aaon_10q33110.htm
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, 2010
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 No Not
Applicable X
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 27, 2010 registrant had outstanding a total of 17,120,865 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, 2010
|
|
|
December
31, 2009
|
|
Assets
|
|
(in thousands except share and
per share data)
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
15,590 |
|
|
$ |
25,639 |
|
Certificates
of deposit
|
|
|
1,824 |
|
|
|
- |
|
Investments
held to maturity at amortized cost
|
|
|
7,894 |
|
|
|
- |
|
Accounts
receivable, net
|
|
|
30,496 |
|
|
|
33,381 |
|
Inventories,
net
|
|
|
30,586 |
|
|
|
28,788 |
|
Prepaid
expenses and other
|
|
|
580 |
|
|
|
1,087 |
|
Financial
derivative assets
|
|
|
1,674 |
|
|
|
2,200 |
|
Assets
held for sale, net
|
|
|
1,573 |
|
|
|
1,522 |
|
Deferred
tax assets
|
|
|
4,251 |
|
|
|
3,623 |
|
Total
current assets
|
|
|
94,468 |
|
|
|
96,240 |
|
Property,
plant and equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,328 |
|
|
|
1,328 |
|
Buildings
|
|
|
42,546 |
|
|
|
41,697 |
|
Machinery
and equipment
|
|
|
92,695 |
|
|
|
90,213 |
|
Furniture
and fixtures
|
|
|
7,377 |
|
|
|
7,225 |
|
Total
property, plant and equipment
|
|
|
143,946 |
|
|
|
140,463 |
|
Less: Accumulated
depreciation
|
|
|
82,926 |
|
|
|
80,567 |
|
Property,
plant and equipment, net
|
|
|
61,020 |
|
|
|
59,896 |
|
Notes
receivable, long-term
|
|
|
75 |
|
|
|
75 |
|
Certificates
of deposit
|
|
|
680 |
|
|
|
- |
|
Investments
held to maturity at amortized cost
|
|
|
3,924 |
|
|
|
- |
|
Total
assets
|
|
$ |
160,167 |
|
|
$ |
156,211 |
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Revolving
credit facility
|
|
$ |
- |
|
|
$ |
- |
|
Current
maturities of long-term debt
|
|
|
53 |
|
|
|
76 |
|
Accounts
payable
|
|
|
11,413 |
|
|
|
8,524 |
|
Dividends
payable
|
|
|
- |
|
|
|
3,100 |
|
Accrued
liabilities
|
|
|
20,156 |
|
|
|
19,186 |
|
Total
current liabilities
|
|
|
31,622 |
|
|
|
30,886 |
|
Long-term
debt, less current maturities
|
|
|
- |
|
|
|
- |
|
Deferred
tax liabilities
|
|
|
7,035 |
|
|
|
7,326 |
|
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, 17,130,566 and
17,214,979 issued and outstanding at March 31, 2010 and December 31, 2009,
respectively
|
|
|
71 |
|
|
|
71 |
|
Additional
paid-in capital
|
|
|
- |
|
|
|
644 |
|
Accumulated
other comprehensive income, net of tax
|
|
|
1,118 |
|
|
|
1,077 |
|
Retained
earnings
|
|
|
120,321 |
|
|
|
116,207 |
|
Total
stockholders’ equity
|
|
|
121,510 |
|
|
|
117,999 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
160,167 |
|
|
$ |
156,211 |
|
The
accompanying notes are an integral part of these statements.
AAON,
Inc., and Subsidiaries
Consolidated
Statements of Income
(unaudited)
|
|
Three
Months Ended
|
|
|
March
31, 2010
|
|
|
March
31, 2009 |
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
49,309 |
|
|
$ |
63,965 |
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
36,315 |
|
|
|
47,031 |
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
12,994 |
|
|
|
16,934 |
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
4,828 |
|
|
|
6,535 |
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
8,166 |
|
|
|
10,399 |
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
- |
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
6 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Other
income (expense), net
|
|
|
(60 |
) |
|
|
245 |
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
8,112 |
|
|
|
10,635 |
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
2,994 |
|
|
|
3,907 |
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
5,118 |
|
|
$ |
6,728 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.30 |
|
|
$ |
0.39 |
|
Diluted
|
|
$ |
0.30 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per common share:
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,186 |
|
|
|
17,189 |
|
Diluted
|
|
|
17,271 |
|
|
|
17,335 |
|
The
accompanying notes are an integral part of these statements.
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, 2009
|
|
|
17,215 |
|
|
$ |
71 |
|
|
$ |
644 |
|
|
$ |
1,077 |
|
|
$ |
116,207 |
|
|
$ |
117,999 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,118 |
|
|
|
5,118 |
|
Foreign
currency translation adjustment
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
41 |
|
|
|
– |
|
|
|
41 |
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,159 |
|
Stock
options exercised and restricted stock awards vested, including tax
benefits
|
|
|
10 |
|
|
|
– |
|
|
|
144 |
|
|
|
– |
|
|
|
– |
|
|
|
144 |
|
Share-based
compensation
|
|
|
– |
|
|
|
– |
|
|
|
209 |
|
|
|
– |
|
|
|
– |
|
|
|
209 |
|
Stock
repurchased and retired
|
|
|
(94 |
) |
|
|
– |
|
|
|
(997 |
) |
|
|
– |
|
|
|
(1,004 |
) |
|
|
(2,001 |
) |
Balance
at March 31, 2010
|
|
|
17,131 |
|
|
$ |
71 |
|
|
$ |
– |
|
|
$ |
1,118 |
|
|
$ |
120,321 |
|
|
$ |
121,510 |
|
The
accompanying notes are an integral part of these statements.
