AAON
Annual Report 2001

Plain-text annual report

AAON, Inc. 2425 South Yukon Avenue Tulsa, Oklahoma 74107 (918) 583-2266 Fax: (918) 583-6094 AAON Coil Products, Inc. 203 Gum Springs Road Longview, TX 75602 (903) 236-4403 Fax: (903) 236-4463 www.aaon.com ReasonsToBelieve. A A O N A n n u a l R e p o r t 0 1 AAON. The only manufacturer of commercial/industrial heating and cooling systems listed in the top 40 of both Forbes’ “200 Best Small Companies” and BusinessWeek’s 100 “Hot Growth Companies” for 2001. In fact, the only such manufacturer on either list. Period. W h a t ’ s I n s i d e : Numbers Tell All: Financial Highlights What AAON CEO Norman H. Asbjornson wants you to know Form 10K The people behind AAON’s continued growth ReasonToBelieve: The Proof is in the Numbers. In a tough and somber year, AAON’s alert eye for innovation remained focused. Growth prevailed. Sales In $ Millions 157.3 155.0 131.9 109.6 81.7 $1.56 $1.38 $1.00 Earnings Per Share Diluted $0.55 $0.32 Stock Price As of end of December $24.47 $11.79 $9.58 $6.21 $5.04 93% Increase 1997 to 2001 388% Increase 1997 to 2001 386% Increase 1997 to 2001 01 00 99 98 97 01* 00* 99* 98* 97* 01* 00* 99* 98* 97* * Reflects the 3 for 2 Stock Split, September 2001 Turning Heads as we Turn Profits. To Our Stockholders: This past grown 93%, earnings have increased year, perhaps more than in any in the 368% and shareholders’ equity has Company’s 14-year history, was a time gained 165%. for reflection and evaluation. We have I believe that four important grown from a small HVAC manufacturer ingredients stimulated and aided our with a limited number of products and growth, particularly over this period. only a handful of customers to a company They were: responsiveness, innovation, that has achieved a prominent position commitment and performance. I further in the HVAC industry. We have produced believe that those same principles still record returns on both revenues and exist today and will allow us to con- shareholders’ equity for any major tinue to achieve excellent revenue and equipment manufacturer within our earnings growth while maintaining industry during the last four decades. our premier position as a manufacturer Over the past five years, revenues have and supplier of quality products. ReasonToBelieve: People are Talking. Just like the researchers that placed AAON on BusinessWeek’s 100 “Hot Growth Companies” list for two years running, AAON’s mega- clients like Wal-Mart, Target and Dillard’s like what they see in AAON. ReasonToBelieve: There’s Strength in Our Numbers. Financial Highlights 2001 2000 1999 1998 1997 I n c o m e D a t a ( $ 0 0 0 ) Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 157,252 Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . 38,853 Operating Income . . . . . . . . . . . . . . . . . . . . . 22,842 Interest Expense . . . . . . . . . . . . . . . . . . . . . . 892 4,380 Depreciation and Amortization . . . . . . . . . . . . Pretax Income . . . . . . . . . . . . . . . . . . . . . . . 22,486 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . 14,156 1.63 Earnings Per Share . . . . . . . . . .(Basic) . . . . 1.56 (Diluted) . . . . 154,982 34,749 20,827 904 3,465 20,359 12,794 1.46 1.38 131,947 30,718 15,977 574 3,063 15,641 9,697 1.04 1.00 109,624 19,829 9,203 1,017 2,848 8,545 5,230 0.56 0.55 B a l a n c e S h e e t ( $ 0 0 0 ) Current Assets . . . . . . . . . . . . . . . . . . . . . . . 42,273 Net Fixed Assets . . . . . . . . . . . . . . . . . . . . . . 34,022 Accumulated Depreciation . . . . . . . . . . . . . . . 22,273 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 76,295 Current Liabilities . . . . . . . . . . . . . . . . . . . . . 22,385 Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . 985 Stockholders’ Equity . . . . . . . . . . . . . . . . . . . 50,041 5.50 Stockholders’ Equity per Share . . . . . . . . . . . . 47,358 29,460 19,063 76,818 31,902 5,853 37,012 3.99 36,477 22,179 15,650 58,656 17,246 6,630 33,618 3.47 31,953 18,553 12,678 50,506 14,832 10,980 24,411 2.57 81,676 13,071 4,925 687 2,517 4,071 3,022 0.33 0.32 26,225 16,585 9,969 42,810 11,039 12,857 18,873 2.00 F u n d s F l o w D a t a ( $ 0 0 0 ) From (To) Operations . . . . . . . . . . . . . . . . . . . 23,879 From (To) Investment . . . . . . . . . . . . . . . . . . . (8,817) From (To) Financing . . . . . . . . . . . . . . . . . . . . (13,956) 1,106 From (To) Cash and Cash Equivalents . . . . . . . 14,040 (10,733) (3,315) (8) 11,953 (6,649) (5,304) — 5,809 (4,767) (1,043) (1) 4,772 (8,956) 4,072 (112) R a t i o A n a l y s i s Return on Average Equity . . . . . . . . . . . . . . . . Return on Average Assets . . . . . . . . . . . . . . . Pre-Tax Income on Sales . . . . . . . . . . . . . . . . Net Income on Sales . . . . . . . . . . . . . . . . . . . Total Liabilities to Equity . . . . . . . . . . . . . . . . Long-Term Debt to Equity . . . . . . . . . . . . . . . . Interest Coverage . . . . . . . . . . . . . . . . . . . . . Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . 32.5% 18.5% 14.3% 9.0% 0.5 0.0 26.2 1.9 36.2% 18.9% 13.1% 8.3% 1.1 0.2 23.5 1.5 33.4% 17.8% 11.9% 7.4% 0.7 0.2 28.2 2.1 24.2% 11.2% 7.8% 4.8% 1.1 0.4 9.4 2.2 17.5% 7.7% 5.0% 3.7% 1.3 0.7 6.9 2.4 = Reflects 3/2 stock split in September 2001. = Reflects reclassification of revolving loan from long term debt to current liabilities for the years 2000 and 2001. = Actual dollars and diluted number of shares for all years reflects 3/2 stock split. = Value for 2001 is less than 0.05. ReasonToBelieve: Innovation. In my shareholder letter to you last year, I discussed the softening in demand witnessed toward the end of 2000, which continued throughout 2001. The tragic events of September 11 had an Introduced in 2001, AAON’s RL 230 tons, up from 130 tons available Model Series of rooftop conditioners in the previous RF Model Series. Rest is the first to offer affordable assured — when it comes to innovation, shares outstanding and, like 2000 per in October 1999, the Company share earnings, reflect the 3-for-2 stock commenced a stock buyback program, Investment Community Recognition. It would appear split effective September 2001. which was completed in January 2001. that the investment community During that time, we purchased 652,000 also believes. For the second evaporative condensing models. This AAON never rests. In February 2002, Improved Financial Condition. shares of common stock at a cost of $11.6 consecutive year, BusinessWeek immediate impact on our business, as incredibly energy-efficient technology AAON introduced its water chiller While we are quite pleased with the million. In addition, we purchased 85,000 Magazine (6/11/01) listed AAON fourth quarter revenues declined 11% compared to the corresponding period in 2000. This marked the Company’s first quarterly decline in revenues on a year-over-year basis in 22 quarters. The tremors of that day are still being felt. Continuous Yearly Growth. Despite the economic and emotional turmoil, 2001 proved to be another year of growth for AAON. The Company achieved its fifth consecutive year of record revenues and its sixth consecutive year of record net income. For the year ended was formerly available only through product line which is as distinctive gains in last year’s operating results, we shares of common stock at a cost of $2.4 among the nation’s top 100 “HOT high-priced, custom-built rooftop products, and energy- and cost-efficient as our which were prohibitively expensive for rooftop line. This will open the door most rooftop product customers. The to a new market for AAON, similar in RL Model Series increases AAON’s size to the rooftop market. available market size due to its capacity-range increase to are especially proud of the Company’s million in September 2001. GROWTH COMPANIES” (ranking significantly improved financial condition. I believe that the Company’s us at 34th), in a feature article, At December 31, 2001, total current exceptional operating performance “WHEN COOL HEADS PREVAIL.” assets were $42.3 million, with a current over the past years and the significantly The Company was also selected ratio of 1.9:1. During the past year, we enhanced balance sheet places us firmly as one of the “200 Best Small reduced our current maturities of long- on a path of future growth through new Companies” by Forbes Magazine term debt by almost $7.0 million to product introductions and the entry into (10/29/01), wherein AAON was $884,000, while our total long-term new markets, while we continue to ranked 36th. A year earlier, AAON debt stood at just under $1.0 million improve our existing product lines. ranked 52nd in the same publication. representing a reduction of $4.9 million. This was accomplished despite capital expenditures of $9.0 million and the final phase of the stock purchase program in which the Company spent $2.8 million. ReasonToBelieve: Listening to Customer Needs. Is it any wonder AAON’s first order December 31, 2001, net revenues $34.8 million a year ago. Despite an (13.4% of revenues) in 2000. Long-term debt to equity was 2.0%. for RL Model Series evaporative increased 1.5% to $157.3 million from increase in SG & A expenses to $16.0 Net income increased 10.6% to $14.2 Total shareholders’ equity climbed to $155.0 million in 2000. Gross profit million (10.2% of revenues) from $13.9 million (9.0% of revenues) or $1.56 $50.0 million or $5.50 per share at year- margins, reflecting the continuing million (9.0% of revenues) primarily per share from $12.8 million (8.3% of end 2001, from $37.0 million or $3.99 improvement in operating efficiencies, due to higher warranty reserves, operating revenues) or $1.38 per share in 2000. per share a year earlier. In 2000 our return widened to 24.7% of revenues or $38.9 income climbed 9.7% to $22.8 million Our 2001 per share calculations are on average shareholders’ equity was million from 22.4% of revenues or (14.5% of revenues) from $20.8 million based upon 9.1 million fully diluted 36.2%, and for 2001 the average ROE stood at 32.5%. It should be noted that condensing units shipped out to California, where energy conservation is imperative? Energy savings can be dramatic: 20-40% annually, depending on the location. And only AAON makes it affordable. ReasonToBelieve: Continuous Expansion. Continuous Growth. August 1988 AAON, an Oklahoma corporation, was founded. September 1988 Purchase of John Zink Air Conditioning Division. Spring 1989 • AAON purchased, renovated and moved into a 184,000 square foot plant in Tulsa, Oklahoma. • Introduced a new product line of rooftop heating and air conditioning units 2-140 tons. Summer 1989 Became a publicly traded company with the reverse acquisition of Diamond Head Resources (now “AAON, Inc.”), a Nevada corporation. December 1990 Listed on NASDAQ Small Cap – Symbol “AAON.” December 1991 Formed AAON Coil Products, a Texas Corporation, as