heating, ventilating, air conditioning, and refrigeration industries. AAON was also pleased to have each of its WV Series water-source heat pump and RN Series two-stage compres- sor rooftop unit voted 2019 Product of the Year by the read- ers of Consulting-Specifying Engineer, a monthly publication V3 Series Air Handling Unit with Gas Heat WV Series Water-Source Heat Pump 11 11 with a circulation of over 47,000 mechanical, electrical and plumbing engineers. These awards highlight our commitment to designing innovative HVAC products of the highest quality and performance. In December of last year, Oklahoma Magazine selected AAON as one of its 2019 Great Companies to Work For. Companies are selected by utilizing a variety of resources, including an online application process, a survey of the state’s largest private- sector employers and commercial and public-sector studies and surveys. In addition, we are pleased to report that AAON was recently recognized by 2020 Women on Boards as an Oklahoma “W” Company, for having 20% or more of its Board seats held by women. Of our current eight-member Board, two positions are held by women. 2020 Women on Boards is a non-profit campaign committed to increasing the percentage of women on board to 20% or greater by the year 2020. OUR EMPLOYEES AAON strives to attract and retain a talented workforce using competitive base pay, profit sharing, equity and benefits. We also provide equity compensation to a broad base of our employees to align their interests with those of our stockholders over a longer term. AAON employees are automatically enrolled to receive a robust 401(k) match, in the form of Company stock, from their first day of employment. In addition, we distribute 10% of our annual pre-tax earnings equally among nearly all personnel as a more rapid means to reward positive results. Lastly, we provide many personnel equity compensation in various forms to build internal ownership and ensure that employee interests align with shareholders. It is our belief that motivating our employees to think and behave like owners of the Company helps drive our success and motivates our team members to strive for results, commit to continual improvement and save for the future while remaining fully-engaged in the long-term success of AAON. a efforts, presented AAON with The Association of Fundraising Professionals of Eastern Oklahoma, in recognition of the Company’s many corporate citizenship Spirit of Philanthropy Award. AAON is dedicated to corporate social responsibility through our AAON Serves initiative. AAON team members contribute their time and resources by in mentoring local schools, participating volunteering at programs and supporting organizations such as the Tulsa Area United Way, Tulsa Regional STEM Alliance, and Junior Achievement. These efforts were further recognized by the appointment of AAON’s Community Relations Administrator, Stephanie Vickers-Cameron, to the Oklahoma Governor’s Council for Workforce and Economic Development. In 2019, AAON achieved Gold level in the Sustainable Tulsa Scor3card verification program. Environmental stewardship and sustainability are integral to AAON’s business strategies and corporate citizenship efforts. AAON is focused on energy conservation and waste reduction and we are continuously looking for ways to measure and improve our performance in these important areas. 12 AAON Team Volunteering with Junior Achievement continued The employment environment to be very challenging in 2019 in our primary employment areas. In an effort to attract and retain our workforce, we focused significant increases on our entry-level wage rates. While this materially increased compensation expenses, we believe it has positively contributed to our improved employee retention, along with our improved on-boarding and training and our highly competitive 401(k) match which has a six-year vesting schedule. These efforts continue to yield more stability in our recently-hired personnel population and will remain closely monitored to ensure these initiatives continue to provide positive impacts on both employee retention and productivity measures. OUTLOOK in from within AAON values the diverse perspectives of our team members, who not only drive the performance of the Company, but its success through their exposure to also participate equity participation. To further engage our team members, we actively seek qualified candidates the organization for promotion and endeavor to ensure that everyone has an equal opportunity with AAON. To that end, our talent development efforts train team members for advancement opportunities through a variety of workforce development initiatives as well as our long-standing tuition reimbursement program. We are fortunate to have a large number of talented, engaged and committed team members. We make every effort to foster an environment where the next generation of AAON leaders are identified and developed in a manner that maximizes their ability to contribute to the sustained growth of AAON well into the future. We have passed the managerial baton to a group of talented and bright individuals. The age of those managers dropped by decades compared to their predecessors. In the course of this management shift, we believe we have solidified AAON’s intermediate and long-term growth prospects while enhancing the Company’s reputation for manufacturing technologically innovative industry leading products. We cannot achieve these results without the combined support and commitment of our customers, sales representatives and stockholders. We also continue to benefit from the total cooperation and dedicated service of our employees, all of whose names appear at the end of this report. We are honored to have each of you with us as we maintain the lead and pursue sales and earnings growth. We have passed the managerial baton to a group of talented and bright individuals....we believe we have solidified AAON’s intermediate and long-term growth prospects while enhancing the Company’s reputation for manufacturing technologically innovative industry leading products. Norman H. Asbjornson Chief Executive Officer and Founder Gary D. Fields President March 16, 2019 13 A Time of Success 1988 - 2008 1988 August AAON, an Oklahoma corporation, was founded. September Purchase of John Zink Air Conditioning Division. 1989 Spring AAON purchased, renovated and moved into a 184,000 square foot plant in Tulsa, Oklahoma. Introduced a new product line of rooftop heating and air conditioning units 2-140 tons. Summer Became a publicly traded company with the reverse acquisition of Diamond Head Resources (now “AAON, Inc.), a Nevada corporation. 1990 December Listed on NASDAQ Small Cap - Symbol “AAON”. 1992 Spring AAON Coil Products purchased, renovated and moved into a 110,000 square foot plant in Longview, Texas. SEPTEMBER One-for-four reverse stock split. Retired $1,927,000 of subordinated debt. 1993 NOVEMBER Listed on the NASDAQ National Market System. 1994 January Introduced a desiccant heat recovery wheel option available on all AAON rooftop units. March Purchased property with 26,000 square foot building adjacent to AAON Coil Products plant in Longview, Texas. Issued a 10% Stock Dividend 1991 December Formed AAON Coil Products, a Texas Corporation, as a subsidiary to AAON, Inc. (Nevada) and purchased coil making assets of Coil Plus. 1995 SEPTEMBER Completed expansion of the Tulsa facility to 332,000 square feet. 1996 DECEMBER Purchased 40 acres with 457,000 square foot plant and 22,000 square foot office space located across from Tulsa facility. 1997 APRIL AAON received U.S. patent for Blower Housing assembly. 1998 October U.S. patent granted to AAON for air conditioner with energy recovery heat wheel. November AAON yearly shipments exceed $100 million. Received U.S. patent for Dimple Heat Exchanger Tube. 1999 SPRING Completed Tulsa, Oklahoma and Longview, Texas plant additions yielding a total exceeding one million square feet. 2000 Fall Our manufacturers representative business grew to more than 100 offices, contributing approximately 60% of total sales. 2001 July AAON added as a member of the Russell 2000® Index FALL Expanded rooftop product line to 230 tons. Introduced evaporative-cooled condensing energy savings feature SEPTEMBER 3-for-2 stock split OCTOBER AAON listed in Forbes’ 200 Best Small Companies 2002 JUNE 3-for-2 stock split FALL Industry introduction of the modular air handler and chiller products. OCTOBER AAON listed in Forbes’ Magazine’s “Hot Shots 200 Up & Comers.” AAON listed in Forbes’ 200 Best Small Companies. 2003 MAY Purchased the assets of Air Wise, of Mississauga, Ontario, Canada. JULY Started production of polyurethane foam-filled double-wall construction panels for rooftop and chiller products using newly purchased manufacturing equipment. OCTOBER AAON listed in Forbes’ 200 Best Small Companies. 2004 APRIL AAON received U.S. Patent for the De-Superheater for Evaporative-Cooled Conditioning SEPTEMBER AAON received U.S. Patent for DPAC. NOVEMBER Introduction of light commercial/ residential product lines. 2005 AUGUST AAON received U.S. Patent for Plenum Fan Banding. 2006 APRIL AAON introduced factory engineered and assembled packaged mechanical room, which includes a boiler and all piping and pumping accessories. JUNE Initiation of a semi-annual cash dividend for AAON shareholders. 2007 March Modular Air Handler products extended to 50,000 cfm. AUGUST 3-for-2 stock split. OCTOBER AAON Listed in Forbes’ 200 Best Small Companies. DECEMBER AAON rings closing bell at NASDAQ. 2008 OCTOBER AAON rings opening bell at NASDAQ. AAON voted “Most Valuable Product” and “Product of the Year” by Consulting-Specifying Engineer Magazine. AAON listed in Forbes’ 200 Best Small Companies. A Time of Success 2009 - 2019 2009 SUMMER AAON increased dividend payment by 13%. AAON named to the Fortune 40 : Best Stocks to Retire On. National Society of Professional Engineers Award AAON 2009 Product of the Year. FALL AAON added to Standard & Poor’s Small Cap 600 Index. National Society of Professional Engineers Award AAON 2009 Product of the Year - D-PAC AAON listed in Forbes’ 200 Best Small Companies. 2010 JULY AAON RQ Series win ACHR News Dealer Design award. OCTOBER AAON RN Series rooftop unit named 2010 Product of the Year - Silver by Consulting-Specifying Engineer Magazine. AAON LC Series Chiller product named 2010 Product of the Year - Bronze by Consulting-Specifying Engineer Magazine. AAON Listed in Forbes’ 200 Best Small Companies 2011 SUMMER National Society of Professional Engineers awarded RQ Series High Efficiency Rooftop Unit - Product of the Year. 3-for-2 stock split. AAON 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 Geothermal RQ Series product named 2011 Product of the Year - Silver by Consulting-Specifying Engineer magazine. 2012 SPRING Industry introduction of light commercial geothermal heat pump self-contained unit product line. JULY AAON SB Series Self-Contained Unit Wins ACHR News Dealer Design Award - Gold SEPTEMBER Consulting-Specifying Engineer magazine awarded RN Series E-Cabinet Product of the Year - Bronze. DECEMBER AAON yearly shipments exceed $300 million. 2013 May Opening of AAON Parts & Supply Store. AAON increases dividend payment by 25% 3-for-2 stock split SEPTEMBER 25th Anniversary AAON rings opening bell at NASDAQ. Consulting-Specifying Engineer magazine awarded SB Series Product of the Year - Bronze. DECEMBER AAON named top Tulsa area stock value. 2014 June 3-for-2 stock split july AAON LN Series Chiller wins ACHR New Dealer Design Award - Bronze september AAON donates $3 Million to A Gathering Place for Tulsa. 2019 JUNE AAON Opens Second Parts & Supply Store in Tulsa August AAON Breaks Ground on New Facility in Longview October AAON Opens Norman Asbjornson Innovation Center December AAON Honored as One of Oklahoma Magazine’s Great Companies to Work For 2017 April First WV Series small packaged vertical water-source heat pump comes off the production line. July AAON products received Dealer Design Awards from ACHR News. september AAON V3 Series, Touchscreen Controller, and WH Series voted Products of the Year by Consulting-Specifying Engineer magazine. 2018 MARCH WattMaster Controls, Inc. Acquisition May AAON increase dividend payment by 23% July RN Series with Two-Stage Compressors wins ACHR News Dealer Design Award - Bronze AUGUST AAON Water-Source Heat Pumps AHRI Performance Certified September 30th Anniversary October AAON rings opening bell at NASDAQ 2015 May AAON increases dividend payment by 20% June AAON receives Gold Dealer Design Award in the Ventilation category. september AAON Low Leakage Dampers voted “Product of the Year” by Consulting-Specifying Engineer magazine. 2016 January AAON received U.S. Patent for the Low Leakage Dampers February AAON Breaks Ground on New "Norman Asbjornson Innovation Center" Research and Development Laboratory July AAON LZ Series Packaged Outdoor Mechanical Room wins ACHR News Dealer Design Award- Gold september Consulting-Specifying Engineer magazine awarded LZ Series Outdoor Mechanical Room Product of the Year - Gold, Chiller category. Consulting-Specifying Engineer magazine awarded RN Series Horizontal Configuration Rooftop Unit Product of the Year - Gold, HVAC/R category. October First WH Series small packaged horizontal water-source heat pump comes off the production line. November AAON increases dividend payment by 18% NAIC Grand Opening Event NAIC Equipment Testing New AAON Parts Store AAON Parts Store Delivery Truck Longview Facility Ground Breaking NAIC Tours with AAON Representatives Innovation for &Today Tomorrow UNITED STATES SECU�ITIES AND E�C�AN�E CO��ISSION �ashington, D.C. 20549 �O�� ���� ANNUA� �E�O�T �U�SUANT TO SECTION �� O� ����� O� T�E SECU�ITIES E�C�AN�E ACT O� ���� ☒ For the fiscal year ended December 31, 2019 or ☐ T�ANSITION �E�O�T �U�SUANT TO SECTION �� O� ����� O� T�E SECU�ITIES E�C�AN�E ACT O� ���� For the transition period from ����������������������������� to ����������������������������� Commission file number: 0-18953 AAON, INC. (Exact name of registrant as specified in its charter) Ne�ada (State or other jurisdiction of incorporation or organi�ation) 87-0448736 (IRS Employer Identification No.) 2425 South �u�on A�e., Tulsa, ��lahoma 74107 (Address of principal executi�e offices) (�ip Code) Registrant�s telephone number, including area code: (918) 583-2266 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stoc� AA�N NASDA� Securities registered pursuant to Section 12(g) of the Act: None Indicate by chec� mar� if the registrant is a well-�nown seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ �es ☒ No Indicate by chec� mar� if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐ �es ☒ No Indicate by chec� mar� 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. ☒ �es ☐ No Indicate by chec� mar� whether the registrant has submitted electronically and posted on its corporate �eb site, if any, e�ery Interacti�e 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). ☒ �es ☐ No Innovation for &Today Tomorrow 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 ☐ Smaller reporting company Emerging growth company ☐ ☐ ☐ Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.) ☐ Yes ☒ 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, 2019 was $2,035.2 million. As of February 24, 2020, registrant had outstanding a total of 52,092,212 shares of its $.004 par value Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of registrant’s definitive Proxy Statement Stockholders to be held May 12, 2020, are incorporated into Part III. to be filed in connection with the Annual Meeting of TABLE OF CONTENTS Page Number Item Number and Caption PART I 1. Business. 1A. Risk Factors. 1B. Unresolved Staff Comments. 2. 3. Properties. Legal Proceedings. 4. Mine Safety Disclosure. PART II 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 6. Selected Financial Data. 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 7A. Quantitative and Qualitative Disclosures About Market Risk. 8. 9. Financial Statements and Supplementary Data. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 9A. Controls and Procedures. 9B. Other Information. PART III 10. Directors, Executive Officers and Corporate Governance. 11. Executive Compensation. 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 13. Certain Relationships and Related Transactions, and Director Independence. 14. Principal Accountant Fees and Services. PART IV 15. Exhibits and Financial Statement Schedules. 2 7 11 11 11 12 12 14 14 24 25 62 62 66 66 66 66 66 66 67 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, (4) general economic, market or business conditions, and (5) the correction of certain of our previously issued consolidated financial statements, which may affect investor confidence and raise reputational issues. Explanatory Note Error Correction Background The Company noted errors in previously issued financial statements relating to share-based compensation expense for stock options and restricted stock awards held by retirement eligible employees and directors. See Note 2, Error Correction located in Part II, Item 8 - Financial Statements and Supplementary Data for further detail. We do not believe that the errors are quantitatively material to any period presented in our prior financial statements. However, due to the qualitative nature of the matters identified in our review, including the number of years over which the errors occurred, we determined that it would be appropriate to correct the errors in our previously issued consolidated financial statements. Accordingly, we have corrected certain information within this Annual Report on Form 10-K, including our consolidated financial statements at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017, selected financial data at and for the years ended December 31, 2016 and 2015, and the relevant unaudited interim financial information for the quarterly periods ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, and March 31, 2018 and the impacted amounts within the accompanying footnotes thereto. Management has evaluated the effects of the error correction regarding the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures and has concluded that a material weakness existed as of December 31, 2019. See Part II, Item 9A - Controls and Procedures for further details. The following parts of this Form 10-K include discussion of or disclosure related to the error corrections: • • • • • Part I, Item 1A - Risk Factors Part II, Item 6 - Selected Financial Data Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations Part II, Item 8 - Financial Statements and Supplementary Data Part II, Item 9A - Controls and Procedures 1 PART I Item 1. Business. General Development and Description of Business AAON, Inc., a Nevada corporation, (“AAON Nevada”) was incorporated on August 18, 1987. Our operating Inc., a Texas subsidiaries include AAON, corporation. Unless the context otherwise requires, references in this Annual Report to “AAON”, the “Company”, “we”, “us”, “our”, or “ours” refer to AAON Nevada and our subsidiaries. Inc., an Oklahoma corporation, and AAON Coil Products, We are 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 outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps 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 $14.8 million, $14.7 million, and $14.6 million of our sales in 2019, 2018, and 2017, respectively. As a percentage of sales, foreign sales accounted for approximately 3% , 3% and 4% of our net sales in each of those years, respectively. Our rooftop and condensing unit markets primarily consist of units installed on commercial or industrial structures of generally less than ten stories in height. Our air handling units, self-contained units, geothermal/water-source heat pumps, chillers, packaged outdoor mechanical rooms and coils are suitable for all sizes of commercial and industrial buildings. The size of these markets is determined primarily by the number of commercial and industrial building completions. The replacement market consists of products installed to replace existing units/components that are worn or damaged and products to upgrade certain components, such as low leakage dampers, high efficiency heat exchangers and modern controls components. Currently, over half of the industry’s market consists of replacement units. 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 six to 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 the population. When new construction is down, we emphasize the replacement market. Based on our 2019 sales of $469.3 million, we estimate that we have approximately a 10% share of the greater than five ton rooftop market and a 2% share of the less than five ton market. During 2019, approximately 50% of our sales were generated from the renovation and replacement markets and 50% 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 and cooling in a self-contained cabinet, referred to in the industry as “unitary products”. Our other finished products are chillers, packaged outdoor mechanical rooms, coils, air handling units, condensing units, makeup air units, energy recovery units, rooftop units, geothermal/water-source heat pumps and controls. We offer four groups of rooftop units: the RQ Series, consisting of five cooling sizes ranging from two to six tons; the RN Series, offered in 28 cooling sizes ranging from six to 140 tons; the RL Series, which is offered in 21 cooling sizes ranging from 45 to 240 tons; and the RZ Series, which is offered in 15 cooling sizes ranging from 45 to 240 tons. We also offer the SA, SB and M2 Series as indoor packaged, water-cooled or geothermal/water-source heat pump self-contained units with cooling capacities of three to 70 tons. 2 Our small packaged geothermal/water-source heat pump units consist of the WH Series horizontal configuration and WV Series vertical configuration, from one-half to 30 tons. We manufacture a LF Series air-cooled chiller, a LN Series air-cooled chiller, and a LZ Series chiller and packaged outdoor mechanical room, which are available in both air-cooled condensing and evaporative-condensed configurations, covering a range of four to 540 tons. BL Series boiler outdoor mechanical rooms are also available with 400-6,000 MBH (1,000 BTU/hr) heating capacity. FZ Series fluid cooler outdoor mechanical rooms are also available with a range of 50 to 450 tons. We offer four groups of condensing units: the CB Series, two to five tons; the CF Series, two to 70 tons; the CN Series, 55 to 140 tons; and the CL Series, 45 to 230 tons. Our air handling units consist of the indoor F1, H3 and V3 Series and the modular M2 and M3 Series, as well as air handling unit configurations of the RQ, RN, RL, RZ and SA Series units. Our energy recovery option applicable to our RQ, RN, RL, RZ and SB units, as well as our H3, V3, M2 and M3 Series air handling units, responds 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. Our air-cooled chillers (LF, LN and LZ Series) are certified with the Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) in accordance with AHRI Standard 550/590. Our water-source heat pump products, including RN, RQ, M2, SB, WH and WV Series, are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256. Our unitary products (RQ, RN, and CB Series) are certified with the AHRI in accordance with AHRI Standard AHRI 210/240 up to 5 tons capacity and AHRI Standard AHRI 340/360 up to 63 tons capacity. Performance characteristics of our products range in cooling capacity from one-half to 540 tons and in heating capacity from 7,200 to 9,000,000 British Thermal Units ("BTUs"). Many of our units far exceed these minimum standards and are among the highest efficiency units currently available. A typical commercial building installation requires one ton of air conditioning for every 300-400 square feet or, for a 100,000 square foot building, 250 tons of air conditioning, which can involve multiple units. AAON designs and produces controls solutions for all of our HVAC units including roof top units, air handlers, chillers, and water source heat pumps. In addition, we provide controls for variable air volume systems associated with those units, as well as controls products for other HVAC related equipment. Our controls are easily configurable to provide a wide variety of HVAC unit application options, and we are able to customize our controls, where necessary, to meet unique customers’ requirements. Most of our controls are Underwriters Laboratories category ZPVI2 complaint and BACnet Testing Laboratories certified. In addition our economizer function is California Title 24 certified. All of these factors allow us to provide AAON controls with factory developed, approved and tested sequences of operation to optimize the performance of the AAON units. Other AAON controls options include providing terminal blocks for field-installed controls and factory installed customer provided controls. With all these controls options available to us, we are able to use controls to help sell more AAON equipment. We also offer six control options: the Pioneer Silver, Pioneer Gold, Touchscreen Controller, Orion Controller, and terminal block for field installed controls, and factory installed customer provided controls. Major Customers One customer, Texas AirSystems, accounted for 10% or more of our sales during 2019, 2018, and 2017. 3 Sources and Availability of Raw Materials The most important materials we purchase are steel, copper and aluminum. We also purchase from other 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 price fluctuations on these materials by entering into cancellable and non- cancellable fixed price contracts with our major suppliers for periods of six to 18 months. We expect to receive delivery of raw materials from our fixed price contracts for use in our manufacturing operations. We have not been significantly impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) that contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as “conflict minerals”, originating from the Democratic Republic of Congo and adjoining countries. Representatives We employ a sales staff of 44 individuals and utilize approximately 63 independent manufacturer representatives’ organizations (“Representatives”) having 105 offices to market our products in the United States and Canada. We also have one international sales organization, which utilizes 19 distributors in other countries. Sales are made directly to the contractor or end user, with shipments being made from our Tulsa, Oklahoma, Longview, Texas, or our Parkville, Missouri, facilities to the job site. Our products and sales strategy focuses on niche markets. The targeted markets for our equipment are customers seeking products of better quality than those offered, and/or options not offered, by standardized manufacturers. To support and service our customers and the ultimate consumer, we provide parts availability through our Representatives' sales offices, as well as our two Tulsa, Oklahoma AAON operated retail parts stores, to serve the local markets. We also have factory service organizations at each of our plants. Additionally, a number of the Representatives we utilize have their own service organizations, which, in connection with us, provide the necessary warranty work and/or normal service to customers. Warranties Our product warranty policy is: the earlier of one year from the date of first use or 18 months from date of shipment for parts only, including controls; 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 ten 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. Our warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for five years from the date of manufacture. The Company also sells extended warranties on parts for various lengths of time ranging from six months to ten years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately priced warranty period. 