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AAON Reports Record Second Quarter Sales and Backlog

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TULSA, Okla., Aug. 02, 2018 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ-AAON) today announced its operating results for the second quarter and six months ended June 30, 2018.

In the quarter ended June 30, 2018, net sales were $109.6 million, up 8.2% from $101.3 million in 2017. Net income was $11.7 million, a decline of 15.2% from $13.8 million in the same period a year ago. Net sales for the six months ended June 30, 2018 were $208.7 million, increasing 11.3% from $187.4 million in 2017. Net income for the six months ended June 30, 2018 was $16.0 million, down 33.6% from $24.0 million in 2017.

Our backlog at June 30, 2018 increased 87.5% to $156.6 million, from $83.5 million for the same period a year ago.

Earnings per diluted share in the second quarter of 2018 were $0.22, down 15.4% from $0.26 for the same period in 2017, based upon 52.7 million and 53.2 million shares outstanding at June 30, 2018 and 2017, respectively. Earnings per diluted share for the six months ended June 30, 2018 were $0.30, a decrease of 33.3% from $0.45 in 2017, based upon 52.8 million and 53.2 million shares outstanding at June 30, 2018 and 2017, respectively

While gross profit is down for both the quarter and six months compared to 2017, as a percent of sales gross profit increased from 15.5% in the first quarter to 25.2% in the second quarter.  Norman H. Asbjornson, CEO, said, "As expected, our gross profit has started to recover as we've entered our peak season. We are working hard to improve our gross profit by closely monitoring our raw material costs while reviewing our supply chain. In addition, we are working to increase our production levels to help absorb overhead."

Selling, general and administrative expenses increased 9.3% to $13.1 million (11.9% of sales) from $12.0 million (11.8% of sales) as compared to the second quarter of 2017.  For the six months ended June 30, 2018, selling, general and administrative expenses  increased 3.6%  to $23.3 million  (11.2%  of sales) compared to $22.5 million (12.0% of sales) for the same period a year ago.

Mr. Asbjornson continued, "Our financial condition at June 30, 2018 remains strong with a current ratio of 2.2:1 (including cash and short-term investments totaling $24.3 million) and we continue to operate debt free."

Gary Fields, President, concluded "While orders were slower than expected at the beginning of the year, they have materialized as evidenced by our record backlog.  We are starting to see the impact of our November 2017 price increases and expect the subsequent prices increases will continue to strengthen our gross profit throughout 2018 and into 2019."

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 8292427); or, for rebroadcast, call 1-855-859-2056 (code 8292427).

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.


 
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
  (in thousands, except share and per share data)
Net sales $ 109,588     $ 101,326     $ 208,670     $ 187,404  
Cost of sales 82,003     69,648     165,695     130,740  
Gross profit 27,585     31,678     42,975     56,664  
Selling, general and administrative expenses 13,086     11,971     23,305     22,501  
(Gain) loss on disposal of assets (4 )   48     (11 )   47  
Income from operations 14,503     19,659     19,681     34,116  
Interest income, net 67     71     135     131  
Other (expense) income, net 12     34     6     45  
Income before taxes 14,582     19,764     19,822     34,292  
Income tax provision 2,891     5,970     3,871     10,281  
Net income $ 11,691     $ 13,794     $ 15,951     $ 24,011  
Earnings per share:              
Basic $ 0.22     $ 0.26     $ 0.30     $ 0.46  
Diluted $ 0.22     $ 0.26     $ 0.30     $ 0.45  
Cash dividends declared per common share: $ 0.16     $ 0.13     $ 0.16     $ 0.13  
Weighted average shares outstanding:              
Basic 52,383,842     52,615,366     52,348,912     52,624,782  
Diluted 52,717,787     53,151,134     52,754,045     53,176,425  
 


