2007 AAON ANNUAL REPORT
AAON is a global leader in providing equipment with
environmentally responsible designs. AAON utilizes ex-
tensive product knowledge and state of the art manufac-
turing to continuously provide a wide variety of energy
efficient and earth friendly features to the dynamic mar-
ketplace. The success of our commitments can be seen
in the consistent growth of our sales and the increasing
profitability of the company.
innova–
tion implementation
= Possibilities
Company Profile
Financial Highlights
OutdOOR AiR HANdLiNg uNitS
iNdOOR AiR HANdLiNg uNitS
RM SeRieS
RL SeRieS
H2 SeRieS
HB SeRieS
RN SeRieS
M2 SeRieS
M3 SeRieS
F1 SeRieS
V2 SeRieS
CONdeNSiNg uNitS
BOiLeR
CHiLLeRS
CL SeRieS
CA SeRieS
CC SeRieS
CB SeRieS
BL SeRieS
LL SeRieS
AiR–CONdeNSed
LL SeRieS
eVApORAtiVe– CONdeNSed
ROOFtOp uNitS
CuStOM uNitS
dt SeRieS
RL SeRieS
RN SeRieS
RM SeRieS
HB SeRieS
MN SeRieS
NJ SeRieS
AAON is engaged in the engineering, manufacturing, marketing and sales of air conditioning and heating
equipment consisting of residential and commercial semi–custom and custom products, including: air handling
units, condensing units, chillers, boilers, rooftop units, make–up air units, heat recovery units and coils. Since the
founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver
heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our
customers. AAON provides specific and unique solutions for individual customer requirements.
Income Data ($000)
Net Sales
Gross Profit
Operating Income
Interest Expense
Interest Income
Depreciation
Pre–Tax Income
Net Income
Earnings Per Share
(Basic)1
(Diluted)1
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
Share3
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 Ratio2
Current Ratio
Year–End Price Earnings Ratio1
2007
2006
2005
2004
2003
$262,517
$57,369
$35,666
$10
$8
$9,665
$35,343
$23,156
$1.24
$1.22
$38,788
$76,295
$60,770
$63,579
$879
$137,140
$37,507
$239
$95,420
$231,460
$43,890
$25,831
$81
$24
$9,146
$26,198
$17,133
$0.93
$0.90
$36,356
$70,759
$59,222
$54,182
$288
$130,056
$34,403
$–
$91,592
$185,195
$35,291
$17,814
$16
$67
$8,503
$18,332
$11,462
$0.62
$0.60
$33,372
$62,950
$50,581
$45,062
$1,837
$113,606
$29,578
$59
$79,495
$171,885
$26,864
$11,650
$38
$183
$5,732
$12,379
$7,521
$0.40
$0.39
$27,939
$55,998
$49,229
$37,017
$3,994
$105,227
$28,059
$167
$71,171
$147,890
$35,885
$20,976
$21
$346
$5,435
$21,853
$14,227
$0.75
$0.72
$35,369
$64,635
$37,450
$31,285
$16,186
$102,085
$29,266
$–
$67,428
$5.29
$4.95
$4.33
$3.84
$3.59
$31,247
$19,428
$(10,751)
$(20,036)
$591
$(16,781)
$(3,333)
$(549)
$11,966
$(8,189)
$(4,200)
$(157)
$16,159
$(11,741)
$(9,857)
$(5,192)
$16,469
$(7,626)
$(7,728)
$1,115
24.8%
16.9%
13.5%
8.8%
0.4
1.1
2.0
16
20.0%
13.2%
11.3%
7.4%
0.4
1.1
2.1
19
15.2%
10.1%
9.9%
6.2%
0.4
1.2
2.1
20
10.9%
7.1%
7.2%
4.4%
0.5
1.1
2.0
27
21.9%
13.9%
14.8%
9.6%
0.5
1.3
2.2
18
1 Reflects 3–for–2 stock splits in August 2007. 2 Cash, cash investments + receivables/current liabilities.3 Actual dollars and diluted number of shares for all years reflect both 3–for–2 stock splits.
Norman H. Asbjornson President/CEO
President’s Letter
Dear Shareholder,
Aided by continuing strength
in non-residential
construction in 2007, which increased 15.7% to $671.1
billion from $579.9 billion in 2006, and particularly
in the new office, manufacturing, healthcare and
educational sectors, AAON once again attained
record levels in both sales and earnings this past year.
Our gross margins widened, benefiting from price
increases and relatively stable raw material prices,
and, despite higher SG&A expenses, we witnessed a
strong improvement in operating margins.
Assisted by strong demand for both our large tonnage
units (45-230 tons) and from our chiller products, we
posted a 13.4% increase in total sales to $262.5
million, and a dividend payout of $5 million, while
The Company’s
having minimal long-term debt. In 1999 and 2002,
continued strong
the Company initiated stock repurchase programs
performance has
pursuant to which 1.1 million shares and 1.9 million
not gone unnoticed.
shares, respectively, were repurchased at a total cost
In October, AAON was
of $36 million. On February 14, 2006, the 2002
selected to the Forbes Best
stock repurchase program was suspended and the
Small Company list, ranking
Board of Directors voted to initiate a semi-annual cash
133rd. Inclusion on the Forbes list
dividend. On August 21, 2007, we paid a 50% stock
requires companies to meet a series
dividend (3-2 stock split), the third such split in the past
of financial benchmarks including annual
six years. Furthermore, we raised our dividend by 20%,
sales criteria and profit margins greater than 5%,
on a post-split basis, to $0.32 per share annually. In
for both the last five years and the last 12 months. This
November, the Board of Directors authorized a new
marks the fourth time AAON has been honored with
repurchase program of up to 10% (approximately 1.8
this listing, with the three previous consecutive listings
million shares) of the outstanding common stock. By
in 2000-2002.
the end of the year we had acquired 690,300 shares
million from $231.5 million. Gross profits rose 30.8%
a three-day business interruption in December at the
at a cost of approximately $13.0 million. In addition,
CAPITAL EXPENDITURES
to $57.4 million (21.9% of sales) from $43.9 million
Tulsa facility due to a severe ice storm. These factors
we bought 260,625 of shares of stock from certain
(19.0% of sales). SG&A expenses climbed 19.9% to
cost us approximately $1.6 million or $0.08 per share.
directors of the Company and 131,811 shares from
We continue to plan for future growth by increasing
$21.7 million (8.3% of sales) from $18.1 million (7.8%
AAON’s 401(k) savings and investment plan by which
both our plant and manufacturing capacity. In 2007,
of sales). This increase was due primarily to higher
While we took important steps during the past year
employee participants are entitled to have shares of
we spent $10.9 million on capital improvements with
warranty accruals based on increased sales and from
to price our custom product line more realistically, the
AAON stock in their accounts sold to the Company
the majority of these expenditures directed toward the
the extension of warranties on our product line from
business (based in Burlington, Ontario, Canada) was
to provide diversification of their investments. We
purchase of new machinery to expand both our sheet
14 to 18 months. Nevertheless, operating income
severely impacted by currency translations which had a
funded the stock purchases out of free cash flow. We
metal fabricating and coil manufacturing capabilities.
gained 38.4% to $35.7 million (13.6% of sales) from
negative effect on the bottom line. We are carefully and
believe our sizeable cash flow can be best utilized by
For 2008, our capital expenditure budget stands at
$25.8 million (11.1% of sales). Net income climbed
extensively re-evaluating this business.
repurchasing our stock at prices that do not reflect the
$7-10 million, with emphasis on continuing to expand
35.7% to $23.2 million or $1.22 per diluted share
Company’s true value.
from $17.1 million or $0.90 per diluted share. The per
STRONG FINANCIAL CONDITION
our plant capacity. We plan to double our RL (45-230
tons) production line, double our RN (26-70 tons)
share calculations are based upon 18.9 million diluted
Total shareholders’ equity climbed to $95.4 million (up
production line and add two new air handler lines.
shares outstanding in 2007 and 19 million diluted
Our financial condition at December 31, 2007, was
4.1%) equal to $5.29 per share compared to $91.6
In addition we plan to enlarge our storage space to
shares outstanding in 2006. It should be noted that
strong. Total current assets were $76.3 million with a
million or $4.95 per share a year earlier. In 2006, our
accommodate our new split system product, a 2 to 5
our net income and earnings per share performance
current ratio of 2:1. We maintained our strong liquid
return on average shareholders’ equity was 20% and
ton unit which can be used in both the light commercial
in 2007 were negatively affected by both the losses
position despite $10.9 million of capital expenditures,
for 2007 this important measurement reached 24.8%.
or residential markets.
incurred in our custom manufacturing business and by
the repurchase of our common stock at a cost of $20.8
HB Series
of our total sales include the new foam cabinetry as a
WHAT’S NEW!!
GROWTH THROUGH INNOVATION
standard feature and we anticipate by the third quarter
We realize our future growth will be partially dependent
upon our ability to react, respond and manufacture
products that meet both the regulatory and customer
demands in today’s marketplace. The complete redesign
of our existing product line which took place over the
past three years has enabled us to introduce innovative
products that are more environmentally friendly and
energy efficient. In addition we are planning to introduce
new products that will give us entry into new markets.
At the end of 2007 our manufacturing capabilities
could accommodate annual volume of up to $330
million to $350 million depending upon our product
mix. Ten years ago, we purchased a 40-acre tract of
land including a 457,000 square foot manufacturing/
warehouse building. That property has been expanded
to 563,000 square feet and at the end of 2007 we
utilized 39% of this property with the remainder leased
to a third party. Eventually, we expect to utilize this total
space which could double our manufacturing capacity
to $700-750 million.
We consistently recognize the need to manufacture
products which adhere
to
regulatory mandates
regarding
the environment.
In addition,
there
is
By 2010, the EPA has mandated
that all manufactured HVAC
equipment must use refrigerants
that do not contain chlorine,
thereby reducing the affect of
ozone depletion in the atmosphere.
In 2001, we introduced a number
of products designed
to use
R410A, an environmentally friendly
refrigerant. By the end of last year,
our entire product line, including
our new chiller product, was
completely R410A compatible.
increasing demand to manufacture products that are
Over the past two years, AAON
more energy efficient and that reduce the utilization of
water. During the past three years we have spent $6.1
million on research and development engineering.
Our growing market share is a testament that our
Company continues to be recognized as one of the
most technologically innovative in the industry.
has become the industry leader in the manufacture of
double wall composite foam panels for the cabinets of
our products. The use of foam rather than fiberglass
creates a cabinet which is lighter and a better insulator.
The R-value of these new cabinets is over four times
the traditional fiberglass product. Approximately 32%
of 2009, our entire product line will be manufactured
We are excited by the introduction of a number of
using foam cabinetry as a standard feature.
new products this year, as well as the addition of new
components to our existing product lines.
In 2005, we introduced our direct drive blower
assemblies that operate without drive belts, eliminating
The Digital Scroll Compressor
the need to adjust or replace fan belts. Additionally,
these products operate with our airfoil backward
This type of compressor is presently being offered as an
curved fan creating increased efficiency over the
option on both our RN and RM product lines. These two
traditional fan design. Presently, these assemblies are
product lines constitute approximately 60% of our total
available on approximately 32% of our sales. By 2010,
sales. This compressor varies the volume of refrigerant
the remainder of our product line will include the direct
that flows through the cooling system, allowing the
drive blower assemblies as a standard feature.
compressor to match the load needed by the unit. This
LL Series
unit has a tighter temperature control than conventional
products, enabling the compressor to modulate from 10
to 100% of its cooling capacity.
In addition, the compressor will
run for a longer period of time,
thereby dehumidifying the air
and cycling
the compressor
on and off less, which creates
sizeable energy savings. This is
a R410A system.
In 2001, we introduced a
number of products designed
to use R410A, an environmentally
friendly refrigerant. By the
end of last year, our entire
product line including our
new chiller product, was
completely R410A compatible.
RN Series
Residential Split System
Commercial Self Contained (“Floor by Floor”)
SALES REPRESENTATIVES’ PERFORMANCE
OUR EMPLOYEES
We have begun to market our 2-5 ton split system
This new product enables AAON to enter into the high-
Our sales representatives continue to be the significant
The ongoing success of our Company can be directly
product directed toward the residential and light
rise office building market. It is available in 20-80 tons
driver of our revenue growth as well as enabling us to
attributed to our employees. To that end we have
commercial customer. This product is a R410A system
and is manufactured with double wall cabinetry and
further diversify our customer mix. At the end of 2007,
created a number of programs which provide for
and is equipped with our direct drive blower assembly.
direct drive blower assemblies. Its modular design
our representatives’ network had 106 offices in all 50
their financial enhancement, health care needs and
It has a SEER rating of up to 17.Optional in the product
for retrofit and renovation projects will enable the
states and Canada. Our manufacturer representatives
vocational enrichment.
is an additional coil used for dehumidification. This
installer to negotiate existing hallways, elevators and
produced a gain of 13.9% of sales in 2007 sales to
allows the unit to control temperature and humidity
doorways. This product offers tenants of each floor the
$238 million or 91% of total corporate sales. This
Our most powerful motivational tool is the Profit Sharing
independently. By dehumidifying the indoor air, mold
ability to control the energy usage of their floor with a
compares with 2006 sales of $209 million or 90.3% of
program. For employees who work from the beginning
and mildew can be prevented. We believe this optional
commercial self-contained unit. Sizeable downtime can
total corporate sales. Our expanded innovative product
to the end of a calendar quarter, we distribute 10%
feature is unique to the residential market and provides
be reduced versus a system using a chiller that serves
line will enable the manufacturer representatives to
of the Company’s pre-tax earnings. This bonus is
us with significant growth potential.
multiple floors.
increase their presence in existing markets as well as
calculated at the operating subsidiary level and all
gain entrance into new markets such as residential and
eligible employees share equally in those funds. This
high-rise office buildings. We expect our manufacturer
program helps to focus employees on the profitability
representative network will continue to make substantial
of the Company, whereas the equity owned by the
contributions to AAON’s future growth.
employees through the 401(k) plan ties them to longer-
term shareholder interests.
The ongoing success of our Company can be directly attributed to our employees.
September
Purchase of John Zink Air
Conditioning Division.
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.
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.
March
Purchase of property with 26,000
square foot building adjacent to
AAON Coil Products plan in Longview,
Texas. Issued a 10% stock dividend.
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 one
million square feet.
Fall
Expanded rooftop product line
to 230 tons. Introduced evaporative
condensing energy savings feature.
3-for-2 stock split.
June
3-for-2 stock split.
July
AAON added as a
member of the Russell
2000® Index.
May
Purchase of the assets of Air Wise,
of Mississauga, Ontario, Canada.
November
Introduction of light
commercial/residential
product lines.
June
Initiation of a
semi-annual cash
dividend for
AAON shareholders.
March
Modular air
handlerproduct
extended to
50,000 CFM
October
AAON Listed
in Forbes ‘200
Best Small
Companies’
1988
89
1990
91
1992
93
1994
95
1996
97
1998
99
2000
01
2002
03
2004
05
2006
07
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.
August
AAON, an
Oklahoma corporation,
was founded.
November
Listed on the
NASDAQ National
Market System.
January
Introduced a desiccant heat recovery
wheel option available on all AAON
rooftop units.
Spring
AAON Coil Products purchased,
renovated and moved into a 110,000
square foot plant in Longview, Texas.
December
Purchased 40 acres with
457,000 square foot plan
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
Started production of polyurethane
foam-filled double-wall construction
panels for rooftop and chiller products
using newly purchased manufacturing
equipment.
October
AAON, listed in FORBES Magazine’s
“Hot Shots 200 Up & Comers.”
Fall
Industry introduction of the
modular air handler and
chiller products.
April
AAON introduces factory
engineered and assembled
packaged mechanical
room, which includes a
boiler and all piping and
pumping accessories.
December
AAON rings
closing bell at
NASDAQ
August
AAON received U.S. Patent for
Plenum Fan Banding.
August
3-for-2
stock split
Since 2004, we have made changes to our 401(k)
We have expanded our efforts to engage employees
OUTLOOK
plan by eliminating the waiting period, increasing
in the cost control process by adding a high-deductible
the Company’s matching contributions, automatically
health plan option matched with available Health
Concerns regarding the environment as well as energy and
enrolling employees and
increasing permitted
Savings Accounts and a Company match which
water conservation have increased significantly in the past
participant contributions. Furthermore, we allow
allow employees to directly and immediately benefit
few years and, we believe, will accelerate in the future. We
participants to sell and thereby diversify their holdings
from improved health care cost trends while building
have and will continue to provide the necessary capital
of AAON stock provided by the Company’s matching
a cushion for future health care needs. Aggressive
and manufacturing effort to produce technologically
contributions. As a result of these changes, participation
management of our health programs has allowed us
innovative products that address these concerns in order
in the plan has increased nearly 50% and contributions
to maintain competitive plan costs while promoting the
to enable us to sustain our growth.
by the Company have doubled. The plan now owns
wellness of our employees.
over 3% of the Company’s outstanding stock.
