AAON Reports Record Sales and Earnings and 30% Increase in Dividends

TULSA, OK--(Marketwired - May 5, 2014) - AAON, Inc. (NASDAQ: AAON), today announced its operating results for the three months ended March 31, 2014. Sales in the first quarter were $76.4 million, up 14.3% from $66.8 million in 2013. Net income was $9.8 million, up 37.6% from $7.1 million in the same period a year ago. Earnings per diluted share in the first quarter of 2014 were $0.26, up 36.8% from $0.19 for the same period the previous year, based upon 37.1 million and 37.0 million shares outstanding at March 31, 2014 and 2013, respectively. All per share earnings and shares reflect the 3-for-2 stock split effective July 2, 2013.

Both sales and earnings in 2014 were all-time records for any first quarter in the history of AAON.

Further, it should be noted that income before taxes in 2014 was $14.3 million, up 71.0% from $8.3 million in the same period a year ago. The effective tax rates on these earnings were 31.3% and 14.6% in the first quarters of 2014 and 2013, respectively. Both such tax rates are abnormally low due to a change in method of accounting for state investment credits in 2014 and several retroactive Federal tax credits along with a change in estimated taxes in 2013. However, the differential in these tax rates greatly distorts the comparison of net income for the first quarters of 2014 and 2013. The current estimated 2014 effective tax rate is 34.0%.

Norman H. Asbjornson, President and CEO, stated, "The first quarter of 2014 gains in sales and income from operations primarily reflect increases in market share, volume and prices, in addition to a decline in cost of materials, with gross profit as a percent of sales increasing from 22.9% to 28.6%. SG&A expenses as a percent of sales decreased from 10.4% to 10.0%."

Mr. Asbjornson continued, "The Company's balance sheet at March 31, 2014, was very strong, showing a current ratio of 3.3:1 (including cash and short-term investments totaling $51.6 million) and we remained debt free. However, our backlog decreased from a record high of $71.7 million at March 31, 2013 (which included an influx of orders in advance of a scheduled price increase), to $51.7 million at March 31, 2014 (which was not affected by any additional price increase)." 

Mr. Asbjornson then said, "Based on the first quarter results and other relevant factors, we expect 2014 to produce higher sales and earnings than 2013."

Mr. Asbjornson next reported that, "Taking into account the Company's sustained period of profitability and mounting liquidity position, the Board of Directors of AAON has approved a 30% increase in its semi-annual cash dividend from $0.10 per share to $0.13 per share, starting with the next dividend payable on July 1, 2014, to stockholders of record on June 12, 2014."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the first quarter results. To participate, call 1-866-544-4631; or, for rebroadcast, call 1-866-245-6755 (code 845795).

AAON, Inc. is a manufacturer of air conditioning and heating equipment consisting of rooftop units, chillers, outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, commercial self-contained units and coils. Its products serve the new construction and replacement markets. The Company has successfully gained market share through its "semi-custom" product lines, which offer the customer value, quality, function, serviceability and efficiency.

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.

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
			Three Months Ended  March 31,
			2014				2013
			(in thousands, except share and per share data)
Net sales			$	76,367			$	66,833
Cost of sales				54,521				51,521
Gross profit				21,846				15,312
Selling, general and administrative expenses				7,629				6,967
(Gain) loss on disposal of assets				(24	)			7
Income from operations				14,241				8,338
Interest income				69				34
Other expense, net				(21	)			(16	)
Income before taxes				14,289				8,356
Income tax provision				4,467				1,216
Net income			$	9,822			$	7,140
Earnings per share:
	Basic*		$	0.27			$	0.19
	Diluted*		$	0.26			$	0.19
Cash dividends declared per common share*:			$	--			$	--
Weighted average shares outstanding:
	Basic*			36,694,554				36,760,632
	Diluted*			37,075,460				36,962,144

