2018 Annual Report
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The NAIC Research and Development Laboratory
is now operating, with an official public grand opening
scheduled for 2019
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sales, an increase of 7.1% compared to 2017. Challenges
of this growth, including labor issues and increasing costs of
raw materials, resulted in a decrease in net income, to $42.6
million for 2018. However, a record $151.8 million in backlog on
December 31st includes price increases enacted throughout the
past year adequate to bring future shipments back to historical
profit margins. Along with the price increases, improvements to
our onboarding and new-hire training processes, and the official
opening of the NAIC R&D laboratory this year, we are focused
on setting new records in sales volume and profitability. We are
dedicated to delivering the same excellence to our stockholders
that we have for 30 years.
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A AON is engaged in the engineering, manufacturing,marketing and sale
of air conditioning and heating equipment consisting of standard,
semi-custom and custom rooftop units, chillers, packaged outdoor
mechanical rooms, air handling units, condensing units, makeup
air units, energy recovery units, geothermal/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.
Product
Family
Product
Family
Financial Highlights
2018
2017
2016
2015
2014
Income Data ($000 except per share data)
Net Sales
Gross Profit
Operating Income
Interest Income (Expense), Net
Depreciation and Amortization
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 and 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
433,947
103,533
55,790
196
17,655
55,939
42,572
0.81
0.81
92,790
140,861
163,003
166,880
1,994
308,197
48,071
-
247,499
4.70
54,856
(34,635)
(39,684)
(19,463)
23.9%
17.6 %
14.1 %
12.9 %
9.8 %
0.2
1.3
2.9
43
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
1 = Reflects 3-for-2 stock split in July 2014
3 = Reflects retrospective adoption of ASU 2015-17
2 = (Cash & cash equivalents + investments + receivables)/current liabilities
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
7
Norman Asbjornson
CEO and Founder
Gary Fields
President
October 29, 2018 at The NASDAQ Stock Market
8
Letter from the CEO and President
Dear Fellow Stockholder,
In 2018, we celebrated our 30th anniversary as a publicly traded company. We were
honored to receive an invitation from NASDAQ to commemorate this occasion by
ringing the opening bell for trading on The NASDAQ Stock Market last October. Our
Company’s 30-year history includes many accomplishments and countless examples
of challenges met and exceeded. We were presented with many challenges during
2018, all while strengthening our position in the marketplace and continuing to
position our Company for long-term growth and profitability.
Aided by a strong economic environment, along with both an improved product line
and strengthened sales personnel, sales in 2018 reached a record level of $433.9
million, which represented a gain of 7.1% compared to $405.2 million in 2017.
Gross profit, burdened by both higher labor and raw material costs, declined 16.1%
to $103.5 million (23.9% of sales) versus $123.4 million (30.5% of sales). SG&A
expenses declined to $47.8 million (11.0% of sales) compared to $49.2 million
(12.2% of sales) during 2017. Nonetheless, income from operations decreased
24.7% to $55.8 million (12.9% of sales) compared to $74.1 million (18.3% of sales)
during 2017. Net income fell 21.9% to $42.6 million or $0.81 per diluted share from
$54.5 million or $1.03 per diluted share in 2017. The Tax Cuts and Jobs Act enacted
in December 2017 benefitted the 2017 income tax provision by $4.4 million.
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9
STRONG FINANCIAL CONDITION
financial condition at December 31, 2018 remained
Our
strong. The current ratio was 2.9:1. Our capital expenditures in
the past year were $37.3 million with approximately 50% of
that total devoted to the building of the Norman Asbjornson
Innovation Center (NAIC) research and development laboratory.
We estimate capital expenditures in 2019 to be in the vicinity
of $40.0 million, the bulk of which will be devoted to plant
and machinery, with approximately $3.0 million to complete
the NAIC facility, which should be fully operational by the fall of
this year. We expect the total cost of the state-of-the-art NAIC
facility to be approximately $34-35 million. We continue to
operate
stockholders’ equity was
$247.5 million, or $4.70 per diluted share, and our return
on average stockholder's equity was 17.6%. Since the end
of 2017 and throughout 2018 we implemented three price
increases, our backlog at
increases. Aided by
December 31, 2018, climbed 86.8% to $151.8 million from
$81.2 million for the same period a year ago.
free of debt. Total
these
We are mindful of the reputation we have earned as one of
the most technologically innovative producers of the highest
quality, most efficient products in the HVAC industry. We
remain dedicated to expend the necessary financial and human
capital to maintain this reputation. We have once again
included a five-year chart that exhibits our net
income,
expenditures and free cash flow. It is a record in which we take
great pride.
We are quite aware of the recent discussions concerning the
appropriateness of corporate stock repurchases. We have
maintained stock repurchase programs from time to time since
AAON Cash Flow
($ mil.)
Net Income
Depreciation
Total Cash Flow
42.5
17.7
60.2
Capital Expenditures
(37.3)
Dividend Payout
(16.7)
Free Cash Flow
6.2
2018
2017
2016
2015
2014
54.5
15.0
69.5
(41.7)
(13.7)
14.1
53.4
13.0
66.4
(26.6)
(12.7)
27.1
45.7
11.7
57.4
(21.0)
(11.9)
24.5
44.2
11.6
55.8
(16.1)
(9.7)
30.0
Stock Repurchases
(27.9)
(18.2)
(20.1)
(37.1)
(29.3)
10
2007, and during the past five years we have spent a total of
$132.6 million on these repurchases. We have also made $64.7
million of total dividend payouts to our stockholders during that
same period. We strongly believe that these two expenditures
have greatly enhanced stockholder values and returns. Our cash
flow generation and capital position also enabled the Company to
make total capital expenditures of $142.7 million during the past
five years.
ACQUISITION OF WATTMASTER
CONTROLS
On February 28, 2018, AAON completed the acquisition of
substantially all of the assets of WattMaster Controls, Inc., a
company based in Parkville, Missouri, for $6.4 million in cash.
WattMaster was a long-time supplier primarily of controls to
AAON. This acquisition facilitated the acceleration of AAON’s
internal development of its own line of controls used in AAON
products.
BOARD OF DIRECTORS AND
EXECUTIVE LEADERSHIP CHANGES
continued
The Company
to have healthy Board and
executive officer refreshment. Caron A. Lawhorn was elected to
AAON’s Board of Directors on January 24, 2019. Ms. Lawhorn
is a certified public accountant, and currently serves as Senior
Vice President and Chief Financial Officer, of ONE Gas, Inc., a
standalone one hundred percent regulated publicly traded
natural gas utility. Prior to her current role, she served as
Senior Vice President, Commercial, a position she held from
ONE Gas's separation from ONEOK in 2014. She served in the
same position at ONEOK, since 2011. From 2009 until 2011,
Caron was Senior Vice President, Corporate Planning and
Development of ONEOK and ONEOK Partners, responsible for
business development, strategic and long-range planning and
capital investment. Prior to that, she was Senior Vice President
of Financial Services and Treasurer of ONEOK.
Additionally, on October 29, 2018, the Board of Directors
promoted Stephen Wakefield to Vice President of Engineering and
Rony Gadiwalla to Vice President of Information Technology and
Chief Information Officer.
Mr. Wakefield has been with the Company since 1999. Prior to
this promotion, he most recently served as AAON’s Director of
Engineering, and prior to that held several engineering roles,
including Director of Design and Engineering Operations from 2017
to 2018, Senior Manager of Research and Development from 2015
to 2017, and Design Engineering Manager from 2005 to 2015.
Mr. Gadiwalla has been with the Company since 2004. Prior to
this promotion, he most recently served as AAON’s Director of
Information Technology since 2014. Prior to that, he held several IT
roles, including Manager of Project Management Office from 2012
to 2014, and Engineering Automation Manager from 2009 to 2012.
SALES REPRESENTATIVES
NETWORK
We continue to enjoy the strongest group of independent sales
representative organizations in our industry and our efforts in
this area during 2017 contributed to our increased sales during
2018. In 2018, we changed four of our sales representative
firms in the United States. Three of these changes were the
result of mergers and one new representative firm was
added. Our current roster of representative firms consists of 63
in
individual companies, 55
Canada, of which there are 101
in
the United States and 11 in Canada. Our independent sales
representatives are key contributors to AAON’s success and were
responsible for more than 90% of our sales during 2018.
in the United States and 8
individual offices, 90
GROWING PAINS
While this past year witnessed good sales growth, inflation of
raw material prices and the lack of experienced labor took a
significant toll on our operating margins. During 2018 we
incurred raw material price increases of 4.7%, 18.2%, 11.8%
and 6.4% in copper, galvanized steel, stainless steel and
aluminum, respectively. In an attempt to offset these costs,
we implemented three price increases, one in late 2017 and
two during the past year. They were admittedly, too little too
late. We manufactured and shipped the lower priced products
for all of 2018 and into the beginning of this year. We believe
inflation is back in the picture. With our aggressive price
increases, we are getting the backlog to return to historic
is two times
profitability. However, our normal backlog
our monthly sales but due to the economy and the sales
improvements we have made, we have in excess of four months’
of business. Therefore, the price increases must work their way
through the backlog. The profitability returned in the last half of
2018 and we expect that it will continue to do so in 2019. How
fast this occurs will depend upon inflation. Price increases as
required will continue.
During 2018 we incurred raw
material price increases of 4.7%,
18.2%, 11.8% and 6.4% in copper,
galvanized steel, stainless steel
and aluminum, respectively. In an
attempt to offset these costs, we
implemented three price increases,
one in late 2017 and two during
the past year… With our aggressive
price increases, we are getting
the backlog to return to historic
profitability.
11
RECOGNITIONS, AWARDS AND
PRODUCT IMPROVEMENTS
AAON was recognized for excellence in product design in the
15th 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 98 entries. AAON’s RN Series rooftop unit was
the Bronze Award Winner in the HVAC Commercial Equipment
category. The ACHR News is the leading trade magazine in
the heating, ventilating, air conditioning, and refrigeration
industries.
Certification,
The Norm Asbjornson Hall
at Montana State University
was recognized with a U.S.
Green Building Council LEED
the
Platinum
highest certification possible. The
facility is home to the university’s
honors college and Norm Asbjornson
College of Engineering, and officially opened
in December 2018. Construction of the building was funded
largely by a private gift from Norm Asbjornson. The building
features an energy saving geothermal and solar heating and
cooling system combined with photovoltaic panels along with
AAON water-source heat pumps. It is expected to use roughly
half the energy per square foot as many of the other buildings
on the campus.
AAON RN Series Rooftop Units are now offered with high-
efficiency, uncomplicated, cost-effective
two-stage scroll
compressors, which combine energy savings with simple
control, for a unit with up to 20.5 IEER, part-load efficiency. This
configuration is available with all of the same premium features
and options of a standard AAON RN Series unit. Energy efficient
features include double wall rigid polyurethane foam injected
panel construction, microchannel aluminum condenser coils,
factory installed AAONAIRE energy recovery wheels, and direct
drive backward curved plenum fans.
12
In June, our air-cooled chiller products were Air-Conditioning,
Heating and Refrigeration Institute (AHRI) Performance Certified,
in accordance with AHRI Standard 550/590. This includes the LF,
LN and LZ Series chillers and packaged outdoor mechanical rooms.
This opens up our chiller product line to additional markets,
locations, and government projects with strict energy code
specifications that require AHRI certification for chilled water
systems.
In August, our water-source heat pump products were AHRI
Performance Certified. Water-source heat pump performance
is rated in accordance with the ANSI/AHRI/ASHRAE/ISO 13256
standard. The Company’s certified product listings are available
on the AHRI’s Directory of Certified Product
Performance. AAON products in the AHRI
certification program include AAON RN
and RQ Series water-source heat pump
rooftop units, M2 Series water-source heat
pump modular self-contained units, SB
Series water-source heat pump vertical self-
contained units, and WH/WV Series small packaged
horizontal/vertical water-source heat pump units.
We have made important changes to our entire larger tonnage
(45-240 tons) RZ product line, which is now available with a
variable speed compressor. This product deploys the
latest
technology and is more energy efficient and cost effective than
other units of similar size.
floor-by-floor units used
in high-rise buildings have
Our
historically been a relatively small contributor to our overall sales.
We have increased the manufacturing efficiency of this product
line and we expect it to make a more significant contribution to
our sales in the future.
remained
replacement
construction
and
firm during
largest market segment and continued
the
Both
new
our
segments
the past year, each
of our business
contributing equally to our total sales. The educational segment was
our
to exhibit good
condo, etc.) and
lodging
growth, while both
commercial (retail, supermarkets, etc.) segments, impacted by the
improved economy, also witnessed slight growth. The following
chart depicts our sales based on the various business segments in
which our products operate.
(hotel,
AAON Sales Mix by Business Segment
NORM ASBJORNSON INNOVATION
CENTER RESEARCH & DEVELOPMENT
LABORATORY
In October, we held an open house at the Norm Asbjornson
Innovation Center Laboratory (NAIC)
for over 500 AAON
sales representatives. We displayed all the capabilities of the
laboratory and detailed the upcoming sales opportunities
that would be available for them to present to customers and
potential customers. Since
that meeting, we have had
multiple representatives and customers tour the facility during
their visits to the factory. An official public grand opening of the
NAIC laboratory is planned for later in 2019.
50% New Construction and 50% Replacement
WATER-SOURCE HEAT PUMP
In 2018 this product line witnessed a 115% increase in unit
sales to 5,334 from 2,485 in 2017. Sales during that same
period grew approximately 50% to $14.7 million from $9.9
million. This technically advanced new product line took two
years to develop and we are no longer limited by in-house
production problems. We introduced this product line with sizes
from one-half ton to 5 tons. This year we will be introducing
sizes 5 through 12 tons of capacity.
We believe the water-source heat pump may become the
fastest growing segment in AAON’s portfolio of products.
Horizontal and Vertical AAON Water-Source Heat Pumps
45 ton AAON Water-Source Heat Pump Rooftop Unit being
moved into the 50 ton Psychrometric Chamber
their
interests with
OUR EMPLOYEES
AAON strives to attract and retain a talented workforce using
competitive base pay, profit sharing and benefits. We also
to a broad base of our
provide equity compensation
those of our
to align
employees
stockholders. AAON employees are automatically enrolled
to receive a robust 401(k) match, in the form of company stock,
from their first day of employment. In addition, we distribute
10% of our annual pre-tax earnings equally among nearly all
personnel as a more rapid means to reward positive results.
It is our belief that motivating our employees to think and
behave like owners of the Company helps drive our success and
motivates our team members to strive for results, commit to
continual improvement and save for the future while remaining
fully-engaged in the long-term success of AAON.
13
in
to
the
unemployment
2018 presented us with a particularly challenging set of
expand
circumstances. As we worked
employment
our manufacturing,
Tulsa,
rate
Oklahoma, our primary location, declined from 4.1% in December
of 2017 to 3.0% in December of 2018. Because of this tight labor
market, we encountered significant difficulty recruiting and
retaining the talent required to perform at our desired level of
output. As a result of these challenges, we have focused on
increasing our entry-level compensation while simultaneously
for new
improving our on-boarding and training practices
personnel. These efforts are beginning to yield more stability in our
recently-hired personnel population and will be closely monitored
to ensure these initiatives continue to provide positive impacts on
both employee retention and productivity measures.
in
further engage our
AAON values the diverse perspectives of our team members,
who not only drive the performance of the Company, but also
participate
its success through their exposure to equity
team members, we
participation. To
actively seek qualified candidates from within the organization for
promotion and endeavor to ensure that everyone has an equal
opportunity with AAON. To that end, our talent development
efforts train team members
for advancement opportunities
through a variety of workforce development initiatives as well
as our long-standing tuition reimbursement program. We are
fortunate to have a large number of talented, engaged and
committed team members. We make every effort to foster an
environment where the next generation of AAON leaders are
identified and developed in a manner that maximizes their ability
to contribute to the sustained growth of AAON well into the future.
As a result of these challenges, we have focused on increasing
our entry-level compensation while simultaneously improving
our on-boarding and training practices for new personnel. These
efforts are beginning to yield more stability in our recently-hired
personnel population and will remain closely monitored to ensure
these initiatives continue to provide positive impacts on both
employee retention and productivity measures.
14
OUTLOOK
This past year marked our 30th anniversary in business. We also
witnessed our total sales reach an all-time record. Operating
margins were restricted by increased inflation affecting both
raw material and labor costs. Beginning in late 2017 and for all
of 2018, we operated behind the pricing curve due to a backlog
in excess of four months’ of shipments rather than the normal
two months’ of shipments. In 2018 we began to implement an
aggressive pricing posture which we believe will beneficially
impact our bottom line for the remainder of 2019 and into 2020.
With a record backlog and a strong incoming order rate, we
believe we are on the threshold of sustainable revenue and
earnings growth. We cannot achieve these goals without the
combined support and cooperation of our customers, sales
representatives
total
commitment of our employees, all of whose names appear at the
end of this report.
stockholders
and with
and
the
We are honored to have you with us as we continue to meet our
challenges and pursue sales and earnings growth.
The tight labor market made the recruitment and retention of
experienced labor quite difficult. Beginning earlier this year, we
initiated new practices that should improve and remedy our
hiring and retention efforts.
March 18, 2019
Norman H. Asbjornson Chief Executive Officer and Founder
Gary D. Fields President
October 29, 2018 - AAON Rings the Opening Bell at The NASDAQ Stock Market
A Time of Success
1988 - 2008
1988
1992
1996
August
AAON, an Oklahoma
corporation, was founded.
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.
Summer
Became a publicly traded company
with the reverse acquisition of
Diamond Head Resources (now
“AAON, Inc.), a Nevada corporation.
