AAON INC
For the period ended Mar 31, 2025. Filed May 1, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 1, 2025
AAON$57.19+5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000824142-24-000211
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0000824142-25-000120
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 109 current paragraphs.
54 unchanged; 27 reworded; 23 added; 20 removed; 4 previous and 5 current paragraphs rearranged.
Tables are not compared: 14 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
AAON is a leader in HVAC solutions for commercial and industrial indoor environments. The Company’s industry-leading approach to designing and manufacturing highly configurable equipment to meet exact needs creates a premier ownership experience with greater efficiency, performance, and long-term value. AAON is headquartered in Tulsa, Oklahoma, where its world-class innovation center and testing capabilities enable continuous advancement toward a cleaner and more sustainable future.
Current report
Macroeconomic Conditions
Current report
Beginning in January 2025, the current United States (“U.S.”) Administration began enacting a series of tariffs affecting nearly all goods imported into the U.S. In retaliation, numerous foreign countries imposed reciprocal tariffs and restricted certain exports to the U.S. The continuous changes and uncertainty in tariff policy could impact our cost of materials, parts, or components imported into the U.S. and could impact the availability of supply from our vendors. We expect to continue to pass along some of these costs to our customers, but the increased price of our products could adversely affect the demand, which could have an adverse effect on our business and our earnings.
Current report
Due to our favorable liquidity position, we are well positioned to make strategic purchases of materials when we see opportunities or potential disruptions in our supply chain. While we source a significant amount of our inventory and supplies from domestic vendors, certain vendors may source components internationally. We have experienced supply chain challenges related to specific manufacturing parts, which could be exacerbated by the trade conflict. We manage our supply chain challenges through strong vendor relationships as well as expanding our list of available vendors.
Current report
Additionally, we continue to experience challenges in a tight labor market, especially the hiring of both skilled and unskilled production labor. We continue to implement human resource initiatives to retain and attract labor to further increase production capacity. We have implemented the following wage increases to remain competitive and to attract and retain employees:
Current report
•In March 2024, we awarded annual merit raises for an overall 3.3% increase to wages.
Current report
•In March 2025, we awarded annual merit raises for an overall 4.0% increase to wages.
Current report
Despite efforts to mitigate the potential business impacts of trade conflict, supply chain challenges, and a tight labor market, future increases in the cost of materials, parts, components, or labor, in addition to supply chain disruptions, while temporary, could negatively impact our consolidated financial position, results of operations, and cash flows.
Current report
At March 31, 2025, our consolidated backlog is at a record $1,026.9 million, an increase of 83.9%, or $468.4 million, as compared to March 31, 2024. Backlog was up from a year ago for both AAON Products and BASX Products with BASX Products increasing 122.7%, or $343.2 million, when compared to March 31, 2024. Most of these orders were associated with the BASX branded data center liquid cooling solutions.
Current report
Consolidated Results of Operations
Current report
•Consolidated net sales for the three months ended March 31, 2025, increased 22.9%, or $59.9 million, due to an increase in sales of our BASX branded products. BASX branded products increased 374.8%, or $104.6 million when compared to 2024, offset by a decrease of our AAON branded products of 19.1%, or $44.7 million when compared to 2024.
Current report
•We increased our dividend from $0.08 per share per quarter to $0.10 per share per quarter, an increase of 25.0%.
Current report
•We continue to invest in the future growth of the Company as evidenced by our $50.4 million in capital expenditures in 2024, an increase of $11.7 million or 30.2% when compared to 2024.
Current report
Total net sales increased $60.0 million, or 22.9%. BASX increased by 138.9%, or $38.5 million, and AAON Coil Products increased 287.8%, or $69.8 million, both primarily related to demand from the BASX branded data center products. AAON Oklahoma sales decreased 23.0%, or $48.3 million due to challenges from the industry-regulated refrigerant transition and nonresidential construction activity that experienced weakened demand during the three months ended March 31, 2025 as compared to 2024.
Current report
Gross profit as a percent of sales decreased to 26.8% during the three months ended March 31, 2025 as compared to 35.2% in 2024. As noted above, challenges from the industry-regulated refrigerant transition and nonresidential construction activity significantly affected our largest segment, AAON Oklahoma, resulting in decreased volumes and lower overhead absorption.
