COMPANY PROFILE
ROOFTOP UNITS
OUTDOOR AIR
HANDLING UNITS
CONDENSING UNITS
CB SERIES
RL SERIE
RL SERIES
RN SERIE
RN SERIES
RQ SERIES
PACKAGED OUTDOOR MECHANICAL ROOMS
SELF-CONTAINED
UNITS
RN SERIESS
SB SERIES
RL SERIES
RL SERIES
CF SERIES
BOILER MECHANICAL
ROOM
LF SERIES
LN SERIES
SA SERIESS
FLUID COOLER
LZ SERIES
C
CN SERIES
R
RQ SERIES
COILS
CL SERIES
BOOSTER,
HYDRONIC,
& DX
INDOOR AIR HANDLING UNITS
M2 SE
M2 SERIES
WATER-SOURCE HEAT PUMPS
F1 SERIES
V3 SERIES
H SERIES
H3 SERIES
R
RQ SERIES
RL SERIES
RL SERIES
RN
N SERIES
SA SERIES
M2 SERIES
M3 SERIES
VERTICAL &
HORIZONTAL
WSHP
M2 SERIES
M2 SERIES
SA
SERIES
SB SE
SB 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 outdoor mechanical rooms, air handling units, condensing units, makeup air
units, energy recovery units, geothermal heat pumps 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. For more information, please visit www.AAON.com.
2015
358,632
108,681
71,302
161
11,741
71,339
45,728
0.85
0.84
80,800
124,213
101,061
124,348
7,908
232,854
43,413
-
178,918
3.28
52,910
(23,194)
(43,760)
(14,044)
25.9%
19.9%
19.9%
12.8%
0.3
2.1
2.9
27
356,322
108,263
68,006
276
11,553
68,246
44,158
0.81
0.80
82,227
124,940
91,922
113,605
21,952
226,974
42,713
-
174,059
3.14
52,279
(6,029)
(36,383)
9,867
26.1%
20.2%
19.2%
12.4%
0.3
2.2
2.9
28
321,140
89,792
55,825
221
12,312
56,294
37,547
0.68
0.68
72,515
108,844
87,283
105,142
12,085
210,665
36,329
-
164,106
2.95
53,592
(31,326)
(13,340)
8,926
24.8%
18.8%
17.5%
11.7%
0.3
2.5
3.0
31
303,114
70,499
44,234
42
13,407
44,317
27,449
0.50
0.49
47,428
87,053
90,695
96,929
3,159
189,000
39,625
-
138,136
2.49
51,167
(30,335)
(17,686)
3,146
21.1%
15.1%
14.6%
9.1%
0.4
1.6
2.2
19
266,220
46,281
22,169
(179)
11,397
21,513
13,986
0.25
0.25
41,177
79,864
93,502
85,935
13
174,458
38,687
-
122,504
2.19
26,484
(24,538)
(4,326)
(2,380)
11.7%
8.4%
8.1%
5.3%
0.4
1.1
2.1
35
1 = Reflects 3-for-2 stock splits in July 2014, July 2013, and June 2011
3 = Reflects retrospective adoption of ASU 2015-17
2 = (Cash & cash equivalents + investments + receivables)/current liabilities
PRESIDENT’S LETTER
OOOLDDDEERRR,
DEAR STOCKHOLDER,
CCCKKKHHH
We ended
dd
llast
last year with a strong
year with a stronngg
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(cid:24)(cid:11) (cid:21)(cid:21)(cid:14)(cid:14)(cid:6)(cid:6)(cid:18)
(cid:18)(cid:16)(cid:16)(cid:24)(cid:24)(cid:11) (cid:10)(cid:10)(cid:6)(cid:6)(cid:9)(cid:9)(cid:13)(cid:13)(cid:12)(cid:12)(cid:9)(cid:9)(cid:18)(cid:18)(cid:3)(cid:3)(cid:11) (cid:13)(cid:13)(cid:6)(cid:6)(cid:11)(cid:11) (cid:14)(cid:14)(cid:8)(cid:8)(cid:31)(cid:31)(cid:3)(cid:3)(cid:11) (cid:8)(cid:8)
(cid:23)(cid:3)(cid:9)(cid:3)(cid:15)(cid:10)(cid:12)(cid:8)(cid:16)(cid:11) (cid:12)(cid:7)(cid:2)(cid:8)(cid:10)(cid:13)(cid:11) (cid:6)(cid:9)(cid:11) (cid:6)(cid:18)(cid:4)(cid:11) (cid:21)(cid:8)(cid:16)(cid:3)(cid:21)(cid:11) (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:4)(cid:7)(cid:8)(cid:9)(cid:10)(cid:3)(cid:11)
(cid:10)(cid:13)(cid:11) (cid:6)(cid:9)(cid:11)
(cid:6)(cid:6)(cid:18)(cid:4)(cid:4)(cid:11) (cid:21)(cid:21)(cid:8)(cid:8)(cid:16)(cid:16)(cid:3)(cid:3)(cid:21)(cid:21)(cid:11) (cid:2)(cid:2)(cid:3)(cid:4)(cid:5)(cid:5)(cid:6)(cid:6)(cid:4)(cid:4)(cid:7)(cid:7)(cid:8)(cid:8)(cid:9)(cid:9)(cid:10)(cid:10)(cid:3)(cid:3)
(cid:13)(cid:14)(cid:12)(cid:21)(cid:11)(cid:29)(cid:3)(cid:8)(cid:4)(cid:11)(cid:8)(cid:9)(cid:24)(cid:11)(cid:23)(cid:3)(cid:29)(cid:6)(cid:9)(cid:24)(cid:19)
(cid:29)(cid:6)(cid:6)(cid:9)(cid:9)(cid:24)(cid:24)(cid:19)(cid:19)
AAON Research and Development Lab Ground Breaking
February 24, 2016
SSAALLEES AANNDD EARNINGS
SALES AND EARNINGS
SSTTRROONNGG FFIINNAANNCCIIAALL CONDITION
STRONG FINANCIAL CONDITION
Sales for r 20020151515 r reaeached a record $358.6 million comompaparereedd d
Sales for 2015 reached a record $358.6 million compared
OuOuOurr r finfinanancicial conndid tion at December 33111, 22 2 2010101010 5,5,555 w ww wwasasasass ss s strtronong.g.g
Our financial condition at December 31, 2015, was strong.
with $356.3 million in 2014, a gain of 0.6%. During the past
2014, a gain of 0.6%. Duringng the past
wiwiwiw ththth $ $35356.3 3 mimim llllioion n ini
Cash and investments totaled $37.3 million (including $30.4
Cashh aa andndndd invesesestmtmtmmmeneneneenttstts ttt tototototalalalalaledee $37.3 millionn ( (ininclclududininng g $3$30.0.4 4
year pricing remained relatively stagnant but we did witness
yeyearar p priricicingng rrememaiainen d d rerelatively stagnant but we ddidid wwitneeessss
million of cash and short-term investments and $6.9 million of
mimimillll ioi n of cash and shhorort-t term invnvesestmtmenentsts a aandndnd $ $$6.6.9 9 mimim llllioion n ofof
a modest increase in the overall number of units sold, with
aaa momomm dedest incncrereasase e inin t thehe o oveverarallll n numumbeber of units ssolold,d w wititth hh
long-term
investments). All
lololongngng t-t-tterererm m investmentntnttts)s)s). AlAlAll ll
investments will mature
invevestststttmemememeentntnts ss s wiwiwiww llllll m mmatatururu e e
a corresponding shift to our smaller tonnage, lower priced
a corresesspopopondndndining g g shshshiftift tto o ououur r smsmalalleler r tonnnnagge, lowwerer p pririceeceddd
within the next 15 months. Total current assets were
thehh next 15 months. Total currrrennt t asa sesetss wwereerere e e
wwiwithht ini
product lines.
prodducuct linees.s.s
$124.2 million with a current ratio of 2.9:1. Our capital
$1244.2 mili liiono with a cucurrrrenent t raatitio o of 2.99:11. . OOurur ccapapititalal
expenditures in the past year were $21.0 million and
exexpependndititures in the past year were $2121.0.0 m milillilionon a andnd
Gross profit remained steady, reaching $108.7 million (30.3%
GrGrGG ososo s prrp ofiofit t reremamainineded s steteadady, reaching $108.7 millionon ( (3030 3.3%%
we paid cash dividends of $11.9 million (in May of
f $1$11.1 9 mim lllioioion n (i(iin n MaMaayy yy ofof
wewe p paiaidd cacashsh d dividdidenenendssdsdss o o
of sales) in 2015, as compared with $108.3 million (30.4% of
of sales) in 2015, as comparedd wwitith h $1$10808.3.3 m milillilionon ( (3030.4.4% % ofof
2015,
20201515, ,
the Board of Directors
ththe e BoBoarard d ofof DDirireecectotorsrsrs
increased
incncncrereeasasasededed
i
the regular
thehehe rr regegegulululararar
t
t
sales) in 2014. Raw material prices decreased and a modest
sales) in 2014. Raw material prices ddecreaseded a andnd a a m modododesest t
semi-annual cash dividend to $0.11 per share or $0.22
seses mimi-a-annnnuauau l l cacaashshsh d divivididenend d tototot $ $ $0.0.0.111111 p ppperere s ssshahahah rereere o o or rr $0$00.2.22 2
improvement in manufacturing productivity helped to offset
improvement in manufacturing productivity heelpedddd tt t tto o offoffseset t
annually, which represented a 22% increase from the previous
ananannununualalallylyly, , whwhwhicicch h h rerereppppressenennteted d d a a 222222% % % ininincrcrcreaeaeaasesese fffrororoom m mm thththhe e e prprprrevevevioioioousususus
the impact of the shift towards our smaller tonnage, lower
thhe impact of the shift towardss our smallllere ttonnagegge, , lolowewer r
$0.09 per share or $0.18 annually, adjusted for stock splits).
$0$0$$ .0.0.09 99 pepepeer rr shshshhararare e e ororr $$0.0 18818 aannnnnnnnnuauauau llllllly,y,y,y, a a adjjdjdjusususteteteed d d d fofofoor rr stststococock kk spspsps lilililitststss))).
priced product lines.
priced product lines.
Furthermore, we continued making open market repurchases
FuFuFurtrtrtthehehehermrmrmmororrrrrre,e,e, ww wwe e e cococoontntntiininnnueueueuuu d d d mamammamakikikiikikikingngnnnn o opepen n mamarkrketet rrepepurururu chchchchc asasasa es
SG&A expenses declined 7.7% from $40.6 million (11.4%
SG&A& expensees declini ed 7.7% from $$$$404404 .6.6 m milillilionon ( (1111.44%%
of our common stock in 2015. Under our stock repurchase
ofofoof o o ourururu c c comomommmomomomon n sttococco k kkk inninin 2 201015.5.5 UUnUnU dedededer r r ououououurrrr rr r r ststststtstststocococo k kk k k rerepuppuurcrccccchahahahahah sesese
of sales) to $37.4 million (10.4% of sales). The decrease in
ofof s salalese ) too $37.4 millionon (10.4% ofof ssalallleses).). TheTheTh d dddecececrereasase ee iniinin
plan, we purchased approximately 1.0 million shares of our
plplplp ananan, , , weweweewe p pppurururu chhcchchasseded a aaappppppp roroxiximamateteetelyly 1 111.0.0.0 m m milililli lilililililionononononononon s sssss shahahahahahaarererereeees s s s ofofofofofof o o o o oouruururur
SG&A expenses reflect both the absence of non-recurring
SG&A&A eexpxpennseses s rereflefl ctc bbototh thhhhe e e ababaaa sesess ncnnncee ofoff n nnononon-r-rr-reeececururririingngng
common stock on the open market at an average price of
cococoommmmmmmonoon sstotoockckkk o o o on n nn ththththhe e e eee opopopenenenen mmmmararaa kekeeet t t t atatat a a annn n avavava ererreragagage e e prprprpricicice ee ofofof
charitable donations made in 2014 and a decrease in
charariti abblele dononnnatta ions mmadade e inn 2222201014 4 annd d a aa dededeecrcrcrc eaeasese iiin n
$24.09 per share. In addition, we purchased AAON stock
$2$2$2$2$ 4.4.0909 p perer s shahaharereee.. I In n nn adaddidititiononn, , wewewww ppp purururrchchchchasasasedededed AAAAAAOAOAOAON N N NNN ststssttstococococo kkk k
warranty expenses. Income from operations, reflecting these
wawarrrranantyty e expxpenenseses.s. InIncococomememee fff frorororom m opopereratattttioionss, , rererefleflefleflefl ctcttctininii g g ththhesesesse e e
from our employees’ 401(k) plan amounting to approximately
frfrrromomom oo ourururr e empmpmmploooloyeyeyy eses’ ’ 4040401(1(k)k) p plalan nn amamamamammououououo ntntntntn inininining g g totototo a a appppppppppppprorororororoxixixixixixiimamamamamamamamatetetettetetet lylylylylyylyly
lower expenses, gained 4.8% to $71.3 million (19.9% of sales)
lolowewer r exexpepensnsesese , , gagainineded 4 44.8.8% % toto $ $7171.3.33 mmmmiliillionn ( (((191919199.9.9.9% % %% ofof s salaleseese ) ))
$11.6 million. We continued to operate free of debt. Total
$1$1$1111.1.1..6 66 6 6 mimimimillllllioion.n.n.n WeWeWW cc cconontitinunueded t to o o opopopopopoppo ererere atatatee e e e frrfrf eeeeeee o o oof ffffff dedededededdedebtbtbtbtbtbtbtbtt... ... TT TTT T Tototototooto alalalalalalaa
from $68.0 million (19.1% of sales). Net income increased
ffromom $6868.0.0 mmilillilionon ( (1919.1.1% % ofof s salaleses).). NeNeNN t inincocococomememem iiii incncn rerereasasasededed
stockholders’ equity was $178.9 million or $3.28 per diluted
ststtococockhkhkhhk ololldededeersrsrs’ ’ ’ eqeqeqequiuiuuityty w wasas $ $17178.8.9 9 mimim llllioion n ororororor $$ $$3.3.3.2828282 p pperererer dd ddilililututututedededede
to $45.7 million (12.8% of sales) versus $44.2 million (12.4%
toto $ $454 .77 m milillilionon ( (1212.88%% ofofo ssalaleses) ) veveersrsusuu $44.2.2 mmmililillillililiononon (( (121211 .4.44% %
share. Our return on average stockholders’ equity was 25.9%.
shhshhararare.e.e. OuOuOuO r reeetuutuurnrnnn oon n nn avavereragage e ststococockhkhololdedersrsrsrs’ ’’ eqeqqquiuiuiuitytytyty w w wwasasasas 2 255.5.5 9%9%9%9%.
of sales).
ofof ssala es).)
