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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
Commission file number: 0-18953
AAON, INC.
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(Exact name of registrant as specified in its charter)
Nevada 87-0448736
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2425 South Yukon, Tulsa, Oklahoma 74107
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(Address of principal executive offices)
(Zip Code)
(918) 583-2266
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No
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Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes |X| No
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As of June 30, 2003, Registrant had outstanding a total of 12,657,608 shares of
its $.004 par value Common Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
On pages 7 through 13 of this report.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company engineers, manufactures and markets commercial rooftop
air-conditioning, heating and heat recovery equipment, chillers,
air-conditioning coils, air handlers and condensing units. The Company's primary
products are its RK, RL, RM and RN Series units. The highly energy efficient RM
and RN units, which were introduced in 2002, are replacing the RK. AAON has also
introduced an expanded air handler product and a Modulating Hot Gas Reheat
feature for the rooftop product lines, condensing units and air handlers. The
new feature addresses humidity, mold and indoor air quality problems that plague
many environments due to excessive moisture. The Company's newest product is the
Model LL Chiller available in both air cooled condensing and enhanced energy
conserving evaporative cooled configurations. The chillers have features that
will enhance the ease of installation and maintenance and includes a remote
monitoring and control system.
AAON sells its products to property owners and contractors through a network of
manufacturers' representatives and its internal sales force. Demand for AAON's
products is influenced by national and regional economic and demographic
factors. The commercial and industrial new construction market is subject to
cyclical fluctuations in that it is generally tied to housing starts, but has a
lag factor of 6-18 months. Housing starts, in turn, are affected by such factors
as interest rates, the state of the economy, population growth and the relative
age of the population. When new construction is down, the Company emphasizes the
replacement market.
The principal element components of cost of goods sold are labor, raw materials,
component costs, factory overhead, freight out and engineering expense. The
principal raw materials used in AAON's manufacturing processes are steel, copper
and aluminum. The major component costs include compressors, electric motors and
electronic controls.
Selling, general and administrative costs include the Company's internal sales
force, warranty costs, profit sharing and administrative expense. Warranty
expense is estimated based on historical trends and other factors. The plant and
office facilities of AAON, Inc. consist of a 337,000 square foot building
(322,000 sq. ft. of manufacturing/warehouse space and 15,000 sq. ft. of office
space) located at 2425 S. Yukon Avenue, Tulsa, Oklahoma (the "original
facility"), and a 457,000 square foot manufacturing/warehouse building and a
22,000 square foot office building (the "expansion facility") that is located
across the street from the original facility. The Company utilizes 25% of the
expansion facility and the remaining 75% is leased to third parties. The
operations of AAON Coil Products are conducted in a plant/office building at
203-207 Gum Springs Road in Longview, Texas, containing 226,000 square feet
(219,000 sq. ft. of manufacturing/warehouse and 7,000 sq. ft. of office space).
-1-
Set forth below is income statement information with respect to the Company for
the three and six months ended June 30, 2003, and 2002:
AAON, Inc.
Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 30, 2003* June 30, 2002* June 30, 2003* June 30, 2002*
---------------------------------------------------------------------------------
(in thousands)
Net sales $ 37,222 $ 40,181 $ 70,078 $ 76,171
Cost of sales 28,414 30,444 52,573 56,817
----------------- ----------------- ---------------- ----------------
Gross profit 8,808 9,737 17,505 19,354
Selling, general and
administrative expenses 3,512 4,079 6,708 8,015
----------------- ----------------- ---------------- ----------------
Income from operations 5,296 5,658 10,797 11,339
Interest expense 9 44 15 71
Interest income (117) (17) (175) (41)
Other income (38) (94) (122) (157)
----------------- ----------------- ---------------- ----------------
Income before income taxes 5,442 5,725 11,079 11,466
Income tax provision 2,085 2,059 4,227 4,153
----------------- ----------------- ---------------- ----------------
Net income $ 3,357 $ 3,666 $ 6,852 $ 7,313
================= ================= ================ ================
*Unaudited
Results of Operations. Net sales decreased $2,959,000 (7.4%) to $37,222,000 from
$40,181,000 for the three months ended June 30, 2003, and $6,093,000 to
$70,078,000 from $76,171,000 for the six months ended June 30, 2003, compared to
the same periods in 2002. The decrease in sales continued to be the result of a
lagging economy. Sales to existing customers in the six months ended June 30,
2003, accounted for 85% of the Company's business, with the balance coming from
new business.
