AAON, Inc. (‘AAON’), and its operating subsidiaries, provides heating, ventilation, and air conditioning (‘HVAC’) solutions for commercial and industrial indoor environments.
The company’s operating subsidiaries include AAON, Inc., an Oklahoma corporation (‘AAON Oklahoma’), AAON Coil Products, Inc., a Texas corporation (‘AAON Coil Products’), and BASX, Inc., an Oregon corporation (‘BASX’). The company’s unique approach to designing and manufacturing highly configurable equipment to meet exact n...
AAON, Inc. (‘AAON’), and its operating subsidiaries, provides heating, ventilation, and air conditioning (‘HVAC’) solutions for commercial and industrial indoor environments.
The company’s operating subsidiaries include AAON, Inc., an Oklahoma corporation (‘AAON Oklahoma’), AAON Coil Products, Inc., a Texas corporation (‘AAON Coil Products’), and BASX, Inc., an Oregon corporation (‘BASX’). The company’s unique 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.
Business Segments
The company conducts its business through three business segments: AAON Oklahoma, AAON Coil Products, and BASX.
AAON Oklahoma: AAON Oklahoma engineers, manufactures, and sells semi-custom and custom HVAC systems, designs and manufactures control solutions, and sells aftermarket parts to customers through retail part stores and online. AAON Oklahoma includes the operations of its Tulsa, Oklahoma, Memphis, Tennessee, and Parkville, Missouri manufacturing facilities, two retail locations, and the Norman Asbjornson Innovation Center (‘NAIC’) research and development laboratory accredited by the Air Movement and Control Association International, Inc. (‘AMCA’).
With the NAIC, a world-class research and development (‘R&D’) laboratory in Tulsa, Oklahoma, the company’s products are continuously tested under a variety of extreme environmental conditions to ensure they deliver the ultimate performance, efficiency, and value.
Also located in Tulsa, Oklahoma, the company’s cutting-edge Exploration Center showcases the engineering, design attributes, and premium build quality of its equipment side-by-side with the market alternatives.
AAON Coil Products: AAON Coil Products engineers and manufactures a selection of the company’s semi-custom and custom HVAC systems, as well as a variety of heating and cooling coils to be used in HVAC systems, mostly for the benefit of AAON Oklahoma, AAON Coil Products, and BASX. AAON Coil Products consists of operations at its Longview, Texas manufacturing facilities. BASX branded products are also manufactured in Longview.
BASX: BASX engineers, manufactures, and sells an array of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market, ventilation solutions for cleanroom environments in the bio-pharmaceutical, semiconductor, medical, and agriculture markets, and highly custom, air handlers and modular solutions for a vast array of markets. BASX consists of operations at its Redmond, Oregon manufacturing facilities.
Business and Marketing Strategy
The company’s products serve the commercial, industrial, data center, and cleanroom markets within the HVAC equipment industry. The company’s strategy involves mass semi-customization, leveraging flexible computer-aided manufacturing systems to produce highly configurable equipment. The company differentiates from other HVAC manufacturers by combining the low unit costs of mass production processes with the flexibility of individual customization.
Through a collaborative effort with the company’s network of independent sales representatives, it engineers and manufactures products and systems that best serve the buyer’s unique needs and applications.
The company’s go-to-market strategy is centered around customers and markets that demand HVAC equipment with extraordinary performance and durability, greater energy efficiency, and best overall value. The company manufactures equipment with more configurability than other ‘standard’ offerings found in the HVAC equipment industry.
The company has been dedicated to manufacturing and product leadership with innovation through R&D, with a specific emphasis on energy performance, durability, efficiency, and indoor air quality.
As a result of the company’s strategy to engineer and manufacture innovative HVAC products of the highest performance, efficiency, and value, it is naturally committed to meeting regulatory and certification standards of the relevant standard-setting bodies, including the Air-Conditioning, Heating, and Refrigeration Institute (‘AHRI’), the American National Standards Institute (‘ANSI’), American Society of Heating, Refrigeration and Air-Conditioning Engineers (‘ASHRAE’), the Air Movement and Control Association (‘AMCA’), and the International Organization for Standardization (‘ISO’).
Products - AAON Brand
AAON branded products are manufactured for, and installed on or beside, commercial and industrial buildings of all sizes.
The total addressable market for AAON branded products is determined primarily by the number of new commercial and industrial building projects and the replacement demand from existing commercial and industrial buildings.
The commercial and industrial new construction markets are subject to cyclical fluctuations in that they generally lag behind the housing market. The housing market, in turn, is influenced by cyclical factors, such as interest rates, inflation, consumer spending habits, employment rates, the state of the economy, and other macroeconomic factors. When new construction is down, the company emphasizes the replacement market.
The company’s flagship products consist of a single-unit system that generates heating and cooling in a self-contained cabinet, referred to in the industry as ‘unitary product.’ The majority of its unitary products are installed on the rooftop of commercial and industrial buildings and structures. These are known in the industry as ‘rooftop units,’ or (‘RTUs’).
