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AAON Reports Record Third Quarter Sales and Earnings

/EIN News/ -- TULSA, Okla., Nov. 03, 2016 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ:AAON) today announced its operating results for the third quarter and nine months ended September 30, 2016. 

In the quarter, net sales were $104.6 million, up 10.8% from $94.4 million in 2015. Net income was $15.7 million, up 18.3% from $13.3 million in the same period a year ago. Net sales for the nine months ended September 30, 2016 were $292.3 million, up 11.8% from  $261.4 million in 2015. Net income for the nine months ended September 30, 2016 was $42.0 million, up 28.0% from $32.8 million in 2015. Both sales and earnings in 2016 were all-time records for any third quarter in the history of AAON.

Earnings per diluted share in the third quarter of 2016 were $0.29, up 20.8% from $0.24 for the same period the previous year, based upon 53.4 million and 54.6 million diluted shares outstanding at September 30, 2016 and 2015, respectively. Earnings per diluted share for the nine months ended September 30, 2016 were $0.78, up 30.0% from $0.60 in 2015, based upon 53.5 million and 54.6 million diluted shares outstanding at September 30, 2016 and 2015, respectively.

The Company early adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which requires that excess tax benefits and deficiencies are reported as an income tax benefit or expense on the statement of income rather than as a component of additional paid-in capital in the statement of equity. For the three and nine months ended September 30, 2016, the Company recognized $0.6 million and $1.8 million, respectively, of excess tax benefits in the Statement of Income. The three months ended September 30, 2016 also had a benefit of $0.5 million related to a return to tax provision adjustment.

Norman H. Asbjornson, President and CEO, stated, “Our volume continues to increase allowing us to gain efficiencies and cost savings in our manufacturing process and keep our gross profit stable. Our increased focus on quality is helping to keep our warranty costs low and reduce our SG&A expense as a percent of sales to approximately 9.9% and 10.2%, respectively, for the three and nine months ended September 30, 2016."

Mr. Asbjornson further added, “Our financial condition at September 30, 2016 remained quite strong with a current ratio of 3.3:1 (including cash and short-term investments totaling $41.3 million). We continue to remain debt free. Our backlog at September 30, 2016 increased 3% to $62.2 million, from $60.4 million for the same period a year ago.”

Mr. Asbjornson continued, “We've had a slower than expected start to our new Water-Source Heat Pump line this quarter due to manufacturing start-up, but have initiated production on our first orders and are moving this forward quickly. We expect steel prices will start to modestly impact us in the fourth quarter but we believe that our cost savings efforts elsewhere will allow us to maintain our gross profit level. We look forward to another year of record sales and earnings."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the third quarter results. To participate, call 1-844-255-9472 (code 2436766); or, for rebroadcast, call 1-855-859-2056 (code 2436766).

AAON, Inc. 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, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps and coils. Since the founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our customers.

Certain statements in this news release may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. Statements regarding future prospects and developments are based upon current expectations and involve certain risks and uncertainties that could cause actual results and developments to differ materially from the forward-looking statements.

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2016   2015   2016   2015
  (in thousands, except share and per share data)
Net sales $ 104,568     $ 94,360     $ 292,309     $ 261,403  
Cost of sales 71,476     64,175     200,739     182,303  
Gross profit 33,092     30,185     91,570     79,100  
Selling, general and administrative expenses 10,400     10,062     29,874     27,579  
Gain on disposal of assets     (34 )   (20 )   (59 )
Income from operations 22,692     20,157     61,716     51,580  
Interest income 82     14     223     87  
Other (expense) income, net (12 )   (58 )   115     (106 )
Income before taxes 22,762     20,113     62,054     51,561  
Income tax provision 7,080     6,862     20,098     18,781  
Net income $ 15,682     $ 13,251     $ 41,956     $ 32,780  
Earnings per share:              
Basic $ 0.30     $ 0.24     $ 0.79     $ 0.61  
Diluted $ 0.29     $ 0.24     $ 0.78     $ 0.60  
Cash dividends declared per common share: $     $     $ 0.11     $ 0.11  
Weighted average shares outstanding:              
Basic 52,891,879     54,209,942     52,942,571     54,160,649  
Diluted 53,394,331     54,579,590     53,467,023     54,623,163  
                       


AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
  September 30, 2016   December 31, 2015
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 14,562     $ 7,908  
Certificates of deposit 6,232     10,080  
Investments held to maturity at amortized cost 20,518     12,444  
Accounts receivable, net 53,334     50,024  
Income tax receivable 2,472     4,702  
Note receivable 25     23  
Inventories, net 43,401     38,499  
Prepaid expenses and other 820     533  
Total current assets 141,364     124,213  
Property, plant and equipment:      
Land 2,233     2,233  
Buildings 77,185     68,806  
Machinery and equipment 156,932     143,100  
Furniture and fixtures 12,543     11,270  
Total property, plant and equipment 248,893     225,409  
Less: Accumulated depreciation 133,659     124,348  
Property, plant and equipment, net 115,234     101,061  
Certificates of deposit     1,880  
Investments held to maturity at amortized cost     5,039  
Note receivable 679     661  
Total assets $ 257,277     $ 232,854  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 7,228     6,178  
Dividends payable      
Accrued liabilities 36,110     37,235  
Total current liabilities 43,338     43,413  
Deferred revenue 1,423     698  
Deferred tax liabilities 7,187     8,706  
Donations 553     1,119  
Commitments and contingencies      
Stockholders' equity:      
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued      
Common stock, $.004 par value, 100,000,000 shares authorized, 52,783,642 and 53,012,363 issued and outstanding at September 30, 2016 and December 31, 2015, respectively 211     212  
Additional paid-in capital      
Retained earnings 204,565     178,706  
Total stockholders' equity 204,776     178,918  
Total liabilities and stockholders' equity $ 257,277     $ 232,854  
               


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
  Nine Months Ended
 September 30,
  2016   2015
Operating Activities (in thousands)
Net income $ 41,956     $ 32,780  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 9,547     8,587  
Amortization of bond premiums 216     168  
Provision for losses on accounts receivable, net of adjustments 30     (48 )
Provision for excess and obsolete inventories 420     (111 )
Share-based compensation 3,172     2,076  
Gain on disposition of assets (20 )   (59 )
Foreign currency transaction (gain) loss (38 )   114  
Interest income on note receivable (21 )   (23 )
Deferred income taxes (1,519 )   (1,000 )
Changes in assets and liabilities:      
Accounts receivable (3,340 )   (1,685 )
Income taxes 2,230     2,614  
Inventories (5,322 )   (3,323 )
Prepaid expenses and other (287 )   (154 )
Accounts payable 949     (3,801 )
Deferred revenue 334     138  
Accrued liabilities and donations (1,300 )   2,130  
Net cash provided by operating activities 47,007     38,403  
Investing Activities      
Capital expenditures (23,627 )   (12,775 )
Proceeds from sale of property, plant and equipment 28     63  
Investment in certificates of deposits (4,112 )   (6,200 )
Maturities of certificates of deposits 9,840     4,658  
Purchases of investments held to maturity (10,384 )   (14,183 )
Maturities of investments 5,622     9,907  
Proceeds from called investments 1,511     757  
Principal payments from note receivable 39     42  
Net cash used in investing activities (21,083 )   (17,731 )
Financing Activities      
Borrowings under revolving credit facility 761      
Payments under revolving credit facility (761 )    
Stock options exercised 1,681     2,640  
Repurchase of stock (14,572 )   (9,074 )
Employee taxes paid by withholding shares (559 )   (362 )
Cash dividends paid to stockholders (5,820 )   (5,965 )
Net cash used in financing activities (19,270 )   (12,761 )
Net increase in cash and cash equivalents 6,654     7,911  
Cash and cash equivalents, beginning of period 7,908     21,952  
Cash and cash equivalents, end of period $ 14,562     $ 29,863  
               

Use of Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), an additional non-GAAP financial measure is provided and reconciled in the following table. The Company believes that this non-GAAP financial measure, when considered together with the GAAP financial measures, provides information that is useful to investors in understanding period-over-period operating results. The Company believes that this non-GAAP financial measure enhances the ability of investors to analyze the Company’s business trends and operating performance.

EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund operations.

The Company defines EBITDAX as net income, plus (1) depreciation, (2) amortization of bond premiums, (3) share-based compensation, (4) interest (income) expense and (5) income tax expense. EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Company’s EBITDAX measure provides additional information which may be used to better understand the Company’s operations. EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDAX are significant components in understanding and assessing a company's financial performance. EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements.

The following table provides a reconciliation of net income (GAAP) to EBITDAX (non-GAAP) for the periods indicated:

  Three Months Ended September 30,   Nine Months Ended September 30,
   
  2016   2015   2016   2015
  (in thousands)
Net Income, a GAAP measure $ 15,682     $ 13,251     $ 41,956     $ 32,780  
Depreciation 3,201     2,988     9,547     8,587  
Amortization of bond premiums 65     62     216     168  
Share-based compensation 1,129     795     3,172     2,076  
Interest income (147 )   (76 )   (439 )   (255 )
Income tax expense 7,080     6,862     20,098     18,781  
EBITDAX, a non-GAAP measure $ 27,010     $ 23,882     $ 74,550     $ 62,137  
                               

 

For Further Information:
Jerry R. Levine
Phone: (914) 244-0292
Fax: (914) 244-0295
Email: jrladvisor@yahoo.com

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