AAON, INC. (NASDAQ-AAON), today announced its results for the
fourth quarter and year 2018. Sales in the fourth quarter were
$112.3 million, up 7.9% from $104.2 million in 2017. Net income for
the fourth quarter was $12.5 million, a decrease of 20.5% from
$15.8 million in the same period a year ago. The fourth quarter of
2017 had a benefit of $4.4 million related to the enactment of the
Tax Cuts and Jobs Act (the "Act") discussed below. Sales for
the year 2018 reached a record level, $433.9 million, representing
a gain of 7.1% compared to $405.2 million in 2017. Net income for
2018 was $42.6 million, a decrease of 21.9% compared to $54.5
million in 2017.
Our backlog at December 31, 2018 increased 86.8%
to $151.8 million, from $81.2 million for the same period a year
ago.
Earnings for the fourth quarter of 2018 were
$0.24 per diluted share, down 19.7% from $0.30 per diluted share in
2017, based upon 52.4 million and 52.9 million diluted shares
outstanding, respectively. Earnings per diluted share for the year
2018 were $0.81, decrease of 21.4% from $1.03 for the year 2017
based upon 52.7 million and 53.1 million diluted shares
outstanding, respectively.
For the three months ended December 31, 2018,
gross profit as a percent of sales was 24.7% compared to 29.8% for
the three months ended December 31, 2017. For the year ended
December 31, 2018, gross profit was a percent of sales was 23.9%
compared to 30.5% in the same period a year ago. Norman H.
Asbjornson, CEO, said "Our gross profit has been negatively
impacted in 2018 mainly due to labor issues and increased costs in
raw materials. The Company elevated staffing levels going
into 2018 when orders were slower in anticipation of increased
order volume and also struggled to hire qualified labor during our
peak season. Our fourth quarter was negatively impacted by
production inefficiencies and we have modified our onboarding and
new-hire training practices to address these issues. We
believe our gross profit percentage will continue to improve to
normal levels as our production increases in the coming year."
Selling, general and administrative expenses for
the quarter decreased $2.5 million to $11.3 million (10.0% of
sales) from $13.7 million (13.2% of sales) as compared to the
fourth quarter of 2017. For the year, SG&A expenses
decreased $1.5 million to $47.8 million (11.0% of sales) from $49.2
million (12.2% of sales) as compared to 2017. The
Company's warranty costs continue to improve with claims paid in
2018 down 9.4% from 2017.
For the three months ended December 31, 2018,
our effective tax rate was 24.0% compared to 9.6% for the three
months ended December 31, 2017. For the year ended December
31, 2018, effective tax rate was 23.9% compared to 26.8% in the
same period a year ago. As a result of the changes provided under
the Act, the Company adjusted its deferred tax assets and
liabilities existing at the date of enactment using the newly
enacted rates for the periods when they are expected to be
realized. This remeasurement resulted in a
benefit to income taxes of $4.4 million for the three months and
year ended December 31, 2017.
Gary Fields, President, added "We are starting
to see the benefits of the price increases put in place at the end
of 2017 and expect continuation of these benefits as a result of
the additional price increases during 2018. With our backlog
at record levels, we expect to witness significant improvements in
both our sales and earnings in 2019."
Norman H. Asbjornson, CEO, concluded "Our
financial condition at December 31, 2018 remained quite strong with
a current ratio of 2.9:1 and we continue to operate debt free."
The Company will host a conference call today at
4:15 P.M. (Eastern Time) to discuss the fourth quarter and year
2018 results. To participate, call 1-888-241-0551 (code 1296698);
or, for rebroadcast, call 1-855-859-2056 (code 1296698).