Other finished products include air-source heat pumps, air handling units, condensing units, makeup air units, energy recovery units, geothermal/water-source heat pumps, coils, and controls.
All AAON branded products are created by assembling a combination of sheet metal and tubing fabrication components and pre-manufactured/purchased components, such as coils, compressors, fans, and control systems. All products undergo rigorous end-of-line testing and inspection prior to being shipped to customers.
The company offers three groups of RTUs: the RQ Series, consisting of five cooling sizes ranging from two to five tons; the RN Series, offered in 26 cooling sizes ranging from six to 140 tons; and the RZ Series, which is offered in 15 cooling sizes ranging from 45 to 261 tons.
When configured as Air-Source Heat Pumps (‘ASHP’), the RQ and RN Series (two to 50 tons), are capable of operating in ambient outside temperatures as low as zero degrees Fahrenheit.
This class of products, known as AAON Alpha Class, is a critical, industry-leading solution that meets the increasing demand for commercial building decarbonization. Utilizing unrivaled engineering prowess and cutting-edge compressor technology, AAON Alpha Class provides energy-efficient heating and cooling throughout the year in virtually any climate.
In addition to the company’s flagship packaged RTUs, it offers a variety of products to meet various market needs:
The company’s SA, SB, and M2 Series consist of indoor packaged, water-cooled or geothermal/water-source heat pump self-contained units with cooling capacities of three to 70 tons.
The company’s condensing unit, the CF Series, is available from two to 70 tons and can be configured as an Alpha Class ASHP.
The company’s air handling units consist of the indoor H3 and V3 Series and the modular M2 Series, as well as air handling unit configurations of the RQ, RN, RZ, and SA Series units.
The company’s energy recovery option applicable to its RQ, RN, RZ, and SB units, as well as its H3, V3, and M2 Series air handling units, responds to the U.S. Clean Air Act mandate to increase fresh air in commercial structures. The company’s products are designed to compete on the higher quality end of standardized products.
The company’s RN, RQ, M2, and SB Series geothermal/water-source heat pumps are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.
The company’s unitary air conditioners and heat pumps (RQ and RN Series) are certified with AHRI and the US Department of Energy (‘DOE’) to ANSI/AHRI 210/240 up to five tons capacity and ANSI/AHRI 340/360 from five to 63 tons capacity.
Performance characteristics of the company’s products range in cooling capacity from two to 261 tons and in heating capacity from 24,000 to 4,500,000 British Thermal Units (‘BTUs’).
Many of the company’s products far exceed DOE minimum efficiency standards and are among the highest efficiency products currently available in the market.
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.
The company’s packaged RTUs with two-stage, digital, or variable speed compressors are optimized with high-efficiency evaporator and condenser coils and variable speed fans, leading to an AHRI Certified performance up to 18.0 Seasonal Energy Efficiency Ratio 2 (‘SEER2’) and 22.8 integrated energy efficiency ratio (‘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.
In addition to the equipment the company manufactures, the company designs and produces high-performance control solutions that enhance its equipment’s unique features and capabilities. The company’s controls division provides factory-developed and tested control options for Variable Air Volume, Make-Up Air, Single Zone VAV, Constant Volume, and Zoning systems associated with its products and other HVAC-related equipment.
The company offers several controls options: the Orion Controller, factory-installed customer provided controls, and terminal block for field-installed controls. Most of the company’s controls are Underwriters Laboratories category ZPVI2 compliant and BACnet Testing Laboratories certified, which ensures its products meet internationally recognized standards for safety, traceability, conformance, and production quality. The company’s economizer function is California Title 24 certified to minimize energy consumption. The company’s proven sequences of operation optimize the performance of its HVAC units.
Products - BASX Brand
As a full complement to the company’s AAON branded products, its BASX branded products are highly customized to meet the expectations of even the most discerning customers.
The company’s data center cooling solutions are focused on providing highly configurable, purpose-built equipment with an emphasis on efficiency, performance, speed of deployment, and build quality. High-performance air-cooled heat rejection solutions are provided with waterside economizers (with optional adiabatic assisted cooling) and are designed to integrate with high-density computing systems requiring direct-to-chip liquid cooling.
Additionally, the company’s perimeter gallery thermal management solutions include direct evaporative coolers, fan coil walls, and computer room air handling (‘CRAH’) units. White space solutions for a close-coupled IT load management approach include overhead fan coils and in-row coolers. Packaged solutions include coupled economizing chillers with integrated air handling and packaged direct expansion (‘DX’) solutions with airside economizers.
The company’s cleanroom products are built to provide environmental control serving critical processes and high-fidelity control for precise industry requirements. Process cooling solutions include recirculation air handling units and makeup air handling units, including the integration of piping systems and controls. Environmental control solutions include modular cleanroom environments, fan filter units, filtered ceiling grids with integral flush mount lighting, pressurized plenums with integral ceiling grids, and hospital surgical suites.
The company’s BASX branded custom air handling products are primarily used in commercial, industrial, healthcare, and institutional facilities employing chilled water cooling, packaged direct expansion, hydronic heating, indirect gas direct heat, humidification, dehumidification, filtration, and integrated controls. BASX manufactures plenum fans for integration into air handling units and replacement applications. BASX also offers integrated sound performance solutions.
