<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission file number: 33-183336-LA
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0448736
------ ----------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
2425 South Yukon, Tulsa, Oklahoma 74107
---------------------------------------
(Address of principal executive offices)
(Zip Code)
(918) 583-2266
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __________
-----------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date. 6,113,449 shares of $.004 par
value Common Stock.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
On pages 2 through 7 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations. Sales decreased by $5,555,000 (from
---------------------
$58,181,000 to $52,626,000) during the nine-month period ended September 30,
1995, compared to the same period in 1994, and by $4,437,000 (from $20,044,000
to $15,607,000) during the third quarter of 1995 compared to 1994. The decline
in sales, both during the nine-month and three-month periods ended September 30,
1995, primarily resulted from a slowdown in national accounts business.
Gross profit decreased to 17.0% during the nine months ended September
30, 1995, compared to 22.3% in 1994, and to 15.4% vs. 24.6% in the comparative
third quarters, which was mainly attributable to an inability to pass on
significant increases in raw material costs, especially copper and aluminum, and
a one-time charge in the third quarter of 1995 attributable to the cumulative
effect of production problems at the Company's Longview, Texas, plant.
The decreases in SG&A expenses of $1,065,000 (from $6,040,000 to
$4,975,000) in the first nine months of 1995 as compared to 1994 and of $637,000
(from $2,270,000 to $1,633,000) in the third quarter of 1995 vs. 1994 were
primarily due to reductions in warranty costs.
The increase in "amortization and other expense", both in the nine-
month and three-month periods ended September 30, 1995, were attributable to
additional depreciable assets and acceleration of depreciation schedules.
Financial Condition and Liquidity. The decrease of $1,371,000 (from
---------------------------------
$11,898,000 to $10,527,000) in accounts receivable at September 30, 1995,
compared to December 31, 1994, resulted from the lower sales volume. The
$3,746,000 increase in buildings, machinery and equipment (from $10,431,000 to
$14,177,000) is attributable to the Tulsa and Longview plant expansions. The
$1,936,000 decrease in current liabilities (from $10,453,000 to $8,517,000)
resulted primarily from the reduction of materials required on lower sales.
The capital needs of the Company are met primarily by its bank
revolving credit facility. Management believes this bank debt (or comparable
financing), term loans and projected profits from operations will provide the
necessary liquidity and capital resources to the Company for at least the next
five years, including a lump-sum payment (pursuant to a noncompete agreement
with the former stockholder of Coils Plus, Inc., the assets of which were
acquired by CP/AAON, Inc., in December, 1991) equal to five times the average of
20% of CP/AAON's pre-tax income for 1995 and 1996, which will be payable in
April, 1997. The Company's belief that it will have the necessary liquidity and
capital resources is based upon its knowledge of the HVAC industry and its place
in that industry, its ability to limit the growth of its business if necessary
and its relationship with its existing bank lender.
For information concerning the Company's long-term debt, see Note 3 to
the Financial Statements appearing on pages 6 and 7 of this report.
