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AAON (NASDAQ:AAON)

Q3 2013 Earnings Call

November 07, 2013 4:15 pm ET

Executives

Norman H. Asbjornson - Chairman, Chief Executive Officer, President, President of AAON Canada Inc, President of AAON Properties Inc and President of AAON Coil Products Inc

Scott M. Asbjornson - Chief Financial Officer and Vice President of Finance

Rebecca A. Thompson - Chief Accounting Officer

Analysts

Joseph Mondillo - Sidoti & Company, LLC

Brian Loftus

DeForest R. Hinman - Walthausen & Co., LLC

Operator

Good afternoon, ladies and gentlemen. Welcome to the AAON's Third Quarter Report Conference Call. As a reminder, this conference is being recorded. I would like to turn the meeting over to Mr. Norman Asbjornson. Please go ahead.

Norman H. Asbjornson

Good afternoon. Thank you for joining us. Prior to moving forward, I want to read a disclaimer. To the extent any statement presented herein deals with information that is not historical, including the outlook for the remainder of the year, such statement is necessarily forward-looking and made pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995. As such, it is subject to the occurrence of many events outside AAON's control that could cause AAON's results to differ materially from those anticipated. Please see the risk factors contained in our most recent SEC filings, including the Annual Report on Form 10-K and the quarterly report on Form 10-Q.

I'd like to now introduce Scott Asbjornson, our CFO, who will take over.

Scott M. Asbjornson

Welcome to our conference call. I'd like to begin by discussing the comparative results of the 3 months ended September 30, 2013, to September 30, 2012.

Net sales were up 16.8% to $89.7 million from $76.8 million. Net sales increased due to gains in market share in the new commercial, industrial, construction and replacement markets as a result of price increases introduced in April 2013. Gross profit increased 55.2% to $26.6 million from $17.1 million. As a percentage of sales, gross profit was 29.7% in the quarter just ended compared to 22.3% in 2012. The improvement in gross margins can be attributed to decreases in raw material costs and increased product prices. Selling, general and administrative expenses increased 43.6% to $9.7 million from $6.7 million in 2012. As a percentage of sales, SG&A was 10.8% of total sales in the third quarter of 2013 and 8.8% in 2012. The increase in SG&A from the quarter ended September 30, 2013, was primarily due to higher profit sharing expense, warranty and employee compensation.

Income from operations increased 62.7% to $16.9 million, or 18.9% of sales, from $10.4 million or 13.5% of sales. Our effective tax rate decreased to 38.1% from 42.7% in the third quarter of 2012. The company had a return to provision adjustment in 2012 that caused the rate to be higher than expected in that period. We expect the rate for the balance of 2013 to be approximately 33.4%. Net income increased 75.2% to $10.5 million, or 11.7% of sales, from $6 million or 7.8% of sales. Diluted earnings per share was $0.28 per share versus $0.16 per share. Diluted earnings per share were based on 37,018,000 shares versus 37,001,000 shares in the same quarter 1 year ago.

The results of the 9 months ended September 30. Net sales were up 10.1% to $247.8 million from $225.1 million. Gross profit increased 34.4% to $69.6 million from $51.8 million. Gross profit as a percent of sales was 28.1% for the 9 months of 2013 compared to 23.0% in 2012. Selling, general and administrative expenses increased 31.2% to $25.7 million, or 10.4% of sales, during 2013 from $19.6 million or 8.7% of sales primarily due to increases in profit sharing, warranty, stock-based compensation, employee benefits, professional fees, advertising and sales taxes.

Income from operations increased 36.5% to $43.9 million or 17.7% of sales, from $32.2 million or 14.3% of sales. Our effective tax rate was 32.8% compared with 38.3% in the third quarter of 2012 due to discrete benefits related to the Research & Development Credit and the Indian Employment Credit. These federal credits were retroactively reinstated on January 2, 2013. No Research & Development Credit or Indian Employment Credit benefits were recorded in the 9 months ended September 30, 2012. Net income increased 49.9% to $29.8 million, or 12.0% of sales, from $19.9 million or 8.8% of sales. Diluted earnings per share was $0.80 per share versus $0.54 per share. Diluted earnings per share were based on 37,042,000 shares versus 37,084,000 shares in the same period 1 year ago.

At this time, I'm going to turn it over to our Chief Accounting Officer, Rebecca Thompson, to discuss the balance sheet.