a subsidiary to AAON, Inc. (Nevada) and pur- chased coil making assets of Coils Plus. Spring 1993 AAON Coil Products purchased, renovated and moved into a 110,000 square foot plant in Longview, Texas. January 1995 Introduced a desiccant heat recovery wheel option available on all AAON rooftop units. September 1993 One-for-four reverse stock split. Retired $1,927,000 of subordinated debt. November 1993 Listed on the NASDAQ National Market System. March 1995 • Purchase of prop- erty with 26,000 square ft. building adjacent to AAON Coil Products plant in Longview, TX. • Issued a 10% stock dividend. September 1995 Completed expansion of the Tulsa facility to 332,000 square feet. December 1997 Purchased 40 acres with 457,000 square foot plant and 22,000 square foot office space located across from Tulsa facility. April 1998 AAON receives U.S. patent for Blower Housing assembly. October 1998 U.S. patent is granted to AAON for air condi- tioner with energy recovery heat wheel. November 1998 • AAON yearly shipments exceed $100 million. • Received U.S. patent for Dimpled Heat Exchanger Tube. Spring 2000 Completed Tulsa, Oklahoma and Longview, Texas plant additions yielding a total exceeding 1 mil- lion square feet. Fall 2001 • Expanded rooftop product line to 230 tons. • Introduced evaporative condensing energy savings feature. • 3-for-2 stock split ReasonToBelieve: Who Knew? Heard of Robert Mondavi Wineries, IHOP or Krispy Kreme Doughnuts? AAON’s perform- ance quietly surpassed these other “Forbes 200” companies to rank 36th on the list. Stock Price Response. The sum total of our efforts and the growing recognition within the financial community can be measured by the price performance of AAON stock. The closing price on December 31, 2000, was $11.79, adjusted for the million while our production capabilities eight stories high, enclosed shopping ReasonToBelieve: Controlling Quality and Costs. Perfect example: At AAON, we are vertically integrated from sales to marketing to assembly. We control quality in-house to meet our standards while eliminating many vendors’ mark- ups. Our customers benefit from both. Other cost-controlling measures? Volume purchasing and direct selling through manufacturer representation. excellent record of growth during 2001. With 101 offices, their business grew by approximately 9% to $102 million, or 65% of total revenues. In contrast, our manufacturers’ representative business contributed $38.6 million, or 39% of total revenues, in 1996. Demand for our products is influenced by the business climate. Taking into consideration the inherent cyclicality of our industry, we believe we can obtain and sustain an annual revenue growth New Products for Additional Markets. A product derivation of the been quite positive. The development rate of at least 15% over the next three of the WA product focuses on the to five years. Our existing product line September 2001 stock split. On can accommodate a total of $240 malls or industrial manufacturing facilities. RL line is the water chiller (LL) series. necessity to ensure constant sufficient is expected to grow at a rate which is December 31, 2001, the stock price million of revenues annually. The While the market for these large units Our innovative technological skills cooling, hence the need for redundant slightly better than the projected industry was $24.47. This represents a gain expanded manufacturing capacity is mature, with annual revenues in the enable us to supply potential buyers cooling. Prior to AAON’s product growth rate of 6-7%. The remaining of 107.5%. I believe that’s quite an has enabled AAON to pursue opportu- range of $150 - $200 million, AAON’s with factory built equipment rooms for introduction, the user placed multiple growth will be contributed by the addition achievement, particularly in an nities in new markets which, in some state-of-the-art manufacturing technology their chilled water needs. The customer units on the structure to provide of new products. The new product investment environment filled cases, are as large as the rooftop enables the Company to produce a unit can now place much of the equipment redundancy. Our product interfaces lines discussed previously will be sold with doubt and concern. market we now serve. capable of providing a lower installed previously field-installed inside the the equipment in a manner that allows by our manufacturers’ representatives Continued Manufacturing Investment. In 1996, the Company Expanded Rooftop Product Line. the product has an evaporative factory. Hence, the size of the equipment used as the redundant source and, I believe that over the next three to five cost to the customer. Additionally, building into the unit as it is built in the a smaller amount of cooling to be to their wide and varied customer base. Approximately one year ago, we condensing section that can reduce room is reduced, as are the costs of through the use of a common mounting years, our manufacturers’ representative began committing significant amounts introduced our RL series rooftop energy consumption by 30 to 40%. construction. As with the RL product, system, installation costs are reduced. network may well contribute over 80% of capital toward the automation and product, capable of more than 200 tons Over the next three to five years, we the water chiller can be built using These manufacturing innovations of AAON’s total revenues. physical expansion of its facilities. of cooling. This product may be used expect to become the industry’s an evaporatively-cooled condensing should enable us to gain a strong During the following six years, we on urban office buildings three to dominant supplier in this market. section to reduce energy consumption foothold in this annualized $150-$200 Employee Stockholders. We expended more than $41 million on capital improvements and have budgeted an additional $5 million in the current year. Our manufacturing facilities in Tulsa, Oklahoma, and Longview, Texas, combined, have grown from a total of 475,000 square feet to over 1.2 million square feet at year-end 2001. ReasonToBelieve: Specialists. Not Generalists. AAON has never fragmented its focus, or sacrificed its specialized expertise for a generalist business Our plants are presently capable of model. We focus on one area: the by 30 to 40%. We estimate the million market. believe that recruitment and retention size of this market in the range of Finally, we are designing an of skilled, trained employees is of critical $700-800 million. While this is a expanded air-handler product with importance to our ability to properly highly competitive market, we expect extra features such as heat recovery serve our customers. In order to to obtain a respectable share over the systems to complement AAON’s accomplish this, we invest in the continual next three to five years. water chiller product offerings. training of employees in our facilities We have recently begun to market our wall-mounted (WA) product. While it is currently available to customers on Sales Representative Distribution. Our manufacturers’ and regularly review our compensation and benefits packages to ensure that they are in keeping with this goal. Since handling revenues in excess of $275 industrial/commercial HVAC market. a limited basis, the initial response has representative network maintained its 1993 we have provided matching and And we do it extremely well. ReasonToBelieve: Industry Firsts. AAON set a new standard for simplified service and maintenance on rooftop units with our introduction of easy-open, easy-access service doors. No more screw-on metal panels with a bad habit of blowing off the roof in sudden gusts of wind. This small but high-impact innovation won the respect and appreciation of servicepeople – who began asking for AAON units by name. discretionary contributions to our benefit, combined with the long-term level. While 2002 should prove to be a employees’ 401(k) accounts. As a result stock ownership incentive, align the year of modest growth, I believe that of these contributions, our employee interests of our employees with those AAON is presently poised on a threshold retirement accounts, as a group, own of our shareholders. We are pleased of renewed growth in both revenues the second largest block of AAON that our employees have prospered as a and earnings, the rate of which should stock. However, to reduce our employees’ result of the success of AAON. accelerate as we move forward through retirement investment risk, we do not the remainder of this year and continue allow them to invest any of their own Business Outlook. The images of into next year and beyond. Future growth contributions in AAON stock. The destruction and heroism of September cannot be achieved without the trust Company’s 401(k) contributions are in 11 are indelibly etched in our minds. and confidence of our loyal customers, addition to quarterly cash “Profit After a decline of business immediately sales representatives and shareholders, Sharing” payments made to all employees following those events, but bolstered as well as the efforts of our outstanding on an equal basis. We believe that the by our nation’s strong resolve, business employees, all of whose names appear short-term nature of the Profit Sharing has began to return to the mid-2001 at the end of this report. ReasonToBelieve: Big Names. Big Believers. Wal-Mart. Target. Dillard’s. The list goes on. Crowning the rooftops of big-name businesses everywhere are easy-to-service, efficient and quiet AAON units. I want to thank all of you for your past support and for your continued belief in the AAON story. Norman H. Asbjornson President / CEO April 19, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 Commission file number: 33-18336-LA AAON, INC. (Exact name of Registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 2425 South Yukon, Tulsa, Oklahoma (Address of principal executive offices) 87-0448736 (IRS Employer Identification No.) 74107 (Zip Code) Registrant’s telephone number, including area code: (918) 583-2266 Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.004 (Title of Class) Rights to Purchase Series A Preferred Stock (Title of Class) 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 _✔ _ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information state- ments incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Registrant’s voting stock held by non-affiliates computed by reference to the clos- ing price of such stock on March 1, 2002, was approximately $155,716,000. For purposes of this computation, all officers, directors and 5% beneficial owners of Registrant are deemed to be affiliates. As of March 1, 2002, Registrant had outstanding a total of 8,780,142 shares of its $.004 par value Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant’s definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders to be held June 4, 2002, are incorporated into Part III. ReasonToBelieve Table of Contents Item Number and Caption PART I 1. 