<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, 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
(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. 6,128,574 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
$6,680,000 (from $52,626,000 to $45,946,000) during the nine-
month period ended September 30, 1996, compared to the same
period in 1995, but increased by $1,566,000 (from $15,607,000 to
$17,173,000) during the third quarter of 1996 compared to 1995.
Net income decreased by $526,000 (from $1,942,000, $.32
per share, to $1,416,000, $.23 per share) during the nine-month
period ended September 30, 1996, compared to the same period in
1995, but increased by $264,000 (from $258,000, $.04 per share,
to $522,000, $.09 per share) during the third quarter of 1996
compared to 1995.
The decline in sales during the first six months of
1996 compared to 1995 reflected a continuation of reduction of
business with two major customers, which appears to have bottomed
out. This change, together with an increase in sales to other
customers, allowed the Company to experience greater sales in the
third quarter of 1996. The increase in earnings in the third
quarter was attributable to the higher sales and improved
margins. Management expects earnings in the fourth quarter of
the year to be much stronger than in the fourth quarter of 1995.
During the course of 1996, the Company has moved from a
majority of its business being with national accounts to a
preponderance of business with other customers. This trend
should continue unless pending sizeable potential business with
national accounts were to materialize.
FINANCIAL CONDITION AND LIQUIDITY. The increase of
$5,173,000 (from $9,846,000 to $15,019,000) in accounts
receivable during the first nine months of 1996, was attributable
to both the increase in sales since year end and slower
collections. The $5,053,000 increase (from $4,424,000 to
$9,477,000) in accounts payable resulted from higher third
quarter sales, purchases for anticipated fourth quarter sales
and, to a lesser extent, a stretch out of payments to creditors.
The $1,573,000 increase (from $2,605,000 to $4,178,000) in
accrued liabilities was attributable to building adequate
reserves commensurate with third quarter results and projected
annual requirements.
Due to earnings and greatly reduced capital
expenditures during the first nine months of 1996, the Company
has reduced long-term debt by approximately $3 million since
December 31, 1995.
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. 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
at September 30, 1996, see Note 3 to the Financial Statements
appearing on pages 7 and 8 of this report.
<PAGE> AAON, Inc.
Consolidated Balance Sheets
SEPT 30, DEC 31,
1996 * 1995
(In Thousands)
ASSETS
CURRENT ASSETS:
Cash $ 25 $ 663
Accounts receivable 15,019 9,846
Inventories 9,479 9,061
Prepaid expenses 796 475
Deferred income tax 1,104 1,104
-------- --------
Total current assets 26,423 21,149
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 274 274
Buildings 7,274 7,246
Machinery and equipment 8,111 7,523
Furniture and fixtures 1,366 1,100
-------- --------
17,025 16,143
Less-accumulated depreciation <7,473> <5,831>
-------- --------
Net property, plant and equipment 9,552 10,312
OTHER ASSETS 526 751
-------- --------
$ 36,501 $ 32,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,477 $ 4,424
Accrued liabilities 4,178 2,605
Current maturities of long-term debt 172 942
-------- --------
Total current liabilities 13,827 7,971
-------- --------
LONG TERM DEBT 7,702 10,695
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000
shares authorized, 6,122,000 and
6,113,000 issued and outstanding at
June 30, 1996, and December 31, 1995,
respectively 24 24
Preferred stock, 5,000,000 shares
authorized, no shares issued
Additional paid-in capital 7,697 7,687
Retained earnings 7,251 5,835
-------- --------
Total stockholders' equity 14,972 13,546
-------- --------
$ 36,501 $ 32,212
======== ========
* Unaudited
<PAGE> AAON, Inc.
Consolidated Statements of Operations
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996* 1995* 1996* 1995*
(In Thousands)
Sales, net $ 17,173 $ 15,607 $ 45,946 $ 52,626
Cost of sales 14,178 13,202 38,029 43,701
-------- -------- -------- --------
Gross profit 2,995 2,405 7,917 8,925
Selling, general and
administrative expenses 1,796 1,633 4,709 4,975
-------- -------- -------- --------
Income from operations 1,199 772 3,208 3,950
Interest expense 218 199 638 580
Amortization and other expense 122 105 286 367
-------- -------- -------- --------
Income before income taxes 859 468 2,284 3,003
Income tax provision 337 210 868 1,061
-------- -------- -------- --------
Net income $ 522 $ 258 $ 1,416 $ 1,942
======== ======== ======== ========
Net income per share* $ .09 $ .04 $ .23 $ .32
======== ======== ======== ========
* Unaudited
<TABLE>
<PAGE> AAON, Inc.