Rebecca A. Thompson

Thank you, Scott. Looking at the balance sheet, you'll see that we have a working capital balance of $66 million. Our current asset ratio is approximately 2.5:1. Our capital expenditures for 2013 are approximately $6.4 million. Shareholder equity per diluted share is $4.37 at September 30, 2013, versus $3.73 at December 31, 2012. We have total cash and investments of $44.2 million at September 30, 2013, compared to $19.3 million at December 31, 2012.

We paid cash dividends of $3.7 million on July 2, 2013. And on November 6, 2013, the Board of Directors declared a regular semi-annual cash dividend of $0.10 per share, which will be paid to the holders of the outstanding common stock of the company as of the close of business on December 2, 2013, the record date, payable December 23, 2013.

I'd now like to turn the call back over to Norm, who will discuss our results in further detail, along with the new products and the outlook for the remainder of the year.

Norman H. Asbjornson

Net sales were up 16.8% for the quarter and 10.1% for the 9 months. Sales increased due to our ability to gain market share. We had some price increase in March. We had this due to our redesigned -- our new redesigned products, and the breakdown between new construction and replacement, as near as we can tell, was pretty consistent as far as our increase in market share. The market, as it exists, however, the new construction market was, in total, the market that we serve, fairly well level. It did not -- it was not level across-the-board, however. And just to give you a feel for how it varied, the strongest part of the market was in the lodging arena in which, according to industry statistics, it went up 26.7%. However, that is one of our weaker markets, and it also is a smaller portion of the overall market.

The other markets that were pretty much level were the office market and the commercial building market. One was up about -- or down about 0.1%, and the other one was up about 0.9%; the health care market, which was down about 5%; the educational market was down a little over 5%; and the religious, which again is a small market, was down about 17%. So if you take all the dollars associated with those various markets and look at them, they were virtually flat from year-to-year.

Looking at AHRI statistics, which reports for the industry on the type of product sold, the amount that was sold in a given period, the most recent time available to me is the August report. And the August report shows in total, including residential, to be down 2%. If we break it down into the residential and commercial, which is fairly easily done, it appears that both of them contributed to that down. And so it looks like the replacement market was down more -- and the commercial world was down more than was the stability that was exhibited in the new construction. And therefore, all -- virtually all of our increase in sales had to be -- come from taking market share. It was not due to any market growth because there was none.

Going into the types of markets we're in and what they -- how they looked, the type of product markets. We pretty much uniformly across all of our products had about -- that increase was distributed fairly reasonably between the rooftops, the chillers, air handlers, split systems and the packaged equipment. The one notable one that seemed to be weak was geothermals. The strongest thing we had, we are now getting much more serious in the parts sales. We've expanded our capability there to include parts other than those which are used on AAON products, and this has gained us some significant growth in our parts business and helped give us the 16%, 16.8% for the quarter and the 10.1% for the 9 months.

The tone of the markets. We follow the markets basically by looking at the Architectural Billing Index, which has been up for 11 of the past 12 months. So it says that the buildings are being designed or there's money being spent on designing. The Architectural Building (sic) [Billings] Index says in its announcement that this predates the date of actual expenditure of the funds on these buildings by somewhere between 9 and 12 months. So since I'm calling out a 12-month time frame, one would have expected there to have been an upswing in the last 2 or 3 months. It might be happening. It's a very faint thing. It does appear to be starting to happen, but it is not a very significant happening.

And since the amount of up that the Architect Billing Index was during that time frame was also rather small over the 50% or the uniform market, this kind of is consistent. So presumably, we will gain a little bit more strength as we go forward in the next few months, and that's the best index that I have that I know about to determine what's likely to happen. So I would have to say that the market -- the new construction market is starting to heal a little bit more and is likely to be up somewhat.

The replacement market, however, is affected by a variety of other things. Probably the biggest effect on it was that for the previous 2 years, there was a federal tax ruling which allowed you to do 100% depreciation a couple years ago and then 50% depreciation on any capital goods which were bought. And that, I believe -- at the time we believed it, and I believe it's still true, brought quite a lot of replacement business into the marketplace over the past couple years. And it probably took some of that market away from the futures. They probably replaced some stuff that they wouldn't have replaced until this year. And that's probably why there's a little bit of weakness in the replacement market, as best I can see it now. That should get its way out of the market, and we should get more into the normal replacement market this coming year. So going forward, I don't think it's going to be a strong upswing, but I think there is a modest upswing in place. And connect that to our new products which are gaining strength and gaining market share to us and the new ones which we're going to be announcing over the next few months, I'm optimistic about the growth potential for AAON even in a very slightly improving marketplace.

