AAON corporate governance and 2009 summary

I've only owned AAON for a few months but so far I really like their management and how they treat their employees and shareholders. Most of the following information came from their 2009 proxy statement and annual report. I love reading proxy statements! It's actually one of the first things I check out when starting to examine a new company.

• Insider stock ownership: Norman Asbjornson, CEO and chairman of the board, owns 3.4 million shares, or a little over 20% of the outstanding shares. As a group, directors and executive officers hold almost 29% of the shares.
• Executive management compensation is very low. Norman Asbjornson base salary was less than $300,000, the rest of the officers made approximately $163,000 each. Asbjornson's total compensation (including restricted stock awards, profit sharing, matching 401K contributions, payments for personal car leases and health care account contributions) totaled $359,000. Asbjornson also did not receive a bonus in 2009.
• Director compensation is also very reasonable. Cash payments ranged from $15,000 up to $31,000 with an average of $22,000. Stock awards added another $21,000 for each director.
• 401K - The company matches 50% up to the first 9%. Also allows employees to sell AAON stock back to the company to provide diversification.
• 10% of the pre-tax profits are paid equally to all employees.
• 3 of the 5 executive officers have been with the company since its founding in 1988.
• AAON started paying a dividend in 2006 and have increased it every year. The dividend is distributed in 2 semi-annual payments.
• AAON has also had 3 stock buyback plans in the last 10 years, in which they have bought back 4.8 million shares, or approximately 22% of the total shares outstanding.
• I like that their annual report lists all the company employees.
• They have almost zero debt and have a ROE of 25%.

To me, this is a great example of good management! From a numbers perspective, revenues were down 12% in 2009 compared to 2008, but this isn't bad compared to many other companies. And due to cost cutting and other efficiency measures, operating income and margins were higher in 2009 than 2008. EPS came in at $1.60/share, the same as 2008 (even though 2009 net income was less than 2008 due to less shares outstanding in 2009).

The only thing I saw in the annual report that I will pay attention to is that they are getting into the lower tonnage market. They have traditionally stayed in the higher tonnage area where there are less competitors. But they feel with their manufacturing experience and financial strength, they are ready to enter this more competitive, but much larger, market. They expect some short-term impacts to margins but believe it will be accretive to earnings. Let's see how this plays out over the year.