Gross profit decreased 9.5% from $9,737,000 to $8,808,000 for the three months
ended June 30, 2003, and 9.6% from $19,354,000 to $17,505,000 for the six months
ended June 30, 2003, compared to the same periods in 2002. The decrease in
margins for the three and six months is attributable to lower sales volume of
higher margin orders and higher sales volume of lower margin orders.
Selling, general and administrative expenses decreased $567,000 from $4,079,00
to $3,512,000 for the three months ended June 30, 2003, compared to June 30,
2002, primarily due to a decrease in warranty expense related to the
introduction of new products in 2002, and improved product quality. SG&A
expenses decreased $1,307,000 from $8,015,000 to $6,708,000 for the six months
ended June 30, 2003, compared to the same period in 2002, due to a decrease in
warranty expenses and agency certification costs related to the introduction of
new products.
-2-
Interest expense decreased $35,000 from $44,000 to $9,000 for the three months
ended June 30, 2003, and $56,000 from $71,000 to $15,000 for the six months
ended June 30, 2003, compared to the same periods in 2002, due to the retirement
of all long-term debt in 2002 and lower average borrowings under the revolving
credit facility.
Interest income increased $100,000 from $17,000 to $117,000 for the three months
ended June 30, 2003, and $134,000 from $41,000 to $175,000 for the six months
ended June 30, 2003, compared to the same period in 2002 due to investments in
short-term money market funds and a certificate of deposit.
The Company's effective tax rate increased by 1% to 38% from 37% in 2003
compared to 2002.
Financial Condition and Liquidity. Accounts receivable increased $4,997,000 from
$22,306,000 to $27,303,000 due to an increase in sales in the month of June with
$16,286,000 in current receivables.
Inventories decreased $429,000 from $14,338,000 to $13,909,000 at June 30, 2003,
compared to December 31, 2002, due to increased sales in June, resulting in
lower inventory levels.
Property, plant and equipment increased $3,606,000 from $62,345,000 to
$65,951,000 with $813,000 of building renovations, $2,678,000 of manufacturing
equipment additions and $115,000 of furniture and fixtures additions. All
capital expenditures and building renovations were financed out of cash
generated from operations.
Accounts payable and accrued liabilities increased by $2,123,000 at June 30,
2003, compared to December 31, 2002, due primarily to an increase in income tax
payable and commissions payable.
Management believes the Company's bank revolving credit facility (or comparable
financing) and projected cash flows from operations will provide the necessary
liquidity and capital resources to the Company for the foreseeable future. The
Company's belief that it will have the necessary liquidity and capital resources
is based upon its knowledge of the HVAC industry and its place in that industry,
its ability to limit the growth of its business if necessary, and its
relationship with its existing bank lender. For information concerning the
Company's revolving credit facility at June 30, 2003, see Note 7 to the
financial statements included in this report.
Critical Accounting Policies. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Because these estimates and
assumptions require significant judgment, actual results could differ from those
estimates and could have a significant impact on the Company's results of
operations, financial position and cash flows. The Company re-evaluates its
estimates and assumptions on a monthly basis.
The following accounting policies may involve a higher degree of estimation or
assumption:
Allowance for Doubtful Accounts - The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends in collections and write-offs, current customer
status, the age of the receivable, economic conditions and other information.
Aged receivables are reviewed on a monthly basis to determine if the reserve is
adequate.
-3-
Allowance for Excess and Obsolete Inventories - The Company establishes an
allowance for excess and obsolete inventories based on the change in inventory
requirements due to product line changes, the feasibility of using obsolete
parts for upgraded part substitutions, the required parts needed for part supply
sales and replacement parts.
