SOURCE: AAON

AAON

August 06, 2015 07:00 ET

AAON Reports Second Quarter Results

TULSA, OK--(Marketwired - August 06, 2015) - AAON, Inc. (NASDAQ: AAON) today announced its operating results for the second quarter and six months ended June 30, 2015.

In the quarter, net sales were $90.3 million, down 2.2% from $92.3 million in 2014. Net income was $11.1 million, down 2.1% from $11.4 million in the same period a year ago. Net sales for the six-month period ended June 30, 2015 were $167.0 million, down 1.0% from $168.7 million in 2014. Net income for the six-month period ended June 30, 2015 was $19.5 million, down 7.8% from $21.2 million in 2014.

Earnings per diluted share in the second quarter of 2015 held constant at $0.20, compared to the same period the previous year, based upon 54.7 million and 55.6 million shares outstanding at June 30, 2015 and 2014, respectively. Earnings per diluted share for the six- month period ended June 30, 2015 were $0.36, down 5.3% from $0.38 in 2014, based upon 54.7 million and 55.6 million shares outstanding at June 30, 2015 and 2014, respectively.

Norman H. Asbjornson, President and CEO, stated, "As previously reported, we expected a better quarter with increases in our sales. Market data suggests there is a fall-off in replacement sales and that new construction may not be as strong as previously thought. However, we continue to maintain our gross profit percentage through lower raw material costs and increased productivity. Our gross profit as a percent of sales remained relatively steady for the quarter at 30.0% compared to 30.2% a year ago and for the six-month period ended June 30, 2015 at 29.3% compared to 29.5% in the same period a year ago. We also have seen decreases in our SG&A expense as a percent of sales of 1.3% (from 11.5% to 10.2%) for the quarter and 0.3% (from 10.8% to 10.5%) for the six-month period."

Mr. Asbjornson continued, "The Company's balance sheet at June 30, 2015, continues to be very strong, showing a current ratio of 3.2:1 (including cash and short-term investments totaling $49.9 million), plus long-term marketable investments of $0.6 million, and we remain debt-free."

Mr. Asbjornson concluded, "Nonetheless, we have made changes to strengthen our organization by hiring three (75% increase) new regional sales managers who we expect will make a positive impact on the performance of our representatives as well as replacing some representatives with new firms. In addition, we are about to introduce a number of new products within the next few months. These steps should aid in stimulating new business in the final half of this year and particularly in 2016."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the second quarter results. To participate, call 1-888-241-0551 (code 86989685); or, for rebroadcast, call 1-855-859-2056 (code 86989685).

AAON, Inc. is a manufacturer of air conditioning and heating equipment consisting of rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, 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 Six Months Ended  
  June 30, June 30,  
  2015  2014 2015  2014  
  (in thousands, except share and per share data)  
Net sales $90,275  $92,310 $167,043  $168,677  
Cost of sales  63,158   64,434  118,128   118,955  
Gross profit  27,117   27,876  48,915   49,722  
Selling, general and administrative expenses  9,200   10,584  17,517   18,213  
Gain on disposal of assets  (30 ) -  (25 ) (24 )
Income from operations  17,947   17,292  31,423   31,533  
Interest income  29   71  73   140  
Other income (expense), net  27   34  (48 ) 13  
Income before taxes  18,003   17,397  31,448   31,686  
Income tax provision  6,873   6,034  11,919   10,501  
Net income $11,130  $11,363 $19,529  $21,185  
Earnings per share:                
 Basic $0.21  $0.21 $0.36  $0.38  
 Diluted $0.20  $0.20 $0.36  $0.38  
Cash dividends declared per common share: $0.11  $0.09 $0.11  $0.09  
Weighted average shares outstanding:                
 Basic  54,208,362   55,004,175  54,205,657   55,036,281  
 Diluted  54,669,763   55,568,212  54,714,604   55,603,979  

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
  June 30,
2015
December 31,
2014
  (in thousands, except share and per share data)
Assets      
Current assets:      
 Cash and cash equivalents $37,600 $21,952
 Certificates of deposit  6,240  6,098
 Investments held to maturity at amortized cost  6,101  11,972
 Accounts receivable, net  45,480  44,092
 Income tax receivable  3,385  2,569
 Note receivable  26  30
 Inventories, net  47,182  37,618
 Prepaid expenses and other  1,055  609
 Deferred tax assets  5,837  6,143
Total current assets  152,906  131,083
Property, plant and equipment:      
 Land  2,233  2,233
 Buildings  66,583  64,938
 Machinery and equipment  134,745  127,968
 Furniture and fixtures  10,581  10,388
  Total property, plant and equipment  214,142  205,527
  Less: Accumulated depreciation  118,347  113,605
 Property, plant and equipment, net  95,795  91,922
Certificates of deposit  480  5,280
Investments held to maturity at amortized cost  75  4,015
Note receivable  756  817
Total assets $250,012 $233,117
 