1990
December
Listed on NASDAQ Small Cap -
Symbol “AAON”.
Spring
AAON Coil Products purchased,
renovated and moved into a 110,000
square foot plant in Longview, Texas.
SEPTEMBER
One-for-four reverse stock split.
Retired $1,927,000 of
subordinated debt.
1993
NOVEMBER
Listed on the NASDAQ National
Market System.
1994
January
Introduced a desiccant heat
recovery wheel option available on
all AAON rooftop units.
March
Purchased property with 26,000
square foot building adjacent
to AAON Coil Products plant in
Longview, Texas.
Issued a 10% Stock Dividend
1991
December
Formed AAON Coil Products, a Texas
Corporation, as a subsidiary to
AAON, Inc. (Nevada) and purchased
coil making assets of Coil Plus.
1995
SEPTEMBER
Completed expansion of
the Tulsa facility to 332,000
square feet.
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.
1998
October
U.S. patent granted to AAON for air
conditioner with energy recovery
heat wheel.
November
AAON yearly shipments exceed
$100 million.
Received U.S. patent for Dimple
Heat Exchanger Tube.
1999
SPRING
Completed Tulsa, Oklahoma and
Longview, Texas plant additions
yielding a total exceeding one
million square feet.
2000
Fall
Our manufacturers representative
business grew to more than 100
offices, contributing approximately
60% of total sales.
2001
July
AAON added as a member of the
Russell 2000® Index
FALL
Expanded rooftop product line to
230 tons.
Introduced evaporative-cooled
condensing energy savings feature
SEPTEMBER
3-for-2 stock split
OCTOBER
AAON listed in Forbes’ 200 Best
Small Companies
2002
JUNE
3-for-2 stock split
FALL
Industry introduction of the modular
air handler and chiller products.
OCTOBER
AAON listed in Forbes’
Magazine’s “Hot Shots 200
Up & Comers.”
AAON listed in Forbes’ 200 Best
Small Companies.
2003
2006
MAY
Purchased the assets of Air Wise, of
Mississauga, Ontario, Canada.
JULY
Started production of polyurethane
foam-filled double-wall
construction panels for rooftop
and chiller products using newly
purchased manufacturing
equipment.
OCTOBER
AAON listed in Forbes’
200 Best Small Companies.
2004
APRIL
AAON received U.S. Patent for
the De-Superheater for
Evaporative-Cooled Conditioning
SEPTEMBER
AAON received U.S. Patent for DPAC.
NOVEMBER
Introduction of light commercial/
residential product lines.
2005
AUGUST
AAON received U.S. Patent for
Plenum Fan Banding.
APRIL
AAON introduced factory engineered
and assembled packaged mechanical
room, which includes a boiler and all
piping and pumping accessories.
JUNE
Initiation of a semi-annual cash
dividend for AAON shareholders.
2007
March
Modular Air Handler products
extended to 50,000 cfm.
AUGUST
3-for-2 stock split.
OCTOBER
AAON Listed in Forbes’ 200 Best
Small Companies.
DECEMBER
AAON rings closing bell at NASDAQ.
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.
A Time of Success
2009 - 2018
2009
2010
2012
SUMMER
AAON increased dividend payment
by 13%.
AAON named to the Fortune 40 :
Best Stocks to Retire On.
National Society of Professional
Engineers Award AAON 2009
Product of the Year.
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.
JULY
AAON RQ Series win ACHR News
Dealer Design award.
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
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.
OCTOBER
AAON Geothermal RQ Series product
named 2011 Product of the Year -
Silver by Consulting-Specifying
Engineer magazine.
SPRING
Industry introduction of light
commercial geothermal heat pump
self-contained unit product line.
JULY
AAON SB Series Self-Contained
Unit Wins ACHR News Dealer
Design Award - Gold
SEPTEMBER
Consulting-Specifying Engineer
magazine awarded RN Series
E-Cabinet Product of the Year -
Bronze.
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
SEPTEMBER
25th Anniversary
AAON rings opening bell
at NASDAQ.
Consulting-Specifying Engineer
magazine awarded SB Series
Product of the Year - Bronze.
DECEMBER
AAON named top Tulsa area
stock value.
2014
June
3-for-2 stock split
july
AAON LN Series Chiller wins ACHR
New Dealer Design Award - Bronze
september
AAON donates $3 Million to A
Gathering Place for Tulsa.
2015
May
AAON increases dividend payment
by 20%
June
AAON receives Gold Dealer
Design Award in the Ventilation
category.
september
AAON Low Leakage Dampers
voted “Product of the Year”
by Consulting-Specifying
Engineer magazine.
2016
2017
January
AAON received U.S. Patent for the
Low Leakage Dampers
February
AAON Breaks Ground on New
"Norman Asbjornson Innovation
Center" Research and Development
Laboratory
July
AAON LZ Series Packaged Outdoor
Mechanical Room wins ACHR News
Dealer Design Award- Gold
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.
October
First WH Series small packaged
horizontal water-source heat pump
comes off the production line.
November
AAON increases dividend payment
by 18%
April
First WV Series small packaged
vertical water-source heat pump
comes off the production line.
July
AAON products received Dealer
Design Awards from ACHR News.
september
AAON V3 Series, Touchscreen
Controller, and WH Series voted
Products of the Year by
Consulting-Specifying Engineer
magazine.
2018
MARCH
WattMaster Controls, Inc.
Acquisition
May
AAON increase dividend payment
by 23%
July
RN Series with Two-Stage
Compressors wins ACHR News Dealer
Design Award - Bronze
AUGUST
AAON Water-Source Heat Pumps
AHRI Performance Certified
September
30th Anniversary
October
AAON rings opening bell at NASDAQ
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, 2018
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.
[X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Large accelerated filer [X]
]
Non-accelerated filer [
Accelerated filer [
Smaller reporting company [
]
]
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.)
[ ] Yes [X] No
The aggregate market value of the common equity held by non-affiliates computed by reference to the closing price of
registrant’s common stock on the last business day of registrant’s most recently completed second quarter June 30, 2018
was $1,360.8 million.
As of February 25, 2019, registrant had outstanding a total of 51,976,455 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 14, 2019, 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
6
10
10
9
11
11
12
13
22
23
47
47
50
50
50
50
50
50
51
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 $14.7 million, $14.6 million, and
$14.7 million of our sales in 2018, 2017, and 2016, respectively. As a percent of sales, foreign sales accounted for
approximately 3% to 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 2018 sales of $433.9 million, we estimate that we have approximately a 11% share of the greater than five
ton rooftop market and a 2% share of the less than five ton market. During 2018, approximately 50% of our sales were
generated from the renovation and replacement markets and 50% 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 four 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; the RL Series, which is offered in 21 cooling sizes
ranging from 45 to 240 tons; and the RZ Series, which is offered in 11 cooling sizes ranging from 55 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 30 tons.
We manufacture a LF Series air-cooled chiller, a LN Series air-cooled chiller, and a LZ Series chiller and packaged
outdoor mechanical room, which are available in both air-cooled condensing and evaporative-condensed 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, RZ and SA Series units.
Our energy recovery option applicable to our RQ, RN, RL, RZ and SB units, as well as our H3, V3, M2 and M3 Series
air handling units, responds 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.
Our air-cooled chillers (LF, LN and LZ Series) are certified with the Air-Conditioning, Heating, and Refrigeration
Institute (“AHRI”) in accordance with AHRI Standard 550/590. Our water-source heat pump products, including RN,
RQ, M2, SB, WH and WV Series, are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.
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.
We also offer six control options: the Pioneer Silver, Pioneer Gold, Touchscreen Controller, Orion Controller, terminal
block for field installed controls, and factory installed customer provided controls.
Major Customers
One customer, Texas AirSystems, accounted for 10% or more of our sales during 2018, 2017, and 2016.
Sources and Availability of Raw Materials
The most important materials we purchase are steel, copper and aluminum, which are obtained from domestic
suppliers. We also purchase from other domestic manufacturers certain components, including compressors, electric
motors and electrical controls used in our products. We attempt to obtain the lowest possible cost in our purchases of raw
materials and components, consistent with meeting specified quality standards. We are not dependent upon any one
source for raw materials or the major components of our manufactured products. By having multiple suppliers, we
believe that we will have adequate sources of supplies to meet our manufacturing requirements for the foreseeable future.
2
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.
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.
Representatives
We employ a sales staff of 41 individuals and utilize approximately 63 independent manufacturer representatives’
organizations (“Representatives”) having 101 offices to market our products in the United States and Canada. We also
have one international sales organization, which utilizes 19 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 and our
Parkville, Missouri, facility 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. 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, RL and RZ (rooftop units), F1, H3, SA, V3, M2 and M3 (air handling units), LF,
LN and LZ (chillers), CB, CF, CN and CL (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 $13.5 million, $13.0
million, and $12 million in 2018, 2017, and 2016, respectively.
Our Norm Asbjornson Innovation Center ("NAIC") research and development laboratory facility that open in 2019,
includes many unique capabilities that exist nowhere else in the world. A few features of the lab include supply, return,
and outside sound testing at actual load conditions, testing up to a 300 ton air conditioning system, testing of up to a 540
ton chiller system, and 80 million Btu/h of gas heating test capacity. Environmental application testing capabilities
include -20 to 140°F testing conditions, up to 8 inches per hour rain testing, up to 2 inches per hour snow testing, and up
to 50 mph wind testing. We have the largest sound-testing chamber in the world for testing heating and air conditioning
equipment, and the only one that can do this testing while putting the equipment under full environmental load. This will
3
enable AAON to lead the industry in the development of quiet, energy efficient commercial and industrial heating and air
conditioning equipment.
Ten testing chambers within the NAIC allow AAON to meet and maintain AHRI (Air-Conditioning Heating and
Refrigeration Institute) and DOE certification, and solidify the company’s industry position as a technological leader in
the manufacturing of HVAC equipment. Current voluntary industry certification programs and government regulations
only go to 63 tons of air conditioning as that is the largest environmental chamber currently available for testing. The
NAIC contain contains both a 100 ton and a 540 ton chamber allowing us to prove to customers our capacity and
efficiency on these larger units.
The NAIC was designed to test units well beyond the standard AHRI rating points and we offer testing services on
AAON equipment throughout its range of application. This is very important on critical facilities where the units must
perform properly and there is great risk in waiting to see once installed. These same capabilities will enable AAON to
develop new extended range of operation equipment and prove its capabilities.
Backlog
Our backlog as of February 1, 2019 was approximately $147.0 million compared to approximately $64.9 million as of
February 1, 2018. The current backlog consists of orders considered by management to be firm and our goal is to fill
orders within approximately 60 to 90 days after an order is deemed to become firm; however, the orders are subject to
cancellation by the customers in which case, cancellation charges apply up to the full price of the equipment.
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, 2018. 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, reliability, product line recognition and acceptability of sales outlets. 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 5, 2019, we employed 2,221 direct employees and contract personnel. 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 2019
to 2033.
4
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.
We also strive to protect the environment, work with suppliers who do the same, and encompass sustainable business
practices in our manufacturing operations. AAON is dedicated to leading the company into a bright sustainable future.
We have joined Sustainable Tulsa, a local non-profit organization, in creating an AAON Scor3card to implement more
sustainable processes throughout all the company locations (Tulsa, Longview and Parkville). We recognize that
sustainability is both profitable and economical.
Since 2014, we have changed out our lighting to a much more energy efficient system. 80% of our lighting was Metal
Halide and 20% was fluorescent. Currently, we are about 80-90% LED, and 10-20% fluorescent. We will be 100% LED
by 2020. When you combine the LED upgrade with our advanced lighting control system, AAON saves about
$400,000/year on electricity. We have also received a similar amount from power company rebates. These power savings
equate to about 5,000,000 kWh saved per year. The LED lighting has also created a better work environment for our
employees and requires less maintenance.
In addition to this, we have installed more energy efficient HVAC systems, air compressors, and building insulation.
At the Tulsa facility currently paper and metal recycling are being conducted. Numerous waste streams have been
identified by our internal GoGreen employee committee that could be recycled, reused, or reduced. We are also
implementing a program to sort all our metals that has been identified to produce more profits. At the Longview facility
currently metal, cardboard, and wood recycling is being conducted. The metal recycling also includes sorting all metals
for maximum rebates. At the Parkville, facility recycling efforts are currently being researched and pursued. We recover
oil in our sheet metal manufacturing area, which is then recycled. The rags are washed and returned to us be used again,
preventing them from entering a landfill.
AAON is also committed to designing and manufacturing innovative HVAC products of the highest quality, efficiency,
and performance. Our water-source heat pumps products recover otherwise wasted energy and employ it to cool, heat,
and provide dehumidification to a building - making it one of the most efficient and environmentally friendly systems.
AAON packaged rooftop units with two stage compressors are optimized with high efficiency evaporator and condenser
coils, and variable speed fans leading to an AHRI Certified performance up to 19.15 SEER and 20.2 IEER. AAON
H3/V3 Series energy recovery wheel air handling units provide energy efficient 100% outside air ventilation, by
recovering energy that would otherwise be exhausted from a building. LZ Series packaged outdoor mechanical rooms are
engineered to maximize the efficiency of the complete hydronic system - compressors, condenser, and evaporator.
Factory installed 98% efficiency boilers with pumping packages available for applications that require hot water. Energy
saving waterside economizers are available for chilled water systems that require cooling at low ambient conditions.
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.
5
Item 1A. Risk Factors.
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.
Our results of operations and financial condition could be negatively impacted by the loss of a major customer.
From time to time in the past we derived a significant portion of our sales from a limited number of customers, and such
concentration may continue in the future. In 2018, 2017, and 2016, one customer, Texas AirSystems, accounted for more
than 10% of our sales. The loss of, or significant reduction in sales to, a major customer could have a material adverse
effect on our results of operations, financial condition and cash flow. Further, the addition of new major customers in the
future could increase our customer concentration risks as described above.
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.
6
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 and policies.
We always face the possibility of new governmental regulations, policies and trade agreements 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.
7
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.
Our operations could be negatively impacted by new legislation as well as changes in regulations and trade agreements,
including tariffs and taxes. Unfavorable conditions resulting from such changes could have a material adverse effect on
our business, financial condition and results of operations.
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.
8
We self-insure for employee health insurance and workers’ compensation insurance coverage up to a predetermined
level, beyond which we maintain stop-loss insurance from a third-party insurer for claims over $200,000 and $750,000
for employee health insurance claims and workers’ compensation insurance claims, respectively. Our aggregate exposure
varies from year to year based upon the number of participants in our insurance plans. We estimate our self-insurance
liabilities using an analysis provided by our claims administrator and our historical claims experience. Our accruals for
insurance reserves reflect these estimates and other management judgments, which are subject to a high degree of
variability. If the number or severity of claims for which we self-insure increases, it could cause a material and adverse
change to our reserves for self-insurance liabilities, as well as to our earnings.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2018, we own all of our Tulsa, Oklahoma, and Longview, Texas, facilities, consisting of
approximately 1.76 million square feet of space for office, manufacturing, warehouse, assembly operations and parts
sales. 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 2018, 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 stand alone 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. This facility is located West of the 940,000 sq. ft.
manufacturing/warehouse building at 2425 South Yukon Avenue.
In 2018, we purchased a 13,500 sq. ft. stand alone building (7,500 sq. ft. warehouse and 6,000 sq. ft. office) which will
be utilized as an additional retail parts store to provide our customers more accessibly to our products. The building is
on approximately one acre and is located at 9528 E 51st St in Tulsa, Oklahoma. We expect to open the retail parts store
in early 2019.
Our operations in Longview, Texas, are conducted in a plant/office building at 203-207 Gum Springs Road, containing
263,000 sq. ft. on 35.0 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.
Our operations in Parkville, Missouri, are conducted in a leased plant/office at 8500 NW River Park Drive, containing
48,000 sq. ft. We believe that the leased facility is well maintained and in good condition and suitable for the conduct of
our business.
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.
9
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 25, 2019, there were 1,119 holders of record of our common stock.
Quarter Ended
March 31, 2017
June 30, 2017
September 30, 2017
December 31, 2017
March 31, 2018
June 30, 2018
September 30, 2018
December 31, 2018
High
$37.00
$38.10
$37.65
$37.55
$40.25
$39.03
$43.30
$44.90
Low
$31.95
$33.95
$31.65
$33.35
$32.50
$29.05
$32.84
$31.55
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
Record Date
Payment Date
Dividend per Share
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
May 18, 2018
November 8, 2018
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
June 8, 2018
November 29, 2018
July 1, 2016
December 23, 2016
July 7, 2017
December 21, 2017
July 6, 2018
December 20, 2018
$0.11
$0.13
$0.13
$0.13
$0.16
$0.16
The following is a summary of our share-based compensation plans as of December 31, 2018:
Plan category
The 2007 Long-
Term Incentive
Plan
The 2016 Long-
Term Incentive
Plan
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))
341,787
174,190
$
$
16.20
33.03
—
4,289,718
10
Repurchases during the fourth quarter of 2018, which include repurchases from our open market, 401(k) and employee
repurchase programs, were as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Total
Number
of Shares
(or Units
Purchased)
(b)
Average
Price
Paid
(Per Share
or Unit)
(c)
Total Number
of Shares (or
Units) Purchased
as part of
Publicly Announced
Plans or Programs
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that may yet be
Purchased under the
Plans or Programs
123,106 $
74,560
72,235
269,901 $
33.15
41.83
34.34
35.51
123,106
74,560
72,235
269,901
—
—
—
—
Period
October 2018
November 2018
December 2018
Total
Comparative Stock Performance Graph
The following performance graph compares our cumulative total shareholder return, the NASDAQ Composite and a peer
group of U.S. industrial manufacturing companies in the air conditioning, ventilation, and heating exchange equipment
markets from December 31, 2013 through December 31, 2018. The graph assumes that $100 was invested at the close of
trading December 31, 2013, 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.