Warranty - A provision is made for the estimated cost of warranty obligation at
the time the product is shipped and revenue is recognized. The warranty period
is: for parts only, the earlier of one year from the date of first use or 15
months from date of shipment; compressors (if applicable), an additional four
years; on gas-fired heat exchangers (if applicable), 15 years; and on stainless
steel heat exchangers (if applicable), 25 years. Warranty expense is estimated
based on the Company's warranty period, historical warranty trends and
associated costs, and any known identifiable warranty issue. Due to the absence
of warranty history on new products, an additional provision may be made for
such products.
Forward-Looking Statements
This report includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "believes," "seeks," "estimates," "will," variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Important factors that could cause actual results to differ
materially from those in the forward-looking statements include (1) the timing
and extent of changes in material prices, (2) the effects of fluctuations in the
commercial/industrial new construction market, (3) the timing and extent of
changes in interest rates, as well as other competitive factors during the year,
and (4) general economic, market or business conditions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
While the Company is exposed to changes in interest rates, a hypothetical 10%
change in interest rates on its variable rate borrowings would not have a
material effect on the Company's earnings or cash flow.
Foreign sales account for less than 2% of the Company's total sales and the
Company accepts payment for such sales only in U.S. dollars; hence the Company
is not exposed to foreign currency exchange rate risk.
Important raw materials purchased by the Company are steel, copper and aluminum,
which are subject to price fluctuations. The Company attempts to limit the
impact of price increases on these materials by negotiating with each of its
major suppliers on a term basis from six months to one year.
-4-
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
At the end of this period covered by this Quarterly Report on Form 10-Q, the
Company's management, under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on that evaluation, the Company's Chief Executive Officer
and Chief Financial Officer believe that:
o The Company's disclosure controls and procedures are designed to
ensure that information required to be disclosed by the Company in the
reports it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms; and
o The Company's disclosure controls and procedures operate such that
important information flows to appropriate collection and disclosure
points in a timely manner and are effective to ensure that such
information is accumulated and communicated to the Company's
management, and made known to the Company's Chief Executive Officer
and Chief Financial Officer, particularly during the period when this
Quarterly Report was prepared, as appropriate to allow timely
decisions regarding the required disclosure.
Changes in internal controls
There have been no significant changes in the Company's internal controls or
other factors that could significantly affect the Company's internal controls
subsequent to their evaluation, nor have there been any corrective actions with
regard to significant deficiencies or material weaknesses in financial
reporting.
Item 5. Other Events.
On October 17, 2002, the Company announced a new stock buyback program to
repurchase up to 10% (1,325,000 shares) of its outstanding stock. Through June
30, 2003, the Company had acquired 640,664 shares of its stock pursuant to its
most recent buyback program.
-5-
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Stockholders held on May 28, 2003, Norman H.
Asbjornson, John B. Johnson, Jr., and Charles C. Stephenson, Jr., were reelected
as directors for three-year terms by votes of 10,039,853, 9,839,845 and
11,150,281 shares, respectively, "For"; 1,109,580, 1,310,908 and 472 shares,
respectively, "Against"; and 1,210,287, 1,208,947 and 1,208,947, respectively,
"Withheld Authority". Other directors whose terms of office continued after the
meeting are: Thomas E. Naugle and Jerry E. Ryan, whose terms end in 2004; and
William A. Bowen and Anthony Pantaleoni, whose terms end in 2005.
-6-
AAON, Inc.
