2017 Annual Report
Record sales and earnings continued in 2017, with $405.2 million
in net sales and $54.5 million in net income. Our focus this year
on One AAON continued our commitment to exceed customer
expectations. We unified our customer support, simplified our
warranty support program, enhanced our sales representative
training programs and advanced
and service
construction on the Norman Asbjornson Innovation Center. We are
determined to deliver this same excellence to our stockholders.
technician
Company Profile
in
is engaged
the engineering, manufacturing, marketing and sale of
AAON
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/water-source
heat pumps, coils and controls. 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.
2425 S. Yukon Ave.Tulsa, OK 74107-2728 www.AAON.comHeating and Cooling for...AuditoriumsConvenience StoresHealth ClubsHealth Care FacilitiesHomesLodgingsManufacturingMuseums & LibrariesNatatoriumsOffice BuildingsRestaurantsRetail StoreSchoolsSupermarkets CONTROLS(WSHP, RTU, SELF-CONTAINED, & SPLIT SYSTEM)COILSBOOSTER, HYDRONIC, & DXSA SERIESSB SERIESM2 SERIES(3-70 tons)INDOOR AIR HANDLING UNITSF1 SERIESV3 SERIESSA SERIESH3 SERIESM2 SERIESM3 SERIES(800 - 100,000 + cfm)M2 SERIESSA SERIESSB SERIESRQ SERIESRN SERIESRZ/RL SERIESVERTICAL & HORIZONTAL WSHP(½ - 230 tons)ROOFTOP UNITS(2-240 tons)RZ/RL SERIESRN SERIESRQ SERIESPACKAGED OUTDOOR MECHANICAL ROOMS(4-540 tons)BOILER MECHANICAL ROOMLF SERIESLN SERIESFLUID COOLERLZ SERIESOUTDOOR AIR HANDLING UNITS RN SERIESRQ SERIES(800 - 100,000 + cfm)RZ/RL SERIESCONDENSING UNITSCB SERIESCF SERIESCN SERIESCL SERIES(2-230 tons)Touchscreen ControllerPioneer GoldPioneer SilverAAON/WattMaster Financial Highlights
2017
2016
2015
2014
2013
405,232
123,397
74,103
298
15,007
74,492
54,498
1.04
1.03
103,662
153,727
142,375
149,963
21,457
296,780
50,065
-
237,226
4.47
57,994
(31,052)
(29,638)
(2,696)
30.5%
24.6%
19.7%
18.4%
13.4%
0.3
1.6
3.1
35
383,977
118,080
79,594
292
13,035
79,991
53,376
1.01
1.00
101,939
140,981
114,892
137,146
24,153
256,530
39,042
-
205,898
3.85
63,923
(16,925)
(30,753)
16,245
30.8%
27.7%
21.8%
20.8%
13.9%
0.2
2.4
3.6
33
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
55,355
(23,194)
(46,205)
(14,044)
30.3%
25.9%
19.9%
19.9%
12.8%
0.3
2.1
2.9
28
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
53,518
(6,029)
(37,622)
9,867
30.4%
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
28.0%
24.8%
18.8%
17.5%
11.7%
0.3
2.5
3.0
31
Income Data ($000 except per share data)
Net Sales
Gross Profit
Operating Income
Interest Income (Expense), Net
Depreciation
Pre-Tax Income
Net Income
Earnings per Share
Basic1
Diluted1
Balance Sheet ($000 except per share data)
Working Capital3
Current Assets3
Net Fixed Assets
Accumulated Depreciation
Cash & Cash Equivalents
Total Assets3
Current Liabilities
Long-Term Debt
Stockholders’ Equity
Stockholders’ Equity per Diluted Share1
Funds Flow Data ($000)
Operations
Investments
Financing
Net Increase (Decrease) in Cash
Ratio Analysis
Gross Profit
Return on Average Equity
Return on Average Assets
Pre-Tax Income on Sales
Net Income of Sales
Total Liabilities to Equity
Quick Ratio2
Current Ratio
Year-End Price Earnings Ratio1
1 = Reflects 3-for-2 stock splits in July 2014 and July 2013
2 = (Cash & cash equivalents + investments + receivables)/current liabilities
3 = Reflects retrospective adoption of ASU 2015-17
Letter from the CEO and President
Norman Asbjornson
CEO and Founder
Gary Fields
President
demand for our expanded and
Dear Fellow Stockholder,
Aided by an improving economic environment,
improved
product line remained firm which enabled the
Company to once again post record sales and
earnings for the year ended December 31, 2017.
The new construction and replacement markets
contributed equally to our sales growth.
improved our product
We expanded and
offerings through a continuing commitment to
significant capital and personnel expenditures.
These
to
sustain
the most
reputation as one of
technologically innovative leaders in the HVAC
industry while delivering excellent
long-term
value to both our customers and stockholders.
investments enabled
its
the Company
v SALES AND EARNINGS
in 2017 gained 5.5% to $405.2 million,
Net sales
compared to $384.0 million in the prior year. The number
of units sold rose 11.9% to 23,381, but the shift to
smaller tonnage lower priced units—which began in
2015 — continued through most of the year, which
tempered our revenue growth. Gross profit increased 4.5%
from
to
(30.5%
and
$118.1
reflected
raw
higher
material costs, along with the shift in product mix. SG&A
expenses increased 27.9% to $49.2 million (12.2% of sales)
from $38.5 million (10.0% of sales), impacted by higher
warranty expenses as well as increases in wages and
benefits.
$123.4 million
million
somewhat
revenue)
revenue)
and
of
of
(30.8%
labor
income,
Operating
the higher SG&A
impacted by
expenses, declined 6.9% to $74.1 million (18.3% of sales)
from $79.6 million (20.7% of sales). The Tax Cuts and Jobs
Act enacted in December 2017 had a beneficial impact on
our corporate tax rate, which was lowered from 35% to 21%.
Due to this change, our income tax provision benefited by
increased 2.1% to $54.5
$4.4 million. Net earnings
million (13.5% of sales) from $53.4 million (13.9% of sales).
Earnings per share on a fully diluted basis were $1.03 versus
$1.00 per share a year ago.
STRONG FINANCIAL CONDITION
Our financial condition was quite strong at December 31,
2017. The current ratio was 3.1:1, with cash and short-term
investments of $30.4 million. Our capital expenditures in the
past year were $41.7 million and we paid cash dividends
of $13.7 million. During 2017 we purchased AAON
stock from our employees’ 401(k) plan amounting to
approximately $16.3 million. We continue to operate free
of debt. Total stockholders’ equity was $237.2 million or
return on average
share. Our
$1.03 per diluted
stockholder equity was 24.6%. Aided by a 3% price
increase implemented in November 2017, our backlog at
December 31, 2017 climbed 65.4% to $81.2 million, versus
$49.1 million for the same period a year ago.
During the past five years we have made total capital
expenditures of $114.4 million and total dividend payouts
of $55.4 million. Our cash flow generation combined with
our capital position enabled the Company to accommodate
these expenses while excess free cash flow was sufficient to
repurchase $113 million of stock during the same period.
CAPITAL EXPENDITURES
Over the past two decades we have worked diligently to earn
a reputation as one of the most technologically innovative
producers of the highest quality and most efficient products
in the HVAC industry. In order to sustain this lofty reputation,
we must continue to expend both the financial and human
capital necessary to maintain that industry position.
For 2018 we are projecting capital expenditures of
approximately $53 million, the highest
in the
Company’s history.
level
increased capital spending with $12.3
In 2017 we
million directed toward the building of our new Norman
Asbjornson Innovation Center research and development
testing laboratory, which is expected to open in the late
7
v We are confident the end result will be a company — One AAON
— which is marked by a unified culture and cohesive approach
in operating its business and interacting with its customers and
suppliers.
acoustical
to
and
testing
fall of this year. The total cost of this facility is estimated
at $32.0 million. The 134,000 square foot state-of-the
and
both
art
an
be
facility will
our
laboratory
performance measuring
knowledge will be
facility of
largest
the
its kind in the world. In addition, we had expenditures
of
of
production lines for our new Water-Source Heat Pump
(WSHP) products. Finally, we had expenditures for the
replacement and repair of machinery.
$6.4 million
installation
continue
to
For 2018 we estimate capital expenditures of $53 million.
The completion of the new Norman Asbjornson Innovation
Center is anticipated to cost $8.0 million and we will spend
approximately $18.0 million to install two additional WSHP
assembly lines. The remainder of our expenditures will
be devoted to the repair and replacement of equipment as
well as the expansion of our plant. It is important to note
that over the past five years (2013-2017) we have spent
approximately $114.4 million on our plant and equipment
and this year we expect to witness another record year of
capital spending.
“ONE AAON” INITIATIVE
At AAON, we are constantly challenging ourselves and
searching for ways to improve. In this regard, we are
currently working on ways to better integrate our Tulsa,
8
Oklahoma and Longview, Texas locations to ensure a more
unified culture and cohesive approach in all aspects of our
business. We have labeled this endeavor the “One AAON”
initiative.
resulted
customer
improvements
initiative has already
to our
in
The One AAON
significant
service
experience, which included streamlining the interaction
process for our customers by routing all customer service
calls to a single dedicated telephone number and email
address for both locations. We have also increased our
dedicated customer service staffing levels and strive for
all customer service calls to be answered in less than three
rings. Additionally, customer service emails are processed
by the same dedicated customer service personnel, which
allows us to better monitor customer service activities and
also require enhanced accountability from our personnel.
in the
The One AAON approach has also resulted
Company’s product management efforts being centralized
in Tulsa (rather than being conducted at both locations) due
to our Tulsa facility’s significant research and development
capabilities. We are currently integrating our Engineering
departments, as well as our Manufacturing Engineering
departments, and are confident our efforts will result in
AAON achieving more consistent product design regardless
of location of manufacture.
The changes brought about to date by our One AAON
initiative have been recognized and well received by our
independent sales representatives and customers. We
have several other areas of focus for our One AAON
initiative and we look forward to continuing this effort
during 2018 and beyond. We are confident the end result
will be a company—One AAON—which is marked by a
unified culture and cohesive approach in operating its
business and interacting with its customers and suppliers.
AAON was also pleased to have each of its WH Series
Water-Source Heat Pump, V3 Series Energy Recovery Wheel
Air Handling Unit, and Touchscreen Controller voted 2017
Product of the Year by the readers of Consulting-Specifying
Engineer, a monthly publication with a circulation of over
47,000 mechanical, electrical and plumbing engineers.
These awards highlight our commitment to designing
innovative HVAC products of the highest quality and
performance.
RECOGNITION AND AWARDS
AAON was recognized for excellence in product design in
the 14th annual Dealer Design Awards Program sponsored
by The Air Conditioning Heating & Refrigeration News
magazine. An independent panel of contractors acted
as judges in the contest, which had 81 entries. The
Company’s WH Series Water-Source Heat Pump was
the Gold Award Winner in the Light Commercial HVAC
Equipment category and the company’s V3 Series Energy
Recovery Wheel Air Handling Unit was the Silver Award
Winner in the Commercial Equipment category in the July
24, 2017 issue of the ACHR News, which is the leading trade
magazine in the heating, ventilating, air conditioning, and
refrigeration industries, with national distribution to over
33,000 HVACR contractors, wholesalers and other industry
professionals.
AAON WH Series Small Packaged
Water-Source Heat Pump Units
configuration
Series horizontal
AAON WH
small
packaged Water-Source Heat Pumps lead the industry with
innovative design, performance, and serviceability. The
WH Series features replacement ready sizes that match
conventional water-source heat pumps and are now
stocked and ready to ship. Quality is designed into the WH
Series with
all
aluminum cabinet with closed cell neoprene foam rubber
insulation, induction brazed copper piping, and stainless-
steel condensate drain pan. Tool-less service panels provide
access to the controls, compressor, and fan. Bottom service
panels provides quick and easy access to the expansion
valve, reversing valve, filter drier, fan, and air filters after the
unit has been installed in place.
standard
designs
include
that
AAON V3 Series Energy Recovery Wheel Vertical Air
Handling Units provide energy efficient 100% outside air
ventilation, while being easy to install because of a compact
footprint and easy to maintain because of large service
access. Available from 450 to 10,000 cfm with overlapping
cabinet sizes for application flexibility, the high performance
includes high
V3 Series with energy recovery wheel
9
efficiency variable speed ECM driven direct drive backward
curved plenum supply and exhaust fans, and double wall
rigid polyurethane foam injected panel construction with
lockable hinged service access doors.
V3 Series Energy Recovery Wheel
Vertical Indoor Air Handling Units
We have also developed
the AAON Touchscreen
Controller. This controller is an economical HVAC unit control
solution for energy savings applications. It controls complex
energy saving operations without requiring the expense of
a large building automation system. The AAON Touchscreen
Controller includes a user friendly touchscreen interface and
can function as a stand-alone unit controller or as part of a
networked system.
AAON Touchscreen Controller
AAON’s growth and success during his lengthy tenure with
the Company. Mr. Fergus’s duties were reallocated among
Mikel D. Crews, Vice President of Operations (an officer of
the Company), Hunter Mattocks, Director of Manufacturing
(a member of the Company’s Senior Leadership Team), as
well as other Company personnel.
In November 2017, Kathy I. Sheffield, Senior Vice President
of Administration and Treasurer, also retired from AAON after
30 years of service with the Company in multiple positions.
Ms. Sheffield made significant contributions to AAON and
contributed to its growth and success over the past 30 years.
Ms. Sheffield’s duties were reallocated among Rebecca
A. Thompson, Chief Accounting Officer, and other Company
personnel.
sales
independent
SALES REPRESENTATIVES NETWORK
We have been in the process of improving our sales
channels for several years and believe our continued efforts
in AAON enjoying the strongest group
have resulted
of
organizations
in our industry. In 2017, we continued to refine our
independent sales representative network. We changed four
sales representative firms in the United States and two in
Canada. Our efforts in three of these areas yielded
immediate increased sales and we continue to have high
expectations for all of our sales representative organizations.
representative
EXECUTIVE LEADERSHIP CHANGES
In April 2017, Robert G. Fergus, Vice President of
Manufacturing, retired from AAON after nearly 30 years
of service. Mr. Fergus made important contributions to
OUR EMPLOYEES
AAON strives to be the employer of choice by building
a culture of mutual trust, promoting the entrepreneurial
spirit and recognizing talent and hard work. AAON attracts
10
We are fortunate to have a large number of talented, engaged and committed
team members and we make every effort to foster an environment where the
next generation of AAON leaders are identified, supported and developed in a
manner that maximizes their potential and ability to contribute to the sustained
growth of AAON well into the future.
and retains a talented workforce using competitive base
pay, profit sharing, and employee benefits. We expand
our compensation for those evaluated more favorably each
year with a variable mix of equity and cash incentives.
We provide equity compensation, typically comprised
of non-qualified stock options, to a broad base of
employees to align the interests of our employees with
term.
stockholders over a
those of our
We also distribute 10% of our annual pre-tax
earnings equally among nearly all personnel as a more
rapid means to reward positive results.
is our
belief that motivating our employees to think and behave
like owners of the Company helps drive our success and
motivates team members to strive for results, commit to
continual improvement, save for the future, care for their
health and remain fully-engaged in the long-term success
of AAON.
longer
It
in conjunction with moving our employee performance
review period to the end of the calendar year. Going
forward, it is our intent that equity grants to both executives
and the broad pool of non-executives will be made in closer
proximity to each other.
