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AAON Reports Record Revenue and Earnings for 2016 Despite a Slump in Fourth Quarter Results

TULSA, Okla., Feb. 23, 2017 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ:AAON), today announced its results for the fourth quarter and year 2016. Sales in the fourth quarter were $91.7 million, down 5.7% from $97.2 million in 2015. Net income was $11.4 million, declining 11.8% from $12.9 million in the same period a year ago. Sales for the year 2016 reached a record level, $384.0 million, representing a gain of 7.1% compared to $358.6 million in 2015. Net income for 2016 was also a record, $53.4 million, rising 16.7% compared to $45.7 million in 2015.

Earnings for the fourth quarter of 2016 and 2015 were $0.21 and $0.24 per diluted share, down 12.5%, based upon 53.4 million and 54.0 million diluted shares outstanding, respectively. Earnings per diluted share for the years 2016 and 2015 were $1.00 and $0.84, representing a gain of 19.0%, based upon 53.4 million and 54.5 million diluted shares outstanding, respectively.

Norman H. Asbjornson, CEO, stated, “We believe the sales rate slowed in the fourth quarter as our customers paused to await and absorb the November election results and the impact they could have on the business environment. In addition, we witnessed a decided shift in our product mix toward lower priced units. This may have been a by-product of the concern surrounding the political atmosphere. Nevertheless, while our unit volume increased 12.5% in 2016, our sales growth advanced only 7.1%."

Mr. Asbjornson continued, "We've been successful in controlling our total costs and maintaining our gross profit margin. Our gross margin last year climbed to 30.8% compared to 30.3% the year earlier. He continued, "Our balance sheet remained quite strong. At year end 2016 the current ratio was 3.6:1 (including cash and cash equivalents of $43.7 million). We continued to operate debt-free and our return on average stockholder equity was 27.7% in 2016 compared with 25.1% a year earlier."

Mr. Asbjornson concluded, "Our Water-Source Heat Pump production is ramping up, albeit at a somewhat slower rate than expected to assure delivery of quality product to customers. We are confident that the WSHP line will continue to show steady improvement throughout next year. Our backlog in 2016 decreased from $57.1 million to $49.1 million. Our business is somewhat seasonal, usually slowing in the fourth quarter. We are closely monitoring our raw material costs which play a major role in our ability to maintain gross margins. While 2017 will present certain challenges, we are encouraged by the tone of business witnessed since the beginning of the year. The incoming order rate and backlog have strengthened and are running at record first quarter levels. Despite some headwinds, we believe that we can achieve record sales and earnings in 2017."

The Company will host a conference call today at 3:30 P.M. (Eastern Time) to discuss the fourth quarter and year 2016 results. To participate, call 1-888-241-0551 (code 72961943); or, for rebroadcast, call 1-855-859-2056 (code 72961943).

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, geothermal/water-source heat pumps, 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. 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
Unaudited Consolidated Statements of Income
Three Months Ended
December 31,
Years Ending
December 31,
2016 2015 2016 2015
(in thousands, except share and per share data)
Net sales$91,668 $97,229 $383,977 $358,632
Cost of sales65,158 67,648 265,897 249,951
Gross profit26,510 29,581 118,080 108,681
Selling, general and administrative expenses8,632 9,859 38,506 37,438
Gain on disposal of assets (20) (59)
Income from operations17,878 19,722 79,594 71,302
Interest income, net69 74 292 161
Other income (expense), net(10) (18) 105 (124)
Income before taxes17,937 19,778 79,991 71,339
Income tax provision6,517 6,830 26,615 25,611
Net income$11,420 $12,948 $53,376 $45,728
Earnings per share:
Basic$0.22 $0.24 $1.01 $0.85
Diluted$0.21 $0.24 $1.00 $0.84
Cash dividends declared per common share:$0.13 $0.11 $0.24 $0.22
Weighted average shares outstanding:
Basic52,891,879 53,680,995 52,924,398 54,045,841
Diluted53,419,948 54,036,021 53,449,754 54,481,484