Consolidated Balance Sheets
June 30, 2003* December 31, 2002
--------------------------------------
(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash of equivalents $ 677 $ 5,071
Certificate of deposit 10,000 -
Accounts receivable, net 27,303 22,306
Inventories, net 13,909 14,338
Prepaid expenses 327 599
Deferred income tax 4,168 4,168
---------------- ----------------
Total current assets 56,384 46,482
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 874 874
Buildings 19,207 18,394
Machinery and equipment 42,258 39,580
Furniture and fixtures 3,612 3,497
---------------- ----------------
Total property, plant & equipment 65,951 62,345
Less: accumulated depreciation 29,654 27,114
---------------- ----------------
Net property, plant & equipment 36,297 35,231
CERTIFICATE OF DEPOSIT - 10,000
---------------- ----------------
Total assets $ 92,681 $ 91,713
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 2,125 $ 3,566
Accounts payable 8,816 8,418
Accrued liabilities 15,074 13,349
---------------- ----------------
Total current liabilities 26,015 25,333
---------------- ----------------
DEFERRED TAX LIABILITY 4,070 4,070
---------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par, 5,000,000 shares
authorized, no shares issued - -
Common stock, $.004 par, 50,000,000 shares
authorized, 12,657,608 and 13,030,916 issued and
outstanding at June 30, 2003, and
December 31, 2002, respectively 51 52
Additional paid-in capital - -
Retained earnings 62,545 62,258
---------------- ----------------
Total stockholders' equity 62,596 62,310
---------------- ----------------
Total liabilities and stockholders' equity $ 92,681 $ 91,713
================ ================
*Unaudited
-7-
AAON, Inc.
Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 30, 2003* June 30, 2002* June 30, 2003* June 30, 2002*
------------------------------------------------------------------------------------
(in thousands, except share data)
Net sales $ 37,222 $ 40,181 $ 70,078 $ 76,171
Cost of sales 28,414 30,444 52,573 56,817
------------------- ------------------- ------------------ -----------------
Gross profit 8,808 9,737 17,505 19,354
Selling, general and
administrative expenses 3,512 4,079 6,708 8,015
------------------- ------------------- ------------------ -----------------
Income from operations 5,296 5,658 10,797 11,339
Interest expense 9 44 15 71
Interest income (117) (17) (175) (41)
Other income (38) (94) (122) (157)
Income before income taxes 5,442 5,725 11,079 11,466
Income tax provision 2,085 2,059 4,227 4,153
------------------- ------------------- ------------------ -----------------
Net income $ 3,357 $ 3,666 $ 6,852 $ 7,313
=================== =================== ================== =================
Earnings Per Share:
Basic $0.26 $0.28 $0.53 $0.56
=================== =================== ================== =================
Diluted $0.25 $0.27 $0.51 $0.53
=================== =================== ================== =================
Weighted Average Shares
Outstanding:
Basic 12,738,484 13,208,004 12,808,535 13,137,613
=================== =================== ================== =================
Diluted 13,239,864 13,782,289 13,326,803 13,722,352
=================== =================== ================== =================
*Unaudited
-8-
AAON, Inc.
Consolidated Statements of Stockholders' Equity
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
------------------------------------------------------------------------------
(in thousands)
Balance, December 31, 2002 13,031 $ 52 $ - $ 62,258 $ 62,310
Exercise of common stock options* 51 - 209 - 209
Repurchase of common stock* (424) (1) (209) (6,565) (6,775)
Net income* - - - 6,852 6,852
----------- ------------ ------------ ------------ ------------
Balance, June 30, 2003* 12,658 $ 51 $ - $ 62,545 $ 62,596
=========== ============ ============ ============ ============
*Unaudited
-9-
AAON, Inc.
