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AAON Reports Record Revenue and Earnings for 2016 Despite a Slump in Fourth Quarter Results

/EIN News/ -- TULSA, Okla., Feb. 23, 2017 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ:AAON), today announced its results for the fourth quarter and year 2016. Sales in the fourth quarter were $91.7 million, down 5.7% from $97.2 million in 2015. Net income was $11.4 million, declining 11.8% from $12.9 million in the same period a year ago. Sales for the year 2016 reached a record level, $384.0 million, representing a gain of 7.1% compared to $358.6 million in 2015. Net income for 2016 was also a record, $53.4 million, rising 16.7% compared to $45.7 million in 2015.

Earnings for the fourth quarter of 2016 and 2015 were $0.21 and $0.24 per diluted share, down 12.5%, based upon 53.4 million and 54.0 million diluted shares outstanding, respectively. Earnings per diluted share for the years 2016 and 2015 were $1.00 and $0.84, representing a gain of 19.0%, based upon 53.4 million and 54.5 million diluted shares outstanding, respectively.

Norman H. Asbjornson, CEO, stated, “We believe the sales rate slowed in the fourth quarter as our customers paused to await and absorb the November election results and the impact they could have on the business environment. In addition, we witnessed a decided shift in our product mix toward lower priced units. This may have been a by-product of the concern surrounding the political atmosphere. Nevertheless, while our unit volume increased 12.5% in 2016, our sales growth advanced only 7.1%."

Mr. Asbjornson continued, "We've been successful in controlling our total costs and maintaining our gross profit margin. Our gross margin last year climbed to 30.8% compared to 30.3% the year earlier. He continued, "Our balance sheet remained quite strong. At year end 2016 the current ratio was 3.6:1 (including cash and cash equivalents of $43.7 million). We continued to operate debt-free and our return on average stockholder equity was 27.7% in 2016 compared with 25.1% a year earlier."  

Mr. Asbjornson concluded, "Our Water-Source Heat Pump production is ramping up, albeit at a somewhat slower rate than expected to assure delivery of quality product to customers. We are confident that the WSHP line will continue to show steady improvement throughout next year. Our backlog in 2016 decreased from $57.1 million to $49.1 million. Our business is somewhat seasonal, usually slowing in the fourth quarter. We are closely monitoring our raw material costs which play a major role in our ability to maintain gross margins. While 2017 will present certain challenges, we are encouraged by the tone of business witnessed since the beginning of the year. The incoming order rate and backlog have strengthened and are running at record first quarter levels. Despite some headwinds, we believe that we can achieve record sales and earnings in 2017."

The Company will host a conference call today at 3:30 P.M. (Eastern Time) to discuss the fourth quarter and year 2016 results. To participate, call 1-888-241-0551 (code 72961943); or, for rebroadcast, call 1-855-859-2056 (code 72961943).

AAON, Inc. is a manufacturer of air conditioning and heating equipment consisting of rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, self-contained units and coils. Its products serve the new construction and replacement markets. The Company has successfully gained market share through its “semi-custom” product lines, which offer the customer value, quality, function, serviceability and efficiency.

Certain statements in this news release may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933. 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
Unaudited Consolidated Statements of Income
  Three Months Ended
 December 31,
  Years Ending
December 31,
  2016   2015   2016   2015
  (in thousands, except share and per share data)
Net sales $ 91,668     $ 97,229     $ 383,977     $ 358,632  
Cost of sales 65,158     67,648     265,897     249,951  
Gross profit 26,510     29,581     118,080     108,681  
Selling, general and administrative expenses 8,632     9,859     38,506     37,438  
Gain on disposal of assets         (20 )   (59 )
Income from operations 17,878     19,722     79,594     71,302  
Interest income, net 69     74     292     161  
Other income (expense), net (10 )   (18 )   105     (124 )
Income before taxes 17,937     19,778     79,991     71,339  
Income tax provision 6,517     6,830     26,615     25,611  
Net income $ 11,420     $ 12,948     $ 53,376     $ 45,728  
Earnings per share:              
Basic $ 0.22     $ 0.24     $ 1.01     $ 0.85  
Diluted $ 0.21     $ 0.24     $ 1.00     $ 0.84  
Cash dividends declared per common share: $ 0.13     $ 0.11     $ 0.24     $ 0.22  
Weighted average shares outstanding:              
Basic 52,891,879     53,680,995     52,924,398     54,045,841  
Diluted 53,419,948     54,036,021     53,449,754     54,481,484  