We have attained a unique reputation as a manufacturer
Lastly, we support continuing training through both
with some of the most advanced and innovative products
We continue to support and encourage adequate
on-site and off-site options. We provide a variety of
in our industry. This lofty position could not have been
retirement planning, which helps our employees reduce
industry-specific training at our facilities and encourage
achieved without the cooperation and commitment of our
some of their longer term concerns.
the pursuit of a broader-range of skills through our
customers, sales representatives and shareholders, and
We provide a health insurance program focused upon
personal growth of our employees, we intend to develop
whose names appear at the end of this report. On behalf
wellness and prevention, a Health Risk Assessment
knowledgeable personnel who can be promoted
of the Board of Directors, we thank all of you for your past
program to allow our employees to better understand
through the organization to provide a deep pool of
contributions and continuing belief in AAON.
tuition reimbursement program. By supporting the
particularly, our loyal and dedicated employees, all of
their particular needs and to help them determine
talent. We believe that the efforts to train employees,
the correct approach to solving their concerns, as
not only for their current position but also for potential
Sincerely,
well as on-site clinics at our U.S. facilities to provide
advancement, will benefit our shareholders through
convenient, basic care and enable employees to
increased profitability.
manage risks identified by the Health Risk Assessment.
Norman H. Asbjornson
President & CEO
April 14, 2008
M2 Series
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10–K
Table of Contents
3
[ ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Item Number and Caption
Page Number
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________________ to _____________________________
For the fiscal year ended December 31, 2007
or
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)
Indicate by check mark if the registrant is a well–known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
3
Yes No
3
3 Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S–K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10–K or any amendment to this Form 10–K.
3
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non–accelerated filer
(as defined in Rule 12b–2 of the Securities Exchange Act of 1934).
Large accelerated filer
Accelerated filer
3
Non–accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b–2 of the Act).
Yes 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, 2007)
was $397.3 million.
As of February 29, 2008, registrant had outstanding a total of 18,061,272 shares of its $.004 par value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
PART I
1. Business. 1
1A. Risk Factors.
1B. Unresolved Staff Comments. 5
2. Properties. 6
3. Legal Proceedings. 6
4. 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. 7
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, Executive Officers and Corporate Governance.
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
4
6
10
11
19
19
19
19
21
22
22
22
22
24
Portions of registrant’s definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders to be held May 20, 2008,
are incorporated into Part III.
15. Exhibits and Financial Statement Schedules.
25
2007 AAON Annual Report
PART I
Item 1. Business.
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, coils and boilers.
Products and Markets
The Company’s heat recovery option applicable to its RM, RN and RL units, as well as its M2, M3 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 products.
Performance characteristics of its products range in cooling capacity from 28,000–4,320,000 BTU’s and in heating capacity from
69,000–6,000,000 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.
A typical commercial building installation requires a ton of air–conditioning for every 300–400 square feet or, for a 100,000
square foot building, 250 tons of air–conditioning, which can involve multiple units.
The Company has developed and is beginning to market a residential condensing unit (CB Series) and air handlers (F1 Series) as
well as boilers (BL Series).
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 5% of its sales in 2007.
Major Customers
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, coils and boilers are applicable to all sizes of commercial and industrial buildings.
Sources and Availability of Raw Materials
No customer accounted for 10% of the Company’s sales during 2007, 2006 or 2005.
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 2007 level of sales of $263 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,
make–up air units, heat recovery units and boilers consisting of boilers and a sheet metal cabinet.
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 (DT Series) heating in sizes as required.
The Company manufactures a Model LL chiller, which is available in both air–cooled condensing and evaporative cooled
configurations.
The Company’s air–handling units consist of the F1 and H/V Series, the modular (M2 and M3) Series and a customized
NJ Series.
The most important materials purchased by the Company are steel, copper and aluminum, which are obtained from domestic
suppliers. The Company also purchases from other domestic manufacturers certain components, including compressors, electric
motors and electrical controls used in its products. The Company endeavors to obtain the lowest possible cost in its purchases of raw
materials and components, consistent with meeting specified quality standards. The Company is not dependent upon any one source
for its raw 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.
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 each of the last three years cost
increases in basic commodities, such as steel, copper and aluminum, negatively impacted profit margins.
Distribution
The Company employs a sales staff of 20 individuals and utilizes approximately 91 independent manufacturer representatives’
organizations having 106 offices to market its products in the United States and Canada. The Company also has one international
sales organization, which utilizes 12 distributors in other countries. Sales are made directly to the contractor or end user, with
shipments being made from the Company’s Tulsa, Oklahoma; 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.
The Company’s products and sales strategy focus on “niche” markets. The targeted markets for its equipment are customers seeking
products of better quality than offered, and/or options not offered, by standardized manufacturers.
To support and service its customers and the ultimate consumer, the Company provides parts availability through its 106 sales
offices 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 warranty on its products is: for parts only, the earlier of one year from the date of first use or 18 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.
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, DT and MN (rooftop units), F1, H/V, M2, M3 and NJ (air handlers), LL (chillers), CB (condensing units) and BL (boilers),
as well as component evaluation and refinement, development of control systems and new product development. The Company
incurred research and development expenses of approximately $2,483,000, $1,974,000 and $1,681,000 in 2007, 2006
and 2005.
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2007 AAON Annual Report
Backlog
Item 1A. Risk Factors.
The Company had a current backlog as of March 1, 2008, of approximately $51,365,000 compared to $62,798,000 at March
1, 2007. The current backlog consists of orders considered by management to be firm and substantially all of which will be filled by
August 1, 2008; however, the orders are subject to cancellation by the customers.
Working Capital Practices
Working capital practices in the industry center on inventories and accounts receivable. The Company regularly reviews its working
capital with a view to maintaining the lowest level consistent with requirements of anticipated levels of operation. The Company’s
greatest needs arise during the months of July–November, the peak season for inventory (primarily purchased material) and
accounts receivable. The Company’s working capital requirements are generally met 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 revolving credit
agreement in July 2008.
Seasonality
Sales of the Company’s products are moderately seasonal with the peak period being July–November of each year.
Competition
In the standardized market, the Company competes primarily with Trane Company, a division of Ingersoll–Rand Company Limited,
Lennox International, Inc., Mestek Inc, LSB Industries and Carrier Corporation, a subsidiary of United Technologies Corporation. 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 on sales of its products because of
the emphasis placed on initial cost; whereas, in the replacement market and other owner–controlled purchases, the Company has
a better chance of getting the business since quality and long–term cost are generally taken into account.
Employees
As of March 1, 2008, the Company had 1,313 permanent employees and 78 temporary employees, none of whom is represented
by unions. Management considers its relations with its employees to be good.
Patents, Trademarks, Licenses and Concessions
The Company does not consider any patents, trademarks, licenses or concessions held by it to be material to its business operations,
other than patents issued regarding its heat recovery wheel option, blower, gas–fired heat exchanger and evaporative condenser
desuperheater.
Environmental Matters
Laws concerning the environment that affect or could affect the Company’s domestic operations include, among others, the Clean
Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National
Environmental Policy Act, the Toxic Substances Control Act, regulations promulgated under these Acts, and any other federal, state
or local laws or regulations governing environmental matters. The Company believes that it presently complies with these laws and
that future compliance will not materially adversely affect the Company’s earnings or competitive position.
Available Information
The Company’s Internet website address is http://www.AAON.com. Its annual reports on Form 10–K, quarterly reports on Form
10–Q, current reports on 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 the Company’s Internet website as soon as reasonably practical after the Company
electronically files such material with, or furnishes it to, the SEC.
The following risks and uncertainties may affect the Company’s performance and results of operations.
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 Heating, Ventilation, and Air Conditioning (“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
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 cancelable 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 supply requirements, we could experience supply interruptions
or cost increases, either of which could have an adverse effect on our gross profit.
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 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 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.
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 competitive factors we face are product reliability, product performance, service and
price, with the relative importance of these factors varying among our product 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
products compete. Several of our competitors have greater financial and other resources than we have, allowing them to invest in
more extensive research and development. We may not be able to compete successfully against current and future competition and
current and future competitive pressures faced by us may materially adversely affect our business and results of operations.
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2007 AAON Annual Report
The loss of Norman H. Asbjornson could impair the growth of our business.
Item 2. Properties.
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 provided the leadership and vision for our growth. Although important responsibilities and functions have
been delegated to other highly experienced and 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 affect the price of our common stock.
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 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.
Item 1B. Unresolved Staff Comments.
None.
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/warehouse building and a 22,000 square foot office building (the “expansion
facility”) located on a 40–acre tract of land across the street from the original facility (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. 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, 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 remaining 357,000 sq. ft.
(presently leased) will afford the Company additional plant space for long–term growth.
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. 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.
The Company’s operations in Burlington, Ontario, Canada, are located at 279 Sumach Drive, consisting of an 82,000 sq. ft. office/
manufacturing facility on a 5.6 acre tract of land.
Production at these facilities averaged approximately $21.9 million per month in 2007, which is approximately 62% of the estimated
current production capacity. Management deems its facilities to be nearly ideal for the type of products being manufactured by the
Company.
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, 2007, through December 31, 2007.
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2007 AAON Annual Report
Part II
On November 7, 2006, the Board of Directors authorized the Company to repurchase shares from certain directors following
their exercise of stock options. The maximum number of shares to be repurchased is unknown under the program as the amount is
contingent on the number of shares sold by directors. Through December 31, 2007, the Company repurchased 260,625 shares for
an aggregate price of $5,232,188, or an average price of $20.08 per share. The Company purchases the shares at the current
market price.
Repurchases during the fourth quarter of 2007 were as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
(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
Period
Month #1 –
October 1–31, 2007
Month #2 –
November 1–30, 2007
Month #3 –
December 1–31, 2007
20,303
$18.60
20,303
372,688
$18.50
372,688
330,747
$19.27
330,747
–
–
–
–
Total
723,738
$18.85
723,738
PART II
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, 2006
June 30, 2006
September 30, 2006
December 31, 2006
March 31, 2007
June 30, 2007
September 30, 2007
December 31, 2007
High (1)
Low (1)
$ 15.94 $ 12.07
$ 19.02 $ 13.97
$ 17.87 $ 14.27
$ 19.34 $ 14.32
$ 19.67 $ 16.46
$ 21.38 $ 16.47
$ 23.01 $ 18.61
$ 21.96 $ 16.60
(1) All prices adjusted to reflect a 3 for 2 stock split effected August 21, 2007
On February 29, 2008, there were 735 holders of record, and 2,860 beneficial owners, of the Company’s Common Stock.
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 to be declared at dates of the Board’s discretion. In 2007, dividends were declared
to shareholders of record at the close of business on June 11, 2007 and paid on July 2, 2007 and declared to shareholders of
record at the close of business on December 13, 2007 and paid on January 3, 2008. Following the 3 for 2 stock split in August
2007 (which was effected by means of a 50% stock dividend), the Board voted to increase the post–split dividend by 20% to $0.16
per share. The Company paid cash dividends of approximately $4,998,000 and declared dividends payable of approximately
$2,943,000 for the year ended December 31, 2007.
Following repurchases of approximately 12% of its outstanding Common Stock between September 1999 and September 2001,
the Company announced and began another stock repurchase program on October 17, 2002, targeting repurchases of up to
approximately 1,987,500 shares of its outstanding stock. On February 14, 2006, the Board of Directors approved the suspension
of the Company’s repurchase program. Through December 31, 2006, the Company had repurchased a total of 1,886,796 shares
under this program for an aggregate price of $22,034,568, or an average of $11.68 per share. The Company purchased the
shares at the current market price.
On November 6, 2007, the Board authorized a new stock buyback program, targeting repurchases of up to approximately 10%
(1.8 million shares) of the outstanding stock of the Company from time to time in open market transactions at prevailing market prices.
Between November 6, 2007 and December 31, 2007, the Company repurchased a total of 690,300 shares under this program
for an aggregate price of $13,012,199, or an average of $18.85 per share.
On July 1, 2005, the Company entered into a stock repurchase arrangement by which employee–participants in AAON’s 401(k)
savings and investment plan are entitled to have shares of AAON stock in their accounts sold to the Company to provide diversification
of their investments. The maximum number of shares to be repurchased is unknown under the program as the amount is contingent on
the number of shares sold by employees. Through December 31, 2007, the Company repurchased 501,075 shares for an aggregate
price of $7,712,287, or an average price of $15.39 per share. The Company purchases the shares at the current market price.
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2007 AAON Annual Report
Stock Performance Graph (1)
Item 6. Selected Financial Data.
The following graph compares the cumulative total shareholder return of the Company, the NASDAQ Composite and its peer group
named below. The graph assumes a $100 investment at the closing price on January 1, 2002, and reinvestment of dividends on the
date of payment without commissions. This table is not intended to forecast future performance of the Company’s Common Stock.
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.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
300.00
250.00
200.00
150.00
100.00
50.00
0.00
2002
2003
2004
2005
2006
2007
AAON INC NASDAQ Composite - Total Returns
Peer Group
The peer group consists of Trane, Inc.; Lennox International, Inc.; Mestek, Inc.; LSB Industries, Inc.; and United Technologies
Corporation, all of which are in the business of manufacturing air conditioning and heat exchange equipment.
(1) Securities and Exchange Commission (“SEC”) filings sometimes “incorporate information by reference.” This means the Company
is referring you to information that has previously been filed with the SEC, and that this information should be considered as part of
the filing you are reading. Unless the Company specifically states otherwise, this Stock Performance Graph shall not be deemed to
be incorporated by reference and shall not constitute soliciting material or otherwise be considered filed under the Securities Act of
1933 as amended, or the Securities Exchange act of 1934, as amended.
Results of Operations:
Net sales
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per
common share
Weighted average shares
outstanding:
Basic
Diluted
Financial Position at End of
Fiscal Year:
Year Ended December 31,
2007
2006
2005
2004
2003
(in thousands, except per share data)
$ 262,517 $ 231,460 $ 185,195 $ 171,885 $ 147,890
7,521 $ 14,227
$
23,156 $
11,462 $
17,133 $
$
$
$
1.24 $
1.22 $
0.93 $
0.90 $
0.62 $
0.60 $
0.40 $
0.39 $
0.75
0.72
0.32 $
0.32 $
– $
– $
–
18,628
18,927
18,456
18,968
18,510
19,125
18,653
19,385
19,027
19,877
December 31,
2007
2006
2005
2004
2003
(in thousands)
Working capital
Total assets
Long–term and current debt
Total stockholders’ equity
$
$
$
$
38,788 $
36,356 $
137,140 $ 130,056 $
59 $
91,592 $
330 $
95,420 $
33,372 $
27,939 $ 35,369
113,606 $ 105,227 $ 102,085
–
167 $
67,428
79,495 $
275 $
71,171 $
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 August 21, 2007, the Company completed a three–
for–two stock split. The shares outstanding and earnings per share disclosures have been restated to reflect the stock split.
9
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2007 AAON Annual Report
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
AAON engineers, manufactures and markets air–conditioning and heating equipment consisting of standardized and custom rooftop
units, chillers, air–handling units, make–up units, heat recovery units, condensing units, coils and boilers. Custom units are marketed and
sold to retail, manufacturing, educational, medical and other commercial industries. AAON markets units to all 50 states in the United
States and certain provinces in Canada. Foreign sales are less than 5% of the Company’s 2007 sales as the majority of all sales are
domestic.
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. Prices increased by
approximately 50% for steel, 75% for aluminum and 190% for copper from 2005 to 2007. The increases resulted in economic challenges
to AAON. AAON reviewed and adjusted current pricing strategies, created efficiencies in production, and continued relationships with
suppliers in order to mitigate the economic factors of increasing commodity prices. The major component costs include compressors,
electric motors and electronic controls, which also increased due to increases in commodities.
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 18 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 charges on heat exchangers do not occur frequently.
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.
Other operations are conducted in a plant/office building at 203–207 Gum Springs Road in Longview, Texas, containing 258,000
square feet (251,000 sq. ft. of manufacturing/warehouse and 7,000 sq. ft. of office space). An additional 15 acres of land was purchased
for future expansion in 2004 and 2005 in Longview, Texas.
The Company’s operations in Burlington, Ontario, Canada, are located at 279 Sumach Drive, consisting of an 82,000 sq. ft. office/
manufacturing facility on a 5.6 acre tract of land.
