TULSA,
Okla., Aug. 3, 2023 /PRNewswire/ -- AAON, INC.
(NASDAQ-AAON), a provider of premier, configurable HVAC solutions
that bring long-term value to customers and owners, today announced
its results for the second quarter of 2023.
Net sales for the second quarter of 2023 increased 36.0% to a
record $284.0 million from
$208.8 million in the second quarter
of 2022. Organic volume growth contributed approximately 16.0% to
year over year growth. Volume growth reflects the efficiencies
gained from developing our workforce and lessening impacts of
supply chain disruption. Additionally, pricing comprised 20.0% of
growth.
Gross profit margin in the quarter increased to 33.1%, up 1,040
basis points from the comparable quarter in 2022. The primary
driver for the higher profit margin was better pricing along with
moderating cost inflation.
As a percent of sales, SG&A expenses increased 90 basis
points to 13.8%. The slight increase in SG&A expenses as a
percent of sales is primarily due to our profit sharing expense
that has increased due to our record earnings in the quarter.
Earnings per diluted share for the three months ended June 30, 2023, was $0.82, an increase of 173.3% from the second
quarter of 2022. The Company recognized a one-time income tax
benefit of $3.1 million from the
change in our valuation allowance during the current quarter that
contributed to the increase to net income for the period.
Financial Highlights:
|
Three Months Ended
June 30,
|
|
%
|
|
|
|
Six Months Ended
June 30,
|
|
%
|
|
2023
|
|
2022
|
|
Change
|
|
|
|
2023
|
|
2022
|
|
Change
|
|
(in thousands, except share and per share
data)
|
|
|
|
(in thousands, except share and per share
data)
|
GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
283,957
|
|
$
208,814
|
|
36.0 %
|
|
|
|
$
549,910
|
|
$
391,585
|
|
40.4 %
|
Gross profit
|
$ 94,018
|
|
$ 47,376
|
|
98.5 %
|
|
|
|
$
171,172
|
|
$ 93,440
|
|
83.2 %
|
Gross profit
margin
|
33.1 %
|
|
22.7 %
|
|
|
|
|
|
31.1 %
|
|
23.9 %
|
|
|
Operating
income
|
$ 54,740
|
|
$ 20,453
|
|
167.6 %
|
|
|
|
$ 98,946
|
|
$ 43,463
|
|
127.7 %
|
Operating
margin
|
19.3 %
|
|
9.8 %
|
|
|
|
|
|
18.0 %
|
|
11.1 %
|
|
|
Net income
|
$ 45,682
|
|
$ 15,946
|
|
186.5 %
|
|
|
|
$ 82,496
|
|
$ 34,005
|
|
142.6 %
|
Earnings per diluted
share
|
$
0.82
|
|
$
0.30
|
|
173.3 %
|
|
|
|
$
1.48
|
|
$
0.63
|
|
134.9 %
|
Diluted average
shares
|
55,646,387
|
|
53,661,876
|
|
3.7 %
|
|
|
|
55,652,332
|
|
53,944,616
|
|
3.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA1
|
$ 65,865
|
|
$ 29,897
|
|
120.3 %
|
|
|
|
$
120,459
|
|
$ 60,004
|
|
100.8 %
|
EBITDA
margin1
|
23.2 %
|
|
14.3 %
|
|
|
|
|
|
21.9 %
|
|
15.3 %
|
|
|
|
1 These are non-GAAP measures. See "Use
of Non-GAAP Financial Measures" below for reconciliation to GAAP
measures.
|
Backlog
June 30, 2023
|
|
March 31, 2023
|
|
June 30, 2022
|
(in thousands)
|
$
526,209
|
|
$
599,912
|
|
$
464,025
|
The Company finished the second quarter of 2023 with a backlog
of $526.2 million, up 13.4% from
$464.0 million a year ago, and down
from $599.9 million at the end of the
first quarter of 2023.
