AAON, INC. (NASDAQ-AAON), today announced its results for the third quarter of 2020.
Financial Highlights: Three Months Ended September 30,   %       Nine Months Ended September 30,   %
  2020   2019   Change       2020   2019   Change
                           
  (in thousands, except share and per share data)       (in thousands, except share and per share data)
Net sales $ 134,772     $ 113,500     18.7   %       $ 397,851     $ 346,759     14.7 %
Gross profit 40,848     27,410     49.0   %       121,926     83,044     46.8 %
Gross profit % 30.3 %   24.1 %           30.6 %   23.9 %    
Selling, general and admin. expenses $ 14,716     $ 12,374     18.9   %       $ 45,869     $ 38,963     17.7 %
SG&A % 10.9 %   10.9 %           11.5 %   11.2 %    
Net income 20,460     14,290     43.2   %       60,117     36,438     65.0 %
Net income % 15.2 %   12.6 %           15.1 %   10.5 %    
Effective Tax Rate 21.8 %   4.9 %           21.1 %   16.8 %    
Earnings per diluted share $ 0.38     $ 0.26     46.2   %       $ 1.14     $ 0.69     65.2 %
Diluted average shares 53,151,295     52,722,127     0.8   %       52,955,049     52,624,583     0.6 %
                           
  September 30,   December 31,   %                
  2020   2019   Change                
                           
  (in thousands)                    
Backlog $ 84,885     $ 142,747     (40.5 ) %                
Cash & cash equivalents & restricted cash 78,601     44,373     77.1   %                
Total current liabilities 61,506     56,028     9.8   %                

Gary Fields, CEO, said "We are pleased to report that our net sales for the third quarter were an all-time record for any quarter in our Company’s history.  I am especially proud we achieved these results despite a slow start to the quarter due to a planned maintenance shutdown at our Tulsa facilities during the beginning of July. In addition, the continued challenges presented by the COVID-19 pandemic resulted in higher medical expenses.  Our third quarter results demonstrate the ongoing progress in our transition from entrepreneurial leadership to a collaborative team-based management approach and validate our Company’s capability to produce great results even through challenging times.  It should also be noted that the record sales along with favorable raw material costs and improved productivity had a significant impact on our gross profit, which increased to 30.3% from 24.1% for the corresponding quarter a year ago."

Mr. Fields continued, "The outlook for 2021 continues to present a lot of uncertainty.  The Architecture Billings Index has been down for several months, indicating a decline in construction, which may start to impact the new nonresidential construction market in late 2020.  Although construction may decline, our equipment is uniquely positioned to address COVID challenges by providing heightened filtration and sanitation through the use of MERV 13 filters, UV lights and bi-polar ionization installed in the factory.  We are beginning to see increases in raw materials costs, which we are offsetting in part with our previously announced price increase, which will be effective January 2021.  With approximately 50% of our total sales already represented by the replacement market, we are confident of our ability to grow our market share in the replacement market while we continue to pursue opportunities in the new construction market.  With our improved lead times, we have been able to continue our planned reduction of our backlog to a more manageable level and we believe this will also allow our order intake to stay consistent but do not see significant growth opportunities in the near term."

Mr. Fields added "Our financial condition remains strong as evidenced by our current ratio of 3.7:1 at September 30, 2020.   We had unrestricted cash and cash equivalents of $70.6 million as of September 30, 2020. Our capital expenditures during the nine months ended September 30, 2020 were $49.0 million, as compared to $30.8 million for the same period a year ago, and we anticipate our full-year 2020 capital expenditures will total approximately $73.2 million, with $41.3 million directed to our new facility in Longview Texas."

Mr. Fields concluded, "Our expansion project at our Longview, Texas facility is nearing completion and the new building is expected to be operational by January 2021.  This project will not only add 220,000 square feet of additional capacity to the Longview facility, but will also create additional space and capacity at our Tulsa facility for future growth potential."

The Company will host a conference call today at 4:15 P.M. (Eastern Time) to discuss the third quarter 2020 results. To participate, call 1-833-634-8218 (code 1233199); or, for rebroadcast available through November 12, 2020, call 1-855-859-2056 (code 1233199).

About AAONAAON, 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 StatementsCertain statements in this news release may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933. Statements regarding future prospects and developments are based upon current expectations and involve certain risks and uncertainties, including risks related to the impact of the error correction, that could cause actual results and developments to differ materially from the forward-looking statements.

