UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________.
Commission file number: 0-18953
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0448736
------ ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) 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 by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer |_| Accelerated filer |X|
Non-accelerated filer |_| Smaller reporting company |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
As of April 29, 2009 registrant had outstanding a total of 17,160,722 shares of
its $.004 par value Common Stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AAON, Inc., and Subsidiaries
Consolidated Balance Sheets
(unaudited)
March 31, December 31,
2009 2008
-------------------------------------------------
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents $ 3,725 $ 269
Accounts receivable, net 40,891 38,804
Inventories, net 33,802 36,382
Prepaid expenses and other 513 428
Deferred tax assets 4,731 4,235
-------------------------------------------------
Total current assets 83,662 80,118
Property, plant and equipment
Land 2,128 2,153
Buildings 37,391 36,371
Machinery and equipment 89,638 87,219
Furniture and fixtures 7,096 7,076
-------------------------------------------------
Total property, plant and equipment 136,253 132,819
Less: Accumulated depreciation 74,522 72,269
-------------------------------------------------
Property, plant and equipment, net 61,731 60,550
Notes receivable, long-term 75 75
-------------------------------------------------
Total assets $ 145,468 $ 140,743
=================================================
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility $ - $ 2,901
Current maturities of long-term debt 91 91
Accounts payable 14,212 14,715
Dividends payable - 2,773
Accrued liabilities 24,025 19,038
-------------------------------------------------
Total current liabilities 38,328 39,518
Other long-term liabilities 99 121
Deferred tax liabilities 4,436 4,582
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 7,500,000 shares authorized, no
shares issued - -
Common stock, $.004 par value, 75,000,000 shares authorized,
17,170,214 and 17,208,733 issued and outstanding at March 31,
2009 and December 31, 2008, respectively 71 71
Additional paid-in capital 36 538
Accumulated other comprehensive income, net of tax 635 778
Retained earnings 101,863 95,135
-------------------------------------------------
Total stockholders' equity 102,605 96,522
-------------------------------------------------
Total liabilities and stockholders' equity $ 145,468 $ 140,743
=================================================
The accompanying notes are an integral part of these statements.
-1-
AAON, Inc., and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended
March 31, 2009 March 31, 2008
--------------------------------------------
(in thousands, except per share data)
Net sales $ 63,965 $ 65,456
Cost of sales 47,031 49,804
------------------ -----------------
Gross profit 16,934 15,652
Selling, general and administrative expenses 6,535 5,902
------------------ -----------------
Income from operations 10,399 9,750
Interest expense (9) (3)
Interest income - 21
Other income, net 245 130
------------------ -----------------
Income before income taxes 10,635 9,898
Income tax provision 3,907 3,464
------------------ -----------------
Net income $ 6,728 $ 6,434
================== =================
Earnings per share:
Basic $ 0.39 $ 0.36
================== =================
Diluted $ 0.39 $ 0.35
================== =================
Cash dividends declared per common share: $ 0.00 $ 0.00
================== =================
Weighted average shares outstanding:
Basic 17,189 18,049
================== =================
Diluted 17,335 18,311
================== =================
The accompanying notes are an integral part of these statements.
-2-
AAON, Inc., and Subsidiaries
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(unaudited)
Accumulated
Other
Common Stock Paid-in Comprehensive Retained
Shares Amount Capital Income Earnings Total
--------------------------------------------------------------------------------------
(in thousands)
Balance at December 31, 2008 17,209 $ 71 $ 538 $ 778 $ 95,135 $ 96,522
Comprehensive income:
Net income - - - - 6,728 6,728
Foreign currency translation
adjustment - - - (143) - (143)
-------------
Total comprehensive income 6,585
Stock options exercised and restricted
stock awards vested, including tax
benefits - - 12 - - 12
Share-based compensation - - 188 - - 188
Stock repurchased and retired (39) - (702) - - (702)
--------------------------------------------------------------------------------------
Balance at March 31, 2009 17,170 $ 71 $ 36 $ 635 $ 101,863 $ 102,605
======================================================================================
The accompanying notes are an integral part of these statements.
-3-
AAON, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Three Months Three Months
Ended Ended
March 31, 2009 March 31, 2008
---------------------------------------------------------
(in thousands)
Operating Activities
Net income $ 6,728 $ 6,434
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,282 2,457
Provision for losses on accounts receivable 410 26
Share-based compensation 188 241
Excess tax benefits from stock options exercised
and restricted stock awards vested (2) (119)
Deferred income taxes (718) (427)
Changes in assets and liabilities:
Accounts receivable (2,537) 2,212
Inventories, net 2,557 (1,199)
Prepaid expenses and other (87) (125)
Accounts payable (452) 824
Accrued liabilities 4,996 (134)
---------------------------------------------------------
Net cash provided by operating activities 13,365 10,190
---------------------------------------------------------
Investing Activities
Capital expenditures (3,512) (972)
---------------------------------------------------------
Net cash used in investing activities (3,512) (972)
---------------------------------------------------------
Financing Activities
Borrowings under revolving credit facility 9,972 4,219
Payments under revolving credit facility (12,873) (4,219)
Payments of long-term debt (22) (23)
Stock options exercised 10 79
Excess tax benefits from stock options exercised
and restricted stock awards vested 2 119
Repurchase of stock (702) (1,823)
Cash dividends paid to stockholders (2,773) (2,943)
---------------------------------------------------------
Net cash used in financing activities (6,386) (4,591)
---------------------------------------------------------
Effect of exchange rate on cash (11) (32)
---------------------------------------------------------
Net increase in cash and cash equivalents 3,456 4,595
---------------------------------------------------------
Cash and cash equivalents, beginning of year 269 879
---------------------------------------------------------
Cash and cash equivalents, end of period $ 3,725 $ 5,474
=========================================================
The accompanying notes are an integral part of these statements.