AAON, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
December 31,
2016 2015
Assets(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents$24,153 $7,908
Certificates of deposit5,512 10,080
Investments held to maturity at amortized cost14,083 12,444
Accounts receivable, net43,001 50,024
Income tax receivable6,239 4,702
Note receivable25 23
Inventories, net47,352 38,499
Prepaid expenses and other616 533
Total current assets140,981 124,213
Property, plant and equipment:
Land2,233 2,233
Buildings78,806 68,806
Machinery and equipment158,216 143,100
Furniture and fixtures12,783 11,270
Total property, plant and equipment252,038 225,409
Less: Accumulated depreciation137,146 124,348
Property, plant and equipment, net114,892 101,061
Certificates of deposit 1,880
Investments held to maturity at amortized cost 5,039
Note receivable657 661
Total assets$256,530 $232,854
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility$ $
Accounts payable7,102 6,178
Accrued liabilities31,940 37,235
Total current liabilities39,042 43,413
Deferred revenue1,498 698
Deferred tax liabilities9,531 8,706
Donations561 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, 52,651,448 and 53,012,363 issued and outstanding at December 31, 2016 and 2015, respectively211 212
Additional paid-in capital
Retained earnings205,687 178,706
Total stockholders' equity205,898 178,918
Total liabilities and stockholders' equity$256,530 $232,854



AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Years Ending December 31,
2016 2015 2014
Operating Activities(in thousands)
Net income$53,376 $45,728 $44,158
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation13,035 11,741 11,553
Amortization of bond premiums249 266 688
Provision for losses on accounts receivable, net of adjustments(25) (48) (22)
Provision for excess and obsolete inventories625 178 135
Share-based compensation4,357 2,891 2,178
Gain on disposition of assets(20) (59) (305)
Foreign currency transaction (gain) loss(22) 139 74
Interest income on note receivable(28) (30) (36)
Deferred income taxes825 1,172 (2,111)
Write-off of note receivable
Changes in assets and liabilities:
Accounts receivable7,048 (5,884) (5,007)
Income tax receivable(1,537) 312 (257)
Inventories(9,478) (1,059) (5,613)
Prepaid expenses and other(83) 76 (305)
Accounts payable654 (5,109) 3,512
Deferred revenue417 189 782
Accrued liabilities and donations(5,470) 4,852 4,094
Net cash provided by operating activities63,923 55,355 53,518
Investing Activities
Capital expenditures(26,604) (20,967) (16,127)
Proceeds from sale of property, plant and equipment28 63 319
Investment in certificates of deposits(4,112) (6,680) (9,940)
Maturities of certificates of deposits10,560 6,098 9,310
Purchases of investments held to maturity(10,384) (14,183) (6,880)
Maturities of investments10,021 11,408 14,197
Proceeds from called investments3,514 1,013 3,029
Principal payments from note receivable52 54 63
Net cash used in investing activities(16,925) (23,194) (6,029)
Financing Activities
Borrowings under revolving credit facility761
Payments under revolving credit facility(761)
Stock options exercised2,063 2,795 1,318
Repurchase of stock(19,317) (36,558) (29,066)
Employee taxes paid by withholding shares
(823) (585) (218)
Cash dividends paid to stockholders(12,676) (11,857) (9,656)
Net cash used in financing activities(30,753) (46,205) (37,622)
Net increase (decrease) in cash and cash equivalents16,245 (14,044) 9,867
Cash and cash equivalents, beginning of period7,908 21,952 12,085
Cash and cash equivalents, end of period$24,153 $7,908 $21,952

Use of Non-GAAP Financial Measure

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, provide 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 Years Ending
December 31, December 31,
2016 2015 2016 2015
(in thousands)
Net Income, a GAAP measure$11,420 $12,948 $53,376 $45,728
Depreciation3,488 3,154 13,035 11,741
Amortization of bond premiums33 98 249 266
Share-based compensation1,185 815 4,357 2,891
Interest (income) expense(102) (172) (541) (427)
Income tax expense6,517 6,830 26,615 25,611
EBITDAX, a non-GAAP measure$22,541 $23,673 $97,091 $85,810

For Further Information: Jerry R. Levine Phone: (914) 244-0292 Fax: (914) 244-0295 Email: jrladvisor@yahoo.com

Source:AAON, Inc.