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 Research and Development (“R&D”) activities are self-sponsored, rather than customer-sponsored. R&D activities have involved the RQ, RN, RL and RZ (rooftop units), F1, H3, SA, V3, M2 and M3 (air handling units), LF, LN and LZ (chillers), CB, CF, CN and CL (condensing units), SA and SB (self-contained units), WH and WV 4 (water-source heat pumps), FZ (fluid coolers) and BL (boilers), as well as component evaluation and refinement, development of control systems and new product development. We incurred R&D expenses of approximately $14.8 million, $13.5 million, and $13.0 million in 2019, 2018, and 2017, respectively. Our Norm Asbjornson Innovation Center ("NAIC") research and development laboratory facility that opened in 2019, includes many unique capabilities that to our knowledge exist nowhere else in the world. A few features of the NAIC include supply, return, and outside sound testing at actual load conditions, testing up to a 300 ton air conditioning system, testing of up to a 540 ton chiller system and 80 million BTU/hr of gas heating test capacity. Environmental application testing capabilities include -20 to 140°F testing conditions, up to 8 inches per hour rain testing, up to 2 inches per hour snow testing and up to 50 mph wind testing. We believe we have the largest sound- testing chamber in the world for testing heating and air conditioning equipment and are not aware of any similar labs that can do this testing while putting the equipment under full environmental load. The unique capabilities of the NAIC will enable AAON to lead the industry in the development of quiet, energy efficient commercial and industrial heating and air conditioning equipment. Ten testing chambers within the NAIC allow AAON to meet and maintain AHRI and DOE certification and solidify the Company’s industry position as a technological leader in the manufacturing of HVAC equipment. Current voluntary industry certification programs and government regulations only go up to 63 tons of air conditioning as that is the largest environmental chamber currently available for testing. The NAIC contains both a 100 ton and a 540 ton chamber, allowing us to uniquely prove to customers our capacity and efficiency on these larger units. The NAIC was designed to test units well beyond the standard AHRI rating points and allows us to offer testing services on AAON equipment throughout range our of application. This capability is vital for critical facilities where the units must perform properly and allows our customers to verify the performance of our units in advance, rather than after installation. These same capabilities will enable AAON to develop new extended range of operation equipment and prove its capabilities. Backlog Our backlog as of February 1, 2020 was approximately $129.2 million, compared to approximately $147.0 million as of February 1, 2019. The current backlog consists of orders considered by management to be firm and our goal is to fill orders within approximately 60 to 90 days after an order is deemed to become firm; however, the orders are subject to cancellation by the customers in which case, cancellation charges apply up to the full price of the equipment. 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 and had no balance outstanding at December 31, 2019. We believe that we will have sufficient funds available to meet our working capital needs for the foreseeable future. Seasonality Sales of our products are moderately seasonal with the peak period being July - November of each year due to timing of construction projects being directly related to warmer weather. 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, reliability, product line recognition and acceptability of sales outlets. 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- 5 controlled purchases, we have a better chance of getting business since quality and long-term cost are generally taken into account. Employees As of February 11, 2020, we employed 2,290 direct employees and contract personnel. Our employees are not 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 energy recovery wheel option, blower, gas-fired heat exchanger, evaporative- cooled condenser de-superheater and low leakage damper which have terms of 20 years with expiration dates ranging from 2020 to 2033. Environmental Matters Laws concerning the environment that affect or could affect our operations include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, 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. We also strive to protect the environment, work with suppliers who do the same and encompass sustainable business practices in our manufacturing operations. AAON is dedicated to leading the company into a bright sustainable future. We have joined Sustainable Tulsa, a local non-profit organization, in creating an AAON Scor3card to implement more sustainable processes throughout all company locations (Tulsa, Longview and Parkville). We recognize that sustainability is both profitable and economical. Since 2014, we have changed out our lighting to a much more energy efficient system. 80% of our lighting was Metal Halide and 20% was fluorescent. Currently, we are about 80-90% LED, and 10-20% fluorescent. We will be 100% LED by the end of 2020. The combination of the LED upgrade with our advanced lighting control system, AAON saves about $400,000/year on electricity. We have also received a similar amount from power company rebates. These power savings equate to about 5,000,000 kWh saved per year. The LED lighting has also created a better work environment for our employees and requires less maintenance. In addition to this, we have installed more energy efficient HVAC systems, air compressors and building insulation. At the Tulsa facility, paper and metal recycling programs are in place. Numerous waste streams have been identified by our internal GoGreen employee committee that could be recycled, reused or reduced. We are also implementing a program to sort all our metals that has been identified to produce more profits. At the Longview facility, metal, cardboard and wood recycling. The metal recycling also includes sorting all metals for maximum rebates. At the Parkville facility, recycling efforts are currently being researched and pursued. We recover oil in our sheet metal manufacturing area, which is then recycled. Rags are washed and returned to us be used again, preventing them from entering a landfill. AAON is also committed to designing and manufacturing innovative HVAC products of the highest quality, efficiency, and performance. Our water-source heat pump products recover otherwise wasted energy and employ it to cool, heat and provide dehumidification to a building, making it one of the most efficient and environmentally friendly systems. AAON packaged rooftop units with two stage compressors are optimized with high efficiency evaporator and condenser coils, and variable speed fans leading to an AHRI Certified performance up to 19.15 SEER and 20.2 IEER. AAON H3/V3 Series energy recovery wheel air handling units provide energy efficient 100% outside air ventilation by recovering energy that would otherwise be exhausted from a building. LZ Series packaged outdoor mechanical rooms are engineered to maximize the efficiency of the complete hydronic system - compressors, condenser, and evaporator. Factory installed 98% efficiency boilers with pumping packages are available for applications that require hot water. Energy saving waterside economizers are available for chilled water systems that require cooling at low ambient conditions. 6 Available Information 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 Securities Exchange Act of 1934, as amended, will be available free of charge through our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information on our website is not a part of, or incorporated by reference into, this annual report on Form 10-K. Copies of any materials we file with the SEC can also be obtained free of charge through the SEC’s website at http:// www.sec.gov, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or by calling the SEC at 1-800-732-0330. Item 1A. Risk Factors. The following risks and uncertainties may affect our performance and results of operations. The discussion below contains “forward-looking statements” as outlined in the Forward-Looking Statements section above. Our ability to mitigate risks may cause our future results to materially differ from what we currently anticipate. Additionally, the ability of our competitors to react to material risks will affect our future results. Our business can be hurt by economic conditions. Our business is affected by a number of economic factors, including the level of economic activity in the markets in which we operate. Sales in the commercial and industrial 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 which could impact our sales volume and profitability. Our results of operations and financial condition could be negatively impacted by the loss of a major customer. From time to time in the past we derived a significant portion of our sales from a limited number of customers, and In 2019, 2018, and 2017, one customer, Texas AirSystems, such concentration may continue in the future. accounted for more than 10% of our sales. The loss of, or significant reduction in sales to, a major customer could have a material adverse effect on our results of operations, financial condition and cash flow. Further, the addition of new major customers in the future could increase our customer concentration risks as described above. 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 cancellable and non-cancellable contracts on terms from six to 18 months 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-cancellable fixed price contracts. Historically, we have attempted to limit the impact of price fluctuations on commodities by entering into non- cancellable fixed price contracts with our major suppliers for periods of six to 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 using hedge accounting since they meet the normal purchases and sales exemption. 7 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 achieve new technological advances in the HVAC industry. Our inability to continue to successfully develop and market new products or our inability to implement 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, 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 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. resources than we have, allowing them to invest The loss of Norman H. Asbjornson could impair the growth of our business. Norman H. Asbjornson, our founder, has served as our Chief Executive Officer from inception to date and President from inception to November 2016. He has provided the leadership and vision for our strategy and 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 well into the future, the death, disability or retirement of Mr. Asbjornson could impair the growth of our business. We do not have an employment agreement with Mr. Asbjornson. The Board of Directors attempts to manage this risk by continually engaging in succession planning concerning Mr. Asbjornson (as well as other key management personnel), as demonstrated by the Board’s appointment of Gary D. Fields as President of AAON in November 2016. Our business is subject to the risks of interruptions by cybersecurity attacks. We depend upon information technology infrastructure, including network, hardware and software systems to conduct our business. Despite our implementation of network and other cybersecurity 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. Our security measures may not be adequate to protect against highly targeted sophisticated cyber-attacks, or other improper disclosures of confidential and/or sensitive information. Additionally, we may have access to confidential or other sensitive information of our customers, which, despite our efforts to protect, may be vulnerable to security breaches, theft, or other improper disclosure. Any cyber-related attack or other improper disclosure of confidential information could have a material adverse effect on our business, as well as other negative consequences, including significant damage to our reputation, litigation, regulatory actions and increased cost. 8 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 laws 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. We are subject to potentially extreme governmental regulations and policies. We always face the possibility of new governmental regulations, policies and trade agreements which could have a substantial or even extreme negative effect on our operations and profitability. Negotiations during the summer of 2013 mitigated some of the negative effects of the Department of Energy Final Rule, Regulatory Identification No. 1904-AC23, published on March 7, 2011. However, certain additional testing and listing requirements are still in place and scheduled to be phased in. Several other intrusive component part governmental regulations are in process. If these proposals become final rules, the effect would be the regulation of compressors and fans in products for which the Department of Energy does not have current authority. This could affect equipment we currently manufacture and could have an impact on our product design, operations and profitability. The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as “conflict minerals”, originating from the Democratic Republic of Congo and adjoining countries. As a result, in August 2012, the SEC adopted annual disclosure and reporting requirements for those companies who use conflict minerals in their products. Accordingly, we began our reasonable country of origin inquiries in fiscal year 2013, with initial disclosure requirements beginning in May 2014. There are costs associated with complying with these disclosure requirements, including for due diligence to determine the sources of conflict minerals used in our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. The implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we may implement. Our operations could be negatively impacted by new legislation as well as changes in regulations and trade agreements, including tariffs and taxes. Unfavorable conditions resulting from such changes could have a material adverse effect on our business, financial condition and results of operations. In the fourth quarter of 2019, we identified a material weakness in our internal control over financial reporting. Our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our outstanding stock to decline. During the year ended December 31, 2019, we identified a material weakness in our internal control over financial reporting related to the appropriate policies and procedures in place to properly recognize share-based compensation for retirement eligible participants in our Long-Term Incentive Plans. For further information regarding this matter, please refer to Item 9A. Controls and Procedures.As a result of such weakness, management, with the oversight of the Audit Committee, determined to correct our consolidated financial statements at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017, selected financial data at and for the years ended December 31, 2016 and 2015, each of the unaudited quarterly periods for September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 31, 2018, June 30, 2018 and March 31, 2018 and the impacted amounts within the accompanying footnotes thereto. 9 Management’s ongoing assessment of internal control over financial reporting may in the future identify additional weaknesses and conditions that need to be addressed. Any failure to improve our internal control over financial reporting to address identified weaknesses in the future, if they were to occur, could prevent us from maintaining accurate accounting records and discovering material accounting errors, which in turn, could adversely affect our business and the value of our outstanding stock. We reached a determination to correct certain of our previously issued consolidated financial statements, which may affect investor confidence and raise reputational issues. As discussed in the Explanatory Note preceding Item 1, Business, in Note 2, Error Correction, and in Note 25, Quarterly Results (Unaudited), in this Annual Report on Form 10-K, we reached a determination to correct our consolidated financial statements at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017, selected financial data at and for the year ended December 31, 2016 and 2015, and each of the unaudited quarterly periods September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 31, 2018, June 30, 2018 and March 31, 2018. As a result, we have become subject to a number of additional risks and uncertainties, which may affect investor confidence in the accuracy of our financial disclosures and may raise reputational issues for our business. We are subject to adverse 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. We are subject to international regulations that could adversely affect our business and results of operations. Due to our use of representatives in foreign markets, we are subject to many laws governing international relations, including those that prohibit improper payments to government officials and commercial customers, and restrict where we can do business, what information or products we can supply to certain countries and what information we can provide to a non-U.S. government, including but not limited to the Foreign Corrupt Practices Act, U.K. Bribery Act and the U.S. Export Administration Act. Violations of these laws, which are complex, may result in criminal penalties or sanctions that could have a material adverse effect on our business, financial condition and results of operations. Operations may be affected by natural disasters, especially since most of our operations are performed at a single location. Natural disasters such as tornadoes and ice storms, as well as accidents, acts of terror, infection and other factors beyond our control could adversely affect our operations. Especially, as our facilities are in areas where tornadoes are likely to occur, and the majority of our operations are at our Tulsa facilities, the effects of natural disasters and other events could damage our facilities and equipment and force a temporary halt to manufacturing and other operations, and such events could consequently cause severe damage to our business. We maintain insurance against these sorts of events; however, this is not guaranteed to cover all the losses and damages incurred. If we are unable to hire, develop or retain employees, it could have an adverse effect on our business. We compete to hire new employees and then seek to train them to develop their skills. We may not be able to successfully recruit, develop and retain the personnel we need. Unplanned turnover or failure to hire and retain a diverse, skilled workforce, could increase our operating costs and adversely affect our results of operations. Variability in self-insurance liability estimates could impact our results of operations. We self-insure for employee health insurance and workers’ compensation insurance coverage up to a predetermined level, beyond which we maintain stop-loss insurance from a third-party insurer for claims over $225,000 and $750,000 for employee health insurance claims and workers’ compensation insurance claims, respectively. Our aggregate exposure varies from year to year based upon the number of participants in our insurance plans. We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical 10 claims experience. Our accruals for insurance reserves reflect these estimates and other management judgments, which are subject to a high degree of variability. If the number or severity of claims for which we self-insure increases, it could cause a material and adverse change to our reserves for self-insurance liabilities, as well as to our earnings. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. As of December 31, 2019, we own all of our Tulsa, Oklahoma, and Longview, Texas, facilities, consisting of approximately 1.76 million square feet of space for office, manufacturing, warehouse, assembly operations and parts sales. 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, and a 940,000 sq. ft. manufacturing/warehouse building and a 70,000 sq. ft. office building located on an approximately 85-acre tract of land across the street from the original facility (2440 South Yukon Avenue) (the “Tulsa facilities”). Our manufacturing area is in heavy industrial type buildings, with some coverage by overhead 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 six cart-type conveyor lines and one roller-type conveyor line with variable line speed adjustment, which are motor driven. Subassembly areas and production line manning are based upon line speed. In 2019, we opened our new engineering research and development laboratory at the Tulsa facilities, since named the Norman Asbjornson Innovation Center. The three-story 134,000 square foot stand alone facility is both an acoustical and a performance measuring laboratory. The new facility consists of ten test chambers allowing AAON to meet and maintain industry certifications. This facility is located West of the 940,000 sq. ft. manufacturing/ warehouse building at 2425 South Yukon Avenue. The Norman Asbjornson Innovation Center is substantially complete and expected to reach full operational status in mid-2020. In addition to a retail part store location at our Tulsa facilities, we also own a 13,500 sq. ft. stand alone building (7,500 sq. ft. warehouse and 6,000 sq. ft. office) which is utilized as an additional retail parts store to provide our customers more accessibly to our products. The building is on approximately one acre and is located at 9528 E 51st St in Tulsa, Oklahoma. Our operations in Longview, Texas, are conducted in a plant/office building at 203-207 Gum Springs Road, containing 263,000 sq. ft. on 39 acres. The manufacturing area (approximately 256,000 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. In August 2019, construction began on a 220,000 sq. ft. building expansion adjacent to our current Longview, Texas facilities. The new building is expected to be completed in late 2020 and will be used for both coil warehouse storage and equipment manufacturing operations. Our operations in Parkville, Missouri, are conducted in a leased plant/office at 8500 NW River Park Drive, containing 48,000 sq. ft. We believe that the leased facility is well maintained and in good condition and suitable for the conduct of our business. Item 3. Legal Proceedings. 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 has been threatened against us, or, to the best of our knowledge, is contemplated. 11 I��� �������� ������ ����������� Not applicable. PART II I������� �����������R���������������������������R�������������������������������I������P������������ ������������������ �ur common stoc� is quoted on the N�SD�� �lobal Select Mar�et under the symbol ����N�. The table below summari�es the intraday high and low reported sale prices for our common stoc� for the past two fiscal years. �s of the close of business on �ebruary 24, 2020, there were 973 holders of record of our common stoc�. �uarter �nded March 31, 2018 �une 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 �une 30, 2019 September 30, 2019 December 31, 2019 �igh �40.25 �39.03 �43.30 �44.90 �46.69 �52.50 �53.27 �51.07 �ow �32.50 �29.05 �32.84 �31.55 �33.52 �44.36 �43.34 �42.57 ��������� � �t the discretion of the �oard of Directors, we pay semi-annual cash di�idends. �oard appro�al is required to determine the date of declaration and amount for each semi-annual di�idend payment. �ur recent di�idends are as follows: Declaration Date May 16, 2017 Record Date �une 9, 2017 �ayment Date �uly 7, 2017 No�ember 7, 2017 No�ember 30, 2017 December 21, 2017 May 18, 2018 �une 8, 2018 �uly 6, 2018 No�ember 8, 2018 No�ember 29, 2018 December 20, 2018 May 20, 2019 �une 3, 2019 �uly 1, 2019 No�ember 6, 2019 No�ember 27, 2019 December 18, 2019 Di�idend per Share �0.13 �0.13 �0.16 �0.16 �0.16 �0.16 The following is a summary of our share-based compensation plans as of December 31, 2019: ����T� ��M��NS�T��N ���N �N��RM�T��N (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) �eighted-a�erage exercise price of outstanding options, warrants and rights (c) Number of securities remaining a�ailable for future issuance under equity compensation plans (excluding securities reflected in column (a)) 270,427 268,522 � � 17.11 34.11 � 2,565,799 �lan category The 2007 �ong-Term �ncenti�e �lan The 2016 �ong-Term �ncenti�e �lan 12 Repurchases during the fourth �uarter of 2019, which include repurchases from our open mar�et, 401(�) and employee repurchase programs, were as follows: ISSUER �URC�ASES O� E�UIT� SECURITIES (a) Total Number of Shares (or Units �urchased) (b) A�erage �rice �aid (�er Share or Unit) (c) Total Number of Shares (or Units) �urchased as part of �ublicly Announced �lans or �rograms (d) Maximum Number (or Approximate Dollar �alue) of Shares (or Units) that may yet be �urchased under the �lans or �rograms �eriod October 2019 No�ember 2019 December 2019 30,725 � 20,201 37,617 Total 88,543 � (cid:21)(cid:57)(cid:55)(cid:58)(cid:43)(cid:60)(cid:43)(cid:62)(cid:51)(cid:64)(cid:47) (cid:36)(cid:62)(cid:57)(cid:45)(cid:53) (cid:33)(cid:47)(cid:60)(cid:48)(cid:57)(cid:60)(cid:55)(cid:43)(cid:56)(cid:45)(cid:47) (cid:25)(cid:60)(cid:43)(cid:58)(cid:50) 47.32 49.93 49.76 48.95 30,725 20,201 37,617 88,543 � � � � The following performance graph compares our cumulati�e total shareholder return, the NASDA� Composite and a peer group of U.S. industrial manufacturing companies in the air conditioning, �entilation, and heating exchange e�uipment mar�ets from December 31, 2014 through December 31, 2019. The graph assumes that �100 was in�ested at the close of trading December 31, 2014, with rein�estment of di�idends. Our peer group includes �ennox International, Inc., Ingersoll Rand �imited, �ohnson Controls Inc., and United Technologies Corporation. This table is not intended to forecast future performance of our Common Stoc�. (cid:21)(cid:57)(cid:55)(cid:58)(cid:43)(cid:60)(cid:51)(cid:61)(cid:57)(cid:56)(cid:1)(cid:57)(cid:48)(cid:1)(cid:24)(cid:51)(cid:64)(cid:47)(cid:1)(cid:42)(cid:47)(cid:43)(cid:60)(cid:1)(cid:21)(cid:63)(cid:55)(cid:63)(cid:54)(cid:43)(cid:62)(cid:51)(cid:64)(cid:47)(cid:1)(cid:37)(cid:57)(cid:62)(cid:43)(cid:54)(cid:1)(cid:35)(cid:47)(cid:62)(cid:63)(cid:60)(cid:56) (cid:19)(cid:61)(cid:61)(cid:63)(cid:55)(cid:47)(cid:61)(cid:1)(cid:27)(cid:56)(cid:51)(cid:62)(cid:51)(cid:43)(cid:54)(cid:1)(cid:27)(cid:56)(cid:64)(cid:47)(cid:61)(cid:62)(cid:55)(cid:47)(cid:56)(cid:62)(cid:1)(cid:57)(cid:48)(cid:1)(cid:2)(cid:9)(cid:8)(cid:8) (cid:22)(cid:47)(cid:45)(cid:47)(cid:55)(cid:44)(cid:47)(cid:60)(cid:1)(cid:11)(cid:9)(cid:5)(cid:1)(cid:10)(cid:8)(cid:9)(cid:17) 250 225 200 175 150 125 100 2014 2015 2016 2017 2018 2019 AAON Inc. NASDA� �eer �roup This stoc� 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. 