11
Item 6. Selected Financial Data.
The following selected financial data should be read in conjunction with our Consolidated Financial Statements and
Notes thereto included under Item 8 of this report and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” contained in Item 7.
Results of Operations:
2018
Years Ended December 31,
2016
2015
2017
2014
Net sales
Net income
Earnings per share:
Basic
$
$
$
Diluted
$
Cash dividends declared per common share: $
(in thousands, except per share data)
433,947 $
405,232 $
383,977 $
358,632 $
356,322
42,572 $
54,498 $
53,376 $
45,728 $
44,158
0.81 $
0.81 $
0.32 $
1.04 $
1.03 $
0.26 $
1.01 $
1.00 $
0.24 $
0.85 $
0.84 $
0.22 $
0.81
0.80
0.18
December 31,
Financial Position at End of Fiscal
Year:
2018
2017
2016
2015
2014
Working capital
Total assets
Long-term and current debt
Total stockholders’ equity
$
92,790 $
103,662 $
101,939 $
80,800 $
308,197
296,780
256,530
232,854
—
—
—
—
82,227
226,974
—
247,499
237,226
205,898
178,918
174,059
(in thousands)
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.
The following table provides a reconciliation of net income (GAAP) to EBITDAX (non-GAAP) for the periods
indicated:
12
2018
2017
December 31,
2016
(in thousands)
2015
2014
Net Income, a GAAP measure
$
42,572 $
54,498 $
53,376 $
45,728 $
Depreciation and amortization
17,655
15,007
13,035
11,741
Amortization of bond premiums
Share-based compensation
Interest income
Income tax expense
13
7,374
(209)
47
6,458
(345)
249
4,357
(541)
266
2,891
(427)
13,367
19,994
26,615
25,611
EBITDAX, a non-GAAP measure
$
80,772 $
95,659 $
97,091 $
85,810 $
44,158
11,553
688
2,178
(964)
24,088
81,701
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 2018 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, 2018, the prices for
copper, galvanized steel, stainless steel and aluminum increased approximately 4.75%, 18.18%, 11.76% and 6.43%,
respectively, from 2017. For the year ended December 31, 2017, the prices for copper, galvanized steel and stainless steel
increased approximately 6.2%, 15.8%, 4.4% and 2.4%, respectively, from 2016.
We attempt to limit the impact of price fluctuations on these materials by entering into cancellable and non-cancellable
fixed price contracts with our major suppliers for periods of six to 18 months. We expect to receive delivery of raw
materials from our fixed price contracts for use in our manufacturing operations.
The following are highlights of our results of operations, cash flows, and financial condition:
• We continue to see growth and improvement in our water-source heat pump line that increased revenues by
$4.7 million.
13
•
•
•
Our warranty expense has stabilized and we expect to see continued improvement.
The Company completed the acquisition of Wattmaster Controls, Inc. for $6.4 million. This acquisition was
strategic in accelerating the development of our own electronic controllers for air distribution.
The Company struggled to maintain its gross profit due to elevated staffing levels, increasing material prices
and changes in personnel.
• We spent $37.3 million in capital expenditures in 2018, continuing our work on such projects as our new
research and development lab, water-source heat pump production line, as well as other internal development
projects.
• We increased our cash dividends, paying $16.7 million in 2018 compared to $13.7 million in 2017.
Results of Operations
Units sold for years ended December 31:
2018
2017
2016
Rooftop Units
Condensing Units
Air Handlers
Outdoor Mechanical Rooms
Water Source Heat Pumps
Total Units
15,273
2,007
2,500
38
5,334
25,152
16,003
2,252
2,577
64
2,485
23,381
16,764
1,639
2,114
65
316
20,898
Year Ended December 31, 2018 vs. Year Ended December 31, 2017
Net Sales
Years Ending December 31,
2018
2017
$ Change % Change
Net sales
Total units
$
(in thousands, except unit data)
28,715
405,232
$
$
433,947
25,152
23,381
1,771
7.1%
7.6%
Most of the increase in revenues is due to our price increase from November 2017. Additionally, our parts sales and
water-source heat pumps sales continue to grow with increases of $6.4 million and $4.7 million, respectively.
Cost of Sales
Years Ending December 31,
Percent of Sales
2018
2017
2018
2017
(in thousands)
Cost of sales
Gross Profit
$
$
330,414
103,533
$
$
281,835
123,397
76.1%
23.9%
69.5%
30.5%
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. Additionally, in January 2018, the Company paid all employees a one-time bonus of $1,000 per employee as a
result of the Tax Cuts and Jobs Act (the “Act”) which lowered the federal corporate tax rate from 35% to 21%. This
bonus increased cost of sales by $1.9 million, excluding taxes and benefits. The Company maintained a higher level of
workforce through the end of 2017 and beginning of 2018 in anticipation of our growing business. The growth in order
intake during the beginning of 2018 did not occur as quickly as anticipated. The Company has been working and
continues to work on managing its staffing levels to improve our efficiency.
14
Twelve month average raw material cost per pound as of December 31:
Years Ending December 31,
2018
2017
% Change
Copper
Galvanized Steel
Stainless Steel
Aluminum
$
$
$
$
3.75
0.52
1.33
1.82
$
$
$
$
3.58
0.44
1.19
1.71
4.7%
18.2%
11.8%
6.4%
Selling, General and Administrative Expenses
Years Ending December 31,
Percent of Sales
2018
2017
2018
2017
Warranty
Profit Sharing
Salaries & Benefits
Stock Compensation
Advertising
Depreciation
Insurance
Professional Fees
Donations
Bad Debt Expense
Other
$
(in thousands)
8,807
$
6,215
12,638
4,244
762
950
1,235
2,441
933
174
9,356
Total SG&A $
47,755
$
11,233
8,400
11,586
4,288
1,735
720
1,005
1,888
724
179
7,491
49,249
2.0%
1.4%
2.9%
1.0%
0.2%
0.2%
0.3%
0.6%
0.2%
—%
2.2%
2.8%
2.1%
2.9%
1.1%
0.4%
0.2%
0.2%
0.5%
0.2%
—%
1.8%
11.0%
12.2%
The Company experienced a decrease in warranty claims paid of 9% in 2018. Additionally, the Company had a change
in estimate in how it calculates its estimated failure rate that is applied to sales to estimate our potential future liability
for warranty claims. This change in estimate reduced our accrual, and thus our expense, by $0.9 million. Our profit
sharing expenses are also down due to lower earnings. Our advertising expense decreased due to cost savings on our
annual sales show. Professional fees have increased related to additional services and work performed for the
Wattmaster acquisition. These fees are not expected to be recurring. Our other expenses have increased due to sales
concessions granted to our customers.
Income Taxes
Years Ending December 31,
2018
2017
Effective Tax Rate
2017
2018
(in thousands)
Income tax provision
$
13,367
$
19,994
23.9%
26.8%
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The overall effective tax rate decreased from
26.8% to 23.9% due to the reduced corporate rate of 35% to 21%. Additionally, 2017 is lower than normal due to a $4.4
million reduction in expense due to the remeasuring of our deferred taxes at the end of 2017 due to the Act.
15
Year Ended December 31, 2017 vs. Year Ended December 31, 2016
Net Sales
Years Ending December 31,
2017
2016
$ Change % Change
Net sales
Total units
$
(in thousands, except unit data)
21,255
383,977
$
$
405,232
23,381
20,898
2,483
5.5%
11.9%
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. 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:
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%
16
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’s warranty expense
increased due to the increase in the failure rate used in calculating our accrual for warranty liability. The failure rate
increased due to the approximately $4.5 million or 110% increase in warranty claims in 2017.
Factors affecting the increase in warranty claims were: (1) changes in personnel that resulted in a less stringent
application of the warranty claim policy, (2) allowing our independent sales representatives to submit a one-time clean-
up of old warranty claims not previously submitted to the Company increased claims by approximately $1.0 million, (3)
two specific job failures, involving multiple units, increased claims by approximately $1.1 million, and (4) paint
department failures which increased claims by approximately $0.8 million. Claims related to the specific job and paint
department failures may continue into 2018.
Income Taxes
Years Ending December 31,
Effective Tax Rate
2017
2016
2017
2016
(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.
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 $19.5 million from December 31, 2017 to December 31, 2018. As of
December 31, 2018, we had $2.0 million in cash and cash equivalents.
17
On July 26, 2018 we renewed our $30.0 million line of credit with BOKF, NA dba Bank of Oklahoma (“Bank of
Oklahoma”). Under the line of credit, there was one standby letter of credit of $1.3 million as of December 31, 2018. At
December 31, 2018 we have $28.7 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, 2018 and 2017, there were no outstanding balances under the revolving credit facility. Interest on
borrowings is payable monthly at LIBOR plus 2.0%. The weighted average interest rate was 4.2% and 3.5% for the years
ended December 31, 2018 and 2017, respectively.
At December 31, 2018, 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,
2018, our tangible net worth was $247.5 million, which meets the requirement of being at or above $175.0 million. Our
total liabilities to tangible net worth ratio was 0.2 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. In May 2018, the Board authorized up
to $15.0 million in open market repurchases and on May 18, 2018, the Company executed a repurchase agreement in
accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.
The agreement expires on March 1, 2019. 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. All 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:
2018
2017
2016
Program
Shares
Total $
$ per
share
Shares
Total $
$ per
share
Shares
Total $
$ per
share
Open market
401(k)
Directors and
employees
252,272 $
497,753
8,373,698 $ 33.19
37.11
18,472,442
8,676 $
467,580
283,654 $ 32.69
34.94
16,336,084
165,598 $
540,501
4,440,658 $ 26.82
27.52
14,875,850
33,751
1,096,625
32.49
45,878
1,614,425
35.19
30,072
823,446
27.38
Total
783,776 $ 27,942,765 $ 35.65
522,134 $ 18,234,163 $ 34.92
736,171 $ 20,139,954 $ 27.36
Inception to Date
Program
Shares
Total $
$ per
share
Open market
401(k)
Directors and
employees
4,095,767 $ 69,605,813 $ 16.99
14.27
7,047,776
100,541,247
1,953,261
18,374,658
9.41
Total
13,096,804 $ 188,521,718 $ 14.39
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:
18
Declaration Date
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
May 18, 2018
November 8, 2018
Record Date
Payment Date
Dividend per Share
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
June 8, 2018
November 29, 2018
July 1, 2016
December 23, 2016
July 7, 2017
December 21, 2017
July 6, 2018
December 20, 2018
$0.11
$0.13
$0.13
$0.13
$0.16
$0.16
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 2019 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
Cash paid for business combination
Purchases of investments
Maturities of investments and proceeds from called investments
Other
Net cash used in investing activities
Financing Activities
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
2018
2017
2016
(in thousands)
$
42,572 $
28,233
54,498 $
20,362
53,376
18,996
(2,832)
(4,461)
(5,598)
(528)
(1,176)
412
(1,766)
54,856
(37,268)
(6,377)
(16,201)
25,145
66
(34,635)
4,987
(26,846)
(1,097)
(16,728)
(7,516)
4,596
(23,698)
98
3,043
258
6,353
57,994
(41,713)
—
(18,521)
29,112
70
(31,052)
2,259
(16,620)
(1,614)
(13,663)
$
(39,684) $
(29,638) $
7,048
(1,537)
(9,478)
(83)
654
417
(5,470)
63,923
(26,604)
—
(14,496)
24,095
80
(16,925)
2,063
(19,317)
(823)
(12,676)
(30,753)
Cash flows from operating activities decreased in 2017 primarily due to increased purchases of raw material during the
year arising from stocking of parts needed for the water-source heat pump line. Additionally, the Company began
stocking water-source heat pump units which resulted in larger amounts of finished goods on hand at the end of the year.
In 2018, the Company increased purchases of metals where lower prices could be obtained in an effort to help manage
our material costs.
19
Cash Flows from Investing Activities
Cash flows used in investing activities increased primarily due our February 2018 business combination.
The capital expenditure program for 2019 is estimated to be approximately $40.0 million. The capital expenditures for
2019 relate to the completion of our R&D lab and water-source heat pump lines, along with expansion of our Tulsa
facility. 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 increased due to open market buybacks following the May 2018 repurchase
agreement.
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, 2018, except for one contractual purchase
obligation for approximately $2.2 million that expires in December 2019.
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. 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. 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.
20
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 February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU will replace previous lease accounting
guidance in U.S. GAAP. The ASU requires the recognition of lease assets and lease liabilities by lessees for those leases
classified as operating leases. The ASU retains a distinction between finance leases and operating leases. The ASU is
effective for the Company beginning January 1, 2019.
The following ASUs have been issued in 2018 with the same effective dates and transition requirements:
•
•
•
•
ASU 2018-01, Land Easement Practical Expedient, which provides a relief from certain land easements held
before the effective date.
ASU 2018-10, Leases: Codification Improvements, which provides clarification for various areas of Topic 842.
ASU 2018-11, Leases: Targeted Improvements, which provides clarification for several areas of Topic 842:
comparative reporting requirements, an optional method of adoption (the transition method) and separating
lease and non lease component for lessors.
ASU 2018-20, Leases: Narrow-Scope Improvement for Lessors, which provided clarification to lessors for sales
taxes, variable payments and other costs.
The Company historically does not enter into numerous or material lease agreements to support its manufacturing
operations. The Company typically enters into lease agreements that are less than a year and for leases on assets such as
warehouse vehicles and office equipment. The Company assumed a multi-year facility lease in the WattMaster
acquisition. The Company has completed the process of determining our contracts to which this new guidance
applies. The Company does not expect this new guidance to have a significant impact on the consolidated financial
statements due the non-material monetary amount of the total leased assets under the new applicable guidance.
Furthermore, we have elected to apply the short-term lease accounting policy election to all short-term leases under the
applicable guidance. Under the policy election the lessee does not recognize a short-term lease liability or right-of-use
asset on its balance sheet.
The Company will elect the transition method, which becomes effective upon the date of adoption of ASU 2016-02
discussed above. The transition method allows entities to initially apply the new leases standard at the adoption date
(January 1, 2019) and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. We expect the cumulative-effect adjustments to the opening balance to be immaterial to the financial
statements as a whole.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements: Changes to the Disclosure Requirement for
Fair Value Measurements. The ASU includes additional disclosure requirements for unrealized gains and losses for
Level 3 fair value measurement and significant observable inputs used to develop Level 3 fair value measurements. The
ASU is effective for the Company beginning after December 15, 2019. We do not expect ASU 2018-13 will have a
material effect on our consolidated financial statements and notes thereto.
21
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. The ASU simplifies how an entity is
required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of
that goodwill. We will be required to perform our annual goodwill impairment test by comparing the fair value of a
reporting unit with its carrying amount. In the event the carrying amount exceeds the reporting unit’s fair value, a
goodwill impairment charge for the excess will be recorded (not exceeding the recorded amount of the reporting unit’s
goodwill). The ASU is effective for the Company beginning April 1, 2020, and requires a prospective method of
adoption, although early adoption is permitted for annual goodwill impairment tests performed on testing dates on or
after January 1, 2017. We adopted this ASU effective January 1, 2018.
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.
22
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
24
25
26
27
28
29
23
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, 2018 and 2017, and the related consolidated statements of income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2018, 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, 2018 and 2017, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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 28, 2019 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 28, 2019
24
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
Intangible assets, net
Goodwill
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, 51,991,242 and
52,422,801 issued and outstanding at December 31, 2018 and 2017, respectively
Additional paid-in capital
Retained earnings
Total stockholders’ equity
December 31,
2018
2017
(in thousands, except share and
per share data)
$
1,994 $
—
—
54,078
6,104
27
77,612
1,046
21,457
2,880
6,077
50,338
1,643
28
70,786
518
140,861
153,727
$
$
3,114
97,393
212,779
16,597
329,883
166,880
163,003
506
3,229
598
2,233
92,075
184,316
13,714
292,338
149,963
142,375
—
—
678
308,197 $
296,780
— $
10,616
37,455
48,071
1,655
10,826
146
—
208
—
247,291
247,499
—
10,967
39,098
50,065
1,512
7,977
—
—
210
—
237,016
237,226
296,780
Total liabilities and stockholders’ equity
$
308,197 $
The accompanying notes are an integral part of these consolidated financial statements.
25
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
$
$
$
$
$
Years Ending December 31,
2018
2017
2016
(in thousands, except per share data)
433,947 $
405,232 $
330,414
103,533
47,755
(12)
55,790
196
(47)
55,939
13,367
281,835
123,397
49,249
45
74,103
298
91
74,492
19,994
42,572 $
54,498 $
0.81 $
0.81 $
0.32 $
1.04 $
1.03 $
0.26 $
383,977
265,897
118,080
38,506
(20)
79,594
292
105
79,991
26,615
53,376
1.01
1.00
0.24
52,284,616
52,667,939
52,572,496
53,078,734
52,924,398
53,449,754
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 (expense) income, net
Income before taxes
Income tax provision
Net income
Earnings per share:
Basic
Diluted
Cash dividends declared per common share:
Weighted average shares outstanding:
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
26
AAON, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Balance at December 31, 2015
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, 2016
Net income
Stock options exercised and restricted
stock awards granted
Share-based compensation
Stock repurchased and retired
Dividends
Balance at December 31, 2017
Net income
Stock options exercised and restricted
stock awards granted
Share-based compensation
Stock repurchased and retired
Dividends
Common Stock
Shares
Amount
Paid-in
Capital
Retained
Earnings
Total
(in thousands)
53,012 $
—
375
212 $
—
2
— $
—
2,061
178,706 $
53,376
—
178,918
53,376
2,063
—
(736)
—
52,651
—
293
—
(522)
—
52,422
—
353
—
(784)
—
—
(3)
—
211
—
1
—
(2)
—
210
—
1
—
(3)
—
4,357
(6,418)
—
—
—
2,258
6,458
(8,716)
—
—
—
4,986
7,374
(12,360)
—
—
(13,719)
(12,676)
205,687
54,498
—
—
(9,516)
(13,653)
237,016
42,572
—
—
(15,580)
(16,717)
4,357
(20,140)
(12,676)
205,898
54,498
2,259
6,458
(18,234)
(13,653)
237,226
42,572
4,987
7,374
(27,943)
(16,717)
Balance at December 31, 2018
51,991 $
208 $
— $
247,291 $
247,499
The accompanying notes are an integral part of these consolidated financial statements.