-4-
AAON, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
March 31, 2009
(unaudited)
1. Basis of Presentation
AAON, Inc. is a Nevada corporation which was incorporated on August 18, 1987.
Our subsidiaries include AAON, Inc., an Oklahoma corporation, AAON Coil
Products, Inc., a Texas corporation, AAON Canada, Inc., d/b/a Air Wise, an
Ontario corporation and AAON Properties, Inc., an Ontario corporation. AAON
Properties is the lessor of property in Burlington, Ontario, Canada, to AAON
Canada. The Consolidated Financial Statements include our accounts and the
accounts of our subsidiaries. Unless the context otherwise requires, references
in this Annual Report to "AAON," the "Company", "we," "us," "our" or "ours"
refer to AAON, Inc., and our subsidiaries.
We have prepared the financial statements included herein 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 accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such
rules and regulations. We believe 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 our latest audited financial statements which were included in the Form 10-K
Report for the fiscal year ended December 31, 2008, filed with the SEC. In the
opinion of management, the accompanying financial statements include all normal,
recurring adjustments required for a fair presentation of the results of the
periods presented. Operating results for the three months ended March 31, 2009,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2009.
Revenue Recognition
We recognize revenues from sales of products when the products are shipped and
the title and risk of ownership pass to the customer. Selling prices are fixed
based on purchase orders or contractual agreements. Sales allowances and
customer incentives are treated as reductions to sales and are provided for
based on historical experiences and current estimates. For sales initiated by
independent manufacturer representatives, we recognize revenues net of the
representatives' commission. Our policy is to record the collection and payment
of sales taxes through a liability account.
Currency
Foreign currency transactions and financial statements are translated in
accordance with Financial Accounting Standards Board ("FASB") Statement 52,
Foreign Currency Translations. We use the U.S. dollar as our functional
currency, except for the Canadian subsidiaries, which use the Canadian dollar.
Adjustments arising from translation of the Canadian subsidiaries' financial
statements are reflected in accumulated other comprehensive income. Transaction
gains or losses that arise from exchange rate fluctuations applicable to
transactions denominated in Canadian currency are included in the results of
operations as incurred.
New Accounting Pronouncements
In December 2007, the FASB issued SFAS 141(R), Business Combinations ("SFAS
141R"), which replaced FASB Statement 141, Business Combinations. This statement
significantly changed the accounting for business combinations and
noncontrolling interests. Among other things, when compared to the predecessor
guidance SFAS 141R will require (i) more assets acquired and liabilities assumed
to be measured at fair value as of the acquisition date, (ii) liabilities
related to contingent consideration to be remeasured to fair value each
subsequent reporting period, and (iii) acquirer in preacquisition periods to
expense all acquisition-related costs. SFAS 141R must be applied prospectively
for fiscal years beginning after December 15, 2008. Adoption of SFAS 141R did
not have a material impact on our Consolidated Financial Statements.
-5-
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51 ("SFAS 160"),
which changes the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS 160 must be adopted no later than January 1, 2009. Adoption of SFAS
160 did not have a material impact on our Consolidated Financial Statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities--an Amendment of FASB Statement No. 133
("SFAS 161"), which requires enhanced disclosures about (i) how and why an
entity uses derivative instruments, (ii) how derivative instruments and related
hedged items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended ("SFAS 133") and its related
interpretations and (iii) how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. Adoption of SFAS 161 did not
have a material impact on our Consolidated Financial Statements.
In June 2008, the Emerging Issues Task Force ("EITF") issued No. 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities ("EITF 03-6-1"), which addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share ("EPS") under the two-class method. EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. Adoption of EITF
03-6-1 did not have a material impact on our Consolidated Financial Statements.
In December 2008, the FASB issued FSP No. FAS 132 R-1, Employers' Disclosures
about Postretirement Benefit Plan Assets ("FAS 132R-1"), which provides guidance
on an employer's disclosures about plan assets of a defined benefit pension or
other postretirement plan and requires employers to provide more transparency
about the assets held by retirement plans and the concentrations of risk in
those plans. FAS 132 R-1 will be effective for fiscal years beginning after
December 15, 2009. We do not expect the adoption of FAS 132 R-1 to have a
material impact on our Consolidated Financial Statements.
2. Accounts Receivable
We grant credit to customers and perform ongoing credit evaluations. We
generally do not require collateral or charge interest. We establish an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends, economic and market conditions and the
age of the receivable. Past due accounts are generally written off against the
allowance for doubtful accounts only after all collection attempts have been
exhausted.
Accounts receivable and the related allowance for doubtful accounts are as
follows:
March 31, December 31,
2009 2008
------------------------------------------------------
(in thousands)
Accounts receivable $ 42,096 $ 39,599
Less: Allowance for doubtful accounts (1,205) (795)
------------------------------------------------------
Total, net $ 40,891 $ 38,804
======================================================
Three Months Ended
March 31, 2009 March 31, 2008
------------------------------------------------------
(in thousands)
Allowance for doubtful accounts:
Balance, beginning of period $ 795 $ 407
Provision for losses on accounts receivable 158 160
Adjustments to provision 252 (134)
Accounts receivable written off, net of recoveries - (126)
------------------------------------------------------
Balance, end of period $ 1,205 $ 307
======================================================
-6-
3. Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out ("FIFO") method. We establish an allowance for excess and
obsolete inventories based on product line changes, the feasibility of
substituting parts and the need for supply and replacement parts. Inventory
balances and the related changes in the allowance for excess and obsolete
inventories account are as follows:
March 31, December 31,
2009 2008
------------------------------------------------------
(in thousands)
Raw materials $ 29,880 $ 32,212
Work in process 2,315 2,545
Finished goods 2,207 1,975
------------------------------------------------------
34,402 36,732
Less: Allowance for excess and obsolete inventories (600) (350)
------------------------------------------------------
Total, net $ 33,802 $ 36,382
======================================================
Three Months Ended
March 31, March 31,
2009 2008
------------------------------------------------------
(in thousands)
Allowance for excess and obsolete inventories:
Balance, beginning of period $ 350 $ 350
Provision for excess and obsolete inventories 450 -
Adjustments to reserve (200) -
------------------------------------------------------
Balance, end of period $ 600 $ 350
======================================================
4. Accrued Liabilities
Accrued liabilities are as follows:
March 31, December 31,
2009 2008
------------------------------------------------------
(in thousands)
Warranty $ 7,000 $ 6,589
Commissions 9,737 8,816
Payroll 3,327 1,883
Income taxes 1,605 -
Workers' compensation 473 610
Medical self-insurance 621 886
Employee benefits and other 1,262 254
------------------------------------------------------
Total $ 24,025 $ 19,038
======================================================
5. Supplemental Cash Flow Information
Interest payments of $9,000 and $3,000 were made for the three months ended
March 31, 2009 and 2008, respectively. There were no income tax payments made
during the three months ended March 31, 2009, compared to the $2.0 million paid
during the three months ended March 31, 2008. Dividends payable of $2.8 million
were accrued as of December 31, 2008 and paid in January 2009.
