AAON Reports Record Sales and Earnings

TULSA, OK--(Marketwired - Nov 6, 2014) - AAON, Inc. (NASDAQ: AAON) today announced its operating results for the third quarter and nine months ended September 30, 2014. 

Sales and earnings for the third quarter and nine months ended September 30, 2014, were all time records and sales in the third quarter exceeded $100.0 million for the first time in any quarter in the Company's history.

Net sales in the third quarter were $102.9 million, up 14.7% from $89.7 million in 2013. Net income was $12.4 million, up 18.2% from $10.5 million for the same period a year ago. Net sales and net income for the nine months ended September 30, 2014, were $271.6 million, up 9.6% from $247.8 million in 2013, with net income of $33.6 million, up 12.9% compared to $29.8 million in 2013.

Earnings per diluted share in the third quarter of 2014 were $0.22, up 15.8% from $0.19 for the same period the previous year, based upon 55.5 million shares outstanding at both September 30, 2014 and 2013. Earnings per diluted share were $0.61, up 13.0% from $0.54, for the nine months ended September 30, 2014 and 2013, based upon 55.4 million and 55.6 million diluted shares outstanding, respectively. All per share earnings and shares reflect the three-for-two stock split effective July 16, 2014. 

Norman H. Asbjornson, President and CEO, stated, "The third quarter increase in sales primarily reflects shifts in product mix with more expensive units being sold during the period. Gross profit as a percent of sales increased to 32.4% compared to 29.7% a year ago. SG&A expense as a percent of sales increased 2.6% (from 10.8% to 13.4%), primarily due to a commitment of $3.0 million to A Gathering Place for Tulsa."

Mr. Asbjornson added that, "While our commitment to the Gathering Place is expected to be paid over five years, U.S. GAAP rules require AAON to book it all in the third quarter when the commitment was made. Absent this very special, non-recurring item, our earnings for the past quarter would have been $0.03 per share higher. The Gathering Place will transform nearly 100 acres of Tulsa's waterfront along the Arkansas River into a $350.0 million park being financed by the George Kaiser Family Foundation ($200.0 million) and numerous local corporate and community philanthropists. AAON will have its name placed on focal points known as the Swing Hill Valley and Bridge at the park. We feel it is important for AAON to be a part of this transformational project in our headquarters' community. Over 1,300 of our total 1,700 employees live in the Tulsa area and we want them and their families to enjoy and personally identify with the park and its many offerings."

Mr. Asbjornson continued, "The Company's balance sheet at September 30, 2014, was very strong, showing a current ratio of 2.7:1 (including cash and short-term investments totaling $42.1 million), plus long-term marketable investments of $12.6 million, and we remained debt-free. In this regard, it should be noted that the Company purchased a total of 530 thousand shares of AAON stock under its resumed buyback program for approximately $9.8 million during the third quarter of this year, for an average of $18.55 per share. Additionally, our backlog increased from $49.9 million at September 30, 2013, to $54.8 million at September 30, 2014." 

Mr. Asbjornson then said, "While we are confident of having record sales and profits for 2014, we believe we will experience our normal seasonal softening in the fourth quarter but expect to compare favorably with 2013."

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 25661198); or, for rebroadcast, call 1-855-859-2056 (code 25661198).

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  September 30,							Nine Months Ended  September 30,
		2014				2013			2014				2013
		(in thousands, except share and per share data)
Net sales		$	102,917			$	89,690		$	271,594			$	247,764
Cost of sales			69,567				63,074			188,522				178,160
Gross profit			33,350				26,616			83,072				69,604
Selling, general and administrative expenses			13,830				9,687			32,043				25,743
Gain on disposal of assets			-				-			(24	)			(52	)
Income from operations			19,520				16,929			51,053				43,913
Interest income			55				60			195				151
Other income (expense), net			(43	)			15			(30	)			252
Income before taxes			19,532				17,004			51,218				44,316
Income tax provision			7,092				6,482			17,593				14,535
Net income		$	12,440			$	10,522		$	33,625			$	29,781
Earnings per share:
	Basic*	$	0.23			$	0.19		$	0.61			$	0.54
	Diluted*	$	0.22			$	0.19		$	0.61			$	0.54
Cash dividends declared per common share*:		$	-			$	-		$	0.09			$	0.07
Weighted average shares outstanding:
	Basic*		54,905,288				55,113,393			54,851,911				55,128,986
	Diluted*		55,484,043				55,526,342			55,423,294				55,562,663