AAON values the diverse perspectives represented by
the over 68% of our team members who are minorities
and the more than 26% who are female. We are proud
that our team members represent over 30 countries
and that all team members have equal opportunities
to advance within our organization.
talent
team
efforts
development
members for internal advancement opportunities through
as
internal workforce
program.
as
well
Our
train
reimbursement
development
initiatives,
actively
tuition
our
in the timing of the
issuance of
Due to a change
equity awards to employees as a whole, you will see that
we issued equity awards to our executives in early 2017 but
very little to our broader team member base at that time.
Our 2016 equity grants for non-executives were made in the
fall of 2016 while the awards made as a result of the 2017
in early 2018,
performance
reviews were made
We are fortunate to have a large number of talented,
engaged and committed team members and we make
every effort to foster an environment where the next
generation of AAON leaders are identified, supported and
developed in a manner that maximizes their potential and
ability to contribute to the sustained growth of AAON well
into the future.
11
OUTLOOK
As we enter our 30th year of operations, we now more than
ever recognize the need to maintain our aggressive posture
for our capital expenditure and research and development
efforts as well as our pursuit and recruitment of skilled
personnel.
We have posted an excellent
record of sales and
earnings growth and we look forward to an acceleration of
growth aided by new product introductions, the Norman
Asbjornson Innovation Center research and development
testing laboratory as well as the change in operating
philosophy creating One AAON. We can achieve our
goals with the continuing support and cooperation of our
customers, sales representatives and stockholders, combined
with the total commitment of our employees, all of whose
names appear at the end of this report.
On Monday, October 29, 2018, we have been invited by
NASDAQ to ring the opening bell for trading on the NASDAQ
stock market. We are honored by this invitation and we hope
you will view the ceremony online or on your local financial
news television network.
Sincerely,
Norman H. Asbjornson
Chief Executive Officer and Founder
Gary D. Fields
President
March 9, 2018
12
The state-of-the-art laboratory facility will be able to measure both acoustics and thermal
performance. To our knowledge it will be the largest testing facility of its kind in the world.
The Norman Asbjornson Innovation Center is expected to open in Fall 2018.
A Timeline of Success
1990 » December
Listed on NASDAQ Small Cap -
Symbol “AAON”.
1991 » December
Formed AAON Coil Products, a Texas
Corporation, as a subsidiary to
AAON, Inc. (Nevada) and purchased
coil making assets of Coil Plus.
1988 » August
AAON, an Oklahoma
corporation, was founded.
1988 » September
Purchase of John Zink Air
Conditioning Division.
1989 » Spring
AAON purchased,
renovated and moved into a 184,000
square foot plant in Tulsa, Oklahoma.
Introduced a new product line of
rooftop heating and air
conditioning units 2-140 tons.
1989 » Summer
Became a publicly traded company
with the reverse acquisition of
Diamond Head Resources (now
“AAON, Inc.), a Nevada corporation.
1996 » December
Purchased 40 acres with 457,000
square foot plant and 22,000 square
foot office space located across from
Tulsa facility.
1997 » April
AAON received U.S. patent for
Blower Housing assembly.
1999 » Spring
Completed Tulsa, Oklahoma and
Longview, Texas plant additions
yielding a total exceeding one
million square feet.
1998 » October
U.S. patent granted to AAON for air
conditioner with energy recovery
heat wheel.
1998 » November
AAON yearly shipments exceed
$100 million.
Received U.S. patent for Dimple
Heat Exchanger Tube.
Company Timeline • 1988-2003
1992 » Spring
AAON Coil Products purchased,
renovated and moved into a 110,000
square foot plant in Longview, Texas.
1993 » November
Listed on the NASDAQ
National Market System.
1994 » January
Introduced a desiccant heat
recovery wheel option available on
all AAON rooftop units.
1995 » September
Completed expansion of
the Tulsa facility to 332,000
square feet.
1992 » September
One-for-four reverse stock
split. Retired $1,927,000 of
subordinated debt.
2000 »
1994 » March
Purchased property with 26,000
square foot building adjacent
to AAON Coil Products plant in
Longview, Texas.
Issued a 10% stock dividend.
2001 » July
AAON added as a member of the
Russell 2000® Index
2001 » Fall
Expanded rooftop product line to
230 tons.
Introduced evaporative-cooled
condensing energy savings feature
2001 » September
3-for-2 stock split
2001 » October
AAON listed in Forbes’ 200 Best
Small Companies
2002 » June
3-for-2 stock split
2002 » Fall
Industry introduction of the modular
air handler and chiller products.
2002 » October
AAON listed in Forbes’
Magazine’s “Hot Shots 200
Up & Comers.”
AAON listed in Forbes’ 200 Best
Small Companies.
2003 » May
Purchased the assets of Air Wise, of
Mississauga, Ontario, Canada.
2003 » July
Started production of
polyurethane foam-filled
double-wall construction panels
for rooftop and chiller products
using newly purchased
manufacturing equipment.
2003 » October
AAON listed in Forbes’
200 Best Small Companies.
A Timeline of Success
2004 » April
AAON received U.S. Patent for
the De-Superheater for
Evaporative-Cooled Conditioning
2004 » September
AAON received U.S. Patent for DPAC.
2004 » November
Introduction of light commercial/
residential product lines.
2005 » August
AAON received U.S. Patent for
Plenum Fan Banding.
2006 » April
AAON introduced factory engineered
and assembled packaged mechanical
room, which includes a boiler and all
piping and pumping accessories.
2006 » June
Initiation of a semi-annual cash
dividend for AAON shareholders.
2007 » March
Modular Air Handler products
extended to 50,000 cfm.
2007 » August
3-for-2 stock split.
2007 » October
AAON Listed in Forbes’ 200 Best
Small Companies.
2007 » December
AAON rings closing bell at NASDAQ.
2012 » Spring
Industry introduction of light
commercial geothermal heat pump
self-contained unit product line.
2012 » July
AAON SB Series Self-Contained
Unit Wins ACHR News Dealer
Design Award - Gold
2012 » September
Consulting-Specifying Engineer
magazine awarded RN Series
E-Cabinet Product of the Year -
Bronze.
2012 » December
AAON yearly shipments
exceed $300 million.
2013 » May
Opening of AAON Parts &
Supply Store.
AAON increases dividend
payment by 25%
3-for-2 stock split
2013 » September
25th Anniversary
AAON rings opening bell
at NASDAQ.
Consulting-Specifying Engineer
magazine awarded SB Series
Product of the Year - Bronze.
2013 » December
AAON named top Tulsa area
stock value.
2014 » June
3-for-2 stock split
2014 » July
AAON LN Series Chiller wins ACHR
New Dealer Design Award - Bronze
2014 » September
AAON donates $3 Million to A
Gathering Place for Tulsa.
2015 » May
AAON increases dividend payment
by 20%
2015 » June
AAON receives Gold Dealer
Design Award in the Ventilation
category.
2015 » September
AAON Low Leakage Dampers
voted “Product of the Year”
by Consulting-Specifying
Engineer magazine.
Company Timeline • 2004-2017
2008 » October
AAON rings opening bell
at NASDAQ.
AAON voted “Most Valuable
Product” and “Product of the Year”
by Consulting-Specifying Engineer
Magazine.
AAON listed in Forbes’ 200 Best
Small Companies.
2009 » Summer
AAON increased dividend payment
by 13%.
2010 » July
AAON RQ Series win ACHR News
Dealer Design award.
AAON named to the Fortune 40 :
Best Stocks to Retire On.
National Society of Professional
Engineers Award AAON 2009
Product of the Year.
2009 » Fall
AAON added to Standard & Poor’s
Small Cap 600 Index.
National Society of Professional
Engineers Award AAON 2009
Product of the Year - D-PAC
AAON listed in Forbes’ 200 Best
Small Companies.
2010 » October
AAON RN Series rooftop unit
named 2010 Product of the Year
- Silver by Consulting-Specifying
Engineer Magazine.
AAON LC Series Chiller product
named 2010 Product of the Year -
Bronze by Consulting-Specifying
Engineer Magazine.
AAON Listed in Forbes’ 200 Best
Small Companies
2017 » April
First WV Series small packaged
vertical water-source heat pump
comes off the production line.
2017 » July
AAON products received Dealer
Design Awards from ACHR News.
2016 » January
AAON received U.S. Patent for the
Low Leakage Dampers
2016 » February
AAON Breaks Ground on New
"Norman Asbjornson Innovation
Center" Research and Development
Laboratory
2016 » July
AAON LZ Series Packaged Outdoor
Mechanical Room wins ACHR News
Dealer Design Award- Gold
2016 » September
Consulting-Specifying Engineer
magazine awarded LZ Series Outdoor
Mechanical Room Product of the
Year - Gold, Chiller category.
Consulting-Specifying Engineer
magazine awarded RN Series
Horizontal Configuration Rooftop Unit
Product of the Year - Gold, HVAC/R
category.
2016 » October
First WH Series small packaged
horizontal water-source heat pump
comes off the production line.
2016 » November
AAON increases dividend payment
by 18%
2011 » Summer
National Society of
Professional Engineers
awarded RQ Series High
Efficiency Rooftop Unit “ -
Product of the Year.”
3-for-2 stock split.
AAON Geothermal RQ Series wins
Silver in ACHR News Dealer Design
Competition. Single Zone VAV
rooftop units win Honorable
Mention in ACHR News Dealer
Design Competition.
2011 » October
AAON Geothermal RQ Series product
named 2011 Product of the Year -
Silver by Consulting-Specifying
Engineer magazine.
2017 » September
AAON V3 Series Air Handling unit
named 2017 Product of the Year
- Gold by Consulting-Specifying
Engineer Magazine.
AAON Touchscreen Controller
named 2017 Product of the Year -
Bronze by Consulting-Specifying
Engineer Magazine.
AAON WH Series Water-Source Heat
Pump named 2017 Product of the
Year - Bronze by Consulting-
Specifying Engineer Magazine
AAON Water-Source Heat Pump Units are Now Stocked
and Ready to Quickly Ship to Customers.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[X]
For the fiscal year ended December 31, 2017
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________________ to _____________________________
Commission file number: 0-18953
AAON, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction
of incorporation or organization)
2425 South Yukon, Tulsa, Oklahoma
(Address of principal executive offices)
87-0448736
(IRS Employer
Identification No.)
74107
(Zip Code)
Registrant's telephone number, including area code: (918) 583-2266
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.004
(Title of Class)
Rights to Purchase Series A Preferred Stock
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
[ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Large accelerated filer [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,
2017 was $1,502.1 million.
As of February 23, 2018, registrant had outstanding a total of 52,433,208 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 15, 2018, are incorporated into Part III.
TABLE OF CONTENTS
Page
Number
Item Number and Caption
PART I
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
4
8
8
8
8
8
11
12
21
22
44
44
46
46
46
46
46
46
47
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 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, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps 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, $14.7 million and
$14.6 million of our sales in 2017, 2016 and 2015, respectively. As a percent of sales, foreign sales accounted for
approximately 4% of our net sales in each of those years.
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, geothermal/water-source heat
pumps, chillers, packaged outdoor mechanical rooms and coils are suitable for 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, 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 2017 sales of $405 million, we estimate that we have approximately a 12% share of the greater than five
ton rooftop market and a 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/
water-source 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 28 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.
Our small packaged geothermal/water-source heat pump units consist of the WH Series horizontal configuration and
WV Series vertical configuration, both from one-half to five 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, RL and SB units, as well as our H3, 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 one-half to 540 tons and in heating capacity
from 7,200 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, Texas AirSystems, accounted for 10% or more of our sales during 2017 and 2016. No customer accounted
for 10% or more of our sales during 2015.
Sources and Availability of Raw Materials
The most important materials we purchase are steel, copper and aluminum, which are obtained from domestic
suppliers. We also purchase from other domestic manufacturers certain components, including compressors, electric
motors and electrical controls used in our products. We attempt to obtain the lowest possible cost in our purchases of
raw materials and components, consistent with meeting specified quality standards. We are not dependent upon any
one source for raw materials or the major components of our manufactured products. By having multiple suppliers, we
believe that we will have adequate sources of supplies to meet our manufacturing requirements for the foreseeable
future.
We have not been significantly impacted 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.
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 33 individuals and utilize approximately 62 independent manufacturer representatives'
organizations ("Representatives") having 100 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. Our warranty policy for the WH and WV Series
geothermal/water-source heat pumps covers parts for five years from the date of manufacture.
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), WH and WV (water-source heat
pumps), FZ (fluid coolers) and BL (boilers), as well as component evaluation and refinement, development of control
systems and new product development. We incurred R&D expenses of approximately $13.0 million, $12.0 million and
$7.5 million in 2017, 2016 and 2015, respectively.
Backlog
Our backlog as of February 1, 2018 was approximately $64.9 million compared to approximately $53.5 million as of
February 1, 2017. 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 no balance outstanding at December 31, 2017. 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 business since quality and long-term cost are generally taken into account.
Employees
As of February 12, 2018, we employed 1,991 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
2018 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.
Item 1A. Risk Factors.
4
The following risks and uncertainties may affect our performance and results of operations. The discussion below
contains "forward-looking statements" as outlined in the Forward-Looking Statements section above. Our ability to
mitigate risks may cause our future results to materially differ from what we currently anticipate. Additionally, the
ability of our competitors to react to material risks will affect our future results.
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 non-cancellable 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.
5
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 effect on our future financial results. Substantially all of the markets in which we participate are highly
competitive. The most significant competitive factors we face are product reliability, product performance, service and
price, with the relative importance of these factors varying among our product line. Other factors that affect competition
in the HVAC market include the development and application of new technologies and an increasing emphasis on the
development of more efficient HVAC products. Moreover, new product introductions are an important factor in the
market categories in which our products compete. Several of our competitors have greater financial and other resources
than we have, allowing them to invest in more extensive research and development. We may not be able to compete
successfully against current and future competition and current and future competitive pressures faced by us may
materially adversely affect our business and results of operations.
The loss of Norman H. Asbjornson could impair the growth of our business.
Norman H. Asbjornson, our founder, has served as our Chief Executive Officer from inception to date and President
from inception to November 2016. He has provided the leadership and vision for our strategy and 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 well into the future, the death,
disability or retirement of Mr. Asbjornson could impair the growth of our business. We do not have an employment
agreement with Mr. Asbjornson.
The Board of Directors attempts to manage this risk by continually engaging in succession planning concerning Mr.
Asbjornson (as well as other key management personnel), as demonstrated by the Board's appointment of Gary D.
Fields as President of AAON in November 2016.
Our business is subject to the risks of interruptions by cybersecurity attacks.
We depend upon information technology infrastructure, including network, hardware and software systems to conduct
our business. Despite our implementation of network and other cybersecurity 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. Our security measures may not be adequate to
protect against highly targeted sophisticated cyber-attacks, or other improper disclosures of confidential and/or sensitive
information. Additionally, we may have access to confidential or other sensitive information of our customers, which,
despite our efforts to protect, may be vulnerable to security breaches, theft, or other improper disclosure. Any cyber-
related attack or other improper disclosure of confidential information could have a material adverse effect on our
business, as well as other negative consequences, including significant damage to our reputation, litigation, regulatory
actions and increased cost.
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, certain additional testing and listing requirements are still in place and scheduled to be phased in.