CCCCCCAAAAAPPPPPIIIIITTTTAAAALLLLL EEEEXXXXPPPPPEEENNNDDDIIITTTUUURRREEESSS
CAPITAL EXPENDITURES
Fully diluted earnings per share in 2015 were $0.84, compared
FuFulllly y didilul tet d eaarnniningsgs p perer s shahaaarerererre iii innn n 20202 15115 w werere e $0$00.8.84,4,4 cc comompapareered d d
with fully diluted earnings per share of $0.80 in 2014. Per
wiwithth f fulullyly ddillutu ed eeaarniningngs s peper shhsharare e ofofo $$0.0.808080 i in n 20201414. . P P PPeereer
DuDuDuD ririringngng t t thehe p ppassasast t yeyeararrr w we e spspenent t apapprproxoximimmmmmmatataa elelele y y y yy $2$2$$ 1.1.1..0 0 0 00 mimimilllllioiooonnn n n
During the past year we spent approximately $21.0 million
share calculations are based upon 54.5 million fully diluted
shsharare e cacalclcululatatioionsns a arere bbasa edd uupopon n 5454.5.5 m milillilionoon f fulullllylyyy d ddddililili utututededee
on the enlargement and improvement of our manufacturing
onon t t ttheheheh e e eeenlnln arargegemememementnt aa aandnd i impmprorovevemementnt o off ff f f f ooooouuoo r rr r mmammanunuuuffafafafactctcttc ururuu inininng g gg
shares outstanding in 2015 and 55.4 million fully diluted
shsharareses o oututststanandidingng i in n 2020155 a andnd 5 55.5.4 4 4 mimimim llllllioioioion n n n fufufufullllllly yy didididd lulululuttetet dd d
facilities as well as for the purchase of new equipment.
faacicicicilililitititiesesese aa aaas s s s weweewelllll a as s fofor r ththe e pupuurcrcccchahahhh sese ooof ff nenneeww ww eqequiuiuipmpmpmenenenent.t.t.t
shares outstanding in 2014.
shs arareses o oututststanandidingng i in n 20201414.
Over the past five years (2011-2015) we made total capital
OvOvvvererereer t t thehehehe p p pasast ttt fivfivfivfive e yeyeyy arars s (2(201011-1-20201515) ) wewewee m mmadadadde e ee totootatal l cacapipipipitatatt ll
expenditures of $96.2 million. For 2016, we have budgeted
fully committed to our research and development efforts.
a significantly enlarged capital expenditure program,
estimated to be approximately $32.7 million, which will be
In 2014, after three years in the field testing phase, we
devoted not only to our existing facilities but also for a new
completed the conversion from tube (copper) and fin
three-story 75,000 square foot engineering research and
(aluminum) condenser coils to all aluminum micro-channel
development laboratory to be located at our Tulsa facilities.
coils. These coils are less expensive to manufacture, more
Ground was broken for this facility in February of this
efficient per dollar of coil, are lighter and more durable and
year and we estimate completion by 2018 at a cost of $27.6
provide a more efficient transfer of heat.
million. During 2016, we anticipate spending approximately
$16.0 million of the total $32.7 million estimated 2016 capital
expenditure budget toward the lab.
THE WATER SOURCE HEAT PUMP
Furthermore, we will begin selling our
ur
recently announced new line of Water
er
Source Heat Pumps (WSHP) which
ich
promise to be the most technologically
ally
innovative, advanced line of products
ucts
in the industry. The first of three planned
lanned
manufacturing lines will be completed by mid-
d by mid-
year with production commencing in August. We
n August. We
The Water Source Heat Pump
The Water Source Heat Pump (WSHP) has been a reliable
product in the HVA
product in the HVAC market for more than 50
years. Its design and functionality have
years. Its de
not significantly changed over
not s
that time. We believe the time
tha
is right for a change. Over the
is r
past year we have committed
past
manpower and capital to devise
manpo
an innovative WSHP product line
an inno
estimate the cost of the initial production line in the area
ion line in the area
which we believe will be heralded as a
which we
of $12.0 million.
“game changer” in the market.
“game changer”
We have become firmly entrenched in the rooftop segment
Our new line of WSHP was introduced earlier this year at an
of the HVAC market and have built a reputation as a leading
AAON product show for sales representatives and customers
manufacturer of the highest quality, most energy efficient
held in Orlando, Florida. Initially, the product will be
products in the industry. We are committed to continuing
available in ½ to 7 ton capacities with larger capacities (up to
these policies so as to enable the Company to produce the
20 tons) brought to market as demand requires. We expect
most technologically innovative products in the industry.
to deliver initial WSHP orders in the third quarter of the
Our strong financial condition and free cash flow allow us
current year.
to pursue our goal and to significantly expand our horizons.
RESEARCH AND DEVELOPMENT
AAON’s technologically advanced product line was achieved
through our unique production methodology which allows for
the integration of mass production with mass customization.
In 2015, we incurred research and development expenditures
Our WSHP will be available in two configurations, horizontal
of $7.5 million. We have spent $27.4 million over the
and vertical, with three different tiers of efficiency: (i) the
past five years (2011-2015) on research and development.
standard level (13 EER); (ii) the premium level (15-17 EER);
We recognize that in order to maintain our status as a
and (iii) the ultra level (over 19 EER). Our WSHP product
technological leader in the HVAC industry we must remain
line has numerous other advanced features, including:
Pictured: AAON Water-Source Heat Pump
All aluminum construction which makes the cabinet
of $12.0 million. While we expect a modest contribution to
approximately 1/3 of the weight of competitive galvanized
sales in the first full year of shipments, start-up and training
dd steel units.
costs will impact WSHP-related earnings throughout most
Bottom access to the supply fan and other components
of the year. The WSHP is expected to become a profitable
along with tool-less access to all other components
product line for the Company toward the end of that period
through lift-and-remove panels.
and thereafter.
Induction brazing on all copper connections, enabling the
highly automated production line to electronically heat
The first new WSHP production line is designed to
joints rather than using torch welding (thereby eliminating
manufacture up to 180 units per day. Initially, the Company
the exposure of key refrigeration components to heat).
will produce and stock standardized horizontal units with
Metal shipping pallets rather than the traditional wooden
no customization options. Our Tulsa warehouse has the
pallets which are more susceptible to damage and difficult
capacity to store up to approximately 2,300 units, which will
to dispose of. The metal shipping pallets weigh less and
allow the Company to provide immediate product shipments
are lower in cost than wooden pallets and easier for the
to satisfy customer demand.
customer to dispose of (whether through recycling or
selling the pallets as scrap metal).
Large micro-channel air-side aluminum coils
for
RECOGNITION AND AWARDS
improved efficiency are a standard feature.
AAON was recognized for excellence in product design
in the Dealer Design Awards Program sponsored by the
The Company currently offers rooftop units,
nits,
Air Conditioning, Heating and Refrigeration News
Air Conditioni
air handlers, indoor packaged units and
condensing units, all with a WSHP option.
Since AAON has not previously manufactured
a smaller tonnage WSHP product, buyers
s
of smaller tonnage WSHP equipment were
re
forced to look elsewhere to fulfill their needs.
ds.
AAON’s new WSHP product line will now offer
ffer
a competitively priced smaller tonnage product
duct
magazine in their July 20, 2015 issue.
ma
The Company’s Low Leakage Damper
Th
was the Gold Award winner in the
w
Ventilation Products category. The
V
ACHR News is distributed nationally
A
to over 33,000 HVACR contractors,
wholesalers
and other
industry
professionals. In the September 17,
which opens a potentially sizeable market for the
the
2015 issue of Consulting-Specifying Engineer
2015 is
Company to capture.
publication, the Company’s Low Leakage Dampers
publication, th
were again a gold award winner. In addition, AAON’s M2
We estimate the total WSHP market to be in the vicinity
Series Modular Geothermal Heat Pump was a gold award
of $550-600 million annually, with the majority of sales
winner in the HVAC category. Consulting-Specifying
directed to commercial and
industrial multiple-room
Engineer is a monthly publication with a circulation of over
buildings such as motels, schools and office buildings. We
47,000 mechanical, electrical and plumbing engineers.
believe that approximately 50% of total sales are devoted to
the replacement market. As previously noted, we expect the
cost of installing the first production line to be in the vicinity
Pictured: AAON Low Leakage Dampers
THE NEW LABORATORY
Our manufacturer’s representative network is comprised of
88 independent representative organizations which operate
113 offices (some representatives have multiple offices) in all
50 states, Canada and one international office. During the
past year the network contributed over 90% of our total sales.
The new WSHP product line has been met with great
enthusiasm from our manufacturer’s representatives. The
In last year’s Annual Report, my letter to stockholders discussed
new products should significantly augment their sales efforts
in detail the Company’s plan to build a new state-of-the-art
by opening new markets, such as multi-room type buildings,
research and development testing laboratory. This project
to AAON products. The sales representative network has
was undertaken to enable AAON to meet and maintain AHRI
contributed significantly to our past growth and we expect
(Air Conditioning, Heating and Refrigeration Institute) and
their continuing efforts will favorably impact our future
DOE (Department of Energy) certifications. I am pleased to
growth.
report that ground was broken on the laboratory facility early
this year. The three story, 75,000 square foot facility will be
OUR EMPLOYEES
both an acoustical and a performance measuring laboratory.
We believe it will be the only laboratory in the world capable
At both our headquarters location in Tulsa, Oklahoma, and
of measuring the supply, return and ambient sound under
at our subsidiary, AAON Coil Products, in Longview, Texas,
actual load conditions. In addition, the laboratory will
AAON strives to be the employer of choice by building a
measure the efficiency by which energy is converted into
culture of mutual trust, promotion of the entrepreneurial
heating, cooling or air movement. A witness test area will
spirit and recognition of talent and hard work. AAON
also allow customers the opportunity to view product testing.
attempts to attract and retain a talented workforce using
The new laboratory is expected to be completed by the end of
a mixture of compensation components, including base
2018, at an estimated total cost of $27.6 million.
SALES REPRESENTATIVES’
PERFORMANCE
salary, incentive pay, whether in the form of cash or
non-cash awards, and employee benefits. We strive to provide a
non-discriminatory and competitive total compensation
package that rewards employees who drive for results, commit
to continual improvement, save for the future, take care of
Over the past two years we revised our regional sales
their health and are interested in the long-term well-being of
managerial structure. Previously there were four geographical
AAON and its stockholders.
territories, each serviced by a regional manager. Since 2014
we have hired three additional regional managers, creating
During the past year, AAON broadened the use of equity
seven sales regions, each overseen by a regional manager.
awards as a component of compensation for a larger number
We believe the new territorial structure will allow for
of our employees. AAON believes that by doing so, it will
closer interaction between the regional managers and the
better align the goals of our employees with the goals of
manufacturer’s representatives and their customers.
the stockholders. This will incentivize our employees to
help AAON grow and succeed in the market by creating a
Pictured: AAON Research and Development Lab
direct connection between Company success and their own
OUTLOOK
personal wealth. AAON employees have long understood
the concept of succeeding through the Company’s growth
We have significantly increased our capital spending levels
as a result of our discretionary quarterly profit-sharing
and research and development efforts in order to maintain
program, which distributes 10% of AAON’s pre-tax profits
our well-earned reputation as a leading technological and
equally to nearly all personnel.
innovative manufacturer in the HVAC industry. We believe
that the introduction of our new WSHP product line and
We have implemented a performance matrix that is designed
the construction of a state-of-the-art testing laboratory will
to award employees based upon their performance and
greatly enhance AAON’s future growth prospects while
impact to AAON. Employees are also evaluated based upon
continuing to solidify our industry reputation.
their adherence to the AAON core values of integrity, mutual
trust and respect, quality, empowerment and innovation.
We can sustain our growth prospects with the continuing
Through our talent development efforts, we are grooming
commitment and
support of our customers,
sales
the next generation of AAON leadership.
representatives and stockholders as well as with the total
cooperation of our employees, all of whose names appear at
AAON is proud of the broad cultural diversity of its employee
the end of this report.
base. Over 64% of the AAON employee population is
comprised of minorities and over 26% are female. At
We are expanding our horizons. The journey promises to
both of its facilities, AAON employs people from over 30
be quite exciting!
countries worldwide. All employees are provided with equal
opportunities to grow and succeed without regard to gender,
Sincerely,
race, ethnicity, national origin, citizenship, disability, age,
veteran status or any other classification protected by law.
We value the success of our employees as is evidenced by
Norman H. Asbjornson
our generous tuition reimbursement program, whereby we
encourage employees to explore learning opportunities.
President & CEO
March 29, 2016
We also provide in-house training and have taken large
strides to educate our employees by implementing an online
training program for employees during 2016 that will allow
our employees to identify training needs and meet those
needs as quickly and easily for the employee as possible.
March
UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
FORM 10-K
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
OF 1934
[X]
[X]
For the fiscal year ended December 31, 2015
For the fiscal year ended December 31, 2015
or
or
[ ]] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
ACT OF 1934
For the transition period from _____________________________ to _____________________________
For the transition period from _____________________________ to _____________________________
Commission file number: 0-18953
Commission file number: 0-18953
AAON, INC.
AAON, INC.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Nevada
Nevada
(State or other jurisdiction
(State or other jurisdiction
of incorporation or organization)
of incorporation or organization)
2425 South Yukon, Tulsa, Oklahoma
,
2425 South Yukon, Tulsa, Oklahoma
(Address of principal executive offices)
(Address of principal executive offices)
,
87-0448736
87-0448736
(IRS Employer
(IRS Employer
Identification No.)
Identification No.)
74107
74107
(Zip Code)
(Zip Code)
Registrant's telephone number, including area code: (918) 583-2266
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(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.004
, p
Common Stock, par value $.004
(Title of Class)
(Title of Class)
Rights to Purchase Series A Preferred Stock
Rights to Purchase Series A Preferred Stock
(Title of Class)
(Title of Class)
g
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No
[ ] 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.
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
[ ] 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
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
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.
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
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
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).
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
[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.
[X]
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 [X]
Non-accelerated filer [ ]
Accelerated filer [ ]
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,
2015 was $919.4 million.
As of February 19, 2016, registrant had outstanding a total of 53,049,365 shares of its $.004 par value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders
to be held May 24, 2016, are incorporated into Part III.
Item Number and Caption
PART I
TABLE OF CONTENTS
Page
Number
1.
Business.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2.
3.
Properties.
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.
9.
Financial Statements and Supplementary Data.
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
7
7
8
8
8
11
13
20
21
41
42
44
44
44
44
44
44
45
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. Our operating subsidiaries
include 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 consisting of rooftop units,
chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing
units, geothermal heat pumps, 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 $14.6 million, $19.9 million and
$17.5 million of our sales in 2015, 2014 and 2013, 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, packaged 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.
Based on our 2015 sales of $358.6 million, we estimate that we have approximately a 12-13% share of the greater than
five ton rooftop market and a 1-2% share of the less than five ton market. 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.
1
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, packaged outdoor mechanical
rooms, coils, air handling units, condensing units, makeup air units, energy recovery units, rooftop units and geothermal
heat pumps.
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 45 to 240 tons.
We also offer the SA, SB and M2 Series as indoor packaged, water-cooled or geothermal/water-source heat pump self-
contained units with cooling capacities of three to 70 tons.