6. Revolving Credit Facility
Our revolving credit facility provides for maximum borrowings of $15.2 million
which is provided by the Bank of Oklahoma, National Association. Under the line
of credit, there is one standby letter of credit totaling $1.0 million. The
letter of credit was a requirement of our workers compensation insurance and has
been renewed and will expire December 31, 2009. Interest on borrowings is
payable monthly at the Wall Street Journal prime rate less 0.5% or LIBOR plus
1.6%, at our election (2.10% at March 31, 2009). No fees are associated with the
unused portion of the committed amount.
-7-
At March 31, 2009, we did not have an outstanding balance under the revolving
credit facility. At December 31, 2008, we had $2.9 million borrowed under the
revolving credit facility. Borrowings available under the revolving credit
facility at March 31, 2009 were $14.2 million. At March 31, 2009, we were in
compliance with our financial ratio covenants. The covenants are related to our
tangible net worth, total liabilities to tangible net worth ratio and working
capital. At March 31, 2009 our tangible net worth was $102.6 million. Our total
liabilities to tangible net worth ratio was 2:5. Our working capital was $45.3
million. On July 30, 2008, we renewed the line of credit with a maturity date of
July 30, 2009. We expect to renew our revolving credit agreement in July 2009.
We do not anticipate the current situation in the credit market to impact our
renewal.
7. Share-Based Compensation
We have historically maintained a stock option plan for key employees, directors
and consultants (the "1992 Plan"). The 1992 Plan provided for 4.4 million shares
of common stock to be issued under the plan. Under the terms of the 1992 Plan,
the exercise price of shares granted may not be less than 85% of the fair market
value at the date of the grant. Options granted to directors prior to May 25,
2004, vest one year from the date of grant and are exercisable for nine years
thereafter. Options granted to directors on or after May 25, 2004, vest
one-third each year, commencing one year after the date of grant. All other
options granted vest at a rate of 20% per year, commencing one year after date
of grant, and are exercisable during years 2-10.
On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan ("LTIP")
which provides an additional 750,000 shares that can be granted in the form of
stock options, stock appreciation rights, restricted stock awards, performance
units and performance awards. Since inception of the LTIP, non-qualified stock
options and restricted stock awards have been granted with the same vesting
schedule as the previous plan. Under the LTIP, the exercise price of shares
granted may not be less than 100% of the fair market value at the date of the
grant.
We apply the provisions of Statement of Financial Accounting Standards No.
123(R) Share-Based Payment ("SFAS 123R"). The compensation cost is based on the
grant date fair value of stock options issued calculated using a
Black-Scholes-Merton Option Pricing Model, or the grant date fair value of a
restricted stock award less the present value of dividends, in accordance with
the provisions of SFAS 123R.
We recognized approximately $105,000 and $124,000 for the three months ended
March 31, 2009 and 2008, respectively, in pre-tax compensation expense related
to stock options in the Consolidated Statements of Income. The total pre-tax
compensation cost related to unvested stock options not yet recognized as of
March 31, 2009 is $1.4 million and is expected to be recognized over a
weighted-average period of 2.3 years.
The following assumptions were used to determine the fair value of the unvested
stock options on the original grant date for expense recognition purposes for
options:
Three Months Ended
March 31, 2009 March 31, 2008
------------------------------------------------------
Directors and Officers:
Expected dividend yield 1.79% 1.81%
Expected volatility 47.47% 43.52%
Risk-free interest rate 2.53% 2.84%
Expected life 7.0 years 8.0 years
Forfeiture rate 0% 0%
Employees:
Expected dividend yield 1.79% 1.81%
Expected volatility 46.94% 42.55%
Risk-free interest rate 2.52% 2.84%
Expected life 8.0 years 6.3 years
Forfeiture rate 31% 28%
-8-
The expected term of the options is based on evaluations of historical and
expected future employee exercise behavior. The risk-free interest rate is based
on the U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the expected life at the grant date. Volatility is based
on historical volatility of our stock.
