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TULSA, Okla., Feb. 28, 2019 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ-AAON), today announced its results for the fourth quarter and year 2018. Sales in the fourth quarter were $112.3 million, up 7.9% from $104.2 million in 2017. Net income for the fourth quarter was $12.5 million, a decrease of 20.5% from $15.8 million in the same period a year ago. The fourth quarter of 2017 had a benefit of $4.4 million related to the enactment of the Tax Cuts and Jobs Act (the "Act") discussed below. Sales for the year 2018 reached a record level, $433.9 million, representing a gain of 7.1% compared to $405.2 million in 2017. Net income for 2018 was $42.6 million, a decrease of 21.9% compared to $54.5 million in 2017.
Our backlog at December 31, 2018 increased 86.8% to $151.8 million, from $81.2 million for the same period a year ago.
Earnings for the fourth quarter of 2018 were $0.24 per diluted share, down 19.7% from $0.30 per diluted share in 2017, based upon 52.4 million and 52.9 million diluted shares outstanding, respectively. Earnings per diluted share for the year 2018 were $0.81, decrease of 21.4% from $1.03 for the year 2017 based upon 52.7 million and 53.1 million diluted shares outstanding, respectively.
For the three months ended December 31, 2018, gross profit as a percent of sales was 24.7% compared to 29.8% for the three months ended December 31, 2017. For the year ended December 31, 2018, gross profit was a percent of sales was 23.9% compared to 30.5% in the same period a year ago. Norman H. Asbjornson, CEO, said "Our gross profit has been negatively impacted in 2018 mainly due to labor issues and increased costs in raw materials. The Company elevated staffing levels going into 2018 when orders were slower in anticipation of increased order volume and also struggled to hire qualified labor during our peak season. Our fourth quarter was negatively impacted by production inefficiencies and we have modified our onboarding and new-hire training practices to address these issues. We believe our gross profit percentage will continue to improve to normal levels as our production increases in the coming year."
Selling, general and administrative expenses for the quarter decreased $2.5 million to $11.3 million (10.0% of sales) from $13.7 million (13.2% of sales) as compared to the fourth quarter of 2017. For the year, SG&A expenses decreased $1.5 million to $47.8 million (11.0% of sales) from $49.2 million (12.2% of sales) as compared to 2017. The Company's warranty costs continue to improve with claims paid in 2018 down 9.4% from 2017.
For the three months ended December 31, 2018, our effective tax rate was 24.0% compared to 9.6% for the three months ended December 31, 2017. For the year ended December 31, 2018, effective tax rate was 23.9% compared to 26.8% in the same period a year ago. As a result of the changes provided under the Act, the Company adjusted its deferred tax assets and liabilities existing at the date of enactment using the newly enacted rates for the periods when they are expected to be realized. This remeasurement resulted in a benefit to income taxes of $4.4 million for the three months and year ended December 31, 2017.
Gary Fields, President, added "We are starting to see the benefits of the price increases put in place at the end of 2017 and expect continuation of these benefits as a result of the additional price increases during 2018. With our backlog at record levels, we expect to witness significant improvements in both our sales and earnings in 2019."
Norman H. Asbjornson, CEO, concluded "Our financial condition at December 31, 2018 remained quite strong with a current ratio of 2.9:1 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 fourth quarter and year 2018 results. To participate, call 1-888-241-0551 (code 1296698); or, for rebroadcast, call 1-855-859-2056 (code 1296698).
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.