Contact InformationJerry R. LevinePhone: (914) 244-0292Fax: (914) 244-0295Email: jrladvisor@yahoo.com

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
               
  (in thousands, except share and per share data)
Net sales $ 134,772     $ 113,500     $ 397,851     $ 346,759  
Cost of sales 93,924     86,090     275,925     263,715  
Gross profit 40,848     27,410     121,926     83,044  
Selling, general and administrative expenses 14,716     12,374     45,869     38,963  
Loss (gain) on disposal of assets 1     6     (61 )   296  
Income from operations 26,131     15,030     76,118     43,785  
Interest income, net 10     9     90     49  
Other income (expense), net 15     (7 )   20     (16 )
Income before taxes 26,156     15,032     76,228     43,818  
Income tax provision 5,696     742     16,111     7,380  
Net income $ 20,460     $ 14,290     $ 60,117     $ 36,438  
Earnings per share:              
Basic $ 0.39     $ 0.27     $ 1.15     $ 0.70  
Diluted $ 0.38     $ 0.26     $ 1.14     $ 0.69  
Cash dividends declared per common share: $     $     $ 0.19     $ 0.16  
Weighted average shares outstanding:              
Basic 52,260,551     52,111,444     52,174,705     52,086,209  
Diluted 53,151,295     52,722,127     52,955,049     52,624,583  
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
  September 30, 2020   December 31, 2019
       
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 70,603     $ 26,797  
Restricted cash 7,998     17,576  
Accounts receivable, net of allowance for credit losses of $546 and $353, respectively 62,195     67,399  
Income tax receivable 3,914     772  
Note receivable 29     29  
Inventories, net 78,819     73,601  
Prepaid expenses and other 1,973     1,375  
Total current assets 225,531     187,549  
Property, plant and equipment:      
Land 3,804     3,274  
Buildings 115,600     101,113  
Machinery and equipment 267,763     236,087  
Furniture and fixtures 18,342     16,862  
Total property, plant and equipment 405,509     357,336  
Less:  Accumulated depreciation 196,631     179,242  
Property, plant and equipment, net 208,878     178,094  
Intangible assets, net 97     272  
Goodwill 3,229     3,229  
Right of use assets 1,618     1,683  
Note receivable 560     597  
Total assets $ 439,913     $ 371,424  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 16,038     11,759  
Accrued liabilities 45,468     44,269  
Total current liabilities 61,506     56,028  
Deferred tax liabilities 22,973     15,297  
Other long-term liabilities 4,191     3,639  
New market tax credit obligation 6,351     6,320  
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, 52,264,801 and 52,078,515 issued and outstanding at September 30, 2020 and December 31, 2019, respectively 209     208  
Additional paid-in capital 8,175     3,631  
Retained earnings 336,508     286,301  
Total stockholders' equity 344,892     290,140  
Total liabilities and stockholders' equity $ 439,913     $ 371,424  
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
  Nine Months Ended September 30,
  2020   2019
       
Operating Activities (in thousands)
Net income $ 60,117     $ 36,438  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 18,971     17,627  
Amortization of debt issuance cost 31      
Provision for losses on accounts receivable, net of adjustments 193     91  
Provision for excess and obsolete inventories 1,776     1,003  
Share-based compensation 8,546     9,854  
(Gain) loss on disposition of assets (61 )   296  
Foreign currency transaction loss (gain) 18     (17 )
Interest income on note receivable (19 )   (19 )
Deferred income taxes 7,676     3,614  
Changes in assets and liabilities:      
Accounts receivable 5,011     (2,096 )
Income taxes (3,142 )   2,283  
Inventories (6,994 )   (4,014 )
Prepaid expenses and other (598 )   (513 )
Accounts payable 3,654     782  
Deferred revenue 1,128     263  
Accrued liabilities 688     4,991  
Net cash provided by operating activities 96,995     70,583  
Investing Activities      
Capital expenditures (48,955 )   (30,831 )
Proceeds from sale of property, plant and equipment 61     68  
Investment in certificates of deposits     (6,000 )
Maturities of certificates of deposits     6,000  
Principal payments from note receivable 38     39  
Net cash used in investing activities (48,856 )   (30,724 )
Financing Activities      
Stock options exercised 18,519     11,283  
Repurchase of stock (21,390 )   (15,437 )
Employee taxes paid by withholding shares (1,130 )   (1,023 )
Cash dividends paid to stockholders (9,910 )   (8,303 )
Net cash used in financing activities (13,911 )   (13,480 )
Net increase in cash, cash equivalents and restricted cash 34,228     26,379  
Cash, cash equivalents and restricted cash, beginning of period 44,373     1,994  
Cash, cash equivalents and restricted cash, end of period $ 78,601     $ 28,373  

 

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