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, 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. 6,176,449 shares of $.004 par value Common Stock.
<PAGE 2>
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 increased by
$12,235,000, 27% (from $45,946,000 to $58,181,000), during the
nine-month period ended September 30, 1997, compared to the same
period in 1996, and by $4,075,000, 24% (from $17,173,000 to
$21,248,000), during the third quarter of 1997 compared to 1996.
These increases were primarily from "rep" sales.
Net income increased by $511,000, 36% (from $1,416,000,
$.23 per share, to $1,927,000, $.31 per share), during the nine-
month period ended September 30, 1997, compared to the same
period in 1996. Net income decreased by $22,000, 4% (from
$522,000, $.09 per share, to $500,000, $.08 per share), during
the third quarter of 1997 compared to 1996.
The increase in sales during the first nine 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,
partially offset by lower margins during the second and third
quarters compared to the first quarter of 1997 due to increased
overtime and labor costs in the very tight Tulsa labor market and
increased selling, general and administrative costs ("SG&A").
SG&A costs increased $830,000, 18% to $5,539,000 for the nine-
month period ended September 30, 1997, from $4,709,000 for the
same period in 1996. This increase was due to higher
administrative costs associated with the increase in revenues.
SG&A increased $55,000, 3%, to $1,851,000 for the quarter ended
September 30, 1997, from $1,796,000 for the same quarter in 1996.
This increase was due to an increase in administrative costs
offset by a decrease in warranty expenses. Orders are well ahead
of last year and management anticipates increased sales and
earnings for the remainder of the year.
Financial Condition and Liquidity. The $2,971,000
increase in inventories (from $9,140,000 to $12,111,000) at
September 30, 1997, compared to December 31, 1996, reflects the
higher sales volume. Machinery and equipment increased by
$2,521,000 due to the purchase of a computerized and automated
sheering, punching and bending machine to enhance the Company's
sheet metal production. Long-term debt increased by $3,391,000
since year end due to the purchase of the above-referenced
machine and a higher amount of cash at September 30, 1997, due
primarily to the timing of payment to creditors.
Equipment purchases during the third quarter of 1997
totalled $1.2 million. The Company has commitments to purchase
additional equipment of $300,000 in December, 1997, and $1
million and $2.3 million in January and April, 1998,
respectively.
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.
<PAGE 3>
For information concerning the Company's long-term debt
at September 30, 1997, see Note 3 to the Financial Statements on
pages 7 and 8 of this report.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
Not applicable
<PAGE 4>
<TABLE> AAON, Inc.
Consolidated Balance Sheets
SEPT 30, DEC 31,
1997 * 1996
(In Thousands)
<CAPTION>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,117 $ 138
Accounts receivable 13,871 13,539
Inventories 12,111 9,140
Prepaid expenses 273 160
Deferred income tax 1,604 1,604
-------- --------
Total current assets 28,976 24,581
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 274 274
Buildings 7,364 7,278
Machinery and equipment 11,454 8,933
Furniture and fixtures 1,867 1,516
-------- --------
20,959 18,001
Less-accumulated depreciation 9,618 7,868
-------- --------
Net property, plant and equipment 11,341 10,133
OTHER ASSETS 852 855
-------- --------
$ 41,169 $ 35,569
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,487 $ 6,097
Accrued liabilities 4,630 4,765
Current maturities of long-term debt 40 91
-------- --------
Total current liabilities 11,157 10,953
-------- --------
LONG TERM DEBT 12,367 8,976
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000
shares authorized, 6,170,949 issued
and outstanding 25 25
Preferred stock, 5,000,000 shares
authorized, no shares issued
Additional paid-in capital 7,783 7,705
Retained earnings 9,837 7,910
-------- --------
Total stockholders' equity 17,645 15,640
-------- --------
$ 41,169 $ 35,569
======== ========
* Unaudited
</TABLE>
<PAGE 5>
<TABLE>
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,
1997* 1996* 1997* 1996*
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Sales, net $ 21,248 $ 17,173 $ 58,181 $ 45,946
Cost of sales 18,283 14,178 48,775 38,029
-------- -------- -------- --------
Gross profit 2,965 2,995 9,406 7,917
Selling, general and
administrative expenses 1,851 1,796 5,539 4,709
-------- -------- -------- --------
Income from operations 1,114 1,199 3,867 3,208
Interest expense 189 218 501 638
Amortization and other expense 47 122 118 286
