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

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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 profit

42,107

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 income

20,615

17,804

15.8

%

36,991

39,657

(6.7

)%

Net income %

14.3

%

14.2

%

14.2

%

15.1

%

Effective Tax Rate

18.3

%

20.0

%

15.4

%

20.8

%

Earnings per diluted share

$

0.38

$

0.34

11.8

%

$

0.69

$

0.75

(8.0

)%

Diluted average shares

53,603,932

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 cash

112,119

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 sales

101,769

87,465

184,400

182,001

Gross profit

42,107

38,131

75,264

81,078

Selling, general and administrative expenses

16,895

15,939

31,591

31,153

(Gain) loss on disposal of assets

(62

)

Income from operations

25,212

22,192

43,673

49,987

Interest (expense), income, net

(4

)

19

(1

)

80

Other income (expense), net

39

32

56

5

Income before taxes

25,247

22,243

43,728

50,072

Income tax provision

4,632

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:

Basic

52,432,822

52,099,694

52,389,989

52,160,348

Diluted

53,603,932

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 cash

692

3,263

Accounts receivable, net of allowance for credit losses of $518 and $506, respectively

53,311

47,387

Income tax receivable

3,339

4,587

Note receivable

32

31

Inventories, net

87,399

82,219

Prepaid expenses and other

2,940

3,739

Total current assets

259,140

220,251

Property, plant and equipment:

Land

5,016

4,072

Buildings

129,607

122,171

Machinery and equipment

301,964

281,266

Furniture and fixtures

20,726

18,956

Total property, plant and equipment

457,313

426,465

Less: Accumulated depreciation

217,549

203,125

Property, plant and equipment, net

239,764

223,340

Goodwill and intangible assets, net

3,229

3,267

Right of use assets

1,472

1,571

Note receivable

579

579

Total assets

$

504,184

$

449,008

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

21,250

$

12,447

Dividends payable

9,970

Accrued liabilities

47,291

46,586

Total current liabilities

78,511

59,033

Deferred tax liabilities

31,071

28,324

Other long-term liabilities

4,493

4,423

New market tax credit obligation

6,383

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, respectively

210

209

Additional paid-in capital

10,998

5,161

Retained earnings

372,518

345,495

Total stockholders’ equity

383,726

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 amortization

14,924

12,340

Amortization of debt issuance cost

20

20

Provision for credit losses on accounts receivable, net of adjustments

12

76

Provision (recoveries) for excess and obsolete inventories

292

(193

)

Share-based compensation

5,793

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 taxes

2,747

5,061

Changes in assets and liabilities:

Accounts receivable

(5,936

)

10,929

Income taxes

1,248

(4,382

)

Inventories

(5,472

)

(11,617

)

Prepaid expenses and other

799

(568

)

Accounts payable

10,650

2,893

Deferred revenue

574

473

Accrued liabilities

300

2,423

Net cash provided by operating activities

62,912

62,762

Investing Activities

Capital expenditures

(33,157

)

(33,510

)

Proceeds from sale of property, plant and equipment

2

61

Principal payments from note receivable

29

25

Net cash used in investing activities

(33,126

)

(33,424

)

Financing Activities

Stock options exercised

11,848

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 activities

45

(2,866

)

Net increase in cash, cash equivalents and restricted cash

29,831

26,472

Cash, cash equivalents and restricted cash, beginning of period

82,288

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 amortization

7,526

6,338

14,924

12,340

Interest expense (income), net

4

(19

)

1

(80

)

Income tax expense

4,632

4,439

6,737

10,415

EBITDA, a non-GAAP measure

$

32,777

$

28,562

$

58,653

$

62,332


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