AON 06012 AR Glamour 4/12/06 11:01 AM Page 1
f e a r l e s s .
2 0 0 5
A n n u a l
R e p o r t
AON 06012 AR Glamour 4/12/06 10:45 AM Page 2
b o u n d l e s s .
When dark clouds mass on the horizon, one
question demands an answer: Will you
descend to a safe place and wait out the
storm … or will you meet the turbulence head
on, setting your trim to surmount it? Where
others have taken shelter,AAON has chosen to
move forward, rising above and beyond
every challenge … leading the way into an
open, endless expanse of possibilities.
AON 06012 AR Glamour 4/12/06 10:45 AM Page 4
c o m p a n y p r o f i l e
f i n a n c i a l h i g h l i g h t s
A AO N , I N C . E N G I N E E R S , M A N U FAC T U R E S A N D M A R K E T S CO M M E R C I A L A I R CO N D I T I O N I N G P R O D U C T S
I N C LU D I N G H E AT I N G , V E N T I L AT I N G , H E AT R E COV E RY A N D H E AT T R A N S F E R CO I L S .
The company’s product offering includes single unit systems containing heating,cooling and heat recovery components in
a self-contained cabinet; chillers and condensing units consisting of heat exchangers, fans and compressors; air handling
units consisting of coils,blowers and filters;and coils consisting of a sheet metal casing with tubes and fins.
AAON sells to a wide range of customers through sales representatives, as well as to many national accounts, such as Wal-Mart stores,
Dillard’s and Wendy’s. Approximately 55% of the company’s sales come from new construction; the remaining from renovations and
replacements. AAON has about a 13% share of the commercial rooftop market and a 1% share of the coil market.
Headquartered in Tulsa, Oklahoma, AAON was founded in 1988. The company owns AAON Coil Products, Inc., a Longview, Texas-
based manufacturer of coils, air handlers and condensing units. In Spring of 2004, AAON acquired Air Wise, Inc., of Mississauga, Ontario,
a company that engineers, manufactures and sells custom air-handling units, makeup air units and packaged rooftop units for
commercial and industrial buildings.
R O O F T O P U N I T S
A I R H A N D L E R S
C O N D E N S I N G U N I T S
RM Packaged Rooftop
Units & Air Handlers
H2 Horizontal Indoor
Air Handlers
CA Condensing Units
RN Packaged Rooftop
Units & Air Handlers
V2 Vertical Indoor
Air Handlers
CB Condensing Units
RL Packaged Rooftop
Units & Air Handlers
M2 Air Handler
HA Horizontal
Discharge
Cooling Units
HB 2 to 5 Ton
Packaged Units
MN Custom Direct Fired
Make Up Air Unit
NJ/TBA Custom
Air Handler and Indirect
Fired Make-Up Air Unit
CL Condensing Units
C H I L L E R S
LL Chillers
C O I L S
Coils Booster Coils,
Hot Water, Chilled
Water & DX Coils
SALES
In $ Millions
2005
2004
2003
185.2
171.9
147.9
BACKLOG
In $ Millions as of the end of December
2005
2004
2003
54.8
49.4
41.9
STOCK PRICE
As of the end of December
2005
2004
2003
$17.88
$16.07
$19.41
Income Data ($000)
Net Sales
Gross Profit
Operating Income
Interest Expense
Interest Income
Depreciation
Pre-Tax Income
Net Income
Earnings Per Share
(Basic)
(Diluted)
Balance Sheet ($000)
Working Capital
Current Assets
Net Fixed Assets
Accumulated Depreciation
Cash & Cash Investment
Total Assets
Current Liabilities
Long-Term Debt
Stockholders' Equity
Stockholders' Equity per Diluted Share
Funds Flow Data ($000)
Operations
Investments
Financing
Net Increase (Decrease) in Cash
Ratio Analysis
Return on Average Equity
Return on Average Assets
Pre-Tax Income on Sales
Net Income on Sales
Total Liabilities to Equity
Quick Ratio
Current Ratio
Year-End Price Earnings Ratio
1
1
2
2
3
4
2
2005
2004
2003
2002
2001
$ 185,195
35,291
17,814
16
67
8,503
18,332
11,462
0.93
0.90
$ 171,885
26,864
11,650
38
183
5,732
12,379
7,521
0.60
0.58
$ 147,890
35,885
20,976
21
346
5,435
21,853
14,227
1.12
1.07
$ 154,141
37,549
22,478
95
214
4,915
23,110
14,611
1.11
1.06
$ 156,485
38,667
22,781
892
-
4,380
22,486
14,156
1.09
1.04
$ 33,372
62,950
50,581
45,062
1,837
113,606
29,578
59
79,495
6.23
$ 27,939
55,998
49,229
37,017
3,994
105,227
28,059
167
71,171
5.51
$ 35,369
64,635
37,450
31,285
16,186
102,085
29,266
-
67,428
5.09
$ 21,149
46,482
35,231
27,114
15,071
91,713
25,333
-
62,310
4.53
$ 19,888
42,273
34,022
22,273
1,123
76,295
22,385
985
50,041
3.67
$ 11,966
8,189
(4,200)
(157)
$ 16,159
(11,741)
(9,857)
(5,192)
$ 16,469
(7,626)
(7,728)
1,115
$ 21,931
(16,118)
(1,865)
3,948
$ 23,879
(8,817)
(13,956)
1,106
16.8%
10.1%
9.9%
6.2%
0.4
1.2
2.1
20
10.9%
7.3%
7.2%
4.4%
0.5
1.1
2.0
28
21.9%
14.7%
14.8%
9.6%
0.5
1.3
2.2
18
26.0%
17.4%
15.0%
9.5%
0.5
1.5
1.8
17
32.5%
18.5%
14.4%
9.0%
0.5
1.1
1.9
16
1 = Reflects 3-for-2 stock splits in September 2001 and June 2002.
2 = Reflects reclassification of revolving loan from long-term debt to current liabilities for the years 2001 and 2002.
3 = Actual dollars and diluted number of shares for all years reflect both 3-for-2 stock splits.
4 = Cash, cash investments + receivables / current liabilities
AON 06012 AR Glamour 4/12/06 10:45 AM Page 6
D E A R S H A R E H O L D E R ,
achieved a 7.7% increase in sales to $185.2 million from $171.9 million.
Gross profit widened as a result of higher volume and improved
We were able to attain record sales levels this past year and experienced
efficiencies, rising 31.2% to $35.3 million from $26.9 million. SG&A
a recovery in net income growth; however, it is important to note a
expenses as a percentage of sales increased to 9.4% or $17.5 million
number of factors that had a profound impact on our overall profitability.
from 8.8% or $15.2 million. Despite that increase, operating income
Raw material prices continued to rise, which affected our cost of
climbed 52.1% to $17.8 million or 9.6% of sales from $11.7 million or
manufacturing. During 2004, the price of galvanized steel more than
6.8% of sales. Net income advanced similarly to $11.5 million or $0.90
doubled by the third quarter from the previous year while the price
per share from $7.5 million or $0.58 per share. Earnings per share
moderated during the fourth quarter.The prices of both copper and steel
calculations are based upon 12.8 million fully diluted shares
continued to rise during 2005, climbing 28% and 13%, respectively.
outstanding in 2005 and 12.9 million shares in 2004.
r i s i n g t o a n y c h a l l e n g e .
S T R O N G F I N A N C I A L C O N D I T I O N
We completed 2005 in solid financial condition. At December 31,
2005, total current assets were $63.0 million with a current ratio of
Our costs relating to Sarbanes-Oxley compliance, involving
2.1:1. We had minimal long-term debt and our cash equivalents
management’s time and effort as well as external costs,gained over the
(including certificates of deposit) were $1.8 million. We maintained
previous year.Also,higher than normal repair expense of $594,000 was
this liquid position despite $10 million of capital expenditures and
incurred in the fourth quarter to moderate sheet metal machine down
the continuation of our stock repurchase program initiated in
time, now and in the future. Finally, while AAON Canada did exhibit
October 2002. During 2005, the Company purchased 182,900 shares
satisfactory top-line growth, particularly in the last half of the year, its
at a cost of $3.2 million. Since inception of the current program
profitability was restricted by a number of factors.For the full year 2005
authorizing the purchase of up to 1.3 million shares or approximately
this subsidiary lost $1.8 million.
10% of the shares outstanding, AAON has spent $22 million and
Total industry volume in unitary products over five tons rose 7.1%
purchased 1,257,864 shares. On February 14, 2006, the stock
to $1.36 billion from $1.27 billion, aided by continuing gains in new
repurchase program was suspended. Total shareholders’ equity
office and manufacturing plant construction which increased on an
improved to $79.5 million (up 11.7%), equal to $6.23 per share (up
industry-wide basis 8.9% and 11.3%, respectively. The educational,
13.1%) at December 31, 2005, compared to $71.2 million or $5.51 per
healthcare and other markets performed well, while the retail sector
share a year earlier. In 2005, our return on average shareholders’
witnessed a modestly improved performance. Benefiting from strong
equity was 16.3%,up from 10.9% in 2004.Our order backlog at March
demand for our larger tonnage units (over 30 tons), the Company
31, 2006 was $47.6 million.
Though copper and steel prices
continued to advance through
much of 2005, we were able to
offset the increase somewhat
through higher volume and
increased efficiencies.
To comply with the Sarbanes-Oxley Act, we have
invested $1.4 million in new personnel and new
documenting, testing and reporting procedures.
These costs should moderate in 2006.
AON 06012 AR Glamour 4/12/06 10:45 AM Page 8
C A P I TA L E X P E N D I T U R E S
C H A N G E I S I N T H E A I R
water chiller,boiler and with the pumping equipment offered as an
Over the past five years we have spent approximately $50 million on
Sensing the opportunity to position AAON as industry leader in certain
added option. Prior to its introduction, this type of packaged
capital improvements to satisfy the anticipated demand for our new
product categories, the Company initiated changes to its existing
system was available only in the custom built market. We estimate
and existing products. In 2004 we had record expenditures of $17
product line introducing both new products as well as making a
this segment of the commercial market to be about $800 million
million with approximately $13 million toward increasing our
number of technological alterations to its existing product line.
annually. In addition, the introduction of packaged water chillers
physical and machinery capacity at both our Tulsa, Oklahoma and
The introduction of double wall composite foam panels for the
gives the Company further access to the air handler market, a $1.4
Longview, Texas facilities. In the past year we spent $10 million on
cabinets for many of our products has enabled the Company to take
billion segment of the commercial market.
capital improvements with more than 80% going toward new
the industry lead in this manufacturing process.The traditional method
Our CB series, a split system air-conditioning and heating unit
manufacturing equipment and the refurbishing of old machinery. In
of manufacturing the walls of the cabinet is to install fiberglass
with capacity of 2-5 tons, aimed at the new and replacement
the expectation of accelerated demand for both our existing
between two pieces of steel. Since the cabinet is usually placed in an
residential and commercial markets, is now ready for distribution
product line and a number of recently introduced products, our
outdoor area, and subject to the elements, there often is a significant
after numerous delays regarding computer software. This system
l e a d i n g b y i n n o v a t i
i n g .
loss of heating or cooling efficiency. The use of foam rather than
will use the “green” refrigerant R-410A and operate with an energy
fiberglass has allowed us to produce a product which is lighter, more
efficiency of 13 SEER. The Company will distribute this product
cost efficient and,importantly,a better insulator;hence,the “R”value of
through its manufacturers’ representative network for sale to local
capital expenditure budget for 2006 is estimated at $12-14 million.
the cabinet is significantly improved. Approximately one-third of our
contractors. The approved contractor will place the order through
We intend to increase our sheet metal fabricating capacity and our
product line is now manufactured with foam-insulated cabinets.
AAON’s website and direct delivery will be made to the contractor.
coil manufacturing capacity. By the end of 2006 our combined
Our RN product line (26 to 70 tons), which constitutes
We estimate the available market for the product and distribution
manufacturing capacities in Tulsa and Longview will accommodate
approximately 25% of our total dollar shipments,now is manufactured
method to be in the vicinity of $2.4 billion.
annual volume in the area of $300-350 million while our plant
using our recently introduced direct drive blower assemblies. These
capacities should reach $700-800 million when we include space
assemblies operate without drive belts, hence no adjustment or
R E G U L AT O R Y M A N D AT E S M E A N C H A N G E S
presently leased out. We expect to have plant and equipment
replacement of fan belts is necessary. Furthermore, this product
Due to recent government mandates, changes within our industry
capacities of $45 million and $20 million, respectively, in our
operates with our new airfoil backward inclined fan which creates
have occurred with greater frequency. The Sarbanes-Oxley Act of
Canadian facility.
higher efficiency than the traditional fan design.Approximately 30% of
2002 requires evaluation and testing of financial reporting and
We have taken significant steps to position the Company as
our product line uses the new direct drive blower assemblies.
accounting controls for public corporations. Over the past two
one of the most innovative in the industry. During the past three
The Company continues to introduce innovative new
years,in order to conform with the requirements of the Act,we have
years we have spent $3.6 million on research, development and R&D
products which allows AAON to pursue additional HVAC market
added personnel as well as documenting, testing and reporting
engineering. Our product line is now recognized as one of the most
segments. For example, the Company recently released a mass
procedures, at a cost of approximately $1.4 million. We expect to
technologically innovative within the industry.
produced, packaged mechanical equipment room consisting of a
witness some moderation of these costs in the current year.
We retooled our manufacturing facilities
well in advance of EPA deadlines, making
AAON the first in the industry to offer
environmentally friendly R-410A
refrigerant on our entire product line.
AAON maintains a leading edge in the industry with
engineering advances such as double-wall composite
foam panels, direct drive blower assemblies and
innovative solutions to humidity control.
AON 06012 AR Glamour 4/12/06 11:07 AM Page 10
The regulatory posture regarding both environment and
In 2004, significantly in advance of the required deadline,
important steps to correct these problems, the most important
Furthermore, AAON Canada’s custom and
semi-custom
energy conservation will cause multi-faceted changes within the
AAON became the first manufacturer to make newer,
being the installation of certain software systems, which enables
manufacturing expertise will allow many of our representatives to
industry that should have a long-term effect not only on our
environmentally friendly R-410A refrigerant available on its entire
the Company to analyze the costs and material content of its
pursue this segment of the rooftop and air handling markets, which
product line but also in the way we conduct our business.
line of products. Currently, approximately 25% of our product line
backlog. The end result will be more realistic pricing. Revenue
were not available to them prior to the acquisition.
Effective January 2006, the Department of Energy (DOE) and
operates with R-410A.
growth in 2006 will be gradual and selective and we estimate total
I believe that the capital and effort we expended over the
the Environmental Protection Agency (EPA) have prescribed that all
revenue in the range of $14 to $15 million. We believe this
past five years to redesign our basic product line and introduce
equipment under six tons of cooling capacity must have a Seasonal
A A O N C A N A D A – P R O G R E S S T H R O U G H C H A N G E
subsidiary will operate at breakeven or with a modest profit.
new products, as well as to enlarge our physical and machinery
Energy Efficiency Ratio (SEER) of 13. Our CB, HB and RM product
The May 2004 acquisition of Air Wise based in Ontario, Canada,
capacity, should enable the Company to continue to show
lines (2-5 ton cooling capacity) were completely redesigned and
allowed AAON to enter the custom and high end of the semi-
S A L E S R E P R E S E N TAT I V E S ’ P E R F O R M A N C E
further progress this year. I am confident the Company can
equipped with larger heat transfer surfaces and with higher
custom rooftop and air handling markets. For the partial year 2004,
Our sales representatives’network with 110 offices in all 50 states and
achieve and maintain annual sales growth rates of at least 12-
efficiency compressors. These product lines now operate with a
AAON Canada had sales of $3.3 million with an operating loss of
10 provinces of Canada performed extremely well during 2005, and
15% over the next five years. We believe the manufacturers’
SEER of 13 or better.
