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CST: 22/08/2019 16:56:25   

AAON Reports Sales And Earnings For The Fourth Quarter And Year 2018

175 Days ago

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).

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: (914) 244-0292
Fax: (914) 244-0295
Email: jrladvisor@yahoo.com


 
AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income
  Three Months Ended
 December 31,
  Years Ending
December 31,
  2018   2017   2018   2017
               
  (in thousands, except share and per share data)
Net sales $ 112,340     $ 104,160     $ 433,947     $ 405,232  
Cost of sales 84,545     73,085     330,414     281,835  
Gross profit 27,795     31,075     103,533     123,397  
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  
Net income $ 12,536     $ 15,770     $ 42,572     $ 54,498  
Earnings per share:              
Basic $ 0.24     $ 0.30     $ 0.81     $ 1.04  
Diluted $ 0.24     $ 0.30     $ 0.81     $ 1.03  
Cash dividends declared per common share: $ 0.16     $ 0.13     $ 0.32     $ 0.26  
Weighted average shares outstanding:              
Basic 52,086,247     52,457,780     52,284,616     52,572,496  
Diluted 52,420,529     52,931,796     52,667,939     53,078,734  
                       


AAON, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
  December 31,
  2018   2017
       
Assets (in thousands, except share and per share data)
Current assets:      
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
Note receivable 27   28
Inventories, net 77,612   70,786
Prepaid expenses and other 1,046   518
Total current assets 140,861   153,727
Property, plant and equipment:      
Land 3,114   2,233
Buildings 97,393   92,075
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  
Goodwill 3,229  
Note receivable 598   678
Total assets $ 308,197   $ 296,780
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $   $
Accounts payable 10,616   10,967
Accrued liabilities 37,455   39,098
Total current liabilities 48,071   50,065
Deferred revenue 1,655   1,512
Deferred tax liabilities 10,826   7,977
Donations 146  
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, 51,991,242 and 52,422,801 issued and outstanding at December 31, 2018 and 2017, respectively 208   210
Additional paid-in capital  
Retained earnings 247,291   237,016
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,
  2018   2017   2016
Operating Activities (in thousands)
Net income $ 42,572     $ 54,498     $ 53,376  
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  
Share-based compensation 7,374     6,458     4,357  
(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:          
Accounts receivable (2,832 )   (7,516 )   7,048  
Income tax receivable (4,461 )   4,596     (1,537 )
Inventories (5,598 )   (23,698 )   (9,478 )
Prepaid expenses and other (528 )   98     (83 )
Accounts payable (1,176 )   3,043     654  
Deferred revenue 412     258     417  
Accrued liabilities and donations (1,766 )   6,353     (5,470 )
Net cash provided by operating activities 54,856     57,994     63,923  
Investing Activities          
Capital expenditures (37,268 )   (41,713 )   (26,604 )
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 )
Financing Activities          
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

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
December 31,
  Years Ending
December 31,
  2018   2017   2018   2017
  (in thousands)
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  
Share-based compensation 1,760     1,498     7,374     6,458  
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  

 

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