AAON Restates First Half of 2026 as Third-Quarter Sales Rise 84 Percent
Third-quarter net sales rose 84.1 percent to $707.4 million and diluted earnings doubled to 83 cents a share. Restated first-quarter sales fell $4.4 million and second-quarter sales rose $15.2 million. AAON raised its 2026 sales growth outlook to 72 to 75 percent.
AAON Inc. restated its financial statements for the first two quarters of 2026 and disclosed a material weakness in its internal control over financial reporting, the Tulsa, Okla., manufacturer said Monday, on the same day it reported record third-quarter sales of $707.4 million, up 84.1 percent from $384.2 million a year earlier.
Management, with oversight from the board's audit committee, concluded on Nov. 3 that the unaudited statements in AAON's Forms 10-Q for the quarters ended March 31 and June 30 "should no longer be relied upon," according to an 8-K filed with the Securities and Exchange Commission. The company filed amended 10-Qs for both periods the same day.
Costs Assigned to the Wrong BASX Projects
The 8-K traces the restatement to errors in AAON's "calculation of revenue under the percent of completion method and accounting for software subscriptions." The amended second-quarter 10-Q is more specific. The revenue errors arose in the BASX-branded revenue process, in the assignment of costs to the appropriate projects, and affected the AAON Coil Products and BASX segments. The software subscriptions "were not properly amortized," which changed selling, general and administrative expense.
Under percent-of-completion accounting, revenue on a custom project is booked as costs accumulate against it, so a cost charged to the wrong job moves revenue between jobs and between quarters. That is the pattern in the restated figures:
| Period | Net sales as reported | Restated | Net income as reported | Restated |
|---|---|---|---|---|
| Q1 2026 | $496.9 million | $492.5 million | $39.8 million | $36.5 million |
| Q2 2026 | $627.0 million | $642.1 million | $56.7 million | $67.1 million |
First-quarter diluted earnings fell to 44 cents a share from 48 cents, and second-quarter earnings rose to 80 cents from 68 cents. In the first quarter, Coil Products sales were cut by $16.0 million while BASX sales rose $11.5 million. In the second, both segments moved up, by $5.6 million and $9.5 million. Software subscription corrections added $385,000 to first-quarter SG&A and $2.4 million to the second quarter's. Across the half, net sales rose $10.7 million, gross margin 71 basis points and diluted earnings 9 cents a share. The company said it "found no evidence of fraud or misconduct."
What the Material Weakness Covers
In its third-quarter 10-Q, AAON said it "did not design and maintain adequate controls within the BASX-branded revenue process," chiefly controls over assigning costs to projects, and that account reconciliation and review in the BASX close "did not operate timely and with complete and accurate information." Its chief executive and chief financial officer concluded that disclosure controls were not effective as of Sept. 30. The filing says AAON had already identified lesser control deficiencies tied to a 2025 ERP implementation and to the growth in business volume.
The remediation plan includes better cost tracking, timely review of estimated costs to complete projects, and a look at whether IT systems can cut reliance on manual controls. The weakness will not count as fixed until the new controls have run long enough to be tested. Grant Thornton LLP is AAON's independent accounting firm.
"We corrected those errors and determined that a material weakness existed in our internal control over financial reporting. We take that seriously," President and Chief Executive Matt Tobolski said in the release.
BASX Passes AAON Brand in Sales
BASX-branded sales, mostly data center cooling, rose 218.3 percent to $397.2 million in the quarter and outsold the AAON brand, which grew 19.6 percent to $310.2 million. BASX liquid cooling sales booked in the Coil Products segment reached $165.5 million, up 255.6 percent. Operating income more than doubled to $100.0 million and diluted earnings rose to 83 cents a share from 37 cents.
Gross margin was 26.7 percent, down from 27.8 percent a year earlier, which AAON attributed to more BASX revenue coming from newer, less utilized plants. The AAON Oklahoma segment carried $20.7 million of overhead tied to the Memphis facility, against $4.5 million a year earlier, and its gross margin fell to 25.5 percent from 33.0 percent.
Total backlog was $1.85 billion, up 40.5 percent from a year earlier but down 5.9 percent from June 30, which AAON put down to faster conversion into revenue and the timing of large BASX awards. AAON now expects 2026 sales to grow 72 to 75 percent, up from 55 to 60 percent, with gross margin around 26 percent.
Why This Matters to Contractors
AAON-branded backlog fell 7.6 percent from June to $499.3 million, and the company said the drop came mainly from higher production as it worked down elevated lead times, with orders holding up in what it called a soft commercial HVAC market. For anyone waiting on AAON rooftop units and air handlers, that is the operational effect of this quarter, separate from the accounting. The restatement itself touched the BASX and Coil Products segments, and the filings report no change to the AAON Oklahoma figures.
Sources
- AAON Inc., "The Aaon Group Reports Record Third Quarter 2026 Results, Restates First and Second Quarter 2026 Financial Statements and Raises Full-Year Outlook," Exhibit 99.1, Nov. 9, 2026. sec.gov
- AAON Inc., Form 8-K, Items 2.02 and 4.02, Nov. 9, 2026. sec.gov
- AAON Inc., Form 10-Q for the quarter ended Sept. 30, 2026, Item 4, Controls and Procedures. sec.gov
- AAON Inc., Form 10-Q/A for the quarter ended June 30, 2026, Note 2, Restatement of Previously Issued Financial Statements. sec.gov