6
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 Department of Energy does not
have current authority. This could affect equipment we currently manufacture and could have an impact on our product
design, operations and profitability.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and
accountability concerning the supply of certain minerals, known as "conflict minerals", originating from the Democratic
Republic of Congo and adjoining countries. As a result, in August 2012, the SEC adopted annual disclosure and reporting
requirements for those companies who use conflict minerals in their products. Accordingly, we began our reasonable
country of origin inquiries in fiscal year 2013, with initial disclosure requirements beginning in May 2014. There are
costs associated with complying with these disclosure requirements, including for due diligence to determine the sources
of conflict minerals used in our products and other potential changes to products, processes or sources of supply as a
consequence of such verification activities. The implementation of these rules could adversely affect the sourcing,
supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering
"conflict free" conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such
suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we determine
that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify
the origins for all conflict minerals used in our products through the procedures we may implement.
We are subject to adverse changes in tax laws.
Our tax expense or benefits could be adversely affected by changes in tax provisions, unfavorable findings in tax
examinations or differing interpretations by tax authorities. We are unable to estimate the impact that current and future
tax proposals and tax laws could have on our results of operations. We are currently subject to state and local tax
examinations for which we do not expect any major assessments.
We are subject to international regulations that could adversely affect our business and results of operations.
Due to our use of representatives in foreign markets, we are subject to many laws governing international relations,
including those that prohibit improper payments to government officials and commercial customers, and restrict where
we can do business, what information or products we can supply to certain countries and what information we can
provide to a non-U.S. government, including but not limited to the Foreign Corrupt Practices Act, U.K. Bribery Act
and the U.S. Export Administration Act. Violations of these laws, which are complex, may result in criminal penalties
or sanctions that could have a material adverse effect on our business, financial condition and results of operations.
Operations may be affected by natural disasters, 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
7
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, 2017, 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").
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 six cart-type conveyor lines and one roller-type conveyor line with variable line
speed adjustment, which are motor driven. Subassembly areas and production line manning are based upon line speed.
In 2017, construction continued on a new engineering research and development laboratory at the Tulsa facilities, since
named the Norman Asbjornson Innovation Center. The three-story 134,000 square foot facility will be both an acoustical
and a performance measuring laboratory. The new facility will consist of ten test chambers allowing AAON to meet
and maintain industry certifications.
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 23, 2018, there were 1,139 holders of record of our common stock.
8
Quarter Ended
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
March 31, 2017
June 30, 2017
September 29, 2017
December 29, 2017
High
$28.02
$28.27
$29.04
$33.90
$37.00
$38.10
$37.65
$37.55
Low
$19.49
$25.65
$25.75
$27.55
$31.95
$33.95
$31.65
$33.35
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.
Our recent dividends are as follows:
Declaration Date
May 19, 2015
October 29, 2015
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
Record Date
June 12, 2015
December 2, 2015
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
Payment Date
July 1, 2015
December 23, 2015
July 1, 2016
December 23, 2016
July 7, 2017
December 21, 2017
Dividend per Share
$0.11
$0.11
$0.11
$0.13
$0.13
$0.13
The following is a summary of our share-based compensation plans as of December 31, 2017:
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))
456,475
100,836
$
$
13.31
32.71
—
2,983,642
Plan category
The 2007 Long-
Term Incentive
Plan
The 2016 Long-
Term Incentive
Plan
9
Repurchases during the fourth quarter of 2017 were as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Total
Number
of Shares
(or Units
Period
Purchased)
October 2017
November 2017
December 2017
49,485
$
27,044
38,245
Total
114,774
$
Comparative Stock Performance Graph
(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
34.51
35.34
36.29
35.30
49,485
27,044
38,245
114,774
—
—
—
—
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, 2012 through December 31, 2017. The graph assumes that $100 was invested
at the close of trading December 31, 2012, 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:
2017
2016
2015
2014
2013
Years Ended December 31,
Net sales
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per common share:
(in thousands, except per share data)
$
$
$
$
$
405,232
54,498
1.04
1.03
0.26
$
$
$
$
$
383,977
53,376
1.01
1.00
0.24
$
$
$
$
$
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
December 31,
Financial Position at End of Fiscal Year:
2017
2016
2015
2014
2013
(in thousands)
Working capital
Total assets
Long-term and current debt
Total stockholders’ equity
$
103,662
$
101,939
$
80,800
$
82,227
$
296,780
256,530
232,854
226,974
—
—
—
—
72,515
210,665
—
237,226
205,898
178,918
174,059
164,106
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, provides 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:
2017
2016
2015
2014
2013
December 31,
(in thousands)
Net Income, a GAAP measure
$
54,498
$
53,376
$
45,728
$
44,158
$
Depreciation
15,007
13,035
11,741
11,553
Amortization of bond premiums
Share-based compensation
Interest income
Income tax expense
47
6,458
(345)
249
4,357
(541)
266
2,891
(427)
688
2,178
(964)
19,994
26,615
25,611
24,088
EBITDAX, a non-GAAP measure
$
95,659
$
97,091
$
85,810
$
81,701
$
37,547
12,312
790
1,763
(1,011)
18,747
70,148
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We engineer, manufacture, market and sell air conditioning and heating equipment consisting of standard, semi-custom
and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy
recovery units, condensing units, geothermal/water-source heat pumps 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 2017 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 fluctuate given that 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, 2017, the
prices for copper, galvanized steel and stainless steel increased approximately 6.2%, 15.8% and 4.4%, respectively,
from a year ago, while the price for aluminum remained relatively unchanged from a year ago. For the year ended
December 31, 2016, the prices for copper, galvanized steel and stainless steel decreased approximately 4.8%, 9.5%,
and 12.3%, respectively, from 2015, while the price for aluminum increased 0.0% from 2015.
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.
12
The following are highlights of our results of operations, cash flows, and financial condition:
• We spent $41.7 million in capital expenditures in 2017, an increase of $15.1 million from the $26.6 million
spent in 2016, primarily due to construction projects related to our new research and development lab, water-
source heat pump production line, as well as other internal development projects.
• We paid cash dividends of $13.7 million in 2017 compared to $12.7 million in 2016.
• We experienced increases in our warranty expense due to refinements and changes to our warranty process.
Results of Operations
Units sold for years ended December 31:
2017
2016
2015
Rooftop Units
Split Systems
Outdoor Mechanical Rooms
Water-Source Heat Pumps
Total Units
16,003
4,829
64
2,485
23,381
16,764
3,753
65
316
20,898
14,891
3,385
57
243
18,576
Year Ended December 31, 2017 vs. Year Ended December 31, 2016
Net Sales
Years Ending December 31,
2017
2016
$ Change % Change
(in thousands, except unit data)
$
405,232
$
383,977
$
21,255
23,381
20,898
2,483
5.5%
11.9%
Net sales
Total units
While we did see an 11.9% increase in the volume of units sold, most of that increase was in Water-Source Heat Pumps
which have a lower price per unit than our other products. As such, total net sales did not increase by the same percentage
as our volume.
Cost of Sales
Years Ending December 31,
Percent of Sales
2017
2016
2017
2016
(in thousands)
Cost of sales
Gross Profit
$
281,835
$
123,397
265,897
118,080
69.5%
30.5%
69.2%
30.8%
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. As shown below, our raw material prices increased during
the year. The Company's gross profit remained stable due to efforts to improve efficiency and absorb overhead.
Twelve month average raw material cost per pound as of December 31:
13
Years Ending December 31,
2017
2016
% Change
Copper
Galvanized Steel
Stainless Steel
Aluminum
$
$
$
$
3.58
0.44
1.19
1.71
$
$
$
$
3.37
0.38
1.14
1.67
6.2%
15.8%
4.4%
2.4%
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2017
2016
2017
2016
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Depreciation
Insurance
Professional Fees
Donations
Bad Debt Expense
Other
(in thousands)
$
11,233
$
8,400
11,586
4,288
1,735
720
1,005
1,888
724
179
7,491
Total SG&A $
49,249
$
3,601
8,991
11,363
2,914
1,395
796
1,072
2,032
370
(45)
6,017
38,506
2.8%
2.1%
2.9%
1.1%
0.4%
0.2%
0.2%
0.5%
0.2%
—%
1.8%
0.9 %
2.3 %
3.0 %
0.8 %
0.4 %
0.2 %
0.3 %
0.5 %
0.1 %
— %
1.6 %
12.2%
10.0 %
The overall increase in SG&A was primarily due to increased warranty expenses. The Company has been working on
modifications and refinements to its warranty policy. These modifications more clearly define what qualifies as a
warranty claim and place a deadline for when claims may be submitted.
Income Taxes
Years Ending December 31,
2017
2016
Effective Tax Rate
2016
2017
(in thousands)
Income tax provision
$
19,994
$
26,615
26.8%
33.3%
The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. As a result of the changes provided under
the Act, the Company adjusted its deferred tax assets and liabilities existing at the date of enactment using the newly
enacted rates for the periods when they are expected to be realized. This remeasurement resulted in a benefit to income
taxes of $4.4 million.
14
Year Ended December 31, 2016 vs. Year Ended December 31, 2015
Net Sales
Years Ending December 31,
2016
2015
$ Change % Change
(in thousands, except unit data)
$
383,977
$
358,632
$
25,345
20,898
18,576
2,322
7.1%
12.5%
Net sales
Total units
Net sales increased due to an increase in our total units sold, offset by a decline in the average price per unit for both
of our locations.
Cost of Sales
Years Ending December 31,
Percent of Sales
2016
2015
2016
2015
(in thousands)
Cost of sales
Gross Profit
$
265,897
$
118,080
249,951
108,681
69.2%
30.8%
69.7%
30.3%
The principal components of cost of sales are labor, raw materials, component costs, factory overhead, freight out and
engineering expense. The principal high volume raw materials used in our manufacturing processes are steel, copper
and aluminum, which are obtained from domestic suppliers.
Twelve month average raw material cost per pound as of December 31:
Years Ending December 31,
2016
2015
% Change
Copper
Galvanized Steel
Stainless Steel
Aluminum
$
$
$
$
3.37
0.38
1.14
1.67
$
$
$
$
3.54
0.42
1.30
1.67
(4.8)%
(9.5)%
(12.3)%
— %
15
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2016
2015
2016
2015
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Depreciation
Insurance
Professional Fees
Donations
Bad Debt Expense
Other
(in thousands)
$
3,601
$
8,991
11,363
2,914
1,395
796
1,072
2,032
370
(45)
6,017
Total SG&A $
38,506
$
4,317
8,037
11,078
2,082
1,191
930
1,153
1,794
452
(48)
6,452
37,438
0.9 %
2.3 %
3.0 %
0.8 %
0.4 %
0.2 %
0.3 %
0.5 %
0.1 %
— %
1.6 %
1.2 %
2.2 %
3.1 %
0.6 %
0.3 %
0.3 %
0.3 %
0.5 %
0.1 %
— %
1.8 %
10.0 %
10.4 %
The increase in SG&A is primarily due to increased compensation costs due to better operating results, offset by a
decrease in warranty expense as a result of continued improvements in quality control and a decrease in other expense.
Income Taxes
Years Ending December 31,
Effective Tax Rate
2016
2015
2016
2015
(in thousands)
Income tax provision
$
26,615
$
25,611
33.3%
35.9%
The Company early adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, applying
the changes for excess tax benefits and tax deficiencies prospectively. As a result, excess tax benefits and deficiencies
are reported as an income tax benefit or expense on the statement of income rather than as a component of additional
paid-in capital on the statement of equity. Excess tax benefits and deficiencies are treated as discrete items to the income
tax provision in the reporting period in which they occur. For the twelve months ended December 31, 2016, the Company
recorded $2.1 million in excess tax benefits as an income tax benefit.
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 $2.7 million from December 31, 2016 to December 31, 2017. As of
December 31, 2017, we had $21.5 million in cash and cash equivalents.
As of December 31, 2017, we had certificates of deposit of $2.9 million and investments held to maturity at amortized
cost of $6.1 million. These certificates of deposit had maturity dates of one to five months. The investments held to
maturity at amortized cost had maturity dates of one to four months.
16
On July 25, 2016 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, 2018. We expect to renew
our line of credit in July 2018 with favorable terms. Under the line of credit, there was one standby letter of credit of
$0.8 million as of December 31, 2017. At December 31, 2017 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, 2017 and 2016, 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 3.5% and 3.0% for the
years ended December 31, 2017 and 2016, respectively.
At December 31, 2017, 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 and total liabilities to tangible net worth ratio. At December
31, 2017, our tangible net worth was $237.2 million, which meets the requirement of being at or above $125.0
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.
The Board has authorized three stock repurchase programs for the Company. The Company may purchase shares on
the open market from time to time, up to a total of 5.7 million shares. The Board must authorize the timing and amount
of these purchases. Effective May 24, 2016, the Board authorized up to $25.0 million in open market repurchases and
on June 2, 2016, the Company executed a repurchase agreement in accordance with the rules and regulations of the
SEC allowing the Company to repurchase an aggregate amount of $25.0 million or a total of approximately 2.0 million
shares from the open market. The repurchase agreement expired on April 15, 2017. The Company also has a stock
repurchase arrangement by which employee-participants in our 401(k) savings and investment plan are entitled to have
shares in AAON, Inc. stock in their accounts sold to the Company. The maximum number of shares to be repurchased
is contingent upon the number of shares sold by employee-participants. Lastly, the Company repurchases shares of
AAON, Inc. stock from certain of its directors and employees for payment of statutory tax withholdings on stock
transactions. Any other repurchases from directors or employees are contingent upon Board approval. All repurchases
are done at current market prices.
Our repurchase activity is as follows:
2017
2016
2015
Program
Open market
401(k)
Directors and
employees
Total
Shares
8,676 $
467,580
Total $
$ per
share
283,654 $32.69
34.94
16,336,084
Shares
$ per
share
Total $
165,598 $ 4,440,658 $26.82
27.52
540,501
14,875,850
$ per
Shares
share
1,037,590 $ 24,999,963 $24.09
22.54
11,557,598
512,754
Total $
25,746
22.74
1,576,090 $ 37,142,974 $23.57
585,413
45,878
35.19
522,134 $ 18,234,163 $34.92
1,614,425
30,072
27.38
736,171 $ 20,139,954 $27.36
823,446
Inception to Date
Program
Open market
401(k)
Directors and
employees
Total
$ per
share
Shares
3,843,495 $ 61,232,115 $15.93
12.53
6,550,023
82,068,805
Total $
9.00
1,919,510
12,313,028 $160,578,953 $13.04
17,278,033
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.
Our recent dividends are as follows:
17
Declaration Date
Record Date
Payment Date
Dividend per Share
May 19, 2015
October 29, 2015
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
June 12, 2015
December 2, 2015
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
July 1, 2015 $
December 23, 2015 $
July 1, 2016 $
December 23, 2016 $
July 7, 2017 $
December 21, 2017 $
0.11
0.11
0.11
0.13
0.13
0.13
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 2018 and the foreseeable future.
Statement of Cash Flows
The table below reflects a summary of our net cash flows provided by operating activities, net cash flows used in
investing activities, and net cash flows used in financing activities for the years indicated.
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
2017
2016
2015
(in thousands)
$
54,498
$
53,376
$
20,362
18,996
(7,516)
4,596
(23,698)
98
3,043
258
6,353
57,994
(41,713)
(18,521)
29,112
70
7,048
(1,537)
(9,478)
(83)
654
417
(5,470)
63,923
(26,604)
(14,496)
24,095
80
45,728
16,250
(5,884)
312
(1,059)
76
(5,109)
189
4,852
55,355
(20,967)
(20,863)
18,519
117
(31,052)
(16,925)
(23,194)
(Payments) borrowings under revolving credit facility, net
—
—
—
Stock options exercised
Repurchase of stock
Employee taxes paid by withholding shares
Cash dividends paid to stockholders
Net cash used in financing activities
Cash Flows from Operating Activities
2,259
(16,620)
(1,614)
(13,663)
2,063
(19,317)
(823)
(12,676)
$
(29,638) $
(30,753) $
2,795
(36,558)
(585)
(11,857)
(46,205)
Cash flows from operating activities decreased primarily due to increased purchases of inventory during the year.
