AAON Reports Record Sales and Earnings for the Fourth Quarter and Year 2017

TULSA, Okla., Feb. 27, 2018 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ:AAON) today announced its results for the fourth quarter and year 2017. Sales in the fourth quarter were $104.2 million, up 13.6% from $91.7 million in 2016. Net income was $15.8 million, increasing 38.1% from $11.4 million in the same period a year ago. Sales for the year 2017 reached a record level, $405.2 million, representing a gain of 5.5% compared to $384.0 million in 2016. Net income for 2017 was also a record, $54.5 million, rising 2.1% compared to $53.4 million in 2016.

Earnings for the fourth quarter of 2017 were $0.30 per diluted share, up 39.4% from $0.21 per diluted share in 2016, based upon 52.9 million and 53.4 million diluted shares outstanding, respectively. Earnings per diluted share for the years 2017 and 2016 were $1.03 and $1.00, representing a gain of 3.0%, based upon 53.1 million and 53.4 million diluted shares outstanding, respectively.

Selling, general and administrative expenses for the quarter increased $5.1 million to $13.7 million (13.2% of sales) from $8.6 million (9.4% of sales) as compared to the fourth quarter of 2016. This increase is due to warranty expense and increases in salaries and benefits. For the year, SG&A expenses increased $10.7 million to $49.2 million (12.2% of sales) from $38.5 million (10.0% of sales) as compared to 2016. In addition to the increases in warranty from modifications made to our warranty policy, the Company had two officers retire during the year, which resulted in accelerated vesting of stock awards and approximately $1.0 million in additional stock compensation expense. The Company expects our SG&A expense will return to a more normal level in 2018.

The Tax Cuts and Job Act (the "Act") was enacted on December 22, 2017. The Act lowered the corporate income tax rate from 35% to 21% starting in 2018. Due to this change, the Company remeasured its deferred tax assets and liabilities on the enactment date, which resulted in a $4.4 million benefit to our income tax provision.

Norman H. Asbjornson, CEO, said, "The Act allows us to improve our compensation to employees and cash distribution to shareholders as well as defer future price increases to customers."

Mr. Asbjornson continued, "Our financial condition at December 31, 2017 remained quite strong with a current ratio of 3.1:1 (including cash and short-term investments totaling $30.4 million). We also remain debt free. Our backlog at December 31, 2017 increased 65.3% to $81.2 million, from $49.1 million for the same period a year ago."

Gary Fields, President, added, "During 2018, we will continue to witness the results of our significant capital investment program. Two new Water-Source Heat Pump lines will begin production and our state of the industry laboratory will initiate operations. These investments, I believe, will have a major impact on AAON's growth in the years ahead."

The Company will host a conference call today at 4:15 P.M. (Eastern Time) to discuss the fourth quarter and year 2017 results. To participate, call 1-888-241-0551 (code 4187646); or, for rebroadcast, call 1-855-859-2056 (code 4187646).

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,
2017 2016 2017 2016
(in thousands, except share and per share data)
Net sales$104,160 $91,668 $405,232 $383,977
Cost of sales73,085 65,158 281,835 265,897
Gross profit31,075 26,510 123,397 118,080
Selling, general and administrative expenses13,714 8,632 49,249 38,506
(Gain) loss on disposal of assets(1) 45 (20)
Income from operations17,362 17,878 74,103 79,594
Interest income, net83 69 298 292
Other income (expense), net5 (10) 91 105
Income before taxes17,450 17,937 74,492 79,991
Income tax provision1,680 6,517 19,994 26,615
Net income$15,770 $11,420 $54,498 $53,376
Earnings per share:
Basic$0.30 $0.22 $1.04 $1.01
Diluted$0.30 $0.21 $1.03 $1.00
Cash dividends declared per common share:$0.13 $0.13 $0.26 $0.24
Weighted average shares outstanding:
Basic52,457,780 52,891,879 52,572,496 52,924,398
Diluted52,931,796 53,419,948 53,078,734 53,449,754

