AAON Reports Record Sales for the Second Quarter of 2021 and a Robust Increase in Backlog

| Source: AAON, Inc. AAON, Inc.

TULSA, Okla., Aug. 05, 2021 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ-AAON), today announced its results for the second quarter of 2021.

Financial Highlights:Three Months Ended 
 June 30,		 %   Six Months Ended 
 June 30,		 %
 2021 2020 Change   2021 2020 Change
 (in thousands, except share and per share data)   (in thousands, except share and per share data)
Net sales$143,876  $125,596  14.6%   $259,664  $263,079  (1.3)%
Gross profit42,107  38,131  10.4%   75,264  81,078  (7.2)%
Gross profit %29.3% 30.4%     29.0% 30.8%  
Selling, general and admin. expenses$16,895  $15,939  6.0%   $31,591  $31,153  1.4%
SG&A %11.7% 12.7%     12.2% 11.8%  
Net income20,615  17,804  15.8%   36,991  39,657  (6.7)%
Net income %14.3% 14.2%     14.2% 15.1%  
Effective Tax Rate18.3% 20.0%     15.4% 20.8%  
Earnings per diluted share$0.38  $0.34  11.8%   $0.69  $0.75  (8.0)%
Diluted average shares53,603,932  52,750,401  1.6%   53,736,134  52,885,491  1.6%
              
EBITDA, a non-GAAP measure$32,777  $28,562  14.8%   $58,653  $62,332  (5.9)%
              
 June 30, June 30,%        
 2021 2020 Change        
 (in thousands)          
Backlog$138,131  $103,508  33.4%        
Cash & cash equivalents & restricted cash112,119  70,845  58.3%        

Net sales for the three months ended June 30, 2021 increased 14.6% to an all time record high of $143.9 million from $125.6 million in the same period in 2020. The year over year increase in net sales was driven by robust replacement demand broadly across the nonresidential building market that increased our volume 24.6%. The return to historical employee attendance levels helped drive our production up year over year which led to an increase in our overall revenues even as our product mix shifted to lower priced units. The Company reported diluted EPS of $0.38, up 11.8% from $0.34 in the prior year period. The increase in EPS was driven by the higher revenue, improved productivity, lower SG&A expenses as a percent of sales and a lower tax rate, partially offset by inflationary cost pressures. The lower tax rate compared to a year ago was associated with lower corporate income tax rates in the state of Oklahoma that were signed into law during the quarter. This resulted in a one-time benefit of $0.8 million, and will also lower our effective rate starting in 2022.

The Company finished the quarter with a backlog of $138.1 million, up from $103.5 million one year ago and up from $96.7 million at the end of the first quarter of 2021. The sequential improvement in backlog reflects the improved demand that we experienced throughout the second quarter. New bookings in the quarter increased approximately 70% compared to the same period one year ago.

Gary Fields, President and CEO, stated, “Our performance in the second quarter was better than we expected. Organic sales growth of 14.6% was particularly noteworthy. Unlike much of the commercial HVAC market that faced a very easy year over year comparison due to the effects the pandemic had on the market in the second quarter of 2020, we did not face such a comparison. Our sales in the second quarter of 2020 were up year over year 5% versus the commercial market being down approximately 20%-25%. We were also pleased with our gross profit performance, especially considering the inflationary challenges of tight labor markets and increased raw material costs. We will continue to improve productivity and increase prices to counteract these cost pressures.”

Mr. Fields continued, “Looking to the second half of the year, we are optimistic sales and earnings growth will accelerate. The backlog at the end of the second quarter was up 33.4% from a year ago and 42.8% from the end of the first quarter, which positions us well. Order trends are robust and we show no sign of slowing. We are particularly optimistic considering the new construction market has yet to recover from the pandemic-related downturn. That said, we are seeing early signs of a strong recovery in new construction project planning. In addition to robust demand, we are optimistic our gross profit will continue to improve. Our disciplined pricing strategy combined with expected productivity improvements should drive higher gross and operating profits. Lastly, we continue to manage the business for the long-term as we maintain a positive outlook on the fundamentals of the company over the next several years.”

As of June 30, 2021, the Company had no debt and unrestricted cash and cash equivalents of $111.4 million, which is up from $79.0 million at the end of 2020. Capital expenditures during the first six months of 2021 were $33.2 million, as compared to $33.5 million for the same period a year ago. Rebecca Thompson, CFO, stated, “We continue to anticipate our full-year 2021 capital expenditures will total approximately $70.7 million.”

The Company will host a conference call on August 6, 2021 at 9:00 A.M. (Eastern Time) to discuss the second quarter 2021 results. To participate, call 1-888-241-0551 (code 6788945); or, for rebroadcast available through August 13, 2021, call 1-855-859-2056 (code 6788945).

About AAON
AAON, Inc. is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils and controls. Since the founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our customers. For more information, please visit www.AAON.com.

Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “should”, “will”, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general economic, market or business conditions.

