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, 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. 6,128,574 shares of $.004 par value Common Stock.
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 $6,680,000 (from $52,626,000 to $45,946,000) during the nine- month period ended September 30, 1996, compared to the same period in 1995, but increased by $1,566,000 (from $15,607,000 to $17,173,000) during the third quarter of 1996 compared to 1995. Net income decreased by $526,000 (from $1,942,000, $.32 per share, to $1,416,000, $.23 per share) during the nine-month period ended September 30, 1996, compared to the same period in 1995, but increased by $264,000 (from $258,000, $.04 per share, to $522,000, $.09 per share) during the third quarter of 1996 compared to 1995. The decline in sales during the first six months of 1996 compared to 1995 reflected a continuation of reduction of business with two major customers, which appears to have bottomed out. This change, together with an increase in sales to other customers, allowed the Company to experience greater sales in the third quarter of 1996. The increase in earnings in the third quarter was attributable to the higher sales and improved margins. Management expects earnings in the fourth quarter of the year to be much stronger than in the fourth quarter of 1995. During the course of 1996, the Company has moved from a majority of its business being with national accounts to a preponderance of business with other customers. This trend should continue unless pending sizeable potential business with national accounts were to materialize. FINANCIAL CONDITION AND LIQUIDITY. The increase of $5,173,000 (from $9,846,000 to $15,019,000) in accounts receivable during the first nine months of 1996, was attributable to both the increase in sales since year end and slower collections. The $5,053,000 increase (from $4,424,000 to $9,477,000) in accounts payable resulted from higher third quarter sales, purchases for anticipated fourth quarter sales and, to a lesser extent, a stretch out of payments to creditors. The $1,573,000 increase (from $2,605,000 to $4,178,000) in accrued liabilities was attributable to building adequate reserves commensurate with third quarter results and projected annual requirements. Due to earnings and greatly reduced capital expenditures during the first nine months of 1996, the Company has reduced long-term debt by approximately $3 million since December 31, 1995. 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 September 30, 1996, see Note 3 to the Financial Statements appearing on pages 7 and 8 of this report.
AAON, Inc. Consolidated Balance Sheets SEPT 30, DEC 31, 1996 * 1995 (In Thousands) ASSETS CURRENT ASSETS: Cash $ 25 $ 663 Accounts receivable 15,019 9,846 Inventories 9,479 9,061 Prepaid expenses 796 475 Deferred income tax 1,104 1,104 -------- -------- Total current assets 26,423 21,149 -------- -------- PROPERTY, PLANT, AND EQUIPMENT, at cost: Land 274 274 Buildings 7,274 7,246 Machinery and equipment 8,111 7,523 Furniture and fixtures 1,366 1,100 -------- -------- 17,025 16,143 Less-accumulated depreciation <7,473> <5,831> -------- -------- Net property, plant and equipment 9,552 10,312 OTHER ASSETS 526 751 -------- -------- $ 36,501 $ 32,212 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 9,477 $ 4,424 Accrued liabilities 4,178 2,605 Current maturities of long-term debt 172 942 -------- -------- Total current liabilities 13,827 7,971 -------- -------- LONG TERM DEBT 7,702 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 7,251 5,835 -------- -------- Total stockholders' equity 14,972 13,546 -------- -------- $ 36,501 $ 32,212 ======== ======== * Unaudited
