Welcome to AAON's First Quarter Earnings Report for 2012 Conference Call. I will now turn the call over to Mr. Norman Asbjornson.

Good afternoon. Thanks for joining us this afternoon. Before going on, I'd like to read a disclaimer. To the extent any statement presented herein deals with information that's 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 Securities and Exchange Commission filings, including the Annual Report on Form 10-K, the quarterly report on 10-Q. Thank you. And now, I'd like to introduce our Vice President of finance, Kathy Sheffield, who will go over some of the statistics with us.

Good afternoon. Welcome to our conference call. Thank you for joining us for this review of AAON's financial performance for the first quarter of 2012. I'd like to begin by discussing the comparative results for the 3 months ended March 31, 2012, to March 31, 2011. Our revenues were up 8.4% to $64.9 million from $59.9 million. The increase in our revenues is the result of our continuation of gains and market shares due to the favorable reception of our new products. Gross profit increased 16.2% to $13.5 million from $11.6 million. As a percentage of sales, gross profit for the quarter was 20.8% compared to 19.4% a year ago. The increase in gross profit is attributable to the improved productivity from our new sheet metal fabrication equipment that we put into service at the end of last year and our revamp production lines. Selling, general and administrative expenses increased 8% to $5.9 million from $5.5 million for the same period a year ago. As a percentage of sales, SG&A remain constant at 9.2% of sales. Operating income increased approximately 24% to $7.6 million or 11.6% of sales from $6.1 million or 10.2% of sales. Net income increased 25.1% to $4.6 million or 6.9% of sales from $3.7 million or 6.1% of sales. Diluted earnings per share was $0.18 per share versus $0.15 per share in the same period a year ago. Earnings per share were based on 24,772,000 shares versus 24,939,000 shares. Moving to the balance sheet, we see that we ended the quarter with a cash balance of $3.2 million and we had no long-term debt. We had a working capital balance of $48.1 million, current asset ratio was 2:1, our capital expenditures were approximately $3 million related to new equipment and the continuation of a building addition. Our shareholders' equity per share was $5.13 compared to $4.85 a year ago. I'd now like to turn the call back over to Norm who will discuss our results in further detail along with our new products and the outlook for the remainder of the year. Norm?

Yes. We'd like to talk a little bit about the -- basically, the differences in the 2 major places where we got our orders, namely new construction and the second one being replacement market. We had, coming into this year, quite a different situation due to things which occurred last year, most namely the replacement markets. The replacement market last year was distorted toward the first part of the year on orders entered due to the 100% write-off that was given to certain capital and the product such as the heating air conditioning equipment by the federal government. And therefore, the first part of last year was very good bookings year -- year the last half was a very poor one, which bring that up kind of set the stage for what has happened in the first quarter of this year. We namely came into this first quarter of this year with a pretty low backlog due to the fact that we had shipped everything to the people who were buying it because they wanted it badly last year to get into the tax break for many of them. And they were not giving us a lot of the orders. So it didn't look really too promising coming off of last year relative to the backlog. And in the first 10 days of January, it kind of continued that way, and then the world changed, the remarkable way. Orders started coming in very rapidly and continued to do so and still continue to do so. They're coming in not at the same rapid rate that they have at various times during the past few months, but consistently been good booking months. January turned out to be a very, very good booking month even though it started out very slow for…

[Operator Instructions] Our first question comes from the line of Jon Braatz with Kansas City Capital.

Can you talk a little bit more about the price increase in the first quarter and what you're expecting in the second quarter, the size of the price increase? And maybe do that in the context of what you're also seeing in terms of some -- maybe component cost increases or steel cost increases whatever. And we'd be able to fully offset some of those costs out increases, if indeed there are some?