18
Cash Flows from Investing Activities
The capital expenditure program for 2018 is estimated to be approximately $53.2 million. The increase in capital
expenditures is primarily due to construction projects related to our new research and development lab, water-source
heat pump production lines, as well as other internal development projects. 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
Cash flows used in financing activities decreased slightly due to fewer open market buybacks following the expiration
of the Company's repurchase agreement in April 2017.
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, 2017.
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. Our warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for
five years from the date of manufacture. Warranty expense is estimated based on the warranty period, historical warranty
trends and associated costs, and any known identifiable warranty issue.
19
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 is recognized on a straight-line basis during the service period of the related share-
based compensation award. Forfeitures are accounted for as they occur. The fair value of each option award and restricted
stock award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The use of the
Black-Scholes-Merton option valuation model requires the input of subjective assumptions such as: the expected
volatility, the expected term of the options granted, expected dividend yield, and the risk-free rate.
New Accounting Pronouncements
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 following ASUs have been issued in 2016 along with ASU 2014-09 with the same effective dates and transition
requirements:
• ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which provides
implementation guidance for Topic 606 on principal versus agent considerations.
• ASU 2016-10, Identifying Performance Obligations and Licensing, which provides clarification for two
aspects of Topic 606: identifying performance obligations and the licensing implementation guidance.
• ASU 2016-12, Revenue from Contracts with Customers, which further amends Topic 606.
• ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,
which further amends Topic 606.
The Company plans to adopt using the retrospective transition method. The Company believes the impact will not be
material to the consolidated financial statements. The Company has reviewed all types of customer contracts and gone
through the five step process outlined in ASU 2014-09 for each type of contract. The new five step process required
by ASU 2014-09 provides results substantially consistent with our current revenue recognition policies. The Company
has also evaluated the categories to use for the disaggregate revenue disclosures. The primary change upon adoption
will be additional disclosures to show disaggregated revenue and further details around our revenue recognition process.
Once we adopt ASU 2014-09, we not anticipate that our internal control framework will materially change, but rather
that existing internal controls will be modified and augmented, as necessary, to consider our new revenue recognition
policy effective January 1, 2018.
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.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which addresses changes to the terms
or condition of a share-based payment award. The ASU becomes effective in the annual reporting period beginning
after December 15, 2017, including interim reporting periods. We do not expect ASU 2017-09 will have a material
effect on our consolidated financial statements and notes thereto.
20
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.
21
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
23
24
25
26
27
28
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
AAON, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of AAON, Inc. (a Nevada corporation) and subsidiaries
(the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, 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 27, 2018 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company's auditor since 2004
Tulsa, Oklahoma
February 27, 2018
23
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
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, 52,422,801 and
52,651,448 issued and outstanding at December 31, 2017 and 2016, respectively
Additional paid-in capital
Retained earnings
Total stockholders' equity
December 31,
2017
2016
(in thousands, except share and
per share data)
$
21,457
$
2,880
6,077
50,338
1,643
28
70,786
518
153,727
2,233
92,075
184,316
13,714
292,338
149,963
142,375
678
24,153
5,512
14,083
43,001
6,239
25
47,352
616
140,981
2,233
78,806
158,216
12,783
252,038
137,146
114,892
657
296,780
$
256,530
$
$
— $
10,967
39,098
50,065
1,512
7,977
—
210
—
237,016
237,226
—
7,102
31,940
39,042
1,498
9,531
561
211
—
205,687
205,898
256,530
Total liabilities and stockholders' equity
$
296,780
$
The accompanying notes are an integral part of these consolidated financial statements.
24
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ending December 31,
2017
2016
2015
(in thousands, except per share data)
$
405,232
$
383,977
$
281,835
123,397
49,249
45
74,103
298
91
74,492
19,994
54,498
1.04
1.03
0.26
$
$
$
$
265,897
118,080
38,506
(20)
79,594
292
105
79,991
26,615
53,376
1.01
1.00
0.24
$
$
$
$
$
$
$
$
358,632
249,951
108,681
37,438
(59)
71,302
161
(124)
71,339
25,611
45,728
0.85
0.84
0.22
52,572,496
53,078,734
52,924,398
53,449,754
54,045,841
54,481,484
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
(Gain) loss on disposal of assets
Income from operations
Interest income, net
Other income (expense), net
Income before taxes
Income tax provision
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per common share:
Weighted average shares outstanding:
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
25
AAON, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
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
Net income
Stock options exercised and restricted
stock awards granted
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2016
Net income
Stock options exercised and restricted
stock awards granted
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2017
Common Stock
Shares
Amount
$
54,042
—
546
—
(1,576)
—
53,012
—
375
—
(736)
—
52,651
—
293
—
(522)
—
52,422
$
216
—
2
—
(6)
—
212
—
2
—
(3)
—
211
—
1
—
(2)
—
210
Paid-in
Capital
(in thousands)
$
— $
—
5,238
Retained
Earnings
Total
$
173,843
45,728
—
174,059
45,728
5,240
2,891
(8,129)
—
—
—
2,061
4,357
(6,418)
—
—
—
2,258
—
(29,008)
(11,857)
178,706
53,376
—
—
(13,719)
(12,676)
205,687
54,498
—
6,458
(8,716)
—
— $
—
(9,516)
(13,653)
237,016
$
$
2,891
(37,143)
(11,857)
178,918
53,376
2,063
4,357
(20,140)
(12,676)
205,898
54,498
2,259
6,458
(18,234)
(13,653)
237,226
The accompanying notes are an integral part of these consolidated financial statements.
26
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
2017
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
Loss (gain) on disposition of assets
Foreign currency transaction (gain) loss
Interest income on note receivable
Deferred income taxes
Changes in assets and liabilities:
Accounts receivable
Income tax receivable
Inventories
Prepaid expenses and other
Accounts payable
Deferred revenue
Accrued liabilities and donations
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
Repurchase of stock
Employee taxes paid by withholding shares
Cash dividends paid to stockholders
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
$
Years Ending December 31,
2016
(in thousands)
53,376
$
$
54,498
15,007
47
179
264
6,458
45
(59)
(25)
(1,554)
(7,516)
4,596
(23,698)
98
3,043
258
6,353
57,994
(41,713)
10
(5,280)
7,912
(13,241)
19,700
1,500
60
(31,052)
—
—
2,259
(16,620)
(1,614)
(13,663)
(29,638)
(2,696)
24,153
21,457
$
13,035
249
(25)
625
4,357
(20)
(22)
(28)
825
7,048
(1,537)
(9,478)
(83)
654
417
(5,470)
63,923
(26,604)
28
(4,112)
10,560
(10,384)
10,021
3,514
52
(16,925)
761
(761)
2,063
(19,317)
(823)
(12,676)
(30,753)
16,245
7,908
24,153
$
2015
45,728
11,741
266
(48)
178
2,891
(59)
139
(30)
1,172
(5,884)
312
(1,059)
76
(5,109)
189
4,852
55,355
(20,967)
63
(6,680)
6,098
(14,183)
11,408
1,013
54
(23,194)
—
—
2,795
(36,558)
(585)
(11,857)
(46,205)
(14,044)
21,952
7,908
The accompanying notes are an integral part of these consolidated financial statements.
27
AAON, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2017
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 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, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps 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 inter-company accounts and transactions have been eliminated.
Cash and Cash Equivalents
We consider all highly liquid temporary investments with original maturity dates of three months or less to be cash
equivalents. Cash and cash equivalents consist of bank deposits and highly liquid, interest-bearing money market funds.
The Company's cash and cash equivalents are held in a few financial institutions in amounts that exceed the insurance
limits of the Federal Deposit Insurance Corporation. However, management believes that the Company's counterparty
risks are minimal based on the reputation and history of the institutions selected.
Investments
Certificates of Deposit
We held $2.9 million and $5.5 million in certificates of deposit at December 31, 2017 and December 31, 2016,
respectively. At December 31, 2017, the certificates of deposit bear interest ranging from 0.95% to 1.10% per annum
and have various maturities ranging from one to five months.
Investments Held to Maturity
At December 31, 2017, our investments held to maturity were comprised of $6.1 million of corporate notes and bonds
with various maturities ranging from one to four 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.
28
The following summarizes the amortized cost and estimated fair value of our investments held to maturity at
December 31, 2017 and December 31, 2016:
December 31, 2017:
Current assets:
Investments held to maturity
Non current assets:
Investments held to maturity
Total
December 31, 2016:
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
6,077
$
— $
(6) $
6,071
—
6,077
$
—
— $
—
(6) $
—
6,071
14,083
$
— $
(12) $
14,071
—
14,083
$
—
— $
—
(12) $
—
14,071
$
$
$
$
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, 2017 or 2016.
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%, 4% and 4% of revenues for the years ended December 31, 2017, 2016 and 2015, respectively. One customer, Texas
AirSystems, accounted for 10% or more of our sales during 2017, 2016 or 2015. No customer accounted for 5% or
more of our accounts receivable balance at December 31, 2017 or 2016.
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.
29
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, 2017, 2016, and 2015 research and development costs amounted
to approximately $13.0 million, $12.0 million, and $7.5 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2017, 2016, and
2015 was approximately $1.7 million, $1.4 million, and $1.2 million, respectively.
Shipping and Handling
We incur shipping and handling costs in the distribution of products sold that are recorded in cost of sales. Shipping
charges that are billed to the customer are recorded in revenues and as an expense in cost of sales. For the years ended
December 31, 2017, 2016 and 2015 shipping and handling fees amounted to approximately $11.4 million, $10.3 million,
and $9.6 million, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and
liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and
the tax basis of assets and liabilities. Excess tax benefits and deficiencies are reported as an income tax benefit or
expense on the statement of income and are treated as discrete items to the income tax provision in the reporting period
in which they occur. 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.
30
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 is recognized ratably over the vesting period of the related share-based compensation
award. Forfeitures are accounted for as they occur. The fair value of restricted stock awards is determined based on the
market value of the Company’s shares on the grant date and the compensation expense is recognized on a straight-line
basis during the service period of the respective grant.
Derivative Instruments
In the course of normal operations, the Company occasionally enters into contracts such as forward priced physical
contracts for the purchase of raw materials that qualify for and are designated as normal purchase or normal sale
contracts. Such contracts are exempted from the fair value accounting requirements and are accounted for at the time
product is purchased or sold under the related contract. The Company does not engage in speculative transactions, nor
does the Company hold or issue financial instruments for trading purposes.
Revenue Recognition
We recognize revenues from sales of products when title and risk of ownership pass to the customer. Final sales prices
are fixed and based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and
are provided for based on historical experiences and current estimates. Sales of our products are moderately seasonal
with the peak period being July - November of each year.
In addition, the Company presents revenues net of sales tax and net of certain payments to our independent manufacturer
representatives (“Representatives”). Representatives are national companies that are in the business of providing HVAC
units and other related products and services to customers. The end user customer orders a bundled group of products
and services from the Representative and expects the Representative to fulfill the order. Only after the specifications
are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we
receive notice of the order. We establish the amount we must receive for our HVAC unit (“minimum sales price”), but
do not control the total order price which is negotiated by the Representative with the end user customer.
We are responsible for billings and collections resulting from all sales transactions, including those initiated by our
Representatives. The Representatives submit the total order price to us for invoicing and collection. The total order
price includes our minimum sales price and 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
$51.8 million, $55.0 million, and $55.4 million for each of the years ended December 31, 2017, 2016, and 2015,
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.
31
Insurance Reserves
Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks
required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected
losses related primarily to workers’ compensation and medical liability. Provisions for losses expected under these
programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred.
Product Warranties
A provision is made for the estimated cost of maintaining product warranties to customers at the time the product is
sold based upon historical claims experience by product line. The Company records a liability and an expense for
estimated future warranty claims based upon historical experience and management's estimate of the level of future
claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the liability and
expense in the current year.
Use of Estimates
The preparation of financial statements in conformity with 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
December 31,
2017
2016
(in thousands)
$
$
50,457
$
43,091
(119)
(90)
50,338
$
43,001
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
Years Ending December 31,
2017
2016
2015
(in thousands)
90
$
115
$
179
(150)
119
$
(25)
—
90
$
$
$
171
(48)
(8)
115
32
4. Inventories
The components of inventories and the related changes in the allowance for excess and obsolete inventories are as
follows:
Raw materials
Work in process
Finished goods
Less: Allowance for excess and obsolete inventories
Total, net
December 31,
2017
2016
(in thousands)
$
57,784
$
5,957
8,163
71,904
(1,118)
$
70,786
$
43,438
2,279
3,017
48,734
(1,382)
47,352
Allowance for excess and obsolete inventories:
(in thousands)
Years Ending December 31,
2017
2016
2015
Balance, beginning of period
Provisions for excess and obsolete inventories
Inventories written off
Balance, end of period
5. Note Receivable
$
$
1,382
$
102
(366)
$
757
625
—
1,118
$
1,382
$
714
178
(135)
757
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 C$1.1 million, 15 year note has
an interest rate of 4.0% and is payable to us monthly, and has a C$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, 2017 and 2016, 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
Years Ending December 31,
2017
2016
2015
(in thousands)
$
— $
— $
16,951
27,353
—
24,125
832
270
83
33
7. Warranties
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
Balance, end of period
Warranty expense:
8. Accrued Liabilities
Years Ending December 31,
2017
2016
2015
(in thousands)
7,936
$
8,469
$
(8,686)
11,233
(4,134)
3,601
10,483
$
7,936
$
8,130
(3,978)
4,317
8,469
11,233
$
3,601
$
4,317
$
$
$
At December 31, accrued liabilities were comprised of the following:
December 31,
2017
2016
Warranty
Due to representatives
Payroll
Profit sharing
Workers' compensation
Medical self-insurance
Customer prepayments
Donations
Employee vacation time
Other
Total
9. Revolving Credit Facility
$
$
$
(in thousands)
10,483
13,086
4,456
2,034
593
725
2,838
588
2,688
1,607
39,098
$
7,936
9,907
4,129
1,967
580
872
2,256
600
2,367
1,326
31,940
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, 2017. Borrowings available under the revolving
credit facility at December 31, 2017, 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, 2017 and 2016,
we had no balance outstanding under our revolving credit facility. The revolving credit facility expires on July 27,
2018. At December 31, 2017 and 2016, the weighted average interest rate was 3.5% and 3.0%, respectively.
At December 31, 2017, we were in compliance with our financial covenants. These covenants require that we meet
certain parameters related to our tangible net worth and total liabilities to tangible net worth ratio. At December 31,
2017 our tangible net worth was $237.2 million, which meets the requirement of being at or above $125.0 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.