A summary of stock options outstanding is as follows:
Options Outstanding Options Exercisable
--------------------------------------------------------------- -----------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Aggregate Number Average
Range of Outstanding at Contractual Exercise Intrinsic Exercisable at Exercise
Exercise Prices March 31, 2009 Life Price Value March 31, 2009 Price
-------------------------------------------------------------------------------------------------------------------------------
$ 0.00 - $ 3.85 82,913 0.53 $ 3.85 $ 14.27 82,913 $ 3.85
$ 5.73 - $11.29 173,663 3.84 8.93 9.19 138,863 8.45
$11.40 - $12.00 33,900 6.46 11.60 6.52 22,500 11.64
$12.68 - $15.55 136,000 8.95 15.10 3.02 25,100 14.42
$15.99 - $21.01 235,200 7.78 17.29 0.83 77,750 17.28
------------------------------------------------------------------------------------------------------
Total 661,676 6.01 $ 12.67 $ 8.15 347,126 $ 9.97
======================================================================================================
A summary of stock option activity is as follows:
Weighted
Average
Remaining Aggregate
Weighted Average Contractual Intrinsic
Shares Exercise Price Term Value ($000)
---------------- ------------------ ---------------- --------------
Outstanding at January 1, 2009 579,576 $ 12.29
Granted 85,000 15.42
Exercised (900) 10.82
Forfeited or Expired (2,000) 19.42
---------------- ------------------
Outstanding at March 31, 2009 661,676 12.67 6.01 $ 3,606
================ ================== ================ ==============
Exercisable at March 31, 2009 347,126 $ 9.97 4.01 $ 2,830
================ ================== ================ ==============
The weighted average grant date fair value of options granted during the three
months ended March 31, 2009 and 2008 was $6.57 and $6.69, respectively. The
total intrinsic value of options exercised during the three months ended March
31, 2009 and 2008 was approximately $18,000 and $342,000, respectively. The cash
received from options exercised during the three months ended March 31, 2009 and
2008, was approximately $10,000 and $79,000, respectively. The impact of these
cash receipts is included in financing activities in the accompanying
Consolidated Statements of Cash Flows.
A summary of the unvested stock options is as follows:
Weighted Average
Grant Date
Shares Fair Value
----------------- ----------------------
Unvested at January 1, 2009 242,600 $ 6.68
Granted 85,000 6.57
Vested (13,050) 7.01
Forfeited - -
----------------- ----------------------
Unvested at March 31, 2009 314,550 $ 6.64
================= ======================
The Compensation Committee of the Board of Directors has authorized and issued
restricted stock awards to our officers and key employees. The restricted stock
award program offers the opportunity to earn shares of AAON common stock over
time, rather than options that give the right to purchase stock at a set price.
Restricted stock awards granted to directors vest one-third each year. All other
restricted stock awards vests at a rate of 20% per year. Restricted stock awards
are grants that entitle the holder to shares of common stock subject to certain
terms. The fair value of restricted stock awards is based on the fair market
value of AAON common stock on the respective grant dates, reduced for the
present value of dividends.
-9-
These awards are recorded at their fair values on the date of grant and
compensation cost is recorded using straight-line vesting over the service
period. We recognized approximately $83,000 and $117,000 for the three months
ended March 31, 2009 and 2008, respectively in pre-tax compensation expense
related to restricted stock awards in the Consolidated Statements of Income. In
addition, as of March 31, 2009, unrecognized compensation cost related to
unvested restricted stock awards was approximately $601,000 which is expected to
be recognized over a weighted average period of 1.6 years.
A summary of the unvested restricted stock awards is as follows:
Shares
----------------------
Unvested at January 1, 2009 42,450
Granted -
Vested -
Forfeited -
----------------------
Unvested at March 31, 2009 42,450
======================
8. Earnings Per Share
Basic net income per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
net income per share assumes the conversion of all potentially dilutive
securities and is calculated by dividing net income by the sum of the weighted
average number of shares of common stock outstanding plus all potentially
dilutive securities. Dilutive common shares consist primarily of stock options
and restricted stock awards.
Three Months Ended
March 31, 2009 March 31, 2008
--------------------------------------------------
(in thousands, except share
and per share data)
Numerator:
Net income $ 6,728 $ 6,434
Denominator:
Denominator for basic earnings per share -
Weighted average shares 17,188,630 18,048,683
Effect of dilutive employee stock options
and restricted stock awards 146,536 262,402
------------------- -----------------
Denominator for diluted earnings per share -
Weighted average shares 17,335,166 18,311,085
=================== =================
Earnings per share:
Basic $ 0.39 $ 0.36
=================== =================
Diluted $ 0.39 $ 0.35
=================== =================
Anti-dilutive shares 378,950 302,150
=================== =================
Weighted average exercise price $ 16.34 $ 16.87
=================== =================
9. Income Taxes
We file income tax returns in the U.S. federal jurisdiction, and various state
and foreign jurisdictions. Effective January 1, 2007, we adopted FIN 48. The
total amount of unrecognized tax benefits at March 31, 2009, is approximately
$50,000 related to tax positions for which it is reasonably possible that the
total amounts could significantly decrease during the next twelve months. This
amount represents the unrecognized tax benefits comprised of items related to
determination of state nexus and intercompany charges.
-10-
We recognize accrued interest and penalties related to unrecognized tax benefits
in income tax expense. At March 31, 2009, we had accrued approximately $6,000
for the potential payment of interest and did not have any accruals for
penalties.
As of March 31, 2009, we are subject to U.S. Federal income tax examinations for
the tax years 2005 through 2008, and to non-U.S. income tax examinations for the
tax years of 2005 through 2008. In addition, we are subject to state and local
income tax examinations for the tax years 2004 through 2008.
The total amount of unrecognized tax benefits that if recognized would affect
the effective tax rate is approximately $50,000.
10. Stock Repurchase
Following repurchases of approximately 12% of our outstanding common stock
between September 1999 and September 2001, we announced and began another stock
repurchase program on October 17, 2002, targeting repurchases of up to an
additional 10% (2.0 million shares) of our outstanding stock. On February 14,
2006, the Board of Directors approved the suspension of our repurchase program.
Through February 14, 2006, we had repurchased a total of 1,886,796 shares under
this program for an aggregate price of $22,034,568, or an average price of
$11.68 per share. We purchased the shares at the then current market price.
On November 6, 2007, the Board authorized a new stock buyback program, targeting
repurchases of up to approximately 10% (1.8 million shares) of our outstanding
stock from time to time in open market transactions. Through March 31, 2009, we
repurchased a total of 1,692,258 shares under this program for an aggregate
price of $33,710,939, or an average price of $19.92 per share. We purchased the
shares at the current market price.