27
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of bond premiums
Provision for losses on accounts receivable, net of adjustments
Provision for excess and obsolete inventories
Share-based compensation
(Gain) loss on disposition of assets
Foreign currency transaction loss (gain)
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
Cash paid in business combination
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 (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years Ending December 31,
2017
2016
2018
$
42,572 $
54,498 $
53,376
(in thousands)
17,655
13
174
152
7,374
(12)
55
(27)
2,849
(2,832)
(4,461)
(5,598)
(528)
(1,176)
412
(1,766)
54,856
(37,268)
(6,377)
13
(7,200)
10,080
(9,001)
14,570
495
53
(34,635)
—
—
4,987
(26,846)
(1,097)
(16,728)
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)
(39,684)
(19,463)
21,457
1,994 $
(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
The accompanying notes are an integral part of these consolidated financial statements.
28
AAON, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2018
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 no certificates of deposit at December 31, 2018 and $2.9 million in certificates of deposit at December 31,
2017.
Investments Held to Maturity
At December 31, 2018, we held no investments. We record the amortized cost basis and accrued interest of the corporate
notes and bonds in the Consolidated Balance Sheets. We record the interest and amortization of bond premium to interest
income in the Consolidated Statements of Income.
The following summarizes the amortized cost and estimated fair value of our investments held to maturity at
December 31, 2017:
December 31, 2017:
Current assets:
Investments held to maturity
Non current assets:
Investments held to maturity
Total
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
(Loss)
Fair
Value
$
$
6,077 $
—
6,077 $
— $
—
— $
(6) $
6,071
—
(6) $
—
6,071
29
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.
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
3%, 4%, and 4% of revenues for the years ended December 31, 2018, 2017, and 2016, respectively. One customer, Texas
AirSystems, accounted for 10% or more of our sales during 2018, 2017, or 2016. No customer accounted for 5% or
more of our accounts receivable balance at December 31, 2018 or 2017.
Inventories
Inventories are valued at the lower of cost or market using the first-in, first-out (“FIFO”) method. Cost in inventory
includes purchased parts and materials, direct labor and applied manufacturing overhead. We establish an allowance for
excess and obsolete inventories based on product line changes, the feasibility of substituting parts and the need for
supply and replacement parts.
Property, Plant and Equipment
Property, plant and equipment, including significant improvements, are recorded at cost, net of accumulated depreciation.
Repairs and maintenance and any gains or losses on disposition are included in operations.
Depreciation is computed using the straight-line method over the following estimated useful lives:
Buildings
Machinery and equipment
Furniture and fixtures
Business Combinations
3-40 years
3-15 years
3-7 years
We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values.
Fair Value Financial Instruments and Measurements
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.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the measurement date. Fair value is based upon assumptions that
market participants would use when pricing an asset or liability. We use the following fair value hierarchy, which
prioritizes valuation technique inputs used to measure fair value into three broad levels:
•
Level 1: Quoted prices in active markets for identical assets and liabilities that we have the ability to access at
the measurement date.
30
•
•
Level 2: Inputs (other than quoted prices included within Level 1) that are either directly or indirectly
observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets,
(ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted
prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data
by correlation or other means.
Level 3: Unobservable inputs for the asset or liability including situations where there is little, if any, market
activity for the asset or liability. Items categorized in Level 3 include the estimated business combination fair
values of property, plant and equipment, intangible assets and goodwill.
The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to
unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the
fair value hierarchy. The lowest level input that is significant to a fair value measurement determines the applicable level
in the fair value hierarchy. Assessing the significance of a particular input to a fair value measurement requires judgment,
considering factors specific to the asset or liability.
Intangible Assets
Our intangible assets include various trademarks, service marks and technical knowledge acquired in our February 2018
business combination (see Note 4). We amortize our intangible assets on a straight-line basis over the estimated useful
lives of the assets. We evaluate the carrying value of our amortizable intangible assets for potential impairment when
events and circumstances warrant such a review.
Goodwill
Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual
assets acquired, net of liabilities assumed. Goodwill at December 31, 2018 is deductible for income tax purposes.
Goodwill is not amortized, but instead is evaluated for impairment at least annually. We perform our annual assessment
of impairment during the fourth quarter of our fiscal year, and more frequently if circumstances warrant.
To perform this assessment, we first consider qualitative factors to determine whether it is more likely than not that the
fair value of the reporting unit exceeds its carrying amount. If we conclude that it is more likely than not that the fair
value of a reporting unit does not exceed its carrying amount, we calculate the fair value for the reporting unit and
compare the amount to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its
fair value, goodwill is considered to be impaired and the goodwill balance is reduced by the difference between the fair
value and carrying amount of the reporting unit.
We performed a qualitative assessment as of December 31, 2018 to determine whether it was more likely than not that
the fair value of the reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative
assessments, we determined that the fair value of the reporting unit was more likely than not greater than the carrying
value of the reporting unit.
Estimates and assumptions used to perform the impairment evaluation are inherently uncertain and can significantly
affect the outcome of the analysis. The estimates and assumptions we use in the annual goodwill impairment assessment
included market participant considerations and future forecasted operating results. Changes in operating results and other
assumptions could materially affect these estimates.
Impairment of Long-Lived Assets
We review long-lived assets for possible impairment when events or changes in circumstances indicate, in management’s
judgment, that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of
the carrying amount of an asset or asset group to its estimated undiscounted future cash flows expected to be generated
by the asset or asset group. If the undiscounted cash flows are less than the carrying amount of the asset or asset group,
an impairment loss is recognized for the amount by which the carrying amount of the asset or asset group exceeds its fair
value.
31
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, 2018, 2017, and 2016 research and development costs
amounted to approximately $13.5 million, $13.0 million, and $12.0 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2018, 2017, and 2016
was approximately $0.8 million, $1.7 million, and $1.4 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, 2018, 2017, and 2016 shipping and handling fees amounted to approximately $12.6 million, $11.4 million,
and $10.3 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.
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
On January 1, 2018, we adopted the new accounting standard FASB ASC 606, Revenue from Contracts with
Customers, and all the related amendments to all contracts using the retrospective method. The impact at adoption was
not material to the consolidated financial statements. The new accounting policy provides results substantially consistent
with prior revenue recognition policies.
The Company recognizes revenue when it satisfies the performance obligation in its contracts. Most of the Company’s
products are highly customized, cannot be resold to other customers and the cost of rework to be resold is not
economical. The Company has a formal cancellation policy and generally does not accept returns on these units. As a
result, many of the Company’s products do not have an alternative use and therefore, for these products we recognize
32
revenue over the time it takes to produce the unit. For all other products that are part sales or standardized units, we
satisfy the performance obligation when the title and risk of ownership pass to the customer, generally at time of
shipment. Final sales prices are fixed 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 that is negotiated by the Representative with the end user customer.
We are responsible for billings and collections resulting from all sales transactions, including those initiated by our
Representatives. The Representatives submit the total order price to us for invoicing and collection. The total order price
includes our minimum sales price and an additional amount which may include both the Representatives’ fee and
amounts due for additional products and services required by the customer. These additional products and services may
include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the
unit (“Third Party Products”). All are associated with the purchase of a HVAC unit but may be provided by the
Representative or another third party. The Company is under no obligation related to Third Party Products.
The Representatives’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts
associated with the order are collected from the customer. The amount of payments to our representatives was $47.8
million, $51.8 million, and $55.0 million for each of the years ended December 31, 2018, 2017, and 2016, respectively.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years.
Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately
priced warranty period.
Insurance Reserves
Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks
required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected
losses related primarily to workers’ compensation and medical liability. Provisions for losses expected under these
programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred.
Product Warranties
A provision is made for the estimated cost of maintaining product warranties to customers at the time the product is sold
based upon historical claims experience by product line. The Company records a liability and an expense for estimated
future warranty claims based upon historical experience and management’s estimate of the level of future
claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the liability and
expense in the current year.
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.
33
3. Revenue Recognition
Disaggregated net sales by major source:
Rooftop Units
Condensing Units
Air Handlers
Outdoor Mechanical Rooms
Water Source Heat Pumps
Part Sales
Other
Net Sales
Years Ending December 31,
2018
2017
2016
(in thousands)
$
333,105
$
317,414
$
309,641
18,282
21,905
2,408
14,660
26,732
16,855
19,276
22,570
3,238
9,911
20,756
12,067
13,987
19,792
4,515
5,835
20,374
9,833
$
433,947
$
405,232
$
383,977
Other sales include freight, extended warranties and miscellaneous revenue.
Disaggregated units sold by major source:
Rooftop Units
Condensing Units
Air Handlers
Outdoor Mechanical Rooms
Water Source Heat Pumps
Total Units
4. Business Combination
Years Ending December 31,
2018
2017
2016
15,273
2,007
2,500
38
5,334
25,152
16,003
2,252
2,577
64
2,485
23,381
16,764
1,639
2,114
65
316
20,898
On February 28, 2018, we closed on the purchase of substantially all of the assets of WattMaster Controls, Inc.,
(“WattMaster”). The assets acquired consisted primarily of intellectual property, receivables, inventory and fixed assets.
The Company also hired substantially all of the WattMaster employees. These assets and workforce will allow us to
accelerate the development of our own electronic controllers for air distribution systems. We funded the business
combination with available cash of $6.0 million. In May 2018, we paid the final working capital settlement of $0.4
million with available cash. We have included the results of WattMaster’s operations in our consolidated financial
statements beginning March 1, 2018.
The following table presents the allocation of the consideration paid to the assets acquired and liabilities assumed, based
on their fair values, in the acquisition of WattMaster described above:
Accounts receivable
Inventories
Property, plant and equipment
Intellectual property
Goodwill
Assumed current liabilities
Consideration paid
34
$
$
1,082
1,380
340
700
3,229
(354)
6,377
Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual
assets acquired, net of liabilities assumed. Goodwill represents a premium paid to acquire the skilled workforce of the
business acquired and is deductible for federal income tax purposes.
5. 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,
2018
2017
(in thousands)
54,342 $
(264)
54,078 $
50,457
(119)
50,338
$
$
Allowance for doubtful accounts:
Balance, beginning of period
Provisions for losses on accounts receivable, net of adjustments
Accounts receivable written off, net of recoveries
Balance, end of period
Years Ending December 31,
2018
2017
2016
$
$
(in thousands)
119 $
174
(29)
264 $
90 $
179
(150)
119 $
115
(25)
—
90
6. Inventories
The components of inventories and the related changes in the allowance for excess and obsolete inventories are as
follows:
December 31,
2018
2017
Raw materials
Work in process
Finished goods
Less: Allowance for excess and obsolete inventories
(in thousands)
67,995 $
$
4,060
6,767
78,822
(1,210)
Total, net
$
77,612 $
57,784
5,957
8,163
71,904
(1,118)
70,786
Allowance for excess and obsolete inventories:
Balance, beginning of period
Provisions for excess and obsolete inventories
Inventories written off
Balance, end of period
Years Ending December 31,
2018
2017
2016
(in thousands)
1,118 $
1,382 $
152
(60)
102
(366)
757
625
—
1,210 $
1,118 $
1,382
$
$
35
7. Intangible Assets
Our intangible assets consist of the following:
Intellectual property
Less: Accumulated amortization
Total, net
Amortization expense recorded in cost of sales is as follows:
Amortization expense
8. Note Receivable
December 31,
2018
2017
(in thousands)
$
$
700 $
(194)
506 $
—
—
—
Years Ending December 31,
2018
2017
2016
(in thousands)
$
194 $
— $
—
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, 2018 and 2017, there was no impairment.
9. 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,
2018
2017
2016
(in thousands)
$
6 $
— $
14,979
16,951
—
27,353
481
832
270
36
10. 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 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
Change in estimate
Balance, end of period
Warranty expense:
Years Ending December 31,
2018
2017
2016
(in thousands)
10,483 $
7,936 $
(7,869)
9,669
(862)
(8,686)
11,233
—
11,421 $
10,483 $
8,469
(4,134)
3,601
—
7,936
8,807 $
11,233 $
3,601
$
$
$
The change in estimate relates to the Company’s failure rate calculation. In reviewing claims data, the Company noted
specific claims that were the result of an isolated incident and not representative of the Company’s historical
performance or representative of expected future claims. As such, these claims were accounted for as a specific accrual
for warranty liability and excluded from our failure rate that the Company utilizes in estimating future claims.
11. Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
Warranty
Due to representatives
Payroll
Profit sharing
Workers' compensation
Medical self-insurance
Customer prepayments
Donations
Employee vacation time
Other
Total
12. Revolving Credit Facility
December 31,
2018
2017
(in thousands)
11,421 $
11,024
4,182
1,835
567
1,207
2,367
150
3,173
1,529
37,455 $
10,483
13,086
4,456
2,034
593
725
2,838
588
2,688
1,607
39,098
$
$
Our revolving credit facility, as amended, provides for maximum borrowings of $30.0 million which is provided by
BOKF, NA dba Bank of Oklahoma (“Bank of Oklahoma”). Under the line of credit, there was one standby letter of credit
totaling $1.3 million as of December 31, 2018. Borrowings available under the revolving credit facility at December 31,
2018, were $28.7 million. Interest on borrowings is payable monthly at LIBOR plus 2.0%. No fees are associated with
the unused portion of the committed amount. As of December 31, 2018 and 2017, we had no balance outstanding under
our revolving credit facility. The revolving credit facility expires on July 26, 2021. At December 31, 2018 and 2017, the
weighted average interest rate was 4.2% and 3.5%, respectively.
37
At December 31, 2018, 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, 2018
our tangible net worth was $247.5 million, which meets the requirement of being at or above $175.0 million. Our total
liabilities to tangible net worth ratio was 0.2 to 1.0, which meets the requirement of not being above 2 to 1.
13. Income Taxes
The provision (benefit) for income taxes consists of the following:
Current
Deferred
Total
Years Ending December 31,
2018
2017
2016
(in thousands)
10,518 $
21,548 $
2,849
(1,554)
13,367 $
19,994 $
$
$
25,790
825
26,615
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,
2018
2017
2016
21 %
6 %
— %
— %
(2)%
(1)%
24 %
35 %
5 %
(6)%
(3)%
(3)%
(1)%
27 %
35 %
5 %
— %
(3)%
(3)%
(1)%
33 %
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 in 2017 using the newly enacted
rates for the periods when they are expected to be realized. The remeasurement in 2017 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 2017. 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%.
38
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 executives during the year. The limit could also be
exceeded by the Chief Executive Officer receiving the maximum amount under our executive annual cash incentive
bonus plan. Any compensation that exceeded this limitation in 2018 and in the future will be a permanent difference and
cause an increase to our income tax provision.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amount used for income tax purposes.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
2018
2017
(in thousands)
Deferred income tax assets (liabilities):
Accounts receivable and inventory reserves
$
401 $
Warranty accrual
Other accruals
Share-based compensation
Donations
Other, net
Total deferred income tax assets
Property & equipment
Total deferred income tax liabilities
Net deferred income tax liabilities
3,105
2,445
1,697
80
851
8,579
(19,405)
(19,405) $
(10,826) $
$
$
318
2,698
1,395
1,432
152
698
6,693
(14,670)
(14,670)
(7,977)
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 2014 to present, and to non-U.S. income tax examinations for the tax years 2014 to
present. In addition, we are subject to state and local income tax examinations for tax years 2014 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.
14. 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 a five year vesting
schedule. 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 6.4 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan,
approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for
issuance under the 2016 Plan, and an additional 2.6 million shares that were approved by the stockholders on May 15,
2018. Under the 2016 Plan, shares 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
39
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, 2018 is
$14.3 million and is expected to be recognized over a weighted-average period of 2.29 years.
The following weighted average assumptions were used to determine the fair value of the stock options granted on the
original grant date for expense recognition purposes for options granted during December 31, 2018, 2017, and 2016
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)
2018
2017
2016
$
$
0.26
$
0.26
$
29.73%
2.20%
5.00
30.81%
1.90%
5.00
0.26
$
0.26
$
29.82%
2.51%
5.00
30.67%
1.89%
5.00
0.22
41.19%
2.00%
7.68
0.25
34.50%
1.73%
5.69
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, 2018:
Range of
Exercise
Prices
Number
of
Shares
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
$5.67 - 32.80
$32.85 - 34.10
$34.15 - 42.94
Total
456,223
42,552
17,202
515,977
5.72 $
7.47
8.30
5.95 $
Intrinsic
Value
(in thousands)
20.25 $
33.95
35.19
21.88 $
6,757
47
7
6,811
40
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
A summary of option activity under the plans is as follows:
Options
Outstanding at December 31, 2017
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Weighted
Average
Exercise
Price
25.27
34.49
17.64
32.84
30.77
21.89
Shares
1,567,109 $
1,480,490
(282,598)
(319,152)
2,445,849 $
515,977 $
The total intrinsic value of options exercised during the year ended December 31, 2018, 2017, and 2016 was $5.4
million, $4.5 million, and $4.9 million, respectively. The cash received from options exercised during the year eneded
December 31, 2018, 2017, and 2016 was $5.0 million, $2.3 million, and $2.1 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.