The backlog. Backlog needs to be understood a little bit. You know that this quarter that we just finished we had a very pronounced upswing of 16.8% for the quarter. What you're seeing here is attributable to the fact that we spent quite a lot of capital money the past few years improving our ability to build product. And habitually, we're in a marketplace where the second and third quarters are the strong quarters because that's when we normally ship a lot of equipment to the construction market due to the timing of the construction building cycle. We also have weak quarters in the first quarter and the fourth quarter. And in the past, we have had a little difficulty keeping up with the customers' needs when they really wanted the product, which was in the second and third quarters.

However, now, with our increased capabilities, we had no problem keeping up. Therefore, what has actually occurred to us is a little bit of the market that we put into that 16.8% for the third quarter was actually removed out of the fourth quarter from us. A year ago or 2 or 3 years ago, it would have slipped into the fourth quarter simply because we could not have built all that we needed to have built. But this year, that was not the case. We built whatever they wanted built when they wanted it built. And so we have distorted, on a comparative basis, what happened in the third quarter this year and what will happen in the fourth quarter this year compared to last year.

The new orders coming in have consistently been running ahead of 1 year ago. On a month-by-month basis, we've had great consistency on getting the new orders at a higher rate than we did in the corresponding month in the preceding year. Not a huge amount additional, but a significant amount. And significant, I mean, up in the -- around the 10% area. And we are still in that mode of getting that. However, with that being said, the amount of sales that we pulled out of the fourth quarter and put in the third quarter has made it such that we are not going to have as much revenue showing up probably in the fourth quarter this year as we had in the fourth quarter 1 year ago. It'll be somewhere up in there, but it probably won't be the same. However, due to the other factors which gave us the very strong profitability, those factors are still going to exist in the fourth quarter, and we will probably be at or above last year's profitability. So we're doing well. Everything is looking right. But there's a little distortion in the way the numbers are coming out.

The gross margins. I've got several things running with them. Right now, we haven't, as we said, been experiencing basic cost increases in the way of material. We have had, of course, a slight amount of wage increases, but productivity has been reasonably well offsetting that. So the only big change that we expect to be occurring, which is going to happen over the next 6 months, is we are in the process of going into a new coil concept that is being introduced into our industry that will lower our cost of some of our coils, and that will give us a little less material cost probably being offset on the opposite side by a small amount of cost increase. So basically, there's nothing in the offing that I see to greatly change the gross profit we make on sales. Now, of course, if our volume is down, like it normally is in the fourth quarter and the first quarter compared to the second and third quarter, we won't be absorbing our fixed overheads as well, and that will have an effect upon the bottom line marginally.

Capital expenditures for 2013, as we explained, were a little over $6 million thus far. We told you 1 year ago that we were going to -- and earlier this year that we were going to be between $8 million to $10 million for the year. That's still a reasonable number for expectation, that $6 million will probably move up in somewhere between the $8 million and the $10 million. Capital expenditures basically were for some equipment and finishing off some of the things we were underway on, on the building project from the preceding year, as well as we have started another new building project here in Tulsa that's underway at the present time and which won't finish until first quarter next year.

The outlook, as I said earlier, for next year at this point in time looks to us to be slightly up in the market capabilities, what's out there in the marketplace looks to have healed itself and should have a little bit of positive to it. And our new products give us a definite edge to continue our taking of market share, as we have for the past 25 years.

Operator, I'm open for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Joe Mondillo.

Joseph Mondillo - Sidoti & Company, LLC

First question, Norm, I was wondering if you could let us know how the quarter trended amongst all the months and how October looks as well?

Norman H. Asbjornson

Well, the quarter was pretty much like it was compared to, say, the second quarter. We were down slightly in volume, and we were in good shape on profit. September was pretty much consistent with that. October is going to be a little bit softer, but very marginally, just right in line with the fact that we're going into the fourth quarter, further in the fourth quarter. And so we don't see any major change other than the normal seasonality occurring. That's the only thing we see happening to us right now. We might have -- because we still are booking quite well, we might have a chance to lift it up in December a little higher than we would normally have it.

Joseph Mondillo - Sidoti & Company, LLC

Okay. And then just to clarify your commentary on replacement versus construction demand, did you say replacement in the industry, sales were down 4% and construction probably down even more than that?