Current report
Our AAON Coil Products segment gross profit increased $24.3 million, or 299.1%, as compared to 2024. Our new Longview, Texas plant expansion was completed in early January 2025, increasing overall plant capacity to be primarily utilized for the production of BASX branded data center products. Our BASX segment gross profit also increased $10.2 million, or 179.5%, as compared to 2024. The temporary inefficiencies associated with our Redmond, Oregon facility construction in 2024 have abated and we continue to ramp up production of this facility. The increased production in Redmond helped improve gross profit as a percent of sales for the BASX segment, increasing it to 24.0% during the three months ended March 31, 2025 as compared to 20.5% in 2024.
Current report
As shown in the table below, we have experienced fluctuations in the cost of several raw materials.
Current report
Outstanding Debt - On December 16, 2024, we amended our Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) to include an $80.0 million term loan (“Term Loan”) in addition to the $200.0 million revolving credit facility (the “Revolver”).
Current report
The Term Loan had an outstanding balance of $74.4 million and $78.4 million as of March 31, 2025 and December 31, 2024 respectively. The Term Loan is payable in equal month installments, plus interest, over 60 months, expiring December 16, 2029.
Current report
Weighted average interest rate of our borrowings outstanding are as follows:
Current report
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.
Current report
Current payment terms for BASX jobs primarily require the Company to fund the upfront working capital resulting in cash outflows related to our contract assets.
Current report
•changes in U.S. or foreign trade policies, including additional tariffs or global trade conflicts;
Removed paragraphs (20)
Previous report
At September 30, 2024, we had a backlog of $647.7 million. Compared to a year ago, backlog was up 32.0% from $490.6 million, driven by the BASX and AAON Coil Products segments. At the end of the quarter, a majority of total backlog consisted of orders of data center equipment that will be delivered in 2025.
Previous report
•Net sales for the three and nine months ended September 30, 2024, increased 4.9% and 4.8%, respectively, compared to the same period in 2023 with increases in our data center solutions of 90.1% and 85.1% for the three and nine months ended September 30, 2024, respectively.
Previous report
•Our cash flows from operations for the nine months ended September 30, 2024 were $191.7 million, up 78.9% compared to a year ago, giving us the flexibility to continue our investment in capital expenditures and software development of $113.8 million for this period.
Previous report
For the three months ended September 30, 2024, total net sales increased $15.3 million or 4.9%, due to an increase in volumes of approximately 2.8% and price increases of approximately 2.1%. For thethree months ended September 30, 2024, our BASX segment increased by 58.8% primarily related to data center cooling solutions.
Previous report
Gross profit as a percent of sales decreased to 34.9% for the three months ended September 30, 2024, as compared to 37.2% for the three months ended September 30, 2023. AAON Oklahoma's gross profit as a percent of sales decreased due to the lower volumes out of this segment that resulted in less overhead absorption. AAON Coil products benefited from a favorable product mix of units for the data center market that had significant repetition and resulted in high production efficiencies. BASX completed construction of its new weld shop expansion in Redmond during the quarter. The continued construction at this location requires outsourcing of some processes and materials that have lowered the BASX margin temporarily.
Previous report
As shown in the table below, the cost of raw materials has decreased, or stayed relatively flat, but we continued to experience inflation in our component parts that typically lag raw materials by six to 18 months. Additionally, in order to retain our existing employees, we have increased our starting wage rate considerably in recent years and continue to award periodic wage increases to our employees. These additional costs have been offset by the various price increases we have put in place in the past two years and increases in our production efficiency that has led to increased overhead absorption.
Previous report
Segment Operating Results for Nine Months Ended September 30, 2024 and Nine Months Ended September 30, 2023
Previous report
For the nine months ended September 30, 2024, total net sales increased $41.0 million or 4.8%, due primarily to increases in price. BASX continues to see increased demand for data cooling solutions, increasing their sales year-over-year 39.0%.
Previous report
Gross profit as a percent of sales increased to 35.4% for the nine months ended September 30, 2024, as compared to 33.3% for the nine months ended September 30, 2023. As noted above, realization of price increases has improved our margin profile along with the slowing of inflation for raw materials, especially in our AAON Oklahoma and AAON Coil Products segments, improving overall consolidated margin performance. Production timing delays at our BASX location during the first quarter of 2024, as well as some expansion construction inefficiencies, and materials outsourcing, contributed to less overhead absorption and margin performance, which resulted in a period over period decline in gross margin for our BASX segment.