Contact Information
Joseph Mondillo
Director of Investor Relations
Phone: (617) 877-6346
Email: joseph.mondillo@aaon.com



AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended 
 June 30,		 Six Months Ended 
 June 30,
 2021 2020 2021 2020
 (in thousands, except share and per share data)
Net sales$143,876  $125,596  $259,664  $263,079 
Cost of sales101,769  87,465  184,400  182,001 
Gross profit42,107  38,131  75,264  81,078 
Selling, general and administrative expenses16,895  15,939  31,591  31,153 
(Gain) loss on disposal of assets—  —  —  (62)
Income from operations25,212  22,192  43,673  49,987 
Interest (expense), income, net(4) 19  (1) 80 
Other income (expense), net39  32  56  5 
Income before taxes25,247  22,243  43,728  50,072 
Income tax provision4,632  4,439  6,737  10,415 
Net income$20,615  $17,804  $36,991  $39,657 
Earnings per share:       
Basic$0.39  $0.34  $0.71  $0.76 
Diluted$0.38  $0.34  $0.69  $0.75 
Cash dividends declared per common share:$0.19  $0.19  $0.19  $0.19 
Weighted average shares outstanding:       
Basic52,432,822  52,099,694  52,389,989  52,160,348 
Diluted53,603,932  52,750,401  53,736,134  52,885,491 



AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 June 30, 2021 December 31, 2020
Assets(in thousands, except share and per share data)
Current assets:   
Cash and cash equivalents$111,427  $79,025 
Restricted cash692  3,263 
Accounts receivable, net of allowance for credit losses of $518 and $506, respectively53,311  47,387 
Income tax receivable3,339  4,587 
Note receivable32  31 
Inventories, net87,399  82,219 
Prepaid expenses and other2,940  3,739 
Total current assets259,140  220,251 
Property, plant and equipment:   
Land5,016  4,072 
Buildings129,607  122,171 
Machinery and equipment301,964  281,266 
Furniture and fixtures20,726  18,956 
Total property, plant and equipment457,313  426,465 
Less: Accumulated depreciation217,549  203,125 
Property, plant and equipment, net239,764  223,340 
Goodwill and intangible assets, net3,229  3,267 
Right of use assets1,472  1,571 
Note receivable579  579 
Total assets$504,184  $449,008 
    
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable$21,250  $12,447 
Dividends payable9,970  — 
Accrued liabilities47,291  46,586 
Total current liabilities78,511  59,033 
Deferred tax liabilities31,071  28,324 
Other long-term liabilities4,493  4,423 
New market tax credit obligation6,383  6,363 
Commitments and contingencies   
Stockholders’ equity:   
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued—  — 
Common stock, $.004 par value, 100,000,000 shares authorized, 52,416,014 and 52,224,767 issued and outstanding at June 30, 2021 and December 31, 2020, respectively210  209 
Additional paid-in capital10,998  5,161 
Retained earnings372,518  345,495 
Total stockholders’ equity383,726  350,865 
Total liabilities and stockholders’ equity$504,184  $449,008 



AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended 
 June 30,
 2021 2020
Operating Activities(in thousands)
Net income$36,991  $39,657 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization14,924  12,340 
Amortization of debt issuance cost20  20 
Provision for credit losses on accounts receivable, net of adjustments12  76 
Provision (recoveries) for excess and obsolete inventories292  (193)
Share-based compensation5,793  5,694 
(Gain) loss on disposition of assets—  (62)
Foreign currency transaction (gain) loss(11) 30 
Interest income on note receivable(19) (12)
Deferred income taxes2,747  5,061 
Changes in assets and liabilities:   
Accounts receivable(5,936) 10,929 
Income taxes1,248  (4,382)
Inventories(5,472) (11,617)
Prepaid expenses and other799  (568)
Accounts payable10,650  2,893 
Deferred revenue574  473 
Accrued liabilities300  2,423 
Net cash provided by operating activities62,912  62,762 
Investing Activities   
Capital expenditures(33,157) (33,510)
Proceeds from sale of property, plant and equipment2  61 
Principal payments from note receivable29  25 
Net cash used in investing activities(33,126) (33,424)
Financing Activities   
Stock options exercised11,848  14,173 
Repurchase of stock(10,271) (15,937)
Employee taxes paid by withholding shares(1,532) (1,102)
Net cash provided by (used in) financing activities45  (2,866)
Net increase in cash, cash equivalents and restricted cash29,831  26,472 
Cash, cash equivalents and restricted cash, beginning of period82,288  44,373 
Cash, cash equivalents and restricted cash, end of period$112,119  $70,845 

Use of Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), an additional non-GAAP financial measure is provided and reconciled in the following table. The Company believes that this non-GAAP financial measure, when considered together with the GAAP financial measures, provides information that is useful to investors in understanding period-over-period operating results. The Company believes that this non-GAAP financial measure enhances the ability of investors to analyze the Company’s business trends and operating performance.

EBITDA
EBITDA (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund operations.

The Company defines EBITDA as net income, plus (1) depreciation and amortization, (2) interest expense (income), net and (3) income tax expense. EBITDA is not a measure of net income or cash flows as determined by GAAP.

The Company’s EBITDA measure provides additional information which may be used to better understand the Company’s operations. EBITDA is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance. EBITDA, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDA is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements.

The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) for the periods indicated:

 Three Months Ended 
 June 30,		 Six Months Ended 
 June 30,
 2021 2020 2021 2020
 (in thousands)
Net Income, a GAAP measure$20,615  $17,804  $36,991  $39,657 
Depreciation and amortization7,526  6,338  14,924  12,340 
Interest expense (income), net 4  (19)  1  (80)
Income tax expense4,632  4,439  6,737  10,415 
EBITDA, a non-GAAP measure$32,777  $28,562  $58,653  $62,332