-1-
<PAGE>
AAON, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, 1995* December 31, 1994
------------------ -----------------
(In Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 27 $ 26
Accounts receivable 10,527 11,898
Inventories 9,983 10,245
Prepaid expenses 138 201
Deferred income tax 1,044 1,407
------- -------
Total current assets 21,719 23,777
------- -------
PROPERTY, PLANT AND
EQUIPMENT, at cost:
Land 274 227
Buildings 6,790 4,088
Machinery and equipment 7,387 6,343
Furniture and fixtures 1,021 896
------- -------
15,472 11,554
Less-accumulated
depreciation 5,203 3,324
------- -------
Net property, plant
and equipment 10,269 8,230
OTHER ASSETS 361 555
------- -------
$32,349 $32,562
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,876 $ 5,852
Accrued liabilities 2,646 3,665
Current maturities of
long-term debt 995 936
------- -------
Total current
liabilities 8,517 10,453
------- -------
LONG-TERM DEBT 10,749 10,648
------- -------
Deferred income tax
payable (333) ---
STOCKHOLDERS' EQUITY
Common stock, $.004 par,
50,000,000 authorized,
6,112,000 issued and
outstanding 24 24
Preferred stock,
5,000,000 shares authorized,
no shares issued
Additional paid-in capital 7,684 7,671
Retained earnings 5,708 3,766
------- -------
Total stockholders' equity 13,416 11,461
------- -------
$32,349 $32,562
======= =======
</TABLE>
* Unaudited
- 2 -
<PAGE>
AAON, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
SEPTEMBER 30, 1995* SEPTEMBER 30, 1994* SEPTEMBER 30, 1995* SEPTEMBER 30, 1994*
(In Thousands)
<S> <C> <C> <C> <C>
Sales, net $15,607 $20,044 $52,626 $58,181
Cost of sales 13,202 15,118 43,701 45,231
------- ------- ------- -------
Gross profit 2,405 4,926 8,925 12,950
Selling, general and
administrative expenses 1,633 2,270 4,975 6,040
------- ------- ------- -------
Income from operations 772 2,656 3,950 6,910
Interest expense 199 211 580 606
Amortization and other expense 105 55 367 138
------- ------- ------- -------
Income before income taxes 468 2,390 3,003 6,166
Income tax provision 210 944 1,061 2,323
------- ------- ------- -------
Net income $ 258 $ 1,446 $ 1,942 $ 3,843
======= ======= ======= =======
Net income per share** $ .04 $ .23 $ .32 $ .61
======= ======= ======= =======
</TABLE>
* Unaudited
** Reflects 10 percent stock dividend paid March 27, 1995 and is calculated
based on weighted shares outstanding and common stock equivalents.
-3-
<PAGE>
AAON, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- -------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 6,102,375 $ 24,000 $7,671,000 $3,766,000 $11,461,000
ISSUE OF COMMON STOCK 9,625 -0- 13,000 -0- 13,000
NET INCOME -0- -0- -0- 1,942,000 1,942,000
--------- -------- ---------- ---------- -----------
BALANCE, September 30, 1995 6,112,000 $ 24,000 $7,684,000 $5,708,000 $13,416,000
========= ======== ========== ========== ===========
</TABLE>
-4-
<PAGE>
AAON, Inc.
Consolidated Statements of Operation
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
SEPT. 30, 1995* SEPT. 30, 1994* SEPT. 30, 1995* SEPT. 30, 1994*
-------------- -------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,942 $3,843 $ 258 $ 1,446
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization 2,026 1,609 654 246
Change in assets and liabilities:
(Increase) decrease in
accounts receivable 1,371 (2,792) (964) 1,494
(Increase) decrease in inventories 262 (1,796) (1,016) (124)
(Increase) decrease in
prepaid expenses 426 (700) 315 (146)
Increase (decrease) in
accounts payable (1,309) 2,425 856 (286)
Increase (decrease) in
accrued liabilities (1,019) 1,885 (631) 673
------- ------- ------- -------
Total adjustments 1,757 91 (786) 1,857
------- ------- ------- -------
Net cash provided by (used in)
operating activities 3,699 3,934 (528) 3,303
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,918) (1,618) (1,153) (1,108)
Payments for other assets 49 33 11 11
------- ------- ------- -------
Net cash used in investing activities (3,869) (1,585) (1,142) (1,097)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit
agreement 32,494 22,800 10,461 7,065
Payments under revolving credit
agreement (32,023) (24,607) (8,560) (9,040)
Increase (decrease) in long-term debt (313) (643) (244) (235)
Cash from issue of stock 13 10 11 3
------- ------- ------- -------
Net cash provided by
financing activities 171 (2,440) 1,668 (2,207)
------- ------- ------- -------
NET CHANGE IN CASH 1 (91) (2) (1)
CASH, beginning of period 26 113 29 23
------- ------- ------- -------
CASH, end of period $ 27 $ 22 $ 27 $ 22
======= ======= ======= =======
</TABLE>
* Unaudited
-5-
<PAGE>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1995
1. BASIS OF PRESENTATION
---------------------
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures made in these
financial statements are adequate to make the information presented not
misleading when read in conjunction with the financial statements and the notes
thereto included in the Company's latest audited financial statements which were
included in the Form 10-K Report for the fiscal year ended December 31, 1994,
filed by AAON, Inc. with the SEC. Management believes that no adjustments to the
financial statements are necessary.