-------- -------- -------- --------
Income before income taxes 878 859 3,248 2,284
Income tax provision 378 337 1,321 868
-------- -------- -------- --------
Net income $ 500 $ 522 $ 1,927 $ 1,416
======== ======== ======== ========
Net income per share* $ .08 $ .09 $ .31 $ .23
======== ======== ======== ========
* Unaudited
</TABLE>
<PAGE 6>
<TABLE>
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* 43,000 -0- 78,000 -0- 78,000
NET INCOME* -0- -0- -0- 1,927,000 1,927,000
----------- ----------- ----------- ----------- ----------
BALANCE, Sept 30, 1997* 6,171,000 $ 25,000 $ 7,783,000 $ 9,837,000 $17,645,000
=========== =========== =========== =========== ==========
*Unaudited
</TABLE>
<PAGE 7>
<TABLE>
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,
1997* 1996* 1997* 1996*
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,927 $ 1,416 $ 500 $ 522
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 1,750 1,857 627 621
Change in assets and liabilities:
<Increase> decrease in
accounts receivable <332> <5,174> <1,193> <2,828>
<Increase> decrease in inventories <2,971> <418> <1,532> 244
<Increase> decrease in prepaid expenses <113> <321> 556 <243>
Increase <decrease> in accounts payable 390 5,053 <248> 4,162
Increase <decrease> in accrued liabilities <135> 1,573 74 938
------- ------- ------- -------
Total adjustments <1,411> 2,570 <1,716> 2,894
------- ------- ------- -------
Net cash provided by <used in>
operating activities 516 3,986 <1,216> 3,416
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures <2,958> <882> <2,043> <348>
Payments for other assets 3 11 1 1
------- ------- ------- -------
Net cash used in investing activities <2,955> <871> <2,042> <347>
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 28,990 24,676 11,065 9,440
Payments under revolving credit agreement <26,830> <25,209> <8,490> <9,765>
Payments on long-term debt 1,180 <3,230> 1,250 <2,732>
Cash from issue of stock 78 10 23 0
------- ------- ------- -------
Net cash provided by <used in>
financing activities 3,418 <3,753> 3,848 <3,057>
------- ------- ------- -------
NET CHANGE IN CASH 979 <638> 590 12
CASH, beginning of period 138 663 527 13
------- ------- ------- -------
CASH, end of period $ 1,117 $ 25 $ 1,117 $ 25
======= ======= ======= =======
* Unaudited
</TABLE>
<PAGE 8>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
September 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 September 30, 1997 (unaudited), and December 31,
1996, consist of the following:
Sept. 30, December 31,
1997 1996
----------- -----------
Raw Materials $8,064,000 $5,510,000
Work in Process 1,994,000 1,385,000
Finished Goods 2,053,000 2,245,000
----------- -----------
$12,111,000 $9,140,000
----------- -----------
3. LONG-TERM DEBT:
Long-term debt at September 30, 1997 (unaudited), and December
31, 1996, consists of the following:
Sept. 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 Sept. 30, 1997)
collateralized by
real estate
$ 297,000 $ 327,000
<PAGE 9>
$15,150,000 maximum bank line
of credit with interest at
LIBOR plus 1.85% (7.5062%
at September 30, 1997) due
June 30, 1999 collateralized
by accounts receivable,
inventory, and intangibles
of AAON and CP/AAON
$10,850,000 $8,690,000
Other $ -0- $ 50,000
___________ __________
$10,850,000 $ 9,067,000
$2,140,000 GE Capital line of
credit with interest at the
30 day commerical paper rate
plus 1.75% (7.31% at Sept. 30,
1997) collateralized by new
Salvagnini metal processing machine,
payable in 84 equal monthly
installments beginning one month
after the loan is fully advanced
(estimated to be in Feb. 1998).
$ 1,260,000 $ -0-
Less Current Maturities 40,000 91,000
----------- -----------
$12,367,000 $ 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 10>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K - Registrant filed a Form
8-K dated September 12, 1997, reporting its
execution of Amendment One to Second Restated
Revolving Credit Loan Agreement effective
June 30, 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: November 10, 1997 By: /s/ Norman H. Asbjornson
------------------------
Norman H. Asbjornson
President
Dated: November 10, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,117
<SECURITIES> 0
<RECEIVABLES> 13,871
<ALLOWANCES> 0
<INVENTORY> 12,111
<CURRENT-ASSETS> 28,976
<PP&E> 20,959
<DEPRECIATION> 9,618
<TOTAL-ASSETS> 41,169
<CURRENT-LIABILITIES> 11,157
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 17,620
<TOTAL-LIABILITY-AND-EQUITY> 41,169
<SALES> 58,181
<TOTAL-REVENUES> 58,181
<CGS> 48,775
<TOTAL-COSTS> 54,314
<OTHER-EXPENSES> 118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 501
<INCOME-PRETAX> 3,248
<INCOME-TAX> 1,321
<INCOME-CONTINUING> 1,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,927
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
