AAON, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 2, 2018

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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 2, 2018
 
Jerry R. Levine Ÿ Phone: (914) 244-0292 Ÿ Fax: (914) 244-0295
 
Email: jrladvisor@yahoo.com

AAON REPORTS RECORD SECOND QUARTER SALES AND BACKLOG

TULSA, Okla, August 2, 2018 - AAON, Inc. (NASDAQ-AAON) today announced its operating results for the second quarter and six months ended June 30, 2018.

In the quarter ended June 30, 2018, net sales were $109.6 million, up 8.2% from $101.3 million in 2017. Net income was $11.7 million, a decline of 15.2% from $13.8 million in the same period a year ago. Net sales for the six months ended June 30, 2018 were $208.7 million, increasing 11.3% from $187.4 million in 2017. Net income for the six months ended June 30, 2018 was $16.0 million, down 33.6% from $24.0 million in 2017.

Our backlog at June 30, 2018 increased 87.5% to $156.6 million, from $83.5 million for the same period a year ago.

Earnings per diluted share in the second quarter of 2018 were $0.22, down 15.4% from $0.26 for the same period in 2017, based upon 52.7 million and 53.2 million shares outstanding at June 30, 2018 and 2017, respectively. Earnings per diluted share for the six months ended June 30, 2018 were $0.30, a decrease of 33.3% from $0.45 in 2017, based upon 52.8 million and 53.2 million shares outstanding at June 30, 2018 and 2017, respectively

While gross profit is down for both the quarter and six months compared to 2017, as a percent of sales gross profit increased from 15.5% in the first quarter to 25.2% in the second quarter. Norman H. Asbjornson, CEO, said, "As expected, our gross profit has started to recover as we've entered our peak season. We are working hard to improve our gross profit by closely monitoring our raw material costs while reviewing our supply chain. In addition, we are working to increase our production levels to help absorb overhead."

Selling, general and administrative expenses increased 9.3% to $13.1 million (11.9% of sales) from $12.0 million (11.8% of sales) as compared to the second quarter of 2017. For the six months ended June 30, 2018, selling, general and administrative expenses increased 3.6% to $23.3 million (11.2% of sales) compared to $22.5 million (12.0% of sales) for the same period a year ago.

Mr. Asbjornson continued, "Our financial condition at June 30, 2018 remains strong with a current ratio of 2.2:1 (including cash and short-term investments totaling $24.3 million) and we continue to operate debt free."

Gary Fields, President, concluded "While orders were slower than expected at the beginning of the year, they have materialized as evidenced by our record backlog. We are starting to see the impact of our November 2017 price increases and expect the subsequent prices increases will continue to strengthen our gross profit throughout 2018 and into 2019."

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 8292427); or, for rebroadcast, call 1-855-859-2056 (code 8292427).

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

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certain risks and uncertainties that could cause actual results and developments to differ materially from the forward-looking statements.

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AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except share and per share data)
Net sales
$
109,588

 
$
101,326

 
$
208,670

 
$
187,404

Cost of sales
82,003

 
69,648

 
165,695

 
130,740

Gross profit
27,585

 
31,678

 
42,975

 
56,664

Selling, general and administrative expenses
13,086

 
11,971

 
23,305

 
22,501

(Gain) loss on disposal of assets
(4
)
 
48

 
(11
)
 
47

Income from operations
14,503

 
19,659

 
19,681

 
34,116

Interest income, net
67

 
71

 
135

 
131

Other (expense) income, net
12

 
34

 
6

 
45

Income before taxes
14,582

 
19,764

 
19,822

 
34,292

Income tax provision
2,891

 
5,970

 
3,871

 
10,281

Net income
$
11,691

 
$
13,794

 
$
15,951

 
$
24,011

Earnings per share:
 

 
 

 
 
 
 
Basic
$
0.22

 
$
0.26

 
$
0.30

 
$
0.46

Diluted
$
0.22

 
$
0.26

 
$
0.30

 
$
0.45

Cash dividends declared per common share:
$
0.16

 
$
0.13

 
$
0.16

 
$
0.13

Weighted average shares outstanding:
 

 
 

 
 
 
 
Basic
52,383,842

 
52,615,366

 
52,348,912

 
52,624,782

Diluted
52,717,787

 
53,151,134

 
52,754,045

 
53,176,425





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AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
June 30, 2018
 
December 31, 2017
Assets
(in thousands, except share and per share data)
Current assets:
 
 
 