AAON,
Inc., and Subsidiaries
Consolidated
Statements of Cash Flows
(unaudited)
|
|
Three
Months
Ended
March
31, 2010
|
|
|
Three
Months
Ended
March
31, 2009
|
|
|
|
(in
thousands)
|
|
Operating
Activities
|
|
|
|
|
|
|
Net income
|
|
$ |
5,118 |
|
|
$ |
6,728 |
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,405 |
|
|
|
2,282 |
|
Provision
for losses on accounts receivable, net of adjustments
|
|
|
(96 |
) |
|
|
410 |
|
Share-based
compensation
|
|
|
209 |
|
|
|
188 |
|
Excess
tax benefits from stock options exercised
|
|
|
|
|
|
|
|
|
and
restricted stock awards vested
|
|
|
(16 |
) |
|
|
(2 |
) |
Deferred
income taxes
|
|
|
(919 |
) |
|
|
(718 |
) |
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
2,981 |
|
|
|
(2,537 |
) |
Inventories
|
|
|
(1,798 |
) |
|
|
2,557 |
|
Prepaid
expenses and other
|
|
|
507 |
|
|
|
(87 |
) |
Financial
derivative assets
|
|
|
526 |
|
|
|
- |
|
Accounts
payable
|
|
|
2,884 |
|
|
|
(452 |
) |
Accrued
liabilities
|
|
|
983 |
|
|
|
4,996 |
|
Net
cash provided by operating activities
|
|
|
12,784 |
|
|
|
13,365 |
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Investment
in certificates of deposit
|
|
|
(2,504 |
) |
|
|
- |
|
Investments
held to maturity at amortized cost
|
|
|
(11,818 |
) |
|
|
- |
|
Capital
expenditures
|
|
|
(3,529 |
) |
|
|
(3,512 |
) |
Net
cash used in investing activities
|
|
|
(17,851 |
) |
|
|
(3,512 |
) |
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
Borrowings
under revolving credit facility
|
|
|
- |
|
|
|
9,972 |
|
Payments
under revolving credit facility
|
|
|
- |
|
|
|
(12,873 |
) |
Payments
of long-term debt
|
|
|
(23 |
) |
|
|
(22 |
) |
Stock
options exercised
|
|
|
128 |
|
|
|
10 |
|
Excess
tax benefits from stock options exercised
|
|
|
|
|
|
|
|
|
and
restricted stock awards vested
|
|
|
16 |
|
|
|
2 |
|
Repurchases
of stock
|
|
|
(2,001 |
) |
|
|
(702 |
) |
Cash
dividends paid to stockholders
|
|
|
(3,100 |
) |
|
|
(2,773 |
) |
Net
cash used in financing activities
|
|
|
(4,980 |
) |
|
|
(6,386 |
) |
Effect
of exchange rate on cash
|
|
|
(2 |
) |
|
|
(11 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
|
(10,049 |
) |
|
|
3,456 |
|
Cash
and cash equivalents, beginning of year
|
|
|
25,639 |
|
|
|
269 |
|
Cash
and cash equivalents, end of period
|
|
$ |
15,590 |
|
|
$ |
3,725 |
|
The
accompanying notes are an integral part of these statements.
AAON,
Inc., and Subsidiaries
Notes
to the Consolidated Financial Statements
March
31, 2010
(unaudited)
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 and AAON Properties, Inc., an
Ontario corporation. The Consolidated Financial Statements include
our accounts and the accounts of our subsidiaries. Unless the context
otherwise requires, references in this Quarterly Report to “AAON,” the
“Company”, “we,” “us,” “our” or “ours” refer to AAON, Inc., and our
subsidiaries.
We closed
our manufacturing operations and reclassified our Canadian facility as held for
sale in September 2009. The products previously manufactured at the
Canadian facility will be produced by the Tulsa, Oklahoma and Longview, Texas
facilities in the future.
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, 2009, 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,
2010, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2010.
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”) Codification (“FASC”) Topic 830,
Foreign Currency
Matters. We use the U.S. dollar as our functional currency,
except for the Canadian subsidiary, which uses 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.
Financial
Derivatives
We use
financial derivatives to mitigate our exposure to volatility in copper
prices. Fluctuations in copper commodity prices impact the value of
the financial derivative that we hold. We are subject to gains which
we record as financial derivative assets if the forward copper commodity prices
increase and losses which we record as financial derivative liabilities if they
decrease. We record the fair value of the financial derivative
position in the Consolidated Balance Sheets. We locked in the
settlement price for the remainder of 2010. We use COMEX
index pricing to support our fair value calculation, which is a Level 2 input
per the valuation hierarchy as the pricing is for instruments similar but not
identical to the contract we will settle (see Note 17, Fair Value
Measurements). We did not designate the financial derivative
as a cash flow hedge. We record changes in the financial derivative’s
fair value currently in earnings based on mark-to-market
accounting. The change in fair value is recorded to cost of sales in
the Consolidated Statements of Income. We do not use financial
derivatives for speculative purposes.
Investments
We made
investments with a large firm which includes cash equivalents and money markets,
certificates of deposit and corporate notes and bonds. We record the
amortized cost basis and accrued interest on the corporate notes and bond in the
Consolidated Balance Sheets. We record the interest and amortization
of bond premiums to interest income on the corporate notes and bonds in the
Consolidated Statements of Income.
Subsequent
Events
We have
determined that no subsequent events which require recognition or disclosure in
our Consolidated Financial Statements exist.
New
Accounting Pronouncements
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
(“ASU 2010-06”), which requires reporting entities to provide information
about movements of assets among Levels 1 and 2 of the three-tier fair value
hierarchy. Separate disclosures need to be made of the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
along with a description of the reason for the transfers. Also,
disclosure of activity in Level 3 fair value measurements needs to be made on a
gross basis rather than as one net number. ASU 2010-06 also requires:
(1) fair value measurement disclosures for each class of assets and liabilities,
and (2) disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and nonrecurring fair value measurements, which
are required for fair value measurements that fall in either Level 2 or Level
3. The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the Level 3 activity disclosures, which are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. Adoption of ASU 2010-06 should not have a
material impact on our Consolidated Financial Statements.
2.
Certificates
of Deposit
We
invested $2.5 million ($1.8 million of current assets) in certificates of
deposit as of March 31, 2010 with various maturities of less than two years. The
certificates of deposit bear interest ranging from 0.5% to 4.3% per
annum. We did not invest in any certificates of deposit in 2009.
3.
Investments Held to Maturity
Our
investments held to maturity include $11.8 million ($7.9 million of current
assets) in corporate notes and bonds with maturities of less than two
years. The investments have
moderate risk with S&P ratings ranging from AA+ to
BBB-. We did not invest in any other investments in 2009.
We record
the amortized cost basis and accrued interest on the corporate notes and bonds
in the Consolidated Balance Sheets. We record the interest and
amortization of bond premium to interest income on the corporate notes and bonds
in the Consolidated Statements of Income. The following summarizes
the amortized cost and estimated fair value of our investments held to
maturity:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized Gain
|
|
|
Gross
Unrealized Loss
|
|
|
Fair
Value
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
held to maturity
|
|
$ |
7,894 |
|
|
$ |
- |
|
|
$ |
(94 |
) |
|
$ |
7,800 |
|
Non-Current Assets (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
held to maturity
|
|
|
3,924 |
|
|
|
- |
|
|
|
(42 |
) |
|
|
3,882 |
|
Total
|
|
$ |
11,818 |
|
|
$ |
- |
|
|
$ |
(136 |
) |
|
$ |
11,682 |
|
(1)
Non-current assets have maturities of between one to two years.
