AAON, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 6, 2015

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Exhibit 99.1                        
NEWS
BULLETIN
 
AAON, Inc.
 
2425 South Yukon Ave. Ÿ Tulsa, OK 74107-2728
 
Ÿ Ph: (918) 583-2266 Ÿ   Fax: (918) 583-6094 Ÿ
 
Ÿhttp://www.aaon.comŸ
 
 
 
For Further Information:
FOR IMMEDIATE RELEASE
August 6, 2015
 
Jerry R. Levine Ÿ Phone: (914) 244-0292 Ÿ Fax: (914) 244-0295
 
Email: jrladvisor@yahoo.com

AAON REPORTS SECOND QUARTER RESULTS

TULSA, OK, August 6, 2015 - AAON, Inc. (NASDAQ-AAON) today announced its operating results for the second quarter and six months ended June 30, 2015.

In the quarter, net sales were $90.3 million, down 2.2% from $92.3 million in 2014. Net income was $11.1 million, down 2.1% from $11.4 million in the same period a year ago. Net sales for the six-month period ended June 30, 2015 were $167.0 million, down 1.0% from $168.7 million in 2014. Net income for the six-month period ended June 30, 2015 was $19.5 million, down 7.8% from $21.2 million in 2014.

Earnings per diluted share in the second quarter of 2015 held constant at $0.20, compared to the same period the previous year, based upon 54.7 million and 55.6 million shares outstanding at June 30, 2015 and 2014, respectively. Earnings per diluted share for the six-month period ended June 30, 2015 were $0.36, down 5.3% from $0.38 in 2014, based upon 54.7 million and 55.6 million shares outstanding at June 30, 2015 and 2014, respectively.

Norman H. Asbjornson, President and CEO, stated, “As previously reported, we expected a better quarter with increases in our sales. Market data suggests there is a fall-off in replacement sales and that new construction may not be as strong as previously thought. However, we continue to maintain our gross profit percentage through lower raw material costs and increased productivity. Our gross profit as a percent of sales remained relatively steady for the quarter at 30.0% compared to 30.2% a year ago and for the six-month period ended June 30, 2015 at 29.3% compared to 29.5% in the same period a year ago. We also have seen decreases in our SG&A expense as a percent of sales of 1.3% (from 11.5% to 10.2%) for the quarter and 0.3% (from 10.8% to 10.5%) for the six-month period.”

Mr. Asbjornson continued, “The Company's balance sheet at June 30, 2015, continues to be very strong, showing a current ratio of 3.2:1 (including cash and short-term investments totaling $49.9 million), plus long-term marketable investments of $0.6 million, and we remain debt-free."

Mr. Asbjornson concluded, "Nonetheless, we have made changes to strengthen our organization by hiring three (75% increase) new regional sales managers who we expect will make a positive impact on the performance of our representatives as well as replacing some representatives with new firms. In addition, we are about to introduce a number of new products within the next few months. These steps should aid in stimulating new business in the final half of this year and particularly in 2016."

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 86989685); or, for rebroadcast, call 1-855-859-2056 (code 86989685).

AAON, Inc. is a manufacturer of air conditioning and heating equipment consisting of rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, self-contained units and coils. Its products serve the new construction and replacement markets. The Company has successfully gained market share through its “semi-custom” product lines, which offer the customer value, quality, function, serviceability and efficiency.

Certain statements in this news release may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. 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.

1


AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands, except share and per share data)
Net sales
$
90,275

 
$
92,310

 
$
167,043

 
$
168,677

Cost of sales
63,158

 
64,434

 
118,128

 
118,955

Gross profit
27,117

 
27,876

 
48,915

 
49,722

Selling, general and administrative expenses
9,200

 
10,584

 
17,517

 
18,213

Gain on disposal of assets
(30
)
 
—

 
(25
)
 
(24
)
Income from operations
17,947

 
17,292

 
31,423

 
31,533

Interest income
29

 
71

 
73

 
140

Other income (expense), net
27

 
34

 
(48
)
 
13

Income before taxes
18,003

 
17,397

 
31,448

 
31,686

Income tax provision
6,873

 
6,034

 
11,919

 
10,501

Net income
$
11,130

 
$
11,363

 
$
19,529

 
$
21,185

Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.21

 
$
0.21

 
$
0.36

 
$
0.38

Diluted
$
0.20

 
$
0.20

 
$
0.36

 
$
0.38

Cash dividends declared per common share:
$
0.11

 
$
0.09

 
$
0.11

 
$
0.09

Weighted average shares outstanding:
 

 
 

 
 
 
 
Basic
54,208,362

 
55,004,175

 
54,205,657

 
55,036,281

Diluted
54,669,763

 
55,568,212

 
54,714,604

 
55,603,979





2


AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
June 30, 2015
 
December 31, 2014
Assets
(in thousands, except share and per share data)
Current assets:
 
 
 
Cash and cash equivalents
$
37,600

 
$
21,952

Certificates of deposit
6,240

 
6,098

Investments held to maturity at amortized cost
6,101

 
11,972

Accounts receivable, net
45,480

 
44,092

Income tax receivable
3,385

 
2,569

Note receivable
26

 
30

Inventories, net
47,182

 
37,618

Prepaid expenses and other
1,055

 
609

Deferred tax assets
5,837

 
6,143

Total current assets
152,906

 
131,083

Property, plant and equipment:
 

 
 

