Tulsa World: Frugality pays off: Avoiding debt looks smart for area firms

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Frugality pays off: Avoiding debt looks smart for area firms

Norm Asbjornson, CEO of AAON Inc., stands inside the company's west Tulsa plant as a climate control unit is moved by crane to a trolley. MICHAEL WYKE/Tulsa World

By KYLE ARNOLD World Staff Writer
Published: 3/22/2009 3:33 AM
Last Modified: 3/22/2009 4:50 AM

Norman Asbjornson has taken plenty of criticism over the years for the growth plan of his company, AAON Inc.

Since purchasing the enterprise in 1987, the president and CEO has refused to leverage his company by taking out the same kind of massive loans that fueled the economic boom of the last 20 years.

Asbjornson said some people urged him to use the company's profitability to grow and buy other businesses.

"We had some debt when we bought the company, and it just ate at me," said the 73-year-old Asbjornson.

AAON is a maker of industrial air-conditioning and heating units with more than 1,000 employees at its Tulsa headquarters and plant. In 2008, the company recorded a record profit of $28.6 million while many publicly traded firms were depreciating assets and writing down debt that led to millions in losses.

Asbjornson partially credits his company's strong performance to its debt-free policy.

Outfits such as AAON that exercised frugality and cautious growth during the boom years are now reaping the rewards as debt drags down hundreds of other companies nationwide.

Electronics retailer Circuit City Stores Inc. filed bankruptcy last year, claiming $2.32 billion in debt. Struggling automaker General Motors Corp. has needed government help under the weight of about $35 billion in debt.

In a time when money is difficult to find, companies with capital hold an advantage.

Nationwide, a credit crisis is prompting banks to tighten lending standards and scrutinize companies with high debt levels.

Asbjornson proudly points out that his company has no long-term debt, even during an expansion that will add 1,000 workers to the Tulsa factory in the next few years. The company has between $2 million and $3 million in revolving credit debt that it incurred for a recent equipment purchase, but AAON plans to pay that off during the coming months.

By not leveraging the business, AAON has also been more competitive in the marketplace.

"Other companies have to raise prices to pay for interest on loans," Asbjornson said. "That's a cost on our product we just don't have to pay."

Oseco USA in Broken Arrow has been essentially debt-free since it was purchased by a British holding company 10 years ago, said president Brian Sanderlin.

"Any cash that we would need we could get from our parent company," he said. "But we usually just don't buy anything that we can't pay for."

But it hasn't stopped the company from expanding, Sanderlin said. Oseco, with 68 employees, has spent about $2 million on new equipment during the last two years.

A small manufacturer, Renfro and Associates Inc. in Tulsa has carried minimal debt during its 30 years in existence, the owner says.

Even when the company had to pay for a new machine last year, owner and president Mike Renfro decided to get a loan for a portion of the costs. The company paid for the machine in just a few months.

"If we want to do something and we know we have the money, then we know we can do it," Renfro said.

The frugal philosophy helped his oil-dependent business through the bust of the early 1980s.

Renfro and Associates' only other long-term loan was for its current 13,000-square-foot headquarters and factory. That was more than 12 years ago.

Renfro said he has seen several local manufacturers struggle with debt in recent months because of expansion. As business slows during the recession, it's often to pay for aggressive expansion projects that depended on quick growth.

For Renfro, the frugal philosophy is born out of a survival instinct, not being overly cautious.

"I grew up really poor and I don't want to go back," he said. "We've had a certain degree of success here and built this business from the ground up, and I don't want to lose it."

Kyle Arnold 581-8380
kyle.arnold@tulsaworld.com By KYLE ARNOLD World Staff Writer

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	Report Comment Just a country boy, North Okmulgee County (3/22/2009 8:11:51 AM) Seems like the govermnet could learn a leason here.
	Report Comment notyourfriend, (3/22/2009 10:12:45 AM) These are the people that I wish would run for elected office.
	Report Comment Mar, Tulsa (3/22/2009 11:07:10 AM) notyourfriend, no way, that wouldn't work. These business owners have too much common sense. We can't have that in our policitians. :)
	Report Comment Aggie, (3/22/2009 5:14:09 PM) We are the ones who elect the crooks who make the promises to spend someone else's money for our benefit. Nobody wants to give up his own place at the government trough; just the other guy. Every time one of your elected officials brags about bringing home the bacon, just remember that all the other politicians in every other state are doing exactly the same. That is how we spend so much money and get wasteful projects and fraud in return. Government cannot create wealth; it can only confiscate it from citizens.
	Report Comment Just a country boy, North Okmulgee County (3/22/2009 7:36:43 PM) So true Aggie.

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