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, 1997
Commission file number: 33-183336-LA
AAON, INC.
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(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. 6,158,074 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 approximately 26%
in the first quarter of 1997 as compared to the same quarter in 1996. This
increase reflects a growth in sales to the Company's entire customer base.
Gross profit increased to 19.0% during the first quarter of 1997,
compared to 16.7% in 1996, which was mainly attributable to a greater
amount of higher margin business.
SG&A expenses increased by 39% during the three months ended
March 31, 1997, as compared to the same period in 1996, primarily due to
increases in reserves for potential warranty and bad debt costs.
Net income was $716,000 in the first quarter of 1997, compared to
$419,000 in 1996, as a result of the above factors.
Financial Condition and Liquidity. Accounts receivable decreased
by 15% since December 31, 1996, even though sales were approximately the
same during the first quarter of 1997 and in the fourth quarter of 1996, as
a result of improved collections.
The 38% decrease in accounts payable during the first quarter was
attributable to timing differences in purchases of material.
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 March
31, 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
MARCH 31, DEC 31,
1997 * 1996
(In Thousands)
<CAPTION>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 211 $ 138
Accounts receivable 11,815 13,539
Inventories 9,879 9,140
Prepaid expenses 264 160
Deferred income tax 1,604 1,604
-------- --------
Total current assets 23,773 24,581
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 274 274
Buildings 7,301 7,278
Machinery and equipment 9,232 8,933
Furniture and fixtures 1,582 1,516
-------- --------
18,389 18,001
Less-accumulated depreciation 8,464 7,868
-------- --------
Net property, plant and equipment 9,925 10,133
OTHER ASSETS 855 855
-------- --------
$ 34,553 $ 35,569
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,429 $ 6,097
Accrued liabilities 5,115 4,765
Current maturities of long-term debt 40 91
-------- --------
Total current liabilities 9,584 10,953
-------- --------
LONG TERM DEBT 8,582 8,976
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000
shares authorized, 6,155,500 issued
and outstanding 25 25
Preferred stock, 5,000,000 shares
authorized, no shares issued
Additional paid-in capital 7,736 7,705
Retained earnings 8,626 7,910
-------- --------
Total stockholders' equity 16,387 15,640
-------- --------
$ 34,553 $ 35,569
======== ========
* Unaudited
</TABLE>
<PAGE 3>
<TABLE>
AAON, Inc.
Consolidated Statements of Operations
Three Three
Months Months
Ended Ended
March 31, March 31,
1997* 1996*
(In Thousands)
<CAPTION>
<S> <C> <C>
Sales, net $ 16,880 $ 13,438
Cost of sales 13,666 11,194
-------- --------
Gross profit 3,214 2,244
Selling, general and
administrative expenses 1,820 1,311
-------- --------
Income from operations 1,394 933
Interest expense 156 206
Amortization and other expense 45 59
-------- --------
Income before income taxes 1,193 668
Income tax provision 477 249
-------- --------
Net income $ 716 $ 419
======== ========
Net income per share* $ .12 $ .07
======== ========
* 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 27,500 -0- 31,350 -0- 31,350
NET INCOME -0- -0- -0- 716,000 716,000
----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1997 6,155,500 $ 25,000 $ 7,736,350 $ 8,626,000 $16,387,350
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<PAGE 5> AAON, Inc.
Consolidated Statements of Cash Flow
<CAPTION>
Three Three
Months Months
Ended Ended
March 31, March 31,
1997* 1996*
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 716 $ 419
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 596 613
Change in assets and liabilities:
<Increase> decrease in
accounts receivable 1,724 1,814
<Increase> decrease in inventories <739> <751>
<Increase> decrease in prepaid expenses <104> <29>
Increase <decrease> in accounts payable <1,668> <334>
Increase <decrease> in accrued liabilities 350 383
------- -------
Total adjustments 159 1,696
------- -------
Net cash provided by <used in>
operating activities 875 2,115
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures <388> <249>
Payments for other assets -0- 9
------- -------
Net cash used in investing activities <388> <240>
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 8,675 5,695
Payments under revolving credit agreement <9,060> <7,974>
Payments on long-term debt <60> <248>
Cash from issue of stock 31 10
------- -------
Net cash provided by <used in>
financing activities <414> <2,517>
------- -------
NET CHANGE IN CASH 73 <642>
CASH, beginning of period 138 663
------- -------
CASH, end of period $ 211 $ 21
======= =======
* Unaudited
</TABLE>
<PAGE 6>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 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 March 31, 1997 (unaudited), and December 31, 1996, consist
of the following:
Mar. 31, December 31,
1997 1996
---------- ----------
Raw Materials $5,753,000 $5,510,000
Work in Process 1,921,000 1,385,000
Finished Goods 2,205,000 2,245,000
---------- ----------
$9,879,000 $9,140,000
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3. LONG-TERM DEBT:
Long-term debt at March 31, 1997 (unaudited), and December 31, 1996,
consists of the following:
Mar. 31, 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
$ 317,000 $ 327,000
<PAGE 7>
$12,150,000 maximum bank line
of credit with interest at
LIBOR plus 1.85% (7.35%
at Mar 31, 1997) due
June 30, 1998 collateralized
by accounts receivables,
inventory, and intangibles
of AAON and CP/AAON
$ 8,305,000 $8,690,000
Other $ -0- $ 50,000
----------- -----------
$ 8,622,000 $ 9,067,000
Less Current Maturities 40,000 91,000
----------- -----------
$ 8,582,000 $ 8,976,000
----------- -----------
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, 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. Registrant filed one report on Form 8-
K during the quarter ended March 31, 1997. It was dated March 6, 1997, and
reported the adoption of a new Bylaw (Section 1A) by Registrant's Board of
Directors to provide for the election of a classified or "staggered" Board
commencing at the Annual Meeting of Stockholders on May 29, 1997.
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: May 1, 1997 By: /s/ Norman H. Asbjornson
--------------------------
Norman H. Asbjornson
President
Dated: May 1, 1997 By: /s/ William A. Bowen
--------------------------
William A. Bowen
Vice President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 211
<SECURITIES> 0
<RECEIVABLES> 11,815
<ALLOWANCES> 0
<INVENTORY> 9,879
<CURRENT-ASSETS> 23,773
<PP&E> 18,389
<DEPRECIATION> 8,464
<TOTAL-ASSETS> 34,553
<CURRENT-LIABILITIES> 9,584
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 16,362
<TOTAL-LIABILITY-AND-EQUITY> 34,553
<SALES> 16,880
<TOTAL-REVENUES> 16,880
<CGS> 13,666
<TOTAL-COSTS> 15,486
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 1,193
<INCOME-TAX> 477
<INCOME-CONTINUING> 716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 716
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