Norman H. Asbjornson

Well, what I said was the construction market, new construction market, was virtually flat according to the governmental statistics showing how many dollars are spent on various types of buildings. There was no up or down to it appreciably from last year to this year. If you look at AHRI statistics on the products shipped by unit size, and the most recent one I have is the August data, it shows it to be down for August compared to 1 year ago. So if that is down a little bit and the basic construction market is level, I have to assume that downage is due to a weaker replacement market than the new construction because the new construction was constant.

Joseph Mondillo - Sidoti & Company, LLC

Okay, got you. And then just to touch on gross margin. This year in particular, you've seen really good demand, but you've been able to push through -- but the market has been quite challenging. You've been able to push through price, and input prices have been very stable. I'm just wondering, have you ever seen a sort of environment like this where you've seen such low input prices, you've been able to push through price and have been able to take market share in such a challenging environment? Just trying to get an idea of where gross margins are going and sort of if they're sustainable at these sort of record high levels.

Norman H. Asbjornson

Well, the one most unusual thing that I have never experienced in my years, which is a lot of them in this industry, is the stability of the cost structure. We're not seeing material costs go up. In fact, they're going down slightly in some cases. And it's the most stable market I've ever experienced in the way of, like, purchase parts and purchase commodities, and that's an unusual thing. The fact that the market is stable. The other unusual thing, though, I'm finding is generally, there's someone that -- all I can say is some -- there's always one manufacturer who's doing things that I consider a little foolish as the way they handle their pricing structure. And that is not happening. I think everybody is being more judicious in the way they handle their pricing. And whatever level they are, they aren't thinking they can buy market and get away with it. So it's given a degree of stability across the market that's kind of unusual. And so, it really comes down then to what you're offering, as in what people are going to be willing to pay. And because we've done so much of advancing our product technologically and the fact that there isn't any great growth going on, it gives us a lot of time to do good selling, and we've got a lot of people that are buying into some of the things we're selling now.

Joseph Mondillo - Sidoti & Company, LLC

Okay. And then just lastly, the SG&A costs. I know you said -- I think you said warranty costs were a little higher, some profit sharing. How do you look at the absolute level? You're almost at $10 million a quarter in the third quarter. How are you sort of looking at sort of a sustainable rate going forward on a quarterly basis?

Scott M. Asbjornson

Yes. The SG&A, we anticipate, is somewhere in that 9% to 10% range is what you would normally expect. A component of SG&A that is driven by our performance is our profit sharing number. So to the extent that the company performs better in profit as a percentage of sales, SG&A automatically gets driven up because the profit sharing is a component of SG&A. So the higher the profit as a percent of sales, the higher that component of SG&A as a percentage of sales.

Joseph Mondillo - Sidoti & Company, LLC

Okay. So you've been above 10% -- at or above 10% for the last 3 quarters now. Is that 9% to 10% maybe not realistic with the growth that you're seeing on the top line? Or how do you look at it going forward and into 2014?

Scott M. Asbjornson

Well, for the balance of this year, obviously, I don't expect it to come down significantly from where it is. But as I said, it's partially driven by profit as a percent of our sales. To the extent we're able to maintain this performance, it may maintain itself on the high side of 10% because it is driven in part by the component of profit sharing.

Norman H. Asbjornson

We're not having -- I'll inject a little bit. We're not having -- the other 2 big ones in there that could upset it is bad debts. We're not having a big issue in bad debts. And the other one is warranty, and we're not having a big problem in warranty. So the most -- what Scott is inferring is our most unusual one is the profitability, which is driving the profit sharing up.

Operator

And the next question comes from Brian Loftus of HARDI.

Brian Loftus

The sales growth, could you break that down between price and units?

Norman H. Asbjornson

Well, the price increase that we had back in March was probably somewhere in the vicinity of 3%. And so, you can take 3% of that improvement and say that's due to the price increase and the rest of it was due to pure growth in unit sales. So if we were, say, this past month, past quarter, dropped 3% out of the 16.8%, so you can say 13.8% was product sales and 3% of it was due to the price increase introduced back in March.

Brian Loftus

Okay, got it. Super. Could you comment on your bid activity and the timing for decisions? There seems to be a persistent theme here where there's a lot of bids, but a lot of -- but a similar number of postponements and a lot of delays on projects. Have you seen any shifting on that? Or any projects is starting to break ground?