$900,000. The integration of this acquisition has taken longer and
posted record results. The representative network produced a sales
representative network will continue to provide a major
Effective
in 2010,
the EPA has mandated that all
has proven more costly than originally planned due to a number of
gain of 9.3% to $157.3 million or 85% of total corporate sales.In 2004
contribution to AAON’s future growth.
manufactured HVAC equipment must use refrigerants that do
factors. While we witnessed excellent revenue growth in 2005 to
representative sales were $146.3 million or 82% of total corporate
not contain chlorine, thereby reducing the effect of ozone
$11.2 million, a number of orders were delivered at price levels
sales. Our aggressive posture regarding new product introductions
E M P L O Y E E S
depletion in the atmosphere.The year 1999 has been established
quoted prior to certain price increases. In addition, in order to
for additional HVAC market segments will allow our manufacturers’
We have always regarded our employees as one of our most
as a benchmark year for the production of R22, the traditionally
accommodate the higher volume, we accelerated new hirings
representatives entrance into new markets producing significant
important assets. We believe that well-motivated, satisfied
used refrigerant for the HVAC industry. Reductions in the
which resulted in a significant amount of training and overtime
incremental sales. In addition, our CB series of products aimed
employees whose focus is on meeting performance goals produce
production of R22 of 35% were mandated as of January 1, 2004
costs.Furthermore,we found that our internal purchasing methods
specifically at the residential market is now ready for marketing.The
superior results over the long term. Our emphasis on employee
and January 1, 2010, respectively, with complete elimination of
were not aligned with our estimating and billing process. The net
Company will distribute the CB series exclusively through its
retention and motivation has led us to create a variety of programs
production on January 1, 2020.
result was an operating loss of $1.8 million. We have taken
manufacturers’representatives,which will add to the network’s sales.
to enhance the skills of our core personnel.
P r o g r e s s a t m a c h s p e e d s
SPRING
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.
AUGUST
AAON, an
Oklahoma
corporation,
was founded.
DECEMBER
Formed AAON Coil Products, a
Texas Corporation, as a
subsidiary to AAON, Inc.
(Nevada) and purchased coil
making assets of Coils Plus.
SEPTEMBER
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
NOVEMBER
Listed on the NASDAQ
National Market System.
JANUARY
Introduced a
desiccant heat
recovery wheel
option available
on all AAON
rooftop units.
SEPTEMBER
Completed
expansion of the
Tulsa facility
to 332,000
square feet.
APRIL
AAON received U.S. patent for
Blower Housing assembly.
OCTOBER
U.S. patent granted to
AAON for air conditioner
with energy recovery
heat wheel.
SPRING
Completed Tulsa,
Oklahoma, and
Longview, Texas, plant
additions yielding a
total exceeding 1
million square feet.
FALL
Industry introduction of
the modular air handler
and chiller products.
MAY
Purchase of
the assets of
Air Wise, of
Mississauga,
Ontario,
Canada
JUNE
3-for-2
stock split.
NOVEMBER
Introduction of
light commercial/
residential 2 to 5
ton condensing
units and rooftop
heating and
cooling units
AUGUST
AAON
received U.S.
Patent for
Plenum Fan
Banding
1 9 8 8 | 1 9 8 9 | 1 9 9 0 | 1 9 9 1 | 1 9 9 2 | 1 9 9 3 | 1 9 9 4 | 1 9 9 5 | 1 9 9 6 |
1 9 9 7 | 1 9 9 8 | 1 9 9 9 | 2 0 0 0 | 2 0 0 1 | 2 0 0 2 | 2 0 0 3 | 2 0 0 4 | 2 0 0 5
SEPTEMBER
Purchase of
John Zink Air
Conditioning
Division.
DECEMBER
Listed on
NASDAQ Small
Cap – Symbol
“AAON.”
SUMMER
Became a publicly
traded company with
the reverse acquisition
of Diamond Head
Resources (now
“AAON, Inc.”), a
Nevada corporation.
SPRING
AAON Coil Products
purchased, renovated
and moved into a
110,000 square foot
plant in Longview, Texas.
MARCH
Purchase of property with
26,000 square foot
building adjacent to
AAON Coil Products plant
in Longview, Texas Issued
a 10% stock dividend.
DECEMBER
Purchased 40 acres with
457,000 square foot plant
and 22,000 square foot
office space located across
from Tulsa facility.
NOVEMBER
AAON yearly
shipments exceed
$100 million.
Received U.S.
patent for
Dimpled Heat
Exchanger Tube.
JULY
AAON added
as a member
of the Russell
2000® Index.
FALL
Expanded rooftop
product line to 230
tons. Introduced
evaporative
condensing energy
savings feature.
3-for-2 stock split.
OCTOBER
AAON, listed
in FORBES
Magazine’s
“Hot Shots
200 Up &
Comers”
JULY
Started production of
polyurethane foam-filled
double-wall construction
panels for rooftop and
chiller products using
newly purchased
manufacturing equipment
AON 06012 AR Glamour 4/12/06 10:45 AM Page 12
One of the largest motivating factors has come through our
subjects. All personnel have access to these training programs and
retirement plan which provides a match in company stock.
can use them to refresh their skills or to prepare for advancement.
Employees with one year of service are now able to sell the
We also encourage the pursuit of broader skills through training at
Company stock in their accounts, but as of December 31, 2005, less
external educational
facilities via a generous
tuition
than 10% of such stock had been redirected into other investments
reimbursement program. These efforts are all focused upon our
and the plan held more than 4% of the Company’s outstanding
goal of improving efficiencies and productivity which will
stock. While all purchases of Company stock are made in the open
ultimately benefit our shareholders through increased profitability.
market, all sales are made directly to the Company at the closing
price for the day. We have also implemented an automatic
O U T L O O K
enrollment and increase system utilizing specified investments
On February 14 of this year, the Board of Directors voted to initiate
within the retirement program which has increased plan
a semi-annual cash dividend of $0.20 per share payable on July 3,
participation to more than 90% with the highest savings rate ever.
2006,to the holders of record on June 12,2006.We believe this cash
By helping people plan for their future in the easiest manner
dividend policy is a clear and strong affirmation of the confidence
possible, we believe that we reduce their concerns and help them
we have in AAON’s growth in the future.
to focus upon their daily tasks.
The Company has made extraordinary progress over the past
An additional incentive connecting the Company’s financial
five years while satisfying the demands of our customers and
performance to employee compensation has been through the
government regulators. This could not have been accomplished
distribution of stock options to a broad number of qualified
without the support and cooperation of our customers, sales
personnel. Both the retirement and stock option programs are tied
representatives and shareholders, as well as the total loyalty of our
to vesting periods which reduces the focus upon short-term
outstanding employees, all of whose names appear at the end of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[3] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________________ to _____________________________
Commission file number: 0-18953
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada
(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)
performance and enhances the retention of personnel. We have
this report.The Board of Directors and I want to thank all of you for
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. q Yes q No
3
also provided a quarterly bonus equal to 10% of the Company’s
your past and continuing confidence and commitment.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
q Yes q No
3
pre-tax earnings paid equally to all eligible employees. Lastly, we
have begun implementing variable compensation systems which
Sincerely,
rapidly and directly tie compensation to the attainment of specified
goals and efficiencies. The result of all of these programs is to
concentrate employee focus on the performance of the Company.
Norman H. Asbjornson
To assist in the attainment of performance objectives, we
President and CEO
provide training at our facilities in a wide variety of industry-specific
April 24, 2006
Product introductions such as our LL Chiller
provide access to new markets. This pre-
packaged system presents a cost-effective
alternative to custom-built mechanical rooms
in a commercial segment worth $800 million.
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.
3
q Yes q 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 statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.
q
3
q Yes q No
q Yes q No
3
The aggregate market value of the common equity held by non-affiliates computed by reference to the closing price of registrant’s
common stock on the last business day of registrant’s most recently completed second quarter (June 30, 2005) was $168,234,000.
As of February 28, 2006, registrant had outstanding a total of 12,273,037 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 May 31, 2006, are incorporated into Part III.
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TABLE OF CONTENTS
P A R T I
Page
Number
Item 1. Business.
Item Number and Caption
PART I
1.
Business.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2.
3.
4.
Properties.
Legal Proceedings.
Submission of Matters to a Vote of Security Holders.
PART II
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
6.
Selected Financial Data.
7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
7A. Quantitative and Qualitative Disclosures About Market Risk.
8.
Financial Statements and Supplementary Data.
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
9A. Controls and Procedures.
9B. Other Information.
PART III
10. Directors and Executive Officers of Registrant.
11. Executive Compensation.
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
13. Certain Relationships and Related Transactions.
14. Principal Accountant Fees and Services.
PART IV
15. Exhibits, Financial Statement Schedules.
1
4
6
6
6
6
7
8
9
14
15
15
15
17
18
18
18
19
19
20
General Development and Description of Business
AAON, Inc., a Nevada corporation, was incorporated on August 18, 1987.
The Company (including its subsidiaries) is engaged in the manufacture and sale of air-conditioning and heating equipment consisting of standardized
and custom rooftop units, chillers, air-handling units, make-up air units, heat recovery units, condensing units and coils.
Products and Markets
The Company’s 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 less than 4% of its sales in 2005.
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, chillers and coils are applicable to all sizes of commercial and industrial buildings.
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 that 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 2005 level of sales of approximately $185 million, the Company estimates that it has a 13% share of the rooftop market and a 1% share of
the coil market. Approximately 55% of the Company’s sales now come from new construction and 45% from renovation/replacements. The
percentage of sales for new construction vs. replacement to particular customers is related to the customer’s stage of development.
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, condensing units consisting of coils, fans and compressors, which, with the
addition of a refrigerant-to-water heat exchanger, become chillers, and make-up air units and heat recovery units.
With regard to its standardized products, the Company currently has five groups of rooftop units: its HB Series consisting of four cooling sizes ranging
from two to five tons; its RM and RN Series offered in 21 cooling sizes ranging from two to 70 tons; its RL Series, which is offered in 15 cooling sizes
ranging from 40 to 230 tons; and its HA Series, which is a horizontal discharge package for either rooftop or ground installation, offered in eight sizes
ranging from seven and one-half to 50 tons. The Company also produces customized rooftop products with direct (MN Series) and indirect (TBA
Series) heating in sizes as required.
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The Company manufactures a Model LL chiller, which is available in both air-cooled condensing and evaporative cooled configurations.
The Company’s products and sales strategy focus on “niche”markets. The targeted markets for its equipment are customers seeking products of better
The Company’s air-handling units consist of the H/V Series, the modular (M2) Series and a customized NJ Series.
The Company’s condensing units consist of the CB and CL series configurations.
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 eight independent parts distributors
and has factory service organizations at each of its plants. 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 heat recovery option applicable to its RM, RN and RL units, as well as its M2 and NJ Series air handlers, respond to the U.S. Clean Air Act
mandate to increase fresh air in commercial structures. The Company’s products are designed to compete on the higher quality end of standardized
The Company’s warranty on its products is: for parts only, the earlier of one year from the date of first use or 14 months from date of shipment;
products.
compressors (if applicable), an additional four years; on gas-fired heat exchangers (if applicable), 15 years; and on stainless steel heat exchangers (if
Performance characteristics of its products range in cooling capacity from 28,000-4,320,000 BTU’s and in heating capacity from 69,000-3,990,000 BTU’s.
All of the Company's products meet the Department of Energy's efficiency standards, which define the maximum amount of energy to be used in
producing a given amount of cooling.
applicable), 25 years.
Research and Development
All R&D activities of the Company are company-sponsored, rather than customer-sponsored. R&D has involved the HB, RM, RN, RL, NJ,TBA and MN
(rooftop units), LL (chillers) and CB (condensing units), as well as component evaluation and refinement, development of control systems and new
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
product development. The Company incurred research and development expenses of $1,681,000 in 2005, $1,072,000 in 2004 and $837,000 in 2003.
tons of air-conditioning, which can involve multiple units.
The Company has developed and is beginning to market a residential condensing unit (CB Series).
Backlog
The Company had a current backlog as of March 1, 2006, of $48,597,000, compared to $33,184,000 at March 1, 2005. The current backlog consists of
orders considered by management to be firm and substantially all of which will be filled by August 1, 2006; however, the orders are subject to
Major Customers
The Company’s largest customer last year was Wal-Mart Stores, Inc., which accounted for less than 10% of total sales. Sales to Wal-Mart were 14% and
cancellation by the customers.
18% of total sales in 2004 and 2003, respectively. The Company has no written contract with this customer.
Working Capital Practices
Working capital practices in the industry center on inventories and accounts receivable. The Company regularly reviews its working capital with a view
In order to diversify its customer base, the Company has added to and/or upgraded its sales representation in various markets.
to maintaining the lowest level consistent with requirements of anticipated levels of operation. Its greatest needs arise during the months of July-
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
November, the peak season for inventory (primarily purchased material) and accounts receivable. The Company's working capital requirements are
generally met by cash flow from operations and a bank revolving credit facility, which currently permits borrowings up to $15,150,000. The Company
believes that it will have sufficient funds available to meet its working capital needs for the foreseeable future. The Company expects to renew its
also purchases from other domestic manufacturers certain components, including compressors, electric motors and electrical controls used in its products.
revolving credit agreement in July 2006.
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 materials 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.
Seasonality
Sales of the Company’s products are moderately seasonal with the peak period being July-November of each year.
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 one year. However, in 2005 and 2004 cost increases in basic commodities, such as steel,
copper and aluminum, severely impacted profit margins.
Distribution
The Company employs a sales staff of 12 individuals and utilizes approximately 87 independent manufacturer representatives’ organizations having
Competition
In the standardized 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, a division of Johnson Controls. All of these competitors are substantially larger
and have greater resources than the Company. In the custom market, the Company competes with many larger and smaller manufacturers. The
Company competes 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
104 offices to market its products in the United States and Canada. The Company also has one international sales organization, which utilizes 12
on sales of its products because of the emphasis placed on initial cost; whereas, in the replacement market and other owner-controlled purchases, the
distributors in other countries. Sales are made directly to the contractor or end user, with shipments being made from the Company’s Tulsa, Oklahoma,
Company has a better chance of getting the business since quality and long-term cost are generally taken into account.
Longview,Texas, and Burlington, Ontario, Canada plants to the job site. Billings are to the contractor or end user, with a commission paid directly to the
manufacturer representative.
2
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Employees
As of March 1, 2006, the Company had 1,335 employees and 78 temporaries, none of whom is represented by unions. Management considers its
We may not be able to successfully develop and market new products.
Our future success will depend upon our continued investment in research and new product development and our ability to continue to realize new
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 and evaporative condenser desuperheater.
technological advances in the HVAC industry. Our inability to continue to successfully develop and market new products or our inability to achieve
technological advances on a pace consistent with that of our competitors could lead to a material adverse effect on our business and results of operations.
We may incur material costs as a result of warranty and product liability claims that would negatively affect
our profitability.