2. 3. 4. PART II 5. 6. 7. 7A. 8. 9. PART III 10. 11. 12. 13. PART IV Business. Properties. Legal Proceedings. Submission of Matters to a Vote of Security Holders. Market for Registrant’s Common Equity and Related Stockholder Matters. Selected Financial Data. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Quantitative and Qualitative Disclosures About Market Risk. Financial Statements and Supplementary Data. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Directors and Executive Officers of Registrant. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management. Certain Relationships and Related Transactions. 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. Page Number 1 5 5 5 6 7 8 11 11 11 12 12 12 12 13 Part I Item 1. Business. General Development of Business AAON, Inc., a Nevada corporation (“AAON-Nevada” or, including its subsidiaries, the “Company”), was incorporated on August 18, 1987. AAON, Inc., an Oklahoma corporation (“AAON-Oklahoma”), was incorporated on August 15, 1988, for the purpose of acquiring the assets, subject to certain liabilities, of the Heating, Ventilation and Air-Conditioning (“HVAC”) Division of John Zink Company in Tulsa, Oklahoma. In June 1989, pursuant to a Conversion/ Exchange Agreement, AAON-Oklahoma became a wholly-owned subsidiary of AAON-Nevada. AAON-Oklahoma is engaged in the manufacture and sale of commercial rooftop air-conditioners and heating equipment. In December 1991, AAON Coil Products, Inc. (“ACP”, formerly CP/AAON, Inc.), a Texas corporation organized as a wholly-owned subsidiary of AAON-Nevada for such purpose, purchased most of the assets of Coils Plus, Inc., of Longview, Texas, which manufactures coils used in the Company’s products, as well as air handling and condensing units introduced in 1998. Products and Markets The Company engineers, manufactures and markets commercial rooftop air-conditioning, heating and heat recovery equipment, air-conditioning coils and air handling and condensing units. Its products serve the commercial and industrial new construction and replacement markets. To date virtually all of the Company’s sales have been to the domestic market, with foreign sales accounting for only 2% of its sales in 2001. The rooftop and condenser markets consist of units installed on commercial or industrial structures of generally less than 10 stories in height. Air handling units and coils are applicable to all sizes of commercial and industrial buildings. Coil sales are also made to other air-conditioning unit manufacturers. The size of these markets is determined primarily by the number of commercial and industrial building completions. The replacement market consists of products installed to replace existing units/components which are worn or damaged. Historically, approximately half of the industry’s market has consisted of replacement units. 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, the Company emphasizes the replacement market. Based on its 2001 level of sales, approximately $157 million, the Company has a 12% share of the rooftop market and a 1% share of the coil market. Approximately 60% of the Company’s sales now come from new construction and 40% from renovation/replacements. The percentage of sales for new construction vs. replacement to particular customers is related to their stage of development. In the case of Wal-Mart, Target and Home Depot, due to their growth posture, the Company’s sales to these major customers was approximately 80% for new construction and 20% replacement. Sales of air handling and condensing units in 2001 amounted to approximately $2.9 million. 1 ReasonToBelieve The Company purchases certain components, fabricates sheet metal and tubing and then assembles and tests its finished products. The Company’s primary finished products consist of a single unit system containing heating, cooling and/or heat recovery components in a self-contained cabinet, referred to in the industry as “unitary” products. The Company’s other finished products are coils consisting of a sheet metal casing with tubing and fins contained therein, air handling units consisting of coils, blowers and filters and condensing units consisting of coils, fans and compressors. The Company currently has four groups of rooftop products: its RK Series, which is offered in 18 cooling sizes ranging from 3 to 60 tons; its RF Series, which is offered in nine cooling sizes ranging from 40 to 130 tons; its RL Series, which is offered in 15 cooling sizes ranging from 40 to 230 tons, which will replace the RF Series during 2002; and its HA Series, which is a horizontal discharge package for either rooftop or ground installation, offered in nine sizes ranging from 4 to 50 tons. The Company’s heat recovery option applicable to its RK and RF units (which responds to the U.S. Clean Air Act mandate to increase fresh air in commercial structures and increases the capacity of these units by up to 50% with no additional energy cost) has gained significant customer acceptance. The Company’s products are designed to compete on the high side of standardized, packaged rooftop products. Accordingly, its prices range from $300 to $550 per ton of cooling, which is approximately 4%, on average, higher than other standardized products. Performance characteristics of these products range in cooling capacity from 32,900-2,676,000 BTU’s and in heating capacity from 69,000-3,990,000 BTU’s. All of the Company’s rooftop products meet the Department of Energy’s efficiency standards, which are designed to set the maximum amount of energy to be used in producing a given amount of cooling. A typical commercial building installation requires a ton of air-conditioning for every 300-400 square feet or, for a 100,000 square foot building, 250 tons of air-conditioning, which would involve multiple units. The Company has developed a prototype wall-hung heating and air-conditioning unit which it plans to market for commercial buildings requiring a product designed for small space(s). Pilot production and testing of this product has begun, but sales in 2001 were not significant. In December 2001, the Company began marketing commercial water chillers. The development of these products did not require a material investment, but could produce material results. Major Customers The Company’s largest customers last year were Wal-Mart Stores, Inc., Home Depot, Inc., and Target Stores, Inc. Sales to Wal-Mart, Target and Home Depot were 14%, 11% and 10% of total sales, respectively, in 2001 compared to 19%, 9% and 10%, respectively, in 2000. The Company has no written contract with these customers. The loss of any of the above customers would have a material adverse affect on the Company. However, with the continuing expansion of the Company’s customer base, management believes that the extent of its dependence on sales to its major customers will diminish over a period of time. In order to diversify its customer base, the Company has added to and/or upgraded its sales representation in various markets. Sources and Availability of Raw Materials The most important materials purchased by the Company are steel, copper and aluminum, which are obtained from domestic suppliers. The Company also purchases from other domestic manufacturers certain components, including compressors, electric motors and electrical controls used in its products. The Company endeavors to obtain the lowest possible cost in its purchases of raw materials and components, consistent with meeting specified quality standards. The Company is not dependent upon any one source for its raw material or the major components of its manufactured products. By having multiple suppliers, the Company believes that it will have adequate sources of supplies to meet its manufacturing requirements for the foreseeable future. Further, the Company attempts to limit the impact of increases in raw materials and purchased component prices on its profit margins by negotiating with each of its major suppliers on a term basis from six months to three years. Distribution The Company utilizes a direct sales staff of nine individuals and approximately 84 independent manufacturer representatives’ organizations having 101 offices to market its products in the United States. The Company also has one international sales organization, which utilizes 12 distributors in other countries. Sales are made directly to the contractor or end user, with shipments being made from the Company’s Tulsa and Longview plants to the job site. Billings are to the contractor or end user, with a commission paid directly to the manufacturer representative. The Company’s products and sales strategy focus on a “niche” market. The targeted market for its rooftop equipment is customers seeking a product of better quality than offered, and/or options not offered, by standardized manufacturers. To support and service its customers and the ultimate consumer, the Company provides parts availability through two independent parts distributors and has a factory service organization at its Tulsa plant. Also, a number of the manufacturer representatives utilized by the Company have their own service organizations, which, together with the Company, provide the necessary warranty work and/or normal service to customers. The Company’s warranty on its products is: for parts only, the earlier of one year from the date of first use or 15 months from date of shipment; compressors (if applicable), an additional four years; and on gas-fired heat exchangers (if applicable), 15 years. Research and Development All R&D activities of the Company are company-sponsored, rather than customer-sponsored. Ongoing work involves the HA Series, component evaluation and refinement, development of control systems and new product development. This work will cost approximately $600,000 per year and is budgeted as a normal, recurring expense. Backlog The Company had a current backlog as of March 1, 2002, of $28,800,000, compared to $34,360,000 at March 1, 2001. The current backlog consists of orders considered by management to be firm and substantially all of which will be filled by August 1, 2002; however, the orders are subject to cancellation by the customers. Working Capital Practices Working capital practices in the industry center on inventories and accounts receivable. The Company regularly reviews its working capital components with a view to maintaining the lowest level consistent with requirements of anticipated levels of operation. Its greatest needs arise during the months of July- November, the peak season for inventory (primarily purchased material) and accounts receivable. The Company’s working capital requirements are generally met through a bank revolving credit facility, which currently permits borrowings up to $15,150,000. The Company believes that it will have sufficient bank credit available to meet its working capital needs for the foreseeable future. 