Good day and welcome to today’s AAON Incorporated second quarter earnings performance conference call. Just as a reminder, this call is being recorded. At this time, I would like to turn the call over to Mr. Norman Asbjornson. Please go ahead, sir.

Good afternoon and welcome to AAON’s second quarter report. With me is Kathy Sheffield, but before we embark upon this I’d like to read the forward-looking disclaimer to you. 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 Securities and Exchange Commission filings including the annual report on Form 10-K and the quarterly report on Form 10-Q. Again thank you and I will turn it over to Kathy Sheffield our Vice President and in charge of finance. Thank you.

Good Afternoon and welcome to our second quarter conference call. I’d like to begin today by discussing the operating results for the three months ended June 30 compared to the three months ended June 30 2007. Revenues were up 6% to $74.8 million from $70.8 million. The increase in the sales was attributable to an increase in our volume, our diversified product mix, an excellent response to many of our new and redesigned products and also to price increases. Gross profit increased 15% to $18 million or 24.1% of sales from $15.6 million or 22% of sales. The increase in the gross profit was a result of higher sales, our price increases and also production in labor efficiencies. Selling, general and administrative expenses increased for the second quarter by 15% or $6.1 million or 8.2% of sales from $5.3 million or 7.4% of sales. The increase in the SG&A was primarily related to an increase in selling related expenses, warranty expense related to the higher increase sales; profit sharing, that’s also related to increased net income and an overall increase in general and administrative expenses. Our operating income increased 15% to $11.9 million compared to 15.9% of sales from $10.3 million or 14.6% of sales. Net income increased to $7.8 million or 10.4% of sales from $6.9 million or 9.7% of sales. The increase in the net income resulted from our higher sales volumes and improved productivity. Our diluted EPS was $0.43 per share versus $0.36 per share compared to the same quarter last year. Our earnings per share for the three months were based 18,145,000 shares compared to 19,336,000 shares in the same quarter a year ago. Moving now to the six months results revenues were up 8% to $140.2 million from $129.5 million. Gross profit increased 7% to…

We are very pleased with the sales performance we’ve had. The economy is a little bit soft in the commercial end. It has been for most of the year and doesn’t have any defined direction at this point whether it’s going to get stronger or not, but it appears that it’s pretty stable at this point. The energy issue has become more and more important and we have done a lot of things to address energy in a positive fashion and it’s helped our sales effort. Probably the one that is more changed than anything though is because of Montreal Protocol which the U.S. is adhering to and the things out of our older type of refrigerant by the first of January 2010 and with a new more environmentally friendly refrigerant called our 410. There’s been a dramatic switch over to 410 by all our customer base and so there has been a bolt of benefit and the problem here the benefit being that we were totally ready for it and therefore probably got some sales because we were ready for it. The negative being of course it’s a massive change in engineering on every product we use as refrigerant not because we haven’t done the engineering, we have but it’s just the conversion from largely using one kind of refrigerant to largely using the other and the change in some of the componentry that had to change to make that happen. So we are very pleased that it has pretty much happened in AAON and we are rapidly getting to a point where only our 410 refrigerant is being bought by our customers. We continue to have growth in some of our new product offerings, some of those are in the split system market out of our Long due…

(Operator instructions) And first, we will hear from Jon from Kansas City Capital. Jon Braatz – Kansas City Capital: Good afternoon, Norman, Kathy.

Good afternoon.

Hi. Jon Braatz – Kansas City Capital: There were a number of things that you talked about that had an impact on your margins on the quarter. The mix, some productivity improvements and so on, I am trying to get a better handle on what maybe more permanent and long lasting, obviously mix can shift but what do you see out there in terms of heading more permanent increase in type of gross margins. How sustainable are these margins I guess?