Certainly. If I just had to give you a percentage because what we've done, we've done a number of things. Where we were thinking that we had some things which were underpriced, we priced them up a little bit. And we did a lot of spot pricings just trying to correct some problems we felt we had in our pricing structure. But then, we also went in and did a pretty much in generalized price increase. So we had a variety of small incremental price increases going on. When it's all into the system and recognized it with the backlog, we have right now, it's not all going to come out in the second quarter. Some of it is going to drift into the third quarter before it gets out of the backlog. But it probably is somewhere in the vicinity of a 5% price increase. And as far as what's going on in the commodity business, that's a non-issue. For the first time in a long time, steel was up very modestly, copper and aluminum are down modestly. Net result, nothing. In other words, I don't see that as being an issue to be discussed on commodities. There is price increases coming through from component manufacturers. Some of them have been fairly substantial. The biggest probably has been about an 8% one. But the most of them are down in the low-single digits, meaning in the 2%, 3%, 4%, 5% area. And since the component part of the material cost is just a portion of the material cost, not includes the commodity part, it's the net result and that's probably down somewhere around 3%. And we got probably somewhere around the 5% increase. So we'll be improving our margin for that reason, if no other reason. And along with it's own work we've done and all the money we spent on new machinery and rearranging the factory is paying off and improved productivity, both in our sheet metal fabrication, as well as our assembly areas. So we don't see that as being negative. So all in all, we have probability at this point in time, everything we can see have been modestly increasing, gross margin coming all the way to the bottom line.

Okay, going back to the new machinery that you installed most recently. How far along are you and maybe, say, reaping the entire benefits of that -- the improved productivity, you mentioned that you're seeing some of it, but will we see additional gains throughout the year from this new equipment?

Well, what we did because as we were doing this, we had to take out some old machinery before we can put in the new machinery. So we have a problem of how do you do that and not affect your production last year? The way to do it is we had excess building on the west side of the street here in Tulsa. And so we put in some of the machinery over here so that we could take it out on the east side and not lose our ability to satisfy our customers. And by doing that and then by refilling the east side backup, what we have done is we didn't just replace the machinery that we got rid off, we actually increased our capacities rather significantly. So we are at the present time realizing virtually all the benefits of the new product, of the new machinery on the production we're doing. However, we're not realizing all of its future because we're not using all of it. So as we get more volume, we will continue to be benefiting from that new machinery.

Your next question comes from the line of Joe Mondillo.

I was wondering if you guys -- if you had any idea on how the mild temperatures affected the first quarter at all?

Well, I've thought that the effect to this was a very positive manner. However, we have a newspaper and it's called the Air Conditioning News, and I would just reading in the most recent April issue that in the third quarter, in the nonresidential construction by the association of the contractors that their business was down 3.24%. And the most recent month was into January, and it was down another 0.8%. And they were trying to figure that out in this article. Like I said, I just received that news magazine here, in just recently. And the general consensus was that they couldn't figure out why it wasn't there. That's what they say in there and they have a pretty broad spectrum -- visibility into it. I don’t think that was true totally and maybe it didn't get going until further along in the year namely February or March, but I'd truly believe we had some people start building buildings much sooner than they normally would have. Some of them in January probably just didn't think that the weather could really be that good and they probably just sat, they're waiting for the big snowstorm, which never occurred. Eventually, they got to believe, well, we just want to get going and start building the building. And they did so, I'm quite certain.

Okay, and then in terms of the orders and what you saw throughout the quarter, so February, I believe, you said -- second half of January, February were extremely strong and I believe you said on the last call that things settled a little bit from such a strong February and March. Did things sort of stabiliz from the March levels into April? Or how did the order trend look throughout the quarter and into April?

Well we kind of distorted to a point that I have a hard time giving you a good answer to that because that's when we put the price increases into effect in April. Whenever you do that, you bring in some orders prematurely because people don't want to pay that extra money. And so we give them 30 days from the time we announced the price increase until it becomes effective that they can't order anything anymore. So it gives them time to cover the orders that they've made bids on to their contractors or to the customers so that they can go on and claim those up because they bid it based upon the premise of our old pricing. So that 30 days gives them the time to put a lot in and they did. Well, they gave us a lot of orders in April and then what you normally expect is that there's a little bit of a drought that will follow that. And so since we've just closed April, and we're just getting well into May, we're looking for the drought and so far, it doesn't appear to be very bad. So we had a fantastic April and bookings due to the price increases and so far, it doesn't look like we're going to pay too big at penalty for it in May. If we don't pay a very big penalty for it in May, then we're just going to be talking more optimistically than I am right now.