2 3 ReasonToBelieve Seasonality Sales of the Company’s products are moderately seasonal with the peak period being July-November of each year. Competition In the domestic market, the Company competes primarily with Trane Company, a division of American Standard, Inc., Carrier Corporation, a subsidiary of United Technologies Corporation, Lennox International, Inc., and York International Corporation. All of these competitors are substantially larger and have greater resources than the Company. The Company competes primarily on the basis of total value, quality, function, serviceability, efficiency, availability of product, product line recognition and acceptability of sales outlet. However, in new construction where the contractor is the purchasing decision maker, the Company often is at a competitive disadvantage on sales of rooftop units because of the emphasis placed on initial cost; whereas, in the replacement market and other owner-controlled purchases of such units, the Company has a better chance of getting the business since quality and long-term cost are generally taken into account. Employees As of March 1, 2002, the Company had 931 employees and 127 temporaries, none of whom are represented by unions. Management considers its relations with its employees to be good. Patents, Trademarks, Licenses and Concessions The Company does not consider any patents, trademarks, licenses or concessions held by it to be material to its business operations, other than patents issued regarding its heat recovery wheel option, blower, gas- fired heat exchanger, wall-hung curb and evaporative condenser desuperheater. Environmental Matters Laws concerning the environment that affect or could affect the Company’s domestic operations include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, regulations promulgated under these Acts, and any other federal, state or local laws or regulations governing environmental matters. The Company believes that it presently complies with these laws and that future compliance will not materially adversely affect the Company’s earnings or competitive position. Item 2. Properties. The plant and office facilities of AAON-Oklahoma 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 on a 12-acre tract of land at 2425 South Yukon, Tulsa, Oklahoma (the “original facility”), and a 457,000 square foot manufacturing/warehouse building and a 22,000 square foot office building (the “expansion facility”) located on a 40-acre tract of land across the street from the original facility. Both plants are of sheet metal construction. The original facility’s manufacturing area is in a heavy industrial type building, with total coverage by bridge cranes, containing manufacturing equipment designed for sheet metal fabrication and metal stamping. The manufacturing equipment contained in the original facility consists primarily of automated sheet metal fabrication equipment, supplemented by presses, press breaks and NC punching equipment. Assembly lines consist of four cart-type conveyor lines with variable line speed adjustment, three of which are motor driven. Subassembly areas and production line manning are based upon line speed. The manufacturing facility is 1,140 feet in length and varies in width from 390 feet to 220 feet. Production at this facility averaged approximately $12.3 million per month in 2001, which is 60% of the estimated capacity of the plant. Management deems this plant to be nearly ideal for the type of rooftop products being manufactured by the Company. The expansion facility, which was purchased in December 1997, is 24% (108,000 sq. ft.) utilized by the Company and 76% leased to third parties. The Company uses 8,000 sq. ft. for office space, 20,000 sq. ft. for warehouse space and 80,000 sq. ft. for manufacturing. The remaining 349,000 sq. ft. will afford the Company additional plant and office space for long-term growth. The operations of ACP are conducted in a plant/office building at 203-207 Gum Springs Road in Longview, Texas, containing 226,000 square feet on 14 acres. The manufacturing area (approximately 219,000 square feet) is located in three 120-foot wide sheet metal buildings connected by an adjoining structure. The facility is built for light industrial manufacturing. Item 3. Legal Proceedings. The Company is not a party to any pending legal proceeding which management believes is likely to result in a material liability and no such action is contemplated by or, to the best of its knowledge, has been threatened against the Company. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of security holders, through solicitation of proxies or otherwise, during the period from October 1, 2001, through December 31, 2001. 4 5 ReasonToBelieve Part II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters. The Company’s Common Stock is traded on the NASDAQ National Market under the symbol “AAON”. The range of sales prices for the Company’s Common Stock during the last two years, as reported by National Association of Securities Dealers, Inc. (adjusted for the 3-for-2 stock split on September 28, 2001), was as follows: Quar ter Ended High Bid Low Bid March 31, 2000 June 30, 2000 September 30, 2000 December 31, 2000 March 31, 2001 June 30, 2001 September 30, 2001 December 31, 2001 $ 12.71 $ 18.50 $ 17.25 $ 17.00 $ 16.58 $ 18.50 $ 21.33 $ 24.47 $ 9.00 $ 11.50 $ 14.75 $ 11.54 $ 12.33 $ 11.17 $ 16.87 $ 16.00 On March 1, 2002, there were 1,034 holders of record, and 3,134 beneficial owners, of the Company’s Common Stock. Since its inception, no cash dividends have been paid on the Company’s Common Stock and the Company does not anticipate paying cash dividends in the foreseeable future. There is a negative covenant under the Company’s Revolving Credit and Term Loan Agreement which prohibits the declaration or payment of such dividends. Item 6. Selected Financial Data. The following selected financial data should be read in conjunction with the financial statements and related notes thereto for the periods indicated, which are included elsewhere in this report. Years Ended December 31, Results of Operations: 2001 2000 1999 (In thousands, except earnings per share) 1998 $ 157,252 $ 14,156 1.63 $ 1.56 $ $154,982 $ 12,794 1.46 $ 1.38 $ $ 131,947 9,697 $ 1.04 $ 1.00 $ $109,624 5,230 $ .56 $ .55 $ 1997 $ 81,676 $ 3,022 .33 $ .32 $ Net sales Net income Basic earnings per share Diluted earnings per share Weighted average shares outstanding: Basic Diluted 8,661 9,094 8,793 9,264 9,362 9,690 9,303 9,578 9,239 9,455 Balance Sheet Data: 2001 2000 December 31, 1999 (In thousands) 1998 1997 Total assets Long-term debt Stockholders’ equity $ 76,295 $ 985 $ 50,041 $ 76,818 $ 5,853 $ 37,012 $ 58,656 $ 6,630 $ 33,618 $ 50,506 $ 10,980 $ 24,411 $ 42,810 $ 12,857 $ 18,873 Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per common share were determined on the assumed exercise of dilutive options, as determined by applying the treasury stock method. Effective September 28, 2001, the Company completed a three-for-two stock split. The shares outstanding and earnings per share disclosures have been restated to reflect the stock split. 6 7 ReasonToBelieve Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. AAON, Inc., engineers, manufactures and markets commercial rooftop air-conditioning, heating and heat recovery equipment, air conditioning coils and air handling and condensing units. AAON’s primary products are its RK, RF and RL (which was designed to replace the RF) series units and the Company also began producing water chillers in late 2001. Future revenues will also come from the introduction of an expanded air-handler product. AAON sells its products to property owners and contractors through its internal sales force and a network of manufacturers’ representatives. The demand for AAON’s 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, the Company emphasizes 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 raw materials used in AAON’s manufacturing processes are steel, copper and aluminum. The major component costs include compressors, electric motors and electronic controls. Selling, general and administrative costs include the Company’s internal sales force, warranty costs, profit sharing and administrative expenses. Warranty expense is estimated based on historical trends and other factors. The Company’s warranty period is generally one year from the date of first use or 15 months from date of shipment; however, compressors (if applicable) carry an additional four-year warranty and gas-fired heat exchangers (if applicable) have a 15-year warranty. In late 1997, the Company began receiving additional machinery to allow for continued expansion of its production. At the end of 1997, the Company bought a 40-acre tract of land across the street from its original plant, containing 457,000 sq. ft. of manufacturing/warehouse space and a 22,000 sq. ft. office building (the “expansion facility”). In 1999 an expansion of slightly over 90,000 sq. ft. was begun on the Longview, Texas, facility, which was completed in 2000. During 2001 the Company began producing its new, larger tonnage RL series units in 100,000 sq. ft. of the expansion facility. Throughout this time period, machinery was added in both the Tulsa and Longview facilities, which allowed the Company to increase sales by 93% from 1997 to 2000. In addition, these facilities have allowed the Company to install assembly areas specifically designed for a particular product, thus improving assembly labor. The new machinery additions have permitted better utilization of manufacturing personnel. Also during this period, the Company invested heavily in creating new computer software to improve its operations. These improvements and expansions contributed to the increase in margins from 16.0% in 1997 to 24.7% in 2001. Set forth below is income statement information with respect to the Company for years 2001, 2000 and 1999: Net sales Cost of sales Gross profit Selling, general and administrative expenses Income from operations Interest expense Other income Income before income taxes Income tax provision Years ended December 31, 2001 2000 (In Thousands) 1999 $157,252 118,399 $154,982 120,233 $131,947 101,229 38,853 16,011 22,842 892 536 22,486 8,330 34,749 13,922 20,827 904 436 20,359 7,565 30,718 14,741 15,977 574 238 15,641 5,944 Net income $ 14,156 $ 12,794 $ 9,697 Results of Operations Net sales increased approximately 1.5% in 2001 as compared to 2000, and 2000 sales were 17.5% greater than in 1999. Sales for the first three quarters of 2001 were 5.6 % greater than sales for the same period in 2000. Following the events of September 11, the