Liabilities and Stockholders' Equity      
Current liabilities:      
 Revolving credit facility  - $-
 Accounts payable  10,513  11,370
 Dividends payable  5,982  -
 Accrued liabilities  30,755  31,343
Total current liabilities  47,250  42,713
Deferred revenue  833  1,006
Deferred tax liabilities  12,808  13,677
Donations  1,692  1,662
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, 54,263,876 and 54,041,829 issued and outstanding at June 30, 2015 and December 31, 2014, respectively  217  216
Additional paid-in capital  -  -
Retained earnings  187,212  173,843
Total stockholders' equity  187,429  174,059
Total liabilities and stockholders' equity $250,012 $233,117

AAON, Inc. and Subsidiaries  
Consolidated Statements of Cash Flows  
(Unaudited) 
        
  Six Months Ended  
  June 30,  
  2015  2014  
Operating Activities (in thousands)  
 Net income $19,529  $21,185  
 Adjustments to reconcile net income to net cash provided by operating activities:         
  Depreciation  5,599   5,719  
  Amortization of bond premiums  106   389  
  Provision for losses on accounts receivable, net of adjustments  (102 ) (8 )
  Provision for excess and obsolete inventories, net  59   156  
  Share-based compensation  1,281   984  
  Excess tax benefits from stock options exercised and restricted stock awards vested  (2,452 ) (680 )
  Gain on disposition of assets  (25 ) (24 )
  Foreign currency transaction loss  53   -  
  Interest income on note receivable  (16 ) (20 )
  Deferred income taxes  (563 ) (1,961 )
  Changes in assets and liabilities:         
   Accounts receivable  (1,286 ) (13,824 )
   Income tax receivable  1,636   1,753  
   Inventories  (9,623 ) (4,624 )
   Prepaid expenses and other  (446 ) (525 )
   Accounts payable  (1,030 ) 3,422  
   Deferred revenue  136   378  
   Accrued liabilities  (867 ) 5,185  
 Net cash provided by operating activities  11,989   17,505  
Investing Activities         
 Capital expenditures  (9,304 ) (5,903 )
 Proceeds from sale of property, plant and equipment  30   29  
 Investment in certificates of deposits  -   (9,220 )
 Maturities of certificates of deposits  4,658   3,904  
 Purchases of investments held to maturity  -   (5,955 )
 Maturities of investments  9,201   6,539  
 Proceeds from called investments  504   1,269  
 Principal payments from note receivable  28   35  
 Net cash provided by (used in) investing activities  5,117   (9,302 )
Financing Activities         
 Stock options exercised  2,534   632  
 Excess tax benefits from stock options exercised and restricted stock awards vested  2,452   680  
 Repurchase of stock  (6,444 ) (5,116 )
 Net cash used in financing activities  (1,458 ) (3,804 )
Net increase in cash and cash equivalents  15,648   4,399  
Cash and cash equivalents, beginning of period  21,952   12,085  
Cash and cash equivalents, end of period $37,600  $16,484  

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), additional non-GAAP financial measures are provided and reconciled in the following tables. The Company believes that these non-GAAP financial measures, 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 these non-GAAP financial measures enhance 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  Six Months Ended  
  June 30,  June 30,  
  2015  2014  2015  2014  
  (in thousands)  
Net Income, a GAAP measure $11,130  $11,363  $19,529  $21,185  
Depreciation  2,795   2,911   5,599   5,719  
Amortization of bond premiums  45   173   106   389  
Share-based compensation  843   572   1,281   984  
Interest (income)  (74 ) (244 ) (179 ) (529 )
Income tax expense  6,873   6,034   11,919   10,501  
EBITDAX, a non-GAAP measure $21,612  $20,809  $38,255  $38,249  

Adjusted Net Income and Adjusted Earnings per Share

The Company defines Adjusted Net Income and the related per share amount as (1) net income, plus (2) non-recurring donations, less (3) the impact on profit sharing expense from the non-recurring donations and (4) the impact on income tax expense from the non-recurring donations. These measures provide additional information which may be used to better understand the Company's operations.

The following tables provide a reconciliation of net income and earnings per share-diluted (GAAP) to adjusted net income and adjusted earnings per share-diluted (non-GAAP) for the periods indicated:

  Three Months Ended  Six Months Ended  
  June 30,  June 30,  
  2015  2014  2015  2014  
  (in thousands except per share data)  
Net Income, a GAAP measure $11,130  $11,363  $19,529  $21,185  
Non-recurring donations  (210 ) 1,000   (195 ) 1,000  
Profit-sharing  21   (100 ) 19   (100 )
Income tax expense  85   (312 ) 80   (298 )
Adjusted Net Income, a non-GAAP measure $11,026  $11,951  $19,433  $21,787  
   
Earnings per share-diluted, a GAAP measure $0.20  $0.20  $0.36  $0.38  
Non-recurring donations  -   0.02   -   0.02  
Profit-sharing  -   -   -   -  
Income tax expense  -   (0.01 ) -   (0.01 )
Adjusted earnings per share-diluted, a non-GAAP measure $0.20  $0.21  $0.36  $0.39  

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