Gary Fields, President and CEO,
stated, "After investing in significant amounts of new
manufacturing capacity over the previous two years, production
output began to outpace bookings in the second quarter, allowing
for the size of our backlog and the length of our lead times to
start to normalize. At June 30,
2023, backlog was down 12.3% from the end of the first
quarter, ending a streak of nine straight quarters of backlog
growth. While the backlog size and lead times are still
higher than we would like them to be, we are pleased at the
progress we are making and anticipate further progress in the
second half of the year. This will enable us to be even more
competitive with bookings as well as help improve operational
efficiencies. In the quarter, we held the grand opening of
our new marketing building, in Tulsa, also known as the Exploration
Center. This facility will also help further our efforts of
taking market share. Overall, while there are pockets of
softness amongst some of our end-markets, the pipeline of projects
is solid and our sales channel remains
positive."
Mr. Fields continued, "Our sales channel has never been stronger
and our new marketing efforts will help continue to strengthen
market penetration. In the third quarter of this year, we
anticipate the sales and marketing roll out of our industry-leading
class of air-source heat pumps, appropriately referred to as ALPHA
Class. The AAON ALPHA Class was engineered to help accelerate the
widespread adoption of cleaner, more-efficient heat pump technology
– and will continue to set the standard for high-performance
air-source heat pumps in the commercial and industrial HVAC
industry."
Mr. Fields concluded, "The second quarter of 2023 was another
excellent quarter for AAON as both sales and earnings were company
records. Volume growth of 16.0% was impressive considering
the year ago comparable quarter also realized volume growth in the
double digits. As we've discussed for some time now, AAON has
been very successful in hiring and retaining employees. We've
added the additional employees needed to increase our run rate and
as more time goes by, we anticipate continued margin improvement
created from a fully trained, more experienced workforce as well as
better overhead absorption from additional production
volume."
As of June 30, 2023, the Company had cash, cash equivalents
and restricted cash of $27.7 million
and a balance of $78.5 million on the
revolving credit facility. Rebecca
Thompson, CFO, commented, "Higher earnings and collection of
customer prepayments increased our cash provided by operating
activities in the quarter to $55.1
million compared to $5.2
million in the second quarter of 2022. The closing of
our New Markets Tax Credit during the quarter generated cash of
$6.1 million and we expect to release
funds from restricted cash in the fourth quarter, which will
accelerate the payments on our revolving credit facility.
Capital expenditures in the quarter were $31.7 million due to our continuous investment at
all locations. Our balance sheet remains strong with a
current ratio of 2.8 and a leverage ratio of 0.37, creating a
strong foundation for our future growth."
Conference Call
The Company will host a conference
call and webcast today at 5:15 P.M.
ET to discuss the second quarter 2023 results and outlook.
The conference call will be accessible via dial-in for those who
wish to participate in Q&A as well as a listen-only
webcast. The dial-in is accessible at 1-877-550-1858 with the
conference ID 1754341. To access the listen-only webcast,
please register at https://app.webinar.net/q12AjXYVoQ8. On the next
business day following the call, a replay of the call will be
available on the Company's website at
https://AAON.com/Investors.
About AAON
Founded in 1988, AAON is a world leader in
HVAC solutions for commercial and industrial indoor environments.