AAON, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
  December 31,
  2016   2015
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 24,153     $ 7,908  
Certificates of deposit 5,512     10,080  
Investments held to maturity at amortized cost 14,083     12,444  
Accounts receivable, net 43,001     50,024  
Income tax receivable 6,239     4,702  
Note receivable 25     23  
Inventories, net 47,352     38,499  
Prepaid expenses and other 616     533  
Total current assets 140,981     124,213  
Property, plant and equipment:      
Land 2,233     2,233  
Buildings 78,806     68,806  
Machinery and equipment 158,216     143,100  
Furniture and fixtures 12,783     11,270  
Total property, plant and equipment 252,038     225,409  
Less: Accumulated depreciation 137,146     124,348  
Property, plant and equipment, net 114,892     101,061  
Certificates of deposit     1,880  
Investments held to maturity at amortized cost     5,039  
Note receivable 657     661  
Total assets $ 256,530     $ 232,854  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 7,102     6,178  
Accrued liabilities 31,940     37,235  
Total current liabilities 39,042     43,413  
Deferred revenue 1,498     698  
Deferred tax liabilities 9,531     8,706  
Donations 561     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, 52,651,448 and 53,012,363 issued and outstanding at December 31, 2016 and 2015, respectively 211     212  
Additional paid-in capital      
Retained earnings 205,687     178,706  
Total stockholders' equity 205,898     178,918  
Total liabilities and stockholders' equity $ 256,530     $ 232,854  



AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
  Years Ending December 31,
  2016   2015   2014
Operating Activities (in thousands)
Net income $ 53,376     $ 45,728     $ 44,158  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation 13,035     11,741     11,553  
Amortization of bond premiums 249     266     688  
Provision for losses on accounts receivable, net of adjustments (25 )   (48 )   (22 )
Provision for excess and obsolete inventories 625     178     135  
Share-based compensation 4,357     2,891     2,178  
Gain on disposition of assets (20 )   (59 )   (305 )
Foreign currency transaction (gain) loss (22 )   139     74  
Interest income on note receivable (28 )   (30 )   (36 )
Deferred income taxes 825     1,172     (2,111 )
Write-off of note receivable          
Changes in assets and liabilities:          
Accounts receivable 7,048     (5,884 )   (5,007 )
Income tax receivable (1,537 )   312     (257 )
Inventories (9,478 )   (1,059 )   (5,613 )
Prepaid expenses and other (83 )   76     (305 )
Accounts payable 654     (5,109 )   3,512  
Deferred revenue 417     189     782  
Accrued liabilities and donations (5,470 )   4,852     4,094  
Net cash provided by operating activities 63,923     55,355     53,518  
Investing Activities          
Capital expenditures (26,604 )   (20,967 )   (16,127 )
Proceeds from sale of property, plant and equipment 28     63     319  
Investment in certificates of deposits (4,112 )   (6,680 )   (9,940 )
Maturities of certificates of deposits 10,560     6,098     9,310  
Purchases of investments held to maturity (10,384 )   (14,183 )   (6,880 )
Maturities of investments 10,021     11,408     14,197  
Proceeds from called investments 3,514     1,013     3,029  
Principal payments from note receivable 52     54     63  
Net cash used in investing activities (16,925 )   (23,194 )   (6,029 )
Financing Activities          
Borrowings under revolving credit facility 761          
Payments under revolving credit facility (761 )        
Stock options exercised 2,063     2,795     1,318  
Repurchase of stock (19,317 )   (36,558 )   (29,066 )
Employee taxes paid by withholding shares
(823 )   (585 )   (218 )
Cash dividends paid to stockholders (12,676 )   (11,857 )   (9,656 )
Net cash used in financing activities (30,753 )   (46,205 )   (37,622 )
Net increase (decrease) in cash and cash equivalents 16,245     (14,044 )   9,867  
Cash and cash equivalents, beginning of period 7,908     21,952     12,085  
Cash and cash equivalents, end of period $ 24,153     $ 7,908     $ 21,952  

Use of Non-GAAP Financial Measure

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, provide 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   Years Ending
   December 31,   December 31,
  2016   2015   2016   2015
  (in thousands)
Net Income, a GAAP measure $ 11,420     $ 12,948     $ 53,376     $ 45,728  
Depreciation 3,488     3,154     13,035     11,741  
Amortization of bond premiums 33     98     249     266  
Share-based compensation 1,185     815     4,357     2,891  
Interest (income) expense (102 )   (172 )   (541 )   (427
Income tax expense 6,517     6,830     26,615     25,611  
EBITDAX, a non-GAAP measure $ 22,541     $ 23,673     $ 97,091     $ 85,810  
 
For Further Information:
Jerry R. Levine 
Phone: (914) 244-0292 
Fax: (914) 244-0295
Email: jrladvisor@yahoo.com

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