 
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
  June 30, 2018   December 31, 2017
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 15,854     $ 21,457  
Certificates of deposit 5,520     2,880  
Investments held to maturity at amortized cost 2,955     6,077  
Accounts receivable, net 53,418     50,338  
Income tax receivable 4,971     1,643  
Note receivable 27     28  
Inventories, net 70,467     70,786  
Prepaid expenses and other 1,453     518  
Total current assets 154,665     153,727  
Property, plant and equipment:      
Land 2,794     2,233  
Buildings 96,043     92,075  
Machinery and equipment 205,464     184,316  
Furniture and fixtures 14,747     13,714  
Total property, plant and equipment 319,048     292,338  
Less: Accumulated depreciation 157,927     149,963  
Property, plant and equipment, net 161,121     142,375  
Intangible assets, net 622      
Goodwill 3,229      
Note receivable 634     678  
Total assets $ 320,271     $ 296,780  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 25,127     10,967  
Dividends payable 8,400      
Accrued liabilities 38,146     39,098  
Total current liabilities 71,673     50,065  
Deferred revenue 1,546     1,512  
Deferred tax liabilities 8,415     7,977  
Donations 200      
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, 52,290,064 and 52,422,801 issued and outstanding at March 31, 2018 and December 31, 2017, respectively 209     210  
Additional paid-in capital      
Retained earnings 238,228     237,016  
Total stockholders' equity 238,437     237,226  
Total liabilities and stockholders' equity $ 320,271     $ 296,780  
 


 
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
  Six Months Ended
 June 30,
  2018   2017
Operating Activities (in thousands)
Net income $ 15,951     $ 24,011  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 8,438     7,281  
Amortization of bond premiums 8     29  
Provision for losses on accounts receivable, net of adjustments 89     141  
Provision for excess and obsolete inventories 299     260  
Share-based compensation 3,699     3,529  
(Gain) loss on disposition of assets (11 )   47  
Foreign currency transaction gain 15     (24 )
Interest income on note receivable 14     (13 )
Deferred income taxes 438     364  
Changes in assets and liabilities:      
  Accounts receivable (2,087 )   (254 )
  Income taxes (3,328 )   5,430  
  Inventories 1,400     (15,983 )
  Prepaid expenses and other (935 )   (272 )
  Accounts payable 12,974     6,801  
  Deferred revenue (931 )   118  
  Accrued liabilities and donations 213     2,295  
Net cash provided by operating activities 36,246     33,760  
Investing Activities      
Capital expenditures (25,925 )   (16,847 )
Cash paid in business combination (6,377 )    
Proceeds from sale of property, plant and equipment 11     7  
Investment in certificates of deposits (7,200 )   (5,280 )
Maturities of certificates of deposits 4,560     5,272  
Purchases of investments held to maturity (9,001 )   (13,241 )
Maturities of investments 11,620     14,063  
Proceeds from called investments 495     500  
Principal payments from note receivable 16     26  
Net cash used in investing activities (31,801 )   (15,500 )
Financing Activities      
Stock options exercised 2,299     1,573  
Repurchase of stock (11,539 )   (9,368 )
Employee taxes paid by withholding shares

 
(808 )   (1,066 )
Net cash used in financing activities (10,048 )   (8,861 )
Net (decrease) increase in cash and cash equivalents (5,603 )   9,399  
Cash and cash equivalents, beginning of period 21,457     24,153  
Cash and cash equivalents, end of period $ 15,854     $ 33,552  
 

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:

  Three Months Ended
June 30,
  Six Months Ended
June 30,
   
  2018   2017   2018   2017
  (in thousands)
Net Income, a GAAP measure $ 11,691     $ 13,794     $ 15,951     $ 24,011  
Depreciation and amortization 4,309     3,643     8,438     7,281  
Amortization of bond premiums 3     13     8     29  
Share-based compensation 1,975     1,884     3,699     3,529  
Interest income (70 )   (85 )   (143 )   (161 )
Income tax expense 2,891     5,970     3,871     10,281  
EBITDAX, a non-GAAP measure $ 20,869     $ 25,219     $ 31,967     $ 44,970  
 


      For Further Information:
    Jerry R. Levine • Phone: (914) 244-0292 • Fax: (914) 244-0295
  Email: jrladvisor@yahoo.com

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