AAON, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
December 31,
2017 2016
Assets(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents$21,457 $24,153
Certificates of deposit2,880 5,512
Investments held to maturity at amortized cost6,077 14,083
Accounts receivable, net50,338 43,001
Income tax receivable1,643 6,239
Note receivable28 25
Inventories, net70,786 47,352
Prepaid expenses and other518 616
Total current assets153,727 140,981
Property, plant and equipment:
Land2,233 2,233
Buildings92,075 78,806
Machinery and equipment184,316 158,216
Furniture and fixtures13,714 12,783
Total property, plant and equipment292,338 252,038
Less: Accumulated depreciation149,963 137,146
Property, plant and equipment, net142,375 114,892
Note receivable678 657
Total assets$296,780 $256,530
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility$ $
Accounts payable10,967 7,102
Accrued liabilities39,098 31,940
Total current liabilities50,065 39,042
Deferred revenue1,512 1,498
Deferred tax liabilities7,977 9,531
Donations 561
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, 52,422,801 and 52,651,448 issued and outstanding at December 31, 2017 and 2016, respectively210 211
Additional paid-in capital
Retained earnings237,016 205,687
Total stockholders' equity237,226 205,898
Total liabilities and stockholders' equity$296,780 $256,530

AAON, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Years Ending December 31,
2017 2016 2015
Operating Activities(in thousands)
Net income$54,498 $53,376 $45,728
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation15,007 13,035 11,741
Amortization of bond premiums47 249 266
Provision for losses on accounts receivable, net of adjustments179 (25) (48)
Provision for excess and obsolete inventories264 625 178
Share-based compensation6,458 4,357 2,891
Loss (gain) on disposition of assets45 (20) (59)
Foreign currency transaction (gain) loss(59) (22) 139
Interest income on note receivable(25) (28) (30)
Deferred income taxes(1,554) 825 1,172
Changes in assets and liabilities:
Accounts receivable(7,516) 7,048 (5,884)
Income tax receivable4,596 (1,537) 312
Inventories(23,698) (9,478) (1,059)
Prepaid expenses and other98 (83) 76
Accounts payable3,043 654 (5,109)
Deferred revenue258 417 189
Accrued liabilities and donations6,353 (5,470) 4,852
Net cash provided by operating activities57,994 63,923 55,355
Investing Activities
Capital expenditures(41,713) (26,604) (20,967)
Proceeds from sale of property, plant and equipment10 28 63
Investment in certificates of deposits(5,280) (4,112) (6,680)
Maturities of certificates of deposits7,912 10,560 6,098
Purchases of investments held to maturity(13,241) (10,384) (14,183)
Maturities of investments19,700 10,021 11,408
Proceeds from called investments1,500 3,514 1,013
Principal payments from note receivable60 52 54
Net cash used in investing activities(31,052) (16,925) (23,194)
Financing Activities
Borrowings under revolving credit facility 761
Payments under revolving credit facility (761)
Stock options exercised2,259 2,063 2,795
Repurchase of stock(16,620) (19,317) (36,558)
Employee taxes paid by withholding shares(1,614) (823) (585)
Cash dividends paid to stockholders(13,663) (12,676) (11,857)
Net cash used in financing activities(29,638) (30,753) (46,205)
Net increase (decrease) in cash and cash equivalents(2,696) 16,245 (14,044)
Cash and cash equivalents, beginning of period24,153 7,908 21,952
Cash and cash equivalents, end of period$21,457 $24,153 $7,908

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 (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
December 31,
Years Ending
December 31,
2017 2016 2017 2016
(in thousands)
Net Income, a GAAP measure$15,770 $11,420 $54,498 $53,376
Depreciation3,982 3,488 15,007 13,035
Amortization of bond premiums8 33 47 249
Share-based compensation1,498 1,185 6,458 4,357
Interest (income) expense(91) (102) (345) (541)
Income tax expense1,680 6,517 19,994 26,615
EBITDAX, a non-GAAP measure$22,847 $22,541 $95,659 $97,091

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

Source:AAON, Inc.