*Reflects three-for-two stock split effective July 2, 2013

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
				March 31, 2014			December 31, 2013
Assets				(in thousands, except share and per share data)
Current assets:
	Cash and cash equivalents			$	19,670		$	12,085
	Certificates of deposit				9,105			8,110
	Investments held to maturity at amortized cost				22,808			16,040
	Accounts receivable, net				45,704			39,063
	Income tax receivable				--			1,073
	Note receivable				29			29
	Inventories, net				34,891			32,140
	Prepaid expenses and other				701			304
	Deferred tax assets				5,488			4,779
Total current assets					138,396			113,623
Property, plant and equipment:
	Land				2,233			1,417
	Buildings				62,744			61,821
	Machinery and equipment				120,942			119,439
	Furniture and fixtures				9,934			9,748
		Total property, plant and equipment			195,853			192,425
		Less: Accumulated depreciation			107,678			105,142
	Property, plant and equipment, net				88,175			87,283
Certificates of deposit					240			2,638
Investments held to maturity at amortized cost					1,027			10,981
Note receivable					881			919
Total assets				$	228,719		$	215,444
Liabilities and Stockholders' Equity
Current liabilities:
	Revolving credit facility			$	--		$	--
	Accounts payable				11,307			7,779
	Accrued liabilities				30,643			28,550
Total current liabilities					41,950			36,329
Deferred revenue					735			585
Deferred tax liabilities					13,979			14,424
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued					--			--
Common stock, $.004 par value, 50,000,000 shares authorized, 36,652,276 and 36,711,354 issued and outstanding at March 31, 2014 and December 31, 2013, respectively					147			147
Additional paid-in capital					--			--
Retained earnings					171,908			163,959
Total stockholders' equity					172,055			164,106
Total liabilities and stockholders' equity				$	228,719		$	215,444

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
				Three Months Ended  March 31,
				2014				2013
Operating Activities				(in thousands)
Net income				$	9,822			$	7,140
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation				2,808				3,191
	Amortization of bond premiums				216				127
	Provision for losses on accounts receivable, net of adjustments				(130	)			269
	Provision for excess and obsolete inventories, net				4				169
	Share-based compensation				412				392
	Excess tax benefits from stock options exercised and restricted stock awards vested				(356	)			(109	)
	(Gain) loss on disposition of assets				(24	)			7
	Foreign currency transaction gain				31				19
	Interest income on note receivable				(10	)			(10	)
	Deferred income taxes				(1,154	)			(1,205	)
	Changes in assets and liabilities:
		Accounts receivable			(6,511	)			5,046
		Income tax receivable			1,429				(172	)
		Inventories			(2,755	)			(1,541	)
		Prepaid expenses and other			(397	)			(99	)
		Accounts payable			3,441				(1,838	)
		Deferred revenue			204				--
		Accrued liabilities			2,039				(2,895	)
Net cash provided by operating activities					9,069				8,491
Investing Activities
	Capital expenditures				(3,616	)			(997	)
	Proceeds from sale of property, plant and equipment				27				--
	Investment in certificates of deposits				--				(238	)
	Maturities of certificates of deposits				1,403				720
	Purchases of investments held to maturity				--				(1,396	)
	Maturities of investments				2,717				610
	Proceeds from called investment				253				--
	Principal payments from note receivable				17				20
	Net cash provided by (used in) investing activities				801				(1,281	)
Financing Activities
	Borrowings under revolving credit facility				--				1,955
	Payments under revolving credit facility				--				(1,955	)
	Stock options exercised				340				354
	Excess tax benefits from stock options exercised and restricted stock awards vested				356				109
	Repurchase of stock				(2,981	)			(1,115	)
	Net cash used in financing activities				(2,285	)			(652	)
Net increase in cash and cash equivalents					7,585				6,558
Cash and cash equivalents, beginning of period					12,085				3,159
Cash and cash equivalents, end of period				$	19,670			$	9,717