41
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, 2018, unrecognized compensation cost related to unvested restricted
stock awards was approximately $6.1 million which is expected to be recognized over a weighted average period of 1.84
years.
A summary of the unvested restricted stock awards is as follows:
Restricted stock
Unvested at December 31, 2017
Granted
Vested
Forfeited
Unvested at December 31, 2018
Weighted
Average
Grant date
Fair Value
25.52
32.20
23.61
28.37
28.54
Shares
341,800 $
112,075
(124,508)
(36,917)
292,450 $
A summary of share-based compensation is as follows for the years ending December 31, 2018, 2017, and 2016:
Grant date fair value of awards during the period:
(in thousands)
2018
2017
2016
Options
Restricted stock
Total
Share-based compensation expense:
Options
Restricted stock
Total
Income tax benefit related to share-based compensation:
Options
Restricted stock
Total
15. Employee Benefits
$
$
$
$
$
$
12,932 $
3,609
16,541 $
3,699 $
4,217
7,916 $
6,102
3,147
9,249
2018
2017
2016
(in thousands)
4,181 $
3,193
7,374 $
2,904 $
3,554
6,458 $
1,681
2,676
4,357
2018
2017
2016
(in thousands)
980 $
353
1,333 $
1,413 $
1,051
2,464 $
1,610
458
2,068
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.
42
The Plan was amended such that the Company matches 175% up to 6% of employee contributions of eligible
compensation. 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, 2018, 2017, and 2016 we made contributions of $8.1 million, $6.1 million, and $5.9
million, respectively. The Company paid no administrative expenses for the years ended 2018 and 2017 and
approximately $0.04 million for the year ended 2016.
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 $6.2 million, $8.4 million, and $9.0 million for the years ended December 31, 2018,
2017, and 2016, respectively.
16. 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. In May
2018, the Board authorized up to $15.0 million in open market repurchases and on May 18, 2018, the Company executed
a repurchase agreement in accordance with the rules and regulations of the SEC allowing the Company to repurchase
shares from the open market. The agreement expires on March 1, 2019. 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. All
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:
2018
2017
2016
Program
Shares
Total $
$ per
share
Shares
Total $
$ per
share
Shares
Total $
$ per
share
Open market
252,272 $ 8,373,698 $ 33.19
8,676 $
283,654 $
32.69 165,598 $ 4,440,658 $
26.82
497,753
18,472,442
37.11
467,580
16,336,084
34.94 540,501
14,875,850
27.52
401(k)
Directors &
employees
33,751
1,096,625
32.49
45,878
1,614,425
35.19
30,072
823,446
Total
783,776 $ 27,942,765 $ 35.65
522,134 $ 18,234,163 $
34.92 736,171 $ 20,139,954 $
Inception to Date
Program
Shares
Total $
$ per share
Open market
4,095,767 $
69,605,813 $
401(k)
Directors & employees
Total
7,047,776
1,953,261
100,541,247
18,374,658
13,096,804 $
188,521,718 $
16.99
14.27
9.41
14.39
27.38
27.36
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.
43
Our recent dividends are as follows:
Declaration Date
May 24, 2016
November 9, 2016
May 16, 2017
November 7, 2017
May 18, 2018
November 8, 2018
Record Date
Payment Date
Dividend per Share
June 10, 2016
December 2, 2016
June 9, 2017
November 30, 2017
June 8, 2018
November 29, 2018
July 1, 2016
December 23, 2016
July 7, 2017
December 21, 2017
July 6, 2018
December 20, 2018
$0.11
$0.13
$0.13
$0.13
$0.16
$0.16
We paid cash dividends of $16.7 million, $13.7 million, and $12.7 million in 2018, 2017, and 2016, respectively.
17. Commitments and Contingencies
We are subject to various claims and legal actions that arise in the ordinary course of business. We closely monitor these
claims and legal actions and frequently consult with our legal counsel to determine whether they may, when resolved,
have a material adverse effect on our financial position, results of operations or cash flows and we accrue and/or disclose
loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate resolution of any
pending litigation or claims will be material or have a material adverse effect on the Company’s business, financial
position, results of operations or cash flows.
We are occasionally party to short-term, cancellable and occasionally non-cancellable, fixed price contracts with major
suppliers for the purchase of raw material and component parts. We expect to receive delivery of raw materials for use in
our manufacturing operations. These contracts are not accounted for as derivative instruments because they meet the
normal purchase and normal sales exemption. At December 31, 2018, we had one material contractual purchase
obligation for approximately $2.2 million that expires in December 2019.
18. 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 February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU will replace previous lease accounting
guidance in U.S. GAAP. The ASU requires the recognition of lease assets and lease liabilities by lessees for those leases
classified as operating leases. The ASU retains a distinction between finance leases and operating leases. The ASU is
effective for the Company beginning January 1, 2019.
The following ASUs have been issued in 2018 with the same effective dates and transition requirements:
•
•
•
•
ASU 2018-01, Land Easement Practical Expedient, which provides a relief from certain land easements held
before the effective date.
ASU 2018-10, Leases: Codification Improvements, which provides clarification for various areas of Topic 842.
ASU 2018-11, Leases: Targeted Improvements, which provides clarification for several areas of Topic 842:
comparative reporting requirements, an optional method of adoption (the transition method) and separating
lease and non lease component for lessors.
ASU 2018-20, Leases: Narrow-Scope Improvement for Lessors, which provided clarification to lessors for sales
taxes, variable payments and other costs.
The Company historically does not enter into numerous or material lease agreements to support its manufacturing
operations. The Company typically enters into lease agreements that are less than a year and for leases on assets such as
warehouse vehicles and office equipment. The Company assumed a multi-year facility lease in the WattMaster
acquisition. The Company has completed the process of determining our contracts to which this new guidance
applies. The Company does not expect this new guidance to have a significant impact on the consolidated financial
statements due to the non-material monetary amount of the total leased assets under the new applicable guidance.
Furthermore, we have elected to apply the short-term lease accounting policy election to all short-term leases under the
44
applicable guidance. Under the policy election the lessee does not recognize a short-term lease liability or right-of-use
asset on its balance sheet.
The Company will elect the transition method, which becomes effective upon the date of adoption of ASU 2016-02
discussed above. The transition method allows entities to initially apply the new leases standard at the adoption date
(January 1, 2019) and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. We expect the cumulative-effect adjustments to the opening balance to be immaterial to the financial
statements as a whole.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements: Changes to the Disclosure Requirement for
Fair Value Measurements. The ASU includes additional disclosure requirements for unrealized gains and losses for
Level 3 fair value measurement and significant observable inputs used to develop Level 3 fair value measurements. The
ASU is effective for the Company beginning after December 15, 2019. We do not expect ASU 2018-13 will have a
material effect on our consolidated financial statements and notes thereto.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. The ASU simplifies how an entity is
required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of
that goodwill. We will be required to perform our annual goodwill impairment test by comparing the fair value of a
reporting unit with its carrying amount. In the event the carrying amount exceeds the reporting unit’s fair value, a
goodwill impairment charge for the excess will be recorded (not exceeding the recorded amount of the reporting unit’s
goodwill). The ASU is effective for the Company beginning April 1, 2020, and requires a prospective method of
adoption, although early adoption is permitted for annual goodwill impairment tests performed on testing dates on or
after January 1, 2017. We adopted this ASU effective January 1, 2018.
19. Earnings Per Share
Basic net income per share is calculated by dividing net income by the weighted average number of shares of common
stock outstanding during the period. Diluted net income per share assumes the conversion of all potentially dilutive
securities and is calculated by dividing net income by the sum of the weighted average number of shares of common
stock outstanding plus all potentially dilutive securities. Dilutive common shares consist primarily of stock options and
restricted stock awards.
The following table sets forth the computation of basic and diluted earnings per share:
Numerator:
Net income
Denominator:
Basic weighted average shares
Effect of dilutive stock options and restricted stock
Diluted weighted average shares
Earnings per share:
Basic
Dilutive
Anti-dilutive shares:
Shares
2018
2017
2016
(in thousands, except share and per share data)
$
42,572 $
54,498 $
53,376
52,284,616
383,323
52,572,496
506,238
52,924,398
525,356
52,667,939
53,078,734
53,449,754
$
$
0.81 $
0.81 $
1.04 $
1.03 $
1.01
1.00
1,920,313
785,825
469,603
45
20. 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 balances with affiliates:
Sales to affiliates
Payments to affiliates
Due from affiliates
Due to affiliates
21. Subsequent Events
Years Ending December 31,
2018
2017
2016
$
(in thousands)
1,442 $
342
1,579 $
432
1,671
697
December 31,
2018
2017
$
(in thousands)
79 $
—
9
—
On January 31, 2019, the Board of Directors authorized the Company to grant up to (i) 77,434 shares of restricted stock
and (ii) 840,000 stock options to non-officer employees, with such awards to be made on March 11, 2019, subject to
eligibility requirements and other restrictions as set forth in the Company’s 2016 Plan.
Subsequent to December 31, 2018 and through February 25, 2019, the Company repurchased 5,799 shares for $0.2
million from the open market and 58,386 shares for $2.2 million from our 401(k) savings and investment plan.
22. Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the years ending December 31, 2018 and 2017:
Quarter
First
Second
Third
Fourth
(in thousands, except per share data)
2018
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2017
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
109,588
$
112,937 $
112,340
27,585
11,691
0.22
0.22
101,326
31,678
13,794
0.26
0.26
$
$
$
$
$
32,763
14,085
0.27 $
0.27 $
27,795
12,536
0.24
0.24
113,668 $
104,160
35,658
14,717
0.28 $
0.28 $
31,075
15,770
0.30
0.30
$
$
$
$
$
$
$
$
$
$
$
$
99,082
15,390
4,260
0.08
0.08
86,078
24,986
10,217
0.19
0.19
46
23. Segments
The following table summarizes certain financial data related to our segments. Transactions between segments are
recorded based on prices negotiated between the segments. Sales of units represents the selling price of our units plus
freight and other miscellaneous charges less any returns and allowances. Parts includes sales of purchased and fabricated
parts including our coils along with the related freight and less any returns and allowances. The “Other” category in the
table below includes certain sales cost and expenses that are not allocated to the reportable segments.
Asset information by segment is not easily identifiable or reviewed by the chief operating decision maker. As such, this
information is not included below.
Sales
Units
Parts - External
Parts - Inter-segment
Other
Eliminations
Net sales
Gross Profit
Units
Parts - External
Parts - Inter-segment
Other
Eliminations
Net gross profit
Years Ending December 31,
2018
2017
2016
(in thousands)
406,331
28,456
29,385
(840)
(29,385)
433,947
108,214
13,215
865
(17,896)
(865)
103,533
384,853
22,050
29,293
(1,671)
(29,293)
405,232
128,571
9,377
426
(14,551)
(426)
123,397
363,666
21,692
25,406
(1,381)
(25,406)
383,977
120,940
9,967
(105)
(12,827)
105
118,080
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
47
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, 2018.
(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, 2018, 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, 2018 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 2018
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
48
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, 2018, 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, 2018, 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, 2018, and our report dated February 28, 2019, 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 28, 2019
49
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 14, 2019.
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) 382-6242.
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 14, 2019.
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 14, 2019.
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 14, 2019.
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 2018, 2017, or 2016.
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 14, 2019.
50
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)
AAON, Inc. 1992 Stock Option Plan, as amended (vii)
(10.2)
AAON, Inc. 2007 Long-Term Incentive Plan, as amended (viii)
(10.3)
AAON, Inc. 2016 Long-Term Incentive Plan (vi)
(21)
(23)
List of Subsidiaries (ix)
Consent of Grant Thornton LLP
(31.1)
Certification of CEO
(31.2)
Certification of CFO
(32.1)
Section 1350 Certification – CEO
(32.2)
Section 1350 Certification – CFO
(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)
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.
51
(vi)
(vii)
(viii)
(ix)
Incorporated herein by reference to our Form S-8 Registration Statement No. 333-212863
dated August 2, 2016 and our Form S-8 Registration Statement No. 333-226512 dated
August 2, 2018.
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.
52
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 28, 2019
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 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
Dated: February 28, 2019
/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/ Angela E. Kouplen
Angela E. Kouplen
Director
/s/ Paul K. Lackey, Jr.
Paul K. Lackey, Jr.
Director
/s/ Caron A. Lawhorn
Caron A. Lawhorn
Director
/s/ Stephen O. LeClair
Stephen O. LeClair
Director
/s/ A.H. McElroy II
A.H. McElroy II
Director
/s/ Jack E. Short
Jack E. Short
Director
/s/ Luke A. Bomer
Luke A. Bomer
Secretary
53
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 28, 2019, 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,
2018. 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, File No. 333-212863 and File No. 333-226512).
Exhibit 23
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 28, 2019
54
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 28, 2019
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
55
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 28, 2019
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
56
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, 2018, 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 28, 2019
/s/ Norman H. Asbjornson
Norman H. Asbjornson
Chief Executive Officer
57
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, 2018, 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 28, 2019
/s/ Scott M. Asbjornson
Scott M. Asbjornson
Chief Financial Officer
58
Company Officers
Norman H. Asbjorson
Mr. Asbjorson 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
Mr. Asbjorson 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
Mr. 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.
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
Transfer Agent and
Registrar
Issuer Direct
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
Gary D. Fields
Mr. 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
Mrs. 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.
Stephen E. Wakefield
Mr. Wakefield has served as Vice President
of Engineering since 2018. Mr. Wakefield
previously served as Director of Engineering,
Director of Design and Engineering Operations,
Senior Manager of Research and Development,
and Design Engineering Manager. Mr. Wakefield
has been with the Company since 1999, and has
a bachelor’s degree in Mechanical Engineering
Technology.
Rony D. Gadiwalla
Mr. Gadiwalla has served as Vice President of
Information Technology and Chief Information
Officer since 2018. Mr. Gadiwalla has served
as Director of Information technology since 2014,
Manager of Project Management Office from
2012 to 2014, and Engineering Automation
Manger from 2009 to 2012. Mr. Gadiwalla has
been with the Company since 2004, and has
a bachelor’s degree in Software Engineering.
Board of Directors
Listed in Alphabetic Order
Norman H. Asbjorson CEO/Chairman of the Board
Gary D. Fields President/Director
Angela E. Kouplen
Ms. 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 of WPX Energy,
and from 2015 to 2016, Ms. Kouplen served
as Vice President - Information Technology of
WPX Energy. From 2016 to November 2018 Ms.
Kouplen
of
Administration and Chief Information Officer
of WPX Energy and from November 2018 to
present currently serves as Senior Vice President
of Administration and Chief Information Officer.
as Vice
President
served
Caron A. Lawhorn
Ms. Lawhorn was elected as a director of the
Company in 2019. Ms. Lawhorn is a certified
public accountant, and currently serves as
Senior Vice President and Chief Financial Officer,
of ONE Gas, Inc., a standalone one hundred
percent regulated publicly traded natural gas
utility. Prior to her current role, she served
as Senior Vice President, Commercial, a
position she held from ONE Gas's separation
from ONEOK in 2014. She served in the same
position at ONEOK, since 2011. From 2009 until
2011, Caron was Senior Vice President, Corporate
Planning and Development of ONEOK and
ONEOK Partners,
for business
development, strategic and long-range planning
and capital investment.
responsible
A.H. McElroy, II
Mr. McElroy has served as a director of the
Company since 2007 and is Chairman of the
Compensation Committee. From 1997 to present,
Mr. McElroy has served as President and CEO of
McElroy Manufacturing, Inc., a manufacturer of
fusion equipment and fintube machines.
Paul K. Lackey, Jr.
Mr. Lackey 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.
Stephen 0. LeClair
Mr. LeClair was elected as a director of
the Company in 2017. Mr. LeClair has 25
in various executive,
years of experience
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.
Jack E. Short
Mr. Short has served as a director the Company
since July 2004, lead independent director since
January 2019, 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.
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
DERRICK ADAMS
JAMILAH ADAMS
DAKOTA ADAMS
PAUL ADAMS
REBECCA ADAMS
RYAN ADAMS
MARIA AGUAYO
LEONARD AGUILAR, JR
ARLEEN AIZAWA
HARRY AIZAWA
DANIEL ALAGDON
MICHAEL ALDRIDGE
TAWANTA ALEXANDER
JAMES ALEXANDER
MARQUIS ALEXANDER
SHARON ALEXANDER
SHANNON ALFORD
AHMAD ALI
ROBERT ALLARD
PAUL ALLEGREZZA
JOHN-PAUL ALLEN
SONIA ALTER ESPINA
ISRAEL ALTER GRANADO
BILLY ALVERSON, III
GABRIEL ANAYA
SARAH ANDERSEN*
JASON ANDERSON
JOSEPH ANDRUS
WESLEY ANSELME
LAURA ARAUJO GONZALEZ
CLYDE ARCHER
JESUS ARELLANES RAMIREZ
FIDEL ARGUMEDO RANGEL
JOSE ARGUMEDO RUIZ
JOSHUA ARMAS
KYLE ARMOUR
JERI ARMSTRONG
KIMBERLY ARNONE
MARIA ARREDONDO
GERARDO ARROYO
ROSA ARROYO SANCHEZ
ROGELIO ARTEAGA
NORMAN ASBJORNSON
SCOTT ASBJORNSON
JOHN ASHLEY, JR
DAVID R ASHLOCK
DAVID L ASHLOCK
CODY AUSBROOK
STEVEN AUTEN
JOSE AVILA
JOSEPH AVILA
KEVIN AVILA
SENG AWNG
ORLANDO AYALA
KRISTIN AYLETT
NORA BACKUS
BRAULIO BAEZ
JACOB BAIER
TERI BAIR
DWIGHT BAKER
JOSEPH BAKER
JUAN BALANDRAN
JOHN BALDWIN
LUKE BALDWIN
DENNIS BALTHAZAR
CLAUDIA BANDA
MYLES BARBER
GREGORY BARKER, JR.