Cash and cash equivalents
$
15,854

 
$
21,457

Certificates of deposit
5,520

 
2,880

Investments held to maturity at amortized cost
2,955

 
6,077

Accounts receivable, net
53,418

 
50,338

Income tax receivable
4,971

 
1,643

Note receivable
27

 
28

Inventories, net
70,467

 
70,786

Prepaid expenses and other
1,453

 
518

Total current assets
154,665

 
153,727

Property, plant and equipment:
 

 
 

Land
2,794

 
2,233

Buildings
96,043

 
92,075

Machinery and equipment
205,464

 
184,316

Furniture and fixtures
14,747

 
13,714

Total property, plant and equipment
319,048

 
292,338

Less:  Accumulated depreciation
157,927

 
149,963

Property, plant and equipment, net
161,121

 
142,375

Intangible assets, net
622

 
—

Goodwill
3,229

 
—

Note receivable
634

 
678

Total assets
$
320,271

 
$
296,780

 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

Current liabilities:
 

 
 

Revolving credit facility
$
—

 
$
—

Accounts payable
25,127

 
10,967

Dividends payable
8,400

 
—

Accrued liabilities
38,146

 
39,098

Total current liabilities
71,673

 
50,065

Deferred revenue
1,546

 
1,512

Deferred tax liabilities
8,415

 
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, 52,290,064 and 52,422,801 issued and outstanding at March 31, 2018 and December 31, 2017, respectively
209

 
210

Additional paid-in capital
—

 
—

Retained earnings
238,228

 
237,016

Total stockholders' equity
238,437

 
237,226

Total liabilities and stockholders' equity
$
320,271

 
$
296,780



4


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended 
 June 30,
 
2018
 
2017
Operating Activities
(in thousands)
Net income
$
15,951

 
$
24,011

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

 
 

Depreciation and amortization
8,438

 
7,281

Amortization of bond premiums
8

 
29

Provision for losses on accounts receivable, net of adjustments
89

 
141

Provision for excess and obsolete inventories
299

 
260

Share-based compensation
3,699

 
3,529

(Gain) loss on disposition of assets
(11
)
 
47

Foreign currency transaction gain
15

 
(24
)
Interest income on note receivable
14

 
(13
)
Deferred income taxes
438

 
364

Changes in assets and liabilities:
 

 
 

Accounts receivable
(2,087
)
 
(254
)
Income taxes
(3,328
)
 
5,430

Inventories
1,400

 
(15,983
)
Prepaid expenses and other
(935
)
 
(272
)
Accounts payable
12,974

 
6,801

Deferred revenue
(931
)
 
118

Accrued liabilities and donations
213

 
2,295

Net cash provided by operating activities
36,246

 
33,760

Investing Activities
 

 
 

Capital expenditures
(25,925
)
 
(16,847
)
Cash paid in business combination
(6,377
)
 
—

Proceeds from sale of property, plant and equipment
11

 
7

Investment in certificates of deposits
(7,200
)
 
(5,280
)
Maturities of certificates of deposits
4,560

 
5,272

Purchases of investments held to maturity
(9,001
)
 
(13,241
)
Maturities of investments
11,620

 
14,063

Proceeds from called investments
495

 
500

Principal payments from note receivable
16

 
26

Net cash used in investing activities
(31,801
)
 
(15,500
)
Financing Activities
 

 
 

Stock options exercised
2,299

 
1,573

Repurchase of stock
(11,539
)
 
(9,368
)
Employee taxes paid by withholding shares

(808
)
 
(1,066
)
Net cash used in financing activities
(10,048
)
 
(8,861
)
Net (decrease) increase in cash and cash equivalents
(5,603
)
 
9,399

Cash and cash equivalents, beginning of period
21,457

 
24,153

Cash and cash equivalents, end of period
$
15,854

 
$
33,552



5


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,
 
 
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Net Income, a GAAP measure
$
11,691

 
$
13,794

 
$
15,951

 
$
24,011

Depreciation and amortization
4,309

 
3,643

 
8,438

 
7,281

Amortization of bond premiums
3

 
13

 
8

 
29

Share-based compensation
1,975

 
1,884

 
3,699

 
3,529

Interest income
(70
)
 
(85
)
 
(143
)
 
(161
)
Income tax expense
2,891

 
5,970

 
3,871

 
10,281

EBITDAX, a non-GAAP measure
$
20,869

 
$
25,219

 
$
31,967

 
$
44,970






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