On July 1, 2005, we entered into a stock repurchase arrangement by which
employee-participants in AAON's 401(k) savings and investment plan are entitled
to have shares of AAON stock in their accounts sold to us to provide
diversification of their investments. The maximum number of shares to be
repurchased is unknown under the program as the amount is contingent on the
number of shares sold by employees. Through March 31, 2009, we repurchased
670,325 shares for an aggregate price of $10,805,018, or an average price of
$16.12 per share. We purchased the shares at the current market price.
On November 7, 2006, the Board of Directors authorized us to repurchase shares
from certain directors following their exercise of stock options. The maximum
number of shares to be repurchased is unknown under the program as the amount is
contingent on the number of shares sold by directors. Through March 31, 2009, we
repurchased 340,375 shares for an aggregate price of $6,957,423, or an average
price of $20.44 per share. We purchased the shares at the current market price.
11. Contingencies
We are subject to claims and legal actions that arise in the ordinary course of
business. Management believes that the ultimate liability, if any, will not have
a material effect on our results of operations or financial position.
12. Commitments and Contractual Agreements
We are a party to several short-term, cancelable and noncancelable, fixed price
contracts with major suppliers for the purchase of raw material and component
parts. In the normal course of business we expect to purchase approximately $4.5
million in the form of legally binding copper commitments during 2009.
-11-
We are locked into the following legally binding copper commitments:
Pounds Price Total
-----------------------------------------------------------
(in thousands) (in thousands)
1,238 2.4090 $ 2,983
225 2.0225 455
225 2.2165 499
75 1.8160 136
75 1.8195 136
75 1.8200 137
25 1.8260 45
25 1.8290 46
25 1.8315 46
--------------------
$ 4,483
====================
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
We engineer, manufacture and market air-conditioning and heating equipment
consisting of standardized and custom rooftop units, chillers, air-handling
units, make-up units, heat recovery units, condensing units, coils and boilers.
Custom units are marketed and sold to retail, manufacturing, educational,
medical and other commercial industries. We market units to all 50 states in the
United States and certain provinces in Canada. International sales are less than
five percent as the majority of all sales are domestic.
We sell our products to property owners and contractors through a network of
manufacturers' representatives and our internal sales force. Demand for our
products is influenced by national and regional economic and demographic
factors. The commercial and industrial new construction market is subject to
cyclical fluctuations in that it is generally tied to housing starts, but has a
lag factor of 6-18 months. Housing starts, in turn, are affected by such factors
as interest rates, the state of the economy, population growth and the relative
age of the population. When new construction is down, we emphasize the
replacement market.
The principal components of cost of goods sold are labor, raw materials,
component costs, factory overhead, freight out and engineering expense. The
principal high volume raw materials used in our manufacturing processes are
steel, copper and aluminum, which are obtained from domestic suppliers. The raw
materials market was volatile during 2008 and 2009 due to the economic
environment. Raw materials pricing had steadily increased from the beginning of
2007 until the second half of 2008 when pricing sharply decreased. We
experienced raw materials price increases of approximately 41% for steel, 123%
for aluminum and 22% for copper from the beginning of 2007 through the second
quarter of 2008. Prices decreased by approximately 39% for steel, 76% for
aluminum and 53% for copper from June 30, 2008 to March 31, 2009. We attempt to
limit the impact of price increases on these materials by entering cancelable
and noncancelable fixed price contracts with our major suppliers for periods of
6 -12 months.
Selling, general, and administrative ("SG&A") costs include our internal sales
force, warranty costs, profit sharing and administrative expense. Warranty
expense is estimated based on historical trends and other factors. Our product
warranty is: the earlier of one year from the date of first use or 18 months
from date of shipment for parts; an additional four years on compressors; 15
years on gas-fired heat exchangers; and 25 years on stainless steel heat
exchangers. Warranty charges on heat exchangers occur infrequently.
Our office facilities consist of a 337,000 square foot building (322,000 sq. ft.
of manufacturing/ warehouse space and 15,000 sq. ft. of office space) located at
2425 S. Yukon Avenue, Tulsa, Oklahoma ("the original facility"), and a 563,000
square foot manufacturing/warehouse building and a 22,000 square foot office
building ("the expansion facility") located across the street from the original
facility at 2440 S. Yukon Avenue. The expansion facility is 39% (228,000 sq.
ft.) utilized by us and 61% leased to a third party through May 31, 2009 at
which time the facility will be remodeled to give us increased manufacturing
capacity. The 2009 capital expenditures budget reflects the projected outlay to
remodel the facility.
Other operations are conducted in a plant/office building at 203-207 Gum Springs
Road in Longview, Texas, containing 258,000 square feet (251,000 sq. ft. of
manufacturing/ warehouse and 7,000 sq. ft. of office space). An additional 15
acres of land was purchased for future expansion in 2004 and 2005 in Longview,
Texas.
Our operations in Burlington, Ontario, Canada, are located at 279 Sumach Drive,
consisting of an 82,000 sq. ft. office/manufacturing facility on a 5.6 acre
tract of land.
