2012 AnnuAl RepoRt
Reaching New Heights A n n uAl R e p oR t
2012 Reaching New Heights
With a dedication to constant improvement and innovation
our company achieved another milestone year. Net sales in
2012 soared over $300 million. By continuing to invest in
our capabilities we are committed to capitalizing on future
opportunities and ascending even higher.
A n n uAl R e p oR t
2012 CoMpAny proFile
rooFtop UnitS
oUtdoor Air
HAndling UnitS
CondenSing
UnitS
rl SerieS
rn SerieS
rQ SerieS
pACkAged oUtdoor MeCHAniCAl rooMS
SelF ContAined
UnitS
rl SerieS
Cl SerieS
Bl SerieS
Boiler
ll SerieS
Air-Cooled CHiller
SA SerieS
rn SerieS
CC SerieS
lC SerieS
Air-Cooled CHiller
ll SerieS
eVAporAtiVe-Cooled CHiller
SB SerieS
rQ SerieS
CB SerieS
indoor Air HAndling UnitS
F1 SerieS
H3 SerieS
V3 SerieS
SA SerieS
M2 SerieS
M3 SerieS
AAON is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment
consisting of standard, semi-custom and custom rooftop units, chillers, packaged mechanical rooms, air handling units,
makeup air units, energy recovery units, condensing 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.
FinAnCiAl HigHligHtS
2012
2011
2010
2009
2008
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 Equivalents
Total Assets
Current Liabilities
Long-Term Debt
Stockholders’ Equity
Stockholders’ Equity per Diluted Share1
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
1 = Reflects 3-for-2 stock split June 2011
2 = Cash, cash equivalents + receivables/current liabilities.
$ 303,114
$ 266,220
$ 244,552
$ 245,282
$ 279,725
$ 70,499
$ 44,234
$ 44
$ 86
$ 13,407
$ 44,317
$ 27,449
$ 46,281
$ 22,169
$ 277
$ 98
$ 11,397
$ 21,513
$ 13,986
$ 55,188
$ 32,715
$ 45
$ 258
$ 9,886
$ 32,693
$ 21,894
$ 67,545
$ 43,754
$ 9
$ 71
$ 9,061
$ 43,892
$ 27,721
$ 67,176
$ 43,388
$ 71
$ 27
$ 9,412
$ 44,068
$ 28,589
$ 1.12
$ 1.11
$0.57
$0.56
$0.87
$0.87
$ 1.07
$ 1.07
$ 1.09
$ 1.07
$ 51,921
$ 45,700
$ 55,502
$ 65,354
$ 40,600
$ 91,546
$ 90,695
$ 96,929
$ 3,159
$ 84,387
$ 93,502
$ 85,935
$ 13
$ 91,748
$ 67,418
$ 86,307
$ 2,393
$ 96,240
$ 59,896
$ 80,567
$ 25,639
$ 80,118
$ 60,550
$ 72,269
$ 269
$ 193,493
$ 178,981
$ 160,277
$ 156,211
$ 140,743
$ 39,625
$ 38,687
$ 36,246
$ 30,886
$ 39,518
-
-
-
-
$ 121
$ 138,136
$ 122,504
$ 116,739
$ 117,999
$ 96,522
$ 5.59
$ 4.92
$ 4.61
$ 4.54
$ 3.60
$ 51,167
$ 26,484
$ 32,152
$ 45,205
$ 33,447
$ (30,335)
$ (24,538)
$ (28,276)
$ (9,639)
$ (9,593)
$ (17,686)
$ (4,326)
$ (27,200)
$ (10,101)
$ (24,460)
$ 3,146
$ (2,380)
$ (23,246)
$ 25,370
$ (610)
21.1%
14.2%
14.6%
9.1%
0.4
1.4
2.3
19
11.7%
7.8%
8.1%
5.3%
0.5
1.1
2.2
37
18.7%
13.7%
13.4%
9.0%
0.4
1.2
2.5
22
25.8%
17.7%
17.9%
11.3%
0.3
1.9
3.1
12
29.8%
20.3%
15.8%
10.2%
0.5
1.0
2.0
13
2012AnnuAl RepoRt
preSident’S letter
Dear ShareholDer,We are exceedingly pleased to report our sales climbed 13.9% in the past year, surpassing the $300 million mark for the first time in the Company’s 24-year history. This milestone was achieved despite an economy which exhibited sub par growth for most of the year. Consequently, construction activity was uneven with modest increases in the commercial (private) sector, while spending in the institutional (public) segment was slightly negative. “sales climbed
13.9% in the past
year, surpassing
the $300 million
mark for the
first time in
the company’s
24-year history.”
Our sales performance was influenced by a number of factors which include
the continuing gain in our share of the market as we witnessed growing
acceptance of our technologically innovative product line. Furthermore, the Tax
Relief, Unemployment Insurance Reauthorization and Job Creation Act signed
into law in December 2010, allowing 100% depreciation for qualified capital
expenditures put in service in calendar 2011, was extended into 2012 but at a
rate of 50%. This extension had a beneficial impact on our replacement business
which contributed more than 55% of our total sales. In addition, we continued to
improve and expand our sales force through increased training, the addition of
personnel and replacement of underperforming offices.
Sales for the year ended December 31, 2012, reached $303.1 million as compared
with $266.2 million in 2011. Gross profit climbed to $70.5 million (23.3% of sales)
from $46.3 million (17.4% of sales), or a gain of 52.3%. It should be noted that
the gross profit performance in 2011 was negatively impacted by a number of
factors, many non-recurring in nature. Nonetheless, our improved gross margins
this past year reflect not only our increase in sales but also our significantly
improved manufacturing productivity discussed later in this
letter.
SG&A expenses, including substantially higher “profit sharing”
costs, climbed 17.7% to $26.3 million (8.7% of sales) from $22.3 million
(8.4% of sales). Operating income benefiting from both the higher sales and
improved operating efficiencies surged 100.0% to $44.2 million (14.6% of sales)
from $22.2 million (8.3% of sales). Included in the 2011 operating income was
a $1.8 million loss on the sale of equipment. Pre-tax income gained 106.0%
from $21.5 million (8.1% of sales) to $44.3 million (14.6% of sales). Our 2011
pre-tax income was negatively impacted by the payment of a $500,000
insurance deductible due to the storm damages caused by February 2011 snow
storms in Tulsa, as well as other charges previously reported. Net income in 2012
increased to $27.4 million (9.1% of sales) or $1.11 per share from $14.0 million
(5.3% of sales) or $0.56 per share in 2011. The 2012 tax rate was 38.0% versus 35.0%
a year ago. Our per share calculations are based upon 24.7 million fully diluted
shares outstanding in 2012 and 24.9 million fully diluted shares in 2011.
2012AnnuAl RepoRt Strong FinAnCiAl Condition
The remainder of our expenditures was directed toward
Our financial condition at December 31, 2012, was
additional plant expansion and machinery. The capacity
quite strong. Cash and investments totaled $19.3 mil-
of our Tulsa and Longview, Texas, plants has increased to
lion (including $16.1 million of short-term certificates
$800 million of annual production, while our machinery
of deposit and corporate bonds, all maturing within
capacity can accommodate approximately $500-$600
two years). Total current assets were $91.5 million with
million of sales.
a current ratio of 2.3:1. Our capital expenditures in
2012 were $14.1 million and we paid dividends of $8.9
million (including a special $0.12 per share dividend
paid in December 2012 amounting to $3.0 million).
Once again, we operated with no long-term debt.
Total shareholders’ equity increased to $138.1 million
or $5.59 per diluted share from $122.5 million or $4.92
For 2013, we have budgeted capital expenditures in the
vicinity of $9-10 million. We anticipate approximately
20% of these expenditures will be directed toward plant
expansion and renovation with the remainder going to
additional machinery.
per diluted share a year ago. Our return on average
A MASter diStriBUtor
shareholders’ equity was 21.1%.
CApitAl expenditUreS
During the past year we began to reap the benefits of
our aggressive capital expenditure program undertaken
in 2011 which totaled $35.9 million. In the 2011 letter to
shareholders, we discussed the relocation and expansion
of three assembly lines and the rearrangement of
two others in anticipation of growing demand in our
2-6 ton, 16-30 ton and 26-70 ton product lines, which
contributed approximately 65% of the Company’s total
volume. In addition, we replaced 50% of our sheet metal
fabricating equipment with more reliable and efficient
machinery, thus improving the overall efficiency of
our manufacturing process. We witnessed significant
productivity improvement in 2012 derived from the
enlarged assembly lines and the installation of new
Our new 200,000 square foot warehouse was completed
at the end of 2012. This new facility will house
production and replacement parts and a wide variety of
products, all of which will be sold to our manufacturer’s
representatives for resale to their customers.
The replacement parts inventory will be made up of
coils manufactured at our Longview facility, as well as
component parts such as compressors, motors, fans and
electrical items which will be purchased from various
manufacturers.
By taking this “supermarket” approach, the Company
can take advantage of wholesale pricing available to
large purchasers while offering its representatives a
wide selection of parts and quick delivery (24-48 hours)
to accommodate their customers.
equipment. We believe that further gains will continue
Our replacement parts business contributed approx-
throughout this year.
Our capital expenditures in 2012 were $14.1 million. We
completed the construction of a 200,000 square foot
warehouse and office building at a cost of $4.0 million
(bringing the total cost of this building to $11.0 million).
imately $12 million of sales in 2012 and we expect
this segment to experience excellent growth over
the intermediate and longer term as more of our
representatives seek to augment their sales via this
incremental business.
reCognitionS
In July, AAON’s SB Series water-source/geothermal heat pump system was
recognized for excellence in product design as a Gold Award Winner in the
“our
HVAC Light Commercial Equipment category sponsored by the Air Conditioning
Heating and Refrigeration News Magazine (ACHR News) in their Dealer Design
Awards Program. An independent panel of 29 contractors acted as judges in
the contest that had 81 entries. The ACHR News is distributed nationally to over
replacement
parts business
33,000 HVAC/R contractors, wholesalers and other industry professionals.
In September, the Company announced that its RN Series packaged rooftops
unit (55-140 tons) had been named a 2012 Product of the Year winner in the
HVAC/R category by Consulting-Specifying Engineer magazine. The RN series won
the bronze award for its efficiency and energy savings at full and partial loads.
Consulting-Specifying Engineer is a monthly publication with a circulation of over
46,000 mechanical, electrical and plumbing (MEP) engineers.
indUStry oUtlook
contributed
approximately
$12 million of
sales in 2012
and we expect
This past February, a news article appeared in the HVAC&R Industry Newsletter
that sighted a recent study published by the American Institute of Architects
this segment
(AIA) forecasting healthy gains this year in nonresidential construction activity.
AIA projects construction spending for this type of buildings rising by 5% in 2013
and 7.2% in 2014. The construction of commercial facilities is expected to lead
the upturn, with spending gains of almost 9% this year and nearly 11% next year.
Industrial (factories) construction spending is projected to increase modestly,
while institutional construction activity should lag behind. AIA expects the
healthcare industry to be the strongest institutional sector.
to experience
excellent
growth
over the
At the date of this letter, we had not yet completed our first quarter of 2013.
Through the first two months of this year, our incoming order rate remained firm
intermediate
and a polling of our manufacturer’s representatives suggests a continuation of
this trend over the near and intermediate terms. While we are pleased by the
upbeat tone of the AIA’s recent findings, we remain mindful of the fact that this
survey is just an indicator of the outlook for future nonresidential construction
activity. An increase in the index may foretell the mood for new construction
projects and HVAC sales over the intermediate and longer terms. However, ar-
chitectural work does not always translate into new construction or HVAC sales.
and longer
term”
2012AnnuAl RepoRt “we have been
and will remain
committed to
expend the
necessary capital
and manpower to
produce the most
technologically
advanced, energy
efficient products
in the industry.”
We have begun to see some strengthening in raw material and component
costs. If this trend continues there is little doubt that we will incur some
near term margin restriction, since there is a lag period between increases
in our cost of sales and our reaction time to implement pricing increases.
SAleS repreSentAtiVe perForMAnCe
Once again we want to commend our manufacturer’s representatives who
enabled the Company to post a significant gain in sales to all-time record
levels this last year. The sales representative network is made up of 93 reps
which operate 108 offices (some reps have multiple offices) in all 50 states
and Canada. This network contributed over 95% of our total sales in 2012.
AAON encountered good growth in end markets such as education,
healthcare, government, the military, and retailing, while the lethargic
atmosphere surrounding the commercial and industrial sectors continued
throughout the year. Our replacement business showed good growth
aided by the continuation of the Tax Relief, Unemployment Insurance
Reauthorization and Job Creation Act of 2010, as well as the excellent
response to a number of our newly revised, innovative energy efficient
products which create significant cost savings for our customers. The
new construction segment, which constitutes the remainder of sales,
was understandably impacted by the continuing slowdown in economic
activity. In 2011 we enhanced our extensive training program for our
representatives so they could better communicate the features and
benefits of AAON products. The results were excellent. We took further
steps to improve and enlarge the representatives’ force by replacing some
underperforming offices and encouraging the addition of personnel
in other offices. We anticipate continuing growth in our market share
through the greater acceptance of our product lines. We believe our
manufacturer’s representatives will continue to play a most important role
in AAON’s future growth.
oUr eMployeeS
We strive to retain and motivate employees in a manner consistent
with shareholder interests. An initial step in this process is to share the
profitability of the company. Over the years we have distributed 10% of
pre-tax profits equally to all personnel. As of January
We view our employees as a long-term investment
1, 2012, we changed this incentive to be calculated
in skills, talent and knowledge. We believe that our
on a consolidated basis (vs. separate subsidiaries) and
approach to personnel matters increases shareholder
added the requirement that personnel remain with the
value by creating an ownership perspective while
company an additional two and one-half months.
helping employees meet their personal financial, health
To encourage a longer-term focus, employees own
nearly 4% of the company’s outstanding stock through
our 401(k) plan which allows employees to benefit,
along with other shareholders, from share appreciation.
Employees (as a group), through the 401(k) plan, are
the fourth largest shareholder of AAON. In 2012, we
contributed 1.5% of each employee's pre-tax earnings
to the 401(k) plan, along with a matching contribution,
to ensure some level of retirement preparation and
corporate ownership. All company contributions are
used to purchase AAON stock on the open market, while
no employee contributions are allowed to be invested in
company stock. Shares of AAON stock are later sold to
and development goals.
oUtlook
Our record sales and strong earnings gains in 2012 were
undoubtedly the result of a number of factors, not the
least of which was the extraordinary effort put forth by
all of our employees and manufacturer’s representatives.
We have been and will remain committed to expend the
necessary capital and manpower to produce the most
technologically advanced, energy efficient products in
the industry. Our strong financial condition and free cash
flow will enable us to continue to pursue a solid growth
policy and remain debt free.
the company if participants diversify their holdings, as
There are many challenges before us and new heights to
they are permitted to do immediately, or leave the plan.
be scaled. We believe we can achieve our goals of further
The 401(k) plan encourages employee longevity through
sales and earnings gains, aided by the continuing support
a six-year benefit vesting structure and provides for the
of our customers, sales representatives and shareholders,
redistribution of participant forfeitures.
as well as the commitment of our employees, all of whose
We are in our fifth year of offering only a high-deductible
health plan, along with contributions to health savings
accounts, wellness incentives and on-site clinics that
are focused on preventative care. We believe that
direct control over their healthcare dollars has made
our employees more conscious of their health and
medical costs. Following a U.S. Supreme Court ruling,
we have focused on ensuring that our plan meets the
requirements of the health reform regulations in the
most cost effective manner possible.
names appear at the end of this report.
Sincerely,
Norman H. Asbjornson
President & CEO
March 29, 2013
2012AnnuAl RepoRt Spring
AAON purchased, renovated and
moved into a 184,000 square foot
plant in Tulsa, Oklahoma.
September
Purchase of John Zink Air
Conditioning Division.
Introduced a new product line
of rooftop heating and air
conditioning units 2-140 tons.
September
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
December
Formed AAON Coil Products,
a Texas Corporation, as a
subsidiary to AAON, Inc.
(Nevada) and purchased coil
making assets of Coils Plus.
March
Purchase of property with 26,000
square foot building adjacent to AAON
Coil Products plant in Longview, Texas.
Issued a 10% stock dividend.
September
Completed expansion of the
Tulsa facility to 332,000
square feet.
November
AAON yearly shipments exceed $100
million. Received U.S. patent for
Dimpled Heat Exchanger Tube.
April
AAON received U.S. patent for
Blower Housing assembly.
Fall
Expanded rooftop product line to
230 tons Introduced evaporative
condensing energy savings feature.
October
AAON listed in Forbes’ 200
Best Small Companies
1987
1988
August
AAON, an Okalhoma
Corporation was founded.
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
December
Listed on NASDAQ Small
Cap - Symbol “AAON.”
Summer
Became a publicly traded company
with the reverse acquisition of
Diamond Head Resources (now
“AAON, Inc.”), a Nevada corporation.
Spring
AAON Coil Products purchased,
renovated and moved into a
110,000 square foot plant in
Longview, Texas.
November
Listed on the NASDAQ
National Market System.
January
Introduced a desiccant heat
recovery wheel option available
on all AAON rooftop units.
Fall
Industry introduction of the
modular air handler and
chiller products.
October
AAON listed in Forbes’ 200
Best Small Companies.
May
Purchase of the assets of
Air Wise, of Mississauga,
Ontario, Canada.
September
AAON received U.S.
Patent for DPAC.
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
June
Initiation of a semi-annual
cash dividend for AAON
shareholders.
August
3-for-2 stock split
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
October
AAON, listed in Forbes
Magazine’s “Hot Shots 200 Up &
Comers.” AAON listed in Forbes’
200 Best Small Companies.
April
AAON received U.S. Patent for
the De-Superheater for
Evaporative Air Conditioning.
August
AAON received U.S. Patent
for Plenum Fan Banding.
October
AAON Listed in Forbes’ 200
Best Small Companies’
October
AAON rings opening
bell at NASDAQ
July
AAON products receive
Dealer Design Awards
from ACHR News.
July
AAON RQ Series Rooftop
Unit wins ACHR News
Dealer Design Award.
June
3-for-2 stock split.
July
Started production of polyurethane foam-filled
double-wall construction panels for rooftop
and chiller products using newly purchased
manufacturing equipment.
November
Introduction of light commercial/
residential product lines.
March
Modular air handler product
extended to 50,000 cfm.
AAON voted “Most Valuble
Product” and “Product of the
Year” by Consulting-Specifying
Engineer Magazine
AAON listed in Forbes’ 200
Best Small Companies
October
AAON listed in Forbes’
200 Best Small Companies.
November
AAON donates high efficiency
equipment to ABC’s Extreme
Makeover: Home Edition
July
Geothermal RQ Series wins
Silver in ACHR News Dealer
Design Competition
Single Zone VAV rooftop units
win Honorable Mention in
ACHR News Dealer Design
Competition.
2012
October
Consulting-Specifying
Engineer magazine awards
Geothermal RQ Series
Product of the Year - Silver
2013
December
AAON yearly
shipments exceed
$300 million
July
AAON SB Series Self Contained
Unit wins ACHR News Dealer
Design Award - Gold
December
Purchased 40 acres with 457,000
square foot plant and 22,000 square
foot office space located across from
Tulsa facility.