I think we’re probably about where we might have a chance to sustain and I don’t think there is a lot of upside left. The productivity improvements I think are ones that will stay with us. That has happened without any special things going on, I guess it’s improvements we’ve made and methods that we do things and the improvements and the machinery to then with and education of our people and improvements of that nature, so probably pretty solid. The biggest unknowing in this whole thing has to do back with the material side of it. We’ve been able to manage that reasonably well with our price increases this past year to where we may have lied a little bit and we may have napped and picked it up with our labor improvements is the way it kind of looks, but it’s definitely still with us and we’re still going to have to be going forward with fairly significant, fairly regular, price increases as we have, and maybe even increasing the size of the them or may be increasing the frequency of them. Because as I said we have been notified of a component cost not steel or not copper nor aluminum but some of the components we use are some fairly significant increases about to fall on us right now and they have been all year but they are not being any less now, that are being a greater percentages. Jon Braatz – Kansas City Capital: How much do you anticipate prices might have to be raised in the subsequent months here to offset that and do you think they’ll continue to be a little bit of lag here or how proactive are you going to be on passing those cost increases through?

We just put through a cost increase, the last one was affective the first part of June, and if it looks like this we are going to have to have another one maintained at about the next 60 days, we are debating about the magnitude of it right now, we are collecting our data as to how much we are going to have to have and. So I’m a little premature to talk, be a minimum of 3% might be up to 5%. Jon Braatz – Kansas City Capital: Will some of those cost increase that are coming, will that influence the profitability on some of the orders that are in the backlog.

Obviously the cost increases that come along are going against it, already predetermine price on the product. So there is going to affect it. We’ve had an improved situation from that last price increase and if you were to draw two curves they are going to cross here someplace, exactly where I don’t know, but we’ve got a little more costs price increase than what we’ve used up, again costs increases right as up this moment in time, but that’s obviously switching everyday that goes by and we will be running behind and our costs increases that we put in back in may want be adequate for what we’ll be shipping here in another month or so and then we will have another one going in, and it will go through the similar type of the cycle. We had done well, as you can see from our numbers that are holding our own, but not gaining great grounds, but considering that it is a pretty competitive environment we are living in w are very pleased with it. Jon Braatz – Kansas City Capital: Okay, thank you.

And next, we’ll hear from Frank from Robins Group. Frank Magdlen – The Robins Group: Congratulations, Norm, a very nice quarter on you and your entire staff.

Thank you, Frank. Frank Magdlen – The Robins Group: Can you expand on Canada a little bit, I’m a little bit lost now as to what type of revenue numbers your really expecting to come out of Canada?

0.5 million to 700,000 a month. Frank Magdlen – The Robins Group: Okay and that’s probably for the balance of this year and maybe what did you do in the first half?

We did a little over $3 million in the first half. Frank Magdlen – The Robins Group: And Kathy, can you help us a little bit, with what we aren’t to expect in round numbers for share account going forward with the repurchases in the weighted average and sort of what beyond me?

Okay, well it’s kind of hard number to give an exact number to Frank, because there is so many things that feed into that number based upon the buyback stock option exercises the market price, but if were to through a dart it we would guess approximately $18 million by the end of the year. Frank Magdlen – The Robins Group: By the end of the year. It's done a little bit from the current quarter for the third and fourth quarters now.

Yes. Frank Magdlen – The Robins Group: And back to Canada, Norm. I would imagine having say a 0.5 million to 700,000 a month is a little bit below your expectations, given you can breakeven at that level?

On last months run-rate we lost about $20,000, so very close to break even, not quite. Obviously the overhead states becoming more and more significantly, we’ve gotten the price up to where, if we can get a little bit more volume will make money. The whole question is how much volume can we get at price level we have to have to make money and right now it seems like we can get about somewhere between 0.5 million and three quarter of a million and that seems to be about where we are running. It looks real good until you get picking up the overhead part of that company and then it doesn’t looks so good. If it gets up, below three quarters of a million start four million, and we hold the price relative to our material and labor cost on the factory and where it is now. We are definitely be making money, if we can’t do that and it looks like it’s getting sicker, worst case we’ll have to close it done. So, we’re sitting there wondering where it’s going ourselves, but we know what we have to do both ways. Frank Magdlen – The Robins Group: And Kathy, the shares repurchased in the quarter and (b) while Kathy is looking at that, Norm, I took your comment on the backlog, do you mean that the lead time to shift something and bigger, bigger products now is less than it used to be so we should expect you to work with a, say a little small backlog going forward?

