EX-99.1 2 aaonq32017pressreleaseexhi.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1                        
NEWS
BULLETIN
 
AAON, Inc.
 
2425 South Yukon Ave. Ÿ Tulsa, OK 74107-2728
 
Ÿ Ph: (918) 583-2266 Ÿ   Fax: (918) 583-6094 Ÿ
 
Ÿhttp://www.aaon.comŸ
 
 
 
For Further Information:
FOR IMMEDIATE RELEASE
November 2, 2017
 
Jerry R. Levine Ÿ Phone: (914) 244-0292 Ÿ Fax: (914) 244-0295
 
Email: jrladvisor@yahoo.com

AAON REPORTS RECORD THIRD QUARTER SALES AND BACKLOG
WITH A SLIGHT DECREASE IN NET INCOME

TULSA, Okla, November 2, 2017 - AAON, Inc. (NASDAQ-AAON) today announced its operating results for the third quarter and nine months ended September 30, 2017.

In the quarter ended September 30, 2017, net sales were $113.7 million, up 8.7% from $104.6 million in 2016. Net income was $14.7 million, a decline of 6.2% from $15.7 million in the same period a year ago. Net sales for the nine months ended September 30, 2017 were $301.1 million, increasing 3.0% from $292.3 million in 2016. Net income for the nine months ended September 30, 2017 was $38.7 million, down 7.7% from $42.0 million in 2016. Earnings per diluted share in the third quarter of 2017 were $0.28, down 3.4% from $0.29 for the same period in 2016, based upon 53.0 million and 53.4 million shares outstanding at September 30, 2017 and 2016, respectively. Earnings per diluted share for the nine months ended September 30, 2017 were $0.73, a decrease of 6.4% from $0.78 in 2016, based upon 53.1 million and 53.5 million shares outstanding at September 30, 2017 and 2016, respectively.

Our backlog at September 30, 2017 increased 19% to $73.8 million, from $62.2 million for the same period a year ago.

Selling, general and administrative expenses increased $2.6 million or 25.3% to $13.0 million (11.5% of sales) from $10.4 million (9.9% of sales) as compared to the third quarter of 2016. This increase is primarily due to warranty expense and modifications the Company has made during the year to its warranty policy. These modifications more clearly define what qualifies as a warranty claim and place a deadline for when claims may be submitted. The Company continues to expect these changes will benefit the Company in the long term with better customer relationships.

We are still awaiting certifications from AHRI on our new water-source heat pump (WSHP) products. However, we are seeing significant increases in WSHP orders, the bulk of which will be delivered by the end of 2017. With the approval of certifications, we anticipate WSHP orders will increase substantially in 2018.

Capital expenditures for the nine months ended September 30, 2017 were $26.4 million and for the total year 2017 we estimate we will reach $47-$50 million to complete work on our first automated WSHP line, start work on one of the two additional WSHP lines and the construction of our state of the art laboratory. For 2018, we currently estimate total capital expenditures in the range of $35-$37 million to finish work on our second WSHP line, start work on our third WSHP line and increase our sheet metal capacity with additional Salvagnini machines.

Norman H. Asbjornson, CEO, said, "We're happy to witness revenue growth and improvement in our production. We continue to make investments in our research and development and capital expenditures so that revenues accelerate in 2018 and beyond. We are now less than a year from opening the Norman Asbjornson Innovation Center, our state of the art acoustical and performance measuring laboratory. The ability to do testing in this facility for ourselves and customers will allow us to introduce new products at a more rapid rate while generating additional revenue."

Mr. Asbjornson concluded, “Our financial condition at September 30, 2017 remains strong with a current ratio of 2.7:1 (including cash and short-term investments totaling $39.9 million) and we continue to operate debt free."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the third quarter results. To participate, call 1-888-241-0551 (code 4098978); or, for rebroadcast, call 1-855-859-2056 (code 4098978).


1


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.

2


AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands, except share and per share data)
Net sales
$
113,668

 
$
104,568

 
$
301,072

 
$
292,309

Cost of sales
78,010

 
71,476

 
208,750

 
200,739

Gross profit
35,658

 
33,092

 
92,322

 
91,570

Selling, general and administrative expenses
13,034

 
10,400

 
35,535

 
29,874

Loss (gain) on disposal of assets
(1
)
 
—

 
46

 
(20
)
Income from operations
22,625

 
22,692

 
56,741

 
61,716

Interest income, net
84

 
82

 
215

 
223

Other income, net
41

 
(12
)
 
86

 
115

Income before taxes
22,750

 
22,762

 
57,042

 
62,054

Income tax provision
8,033

 
7,080

 
18,314

 
20,098

Net income
$
14,717

 
$
15,682

 
$
38,728

 
$
41,956

Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.28

 
$
0.30

 
$
0.74

 
$
0.79

Diluted
$
0.28

 
$
0.29

 
$
0.73

 
$
0.78

Cash dividends declared per common share:
$
—

 
$
—

 
$
0.13

 
$
0.11

Weighted average shares outstanding:
 