Air Quality Products
ASHRAE, a professional association with a goal of advancing HVAC systems designs and construction, established an Epidemic Task Force in 2020 and determined several recommendations to mitigate the spread of the virus, including humidity control, air filtration, increased outdoor air ventilation, and air disinfection.
Humidity control - The company continues to lead the market in developing energy-efficient humidity control with the use of variable capacity compressors and modulating hot gas reheat. Designing HVAC systems with superior humidity control allows building management to maintain ASHRAE’s recommended ambient relative humidity levels of 40%-60%, the ideal level to inactivate viruses in the air and on surfaces.
Air Filtration - The company’s standard design uses a backward curved fan wheel, which can accommodate higher airflow and static pressure required for the ASHRAE recommended MERV 13 filtration, the minimum filter level for virus mitigation, with very little reconfiguration. Prior to 2020, a vast majority of commercial buildings used filtration levels of MERV 4 to MERV 8, which has always been acceptable for filtering out typical particulates in the air stream.
Outdoor Air Ventilation - The company’s innovative use of energy recovery wheels and energy recovery plates, combined with its superior humidity control design, can help building management follow outdoor ventilation air recommendations while limiting an increase of energy usage and maintaining recommended humidity levels. AAON’s Delta Class products provide industry-leading cooling, dehumidification, and heating options for high percentage outdoor air applications to promote better indoor air quality while minimizing energy consumption.
On October 31st, 2022, the DOE released its final ruling concerning direct expansion-dedicated outdoor air systems (‘DX-DOAS’). These are systems that condition primarily fresh outside air streams to maintain space comfort and air quality.
On May 1, 2024, the DOE began regulating the efficiency of dedicated outdoor air units separately from other comfort cooling systems. The company perceives this as an advantage because its equipment is designed for higher energy efficiency and superior part load and dehumidification performance than competitors who focus on the initial sale price of their equipment or do not participate in the certification programs offered by AHRI.
Air Disinfection - The company’s basic design characteristics allow for an easy installation of ultraviolet lighting equipment. In addition to this equipment offered as options in new units sold, its basic design characteristics allow for easy installation in units already used in the field.
Overall, the company is well positioned to accommodate the heightened demand for features that can help mitigate virus transmission and improve indoor air quality. The features that ASHRAE recommends require premium designs and configurations that are standard in its units. As a result, the company is able to incorporate air quality features into its units at a minimal price premium and with no delivery delay.
Representatives
To support and service the company’s customers and the ultimate consumer, it provides parts availability through its Representatives' sales offices, as well as its two Tulsa, Oklahoma operated retail parts stores, to serve the local markets. The company also has factory service organizations at each of its facilities.
The company has a program focused on increasing service capabilities across its North America Representative network, to ensure it collectively supports its customers across North America.
Warranties
The company’s product warranty policy is the earlier of one year from the date of first use or 18 months from the date of shipment for parts only, including controls; 18 months for data center cooling solutions and cleanroom systems; five years for compressors; 15 years on aluminized steel gas-fired heat exchangers; 25 years on stainless steel heat exchangers; and ten years on gas-fired heat exchangers in the company’s historical RL products. The company’s warranty policy for the RQ series covers parts for two years from the date of unit shipment. The company’s warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for five years from the date of installation.
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.
Major Customers
For the year-ended December 31, 2024, Texas AirSystems accounted for approximately 16.4% of the company’s sales. Through portfolio groups, Meriton has an ownership interest in Texas AirSystems and certain other of its sales representatives. The aggregate sales percentages through Meriton-affiliated groups that are in addition to Texas AirSystems’ sales for the year-ended December 31, 2024, accounted for an additional 8.0%.
Two other similar groups, Ambient and AIR Control Concepts, share common ownership of some of the company’s other sales representatives through portfolio groups, and for the year-ended December 31, 2024, aggregate sales through their portfolio groups accounted for approximately 14.9% and 9.2% of its sales, respectively.
Competition
The company’s AAON branded products primarily compete with Lennox (Lennox International, Inc.), Trane (Trane Technologies plc), York International (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries). The company’s BASX branded products primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters, Silent Aire (Johnson Controls International PLC), Nortek (Nortek Air Solutions), Modine (Modine Manufacturing Co.), and Engineered Air.
Research and Development
The company’s research and development expenses incurred were approximately $47.3 million in 2024.
Seasonality
Historically, sales of the company’s products were moderately seasonal with the peak period being May-October of each year due to the timing of construction projects being directly related to warmer weather. However, in recent years, given the increase in demand for its products and increase in its backlog, sales have become more constant throughout the year (year ended December 31, 2024).
Environmental & Regulatory Matters
Laws concerning the environment that affect or could affect the company’s 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, the AIM Act, regulations promulgated under these Acts, and any other federal, state, or local laws or regulations governing environmental matters.
History
AAON, Inc. was founded in 1987. The company, a Nevada corporation, was incorporated in 1987.
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