Previous report
As shown in the table below, the cost of raw materials has started to come down but we continued to experience inflation in our component parts that typically lag raw materials by six to 18 months. Additionally, in order to retain our existing employees, we have increased our starting wage rate considerably in recent years and continue to award periodic wage increases to our employees. These additional costs have been offset by the various price increases we have put in place in the past two years and increases in our production efficiency that has led to increased overhead absorption.
Previous report
Raw Material Costs
Previous report
Selling, General and Administrative Expenses
Previous report
Selling, general and administrative expenses increased $16.1 million for the nine months ended September 30, 2024, from the prior year period. Depreciation and amortization has increased $4.2 million due to investments in back office technology and automation. Professional fees decreased $4.8 million during the nine months ended September 30, 2024, primarily due the 2023 litigation settlement (Note 18), offset by increases in various professional, regulatory, and legal corporate requirements. Other expenses increased $6.3 million or 29.8% during the nine months ended September 30, 2024, due to increased travel, bad debts, the closing of our New Markets Tax Credit transaction, and consulting expenses.
Previous report
Income Taxes
Previous report
The 18.4% overall effective tax rate for the nine months ended September 30, 2023, was primarily due to the change in our valuation allowance from the discontinuation of our participation in the state of Oklahoma’s manufacturing property investment program. This change will allow the Company to utilize existing credit carryforwards in future tax years, eliminating the need for a valuation allowance against this deferred tax asset. The related valuation allowance was reversed resulting in a one-time benefit of $3.1 million to the estimated income tax provision for the nine months ended September 30, 2023.
Previous report
In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual. Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of approximately $2.6 million for the nine months ended September 30, 2024.
Previous report
On July 7, 2023, the Board of Directors declared a three-for-two stock split of the Company's common stock that was paid in the form of a stock dividend. Stockholders of record at the close of business on July 28, 2023 received one additional share for every two shares they held as of that date on August 16, 2023 (ex-dividend date August 17, 2023). All share and per share information has been updated to reflect the effects of this stock split.
Previous report
37 - mitigate the impact of future supply chain disruptions on our operations; however, as inflationary and supply chain disruptions have decreased, the Company has been able to reduce overall inventory levels. Additionally, timing of our customer prepayment as well as increases in our employee bonuses pools and benefits (as a result of our positive operating results) increased our cash provided by accrued liabilities during the nine months ended September 30, 2023.
Previous report
Payment terms for BASX jobs typically require upfront cash to fund the job resulting in cash inflows related to our contract liabilities and cash inflows fluctuate due to job timing and scheduling.
Previous report
In November 2024, the Company entered into a definitive agreement to purchase a new 787,000 square foot facility in Memphis, Tennessee, which will accommodate incremental demand from the data center market over the next several years, at the same time providing more geographic diversification across our manufacturing footprint. The purchase price for the facility is approximately $63.0 million.
Reworded paragraphs (27)
Previous wording
We are engaged in the engineering, manufacturing, and selling of premium heating, ventilation, and air conditioning equipment consisting primarily of semi-custom and custom rooftop units, data center cooling solutions, cleanroom systems, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. These products are marketed and sold to a variety of vertical markets including retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, industrial, and other commercial markets. We sell our products to all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately $24.6 million of our total net sales for the nine months ended September 30, 2024, and $29.3 million of our sales during the same period of 2023.
Current wording
We engineer, manufacture, and sell premium heating, ventilation, and air conditioning equipment consisting of semi-custom and custom rooftop units, data center cooling solutions, cleanroom systems, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. These products are marketed and sold to a variety of vertical markets including retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, industrial, and other commercial markets. We sell our products to all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately $11.3 million of our total net sales for the three months ended March 31, 2025, and $7.4 million of our sales during the same period of 2024.