-13-
Set forth below is unaudited income statement information for the periods ended
March 31, 2009 and 2008:
Three Months Ended
March 31, 2009 March 31, 2008
-------------------------------------------------
Net sales $ 63,965 100% $ 65,456 100%
Cost of sales 47,031 73.5% 49,804 76.1%
-------------------- --------------------
Gross profit 16,934 26.5% 15,652 23.9%
Selling, general and administrative
expenses 6,535 10.2% 5,902 9.0%
-------------------- --------------------
Income from operations 10,399 16.3% 9,750 14.9%
Interest expense (9) 0.0% (3) 0.0%
Interest income - 0.0% 21 0.0%
Other income, net 245 0.3% 130 0.2%
-------------------- --------------------
Income before income taxes 10,635 16.6% 9,898 15.1%
Income tax provision 3,907 6.1% 3,464 5.3%
-------------------- --------------------
Net income $ 6,728 10.5% $ 6,434 9.8%
==================== ====================
Results of Operations
Key events impacting our cash balance, financial condition, and results of
operations for the three months ended March 31, 2009, include the following:
o We remained the leader in the industry for environmentally-friendly,
energy efficient and quality innovations, utilizing R410A refrigerant
and phasing out pollutant causing R22 refrigerant. The phase out of
R22 began in early 2004. We also utilize a high performance composite
foam panel to eliminate over half of the heat transfer from typical
fiberglass insulated panels. We continue to utilize sloped condenser
coils, and access compartments to filters, motor, and fans. All of
these innovations increase the demand for our products thus increasing
market share.
o In February 2006, the Board of Director's initiated a program of
semi-annual cash dividend payments. Cash dividend payments of $5.8
million were made in 2008 and $2.8 million in 2009.
o Stock repurchases from employee's 401(k) savings and investments plan
were authorized in 2005. Stock repurchases from directors were
authorized in 2006. Stock repurchases from the open market were
authorized in 2007. Total purchases resulted in cash payments of $0.7
million for the first three months of 2009, and $24.8 million in 2008.
o Purchases of equipment and expansion of facilities to create
efficiencies remained a priority. Our capital expenditures were $3.5
million. Equipment purchases create significant efficiencies, lower
production costs and allow continued growth in production. We
currently expect to spend approximately $7.0 million to $8.0 million
on capital expenditures during 2009 for continued growth. A portion of
our budgeted capital expenditures will be spent expanding our
manufacturing facilities in Tulsa. Such expansion provides
manufacturing capacity to increase production of our products
traditionally manufactured in Tulsa. The expansion also provides
operational flexibility for us to potentially establish production
lines in Tulsa to manufacture custom products which are currently
being manufactured at our Canadian facilities.
-14-
Net Sales
Net sales decreased $1.5 million or 2.3% to $64.0 million from $65.5 million for
the three months ended March 31, 2009, compared to the same period in 2008. The
favorable response by our customers to our new and redesigned products continued
to be relatively strong in the first quarter of 2009, however a decrease in net
sales from our Canadian operations contributed to lower net sales.
Gross Profit
Gross profit increased $1.2 million or 7.6% to $16.9 million from $15.7 million
for the three months ended March 31, 2009, compared to the same period in 2008.
As a percentage of sales, gross margins were 26.5% compared to 23.9% for the
three months ended March 31, 2009 and 2008, respectively. The increase in gross
margins for the three months was primarily a result of lower material costs and
production and labor efficiencies.
The principal components of cost of goods sold are labor, raw materials,
component costs, factory overhead, freight out and engineering expense. The
principal high volume raw materials used in our manufacturing processes are
steel, copper and aluminum, which are obtained from domestic suppliers. The raw
materials market was volatile during 2008 and 2009 due to the economic
environment. Raw materials pricing had steadily increased from the beginning of
2007 until the second half of 2008 when pricing sharply decreased. We
experienced raw materials price increases of approximately 41% for steel, 123%
for aluminum and 22% for copper from the beginning of 2007 through the second
quarter of 2008. Prices decreased by approximately 39% for steel, 76% for
aluminum and 53% for copper from June 30, 2008 to March 31, 2009. We attempt to
limit the impact of price increases on these materials by entering cancelable
and noncancelable fixed price contracts with our major suppliers for periods of
6 -12 months.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $0.6 million or 10.2% to
$6.5 million from $5.9 million for the three months ended March 31, 2009,
compared to the same period in 2008. The change was primarily due to an increase
in warranty expense related to higher trade sales, bad debt expense to increase
the bad debt reserve to accommodate economic uncertainties and profit sharing
due to increased net income.
Other Income
Other income increased approximately $115,000 to approximately $245,000 from
$130,000 for the three months ended March 31, 2009, compared to the same period
in 2008. The increase in other income was primarily related to lower foreign
currency losses that resulted from operations in Canada in 2009 and 2008. Other
income is attributable primarily to rental income from our expansion facility.
All expenses associated with the facility that are allocated to the rental
portion of the building are included in other income. We plan to continue to
rent the expansion facility until the lease term expires on May 31, 2009.
Analysis of Liquidity and Capital Resources
Our working capital and capital expenditure requirements are generally met
through net cash provided by operations and occasionally, based on current
liquidity at the time, the revolving bank line of credit.
Management believes our projected cash flows from operations and bank revolving
credit facility, or comparable financing, will provide the necessary liquidity
and capital resources for fiscal year 2009 and the foreseeable future. Our
belief that we will have the necessary liquidity and capital resources is based
upon our knowledge of the heating, ventilation, and air conditioning ("HVAC")
industry and our place in that industry, our ability to limit the growth of our
business if necessary, our ability to adjust dividend cash payments, and our
relationship with the existing bank lender. For information concerning our
revolving credit facility at March 31, 2009, see Note 6 to our Consolidated
Financial Statements, Revolving Credit Facility.
Cash Flows Provided by Operating Activities. Net cash provided by operating
activities increased in the three months ended March 31, 2009 by $3.2 million
from the three months ended March 31, 2008. The increase was due primarily to
changes in accrued liabilities, accounts receivable and inventories.
-15-
Cash Flows Used in Investing Activities. Cash flows used in investing activities
were $3.5 million and $1.0 million for the three months ended March 31, 2009 and
2008, respectively. The increase in cash flows used in investing activities in
2009 was primarily related to higher capital expenditures of $3.5 million for
additions to machinery and equipment and manufacturing facilities, compared to
$1.0 million for the same period in 2008. Capital expenditures in 2008 related
to a building expansion and additions of machinery and equipment to further
automate production. Management utilizes cash flows provided from operating
activities to fund capital expenditures that are expected to increase growth and
create efficiencies. We have budgeted capital expenditures of approximately $7.0
million to $8.0 million in 2009 to complete the building expansion that started
in 2008, for a building renovation of the previously leased facility, and for
machinery and equipment purchases. We expect our cash requirements to be
provided from cash flows from operations.
