<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 March 31, 1996
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
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(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. 6,121,999 shares of $.004 par
value Common Stock.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
On pages 3 through 8 of this report.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations. Net sales decreased by approximately 25% in
---------------------
the first quarter of 1996 as compared to the same quarter in 1995. This was
primarily due to a reduced level of business with two major customers, partially
offset by an increase in sales to other customers.
Gross profit decreased to 16.7% during the first quarter of 1996,
compared to 18.6% in 1995, which was mainly attributable to a greater amount of
lower margin business.
SG&A expenses were reduced by 24% during the three months ended March
31, 1996, as compared to the same period in 1995, primarily due to a reduction
in warranty costs.
Net income was $419,000 in the first quarter of 1996, compared to
$852,000 in 1995. The reduction in earnings was attributable to the lower sales
volume, pricing and production inefficiencies.
Cash flows during the first quarter of 1996 enabled the Company to
reduce total debt by $2,517,000.
Financial Condition and Liquidity. Current assets decreased by
---------------------------------
approximately 9% during the three months ended March 31, 1996, primarily as the
result of decreased sales.
As noted above, total borrowing decreased by $2,517,000 during the
first quarter of 1996.
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.
The Company's revolving credit line (which currently extends to July
31, 1997) provides for maximum borrowings of $8,150,000. Interest on this line
is payable monthly at the Chase Manhattan Bank prime rate or LIBOR plus 2.4%, at
the election of the Company. Availability of funds under the agreement is based
on 80% of eligible accounts receivable, plus 50% of raw materials and finished
goods inventories, with inventories not to exceed 50% of the borrowing base.
-1-
<PAGE>
The Company has four term loans totalling $3,137,000 at March 31, 1996, three
of which mature on January 31, 1999, and are being amortized by monthly
principal payments aggregating $50,000, plus interest at the Chase Manhattan
Bank prime rate plus 1/2%, and the fourth provides for monthly principal
payments of $3,333.33, plus interest payable monthly at Bank One base rate plus
1/4%, through February, 2000, with a balloon payment due in March, 2000.
-2-
<PAGE>
AAON, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
MARCH 31, 1996 * DECEMBER 31, 1996
(In Thousands)
===================================================================================================================
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 21 $ 663
Accounts receivable 8,032 9,846
Inventories 9,812 9,061
Prepaid expenses 504 475
Deferred income tax 1,104 1,104
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Total current assets 19,473 21,149
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PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 274 274
Buildings 7,298 7,246
Machinery and equipment 7,703 7,523
Furniture and fixtures 1,117 1,100
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16,392 16,143
Less-accumulated depreciation (6,372) (5,831)
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Net property, plant and equipment 10,020 10,312
OTHER ASSETS 670 751
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$ 30,163 $ 32,212
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,090 $ 4,424
Accrued liablilities 2,988 2,605
Current maturities of long-term debt 849 942
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Total current liabilities 7,927 7,971
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LONG-TERM DEBT 8,261 10,695
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STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000 shares authorized
6,121,250 issued and outstanding 24 24
Preferred stock, 5,000,000 shares authorized,
no shares issued
Additional paid-in capital 7,697 7,687
Retained earnings 6,254 5,835
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Total stockholders' equity 13,975 13,546
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$ 30,163 $ 32,212
========== ==========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Unaudited
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<PAGE>
AAON, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended
MARCH 31, 1996 * MARCH 31, 1995 *
(In Thousands)
===================================================================================================================
<S> <C> <C>
Sales, net $ 13,438 $ 17,846
Cost of sales 11,194 14,533
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Gross profit 2,244 3,313
Selling, general and
administrative expenses 1,311 1,723
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Income from operations 933 1,590
Interest expense 206 82
Amortization and other expense 59 124
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Income before income taxes 668 1,284
