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Revenue Recognition
 9 Months Ended
Sep. 30, 2022
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
 
The following tables show disaggregated net sales by reportable segment (Note 20) by major source, net of intercompany sales eliminations.
Three Months Ended September 30, 2022
AAON OklahomaAAON Coil ProductsBasXTotal
(in thousands)
Rooftop Units$154,171 $— $— $154,171 
Condensing Units— 12,720 — 12,720 
Air Handlers— 14,380 2,211 16,591 
Outdoor Mechanical Rooms58 118 — 176 
Cleanroom Systems— — 15,283 15,283 
Data Center Cooling Solutions— — 14,884 14,884 
Water-Source Heat Pumps3,236 2,445 — 5,681 
Part Sales15,724 — 176 15,900 
Other2
5,980 841 378 7,199 
$179,169 $30,504 $32,932 $242,605 
Three Months Ended September 30, 2021
AAON OklahomaAAON Coil Products
BasX1
Total
(in thousands)
Rooftop Units$103,900 $— $— $103,900 
Condensing Units120 6,677 — 6,797 
Air Handlers— 6,279 — 6,279 
Outdoor Mechanical Rooms179 29 — 208 
Water-Source Heat Pumps2,536 2,679 — 5,215 
Part Sales12,102 — — 12,102 
Other2
3,299 771 — 4,070 
$122,136 $16,435 $— $138,571 
Nine Months Ended September 30, 2022
AAON OklahomaAAON Coil ProductsBasXTotal
(in thousands)
Rooftop Units$414,493 $— $— $414,493 
Condensing Units242 33,645 — 33,887 
Air Handlers— 35,358 6,495 41,853 
Outdoor Mechanical Rooms612 488 — 1,100 
Cleanroom Systems— — 31,568 31,568 
Data Center Cooling Solutions— — 38,589 38,589 
Water-Source Heat Pumps8,098 6,596 — 14,694 
Part Sales39,797 — 507 40,304 
Other2
13,275 3,106 1,321 17,702 
$476,517 $79,193 $78,480 $634,190 
Nine Months Ended September 30, 2021
AAON OklahomaAAON Coil Products
BasX1
Total
(in thousands)
Rooftop Units$298,695 $— $— $298,695 
Condensing Units762 19,868 — 20,630 
Air Handlers— 19,958 — 19,958 
Outdoor Mechanical Rooms820 363 — 1,183 
Water-Source Heat Pumps8,993 7,312 — 16,305 
Part Sales30,325 — — 30,325 
Other2
8,783 2,356 — 11,139 
$348,378 $49,857 $— $398,235 
1 BasX was acquired by the Company on December 10, 2021. As the BasX segment was not applicable for the three and nine months ended September 30, 2021, it has been excluded from the tables for those periods.
2 Other sales include freight, extended warranties and miscellaneous revenue.


Due to the highly customized nature of many of the Company’s products and each product not having an alternative use to the Company without significant costs to the Company, the Company recognizes revenue over time as progress is made toward satisfying the performance obligations of each contract. The Company has formal cancellation policies and generally does not accept returns on these units.

Contract costs include direct materials, direct labor, installation, freight and delivery, commissions and royalties. Other costs not related to contract performance, such as indirect labor and materials, small tools and supplies, operating expenses, field rework and back charges are charged to expense as incurred. Provisions for estimated losses on contracts in progress are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income, and are estimated and recognized by the Company throughout the life of the contract. The aggregate of costs incurred and income recognized on uncompleted contracts in excess of billings is shown as a contract asset within our consolidated balance sheets, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a contract liability within our consolidated balance sheets.

For all other products that are part sales or standardized units, the Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts. As the primary performance obligation in such a contract is delivery of the requested manufactured equipment, 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 May-October of each year.

Product Warranties

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.

Representatives and Third Party Products

We are responsible for billings and collections resulting from all sales transactions, including those initiated by 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. 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. 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. 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. The Company is considered the principal for the equipment we design and manufacture and records that revenue. The Company has no control over the Third Party Products to the end customer and the Company is under no obligation related to the Third Party Products. Amounts related to Third Party Products are not recognized as revenue but are recorded as a liability and are included in accrued liabilities on the consolidated balance sheet.

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 were $10.8 million and $9.5 million for the three months ended September 30, 2022 and 2021, respectively. The amount of payments to our Representatives were $28.7 million and $34.5 million for the nine months ended September 30, 2022 and 2021, respectively.