October
U.S. patent granted to AAON
for air conditioner with
energy recovery heat wheel.
June
AAON named to the Fortune
40: Best Stocks to Retire On.
National Society of Professional
Engineers Award AAON 2009
Product of the Year.
October
RN series rooftop unit names
2010 Product of the Year - Silver
by Consulting-Specifying
Engineer Magazine
LC series chiller product named
2010 Product of the Year - Bronze
by Consulting-Specifying
Engineer Magazine
AAON listed in Forbes’ 200
Best Small Companies.
July
AAON added as a member
of the Russell 2000® Index.
Spring
Completed Tulsa, Oklahoma, and
Longview, Texas, plant additions yielding
a total exceeding one million square feet.
September
3-for-2 stock split.
Spring
Industry introduction of light
commercial geothermal heat pump
self contained unit product line.
June
National Society of Professional
Engineers awards RQ Series High
Efficiency Rooftop Unit "Product
of the Year."
August
AAON added to Standard &
Poor’s SmallCap 600 Index.
May
AAON increases dividend
payment by 13%.
3-for-2 stock split
January
Outdoor mechanical room
extended to 540 tons of capacity
September
Consulting-Specifying
Engineer magazine awards RN
Series E Cabinet Product of the
Year - Bronze
Spring
AAON purchased, renovated and
moved into a 184,000 square foot
plant in Tulsa, Oklahoma.
September
Purchase of John Zink Air
Conditioning Division.
Introduced a new product line
of rooftop heating and air
conditioning units 2-140 tons.
1987
1988
August
AAON, an Okalhoma
Corporation was founded.
A tiMeline oF SUCCeSS
September
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
December
Formed AAON Coil Products,
a Texas Corporation, as a
subsidiary to AAON, Inc.
(Nevada) and purchased coil
making assets of Coils Plus.
March
Purchase of property with 26,000
square foot building adjacent to AAON
Coil Products plant 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.
November
AAON yearly shipments exceed $100
million. Received U.S. patent for
Dimpled Heat Exchanger Tube.
Fall
Expanded rooftop product line to
230 tons Introduced evaporative
condensing energy savings feature.
October
AAON listed in Forbes’ 200
Best Small Companies
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
December
Listed on NASDAQ Small
Cap - Symbol “AAON.”
Spring
AAON Coil Products purchased,
renovated and moved into a
110,000 square foot plant in
Longview, Texas.
November
Listed on the NASDAQ
National Market System.
January
Introduced a desiccant heat
recovery wheel option available
on all AAON rooftop units.
Summer
Became a publicly traded company
with the reverse acquisition of
Diamond Head Resources (now
“AAON, Inc.”), a Nevada corporation.
April
AAON introduces factory engineered
and assembled packaged mechanical
room, which includes a boiler and all
piping and pumping accessories.
Fall
Industry introduction of the
modular air handler and
chiller products.
October
AAON listed in Forbes’ 200
Best Small Companies.
May
Purchase of the assets of
Air Wise, of Mississauga,
Ontario, Canada.
September
AAON received U.S.
Patent for DPAC.
December
AAON rings closing
bell at NASDAQ
June
Initiation of a semi-annual
cash dividend for AAON
shareholders.
August
3-for-2 stock split
December
Purchased 40 acres with 457,000
square foot plant and 22,000 square
foot office space located across from
Tulsa facility.
October
U.S. patent granted to AAON
for air conditioner with
energy recovery heat wheel.
July
AAON added as a member
of the Russell 2000® Index.
Spring
Completed Tulsa, Oklahoma, and
Longview, Texas, plant additions yielding
a total exceeding one million square feet.
September
3-for-2 stock split.
June
AAON named to the Fortune
40: Best Stocks to Retire On.
National Society of Professional
Engineers Award AAON 2009
Product of the Year.
August
AAON added to Standard &
Poor’s SmallCap 600 Index.
May
AAON increases dividend
payment by 13%.
October
RN series rooftop unit names
2010 Product of the Year - Silver
by Consulting-Specifying
Engineer Magazine
LC series chiller product named
2010 Product of the Year - Bronze
by Consulting-Specifying
Engineer Magazine
June
National Society of Professional
Engineers awards RQ Series High
Efficiency Rooftop Unit "Product
of the Year."
3-for-2 stock split
AAON listed in Forbes’ 200
Best Small Companies.
January
Outdoor mechanical room
extended to 540 tons of capacity
Spring
Industry introduction of light
commercial geothermal heat pump
self contained unit product line.
September
Consulting-Specifying
Engineer magazine awards RN
Series E Cabinet Product of the
Year - Bronze
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
April
AAON received U.S. Patent for
the De-Superheater for
Evaporative Air Conditioning.
August
AAON received U.S. Patent
for Plenum Fan Banding.
October
AAON Listed in Forbes’ 200
Best Small Companies’
October
AAON rings opening
bell at NASDAQ
July
AAON products receive
Dealer Design Awards
from ACHR News.
July
AAON RQ Series Rooftop
Unit wins ACHR News
Dealer Design Award.
2012
October
Consulting-Specifying
Engineer magazine awards
Geothermal RQ Series
Product of the Year - Silver
2013
December
AAON yearly
shipments exceed
$300 million
AAON voted “Most Valuble
Product” and “Product of the
Year” by Consulting-Specifying
Engineer Magazine
AAON listed in Forbes’ 200
Best Small Companies
October
AAON listed in Forbes’
200 Best Small Companies.
November
AAON donates high efficiency
equipment to ABC’s Extreme
Makeover: Home Edition
July
AAON SB Series Self Contained
Unit wins ACHR News Dealer
Design Award - Gold
July
Geothermal RQ Series wins
Silver in ACHR News Dealer
Design Competition
Single Zone VAV rooftop units
win Honorable Mention in
ACHR News Dealer Design
Competition.
October
AAON, listed in Forbes
Magazine’s “Hot Shots 200 Up &
Comers.” AAON listed in Forbes’
200 Best Small Companies.
June
3-for-2 stock split.
July
Started production of polyurethane foam-filled
double-wall construction panels for rooftop
and chiller products using newly purchased
manufacturing equipment.
November
Introduction of light commercial/
residential product lines.
March
Modular air handler product
extended to 50,000 cfm.
2012AnnuAl RepoRt UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[P] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________________ to _____________________________
Commission file number: 0-18953
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction
of incorporation or organization)
2425 South Yukon, Tulsa, Oklahoma
(Address of principal executive offices)
87-0448736
(IRS Employer
Identification No.)
74107
(Zip Code)
Registrant’s telephone number, including area code: (918) 583-2266
Securities registered pursuant to Section 12(b) of the Act: None
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.
[ ] Yes [P ] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
[ ] Yes [ P ] No
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.
[ P ] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
[ P ] 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.
[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Large accelerated filer
Non-accelerated filer
Accelerated filer [ P ]
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.)
[ ] Yes [ P ] No
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, 2012 was $346.1 million.
As of February 28, 2013, registrant had outstanding a total of 24,497,978 shares of its $.004 par value Common Stock.
Portions of registrant's definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders to be held
DOCUMENTS INCORPORATED BY REFERENCE
May 21, 2013, are incorporated into Part III.
tABle oF ContentS
iteM nUMBer And CAption
pAge nUMBer
pArt i
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
pArt ii
5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 14
8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
pArt iii
10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . 17
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Certain Relationships and Related Transactions, and
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
pArt iV
15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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”, “should”, “will”,
and variations of such words and similar expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are
difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in
such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. We undertake no 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.
pArt i
Item 1. BuSIneSS
GeneRAl Development AnD DeScRIptIon
oF BuSIneSS
AAON, Inc., a Nevada corporation, was incorporated on August
18, 1987. We have two operating subsidiaries, AAON, Inc., an
Oklahoma corporation and AAON Coil Products, Inc., a Texas
corporation. Unless the context otherwise requires, references
in this Annual Report to “AAON,” the “Company”, “we”, “us”, “our”,
or “ours” refer to AAON, Inc., and our subsidiaries.
We are engaged in the manufacture and sale of air-condition-
ing and heating equipment. Our products consist of rooftop
units, chillers, air-handling units, make-up air units, heat
recovery units, condensing units, commercial-self contained
units and coils.
pRoDuctS AnD mARketS
Our products serve the commercial and
industrial new
construction and replacement markets. To date, our sales have
been primarily to the domestic market. Foreign sales accounted
for approximately 5% of our sales in 2012.
Our rooftop and condenser markets consist of units installed
on commercial or industrial structures of generally less than
10 stories in height. Our air-handling units, commercial self-
contained units, chillers, and coils are applicable to all sizes of
commercial and industrial buildings.
The size of these markets is determined primarily by the
number of commercial and industrial building completions.
The replacement market consists of products installed to
replace existing units/components that are worn or damaged.
Currently, slightly over half of the industry's market consists of
replacement units.
starts, in turn, are affected by such factors as interest rates, the
state of the economy, population growth and the relative age of
the population. When new construction is down, we emphasize
the replacement market.
Based on our 2012 level of sales of $303.1 million, we estimate
that we have approximately a 14% share of the rooftop market
and a 1-3% share of other markets. Approximately 55% of our
sales were generated from the sale to the renovation and
replacement markets and 45% from new construction. The
percentage of sales for new construction vs. replacement
to particular customers is related to the customer’s stage of
development.
We purchase certain components, fabricate sheet metal and
tubing and then assemble and test the finished products.
Our 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”. Our other finished products are chillers,
coils, air-handling units, condensing units, make-up air units,
heat recovery units and commercial self-contained units.
We offer four groups of rooftop units. The RQ Series consisting
of six cooling sizes ranging from one to six tons; the RN Series
offered in 18 cooling sizes ranging from six to 70 tons, and an
expansion of the RN series introduced in 2012 that increased
the cooling range up to 140 tons and the number of cooling
sizes from 18 to 26. The RL Series, which is offered in 15 cooling
sizes ranging from 40 to 230 tons; and the 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. We also offer the SA and SB models as an
indoor package water cooled units with cooling capacities of
3 to 70 tons.
We manufacture a Model LC Chiller, air cooled, and a Model
LL chiller, which is available in both air-cooled condensing
and evaporative cooled configurations covering a range of
3 to 540 tons.
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
Our air-handling units consist of the F1 and H3/V3 Series and
the modular (M2 and M3) Series as well as air handling unit
versions of the RN, RL and SA units.
1
Our heat recovery option applicable to our RQ, RN and RL units,
as well as our M2 and M3 Series air handlers, respond to the
U.S. Clean Air Act mandate to increase fresh air in commercial
structures. Our products are designed to compete on the higher
quality end of standardized products.
Performance characteristics of our products range in cooling
capacity from 1½ to 540 tons and in heating capacity from
69,000 - 9,000,000 BTU's. All of our products meet the
Department of Energy's (“DOE”) minimum efficiency standards,
which define the maximum amount of energy to be used in
producing a given amount of cooling. Many of our units far
exceed these minimum standards and are among the highest
efficiency units currently available.
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.
mAjoR cuStomeRS
No customer accounted for 10% of our sales during 2012, 2011
or 2010.
SouRceS AnD AvAIlABIlIty oF RAw
mAteRIAlS
The most important materials we purchase are steel, copper
and aluminum, which are obtained from domestic suppliers.
We also purchase from other domestic manufacturers certain
components,
including compressors, electric motors and
electrical controls used in our products. We attempt to obtain
the lowest possible cost in our purchases of raw materials
and components, consistent with meeting specified quality
standards. We are not dependent upon any one source for
raw materials or the major components of our manufactured
products. By having multiple suppliers, we believe that we will
have adequate sources of supplies to meet our manufacturing
requirements for the foreseeable future.
We attempt to limit the impact of increases in raw materials
and purchased component prices on our profit margins by
negotiating with each of our major suppliers on a term basis
from six months to one year.
To support and service our customers and the ultimate
consumer, we provide parts availability through our sales
offices and have factory service organizations at each of our
plants. Also, a number of the Representatives we utilize have
their own service organizations, which, in connection with us,
provide the necessary warranty work and/or normal service to
customers.
Our product warranty policy is: the earlier of one year from the
date of first use or 18 months from date of shipment for parts
only; an additional four years for compressors (if applicable);
15 years on aluminized steel gas-fired heat exchangers (if
applicable); 25 years on stainless steel heat exchangers (if
applicable); and 10 years on gas-fired heat exchangers in RL
products (if applicable). Our warranty policy for the RQ series
covers parts for two years from date of unit shipment and labor
for one year from date of unit shipment.
ReSeARch AnD Development
Our products are engineered for performance, flexibility and
serviceability. This has become a critical factor in competing
in the heating, ventilation and air conditioning (“HVAC”)
equipment industry. We must continually develop new and
improved products in order to compete effectively and to meet
evolving regulatory standards in all of our major product lines.
All of our R&D activities are self-sponsored, rather than
customer-sponsored. R&D has involved the RQ, RN and RL
(rooftop units), F1, H/V, M2 and M3 (air handlers), LC and
LL (chillers), CB and CC (condensing units), SA (commercial
self-contained units) and BL (boilers), as well as component
evaluation and refinement, development of control systems
and new product development. We incurred research and
development expenses of approximately $3.6 million, $4.8
million, and $3.6 million in 2012, 2011 and 2010, respectively.
BAckloG
Our current backlog as of March 1, 2013 was approximately
$51.1 million compared to approximately $55.3 million as
of March 1, 2012. The current backlog consists of orders
considered by management to be firm and generally are filled
on average within approximately 60 days to 92 days after
an order is deemed to become firm; however, the orders are
subject to cancellation by the customers.
DIStRIButIon
individuals and utilize
We employ a sales staff of 20
approximately 93 independent manufacturer representatives'
organizations (“Representatives”) having 108 offices to market
our products in the United States and Canada. We also have
international sales organization, which utilizes 12
one
distributors in other countries. Sales are made directly to the
contractor or end user, with shipments being made from our
Tulsa, Oklahoma and Longview, Texas plants to the job site.
Our products and sales strategy focus on niche markets. The
targeted markets for our equipment are customers seeking
products of better quality than offered, and/or options not
offered, by standardized manufacturers.
woRkInG cApItAl pRActIceS
Working capital practices in the industry center on inventories
and accounts receivable. Our management regularly reviews
our working capital with a view of maintaining the lowest
level consistent with requirements of anticipated levels of
operation. Our greatest needs arise during the months of
July - November, the peak season for inventory (primarily
purchased material) and accounts receivable. Our working
capital requirements are generally met by cash flow from
operations and a bank revolving credit facility, which currently
permits borrowings up to $30 million (currently unused). We
believe that we will have sufficient funds available to meet our
working capital needs for the foreseeable future.
2
2012AnnuAl RepoRt SeASonAlIty
Sales of our products are moderately seasonal with the peak
period being July - November of each year.
Item 1A. RISk FActoRS
The following risks and uncertainties may affect our perfor-
mance and results of operations.
competItIon
In the standardized market, we compete primarily with
Lennox International, Inc., Trane (Ingersoll Rand Limited),
York (Johnson Controls Inc.) and Carrier (United Technologies
Corporation). All of these competitors are substantially larger
and have greater resources than we do. Our products compete
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, we are
often at a competitive disadvantage because of the emphasis
placed on initial cost. In the replacement market and other
owner-controlled purchases, we have a better chance of getting
the business since quality and long-term cost are generally
taken into account.
employeeS
As of March 1, 2013, we employed 1,392 permanent employees
and 4 temporary employees. Our employees are not currently
represented by unions. Management considers its relations
with our employees to be good.
pAtentS, tRADemARkS, lIcenSeS AnD
conceSSIonS
We do not consider any patents, trademarks, licenses or
concessions to be material to our business operations, other
than patents issued regarding our heat recovery wheel option,
blower, gas-fired heat exchanger and evaporative condenser
desuperheater which have terms of twenty years with expiration
dates ranging from 2016 to 2022.
envIRonmentAl mAtteRS
Laws concerning the environment that affect or could affect
our 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. We believe that we are in compliance
with these laws and that future compliance will not materially
affect our earnings or competitive position.
AvAIlABle InFoRm AtIon
Our Internet website address is http://www.aaon.com. Our
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 our Internet
website as soon as reasonably practical after we electronically
file such material with, or furnish it to, the SEC.
ouR BuSIneSS cAn Be huRt B y economIc
conDItIonS .
Our business is affected by a number of economic factors, in-
cluding the level of economic activity in the markets in which
we operate. Since 2008, the state of the United States economy
has negatively impacted the commercial and industrial new
construction markets. The decline in economic activity in the
United States has materially affected our financial condition
and results of operations. Sales in the commercial and indus-
trial new construction markets correlate 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 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; but, thus far, has not resulted 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. Occasionally, we enter into
cancelable and noncancelable 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 RISk hAvInG loSSeS ReSultInG FRom
the uSe oF non-cAncelABle FIxeD pRIce
contRActS.
Historically, we attempted to
impact of price
fluctuations on commodities by entering into non-cancelable
fixed price contracts with our major suppliers for periods of
6 - 18 months. We expect to receive delivery of raw materials
from our fixed price contracts for use in our manufacturing
operations. These fixed price contracts are not accounted for as
derivative instruments since they meet the normal purchases
and sales exemption.
limit the
3
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.
the loSS oF noRmAn h. ASBjoRnSon
coulD ImpAIR the GRowth oF ouR
BuSIneSS.
Norman H. Asbjornson, our founder, has served as our President
and Chief Executive Officer 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, and our products are technologically advanced
and well positioned for sales into the future, his death, disability
or retirement could impair the growth of our business. We do
not have an employment agreement with Mr. Asbjornson.
It should be noted, however, that the Board of Directors is in the
process of evolving a succession plan relating to Mr. Asbjornson
and the positions currently held by him.
information technology
ouR BuSIneSS IS SuBject to the RISkS
oF InteRRuptIonS By pRoBlemS Such AS
computeR vIRuSeS.
We depend upon
infrastructure,
including network, hardware and software systems to conduct
our business. Despite our implementation of network and
other cyber security measures, our information technology
system and networks could be disrupted or experience a
security breach from computer viruses, break-ins and similar
disruptions from unauthorized tampering with our computer
systems. Any such event could have a material adverse effect
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
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.
laws
extReme GoveRnmentAl ReGul AtIonS.
We always face the possibility of new governmental regulations
which could have a substantial or even extreme negative
effect on our operations and profitability. Specifically, Final
Rule, Regulatory Identification No. 1904-AC23, published on
March 7, 2011, which, if fully implemented subsequent to
the current extension to the implementation date of January
1, 2014, would have highly detrimental consequences to all
industries involving sales of energy using products by imposing
burdensome, excessive and,
impossible testing
requirements.
in part,
In addition, several other intrusive component part regulations
have been proposed recently. If these proposals become
final rules, the effect would be the regulation of compressors
andfans in products for which the DOE does not have
current authority. This could affect equipment we currently
manufacture and could have an impact on our product design,
operations and profitability.
4
2012AnnuAl RepoRt we ARe SuBject to AD veRSe chAnGeS In
tAx lAwS.
Our tax expense or benefits could be adversely affected
by changes in tax provisions, unfavorable findings in tax
examinations or differing interpretations by tax authorities. We
are unable to estimate the impact that current and future tax
proposals and tax laws could have on our results of operations.
We are currently subject to state and local tax examinations for
which we do not expect any major assessments.