Investments
held to maturity have been in a loss position for less than three months as of
March 31, 2010. We evaluate for other-than-temporary impairments on a
quarterly basis. We do not believe that any of the unrealized losses
represent an other-than-temporary impairment.
4.
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,
2010
|
|
|
December
31,
2009
|
|
|
|
(in
thousands)
|
|
Accounts
receivable
|
|
$ |
31,176 |
|
|
$ |
34,157 |
|
Less:
Allowance for doubtful accounts
|
|
|
(680 |
) |
|
|
(776 |
) |
Total,
net
|
|
$ |
30,496 |
|
|
$ |
33,381 |
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
March
31,
2010
|
|
|
March
31,
2009
|
|
|
|
(in
thousands)
|
|
Allowance
for doubtful accounts:
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
776 |
|
|
$ |
795 |
|
Provision
for losses on accounts receivable
|
|
|
125 |
|
|
|
158 |
|
Adjustments
to provision
|
|
|
(221 |
) |
|
|
252 |
|
Accounts
receivable written off, net of recoveries
|
|
|
- |
|
|
|
- |
|
Balance,
end of period
|
|
$ |
680 |
|
|
$ |
1,205 |
|
5.
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 are as follows:
|
|
March
31,
2010
|
|
|
December
31,
2009
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
26,484 |
|
|
$ |
26,581 |
|
Work
in process
|
|
|
2,485 |
|
|
|
1,835 |
|
Finished
goods
|
|
|
1,967 |
|
|
|
1,132 |
|
|
|
|
30,936 |
|
|
|
29,548 |
|
Less:
Allowance for excess and obsolete inventories
|
|
|
(350 |
) |
|
|
(760 |
) |
Total,
net
|
|
$ |
30,586 |
|
|
$ |
28,788 |
|
The
related changes in the allowance for excess and obsolete inventories account are
as follows:
|
|
Three
Months Ended
|
|
|
|
March
31,
2010
|
|
|
March
31,
2009
|
|
|
|
(in
thousands)
|
|
Allowance
for excess and obsolete inventories:
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
760 |
|
|
$ |
350 |
|
Provision
for excess and obsolete inventories
|
|
|
200 |
|
|
|
450 |
|
Adjustments
to reserve
|
|
|
(200 |
) |
|
|
(200 |
) |
Inventories
written off
|
|
|
(410 |
) |
|
|
- |
|
Balance,
end of period
|
|
$ |
350 |
|
|
$ |
600 |
|
6.
Financial Derivatives
We
entered into a financial derivative instrument during the third quarter 2009
with a large financial institution to mitigate our exposure to volatility in
copper prices. We monitor our financial derivative and the credit
worthiness of the financial institution. We do not anticipate losses
due to counterparty non-performance. We do not use financial
derivatives for speculative purposes.
The
financial derivative is in the form of a commodity futures
contract. The financial derivative contract began settling monthly in
January 2010 and will continue through December 2010. In March 2010,
we locked in the settlement price for the remainder of 2010. The
contract is for a total of 2,250,000 pounds of copper (1,650,000 pounds
remaining as of March 31, 2010) at $2.383 per pound. The contract is
for quantities equal to or less than those expected to be used in our
manufacturing operations in 2010.
Generally,
fluctuations in copper commodity prices impact the value of the financial
derivative. Prior to locking in the settlement price, we would have
been subject to gains which we would have recorded as financial derivative
assets if the forward copper commodity prices increased and losses which we
would have recorded as financial derivative liabilities if they
decreased. At March 31, 2010, the forward copper commodity prices
were higher than our contract price resulting in a gain or financial derivative
assets. We will continue to be in a gain or financial derivative
assets position for the remainder of 2010 based on the settlement price we
locked into. We recognized the following financial derivative assets
at fair value in the Consolidated Balance Sheets:
Type
of Contract
|
Balance
Sheet Location
|
|
Fair
Value
|
|
|
|
|
(in
thousands)
|
|
Financial
derivative not designated as hedging instruments:
|
|
Commodity
futures contract
|
Financial
Derivative Assets
|
|
$ |
1,674 |
|
Total
financial derivative not designated as hedging instruments
|
|
$ |
1,674 |
|
We did
not designate the financial derivative as a cash flow hedge. We
recorded changes in the financial derivative’s fair value currently in earnings
based on mark-to-market accounting. We recorded the following
unrealized gain on financial derivative assets at fair value in the Consolidated
Statements of Income for the three months ended March 31, 2010:
Type
of Contract
|
Income
Statement Location
|
|
Amount
|
|
|
|
|
(in
thousands)
|
|
Financial
derivative not designated as hedging instruments:
|
|
Commodity
futures contract
|
Cost
of sales
|
|
$ |
14 |
|
Total
financial derivative not designated as hedging instruments
|
|
$ |
14 |
|
We locked
in the settlement price for the remainder of 2010. We use COMEX index
pricing to support our fair value calculation, which is a Level
2 input per the valuation hierarchy as the pricing is for instruments similar
but not identical to the contract we will settle (see Note 17, Fair Value Measurements).
7. Accrued
Liabilities
Accrued
liabilities are as follows:
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
Warranty
|
|
$ |
7,000 |
|
|
$ |
7,200 |
|
Commissions
|
|
|
8,000 |
|
|
|
7,975 |
|
Payroll
|
|
|
2,199 |
|
|
|
1,633 |
|
Income
taxes
|
|
|
390 |
|
|
|
- |
|
Workers’
compensation
|
|
|
755 |
|
|
|
591 |
|
Medical
self-insurance
|
|
|
1,213 |
|
|
|
1,410 |
|
Employee
benefits and other
|
|
|
599 |
|
|
|
377 |
|
Total
|
|
$ |
20,156 |
|
|
$ |
19,186 |
|
8.
Supplemental Cash Flow Information
Interest
payments were not made for the three months ended March 31,
2010. Interest payments of approximately $9,000 were made for the
three months ended March 31, 2009. Payments for income taxes of $0.5
million were made during the three months ended March 31, 2010. There
were no income tax payments made during the three months ended March 31,
2009. Dividends payable of $3.1 million were accrued as of December
31, 2009 and paid in January 2010.
9.
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 $0.9
million. The letter of credit was a requirement of our workers
compensation insurance and will expire December 31, 2010. Interest on
borrowings is payable monthly at the greater of 4% or LIBOR plus 2.5% (4.00% at
March 31, 2010). No fees are associated with the unused portion of
the committed amount.