We manufacture a LF Series chiller, air-cooled, a LN Series chiller, air-cooled, and a LZ Series chiller and packaged
outdoor mechanical room, which are available in both air-cooled condensing and evaporative-cooled configurations,
covering a range of four to 540 tons. BL Series boiler outdoor mechanical rooms are also available with 400-6,000
MBH heating capacity. FZ Series fluid cooler outdoor mechanical rooms are also available with a range of 50 to 450
tons.
We offer four groups of condensing units: the CB Series, two to five tons; the CF Series, two to 70 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, H3 and V3 Series and the modular M2 and M3 Series, as well as air
handling unit configurations 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 V3, 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 one 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
One customer accounted for 10% or more of our sales during 2015. No customer accounted for 10% or more of our
sales during 2014 or 2013.
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.
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.
2
We attempt to limit the impact of price fluctuations on these materials by entering into cancellable and non-cancellable
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 37 individuals and utilize approximately 88 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
activities have involved the RQ, RN and RL (rooftop units), F1, H3, V3, M2 and M3 (air handling units), LF, LN and
LZ (chillers), CB, CF and CN (condensing units), SA and SB (self-contained units), FZ (fluid coolers) 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 $7.5 million, $6.3 million and $5.2 million in 2015,
2014 and 2013, respectively.
Backlog
Our backlog as of February 1, 2016 was approximately $52.3 million compared to approximately $49.5 million as of
February 1, 2015. 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.
3
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, 2015. 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 February 19, 2016, we employed 1,676 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 energy recovery wheel option, blower, gas-fired heat exchanger, evaporative-cooled
condenser de-superheater and low leakage damper which have terms of 20 years with expiration dates ranging from
2016 to 2033.
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.
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.
4
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 cancellable and noncancellable 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-cancellable fixed price contracts.
Historically, we have attempted to limit the impact of price fluctuations on commodities by entering into non-cancellable
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.
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.
5
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.
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 Department of Energy 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.
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.
6
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, especially since most of our operations are performed at a
single location.
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, and the majority of our operations are at our Tulsa facilities, 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.
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 $200,000 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, 2015, we own all of our facilities, consisting of approximately 1.55 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 940,000 sq. ft. manufacturing/warehouse building and a 70,000 sq. ft. office building located on an approximately
78-acre tract of land across the street from the original facility (2440 South Yukon Avenue) (the "Tulsa facilities").
7
Our manufacturing area is in heavy industrial type buildings, with some coverage by overhead 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
263,000 sq. ft. on 33.0 acres. The manufacturing area (approximately 256,000 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.
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 February 19, 2016, there were 1,120 holders of record of our common stock.
Quarter Ended
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
High
$18.87
$22.43
$17.58
$22.75
$24.71
$24.95
$23.23
$25.15
Low
$18.30
$21.82
$17.00
$22.35
$20.85
$22.39
$19.12
$19.19
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.
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. In addition, on May 21, 2013, we approved a semi-
annual cash dividend of $0.06 per share, 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 $0.07 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.
8
On May 2, 2014, we declared a regular semi-annual cash dividend of $0.09 per share, to stockholders of record at the
close of business on June 12, 2014, the record date. Those dividends were paid on July 1, 2014.
On June 5, 2014, 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 16, 2014. Stockholders of record at the close of business on June 27, 2014 received one additional
share for every two shares they held as of that date.
At a meeting of the Board of Directors on November 4, 2014, the Board declared a regular semi-annual cash dividend
of $0.09 per share. The dividends were payable to shareholders of record at the close of business on December 2, 2014,
the record date, and were paid on December 23, 2014.
On May 19, 2015, the Board of Directors declared a regular semi-annual cash dividend of $0.11 per share, to stockholders
of record at the close of business on June 12, 2015, the record date. The dividends were paid on July 1, 2015.
On October 29, 2015, the Board of Directors declared a regular semi-annual cash dividend of $0.11 per share, to
stockholders of record at the close of business on December 2, 2015, the record date. The dividends were paid on
December 23, 2015.
The following is a summary of our share-based compensation plans as of December 31, 2015:
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))
29,482
418,889
$
$
4.43
7.76
—
439,702
Plan category
The 1992 stock
option plan
The 2007 Long-
Term Incentive
Plan
Repurchases during the fourth quarter of 2015 were as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Total
Number
of Shares
(or Units
Period
Purchased)
October 2015
November 2015
December 2015
51,780
$
635,058
470,340
Total
1,157,178
$
(b)
Average
Price
Paid
(Per Share
or Unit)
(c)
Total Number
of Shares (or
Units) Purchased
as part of
Publicly Announced
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that may yet be
Purchased under the
Plans or Programs
Plans or Programs
51,780
635,058
470,340
1,157,178
—
—
—
—
20.92
24.30
23.80
23.94
9
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, 2010 through December 31, 2015. The graph assumes that $100 was invested
at the close of trading December 31, 2010, 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.
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.
10
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:
2015
Years Ended December 31,
2014
2013
(in thousands, except per share data)
2012
Net sales
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per
common share:
$
$
$
$
$
358,632
45,728
0.85
0.84
0.22
$
$
$
$
$
356,322
44,158
0.81
0.80
0.18
$
$
$
$
$
321,140
37,547
0.68
0.68
0.13
$
$
$
$
$
303,114
27,449
0.50
0.49
(1)
0.16
(1) Includes special dividend of $0.05 per common share paid on December 24, 2012.
2011
266,220
13,986
0.25
0.25
0.11
$
$
$
$
$
Financial Position at End of
Fiscal Year:
2015
2014
December 31,
2013
(in thousands)
2012
2011
Working capital
Total assets
Long-term and current debt
Total stockholders’ equity
$
80,800
$
82,227
$
72,515
$
47,428
$
41,177
232,854
226,974
210,665
189,000
—
—
—
—
178,918
174,059
164,106
138,136
174,458
4,575
122,504
Use of Non-GAAP Financial Measure
To supplement the Company’s consolidated financial statements presented in accordance with generally accepted
accounting principles (“GAAP”), an additional non-GAAP financial measure is provided and reconciled in the following
table. The Company believes that this non-GAAP financial measure, when considered together with the GAAP financial
measures, provide information that is useful to investors in understanding period-over-period operating results. The
Company believes that this non-GAAP financial measure enhances the ability of investors to analyze the Company’s
business trends and operating performance.
EBITDAX
EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income because of
its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund
operations.
The Company defines EBITDAX as net income, plus (1) depreciation, (2) amortization of bond premiums, (3) share-
based compensation, (4) interest (income) expense and (5) income tax expense. EBITDAX is not a measure of net
income or cash flows as determined by GAAP.
The Company’s EBITDAX measure provides additional information which may be used to better understand the
Company’s operations. EBITDAX is one of several metrics that the Company uses as a supplemental financial
measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful
than, net income, as an indicator of operating performance. Certain items excluded from EBITDAX are significant
components in understanding and assessing a company's financial performance. EBITDAX, as used by the Company,
may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDAX
is a widely followed measure of operating performance and is one of many metrics used by the Company’s management
team, and by other users of the Company’s consolidated financial statements.
11
The following table provides a reconciliation of net income (GAAP) to EBITDAX (non-GAAP) for the periods
indicated:
2015
2014
December 31,
2013
(in thousands)
2012
2011
Net Income, a GAAP measure
$
45,728
$
44,158
$
37,547
$
27,449
$
Depreciation
Amortization of bond premiums
Share-based compensation
Interest (income) expense
Income tax expense
11,741
266
2,891
(427)
25,611
11,553
688
2,178
(964)
24,088
12,312
790
1,763
(1,011)
18,747
13,407
155
1,294
(197)
16,868
EBITDAX, a non-GAAP measure
$
85,810
$
81,701
$
70,148
$
58,976
$
13,986
11,397
156
680
23
7,527
33,769
12
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,
packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units,
geothermal heat pumps, 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.
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 2015 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
out 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 global economy. For the
year ended December 31, 2015, the prices for copper, galvanized steel and stainless steel decreased approximately
13.0%, 10.6% and 13.9%, respectively, from a year ago, while the price for aluminum increased 1.8% from a year
ago. For the year ended December 31, 2014, the price for copper decreased approximately 5.1%, while the prices for
galvanized steel, stainless steel, and aluminum increased 2.2%, 3.4% and 8.6%, respectively, from 2013.
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 a conventional air conditioning system. We expect to be using this type of condenser coil throughout the complete
rooftop unit product line. 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 cancellable and non-cancellable
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 highlights of our results of operations, cash flows, and financial condition:
• We spent $21.0 million in capital expenditures in 2015, an increase of $4.9 million from the $16.1 million
spent in 2014, to increase our production capacity and efficiency.
• We paid cash dividends of $11.9 million in 2015 compared to $9.7 million in 2014.
• We reinstated open market repurchases of our stock, repurchasing slightly more than 1.0 million shares for
nearly $25.0 million from the open market in the last two months of 2015.
13
Results of Operations
Units sold for years ended December 31:
2015
2014
2013
Rooftop Units
Split Systems
Outdoor Mechanical Rooms
Total Units
15,134
3,385
57
18,576
14,587
2,622
114
17,323
13,969
2,604
93
16,666
Year Ended December 31, 2015 vs. Year Ended December 31, 2014
Net Sales
Years Ending December 31,
2015
2014
$ Change % Change
(in thousands, except unit data)
$
$
358,632
18,576
$
356,322
17,323
2,310
1,253
0.6%
7.2%
Net sales
Total units
Net sales remained relatively stable while we saw an increase in our total units sold. Most of the increase in our units
sold came from our Longview facility which have a lower average price per unit.
Cost of Sales
Years Ending December 31,
Percent of Sales
2015
2014
2015
2014
(in thousands)
Cost of sales
Gross Profit
$
$
249,951
108,681
248,059
108,263
69.7%
30.3%
69.6%
30.4%
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.
Twelve month average raw material cost per pound as of December 31:
Years Ending December 31,
2015
2014
% Change
Copper
Galvanized Steel
Stainless Steel
Aluminum
$
$
$
$
3.54
0.42
1.30
1.67
$
$
$
$
4.07
0.47
1.51
1.64
(13.0)%
(10.6)%
(13.9)%
1.8 %
14
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2015
2014
2015
2014
$
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Depreciation
Insurance
Professional Fees
Donations
Other
Total SG&A $
(in thousands)
$
4,317
8,037
11,078
2,082
1,191
930
1,153
1,794
452
6,404
37,438
$
4,874
7,781
11,638
1,520
1,015
878
1,160
1,986
4,202
5,508
40,562
1.2%
2.2%
3.1%
0.6%
0.3%
0.3%
0.3%
0.5%
0.1%
1.8%
10.4%
1.4%
2.2%
3.3%
0.4%
0.3%
0.2%
0.3%
0.6%
1.2%
1.5%
11.4%
The decrease in SG&A is primarily due to the non-recurring donations in 2014, along with a decrease in warranty
expense as a result of continued improvements in quality control, offset by an increase in other expense. In 2015,
other expense increased due to sales taxes to certain states.
Income Taxes
Years Ending December 31,
2015
2014
(in thousands)
Effective Tax Rate
2014
2015
Income tax provision
$
25,611
$
24,088
35.9%
35.3%
Year Ended December 31, 2014 vs. Year Ended December 31, 2013
Net Sales
Years Ending December 31,
2014
2013
$ Change % Change
(in thousands, except unit data)
$
356,322
$
321,140
$
35,182
17,323
16,666
657
11.0%
3.9%
Net sales
Total units
The increase in net sales was the result of the favorable reception to our new products and increased market share.
Because of our wide product mix and flexibility of features within each product, overall net sales increased approximately
11.0%. We estimate that approximately 5.5% of the net sales increase was related to increases in the average sales price
due to changes in product mix and price increases and the other 3.9% was related to increased unit sales.
15
Cost of Sales
Years Ending December 31,
Percent of Sales
2014
2013
2014
2013
(in thousands)
Cost of sales
Gross Profit
$
248,059
$
231,348
108,263
89,792
69.6%
30.4%
72.0%
28.0%
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. The improvement in gross profit is primarily due to
efficiencies gained from our investment in equipment.
Twelve month average raw material cost per pound as of December 31:
Years Ending December 31,
2014
2013
% Change
Copper
Galvanized Steel
Stainless Steel
Aluminum
$
$
$
$
4.07
0.47
1.51
1.64
$
$
$
$
4.29
0.46
1.46
1.51
(5.1)%
2.2 %
3.4 %
8.6 %
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2014
2013
2014
2013
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Depreciation
Insurance
Professional Fees
Donations
Other
$
(in thousands)
$
4,874
7,781
11,638
1,520
1,015
878
1,160
1,986
4,202
5,508
6,024
6,397
10,287
1,086
946
861
1,072
2,108
231
4,977
1.4%
2.2%
3.3%
0.4%
0.3%
0.2%
0.3%
0.6%
1.2%
1.5%
1.9%
2.0%
3.2%
0.3%
0.3%
0.3%
0.3%
0.7%
0.1%
1.5%
Total SG&A $
40,562
$
33,989
11.4%
10.6%
The increase in SG&A is primarily due to an additional $4.0 million in charitable donations, higher profit sharing
expense as a result of higher operating income before income taxes and increased compensation costs in 2014. these
increases were offset by a decrease in warranty expense as a result of improvement in quality control.
16
Income Taxes
Years Ending December 31,
2014
2013
(in thousands)
Effective Tax Rate
2013
2014
Income tax provision
$
24,088
$
18,747
35.3%
33.3%
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").
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 decreased $14.0 million from December 31, 2014 to December 31, 2015. As of
December 31, 2015, we had $7.9 million in cash and cash equivalents.
As of December 31, 2015, we had certificates of deposit of $12.0 million and investments held to maturity at
amortized cost of $17.5 million. These certificates of deposit had maturity dates of less than one month to
approximately 15 months. The investments held to maturity at amortized cost had maturity dates of less than one
month to approximately 15 months.
On July 25, 2014 we renewed our 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, 2016. We expect to renew
our line of credit in July 2016 with favorable terms. Under the line of credit, there was one standby letter of credit of
$0.8 million as of December 31, 2015. At December 31, 2015 we have $29.2 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, 2015 and 2014, 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 2.6% and 2.7% for the
years ended December 31, 2015 and 2014, respectively.
At December 31, 2015, 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, 2015, our tangible net worth was $178.9 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 $80.8 million, which meets the requirement of being at or above $40.0
million.
We repurchased shares of stock from the open market, 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 $37.1
million for 1.6 million shares, $29.3 million for 1.5 million shares and $8.2 million for 0.6 million shares in 2015, 2014
and 2013, respectively. We repurchased the shares at current market prices.
For the years ended December 31, 2015, 2014 and 2013 we paid cash dividends of $11.9 million, $9.7 million and $7.4
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 2016 and the foreseeable future.
17
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.