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: (914) 244-0292Fax: (914)
244-0295Email: jrladvisor@yahoo.com
|
AAON, Inc. and Subsidiaries |
Unaudited Consolidated Statements of
Income |
|
Three Months Ended December
31, |
|
Years EndingDecember
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share data) |
Net sales |
$ |
112,340 |
|
|
$ |
104,160 |
|
|
$ |
433,947 |
|
|
$ |
405,232 |
|
Cost of sales |
84,545 |
|
|
73,085 |
|
|
330,414 |
|
|
281,835 |
|
Gross profit |
27,795 |
|
|
31,075 |
|
|
103,533 |
|
|
123,397 |
|
Selling, general and
administrative expenses |
11,260 |
|
|
13,714 |
|
|
47,755 |
|
|
49,249 |
|
(Gain) loss on disposal
of assets |
(3 |
) |
|
(1 |
) |
|
(12 |
) |
|
45 |
|
Income from
operations |
16,538 |
|
|
17,362 |
|
|
55,790 |
|
|
74,103 |
|
Interest income,
net |
25 |
|
|
83 |
|
|
196 |
|
|
298 |
|
Other (expense) income,
net |
(58 |
) |
|
5 |
|
|
(47 |
) |
|
91 |
|
Income before
taxes |
16,505 |
|
|
17,450 |
|
|
55,939 |
|
|
74,492 |
|
Income tax
provision |
3,969 |
|
|
1,680 |
|
|
13,367 |
|
|
19,994 |
|
Net income |
$ |
12,536 |
|
|
$ |
15,770 |
|
|
$ |
42,572 |
|
|
$ |
54,498 |
|
Earnings per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.24 |
|
|
$ |
0.30 |
|
|
$ |
0.81 |
|
|
$ |
1.04 |
|
Diluted |
$ |
0.24 |
|
|
$ |
0.30 |
|
|
$ |
0.81 |
|
|
$ |
1.03 |
|
Cash dividends declared
per common share: |
$ |
0.16 |
|
|
$ |
0.13 |
|
|
$ |
0.32 |
|
|
$ |
0.26 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
52,086,247 |
|
|
52,457,780 |
|
|
52,284,616 |
|
|
52,572,496 |
|
Diluted |
52,420,529 |
|
|
52,931,796 |
|
|
52,667,939 |
|
|
53,078,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
AAON, Inc. and Subsidiaries |
Unaudited Consolidated Balance
Sheets |
|
December 31, |
|
2018 |
|
2017 |
|
|
|
|
Assets |
(in thousands, except share and per share data) |
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
1,994 |
|
$ |
21,457 |
Certificates of deposit |
— |
|
2,880 |
Investments held to maturity at amortized cost |
— |
|
6,077 |
Accounts
receivable, net |
54,078 |
|
50,338 |
Income
tax receivable |
6,104 |
|
1,643 |
Note
receivable |
27 |
|
28 |
Inventories, net |
77,612 |
|
70,786 |
Prepaid
expenses and other |
1,046 |
|
518 |
Total current
assets |
140,861 |
|
153,727 |
Property, plant and
equipment: |
|
|
|
Land |
3,114 |
|
2,233 |
Buildings |
97,393 |
|
92,075 |
Machinery
and equipment |
212,779 |
|
184,316 |
Furniture
and fixtures |
16,597 |
|
13,714 |
Total
property, plant and equipment |
329,883 |
|
292,338 |
Less: Accumulated depreciation |
166,880 |
|
149,963 |
Property,
plant and equipment, net |
163,003 |
|
142,375 |
Intangible assets,
net |
506 |
|
— |
Goodwill |
3,229 |
|
— |
Note receivable |
598 |
|
678 |
Total assets |
$ |
308,197 |
|
$ |
296,780 |
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
Revolving
credit facility |
$ |
— |
|
$ |
— |
Accounts
payable |
10,616 |
|
10,967 |
Accrued
liabilities |
37,455 |
|
39,098 |
Total current
liabilities |
48,071 |
|
50,065 |
Deferred revenue |
1,655 |
|
1,512 |
Deferred tax
liabilities |
10,826 |
|
7,977 |
Donations |
146 |
|
— |
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, 51,991,242
and 52,422,801 issued and outstanding at December 31, 2018 and
2017, respectively |
208 |
|
210 |
Additional paid-in capital |
— |
|
— |
Retained
earnings |
247,291 |
|
237,016 |
Total stockholders'
equity |
247,499 |
|
237,226 |
Total liabilities and
stockholders' equity |
$ |
308,197 |
|
$ |
296,780 |
|
|
|
|
|
|
|
AAON, Inc. and Subsidiaries |
Unaudited Consolidated Statements of Cash
Flows |
|
Years Ending December 31, |
|
2018 |
|
2017 |
|
2016 |
Operating
Activities |
(in thousands) |
Net income |
$ |
42,572 |
|
|
$ |
54,498 |
|
|
$ |
