AAON, Inc. (NASDAQ-AAON) today announced its operating results for the third quarter and nine months ended September 30, 2019. 

In the quarter ended September 30, 2019, net sales were $113.5 million, up 0.5% from $112.9 million in 2018. Net income was $13.8 million, a decrease of 1.8% from $14.1 million in the same period a year ago.  Net sales for the nine months ended September 30, 2019 were $346.8 million, increasing 7.8% from $321.6 million in 2018. Net income for the nine months ended September 30, 2019 was $37.7 million, up 25.5% from $30.0 million in 2018.  Our net income benefited from additional tax credits the Company was able to take advantage of and also from positive return to provision adjustments on our tax return that together totaled $1.6 million for the quarter ended September 30, 2019.

Our backlog at September 30, 2019, increased 8.9% to $165.3 million, from $151.8 million at December 31, 2018, and increased 30.4% from $126.8 million at September 30, 2018.

Earnings per diluted share for the third quarter of 2019 were $0.26, a decrease of 3.7% from $0.27 for the same period in 2018, based upon 52.7 million and 52.6 million shares outstanding at September 30, 2019 and 2018, respectively.  Earnings per diluted share for the nine months ended September 30, 2019 were $0.72, an increase of 26.3% from $0.57 in 2018, based upon 52.6 million and 52.7 million shares outstanding at September 30, 2019 and 2018, respectively.

Gross profit, benefiting from moderating raw material costs and improved productivity, increased 10.1% to $83.4 million (24.0% of sales) for the nine months ended September 30, 2019, versus $75.7 million (23.5% of sales) for the same period a year ago.

Gary D. Fields, President, said, “Our net sales have been constrained primarily by sheet metal production.  We are beginning to see improvements in our manufacturing capacity due to additional Salvagnini sheet metal fabrication machines coming online during mid-September.  In addition, we have significantly increased the number of our Salvagnini maintenance technicians on staff, and our heightened emphasis on best-practice equipment maintenance policies has also contributed to manufacturing capacity improvements.  We have recently reorganized certain key production management positions at our Tulsa facilities and are witnessing operational improvements as a direct result.”

Selling, general and administrative expenses decreased 1.5% to $13.0 million (11.4% of sales) from $13.2 million (11.7% of sales) as compared to the third quarter of 2018.  For the nine months ended September 30, 2019, selling, general and administrative expenses increased 2.7% to $37.5 million (10.8% of sales) compared to $36.5 million (11.3% of sales) for the same period a year ago.

Mr. Fields continued, "Our financial condition at September 30, 2019 remained strong with a current ratio of 3.2:1, including cash and investments totaling $28.4 million."

Norman H. Asbjornson, CEO, stated, “On October 29th we had the grand opening for our research and development laboratory.  Approximately 25 years ago, we reviewed the need for additional labs with two objectives.  First, was to provide for our laboratory needs in the future.  Second, was the opportunity to design a lab with capabilities far beyond industry standards and unlikely to be copied.  Among the things unique to our lab is  the ability to test a capacity of 300 tons when the industry standard is 100 tons or less.  Another item is combining performance testing with acoustical testing simultaneously which is not available in any other lab.  We believe this and other attributes give AAON an advantage far into the future.  I am greatly honored to report we named our lab the Norman Asbjornson Innovation Center.  It will enable AAON to continue to lead the industry in the development of quiet, energy efficient and sustainable HVAC equipment well into the future.”

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 8175235); or, for rebroadcast, call 1-855-859-2056 (code 8175235).

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
(Unaudited)
 Three Months Ended   September 30, Nine Months Ended   September 30,
 2019 2018 2019 2018
 (in thousands, except share and per share data)
Net sales$113,500 $112,937 $346,759 $321,607
Cost of sales86,115 80,174 263,406 245,869
Gross profit27,385 32,763 83,353 75,738
Selling, general and administrative expenses12,994 13,190 37,476 36,495
Loss (gain) on disposal of assets6 2 296 (9)
Income from operations14,385 19,571 45,581 39,252
Interest income, net9 36 49 171
Other (expense) income, net(7) 5 (16) 11
Income before taxes14,387 19,612 45,614 39,434
Income tax provision560 5,527 7,924 9,398
Net income$13,827 $14,085 $37,690 $30,036
Earnings per share:       
Basic$0.27 $0.27 $0.72 $0.57
Diluted$0.26 $0.27 $0.72 $0.57
Cash dividends declared per common share:$ $ $0.16 $0.16
Weighted average shares outstanding:       
Basic52,111,444 52,238,796 52,086,209 52,315,719
Diluted52,722,127 52,627,541 52,624,583 52,715,390

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 September 30, 2019 December 31, 2018
Assets(in thousands, except share and per share data)
Current assets:   
Cash and cash equivalents$28,373 $1,994
Accounts receivable, net56,083 54,078
Income tax receivable3,870 6,104
Note receivable28 27
Inventories, net80,623 77,612
Prepaid expenses and other1,559 1,046
Total current assets170,536 140,861
Property, plant and equipment:   
Land3,274 3,114
Buildings99,705 97,393
Machinery and equipment230,806 212,779
Furniture and fixtures17,310 16,597
Total property, plant and equipment351,095 329,883
Less: Accumulated depreciation175,357 166,880
Property, plant and equipment, net175,738 163,003
Intangible assets, net331 506
Goodwill3,229 3,229
Right of use assets1,724 
Note receivable594 598
Total assets$352,152 $308,197
    
Liabilities and Stockholders' Equity   
Current liabilities:   
Revolving credit facility$ $
Accounts payable11,118 10,616
Accrued liabilities42,764 37,455
Total current liabilities53,882 48,071
Deferred tax liabilities15,034 10,826
Other long-term liabilities3,669 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, 52,119,295 and 51,991,242 issued and outstanding at September 30, 2019 and December 31, 2018, respectively209 208
Additional paid-in capital2,680 
Retained earnings276,678 247,291
Total stockholders' equity279,567 247,499
Total liabilities and stockholders' equity$352,152 $308,197

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended   September 30,
 2019 2018
Operating Activities(in thousands)
Net income$37,690 $30,036
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization17,627 12,865
Amortization of bond premiums 11
Provision for losses on accounts receivable, net of adjustments91 67
Provision for excess and obsolete inventories1,003 55
Share-based compensation7,858 5,614
Loss (gain) on disposition of assets296 (9)
Foreign currency transaction gain(17) (20)
Interest income on note receivable(19) 27
Deferred income taxes4,208 864
Changes in assets and liabilities:   
Accounts receivable(2,096) 146
Income taxes2,234 (649)
Inventories(4,014) (7,071)
Prepaid expenses and other(513) (792)
Accounts payable782 4,328
Deferred revenue263 (1,644)
Accrued liabilities5,190 364
Net cash provided by operating activities70,583 44,192
Investing Activities   
Capital expenditures(30,831) (34,328)
Cash paid in business combination (6,377)
Proceeds from sale of property, plant and equipment68 11
Investment in certificates of deposits(6,000) (7,200)
Maturities of certificates of deposits6,000 7,920
Purchases of investments held to maturity (9,001)
Maturities of investments 13,320
Proceeds from called investments 495
Principal payments from note receivable39 32
Net cash used in investing activities(30,724) (35,128)
Financing Activities   
Stock options exercised11,283 3,504
Repurchase of stock(15,437) (17,500)
Employee taxes paid by withholding shares(1,023) (860)
Cash dividends paid to stockholders(8,303) (8,400)
Net cash used in financing activities(13,480) (23,256)
Net increase (decrease)  in cash and cash equivalents26,379 (14,192)
Cash and cash equivalents, beginning of period1,994 21,457
Cash and cash equivalents, end of period$28,373 $7,265

 

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