Item 3. leGAl pR oceeDInGS.
We are 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 our
knowledge, has been threatened against us.
Item 4. mIne SAFety DIScloSuRe.
Not applicable.
Item 1B. unReSolveD StAFF
commentS.
None.
Item 2. pRopeRtIeS .
As of December 31, 2012, we own approximately 1.5 million
square feet of space for office, manufacturing, warehouse and
assembly operations in Tulsa, Oklahoma and Longview, Texas.
We believe that our facilities are well maintained and are in
good condition and suitable for the conduct of our business.
Our plant and office facilities in Tulsa, Oklahoma, consist of
a 342,000 sq. ft. building (327,000 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 861,000 sq. ft. manufacturing/warehouse
building and a 70,000 sq. ft. office building (the “expansion
facility”) located on a 40-acre tract of land across the street
from the original facility (2440 South Yukon Avenue). We own
the original facility and the expansion facility. Both plants are of
sheet metal construction.
Our manufacturing area is in heavy industrial type buildings,
with total coverage by bridge cranes, containing manufacturing
equipment designed for sheet metal fabrication and metal
stamping. The manufacturing equipment contained in the
facilities consists primarily of automated sheet metal fabrication
equipment, supplemented by presses. Assembly lines consist
of seven cart-type conveyor lines with variable line speed
adjustment, which are motor driven. Subassembly areas and
production line manning are based upon line speed.
Our 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 remaining
7,000 square feet are utilized as office space. The facility is built
for light industrial manufacturing. An additional, contiguous 15
acres were purchased in 2004 and 2005 for future expansion.
We own both the existing plant/office building, and the 15
acres designated for future expansion.
pArt ii
Item 5. mARket FoR ReGIStRAnt'S
common equIty, Rel AteD
StockholDeR mAtteRS AnD
ISSueR puRchASeS oF equIty
SecuRItIeS .
Our common stock is quoted on the NASDAQ Global Select
Market under the symbol "AAON". The table below summarizes
the high and low reported sale prices for our common stock for
the past two fiscal years. As of the close of business on February
28, 2013, there were 1,011 holders of record, and approximately
4,144 beneficial owners, of our common stock.
QUArter ended
March 31, 2011
June 30, 2011
September 30, 2011
December 31, 2011
March 31, 2012
June 30, 2012
September 30, 2012
December 31, 2012
HigH
$ 21.98
$ 23.44
$ 24.23
$ 22.98
$ 22.04
$ 20.99
$ 20.81
$ 22.41
low
$ 17.51
$ 20.07
$ 14.91
$ 14.64
$ 17.75
$ 18.00
$ 17.55
$ 18.34
At the discretion of the Board of Directors we pay semi-annual
cash dividends. Board approval is required to determine the
date of declaration and amount for each semi-annual dividend
payment. The Board of Directors approved dividend payments
of $0.12 per share related to the 3-for-2 stock split effective June
13, 2011.
5
We declared dividends to shareholders of record at the close
of business on June 11, 2012, which were paid on July 2, 2012.
At a meeting of the Board of Directors on November 7, 2012,
the Board declared a regular semi-annual cash dividend of
$0.12 per share, and, in view of our strong financial position,
the Board also declared a one-time special cash dividend of
$0.12 per share. Both dividends were paid to shareholders of
record at the close of business on December 3, 2012 and paid
on December 24, 2012.
We paid cash dividends of $8.8 million, $5.9 million, and $9.2
million in 2012, 2011, and 2010, respectively.
On November 6, 2007, our Board of Directors authorized
a stock buyback program, targeting repurchases of up to
approximately 10% (2.7 million shares) of our outstanding stock
from time to time in open market transactions. On May 12,
2010, we completed the stock buyback program. Through May
12, 2010, we repurchased a total of 2.7 million shares under this
program for an aggregate price of $36.1 million, or an average
price of $13.36 per share. We purchased the shares at current
market prices.
On May 17, 2010, the Board authorized a new stock buyback
program, targeting repurchases of up to approximately 5%
(1.3 million shares) of our outstanding stock from time to
time in open market transactions. Through June 28, 2010,
we repurchased a total of approximately 0.718 million shares
under this program for an aggregate price of $11.5 million, or an
average price of $16.04 per share. We purchased the shares at
current market prices. We did not repurchase any of our equity
securities during 2012.
On July 1, 2005, we entered into a stock repurchase arrange-
ment by which employee-participants in our 401(k) savings
and investment plan are entitled to have shares of AAON
stock in their accounts sold to us to provide diversification
of their investments. The maximum number of shares to be
repurchased is contingent upon the number of shares sold
by employees. Through December 31, 2012, we repurchased
approximately 1.9 million shares for an aggregate price of $25.1
million, or an average price of $13.38 per share. We purchased
the shares at current market prices.
On November 7, 2006, the Board of Directors authorized us to
repurchase shares from certain directors and officers following
their exercise of stock options. The maximum number of
shares to be repurchased is contingent upon the number of
shares sold. Through December 31, 2012, we repurchased
approximately 0.734 million shares for an aggregate price
of $11.2 million, or an average price of $15.25 per share. We
purchased the shares at current market prices.
Repurchases during the fourth quarter of 2012 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 Approxi-
mate Dollar Value) of Shares (or
Units) that May Yet Be Purchased
Under the Plans or Programs
$ 18,347
$ 24,458
$ 67,253
$ 110,058
$ 19.69
$ 19.99
$ 21.26
$ 20.72
$ 18,347
$ 24,458
$ 67,253
$ 110,058
-
-
-
-
period
October 2012
November 2012
December 2012
Total
6
2012AnnuAl RepoRt compARAtIve Stock peRFoRm Ance GRAph
The following performance graph compares our cumulative
total shareholder return, the NASDAQ Composite and a peer
group of U.S. industrial manufacturing companies in the air
conditioning, ventilation, and heating exchange equipment
markets from December 31, 2007 through December 31, 2012.
The graph assumes that $100 was invested at the close of
trading December 31, 2007, with reinvestment of dividends.
Our peer group includes Lennox International, Inc., Ingersoll
Rand Limited, Johnson Controls Inc., and United Technologies
Corporation. This table is not intended to forecast future
performance of our Common Stock.
CoMpUlSion oF 5 yeAr CUMUlAtiVe totAl retUrn
Assumes Initial Investment of $100
December 2012
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
2007
2008
2009
2010
2011
2012
AAON Inc.
S&P 500 Index - Total Returns
Peer Group
This stock performance Graph is not deemed to be “soliciting material” or otherwise be considered to be “filed” with the SEC or
subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (Exchange Act) or to the liabilities of Section 18 of
the Exchange Act, and should not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing.
7
Item 6. SelecteD FInAncIAl D AtA.
The following selected financial data should be read in
conjunction with our Consolidated Financial Statements
and Notes thereto included under Item 8 of this report and
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in Item 7.
results of operations:
2012
2011
2010
2009
2008
yeArS ended deCeMBer 31,
Net sales
Net income
Earnings per share:
Basic
Diluted
Dividends per share
Weighted average shares outstanding:
Basic
Diluted
(in thousands, except per share data)
$ 303,114
$ 266,220
$ 244,552
$ 245,282
$ 279,725
$ 27,449
$ 13,986
$ 21,894
$ 27,721
$ 28,589
$ 1.12
$ 1.11
$ 0.36
24,550
24,699
$ 0.57
$ 0.56
$ 0.24
24,690
24,881
$ 0.87
$ 0.87
$ 0.24
25,198
25,339
$ 1.07
$ 1.07
$ 0.24
25,780
25,963
$ 1.09
$ 1.07
$ 0.21
26,340
26,782
Financial position at end of Fiscal year:
2012
2011
2010
2009
2008
deCeMBer 31,
Working capital
Total assets
Long-term and current debt
Total stockholders’ equity
(in thousands)
$ 51,922
$ 45,700
$ 55,502
$ 65,354
$ 40,600
193,493
-
138,136
178,981
4,575
122,504
160,277
156,211
140,743
-
76
116,739
117,999
3,113
96,522
Item 7. mAnAGement'S
DIScuSSIon AnD AnAlySIS oF
FInAncIAl c onDItIon AnD
ReSultS oF opeRAtIonS.
oveRvIew
We engineer, manufacture and market air-conditioning
and heating equipment consisting of rooftop units, chillers,
air-handling units, make-up air units, heat recovery units,
condensing units, commercial self-contained units and coils.
These products are marketed and sold to retail, manufacturing,
educational, medical and other commercial industries. We
market our products to all 50 states in the United States and
certain provinces in Canada. Foreign sales were approximately
5% of our 2012 sales.
Our business can be affected by a number of economic factors,
including the level of economic activity in the markets in which
we operate. The recent state of the economy has negatively
impacted the commercial and industrial new construction
markets. A further decline in economic activity could result in
a decrease in our sales volume and profitability. 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.
We sell our products to property owners and contractors
through a network of manufacturers’ representatives and our
internal sales force. The demand for our products is influenced
by national and regional economic and demographic factors.
The commercial and industrial new construction market is
subject to cyclical fluctuations in that it is generally tied to
housing starts, but has a lag factor of 6-18 months. Housing
starts, in turn, are affected by such factors as interest rates, the
state of the economy, population growth and the relative age of
8
2012AnnuAl RepoRt the population. When new construction is down, we emphasize
the replacement market.
The following are key highlights and events that impacted our
results of operations, cash flows, and financial condition in 2012:
The principal components of cost of goods sold are labor, raw
materials, component costs, factory overhead, freight and
engineering expense. The principal high volume raw materials
used in our manufacturing processes are steel, copper and
aluminum and are obtained from domestic suppliers. We also
purchase from domestic manufacturers certain components,
including compressors, motors and electrical controls.
The price levels of our raw materials have moderated from
the high prices we experienced a year ago, but the market
continues to be volatile and unpredictable as a result of the
uncertainty related to the U.S. economy, a weakening global
economy, and November 2012’s presidential election. For the
year ended December 31, 2012, the price for copper increased
by approximately 0.5% and the cost for steel and aluminum
decreased approximately 2.5% and 8.0% respectively, from a year
ago. For the year ended December 31, 2011 prices for copper
and steel increased approximately 3% and 10%, respectively
from prior year, while the cost of aluminum decreased ap-
proximately 2%.
We attempt to limit the impact of price fluctuations on these
materials by entering into cancelable and non-cancelable fixed
price contracts with our major suppliers for periods of 6 to 18
months. We expect to receive delivery of raw materials from
in our manufacturing
our fixed price contracts for use
operations. In addition, from time to time we use derivative
contracts to partially mitigate the volatility in the prices for
some of these commodities. We did not enter into a derivative
contract for any of our key raw materials during the years ended
December 31, 2012 and 2011.
• Net sales for 2012 were $303.1 million, the highest in the
Company’s history, compared to $266.2 million in 2011. The
increase in net sales can be attributed to gains in market
share in the non-residential and replacement markets along
with price increases introduced earlier in the year.
• We estimate that we have captured approximately 14% share
of the rooftop market and a 1% share of the coil market.
Approximately 55% of our sales were generated from the sale
to the renovation and replacement markets and 45% from
new construction markets.
•
Income from operations was $44.2 million compared to $22.2
million in 2011. The increase in operational income can be
attributed to higher sales and improved productivity during
the year.
• Net income for 2012 was $27.4 million, up by $13.4 million,
compared to $14.0 million in 2011.
• We paid $14.1 million in capital expenditures, a decrease of
$21.8 million from 2011.
• We paid cash dividends of $8.8 million in 2012 compared
to $5.9 million in 2011. The 2012 dividends included a one-
time special dividend of $0.12, in addition to the regular
semi-annual dividend of $0.12, declared by the Board on
November 7, 2012, due to our strong financial position.
ReSultS oF opeRAtIonS
The following is a summary of the income statement information
as a percentage of net sales:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Loss (gain) on disposal of assets
Income from operations
Interest expense
Interest income
Other income (expense), net
Income before income taxes
Income tax provision
Net income
yeArS ending deCeMBer 31,
2012
2011
2010
$ 303,114
100.0%
$ 266,220
100.0%
$ 244,552
100.0%
232,615
70,499
26,261
4
44,234
(44)
86
41
44,317
16,868
$ 27,449
76.7%
23.3%
8.7%
0.0%
14.6%
(0.0)%
0.0%
0.0%
14.6%
5.5%
9.1%
219,939
46,281
22,310
1,802
22,169
(277)
98
(477)
21,513
7,527
$ 13,986
82.6%
17.4%
8.4%
0.7%
8.3%
(0.1)%
0.0%
(0.2)%
8.1%
2.8%
5.3%
189,364
55,188
22,546
(73)
32,715
(45)
258
(235)
32,693
10,799
$ 21,894
77.4%
22.6%
9.2%
0.0%
13.4%
(0.02)%
0.1%
(0.1)%
13.4%
4.4%
9.0%
9
yeAR enDeD DecemBeR 31, 2012 vS.
yeAR enDeD DecemBeR 31, 2011
net SAleS
Net sales for the year ended December 31, 2012 increased by
13.9%, or $36.9 million to $303.1 million, compared with the
same period in 2011. The increase in net sales was the result of
the favorable reception to our new products, increased market
share along with price increases introduced earlier in the year.
GRoSS pRoFIt
Gross profit increased by 52.3%, or $24.2 million, to $70.5 million
in 2012 compared to 2011. As a percentage of sales, gross
profit was 23.3% and 17.4% in 2012 and 2011, respectively. The
improvement in gross profit can be attributed to cost savings
in raw materials, increased product prices, product mix and
improved productivity.
The principal components of cost of goods sold are labor, raw
materials, component costs, factory overhead, freight out and
engineering expense. The principal high volume raw materials
used in our manufacturing processes are steel, copper and
aluminum, which are obtained from domestic suppliers. For the
year ended December 31, 2012, the price for copper increased
by approximately 0.5% and the cost for steel and aluminum
decreased approximately 2.5% and 8.0% respectively, from a
year ago.
SellInG, GeneRAl AnD ADmInIStRAtIve
expenSeS
(“SG&A”) expenses
Selling, General and Administrative
increased by 17.7%, or $4.0 million, to $26.3 million in 2012
compared to 2011, and as a percentage of net sales, SG&A
expenses increased to 8.7% in 2012 from 8.4% in 2011. The
increase in SG&A is primarily due to higher profit sharing
expense as a result of higher operating income before income
taxes of approximately $2.5 million and higher employee
salaries of approximately $2.1 million as a result of salary pay
increases and management discretionary bonus incentive plan,
partially offset by decreases in our warranty expenses of $0.6
million and advertising expenses of approximately $0.3 million.
InteReSt expenSe
Interest expense was approximately $0.044 million and $0.277
million in 2012 and 2011, respectively. The decrease in interest
expense of $0.233 million in 2012 from prior year was due to
decreased borrowings on the revolving credit facility. During
2012 we borrowed $34.8 million from the revolving credit
facility as compared to $82.1 million in 2011. Interest on
borrowings is payable monthly at LIBOR plus 2.5%. For the year
ended December 31, 2012, we paid a weighted average interest
rate of approximately 2.8%.
InteReSt Income
Interest income decreased by approximately $0.012 million
to $0.086 million in 2012 compared to the same period in
2011. The decrease was due primarily to the fact that we
held investments from January of 2011 until November 2011,
when the investments fully matured, and we did not purchase
additional interest bearing investments until May of 2012.
otheR Income (expenSe)
Other income, net was $0.041 million for the year ended 2012,
an increase of $0.518 million from $0.477 million of expense
in 2011. The higher 2011 expense was primarily due to repair
expenses related to roof damages to one of our manufacturing
facilities in Tulsa, Oklahoma caused by a severe snowstorm in
February 2011.
yeAR enDeD DecemBeR 31, 2011 vS.
yeAR enDeD DecemBeR 31, 2010
net SAleS
Net sales for the year ended December 31, 2011 increased by
9%, or $21.7 million to $266.2 million, compared with the same
period in 2010. The increase in net sales was the result of the
favorable reception to our new products, a significant increase
in the replacement market of approximately 10% over prior year,
and increased market share.
GRoSS pRoFIt
Gross profit decreased by 16.1%, or $8.9 million, to $46.3 million
in 2011 compared to 2010. As a percentage of sales, gross
profit was 17.4% and 22.6% in 2011 and 2010, respectively. The
decrease in gross profit was caused by increases in raw material
and component part costs of approximately 6% that we were
unable to neutralize completely with price increases for some
of our product lines, and increased labor costs and freight cost
of 8% and 1%, respectively.
The principal components of cost of goods sold are labor, raw
materials, component costs, factory overhead, freight out and
engineering expense. The principal high volume raw materials
used in our manufacturing processes are steel, copper and
aluminum, which are obtained from domestic suppliers. For the
year ended December 31, 2011 we experienced price increases
in copper and steel of approximately 3% and 10%, and an overall
price decrease in aluminum of approximately 2% as compared
to 2010.
SellInG, GeneRAl AnD ADmInIStRAtIve
expenSeS
Selling, General and Administrative
(“SG&A”) expenses
decreased by $0.236 million, or 1.0% to $22.3 million in 2011
compared to 2010, and as a percentage of net sales, SG&A
expenses declined to 8.4% in 2011 from 9.2% in 2010. The
decrease was primarily due to lower profit sharing expense
of approximately $1.4 million as a result of lower operating
income before income tax offset by increases in salaries and
employee benefits of $0.6 million, and advertising expense and
professional fees of approximately $0.6 million.
10
2012AnnuAl RepoRt InteReSt expenSe
Interest expense was approximately $0.277 million and $0.045
million in 2011 and 2010, respectively. The increase in interest
expense of $0.232 million in 2011 from prior year was due to
increased borrowings on the revolving credit facility. During
2011 we borrowed $82.1 million from the revolving credit
facility as compared to $20.8 million in 2010. Interest on
borrowings is payable monthly at LIBOR plus 2.5%. For the year
ended December 31, 2011, we paid a weighted average interest
rate of approximately 3.4%.
InteReSt Income
Interest income decreased by approximately $0.160 million to
$0.098 million in 2011 compared to the same period in 2010.
The decreased was due primarily to all of our investments
maturing and no additional funds invested in 2011.
otheR Income (expenSe)
Other expense, net increased by $0.242 million to $0.477 million
in 2011 from $0.235 million in 2010 due to repair expenses
related to the snowstorm in February of 2011, as noted above.
lIquIDIty AnD cApItAl ReSouRceS
Our working capital and capital expenditure requirements are
generally met through net cash provided by operations and the
occasional use of the revolving bank line of credit based on our
current liquidity at the time.
GeneRAl
On July 29, 2012 we renewed the line of credit with the Bank
of Oklahoma, National Association. The revolving line of credit
matures on July 28, 2013. We expect to renew our line of credit
in July 2013 with favorable terms as we do not anticipate a
tightening of funds in the financial markets. Under the line of
credit, there is one standby letter of credit of $0.9 million. At
December 31, 2012 we have approximately $29.1 million of
borrowings available under the revolving credit facility. No
fees are associated with the unused portion of the committed
amount.
As of December 31, 2012, there was no outstanding balance
under the revolving credit facility and $4.6 million borrowings
were outstanding at December 31, 2011. Interest on borrowings
is payable monthly at LIBOR plus 2.5%. The weighted average
interest rate was 2.8% and 3.4% for the years ended December
31, 2012 and 2011, respectively.