The development, manufacture, sale and use of our products involve a risk of warranty and product liability claims. Our product liability insurance policies
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
have limits that, if exceeded, may result in material costs that would have an adverse effect on our future profitability. In addition, warranty claims are not
covered by our product liability insurance and there may be types of product liability claims that are also not covered by our product liability insurance.
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.
We may not be able to compete favorably in the highly competitive HVAC business.
Competition in our various markets could cause us to reduce our prices or lose market share, or could negatively affect our cash flow, which could have an
adverse effect on our future financial results. Substantially all of the markets in which we participate are highly competitive. The most significant competi-
tive factors we face are product reliability, product performance, service and price, with the relative importance of these factors varying among our product
Available Information
The Company’s Internet web site address is http://www.aaon.com. Its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
line. Other factors that affect competition in the HVAC market include the development and application of new technologies and an increasing emphasis
on the development of more efficient HVAC products. Moreover, new product introductions are an important factor in the market categories in which our
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 will be available through
products compete. Several of our competitors have greater financial and other resources than we have, allowing them to invest in more extensive research
the Company’s Internet web site as soon as reasonably practical after the Company electronically files such material with, or furnishes it to, the SEC.
and development. We may not be able to compete successfully against current and future competition and current and future competitive pressures
Item 1A. Risk Factors.
faced by us may materially adversely affect our business and results of operations.
The loss of Norman H. Asbjornson could impair the growth of our business.
Norman H.Asbjornson,the founder of AAON,Inc.,has served as the President and Chief Executive Officer of the Company from inception to date. He has
The following risks and uncertainties may affect the Company’s performance and results of operations.
provided the leadership and vision for our growth. Although important responsibilities and functions have been delegated to other highly experienced and
Our business can be hurt by an economic downturn.
Our business is affected by a number of economic factors, including the level of economic activity in the markets in which we operate. A decline in
economic activity in the United States could materially affect our financial condition and results of operations. Sales in the commercial and industrial
new construction markets correlate closely to the number of new homes and buildings that are built, which in turn is influenced by cyclical factors
such as interest rates, inflation, consumer spending habits, employment rates and other macroeconomic factors over which we have no control. In the
capable management personnel,our products are technologically advanced and well positioned for sales into the future and we carry key man insurance on
Mr.Asbjornson, his death,disability or retirement,could impair the growth of our business. We do not have an employment agreement with Mr.Asbjornson.
Our stockholder rights plan and some provisions in our bylaws and Nevada law could delay or prevent a
change in control.
Our stockholder rights plan and some provisions in our bylaws and Nevada law could delay or prevent a change in control, which could adversely
HVAC business, a decline in economic activity as a result of these cyclical or other factors typically results in a decline in new construction and
affect the price of our common stock.
replacement purchases, which would result in a decrease in our sales volume and profitability.
We may be adversely affected by problems in the availability, or increases in the prices, of raw materials and
components.
Problems in the availability, or increases in the prices, of raw materials or components could depress our sales or increase the costs of our products. We
are dependent upon components purchased from third parties, as well as raw materials such as steel, copper and aluminum. We enter into contracts
on terms from six months to one year for raw materials and components at fixed prices. However, if a key supplier is unable or unwilling to meet our
AAON’s business is subject to the risks of interruptions by problems such as computer viruses.
Despite our company’s implementation of network security measures, its services are vulnerable to computer viruses, break-ins and similar disruptions
from unauthorized tampering with its computer systems. Any such event could have a material adverse affect on our business.
Exposure to environmental liabilities could adversely affect our results of operations.
Our future profitability could be adversely affected by current or future environmental laws. We are subject to extensive and changing federal, state
supply requirements, we could experience supply interruptions or cost increases, either of which could have an adverse effect on our gross profit.
and local laws and regulations designed to protect the environment in the United States and in other parts of the world. These laws and regulations
could impose liability for remediation costs and result in civil or criminal penalties in case of non-compliance. Compliance with environmental laws
increases our costs of doing business. Because these laws are subject to frequent change, we are unable to predict the future costs resulting from
environmental compliance.
4
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Item 1B. Unresolved Staff Comments.
P A R T I I
None.
Item 2. Properties.
The plant and office facilities in Tulsa, 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 Avenue (the “original facility”), and a 563,000 square foot manufacturing/ware-
house 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
(2440 South Yukon Avenue). 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 $13.9
million per month in 2005, which is 89% 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.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
The Company's Common Stock is traded on the NASDAQ National Market under the symbol "AAON". The range of closing prices for the Company's
Common Stock during the last two years, as reported by National Association of Securities Dealers, Inc., was as follows:
Quarter Ended
March 31, 2004
June 30, 2004
September 30, 2004
December 31, 2004
March 31, 2005
June 30, 2005
September 30, 2005
December 31, 2005
High
Low
$22.40
$21.24
$19.54
$18.20
$16.46
$18.99
$19.33
$18.46
$18.00
$18.78
$15.52
$14.16
$13.91
$16.15
$16.28
$16.22
The expansion facility is 39% (228,000 sq.ft.) utilized by the Company and 61% leased to a third party. The Company uses 22,000 sq.ft.for office space,
On February 28, 2006, there were 1,026 holders of record, and 2,507 beneficial owners, of the Company’s Common Stock.
20,000 sq.ft.for warehouse space and 80,000 sq.ft.for two production lines; an additional 106,000 square feet is utilized for sheet metal fabrication. The re-
maining 357,000 sq.ft.(presently leased) will afford the Company additional plant space for long-term growth.
Although the Company has paid no cash dividends from inception to date, on February 14, 2006, the Board of Directors voted to initiate a semi-annual
cash dividend of $0.20 per share to the holders of the outstanding Common Stock of the Company as of the close of business on June 12, 2006, the
The Company’s operations in Longview,Texas, are conducted in a plant/office building at 203-207 Gum Springs Road, containing 258,000 sq.ft.on 14 acres.
record date, payable on July 3, 2006.
The manufacturing area (approximately 251,000 sq.ft.) is located in three 120-foot wide sheet metal buildings connected by an adjoining structure. The
facility is built for light industrial manufacturing. An additional, contiguous 15 acres were purchased in 2004 and 2005 for future expansion.
Following repurchases of approximately 12% of its outstanding Common Stock between September 1999 and September 2001,the Company announced
The Company’s operations in Burlington, Ontario, Canada, are located at 279 Sumach Drive, consisting of an 82,000 sq. ft. office/manufacturing facility
stock. Through December 31,2005,the Company had repurchased a total of 1,257,864 shares under the current program for an aggregate price of
on a 5.6 acre tract of land.
$22,034,568,or an average of $17.52 per share.On February 14,2006,the Board of Directors approved the suspension of the Company’s repurchase program.
and began its current stock repurchase program on October 17,2002,targeting repurchases of up to an additional 10% (1,325,000 shares) of its outstanding
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, 2005, through
December 31, 2005.
6
Repurchases during the fourth quarter of 2005 were as follows:
Issuer Purchases of Equity Securities
Period
Month #1
October 1-31, 2005
Month #2
November 1-30, 2005
Month #3
December 1-31, 2005
Total
(a)
Total Number of
Shares (or Units)
Purchased
(b)
Average Price
Paid Per Share
(or Unit)
(c)
Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced Plans or
Programs
(d)
Maximum Number (or Approximate
Dollar Value) of Shares (or Units) that
May Yet Be Purchased Under the Plans
or Programs
–
–
16,800
$17.24
17,200
34,000
$18.49
$17.87
–
16,800
17,200
34,000
7
101,136
84,336
67,136
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Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
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.
AAON engineers, manufactures and markets air-conditioning and heating equipment consisting of standardized and custom rooftop units, chillers, air-
Results of Operations:
2005
2004
2003
2002
2001
(in thousands, except per share data)
Year Ended December 31,
Net sales
Net income
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
$185,195
$ 11,462
$
$
0.93
0.90
12,340
12,750
$171,885
$ 7,521
$
$
0.60
0.58
12,435
12,923
$154,141
$ 14,611
$
$
1.11
1.06
13,158
13,740
$ 156,485
$ 14,156
$
$
1.09
1.04
12,992
13,641
$147,890
$ 14,227
$
$
1.12
1.07
12,685
13,251
December 31,
handling units, make-up units, heat recovery units, condensing units and coils.
AAON sells its products to property owners and contractors through a network of manufacturers’ representatives and its internal sales force. Demand
for the Company’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 (“SG&A”) costs include the Company’s internal sales force, warranty costs, profit sharing and administrative expense.
Warranty expense is estimated based on historical trends and other factors. The Company’s warranty on its products is: for parts only, the earlier of one
year from the date of first use or 14 months from date of shipment; compressors (if applicable), an additional four years, on gas-fired heat exchangers (if
applicable), 15 years, and on stainless steel heat exchangers (if applicable), 25 years.
The Company’s operations in Burlington, Ontario, Canada, are located at 279 Sumach Drive, consisting of an 82,000 sq. ft. office/manufacturing facility
Balance Sheet Data:
2005
2004
2003
2002
2001
on a 5.6 acre tract of land.
Total assets
Long-term debt
Stockholders’ equity
$113,606
$105,227
$102,085
$ 91,713
(in thousands)
$
59
$ 79,495
$
167
$ 71,171
–
–
$ 76,295
$
985
$ 67,428
$ 62,310
$ 50,041
The office facilities of AAON, Inc. consist of a 337,000 square foot building (322,000 sq. ft. of manufacturing/warehouse space and 15,000 sq. ft. of office
space) located at 2425 S.Yukon Avenue,Tulsa, Oklahoma (the “original facility”), and a 563,000 square foot manufacturing/warehouse building and a
22,000 square foot office building (the “expansion facility”) located across the street from the original facility at 2440 S.Yukon Avenue. The Company
utilizes 39% of the expansion facility and the remaining 61% is leased to a third party. The operations of AAON Coil Products, Inc. are conducted in a
plant/office building at 203-207 Gum Springs Road in Longview,Texas, containing 258,000 square feet (251,000 sq. ft. of manufacturing/warehouse and
7,000 sq. ft. of office space). In 2004 and 2005, AAON Coil Products purchased an additional 15 acres of land for future expansion.
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 and June 4, 2002, the Company completed three-for-two stock splits. The shares
outstanding and earnings per share disclosures have been restated to reflect the stock splits.
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Set forth below is income statement information with respect to the Company for years 2005, 2004 and 2003:
Steel, copper and aluminum are high volume materials used in the manufacturing of the Company’s products, which are obtained from domestic
Year Ended December 31
controls used in its products. The suppliers of these components are significantly affected by the rising raw material costs, as steel, copper and
suppliers. The Company also purchases from other domestic manufacturers certain components, including compressors, electric motors and electrical
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense
Interest income
Other income, net
Income before income taxes
Income tax provision
Net income
2005
$ 185,195
149,904
35,291
17,477
17,814
(16)
67
467
18,332
6,870
2004
(in thousands)
$ 171,885
145,021
26,864
15,214
11,650
(38)
183
584
12,379
4,858
2003
$ 147,890
112,005
35,885
14,909
20,976
(21)
346
552
21,853
7,626
aluminum are used in the manufacturing of their products. The Company is also experiencing price increases from component part suppliers.
Selling, general and administrative expenses increased $2.3 million (14.9%) in 2005 compared to 2004 due primarily to an increase in professional fees,
computer consulting, internal accounting expenses, employee profit sharing and a full year of AAON Canada expenses.The AAON Canada asset
acquisition occurred May 4, 2004. SG&A increased $305,000 (2.0%) in 2004 compared to 2003 due primarily to increases in bad debt expense.
Interest expense was $16,000, $38,000, and $21,000 in 2005, 2004 and 2003, respectively. The reduction in interest expense was due to lower average
borrowings under the revolving credit facility in 2005 compared to 2004.The reduction in interest expense in 2003 was due to lower interest rates.
Interest income was $67,000, $183,000, and $346,000 in 2005, 2004 and 2003 respectively, due to investments in short-term money markets and
certificates of deposit.
Other income was $467,000, $584,000, $552,000 in 2005, 2004 and 2003, respectively. Other income is attributable primarily to rental income from the
Company’s expansion facility.
$ 11,462
$
7,521
$ 14,227
Financial Condition and Liquidity
Net accounts receivable increased $5.4 million at December 31, 2005, compared to December 31, 2004, due to an increase in sales.
Results of Operations
Net sales increased $13.3 million in 2005 compared to 2004, and increased $24.0 million in 2004 compared to 2003. The increase in sales in 2005 was
attributable to both volume and price increases and a full year of sales from AAON Canada.The increase in sales in 2004 was primarily attributable to
Inventories increased $2.8 million at December 31, 2005, compared to December 31, 2004, due to procurement of inventory to accommodate
increased sales and increased inventory values related to higher raw material and component parts costs.
the introduction of new products, the improving outlook for the U.S. economy, and the AAON Canada acquisition, which contributed $3,250,000 (1.9%)
Prepaid expenses increased by $563,000 at December 31, 2005, compared to December 31, 2004, due to prepaid copper inventory, at 2005 pricing, for
to sales between May 4 – December 31, 2004. The increased sales were offset by computer and electrical outages that caused the closings of the Tulsa
2006 material requirements.
facility for four days, which also affected production at Longview and Canada.
Gross margins in 2005 were 19.1% compared to 15.6% in 2004 and 24.3% in 2003. Gross profit increased $8.4 million (31.4%) to $35.3 million in 2005
and timing of payments to vendors.
from $26.9 million in 2004 and decreased $9.0 million to $26.9 million from $35.9 million in 2004 compared to 2003.The increases in margins and gross
profit for 2005 were due primarily to increased volume, price increases and improved production efficiencies offset by lower gross margins by AAON
The Company generated $12.0 million, $16.2 million and $16.5 million cash from operating activities in 2005, 2004 and 2003, respectively. Operating
Canada, continuing high material costs for raw materials and component parts and increased copper costs, and higher than normal repair expenses to
cash flows in 2005 primarily consisted of $11.5 million of net income.The decrease in cash provided from operating activities in 2005 is primarily due to
moderate sheet metal down time.The decrease in margins for 2004 compared to 2003 was due to price increases in steel, copper and aluminum,
an increase in inventories and accounts receivable.The decrease in cash provided from operating activities in 2004 is due primarily to an increase in
startup costs associated with a new coil project, closings of the Tulsa facility for four days due to computer and electrical outages, which also affected
cost of sales and an increase in accounts receivable. Operating cash flows in 2003 consisted of $14.2 million of net income, $5.4 million of depreciation,
the Longview and Canada facilities, and equipment failures at the Company’s Longview,Texas, facility that prevented coil production needed by the
$(3.2) million in working capital and other changes. The decrease in 2003 is due primarily to an increase in inventories.