34
10. Income Taxes
The provision (benefit) for income taxes consists of the following:
Current
Deferred
Total
Years Ending December 31,
2017
2016
2015
(in thousands)
25,790
$
$
825
21,548
(1,554)
19,994
$
26,615
$
$
$
24,439
1,172
25,611
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
Remeasurement of deferred taxes
Domestic manufacturing deduction
Excess tax benefits
Other
Years Ending December 31,
2017
2016
2015
35 %
5 %
(6)%
(3)%
(3)%
(1)%
27 %
35 %
5 %
— %
(3)%
(3)%
(1)%
33 %
35 %
5 %
— %
(3)%
— %
(1)%
36 %
The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. Major changes under the Act include the
following:
• Reducing the corporate rate to 21 percent
• Doubling bonus depreciation to 100 percent for five years
Further limitations on executive compensation deductions
•
• Eliminating the domestic manufacturing deduction
As a result of these changes, the Company adjusted its deferred tax assets and liabilities existing at the date of enactment
using the newly enacted rates for the periods when they are expected to be realized. This remeasurement resulted in
a benefit to income taxes of $4.4 million. The new bonus depreciation provisions resulted in the Company taking $3.2
million of bonus depreciation in the fourth quarter of 2017. The Company sometimes has executive compensation that
exceeds the $1.0 million limitation. Typically the limit is exceeded due to the volume of stock activity performed by
the executive during the year. The Company cannot predict the performance of its stock or when executives may choose
to initiate stock activity. As such, the Company is unable to quantify any impact of this tax law change but any
compensation that does exceed this limitation in the future will be a permanent difference and cause an increase to our
income tax provision. The Company also has historically taken the domestic manufacturing deduction. The Company
will no longer receive the benefit of this deduction which typically has lowered our effective tax rate by 3.0% to 4.0%.
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.
35
The significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
2017
2016
(in thousands)
Deferred income tax assets (liabilities):
Accounts receivable and inventory reserves
$
318
$
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
2,698
1,395
1,432
152
698
6,693
(14,670)
(14,670) $
(7,977) $
$
$
587
3,165
1,715
1,784
463
738
8,452
(17,983)
(17,983)
(9,531)
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 2013 to present, and to non-U.S. income tax examinations for the tax years of 2013 to
present. In addition, we are subject to state and local income tax examinations for tax years 2013 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.
11. Share-Based Compensation
On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan ("LTIP") which provided an additional 3.3
million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards,
performance units and performance awards, in addition to the shares from the previous plan, the 1992 Plan. Since
inception of the LTIP, non-qualified stock options and restricted stock awards have been granted with the same vesting
schedule as the 1992 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.
On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan ("2016 Plan") which provides for
approximately 3.8 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan and
approximately 0.4 million shares that were available for issuance under the previous LTIP, that are now authorized for
issuance under the 2016 Plan, that can be granted in the form of stock options, stock appreciation rights, restricted stock
awards, performance awards, dividend equivalent rights, and other awards. Under the 2016 Plan, the exercise price of
shares granted may not be less than 100% of the fair market value at the date of the grant. The 2016 Plan is administered
by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is
designated by the Board of Directors (the "Committee"). Membership on the Committee is limited to independent
directors. The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016
Plan. The Committee determines the persons to whom awards are to be made, determines the type, size and terms of
awards, interprets the 2016 Plan, establishes and revises rules and regulations relating to the 2016 Plan and makes any
other determinations that it believes necessary for the administration of the 2016 Plan.
The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2017 is
$8.3 million and is expected to be recognized over a weighted-average period of 2.29 years.
36
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, 2017, 2016 and 2015
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)
2017
2016
2015
$
$
0.26
$
0.22
$
30.81%
1.90%
5.00
41.19%
2.00%
7.68
0.26
$
0.25
$
30.67%
1.89%
5.00
34.50%
1.73%
5.69
0.18
44.14%
1.97%
8.00
0.22
42.71%
1.41%
8.00
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, 2017:
Range of
Exercise
Prices
Number
of
Shares
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
$4.54 - 22.76
$23.57 - 32.85
$32.90 - 37.30
Total
424,130
107,456
25,725
557,311
4.36
8.31
9.19
5.35
$
$
Intrinsic
Value
(in thousands)
12.41
$
30.10
34.07
16.82
$
10,303
709
68
11,080
The following is a summary of stock options vested and exercisable as of December 31, 2016:
Range of
Exercise
Prices
Number
of
Shares
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Intrinsic
Value
(in thousands)
$4.54 - 20.92
$20.96 - 26.50
Total
338,308
71,928
410,236
4.75
8.56
5.42
$
$
8.03
22.50
10.57
$
$
8,465
759
9,224
37
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
Total
421,237
27,134
448,371
4.89
7.82
5.07
$
$
7.04
$
15.31
7.54
$
6,814
215
7,029
A summary of option activity under the plans is as follows:
Options
Outstanding at December 31, 2016
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2017
Exercisable at December 31, 2017
Weighted
Average
Exercise
Price
21.33
34.46
11.93
29.93
25.27
16.82
Shares
1,450,704
$
410,960
(189,415)
(105,140)
1,567,109
557,311
$
$
The total intrinsic value of options exercised during December 31, 2017, 2016 and 2015 was $4.5 million, $4.9 million
and $7.4 million, respectively. The cash received from options exercised during December 31, 2017, 2016 and 2015
was $2.3 million, $2.1 million and $2.8 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 and since May 2016 as part of the 2016 Plan, the Compensation Committee of the Board
of Directors has authorized and issued restricted stock awards to directors and certain 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, 2017, unrecognized compensation cost related to unvested restricted
stock awards was approximately $6.5 million which is expected to be recognized over a weighted average period of
1.85 years.
38
A summary of the unvested restricted stock awards is as follows:
Restricted stock
Unvested at December 31, 2016
Granted
Vested
Forfeited
Unvested at December 31, 2017
Weighted
Average
Grant date
Fair Value
20.47
33.97
19.97
22.09
25.52
Shares
408,162
$
124,126
(170,434)
(20,054)
341,800
$
A summary of share-based compensation is as follows for the years ending December 31, 2017, 2016 and 2015:
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
2017
2016
2015
(in thousands)
3,699
$
6,102
$
4,217
3,147
7,916
$
9,249
$
2017
2016
2015
(in thousands)
2,904
$
1,681
$
3,554
2,676
6,458
$
4,357
$
2017
2016
2015
(in thousands)
1,413
1,051
2,464
$
$
1,610
458
2,068
$
$
3,685
2,985
6,670
833
2,058
2,891
2,165
280
2,445
$
$
$
$
$
$
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.
Effective October 1, 2013, the Plan was amended such that the Company contributed 3% of eligible payroll to the Plan
for each employee and matched 100% up to 6% of employee contributions of eligible compensation. We contributed
and continue to 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, vested over
two years.
39
Effective January 1, 2016, the Plan was amended such that the Company matches 175% up to 6% of employee
contributions of eligible compensation. The Company no longer contributes 3% of eligible payroll to the Plan for each
employee. The Company ceased paying administrative expenses for the Plan at which time administrative expenses
are paid for by Plan participants. Additionally, Plan participant forfeitures are used to reduce the cost of the Company
contributions.
For the years ended December 31, 2017, 2016 and 2015 we made contributions of $6.1 million, $5.9 million and $9.0
million, respectively. Administrative expenses were approximately $0, $40.0 thousand, and $0.1 million for the years
ended 2017, 2016 and 2015, 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 $8.4 million, $9.0 million and $8.0 million for the years ended December 31, 2017,
2016 and 2015, respectively.
13. Stockholders’ Equity
Stock Repurchase - The Board has authorized three stock repurchase programs for the Company. The Company may
purchase shares on the open market from time to time, up to a total of 5.7 million shares. The Board must authorize
the timing and amount of these purchases. Effective May 24, 2016, the Board authorized up to $25.0 million in open
market repurchases and on June 2, 2016, the Company executed a repurchase agreement in accordance with the rules
and regulations of the SEC allowing the Company to repurchase an aggregate amount of $25.0 million or a total of
approximately 2.0 million shares from the open market. The repurchase agreement expired on April 15, 2017. The
Company also has a stock repurchase arrangement by which employee-participants in our 401(k) savings and investment
plan are entitled to have shares in AAON, Inc. stock in their accounts sold to the Company. The maximum number of
shares to be repurchased is contingent upon the number of shares sold by employee-participants. Lastly, the Company
repurchases shares of AAON, Inc. stock from certain of its directors and employees for payment of statutory tax
withholdings on stock transactions. A11 other repurchases from directors or employees are contingent upon Board
approval. All repurchases are done at current market prices.
Our repurchase activity is as follows:
2017
2016
2015
Program
Open market
401(k)
Directors and
employees
Total
Shares
8,676 $
467,580
Total $
$ per
share
283,654 $32.69
34.94
16,336,084
Shares
$ per
share
Total $
165,598 $ 4,440,658 $26.82
27.52
540,501
14,875,850
$ per
share
Shares
1,037,590 $ 24,999,963 $24.09
22.54
11,557,598
512,754
Total $
25,746
22.74
1,576,090 $ 37,142,974 $23.57
585,413
35.19
45,878
522,134 $ 18,234,163 $34.92
1,614,425
27.38
30,072
736,171 $ 20,139,954 $27.36
823,446
Inception to Date
Program
Open market
401(k)
Directors and
employees
Total
$ per
Shares
share
3,843,495 $ 61,232,115 $15.93
12.53
6,550,023
82,068,805
Total $
9.00
1,919,510
12,313,028 $160,578,953 $13.04
17,278,033
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.
Our recent dividends are as follows:
40
Declaration Date
May 19, 2015
October 29, 2015
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
Record Date
June 12, 2015
December 2, 2015
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
Payment Date
July 1, 2015
December 23, 2015
July 1, 2016
December 23, 2016
July 7, 2017
December 21, 2017
Dividend per Share
$0.11
$0.11
$0.11
$0.13
$0.13
$0.13
We paid cash dividends of $13.7 million, $12.7 million and $11.9 million in 2017, 2016 and 2015, 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.
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 following ASUs have been issued in 2016 along with ASU 2014-09 with the same effective dates and transition
requirements:
• ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which provides
implementation guidance for Topic 606 on principal versus agent considerations.
• ASU 2016-10, Identifying Performance Obligations and Licensing, which provides clarification for two
aspects of Topic 606: identifying performance obligations and the licensing implementation guidance.
• ASU 2016-12, Revenue from Contracts with Customers, which further amends Topic 606.
• ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,
which further amends Topic 606.
The Company plans to adopt using the retrospective transition method. The Company believes the impact will not be
material to the consolidated financial statements. The Company has reviewed all types of customer contracts and gone
through the five step process outlined in ASU 2014-09 for each type of contract. The new five step process required
by ASU 2014-09 provides results substantially consistent with our current revenue recognition policies. The Company
has also evaluated the categories to use for the disaggregate revenue disclosures. The primary change upon adoption
will be additional disclosures to show disaggregated revenue and further details around our revenue recognition process.
Once we adopt ASU 2014-09, we do not anticipate that our internal control framework will materially change, but
rather that existing internal controls will be modified and augmented, as necessary, to consider our new revenue
recognition policy effective January 1, 2018.
41
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.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which addresses changes to the terms
or condition of a share-based payment award. The ASU becomes effective in the annual reporting period beginning
after December 15, 2017, including interim reporting periods. We do not expect ASU 2017-09 will have a material
effect on our consolidated financial statements and notes thereto.
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:
2017
2016
2015
(in thousands, except share and per share data)
$
54,498
$
53,376
$
45,728
Basic weighted average shares
52,572,496
52,924,398
54,045,841
Effect of dilutive stock options and restricted stock
506,238
525,356
435,643
Diluted weighted average shares
53,078,734
53,449,754
54,481,484
Earnings per share:
Basic
Dilutive
Anti-dilutive shares:
Shares
$
$
1.04
1.03
$
$
1.01
1.00
$
$
0.85
0.84
785,825
469,603
146,548
42
17. Related Parties
The Company purchases some supplies from an entity controlled by the Company's CEO. The Company sometimes
makes sales to the CEO for parts. Additionally, the Company sells units to an entity owned by a member of the
President's immediate family. This entity is also one of the Company's Representatives and as such, the Company
makes payments to the entity for third party products. All related party transactions are made on standard Company
terms. Following is a summary of transactions and balance with affiliates:
Years Ending December 31,
2017
2016
2015
(in thousands)
$
1,579 $
432
1,671 $
697
1,532
841
December 31,
2017
2016
$
(in thousands)
9 $
—
10
—
Sales to affiliates
Payments to affiliates
Due from affiliates
Due to affiliates
18. Subsequent Events
On January 2, 2018, the Company granted 37,700 shares of restricted stock and 433,400 stock options to members
of senior management. Additionally, on February 9, 2018, the Company granted 19,100 shares of restricted stock
and 921,700 stock options to employees of the Company.
19. Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the years ending December 31, 2017 and 2016:
2017
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2016
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
Quarter
First
Second
Third
Fourth
(in thousands, except per share data)
$
101,326
$
113,668
$
104,160
31,678
13,794
0.26
0.26
102,319
32,747
14,725
0.28
0.27
$
$
$
$
$
35,658
14,717
0.28
0.28
$
$
104,568
$
33,092
15,682
0.30
0.29
$
$
$
$
$
$
$
31,075
15,770
0.30
0.30
91,668
26,510
11,420
0.22
0.21
$
$
$
$
$
$
86,078
24,986
10,217
0.19
0.19
85,422
25,731
11,551
0.22
0.22
43
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not Applicable.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
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, 2017.
(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, 2017, 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, 2017 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 2017
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
AAON, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of AAON, Inc. (a Nevada corporation) and subsidiaries
(the “Company”) as of December 31, 2017, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2017, 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) ("PCAOB"), the consolidated financial statements of the Company as of and for the year ended December
31, 2017, and our report dated February 27, 2018, expressed an unqualified opinion on those financial statements.
Basis for opinion
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 are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and limitations of internal control over financial reporting
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.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 27, 2018
45
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 15, 2018.
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 15, 2018.
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 15, 2018.
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 15, 2018.
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 2017, 2016 or 2015.
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 15, 2018.
46
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 Eleven to Third Restated Revolving Credit Loan Agreement (v)
(10.1)
(10.2)
(10.3)
(21)
(23)
(31.1)
(31.2)
(32.1)
(32.2)
AAON, Inc. 1992 Stock Option Plan, as amended (vii)
AAON, Inc. 2007 Long-Term Incentive Plan, as amended (viii)
AAON, Inc. 2016 Long-Term Incentive Plan (vi)
List of Subsidiaries (ix)
Consent of Grant Thornton LLP
Certification of CEO
Certification of CFO
Section 1350 Certification – CEO
Section 1350 Certification – CFO
(101)
(INS)
XBRL Instance Document
(101)
(SCH) XBRL Taxonomy Extension Schema Document
(101)
(CAL) XBRL Taxonomy Extension Calculation Linkbase Document
(101)
(DEF) XBRL Taxonomy Extension Definition Linkbase Document
(101)
(LAB) XBRL Taxonomy Extension Label Linkbase Document
(101)
(PRE) XBRL Taxonomy Extension Presentation Linkbase Document
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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 27, 2016.
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-212863
dated August 2, 2016.
47
(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.
48
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 27, 2018
By:
/s/ Norman H. Asbjornson
Norman H. Asbjornson, Chief Executive Officer
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 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
Dated: February 27, 2018
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer 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
President and 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/ Stephen O. LeClair
Stephen O. LeClair
Director
/s/ Angela E. Kouplen
Angela E. Kouplen
Director
/s/ Luke A. Bomer
Luke A. Bomer
Secretary
49
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 27, 2018, 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,
2017. We consent to the incorporation by reference of said reports in the Registration Statements of AAON, Inc. on
Forms S-8 (File No. 333-151915, File No. 333-207737, and File No. 333-212863).
