<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 June 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. 6,121,699 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 $8,246,000 (from
---------------------
$37,019,000 to $28,773,000) during the six-month period ended June 30, 1996,
compared to the same period in 1995, and by $3,838,000 (from $19,173,000 to
$15,335,000) during the second quarter of 1996 compared to 1995.
Net income decreased by $790,000 (from $1,684,000, $.28 per share, to
$894,000, $.15 per share) during the six-month period ended June 30, 1996,
compared to the same period in 1995, and by $357,000 (from $832,000, $.14 per
share, to $475,000, $.08 per share) during the second quarter of 1996 compared
to 1995.
The decreases in sales during both the first three months and six
months of 1996 compared to 1995 reflect a continuation in the reduction of
business with two major customers. The earnings decreases were primarily due to
the lower sales volume.
The Company has experienced an 18-month decline in business from
national accounts, while achieving growth in sales from other customers.
Management believes that the decline in the national accounts portion of
business has bottomed out and that increases in other sales will produce a net
increase in sales for the foreseeable future. Accordingly, it is expected that
sales and earnings for the balance of 1996 will be greater than in the first
half of the year.
Financial Condition and Liquidity. The increase of $2,346,000 (from
---------------------------------
$9,846,000 to $12,192,000) in accounts receivable during the first six months of
1996, was attributable to the increase in sales since year end. The $891,000
increase (from $4,424,000 to $5,315,000) in accounts payable resulted from the
higher sales level.
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 at June 30,
1996, see Note 3 to the Financial Statements appearing on pages 7 and 8 of this
report. It has been orally agreed that, effective July 1, 1996, the Company's
four term loans will be consolidated into its revolving
-1-
<PAGE>
credit facility, which will be increased to $12,150,000 and extended to June 30,
1998. Upon execution of the Second Restated Revolving Credit and Loan
Agreement, the Company will file a Form 8-K providing additional information
concerning this refinancing and copies of the new loan agreement and $12,150,000
Promissory Note.
-2-
<PAGE>
AAON, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JUNE 30, 1996 * DECEMBER 31, 1995
(In Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 13 $ 663
Accounts receivable 12,192 9,846
Inventories 9,723 9,061
Prepaid expenses 553 475
Deferred income tax 1,104 1,104
------------ ------------
Total current assets 23,585 21,149
------------ ------------
PROPERTY, PLANT AND EQUIPMENT,
at cost:
Land 274 274
Buildings 7,298 7,246
Machinery and equipment 7,933 7,523
Furniture and fixtures 1,172 1,100
------------ ------------
16,677 16,143
Less-accumulated depreciation (6,924) (5,831)
------------ ------------
Net property, plant and equipment 9,753 10,312
OTHER ASSETS 598 751
------------ ------------
$ 33,936 $ 32,212
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,315 $ 4,424
Accrued liabilities 3,240 2,605
Current maturities of long-term debt 714 942
------------ ------------
Total current liabilities 9,269 7,971
------------ ------------
LONG-TERM DEBT 10,217 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 6,729 5,835
------------ ------------
Total stockholders' equity 14,450 13,546
------------ ------------
$ 33,936 $ 32,212
</TABLE> ============ ============
* Unaudited
- --------------------------------------------------------------------------------
-3-
<PAGE>
AAON, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
JUNE 30, 1996 * JUNE 30, 1995 * JUNE 30, 1996 * JUNE 30, 1995 *
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales, net $ 15,335 $ 19,173 $ 28,773 $ 37,019
Cost of sales 12,657 15,966 23,851 30,499
------------ ------------ ------------ ------------
Gross profit 2,678 3,207 4,922 6,520
Selling, general and
administrative expenses 1,602 1,619 2,913 3,342
------------ ------------ ------------ ------------
Income from operations 1,076 1,588 2,009 3,178
Interest expense 214 199 420 381
Amortization and other
expense 105 138 164 262
------------ ------------ ------------ ------------
Income before income taxes 757 1,251 1,425 2,535
Income tax provision 282 419 531 851
------------ ------------ ------------ ------------
Net income $ 475 $ 832 $ 894 $ 1,684
============ ============ ============ ============
Net income per share* $ .08 $ .14 $ .15 $ .28
============ ============ ============ ============
</TABLE>
* Unaudited
- --------------------------------------------------------------------------------
-4-
<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 3l, 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 - 894,000 894,000
----------- ---------- ------------ ------------ ------------
BALANCE, JUNE 30, 1996* 6,122,000 $ 24,000 $ 7,697,000 $ 6,729,000 $ 14,450,000
=========== ========== ============ ============ ============
</TABLE>
* Unaudited
- --------------------------------------------------------------------------------
-5-
<PAGE>
AAON, Inc.