Jerry R. Levine
Phone: (914) 244-0292
Fax: (914) 244-0295
|AAON, Inc. and Subsidiaries|
|Unaudited Consolidated Statements of Income|
Three Months Ended
|(in thousands, except share and per share data)|
|Cost of sales||84,545||73,085||330,414||281,835|
|Selling, general and administrative expenses||11,260||13,714||47,755||49,249|
|(Gain) loss on disposal of assets||(3||)||(1||)||(12||)||45|
|Income from operations||16,538||17,362||55,790||74,103|
|Interest income, net||25||83||196||298|
|Other (expense) income, net||(58||)||5||(47||)||91|
|Income before taxes||16,505||17,450||55,939||74,492|
|Income tax provision||3,969||1,680||13,367||19,994|
|Earnings per share:|
|Cash dividends declared per common share:||$||0.16||$||0.13||$||0.32||$||0.26|
|Weighted average shares outstanding:|
|AAON, Inc. and Subsidiaries|
|Unaudited Consolidated Balance Sheets|
|Assets||(in thousands, except share and per share data)|
|Cash and cash equivalents||$||1,994||$||21,457|
|Certificates of deposit||—||2,880|
|Investments held to maturity at amortized cost||—||6,077|
|Accounts receivable, net||54,078||50,338|
|Income tax receivable||6,104||1,643|
|Prepaid expenses and other||1,046||518|
|Total current assets||140,861||153,727|
|Property, plant and equipment:|
|Machinery and equipment||212,779||184,316|
|Furniture and fixtures||16,597||13,714|
|Total property, plant and equipment||329,883||292,338|
|Less: Accumulated depreciation||166,880||149,963|
|Property, plant and equipment, net||163,003||142,375|
|Intangible assets, net||506||—|
|Liabilities and Stockholders' Equity|
|Revolving credit facility||$||—||$||—|
|Total current liabilities||48,071||50,065|
|Deferred tax liabilities||10,826||7,977|
|Commitments and contingencies|
|Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued||—||—|
|Common stock, $.004 par value, 100,000,000 shares authorized, 51,991,242 and 52,422,801 issued and outstanding at December 31, 2018 and 2017, respectively||208||210|
|Additional paid-in capital||—||—|
|Total stockholders' equity||247,499||237,226|
|Total liabilities and stockholders' equity||$||308,197||$||296,780|
|AAON, Inc. and Subsidiaries|
|Unaudited Consolidated Statements of Cash Flows|
|Years Ending December 31,|
|Operating Activities||(in thousands)|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||17,655||15,007||13,035|
|Amortization of bond premiums||13||47||249|
|Provision for losses on accounts receivable, net of adjustments||174||179||(25||)|
|Provision for excess and obsolete inventories||152||264||625|
|(Gain) loss on disposition of assets||(12||)||45||(20||)|
|Foreign currency transaction loss (gain)||55||(59||)||(22||)|
|Interest income on note receivable||(27||)||(25||)||(28||)|
|Deferred income taxes||2,849||(1,554||)||825|
|Changes in assets and liabilities:|
|Income tax receivable||(4,461||)||4,596||(1,537||)|
|Prepaid expenses and other||(528||)||98||(83||)|
|Accrued liabilities and donations||(1,766||)||6,353||(5,470||)|
|Net cash provided by operating activities||54,856||57,994||63,923|
|Cash paid in business combination||(6,377||)||—||—|
|Proceeds from sale of property, plant and equipment||13||10||28|
|Investment in certificates of deposits||(7,200||)||(5,280||)||(4,112||)|
|Maturities of certificates of deposits||10,080||7,912||10,560|
|Purchases of investments held to maturity||(9,001||)||(13,241||)||(10,384||)|
|Maturities of investments||14,570||19,700||10,021|
|Proceeds from called investments||495||1,500||3,514|
|Principal payments from note receivable||53||60||52|
|Net cash used in investing activities||(34,635||)||(31,052||)||(16,925||)|
|Borrowings under revolving credit facility||—||—||761|
|Payments under revolving credit facility||—||—||(761||)|
|Stock options exercised||4,987||2,259||2,063|
|Repurchase of stock||(26,846||)||(16,620||)||(19,317||)|
|Employee taxes paid by withholding shares||(1,097||)||(1,614||)||(823||)|
|Cash dividends paid to stockholders||(16,728||)||(13,663||)||(12,676||)|
|Net cash used in financing activities||(39,684||)||(29,638||)||(30,753||)|
|Net (decrease) increase in cash and cash equivalents||(19,463||)||(2,696||)||16,245|
|Cash and cash equivalents, beginning of period||21,457||24,153||7,908|
|Cash and cash equivalents, end of period||$||1,994||$||21,457||$||24,153|
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 (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
|Net Income, a GAAP measure||$||12,536||$||15,770||$||42,572||$||54,498|
|Depreciation and amortization||4,790||3,982||17,655||15,007|
|Amortization of bond premiums||2||8||13||47|
|Interest income, net||(30||)||(91||)||(209||)||(345||)|
|Income tax expense||3,969||1,680||13,367||19,994|
|EBITDAX, a non-GAAP measure||$||23,027||$||22,847||$||80,772||$||95,659|