Company experienced a period of minimal sales activity and many orders were delayed by the Company’s customers. Accordingly, sales for the fourth quarter of 2001 decreased 11% compared to the same period in 2000. The increase in sales in 2000 compared to 1999 was attributable to increased sales to the Company’s entire customer base. Sales to existing customers accounted for 90% of the Company’s business in 2001, with 10% coming from new business. Gross profit in 2001 increased to 24.7% compared to 22.4% in 2000 and 23.3% in 1999. Material cost as a percent of sales decreased to 49.9% in 2001 compared to 53.4% in 2000. Direct labor as a percent of sales decreased to 4.6% in 2001 compared to 6.8% in 2000. Material and direct labor as a percent of sales improved due to efficiencies being realized from the higher plant utilization and a more stable work force which allowed the Company to reduce the amount of overtime incurred. The more stable work force has also allowed the Company to realize better overall labor efficiencies. The decrease in margins in 2000 compared to 1999 was primarily attributable to higher material costs that could not be recovered through higher selling prices. Selling, general and administrative expenses increased to $16.0 million, or 10.0% of sales, in 2001 from $13.9 million, or 9.0% of sales, in 2000. The increase is primarily due to higher warranty costs related to the introduction of new products both within existing and new product lines. Selling, general and administrative expense decreased in 2000 from $14.7 million, or 11.2% of sales, in 1999. The decrease was primarily due to lower warranty costs and lower professional fees. Other income is primarily attributable to rental income from the Company’s “expansion facility.” Interest expense was $.9 million, $.9 million and $.6 million in 2001, 2000 and 1999, respectively. The increase in 2001 and 2000 compared to 1999 primarily relates to borrowings for the purchase of equipment and facilities described above. The income tax provisions in 2001, 2000 and 1999 were 37%, 37% and 38%, respectively. 8 9 ReasonToBelieve New Accounting Pronouncements In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (Statement 141), Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement 142) and Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (Statement 143). In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement 144). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. The Company is required to adopt the provisions of Statement 141 immediately, and Statement 142 effective January 1, 2002. Goodwill acquired in business combinations completed before July 1, 2001, will continue to be amortized prior to the adoption of Statement 142. Adoption of Statement 141 and 142 had no material impact on the Company’s results of operations or financial condition. Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Statement 143 is effective for fiscal years beginning after June 15, 2002. Statement 144 retains the requirement to report discontinued operations separately and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. Statement 144 is effective for fiscal years beginning after December 15, 2001, and for interim periods within those fiscal years. The Company is currently assessing the impact of Statements 143 and 144 on its financial condition and results of operations. Financial Condition and Liquidity Cash flows from operations were $23.9 million, $14.0 million and $12.0 million in 2001, 2000 and 1999, respectively. Cash flows from operations in 2001 consisted of net income of $14.2 million, depreciation of $4.4 million and working capital and other changes of $5.3 million. Working capital changes were primarily due to decreases in accounts receivable and inventories of $4.6 million and $1.8 million, respectively, at December 31, 2001, compared to year-end 2000. Additionally, accounts payable and accrued liabilities decreased $1.6 million at December 31, 2001 from December 31, 2000. Cash flows used in investing activities were $8.8 million, $10.7 million and $6.6 million, in 2001, 2000 and 1999, respectively. Cash flows used in investing activities in 2001 primarily related to capital expenditures for additional machinery and refurbishments made to the Company’s manufacturing facilities. Cash flows used in financing activities were $14.0 million, $3.3 million and $5.3 million in 2001, 2000 and 1999, respectively. Cash flows used in financing activities in 2001 primarily related to net debt payments of $11.8 million and stock repurchases of $2.8 million, net of $.6 million from stock option exercises. The Company’s total outstanding debt at December 31, 2001 was $1.9 million compared to $13.7 million at December 31, 2000. The Company’s revolving credit line (which currently extends to July 31, 2002) provides for maximum borrowings of $15.15 million. Interest on this line is payable monthly at the Wall Street Journal prime rate less .5% or LIBOR plus 1.6%, at the election of the Company. Borrowings available under the revolving credit line at December 31, 2001 were $14.7 million. Future cash flows are expected to be used to fund possible acquisitions and/or additional stock repurchases or will be retained for general working capital purposes. The capital needs of the Company are met primarily by its bank revolving credit facility. Management believes this bank debt (or comparable financing), term loans and projected profits from operations will provide the necessary liquidity and capital resources to the Company for at least the next five years. The Company’s belief that it will have the necessary liquidity and capital resources is based upon its knowledge of the HVAC industry and its place in that industry, its ability to limit the growth of its business if necessary, and its relationship with its existing bank lender. Forward-Looking Statements This Annual Report 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. The Company undertakes 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 material 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 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to changes in interest rates regarding its total variable rate debt of $446,000. A hypothetical 10% change in interest rates on its variable rate borrowings would not have a material effect on the Company’s earnings or cash flows. Foreign sales accounted for only 2% of the Company’s sales in 2001 and the Company accepts payment for such sales only in U.S. dollars; hence, the Company is not exposed to any foreign currency exchange rate risk. Important raw materials purchased by the Company are steel, copper and aluminum, which are subject to price fluctuations. The Company attempts to limit the impact of price increases on these materials by negotiating with each of its major suppliers on a term basis from six months to three years. Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data are included at page 16. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 10 11 ReasonToBelieve Part III Item 10. Directors and Executive Officers of Registrant. Incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Company’s 2002 Annual Meeting of Stockholders. Item 11. Executive Compensation. Incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Company’s 2002 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management. Incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Company’s 2002 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions. Incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Company’s 2002 Annual Meeting of Stockholders. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1. Financial statements. See Index to Consolidated Financial Statements on page 15. 2. Exhibits: (3) Articles of Incorporation (i) (A) (A-1) Article Amendments (ii) (B) (B-1) Amendments of Bylaws (iii) Bylaws (i) (4) (A) (A-1) (B) Second Restated Revolving Credit and Term Loan Agreement (“Loan Agreement”) and related documents (iv) Latest amendments of Loan Agreement (v) Rights Agreement dated February 19, 1999 (vi) (10) (21) (23) AAON, Inc. 1992 Stock Option Plan, as amended (vii) List of Subsidiaries (viii) Consent of Arthur Andersen LLP (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Incorporated herein by reference to the exhibits to the Company’s Form S-18 Registration Statement No. 33-18336-LA. Incorporated herein by reference to the exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and to the Company’s Forms 8-K dated March 21, 1994, March 10, 1997, and March 17, 2000. Incorporated herein by reference to the Company’s Forms 8-K dated March 10, 1997, May 27, 1998 and February 25, 1999, or exhibits thereto. Incorporated by reference to exhibit to the Company’s Form 8-K dated September 25, 1996. Incorporated herein by reference to exhibits to the Company’s Forms 8-K dated September 26, 1997, March 9, 1999, and March 17, 2000, January 18, 2001, and September 24, 2001. Incorporated by reference to exhibits to the Company’s Form 8-K dated February 25, 1999, and Form 8-A Registration Statement No. 000-18953. Incorporated herein by reference to exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and to the Company’s Form S-8 Registration Statement No. 33-78520, as amended. Incorporated herein by reference to exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991. (b) The Company did not file any reports on Form 8-K during the period from October 1, 2001, to December 31, 2001. 12 13 Index To Consolidated Financial Statements Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Page 16 17 18 19 20 21 ReasonToBelieve Signatures Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. AAON, INC. Dated: March 15, 2002 By: /s/ Norman H. Asbjornson Norman H. Asbjornson, President Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: March 15, 2002 Dated: March 15, 2002 Dated: March 15, 2002 Dated: March 15, 2002 Dated: March 15, 2002 /s/ Norman H. Asbjornson Norman H. Asbjornson President and Director (principal executive officer) /s/ Kathy I. Sheffield Kathy I. Sheffield Treasurer (principal financial officer and principal accounting officer) /s/ John B. Johnson, Jr. John B. Johnson, Jr. Director /s/ Thomas E. Naugle Thomas E. Naugle Director /s/ Jerry E. Ryan Jerry E. Ryan Director 14 15 ReasonToBelieve Report of Independent Public Accountants To the Stockholders of AAON, Inc.: We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AAON, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Tulsa, Oklahoma February 6, 2002 Consolidated Balance Sheets (In thousands, except share amounts) ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable, net Inventories, net Prepaid expenses and other Deferred tax asset Total current assets PROPERTY, PLANT AND EQUIPMENT, net Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities Current maturities of long-term debt Total current liabilities DEFERRED TAX LIABILITY LONG-TERM DEBT CONTINGENCIES STOCKHOLDERS’ EQUITY, per accompanying statements: Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued Common stock, $.004 par value, 50,000,000 shares authorized, 8,666,207 and 8,644,611 issued at December 31, 2001 and 2000, respectively Additional paid-in capital Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity December 31, 2001 2000 $ 1,123 23,392 13,471 220 4,067 42,273 34,022 $ 76,295 $ 8,005 13,496 884 22,385 2,884 985 $ 17 28,247 15,140 245 3,709 47,358 29,460 $ 76,818 $ 11,691 12,351 7,860 31,902 2,051 5,853 - 35 1,063 48,943 50,041 $ 76,295 - 35 - 36,977 37,012 $ 76,818 The accompanying notes are an integral part of these consolidated balance sheets. 