With the equipment we’ve been buying and the things we’ve been changing, we didn’t have that occur to this year. If the customer wanted it shipped in six weeks, we shipped it in six weeks and so, consequently we didn’t get the backlog build up because of our inability to ship. We were able to ship when they wanted it which from a standpoint of the healthy company is obviously more attracting because the customer after, will satisfy hem ultimately, we’ll give them more business them even if we’ve always a little bit late with our shipments. Frank Magdlen – The Robins Group: Okay.

On the share buyback, Frank. On the open market in the second quarter we purchase 697,358 shares, however if you add our 401K buyback program and our director buyback program the total ended up being abut 742,000. Frank Magdlen – The Robins Group: All right, and how much money on that 14.4?

14, for the quarter. Yes, well over 15. Frank Magdlen – The Robins Group: All right, thank you very much and we are looking forward to your success.

Thank you.

Good afternoon Norm, Kathy Sidoti & Company: Good afternoon Norm, Kathy

Hi, Joe.

Hi, Joe. Joe Mondello – Sidoti & Company: , :

Well we are fortunate Joe, I’ve been in the industry an awful long time and the industry acted very immaterially for many, many years. It's now acting like we got more well informed business people running out competitors because they all are raising prices like we are. So their situation is not a great deal different than ours and we are all kind of going up hand and glow, because of the necessity to have it and we all see it very similarly as it appears and therefore we aren’t handicapped by the fact that we have to work with our price. So I don’t see that as being an issue, in the past may times people didn’t recognized that they were getting in trouble until after they were in big trouble and that doesn’t appeared to be happening any more. The thing that we think is going to be our big help to improve our competitive situation is what we are doing with energy and with better quality product. We are making some very significant scribes particularly in the energy area and while that’s on everybody play, we believe we are out running the competition in that area at this point in times. We feel that our ability to take market share I going to be enhanced as we go forward. Joe Mondello – Sidoti & Company:

We analyzed everything we were doing about how could we do it better, and we found a number of ways to do things better and that’s what gave us the productivity increase which means we have dint need the people as madly, so the people shortage or the peoples ability to grow from people did not really heard us very much, it’s basically been the market conditions that’s held us where we are volume wise. Joe Mondello – Sidoti & Company: And Kathy, your gross margin increased about 200 basis points. Do you have any idea of how much that was affected or how much volume and price increases and product mix, if you could give a percentage on each of those out of the 200 basis points? Do you any idea to you how much that breaks up?

I’m sorry, but I don’t have any numbers to break it down for you. Joe Mondello – Sidoti & Company: Okay. How about the 4/4 products anything new there or any increased interest?

No, we put out a preproduction run of the whole quantity of three for about 50 sum thousand dollars so far and we’ve continue to finish off and get everything better for manufacturing of it. To the point that we have a trailer with three products, three new products on it running in the United States at the present time from seller city to city and products we’re showing on there one of them is the 4/4 unit, which seems to be getting a very good reception. So, we think if that’s going to be very good, one of the catches is as we don’t clearly have any production line set up for it yet, if fact its going to be put up in the new building. When we do that later this year we can’t built it however, but not in a really good environment to build, not in a real high productivity methodology because it want be on a line that’s it’s designed to be built on. The other two products that are on the trailer is a small tonnage competitively priced water chiller built in our Longview facility and then the third one is what I spoke of earlier the new 50 or 60 through 30 ton Roof Top unit with impaling the tonnage form and the direct dry bowler and a whole a lot of other new innovations in it. Those three items are on the trailer going from City to City as we speak. Joe Mondello – Sidoti & Company: Finally how much does your new products make up, say like last three years the new products are – however you track that, a makeup of our total sales?