Previous wording
We sell our products to property owners and contractors mainly through a network of independent manufacturers’ Representatives. This go-to-market strategy is unique compared to most of our larger competitors in that most control their sales channel. We value the independent sales channel as we think it is a more effective way of increasing market share. Although we concede full control of the sales process with this strategy, the entrepreneurial aspect of the independent sales channel attracts the most talent and provides greater financial incentives for its salespeople. Furthermore, the independent sales channel sells different types of equipment from various manufacturers, allowing it to operate with more of a solutions-based mindset, as opposed to an internal sales department of a manufacturing company that is incentivized to only sell its equipment regardless if it is the best solution for the end customer. We also have a small internal sales force that supports the relationships between the Company and our sales channel partners. BASX sells highly customized products for unique applications for a more concentrated customer base and an internal sales force is more effective for such products.
Current wording
We sell our products to property owners and contractors mainly through a network of independent manufacturers’ Representatives. This go-to-market strategy is unique compared to most of our larger competitors in that most control their sales channel. We value the independent sales channel as we think it is a more effective way of increasing market share. Although we concede full control of the sales process with this strategy, the entrepreneurial aspect of the independent sales channel attracts the most talent and provides greater financial incentives for its salespeople. Further, the independent sales channel sells different types of equipment from various manufacturers, allowing it to operate with more of a solutions-based mindset, as opposed to an internal sales department of a manufacturing company that is incentivized to only sell its equipment regardless if it is the best solution for the end customer. We also have a small internal sales force that supports the relationships between the Company and our sales channel partners. BASX sells highly customized products for unique applications for a more concentrated customer base and an internal sales force is more effective for such products.
Previous wording
The principal components of cost of goods sold are labor, raw materials, component costs, factory overhead, freight and engineering expense. The principal high volume raw materials used in our manufacturing processes are steel, copper and aluminum, and are obtained from domestic suppliers. We also purchase from domestic manufacturers certain components, including coils, compressors, motors, and electrical controls.
Current wording
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, and are obtained from domestic suppliers. We also purchase from domestic manufacturers certain components, including coils, compressors, motors, and electrical controls.
Previous wording
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. At September 30, 2024, the price (year to date average) for copper, galvanized steel, stainless steel and aluminum decreased 5.1%, 13.2%, 23.7%, and 1.6%, respectively, as compared to the price (year to date average) at September 30, 2023.
Current wording
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. At March 31, 2025, the price (year to date average) for copper and aluminum increased 6.5% and 3.0%, respectively, while galvanized steel and stainless steel decreased 3.4% and 30.8%, respectively, as compared to the price (year to date average) at March 31, 2024.
Previous wording
We occasionally increase the price of our products to help offset any inflationary headwinds. In 2022, we implemented a recurring 1% monthly price increase beginning June 1, 2022, and ending on April 1, 2023. We reinstated the recurring 1% monthly price increase on October 1, 2023, through February 1, 2024.
Current wording
We occasionally increase the price of our products to help offset any inflationary headwinds. In recent years, price increases have been more frequent due to the amount of inflation the business has endured. We implemented a recurring 1.0% monthly price increase on October 1, 2023, and carried that through February 1, 2024, for AAON branded products. On January 1, 2025, we implemented a one-time 3.0% price increase for AAON branded products. On April 1, 2025, we implemented a 6.0% surcharge on all AAON branded products as a result of the uncertainty of international tariffs. BASX branded products are priced by job and in most cases, provide the ability to increase the price if the order is outside normal lead times.
Previous wording
•We completed the repurchase of 1.4 million shares for $107.5 million during the nine months ended September 30, 2024.
Current wording
•We completed the repurchase of 0.4 million shares for $30.0 million during the three months ended March 31, 2025.
Previous wording
We report our financial results based on three reportable segments: AAON Oklahoma, AAON Coil Products, and BASX, which are further described in "Segments" (Note 20) within our notes to the consolidated financial statements. The Company's chief operating decision maker ("CODM"), our CEO, allocates resources and assesses the performance of each operating segment using information about the operating segment's net sales and income from operations. The CODM does not evaluate operating segments using asset or liability information.
Current wording
We report our financial results based on three reportable segments: AAON Oklahoma, AAON Coil Products, and BASX, which are further described in “Segments” (Note 21) within our notes to the consolidated financial statements. The Company’s chief operating decision maker (“CODM”), our CEO, allocates resources and assesses the performance of each operating segment using information about the operating segment's net sales and gross profit. The CODM does not evaluate operating segments using asset or liability information.