Set forth below is income statement information and as a percentage of sales with respect to the Company for years 2007, 2006
and 2005:
2007
Year Ended December 31,
2006
(in thousands)
2005
$262,517
205,148
57,369
100.0%
78.1%
21.9%
$231,460
187,570
43,890
100.0%
81.0%
19.0%
$185,195
149,904
35,291
21,703
35,666
(10)
8
8.3%
13.6%
0.0%
0.0%
18,059
25,831
(81)
24
7.8%
11.2%
0.0%
0.0%
17,477
17,814
(16)
67
100.0%
81.0%
19.0%
9.4%
9.6%
0.0%
0.0%
(321)
(0.1%)
424
0.1%
467
0.3%
35,343
12,187
$23,156
13.5%
4.7%
8.8%
26,198
9,065
$17,133
11.3%
3.9%
7.4%
$
18,332
6,870
11,462
9.9%
3.7%
6.2%
Net sales
Cost of sales
Gross profit
Selling, general and
administrative expenses
Income from operations
Interest expense
Interest income
Other income (expense),
net
Income before income
taxes
Income tax provision
Net income
Results of Operations
Key events impacting AAON’s cash balance, financial condition, and results of operations in 2007 include the following:
• An increase in the volume of sales on all product lines due to commercial construction growth and market share gains, and
effective moderation of commodity costs with purchase agreements and pricing strategies affecting gross margin, positively
resulted in significantly higher revenues and net income. The large volume of sales also lowered the effect of major fixed
costs in general and administrative expenses and occupancy expenses.
• AAON remained the leader in the industry for environmentally–friendly, energy efficient and quality innovations, utilizing
R410A refrigerant and phasing out pollutant causing R22 refrigerant. The phase out of R22 began at the beginning of
2004. AAON also utilizes a high performance composite foam panel to eliminate over half of the heat transfer from typical
fiberglass insulated panels. AAON continues to utilize sloped condenser coils, and access compartments to filters, motor,
and fans. All of these innovations increase the demand for AAON’s products thus increasing market share.
In February 2006, the Board of Directors initiated a program of semi–annual cash dividend payments. Cash payments of
$5.0 million were made in 2007 ($2.5 million paid in January and July 2007, respectively), and $2.9 million was accrued
as a liability for payment in January 2008.
•
• Stock repurchases of AAON stock from employee’s 401(k) savings and investments plan was authorized in 2005. Stock
repurchases of AAON stock from directors was authorized in 2006. Stock repurchases of AAON stock from the open
market was authorized and initiated in November 2007. Total repurchases resulted in cash payments of $20.8 million.
This cash outlay is partially offset by cash received from options exercised by employees as a part of an incentive bonus
program. The cash received in 2007 from options exercised was $2.4 million.
• Borrowings under the line of credit were approximately $12.1 million, and approximately $10,000 in interest expense was
paid in 2007. Borrowings under the line of credit where interest is accrued are relatively short and generally paid off within
the month incurred or the following month. At the end of 2007 there were no borrowings owed on the line of credit.
• Purchases of equipment and renovations to manufacturing facilities remained a priority. AAON’s capital expenditures were
$10.9 million. Equipment purchases create significant efficiencies, lower production costs and allow continued growth in
production. The Company currently estimates to dedicate $7.0 million to $10.0 million to capital expenditures in 2008 for
continued growth.
11
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2007 AAON Annual Report
Net Sales
Other Income (Expense)
Net sales were $262.5 million, $231.5 million and $185.2 million in 2007, 2006 and 2005. The highest level of sales occurred in 2007.
This increase in sales of $31.0 million or 13.4% was attributable to an increase in volume of product sold related to the Company’s new and
redesigned products being favorably received by its customers, active marketing by sales representatives and pricing strategies implemented on
90% of the Company’s product lines in the second quarter in order to keep up with increasing raw materials costs. New commercial construction
steadily improved throughout 2007 and 2006, contributing to growth of the market. The increase in sales in 2006 of $46.3 million or 25% was
attributable to both volume and price increases. The increased sales were offset by computer and electrical outages that caused the closing of
the Tulsa facility for four days. Management anticipates continued growth throughout 2008.
Gross Profit
Gross margins in 2007, 2006 and 2005 were $57.4 million, $43.9 million and $35.3 million, respectively. As a percentage of sales, gross
margins were 21.9%, 19.0% and 19.0% for the years ended 2007, 2006 and 2005. The increase in gross profit for 2007, resulted from pricing
strategies becoming fully utilized and production and labor efficiencies, as sales volume increased. The Company saw a leveling off of raw
material increases in the first half of the year, which also contributed to higher gross profits. The increase in margins was attained despite increased
pricing on certain materials in the last half of the year. Management anticipates the moderation of commodity costs through relationships with
suppliers and price decreases in certain commodity costs will only enhance already increased margins. The stable gross profit percentage from
2005 to 2006 resulted from adjusting pricing strategies for continued high material costs for raw materials and components. Certain labor
efficiencies were also experienced in 2006 adding to the positive gross margin. Due to an increase in the volume of sales, actual gross profit for
2007 increased by $13.5 million from 2006, and by $8.6 million from 2005 to 2006.
Steel, copper and aluminum are high volume materials used in the manufacturing of the Company’s products, which are obtained from domestic
suppliers. Raw materials pricing increased approximately 50% for steel, 75% for aluminum and 190% for copper from 2005 to 2007, causing
increased inventory costs. The Company also purchases from other domestic manufacturers certain components, including compressors, electric
motors and electrical controls used in its products. The suppliers of these components are significantly affected by the rising raw material costs,
as steel, copper and aluminum are used in the manufacturing of their products; therefore, the Company is also experiencing price increases
from component part suppliers. The Company instituted several price increases from 2005 to 2007 to customers in an attempt to offset the
continued increases in steel, copper and aluminum. The Company attempts to limit the impact of price increases on these materials by entering
into cancelable fixed price contracts with its major suppliers for periods of 6–12 months.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $21.7 million, $18.1 million and $17.5 million for the years ended 2007, 2006 and 2005.
The increase in selling, general and administrative expenses is due primarily to an increase in warranty expense caused by increased sales
and an increase in profit sharing resulting from an increase in net income. In 2006, the increase in selling, general and administrative expenses
was caused primarily by an increase in sales expenditures for an increased sales force and active marketing, increases in salaries for selling,
general and administrative personnel and an increase in profit sharing. There were additional non–cash compensation costs for the fair value
of stock options granted to employees in accordance with the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
Share–Based Payment (“SFAS 123(R)”).
Interest Expense
Interest expense was approximately $10,000, $81,000 and $16,000 for the years ended 2007, 2006 and 2005. The decrease in interest
expense of approximately $71,000 in 2007 was due to less average borrowings under the revolving credit facility as a result of an increase
in net cash provided by operations. The increase in interest expense of approximately $65,000 in 2006 was due to an increase in average
borrowings under the revolving credit facility and increases in interest rates. Interest on borrowings is payable monthly at the Wall Street Journal
prime rate less 0.5% or LIBOR plus 1.6%, at the election of the Company (6.84% at December 31, 2007). Average borrowings under the
revolving credit facility are typically paid in full within the month of borrowing or the following month.
Interest Income
Interest income was approximately $8,000, $24,000 and $67,000 in 2007, 2006 and 2005 respectively. The decrease in interest income is
due to lower balances in certificates of deposit and short–term money markets.
Other expense was approximately $321,000 in 2007. Other income (expense) also includes foreign currency gains and losses that
result from operations in Canada. The weakened U.S. dollar was the primary reason for the decrease in other income (expense) in
2007. Other income was approximately $424,000 and $467,000 in 2006 and 2005, respectively. Other income is attributable
primarily to rental income from the Company’s expansion facility. All expenses associated with the facility that are allocated to the
rental portion of the building are included in other income. The Company plans to continue to monetize the expansion facility until
it is needed for increased capacity.
Analysis of Liquidity and Capital Resources
AAON’s working capital and capital expenditure requirements are generally met through net cash provided by operations and the
revolving bank line of credit.
Cash Provided by Operating Activities. Net cash provided from operating activities has fluctuated from year to year. Net cash
provided by operating activities was $31.2 million, $19.4 million and $12.0 million in fiscal years 2007, 2006 and 2005,
respectively. The year–to–year variances are primarily from results of changes in net income, accounts receivable, inventories held
by the Company, accounts payable and accrued liabilities.
Net income for fiscal year 2007 was $23.2 million, an increase of $6.1 million from 2006. The increase in net income during fiscal
years 2007 and 2006 compared to fiscal years 2006 and 2005 was primarily due to increased volume of sales, adjusted pricing
strategies to compensate for higher raw materials costs, innovative and efficient products, as well as strong economic growth of the
commercial construction industry.
Depreciation expense was $9.7 million, $9.1 million and $8.5 million for the years ended December 31, 2007, 2006 and 2005,
respectively. The continued increase is due to capital expenditure purchases for growth and production efficiencies. The Company
adopted SFAS 123(R) in 2006, which decreased net income by $0.6 million in 2007 and by $0.5 million in 2006. Share–based
compensation was not applicable in 2005. Both depreciation expense and share–based compensation expense decreased net
income but had no effect on operating cash.
Accounts receivable balances have continued to increase in 2007, 2006 and 2005 from the increase in sales. Accounts receivable
increased by $1.6 million at December 31, 2007 compared to December 31, 2006. The increase at December 31, 2006 from
December 31, 2005 was $4.3 million.
Inventories increased by $2.1 million, $5.8 million and $2.8 million at December 31, 2007, 2006 and 2005, respectively. The
leading factor in the increase is primarily related to the valuation of inventories since 2005 due to higher raw material and component
parts costs. The increase is also attributable to procurement of inventory to accommodate an increase of sales.
Prepaid expenses increased by $0.2 million as compared to a decrease of $0.8 million at December 31, 2006 and an increase of
$0.6 million at December 31, 2005. The increase in 2007 was related to multiple accounts, none of which experienced a significant
increase. The decrease in 2006 was primarily related to prepaid copper inventory at 2005 pricing for 2006 material requirements
that was included in prepaid expenses at December 31, 2005.
Accounts payable and accrued liabilities increased by $4.9 million, $4.3 million and $2.3 million at December 31, 2007, 2006
and 2005. The increase in 2007 is due to an increase in commissions payable related to the increase in sales, timing of commissions
payable and payments to vendors. The change from December 31, 2006, compared to December 31, 2005, was attributable to
timing of commissions payable and payments to vendors.
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2007 AAON Annual Report
Cash Flows Used in Investing Activities. Cash flows used in investing activities were $10.8 million, $16.8 million and $8.2 million in
2007, 2006 and 2005, respectively. The decrease in cash flows used in investing activities in 2007 was $6.0 million, and primarily
related to a decrease in capital expenditures. The increase in cash flows used in investing activities in 2006 was primarily related
to capital expenditures of $17.8 million for additions of machinery and equipment for increased efficiency and a manufacturing
addition at the Longview facility. Cash flows used in investing activities in 2005 consisted primarily of capital expenditures of $10.1
million for additions of machinery and equipment and an office renovation for the facility located in Longview. Management utilizes
cash flows provided from operating activities to fund capital expenditures that are expected to spur growth and create efficiencies.
Due to anticipated production demands, the Company expects to expend approximately $7.0 million to $10.0 million in 2008
for equipment requirements, a building renovation and a building expansion. The Company expects the cash requirements to be
provided from cash flows from operations.
In 2007, the Company did not invest in any certificates of deposits. In 2006, the Company invested a total of $2 million in certificates
of deposit, the latest one maturing in July 2006. In 2005, the Company invested $1 million in a certificate of deposit, which matured
in the first quarter of 2006. In 2002, the Company invested $3 million in a certificate of deposit that matured in the first quarter of
2005.
Cash Flows Used in Financing Activities. Cash flows used in financing activities were $20.0 million, $3.3 million and $4.2 million
in 2007, 2006 and 2005, respectively. The increase of cash used in financing activities primarily relates to cash dividends declared
and paid and the continued repurchase of the Company’s stock.
The Company utilizes the revolving line of credit as described below in ”General” to meet certain short–term cash demands based
on current liquidity at the time. The Company accessed $12.1 million, and $53.7 million of borrowings under the line of credit and
paid each separate borrowing within the month the borrowing occurred or the following month, resulting in no net borrowings under
the revolving line of credit at December 31, 2007 and 2006, respectively. The Company utilized the revolving line of credit in 2005
for short–term cash demands in the amount of $21.1 million.
The Company received cash from stock options exercised of $2.4 million and $1.3 million and classified the tax benefit of stock
options exercised of $3.0 million and $1.9 million in financing activities in 2007 and 2006, respectively. The Company received
cash from stock options exercised for the year ended 2005 of approximately $0.8 million.
The Company repurchased shares of stock under the Board of Directors authorized stock buyback programs in 2007, 2006 and
2005. The Company repurchased shares of stock from employees’ 401(k) savings and investment plan, Directors, and the open
market in 2007 in the amount of $20.8 million for 1,082,736 shares of stock. The Company repurchased shares of stock from
employees’ 401(k) savings and investment plan and Directors in 2006 in the amount of $3.9 million for 250,500 shares of stock.
The Company repurchased shares of stock from employees’ 401(k) savings and investment plan in 2005 in the amount of $4.9
million for 274,350 shares of stock.
In February 2006, the Board of Directors authorized a semi–annual cash dividend payment. Cash dividend payments of $5.0
million were made in 2007, and $2.9 million in dividends were declared and accrued as a liability in December 2007 for payment
in January 2008. Cash dividend payments of $2.5 million were made in 2006, and $2.5 million in dividends were declared
and accrued as a liability in December 2006 for payment in January 2007. Board approval is required to determine the date of
declaration for each semi–annual payment. Prior to 2006, no cash dividends had been declared or paid.
General
The Company’s revolving credit facility provides for maximum borrowings of $15.2 million which is provided by the Bank of
Oklahoma, National Association. Under the line of credit, there is one standby letter of credit totaling $1.3 million. The letter of
credit is a requirement of the Company’s workers compensation insurance and was extended in 2007 and will expire on December
31, 2008. Interest on borrowings is payable monthly at the Wall Street Journal prime rate less 0.5% or LIBOR plus 1.6%, at the
election of the Company (6.84% at December 31, 2007). No fees are associated with the unused portion of the committed amount.
At December 31, 2007 and 2006, the Company had no borrowings outstanding under the revolving credit facility. Borrowings
available under the revolving credit facility at December 31, 2007, were $13.9 million. The credit facility previously required the
Company to maintain a certain financial ratio and prohibited the declaration of cash 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 Stock. In
conjunction with the Board’s vote on February 14, 2006, the restriction of payments of dividends was waived by the lender and
removed from the covenants with the renewal of the line of credit on July 30, 2006. At December 31, 2007 and 2006, the Company
was in compliance with its financial ratio covenants. On July 30, 2007, the Company renewed the line of credit with a maturity date
of July 30, 2008.
On July 12, 2007, the Company’s Board of Directors approved a three–for–two stock split of AAON’s outstanding stock for
shareholders of record as of August 3, 2007. The stock split was treated as a 50% stock dividend which was distributed on August
21, 2007. As a result of the stock split, the Company adjusted the dividend paid per share to $0.16. The applicable share and per
share data for all periods included herein has been restated to reflect the stock split
Management believes the Company’s bank revolving credit facility (or comparable financing), and projected cash flows from
operations will provide the necessary liquidity and capital resources to the Company for fiscal year 2008 and the foreseeable
future. The Company’s belief that it will have the necessary liquidity and capital resources is based upon its knowledge of the HVAC
industry and its place in that industry, its ability to limit the growth of its business if necessary, its ability to authorize dividend cash
payments, and its relationship with its existing bank lender. For information concerning the Company’s revolving credit facility at
December 31, 2007, see Note 4 to the Consolidated Financial Statements, Revolving Credit Facility.
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2007 AAON Annual Report
Commitments and Contractual Agreements
The following table summarizes the Company’s long–term debt and other contractual agreements as of December 31, 2007:
Payments Due By Period
(in thousands)
Contractual Financial Obligations
Total
Less Than
1 Year
1–3
Years
4–5
Years
After 5
years
Long–term debt and capital leases
Total contractual obligations
$
$
258
258
$
$
91
91
$
$
167
167
$
$
–
–
$
$
–
–
The fixed rate interest on long–term debt includes the amount of interest due on the Company’s fixed rate long–term debt. These
amounts do not include interest on the Company’s variable rate obligation related to the Company’s revolving credit facility.
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.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Because these estimates and assumptions require significant judgment, future actual results could differ from
those estimates and could have a significant impact on 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:
Allowance for Doubtful Accounts–The Company’s allowance for doubtful accounts is estimated to cover the risk of loss related to
accounts receivable. 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. The evaluation of these factors involves complex, subjective judgments. Thus, changes in these
factors or changes in economic circumstances may significantly impact the Company’s Consolidated Financial Statements.