Well we’ve got several different ones to talk about and it depends upon what timeframe we are getting in. It is user a three year thing that will be shorter time frame that some of the new products, some of them have been out there four years now or four or more now, but within the three year time frame we’ll probably be building about 30% of our dollar volume in those new products right now. Joe Mondello – Sidoti & Company: Okay, great. All right, thanks a lot guys.

Thank you.

And next we’ll hear from Graeme from Bares Capital. Graeme Rein – Bares Capital: Congratulations, Norm.

Thank you. Graeme Rein – Bares Capital: Just looking at your cash flow generation. Its very strong obviously, could have been stronger with the AR hadn’t have increase, is there anything unusual going on with the AR?

No, Graeme, they really isn’t. The main issue with the AR being higher is just because of the volume that we had in June.

Volume, of course, tells us how much money we have to put in reserve for bad debts and reserve for well warranty and all of the other issues that we have to be concerned with and it doesn’t necessarily reflect that we’ve had the problems, because the problems are the anticipated problems that we put it in, but that surge of orders we’ve had, that we’ve produced basically in June drove it up. Graeme Rein – Bares Capital: Okay, that makes sense. And then, Norm how does the order growth look in July and the first part of August are you still comfortable with how that’s progressing?

We started out as I’ve mentioned that in the first quarter that we had kind of a weak order input and has modestly improved since that time and still appears to be modestly better than it was a year ago, whether it’s more than our price increases very much, it’s not a lot more than the price increases, but it does appear to be a little bit more than what our price increases would reflect from year-to-year. So, at this point in time, it looks pretty solid where we are. It doesn’t us show a sign of going up and looking at some of our competitors who have had a little bit of the downturn that it appears we are doing well in the marketplace. Graeme Rein – Bares Capital: Okay and then the last thing, I know you’ve said you’re sticking with the $7 million or $10 in capital spending for the remainder of the year. What about next year? I mean how much of capital is required to kind of complete this renovation or expansion. Just trying to get a feel for what next year’s CapEx might look like?

Well, from an equipment standpoint, it’s going to be modest just like it’s been very modest this year and as I said we have the equipment now we are on a run rate, we could manufacture $400 million a year, with what we’ve got at the present time. So it’s going to be very modest whatever we spend on the equipment next year it will again comeback to weather our confidence level of what's going forward, we’ll tell us we should go ahead and straighten out some of our building needs or whether we shouldn’t. We are in a point weather if we felt it was necessary we could run on a very low CapEx if we had to, f we think that the things still look pretty good and things are going to go forward fairly well, we’ve got to build another section of our building up, because we’re stressed out pretty well on the warehouse for purchase material, we’ve got a lot of that stuff in fact sitting outside as a matter of fact and that we don’t feel comfortable with that. So that would be another thing that we would like to get underway, but it will be depended upon how we see the future of the year. Net result to answer your question, the CapEx won't be anymore than it was this year, even on the optimistic side and it could be less by quite a bit. Graeme Rein – Bares Capital: Okay and then one more thing for you. Given your strong balance sheet, you guys are as far as innovation probably a ahead of most of most of the competition and given your small-size it seems like you might be a logical acquisition target for the larger player, is there been any activity on that front and what’s kind of your interest level in having those types of discussions?

Well, I’m paid to look out for the interest of the stock holders, and if somebody comes along and offered what appeared to be a very good price for it, they would be able to own it. If they come along and look for a bargain there are going to get it, and so far there have been a lot of people who want to talk to us, but they are all bargain vendors and so being a major stockholder I’m not about to want to give my money away and I don’t want to give your money away, and that’s kind of where it is. If they really get serious, and want to pay what this company’s worth and they will get the company as for us, but if they think that there is bargain here, because everything we’re doing is long range and we have a lot of very, very advanced things going on in this company far ahead I believe, what a lot of those people are doing and I’m not going to give all that away, because we’ve spent a lot money getting the lot of it. Graeme Rein – Bares Capital: All right, okay, great, thanks a lot, Norm.