Exhibit 23
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 27, 2018
50
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 27, 2018
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
51
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 27, 2018
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
52
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, 2017, 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 27, 2018
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
53
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, 2017, 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 27, 2018
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
54
GARY D. FIELDS has served as President
of the Company since 2016 and a director of the
Company since 2015. Mr. Fields been involved
in the HVAC industry for over 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.
REBECCA A. THOMPSON
has served as Chief Accounting Officer and
Treasurer of the Company since 2017, and
Chief Accounting Officer of the Company
since 2012. Ms. Thompson previously served
as a Senior Manager at Grant Thornton, LLP
where she had 11 years of experience in
the assurance division. Ms. Thompson is a
licensed certified public accountant.
Company Officers
NORMAN H. ASBJORNSON
has served as CEO and Chairman of the Board
of the Company since 1988. Mr. Asbjornson
also serves as the Chairman of the Board of
AAON Coil Products, Inc. Mr. Asbjornson served
as the President of AAON, Inc., from 1988
to 2016. Mr. Asbjornson has been in senior
management positions in the HVAC industry
for over 40 years.
SCOTT M. ASBJORNSON
has served as Vice President, Finance, and
CFO of the Company since 2012. Mr.
Asbjornson joined the Company in 1990 and
is the son of the Company’s CEO, Norman H.
Asbjornson. Mr. Asbjornson has an MBA
and has held various leadership positions
with the Company, 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.
MIKEL D. CREWS has served as
Vice President, Operations since 2017. Mr.
Crews has served as Director of Material and
Operations since 2015, Manager of Operations
from 1991 to 2015, and in various operational,
production and inventory management roles
since the Company’s inception. Mr. Crews has
been in leadership positions in the HVAC
industry for over 40 years.
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, P.C.
Two Warren Place
6120 South Yale Avenue, Suite 500
Tulsa, Oklahoma 74136
Investor Relations
Jerry Levine
105 Creek Side Road,
Mt. Kisco, New York 10549,
Ph: 914-244-0292,
Fax: 914-244-0295,
jrladvisor@yahoo.com
Executive Offices
2425 South Yukon Avenue
Tulsa, Oklahoma 74107
Common Stock
NASDAQ-AAON
Board of Directors
Back row (from left to right): A.H. McElroy, II, Paul K. Lackey, Angela E. Kouplen, Stephen O. LeClair
Front row (from left to right): Gary D. Fields, Norman H. Asbjornson, Jack. E. Short
NORMAN H. ASBJORNSON
CEO/Chairman of the Board
Gary D. Fields
President/Director
JACK E. SHORT has served as a director the Company
since July 2004 and is the Chairman of the Audit Committee.
Mr. Short was employed by Price Waterhouse Coopers for 29 years
and retired as the managing partner of the Oklahoma practice in
2001.
Stephen O. LeClair was elected as a director of the
Company in 2017. Mr. LeClair has 25 years of experience in various
executive, manufacturing, finance, sales and operational positions.
Mr. LeClair currently serves as CEO of Core & Main (formerly HD
Supply Waterworks) a position he has held since 2017, and in such
role is responsible for leading the nation’s largest distributor of
water, sewer, storm and fire protection products. Prior to his current
role, he served as President of HD Supply Waterworks from 2011 to
2017, Chief Operating Officer of HD Supply Waterworks from 2008
to 2011, and President of HD Supply Lumber and Building Materials
from April 2007 until its divestiture to ProBuild Holdings in 2008. Mr.
LeClair joined HD Supply in 2005 as Senior Director of Operations.
A.H. MCELROY, II has served as a director of the
is Chairman of the Compensation
Company since 2007 and
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.
PAUL K. LACKEY, JR. has served as a director of
the Company since 2007 and is Chairman of the 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.
ANGELA E. KOUPLEN was elected as a director of
the Company in 2016. Ms. Kouplen has over 20 years of experience
at multiple energy companies, with an emphasis on information
technology, contract management, sourcing/vendor relations,
human resource management, strategy and governance. From 2012
through 2014, Ms. Kouplen served as Director - Talent Acquisition
and Leadership, and from 2015 to 2016, Ms. Kouplen served as Vice
President - Information Technology of WPX Energy. Since 2016,
Ms. Kouplen has served as Vice President of Administration and
Chief Information Officer of WPX Energy.
Company Employees
THE ONGOING SUCCESS OF OUR COMPANY CAN BE DIRECTLY ATTRIBUTED TO OUR EMPLOYEES
Angel Acedo
Mirian Acosta
Ma Acosta De Aguayo
Andres Acosta-Lujan
Raquel Acuna Segura
Enriqueta Adame
Gary Adams
Paul Adams
Rebecca Adams
Ryan Adams
Derrick Adams
Maria Aguayo
Leonard Aguilar, Jr.
Arleen Aizawa
Saif Al Bahlani
Daniel Alagdon
Julisa Alcala
James Alexander
Marquis Alexander
Shannon Alford
Nader Al-Hashmi
Paul Allegrezza
Sonia Alter Espina
Israel Alter Granado
Billy Alverson, Iii
Emilia Amezcua
Sarah Andersen
Cordarius Anderson
Nick Anderson
Wesley Anselme
Mark Anthony
Patrick Anthony*
William Appeldorn
Alexander Aquino
Joe Aquino
Luz Aquino
Clyde Archer
Jesus Arellanes Ramirez
Fidel Argumedo Rangel
Jose Argumedo Ruiz
Vincent Argyle
Holly Arizola
Joshua Armas
Thomas Armer Jr.
Jarrod Armstrong*
Maria Arredondo
Gerardo Arreguin
Gerardo Arroyo
Rogelio Arteaga
Norman Asbjornson
Scott Asbjornson
John Ashley, Jr.
David L. Ashlock
David R. Ashlock
Gary Ashmore
Matthew Austin
Steven Auten
Joseph Avila
Kelton Axtell
Orlando Ayala
Kristin Aylett
Nora Backus
Richard Backus, III
Jacob Baier
Jewel Bailey
Dwight Baker
Tony Baker
John Baldwin
Luke Baldwin
Sherry Ballard
Dennis Balthazar
Claudia Banda
Myles Barber
Phillip Barker
Gregory Barker, Jr.
Justin Barlett
James Barnes, III
David Barnett
Ana Barragan De Alteneh
Nereyda Barrios De Perez
Teresa Barron
Francisco Bartolo Gaona
Sherry Bates
James Baugh
Stuart Baugh
Avery Beavers
Timothy Beck
Lionel Beckman
Shawntrelle Bell
Jason Bell
Ruben Bellido Ferrer
Quentin Benke
Francis Bennett, Jr.
Bonnie Benson
Jared Benton
Ida Bermudez
Wilmer Bernales Armella
David Berry
Sergio Beserra
David Bethune
Carl Beyer
Brandie Biffle
Daniel Bigby
Kenneth Bigham Jr.
Amie Bishop*
Vickie Black
Ethan Blackman
Brian Blackmon
Kennon Blackshire
Corey Bledsoe
David Blevins
Devon Blood
Nicholas Bobbitt
Lam Boi
Lhing Boi
Khawm Boih
Nuam Boih
Joshua Boney
Michael Boney
Mario Bonilla Marroquin
Roger Borja Barreiro
Cassandra Botello
Rosendo Botello
Eugene Bowman
Kyle Bowman
John Boyd
Justin Boyd
Robert Boyd
Sharmaine Boyd
LaToya Boyd
Anthony Boyd, Jr.
Marc Bradbury
Corey Braker
Alan Brock
Dustin Brod
Winston Broseke
Orville Brower
David Brown
Brandon Brown
Phyllis Brown
Donald Brown Smittick
James Brown, IV
Johnny Brown, Jr.
Christopher Bryant
Minh Bui
Jason Bunnell
Joshua Burgess
Scott Burgess
Trevor Burke
Jermaine Burkhalter
Latisha Burkhalter*
Monica Burns
Danielle Burrow
Thomas Burrow
Clifton Burrus
Wayne Bush
Penny Bush
Verenice Bustos
James Butler
Rosa Butler
Kedric Butler
Angel Cabrera
Janibal Cabudoy
Alejandro Cadena
Marbella Cadena
Maribel Cadenas
Cleveland Cage, Jr.
Steven Cagle
Margarito Calderon*
Sandra Caldwell
Jorge Calixto
Edward Calloway
Lazaro Cama
Maria Camacho
Claudia Campa-Orozco
Chanquise Campbell
David Campbell
Spencer Campbell
Luis Campuzano
Odess Camren
Jacob Cantrel
Billy Carder
Drew Cardoza
Todd Carner
Lisa Carriero
Vickie Carrington
Vincent Carson
Ronald Carson
John Carter
Terence Carter
Larry Carter, Jr.
Cristobal Carvajal Colorado
Yvonne Case
Beatriz Casiano
Jorge Castellanos
Stephanie Cates
Lewis Caudill
Brian Cavner
Hector Cazares
Francisco Cervantes
Francisco Cervantes, Jr.
Justo Chagoya
Guadalupe Chairez-Galan
Larry Chalk
Zo Chama
Ricky Chambliss
Donnie Chandler, Jr.
Patrick Chapman
James Chasengnou
Aleex Chatkehoodle
Christella Chavez
Edgar Chavez
Gregory Chavez
Zully Chavez
Mani Chettipalli
Shelly Chisnall
Eddie Choates
Terrance Choice Jr.
Mau Ciin
Kham Cin
Lang Cin
Lian Cin
Luan Cin
Pau Cin
Paul Cin
Suan Cin
Tuang Cin
Vung Cin
Vungh Cin
Cing Cing
Dim K. Cing
Dim L. Cing
Hau Cing
Lian Cing
Lun Cing
Man H. Cing
Man L. Cing
Nang Cing
Neel Cing
Nem G. Cing
Nem K. Cing
Ngai Cing
Niang Cing
Ning Cing
San Cing
San Cing
Thang Cing
Zen Cing
Zen N. Cing
Theresa Cing Kok
Manuela Cisneros Moreno
Justin Claiborne
George Clark
Christi Clark
Samuel Clark Jr.
Juan Clemente Valladares
Devonta Coats
Mark Cobb
Adriana Cobos
Kenneth Cochran
Troy Cockrum
Christine Coester
Doreisha Colbert
Earnest Colbert, III
Robert Cole*
Michael Cole
Joel Coleman
Donnie Coleman Jr.
Adrian Collins
Jimmy Collins
Shaquna Collins Walters
Ronald Collins, Jr.
Tim Collinsworth
Jeffery Columbia
Aaron Columbus
Harold Compton
Andrew Conard
Bobby Conditt
Nicholas Conger
Dale Conkwright
Jude Connolly
Mark Cook
Davatric Cooks
Michael Coolidge
Scott Coon
Donna Coonfield
James Cooper
Pamela Cooper
Gregory Cooper
Gregory Cope
Mariana Cordova
Pablo Cordova Cordova
Jeremy Cornelius
Roberto Corona
Genoveva Corona De Rivera
Miguel Cortez
Rosa Cortez
Michael Cortez
Billy Cox
Enoch Cox
Adrian Crabtree
Kathleen Crabtree
Stephan Crabtree
Richard Craite
Steven Crase
Quincy Crawford
Courtney Crayne
Jacob Crayne
Gracious Creer
Mikel Crews
Timothy Cross
Darrell Crow
Sarah Crowley
Chris Cummings
Robert Cummings
Tyree Currin
Kevin Cyrus
Zawng Dai
Cing Dal
Gin Dal
Go Dal
Neng Dal
Thang Dal
Henley Dang
Justin Daniels
John Daniels
Clyde Daniels Jr.
Jenifur Davidson
Cameron Davis
Darryl Davis
Gregory Davis
Jerry Davis
Matthew Davis
Richard Davis
Samuel Davis
Terrance Davis
Angela Davis
Carl Davis
Carolyn Davis
Dustin Davis
Lacoby Davis
Billy Davis, Jr.
Daniel De Casas
Yoana De La Torre
Danyale DeArion
David Deason
Seth Decoux
Ismael DeLapaz
Matias DeLapena Jr.
Doreen DeLeo
Juana DeLobo
Ariel DeLuna
Raquel DeLuna
Barry Dennis
M Dennis
Michael Dennis
Joseph Denton
Donald Deramus, Jr.
Matthew Deshazer
Stephen Deshazer
Audencia Devilla
Roy Deville
Jonathan Diaz
Elizabeth Diaz De Moreno
Casey Dickens
Ciang Dim
Cing Dim
Hau Dim*
Lian Dim
Man Dim
Vung Dim
Johan Dina
Cong Dinh
Tien Dinh
Zam Do
Daniel Doering
Sol Dominguez
Nem Don
Tiffany Donald
Cin Dong
Mksing Dopmul
Nang Dopmul
Niangnuam Dopmul
Thangminlian Dopmul
Devin Dornan
Ashley Dorris
John Dovitski III
Thomas Dreadfulwater
Seneca Drennan
Michelle Drew
Daniel Drucker
Esmeralda Duarte
Cathryn Dubbs
Kenneth Dueck
Robert Dugan
Theresa Dugan
Linda Dunec
Guy Dunn
Justin Dunn
Llewellyn Dupree
Fernando Duran Miguel
Ralph Durbin
Randy Dwiggins
Wendell Easiley
William Easley
Gretchen Edmondson
Gabriel Edwards
Jaderek Elam
Corrie Elder
Kimbra Ellison
Brandi Ellison
Brent Elsheimer
Austin Embry
Matthew Emery-Giuffre
Kham En Thang
Tinisha English
Carlos Escobar Kanan
Dwight Eskew
Norberto Esparza-Torres
Joan Espina Matheus
Gilda Etumudor
James Evans
Rozell Evans
Shannon Evans
Tyler Evans
Joshua Everett
Chad Evers
Kyle Evitt
Kurtis Ewing
Jesse Ewton
Aracely Faglie
Shawn Fairley
Blake Faluotico
Jessica Faria Portillo
Austin Farley
Amy Fehnel*
Fabiola Fernandez
Catalina Fernandez
Carlos Ferrebus Rivas
Roberto Ferrebuz Rivas
David Ferrell, II
Alfred Fetterhoff, Jr.
Gary Fields
Tina Fields
Thomas Fierros
Christian Figueroa Mauras
Andrew Finch
Jessica Finkbiner
Anthony Fisher
Bruce Fisher
Rickey Fisher
Isaac Flaherty
Efigenia Flores
Carolina Flores
Elisa Flores
Laura Flores
Gabriel Flores-Bernal
Brandon Floyd
Jon Floyd
Ruby Floyd
Mark Fly
Ryan Focht
Rebecca Ford
Sheila Forrest
Alex Foster
Christopher Foster
Frederick Foster
Ramon Fourshey
Nicholas Fowler
Loretta Fowlkes
Kenneth Foyil
Michael Francis
Ruben Franco Gomez
Phillip Frank
Warren Franklin
Koltyn Franks
Revonda Franks
Brenda Freeman
John Freeman, Jr
Jose Fregoso
Angel Frias
Brandon Frick
Barry Friend
Wade Fuller
Kaylon Fuller
Rony Gadiwalla
Bryant Gahagan
Curtiss Gaines
Ernesto Gallardo
Jorge Galvan
Daniel Gann
Aleyda Gaona De Martinez
Angel Garcia
David Garcia
Roger Garcia
Jose Garcia
Isidro Garcia Arriaga
Alvaro Garcia Bartra
Teresita Garcia Diaz
Roger Garcia Tapia
Michael Garland, Jr.