Consolidated Statements of Stockholders' Equity
<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* 9,000 -0- 10,000 -0- 10,000
NET INCOME* -0- -0- -0- 1,416,000 1,416,000
----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 1996* 6,122,000 $ 24,000 $ 7,697,000 $ 7,251,000 $14,972,000
=========== =========== =========== =========== ===========
* Unaudited
</TABLE>
<TABLE>
<PAGE> AAON, Inc.
Consolidated Statements of Cash Flow
<CAPTION>
Nine Nine Three Three
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996* 1995* 1996* 1995*
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,416 $ 1,942 $ 522 $ 258
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 1,857 2,026 621 654
Change in assets and liabilities:
<Increase> decrease in
accounts receivable <5,174> 1,371 <2,828> <964>
<Increase> decrease in inventories <418> 262 244 <1,016>
<Increase> decrease in prepaid expenses <321> 426 <243> 315
Increase <decrease> in accounts payable 5,053 <1,309> 4,162 856
Increase <decrease> in accrued liabilities 1,573 <1,019> 938 <631>
------- ------- ------- -------
Total adjustments 2,570 1,757 2,894 <786>
------- ------- ------- -------
Net cash provided by <used in>
operating activities 3,986 3,699 3,416 <528>
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures <882> <3,918> <348> <1,153>
Payments for other assets 11 49 1 11
------- ------- ------- -------
Net cash used in investing activities <871> <3,869> <347> <1,142>
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 24,676 32,494 9,440 10,461
Payments under revolving credit agreement <25,209> <32,023> <9,765> <8,560>
Payments on long-term debt <3,230> <313> <2,732> <244>
Cash from issue of stock 10 13 0 11
------- ------- ------- -------
Net cash provided by <used in>
financing activities <3,753> 171 <3,057> 1,668
------- ------- ------- -------
NET CHANGE IN CASH <638> 1 12 <2>
CASH, beginning of period 663 26 13 29
------- ------- ------- -------
CASH, end of period $ 25 $ 27 $ 25 $ 27
======= ======= ======= =======
* Unaudited
</TABLE>
<PAGE>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 1996 (unaudited), and December 31,
1995, consist of the following:
Sept. 30, December 31,
1996 1995
------------ ------------
Raw Materials $ 5,500,000 $ 5,301,000
Work in Process 1,750,000 1,366,000
Finished Goods 2,229,000 2,394,000
------------ ------------
$ 9,479,000 $ 9,061,000
------------ ------------
3. LONG-TERM DEBT:
Long-term debt at September 30, 1996 (unaudited), and December
31, 1995, consists of the following:
Sept. 30 December 31
1996 1995
----------- ------------
Three term loan agreements,
payable in monthly principal
payments totaling $50,000
through January 1999, with a
balloon payment in January 1999,
plus interest payable monthly
at Chase Manhattan Bank prime
plus 0.5% collateralized by
machinery, equipment and
real estate
$ -0- $ 2,930,000
<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%
(8.5% at Sept. 30, 1996)
collateralized by
real estate
$ 337,000 $ 367,000
$12,150,000 maximum bank line
of credit with interest at
LIBOR plus 1.85% (7.2875%
at Sept. 30, 1996) due
June 30, 1998 collateralized
by accounts receivables,
inventory, and intangibles
of AAON and CP/AAON
$ 7,405,000 $ 7,938,000
Other $ 132,000 $ 402,000
------------ ------------
$ 7,874,000 $11,637,000
Less Current Maturities 172,000 942,000
------------ ------------
$ 7,702,000 $10,695,000
------------ ------------
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 Operations and Organization
2 Accounting Policies
5 Income Taxes
6 Major Customers
7 Benefit Plans
8 Stock Dividend and Reverse Split
<PAGE> PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K. Registrant filed one report
on Form 8-K during the quarter ended September 30, 1996. It was
dated September 11, 1996, and reported Registrant's execution on
that date of the Second Restated Revolving Credit 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: October 28, 1996 By: /s/ Norman H. Asbjornson
Norman H. Asbjornson
President
Dated: October 28, 1996 By: /s/ William A. Bowen
William A. Bowen
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 15,019
<ALLOWANCES> 0
<INVENTORY> 9,479
<CURRENT-ASSETS> 26,423
<PP&E> 17,025
<DEPRECIATION> 7,473
<TOTAL-ASSETS> 36,501
<CURRENT-LIABILITIES> 13,827
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 14,948
<TOTAL-LIABILITY-AND-EQUITY> 36,501
<SALES> 45,946
<TOTAL-REVENUES> 45,946
<CGS> 38,029
<TOTAL-COSTS> 42,738
<OTHER-EXPENSES> 286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 638
<INCOME-PRETAX> 2,284
<INCOME-TAX> 868
<INCOME-CONTINUING> 1,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,416
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