At December 31, 2012 we were in compliance with all of the
covenants under the revolving credit facility. We are obligated
to comply with certain financial covenants under the revolving
credit facility. These covenants require that we meet certain
parameters related to our tangible net worth, total liabilities
to tangible net worth ratio and working capital. At December
31, 2012 our tangible net worth was $138.1 million, which
meets the requirement of being at or above $95.0 million. Our
total liabilities to tangible net worth ratio was 0.4 to 1.0 which
meets the requirement of not being above 2 to 1. Our working
capital was $51.9 million, which meets the requirement of being
at or above $40.0 million.
We repurchased shares of stock under our authorized stock
buyback programs, employees’ 401(k) savings, investment plan,
and from option exercises of our directors and officers in the
open market in the amount of $6.7 million for 0.336 million
shares, $3.7 million for 0.212 million shares and $19.5 million
for approximately 1.2 million shares of stock in 2012, 2011 and
2010, respectively.
For the year ended December 31, 2012, 2011 and 2010 we paid
cash dividends of $8.8 million, $5.9 million, and $9.2 million
respectively.
Based on historical performance and current expectations, we
believe our cash and cash equivalents balance, the projected
cash flows generated from our operations, our existing
committed revolving credit facility (or comparable financing)
and our expected ability to access capital markets will satisfy
our working capital needs, capital expenditures and other
liquidity requirements associated with our operations in 2013
and the foreseeable future.
Statement of Cash Flows
The table below reflects a summary of our net cash flows
provided by operating activities, net cash flows used in investing
activities, and net cash flows used in financing activities for
the years indicated.
2012
2011
2010
(in millions)
$ 51.2
$ 26.5
$ 32.2
(30.3)
(24.5)
(28.3)
(17.7)
(4.3)
(27.2)
Net cash provided by
operating activities
Net cash used in investing
activities
Net cash used in financing
activities
Cash Flows from Operating Activities
Net cash provided by operating activities was $51.2 million
in 2012 compared to $26.5 million in 2011. This increase was
due to higher net income and a favorable change in working
capital. For the year ended December 31, 2012, net income
increased by $13.5 million. For 2011, net income decreased by
$7.9 million from 2010.
Significant fluctuations in working capital were as follows:
• Inventory - less cash was used in 2012 as we experienced
decreases in raw materials prices from the prior year end.
Overall, inventories decreased $2.3 million to $32.6 million at
December 31, 2012 compared to $34.9 million the previous
year. More cash was used in 2011 as improved demand
11
resulted in increased volume and higher prices for raw
materials, component, and parts in our inventory balance
as compared to 2010 resulting in decreased cash flows of
$1.3 million.
• Accounts receivable – increased by approximately $9.6
million from the prior year primarily as a result of increased
sales. In 2011, we experienced improved collection rates as
a result of targeted sales discounts for some of our selected
customers. This resulted in a decrease in our accounts
receivable balance of approximately $6.1 million from 2010.
• Accrued liabilities – accrued liabilities increased cash flows
by approximately $6.6 million due to an increase in customer
product pre-payments and credits of approximately
$2.1 million, an increase in payroll and employee benefit
accruals of approximately $3.0 million and an increase
in the accrual of amounts due to our representatives of
approximately $1.5 million. Accrued liabilities decreased
cash flows by approximately $3.0 million in 2011 due to
changes in certain reserves estimates as a result of better and
improved experience and a decreased in amounts due to
our representatives offset by a slight increase in accrued
payroll and employee benefits.
Cash Flows from Investing Activities
Net cash used in investing activities was $30.3 million for the
year ended December 31, 2012 compared with net cash used
in investing activities of $24.5 million in 2011. The change is
primarily attributable to 2012 investments of $6.5 million in
certificates of deposit and $11.7 million in corporate notes
and bonds, proceeds from investments in 2012 of $1.3 million
compared to approximately $10.9 million in 2011, offset by
a decrease in capital expenditures of $21.7 million from the
prior year. Net cash used in investing activities was $24.5 million
for the year ended December 31, 2011 compared with $28.3
million in 2010. The change in investing activities is primarily
attributable to the net proceeds from investments in 2011 that
were offset by an increase in capital expenditures during 2011.
in 2012 were primarily
Capital expenditures were $14.1 million, $35.9 million and
$17.5 million in 2012, 2011 and 2010, respectively. Capital
in our
expenditures
manufacturing and production equipment to support our
growth and
improve efficiencies with equipment which
combines the latest advancement in automation and laser
technology.
investments
The capital expenditure program for 2013 is estimated to be
approximately $10 million. Many of these projects are subject
to review and cancellation at the discretion of our CEO and
Board of Directors without incurring substantial charges.
Cash Flows from Financing Activities
Net cash used in financing activities during the year ended
December 31, 2012 was $17.7 million, compared with $4.3
million during 2011. The change in financing activities is
primarily related to approximately $6.7 million of share
repurchases as well as dividend payments of $8.8 million,
and reduced borrowings and increased payments on our
credit facility resulting
in no outstanding borrowings at
December 31, 2012.
Net cash used in financing activities during the year ended
December 31, 2011 was $4.3 million, compared with $27.2
million during 2010. The change in financing activities is primarily
related to approximately $3.7 million of share repurchases as
well as dividend payments of $5.9 million, partially offset by
an increase in net borrowing of approximately $4.6 million and
stock options and restricted stock awards exercised.
oFF-BAlAnce Sheet ARRAnGement S
We are not party to any off-balance sheet arrangements that
have or are reasonably likely to have a material current or future
effect on our financial condition, changes in financial condition,
revenues, expenses, results of operations, liquidity, capital
expenditures or capital resources.
commItmentS AnD contRActuAl
AGReementS
We have no material contractual agreements as of December
31, 2012.
contInGencIeS
We are subject to various claims and legal actions that arise
in the ordinary course of business. We closely monitor these
claims and legal actions and frequently consult with our legal
counsel to determine whether they may, when resolved, have
a material adverse effect on our financial position or results of
operations. While we are unable to estimate the ultimate dollar
amount of exposure or loss in connection with these matters,
we make accruals as warranted. We believe that we have
adequately provided in our consolidated financial statements
for the potential impact of these contingencies. We also believe
that the outcomes will not significantly affect the long-term
results of operations, our financial position or our cash flows.
cRItIcAl AccountInG polIcIeS
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America (“US GAAP”) requires management to make
estimates and assumptions about future events, and apply
judgments that affect the reported amounts of assets, liabilities,
revenue and expenses in our consolidated financial statements
and related notes. We base our estimates, assumptions and
judgments on historical experience, current trends and other
factors believed to be relevant at the time our consolidated
financial statements are prepared. However, because future
events and their effects cannot be determined with certainty,
actual results could differ from our estimates and assumptions,
and such differences could be material. We believe the
following critical accounting policies affect our more significant
estimates, assumptions and judgments used in the preparation
of our consolidated financial statements.
12
2012AnnuAl RepoRt Revenue Recognition – We recognize revenues from sales of
products when the products are shipped and the title and risk
of ownership pass to the customer. Final sales prices are fixed
and based on purchase orders. Sales allowances and customer
incentives are treated as reductions to sales and are provided
for based on historical experiences and current estimates.
(“Representatives”). Representatives
In addition, the Company presents revenues net of sales tax
and net of certain payments to our independent manufacturer
are
representatives
national companies that are in the business of providing HVAC
units and other related products and services to customers.
The end user customer orders a bundled group of products
and services from the Representative and expects the
Representative to fulfill the order. Only after the specifications
are agreed to by the Representative and the customer, and the
decision is made to use an AAON HVAC unit, will we receive
notice of the order. We establish the amount we must receive
for our HVAC unit (“minimum sales price”), but do not control
the total order price which is negotiated by the Representative
with the end user customer.
We are responsible for billings and collections resulting
from all sales transactions, including those initiated by our
Representatives. The Representatives submit the total order
price to us for invoicing and collection. The total order price
includes our minimum sales price and an additional amount
which may include both the Representatives’ fee and amounts
due for additional products and services required by the
customer. These additional products and services may include
controls purchased from another manufacturer to operate
the unit, start-up services, and curbs for supporting the unit
(“Third Party Products”). All are associated with the purchase
of a HVAC unit but may be provided by the Representative or
another third party. The Company is under no obligation related
to Third Party Products.
The Representatives do not provide us with a break-out of the
amount of the total order price over the minimum sales price
which includes the Representatives’ fee and Third Party Product
amounts (“Due to Representatives”). The Due to Representatives
amount is paid only after all amounts associated with the order
are collected from the customer. The amount of payments to
our Representatives was $57.1 million, $51.6 million and $51.4
million for the years ended December 31, 2012, 2011, and 2010,
respectively.
Allowance for Doubtful Accounts - Our allowance for
doubtful accounts is estimated to cover the risk of loss
related to accounts receivable. We establish 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 subjective judgments. Thus, changes
in these factors or changes in economic circumstances may
significantly impact our Consolidated Financial Statements.
Inventory Reserves – We establish 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: the earlier of one year from the date
of first use or 18 months from date of shipment for parts only;
an additional four years on compressors (if applicable); 15 years
on aluminized steel gas-fired heat exchangers (if applicable);
25 years on stainless steel heat exchangers (if applicable); and
10 years on gas-fired heat exchangers in RL products (if appli-
cable). With the introduction of the RQ product line in 2010,
our warranty policy for the RQ series was implemented to cover
parts for two years from date of unit shipment and labor for one
year from date of unit shipment. Warranty expense is estimated
based on the warranty period, historical warranty trends and as-
sociated costs, and any known identifiable warranty issue.
Due to the absence of warranty history on new products, an
additional provision may be made for such products. Our
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 our
estimates, revisions to the estimated product warranty liability
would be required.
Medical Insurance – A provision is made for medical
costs associated with our 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 any claim over $125,000 is covered
by insurance.
Stock Compensation – We measure and recognize com-
pensation expense for all share-based payment awards made
to our employees and directors, including stock options and
restricted stock awards, based on their fair values at the time
of grant. Compensation expense, net of estimated forfeitures,
is recognized on a straight-line basis during the service period
of the related share-based compensation award. Forfeitures are
estimated based on the Company’s historical experience. The
fair value of each option award and restricted stock award is
estimated on the date of grant using the Black-Scholes-Merton
option pricing model. The use of the Black-Scholes option valu-
ation model requires the input of subjective assumptions such
as: the expected volatility, the expected term of the options
granted, expected dividend yield, and the risk free rate.
new AccountInG pRonouncementS
In June 2011, the FASB issued ASU No. 2011-05, Presentation
of Comprehensive Income and the update to this standard was
issued December 2011. This standard eliminates the option to
report other comprehensive income and its components in the
statement of changes in equity. The amendment requires that all
13
non-owner changes in stockholders’ equity be presented either
in a single continuous statement of comprehensive income or in
two separate but consecutive statements. In the two-statement
approach, the first statement should present total net income
and its components followed consecutively by a second
statement that should present total other comprehensive
income, the components of other comprehensive income,
and the total of comprehensive income. The amendment must
be applied retrospectively and is effective for fiscal years and
interim periods within those years, beginning after December
15, 2011. The adoption of this standard did not have a material
effect on our consolidated financial statements.
Item 7A. quAntItAtIve AnD
quAlItAtIve DIScloSuReS ABout
mARket RISk.
We experience various market risks, primarily from commodity
prices and interest rates. We do not use derivative financial
instruments to hedge our
interest rate risk. However,
occasionally we use financial derivatives to economically hedge
our commodity price risk. We do not use financial derivatives for
speculative purposes.
InteReSt R Ate RISk
We are exposed to interest rate risk on our revolving credit
facility, which bears a variable interest rate of LIBOR plus 2.5%. At
December 31, 2012 we had no borrowings outstanding under
the revolving credit facility. The weighted average interest rate
was 2.8% and 3.4% for the years ended December 31, 2012 and
2011, respectively.
commoDIty pRIce RISk
We are exposed to volatility in the prices of commodities used
in some of our products and occasionally we use fixed price
cancellable and non-cancellable contracts with our major
suppliers for periods of 6 to 18 months to manage this exposure.
From time to time we use financial derivatives to economically
hedge our commodity price risk. We do not have committed
commodity derivative instruments in place at December 31,
2012.
Item 8. FInAncIAl StAtementS
AnD SupplementARy DAtA.
The financial statements and supplementary data are included
commencing at page 22.
Item 9. chAnGeS In AnD
DISAGReementS wIth
AccountAntS on AccountInG
AnD FInAncIAl DIScloSuRe.
Not Applicable.
Item 9A. contRolS AnD
pRoceDuReS .
(a) evaluation of Disclosure controls and procedures
As of the end of the period covered by this Annual Report on
Form 10-K (the Evaluation Date), we carried out an evaluation,
under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer with the oversight of the Audit Committee,
regarding the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended). Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded, as of the end
of the period covered by this Annual Report, that our disclosure
controls and procedures were not effective as a result of the
identified material weakness in internal control over financial
reporting, the nature of which is summarized below.
is
(b) management's Annual Report on Internal control over
Financial Reporting
Our management
for establishing and
responsible
maintaining adequate internal control over financial reporting,
as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f ). Our
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.
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.
Under the supervision and with the participation of our
management,
including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of
December 31, 2012 based on the criteria established in Internal
Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Based on the results of this evaluation, we concluded that our
internal control over financial reporting was not effective as of
December 31, 2012 due to a material weakness in the review
procedures associated with key financial statement elements
related to intercompany activities, income taxes and inventory.
In light of the material weakness, the Company performed
additional analysis and other post-closing procedures to ensure
that the Company’s consolidated financial statements were
prepared in accordance with generally accepted accounting
principles and accurately reflect the results for the year ended
December 31, 2012. As a result, notwithstanding the material
weakness as described above, management concluded that the
consolidated financial statements included in this Form 10-K
present fairly in all material respects, the Company’s financial
position, results of operations and cash flows for the periods
presented.
14
2012AnnuAl RepoRt A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of
the Company’s annual or interim financial statements will not
be prevented or detected on a timely basis.
The effectiveness of the Company’s internal control over
financial reporting as of December 31, 2012 has been audited
by Grant Thornton LLP, our independent registered public
accounting firm, as stated in their report which is included in
this Item 9A of this report on Form 10-K.
(c) Remediation of material weakness
To remediate the material weakness described above and
improve the operational effectiveness of our internal control
over financial reporting, management is in the process of
implementing the following items:
• Hire a new Chief Accounting Officer with requisite technical
and financial reporting skills to help address the identified
matters.
• Create a better model for analyzing inventory variances and
automating this process to help eliminate errors.
• Verify the accuracy of reports and data used in critical
calculations.
• Design a process and controls to ensure a more precise
review is performed for manual journal entries relating to
critical calculations and estimates.
The Company began implementing these items in the fourth
quarter of 2012. However, not all items have been implemented
yet and some items will be implemented subsequent to the
filing of this Form 10-K. The material weakness will be fully
remediated when, in the opinion of management, the revised
control processes have been operating for a sufficient period of
time to provide reasonable assurance as to their effectiveness.
The remediation and ultimate resolution of our material
weakness will be reviewed by the Audit Committee of our
Board of Directors.
(d) changes in Internal control over Financial Reporting
Except as discussed in item (c) above, there have been no
changes in internal control over financial reporting that
occurred during the fourth quarter of 2012 that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
15
RepoRt oF InDepenDent ReGISteReD puBlIc AccountInG FIRm
Board of Directors and Stockholders
AAON, Inc.
We have audited the internal control over financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries
(the “Company”) as of December 31, 2012, 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 (“Management’s Report”). 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.
A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weakness has been identified
and included in management’s assessment:
• As indicated in the accompanying Management’s Report, management has identified a material weakness
in the review procedures associated with key financial statement elements related to intercompany
activities, income taxes and inventory.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives
of the control criteria, the Company has not maintained effective internal control over financial reporting as of
December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended December 31, 2012.
The material weakness identified above was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2012 consolidated financial statements, and this report does not affect our report dated
March 14, 2013, which expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 14, 2013
16
2012AnnuAl RepoRt
Item 9B. otheR InFoRmAtIon.
None.
pArt iii
Item 10. DIRectoRS, executIve
oFFIceRS AnD coRpoRAte
GoveRnAnce.
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 our definitive Proxy Statement
to be filed with the Securities and Exchange Commission in
connection with our annual meeting of shareholders scheduled
to be held on May 21, 2013.
coDe oF ethIcS
We adopted a code of ethics that applies to our principal
executive officer, principal financial officer and principal
accounting officer or persons performing similar functions,
as well as other employees and directors. Our code of ethics
can be found on our website at www.aaon.com. We will also
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 our definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our
annual meeting of shareholders scheduled to be held on May
21, 2013.
Item 12. SecuRIty owneRShIp
oF ceRtAIn BeneFIcIAl o wneRS
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 our definitive Proxy Statement to be filed with
the Securities and Exchange Commission in connection with
our annual meeting of stockholders scheduled to be held
May 21, 2013.
Item 13. ceRtAIn RelAtIonShIpS
AnD RelAteD tRAnSActIonS, AnD
DIRectoR InDepenDence
The information required to be reported pursuant to Item 404 of
Regulation S-K and paragraph (a) of Item 407 of Regulation S-K
is incorporated by reference in our definitive proxy statement
relating to our 2013 annual meeting of shareholders scheduled
to be held May 21, 2013.
Our 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, rules and regulations. We
have not entered into any new related party transactions and
have no preexisting related party transactions in 2012, 2011 or
2010.
Item 14. pRIncIpAl AccountAnt
FeeS AnD SeRvIceS.
This information is incorporated by reference in our definitive
Proxy Statement to be filed with the Securities and Exchange
Commission
in connection with our annual meeting of
stockholders scheduled to be held May 21, 2013.
17
pArt iV
Item 15. exhIBItS AnD FInAncIAl StAtement ScheDuleS.
(a) Financial statements.
See Index to Consolidated Financial Statements on page 20.
(b) Exhibits:
(3)
(4)
Articles of Incorporation (i)
(A)
(A-1) Article Amendments (ii)
(B)
(B-1) Amendments of Bylaws (iii)
Bylaws (i)
Third Restated Revolving Credit and Term Loan Agreement and related documents (iv)
(A)
(A-1) Amendment Seven to Third Restated Revolving Credit 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
__________
(i)
Incorporated herein by reference to the exhibits to our Form S-18 Registration Statement No. 33-18336-LA.
(ii)
Incorporated herein by reference to the exhibits to our Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, and to our Forms 8-K dated March 21, 1994, March 10, 1997, and March 17, 2000.
(iii)
Incorporated herein by reference to our Forms 8-K dated March 10, 1997, May 27, 1998 and February 25, 1999,
or exhibits thereto.
(iv)
Incorporated by reference to exhibit to our Form 8-K dated July 30, 2004.
(v)( Incorporated herein by reference to exhibit to our Form 8-K dated July 29, 2012
(vi)
Incorporated by reference to exhibits to our 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 our Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, and to our Form S-8 Registration Statement No. 33-78520, as amended.
(viii) Incorporated herein by reference to Appendix B to our definitive Proxy Statement for the 2007 Annual Meeting
of Stockholders filed April 23, 2007.
(ix)
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year ended
December 31, 2004.