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 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 18 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. Warranty charges associated with heat exchanges do not occur
frequently.
Due to the absence of warranty history on new products, an additional provision may be made for such products. The Company’s
estimated future warranty cost is subject to adjustment from time to time depending on changes in actual warranty trends and cost
experience. Should actual claim rates differ from the Company’s estimates, revisions to the estimated product warranty liability
would be required.
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 potential significant
future claims. The plan is supplemented by employee contributions and an excess policy for claims over $100,000 each.
Stock Compensation–The Company adopted SFAS 123(R), effective January 1, 2006. Applying this standard to value equity–
based compensation requires the Company to use significant judgment and to make estimates, particularly for the assumptions used
in the Black–Scholes valuation model, such as stock price volatility and expected option lives, as well as for the expected option
forfeiture rates. In accordance with SFAS 123(R) the Company measures the cost of employee services received in exchange for
an award of equity instruments using the Black–Scholes valuation model to calculate the grant–date fair value of the award. The
compensation cost is 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.
Historically, actual results have been within management’s expectations.
New Accounting Pronouncements
In July 2006, the FASB released Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS
No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertain tax positions as described in SFAS No. 109, Accounting for
Income Taxes, and requires a company to recognize, in its financial statements, the impact of a tax position only if that position
is “more likely than not” of being sustained on an audit basis solely on the technical merits of the position. FIN 48 also requires
qualitative and quantitative disclosures including a discussion of reasonably possible changes that might occur in the recognized tax
benefits over the next twelve months as well as a roll–forward of all unrecognized tax benefits. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a
material impact on the Company’s Consolidated Financial Statements.
In September 2006, the FASB released SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value and
establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair
value measurements. Although SFAS 157 applies to (and amends) the provisions of existing authoritative literature, it does not, of
itself, require any new fair value measurements or establish valuation standards. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Adoption of SFAS 157 is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
In February, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
(“FAS 159”), which creates an alternative measurement treatment for certain financial assets and financial liabilities. SFAS 159
permits fair value to be used for both the initial and subsequent measurements on an instrument by instrument basis, with changes
in the fair value to be recognized in earnings as those changes occur. This election is referred to as the fair value option. SFAS 159
also requires additional disclosures to compensate for the lack of comparability that will arise from the use of the fair value option.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. Adoption of SFAS 159 did not have a material impact
on the Company’s 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.
17
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2007 AAON Annual Report
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
(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, 2007, the Company’s internal control over financial reporting is effective based
on those criteria.
AAON’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over
financial reporting.
Date: March 11, 2008
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
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 had no outstanding balance as of December 31, 2007.
Foreign sales accounted for less than approximately 5% of the Company’s sales in 2007 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 SFAS 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 denominated in Canadian currency are included in the results of operations as incurred. The exchange
rate of the Canadian dollar to the United States dollar was $0.862 and $1.019 at December 31, 2006 and 2007, respectively.
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, from 2005 to 2007 cost increases in basic commodities, such as steel, aluminum
and copper, rose by 50%, 75% and 190%, and impacted profit margins.
The Company does not utilize derivative financial instruments to hedge its interest rate, foreign currency exchange rate or raw
materials price risks.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are included commencing at page 30.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
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 in the SEC’s rules and forms; and
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 management, 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, 2007.
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2007 AAON Annual Report
(c) Report of Independent Registered Public Accounting Firm
PART III
Report of Independent Registered Public Accounting Firm
Item 10. Directors, Executive Officers and Corporate Governance.
Board of Directors and
Stockholders of AAON, Inc.
We have audited AAON, Inc. (a Nevada corporation) and subsidiaries’ internal control over financial reporting as of December
31, 2007, based on 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, included in
the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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 its 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.
The information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S–K is incorporated by reference
to the information contained in the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission
in connection with the Company’s 2008 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.
The information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S–K is incorporated by reference to the information
contained in the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with
the Company’s 2008 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 403 and Item 201(d) of Regulation S–K is incorporated by reference to the information contained
in the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the
Company’s 2008 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions.
Transactions with Related Persons
AAON’s Code of Conduct guides the Board of Directors in its actions and deliberations with respect to related party transactions.
Under the Code, conflicts of interest, including any involving the directors or any Named Officers, are prohibited except under any
guidelines approved by the Board of Directors. Only the Board of Directors may waive a provision of the Code of Conduct for a
director or a Named Officer, and only then in compliance with all applicable laws and rules and regulations. The Company did not
enter into any new related party transactions and has no preexisting related party transactions in 2007 or 2006, respectively.
In our opinion, AAON, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by COSO.
Director Independence
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, 2007 and 2006, and the related consolidated
statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2007 and our report dated March 10, 2008 expressed an unqualified opinion on those consolidated
financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 10, 2008
(d) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2007 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
21
The Board has adopted director independence standards that meets and/or exceed listing standards set by NASDAQ. NASDAQ
has set forth six applicable tests and requires that a director who fails any of the tests be deemed not independent. In 2007, the
Board affirmatively determined, considering the standards described more fully below, that Messrs. Naugle, Pantaleoni, Ryan, Short
and Stephenson are independent. Upon the resignations of Messrs. Naugle and Ryan, followed by the subsequent elections of
Messrs. Lackey and McElroy, the Board affirmatively determined that Messrs. Lackey and McElroy are independent. As a result of
his position as the President of the Company, Mr. Asbjornson does not qualify as independent under the standards set forth below.
The Board has determined that Mr. Johnson should not be deemed independent, because he is a member of the law firm that
serves as General Counsel to the Company. In addition, each member of the Audit Committee and the Compensation Committee
is independent.
22
The Board undertakes an annual review of the independence of all non–employee directors. In advance of the meeting at which
this review occurs, each non–employee director is asked to provide the Board with full information regarding the director’s business
and other relationships with the Company and its affiliates and with senior management and their affiliates to enable the Board to
evaluate the director’s independence.
Directors have an affirmative obligation to inform the Board of any material changes in their circumstances or relationships that may
impact their designation by the Board as “independent.” This obligation includes all business relationships between, on the one
hand Directors or members of their immediate family, and, on the other hand, the Company and its affiliates or members of senior
management and their affiliates, whether or not such business relationships are subject to any other approval requirements of the
Company.
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 2008 Annual Meeting of Stockholders.
2007 AAON Annual Report
The Company’s director independence standards are as follows:
It is the policy of the Board of Directors that a majority of the members of the Board consist of directors independent of the Company
and of the Company’s management. For a director to be deemed “independent,” the Board shall affirmatively determine that the
director has no material relationship with the Company or its affiliates or any member of the senior management of the Company
or his or her affiliates. In making this determination, the Board applies, at a minimum and in addition to any other standards for
independence established under applicable statutes and regulations as outlined by the NASDAQ listing standards Rule 4200, the
following standards, which it may amend or supplement from time to time:
•A director who is, or has been within the last three years, an employee of the Company, or whose immediate family member
is, or has been within the last three years a Named Officer, of the Company can not be deemed independent. Employment
as an interim Chairman or Chief Executive Officer will not disqualify a director from being considered independent following
that employment.
•A director who has received, or who has an immediate family member who has received, during any twelve–month period
within the last three years, more than $60,000 in direct compensation from the Company, other than director and committee
fees and benefits under a tax–qualified retirement plan, or non–discretionary compensation for prior service (provided such
compensation is not contingent in any way on continued service), can not be deemed independent. Compensation received
by a director for former service as an interim Chairman or Chief Executive Officer and compensation received by an
immediate family member for service as a non–executive employee of the Company will not be considered in determining
independence under this test.
•A director who (A) is, or whose immediate family member is, a current partner of a firm that is the Company’s external
auditor; (B) is a current employee of such a firm; or (C) was, or whose immediate family member was, within the last three
years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that
time can not be deemed independent.
•A director who is, or whose immediate family member is, or has been within the last three years, employed as an executive
officer of another company where any of the Company’s present Named Officers at the time serves or served on that
company’s compensation committee can not be deemed independent.
•A director who is a current employee or general partner, or whose immediate family member is a current executive
officer or general partner, of an entity that has made payments to, or received payments from, the Company for property
or services in an amount which, in any of the last three fiscal years, exceeds the greater of $200,000 or 5% of such other
entity’s consolidated gross revenues, other than payments arising solely from investments in
the Company’s securities or
payments under non–discretionary charitable contribution matching programs, can not be deemed independent.
For purposes of the independence standards set forth above, the terms:
•“affiliate” means any consolidated subsidiary of the Company and any other Company or entity that controls, is controlled
by or is under common control with the Company;
•“executive officer” means an “officer” within the meaning of Rule 16a–1(f) under the Securities Exchange Act of 1934,
as amended; and
•“immediate family” means spouse, parents, children, siblings, mothers– and fathers–in–law, sons– and daughters–in–
law, brothers– and sisters–in–law and anyone (other than employees) sharing a person’s home, but excluding any person
who is no longer an immediate family member as a result of legal separation or divorce, death or incapacitation.
23
24
Part III
2007 AAON Annual Report
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)
Financial statements.
See Index to Consolidated Financial Statements on page 28.
(b) Exhibits:
(3) (A)
Articles of Incorporation (i)
(A–1) Article Amendments (ii)
(B)
(B–1) Amendments of Bylaws (iii)
Bylaws (i)
(4) (A)
Third Restated Revolving Credit and Term Loan Agreement and related documents (iv)
(A–1)
Third Amendment to Third Restated Revolving Credit and Term Loan Agreement (v)
(B)
Rights Agreement dated February 19, 1999, as amended (vi)
(10.1) AAON, Inc. 1992 Stock Option Plan, as amended (vii)
(10.2) AAON, Inc. 2007 Long–Term Incentive Plan, as amended (viii)
(21) List of Subsidiaries (ix)
(23) Consent of Grant Thornton LLP
(31.1) Certification of CEO
(31.2) Certification of CFO
(32.1) Section 1350 Certification–CEO
(32.2) Section 1350 Certification–CFO
2007 AAON Annual Report
(i)
(ii)
Incorporated herein by reference to the exhibits to the Company’s Form S–18 Registration
Statement No. 33–18336–LA
Incorporated herein by reference to the exhibits to the Company’s Annual Report on Form 10–K
for the fiscal year ended December 31, 1990, and to the Company’s Forms 8–K dated March
21, 1994, March 10, 1997, and March 17, 2000.
(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.
(v)
Incorporated herein by reference to exhibit to the Company’s Form 8–K dated August 7, 2007
(vi)
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 Appendix B to the Company’s definitive Proxy Statement for
the 2007 Annual Meeting of Stockholders filed April 23, 2007.
(ix)
Incorporated herein by reference to exhibits to the Company’s Annual Report on Form 10–K for
the fiscal year ended December 31, 2004.
25
26
2007 AAON Annual Report
Part IV
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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
Page
29
30
31
32
33
34
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 11, 2008
AAON, INC.
By:
/s/ Norman H. Asbjornson
Norman H. Asbjornson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: March 11 2008
Dated: March 11, 2008
Dated: March 11, 2008
Dated: March 11, 2008
Dated: March 11, 2008
Dated: March 11, 2008
Dated: March 11, 2008
Dated: March 11, 2008
/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/ Anthony Pantaleoni
Anthony Pantaleoni
Director
/s/ Charles C. Stephenson, Jr.
Charles C. Stephenson, Jr.
Director
/s/ Jack E. Short
Jack E. Short
Director
/s/ Paul K. Lackey, Jr.
Paul K. Lackey, Jr.
Director
/s/ A.H. McElroy II
A.H. McElroy II
Director
27
28
2007 AAON Annual Report
Report of Independent Registered Public Accounting Firm
AAON, Inc., and Subsidiaries
Consolidated Balance Sheets
Board of Directors and
Stockholders of AAON, Inc.
We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada Corporation) and subsidiaries
(collectively, the Company) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’
equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with 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 the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of AAON, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
AAON, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report
dated March 10, 2008 expressed an unqualified opinion thereon.
Tulsa, Oklahoma
March 10, 2008
/s/ GRANT THORNTON LLP
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other
Deferred tax asset
Total current assets
Property, plant and equipment, net
Note receivable, long–term
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long–term debt
Accounts payable
Dividends payable
Accrued liabilities
Total current liabilities
Other long–term liabilities
Deferred tax liability
Commitments and contingencies
Stockholders’ equity:
December 31,
2007
2006
(in thousands, except per share and share data)
$ 879
38,813
31,849
442
4,312
76,295
60,770
75
137,140
$ 288
36,748
29,502
267
3,954
70,759
59,222
75
130,056
91
15,059
2,943
19,414
37,507
59
15,821
2,465
16,058
34,403
239
3,974
–
4,061
Preferred stock, $.001 par value, 7,500,000 shares
authorized, no shares issued*
Common stock, $.004 par value, 75,000,000 shares
authorized, 18,054,246 and 18,508,248 issued and
outstanding at December 31, 2007 and 2006, respectively*
Additional paid in capital
Accumulated other comprehensive income
Retained earnings
Total stockholders’ equity
–
–
73
–
1,942
93,405
95,420
74
185
667
90,666
91,592
Total liabilities and stockholders’ equity
$ 137,140
$ 130,056
* Reflects three–for–two stock split effective August 21, 2007.
The accompanying notes are an integral part of these statements.
29
30
2007 AAON Annual Report
AAON, Inc., and Subsidiaries
Consolidated Statements of Income
Year Ending December 31,
2007
2006
(in thousands, except per share data)
2005
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense
Interest income
Other income (expense), net
Income before income taxes
Income tax provision
Net income
Earnings per share:
Basic*
Diluted*
Cash dividends declared per common share*
Weighted average shares outstanding:
Basic*
Diluted*
$ 262,517
205,148
57,369
21,703
35,666
(10)
8
(321)
35,343
12,187
$ 231,460
$
185,195
187,570
43,890
18,059
25,831
(81)
24
424
26,198
9,065
149,904
35,291
17,477
17,814
(16)
67
467
18,332
6,870
$ 23,156
$ 17,133
$
11,462
$
$
$
1.24
1.22
0.32
18,628
18,927
$
$
$
0.93
0.90
0.32
$
$
$
18,456
18,968
0.62
0.60
–
18,510
19,125
AAON, Inc., and Subsidiaries
Consolidated Statements of Stockholders’ Equity and Comprehensive Income
Common Stock
Shares *
Amount
Accumulated
Other
Comprehensive
Income
Paid–in
Capital
(in thousands)
Retained
Earnings
Total
18,525
$ 74
$ –
$ 247
$ 70,850
$ 71,171
–
–
243
(417)
18,351
–
–
408
–
(251)
–
18,508
–
–
613
–
(1,067)
–
18,054
–
–
1
(1)
74
–
–
1
–
(1)
–
74
–
–
4
–
(5)
–
$ 73
–
–
1,507
(1,507)
–
–
–
3,107
500
(3,422)
–
185
–
–
5,420
582
(6,187)
–
$ –
–
266
–
–
513
–
154
–
–
–
–
667
11,462
11,462
–
–
(3,404)
78,908
266
11,728
1,508
(4,912)
79,495
17,133
17,133
–
–
–
(432)
(4,943)
90,666
154
17,287
3,108
500
(3,855)
(4,943)
91,592
(396)
(396)
–
23,156
23,156
1,275
–
–
–
–
$ 1,942
–
1,275
24,431
–
–
(14,581)
(5,440)
5,424
582
(20,773)
(5,440)
$ 93,405 $ 95,420
Balance at December 31, 2004
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, 2005
Comprehensive income:
Net income
Foreign currency translation
adjustment
Total comprehensive income
Stock options exercised, including tax
benefits
Share–based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2006
Adjustment for the adoption of FASB
Interpretation (FIN) No. 48
Comprehensive income:
Net income
Foreign currency translation
adjustment
Total comprehensive income
Stock options exercised, including tax
benefits
Share–based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2007
* Reflects three–for–two stock split effective August 21, 2007
* Reflects three–for–two stock split effective August 21, 2007
The accompanying notes are an integral part of these statements.
The accompanying notes are an integral part of these statements.
