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, 1998
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.
6,178,449 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
$6,625,000, 39% (from $16,880,000 to $23,505,000), during the
three-month period ended March 31, 1998, compared to the same
period in 1997.
Net income increased by $388,000, 54% [from $716,000,
$.12 per share (basic), to $1,104,000, $.18 per share (basic)],
during the first quarter of 1998, compared to the same quarter in
1997.
The increase in sales during the first three months of
1998 compared to 1997 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 due to increased labor costs in the very
tight Tulsa labor market and outsourcing of sheet metal
fabrication. Also, despite the much higher sales in the first
quarter of 1998 compared to 1997, selling, general and
administrative expenses increased only 14% (from $1,135,000 to
$1,292,000). 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 $951,000
increase in inventories (from $10,652,000 to $11,603,000) at March
31, 1998, compared to December 31, 1997, reflects the higher sales
volume. Although machinery and equipment increased by $983,000
during the three months ended March 31, 1998, net cash provided by
operations of $1,765,000 allowed the Company to reduce its long-
term debt by $665,000.
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, 1998, 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,
1998 * 1997
(In Thousands)
<CAPTION>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 11 $ 26
Accounts receivable 14,495 14,018
Inventories 11,603 10,652
Prepaid expenses 455 403
Deferred income tax 1,043 1,043
-------- --------
Total current assets 27,607 26,142
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 874 874
Buildings 11,926 11,865
Machinery and equipment 12,889 11,906
Furniture and fixtures 1,911 1,909
-------- --------
27,600 26,554
Less-accumulated depreciation 10,647 9,969
-------- --------
Net property, plant and equipment 16,953 16,585
OTHER ASSETS 42 42
-------- --------
$ 44,602 $ 42,769
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,452 $ 7,137
Accrued liabilities 4,875 3,727
Current maturities of long-term debt 248 175
-------- --------
Total current liabilities 12,575 11,039
-------- --------
LONG TERM DEBT 11,984 12,857
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.004 par, 50,000,000
shares authorized, 6,191,199 issued
and outstanding 25 25
Preferred stock, 5,000,000 shares
authorized, no shares issued
Additional paid-in capital 7,981 7,916
Retained earnings 12,037 10,932
-------- --------
Total stockholders' equity 20,043 18,873
-------- --------
$ 44,602 $ 42,769
======== ========
* Unaudited
</TABLE>
<PAGE 3>
<TABLE>
AAON, Inc.
Consolidated Statements of Operations
Three Three
Months Months
Ended Ended
MARCH 31, MARCH 31,
1998* 1997*
(In Thousands)
<CAPTION>
<S> <C> <C>
Sales, net $ 23,505 $ 16,880
Cost of sales 19,655 13,666
-------- --------
Gross profit 3,850 3,214
Selling, general and
administrative expenses 2,005 1,820
-------- --------
Income from operations 1,845 1,394
Interest expense 140 156
Amortization and other expense <28> 45
-------- --------
Income before income taxes 1,733 1,193
Income tax provision 629 477
-------- --------
Net income $ 1,104 $ 716
======== ========
Net income per share (Basic) $ .18 $ .12
======== ========
(Diluted) $ .17 $ .11
======== ========
* Unaudited
</TABLE>
<PAGE 4>
<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, 1997 6,176,000 $ 25,000 $ 7,916,000 $10,932,000 $18,873,000
ISSUE OF COMMON STOCK* 15,200 -0- 66,000 -0- 66,000
NET INCOME -0- -0- -0- 1,104,000 1,104,000
----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1998* 6,191,200 $ 25,000 $ 7,982,000 $12,036,000 $20,043,000
=========== =========== =========== =========== ===========
*Unaudited
</TABLE>
<PAGE 5>
<TABLE>
AAON, Inc.
Consolidated Statements of Cash Flows
<CAPTION>
Three Three
Months Months
Ended Ended
MARCH 31, MARCH 31,
1998* 1997*
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,104 $ 716
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 678 596
Change in assets and liabilities:
<Increase> decrease in:
Accounts Receivable <477> 1,724
Inventories <951> <739>
Prepaid Expenses <52> <104>
Increase <decrease> in:
Accounts Payable 315 <1,668>
Accrued Liabilities 1,148 350
------- -------
Total adjustments 661 159
------- -------
Net cash provided by <used in>
Operating Activities 1,765 875
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures <1,046> <388>
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under revolving credit agreement 9,000 8,675
Payments under revolving credit agreement <10,705> <9,060>
Changes in long-term debt 905 <60>
Cash from issue of stock 66 31
------- -------
Net cash provided by <used in>
financing activities <734> <414>
------- -------
NET CHANGE IN CASH <15> 73
CASH, beginning of period 26 138
------- -------
CASH, end of period $ 11 $ 211
======= =======
* Unaudited
</TABLE>
<PAGE 6>
AAON, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
March 31, 1998
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,
1997, filed by AAON, Inc. with the SEC. Management believes that
no adjustments to the financial statements are necessary.
2. INVENTORIES:
Inventories at March 31, 1998 (unaudited), and December 31, 1997,
consist of the following:
March 31, December 31,
1998 1997
------------ ------------
Raw Materials $6,771,000 $7,073,000
Work in Process 2,621,000 2,136,000
Finished Goods 2,211,000 1,443,000
------------ ------------
$11,603,000 $10,652,000
------------- -------------
3. LONG-TERM DEBT:
Long-term debt at March 31, 1998 (unaudited), and December 31,
1997, consists of the following:
March 31, December 31
1998 1997
--------- -----------
Bank Note,
payable in monthly principal
payments of $3,333 through
February 2000, with a balloon
payment in March 2000, plus
interest payable monthly at
bank's base rate plus 0.25%
(8.75% at Sept. 30, 1997)
collateralized by
real estate
$ 277,000 $ 287,000
<PAGE 7>
$15,150,000 bank line of credit
with interest payable monthly
at LIBOR plus 1.85% (7.44375%
at March 31, 1998) due
June 30, 1999 collateralized
by accounts receivable,
inventory, and intangibles
of AAON and AAON COIL PRODUCTS
9,780,000 11,485,000
Note payable due in 84 month
equal installments estimated
to begin in May, 1998, plus
interest at the 30 day paper
commercial rate plus 1.75%
(7.47% at March 31, 1998)
collateralized by machinery
and equipment.
2,175,000 1,260,000
----------- -----------
12,232,000 13,032,000
Less Current Maturities 248,000 175,000
----------- -----------
$11,984,000 $12,857,000
----------- -----------
4. FOOTNOTES INCORPORATED BY REFERENCE:
Certain footnotes are applicable to the financial statements, but
would be substantially unchanged from those presented in the
December 31, 1997, 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 Commitment
<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: May 5, 1998 By: /s/ Norman H. Asbjornson
-------------------------
Norman H. Asbjornson
President
Dated: May 5, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 14,495
<ALLOWANCES> 0
<INVENTORY> 11,603
<CURRENT-ASSETS> 27,607
<PP&E> 27,600
<DEPRECIATION> 10,647
<TOTAL-ASSETS> 44,602
<CURRENT-LIABILITIES> 12,575
<BONDS> 11,984
0
0
<COMMON> 25
<OTHER-SE> 20,018
<TOTAL-LIABILITY-AND-EQUITY> 44,602
<SALES> 23,505
<TOTAL-REVENUES> 23,505
<CGS> 19,655
<TOTAL-COSTS> 21,660
<OTHER-EXPENSES> (28)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 1,733
<INCOME-TAX> 629
<INCOME-CONTINUING> 1,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,104
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
</TABLE>