16 17 ReasonToBelieve Consolidated Statements of Operations (In thousands, except per share amounts) NET SALES COST OF SALES Years Ended December 31, 2001 2000 1999 $157,252 $ 154,982 $131,947 118,399 120,233 101,229 GROSS PROFIT 38,853 34,749 30,718 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 16,011 13,922 14,741 INCOME FROM OPERATIONS 22,842 20,827 15,977 INTEREST EXPENSE OTHER INCOME 892 536 904 436 574 238 INCOME BEFORE INCOME TAXES 22,486 20,359 15,641 INCOME TAX PROVISION 8,330 7,565 5,944 NET INCOME $ 14,156 $ 12,794 $ 9,697 EARNINGS PER SHARE: Basic Diluted $ $ 1.63 1.56 $ $ 1.46 1.38 $ $ 1.04 1.00 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic Diluted 8,661 9,094 8,793 9,264 9,362 9,690 Consolidated Statements Of Stockholders’ Equity (In thousands) Common Stock Shares Amount Paid-in Retained Earnings Capital Total BALANCE, JANUARY 1, 1999 9,329 $ 37 $ 8,212 $16,162 $ 24,411 NET INCOME STOCK OPTIONS EXERCISED, INCLUDING TAX BENEFITS STOCK RETIRED - 72 (92) BALANCE, DECEMBER 31, 1999 9,309 NET INCOME STOCK OPTIONS EXERCISED, INCLUDING TAX BENEFITS - 192 STOCK REPURCHASED AND RETIRED (856) BALANCE, DECEMBER 31, 2000 8,645 NET INCOME STOCK OPTIONS EXERCISED, INCLUDING TAX BENEFITS STOCK ISSUED TO EMPLOYEES - 178 1 - - - 37 - 1 (3) 35 - 1 - - 9,697 9,697 308 (798 ) - - 308 (798) 7,722 25,859 33,618 - 12,794 12,794 969 - 970 (8,691 ) (1,676) (10,370) - 36,977 37,012 - 14,156 14,156 1,634 25 - 1,635 - 25 STOCK REPURCHASED AND RETIRED (158) (1) (596 ) (2,190) (2,787) BALANCE, DECEMBER 31, 2001 8,666 $ 35 $ 1,063 $48,943 $ 50,041 The accompanying notes are an integral part of these consolidated statements. The accompanying notes are an integral part of these consolidated statements. 18 19 ReasonToBelieve Consolidated Statements Of Cash Flows (In thousands) Years Ended December 31, 2001 2000 1999 $14,156 $ 12,794 $ 9,697 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities- Depreciation Provision for losses on accounts receivable Provision for excess and obsolete inventories Gain on disposition of assets Deferred income taxes Changes in assets and liabilities- Accounts receivable Inventories Prepaid expenses and other Accounts payable Accrued liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment Capital expenditures Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit agreement Payments under revolving credit agreement Proceeds from long-term debt Payments on long-term debt Stock issued to employees Stock options exercised Repurchase of stock Net cash used in financing activities NET INCREASE (DECREASE) IN CASH CASH AND CASH EQUIVALENTS, beginning of year 4,380 260 (100) (125) 475 4,595 1,769 25 (3,686) 2,130 23,879 200 (9,017) (8,817) 56,290 (62,761) 2,500 (7,873) 25 650 (2,787) (13,956) 1,106 17 CASH AND CASH EQUIVALENTS, end of year $ 1,123 $ The accompanying notes are an integral part of these consolidated statements. 3,465 696 50 (11) (127) (7,616) (3,324) 321 2,646 5,146 14,040 11 (10,744) (10,733) 68,219 (66,092) 5,048 (530) - 410 (10,370) (3,315) (8) 25 17 3,063 470 550 (40) (220) (3,864) (256) (325) 567 2,311 11,953 40 (6,689) (6,649) 60,875 (62,975) - (2,569) - 163 (798) (5,304) - 25 $ 25 Notes To Consolidated Financial Statements December 31, 2001 And 2000 (Dollar amounts in thousands, except share and per share information) 1. Business And Summary Of Significant Accounting Policies: AAON, Inc. (the Company, a Nevada corporation) is engaged in the manufacture and sale of commercial rooftop air conditioners, heating equipment and air conditioning coils through its wholly-owned subsidiaries AAON, Inc. (AAON, an Oklahoma corporation) and AAON Coil Products, Inc. (ACP, a Texas corporation). The consolidated financial statements include the accounts of the Company and its subsidiaries, AAON and ACP. All significant intercompany accounts and transactions have been eliminated. Revenue Recognition The Company recognizes revenues from sales of products at the time of shipment. Amounts billed to customers for shipping and handling costs are also included in revenues, consistent with EITF 00-10, “Accounting for Shipping and Handling Fees and Costs.” Business and Credit Concentrations The Company’s customers are concentrated primarily in the domestic commercial and industrial new construction and replacement markets. At December 31, 2001, two customers represented approximately 14% and 11%, respectively, of accounts receivable. At December 31, 2000, one customer represented approximately 10% of total accounts receivable. The Company reviews a customer’s credit history before extending credit. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Sales to customers representing 10% or greater of total sales consist of the following: Home Depot Wal-Mart Stores, Inc. Target *Less than 10% Years Ended December 31, 2001 2000 1999 10% 14% 11% 10% 19% * * 23% * Cash and Cash Equivalents Cash and cash equivalents consists of bank deposits and $1.1 million in highly liquid, interest bearing money market funds with initial maturities of three months or less. Inventories Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. 20 21 ReasonToBelieve Property, Plant and Equipment Property, plant and equipment are stated at cost. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives: Buildings Machinery and equipment Furniture and fixtures Years 10-30 3-15 2-5 Warranties A provision is made for the estimated cost of warranty obligations at the time the related products are sold. Warranty expense was $5,792, $4,938 and $5,456 for the years ended December 31, 2001, 2000 and 1999, respectively. Earnings Per Share Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per common share were determined based on the assumed exercise of dilutive options, as determined by applying the treasury stock method. For the year ended December 31, 2001 and 2000, 22,500 and 5,000 options, respectively, were considered to be anti-dilutive. For the year ended December 31, 1999, all outstanding options were considered dilutive. A reconciliation of net income and weighted average shares (in thousands) used in computing basic and diluted earnings per share is as follows: Basic EPS Net additional shares issuable Diluted EPS Basic EPS Net additional shares issuable Diluted EPS Basic EPS Net additional shares issuable Diluted EPS Year Ended December 31, 2001 Income Shares Per-Share Amount $ 14,156 - $ 14,156 8,661 433 9,094 $1.63 - $1.56 Year Ended December 31, 2000 Income Shares Per-Share Amount $ 12,794 - $ 12,794 8,793 471 9,264 $1.46 - $1.38 Year Ended December 31, 1999 Income Shares Per-Share Amount $ 9,697 - $ 9,697 9,362 328 9,690 $1.04 - $1.00 Use of Estimates 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock Split Effective September 28, 2001, the Company completed a three-for-two stock split payable in the form of a 50% stock dividend. All stock and per share information for all periods presented have been adjusted to reflect the three-for-two stock split. Reclassifications Certain reclassifications have been made to the 2000 and 1999 financial statements to conform with the 2001 presentation. Such reclassifications did not impact total assets or net income. New Accounting Pronouncements In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (Statement 141), Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement 142), and Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (Statement 143). In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement 144). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. The Company is required to adopt the provisions of Statement 141 immediately, and Statement 142 effective January 1, 2002. Goodwill acquired in business combinations completed before July 1, 2001, will continue to be amortized prior to the adoption of Statement 142. The adoption of Statement 141 and 142 had no material impact on the Company’s results of operations or financial condition. Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Statement 143 is effective for fiscal years beginning after June 15, 2002. Statement 144 retains the requirement to report discontinued operations separately and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. Statement 144 is effective for fiscal years beginning after December 15, 2001, and for interim periods within those fiscal years. The Company is currently assessing the impact of Statements 143 and 144 on its financial condition and results of operations. 22 23 ReasonToBelieve Details to Consolidated Balance Sheets 2. Supplemental Cash Flow Information: ACCOUNTS RECEIVABLE: Accounts receivable Less- allowance for doubtful accounts Total, net INVENTORIES: Raw materials Work in process Finished goods Less- allowance for excess and obsolete inventories Total, net PROPERTY, PLANT AND EQUIPMENT: Land Buildings Machinery and equipment Furniture and fixtures Less- accumulated depreciation Total, net ACCRUED LIABILITIES: Warranty Commissions Income taxes Workers’ compensation Medical self-insurance Other Total ALLOWANCE FOR DOUBTFUL ACCOUNTS: Balance, beginning of period Provision for losses on accounts receivable Accounts receivable written off, net of recoveries Balance, end of period ALLOWANCE FOR EXCESS AND OBSOLETE INVENTORIES: Balance, beginning of period Provision for excess and obsolete inventories Adjustments to reserve Balance, end of period December 31, 2001 2000 $ 24,252 860 $ 23,392 $ 29,297 1,050 $ 28,247 December 31, 2001 2000 $ 10,376 2,258 1,687 14,321 850 $ 13,471 $ 874 16,893 35,331 3,197 56,295 22,273 $ 34,022 $ 7,000 3,295 1,048 314 651 1,188 $ 13,496 $ 10,651 1,967 3,472 16,090 950 $15,140 $ 885 16,594 27,869 3,175 48,523 19,063 $ 29,460 $ 5,400 3,427 933 890 660 1,041 $ 12,351 Years Ended December 31, 2001 2000 1999 $ 1,050 260 (450) $ 860 $ 850 696 (496) $ 1,050 $ 410 470 (30) $ 850 Years Ended December 31, 2001 2000 1999 $ 950 - (100) $ 850 $ 900 50 - $ 950 $ 350 550 - $ 900 Interest payments of $892, $889 and $561 were made during the years ended December 31, 2001, 2000 and 1999, respectively. Payments for income taxes of $6,754, $6,375 and $6,234 were made during the years ended December 31, 2001, 2000 and 1999, respectively. 