31
32
2007 AAON Annual Report
AAON, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation
Provision for losses on accounts receivable
Share–based compensation
Excess tax benefits from stock options exercised
(Gain) loss on disposition of assets
Deferred income taxes
Changes in assets and liabilities:
Accounts receivable
Inventories, net
Prepaid expenses and other
Accounts payable
Accrued liabilities
Net cash provided by operating activities
Investing Activities
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 facility
Payments under revolving credit facility
Borrowings (payments) of long–term debt
Stock options exercised
Excess tax benefit from stock options exercised
Repurchase of stock
Cash dividends paid to stockholders
Net cash used in financing activities
Effects of exchange rate of cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Year Ended December 31,
2007 2006 2005
(in thousands)
$ 23,156 $ 17,133 $ 11,462
9,665
203
582
(2,998)
(108)
(124)
(1,760)
(2,095)
(172)
(1,370)
6,268
31,247
9,146
(59)
500
(1,852)
–
(510)
(4,197)
(5,790)
776
4,178
103
19,428
8,503
68
–
–
130
(1,696)
(5,366)
(2,840)
(563)
(1,269)
3,537
11,966
123
–
–
–
(10,874)
(10,751)
–
3,000
(2,000)
–
(17,781)
(16,781)
30
3,000
(1,000)
(75)
(10,144)
( 8,189)
12,142
(12,142)
271
2,426
2,998
(20,773)
(4,958)
(20,036)
53,706
(53,706)
(108)
1,256
1,852
(3,855)
(2,478)
(3,333)
21,143
(21,143)
(108)
820
–
(4,912)
–
(4,200)
131
591
288
$ 879 $
137
(549)
837
288 $
266
(157)
994
837
AAON, Inc., and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007
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 standardized and custom rooftop units, chillers, air–handling units, make–up air units, heat recovery units, condensing units,
coils and boilers, through its wholly–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., (AAON
Properties, 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. 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 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 denominated in
Canadian currency 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 of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because these
estimates and assumptions require significant judgment, future actual results could differ from those estimates and could have a significant
impact on the Company’s results of operations, financial position and cash flows. The Company reevaluates its estimates and assumptions on
a monthly basis.
The most significant estimates include the allowance for doubtful accounts, inventory reserves, warranty accrual, medical insurance accrual,
and stock–based compensation. Actual results could differ materially from those estimates.
Revenue Recognition
The Company recognizes revenues from sales of products when the products are shipped and the title and risk of ownership pass to the
customer. Selling prices are fixed based on purchase orders or contractual agreements. Sales allowances and customer incentive are
treated as reductions to sales and are provided for based on historical experiences and current estimates. For sales initiated by independent
manufacturer representatives, the Company recognizes revenues net of the representatives’ commission. The Company’s policy is to record
the collection and payment of sales taxes through a liability account.
The accompanying notes are an integral part of these statements.
33
34
2007 AAON Annual Report
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
Inventories
The Company’s customers are concentrated primarily in the domestic 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 5% of revenues in
2007. No customer accounted for 10% of the Company’s sales during 2007, 2006 or 2005 or more than 5% of the Company’s accounts
receivable balance at December 31, 2007 or 2006.
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.
Accounts receivable and the related allowance for doubtful accounts are as follows:
Accounts receivable
Less: Allowance for doubtful accounts
Total, net
Allowance for doubtful accounts:
Balance, beginning of period
Provisions for losses on accounts receivable
Adjustments to provision
Accounts receivable written off, net of recoveries
Balance, end of period
December 31,
2007
2006
(in thousands)
$ 39,220
(407)
$ 38,813
$ 37,014
(266)
$ 36,748
Year Ended December 31,
2007
$
$
266
625
(422)
(62)
407
2006
(in thousands)
2005
$
$
685
589
(648)
(360)
266
$
$
717
634
(566)
(100)
685
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 for excess and obsolete inventories based on product line changes, the feasibility of substituting parts and
the need for supply and replacement parts. Inventory balances at December 31, 2007 and 2006, and the related changes in the
allowance for excess and obsolete inventories account for the three years ended December 31, 2007, 2006 and 2005, are as
follows:
December 31,
2007
2006
(in thousands)
$
$
27,651
1,760
2,788
32,199
(350)
31,849
$ 25,977
2,226
1,649
29,852
(350)
$ 29,502
2007
Year Ended December 31,
2006
(in thousands)
2005
$
$
350
–
–
350
$
$
350
–
–
350
$ 1,050
–
(700)
350
$
Raw materials
Work in progress
Finished goods
Less: Allowance for excess and obsolete inventories
Total, net
Allowance for excess and obsolete inventories:
Balance, beginning of period
Provision for excess and obsolete inventories
Adjustments to reserve
Balance, end of period
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Maintenance and repairs, 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:
Description
Buildings
Machinery and equipment
Furniture and fixtures
Years
10–40
3–15
2–5
35
36
2007 AAON Annual Report
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 (continued)
Warranties
At December 31, property, plant and equipment were comprised of the following:
2007
2006
(in thousands)
Land
Buildings
Machinery and equipment
Furniture and fixtures
Less: Accumulated depreciation
Total, net
Impairment of Long–Lived Assets
$
$
2,196
2,354
31,272
32,211
74,053
82,872
5,883
6,912
113,404
124,349
(63,579)
(54,182)
$ 60,770 $ 59,222
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 2007, 2006 and 2005.
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.
Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
Warranty
Commissions
Payroll
Workers’ compensation
Medical self–insurance
Other
Total
2007
2006
(in thousands)
$
$
6,308
8,851
2,175
1,127
608
345
19,414
$
5,572
6,862
1,890
494
837
403
$ 16,058
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 $4.0 million, $2.4 million and $3.6 million
for the years ended December 31, 2007, 2006 and 2005, respectively.
Changes in the Company’s warranty accrual during the years ended December 31, 2007, 2006 and 2005 are as follows:
2007
2006
(in thousands)
2005
Balance, beginning of the year
Payments made
Warranties issued
Changes in estimate related to preexisting warranties
Balance, end of period
$ 5,572
(3,321)
3,757
300
$ 6,308
$ 6,282
(3,128)
4,343
(1,925)
$ 5,572
$ 6,301
(3,641)
3,622
–
$ 6,282
In 2007, the provision for warranties was increased due to an extension in the warranty period. In 2006, the provision for warranties
was decreased due to a change in estimate related to preexisting warranties occurring in the fourth quarter of 2006. The change
in estimate was due to factors stated above, such as current information on historical trends and a reduction in identifiable warranty
issues.
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
2007
Years Ended,
2005
2006
(in thousands, except share and per share data)
$ 23,156
$ 17,133
$ 11,462
18,628,029
299,015
18,456,108
511,486
18,509,997
614,700
Numerator:
Net income
Denominator:
Denominator for basic earnings per
share –
Weighted average shares*
Effect of dilutive stock options*
Denominator for diluted earnings
per share –
Weighted average shares*
18,927,044
18,967,594
19,124,697
Earnings per share
Basic*
Diluted*
$1.24
$1.22
$ 0.93
$ 0.90
Anti–dilutive shares*
Weighted average exercise price*
282,100
$ 17.81
269,250
$ 16.19
$ 0.62
$ 0.60
172,875
$ 12.57
* Reflects three–for–two stock split effective August 21, 2007.
37
38
2007 AAON Annual Report
1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
1. Business, Summary of Significant Accounting Policies and Other Financial Data (continued)
Advertising
Advertising costs are expensed as incurred. Advertising expense was approximately $784,000, $549,000 and $506,000 for the
years ended December 31, 2007, 2006 and 2005, respectively.
Research and Development
Research and development costs are expensed as incurred. Research and development expense was $2.5 million, $2.0 million and
$1.7 million for the years ended December 31, 2007, 2006 and 2005, 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.
Profit Sharing Bonus Plan
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 in order to reward employee productivity. Eligible employees are regular full–time
employees who are actively employed and working on the first day of the calendar quarter and remain continuously, actively
employed and working on the last day of the quarter and who work at least 80% of the quarter. Profit sharing expense was $4.2
million, $3.3 million and $2.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.
Defined Contribution Plan – 401(k)
The Company sponsors a defined contribution benefit plan (“401(k) Plan”). Eligible employees may make contributions in accordance
with the 401(k) Plan and IRS guidelines. 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 and enrollment. Beginning with pay periods after May
30, 2005, the one year enrollment waiting period was waived. Administrative expenses paid by the Company for the plan were
approximately $98,000, $85,000 and $69,000 for the years ended 2007, 2006 and 2005, respectively.
After January 1, 2006, the Company matching increased to 50% of the employee’s salary deferral up to the first 7% of compensation.
Prior to January 1, 2006 the Company matched 100% of the employee’s salary deferral up to the first 3% of compensation. The
Company contributes in the form of cash and directs the investment to shares of AAON Stock. No other purchases of AAON stock
are permitted. Employees are 100% vested in salary deferral contributions and vest proportionately over 6 years in employer
matching contributions. The Company made matching contributions of $1.3 million, $1.0 million and $0.8 million in 2007, 2006
and 2005, respectively.
New Accounting Pronouncements
In July 2006, Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an Interpretation of SFAS No. 109 (“FIN 48”) was released. FIN 48 clarifies the accounting for uncertain tax positions as described
in SFAS No. 109, Accounting for Income Taxes, and requires a company to recognize, in its financial statements, the impact of a
tax position only if that position is “more likely than not” of being sustained on an audit basis solely on the technical merits of the
position. FIN 48 also requires qualitative and quantitative disclosures including a discussion of reasonably possible changes that
might occur in the recognized tax benefits over the next twelve months as well as a roll–forward of all unrecognized tax benefits.
FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007. The
adoption of FIN 48 did not have a material impact on the Company’s Consolidated Financial Statements.
New Accounting Pronouncements (continued)
In September 2006, the FASB released SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value and
establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair
value measurements. Although SFAS 157 applies to (and amends) the provisions of existing authoritative literature, it does not, of
itself, require any new fair value measurements or establish valuation standards. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Adoption of SFAS 157 is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
In February, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
(“FAS 159”), which creates an alternative measurement treatment for certain financial assets and financial liabilities. SFAS 159
permits fair value to be used for both the initial and subsequent measurements on an instrument by instrument basis, with changes
in the fair value to be recognized in earnings as those changes occur. This election is referred to as the fair value option. SFAS 159
also requires additional disclosures to compensate for the lack of comparability that will arise from the use of the fair value option.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. Adoption of SFAS 159 did not have a material impact
on the Company’s Consolidated Financial Statements.
Segments
Management has reviewed its business operations and determined that it operates in a single homogeneous business segment as
defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information. The Company sells similar products with
similar economic characteristics to similar classes of customers. The technologies and operations are highly integrated. Revenues and
costs are reviewed monthly by management on a product line basis as a single business segment.
2. Supplemental Cash Flow Information
Interest payments of approximately $10,000, $81,000 and $16,000 were made during the years ended December 31, 2007,
2006 and 2005, respectively. Payments for income taxes of $10.2 million, $6.5 million and $7.2 million were made during the
years ended December 31, 2007, 2006 and 2005, respectively. Dividends payable of $2.9 million and $2.5 million were accrued
as of December 31, 2007 and 2006 and paid on January 3, 2008 and 2007, respectively.
3. Certificate of Deposit
At December 31, 2007 and 2006 there were no investments in certificate of deposits. The Company invested $500,000 in a
30–day certificate of deposit at January 31, 2006 bearing interest at 4.1% per annum. The Company reinvested the proceeds
in April 2006 in a 60–day certificate of deposit bearing interest at 4.7% per annum. At December 31, 2005, the Company had
invested $1.0 million in a 30–day certificate of deposit bearing interest at 4% per annum. Proceeds from the $1.0 million certificate
of deposit were reinvested in April 2006 in a 90–day certificate of deposit bearing interest at 4.6% per annum.
4. Revolving Credit Facility
The Company’s revolving credit facility provides for maximum borrowings of $15.2 million which is provided by the Bank of
Oklahoma, National Association. Under the line of credit, there is one standby letter of credit totaling $1.3 million. The letter of
credit was a requirement of the Company’s workers compensation insurance and has been renewed and will expire December
31, 2008. Interest on borrowings is payable monthly at the Wall Street Journal prime rate less 0.5% or LIBOR plus 1.6%, at the
election of the Company (6.84% at December 31, 2007). No fees are associated with the unused portion of the committed amount.
At December 31, 2007 and 2006, the Company had no borrowings outstanding under the revolving credit facility. Borrowings
available under the revolving credit facility at December 31, 2007, were $13.9 million. The credit facility previously required the
Company to maintain a certain financial ratio and prohibited the declaration of cash 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 Stock. In
conjunction with the Board’s vote on February 14, 2006, the restriction of payments of dividends was waived by the lender and
removed from the covenants with the renewal of the line of credit July 30, 2006. At December 31, 2007 and 2006, the Company
was in compliance with its financial ratio covenants. On July 30, 2007, the Company renewed the line of credit with a maturity date
of July 30, 2008.
39
40
2007 AAON Annual Report
5. Debt
The total amount of unrecognized tax benefits is as follows:
Short–term debt at December 31, 2007 and 2006 consisted of notes payable totaling approximately $91,000 and $59,000
due in 2008 and 2007, respectively. In 2007, the notes payable are due in monthly installments of $7,588, with an interest rate of
4.148%. In 2006, the notes payable are due in monthly installments of $9,004, with an interest rate of 3.53%, related to a computer
capital lease.
6. Income Taxes
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:
Current
Deferred
2007
Year Ending December 31,
2006
(in thousands)
2005
$ 12,631
(444)
$ 12,187
$ 9,556
(491)
$ 9,065
$ 8,566
(1,696)
$ 6,870
The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
The “Other” tax rate primarily relates to certain domestic credits.
Federal statutory rate
State income taxes, net of federal benefit
Other
Year Ending December 31,
2007
2006
2005
35%
3%
(3%)
35%
35%
4%
(4%)
35%
35%
4%
(2%)
37%
The tax effect of temporary differences giving rise to the Company’s deferred income taxes at December 31 is as follows:
Net current deferred assets and (liabilities) relating to:
Valuation reserves
Warranty accrual
FIN 48
Other accruals
Other, net
Net long–term deferred (assets) and liabilities relating to:
Depreciation and amortization
NOL
Share–based compensation
2007
2006
(in thousands)
2005
$ 295
2,456
83
1,430
48
$ 4,312
$ 6,376
(2,019)
(383)
$ 3,974
$ 240
2,172
–
1,492
50
$ 3,954
$ 5,492
(1,242)
(189)
$ 4,061
$ 391
2,284
–
1,170
32
$ 3,877
$ 5,027
(695)
142
$ 4,474
The total net operating loss (NOL) deferred tax asset of approximately $5.5 million relates to AAON Canada. The NOL’s originating
in 2007 and 2006 will expire in twenty years. The NOL’s originating in 2005 will expire in nine years.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions.
Effective January 1, 2007 the Company adopted FIN 48.
Balance at January 1, 2007
Change as a result of tax positions taken during an earlier period
Change as a result of tax positions taken during the current period
Change as a result of settlements with tax authorities
Change as a result of a lapse of the applicable statue of limitation
Balance at December 31, 2007
(in thousands)
$
$
551
–
–
(156)
(142)
253
The total amount of unrecognized tax benefits that if recognized would impact the effective tax rate is approximately $190,000.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December
31, 2007 and 2006, the Company had accrued approximately $110,000 and $0 for the potential payment of interest and
penalties, respectively.
The total amount of unrecognized tax benefits at December 31, 2007 is approximately $253,000 related to tax positions for which
it is reasonably possible that the total amounts could significantly decrease during the next twelve months. This amount represents
the unrecognized tax benefits comprised of items related to determination of state nexus. Resolution of these tax benefits will occur
through a voluntary compliance program, which it is reasonably possible will be completed during the next twelve months. As of
December 31, 2007, the Company is subject to U.S. Federal income tax examinations for the tax years 2004 through 2007, and to
non–U.S. income tax examinations for the tax years of 2004 through 2007. In addition, the Company is subject to state and local
income tax examinations for the tax years 2001 through 2007.
7. Stock–Based Compensation
The Company maintains a stock option plan for key employees, directors and consultants. The Company’s stock option plan provided
for 4.4 million shares of Common Stock to be issued under the plan. Under the terms of the plan, the exercise price of shares granted
may not be less than 85% of the fair market value at the date of the grant. Options granted to directors prior to May 25, 2004,
vest one year from the date of grant and are exercisable for nine years thereafter. Options granted to directors on or after May 25,
2004, vest one–third each 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. On May 22, 2007, the stockholders of the Company adopted a Long–Term
Incentive Plan which provides an additional 750,000 shares that can be granted in the form of stock options, stock appreciation
rights, restricted stock awards, performance units and performance awards. Since inception of the Plan, non–qualified stock options
and restricted stock awards have been granted with the same vesting schedule as the previous plan.
Prior to January 1, 2006, the Company accounted for its nonqualified stock options under the recognition and measurement
principles of APB 25 and related interpretations. Under APB 25, no stock–based employee compensation cost was reflected in net
income, as all options granted under the plan qualified for “fixed” plan accounting and had an exercise price equal to the market
value of the underlying common stock on the date of grant. The Company had adopted the disclosure–only provisions of FAS 123.