13 (cid:27)(cid:62)(cid:47)(cid:55) (cid:14)(cid:7)(cid:1) (cid:36)(cid:47)(cid:54)(cid:47)(cid:45)(cid:62)(cid:47)(cid:46) (cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:43)(cid:54) (cid:22)(cid:43)(cid:62)(cid:43). The following selected financial data should be read in conjunction with our (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:24)(cid:46)(cid:28)(cid:46)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:45) (cid:28)(cid:41)(cid:31) (cid:24)(cid:47)(cid:43)(cid:43)(cid:39)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:28)(cid:44)(cid:51) (cid:13)(cid:28)(cid:46)(cid:28) thereto included under Item 8 of this report and (cid:18)(cid:28)(cid:41)(cid:28)(cid:34)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:54)(cid:45) (cid:13)(cid:36)(cid:45)(cid:30)(cid:47)(cid:45)(cid:45)(cid:36)(cid:42)(cid:41) (cid:28)(cid:41)(cid:31) (cid:10)(cid:41)(cid:28)(cid:39)(cid:51)(cid:45)(cid:36)(cid:45) (cid:42)(cid:33) (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:12)(cid:42)(cid:41)(cid:31)(cid:36)(cid:46)(cid:36)(cid:42)(cid:41) (cid:28)(cid:41)(cid:31) (cid:23)(cid:32)(cid:45)(cid:47)(cid:39)(cid:46)(cid:45) (cid:42)(cid:33) (cid:20)(cid:43)(cid:32)(cid:44)(cid:28)(cid:46)(cid:36)(cid:42)(cid:41)(cid:45) contained in Item 7. Results of Operations: 2019 2018 2017 2016 2015 �ears Ended December 31, Net sales Net income (a) Earnings per share: �asic (a) Diluted (a) � � � � �ash di�idends declared per common share: � (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) 469,333 53,711 1.03 1.02 0.32 � � � � � 433,947 42,329 0.81 0.80 0.32 � � � � � 405,232 53,830 1.02 1.01 0.26 � � � � � 383,977 53,020 1.00 0.99 0.24 � � � � � 358,632 44,932 0.83 0.82 0.22 December 31, Financial �osition at End of Fiscal �ear: 2019 2018 2017 2016 2015 �or�ing capital (a) Total assets (a) Re�ol�ing credit facility New mar�et ta� credit obligation Total stoc�holders� e�uity (a) (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 131,521 � 93,167 � 104,002 � 102,287 � 81,106 371,424 307,994 296,590 256,335 232,683 � 6,320 � � � � � � � � 290,140 249,443 238,925 208,410 181,124 (a) �e ha�e corrected pre�iously reported consolidated financial data for fiscal years ended 2018, 2017, 2016 and 2015, as well as the related balance sheets. See Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), in Item 8, (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:24)(cid:46)(cid:28)(cid:46)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:45) (cid:28)(cid:41)(cid:31) (cid:24)(cid:47)(cid:43)(cid:43)(cid:39)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:28)(cid:44)(cid:51) (cid:13)(cid:28)(cid:46)(cid:28), for additional information. (cid:27)(cid:62)(cid:47)(cid:55)(cid:1)(cid:15)(cid:7)(cid:1)(cid:1)(cid:30)(cid:43)(cid:56)(cid:43)(cid:49)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:69)(cid:61)(cid:1)(cid:22)(cid:51)(cid:61)(cid:45)(cid:63)(cid:61)(cid:61)(cid:51)(cid:57)(cid:56)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:19)(cid:56)(cid:43)(cid:54)(cid:67)(cid:61)(cid:51)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:43)(cid:54)(cid:1)(cid:21)(cid:57)(cid:56)(cid:46)(cid:51)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:35)(cid:47)(cid:61)(cid:63)(cid:54)(cid:62)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:32)(cid:58)(cid:47)(cid:60)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:61)(cid:7) (cid:32)(cid:64)(cid:47)(cid:60)(cid:64)(cid:51)(cid:47)(cid:65) The following discussion should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:24)(cid:46)(cid:28)(cid:46)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:45) (cid:28)(cid:41)(cid:31) (cid:24)(cid:47)(cid:43)(cid:43)(cid:39)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:28)(cid:44)(cid:51) (cid:13)(cid:28)(cid:46)(cid:28). (cid:21)(cid:57)(cid:60)(cid:60)(cid:47)(cid:45)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:57)(cid:48)(cid:1)(cid:43)(cid:56)(cid:1)(cid:23)(cid:60)(cid:60)(cid:57)(cid:60) �e ha�e corrected our pre�iously issued consolidated financial statements contained in this Annual Report on Form 10-K. Refer to the (cid:14)(cid:50)(cid:43)(cid:39)(cid:28)(cid:41)(cid:28)(cid:46)(cid:42)(cid:44)(cid:51) (cid:19)(cid:42)(cid:46)(cid:32) preceding Item 1, (cid:11)(cid:47)(cid:45)(cid:36)(cid:41)(cid:32)(cid:45)(cid:45), for bac�ground on the correction, the fiscal periods impacted, control considerations, and other information. In addition, we ha�e changed certain pre�iously reported financial information at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017 in this Item 7, (cid:18)(cid:28)(cid:41)(cid:28)(cid:34)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:54)(cid:45) (cid:13)(cid:36)(cid:45)(cid:30)(cid:47)(cid:45)(cid:45)(cid:36)(cid:42)(cid:41) (cid:28)(cid:41)(cid:31) (cid:10)(cid:41)(cid:28)(cid:39)(cid:51)(cid:45)(cid:36)(cid:45) (cid:42)(cid:33) (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:12)(cid:42)(cid:41)(cid:31)(cid:36)(cid:46)(cid:36)(cid:42)(cid:41) (cid:28)(cid:41)(cid:31) (cid:23)(cid:32)(cid:45)(cid:47)(cid:39)(cid:46)(cid:45) (cid:42)(cid:33) (cid:20)(cid:43)(cid:32)(cid:44)(cid:28)(cid:46)(cid:36)(cid:42)(cid:41)(cid:45), including but not limited to information within the (cid:23)(cid:32)(cid:45)(cid:47)(cid:39)(cid:46)(cid:45) (cid:42)(cid:33) (cid:20)(cid:43)(cid:32)(cid:44)(cid:28)(cid:46)(cid:36)(cid:42)(cid:41)s section. See Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), in Item 8, (cid:15)(cid:36)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39) (cid:24)(cid:46)(cid:28)(cid:46)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:45) (cid:28)(cid:41)(cid:31) (cid:24)(cid:47)(cid:43)(cid:43)(cid:39)(cid:32)(cid:40)(cid:32)(cid:41)(cid:46)(cid:28)(cid:44)(cid:51) (cid:13)(cid:28)(cid:46)(cid:28), for additional information related to the correction of an error. 14 Description of the Company We engineer, manufacture, market and sell air conditioning and heating equipment consisting of standard, semi- custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pump, coils and controls. These products are marketed and sold to retail, manufacturing, educational, lodging, supermarket, medical and other commercial industries. We market our products to all 50 states in the United States and certain provinces in Canada. 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 uncertainty 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 six to 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 the population. When new construction is down, we emphasize the replacement market. The new construction market in 2019 continued to be unpredictable and uneven. Thus, throughout the year, we emphasized promotion of the benefits of AAON equipment to property owners in the replacement market. The principal components of cost of sales 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. We also purchase from other manufacturers certain components, including compressors, motors and electrical controls. The price levels of our raw materials fluctuate given that the market continues to be volatile and unpredictable as a result of the uncertainty related to the U.S. economy and global economy. For the year ended December 31, 2019, the prices for copper, galvanized steel, stainless steel and aluminum decreased approximately 3.2%, 5.8%, 2.3% and 1.6%, respectively, from 2018. For the year ended December 31, 2018, the prices for copper, galvanized steel and stainless steel increased approximately 4.7%, 18.2%, 11.8% and 6.4%, respectively, from 2017. We attempt to limit the impact of price fluctuations on these materials by entering into cancellable and non- cancellable fixed price contracts with our major suppliers for periods of six to 18 months. We expect to receive delivery of raw materials from our fixed price contracts for use in our manufacturing operations. The following are highlights of our results of operations, cash flows, and financial condition: • We started to realize the price increases put in place in 2018 and early 2019. • We saw improvement in our gross margin despite sheet metal fabrication downtime and changes in • personnel. Overall units sold increased approximately 4.6% for the year ended 2019, as compared to the same period last year. • We continue to see growth and improvement in our water-source heat pump line that increased revenues by $10.8 million. Our warranty expense has stabilized and we expect to see continued improvement. • • We spent $37.2 million in capital expenditures in 2019, continuing our work on such projects as our new lab, water-source heat pump production line and additional Salvagnini research and development machines that will increase our sheet metal capacity. Our order intake level continued to support our high backlog. • 15 (cid:35)(cid:47)(cid:61)(cid:63)(cid:54)(cid:62)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:32)(cid:58)(cid:47)(cid:60)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:61) Units sold for years ended December 31: 2019 2018 2017 Rooftop Units Condensing Units �ir �andlers Outdoor Mechanical Rooms �ater �ource �eat �umps Total Units 14,448 1,738 2,372 33 7,716 26,307 15,273 2,007 2,500 38 5,334 25,152 16,003 2,252 2,577 64 2,485 23,381 (cid:42)(cid:47)(cid:43)(cid:60)(cid:1)(cid:23)(cid:56)(cid:46)(cid:47)(cid:46)(cid:1)(cid:22)(cid:47)(cid:45)(cid:47)(cid:55)(cid:44)(cid:47)(cid:60)(cid:1)(cid:11)(cid:9)(cid:5)(cid:1)(cid:10)(cid:8)(cid:9)(cid:17)(cid:1)(cid:64)(cid:61)(cid:7)(cid:1)(cid:42)(cid:47)(cid:43)(cid:60)(cid:1)(cid:23)(cid:56)(cid:46)(cid:47)(cid:46)(cid:1)(cid:22)(cid:47)(cid:45)(cid:47)(cid:55)(cid:44)(cid:47)(cid:60)(cid:1)(cid:11)(cid:9)(cid:5)(cid:1)(cid:10)(cid:8)(cid:9)(cid:16)(cid:1) (cid:31)(cid:47)(cid:62)(cid:1)(cid:36)(cid:43)(cid:54)(cid:47)(cid:61) �ears �nded December 31, 2019 2018 � Change � Change (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:47)(cid:41)(cid:36)(cid:46)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 469,333 � 433,947 � 35,386 26,307 25,152 1,155 8�2 � 4�6 � Net sales Total units Most of the increase in re�enues is due to our price increases in 2018 �hich �ere reali�ed during 2019� �dditionally, our parts sales and �ater�source heat pumps sales continue to gro� �ith increases of �7�0 million and �10�8 million, respecti�ely� (cid:21)(cid:57)(cid:61)(cid:62) (cid:57)(cid:48) (cid:36)(cid:43)(cid:54)(cid:47)(cid:61) �ears �nded December 31, �ercent of �ales 2019 2018 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Cost of sales �ross �rofit � � 349,908 119,425 � � 330,414 103,533 74�6 � 25�4 � 76�1 � 23�9 � The principal components of cost of sales are labor, ra� materials, component costs, factory o�erhead, freight out and engineering e�pense� The principal high �olume ra� materials used in our manufacturing processes are steel, copper and aluminum� �s sho�n belo�, our a�erage ra� material prices decreased during the year, a trend �e e�pect to continue into 2020� The Company also maintained a steady le�el of �or�force throughout 2019� The Company continues to impro�e its labor and o�erhead efficiencies and e�pects impro�ements to continue as ne� sheet metal machines �ere placed into ser�ice in the last �uarter of 2019 and early 2020� T�el�e month a�erage ra� material cost per pound as of December 31: 2019 2018 � Change Copper �al�ani�ed �teel �tainless �teel �luminum � � � � 3�63 0�49 1�30 1�79 � � � � 3�75 0�52 1�33 1�82 �3�2�� �5�8�� �2�3�� �1�6�� 16 (cid:36)(cid:47)(cid:54)(cid:54)(cid:51)(cid:56)(cid:49)(cid:5) (cid:25)(cid:47)(cid:56)(cid:47)(cid:60)(cid:43)(cid:54) (cid:43)(cid:56)(cid:46) (cid:19)(cid:46)(cid:55)(cid:51)(cid:56)(cid:51)(cid:61)(cid:62)(cid:60)(cid:43)(cid:62)(cid:51)(cid:64)(cid:47) (cid:23)(cid:66)(cid:58)(cid:47)(cid:56)(cid:61)(cid:47)(cid:61) �ears �nded Decem�er 31, �ercent of �ales 2019 2018 2019 2018 �arranty �rofit �haring �alaries � �enefits �toc� Compensation �d�ertising Depreciation Insurance �rofessional �ees Donations �ad De�t �xpense Other � (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 8,047 7,448 13,394 6,690 818 1,524 805 2,738 1,137 91 9,385 Total ���� � 52,077 � 8,807 6,165 12,638 4,733 762 950 1,235 2,441 933 174 9,356 48,194 1.7 � 1.6 � 2.9 � 1.4 � 0.2 � 0.3 � 0.2 � 0.6 � 0.2 � � � 2.0 � 2.0 � 1.4 � 2.9 � 1.1 � 0.2 � 0.2 � 0.3 � 0.6 � 0.2 � � � 2.2 � 11.1 � 11.1 � The Company experienced a decrease in �arranty claims paid of 13.4� in 2019. Our profit sharing expenses are up due to higher earnings. Depreciation has increased due to our continued expansion of our facilities. The Company ma�es company �ide e�uity grants each year that cause our increases in stoc� compensation. �e raised our minimum �age t�ice during 2019 and �or� to �eep our salaries consistent �ith mar�et rates to help retain employees. (cid:27)(cid:56)(cid:45)(cid:57)(cid:55)(cid:47) (cid:37)(cid:43)(cid:66)(cid:47)(cid:61) �ears �nded Decem�er 31, 2019 2018 �ffecti�e Tax �ate 2018 2019 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Income tax pro�ision � 13,320 � 13,171 19.9 � 23.7 � �pon completion of the Company�s 2018 tax return in 2019, the Company recorded additional �enefit due to higher than expected research and de�elopment credit of �0.6 million. �dditionally in 2019, the Company determined it could ta�e ad�antage of an additional 1� tax credit in O�lahoma for years in �hich the Company�s location �as deemed to �e �ithin an enterprise �one. The additional O� Credit for �eing in an enterprise �one, or other�ise allo�a�le under O�lahoma la�, resulted in a �enefit of �1.2 million. (cid:42)(cid:47)(cid:43)(cid:60) (cid:23)(cid:56)(cid:46)(cid:47)(cid:46) (cid:22)(cid:47)(cid:45)(cid:47)(cid:55)(cid:44)(cid:47)(cid:60) (cid:11)(cid:9)(cid:5) (cid:10)(cid:8)(cid:9)(cid:16) (cid:64)(cid:61)(cid:7) (cid:42)(cid:47)(cid:43)(cid:60) (cid:23)(cid:56)(cid:46)(cid:47)(cid:46) (cid:22)(cid:47)(cid:45)(cid:47)(cid:55)(cid:44)(cid:47)(cid:60) (cid:11)(cid:9)(cid:5) (cid:10)(cid:8)(cid:9)(cid:15) (cid:31)(cid:47)(cid:62) (cid:36)(cid:43)(cid:54)(cid:47)(cid:61) �ears �nded Decem�er 31, 2018 2017 � Change � Change (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:47)(cid:41)(cid:36)(cid:46)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 433,947 � 405,232 � 28,715 25,152 23,381 1,771 7.1 � 7.6 � Net sales Total units �ost of the increase in re�enues is due to our price increase from No�em�er 2017. �dditionally, our parts sales and �ater�source heat pumps sales continued to gro� �ith increases of �6.4 million and �4.7 million, respecti�ely. 17 (cid:21)(cid:57)(cid:61)(cid:62) (cid:57)(cid:48) (cid:36)(cid:43)(cid:54)(cid:47)(cid:61) �ears �nded Decem�er 31, �ercent of �ales 2018 2017 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Cost of sales �ross �rofit � � 330,414 103,533 � � 281,581 123,651 76�1 � 23�9 � 69�5 � 30�5 � �he principal components of cost of sales are la�or, raw materials, component costs, factor� o�erhead, freight out and engineering e�pense� �he principal high �olume raw materials used in our manufacturing processes are steel, copper and aluminum� �s shown �elow, our raw material prices increased during the �ear� �dditionall�, in �anuar� 2018, the Compan� paid all emplo�ees a one�time �onus of �1,000 per emplo�ee as a result of the �a� Cuts and �o�s �ct �the ��ct�� which lowered the federal corporate ta� rate from 35� to 21�� �his �onus increased cost of sales �� �1�9 million, e�cluding ta�es and �enefits� �he Compan� maintained a higher le�el of wor�force through the end of 2017 and �eginning of 2018 in anticipation of our growing �usiness� �he growth in order inta�e during the �eginning of 2018 did not occur as �uic�l� as anticipated� �wel�e month a�erage raw material cost per pound as of Decem�er 31: 2018 2017 � Change Copper �al�ani�ed �teel �tainless �teel �luminum � � � � 3�75 0�52 1�33 1�82 � � � � 3�58 0�44 1�19 1�71 4�7 � 18�2 � 11�8 � 6�4 � (cid:36)(cid:47)(cid:54)(cid:54)(cid:51)(cid:56)(cid:49)(cid:5) (cid:25)(cid:47)(cid:56)(cid:47)(cid:60)(cid:43)(cid:54) (cid:43)(cid:56)(cid:46) (cid:19)(cid:46)(cid:55)(cid:51)(cid:56)(cid:51)(cid:61)(cid:62)(cid:60)(cid:43)(cid:62)(cid:51)(cid:64)(cid:47) (cid:23)(cid:66)(cid:58)(cid:47)(cid:56)(cid:61)(cid:47)(cid:61) �ears �nded Decem�er 31, �ercent of �ales 2018 2017 2018 2017 �arrant� �rofit �haring �alaries � �enefits �toc� Compensation �d�ertising Depreciation Insurance �rofessional �ees Donations �ad De�t ��pense Other � (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 8,807 6,165 12,638 4,733 762 950 1,235 2,441 933 174 9,356 �otal ���� � 48,194 � 11,233 8,414 11,586 4,396 1,735 720 1,005 1,888 724 179 7,491 49,371 2�0 � 1�4 � 2�9 � 1�1 � 0�2 � 0�2 � 0�3 � 0�6 � 0�2 � � � 2�2 � 2�8 � 2�1 � 2�9 � 1�1 � 0�4 � 0�2 � 0�2 � 0�5 � 0�2 � � � 1�8 � 11�1 � 12�2 � �he Compan� e�perienced a decrease in warrant� claims paid of 9� in 2018� �dditionall�, the Compan� had a change in estimate in how it calculates its estimated failure rate that is applied to sales to estimate our potential future lia�ilit� for warrant� claims� �his change in estimate reduced our accrual, and thus our e�pense, �� �0�9 million� Our profit sharing e�penses are also down due to lower earnings� Our ad�ertising e�pense decreased due to cost sa�ings on our annual sales show� �rofessional fees ha�e increased related to additional ser�ices and wor� 18 performed for the �attmaster ac�uisition. �hese fees are not expected to be recurring. Our other expenses ha�e increased due to sales concessions granted to our customers. (cid:27)(cid:56)(cid:45)(cid:57)(cid:55)(cid:47) (cid:37)(cid:43)(cid:66)(cid:47)(cid:61) �ears �nded December 31, �ffecti�e �ax �ate 2018 2017 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) �ncome tax pro�ision � 13,171 � 20,794 23.7 � 27.9 � �he �ax Cuts and �obs Act was enacted on December 22, 2017. �he o�erall effecti�e tax rate decreased from 27.9� to 23.7� due to the reduced corporate rate of 3�� to 21� in 2018. At the end of 2017, we recorded a �3.7 million reduction in expense due to the remeasuring of our deferred taxes due to the Act. (cid:29)(cid:51)(cid:59)(cid:63)(cid:51)(cid:46)(cid:51)(cid:62)(cid:67) (cid:43)(cid:56)(cid:46) (cid:21)(cid:43)(cid:58)(cid:51)(cid:62)(cid:43)(cid:54) (cid:35)(cid:47)(cid:61)(cid:57)(cid:63)(cid:60)(cid:45)(cid:47)(cid:61) Our wor�ing capital and capital expenditure re�uirements are generally met through net cash pro�ided by operations and the occasional use of the re�ol�ing ban� line of credit based on our current li�uidity at the time. (cid:27)(cid:41)(cid:44)(cid:37)(cid:36)(cid:40)(cid:34) (cid:10)(cid:28)(cid:42)(cid:36)(cid:46)(cid:28)(cid:38) (cid:4) Our cash, cash e�ui�alents and restricted cash increased �42.4 million from December 31, 2018 to December 31, 2019. As of December 31, 2019, we had �44.4 million in cash, cash e�ui�alents and restricted cash. (cid:22)(cid:32)(cid:48)(cid:41)(cid:38)(cid:48)(cid:36)(cid:40)(cid:34) (cid:17)(cid:36)(cid:40)(cid:32) (cid:41)(cid:33) (cid:10)(cid:44)(cid:32)(cid:31)(cid:36)(cid:46) (cid:5) On �uly 2�, 2018 we renewed our �30.0 million line of credit ���O� �e�ol�er�� with �O��, �A dba �an� of O�lahoma ���an� of O�lahoma��. �nder the line of credit, there was one standby letter of credit of �1.7 million as of December 31, 2019. At December 31, 2019 we ha�e �28.3 million of borrowings a�ailable under the re�ol�ing credit facility. �o fees are associated with the unused portion of the committed amount. As of December 31, 2019 and 2018, there were no outstanding balances under the re�ol�ing credit facility. �nterest on borrowings is payable monthly at ���O� plus 2.0�. �he weighted a�erage interest rate was .042� .042 and for the years ended December 31, 2019 and 2018, respecti�ely. At December 31, 2019, we were in compliance with all of the co�enants under the �O� �e�ol�er. �e are obligated to comply with certain financial co�enants under the �O� �e�ol�er. �hese co�enants re�uire that we meet certain parameters related to our tangible net worth and total liabilities to tangible net worth ratio. At December 31, 2019, our tangible net worth was �290.1 million, which meets the re�uirement of being at or abo�e �17�.0 million. Our total liabilities to tangible net worth ratio was 0.3 to 1.0 which meets the re�uirement of not being abo�e 2 to 1. On October 24, 2019 we amended the �O� �e�ol�er to allow for the occurrence of transactions associated with the �ew �ar�ets �ax Credit transaction ��ote 19�. �his amendment also remo�ed section 8.1.4 which re�uired our Chief �xecuti�e Officer, �orman Asb�ornson, to maintain ownership of 2�� of the Company. As �r. �orman Asb�ornson does not currently, and has not for se�eral years maintained this le�el of ownership, a limited wai�er of default was also added to the amendment. (cid:19)(cid:32)(cid:49) (cid:18)(cid:28)(cid:44)(cid:37)(cid:32)(cid:46) (cid:24)(cid:28)(cid:50) (cid:10)(cid:44)(cid:32)(cid:31)(cid:36)(cid:46) (cid:20)(cid:29)(cid:38)(cid:36)(cid:34)(cid:28)(cid:46)(cid:36)(cid:41)(cid:40) (cid:5) On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third�party financial institution �the ��n�estor�� and a certified Community De�elopment �ntity under a �ualified �ew �ar�ets �ax Credit �����C�� program pursuant to �ection 4�D of the �nternal �e�enue Code of 198�, as amended, related to an in�estment in plant and e�uipment to facilitate the expansion of our �ong�iew, �exas manufacturing operations �the ��ro�ect��. �n connection with the ���C transaction, the Company recei�ed a �23.0 million ���C allocation for the �ro�ect and secured low interest financing and the potential for future debt forgi�eness related to the expansion of its �ong�iew, �exas facilities. 19 �pon closing of the �MT� transaction, the �ompany pro�ided an aggregate of approximately �15.9 million to the In�estor, in the form of a loan recei�able, �ith a term of t�enty-fi�e years, bearing an interest rate of 1.0�. This �15.9 million in proceeds plus capital contributed from the In�estor �as used to ma�e an aggregate �22.5 million loan to a subsidiary of the �ompany. This financing arrangement is secured by e�uipment at the �ompany�s �ong�ie�, Texas facilities, and a guarantee from the �ompany, including an unconditional guarantee of �MT�s. ����� �e������se (cid:5) The �oard has authori�ed three stoc� repurchase programs for the �ompany. The �ompany may purchase shares on the open mar�et from time to time, up to a total of 5.7 million shares. The �oard must authori�e the timing and amount of these purchases and all repurchases are in accordance �ith the rules and regulations of the ��� allo�ing the �ompany to repurchase shares from the open mar�et. �ur open mar�et repurchase programs are as follo�s� (cid:19)(cid:49)(cid:60)(cid:47)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:1)(cid:23)(cid:66)(cid:47)(cid:45)(cid:63)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:22)(cid:43)(cid:62)(cid:47) (cid:19)(cid:63)(cid:62)(cid:50)(cid:57)(cid:60)(cid:51)(cid:68)(cid:47)(cid:46)(cid:1)(cid:35)(cid:47)(cid:58)(cid:63)(cid:60)(cid:45)(cid:50)(cid:43)(cid:61)(cid:47)(cid:1)(cid:2) (cid:23)(cid:66)(cid:58)(cid:51)(cid:60)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:22)(cid:43)(cid:62)(cid:47) �une 2, 2016 May 16, 2018 March 5, 2019 �25 million �15 million �20 million April 15, 2017 March 1, 2019 March 4, 2020 The �ompany also has a stoc� repurchase arrangement by �hich employee-participants in our 401��� sa�ings and in�estment plan are entitled to ha�e shares in AA��, Inc. stoc� in their accounts sold to the �ompany. The maximum number of shares to be repurchased is contingent upon the number of shares sold by employee- participants. �astly, the �ompany repurchases shares of AA��, Inc. stoc� from certain of its directors and employees for payment of statutory tax �ithholdings on stoc� transactions. All other repurchases from directors or employees are contingent upon �oard appro�al. All repurchases are done at current mar�et prices. �ur repurchase acti�ity is as follo�s� 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) �rogram �pen mar�et 401��� Directors and employees Total �hares 5,799 � 419,963 Total � � per share 34.46 46.16 19,386 200 � Total � �hares 252,272 � 8,374 � 497,753 18,472 � per share 33.19 37.11 �hares Total � 8,676 � 284 � 467,580 16,336 � per share 32.69 34.94 28,668 454,430 � 20,793 � 1,207 42.11 45.76 33,751 783,776 � 27,943 � 1,097 32.49 35.65 45,878 522,134 � 18,234 � 1,614 35.19 34.92 Inception to Date (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � per share Total � �rogram �pen mar�et 401��� �hares 4,101,566 � 7,467,739 Directors and employees Total 1,981,929 13,551,234 � 69,806 � 119,927 19,582 209,315 � 17.02 16.06 9.88 15.45 Dividends - At the discretion of the �oard of Directors, �e pay semi-annual cash di�idends. �oard appro�al is re�uired to determine the date of declaration and amount for each semi-annual di�idend payment. 20 Our recent di�idends are as follows: Declaration Date May 16, 2017 No�ember 7, 2017 May 18, 2018 No�ember 8, 2018 May 20, 2019 No�ember 6, 2019 Record Date �une 9, 2017 No�ember 30, 2017 �une 8, 2018 No�ember 29, 2018 �une 3, 2019 No�ember 27, 2019 �ayment Date �uly 7, 2017 December 21, 2017 �uly 6, 2018 December 20, 2018 �uly 1, 2019 December 18, 2019 Di�idend per �hare �0.13 �0.13 �0.16 �0.16 �0.16 �0.16 �ased on historical performance and current expectations, we belie�e our cash and cash equi�alents balance, the projected cash flows generated from our operations, our existing committed re�ol�ing credit facility (or comparable financing) and our expected ability to access capital mar�ets will satisfy our wor�ing capital needs, capital expenditures and other liquidity requirements associated with our operations in 2020 and the foreseeable future. (cid:36)(cid:62)(cid:43)(cid:62)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62) (cid:57)(cid:48) (cid:21)(cid:43)(cid:61)(cid:50) (cid:24)(cid:54)(cid:57)(cid:65)(cid:61) �he table below reflects a summary of our net cash flows pro�ided by operating acti�ities, net cash flows used in in�esting acti�ities, and net cash flows used in financing acti�ities for the years indicated. 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) (cid:32)(cid:58)(cid:47)(cid:60)(cid:43)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Net Income Income statement adjustments, net Changes in assets and liabilities: Accounts recei�able Income tax recei�able In�entories �repaid expenses and other Accounts payable Deferred re�enue Accrued liabilities Net cash pro�ided by operating acti�ities (cid:27)(cid:56)(cid:64)(cid:47)(cid:61)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Capital expenditures Cash paid for business combination �urchases of in�estments Maturities of in�estments and proceeds from called in�estments Other Net cash used in in�esting acti�ities (cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) (�ayments) borrowings under re�ol�ing credit facility, net �roceeds from financing obligation, net of issuance costs �ayment related to financing costs �toc� options exercised Repurchase of stoc� Employee taxes paid by withholding shares Cash di�idends paid to stoc�holders Net cash used in financing acti�ities 21 � 53,711 � 42,329 � 42,440 28,513 (13,412) 5,129 2,557 (329) 280 425 7,124 97,925 (37,166) � (6,000) 6,000 120 (37,046) � 6,614 (301) 12,625 (19,586) (1,207) (16,645) (2,832) (4,448) (5,598) (528) (1,176) 412 (1,816) 54,856 (37,268) (6,377) (16,201) 25,145 66 (34,635) � � � 4,987 (26,846) (1,097) (16,728) � (18,500) � (39,684) � 53,830 21,022 (7,516) 4,591 (23,698) 98 3,043 258 6,366 57,994 (41,713) � (18,521) 29,112 70 (31,052) � � � 2,259 (16,620) (1,614) (13,663) (29,638) Cash Flows from Operating Activities Cash flows from operating activities increased in 2019 mainly as a result of our continuing operations results which included the full year of price increases enacted during 2018, combined with an overall decrease in the average cost of inventory raw materials in 2019. In 2018, the Company's cash flows were tighter due to our capital expenditures and business combination that was completed during the year. For 2019, the Company saw an increase in customer prepayments and lower warranty claims that decreased our liability payments. Our increased federal and state tax credits created additional cash inflows. Cash Flows from Investing Activities Cash flows from investing activities increased marginally in 2019 as compared to 2018. Cash flows from investing activities are primarily affected by the timing of our capital expenditures and purchase/maturity of investments with available cash. Additionally, we paid approximately $6.4 million in 2018 related to our February 2018 business combination. The capital expenditures for 2019 relate to the completion of our R&D lab and water-source heat pump lines, along with expansion of our Longview facility. Our capital expenditure program for 2020 is estimated to be approximately $73.2 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 Cash flows from financing activities is primarily affected by the timing of stock options exercised by our employees. Cash flows from stock options exercised increased to the increase in our publically traded stock price. Additionally, we received approximately $6.6 million in net proceeds in 2019 related to the New Markets Tax Credit transaction (Note 19). Off-Balance Sheet Arrangements 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 had no material contractual purchase agreements as of December 31, 2019, except for one contractual purchase obligation for approximately $2.5 million that expires in December 2020. 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, results of operations or cash flows and we accrue and/or disclose loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate resolution of any pending litigation or claims will be material or have a material adverse effect on the Company’s business, financial position, results of operations or cash flows. 22 Critical Accounting Estimates 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. 