2. INVENTORIES
-----------
Inventories at September 30, 1995 and December 31, 1994, consist of the
following:
September 30, December 31,
1995 1994
------------- ------------
Raw Material $5,800,000 $ 6,208,000
Work in Process 1,771,000 2,202,000
Finished Goods 2,412,000 1,835,000
---------- -----------
$9,983,000 $10,245,000
3. LONG-TERM DEBT:
--------------
Long-term debt at September 30,1995, consists of the following:
September 30, December 31,
1995 1994
------------- ------------
Three term loan agreements,
payable in monthly principal
payments totalling $50,000
through January 1999, with a
balloon payment in January 1999,
plus interest payable monthly
at Chase Manhattan Bank prime
plus 0.5% (9.25% at Sept. 30,
1995) collateralized by machinery,
equipment and real estate
$ 3,080,000 $3,530,000
6
<PAGE>
Bank term loan agreement,
payable in monthly principal
payments of $3,333 through
February 2000, with a balloon
payment in March 2000, plus
interest payable monthly at
Bank One base rate plus 0.25%
(9.0% at Sept. 30, 1995)
collateralized by
real estate
$ 380,000 -0-
$8,150,000 maximum bank line
of credit subject to a
borrowing base of accounts
receivables and inventory,
with interest at LIBOR
plus 2.40% (8.2125% at
June 30, 1995) due March 31,
1997 collateralized by accounts
receivables, inventory,
intangibles and the stock of
AAON and CP/AAON
$ 7,787,000 $ 7,315,000
Other $ 497,000 $ 739,000
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$11,744,000 $11,584,000
Less Current Maturities 995,000 936,000
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$10,749,000 $10,648,000
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4. EARNINGS PER SHARE:
-------------------
Earnings per share have been calculated by dividing net income by the average
number of common shares and equivalent outstanding adjusted for 10% stock
dividend paid March 27, 1995.
5. FOOTNOTES INCORPORATED BY REFERENCE:
------------------------------------
Certain footnotes are applicable to the financial statements, but would be
substantially unchanged from those presented in the December 31, 1994, 10-K
filed with the SEC. Accordingly, reference should be made to this statement for
the following:
Note Description
- - - ---- ----------------------------------------------------
1 Company Operations and Organization
2 Accounting Policies
5 Income Taxes
6 Major Customers
7 Benefit Plans
9 Subsequent Event
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAON, INC.
Dated: November 13, 1995 By: /s/ Norman H. Asbjornson
--------------------------
Norman H. Asbjornson
President
Dated: November 13, 1995 By: /s/ William A. Bowen
----------------------
William A. Bowen
Vice President - Finance
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 27,000
<SECURITIES> 0
<RECEIVABLES> 10,527,000
<ALLOWANCES> 0
<INVENTORY> 9,983,000
<CURRENT-ASSETS> 21,719,000
<PP&E> 15,472,000
<DEPRECIATION> 5,203,000
<TOTAL-ASSETS> 32,349,000
<CURRENT-LIABILITIES> 8,517,000
<BONDS> 0
<COMMON> 24,000
0
0
<OTHER-SE> 13,392,000
<TOTAL-LIABILITY-AND-EQUITY> 32,349,000
<SALES> 52,626,000
<TOTAL-REVENUES> 52,626,000
<CGS> 43,701,000
<TOTAL-COSTS> 43,701,000
<OTHER-EXPENSES> 5,342,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 580,000
<INCOME-PRETAX> 3,003,000
<INCOME-TAX> 1,061,000
<INCOME-CONTINUING> 1,942,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,942,000
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