Income tax provision 249 432
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Net income $ 419 $ 852
========== ==========
Net income per share $ .07 $ .14
========== ==========
* Unaudited
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<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 31,1995 6,113,000 $ 24,000 $ 7,687,000 $ 5,835,000 $ 13,546,000
ISSUE OF COMMON STOCK 8,250 - 0 - 10,000 - 0 - 10,000
NET INCOME - 0 - - 0 - - 0 - 419,000 419,000
----------- ---------- ------------- ------------- ---------------
BALANCE, March 31, 1996 6,121,250 $ 24,000 $ 7,697,000 $ 6,254,000 $ 13,975,000
=========== ========== ============= ============= ===============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
AAON, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
MARCH 31, 1996 * MARCH 31, 1995 *
===================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 419 $ 852
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 613 715
Change in assets and liabilities:
(Increase) decrease in
accounts receivable 1,814 3,964
(Increase) decrease in inventories (751) (1,604)
(Increase) decrease in prepaid expenses (29) (30)
Increase (decrease) in accounts payable (334) (841)
Increase (decrease) in accrued liabilities 383 295
------------ ------------
Total adjustments 1,696 2,499
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Net cash provided by (used in)
operating activities 2,115 3,351
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (249) (1,032)
Payments for other assets 9 27
------------ ------------
Net cash used in investing activities (240) (1,005)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 5,695 9,700
Payments under revolving credit agreement (7,974) (12,228)
Increase (decrease) in long-term debt (248) 178
Cash from issue of stock 10 - 0 -
------------ ------------
Net cash provided by
financing activities (2,517) (2,350)
------------ ------------
NET CHANGE IN CASH (642) (4)
CASH, beginning of period 663 26
------------ ------------
CASH, end of period $ 21 $ 22
============ ============
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</TABLE>
* Unaudited
-6-
<PAGE>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1996
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, 1995,
filed by AAON, Inc. with the SEC. Management believes that no adjustments to
the financial statements are necessary.
2. INVENTORIES:
------------
Inventories at March 31, 1996 and December 31, 1995, consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw Materials $5,536,000 $5,301,000
Work in Process 1,623,000 1,366,000
Finished Goods 2,653,000 2,394,000
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$9,812,000 $9,061,000
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</TABLE>
7
<PAGE>
3. LONG-TERM DEBT:
---------------
Long-term debt at March 31, 1996, consists of the following:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- -----------
<S> <C> <C>
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% (8.75% at March 31,
1996) collateralized by machinery,
equipment and real estate
$ 2,780,000 $ 2,930,000
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%
(8.5% at March 31, 1996)
collateralized by
real estate
$ 357,000 367,000
$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% (7.775% at
Mar. 31, 1996) due July 31,
1997 collateralized by accounts
receivables, inventory,
intangibles and the stock of
AAON and CP/AAON
$ 5,659,000 $ 7,938,000
Other $ 314,000 $ 402,000
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$ 9,110,000 $11,637,000
Less Current Maturities 849,000 942,000
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$ 8,261,000 $10,695,000
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</TABLE>
4. EARNINGS PER SHARE:
-------------------
Earnings per share have been calculated by dividing net income by the average
number of common shares outstanding.
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, 1995, 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
8 Stock Dividend and Reverse Split
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K. Registrant filed one report on Form 8-K
(dated March 4, 1996) during the quarter ended March 31, 1996, which reported
Registrant's execution of the Sixth Amendment of its Restated Revolving Credit
and Term Loan Agreement.
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: April 29, 1996 By: /s/ Norman H. Asbjornson
------------------------------
Norman H. Asbjornson
President
Dated: April 29, 1996 By: /s/ William A. Bowen
------------------------------
William A. Bowen
Vice President - Finance
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 8,032
<ALLOWANCES> 0
<INVENTORY> 9,812
<CURRENT-ASSETS> 19,473
<PP&E> 16,392
<DEPRECIATION> 6,372
<TOTAL-ASSETS> 30,163
<CURRENT-LIABILITIES> 7,927
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 13,951
<TOTAL-LIABILITY-AND-EQUITY> 30,163
<SALES> 13,438
<TOTAL-REVENUES> 13,438
<CGS> 11,194
<TOTAL-COSTS> 12,505
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206
<INCOME-PRETAX> 668
<INCOME-TAX> 249
<INCOME-CONTINUING> 668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 419
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