No stock based compensation cost was recognized in the Consolidated Statements of Income for the year ended December 31,
2005.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R) using the modified–
prospective transition method. Under that transition method, compensation cost recognized for the year ended December 31, 2007
and 2006 includes all share–based payments granted prior to, but not yet vested as of January 1, 2006, and compensation cost
for all share–based payments granted subsequent to January 1, 2006. The compensation cost is based on the grant date fair value
calculated using a Black–Scholes–Merton Option Pricing Model in accordance with provisions of SFAS 123(R).
41
42
2007 AAON Annual Report
For the year ended December 31, 2007 and 2006, the Company recognized approximately $526,000 and $500,000 in pre–tax
compensation expense in the Consolidated Statements of Income related to the stock option plan. The total pre–tax compensation
cost related to nonvested stock options not yet recognized as of December 31, 2007 and 2006, is $1.5 million and $1.9 million,
respectively. The nonvested stock options are expected to be recognized over a weighted–average period of 2.3 years.
Prior to the adoption of SFAS 123(R), the Company presented all tax benefits resulting from the exercise of stock options as operating
cash flows in the Consolidated Statements of Cash Flows. FAS 123(R) requires that cash flows from the exercise of stock options
resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash
flows.
The effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to
stock–based employee compensation in prior years is as follows:
Year Ended
December 31, 2005
(in thousands except
per share data)
Net income, as reported
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
$ 11,462
(438)
$ 11,024
$ 0.62
$ 0.60
$ 0.60
$ 0.58
The following assumptions were used to determine the fair value of the unvested stock options on the original grant date for expense
recognition purposes for options granted during the years ended December 31, 2007 and 2006 and for pro forma disclosure
purposes for the year ended December 31, 2005:
Directors and Officers:
Expected dividend yield
Expected volatility
Risk–free interest rate
Expected life
Forfeiture Rate
Employees:
Expected dividend yield
Expected volatility
Risk–free interest rate
Expected life
Forfeiture Rate
2007
2006
2005
N/A
N/A
N/A
N/A
N/A
1.67%
41.92%
4.61%
6.3 yrs
28%
2.05%
42.76%
5.05%
8.0 yrs
0%
2.05%
42.33%
4.84%
6.3 yrs
28%
–
32.15%
4.39%
8.0 yrs
0%
–
32.15%
4.39%
8.0 yrs
0%
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk–free
interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at
the grant date. Volatility is based on historical volatility of the Company’s stock. The Company had not declared dividends in prior
years, but initiated a dividend payout in 2006. Previously, the Company used the Board of Director approved semi–annual dividend
payout of $0.20 per share to calculate the expected dividend yield. The Board of Directors approved future dividend payments of
$0.16 per share related to the stock split effective August 21, 2007 and the table above was adjusted to reflect the change.
The following is a summary of stock options outstanding as of December 31, 2007:
Options Outstanding
Options Exercisable
Number
Outstanding
at
December 31,
2007
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Number
Exercisable at
December 31,
2007
Weighted
Average
Exercise
Price
21,750
307,320
241,613
46,500
67,500
244,250
928,933
0.04
1.34
4.84
7.59
7.89
8.81
4.97
$ 2.26
3.20
8.45
11.69
14.34
17.23
$ 9.47
$17.56
16.62
11.37
8.13
5.48
2.59
$13.67
21,750
307,320
180,413
24,400
23,300
36,450
593,633
$2.26
3.20
7.69
11.75
14.18
16.81
$6.15
Range of
Exercise Prices
2.26–2.26
2.67–3.85
5.73–11.29
11.40–12.00
12.68–15.55
15.99–21.01
Total
A summary of option activity under the plan as of December 31, 2007, is as follows:
Options
Outstanding at December 31, 2004
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2005
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2006
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2007
Exercisable at December 31, 2007
Shares
1,739,670
199,500
(243,600)
(25,050)
1,670,520
269,251
(406,950)
(71,325)
1,461,496
139,188
(573,374)
(98,377)
928,933
593,633
Weighted
Average
Exercise Price
$ 4.09
11.09
3.37
5.58
$ 5.01
15.93
3.09
11.11
$ 7.33
15.98
4.24
14.80
9.47
$ 6.15
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
($000)
4.97
3.07
$ 9,617
$ 8,116
43
44
2007 AAON Annual Report
The weighted average grant date fair value of options granted during 2007 and 2006 was $7.07 and $6.70, respectively. The
total intrinsic value of options exercised during the year ended December 31, 2007 and 2006 was $8.7 million and $5.0 million,
respectively. The cash received from options exercised during the year ended December 31, 2007 and 2006 was $2.4 million
and $1.3 million, respectively. The impact of these cash receipts is included in financing activities in the accompany Consolidated
Statements of Cash Flows.
A summary of the status of the non–vested stock option shares as of December 31, 2007, is as follows:
Weighted Average
Nonvested at January 1, 2007
Granted
Vested
Forfeited
Nonvested at December 31, 2007
Shares
415,980
108,250
(100,678)
(88,252)
335,300
Grant Date Fair Value
$ 6.09
7.50
6.10
6.68
$ 6.49
The total fair value of shares vested during the year ended December 31, 2007 was approximately $449,000.
The Company also grants restricted stock awards to key employees and directors. These awards are recorded at their fair value on
the date of grant and compensation cost is recorded using straight–line vesting over the service period. The weighted average grant
date fair value of restricted stock awards granted during 2007 was $20.85 per share, total grant date fair value of approximately
$811,000. As of December 31, 2007, there was no aggregate intrinsic value of restricted stock awards. For the year ended
December 31, 2007, the Company recognized approximately $56,000 in pre–tax compensation expense in the Consolidated
Statements of Income related to restricted stock awards. In addition, as of December 31, 2007, unrecognized compensation cost
related to non–vested restricted stock awards was approximately $734,000 which is expected to be recognized over a weighted
average period of 2.0 years.
A summary of restricted stock activity under the plan as of December 31, 2007, is as follows:
Options
Shares
Nonvested at January 1, 2007
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2007
Exercisable at December 31, 2007
–
38,900
–
(1,050)
37,850
–
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value ($000)
9.50
–
$ –
$ –
During 2007, the Compensation Committee of the Board of Directors authorized and issued restricted stock awards to the key
employees and directors of the Company. The restricted stock award program offers the opportunity to earn shares of AAON
Common Stock over time, rather than options that give the right to purchase stock at a set price. Restricted stock awarded to directors
vest one–third each year. All other restricted stock awards vests at a rate of 20% per year. Restricted stock awards are grants that
entitle the holder to shares of Common Stock subject to certain terms. The fair value of option grants is based on the fair market value
of AAON Common Stock on the respective grant dates, reduced for the present value of dividends.
SFAS 123(R) requires that cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative
compensation costs (excess tax benefits) be classified as financing cash flows. For the twelve months ended December 31, 2007
and 2006, $3.0 million and $1.9 million respectively, of such excess tax benefits from share based payment plans was classified
as financing cash flows.
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 Company’s
Common Stock. 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 the
exercise price.
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. Stock Repurchase
Following repurchases of approximately 12% of its outstanding Common Stock between September 1999 and September 2001,
the Company announced and began another stock repurchase program on October 17, 2002, targeting repurchases of up to
approximately 2.0 million shares of its outstanding stock. On February 14, 2006, the Board of Directors approved the suspension
of the Company’s repurchase program. Through December 31, 2006, the Company had repurchased a total of 1,886,796 shares
under this program for an aggregate price of $22,034,568, or an average of $11.68 per share. The Company purchased the
shares at the current market price.
On November 6, 2007, the Company began a new stock repurchase program, targeting repurchases of up to approximately 10%
(1.8 million shares) of the outstanding stock of the Company from time to time in open market transactions at prevailing market prices.
Through December 31, 2007, the Company had repurchased a total of 690,300 shares under this program for an aggregate price
of $13,012,199, or an average price of $18.85 per share.
On July 1, 2005, the Company entered into a stock repurchase arrangement by which employee participants in AAON’s 401(k)
savings and investment plan are entitled to have shares of AAON stock in their accounts sold to the Company to provide diversification
of their investments. The maximum number of shares to be repurchased is unknown under the program as the amount is contingent on
the number of shares sold by employees. Through December 31, 2007, the Company repurchased 501,075 shares for an aggregate
price of $7,712,287, or an average price of $15.39 per share. The Company purchases the shares at the current market price.
On November 7, 2006, the Board of Directors authorized the Company to repurchase shares from certain directors following
their exercise of stock options. The maximum number of shares to be repurchased is unknown under the program as the amount is
contingent on the number of shares sold by directors. Through December 31, 2007, the Company repurchased 260,625 shares for
an aggregate price of $5,232,188, or an average price of $20.08 per share. The Company purchases the shares at the current
market price.
45
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2007 AAON Annual Report
10. Dividends
On February 14, 2006, the Board of Directors voted to initiate a semi–annual cash dividend. Previously, the Company paid Board
of Director approved semi–annual dividend payout of $0.20 per share. The Board of Directors approved future dividend payments
of $0.16 per share related to the stock split effective August 21, 2007. Dividends were declared to shareholders of record at the
close of business on June 11, 2007 and December 13, 2007 and paid on July 2, 2007 and January 3, 2008. The company paid
cash dividends of $5.0 million ($2.5 million paid in January and July 2007, respectively) and declared dividends payable of $2.9
million for the year ended December 31, 2007. The Company paid cash dividends of $2.5 million and declared dividends payable
of $2.5 million for the year ended December 31, 2006.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated March 10 2008, accompanying the consolidated financial statements and management’s assessment of
the effectiveness of internal controls over financial reporting included in the Annual Report of AAON, Inc. on Form 10–K for the year ended
December 31, 2007. We hereby consent to the incorporation by reference of said reports in the Registration Statement of AAON, Inc. on
Form S–8 (File No. 333–52824, effective December 28, 2000).
Exhibit 23.1
11. 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.
Tulsa, Oklahoma
March 10, 2008
12. Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the years ending December 31, 2007 and 2006:
/s/ Grant Thornton LLP
2007
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2006
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
March 31
June 30
September 30
(in thousands, except per share data)
December 31
Quarter Ended
$58 ,628
15,722
6,317
0.34*
0.33*
$70,835
15,598
6,877
0.37*
0.36*
$70,907
13,640
5,382
0.29*
0.28*
$62,147
12,409
4,580
0.25
0.24
March 31
June 30
September 30
(in thousands, except per share data)
December 31
Quarter Ended
$53,620
10,384
3,743
0.20*
0.20*
$59,137
10,119
3,455
0.19*
0.18*
$64,153
13,591
5,397
0.29*
0.28*
$54,550
9,796
4,538
0.25*
0.24*
*Reflects three–for–two stock split effective August 21, 2007.
47
48
2007 AAON Annual Report
I, Norman H. Asbjornson, certify that:
I, Kathy I. Sheffield, certify that:
1. I have reviewed this Annual Report on Form 10–K of AAON, Inc.
1. I have reviewed this Annual Report on Form 10–K of AAON, Inc.
CERTIFICATION
CERTIFICATION
Exhibit 31.1
Exhibit 31.2
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;
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;
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;
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:
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;
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;
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
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
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):
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
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.
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 11, 2008
49
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
Date: March 11, 2008
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
50
2007 AAON Annual Report
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES–OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES–OXLEY ACT OF 2002
Exhibit 32.1
Exhibit 32.2
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10–K for the year ended December 31, 2007, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman H. Asbjornson, Chief Executive 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:
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10–K for the year ended December 31, 2007, 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
(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.
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the
Company.
March 11, 2008
/s/ Norman H. Asbjornson
March 11, 2008
Norman H. Asbjornson
Chief Executive Officer
/s/ Kathy I. Sheffield
Kathy I. Sheffield
Chief Financial Officer
51
52
2007 AAON Annual Report
Officers
Board of Directors
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.
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.
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 over 40 years.
Norman H. Asbjornson
President/CEO
John B. Johnson, Jr.
Secretary
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.
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.
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 38 years, holding
positions in design, research,
software development,
engineering, teaching, sales and
senior management.
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
of the Company.
53
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.
Arthur (Chip) H. McElroy, II
was elected as a director of
the company in 2007. From
1997 to present, Mr. McElroy
has served as President and
CEO of McElroy Manufacturing,
Inc., a manufacturer of fusion
equipment and fintube machines.
Ken Lackey
was elected as a director of the
Company in 2007. From 2001
to present, Mr. Lackey has served
as CEO and president of NORDAM,
a privately held aerospace company.
Corporate Data
Transfer Agent and Registrar–Progressive Transfer Company,
1981 East Murray-Holladay Road, Suite 200, Salt Lake City, Utah 84117
Auditors–Grant Thornton LLP, 2431 East 61st Street, Suite 500,
Tulsa, Oklahoma 74136
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
General Counsel–Johnson, Jones, Dornblaser, Coffman & Shorb–2200
Bank of America Center, 15 West Sixth Street, Tulsa, Oklahoma 74119
Common Stock–NASDAQ-AAON
54
2007 AAON Annual Report
THANKS TO OUR EMPLOYEES
WILLIAM ABBOTT
MARIA ARREDONDO
SHARRON ABERCROMBIE
MARIA ARROYO DE CIRIACO
DAVID ARTIAGA Y
NORMAN ASBJORNSON
SCOTT ASBJORNSON
ROBERT ASHBY
GARY ASHMORE
DWIGHT AUSTIN
IVAN AVALOS
JESUS AVELAR SALDIVAR
ERNESTO AVILA
JOSEPH AVILA
NORA BACKUS
RICHARD BACKUS
JASWINDER BADESHA
JAHANGIR BAHRAQMI
DWIGHT BAKER
ERIC BAKER
JOHN BALDWIN
SARBJIT BANWAIT
CARLOS BARAJAS
CAROLYN BARBER
RAY BARBER
CANDY BARBOSA
JUSTIN BARLETT
KIONTE BARNES
DAVID BARNETT
CESAR BARRAZA
MARIBEL BARRIOS
MARCUS BLACK
VICKIE BLACK
KEVIN BLACKBOROW
BRIAN BLACKMON
MARIA BLANCO
DAVID BLEVINS
JIMMY BLEVINS
JUSTIN BLEVINS
AARON BODOVSKY
GENE BOESE
JAMES BOND
ALEXANDER BOTELLO
ANTHONY BOTELLO
ROSENDO BOTELLO
SHAWN BOUGH
KAY BOX
DEMETRIUS BOYD
JOHN BOYD
BRIAN BRADFORD
MYOSHIA BRADLEY
CHRISTOPHER BRANTLEY
RAYNOR BRENTON
ARLANDO BREWER
BOBBY BREWER
DAVID BRICE
JASPER BRITT
ARLUNDA BROOKS
MITCHELL BROOKS
NEREYDA BARRIOS DE PEREZ
DAVID BROWN
ROSA BARRO
ESTHER BARRON
ANDREW BASS
MICHAEL BASS
JUSTIN BATEMAN
STUART BAUGH
ELLIOTT BAYHYLLE
JASON BAZAN
SHANNON BECK
ELOY BELLO-CRUZ
GUZMAN BENITEZ
OFELIA BENITEZ
BONNIE BENSON
IDA BERMUDEZ
ROLAND BERRY
SERGIO BESERRA
THOMAS BIRD
JESSICA BIRDWELL
CHERYL BIRMINGHAM
JERMAINE BROWN
MITCHELL BROWN
JAMES BRUCE
PHILLIP BRUCE
MACEO BRUMLEY
WILLIAM BRYANT
ANNA BUI
BANG BUI
KELLI BURKES
BILLY BURNS
MONICA BURNS
SHANNON BURTCH
DOUGLAS BURTRUM
JOSEPH BUSH
TINA BUSH
WAYNE BUSH
ANGELICA BUSTOS
JOHN BUTLER
JOHNNIE BUTLER
LUIS ACOSTA
MARIA D. ACOSTA
MARIA L. ACOSTA
MARTHA ACOSTA
ROGELIO ACOSTA GUERRERO
ANDRES ACOSTA-LUJAN
DANIEL ADAIR
ENRIGUETA ADAME
GARY ADAMS
RODNEY ADAMS
ISAAC ADERINBOYE
RITA ADIMARI
MARIA AGUAYO
ARTURO AGUILAR
HUMBERTO AGUILAR
PRITESH AHLUWALI
ROSHANLAL AHLUWALIA
JAMES AKINS
DANIEL ALAGDON
MARTHA ALANIS
ENRIQUE ALAVALA
IMELDA ALBA
SOCORRO ALBA
JULIO ALBINO
NORMAN ALBRIGHT
DEMARCO ALEXANDER
JAMES ALEXANDER
SHANNON ALFORD
BRENDAN ALLEN
DONALD ALLEN
KEVIN ALLEN
NORMAN ALLEN
RAFAEL ALONZO
TARIK ALSAADI
FELIPE ALVARADO
LINDA ALVARADO
MICHAEL AMBURGEY
CYNTHIA AMENT
JEHAD AMIREH
MARGARITO ANGELES
WESLEY ANSELME
ALFREDO ANTONIO
URIEL ARELLANO GUERRA
JOSE ARGUMEDO-RUIZ
SESAR ARIAS
RONDELL ARMSTRONG
GARY ARNOLD
55
ROSA BUTLER
BERRY BUZZARD
DORA CADENA
CLEVELAND CAGE, JR.