Cash Flows Used in Financing Activities. Cash flows used in financing activities
were $6.4 million and $4.6 million for the three months ended March 31, 2009 and
2008, respectively. The increase of cash used in financing activities is
primarily due to repayments of previous borrowings under the revolving credit
facility related to cash required for capital expenditures.
We repurchased shares of stock from employees' 401(k) savings and investment
plan and other incentive plans for the three months ended March 31, 2009 in the
amount of $0.7 million for 39,419 shares of stock. There were shares of stock
repurchased for a total of $1.8 million for the same period in 2008.
We received cash from stock options exercised of approximately $10,000 and
classified the excess tax benefit of stock options exercised and restricted
stock awards vested of approximately $2,000 in financing activities for the
three months ended March 31, 2009. The cash received for options exercised and
income tax effect partially offset the stock repurchase and dividend payments
for the three months ended March 31, 2009. The cash received from stock options
exercised for the same period in 2008 was approximately $79,000 and the excess
tax benefit of stock options exercised was approximately $119,000.
Our revolving credit facility provides for maximum borrowings of $15.2 million
which is provided by the Bank of Oklahoma, National Association. Under the line
of credit, there is one standby letter of credit totaling $1.0 million. The
letter of credit was a requirement of our workers compensation insurance which
has been renewed and will expire December 31, 2009. Interest on borrowings is
payable monthly at the Wall Street Journal prime rate less 0.5% or LIBOR plus
1.6%, at our election (2.10% at March 31, 2009). No fees are associated with the
unused portion of the committed amount.
At March 31, 2009, we did not have an outstanding balance under the revolving
credit facility. At December 31, 2008, we had $2.9 million borrowed under the
revolving credit facility. Borrowings available under the revolving credit
facility at March 31, 2009 were $14.2 million. At March 31, 2009 and 2008, we
were in compliance with our financial ratio covenants. The covenants are related
to our tangible net worth, total liabilities to tangible net worth ratio and
working capital. At March 31, 2009 our tangible net worth was $102.6 million.
Our total liabilities to tangible net worth ratio was 2:5. Our working capital
was $45.3 million. On July 30, 2008, we renewed the line of credit with a
maturity date of July 30, 2009. We expect to renew our revolving credit
agreement in July 2009. We do not anticipate the current situation in the credit
market to impact our renewal.
Cash dividends were declared in December 2008 and were paid in January 2009 in
the amount of $2.8 million. Board of Director approval is required to determine
the date of declaration for each semi-annual payment.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Because these estimates and assumptions require significant
judgment, future actual results could differ from those estimates and could have
a significant impact on our results of operations, financial position and cash
flows. We reevaluate our estimates and assumptions on a monthly basis.
-16-
There have been no significant changes in critical accounting policies or
management estimates since the year ended December 31, 2008. A comprehensive
discussion of our critical accounting policies and management estimates is
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report on Form 10-K for the year ended
December 31, 2008.
New Accounting Pronouncements
In December 2007, the FASB issued SFAS 141(R), Business Combinations ("SFAS
141R"), which replaced FASB Statement 141, Business Combinations. This statement
significantly changed the accounting for business combinations and
noncontrolling interests. Among other things, when compared to the predecessor
guidance SFAS 141R will require (i) more assets acquired and liabilities assumed
to be measured at fair value as of the acquisition date, (ii) liabilities
related to contingent consideration to be remeasured to fair value each
subsequent reporting period, and (iii) an acquirer in preacquisition periods to
expense all acquisition-related costs. SFAS 141R must be applied prospectively
for fiscal years beginning after December 15, 2008. Adoption of SFAS 141R did
not have a material impact on our Consolidated Financial Statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51 ("SFAS 160"),
which changes the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS 160 must be adopted no later than January 1, 2009. Adoption of SFAS
160 did not have a material impact on our Consolidated Financial Statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities--an Amendment of FASB Statement No. 133
("SFAS 161"), which requires enhanced disclosures about (i) how and why an
entity uses derivative instruments, (ii) how derivative instruments and related
hedged items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended ("SFAS 133") and its related
interpretations and (iii) how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. Adoption of SFAS 161 did not
have a material impact on our Consolidated Financial Statements.
In June 2008, the Emerging Issues Task Force ("EITF") issued No. 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities ("EITF 03-6-1"), which addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share ("EPS") under the two-class method. EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. Adoption of EITF
03-6-1 did not have a material impact on our Consolidated Financial Statements.
In December 2008, the FASB issued FSP No. FAS 132 R-1, Employers' Disclosures
about Postretirement Benefit Plan Assets ("FAS 132R-1"), which provides guidance
on an employer's disclosures about plan assets of a defined benefit pension or
other postretirement plan and requires employers to provide more transparency
about the assets held by retirement plan and the concentrations of risk in those
plans. FAS 132 R-1 will be effective for fiscal years beginning after December
15, 2009. We do not expect the adoption of FAS 132 R-1 to have a material impact
on our Consolidated Financial Statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Words such
as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", "will", and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on which they
are made.
-17-
While the recent adverse economic climate has not yet resulted in a significant
decline in our operations, there can be no assurances that economic conditions
will not adversely affect our business in the future. We undertake no obligation
to update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Important factors that could cause
results to differ materially from those in the forward-looking statements
include (1) the timing and extent of changes in raw material and component
prices, (2) the effects of fluctuations in the commercial/industrial new
construction market, (3) the timing and extent of changes in interest rates, as
well as other competitive factors during the year, and (4) general economic,
market or business conditions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to interest rate risk on the revolving credit facility which
bears variable interest based upon a prime or LIBOR rate. At March 31, 2009, we
did not have an outstanding balance under the revolving credit facility.