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
JUNE 30, 1996* JUNE 30, 1995* JUNE 30, 1996* JUNE 30, 1995*
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 894 $ 1,684 $ 475 $ 832
Adjustments to reconcile net
income to net cash provided
by operating activities-
Depreciation and amortization 1,236 1,372 623 657
Change in assets and liabilities:
(Increase) decrease in
accounts receivable (2,346) 2,335 (4,160) (1,629)
(Increase) decrease in
inventories (662) 1,278 89 2,883
(Increase) decrease in
prepaid expenses (78) 111 (49) 141
Increase (decrease) in
accounts payable 891 (2,165) 1,225 (1,325)
Increase (decrease) in
accrued liabilities 635 (388) 252 (684)
--------- --------- --------- ---------
Total adjustments (324) 2,543 (2,020) 43
--------- --------- --------- ---------
Net cash provided by
(used in) operating activities 570 4,227 (1,545) 875
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (534) (2,765) (285) (1,732)
Payments for other assets 10 38 1 11
--------- --------- --------- ---------
Net cash used in
investing activities (524) (2,727) (284) (1,721)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving
credit agreement 15,236 22,033 9,541 12,333
Payments under revolving
credit agreement (15,444) (23,463) (7,470) (11,235)
Payments on long-term debt (498) (69) (250) (247)
Cash from issue of stock 10 2 0 2
--------- --------- --------- ---------
Net cash provided by
(used in) financing activities (696) (1,497) 1,821 853
--------- --------- --------- ---------
NET CHANGE IN CASH (650) 3 (8) 7
CASH, beginning of period 663 26 21 22
--------- --------- --------- ---------
CASH, end of period $ 13 $ 29 $ 13 $ 29
========= ========= ========= =========
</TABLE>
* Unaudited
- --------------------------------------------------------------------------------
-6-
<PAGE>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 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 June 30, 1996 (unaudited), and December 31, 1995, consist of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Raw Materials $5,923,000 $5,301,000
Work in Process 1,539,000 1,366,000
Finished Goods 2,261,000 2,394,000
------------ --------------
$9,723,000 $9,061,000
------------ --------------
</TABLE>
3. LONG-TERM DEBT:
---------------
Long-term debt at June 30, 1996 (unaudited), and December 31, 1995, consists of
the following:
<TABLE>
<CAPTION>
June 30, 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 June 30,
1996) collateralized by machinerey,
equipment and real estate
$ 2,630,000 $2,930,000
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
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 June 30, 1996)
collateralized by
real estate
$ 347,000 $ 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% (7.90% at
June 30, 1996) due July 31,
1997 collateralized by accounts
receivables, inventory,
intangibles and the stock of
AAON and CP/AAON
$ 7,730,000 $ 7,938,000
Other $ 224,000 $ 402,000
----------- -----------
$10,931,000 $11,637,000
Less Current Maturities 714,000 942,000
----------- -----------
$10,217,000 $10,695,000
</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:
<TABLE>
<CAPTION>
Note Description
- ---- --------------------------------------------------------
<S> <C>
1 Company Operations and Organization
2 Accounting Policies
5 Income Taxes
6 Major Customers
7 Benefit Plans
8 Stock Dividend and Reverse Split
</TABLE>
8
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders of Registrant held on May 14,
1996, all directors, Norman H. Asbjornson, William A. Bowen, John B. Johnson,
Jr., Joseph M. Klein, Richard E. Minshall, Anthony Pantaleoni and Charles C.
Stephenson, Jr., were reelected by the following votes: Mr. Asbjornson,
5,318,298 shares For, 60,575 shares Against; Mr. Bowen, 5,318,068 shares For,
60,805 shares Against; Mr. Johnson, 5,319,094 shares For, 59,779 shares Against;
Mr. Klein, 5,316,493 shares For, 62,380 shares Against; Mr. Minshall, 5,318,038
shares For, 60,835 shares Against; Mr. Pantaleoni, 5,307,038 shares For, 71,835
shares Against; and Mr. Stephenson, 5,317,538 shares For, 61,335 shares Against.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K. Registrant did not file any report on Form
8-K during the quarter ended June 30, 1996.
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: August 1, 1996 By: /s/ Norman H. Asbjornson
--------------------------
Norman H. Asbjornson
President
Dated: August 1, 1996 By: /s/ William A. Bowen
----------------------
William A. Bowen
Vice President - Finance
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Unaudited Financial* AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
*Statements as of June 30, 1996 and for the quarter then ended
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 12,192
<ALLOWANCES> 0
<INVENTORY> 9,723
<CURRENT-ASSETS> 23,585
<PP&E> 16,677
<DEPRECIATION> 6,924
<TOTAL-ASSETS> 33,936
<CURRENT-LIABILITIES> 9,269
<BONDS> 0
<COMMON> 24
0
0
<OTHER-SE> 14,426
<TOTAL-LIABILITY-AND-EQUITY> 33,936
<SALES> 28,773
<TOTAL-REVENUES> 28,773
<CGS> 23,851
<TOTAL-COSTS> 26,764
<OTHER-EXPENSES> 164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420
<INCOME-PRETAX> 1,425
<INCOME-TAX> 531
<INCOME-CONTINUING> 1,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 894
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