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
Net cash used in investing activities
Financing Activities
(Payments) borrowings under revolving credit facility, net
Stock options exercised and 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
Cash Flows from Operating Activities
2015
2014
(in thousands)
2013
$
$
45,728
13,805
$
44,158
10,915
37,547
12,892
(5,884)
312
(1,059)
76
(5,109)
189
4,852
52,910
(20,967)
(20,863)
18,519
117
(23,194)
(5,007)
(257)
(5,613)
(305)
3,512
782
4,094
52,279
(16,127)
(16,820)
26,536
382
(6,029)
4,662
464
231
436
(5,197)
615
1,942
53,592
(9,041)
(31,383)
8,937
161
(31,326)
—
—
—
5,240
(37,143)
(11,857)
(43,760) $
2,557
(29,284)
(9,656)
(36,383) $
2,310
(8,222)
(7,428)
(13,340)
$
Cash flows from operating activities have remained relatively consistent in 2015 with 2014 and 2013.
Cash Flows from Investing Activities
Capital expenditures increased in 2015 as compared to 2014 and were primarily related to investments in additional
manufacturing and production equipment to support our growth and improve efficiencies.
The capital expenditure program for 2016 is estimated to be approximately $32.7 million. The increase in capital
expenditures is primarily due to construction projects related to our new research and development lab. Many of these
projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring
substantial charges.
Cash Flows from Financing Activities
We continued to increase our buyback activity in 2015 compared to prior years, resulting in approximately $25.0 million
in open market repurchases of our stock in 2015.
18
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 no material contractual purchase agreements as of December 31, 2015.
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 we accrue
and/or disclose loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate
resolution of any pending litigation or claims will be material or have a material adverse effect on the Company's
business, financial position, results of operations or cash flows.
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.
19
New Accounting Pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting
standards updates ("ASUs") to the FASB's Accounting Standards Codification.
We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either
not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to
customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.
In August 2015, with the issuance of ASU 2015-14, the FASB amended the effective date for us to January 1, 2018.
The standard permits the use of either the retrospective or cumulative effect transition method. We do not expect ASU
2014-09 will have a material effect on our consolidated financial statements and notes thereto.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Taxes, which requires presentation
of deferred tax assets and liabilities as non-current in a classified balance sheet. The ASU becomes effective in the
annual reporting period beginning after December 31, 2016, including interim reporting periods. Early adoption is
allowed as of the beginning of any interim or annual reporting period. The standard permits the use of the retrospective
or prospective transition method. We have early adopted the standard effective October 1, 2015, for the interim and
annual reporting periods ending December 31, 2015 and have applied the retrospective transition method. The following
table displays the prior period quantitative effects on the consolidated balance sheets:
December 31, 2014
As Reported
As Restated
Deferred tax assets
Total current assets
Total assets
Deferred tax liabilities
Total liabilities and stockholders' equity
$
(in thousands)
$
6,143
131,083
233,117
13,677
233,117
—
124,940
226,974
7,534
226,974
There are no prior period quantitative effects on the consolidated statements of income, stockholders' equity or cash
flows.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities, which will address certain aspects of recognition, measurement, presentation and disclosure of financial
instruments. The ASU becomes effective in the annual reporting period beginning after December 31, 2017, including
interim reporting periods. We do not expect ASU 2016-01 will have a material effect on our consolidated financial
statements and notes thereto.
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.
20
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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
Page
22
23
24
25
26
27
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
AAON, Inc.
We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada corporation) and subsidiaries
(the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2015. 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, 2015 and 2014, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 10 to the consolidated financial statements, the Company adopted new accounting guidance in
2015 and 2014, related to the presentation of deferred income taxes.
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, 2015, based on criteria established
in the 2013 Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 25, 2016, expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 25, 2016
22
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Certificates of deposit
Investments held to maturity at amortized cost
Accounts receivable, net
Income tax receivable
Note receivable
Inventories, net
Prepaid expenses and other
Total current assets
Property, plant and equipment:
Land
Buildings
Machinery and equipment
Furniture and fixtures
Total property, plant and equipment
Less: Accumulated depreciation
Property, plant and equipment, net
Certificates of deposit
Investments held to maturity at amortized cost
Note receivable, long-term
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility
Accounts payable
Accrued liabilities
Total current liabilities
Deferred revenue
Deferred tax liabilities
Donations
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued
Common stock, $.004 par value, 100,000,000 shares authorized, 53,012,363 and
54,041,829 issued and outstanding at December 31, 2015 and 2014, respectively
Additional paid-in capital
Retained earnings
Total stockholders' equity
December 31,
2015
2014
(in thousands, except share and
per share data)
$
7,908
$
10,080
12,444
50,024
4,702
23
38,499
533
124,213
2,233
68,806
143,100
11,270
225,409
124,348
101,061
1,880
5,039
661
21,952
6,098
11,972
44,092
2,569
30
37,618
609
124,940
2,233
64,938
127,968
10,388
205,527
113,605
91,922
5,280
4,015
817
232,854
$
226,974
$
$
— $
6,178
37,235
43,413
698
8,706
1,119
212
—
178,706
178,918
—
11,370
31,343
42,713
1,006
7,534
1,662
216
—
173,843
174,059
226,974
Total liabilities and stockholders' equity
$
232,854
$
The accompanying notes are an integral part of these consolidated financial statements.
23
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ending December 31,
2015
2014
2013
(in thousands, except per share data)
$
358,632
$
356,322
$
249,951
108,681
37,438
(59)
71,302
161
(124)
71,339
25,611
45,728
0.85
0.84
0.22
$
$
$
$
248,059
108,263
40,562
(305)
68,006
276
(36)
68,246
24,088
44,158
0.81
0.80
0.18
$
$
$
$
$
$
$
$
321,140
231,348
89,792
33,989
(22)
55,825
221
248
56,294
18,747
37,547
0.68
0.68
0.13
54,045,841
54,481,484
54,809,319
55,369,016
55,119,150
55,587,381
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Gain on disposal of assets
Income from operations
Interest income, net
Other (expense) income, 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
The accompanying notes are an integral part of these consolidated financial statements.
24
AAON, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
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
Balance at December 31, 2013
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, 2014
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, 2015
Common Stock
Shares
Amount
$
55,166
—
435
—
(534)
—
55,067
—
463
—
(1,488)
—
54,042
—
546
—
(1,576)
—
53,012
$
221
—
2
—
(2)
—
221
—
1
—
(6)
—
216
—
2
—
(6)
—
212
Paid-in
Capital
(in thousands)
$
— $
—
2,308
Retained
Earnings
Total
$
137,915
37,547
—
138,136
37,547
2,310
1,763
(4,071)
—
—
—
2,556
2,178
(4,734)
—
—
—
5,238
—
(4,149)
(7,428)
163,885
44,158
—
—
(24,544)
(9,656)
173,843
45,728
—
2,891
(8,129)
—
— $
—
(29,008)
(11,857)
178,706
$
$
1,763
(8,222)
(7,428)
164,106
44,158
2,557
2,178
(29,284)
(9,656)
174,059
45,728
5,240
2,891
(37,143)
(11,857)
178,918
The accompanying notes are an integral part of these consolidated financial statements.
25
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
2015
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 on disposition of assets
Foreign currency transaction loss
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
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 (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
$
Years Ending December 31,
2014
(in thousands)
44,158
$
$
45,728
11,741
266
(48)
178
2,891
(2,445)
(59)
139
(30)
1,172
—
(5,884)
312
(1,059)
76
(5,109)
189
4,852
52,910
(20,967)
63
(6,680)
6,098
(14,183)
11,408
1,013
54
(23,194)
—
—
2,795
2,445
(37,143)
(11,857)
(43,760)
(14,044)
21,952
7,908
$
11,553
688
(22)
135
2,178
(1,239)
(305)
74
(36)
(2,111)
—
(5,007)
(257)
(5,613)
(305)
3,512
782
4,094
52,279
(16,127)
319
(9,940)
9,310
(6,880)
14,197
3,029
63
(6,029)
—
—
1,318
1,239
(29,284)
(9,656)
(36,383)
9,867
12,085
21,952
$
2013
37,547
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
(9,041)
92
(9,108)
3,600
(22,275)
2,005
3,332
69
(31,326)
8,325
(8,325)
1,467
843
(8,222)
(7,428)
(13,340)
8,926
3,159
12,085
The accompanying notes are an integral part of these consolidated financial statements.
26
AAON, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
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 (collectively, the
"Company"). 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, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing
units, geothermal heat pumps, self-contained 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 ("U.S. GAAP"). 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 $12.0 million and $11.4 million in certificates of deposit at December 31, 2015 and December 31, 2014,
respectively. At December 31, 2015, the certificates of deposit bear interest ranging from 0.25% to 0.90% per annum
and have various maturities ranging from less than one month to approximately 15 months.
Investments Held to Maturity
At December 31, 2015, our investments held to maturity were comprised of $17.5 million of corporate notes and
bonds with various maturities ranging from less than one month to approximately 15 months. The investments have
moderate risk with S&P ratings ranging from AA+ 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.
27
The following summarizes the amortized cost and estimated fair value of our investments held to maturity at
December 31, 2015 and December 31, 2014:
December 31, 2015:
Current assets:
Investments held to maturity
Non current assets:
Investments held to maturity
Total
December 31, 2014:
Current assets:
Investments held to maturity
Non current assets:
Investments held to maturity
Total
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
(Loss)
(in thousands)
Fair
Value
12,444
$
— $
(16) $
12,428
5,039
17,483
$
—
— $
(17)
(33) $
5,022
17,450
11,972
$
— $
(7) $
11,965
4,015
15,987
$
—
— $
(16)
(23) $
3,999
15,964
$
$
$
$
We evaluate these investments for other-than-temporary impairments on a quarterly basis. We do not believe there was
an other-than-temporary impairment for our investments at December 31, 2015 or 2014.
Accounts and Note Receivable
Accounts and note 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 ninety days past negotiated credit terms. 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
4%, 6% and 5% of revenues for the years ended December 31, 2015, 2014 and 2013, respectively. One customer
accounted for 10% or more of our sales during 2015. No customer accounted for 10% or more of our sales during 2014
or 2013. No customer accounted for 5% or more of our accounts receivable balance at December 31, 2015 or 2014.
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.
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.
28
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, 2015, 2014, and 2013 research and development costs amounted
to approximately $7.5 million, $6.3 million, and $5.2 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2015, 2014, and
2013 was approximately $1.2 million, $1.0 million, and $0.9 million, respectively.
Shipping and Handling
We incur shipping and handling costs in the distribution of products sold that are recorded in cost of sales. Shipping
charges that are billed to the customer are recorded in revenues and as an expense in cost of sales. For the years ended
December 31, 2015, 2014 and 2013 shipping and handling fees amounted to approximately $9.6 million, $8.5 million,
and $7.9 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 unrecognized 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.
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.
29
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 could contain 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
$55.4 million, $59.7 million, and $63.0 million for each of the years ended December 31, 2015, 2014, and 2013,
respectively.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years.
Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately
priced warranty period.
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.
30
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP 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, 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 as needed, but at a minimum on a quarterly basis. The most significant
estimates include, but are not limited to, 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
$
$
4. Inventories
December 31,
2015
2014
(in thousands)
$
$
50,139
(115)
50,024
$
$
44,263
(171)
44,092
Years Ending December 31,
2015
2014
(in thousands)
2013
171
$
193
$
(48)
(8)
115
$
—
(22)
171
$
52
141
—
193
The components of inventories and the related changes in the allowance for excess and obsolete inventories are as
follows:
December 31,
2015
2014
(in thousands)
$
33,853
$
34,153
2,522
2,881
39,256
(757)
38,499
$
2,262
1,917
38,332
(714)
37,618
$
Raw materials
Work in process
Finished goods
Less: Allowance for excess and obsolete inventories
Total, net
31
Allowance for excess and obsolete inventories:
Balance, beginning of period
Provisions for excess and obsolete inventories
Inventories written off
Balance, end of period
5. Note Receivable
$
$
Years Ending December 31,
2015
2014
(in thousands)
2013
714
$
178
(135)
757
$
579
135
—
$
714
$
363
243
(27)
579
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, 15 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, 2015 and 2014, there was no impairment.
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
7. Warranties
Years Ending December 31,
2015
2014
(in thousands)
2013
$
— $
— $
24,125
26,456
83
—
(79)
—
1
19,884
71
315
The Company has warranties with various terms from 18 months for parts to 25 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
Warranty expense:
Years Ending December 31,
2015
2014
(in thousands)
2013
$
$
$
8,130
(3,978)
4,317
—
8,469
4,317
$
$
$
7,352
(4,096)
4,874
—
8,130
4,874
$
$
$
5,776
(4,448)
6,005
19
7,352
6,024
32
8. Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
December 31,
2015
2014
Warranty
Due to representatives
Payroll
401(k) Contributions
Profit sharing
Workers' compensation
Medical self-insurance
Customer prepayments
Donations
Employee benefits and other
Total
9. Revolving Credit Facility
$
$
$
(in thousands)
8,469
10,597
3,954
3,054
2,220
366
676
2,895
600
4,404
37,235
$
8,130
10,188
3,153
104
2,016
535
532
1,639
1,600
3,446
31,343
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 $0.8 million as of December 31, 2015. Borrowings available under the revolving
credit facility at December 31, 2015, were $29.2 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, 2015 and 2014,
we had no balance outstanding under our revolving credit facility. At December 31, 2015 and 2014, the weighted
average interest rate was 2.6% and 2.7%, respectively.
At December 31, 2015, 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, 2015 our tangible net worth was $178.9 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 $80.8 million which meets the requirement of being at or above $40.0 million.
Effective July 25, 2014, 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, 2016.
10. Income Taxes
The provision (benefit) for income taxes consists of the following:
Years Ending December 31,
2015
24,439
1,172
25,611
$
2014
(in thousands)
26,199
$
(2,111)
24,088
2013
$
$
20,341
(1,594)
18,747
Current
Deferred
$
$
33
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate
before the provision for income taxes.
The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
Federal statutory rate
State income taxes, net of federal benefit
Domestic manufacturing deduction
Other
Other primarily relates to certain domestic credits.
Years Ending December 31,
2015
2014
2013
35 %
5 %
(3)%
(1)%
36 %
35 %
5 %
(4)%
(1)%
35 %
35 %
4 %
(4)%
(2)%
33 %
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:
December 31,
2015
2014
(in thousands)
Deferred income tax assets (liabilities):
Accounts receivable and inventory reserves
$
351
$
Warranty accrual
Other accruals
Share-based compensation
Donations
Other, net
Total deferred income tax assets
Property & equipment
Total deferred income tax liabilities
Net deferred income tax liabilities
3,405
1,248
1,099
691
986
7,780
(16,486)
(16,486) $
(8,706) $
$
$
355
3,263
1,238
707
1,309
888
7,760
(15,294)
(15,294)
(7,534)
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Taxes, which requires presentation
of deferred tax assets and liabilities as non-current in a classified balance sheet. The ASU becomes effective in the
annual reporting period beginning after December 31, 2016, including interim reporting periods. Early adoption is
allowed as of the beginning of any interim or annual reporting period. The standard permits the use of the retrospective
or prospective transition method. We have early adopted the standard effective October 1, 2015, for the interim and
annual reporting periods ending December 31, 2015 and have applied the retrospective transition method. The following
table displays the prior period quantitative effects on the consolidated balance sheets:
34
December 31, 2014
As Reported
As Restated
Deferred tax assets
Total current assets
Total assets
Deferred tax liabilities
Total liabilities and stockholders' equity
(in thousands)
$
6,143
$
131,083
233,117
13,677
233,117
—
124,940
226,974
7,534
226,974
There are no prior period quantitative effects on the consolidated statements of income, stockholders' equity or cash
flows.
