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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 September 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 October 31, 2003, Registrant had outstanding a total of 12,812,508 shares
of its $.004 par value Common Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
On pages 6 through 12 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 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 Company's newest product
is the Model LL Chiller available in both air cooled condensing and evaporative
cooled configurations.
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 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 nine months ended September 30, 2003, and 2002:
AAON, Inc.
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
Sept. 30, 2003* Sept. 30, 2002* Sept. 30, 2003* Sept. 30, 2002*
------------------------------------------------------------------------------------
(in thousands)
Net sales $ 41,003 $ 41,702 $ 111,081 $ 117,873
Cost of sales 31,491 31,301 84,064 88,118
------------------- ------------------- ------------------ -----------------
Gross profit 9,512 10,401 27,017 29,755
Selling, general and
administrative expenses 3,861 3,992 10,569 12,007
------------------- ------------------- ------------------ -----------------
Income from operations 5,651 6,409 16,448 17,748
Interest expense 6 1 21 72
Interest income (84) (83) (259) (124)
Other income (45) (80) (167) (237)
------------------- ------------------- ------------------ -----------------
Income before income taxes 5,774 6,571 16,853 18,037
Income tax provision 2,139 2,385 6,366 6,538
------------------- ------------------- ------------------ -----------------
Net income $ 3,635 $ 4,186 $ 10,487 $ 11,499
=================== =================== ================== =================
*Unaudited
Results of Operations. Net sales decreased $699,000 (1.7%) to $41,003,000 from
$41,702,000 for the three months ended September 30, 2003, and $6,792,000 (5.8%)
to $111,081,000 from $117,873,000 for the nine months ended September 30, 2003,
compared to the same periods in 2002. The decrease in sales for the three and
nine months ended September 30, 2003, compared to the same period in 2002, was
primarily due to economic conditions in the United States. However, there was an
improvement noted in the third quarter compared to the first and second
quarters. Sales to existing customers in the nine months ended September 30,
2003, accounted for 85% of the Company's business, with the balance coming from
new business.
Gross profit decreased $899,000 (8.6%) to $9,512,000 from $10,401,000 for the
three months ended September 30, 2003, and $2,738,000 (9.2%) to $27,017,000 from
$29,755,000 for the nine months ended September 30, 2003, compared to the same
periods in 2002. The decrease for the three months ended September 30, 2003, was
primarily due to efficiency issues related to the manufacturing of new products.
The decrease in margins for the first nine months of the year was primarily
attributable to lower sales volume of higher margin orders and higher sales
volume of lower margin orders.
Selling, general and administrative expenses decreased $131,000 (3.3%) to
$3,861,000 from $3,992,000 for the three months ended September 30, 2003,
compared to September 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 $1,438,000 (12.0%) to $10,569,000 from
$12,007,000 for the nine months ended September 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 in the earlier periods.
-2-
The Company's effective tax rate increased by 1% to 38% from 37% in 2003
compared to 2002.
Financial Condition and Liquidity. The Company generated $15,915,000 and
$14,647,000 cash from operating activities during the nine months ended
September 30, 2003, and September 30, 2002, respectively. The cash generated
allowed for the repurchase of company stock totaling $9,132,000 and capital
expenditures totaling $3,964,000 in 2003. These funds and subsequent cash flows
will be retained for general working capital purposes, continuance of the
company stock buyback program, capital expenditures which include machinery,
equipment and buildings, and future business opportunities.
Accounts receivable increased $2,100,000 from $22,306,000 to $24,406,000 at
September 30, 2003, compared to December 31, 2002, due to an increase in sales
in the third quarter as compared to the fourth quarter 2002, and timing of
receipts.
Inventories decreased $158,000 from $14,338,000 to $14,180,000 at September 30,
2003, compared to December 31, 2002, due to an increase in sales in the third
quarter of 2003, resulting in lower inventory levels as compared to the fourth
quarter 2002.
Property, plant and equipment increased $3,964,000 from $62,345,000 to
$66,309,000 at September 30, 2003 compared to December 31, 2002. The additions
were comprised of $1,136,000 of building renovations, $2,624,000 of
manufacturing equipment additions, primarily due to the purchase of sheet metal
and refrigeration equipment, and $204,000 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 $3,967,000 from $21,767,000
to $25,734,000 at September 30, 2003, compared to December 31, 2002, due
primarily to an increase in income taxes 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 September 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 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 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 issues. 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," or
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 the 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 has there been any need for 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 stock buyback program to repurchase
up to 10% (1,325,000 shares) of its outstanding stock. Through September 30,
2003, the Company had acquired 769,664 shares of its stock pursuant to its
current buyback program.
