AAON Reports First Quarter Sales and Earnings

Date : 05/02/2019 @ 11:00AM
Source : GlobeNewswire Inc.
Stock : AAON Inc (AAON)
Quote : 50.34  -0.12 (-0.24%) @ 9:30PM
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AAON Reports First Quarter Sales and Earnings

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1 Year : From Nov 2018 to Nov 2019

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AAON, Inc. (NASDAQ-AAON) today announced its operating results for the first quarter and three months ended March 31, 2019.

In the quarter ended March 31, 2019, net sales were $113.8 million, up 14.9% from $99.1 million in 2018. Net income was $10.9 million, an increase of 155.9% from $4.3 million in the same period a year ago.  Earnings per diluted share for the three months ended March 31, 2019 were $0.21, an increase of 162.5% from $0.08 in 2018, based upon 52.4 million and 52.9 million shares outstanding at March 31, 2019 and 2018, respectively.

Our backlog at March 31, 2019, increased 9.7% to $166.6 million, from $151.8 million at December 31, 2018, and increased 125% from $74.1 million at March 31, 2018.

Gross profit increased 67.6% to $25.8 million (22.7% of sales) versus $15.4 million (15.5% of sales).  Norman H. Asbjornson, CEO, said, "While we witnessed increases in both labor and raw material costs, the price increases implemented during the second half of 2018, as well as increased productivity and higher sales helped partially offset these costs and had a positive impact on our gross margins in the first quarter. We expect our gross margins will continue to recover as our production increases and we work through the lower-priced portion of our backlog."

For the three months ended March 31, 2019, selling, general and administrative expenses increased 7.7% to $11.0 million (9.7% of sales) compared to $10.2 million (10.3% of sales) for the same period a year ago, positively impacted by moderating warranty costs, which we believe have stabilized.

Mr. Asbjornson continued, "Strong sales supported by an increasing backlog coupled with improving margins, secure financial condition (current ratio of 3.3:1, including cash totaling $7.1 million) and debt free balance sheet provide a solid foundation for future growth."

Gary Fields, President, stated, "We continue to gradually strengthen our manufacturing personnel and are beginning to witness increases in our production capacity as a result of our improved employee training and on-boarding initiatives. We are also improving our sheet metal manufacturing operations and we anticipate these enhancements will enable us to optimize our sheet metal manufacturing capacity before the end of the year."

Mr. Fields concluded, "As we continue to work through our lower-priced backlog and also improve productivity, we believe the Company is well positioned to capitalize on what we anticipate to be a sustainable growth opportunity as we enter our peak season."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the first quarter results. To participate, call 1-888-241-0551 (code 5189007); or, for rebroadcast, call 1-855-859-2056 (code 5189007).

About AAONAAON, 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, coils and controls. 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. For more information, please visit www.AAON.com.

Certain statements in this news release may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933. 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.

Contact InformationJerry R. LevinePhone: (561) 482-4046 or (914) 244-0292Fax: (914) 244-0295Email: jrladvisor@yahoo.com

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
 Three Months Ended  March 31,
 2019 2018
 (in thousands, except share and per share data)
Net sales$113,822  $99,082 
Cost of sales88,029  83,692 
Gross profit25,793  15,390 
Selling, general and administrative expenses11,001  10,219 
Loss (gain) on disposal of assets284  (7)
Income from operations14,508  5,178 
Interest income, net9  68 
Other expense, net(26) (6)
Income before taxes14,491  5,240 
Income tax provision3,589  980 
Net income$10,902  $4,260 
Earnings per share:   
Basic$0.21  $0.08 
Diluted$0.21  $0.08 
Weighted average shares outstanding:   
Basic51,992,150  52,433,902 
Diluted52,369,660  52,910,223 

AAON, Inc. and Subsidiaries 
Consolidated Balance Sheets 
  March 31, 2019  December 31, 2018 
Assets (in thousands, except share and per share data) 
Current assets:       
Cash and cash equivalents$7,143  $1,994 
Accounts receivable, net58,688  54,078 
Income tax receivable4,756  6,104 
Note receivable27  27 
Inventories, net74,577  77,612 
Prepaid expenses and other1,607  1,046 
Total current assets146,798  140,861 
Property, plant and equipment:   
Land3,114  3,114 
Buildings98,394  97,393 
Machinery and equipment215,928  212,779 
Furniture and fixtures17,079  16,597 
Total property, plant and equipment334,515  329,883 
Less: Accumulated depreciation167,863  166,880 
Property, plant and equipment, net166,652  163,003 
Intangible assets, net447  506 
Goodwill3,229  3,229 
Right of use assets1,796   
Note receivable603  598 
Total assets$319,525  $308,197 
Liabilities and Stockholders' Equity   
Current liabilities:   
Revolving credit facility$  $ 
Accounts payable5,947  10,616 
Accrued liabilities38,053  37,455 
Total current liabilities44,000  48,071 
Deferred tax liabilities12,713  10,826 
Other long-term liabilities3,442  1,801 
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, 52,099,274 and 51,991,242 issued and outstanding at March 31, 2019 and December 31, 2018, respectively208  208 
Additional paid-in capital969   
Retained earnings258,193  247,291 
Total stockholders' equity259,370  247,499 
Total liabilities and stockholders' equity$319,525  $308,197 

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Three Months EndedMarch 31 
  2019  2018
Operating Activities(in thousands) 
 Net income $ 10,902   $ 4,260 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization5,914  4,129 
Amortization of bond premiums  5 
Provision for losses on accounts receivable, net of adjustments115  (11)
Provision for excess and obsolete inventories357  101 
Share-based compensation2,030  1,724 
Loss (gain) on disposition of assets284  (7)
Foreign currency transaction gain(16) 3 
Interest income on note receivable(6) 9 
Deferred income taxes1,887  420 
Changes in assets and liabilities:   
  Accounts receivable(4,725) (2,897)
  Income taxes1,348  (5,673)
  Inventories2,678  3,447 
  Prepaid expenses and other(561) (712)
  Accounts payable(5,730) 9,833 
  Deferred revenue25  37 
  Accrued liabilities and donations411  (3,924)
Net cash provided by operating activities14,913  10,744 
Investing Activities   
Capital expenditures(8,772) (8,451)
Cash paid in business combination  (6,000)
Proceeds from sale of property, plant and equipment52  6 
Investment in certificates of deposits  (4,320)
Maturities of certificates of deposits  1,200 
Purchases of investments held to maturity  (7,495)
Maturities of investments  4,230 
Proceeds from called investments  395 
Principal payments from note receivable17  14 
Net cash used in investing activities(8,703) (20,421)
Financing Activities   
Stock options exercised4,010  1,340 
Repurchase of stock(4,483) (4,379)
Employee taxes paid by withholding shares (588) (568)
Net cash used in financing activities(1,061) (3,607)
Net increase (decrease)  in cash and cash equivalents5,149  (13,284)
Cash and cash equivalents, beginning of period1,994  21,457 
Cash and cash equivalents, end of period$7,143  $8,173 

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 (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 and amortization, (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 EndedMarch 31, 
 2019  2018 
 (in thousands) 
Net Income, a GAAP measure10,902  4,260 
Depreciation and amortization5,914  4,129 
Amortization of bond premiums  5 
Share-based compensation2,030  1,724 
Interest income(9) (73)
Income tax expense3,589  980 
EBITDAX, a non-GAAP measure$22,426  $11,025 


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