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 2012 to present, and to non-U.S. income tax examinations for the tax years of 2011 to
present. In addition, we are subject to state and local income tax examinations for the tax years 2011 to present. The
Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be
recognized as a component of income tax expense.
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. Had the ATRA had been enacted prior to January 1, 2013, our overall tax expense
for 2013 would have been approximately $0.5 million higher. 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 35.3% for the year ended December 31, 2013.
11. Share-Based Compensation
We have historically maintained a stock option plan for key employees, directors and consultants (“the 1992 Plan”).
The 1992 Plan provided for 14.9 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 3.3
million 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, 2015 is
$2.4 million and is expected to be recognized over a weighted-average period of 2.05 years.
35
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, 2015, 2014 and
2013 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)
2015
2014
2013
$
$
0.18
44.14%
1.97%
8
N/A $
N/A
N/A
N/A
0.22
$
0.14
$
42.71%
1.41%
8
44.85%
2.26%
8
0.08
47.08%
1.55%
7
0.08
45.92%
1.40%
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.
The following is a summary of stock options vested and exercisable as of December 31, 2015:
Range of
Exercise
Prices
Number
of
Shares
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Intrinsic
Value
(in thousands)
$4.31 - 8.65
$8.70 - 22.76
$23.57 - 23.57
Total
421,237
27,134
—
448,371
4.89
7.82
0.00
5.07
$
$
7.04
$
15.31
—
7.54
$
6,814
215
—
7,029
The following is a summary of stock options vested and exercisable as of December 31, 2014:
Range of
Exercise
Prices
Number
of
Shares
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
$3.21 - 6.89
$7.13 - 8.17
$8.65 - 21.14
Total
411,553
81,050
175,527
668,130
3.46
6.54
6.53
4.64
$
$
Intrinsic
Value
(in thousands)
5.16
7.27
8.76
6.36
$
$
7,113
1,226
2,392
10,731
36
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
$3.21 - 6.89
$7.13 - 8.17
$8.65 - 9.34
Total
422,003
63,225
97,887
583,115
4.09
7.45
8.38
5.17
$
$
A summary of option activity under the plan is as follows:
Options
Outstanding at December 31, 2014
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2015
Exercisable at December 31, 2015
Intrinsic
Value
(in thousands)
4.85
7.24
8.65
5.75
$
$
6,941
889
1,238
9,068
Weighted
Average
Exercise
Price
8.16
22.79
6.42
14.02
13.38
7.54
Shares
1,233,911
$
363,895
(435,562)
(31,334)
1,130,910
448,371
$
$
The total intrinsic value of options exercised during December 31, 2015, 2014 and 2013 was $7.4 million, $2.8 million
and $2.7 million, respectively. The cash received from options exercised during December 31, 2015, 2014 and 2013
was $2.8 million, $1.3 million and $1.5 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, 2015, unrecognized compensation cost related to unvested restricted
stock awards was approximately $4.7 million which is expected to be recognized over a weighted average period of
1.99 years.
37
A summary of the unvested restricted stock awards is as follows:
Restricted stock
Unvested at December 31, 2014
Granted
Vested
Forfeited
Unvested at December 31, 2015
Weighted
Average
Grant date
Fair Value
16.76
22.22
15.61
18.46
18.78
Shares
414,846
134,346
(115,885)
(23,284)
410,023
$
$
A summary of share-based compensation is as follows for the years ending December 31, 2015, 2014 and 2013:
Grant date fair value of awards during the period:
Options
Restricted stock
Total
Share-based compensation expense:
Options
Restricted stock
Total
Income tax benefit related to share-based compensation:
Options
Restricted stock
Total
12. Employee Benefits
2015
2014
(in thousands)
2013
3,685
2,985
6,670
$
$
817
5,024
5,841
2015
2014
(in thousands)
833
2,058
2,891
$
$
898
1,280
2,178
2015
2,165
280
2,445
2014
(in thousands)
979
$
260
1,239
$
$
$
$
$
$
$
841
2,306
3,147
2013
1,170
593
1,763
2013
715
128
843
$
$
$
$
$
$
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), eligible
employees are 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. 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, a Safe-Harbor contribution, vests over two years.
38
Effective January 1, 2016, the Plan has been amended such that the Company will match 175% up to 6% of employee
contributions of eligible compensation. The Company will no longer contribute 3% of eligible payroll to the Plan for
each employee. The Company will cease paying administrative expenses for the Plan at which time administrative
expenses will be paid for by Plan participants. Additionally, Plan participant forfeitures will be used to reduce the cost
of the Company contributions.
For the years ended December 31, 2015, 2014 and 2013 we made contributions of $9.0 million, $6.8 million and $3.0
million, respectively. Administrative expenses were approximately $0.1 million, $0.2 million, and $0.2 million for the
years ended 2015, 2014 and 2013, respectively.
Profit Sharing Bonus Plan - We maintain a discretionary profit sharing bonus plan under which approximately 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 and who were employed full-time for at least three full months prior to the beginning of the calendar
quarter. Profit sharing expense was $8.0 million, $7.8 million and $6.4 million for the years ended December 31, 2015,
2014 and 2013, 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 2.9 million shares) of our outstanding stock from time to time in open market
transactions. In May 2015, the Board authorized repurchases up to an additional 2.75 million shares, or a total of
approximately 5.7 million shares. In October 2015, the Board authorized $25.0 million for use under the Company's
stock buyback program. Since the inception of the program, we repurchased a total of approximately 3.7 million shares
for an aggregate price of $56.5 million, or an average price of $15.40 per share. We purchased the shares at current
market prices. We repurchased 1.0 million shares in each of the years ended December 31, 2015 and 2014.
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, 2015, we repurchased approximately 5.5 million shares for an aggregate price
of $50.9 million, or an average price of $9.18 per share. We purchased the shares at current market prices.
Periodically, the Company repurchases shares of AAON, Inc. stock from certain of its directors and employees. The
number of shares to be repurchased is contingent upon Board approval. Through December 31, 2015, we repurchased
approximately 1.8 million shares for an aggregate price of $14.8 million, or an average price of $8.05 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.
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. In addition, on May 21, 2013, the Board
of Directors approved a semi-annual cash dividend of $0.06 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 $0.07 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.
On May 2, 2014, we declared a regular semi-annual cash dividend of $0.09 per share, to stockholders of record at the
close of business on June 12, 2014, the record date. Those dividends were paid on July 1, 2014.
On June 5, 2014, 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 16, 2014. Stockholders of record at the close of business on June 27, 2014 received one additional
share for every two shares they held as of that date.
39
At a meeting of the Board of Directors on November 4, 2014, the Board declared a regular semi-annual cash dividend
of $0.09 per share. The dividends were payable to shareholders of record at the close of business on December 2, 2014,
the record date, and were paid on December 23, 2014.
On May 19, 2015, the Board of Directors declared a regular semi-annual cash dividend of $0.11 per share, to stockholders
of record at the close of business on June 12, 2015, the record date. The dividends were paid on July 1, 2015.
On October 29, 2015, the Board of Directors declared a regular semi-annual cash dividend of $0.11 per share, to
stockholders of record at the close of business on December 2, 2015, the record date. The dividends were paid on
December 23, 2015.
We paid cash dividends of $11.9 million, $9.7 million and $7.4 million in 2015, 2014 and 2013, 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 we accrue
and/or disclose loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate
resolution of any pending litigation or claims will be material or have a material adverse effect on the Company's
business, financial position, results of operations or cash flows.
We are occasionally party to short-term, cancellable and occasionally non-cancellable, 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
agreement for approximately $1.4 million that expired in December 2014.
15. New Accounting Pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting
standards updates ("ASUs") to the FASB's Accounting Standards Codification.
We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either
not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to
customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.
In August 2015, with the issuance of ASU 2015-14, the FASB amended the effective date for us to January 1, 2018.
The standard permits the use of either the retrospective or cumulative effect transition method. We do not expect ASU
2014-09 will have a material effect on our consolidated financial statements and notes thereto.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Taxes, which requires presentation
of deferred tax assets and liabilities as non-current in a classified balance sheet. We have early adopted the standard
effective October 1, 2015, for the interim and annual reporting periods ending December 31, 2015 and have applied
the retrospective transition method. Additional information regarding our adoption is contained in Note 10 to the
Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities, which will address certain aspects of recognition, measurement, presentation and disclosure of financial
instruments. The ASU becomes effective in the annual reporting period beginning after December 31, 2017, including
interim reporting periods. We do not expect ASU 2016-01 will have a material effect on our consolidated financial
statements and notes thereto.
40
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:
2015
2014
(in thousands, except share and per share data)
37,547
$
45,728
44,158
2013
$
$
Basic weighted average shares
Effect of dilutive stock options and restricted stock
Diluted weighted average shares
54,045,841
435,643
54,481,484
54,809,319
559,697
55,369,016
55,119,150
468,231
55,587,381
Earnings per share:
Basic
Dilutive
Anti-dilutive shares:
Shares
17. Quarterly Results (Unaudited)
$
$
0.85
0.84
$
$
0.81
0.80
$
$
0.68
0.68
146,548
32,436
206,264
The following is a summary of the quarterly results of operations for the years ending December 31, 2015 and 2014:
2015
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2014
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
Quarter
First
Second
Third
Fourth
(in thousands, except per share data)
$
$
$
$
$
$
76,768
$
90,275
$
94,360
$
21,798
8,399
0.16
0.15
76,367
21,846
9,822
0.18
0.17
$
$
$
$
$
27,117
11,130
0.21
0.20
92,310
27,876
11,363
0.21
0.20
$
$
$
$
$
30,185
13,251
0.24
0.24
102,917
33,350
12,440
0.23
0.22
$
$
$
$
$
97,229
29,581
12,948
0.24
0.24
84,728
25,191
10,533
0.19
0.19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not Applicable.
41
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, 2015.
(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. GAAP.
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 has used the criteria issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in the 2013 Internal Control—
Integrated Framework. Based on our assessment, we believe that, as of December 31, 2015, 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, 2015 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 2015
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
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, 2015, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2015, based on criteria established in the 2013 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, 2015, and
our report dated February 25, 2016, expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 25, 2016
43
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 24, 2016.
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 24, 2016.
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 24, 2016.
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 annual meeting of
shareholders scheduled to be held May 24, 2016.
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 material related party transactions and have no preexisting
material related party transactions in 2015, 2014 or 2013.
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 24, 2016.
44
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Financial statements.
(1)
(2)
(3)
The consolidated financial statements and the report of independent registered public accounting
firm are included in Item 8 of this Form 10-K.
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.
The exhibits listed at item (b) below are filed as part of, or incorporated by reference into, this
Form 10-K.
(b) Exhibits:
(3)
(A)
(B)
Amended and Restated Articles of Incorporation (ii)
Bylaws (i)
(B-1)
Amendments of Bylaws (iii)
(4)
(A)
Third Restated Revolving Credit and Term Loan Agreement and related documents (iv)
(A-1)
Amendment Ten 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
(10.1)
(10.2)
(21)
(23)
(31.1)
(31.2)
(32.1)
(32.2)
(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)
Incorporated herein by reference to the exhibits to our Form S-18 Registration Statement
No. 33-18336-LA.
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2014.
Incorporated herein by reference to our Forms 8-K dated March 10, 1997, May 27, 1998
and February 25, 1999, or exhibits thereto.
Incorporated herein 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 25, 2014.
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.
45
(vii)
(viii)
(ix)
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, Form S-8 Registration Statement No. 333-207737, and to our Form 8-K
dated May 21, 2014.
Incorporated herein by reference to exhibits to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2004.
46
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.
SIGNATURES
AAON, INC.
Dated: February 25, 2016
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: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
/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/ Gary D. Fields
Gary D. Fields
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/ Luke A. Bomer
Luke A. Bomer
Secretary
47
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 25, 2016, with respect to the consolidated financial statements and internal
control over financial reporting in the Annual Report of AAON, Inc. on Form 10-K for the year ended December 31,
2015. We consent to the incorporation by reference of said reports in the Registration Statements of AAON, Inc. on
Forms S-8 (File No. 333-52824, File No. 333-151915 and File No. 333-207737).
Exhibit 23
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 25, 2016
48
Exhibit 31.1
I, Norman H. Asbjornson, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including our consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
disclosed in this report any change in the registrant’s internal controls over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: February 25, 2016
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
49
Exhibit 31.2
I, Scott M. Asbjornson, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of AAON, Inc.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including our consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
disclosed in this report any change in the registrant’s internal controls over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: February 25, 2016
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
50
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended
December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman
H. Asbjornson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and our results of operations.
Dated: February 25, 2016
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
51
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AAON, Inc. (the “Company”), on Form 10-K for the year ended
December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott
M. Asbjornson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and our results of operations.
Dated: February 25, 2016
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
52
COMPANY 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.
the Company
ROBERT G. FERGUS has served as
Vice President, Manufacturing,
since 1989.
of
Mr. Fergus also serves as Vice
President, Manufacturing,
of
AAON, Inc. Mr. Fergus has been
in senior management positions in
the heating and air conditioning
industry for over 40 years.
previously
REBECCA A. THOMPSON has served
as Chief Accounting Officer of
the Company since 2012. Ms.
Thompson
served
as a Senior Manager at Grant
Thornton, LLP where she had
11 years of experience
in the
assurance division. Ms. Thompson
licensed certified public
is a
accountant.
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
KATHY I. SHEFFIELD has served as Senior
Vice President, Administration, of the
Company since 2012, Treasurer of the
Company since 1999, and Vice President
of the Company from 2002 to 2012.
Ms. Sheffield has been in leadership
positions with the Company for over
25 years. Ms. Sheffield also serves as
Senior Vice President, Administration,
and Treasurer of AAON, Inc. and as
Treasurer of AAON Coil Products, Inc.
SCOTT M. ASBJORNSON has served as
Vice President, Finance, and CFO of
the Company since 2012. Mr. Scott
Asbjornson joined the Company in
1990 and is the son of the Company’s
President and CEO, Norman H.
Asbjornson. Mr. Scott Asbjornson
has held various leadership positions
with
and AAON
Coil Products, Inc., including Vice
President (2007-2010) and President
(2010-2012) of AAON Coil Products,
Inc. He also serves as Vice President,
Finance, and CFO of AAON, Inc.
the Company
SAMUEL J. NEALE has served as Vice
President of the Company since 2015.
Mr. Neale has served as President of
AAON Coil Products Inc. since 2012.
leadership
Mr. Neale has been
positions
the heating and air
in
conditioning industry for over 15 years.
