AAON Reports Second Quarter Sales and Earnings

Date : 08/01/2019 @ 12:00PM
Source : GlobeNewswire Inc.
Stock : AAON Inc (AAON)
Quote : 47.53  2.62 (5.83%) @ 7:33PM

AAON Reports Second Quarter Sales and Earnings

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AAON, Inc. (NASDAQ-AAON) today announced its operating results for the second quarter and six months ended June 30, 2019.

In the quarter ended June 30, 2019, net sales were $119.4 million, up 9.0% from $109.6 million in 2018. Net income was $13.0 million, an increase of 10.9% from $11.7 million in the same period a year ago.  Net sales for the six months ended June 30, 2019 were $233.3 million, increasing 11.8% from $209 million in 2018. Net income for the six months ended June 30, 2019 was $23.9 million, up 49.6% from $16.0 million in 2018.

Our backlog at June 30, 2019, increased 18.3% to $179.6 million, from $151.8 million at December 31, 2018, and increased 15.0% from $156.6 million at June 30, 2018.

Earnings per diluted share for the second quarter of 2019 were $0.25, an increase of 13.6% from $0.22 for the same period in 2018, based upon 52.7 million and 52.7 million shares outstanding at June 30, 2019 and 2018, respectively.  Earnings per diluted share for the six months ended June 30, 2019 were $0.45, an increase of 50.0% from $0.30 in 2018, based upon 52.6 million and 52.8 million shares outstanding at June 30, 2019 and 2018, respectively.

Gross profit, benefiting from moderating raw material costs and improved productivity, increased 30.2% to $56.0 million (24.0% of sales) for the six months ended June 30, 2019, versus $43.0 million (20.6% of sales) for the same period a year ago.

Norman H. Asbjornson, CEO, said, "In the fourth quarter of 2018 we became aware of the need for additional sheet metal fabrication equipment and ordered four additional systems at that time. However, due to the substantial increase in business, we pushed our existing equipment as hard as possible which caused additional downtime on the equipment, thus limiting the amount of additional growth we were able to attain. As the year has progressed we experienced strengthening demand and thus recently ordered another four machines, totaling eight machines on order."

Selling, general and administrative expenses increased 3.0% to $13.5 million (11.3% of sales) from $13.1 million (11.9% of sales) as compared to the second quarter of 2018.  For the six months ended June 30, 2019, selling, general and administrative expenses increased 5.1% to $24.5 million (10.5% of sales) compared to $23.3 million (11.2% of sales) for the same period a year ago.

Mr. Asbjornson continued, "Our financial condition at June 30, 2019 remained strong with a current ratio of 2.9:1, including cash and investments totaling $17.7 million, and we continue to operate debt free."

Gary Fields, President, stated, "Our recently purchased Salvagnini sheet metal fabrication machines started to arrive in early July and will continue to arrive throughout 2019, with the final machine scheduled to arrive January of 2020. Each Salvagnini system will be in full production within 45 days of arrival.  Furthermore, we have taken significant steps to improve our sheet metal fabrication equipment maintenance and production capabilities through the hiring of a former long-term Salvagnini employee to implement and oversee strengthened maintenance and replacement initiatives."

Mr. Fields concluded, "We believe the steps taken to address our manufacturing capacity issues will allow us to see improvements in our overall operations as the year progresses."

The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the second quarter results. To participate, call 1-888-241-0551 (code 3096466); or, for rebroadcast, call 1-855-859-2056 (code 3096466).

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  June 30, Six Months Ended  June 30,
 2019 2018 2019 2018
 (in thousands, except share and per share data)
Net sales$119,437  $109,588  $233,259  $208,670 
Cost of sales89,262  82,003  177,291  165,695 
Gross profit30,175  27,585  55,968  42,975 
Selling, general and administrative expenses13,481  13,086  24,482  23,305 
Loss (gain) on disposal of assets6  (4) 290  (11)
Income from operations16,688  14,503  31,196  19,681 
Interest income, net31  67  40  135 
Other expense, net17  12  (9) 6 
Income before taxes16,736  14,582  31,227  19,822 
Income tax provision3,775  2,891  7,364  3,871 
Net income$12,961  $11,691  $23,863  $15,951 
Earnings per share:       
Basic$0.25  $0.22  $0.46  $0.30 
Diluted$0.25  $0.22  $0.45  $0.30 
Cash dividends declared per common share:$0.16  $0.16  $0.16  $0.16 
Weighted average shares outstanding:       
Basic52,120,272  52,383,842  52,087,626  52,348,912 
Diluted52,747,199  52,717,787  52,589,845  52,754,045 

AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
 June 30, 2019 December 31, 2018
Assets(in thousands, except share and per share data)
Current assets:   
Cash and cash equivalents$13,683  $1,994 
Certificates of deposit4,000   
Accounts receivable, net68,933  54,078 
Income tax receivable3,246  6,104 
Note receivable28  27 
Inventories, net77,044  77,612 
Prepaid expenses and other1,696  1,046 
Total current assets168,630  140,861 
Property, plant and equipment:   
Land3,125  3,114 
Buildings99,193  97,393 
Machinery and equipment219,438  212,779 
Furniture and fixtures17,107  16,597 
Total property, plant and equipment338,863  329,883 
Less: Accumulated depreciation171,232  166,880 
Property, plant and equipment, net167,631  163,003 
Intangible assets, net389  506 
Goodwill3,229  3,229 
Right of use assets1,764   
Note receivable608  598 
Total assets$342,251  $308,197 
Liabilities and Stockholders' Equity   
Current liabilities:   
Revolving credit facility$  $ 
Accounts payable7,885  10,616 
Dividends payable8,355   
Accrued liabilities42,713  37,455 
Total current liabilities58,953  48,071 
Deferred tax liabilities14,938  10,826 
Other long-term liabilities3,791  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, 52,118,180 and 51,991,242 issued and outstanding at June 30, 2019 and December 31, 2018, respectively209  208 
Additional paid-in capital1,586   
Retained earnings262,774  247,291 
Total stockholders' equity264,569  247,499 
Total liabilities and stockholders' equity$342,251  $308,197 

AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Six Months Ended  June 30,
 2019 2018
Operating Activities(in thousands)
Net income$23,863  $15,951 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization11,760  8,438 
Amortization of bond premiums  8 
Provision for losses on accounts receivable, net of adjustments128  89 
Provision for excess and obsolete inventories1,153  299 
Share-based compensation5,073  3,699 
Loss (gain) on disposition of assets290  (11)
Foreign currency transaction gain(13) 15 
Interest income on note receivable(26) 14 
Deferred income taxes4,112  438 
Changes in assets and liabilities:   
Accounts receivable(14,983) (2,087)
Income taxes2,858  (3,328)
Inventories(585) 1,400 
Prepaid expenses and other(650) (935)
Accounts payable(2,592) 12,974 
Deferred revenue172  (931)
Accrued liabilities5,312  213 
Net cash provided by operating activities35,872  36,246 
Investing Activities   
Capital expenditures(16,784) (25,925)
Cash paid in business combination  (6,377)
Proceeds from sale of property, plant and equipment59  11 
Investment in certificates of deposits(6,000) (7,200)
Maturities of certificates of deposits2,000  4,560 
Purchases of investments held to maturity  (9,001)
Maturities of investments  11,620 
Proceeds from called investments  495 
Principal payments from note receivable28  16 
Net cash used in investing activities(20,697) (31,801)
Financing Activities   
Stock options exercised7,685  2,299 
Repurchase of stock(10,191) (11,539)
Employee taxes paid by withholding shares  (980) (808)
Net cash used in financing activities(3,486) (10,048)
Net increase (decrease)  in cash and cash equivalents11,689  (5,603)
Cash and cash equivalents, beginning of period1,994  21,457 
Cash and cash equivalents, end of period$13,683  $15,854 

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 Ended  June 30, Six Months Ended  June 30,
 2019 2018 2019 2018
 (in thousands)
Net Income, a GAAP measure$12,961  $11,691  $23,863  $15,951 
Depreciation and amortization5,846  4,309  11,760  8,438 
Amortization of bond premiums  3    8 
Share-based compensation3,043  1,975  5,073  3,699 
Interest income(31) (70) (40) (143)
Income tax expense3,775  2,891  7,364  3,871 
EBITDAX, a non-GAAP measure$25,594  $20,799  $48,020  $31,824 

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