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, 1997
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. 6,164,824 shares of $.004 par value Common Stock.
<PAGE 1>
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. Net sales increased by
$8,160,000 (from $28,773,000 to $36,933,000) during the six-month
period ended June 30, 1997, compared to the same period in 1996,
and by $4,718,000 (from $15,335,000 to $20,053,000) during the
second quarter of 1997 compared to 1996.
Net income increased by $533,000 (from $894,000, $.15
per share, to $1,427,000, $.23 per share) during the six-month
period ended June 30, 1997, compared to the same period in 1996,
and by $236,000 (from $475,000, $.08 per share, to $711,000, $.12
per share) during the second quarter of 1997 compared to 1996.
The increase in sales during the first six months of
1997 compared to 1996 resulted from higher sales to all types of
customers, e.g., retail stores, schools, industrial and office
buildings. The earnings increase reflects higher sales and lower
costs and expenses, although gross profit margins declined during
the second quarter compared to the first quarter of 1997 due to
increased overtime and labor costs in the very tight Tulsa labor
market. Orders are well ahead of last year and management
anticipates increased sales and earnings for the remainder of the
year.
Financial Condition and Liquidity. While there were
material increases in inventories ($1,439,000) and accounts
payable ($638,000) at June 30, 1997, compared to December 31,
1996, these increases reflect the higher sale volume. The
decrease in accounts receivable ($861,000) was attributable to
improved collections.
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 June 30, 1997, see Note 3 to the Financial Statements on pages
6 and 7 of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not applicable
<PAGE 2>
<TABLE> AAON, Inc.
Consolidated Balance Sheets
JUNE 30, DEC 31,
1997 * 1996
(In Thousands)
<CAPTION>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 527 $ 138
Accounts receivable 12,678 13,539
Inventories 10,579 9,140
Prepaid expenses 829 160
Deferred income tax 1,604 1,604
-------- --------
Total current assets 26,217 24,581
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 274 274
Buildings 7,331 7,278
Machinery and equipment 9,595 8,933
Furniture and fixtures 1,716 1,516
-------- --------
18,916 18,001
Less-accumulated depreciation 8,991 7,868
-------- --------
Net property, plant and equipment 9,925 10,133
OTHER ASSETS 853 855
-------- --------
$ 36,995 $ 35,569
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,735 $ 6,097
Accrued liabilities 4,556 4,765
Current maturities of long-term debt 40 91
-------- --------
Total current liabilities 11,331 10,953
-------- --------
LONG TERM DEBT 8,542 8,976
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000
shares authorized, 6,162,824 issued
and outstanding 25 25
Preferred stock, 5,000,000 shares
authorized, no shares issued
Additional paid-in capital 7,760 7,705
Retained earnings 9,337 7,910
-------- --------
Total stockholders' equity 17,122 15,640
-------- --------
$ 36,995 $ 35,569
======== ========
* Unaudited
</TABLE>
<PAGE 3>
<TABLE>
AAON, Inc.
Consolidated Statements of Operations
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997* 1996* 1997* 1996*
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Sales, net $ 20,053 $ 15,335 $ 36,933 $ 28,773
Cost of sales 16,826 12,657 30,492 23,851
-------- -------- -------- --------
Gross profit 3,227 2,678 6,441 4,922
Selling, general and
administrative expenses 1,868 1,602 3,688 2,913
-------- -------- -------- --------
Income from operations 1,359 1,076 2,753 2,009
Interest expense 156 214 312 420
Amortization and other expense 26 105 71 164
-------- -------- -------- --------
Income before income taxes 1,177 757 2,370 1,425
Income tax provision 466 282 943 531
-------- -------- -------- --------
Net income $ 711 $ 475 $ 1,427 $ 894
======== ======== ======== ========
Net income per share* $ .12 $ .08 $ .23 $ .15
======== ======== ======== ========
* Unaudited
</TABLE>
<TABLE>
<PAGE 4> 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, 1996 6,128,000 $ 25,000 $ 7,705,000 $ 7,910,000 $15,640,000
ISSUE OF COMMON STOCK* 35,000 -0- 55,000 -0- 55,000
NET INCOME* -0- -0- -0- 1,427,000 1,427,000
----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1997* 6,163,000 $ 25,000 $ 7,760,000 $ 9,337,000 $17,122,000
=========== =========== =========== =========== ===========
*Unaudited
</TABLE>
<TABLE>
<PAGE 5> AAON, Inc.