Tulsa facility. The Company instituted two product price increases to its customers in 2004, in an attempt to offset the increases in steel, copper and
aluminum. Due to the Company’s high backlog, orders with old pricing had to flow through the system before new orders began to reflect the new
Cash flows used in investing activities were $8.2 million, $11.7 million and $7.6 million in 2005, 2004 and 2003, respectively. Cash flows used in
pricing. The Company attempts to limit the impact of price increases on these materials by entering into cancelable fixed price contracts with its major
investing activities in 2005 were related primarily to capital expenditures of $10.1 million for additions of machinery and equipment, a manufacturing
suppliers for periods of 6-12 months. In many instances, due to significant price increases in 2004, suppliers refused to sell materials at the originally
addition and an office renovation to the Longview facility. Cash flows used in investing activities in 2004 related to capital expenditure additions
Accounts payable and accrued liabilities increased $1.5 million at December 31, 2005, compared to December 31, 2004, due to commissions payable
negotiated six-month or one year purchase order price.
totaling $17 million, reflecting primarily additions to machinery and equipment, a sheet metal facility at the Tulsa plant and renovations made to the
Company’s Tulsa manufacturing and Longview office facilities. In 2003 cash used in investing activities was comprised primarily of capital ex-
penditures totaling $7.7 million. All capital expenditures and building renovations were financed out of cash generated from operations. In 2005, the
Company invested $1 million in a certificate of deposit, which will mature in the first quarter of 2006. In 2002, the Company invested $10 million in a
certificate of deposit that matured in 2004 and an additional $3 million was invested in certificates of deposit in 2004, which matured in the first
quarter of 2005. Due to anticipated production demands, the Company expects to expend approximately $11 million in 2006 for equipment
requirements. The Company expects the cash requirements to be provided from cash flow from operations.
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Cash flows used in financing activities were $4.2 million, $9.9 million and $7.7 million in 2005, 2004 and 2003, respectively. In October 2002, the
Company’s Board of Directors authorized a stock buyback program to repurchase up to 1,325,000 shares of stock. There were 182,900 shares of stock
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to
repurchased for a total of $4.9 million and 265,100 shares of stock repurchased for a total of $5.0 million in 2005 and 2004, respectively, with 597,001
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the
shares of stock repurchased for a total of $9.9 million in 2003. Additionally, the Company had no net borrowings/(repayments) in 2005, and had $(5.4)
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because these estimates and
million, and $1.8 million, in 2004 and 2003, respectively, under its revolving credit facility.
Off Balance Sheet Arrangements
The Company’s revolving credit facility (which currently extends to July 30, 2006) provides for maximum borrowings of $15.15 million. Interest on
borrowings is payable monthly at the Wall Street Journal prime rate less .5% or LIBOR plus 1.6%, at the election of the Company. The Company had no
assumptions require significant judgment, future actual results could differ from those estimates and could have a significant impact on the Company’s
results of operations, financial position and cash flows. The Company reevaluates its estimates and assumptions on a monthly basis.
The following accounting policies may involve a higher degree of estimation or assumption:
borrowings under the revolving credit facility as of December 31, 2005. Borrowings available under the revolving credit facility at December 31, 2005
Allowance for Doubtful Accounts - The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of
were $14.6 million. In addition, the Company has a $600,000 Letter of Credit that expires December 31, 2006. The credit facility requires that the
specific customers, historical trends in collections and write-offs, current customer status, the age of the receivable, economic conditions and other
Company maintain certain financial ratios and, at December 31, 2005, prohibited the declaration or payments of dividends. At December 31, 2005, the
information. Aged receivables are reviewed on a monthly basis to determine if the reserve is adequate and adjusted accordingly at that time.
Company was in compliance with its financial ratio covenants and, subsequently thereto, the lender waived the restriction on payment of dividends. On
February 14, 2006, the Board of Directors voted to initiate a semi-annual cash dividend of $0.20 per share to the holders of the outstanding Common
Inventory Reserves – The Company establishes a reserve for inventories based on the change in inventory requirements due to product line changes,
Stock of the Company as of the close of business on June 12, 2006, the record date, payable on July 3, 2006. In addition, on February 14, 2006, the
the feasibility of using obsolete parts for upgraded part substitutions, the required parts needed for part supply sales, replacement parts and for
Company suspended its stock repurchase program. The Company plans to renew its revolving credit agreement in July 2006.
estimated shrinkage.
Management believes the Company’s bank revolving credit facility (or comparable financing), and projected cash flows from operations will provide
Warranty – A provision is made for estimated warranty costs at the time the product is shipped and revenue is recognized.The warranty period is: for
the necessary liquidity and capital resources to the Company for the foreseeable future. The Company’s belief that it will have the necessary liquidity
parts only, the earlier of one year from the date of first use or 14 months from date of shipment; compressors (if applicable), an additional four years; on
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 nec-
gas-fired heat exchangers (if applicable), 15 years; and on stainless steel heat exchangers (if applicable), 25 years. Warranty expense is estimated based
essary, and its relationship with its existing bank lender. For information concerning the Company’s revolving credit facility at December 31, 2005, see
on the Company’s warranty period, historical warranty trends and associated costs, and any known identifiable warranty issue. Due to the absence of
Note 4 to the financial statements included in this report.
warranty history on new products, an additional provision may be made for such products.
Commitments and Contractual Agreements
The Company is a party to several short-term, cancelable, fixed price contracts with major suppliers for the purchase of raw material and component parts.
The Company has cancelable commitments to purchase machinery and equipment at a cost of $11.2 million.
The following table summarizes our long-term debt and other contractual agreements as of December 31, 2005:
Medical Insurance – A provision is made for medical costs associated with the Company’s Medical Employee Benefit Plan, which is primarily a self-
funded plan. A provision is made for estimated medical costs based on historical claims paid and any known potential of significant future claims.The
plan is supplemented by employee contributions and an excess policy for claims over $100,000 each.
Historically, reserves have been within management’s expectations.
Payments Due By Period
Employees and related interpretations in accounting for stock options. Under “fixed plan”accounting in APB 25, because the exercise price of the
Stock Compensation - The Company has elected to follow Accounting Principles Board Opinion No. 25 (“APB 25”), Accounting for Stock Issued to
Long-term debt
Interest on fixed rate long-term debt
Purchase commitments
Total
Less Than 1 Year
1-3 Years
$
167
5
$ 11,200
(in thousands)
$
108
$
4
$
11,200
59
1
–
Total
$ 11,372
$
11,312
$
60
The fixed rate interest on long-term debt includes the amount of interest due on our fixed rate long-term debt.These amounts do not include interest
on our variable rate obligation related to the Company’s Revolving Credit Facility.
Company's options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has
adopted pro forma disclosures of SFAS 123.
New Accounting Pronouncements
FASB (Financial Accounting Standards Board) Statement 123 (R) replaces FASB Statement No.123, Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The Statement requires measurement of the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost will be recognized
over the period of time during which an employee is required to provide service in exchange for the award, which will be the vesting period.The
Statement applies to all awards granted and any unvested awards at December 31, 2005. SFAS 123 (R) will be effective for the Company for interim
reporting beginning after December 31, 2005. The Company is currently considering which valuation model it will adopt and, therefore, has not
determined the impact future grants will have on the financial statements. Existing grants will result in compensation expenses being recorded similar
in nature to the amounts disclosed in the pro forma information in footnote 1 of the Consolidated Financial Statements.
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FASB Statement 151, “Inventory Costs”, replaces “Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing”. The Statement requires that
abnormal amounts of idle facility expense, freight, handling costs and spoilage be expensed as incurred and not included in overhead as an inventory
cost.The new statement also requires that allocation of fixed production overhead costs be based on normal capacity of the production facilities.The
Statement is effective January 1, 2006. The Company does not expect the adoption of this statement to have a material impact on its Consolidated
Financial Statements.
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 obligations to update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Important factors that could cause results to differ materially from those in the forward-looking statements
include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new
construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general
economic, market or business conditions.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are included commencing at page 26.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
The information called for by Item 304 of Regulation S-K has been previously reported in the Company’s Form 8-K dated June 25, 2004.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, the Company’s management, under the supervision and with the participation
of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s
disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe that:
•
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the
reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified
The Company is subject to interest rate risk on its revolving credit facility, which bears variable interest based upon a prime or LIBOR rate. The Company
in the SEC’s rules and forms; and
had no outstanding balance as of December 31, 2005.
Foreign sales accounted for less than 4% of the Company’s sales in 2005 and the Company accepts payment for such sales in U.S. and Canadian dollars;
therefore, the Company believes it is not exposed to significant foreign currency exchange rate risk on these sales. Foreign currency transactions and
financial statements are translated in accordance with Statement of Financial Standards No. 52, Foreign Currency Translation. The Company uses the U.S.
dollar as its functional currency, except for the Company’s Canadian subsidiaries, which use the Canadian dollar. Adjustments arising from translation of
the Canadian subsidiaries’ financial statements are reflected in accumulated other comprehensive income. Transaction gains or losses that arise from
exchange rate fluctuations applicable to transactions are denominated in Canadian currency and are included in the results of operations as incurred.
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 entering cancelable fixed price contracts with its major suppliers for periods of 6-12 months.
However, in 2005 and 2004 cost increases in basic commodities, such as steel, copper and aluminum, severely impacted profit margins.
The Company does not utilize derivative financial instruments to hedge its interest rate or raw materials price risks.
•
The Company’s disclosure controls and procedures operate such that important information flows to appropriate collection and disclosure
points in a timely manner and are effective to ensure that such information is accumulated and communicated to the Company’s man-
agement, and made known to the Company’s Chief Executive Officer and Chief Financial Officer, particularly during the period when this
Annual Report was prepared, as appropriate to allow timely decisions regarding the required disclosure.
AAON’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures and concluded that these
controls and procedures were effective as of December 31, 2005.
(b) Management's Annual Report on Internal Control over Financial Reporting
The management of AAON, Inc. and its subsidiaries (AAON), is responsible for establishing and maintaining adequate internal control over financial
reporting. AAON’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors
regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations.Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
In making its assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, we believe that, as of
December 31, 2005, the Company’s internal control over financial reporting is effective based on those criteria.
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AAON’s independent registered public accounting firm has issued an attestation report on management’s assessment of the Company’s internal
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
control over financial reporting.
Date: March 3, 2006
(c) Report of Independent Registered Public Accounting Firm
Board of Directors and
Stockholders of AAON, Inc.
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance
sheets of AAON, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity and
comprehensive income, and cash flows for the years then ended and our report dated March 3, 2006 expressed an unqualified opinion on those
financial statements.
Tulsa, Oklahoma
March 3, 2006
(d) Changes in Internal Control over Financial Reporting
/s/ GRANT THORNTON LLP
We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial
There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2005 that have materially affected,
Reporting, that AAON, Inc. (a Nevada Corporation) and subsidiaries (collectively, the Company) maintained effective internal control over financial
or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other information.
None.
reporting as of December 31, 2005, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on
management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment,
testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that AAON, Inc. and subsidiaries maintained effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, AAON, Inc. and subsidiaries maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated
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Item 13. Certain Relationships and Related Transactions.
Item 10. Directors and Executive Officers of Registrant.
the Company’s 2006 Annual Meeting of Stockholders.
Incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with
The information required by Items 401 and 405 of Regulation S-K is 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 2006 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services.
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 2006 Annual Meeting of Stockholders.
Code of Ethics
The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer or
persons performing similar functions, as well as its other employees and directors. The Company undertakes to provide any person without charge,
upon request, a copy of such code of ethics. Requests may be directed to AAON, Inc., 2425 South Yukon Avenue,Tulsa, Oklahoma 74107, attention
Kathy I. Sheffield, or by calling (918) 382-6204.
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 2006 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
The information required by Item 403 of Regulation S-K is 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 2006 Annual Meeting of Stockholders.
Summary of All Existing Equity Compensation Plans
The following table sets forth information concerning the equity compensation plans of the Company as of December 31, 2005.
EQUITY COMPENSATION PLAN INFORMATION
Plan Category
Number of securities to be issued upon
exercise of outstanding options, warrants
and rights
Weighted-average exercise
price of outstanding options, warrants
and rights
Number of securities remaining available
for future issuance under equity
compensation plan [excluding securities
reflected in column (a)]
Equity compensation plans approved by
security holders (1)
Equity compensation plans not approved by
security holders (2)
Total
(a)
1,113,680
–
1,113,680
(b)
$7.51
–
$7.51
(c)
180,661
–
180,661
(1) Consists of shares covered by the Company’s 1992 Stock Option Plan, as amended.
(2)
The Company does not maintain any equity compensation plans that have not been approved by the stockholders.
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(v)
(vi)
Incorporated herein by reference to exhibit to the Company’s Form 8-K dated August 3, 2005.
Incorporated by reference to exhibits to the Company’s Forms 8-K dated February 25, 1999, and August 20, 2002, and Form 8-A
Registration Statement No. 000-18953, as amended.
(vii)
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.
(viii)
Incorporated herein by reference to exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.
P A R T I V
Item 15. Exhibits and Financial Statement Schedules.
(a)
Financial statements.
See Index to Consolidated Financial Statements on page 23.
(b)
Exhibits:
(3)
(A)
Articles of Incorporation (i)
(A-1) Article Amendments (ii)
(B)
Bylaws (i)
(B-1) Amendments of Bylaws (iii)
(4)
(A)
Third Restated Revolving Credit and Term Loan Agreement and related documents (iv)
(A-1)
Latest Amendment of Loan Agreement (v)
(B)
Rights Agreement dated February 19, 1999, as amended (vi)
(10)
AAON, Inc. 1992 Stock Option Plan, as amended (vii)
(21)
List of Subsidiaries (viii)
(23.1)
Consent of Grant Thornton LLP
(23.2)
Consent of Ernst & Young LLP
(31.1)
Certification of CEO
(31.2)
Certification of CFO
(32.1)
Section 1350 Certification – CEO
(32.2)
Section 1350 Certification - CFO
__________
(i)
Incorporated herein by reference to the exhibits to the Company's Form S-18 Registration Statement No. 33-18336-LA.
(ii)
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.
(iii)
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.
(iv)
Incorporated by reference to exhibit to the Company’s Form 8-K dated July 30, 2004.
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24
25
26
27
28
29
30
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Dated: March 10, 2006
By: /s/ Norman H. Asbjornson
Norman H. Asbjornson, President
Report of Independent Registered Public Accounting Firm – Ernst & Young LLP
AAON, INC.
Report of Independent Registered Public Accounting Firm – Grant Thornton LLP
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders’ Equity and Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
Dated: March 10, 2006
/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/ Anthony Pantaleoni
Anthony Pantaleoni
Director
/s/ Jerry E. Ryan
Jerry E. Ryan
Director
/s/ Jack E. Short
Jack E. Short
Director
/s/ Charles C. Stephenson, Jr.
Charles C. Stephenson, Jr.
Director
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Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Board of Directors and
Stockholders of AAON, Inc.
Stockholders
AAON, Inc.
We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada Corporation) and subsidiaries (collectively, the Company) as
We have audited the accompanying consolidated statements of income, stockholders’ equity and comprehensive income and cash flows of AAON, Inc.
of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows
for the year ended December 31, 2003.These financial statements are the responsibility of the Company’s management. Our responsibility is to express
for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
an opinion on these financial statements based on our audit.
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
believe that our audit provides a reasonable basis for our opinion.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AAON, Inc. and
AAON, Inc. for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.