 
 

 
 
 
 
Basic
52,566,619

 
52,891,879

 
52,586,429

 
52,942,571

Diluted
53,014,269

 
53,394,331

 
53,103,408

 
53,467,023





3


AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
September 30, 2017
 
December 31, 2016
Assets
(in thousands, except share and per share data)
Current assets:
 
 
 
Cash and cash equivalents
$
23,515

 
$
24,153

Certificates of deposit
5,040

 
5,512

Investments held to maturity at amortized cost
11,342

 
14,083

Accounts receivable, net
57,342

 
43,001

Income tax receivable
—

 
6,239

Note receivable
28

 
25

Inventories, net
66,117

 
47,352

Prepaid expenses and other
757

 
616

Total current assets
164,141

 
140,981

Property, plant and equipment:
 

 
 

Land
2,233

 
2,233

Buildings
88,740

 
78,806

Machinery and equipment
179,712

 
158,216

Furniture and fixtures
14,136

 
12,783

Total property, plant and equipment
284,821

 
252,038

Less:  Accumulated depreciation
146,513

 
137,146

Property, plant and equipment, net
138,308

 
114,892

Note receivable
689

 
657

Total assets
$
303,138

 
$
256,530

 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

Current liabilities:
 

 
 

Revolving credit facility
$
—

 
$
—

Accounts payable
18,933

 
7,102

Dividends payable
—

 
—

Accrued liabilities
41,682

 
31,940

Total current liabilities
60,615

 
39,042

Deferred revenue
1,547

 
1,498

Deferred tax liabilities
10,678

 
9,531

Donations
—

 
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, 52,513,061 and 52,651,448 issued and outstanding at September 30, 2017 and December 31, 2016, respectively
210

 
211

Additional paid-in capital
—

 
—

Retained earnings
230,088

 
205,687

Total stockholders' equity
230,298

 
205,898

Total liabilities and stockholders' equity
$
303,138

 
$
256,530



4


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended 
 September 30,
 
2017
 
2016
Operating Activities
(in thousands)
Net income
$
38,728

 
$
41,956

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation
11,025

 
9,547

Amortization of bond premiums
39

 
216

Provision for losses on accounts receivable, net of adjustments
180

 
30

Provision for excess and obsolete inventories
54

 
420

Share-based compensation
4,960

 
3,172

Loss (gain) on disposition of assets
46

 
(20
)
Foreign currency transaction gain
(65
)
 
(38
)
Interest income on note receivable
(18
)
 
(21
)
Deferred income taxes
1,147

 
(1,519
)
Changes in assets and liabilities:
 

 
 

Accounts receivable
(14,521
)
 
(3,340
)
Income taxes
6,239

 
2,230

Inventories
(18,819
)
 
(5,322
)
Prepaid expenses and other
(141
)
 
(287
)
Accounts payable
3,781

 
949

Deferred revenue
416

 
334

Accrued liabilities and donations
8,814

 
(1,300
)
Net cash provided by operating activities
41,865

 
47,007

Investing Activities
 

 
 

Capital expenditures
(26,436
)
 
(23,627
)
Proceeds from sale of property, plant and equipment
8

 
28

Investment in certificates of deposits
(5,280
)
 
(4,112
)
Maturities of certificates of deposits
5,752

 
9,840

Purchases of investments held to maturity
(13,241
)
 
(10,384
)
Maturities of investments
15,443

 
5,622

Proceeds from called investments
500

 
1,511

Principal payments from note receivable
48

 
39

Net cash used in investing activities
(23,206
)
 
(21,083
)
Financing Activities
 

 
 

Borrowings under revolving credit facility
—

 
761

Payments under revolving credit facility
—

 
(761
)
Stock options exercised
1,715

 
1,681

Repurchase of stock
(12,991
)
 
(14,572
)
Employee taxes paid by withholding shares

(1,193
)
 
(559
)
Cash dividends paid to stockholders
(6,828
)

(5,820
)
Net cash used in financing activities
(19,297
)
 
(19,270
)
Net (decrease) increase in cash and cash equivalents
(638
)
 
6,654

Cash and cash equivalents, beginning of period
24,153

 
7,908

Cash and cash equivalents, end of period
$
23,515

 
$
14,562



5


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,
 
 
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Net Income, a GAAP measure
$
14,717

 
$
15,682

 
$
38,728

 
$
41,956

Depreciation
3,744

 
3,201

 
11,025

 
9,547

Amortization of bond premiums
10

 
65

 
39

 
216

Share-based compensation
1,431

 
1,129

 
4,960

 
3,172

Interest income
(93
)
 
(147
)
 
(254
)
 
(439
)
Income tax expense
8,033

 
7,080

 
18,314

 
20,098

EBITDAX, a non-GAAP measure
$
27,842

 
$
27,010

 
$
72,812

 
$
74,550






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