*Reflects three-for-two stock split effective July 16, 2014

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
			September 30, 2014			December 31, 2013
Assets			(in thousands, except share and per share data)
Current assets:
	Cash and cash equivalents		$	18,819		$	12,085
	Certificates of deposit			7,223			8,110
	Investments held to maturity at amortized cost			16,079			16,040
	Accounts receivable, net			54,785			39,063
	Income tax receivable			-			1,073
	Note receivable			30			29
	Inventories, net			37,240			32,140
	Prepaid expenses and other			790			304
	Deferred tax assets			7,093			4,779
Total current assets				142,059			113,623
Property, plant and equipment:
	Land			2,233			1,417
	Buildings			64,098			61,821
	Machinery and equipment			128,459			119,439
	Furniture and fixtures			10,230			9,748
		Total property, plant and equipment		205,020			192,425
		Less: Accumulated depreciation		112,995			105,142
	Property, plant and equipment, net			92,025			87,283
Certificates of deposit				6,720			2,638
Investments held to maturity at amortized cost				5,845			10,981
Note receivable				860			919
Total assets			$	247,509		$	215,444
Liabilities and Stockholders' Equity
Current liabilities:
	Revolving credit facility		$	-		$	-
	Accounts payable			13,602			7,779
	Accrued liabilities			39,922			28,550
Total current liabilities				53,524			36,329
Deferred revenue				920			585
Deferred tax liabilities				12,377			14,424
Donations				1,645			-
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, 54,460,266 and 55,067,031 issued and outstanding at September 30, 2014 and December 31, 2013, respectively*				218			221
Additional paid-in capital				-			-
Retained earnings*				178,825			163,885
Total stockholders' equity				179,043			164,106
Total liabilities and stockholders' equity			$	247,509		$	215,444

*Reflects three-for-two stock split effective July 16, 2014

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
				Nine Months Ended  September 30,
				2014				2013
Operating Activities				(in thousands)
	Net income			$	33,625			$	29,781
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation			8,660				9,349
		Amortization of bond premiums			561				545
		Provision for losses on accounts receivable, net of adjustments			(59	)			121
		Provision for excess and obsolete inventories, net			223				468
		Share-based compensation			1,578				1,054
		Excess tax benefits from stock options exercised and restricted stock awards vested			(908	)			(502	)
		Gain on disposition of assets			(24	)			(52	)
		Foreign currency transaction loss			36				35
		Interest income on note receivable			(30	)			(31	)
		Deferred income taxes			(4,361	)			(1,794	)
		Write-off of note receivable			-				75
		Changes in assets and liabilities:
			Accounts receivable		(15,663	)			(2,384	)
			Income tax receivable		1,981				1,753
			Inventories		(5,323	)			(1,237	)
			Prepaid expenses and other		(486	)			121
			Accounts payable		5,982				(227	)
			Deferred revenue		591				358
			Accrued liabilities		12,761				1,410
	Net cash provided by operating activities				39,144				38,843
Investing Activities
	Capital expenditures				(13,567	)			(6,407	)
	Proceeds from sale of property, plant and equipment				30				72
	Investment in certificates of deposits				(9,940	)			(8,869	)
	Maturities of certificates of deposits				6,745				1,440
	Purchases of investments held to maturity				(6,880	)			(22,275	)
	Maturities of investments				8,891				3,315
	Proceeds from called investments				2,525				-
	Principal payments from note receivable				52				52
	Net cash used in investing activities				(12,144	)			(32,672	)
Financing Activities
	Borrowings under revolving credit facility				-				8,325
	Payments under revolving credit facility				-				(8,325	)
	Stock options exercised				908				986
	Excess tax benefits from stock options exercised and restricted stock awards vested				908				502
	Repurchase of stock				(17,309	)			(4,817	)
	Cash dividends paid to stockholders				(4,773	)			(3,712	)
	Net cash used in financing activities				(20,266	)			(7,041	)
Net increase (decrease) in cash and cash equivalents					6,734				(870	)
Cash and cash equivalents, beginning of period					12,085				3,159
Cash and cash equivalents, end of period				$	18,819			$	2,289