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AAON Reports Third Quarter Sales and Earnings
Globe Newswire 1-Nov-2018 7:00 AM
TULSA, Okla., Nov. 01, 2018 (GLOBE NEWSWIRE) -- AAON, Inc. (NASDAQ-AAON) today announced its operating results for the third quarter and nine months ended September 30, 2018.
In the quarter ended September 30, 2018, net sales were $112.9 million, down 0.6% from $113.7 million in 2017. Net income was $14.1 million, a decline of 4.3% from $14.7 million in the same period a year ago. Net sales for the nine months ended September 30, 2018 were $321.6 million, increasing 6.8% from $301.1 million in 2017. Net income for the nine months ended September 30, 2018 was $30.0 million, down 22.4% from $38.7 million in 2017.
Our backlog at September 30, 2018 increased 71.8% to $126.8 million, from $73.8 million for the same period a year ago.
Earnings per diluted share in the third quarter of 2018 were $0.27, down 3.6% from $0.28 for the same period in 2017, based upon 52.6 million and 53.0 million shares outstanding at September 30, 2018 and 2017, respectively. Earnings per diluted share for the nine months ended September 30, 2018 were $0.57, a decrease of 21.9% from $0.73 in 2017, based upon 52.7 million and 53.1 million shares outstanding at September 30, 2018 and 2017, respectively.
For the three months ended September 30, 2018, gross profit as a percent of sales was 29.0% compared to 31.4% for the three months ended September 30, 2017 and 25.2% for the three months ended June 30, 2018. For the nine months ended September 30, 2018, gross profit as a percent of sales was 23.5% compared to 30.7% in the same period a year ago. Norman H. Asbjornson, CEO, said, "While our gross profit improved in the third quarter, our business continues to be impacted by the implementation of new manufacturing technologies, a lack of labor availability, and the productivity of our new hires. Even though we are experiencing record backlogs, we have slowed our rate of adding new employees and this has improved both productivity and throughput. Warranty costs continue to be higher than historical levels but we are beginning to see slow improvement. Certain other costs are higher year over year but these are manageable and will be offset by increased sales volumes."
Selling, general and administrative expenses increased 1.2% to $13.2 million (11.7% of sales) from $13.0 million (11.5% of sales) as compared to the third quarter of 2017. For the nine months ended September 30, 2018, selling, general and administrative expenses increased 2.7% to $36.5 million (11.3% of sales) compared to $35.5 million (11.8% of sales) for the same period a year ago.
Gary Fields, President, said "We believe the significant increase in our backlog at the end of the third quarter is directly attributable to our innovative product lines and also reflects the overwhelmingly positive response from members of our independent sales representative firms who received a limited demonstration of our soon to be completed state-of-the art research and development laboratory facility during our recent national sales meeting, several of which have already requested early laboratory visits for their major customers."
Mr. Asbjornson concluded, "Our financial condition at September 30, 2018 remained strong with a current ratio of 2.7:1 (including cash and short-term investments totaling $10.7 million) and we continue to operate debt free."
The Company will host a conference call today at 4:15 P.M. Eastern Time to discuss the third quarter results. To participate, call 1-888-241-0551 (code 6839319); or, for rebroadcast, call 1-855-859-2056 (code 6839319).
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.
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2018
2017
2018
2017
(in thousands, except share and per share data)
Net sales
$
112,937
$
113,668
$
321,607
$
301,072
Cost of sales
80,174
78,010
245,869
208,750
Gross profit
32,763
35,658
75,738
92,322
Selling, general and administrative expenses
13,190
13,034
36,495
35,535
(Gain) loss on disposal of assets
2
(1
)
(9
)
46
Income from operations
19,571
22,625
39,252
56,741
Interest income, net
36
84
171
215
Other (expense) income, net
5
41
11
86
Income before taxes
19,612
22,750
39,434
57,042
Income tax provision
5,527
8,033
9,398
18,314
Net income
$
14,085
$
14,717
$
30,036
$
38,728
Earnings per share:
Basic
$
0.27
$
0.28
$
0.57
$
0.74
Diluted
$
0.27
$
0.28
$
0.57
$
0.73
Cash dividends declared per common share:
$
—
$
—
$
0.16
$
0.13
Weighted average shares outstanding:
Basic
52,238,796
52,566,619
52,315,719
52,586,429
Diluted
52,627,541
53,014,269
52,715,390
53,103,408
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, 2018
December 31, 2017
Assets
(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents
$
7,265
$
21,457
Certificates of deposit
2,160
2,880
Investments held to maturity at amortized cost
1,252
6,077
Accounts receivable, net
51,207
50,338
Income tax receivable
2,292
1,643
Note receivable
28
28
Inventories, net
79,182
70,786
Prepaid expenses and other
1,310
518
Total current assets
144,696
153,727
Property, plant and equipment:
Land
3,029
2,233
Buildings
97,944
92,075
Machinery and equipment
210,182
184,316
Furniture and fixtures
16,035
13,714
Total property, plant and equipment
327,190
292,338
Less: Accumulated depreciation
162,294
149,963
Property, plant and equipment, net
164,896
142,375
Intangible assets, net
564
—
Goodwill
3,229
—
Note receivable
639
678
Total assets
$
314,024
$
296,780
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility
$
—
$
—
Accounts payable
16,224
10,967
Accrued liabilities
37,492
39,098
Total current liabilities
53,716
50,065
Deferred revenue
1,638
1,512
Deferred tax liabilities
8,841
7,977
Donations
200
—
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued
—
—
Common stock, $.004 par value, 100,000,000 shares authorized, 52,209,643 and 52,422,801 issued and outstanding at September 30, 2018 and December 31, 2017, respectively
209
210
Additional paid-in capital
—
—
Retained earnings
249,420
237,016
Total stockholders' equity
249,629
237,226
Total liabilities and stockholders' equity
$
314,024
$
296,780
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
2018
2017
Operating Activities
(in thousands)
Net income
$
30,036
$
38,728
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
12,865
11,025
Amortization of bond premiums
11
39
Provision for losses on accounts receivable, net of adjustments
67
180
Provision for excess and obsolete inventories
55
54
Share-based compensation
5,614
4,960
(Gain) loss on disposition of assets
(9
)
46
Foreign currency transaction gain
(20
)
(65
)
Interest income on note receivable
27
(18
)
Deferred income taxes
864
1,147
Changes in assets and liabilities:
Accounts receivable
146
(14,521
)
Income taxes
(649
)
6,239
Inventories
(7,071
)
(18,819
)
Prepaid expenses and other
(792
)
(141
)
Accounts payable
4,328
3,781
Deferred revenue
(1,644
)
416
Accrued liabilities and donations
364
8,814
Net cash provided by operating activities
44,192
41,865
Investing Activities
Capital expenditures
(34,328
)
(26,436
)
Cash paid in business combination
(6,377
)
—
Proceeds from sale of property, plant and equipment
11
8
Investment in certificates of deposits
(7,200
)
(5,280
)
Maturities of certificates of deposits
7,920
5,752
Purchases of investments held to maturity
(9,001
)
(13,241
)
Maturities of investments
13,320
15,443
Proceeds from called investments
495
500
Principal payments from note receivable
32
48
Net cash used in investing activities
(35,128
)
(23,206
)
Financing Activities
Stock options exercised
3,504
1,715
Repurchase of stock
(17,500
)
(12,991
)
Employee taxes paid by withholding shares
(860
)
(1,193
)
Cash dividends paid to stockholders
(8,400
)
(6,828
)
Net cash used in financing activities
(23,256
)
(19,297
)
Net decrease in cash and cash equivalents
(14,192
)
(638
)
Cash and cash equivalents, beginning of period
21,457
24,153
Cash and cash equivalents, end of period
$
7,265
$
23,515
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 September 30,
Nine Months Ended September 30,
2018
2017
2018
2017
(in thousands)
Net Income, a GAAP measure
$
14,085
$
14,717
$
30,036
$
38,728
Depreciation and amortization
4,427
3,744
12,865
11,025
Amortization of bond premiums
3
10
11
39
Share-based compensation
1,915
1,431
5,614
4,960
Interest income
(36
)
(93
)
(179
)
(254
)
Income tax expense
5,527
8,033
9,398
18,314
EBITDAX, a non-GAAP measure
$
25,957
$
27,842
$
57,924
$
72,812
For Further Information:
Jerry R. Levine • Phone: (914) 244-0292 • Fax: (914) 244-0295