18
2012AnnuAl RepoRt
SignAtUreS
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
AAon, Inc.
Dated: March 14, 2013
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 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
Dated: March 14, 2013
19
/s/ Norman H. Asbjornson
Norman H. Asbjornson
President and Director
(principal executive officer)
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
(principal financial officer)
/s/ Rebecca A. Thompson
Rebecca A. Thompson
Chief Accounting Officer
(principal accounting officer)
/s/ John B. Johnson, Jr.
John B. Johnson, 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
/s/ Jerry R. Levine
Jerry R. Levine
Director
/s/ Joseph E. Cappy
Joseph E. Cappy
Director
InDex to conSolIDAteD FInAncIAl StAtementS
pAGe
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
20
2012AnnuAl RepoRt 21
RepoRt oF InDepenDent ReGISteReD puBlIc AccountInG FIRm
Board of Directors and Stockholders
AAON, Inc.
We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada Corporation) and
subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income,
comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December
31, 2012. 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, 2012 and 2011, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2012, 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), the Company’s internal control over financial reporting as of December 31, 2012, 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 14, 2013, expressed an adverse opinion on the effectiveness of
internal control over financial reporting.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 14, 2013
22
2012AnnuAl RepoRt
AAon, Inc. AnD SuBSIDIARIeS
ConSolidAted BAlAnCe SHeetS
opeRAtInG ActIvItIeS
ASSetS
Current assets:
Cash and cash equivalents
Certificates of deposit
Investments held to maturity at amortized cost
Accounts receivable, net
Income tax receivable
Note receivable
Inventories, net
Prepaid expenses and other
Deferred tax assets
Total Current Assets
Property, plant and equipment:
Land
Buildings
Machinery and equipment
Furniture and fixtures
Total property, plant and equipment
Less: Accumulated depreciation
Property, plant and equipment, net
Certificates of deposit
Investments held to maturity at amortized cost
Note receivable, long-term
Total assets
lIABIlItIeS AnD StockholDeRS’ equIty
Current liabilities:
Revolving credit facility
Accounts payable
Accrued liabilities
Total current liabilities
Deferred tax liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.001 par value, 11,250,000 shares authorized, no
shares issued
Common stock, $.004 par value, 112,500,000 shares authorized,
24,517,749 and 24,618,324 issued and outstanding at December
31, 2012 and 2011, respectively
Additional paid-in capital
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
deCeMBer 31,
2012
2011
(in thousands, except share and per share data)
$ 3,159
3,120
2,832
43,866
694
28
32,614
740
4,493
91,546
1,340
59,761
117,617
8,906
187,624
96,929
90,695
2,120
8,041
1,091
$ 193,493
-
13,047
26,578
39,625
15,732
$ 13
-
-
34,137
10,016
27
34,948
723
4,523
84,387
1,340
56,057
114,256
7,784
179,437
85,935
93,502
-
-
1,092
$ 178,981
$ 4,575
14,118
19,994
38,687
17,790
-
-
98
-
138,038
138,136
$ 193,493
98
-
122,406
122,504
$ 178,981
The accompanying notes are an integral part of these consolidated financial statements.
23
AAon, Inc. AnD SuBSIDIARIeS
ConSolidAted StAteMentS oF inCoMe
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Loss (gain) on disposal of assets
Income from operations
Interest expense
Interest income
Other income (expense), net
Income before taxes
Income tax provision
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per common share
Weighted average shares outstanding:
Basic
Diluted
yeArS ending deCeMBer 31,
2012
2011
2010
(in thousands, except share and per share data)
$ 303,114
$ 266,220
$ 244,552
232,615
219,939
189,364
70,499
26,261
4
44,234
(44)
86
41
44,317
16,868
46,281
22,310
1,802
22,169
(277)
98
(477)
21,513
7,527
$ 27,449
$ 13,986
$ 1.12
$ 1.11
$ 0.36
24,550
24,699
$ 0.57
$ 0.56
$ 0.24
24,690
24,881
55,188
22,546
(73)
32,715
(45)
258
(235)
32,693
10,799
$ 21,894
$ 0.87
$ 0.87
$ 0.24
25,198
25,339
The accompanying notes are an integral part of these consolidated financial statements.
24
2012AnnuAl RepoRt
AAon, Inc. AnD SuBSIDIARIeS
ConSolidAted StAteMentS oF CoMpreHenSiVe inCoMe
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
Net income
$ 27,449
$ 13,986
$ 21,894
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Other comprehensive income
Comprehensive income
-
-
-
-
(1,077)
(1,077)
$ 27,449
$ 13,986
$ 20,817
The accompanying notes are an integral part of these consolidated financial statements.
25
AAon, Inc. AnD SuBSIDIARIeS
ConSolidAted StAteMentS oF StoCkHolderS’ eQUity
ASSetS
CoMMon StoCk
SHAreS
AMoUnt
pAid-in
CApitAl
ACCUMUlAted
otHer
CoMpreHenSiVe
inCoMe
(in thousands)
retAined
eArningS
totAl
Balance at December 31, 2009
25,821
$ 102
$ 644
$ 1,077
$ 116,176
$ 117,999
Net income
Foreign currency translation adjust-
ment (net of taxes of $0.6 million)
Stock options exercised and restricted
stock awards vested, including tax
benefits
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2010
Net income
Stock options exercised and restricted
stock awards vested, including tax
benefits
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2011
Net income
Stock options exercised and restricted
stock awards vested, including tax
benefits
Share-based compensation
Stock repurchased and retired
Dividends
-
-
170
-
(1,233)
-
24,758
-
72
-
(212)
-
24,618
236
-
(336)
-
-
-
-
-
(3)
-
99
-
-
-
(1)
-
98
1
-
(1)
-
Balance at December 31, 2012
24,518
$ 98
-
-
1,524
791
(2,959)
-
-
-
705
680
(1,375)
(10)
-
2,388
1,294
(3,682)
-
-
-
21,894
21,894
(1,077)
1,155
78
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,524
791
(16,518)
(19,480)
(6,067)
(6,067)
116,640
116,739
13,986
13,986
-
-
(2,295)
(5,925)
705
680
(3,671)
(5,935)
122,406
122,504
27,449
27,449
-
-
(2,977)
(8,840)
2,389
1,294
(6,660)
(8,840)
$ 138,038
$ 138,136
The accompanying notes are an integral part of these consolidated financial statements.
26
2012AnnuAl 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
Amortization of bond premiums
Provision for losses on accounts receivable, net of
adjustments
Provision for excess and obsolete inventories
Share-based compensation
Excess tax benefits from stock options exercised and
restricted stock awards vested
(Gain)loss on disposition of assets
Unrealized gain on financial derivative asset
Foreign currency transaction gain
Interest income on note receivable
Deferred income taxes
Changes in assets and liabilities:
Accounts receivable
Income tax receivable
Inventories
Prepaid expenses and other
Financial derivative asset
Accounts payable
Accrued liabilities
Net cash provided by operating activities
InveStInG ActIvItIeS
Proceeds from sale of property, plant and equipment
Investment in certificates of deposits
Maturities of certificates of deposits
Purchases of investments held to maturity
Maturities of investments
Proceeds from assets held for sale
Proceeds from called investment
Capital expenditures
Principal payments from note receivable
Net cash used in investing activities
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
$ 27,449
$ 13,986
$ 21,894
13,407
155
(83)
63
1,294
(393)
4
-
(27)
(42)
11,397
156
(289)
(50)
680
(211)
1,802
-
(8)
-
(2,028)
10,122
(9,646)
9,715
2,271
(17)
-
2,461
6,584
51,167
11
(6,540)
1,300
(11,654)
-
-
626
6,053
(10,016)
(1,296)
(67)
-
(2,751)
(3,024)
26,484
482
-
1,503
-
9,364
-
-
9,886
379
(117)
-
791
(356)
(73)
(14)
-
-
(558)
(6,403)
-
(4,814)
431
2,214
6,522
2,370
32,152
136
(2,745)
1,242
(12,018)
2,119
460
-
(14,147)
(35,914)
(17,470)
69
27
-
(30,335)
(24,538)
(28,276)
27
(Continued on next page)
AAon, Inc. AnD SuBSIDIARIeS
ConSolidAted StAteMentS oF CASH FlowS (ContinUed)
FInAncInG ActIvItIeS
Borrowings under revolving credit facility
Payments under revolving credit facility
Payments of long-term debt
Stock options exercised
Excess tax benefits from stock options exercised and
restricted stock awards vested
Repurchase of stock
Cash dividends paid to stockholders
Net cash used in financing activities
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
34,847
(39,422)
-
1,996
393
(6,660)
(8,840)
(17,686)
82,078
(77,503)
-
494
211
(3,671)
(5,935)
(4,326)
20,839
(20,839)
(76)
1,168
356
(19,480)
(9,168)
(27,200)
eFFeCtS oF exCHAnge rAte on CASH
-
-
78
net inCreASe (deCreASe) in CASH And
CASH eQUiVAlentS
CASH And CASH eQUiVAlentS,
Beginning oF yeAr
CASH And CASH eQUiVAlentS,
end oF yeAr
3,146
(2,380)
(23,246)
13
2,393
25,639
$ 3,159
$ 13
$ 2,393
The accompanying notes are an integral part of these consolidated financial statements.
28
2012AnnuAl RepoRt AAon, Inc. AnD SuBSIDIARIeS
noteS to ConSolidAted FinAnCiAl StAteMentS
December 31, 2012
1. BUSineSS deSCription
AAON, Inc. is a Nevada corporation which was incorporated
on August 18, 1987. Our operating subsidiaries include
AAON, Inc., an Oklahoma corporation and AAON Coil
Products, Inc., a Texas corporation. The Consolidated
Financial Statements
include our accounts and the
accounts of our subsidiaries. Unless the context otherwise
requires, references in this Annual Report to “AAON,” the
“Company”, “we,” “us,” “our” or “ours” refer to AAON, Inc., and
our subsidiaries.
We are engaged in the manufacture and sale of air
conditioning and heating equipment consisting of rooftop
units, chillers, air-handling units, make-up air units, heat
recovery units, condensing units and coils.
2. SUMMAry oF SigniFiCAnt
ACCoUnting poliCieS
Principles of Consolidation
These financial statements are prepared in accordance
with accounting principles generally accepted in the
United States of America. The accompanying consolidated
financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant inter-
company accounts and transactions have been eliminated.
Cash and Cash Equivalents
We consider all highly liquid temporary investments with
original maturity dates of three months or less to be cash
equivalents. Cash and cash equivalents consist of bank
deposits and highly liquid, interest-bearing money market
funds. The Company’s cash and cash equivalents are held
in a few financial institutions in amounts that exceed
the insurance limits of the Federal Deposit Insurance
Corporation. However, management believes that the
Company’s counterparty risks are minimal based on the
reputation and history of the institutions selected.
Investments
Certificates of Deposit
We invested $6.5 million in certificates of deposit for the
year ending December 31, 2012 with various maturities
ranging from two months to two years. The certificates of
deposit bear interest ranging from 0.3% to 0.85% per annum.
We did not invest in any certificates of deposit in 2011.
Investments Held to Maturity
Our investments held to maturity are comprised of
$10.9 million of corporate notes and bonds with various
maturities ranging from two months to 25 months. The
investments have moderate risk with S&P ratings ranging
from A+ to BBB-. We did not invest in any investments held
to maturity in 2011.
We record the amortized cost basis and accrued interest
of the corporate notes and bonds in the Consolidated
Balance Sheets. We record the interest and amortization
of bond premium to interest income in the Consolidated
Statements of Income.
The
following summarizes the amortized cost and
estimated fair value of our investments held to maturity at
December 31, 2012:
AMortized
CoSt
groSS
UnreAlized
gAin
groSS
UnreAlized
loSS
FAir
VAlUe
cuRRent ASSet S:
Investments held to maturity
non cuRRent ASSet S:
Investments held to maturity
Total
$ 2,832
8,041
$ 10,873
(in thousands)
-
-
-
$ (1)
$ 2,831
(9)
8,032
$ (10)
$ 10,863
We evaluate these investments for other-than-temporary impairments on a quarterly basis. We do not believe that
any of the unrealized losses represent an other-than-temporary impairment.
29
Accounts and Notes Receivable
Accounts and notes receivable are stated at amounts
due from customers, net of an allowance for doubtful
accounts. We generally do not require that our customers
provide collateral. The Company determines its allowance
for doubtful accounts by considering a number of
factors, including the credit risk of specific customers, the
customer’s ability to pay current obligations, historical
trends, economic and market conditions and the age of the
receivable. Accounts are considered past due when the
balance has been outstanding for greater than ninety days.
Past due accounts are generally written-off against the
allowance for doubtful accounts only after all collection
attempts have been exhausted.
in
Concentration of Credit Risk
Our customers are concentrated primarily
the
domestic commercial and industrial new construction
and replacement markets. To date, our sales have been
primarily to the domestic market, with foreign sales
accounting for approximately 5% of revenues for the years
ended December 31, 2012, 2011 and 2010. No customer
accounted for 10% of our sales during 2012, 2011 or 2010.
Other than one customer who placed an exceptionally
large order with an invoice date of 12/27/12 and a payment
date of 1/17/13, no customer accounted for more than 5%
of our accounts receivable balance at December 31, 2012,
2011 or 2010.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents,
liabilities
receivables, accounts payable and accrued
approximate fair value because of the short-term maturity
of the items. The carrying amount of the Company's
revolving line of credit, and other payables, approximate
their fair values either due to their short term nature,
the variable rates associated with the debt or based on
current rates offered to the Company for debt with similar
characteristics.
Inventories
Inventories are valued at the lower of cost or market using
the first-in, first-out (“FIFO”) method. Cost in inventory
includes purchased parts and materials, direct labor
and applied manufacturing overhead. We establish an
allowance for excess and obsolete inventories based on
product line changes, the feasibility of substituting parts
and the need for supply and replacement parts.
Property, Plant and Equipment
including significant
Property, plant and equipment,
improvements, are recorded at cost, net of accumulated
depreciation. Repairs and maintenance and any gains or
losses on disposition are included in operations.
Depreciation is computed using the straight-line method
over the following estimated useful lives:
Buildings
Machinery and equipment
Furniture and fixtures
3-40 years
3-15 years
3-7 years
Impairment of Long-Lived Assets
We review long-lived assets for possible impairment
when events or changes in circumstances indicate, in
management’s judgment, that the carrying amount of an
asset may not be recoverable. Recoverability is measured
by a comparison of the carrying amount of an asset or asset
group to its estimated undiscounted future cash flows
expected to be generated by the asset or asset group. If
the undiscounted cash flows are less than the carrying
amount of the asset or asset group, an impairment loss is
recognized for the amount by which the carrying amount
of the asset or asset group exceeds its fair value.
Research and Development
The costs associated with research and development for
the purpose of developing and improving new products
are expensed as incurred. For the years ended December
31, 2012, 2011, and 2010 research and development costs
amounted to approximately $3.6 million, $4.8 million, and
$3.6 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising
expense for the years ended December 31, 2012, 2011, and
2010 was approximately $0.9 million, $1.2 million, and $0.9
million, respectively.
Shipping and Handling
We incur 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 and as an expense in cost of sales. For the years
ended December 31, 2012, 2011 and 2010 shipping and
handling fees amounted to approximately $8.6 million,
$8.7 million, and $8.6 million, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability
method. The Company recognizes deferred tax assets and
liabilities for the expected future tax consequences of
temporary differences between the book carrying amounts
and the tax basis of assets and liabilities. We establish
accruals for uncertain tax positions when it is more likely
than not that our tax return positions may not be fully
sustained. The Company records a valuation allowance for
deferred tax assets when, in the opinion of management,
it is more likely than not that deferred tax assets will not
be realized.
30
2012AnnuAl RepoRt Stock Compensation
The Company recognizes expense for its share-based
compensation based on the fair value of the awards that are
granted. The Company’s share-based compensation plans
provide for the granting of stock options, and restricted
stock. The fair values of stock options are estimated at the
date of grant using the Black-Scholes option valuation
model. The use of the Black-Scholes option valuation
model requires the input of subjective assumptions.
Measured compensation cost, net of estimated forfeitures,
is recognized ratably over the vesting period of the
related share-based compensation award. Forfeitures are
estimated based on the Company’s historical experience.
The fair value of restricted stock awards is determined
based on the market value of the Company’s shares on the
grant date and the compensation expense is recognized
on a straight-line basis during the service period of the
respective grant.
Financial Derivatives
The Company occasionally uses derivative financial
instruments to reduce its exposure to the risk of increasing
commodity prices. Contract terms of the hedging
instrument closely mirror those of the hedged forecasted
transaction providing for the hedge relationship to be
highly effective both at
inception and continuously
throughout the term of the hedging relationship. The
Company does not engage in speculative transactions, nor
does the Company hold or issue financial instruments for
trading purposes.
The Company recognizes all derivatives on the balance
sheets at fair value. Derivatives that do not meet the
criteria for hedge accounting are adjusted to fair value
through income. If the derivative is designated as a cash
flow hedge, changes in the fair value are recognized in
accumulated other comprehensive income (loss) until the
hedged transaction is recognized in income. If a hedging
instrument is terminated, any unrealized gain (loss) at
the date of termination is carried in accumulated other
comprehensive income (loss) until the hedged transaction
is recognized in income. The ineffective portion of a
derivative’s change in fair value is recognized in income in
the period of change.
Revenue Recognition
We recognize revenues from sales of products when the
products are shipped and the title and risk of ownership
pass to the customer. Final sales prices are fixed and
based on purchase orders. Sales allowances and customer
incentives are treated as reductions to sales and are
provided for based on historical experiences and current
estimates.
In addition, the Company presents revenues net of sales
tax and net of certain payments to our independent
(“Representatives”).
manufacturer
Representatives are national companies that are in the
business of providing HVAC units and other related
representatives
products and services to customers. The end user customer
orders a bundled group of products and services from the
Representative and expects the Representative to fulfill the
order. Only after the specifications are agreed to by the
Representative and the customer, and the decision is made
to use an AAON HVAC unit, will we receive notice of the
order. We establish the amount we must receive for our
HVAC unit (“minimum sales price”), but do not control the
total order price which is negotiated by the Representative
with the end user customer.
We are responsible for billings and collections resulting
from all sales transactions, including those initiated by
our Representatives. The Representatives submit the total
order price to us for invoicing and collection. The total order
price includes our minimum sales price and an additional
amount which may include both the Representatives’ fee
and amounts due for additional products and services
required by the customer. These additional products and
services may include controls purchased from another
manufacturer to operate the unit, start-up services, and
curbs for supporting the unit (“Third Party Products”). All
are associated with the purchase of a HVAC unit but may
be provided by the Representative or another third party.
The Company is under no obligation related to Third Party
Products.
The Representatives do not provide us with a break-out
of the amount of the total order price over the minimum
sales price which includes the Representatives’ fee and
Third Party Product amounts (“Due to Representatives”).
The Due to Representatives amount is paid only after all
amounts associated with the order are collected from the
customer. The amount of payments to our representatives
was $57.1 million, $51.6 million, and $51.4 million for each
of the years ended December 31, 2012, 2011, and 2010,
respectively.
Insurance Reserves
Under the Company’s insurance programs, coverage is
obtained for significant liability limits as well as those risks
required to be insured by law or contract. It is the policy of
the Company to self-insure a portion of certain expected
losses related primarily to workers’ compensation and
medical liability. Provisions for losses expected under these
programs are recorded based on the Company’s estimates
of the aggregate liabilities for the claims incurred.
Product Warranties
A provision is made for the estimated cost of maintaining
product warranties to customers at the time the product
is sold based upon historical claims experience by product
line. The Company records a liability and an expense for
estimated future warranty claims based upon historical
experience and management's estimate of the level
of future claims. Changes in the estimated amounts
recognized in prior years are recorded as an adjustment to
the liability and expense in the current year.
31
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 our results of operations,
financial position and cash flows. We reevaluate our
estimates and assumptions on a monthly basis. The
most significant estimates include the allowance for
doubtful accounts, inventory reserves, warranty accrual,
workers compensation accrual, medical
insurance
accrual, share-based compensation and the fair value
of derivative financial instruments. Actual results could
differ materially from those estimates.
3. ACCoUntS reCeiVABle
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
Provision for losses on accounts receivable
Accounts receivable written off, net of recoveries
Balance, end of period
deCeMBer 31,
2012
2011
(in thousands)
$ 43,918
(52)
$ 43,866
$ 34,405
(268)
$ 34,137
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
$ 268
(83)
(133)
$ 52
$ 600
$ 776
(289)
(117)
(43)
$ 268
(59)
$ 600
32
2012AnnuAl RepoRt 4. inVentorieS
The components of inventories and the related changes in the allowance for excess and obsolete inventories are as
follows:
Raw materials
Work in process
Finished goods
Less: Allowance for excess and obsolete inventories
deCeMBer 31,
2012
2011
(in thousands)
$ 28,155
$ 31,746
2,757
2,065
32,977
(363)
1,979
1,523
35,248
(300)
Total, net
$ 32,614
$ 34,948
Allowance for doubtful accounts:
Balance, beginning of period
Provision for excess and obsolete inventories
Inventories written off
Balance, end of period
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
$ 300
63
-
$ 363
$ 350
(50)
-
$ 300
$ 760
-
(410)
$ 350
5. note reCeiVABle
In connection with the closure of our Canadian facility on May 18, 2009 we sold land and a building in September
2010 and assumed a note receivable from the borrower secured by the property. The $1.1 million, fifteen-year note
has an interest rate of 4.0% and is payable to us monthly, and has a $0.6 million balloon payment due in October
2025. Interest payments are recognized in interest income.
We evaluate the note for impairment on a quarterly basis. We determine the note receivable to be impaired if we
are uncertain of its collectability based on the contractual terms. At December 31, 2012 and 2011 there was no
impairment.
33
6. SUppleMentAl CASH Flow inForMAtion
Supplemental disclosures:
Interest paid
Income taxes paid
Non-cash investing and financing activities:
Non-cash capital expenditures
Trade-in of equipment
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
$ 44
15,128
(3,670)
300
$ 277
6,377
3,852
1,802
$ 45
7,800
-
14
7. wArrAntieS
A provision is made for estimated warranty costs at the time the related products are sold based upon the warranty
period, historical trends, new products and any known identifiable warranty issues. Warranty expense was $3.5
million, $4.2 million and $4.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.
Changes in the warranty accrual are as follows:
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
Warranty accrual:
Balance, beginning of period
Payments made
Provisions
Adjustments related to changes in estimates
$ 6,093
(3,861)
3,304
240
$ 7,300
(5,387)
5,146
(966)
Balance, end of period
$ 5,776
$ 6,093
$ 7,200
(4,405)
3,987
518
$ 7,300
8. ACCrUed liABilitieS
At December 31, accrued liabilities were comprised of the following:
Warranty
Due to Representatives
Payroll
Workers’ compensation
Medical self-insurance
Customer prepayments
Employee benefits and other
Total
2012
2011
(in thousands)
$ 5,776
$ 6,093
9,439
3,852
928
420
3,933
2,230
7,891
1,736
886
326
1,784
1,278
$ 26,578
$ 19,994
34
2012AnnuAl RepoRt At December 31, 2012, we were in compliance with our
financial covenants. These covenants require that we
meet certain parameters related to our tangible net
worth, total liabilities to tangible net worth ratio and
working capital. At December 31, 2012 our tangible net
worth was $138.1 million, which meets the requirement
of being at or above $95.0 million. Our total liabilities
to tangible net worth ratio was 0.4 to 1.0, which meets
the requirement of not being above 2 to 1. Our working
capital was $51.9 million which meets the requirement
of being at or above $40.0 million.
9. reVolVing Credit FACility
Our revolving credit facility provides for maximum
borrowings of $30.0 million which is provided by the
Bank of Oklahoma, National Association. Under the line
of credit, there is one standby letter of credit totaling
$0.9 million. Borrowings available under the revolving
credit facility at December 31, 2012, were $29.1 million.
Interest on borrowings is payable monthly at LIBOR plus
2.5%. No fees are associated with the unused portion of
the committed amount. As of December 31, 2012, we
had no balance outstanding under our revolving credit
facility and $4.6 million was outstanding at December
31, 2011. At December 31, 2012 and 2011, the weighted
average interest rate was 2.8% and 3.4%, respectively.
10. inCoMe tAxeS
The provision for income taxes consists of the following:
Current
Deferred
yeArS ending deCeMBer 31,
2012
2011
(in thousands)
2010
$ 18,896
(2,028)
$ 16,868
$ (2,595)
10,122
$ 7,527
$ 11,357
(558)
$ 10,799
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate before the provision for income taxes.
The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
Federal statutory rate
State income taxes, net of federal benefit
Other
yeArS ending deCeMBer 31,
2012
2011
2010
35%
5%
(2)%
38 %
35%
4 %
(4)%
35%
35%
4%
(6)%
33%
35
Other primarily relates to the domestic production activity credit, certain domestic credits and a change in rate
applied to deferred taxes.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amount used for income tax purposes.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
Net current deferred assets and (liabilities) relating to:
Valuation reserves
Warranty accrual
Other accruals
Other, net
Net long-term deferred assets and (liabilities) relating to:
Depreciation
Share-based compensation
Other net
deCeMBer 31,
2012
2011
(in thousands)
$ 164
2,287
1,996
46
$ 4,493
$ 221
2,376
1,216
710
$ 4,523
$ (16,659)
$ (18,802)
653
274
648
364
$ (15,732)
$ (17,790)
We file income tax returns in the U.S., state and foreign
income tax returns jurisdictions. We are subject to U.S.
examinations for tax years 2010 through 2012, and to
non-U.S. income tax examinations for the tax years of
2007 through 2010. In addition, we are subject to state
and local income tax examinations for the tax years 2009
through 2012.
The Company evaluates uncertain tax positions for
in the consolidated
recognition and measurement
financial statements. To recognize a tax position, the
Company determines whether it is more likely than
not that the tax positions will be sustained upon
examination, including resolution of any related appeals
or litigation, based on the technical merits of the
position. A tax position that meets the more likely than
not threshold is measured to determine the amount of
benefit to be recognized in the consolidated financial
statements. The amount of tax benefit recognized with
respect to any tax position is measured as the largest
amount of benefit that is greater than 50 percent likely
of being realized upon settlement. The Company had no
uncertain tax positions that required recognition in the
consolidated financial statements at December 31, 2012
and 2011. Any interest or penalties would be recognized
as a component of income tax expense.
The year ended December 31, 2011 resulted in a net
operating loss (NOL) of $4.6 million. The full amount of
the NOL is expected to be utilized with the filing of the
2012 federal tax return.
On January 2, 2013 the American Taxpayer Relief
Act (ATRA) of 2012 was signed into law. Some of the
provisions were retroactive to January 1, 2012, including
the extension of certain tax credits. The tax rate above
reflects the tax law that was in place as of December 31,
2012. Had the ATRA had been enacted prior to January
1, 2013, our overall tax expense would have been
approximately $0.53 million lower at an overall effective
rate of 37%. This $0.53 million difference will be reflected
as a reduction in expense in the first quarter of 2013.
36
2012AnnuAl RepoRt 11. SHAre-BASed CoMpenSAtion
We have historically maintained a stock option plan for
key employees, directors and consultants (“the 1992
Plan”). The 1992 Plan provided for 6.6 million shares to
be issued under the plan in the form of stock options.
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 year, commencing one year after the
date of grant. All other options granted vest at a rate of
20% per year, commencing one year after date of grant,
and are exercisable during years 2-10.
On May 22, 2007, our stockholders adopted a Long-Term
Incentive Plan (“LTIP”) which provides an additional
1,125,000 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. Under the
LTIP, the exercise price of shares granted may not be
less than 100% of the fair market value at the date of the
grant.
The total pre-tax compensation cost related to unvested
stock options not yet recognized as of December 31,
2012 is $2.4 million and is expected to be recognized
over a weighted-average period of 2.4 years.
The following weighted average assumptions were used
to determine the fair value of the stock options granted
on the original grant date for expense recognition
purposes for options granted during December 31,
2012, 2011 and 2010 using a Black Scholes Model:
direCtorS And oFFiCerS
2012
2011
2010
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)
eMployeeS
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)
1.22%
47.54%
1.19%
7%
1.22%
45.99%
1.19%
8
N/A
N/A
N/A
N/A
1.19%
45.22%
1.41%
8
1.53%
45.37%
2.63%
7%
1.53%
45.29%
2.44 %
8
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free
interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the
grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.
37
The following is a summary of stock options vested and exercisable as of December 31, 2012:
rAnge oF
exerCiSe priCeS
nUMBer oF
SHAreS
weigHted AVerAge
reMAining
ContrACtUAl liFe
weigHted
AVerAge exerCiSe
priCe*
$7.21 - 9.71
$10.21 - 12.97
$13.70 - 18.30
Total
66,350
135,050
50,100
251,500
2.86
5.22
7.86
5.12
The following is a summary of stock options vested and exercisable as of December 31, 2011:
rAnge oF
exerCiSe priCeS
nUMBer oF
SHAreS
weigHted AVerAge
reMAining
ContrACtUAl liFe
weigHted
AVerAge exerCiSe
priCe*
$6.45 - 7.21
$7.53 - 10.66
$10.75 - 13.79
$15.51 - 18.30
Total
81,850
153,900
114,200
16,200
366,150
2.42
5.00
5.13
8.50
4.62
intrinSiC
VAlUe
(in thousands)
$ 851
1,362
263
$ 8.04
10.78
15.63
$ 11.03
$ 2,476
intrinSiC
VAlUe
(in thousands)
$ 1,111
1,682
957
74
$ 6.91
9.56
12.12
15.91
$ 10.05
$ 3,824
The following is a summary of stock options vested and exercisable as of December 31, 2010:
rAnge oF
exerCiSe priCeS
nUMBer oF
SHAreS
weigHted AVerAge
reMAining
ContrACtUAl liFe
weigHted
AVerAge exerCiSe
priCe*
$6.45 - 7.21
$7.53 - 10.66
$10.75 - 14.28
Total
103,350
138,300
77,700
319,350
3.18
5.57
5.93
4.89
$ 6.83
9.29
12.16
$ 9.19
intrinSiC
VAlUe
(in thousands)
$ 1,238
1,317
516
$ 3,071
38
2012AnnuAl RepoRt A summary of option activity under the plan is as follows:
optionS
SHAreS
Outstanding at December 31, 2011
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2012
Exercisable at December 31, 2012
653,050
301,575
(197,950)
(13,000)
743,675
251,500
weigHted
AVerAge
exerCiSe priCe
$ 11.77
19.47
10.08
18.54
15.23
$ 11.03
The total intrinsic value of options exercised during
December 31, 2012, 2011 and 2010 was $4.0 million, $1.1
million and $2.4 million, respectively. The cash received
from options exercised during December 31, 2012,
2011 and 2010 was $2.0 million, $0.5 million and $1.2
million, respectively. The impact of these cash receipts
is included in financing activities in the accompanying
Consolidated Statements of Cash Flows.
During 2007, the Compensation Committee of the
Board of Directors authorized and issued restricted stock
awards to directors and key employees. The restricted
stock award program offers the opportunity to earn
shares of AAON Common Stock over time, rather than
options that give the right to purchase stock at a set
price. Restricted stock awards granted to directors vest
one-third each year. All other restricted stock awards
vest at a rate of 20% per year. Restricted stock awards
are grants that entitle the holder to shares of common
stock subject to certain terms. The fair value of restricted
stock awards is based on the fair market value of AAON
common stock on the respective grant dates, reduced
for the present value of dividends.
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.
At December 31, 2012, unrecognized compensation
cost related to unvested restricted stock awards was
approximately $0.837 million which is expected to be
recognized over a weighted average period of 2.2 years.
A summary of the unvested restricted stock awards is as
follows:
reStriCted StoCk
SHAreS
Unvested at December 31, 2011
Granted
Vested
Forfeited
Unvested at December 31, 2012
37,350
45,550
(18,825)
-
64,075
weigHted
AVerAge
exerCiSe priCe
$ 20.65
18.21
19.20
-
$ 18.16
39
A summary of share-based compensation is as follows for the years ending December 31, 2012, 2011 and 2010:
grAnt dAte FAir VAlUe oF AwArdS dUring tHe period
2012
2011
2010
yeArS ending deCeMBer 31,
Options
Restricted stock
Total
$ 2,569
830
$ 3,399
(in thousands)
$ 632
325
$ 957
$ 799
330
$ 1,129
SHAre-BASed CoMpenSAtion expenSe
2012
2011
2010
Options
Restricted stock
Total
inCoMe tAx BeneFit relAted to SHAre-BASed
CoMpenSAtion
Options
Restricted stock
Total
$ 958
336
$ 1,294
(in thousands)
$ 389
291
$ 680
$ 446
345
$ 791
2012
2011
2010
(in thousands)
$ 154
57
$ 211
$ 370
23
$ 393
$ 334
22
$ 356
12. eMployee BeneFitS
Defined Contribution Plan - 401(k) - We sponsor a defined
contribution plan (“the Plan”). Eligible employees may
make contributions in accordance with the Plan and IRS
guidelines. In addition to the traditional 401(k), effective
July 2010, eligible employees were given the option of
making an after-tax contribution to a Roth 401(k) or a
combination of both. Effective May 30, 2005, the Plan
was amended to provide for automatic enrollment
and provided for an automatic increase to the deferral
percentage 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.
Under the plan the Company contributes a specified
percentage of each eligible employee’s compensation.
In addition, the Company contributes 1.5% of eligible
payroll to the 401(k) plan each year. We contribute in
the form of cash and direct the investment to shares of
AAON stock. Employees are 100% vested in salary deferral
contributions and vest 20% per year at the end of years
two through six of employment in employer matching
contributions. For the year ended December 31, 2012,
2011 and 2010 we made matching contributions of
$2.4 million, $2.2 million and $1.7 million, respectively.
Administrative expenses
remained consistent at
approximately $0.1 million for the years ended 2012,
2011 and 2010, respectively.
Profit Sharing Bonus Plan - We maintain a discretionary
profit sharing bonus plan under which 10% of pre-tax
profit 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 through the 15th of the third
month following the calendar quarter and who work at
least 80% of the five and one-half month period. Profit
sharing expense was $4.9 million, $2.4 million and $3.8
million for the years ended December 31, 2012, 2011
and 2010, respectively.
13. SHAreHolderS’ eQUity
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 our 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 our Common Stock. The rights
become exercisable after a person has acquired, or a
tender offer is made for, 15% or more of our Common
Stock. If either of these events occurs, upon exercise the
holder (other than a holder owning more than 15% of the
40
2012AnnuAl RepoRt outstanding stock) will receive the number of shares of our
Common Stock having a market value equal to two times
the exercise price.
The rights may be redeemed by us for $0.001 per right until
a person or group has acquired 15% of our Common Stock.
The rights expired on August 20, 2012.
Stock Repurchase - On May 12, 2010, we completed a stock
buyback program under a Board of Directors authorization
dated November 6, 2007. As authorized we repurchased
a total of 2.7 million shares under this program for an
aggregate price of approximately $36.1 million, or an
average price of $13.36 per share. We purchased these
shares at current market prices.
On May 17, 2010, the Board authorized a new stock buyback
program, targeting repurchases of up to approximately 5%
(approximately 1.3 million shares) of our outstanding stock
from time to time in open market transactions. Through
June 28, 2010, we repurchased a total of approximately
0.718 million shares for an aggregate price of $11.5 million,
or an average price of $16.04 per share. We purchased the
shares at current market prices. No purchases were made
for the years ended December 31, 2012 and 2011.
On July 1, 2005, we entered into a stock repurchase
arrangement by which employee-participants
in our
401(k) savings and investment plan are entitled to have
shares of AAON stock in their accounts sold to us to provide
diversification of their investments. The maximum number
of shares to be repurchased is contingent upon the
number of shares sold by employees. Through December
31, 2012, we repurchased approximately 1.9 million shares
for an aggregate price of $25.1 million, or an average price
of $13.38 per share. We purchased the shares at current
market prices.
On November 7, 2006, the Board of Directors authorized
us to repurchase shares from certain directors and officers
following their exercise of stock options. The maximum
number of shares to be repurchased is contingent upon
the number of shares sold. Through December 31, 2012,
we repurchased approximately 0.734 million shares for
an aggregate price of $11.2 million, or an average price
of $15.25 per share. We purchased the shares at current
market prices.
Dividends - At the discretion of the Board of Directors we
pay semi-annual cash dividends. Board approval is required
to determine the date of declaration and amount for each
semi-annual dividend payment. The Board of Directors
approved dividend payments of $0.12 per share related to
the 3-for-2 stock split effective on June 13, 2011.
We declared dividends to shareholders of record at the
close of business on June 11, 2012, which were paid on
July 2, 2012. At a meeting of the Board of Directors on
November 7, 2012, the Board declared a regular semi-
annual cash dividend of $0.12 per share, and, in view of
our strong financial position, the Board also declared a
one-time special cash dividend of $0.12 per share. Both
dividends were paid to shareholders of record at the close
of business on December 3, 2012 and paid on December
24, 2012.
We paid cash dividends of $8.8 million, $5.9 million and
$9.2 million in 2012, 2011 and 2010, respectively.
14. CoMMitMentS And ContingenCieS
We are subject to various claims and legal actions that
arise in the ordinary course of business. We closely monitor
these claims and legal actions and frequently consult with
our legal counsel to determine whether they may, when
resolved, have a material adverse effect on our financial
position or results of operations and accrue and/or disclose
loss contingencies as appropriate.
We are party to several short-term, cancelable and
occasionally non-cancelable, fixed price contracts with
major suppliers for the purchase of raw material and
component parts. We expect to receive delivery of raw
materials for use in our manufacturing operations. These
contracts are not accounted for as derivative instruments
because they meet the normal purchase and normal sales
exemption.
15. new ACCoUnting
pronoUnCeMentS
In June 2011, the FASB
issued ASU No. 2011-05,
Presentation of Comprehensive Income and the update
to this standard was issued December 2011. This standard
eliminates the option to report other comprehensive
income and its components in the statement of changes
in equity. The amendment requires that all non-owner
changes in stockholders’ equity be presented either in a
single continuous statement of comprehensive income
or in two separate but consecutive statements. In the
two-statement approach, the first statement should
present total net income and its components followed
consecutively by a second statement that should present
total other comprehensive
income, the components
of other comprehensive
income, and the total of
comprehensive income. The amendment must be applied
retrospectively and is effective for fiscal years and interim
periods within those years, beginning after December 15,
2011. The adoption of this standard did not have a material
effect on our consolidated financial statements.
41
16. eArningS per SHAre
Basic net income per share is calculated by dividing
net income by the weighted average number of shares
of common stock outstanding during the period.
Diluted net income per share assumes the conversion
of all potentially dilutive securities and is calculated by
dividing net income by the sum of the weighted average
number of shares of common stock outstanding plus all
potentially dilutive securities. Dilutive common shares
consist primarily of stock options and restricted stock
awards.
The following table sets forth the computation of basic
and diluted earnings per share:
numeRAtoR:
Net Income
DenomInAtoR:
Basic weighted average shares
yeArS ending deCeMBer 31,
2012
2011
2010
(in thousands except share and per share data)
$ 27,449
$ 13,986
$ 21,894
24,550,113
24,689,852
25,198,166
Effect of dilutive stock options and restricted stock
149,104
191,294
141,227
Diluted weighted average shares
24,699,217
24,881,146
25,339,393
eARnInGS peR ShARe:
Basic
Diluted
$ 1.12
$ 1.11
$ 0.57
$ 0.56
$ 0.87
$ 0.87
AntI-DIlutIve ShAReS :
Shares
Weighted average exercise price of anti-dilutive shares
413,275
$ 18.54
171,250
$ 16.35
121,500
$ 15.23
42
2012AnnuAl RepoRt 17. QUArterly reSUltS (UnAUdited)
The following is a summary of the quarterly results of operations for the years ending December 31, 2012 and 2011:
2012
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2011
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
QUArter
FirSt
SeCond
tHird
FoUrtH
(in thousands except share and per share data)
$ 64,957
$ 83,333
$ 76,816
$ 78,008
13,518
4,567
0.19
0.18
21,103
9,297
0.38
0.38
17,149
6,007
0.24
0.24
18,729
7,578
0.31
0.31
$ 59,913
$ 69,076
$ 73,829
$ 63,402
11,638
3,650
0.15
0.15
11,737
3,839
0.16
0.15
14,259
5,626
0.23
0.23
8,647
871
0.04
0.04
Higher component prices adversely affected both
gross margins and profits in the fourth quarter of 2011.
Also, the Company experienced the negative effect of
manufacturing inefficiencies due to the introduction
of new products and, quite significantly, a $1.8 million
charge to earnings caused by our decision to replace
approximately 50% of AAON’s heavily-used sheet metal
equipment to benefit from a Federal law allowing 100%
depreciation (for tax purposes) of qualified capital
expenditures put in service in calendar year 2011 and
to gain greatly improved manufacturing efficiencies in
2012 and beyond. The charge to earnings was caused by
a pre-tax loss of $1.8 million on the trade in of the old
equipment. The new equipment is state of the art and
combines the latest advancements in automation and
laser technology, in furtherance of our strategic vision to
improve manufacturing efficiencies.
A number of additional one-time charges were incurred
in the fourth quarter of 2011:
•
Inefficient sheet metal production due to the
changing out of approximately 50% of our capacity
in a short period of time in order to have our new
equipment operable by the end of the year.
• Numerous costs expensed during the change out of
the equipment.
•
Inefficiencies in production due to lack of sheet metal
parts in a timely fashion.
• Costs associated with relocating three assembly lines
and rearranging two other assembly lines.
43
conSent oF InDepenDent
ReGISteReD puBlIc AccountInG FIRm
We have issued our reports dated March 14, 2013, with respect to the consolidated financial statements and internal
control over financial reporting in the Annual Report of AAON, Inc. on Form 10-K for the year ended December 31,
2012. We hereby consent to the incorporation by reference of said reports in the Registration Statements of AAON,
Inc. on Forms S-8 (File No. 333-52824 and File No. 333-151915).
ExHIBIT 23
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 14, 2013
44
2012AnnuAl RepoRt
ExHIBIT 31.1
ceRtIFIc AtIon
I, Norman H. Asbjornson, certify that:
1.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to 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;
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 our 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;
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;
c)
d) disclosed in this report any change in the registrant’s internal controls over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: March 14, 2013
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
45
I, Scott M. Asbjornson, certify that:
ceRtIFIc AtIon
1.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
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;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f )) for the registrant and
have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including our consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
d) disclosed in this report any change in the registrant’s internal controls over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: March 14, 2013
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
46
2012AnnuAl RepoRt
ceRtIFIc AtIon puRSuAnt to
18 u.S.c. SectIon 1350,
AS Adopted pUrSUAnt to
SeCtion 906 oF tHe SArBAneS-oxley ACt oF 2002
ExHIBIT 32.1
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December
31, 2012, 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:
(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
our results of operations.
Dated: March 14, 2013
/s/ Norman H Asbjornson
Norman H. Asbjornson
Chief Executive Officer
47
ExHIBIT 32.2
ceRtIFIc AtIon puRSuAnt to
18 u.S.c. SectIon 1350,
AS Adopted pUrSUAnt to
SeCtion 906 oF tHe SArBAneS-oxley ACt oF 2002
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended December 31,
2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott M. Asbjornson,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
our results of operations.
Dated: March 14, 2013
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
48
2012AnnuAl RepoRt
oFFiCerS
norMAn H. ASBjornSon
has served as President, CEO 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 has served
as Senior Vice President, Admin-
istration, of the Company since
2012 and Treasurer of the Company
since 1999. Ms. Sheffield previously
served as Vice President of the
Company from 2002 to 2012, and
Accounting Manager of the Com-
pany from 1988 to 1999.
dAVid e. kneBel has served
as Senior Vice President, Sales and
Technology, of the Company since
2012. Mr. Knebel previously served
as Vice President of the Company
from 2005 to 2012, Director of Sales
and Technology of the Company
from 2002 to 2005 and Manager
of Technology and Training of the
Company from 2001 to 2002. Mr.
Knebel has been in the heating and
air conditioning industry for over 40
years, holding positions in design,
research, software development,
engineering, teaching, sales and
senior management.
roBert g. FergUS has served
as Vice President, Manufacturing, of
the Company since 1988. Mr. Fergus
has been in senior management
positions in the heating and air
conditioning industry for over 40
years.
SCott M. ASBjornSon
has served as Vice President,
Finance, and CFO of the Company
since 2012. Mr. Asbjornson began
work at the Company in 1988 and
previously served as President of
AAON Coil Products from 2010 to
2012, Vice President of AAON Coil
Products from 2000 to 2010 and
General Manager of AAON Coil
Products from 1996 to 2010.
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 which serves as
General Counsel of the Company.
49
BoArd oF direCtorS
Back row (from left to right): Jerry R. Levine, A.H. McElroy, II, Joseph E. Cappy, Paul K. Lackey, Jr.
Front row (from left to right): Jack E. Short, Norman H. Asbjornson, John B. Johnson, Jr.
norMAn H. ASBjornSon
President/CEO
joHn B. joHnSon, jr. Secretary
joSepH e. CAppy was elected a director
of the Company in 2010. From 1997 to 2003,
Mr. Cappy served as the Chairman, President
and CEO of DollarThrifty Automotive Group.
From 1987 to 1997 he was Vice President of
Chrysler Corporation. From 1982 to 1987 he
was President and CEO of American Motors
Corporation.
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.
A.H. MCelroy, ii was elected as a dir-
ector 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.
pAUl k. lACkey, jr. 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.
jerry r. leVine has served as a director
of the Company since 2008. Since 1999,
Mr. Levine has provided
investor and
shareholder relations services and advice to
the 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
General Counsel
Johnson & Jones,
2200 Bank of America
Center, 15 West Sixth Street,
Tulsa, Oklahoma 74119
Investor Relations
Jerry Levine,
105 Creek Side Road,
Mt. Kisco, New York 10549,
Ph: 914-244-0292,
Fax: 914-244-0295,
jrladvisor@yahoo.com
Executive Offices
2425 South Yukon Avenue,
Tulsa, Oklahoma 74107
Common Stock
NASDAQ-AAON
50
Thanks
to oUr eMployeeS
Mohammad Abdallah
Maria Acosta
Andres Acosta-Lujan
Enriqueta Adame
Derrick Adams
Gary Adams
Rodney Adams
Ryan Adams
Timothy Adams
Brian Adkins
Maria Aguayo
Arturo Aguilar
Miguel Aguilera
Daniel Alagdon
Frankie Alagdon
Martha Alanis
Javier Alba
Julio Albino
James Alexander
Shannon Alford
Nader Al-Hashmi
Donald Allen
Kevin Allen
Earl Alston
Luis Alvarado De La
Cruz
Michael Amburgey
Sarah Andersen
Sarah Andersen
Elbert Anderson
Jose Andrada
Fannie Andrews
Margarito Angeles
Wesley Anselme
Price Anson
Latisha Anthony
Alfredo Antonio
Daniel Aponte
Lorenzo Aragon
Nohemi Aranda
Clyde Archer
Uriel Arellano Guerra
Jose Arguelles
Jose Argumedo Ruiz
Thomas Armer, Jr.
Rondell Armstrong
Maria Arredondo
Gerardo Arroyo
Norman Asbjornson
Scott Asbjornson
David Ashlock
Gary Ashmore
Dwight Austin
Joseph Avila
Orlando Ayala
William Ayers
Nora Backus
Richard Backus
Dwight Baker
Eric Baker
John Baldwin
Miguel Barajas
Carolyn Barber
Ray Barber
Candy Barbosa
Gregory Barker, Jr.
Justin Barlett
David Barnett
Ana Barragan De
Alteneh
Nereyda Barrios De
Perez
Rosa Barro
Teresa Barron
Phillip Basham
Michael Bass
Stuart Baugh
Aaron Beavers *
Daniel Beck
Lionel Beckman
Bonnie Benson
James Berden
Ida Bermudez
Sergio Beserra
John Bia
Timothy Bingham
Christopher Birdsong
Vickie Black
Steven Blackbird
Brian Blackmon
Debbie Blackmon
Trever Blakney
Maria Blanco
David Blevins
Justin Blevins
Nicholas Bobbitt
Gene Boese
Kim Boih
Michael Boney
Dale Booher
Rosendo Botello
Lewis Bovee, Jr.
Dujuan Bowie
Tomandre Bowman
Demetrius Boyd
John Boyd
Brian Bradford
Myoshia Bradley
Christopher Brantley
Arlando Brewer
Shahani Britt
Kwynce Brookins
Arlunda Brooks
David Brown
Timonthy Brown
Johnny Brown, Jr.
Christopher Bryant
William Bryant
Jason Bunnell
Scott Burgess
Trevor Burke
Kelli Burkes
Monica Burns
Lavar Burton
Wayne Bush
Verenice Bustos
Beatrice Butler
Rosa Butler
Konnor Buxton
David Bya
Scott Byrd
Michael Cable
Janibal Cabudoy
Alejandro Cadena
Jesus Cadenas
Cleveland Cage, Jr.
Margarito Calderon
Jorge Calixto
Elizabeth Calvillo
Lazaro Cama
Maria Camacho
David Campbell
Arthur Candler
Don Canterbury
Yong Cantrell
Refugio Carachure
Billy Carder
Justin Cardoza
Lisa Carriero
Vincent Carson
Larry Carter, Jr.
Sulma Castaneda
Hector Cazares
Nicolas Ceballos Trujillo
Elvis Cerda
Francisco Cervantes
Guadalupe Chairez-
Galan
Jonathan Chapman
Patrick Chapman
Joshua Chattillon
Francisco Chavero
Edgar Chavez
Gregory Chavez
Ramiro Chavez
Jose Chavez Perez
Dale Cherry
Daniel Cherry
Adan Chicas
Clifton Childers
Awi Ciang
Man Ciin
Hau Cin
Kam Cin
Kham Cin
Sian Cin
Thang Cin
Tg Cin Za Khai
Cing Cing
Dim Cing
Man Cing
Nem Cing
Justin Claiborne
George Clark
John Clark
Samuel Clark, Jr.
Stephanie Cleveland
Troy Cleveland
Brenda Coats
David Cochran
Kenneth Cochran
Troy Cockrum
Michael Coffelt
Arthur Cole
Ronald Collins
Tim Collinsworth
Aaron Columbus
Dale Conkwright
Michael Conley
Jude Connolly
51
Mark Cook
Timothy Cook
Michael Coolidge
Scott Coon
Donna Coonfield
Allen Cooper *
James Cooper
Alvis Copeland
Pablo Cordova Cordova
Elaine Corkhill
Roberto Corona
Genoveva Corona De Rivera
Rosa Cortez
Jonathan Coti
Billy Cox
Jerry Cox
Robert Cox
Adrian Crabtree
Richard Craite
Steven Crase
Juan Crespo-Maisonet
Mikel Crews
Darrell Crow
Carolyn Crutchfield
Victory Cullom, II
Robert Cummings
Christopher Cunneen
Gene Curtis
Kevin Cyrus
Hau K. Dal
Hau S. Dal
Gwendolyn Daniels
John Daniels
Justin Daniels
Charles Dauster
Jenifur Davidson
Byron Davis
Cameron Davis
Carolyn Davis
Cathy Davis
Chester Davis
Darryl Davis
Eric Davis
Jerry Davis
Marleitta Davis
Rhonda Davis
Richard Davis
Samuel Davis
Susan Davis
Trenton Davis
Cookie Davison
Yoana De La Torre
Alvaro De Leon Mendoza
Pedro De Los Santos, Jr.
Freddie Deboe
Pong Dee
Bobby Degraffenreid
Ismael Delapaz
Martha Delarosa Molina
Eva Delatorre
Juana Delobo
Andres Delos Santos
Raquel Deluna
Shiira Demery
Demario Dennis
Bruce Derr
Jermein Devers
Audencia Devilla
Roy Deville
Charles Deweese
Anthony Diaz
Ciin Dim
Hau Dim
Lakeitra Dixon
Rickey Dodson
Edreys Dominguez
Sol Dominguez
Thang Dop Mui
Shundrika Draper
Thomas Dreadfulwater
Esmeralda Duarte
Cathryn Dubbs
Linda Dunec
Charles Dunn
Ralph Durbin
Randy Dwiggins
Wendell Easiley
Jeffrey Easter
Harvey Ellis
Austin Embry *
Carlos Encarnacion
Gregory English
Tinisha English
John Enochs
Eva Enriquez
Benjamin Epp
Steven Ervin
Daisy Escalante
Teresa Escobedo
Norberto Esparza-Torres
Leonardo Espinoza Flores
Jesus Estrada-Gonzalez
Benjamin Estrelles
Stephen Etter
Gilda Etumudor
Gareth Evans
Joshua Everett
Reginald Everidge, Jr.
Chad Evers
Shawn Fairley
Blake Faluotico
Keith Farmer
Jeffrey Fath
Richard Faust
Amy Fehnel
Robert Fergus
Catalina Fernandez
Fabiola Fernandez
Samuel Fields
Thomas Fierros
Jesse Figueroa
Christian Figueroa Mauras
Sterlyn Finch
Anthony Fisher
Bruce Fisher
Chad Fisher
Anthony Fizer
Copotenia Fletcher, Jr.
Carolina Flores
Efigenia Flores
Juana Flores
Laura Flores
Ruby Floyd
Vicky Floyd
Mark Fly
Sharon Fontenot
Eric Ford
Gregory Foreman
Sheila Forrest
Alex Foster
Bradley Foster
Christopher Foster
Frederick Foster
Ramon Fourshey
Loretta Fowlkes
Kenneth Foyil
Phillip Frank
Damion Franklin
Warren Franklin
Revonda Franks
Matthew Frederick
Olga French
Angel Frias
Brandon Frick
Berry Friend
Eric Friend
Wade Fuller
Rony Gadiwalla
Curtiss Gaines
Ranulfo Galicia
Maria Galindo
John Gall
Shayla Galland
Josue Gallegos
Belinda Galvan
Ma Galvan
Andrez Garcia
Angel Garcia
Jose Garcia
Roger Garcia
Wuilson Garcia Alvarado
Isidro Garcia Arriaga
Yesica Garcia Barreto
Norma Garibay
James Garrison
Michael Geeter
James George
Gaspar Gerena
Petr Getmanenko
Aaron Gilbert
Jaimon Gilstrap
Penny Glossinger
Celia Gomez
Jose Gomez
Maria Gomez
Raquel Gomez
Maria Gomez Medina
Daniel Gomez-Sigala
Adrian Gonzalez
Consuela Gonzalez
Imelda Gonzalez
Marisela Gonzalez
Raul Gonzalez
Scott Goodson
Dale Graham
Hasson Granado
Buenaventura Granados-
Rubios
Michael Gray
Ba Great
John Griffin
Kevin Griffin
Ronald Grimes
Daniel Groff
Jackie Grubb
Rodolfo Guevara
Carolina Guillen
Ronald Guinn
Georgina Guzman
Jack Hagan *
Joshua Halfpap *
Dennis Hall
Jack Hall
Kelly Hall
Koren Hall
Stephen Hall
Scott Hamilton
Otis Hamilton
Jeffrey Hammer
Sam Hammoud
Joseph Hampton, Jr.
Mung Hang
Natasha Harris
Stacey Harris
Marcus Harry *
Robi Hartmann
Heather Haskins
Troy Hatfield
Neng Hau Lian
Kevin Hawkins
Willie Hawkins
Billy Hawley, Jr.
Justin Heck
Bret Hedrick
Tim Hefflin
Cody Helscel
Antonio Henderson *
Daniel Henderson
Kyle Hendrick
Kevin Henson
Edith Heredia De Birrueta
Armando Hernandez
Blanca Hernandez
Corcina Hernandez
Josue Hernandez
Lily Hernandez
Luis Hernandez
Maria Hernandez
Mariano Hernandez
Jahel Herrera
Christopher Herrin *
Mark Heston
Brandon Hicks
Ronald Hicks
Takeo Higa
Brenda Higgins
Larry Highfield
Dewayne Hightower
Cortez Hill
Latasha Hill
Marcus Hill
Alberto Hinojosa
Juan Hinojosa
Tyson Hinther
Bon Hoang
Samuel Hobson
Donna Holloway
Lawrence Honel
Stephen Hoover
Kevin Horn *
52
Terri Horn
Stanley Horton
David Howard
Larry Howard
James Howell, II
Do Ngaih Huai
Nuam Huai
Kaitlynn Hubbs
Lydia Hudson
Philip Hudson
Anthony Huffman
Jimmy Hughes
Fiona Humphrey
Larry Humphrey
Jade Hurst
Ronald Hutchcraft
Gary Hutchins
Cindi Hutton *
Tan Huynh
Okechukwu Ibeh
Alexander Ignatenkov *
Samuel Ingram
Tim Ingram, Sr.
Belinda Jackson
Jeff Jackson
Levita Jackson
Demetrica Jacobs
Jose Jamaica
Joseph Jelinek, Jr.
Genelle Jimboy
Pedro Jimenez-Delfin
Samuel Jimison
Frederick Jimmerson
Aaron Johnson
Ashley Johnson
Ed Johnson
Holly Johnson
Mark Johnson
Cheryl Jones
Danny Jones
David Jones
Dean Jones
Demareo Jones
Djuan Jones
Henry Jones
Jeremy Jones
Karrington Jones
Raymon Jones
Remia Jones
Rose Jones
Timothy Jones
James Jones, Jr.
Jason Jordan
Rodney Jordan
Sean Jordan
Jaime Juarez
Leandro Jumelles Nunez
Garrett Kaiser
Patrick Kaiser
Do Kam
Hau Kam
Khual Kam
Ngin Kam
Thawng Kam
Dal Khan Kap
Dal Suan Kap
Gin Kap
Lian Kap
Thang Kap
Brian Kastl
Adam Kauffman
Eryn Kavanaugh
Tuang Kawi
Kenneth Kawuma
Aaron Kelly
Brian Kelsey
Gregg Kennedy
Sean Kennedy
Ronald Kenney
Antony Khai
En Khai
John Khai
Kham Khai
Mang Khai
Nang Khai
Pau Khai
Peter Khai
Peter Khai
Thang H. Khai
Thang S. Khai
Thawng Khai
Vuum Khai
Go Kham
Mung Kham
Ngun Kham
Cin Khin
Niang Khoi
Hau Khual
Khai Khual
Mung Khual
Thang L. Khual
Thang S. Khual
Za Khual
Cin Khup
Dai Khup
Deih Khup
Kap Khup
Kham Khup
Lang Khap
Lian Khap
Nang Khap
Ngin Khup
Pau Khup
Thang Sian Khup
Thang Suan Khup
Tuan Khup
Alan Kilgore
Andrew Kilgore
Cin Kim
Cing Kim
Hau Kim
Kap Kim
Thang D. Kim *
Thang T. Kim
Thang Z. Kim
Dennis Kimbrough
Gene King
Joseph King
Lori King
Randy King
Russell King
Roger Kinkade, Jr.
David Knebel
Stephanie Knight
Christian Knox
Robert Knuth
Scott Koscheski
James Koss
Robert Krafjack
Larry Kreps
Mikhail Krupenya
Thu Kun Hen
Ricky Kurin
Laura Kyle *
Phillip Lafond
Giang Lai
Do Lal
Sei Lal
Thang Lal
George Lam
Mang Lam
Cole Lambert
Deborah Lane
Donald Laney
Gin Lang
Kap Lang
Pum Lang
Kap Langh
Thawng Langh
Martin Larsen
Michael Lavallee
Bill Lawson
Jeffrey Lawson
Ronald Lawson
Walter Lazcano
Anh Le
Lai Le
Rickey Leatch
Jules Lebel
Michel Lebel
Jose Lebron
David Lee
Gralind Lee
Jacqueline Lee
Rhonda Lee
Kevin Lee, Jr.
Matthew Leeper *
Hugo Lerma
Boy Let
Cynthia Leyva
Awi Lian
Dal Lian
Do Lian
Gin Lian
Hau Lian
Kam Lian
Sang Lian
Sing Lian
Tha Lian
Thang C. Lian
Thang D. Lian
Thang K. Lian
Tuan Lian
Ping Lin
Israel Linares
Jerry Lincoln
Thomas Lincoln
William Lindsay
Jerome Linwood
John Livingston *
Jonathan Lockmiller
John Lopez
Margarito Lopez
Rafael Lopez
Rebecca Lopez
Thomas Lopez
Jason Lovett
Paul Lowery
Oscar Lozano
Ralph Lucas
Jarrod Ludlow
Quannah Ludlow
Cing N. Lun
Cing Ngai Lun
Dim Lun
Lu Lun
Mariana Luna
Ryan Luna
Joshua Lundy
Kelly Lybarger *
Jimmy Mabry
Gregory Mack
Sherenda Mack
Keith Mackey, Jr.
Jorge Madrigal
Tam Mai
David Main
Carlos Malone
Jeffrey Maly
Ciin Man
Cing Man
Maria Mancilla
Dai Mang
Dal Khan Mang
Dal Kim Mang
En Mang
Gin Mang
Kam Mang
Kham Mang
Kham L. Mang
Khup Mang
Lian Mang
Nang Mang
Ngin Mang
Sian Mang
Thang Kim Mang
Thang Lian Mang
Vung Mang
Ngam Manlun
Adam Mansfield
Zacchary Marinis
William Markwardt
Ma Marquez De-Gilbreath
Ana Marroquin
Errol Marshall *
Parker Martel
Cassandra Martin
Jerrad Martin
Juan Martinez
Karen Martinez
Miguel Martinez
Mosses Martinez
Obdulia Martinez
Hector Martinez Molina
Florentino Martin-Romo
Timothy Marvin
Timothy Marvin, Jr.
Thomas Masengale, Jr.
Beverley Mason
James Mason
53
Charles Mattocks, IV
Ron Mauch
Antonio Mauricio
Leonard Maxwell
Duane Mayfield
Marcus Mayfield
Latoya Mays
Courtney McAfee
Deborah McAteer
Tina McBeath
Robert McBowman
Shemaal McCain
Robert McCleary
Dirk McClellan
Daniel McClure
Michael McConnell
Roy McConnell
Corey McCowan
Debra McCowan
Wesley McCowan, Jr.
Paula McCrary
Michael McCuin
Kathy McCulloch
Vickie McCullum
Loyd McDaniel
Randall McDaniel
Sharon McDaniel
Karen McDow
James McElroy
Deborah McFarlin
Lacy McGrew
Mark McIllwain
Michael McIllwain
Domingo McKnight
Gina Means
J Medina Olvera
Angel Medrano
Jericho Melendez
James Melton
Silvestre Mendez
Gonzales
Edwin Mendez Orozco
Kevin Merideth
Dale Michelson
Glenn Milam
Michael Miles
Ranulfa Milian
Chris Miller
Mykea Miller
Brian Mingle
Scarlett Miranda
Orlando Mitchell
Wayne Mitchell
Johnny Mize, Ii
Jay Modisette
Ronald Modlin
Irma Moguel
Tammy Mohaupt
Braulio Moises-Lee
Biasney Mojica
Castaneda
Jose Molina
Jose Monreal
Enoc Montes
Mario Montes Avina
Jerome Montgomery, Jr.
Jon Moody
Herbert Moore
James Moore
Kashonda Moore
Marc Moore
Maria Moore
Tony Moore
Alfonso Moran
Tony Morehead
Berta Moreno
Erasmo Moreno Medina
Jason Moretz
Matthew Morgan
Myron Morgan
Desron Morrow
Marcus Morrow *
Phillip Moss, Jr.
Clayton Mote
Stephanie Mounce
Seth Mowery
Do Muang
Cleve Mulder
Eric Mulliniks
Dal Mung
En Mung
Gin L. Mung
Gin S. Mung
Hau Mung
Kai Mung
Khai Mung
Khup Mung
Lang Mung
Lian Mung
Suaan Mung
Suan G. Mung
Suan S. Mung
Thang K. Mung
Thang S. Mung
Vum Mung
Vung Mung
Gabriel Muniz Gonzalez
Jesus Munoz
Eduardo Murillo-Munoz
David Myers
LaHarry Myers
Krystal Nail
Sing Nang *
Thomas Nang
Marcus Naranjo
Jose Nava
Maria Nava
Abel Navejas
Clayton Neal
Mark Neal
Samuel Neale
Natalie Neilson
Ronald Nelson
Ciin Neu
Robert Neu
Cing Ngaih
Tha Nge
Haunung Ngin Pi
Duong Nguyen
Gam Nguyen
Hoang-Chi Nguyen
Phuoc Nguyen
Thanh Nguyen
Cing Niang
Dim L. Niang
Dim N. Niang
Go Niang
Karen Niles-Blayer
Thang No
Christopher Norfleet
Willie Norfleet
Robert Norfleet, Jr.
Eric Norris
Debra Nothnagel
Tumai Npawt
Ning Nuam
Zen Nuam
Let Nung
John Nutt
Deangelo Oakley
Joey O’brien
Thomas O’brien
Alexander Ofosu
Rickey Ogans
John Ogle
Maria Olivas De Torres
Kejuan Oliver
Scotty Oliver
Anthony Oliveras
Eric Olson
Sunday Omasere
John Ondinyo
James O’Neill, Jr.
Benjamin Orme
Christina Orona
Leticia Orona
Margarita Orona
Maria Orona
Margarita Orozco
Dehuizar
Carlos Orozco-Torres
David Osborne
Ofelia Osuna
Jennifer Overmeyer
Martin Ozura-Carrillo
Gerard Pacheco
Guillermo Pacheco
Luis Pacheco
Mark Page
Edmundo Paiz
Julianne Palmer
Michael Palmer
Candido Palomo
J Paniagua
Corey Parten
Jason Pate
Jeanetta Pate
Cesar Patino
Corry Patterson
Kenneth Pattinson
Chin Pau
Cia Pau
Ciang Pau
Dal Pau
Gin S. Pau
Gin Sian Pau
Gin Suan Pau
Go Pau
Kam L. Pau
Kam S. Pau
Kam Sian Pau
Langh Pau
Lian Pau
Liang Pau
Nang Pau
Neng Pau
Thang Pau
Zam Pau
Justin Paulson
Travis Pearson
Vladimir Peniaz
Cesar Perez
Rudy Perez
Sergio Perez
Ma Lourdes Perez
Perez
54
John Peters
Ladrue Peters
Michael Peterson
Daniel Peurifoy
Kinh Pham
Randy Phelps
Alexander Phillips
Brandon Phillips
Lance Phillips
Michael Phillips
Ronnie Phillips
Alexander Phomprida
Thang Pi
Tuang Pi
Goh Piang
Khup Piang
Thang K. Piang
Thang L. Piang
Thang Lamp Piang
Van Piang
Zam Piang
Christopher Pickens
Shedrica Pickett
Wanda Pickett
James Pierson, Jr.
Pedro Pina-Valles
Jose Pineda
Clifford Pitchford
Susanne Poindexter *
Ashish Pokhrel
Basant Pokhrel
Renu Pokhrel *
Mark Pool
Timothy Pool
Javorus Poole
Richard Porter
Rudy Powell
Greg Powers
Jeffery Powers
Jose Prado
Kenneth Prentice, Jr.
Eric Prickett
Markiese Propes
Joshua Pruett
Lian Pu
Sian Pu
Alma Puga
Daniel Puga, Jr.
Thang Puno
Darrell Purser
Javier Quezada
Jesus Quinones
Nimalakirthi Rajasinghe
Adrian Ramirez
Antonia Ramirez
Raymon Ramirez
Samuel Ramirez
William Ramirez
Nandy Ramirez B
Gemma Rangeloff
Robert Ratliff
Kyle Ratzlaff
Charles Ratzloff
Terry Ratzloff
Robert Rayno
Thomas Read
Sandra Reader
Diego Rebollar-Marin
Peggy Redden
Stephen Redman
James Reed
Freeman Reed, Jr.
Cameron Reese
Tiffany Reese
Margaret Reeves
Lloyd Reichert
Alberto Rendon Parra
Rodolfo Renteria
Svyatoslav Reshetov
Thomas Reynolds
Daniel Rhoades
Gene Rice
James Rice
Robert Riddell
Angela Rideout
Brett Riegel
Brian Riggs
Delmecio Riser
Stephen Riser
James Ritchie
Hillary Rite
Jesus Rivera, Jr.
John Roberts
Markus Robinson
William Robinson, Jr.
Alex Rodriguez
Diana Rodriguez
Francisco Rodriguez
Gilberto Rodriguez
Hector Rodriguez
Maria Rodriguez
Martin Rodriguez
Rebecca Rodriguez
Rivelino Rodriguez
Jesus Rodriguez
Santibanez
J Rodriguez-Flores
Don Rogers
Jake Rogers
Samantha Rogers *
Tony Rogers
Lidia Rojas
Nelson Rojas
Marvin Rolland
Terry Rombach
Oscar Rose
Catherine Ross
Lane Ross
Richard Rowe, Jr.
Wendell Rowland
Thomas Royal
Ricardo Ruiz
Vicente Ruiz
Ava Russell *
Jimmy Russell
John Russell
Kimberly Russell
Maverick Sadler
Adan Salazar
Alberto Salazar
Nora Salazar
Walter Salazar
David Saldivar
Maria Saldivar
Miguel Saldivar
Victor Saldivar
Jose Saldivar Orepeza
Alejandro Salinas
Diana Salinas
Jessica Samaroo
Beatriz Sanchez
Hector Sanchez
Tara Sanchez
Esperanza Sanchez
Ruiz
Luis Sanchez-Lopez
Christina Sanders
Tanisha Sanders
Michael Sandor, Jr.
Cin Sang
Thiam Sang
Agustin Santana
Jorge Santana Francis
Wenceslao Santiago
Harold Santiago Torres
Carlos Santiago Torrez
Ignacio Santillan
Pedro Santillan
Angela Santillano
Rebecca Sar
Erick Sawyer
Frank Scanlon
William Scharosch
Brummett Scott
Kenneth Scott
Donald Scott, Sr.
Vivian Scroggins
Ku Sei
Let Sei
Maria Serrano De
Torres
Carrol Shackelford
Douglas Sheehan
Kathy Sheffield
Terry Shelly
Brandon Shelton
Vasiliy Shemereko
Kathleen Shepard
Jackie Shephard
Lynnda Shepherd
Todd Shook
Nelson Sierra
Cory Simmons
Dwayne Simpson
James Simpson, II
Daai Sing
Kap Sing
Mang Sing
Nang Sing
Thang Sing
Thawn Sing
Amy Siviero *
Michael Skinner
Ian Slattery
Debi Sloan
Mekissa Sloan
Larry Slone
Raymond Slovacek
Brett Smith
David Smith
Emily Smith
Jordan Smith
Owen Smith
Renaldo Smith
Ricardo Smith
Ryan Smith
Sweetie Smith
Billy Smith, II
Robert Smith, II
Wilbert Smith, Jr.
Robert Smithson
Kap So Te
Showe Soe
Jose Solares
Malcolm Soles
Maria Solis
55
Nemisia Solis
Kevin Souvannasing
Denney Sowder
John Spain, III
Ronnie Sparks
Elda Spears
Jameson Spires
Michael Sportel
Michael Srader
Lawana Stane
Daniel Stanislawski
Larry Stanton
Vincent Steadman
Shannon Sterns
Crystal Stevens
Brent Stockton
Harvey Stoddard
Kevin Stoddard
Scott Stoltzfus
Chase Stone
Edwin Stone
Michael Straub
Daniel Strelow
Billy Strength
Hau Suan
Khup Suan
Thang Suan
Zen Suan
Nang Sum
Victor Sum
Pau Sut
Jack Sweet
Eric Sypert
Kam Ta
James Taber
Go Tang
Ryan Tankersley
William Tankersley
Joe Tart
Larry Tate
Mark Tate *
Tenna Tatum
Mung Tawng
Charles Taylor
Deborah Taylor
Eric Taylor
Michael Taylor
Andrea Teakell
Kevin Teakell
Robert Teis
Ngin Teng
Xien Thach
Cin Thang
Cin L. Thang
Cin Lian Thang
Cin M. Thang
Dai Thang
Dal Thang
Go Thang
Go C. Thang
Go Z. Thang
Hau Thang
Kam K. Thang
Kam S. Thang
Kam Suan Thang
Kham Thang
Let Thang
Lian Thang
Mang Thang
Ngo Thang
Pau K. Thang
Pau S. Thang
Pau Z. Thang
Suan Thang
Thawng Thang
Tual Thang
Tuan L. Thang
Tuan S. Thang
Lian Thang Lam
Lal Thari
Kham Thawn
Suan Thawn
Thang Thawn
Lang Thawng
Zam Thawng
Gerald Thomas
John Thomas
Lee Thomas
Pastasia Thomas
Richard Thomas
Cheryl Thomason
Archie Thompson
Rebecca Thompson
Michael Thornton
Tuan Thung *
Jessica Thurber
Ted Tiger
Go Tin
Gabriela Tirado
William Tobar
Christopher Toles
Breny Tornes
Reinaldo Torres
Travis Traeger
Heip Tran
Tuong Tran
Marisol Trejo
Martin Trevino-Saldana
Mark Tribble
Ha Trinh
Juanito Tronzon
Kam Tuang
Kham Tuang
Sing Tuang
Suum Tuang
Thang Tuang
Thang L. Tuang
Thang Z. Tuang
Tun Tuang
Vung Tuang
Zam Tun
Gin Tung
Kaam Tung
Thang Tung
Thawng Tung
Paul Turbe
David Turley
Charles Turner
Phyllis Tyiska
James Tyler
Jacob Tzang
Jesus Tzul
Ni Uk
Pernell Underwood
Colton Upchurch
Tony Urich
Maria Urquiza
Yadira Urquiza
Allen Vang
Sua Vang
John Vanness
Shawn Vawter
Juan Vazquez
Mercedes Vela Casanova
Antonio Velasco
James Velde
Juan Vences
Angel Venegas
Salome Vera
Laura Vergara
James Verhamme
George Verrett
Timothy Vetting
Teresa Victory
Efrain S. Villa
Efrain Sanchez Villa
Selina Viramontes
Cuong Vo
Suong Vo
Tong Vo
Thu Vu Nguyen
Jovan Vucovich
Houa Vue
Lian Vum
Mary Vung
Ning Vung
Kayla Wadding
Joseph Wahl
Stephen Wakefield
Whitney Wakefield
Diana Walker
Joshua Walker
Patrick Walker
Roderick Walker
David Walkup
Barry Wall
Dale Wallace
Gary Wallace
Kim Wallace
Todd Wallingford
Leslie Wallis, Jr.
Darius Walters
Joseph Walton
Gayle Ward
Perry Warner
Anthony Washington
Donna Washington
Joseph Washington, IV
Steven Watkins
Kyle Webb
Anthony Welch
Jerremy Welch
Sharon West
Deborah Whitaker
Mike Whitaker
Sheila Whitaker
Johnny Whitaker, Jr.
Allyn White
James White
Randy White
Timothy White
David Whitlock
Steven Whorton
Christopher Wiles
Jackie Wiles
Jerry Wiles
Michael Wiles
Richard Wilkerson
Matthew Wilkins *
Sherri Wilkins
Stanley Wilkins
Duane Wilkinson
James Wilkinson
Barbara Williams
Chante Williams
Cheray Williams
Jaboriece Williams
Kristy Williams
Latrenia Williams
Robert Williams
Rodney Williams
Billy Williams, II
Aaron Williamson
James Williamson
Jeremy Williamson
Brandi Wilson
Daniel Wilson
Isaac Wilson
James Wilson
Jonathan Wilson
Thomas Wingo
Wanda Winkfield
Micah Wisdom
Jack Witt, Jr.
Stanley Womack, Jr.
Brandon Wood
Curtis Wood *
Ronald Wood
Kasey Worthington
Westley Wright
Berry Wyers
Jim Wyrick
Linda Wyrick
Ector Yancey, Jr.
Patrial Yarbrough
Buel York, II
Eddie Young
Keith Young
Marc Young
Patricia Young
Nikolay Zagorodniy
Lang Zah Lang
Aurora Zavaleta
Luis Zepeda
Juan Zermeno
Virginia Zermeno
* Pictured
The ongoing success of our company can be
directly attributed to our employees.
56
AAon, Inc.
2425 South Yukon Avenue • Tulsa, OK 74107
918.583.2266 • Fax: 918.583.6094
AAon coil products, Inc.
203 Gum Springs Road • Longview, TX 75602
903.236.4403 • Fax: 903.236.4463
www.AAon.com