We did
not have an outstanding balance under the revolving credit facility at March 31,
2010 or December 31, 2009. Borrowings available under the revolving
credit facility at March 31, 2010 were $14.3 million. At March 31,
2010, 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, 2010 our tangible
net worth was $121.5 million which meets the requirement of being at or above
$75.0 million. Our total liabilities to tangible net worth ratio was
1 to 3 which meets the requirement of not being above 2 to 1. Our
working capital was $62.8 million which meets the requirement of being at or
above $30.0 million. On July 30, 2009, we renewed the line of credit
with a maturity date of July 30, 2010 with terms substantially the same as the
previous agreement.
10.
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 three 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 FASC Topic 718, Compensation – Stock
Compensation. 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 expected during the vesting
period.
We recognized approximately $113,000
and $105,000 for the three months ended March 31, 2010 and 2009, 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, 2010 is $0.9 million
and is expected to be recognized over a weighted average period of 2.1
years.
The
following weighted average assumptions were used to determine the fair value of
the stock options granted on the original grant date for expense recognition
purposes for options:
|
Three
Months Ended
|
|
March
31, 2010
|
|
March
31, 2009
|
|
|
|
|
Directors
and Officers:
|
|
|
|
Expected
dividend yield
|
N/A
|
|
1.79%
|
Expected
volatility
|
N/A
|
|
47.47%
|
Risk-free
interest rate
|
N/A
|
|
2.53%
|
Expected
life
|
N/A
|
|
7.0
years
|
Forfeiture
rate
|
N/A
|
|
0%
|
Employees:
|
|
|
|
Expected
dividend yield
|
1.72%
|
|
1.79%
|
Expected
volatility
|
45.95%
|
|
46.94%
|
Risk-free
interest rate
|
3.14%
|
|
2.52%
|
Expected
life
|
8.0
years
|
|
8.0
years
|
Forfeiture
rate
|
31%
|
|
31%
|
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 over
time periods equal to the expected life at grant date.
A summary
of stock options outstanding is as follows:
|
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Range
of
Exercise
Prices
|
|
|
Number
Outstanding
at March 31, 2010
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic Value
|
|
|
Number
Exercisable
at
March 31, 2010
|
|
|
Weighted
Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5.73
– $11.29 |
|
|
|
115,413 |
|
|
|
3.08 |
|
|
$ |
9.04 |
|
|
$ |
13.58 |
|
|
|
98,913 |
|
|
$ |
8.74 |
|
$ |
11.40
– $12.00 |
|
|
|
33,900 |
|
|
|
5.46 |
|
|
|
11.60 |
|
|
|
11.02 |
|
|
|
28,200 |
|
|
|
11.62 |
|
$ |
13.60
– $15.55 |
|
|
|
131,500 |
|
|
|
7.97 |
|
|
|
15.13 |
|
|
|
7.49 |
|
|
|
49,700 |
|
|
|
14.91 |
|
$ |
15.99
– $21.42 |
|
|
|
176,300 |
|
|
|
7.14 |
|
|
|
17.76 |
|
|
|
4.86 |
|
|
|
77,600 |
|
|
|
17.53 |
|
Total
|
|
|
|
457,113 |
|
|
|
6.23 |
|
|
$ |
14.34 |
|
|
$ |
9.67 |
|
|
|
254,413 |
|
|
$ |
12.95 |
|
A summary
of stock option activity is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Term
|
|
|
Aggregate
Intrinsic Value ($000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2010
|
|
|
460,513 |
|
|
$ |
14.22 |
|
|
|
|
|
|
|
Granted
|
|
|
12,000 |
|
|
|
19.97 |
|
|
|
|
|
|
|
Exercised
|
|
|
(9,700 |
) |
|
|
13.22 |
|
|
|
|
|
|
|
Forfeited
or Expired
|
|
|
(5,700 |
) |
|
|
18.37 |
|
|
|
|
|
|
|
Outstanding
at March 31, 2010
|
|
|
457,113 |
|
|
|
14.34 |
|
|
|
6.23 |
|
|
$ |
3,784 |
|
Exercisable
at March 31, 2010
|
|
|
254,413 |
|
|
$ |
12.95 |
|
|
|
5.06 |
|
|
$ |
2,461 |
|
The
weighted average grant date fair value of options granted during the three
months ended March 31, 2010 and 2009 was $8.97 and $6.57,
respectively. The total intrinsic value of options exercised during
the three months ended March 31, 2010 and 2009 was approximately $204,000 and
$18,000, respectively. The cash received from options exercised
during the three months ended March 31, 2010 and 2009, was approximately
$128,000 and $10,000, 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:
|
|
Shares
|
|
|
Weighted
Average Grant
Date
Fair Value
|
|
|
|
|
|
|
|
|
Unvested
at January 1, 2010
|
|
|
216,200 |
|
|
$ |
6.77 |
|
Granted
|
|
|
12,000 |
|
|
|
8.97 |
|
Vested
|
|
|
(19,800 |
) |
|
|
6.50 |
|
Forfeited
|
|
|
(5,700 |
) |
|
|
7.66 |
|
Unvested
at March 31, 2010
|
|
|
202,700 |
|
|
$ |
6.90 |
|
The
Compensation Committee of the Board of Directors (“Board”) has authorized and
issued restricted stock awards to our directors 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 vest 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 expected during the vesting period.
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 $96,000 and $83,000 for the three
months ended March 31, 2010 and 2009, respectively in pre-tax compensation
expense related to restricted stock awards in the Consolidated Statements of
Income. In addition, as of March 31, 2010, unrecognized compensation
cost related to unvested restricted stock awards was approximately $0.4 million
which is expected to be recognized over a weighted average period of 1.4
years.
A summary
of the unvested restricted stock awards is as follows:
|
|
Shares
|
|
|
|
|
|
Unvested
at January 1, 2010
|
|
|
33,250 |
|
Granted
|
|
|
- |
|
Vested
|
|
|
- |
|
Forfeited
|
|
|
- |
|
Unvested
at March 31, 2010
|
|
|
33,250 |
|
11. 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, 2010
|
|
|
March
31, 2009
|
|
|
(in
thousands, except share and per share data)
|
Numerator:
|
|
|
|
|
|
Net
income
|
|
$ |
5,118 |
|
|
$ |
6,728 |
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per
share –
Weighted
average shares
|
|
|
17,186,165 |
|
|
|
17,188,630 |
|
Effect
of dilutive employee stock options and restricted stock
awards
|
|
|
85,049 |
|
|
|
146,536 |
|
Denominator
for diluted earnings per share –
Weighted
average shares
|
|
|
17,271,214 |
|
|
|
17,335,166 |
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.30 |
|
|
$ |
0.39 |
|
Diluted
|
|
$ |
0.30 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
Anti-dilutive
shares
|
|
|
120,100 |
|
|
|
378,950 |
|
Weighted
average exercise price
|
|
$ |
15.73 |
|
|
$ |
16.34 |
|
12.
