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
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MICHAEL PUTNAM
JOHN QUANG
FLARA RACHU
VINA RACHU
VINCENT RACHU
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ASNOR RAIMOND
RETSIAN RAIN
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SUSAN RAMBO
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MARTINELLY RAMIREZ
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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
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AMANDA REEVES
MARGARET REEVES
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JOHN RENTKO, JR.
JAKOB RESSLER
PABLO REYES
CLARA REYES
AGUSTIN REYES, JR.
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WILLIAM REYNOLDS
DANIEL RHOADES
JEFFREY RHODES
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DANNY RICHARDSON
BRYAN RICHARDSON
BRIAN RICKETT JR
TERRY RICKNER
ROBERT RIDDELL
RANDALL RIDENOUR
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COREY RIDER
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DANIEL RITCHIE
HILLARY RITE
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CARL ROBERTS
BRANDON ROBERTSON
CHRISTOPHER ROBERTSON
DAVID ROBINSON
DAVID ROBINSON, JR.
JEREMIAH ROBISON
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HECTOR RODRIGUEZ
MARIA G RODRIGUEZ
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RALPH ROSENOGLE
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CASEY ROSS
MARY ROWE
RICHARD ROWE, JR.
JOSHUA ROWELL
JACOB RUCKER
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MA RUIZ ORTEGA
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HAROLD RUSSELL
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RENALDO SMITH
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FRANKIE SMITH
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TONY SMITH
JAMES SMITH, II
DENNIS SMITH, JR
WILBERT SMITH, JR.
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