Viviana Gaspar Serrano
Donald Gay
Gregory Gentry
Marlana Gentry
Gerald Gentry
Anthony George
James George
Petr Getmanenko
Gabriel Giachino
Brian Gibbons
Mitch Gibson*
Doyle Gibson, Jr.
Jeffery Gill
Kyranna Gilstrap
D'Marcus Gilstrap
Thomas Gin
Kendra Gladson
Lincoln Goff
Jose Gomez
Reiquel Gomez
Maria Gomez
Maria Gomez Medina
Jafet Gomez Ortiz
Alicia Gonerway
Marisela Gonzalez
Eunice Gonzalez
Imelda Gonzalez
Raul Gonzalez
Abrum Gonzalez Alter
Mejhel Gonzalez Alter
Lidia Gonzalez Rivera
Delfin Gonzalez Villamizar
Michael Goodroad
Barry Goodson
Marleitta Grammer
Buenaventura Granados-
Rubios
Mekion Grant*
April Graugnard
Pearlie Graves
Michael Gray
Michael Grayson
David Green
Ron Griffith
Ronald Grimes
Jackie Grubb
Rachel Grundmann
Paul Grundy, II
Eneida Guerrero
Luis Guevara
Maria Guevara
Rodolfo Guevara
Carolina Guillen
Ronald Guinn
Vernice Guinn
Nathaniel Gunn
Rickey Gunter
Eugene Guy
Georgina Guzman
Chau Ha
Ngam Hak
Rebecca Hale
Marcia Haley
Joshua Halfpap
Dennis Hall
Jack Hall
Kelly Hall
Stephen Hall
Summar Hall
Mark Hall
Dale Hall, III
Zachary Halsey
Daniel Halterman
Cody Haltom
Jessica Haltom
Scott Hamilton
Sam Hammoud
Mung Hang
Paun Hang
Thang Hang
Chin Haokip
Lhun Haokip
Derek Harbin, Sr.
Tyler Hardy
Scott Harjo
Bruce Harman, II
Natasha Harris
Stacey Harris
Donald Harris
Lynnetta Harrold
Daniel Hart
Robi Hartmann
Amanda Hartsell
Heather Haskins
Cin Hau
Cing Hau
Kam Hau
Thang Hau
Neng Hau Lian
Paul Havens
Billy Hawley, Jr.
Jacqueline Haynes
Jeremiah Haynes
Tonya Haywood
Andrea Heidt
Daniel Henderson
Eric Henderson
Chakiris Henderson
Sheila Henderson
Tyshanna Hendricks
Kenneth Henry
Justin Henshaw
Kevin Henson
Jalen Henson
Angela Hernandez
Armando Hernandez
Corcina Hernandez
Luis Hernandez
Mariano Hernandez
Jose Hernandez Esquer
Gabino Hernandez Martinez
Paola Herrera Real
Mark Heston
Valantine Hetiback
Eddie Hewitt
Michael Hickman
Ronald Hicks
Brenda Higgins
Larry Highfield
Pamela Hightower
Katherine Hill
Tinida Hill
Virginia Hill
Jamarious Hill
Davy Hill, Jr.
D'Anna Hilton
Steven Hinds
Lamont Hines
Juan Hinojosa
Tyson Hinther
Wes Hiott*
Ronald Hishaw, Jr.
Min Hla
Thang Hmung
Tuang Hnin
Blake Hobbs
Jacob Hobbs
Nataly Hobbs
Taquisa Hodnett-Smith
Katherine Hofmann
Lee Holden, Jr.
Debra Holman
Brock Holmes
Lawrence Honel
Anastasia Honn
Stephen Hoover
Stanley Horton*
De'Raymond Horton
Nu Hou
Sandra House
David Howard
Benedict Howell
James Howell, II
Saw Htoo
Cing Huai
Muan Huai
Nuam Huai
Lydia Hudson
Jared Hughes
Fiona Humphrey
Jerad Humphrey
Larry Humphrey
Michael Humphrey
Khan Hung
Crystal Hunter
Andrew Hurd
Ronald Hutchcraft
Gary Hutchins
Vernon Hutchinson
Cindi Hutton
Dedra Ibanez
Alejandro Ibarra Mederos
Alexander Ignatenkov
Samuel Ingram
Durell Ingram, Jr.
Jacob Isham
Christina Itosy
Melissa Ivy
Khai Ja Khup
Jeff Jackson
Michael Jackson
Belinda Jackson
Deric Jackson
Jeremy Jackson
Randall Jackson
Terrance Jackson
Jose Jamaica
Ethan Jamison
Frances Jaramillo
Esther Jasuan
Wade Jenkins
Frederick Jimmerson
Sarah Jindra
Chaitanya Johar
Alberta Johnson
Brian Johnson
Christopher Johnson
Jeffrey Johnson
Joseph Johnson
Kejuan Johnson
Richard Johnson
Thomas Johnson
Brady Johnson
Jeremy Johnson
Johnny Johnson
Lester Johnson
Marqal Johnson
Marvin Johnson
William Johnson, Jr.
Arthur Jones
Christie Jones
Connie Jones
Danny Jones
David Jones
Garon Jones
Jeremy Jones
Michael Jones
Raymon Jones
Remia Jones
Richard Jones
Timothy Jones
Miessha Jones*
Shannon Jones
Shirley Jones
Ronald Jordan
Sean Jordan
Keyonnah Joshua
Eduardo Juarez Pirona
Eduarmig Juarez Pirona
Leandro Jumelles Nunez
Carl Justice
Ha Ka Ha
Zam Kai
Garrett Kaiser
Hau Kam
Mang Kam
Ngin Kam
Brian Kammers
Dal K. Kap
Dal S. Kap
Thang K. Kap
Thang S. Kap
Sian Kap Lian
Brian Kastl
Eryn Kavanaugh
Tristan Kavanaugh
Lia Kaw
Tuang Kawi
Nenglian Kawngte
Brandon Kelley
Aaron Kelly
Kenneth Kelly, Jr
Gregg Kennedy
Keith Kennedy
Lynn Kennedy
Eric Kenny
Dal Khai
David Khai*
Dim Khai
En Khai
Go Khai
Hang Khai
John Khai
Kham K. Khai
Kham L. Khai
Laang Khai
Mang Khai
Ngin Khai
Ngin Khai
Pau Kim Khai
Pau S. Khai
Paul Khai
Peter Khai
Thang H. Khai
Thang K. Khai
Thang S. Khai
Thang Sian Khai
Thawng Khai
Tuan Khai
Tun Khai
Zaam Khai
Zam Khai Zomi
Thura Khaing
Dongh Kham
Go C. Kham
Go Z. Kham
Mung Kham
Ngun Kham
Pau D. Kham
Pau Khan Kham
Pau Khen Kham
Thang Khat
Cing Khawn
Cing Khek
Kam Khen
Niang Khoi
Dai Khual
Kam Khual
Pau Khual
Thang Khual
Thang L. Khual
Thang S. Khual
Thang Sian Khual
Thawng Khual
Dai Khup
Kap K. Khup
Kap S. Khup
Lang Khup
Lian Khup
Mang Khup
Nang Khup
Ngin Khup
Pau Khup
Pau Khup
Peter Khup
Thang Khup
Thang Khup
Thang Khup
Alan Kilgore
Andrew Kilgore
Rodney Kilgore
Ciin San Kim
Ciin San Kim
Cing Kim
Ed Kim
Hau Kim
Mang Kim
Nang Kim
Nem Kim*
Ning Kim
Pa Kim
Peter Kim
Sian Kim
Thang Kim
Thang Z. Kim
Zam Kim
Jimmy Kimbley
Joe Kincade
Martin Kindle
Clinton King
Cody King
Joseph King
Lori King
Russell King
Korby Kinkade
Roger Kinkade, Jr.
Mangneo Kipgen
Ian Kirk
Alan Kizer
Spencer Kizer
Zakary Kizer
Robert Knebel
Buddy Kons
Cynthia Kosechata
James Koss
Robert Krafjack
Larry Kreps
Fred Kruger
Mikhail Krupenya
Mang Kuak
Adam Kubicki
Cassy Kuykendall
Nicholas Kuykendall
Phillip Lafond
Erika Lagunas
Giang Lai
Sophia Laird
Dau Lakum
Kap Lal
Lun Lal
Gin Lam
Langh Lam
Mung Lam
Lami Lam Tung
Jasper Landon
Myoshia Landrum
Roady Landtiser
Deborah Lane
Elijah Lang
Gin Lang
Kap D. Lang
Kap S. Lang
Pum Lang
Hau Langh
Kap Langh
Thang Langh
Cheto Lara
Martin Larsen
Shannon Lasater
Jennifer Law
Man Lawh
John Lawley
Steve Lawrence, Jr
Jeffrey Lawson
Stephen Lawson
Gabrielle Laymon
Walter Lazcano
Lai Le
Pete Ledbetter
Allen Lee
Christopher Lee
David Lee
Jackie Lee
Matthew Leeper
Ariel Leff
Gregory Leffler
Thomas Lennon
Candace Lewis
Dante Lewis
Justlean Lewis
Tanesha Lewis
Treasure Lewis
Cynthia Leyva
Vah Lhing
Awi Lian
Bawi Lian
Cin Lian
Cing Lian
Dal Lian
David Lian
Dim Lian
Do Lian
Dong Lian
Gin K. Lian
Gin T. Lian
Gin Z. Lian
Go Lian
Huai Lian
Joseph Lian
Kham Lian
Lal Lian
Man Lian
Nang Lian
Niang Lian
Pau Dal Lian
Pau Deih Lian
Pau M. Lian
Pau N. Lian
Pau Sian Lian
Pau Suan Lian
Pausian Lian
Sing Lian
Suang Lian
Thang Kap Lian
Thang Khen Lian
Thang N. Lian
Thang S. Lian
Thang T. Lian
Vi Lian
Vum Lian
Lal Liana
Sawm Liana
Feuquan Lilly
Ping Lin
Thomas Lincoln
William Lindsay
Tristan Lindsey
Keith Linker
Edward Littrell-Coleman
Olena Lobova
Jonathan Lockmiller
Kevin Lockridge
Matthew Loewen
James Londono Coro
Kristin Long
Ricky Long*
Victor Long
Billy Long
Angel Lopez
Fabiana Lopez
Margarito Lopez
Thomas Lopez
Teri Lopez
Eduardo Lopez Olivares
Jose Lopez Olivares
Josybel Lopez Olivares
Mark Lotakoon
Jason Lovett
Edgar Lozano
Scott Ludgate
Jarrod Ludlow
Quannah Ludlow
Evelyn Lugo-Ortiz
Lorena Lujan
Dawn Luke
Cing N. Lun
Cing S. Lun
Dieh Lun
Dim Lun
Ngo Lun
Niang Ngaih Lun
Niang Ngaih Lun
Niang S. Lun
Van Lun
Vung Lun
Vuum Lun
Thang Luong
Thi Luu
Jacob Luzier
Kelly Lybarger
Keith Mackey
Colton Macy
Larry Madalone, II
Jorge Madrigal
Tam Mai
Quinisha Malcolm
Edward Maldonado-Mazariegos
Nikki Malone
Jeffrey Maly
Cing L. Man
Cing S. Man
Nang Man
Maria Mancilla
Awi Mang
Chin Mang
Dai Mang
Dal Mang
Do Mang
En Mang
Gin Mang
Hau Mang
Hau Sian Mang
Kam Mang
Khai Mang
Kham Mang
Kham T. Mang
Khan Mang
Lagh Mang
Lian Mang
Lian N. Mang
Lian S. Mang
Linus Mang
Ngin Mang
Niang Mang
Ning Mang
Sui Mang
Thang Mang
Thawng Mang
Vung Mang
Zam Mang
Zen Mang
Thang Manga
Kevyn Manning
Barbara Manns
William Markwardt
Maria Marquez De-Gilbreath
Mariana Marquez Marquez
Ana Marroquin
Errol Marshall
Cynthia Marshall
Jonathan Marshall
Michael Martin
William Martin
Amanda Martinez
Obdulia Martinez
Hector Martinez Molina
Yesenia Martinez Vazquez
Florentino Martin-Romo
Thomas Masengale, Jr.
James Mason
Beverley Mason
Sheridan Mason
Sandra Mata
Elvin Mathis
Ashley Matthews
Donald Matthews
Charles Mattocks, IV
Patricia Mauch
Ron Mauch
Patricia Maximo
Leonard Maxwell
Shane Mayhugh
Courtney Mcafee
Tina Mcbeath
Robert Mcbowman
Mykea Mccalister
Kavonte McCall
Ian Mccarty
Kristopher Mcclain
Francis McClain
Robert Mccleary
Dirk Mcclellan
Walter McClusky
Michael Mcconnell
Roy Mcconnell
Debra McCowan
Wesley McCowan Jr.
Michael McCuin
Kathy McCulloch*
Loyd Mcdaniel
Randall Mcdaniel
Billy McDaniel
Misti Mcdaris
Michael McDevitt
James McElroy
Nicholas McElroy
Clayton McFall
Marcus McFarling
Ronnie Joe McGee
Ronnie Joe McGee
Larry McGee
John McIntyre
Daniel Mckee
Donna McKinney
Jadarrik McLemore
Georgie McNac
Gina Means
Jon Medeiros
Jesus Mendez
Silvestre Mendez Gonzales
Antonio Mendoza
Johnny Merrell, Jr.
Nicholas Meryhew
Yunior Mesa Vieyto
Steven Metcalf
Jesus Meza Petit
Jose Meza Urdaneta
Carmen Milam
Ranulfa Milian
Chris Miller
Courtney Mitchell
Dallas Mitchell
Phillip Mitchell
Volta Mitchell*
Wayne Mitchell
Jay Modisette
Ricardo Mojica
Biasney Mojica Castaneda
Josue Mojica Torres
Rafael Monarres
Alexis Monasterio Aguilera
Dinora Monroy De Diaz
Iris Montanez
Pedro Montanez
Johnny Montoya
Felicia Moon
Cordell Moore
Herbert Moore
Mario Moore
Mark Moore
Phillip Moore
Tiffany Moore
Tony Moore
Alfonso Moran
Tony Morehead
Edward Moreland
Manuel Moreno
Luke Morey
Christopher Morgan
Deon Morgan
John Morgan
Matthew Morgan
Randy Morris
Reginald Morris
Michael Moses
Bernard Moss
Phillip Moss, Jr.
