AAON, INC. (NASDAQ-AAON), today announced its results for the fourth quarter and full year 2019.

Financial Highlights:Three Months Ended December 31, %   Years Ended December 31, %
 2019 2018 Change   2019 2018 Change
 (in thousands, except share and per share data)   (in thousands, except share and per share data)
Net sales$122,574  $112,340  9.1%   $469,333  $433,947  8.2%
Gross profit36,381  27,846  30.7%   119,425  103,533  15.3%
Gross profit %29.7% 24.8%     25.4% 23.9%  
Selling, general and administrative expenses$13,114  $10,723  22.3%   $52,077  $48,194  8.1%
Net income17,273  12,964  33.2%   53,711  42,329  26.9%
Earnings per diluted share:$0.33  $0.25  32.0%   $1.02  $0.80  27.5%
Diluted average shares52,701,202  52,420,529  0.5%   52,635,415  52,667,939  (0.1)%
 As of December 31, %        
 2019 2018 Change        
 (in thousands)          
Backlog$142,747  $151,767  (5.9)%        
Cash & cash equivalents26,797  1,994  1,244%        

Gary Fields, President, said, “Our increase in net sales is attributable to our continuing investment in new manufacturing equipment that has allowed us to capitalize on our existing workforce as well as reorganize production resources at our Tulsa facilities. We are witnessing operational and financial improvements as a direct result. Combined with our 2018 sales price increases, the result has been record sales for the year of 2019, an increase of 8.2%, as compared to $433.9 million in 2018.”

Mr. Fields, continued, “We are seeing improvements in our manufacturing capacity due to additional Salvagnini sheet metal fabrication machines coming online during mid-September 2019, evidenced by our results of a record gross profit in the fourth quarter of 2019. In addition to improvements in gross profit, we continue to reduce other costs as evidenced by the decrease in warranty claims paid for the year down 13.4% from 2018. With our high backlog containing the 2018 price increases combined with our continual improvements in operational capacity and efficiency, we expect to witness improvements in both our sales and earnings in 2020.”

Norman H. Asbjornson, CEO, added, “With a 2020 capital expenditure budget of $73.2 million, the Company continues to make strategic investments to maintain future sustainable growth. These investments in both operations and innovation are being made while maintaining a strong financial condition evidenced by our current ratio of 3.3:1 at December 31, 2019. Furthermore, we have unrestricted cash and cash equivalents of $26.8 million as of December 31, 2019, to ensure that our future investment in the Company remains fiscally sound.”

The Company will host a conference call today at 4:15 P.M. (Eastern Time) to discuss the fourth quarter and year 2019 results. To participate, call 1-888-241-0551 (code 2880248); or, for rebroadcast available through March 4, 2020, call 1-855-859-2056 (code 2880248).

Error Correction

The Company noted errors in previously issued financial statements relating to share-based compensation expense for stock options and restricted stock awards held by retirement eligible employees and directors. The Company determined that it would be appropriate to correct the errors in our previously issued consolidated financial statements by correcting such financial statements with the Company’s 2019 annual report. More details, including the impact to each of the annual and interim financial statements is described in detail in the Company’s 2019 annual report. The effect of the error correction for the year ending December 31, 2018 was a $0.2 million decrease in net income and $0.01 decrease in our diluted earnings per common share. The effect of the error correction for the quarter ending December 31, 2018 was a $0.4 million increase in net income and $0.01 increase in our diluted earnings per common share. 

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.

Forward-Looking StatementsCertain 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, including risks related to the impact of the error correction, that could cause actual results and developments to differ materially from the forward-looking statements.

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

AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income
 Three Months Ended   December 31, Years Ended December 31,
 2019 2018 2019 2018
 (in thousands, except share and per share data)
Net sales$122,574   $112,340   $469,333   $433,947  
Cost of sales86,193   84,494   349,908   330,414  
Gross profit36,381   27,846   119,425   103,533  
Selling, general and administrative expenses13,114   10,723   52,077   48,194  
Loss (gain) on disposal of assets41   (3)  337   (12) 
Income from operations23,226   17,126   67,011   55,351  
Interest income, net17   25   66   196  
Other (expense) income, net(30)  (58)  (46)  (47) 
Income before taxes23,213   17,093   67,031   55,500  
Income tax provision5,940   4,129   13,320   13,171  
Net income$17,273   $12,964   $53,711   $42,329  
Earnings per share:       
Basic$0.33   $0.25   $1.03   $0.81  
Diluted$0.33   $0.25   $1.02   $0.80  
Cash dividends declared per common share:$0.16   $0.16   $0.32   $0.32  
Weighted average shares outstanding:       
Basic52,094,125   52,086,247   52,079,865   52,284,616  
Diluted52,701,202   52,420,529   52,635,415   52,667,939  