Okay, and in terms of the price increases, I'm not sure if I'd heard you wrong or what but I thought you said maybe that you had a problem with price increases last year? Or some sort of issue with price increases, did I get that wrong?

No, what happened last year, the first 7 months of last year, we were up 19% on orders. We felt we had a great year going and we put some price increases in. But then out there in the eighth month, it seems that all the world has changed dramatically and from there on until the end of the year, the average for those last 5 months was down 9% compared to the previous year. So we went from having a plus 19% to a negative 9%. So during that negative 9%, we felt that bottom was falling out of the marketplace except we had pretty well figured that it was the replacement portion of it that was doing so and we didn't want to raise prices in a declining -- in severely declining market because that would have only lost us more volume and the lost of the volume would have been more than the gain we would have realized from price increase. So we did that throughout the last half of last year and into the first 10 days of this year before orders started flowing the way they did. That's what I was saying is we didn't have price increases very much in the last half of last year because of the downturn we were experiencing.

Okay, got you. And then I don't know if you talk about maybe a little more color on sort of the demand that you're seeing right now. What kind of size products are you seeing? What kind of regions in the country are sort of heavier than others? And then also end markets in terms of where the demand is coming from?

Okay, the majority of our growth and the best part of our growth has been in our larger tonnage units that we redesigned. Now, I can't say that's because of the market conditions necessarily because that's where we started our redesign efforts was in the largest ones and we worked to the bottom ones. So they had had more time out in the marketplace to develop a positive image and a more of a customer following and a smaller ones. But the bigger ones have led our price, our order input and the small ones have come along very well, but I would still say that it's been in the larger tonnages where we've done the best. At this point, that's what we think we're seeing. As far as parts of the country, in general, I would say it's a pretty uniform thing. I would say the Western part of the country may be suffering more than the rest of the country is. But really California is suffering quite a bit to some degree. I think Oregon and Washington state are also. But those would be the only ones that I would say might noticeably be showing problems with growth is region. Now in those -- the other parts of the areas, there probably our individual states that are having problems for whatever reason. But in general, it's just the Western issue.

Then any color on end markets such as education, healthcare, or where are you seeing the demand?

Well, if I to believe the Census Bureau here, the strongest demand of all is in manufacturing. And it's pretty spectacular. The next strongest demand is in commercial, which is your retail, your office, your retail in stores and things of that nature. And then the next one down from that is the healthcare is the next. I'll give you some numbers. The manufacturing, this is on a March-to-March basis, 42.5% up. Spectacular. commercial, 11.5%; healthcare, 7.1%; educational, 3.4%; religious, negative 8.2%; office building, 1.8%; lodging, 1.3%. So those are the buildings that we furnish equipment to and that's what they are. And that's what I'd say, if you add it all that up, it's not a bad growth from these things. Now these are buildings normally speaking that could have been started at any point in time because this is the dollars that are spent on those buildings. So some of them are in the final stages of completion and they're spending the money on it, some of them are at the beginning stages of building. But that's where they're spending money in March of this year.

Okay, and then just last question and it may have to do with sort of your comments on sort of the larger tonnage, potentially in the mix. But if you could just address the gross margin you obviously saw close to 21% this quarter. Do you think that's sustainable or what are you looking at the gross margin?

Well, I'll be very disappointed if it doesn't grow bigger than that. I think we've got everything in place to see a continuation, not a huge continuation but a modest continuation of improving gross margins.

The next question comes from the line of Jon Braatz.

Just a follow-up. Kathy, I see, that your tax rate went up as you weren't able to take advantage of some tax credits and also you didn't qualify for the production activity tax credit. Is that the accelerated depreciation that you missed out on?