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. 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 ten 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. Our warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for five years from the date of manufacture. Warranty expense is estimated based on the warranty period, historical warranty trends and associated 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. Stock Compensation – We measure and recognize compensation 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 is recognized on a straight-line basis over the service period of the related share-based compensation award. Forfeitures are accounted for as they occur. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The use of the Black-Scholes- Merton option valuation 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. 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. New Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto. In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The ASU includes simplification of accounting for income taxes for franchise taxes, step up in tax basis for goodwill as part of a business combination and interim reporting of enacted changes in tax laws. The ASU is effective for the Company beginning after December 15, 2020. We do not expect ASU 2019-12 will have a material effect on our consolidated financial statements and notes thereto. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements: Changes to the Disclosure Requirement for Fair Value Measurements. The ASU includes additional disclosure requirements for unrealized gains and losses for Level 3 fair value measurement and significant observable inputs used to develop Level 3 fair value 23 measurements. The ASU is effective for the Company beginning after December 15, 2019. We do not expect ASU 2018-13 will have a material effect on our consolidated financial statements and notes thereto. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 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 six to 18 months to manage this exposure. 24 Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Page 26 28 29 30 31 32 25 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders AAON, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 26, 2020 expressed an adverse opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Inventory – manual inventory adjustments As described in Note 3 to the Company’s financial statements, the Company reports inventory using the first in, first out (“FIFO”) method, which involves manual adjustments recorded to the general ledger such as inventory variance, inventory allowance and labor and overhead adjustments. These manual adjustments have been identified as a critical audit matter. The principal consideration for our determination such manual inventory adjustments as a critical audit matter is these manual adjustments require substantial use of management estimates and requires the Company to have effective inventory valuation processes. Significant management judgments and estimates utilized to determine manual inventory adjustments are subject to estimation uncertainty and require significant auditor subjectivity in evaluating the reasonableness of those judgments and estimates. 26 Our audit procedures related to the manual inventory adjustments included the following, among others. • We tested the design and operating effectiveness of controls over inventory valuation, including the standard cost updates in the accounting system and the completeness and accuracy of the inputs to the inventory variance calculation and any related adjustments. • We verified the Company’s standard costing of inventory approximated FIFO by obtaining FIFO buildups and inspected underlying documents for a sample of raw materials. • We assessed the reasonableness of management’s inventory reserve by recalculating the reserve using management’s inputs, and evaluated those inputs for reasonableness. • We tested labor and overhead rate changes by recalculating the rates used and tested any adjustments recorded to the general ledger. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Tulsa, Oklahoma February 26, 2020 27 (cid:19)(cid:61)(cid:61)(cid:47)(cid:62)(cid:61) Current assets: Cash and cash equi�alents Restricted cash Accounts recei�able, net Income tax recei�able �ote recei�able In�entories, net �repaid expenses and other Total current assets �roperty, plant and equipment: �and �uildings Machinery and equipment Furniture and fixtures Total property, plant and equipment �ess: Accumulated depreciation �roperty, plant and equipment, net Intangible assets, net �ood�ill Right of use assets �ote recei�able, long-term Total assets (cid:29)(cid:51)(cid:43)(cid:44)(cid:51)(cid:54)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:62)(cid:57)(cid:45)(cid:53)(cid:50)(cid:57)(cid:54)(cid:46)(cid:47)(cid:60)(cid:61)(cid:69)(cid:1)(cid:23)(cid:59)(cid:63)(cid:51)(cid:62)(cid:67) Current liabilities: Re�ol�ing credit facility Accounts payable Accrued liabilities Total current liabilities Deferred tax liabilities Other long-term liabilities �e� mar�et tax credit obligation �a� Commitments and contingencies �toc�holders� equity: (cid:19)(cid:19)(cid:32)(cid:31)(cid:5)(cid:1)(cid:27)(cid:56)(cid:45)(cid:7)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:63)(cid:44)(cid:61)(cid:51)(cid:46)(cid:51)(cid:43)(cid:60)(cid:51)(cid:47)(cid:61) (cid:21)(cid:57)(cid:56)(cid:61)(cid:57)(cid:54)(cid:51)(cid:46)(cid:43)(cid:62)(cid:47)(cid:46)(cid:1)(cid:20)(cid:43)(cid:54)(cid:43)(cid:56)(cid:45)(cid:47)(cid:1)(cid:36)(cid:50)(cid:47)(cid:47)(cid:62)(cid:61) December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1) (cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 26,797 � 17,576 67,399 772 29 73,601 1,375 187,549 3,274 101,113 236,087 16,862 357,336 179,242 178,094 272 3,229 1,683 597 1,994 � 54,078 5,901 27 77,612 1,046 140,658 3,114 97,393 212,779 16,597 329,883 166,880 163,003 506 3,229 � 598 371,424 � 307,994 � � � � 11,759 44,269 56,028 15,297 3,639 6,320 � 10,616 36,875 47,491 9,259 1,801 � � 208 � 249,235 249,443 307,994 �referred stoc�, �.001 par �alue, 5,000,000 shares authori�ed, no shares issued Common stoc�, �.004 par �alue, 100,000,000 shares authori�ed, 52,078,515 and 51,991,242 issued and outstanding at December 31, 2019 and 2018, respecti�ely Additional paid-in capital Retained earnings Total stoc�holders� equity 208 3,631 286,301 290,140 � Total liabilities and stoc�holders� equity �a� �eld by �ariable interest entities ��ote 18� � 371,424 � The accompanying notes are an integral part of these consolidated financial statements. 28 (cid:19)(cid:19)(cid:32)(cid:31)(cid:5)(cid:1)(cid:27)(cid:56)(cid:45)(cid:7)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:63)(cid:44)(cid:61)(cid:51)(cid:46)(cid:51)(cid:43)(cid:60)(cid:51)(cid:47)(cid:61) (cid:21)(cid:57)(cid:56)(cid:61)(cid:57)(cid:54)(cid:51)(cid:46)(cid:43)(cid:62)(cid:47)(cid:46)(cid:1)(cid:36)(cid:62)(cid:43)(cid:62)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:27)(cid:56)(cid:45)(cid:57)(cid:55)(cid:47) Net sales Cost of sales �ross profit �elling, general and administrati�e expenses �oss (gain) on disposal of assets Income from operations Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic Diluted Cash di�idends declared per common share: �eighted a�erage shares outstanding: �asic Diluted �ears Ended December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 469,333 � 433,947 � 349,908 119,425 52,077 337 67,011 66 (46) 67,031 13,320 53,711 1.03 1.02 0.32 � � � � 330,414 103,533 48,194 (12) 55,351 196 (47) 55,500 13,171 42,329 0.81 0.80 0.32 � � � � � � � � 405,232 281,581 123,651 49,371 45 74,235 298 91 74,624 20,794 53,830 1.02 1.01 0.26 52,079,865 52,635,415 52,284,616 52,667,939 52,572,496 53,078,734 The accompanying notes are an integral part of these consolidated financial statements. 29 (cid:19)(cid:19)(cid:32)(cid:31)(cid:5)(cid:1)(cid:27)(cid:56)(cid:45)(cid:7)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:63)(cid:44)(cid:61)(cid:51)(cid:46)(cid:51)(cid:43)(cid:60)(cid:51)(cid:47)(cid:61) (cid:21)(cid:57)(cid:56)(cid:61)(cid:57)(cid:54)(cid:51)(cid:46)(cid:43)(cid:62)(cid:47)(cid:46)(cid:1)(cid:36)(cid:62)(cid:43)(cid:62)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:36)(cid:62)(cid:57)(cid:45)(cid:53)(cid:50)(cid:57)(cid:54)(cid:46)(cid:47)(cid:60)(cid:61)(cid:69)(cid:1)(cid:23)(cid:59)(cid:63)(cid:51)(cid:62)(cid:67) �alance at �ecember 31, 2016 52,651 � 211 � � � 208,199 � 208,410 Common Stoc� Shares Amount �aid-in Capital �etained Earnings Total (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired �i�idends �alance at �ecember 31, 2017 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired �i�idends �alance at �ecember 31, 2018 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired �i�idends � 293 � (522) � 52,422 � 353 � (784) � 51,991 � 542 � (454) � � 1 � (2) � 210 � 1 � (3) � 208 � 2 � (2) � � 2,258 6,313 (8,571) � � � 4,986 7,862 (12,848) � � � 12,623 11,799 (20,791) 53,830 � � (9,661) (13,653) 238,715 42,329 � � (15,092) (16,717) 249,235 53,711 � � � � (16,645) 53,830 2,259 6,313 (18,234) (13,653) 238,925 42,329 4,987 7,862 (27,943) (16,717) 249,443 53,711 12,625 11,799 (20,793) (16,645) �alance at �ecember 31, 2019 52,079 � 208 � 3,631 � 286,301 � 290,140 The accompanying notes are an integral part of these consolidated financial statements. 30 (cid:19)(cid:19)(cid:32)(cid:31)(cid:5)(cid:1)(cid:27)(cid:56)(cid:45)(cid:7)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:63)(cid:44)(cid:61)(cid:51)(cid:46)(cid:51)(cid:43)(cid:60)(cid:51)(cid:47)(cid:61) (cid:21)(cid:57)(cid:56)(cid:61)(cid:57)(cid:54)(cid:51)(cid:46)(cid:43)(cid:62)(cid:47)(cid:46)(cid:1)(cid:36)(cid:62)(cid:43)(cid:62)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:57)(cid:48)(cid:1)(cid:21)(cid:43)(cid:61)(cid:50)(cid:1)(cid:24)(cid:54)(cid:57)(cid:65)(cid:61) 2019 (cid:32)(cid:58)(cid:47)(cid:60)(cid:43)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Net income Ad�ustments to reconcile net income to net cash pro�ided by operating acti�ities: � Depreciation and amorti�ation Amorti�ation of bond premiums Amorti�ation of debt issuance costs �ro�ision for losses on accounts recei�able, net of ad�ustments �ro�ision for excess and obsolete in�entories Share-based compensation �oss (gain) on disposition of assets Foreign currency transaction (gain) loss �nterest income on note recei�able Deferred income taxes Changes in assets and liabilities: Accounts recei�able �ncome tax recei�able �n�entories �repaid expenses and other Accounts payable Deferred re�enue Accrued liabilities and donations Net cash pro�ided by operating acti�ities (cid:27)(cid:56)(cid:64)(cid:47)(cid:61)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Capital expenditures Cash paid in business combination �roceeds from sale of property, plant and e�uipment �n�estment in certificates of deposits Maturities of certificates of deposits �urchases of in�estments held to maturity Maturities of in�estments held to maturity �roceeds from called in�estments �rincipal payments from note recei�able Net cash used in in�esting acti�ities (cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) �roceeds from financing obligation, net of issuance costs �ayment related to financing costs Stoc� options exercised �epurchase of stoc� Employee taxes paid by withholding shares Cash di�idends paid to stoc�holders Net cash used in financing acti�ities (cid:31)(cid:47)(cid:62)(cid:1)(cid:51)(cid:56)(cid:45)(cid:60)(cid:47)(cid:43)(cid:61)(cid:47)(cid:1)(cid:3)(cid:46)(cid:47)(cid:45)(cid:60)(cid:47)(cid:43)(cid:61)(cid:47)(cid:4)(cid:1)(cid:51)(cid:56)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:5)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:60)(cid:47)(cid:61)(cid:62)(cid:60)(cid:51)(cid:45)(cid:62)(cid:47)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50) (cid:21)(cid:43)(cid:61)(cid:50)(cid:5)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:60)(cid:47)(cid:61)(cid:62)(cid:60)(cid:51)(cid:45)(cid:62)(cid:47)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:5)(cid:1)(cid:44)(cid:47)(cid:49)(cid:51)(cid:56)(cid:56)(cid:51)(cid:56)(cid:49)(cid:1)(cid:57)(cid:48)(cid:1)(cid:67)(cid:47)(cid:43)(cid:60) (cid:21)(cid:43)(cid:61)(cid:50)(cid:5)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:60)(cid:47)(cid:61)(cid:62)(cid:60)(cid:51)(cid:45)(cid:62)(cid:47)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:5)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:67)(cid:47)(cid:43)(cid:60) � �ears Ended December 31, 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 42,329 � � 53,711 22,766 � 7 91 1,454 11,799 337 (27) (25) 6,038 (13,412) 5,129 2,557 (329) 280 425 7,124 97,925 (37,166) � 69 (6,000) 6,000 � � � 51 (37,046) 6,614 (301) 12,625 (19,586) (1,207) (16,645) (18,500) 42,379 1,994 44,373 44,373 � 17,655 13 � 174 152 7,862 (12) 55 (27) 2,641 (2,832) (4,448) (5,598) (528) (1,176) 412 (1,816) 54,856 (37,268) (6,377) 13 (7,200) 10,080 (9,001) 14,570 495 53 (34,635) � � 4,987 (26,846) (1,097) (16,728) (39,684) (19,463) 21,457 1,994 1,994 � 2017 53,830 15,007 47 � 179 264 6,313 45 (59) (25) (749) (7,516) 4,591 (23,698) 98 3,043 258 6,366 57,994 (41,713) � 10 (5,280) 7,912 (13,241) 19,700 1,500 60 (31,052) � � 2,259 (16,620) (1,614) (13,663) (29,638) (2,696) 24,153 21,457 21,457 The accompanying notes are an integral part of these consolidated financial statements. 31 AAON, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2019 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 (collectively, the “Company”). The Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. We are 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 outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils and controls. 2. Error Correction We have corrected herein our consolidated financial statements at December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections. The unaudited interim financial information for the quarterly periods ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, has also been corrected and is included in Note 25, Quarterly Results (Unaudited). The 2019 quarterly corrections will be reflected in the filing of our future 2020 unaudited interim consolidated financial statement filings in Quarterly Reports on Form 10-Q. Error Correction Background The Company noted errors in previously issued financial statements relating to share-based compensation expense for stock options and restricted stock awards held by retirement eligible employees and directors. As defined by our Long-Term Incentive Plans (Note 16), stock options and restricted stock awards are fully vested when an active employee or director meets certain retirement eligibility requirements. We corrected the financial statements to recognize all share-based compensation, related to retirement eligible employees or directors, by the earlier of the grant date (if retirement eligible on grant date) or ratably from grant date to retirement eligible date. The corrected financial statements also include corrections for the tax effect of the share-based compensation corrections as well as the corrections' impact on our prior periods' employees profit sharing bonus plan (Note 17). We do not believe that the errors are quantitatively material to any period presented in our prior financial statements. However, due to the qualitative nature of the matters identified in our review, including the number of years over which the errors occurred, we determined that it would be appropriate to correct the errors in our previously issued consolidated financial statements. Accordingly, we have corrected our consolidated financial statements and the impacted amounts within the accompanying footnotes thereto. 32 (cid:11)(cid:32)(cid:45)(cid:30)(cid:44)(cid:36)(cid:42)(cid:46)(cid:36)(cid:41)(cid:40) (cid:41)(cid:33) (cid:24)(cid:28)(cid:29)(cid:38)(cid:32)(cid:45) The following tables represent our corrected consolidated statements of income, statements of stoc�holders� e�uity, and statements of cash flows for the years ended December 31, 2018 and December 31, 2017, as well as our corrected consolidated balance sheet at December 31, 2018. The �alues as pre�iously reported for years ended 2018 and 2017 were deri�ed from our Annual Report on Form 10-� for the year ended December 31, 2018 filed on February 28, 2019. Consolidated Statements of Income �ear Ended December 31, 2018 �ear Ended December 31, 2017 �re�iously Reported Corrections As Corrected �re�iously Reported Corrections As Corrected (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 433,947 � � � 433,947 � 405,232 � � � 405,232 330,414 103,533 � (a) � 330,414 103,533 281,835 123,397 (254) (a) 254 281,581 123,651 47,755 439 (b) 48,194 49,249 122 (b) 49,371 Income from operations 55,790 Net sales Cost of sales �ross profit Selling, general and administrati�e expenses (�ain) loss on disposal of assets Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic � � (12) 196 (47) 55,939 13,367 0.81 � (439) � � (439) (196) (c) (12) 45 55,351 74,103 196 (47) 55,500 13,171 298 91 74,492 19,994 � 132 � � 132 800 (c) 42,572 � (243) � Diluted Cash di�idends declared per common share: �eighted a�erage shares outstanding: 0.81 0.32 � �asic Diluted 52,284,616 52,667,939 � � � � (0.01) � � � � � � � 42,329 � 54,498 � (668) 0.81 0.80 0.32 � � � 1.04 1.03 0.26 � � � 52,284,616 52,572,496 52,667,939 53,078,734 (0.02) (0.02) � � � 45 74,235 298 91 74,624 20,794 53,830 1.02 1.01 0.26 52,572,496 53,078,734 � � � � (a) The share-based compensation correction to cost of sales for the year ended December 31, 2017 was approximately �0.3 million. There was no correction re�uired for the year ended December 31, 2018 for cost of sales. (b) The share-based compensation correction to selling, general and administrati�e expenses for the years ended December 31, 2018 and 2017 was approximately �0.5 million and �0.1 million, respecti�ely. Included in the correction to selling, general and administrati�e expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately �0.1 million and �0.1 million for the years ended December 31, 2018 and 2017, respecti�ely. (c) The correction to income taxes is the tax affect of the share-based compensation correction discussed abo�e. 33 (cid:19)(cid:61)(cid:61)(cid:47)(cid:62)(cid:61) Current assets: Cash and cash equi�alents Accounts recei�able, net Income tax recei�able �ote recei�able In�entories, net �repaid expenses and other Total current assets �roperty, plant and equipment: �and �uildings Machinery and equipment Furniture and fixtures Total property, plant and equipment �ess: Accumulated depreciation �roperty, plant and equipment, net Intangible assets, net �oodwill �ote recei�able, long-term Total assets (cid:29)(cid:51)(cid:43)(cid:44)(cid:51)(cid:54)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:36)(cid:62)(cid:57)(cid:45)(cid:53)(cid:50)(cid:57)(cid:54)(cid:46)(cid:47)(cid:60)(cid:61)(cid:69)(cid:1)(cid:23)(cid:59)(cid:63)(cid:51)(cid:62)(cid:67) Current liabilities: Re�ol�ing credit facility Accounts payable Accrued liabilities Total current liabilities Deferred tax liabilities Other long-term liabilities Commitments and contingencies �toc�holders� equity: �referred stoc�, �.001 par �alue, 5,000,000 shares authori�ed, no shares issued Consolidated �alance �heets December 31, 2018 �re�iously Reported Corrections As Corrected (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 1,994 � 54,078 6,104 27 77,612 1,046 140,861 3,114 97,393 212,779 16,597 329,883 166,880 163,003 506 3,229 598 � � � (203) (a) � � � (203) � � � � � � � � � � 308,197 � (203) � � � � 10,616 37,455 48,071 10,826 1,801 � � � � � (580) (b) (580) (1,567) (a) � � � � 1,944 (c) 1,944 1,994 54,078 5,901 27 77,612 1,046 140,658 3,114 97,393 212,779 16,597 329,883 166,880 163,003 506 3,229 598 307,994 � 10,616 36,875 47,491 9,259 1,801 � 208 � 249,235 249,443 307,994 Common stoc�, �.004 par �alue, 100,000,000 shares authori�ed, 51,991,242 and 52,422,801 issued and outstanding at December 31, 2018 and 2017, respecti�ely 208 Additional paid-in capital Retained earnings Total stoc�holders� equity � 247,291 247,499 Total liabilities and stoc�holders� equity � 308,197 � (203) � (a) The correction to income tax recei�able and deferred tax liability are the tax effect of the share-based compensation corrections. (b) This is the cumulati�e reduction of our employee profit sharing bonus plan (�ote 17) liability as a result of the share-based compensation correction. The prior period costs will be reco�ered through our estimated 2019 fourth quarter payment which will be paid in early 2020. (c) �ee descriptions of the stoc�holders� equity in the consolidated statements of stoc�holders� equity for the year ended December 31, 2018 in sections below. 34 Consolidated Statements of Stoc�holders� E�uity Common Stoc� Shares Amount �aid-in Capital �etained Earnings Total (cid:19)(cid:61)(cid:1)(cid:33)(cid:60)(cid:47)(cid:64)(cid:51)(cid:57)(cid:63)(cid:61)(cid:54)(cid:67)(cid:1)(cid:35)(cid:47)(cid:58)(cid:57)(cid:60)(cid:62)(cid:47)(cid:46) (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) �alance at December 31, 2017 52,422 � 210 � � � 237,016 � 237,226 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends �alance at December 31, 2018 (cid:21)(cid:57)(cid:60)(cid:60)(cid:47)(cid:45)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:27)(cid:55)(cid:58)(cid:43)(cid:45)(cid:62)(cid:61) �alance at December 31, 2017 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends �alance at December 31, 2018 (cid:19)(cid:61)(cid:1)(cid:21)(cid:57)(cid:60)(cid:60)(cid:47)(cid:45)(cid:62)(cid:47)(cid:46) �alance at December 31, 2017 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends � 353 � (784) � 51,991 � � � � � � � 52,422 � 353 � (784) � � 1 � (3) � 208 � � � � � � � 210 � 1 � (3) � � 4,986 7,374 (12,360) � � � � � 488 (488) � � � � 4,986 7,862 (12,848) � 42,572 � � (15,580) (16,717) 247,291 1,699 (243) � � 488 � 1,944 238,715 42,329 � � (15,092) (16,717) 42,572 4,987 7,374 (27,943) (16,717) 247,499 1,699 (243) � 488 � � 1,944 � 238,925 42,329 4,987 7,862 (27,943) (16,717) �alance at December 31, 2018 51,991 � 208 � � � 249,235 � 249,443 See descriptions of net income in the consolidated statement of income for the year ended December 31, 2018 in the section abo�e� 35 Consolidated Statements of Stoc�holders� E�uity Common Stoc� Shares Amount �aid-in Capital �etained Earnings Total (cid:19)(cid:61)(cid:1)(cid:33)(cid:60)(cid:47)(cid:64)(cid:51)(cid:57)(cid:63)(cid:61)(cid:54)(cid:67)(cid:1)(cid:35)(cid:47)(cid:58)(cid:57)(cid:60)(cid:62)(cid:47)(cid:46) (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) �alance at December 31, 2016 52,651 � 211 � � � 205,687 � 205,898 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends �alance at December 31, 2017 (cid:21)(cid:57)(cid:60)(cid:60)(cid:47)(cid:45)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:27)(cid:55)(cid:58)(cid:43)(cid:45)(cid:62)(cid:61) �alance at December 31, 2016 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends �alance at December 31, 2017 (cid:19)(cid:61)(cid:1)(cid:21)(cid:57)(cid:60)(cid:60)(cid:47)(cid:45)(cid:62)(cid:47)(cid:46) �alance at December 31, 2016 Net income Stoc� options e�ercised and restricted stoc� a�ards granted Share-based compensation Stoc� repurchased and retired Di�idends � 293 � (522) � 52,422 � � � � � � � 52,651 � 293 � (522) � � 1 � (2) � 210 � � � � � � � 211 � 1 � (2) � � 2,258 6,458 (8,716) � � � � � (145) 145 � � � � 2,258 6,313 (8,571) � 54,498 � � (9,516) (13,653) 237,016 2,512 (668) � � (145) � 1,699 208,199 53,830 � � (9,661) (13,653) 54,498 2,259 6,458 (18,234) (13,653) 237,226 2,512 (668) � (145) � � 1,699 208,410 53,830 2,259 6,313 (18,234) (13,653) �alance at December 31, 2017 52,422 � 210 � � � 238,715 � 238,925 See descriptions of net income in the consolidated statement of income for the year ended December 31, 2017 in the section abo�e� 36 Consolidated Statements of Cash Flows �ear Ended December 31, 2018 �ear Ended December 31, 2017 �re�iously Reported Corrections As Corrected �re�iously Reported Corrections As Corrected � 42,572 � (243) � 42,329 � 54,498 � (668) � 53,830 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) (cid:32)(cid:58)(cid:47)(cid:60)(cid:43)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Net income Ad�ustments to reconcile net income to net cash pro�ided by operating acti�ities: Depreciation and amorti�ation 17,655 Amorti�ation of bond premiums �ro�ision for losses on accounts recei�able, net of ad�ustments �ro�ision for excess and obsolete in�entories Share-based compensation (�ain) loss on disposition of assets Foreign currency transaction loss (gain) �nterest income on note recei�able Deferred income taxes Changes in assets and liabilities: Accounts recei�able �ncome tax recei�able �n�entories �repaid expenses and other Accounts payable Deferred re�enue Accrued liabilities and donations Net cash pro�ided by operating acti�ities (cid:27)(cid:56)(cid:64)(cid:47)(cid:61)(cid:62)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Capital expenditures Cash paid in business combination �roceeds from sale of property, plant and equipment �n�estment in certificates of deposits Maturities of certificates of deposits �urchases of in�estments held to maturity Maturities of in�estments held to maturity �roceeds from called in�estments �rincipal payments from note recei�able 13 174 152 7,374 (12) 55 (27) (2,832) (4,461) (5,598) (528) (1,176) 412 (1,766) 54,856 (37,268) (6,377) 13 (7,200) 10,080 (9,001) 14,570 495 53 � � � � 488 � � � 17,655 15,007 13 174 152 7,862 (12) 55 (27) 47 179 264 6,458 45 (59) (25) � 13 � � � � (50) � (2,832) (4,448) (5,598) (528) (1,176) 412 (1,816) 54,856 (7,516) 4,596 (23,698) 98 3,043 258 6,353 57,994 � � � � (145) � � � 805 15,007 47 179 264 6,313 45 (59) (25) (749) � (5) (7,516) 4,591 � (23,698) � � � 13 � 98 3,043 258 6,366 57,994 � (37,268) (41,713) � (41,713) � � � � � � � � (6,377) 13 (7,200) 10,080 � 10 (5,280) 7,912 � � � � � 10 (5,280) 7,912 (9,001) (13,241) � (13,241) 14,570 495 53 19,700 1,500 60 � � � 19,700 1,500 60 2,849 (208) 2,641 (1,554) Net cash used in in�esting acti�ities (34,635) � (34,635) (31,052) � (31,052) (cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:56)(cid:49)(cid:1)(cid:19)(cid:45)(cid:62)(cid:51)(cid:64)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) Stoc� options exercised Repurchase of stoc� Employee taxes paid by withholding shares Cash di�idends paid to stoc�holders Net cash used in financing acti�ities (cid:31)(cid:47)(cid:62)(cid:1)(cid:46)(cid:47)(cid:45)(cid:60)(cid:47)(cid:43)(cid:61)(cid:47)(cid:1)(cid:51)(cid:56)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:1) (cid:21)(cid:43)(cid:61)(cid:50)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:5)(cid:1)(cid:44)(cid:47)(cid:49)(cid:51)(cid:56)(cid:56)(cid:51)(cid:56)(cid:49)(cid:1)(cid:57)(cid:48)(cid:1) (cid:67)(cid:47)(cid:43)(cid:60) (cid:21)(cid:43)(cid:61)(cid:50)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:45)(cid:43)(cid:61)(cid:50)(cid:1)(cid:47)(cid:59)(cid:63)(cid:51)(cid:64)(cid:43)(cid:54)(cid:47)(cid:56)(cid:62)(cid:61)(cid:5)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:67)(cid:47)(cid:43)(cid:60) 4,987 (26,846) (1,097) (16,728) (39,684) (19,463) 21,457 � 4,987 2,259 � (26,846) (16,620) � (1,097) (1,614) � (16,728) (13,663) � (39,684) (29,638) � (19,463) � 21,457 (2,696) 24,153 � 2,259 � (16,620) � (1,614) � (13,663) � (29,638) � � (2,696) 24,153 � 1,994 � � � 1,994 � 21,457 � � � 21,457 37 No corrections impacted the classifications between net operating, net investing, or net financing cash flow activities. 3. 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 (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. Our financial statements consolidate all of our affiliated entities in which we have a controlling financial interest. Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 18) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in those VIEs. 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. Restricted Cash Restricted cash held at December 31, 2019 consist of bank deposits and highly liquid, interest-bearing money market funds held for the purpose of the Company's qualified New Markets Tax Credit program (Note 19) to benefit an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations. The Company’s restricted cash is held in a 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. Certificates of Deposit We held no certificates of deposit at December 31, 2019 and 2018. Investments Held to Maturity At December 31, 2019 and 2018, we held no investments. 