AAON, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
 December 31,
 2019 2018
Assets(in thousands, except share and per share data)
Current assets:   
Cash and cash equivalents$26,797  $1,994 
Restricted cash17,576   
Accounts receivable, net67,399  54,078 
Income tax receivable772  5,901 
Note receivable29  27 
Inventories, net73,601  77,612 
Prepaid expenses and other1,375  1,046 
Total current assets187,549  140,658 
Property, plant and equipment:   
Land3,274  3,114 
Buildings101,113  97,393 
Machinery and equipment236,087  212,779 
Furniture and fixtures16,862  16,597 
Total property, plant and equipment357,336  329,883 
Less: Accumulated depreciation179,242  166,880 
Property, plant and equipment, net178,094  163,003 
Intangible assets, net272  506 
Goodwill3,229  3,229 
Right of use assets1,683   
Note receivable597  598 
Total assets$371,424  $307,994 
    
Liabilities and Stockholders' Equity   
Current liabilities:   
Revolving credit facility$  $ 
Accounts payable11,759  10,616 
Accrued liabilities44,269  36,875 
Total current liabilities56,028  47,491 
Deferred tax liabilities15,297  9,259 
Other long-term liabilities3,639  1,801 
New market tax credit obligation6,320   
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, 52,078,515 and 51,991,242issued and outstanding at December 31, 2019 and 2018, respectively208  208 
Additional paid-in capital3,631   
Retained earnings286,301  249,235 
Total stockholders' equity290,140  249,443 
Total liabilities and stockholders' equity$371,424  $307,994 

AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
 Years Ended December 31,
 2019 2018
Operating Activities(in thousands)
Net income$53,711   $42,329  
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization22,766   17,655  
Amortization of bond premiums   13  
Amortization of debt issuance costs7     
Provision for losses on accounts receivable, net of adjustments91   174  
Provision for excess and obsolete inventories1,454   152  
Share-based compensation11,799   7,862  
Loss (gain) on disposition of assets337   (12) 
Foreign currency transaction (gain) loss(27)  55  
Interest income on note receivable(25)  (27) 
Deferred income taxes6,038   2,641  
Changes in assets and liabilities:   
Accounts receivable(13,412)  (2,832) 
Income tax receivable5,129   (4,448) 
Inventories2,557   (5,598) 
Prepaid expenses and other(329)  (528) 
Accounts payable280   (1,176) 
Deferred revenue425   412  
Accrued liabilities and donations7,124   (1,816) 
Net cash provided by operating activities97,925   54,856  
Investing Activities   
Capital expenditures(37,166)  (37,268) 
Cash paid in business combination   (6,377) 
Proceeds from sale of property, plant and equipment69   13  
Investment in certificates of deposits(6,000)  (7,200) 
Maturities of certificates of deposits6,000   10,080  
Purchases of investments held to maturity   (9,001) 
Maturities of investments   14,570  
Proceeds from called investments   495  
Principal payments from note receivable51   53  
Net cash used in investing activities(37,046)  (34,635) 
Financing Activities   
Proceeds from financing obligation, net of issuance costs6,614     
Payments related to financing costs(301)    
Stock options exercised12,625   4,987  
Repurchase of stock(19,586)  (26,846) 
Employee taxes paid by withholding shares(1,207)  (1,097) 
Cash dividends paid to stockholders(16,645)  (16,728) 
Net cash used in financing activities(18,500)  (39,684) 
Net increase (decrease) in cash, cash equivalents and restricted cash42,379   (19,463) 
Cash, cash equivalents and restricted cash, beginning of period1,994   21,457  
Cash, cash equivalents and restricted cash, end of period$44,373   $1,994  

 

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