Consolidated Statements of Cash Flows
Six Months Ended Six Months Ended
June 30, 2003* June 30, 2002*
--------------------------------------------------------
(in thousands)
OPERATING ACTIVITIES
Net income $ 6,852 $ 7,313
----------------------- -----------------------
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,540 2,415
Changes in assets and liabilities:
Accounts receivable (4,997) 1,188
Inventories 429 (1,685)
Prepaid expenses 272 (291)
Accounts payable 398 579
Accrued liabilities 1,725 2,145
----------------------- -----------------------
Total adjustments 367 4,351
----------------------- -----------------------
Net cash provided by operating activities 7,219 11,664
----------------------- -----------------------
INVESTING ACTIVITIES
Capital expenditures (3,606) (1,403)
Investment in certificate of deposit - (10,000)
----------------------- -----------------------
Net cash used in investing activities (3,606) (11,403)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement 20,388 16,686
Payments under revolving credit agreement (21,829) (17,132)
Payments on long-term debt - (1,423)
Stock options exercised 209 649
Repurchase of common stock (6,775) -
----------------------- -----------------------
Net cash used in financing activities (8,007) (1,220)
----------------------- -----------------------
NET CHANGE IN CASH (4,394) (959)
CASH AND CASH EQUIVALENTS, beginning of period 5,071 1,123
----------------------- -----------------------
CASH AND CASH EQUIVALENTS, end of period $ 677 $ 164
======================= =======================
*Unaudited
-10-
AAON, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
1. BASIS OF PRESENTATION:
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures made in these financial statements are adequate to make the
information presented not misleading when read in conjunction with the financial
statements and the notes thereto included in the Company's latest audited
financial statements which were included in the Form 10-K Report for the fiscal
year ended December 31, 2002, filed by AAON, Inc. with the SEC. Certain
reclassifications of prior year amounts have been made to conform to current
year presentations. These reclassifications had no impact on net income. In the
opinion of management, the accompanying financial statements include all normal,
recurring adjustments required for a fair presentation of the results of the
periods presented. Operating results for the six months ended June 30, 2003, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2003.
2. STOCK COMPENSATION:
The Company accounts for its Stock Option Plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under the plan had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, to stock-based employee compensation, is as
follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------------------------------------------------------
(in thousands, except share data)
Net income as reported $3,357 $3,666 $6,852 $7,313
Deduct total stock-based employee
compensation: Compensation expense
determined under fair value method for all
awards, net of related tax effects (184) (263) (315) (554)
----------- ----------- ------------ ------------
Pro forma net income $3,173 $3,403 $6,537 $6,759
=========== =========== ============ ============
Earnings per share:
Basic, as reported $0.26 $0.28 $0.53 $0.56
=========== =========== ============ ============
Basic, pro forma $0.25 $0.26 $0.51 $0.51
=========== =========== ============ ============
Diluted, as reported $0.25 $0.27 $0.51 $0.53
=========== =========== ============ ============
Diluted, pro forma $0.24 $0.25 $0.49 $0.49
=========== =========== ============ ============
3. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of bank deposits and highly liquid,
interest-bearing money market funds with initial maturities of three months or
less.
-11-
4. INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method. The Company establishes an allowance for
excess and obsolete inventories based on product line changes, the feasibility
of substituting parts and the need for supply and replacement parts. At June 30,
2003 (unaudited), and December 31, 2002, inventory and the related allowance for
excess and obsolete inventories are as follows (in thousands):
June 30, 2003 December 31, 2002
------------------------- -------------------------
Raw materials $10,587 $11,508
Work in process 3,232 2,750
Finished goods 1,090 1,080
------------------------- ------------------------
$14,909 $15,338
Less: allowance for excess and obsolete
raw materials inventory 1,000 1,000
------------------------- ------------------------
Total, net $13,909 $14,338
========================= ========================
5. CERTIFICATE OF DEPOSIT:
The $10 million certificate of deposit bears interest at 3.25% per annum and
matures on June 12, 2004. There is a three-month interest penalty for early
withdrawal.
6. WARRANTIES:
A provision is made for the estimated cost of warranty obligations at the time
the related products are sold based upon the warranty period, historical trends,
new products and any known identifiable warranty issues.
Changes in the Company's warranty liability during the three and six months
ended June 30, 2003, and 2002, are as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------ ------------- ------------ ------------
Balance, beginning of period $ 7,309 $ 7,835 $ 7,200 $ 7,000
Warranties accrued during the period 739 320 1,226 1,597
Warranties settled during the period (2,105) (987) (2,483) (1,429)
------------ ------------- ------------ ------------
Balance, end of period $ 5,943 $ 7,168 $ 5,943 $ 7,168
============ ============= ============ ============
7. REVOLVING CREDIT FACILITY:
The $15,150,000 bank line of credit has interest payable monthly at LIBOR plus
1.60% (2.92% at June 30, 2003). On July 31, 2003, the Company renewed the line
of credit with a new maturity date of July 1, 2004. At June 30, 2003, the
Company had $2,125,000 outstanding balance on the bank line of credit and had
$3,566,000 outstanding at December 31, 2002.