Previous wording
Selling, general and administrative expenses decreased $2.8 million for the three months ended September 30, 2024, from the prior year period. Depreciation and amortization increased $1.9 million during the three months ended September 30, 2024, due to increased investments in back office technology and automation. Professional fees decreased $8.7 million during the three months ended September 30, 2024, due to the 2023 litigation settlement (Note 18). Other expenses increased $1.1 million or 13.4% during the three months ended September 30, 2024, due to increased travel and consulting expenses.
Current wording
Selling, general and administrative expenses increased $6.0 million for the three months ended March 31, 2025, from the prior year period. Depreciation and amortization increased $3.0 million during the three months ended March 31, 2025, due to increased investments in back office technology and automation. Professional fees decreased $3.1 million during the three months ended March 31, 2025, due to various professional, regulatory, and legal corporate requirements incurred in 2024. Other expenses increased $6.6 million or 82.2% during the three months ended March 31, 2025, due to increased travel, consulting expenses, and approximately $2.7 million of incentive fees due to our real estate broker associated with the acquisition of our Memphis, Tennessee plant for a percentage of the incentives awarded to us by various entities.
Previous wording
The Company’s estimated annual 2024 effective tax rate, excluding discrete events, is expected to be approximately 24.9%.
Current wording
The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 25.4%.
Previous wording
During the three months ended September 30, 2024, the Company recorded an excess tax benefit of $5.1 million as compared to $0.5 million during the same period in 2023. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the three months ended September 30, 2024 and 2023, respectively.
Current wording
During the three months ended March 31, 2025, the Company recorded an excess tax benefit of $7.2 million as compared to $4.4 million during the same period in 2024. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Working Capital - Our unrestricted cash decreased $0.3 million from December 31, 2023 to September 30, 2024. Our restricted cash decreased $2.1 million due to funding requirements related to our Longview, Texas expansion. Our restricted cash originates from the closing of our recent New Markets Tax Credit transaction related to our Longview, Texas expansion. We expect most funds will be released from this account by the end of 2024.
Current wording
Working Capital - Our unrestricted cash increased $1.0 million from December 31, 2024 to March 31, 2025. Our restricted cash decreased $5.1 million due to funding requirements related to our Longview, Texas expansion.
Previous wording
Revolving Line of Credit - Our revolving credit facility (as amended, "Revolver"), provides for maximum borrowings of $200.0 million. As of September 30, 2024 and December 31, 2023, we had $55.7 million and $38.3 million outstanding under the Revolver, respectively. We have one standby letter of credit totaling $0.3 million as of September 30, 2024 and two standby letters of credit totaling $2.3 million as of December 31, 2023. At September 30, 2024, we have $144.0 million of borrowings available under the Revolver. The Revolver expires May 27, 2027. We have amended the Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transactions (Note 17).
Current wording
As of March 31, 2025 and December 31, 2024, we had $178.0 million and $76.5 million outstanding under the Revolver, respectively. We have one standby letter of credit totaling $0.7 million as of March 31, 2025 and one standby letter of credit totaling $0.3 million as of December 31, 2024. At March 31, 2025, we have $21.4 million of borrowings available under the Revolver. The Revolver expires May 27, 2027. We have amended the Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transactions (Note 18).
Previous wording
Any outstanding loans under the Revolver bear interest at the daily compounded secured overnight financing rate ("SOFR") plus the applicable margin. Applicable margin, ranging from 1.25% - 1.75%, is determined quarterly based on the Company's leverage ratio. The Company is also subject to letter of credit fees, ranging from 1.25% - 1.75%, and a commitment fee, ranging from 0.10% - 0.20%. The applicable fee percentage is determined quarterly based on the Company's leverage ratio. The weighted average interest rate on borrowings outstanding on the Revolver was 6.6% for both the three and nine months ended September 30, 2024, respectively, as compared to 6.5% and 6.3% for the three and nine months ended September 30, 2023, respectively. Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and nine months ended September 30, 2024 and 2023.
Current wording
Any outstanding loans under the Revolver bear interest at the daily compounded secured overnight financing rate (“SOFR”) plus the applicable margin. The Term Loan bears interest at the SOFR plus a credit spread adjustment of 0.10% per annum plus the Applicable Margin.
Previous wording
If SOFR cannot be determined pursuant to the definition, as defined by the Revolver agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate ("ABR") loans. ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50%, or (c) daily simple SOFR for a one-month tenor in effect on such day plus 1.00%.