The Company's industry-leading approach to designing and
manufacturing highly configurable equipment to meet exact needs
creates a premier ownership experience with greater efficiency,
performance and long-term value. AAON is headquartered in
Tulsa, Oklahoma, where its
world-class innovation center and testing lab allows AAON engineers
to continuously push boundaries and advance the industry. 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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in thousands, except share and per share
data)
|
Net sales
|
$
283,957
|
|
$
208,814
|
|
$
549,910
|
|
$
391,585
|
Cost of
sales
|
189,939
|
|
161,438
|
|
378,738
|
|
298,145
|
Gross profit
|
94,018
|
|
47,376
|
|
171,172
|
|
93,440
|
Selling, general and
administrative expenses
|
39,272
|
|
26,933
|
|
72,214
|
|
49,989
|
Loss (gain) on disposal
of assets
|
6
|
|
(10)
|
|
12
|
|
(12)
|
Income from
operations
|
54,740
|
|
20,453
|
|
98,946
|
|
43,463
|
Interest expense,
net
|
(1,543)
|
|
(550)
|
|
(2,693)
|
|
(740)
|
Other income,
net
|
163
|
|
220
|
|
277
|
|
241
|
Income before
taxes
|
53,360
|
|
20,123
|
|
96,530
|
|
42,964
|
Income tax
provision
|
7,678
|
|
4,177
|
|
14,034
|
|
8,959
|
Net income
|
$
45,682
|
|
$
15,946
|
|
$
82,496
|
|
$
34,005
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.84
|
|
$
0.30
|
|
$
1.52
|
|
$
0.64
|
Diluted
|
$
0.82
|
|
$
0.30
|
|
$
1.48
|
|
$
0.63
|
Cash dividends declared
per common share:
|
$
0.12
|
|
$
0.19
|
|
$
0.24
|
|
$
0.19
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
54,293,127
|
|
53,095,286
|
|
54,175,682
|
|
52,992,439
|
Diluted
|
55,646,387
|
|
53,661,876
|
|
55,652,332
|
|
53,944,616
|
|
AAON, Inc. and Subsidiaries
|
Consolidated Balance Sheets
|
(Unaudited)
|
|
June 30, 2023
|
|
December 31, 2022
|
Assets
|
(in thousands, except share and per share
data)
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
5,237
|
|
$
5,451
|
Restricted
cash
|
22,428
|
|
498
|
Accounts receivable,
net of allowance for credit losses of $306 and $477,
respectively
|
154,111
|
|
127,158
|
Income tax
receivable
|
2,699
|
|
—
|
Inventories,
net
|
215,408
|
|
198,939
|
Contract
assets
|
19,862
|
|
15,151
|
Prepaid expenses and
other
|
4,466
|
|
1,919
|
Total current
assets
|
424,211
|
|
349,116
|
Property, plant and
equipment:
|
|
|
|
Land
|
15,291
|
|
8,537
|
Buildings
|
187,237
|
|
169,156
|
Machinery and
equipment
|
370,414
|
|
342,045
|
Furniture and
fixtures
|
38,344
|
|
30,033
|
Total property, plant
and equipment
|
611,286
|
|
549,771
|
Less: Accumulated depreciation
|
263,890
|
|
245,026
|
Property, plant and
equipment, net
|
347,396
|
|
304,745
|
Intangible assets,
net
|
62,803
|
|
64,606
|
Goodwill
|
81,892
|
|
81,892
|
Right of use
assets
|
7,378
|
|
7,123
|
Other long-term
assets
|
6,371
|
|
6,421
|
Total assets
|
$
930,051
|
|
$
813,903
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
32,210
|
|
$
45,513
|
Accrued
liabilities
|
101,201
|
|
78,630
|
Contract
liabilities
|
20,262
|
|
21,424
|
Total current
liabilities
|
153,673
|
|
145,567
|
Revolving credit
facility, long-term
|
78,536
|
|
71,004
|
Deferred tax
liabilities
|
14,223
|
|
18,661
|
Other long-term
liabilities
|
11,364
|
|
11,508
|
New market tax credit
obligation
|
12,144
|
|
6,449
|
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, 54,379,324 and 53,425,184
issued and outstanding at June 30, 2023 and December 31, 2022,
respectively
|
218
|
|
214
|
Additional paid-in
capital
|
128,636
|
|
98,735
|
Retained
earnings
|
531,257
|
|
461,765
|
Total stockholders'
equity
|
660,111
|
|
560,714
|
Total liabilities and
stockholders' equity
|
$
930,051
|
|
$
813,903
|
|
|
|
|
AAON, Inc. and Subsidiaries
|
Consolidated Statements of Cash
Flows
|
(Unaudited)
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
Operating Activities
|
(in thousands)
|
Net income
|
$
82,496
|
|
$
34,005
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