-5-
AAON, Inc.
Consolidated Balance Sheets
Sept. 30, 2003* December 31, 2002
----------------------------------------------
(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,616 $ 5,071
Certificate of deposit 10,000 -
Accounts receivable, net 24,406 22,306
Inventories, net 14,180 14,338
Prepaid expenses 1,090 599
Deferred income tax 4,168 4,168
------------------- -------------------
Total current assets 58,460 46,482
------------------- -------------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 874 874
Buildings 19,530 18,394
Machinery and equipment 42,204 39,580
Furniture and fixtures 3,701 3,497
------------------- -------------------
Total property, plant & equipment 66,309 62,345
Less: accumulated depreciation 31,008 27,114
------------------- -------------------
Net property, plant & equipment 35,301 35,231
CERTIFICATE OF DEPOSIT - 10,000
------------------- -------------------
Total assets $ 93,761 $ 91,713
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ - $ 3,566
Accounts payable 9,584 8,418
Accrued liabilities 16,150 13,349
------------------- -------------------
Total current liabilities 25,734 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, 12,541,233 and 13,030,916 issued and
outstanding at Sept. 30, 2003 and
December 31, 2002, respectively 50 52
Additional paid-in capital - -
Retained earnings 63,907 62,258
------------------- -------------------
Total stockholders' equity 63,957 62,310
------------------- -------------------
Total liabilities and stockholders' equity $ 93,761 $ 91,713
=================== ===================
*Unaudited
-6-
AAON, Inc.
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
Sept. 30, 2003* Sept. 30, 2002* Sept. 30, 2003* Sept. 30, 2002*
------------------------------------------------------------------------------------
(in thousands, except share data)
Net sales $ 41,003 $ 41,702 $ 111,081 $ 117,873
Cost of sales 31,491 31,301 84,064 88,118
------------------- ------------------- ------------------ -----------------
Gross profit 9,512 10,401 27,017 29,755
Selling, general and
administrative expenses 3,861 3,992 10,569 12,007
------------------- ------------------- ------------------ -----------------
Income from operations 5,651 6,409 16,448 17,748
Interest expense 6 1 21 72
Interest income (84) (83) (259) (124)
Other income (45) (80) (167) (237)
------------------- ------------------- ------------------ -----------------
Income before income taxes 5,774 6,571 16,853 18,037
Income tax provision 2,139 2,385 6,366 6,538
------------------- ------------------- ------------------ -----------------
Net income $ 3,635 $ 4,186 $ 10,487 $ 11,499
=================== =================== ================== =================
Earnings Per Share:
Basic $ 0.29 $ 0.32 $ 0.82 $ 0.87
=================== =================== ================== =================
Diluted $ 0.27 $ 0.30 $ 0.79 $ 0.84
=================== =================== ================== =================
Weighted Average Shares
Outstanding:
Basic 12,593,711 13,220,792 12,736,140 13,165,747
=================== =================== ================== =================
Diluted 13,292,444 13,794,595 13,314,563 13,746,839
=================== =================== ================== =================
*Unaudited
-7-
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* 61 - 292 - 292
Repurchase of common stock* (551) (2) (292) (8,838) (9,132)
Net income* - - - 10,487 10,487
----------- ------------ ------------ ------------ ------------
Balance, September 30, 2003* 12,541 $ 50 $ - $ 63,907 $ 63,957
=========== ============ ============ ============ ============
*Unaudited
-8-
AAON, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended Nine Months Ended
Sept. 30, 2003* Sept. 30, 2002*
--------------------------------------------------------
(in thousands)
OPERATING ACTIVITIES
Net income $ 10,487 $ 11,499
----------------------- -----------------------
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,894 3,591
Changes in assets and liabilities:
Accounts receivable (2,100) (3,502)
Inventories 158 (1,166)
Prepaid expenses (491) (775)
Accounts payable 1,166 1,219
Accrued liabilities 2,801 3,781
----------------------- -----------------------
Total adjustments 5,428 3,148
----------------------- -----------------------
Net cash provided by operating activities 15,915 14,647
----------------------- -----------------------
INVESTING ACTIVITIES
Capital expenditures (3,964) (2,835)
Investment in certificate of deposit - (10,000)
----------------------- -----------------------
Net cash used in investing activities (3,964) (12,835)
----------------------- -----------------------
FINANCING ACTIVITIES
Borrowings under revolving credit agreement 26,862 23,613
Payments under revolving credit agreement (30,428) (24,058)
Payments on long-term debt - (1,424)
Stock options exercised 292 718
Repurchase of common stock (9,132) -
----------------------- -----------------------
Net cash used in financing activities (12,406) (1,151)
----------------------- -----------------------
NET CHANGE IN CASH (455) 661
CASH AND CASH EQUIVALENTS, beginning of period 5,071 1,123
----------------------- -----------------------
CASH AND CASH EQUIVALENTS, end of period $ 4,616 $ 1,784
======================= =======================
*Unaudited
-9-
AAON, Inc.