Current wording
If SOFR cannot be determined pursuant to the definition, as defined by the Amended Loan Agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate (“ABR”) loans. ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50%, or (c) daily simple SOFR for a one-month tenor in effect on such day plus 1.00%. As of December 16, 2024, as defined by the Amended Loan Agreement, if the SOFR cannot be determined any outstanding balance will bear interest at the Prime Rate in effect on such day.
Previous wording
At September 30, 2024, we were in compliance with our financial covenants, as defined by the Revolver. These covenants require that we meet certain parameters related to our leverage ratio. At September 30, 2024, our leverage ratio was 0.19 to 1.0, which meets the requirement of not being above 3 to 1.
Current wording
At March 31, 2025, we were in compliance with our financial covenants, as defined by the Amended Loan Agreement. These covenants require that we meet certain parameters related to our leverage ratio. At March 31, 2025, our leverage ratio was 0.95 to 1.0, which meets the requirement of not being above 3 to 1.
Previous wording
Upon closing of the 2019 NMTC transaction, the Company provided an aggregate of approximately $15.9 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $15.9 million in proceeds plus capital contributed from the Investor was used to make an aggregate $22.5 million loan to a subsidiary of the Company. This financing arrangement is secured by equipment at the Company's Longview, Texas facilities, and a guarantee from the Company, including an unconditional guarantee of the NMTCs.
Current wording
Upon closing of the 2019 NMTC transaction, the Company provided an aggregate of approximately $15.9 million to the 2019 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0%. This $15.9 million in proceeds plus capital contributed from the 2019 Investor was used to make an aggregate $22.5 million loan to a subsidiary of
Previous wording
2019 New Markets Tax Credit -On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2019 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2019 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “2019 Project”). In connection with the NMTC transaction, the Company received a $23.0 million NMTC allocation for the 2019 Project and secured low interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.
Current wording
2023 New Markets Tax Credit -On April 25, 2023, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2023 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2023 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “2023 Project”). In connection with the 2023 NMTC transaction, the Company received a $23.0 million NMTC allocation for the 2023 Project and secured low interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.
Previous wording
Upon closing of the 2023 NMTC transaction, the Company provided an aggregate of approximately $16.7 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $16.7 million in proceeds plus capital contributed from the Investor was used to make an aggregate $23.8 million loan to a subsidiary of the Company. This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs. The unused net proceeds from the closing of the 2023 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.
Current wording
Upon closing of the 2023 NMTC transaction, the Company provided an aggregate of approximately $16.7 million to the 2023 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0%. This $16.7 million in proceeds plus capital contributed from the 2023 Investor was used to make an aggregate $23.8 million loan to a subsidiary of the Company. This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs. The unused net proceeds from the closing of the 2023 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.
Previous wording
Upon closing of the 2024 NMTC transaction, the Company provided an aggregate of approximately $11.0 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $11.0 million in proceeds plus capital contributed from the Investor was used to make an aggregate $16.0 million loan to a subsidiary of the Company. This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs. The unused net proceeds from the closing of the 2024 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.
Current wording
Upon closing of the 2024 NMTC transaction, the Company provided an aggregate of approximately $11.0 million to the 2024 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0%. This $11.0 million in proceeds plus capital contributed from the 2024 Investor was used to make an aggregate $16.0 million loan to a subsidiary of the Company. This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs. The unused net proceeds from the closing of the 2024 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.
Previous wording
Stock Repurchases -The Board must authorize the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.
Current wording
Stock Repurchase -The Board has authorized stock repurchase programs for the Company. The Company may purchase shares on the open market from time to time. The Board must authorize the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.
Previous wording
The following table reflects the major categories of cash flows for the nine months ended September 30, 2024 and 2023. For additional details, see the consolidated financial statements.
Current wording
The following table reflects the major categories of cash flows for the three months ended March 31, 2025 and 2024. For additional details, see the consolidated financial statements.
Previous wording
The Company currently manages cash needs through working capital as well as drawing on its line of credit. Collections and payments cycles are on a normal pattern and fluctuate due to timing of receipts and payments.