3. Debt: Long-term debt at December 31, consists of the following: $15,150 unsecured bank line of credit, with interest payable monthly at LIBOR plus 1.60% (3.47% at December 31, 2001), due July 31, 2002. Notes payable, due in monthly installments of $36, with interest ranging from 7.47% to 7.52% at December 31, 2001, collateralized by machinery and equipment. Less- current maturities Total long-term debt 2001 2000 $ 446 $ 6,917 1,423 1,869 884 985 $ 6,796 13,713 7,860 $ 5,853 Maturities of long-term debt for each of the years ended December 31 are as follows: 2002 2003 2004 2005 $ 884 438 438 109 $ 1,869 Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the long-term debt approximates the carrying value. 4. Income Taxes: The Company accounts for income taxes as required by Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. The income tax provision consists of the following: Current Deferred Years Ended December 31, 2001 2000 1999 $ 7,855 475 $ 8,330 $ 7,692 (127) $ 7,565 $ 6,164 (220) $ 5,944 The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: Federal statutory rate State income taxes, net of federal benefit Employment credits Other Years Ended December 31, 2001 2000 1999 35% 4 (1) (1) 37% 35% 4 (2) - 37% 35% 4 (1 ) - 38% 24 25 ReasonToBelieve The tax effect of temporary differences giving rise to the Company’s deferred income taxes at December 31 are as follows: Deferred tax assets - Valuation reserves Warranty accrual Other accruals Other, net Deferred tax liabilities - Depreciation and amortization 5. Benefit Plans: 2001 $ 648 2,653 746 20 $ 4,067 $ 2,884 2000 $ 740 1,998 958 13 $ 3,709 $ 2,051 The Company maintains a stock option plan for key employees and directors and restricts 1,950,000 shares of common stock for issuance under the plan. Under the terms of this plan, the exercise price of shares granted will not be less than 85% of their fair market value at the date of the grant. The exercise price of all options granted was equal to the market price at the date of grant. Options granted vest at a rate of 20% per year, commencing one year after date of grant, and are exercisable for ten years. At December 31, 2001, 663,388 shares were available for granting future options. For the years ending December 31, 2001 and 2000, the Company reduced its income taxes payable by $985 and $559, respectively, as the result of nonqualified stock options exercised under the Company’s stock option plan. The number and exercise price of options granted were as follows: OUTSTANDING AT JANUARY 1, 1999 Granted Exercised Cancelled OUTSTANDING AT DECEMBER 31, 1999 Granted Exercised Cancelled OUTSTANDING AT DECEMBER 31, 2000 Granted Exercised Cancelled Number of Shares 1,108,313 450,750 (71,363 ) (31,500 ) 1,456,200 7,500 (192,075 ) (75,300 ) 1,196,325 131,250 (177,875 ) (46,400 ) Weighted Average Exercise Price Per Share $ 3.77 8.43 2.48 5.25 5.25 14.75 2.15 7.50 5.66 17.24 3.70 8.19 OUTSTANDING AT DECEMBER 31, 2001 1,103,300 $ 7.52 The following is a summary of stock options outstanding as of December 31, 2001: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding at December 31, 2001 Weighted Average Exercise Price Weighted Average Remaining Contractual Life Number Exercisable at December 31, 2001 Weighted Average Exercise Price $.76 3.00-5.08 6.00-6.67 7.50-8.67 12.88-14.97 18.53-20.10 41,250 489,300 112,500 321,500 60,000 78,750 1,103,300 $ .76 4.41 6.20 8.52 14.16 19.35 $ 7.52 .2 5.1 7.0 7.6 9.3 9.7 41,250 390,571 60,000 136,850 1,500 - 630,171 $ .76 4.30 6.15 8.46 14.75 - $ 5.17 The Company applies the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company’s stock option plans been determined consistent with the provisions of Statement 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below: Net income: As reported Pro forma Basic earnings per share: As reported Pro forma Diluted earnings per share: As reported Pro forma 2001 2000 1999 $ 14,156 $ 13,581 $12,794 $12,229 $ 9,697 $ 9,299 $ $ $ $ 1.63 1.57 1.56 1.49 $ 1.46 $ 1.39 $ 1.04 .99 $ $ 1.38 $ 1.32 $ 1.00 .96 $ The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Expected dividend yield Expected volatility Risk-free interest rate Expected life 2001 2000 1999 0% 45.38% 5.04% 8 yrs 0% 51.99% 5.50% 8 yrs 0% 54.33% 6.09% 8 yrs The Company sponsors a defined contribution benefit plan. Employees can make contributions at a minimum of 1% and a maximum of 15% of compensation. The Company may, on a discretionary basis, contribute a Company matching contribution not to exceed 6% of compensation. The Company made matching contributions of $504, $493 and $329 in 2001, 2000 and 1999, respectively. The Company made additional discretionary contributions of $325, $1,308 and $1,150 in the form of Company stock during 2001, 2000 and 1999, respectively. The Company maintains a discretionary profit sharing bonus plan under which 10% of pre-tax profit at each subsidiary is paid to eligible employees on a quarterly basis. Profit sharing expense was $2,507, $2,277 and $1,735, for the years ended December 31, 2001, 2000 and 1999, respectively. 26 27 ReasonToBelieve 6. Stockholder Rights Plan: During 1998, the Board of Directors adopted a Stockholder Rights Plan. The plan creates a dividend of one right for each outstanding share of the Company’s common stock. The rights are traded with the Company’s common stock. Generally, the rights become exercisable after a public announcement that a person has acquired, or a tender offer is made for, 20% or more of the common stock of the Company. If either of these events occur, each right will entitle the holder (other than a holder owning more than 20% of the outstanding stock) to buy the number of shares of the Company’s common stock having a market value two times the exercise price. The exercise price is $60. The rights may be redeemed by the Company for $0.001 per right until a person or group has acquired 20% of the Company’s common stock. The distribution of the rights were made to stockholders of record as of March 1, 1999. 7. Contingencies: The Company is 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 the Company’s financial position or on the results of operations. 8. Quarterly Results (Unaudited): The following is a summary of the quarterly results of operations for the years ended December 31, 2001 and 2000: 2001 Net sales Gross profit Net income Earnings per share: Basic Diluted 2000 Net sales Gross profit Net income Earnings per share: Basic Diluted Quarter Ended March 31 June 30 September 30 December 31 $ 39,435 11,262 3,576 $ 41,520 10,882 3,816 $ 41,402 8,733 3,523 .41 .39 .44 .42 .40 .38 Quarter Ended $ 34,895 7,976 3,241 .37 .36 March 31 June 30 September 30 December 31 $ 35,465 8,835 3,045 $ 39,388 8,563 3,328 $ 40,970 8,889 3,409 .34 .33 .38 .36 .39 .37 $ 39,159 8,462 3,012 .35 .33 Board of Directors Norman H. Asbjornson President/CEO AAON, Inc. Tulsa, Oklahoma William A. Bowen Consultant Georgetown, South Carolina John B. Johnson, Jr. Member, Johnson, Jones, Dornblaser, Coffman & Shorb Tulsa, Oklahoma (Law Firm) Officers Norman H. Asbjornson President/CEO Robert G. Fergus Vice President John B. Johnson, Jr. Secretary Kathy I. Sheffield Treasurer Thomas E. Naugle President, Naugle & Co. Tulsa, Oklahoma (Investments) Anthony Pantaleoni Partner, Fulbright & Jaworski L.L.P. New York, New York (Law Firm) Jerry E. Ryan Consultant Tulsa, Oklahoma Charles C. Stephenson, Jr. Chairman, Vintage Petroleum, Inc. Tulsa, Oklahoma (Oil & Gas Production & Exploration) Corporate Data Transfer Agent and Registrar Progressive Transfer Company 1981 East Murray-Holladay Road Suite 200 Salt Lake City, Utah 84117 Auditors Arthur Andersen LLP 6450 South Lewis Suite 300 Tulsa, Oklahoma 74136 General Counsel Johnson, Jones, Dornblaser, Coffman & Shorb 2200 Bank of America Center 15 West Sixth Street Tulsa, Oklahoma 74119 Executive Offices 2425 South Yukon Avenue Tulsa, Oklahoma 74107 Common Stock NASDAQ–AAON Website Address http://www.aaon.com 28 29 949 More ReasonsToBelieve AAON proudly honors our people, whose dedication brings success to our CURTIS CARR, JR. KAREN COOPER MENDY CASTIGLIONE DEBRA COPPAGE LEONARDO CASTILLO ELAINE CORKHILL CARLA DAVIES ANDREA DAVIS ANGELA DAVIS RALPH DURBIN LUIS FLORES RANDY DWIGGINS MARIA FLORES MARY EADES RUDY FOGLE company – and meaning to our work. RODRIGO CASTILLO BLANCA CORONA ANTHONY DAVIS WENDELL EASILEY KENNETH FONTENOT SHAHRAM AMINZADEH CAROLYN BARBER MARIA BLANCO WILLIAM BRYANT LARRY ANDERSON CANDY BARBOSA DAVID BLEVINS SHAROLETTE BUCHANAN STACY ANDERSON MARIA BARRAGAN JIMMY BLEVINS CHARLES ANDERSON, JR. GUALBERTO BARRIOS JUSTIN BLEVINS BANG BUI BICH BUI GERMANO ANGULO ALFREDO ANTONIO JEWEL ANTWINE, SR. MANOR ARITA GARY ARNOLD GUILLERMO BOBADILLA CARLOS BUIRREA RICHARD BOBO FRED BUNTON EDWARD BODNARYUK ROBERT BURCH DAVID BOGLE SCOTT BURGESS JAY CASTOE DEREK COURTNEY GREGORY DAVIS CATHY EASLEY ROBERTO CASTRO AMBROSE COX GERALD CATTERLIN BILLY COX MARK CHALMERS CHRISTINE COX JERRY COX JOHN COX JERRY DAVIS RICHARD DAVIS WILLIAM DAVIS DAVID DEAN THEODORE EDMUNDS BETTY ELI EARL ELLIOTT TINISHA ENGLISH SHARON FONTENOT GWENDOLYN DECKARD FRANCISCO ENSALDO DERRICK FORT RICHARD CRAITE JAMES DEES MARIAN ESQUIBEL FREDERICK FOSTER LINDA CRAMER BOBBY DEGRAFFENREID STEPHEN ETTER LORETTA FOWLKES JOSH CHATTILLON JAMES CRASE AMBER DELANCY GILDA ETUMUDOR KENNETH FOYIL RAMIRO CHAVEZ STEVEN CRASE ISMAEL DELAPAZ SEWELL EVERETT CHRISTIAN FRANCO CAROLINA BARRON STEPHEN BOLOMEY MONICA BURNS DALE CHERRY MARK CREASON VIOLETA DELAPAZ EYVONNE EVERS PHILLIP FRANK NORMAN ASBJORNSON ESTHER BARRON SCOTT ASBJORNSON MARIA BARRON JAMES BOND ELI BOTELLO CHARLES BURRIS ROBERT BURRIS DANIEL CHERRY MIKEL CREWS ALBERTO DELEON CYNTHIA FAISON WARREN FRANKLIN KRISTEN CHEVALLIER CLARK CROSBY, JR. RAGELIO DELGADO WEI FANG JERRY FRANKS GARY ASHMORE DWIGHT AUSTIN JOSEPH AVILA PEDRO AVINA NORA BACKUS CATHY BAILEY WILLIAM BARTH, JR. ROSENDO BOTELLO DOUGLAS BURTRUM TENISHA CHILDS CAROLYN CRUTCHFIELD JUANA DELOBO JOSE FELICIANO REVONDA FRANKS MANUEL BARTHOLIC ALEXANDER BOTELLO, SR. TINA BUSH ALBERTO CHINCHILLA BRIAN CRUZ CHARLES DEWEESE CHAD FENSLAGE RODNEY FRAZIER MICHAEL BASS JOHNNIE BOUGH FILOMERO BUSTOS JARED BATEMAN WILLIAM BOWEN PEDRO BUSTOS STUART BAUGH JOHN BOYD AMILCAR BAUTISTA LORRAINE BRADFORD EDDIE CHISM GEORGE CLARK MORRIS CLARK PEDRO CRUZ SERGIE DEZHNYUK ROGELIO CUEVAS RAMON DIAZ ROBERT CUMMINGS WILVERT DIAZ RICHARD CLARK BRIAN CUNNINGHAM ERRIN DIXON NELSON FRY GUILLERMO FUENTES ELBERT FULLER DULCES GALLEGOS LAMARCUS BAILEY JASON BAZAN STEVEN BRADLEY ROBERT CLARY GENE CURTIS GERALD DIXON ROBERT FERGUS FRANCISCO GAMEZ LONNIE BAILEY ASHLEY BAKER ERIC BAKER ERNEST BAKER CLIFTON BEASLEY GLEN BRAUER, JR. DAVID BEASLEY JASON BELL TANJA BELL ERIC BRAUN CURTIS BRICE RYAN BRISTLE JOHN BUTLER MAC BYLER DAVID CAMPBELL FLOYD CLEGHORN EMMANUEL DAARA HOMER DODD DARRELL FERGUSON VALERIANO GANDARILLAS