Income Taxes
We file
income tax returns in the U.S. federal jurisdiction, and various state and
foreign jurisdictions and account for income taxes in accordance with FASC Topic
740, Income
Taxes. As of March 31, 2010, we do not have any unrecognized
tax benefits that if recognized would affect the effective tax
rate. We do not expect to record any unrecognized tax benefits during
the next twelve months.
We
recognize accrued interest and penalties related to unrecognized tax benefits in
income tax expense. At March 31, 2010, we did not have any accruals
for the potential payment of interest or penalties.
As of
March 31, 2010, we are subject to U.S. Federal income tax examinations for the
tax years 2006 through 2009, and to non-U.S. income tax examinations for the tax
years of 2006 through 2009. In addition, we are subject to state and
local income tax examinations for the tax years 2005 through 2009.
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 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 current
market prices.
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, 2010, we repurchased a total of 1,748,039 shares under this program for an
aggregate price of $34,854,368, or an average price of $19.94 per
share. We purchased the shares at current market prices.
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, 2010, we
repurchased 824,357 shares for an aggregate price of $13,934,909, or an average
price of $16.90 per share. We purchased the shares at current market
prices.
On
November 7, 2006, the Board of Directors authorized us to repurchase shares from
certain directors and officers following their exercise of stock
options. The maximum number of shares to be repurchased under the
program is unknown as the amount is contingent on the number of shares
sold. Through March 31, 2010, we repurchased 350,375 shares for an
aggregate price of $7,167,623, or an average price of $20.46 per
share. We purchased the shares at current market prices.
14.
Commitments and Contingencies
We are
subject to claims and legal actions that arise in the ordinary course of
business. Management believes that the ultimate liability from these
claims and actions, if any, will not have a material effect on our results of
operations or financial position.
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. We expect to receive delivery of raw materials for use in our
manufacturing operations from our fixed price contracts. These
contracts are not accounted for as derivative instruments because they meet the
normal purchases and sales exemption.
In the
normal course of business we expect to purchase 2.0 million pounds of aluminum
at a price of $0.80 per pound or $1.6 million during the remainder of
2010.
15.
Canadian Facility
On May
18, 2009 we announced the closure of our Canadian facility and filed an 8-K to
that effect. At the same time, we notified the 47 Canadian employees
of the expected closure date of July 23, 2009. The actual closure
date was at the end of September 2009. We accrued and charged to
expense $0.3 million through December 31, 2009, in closure costs related to
employee termination benefits in accordance with Canadian labor laws and
regulations. We incurred employee termination costs as well as costs
to dispose of inventory. We accrued and charged to expense $0.4
million as an adjustment to our inventory reserve in second quarter 2009 to
account for inventory items we did not transfer to our other
locations.
The
following closure costs were included in income from continuing operations in
the income statement and paid as of December 31, 2009:
|
|
Balance
June
30, 2009
|
|
|
Additional
Accrual
|
|
|
Charged
to Expense
|
|
|
|
(in
thousands)
|
|
Employee
termination benefits
|
|
$ |
280 |
|
|
$ |
26 |
|
|
$ |
306 |
|
Inventory
reserve adjustments
|
|
|
389 |
|
|
|
- |
|
|
|
389 |
|
Total
|
|
$ |
669 |
|
|
$ |
26 |
|
|
$ |
695 |
|
16.
Assets Held For Sale
We
reclassified certain fixed assets with a net book value of $1.6 million to
assets held for sale upon closure of our Canadian manufacturing operations in
September 2009. The assets consist of a building and land valued at
the lower of cost or market. No additional depreciation expense was
taken on the building as of October 1, 2009. We have contracted with
a realtor and plan to sell the property within one year. The products
previously manufactured at the Canadian facility will be produced by the Tulsa,
Oklahoma and Longview, Texas facilities in the future.
17.
Fair Value Measurements
We follow
the provisions of FASC Topic 820, Fair Value Measurements and
Disclosures related to financial assets and
liabilities that are being measured and reported on a fair value
basis. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants in the principal market at the measurement date (exit
price). We are required to classify fair value measurements in one of
the following categories:
Level 1
inputs which are defined as quoted prices (unadjusted) in active markets for
identical assets or liabilities that the reporting entity has the ability to
access at the measurement date.
Level 2
inputs which are defined as inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either directly or
indirectly.
Level 3
inputs are defined as unobservable inputs for the assets or
liabilities.
Financial
assets and liabilities are classified based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the
significance of a particular input to the fair value measurement requires
judgment, and may affect the valuation of the fair value of assets and
liabilities and their placement within the fair value hierarchy
levels.
Financial
Derivatives Fair Value Measurements
Our
financial derivative assets consist of a forward purchase contract that is
measured at fair value using the quoted prices in the COMEX commodity markets
which is the lowest level of input significant to measurement. The
fair value and carrying amount of our financial derivative assets at March 31,
2010 is $1.7 million. We locked in the settlement price for the
remainder of 2010. The measurement is based on pricing for
instruments similar but not identical to the contract we will
settle. These prices are based upon regularly traded commodities on
COMEX. Therefore we consider the market for our contract to be
active.
We record
changes in the financial derivative’s fair value currently in earnings based on
mark-to-market accounting. During the three months ended March 31,
2010, we recorded approximately $14,000 to cost of sales from the unrealized
gain on financial derivative assets at fair value in the Consolidated Statements
of Income.
The
following table presents the fair value of our assets and liabilities measured
at fair value on a recurring basis as of March 31, 2010:
|
|
Quoted
Prices in Active Markets for Identical Assets
Level
1
|
|
|
Significant
Other Observable Inputs
Level
2
|
|
|
Significant
Unobservable Inputs
Level
3
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Financial
derivative assets
|
|
$ |
- |
|
|
$ |
1,674 |
|
|
$ |
- |
|
|
$ |
1,674 |
|
Total
|
|
$ |
- |
|
|
$ |
1,674 |
|
|
$ |
- |
|
|
$ |
1,674 |
|
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 rooftop units, chillers, air-handling units,
make-up air units, heat recovery units, condensing units, commercial self
contained units and coils. These 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 of our sales.