Consolidated Statements of Cash Flow
<CAPTION>
Six Six Three Three
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997* 1996* 1997* 1996*
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,427 $ 894 $ 711 $ 475
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 1,123 1,236 527 623
Change in assets and liabilities:
<Increase> decrease in
accounts receivable 861 <2,346> <863> <4,160>
<Increase> decrease in inventories <1,439> <662> <700> 89
<Increase> decrease in prepaid expenses <669> <78> <565> <49>
Increase <decrease> in accounts payable 638 891 2,306 1,225
Increase <decrease> in accrued liabilities <209> 635 <559> 252
------- ------- ------- -------
Total adjustments 305 <324> 146 <2,020>
------- ------- ------- -------
Net cash provided by <used in>
operating activities 1,732 570 857 <1,545>
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures <915> <534> <527> <285>
Payments for other assets 2 10 2 1
------- ------- ------- -------
Net cash used in investing activities <913> <524> <525> <284>
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 17,925 15,236 9,250 9,541
Payments under revolving credit agreement <18,340> <15,444> <9,280> <7,470>
Payments on long-term debt <70> <498> <10> <250>
Cash from issue of stock 55 10 24 0
------- ------- ------- -------
Net cash provided by <used in>
financing activities <430> <696> <16> 1,821
------- ------- ------- -------
NET CHANGE IN CASH 389 <650> 316 <8>
CASH, beginning of period 138 663 211 21
------- ------- ------- -------
CASH, end of period $ 527 $ 13 $ 527 $ 13
======= ======= ======= =======
* Unaudited
</TABLE>
<PAGE 6>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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, 1996, filed by
AAON, Inc. with the SEC. Management believes that no adjustments to
the financial statements are necessary.
2. INVENTORIES:
Inventories at June 30, 1997 (unaudited), and December 31, 1996,
consist of the following:
June 30, December 31,
1997 1996
---------- ----------
Raw Materials $6,153,000 $5,510,000
Work in Process 2,213,000 1,385,000
Finished Goods 2,213,000 2,245,000
----------- ----------
$10,579,000 $9,140,000
----------- ----------
3. LONG-TERM DEBT:
Long-term debt at June 30, 1997 (unaudited), and December 31, 1996,
consists of the following:
June 30, December 31
1997 1996
---------- -----------
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%
(8.75% at March 31, 1997)
collateralized by
real estate
$ 307,000 $ 327,000
$15,150,000 maximum bank line
of credit with interest at
LIBOR plus 1.85% (7.5375%
at June 30, 1997) due
June 30, 1999 collateralized
by accounts receivable,
inventory, and intangibles
of AAON and CP/AAON
$ 8,275,000 $8,690,000
Other $ -0- $ 50,000
----------- -----------
$ 8,582,000 $ 9,067,000
Less Current Maturities 40,000 91,000
----------- -----------
$ 8,542,000 $ 8,976,000
----------- -----------
<PAGE 7>
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, 1996, 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 8>
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: July 29 , 1997 By: /s/ Norman H. Asbjornson
-------------------------
Norman H. Asbjornson
President
Dated: July 29, 1997 By: /s/ William A. Bowen
-------------------------
William A. Bowen
Vice President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 527
<SECURITIES> 0
<RECEIVABLES> 12,678
<ALLOWANCES> 0
<INVENTORY> 10,579
<CURRENT-ASSETS> 26,217
<PP&E> 18,916
<DEPRECIATION> 8,991
<TOTAL-ASSETS> 36,995
<CURRENT-LIABILITIES> 11,331
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 17,097
<TOTAL-LIABILITY-AND-EQUITY> 36,995
<SALES> 20,053
<TOTAL-REVENUES> 20,053
<CGS> 16,826
<TOTAL-COSTS> 16,826
<OTHER-EXPENSES> 1,894
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 1,177
<INCOME-TAX> 466
<INCOME-CONTINUING> 711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 711
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