RAYMOND CLEVELAND DERRICK DAN RICKEY DODSON ELIZABETH FERGUSON MARIA GARAY WILLIAM CLEVELAND AARON DANIELS SEAN DONALD PEDRO FERNANDEZ EDGAR GARCIA VERNETT COBB GWENDOLYN DANIELS HAROLD DOUGLAS STERLYN FINCH HENRY GARCIA SHANNON BAKER BRUCE BELLER JAMES BROOKS ALBA CAMPOS KENNETH COCHRAN NATALYA DANIL CHENKO ERIC DOWNING MICHAEL FLANAGAN JUAN GARCIA GUZMAN BENITEZ DAVID BROWN ARTHUR CANDLER OFELIA BENITEZ DEMETRIA BROWN ARTHUR CANDLER, III ISAAC BENN IDA BERMUDEZ HARLEY BROWN STACEY BROWN AMADITO CARDENAS FAUSTINO CARDENAS KELLI BANKS HORACIO BESERRA VUNTARIUS BROWN FERNANDO CARDENAS MANUEL BARAHONA ROBERT BISCAINO JAMES BRUCE CARLOS CARDONA MEDARDO BARAHONA JASON BLACK CHRISTOPHER BRYANT JORGE CARMONA MICKEY COLE PENNY COLE ALEKSEY DANIL’CHENKO THOMAS DREADFULWATER BOBBY FLEMING MARIA GARCIA LORETTA DARLING MICHAEL DREW HARRY FLETCHER SANTIAGO GARCIA MARY COLEMAN JERRY DARRINGTON, JR. CATHRYN DUBBS TERRA FLETCHER WILSON GARCIA JOSEPH CONLEY JONATHAN CONNELL SHANDOLYN CONNOR CLARENCE COOK JERROLD DUBBS EFIGENIA FLORES CARLOS GARZA RANDY DUNAWAY FREDDY FLORES GUSTAVO GARZA HENRY DUNCAN LINDA DUNEC JAIME FLORES JOEL FLORES STEVE GEARY JAMES GEORGE CARLOS ACOSTA MARIA ACOSTA MARTHA ACOSTA FELIX ADAME FRANCISCO ADAME GARY ADAMS CHRISTIAN AGUILAR ESVIN AGUILAR FREDY AGUILAR HECTOR AGUILAR JOSE AGUILAR MARINO AGUILAR ALEX AKUAGWU JAMES ALEXANDER WILIE ALEXANDER DONALD ALLEN KEVIN ALLEN MICHAEL ALLEN WILLIAM ALLEN EDUARDO ALVARADO FELIPE ALVARADO JUAN ALVARADO LUIS ALVARADO MANUEL ALVARADO LUCY ALVAREZ MICHAEL AMBURGEY CYNTHIA AMENT JUAN GERRERO BRYAN GILLAM ERIC GILLIS ELSA GUZMAN ARELY HERNANDEZ STANLEY HORTON ANTHONY JINKINS DAVID KIRKPATRICK ELIZABETH LISCANO GEORGINA GUZMAN ARMANDO HERNANDEZ TAMANDA HORTON MANGO JOHNS ALEKSANDR KIRYUKHIN RAQUEL LISCANO NANCY HACKNEY FRANCISCO HERNANDEZ JERRY HOUSTON ANTHONY JOHNSON DAVID KNEBEL STEVEN LITTLEJOHN WESLEY GODFREY CHRISTOPHER HADEN FRANCISCO O. HERNANDEZ LARRY HOWARD HENRY GOLDSTON YING GONG GELACIO GONZALES ADRIAN GONZALEZ ED JOHNSON REX JOHNSON GONZALO HERNANDEZ MAX HOWELLS ISIDRO HERNANDEZ LYDIA HUDSON VERNA JOHNSON JAIRO HERNANDEZ LARRY HUFFMAN JORGE HERNANDEZ BILLY HUGHART GABRIEL GONZALEZ STEPHEN HAINES JOSE HERNANDEZ SHANNON HUGHES MARISELA GONZALEZ ANITA HALE LUCIANO HERNANDEZ MARQUETTE HUNTER REBECCA KNIGHT FRANKLIN LOGAN, JR. ANN KNODE ROBERT KNUTH JOHN KOERBER ARCADIO LOPEZ FRANCISCO LOPEZ JAVIER LOPEZ RAYMOND KOLLOCK MARGARITO LOPEZ NIKOLAI KORAN MARIO LOPEZ JAMES KOSS THOMAS LOPEZ MARTHA GONZALEZ ROBERTO GONZALEZ JACK HALL KELLY HALL MARIA HERNANDEZ BRENDA HURTADO SHERRI JOHNSTON MIKHAIL KRUPENYA VICTOR LOPEZ MAYTE HERNANDEZ RONALD HUTCHCRAFT LISA JONES SUSAN LA SARGE YASMINA LOPEZ JERRY GOODALE STEPHEN HALL MARCOS HERRERA GARY HUTCHINS MARILYN JONES LEE LAMB PAUL LOWERY BARRY GOODSON ROBERT HALTON VICENTE HERRERA STEPHEN IGLESIAS ROSE JONES DEBORAH LANE FRANCISCO LOZOYA SCOTT HAMILTON CODY HESELIUS SAMUEL INGRAM SANDRA JONES DENNIS LANE JOSE LUNA JAMES GORDON PERRY GORDON SAM HAMMOUD JESSE HETTICK BUENAS GRANADOS JAMES HAMPTON TAKEO HIGA TIM IRWIN BETTY IVY TERRY JONES ALEX JUAREZ ESDRAS GRAY MARIA GRAY PETER HANSEN DEWAYNE HIGHTOWER BELINDA JACKSON DAVID JUAREZ DONALD HARDEN BEVERLEY JACKSON GALI JUAREZ DANIEL LYNCH ADAN MACARIO ALBERTO MACARIO JULIO MACARIO DERRICK GREEN CARMEKA HARDING MAVIS JACKSON, JR. JAIME JUAREZ JOEY LANKFORD MAXIMILIANO MACARIO JAMES GREEN ROBERT GREEN EDWARD GREER RANDY HARGROVE DEBRA HARRIS JACOB HARRIS ALBERTO JAMAICA MENFIL JUAREZ JOSE JAMAICA LAFRENDA HILBURN SAUL JAMAICA YONI JUAREZ CARL JUSTICE JEREMY LANOY JUAN LARA GLEN LATHAN GREGORY MACK SHELDON MACK JERRY MADDOX RONALD GRIMES JOSHUA HARRIS JACOB HILL CURTIS JAMES RICHARD KEATON RICHARD LAWSON DON MADEWELL CRITINO GUEVARA KENNY HARRIS ROXANNE HILL JACQUELINE JAMES RANDALL KEENER RONALD LAWSON FERANDO MAGANA VICTOR GUEVARA MICHELLE HARRIS TYSON HINTHER MCKINLEY JAMES DERRICK KELLUM WILLIAM LAWYER DAVID MAGEE STACEY HARRIS BRIAN HOLLIE ELSWORTH JEFFERSON ERIC KELLY MATTHEW HAYES JAMES HOLLINGSWORTH JASON JEWELL GREGG KENNEDY MARCUS HAYNES ANTHONY HOLLINS GENELLE JIMBOY MARK KENNEDY ANGELA HEATH JAMES HOLLOMAN LUIS JIMENEZ YENY GUEVARA TIM HEFFLIN DONNA HOLLOWAY OMAR JIMENEZ LARRY KENTON KIRK KHILLINGS JUSTIN MAINUS DAVID LAYSON CYNTHIA LEE JACQUELINE LEE QUENTIN LEE PETER LEININGER REMIA GUTHERY DANIEL HENDERSON STEPHEN HOOVER PASCUAL JIMENEZ ALAN KILGORE PATRICIA LENNOX HECTOR MALDONADO MANUEL GUTIEREZ CYNTHIA HENRY JOSEPH HOPKINS MARIA GUTIERREZ KENNETH HENRY, JR. JUSTIN HORN NANCY GUTIERREZ MIKE HENSLEY DANIEL HORRELL RAQUEL GUTIERREZ ANAI HERNANDEZ STEVEN HORSLEY BOBBY KILGORE RUSSELL KING SHONERIC KING CHRIS KINION RONALD LESTER CARLOS MALONE SERGIO LEYVA JERRY LINCOLN JAMES LINWOOD KENNETH MANN CARLOS MANZO TERESA MANZO GINA MEANS JAMES MELDA JAIME MEMIJE ELVIA MURILLO SEDRICK MURRY JOHNNY MUSGRAVE FERNANDO MENDEZ DAVID MYERS IRMA MERCADO KANDYCE MYERS VIVIAN MEYER CHRIS MILLER MARK MILOW BRIAN MINGLE LUIS NAVA MARIA NAVA MARTIN NAVA OVIDIO NAVARRO DOUGLAS MITCHELL VICTOR NAVARRO JAY MODISETTE AUGUSTUS NEAL IRMA MOGUEL JOSHUA MOLT LUKE MOMODU CAMIE MONDAY STEVE MONDAY ERIK MONREAL JOSE MONREAL NATALIE NEILSON ERIC NETTLES AN NGUYEN GAOXIA NI NITA NICHOLS JIMMY NIMMO JERRY NOLAN BRENDA MONTGOMERY MARIO NOLASCO MATTHEW MOORE TONY MOORE JOHNNY MORALES OMAR MORALES ANA MORAN CATHERINE NORTON TONY MOREHEAD DEBRA NOTHNAGEL ANTHONY MORGAN DEREK NYLUND DAVID MORGERSON JAMES O’NEILL, JR. GLENN MORRILL JAMES O’NEILL, SR. JOHN MORRIS EDDIE OLENBERGER, II JACQUELINE MORRISON LEE OLIVER, JR. ANSEL MORROW ANTHONY OLIVERAS CLINTON MORROW ERIC OLSON MARCUS MORROW CARLOS ORDONEZ JAMES MOSS CLAYTON MOTE JUAN ORELLANA LETICIA ORONA EDUARDO MURILLO EDDY OROZCO MARIA MANZO-MEJIA BLANCA MARQUEZ JOSE MARROQUIN ECO MARSHALL GEORGE MARSHALL, JR. JAMIE MARTIN THOMAS MARTIN ADRIAN MARTINEZ ALEJANDRO MARTINEZ ARTURO MARTINEZ JAVIER MARTINEZ JOSE MARTINEZ JUAN MARTINEZ ROBERTO MARTINEZ SERGIO MARTINEZ JAMES MASON CHRISTOPHER MASON, JR. ARTURO MATUL RON MAUCH WILSON MAURICIO TINA McBEATH CHARLES McCARTHY DORIS McCLOUD DEAN McCOMBS ROY McCONNELL RAY McCORMICK SHAWN McCRARY THOMAS McCUNE FLORENCE McDANIEL JAMES McELROY RICHARD McKINNEY DOMINGO McKNIGHT GEORGIE McNAC RODOLFO OROZCO URIAS OROZCO MANUEL ORTEGA PEDRO ORTIZ DAVID OSBORNE ROBERT OTIS BYRON PACHECO GUILLERMO PACHECO EDMUNDO PAIZ FREDRICK PALAZZOLO DON PALMER STEPHEN PARGETER JAMES PARRO MARIO PASTOR JASON PATE RONNIE PATTON VADEN PAULSEN KIMBERLY PEEKS WILLIAM PEGUES VLADIMIR PENIAZ CONSUELO PERALES CATALINO PERALTA CARLOS PEREZ GABRIEL PEREZ JOSE PEREZ KLEYNER PEREZ PEDRO PEREZ SANDRA PEREZ SERGIO PEREZ SERGIO R. PEREZ BRIAN PERKINS SANTIAGO PERU JACK PETRIN DANIEL PEURIFOY FELICIA PHILLIPS LOUIS PHILLIPS JEFF PICKERING ANGEL PINEDA RICARDO PINEDA, JR. KEVIN PITTSER BERT POHL BASANT POKHREL MARK POOL DENNY PORTILLO OSCAR POUND RUDY POWELL GREG POWERS JEFFERY POWERS ALMA PUGA GENARO PULIDO ALBERTO QUE JESUS QUINONES JOHN QUINTON TIMOTHY RADER HECTOR RAMIREZ JOSE RAMON ROBERT RAYNO SANDRA READER DIEGO REBOLLAR FLOR REBOLLAR DAVID REED JAMES REED LYNN REED KENARD REESE MARGARET REEVES EVERETT REITZ RAYMOND ROETTGER KATHLEEN SEALS DIXIE REMY JACKIE REMY JERRY ROGERS MARC SEIP MAXIMILIANO ROJAS DELBERT SERMENO STEVEN SMITH SWEETIE SMITH DENNIS SNOW PILAR TABER PHILLIP TYSON EFFRAIN VILLA JAMES WILLIAMS PHILLIP TALAMASY BONNIE UMSTED MARIA VIRAMONTES JOHNATHAN WILLIAMS JIMMY TALBOT PERNELL UNDERWOOD DAVID RENEAU NELSON ROJAS EFRAIN SERRANO MALCOLM SOLES JESUS TAPIA SVYATOSLAV RESHETOV JEFF ROLLINS ALEXSANDR SHAPOVALOV KEVIN SOUVANNASING JOE TART MARTIN REYNA IGNACIO ROMARO NATALYA SHAPOVALOVA ELDA SPEARS TENNA TATUM EFRAIN URQUIZA MARIA URQUIZA SERGIO URQUIZA CUONG VO SUONG VO TONG VO LINH VU ROBERT WILLIAMS JAMES WILLIAMSON JOE WILLIS NORMA WILLIS PAUL RHEA TERRY ROMBACH DOLORES SHARP MITCHELL SPENCE CHARLES D.TAYLOR SOLIN URQUIZA IVAN VYSOTSKY PAUL WILLS MILDRED RICHARDSON DONATO ROMERO SYLVESTER RICHARDSON RAUL ROMERO STEVEN SHAW THOMAS SHAW ANGELA RIDEOUT ROBERT ROMO KATHY SHEFFIELD JAMES SPENCER CHARLES R.TAYLOR YADIRA URQUIZA STEPHEN WAKEFIELD RALPH WILLS ROGER TAYLOR KEVIN TEAKELL ANTHONY UTLEY RODERICK WALKER JAMES WILSON ARMANDO VALERO NOLA WALTERS THOMAS WIND DELMECIO RISER PATRICIA ROSAS STEPHANIE SHELL JERRY TENNISON DAVID VALLIERE ROBERT WALTERS WANDA WINKFIELD STEPHEN RISER JAMES RITCHIE JESUS RIVAS KEVIN RUCKMAN GILBERT SHELTON DAWNELL TERRY JOHN VANNESS LEE WARD WILLIAM WINTERMUTE RONALD RUENGERT DARRELL SHEPHERD SUSAN SPENCER DOUA THAO ALEJANDRO VARGAS AVA RUSSELL RHONDA SHEPHERD MICHAEL SPORTEL DAVID THOMAS JUAN VARGAS GUILLERMO RIVERA PATRICIA RUSSELL CHARLES SHOEMAKER NICK SPROWSO JERONE THOMAS RANFERI VARGAS MARGARITA RIVERA J SALDIVAR FELICIANO SIFUENTES BONNIE STANDRIDGE ROBERT THOMAS SALVADOR VARGAS MICAH WISDOM DALE WRIGHT BARBARA WYATT MARSHA WYNNE JOSE SALDIVAR TAURINO SIGALA LAWANA STANE BOBBY THOMPSON OCTAVIO VASQUES PERRY WARNER JIM WYRICK MIGUEL SALDIVAR ROCALI SILVA SONDRA STANSELL MARK THOMPSON EFRAIN VASQUEZ JEANETTE WASHINGTON ECTOR YANCEY, JR. VICTOR SALDIVAR PATRICK SIMPSON LARRY STANTON CHRISTOPHER TOLES FELIPE VASQUEZ GERALDINE WATSON GERARDO YANEZ FLOYD SALTSMAN HAROLD SINK ARTIS STARLING, JR. DANIEL TORRES HECTOR VASQUEZ ARTHUR WATSON, JR. WAYNE YEAGER ALONSO RIVERA-MARTINEZ MAXIMINO SANAN TIM ROBINSON JOSE ROBLES BETTY SANCHEZ CESAR SANCHEZ KENYAN RODGERS EVA SANCHEZ ANTONIO RODRIGUEZ FRANCISCA SANCHEZ MICHAEL SKINNER CIRO RODRIGUEZ GUSTAVO SANCHEZ JOHN SLINKER DIANA RODRIGUEZ JOSE SANCHEZ EMMA RODRIGUEZ ROSA SANCHEZ LARRY SLONE ALBERT SMITH JUAN RODRIGUEZ MICHAEL SANDOR, JR. BOBBY SMITH BARBARA STARR JOHN STEDMAN GLENN STEFFY BERT STEPHENS BRIAN STEWART TOMMY STEWART PATRICK STILL JOHN STINSON BRENT STOCKTON JORGE TORRES SILVIA TORRES JUAN VASQUEZ JULIO VASQUEZ JOHN WATTS DEBRA WEEKLEY DAVID TOWNSEND LUCIANO VASQUEZ ANTHONY WELCH MICHAEL YOHE KATHY YOUNG MARC YOUNG STEPHEN TRACY MAYNOR VASQUEZ CAROLYN WESLEY DINAH YOUNGBLOOD UT TRAN VICENTE VASQUEZ SHARON WEST NIKOLAY ZAGORODNIY WYLLY VASQUEZ DIANA WHEELER CESAR ZAMARRIPA LUIS VASQUIZ DEBORAH WHITAKER JOHN ZENTER DEBORAH VAUGHT HARVEY WHITAKER OLGA ZVEZDUN SHERRY VAUGHT JOSEPH WHITE MARIA RODRIGUEZ PEDRO SANTILLAN BRETT SMITH MICHAEL STRAUB LINDA TREADWELL LUIS VAZQUEZ WENDY WHITLOW MARICRUZ RODRIGUEZ GALINA SAVINA CURTIS SMITH BILLY STRENGTH DANIEL TREJO ROGELIO VAZQUEZ STEVEN WHORTON OMAR RODRIGUEZ WILLIAM SCHAROSCH DEBORAH SMITH THOMAS STRONG HA TRINH TERESA RODRIGUEZ ROBERT SCHOOLEY GAY SMITH LUIS RODRIQUEZ RUSSELL SCHOONOVER GWENDOLYN SMITH ERIC SUBIA GARY SWARER JAY TROTTER JEREMY TUCKER ANGEL VENEGAS SVETLANA WILES MARCO RODRIQUEZ DWAYNE SCHWARTZ LINDA SMITH JENNIFER SWIFT PAUL TURBE RENE VERASTEGUI BILLY WILLIAMS MARIA RODRIQUEZ HUGH SEAGER, JR. MICHAEL SMITH JAMES TABER PHYLLIS TYISKA BENITO VERGARA DONNA WILLIAMS DELIA VEGA VICTOR VEGA JACKIE WILES JERRY WILES 

Continue reading text version or see original annual report in PDF format above