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. Accounts and Note Receivable Accounts and note 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 ninety days past negotiated credit terms. Past due accounts are generally written-off against the allowance for doubtful accounts only after all collection attempts have been exhausted. 38 Concentration of Credit Risk Our customers are concentrated primarily in the domestic commercial and industrial new construction and replacement markets. To date, our sales have been primarily to the domestic market, with foreign sales accounting for approximately 3%, 3% and 4% of revenues for the years ended December 31, 2019, 2018, and 2017, respectively. One customer, Texas AirSystems, accounted for approximately 10% of our sales during 2019, 2018 and 2017. No other customer accounted for more than 5% of our sales during 2019, 2018 and 2017. One customer, Texas AirSystems, accounted for approximately 10% of our accounts receivable balance at December 31, 2019. No other customer accounted for 5% or more of our accounts receivable balance at December 31, 2019 and 2018. Inventories Inventories are valued at the lower of cost or net realizable value 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 Property, plant and equipment, including significant 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 Business Combinations 3 - 40 years 3 - 15 years 3 - 7 years We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. Fair Value Financial Instruments and Measurements The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities 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. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is based upon assumptions that market participants would use when pricing an asset or liability. We use the following fair value hierarchy, which prioritizes valuation technique inputs used to measure fair value into three broad levels: • • • Level 1: Quoted prices in active markets for identical assets and liabilities that we have the ability to access at the measurement date. Level 2: Inputs (other than quoted prices included within Level 1) that are either directly or indirectly observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means. Level 3: Unobservable inputs for the asset or liability including situations where there is little, if any, market activity for the asset or liability. Items categorized in Level 3 include the estimated business combination fair values of property, plant and equipment, intangible assets and goodwill. 39 The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to a fair value measurement requires judgment, considering factors specific to the asset or liability. Intangible Assets Our intangible assets include various trademarks, service marks and technical knowledge acquired in our February 2018 business combination (Note 5). We amortize our intangible assets on a straight-line basis over the estimated useful lives of the assets. We evaluate the carrying value of our amortizable intangible assets for potential impairment when events and circumstances warrant such a review. Goodwill Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill at December 31, 2019 is deductible for income tax purposes. Goodwill is not amortized, but instead is evaluated for impairment at least annually. We perform our annual assessment of impairment during the fourth quarter of our fiscal year, and more frequently if circumstances warrant. To perform this assessment, we first consider qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit does not exceed its carrying amount, we calculate the fair value for the reporting unit and compare the amount to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered to be impaired and the goodwill balance is reduced by the difference between the fair value and carrying amount of the reporting unit. We performed a qualitative assessment as of December 31, 2019 to determine whether it was more likely than not that the fair value of the reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative assessments, we determined that the fair value of the reporting unit was more likely than not greater than the carrying value of the reporting unit. Estimates and assumptions used to perform the impairment evaluation are inherently uncertain and can significantly affect the outcome of the analysis. The estimates and assumptions we use in the annual goodwill impairment assessment included market participant considerations and future forecasted operating results. Changes in operating results and other assumptions could materially affect these estimates. 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, 2019, 2018, and 2017 research and development costs amounted to approximately $14.8 million, $13.5 million, and $13.0 million, respectively. 40 Advertising Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2019, 2018, and 2017 was approximately $0.8 million, $0.8 million, and $1.7 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, 2019, 2018, and 2017 shipping and handling fees amounted to approximately $14.4 million, $12.6 million, and $11.4 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. Excess tax benefits and deficiencies are reported as an income tax benefit or expense on the statement of income and are treated as discrete items to the income tax provision in the reporting period in which they occur. We establish accruals for unrecognized 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. Share-Based 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-Merton option valuation model. The use of the Black-Scholes-Merton option valuation model requires the input of subjective assumptions. 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. Compensation expense is recognized on a straight-line basis over the service period of the related share-based compensation award. Stock options and restricted stock awards, granted to employees, vest at a rate of 20% per year. Restricted stock awards granted to directors historically vest one-third each year or, if granted on or after May 2019, vest over the shorter of directors' remaining elected term or one-third each year. If the employee or director is retirement eligible (as defined by the Long Term Incentive Plans) or becomes retirement eligible during service period of the related share-based compensation award, the service period is the lesser of 1) the grant date, if retirement eligible on grant date, or 2) the period between grant date and retirement eligible date. Forfeitures are accounted for as they occur. Derivative Instruments In the course of normal operations, the Company occasionally enters into contracts such as forward priced physical contracts for the purchase of raw materials that qualify for and are designated as normal purchase or normal sale contracts. Such contracts are exempted from the fair value accounting requirements and are accounted for at the time product is purchased or sold under the related contract. The Company does not engage in speculative transactions, nor does the Company hold or issue financial instruments for trading purposes. Revenue Recognition On January 1, 2018, we adopted the new accounting standard FASB ASC Topic 606, Revenue from Contracts with Customers, and all the related amendments to all contracts using the retrospective method. The impact at adoption was not material to the consolidated financial statements. The new accounting policy provides results substantially consistent with prior revenue recognition policies. The Company recognizes revenue when it satisfies the performance obligation in its contracts. Most of the Company’s products are highly customized, cannot be resold to other customers and the cost of rework to be resold is not economical. The Company has a formal cancellation policy and generally does not accept returns on these units. As a result, many of the Company’s products do not have an alternative use and therefore, for these products 41 we recognize revenue over the time it takes to produce the unit. For all other products that are part sales or standardized units, we satisfy the performance obligation when the control is passed to the customer, generally at time of shipment. Final sales prices are fixed based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates. Sales of our products are moderately seasonal with the peak period being July - November of each year. In addition, the Company presents revenues net of sales tax and net of certain payments to our independent manufacturer representatives (“Representatives”). Representatives are 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 that 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’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts associated with the order are collected from the customer. The amount of payments to our representatives was $46.1 million, $47.8 million, and $51.8 million for each of the years ended December 31, 2019, 2018, and 2017, respectively. The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately priced warranty period. 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. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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, 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 as needed, but at a minimum on a quarterly basis. The most significant estimates include, but are not limited to, the allowance for doubtful accounts, inventory reserves, 42 warranty accrual, wor�ers compensation accrual, medical insurance accrual, share�based compensation and income taxes. Actual results could differ materially from those estimates. �� ������� ����������� Disaggregated net sales by major source: Rooftop Units Condensing Units Air �andlers Outdoor Mechanical Rooms �ater Source �eat �umps �art Sales Other Net Sales �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 349,427 � 333,105 � 317,414 18,475 24,265 1,643 25,447 33,331 16,745 18,282 21,905 2,408 14,660 26,732 16,855 19,276 22,570 3,238 9,911 20,756 12,067 � 469,333 � 433,947 � 405,232 Other sales include freight, extended warranties and miscellaneous re�enue. Disaggregated units sold by major source: Rooftop Units Condensing Units Air �andlers Outdoor Mechanical Rooms �ater Source �eat �umps Total Units �� �������� ����������� �ears �nded December 31, 2019 2018 2017 14,448 1,738 2,372 33 7,716 26,307 15,273 2,007 2,500 38 5,334 25,152 16,003 2,252 2,577 64 2,485 23,381 On �ebruary 28, 2018, we closed on the purchase of substantially all of the assets of �attMaster Controls, �nc. ���attMaster��. The assets ac�uired consisted primarily of intellectual property, recei�ables, in�entory and fixed assets. The Company also hired substantially all of the �attMaster employees. These assets and wor�force will allow us to accelerate the de�elopment of our own electronic controllers for air distribution systems. �e funded the business combination with a�ailable cash of �6.0 million. �n May 2018, we paid the final wor�ing capital settlement of �0.4 million with a�ailable cash. �e ha�e included the results of �attMaster�s operations in our consolidated financial statements beginning March 1, 2018. 43 The following table presents the allocation of the consideration paid to the assets acquired and liabilities assumed, based on their fair �alues, in the acquisition of �att�aster described abo�e� Accounts recei�able In�entories �roperty, plant and equipment Intellectual property �oodwill Assumed current liabilities Consideration paid (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � � 1,082 1,380 340 700 3,229 (354) 6,377 �oodwill represents the excess of the consideration paid for the acquired businesses o�er the fair �alue of the indi�idual assets acquired, net of liabilities assumed. �oodwill represents a premium paid to acquire the s�illed wor�force of the business acquired and is deductible for federal income tax purposes. (cid:14)(cid:7)(cid:1)(cid:29)(cid:47)(cid:43)(cid:61)(cid:47)(cid:61) �e adopted A�� �o. 2016-02, (cid:17)(cid:32)(cid:28)(cid:45)(cid:32)(cid:45) (cid:2)(cid:25)(cid:42)(cid:43)(cid:36)(cid:30) (cid:9)(cid:8)(cid:7)(cid:3), as amended, as of �anuary 1, 2019, using the transition method, which becomes effecti�e upon the date of adoption. The transition method allows entities to initially apply the new leases standard at the adoption date (�anuary 1, 2019) and recogni�es a cumulati�e-effect ad�ustment to the opening balance of retained earnings in the period of adoption. In addition, we elected the pac�age of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. �e ha�e also elected the short-term lease measurement and recognition exemption which does not require balance sheet presentation for short-term leases. The Company historically does not enter into numerous or material lease agreements to support its manufacturing operations. Furthermore, any lease agreements entered into are usually less than a year and for leases on non material assets such as warehouse �ehicles and office equipment. Adoption of the new standard resulted in the recording of additional lease right of use assets and lease liabilities of approximately �1.8 million as of �anuary 1, 2019, which mostly relates to the multi-year facility lease assumed in the 2018 �att�aster acquisition (�ote 5). The cumulati�e-effect ad�ustment to the opening balance was immaterial to the consolidated financial statements as a whole. The standard did not materially impact our consolidated net earnings or cash flows. (cid:15)(cid:7)(cid:1)(cid:19)(cid:45)(cid:45)(cid:57)(cid:63)(cid:56)(cid:62)(cid:61)(cid:1)(cid:35)(cid:47)(cid:45)(cid:47)(cid:51)(cid:64)(cid:43)(cid:44)(cid:54)(cid:47) Accounts recei�able and the related allowance for doubtful accounts are as follows� Accounts recei�able �ess� Allowance for doubtful accounts Total, net December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � � 67,752 � 54,342 (353) (264) 67,399 � 54,078 44 Allowance for doubtful accounts: �alance, beginning of period �ro�isions for losses on accounts recei�able, net of ad�ustments Accounts recei�able written off, net of reco�eries �alance, end of period �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 264 � 91 (2) � 119 174 (29) 353 � 264 � 90 179 (150) 119 � � (cid:16)(cid:7)(cid:1)(cid:27)(cid:56)(cid:64)(cid:47)(cid:56)(cid:62)(cid:57)(cid:60)(cid:51)(cid:47)(cid:61) The components of in�entories and the related changes in the allowance for e�cess and obsolete in�entories are as follows: Raw materials �or� in process Finished goods �ess: Allowance for e�cess and obsolete in�entories Total, net Allowance for e�cess and obsolete in�entories: �alance, beginning of period �ro�isions for e�cess and obsolete in�entories In�entories written off �alance, end of period (cid:17)(cid:7)(cid:1)(cid:27)(cid:56)(cid:62)(cid:43)(cid:56)(cid:49)(cid:51)(cid:44)(cid:54)(cid:47)(cid:1)(cid:19)(cid:61)(cid:61)(cid:47)(cid:62)(cid:61) Our intangible assets consist of the following: Intellectual property �ess: Accumulated amorti�ation Total, net Amorti�ation e�pense recorded in cost of sales is as follows: December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 68,842 � 1,825 5,578 76,245 (2,644) � 73,601 � 67,995 4,060 6,767 78,822 (1,210) 77,612 �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 1,210 � 1,118 � 1,454 (20) 152 (60) 2,644 � 1,210 � � � 1,382 102 (366) 1,118 December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � � 700 (428) 272 � � 700 (194) 506 �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Amorti�ation e�pense � 234 � 194 � � 45 1�.������ ���������� 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 recei�able from the borrower secured by the property. �he C�1.1 million, 15 year note has an interest rate of 4.0� and is payable to us monthly, and has a C�0.6 million balloon payment due in �ctober 2025. Interest payments are recogni�ed in interest income. �e e�aluate the note for impairment on a �uarterly basis. �e determine the note recei�able to be impaired if we are uncertain of its collectability based on the contractual terms. At December 31, 2019 and 2018, there was no impairment. 11. ���������������������������������� Supplemental disclosures: Interest paid Income taxes paid, net Non-cash in�esting and financing acti�ities: Non-cash capital expenditures 1�.����������� �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � � � 6 � 2,172 14,979 � 16,951 863 481 832 �he Company has warranties with �arious terms from 18 months for parts to 25 years for certain heat exchangers. �he Company has an obligation to replace parts if conditions under the warranty are met. A pro�ision 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 �nown identifiable warranty issues. Changes in the warranty accrual are as follows: �arranty accrual: �alance, beginning of period �ayments made �ro�isions Change in estimate �alance, end of period �arranty expense: �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 11,421 � 10,483 � (6,816) 8,047 � (7,869) 9,669 (862) 7,936 (8,686) 11,233 � 12,652 � 11,421 � 10,483 8,047 � 8,807 � 11,233 � � � �he change in estimate relates to the Company�s failure rate calculation. During 2018, in re�iewing claims data, the Company noted specific claims that were the result of an isolated incident and not representati�e of the Company�s historical performance or representati�e of expected future claims. As such, these claims were accounted for as a specific accrual for warranty liability and excluded from our failure rate that the Company utili�es in estimating future claims. 46 (cid:9)(cid:11)(cid:7)(cid:1)(cid:19)(cid:45)(cid:45)(cid:60)(cid:63)(cid:47)(cid:46)(cid:1)(cid:29)(cid:51)(cid:43)(cid:44)(cid:51)(cid:54)(cid:51)(cid:62)(cid:51)(cid:47)(cid:61) At December 31, accrued liabilities were comprised of the following: December 31, 2019 2018 �arranty Due to representati�es �ayroll �rofit sharing �or�ers� compensation Medical self-insurance Customer prepayments Donations �mployee �acation time Other Total (cid:9)(cid:12)(cid:7)(cid:1)(cid:35)(cid:47)(cid:64)(cid:57)(cid:54)(cid:64)(cid:51)(cid:56)(cid:49)(cid:1)(cid:21)(cid:60)(cid:47)(cid:46)(cid:51)(cid:62)(cid:1)(cid:24)(cid:43)(cid:45)(cid:51)(cid:54)(cid:51)(cid:62)(cid:67) � � � (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 12,652 11,538 5,058 1,721 522 707 4,627 354 3,804 3,286 44,269 44,269 � 11,421 11,024 4,182 1,255 567 1,207 2,367 150 3,173 1,529 36,875 36,875 Our re�ol�ing credit facility (��O� �e�ol�er�), as amended, pro�ides for ma�imum borrowings of �30.0 million which is pro�ided by �O��, �A dba �an� of O�lahoma (��an� of O�lahoma�). �nder the line of credit, there was one standby letter of credit totaling �1.7 million as of December 31, 2019. �orrowings a�ailable under the re�ol�ing credit facility at December 31, 2019, were �28.3 million. �nterest on borrowings is payable monthly at ���O� plus 2.0�. �o fees are associated with the unused portion of the committed amount. As of December 31, 2019 and 2018, we had no balance outstanding under our re�ol�ing credit facility. The re�ol�ing credit facility e�pires on �uly 26, 2021. At December 31, 2019 and 2018, the weighted a�erage interest rate of our re�ol�ing credit facility was 4.3� and 4.2�, respecti�ely. At December 31, 2019, we were in compliance with our financial co�enants. These co�enants require that we meet certain parameters related to our tangible net worth and total liabilities to tangible net worth ratio. At December 31, 2019 our tangible net worth was �290.1 million, which meets the requirement of being at or abo�e �175.0 million. Our total liabilities to tangible net worth ratio was 0.3 to 1.0, which meets the requirement of not being abo�e 2 to 1. On October 24, 2019 we amended the �O� �e�ol�er to allow for the occurrence of transactions associated with the �ew Mar�ets Ta� Credit transaction (�ote 19). This amendment also remo�ed section 8.1.4 which required our Chief ��ecuti�e Officer, �orman Asb�ornson, to maintain ownership of 25� of the Company. As Mr. �orman Asb�ornson does not currently, and has not for se�eral years maintained this le�el of ownership, a limited wai�er of default was also added to the amendment. (cid:9)(cid:13)(cid:7)(cid:1)(cid:1)(cid:27)(cid:56)(cid:45)(cid:57)(cid:55)(cid:47)(cid:1)(cid:37)(cid:43)(cid:66)(cid:47)(cid:61) The pro�ision (benefit) for income ta�es consists of the following: Current Deferred Total �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 10,530 � � 21,543 2,641 (749) 7,282 6,038 13,320 � 13,171 � 20,794 � � 47 The pro�ision for income taxes differs from the amount computed by applying the statutory federal income tax rate before the pro�ision for income taxes. The reconciliation of the federal statutory income tax rate to the effecti�e income tax rate is as follows: Federal statutory rate State income taxes, net of federal benefit Remeasurement of deferred taxes Domestic manufacturing deduction Excess tax benefits Return to pro�ision O�lahoma amended tax returns Other �ears Ended December �1, 2019 2018 2017 21 � � � � � � � ���� �1�� �1�� �1�� 20 � 21 � � � � � � � �2�� � � � � �1�� 24 � �� � � � ���� ���� ���� � � � � �1�� 28 � The Tax Cuts and �obs Act �the �Act�� was enacted on December 22, 2017. �ajor changes under the Act include the following: � � � � Reducing the corporate rate to 21 percent Doubling bonus depreciation to 100 percent for fi�e years Further limitations on executi�e compensation deductions Eliminating the domestic manufacturing deduction As a result of these changes, the Company adjusted its deferred tax assets and liabilities in 2017 using the newly enacted rates for the periods when they are expected to be reali�ed. The remeasurement in 2017 resulted in a benefit to income taxes of ��.7 million. The new bonus depreciation pro�isions resulted in the Company ta�ing ��.2 million of bonus depreciation in 2017. The Company also has historically ta�en the domestic manufacturing deduction. The Company will no longer recei�e the benefit of this deduction which typically has lowered our effecti�e tax rate by �.0�. The Company sometimes has executi�e compensation that exceeds the �1.0 million limitation. Typically the limit is exceeded due to the �olume of stoc� acti�ity performed by the executi�es during the year. The limit could also be exceeded by the Chief Executi�e Officer recei�ing the maximum amount under our executi�e annual cash incenti�e bonus plan. Any compensation that exceeded this limitation in 2018 and in the future will be a permanent difference and cause an increase to our income tax pro�ision. �pon completion of the Company�s 2018 tax return in 2019, the Company recorded additional benefit due to higher than expected research and de�elopment credit of �0.� million. Additionally in 2019, the Company determined it could ta�e ad�antage of an additional 1� tax credit in O�lahoma for years in which the Company�s location was deemed to be within an enterprise �one. The additional O� Credit for being in an enterprise �one, or otherwise allowable under O�lahoma law, resulted in a benefit of �1.2 million. 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. 48 The significant components of the Company�s deferred tax assets and liabilities are as follows: December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) Deferred income tax assets (liabilities): �ccounts recei�able and in�entory reser�es � 835 � �arranty accrual Other accruals Share-based compensation Donations Other, net Total deferred income tax assets �roperty � e�uipment Total deferred income tax liabilities Net deferred income tax liabilities 3,523 1,919 3,906 194 2,140 12,517 (27,814) (27,814) � (15,297) � � � 401 3,105 2,445 3,264 80 851 10,146 (19,405) (19,405) (9,259) �e file income tax returns in the U.S., state and foreign income tax returns jurisdictions. �e are subject to U.S. examinations for tax years 2016 to present, and to non-U.S. income tax examinations for the tax years 2015 to present. In addition, we are subject to state and local income tax examinations for tax years 2015 to present. The Company continues to e�aluate its need to file returns in �arious state jurisdictions. �ny interest or penalties would be recogni�ed as a component of income tax expense. (cid:9)(cid:14)(cid:7)(cid:1)(cid:1)(cid:36)(cid:50)(cid:43)(cid:60)(cid:47)(cid:6)(cid:20)(cid:43)(cid:61)(cid:47)(cid:46) (cid:21)(cid:57)(cid:55)(cid:58)(cid:47)(cid:56)(cid:61)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56) On �ay 22, 2007, our stoc�holders adopted a �ong-Term Incenti�e �lan (��TI��) which pro�ided an additional 3.3 million shares that could be granted in the form of stoc� options, stoc� appreciation rights, restricted stoc� awards, performance units and performance awards, in addition to the shares from the pre�ious plan, the 1992 �lan. Since inception of the �TI�, non-�ualified stoc� options and restricted stoc� awards ha�e been granted with a fi�e year �esting schedule. Under the �TI�, the exercise price of shares granted may not be less than 100� of the fair mar�et �alue at the date of the grant. On �ay 24, 2016, our stoc�holders adopted the 2016 �ong-Term Incenti�e �lan (�2016 �lan�) which pro�ides for approximately 6.4 million shares, comprised of 3.4 million new shares pro�ided for under the 2016 �lan, approximately 0.4 million shares that were a�ailable for issuance under the pre�ious �TI� that are now authori�ed for issuance under the 2016 �lan, and an additional 2.6 million shares that were appro�ed by the stoc�holders on �ay 15, 2018. Under the 2016 �lan, shares can be granted in the form of stoc� options, stoc� appreciation rights, restricted stoc� awards, performance awards, di�idend e�ui�alent rights, and other awards. Under the 2016 �lan, the exercise price of shares granted may not be less than 100� of the fair mar�et �alue at the date of the grant. The 2016 �lan is administered by the Compensation Committee of the �oard of Directors or such other committee of the �oard of Directors as is designated by the �oard of Directors (the �Committee�). �embership on the Committee is limited to independent directors. The Committee may delegate certain duties to one or more officers of the Company as pro�ided in the 2016 �lan. The Committee determines the persons to whom awards are to be made, determines the type, si�e and terms of awards, interprets the 2016 �lan, establishes and re�ises rules and regulations relating to the 2016 �lan and ma�es any other determinations that it belie�es necessary for the administration of the 2016 �lan. 49 The follo�ing �eighted a�erage assumptions �ere used to determine the fair �alue of the stoc� options granted on the original grant date for expense recognition purposes for options granted during December 31, 2019, 2018, and 2017 using a �lac� Scholes��erton �odel: (cid:22)(cid:51)(cid:60)(cid:47)(cid:45)(cid:62)(cid:57)(cid:60)(cid:1)(cid:43)(cid:56)(cid:46)(cid:1)(cid:32)(cid:48)(cid:48)(cid:51)(cid:45)(cid:47)(cid:60)(cid:61)(cid:18) Expected di�idend yield Expected �olatility Ris��free interest rate Expected life (in years) (cid:23)(cid:55)(cid:58)(cid:54)(cid:57)(cid:67)(cid:47)(cid:47)(cid:61)(cid:18) Expected di�idend yield Expected �olatility Ris��free interest rate Expected life (in years) 2019 2018 2017 � � 0.32 � 0.26 � 29.54 � 2.40 � 5.00 29.73 � 2.20 � 5.00 0.32 � 0.26 � 29.54 � 2.38 � 5.00 29.82 � 2.51 � 5.00 0.26 30.81 � 1.90 � 5.00 0.26 30.67 � 1.89 � 5.00 The expected term of the options is based on e�aluations of historical and expected future employee exercise beha�ior. The ris��free interest rate is based on the �.S. Treasury rates at the date of grant �ith maturity dates approximately equal to the expected life at the grant date. �olatility is based on historical �olatility of our stoc� o�er time periods equal to the expected life at grant date. The follo�ing is a summary of stoc� options �ested and exercisable as of December 31, 2019: Range of Exercise �rices Number of Shares �eighted ��erage Remaining Contractual �ife �eighted ��erage Exercise �rice �7.18 � 34.10 �34.15 � 40.87 �41.37 � 50.68 Total 451,077 86,122 1,750 538,949 5.44 � 7.82 1.81 5.81 � Intrinsic �alue (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 