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. We also purchase from other domestic manufactures certain
components, including compressors electric motors and electrical controls used
in our products. The suppliers of these components are significantly
affected by the raw material costs as steel, copper and aluminum are used in
their products. The raw materials market was volatile during 2010 and
2009 due to the economic environment. We have entered into contracts
that are below the average index price as of March 31, 2010. Prices
increased by approximately 59% for steel, 52% for aluminum and 107% for copper
from March 31, 2009 to March 31, 2010. These price increases impacted
our gross margins and may impact margins in future periods.
We
entered into a financial derivative instrument in the third quarter of 2009 with
a large financial institution to mitigate our exposure to volatility in copper
prices. The financial derivative is in the form of a commodity
futures contract. The contract began settling monthly in January 2010
and will continue through December 2010. In March 2010, we locked in
the settlement price for the remainder of 2010. The contract is for a
total of 2,250,000 pounds of copper (1,650,000 remaining at March 31, 2010) at
$2.383 per pound. The contract is for quantities equal to or less
than those expected to be used in our manufacturing operations in
2010.
In
addition to our financial derivative instrument, we attempt to limit the impact
of price fluctuations on these materials by entering into cancelable and
noncancelable fixed price contracts with our major suppliers for periods of 6 -
18 months. We expect to receive delivery of raw materials from our
fixed price contracts for use in our manufacturing operations. These
contracts are not accounted for as derivative instruments because they meet the
normal purchases and sales exemption.
We are
subject to claims and legal actions that arise in the ordinary course of
business. Management believes that the ultimate liability from these
claims and actions, if any, will not have a material effect on our results of
operations or financial position.
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 plant
and office facilities in Tulsa, Oklahoma consist of a 337,000 sq. ft. building
(322,000 sq. ft. of manufacturing/ warehouse space and 15,000 sq. ft. of office
space) located at 2425 S. Yukon Avenue (“the original facility”), and a 693,000
sq. ft. manufacturing/warehouse building and a 22,000 sq. ft. office building
(“the expansion facility”) located across the street from the original facility
at 2440 S. Yukon Avenue.
In the expansion facility
we use 22,000 sq. ft. for office space, 20,000 sq. ft. for warehouse
space and 80,000 sq. ft. for two production lines; an additional 106,000 sq. ft.
is utilized for sheet metal fabrication. The remaining 487,000 sq.
ft. is presently being prepared as additional plant space for long-term
growth.
Other
operations in Longview, Texas are conducted in a plant/office building at
203-207 Gum Springs Road, containing 258,000 sq. ft. (251,000 sq. ft. of
manufacturing/ warehouse and 7,000 sq. ft. of office space). An
additional 15 acres were purchased in 2004 and 2005 for future
expansion.
Our previous operations in
Burlington, Ontario, Canada, were located at 279 Sumach Drive, consisting of an
82,000 sq. ft. office/manufacturing facility. The facility was
classified as available for sale upon closure of our manufacturing operations in
September 2009 (see Note 16, Assets Held For
Sale). We have contracted with a realtor and plan to sell the
property within one year.
Set forth
below is unaudited income statement information for the periods ended March 31,
2010 and 2009:
|
|
Three
Months Ended
|
|
|
|
March
31, 2010
|
|
|
March
31, 2009
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
49,309 |
|
|
|
100 |
% |
|
$ |
63,965 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
36,315 |
|
|
|
73.6 |
% |
|
|
47,031 |
|
|
|
73.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
12,994 |
|
|
|
26.4 |
% |
|
|
16,934 |
|
|
|
26.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
4,828 |
|
|
|
9.8 |
% |
|
|
6,535 |
|
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
8,166 |
|
|
|
16.6 |
% |
|
|
10,399 |
|
|
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
- |
|
|
|
0.0 |
% |
|
|
(9 |
) |
|
|
0.0 |
% |
Interest
income
|
|
|
6 |
|
|
|
0.0 |
% |
|
|
- |
|
|
|
0.0 |
% |
Other
income (expense), net
|
|
|
(60 |
) |
|
|
(0.1 |
)% |
|
|
245 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
8,112 |
|
|
|
16.5 |
% |
|
|
10,635 |
|
|
|
16.6 |
% |
Income
tax provision
|
|
|
2,994 |
|
|
|
6.1 |
% |
|
|
3,907 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
5,118 |
|
|
|
10.4 |
% |
|
$ |
6,728 |
|
|
|
10.5 |
% |
Results
of Operations
Key
events impacting our cash balance, financial condition, and results of
operations for the three months ended March 31, 2010, include the
following:
·
|
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.
|
·
|
We
attempt to moderate certain commodity costs by utilizing purchase
agreements and pricing strategies which affect our gross
margins.
|
·
|
In
February 2006, the Board of Directors (“Board”) initiated a program of
semi-annual cash dividend payments. Cash dividend payments of
$5.9 million were made in 2009 and $3.1 million were made in
2010. In May 2009, the Board increased the semi-annual cash
dividend from $0.16 per share to $0.18 per
share.
|
·
|
Stock
repurchases resulted in cash payments of $2.0 million. This
cash outlay is partially offset by cash received from options exercised by
employees as a part of an incentive bonus program of $0.1
million.
|
·
|
We
have a strong liquidity position with cash on hand of $15.6 million and
current investments of $9.7 million and non-current investments of $4.6
million. In view of the current economic environment, our goal
remains to keep a healthy financial
condition.
|
·
|
Purchases
of equipment and expansion of facilities to create efficiencies remain 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 2010 for continued
growth.
|
·
|
We
closed our manufacturing operations and reclassified our Canadian facility
as held for sale in September 2009 (see Note 16, Assets Held For
Sale). The products previously manufactured at the
Canadian facility will be produced by the Tulsa, Oklahoma and Longview,
Texas facilities in the future.
|
·
|
The
Tulsa manufacturing facility was expanded in 2009 for future
growth.
|
Net
Sales
Net sales
decreased $14.7 million or 23% to $49.3 million from $64.0 million for the three
months ended March 31, 2010 and 2009, respectively. The decrease in
net sales was a result of the decreased volume related to the current economic
environment. The current economic environment has negatively impacted
commercial construction markets with some projects delayed, postponed
indefinitely or cancelled. The replacement market has also been
affected by customers delaying equipment replacement as a cost saving
strategy.