STEVEN COATNEY
KENNETH COCHRAN
BARBARA COLEMAN
DARREN COLEMAN
MARTHA CALDERAS-MOSQUEDA
LATOYA COLEMAN
MARGARITO CALDERON
DANIELLE CALHOUN
JORGE CALIXTO
ELIZABETH CALVILLO
LAZARO CAMA
JOSE CAMAS-PADILLA
DAVID CAMPBELL
ARTHUR CANDLER
JORGE CARCAMO
RONALD COLLINS
CHRISTOPHER COMBS
KATHLEEN COMPTON
DALE CONKWRIGHT
JONATHAN CONNELL
GERARDO CONTRERAS
MARK COOK
SHERITTA COOKS
MICHAEL COOLIDGE
HERMES CARCAMO-CASTRO
SCOTT COON
ERIC CARDENAS
MARIA CARDENAS
JUSTIN CARDOZA
CARL CARPENTER
SHAWN CARR
MODESTO CARRERA
VINCENT CARSON
ALEJANDRO CARTAGENA
JAMES CARTER
ALFREDO CASIMIRO
SOLEDAD CASTRO
JOSE CASTRO M
MARIA CERDA
JUSTO CHAGOYA
GUADALUPE CHAIREZ-GALAN
PATRICK CHAPMAN
SERGIO CHARLES
RASEAN CHARVIS
CLARK CHASE
JOSH CHATTILLON
ADALBERTO CHAVEZ
GREGORY CHAVEZ
JOHN CHAVEZ
DALE CHERRY
DANIEL CHERRY
MICHAEL CHERRY
ADAN CHICAS
DONNA COONFIELD
JAMES COOPER
ELAINE CORKHILL
ALBERTO CORONA
BLANCA CORONA
HERON CORONA
ROBERTO CORONA
EDUARDO CORTEZ
ROSA CORTEZ
SERGIO COTERO
JOHN COTTON, III
WESLEY COVEY
BILLY COX
CHRISTINE COX
JERRY COX
JOHN COX
PATRICK COX
ADRIAN CRABTREE
RICHARD CRAITE
STEVEN CRASE
DEVIN CREECH
JUAN CRESPO-MAISONET
DALE CREVAR
MIKEL CREWS
DARRELL CROW
DARRELL CROW, JR.
DRUMMOND CROWE
CAROLYN CRUTCHFIELD
WILLIAM CHRISTOPHER
MAGNOLIA CUADROS DE SANCHEZ
GEORGE CLARK
JOHN CLARK
MORRIS CLARK
FLOYD CLEGHORN
WILLIAM CLEVELAND
VICTORY CULLOM, II
ROBERT CUMMINGS
JAMES CURLEY
GENE CURTIS
BOGDAN CZEMIAWSKI
CARLOS BRISENO GUERRERO
WARREN CASTLEBERRY
ANGEL GARCIA
JESUS GARCIA
LAURA GARCIA
MARIO GARCIA
MAXIMO GARCIA
NICKLAUS GARCIA
ROBERTO GARCIA
WILSON GARCIA
MARIA GARCIA GARCIA
GLITER GARCIA LOPEZ
MIGUEL GARCIA-SUAREZ
JOHNNY GARDNER, JR.
NORMA GARIBAY
JAMIE GARLISI
STACY GARRETT
PATRICK GARRETT, SR.
CARLOS GARZA
JORDON GARZA
RALPH GASAWAY
MIKE GATELEY
STEVE GEARY
JAMES GEORGE
SANTONIA GIBSON
AMRIK GILL
DARRYL GILLIAM, II
WILBERT GILMORE
VINCENT GLOVER
GARY GOFF
EMMETT GOINS
HECTOR GOMEZ
HUMBERTO GOMEZ
JOSE GOMEZ
MARIA GOMEZ
MOISES GOMEZ
JOSE GOMEZ-MORENO
NICK DABIJA
CANDY DAILEY
CHANH DANG
GWENDOLYN DANIELS
JOHN DANIELS
MARQUES DARBY
WILLIAM DAUGHERTY
ANGELA DAVIS
BYRON DAVIS
CAROLYN DAVIS
CATHY DAVIS
JERRY DAVIS
MARLEITTA DAVIS
RICHARD DAVIS
JAMES DAVIS, III
WILFREDO DE JESUS
OTILIA DE JONES
MATILDE DE LA TORRE
GWENDOLYN DECKARD
BOBBY DEGRAFFENREID
MAGALI DEJESUS
ISMAEL DELAPAZ
EVA DELATORRE
LUCERO DELEON MENDOZA
ALBERTO DELEON-CASTILLO
ALVARO DELEON-MEDOZA
GUADALUPE DELGADO
LUIS DELGADO
JUANA DELOBO
ANDRES DELOS SANTOS
RAQUEL DELUNA
RODRIGO DELUNA
JATINDER DEOL
SURJIT DEOL
EUFEMIO DEPAZ
VICENTE DEPAZ-MEDINA
DERRICK DESTRO
AUDENCIA DEVILLA
ROY DEVILLE
CHARLES DEWEESE
SOLEDAD DIAZ
HEATHER DIETLIN
CARL DIKA
MELANIE DIXON
HOMER DODD
RICKEY DODSON
MARTIN DOMINGUEZ
PABLO DOMINGUEZ
WILBER DOMINGUEZ
SEAN DONALD
JENNIFER DOSSMAN
JODI DOTY
HAROLD DOUGLAS
ERIC DOWNING
JUAN DUARTE
CATHRYN DUBBS
JERROLD DUBBS
BRIAN DUCKETT
CAROLYN DUESLER
CRAIG DUKE
LINDA DUNEC
BUDDY DUNN
CORTNEY DUNN
ISAAC DUNPHY
JASON DUNPHY
RALPH DURBIN
ALEJANDRO DURON
RANDY DWIGGINS
ADRIAN DYE
WENDELL EASILEY
DAVID ECHEVARIA
ANDREW ECKERT
ALSON EDWARDS
GARY EDWARDS
ABBAS ELHORCHI
BETTY ELI
EARL ELLIOTT
HARVEY ELLIS
TINISHA ENGLISH
CARL EPPS, II
NORBERTO ESPARZA-TORRES
JOSE ESPINOSA
JOSE ESQUIVEL
EARL ESTEP
JESUS ESTRADA-GONZALEZ
STEPHEN ETTER
GILDA ETUMUDOR
GREGORY EUBANKS
OTIS EVANS
REGINALD EVERIDGE, JR.
SHAWN FAIRLEY
KATHY FALCONER
JOSE FELIX-GALVAN
ROBERT FERGUS
ELIZABETH FERGUSON
CATALINA FERNANDEZ
DAVID FERNANDEZ
SALVADOR FERNANDEZ
ANDREW FINCH
JESSE FINCH
STERLYN FINCH
BRUCE FISHER
JASON FISHER
ANTHONY FIZER
WAYNE FLASKA
RAY FLETCHER
COPOTENIA FLETCHER, JR.
CAROLINA FLORES
EFIGENIA FLORES
JUANA FLORES
LAURA FLORES
DEBRA FLOYD
MITCHELL FLOYD
RUBY FLOYD
VICKY FLOYD
MARK FLY
HECTOR FONTANEZ-ZAYAS
KENNETH FONTENOT
SHARON FONTENOT
SHEILA FORREST
CHRISTOPHER FOSTER
FREDERICK FOSTER
JOSEPH FOWLER
LORETTA FOWLKES
KENNETH FOX
KENNETH FOYIL
DUDLEY FRANCIS
PHILLIP FRANK
JASON FRANKLIN
WARREN FRANKLIN
REVONDA FRANKS
CURTIS FRAZEE
GARY FREDERIKSEN, JR.
OLGA FRENCH
ANGEL FRIAS
DANIEL FRIAS
ELBERT FULLER
WADE FULLER
REGINALD FULSOM, JR.
ANGELIA FULTON CREWS
RONY GADIWALLA
RANULFO GALICIA
MALISSA GALINDO
MARIA GALINDO
MA GALVAN
MARIA GALVAN
YOLANDA GALVAN
ALVARO GARCIA
AMBER GARCIA
ANDRES GARCIA
56
2007 AAON Annual Report
JUAN GOMEZ-OLMOS
DANIEL GOMEZ-SIGALA
CHRISTOPHER GONZALES
ADRIAN GONZALEZ
ALEX GONZALEZ
MANUEL GONZALEZ
MARTIN GONZALEZ
NAYELI GONZALEZ
VICTOR GONZALEZ
BARRY GOODSON
JAMES GOREE
STEPHEN GOTCHER
DALE GRAHAM
BUENAS GRANADOS
CARLA GRAVES
ZAINAB GRAVES
MARIA GRAY
TYRA GRAY
JESSE GREEN, JR.
KELLI GREER
BRANDON GRIFFIN
CODY GRIFFIN
JOHN GRIFFIN
RONALD GRIMES
DAN GRINBERGS
DANIEL GROFF
RAMON GUERRERO
JOSHUA GUITAR
REMIA GUTHERY
MANUEL GUTIEREZ
ISAAC GUTIERREZ
RAQUEL GUTIERREZ
EVELYN GUTIERREZ LAINEZ
ERASMO GUZMAN
NANCY HACKNEY
JACK HALL
KELLY HALL
STEPHEN HALL
LESLIE HALL, JR.
RITA HALLER
SCOTT HAMILTON
OTIS HAMILTON
JEFFREY HAMMER
SAM HAMMOUD
ROBERT HANNA
DONALD HARDEN
MARQUIS HARLIN
DONALD HARMON
KENNY HARRIS
STACEY HARRIS
ROBI HARTMANN
HEATHER HASKINS
DONALD HATLEY
JEREMY HAWKE
BILLY HAWLEY, JR.
WILLIE HAYES
BRADLEY HAYNES
TEMESIA HEATH
THEODORE HEATH
TIM HEFFLIN
STEPHEN HEGVOLD
DANIEL HENDERSON
TYSON HINTHER
CLYDE HITCHYE
BON HOANG
SANDRA HOFFMAN
BRYAN HOLLAND
JAMES HOLLINGSWORTH
DONNA HOLLOWAY
LAWRENCE HONEL
STEPHEN HOOVER
SAMANTHA HOPKINS
TERRI HORN
VICTORIA HORNER
WILBURN HORNER, JR.
DANIEL HORRELL
JOSHUA HORST
JERRY HOUSTON
DAVID HOWARD
LARRY HOWARD
CLARENCE HUBBELL
LYDIA HUDSON
PHILIP HUDSON
PHILIP HUDSON, JR.
ANTHONY HUFFMAN
BILLY HUGHART
JIMMY HUGHES
ROSARIO HUIZAR
ROBERTO HUNT
DEMETRIUS HENDERSON
BRENDA HURTADO
MIKE HENSLEY
ALVARO HERNANDEZ
ARMANDO HERNANDEZ
CORCINA HERNANDEZ
EDUARDO HERNANDEZ
FRANCISCO D. HERNANDEZ
FRANCISCO O. HERNANDEZ
JOSE HERNANDEZ
LILY HERNANDEZ
LUIS HERNANDEZ
MARIA HERNANDEZ
MARIANO HERNANDEZ
MAYTE HERNANDEZ
OSCAR HERNANDEZ
DONALD HICKMAN
DANNY HIDALGO
TAKEO HIGA
BRENDA HIGGINS
DEWAYNE HIGHTOWER
PAUL HILL
JEFFERY HINES
JUAN HINOJOSA
RONALD HUTCHCRAFT
GARY HUTCHINS
GARY HUTCHINSON
TAN HUYNH
OKECHUKWU IBEH
SAMUEL INGRAM
ANTHONY INKTON
FIRDOUS IRANI
TIM IRWIN
MELHAM JABR
BELINDA JACKSON
JEFF JACKSON
MAVIS JACKSON, JR.
DELLA JACOBS
DANNY JACOT
JOSE JAMAICA
RITA JAMAICA
MCKINLEY JAMES
WILBUR JAMES
FRANCES JARAMILLO
JASON JEWELL
GENELLE JIMBOY
ALEJANDRO JIMENEZ
J. ROSARIO JIMENEZ
MARIA JIMENEZ
RAUL JIMENEZ
VINCENT JIMENEZ
JUAN JIMENEZ, JR.
RICARDO JIMENEZ MONTELONGO
PEDRO JIMENEZ-DELFIN
FREDERICK JIMMERSON
KAREN JOBE
ED JOHNSON
JESSICA JOHNSON
LEROY JOHNSON
REX JOHNSON
SYLVIA JOHNSON
WILL JOHNSON
THURLIN JOHNSON, II
PETE JOHNSON, JR.
WILLIAM JOHNSON, JR.
ANTONIO JONES
DANNY JONES
DAVID JONES
DJUAN JONES
JAMIETRIS JONES
KELLI JONES
RENEE JONES
ROSE JONES
GEORGE JONES, JR.
JAMES JONES, JR.
JASON JORDAN
FERNANDO JUAREZ
JAIME JUAREZ
PATRICK KAISER
BRIAN KASTL
RICHARD KEATON
DONALD KEELER
AARON KELLY
DANIEL KEMP
GREGG KENNEDY
CHRISTINE KEY
GO KHAM
MOHAMMED KHAN
PAVEL KHARABORA
KIRK KHILLINGS
NANG KHUP
RENA KIGHT
ALAN KILGORE
ANDREW KILGORE
BOBBY KILGORE
THANG KIM
MICHAEL KIMMONS
LORI KING
RUSSELL KING
STEPHEN KINSEY
ALEKSANDR KIRYUKHIN
GEORGE KLICK
FEDIR KLYUCHNYK
DAVID KNEBEL
CLYDE KNOX
ROBERT KNUTH
ANATOLI KONOVALCHUK
JAMES KOSS
EDWARD KRACKE, II
ROBERT KRAFJACK
MIKHAIL KRUPENYA
KARL KUENEMANN
MIKE LAFOND
JEANETTE LAIRD
RENATO LALATA
GEORGE LAM
COLE LAMBERT
LISA LONG
LINDA LONGORIA
ALONZO LOPEZ
ANA LOPEZ
ARTURO LOPEZ
MARGARITO LOPEZ
RAUL LOPEZ
THOMAS LOPEZ
MA DE LOPEZ CUEVA
JOHNNY LOPEZ, JR.
NICK LORBETSKIE
VINCENT LOWE
PAUL LOWERY
CHEVONCO LUCAS
ROBERT LUCIDI
JARRAD LUDLOW
QUANNAH LUDLOW
ANDREA LUECK
JAMES LUKER
ANA LULE
KAREN MARTINEZ
OBDULIA MARTINEZ
JOHNNY MERRELL
AUBREY METCALF, JR.
FRANCISCO MARTINEZ LEON
VIVIAN MEYER
JUAN MARTINEZ-RUIZ
BEVERLEY MASON
JAMES MASON
ARTURO MATUL
RON MAUCH
ANTONIO MAURICIO
LEONARD MAXWELL
DUANE MAYFIELD
JACQUELINE MAYFIELD
TERRELL MAYFIELD
VLADO MAZILICA
COURTNEY McAFEE
DEBORAH McATEER
TINA McBEATH
ROBERT McBOWMAN
CHRISTOPHER McCLAIN
DIRK McCLELLAN
MOMCILO MIJAKOVAC
RONALD MIKEL
BRENDA MIKESKA
RUSSELL MILE
RANULFA MILIAN
CHRIS MILLER
MYKEA MILLER
DUANE MILLS
MICHAEL MILTON
BRIAN MINGLE
BRUCE MINTON
SCARLETT MIRANDA
RUSSELL MITCHELL
JOHNNY MIZE
JAY MODISETTE
RONALD MODLIN
IRMA MOGUEL
ERIC MULLINIKS
ALLEN MUMPHREY
TUAL MUNG
JESUS MUNOZ
EDUARDO MURILLO
JOHNNY MUSGRAVE
JUNE MUSGRAVE
DAVID MYERS
ASAD NAKHAEI
SING NANG
VINCENT NASH
GO NAULAK
MARIA NAVA
MAHENDRAN NAVARATNAM
ABEL NAVEJAS
CLAYTON NEAL
SAMUEL NEALE
NATALIE NEILSON
NATHANIEL NELSON
RONALD NELSON
CHRISTOPHER LUMBERT
MICHAEL McCLELLAND
BRAULIO MOISES-LEE
CARLOS NEVARA NEGRON
JOSE DEL CARMEN LANDERO SANCHEZ
MARIANA LUNA
DORIS McCLOUD
ROY McCONNELL
DEBRA McCOWAN
KEVIN McCOWAN
JOSE MOLINA
STAN MOLOUCH
STEVEN MOLSTER
JOSE MONREAL
WESLEY McCOWAN, JR.
