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AAON Reports Record First Quarter Sales but Lower Net Income

TULSA, Okla., May 04, 2017 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ:AAON) today announced its operating results for the first quarter ended March 31, 2017. 

Net sales in the first quarter gained 0.8% to $86.1 million from $85.4 million in the corresponding period in 2016. Net income declined 11.5% to $10.2 million, or $0.19 per diluted share, as compared with $11.6 million, or $0.22 per diluted share for the same period a year ago, based upon 53.2 million and 53.6 million diluted shares outstanding at March 31, 2017 and 2016, respectively.

Mr. Asbjornson said, "The Company had a slow start to the year because of weak order input in the fourth quarter. Toward the final half of the first quarter, the order input rate improved and we ended the quarter with a near record backlog of $68.9 million, up 40.9% from December 31, 2016 and up 14.3% from the same period a year ago. The firm rate of order input has continued into the current quarter."

Increases in manufacturing costs restricted gross profits which declined 2.9% to $25.0 million (29.0% of sales) versus $25.7 million (30.1% of sales). Selling, general and administrative expenses, impacted by unusually higher warranty expenses, non-recurring advertising and promotional costs as well as increased stock compensation expenses, all combined to cause these costs to increase $1.6 million or 18.1% to $10.5 million (12.2% of sales) from $8.9 million (10.4% of sales) during the same period a year ago.

Norman H. Asbjornson, CEO, said, “We implemented selective price increases on March 1st which should begin to impact our sales in the latter half of the year. We are closely monitoring our SG&A expenses and we expect to witness reduction of these expenses throughout the year."

Mr. Asbjornson further added, "Although we continue to restrain our sales effort to ensure initial customer satisfaction, our new Water-Source Heat Pump line production is exhibiting excellent progress."

Mr. Asbjornson concluded, “Our financial condition at March 31, 2017 is strong with a current ratio of 3.6:1 (including cash and short-term investments totaling $41.9 million) and we continue to remain debt free. The combination of increasing sales and moderating SG&A expenses should enable us to once again post record sales and earnings for the current year."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the first quarter results. To participate, call 1-888-241-0551 (code 14715826); or, for rebroadcast, call 1-855-859-2056 (code 14715826).

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.

/EIN News/ --

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
              Three Months Ended
 March 31,
              2017   2016
              (in thousands, except share and per share data)
Net sales             $ 86,078     $ 85,422  
Cost of sales             61,092     59,691  
Gross profit             24,986     25,731  
Selling, general and administrative expenses             10,530     8,913  
Gain on disposal of assets             (1 )   (8 )
Income from operations             14,457     16,826  
Interest income             60     74  
Other income, net             11     117  
Income before taxes             14,528     17,017  
Income tax provision             4,311     5,466  
Net income             $ 10,217     $ 11,551  
Earnings per share:                  
Basic             $ 0.19     $ 0.22  
Diluted             $ 0.19     $ 0.22  
Cash dividends declared per common share:             $     $  
Weighted average shares outstanding:                  
Basic             52,622,539     53,061,058  
Diluted             53,190,057     53,593,269  

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
  March 31, 2017   December 31, 2016
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 31,623     $ 24,153  
Certificates of deposit 3,120     5,512  
Investments held to maturity at amortized cost 7,139     14,083  
Accounts receivable, net 44,377     43,001  
Income tax receivable 3,009     6,239  
Note receivable 25     25  
Inventories, net 55,988     47,352  
Prepaid expenses and other 929     616  
Total current assets 146,210     140,981  
Property, plant and equipment:      
Land 2,233     2,233  
Buildings 81,117     78,806  
Machinery and equipment 161,024     158,216  
Furniture and fixtures 13,315     12,783  
Total property, plant and equipment 257,689     252,038  
Less: Accumulated depreciation 139,272     137,146  
Property, plant and equipment, net 118,417     114,892  
Note receivable 656     657  
Total assets $ 265,283     $ 256,530  
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 9,936     7,102  
Accrued liabilities 31,186     31,940  
Total current liabilities 41,122     39,042  
Deferred revenue 1,546     1,498  
Deferred tax liabilities 10,251     9,531  
Donations 569     561  
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, 52,622,539
and 52,651,448 issued and outstanding at March 31, 2017 and December 31,
2016, respectively
210     211  
Additional paid-in capital      
Retained earnings 211,585     205,687  
Total stockholders' equity 211,795     205,898  
Total liabilities and stockholders' equity $ 265,283     $ 256,530  

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
          Three Months Ended
 March 31,
          2017   2016
Operating Activities                       (in thousands)
Net income         $ 10,217     $ 11,551  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation         3,638     3,171  
Amortization of bond premiums         16     83  
Provision for losses on accounts receivable, net of adjustments         184     123  
Provision for excess and obsolete inventories         60     137  
Share-based compensation         1,645     948  
Gain on disposition of assets         (1 )   (8 )
Foreign currency transaction gain         (5 )   (48 )
Interest income on note receivable         (7 )   (7 )
Deferred income taxes         720     (1,030 )
Changes in assets and liabilities:              
Accounts receivable         (1,560 )   7,900  
Income taxes         3,230     5,989  
Inventories         (8,696 )   (4,117 )
Prepaid expenses and other         (313 )   (1,950 )
Accounts payable         1,736     (3,129 )
Deferred revenue         78     110  
Accrued liabilities and donations         (776 )   (3,730 )
Net cash provided by operating activities         10,166     15,993  
Investing Activities              
Capital expenditures         (6,071 )   (7,332 )
Proceeds from sale of property, plant and equipment         7     8  
Maturities of certificates of deposits         2,392     1,200  
Maturities of investments         6,928     1,700  
Proceeds from called investments             505  
Principal payments from note receivable         13     13  
Net cash provided by (used in) investing activities         3,269     (3,906 )
Financing Activities              
Stock options exercised         898     709  
Repurchase of stock         (6,303 )   (3,276 )
Employee taxes paid by withholding shares

        (560 )   (180 )
Net cash used in financing activities         (5,965 )   (2,747 )
Net increase in cash and cash equivalents         7,470     9,340  
Cash and cash equivalents, beginning of period         24,153     7,908  
Cash and cash equivalents, end of period         $ 31,623     $ 17,248  

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 (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
 March 31,
      2017   2016
      (in thousands)
Net Income, a GAAP measure                         $ 10,217     $ 11,551  
Depreciation     3,638     3,171  
Amortization of bond premiums     16     83  
Share-based compensation     1,645     948  
Interest income     (76 )   (157 )
Income tax expense     4,311     5,466  
EBITDAX, a non-GAAP measure     $ 19,751     $ 21,062  


For Further Information:
Jerry R. Levine 
Phone: (914) 244-0292 
Fax: (914) 244-0295

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