Norman H. Asbjornson

Well, that is a very viable question, one -- and a very critical one that we try and answer because after the architects do all the design work, then the product you would expect to come on the market and get bid and start resulting in sales. And it seems a little bit slow in happening right now. In other words, I think a lot of the people need the building, so they're willing to pay out the 6% or whatever percent they have to for the engineering and the architecture work to be done. But then when the other 94% has to be committed to, they're a little hesitant about going forward. I think there is some of that right now going on. Not terribly, it's not a big thing, but I believe there is a little of it.

Brian Loftus

Okay. Last question. A couple quarters ago, I believe you mentioned that the impact that the price spike of R-22 had on the repair versus replace decision. Now the price has come back down a little back to more normal levels, can you talk about how the perception or the -- how R-22 is influencing the replace and repair decision in your markets?

Norman H. Asbjornson

Okay. The one that has been kind of up in the air has been the residential because the way the wording was in that ruling had allowed the people who were in residential to ship condensing units with no refrigerant in them. They were set up to be used on R-22. So it kind of screwed up the changeover for the residential people. That did not occur in the commercial world, which is where we are. So as far as we're concerned, R-22 has been dead for a couple, 3 or 4 years now, and it's really has no effect upon us. We're pretty much -- that's behind us as far as that portion of it.

Brian Loftus

Okay. I thought you mentioned a couple quarters ago that with the price spike, that some people were -- some commercial customers were replacing a little sooner than they ordinarily would.

Norman H. Asbjornson

Yes, yes. Okay, I see what you're talking about. I misunderstood your question. Yes, that is starting to happen. Because what has -- what happens -- I'll give you one for instance. There's one school district, we understand, has put out a thing that if they have 2 leaks on a unit in a year of R-22 unit, rather than fix it the second time, they just buy a new machine because the cost of putting the refrigerant, an R-22 refrigerant in, is pretty high now because R-22 refrigerant has gone up in price. And so the people have determined it's more cost-effective to just go ahead and get rid of that unit. Even though it may still be a very functional unit, they know that if it gets another leak, it's just going to further put costs into that unit that they aren't going to get recovered. So they go ahead and make the change. I totally believe that, that is becoming a more driving factor in the replacement market. However, I think it was also offset by this governmental 100% depreciation allowance, which units to also replace. And now that, that's been pulled away, while the refrigerant thing is still present, it hasn't been enough to overcome the premature buying of replacement units and removing them from today's market.

Brian Loftus

Okay. Then just to follow up on that briefly, you mentioned that anecdotal story before. Have you heard that similar reasoning from other customers, from other sources also?

Norman H. Asbjornson

Haven't heard that precise one from other sources, but we have noticed that we hear conversations going on about whether it's worthwhile. In other words, they've added another ingredient. Normally, they would look at how old the machine was and how much their cost to repair is. And now they've got a third component in there, which is how much is R-22 refrigerant costing. And so it adds to the reason why you would change the unit. The other thing, of course, which is, is if electrical costs are going up in some area, the older R-22 equipment just across-the-board, no matter whose product it is or whatever, is a more inefficient product than what today's product is. So that adds another ingredient into why some people will go ahead and move forward with a replacement.

Operator

And the next question is from DeForest Hinman of Walthausen & Company.

DeForest R. Hinman - Walthausen & Co., LLC

I just had a couple of questions. On the commentary in the press release about profit being down, just to be clear, is that gross profit or operating profit?

Norman H. Asbjornson

Just a moment. Let us make sure we understand what you're talking about.

Scott M. Asbjornson

I believe it's -- you were talking about as a percentage. Can you reference the exact segment you're talking about?

DeForest R. Hinman - Walthausen & Co., LLC

In the press release, you commented that the fourth quarter profits would be down on a year-over-year basis. Is that operating profit or gross profit?

Norman H. Asbjornson

Just a moment.

Scott M. Asbjornson

You're talking about our comment on the fourth quarter, the upcoming fourth quarter?

DeForest R. Hinman - Walthausen & Co., LLC

Yes. Yes.

Norman H. Asbjornson

Okay. Okay, here's what I was trying to say to you. If you look at fourth quarter of 2012 and say how are we going to relate to that, what we're saying to -- is while we're going to have record sales and we're going to have record profits for 2014, in the fourth quarter we expect that the sales compared to the fourth quarter last year will probably be a little less because as I said, we had a very booming fourth quarter last year and we shipped some of our normal fourth quarter business -- this year, we shipped it in the third quarter. So the revenue portion is going to go down. However, what I said about the profits is they would probably be comparable to 1 year ago. And so, what's that really saying to you is the profit per dollar of sales in the fourth quarter this coming -- of this year are probably going to be better than they were last year.

