AAON, INC. (NASDAQ-AAON), today announced its results for the third
quarter of 2021.
Financial Highlights: |
Three Months Ended September
30, |
|
% |
|
|
Nine Months Ended September
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 |
$ |
138,571 |
|
|
$ |
134,772 |
|
|
2.8 |
|
% |
|
|
$ |
398,235 |
|
|
$ |
397,851 |
|
|
0.1 |
|
% |
Gross profit |
36,019 |
|
|
40,848 |
|
|
(11.8 |
) |
% |
|
|
111,283 |
|
|
121,926 |
|
|
(8.7 |
) |
% |
Gross profit % |
26.0 |
% |
|
30.3 |
% |
|
|
|
|
27.9 |
% |
|
30.6 |
% |
|
|
Selling, general and admin. expenses |
$ |
15,897 |
|
|
$ |
14,716 |
|
|
8.0 |
|
% |
|
|
$ |
47,488 |
|
|
$ |
45,869 |
|
|
3.5 |
|
% |
SG&A % |
11.5 |
% |
|
10.9 |
% |
|
|
|
|
11.9 |
% |
|
11.5 |
% |
|
|
Net income |
15,581 |
|
|
20,460 |
|
|
(23.8 |
) |
% |
|
|
52,572 |
|
|
60,117 |
|
|
(12.6 |
) |
% |
Net income % |
11.2 |
% |
|
15.2 |
% |
|
|
|
|
13.2 |
% |
|
15.1 |
% |
|
|
Earnings per diluted share |
$ |
0.29 |
|
|
$ |
0.38 |
|
|
(23.7 |
) |
% |
|
|
$ |
0.98 |
|
|
$ |
1.14 |
|
|
(14.0 |
) |
% |
EBITDA, a non-GAAP measure |
$ |
27,726 |
|
|
$ |
32,777 |
|
|
(15.4 |
) |
% |
|
|
$ |
86,379 |
|
|
$ |
95,109 |
|
|
(9.2 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
September 30, |
% |
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Change |
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
Backlog |
$ |
181,813 |
|
|
$ |
84,885 |
|
|
114.2 |
|
% |
|
|
|
|
|
|
|
Cash & cash equivalents & restricted cash |
102,473 |
|
|
78,601 |
|
|
30.4 |
|
% |
|
|
|
|
|
|
|
Net sales for the three months ended September
30, 2021 increased 2.8% to $138.6 million from $134.8 million in
the same period in 2020. The year over year increase in net sales
was driven by price increases and a favorable product mix,
partially offset by unit volumes which were down approximately
11.2%. The decline in volume was mainly a result of a very tight
labor market that restricted the Company's production ramp-up
plans. While overall headcount has increased throughout the year,
the increase is related to our Longview facility, with our Tulsa
facility being slightly down year over year. In addition to labor
shortage challenges, raw material inflation weighed on gross profit
and earnings. Compared to the third quarter of 2020, gross profit
declined 11.8% and as a percent of sales, contracted 430 basis
points to 26.0%, both of which were a result of three factors. The
first factor is the increase in material costs and wages rising
quicker than previously announced price increases could counteract.
Second, minor supply chain disruptions caused production to slow
and be less efficient. Those inefficiencies together with lower
overall production limited the Company's ability to absorb certain
fixed costs. Third, the Company's Longview facility suffered from
COVID-19 related absenteeism in the quarter which reduced the
production of coils that were needed to complete units in Tulsa.
SG&A expenses were essentially in line with Company
expectations, but with lower sales volumes, they also adversely
affected operating profit and earnings.
The Company finished the quarter with a backlog
of $181.8 million, up 114% from $84.9 million one year ago and up
32% from $138.1 million at the end of the second quarter of 2021.
The sequential increase in backlog reflects robust end-market
demand as well as improvements the Company and channel partners
have made to gain market share. New bookings in the quarter
increased approximately 60% compared to the same period one year
ago.