Gross
Profit
Gross
profit decreased $3.9 million or 23% to $13.0 million from $16.9 million for the
three months ended March 31, 2010 and 2009, respectively. As a
percentage of sales, gross margins were 26.4% compared to 26.5% for the three
months ended March 31, 2010 and 2009, respectively. Despite lower sales, in the
first three months of 2010, our gross margin percentages remained consistent
with the same period in 2009, which was accomplished by a continuation of
improved production and labor efficiencies and a reduction in manufacturing
related expenses.
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. We also purchase from other domestic manufacturers certain
components, including compressors, electric motors and electrical controls used
in our products. The suppliers of these components are significantly
affected by the raw material costs of steel, copper and aluminum used in their
products. The raw materials market was volatile during 2010 and 2009
due to the economic environment. We have entered into contracts that
are below the average index price as of March 31, 2010. Prices
increased by approximately 59% for steel, 52% for aluminum and 107% for copper
from March 31, 2009 to March 31, 2010. These price increases impacted
our gross margins and may impact margins in future periods.
We
entered into a financial derivative instrument in the third quarter of 2009 with
a large financial institution to mitigate our exposure to volatility in copper
prices. The financial derivative is in the form of a commodity
futures contract. The contract began settling monthly in January 2010
and will continue through December 2010. In March 2010, we locked in
the settlement price for the remainder of 2010. The contract is for a
total of 2,250,000 pounds of copper (1,650,000 pounds remaining as of March 31,
2010) at $2.383 per pound. The contract is for quantities equal to or
less than those expected to be used in our manufacturing operations in
2010.
In
addition to our financial derivative instrument, we attempt to limit the impact
of price fluctuations on these materials by entering into cancelable and
noncancelable fixed price contracts with our major suppliers for periods of 6 -
18 months. We expect to receive delivery of raw materials for use in
our manufacturing operations from our fixed price contracts. These
contracts are not accounted for as derivative instruments since they meet the
normal purchases and sales exemption.
Selling,
General and Administrative Expenses
SG&A
expenses decreased $1.7 million or 26% to $4.8 million from $6.5 million for the
three months ended March 31, 2010 and 2009, respectively. The
decrease was primarily due to lower bad debt expense to reduce the bad debt
reserve, a decrease in warranty expenses related to fewer sales and sales
related expenses.
Other
Income (Expense)
Other
expense increased $0.3 million to $0.1 million compared to other income of $0.2
million for the three months ended March 31, 2010 and 2009,
respectively. The increase in other expense was primarily related to
termination of the lease on our expansion facility.
Previously
other income was primarily attributable to rental income from our expansion
facility which we received through the lease expiration on May 31,
2009. We began renovations on the expansion facility to give us
increased manufacturing capacity upon expiration of the lease. Our 2010
capital expenditures budget reflects the projected outlay to remodel the
facility.
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.
General
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 $0.9
million. The letter of credit is a requirement of our workers
compensation insurance and will expire December 31, 2010. Interest on
borrowings is payable monthly at the greater of 4% or LIBOR plus 2.5% (4.00% at
March 31, 2010). No fees are associated with the unused portion of
the committed amount.
We did
not have an outstanding balance under the revolving credit facility at March 31,
2010 or December 31, 2009. Borrowings available under the revolving
credit facility at March 31, 2010 were $14.3 million. At March 31,
2010, 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, 2010 our tangible
net worth was $121.5 million which meets the requirement of being at or above
$75.0 million. Our total liabilities to tangible net worth ratio was
1 to 3 which meets the requirement of not being above 2 to 1. Our
working capital was $62.8 million which meets the requirement of being at or
above $30.0 million. On July 30, 2009, we renewed the line of credit
with a maturity date of July 30, 2010, with terms substantially the same as the
previous agreement.
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 2010 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, 2010 (see Note 9, Revolving Credit
Facility).
Cash
Flows Provided by Operating Activities
Net cash
provided by operating activities decreased in the three months ended March 31,
2010, by $0.6 million from the three months ended March 31, 2009. The
decrease was primarily due to changes in net income, accounts receivable and
provision for losses on accounts receivable, inventories, accounts payable, and
accrued liabilities.
Cash Flows Used in Investing
Activities
Cash
flows used in investing activities were $17.9 million and $3.5 million for the
three months ended March 31, 2010 and 2009, respectively. The
increase in cash flows used in investing activities in 2010 was related to
investments of $2.5 million ($1.8 million of current assets) in certificates of
deposit and $11.8 million ($7.9 million of current assets) in corporate notes
and bonds. We did not invest in any certificates of deposits or other
investments in 2009. Capital expenditures remained constant at $3.5
million for the three months ended March 31, 2010 and
2009. 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 2010 for renovation of the
previously third party leased production facility and equipment
purchases. We expect our cash requirements to be provided by cash
flows from operations.
Cash Flows Used in Financing
Activities
Cash
flows used in financing activities were $5.0 million and $6.4 million for the
three months ended March 31, 2010 and 2009, respectively. The
decrease of cash used in financing activities is primarily due to higher average
borrowings on the revolving credit facility during the quarter ended March 31,
2009.
We did
not have an outstanding balance under the revolving credit facility at March 31,
2010 or December 31, 2009. We repurchased shares of stock from
employees’ 401(k) savings and investment plan and from the open market in the
amount of $2.0 million for 94,115 shares of stock and $0.7 million for 39,419
shares of stock for the three months ended March 31, 2010 and 2009,
respectively.
We
received cash from stock options exercised of approximately $128,000 and
classified the excess tax benefit of stock options exercised and restricted
stock awards vested of approximately $16,000 in financing activities for the
three months ended March 31, 2010. 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, 2010. The cash
received from stock options exercised for the same period in 2009 was
approximately $10,000 and the excess tax benefit of stock options exercised and
restricted stock awards vested was approximately $2,000.
Cash
dividends were declared in December 2009 and were paid in January 2010 in the
amount of $3.1 million. Board approval is required to determine the
date of declaration and amount for each semi-annual dividend
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.
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, 2009. There have been no significant changes
in critical accounting policies or management estimates other than as related to
investments stated below since the year ended December 31, 2009.
We have
added the following accounting policies since December 31, 2009:
Investments
We made
investments with a large firm which includes cash equivalents and money markets,
certificates of deposit and corporate notes and bonds. We record the
amortized cost basis and accrued interest on the corporate notes and bonds in
the Consolidated Balance Sheets. We record the interest and
amortization of bond premiums to interest income on the corporate notes and
bonds in the Consolidated Statements of Income.
