AAON Reports Third Quarter Sales and Earnings

TULSA, Okla., Nov. 01, 2018 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ-AAON) today announced its operating results for the third quarter and nine months ended September 30, 2018.

In the quarter ended September 30, 2018, net sales were $112.9 million, down 0.6% from $113.7 million in 2017. Net income was $14.1 million, a decline of 4.3% from $14.7 million in the same period a year ago. Net sales for the nine months ended September 30, 2018 were $321.6 million, increasing 6.8% from $301.1 million in 2017. Net income for the nine months ended September 30, 2018 was $30.0 million, down 22.4% from $38.7 million in 2017.

Our backlog at September 30, 2018 increased 71.8% to $126.8 million, from $73.8 million for the same period a year ago.

Earnings per diluted share in the third quarter of 2018 were $0.27, down 3.6% from $0.28 for the same period in 2017, based upon 52.6 million and 53.0 million shares outstanding at September 30, 2018 and 2017, respectively. Earnings per diluted share for the nine months ended September 30, 2018 were $0.57, a decrease of 21.9% from $0.73 in 2017, based upon 52.7 million and 53.1 million shares outstanding at September 30, 2018 and 2017, respectively.

For the three months ended September 30, 2018, gross profit as a percent of sales was 29.0% compared to 31.4% for the three months ended September 30, 2017 and 25.2% for the three months ended June 30, 2018. For the nine months ended September 30, 2018, gross profit as a percent of sales was 23.5% compared to 30.7% in the same period a year ago. Norman H. Asbjornson, CEO, said, "While our gross profit improved in the third quarter, our business continues to be impacted by the implementation of new manufacturing technologies, a lack of labor availability, and the productivity of our new hires. Even though we are experiencing record backlogs, we have slowed our rate of adding new employees and this has improved both productivity and throughput. Warranty costs continue to be higher than historical levels but we are beginning to see slow improvement. Certain other costs are higher year over year but these are manageable and will be offset by increased sales volumes."

Selling, general and administrative expenses increased 1.2% to $13.2 million (11.7% of sales) from $13.0 million (11.5% of sales) as compared to the third quarter of 2017. For the nine months ended September 30, 2018, selling, general and administrative expenses increased 2.7% to $36.5 million (11.3% of sales) compared to $35.5 million (11.8% of sales) for the same period a year ago.

Gary Fields, President, said "We believe the significant increase in our backlog at the end of the third quarter is directly attributable to our innovative product lines and also reflects the overwhelmingly positive response from members of our independent sales representative firms who received a limited demonstration of our soon to be completed state-of-the art research and development laboratory facility during our recent national sales meeting, several of which have already requested early laboratory visits for their major customers."

Mr. Asbjornson concluded, "Our financial condition at September 30, 2018 remained strong with a current ratio of 2.7:1 (including cash and short-term investments totaling $10.7 million) 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 third quarter results. To participate, call 1-888-241-0551 (code 6839319); or, for rebroadcast, call 1-855-859-2056 (code 6839319).

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 and coils. 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.

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.

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

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: