Y E A R S
of
Growth
DEDICATED TO MAKING THE NEXT 25 YEARS AS PROSPEROUS AS THE FIRST.
2013 ANNUAL REPORT
Celebrating 25 Years
Over the past 25 years our company has achieved
monumental sales, income and total stockholders’
equity growth. In 2013, net sales and net income
were both record highs at $321 million and $38
million, respectively. By continuing to invest in our
capabilities, we are dedicated to making the next
25 years as prosperous as the first.
2013 ANNUAL REPORT
COMPANY PROFILE
ROOFTOP UNITS
OUTDOOR AIR
HANDLING UNITS
CONDENSING
UNITS
RL SERIES
RN SERIES
RQ SERIES
RL SERIES
PACKAGED OUTDOOR MECHANICAL ROOMS
SELF-CONTAINED UNITS
BL SERIES
BOILER
LL SERIES
AIR-COOLED CHILLER
LN SERIES
SA SERIES
LC SERIES
AIR-COOLED CHILLER
LL SERIES
EVAPORATIVE-COOLED CHILLER
SB SERIES
INDOOR AIR HANDLING UNITS
RN SERIES
RQ SERIES
COILS
BOOSTER, HYDRONIC, & DX
CL SERIES
CN SERIES
CC SERIES
CB SERIES
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
2013
2012
2011
2010
2009
Income Data ($000 except per share data)
Net Sales
$ 321,140
Gross Profit
Operating Income
Interest Income (Expense)
Depreciation
Pre-Tax Income
Net Income
Earnings Per Share
Basic1
Diluted1
$ 89,792
$ 55,825
$ 221
$ 12,312
$ 56,294
$ 37,547
$ 1.02
$ 1.01
Balance Sheet ($000 except per share data)
$ 303,114
$ 266,220
$ 244,552
$ 245,282
$ 70,499
$ 44,234
$ 42
$ 13,407
$ 44,317
$ 27,449
$ 46,281
$ 22,169
$ (179)
$ 11,397
$ 21,513
$ 13,986
$ 55,188
$ 32,715
$ 213
$ 9,886
$ 32,693
$ 21,894
$ 67,545
$ 43,754
$ 62
$ 9,061
$ 43,892
$ 27,721
$ 0.75
$ 0.74
$ 0.38
$ 0.37
$ 0.58
$ 0.58
$ 0.72
$ 0.71
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 splits in July 2013 and June 2011
2 = Cash & cash equivalents + receivables/current liabilities.
$ 77,294
$ 113,623
$ 87,283
$ 105,142
$ 12,085
$ 51,921
$ 91,546
$ 90,695
$ 96,929
$ 3,159
$ 45,700
$ 84,387
$ 93,502
$ 85,935
$ 13
$ 55,502
$ 91,748
$ 67,418
$ 86,307
$ 2,393
$ 65,354
$ 96,240
$ 59,896
$ 80,567
$ 25,639
$ 215,444
$ 193,493
$ 178,981
$ 160,277
$ 156,211
$ 36,329
$ 39,625
$ 38,687
$ 36,246
$ 30,886
-
-
-
-
-
$ 164,106
$ 138,136
$ 122,504
$ 116,739
$ 117,999
$ 4.43
$ 3.73
$ 3.28
$ 3.07
$ 3.03
$ 53,592
$ (31,326)
$ (13,340)
$ 8,926
$ 51,167
$ 26,484
$ 32,152
$ (30,335)
$ (24,538)
$ (28,276)
$ 45,205
$ (9,639)
$ (17,686)
$ 3,146
$ (4,326)
$ (2,380)
$ (27,200)
$ (10,101)
$ (23,246)
$ 25,370
24.8%
18.4%
17.5%
11.7%
0.3
2.5
3.1
31
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
2013 ANNUAL REPORT PRESIDENT’S LETTER
DEAR STOCKHOLDER,This past year was a momentous one for AAON. The Company celebrated its twenty-fifth year in business and, on September 30, a group representing management and the Board of Directors was invited to ring the opening bell on The NASDAQ Stock Market. Furthermore, for the second consecutive year, the Company posted record sales and earnings as sales climbed 5.9% and net income increased 36.9%. This performance was accomplished despite the continuing unevenness in construction activity, both in the commercial (private) and institutional (public) sectors. Our sales performance benefited from a continuing gain in our market share as customers responded positively to our technologically innovative product line. In addition, the Jobs Relief Unemployment Insurance Reauthorization and Job Creation Act signed into law in December, 2010, allowing 100% depreciation for qualified capital expenditures in calendar 2011 was extended into 2012, and again into 2013, with the latter two years being at a rate of 50%. Our replacement business, which we estimate to be just over 50% of our total sales in 2013, benefited from this extended tax benefit. Furthermore, we continued to concentrate on improving and expanding our sales force by adding personnel and broadening our training programs. Finally, in July, we declared a 3-for-2 stock dividend, our fifth such action in the past 12 years. We also increased our annual cash dividend 25% to $0.20 per share from $0.16 per share.SALES AND EARNINGS Sales for the year ended December 31, 2013, increased to $321.1 million compared with $303.1 million in 2012. During the past year we put in place price increases of 3-4%. This increase had a beneficial impact on sales; but more importantly, we witnessed a 5.4% gain in unit growth which enabled the Company to post a total sales increase of 5.9%.Gross profit increased to $89.8 million (28.0% of sales) from $70.5 million (23.3% of sales), or by 27.4%. Our gross profit performance last year not only benefitted from our increased sales and declining raw material prices but also from the continuing improvement in manufacturing productivity.SG&A expenses climbed 29.3% to $34.0 million (10.6% of sales) from $26.3 million (8.7% of sales). Warranty expenses, reflecting both higher sales and modest increases in warranty claims, combined with rising salaries, benefits and higher “profit sharing” costs, impacted this category. Nevertheless, operating income increased to $55.8 million (17.4% of sales) from $44.2 million (14.6% of sales) 2013 ANNUAL REPORT representing an increase of 26.2%. Net income rose to $37.5 million (11.7% of sales), or $1.01 per share, from
$27.4 million (9.0% of sales) or $0.74 per share. The tax rate in 2013 was 33.3% vs. 38.1% in the previous
year. Our per share calculations are based upon 37.1 million fully diluted shares outstanding in 2013 and 37.0
million fully diluted shares outstanding in 2012 and reflect a 3-for-2 stock dividend in July, 2013.
STRONG FINANCIAL CONDITION
Our financial condition at December 31, 2013, continued to be quite strong. Cash and investments were $49.9
million (including $37.8 million of short-term certificates of deposit and corporate bonds, all maturing within 1
or 2 years). Total current assets were $113.6 million, with a current ratio of 3.1:1. Our capital expenditures were
$9.0 million and we paid dividends of $7.4 million. Once again, we operated free of debt. Total stockholders’
equity increased 18.8% to $164.1 million, or $4.43 per diluted share. Our return on average stockholders’
equity was 24.8%.
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
AAON: 25 YEARS OF FINANCIAL PERFORMANCE
2013 Net Sales = 321.1 M
2013 TSE = 164.1 M
2013 Net Income = 37.5 M
1989 Net Sales = 31.3 M
1989 TSE = 0.6 M
1989 Net Income = 0.2 M
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
Net Sales ($000)
Total Stockholders' Equity ($000)
Net Income ($000)
Total Stockholders' Equity is the net worth of a company. It represents the stockholders' claim to the assets after all creditors
and debts have been paid. Stockholders’ equity is derived substantially from Retained Earnings, which are the accumulated
profits a business has retained and not paid out to stockholders as dividends.
25 YEAR AVERAGE ANNUAL SALES GROWTH = 10%
25 YEAR AVERAGE ANNUAL NET INCOME GROWTH = 24%
25 YEAR AVERAGE STOCKHOLDERS' EQUITY GROWTH = 26%
CAPITAL EXPENDITURES
Over the past five years (2009-2013) we made total capital
expenditures of $86.3 million for purchases of land and machinery
as well as to expand and renovate our manufacturing facilities.
During the past year, we witnessed continued improvement in our
manufacturing productivity. This improvement was influenced
“IN DECEMBER,
by a significant capital expenditure program ($35.9 million)
in 2011, whereby we replaced approximately 50% of our sheet
THE COMPANY
metal fabricating machinery with more efficient and reliable
equipment, and we relocated and expanded three assembly lines
ANNOUNCED
while rearranging two others.
Our capital expenditures in 2013 were $9.0 million, of which $2.0
million was directed to plant and land expansion. The remainder
was for machinery, including the purchase of a new metal
fabricating machine for our Longview, Texas, facility. For 2014,
we have budgeted capital spending in the area of $12-14 million.
We anticipate approximately 30-40% of these expenditures will
be allocated toward plant expansion and renovation, with the
remainder going to machinery purchases.
A MASTER PARTS DISTRIBUTOR
In late 2012, we completed construction of a 200,000 square foot
warehouse (at a total cost of $12.0 million) to 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. It will enable the Company to significantly
accelerate its growth plans for this business. In addition, AAON
opened its first retail store located in Tulsa in May of this past year.
This store serves local contractors, technicians and a variety of
other customers needing HVAC parts and supplies.
The replacement parts inventory includes certain products
manufactured by AAON, such as coils from our Longview facility,
as well as a selection of component parts which are purchased
from various manufacturers.
THAT AAON COIL
PRODUCTS, INC., ITS
SUBSIDIARY LOCATED
IN LONGVIEW, TEXAS,
RECEIVED THE
EMPLOYER AWARD
OF EXCELLENCE FOR
THE WORKFORCE
SOLUTIONS EAST
TEXAS AREA.”
2013 ANNUAL REPORT “OVER THE PAST
THREE YEARS
WE HAVE SPENT
$13.6 MILLION ON
RESEARCH AND
DEVELOPMENT
AND INTEND
TO CONTINUE
TO INVEST
AGGRESSIVELY IN
THE DEVELOPMENT
OF NEW
PRODUCTS AND
IMPROVEMENTS.”
AAON will take advantage of sizeable discounts offered on large
purchases while offering its representatives a varied selection of
well-priced parts combined with quick delivery (24-48 hours) to
accommodate their customers.
Last year, part sales gained 17.9% and contributed approximately
4.9% of total Company sales. By the end of 2013, we had enlisted
approximately 25% of our manufacturer’s representatives to begin
stocking OEM parts locally which will drive the success of our parts
distribution program. We expect parts sales to witness excellent
growth over the intermediate and longer terms as more of our
representatives begin to acknowledge the sales and profit potential
of this incremental business which carries profit margins above the
company average. For the current year, we expect to increase the
number of stocking representatives by an additional 25%. These
newly recruited representatives will be integrated gradually over the
year. Nevertheless, we expect to witness annual sales growth in this
business of 20% or better in 2014 and beyond.
RESEARCH AND DEVELOPMENT AND NEW
PRODUCT INTRODUCTION
In order to maintain our position as a technological leader in the HVAC
industry, we remain devoted to our research and development effort.
Over the past three years we have spent $13.6 million on research
and development and intend to continue to invest aggressively in the
development of new products and improvements.
Last year, we introduced the CN Series condensing units available
from 55 to 140 tons. These products have all of the standard features
of AAON equipment in addition to variable speed scroll compressors
and many selectable options.
We also introduced the LN Series chillers and outdoor mechanical
rooms available from 45-140 tons. Similar to the CN Series, this
equipment has all of the standard AAON features with selectable
options such as factory installed pumping packages and variable
speed condenser fans.
RECOGNITIONS
In September, AAON’s SB Series indoor self-contained unit (3-18 tons) was named 2013 Product of the Year-Bronze
in the HVAC/R Category by Consulting-Specifying Engineer magazine. This magazine is a monthly publication with
a circulation of over 46,000 mechanical, electrical and plumbing (MEP) engineers.
In December, the Company announced that AAON Coil Products, Inc., its subsidiary located in Longview, Texas,
received the Employer Award of Excellence for the Workforce Solutions East Texas area. This award honors
employers that are involved with their local workforce board and have made a positive impact on employees and
the community.
SALES REPRESENTATIVE PERFORMANCE
In January 2013, the Company kicked off its sales year by hosting an AAON Product Exhibition BBQ and Rodeo in
Mesquite, Texas, a few days prior to an industrial HVAC convention in Dallas. This invitation only event was attended
by all of the AAON sales representative offices, along with their best customers. It enabled us to showcase all of our
newest and most innovative products. We believe that over 3,000 people attended this event and the feedback we
received was excellent.
Our manufacturer’s representative organization posted strong sales gains during the past year despite the
lackluster, lethargic atmosphere surrounding construction spending. This network, made up of 82 independent
representative organizations which operate 113 offices in all 50 states and Canada, contributed over 95% of our
total sales in 2013.
We continue to reinforce and expand the training program for our representatives so they can better communicate
the numerous new features and benefits of AAON products. We took further steps to improve and enlarge the
network by replacing some underperforming offices and encouraged the addition of personnel in other offices.
We believe our representative network will continue to play a major role in AAON’s future growth.
2013 ANNUAL REPORT OUR EMPLOYEES
We strive to retain and motivate our employees in a manner consistent with stockholder interests. The initial
step in this process is to share the profitability of the Company. We distribute 10% of pre-tax profits equally to
nearly all personnel.
Through the investment of company contributions, employees in our 401(k) plan now own nearly 4% of the
Company’s outstanding stock. This ownership allows employees to benefit, along with other stockholders,
from share appreciation and encourages AAON’s longer-term focus. The ownership through the 401(k) plan,
cumulatively, is the sixth largest stockholder. On October 1, 2013, we increased the automatic company
contribution and raised the available company match while lowering the required employee deferral necessary
to obtain the full match. These changes are increasing retirement readiness for participants by making it easier
for all employees to receive the retirement funds available from the company. Although our intent is to ensure
retirement preparedness for all plan participants, the 401(k) program encourages employee longevity through
vesting requirements and the reallocation of participant forfeitures equally among remaining participants.
Lastly, we have begun a process of incorporating equity as a component of compensation for a larger number
of employees than has been done in the past. Presently, including shares allocated to the Board of Directors
and Executives, this represents an amount equal to nearly 3% of the company’s outstanding stock. It is our
expectation that, as we continue to build equity participation among our employees, we will increasingly
align the interests of employees with those of stockholders while rewarding longevity.
We view our employees as an investment in skills, talent and knowledge. We believe that our approach
to employment increases stockholder value by creating a culture of employee ownership while helping
employees meet their personal financial and career development goals.
OUTLOOK
Over the past 25 years we have transitioned from a small, entrepreneurial company with a limited customer base
to a nationally recognized manufacturer of HVAC systems. The breadth and depth of our current management
team have enabled us to establish a strong base of sales and profits as well as a solid financial condition. Over
the past decade we have maintained an aggressive capital expenditure and research and development policy
which has enabled the Company to produce some of the most technologically advanced, energy efficient
products in the industry. Our strong financial condition and free cash flow allows us to maintain our pursuit
of continued growth.
We are fully aware that our past performance and future aspirations could not have been and will not be
attained without the commitment and cooperation of our customers, sales representatives and stockholders
as well as the continuing support of our employees, all of whose names appear at the end of this report.
We look at our past achievements with great satisfaction and to our future accomplishments with great
expectations.
Sincerely,
Norman H. Asbjornson
President & CEO
March 24, 2014
2013 ANNUAL 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.
December
Formed AAON Coil Products,
a Texas Corporation, as a
subsidiary to AAON, Inc.
(Nevada) and purchased coil
making assets of Coils Plus.
September
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
March
Purchased property with 26,000 square
foot building adjacent to AAON Coil
Products plant in Longview, Texas.
Issued a 10% stock dividend.
December
Purchased 40 acres with 457,000
square foot plant and 22,000 square
foot office space located across from
Tulsa facility.
November
AAON yearly shipments exceed $100
million. Received U.S. patent for
Dimpled Heat Exchanger Tube.
Fall
Expanded rooftop product line to
230 tons. Introduced evaporative
condensing energy savings feature.
Fall
Industry introduction of the
modular air handler and
chiller products.
Spring
Completed Tulsa, Oklahoma, and
Longview, Texas, plant additions yielding
a total exceeding one million square feet.
October
AAON listed in Forbes’ 200
Best Small Companies.
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
August
AAON, an Oklahoma
Corporation, was founded.
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.
September
Completed expansion of the
Tulsa facility to 332,000
square feet.
January
Introduced a desiccant heat
recovery wheel option available
on all AAON rooftop units.
October
AAON listed in Forbes’ 200
Best Small Companies.
May
Purchased the assets of Air
Wise, of Mississauga,
Ontario, Canada.
September
AAON received U.S.
Patent for DPAC.
April
AAON introduced 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.
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
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.
October
Consulting-Specifying
Engineer magazine awards
Geothermal RQ Series
Product of the Year - Silver.
December
AAON yearly
shipments exceed
$300 million.
December
AAON named top
Tulsa area stock
value.
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 Valuable
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 donated high efficiency
equipment to ABC’s Extreme
Makeover: Home Edition.
July
Geothermal RQ Series wins
Silver in ACHR News Dealer
Design Competition.
July
AAON SB Series Self Contained
Unit wins ACHR News Dealer
Design Award - Gold.
Single Zone VAV rooftop units
win Honorable Mention in
ACHR News Dealer Design
Competition.
May
Opening of AAON Parts
& Supply Store.
3-for-2 stock split.
AAON increases dividend
payment by 25%.
April
AAON received U.S. patent for
Blower Housing assembly.
October
U.S. patent granted to AAON
for air conditioner with
energy recovery heat wheel.
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 named
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.
June
National Society of Professional
Engineers awarded RQ Series
High Efficiency Rooftop Unit
"Product of the Year."
3-for-2 stock split.
August
AAON added to Standard &
Poor’s Small Cap 600 Index.
May
AAON increases dividend
payment by 13%.
January
Outdoor mechanical
room extended to 540
tons of capacity.
Spring
Industry introduction of light
commercial geothermal heat pump
self contained unit product line.
October
AAON listed in Forbes
Magazine’s “Hot Shots 200 Up &
Comers.” AAON listed in Forbes’
200 Best Small Companies.
September
3-for-2 stock split.
June
3-for-2 stock split.
September
Consulting-Specifying
Engineer magazine awarded
RN Series E Cabinet Product
of the Year - Bronze.
September
25th Anniversary
AAON rings opening
bell at NASDAQ.
Consulting-Specifying Engineer
magazine awarded SB Series
Product of the Year - Bronze.
2013
2014
Spring
AAON purchased, renovated and
moved into a 184,000 square foot
plant in Tulsa, Oklahoma.
September
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
September
Purchase of John Zink Air
Conditioning Division.
Introduced a new product line
of rooftop heating and air
conditioning units 2-140 tons.
December
Formed AAON Coil Products,
a Texas Corporation, as a
subsidiary to AAON, Inc.
(Nevada) and purchased coil
making assets of Coils Plus.
A TIMELINE OF SUCCESS
March
Purchased property with 26,000 square
foot building adjacent to AAON Coil
Products plant in Longview, Texas.
Issued a 10% stock dividend.
December
Purchased 40 acres with 457,000
square foot plant and 22,000 square
foot office space located across from
Tulsa facility.
November
AAON yearly shipments exceed $100
million. Received U.S. patent for
Dimpled Heat Exchanger Tube.
Fall
Expanded rooftop product line to
230 tons. Introduced evaporative
condensing energy savings feature.
Fall
Industry introduction of the
modular air handler and
chiller products.
October
AAON listed in Forbes’ 200
Best Small Companies.
Spring
Completed Tulsa, Oklahoma, and
Longview, Texas, plant additions yielding
a total exceeding one million square feet.
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
August
AAON, an Oklahoma
Corporation, was founded.
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.
November
Listed on the NASDAQ
National Market System.
Spring
AAON Coil Products purchased,
renovated and moved into a
110,000 square foot plant in
Longview, Texas.
September
Completed expansion of the
Tulsa facility to 332,000
square feet.
January
Introduced a desiccant heat
recovery wheel option available
on all AAON rooftop units.
April
AAON received U.S. patent for
Blower Housing assembly.
October
U.S. patent granted to AAON
for air conditioner with
energy recovery heat wheel.
July
AAON added as a member
of the Russell 2000® Index.
September
3-for-2 stock split.
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.
April
AAON introduced factory engineered
and assembled packaged mechanical
room, which includes a boiler and all
piping and pumping accessories.
October
AAON listed in Forbes’ 200
Best Small Companies.
May
Purchased 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.
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 Small Cap 600 Index.
May
AAON increases dividend
payment by 13%.
October
RN series rooftop unit named
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.
June
National Society of Professional
Engineers awarded RQ Series
High Efficiency Rooftop Unit
"Product of the Year."
3-for-2 stock split.
September
Consulting-Specifying
Engineer magazine awarded
RN Series E Cabinet Product
of the Year - Bronze.
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
25th Anniversary
AAON rings opening
bell at NASDAQ.
Consulting-Specifying Engineer
magazine awarded SB Series
Product of the Year - Bronze.
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
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.
October
Consulting-Specifying
Engineer magazine awards
Geothermal RQ Series
Product of the Year - Silver.
December
AAON yearly
shipments exceed
$300 million.
December
AAON named top
Tulsa area stock
value.
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 Valuable
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 donated high efficiency
equipment to ABC’s Extreme
Makeover: Home Edition.
July
Geothermal RQ Series wins
Silver in ACHR News Dealer
Design Competition.
July
AAON SB Series Self Contained
Unit wins ACHR News Dealer
Design Award - Gold.
Single Zone VAV rooftop units
win Honorable Mention in
ACHR News Dealer Design
Competition.
May
Opening of AAON Parts
& Supply Store.
3-for-2 stock split.
AAON increases dividend
payment by 25%.
2013 ANNUAL REPORT UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K*
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
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 [X ] 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 [ X ] 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.
[ X ] 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).
[ X ] 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 [ X ]
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.)
[ ] Yes [ X ] 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, 2013 was $617.3 million.
As of March 1, 2014, registrant had outstanding a total of 36,687,591 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 20, 2014, are incorporated into Part III.
* As amended on Form 10-K/A as filed on March 27th, 2014
TABLE OF CONTENTS
Item Number and Caption
Page Number
PART I
1. Business.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2. Properties.
3. Legal Proceedings.
4. Mine Safety Disclosure.
PART II
5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
6. Selected Financial Data.
7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
7A. Quantitative and Qualitative Disclosures About Market Risk.
8. Financial Statements and Supplementary Data.
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
9A. Controls and Procedures.
9B. Other Information.
PART III
10. Directors, Executive Officers and Corporate Governance.
11. Executive Compensation.
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
13. Certain Relationships and Related Transactions, and
Director Independence.
14. Principal Accountant Fees and Services.
PART IV
15. Exhibits and Financial Statement Schedules.
1
5
8
8
8
8
9
12
12
22
22
45
46
48
48
48
48
48
48
49
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, ("AAON Nevada") 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 Nevada and our subsidiaries.
We are engaged in the manufacture and sale of air-conditioning 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 $17.5 million,
$16.2 million and $13.6 million of our sales in 2013, 2012 and 2011, respectively.
Our rooftop and condensing unit markets primarily consist of units installed on commercial or industrial
structures of generally less than ten stories in height. Our air handling units, self-contained units, chillers,
outdoor mechanical rooms 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.
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 six to 18 months. Housing starts, in turn, are affected by such
factors as interest rates, the state of the economy, population growth and the relative age of the population.
When new construction is down, we emphasize the replacement market.
1
Based on our 2013 level of sales of $321.1 million, we estimate that we have approximately a 15% share of
the rooftop market and a 1-3% share of other markets. Approximately 55% of our sales were generated from
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 and cooling in
a self-contained cabinet, referred to in the industry as "unitary products”. Our other finished products are
chillers, outdoor mechanical rooms, coils, air handling units, condensing units, makeup air units, energy
recovery units and self-contained units.
We offer three groups of rooftop units: the RQ Series, consisting of five cooling sizes ranging from two to six
tons; the RN Series, offered in 27 cooling sizes ranging from six to 140 tons; and the RL Series, which is offered
in 21 cooling sizes ranging from 40 to 240 tons.
We also offer the SA and SB Series as indoor packaged, water-cooled or water-source heat pump units with
cooling capacities of three to 70 tons.
We manufacture a LC Series chiller, air-cooled, a LN Series chiller, air-cooled, and a LL Series chiller and
packaged outdoor mechanical room, which are available in both air-cooled condensing and evaporative-
cooled configurations, covering a range of three to 540 tons. BL Series boiler outdoor mechanical rooms are
also available with 500-6,000 MBH heating capacity.
We offer four groups of condensing units: the CB Series, two to five tons; the CC Series, two to 63 tons; the CN
Series, 55 to 140 tons; and the CL Series, 45 to 230 tons.
Our air-handling units consist of the indoor F1 Series and H3/V3 Series and the modular M2 and M3 Series, as
well as air handling unit versions of the RQ, RN, RL and SA Series units.
Our energy recovery option applicable to our RQ, RN and RL units, as well as our M2 and M3 Series air handling
units, 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 two to 540 tons and in heating
capacity from 69,000 to 9,000,000 BTUs. 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% or more of our sales during 2013, 2012 or 2011.
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.
2
2013 ANNUAL REPORT Sourcing of raw materials may be impacted in the future by the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the "Dodd-Frank Act") that contains provisions to improve transparency and accountability
concerning the supply of certain minerals, known as "conflict minerals", originating from the Democratic
Republic of Congo and adjoining countries. As companies begin implementing the requirements adopted
by the Securities and Exchange Commission ("SEC") in response to the provisions in the Dodd-Frank Act,
availability of materials that contain conflict minerals may be affected.
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 six to 18 months. We expect to receive
delivery of raw materials from our fixed price contracts for use in our manufacturing operations.
Representatives
We employ a sales staff of 20 individuals and utilize approximately 82 independent manufacturer
representatives' organizations (“Representatives”) having 113 offices to market our products in the United
States and Canada. We also have one international sales organization, which utilizes 12 distributors in other
countries. Sales are made directly to the contractor or end user, with shipments being made from our Tulsa,
Oklahoma, and Longview, Texas, plants to the job site.
Our products and sales strategy focuses 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.
To support and service our customers and the ultimate consumer, we provide parts availability through our
sales offices. We also have factory service organizations at each of our plants. Additionally, 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.
Warranties
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 ten
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.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to
ten years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis
over the separately priced warranty period.
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 Research and Development ("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 $5.2 million, $3.6 million, and $4.8 million in 2013,
2012 and 2011, respectively.
3
Backlog
Our backlog as of March 1, 2014 was approximately $48.8 million compared to approximately $51.1 million as
of March 1, 2013. The current backlog consists of orders considered by management to be firm and generally
are filled on average within approximately 60 to 90 days after an order is deemed to become firm; however,
the orders are subject to cancellation by the customers.
Working Capital Practices
Working capital practices in the industry center on inventories and accounts receivable. 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 and had a zero balance at December 31, 2013. We believe that we will have
sufficient funds available to meet our working capital needs for the foreseeable future.
Seasonality
Sales of our products are moderately seasonal with the peak period being July - November of each year due
to timing of construction projects being directly related to warmer weather.
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, 2014, we employed 1,431 permanent employees. Our employees are not 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 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.
4
2013 ANNUAL REPORT Available Information
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 Securities Exchange Act of 1934, as amended, will be available free of charge
through our Internet website as soon as reasonably practicable after we electronically file such material with,
or furnish it to, the SEC. The information on our website is not a part of, or incorporated by reference into, this
annual report on Form 10-K.
Copies of any materials we file with the SEC can also be obtained free of charge through the SEC’s website at
http://www.sec.gov, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or by
calling the SEC at 1-800-732-0330.
Item 1A. Risk Factors.
The following risks and uncertainties may affect our performance and results of operations.
Our business can be hurt by economic conditions.
Our business is affected by a number of economic factors, including the level of economic activity in the
markets in which we operate. Sales in the commercial and industrial 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 which could impact
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 to 18 months 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 limit the impact of price fluctuations on commodities by entering into non-
cancelable fixed price contracts with our major suppliers for periods of six to 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 using hedge accounting since they meet the normal purchases and sales
exemption.
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 achieve new technological advances in the HVAC industry. Our inability to continue
to successfully develop and market new products or our inability to implement 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.
5
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, which could
have an adverse affect 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.
Our business is subject to the risks of interruptions by problems such as computer viruses.
We depend upon information technology 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 laws increases our costs of doing business. Because these laws are subject to frequent change,
we are unable to predict the future costs resulting from environmental compliance.
6
2013 ANNUAL REPORT We are subject to potentially extreme governmental regulations.
We always face the possibility of new governmental regulations which could have a substantial or even extreme
negative effect on our operations and profitability. Negotiations during the summer of 2013 mitigated some of the
negative effects of the DOE Final Rule, Regulatory Identification No. 1904-AC23, published on March 7, 2011. However,
some additional testing and listing requirements are still in place and will be phased in over the next two years.
In addition, several other intrusive component part governmental regulations are in process. If these proposals
become final rules, the effect would be the regulation of compressors and fans 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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency
and accountability concerning the supply of certain minerals, known as "conflict minerals", originating from the
Democratic Republic of Congo and adjoining countries. As a result, in August 2012, the SEC adopted annual disclosure
and reporting requirements for those companies who use conflict minerals in their products. Accordingly, we began
our reasonable country of origin inquiries in fiscal year 2013, with initial disclosure requirements beginning in May
2014. There are costs associated with complying with these disclosure requirements, including for due diligence to
determine the sources of conflict minerals used in our products and other potential changes to products, processes or
sources of supply as a consequence of such verification activities. The implementation of these rules could adversely
affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of
suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict
minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges
if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to
sufficiently verify the origins for all conflict minerals used in our products through the procedures we may implement.
We are subject to adverse 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.
We are subject to international regulations that could adversely affect our business and results of operations.
Due to our use of representatives in foreign markets, we are subject to many laws governing international relations,
including those that prohibit improper payments to government officials and commercial customers, and restrict
where we can do business, what information or products we can supply to certain countries and what information we
can provide to a non-U.S. government, including but not limited to the Foreign Corrupt Practices Act, U.K. Bribery Act
and the U.S. Export Administration Act. Violations of these laws, which are complex, may result in criminal penalties
or sanctions that could have a material adverse effect on our business, financial condition and results of operations.
Operations may be affected by natural disasters.
Natural disasters such as tornadoes and ice storms, as well as accidents, acts of terror, infection and other factors
beyond our control could adversely affect our operations. Especially, as our facilities are in areas where tornadoes are
likely to occur, the effects of natural disasters and other events could damage our facilities and equipment and force
a temporary halt to manufacturing and other operations, and such events could consequently cause severe damage
to our business. We maintain insurance against these sorts of events; however, this is not guaranteed to cover all the
losses and damages incurred.
7
If we are unable to hire, develop or retain employees, it could have an adverse effect on our business.
We compete to hire new employees and then seek to train them to develop their skills. We may not be able to
successfully recruit, develop and retain the personnel we need. Unplanned turnover or failure to hire and retain a
diverse, skilled workforce, could increase our operating costs and adversely affect our results of operations.
Variability in self-insurance liability estimates could impact our results of operations.
We self-insure for employee health insurance and workers’ compensation insurance coverage up to a predetermined
level, beyond which we maintain stop-loss insurance from a third-party insurer for claims over $160,000 and $750,000
for employee health insurance claims and workers' compensation insurance claims, respectively. Our aggregate
exposure varies from year to year based upon the number of participants in our insurance plans. We estimate our self-
insurance liabilities using an analysis provided by our claims administrator and our historical claims experience. Our
accruals for insurance reserves reflect these estimates and other management judgments, which are subject to a high
degree of variability. If the number or severity of claims for which we self-insure increases, it could cause a material and
adverse change to our reserves for self-insurance liabilities, as well as to our earnings.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2013, we own all of our facilities, consisting of approximately 1.5 million square feet of space for
office, manufacturing, warehouse, assembly operations and parts sales 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, and
a 861,000 sq. ft. manufacturing/warehouse building and a 70,000 sq. ft. office building located on an approximately
40-acre tract of land across the street from the original facility (2440 South Yukon Avenue) (the "Tulsa facilities"). The
Tulsa facilities are of sheet metal construction.
Our manufacturing area is in heavy industrial type buildings, with some 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 31.5 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.
Item 3. Legal Proceedings.
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 has been threatened against us, or, to the best of our knowledge, is contemplated.
Item 4. Mine Safety Disclosure.
Not applicable.
8
2013 ANNUAL REPORT PART II
Item 5. Market for Registrant's Common Equity, Related 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 intraday high and low reported sale prices for our common stock for the past two fiscal years.
As of the close of business on March 1, 2014, there were 1,086 holders of record of our common stock.
Quarter Ended
March 31, 2012
June 30, 2012
September 30, 2012
December 31, 2012
March 31, 2013
June 30, 2013
September 30, 2013
December 31, 2013
High
$ 20.65*
$ 19.06*
$ 19.95*
$ 20.95*
$ 28.26*
$ 33.78*
$ 26.98
$ 32.58
Low
$ 20.05*
$ 18.64*
$ 19.63*
$ 20.17*
$ 27.28*
$ 32.00*
$ 26.21
$ 31.84
* Reflects three-for-two stock split effective July 2, 2013
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. Future cash dividends
will be dependent on cash flows and results of operations.
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 $0.08 per share, and, in view of our strong financial position, the Board also declared
a one-time special cash dividend of $0.08 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.
On May 21, 2013, we declared a three-for-two stock split of the Company's common stock to be paid in the form
of a stock dividend on July 2, 2013. Stockholders of record at the close of business on June 13, 2013 received
one additional share for every two shares they held as of that date. All share and per share information has
been updated to reflect the effects of this stock split. In addition, on May 21, 2013, we approved a semi-annual
cash dividend of $0.10 per share, post split, to the holders of our outstanding Common Stock as of the close
of business on June 13, 2013, the record date. Those dividends were paid on July 2, 2013.
We declared a regular semi-annual cash dividend of $0.10 per share on November 6, 2013. The dividends were
payable to shareholders of record at the close of business on December 2, 2013, the record date, and were
paid on December 23, 2013.
9
The following is a summary of our share-based compensation plans as of December 31, 2013:
Equity Compensation Plan Information
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected
in column (a))
112,810
819,243
$ 6.15
$ 11.49
-
281,464
Plan category
The 1992 stock option plan
The Long-Term Incentive Plan
Repurchases during the fourth quarter of 2013 were as follows:
Issuer Purchases of Equity Securities
Period
October 2013
November 2013
December 2013
Total
(a)
Total Number of
Shares (or Units
Purchased)
(b)
Average Price
Paid (Per Share
or Unit)
28,618
38,257
49,593
116,468
$ 26.94
$ 28.47
$ 30.51
$ 28.96
(c)
Total Number of Shares
(or Units) Purchased
as part of Publicly
Announced Plans or
Programs
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that may yet be
Purchased under the
Plans or Programs
28,618
38,257
49,593
116,468
-
-
-
-
10
2013 ANNUAL REPORT Comparative Stock Performance 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, 2008 through December 31, 2013. The graph assumes that
$100 was invested at the close of trading December 31, 2008, 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.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 31, 2013
400
350
300
250
200
150
100
50
2008
2009
2010
2011
2012
2013
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.
11
Item 6. Selected Financial Data.
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:
2013
2012
2011
2010
2009
Years Ending December 31,
Net sales
Net income
Earnings per share:
Basic*
Diluted*
Cash dividends declared per
common share:
(in thousands, except per share data)
$ 321,140
$ 303,114
$ 266,220
$ 244,552
$ 245,282
$ 37,547
$ 27,449
$ 13,986
$ 21,894
$ 27,721
$ 1.02
$ 1.01
$ 0.20
$ 0.75
$ 0.74
$ 0.24 (1)
$ 0.38
$ 0.37
$ 0.16
$ 0.58
$ 0.58
$ 0.16
$ 0.72
$ 0.71
$ 0.16
*Reflects three-for-two stock split effective July 2, 2013
(1) Includes special dividend of $0.08 per common share paid on December 24, 2012.
Financial Position at End
of Fiscal Year:
2013
2012
2011
2010
2009
December 31,
Working capital
Total assets
Long-term and current debt
$ 77,294
215,444
-
$ 51,921
193,493
-
Total stockholders’ equity
164,106
138,136
(in thousands)
$ 45,700
178,981
4,575
122,504
$ 55,502
160,277
-
$ 65,354
156,211
76
116,739
117,999
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
We engineer, manufacture and market air conditioning and heating equipment consisting of rooftop units,
chillers, outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing
units, commercial self-contained units and coils. These products are marketed and sold to retail, manufacturing,
educational, lodging, supermarket, medical and other commercial industries. We market our products to all
50 states in the United States and certain provinces in Canada.
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 uncertainty 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.
12
2013 ANNUAL REPORT 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 six to 18 months. Housing starts,
in turn, are affected by such factors as interest rates, the state of the economy, population growth and the
relative age of the population. When new construction is down, we emphasize the replacement market. The
new construction market in 2013 continued to be unpredictable and uneven. Thus, throughout the year, we
emphasized promotion of the benefits of AAON equipment to property owners in the replacement market.
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 remained relatively consistent the past few years, but the market
continues to be volatile and unpredictable as a result of the uncertainty related to the U.S. economy and a
weakening global economy. For the year ended December 31, 2013, the prices for copper, galvanized steel,
stainless steel and aluminum decreased approximately 3.4%, 4.2%, 14.12% and 6.8% respectively, from a year
ago. For the year ended December 31, 2012, prices for copper increased approximately 0.5% from prior year,
while the cost of galvanized steel, stainless steel and aluminum decreased approximately 4.0%, 12.82% and
8.0%, respectively.
In 2011, we began using an all aluminum microchannel condenser coil on our small rooftop unit product line
and, in 2013, we began using this condenser coil in our new large rooftop product line as well. The condenser
coil is the outdoor coil of an conventional air conditioning system. We expect to be using this type of condenser
coil throughout the complete rooftop unit product line by the end of 2014. This will reduce our copper tube
usage in this component of the product, however, copper will remain a high volume raw material because of
its use throughout the equipment.
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 six to 18 months. We expect to receive
delivery of raw materials from our fixed price contracts for use in our manufacturing operations.
The following are recent developments that impacted our results of operations, cash flows, and financial
condition:
• We estimate that we have captured approximately 15% 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 markets.
• We paid $9.0 million in capital expenditures in 2013, a decrease of $5.1 million from the
$14.1 million in 2012.
• We paid cash dividends of $7.4 million in 2013 compared to $8.8 million in 2012.
• We introduced two large commercial product lines in 2013, the CN Series condensing units
and the LN Series chillers. These products share common parts and designs with our large
commercial RN Series rooftop units and have similar efficiency and serviceability benefits
for our customers.
• With the opening of a local retail parts store and improvement of parts sales efficiencies to
the sales representatives during 2013, we saw an 17.9% increase in parts sales compared
with 2012. In 2013, parts sales were approximately 4.9% of total net sales.
13
Results of Operations
Units sold for years ended December 31:
Rooftop Units
Split Systems
Outdoor Mechanical Rooms
2013
2012
2011
13,969
2,604
93
16,666
13,091
2,651
67
15,809
12,023
3,121
80
15,224
Total Units
Year Ended December 31, 2013 vs. Year Ended December 31, 2012
Net Sales
Net sales
Total Units
Years Ending December 31,
2013
2012
$ Change
% Change
(in thousands, except unit data)
$ 321,140
16,666
$ 303,114
15,809
$ 18,026
857
5.9%
5.4%
The increase in net sales was the result of the favorable reception to our new products and increased market share, along with 3-4%
price increases introduced during the year. Because of our wide product mix and flexibility of features within each product, overall
net sales increased approximately 6%. We estimate that approximately 3% of the net sale increase was a related to the price increases
during the year and the other 3% was related to increased unit sales
Cost of Sales
Years Ending December 31,
Percent of Sales
2013
2012
2013
2012
(in thousands)
Cost of sales
Gross Profit
$ 231,348
89,792
$ 232,615
70,499
72.0%
28.0%
76.7%
23.3%
The principal components of cost of sales 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.
14
2013 ANNUAL REPORT Twelve month average raw material cost per pound as of December 31:
Copper
Galvanized Steel
Stainless Steel
Aluminum
Years Ending December 31,
2013
2012
% Change
$ 4.29
$ 0.46
$ 1.46
$ 1.51
$ 4.44
$ 0.48
$ 1.70
$ 1.62
(3.4)%
(4.2)%
(14.1)%
(6.8)%
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2013
2012
2013
2012
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Other
$ 6,024
6,397
10,287
1,086
946
9,249
(in thousands)
$ 3,545
4,924
8,745
1,009
893
7,145
1.9%
2.0%
3.2%
0.3%
0.3%
2.9%
Total SG&A
$ 33,989
$ 26,261
10.6%
1.2%
1.6%
2.9%
0.3%
0.3%
2.4%
8.7%
The increase in SG&A is primarily due to higher profit sharing expense as a result of higher operating income before income taxes and
higher employee salaries as a result of salary pay increases and additional headcount. In addition, warranty expenses increased due to
higher sales and claims in 2013 compared to 2012.
Other Income (Expense), net
Years Ending December 31,
Percent of Sales
2013
2012
2013
2012
(in thousands)
Other income (expense), net
$ 248
$ 41
0.1%
- %
In the second quarter of 2013, the Company completed work done to repair its facilities from an ice storm in a prior year. The insurance
proceeds received for this damage exceeded the cost to repair the buildings resulting in a gain of approximately $0.3 million.
15
Income Taxes
Years Ending December 31,
Effective Tax Rate
2013
2012
2013
2012
(in thousands)
Income tax provision
$ 18,747
$ 16,868
33.3%
38.1%
The income tax provision for 2013 reflected benefits related to the R&D Credit and the Indian Employment Credit of approximately
$0.9 million for tax years 2013 and 2012. These federal credits were retroactively reinstated on January 2, 2013, with the enactment of
the American Taxpayer Relief Act of 2012 ("ATRA"). No R&D Credit or Indian Employment Credit benefits were recorded in the income
tax provision for 2012. The Company also had a change in estimate related to the recoverability of certain 2012 tax credits that was
recorded in the first quarter of 2013 for approximately $0.6 million, causing our effective tax rate to be lower than expected. This
change in estimate was the result of additional and better information. In addition, our domestic manufacturing deduction for 2013
increased approximately $0.7 million compared to 2012.
Year Ended December 31, 2012 vs. Year Ended December 31, 2011
Net Sales
Net sales
Total Units
Years Ending December 31,
2012
2011
$ Change
% Change
(in thousands)
$ 303,114
$ 266,220
15,809
15,224
$ 36,894
585
13.9%
3.8%
The increase in net sales was the result of the favorable reception to our new products and increased market share, along with 3% to
5% price increases introduced during the year. Because of our wide product mix and flexibility of features within each product, overall
net sales increased approximately 14%. We estimate that approximately 4% of the net sale increase was related to the price increases
during the year and the other 9% was related to increased unit sales.
Cost of Sales
Cost of sales
Gross Profit
Years Ending December 31,
Percent of Sales
2012
2011
2012
2011
$ 232,615
$ 219,939
70,499
46,281
76.7%
23.3%
82.6%
17.4%
The principal components of cost of sales 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.
Higher component prices adversely affected gross profit in 2011. Also, the Company experienced the negative effect of manufacturing
inefficiencies due to the introduction of new products and our decision to replace approximately 50% of AAON’s heavily-used sheet
metal equipment in 2011. The new equipment allowed us to improve manufacturing efficiencies in 2012, reducing our labor and
overhead costs.
16
2013 ANNUAL REPORT Twelve month average raw material cost per pound as of December 31:
Copper
Galvanized Steel
Stainless Steel
Aluminum
Years Ending December 31,
2012
2011
% Change
$ 4.44
$ 0.48
$ 1.70
$ 1.62
$ 4.42
$ 0.50
$ 1.95
$ 1.76
0.5%
(4.0)%
(12.8)%
(8.0)%
Selling, General and Administrative Expenses
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Other
Years Ending December 31,
Percent of Sales
2012
2011
2012
2011
(in thousands)
$ 3,545
$ 4,180
4,924
8,745
1,009
893
7,145
2,449
7,299
521
1,223
6,638
Total SG&A
$ 26,261
$ 22,310
1.2%
1.6%
2.9%
0.3%
0.3%
2.4%
8.7%
1.6%
0.9%
2.7%
0.2%
0.5%
2.5%
8.4%
Profit sharing expense increased as a result of higher operating income before income tax. Salaries and benefits increased due to pay
increases and increases in the management discretionary bonus incentive plan. Warranty decreased as a result of lower claims.
Loss on Disposal of Assets
Years Ending December 31,
Percent of Sales
2012
2011
2012
2011
(in thousands)
Loss on Disposal of Assets
$ 4
$ 1,802
- %
0.7%
A $1.8 million charge to earnings was recorded in 2011 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.
17
Other Income (Expense), net
Years Ending December 31,
Percent of Sales
2012
2011
2012
2011
Other income(expense), net
$ 41
$ (477)
- %
(0.2)%
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.
Income Taxes
Years Ending December 31,
Effective Tax Rate
2012
2011
2012
2011
(in thousands)
Income tax provision
$ 16,868
$ 7,527
38.1%
35.0%
On January 2, 2013, the ATRA was signed into law. Some of the provisions were retroactive to January 1, 2012, including the extension
of certain tax credits. The tax rate for 2012 above reflects the tax law that was in place as of December 31, 2012. Had the ATRA
been enacted prior to January 1, 2013, our overall tax expense would have been approximately $0.5 million lower. This $0.5 million
difference was recorded as a reduction in expense in the first quarter of 2013. The Company also had a change in estimate related to
the recoverability of certain 2012 tax credits that was recorded in the first quarter of 2013 for approximately $0.6 million. This change
in estimate was the result of additional and better information. Had the ATRA impact and the change in estimate been booked in 2012
instead of 2013, our overall effective tax rate would have been approximately 35.5%.
18
2013 ANNUAL REPORT 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.
Our cash and cash equivalents increased $8.9 million from December 31, 2012 to December 31, 2013. As of
December 31, 2013, we had $12.1 million in cash and cash equivalents.
As of December 31, 2013, we had certificates of deposit of $10.7 million and investments held to maturity at
amortized cost of $27.0 million. These certificates of deposit had maturity dates of approximately one month
to 15 months. The investments held to maturity at amortized cost had maturity dates of less than one month
to approximately 16 months.
On July 28, 2013 we renewed the line of credit with BOKF, NA dba Bank of Oklahoma, formerly known as Bank
of Oklahoma, N.A. ("Bank of Oklahoma"). The revolving line of credit matures on July 27, 2014. We expect to
renew our line of credit in July 2014 with favorable terms as we do not anticipate a tightening of funds in the
financial markets. Under the line of credit, there was one standby letter of credit of $0.9 million as of December
31, 2013. Subsequent to year-end, we renewed the standby letter of credit and decreased the amount to
$0.8 million. At December 31, 2013 we have $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, 2013 and 2012, there were no outstanding balances under the revolving credit facility.
Interest on borrowings is payable monthly at LIBOR plus 2.5%. The weighted average interest rate was 2.7%
and 2.8% for the years ended December 31, 2013 and 2012, respectively.
At December 31, 2013, 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, 2013, our tangible net worth was $164.1 million, which
meets the requirement of being at or above $95.0 million. Our total liabilities to tangible net worth ratio was
0.3 to 1.0 which meets the requirement of not being above 2 to 1. Our working capital was $77.3 million,
which meets the requirement of being at or above $40.0 million.
We repurchased shares of stock from employees’ 401(k) savings investment plan, option exercises of our
directors and officers and vested restricted stock from employees, directors and officers in the amount of $8.2
million for 0.4 million shares, $6.7 million for 0.5 million shares and $3.7 million for 0.3 million shares in 2013,
2012 and 2011, respectively. We repurchased the shares at current market prices. Prior year share amounts
have been adjusted for the three-for-two stock split effective July 2, 2013.
For the years ended December 31, 2013, 2012 and 2011, we paid cash dividends of $7.4 million, $8.8 million
and $5.9 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 2014 and the
foreseeable future.
19
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.
2013
2012
2011
(in thousands)
$ 37,547
12,892
$ 27,449
12,350
$ 13,986
23,599
Operating Activities
Net Income
Income statement adjustments, net
Changes in assets and liabilities:
Accounts receivable
Income tax receivable
Inventories
Prepaid expenses and other
Accounts payable
Deferred revenue
Accrued liabilities
Net cash provided by operating activities
Investing Activities
Capital expenditures
Purchases of investments
Maturities of investments and proceeds from called investments
Other
4,662
464
231
436
(5,197)
615
1,942
53,592
(9,041)
(31,383)
8,937
161
(9,646)
9,715
2,271
(17)
2,461
-
6,584
51,167
(14,147)
(18,194)
1,926
80
Net cash used in investing activities
(31,326)
(30,335)
Financing Activities
(Payments) borrowings under revolving credit facility, net
Stock options exercised and excess tax benefits from stock op-
tions exercised and restricted stock awards vested
Repurchase of stock
Cash dividends paid to stockholders
Net cash used in financing activities
Cash Flows from Operating Activities
-
2,310
(8,222)
(7,428)
(4,575)
2,389
(6,660)
(8,840)
$ (13,340)
$ (17,686)
6,053
(10,016)
(1,296)
(67)
(2,751)
-
(3,024)
26,484
(35,914)
-
10,867
509
(24,538)
4,575
705
(3,671)
(5,935)
$ (4,326)
Accounts receivable decreased as a result of lower fourth quarter sales in 2013 compared to 2012. Fourth
quarter sales in 2012 were higher than fourth quarter 2011, which caused accounts receivable at December
31, 2012 to increase compared to 2011.
The higher 2011 income statement adjustment and change in income tax receivable was due to deferred
taxes from additional bonus depreciation and capital expenditures done in 2011.
20
2013 ANNUAL REPORT Cash Flows from Investing Activities
Capital expenditures were primarily investments in our manufacturing and production equipment to support
our growth and improve efficiencies with equipment which combines the latest advancement in automation
and laser technology. We took advantage of 2011 bonus depreciation tax deductions, which caused the large
amount of capital expenditures in 2011.
The capital expenditure program for 2014 is estimated to be approximately $13 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.
Investment purchase activity in 2013 and 2012 is primarily attributable to investment of excess cash flows
from operations.
Cash Flows from Financing Activities
We continued to increase our buyback activity in 2013 compared to prior years.
Off-Balance Sheet Arrangements
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 had one material contractual agreement as of December 31, 2013, as follows:
Payments Due by Period
Total
Less Than 1
Year
1 to 3 Years
3 to 5 Years
(in thousands)
More Than 5
Year
Purchase obligations(1)
$ 1,361
$ 1,361
$ -
$ -
$ -
(1) The purchase obligation consists of delivery of aluminum ingot from one supplier. The quantity and price are fixed over the life of
the contract.
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.
21
Critical Accounting Estimates
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.
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 applicable). 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 associated costs, and any known identifiable warranty issue.
Due to the absence of warranty history on new products, an additional provision may be made for such
products. 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.
Stock Compensation – We measure and recognize compensation 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-Merton option valuation 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
None.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
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 six to 18
months to manage this exposure.
Item 8. Financial Statements and Supplementary Data.
22
2013 ANNUAL REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
24
25
26
27
28
30
23
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, 2013 and 2012, and the related consolidated statements of
income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31,
2013. 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, 2013 and 2012, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2013, 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, 2013, based
on criteria established in the 1992 Internal Control–Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 13, 2014,
expressed an unqualified opinion on the effectiveness of internal control over financial reporting.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 13, 2014
24
2013 ANNUAL REPORT AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31,
2013
2012
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Certificates of deposit
Investments held to maturity at amortized cost
Accounts receivable, net
Income tax receivable
Notes 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
Notes receivable, long-term
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Revolving credit facility
Accounts payable
Accrued liabilities
Total current liabilities
Deferred revenue
Deferred tax liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares
issued
$ 12,085
8,110
16,040
39,063
1,073
29
32,140
304
4,779
113,623
1,417
61,821
119,439
9,748
192,425
105,142
87,283
2,638
10,981
919
$ 215,444
$ -
7,779
28,550
36,329
585
14,424
$ 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
Common stock, $.004 par value, 50,000,000 shares authorized,
147
147
36,711,354 and 36,776,624 issued and outstanding at
December 31, 2013 and 2012, respectively*
Additional paid-in capital
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
*Reflects three-for-two stock split effective July 2, 2013
163,959
164,106
$ 215,444
137,989
138,136
$ 193,493
25
The accompanying notes are an integral part of these consolidated financial statements.
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
(Gain) loss on disposal of assets
Income from operations
Interest income (expense)
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,
2013
2012
2011
(in thousands, except per share data)
$ 321,140
$ 303,114
231,348
89,792
33,989
(22)
55,825
221
248
56,294
18,747
37,547
$ 1.02
$ 1.01
$ 0.20
232,615
70,499
26,261
4
44,234
42
41
44,317
16,868
27,449
0.75
0.74
0.24(1)
$ 266,220
219,939
46,281
22,310
1,802
22,169
(179)
(477)
21,513
7,527
13,986
0.38
0.37
0.16
36,746,100
37,058,254
36,825,170
37,048,826
37,034,778
37,321,719
*Reflects three-for-two stock split effective July 2, 2013
(1) Includes special dividend of $0.08 per common share paid on December 24, 2012.
The accompanying notes are an integral part of these consolidated financial statements.
26
2013 ANNUAL REPORT AAON, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Common Stock
Shares*
Amount*
Paid-In
Capital
Retained
Earnings*
Total
Balance at December 31, 2010
37,137
$ 149
Net income
Stock options exercised and restricted
stock awards granted, 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 granted, including tax
benefits
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2012
Net income
Stock options exercised and restricted
stock awards granted, including tax
benefits
Share-based compensation
Stock repurchased and retired
Dividends**
-
108
-
(318)
-
36,927
-
354
-
(504)
-
36,777
-
290
-
(356)
-
-
-
-
(1)
-
148
-
1
-
(2)
-
147
-
1
-
(1)
-
Balance at December 31, 2013
36,711
$ 147
(in thousands)
-
-
$ 116,590
$ 116,739
13,986
13,986
705
680
(1,375)
(10)
-
-
2,388
1,294
(3,682)
-
-
-
2,309
1,763
(4,072)
-
$ -
-
-
(2,295)
(5,925)
122,356
27,449
-
-
(2,976)
(8,840)
137,989
37,547
-
-
(4,149)
(7,428)
705
680
(3,671)
(5,935)
122,504
27,449
2,389
1,294
(6,660)
(8,840)
138,136
37,547
2,310
1,763
(8,222)
(7,428)
$ 163,959
$ 164,106
*Reflects three-for-two stock split effective July 2, 2013
**Includes cash payment of fractional shares from three-for-two stock split effective July 2, 2013
The accompanying notes are an integral part of these consolidated financial statements.
27
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
Foreign currency transaction gain
Interest income on note receivable
Deferred income taxes
Write-off of note receivable
Changes in assets and liabilities:
Accounts receivable
Income tax receivable
Inventories
Prepaid expenses and other
Accounts payable
Deferred revenue
Accrued liabilities
Net cash provided by operating activities
Years Ending December 31,
2013
2012
2011
(in thousands)
$ 37,547
$ 27,449
$ 13,986
12,312
790
141
243
1,763
(843)
(22)
67
(40)
(1,594)
75
4,662
464
231
436
(5,197)
615
1,942
53,592
13,407
155
(83)
63
1,294
(393)
4
(27)
(42)
(2,028)
-
(9,646)
9,715
2,271
(17)
2,461
-
6,584
51,167
11,397
156
(289)
(50)
680
(211)
1,802
(8)
-
10,122
-
6,053
(10,016)
(1,296)
(67)
(2,751)
-
(3,024)
26,484
(Continued on next page)
28
2013 ANNUAL REPORT AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
Investing Activities
Capital expenditures
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 called investments
Principal payments from note receivable
Net cash used in investing activities
Financing Activities
Borrowings under revolving credit facility
Payments under revolving credit facility
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
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning
of year
Cash and cash equivalents, end of year
Years Ending December 31,
2013
2012
2011
(in thousands)
$ (9,041)
$ (14,147)
$ (35,914)
92
(9,108)
3,600
(22,275)
2,005
3,332
69
11
(6,540)
1,300
(11,654)
-
626
69
482
-
1,503
-
9,364
-
27
(31,326)
(30,335)
(24,538)
8,325
(8,325)
1,467
843
(8,222)
(7,428)
(13,340)
8,926
3,159
$ 12,085
34,847
(39,422)
1,996
393
(6,660)
(8,840)
(17,686)
3,146
13
$ 3,159
82,078
(77,503)
494
211
(3,671)
(5,935)
(4,326)
(2,380)
2,393
$ 13
The accompanying notes are an integral part of these consolidated financial statements.
29
AAON, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2013
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.
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 intercompany 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 held $10.7 million and $5.2 million in certificates of deposit at December 31, 2013, and December 31, 2012,
respectively. At December 31, 2013, the certificates of deposit bear interest ranging from 0.15% to 0.90% per
annum and have various maturities ranging from approximately one month to 15 months.
Investments Held to Maturity
At December 31, 2013, our investments held to maturity were comprised of $27.0 million of corporate notes
and bonds with various maturities ranging from less than one month to approximately 16 months. The
investments have moderate risk with S&P ratings ranging from A+ to BBB-.
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.
30
2013 ANNUAL REPORT The following summarizes the amortized cost and estimated fair value of our investments held to maturity at
December 31, 2013 and December 31, 2012:
Amortized Cost
Gross
Unrealized Gain
Gross
Unrealized (Loss)
Fair Value
(in thousands)
December 31, 2013:
Current assets:
Investments held to maturity
$ 16,040
Non current assets:
Investments held to maturity
Total
10,981
$ 27,021
December 31, 2012:
Current assets:
Investments held to maturity
$ 2,832
Non current assets:
Investments held to maturity
Total
8,041
$ 10,873
11
7
18
-
-
-
-
-
-
$ 16,051
10,988
$ 27,039
$ (1)
$ 2,831
(9)
$ (10)
8,032
$ 10,863
We evaluate these investments for other-than-temporary impairments on a quarterly basis. We do not believe
that there was an other-than-temporary impairment for our investments at December 31, 2013 or 2012.
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.
Concentration of Credit Risk
Our customers are concentrated primarily in 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, 2013, 2012 and 2011. No
customer accounted for 10% or more of our sales during 2013, 2012 or 2011. One customer accounted 5%
of our accounts receivable balance at December 31, 2013. At December 31, 2012, we had one customer who
placed an exceptionally large order with an invoice date of December 27, 2012 and a payment date of January
17, 2013 that accounted for approximately 12% of our accounts receivable balance.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities
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.
31
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
Property, plant and equipment, including significant 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
Impairment of Long-Lived Assets
3-40 years
3-15 years
3-7 years
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, 2013, 2012, and 2011 research and
development costs amounted to approximately $5.2 million, $3.6 million, and $4.8 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2013,
2012, and 2011 was approximately $0.9 million, $0.9 million, and $1.2 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, 2013, 2012 and 2011 shipping and handling fees amounted to approximately
$7.9 million, $8.6 million, and $8.7 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.
32
2013 ANNUAL REPORT Share-Based 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-
Merton option valuation model. The use of the Black-Scholes-Merton 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.
Derivative Instruments
In the course of normal operations, the Company occasionally enters into contracts such as forward priced
physical contracts for the purchase of raw materials that qualify for and are designated as normal purchase
or normal sale contracts. Such contracts are exempted from the fair value accounting requirements and are
accounted for at the time product is purchased or sold under the related contract. The Company does not
engage in speculative transactions, nor does the Company hold or issue financial instruments for trading
purposes.
Revenue Recognition
We recognize revenues from sales of products when 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. Sales of our
products are moderately seasonal with the peak period being July - November of each year.
In addition, the Company presents revenues net of sales tax and net of certain payments to our independent
manufacturer representatives (“Representatives”). Representatives are 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’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all
amounts associated with the order are collected from the customer. 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 $63.0 million, $57.1 million, and $51.6 million for each of the years ended December
31, 2013, 2012, and 2011, respectively.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to
ten years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis
over the separately priced warranty period.
33
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.
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 income taxes. 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
Provisions for losses on accounts receivables,
net of adjustments
Accounts receivable written off, net of recoveries
Balance, end of period
December 31,
2013
2012
(in thousands)
$ 39,256
(193)
$ 39,063
$ 43,918
(52)
$ 43,866
Years Ending December 31,
2013
2012
2011
(in thousands)
$ 52
141
-
$ 193
$ 268
(83)
(133)
$ 52
$ 600
(289)
(43)
$ 268
34
2013 ANNUAL 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
Total, net
Allowance for excess and obsolete inventories:
Balance, beginning of period
Provisions for excess and obsolete inventories
Inventories written off
Balance, end of period
December 31,
2013
2012
(in thousands)
$ 28,592
$ 28,155
2,286
1,841
32,719
(579)
32,140
2,757
2,065
32,977
(363)
32,614
Years Ending December 31,
2013
2012
2011
(in thousands)
$ 363
243
(27)
$ 579
$ 300
63
-
$ 363
$ 350
(50)
-
$ 300
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, 2013 and 2012, there
was no impairment.
35
6. Supplemental Cash Flow Information
Supplemental disclosures:
Interest paid
Income taxes paid, net
Non-cash investing and financing activities:
Non-cash capital expenditures
Trade-in of equipment
Years Ending December 31,
2013
2012
2011
(in thousands)
$ 1
19,884
71
315
$ 44
15,128
(3,670)
300
$ 277
6,377
3,852
1,802
7. Warranties
The Company has warranties with various terms from eighteen months for parts to twenty-five years for
certain heat exchangers. The Company has an obligation to replace parts or service its products if conditions
under the warranty are met. 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.
Changes in the warranty accrual are as follows:
Warranty accrual:
Balance, beginning of period
Payments made
Provisions
Adjustments related to changes in estimates
Balance, end of period
Years Ending December 31,
2013
2012
2011
(in thousands)
$ 5,776
(4,448)
6,005
19
7,352
$ 6,093
(3,861)
3,304
240
5,776
$ 7,300
(5,387)
5,146
(966)
6,093
Warranty expense:
$ 6,024
$ 3,545
$ 4,180
36
2013 ANNUAL REPORT 8. Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
Warranty
Due to representatives
Payroll
Profit sharing
Workers' compensation
Medical self-insurance
Customer prepayments
Employee benefits and other
Total
9. Revolving Credit Facility
December 31,
2013
2012
(in thousands)
$ 7,352
$ 5,776
9,480
4,448
1,389
665
353
2,077
2,786
9,439
2,515
1,337
928
420
3,933
2,230
$ 28,550
$ 26,578
Our revolving credit facility provides for maximum borrowings of $30.0 million which is provided by BOKF,
NA dba Bank of Oklahoma, formerly known as Bank of Oklahoma, N.A. ("Bank of Oklahoma"). Under the line
of credit, there was one standby letter of credit totaling $0.9 million as of December 31, 2013. Subsequent
to year-end, we renewed the standby letter of credit and decreased the amount to $0.8 million. Borrowings
available under the revolving credit facility at December 31, 2013, 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, 2013 and 2012, we had no balance outstanding under our revolving credit
facility. At December 31, 2013 and 2012, the weighted average interest rate was 2.7% and 2.8%, respectively.
At December 31, 2013, 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, 2013 our tangible net worth was $164.1 million, which meets the
requirement of being at or above $95.0 million. Our total liabilities to tangible net worth ratio was 0.3 to 1.0,
which meets the requirement of not being above 2 to 1. Our working capital was $77.3 million which meets
the requirement of being at or above $40.0 million.
Effective July 28, 2013, the Company amended its revolving credit facility with the Bank of Oklahoma. The
amendment extends the termination date of the revolving credit facility to July 27, 2014.
10. Income Taxes
The provision for income taxes consists of the following:
Current
Deferred
Years Ending December 31,
2013
2012
2011
$ 20,341
(1,594)
$ 18,747
(in thousands)
$ 18,896
(2,028)
$ 16,868
$ (2,595)
10,122
$ 7,527
The provision for income taxes differs from the amount computed by applying the statutory federal income
tax rate before the provision for income taxes.
37
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
Domestic manufacturing deduction
Other
Years Ending December 31,
2013
2012
2011
35%
4%
(4)%
(2)%
33%
35%
5%
(3)%
1%
38%
35%
4%
- %
(4)%
35%
Other primarily relates to 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,
2013
2012
(in thousands)
$ 304
2,901
1,420
154
$ 164
2,287
1,996
46
$ 4,779
$ 4,493
$ (14,843)
$ (16,659)
692
(273)
653
274
$ (14,424)
$ (15,732)
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 2011 to present, and to non-U.S. income tax examinations for the tax years of 2008
through 2011. In addition, we are subject to state and local income tax examinations for the tax years 2010 to
present. The Company continues to evaluate its need to file returns in various state jurisdictions and recorded
$0.2 million in additional state income tax expense, net of federal benefit, during 2013 related to our updated
assessment of required state filings. 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 was utilized with the amended filing of the 2009 federal tax return.
38
2013 ANNUAL REPORT On January 2, 2013 the ATRA 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 $0.5 million lower. This was recorded as a reduction in expense in the first quarter
of 2013. The Company also had a change in estimate related to the recoverability of certain 2012 tax credits
that was recorded in the first quarter of 2013 for approximately $0.6 million. This change in estimate was the
result of additional and better information. Had the ATRA impact and the change in estimate been booked in
2012 instead of 2013, our overall effective tax rate would have been approximately 35.5% for the year ended
December 31, 2012.
11. Share-Based Compensation
As discussed in Note 13, the Company had a three-for-two stock split effective July 2, 2013. All share information
herein has been updated to reflect the effect of this stock split.
We have historically maintained a stock option plan for key employees, directors and consultants (“the 1992
Plan”). The 1992 Plan provided for 9.9 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
1,687,500 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,
2013 is $1.4 million and is expected to be recognized over a weighted-average period of 2.09 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, 2013, 2012 and 2011 using a Black Scholes-Merton Model:
Director and Officers:
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)
2013
2012
2011
1.19%
47.08%
1.55%
7
1.14%
45.92%
1.40%
8
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
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.
39
The following is a summary of stock options vested and exercisable as of December 31, 2013:
Range of
Exercise Prices
Number of
shares
Weighted Average
Remaining Contractual Life
Weighted Average
Exercise Price
$4.81 - 10.34
$10.70 - 12.25
$12.98 - 14.01
Total
281,335
42,150
65,258
388,743
4.09
7.45
8.38
5.17
$ 7.28
10.86
12.98
$ 8.62
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
$4.81 - 6.47
$6.81 - 8.65
$9.13 - 12.20
Total
99,525
202,575
75,150
377,250
2.86
5.22
7.86
5.12
$ 5.36
7.19
10.42
$ 7.35
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
$4.30 - 4.81
$5.02 - 7.11
$7.17 - 9.19
$10.34 - 12.20
Total
122,775
230,850
171,300
24,300
549,225
2.42
5.00
5.13
8.50
4.62
$ 4.61
6.37
8.08
10.61
$ 6.70
Intrinsic Value
(in thousands)
$ 6,941
889
1,238
$ 9,068
Intrinsic Value
(in thousands)
$ 851
1,362
263
$ 2,476
Intrinsic Value
(in thousands)
$ 1,111
1,682
957
74
$ 3,824
A summary of option activity under the plan is as follows:
Options:
Outstanding at December 31, 2012
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2013
Exercisable at December 31, 2013
Shares
Weighted Average
Exercise Price
1,115,513
47,500
(180,935)
(50,025)
932,053
388,743
$ 10.15
17.70
8.11
11.82
$ 10.84
$ 8.62
40
2013 ANNUAL REPORT The total intrinsic value of options exercised during December 31, 2013, 2012 and 2011 was $2.7 million, $4.0
million and $1.1 million, respectively. The cash received from options exercised during December 31, 2013,
2012 and 2011 was $1.5 million, $2.0 million and $0.5 million, respectively. The impact of these cash receipts is
included in financing activities in the accompanying Consolidated Statements of Cash Flows.
Since 2007, as part of the LTIP, the Compensation Committee of the Board of Directors has authorized and
issued restricted stock awards to directors and key employees. Restricted stock awards granted to directors
vest one-third each year. All other restricted stock awards vest at a rate of 20% per year. 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, 2013, unrecognized compensation cost related
to unvested restricted stock awards was approximately $1.6 million which is expected to be recognized over
a weighted average period of 2.48 years.
A summary of the unvested restricted stock awards is as follows:
Restricted Stock:
Unvested at December 31, 2012
Granted
Vested
Forfeited
Unvested at December 31, 2013
Shares
Weighted Average
Grant Date Fair Valve
96,116
98,429
(35,876)
(1,315)
157,354
$ 12.11
23.42
12.17
13.95
$ 19.16
Grant date fair value of awards during the period:
2013
2012
2011
Options
Restricted stock
Total
$ 841
2,306
$ 3,147
(in thousands)
$ 2,569
830
$ 3,399
$ 632
325
$ 957
Share-based compensation expense:
2013
2012
2011
Options
Restricted stock
Total
Income tax benefit related to share-based
compensation:
Options
Restricted stock
Total
$ 1,170
593
$ 1,763
(in thousands)
$ 958
336
$ 1,294
$ 389
291
$ 680
2013
2012
2011
(in thousands)
$ 370
23
$ 393
$ 715
128
$ 843
$ 154
57
$ 211
41
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. The Plan provides for automatic enrollment and 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. Effective October 1, 2013, and each year thereafter, eligible
employees are automatically enrolled in the Plan at a 6% deferral rate and currently contributing employees
deferral rates will be increased to 6% unless their current rate is above 6% or the employee elects to decline
the automatic enrollment or increase.
Under the Plan, through September 30, 2013, the Company contributed a specified percentage of each eligible
employee’s compensation. In addition, the Company contributed 1.5% of eligible payroll to the Plan each year.
Effective October 1, 2013, the Plan was amended such that the Company contributes 3% of eligible payroll to
the Plan for each employee and matches 100% up to 6% of employee contributions of eligible compensation.
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. The additional 3% Company contribution vests over two years. For the
years ended December 31, 2013, 2012 and 2011 we made matching contributions of $3.0 million, $2.4 million
and $2.2 million, respectively. Administrative expenses were approximately $0.2 million for the year ended
2013 and approximately $0.1 million for the years ended 2012 and 2011, 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 and last days
of the calendar quarter. Profit sharing expense was $6.4 million, $4.9 million and $2.4 million for the years
ended December 31, 2013, 2012 and 2011, respectively.
13. Stockholders’ Equity
Stock Repurchase - On May 17, 2010, the Board authorized a stock buyback program, targeting repurchases
of up to approximately 5% (approximately 2.0 million shares) of our outstanding stock from time to time in
open market transactions. Through June 28, 2010, we repurchased a total of approximately 1.1 million shares
for an aggregate price of $11.5 million, or an average price of $10.69 per share. We purchased the shares at
current market prices. No purchases were made for the years ended December 31, 2013 and 2012.
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, 2013, we repurchased approximately
3.1 million shares for an aggregate price of $31.1 million, or an average price of $10.10 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, 2013, we repurchased approximately 1.2
million shares for an aggregate price of $13.2 million, or an average price of $11.22 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.
42
2013 ANNUAL REPORT 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 $0.08 per share, and, in view of our strong financial position, the Board also declared
a one-time special cash dividend of $0.08 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.
On May 21, 2013, the Board of Directors declared a three-for-two stock split of the Company's common stock
to be paid in the form of a stock dividend on July 2, 2013. Stockholders of record at the close of business on
June 13, 2013 received one additional share for every two shares they held as of that date. All share and per
share information has been updated to reflect the effects of this stock split.
On May 21, 2013, the Board of Directors approved a semi-annual cash dividend of $0.10 per share, post split,
to the holders of our outstanding Common Stock as of the close of business on June 13, 2013, the record date.
Those dividends were paid on July 2, 2013.
At a meeting of the Board of Directors on November 6, 2013, the Board declared a regular semi-annual cash
dividend of $0.10 per share. The dividends were payable to shareholders of record at the close of business on
December 2, 2013, the record date, and were paid on December 23, 2013.
We paid cash dividends of $7.4 million, $8.8 million and $5.9 million in 2013, 2012 and 2011, 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, results of operations or cash
flows 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. At December 31, 2013, we
had one material contractual purchase obligation for approximately $1.4 million that expires in December
2014.
15. New Accounting Pronouncements
There have been no recent accounting pronouncements that would impact our financial statements.
43
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:
2013
2012
2011
(in thousands, except share and per share data)
$ 37,547
$ 27,449
$ 13,986
Basic weighted average shares*
36,746,100
36,825,170
37,034,778
Effect of dilutive stock options and restricted stock*
312,154
223,656
286,941
Diluted weighted average shares*
37,058,254
37,048,826
37,321,719
Earnings per share:
Basic*
Dilutive*
Anti-dilutive shares:
Shares*
*Reflects three-for-two stock split effective July 2, 2013
$ 1.02
$ 1.01
$ 0.75
$ 0.74
$ 0.38
$ 0.37
137,509
619,913
256,875
44
2013 ANNUAL REPORT 17. Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the years ending December 31, 2013 and
2012:
2013
Net sales
Gross profit
Net income
Earnings per share:
Basic*
Diluted*
2012
Net sales
Gross profit
Net income
Earnings per share:
Basic*
Diluted*
Quarter
First
Second
Third
Fourth
(in thousands, except per share data)
$ 66,833
$ 91,241
$ 89,690
$ 73,376
15,312
7,140
$ 0.19
$ 0.19
27,676
12,119
$ 0.33
$ 0.33
26,616
10,522
$ 0.29
$ 0.28
20,188
7,766
$ 0.21
$ 0.21
$ 64,957
$ 83,333
$ 76,816
$ 78,008
13,518
4,567
$ 0.13
$ 0.12
21,103
9,297
$ 0.25
$ 0.25
17,149
6,007
$ 0.16
$ 0.16
18,729
7,578
$ 0.21
$ 0.21
*Reflects three-for-two stock split effective July 2, 2013
18. Subsequent Events
On January 6, 2014, we purchased two plots of land totaling 38 acres near our Tulsa, Oklahoma production
facilities for a combined purchase price of approximately $0.8 million.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not Applicable.
45
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, our management, under the supervision
and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer believe that:
• Our disclosure controls and procedures are designed at a reasonable assurance threshold
to ensure that information required to be disclosed by us in the reports we file under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms; and
• Our disclosure controls and procedures operate at a reasonable assurance threshold
such that important information flows to appropriate collection and disclosure points in
a timely manner and are effective to ensure that such information is accumulated and
communicated to our management, and made known to our Chief Executive Officer
and Chief Financial Officer, particularly during the period when this Annual Report was
prepared, as appropriate to allow timely decisions regarding the required disclosure.
Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures
and concluded that these controls and procedures were effective as of December 31, 2013.
(b) Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Our internal control over financial reporting is a process designed by, or under the supervision of,
our principal executive and principal financial officer, and effected by our board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
In making our assessment of internal control over financial reporting, management used the criteria issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 1992 Internal
Control—Integrated Framework. Based on our assessment, we believe that, as of December 31, 2013, our
internal control over financial reporting is effective at the reasonable assurance level based on those criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2013 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) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the fourth
quarter of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
46
2013 ANNUAL REPORT 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, 2013, based on criteria established in the 1992 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.
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.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2013, based on criteria established in the 1992 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, 2013, and our
report dated March 13, 2014, expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 13, 2014
47
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 20, 2014.
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
Scott M. Asbjornson, 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 20, 2014.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The information required by Item 403 and Item 201(d) of Regulation S-K is incorporated by reference to the information
contained in 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 20, 2014.
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 2014 annual meeting of shareholders
scheduled to be held May 20, 2014.
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 2013,
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 20, 2014.
48
2013 ANNUAL REPORT Part IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Financial statements.
(1) The consolidated financial statements and the report of independent registered public accounting firm are
included in Item 8 of this Form 10-K.
(2) The consolidated financial statements other than those listed at item (a)(1) above have been omitted because
they are not required under the related instructions or are not applicable.
(3) The exhibits listed at item (b) below are filed as part of, or incorporated by reference into, this Form 10-K.
(b) Exhibits:
(3)
(4)
(10.1)
(10.2)
(21)
(23)
(31.1)
(31.2)
(32.1)
(32.2)
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 Eight to Third Restated Revolving Credit Loan Agreement (v)
(B)
Rights Agreement dated February 19, 1999, as amended (vi)
AAON, Inc. 1992 Stock Option Plan, as amended (vii)
AAON, Inc. 2007 Long-Term Incentive Plan, as amended (viii)
List of Subsidiaries (ix)
Consent of Grant Thornton LLP
Certification of CEO
Certification of CFO
Section 1350 Certification – CEO
Section 1350 Certification – CFO
(101)
(INS) XBRL Instance Document
(101)
(SCH) XBRL Taxonomy Extension Schema Document
(101)
(CAL) XBRL Taxonomy Extension Calculation Linkbase Document
(101)
(DEF) XBRL Taxonomy Extension Definition Linkbase Document
(101)
(LAB) XBRL Taxonomy Extension Label Linkbase Document
(101)
(PRE) XBRL Taxonomy Extension Presentation Linkbase Document
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Incorporated herein by reference to the exhibits to our Form S-18 Registration Statement No. 33-
18336-LA.
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.
Incorporated herein by reference to our Forms 8-K dated March 10, 1997, May 27, 1998 and February
25, 1999, or exhibits thereto.
Incorporated by reference to exhibit to our Form 8-K dated July 30, 2004.
Incorporated herein by reference to exhibit to our Form 8-K dated July 29, 2012
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.
Incorporated 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. 333-52824.
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-151915.
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2004.
49
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 13, 2014
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 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
Dated: March 13, 2014
/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
50
2013 ANNUAL 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.
REBECCA THOMPSON
has served as the Chief Accounting
the Company since
Officer of
2012. Ms. Thompson previously
served as a Senior Manager at
Grant Thornton, LLP where she
had 11 years of experience in the
assurance division. Ms. Thompson
is also a licensed certified public
accountant.
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.
51
BOARD OF DIRECTORS
Back row (from left to right): Jerry R. Levine, Paul K. Lackey, Jr., Joseph E. Cappy, A.H. McElroy, II,
Front row (from left to right): John B. Johnson, Jr., Norman H. Asbjornson, Jack E. Short
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 director
of the Company in 2007. From 1997 to
present, Mr. McElroy has served as President
and CEO of McElroy Manufacturing, Inc.,
a manufacturer of fusion equipment and
fintube machines.
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
stockholder 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
52
Thanks
TO OUR EMPLOYEES
Abrahm Abington
Martha Acosta
Andres Acosta-Lujan
Enriqueta Adame
Derrick Adams
Gary Adams
Kevin Adams *
Rodney Adams
Ryan Adams
Maria Aguayo
Arturo Aguilar
Lucia Aguilar
Miguel Aguilera
Nader Al-Hashmi
Daniel Alagdon
Frankie Alagdon
Javier Alba
Christopher Alden
James Alexander
Shannon Alford
Donald Allen
Kevin Allen
Earl Alston
Celia Alvarado
Luis Alvarado De La
Cruz
Michael Amburgey
Sarah Andersen
Anthony Anderson
Jose Andrada
Margarito Angeles
Wesley Anselme
Cedric Anthony
Latisha Anthony
Alfredo Antonio
Clyde Archer
Jose Argumedo Ruiz
Tom Armbruster
Thomas Armer, Jr.
Broderick Armstrong
Maria Arredondo *
Gerardo Arroyo
Norman Asbjornson
Scott Asbjornson
David Ashlock
Gary Ashmore
Dwight Austin
Joseph Avila
Ramiro Avila Castenada
Orlando Ayala
Nora Backus
Dwight Baker
John Baldwin
Miguel Barajas
Ruth Barba
Ray Barber
Gregory Barker, Jr.
Justin Barlett
David Barnett
Ana Barragan De
Alteneh
Teresa Barron
Phillip Basham
Michael Bass
Stuart Baugh
Joshua Bawi Ling
Aaron Beavers
Daniel Beck
Lionel Beckman
Bonnie Benson
James Berden
Ida Bermudez
Sergio Beserra
John Bia
Daniel Bigby
Vickie Black
Brian Blackmon
Debbie Blackmon
Maria Blanco
Freddie Bledsoe, Jr.
David Blevins
Justin Blevins
Nicholas Bobbitt
Gene Boese
Mang Boi
Michael Boney
Dale Booher
Rosendo Botello
Lewis Bovee, Jr.
John Boyd
Justin Boyd *
Robert Boyd
Christopher Brantley
Arlando Brewer
Shahani Britt
Kwynce Brookins
Tre Brookins
Arlunda Brooks
David Brown
John Brown
Michael Brown
Johnny Brown, Jr.
James Bruce
Christopher Bryant
William Bryant
Jason Bunnell
Scott Burgess
Trevor Burke
Kelli Burkes
Monica Burns
Lavar Burton
Wayne Bush
Verenice Bustos
Rosa Butler
Konnor Buxton
David Bya
Janibal Cabudoy
Alejandro Cadena
Jesus Cadenas
Cleveland Cage, Jr.
Margarito Calderon
Matthew Cale
Jorge Calixto
Elizabeth Calvillo
Lazaro Cama
Maria Camacho
David Campbell
Arthur Candler
Don Canterbury
Refugio Carachure
Gilder Cardenas Ruiz
Billy Carder
Justin Cardoza
Lisa Carriero
Vincent Carson
Larry Carter, Jr.
Christopher Castle
Hector Cazares
Nicolas Ceballos Trujillo
Cornelio Ceja Grimaldo
Francisco Cervantes
Guadalupe Chairez-
Galan
Jonathan Chapman
Patrick Chapman
Francisco Chavero
Edgar Chavez
Gregory Chavez
Ramiro Chavez
Jose Chavez Perez
Dale Cherry
Daniel Cherry
Adan Chicas
Clifton Childers
Eddie Choates
Christopher Cichocki
Man Ciin
Hau Cin
Kham Cin
Sian Cin
Thang K Cin
Thang S Cin
Tg Cin Za Khai
Cing Cing
Dim Cing
Lun Cing
Man Cing
Nem Cing
Sian Cing
Justin Claiborne
George Clark
John Clark
Samuel Clark, Jr.
Stephanie Cleveland
William Cleveland
Brenda Coats
David Cochran
Kenneth Cochran
Troy Cockrum
Ronald Collins
Tim Collinsworth
Aaron Columbus
Bobby Conditt
Dale Conkwright *
Jude Connolly
Tracy Conwell
Mark Cook
Timothy Cook
Michael Coolidge
Scott Coon
Donna Coonfield
Allen Cooper
James Cooper
Alvis Copeland
Pablo Cordova Cordova
Roberto Corona
53
Thanks
TO OUR EMPLOYEES
Genoveva Corona De Rivera
Miguel Cortez
Rosa Cortez
Billy Cox
Jerry Cox
Maurice Cox
Adrian Crabtree
Richard Craite
Steven Crase
Jacob Crayne
Juan Crespo-Maisonet
Mikel Crews
Darrell Crow
Carolyn Crutchfield
Jacinto Cruz Rodriguez
Victory Cullom, II
Robert Cummings
Kevin Cyrus
Gin Dal
Hau K Dal
Hau S Dal
Hau S T Dal
John Daniels
Justin Daniels
Charles Dauster
Jenifur Davidson
Byron Davis
Cameron Davis
Carolyn Davis
Cathy Davis
Chester Davis
Darryl Davis
Jerry Davis
Marleitta Davis
Rhonda Davis
Richard Davis
Samuel Davis
Susan Davis
Cookie Davison
Daniel De Casas
Yoana De La Torre
Jose De La Torre Garcia
Alvaro De Leon Mendoza
Freddie Deboe
Pong Dee
Bobby Degraffenreid
Ismael Delapaz
Eva Delatorre
Juana Delobo
Andres Delos Santos
Raquel Deluna
Shiira Demery
Bruce Derr
Jermein Devers
Audencia Devilla
Roy Deville
Charles Deweese
Anthony Diaz *
Ciin Dim
Hau Dim
Thang Dim
Rickey Dodson
Edreys Dominguez
Sol Dominguez
Thang Dong
Thang Dop Mui
Thomas Dreadfulwater
Seneca Drennan
Esmeralda Duarte
Cathryn Dubbs
Andrew Duhon
Linda Dunec
Charles Dunn
Ralph Durbin
Randy Dwiggins
Wendell Easiley
Jeffrey Easter
Austin Embry
Matthew Emery-Giuffre
Tinisha English
Eva Enriquez
Benjamin Epp
Steven Ervin
Teresa Escobedo
Norberto Esparza-Torres
Leonardo Espinoza Flores
Jesus Estrada-Gonzalez
Stephen Etter
Gilda Etumudor
Joshua Everett
Reginald Everidge, Jr.
Chad Evers
Shawn Fairley
Blake Faluotico
Keith Farmer
Richard Faust
Amy Fehnel
Robert Fergus
Catalina Fernandez
Samuel Fields
Thomas Fierros
Jesse Figueroa
Christian Figueroa Mauras
Sterlyn Finch
Anthony Fisher
Bruce Fisher
Rickey Fisher
Anthony Fizer
Copotenia Fletcher, Jr.
Carolina Flores
Diana Flores
Efigenia Flores
Juana Flores
Laura Flores
Gabriel Flores-Bernal
Ruby Floyd
Mark Fly
Sharon Fontenot
Eric Ford
Sheila Forrest
Crystal Forrester
Alex Foster
Bradley Foster
Christopher Foster *
Frederick Foster
Ramon Fourshey
Loretta Fowlkes
Kenneth Foyil
Michael Francis
Phillip Frank
Damion Franklin
Warren Franklin
Revonda Franks
Jose Fregoso
Olga French
Angel Frias
Brandon Frick
Barry Friend
Eric Friend
Wade Fuller
Jerry Gable
Rony Gadiwalla
Curtiss Gaines
Delano Galbreath
John Gall
Belinda Galvan
Angel Garcia
Jose Garcia
Roger Garcia
Wuilson Garcia Alvarado
Isidro Garcia Arriaga *
Norma Garibay
Michael Geeter
James George
Petr Getmanenko
Doyle Gibson Jr
Aaron Gilbert
Robert Gilbert
Paul Girod, Jr.
2013 ANNUAL REPORT
Penny Glossinger
Jose Gomez
Maria Gomez
Raquel Gomez
Luis Gomez Acuna
Maria Gomez Medina
Daniel Gomez-Sigala
Adrian Gonzalez
Consuelo Gonzalez
Imelda Gonzalez
Marisela Gonzalez
Oscar Gonzalez
Raul Gonzalez
Barry Goodson
Buenaventura Granados-
Rubios
Brian Gray
Michael Gray
John Griffin
Ronald Grimes
Daniel Groff
Jackie Grubb
Rodolfo Guevara
Carolina Guillen
Ronald Guinn
Georgina Guzman
Marcia Haley
Joshua Halfpap
Dennis Hall
Jack Hall
Kelly Hall
Koren Hall
Stephen Hall
Zachary Halsey
Scott Hamilton
Otis Hamilton
Jeffrey Hammer
Sam Hammoud
Mung Hang
Tyler Hardy
Natasha Harris
Stacey Harris
Marcus Harry
Robi Hartmann
Heather Haskins
Troy Hatfield
Pau Hau
Neng Hau Lian
Willie Hawkins
Billy Hawley, Jr.
Tim Hefflin
Antonio Henderson
Daniel Henderson
Kyle Hendrick
Kevin Henson
Edith Heredia De Birrueta
Armando Hernandez
Corcina Hernandez
Lily Hernandez
Linda Hernandez
Luis Hernandez
Maria Hernandez
Mariano Hernandez
Mark Heston
Ronald Hicks
Takeo Higa
Brenda Higgins
Larry Highfield
Cortez Hill
Juan Hinojosa
Tyson Hinther
Bon Hoang
Samuel Hobson
Jarrod Hoggatt
Robert Hollins
Lamario Hollis
Donna Holloway
Daniel Honel
Lawrence Honel
Derek Hooks, Jr.
Stephen Hoover
Adam Hopper
Kevin Horn
Terri Horn
Stanley Horton
David Howard
Larry Howard
James Howell, II
Saw Htoo
Do Ngaih Huai
Nuam Huai
Lydia Hudson
Philip Hudson
Brenda Huether
Jimmy Hughes
Fiona Humphrey
Larry Humphrey
Khan Hung
Jade Hurst
Cody Hutchcraft
Ronald Hutchcraft
Gary Hutchins
Cindi Hutton
Tan Huynh
Okechukwu Ibeh
Alexander Ignatenkov
54
Thang T Kim
Thang Z Kim
Dennis Kimbrough
Joseph King
Lori King
Randy King
Russell King
Roger Kinkade, Jr.
Alan Kizer
David Knebel
Scott Koscheski
James Koss
Jeffery Krauss
Larry Kreps
Mikhail Krupenya
Thu Kun Hen
Phillip Lafond
Giang Lai
Do Lal
Lun Lal
George Lam
Gin Lam
Mang Lam
Cole Lambert
Myoshia Landrum
Deborah Lane
Gin Lang
Kap Lang
Pum Lang
Kap Langh
Thawng Langh
Martin Larsen
Michael Lavallee
Jeffrey Lawson
Walter Lazcano
Anh Le
Lai Le
Rickey Leatch
Michel Lebel
Jose Lebron
David Lee *
Gralind Lee
Jacqueline Lee
Rhonda Lee
Kevin Lee, Jr.
Matthew Leeper
Pao Len
Hugo Lerma
Boy Let *
Spencer Lewis
Cynthia Leyva
Bawi Lian
Cin Lian
Cing K Lian
Cing T Lian
Do Lian
Gin Lian
Hau Lian
Kam Lian
Lal Lian
Nang Lian
Sang Lian
Sing Lian
Tha Lian
Thang H Lian
Thang K Lian
Tuan Lian
Ping Lin
Israel Linares
Jerry Lincoln
Thomas Lincoln
William Lindsay
Darryl Liner
John Livingston
Jonathan Lockmiller
Gabriel Lopez
Margarito Lopez
Rafael Lopez
Rebecca Lopez
Thomas Lopez
Jason Lovett
Paul Lowery
Oscar Lozano
Jarrod Ludlow
Quannah Ludlow
Cing N Lun
Cing Ngai Lun
Dim Lun
Lu Lun
Mariana Luna
Kelly Lybarger
Gregory Mack
Jorge Madrigal
Tam Mai
Carlos Malone
Jeffrey Maly
Ciin Man
Cing Man
Maria Mancilla
Cin Mang
Dai Mang
En Mang
Gin Mang
Hau Mang
Hem Mang
Kham Mang
Kham T Mang
Khup Mang
Lhun Mang
Lian Mang
Lian Mang
Ngin Mang
Sian Mang
Thang K Mang
Thang Khan Mang
Vung Mang
Thang Manga
Adam Mansfield
Melody Maradiaga
William Markwardt
Ma Marquez De-Gilbreath
Mariana Marquez Marquez
Ana Marroquin
Errol Marshall
Parker Martel
Cassandra Martin
Jerrad Martin
Florentino Martin-Romo
Daniel Martinez
Juan Martinez
Julio Martinez
Karen Martinez
Moses Martinez
Obdulia Martinez
Hector Martinez Molina
Ryan Marts
Timothy Marvin
Thomas Masengale, Jr.
Beverley Mason
James Mason
Sandra Mata
Charles Mattocks, IV
Ron Mauch
Leonard Maxwell
Duane Mayfield
Marcus Mayfield
Latoya Mays
Gina Means
J Medina Olvera
James Melton
Silvestre Mendez Gonzales
Kevin Merideth
Dale Michelson
Carmen Milam
Glenn Milam
Jordan Miles
Michael Miles
Ranulfa Milian
Chris Miller
2013 ANNUAL REPORT
Samuel Ingram
Belinda Jackson
Jeff Jackson
Levita Jackson
Scaasi Jackson
Terrell Jackson
Jose Jamaica
Lucia Jaramillo
Joseph Jelinek, Jr.
Jason Jewell
Genelle Jimboy
Samuel Jimison
Frederick Jimmerson
Ashley Johnson
Ed Johnson
Holly Johnson
Terry Johnson
Cheryl Jones
Danny Jones
David Jones
Henry Jones
Jeremy Jones
Raymon Jones
Remia Jones
Rose Jones
Timothy Jones
James Jones, Jr.
Jason Jordan
Sean Jordan
Jaime Juarez
Leandro Jumelles Nunez
Ha Ka Ha
Garrett Kaiser
Patrick Kaiser
Do Kam
Hau Kam
Khual Kam
Mang Kam
Ngin Kam
Pau Kam *
Thawng Kam
Dal K Kap
Dal S Kap
Gin Kap
Kam Kap
Lian Kap
Thang Kap
Thong Kap
Brian Kastl
Adam Kauffman
Eryn Kavanaugh
Tuang Kawi
Kenneth Kawuma
Brandon Kelley
Aaron Kelly
Brian Kelsey
Zackary Kemper
Gregg Kennedy
David Keys
Cin Khai
En Khai
John Khai
Kham Khai
Mang Khai
Nang Khai
Pau Khai
Peter Khai
Thang H Khai
Thang K Khai
Thang S Khai
Thang Suan Khai *
Thang Sza Khai
Thawng Khai
Vuum Khai
Dongh Kham
Go Kham
Mung Kham
Ngun Kham
Cing Khawn
Cin Khin
Niang Khoi
Dai Khual
Khai Khual
Thang L Khual
Thang S Khual
Za Khual
Deih Khup
Kap Khup
Lang Khup
Lian Khup
Nang Khup
Ngin Khup
Pau Khup
Thang K Khup
Thang S Khup
Tuan Khup
Alan Kilgore
Andrew Kilgore
Rodney Kilgore
Cin Kim
Cing N Kim
Cing Nuam Kim
Cing Kim
Hau Kim
Kap Kim
Thang D Kim
55
Mykea Miller
Mark Mills
Brian Mingle
Dallas Mitchell
Orlando Mitchell
Travis Mitchell
Wayne Mitchell
Jay Modisette
Ronald Modlin
Biasney Mojica Castaneda
Jose Molina
Enoc Montes
Jon Moody
Herbert Moore
James Moore
Kashonda Moore
Marc Moore
Maria Moore
Tony Moore
Trey Moore
Alfonso Moran
Tony Morehead
Edward Moreland
Berta Moreno
Erasmo Moreno Medina
Jason Moretz
Jason Morgan
Matthew Morgan
Phillip Moss, Jr.
Clayton Mote
Stephanie Mounce
Seth Mowery
Do Muang *
Sevgi Muhammad
Eric Mulliniks
Thang Mun
Dal Mung
En Mung
Gin Mung
Hau Mung
Kam Mung
Khai Mung
Khual Mung
Khup Mung
Khup G Mung
Lang Mung
Lian Mung
Pau Mung
Suan G Mung
Suan S Mung
Thang K Mung
Thang L Mung
Thang S Mung
Vum Mung
Vung Mung
Zam Mung
Gabriel Muniz Gonzalez
Jesus Munoz
Rebeca Munoz
Eduardo Murillo-Munoz
David Myers
Laharry Myers
Courtney Mcafee
Tina Mcbeath
Robert Mcbowman
Robert Mccleary
Dirk Mcclellan
James Mccondichie
Michael Mcconnell
Roy Mcconnell
Corey Mccowan
Debra Mccowan
Wesley Mccowan, Jr.
Paula Mccrary *
Michael Mccuin
Kathy Mcculloch
Vickie Mccullum
Loyd Mcdaniel
Randall Mcdaniel
James Mcelroy
Deborah Mcfarlin
Michael Mcillwain
Daniel Mckee
Domingo Mcknight
Sing Nang
Thawng Nang
Thomas Nang
Jesus Nava *
Jose Nava
Maria Nava
Abel Navejas
Clayton Neal
Samuel Neale
Natalie Neilson
Ciin Neu
Tha Nge
Haunung Ngin Pi
Than Ngio
En Ngo
Duong Nguyen
Hoang-Chi Nguyen
Phuoc Nguyen
Thanh Nguyen
Cing Niang
Dim L Niang
Dim N Niang
Go Niang
Mang Niang
Karen Niles-Blayer
Robert No
Thang No
Shiblee Noman
Nuam Noo
Christopher Norfleet
Willie Norfleet
Robert Norfleet, Jr.
Eric Norris
Tumai Npawt
Ning Nuam
Let Nung
John Nutt
Michael O'Brien
James O'Neill, Jr.
Deangelo Oakley
Alexander Ofosu
Rickey Ogans
John Ogle
Maria Olivas De Torres
Kejuan Oliver
Anthony Oliveras
Eric Olson
Sunday Omasere
John Ondinyo
Benjamin Orme
Leticia Orona
Margarita Orona
Maria Orona
Margarita Orozco Dehuizar
Carlos Orozco-Torres
David Osborne
Ofelia Osuna
Jennifer Overmeyer
Trevin Owens
Martin Ozura-Carrillo
Earnest Pace, Jr.
Gerard Pacheco
Guillermo Pacheco
Luis Pacheco
Mark Page
Edmundo Paiz
Julianne Palmer
Candido Palomo
J Paniagua
Eric Pate
Jason Pate
Kimberly Pate
Corry Patterson
Chin Pau
Ciang Pau
56
Cin Pau
Dai Pau
Gin S Pau
Gin Sian Pau
Gin Suan Pau
Go Pau
Kam L Pau
Kam S Pau
Kam Sian Pau
Langh Pau
Lian S Pau
Lian Suan Pau
Liang Pau
Nang Pau
Neng H Pau
Neng K Pau
Thang Pau
Zam Pau
Mani Pazhanathadalam
Travis Pearson
Vladimir Peniaz
Adam Pense
Cesar Perez
Sergio Perez
Hector Perez Arias
Kimberly Persons
John Peters *
Ladrue Peters *
Anita Peterson
Emmitt Pettigrew, Jr.
Daniel Peurifoy
Kinh Pham
Anh Phan
Randy Phelps
Alexander Phillips
Brandon Phillips
Michael Phillips
Alexander Phomprida
Thomas Pi
Tuang Pi
Goh Piang
Khup Piang
Pau Piang
Thang K Piang
Thang L Piang
Thang Lamp Piang *
Van Piang
Zam Piang
Christopher Pickens
Shedrica Pickett *
Pedro Pina-Valles
Jose Pineda
Dixan Pita Mendez
Clifford Pitchford
Hunter Pittman
Michael Plummer
Susanne Poindexter
Basant Pokhrel
Renu Pokhrel
Htinram Pongkum
Mark Pool
Javorus Poole
Rudy Powell
Greg Powers
Jeffery Powers
Jose Prado
Kenneth Prentice, Jr.
Eric Prickett
Denzel Prudhomme
Lian Pu
Alma Puga
Daniel Puga, Jr.
Thang Puno
Darrell Purser
Javier Quezada
Mahfuzar Rahman
Adrian Ramirez
Antonia Ramirez
Raymon 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.
Margaret Reeves
Russell Reeves
Alberto Rendon Parra
Rodolfo Renteria
Svyatoslav Reshetov
Agustin Reyes, Jr. *
Thomas Reynolds
Daniel Rhoades
James Rice
Robert Riddell
Angela Rideout
Brett Riegel *
Brian Riggs
Delmecio Riser
Stephen Riser
Hillary Rite
Ramon Rivera
Jesus Rivera, Jr.
Yusef Roberts
Markus Robertson
William Robinson, Jr.
Diana Rodriguez
Francisco Rodriguez
Gilberto Rodriguez
Hector Rodriguez
Maria Rodriguez
Rebecca Rodriguez
Rivelino Rodriguez
Jesus Rodriguez
Santibanez
J Rodriguez-Flores
Don Rogers
Samantha Rogers
Tony Rogers
Lidia Rojas
Nelson Rojas
Oscar Rose
Catherine Ross
Richard Rowe, Jr.
Thomas Royal
Ricardo Ruiz
Ava Russell
John Russell *
Adan Salazar
Nora Salazar
Walter Salazar
David Saldivar
Maria Saldivar
Miguel Saldivar
Victor Saldivar
Jose Saldivar Orepeza
Alejandro Salinas
Jessica Samaroo
Beatriz Sanchez
Hector Sanchez
Tara Sanchez
Esperanza Sanchez
Ruiz
Luis Sanchez-Lopez
Christina Sanders
Tanisha Sanders
Michael Sandor, Jr.
Cin Sang
Lian Sang
Thang Sang
Thiam Sang
Agustin Santana
Wenceslao Santiago
Basilisa Santiago Avila
Harold Santiago Torres
Carlos Santiago Torrez
Ignacio Santillan
Pedro Santillan
Rebecca Sar
Erick Sawyer
Frank Scanlon
William Scharosch
Vivian Scroggins
Hou Sei
Ku Sei
Let Sei
Thang Sei
Maria Serrano De
Torres
Carrol Shackelford
Douglas Sheehan
Kathy Sheffield
Brandon Shelton
Vasiliy Shemereko
Kathleen Shepard
Jackie Shephard
Lynnda Shepherd
Michelle Shrum
Disciple Sian
Pau Sian
Nelson Sierra
Armando Silva Canela
Cory Simmons
Dwayne Simpson
James Simpson, II
Daai Sing
Dal Sing
Do Sing
Kap Sing
Mang Sing
Nang Sing
Thang Sing
Thawn Sing
Christopher Sissom
Amy Siviero
Michael Skinner
Ian Slattery
Danny Slayton *
Llewellyn Slayton
Debi Sloan
Melissa Sloan
Larry Slone
Brett Smith
57
2013 ANNUAL REPORT
David Smith
Jordan Smith
Owen Smith
Renaldo Smith
Ricardo Smith
Ryan Smith
Sweetie Smith
Anthony Smith, Jr
Wilbert Smith, Jr.
Kap So Te
Carlos Soberano Gomez
Showe Soe
Jose Solares *
Malcolm Soles
Maria Solis
Nemisia Solis
Clent Southerland, II
Kevin Souvannasing
Denney Sowder
John Spain, III
Ronnie Sparks *
Jameson Spires
Michael Sportel
Lawana Stane
Vincent Steadman
Larry Stewart
Brent Stockton
Kevin Stoddard
Scott Stoltzfus
Edwin Stone
Dramone Stover Sr
Michael Straub
Billy Strength
Hau Suan
Ngin Suan
Thang Suan
Zen Suan
Nang Sum
Victor Sum
Pau Sut
Jack Sweet
Eric Sypert
Kam Ta
James Taber
Ryan Tankersley
William Tankersley
Joe Tart
Larry Tate
Mark Tate
Tenna Tatum
Mung Tawng
Charles Taylor
Deborah Taylor
Eric Taylor
Shakela Taylor
Stevon Taylor
Andrea Teakell
Kevin Teakell
Robert Teis
Jose Tellez
Cin Thang
Cin L Thang
Cin L Thang
Cin M Thang
Dai Thang
Dal Thang
Gin Thang
Go Thang
Go Z Thang
Hau Thang
Kam G Thang
Kam K Thang
Kam Kap Thang
Kham S Thang
Kham Suan Thang
Khan Thang
Lian Thang
Lin Thang
Mang Thang
Ngin Thang
Ngo Thang
Pau Kap Thang
Pau Kim Thang
Pau Sian Thang
Pau Suan Thang
Pau Sum Thang
Suan Thang
Thawng Thang
Tual Thang
Tuan Thang
Lian Thang Lam
Kap Thang Lian
Kham Thawn
Suan Thawn
Thang Thawn
Lang Thawng
Zam Thawng
Gerald Thomas
John Thomas
Richard Thomas
Cheryl Thomason
Archie Thompson
Rebecca Thompson
Michael Thornton
Tuan Thung
Jessica Thurber
Ted Tiger
Go Tin
Gabriela Tirado
William Tobar
Bradon Toothman
Breny Tornes
Reinaldo Torres
Travis Traeger
Hiep Tran
Tuong Tran
Mark Tribble
Ha Trinh
Juanito Tronzon
Cin Tuang
Kam Tuang
Kham Tuang
Pau Tuang
Sing Tuang
Suum Tuang
Thang L Tuang
Thang Za Tuang
Thang Za Tuang
Tun Tuang
Vung Tuang
Zam Tun
Gin Tung
Kaam Tung
Thawng Tung
Paul Turbe
David Turley
Charles Turner
Phyllis Tyiska
James Tyler
Jacob Tzang
Jesus Tzul
Ni Uk
Dawn Underwood
Pernell Underwood
Colton Upchurch
Tony Urich
Maria Urquiza
Yadira Urquiza
Richard Valluzzi, Jr.
Zachary Vance
Allen Vang
Sua Vang
John Vanness
Shawn Vawter
Juan Vazquez
Mercedes Vela Casanova
Antonio Velasco
James Velde
Juan Vences
Angel Venegas
Salome Vera
James Verhamme
George Verrett
Timothy Vetting
Teresa Victory
Efrain S Villa
Efrain Sanchez Villa
Louis Vincent
Selina Viramontes
Cuong Vo
Tong Vo
Thu Vu Nguyen
Houa Vue
Lian Vum
Cing Vung
Mary Vung
Ning Vung
Mark Wakefield
Stephen Wakefield
Whitney Wakefield
Diana Walker
Joshua Walker
Patrick Walker *
Roderick Walker
David Walkup
Barry Wall
Kim Wallace
Robert Wallace
Todd Wallingford
Leslie Wallis, Jr.
Darius Walters
Gayle Ward
Perry Warner
Nugene Warren
Ryan Warren
Steven Watkins
Kyle Webb
Anthony Welch
Jerremy Welch
Arthur Wells, IV
Sharon West
Deborah Whitaker
Mike Whitaker
Sheila Whitaker
Johnny Whitaker, Jr
James White
Timothy White
David Whitlock
Steven Whorton
Gordon Wichman
Jason Widdoes
Jackie Wiles
Jerry Wiles
Michael Wiles
Matthew Wilkins
Sherri Wilkins
Stanley Wilkins
Duane Wilkinson
James Wilkinson
Chante Williams
Cheray Williams
Demarco Williams
Donna Williams
Kristy Williams
Latrenia Williams
Nicole Williams
Robert Williams
Rodney Williams
Aaron Williamson *
James Williamson
Jeremy Williamson *
Brandi Wilson
Daniel Wilson
Isaac Wilson
James Wilson
Kenneth Winchester
Thomas Wingo
Wanda Winkfield
Micah Wisdom
Bret Wissman
Jack Witt, Jr.
Stanley Womack, Jr.
Curtis Wood
Ronald Wood
Brandon Workman
Kasey Worthington
Jim Wyrick
Linda Wyrick
Ector Yancey, Jr.
Patrial Yarbrough
Eddie Young
Keith Young
Marc Young
Patricia Young
Nikolay Zagorodniy
Lang Zah Lang
Nu Zam
Aurora Zavaleta
Luis Zepeda
Juan Zermeno
Virginia Zermeno
* Pictured
The ongoing success of our company can be
directly attributed to our employees.
58
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