AAON, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 4, 2016

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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 4, 2016
 
Jerry R. Levine Ÿ Phone: (914) 244-0292 Ÿ Fax: (914) 244-0295
 
Email: jrladvisor@yahoo.com

AAON REPORTS RECORD SECOND QUARTER SALES AND EARNINGS

TULSA, OK, August 4, 2016 - AAON, Inc. (NASDAQ-AAON) today announced its operating results for the second quarter and six months ended June 30, 2016.

In the quarter, net sales were $102.3 million, up 13.3% from $90.3 million in 2015. Net income was $14.3 million, up 28.8% from $11.1 million in the same period a year ago. Net sales for the six months ended June 30, 2016 were $187.7 million, up 12.4% from $167.0 million in 2015. Net income for the six months ended June 30, 2016 was $25.1 million, up 28.8% from $19.5 million in 2015. Both sales and earnings in 2016 were all-time records for any second quarter in the history of AAON.

Earnings per diluted share in the second quarter of 2016 were $0.27, up 35.0% from $0.20 for the same period the previous year, based upon 53.4 million and 54.7 million shares outstanding at June 30, 2016 and 2015, respectively. Earnings per diluted share for the six months ended June 30, 2016 were $0.47, up 30.6% from $0.36 in 2015, based upon 53.4 million and 54.7 million shares outstanding at June 30, 2016 and 2015, respectively.

Norman H. Asbjornson, President and CEO, stated, “The addition of new regional sales managers in 2015 is starting to show results with our gains in sales for 2016, however, the market appears to have softened. The increased production volume has also created efficiencies to help us maintain and slightly grow our gross profit as a percentage of sales to 32.0% compared to 30.0% a year ago. We have also been able to control our SG&A expense, keeping SG&A expense as a percent of sales flat at approximately 10.3% for both the quarter and six months ended 2016 and 2015."

Mr. Asbjornson further added, “Our financial condition at June 30, 2016 remained quite strong with a current ratio of 2.7:1 (including cash and short-term investments totaling $44.3 million). We continue to remain debt free. Our backlog at June 30, 2016 increased 5% to $69.3 million, from $66.0 million for the same period a year ago.”

Mr. Asbjornson continued, “We are looking forward to introducing our new Water Source Heat Pump line this quarter, but we don't expect significant results from this new line to impact profit until 2018. We continue to monitor steel prices and look for ways to maintain our gross profit with rising raw material costs, although we currently believe the impact to costs will be less than the equivalent of 2% of sales. The next six months will be a challenge, but we expect to have a successful year."

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 50519850); or, for rebroadcast, call 1-855-859-2056 (code 50519850).

AAON, 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 and coils. 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.

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,
 
2016
 
2015
 
2016
 
2015
 
(in thousands, except share and per share data)
Net sales
$
102,319

 
$
90,275

 
$
187,741

 
$
167,043

Cost of sales
69,572

 
63,158

 
129,263

 
118,128

Gross profit
32,747

 
27,117

 
58,478

 
48,915

Selling, general and administrative expenses
10,561

 
9,200

 
19,474

 
17,517

Gain on disposal of assets
(12
)
 
(30
)
 
(20
)
 
(25
)
Income from operations
22,198

 
17,947

 
39,024

 
31,423

Interest income
67

 
29

 
141

 
73

Other income (expense), net
10

 
27

 
127

 
(48
)
Income before taxes
22,275

 
18,003

 
39,292

 
31,448

Income tax provision
7,934

 
6,873

 
14,145

 
11,919

Net income
$
14,341

 
$
11,130

 
$
25,147

 
$
19,529

Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.27

 
$
0.21

 
$
0.47

 
$
0.36

Diluted
$
0.27

 
$
0.20

 
$
0.47

 
$
0.36

Cash dividends declared per common share:
$
0.11

 
$
0.11

 
$
0.11

 
$
0.11

Weighted average shares outstanding:
 

 
 

 
 
 
 
Basic
53,036,009

 
54,208,362

 
53,028,224

 
54,205,657

Diluted
53,401,238

 
54,669,763

 
53,395,361

 
54,714,604





2


AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
June 30, 2016
 
December 31, 2015
Assets
(in thousands, except share and per share data)
Current assets:
 
 
 