Mr. Neale is a professionally licensed
mechanical engineer.
in
(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:4)(cid:10)(cid:11)(cid:12)(cid:5)(cid:4)(cid:13)
2425 South Yukon Avenue,
Tulsa, Oklahoma 74107
Common Stock
NASDAQ-AAON
BOARD OF DIRECTORS
NORMAN H. ASBJORNSON
President/CEO
JACK E. SHORT was elected to he 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 and is Chairman of
our Compensation Committee. From 1997 to
present, Mr. McElroy has served as President
and CEO of McElroy Manufacturing, Inc.,
a manufacturer of fusion equipment and
fintube machines.
JERRY R. LEVINE has served as a director
of the Company since 2008. Since 1999,
Mr. Levine has provided
investor and
shareholder relations services and advice to
the Company.
GARY D. FIELDS was elected as a director
of AAON in 2015. Mr. Fields has been
involved in the HVAC industry for more
than 35 years. From 1983 to 2012, he was
an HVAC equipment sales representative
at and, from 2002 to 2012, a member of the
ownership group of Texas AirSystems, the
largest independent HVAC equipment and
solutions provider in the state of Texas. Mr.
Fields is currently an owner and President
of GKR Partners LTD, an HVAC business
development consulting firm, which has
provided business development advice and
consultation to the Company and its sales
representatives since 2013.
PAUL K. LACKEY, JR. was elected as a
director of the Company in 2007 and is
Chairman of our Governance Committee.
Between April 2002 and October 2005
Mr. Lackey served as CEO and President
of The NORDAM Group, a privately held
aerospace company. Between October 2005
and December 2008 Mr. Lackey served as
the Chairman and CEO of The NORDAM
Group. Between January 2009 and December
2011 Mr. Lackey served as the Executive
Chairman of the Board of The NORDAM
Group. Since January 2012 Mr. Lackey has
served as the Chairman of the Board of The
NORDAM Group. company.
ABRAHM ABINGTON
MA ACOSTA DE AGUAYO
ANDRES ACOSTA-LUJAN
ENRIQUETA ADAME
DERRICK ADAMS
GARY ADAMS
JASON ADAMS
RYAN ADAMS
MARIA AGUAYO
JUSTIN AGUERO
NADER AL-HASHMI
DANIEL ALAGDON
JAVIER ALBA
JULIO ALBINO
JAMES ALEXANDER
MARQUIS ALEXANDER
SHANNON ALFORD
PAUL ALLEGREZZA
DONALD ALLEN
MICHAEL AMBURGEY
SARAH ANDERSEN
DANIEL ANDERSON
QUINCY ANDERSON
WESLEY ANSELME
PATRICK ANTHONY
IVONNE ARAGON
CLYDE ARCHER
JESUS ARELLANES RAMIREZ
JUAN ARELLANO
JOSE ARGUMEDO RUIZ
VINCENT ARGYLE
TOM ARMBRUSTER
THOMAS ARMER, JR.
BRODERICK ARMSTRONG
EARLENE ARMSTRONG
MARIA ARREDONDO
ROGELIO ARTEAGA
NORMAN ASBJORNSON
SCOTT ASBJORNSON
DAVID L ASHLOCK
DAVID R ASHLOCK
GARY ASHMORE
JOSEPH AVILA
JA AWNG
NAW AWNG
ORLANDO AYALA
AMANDA AYENSON
NORA BACKUS*
RICHARD BACKUS, III
DWIGHT BAKER
JOHN BALDWIN
DENNIS BALTHAZAR
CLAUDIA BANDA
WILLIE BANKS MYERS, IV
RUTH BARBA
RAY BARBER
GREGORY BARKER, JR.
JUSTIN BARLETT
JAMES BARNES, III
DAVID BARNETT
ROBERT BARNETT
GARRETT BARNGROVER
ANA BARRAGAN DE
ALTENEH*
TERESA BARRON
SHERRY BATES*
JAMES BAUGH
STUART BAUGH
AARON BEAVERS
DANIEL BECK
TIMOTHY BECK
LIONEL BECKMAN
ANGEL BELLO CABALLERO
DOUGLAS BENEDICT
TAYLEN BENNETT
BONNIE BENSON
CHRISTOPHER BENSON
IDA BERMUDEZ
SERGIO BESERRA
DANIEL BIGBY
COURTNEY BILDERBACK
AMIE BISHOP
VICKIE BLACK
STEVEN BLACKBIRD
ETHAN BLACKMAN
BRIAN BLACKMON
MARIA BLANCO
FREDDIE BLEDSOE, JR.
DAVID BLEVINS
JUSTIN BLEVINS
NICHOLAS BOBBITT
CHRISTOPHER BOGUE
LAM BOI
LHING BOI
JESSICA BOIH
NUAM BOIH
MICHAEL BONEY
MARIO BONILLA MARROQUIN
ROGER BORJA BARREIRO
ROSENDO BOTELLO
JOHN BOYD
JUSTIN BOYD
LaTOYA BOYD
ROBERT BOYD
BRIAN BRADFORD
CHRISTOPHER BRANTLEY
SHAHANI BRITT
ALAN BROCK
DUSTIN BROD
ARLUNDA BROOKS
WINSTON BROSEKE
ALLEN BROWN
DAVID BROWN
TYBREON BROWN
JOHNNY BROWN, JR.
ROBERT BROWNING, JR.
CHRISTOPHER BRYANT
JASON BUNNELL
SCOTT BURGESS
JUSTIN BURKE
TREVOR BURKE
KELLI BURKES
LATISHA BURKHALTER
DOUGLAS BURNS
MONICA BURNS
THOMAS BURROW
CLIFTON BURRUS
PENNY BUSH
WAYNE BUSH
VERENICE BUSTOS
TIMOTHY BUTCHER
ANDRE BUTLER
KONNOR BUXTON
JANIBAL CABUDOY
ALEJANDRO CADENA
CLEVELAND CAGE, JR.
STEVEN CAGLE
MARGARITO CALDERON
CECILE CALDWELL
SANDRA CALDWELL
JORGE CALIXTO
EDWARD CALLOWAY
LAZARO CAMA
MARIA CAMACHO
DAVID CAMPBELL
JACOB CANTREL
BILLY CARDER
DREW CARDOZA
JUSTIN CARDOZA
LISA CARRIERO
VICKIE CARRINGTON
JEFFREY CARROLL
TERENCE CARTER
LARRY CARTER, JR.*
CRISTOBAL CARVAJAL
COLORADO
BEATRIZ CASIANO
HECTOR CAZARES
CORNELIO CEJA GRIMALDO
FRANCISCO J CERVANTES
FRANCISCO CERVANTES
JUSTO CHAGOYA
GUADALUPE CHAIREZ-GALAN
LARRY CHALK*
PATRICK CHAPMAN
ALEEX CHATKEHOODLE
EDGAR CHAVEZ
GREGORY CHAVEZ
ZULLY CHAVEZ
JOSE CHAVEZ PEREZ
DANIEL CHERRY
EDDIE CHOATES
HONG CHUNG
NGAI CIIN
KHAM CIN
NGO CIN
PAUL CIN
SUAN CIN
THAWNG CIN
TUAL CIN
VUNGH CIN
CING CING
DIM K CING
DIM L CING
HAU CING
HUNG CING
LUN CING
MAN L CING
MAN CING
NIANG L CING
NIANG S CING
NING CING
SAN CING
SIAN CING
THANG S CING
THANG Z CING
VERONICA CING
THERESA CING KOK
JUSTIN CLAIBORNE
GEORGE CLARK
SAMUEL CLARK, JR.
JUAN CLEMENTE
VALLADARES
STEPHANIE CLEVELAND
WILLIAM CLEVELAND
MARK COBB
ADRIANA COBOS
KENNETH COCHRAN
TROY COCKRUM
CHRISTINE COESTER
MICHAEL COLE
ROBERT COLE
CHRISTI COLLINS
RONALD COLLINS
TIM COLLINSWORTH
AARON COLUMBUS
BOBBY CONDITT
NICHOLAS CONGER
DALE CONKWRIGHT
ANASTASIA CONNER
JUDE CONNOLLY*
MARK COOK
TIMOTHY COOK
MICHAEL COOLIDGE
SCOTT COON
DONNA COONFIELD
DEANGELO COOPER
GREGORY COOPER
JAMES COOPER
ALVIS COPELAND
MARIANA CORDOVA
PABLO CORDOVA CORDOVA
JEREMY CORNELIUS
LUIS CORONA
ROBERTO CORONA
GENOVEVA CORONA DE
RIVERA
MIGUEL CORTEZ
ROSA CORTEZ
BILLY COX
DIANA COX
JERRY COX
ADRIAN CRABTREE
RICHARD CRAITE
STEVEN CRASE
JACOB CRAWFORD
JACOB CRAYNE
MIKEL CREWS
DARRELL CRISTLER
DARRELL CROW
JACINTO CRUZ RODRIGUEZ
ZACHARY CULLEY
VICTORY CULLOM, II
CHRIS CUMMINGS
ROBERT CUMMINGS
LIAN CUNGA
KEVIN CYRUS
ZAWNG DAI
CING DAL
GIN DAL
GO DAL
HAU DAL
NENG DAL
JOHN DANIELS
JUSTIN DANIELS
CLYDE DANIELS, JR.
ROBERT DANIELS, II
JENIFUR DAVIDSON
ARTHUR DAVIS
BYRON DAVIS
CAMERON DAVIS
CAROLYN DAVIS
CATHY DAVIS
DARRYL DAVIS
JERRY DAVIS
MARLEITTA DAVIS
MATTHEW DAVIS
PHILLIP DAVIS
RICHARD DAVIS
SAMUEL DAVIS
TRAVIS DAVIS
BILLY DAVIS, JR.
DANIEL DE CASAS
FRANCISCO DE LA OSALAS
YOANA DE LA TORRE
ALVARO DE LEON MENDOZA
DANYALE DEARION
NATHAN DECOCQ
PONG DEE
ISMAEL DELAPAZ
DOREEN DELEO
JUANA DELOBO
ANDRES DELOS SANTOS
RAQUEL DELUNA
SHIIRA DEMERY
DYLON DENNIS
JOSEPH DENTON
BRUCE DERR
MATTHEW DESHAZER
STEPHEN DESHAZER
AUDENCIA DEVILLA
ROY DEVILLE
CHARLES DEWEESE
ANTHONY DIAZ
REINALDO DIAZ
ELIZABETH DIAZ DE MORENO
GREGORY DILLOW, JR.
CIANG DIM
HAU DIM
THANG DIM
JOHAN DINA
ZAM DO
RICKEY DODSON
EDREYS DOMINGUEZ
SOL DOMINGUEZ
NEM DON
CIN DONG
MKSING DOPMUL
NANG DOPMUL
JUSTIN DOVER
THOMAS DREADFULWATER
SENECA DRENNAN
CATHRYN DUBBS
GOMORRHA DUNCAN
LINDA DUNEC
FERNANDO DURAN MIGUEL
RALPH DURBIN
RANDY DWIGGINS
SETH DeCOUX
WENDELL EASILEY
JEFFREY EASTER
SHEDRICA ELAM
AUSTIN EMBRY
MATTHEW EMERY-GIUFFRE
MIRANDA EMSLEY
TINISHA ENGLISH
STEVEN ERVIN
DWIGHT ESKEW*
NORBERTO ESPARZA-
TORRES
LEONARDO ESPINOZA
FLORES
JASON ESTES
JESUS ESTRADA-GONZALEZ
ROXANA ESTRELLA SALDANA
GILDA ETUMUDOR
TYLER EVANS
JOSHUA EVERETT
CHAD EVERS
ARACELY FAGLIE
SHAWN FAIRLEY
BLAKE FALUOTICO
RICHARD FAUST
AMY FEHNEL
ROBERT FERGUS
CATALINA FERNANDEZ
DAVID FERRELL, II
TINA FIELDS
THOMAS FIERROS
JESSE FIGUEROA
CHRISTIAN FIGUEROA
MAURAS
STERLYN FINCH
JESSICA FINKBINER
BRUCE FISHER
JOSEPH FISHER
RICKEY FISHER
ANTHONY FIZER
ISAAC FLAHERTY
COPOTENIA FLETCHER, JR.
CAROLINA FLORES*
EFIGENIA FLORES
ELISA FLORES
LAURA FLORES
GABRIEL FLORES-BERNAL
CHARLES FLOWERS, JR.
RUBY FLOYD
MARK FLY
DILLON FORD
SHEILA FORREST
ALEX FOSTER
CHRISTOPHER FOSTER
FREDERICK FOSTER
RAMON FOURSHEY
JOSEPH FOWLER
LORETTA FOWLKES
LINDA FOX
KENNETH FOYIL
MICHAEL FRANCIS
PHILLIP FRANK
WARREN FRANKLIN
REVONDA FRANKS
BRENDA FREEMAN
JOSE FREGOSO
OLGA FRENCH
ANGEL FRIAS
BRANDON FRICK
BARRY FRIEND
ERIC FRIEND
WADE FULLER
JERRY GABLE
RONY GADIWALLA
CURTISS GAINES
DELANO GALBREATH
JOHN GALL
ALEYDA GAONA DE MARTINEZ
ANGEL GARCIA
JOSE GARCIA
ROGER GARCIA
WUILSON GARCIA ALVARADO
ISIDRO GARCIA ARRIAGA
TERESITA GARCIA DIAZ
NORMA GARIBAY
VIVIANA GASPAR SERRANO
MICHAEL GEETER
JAMES GEORGE
PETR GETMANENKO
DOYLE GIBSON, JR.
THOMAS GIN
DEVELON GIPSON
JOSE GOMEZ
MARIA GOMEZ
RAQUEL GOMEZ
LUIS GOMEZ ACUNA
MARIA GOMEZ MEDINA
DANIEL GOMEZ-SIGALA
IMELDA GONZALEZ
MARISELA GONZALEZ
RAUL GONZALEZ
BARRY GOODSON
BUENAVENTURA GRANADOS-
RUBIOS
MEKION GRANT
MICHAEL GRAY
BA GREAT
DAVENTA GREGORY
RONALD GRIMES
DANIEL GROFF
JACKIE GRUBB
LUIS GUEVARA
MARIA GUEVARA
RODOLFO GUEVARA
VICTOR GUEVARA LANDA
CAROLINA GUILLEN
RONALD GUINN
KELLIE GURNEE
GEORGINA GUZMAN
CHAU HA
KEVIN HAINES
NGAM HAK
MARCIA HALEY
JOSHUA HALFPAP
DENNIS HALL
JACK HALL
KELLY HALL
STEPHEN HALL
ZACHARY HALSEY
NICHOLAS HAMILTON
OTIS HAMILTON
SCOTT HAMILTON
SAM HAMMOUD
BRANDON HAMPTON
WALTER HAMPTON
WILLIAM HANEY
MUNG HANG
THANG HANG
DEREK HARBIN, SR.
DYLAN HARDEN
JOHN HARDIN
KENNETH HARGER
DONALD HARRIS
NATASHA HARRIS
STACEY HARRIS
ROBERT HARVEY, JR.
HEATHER HASKINS
CING HAU
PAU HAU
THANG L HAU
THANG S HAU
NENG HAU LIAN
PAUL HAVENS
BILLY HAWLEY, JR.