In our opinion the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of
subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ ERNST & YOUNG LLP
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of AAON,
Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Frame-
work issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 3, 2006, expressed an
unqualified opinion on management’s assessment of the effectiveness of AAON, Inc. and subsidiaries’ internal control over financial reporting and an
Tulsa, Oklahoma
February 6, 2004
unqualified opinion on the effectiveness of AAON, Inc. and subsidiaries’ internal control over financial reporting.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 3, 2006
24
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A A O N ,
I n c . , a n d S u b s i d i a r i e s
A A O N ,
I n c . , a n d S u b s i d i a r i e s
Consolidated Balance Sheets
Consolidated Statements of Income
Assets
Current assets:
Cash and cash equivalents
Certificate of deposit
Accounts receivable, net
Inventories, net
Prepaid expenses and other
Deferred tax asset
Total current assets
Property, plant and equipment, net
Note receivable, long term
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Revolving credit facility
Current maturities of long-term debt
Accounts payable
Accrued liabilities
Total current liabilities
Long-term debt, less current maturities
Deferred tax liability
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized,
no shares issued
Common stock, $.004 par value, 50,000,000 shares authorized,
12,233,558 and 12,349,583 issued and outstanding at
December 31, 2005 and 2004, respectively
Accumulated other comprehensive income
Retained earnings
Total stockholders’ equity
December 31,
2005
2004
(in thousands, except for share data)
$
837
1,000
32,487
23,708
1,041
3,877
62,950
50,581
75
$ 113,606
$
-
108
11,643
17,827
29,578
59
4,474
$
$
$
994
3,000
27,121
20,868
478
3,537
55,998
49,229
-
105,227
-
108
12,882
15,069
28,059
167
5,830
-
-
49
513
78,933
79,495
49
247
70,875
71,171
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense
Interest income
Other income, net
Income before income taxes
Income tax provision
Net income
Earnings per share:
Basic
Diluted
Year Ending December 31,
2005
2004
2003
$
185,195
(in thousands, except per share data)
171,885
$
$
145,021
26,864
15,214
11,650
(38)
183
584
12,379
4,858
7,521
149,904
35,291
17,477
17,814
(16)
67
467
18,332
6,870
$
11,462
$
$
0.93
0.90
$
$
$
147,890
112,005
35,885
14,909
20,976
(21)
346
552
21,853
7,626
$
14,227
0.60
0.58
$
$
1.12
1.07
Weighted average shares outstanding:
Basic
Diluted
12,340
12,750
12,435
12,923
12,685
13,251
The accompanying notes are an integral part of these statements.
Total liabilities and stockholders’ equity
$ 113,606
$
105,227
The accompanying notes are an integral part of these statements.
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A A O N ,
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A A O N ,
I n c . , a n d S u b s i d i a r i e s
Consolidated Statements of Stockholders’ Equity and Comprehensive Income
Consolidated Statements of Cash Flows
Common Stock
Shares
Amount
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
(in thousands)
$
–
–
–
–
–
–
247
–
–
247
–
266
–
–
–
–
811
(811)
–
–
–
954
(954)
–
–
–
1507
(1507)
Retained
Earnings
Total
$
62,258
$ 62,310
14,227
–
(9,107)
67,378
7,521
–
–
(4,024)
70,875
11,462
–
–
(3,404)
14,227
811
(9,920)
67,428
7,521
247
7,768
954
(4,979)
71,171
11,462
266
11,728
1,508
(4,912)
$
–
$
513
$ 78,933
$ 79,495
Balance at December 31, 2002
13,031
$
52
$
Net income
Stock options exercised, including tax benefits
Stock repurchased and retired
Balance at December 31, 2003
Comprehensive income:
Net income
Foreign currency translation adjustment
Total comprehensive income
Stock options exercised, including tax benefits
Stock repurchased and retired
Balance at December 31, 2004
Comprehensive income:
Net income
Foreign currency translation adjustments
Total comprehensive income
Stock options exercised, including tax benefits
Stock repurchased and retired
Balance at December 31, 2005
–
86
(597)
12,520
–
–
95
(265)
12,350
–
–
162
(278)
12,234
$
The accompanying notes are an integral part of these statements.
–
–
(2)
50
–
–
–
(1)
49
–
–
1
(1)
49
28
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 11,462
$
7,521
$
14,227
Year Ended December 31,
2005
2004
2003
(in thousands)
8,503
68
-
130
(1,696)
(5,366)
(2,840)
(563)
(1,269)
3,537
11,966
-
30
3,000
(1,000)
(75)
(10,144)
(8,189)
21,143
(21,143)
(108)
820
(4,912)
(4,200)
5,732
521
-
4
434
(4,002)
(698)
2,175
1,329
3,143
16,159
(1,778)
13
10,000
(3,000)
-
(16,976)
(11,741)
45,471
(50,827)
-
478
(4,979)
(9,857)
5,435
467
50
(28)
1,957
(714)
(5,423)
(2,054)
3,135
(583)
16,469
-
74
-
-
-
(7,700)
(7,626)
33,742
(31,952)
-
402
(9,920)
(7,728)
266
(157)
994
837
247
(5,192)
6,186
994
$
$
-
1,115
5,071
6,186
$
Depreciation
Provision for losses on accounts receivable
Provision for excess and obsolete inventories, net
(Gain)/Loss on disposition of assets
Deferred income taxes
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable
Inventories
Prepaid expenses and other
Accounts payable
Accrued liabilities
Net cash provided by operating activities
Investing Activities
Cash paid for acquisition
Proceeds from sale of property, plant and equipment
Proceeds from matured certificate of deposit
Investment in certificate of deposit
Notes receivable, long-term
Capital expenditures
Net cash used in investing activities
Financing Activities
Borrowings under revolving credit agreement
Payments under revolving credit agreement
Payments on long-term debt
Stock options exercised
Repurchase of stock
Net cash used in financing activities
Effects of exchange rate of cash
Net increase (decrease) in cash
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
The accompanying notes are an integral part of these statements.
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1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
Notes to Consolidated Financial Statements
December 31, 2005
Medical Insurance – A provision is made for medical costs associated with the Company’s Medical Employee Benefit Plan, which is primarily a self-
funded Plan. A provision is made for estimated medical costs based on historical claims paid and any known potential of significant future claims.The
plan is supplemented by employee contributions and an excess policy for claims over $100,000 per claim.
Actual results could differ from those estimates.
1. Business, Summary of Significant Accounting Policies and Other Financial Data
AAON, Inc. (the Company, a Nevada corporation) is engaged in the manufacture and sale of air conditioning and heating equipment consisting of
Revenue Recognition
The Company recognizes revenues from sales of products at the time of shipment. For sales initiated by independent manufacturer representatives,
standardized and custom rooftop units, chillers, air-handling units, make-up air units, heat recovery units, condensing units and coils, through its wholly-
the Company recognizes revenues net of the representatives’ commission.
owned subsidiaries, AAON, Inc. (AAON, an Oklahoma corporation), AAON Coil Products, Inc. (ACP, a Texas corporation), and AAON Canada, Inc., d/b/a Air
Wise (AAON Canada, an Ontario corporation). AAON Properties Inc., (an Ontario corporation) is the lessor of property in Burlington, Ontario, Canada, to
AAON Canada. The consolidated financial statements include the accounts of the Company and its subsidiaries, AAON, ACP, AAON Canada and AAON
Properties Inc. All significant intercompany accounts and transactions have been eliminated.
Currency
Foreign currency transactions and financial statements are translated in accordance with Statement of Financial Standards No. 52, Foreign Currency
Acquisition
On May 4, 2004, the Company (through AAON Canada, Inc.) acquired certain assets and assumed certain liabilities of Air Wise Inc. of Mississauga,
Ontario, Canada for a total cost of $1,778,000. Air Wise is engaged in the engineering, manufacturing, and sale of custom air-handling units, make-up air
units and packaged rooftop units for commercial and industrial buildings.The acquisition complemented and expanded the products the Company
manufactures and adds significant additional capabilities for future growth. The purchase was paid for by cash flow generated from operations.
Subsequent to May 4, 2004, AAON Canada Inc.’s activity is included in the Company’s results of operations for the years ended December 31, 2005 and
Translations. The Company uses the U.S. dollar as its functional currency, except for the Company’s Canadian subsidiaries, which use the Canadian
2004.
dollar. Adjustments arising from translation of the Canadian subsidiaries’ financial statements are reflected in accumulated other comprehensive
income. Transaction gains or losses that arise from exchange rate fluctuations applicable to transactions are denominated in Canadian currency and
The Air Wise acquisition purchase price was allocated as of May 4, 2004, as follows:
are included in the results of operations as incurred.
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 in the consolidated financial statements and accompanying notes.
The following accounting policies may involve a higher degree of estimation or assumption:
Allowance for Doubtful Accounts – The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends in collections and write-offs, current customer status, the age of the receivable, economic conditions and other
information. Aged receivables are reviewed on a monthly basis to determine if the reserve is adequate and adjusted accordingly at that time.
Accounts receivable
Inventory
Fixed assets
Accrued warranty liability
Total purchase price
U.S. Dollar
(in thousands)
1,087
459
277
(45)
1,778
$
$
Inventory Reserves – The Company establishes a reserve for inventories based on the change in inventory requirements due to product line changes,
the feasibility of using obsolete parts for upgraded part substitutions, the required parts needed for part supply sales, replacement parts and for
The Air Wise acquisition is not material for pro forma disclosure purposes.
estimated shrinkage.
Warranty – A provision is made for estimated warranty costs at the time the product is shipped and revenue is recognized.The warranty period is: for
parts only, the earlier of one year from the date of first use or 14 months from date of shipment; compressors (if applicable), an additional four years; on
gas-fired heat exchangers (if applicable), 15 years; and on stainless steel heat exchangers (if applicable), 25 years. Warranty expense is estimated based
on the Company’s warranty period, historical warranty trends and associated costs, and any known identifiable warranty issue. Due to the absence of
warranty history on new products, an additional provision may be made for such products.
On July 29, 2004, the Company (through AAON Properties, Inc.) purchased property in Burlington, Canada, to relocate AAON Canada Inc.The purchase
will allow the Company to enlarge and further expand its production capabilities.The purchase price totaled $1,100,000.
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1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
Concentrations
The Company’s customers are concentrated primarily in the domestic commercial and industrial new construction and replacement markets. To date,
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. The Company establishes an allowance
virtually all of the Company’s sales have been to the domestic market, with foreign sales accounting for less than 4% of revenues in 2005. At December
for excess and obsolete inventories based on product line changes, the feasibility of substituting parts and the need for supply and replacement parts.
31, 2005 and 2004, the two customers having the highest account balances represented approximately 1% and 5% respectively, of total accounts
Inventory balances at December 31, 2005 and 2004, and the related changes in the allowance for excess and obsolete inventories account for the three
receivable.
years ended December 31, 2005, are as follows:
Sales to customers representing 10% or greater of total sales consist of the following:
Wal-Mart Stores, Inc.
*Less than 10%
Year Ended December 31,
2004
14%
2003
18%
2005
*
Raw materials
Work in process
Finished goods
Less: allowance for excess and obsolete inventories
Total, net
Cash and Cash Equivalents
Cash and cash equivalents consist of bank deposits and highly liquid, interest-bearing money market funds with initial maturities of three months or
less.
Accounts Receivable
The Company grants credit to its customers and performs ongoing credit evaluations. The Company generally does not require collateral or charge
interest. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical
trends, economic and market conditions and the age of the receivable. Past due accounts are generally written off against the allowance for doubtful
accounts only after all collection attempts have been exhausted.
Allowance for excess and obsolete inventories:
Balance, beginning of period
Provision for excess and obsolete inventories
Adjustments to reserve
Balance, end of period
Accounts receivable and the related allowance for doubtful accounts are as follows:
December 31,
2005
2004
(in thousands)
$ 18,256
1,981
3,821
24,058
(350)
$ 23,708
$ 16,397
2,305
3,216
21,918
(1,050)
$ 20,868
Year Ended December 31,
2005
2004
2003
$ 1,050
–
(700)
350
$
(in thousands)
$
$
1,050
425
(425)
1,050
$
$
1,000
250
(200)
1,050
Accounts receivable
Less: allowance for doubtful accounts
Total, net
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
December 31,
2005
2004
(in thousands)
$ 33,172
(685)
$ 32,487
$ 27,838
(717)
$ 27,121
Year Ended December 31,
2005
2004
2003
$
$
717
68
(100)
685
(in thousands)
$
$
1,145
521
(949)
717
$
$
860
467
(182)
1,145
At December 31, 2005, the Company had prepaid $776,000 for copper, at 2005 pricing, for 2006 material requirements.This amount is included as
prepaid expenses and other in the Company’s Consolidated Balance Sheet at December 31, 2005.
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1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
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
as incurred; major additions to physical properties are capitalized. Property, plant and equipment are depreciated using the straight-line method over
the following estimated useful lives:
Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
Buildings
Machinery and equipment
Furniture and fixtures
At December 31, property, plant and equipment were comprised of the following:
Years
10-30
3-15
2-5
Warranty
Commissions
Payroll
Income taxes
Workers’ compensation
Medical self-insurance
Other
Total
2005
2004
(in thousands)
$ 6,282
8,037
1,215
623
555
664
451
$ 17,827
$
6,301
5,921
1,115
309
457
933
33
$ 15,069
Land
Buildings
Machinery and equipment
Furniture and fixtures
Less: accumulated depreciation
Total, net
2005
2004
(in thousands)
$ 2,193
28,953
58,983
5,514
95,643
(45,062)
$ 50,581
$
2,082
26,805
52,540
4,819
86,246
(37,017)
$ 49,229
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate, in management’s judgment, that the
carrying value of such assets may not be recoverable. When an indicator of impairment has occurred, management’s estimate of undiscounted cash
flows attributable to the assets is compared to the carrying value of the assets to determine whether impairment has occurred. If an impairment of the
carrying value has occurred, the amount of the impairment recognized in the financial statements is determined by estimating the fair value of the
assets and recording a loss for the amount that the carrying value exceeds the estimated fair value. Management determined no impairment was
required during 2005 and 2004.
Commitments and Contractual Agreements
The Company is a party to several short-term, cancelable, fixed price contracts with major suppliers for the purchase of raw material and component parts.
The Company has cancelable commitments to purchase machinery and equipment at a cost of $11.2 million.
Warranties
A provision is made for estimated warranty costs at the time the related products are sold based upon the warranty period, historical trends, new
products and any known identifiable warranty issues. Warranty expense was $3.6 million, $3.8 million and $3.2 million for the years ended
December 31, 2005, 2004 and 2003, respectively.
Changes in the Company’s warranty accrual during the years ended December 31, 2005, 2004 and 2003 are as follows:
Balance, beginning of the year
Warranties accrued during the year
Warranties settled during the year
2005
2004
2003
$ 6,301
3,622
(3,641)
$ 6,282
(in thousands)
$
$
6,020
3,774
(3,493)
6,301
$
$
7,220
3,160
(4,360)
6,020
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1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
Earnings Per Share
Basic earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding
Stock Compensation
The Company maintains a stock option plan for key employees, directors and consultants, which is described more fully in Note 7. The Company
during the year. Diluted earnings per common share are determined based on the assumed exercise of dilutive options, as determined by applying the
accounts for the plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
treasury stock method. For the years ended December 31, 2005, 2004 and 2003, 115,250, 72,250 and 41,250 options, respectively, were anti-dilutive.
Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan qualify for “fixed”plan
The weighted average exercise price of the anti-dilutive options was $18.85 at December 31, 2005, $19.40 at December 31, 2004 and $19.27 for
accounting and had an exercise price equal to the market value of the underlying common stock on the date of grant. The effect on net income and
December 31, 2003. The computation of basic and diluted earnings per share (“EPS”) is as follows:
earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-
based employee compensation is as follows:
Year Ended December 31, 2005
Net Income
Weighted
Average
Shares
Per-Share
Amount
(in thousands, except per share data)
$ 11,462
–
$ 11,462
12,340
410
12,750
$
$
0.93
–
0.90
Year Ended December 31, 2004
Net Income
Weighted
Average
Shares
Per-Share
Amount
(in thousands, except per share data)
$
$
7,521
–
7,521
12,435
488
12,923
$
$
0.60
–
0.58
Year Ended December 31, 2003
Net Income
Weighted
Average
Shares
Per-Share
Amount
(in thousands, except per share data)
$ 14,227
–
$ 14,227
12,685
566
13,251
$
$
1.12
–
1.07
Basic EPS
Effect of dilutive securities
Diluted EPS
Basic EPS
Effect of dilutive securities
Diluted EPS
Basic EPS
Effect of dilutive securities
Diluted EPS
Year Ended December 31,
2005
2004
2003
(in thousands, except per share data)
Net income, as reported
$ 11,462
$
7,521
$
14,227
Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards, net of
related tax effects
Pro forma net income
Earnings per share:
Basic, as reported
Basic, pro forma
Diluted, as reported
Diluted, pro forma
(438)
$ 11,024
$
$
$
$
0.93
0.89
0.90
0.86
(298)
7,223
0.60
0.58
0.58
0.56
$
$
$
$
$
(611)
13,616
1.12
1.07
1.07
1.03
$
$
$
$
$
Advertising
Advertising costs are expensed as incurred. Advertising expense was $506,000, $615,000 and $781,000 for the years ending December 31, 2005, 2004
and 2003, respectively.
Research and Development
Research and development costs are expensed as incurred. Research and development expense was $1,681,000, $1,072,000 and $837,000 for the years
ending December 31, 2005, 2004 and 2003, respectively.
Shipping and Handling
The Company incurs shipping and handling costs in the distribution of products sold that are recorded in cost of sales. Shipping charges that are billed
to the customer are recorded in revenues.
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1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
5. Debt
New Accounting Pronouncements
FASB (Financial Accounting Standards Board) Statement 123 (R) replaces FASB Statement No.123, Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The Statement requires measurement of the cost of employee services
Long-term debt at December 31, 2005, consisted of notes payable totaling $59,000 due in 2007, net of $108,000 current liability, which were due in
monthly installments of $9,004, with an interest rate of 3.53%, related to a computer capital lease.
received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost will be recognized
6. Income Taxes
over the period of time during which an employee is required to provide service in exchange for the award, which will be the vesting period.The
Statement applies to all awards granted and any unvested awards at December 31, 2005. SFAS 123 (R) will be effective for the Company for interim
reporting beginning after December 31, 2005. The Company is considering which valuation model it will adopt and, therefore, has not determined the
impact future grants will have on the financial statements. Existing grants will result in compensation expenses being recorded similar in nature to the
amounts disclosed in the pro forma information in footnote 1.
The Company follows the liability method of accounting for income taxes, which provides that deferred tax liabilities and assets are 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:
FASB Statement 151,“Inventory Costs”, replaces “Accounting Research Bulletin No.43,Chapter 4,Inventory Pricing”.The Statement requires that abnormal amounts
of idle facility expense,freight,handling costs and spoilage should be expensed as incurred and not included in overhead as an inventory cost.The new
statement also requires that allocation of fixed production overhead costs should be based on normal capacity of the production facilities.The Statement is
effective January 1,2006. The Company does not expect the adoption of this statement to have a material impact on its Consolidated Financial Statements.
Current
Deferred
Year Ended December 31,
2005
2004
$
$
8,566
(1,696)
6,870
(in thousands)
4,424
434
4,858
$
$
2003
5,669
1,957
7,626
$
$
Segments
The Company operates under one reportable segment as defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information.
Reclassifications
Income Statement reclassifications were made for years ended December 31, 2004 and 2003, to conform to the 2005 presentation.The reclassifications
had no affect on Net Income.
2. Supplemental Cash Flow Information
Interest payments of $16,000, $38,000 and $21,000 were made during the years ending December 31, 2005, 2004 and 2003, respectively. Payments for
income taxes of $7,189,000, $3,977,000 and $6,750,000 were made during the years ending December 31, 2005, 2004 and 2003, respectively.
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
Other
Year Ended December 31,
2005
35%
4%
(2%)
37%
2004
35%
5%
(1%)
39%
2003
35%
4%
(4%)
35%
3. Certificate of Deposit
The tax effect of temporary differences giving rise to the Company’s deferred income taxes at December 31 is as follows:
At December 31, 2005, the Company had invested $1 million in a 30-day certificate of deposit that bears interest at 4% per annum. On June 12, 2004,
the Company had a $10 million certificate of deposit that matured bearing interest at 3.25% per annum. Proceeds of $7 million were used for cash flow
purposes and a reinvestment of $3 million, and various amounts throughout the remainder of the year, were invested in 30-day certificate of deposits.
At December 31, 2004, the Company had invested $3 million in a 30-day certificate of deposit bearing interest at 1.9% annum.
4. Revolving Credit Facility
The Company has a $15,150,000 unsecured bank line of credit that matures July 30, 2006. The line of credit requires that the Company maintain certain
financial ratios and prohibits the declaration or payments of dividends. At December 31, 2005, the Company was in compliance with its financial ratio
covenants. On February 14, 2006, the Board of Directors voted to initiate a semi-annual cash dividend of $0.20 per share to the holders of the
outstanding Common Stock of the Company as of the close of business on June 12, 2006, the record date, payable on July 3, 2006.The restriction of
payments of dividends has been waived by the lender. Borrowings under the credit facility bear interest at prime rate less 0.5% or at LIBOR plus 1.60%.
At December 31, 2005, the Company had no borrowings under the revolving credit facility. Borrowings available under the revolving credit facility at
December 31, 2005 and 2004 were $14.6 million. In addition, the Company had a $600,000 bank Letter of Credit at December 31, 2005 and 2004, and
the December 31, 2005, bank letter of credit will expire December 31, 2006. The Company plans to renew its revolving credit agreement in July 2006.
Deferred current tax assets and liabilities relating to:
Valuation reserves
Warranty accrual
Depreciation
Other accruals
Other, net
Deferred long-term tax assets and liabilities relating to:
Depreciation and amortization
NOL
Other, net
2005
2004
2003
(in thousands)
$
$
$
391
2,284
3
1,170
29
3,877
5,030
(695)
139
$
$
$
670
2,283
-
553
31
3,537
5,830
–
$
$
$
900
2,342
-
253
37
3,532
5,391
–
$
4,474
$
5,830
$
5,391
38
39
The NOL Deferred Tax Asset relates to AAON Canada and expires in ten years.
AAON 10K 4/12/06 10:46 AM Page 40
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7. Benefit Plans
7. Benefit Plans (continued)
The Company’s stock option plan provided for 2,925,000 shares of common stock to be issued under the plan. Under the terms of the plan, the
For purposes of the stock compensation information presented in Note 1, the fair value of each option grant is estimated on the date of grant using the
exercise price of shares granted may not be less than 85% of the fair market value at the date of the grant. Options granted to directors prior to May
Black-Scholes option pricing model with the following weighted average assumptions:
25, 2004, vest one year from the date of grant and are exercisable for nine years thereafter. Options granted to directors on or after May 25, 2004, vest
one-third each after 1-3 years. All other options granted vest at a rate of 20% per year, commencing one year after date of grant, and are exercisable
during years 2-10. At December 31, 2005, 180,661 shares were available for future option grants. For the years ended December 31, 2005 and 2004, the
Company reduced its income tax payable by $750,000 and $476,000, respectively, as a result of nonqualified stock options exercised under the
Company’s stock option plan. The number and exercise price of options granted were as follows:
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life
2005
0%
32.15%
4.39%
8 yrs
2004
0%
36.70%
4.24%
8 yrs
2003
0%
37.80%
3.73%
8 yrs
Outstanding at December 31, 2002
Granted
Exercised
Cancelled
Outstanding at December 31, 2003
Granted
Exercised
Cancelled
Outstanding at December 31, 2004
Granted
Exercised
Cancelled
Outstanding at December 31, 2005
Number
Of Shares
1,277,543
56,250
(85,818)
(20,645)
1,227,330
31,000
(94,950)
(3,600)
1,159,780
133,000
(162,400)
(16,700)
1,113,680
Weighted Average Exercise
Price Per Share
$
$
$
$
5.33
13.53
4.69
8.71
5.70
19.58
4.99
5.78
6.13
16.63
5.05
8.37
7.51
The weighted-average grant date fair value for options granted during 2005, 2004, and 2003 was $7.72, $9.84 and $6.47, respectively.
The following is a summary of stock options outstanding as of December 31, 2005:
The Company sponsors a defined contribution benefit plan. Employees may make contributions at a minimum of 1% and a maximum of 50% of
compensation. The Company may, on a discretionary basis, contribute a Company matching contribution of 100% of the salary deferral up to 3%. After
January 1, 2006, the Company matching increased to 50% of the salary deferral up to the first 7% of compensation. In addition, effective May 30, 2005,
the Plan was amended to provide for automatic enrollment in the Plan and provided for an automatic increase to the deferral percent at January 1st of
each year and each year thereafter, unless the employee elects to decline the automatic increase. Beginning with pay periods after May 30, 2005, the
one year enrollment waiting period was waived.The Company made matching contributions of $700,000, $546,000 and $585,000 in 2005, 2004 and
2003, 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 $2,075,000, $1,408,000 and $2,428,000 for the years ended December 31, 2005, 2004 and 2003,
respectively.
8. Stockholder Rights Plan
During 1999, the Board of Directors adopted a Stockholder Rights Plan (the “Plan”), which was amended in 2002. Under the Plan, stockholders of record
on March 1, 1999, received a dividend of one right per share of the Company’s common stock. Stock issued after March 1, 1999, contains a notation
incorporating the rights. Each right entitles the holder to purchase one one-thousandth (1/1,000) of a share of Series A Preferred Stock at an exercise
price of $90. The rights are traded with the Company’s common stock. The rights become exercisable after a person has acquired, or a tender offer is
made for, 15% or more of the common stock of the Company. If either of these events occurs, upon exercise the holder (other than a holder owning
more than 15% of the outstanding stock) will receive the number of shares of the Company’s common stock having a market value equal to two times
Options Outstanding
Options Exercisable
the exercise price.
Range of
Exercise Prices
Number
Outstanding at
December 31, 2005
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual Life
Number
Exercisable at
December 31, 2005
Weighted
Average
Exercise Price
2.28 – 3.39
4.00 – 5.78
8.44 – 12.36
13.40 – 16.94
17.10 – 20.40
Total
403,375
350,305
96,750
148,000
115,250
1,113,680
$
$
3.00
5.07
9.55
15.47
18.74
7.51
1.18
3.30
5.25
8.21
7.90
403,375
350,305
79,650
32,400
50,530
916,260
$
$
3.00
5.07
9.56
14.18
19.33
5.66
The rights may be redeemed by the Company for $0.001 per right until a person or group has acquired 15% of the Company’s common stock. The
rights expire on August 20, 2012.
9. 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 results of operations or financial position.
10. Subsequent Events
On February 14, 2006, the Board of Directors voted to initiate a semi-annual cash dividend of $0.20 per share to the holders of the outstanding
common stock of the Company as of the close of business on June 12, 2006, the record date, payable on July 3, 2006. As of December 31, 2005, the
Company’s revolving credit facility prohibited payment of dividends.The restriction has since been waived.
The Board also approved the suspension of the Company’s current stock repurchase program (for 1,325,000 shares), on which a balance of 67,136
shares remains to be bought.
40
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11. Quarterly Results (Unaudited)
Exhibit 23.1
The following is a summary of the quarterly results of operations for the years ending December 31, 2005 and 2004:
Quarter Ended
Consent Of Independent Registered Public Accounting Firm
We have issued our reports dated March 3, 2006 accompanying the consolidated financial statements and management's assessment of the
effectiveness of internal control over financial reporting included in the Annual Report of AAON, Inc. on Form 10-K for the year ended December 31,
2005. We hereby consent to the incorporation by reference of said reports in the Registration Statement (Post-Effective Amendment No. 2 to Form S-8
March 31
June 30
September 30
December 31
(File No. 33-78520)) of AAON, Inc.
2005
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
(in thousands, except per share data)
$ 45,394
8,372
3,125
0.25
0.24
$
48,136
8,643
2,766
0.22
0.22
$ 48,885
8,226
2,284
0.19
0.18
$ 42,780
10,050
3,287
0.27
0.26
Tulsa, Oklahoma
March 9, 2006
/s/ GRANT THORNTON LLP
Quarter Ended
March 31
June 30
September 30
December 31
(in thousands, except per share data)
$ 37,200
7,593
2,337
0.19
0.18
$ 42,662
6,161
1,571
0.13
0.12
$
47,387
5,962
1,527
0.12
0.12
$
44,636
7,148
2,086
0.17
0.16
2004
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
42
43
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Exhibit 23.2
Consent Of Independent Registered Public Accounting Firm
Exhibit 31.1
Certification
We consent to the incorporation by reference in the Registration Statement (Post-Effective Amendment No. 2 to Form S-8 No. 33-78520) pertaining to
I, Norman H. Asbjornson, certify that:
the AAON, Inc. 1992 Stock Option Plan, as amended, of our report dated February 6, 2004, with respect to the consolidated financial statements of
AAON, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2005
1.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
/s/ ERNST & YOUNG LLP
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
Tulsa, Oklahoma
March 9, 2006
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 9, 2006
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
44
45
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Exhibit 31.2
Certification
I, Kathy I. Sheffield, certify that:
Exhibit 32.1
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
1.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
and Exchange Commission on the date hereof (the “Report”), I, Norman H. Asbjornson, Chief Executive Officer of the Company, certify, pursuant to 18
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2005, as filed with the Securities
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
Company.
March 9, 2006
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 9, 2006
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
46
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Exhibit 32.2
OFFICERS
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2005, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Kathy I. Sheffield, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §
1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the
Company.
March 9, 2006
48
Norman H. Asbjornson
has served as President
and a director of the
Company since 1988. Mr.
Asbjornson has been in
senior management
positions in the heating
and air conditioning
industry for over 40 years.
Robert G. Fergus
has served as Vice President of
the Company since 1988. Mr.
Fergus has been in senior
management positions
in the heating and air
conditioning industry
for 38 years.
Kathy I. Sheffield
became Treasurer of the
Company in 1999 and Vice
President in June of 2002.
Ms. Sheffield previously
served as Accounting
Manager of the Company
from 1988 to 1999.
John B. Johnson, Jr.
has served as Secretary
and a director of the
Company since 1988. Mr.
Johnson is a member of
the firm of Johnson, Jones,
Dornblaser, Coffman &
Shorb, which serves as
General Counsel
to the Company.
David E. Knebel has served as
Vice President of Sales for the
company since 2005. Mr.
Knebel has been in the
heating and air conditioning
industry for 36 years, holding
positions in design, research,
software development,
engineering, teaching, sales,
and senior management.
CORPORATE DATA
Transfer Agent and Registrar
Progressive Transfer Company
1981 East Murray-Holladay Road, Suite 200
Salt Lake City, Utah 84117
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
BOARD OF DIRECTORS
Jack E. Short was elected to the Board in
July 2004 and is the Chairman of the Audit
Committee. Mr. Short was employed by
PriceWaterhouseCoopers for 29 years and
retired as the managing partner of the
Oklahoma practice in 2001.
Anthony Pantaleoni has served as a
director of the Company since 1989. Mr.
Pantaleoni is of counsel to Fulbright &
Jaworski LLP in New York, New York.