Cash and cash equivalents
$
12,209

 
$
7,908

Certificates of deposit
9,832

 
10,080

Investments held to maturity at amortized cost
22,303

 
12,444

Accounts receivable, net
58,483

 
50,024

Income tax receivable
669

 
4,702

Note receivable
25

 
23

Inventories, net
40,125

 
38,499

Prepaid expenses and other
1,083

 
533

Total current assets
144,729

 
124,213

Property, plant and equipment:
 

 
 

Land
2,233

 
2,233

Buildings
75,912

 
68,806

Machinery and equipment
152,165

 
143,100

Furniture and fixtures
12,058

 
11,270

Total property, plant and equipment
242,368

 
225,409

Less:  Accumulated depreciation
130,505

 
124,348

Property, plant and equipment, net
111,863

 
101,061

Certificates of deposit
240

 
1,880

Investments held to maturity at amortized cost
—

 
5,039

Note receivable
695

 
661

Total assets
$
257,527

 
$
232,854

 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

Current liabilities:
 

 
 

Revolving credit facility
$
—

 
$
—

Accounts payable
9,367

 
6,178

Dividends payable
5,797

 
—

Accrued liabilities
38,087

 
37,235

Total current liabilities
53,251

 
43,413

Deferred revenue
1,295

 
698

Deferred tax liabilities
6,855

 
8,706

Donations
1,142

 
1,119

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, 53,008,136 and 53,012,363 issued and outstanding at June 30, 2016 and December 31, 2015, respectively
212

 
212

Additional paid-in capital
—

 
—

Retained earnings
194,772

 
178,706

Total stockholders' equity
194,984

 
178,918

Total liabilities and stockholders' equity
$
257,527

 
$
232,854



3


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended 
 June 30,
 
2016
 
2015
Operating Activities
(in thousands)
Net income
$
25,147

 
$
19,529

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

 
 

Depreciation
6,346

 
5,599

Amortization of bond premiums
151

 
106

Provision for losses on accounts receivable, net of adjustments
(42
)
 
(102
)
Provision for excess and obsolete inventories
308

 
59

Share-based compensation
2,043

 
1,281

Excess tax benefits from stock options exercised and restricted stock awards vested
(1,129
)
 
(2,452
)
Gain on disposition of assets
(20
)
 
(25
)
Foreign currency transaction (gain) loss
(48
)
 
53

Interest income on note receivable
(14
)
 
(16
)
Deferred income taxes
(1,851
)
 
(563
)
Changes in assets and liabilities:
 

 
 

Accounts receivable
(8,417
)
 
(1,286
)
Income taxes
5,162

 
1,636

Inventories
(1,934
)
 
(9,623
)
Prepaid expenses and other
(550
)
 
(446
)
Accounts payable
1,848

 
(1,030
)
Deferred revenue
220

 
136

Accrued liabilities and donations
1,252

 
(867
)
Net cash provided by operating activities
28,472

 
11,989

Investing Activities
 

 
 

Capital expenditures
(15,825
)
 
(9,304
)
Proceeds from sale of property, plant and equipment
1

 
30

Investment in certificates of deposits
(4,112
)
 
—

Maturities of certificates of deposits
6,000

 
4,658

Purchases of investments held to maturity
(9,782
)
 
—

Maturities of investments
3,801

 
9,201

Proceeds from called investments
1,010

 
504

Principal payments from note receivable
26

 
28

Net cash (used in) provided by investing activities
(18,881
)
 
5,117

Financing Activities
 

 
 

Borrowings under revolving credit facility
761

 
—

Payments under revolving credit facility
(761
)
 
—

Stock options exercised
1,255

 
2,534

Excess tax benefits from stock options exercised and restricted stock awards vested
1,129

 
2,452

Repurchase of stock
(7,674
)
 
(6,444
)
Net cash used in financing activities
(5,290
)
 
(1,458
)
Net increase in cash and cash equivalents
4,301

 
15,648

Cash and cash equivalents, beginning of period
7,908

 
21,952

Cash and cash equivalents, end of period
$
12,209

 
$
37,600



4


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
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,
 
 
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Net Income, a GAAP measure
$
14,341

 
$
11,130

 
$
25,147

 
$
19,529

Depreciation
3,175

 
2,795

 
6,346

 
5,599

Amortization of bond premiums
68

 
45

 
151

 
106

Share-based compensation
1,095

 
843

 
2,043

 
1,281

Interest income
(135
)
 
(74
)
 
(292
)
 
(179
)
Income tax expense
7,934

 
6,873

 
14,145

 
11,919

EBITDAX, a non-GAAP measure
$
26,478

 
$
21,612

 
$
47,540

 
$
38,255






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