Shaun Nicholson – Kennedy Capital: Hi, how are you?

Very good, thank you. Shaun Nicholson – Kennedy Capital: Just one question, I was talking to few people in the retail industry about Wal-Mart and you mentioned energy as your focus and according to them Wal-Mart is extremely serious about that almost versus the cost of putting potential units on their buildings, they want more energy efficient units. Have you seen anything on that end?

Well it’s kind of the funny thing because we raised our price more than Wal-Mart wanted to pay for. We did loose their day-to-day business for the most part and yet on the six prototype stores which have been built for their very, very concerned energy as you say, we build them all. We are right now getting ready to build some more foam. We have meetings with them about this, because we are from an energy standpoint more capable apparently in their opinion than anybody else could do what they think needs to be done, so they’re buying that from us which ultimately wouldn’t say that if somebody else can copy what we’re doing and do it cheaper then you won’t get the business that they choose to go forward with which appears they are going to go. If nobody else can figure out how to do it for what we can afford to do it for then we will get the business, so that’s where it is at this point in time. We’ve built 60% of normal very advanced energy saving ideas that they’ve been wanting to do. So, in that area, as I say we are very advanced in knowing what to do with energy. We have small, let’s say fast food store that we’ve done for one of the big national fast food people and we’re having a hard time coming to grips with it, but we have a lot of the energy saving going on at the meter. Every month it gets metered and they check how many KW they were using and it’s very, very good and so it’s not just the big stores and big things that we’re getting ourselves lined up for. Some of this is brand new to us, it’s brand new to the industry and we’re just getting organized really to go after it very well at this point in time. If people really want to get serious about energy, we’re there with them and we can do something for them. Shaun Nicholson – Kennedy Capital: Great, thanks for the color.

Corey McCullum – GMP Capital: Good afternoon, Norm and Kathy. Congratulations on another strong quarter.

Thank you.

Thank you, Cory. Corey McCullum – GMP Capital: Just two housekeeping questions here and one would just be if you have a backlog number and then two if there is a breakdown on your top-line growth here between price and units for the past quarter, I’ll hang up and listen.

Yes, I gave the backlog here a little bit ago, its $67,110,495 million as of June 30, okay and that’s for all three facilities. If we were to break it down, the backlog is pretty much steady in the Tulsa facility from the year-ago; the backlog is up from the year-ago and now it’s about balanced out on the Longview facility and that all the short fall in backlog is connected to our Canadian facility and by that our short fall what I’m talking about, I also mentioned that we’re down by $10 million in backlog for last year and virtually all of that that’s in backlog is in Canadian facility. Corey McCullum – GMP Capital: Thank you for the clarification there and then any color you can give on the breakdown in the top-line growth?

Yes, I would say about somewhere around 75% of it is price differentials and 25% of it is real growth. Corey McCullum – GMP Capital: Okay, thank you.

And it appears we have no further questions. I’d like to turn it back to Mr. Asbjornson for closing remarks or comments.

Okay. Well, I thank you very much for being interested and joining me on this conference call. Kathy and I appreciate your interest. We don’t see any real bumps in the road as far as you probably are familiar with. The business environment well it’s a kind of rocky right now. It doesn’t appear to be heading one way or another that we can notice and as I expressed earlier, my big long range concern has to do with this possibility of the United States basically being unionized, that worries me tremendously, but beyond that we have optimism that for sure we’re going to do like we said and we’re going to have a strong third quarter and as far as we can see, it will be a record breaking year for us in both volume and bottom line. Kathy?

Yes, thank you for attending the call today and we’ll speak to you again in November when we have our third quarter results.

Okay, thank you people.

And that does conclude today’s conference. We do thank you for your participation and ask that you enjoy the remainder of your day.