Current wording
The Company currently manages cash needs through working capital as well as drawing on its line of credit. Collections and payments cycles are on a normal pattern and fluctuate due to timing of receipts and payments. Historically, the Company increased the purchase of inventory to take advantage of favorable pricing opportunities and also to mitigate the impact of future supply chain disruptions on our operations; however, we continue to make significant purchases of inventory related to data center orders. These purchases are allocated to customer jobs and show as increases to our contract assets.
Previous wording
The capital expenditures for the nine months ended September 30, 2024, relate to our continued investment in our production capabilities. Purchases during the nine months ended September 30, 2024, relate to additional infrastructure and machinery for both replacement and growth, additional production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and additional land in Tulsa, Oklahoma for future growth. We have also made investments to purchase or develop software for internal use in anticipation of future Company growth. The capital expenditure program for 2024 is estimated to be approximately $215.0 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.
Current wording
Capital expenditures during the three months ended March 31, 2025, relate to additional infrastructure and machinery for both replacement and production growth, finalizing our new production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and new equipment for our Memphis,
Previous wording
The change in cash from financing activities in 2024 is primarily related to borrowings under our revolving credit facility to manage our working capital needs, especially strategic purchases of inventory to avoid supply chain delays and the funding of certain capital expenditures, offset by repayments we were able to make due to our increased operating results and financial condition.
Current wording
The change in cash from financing activities in 2025 is primarily related to borrowings under our revolving credit facility to manage our working capital needs, especially strategic purchases of inventory to avoid supply chain delays and the funding of certain capital expenditures, offset by repayments we were able to make due to our operating results and financial condition.
Previous wording
During the nine months ended September 30, 2024, we repurchased $100.0 million under our open market share repurchase programs. Furthermore, cash flows from financing activities is historically affected by the timing of stock options exercised by our employee.
Current wording
During the three months ended March 31, 2025, we repurchased $30.0 million under our open market share repurchase programs. Furthermore, cash flows from financing activities is historically affected by the timing of stock options exercised by our employees.
Previous wording
In 2023, the Company executed a five-year purchase commitment for refrigerants. Payments made in satisfaction of the purchase commitment were approximately $3.1 million and $9.7 million the three and nine months ended September 30, 2024, respectively, as compared to $2.4 million and $7.5 million for the three and nine months ended September 30, 2023, respectively. Estimated minimum future payments are $2.2 million, $9.1 million, $10.5 million, and $11.2 million for 2024, 2025, 2026, and 2027, respectively. We had no other material contractual purchase obligations as of September 30, 2024.
Current wording
In 2023, the Company executed a five-year purchase commitment for refrigerants. Payments made in satisfaction of the purchase commitment were approximately $0.6 million and $3.6 million the three months ended March 31, 2025 and 2024, respectively. Estimated minimum future payments are $8.5 million, $10.5 million, and $11.2 million for 2025, 2026, and 2027, respectively.
Previous wording
There have been no material changes in the Company’s critical accounting policies during the nine months ended September 30, 2024.
Current wording
There have been no material changes in the Company’s critical accounting policies during the three months ended March 31, 2025.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Applicable margin, ranging from 1.25% - 1.75%, is determined quarterly based on the Company’s leverage ratio. The Company is also subject to letter of credit fees, ranging from 1.25% - 1.75%, and a commitment fee, ranging from 0.10% - 0.20%. The applicable fee percentage is determined quarterly based on the Company's leverage ratio.
Current report — wording carried from elsewhere
Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three months ended March 31, 2025 and 2024.
Current report — wording carried from elsewhere
36 - the Company. This financing arrangement is secured by equipment at the Company’s Longview, Texas facilities, and a guarantee from the Company, including an unconditional guarantee of the NMTCs.
Current report — wording carried from elsewhere
Tennessee facility. We have also made investments to purchase or develop software for internal use in anticipation of future Company growth. Many of these projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring substantial charges.
Current report — wording carried from elsewhere
The capital expenditure program for 2025 is estimated to be approximately $220.0 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.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Nine-month average raw material cost per pound as of September 30:
Previous report — wording carried elsewhere
The Company’s estimated annual 2024 effective tax rate, excluding discrete events, is expected to be approximately 24.9%.
Previous report — wording carried elsewhere
During the nine months ended September 30, 2024, the Company recorded an excess tax benefit of $11.7 million as compared to $6.3 million during the same period in 2023. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the nine months ended September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Historically, the Company increased the purchase of inventory to take advantage of favorable pricing opportunities and also to