23.47 � 36.33 41.59 25.58 � 11,702 1,126 14 12,842 The follo�ing is a summary of stoc� options �ested and exercisable as of December 31, 2018: Range of Exercise �rices Number of Shares �eighted ��erage Remaining Contractual �ife �eighted ��erage Exercise �rice Intrinsic �alue (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) �5.67 � 32.80 �32.85 � 34.10 �34.15 � 42.94 Total 456,223 42,552 17,202 515,977 5.72 � 7.47 8.30 5.95 � 20.25 � 33.95 35.19 21.88 � 6,757 47 7 6,811 50 The follo�ing is a summar� of stoc� options �ested and exercisable as of December 31, 2017: Range of Exercise �rices Number of Shares �eighted ��erage Remaining Contractual �ife �eighted ��erage Exercise �rice �4.54 � 22.76 �23.57 � 32.85 �32.90 � 37.30 Total 424,130 107,456 25,725 557,311 4.36 � 8.31 9.19 5.35 � � summar� of option acti�it� under the plans is as follo�s: (cid:32)(cid:58)(cid:62)(cid:51)(cid:57)(cid:56)(cid:61) Outstanding at December 31, 2018 �ranted Exercised Forfeited or Expired Outstanding at December 31, 2019 Exercisable at December 31, 2019 Intrinsic �alue (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 12.41 � 30.10 34.07 16.82 � 10,303 709 68 11,080 �eighted ��erage Exercise �rice 30.77 41.50 28.40 36.78 36.32 25.58 Shares 2,445,849 � 1,975,820 (444,389) (350,233) 3,627,047 538,949 � � The total pre�tax compensation cost related to un�ested stoc� options not �et recogni�ed as of December 31, 2019 is �19.4 million and is expected to be recogni�ed o�er a �eighted�a�erage period of 3.58 �ears. The total intrinsic �alue of options exercised during the �ears ended December 31, 2019, 2018, and 2017 �as �8.1 million, �5.4 million, and �4.5 million, respecti�el�. The cash recei�ed from options exercised during the �ear ended December 31, 2019, 2018, and 2017 �as �12.6 million, �5.0 million, and �2.3 million, respecti�el�. The impact of these cash receipts is included in financing acti�ities in the accompan�ing Consolidated Statements of Cash Flo�s. � summar� of the un�ested restricted stoc� a�ards is as follo�s: (cid:35)(cid:47)(cid:61)(cid:62)(cid:60)(cid:51)(cid:45)(cid:62)(cid:47)(cid:46)(cid:1)(cid:61)(cid:62)(cid:57)(cid:45)(cid:53) �n�ested at December 31, 2018 �ranted �ested Forfeited �n�ested at December 31, 2019 �eighted ��erage �rant date Fair �alue 28.54 40.98 26.38 34.71 34.42 Shares 292,450 113,018 (122,278) (15,706) 267,484 � � �t December 31, 2019, unrecogni�ed compensation cost related to un�ested restricted stoc� a�ards �as approximatel� �4.6 million �hich is expected to be recogni�ed o�er a �eighted a�erage period of 2.64 �ears. 51 A summary of share-based compensation is as follows for the years ended December 31, 2019, 2018, and 2017: (cid:25)(cid:60)(cid:43)(cid:56)(cid:62)(cid:1)(cid:46)(cid:43)(cid:62)(cid:47)(cid:1)(cid:48)(cid:43)(cid:51)(cid:60)(cid:1)(cid:64)(cid:43)(cid:54)(cid:63)(cid:47)(cid:1)(cid:57)(cid:48)(cid:1)(cid:43)(cid:65)(cid:43)(cid:60)(cid:46)(cid:61)(cid:1)(cid:46)(cid:63)(cid:60)(cid:51)(cid:56)(cid:49)(cid:1)(cid:62)(cid:50)(cid:47)(cid:1)(cid:58)(cid:47)(cid:60)(cid:51)(cid:57)(cid:46)(cid:18) Options �estricted stoc� Total (cid:36)(cid:50)(cid:43)(cid:60)(cid:47)(cid:6)(cid:44)(cid:43)(cid:61)(cid:47)(cid:46)(cid:1)(cid:45)(cid:57)(cid:55)(cid:58)(cid:47)(cid:56)(cid:61)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:47)(cid:66)(cid:58)(cid:47)(cid:56)(cid:61)(cid:47)(cid:18) Options �estricted stoc� Total (cid:27)(cid:56)(cid:45)(cid:57)(cid:55)(cid:47)(cid:1)(cid:62)(cid:43)(cid:66)(cid:1)(cid:44)(cid:47)(cid:56)(cid:47)(cid:48)(cid:51)(cid:62)(cid:1)(cid:60)(cid:47)(cid:54)(cid:43)(cid:62)(cid:47)(cid:46)(cid:1)(cid:62)(cid:57)(cid:1)(cid:61)(cid:50)(cid:43)(cid:60)(cid:47)(cid:6)(cid:44)(cid:43)(cid:61)(cid:47)(cid:46)(cid:1)(cid:45)(cid:57)(cid:55)(cid:58)(cid:47)(cid:56)(cid:61)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:18) Options �estricted stoc� Total 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 20,442 � 12,932 � 4,631 3,609 25,073 � 16,541 � 3,699 4,217 7,916 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 9,145 � 5,344 � 2,654 2,518 11,799 � 7,862 � 3,095 3,218 6,313 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 1,197 575 1,772 � � 980 353 1,333 � � 1,413 1,051 2,464 � � � � � � (cid:9)(cid:15)(cid:7)(cid:1)(cid:23)(cid:55)(cid:58)(cid:54)(cid:57)(cid:67)(cid:47)(cid:47)(cid:1)(cid:20)(cid:47)(cid:56)(cid:47)(cid:48)(cid:51)(cid:62)(cid:61) (cid:11)(cid:32)(cid:33)(cid:36)(cid:40)(cid:32)(cid:31) (cid:10)(cid:41)(cid:40)(cid:46)(cid:44)(cid:36)(cid:29)(cid:47)(cid:46)(cid:36)(cid:41)(cid:40) (cid:21)(cid:38)(cid:28)(cid:40) (cid:4) (cid:7)(cid:5)(cid:6)(cid:2)(cid:37)(cid:4) �e sponsor a defined contribution plan �the ��lan��. �li�ible employees may ma�e contributions in accordance with the �lan and ��� �uidelines. �n addition to the traditional 401���, eli�ible employees are �i�en the option of ma�in� an after-ta� contribution to a �oth 401��� or a combination of both. The �lan pro�ides for automatic enrollment and for an automatic increase to the deferral percenta�e at �anuary 1st of each year and each year thereafter. �li�ible employees are automatically enrolled in the �lan at a 6� deferral rate and currently contributin� employees deferral rates will be increased to 6� unless their current rate is abo�e 6� or the employee elects to decline the automatic enrollment or increase. Administrati�e e�penses are paid for by �lan participants. The Company paid no administrati�e e�penses for the years ended 2019, 2018 and 2017. The Company matches 175� up to 6� of employee contributions of eli�ible compensation. Additionally, �lan participant forfeitures are used to reduce the cost of the Company contributions. Contributions made to the defined contribution plan � 7.0 � 8.1 � 6.1 �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 52 (cid:21)(cid:44)(cid:41)(cid:33)(cid:36)(cid:46) (cid:23)(cid:35)(cid:28)(cid:44)(cid:36)(cid:40)(cid:34) (cid:9)(cid:41)(cid:40)(cid:47)(cid:45) (cid:21)(cid:38)(cid:28)(cid:40) �e maintain a discretionary profit sharing bonus plan under which approximately 10� of pre-tax profit is paid to eligible employees on a quarterly basis in order to reward employee producti�ity. Eligible employees are regular full-time employees who are acti�ely employed and wor�ing on the first and last days of the calendar quarter and who were employed full-time for at least three full months prior to the beginning of the calendar quarter, excluding the Company�s senior leadership team. �ears Ended �ecember 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) �rofit sharing bonus plan expense � 7.4 � 6.2 � 8.4 (cid:12)(cid:39)(cid:42)(cid:38)(cid:41)(cid:51)(cid:32)(cid:32) (cid:18)(cid:32)(cid:31)(cid:36)(cid:30)(cid:28)(cid:38) (cid:21)(cid:38)(cid:28)(cid:40) �e self-insure for our employee�s health insurance. Eligible employees are regular full-time employees who are acti�ely employed and wor�ing. �articipants are expected to pay a portion of the premium costs for co�erage of the benefits pro�ided under the �lan. �e estimate our self-insurance liabilities using an analysis pro�ided by our claims administrator and our historical claims experience. �n addition, the Company matches 175� of a participating employee�s allowed contributions to a qualified health sa�ing account to assist employees with our heath insurance plan deductibles. �ears Ended �ecember 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � � 5.9 3.3 � 5.9 2.9 4.8 2.5 Medical claim payments �eath sa�ing account payments (cid:9)(cid:16)(cid:7)(cid:1)(cid:1)(cid:36)(cid:62)(cid:57)(cid:45)(cid:53)(cid:50)(cid:57)(cid:54)(cid:46)(cid:47)(cid:60)(cid:61)(cid:69)(cid:1)(cid:23)(cid:59)(cid:63)(cid:51)(cid:62)(cid:67) (cid:23)(cid:46)(cid:41)(cid:30)(cid:37) (cid:22)(cid:32)(cid:42)(cid:47)(cid:44)(cid:30)(cid:35)(cid:28)(cid:45)(cid:32) �he �oard has authori�ed three stoc� repurchase programs for the Company. �he Company may purchase shares on the open mar�et from time to time, up to a total of 5.7 million shares. �he �oard must authori�e the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open mar�et. �ur open mar�et repurchase programs are as follows� (cid:19)(cid:49)(cid:60)(cid:47)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:1)(cid:23)(cid:66)(cid:47)(cid:45)(cid:63)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:22)(cid:43)(cid:62)(cid:47) (cid:19)(cid:63)(cid:62)(cid:50)(cid:57)(cid:60)(cid:51)(cid:68)(cid:47)(cid:46)(cid:1)(cid:35)(cid:47)(cid:58)(cid:63)(cid:60)(cid:45)(cid:50)(cid:43)(cid:61)(cid:47)(cid:1)(cid:2) (cid:23)(cid:66)(cid:58)(cid:51)(cid:60)(cid:43)(cid:62)(cid:51)(cid:57)(cid:56)(cid:1)(cid:22)(cid:43)(cid:62)(cid:47) �une 2, 2016 May 16, 2018 March 5, 2019 �25 million �15 million �20 million April 15, 2017 March 1, 2019 March 4, 2020 �he Company also has a stoc� repurchase arrangement by which employee-participants in our 401��� sa�ings and in�estment plan are entitled to ha�e shares in AA��, �nc. stoc� in their accounts sold to the Company. �he maximum number of shares to be repurchased is contingent upon the number of shares sold by employee- participants. �astly, the Company repurchases shares of AA��, �nc. stoc� from certain of its directors and employees for payment of statutory tax withholdings on stoc� transactions. All other repurchases from directors or employees are contingent upon �oard appro�al. All repurchases are done at current mar�et prices. 53 Our repurchase acti�ity is as follows� 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) 2017 �ro�ram �hares Total � � per share �hares Total � � per share �hares Total � � per share Open mar�et 5,799 � 200 � 34.46 252,272 � 8,374 � 33.19 8,676 � 284 � 419,963 19,386 46.16 497,753 18,472 37.11 467,580 16,336 28,668 1,207 Total 454,430 � 20,793 � 42.11 45.76 33,751 1,097 32.49 45,878 1,614 783,776 � 27,943 � 35.65 522,134 � 18,234 � 401��� Directors � employees 32.69 34.94 35.19 34.92 Inception to Date (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) �ro�ram �hares Total � � per share Open mar�et 401��� Directors � employees Total 4,101,566 � 69,806 � 7,467,739 119,927 1,981,929 13,551,234 � 19,582 209,315 � 17.02 16.06 9.88 15.45 Dividends �t the discretion of the �oard of Directors, we pay semi-annual cash di�idends. �oard appro�al is re�uired to determine the date of declaration and amount for each semi-annual di�idend payment. Our recent di�idends are as follows� Declaration Date May 16, 2017 �o�ember 7, 2017 May 18, 2018 �o�ember 8, 2018 May 20, 2019 �o�ember 6, 2019 Record Date �une 9, 2017 �o�ember 30, 2017 �une 8, 2018 �o�ember 29, 2018 �une 3, 2019 �o�ember 27, 2019 �ayment Date �uly 7, 2017 December 21, 2017 �uly 6, 2018 December 20, 2018 �uly 1, 2019 December 18, 2019 Di�idend per �hare �0.13 �0.13 �0.16 �0.16 �0.16 �0.16 �e paid cash di�idends of �16.6 million, �16.7 million, and �13.7 million in 2019, 2018, and 2017, respecti�ely. (cid:9)(cid:17)(cid:7)(cid:1)(cid:1)(cid:31)(cid:47)(cid:65) (cid:30)(cid:43)(cid:60)(cid:53)(cid:47)(cid:62)(cid:61) (cid:37)(cid:43)(cid:66) (cid:21)(cid:60)(cid:47)(cid:46)(cid:51)(cid:62) On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution �the �In�estor�� and a certified Community De�elopment �ntity under a �ualified �ew Mar�ets Ta� Credit ���MTC�� pro�ram pursuant to �ection 45D of the Internal Re�enue Code of 1986, as amended, related to an in�estment in plant and e�uipment to facilitate the e�pansion of our �on��iew, Te�as manufacturin� operations �the ��ro�ect��. In connection with the �MTC transaction, the Company recei�ed a �23.0 million �MTC allocation for the �ro�ect and secured low interest financin� and the potential for future debt for�i�eness related to the �ro�ect. �pon closin� of the �MTC transaction, the Company pro�ided an a��re�ate of appro�imately �15.9 million to the In�estor, in the form of a loan recei�able, with a term of twenty-fi�e years, bearin� an interest rate of 1.0�. This �15.9 million in proceeds plus capital contributed from the In�estor was used to ma�e an a��re�ate �22.5 million loan to a subsidiary of the Company. This financin� arran�ement is secured by e�uipment at the Company�s �on��iew, Te�as facilities and a �uarantee from the Company, includin� an unconditional �uarantee of �MTCs. This transaction also includes a put�call feature that either of which can be e�ercised at the end of the se�en-year compliance period. The In�estor may e�ercise its put option or the Company can e�ercise the call, both of which could ser�e to tri��er for�i�eness of a portion of the debt. The �alue attributable to the put�call is nominal. The 54 Investor's interest of $6.3 million is recorded in New market tax credit obligation on the consolidated balance sheet. The Company incurred approximately $0.3 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction. The Investor is subject to 100 percent recapture of the NMTC it receives for a period of seven years, as provided in the Internal Revenue Code and applicable U.S. Treasury regulations in the event that the financing facility of the Borrower under the transaction (AAON Coil Products, Inc.) becomes ineligible for NMTC treatment per the Internal Revenue Code requirements. The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Noncompliance with applicable requirements could result in the Investor’s projected tax benefits not being realized and, therefore, require the Company to indemnify the Investor for any loss or recapture of the NMTC related to the financing until such time as the recapture provisions have expired under the applicable statute of limitations. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement. The Investor and its majority owned community development entity are considered VIEs and the Company is the primary beneficiary of the VIEs. This conclusion was reached based on the following: • • • • the ongoing activities of the VIEs--collecting and remitting interest and fees and NMTC compliance--were all considered in the initial design and are not expected to significantly affect performance throughout the life of the VIE; contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various other guarantees to the Investor and community development entity; the Investor lacks a material interest in the underling economics of the project; and the Company is obligated to absorb losses of the VIEs. Because the Company is the primary beneficiary of the VIEs, they have been included in the consolidated financial statements. There are no other assets, liabilities or transaction in these VIEs outside of the financing transactions executed as part of the NMTC arrangement. 20. 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, results of operations or cash flows and we accrue and/or disclose loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate resolution of any pending litigation or claims will be material or have a material adverse effect on the Company’s business, financial position, results of operations or cash flows. We are occasionally party to short-term, cancellable and occasionally non-cancellable, fixed price contracts with major suppliers for the purchase of raw material and component parts. We expect to receive delivery of raw materials for use in our manufacturing operations. These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption. At December 31, 2019, we had one material contractual purchase obligation for approximately $2.5 million that expires in December 2020. 21. New Accounting Pronouncements Changes to U.S. GAAP are established by the FASB in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto. In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The ASU includes simplification of accounting for income taxes for franchise taxes, step up in tax basis for goodwill as part of a business combination and interim reporting of enacted changes in tax laws. The ASU is effective for the 55 �ompany beginning after December 15, 2020. �e do not e�pect �S� 2019�12 will ha�e a material effect on our consolidated financial statements and notes thereto. �n �ugust 2018, the F�S� issued �S� 2018�13, Fair �alue �easurements: �hanges to the Disclosure �e�uirement for Fair �alue �easurements. The �S� includes additional disclosure re�uirements for unreali�ed gains and losses for �e�el 3 fair �alue measurement and significant obser�able inputs used to de�elop �e�el 3 fair �alue measurements. The �S� is effecti�e for the �ompany beginning after December 15, 2019. �e do not e�pect �S� 2018�13 will ha�e a material effect on our consolidated financial statements and notes thereto. 22. �������� ��� ����� �asic net income per share is calculated by di�iding net income by the weighted a�erage number of shares of common stoc� outstanding during the period. Diluted net income per share assumes the con�ersion of all potentially diluti�e securities and is calculated by di�iding net income by the sum of the weighted a�erage number of shares of common stoc� outstanding plus all potentially diluti�e securities. Diluti�e common shares consist primarily of stoc� options and restricted stoc� awards. The following table sets forth the computation of basic and diluted earnings per share: ���������� Net income ������������ 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 53,711 � 42,329 � 53,830 �asic weighted a�erage shares 52,079,865 52,284,616 52,572,496 �ffect of diluti�e stoc� options and restricted stoc� 555,550 383,323 506,238 Diluted weighted a�erage shares 52,635,415 52,667,939 53,078,734 ������������������� �asic Diluti�e ��������������������� Shares 23. ��������������� � � 1.03 1.02 � � 0.81 0.80 � � 1.02 1.01 1,868,087 1,920,313 785,825 The �ompany purchases some supplies from an entity controlled by the �ompany�s ���. The �ompany sometimes ma�es sales to the ��� for parts. �dditionally, the �ompany sells units to an entity owned by a member of the �resident�s immediate family. This entity is also one of the �ompany�s �epresentati�es and as such, the �ompany ma�es payments to the entity for third party products. Following is a summary of transactions and balances with affiliates: Sales to affiliates �ayments to affiliates Due from affiliates Due to affiliates �ears �nded December 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) 886 � 332 1,442 � 342 1,579 432 December 31, 2019 2018 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 22 � 2 79 � � 56 2�. ������������������ Subsequent to December 31, 2019 and through February 24, 2020, the Company repurchased 11,144 shares for �0�6 million from employees for payment of statutory ta� withholdings on stoc� transactions and 73,780 shares for �3�9 million from our 401��� sa�ings and in�estment plan� 25. �������������������������������������������� The following is a summary of the quarterly results of operations for the years ended December 31, 2019 and 2018: 2019 Net sales �ross profit Net income Earnings per share: �asic Diluted 2018 Net sales �ross profit Net income Earnings per share: �asic Diluted �uarter First Second Third Fourth (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 113,822 � 119,437 � 113,500 � 122,574 25,430 8,757 0�17 0�17 99,082 15,196 3,154 0�06 0�06 � � � � � 30,204 13,391 0�26 0�26 109,588 27,661 11,697 0�22 0�22 � � � � � 27,410 14,290 0�27 0�26 � � 36,381 17,273 0�33 0�33 112,937 � 112,340 32,830 14,514 0�28 0�27 � � 27,846 12,964 0�25 0�25 � � � � � 57 The following tables reconcile our pre�iously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended March 31, 2019 and 2018. Three Months Ended March 31, 2019 Three Months Ended March 31, 2018 �re�iously Reported Corrections As Corrected �re�iously Reported Corrections As Corrected (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 113,822 � � � 113,822 � 99,082 � � � 99,082 363 (a) (363) 88,392 25,430 83,692 15,390 194 (a) (194) 83,886 15,196 2,676 (b) 13,677 10,219 1,432 (b) 11,651 � 284 (7) � (3,039) 11,469 5,178 (1,626) � � (3,039) (894) (c) 9 (26) 11,452 2,695 68 (6) 5,240 980 � � (1,626) (520) (c) � � � 10,902 � (2,145) 0.21 0.21 � � (0.04) (0.04) � � � 8,757 � 4,260 � (1,106) 0.17 0.17 � � 0.08 0.08 � � (0.02) (0.02) � � � (7) 3,552 68 (6) 3,614 460 3,154 0.06 0.06 88,029 25,793 11,001 284 14,508 9 (26) 14,491 3,589 51,992,150 52,369,660 � � 51,992,150 52,433,902 52,369,660 52,910,223 � � 52,433,902 52,910,223 Net sales Cost of sales �ross profit Selling, general and administrati�e expenses �oss (gain) on disposal of assets Income from operations Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic Diluted �eighted a�erage shares outstanding: �asic Diluted (cid:20)(cid:43)(cid:54)(cid:43)(cid:56)(cid:45)(cid:47)(cid:1)(cid:36)(cid:50)(cid:47)(cid:47)(cid:62)(cid:1)(cid:22)(cid:43)(cid:62)(cid:43)(cid:1)(cid:3)(cid:43)(cid:62)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:58)(cid:47)(cid:60)(cid:51)(cid:57)(cid:46)(cid:4)(cid:18) Current assets Total assets Current liabilities Deferred income taxes Other long-term liabilities � 146,798 � (287) (c) � 146,511 � 154,687 � (237) (c) � 154,450 319,525 44,000 12,713 3,442 (287) (c) (918) (d) (2,545) (c) � 319,238 43,082 10,168 3,442 306,945 57,292 8,397 1,645 (237) (c) (711) (d) (1,926) (c) � 306,708 56,581 6,471 1,645 Total stoc�holders� equity � 259,370 � 3,176 (e) � 262,546 � 239,611 � 2,400 (e) � 242,011 (a) The share-based compensation correction to cost of sales for the quarters ended March 31, 2019 and 2018 was approximately �0.4 million and �0.2 million, respecti�ely. (b) The share-based compensation correction to selling, general and administrati�e expenses for the quarters ended March Included in the correction to selling, 31, 2019 and 2018 was approximately �3.0 million and �1.6 million, respecti�ely. general and administrati�e expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately �0.4 million and �0.2 million for the quarters ended March 31, 2019 and 2018, respecti�ely. (c) The corrections to income tax recei�able and deferred tax liability are the tax effect of the share-based compensation correction. (d) This is the cumulati�e reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share- based compensation correction. The prior period costs will be reco�ered through our estimated 2019 fourth quarter payment which will be paid in early 2020. (e) This is the cumulati�e effect on stoc�holders� equity as result of the share-based compensation correction. See Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), for a descriptions of the changes in stoc�holders� equity in the consolidated statements of stoc�holders� equity for the years ended December 31, 2019 and 2018. 58 The following tables reconcile our pre�iously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended �une 30, 2019 and 2018. Three �onths Ended �une 30, 2019 Three �onths Ended �une 30, 2018 �re�iously Reported Corrections As Corrected �re�iously Reported Corrections As Corrected � 119,437 � � � 119,437 � 109,588 � � � 109,588 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) Net sales Cost of sales �ross profit Selling, general and administrati�e expenses �oss (gain) on disposal of assets Income from operations Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic Diluted Cash di�idends declared per common share: � � � � 89,262 30,175 13,481 6 16,688 31 17 16,736 3,775 12,961 0.25 0.25 0.16 � � � � �eighted a�erage shares outstanding: �asic Diluted 52,120,272 52,474,199 (cid:20)(cid:43)(cid:54)(cid:43)(cid:56)(cid:45)(cid:47)(cid:1)(cid:36)(cid:50)(cid:47)(cid:47)(cid:62)(cid:1)(cid:22)(cid:43)(cid:62)(cid:43)(cid:1)(cid:3)(cid:43)(cid:62)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:58)(cid:47)(cid:60)(cid:51)(cid:57)(cid:46)(cid:4)(cid:18) (29) (a) 29 89,233 30,204 82,003 27,585 (76) (a) 76 81,927 27,661 (569) (b) 12,912 13,086 67 (b) 13,153 � 598 � � 598 168 (c) 430 0.01 0.01 � � � � � � � 6 17,286 31 17 17,334 3,943 13,391 0.26 0.26 0.16 � � � � (4) 14,503 67 12 14,582 2,891 11,691 0.22 0.22 0.16 � � � � 52,120,272 52,383,842 52,474,199 52,717,787 � 9 � � 9 3 (c) 6 � � � � � � � � � (4) 14,512 67 12 14,591 2,894 11,697 0.22 0.22 0.16 52,383,842 52,717,787 Current assets � 168,630 � (270) (c) � 168,360 � 154,665 � (237) (c) � 154,428 Total assets 342,251 (270) (c) 341,981 320,271 (237) (c) 320,034 Current liabilities Deferred income taxes Other long-term liabilities 58,953 14,938 3,791 (851) (d) (2,361) (c) � 58,102 12,577 3,791 71,673 8,415 1,746 (711) (d) 70,962 (1,922) (c) � 6,493 1,746 Total stoc�holders� equity � 264,569 � 2,942 (e) � 267,511 � 238,437 � 2,396 (e) � 240,833 (a) The share-based compensation correction to cost of sales for the quarters ended �une 30, 2019 and 2018 was approximately �0.1 million and �0.1 million, respecti�ely. (b) The share-based compensation correction to selling, general and administrati�e expenses for the quarters ended �une 30, 2019 and 2018 was approximately �0.6 million and �0.1 million, respecti�ely. Included in the correction to selling, general and administrati�e expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately �0.1 million and �0.1 million for the quarters ended �une 30, 2019 and 2018, respecti�ely. (c) The corrections to income tax recei�able and deferred tax liability are the tax effect of the share-based compensation correction. (d) This is the cumulati�e reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share- based compensation correction. The prior period costs will be reco�ered through our estimated 2019 fourth quarter payment which will be paid in early 2020. (e) This is the cumulati�e effect on stoc�holders� equity as result of the share-based compensation correction. See Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), for a descriptions of the changes in stoc�holders� equity in the consolidated statements of stoc�holders� equity for the years ended December 31, 2019 and 2018. 59 The following tables reconcile our pre�iously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended September 30, 2019 and 2018. Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 �re�iously Reported Corrections As Corrected �re�iously Reported Corrections As Corrected � 113,500 � � � 113,500 � 112,937 � � � 112,937 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) (25) (a) 25 86,090 27,410 80,174 32,763 (67) (a) 67 80,107 32,830 (620) (b) 12,374 13,190 (523) (b) 12,667 Net sales Cost of sales �ross profit Selling, general and administrati�e expenses �oss (gain) on disposal of assets Income from operations Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic Diluted 86,115 27,385 12,994 6 14,385 9 (7) 14,387 560 13,827 0.27 0.26 � � � � � � �eighted a�erage shares outstanding: �asic Diluted 52,111,444 52,722,127 (cid:20)(cid:43)(cid:54)(cid:43)(cid:56)(cid:45)(cid:47)(cid:1)(cid:36)(cid:50)(cid:47)(cid:47)(cid:62)(cid:1)(cid:22)(cid:43)(cid:62)(cid:43)(cid:1)(cid:3)(cid:43)(cid:62)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:58)(cid:47)(cid:60)(cid:51)(cid:57)(cid:46)(cid:4)(cid:18) � 645 � � 645 182 (c) 463 � � � � � � � 6 15,030 9 (7) 15,032 742 14,290 0.27 0.26 � � � 2 19,571 36 5 19,612 5,527 14,085 0.27 0.27 � � � 52,111,444 52,238,796 52,722,127 52,627,541 � 590 � � 590 161 (c) 429 0.01 � � � � � � 2 20,161 36 5 20,202 5,688 14,514 0.28 0.27 52,238,796 52,627,541 144,476 313,804 53,071 7,097 1,838 Current assets Total Assets Current liabilities Deferred income taxes Other long-term liabilities � 170,536 � (252) (c) � 170,284 � 144,696 � (220) (c) � 352,152 53,882 15,034 3,669 (252) (c) (779) (d) (2,161) (c) � 351,900 53,103 12,873 3,669 314,024 53,716 8,841 1,838 (220) (c) (645) (d) (1,744) (c) � Total stoc�holders� equity � 279,567 � 2,688 (e) � 282,255 � 249,629 � 2,169 (e) � 251,798 (a) The share-based compensation correction to cost of sales for the quarters ended September 30, 2019 and 2018 was approximately �0.1 million and �0.1 million, respecti�ely. (b) The share-based compensation correction to selling, general and administrati�e expenses for the quarters ended September 30, 2019 and 2018 was approximately �0.7 million and �0.6 million, respecti�ely. Included in the correction to selling, general and administrati�e expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately �0.1 million and �0.1 million for the quarters ended September 30, 2019 and 2018, respecti�ely. (c) The corrections to income tax recei�able and deferred tax liability are the tax effect of the share-based compensation corrections. (d) This is the cumulati�e reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share- based compensation correction. The prior period costs will be reco�ered through our estimated 2019 fourth quarter payment which will be paid in early 2020. (e) This is the cumulati�e effect on stoc�holders� equity as result of the share-based compensation correction. See Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), for a descriptions of the changes in stoc�holders� equity in the consolidated statements of stoc�holders� equity for the years ended December 31, 2019 and 2018. 