53,376 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
17,655 |
|
|
15,007 |
|
|
13,035 |
|
Amortization of bond premiums |
13 |
|
|
47 |
|
|
249 |
|
Provision
for losses on accounts receivable, net of adjustments |
174 |
|
|
179 |
|
|
(25 |
) |
Provision
for excess and obsolete inventories |
152 |
|
|
264 |
|
|
625 |
|
Share-based compensation |
7,374 |
|
|
6,458 |
|
|
4,357 |
|
(Gain)
loss on disposition of assets |
(12 |
) |
|
45 |
|
|
(20 |
) |
Foreign
currency transaction loss (gain) |
55 |
|
|
(59 |
) |
|
(22 |
) |
Interest
income on note receivable |
(27 |
) |
|
(25 |
) |
|
(28 |
) |
Deferred
income taxes |
2,849 |
|
|
(1,554 |
) |
|
825 |
|
Changes
in assets and liabilities: |
|
|
|
|
|
Accounts
receivable |
(2,832 |
) |
|
(7,516 |
) |
|
7,048 |
|
Income
tax receivable |
(4,461 |
) |
|
4,596 |
|
|
(1,537 |
) |
Inventories |
(5,598 |
) |
|
(23,698 |
) |
|
(9,478 |
) |
Prepaid
expenses and other |
(528 |
) |
|
98 |
|
|
(83 |
) |
Accounts
payable |
(1,176 |
) |
|
3,043 |
|
|
654 |
|
Deferred
revenue |
412 |
|
|
258 |
|
|
417 |
|
Accrued
liabilities and donations |
(1,766 |
) |
|
6,353 |
|
|
(5,470 |
) |
Net cash
provided by operating activities |
54,856 |
|
|
57,994 |
|
|
63,923 |
|
Investing
Activities |
|
|
|
|
|
Capital
expenditures |
(37,268 |
) |
|
(41,713 |
) |
|
(26,604 |
) |
Cash paid
in business combination |
(6,377 |
) |
|
— |
|
|
— |
|
Proceeds
from sale of property, plant and equipment |
13 |
|
|
10 |
|
|
28 |
|
Investment in certificates of deposits |
(7,200 |
) |
|
(5,280 |
) |
|
(4,112 |
) |
Maturities of certificates of deposits |
10,080 |
|
|
7,912 |
|
|
10,560 |
|
Purchases
of investments held to maturity |
(9,001 |
) |
|
(13,241 |
) |
|
(10,384 |
) |
Maturities of investments |
14,570 |
|
|
19,700 |
|
|
10,021 |
|
Proceeds
from called investments |
495 |
|
|
1,500 |
|
|
3,514 |
|
Principal
payments from note receivable |
53 |
|
|
60 |
|
|
52 |
|
Net cash
used in investing activities |
(34,635 |
) |
|
(31,052 |
) |
|
(16,925 |
) |
Financing
Activities |
|
|
|
|
|
Borrowings under revolving credit facility |
— |
|
|
— |
|
|
761 |
|
Payments
under revolving credit facility |
— |
|
|
— |
|
|
(761 |
) |
Stock
options exercised |
4,987 |
|
|
2,259 |
|
|
2,063 |
|
Repurchase of stock |
(26,846 |
) |
|
(16,620 |
) |
|
(19,317 |
) |
Employee
taxes paid by withholding shares |
(1,097 |
) |
|
(1,614 |
) |
|
(823 |
) |
Cash
dividends paid to stockholders |
(16,728 |
) |
|
(13,663 |
) |
|
(12,676 |
) |
Net cash
used in financing activities |
(39,684 |
) |
|
(29,638 |
) |
|
(30,753 |
) |
Net (decrease)
increase in cash and cash equivalents |
(19,463 |
) |
|
(2,696 |
) |
|
16,245 |
|
Cash and cash
equivalents, beginning of period |
21,457 |
|
|
24,153 |
|
|
7,908 |
|
Cash and cash
equivalents, end of period |
$ |
1,994 |
|
|
$ |
21,457 |
|
|
$ |
24,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Non-GAAP Financial
Measure
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, provide
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 December 31, |
|
Years
EndingDecember 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in thousands) |
Net Income, a GAAP
measure |
$ |
12,536 |
|
|
$ |
15,770 |
|
|
$ |
42,572 |
|
|
$ |
54,498 |
|
Depreciation and
amortization |
4,790 |
|
|
3,982 |
|
|
17,655 |
|
|
15,007 |
|
Amortization of bond
premiums |
2 |
|
|
8 |
|
|
13 |
|
|
47 |
|
Share-based
compensation |
1,760 |
|
|
1,498 |
|
|
7,374 |
|
|
6,458 |
|
Interest income,
net |
(30 |
) |
|
(91 |
) |
|
(209 |
) |
|
(345 |
) |
Income tax expense |
3,969 |
|
|
1,680 |
|
|
13,367 |
|
|
19,994 |
|
EBITDAX, a non-GAAP
measure |
$ |
23,027 |
|
|
$ |
22,847 |
|
|
$ |
80,772 |
|
|
$ |
95,659 |
|
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