New
Accounting Pronouncements
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
(“ASU 2010-06”), which requires reporting entities to provide information
about movements of assets among Levels 1 and 2 of the three-tier fair value
hierarchy. Separate disclosures need to be made of the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
along with a description of the reason for the transfers. Also,
disclosure of activity in Level 3 fair value measurements needs to be made on a
gross basis rather than as one net number. ASU 2010-06 also requires:
(1) fair value measurement disclosures for each class of assets and liabilities,
and (2) disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and nonrecurring fair value measurements, which
are required for fair value measurements that fall in either Level 2 or Level
3. The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the Level 3 activity disclosures, which are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. Adoption of ASU 2010-06 should not
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. 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.
Interest
Rate Risk
We are
subject to interest rate risk on the revolving credit facility which bears
variable interest based upon the greater of a rate of 4% or LIBOR plus
2.5%. At March 31, 2010, we did not have an outstanding balance under
the revolving credit facility.
Foreign
Currency Exchange Rate Risk
Foreign
sales accounted for less than 5% of our sales for the three months ended March
31, 2010, 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. We believe our foreign currency
exchange rate risk has diminished due to the closure of our manufacturing
operations in Canada in September 2009.
Foreign
currency transactions and financial statements are translated in accordance with
FASC Topic 830, Foreign
Currency Matters. We use the U.S. dollar as our functional
currency, except for the Canadian subsidiaries, which use the Canadian
dollar. We record adjustments arising from translation of the
Canadian subsidiaries’ financial statements to 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 $0.9823 and $0.7942
at March 31, 2010 and 2009, respectively.
Commodity
Price Risk
We
entered into a financial derivative instrument in the third quarter of 2009 with
a large financial institution, to mitigate our exposure to volatility in copper
prices. We monitor our financial derivative and the credit worthiness
of the financial institution. We do not anticipate losses due to
counterparty non-performance. We do not use financial
derivatives for speculative purposes.
Generally,
fluctuations in copper commodity prices impact the value of the financial
derivative. In March 2010, we locked in the settlement price for the
remainder of 2010. Prior to locking in the settlement price, we would
have been subject to gains which we would have recorded as financial derivative
assets if the forward copper commodity prices increased and losses which we
would have recorded as financial derivative liabilities if they
decreased. At March 31, 2010, the forward copper commodity prices
were higher than our contract price resulting in a gain or financial derivative
assets. We will continue to be in a gain or financial derivative
assets position for the remainder of 2010 based on the settlement price we
locked into. The fair value of the financial derivative settlements
through December 2010 is $1.7 million and recognized as current financial
derivative assets in the Consolidated Balance Sheets.
We use
COMEX index pricing to support our fair value calculation, which is a Level 2
input per the valuation hierarchy as the pricing is for instruments similar but
not identical to the contract we will settle (see Note 17, Fair Value
Measurements).
We did
not designate the financial derivative as a cash flow hedge. We
record changes in the financial derivative’s fair value currently in earnings
based on mark-to-market accounting. As a result, the Consolidated
Income Statement includes an approximately $14,000 adjustment to cost of sales
for the three months ended of March 31, 2010.
Information
about our exposure to market risks related to forward copper commodity prices
and a sensitivity analysis related to our financial derivative is presented
below:
|
|
March
31, 2010
|
|
|
|
(in
thousands)
|
|
|
|
|
|
Remaining
notional amount
|
|
1,650
pounds
|
|
Carrying
amount and fair value of financial derivative assets
|
|
$ |
1,674 |
|
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 2010 and 2009
due to the economic environment. We have entered into contracts that
are below the average index price as of March 31, 2010. Prices
increased by approximately 59% for steel, 52% for aluminum and 107% for copper
from March 31, 2009 to March 31, 2010.
In
addition to the financial derivative instrument described above, we attempt to
limit the impact of price fluctuations on these materials by entering into
cancelable and noncancelable fixed price contracts with our major suppliers for
periods of 6 - 18 months. We expect to receive delivery of raw
materials from our fixed price contracts for use in our manufacturing
operations. These contracts are not accounted for as derivative
instruments since they meet the normal purchases and sales
exemption.
We do not
utilize derivative financial instruments to hedge interest rate or foreign
currency exchange rate risk. We do use financial derivatives to
economically hedge our commodity price risk.
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:
·
|
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
|
·
|
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.
|
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, 2010.
Changes in Internal Control over
Financial Reporting
There
have been no changes in internal control over financial reporting that occurred
during 2010 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 in 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 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 current
market prices.
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, 2010, we repurchased a total of 1,748,039
shares under this program for an aggregate price of $34,854,368, or an average
price of $19.94 per share. We purchased the shares at current market
prices.
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, 2010, we
repurchased 824,357 shares for an aggregate price of $13,934,909, or an average
price of $16.90 per share. We purchased the shares at current market
prices.
On
November 7, 2006, the Board of Directors authorized us to repurchase shares from
certain directors and officers following their exercise of stock
options. The maximum number of shares to be repurchased under the
program is unknown as the amount is contingent on the number of shares
sold. Through March 31, 2010, we repurchased 350,375 shares for an
aggregate price of $7,167,623, or an average price of $20.46 per
share. We purchased the shares at current market prices.
Repurchases
during the first quarter of 2010 were as follows:
Period
|
|
(a)
Total Number of Shares (or Units) Purchased
|
|
|
(b)
Average Price Paid Per Share (or Unit)
|
|
|
(c)
Total Number of Shares (or Units) Purchased as Part of Publicly
Announced Plans or Programs
|
|
|
(d)
Maximum Number
(or
Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased
Under the Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2010
|
|
|
20,838 |
|
|
$ |
20.36 |
|
|
|
20,838 |
|
|
|
- |
|
February
2010
|
|
|
14,960 |
|
|
|
21.01 |
|
|
|
14,960 |
|
|
|
- |
|
March
2010
|
|
|
58,317 |
|
|
|
21.77 |
|
|
|
58,317 |
|
|
|
- |
|
Total
|
|
|
94,115 |
|
|
$ |
21.34 |
|
|
|
94,115 |
|
|
|
- |
|
Item
4. Submission of Matters to a Vote of Security Holders.
None
Item
5. Other Information.
None
Item
6. Exhibits.
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,
2010 |
|
By: |
/s/ Norman H.
Asbjornson |
|
|
|
Norman H.
Asbjornson |
|
|
|
President/CEO |
|
|
|
|
|
|
|
|
|
|
|
|
Dated: May 6,
2010 |
|
By: |
/s/ Kathy I.
Sheffield |
|
|
|
Kathy I.
Sheffield |
|
|
|
Vice
President/CFO |
|
|
|
|