Norman H. Asbjornson
President / CEO
Jerry E. Ryan was elected
as a director by the Board
in 2001. Mr. Ryan serves on
the Boards of Directors of
Lone Star Technologies of
Dallas, Texas and Global
Energy Equipment Group,
Tulsa, Oklahoma.
Thomas E. Naugle has
served as a director of the
Company since 1998.
From 1985 to present, Mr.
Naugle has served as
Chairman of the Board
and/or President of
Naugle & Co., a company
engaged in the business
of investments.
John B. Johnson, Jr.
Secretary
Charles C. Stephenson, Jr. has served
as a director of the Company since
1996. From 1987 to January 2006, Mr.
Stephenson served as Chairman of the
Board of Vintage Petroleum, Inc., based
in Tulsa, Oklahoma.
Auditors
Grant Thornton LLP
2431 East 61st Street, Suite 500
Tulsa, OK 74136
General Counsel
Johnson, Jones, Dornblaser,
Coffman & Shorb
2200 Bank of America Center
15 West Sixth Street
Tulsa, Oklahoma 74119
Investor Relations
Jerry Levine
105 Creek Side Road
Mt. Kisco, New York 10549
Ph: 914-244-0292
Fax: 914-244-0295
Jerry.levine@worldnet.att.net
Executive Offices
2425 South Yukon Avenue
Tulsa, Oklahoma 74107
Common Stock
NASDAQ–AAON
Website Address
www.aaon.com
AON 06012 AR Back End 4/12/06 10:50 AM Page 2
t h a n k s t o o u r e m p l o y e e s
MATHEW ABBOTT
GARY ARNOLD
ANDRES BENITEZ
REZKAR ABDULMAJEED
NORMAN ASBJORNSON
GUZMAN BENITEZ
SHARRON ABERCROMBIE
SCOTT ASBJORNSON
DESHAUN ABRON
MARIA ACOSTA
MARTHA ACOSTA
BRENT ADAMS
GARY ADAMS
RODNEY ADAMS
ISAAC ADERINBOYE
RITA ADIMARI
KEVIN ADKINS
GARY ASHMORE
DWIGHT AUSTIN
IVAN AVALOS
JOSEPH AVILA
JUAN AYALA
MIGUEL AYALA
KELLY BABINEAU
NORA BACKUS
JASWINDER BADESHA
ROSHANLA AHLUWALIA
TIMOTHY BAEHLER
WILLIAM BAGLEY
JAHANGIA BAHRAMI
LAMARCUS BAILEY
NOEL BAILEY
MATTHEW BAKER
MARIA BENITEZ
OFELIA BENITEZ
ERIC BENNETT
BONNIE BENSON
JERRY BENSON
VICKIE BERRY
HUGO BERUNEN
SERGIO BESERRA
ALLEN BEVIS
BRANDON BILL
BILL BINNIE
THOMAS BIRD
JAMES BIRRELL
JAMES BLACK
JASON BLACK
KEVIN BLACKBOROW
KOHULAN BALASUBRAMANIAM
BENJAMIN BLACKWELL
STEPHEN BALLARD
LUIS BANUELOS
CAROLYN BARBER
RAY BARBER
CANDY BARBOSA
JUSTIN BARLETT
KIONTE BARNES
DARREL BARNETT
DAVID BARNETT
HENRY BARRIOS
ELIA BARRON
ESTHER BARRON
MARIA BLANCO
MANUEL BLANQUET
DAVID BLEVINS
JIMMY BLEVINS
JUSTIN BLEVINS
GENE BOESE
EDGAR BOJ
TERRY BOLER
JAMES BOND
ELI BOTELLO
ROSENDO BOTELLO
DEMETRIUS BOYD
ATEF AHMED
DANIEL ALAGDON
IMELDA ALBA
JULIO ALBINO
AARON ALEXANDER
BRYAN ALEXANDER
DANIEL ALEXANDER
JAMES ALEXANDER
BRENDAN ALLEN
DONALD ALLEN
HEATH ALLEN
JAMES ALLEN
KEVIN ALLEN
MICHAEL ALLEN
JASON ALLISON
RAFAEL ALONZO
TARIK ALSAADI
FELIPE ALVARADO
PHILLIP BRUCE
MACEO BRUMLEY
RICHARD BRUNET
NANCY BRYAN
CHRISTOPHER BRYANT
MACEDONIO CARRILLO-RUIZ
ALEJANDRO CARTAGENA
JAMES CARTER
KAREN CARTER
RAY CARTER
WILLIAM BRYANT
LEON CARTWRIGHT
SEAN BRYE
BANG BUI
BICH BUI
OSMAN BULSHO
ROBERT BURCH
MICHAEL BURGESS
JACOB CASON
JOSE CASTANEDA-PAREJA
JOSE CASTRO M
ELVIS CERDA
MARIA CERDA
ADAM CHAFE
ESPERANZA BURNETT
MARK CHALMERS
MONICA BURNS
CHARLES BURRIS
SHANNON BURTCH
DOUGLAS BURTRUM
TINA BUSH
JOE BUSH
TRACY CHAMBLISS
PATRICK CHAPMAN
SERGIO CHARLES
JOSH CHATTILLON
JEANNIE CHAU
ADALBERTO CHAVEZ
JOSE BUSTOS-VERGARA
FRANCISCO CHAVEZ
JOHN BUTLER
TYRONE BUTLER
BRUCE BUTLER
GREGORY CHAVEZ
DALE CHERRY
DANIEL CHERRY
FRANCISCO CABRERA
KRISTEN CHEVALLIER
DORA CADENA
DANIEL CAEZ
ADAN CHICAS
JUAN CHIQUILLO
MARTHA CALDERAS-MOSQUEDA
WILLIAM CHRISTOPHER
MARGARITO CALDERON
WILLIAM CALDWELL
LUKE CALVERT
LAZARO CAMA
GEORGE CLARK
MORRIS CLARK
PETER CLARK
JOHN CLARK
MARIO ALVARADO-OROZCO
MANUEL BARTHOLIC
JOHN BOYD
JOSE CAMAS-PADILLA
FLOYD CLEGHORN
ELEAZAR ALVAREZ
GUSTAVO ALVAREZ
ANDREW BASS
MICHAEL BASS
BRET BRADFORD
BRIAN BRADFORD
CARLOS ALVAREZ-VELAZQUEZ
ANGELA BASTIDOS
MYOSHIA BRADLEY
FRED BRAGA
MARCO CAMILLO-LOZANO
WILLIAM CLEVELAND
NATHAN CAMPBELL
DAVID CAMPBELL
ARTHUR CANDLER
STEVEN COATNEY
VERNETT COBB
KENNETH COCHRAN
ARNOLDO AMAYA
MICHAEL AMBURGEY
CYNTHIA AMENT
JEHAD AMIREH
EMILO ANDALON
FERNANDO ANDALON
JUSTIN BATEMAN
RICARDO BATISTA
ELLIOTT BAYHYLLE
JASON BAZAN
BESSIE BEASLEY
ELBERT BEASLEY
GLEN BRAUER, JR.
RAYNOR BRENTON
MITCHELL BROOKS
DAVID BROWN
ADAM CAPRI
REFUGIO CARACHURE
KUMSAI COLE
MICKEY COLE
JORGE CARCAMO
LATOYA COLEMAN
FAUSTINO CARDENAS
BARBARA COLEMAN
GERRY DAVIS
JERRY DAVIS
RICHARD DAVIS
WILLIAM DAVIS
ANGELA DAVIS
CAROLYN DAVIS
JOHNNY DAVIS
OTILIA DE JONES
BUDDY DUNN
ISAAC DUNPHY
JASON DUNPHY
VICTOR DURAN
RALPH DURBIN
RANDY DWIGGINS
JERRY EARLEY, JR.
WENDELL EASILEY
FELIPE DE LA TORRE
OWEN ECHO HAWK
ANDRES DE LEON, JR.
GARY EDWARDS
GWENDOLYN DECKARD
RICKEY EDWARDS
TROY DEERINWATER
MICHAEL EGAN
BOBBY DEGRAFFENREID
WILLIAM EKLUND
AMBER DELANCY
ISMAEL DELAPAZ
EVA DELATORRE
ALVARO DELEON
BETTY ELI
EARL ELLIOTT
HARVEY ELLIS
TINISHA ENGLISH
ALVARO DELEON MEDOZA
STEPHEN ENSMINGER
DONALDO CONTRERAS
MARK COOK
ROBERT COOK
WILLIAM COOK
MICHAEL COOLIDGE
DONNA COONFIELD
JAMES COOPER
ELAINE CORKHILL
ALBERTO CORONA
BLANCA CORONA
HERON CORONA
IGNACIO CORONA
ROBERTO CORONA
EDUARDO CORTEZ
ROSA CORTEZ
SHANA COUGHRAN
BILLY COX
CHRISTINE COX
JERRY COX
JOHN COX
JOSEPH COX
PATRICK COX
ADRIAN CRABTREE
RICHARD CRAITE
STEVEN CRASE
KERMIT CRAWFORD
EVERETT CRAWFORD
MIKEL CREWS
CLARK CROSBY, JR.
DARRELL CROW
LUIS DELGADO
JUANA DELOBO
RODRIGO DELUNA
RAQUEL DELUNA
JATINDER DEOL
SURJIT DEOL
EUFEMIO DEPAZ
AUDENCIA DEVILLA
CHARLES DEWEESE
CARL DIKA
HOMER DODD
CAROLYN CRUTCHFIELD
RICKEY DODSON
VICTORY CULLOM II
ROBERT CUMMINGS
JAMES CURLEY
GENE CURTIS
KELLY CUTTING
WILBER DOMINGUEZ
MARTIN DOMINGUEZ
SEAN DONALD
RODNEY DORSEY
MATTHEW DOSS
NICK DABIJA
CHANH DANG
LIEN DANG
GWENDOLYN DANIELS
JOHN DANIELS
ERIC DOWNING
WAYNE DOYLE
EMIL DRAGNEV
CLAUDIA DUARTE
CATHRYN DUBBS
ALEJO ESCALERA
ALEJO ESCALERA
JOSE ESCOBEDO
JOSE ESPINOSA
EARL ESTEP
STEPHEN ETTER
BARRON EUBANKS
GREGORY EUBANKS
ARNOLD EUDY
OTIS EVANS
SHAWN FAIRLEY
JORGE FELICIANO
JOSE FELICIANO
JOSE FELIX-GALVAN
ROBERT FERGUS
FABIOLA FERNANDEZ
RICARDO FERNANDEZ
PEDRO FERNANDEZ
NICK FERRARO
MARIA FERRER
GERALD FIELDS
FRANCISCO FIERRO
ANDREW FINCH
STERLYN FINCH
BRUCE FISHER
LACRETIA FISHER
TIFFANY FITZPATRICK
ANTHONY FIZER
WAYNE FLASKA
TERRA FLETCHER
MIGUEL GARCIA-SUAREZ
JOHNNY GARDNER, JR.
NORMA GARIBAY
CARLOS GARZA
RALPH GASAWAY
MIKE GATELEY
COPOTENIA FLETCHER, JR
MATT GAUNTLETT
BERTHA FLORES
EFIGENIA FLORES
JOSE FLORES
ZENAYDA FLORES
CAROLINA FLORES
JUANA FLORES
LAURA FLORES
CECILE FLOYD
RUBY FLOYD
VICKY FLOYD
RUDY FOGLE
STEVE GEARY
JAMES GEORGE
DEANGELO GIBBS
AMRIK GILL
JORAWAR GILL
SATINDER GILL
DERRICK GILLIS
JASON GILMORE
GREG GLAZIER
BRAD GOBER
EMMETT GOINS
KENNETH FONTENOT
ALPHONSO GOLDEN
SHARON FONTENOT
HENRY GOLDSTON
SHEILA FORREST
CHRISTOPHER FOSTER
FREDERICK FOSTER
JOSEPH FOWLER
LORETTA FOWLKES
KENNETH FOYIL
JUAN FRANCO
PHILLIP FRANK
WARREN FRANKLIN
REVONDA FRANKS
KIMBERLY FRAZIER
GARY FREDERIKSEN JR
OLGA FRENCH
ELBERT FULLER
RICKY GAFFNEY II
RANULFO GALICIA
BRENDA GALINDO
YOLANDA GALVAN
ANGEL GARCIA
MAXIMO GARCIA
NICKLAUS GARCIA
WILSON GARCIA
ALEJANDRO GARCIA
J. GARCIA-GONZALEZ
LARRY GOLETTO
HECTOR GOMEZ
JORGE GOMEZ
MOISES GOMEZ
FAUSTINO GOMEZ
HUMBERTO GOMEZ
MARIA GOMEZ
JESUS GOMEZ, II
JUAN GOMEZ-OLMOS
CHRISTOPHER GONZALES
ADRIAN GONZALEZ
ELIO GONZALEZ
JOHN GONZALEZ
MARIA GONZALEZ
MARIA G. GONZALEZ
MARISELA GONZALEZ
MARTIN GONZALEZ
NICHOLAS GONZALEZ
MANUEL GONZALEZ
VICTOR GONZALEZ
REYNALDO GONZALEZ-
RODRIQUEZ
TOMMIE GOODIN
BARRY GOODSON
PERRY GORDON
ADRIAN GORE
JESUS ESTRADA-GONZALEZ
WILFRED FOURNIER
VICENTE DEPAZ-MEDINA
GILDA ETUMUDOR
CHRISTOPHER BRANTLEY
ARTHUR CANDLER, III
JACQUELINE COFFEY
BOGDAN CZEMIAWSKI
HAROLD DOUGLAS
DAVID FERNANDEZ
ELIZABETH FERGUSON
RONY GADIWALLA
LETICIA ANDALON
ROBERT BEAUCHAMP
DEWAYNE BROWN
FERNANDO CARDENAS
RONALD COLLINS
CHARLES ANDERSON, JR.
DAMARCO BECK
KENYA ANJORIN
ALFREDO ANTONIO
JAVIER ARANDA
SHANNON BECK
MARK BEHN
TORREY BELCHER
JOSHUA BROWN
PAUL BROWN
RONALD BROWN
JAMES BRUCE
MARIA CARDENAS
JERRY COMLEY
ALEKSEY DANIL'CHENKO
JERROLD DUBBS
MARIA G. CARDENAS
KATHLEEN COMPTON
ANTHONY CARMONA
DALE CONKWRIGHT
CARL CARPENTER
JOSEPH CONLEY
ANDY DANSBY
LORETTA DARLING
CATARINO DAVILA
BRIAN DUCKETT
CRAIG DUKE
LINDA DUNEC
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DEWAYNE HIGHTOWER
MAURICE JACKSON
FERNANDO JUAREZ
ERNESTO GRANADOS
DANIEL HENDERSON
DAVID HOWARD
BUENAS GRANADOS
DEMETRIUS HENDERSON
CLARENCE HUBBELL
ZAINAB GRAVES
DERRICK GREEN
DAPHINE GREEN
JESSE GREEN, JR.
KELLI GREER
JAMES GREGG
ARACELI GRIEGO
KENNETH GRIFFITH
RONALD GRIMES
DANIEL GROFF
ALVIN GUAJARDO
JOSH GUITAR
MIKE HENSLEY
LYDIA HUDSON
ARMANDO HERNANDEZ
LARRY HUFFMAN
BENJAMIN HERNANDEZ
CORCINA HERNANDEZ
BILLY HUGHART
JIMMY HUGHES
EDUARDO HERNANDEZ
ROBB HULLER
JOSE HERNANDEZ
LUIS HERNANDEZ
MARIA HERNANDEZ
MAYTE HERNANDEZ
BRADLEY HUNT
BRENDA HURTADO
GARY HUTCHINS
GARY HUTCHINSON
FRANCISCO HERNANDEZ
SAMUEL INGRAM
FRANCISCO O. HERNANDEZ
ANTHONY INKTON
MARIANO HERNANDEZ
FIRDOUS IRANI
AURELIO GURRUSQUIETA
FRANCISCO HERRA, JR.