21,236
|
|
16,300
|
Amortization of debt
issuance cost
|
32
|
|
21
|
Amortization of right
of use assets
|
67
|
|
143
|
(Recoveries of)
provision for credit losses on accounts receivable, net of
adjustments
|
(171)
|
|
181
|
Provision for excess
and obsolete inventories, net of write-offs
|
1,458
|
|
148
|
Share-based
compensation
|
7,823
|
|
6,908
|
Loss (gain) on
disposition of assets
|
12
|
|
(12)
|
Foreign currency
transaction (gain) loss
|
(13)
|
|
9
|
Interest income on
note receivable
|
(10)
|
|
(11)
|
Deferred income
taxes
|
(4,438)
|
|
(127)
|
Changes in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
(26,782)
|
|
(53,736)
|
Income tax
receivable
|
(15,171)
|
|
(1,895)
|
Inventories
|
(17,927)
|
|
(33,879)
|
Contract
assets
|
(4,711)
|
|
(2,820)
|
Prepaid expenses and
other long-term assets
|
(2,502)
|
|
(3,066)
|
Accounts
payable
|
(14,874)
|
|
6,490
|
Contract
liabilities
|
(1,162)
|
|
22,217
|
Extended
warranties
|
1,526
|
|
421
|
Accrued liabilities
and other long-term liabilities
|
33,051
|
|
7,123
|
Net cash provided by
(used in) operating activities
|
59,940
|
|
(1,580)
|
Investing Activities
|
|
|
|
Capital
expenditures
|
(60,629)
|
|
(27,227)
|
Cash paid for
building
|
—
|
|
(22,000)
|
Cash paid in business
combination, net of cash acquired
|
—
|
|
(249)
|
Proceeds from sale of
property, plant and equipment
|
104
|
|
12
|
Principal payments
from note receivable
|
28
|
|
27
|
Net cash used in
investing activities
|
(60,497)
|
|
(49,437)
|
Financing Activities
|
|
|
|
Proceeds from
financing obligation, net of issuance costs
|
6,061
|
|
—
|
Payment related to
financing costs
|
(398)
|
|
—
|
Borrowings under
revolving credit facility
|
279,961
|
|
94,900
|
Payments under
revolving credit facility
|
(272,429)
|
|
(28,651)
|
Principal payments on
financing lease
|
—
|
|
(28)
|
Stock options
exercised
|
23,244
|
|
6,385
|
Repurchase of
stock
|
—
|
|
(5,912)
|
Employee taxes paid by
withholding shares
|
(1,162)
|
|
(954)
|
Cash dividends paid to
stockholders
|
(13,004)
|
|
—
|
Net cash provided by
financing activities
|
22,273
|
|
65,740
|
Net increase in cash, cash equivalents and restricted
cash
|
21,716
|
|
14,723
|
Cash, cash equivalents and restricted cash, beginning
of period
|
5,949
|
|
3,487
|
Cash, cash equivalents and restricted cash, end of
period
|
$
27,665
|
|
$
18,210
|
Use of Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles ("GAAP"), additional non-GAAP financial measures are
provided and reconciled in the following tables. The Company
believes that these non-GAAP financial measures, when considered
together with the GAAP financial measures, provide 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 as they are
used by management to better understand operating performance.
Since EBITDA and EBITDA margin are non-GAAP measures and are
susceptible to varying calculations, EBITDA and EBITDA margin, as
presented, may not be directly comparable with other similarly
titled measures used by other companies.
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. EBITDA
margin is defined as EBITDA as a percentage of net sales.
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) and for the periods indicated:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in thousands)
|
Net income, a GAAP
measure
|
$
45,682
|
|
$
15,946
|
|
$
82,496
|
|
$
34,005
|
Depreciation and
amortization
|
10,962
|
|
9,224
|
|
21,236
|
|
16,300
|
Interest expense,
net
|
1,543
|
|
550
|
|
2,693
|
|
740
|
Income tax
expense
|
7,678
|
|
4,177
|
|
14,034
|
|
8,959
|
EBITDA, a non-GAAP
measure
|
$
65,865
|
|
$
29,897
|
|
$
120,459
|
|
$
60,004
|
EBITDA
margin
|
23.2 %
|
|
14.3 %
|
|
21.9 %
|
|
15.3 %
|
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multimedia:https://www.prnewswire.com/news-releases/aaon-reports-record-sales--earnings-for-the-second-quarter-of-2023-301892832.html
SOURCE AAON