Clayton Mote
Pasian Muan
Cing Muang
Do Muang
Mua Muang
Vum Muang
Delcimar Mujica Mendez
Arna Mukherjee*
Eric Mulliniks
Thang L. Mun
Thang S. Mun
Cin D. Mung
Cin K. Mung
Cin S. Mung
Cin T. Mung
Daii Mung
Dal Mung
En Mung
Gindal Mung
Hau Suan Mung
Hero Mung
James Mung
Kai Mung
Kam Mung
Khual K. Mung
Khual S. Mung
Khup Mung
Lang G. Mung
Lang K. Mung
Nang Mung
Ngin Mung
Ngo Mung
Pau K. Mung
Pau S. Mung
Song Mung
Suan G. Mung
Suan S. Mung
Thang D. Mung
Thang K. Mung
Thang L. Mung
Thang S. Mung
Tual Mung
Vum Mung
Vungh Mung
Gabriel Muniz Gonzalez
Jesus Munoz
William Murrell
John Mutanda
Kelvin Mwaniki
Saw Naing
Diego Najera
Aini Namelo
Wilfy Namelo
Ah Nan
Michael Nance
Lawrence Nang
Sing Nang
Thawng Nang
Thomas Nang
Darin Narboe
Thang Naulak
Maria Nava
Jose Nava
Abel Navejas
Clayton Neal
Samuel Neale
Natalie Neilson*
Niang Nel
Nathaniel Nelson
Sian Nem
Dei Neng
Cing Ngai
Mang Ngaih
Nuam Ngin
Zam Ngin
En Ngo
Pau Ngo
Duong Nguyen
Hung Nguyen
Huu Nguyen
Manh Nguyen
Noi Nguyen
Phuoc Nguyen
Thanh Nguyen
Cing Ni
Cin Niang
Cing Niang
Cing Niang
Dim Niang
Dim Niang
Dim Niang
En Niang
Esther Niang
Gin Niang
Go Niang
Hau Niang
Kap Niang
Khem Niang
Kim Niang
Lam Niang
Nem Niang
Ning Niang
Piang Niang
Pum Niang
Tual Niang
Vung Niang
Zel Niang
Jacob Nichols
Kierra Nichols
Thang Ning
Zam Ning
Cing No
Thang No
Ashley Nobile
Nuam Noo
Christopher Norfleet
Willie Norfleet
Eric Norris
Tumai Npawt
Esther Nu
Lian Nu
Ciin L. Nuam
Ciin N. Nuam
Cing Nuam
Ning Nuam
Thang Nuam
Theresa Nuam
Zen Nuam
Michael O'Brien
Michael Odom
Alexander Ofosu
Rickey Ogans
Wyatt Ogle
Cedric Oliver
Kennie Oliver
Nyha Oliver
Anthony Oliveras
Eric Olson
David On Tuang
Judy Orms
Leticia Orona
Margarita Orona
Jesus Ortiz Borjas
Jessica Ortiz Estrada
David Osborne
Ofelia Osuna
Jennifer Overmeyer
Devin Overstreet
Johnny Owens
Miguel Pabon
Gerard Pacheco
Luis Pacheco
Hugo Padilla
Mark Page
Brandon Paige
Jordy Paredes
Billy Parker
Robert Parker
Chavaughna Parker
Jason Pate
Paul Patterson
Ciang Pau
Cin L. Pau
Cin N. Pau
Dai Pau
Dal K. Pau
Dal Z. Pau
En Pau
Gin S. Pau
Gin Suan Pau
Kam Pau
Khawm Pau
Lang Pau
Mung Pau
Nang Pau
Neng H. Pau
Neng K. Pau
Pum Pau
Thang Pau
Tual Pau
Zam K. Pau
Zam L. Pau
Nan Paw
Rebecca Payne
Mani Pazhanathadalam
Carldell Pearson
Herlip Pell
Maria Pena
Ronald Penny, Jr.
Ira Penrod
Brenda Pentecost
Shamata Pentecost
Vladimir Penyaz
Cesar Perez
Daniel Perez*
Sergio Perez
Joe Perez
Hector Perez Arias
Pedro Perez Paez
Kimberly Persons
Conal Persun
Montell Pete
Ladrue Peters
Rowdy Peterson
Daniel Peurifoy
Kinh Pham
Linh Pham
Adriana Phillips
Alexander Phillips
Brandon Phillips
Shannon Phillips
Nathaniel Phillips
Rodney Phillips, Jr.
Alexander Phomprida
Hau Pi
Helen Pi
Niang Pi
Peter Pi
Thang Pi
Thomas Pi
Tuang Pi
Tuang Pi
Tun Pi
Goh Piang
Khup Piang
Thang K. Piang
Thang Lamp Piang
Van Piang
Lian Piang
Christopher Pickens
Mayra Pina
Jose Pineda
Clifford Pitchford
Michael Plummer
Osiel Poblete Bartolo
Susanne Poindexter
Shelbey Poindexter
Basant Pokhrel
Renu Pokhrel
Jesus Ponce
Mark Pool
Walter Pope, III
Rudy Powell
Greg Powers
Jeffery Powers
Michael Poynter
Jose Prado
Kenneth Prentice, Jr.
Eric Prickett
Lee Prince
Khai Pu
Khai Pu
Kham Pu
Mang Pu
Muang Pu
Peter Pu
Tuang Pu
Alma Puga
Khai Pui
Thang Pui
Kam Pum
Thang Puno
Darrell Purser
Francis Rachu
Vickinson Rachu
Eric Racine
Audrey Rakes
Holly Ralston
Philip Ramaly
Jesus Ramirez
Jesus Ramirez
Keli Ramirez
William Ramirez
Yosselin Ramirez Aguilar
Natalya Ramirez Marchiran
Felix Ramirez Solano
German Ramos Alonso
Heidi Ramzel
Aaron Randall
Robert Ratliff
Tommy Ratliff
Kyle Ratzlaff
Terry Ratzloff
Curtis Rayon
Keianya Rayson*
Thomas Read
Diego Rebollar-Marin
Peggy Redden
Christophe Reed
James Reed
Montie Reed
Freeman Reed, Jr.
DeVondrick Reese
Amanda Reeves
Margaret Reeves
Byron Reeves
Fedora Regus
Stepan Regus
Alberto Rendon Parra
Rodolfo Renteria
Svyatoslav Reshetov
Pablo Reyes
Paulina Reyes
Agustin Reyes, Jr.
Daichi Reyna
Thomas Reynolds
Daniel Rhoades
Bryan Richardson
David Richardson, Jr.
Robert Riddell
Angela Rideout
Brett Riegel
Rashid Riggins
Delmecio Riser
Hillary Rite
Ramon Rivera
Carl Roberts
Lee Roberts
Amber Robinson
David Robinson, Jr.
Lucas Robl
Brad Rodrigues
Carlos Rodriguez
Hector Rodriguez
Maria G. Rodriguez
Maria L. Rodriguez
Rivelino Rodriguez
Jesica Rodriguez
Rebecca Rodriguez*
Jesus Rodriguez Santibanez
J Rodriguez-Flores
Derrick Rogers
Don Rogers
Tony Rogers
Nelson Rojas
Lidia Rojas
Tony Rongey
Oscar A. Rose
Oscar A. Rose , Jr.
Robert Rosencutter
Casey Ross
Richard Rowe, Jr.
Iosuwe Rudolph
Edgar Ruiz
Ricardo Ruiz
Ma Ruiz Ortega
Harold Russell
Charles Ryan
George Ryan
Karina Saenz Acosta
Cesar Saenz Rodriguez
Lorenza Salas
Abelino Salazar
Adan Salazar
Nora Salazar
Mario Saldana
Maria Saldivar
Miguel Saldivar
Victor Saldivar
Jose Saldivar Orepeza
David Salego
Diana Salinas
Jeffrey Salisbury
Ah Salupta
Ciin San
Beatriz Sanchez*
Lucia Sanchez
Jesus Sanchez
Calvin Sanders
Tanisha Sanders
Nathaniel Sanders
Michael Sandor, Jr.
Cin Sang
Lian Sang
Mang Sang
Samuel Sang
Tuan Sang
Zam Sang
Lal Sangi
William Sangster
Wenceslao Santiago
Ignacio Santillan
Rebecca Sar
Brooklyn Sargent
Erick Sawyer
Sherri Sayles
Taylor Schaming
William Scharosch
Caleb Schmeling
Keeley Schurbon
Lane Schurbon
Jerry Scott
Joseph Scott
Sadie Scott
John Scott
Thang Sei
Tong Sei
Nem Sen
Kayun Seng
Roi Seng
Nicholas Serna
Maria Serrano De Torres
Carrol Shackelford
Dee Shar
James Shelton
Vasiliy Shemereko
Crystal Shephard
Amanda Sheridan
Khin Si
Naa Siam
Zam Siam
Ciin Sian
Cing Sian
Ngin Sian
On Sian
Pau Sian
Michael Sicking
Nelson Sierra
Cory Simmons
Elijah Simmons
Jerry Simmons
Dwayne Simpson
Belinda Simpson
Daai Sing
Dal Sing
Kham Sing
Nang Sing
Thawn Sing
Christopher Sissom
Michael Sitterly
Michael Skinner
Andrew Slavens
Danny Slayton
Paul Slayton
Debi Sloan
Larry Slone
Donna Slone
Ryan Smallwood
Alyante Smith
David Smith
Jamie Smith
Jeffery Smith
Justin Smith
Kerry Smith
Presley Smith
Renaldo Smith
Ricardo Smith
Ryan Smith
Frankie Smith
Galexus Smith
Wilbert Smith Jr.
Anthony Smith, Jr.
Kap So Te
Showe Soe
Jose Solares
Nemisia Solis
Maria Solis
Jami Sorrels
Cyntia Soto Suarez
Kerry Soucy-Evans
Clent Southerland, II
Kevin Souvannasing
Denney Sowder
John Spain, III
Ronnie Sparks
Jameson Spires
Lawana Stane
Joel Staner
Debbie Starr
Vincent Steadman
Arrest Stephen
Brent Stockton
Kevin Stoddard
Scott Stoltzfus
Allen Stone
Su Storrs
Michael Straub
Hau Suan
Kim Suan
Nang Suan
Ngin Suan
Pau Suan
Thang Suan*
Zen Suan
Paul Suan Mung
Kham Suantak
Hau Sum
Mang Sum
Ngin Sum
Pau Sum
Victor Sum
Wa Sum
Sean Surowiak
Jack Sweet
Eric Sypert
James Taber
Thang Taithul
William Tankersley
Keith Tanner
Whitney Tapp
Mark Tate
Larry Tate, Jr.
Nekesha Tatum
Tenna Tatum
Keith Tave
Beverly Taylor
Eric Taylor
Randall Taylor
Rebecca Taylor
Alfonzo Taylor
Keith Taylor
Nicholas Teague
Andrea Teakell
Kevin Teakell
Robert Teis
Shannon Terry
Manlawh Tgzomi
Benjamin Thang
Cin Thang
Cin Thang
Cin Thang
Cin Thang
Dai Thang
Gin Thang
Go Thang
Hau Thang
Hau Thang
Kam Thang
Kam Thang
Kam Thang
Kam Thang
Kham Thang
Lam Thang
Lam Thang
Lang Thang
Langh Thang
Lian Thang
Lian Thang
Lian Thang
Mang Thang
Mang Thang
Ngin Thang
Ngin Thang
Ngun Thang
Pau Thang
Pau Thang
Pau Thang
Pau Thang
Pau Thang
Pau Thang
Sang Thang
Suan Thang
Thawng Thang
Vial Thang
Zam Thang
Zam Thang
Zen Thang
Lian Thang Lam
Peter Thangpi
Suan Thawn
Thang Lam Thawn
Thang Lam Thawn
Thang Lam Thawn
Tual Thawn
Lang Thawng
Pau Thawng
Joshua Thibodeaux
Fred Thomas
Jeremy Thomas
Avery Thompson
Jacob Thompson
Marlo Thompson
Rebecca Thompson
Jkeal Thompson
Jessica Thurber
Ted Tiger
Chad Tillery
Gabriela Tirado
Thawng Tluang
William Tobar
Norman Todd
Harold Toerck
Debbie Tomlin
Cesar Torres Bibiano
Tameria Townsell*
Cong Tran
Hiep Tran
Thi Tran
Thi Tran
Tuong Tran
Mark Tribble
Juanito Tronzon, Jr.
Seng Tu
Mang Tual
Ngin Tuan
Cin Tuang
Dal Tuang
Gin Tuang
Kam Tuang
Kham Tuang
Langh Tuang
Sian Tuang
Sing Tuang
Suanlam Tuang
Thang Tuang
Thang Tuang
Thang Tuang
Tun Tuang
Vungh Tuang
Zam Tuang
Kory Tuell
Ngin Tun
Thang Tun
Zam Tun
Go Tung
Kaam Tung
Langh Tung
Mung Tung
Suang Tung
Thang Tung
Vung Tung
Michael Tunnell
Paul Turbe
David Turley
Bryan Turner
Charles Turner
Latoshia Turner
Randal Tyer
Jessica Tyler
Jacob Tzang
Jesus Tzul
Cing Uap
Pau Uap
Pernell Underwood
Andrei Untila
Maria Urquiza
Joseph Weidman
Anthony Welch
Joe Welch
Kenneth West
Sharon West
William Wheeler
Mark Wherry
Deborah Whitaker
Allyn White
Kyle White
Timothy White
Amber White
Steven Whorton
Doug Wichman
Jackie Wiles
Jerry Wiles
Michael Wiles
Cornell Wiles, Jr.
Chante Williams
Clyde Williams
Donna Williams
Justin Williams*
Nicole Williams
Rodney Williams
Rosalind Williams
Stanton Williams
Billy Williams
Bobbie Williams
Cheray Williams
Frenchmon Williams
Gary Williams
Katheryn Williams
Aaron Williamson
James Williamson
Jeremy Williamson
Bruce Willis
Javoris Willis
Christie Wilson
Christopher Wilson
Dallas Wilson
Isaac Wilson
James Wilson
Justin Wilson
Scott Wilson
Weston Wilson
DeMeatrica Wilson
Robert Wilson, Jr.
Naw Win
Dylan Winn
Whitney Winn
Micah Wisdom
Jack Witt, Jr.
Ronald Wood
Emily Wood*
Cody Woodard
Brandon Workman
Kasey Worthington
Benjamin Wright
Barry Wyers
Jim Wyrick
Patrial Yarbrough
Angel Young
Jason Young
Marc Young
Kato Young
Trudy Young
Domonic Zachary
Lang Zahlangh
Cing Zam
En Zam
Nu Zam
Pongsan Zame*
Isaac Zapata Rey
Daung Zaung
Aurora Zavaleta
Juan Zermeno
Virginia Zermeno
Thangkim Zotaithul
Yadira Urquiza
Latonya Uwak
Eduardo Vaca
Vicki Vail
Giovana Valencia
Lindsey Valencia
Susana Valencia
Julio Valle
Brennen Vance
Timothy Vance
Zachary Vance
Allen Vang
Dallas Vang
Nancy Vargas
Shawn Vawter
Juan Vazquez
Antonio Velasco
James Velde
Juan Vences
Angel Venegas
Salome Vera
James Verhamme
George Verrett
Jeremy Vick
Stephanie Vickers-Cameron
Teresa Victory
Efrain Villa
Jose Villalobos Gonzalez
Wilson Villalobos Molero
Isabel Villalpando Martinez
Raulito Villanueva
Selina Viramontes
Anissa Vissering
Cuong Vo
Tim Vo
Tong Vo
Chuan Vu
Thu Vu Nguyen
Ciin Vum
Ciin Vung
Cing Vung
Cing Vung
Don Vung
Kap Vung
Mang Vung
Mary Vung
Niang Vung
Ning Vung
Vum Vung
Mark Wakefield
Stephen Wakefield
Whitney Wakefield
Cody Walden
Diana Walker
Joshua Walker
Roderick Walker
Ronald Walker, Jr.
David Walkup
Samuel Walkup
Barry Wall
Amilcar Wallace
Tenekia Wallace
Santonnieyeo Wallace, III
Todd Wallingford
Justin Wallis
Buddy Walston
Brent Walters
Darius Walters
Misty Walters
Nolan Walters
Shoricore Walters
Newman Walton
Gayle Ward
Jerome Warren
Nugene Warren
Ryan Warren
Anthony Washington
Steven Watkins
Boone Watson
Trevor Watson
Vicki Watson
Kendra Watts
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