MARIA MONSIVAIS
PEDRO NEVAREZ
DUNG NGUYEN
HOANG-CHI NGUYEN
THANH NGUYEN
TIEN NGUYEN
DEBORAH LANE
DONALD LANEY
UGIN LANG
MICHAEL LAVALLEE
JEFFREY LAWSON
RONALD LAWSON
MICHEL LEBEL
JOSE LEBRON
JACQUELINE LEE
RHONDA LEE
MATTHEW LEEPER
PATRICIA LENNOX
ALBERTO LEON-BENITEZ
RONALD LESTER
TIMOTHY LEWIS
JIMMY LEWIS JR
GILBERTO LEYVA
MARC LICHTBLAU
PING LIN
JERRY LINCOLN
THOMAS LINCOLN
WILLIAM LINDSAY
ANTHONY LITTLE
JARED LITTLEJOHN
MIKE LO VAN
JOEL LOCKMILLER
FRANKLIN LOGAN, JR.
MASSOUD LOLOYAN
KELLY LYBARGER
GREGORY MACK
JORGE MADRIGAL
MONICA MAGANA
OCTAVIO MAGANA
N MAI
BARBARA MALONE
CARLOS MALONE
NGIN MANG
SUAN MANG
ERIC MANN
KENNETH MANN
EVELYN MANNING
PAULA McCRARY
SHAWN McCRARY
ROBERT McCULLEY
KATHY McCULLOCH
FLORENCE McDANIEL
LOYD McDANIEL
SHARRON McDANIEL
JAMES McELROY
DEBORAH McFARLIN
GEORGINA MANZO DE BARRERA
DEXTER McKINLEY
ALVINO MARES
CHRISTINA MARK
WILLIAM MARKWARDT
MA MARQUEZ DE-GILBREATH
RANDY McKINNEY
DOMINGO McKNIGHT
JOSHUA McLAIN
GINA MEANS
MARGARITO MARQUINA-GONZALEZ
JESUS MEDRANO
ANA MARROQUIN
JUANA MARROQUIN
ECO MARSHALL
JOSE MEJIA
JIMMY MEKSAVANH
JAMES MELDA
FLORENTINO MARTIN-ROMO
KEVIN MENDENHALL
ALFREDO MARTINEZ
BARBARA MARTINEZ
JAVIER MARTINEZ
JOSE MARTINEZ
JUAN MARTINEZ
MARIO MENDEZ
JESUS MENDOZA
JOSE MENDOZA
ARTHUR MENDOZA, JR.
VERNON MERCEAL, JR.
PRIMITIVO MONTELONGO SANCHEZ
CHRISTOPHER NICKOLES
ENOC MONTES
KASEY MONTGOMERY
JON MOODY
JAMES MOORE
MARC MOORE
MARIA MOORE
TONY MOORE
ISRAEL MORA
JUAN MORA
LAURA MORALES
CARLOS MORAN
RON MOREHEAD
DAVID MORELAND
BERTA MORENO
MATTHEW MORGAN
DAVID MORGERSON
BRANDON MORRIS
MATTHEW MORRISON
MARCUS MORROW
CLAYTON MOTE
DARRELL MOTE
ISSA MOUID
THERESA MUISE
KAREN NILES-BLAYER
HANK NOESKE
JERRY NOLAN
ABDOLHOSSEIN NOORI
CHRISTOPHER NORFLEET
WILLIE NORFLEET
ROBERT NORFLEET, JR.
DEBRA NOTHNAGEL
JESUS NUNEZ
JOHN NUTT
CHARLES NYLANDER
MICHAEL O’BRIEN
JAMES O’NEILL, JR.
JAMES O’NEILL, SR.
DEANGELO OAKLEY
JOSE OCHOA
ALEXANDER OFOSU
CHRIS OGANS
JOHN OGLE
RUBEN OLAN GARCIA
DUSTIN OLDEN
MARIA OLIVAS DE TORRES
LEE OLIVER, JR.
57
58
ISAGANI SAN AGUSTIN
VIENCHA SIMMALAVONG
JOSE RECIO-GOMES
CAROLINA ROJAS-GONZALEZ
VIVIAN SCROGGINS
2007 AAON Annual Report
ANTHONY OLIVERAS
JISEL OLIVEROS
ERIC OLSON
JOSE PINEDA
WALTER PINTO
KOSTA PIRUZESKI
LUIS OQUENDO ALBERTO
CLIFFORD PITCHFORD
LETICIA ORONA
MARGARITA ORONA
KEVIN PITTSER
BASANT POKHREL
MARGARITA OROZCO DEHUIZAR
RENU POKHREL
VELMA POLLEY
BLAKE POMEROY
MICHAEL POOL
PEGGY REDDEN
JAMES REED
FREEMAN REED, JR.
MARGARET REEVES
EVERETT REITZ
ALBERTO RENDON
DAVID RENEAU
ISAGANI REQUINTINA
OVIEDO REYES GONZALES
TERRY ROMBACH
RICHARD ROMO
BOBBY ROSS
DELINA ROSS
ADAM ROUGELY
DMITRI RUDNITSKI
RICARDO RUIZ
VICENTE RUIZ
AVA RUSSELL
GERARDO PORTILLO
ALFREDO REYNA-MENERA
NARINDER SAHOTA
ADAN SALAZAR
NORA SALAZAR
WALTER SALAZAR
J SALDIVAR
JOSE SALDIVAR
MIGUEL SALDIVAR
VICTOR SALDIVAR
DIANA SALINAS
BEATRIZ SANCHEZ
BETTY SANCHEZ
ESTEVAN SANCHEZ
EVA SANCHEZ
SERAFIN SANCHEZ
LUIS SANCHEZ-LOPEZ
EDWIN SANCHEZ-MONTEZ
IVELISSE SANCHEZ-RIVERA
ALICIA SANDERS
TANISHA SANDERS
DAVINDERPAL SANDHU
HARNEK SANDHU
CARLOS OROZCO-TORRES
CECILIO ORTEGA
DANIEL OSBERN
SANDRA OSBERN
KATIE OSBORNE
JENNIFER OVERMEYER
ROBERT OWENS
MARTIN OZURA-CARRILLO
GUILLERMO PACHECO
LUIS PACHECO
EDMUNDO PAIZ
J PANIAGUA
NOEMI PANIAGUA BELMONTE
JOSE PARDINAS
JOSE PARRA
SAUL PARRA
XOCHIL PARTIDA
CORRY PATTERSON
VADEN PAULSEN
TRAVIS PEARSON
KIMBERLY PEEKS
JOSE PENA
CHRIS PENCZAK
VLADIMIR PENIAZ
SERGIO PERALTA
ROLANDO PERES OSORIO
CESAR PEREZ
JUANA PEREZ
JUSTINA PEREZ
MARIA PEREZ
SERGIO PEREZ
ANDREW POSAS
PHILLIP POWELL
RUDY POWELL
SHELDON POWELL
GREG POWERS
JEFFERY POWERS
JOSE PRADO-HUERTA
CODY PRATT
TONY PRATT
LEON PRICE, JR.
SCOTT PRIES
ALMA PUGA
DAVID QUANG
VAN GIOAN QUANG
JESUS QUINONES
JOSE QUINTERO
JOHN QUINTON
JAMES RAFUSE
HEATHER REYNOLDS
DAVID RICHARDS
KIMBERLY RICHARDS
DARWIN RICHARDSON
SYLVESTER RICHARDSON
ANGELA RIDEOUT
DELMECIO RISER
SHANNON RISER
STEPHEN RISER
FRANKLIN RISNER
JAMES RITCHIE
VERONICA RIVAS
GENOVEVA RIVERA
LAURA ROBERSON
PAUL ROBERTS
JOHN ROBERTS
PHILLIP ROBERTSON, JR.
ANN ROBINSON
NIMALAKIRTHI RAJASINGHE
BENTON ROBINSON
MARY ROBINSON
MICHAEL ROBINSON
FERDINAN RALAT
ANTONIA RAMIREZ
JOSE RAMIREZ
RAYMON RAMIREZ
NANDY RAMIREZ B
JOSE RAMON
MARTINA RAMOS-RAMOS
BRANDON RAMSEY
MA LOURDES PEREZ PEREZ
JERRY RAMSEY
JOSEPH PERKINS
LADRUE PETERS
EMIL PETROV
DANIEL PEURIFOY
SONG PHAN
RANDY PHELPS
MAURICE PHENIX
LOUIS PHILLIPS
JEFF PICKERING
MARK PIERCE
PEDRO PINA-VALLES
59
JOSE RANGEL-ALVARADO
MARIWAN RASUL
SAFWAN RASUL
ROBERT RATLIFF
TERRY RATZLOFF
ROBERT RAYNO
THOMAS READ
SANDRA READER
JOSEPH REAGH
DIEGO REBOLLAR
FLOR REBOLLAR
VOLODYMYR RODOVNSKY
MICHAEL SANDOR, JR.
DANIEL RODRIGUEZ
DIANA RODRIGUEZ
GILBERTO RODRIGUEZ
HECTOR RODRIGUEZ
JOHNNY RODRIGUEZ
KARLA RODRIGUEZ
MARIA RODRIGUEZ
MELVIN RODRIGUEZ
RIVELINO RODRIGUEZ
ROSE RODRIGUEZ
RUBEN RODRIGUEZ
TERESA RODRIGUEZ
AGUSTIN SANTANA
REINALDO SANTANA
HECTOR SANTIAGO
MIGUEL SANTIAGO
WENCESLAO SANTIAGO
HUMBERTO SANTILLAN
PEDRO SANTILLAN
DAVID SAPICO
DAVID SARANT
RICHARD SATTERFIELD
ERICK SAWYER
WILLIAM SCHAROSCH
JOSE RODRIGUEZ-CINTION
RUSSELL SCHOONOVER
J RODRIGUEZ-FLORES
DWAYNE SCHWARTZ
DON ROGERS
LIDIA ROJAS
NELSON ROJAS
BRUMMETT SCOTT
KENNETH SCOTT
ROSMOND SCOTT
MARCUS SEIP
EDUARDO SERRANO
HUGHGO SEWELL
CARROL SHACKELFORD
PEGGY SHANNON
ALEXSANDR SHAPOVALOV
VANESSA SHARP
GREGORY SHAW
MATTHEW SHAW
THOMAS SHAW
KATHY SHEFFIELD
STEPHANIE SHELL
KATHLEEN SHEPARD
JACKIE SHEPHARD
BARBARA SHIPMAN
CONSUELA SHORE
RASCHID SHOWOLE
NELSON SIERRA
CORY SIMMONS
PATRICK SIMPSON
KULWINDER SINGH
MYRON SINGLETON
RUSSELL SINGLETON
RONALD SISNEROS
MICHAEL SKINNER
LARRY SLONE
ADAM SMITH
BRETT SMITH
RENALDO SMITH
RICARDO SMITH
RYAN SMITH
SWEETIE SMITH
MICHAEL SMOLINIEC
JULIO SOBERANIS
MALCOLM SOLES
IMELDA SOLIS
IRASEMA SOLIS
MARIA SOLIS
NEMISIA SOLIS
FELIX SOLORZANO-ROMO
KEVIN SOUVANNASING
ELDA SPEARS
SUSAN SPENCER
ALAN SPILLERS
MICHAEL SPORTEL
JESS ST GEORGE
MIKE ST PIERRE
LAWANA STANE
DANIEL WILSON
ISAAC WILSON
JAMES WILSON
WILLIAM WILSON
THOMAS WIND
MARK WINGER
THOMAS WINGO
WANDA WINKFIELD
WHITNEY WINN
MICAH WISDOM
EDWARD WOFFORD
CURTIS WOOD
SAM WOOD
JIM WYRICK
LINDA WYRICK
ECTOR YANCEY, JR.
SHANA YINGLING
KATHRYN YOUNG
PATRICIA YOUNG
DINAH YOUNGBLOOD
JOSH YOUNGS
NIKOLAY ZAGORODNIY
AURORA ZAVALETA
MERCEDES ZAVALETA
JUAN ZERMENO
VIRGINIA ZERMENO
JUSTIN ZIMMERMAN
SONDRA STANSELL
MICHAEL STAPLETON
CHARLES STARLING
STEPHEN STEPP
MICKEAL STEVENSON
ARTNEY STEWART
BRENT STOCKTON
ADAM STOKER
ALBERT STOKER
TABATHA STOKLEY
DEBRA STRASBOURG
MICHAEL STRAUB
BILLY STRENGTH
CREMERIS TOWNS
HA TRAN
HAI TRAN
PHUOC TRAN
QUAN TRAN
UT TRAN
ROBERTO TREBINO
ERIC TREIBER
MARISOL TREJO
CHARLES TREMBLAY
MARTIN TREVINO-SALDANA
HA TRINH
ROSA TRUJILLO
CARMEN SUAREZ BONILLA
CHRISTOPHER TUBBS
ROSA SUMMERS
GARY SWARER
SHBRONE SWYGERT
MARCUS SYAS
WASEEM SYED
UD-DIN SYEDBASHIR
ERIC SYPERT
JAMES TABER
PEDRO TALAVERA
BRIAN TALLEY
WILLIAM TANKERSLEY
JESUS TAPIA
JOE TART
TENNA TATUM
CHARLES TAYLOR
DEBORAH TAYLOR
ERIC TAYLOR
JEFF TAYLOR
THOMAS TAYLOR
ANDREA TEAKELL
KEVIN TEAKELL
ROBERT TEIS
JOSE TERRAZAS
LEE THOMAS
CHARLES THOMASON
ASMOND THOMPSON
TWJUAN THOMPSON
WESLEY THURMOND, II
CRYSTAL TINER
WILLIAM TOBAR
CHRISTOPHER TOLES
MOLLY TOMPKINS
GERARDO TORRES
REINALDO TORRES
GIRALDO TORRES-CHAVES
MANUEL TORRES-TORRES
JOSEPH TUBBS
STEVE TULLOCH
PAUL TURBE
JEFFREY TURNER
ARMANDO TUY
PHYLLIS TYISKA
JAMES TYO
PERNELL UNDERWOOD
MARIA URQUIZA
YADIRA URQUIZA
CARLOS VALDEZ
RAQUEL VALDEZ
DANG VANG
SHANNON VANN
JOHN VANNESS
JOEL VANSCOY, JR.
SALVADOR VAQUERA
JULIO VASQUEZ
DANNY VEGA
ANTONIO VELASCO
ROMAN VELASQUEZ
JAMES VELDE
ANGEL VENEGAS
RUDY VENEGAS
SALOME VERA
LAURA VERGARA
JAMES VERHAMME
EFRAIN VILLA
JAVIER VILLARREAL
FRANCISCO VILLEDA
SELINA VIRAMONTES
CUONG VO
SUONG VO
TONG VO
NING VUNG
ROBERT WAGONER
STEPHEN WAKEFIELD
DIANA WALKER
JERMAINE WALKER
RODERICK WALKER
THEODORE WALKER
DAVID WALKUP
PHILLIP WALLACE
WILLIAM WALLACE
LESLIE WALLIS, JR.
MERLYN WALTERS
STACEY WALTERS
CHARLES WALTON
YAN WANG
GAYLE WARD
BILLY WARDEN, II
PERRY WARNER
DONALD WASHINGTON
SAM WASHINGTON
VIELKA WASHINGTON
JAMES WATLEY, JR.
JOHN WEAVER
DEMETRIA WEBB
CHARLES WEEDEN
ANTHONY WELCH
DERRICK WELLESLEY
DELORENCE WELLS
SUSAN WERNER
CAROLYN WESLEY
SHARON WEST
DEBORAH WHITAKER
DAVID WHITE
SARAH WHITE
TIAJUANNA WHITE
TIMOTHY WHITE
CHRISTOPHER WHITESELL
DAVID WHITLOCK
TIMOTHY WHITTEN
STEVEN WHORTON
BILLY WILBURN
SHAWN WILDE
JACKIE WILES
JERRY WILES
RONALD WILKERSON
SHERRI WILKINS
JAMES WILKINSON
DONNA WILLIAMS
ROBERT WILLIAMS
TOMMY WILLIAMS
JAMES WILLIAMSON
JARVORIS WILLIS
60
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