DeForest R. Hinman - Walthausen & Co., LLC

On the gross margin side?

Norman H. Asbjornson

Yes, right. Just that the revenue is going to slide a little. And if the revenue slides, even though the profit -- gross margin is probably going to be higher, it's probably going to -- it's going to be offsetting. In other words, the reduction that's probably going to occur in revenue is probably going to offset the improvement due to the gross margin, the net result being that the profit itself will be about equal.

DeForest R. Hinman - Walthausen & Co., LLC

Okay, that's great. And a second question on -- I think you were alluding to in the commentary about the aluminum coils. The rollout of that new coil in the equipment, is that something that's gradually getting phased in over the SKUs? Or is that kind of an all-at-once changeover?

Norman H. Asbjornson

It's being gradually phased in. And here's the situation. To some degree, it would seem, and for a lot of companies, it may be true, that it was a pretty simple "just replace one with the other." However, because of the way we build product and the options we give and all the various things we allow our product to do, we felt it necessary to run the new unit through a very extensive laboratory test to make sure that it wasn't going to have a problem in somewhat of those conditions that we do as a regular fashion. And some of our competitors don't do those things. And what am I saying? Low temperatures, 100% outside air. There's a lot of things we do that is different than what a lot of the other people do. So we do a much more in-depth analysis to make sure we aren't going to get ourselves in trouble with this. Because the coil is not -- it doesn't perform precisely as did the old tube coil, there are situations which developed with this coil that didn't develop with the other coil, and we found that out. And so we said, "Okay, we have to make sure -- we don't know for sure what's causing this, but we know how to cure it." That's a funny thing to say, but we know the answer. We don't know for sure what the question is. But the net result is what that has done has been tie up our lab with testing these units very thoroughly before we release them, which slowed down the rollout. Of course, a lot of people that wouldn't have done all that we have done, they would have maybe made a rollout all at one time. We weren't able to because we have to do so much lab work. So ours is going out little by little. And it will continue going out little by little until we're done. We're about -- in dollars, we're at about the 30% mark as far as the dollars of our shipment that have the new coil. And by the end of the year, we'll probably be at somewhere around the 50%. And about the end of the first quarter, we should be probably at the 85% market. And then we will be -- end of second quarter, we'll be at 100%.

DeForest R. Hinman - Walthausen & Co., LLC

Okay, that's helpful. And another question on capital. I think we're, to some extent, running into a similar situation as last year where you -- it's kind of a good problem to have. You have a lot of excess cash but maybe not a lot of things to do with it. You've done some capital projects. And I'm wondering if there's – one, is there something more in the pipe to do? And if not, we haven't had a lot of traction on the repurchases. Does that position us for another special dividend at the end of this year?

Norman H. Asbjornson

We aren't talking special dividend. What we are doing is we're doing a couple things. Number one, we're completing some of our capital expenditures in the building program. We've got a long-term plan. We've laid out in great depth several years in advance where this company should be going. And so we're going -- moving forward with some of those building plans as we speak. Probably the biggest one that we have coming up, and we are not ready for it yet because we have to do our homework, so to speak, to make sure we've studied it out well enough to do it correctly, and that is we need a new laboratory. And the new laboratory is going to cost an unknown amount at this time, but it's probably going to be in the $10 million to $15 million arena or somewhere in that vicinity. And that could occur next year. So we need to keep that around. We're also thinking that contrary to what we normally do, there might be an opportunity to buy something, and it doesn't hurt to hold money. And the third thing, which is very obvious, is we're talking about should we increase our dividend. And so all those things are on our plate, and we're going to be trying to come to a conclusion in the next quarter as to what should we do, particularly as it relates to the dividend.

Operator

[Operator Instructions] There are no further questions at this time. Please continue.

Norman H. Asbjornson

Well, thank you, ladies and gentlemen, for being with us for our third quarter and the first 9 months' report. We appreciate all your continued support. We're quite optimistic, looking forward, about the future of AAON. And as long as the economy continues to do nothing too drastic, we should have a very good year coming up. Thank you, and speak with you later. Goodbye.

Operator

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.

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Source: AAON Management Discusses Q3 2013 Results - Earnings Call Transcript
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