JUSTIN BARLETT
LEROY BARNABAS
JAMES BARNES, III
DAVID BARNETT
ANA BARRAGAN DE ALTENEH
NEREYDA BARRIOS
FRANCISCO BARTOLO GAONA
JAMIE BASSETT
PATRICIA BASTIDAS
SHERRY BATES
JAMES BAUGH
STUART BAUGH
LIONEL BECKMAN
ALEXIS BEDA
JASON BELL
QUENTIN BENKE
FRANCIS BENNETT, JR.
JOSEPH BENOIT
BONNIE BENSON
STEVEN BENSON
JARED BENTON*
IDA BERMUDEZ
DAVID BERRY
SERGIO BESERRA
JAMMIE BETHEL
CARL BEYER
BRANDIE BIFFLE
DANIEL BIGBY
KENNETH BIGHAM JR
TYLER BILLY
PHILLIP BINFORD
AMIE BISHOP
VICKIE BLACK
ETHAN BLACKMAN
KENNON BLACKSHIRE
DAVID BLEVINS
DEVON BLOOD
NICHOLAS BOBBITT
LAM BOI*
LHING BOI
LUN BOIH
NUAM BOIH
ADELTRUDES BOND
JOSHUA BONEY
MICHAEL BONEY
KARLY BOOKOUT
ROGER BORJA BARREIRO
CINDY BOSTICK
LARRY BOWERS
EUGENE BOWMAN
KYLE BOWMAN
JOHN BOYD
JUSTIN BOYD
ANTHONY BOYD, JR
MARC BRADBURY
COREY BRAKER
JAIME BRAME
MILES BRIGHT
MICHAEL BRIMER
JOHN BRISCO
ALAN BROCK
DUSTIN BROD
WINSTON BROSEKE
ORVILLE BROWER
PHYLLIS BROWN
LARODERICK BROWN
RUSTY BROWN
ARIELLE BROWN
DAVID BROWN
JAMES BROWN
MITCHELL BROWN
STEVEN BROWN
TOPAZ BROWN
DONALD BROWN SMITTICK
JAMES BROWN, IV
JOHNNY BROWN, JR.
JENNIFER BRYAN
CHRISTOPHER BRYANT
MINH BUI
JASON BUNNELL
JOSHUA BURGESS
SCOTT BURGESS
LATISHA BURKHALTER
DIALLO BURKS
ROBYN BURNETTE
CHRISTOPHER BURRIS
CHARLES BURROUGH
DANIELLE BURROW
THOMAS BURROW
CLIFTON BURRUS
PENNY BUSH
JEROME BUSH
WAYNE BUSH
VERENICE BUSTOS
KEDRIC BUTLER*
JAMES BUTLER
ROSA BUTLER
TIFFANY BUYCKES
MARY BYA
JANIBAL CABUDOY
MARBELLA CADENA
ALEJANDRO CADENA
MARIBEL CADENAS
CLEVELAND CAGE, JR.
STEVEN CAGLE
YOSMAR CALDERA
HERNANDEZ
MARGARITO CALDERON
SANDRA CALDWELL
TYLER CALICO
JORGE CALIXTO
EDWARD CALLOWAY
LAZARO CAMA
MARIA CAMACHO
TEVIN CAMERON
DAVID CAMPBELL
REGINALD CAMPBELL
RUSTI CAMPBELL
MICHAEL CAMPBELL, II
ODESS CAMREN
JACOB CANTREL
DOMINICK CAPRIA
BILLY CARDER
DREW CARDOZA
JUSTIN CARDOZA
TODD CARNER
CLARENCE CARR
TIBERIUS CARRAWAY
LISA CARRIERO
MICHAEL CARRILLO
RONALD CARSON
VINCENT CARSON
TERENCE CARTER*
JERMAINE CARTER
LARRY CARTER, JR.
CRISTOBAL CARVAJAL
COLORADO
YVONNE CASE
KEITH CASEY
BEATRIZ CASIANO
JORGE CASTELLANOS
DAVID CASTILLO
MARIO CASTRO JR.
IRVIN CASTRO SIFUENTES
BRIAN CAVNER
HECTOR CAZARES
FRANCISCO CERVANTES
BRYAN CHADWELL
GUADALUPE CHAIREZ-GALAN
LARRY CHALK
ZO CHAMA
LARRY CHAMBERS
RICKY CHAMBLISS
DONNIE CHANDLER, JR.
ROBERT CHANEY
PATRICK CHAPMAN
CONNIE CHASTEEN
ALEEX CHATKEHOODLE
CHRISTELLA CHAVEZ
EDGAR CHAVEZ
GREGORY CHAVEZ
ZULLY CHAVEZ
STEVEN CHERRY
KEVIN CHESTNUT
MANI CHETTIPALLI
EDDIE CHOATES
TERRANCE CHOICE JR
AWI CIANG
MAU LUN CIIN
VUNG LAM CIIN
KHAM KHAW CIN
KHAM KAP CIN
LANG KHEN CIN
LUAN NGAIH CIN
PAU LAM CIN
PAUL THANG KHAW CIN*
SUAN EN CIN
VUNG LAM CIN
VUNGH KHAN CIN
CIN THEIGH CING
CING LUN CING
DIM K CING
DIM LAM CING
LIAN CING
LIAN H CING
LIAN HAU CING
LUN LAM CING
MAN LUN CING
MAN CING
NANG ZA CING
NEM GIN CING
NGAI LIAN CING
NIANG LUN CING
NING SAWM CING
NUAM SUAN CING
SAN CING
SAN CING
THANG ZA CING
ZEN NEM CING
ZEN CING
THERESA CING KOK
JUSTIN CLAIBORNE*
LOURDES CLANCE
CHRISTI CLARK
DYWAN CLARK
GEORGE CLARK
SAMUEL CLARK, JR.
JUAN CLEMENTE VALLADARES
RONNIE CLOWERS
KEANDRE COBB
KENTRAIL COBB
MARK COBB
ADRIANA COBOS
KENNETH COCHRAN
TROY COCKRUM
ANDRE COHEN
BRANDON COLBERT
MICHAEL COLE
NATHAN COLE
ROBERT COLE
DONNIE COLEMAN, JR
CLAYTON COLLINS
TIM COLLINSWORTH
AARON COLUMBUS
BOBBY CONDITT
NICHOLAS CONGER
DALE CONKWRIGHT
JUDE CONNOLLY
MARK COOK
ADDIE COOKS
MICHAEL COOLIDGE
SCOTT COON
DONNA COONFIELD
GREGORY COOPER
JAMES COOPER
PAMELA COOPER
MARIANA CORDOVA
JEREMY CORNELIUS
GENOVEVA CORONA
DE RIVERA
MICHAEL CORTEZ
ROSA CORTEZ
FRED COTTON
BILLY COX
ENOCH COX
ADRIAN CRABTREE
KATHLEEN CRABTREE
STEPHAN CRABTREE
REBECCA CRAIGHEAD
RICHARD CRAITE
STEVEN CRASE
QUINCY CRAWFORD
COURTNEY CRAYNE
JACOB CRAYNE
KEYLON CRAYTON
BRADLEY CREWS
MIKEL CREWS
SAVANNAH CROSSON
DARRELL CROW
SARAH CROWLEY
CHRIS CUMMINGS
ROBERT CUMMINGS
ANTHONY CUNNINGHAM
TYREE CURRIN
KEVIN CYRUS
ZIRAM DAHKUM
ZAWNG DAI
CING DAL
GIN DAL
NENG DAL
HENLEY DANG
JOHN DANIELS
JUSTIN DANIELS
JENIFUR DAVIDSON
CAROLYN DAVIS
CARL DAVIS
CAMERON DAVIS
DARRYL DAVIS
GREGORY DAVIS
JASMINE DAVIS
JERRY DAVIS
MATTHEW DAVIS
RICHARD DAVIS
TERRANCE DAVIS
BILLY DAVIS, JR.
DANIEL DE CASAS
YOANA DE LA TORRE
CARLOS DE LOS SANTOS
DANYALE DEARION
DAVID DEASON
SETH DeCOUX
JOYLE DEERING, JR
ISMAEL DELAPAZ
MATIAS DELAPENA JR
DOREEN DELEO
JUANA DELOBO
RAQUEL DELUNA
MATTHEW DEMAREE
BARRY DENNIS
HELEN DENNIS
MICHAEL DENNIS
JOSEPH DENTON
DONALD DERAMUS, JR
MATTHEW DESHAZER
JARED DEVAILL
AUDENCIA DEVILLA
ROY DEVILLE
CHRISTIAN DIAZ
JONATHAN DIAZ
MARISELA DIAZ NUNEZ
CASEY DICKENS
LACEY KAYLYNN DILLEY
CIANG DIM
CING DIM
DON DIM
HAU DIM
MAN DIM
NIANG DIM
THANG DIM
VUNG DIM
CING DIM TUANG
CATHERINE DIMICK
JOHAN DINA
CONG DINH
TIEN DINH
ZAM DO
DANIEL DOERING
SOL DOMINGUEZ
ALMA DOMINGUEZ
PABLO DOMINGUEZ
NIANG DON
CIN DONG
MKSING DOPMUL
NANG DOPMUL*
NIANGNUAM DOPMUL
THANGMINLIAN DOPMUL
DEVIN DORNAN
JOHN DOVITSKI III
ROGER DRAINE
SENECA DRENNAN
MICHELLE DREW
CATHRYN DUBBS
THERESA DUGAN
GUY DUNN
JUSTIN DUNN
FERNANDO DURAN
MIGUEL
RALPH DURBIN
KYLE DURNING
RANDY DWIGGINS*
WENDELL EASILEY
CHRISTOPHER EASON
KRYSTLE EDENS
JOE EDWARDS
MARDIN EJERCITO
LIPSINA ELIMO
MELISSA ELLIS
AUSTIN EMBRY
MATTHEW EMERY-
GIUFFRE
KHAM EN THANG
TINISHA ENGLISH
DEIDRE EPPS
CARLOS ESCOBAR KANAN
DWIGHT ESKEW
NORBERTO ESPARZA-
TORRES
JOAN ESPINA MATHEUS
DELIA ESTRADA
RANDY ETHERIDGE
GILDA ETUMUDOR
JAMES EVANS
TYLER EVANS
ZSAQUITA EVANS
MARCUS EVANS, JR
JOSHUA EVERETT
CHAD EVERS
KYLE EVITT
KURTIS EWING
JESSE EWTON
ARACELY FAGLIE
SHAWN FAIRLEY
JESSICA FARIA PORTILLO
AUSTIN FARLEY
DE'ANDRE FARLEY
AMY FEHNEL
CATALINA FERNANDEZ
FABIOLA FERNANDEZ
CARLOS FERREBUS RIVAS
ROBERTO FERREBUZ
RIVAS
DAVID FERRELL, II
ALFRED FETTERHOFF, JR
GARY FIELDS
THOMAS FIERROS
CHRISTIAN FIGUEROA
MAURAS
ANDREW FINCH
JESSICA FINKBINER
STEPHEN FINNEY
ANTHONY FISHER
BRUCE FISHER
RICKEY FISHER
SHANE FITZPATRICK
ISAAC FLAHERTY
CAROLINA FLORES*
LAURA FLORES
ELISA FLORES
EFIGENIA FLORES
GABRIEL FLORES-BERNAL
JON FLOYD
MARK FLY
REBECCA FORD
SHEILA FORREST
WYETHA FOSTER
ALEX FOSTER
CHRISTOPHER FOSTER
FREDERICK FOSTER
RAMON FOURSHEY
LORETTA FOWLKES
KENNETH FOYIL
MICHAEL FRANCIS
EYLIDD FRANCO
RUBEN FRANCO GOMEZ
JACQUES FRANK
PHILLIP FRANK
WARREN FRANKLIN
BRENDA FREEMAN
JOSE FREGOSO
ANGEL FRIAS
TIMOTHY FRIAS
BRANDON FRICK
SHILAH FRIDAY
BARRY FRIEND
WADE FULLER
ANDRE FURMAN
RONY GADIWALLA
CURTISS GAINES
SARA GAITHER
ERNESTO GALLARDO
JORGE GALVAN
ALEYDA GAONA
DE MARTINEZ
JOE GARCIA
JAIME GARCIA
ANGEL GARCIA
DAVID GARCIA
ISIDRO GARCIA ARRIAGA
YESICA GARCIA BARRETO
ALVARO GARCIA BARTRA
TERESITA GARCIA DIAZ
LESLIE GARCIA TAPIA
ROGER GARCIA TAPIA
ROBERT GARDNER
EBARDO GARI GARCIA
NORMA GARIBAY
VILLENA
MICHAEL GARLAND, JR.
ALEXIS GARZA
DONALD GAY
GREGORY GENTRY
MARLANA GENTRY
JAMES GEORGE
STEPHANIE GEORGE
ANTHONY GEORGE
KEVIN GEORGE
KURSTON GERTY
PETR GETMANENKO
GABRIEL GIACHINO
CHARLES GIBSON
LAMAR BRADLEY GIBSON
JAMES GILBERT
KYRANNA GILSTRAP
MARIA GOMEZ
JOSE GOMEZ
REIQUEL GOMEZ
MARIA GOMEZ MEDINA
JAFET GOMEZ ORTIZ
SERGIO GOMEZ-PEREZ
RAUL GONZALEZ
IMELDA GONZALEZ
ROBYN GONZALEZ
BEVERLY GONZALEZ
MARISELA GONZALEZ
ABRUM GONZALEZ ALTER
MEJHEL GONZALEZ ALTER
LIDIA GONZALEZ RIVERA
DELFIN GONZALEZ
VILLAMIZAR
MICHAEL GOODROAD
BARRY GOODSON
NOOM GRAHAM
MARLEITTA GRAMMER
BUENAVENTURA GRANA-
DOS-RUBIOS
ERIC GRANT
MEKION GRANT
APRIL GRAUGNARD
PEARLIE GRAVES
MICHAEL GRAY
DREW GRAY
ANTHONY GREEN
DAVID GREEN
KYLA GREWE
STARLA GRIFFIN
RONALD GRIMES
EBELIO GRISHAM
RACHEL GRUNDMANN
JOHN GRUNDMANN
JUAN GUERRA MEDINA
LUIS GUEVARA
MARIA GUEVARA
RODOLFO GUEVARA
CAROLINA GUILLEN
VERNICE GUINN
RONALD GUINN
KEVIN GULLICK
NATHANIEL GUNN
RICKEY GUNTER
SILVIA GUTIERREZ
MENDOZA
EUGENE GUY
GARY GUYTON
GEORGINA GUZMAN
SCOTTY HAGLER
MICHAEL HAINES
NGAM HAK
TIMOTHY HALBERT
CODY HALE
REBECCA HALE
MARCIA HALEY*
JOSHUA HALFPAP
DENNIS HALL
JACK HALL
JEROME HALL
KELLY HALL
STEPHEN HALL
SUMMAR HALL
DALE HALL,III
ZACHARY HALSEY
DANIEL HALTERMAN
TOLOVE HAM
SHYNESE HAMILTON
G. SCOTT HAMILTON
JOHN HAMILTON JR.
RANDY HAMMOND
SAM HAMMOUD
MUNG HANG
PAUN HANG
THANG HANG
LAKEISHA HANNAH
CHIN HAOKIP
LHUN HAOKIP
PAO HAOKIP
DEREK HARBIN, SR.
MARKUS HARDWICK
SCOTT HARJO
BRUCE HARMAN, II
DONALD HARRIS
STACEY HARRIS
BOBBY HARRIS, III
ROBI HARTMANN
HEATHER HASKINS
ARCHIE HASS III
TONYA HASTINGS
CING HAU
CING N HAU
KAM HAU
NGAI HAU
THANG HAU
NENG HAU LIAN
PAUL HAVENS
JOVAN HAWKINS
BILLY HAWLEY, JR.
ANDREA HEIDT
CHAKIRIS HENDERSON
SHEILA HENDERSON
DANIEL HENDERSON
ERIC HENDERSON
STEPHEN HENDRIX
KENNETH HENRY
JUSTIN HENSHAW
JALEN HENSON
MARIANO HERNANDEZ
GERARDO HERNANDEZ
ANGELA HERNANDEZ
ARMANDO HERNANDEZ
CORCINA HERNANDEZ
JOSE HERNANDEZ
LUIS HERNANDEZ
AXEL HERRERA BAEZ
MARIA HERRERA PERNIA
PAOLA HERRERA REAL
RAMEE HESTER
MARK HESTON
EDDIE HEWITT
MICHAEL HICKMAN
BRENDA HIGGINS
LARRY HIGHFIELD
JAMARIOUS HILL
CHRISTOPHER HILL
DONALD HILL
KATHERINE HILL
SANTANYA HILL
DAVY HILL, JR.