-12-
8. EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
--------------------------------------------------------------------------
(in thousands, except share data)
Numerator:
Income available to common
stockholders $ 3,357 $ 3,666 $ 6,852 $ 7,313
Denominator:
Denominator for basic earnings per share
- weighted average shares 12,738,484 13,208,004 12,808,535 13,137,613
Effect of dilutive employee stock options
501,380 574,285 518,268 584,739
--------------- -------------- -------------- ---------------
Denominator for diluted earnings per
share - weighted average shares 13,239,864 13,782,289 13,326,803 13,722,352
=============== ============== ============== ===============
--------------- -------------- -------------- ---------------
Basic earnings per share $ 0.26 $ 0.28 $ 0.53 $ 0.56
=============== ============== ============== ===============
Diluted earnings per share $ 0.25 $ 0.27 $ 0.51 $ 0.53
=============== ============== ============== ===============
9. NEW ACCOUNTING PRONOUNCEMENTS:
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" (Statement 143), which
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred and a corresponding
increase in the carrying amount of the long-lived asset. Statement 143 is
effective for fiscal years beginning after June 15, 2002. Adoption of Statement
143 did not have a material impact on AAON's financial condition or results of
operations.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," (the Interpretation). The interpretation provides
guidance on how to identify a variable interest entity (VIE) and determine when
the assets, liabilities, non-controlling interests, and results of operations of
a VIE need to be included in a company's consolidated financial statements. The
Interpretation requires additional disclosures by primary beneficiaries and
other significant variable interest holders. The provisions of this
interpretation were effective immediately for all variable interest entities
created after January 31, 2003; for the first fiscal year or interim period
beginning after June 15, 2003, for variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
The adoption of the Interpretation did not have a material impact on AAON's
financial position or results of operations.
10. FOOTNOTES INCORPORATED BY REFERENCE:
Certain footnotes are applicable to the financial statements, but would be
substantially unchanged from those presented in the December 31, 2002, 10-K
filed with the SEC. Accordingly, reference should be made to this statement for
the following:
Note Description
============== ==========================================================
1 Business, Summary of Significant Accounting Policies
and Other Financial Data
6 Income Taxes
7 Benefit Plans
8 Stockholder Rights Plan
9 Contingencies
-13-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Registrant did not file any reports on Form 8-K during the
three-month period ended June 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAON, INC.
Dated: August 12, 2003 By: /s/ Norman H. Asbjornson
------------------------------
Norman H. Asbjornson
President
Dated: August 12, 2003 By: /s/ Kathy I. Sheffield
------------------------------
Kathy I. Sheffield
Treasurer
-14-
Exhibit 31.1
CERTIFICATION
I. I, Norman H. Asbjornson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AAON, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) (Intentionally omitted)
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, of internal control over financial
reporting to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: August 12, 2003 /s/ Norman H. Asbjornson
-------------------------
Norman H. Asbjornson
Chief Executive Officer
-15-
Exhibit 31.2
CERTIFICATION
II. I, Kathy I. Sheffield, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AAON, Inc.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) (Intentionally omitted)
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, of internal control over financial
reporting to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: August 12, 2003 /s/ Kathy I. Sheffield
------------------------
Kathy I. Sheffield
Chief Financial Officer
-16-
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AAON, Inc. (the "Company"), on Form
10-Q for the period ended June 30, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Norman H. Asbjornson,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Norman H. Asbjornson
- -------------------------
Norman H. Asbjornson
Chief Executive Officer
-17-
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AAON, Inc. (the "Company"), on Form
10-Q for the period ended June 30, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Kathy I. Sheffield,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Kathy I. Sheffield
- -----------------------
Kathy I. Sheffield
Chief Financial Officer
-18-