NOTES TO FINANCIAL STATEMENTS
September 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. 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 nine months ended September 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 Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
-------------------------------------------------------------------
(in thousands, except share data)
Net income as reported $ 3,635 $ 4,186 $ 10,487 $ 11,499
Deduct total stock-based employee
compensation: Compensation expense
determined under fair value method for all
awards, net of related tax effects 117 268 432 822
-------------- -------------- ------------- --------------
Pro forma net income $ 3,518 $ 3,918 $ 10,055 $ 10,677
============== ============== ============= ==============
Earnings per share:
Basic, as reported $ 0.29 $ 0.32 $ 0.82 $ 0.87
============== ============== ============= ==============
Basic, pro forma $ 0.28 $ 0.30 $ 0.79 $ 0.81
============== ============== ============= ==============
Diluted, as reported $ 0.27 $ 0.30 $ 0.79 $ 0.84
============== ============== ============= ==============
Diluted, pro forma $ 0.26 $ 0.28 $ 0.76 $ 0.78
============== ============== ============= ==============
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.
-10-
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
September 30, 2003 (unaudited), and December 31, 2002, inventory and the related
allowance for excess and obsolete inventories are as follows (in thousands):
Sept. 30, 2003 Dec. 31, 2002
--------------------- ---------------------
Raw materials $10,447 $11,508
Work in process 3,135 2,750
Finished goods 1,598 1,080
--------------------- ---------------------
$15,180 $15,338
Less: allowance for excess and obsolete
raw materials inventory 1,000 1,000
--------------------- ---------------------
Total, net $14,180 $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 nine months
ended September 30, 2003, and 2002, are as follows (in thousands):
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------------- ------------- ------------ -------------
Balance, beginning of period $ 5,943 $ 7,168 $ 7,200 $ 7,000
Warranties accrued during the period 1,033 1,164 2,259 3,807
Warranties settled during the period (844) (855) (3,327) (3,330)
--------- --------- --------- ---------
Balance, end of period $ 6,132 $ 7,477 $ 6,132 $ 7,477
========= ========= ========= =========
7. REVOLVING CREDIT FACILITY:
The Company's $15,150,000 bank line of credit has interest payable monthly at
LIBOR plus 1.60% (2.72% at September 30, 2003), with a maturity date of July 31,
2004. At September 30, 2003, the Company had no outstanding balance on the bank
line of credit and had $3,566,000 outstanding at December 31, 2002.
-11-
8. EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Nine Months Ended
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
----------------------------------------------------------------------------
(in thousands, except share data)
Numerator:
Income available to common
stockholders $ 3,635 $ 4,186 $ 10,487 $ 11,499
Denominator:
Denominator for basic earnings per share
- weighted average shares 12,593,711 13,220,792 12,736,140 13,165,747
Effect of dilutive employee stock options
698,733 573,803 578,423 581,092
---------------- ---------------- ---------------- -----------------
Denominator for diluted earnings per
share - weighted average shares 13,292,444 13,794,595 13,314,563 13,746,839
Basic earnings per share $ 0.29 $ 0.32 $ 0.82 $ 0.87
================ ================ ================ =================
Diluted earnings per share $ 0.27 $ 0.30 $ 0.79 $ 0.84
================ ================ ================ =================
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
-12-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K: Registrant filed one report on Form 8-K
during the three-month period ended September 30, 2003, reporting
an amendment of its Second Revolving Credit Loan Agreement on
July 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: November 11, 2003 By: /s/ Norman H. Asbjornson
-------------------------
Norman H. Asbjornson
President/CEO
Dated: November 11, 2003 By: /s/ Kathy I. Sheffield
-------------------------
Kathy I. Sheffield
Treasurer
-13-
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) 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
c) 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: November 11, 2003 /s/ Norman H. Asbjornson
------------------------
Norman H. Asbjornson
President/Chief Executive Officer
-14-
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) 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
c) 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: November 11, 2003 /s/ Kathy I. Sheffield
-----------------------
Kathy I. Sheffield
Chief Financial Officer
-15-
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 September 30, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Norman H. Asbjornson,
President/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,
to my knowledge:
(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
President/Chief Executive Officer
-16-
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 September 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, to my
knowledge:
(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
-17-