D'ANNA HILTON
LAMONT HINES
JUAN HINOJOSA
TYSON HINTHER
JOSEPH HIOTT
MIN HLA
THANG HMUNG
TUANG HNIN
BLAKE HOBBS
JACOB HOBBS
NATALY HOBBS
ANDREW HODGES
TAQUISA HOD-
NETT-SMITH
DAVID HOGAN
LENA HOGAN
LEE HOLDEN, JR.
DEBRA HOLMAN
WILLIAM HOLMAN
LAWRENCE HONEL
ANASTASIA HONN
JACK HONN
STEPHEN HOOVER
STANLEY HORTON
STEWART HOSEAH
NU HOU
SANDRA HOUSE
DAVID HOWARD
MICHAEL HOWARD
BENEDICT HOWELL
DARIN HOWELL
JAMES HOWELL, II
RAYMOND HOWZE
SAW HTOO
CING S HUAI
CING N HUAI
MUAN HUAI
NIAL HUAI
NUAM HUAI
VERONICA HUAI
SCOTT HUBER
LYDIA HUDSON*
JIMMI HUGHES LEXING
RICKY HULVEY
JERAD HUMPHREY
LARRY HUMPHREY
MICHAEL HUMPHREY
KHAN HUNG
CRYSTAL HUNTER
RONALD HUTCHCRAFT
GARY HUTCHINS
REGINALD ISAAC, SR
MELISSA IVY
KHAI JA KHUP
JEREMY JACKSON
BELINDA JACKSON
JEFF JACKSON
MARY JACKSON
MICHAEL JACKSON
JEREMY JACOBS
CAMERON JAEGER
JOSE JAMAICA
JOSEPH JAMES
QUINTON JAMISON
ESTHER JASUAN
DANGELO JEFFERSON
WADE JENKINS
AUTUMN JENNINGS
MICHAEL JENSEN
FREDERICK JIMMERSON
CHAITANYA JOHAR
MARVIN JOHNSON
JOHNNY JOHNSON
BRADY JOHNSON
TANISHA JOHNSON
LESTER JOHNSON*
KEITH JOHNSON
ALBERTA JOHNSON
BRIAN JOHNSON
EBONI JOHNSON
JEFFREY JOHNSON
JEREMIAH JOHNSON
KEJUAN JOHNSON
THOMAS JOHNSON
ZACHARY JOHNSON
SHIRLEY JONES
SHANNON JONES
CONNIE JONES
DANNY JONES
DAVID JONES
JEREMY JONES
RAYMON JONES
REMIA JONES
BRANDON JORDAN
RONALD JORDAN
SEAN JORDAN
YOLANDA JUAREZ
EDUARDO JUAREZ
PIRONA
DERMIDIO JUEZ PEREZ
LEANDRO JUMELLES
NUNEZ
CARL JUSTICE
LASHETIA JUSTICE
HA KA HA
ZAM KAI
KANOR KAIOS
GARRETT KAISER
HAU KAM
MANG KAM
NGIN KAM
SRIRAM KANDHASWAMY
DAL KAP
GO KAP
THANG S KAP
THANG K KAP
ZAM KAP
SIAN KAP LIAN
BRIAN KASTL
TRISTAN KAVANAUGH
TUANG KAWI
NENGLIAN KAWNGTE
BRANDON KELLEY
JOHN KELLY
KENNETH KELLY, JR
RONALD KENEIPP II
KEITH KENNEDY
LYNN KENNEDY
GREGG KENNEDY
ERIC KENNY
JAY KEPHART
ENOLYNE KERESEN
DAL KHAI
DAVID P KHAI
DAVID T KHAI
EN KHAI
JOHN KHAI
KAM KHAI
KHAM L KHAI
KHAM K KHAI
LAANG KHAI
LAUNG KHAI
NGIN T KHAI
NGIN C KHAI
PAU K KHAI
PAU S KHAI
PAUL KHAI
PETER KHAI
THANG S KHAI
THANG H KHAI
THANG K KHAI
THANG S KHAI
THAWNG KHAI
ZAAM KHAI
ZAM KHAI ZOMI
THURA KHAING
DONGH KHAM
GO Z KHAM
GO C KHAM
NGUN KHAM
PAU K KHAM
PAU D KHAM
PAU K KHAM
ABDOLREZA KHASHEI
THANG KHAT
CING KHAWN
CING KHEK
KAM KHEN
NIANG KHOI
DAI KHUAL
KAM KHUAL
PAU Z KHUAL
THANG L KHUAL
THANG S KHUAL
THANG SIAN KHUAL
THANG SIAN KHUAL
CIN KHUP
DAI KHUP
KAP KHUP
LIAN KHUP
MANG KHUP
NANG KHUP
NGIN KHUP
PAU C KHUP
PAU L KHUP
PAUL KHUP
PETER KHUP
THANG S KHUP
THANG G KHUP
THANG L KHUP
ANDREW KILGORE
RODNEY KILGORE
CIANG KIM
CIIN SAN KIM
CIIN SAN KIM
CING KIM
DIM KIM
ED KIM
HAU KIM
MAN KIM
MANG KIM
NANG KIM
NEM KIM
NING H KIM
NING S KIM
PA KIM
SIAN KIM
THANG Z KIM
THANG KIM
ZAM KIM
JOE KINCADE
KENOSHA KINDLE
MARTIN KINDLE
JORDAN KING
CODY KING
JOSEPH KING
LORI KING
RUSSELL KING
KORBY KINKADE
ROGER KINKADE, JR.
MANGNEO KIPGEN
JOE KIRBY, JR
IAN KIRK
ALAN KIZER
SPENCER KIZER
ZAKARY KIZER
ROBERT KNEBEL
BUDDY KONS
CYNTHIA KOSECHATA
JAMES KOSS
ROBERT KRAFJACK
NEBOJSA KRESOVIC
FRED KRUGER
MIKHAIL KRUPENYA
MANG KUAK
ADAM KUBICKI
CASSY KUYKENDALL
NICHOLAS KUYKENDALL
JOSCELIN LACAYO
MESTRE
PHILLIP M LAFOND
GIANG LAI
SOPHIA LAIRD
KAP LAL
LUN LAL
ZVJEZDANA LALIC
GIN LAM
MUNG LAM
LAMI LAM TUNG
MYOSHIA LANDRUM
ROADY LANDTISER
DEBORAH LANE
GIN LANG
PUM LANG
DO LANGH
HAU LANGH
KAP LANGH
THANG LANGH
THAWNG LANGH
CHETO LARA
HUGH LASATER
SENG LASI
DERRICK LATHAM
JENNIFER LAW
MAN LAWH
JOHN LAWLEY
STEVE LAWRENCE, JR
JEFFREY LAWSON
STEPHEN LAWSON
LAI LE
CANDICE LEAGUE
PETE LEDBETTER
JACQUELINE LEE
ALLEN LEE
AMANDA LEE
DAVID LEE
PO LEE
MATTHEW LEEPER
ARIEL LEFF*
GREGORY LEFFLER
MARK LEHMAN*
THOMAS LENNON
SANDRA LEON DE
ESTEBANE
DANTE LEWIS
CYNTHIA LEYVA
VAH LHING
AWI LIAN
BAWI LIAN
CIN LIAN
CING D LIAN
CING K LIAN
DIM K LIAN
DIM L LIAN
DO LIAN
DONG LIAN
GIN K LIAN
GIN T LIAN
GO LIAN
HUAI LIAN
JOSEPH LIAN
KHAM LIAN
LAL LIAN
MAN LIAN
NANG LIAN
NIANG LIAN
PAU N LIAN
PAU D LIAN
PAU S LIAN
PAU D LIAN
PAU M LIAN
PAU SIAN LIAN
SIAN LIAN
THANG S LIAN
THANG K LIAN
THANG T LIAN
THANG N LIAN
THANG SAWM LIAN
VI LIAN
VUM LIAN
LAL LIANA
SAWM LIANA
PING LIN
THOMAS LINCOLN
WILLIAM LINDSAY
KAREN LINDSAY
KEITH LINKER
DEREK LISTER
BRIAN LITTLE
EDWARD
LITTRELL-COLEMAN
ANGELICA LIZARRAGA
OLIVAS
OLENA LOBOVA
MATTHEW LOEWEN
JAMES LONDONO CORO
KRISTIN LONG
RICKY LONG
ANGEL LOPEZ
MARGARITO LOPEZ
THOMAS LOPEZ
EDUARDO LOPEZ
OLIVARES
JOSE LOPEZ OLIVARES
JOSYBEL LOPEZ OLIVARES
EDITH LORENTZ
MARK LOTAKOON
CRYSTAL LOUCIOUS
JASON LOVETT
EDGAR LOZANO
DANIJELA LUCIC
SCOTT LUDGATE
JARROD LUDLOW
QUANNAH LUDLOW
EDWIN LUEVANO LEAL
EVELYN LUGO-ORTIZ
LORENA LUJAN
DAWN LUKE
CING N LUN
CING S LUN
DIM LUN
HKIN LUN
KHUP LUN
KIM LUN
NGO LUN
NIANG N LUN
NIANG S LUN
NIANG NGAIH LUN
VUNG LUN
THANG LUONG
THI LUU
JACOB LUZIER
KELLY LYBARGER
AHCHANG MABU
CARMEN MACIAS
TERRAZAS
JORDAN MACK
KEITH MACKEY
RUSTIN MACKEY
LARRY MADALONE, II
JORGE MADRIGAL
TAM MAI
CHRISTOPHER MAIDHER
NIKKI MALONE
KOZI MALONG
JEFFREY MALY
CING L MAN
CING S MAN
LIAN MAN
NANG MAN
TAM MANA
MARIA MANCILLA
AWI MANG
CHIN MANG
CIIN KHO MANG
CIN KHAN MANG
CING MANG
DAI MANG
EN C MANG
EN MANG
GIN MANG
HAU MANG
HAU D MANG
KAM MANG
KHAI MANG
KHAM T MANG
KHAM MANG
KHAN MANG
KIM MANG
LAGH MANG
LIAN MANG
LIAN S MANG
LIAN N MANG
LINUS MANG
MAN MANG
NGIN MANG
NIAN MANG
NING MANG
SUI MANG
THANG MANG
VUNG MANG
ZAM K MANG
ZAM S MANG
ZEN MANG
THANG MANGA
STEPHANIE MANHAVE
BARBARA MANNS
DAVID MANSINGER
APRIL MARGWARTH
PAUL MARGWARTH
WILLIAM MARKWARDT
MARIA MARQUEZ
DE-GILBREATH
MARIANA MARQUEZ
MARQUEZ
MICHEL MARRERO
RIVERA
ANA MARROQUIN
ESTEBAN MARROQUIN
JONATHAN MARSHALL
ERROL MARSHALL
CHRISTINA MARTIN
JERRY MARTIN
MICHAEL MARTIN
WILLIAM MARTIN
DANIEL MARTIN III
FLORENTINO MAR-
TIN-ROMO
OBDULIA MARTINEZ
AMANDA MARTINEZ
LEONARDO MARTINEZ
HECTOR MARTINEZ
MOLINA
YESENIA MARTINEZ
VAZQUEZ
THOMAS MASENGALE, JR.
DAVID MASON
BEVERLEY MASON
SHERIDAN MASON
JAMES MASON
DANIEL MATA
SANDRA MATA
ELVIN MATHIS*
ASHLEY MATTHEWS
PATRICIA MAUCH
RON MAUCH
CIIN MAWI
PATRICIA MAXIMO
LEONARD MAXWELL
SHANE MAYHUGH
TAMALA MAYS
TION MAYS
COURTNEY McAFEE
TINA McBEATH
ROBERT McBOWMAN
MYKEA McCALISTER
IAN McCARTY
FRANCIS MCCLAIN
ROBERT McCLEARY
DIRK McCLELLAN
WALTER McCLUSKY
MICHAEL McCONNELL
DEBRA MCCOWAN
WESLEY McCOWAN, JR.
MICHAEL McCUIN
KATHY McCULLOCH
LOYD McDANIEL
MISTI McDARIS
JAMES McELROY
NICHOLAS McELROY
MICAH MCELWEE
CLAYTON McFALL
JEFFERY McGEE
RONNIE JOE McGEE
RONNIE McGEE
BENJAMIN MCINTIRE, JR
JOHN McINTYRE
CHRISTOPHER McKEE
DANIEL McKEE
DONNA McKINNEY
JADARRIK MCLEMORE
GEORGE E MCNAC
GEORGIE A MCNAC
SEAN McNARY
JUSTIN MCPHERSON
JOHN MCSHAN III
GINA MEANS
JON MEDEIROS
SILVESTRE MENDEZ
GONZALES
ANTONIO MENDOZA*
JOHNNY MERRELL, JR
NICHOLAS MERYHEW
YUNIOR MESA VIEYTO
STEVEN METCALF
CARMEN MILAM
RANULFA MILIAN
CHRIS M MILLER
MARQUIS MILLS
JENNIFER MILLS
DALLAS MITCHELL
JASON MITCHELL
PHILLIP MITCHELL
ROBERT MITCHELL
VOLTA MITCHELL
ERASMO MOCTEZUMA
JAY MODISETTE
BIASNEY MOJICA
CASTANEDA
JOSUE MOJICA TORRES
RAFAEL MONARRES
ALEXIS MONASTERIO
AGUILERA
ERICA M MONDRAGON
STEPHANIE MONROE
DINORA MONROY
DE DIAZ
IRIS MONTANEZ
FIORELA MONTANO
NATALIE MONTANO
JOHNNY MONTOYA
TONY MOORE
CORDELL MOORE
HERBERT MOORE
MARIO MOORE
MARK MOORE
PHILLIP MOORE
MARTHA MORALES
ALFONSO MORAN
TONY MOREHEAD
LUKE MOREY
CHRISTOPHER MORGAN
ELROY MORGAN
JOHN MORGAN
MATTHEW MORGAN
JOSE MORONTA URBINA
PAUL MORRIS
JAMES MORROW
LONDON MOSELEY
PHILLIP MOSS, JR.
CLAYTON MOTE
PASIAN MUAN
CING MUANG
MUA MUANG
DELCIMAR MUJICA
MENDEZ
ERIC MULLINIKS
ALONZO MUMPHREY
THANG L MUN
THANG S MUN
CIN D MUNG
CIN K MUNG
CIN S MUNG
DAII MUNG
DAL MUNG
GINDAL MUNG
HAU 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 S MUNG
PAU K MUNG
PAU L MUNG
PETER MUNG
SUAN MUNG
THANG K MUNG
THANG S MUNG
THANG L MUNG
THANG D MUNG
TUAL MUNG
VUM MUNG
VUNGH MUNG
GABRIEL MUNIZ
GONZALEZ
JESUS MUNOZ
JOHN MUTANDA
SAW NAING
DIEGO NAJERA
AH NAN
LAWRENCE NANG
SING NANG
THAWNG NANG
THOMAS NANG
DARIN NARBOE
THANG NAULAK
MARIA NAVA
HTOI NAW
CLAYTON NEAL
NATALIE NEILSON
NIANG NEL
NATHANIEL NELSON
CING NEM
DIM NEM
DEI NENG
JOSHUA NETTEN
SETH NETTEN
MANG NGAIH
DIM NGAIH LIAN
NUAM NGIN
ZAM NGIN
EN NGO
PAU NGO
A VAN NGUYEN
DUONG NGUYEN
HUNG NGUYEN
HUU NGUYEN
NOI NGUYEN
PHUOC NGUYEN
THANH NGUYEN
HKAWN NHKUM
CIN M NIANG
CIN N NIANG
CING NIANG
DIM L NIANG
DIM H NIANG
DIM M NIANG
EN NIANG
ESTHER NIANG
GIN NIANG
GO NIANG
HAU NIANG
KAP NIANG
KHAN NIANG
KHEM NIANG
LAM NIANG
PIANG NIANG
PUM NIANG
TUAL NIANG
VUNG NIANG
ZEL NIANG
JACOB NICHOLS
SIMON NIEKERK
THANG NING
ZAM NING
CING NO
THANG NO
NUAM NOO
WILLIE NORFLEET
ERIC NORRIS
DAISY NOU
JERRY NOWEL
TUMAI NPAWT
KIM NU
LIAN NU
MANG NU
CIIN NUAM
CING Z NUAM
CING D NUAM
DIM NUAM
MAN NUAM
NING NUAM
THANG NUAM
THERESA NUAM
ZEN NUAM
MICHAEL O'BRIEN
BRUNO OCHOA*
JORGE OCHOA
MICHAEL ODOM
ALEXANDER OFOSU
RICKEY OGANS
UDUIHAYE OGEDENGBE
WYATT OGLE
ANTHONY OLIVERAS
KEITH OLSON
ERIC OLSON
SONYA OLSON
JAMES ONEILL, JR
CHRISTINE ONEY
PAUL ONYENEHO
MARIA ORONA
LETICIA ORONA
MARGARITA ORONA
VICTOR ORONA
JESSICA ORTIZ ESTRADA
DAVID OSBORNE
OFELIA OSUNA
JENNIFER OVERMEYER
DEVIN OVERSTREET
JOHNNY OWENS
AH PA
MIGUEL PABON
MARIA PADRON
JUSTIN PAGE
MARK PAGE
BRANDON PAIGE
ROBERT PARANG
JORDY PAREDES
HEIDI PARK
CHAVAUGHNA PARKER
BILLY PARKER
ROBERT PARKER
TIMOTHY PARKER
CODY PASEMAN
JASON PATE
CALEB PATERIK
PAUL PATTERSON
CIANG PAU
CIN L PAU
CIN N PAU
DAI K PAU
DAL Z PAU
DAL KHAN PAU
EN PAU
GIN PAU
KAM PAU
MUNG PAU
NANG PAU
NENG H PAU
NENG K PAU
PUM PAU
THANG PAU
ZAM L PAU
ZAM K PAU
NAN PAW
MANI PAZHANATHA
DALAM
CARLDELL PEARSON
HERLIP PELL
MARIA PENA
MICOLE PENNINGTON
RONALD PENNY, JR
VLADIMIR PENYAZ
IVORY PEOPLES
LETICIA PEREZ
JOSE PEREZ
JOE PEREZ
CESAR PEREZ
SERGIO PEREZ
HECTOR PEREZ ARIAS
PEDRO PEREZ PAEZ
DONNA PERRY
KIMBERLY PERSONS
MONTELL PETE
LADRUE PETERS
ROBERT PETERSON
DANIEL PEURIFOY
KINH PHAM
LINH PHAM
PHUOC PHAN
NATHANIEL PHILLIPS*
ADRIANA PHILLIPS
ALEXANDER PHILLIPS
BRANDON PHILLIPS
KRISTOFER PHILLIPS
NATHAN PHILLIPS
SHANNON PHILLIPS
TYMARQUIS 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
MAN PIANG
THANG K PIANG
THANG L PIANG
VAN PIANG
CHRISTOPHER PICKENS
DANIEL PICKETT
ANDREA PIGEON
CLIFFORD PITCHFORD
HAROLD PITTS, II
CANDY PITTSER
MARIELYS PLAZA CARPIO
MICHAEL PLUMMER
OSIEL POBLETE BARTOLO
KEVIN POBUDA
SHELBEY POINDEXTER
SUSANNE POINDEXTER
BASANT POKHREL
RENU POKHREL
JESUS PONCE
EDIE POND
MICAH PONDER
MARK POOL
RAMONDA PORTER
ASHLEY POWELL
DAVENA POWELL
RUDY POWELL
JEFFERY POWERS
MICHAEL POYNTER
JOSE PRADO
KENNETH PRENTICE, JR.