MICHELLE HAYES
SOLOMON HAYES
WYATT HAYES
TIM HEFFLIN
CHAKIRIS HENDERSON
DANIEL HENDERSON
SHEILA HENDERSON
DONALD HENDERSON, JR.
KYLE HENDRICK
KENNETH HENRY
JESSE HENSON
KEVIN HENSON
ARMANDO HERNANDEZ
CORCINA HERNANDEZ
JOSUE HERNANDEZ
LINDA HERNANDEZ
LUIS HERNANDEZ
MARIANO HERNANDEZ
JOSE HERNANDEZ ESQUER
VICTOR HERNANDEZ SANTIAGO
MARK HESTON
MICHAEL HICKMAN
RONALD HICKS
BRENDA HIGGINS
LARRY HIGHFIELD
RICHARD HILDERBRAND
ESTELL HILL
RICHARD HILL
RUFUS HILL
D’ANNA HILTON
JUAN HINOJOSA
TYSON HINTHER
RONALD HISHAW, JR.
THANG HMUNG
TUANG HNIN
BON HOANG
TAO HOANG
KATHERINE HOFMANN
JARROD HOGGATT
RAY HOLCOMB
BROCK HOLMES
LAWRENCE HONEL
STEPHEN HOOVER
TERRI HORN
STANLEY HORTON
DAVID HOWARD
JAMES HOWELL, II
SAW HTOO
MUAN HUAI
NUAM HUAI
LYDIA HUDSON*
JIMMY HUGHES
FIONA HUMPHREY
JERAD HUMPHREY
LARRY HUMPHREY
KHAN HUNG
JARED HURT
LOUIS HURTADO
RONALD HUTCHCRAFT
GARY HUTCHINS
CINDI HUTTON
ALEXANDER IGNATENKOV
SAMUEL INGRAM
KHAI JA KHUP
BELINDA JACKSON*
COREY JACKSON
DAMION JACKSON
JEFF JACKSON
LEVITA JACKSON
TERRELL JACKSON
DELLA JACOBS
JOSE JAMAICA*
LUCIA JARAMILLO
ESTHER JASUAN
GENELLE JIMBOY
JOSEFINA JIMENEZ LEDEZMA
FREDERICK JIMMERSON
CHAITANYA JOHAR
AARON JOHNSON
ASHLEY JOHNSON
BRIAN JOHNSON
CHRISTOPHER JOHNSON
ED JOHNSON
GERRIE JOHNSON
JEFFREY JOHNSON
JOSEPH JOHNSON
SOPHIA JOHNSON
THOMAS JOHNSON
DANNY JONES
DAVID JONES
DUSTY JONES
GARON JONES
HENRY JONES
JEREMY JONES
MARK JONES
RAYMON JONES
REMIA JONES
ROSE JONES
SHANNON JONES
TERRENCE JONES
TIMOTHY JONES
CARSIE JONES, II
DANNY JONES, JR.
JASON JORDAN
SEAN JORDAN
JAIME JUAREZ
LEANDRO JUMELLES NUNEZ
HA KA HA
ZAM KAI
GARRETT KAISER
PATRICK KAISER
DO KAM
HAU KAM
KHUAL KAM
MANG KAM
NGIN KAM*
THAWNG KAM
BRIAN KAMMERS
DAL K KAP
DAL S KAP
HTANG KAP
KAM KAP
LIAN KAP
THANG KAP
THONG KAP
SIAN KAP LIAN
BRIAN KASTL
ERYN KAVANAUGH
LIA KAW
TUANG KAWI
NANG KAWNGTE
ANDREW KEITEL
BRANDON KELLEY
AARON KELLY
MISTY KELLY
BRIAN KELSEY
GLEN KENNEDY
GREGG KENNEDY
KEITH KENNEDY
LELAND KENNEDY
LYNN KENNEDY
ERIC KENNY
MATTHEW KERR
DANNY KESLER, JR.
DAL KHAI
DAVID KHAI
DIM KHAI
EN KHAI
GIN KHAI
GO KHAI
JOHN KHAI
KAM KHAI
KHAM K KHAI
KHAM L KHAI
LAANG KHAI
LIAN KHAI
NGIN C KHAI
NGIN T KHAI
PAU K KHAI
PAU S KHAI
PETER KHAI
THANG H KHAI
THANG K KHAI
THANG S KHAI
THANG SUAN KHAI
THAWNG KHAI
TUN KHAI
VUUM KHAI
ZAAM KHAI
THURA KHAING
DAL KHAM
DONGH KHAM
GIN KHAM
GO KHAM
MUNG KHAM
NGUN KHAM
PAU D KHAM
PAU K KHAM
THANG KHAT
CING KHAWM SIAM
CING KHAWN
CING KHEK
KAM KHEN
NIANG KHOI
DAI KHUAL
PAW KHUAL*
THANG L KHUAL
THANG S KHUAL
THAWNG KHUAL
ZA KHUAL
DAI KHUP
KAM KHUP
KAP K KHUP
KAP S KHUP
LIAN KHUP
MANG KHUP
NGIN KHUP
PAU C KHUP
PAU K KHUP
PAU L KHUP
SUAN KHUP
THANG G KHUP
THANG S KHUP
THAWNG KHUP
TUAN KHUP
JUSTIN KIDD
ALAN KILGORE
ANDREW KILGORE
RODNEY KILGORE
CIIN KIM
CING KIM
CING K KIM
CING N KIM
DAI KIM
DIM KIM
GIN KIM
HAU KIM
NIANG KIM
PA KIM
THANG KIM
THANG Z KIM
ZAM KIM
DENNIS KIMBROUGH
JOE KINCADE
MARTIN KINDLE
CLINTON KING
CODY KING
JAMIE KING
JOSEPH KING
LORI KING
RANDY KING
RUSSELL KING
KORBY KINKADE
ROGER KINKADE, JR.
MANGNEO KIPGEN
ALAN KIZER
ROBERT KNEBEL
JAMES KOSS
LARRY KREPS
MIKHAIL KRUPENYA
CASSY KUYKENDALL
NICHOLAS KUYKENDALL
NATHANIEL LABANG
PHILLIP LAFOND
GIANG LAI
DAU LAKUM
LUN LAL
TUAN LAL
GIN LAM
LANGH LAM
LAMI LAM TUNG
MYOSHIA LANDRUM
DEBORAH LANE
GIN LANG
KAP LANG
MANG LANG
PUM LANG
HAU LANGH
KAP LANGH
THAWNG LANGH
MARTIN LARSEN
JOSHUA LAUBENSTEIN
MAN LAWH
MAN M LAWH
TERRY LAWRENCE
STEVE LAWRENCE, JR.
JEFFREY LAWSON
STEPHEN LAWSON
WALTER LAZCANO
ANH LE
LAI LE
MICHEL LEBEL
JOSE LEBRON
DAVID LEE
JACQUELINE LEE
RHONDA LEE
KEVIN LEE, JR.
MATTHEW LEEPER
ARIEL LEFF
THOMAS LENNON
BOY LET
CYNTHIA LEYVA
VAH LHING
AWI LIAN
BAWI LIAN
CING LIAN
DAL LIAN
DO LIAN
DONG LIAN
GIN K LIAN
GIN T LIAN
GIN Z LIAN
GO LIAN
HANG LIAN
KHAM LIAN
LAL LIAN
NANG LIAN
NIANG LIAN
PAU D LIAN
PAU DEIH LIAN
PAU M LIAN
PAU N LIAN
PAU S LIAN
SUANG LIAN
THANG KAP LIAN
THANG K LIAN
THANG M LIAN
THANG T LIAN
TUAN LIAN
VI LIAN
VUM LIAN
LAL LIANA
SAWM LIANA
PING LIN
THOMAS LINCOLN
WILLIAM LINDSAY
KEITH LINKER
JONATHAN LOCKMILLER
MATTHEW LOEWEN
RICKY LONG
VICTOR LONG
ANGEL LOPEZ
MARGARITO LOPEZ
REBECCA LOPEZ
THOMAS LOPEZ
DANIEL LOPEZ, II
JASON LOVETT
PAUL LOWERY
OSCAR LOZANO*
RALPH LUCAS
JARROD LUDLOW
QUANNAH LUDLOW
LORENA LUJAN
CING N LUN
CING NGAI LUN
CING S LUN
DIM LUN
HKIN LUN
NGAI LUN
NGO LUN
NIANG LUN
VAN LUN
VUNG LUN
THANG LUONG
JACOB LUZIER
KO LWIN
KELLY LYBARGER
LARRY MADALONE, II
JORGE MADRIGAL
TAM MAI
CARLOS MALONE
JEFFREY MALY
CING MAN
NANG MAN
MARIA MANCILLA
MAGDALENO MANCILLA, JR.
AWI MANG
CIN MANG
DAI MANG
DAM MANG
DO MANG
EN MANG
GIN MANG
HAU MANG
HAU S MANG
KAM MANG
KHAM MANG
KHAM T MANG
KHAN MANG
KIIM MANG
LHUN MANG
LIAN MANG
LIAN MANG
LIAN N MANG
LIAN S MANG
LINUS MANG
LUKE MANG
NGIN MANG
NIN MANG
PAU MANG
SIAN MANG
SUI MANG
THAN MANG
THANG K MANG
THANG T MANG
VUNG MANG
ZAM MANG
ZEN MANG
ZUNG MANG
THANG MANGA
VALERIE MANGIAMELE
BAWK MARIP
WILLIAM MARKWARDT
MA MARQUEZ DE-
GILBREATH
MARIANA MARQUEZ
MARQUEZ
ANA MARROQUIN
ERROL MARSHALL
JONATHAN MARSHALL
PATRICIA MARTIN
WILLIAM MARTIN
FLORENTINO MARTIN-ROMO
AMANDA MARTINEZ
KAREN MARTINEZ
MOSES MARTINEZ
OBDULIA MARTINEZ
DIANA MARTINEZ
CASTANEDA
ROSA MARTINEZ FRANCO
HECTOR MARTINEZ MOLINA
THOMAS MASENGALE, JR.
BEVERLEY MASON
JAMES MASON*
SANDRA MATA
ASHLEY MATTHEWS*
CHARLES MATTOCKS, IV
PATRICIA MAUCH*
RON MAUCH
LEONARD MAXWELL
DUANE MAYFIELD
MARCUS MAYFIELD
SHANE MAYHUGH*
LATOYA MAYS
GINA MEANS
JON MEDEIROS
JESUS MEDINA
J MEDINA OLVERA
JAMES MELTON
JESUS MENDEZ
SILVESTRE MENDEZ
GONZALES
JOHNNY MERRELL, JR.
YUNIOR MESA VIEYTO
CARMEN MILAM
JORDAN MILES
RANULFA MILIAN
CHRIS MILLER
MARK MILLS
DALLAS MITCHELL
WAYNE MITCHELL
JAY MODISETTE
BIASNEY MOJICA
CASTANEDA
JOSUE MOJICA TORRES
DINORA MONROY DE DIAZ
IRIS MONTANEZ
DEBRA MONTOYA
JON MOODY
FELICIA MOON
CORDELL MOORE
HERBERT MOORE
JAMES MOORE
KASHONDA MOORE
MARC MOORE
MARIO MOORE
MARK MOORE
TONY MOORE
LUIS MORALES DE LA PAZ
ALFONSO MORAN
MICHAEL MOREHEAD
TONY MOREHEAD
EDWARD MORELAND
BERTA MORENO
JOHN MORGAN
KENDALE MORGAN
MYRON MORGAN
PHILLIP MOSS, JR.
CLAYTON MOTE
CHRISTOPHER MOUNCE
STEPHANIE MOUNCE
DO MUANG
MUA MUANG
VUM MUANG
ARNA MUKHERJEE
ERIC MULLINIKS
THANG L MUN
THANG S MUN
CIN D MUNG
CIN K MUNG
CIN T MUNG
DAII MUNG
DAL MUNG
EN MUNG
GIN D MUNG
GIN S MUNG
HANG MUNG
HAU MUNG
HERO MUNG
KHAI MUNG
KHAM MUNG
KHUAL K MUNG
KHUAL S MUNG
KHUP MUNG
KHUP G MUNG
LANG MUNG
LIAN MUNG
NANG MUNG
PAU MUNG
SONG MUNG
SUAN G MUNG
SUAN S MUNG
THANG K MUNG
THANG L MUNG
THANG S MUNG
TUAL MUNG
VUM MUNG
VUNG MUNG
ZAM MUNG
GABRIEL MUNIZ GONZALEZ
JESUS MUNOZ
REBECA MUNOZ
CRAIG MURPHY, II
JOHN MUTANDA
DAVID MYERS
COURTNEY McAFEE
TINA McBEATH
ROBERT McBOWMAN
MYKEA McCALISTER
IAN McCARTY
ROBERT McCLEARY
DIRK McCLELLAN
MICHAEL McCONNELL
ROY McCONNELL
DEBRA McCOWAN
WESLEY McCOWAN, JR.
PAULA McCRARY
MICHAEL McCUIN
KATHY McCULLOCH
LOYD McDANIEL
RANDALL McDANIEL
JAMES McELROY
CLAYTON McFALL
MARCUS McFARLING
JOSHUA McGEE
RONNIE McGEE
JOHN McINTYRE
DANIEL McKEE
DENNIS McKINNEY
DOMINGO McKNIGHT
JOHN McNEVIN
SAW NAING
DIEGO NAJERA
AH NAN
LAWRENCE NANG
PAU NANG
SING NANG
THAWNG NANG
THOMAS NANG
JOSE NAVA
MARIA NAVA
ABEL NAVEJAS
LIAN NAWL
CLAYTON NEAL
SAMUEL NEALE
ZAMLAM NEIHKHUP
NATALIE NEILSON
PAMELA NEISLER*
NIANG NEL
CIIN NEU
SOLOMON NEU
TONY NEWHOUSE
CING NGAI
MANG NGAIH
THA NGE
NUAM NGIN
HAUNUNG NGIN PI
THAN NGIO
EN NGO
ALVIN NGUYEN
DIEP NGUYEN
DUONG NGUYEN
KHANH NGUYEN
NOI NGUYEN
THANH NGUYEN
CIN NIANG
CING K NIANG
CING L NIANG
DIM H NIANG
DIM L NIANG
EN NIANG
ESTHER NIANG
GO NIANG
HAU NIANG
KAP NIANG
LAM NIANG
MANG NIANG
NEM NIANG
VUNG D NIANG
VUNG L NIANG
VUNG M NIANG
VUNG S NIANG
ZEL NIANG
MUNG NIANGBAWL
KENNETH NICHOLS
LIROY NICHOLS
ZAM NING
CING NO
ROBERT NO
THANG NO
CHRISTOPHER NORFLEET
WILLIE NORFLEET
ROBERT NORFLEET, JR.
ERIC NORRIS
TUMAI NPAWT
NGIN NTEM
KIM NU*
CIIN NUAM
CING NUAM
CING NUAM
MAN NUAM
NIANG NUAM
NING NUAM
JOHN NUTT
MICHAEL O’BRIEN
JAMES O’NEILL, JR.