Yes, it is, Jon.

Okay, all right. And then secondly, I assume tax rate goes back to normal and the remaining 3 quarters, which is right around 37% or something to that effect?

That's correct. We're anticipating it would be around 37% and then always looking, waiting for the government to possibly approve the R&D credit, if which it could lower that to 36%.

The mix, however, will have to include what we just furnished, which is right at 40%. So the net, the mix for the year is probably going to be more like 38% or 37.5%.

[ Operator Instructions] We have a question from the line of Joe Mondillo.

Norman, I guess had a one quick question. First off, do you have the backlog at the and of 2011?

Yes, I do. One moment here. The backlog at the end of 2011 was $43,993,763.

Okay, and then I guess just looking at the backlog, so the backlog was up 20% year-over-year. And that's roughly, you should realize all of that backlog within the quarter. Having said that, and the fact that you continue to seem to receive solid orders continued through April, which is essentially would be the entire second quarter. Are we expecting -- could we be expecting a 20% year-over-year top line growth in the second quarter?

That's pretty big growth.

Because I mean, essentially -- if the fact...

Here's the only problem. I've got to hire people to do that. And I am hiring people as fast as we can. However, our unemployment in Oklahoma right now is sitting at 5.4%. So you're getting down into a group of people that aren't very much enthusiastic about working and in some cases, aren't really qualified to work. And so we're not able to just hire people because we're trying to hire them. We're having some difficulty, not big difficulty, I'm not saying that, but we cannot just ramp the place up as fast as we might, and that would be the primary reason we wouldn't be able to do 20% over. And the other thing is I don't want to just take a bubble and squash it real quickly, if it isn't going to be followed on by additional orders. And that's not to say I don't think that additional orders are coming. I just don’t feel real comfortable in this economic environment to say that they definitely are. But if it's because we're taking the business from other people, then I see no reason why we shouldn't continue to do so.

Okay, and then just one more question. In terms of the first quarter, sort of the upper earning leverage that you saw, it seems a little weak considering you saw the improvement in the gross margin, the top line grew by 8%, but SG&A seem to be very bloated compared to last year, as a percent of sales, the SG&A was very comparable. So you didn't get the leverage down -- fully down to the bottom line. You saw top line grow 8%, EPS grow just 2%. So could you comment on that? And should that improve throughout the year and why did that -- why didn't you get that the leverage there?

To some degree, that will improve. One of the things that we had was profit-sharing expenses went up on it. And the other thing is that we have replenished some of our warranty throughout the things we had in warranty and everything. So we've improved some of our reserves and everything to it.

Okay, and so compared -- you do that on annual basis though, right? So was the warranty expense higher than last year for some reason?

Yes, it was. What happened to us with new products, you always take a chance that you're going to have some problems and we did have 2 problems. And to that, you might say that we did a recall. We sent people out in vehicles to go to those job sites and do some work. One of them was a manufacturing design -- manufacturing problem, a quality issue, if you will. On one side of the street, the people doing the work built the product correctly. On the other side, they did not. And so we had to go correct that. And the other thing was an engineering, a minor engineering error that we didn't want to leave out there. Both of these were connected to heating, and we didn't want to leave somebody having problems with their heating system. So we did spend an unusual amount of money. Those things are all behind us now. And so the product is basically considering that we redesigned all the product. It was pretty trouble-free and it's kind of like where they tell you don't buy a brand new, the first of the new cars because it's going to have some problems. Well, that holds true in air conditioners, too. There are some potential problems on the brand new product as manufacturing gives everything under way. And so we did have a little bit more on warranty costs than would be normal.

And there are no more questions in queue.

Okay. Well, thank you for coming with us to talk things about the first quarter of 2012. We're looking forward to, as we've said, an even more promising fall when we have it in -- with the August for the second quarter. We're optimistic that we will bring you even better news. And thank you for staying with us and being our stockholders and being part of our operation. Thanks. Goodbye.

This concludes today's conference call. You may now disconnect your lines.