Land
2,233

 
2,233

Buildings
66,583

 
64,938

Machinery and equipment
134,745

 
127,968

Furniture and fixtures
10,581

 
10,388

Total property, plant and equipment
214,142

 
205,527

Less:  Accumulated depreciation
118,347

 
113,605

Property, plant and equipment, net
95,795

 
91,922

Certificates of deposit
480

 
5,280

Investments held to maturity at amortized cost
75

 
4,015

Note receivable
756

 
817

Total assets
$
250,012

 
$
233,117

 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

Current liabilities:
 

 
 

Revolving credit facility
$
—

 
$
—

Accounts payable
10,513

 
11,370

Dividends payable
5,982

 
—

Accrued liabilities
30,755

 
31,343

Total current liabilities
47,250

 
42,713

Deferred revenue
833

 
1,006

Deferred tax liabilities
12,808

 
13,677

Donations
1,692

 
1,662

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, 54,263,876 and 54,041,829
217

 
216

issued and outstanding at June 30, 2015 and December 31, 2014, respectively
 

 
 

Additional paid-in capital
—

 
—

Retained earnings
187,212

 
173,843

Total stockholders' equity
187,429

 
174,059

Total liabilities and stockholders' equity
$
250,012

 
$
233,117



3


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended 
 June 30,
 
2015
 
2014
Operating Activities
(in thousands)
Net income
$
19,529

 
$
21,185

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation
5,599

 
5,719

Amortization of bond premiums
106

 
389

Provision for losses on accounts receivable, net of adjustments
(102
)
 
(8
)
Provision for excess and obsolete inventories, net
59

 
156

Share-based compensation
1,281

 
984

Excess tax benefits from stock options exercised and restricted stock awards vested
(2,452
)
 
(680
)
Gain on disposition of assets
(25
)
 
(24
)
Foreign currency transaction loss
53

 
—

Interest income on note receivable
(16
)
 
(20
)
Deferred income taxes
(563
)
 
(1,961
)
Changes in assets and liabilities:
 

 
 

Accounts receivable
(1,286
)
 
(13,824
)
Income tax receivable
1,636

 
1,753

Inventories
(9,623
)
 
(4,624
)
Prepaid expenses and other
(446
)
 
(525
)
Accounts payable
(1,030
)
 
3,422

Deferred revenue
136

 
378

Accrued liabilities
(867
)
 
5,185

Net cash provided by operating activities
11,989

 
17,505

Investing Activities
 

 
 

Capital expenditures
(9,304
)
 
(5,903
)
Proceeds from sale of property, plant and equipment
30

 
29

Investment in certificates of deposits
—

 
(9,220
)
Maturities of certificates of deposits
4,658

 
3,904

Purchases of investments held to maturity
—

 
(5,955
)
Maturities of investments
9,201

 
6,539

Proceeds from called investments
504

 
1,269

Principal payments from note receivable
28

 
35

Net cash provided by (used in) investing activities
5,117

 
(9,302
)
Financing Activities
 

 
 

Stock options exercised
2,534

 
632

Excess tax benefits from stock options exercised and restricted stock awards vested
2,452

 
680

Repurchase of stock
(6,444
)
 
(5,116
)
Net cash used in financing activities
(1,458
)
 
(3,804
)
Net increase in cash and cash equivalents
15,648

 
4,399

Cash and cash equivalents, beginning of period
21,952

 
12,085

Cash and cash equivalents, end of period
$
37,600

 
$
16,484



4


Use of Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), additional non-GAAP financial measures are provided and reconciled in the following tables. The Company believes that these non-GAAP financial measures, 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 these non-GAAP financial measures enhance 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 
 June 30,
 
Six Months Ended June 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Net Income, a GAAP measure
$
11,130

 
$
11,363

 
$
19,529

 
$
21,185

Depreciation
2,795

 
2,911

 
5,599

 
5,719

Amortization of bond premiums
45

 
173

 
106

 
389

Share-based compensation
843

 
572

 
1,281

 
984

Interest (income)
(74
)
 
(244
)
 
(179
)
 
(529
)
Income tax expense
6,873

 
6,034

 
11,919

 
10,501

EBITDAX, a non-GAAP measure
$
21,612

 
$
20,809

 
$
38,255

 
$
38,249


Adjusted Net Income and Adjusted Earnings per Share
The Company defines Adjusted Net Income and the related per share amount as (1) net income, plus (2) non-recurring donations, less (3) the impact on profit sharing expense from the non-recurring donations and (4) the impact on income tax expense from the non-recurring donations. These measures provide additional information which may be used to better understand the Company’s operations.
The following tables provide a reconciliation of net income and earnings per share-diluted (GAAP) to adjusted net income and adjusted earnings per share-diluted (non-GAAP) for the periods indicated:

 
Three Months Ended 
 June 30,
 
Six Months Ended June 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
(in thousands except per share data)
Net Income, a GAAP measure
$
11,130

 
$
11,363

 
$
19,529

 
$
21,185

Non-recurring donations
(210
)
 
1,000

 
(195
)
 
1,000

Profit-sharing
21

 
(100
)
 
19

 
(100
)
Income tax expense
85

 
(312
)
 
80

 
(298
)
Adjusted Net Income, a non-GAAP measure
$
11,026

 
$
11,951

 
$
19,433

 
$
21,787

 
 
 
 
 
 
 
 
Earnings per share-diluted, a GAAP measure
$
0.20

 
$
0.20

 
$
0.36

 
$
0.38

Non-recurring donations
—

 
0.02

 
—

 
0.02

Profit-sharing
—

 
—

 
—

 
—

Income tax expense
—

 
(0.01
)
 
—

 
(0.01
)
Adjusted earnings per share-diluted, a non-GAAP measure
$
0.20

 
$
0.21

 
$
0.36

 
$
0.39



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