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, 1996* 1995* 1996* 1995* (In Thousands) Sales, net $ 17,173 $ 15,607 $ 45,946 $ 52,626 Cost of sales 14,178 13,202 38,029 43,701 -------- -------- -------- -------- Gross profit 2,995 2,405 7,917 8,925 Selling, general and administrative expenses 1,796 1,633 4,709 4,975 -------- -------- -------- -------- Income from operations 1,199 772 3,208 3,950 Interest expense 218 199 638 580 Amortization and other expense 122 105 286 367 -------- -------- -------- -------- Income before income taxes 859 468 2,284 3,003 Income tax provision 337 210 868 1,061 -------- -------- -------- -------- Net income $ 522 $ 258 $ 1,416 $ 1,942 ======== ======== ======== ======== Net income per share* $ .09 $ .04 $ .23 $ .32 ======== ======== ======== ======== * Unaudited <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, 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- 1,416,000 1,416,000 ----------- ----------- ----------- ----------- ----------- BALANCE, September 30, 1996* 6,122,000 $ 24,000 $ 7,697,000 $ 7,251,000 $14,972,000 =========== =========== =========== =========== =========== * Unaudited </TABLE> <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, 1996* 1995* 1996* 1995* (In Thousands) <S> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,416 $ 1,942 $ 522 $ 258 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 1,857 2,026 621 654 Change in assets and liabilities: <Increase> decrease in accounts receivable <5,174> 1,371 <2,828> <964> <Increase> decrease in inventories <418> 262 244 <1,016> <Increase> decrease in prepaid expenses <321> 426 <243> 315 Increase <decrease> in accounts payable 5,053 <1,309> 4,162 856 Increase <decrease> in accrued liabilities 1,573 <1,019> 938 <631> ------- ------- ------- ------- Total adjustments 2,570 1,757 2,894 <786> ------- ------- ------- ------- Net cash provided by <used in> operating activities 3,986 3,699 3,416 <528> ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures <882> <3,918> <348> <1,153> Payments for other assets 11 49 1 11 ------- ------- ------- ------- Net cash used in investing activities <871> <3,869> <347> <1,142> ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing under revolving credit agreement 24,676 32,494 9,440 10,461 Payments under revolving credit agreement <25,209> <32,023> <9,765> <8,560> Payments on long-term debt <3,230> <313> <2,732> <244> Cash from issue of stock 10 13 0 11 ------- ------- ------- ------- Net cash provided by <used in> financing activities <3,753> 171 <3,057> 1,668 ------- ------- ------- ------- NET CHANGE IN CASH <638> 1 12 <2> CASH, beginning of period 663 26 13 29 ------- ------- ------- ------- CASH, end of period $ 25 $ 27 $ 25 $ 27 ======= ======= ======= ======= * Unaudited </TABLE>
AAON, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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 September 30, 1996 (unaudited), and December 31, 1995, consist of the following: Sept. 30, December 31, 1996 1995 ------------ ------------ Raw Materials $ 5,500,000 $ 5,301,000 Work in Process 1,750,000 1,366,000 Finished Goods 2,229,000 2,394,000 ------------ ------------ $ 9,479,000 $ 9,061,000 ------------ ------------ 3. LONG-TERM DEBT: Long-term debt at September 30, 1996 (unaudited), and December 31, 1995, consists of the following: Sept. 30 December 31 1996 1995 ----------- ------------ Three term loan agreements, payable in monthly principal payments totaling $50,000 through January 1999, with a balloon payment in January 1999, plus interest payable monthly at Chase Manhattan Bank prime plus 0.5% collateralized by machinery, equipment and real estate $ -0- $ 2,930,000
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 Sept. 30, 1996) collateralized by real estate $ 337,000 $ 367,000 $12,150,000 maximum bank line of credit with interest at LIBOR plus 1.85% (7.2875% at Sept. 30, 1996) due June 30, 1998 collateralized by accounts receivables, inventory, and intangibles of AAON and CP/AAON $ 7,405,000 $ 7,938,000 Other $ 132,000 $ 402,000 ------------ ------------ $ 7,874,000 $11,637,000 Less Current Maturities 172,000 942,000 ------------ ------------ $ 7,702,000 $10,695,000 ------------ ------------ 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, 1995, 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
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K. Registrant filed one report on Form 8-K during the quarter ended September 30, 1996. It was dated September 11, 1996, and reported Registrant's execution on that date of the Second Restated Revolving Credit Loan Agreement. 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: October 28, 1996 By: /s/ Norman H. Asbjornson Norman H. Asbjornson President Dated: October 28, 1996 By: /s/ William A. Bowen William A. Bowen Vice President-Finance