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AAON Reports First Quarter Sales and Earnings

1110 Days ago

TULSA, Okla., May 02, 2019 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ-AAON) today announced its operating results for the first quarter and three months ended March 31, 2019.

In the quarter ended March 31, 2019, net sales were $113.8 million, up 14.9% from $99.1 million in 2018. Net income was $10.9 million, an increase of 155.9% from $4.3 million in the same period a year ago.  Earnings per diluted share for the three months ended March 31, 2019 were $0.21, an increase of 162.5% from $0.08 in 2018, based upon 52.4 million and 52.9 million shares outstanding at March 31, 2019 and 2018, respectively.

Our backlog at March 31, 2019, increased 9.7% to $166.6 million, from $151.8 million at December 31, 2018, and increased 125% from $74.1 million at March 31, 2018.

Gross profit increased 67.6% to $25.8 million (22.7% of sales) versus $15.4 million (15.5% of sales).  Norman H. Asbjornson, CEO, said, "While we witnessed increases in both labor and raw material costs, the price increases implemented during the second half of 2018, as well as increased productivity and higher sales helped partially offset these costs and had a positive impact on our gross margins in the first quarter. We expect our gross margins will continue to recover as our production increases and we work through the lower-priced portion of our backlog."

For the three months ended March 31, 2019, selling, general and administrative expenses increased 7.7% to $11.0 million (9.7% of sales) compared to $10.2 million (10.3% of sales) for the same period a year ago, positively impacted by moderating warranty costs, which we believe have stabilized.

Mr. Asbjornson continued, "Strong sales supported by an increasing backlog coupled with improving margins, secure financial condition (current ratio of 3.3:1, including cash totaling $7.1 million) and debt free balance sheet provide a solid foundation for future growth."

Gary Fields, President, stated, "We continue to gradually strengthen our manufacturing personnel and are beginning to witness increases in our production capacity as a result of our improved employee training and on-boarding initiatives. We are also improving our sheet metal manufacturing operations and we anticipate these enhancements will enable us to optimize our sheet metal manufacturing capacity before the end of the year."

Mr. Fields concluded, "As we continue to work through our lower-priced backlog and also improve productivity, we believe the Company is well positioned to capitalize on what we anticipate to be a sustainable growth opportunity as we enter our peak season."

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 5189007); or, for rebroadcast, call 1-855-859-2056 (code 5189007).

About AAON
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, coils and controls. 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. For more information, please visit www.AAON.com.

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.

Contact Information
Jerry R. Levine
Phone: (561) 482-4046 or (914) 244-0292
Fax: (914) 244-0295
Email: jrladvisor@yahoo.com

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
  Three Months Ended
 March 31,
  2019   2018
  (in thousands, except share and per
share data)
Net sales $ 113,822     $ 99,082  
Cost of sales 88,029     83,692  
Gross profit 25,793     15,390  
Selling, general and administrative expenses 11,001     10,219  
Loss (gain) on disposal of assets 284     (7 )
Income from operations 14,508     5,178  
Interest income, net 9     68  
Other expense, net (26 )   (6 )
Income before taxes 14,491     5,240  
Income tax provision 3,589     980  
Net income $ 10,902     $ 4,260  
Earnings per share:      
Basic $ 0.21     $ 0.08  
Diluted $ 0.21     $ 0.08  
Weighted average shares outstanding:      
Basic 51,992,150     52,433,902  
Diluted 52,369,660     52,910,223  

AAON, Inc. and Subsidiaries  
Consolidated Balance Sheets  
    March 31, 2019     December 31, 2018  
Assets   (in thousands, except share and per share data)  
Current assets:              
Cash and cash equivalents $ 7,143     $ 1,994  
Accounts receivable, net 58,688     54,078  
Income tax receivable 4,756     6,104  
Note receivable 27     27  
Inventories, net 74,577     77,612  
Prepaid expenses and other 1,607     1,046  
Total current assets 146,798     140,861  
Property, plant and equipment:      
Land 3,114     3,114  
Buildings 98,394     97,393  
Machinery and equipment 215,928     212,779  
Furniture and fixtures 17,079     16,597  
Total property, plant and equipment 334,515     329,883  
Less: Accumulated depreciation 167,863     166,880  
Property, plant and equipment, net 166,652     163,003  
Intangible assets, net 447     506  
Goodwill 3,229     3,229  
Right of use assets 1,796      
Note receivable 603     598  
Total assets $ 319,525     $ 308,197  
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 5,947     10,616  
Accrued liabilities 38,053     37,455  
Total current liabilities 44,000     48,071  
Deferred tax liabilities 12,713     10,826  
Other long-term liabilities 3,442     1,801  
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, 52,099,274 and 51,991,242 issued and outstanding at March 31, 2019 and December 31, 2018, respectively 208     208  
Additional paid-in capital 969      
Retained earnings 258,193     247,291  
Total stockholders' equity 259,370     247,499  
Total liabilities and stockholders' equity $ 319,525     $ 308,197  

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
  Three Months Ended
March 31 
   2019    2018
Operating Activities (in thousands) 
 Net income  $  10,902      $  4,260  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 5,914     4,129  
Amortization of bond premiums     5  
Provision for losses on accounts receivable, net of adjustments 115     (11 )
Provision for excess and obsolete inventories 357     101  
Share-based compensation 2,030     1,724  
Loss (gain) on disposition of assets 284     (7 )
Foreign currency transaction gain (16 )   3  
Interest income on note receivable (6 )   9  
Deferred income taxes 1,887     420  
Changes in assets and liabilities:      
  Accounts receivable (4,725 )   (2,897 )
  Income taxes 1,348     (5,673 )
  Inventories 2,678     3,447  
  Prepaid expenses and other (561 )   (712 )
  Accounts payable (5,730 )   9,833  
  Deferred revenue 25     37  
  Accrued liabilities and donations 411     (3,924 )
Net cash provided by operating activities 14,913     10,744  
Investing Activities      
Capital expenditures (8,772 )   (8,451 )
Cash paid in business combination     (6,000 )
Proceeds from sale of property, plant and equipment 52     6  
Investment in certificates of deposits     (4,320 )
Maturities of certificates of deposits     1,200  
Purchases of investments held to maturity     (7,495 )
Maturities of investments     4,230  
Proceeds from called investments     395  
Principal payments from note receivable 17     14  
Net cash used in investing activities (8,703 )   (20,421 )
Financing Activities      
Stock options exercised 4,010     1,340  
Repurchase of stock (4,483 )   (4,379 )
Employee taxes paid by withholding shares  (588 )   (568 )
Net cash used in financing activities (1,061 )   (3,607 )
Net increase (decrease)  in cash and cash equivalents 5,149     (13,284 )
Cash and cash equivalents, beginning of period 1,994     21,457  
Cash and cash equivalents, end of period $ 7,143     $ 8,173  

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 and amortization, (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,
  2019     2018  
  (in thousands)  
Net Income, a GAAP measure 10,902     4,260  
Depreciation and amortization 5,914     4,129  
Amortization of bond premiums     5  
Share-based compensation 2,030     1,724  
Interest income (9 )   (73 )
Income tax expense 3,589     980  
EBITDAX, a non-GAAP measure $ 22,426     $ 11,025  


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