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
MICHAEL PUTNAM
FLARA RACHU
FRANCIS RACHU
VICKINSON RACHU
VINA RACHU
VINCENT RACHU
ERIC RACINE
HOLLY RALSTON
PHILIP RAMALY
BRIAN RAMBO
JESUS RAMIREZ
KELI RAMIREZ
MARISSA RAMIREZ
YOSSELIN RAMIREZ
AGUILAR
ROSA RAMIREZ AGUINAGA
GERMAN RAMOS ALONSO
HEIDI RAMZEL
AARON RANDALL
ROBERT RATLIFF
TOMMY RATLIFF
KYLE RATZLAFF
DAKOTA RATZLOFF
TERRY RATZLOFF
CURTIS RAYON
KEIANYA RAYSON
THOMAS READ
DIEGO REBOLLAR-MARIN
PEGGY REDDEN
CHRISTOPHER REED
COCO REED
JAMES REED
MICHAEL REED
MONTIE REED
GUADALUPE REESE
BYRON REEVES
AMANDA REEVES
MARGARET REEVES
FEDORA REGUS
STEPAN REGUS
RODOLFO RENTERIA
JOHN RENTKO, JR.
JAKOB RESSLER
PABLO REYES
AGUSTIN REYES, JR.
DAICHI REYNA
THOMAS REYNOLDS
DANIEL RHOADES
BRYAN RICHARDSON
KENYON RICHARDSON
DAVID RICHARDSON, JR.*
ROBERT RIDDELL
ANGELA RIDEOUT
BRETT RIEGEL
RASHID RIGGINS
DANIEL RITCHIE
HILLARY RITE
RAMON RIVERA
SIGFREDO RIVERA
MICHELE ROBB
LEE ROBERTS
SANDY ROBERTS
CARL ROBERTS
MICHAEL ROBINSON
DAVID ROBINSON, JR.
REBECCA ROBLEDO
TERRENCE RODGERS
BRAD RODRIGUES
ADRIANA RODRIGUEZ
REBECCA RODRIGUEZ
JESICA RODRIGUEZ
RICARDO RODRIGUEZ
HECTOR RODRIGUEZ
MARIA G RODRIGUEZ
MARIA L RODRIGUEZ
NELSON RODRIGUEZ
J RODRIGUEZ-FLORES
DERRICK ROGERS
DON ROGERS
GEEOVANTA ROGERS
TONY ROGERS
DEVON ROHRING
LIDIA ROJAS
NELSON ROJAS
JEFERSON ROJAS
GONZALEZ
TONY RONGEY
OSCAR ROSE
ROBERT ROSENCUTTER
RALPH ROSENOGLE
CASEY ROSS
MARY FRANCES ROWE
RICHARD ROWE, JR.
JACOB RUCKER
RICARDO RUIZ
MA RUIZ ORTEGA
TERENCE RUSHING
HAROLD RUSSELL
JAMES RUSSELL
JOANA RUVALCABA
KARINA SAENZ ACOSTA
CESAR SAENZ RODRIGUEZ
KYLE SAGO
LORENZA SALAS
ADAN SALAZAR
ABELINO SALAZAR
LAOTSE SALAZAR BOLIVAR
MARIANGEL SALAZAR
GONZALEZ
YSABEL SALAZAR SOARES
MARIA SALDIVAR
MIGUEL SALDIVAR
VICTOR SALDIVAR
JOSE SALDIVAR OREPEZA*
DAVID SALEGO
DIANA SALINAS
JEFFREY SALISBURY
WILLIAM SALLEE
AH SALUPTA
BEATRIZ SANCHEZ
CRISTAL SANCHEZ
EFREN SANCHEZ
LUCIA SANCHEZ
MARIA SANCHEZ
LUZ SANCHEZ NUNEZ
PAMERLA SANDERS
CALVIN SANDERS
LYNCON SANDERS
TANISHA SANDERS
CIN SANG
LIAN SANG
SAMUEL SANG
TUAN SANG
LAL SANGI
WILLIAM SANGSTER
ANTONIO SANTACRUZ
WENCESLAO SANTIAGO
IGNACIO SANTILLAN
REBECCA SAR
BROOKLYN SARGENT
ERICK SAWYER
LANGH SB
AUDREY SCHAMING
WILLIAM SCHAROSCH
CALEB SCHMELING
JOHN SCOTT
JERRY SCOTT
TANZY SCOTT
LISA SCRIBNER
MARK SCURLOCK
RONA SEAGO
THANG SEI
THONGKU SEI
TONG SEI
NEM SEN
KAYUN SENG
ROI SENG
NICHOLAS SERNA
KEVIN SERNA MEDINA
CARROL SHACKELFORD
ALISHA SHAW
JAMES SHELTON
VASILIY SHEMEREKO
LARRY SHEPHERD
AMANDA SHERIDAN
DARREN SHERWOOD
COURTNEY SHINAULT
BRUCE SHIPLEY
WESTLEY SHOEMAKE
RAYMOND SHUNOWSKI, JR
NAA SIAM
ZAM SIAM
CIIN SIAN
CING SIAN
NGIN SIAN
ON SIAN
PAU SIAN
NELSON SIERRA
YANNELIS SIERRA DE GARI
ELIBETT SILVA PERDOMO
TARA SIMMONS
CORY SIMMONS
JERRY SIMMONS
DWAYNE SIMPSON
DAAI SING
DAL SING
NANG SING
THAWN SING
CHRISTOPHER SISSOM
MICHAEL SITTERLY
MICHAEL SKINNER
ANDREW SLAVENS
LLEWELLYN SLAYTON
DEBI SLOAN
LARRY SLONE
PAMELA SMITH
TONY SMITH
FRANKIE SMITH
MARY SMITH
ALYANTE SMITH
CARMA SMITH
CHRISTOPHER SMITH
DOUGLAS SMITH
JAMIE SMITH
JEFFERY SMITH
JUSTIN SMITH
KELSEY SMITH
KERRY SMITH
KYLE SMITH
MARQUIS SMITH
JEREMY WILSON
JUSTIN WILSON
SUSAN WILSON
WESTON WILSON
NAW WIN
DYLAN WINN
WHITNEY WINN
VINCENT WINTON
MICAH WISDOM
JACK WITT, JR.
VIRGINIA WOMACK
EMILY WOOD
RONALD WOOD
SCOTT WOOD
BOLDRICK WOODS*
SAM WORIMONK
BRANDON WORKMAN
KASEY WORTHINGTON
BENJAMIN WRIGHT
CECIL WRIGHT
BARRY WYERS
JIM WYRICK
PATRIAL YARBROUGH
MICHAEL YOHE
TRUDY YOUNG
ANGEL YOUNG
MARC YOUNG
DOMONIC ZACHARY
ELIOTT ZACHERY
MARY ZACHERY
LANG ZAHLANGH
CING ZAM
EN ZAM
NU ZAM
PETER ZAM
PONGSAN ZAME
NICHOLAS ZAMORA
ISAAC ZAPATA REY
DAUNG ZAUNG
AURORA ZAVALETA
SAW ZAW
PATRICK ZEISSIG
BRIAN ZELLER
VIRGINIA ZERMENO
JUAN ZERMENO
BRANDON ZOREK
RENALDO SMITH
RICARDO SMITH
RYAN SMITH
TAMARA SMITH
WILLIAM SMITH
JAMES SMITH, II
WILBERT SMITH, JR.*
ANTHONY SMITH, JR.
TYLER SNODGRASS
BRIAN SOCIA
JOSE SOLARES
MARIA SOLIS
NEMISIA SOLIS
JAMI SORRELS
MILISSA SOTO
REBECA SOTO-LEONARD
KERRY SOUCY-EVANS
CLENT SOUTHERLAND, II
KEVIN SOUVANNASING
DENNEY SOWDER
JOHN SPAIN, III
RONNIE SPARKS
JAMESON SPIRES
LAWANA STANE
EDNA STARR
DEBBIE STARR
ARREST STEPHEN
MARNINTA STEPHEN
ROCKSER STEPHEN
MELVIN STEPHENS
CHARLES STINECIPHER
SHANEKA STINSON
BRENT STOCKTON
KEVIN STODDARD
ALLEN STONE
SU STORRS
STACEY STRATTON
MICHAEL STRAUB
JASON STUBBS
HAU SUAN
KIM SUAN
NANG SUAN
NGIN SUAN
PAU SUAN
THANG SUAN
VUNG SUAN
ZEN SUAN
PAUL SUAN MUNG
KHAM SUANTAK
CAROLINA SUAREZ GONZALEZ
HAU SUM
MANG SUM
NGIN SUM
PAU SUM
VICTOR SUM
WA SUM
SUZANNE SUPERNAW
TIMOTHY SURGEON, II
SEAN SUROWIAK
JACK SWEET
ERIC SYPERT
JAMES TABER
ALBERT TACHUO
ZACHARY TACKETT
WILLIAM TANKERSLEY
KEITH TANNER
WHITNEY TAPP
SAMUEL TARIAH
LARRY TATE, JR
GABRIEL TAYLOR
BEVERLY TAYLOR
BRENDON TAYLOR
ERIC TAYLOR
RANDALL TAYLOR
REBECCA TAYLOR
ROSEANN TAYLOR
ANDREA TEAKELL*
KEVIN TEAKELL
MICHAEL TEEL
ROBERT TEIS
KEENA TEMPLE
NGIN TENG
SHANNON TERRY
BENJAMIN THANG
CIN L THANG
CIN THANG
CIN Z THANG
DAI THANG
GIN THANG
GO THANG
HAU SIAN THANG
HAU N THANG
KAM S THANG
KAM SUAN THANG
KAM L THANG
KAM K THANG
KHAM THANG
KHUP THANG
LAM THANG
LANG THANG
LANGH THANG
LIAN K THANG
LIAN C THANG
MANG THANG
NGIN THANG
NGUN THANG
PAU SUM THANG
PAU KAP THANG
PAU SIAN THANG
PAU KHAN THANG
PAU N THANG
PAU SUAN THANG
SUAN THANG
THAWNG THANG
TUAN THANG
VIAL SA LUAI THANG
ZAM P THANG
ZAM L THANG
ZAM C THANG
ZEN KHAW THANG
ZEN KHUA THANG
LIAN THANG LAM
PETER THANGPI
KYLE THAO
SUAN THAWN
THANG LAM THAWN
THANG K THAWN
TUAL THAWN
LANG THAWNG
PAU THAWNG
JOSHUA THIBODEAUX
FRED THOMAS
DAKOTA THOMPSON
JACOB THOMPSON
MARLO THOMPSON
REBECCA THOMPSON
JESSICA THURBER
TED TIGER
KYLE TILLERY
DIONA TIO
TAILY TISAN
EBBONY TITSWORTH
LAL TLING
THAWNG TLUANG
WILLIAM TOBAR
NORMAN TODD
HAROLD TOERCK
DEBBIE TOMLIN
NESTOR TORRES GARCIA
LEONARDO TORRES OLIVARES
CARLOS TORRES SANTOS
PATRICIA TOTTRESS
CONG TRAN
HIEP TRAN
THI K TRAN
THI N TRAN
TUONG TRAN
MARK TRIBBLE
JUANITO TRONZON, JR
RICHARD TRULL
SENG TU
MANG TUAL
NGIN TUAN
CIN TUANG
GIN TUANG
KAM TUANG
KHAM TUANG
LANGH TUANG
SIAN TUANG
SUANLAM TUANG
THANG Z TUANG
THANG LAM TUANG
THANG L TUANG
TUN TUANG
VUNGH TUANG
ZAM TUANG
NGIN TUN
THANG TUN
ZAM TUN
GO TUNG
MUNG TUNG
SUANG TUNG
VUNG TUNG
MICHAEL L TUNNELL
PAUL L TURBE
LARRY J TURNER
AHMAD K TURNER
BRYAN TURNER
CHARLES TURNER
KELO TURNER
KYLO TURNER
RANDAL TYER
JESSICA TYLER
JACOB TZANG
JESUS TZUL
CING UAP
PAU UAP
PERNELL UNDERWOOD
SUDEEP UNNIKRISHNAN
MARIA URQUIZA
YADIRA URQUIZA
LATONYA UWAK
GIOVANA VALENCIA
SUSANA VALENCIA
JULIO VALLE
BRENNEN VANCE
TIMOTHY VANCE
ZACHARY VANCE
ALLEN VANG
DALLAS VANG
SEVERO VARGAS
RAFAEL VARONA
EVELYN VASQUEZ
CARLO VASSALLE
DWAYNE VAUGHN, JR
SHAWN L VAWTER
JUAN VAZQUEZ
ARLENE VEGA CASTRO
ANTONIO VELASCO
JAMES VELDE
NOEMI VELIZ
JUAN VENCES
ANGEL VENEGAS
SALOME VERA
JAMES VERHAMME
GEORGE VERRETT
STEPHANIE VICKERS-
CAMERON
TERESA VICTORY
EFRAIN SANCHEZ VILLA
EFRAIN SOTELO VILLA
JOSE VILLALOBOS GONZALEZ
WILSON VILLALOBOS MOLERO
ISABEL VILLALPANDO-
MARTINEZ
RAULITO VILLANUEVA
SELINA VIRAMONTES
JAMEEL'AH VIRGIN
CUONG VO
TIM VO
TONG VO
CHRISTOPHER VOIGHT
CHUAN VU
THU VU NGUYEN
CIIN VUM
CIIN D VUNG
CING K VUNG
CING L VUNG
DON VUNG
KAP VUNG
MANG VUNG
MARY VUNG
NIAN VUNG
NIANG S VUNG
NIANG L VUNG
NING VUNG
MARK WAKEFIELD
STEPHEN WAKEFIELD
WHITNEY WAKEFIELD
CODY WALDEN
KAILEY WALDRAN
DIANA WALKER
JOSHUA WALKER
RODERICK WALKER
RONALD WALKER, JR
DAVID WALKUP
ENEIDA WALKUP
BARRY WALL
AMILCAR WALLACE
BRANDON WALLACE
KENDALL WALLACE
RYAN WALLACE
JERRY WALLER
TODD WALLINGFORD
JUSTIN WALLIS
WELDON WALSTON
STEPHANIE WALTER
BELINDA WALTERS
NOLAN WALTERS
SHORICORE WALTERS*
NEWMAN WALTON
GUOYI WANG
GAYLE WARD
DALPHA WARREN
JEROME WARREN
NUGENE WARREN
RYAN WARREN
DAMION WASHINGTON
DENZEL WASHINGTON
REBECCA WASSERMAN
VICKI WATSON
BOONE WATSON
CLAUDE WATSON, JR
KENDRA WATTS
PERSEPHONE WATTS
VIKTORIA WEBB
JOSEPH WEIDMAN
ANTHONY WELCH
JOE WELCH
RONALD WELCH
TRACEY WELDON
DERRICK WELLS
GREGORY WENGER
JOHN WEST
KENNETH WEST
SHARON WEST
WILLIAM WHEELER
AMBER WHITE
KEVIN WHITE
ALLYN WHITE
EMILY WHITE
KYLE WHITE
TIMOTHY WHITE
CASEY WHITELEY
STEVEN WHORTON
GORDON WICHMAN
JACKIE WILES
JERRY WILES
MICHAEL WILES
CORNELL WILES, JR
JUSTIN WILLIAMS
VANDOIL WILLIAMS
KATHERYN WILLIAMS
CHERAY WILLIAMS
NINA WILLIAMS
ALLEN WILLIAMS
CHANTE WILLIAMS
CLYDE WILLIAMS
KOREY WILLIAMS
NICOLE WILLIAMS
RODNEY WILLIAMS
ROSALIND WILLIAMS
ROGER WILLIAMS, JR
JAMES WILLIAMSON
DRAKE WILLIANDER
NORCY WILLIANDER
DIEGO WILLY
CHRISTOPHER WILSON
CYNTHIA WILSON
ISAAC WILSON
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Parkville