Foreign sales accounted for less than 5% of our sales for the three months ended
March 31, 2009, and we accept payment for such sales in U.S. and Canadian
dollars; therefore, we believe we are not exposed to significant foreign
currency exchange rate risk on these sales. Foreign currency transactions and
financial statements are translated in accordance with FASB Statement No. 52,
Foreign Currency Translation. We use the U.S. dollar as our functional currency,
except for the Canadian subsidiaries, which use the Canadian dollar. Adjustments
arising from translation of the Canadian subsidiaries' financial statements are
reflected in accumulated other comprehensive income in the Consolidated
Statements of Stockholders' Equity and Comprehensive Income. Transaction gains
or losses that arise from exchange rate fluctuations applicable to transactions
are denominated in Canadian currency and are included in the results of
operations as incurred. The exchange rate of the United States dollar to the
Canadian dollar was $0.7942 and $0.9882 at March 31, 2009 and 2008,
respectively.
The principal components of cost of goods sold are labor, raw materials,
component costs, factory overhead, freight out and engineering expense. The
principal high volume raw materials used in our manufacturing processes are
steel, copper and aluminum, which are obtained from domestic suppliers. The raw
materials market was volatile during 2008 and 2009 due to the economic
environment. Raw materials pricing had steadily increased from the beginning of
2007 until the second half of 2008 when pricing sharply decreased. We
experienced raw materials price increases of approximately 41% for steel, 123%
for aluminum and 22% for copper from the beginning of 2007 through the second
quarter of 2008. Prices decreased by approximately 39% for steel, 76% for
aluminum and 53% for copper from June 30, 2008 to March 31, 2009. We attempt to
limit the impact of price increases on these materials by entering cancelable
and noncancelable fixed price contracts with our major suppliers for periods of
6 - 12 months.
We do not utilize derivative financial instruments to hedge interest rate or raw
materials price risks.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the design and operation of our disclosure controls and procedures. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer believe
that:
o Our disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in the reports we file
under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms; and
o Our disclosure controls and procedures operate such that important
information flows to appropriate collection and disclosure points in a
timely manner and are effective to ensure that such information is
accumulated and communicated to our management, and made known to our
Chief Executive Officer and Chief Financial Officer, particularly
during the period when this Quarterly Report was prepared, as
appropriate to allow timely decisions regarding the required
disclosure.
-18-
Our Chief Executive Officer and Chief Financial Officer have evaluated our
disclosure controls and procedures and concluded that these controls and
procedures were effective as of March 31, 2009.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that
occurred during 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1A. Risk Factors.
There have been no material changes from risk factors as previously disclosed in
our Form 10-K in response to Item 1A, to Part I of Form 10-K.
Item 2. Unregistered Sales of Equity and Securities and Use of Proceeds.
Following repurchases of approximately 12% of our outstanding Common Stock
between September 1999 and September 2001, we announced and began another stock
repurchase program on October 17, 2002, targeting repurchases of up to an
additional 10% (2.0 million shares) of our outstanding stock. On February 14,
2006, the Board of Directors approved the suspension of our repurchase program.
Through February 14, 2006, we repurchased a total of 1,886,796 shares under this
program for an aggregate price of $22,034,568, or an average price of $11.68 per
share. We purchased the shares at the then current market price.
On November 6, 2007, the Board authorized a new stock buyback program, targeting
repurchases of up to approximately 10% (1.8 million shares) of our outstanding
stock from time to time in open market transactions at prevailing market prices.
Through March 31, 2009, we repurchased a total of 1,692,258 shares under this
program for an aggregate price of $33,710,939, or an average price of $19.92 per
share. We purchased the shares at the current market price.
On July 1, 2005, we entered into a stock repurchase arrangement by which
employee-participants in AAON's 401(k) savings and investment plan are entitled
to have shares of AAON's stock in their accounts sold to us to provide
diversification of their investments. The maximum number of shares to be
repurchased is unknown under the program as the amount is contingent on the
number of shares sold by employees. Through March 31, 2009, we repurchased
670,325 shares for an aggregate price of $10,805,018, or an average price of
$16.12 per share. We purchased the shares at the current market price.
On November 7, 2006, the Board of Directors authorized us to repurchase shares
from certain directors following their exercise of stock options. The maximum
number of shares to be repurchased is unknown under the program as the amount is
contingent on the number of shares sold by directors. Through March 31, 2009, we
repurchased 340,375 shares for an aggregate price of $6,957,423, or an average
price of $20.44 per share. We purchased the shares at the current market price.
-19-
Repurchases during the first quarter of 2009 were as follows:
(d) Maximum
(c) Total Number Number (or
of Shares (or Approximate Dollar
(a) Total (b) Units) Purchased Value) of Shares (or
Number of Average as Part of Units) that May Yet
Shares (or Price Paid Publicly Be Purchased Under
Units) Per Share Announced Plans the Plans or
Period Purchased (or Unit) or Programs Programs
------------------------------------------------------------------------------
January 2009 14,378 $ 19.85 14,378 -
February 2009 12,893 16.09 12,893 -
March 2009 12,148 17.24 12,148 -
------------------------------------------------------------------------------
Total 39,419 $ 17.82 39,419 -
==============================================================================
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
-20-
Item 6. Exhibits.
(a) Exhibits
(i) Exhibit 31.1 Section 302 Certification of CEO
(ii) Exhibit 31.2 Section 302 Certification of CFO
(iii) Exhibit 32.1 Section 1350 Certification of CEO
(iv) Exhibit 32.2 Section 1350 Certification of CFO
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 6, 2009 By: /s/ Norman H. Asbjornson
-------------------------------
Norman H. Asbjornson
President/CEO
Dated: May 6, 2009 By: /s/ Kathy I. Sheffield
-------------------------------
Kathy I. Sheffield
Vice President/CFO
-21-