60 The following table reconciles our pre�iously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended December 31, 2018. Three Months Ended December 31, 2018 �re�iously �eported Corrections As Corrected (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:4)(cid:1)(cid:32)(cid:50)(cid:30)(cid:32)(cid:43)(cid:46)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:43)(cid:32)(cid:44)(cid:1)(cid:45)(cid:35)(cid:28)(cid:44)(cid:32)(cid:1)(cid:31)(cid:28)(cid:46)(cid:28)(cid:3) � 112,340 � Net sales Cost of sales �ross profit �elling, general and administrati�e expenses �oss (gain) on disposal of assets Income from operations Interest income, net Other (expense) income, net Income before taxes Income tax pro�ision Net income Earnings per share: �asic Diluted Cash di�idends declared per common share: �eighted a�erage shares outstanding: �asic Diluted (cid:20)(cid:43)(cid:54)(cid:43)(cid:56)(cid:45)(cid:47)(cid:1)(cid:36)(cid:50)(cid:47)(cid:47)(cid:62)(cid:1)(cid:22)(cid:43)(cid:62)(cid:43)(cid:1)(cid:3)(cid:43)(cid:62)(cid:1)(cid:47)(cid:56)(cid:46)(cid:1)(cid:57)(cid:48)(cid:1)(cid:58)(cid:47)(cid:60)(cid:51)(cid:57)(cid:46)(cid:4)(cid:18) Current assets Total Assets Current liabilities Deferred income taxes Other long-term liabilities Total stoc�holders� equity 84,545 27,795 11,260 (3) 16,538 25 (58) 16,505 3,969 12,536 0.24 0.24 0.16 � � � � 52,086,247 52,420,529 � � (51) (a) 51 (537) (b) � 588 � � 588 160 (c) 428 0.01 0.01 � � � � � � � 112,340 84,494 27,846 10,723 (3) 17,126 25 (58) 17,093 4,129 12,964 0.25 0.25 0.16 52,086,247 52,420,529 140,658 307,994 47,491 9,259 1,801 140,861 � (203) (c) � 308,197 48,071 10,826 1,801 (203) (c) (580) (d) (1,567) (c) � 247,499 � 1,944 (e) � 249,443 � � � � � � (a) The share-based compensation correction for cost of sales for the quarter ended December 31, 2018 was approximately �0.1 million. (b) The share-based compensation correction to selling, general and administrati�e expenses for the quarter ended December Included in the correction to selling, general and administrati�e expenses is a 31, 2018 was approximately �0.6 million. correction to our employee profit sharing bonus plan (Note 17) of approximately �0.1 million for the quarter ended December 31, 2018. (c) The corrections to income tax recei�able and deferred tax liability are the tax effect of the share-based compensation corrections. (d) This is the cumulati�e reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share- based compensation correction. The prior period costs will be reco�ered through our estimated 2019 fourth quarter payment which will be paid in early 2020. (e) This is the cumulati�e effect on stoc�holders� equity as result of the share-based compensation correction. �ee Note 2, (cid:14)(cid:44)(cid:44)(cid:42)(cid:44) (cid:12)(cid:42)(cid:44)(cid:44)(cid:32)(cid:30)(cid:46)(cid:36)(cid:42)(cid:41), for a descriptions of the changes in stoc�holders� equity in the consolidated statements of stoc�holders� equity for the years ended December 31, 2018. 61 (cid:10)(cid:14)(cid:7)(cid:1)(cid:36)(cid:47)(cid:49)(cid:55)(cid:47)(cid:56)(cid:62)(cid:61) The following table summari�es certain financial data related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. Sales of units represents the selling price of our units plus freight and other miscellaneous charges less any returns and allowances. �arts includes sales of purchased and fabricated parts including our coils along with the related freight and less any returns and allowances. The “Other” category in the table below includes certain sales cost and expenses that are not allocated to the reportable segments. Asset information by segment is not easily identifiable or re�iewed by the chief operating decision ma�er. As such, this information is not included below. (cid:36)(cid:43)(cid:54)(cid:47)(cid:61) Units �arts � External �arts � �nter�segment Other Eliminations Net sales (cid:25)(cid:60)(cid:57)(cid:61)(cid:61)(cid:1)(cid:33)(cid:60)(cid:57)(cid:48)(cid:51)(cid:62) Units �arts � External �arts � �nter�segment Other Eliminations �ross profit �ears Ended �ecember 31, 2019 2018 2017 (cid:2)(cid:36)(cid:41)(cid:1)(cid:46)(cid:35)(cid:42)(cid:47)(cid:45)(cid:28)(cid:41)(cid:31)(cid:45)(cid:3) � 434,283 � 406,331 � 384,853 � � 35,424 28,053 (374) (28,053) 469,333 121,878 17,301 985 (19,754) (985) � � 28,456 29,385 (840) (29,385) 433,947 108,214 13,215 865 (17,896) (865) � � 22,050 29,293 (1,671) (29,293) 405,232 128,647 9,555 426 (14,551) (426) � 119,425 � 103,533 � 123,651 (cid:27)(cid:62)(cid:47)(cid:55) (cid:17)(cid:7)(cid:1) (cid:21)(cid:50)(cid:43)(cid:56)(cid:49)(cid:47)(cid:61) (cid:51)(cid:56) (cid:43)(cid:56)(cid:46) (cid:22)(cid:51)(cid:61)(cid:43)(cid:49)(cid:60)(cid:47)(cid:47)(cid:55)(cid:47)(cid:56)(cid:62)(cid:61) (cid:65)(cid:51)(cid:62)(cid:50) (cid:19)(cid:45)(cid:45)(cid:57)(cid:63)(cid:56)(cid:62)(cid:43)(cid:56)(cid:62)(cid:61) (cid:57)(cid:56) (cid:19)(cid:45)(cid:45)(cid:57)(cid:63)(cid:56)(cid:62)(cid:51)(cid:56)(cid:49) (cid:43)(cid:56)(cid:46) (cid:24)(cid:51)(cid:56)(cid:43)(cid:56)(cid:45)(cid:51)(cid:43)(cid:54) (cid:22)(cid:51)(cid:61)(cid:45)(cid:54)(cid:57)(cid:61)(cid:63)(cid:60)(cid:47)(cid:7) Not Applicable. (cid:27)(cid:62)(cid:47)(cid:55) (cid:17)(cid:19)(cid:7)(cid:1)(cid:1)(cid:21)(cid:57)(cid:56)(cid:62)(cid:60)(cid:57)(cid:54)(cid:61) (cid:43)(cid:56)(cid:46) (cid:33)(cid:60)(cid:57)(cid:45)(cid:47)(cid:46)(cid:63)(cid:60)(cid:47)(cid:61)(cid:7) (cid:2)(cid:28)(cid:3)(cid:1) (cid:14)(cid:48)(cid:28)(cid:39)(cid:47)(cid:28)(cid:46)(cid:36)(cid:42)(cid:41)(cid:1)(cid:42)(cid:33)(cid:1)(cid:13)(cid:36)(cid:45)(cid:30)(cid:39)(cid:42)(cid:45)(cid:47)(cid:44)(cid:32)(cid:1)(cid:12)(cid:42)(cid:41)(cid:46)(cid:44)(cid:42)(cid:39)(cid:45)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:21)(cid:44)(cid:42)(cid:30)(cid:32)(cid:31)(cid:47)(cid:44)(cid:32)(cid:45) Our management, with the participation of our �hief Executi�e Officer and �hief �inancial Officer, has e�aluated the effecti�eness of our disclosure controls and procedures (as defined in �ules 13a�15(e) and 15d�15(e) under the Exchange Act) as of �ecember 31, 2019. �ased on that e�aluation, our �hief Executi�e Officer and �hief �inancial Officer ha�e concluded that as of �ecember 31, 2019, due to the existence of the material wea�ness in our internal control o�er financial reporting described below, our disclosure controls and procedures were not effecti�e to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summari�ed, and reported within the time periods specified in the SE��s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. 62 (b) Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In making our assessment of internal control over financial reporting, management has used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control— Integrated Framework. Based on our assessment, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2019 due to the material weakness in establishing the accounting policy for share-based compensation for retirement eligible employees. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our 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, 2019 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 Our management is in the process of executing a plan to remediate the material weakness described above. This plan includes the implementing of a process and control to ensure a more complete and comprehensive review is performed for researching and establishing the Company's accounting policies. We have begun and expect to continue implementing the changes in our internal control over financial reporting to remediate the material weakness described above. The material weakness will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. (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 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 63 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders AAON, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weakness described in the following paragraphs 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, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. 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. The Company identified a material weakness related to the accounting for share-based compensation for retirement eligible employees. The Company’s controls related to technical accounting research and specific provisions of the plan agreements and the identification of and monitoring of retirement eligible employees were not designed effectively to ensure that the Company correctly interpreted and applied technical accounting requirements for share-based compensation for retirement eligible employees. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2019. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report dated February 26, 2020 which expressed an unqualified opinion on those financial statements. Basis for opinion 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable 64 assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Tulsa, Oklahoma February 26, 2020 65 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 14, 2020. 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 Scott M. Asbjornson, or by calling (918) 382-6242. 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 12, 2020. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by Item 403 and Item 201(d) of Regulation S-K is incorporated by reference to the information contained in our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with our annual meeting of stockholders scheduled to be held May 12, 2020. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required to be reported pursuant to Item 404 of Regulation S-K and paragraph (a) of Item 407 of Regulation S-K is incorporated by reference in our definitive proxy statement relating to our annual meeting of shareholders scheduled to be held May 12, 2020. Our Code of Conduct guides the Board of Directors in its actions and deliberations with respect to related party transactions. Under the Code, conflicts of interest, including any involving the directors or any Named Officers, are prohibited except under any guidelines approved by the Board of Directors. Only the Board of Directors may waive a provision of the Code of Conduct for a director or a Named Officer, and only then in compliance with all applicable laws, rules and regulations. We have not entered into any new material related party transactions and have no preexisting material related party transactions in 2019, 2018, or 2017. 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 12, 2020. 66 PART IV Item 15. Exhibits and Financial Statement Schedules. (a) Financial statements. (1) (2) (3) The consolidated financial statements and the report of independent registered public accounting firm are included in Item 8 of this Form 10-K. The consolidated financial statements other than those listed at item (a)(1) above have been omitted because they are not required under the related instructions or are not applicable. The exhibits listed at item (b) below are filed as part of, or incorporated by reference into, this Form 10-K. (b) Exhibits: (3) (A) (B) Amended and Restated Articles of Incorporation (ii) Bylaws (i) (B-1) Amendments of Bylaws (iii) (4) (A) Third Restated Revolving Credit and Term Loan Agreement and related documents (iv) (A-1) Amendment Thirteen (October 24, 2019) to Third Restated Revolving Credit Loan Agreement (v) (4.16) (10.1) (10.2) (10.3) (21) (23) (31.1) (31.2) (32.1) (32.2) Description of Securities AAON, Inc. 1992 Stock Option Plan, as amended (vii) AAON, Inc. 2007 Long-Term Incentive Plan, as amended (viii) AAON, Inc. 2016 Long-Term Incentive Plan (vi) List of Subsidiaries (ix) Consent of Grant Thornton LLP Certification of CEO Certification of CFO Section 1350 Certification – CEO Section 1350 Certification – CFO (101) (INS) Inline XBRL Instance Document (101) (SCH) Inline XBRL Taxonomy Extension Schema (101) (CAL) Inline XBRL Taxonomy Extension Calculation Linkbase (101) (DEF) Inline XBRL Taxonomy Extension Definition Linkbase (101) (LAB) Inline XBRL Taxonomy Extension Label Linkbase (101) (PRE) Inline XBRL Taxonomy Extension Presentation Linkbase (104) (i) (ii) Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) Incorporated herein by reference to the exhibits to our Form S-18 Registration Statement No. 33-18336-LA. Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 67 (iii) (iv) (v) (vi) (vii) (viii) (ix) Incorporated herein by reference to our Forms 8-K dated March 10, 1997, May 27, 1998 and February 25, 1999, or exhibits thereto. Incorporated herein by reference to exhibit to our Form 8-K dated July 30, 2004. Incorporated herein by reference to exhibit to our Form 8-K dated July 27, 2016. Incorporated herein by reference to our Form S-8 Registration Statement No. 333-212863 dated August 2, 2016 and our Form S-8 Registration Statement No. 333-226512 dated August 2, 2018. Incorporated by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and to our Form S-8 Registration Statement No. 333-52824. Incorporated herein by reference to our Form S-8 Registration Statement No. 333-151915, Form S-8 Registration Statement No. 333-207737, and to our Form 8-K dated May 21, 2014. Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004. 68 �ursuant to the re�uirement of Section �� or ��(d) of the Securities E�change Act of �9��, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authori�ed. (cid:36)(cid:27)(cid:25)(cid:31)(cid:19)(cid:37)(cid:38)(cid:35)(cid:23)(cid:36) AAON, INC. Dated: February 26, 2020 �y: /s/ Norman �. Asbjornson Norman �. Asbjornson, Chief E�ecuti�e Officer �ursuant to the re�uirements of the Securities E�change Act of �9��, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 Dated: February 26, 2020 /s/ Norman �. Asbjornson Norman �. Asbjornson Chief E�ecuti�e Officer and Director (principal e�ecuti�e 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/ �ary D. Fields �ary D. Fields �resident and Director /s/ Angela E. Kouplen Angela E. Kouplen Director /s/ �aul K. �ac�ey, �r. �aul K. �ac�ey, �r. Director /s/ Caron A. �awhorn Caron A. �awhorn Director /s/ Stephen O. �eClair Stephen O. �eClair Director /s/ A.�. McElroy II A.�. McElroy II Director /s/ �ac� E. Short �ac� E. Short Director /s/ �u�e A. �omer �u�e A. �omer Secretary 69 Exhibit 4.16 DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 As of February 24, 2020, AAON, Inc., a Nevada corporation, (“AAON”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Common Stock. Description of Common Stock The following description of our Common Stock is a summary based on and qualified by our Amended and Restated Articles of Incorporation of AAON, Inc. (as further amended to date, the “Articles of Incorporation”) and our Bylaws (as amended to date, the “Bylaws”). Authorized Capital Shares Our authorized capital shares consist of 100,000,000 shares of common stock, $0.004 par value per share (“Common Stock”), and 5,000,000 shares of series preferred stock, $0.001 par value per share (“Preferred Stock”). The outstanding shares of our Common Stock are fully paid and nonassessable. Voting Rights Holders of Common Stock are entitled to one vote per share on all matters voted on by the stockholders, including the election of directors. Our Common Stock does not have cumulative voting rights. Dividend Rights Subject to the rights of holders of outstanding shares of Preferred Stock, if any, the holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Board of Directors in its discretion out of funds legally available for the payment of dividends. Liquidation Rights Subject to any preferential rights of outstanding shares of Preferred Stock, if any, holders of Common Stock will share ratably in all assets legally available for distribution to our stockholders in the event of dissolution. Other Rights and Preferences Our Common Stock has no sinking fund or redemption provisions or preemptive, conversion or exchange rights. Listing The Common Stock is traded on The Nasdaq Stock Market LLC under the trading symbol “AAON.” 70 Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our reports dated February 26, 2020, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of AAON, Inc. on Form 10-K for the year ended December 31, 2019. We consent to the incorporation by reference of said reports in the Registration Statements of AAON, Inc. on Forms S-8 (File No. 333-151915, File No. 333-207737, File No. 333-212863 and File No. 333-226512). /s/ GRANT THORNTON LLP Tulsa, Oklahoma February 26, 2020 71 Exhibit 31.1 I, Norman H. Asbjornson, certify that: CERTIFICATION 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of AAON, Inc. 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; 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; 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) b) c) d) 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; 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; 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) b) 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 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: February 26, 2020 /s/ Norman H. Asbjornson Norman H. Asbjornson Chief Executive Officer 72 Exhibit 31.2 I, Scott M. Asbjornson, certify that: CERTIFICATION 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of AAON, Inc. 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; 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; 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) b) c) d) 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; 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; 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) b) 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 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: February 26, 2020 /s/ Scott M. Asbjornson Scott M. Asbjornson Chief Financial Officer 73 Exhibit 32.1 CERTIFICATION 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, 2019, 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: February 26, 2020 /s/ Norman H. Asbjornson Norman H. Asbjornson Chief Executive Officer 74 Exhibit 32.2 CERTIFICATION 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, 2019, 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: February 26, 2020 /s/ Scott M. Asbjornson Scott M. Asbjornson Chief Financial Officer 75 Company Officers Norman H. Asbjornson Mr. Asbjornson has served as CEO and Chair of the Board of the Company since 1988. Mr. Asbjornson also serves as the Chair of the Board of AAON Coil Products, Inc. Mr. Asbjornson served as the President of AAON, Inc., from 1988 to 2016. Mr. Asbjornson has been in senior management positions in the HVAC industry for over 40 years. Scott M. Asbjornson Mr. Asbjornson son has served as Vice President, Finance, and CFO of the Company since 2012. Mr. Asbjornson joined the Company in 1990 and is the son of the Company’s CEO, Norman H. Asbjornson. Mr. Asbjornson has an MBA and has held various leadership positions with the Company, including Vice President (2007-2010) and President (2010-2012) of AAON Coil Products, Inc. He also serves as Vice President, Finance, and CFO of AAON, Inc. Mikel D. Crews Mr. Crews has served as Vice President, Operations since 2017. Mr. Crews has served as Director of Material and Operations since 2015, Manager of Operations from 1991 to 2015, and in various operational, production and inventory management roles since the Company’s inception. Mr. Crews has been in leadership positions in the HVAC industry for over 40 years. 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 Transfer Agent and Registrar Issuer Direct 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, P.C. Two Warren Place 6120 South Yale Avenue, Suite 500 Tulsa, Oklahoma 74136 Gary D. Fields Mr. Fields has served as President of the Company since 2016 and a director of the Company since 2015. Mr. Fields been involved in the HVAC industry for over 35 years. From 1983 to 2012, he was an HVAC equipment sales representative at and, from 2002 to 2012, a member of the ownership group of Texas AirSystems, the largest independent HVAC equipment and solutions provider in the state of Texas. Rebecca A. Thompson Ms. Thompson has served as Chief Accounting Officer and Treasurer of the Company since 2017, and Chief Accounting Officer of the Company since 2012. Ms. Thompson previously served as a Senior Manager at Grant Thornton, LLP where she had 11 years of experience in the assurance division. Ms. Thompson is a licensed certified public accountant. Stephen E. Wakefield Mr. Wakefield has served as Vice President of Engineering since 2018. Mr. Wakefield previously served as Director of Engineering, Director of Design and Engineering Operations, Senior Manager of Research and Development, and Design Engineering Manager. Mr. Wakefield has been with the Company since 1999, and has a bachelor’s degree in Mechanical Engineering Technology. Rony D. Gadiwalla Mr. Gadiwalla has served as Vice President of Information Technology and Chief Information Officer since 2018. Mr. Gadiwalla has served as Director of Information technology since 2014, Manager of Project Management Office from 2012 to 2014, and Engineering Automation Manger from 2009 to 2012. Mr. Gadiwalla has been with the Company since 2004, and has a bachelor’s degree in Software Engineering. Back Row (from left to right): Stephen 0. LeClair, A.H. McElroy, II, Angela E. Kouplen, Paul K. Lackey, Jr., Caron A. Lawhorn Front Row (from left to right): Norman H. Asbjornson, Gary D. Fields, Jack E. Short Board of Directors Board of Directors Listed in Alphabetic Order Back Row (from left to right): Stephen 0. LeClair, A.H. McElroy, II, Angela E. Kouplen, Paul K. Lackey, Jr., Caron A. Lawhorn Front Row (from left to right): Norman H. Asbjornson, Gary D. Fields, Jack E. Short Norman H. Asbjornson CEO/Chair of the Board Gary D. Fields President/Director Angela E. Kouplen Ms. Kouplen was elected as a director of the Company in 2016. Ms. Kouplen has over 20 years of experience at multiple energy companies, with an emphasis on information technology, contract management, sourcing/vendor relations, human resource management, strategy and governance. From 2012 through 2014, Ms. Kouplen served as Director - Talent Acquisition and Leadership of WPX Energy, and from 2015 to 2016, Ms. Kouplen served as Vice President - Information Technology of WPX Energy. From 2016 to November 2018 Ms. Kouplen served as Vice President of Administration and Chief Information Officer of WPX Energy and from November 2018 to present currently serves as Senior Vice President of Administration and Chief Information Officer. Caron A. Lawhorn Ms. Lawhorn was elected as a director of the Company in 2019 and currently serves as the Audit Committee Chair. Ms. Lawhorn is a certified public accountant, and currently serves as Senior Vice President and Chief Financial Officer, of ONE Gas, Inc., a standalone one hundred percent regulated publicly traded natural gas utility. Prior to her current role, she served as Senior Vice President, Commercial, a position she held from ONE Gas's separation from ONEOK in 2014. She served in the same position at ONEOK, since 2013. A.H. McElroy, II Mr. McElroy has served as a director of the Company since 2007 and is Chair of the Compensation Committee. 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. Mr. Lackey has served as a director of the Company since 2007 and is Chair of the Governance Committee. Between April 2002 and October 2005 Mr. Lackey served as CEO and President of The NORDAM Group, a privately held aerospace company. Between October 2005 and December 2008 Mr. Lackey served as the Chairman and CEO of The NORDAM Group. Between January 2009 and December 2011 Mr. Lackey served as the Executive Chairman of the Board of The NORDAM Group. Since January 2012, Mr. Lackey has served as the Chairman of the Board of The NORDAM Group. Stephen 0. LeClair Mr. LeClair was elected as a director of the Company in 2017. Mr. LeClair has 25 years of experience in various executive, manufacturing, finance, sales and operational positions. Mr. LeClair currently serves as CEO of Core & Main (formerly HD Supply Waterworks) a position he has held since 2017, and in such role is responsible for leading the nation’s largest distributor of water, sewer, storm and fire protection products. Prior to his current role, he served as President of HD Supply Waterworks from 2011 to 2017, Chief Operating Officer of HD Supply Waterworks from 2008 to 2011, and President of HD Supply Lumber and Building Materials from April 2007 until its divestiture to ProBuild Holdings in 2008. Mr. LeClair joined HD Supply in 2005 as Senior Director of Operations. Jack E. Short Mr. Short has served as a director the Company since July 2004 and lead independent director since January 2019. Mr. Short was employed by Price Waterhouse Coopers for 29 years and retired as the managing partner of the Oklahoma practice in 2001. Company Employees THE ONGOING SUCCESS OF OUR COMPANY CAN BE DIRECTLY ATTRIBUTED TO OUR EMPLOYEES SUSAN AARON ANGEL ACEDO MIRIAN ACOSTA MA ACOSTA DE AGUAYO ANDRES ACOSTA-LUJAN RAQUEL ACUNA SEGURA ENRIQUETA ADAME DAKOTA ADAMS PAUL ADAMS REBECCA ADAMS RYAN ADAMS DERRICK ADAMS JAMILAH ADAMS RUSTY ADAMS JUAN AGUAYO MARIA AGUAYO LEONARD AGUILAR, JR ARLEEN AIZAWA DANIEL ALAGDON ROEL ALANIZ, JR JAMES ALEXANDER MARQUIS ALEXANDER SHARON ALEXANDER TAWANTA ALEXANDER THOMAS ALEXANDER SHANNON ALFORD CHARLES ALLEN JOHN-PAUL ALLEN SONIA ALTER ESPINA ISRAEL ALTER GRANADO YACKSENDEL ALVARADO MALDONADO BILLY ALVERSON, III SARAH ANDERSEN JOE ANDOE KS ANDON JOSEPH ANDRUS THOMAS ANGEI ANJA ANKIEN WESLEY ANSELME LAURA ARAUJO GONZALEZ CLYDE ARCHER JESUS ARELLANES RAMIREZ FIDEL ARGUMEDO RANGEL JOSHUA ARMAS DAVID ARMSTRONG JERI ARMSTRONG KIMBERLY ARNONE MARIA ARREDONDO GERARDO ARREGUIN GERARDO ARROYO ROSA ARROYO SANCHEZ ROGELIO ARTEAGA BROOKLYNN ARTIS NORMAN ASBJORNSON SCOTT ASBJORNSON MARIA ASENCIO JOHN ASHLEY, JR DAVID R ASHLOCK DAVID L ASHLOCK FATANIA ATTAN NAN SUSAN AUNG HTOO CODY AUSBROOK ROBERT AUSMUS STEVEN AUTEN JOSEPH AVILA JOSE AVILA SENG AWNG ELIZABETH AYALA ORLANDO AYALA MARRIUM AYESHA KRISTIN AYLETT NORA BACKUS PHILIPPE BAFOU PEUWO JACOB BAIER CORDERO BAKER DWIGHT BAKER JUAN BALANDRAN JOHN BALDWIN KHALEEL BALL THOMAS BALL AMISS BANDA CLAUDIA BANDA MYLES BARBER GREGORY BARKER, JR. JUSTIN BARLETT LEROY BARNABAS JAMES BARNES, III DAVID BARNETT ANA BARRAGAN DE ALTENEH NEREYDA BARRIOS TERESA BARRON FRANCISCO BARTOLO GAONA JAMIE BASSETT SHERRY BATES JAMES BAUGH STUART BAUGH SHANNON BECK LIONEL BECKMAN PHILLIP BEECHAM EFTON BELL BRANCE BELL JASON BELL MEKALA BELL RUBEN BELLIDO FERRER RAMON BENN FRANCIS BENNETT, JR. JOSEPH BENOIT BONNIE BENSON JARED BENTON IDA BERMUDEZ LIDIA BERNAL BECERRA DAVID BERRY SERGIO BESERRA SHAQUAN BETHEA CARL BEYER DANIEL BIGBY KENNETH BIGHAM JR JEFFREY BILLY PHILLIP BINFORD AMIE BISHOP VICKIE BLACK ETHAN BLACKMAN DONNA BLANKENSHIP DAVID BLEVINS DEVON BLOOD NICHOLAS BOBBITT LAM BOI LHING BOI JASMINE BOLDEN ADELTRUDES BOND JOSHUA BONEY MICHAEL BONEY KYLE BOOKOUT ROGER BORJA BARREIRO CINDY BOSTICK LARRY BOWERS EUGENE BOWMAN CHARMAINE BOYCE JOHN BOYD JUSTIN BOYD WYNETTA BOYD JOHNNY BOZMAN MARC BRADBURY JESSE BRADEN BRIAN BRADFORD JAIME BRAME SETH BRESSLER KEIARA BRICE QUINTON BROADNAX ALAN BROCK DUSTIN BROD ARLUNDA BROOKS DON BROOKS WINSTON BROSEKE ARIELLE BROWN BRITTANY BROWN DOMINIQUE BROWN EDWIN BROWN JAMES BROWN JANICE BROWN MITCHELL BROWN STEVEN BROWN VENUS BROWN WILLIAM BROWN LARODERICK BROWN RUSTY BROWN JOHNNY BROWN, JR. CHRISTOPHER BRYANT SEQUOYAH BUCHANAN MINH BUI VAN BUI ROBBIN BULLARD CORRELL BULLOCK JASON BUNNELL JOSHUA BURGESS SCOTT BURGESS LATISHA BURKHALTER BEN BURLESON ROBYN BURNETTE CLIFTON BURRUS WAYNE BUSH COREY BUSH DKAYLON BUSH JEROME BUSH VERENICE BUSTOS ADRIAN BUTLER JAMES BUTLER ROSA BUTLER JANIBAL CABUDOY ALEJANDRO CADENA FERMIN CADENA MARBELLA CADENA JOSE CADENAS CLEVELAND CAGE, JR. ELIZABETH CAGLE YOSMAR CALDERA HERNANDEZ MARGARITO CALDERON SANDRA CALDWELL TYLER CALICO JORGE CALIXTO EDWARD CALLOWAY DESMOND CALLOWAY II MARIA CAMACHO TEVIN CAMERON REGINALD CAMPBELL RUSTI CAMPBELL DAVID CAMPBELL ODESS CAMREN IESHIA CANADA KEVIN CANADA GILDA CANNADY JACOB CANTREL CAROMI CAPELLE JAMES CAPELLE BILLY CARDER DREW CARDOZA EMILY CAREY TODD CARNER CLARENCE CARR SHAMAYA CARR LISA CARRIERO MICHAEL CARRILLO JOHN CARSON VINCENT CARSON ALEXANDER CARTER KEVIN CARTER TERENCE CARTER LARRY CARTER, JR. ISMAEL CARVAJAL CRISTOBAL CARVAJAL COLORADO YVONNE CASE BEATRIZ CASIANO JORGE CASTELLANOS DAVID CASTILLO ISABEL CASTILLO LOPEZ MARIO CASTRO JR. ALEJANDRO CASTRO REYES JEFFREY CAVALLO BRIAN CAVNER EDDIE CAVNER HECTOR CAZARES KARI CECIL CORNELIO CEJA GRIMALDO FRANCISCO CERVANTES BRYAN CHADWELL FABIAN CHAIREZ HERNANDEZ GUADALUPE CHAIREZ-GALAN LARRY CHALK ZO CHAMA RICKY CHAMBLISS ROBERT CHANEY NIN CHANGMAR PATRICK CHAPMAN CONNIE CHASTEEN ALEEX CHATKEHOODLE EDGAR CHAVEZ GREGORY CHAVEZ REBECCA CHEEK KEVIN CHESTNUT EDDIE CHOATES TERRANCE CHOICE JR AWI CIANG MAU CIIN KHAM CIN LANG CIN LUAN CIN PAUL CIN TUAN CIN VUNG CIN VUNGH CIN AIH CING CIANG CING CIIN CING CIN CING CING CING DIM CING LIAN CING LUN LAM CING LUN CING MAN LUN CING MAN CING NANG CING NEM CING NGAI CING NGOIH CING NIANG CING NIIANG CING NING CING NUAM SUAN CING NUAM CING SAN CING SIAN H CING THANG ZA CING VUNG SIAN LUNG CING ZEN NEM CING ZEN CING THERESA CING KOK DAVID CIRIACO JUSTIN CLAIBORNE LOURDES CLANCE GEORGE CLARK CHRISTI CLARK JASON CLARK SAMUEL CLARK, JR. JUAN CLEMENTE VALLADARES CLIFTON CLINE RONNIE CLOWERS DEVONTA COATS BRYTON COBB MARK COBB KENNETH COCHRAN TROY COCKRUM BRANDON COLBERT ROBERT COLE MICHAEL COLE CLAYTON COLLINS JEREMY COLLINS TIM COLLINSWORTH AARON COLUMBUS BOBBY CONDITT DALE CONKWRIGHT RAQUEL CONN DAMON CONN PATRICK CONN JUDE CONNOLLY MARK COOK ALFRED COOKS ALAINA COOKS MICHAEL COOLIDGE SCOTT COON DONNA COONFIELD JAMES COOPER GREGORY COOPER MICHELLE COPELAND MARIANA CORDOVA LORIN CORNWELL GENOVEVA CORONA DE RIVERA JOSE CORREA ROSA CORTEZ MICHAEL CORTEZ FRED COTTON VERNON COUSINO ENOCH COX MAGGIE COX ADRIAN CRABTREE JACOB CRABTREE KATHLEEN CRABTREE STEPHAN CRABTREE WALTER CRAWLEY COURTNEY CRAYNE JACOB CRAYNE BRADLEY CREWS MIKEL CREWS ZOEY CRITES APRIL CROW DARRELL CROW FAWN CROWDER SARAH CROWLEY CHRIS CUMMINGS ROBERT CUMMINGS KEVIN CYRUS ZIRAM DAHKUM ZAWNG DAI CING DAL GIN DAL JOHN DAL NENG DAL LIAN DAL HENLEY DANG JUSTIN DANIELS CHARLES DANIELS JOHN DANIELS RICHARD DANIELSON RONDARIUS DARDEN JUNIE DARE GERYL DAULONG JENIFUR DAVIDSON CAMERON DAVIS DARRYL DAVIS GREGORY DAVIS JASMINE DAVIS JERRY DAVIS MATTHEW DAVIS RICHARD DAVIS RYAN DAVIS TERRANCE DAVIS VERONICA DAVIS BILLY DAVIS, JR. MYRA DAWSON DANIEL DE CASAS YOANA DE LA TORRE DAVID DEASON ZACHARY DECKER SETH DeCOUX CIIN DEIH ISMAEL DELAPAZ MATIAS DELAPENA JR DOREEN DELEO JUANA DELOBO RAQUEL DELUNA MATTHEW DEMAREE RUSSELL DEMOSS BARRY DENNIS HELEN DENNIS MICHAEL DENNIS JOSEPH DENTON DONALD DERAMUS, JR CRYSTAL DERRICK MATTHEW DESHAZER AUDENCIA DEVILLA ROY DEVILLE JESSICA DEWITT JONATHAN DIAZ RODRIGO DIAZ-FLORES CIANG DIM DON DIM HAU DIM KAI DIM MAN LUN DIM MAN ZA DIM NIANG DIM THANG DIM VUNG DIM CING DIM TUANG CATHERINE DIMICK FRANK DIMOND JOHAN DINA LIAN DING CONG DINH QUANG DINH TIEN DINH DANE DIXSON ALMA DOMINGUEZ PABLO DOMINGUEZ SOL DOMINGUEZ NIANG DON CIN DONG MKSING DOPMUL NANG DOPMUL NIANGNUAM DOPMUL THANGMINLIAN DOPMUL DEVIN DORNAN CHRISTOPHER DOTREY JOHN DOVITSKI III TIMOTHY DOWNS ROGER DRAINE SENECA DRENNAN TYLER DRESSLER MICHELLE DREW CATHRYN DUBBS DERRICK DUDLEY SAMUEL DUELL HARRIS THERESA DUGAN DEREK DUKE GUY DUNN JUSTIN DUNN LANIKA DUNN WHITNEY DUNN FERNANDO DURAN MIGUEL RALPH DURBIN KYLE DURNING KATELYN DWIGGINS RANDY DWIGGINS CHRISTOPHER EASON KRYSTLE EDENS MARDIN EJERCITO REIPIN ELIMO MELISSA ELLIS JEANNE ELLIS-RAPSON TRACEE ELLISON AUSTIN EMBRY THANG EN KHAM EN THANG TINISHA ENGLISH BENJAMIN ERNST STEVEN ERVIN CARLOS ESCOBAR KANAN BRYANT ESCOE DWIGHT ESKEW NORBERTO ESPARZA-TORRES JOAN ESPINA MATHEUS DELIA ESTRADA TYLER EVANS MARCUS EVANS, JR CHAD EVERS KYLE EVITT KURTIS EWING JESSE EWTON ARACELY FAGLIE SHAWN FAIRLEY MASON FALLING JESSICA FARIA PORTILLO AMY FEHNEL CATALINA FERNANDEZ CARLOS FERREBUS RIVAS ROBERTO FERREBUZ RIVAS DAVID FERRELL, II ALFRED FETTERHOFF, JR GARY FIELDS THOMAS FIERROS CHRISTIAN FIGUEROA MAURAS V CHOK FILIPUS ANDREW FINCH JESSICA FINKBINER STEPHEN FINNEY BRUCE FISHER RICKEY FISHER ISAAC FLAHERTY CHASTINEY FLETCHER TYRONICA FLETCHER PHILIP FLOOD EFIGENIA FLORES CAROLINA FLORES ELISA FLORES LAURA FLORES GABRIEL FLORES-BERNAL MARTIN FLORES-LOYA JON FLOYD MARK FLY CARLOS FORD REBECCA FORD SHEILA FORREST ALEX FOSTER CHRISTOPHER FOSTER FREDERICK FOSTER WYEATHA FOSTER LORETTA FOWLKES KENNETH FOYIL MICHAEL FRANCIS EYLIDD FRANCO RUBEN FRANCO GOMEZ PHILLIP FRANK WARREN FRANKLIN DANTE FRANKS ELVIS FRASCINI BRENDA FREEMAN JOSE FREGOSO ANGEL FRIAS TIMOTHY FRIAS BRANDON FRICK SHILAH FRIDAY BARRY FRIEND DERECK FROST DONALD FRY TOMAS FUENTES ALCALA WADE FULLER MEEKAYLA FULLER ANDRE FURMAN RONY GADIWALLA AARTHUR GAINES LAKEIA GAINES SARA GAITHER ERNESTO GALLARDO ALEYDA GAONA DE MARTINEZ MARIA GARAY FRANCISCO GARAY CORONA ANGEL GARCIA ANGELICA GARCIA JAIME GARCIA JOE GARCIA ISIDRO GARCIA ARRIAGA TERESITA GARCIA DIAZ LESLIE GARCIA TAPIA ROGER GARCIA TAPIA EBARDO GARI GARCIA NORMA GARIBAY VILLENA MICHAEL GARLAND, JR. JAMES GARNER CASON GAROUTTE JA'MYIA GARRETT ALEXIS GARZA LLOYD GATES GREGORY GENTRY ANTHONY GEORGE JAMES GEORGE STEPHANIE GEORGE TIFFANEY GEORGE KURSTON GERTY PETR GETMANENKO GABRIEL GIACHINO CHARLES GIBSON WILLIAM GILL KAREN GILLISPIE KYRANNA GILSTRAP JOHN GLACKEN IV TREMELL GLAZE GARRETT GODDARD JOSE GOMEZ REIQUEL GOMEZ ANDREA GOMEZ MARIA G GOMEZ MARIA C GOMEZ MEDINA JAFET GOMEZ ORTIZ MARISELA GONZALEZ IMELDA GONZALEZ ABRUM GONZALEZ ALTER NUVIA GONZALEZ CANIZALEZ MARIA GONZALEZ DE CAVELLO LIDIA GONZALEZ RIVERA DELFIN GONZALEZ VILLAMIZAR DAMON GOODAY BARRY GOODSON JASON GRAHAM MARLEITTA GRAMMER BUENAVENTURA GRANADOS-RUBIOS ERIC GRANT MEKION GRANT APRIL GRAUGNARD PEARLIE GRAVES BRIANA GRAY DREW GRAY SHAMEKA GRAYSON ANTHONY GREEN DAVID GREEN DONJA GRIFFIN STARLA GRIFFIN RONALD GRIMES JOHN GRUNDMANN RACHEL GRUNDMANN JUAN GUERRA MEDINA GERARDO GUERRERO CASTELLANOS MARIA GUEVARA RODOLFO GUEVARA CAROLINA GUILLEN RONALD GUINN VERNICE GUINN BRANDON GUNTER DOMINGO GUTARRA GILBERTO GUTIERREZ SILVIA GUTIERREZ MENDOZA EUGENE GUY GEORGINA GUZMAN LUIS GUZMAN HUGH HA SCOTTY HAGLER MICHAEL HAINES NGAM HAK TIMOTHY HALBERT REBECCA HALE MARCIA HALEY JOSHUA HALFPAP DENNIS HALL JEROME HALL KELLY HALL STEPHEN HALL PIERRE HALL STEPHANIE HALL ZACHARY HALSEY DANIEL HALTERMAN G. SCOTT HAMILTON JEFFREY HAMMONS KIPPEY HAMPTON CIN HAN MUNG HANG PAUN HANG THANG HANG LAL HANGSAWK LAM HANGSAWK CHIN HAOKIP LET MIN HAOKIP LHUN HAOKIP PAO HAOKIP DEREK HARBIN, SR. MICHAEL HARJO SCOTT HARJO BRUCE HARMAN, II JAMEESE HARRIS STACEY HARRIS DONALD HARRIS JERRY HARRIS MICHELLE HARRIS DAVON HARRISON RONALD HARRISON ROBI HARTMANN HEATHER HASKINS ARCHIE HASS III CING HAU CING NGAIH HAU KAM HAU KHUP HAU NGAI HAU THANG HAU NENG HAU LIAN PAUL HAVENS DEVARDUUS HAWKINS BILLY HAWLEY, JR. STEVEN HEAD ANDREA HEIDT TERRENCE HEINBERG LUKE HEMPHILL DANIEL HENDERSON ERIC HENDERSON CHAKIRIS HENDERSON SHEILA HENDERSON STEPHEN HENDRIX MELISSA HENLEY KENNETH HENRY JUSTIN HENSHAW ARMANDO HERNANDEZ CORCINA HERNANDEZ JOSE HERNANDEZ LUIS HERNANDEZ MARIANO HERNANDEZ CESAR HERNANDEZ DOMINGUEZ AXEL HERRERA BAEZ PAOLA HERRERA REAL RAMEE HESTER MARK HESTON MICHAEL HICKMAN ALECIA HICKS CLINTON HICKS BRENDA HIGGINS LARRY HIGHFIELD DONALD HILL SANTANYA HILL JAMARIOUS HILL JUDITH HILL DAVY HILL, JR. D'ANNA HILTON LAMONT HINES JUAN HINOJOSA TYSON HINTHER TU HKAWNG MIN HLA THANG HMUNG TUANG HNIN JACOB HOBBS RICKY HOBBS BRANDIE HOBDEN ANDREW HODGES TAQUISA HODNETT-SMITH AARON HOFSTROM DAVID HOGAN LENA HOGAN PAUL HOGAN KEITH HOLCOMB JAMAHCO HOLDMAN CLEMA HOLLAND SEDRIC HOLLAND ANTHONY HOLLISTER WILLIAM HOLMAN DESIREA HOLT LAWRENCE HONEL ANASTASIA HONN JACK HONN STEPHEN HOOVER SHELBY HORNBERGER WILBURN HORNER ABERIAL HORTON STANLEY HORTON TITAN HORTON WANDA HORTON NU HOU MANGTHOUNG HOU KIP SANDRA HOUSE JERRY HOUSEMAN RICHARD HOUSTON WAYNE HOUSTON AARON HOWARD ANTHONY HOWARD MICHAEL HOWARD DAVID HOWARD DARIN HOWELL JAMES HOWELL, II SAW HTOO YEAUNG HTWE CING SIAN HUAI CING NGAIH HUAI CING ZA HUAI MUAN HUAI NUAM HUAI VERONICA HUAI VUNG HUAI THANG HUAT SCOTT HUBER LYDIA HUDSON JIMMI HUGHES LEXING JERAD HUMPHREY LARRY HUMPHREY MICHAEL HUMPHREY MICHAEL HUMPHREY, JR LATARCHA HUMPHRIES KHAN HUNG CRYSTAL HUNTER RONALD HUTCHCRAFT GARY HUTCHINS SAMUEL HUTCHINSON DUNG HUYNH BRIANA HYSELL OTILIA IOWANES REGINALD ISAAC, SR MELISSA IVY TU JA KHAI JA KHUP AUTUMN JACKSON DALTON JACKSON JEFF JACKSON JOSEPH JACKSON MARY JACKSON BELINDA JACKSON QUINCY JACKSON TIMOTHY JACKSON CAMERON JAEGER JOSE JAMAICA ESTHER JASUAN WADE JENKINS TERRIELLE JENNINGS MICHAEL JENSEN FREDERICK JIMMERSON CHAITANYA JOHAR BRIAN JOHNSON CHRISTOPHER JOHNSON EBONI JOHNSON JEREMIAH JOHNSON KAYLA JOHNSON TODD JOHNSON TRISTAN JOHNSON ZACHARY JOHNSON DYWANE JOHNSON KEITH JOHNSON LECEDRA JOHNSON LESTER JOHNSON MISTEE JOHNSON CONNIE JONES DANNY JONES DAVID JONES DERRIC JONES KEVIN JONES MATTHEW JONES RAYMON JONES REMIA JONES CLARISSA JONES DEKESHA JONES EVA JONES KINESHA JONES RANDOLPH JORDAN RONALD JORDAN SEAN JORDAN DEMETRIUS JOSEPH TJ JOSEPH YOLANDA JUAREZ EDUARDO JUAREZ PIRONA DERMIDIO JUEZ PEREZ LEANDRO JUMELLES NUNEZ LASHETIA JUSTICE HA KA HA NATALY KADDOURA ZAM KAI KANOR KAIOS JAMES KAIRU GARRETT KAISER JASON KALE LIAN KAM MANG KAM NGIN KAM DAL KAP GO KAP LIAN KAP THANG KAP SIAN KAP LIAN BRIAN KASTL TUANG KAWI NENGLIAN KAWNGTE BRANDON KELLEY JOHN KELLY KENNETH KELLY, JR GREGG KENNEDY KEITH KENNEDY JAY KEPHART ABRAHAM KHAI DAL KHAI DAL KHAI DAVID P KHAI DAVID T KHAI DIM KHAI EN KHAI HAU KHAI JOHN KHAI KAM KHAI KHAM LIAN KHAI KHAM KHAN KHAI KHAM CIN KHAI KHUAL KHAI KIM KHAI LAANG KHAI LANG KHAI NANG KHAI NGIN TUAN KHAI NGIN CIN KHAI PAU KIM KHAI PAU SIAN KHAI PAU KHAI PAU ZA KHAI PAUL KHAI PETER KHAI THAN KHAI THANG S KHAI THANG H KHAI THANG KHAN KHAI THANG SIAN KHAI THANG LIAN KHAI THAWNG KHAI ZAAM KHAI ZAM KHAI ZOMI THURA KHAING DONGH KHAM GO KHAM LIAN KHAM MUNG KHAM PAU KHEN KHAM PAU DO KHAM PAU KHAN KHAM THANG KHAT CING KHAWL PAU KHEH CING KHEK KAM KHEN NIANG KHOI NGAM KHOLEL NO KHONG LANG DAI KHUAL HAU KHUAL KAM KHUAL PAU KHUAL THANG LIAN KHUAL THANG S KHUAL THANG SIAN KHUAL CIN KHUP DAI KHUP KAP KHUP KHAM KHUP LIAN KHUP MANG KHUP NANG LIAN KHUP NANG SUAN KHUP PAU CIN KHUP PAU LIAN KHUP PETER KHUP THANG SUAN KHUP THANG GO KHUP THANG LIAN KHUP AMANDA KIDD BIAK KIL ANDREW KILGORE CIANG KIM CIIN KIM CING KIM DIM KIM EDWARD KIM MAN KIM NANG ZA KIM NENG KIM NING KIM PA KIM THANG ZON KIM THANG KIM THANG DEIH KIM THAWNG KIM ZAM KIM KEVIN KIMBALL JOE KINCADE MARTIN KINDLE KENOSHA KINDLE CODY KING JOSEPH KING LORI KING RUSSELL KING JAZMYNE KING KORBY KINKADE ROGER KINKADE, JR. MANGNEO KIPGEN ALAN KIZER ZAKARY KIZER SEAN KIZZEE JOSEPH KLEBER ROBERT KNEBEL RONALD KOMANTA BUDDY KONS MARK KOSCHMEDER MORPHY KOSMES JAMES KOSS ROBERT KRAFJACK NEBOJSA KRESOVIC FRED KRUGER MIKHAIL KRUPENYA MANG KUAK ADAM KUBICKI CASSY KUYKENDALL NICHOLAS KUYKENDALL JOHNY LACAYO FORNOS JOSCELIN LACAYO MESTRE YAWSEP LAHPAI GIANG LAI KAP LAL LUN LAL ZVJEZDANA LALIC GIN LAM MUNG LAM LAMI LAM TUNG ANGELA LAMBERT MYOSHIA LANDRUM ROADY LANDTISER DEBORAH LANE GIN LANG PUM LANG DO LANGH HAU LANGH KAP LANGH THANG LANGH THAWNG LANGH DANIEL LAPRES HUGH LASATER SHANNON LASATER SENG LASI TAMESHIA LAURY JENNIFER LAW MAN LAWH JOYCE LAWRENCE STEVE LAWRENCE, JR JEFFREY LAWSON STEPHEN LAWSON RUBY LAWSON LAI LE JACOB LEACH CANDICE LEAGUE PETE LEDBETTER ALBERT LEDBETTER III ALLEN LEE DARREN LEE PO LEE JACQUELINE LEE MATTHEW LEEPER ARIEL LEFF GREGORY LEFFLER MARK LEHMAN SAMANTHA LEHO LAURIN LEMLEY FRANCISCO LEMUS SANDRA LEON DE ESTEBANE ALMA LETAL ADUNTE LEWIS CYNTHIA LEYVA BRANDON LEYVA-ORONA VAH LHING AWI NGAIH LIAN AWI D LIAN BAWI LIAN CIN SUAN LIAN CIN ZA LIAN CING KHAWM LIAN CING THEIH LIAN DIM LIAN DONG LIAN GIN KHAN LIAN GIN TUANG LIAN GO LIAN HUAI LIAN JOSEPH LIAN KAM LIAN KHAM LIAN KHEN LIAN MAN DEIH LIAN MAN NGAIH LIAN NANG THAN LIAN NIANG DEIH LIAN NO LIAN PAU NEIH LIAN PAU DAL LIAN PAU SUAN LIAN PAU DEIH LIAN PAU MUAN LIAN PAU SIAN LIAN SIAN KHAM LIAN THANG KHEN LIAN THANG THAH LIAN THANG NGAIH LIAN THANG SAWM LIAN VI LIAN VUM LIAN LAL LIANA SAWM LIANA MICHAEL LILLARD JEREMY LILLY PING LIN THOMAS LINCOLN WILLIAM LINDSAY FRANK LINDSEY KEITH LINKER BRIAN LITTLE SERGEI LITVINOV ANGELICA LIZARRAGA OLIVAS ASPEN LLOYD MATTHEW LOEWEN OLIVER LOGAN BENJAMIN LOGSDON ALANA LOMAE LABIL LOMAE JAMES LONDONO CORO RICKY LONG ELIZABETH LOONEY ANGEL LOPEZ MARGARITO LOPEZ NICELT LOPEZ THOMAS LOPEZ BENJAMIN LOPEZ EDUARDO LOPEZ OLIVARES JOSE LOPEZ OLIVARES MARK LOTAKOON JUSTIN LOUCAS JASON LOVETT EDGAR LOZANO DANIJELA LUCIC JOHNNY LUCIUS SCOTT LUDGATE JARROD LUDLOW QUANNAH LUDLOW EVELYN LUGO-ORTIZ DAWN LUKE JEROLYNN LUKE HAWNG LUM CING N LUN CING SAN LUN CING HAU LUN DIM LUN HAU LUN HKIN LUN KHUP LUN KIM LUN LIAN LUN NIANG NGAIH LUN NIANG SAN LUN NIANG NGAIH LUN THANG LUONG THI LUU JACOB LUZIER KELLY LYBARGER GERRY LYDIA SAMUEL LYNCH JR. AHCHANG MABU HAMSAR MABU CARMEN MACIAS TERRAZAS JORDAN MACK KEITH MACKEY RUSTIN MACKEY LARRY MADALONE, II JORGE MADRIGAL CORY MAHONEY TAM MAI CHRISTOPHER MAIDHER CARLOS MALONE KI MALONE TIFFANY MALONE JOSHUA MALOY JEFFREY MALY CING LUN MAN CING SAN MAN LIAN MAN NIANG MAN ZEN MAN TAM MANA MARIA MANCILLA CHIN MANG CIIN KHO MANG CIN KHAN MANG CING MANG DAI MANG EN CIN MANG EN MANG GIN MANG HAU MANG HAU DO MANG KAM KIM MANG KHAI KHAN MANG KHAM MANG KHAM TUNG MANG KHAM LAM MANG KHAN MANG KHUP MANG KIM MANG LAGH MANG LIAN MANG LIAN SIN MANG LIAN NGAIH MANG LIAN NGAIH MANG LINUS MANG NIAN MANG NING MANG THANG MANG VUNG MANG ZAM MANG ZEN MANG MARQ MANNING BARBARA MANNS ZAU MARAN APRIL MARGWARTH PAUL MARGWARTH WILLIAM MARKWARDT MARIA MARQUEZ DE-GILBREATH MARIANA MARQUEZ MARQUEZ ANA MARROQUIN VICKEY MARS ERROL MARSHALL ANTONIO MARTIN DANIEL MARTIN GAVIN MARTIN JERRY MARTIN MICHAEL MARTIN WILLIAM MARTIN FLORENTINO MARTIN-ROMO AMANDA MARTINEZ DIANA MARTINEZ JULISA MARTINEZ OBDULIA MARTINEZ RAUL MARTINEZ HECTOR MARTINEZ MOLINA YESENIA MARTINEZ VAZQUEZ THOMAS MASENGALE, JR. JAMES MASON BEVERLEY MASON DAVID MASON SHERIDAN MASON CRISTIE MASSEY MARCELINO MATA SANDRA MATA ELVIN MATHIS LENON MATOS FELIZ RON MAUCH CIIN MAWI RAM MAWI PATRICIA MAXIMO DYLAN MAXWELL LEONARD MAXWELL SHANE MAYHUGH COURTNEY McAFEE TINA McBEATH ROBERT McBOWMAN MYRA MCBRIDE MICHAEL MCCALISTER MYKEA McCALISTER ELIZABETH MCCALL FRANCIS MCCLAIN ROBERT McCLEARY DIRK McCLELLAN WALTER McCLUSKY CHERYL MCCLUSTER AARON MCCONNELL MICHAEL McCONNELL JAKE MCCORMICK DEBRA MCCOWAN WESLEY McCOWAN, JR. RASHAAD MCCRAY MICHAEL McCUIN KATHY McCULLOCH LOYD McDANIEL JAMES McELROY NICHOLAS McELROY MICAH MCELWEE CLAYTON McFALL JEFFERY McGEE RONNIE JOE McGEE RONNIE JOE McGEE DAVID MCGILL, JR PETER MCINTIRE JOHN McINTYRE DANIEL McKEE CHRISTOPHER MCKEE DONNA McKINNEY GEORGIE MCNAC SEAN McNARY GINA MEANS JON MEDEIROS LUIS MEDINA MARCANO ELIZABETH MEDINA-MACEDO MICHAEL MELLOTT BRIANNA MELTON SILVESTRE MENDEZ GONZALES ANTONIO MENDOZA BILLY MERRELL JOHNNY MERRELL, JR STEVEN METCALF JERRY MEYER NICOLE MICHAEL CARMEN MILAM MICHAEL MILES CEDRIC MILES SHELLY MILLER JENNIFER MILLS TYRELL MIMS DALLAS MITCHELL JASON MITCHELL PHILLIP MITCHELL ROBERT MITCHELL VOLTA MITCHELL PORSHA MITCHELL ERASMO MOCTEZUMA JAY MODISETTE BIASNEY MOJICA CASTANEDA JOSUE MOJICA TORRES RAFAEL MONARRES ALEXIS MONASTERIO AGUILERA BLANCA MONDRAGON DINORA MONROY DE DIAZ IRIS MONTANEZ FIORELA MONTANO NATALIE MONTANO JOHNNY MONTOYA CORDELL MOORE HERBERT MOORE MARIO MOORE PHILLIP MOORE TONY MOORE ALFONSO MORAN TONY MOREHEAD LUKE MOREY ELROY MORGAN MATTHEW MORGAN JESSAMYN MORRIS PATSY MORRIS JAMES MORROW WALTER MOSER AUQUAN MOSES PHILLIP MOSS, JR. CLAYTON MOTE CING MUANG MUA MUANG NIANG MUANG TUANG MUANG ZAM MUANG DELCIMAR MUJICA MENDEZ ERIC MULLINIKS ALONZO MUMPHREY THANG LUM MUN THANG SIAN MUN CIN DEIH MUNG CIN KHAN MUNG CIN SIAN MUNG DAII MUNG GINDAL MUNG HAU MUNG HERO MUNG JAMES MUNG KAI MUNG KHUAL MUNG KHUP GEEL MUNG KHUP KHAN MUNG LANG KHAN MUNG LANG LAM MUNG LIAN MUNG NANG SIAN MUNG NGO MUNG PAU SIAN MUNG PAU KHAN MUNG PAU LIAN MUNG PAU LIAN MUNG PETER MUNG SANG MUNG SUAN MUNG THANG KHAN MUNG THANG LAM MUNG THANG DEIH MUNG VUM MUNG TRAVIS MUNGER GABRIEL MUNIZ GONZALEZ JESUS MUNOZ AUDIE MURRAY MA MUSHRUSH JOHN MUTANDA ROSY MUZIKA JACOB MYERS CHOI NAING SAW NAING DIEGO NAJERA LAWRENCE NANG SING NANG THOMAS NANG DARIN NARBOE NOORY NARTIN CARDRICO NASH THANG NAULAK ZAM NAULAK MARIA NAVA BAWK NAW CLAYTON NEAL DARYL NEALY, JR NIANG NEL JEFFREY NELSON HENRY NELSON JR CING NEM DIM NEM SAN NEM DEI NENG JOSHUA NETTEN SETH NETTEN ROBERT NEZ DIM NGAIH LIAN MANG NGENZO NUAM NGIN ZAM NGIN EN NGO PAU NGO A VAN NGUYEN DUONG NGUYEN HUNG NGUYEN HUU NGUYEN MANH NGUYEN NOI NGUYEN PHUOC NGUYEN THANH NGUYEN HKAWN NHKUM CIN MAN NIANG CIN NGAIH NIANG CING KHAWM NIANG CING SIAN NIANG CING TAWI NIANG CING KHAN NIANG DIM L NIANG DIM HAU NIANG DIM MAN NIANG EN NIANG ESTHER NIANG ESTHER HAU NIANG GIN NIANG GO NIANG HAU NIANG KAP NIANG KHAN NIANG KHEM NIANG LAM NIANG MAN NIANG MANG NIANG NGO NIANG PUM NIANG TUAL NIANG VUNG NIANG VUNG NIANG ZEL NIANG JACOB NICHOLS SIMON NIEKERK JOHN NIMAL II THANG NING ZAM NING ERICA NIXON MEAGAN NIXON CING NO CING NO JACOB NOE NUAM NOO WILLIE NORFLEET ERIC NORRIS JODY NORTHRUP JERRY NOWEL JACOB NOWLIN TUMAI NPAWT NGIN NTEM KIM NU LIAN NU MANG NU CIIN NUAM CING ZA NUAM CING KHAN NUAM CING DO NUAM DIM NUAM LAWH NUAM MAN NUAM NIANG NUAM NING NUAM THANG NUAM THERESA NUAM CING NUAMBOIH WILMER NUNEZ CHIRIVELLA NGIN NUNG LAYAUK NYOI MICHAEL O'BRIEN BRUNO OCHOA MICHAEL ODOM ALEXANDER OFOSU RICKEY OGANS UDUIHAYE OGEDENGBE WYATT OGLE ANTHONY OLIVERAS SONYA OLSON ERIC OLSON KEITH OLSON JAMES ONEILL, JR CHRISTINE ONEY PAUL ONYENEHO WAI OO VICTOR ORONA LETICIA ORONA MARGARITA ORONA MARIA ORONA ERLINDA ORTEGA DAVID OSBORNE OFELIA OSUNA JENNIFER OVERMEYER JOHNNY OWENS MIGUEL PABON KENNYS PACHECO SALAZAR MARK PAGE JORDY PAREDES HEIDI PARK BILLY PARKER MICHAEL PARKER RITA PARKER ROBERT PARKER DEIDRA PARKER ELIZABETH PARKER KEYANNA PARKER JUSTIN PARTNEY CODY PASEMAN JASON PATE CALEB PATERIK JOHN PATTERSON PAUL PATTERSON LAUREN PATTERSON CIANG PAU CIN LIAN PAU CIN N PAU DAI KHEN PAU DAL ZA PAU DAL KHAN PAU DO PAU EN PAU GIN SIAN PAU GIN SUAN PAU KAM PAU MUNG PAU NANG PAU NENG PAU PUM PAU THANG PAU ZAM LAM PAU ZAM KHAN PAU ZAM KHEN PAU ZOO PAU MANI PAZHANATHADALAM JOSHUA PEARCE CARLDELL PEARSON ANTHONY PEDONE HERLIP PELL RONALD PENNY, JR VLADIMIR PENYAZ SHAQUILYA PEOPLES OSCAR PEREZ SERGIO PEREZ JOE PEREZ LETICIA PEREZ HECTOR PEREZ ARIAS PERLA PEREZ ARIAS CHRISTIAN PEREZ GUTIERREZ PEDRO PEREZ PAEZ FRANCISCO PEREZ SANCHEZ ROBERT PERKINS MILES PERRY KIMBERLY PERSONS MATTHEW PESCHONG MONTELL PETE JAMARCUS PETERS ROBERT PETERSON DANIEL PEURIFOY KINH PHAM LINH PHAM PHUOC PHAN LIANKHAN PHAWNG ADRIANA PHILLIPS KRISTOFER PHILLIPS SHANNON PHILLIPS TYMARQUIS PHILLIPS NATHANIEL PHILLIPS ALEXANDER PHOMPRIDA HAU PI HELEN PI KHUAL PI NIANG PI NUAM PI PETER PI THANG PI THOMAS PI TUANG PI GOH PIANG KHUP PIANG MAN PIANG SUAN PIANG THANG LAMP PIANG THANG DEIH PIANG VAN PIANG CHRISTOPHER PICKENS MARK PIGMAN DALTON PIPES NELSON PIRELA GONZALEZ MIGLANIA PIRONA GONZALEZ HAROLD PITTS, II CANDY PITTSER MARIELYS PLAZA CARPIO KEVIN POBUDA SUSANNE POINDEXTER SHELBEY POINDEXTER BASANT POKHREL RENU POKHREL VELMA POLLEY MARK POOL BRANDIE PORTLEY DAMON POTTS ASHLEY POWELL NICOLE POWELL ORAN POWELL RUDY POWELL NYELAN POWELL MICHAEL POYNTER NATHAN PRADMORE JOSE PRADO LAJUAN PREAR, JR KENNETH PRENTICE, JR. DANIEL PRESSLER, JR KHAI PU KHAM PU MANG PU MUANG PU SING PU TUANG PU ALMA PUGA KHAI PUI THANG PUI KAM PUM THANG PUNO MICHAEL PUTNAM JOHN QUANG FLARA RACHU VINA RACHU VINCENT RACHU ERIC RACINE ASNOR RAIMOND RETSIAN RAIN BRIAN RAMBO SUSAN RAMBO EVA RAMIREZ MARTINELLY RAMIREZ YOSSELIN RAMIREZ AGUILAR ROSA RAMIREZ AGUINAGA PATRICIA RAMIREZ NAVARR GERMAN RAMOS ALONSO HEIDI RAMZEL KARLY RANCK AARON RANDALL JEFFREY RANDALL ROBERT RATLIFF TOMMY RATLIFF KYLE RATZLAFF DAKOTA RATZLOFF TAYLOR RAY LYDIA RAY CURTIS RAYON KEIANYA RAYSON THOMAS READ DIEGO REBOLLAR-MARIN PEGGY REDDEN JAMES REED MICHAEL REED GUADALUPE REESE LAQUAN REESE WYKELAN REESE AMANDA REEVES MARGARET REEVES FEDORA REGUS STEPAN REGUS JOHN RENTKO, JR. JAKOB RESSLER PABLO REYES CLARA REYES AGUSTIN REYES, JR. DAICHI REYNA THOMAS REYNOLDS WILLIAM REYNOLDS DANIEL RHOADES JEFFREY RHODES JAVON RICE DANNY RICHARDSON BRYAN RICHARDSON BRIAN RICKETT JR TERRY RICKNER ROBERT RIDDELL RANDALL RIDENOUR ANGELA RIDEOUT COREY RIDER BRETT RIEGEL DANIEL RITCHIE HILLARY RITE BRAYAN RIVAS SANCHEZ SIGFREDO RIVERA RAMON RIVERA MONTIA ROBBINS CARL ROBERTS BRANDON ROBERTSON CHRISTOPHER ROBERTSON DAVID ROBINSON DAVID ROBINSON, JR. JEREMIAH ROBISON DEE ROCHA BRAD RODRIGUES HECTOR RODRIGUEZ MARIA G RODRIGUEZ MARIA LOUISA RODRIGUEZ NELSON RODRIGUEZ REBECCA RODRIGUEZ RICARDO RODRIGUEZ DERRICK ROGERS DON ROGERS GEEOVANTA ROGERS TONY ROGERS NELSON ROJAS LIDIA ROJAS JAMIE ROLLINSON TONY RONGEY ROBERT ROSENCUTTER RALPH ROSENOGLE WENDELL ROSS CASEY ROSS MARY ROWE RICHARD ROWE, JR. JOSHUA ROWELL JACOB RUCKER TERRANCE RUDD CARLOS RUIZ MA RUIZ ORTEGA TERENCE RUSHING HAROLD RUSSELL KARINA SAENZ ACOSTA CESAR SAENZ RODRIGUEZ ABELINO SALAZAR MARIANGEL SALAZAR GONZALEZ JORGE SALAZAR MARTINEZ YSABEL SALAZAR SOARES MARIA SALDIVAR MIGUEL SALDIVAR VICTOR SALDIVAR JOSE SALDIVAR OREPEZA DAVID SALEGO NAEL SALEM DIANA SALINAS JEFFREY SALISBURY PUNUNGAU SALLE AHJUNG SALUPTA BRENT SALYER ROMERO SAMPSON NAW SAN BEATRIZ SANCHEZ CRISTAL SANCHEZ LUCIA SANCHEZ MARIA SANCHEZ MAYRA SANCHEZ GABRIELA SANCHEZ ALBERTH SANCHEZ BOLIVAR LUZ SANCHEZ NUNEZ KATHRYN SANDAY CALVIN SANDERS QUIJUANA SANDERS TANISHA SANDERS CIN SANG SAMUEL SANG TUAN SANG LAL SANGI WILLIAM SANGSTER ANTONIO SANTACRUZ WENCESLAO SANTIAGO NANG SAR BROOKLYN SARGENT STEVEN SAW ERICK SAWYER COREY SCAIFE JUANITA SCHAFNER AUDREY SCHAMING WILLIAM SCHAROSCH CALEB SCHMELING AUSTIN SCHROEDER KARL SCHWEGLER CARIE SCOTT DARLA SCOTT JERRY SCOTT BRIANNA SCOTT RONA SEAGO SOVATNITA SEAMAN THANG SEI THONGKU SEI ALEXA SEIDEL NEM SEN KAYUN SENG ANNETTE SERNA JACOB SHAFER PONG SHAR THOMAS SHAW RONALD SHAW JR. RANDY SHELBY JAMES SHELTON VASILIY YAKOVLEVICH SHEMEREKO VASILIY VASIL'YEVICH SHEMEREKO LARRY SHEPHERD DAMIEN SHEROW DARREN SHERWOOD NANG SHIN COURTNEY SHINAULT BRUCE SHIPLEY KEITH SHORES GERRY SHORT SHAWN SHOULDERS RAYMOND SHUNOWSKI, JR NAA SIAM ZAM SIAM BIAK SIAN CIIN SIAN NGIN SIAN ON SIAN PAU SIAN MICHAEL SICKING NELSON SIERRA YANNELIS SIERRA DE GARI ELIBETT SILVA PERDOMO DOROTHY SIMMONS CORY SIMMONS JERRY SIMMONS TARA SIMMONS DWAYNE SIMPSON ANTHONY SING DAAI SING DAL SUAN SING DAL SUAN SING PAU SING THANG SING THAWN SING CHRISTOPHER SISSOM MICHAEL SITTERLY CHRISTOPHER SIZEMORE SHADARON SLAUGHTER ANDREW SLAVENS DEBI SLOAN LARRY SLONE CHRISTOPHER SMITH DOUGLAS SMITH HEIDI SMITH JEFFERY SMITH KERRY SMITH KYLE SMITH RENALDO SMITH RICARDO SMITH RYAN SMITH TAMARA SMITH FRANKIE SMITH MARY SMITH TONY SMITH JAMES SMITH, II DENNIS SMITH, JR WILBERT SMITH, JR. JOHNATHAN SNEED JOSHUA SNIDER ROGER SNOW JOSE SOLARES NEMISIA SOLIS MARIA SOLIS VERONICA SOLIS MARCO SOLIS-GUTIERREZ MILISSA SOTO KERRY SOUCY-EVANS CLENT SOUTHERLAND, II KEVIN SOUVANNASING DENNEY SOWDER JOHN SPAIN, III SIERRA SPARKS RONNIE SPARKS CHANDA SPENCER JAMESON SPIRES KOREY SREDINSKY CHRISTY STANDBERRY MARCUS STANDBERRY GEORGE STANDING LAWANA STANE ASHLEY STARLIN ARREST STEPHEN MARNINTA STEPHEN ROCKSER STEPHEN WISHLY STEPHEN KELLY STEPHENSEN TERRENCE STEPHENSON ETHAN STICKLEY DAVID STIEWE JOSEPH STIEWE CHARLES STINECIPHER BRENT STOCKTON JACOB STODDARD KEVIN STODDARD ALLEN STONE SU STORRS STACEY STRATTON BRIAN STUNKARD BRYAN STURDIVANT DAI KHAN SUAN HAU SUAN KHUAL SUAN KHUP SUAN KIM SUAN NANG SUAN NGIN SUAN PAU SUAN THANG SUAN VUNG SUAN PAUL SUAN MUNG KHAM SUANTAK DEIH SUKZO BAWMKHAI DAVID SUM HAU SUM MANG SUM PAU SUM SAI SUM WA SUM LADDIE SUMTER JR. TIMOTHY SURGEON, II SEAN SUROWIAK JACK SWEET CHAD SWIFT SWAINER SYNE JAMES TABER JEFF TALLEY GEORGE TALUGMAR MINH TANG WILLIAM TANKERSLEY KEITH TANNER MARTIN TAPIA CARVAJAL WHITNEY TAPP LARRY TATE, JR BOIH TAWNG MANG TAWNG BEVERLY TAYLOR BRENDON TAYLOR CLINTON TAYLOR ERIC TAYLOR GRANVILLE TAYLOR MISHAELA TAYLOR RANDALL TAYLOR REBECCA TAYLOR ROSEANN TAYLOR WILLIE TAYLOR ANDREA TEAKELL KEVIN TEAKELL ROBERT TEIS KEENA TEMPLE YASMINE TEMPLETON NGIN TENG MERCEDES TENNYSON ANDREW TERRY SHANNON TERRY BENJAMIN THANG CIN THANG CIN ZAM THANG DAI DO THANG DAL KHAN THANG DO DEIH THANG DO T THANG GEN THANG GIN THANG GO THANG HAU THANG KAM S THANG KAM SUAN THANG KAM LIAN THANG KAM KAP THANG KHAI THANG KHAM THANG LAL THANG LAM THANG LANG THANG LANGH THANG LIAN KAP THANG LIAN CUNG THANG MANG THANG NGIN THANG NGUN THANG PAU SUM THANG PAU KAP THANG PAU SIAN THANG PAU KHAN THANG PAU SUAN THANG PAU THAWN THANG RA THANG SUAN THANG THAWNG THANG TUAN THANG TUN THANG VIAL THANG ZAM PIAN THANG ZAM LEM THANG ZAM CIN THANG ZEN KHAW THANG ZEN KHUA THANG LIAN THANG LAM GINDEIH THANGHATZAW PETER THANGPI LIAN THAWN SUAN THAWN THANG THAWN TUAL THAWN LANG THAWNG PAU THAWNG BRADLEY THOMANN DEONTE THOMPSON MARLO THOMPSON NATHANIEL THOMPSON REBECCA THOMPSON XAVIER THOMPSON JESSICA THURBER TED TIGER KYLE TILLERY TYLER TINDELL WILLIE TIPLING TAILY TISAN THAWNG TLUANG WILLIAM TOBAR DEBBIE TOMLIN IVAN TORRES LEONARDO TORRES OLIVARES CARLOS TORRES SANTOS ALEJANDRO TORRES SILVA STEPHEN TRACY CONG TRAN THI K TRAN THI N TRAN TUONG TRAN UT TRAN MARK TRIBBLE RICHARD TRULL SENG TU MANG TUAL NGIN TUAN CIN LAM TUANG CIN SIAN TUANG GIN TUANG KAM K TUANG KAM TUANG KAM CIN TUANG KAM TUANG LANGH TUANG SIAN LIAN TUANG SIAN ZIAN TUANG SUAN TUANG SUANLAM TUANG THANG ZA TUANG THANG L TUANG THANG LIAN TUANG THANG SUAN TUANG TUN TUANG VUNGH TUANG ZAM TUANG FELICIA TUETKEN JESSICA TULLAR NGIN TUN THANG TUN ZAM TUN GO TUNG KAMZA TUNG LANGH TUNG MUNG TUNG SUANG TUNG THANG TUNG VUNG TUNG MICHAEL TUNNELL PAUL TURBE BRYAN TURNER CHARLES TURNER AHMAD TURNER DANTAVIUS TURNER JESTON TURNER KEVIN TURNER LARRY TURNER RANDAL TYER JESSICA TYLER JACOB TZANG JESUS TZUL CING UAP HUAI UAP PAU UAP PAT UNDERWOOD PERNELL UNDERWOOD SUDEEP UNNIKRISHNAN MARIA URQUIZA YADIRA URQUIZA BOENAWAN UTOMO GIOVANA VALENCIA SUSANA VALENCIA MIRYIANDRIS VALERA BARRIOS JULIO VALLE BRENNEN VANCE TIMOTHY VANCE ZACHARY VANCE SEVERO VARGAS RAFAEL VARONA CARLO VASSALLE SHAWN VAWTER JUAN VAZQUEZ ARLENE VEGA CASTRO ANTONIO VELASCO JAMES VELDE NOEMI VELIZ JUAN VENCES ANGEL VENEGAS KASEY VENETOFF SALOME VERA JAMES VERHAMME STEPHANIE VICKERS-CAMERON TERESA VICTORY EFRAIN SANCHEZ VILLA EFRAIN SOTELO VILLA WILSON VILLALOBOS MOLERO ISABEL VILLALPANDO-MARTINEZ RAULITO VILLANUEVA SELINA VIRAMONTES CUONG VO TONG VO CHRISTOPHER VOIGHT CHUAN VU THU VU NGUYEN CIIN VUM CIIN DEIH VUNG CING KHAWM VUNG CING LAM VUNG CING HUAI VUNG CING ZA VUNG DON VUNG HAW VUNG KAP VUNG MANG VUNG MARY VUNG NIAN VUNG NIANG SIAM VUNG NIANG LIAN VUNG NING VUNG ZEL VUNG ZEN VUNG SYNRAM WADAMHKONG MATTHEW WAGNER MARK WAKEFIELD STEPHEN WAKEFIELD WHITNEY WAKEFIELD CODY WALDEN DIANA WALKER JOSHUA WALKER RODERICK WALKER RONALD WALKER, JR ENEIDA WALKUP BARRY WALL AMILCAR WALLACE BRITTNEY WALLACE SAMANTHA WALLACE JERRY WALLER TODD WALLER TODD WALLINGFORD JUSTIN WALLIS DOMINIQUE WALSTON WELDON WALSTON STEPHANIE WALTER NOLAN WALTERS SHORICORE WALTERS NEWMAN WALTON GUOYI WANG GAYLE WARD MARQUIS WARD MICHAEL WARREN NUGENE WARREN DENZEL WASHINGTON DAQUIESHA WASHINGTON THURMOND WASHINGTON BOONE WATSON CLAUDE WATSON, JR KENDRA WATTS PERSEPHONE WATTS ALAN WEBB AUSTIN WEBBER ANGELINA WEBER JOE WELCH RONALD WELCH TRACEY WELDON GREGORY WENGER DEXTER WENGU ALLEN WESSEL JR., SHARON WEST JEFFERY WHEELER WILLIAM WHEELER KENT WHINNERY DAVID WHIPKEY II RONALD WHISENHUNT DMARCUS WHITAKER ALLYN WHITE ANGELA WHITE EMILY WHITE KYLE WHITE LEAYN WHITE TIMOTHY WHITE KENDREVIAN WHITE CASEY WHITELEY CHRISTIAN WHITESIDE ROBERT WHITNEY STEVEN WHORTON GORDON WICHMAN JACKIE WILES JERRY WILES MICHAEL WILES CORNELL WILES, JR GAYLON WILEY SHELLEY WILLADSON ALLEN WILLIAMS CHANTE WILLIAMS CLYDE WILLIAMS JACQUELYN WILLIAMS KELLY WILLIAMS KOREY WILLIAMS NICOLE WILLIAMS RODNEY WILLIAMS ROSALIND WILLIAMS BENNY WILLIAMS CORNELL WILLIAMS KATHERYN WILLIAMS NINA WILLIAMS VANDOIL WILLIAMS ROGER WILLIAMS, JR JAMES WILLIAMSON DRAKE WILLIANDER NORCY WILLIANDER CALVIN E WILLIS DIEGO WILLY CYNTHIA WILSON ISAAC WILSON JUSTIN WILSON SUSAN WILSON WESTON WILSON NAW WIN CYAN WINN VINCENT WINTON JESSE WISE RASHAUNA WISE LI WO JACOB WOLFF RONALD WOOD EMILY WOOD MYRON WOODFORK JAMAIL WOODS KASEY WORTHINGTON www.AAON.com 

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