TIM IRWIN
REMIA GUTHERY
MANUEL GUTIEREZ
ERBEY GUTIERREZ
ISAAC GUTIERREZ
MARCOS HERRERA
DONALD HICKMAN
CLINTON HICKS
TAKEO HIGA
RAQUEL GUTIERREZ
BRENDA HIGGINS
MELHAM JABR
DONALD JACKSON
JEFF JACKSON
BELINDA JACKSON
GEORGE JACKSON
NANCY HACKNEY
TERRY HAIR
EDMUND HALE, SR.
JACK HALL
KELLY HALL
STEPHEN HALL
ROBERT HALTON
SCOTT HAMILTON
OTIS HAMILTON
JEFFREY HAMMER
SAM HAMMOUD
RODERICK HARBIN
DONALD HARDEN
HYLAND HARGER
MARQUIS HARLIN
KENNY HARRIS
STACEY HARRIS
HEATHER HASKINS
DONALD HATLEY
JOHN HAWLEY, JR.
WILLIE HAYES
JOE HAYS
RICKEY HAZLETT
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TIM HEFFLIN
PAUL HILL
RONALD HILL
JULIAN HILL JR
BRAD HINDMAN
JUAN HINOJOSA
TYSON HINTHER
CLYDE HITCHYE
ROBERT HITCHYE
SANDRA HOFFMAN
MELIKA JACKSON
MAVIS JACKSON, JR.
DANNY JACOT
TIMOTHY JAHR
JOSE JAMAICA
MCKINLEY JAMES
STEVEN JAMES
TAKETHA JAMES
PHILIP JENKINS
JAMES HOLLINGSWORTH
JUSTINE JENKINS
JASON JEWELL
GENELLE JIMBOY
ALEJANDRO JIMENEZ
ANA JIMENEZ
J. ROSARIO JIMENEZ
JAVIER JIMENEZ
JOSE JIMENEZ
RAMIRO JIMENEZ
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LAWRENCE HONEL
LOUIS HOOVER
STEPHEN HOOVER
SAMANTHA HOPKINS
CHRISTOPHER HORAK
TERRI HORN
DANIEL HORRELL
JOSHUA HORST
STANLEY HORTON
JERRY HOUSTON
LARRY HOWARD
ED JOHNSON
JASON JOHNSON
JUSTIN JOHNSON
LEROY JOHNSON
REX JOHNSON
RICHARD JOHNSON
TERRY JOHNSON
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JAMES KOSS
DANIEL KRAFT
KRISTIN KRAFT
MIKHAIL KRUPENYA
EDWARD KSIAZEK
KARL KUENEMANN
KIMBERLY JOHNSON
RICKY KUYKENDALL
THURLIN JOHNSON, II
PETE JOHNSON, JR.
DANNY JONES
DEBORAH JONES
KELLI JONES
SANDRA JONES
ANGEL JONES
ROSE JONES
JAMES JONES, JR.
BRANDON JORDON
JAIME JUAREZ
CESAR JUAREZ
JOSHUA KAISER
BRIAN KASTL
RICHARD KEATON
STEVEN KEELING
ANTONYO KELLER
AARON KELLY
OMAR KELLY
GREGG KENNEDY
TRENT KEPLINGER
ABDUL KHAN
EBRAHIM KHIDIR
RENA KIGHT
ALAN KILGORE
BOBBY KILGORE
THANG KIM
GEORGE KINDLE
KENOSHA KINDLE
LORI KING
RUSSELL KING
JUSTIN LACEY
PHILLIP LAFOND
JEANETTE LAIRD
RENATO LALATA
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COLE LAMBERT
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DONALD LANEY
MANUEL LARA
JEFFREY LAWSON
RONALD LAWSON
RICKY LAWSON
DAVID LAYSON
QUENTIN LEE
RHONDA LEE
MATTHEW LEEPER
JOSE LEJONA
PATRICIA LENNOX
ALBERTO LEON
HUGO LERMA
RONALD LESTER
KEVIN LEWIS
JOHNNY LEWIS, JR.
GILBERTO LEYVA
HONG LIN
PING LIN
JERRY LINCOLN
WILLIAM LINDSAY
JAMES LINWOOD
ELIZABETH LISCANO
ANTHONY LITTLE
JARED LITTLEJOHN
JIAN LIU
STEVEN LO
CARMEKA HARDING
MICAH HOLT
SANGARAPILLAI JEYAKUMARAN
KIRK KHILLINGS
DAVID LOPEZ
GABINO LOPEZ
JORGE LOPEZ
MARGARITO LOPEZ
MARIO LOPEZ
THOMAS LOPEZ
CRISSTIAN LOPEZ
RUFINO LOPEZ, JR.
TOMMIE LOVE
VINCENT LOWE
PAUL LOWERY
DIANA LOZOYA
ADRIAN MARTINEZ
JOSEPH McGHEE
ALFREDO MARTINEZ
ANTONIO McGILBRA
MARC MOORE
MARIA MOORE
JOSE MARTINEZ
JUAN MARTINEZ
KAREN MARTINEZ
RAMIRO MARTINEZ
ROBERTO MARTINEZ
FRANCISCO MARTINEZ
JAVIER MARTINEZ
JOSE MARTINEZ
JUAN MARTINEZ
REBECCA McGUIRE
MICHAEL MOORE
DOMINGO McKNIGHT
JOSHUA McLAIN
GEORGIE McNAC
GINA MEANS
DAVID MEJIA
JAMES MELDA
TONY MOORE
TROY MOORE
CARLOS MORAN
RON MOREHEAD
TONY MOREHEAD
DAVID MORELAND
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EVAN MORGAN
SEAN MELILLO
MATTHEW MORGAN
ANTHONY MORGAN
DAVID MORGERSON
MARCUS MORROW
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TUAN NGUYEN
NITA NICHOLS
KAREN NILES-BLAYER
STEVEN NOBLE
HANK NOESKE
JERRY NOLAN
ABDOLHOSSEIN NOORI
WILLIE NORFLEET
LAMAR NORMAN
MATTHEW NORRIS
STEVEN NORRIS
DEBRA NOTHNAGEL
ALEXANDER OFOSU
EDWARD MARTINEZ-GONZALEZ
HERNAN MEMBRILA
JARRAD LUDLOW
SOL MARTINEZ-LOPEZ
KEVIN MENDENHALL
QUANNAH LUDLOW
JUAN MARTINEZ-RUIZ
IRMA MERCADO
ANDREA LUECK
KENNETH LUFKIN, JR.
KENNETH LUIS
MARIANA LUNA
JESSE LUPER
WILLIE LYNCH
ADAN MACARIO
JAMES MASON
JERRY MASON
BEVERLEY MASON
BILLY MASSEY
IAN MATHESON
ARTURO MATUL
EVERADO MATUL
BRIAN MACDOUGALL
RON MAUCH
GREGORY MACK
MICHAEL MACK
DON MADEWELL
KEVIN MAXWELL
LEONARD MAXWELL
VLADO MAZILICA
AUBREY METCALF, JR.
MOHAMMAD MORTEZAEI
JOHN OGLE
KITTY MEYER
DALE MICHELSON
MOMCILO MIJAKOVAC
RONALD MIKEL
RUSSELL MILE
RANULFA MILIAN
CHRIS MILLER
MICHAEL MILTON
BRIAN MINGLE
BRUCE MINTON
KURT MORTON
CLAYTON MOTE
DARRELL MOTE
OMAR MOYA
ERIC MULLINIKS
EMMANUEL MUNOZ
JESUS MUNOZ
EDUARDO MURILLO
JOHNNY MUSGRAVE
LEE OLIVER, JR.
ANTHONY OLIVERAS
EVELIO OLIVERAS-RIVERA
ERIC OLSON
JOSE OLVERA
SCOTT O'NEILL
JAMES O'NEILL, JR.
JAMES O'NEILL, SR.
MIGUEL OQUENDO
RAGULENDRAN MUTHURAJAH
GERRIN ORANGE
ALEJANDRO MAGANA
COURTNEY McAFEE
CHRISTOPHER MITCHELL
DAVID MYERS
JUVENTINO ORNELAS, JR.
ARTURO MAGANA
MONICA MAGANA
OCTAVIO MAGANA
SYED MAHMOOD
ZAHID MAHMOOD
JUSTIN MAINUS
CARLOS MALONE
NATHANIEL MCALEXANDER
DOUGLAS MITCHELL
DEBORAH McATEER
RUSSELL MITCHELL
TINA McBEATH
ANTHONY MITCHELL
APRIL NAIL
ASAD NAKHAEI
VINCENT NASH
ROBERT McBOWMAN
JAY MODISETTE
ATTAR NASHWAN
CHRISTOPHER McCLAIN
RONALD MODLIN
DIRK McCLELLAN
IRMA MOGUEL
MARIA NAVA
MARTIN NAVA
LETICIA ORONA
JOAQUIN OROPEZA
ADAN ORTIZ
HOMERO ORTIZ
ROSA ORTIZ
HERIBERTO ORTIZ-GONZALEZ
MICHAEL McCLELLAND
HESHMATOLLAH MOHAMMADALIZADEH
MAHENDRAN NAVARATNAM
AXEL ORTIZ-PACHECO
BARBARA MALONE
DORIS McCLOUD
MOHAMMAD MOHAMMADI
YOUNUS NAZMI
JOSEPH McCOLLOCH
BRAULIO MOISES-LEE
COSMAS NDLOVU
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KENNETH MANN
ARTHUR MANNING
ROY McCONNELL
DEBRA McCOWAN
CHRISTOPHER MANSON
WESLEY McCOWAN, JR.
VICTOR MAPPS
SHAWN McCRARY
WILLIAM MARKWARDT
ROBERT McCULLEY
JOSE MOLINA
MARTHA MOLINA
STEVEN MOLSTER
JOSHUA MOLT
LUKE MOMODU
CLAYTON NEAL
SAMUEL NEALE
JOSE NEGRON
NATALIE NEILSON
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RONALD NELSON
PEDRO NEVAREZ
JERRY ORTWEIN
DANIEL OSBERN
DAVID OSBORNE
ERNESTO PACHECO
GUILLERMO PACHECO
LUIS PACHECO
EDMUNDO PAIZ
TARAS PANCHYSHYN
J PANIAGUA
FRANK PAOLO
WILBURN HORNER, JR.
RAUL JIMENEZ
ANA MARROQUIN
KATHY McCULLOCH
ABUEDE MOMODU, JR.
VINCENT JIMENEZ
STEPHEN KINSEY
FREDERICK JIMMERSON
ALEKSANDR KIRYUKHIN
JOEL LOCKMILLER
KAREN JOBE
VICTOR JOHN
BRIEN JOHNSON
DAVID KNEBEL
ROBERT KNUTH
JOHN KOERBER
FRANKLIN LOGAN, JR.
MICHAEL LOLLIS
ANA LOPEZ
JOSE MARRUFO
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DARRELD MARTIN
DELL MARTIN
THOMAS MARTIN
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JOSE MONREAL
LOYD McDANIEL
GERMAN MONTANO, JR.
KARMEN NEWMAN
MARCUS McDANIEL
MARCEL MONTGOMERY
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GERALD PARKS, JR.
JAMES McELROY
JULIO MONTOYA-SERNA
THANH NGUYEN
DEBORAH McFARLIN
JAMES MOORE
THO NGUYEN
SAUL PARRA
LUCAS PARRISH
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KENNETH SCOTT
MARLE VALMORIA
DONALD WASHINGTON
LINDA WYRICK
JAMES PARRO
MARCUS PARTEE
OSCAR PARTNER
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CORRY PATTERSON
JEFFERY PATTY
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JOSE PENA
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CARL PLYLEY
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MOISES RAMOS
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J SALDIVAR
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LIDIA ROJAS
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TERRY ROLAND
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RENALDO SMITH
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RICARDO RUIZ
DWAYNE SCHWARTZ
RYAN SMITH
OLVIN PEREZ-SANTANA
SANDRA READER
DIEGO REBOLLAR
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JACKIE SHEPHARD
RODRIGO RODRIGUEZ
RAUL SANCHEZ
SANDRA RODRIGUEZ
SERAFIN SANCHEZ
JOSE RODRIGUEZ-CINTION
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DARRELL SHEPHERD
BARBARA SHIPMAN
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PHILLIP PITTMAN
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TERRY ROMBACH
CHARLES THOMASON
JOSE VARGGAS-CISNEROS
GERALDINE WATSON
SWEETIE SMITH
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CLIFFORD TERRELL
JOSEPH THOMAS
MICHAEL SMOLINIEC
LEE THOMAS
MARLOW THOMAS
DANG VANG
SHANNON VANN
JOHN VANNESS
MIKE SNOBLE
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VICTOR VEGA
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BONNIE STANDRIDGE
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LARRY STANTON
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CEDRIC STEWART
JOHN STINSON
BRENT STOCKTON
RUSSELL STONER
GERARDO TORRES
RAQUEL TORRES
REINALDO TORRES
CREMERIS TOWNS
STOJAN TRAJCESKI
ALEX TRAN
DANH TRAN
HA TRAN
HAI TRAN
PETER TRAN
QUAN TRAN
UT TRAN
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MIKE WHITAKER
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RENE VERASTEGUI
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JUAN VIDALES
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TIMOTHY WHITE
CHRISTOPHER WHITESELL
RANDY WHITTEN
TIMOTHY WHITTEN
STEVEN WHORTON
CLIFFORD WICKHAM
JACKIE WILES
JERRY WILES
RONALD WILKERSON
JAVIER VILLARREAL
JAMES WILLEN
LINDA TREADWELL
LENNY VILLARREAL-ENRIQUEZ
DONNA WILLIAMS
JOHN ZENTER
JUAN ZERMENO
VIRGINIA ZERMENO
MICHAEL STRAUB
DANIEL STRELOW
BILLY STRENGTH
DELMER SWARER
GARY SWARER
IVAN SWEENEY
W SYED
ERIC SYPERT
JAMES TABER
PEDRO TALAVERA
JESUS TAPIA
JOE TART
TENNA TATUM
CHARLES TAYLOR
JEFF TAYLOR
ANDREA TEAKELL
KEVIN TEAKELL
ROBERT TEIS
RICARDO TEJEDA
CHARLES TREMBLAY
MARTIN TREVINO-SALDANA
SERGIO TREVIZO GAMEZ
CUONG VO
SUONG VO
TONG VO
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PAUL WILLS
HA TRINH
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MICHAEL TROTTER
LINH VU
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JOSEPH TUBBS
STEVE TULLOCH
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JERMAINE WALKER
RODERICK WALKER
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ISAAC WILSON
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JEREMIAH WILSON
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MICAH WISDOM
PERNELL UNDERWOOD
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EDWARD WOFFORD
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IVELISSE SANCHEZ-RIVERA
ASLAM SIDDIQUI
DEBRA STRASBOURG
ERIC TREIBER
MARCO VILLARREAL-ENRIQUEZ
MARIO WILLIAMS
AON 06012 AR Back End 4/12/06 11:18 AM Page 8
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