ALEXANDER OFOSU
RICKEY OGANS
JOHN OGLE
KEJUAN OLIVER
ANTHONY OLIVERAS
ERIC OLSON
SUNDAY OMASERE
BENJAMIN ORME
LETICIA ORONA
MARGARITA ORONA
FELIPE ORTIZ
JESSICA ORTIZ ESTRADA
DAVID OSBORNE
SHANNON OSEI
OFELIA OSUNA
OLIMPIA OTERO CHAVEZ
JENNIFER OVERMEYER
TREVIN OWENS
GERARD PACHECO
LUIS PACHECO
HUGO PADILLA
MARK PAGE
BENJAMIN PALMA
WILLIAM PALMER, JR.
DIANA PANTOJA
BILLY PARKER
JEFF PARKHURST
JASON PATE
CORRY PATTERSON
CHIN PAU
CIANG PAU
CIN PAU
DAI PAU
DAL PAU
GIN S PAU
GIN SIAN PAU*
GIN SUAN PAU
KAM PAU
KHAWM PAU
LANG PAU
LIANG PAU
MUNG PAU
NANG PAU
NENG H PAU
NENG K PAU
THANG PAU
THAWNG PAU
THAWNG PAU
TUAL PAU
ZAM PAU
ANGELA PAULSEN
MANI PAZHANATHADALAM
TRAVIS PEARSON
VLADIMIR PENIAZ
BRENDA PENTECOST
CESAR PEREZ
SERGIO PEREZ
HECTOR PEREZ ARIAS
KIMBERLY PERSONS
JOHN PETERS
LADRUE PETERS
ANITA PETERSON
BRADY PETTIE
EMMITT PETTIGREW, JR.
DANIEL PEURIFOY
KINH PHAM
ADRIANA PHILLIPS*
ALEXANDER PHILLIPS
BRANDON PHILLIPS
MICHAEL PHILLIPS
ALEXANDER PHOMPRIDA
ALBERT PI
HAU PI
THANG PI
THOMAS PI
DO PIANG
GO PIANG
GOH PIANG
THANG K PIANG
THANG L PIANG
THANG LAMP PIANG
VAN PIANG
CHRISTOPHER PICKENS
SHARON PICKETT BROOKS
MAYRA PINA
PEDRO PINA-VALLES
JOSE PINEDA
DIXAN PITA MENDEZ
CLIFFORD PITCHFORD
HUNTER PITTMAN
KENDALL PITTS
MICHAEL PLUMMER
SHILOH PLUMMER
OSIEL POBLETE BARTOLO
BASANT POKHREL
RENU POKHREL
HTINRAM PONGKUM
MARK POOL
DAMYIEN PORTER
RUDY POWELL
GREG POWERS
JEFFERY POWERS
JOSE PRADO*
KENNETH PRENTICE, JR.
ERIC PRICKETT
JAMES PRIDE
LEE PRINCE
KHAI PU
LIAN PU
MUANG PU
PETER PU
PETER PU
TUANG PU
ALMA PUGA
DANIEL PUGA, JR.
KHAI PUI
THANG PUI
THANG PUNO
DARRELL PURSER
JAVIER QUEZADA
HOLLY RALSTON
ADRIAN RAMIREZ
ANTONIA RAMIREZ
RAYMON RAMIREZ
WILLIAM RAMIREZ
YOSSELIN RAMIREZ AGUILAR
NANDY RAMIREZ B
FRANCISCO RAMIREZ CORTEZ
GEMMA RANGELOFF
ROBERT RATLIFF
KYLE RATZLAFF
TERRY RATZLOFF
SHA RAW
ROBERT RAYNO
KEIANYA RAYSON
THOMAS READ
DIEGO REBOLLAR-MARIN
PEGGY REDDEN
CHRISTOPHER REED
JAMES REED
FREEMAN REED, JR.
MARGARET REEVES
FEDORA REGUS
STEPAN REGUS
ALBERTO RENDON PARRA
RODOLFO RENTERIA
SVYATOSLAV RESHETOV
AGUSTIN REYES, JR.
THOMAS REYNOLDS
DANIEL RHOADES
DAVID RICHARDSON, JR.
ROBERT RIDDELL
ANGELA RIDEOUT
COREY RIDER
BRETT RIEGEL
DELMECIO RISER
HILLARY RITE
RAMON RIVERA
RAFAEL RIVERA PENA
DEMARIO RIVERS
KEVIN ROADCAP
CARL ROBERTS
DAVID ROBINSON, JR.
RAYMOND RODEN
FRANCISCO RODRIGUEZ*
HECTOR RODRIGUEZ
MARIA G RODRIGUEZ
MARIA L RODRIGUEZ
REBECCA RODRIGUEZ
RIVELINO RODRIGUEZ
JESUS RODRIGUEZ
SANTIBANEZ
J RODRIGUEZ-FLORES
DON ROGERS
TONY ROGERS
TONYA ROGERS
BRENT ROGERS, JR.
LIDIA ROJAS
NELSON ROJAS
CALEB ROLLS
OSCAR ROSE
CASEY ROSS
CATHERINE ROSS
RICHARD ROWE, JR.
ITZIA RUIZ
RICARDO RUIZ
ADAN RUIZ, JR.
AVA RUSSELL
KIMBERLY RUSSELL
LORENZA SALAS
ABELINO SALAZAR
ADAN SALAZAR
NORA SALAZAR
WALTER SALAZAR
MARIA SALDIVAR*
MIGUEL SALDIVAR
VICTOR SALDIVAR
JOSE SALDIVAR OREPEZA
DAVID SALEGO
DIANA SALINAS
AH SALUPTA
CIIN SAN
BEATRIZ SANCHEZ
JESUS SANCHEZ
TANISHA SANDERS
MICHAEL SANDOR, JR.
CIN SANG
KHUP SANG
LIAN SANG
MANG SANG
THANG SANG
THIAM SANG
TUAN SANG
ZAM SANG
LAL SANGI
AGUSTIN SANTANA
WENCESLAO SANTIAGO
BASILISA SANTIAGO AVILA
IGNACIO SANTILLAN
RUDY SANTOS
REBECCA SAR
JAMES SATRE
ERICK SAWYER
NANG SBSUM
WILLIAM SCHAROSCH
THANG SEI
TONG SEI
NEM SEN
ROI SENG
MARIA SERRANO DE TORRES
CARROL SHACKELFORD
DOUGLAS SHEEHAN
KATHY SHEFFIELD
VIRGIL SHELTON
VASILIY SHEMEREKO
KATHLEEN SHEPARD
JACKIE SHEPHARD
LYNNDA SHEPHERD
MATTHEW SHINAULT
NAA SIAM
ZAM SIAM
CIIN SIAN
NGIN SIAN
PAU SIAN
MANG SIAN KHAI
STEPHEN SIECK
NELSON SIERRA
CORY SIMMONS
JERRY SIMMONS
DWAYNE SIMPSON
ANTHONY SING
DAAI SING
DAL SING
DO SING
KHAM SING
NANG SING
THAWN SING
MELINDA SINGLETON
CHRISTOPHER SISSOM
COURTNEY SITTEL
SARA SIVIERO
MICHAEL SKINNER
IAN SLATTERY
DANNY SLAYTON
LLEWELLYN SLAYTON
DEBI SLOAN
LARRY SLONE
BRETT SMITH
DAVID SMITH
JEFFERY SMITH
JUSTIN SMITH
PRESLEY SMITH
RENALDO SMITH
RICARDO SMITH
RYAN SMITH
TREQUEEL SMITH
ANTHONY SMITH, JR.
WILBERT SMITH, JR.
KAP SO TE
SHOWE SOE
JOSE SOLARES
MARIA SOLIS
NEMISIA SOLIS
CLENT SOUTHERLAND, II
BRADLEY SOUTHERN
KEVIN SOUVANNASING
DENNEY SOWDER
JOHN SPAIN, III
RONNIE SPARKS
JAMESON SPIRES
MICHAEL SPORTEL
LAWANA STANE
JOEL STANER
VINCENT STEADMAN
PAUL STEARMAN
JAYME STEDMAN
BRENT STOCKTON
KEVIN STODDARD
SCOTT STOLTZFUS
KATHRYN STONE
MICHAEL STRAUB
HAU SUAN
KIM SUAN
NGIN SUAN
NIN SUAN
PAU SUAN
THANG SUAN
VUNG SUAN
ZEN SUAN
PETER SUAN MUI
PAUL SUAN MUNG
TUANG SUAN MUNG
KHAM SUANTAK
HAU SUM
PAU M SUM
PAU S SUM
WA SUM
PAU SUT
JACK SWEET
ERIC SYPERT
KAM TA
JAMES TABER
WILLIAM TANKERSLEY
KEITH TANNER
WHITNEY TAPP
JOE TART
LARRY TATE
MARK TATE
NEKESHA TATUM
TENNA TATUM
BEVERLY TAYLOR
CHARLES TAYLOR
DEBORAH TAYLOR
ERIC TAYLOR
ANDREA TEAKELL
KEVIN TEAKELL
ROBERT TEIS
BENJAMIN THANG
CIN THANG
CIN L THANG
CIN LIAN THANG
CIN P THANG
CIN S THANG
CIN Z THANG
DAI THANG
DO THANG
GIN THANG
GO THANG
HAU THANG
HAU N THANG
HAU S THANG
KAM L THANG
KAM S THANG
KAM SUAN THANG
KAM K THANG
KHAI THANG
KHAM H THANG
KHAM K THANG
LAM THANG
LIAN K THANG
LIAN S THANG
MANG M THANG
MANG T THANG
NGIN L THANG
NGIN S THANG
NGUN THANG
PAU KAP THANG
PAU KHAN THANG
PAU KIM THANG
PAU SIAN THANG
PAU SUM THANG
SUAN THANG
THAWNG THANG
ZEN THANG
LIAN THANG LAM
PETER THANGPI
SUAN THAWN
THANG K THAWN
THANG THAWN
THANG THAWN
TUAL THAWN
LANG THAWNG
NI THAWNG
BRIAN THOMAS
FRED THOMAS
GERALD THOMAS
RACHEL THOMAS
BRIAN THOMAS, SR
CHERYL THOMASON
ARCHIE THOMPSON
REBECCA THOMPSON
LARRY THROCKMORTON
TUAN THUNG
JESSICA THURBER
KELLY THURBER
TED TIGER
GABRIELA TIRADO
LAL TLING
THAWNG TLUANG
WILLIAM TOBAR
DEBBIE TOMLIN
REINALDO TORRES
CESAR TORRES BIBIANO
HIEP TRAN
TUONG TRAN
JIM TRAVER
MARK TRIBBLE
HA TRINH
KIMBERLY TROCHEZ RIOS
SENG TU
CIN K TUANG
CIN S TUANG
KAM TUANG
KAM K TUANG
KHAM TUANG
SIAN TUANG
SING TUANG
SUANLAM TUANG
THANG L TUANG
THANG LAM TUANG
THANG Z TUANG
TUN TUANG
VUNG TUANG
NGIN TUN
ZAM TUN
DAVID TUNG
KAAM TUNG
KAM TUNG
LANGH TUNG
MUNG TUNG
THANG TUNG
THAWNG TUNG
MICHAEL TUNNELL
PAUL TURBE
DAVID TURLEY
RANDAL TYER
PHYLLIS TYISKA
DAVID TYLER
JAMES TYLER
JESSICA TYLER
JACOB TZANG
JESUS TZUL
PAU UAP
DAWN UNDERWOOD
PERNELL UNDERWOOD
TONY URICH
MARIA URQUIZA
YADIRA URQUIZA
VICKI VAIL
JULIO VALLE
BRENNEN VANCE
ZACHARY VANCE
ALLEN VANG
SUA VANG
TUCKER VANKALSBEEK
JOHN VANNESS
BRANDON VANZANDT
SHAWN VAWTER
JUAN VAZQUEZ
ROSA VELA
ANTONIO VELASCO
JAMES VELDE
JUAN VENCES
ANGEL VENEGAS
DESTINY VERA
SALOME VERA
JAMES VERHAMME
GEORGE VERRETT
JEREMY VICK
TERESA VICTORY
EFRAIN VILLA
EFRAIN S VILLA
RAULITO VILLANUEVA
SELINA VIRAMONTES
CUONG VO
TONG VO
CHUAN VU
THU VU NGUYEN
HOUA VUE
CIIN VUNG
CING VUNG
MARY VUNG
NIANG L VUNG
NIANG S VUNG
NING VUNG
MARK WAKEFIELD
STEPHEN WAKEFIELD
WHITNEY WAKEFIELD*
DIANA WALKER
JOSHUA WALKER
PATRICK WALKER
RODERICK WALKER
HAROLD WALKER, JR
RONALD WALKER, JR
DAVID WALKUP
BARRY WALL
AMILCAR WALLACE
KIM WALLACE
SANTONNIEYEO WALLACE, III
TODD WALLINGFORD
PHILLIP WALLIS
JASIMINE WALTER
DARIUS WALTERS
MISTY WALTERS
GAYLE WARD
PERRY WARNER
RYAN WARREN
RACHQUEL WARRIOR
ANTHONY WASHINGTON
LACEJI WASHINGTON
JONATHAN WATASHE
ANDRE WATKINS
RONNIE WATKINS
STEVEN WATKINS
BOONE WATSON
BRYAN WATSON
NICHOLAS WATSON
ANTHONY WELCH
JOE WELCH
MARCEL WELCH
RANDOLPH WESSON, III
KELLY WEST
SHARON WEST
JIMMY WHEELER
WILLIAM WHEELER
DEBORAH WHITAKER
HARVEY WHITAKER
JONATHAN WHITAKER
JAMES WHITE
KYLE WHITE*
TIMOTHY WHITE
JOHN WHITEFIELD
DAVID WHITLOCK
STEVEN WHORTON
GORDON WICHMAN
JACKIE WILES
JERRY WILES
MICHAEL WILES
JAMES WILKINSON
ANTHONY WILLIAMS
CHANTE WILLIAMS
CHERAY WILLIAMS
DEMARCO WILLIAMS
DONNA WILLIAMS
GARY WILLIAMS
JUSTIN WILLIAMS
KATHERYN WILLIAMS
KIMBERLY WILLIAMS
LATRENIA WILLIAMS
NICOLE WILLIAMS
RODNEY WILLIAMS
AARON WILLIAMSON
JAMES WILLIAMSON
JEREMY WILLIAMSON
CLYDE WILLIS
BRANDI WILSON
CHRISTOPHER WILSON
ISAAC WILSON
JAMES WILSON
SCOTT WILSON
JOSEPH WILSON, III
NAW WIN
THOMAS WINGO
MICAH WISDOM
JACK WITT, JR.
RILEY WOOD
RONALD WOOD
CODY WOODARD
RONNIE WORTHAM
KASEY WORTHINGTON
BENJAMIN WRIGHT
BARRY WYERS
JIM WYRICK
LINDA WYRICK
PATRIAL YARBROUGH
KEITH YOUNG
MARC YOUNG
SAM YOUNG
LANG ZAHLANGH
CING ZAM
NU ZAM
THANG ZAM
DAUNG ZAUNG
AURORA ZAVALETA
LUIS ZEPEDA
JUAN ZERMENO
VIRGINIA ZERMENO