As of September 30, 2021, the Company had no
debt and unrestricted cash and cash equivalents of $101.8 million,
which is up from $79.0 million at the end of 2020. Capital
expenditures during the first nine months of 2021 were $42.6
million, as compared to $49.0 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 $60.0
million.”
Gary Fields, President and CEO, stated, "I am
extremely pleased with the growth we have seen in our backlog and
new bookings. Our backlog being up year over year 114% and bookings
up 60% is truly extraordinary. Moreover, our bookings were up year
over year 19% in the third quarter of 2020, a period of time when
our industry was still contracting. Thus, this growth was not a
reflection of an easy comparison as the overall market realized. In
this latest quarter, the growth reflects several factors, including
solid end-market demand, competitive lead times, the strengthening
of our independent sales channel and the compelling value
proposition AAON equipment offers."
Mr. Fields continued, "While we are pleased with
many aspects of the third quarter, the overall results are
disappointing. The main factors that contributed to the lower than
anticipated profits were raw material inflation and labor
shortages, which restricted us from ramping up production as
quickly as we would have liked. Immediately prior to the June 1st
price increase, we received a surge of orders. The increased
backlog created by the order surge along with slightly longer lead
times delayed the impact of the price increase hitting the floor so
that it had minimal impact on the quarter. We also saw the highest
priced materials to date coming out of our inventory and flowing
through production. It has become clear that this dynamic has
resulted in a temporary squeeze in gross margin."
Mr. Fields continued, “On a positive note, we
believe the price/cost issue is largely a timing factor and that it
will begin to dissipate as the year closes. We have
implemented additional price increases since the two in the first
half of the year, bringing the total announced increases for the
year to 18%, of which 5% was realized in the third quarter. As for
the labor shortage challenges, we are working hard to overcome this
issue and expect to make progress in the fourth
quarter. That said, this issue could linger into 2022
depending how the overall economy progresses. Even with these labor
challenges, our lead times remain very competitive. While lead
times have extended modestly, they are not nearly as extended as
some of our competition."
Mr. Fields concluded, "Despite the current
challenges that resulted in the disappointing third quarter
earnings, we remain extremely optimistic on the fundamentals of the
business. With a robust backlog that has an improving margin
profile, continued strength in bookings and expected increases in
headcount and production rates, we believe we are very much on
track with our overall growth strategy. Moreover, we
continue to believe AAON is best positioned to benefit from an
increased focus on decarbonization, electrification, energy
efficiency and indoor air quality. Finally, although sustainability
has just recently become a primary focus for many, it has been the
backbone of our Company for decades. Recently, we published our
2020 Sustainability ESG Report, which can be found at
https://www.aaon.com/Sustainability."
Earnings Conference Call
InformationThe Company will host a conference call on
November 4, 2021 at 5:30 P.M. (Eastern Time) to discuss the
third quarter 2021 results. To participate, call 1-888-241-0551
(code 2466188); or, for rebroadcast available through November 11,
2021, call 1-855-859-2056 (code 2466188).
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 StatementsThis
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 InformationJoseph
MondilloDirector of Investor RelationsPhone: (617) 877-6346Email:
joseph.mondillo@aaon.com
AAON, Inc. and Subsidiaries |
Consolidated Statements of Income |
(Unaudited) |
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(in thousands, except share and per share data) |
Net sales |
$ |
138,571 |
|
|
|
$ |
134,772 |
|
|
$ |
398,235 |
|
|
|
$ |
397,851 |
|
|
Cost of sales |
102,552 |
|
|
|
93,924 |
|
|
286,952 |
|
|
|
275,925 |
|
|
Gross profit |
36,019 |
|
|
|
40,848 |
|
|
111,283 |
|
|
|
121,926 |
|
|
Selling, general and administrative expenses |
15,897 |
|
|
|
14,716 |
|
|
47,488 |
|
|
|
45,869 |
|
|
(Gain) loss on disposal of assets |
(15 |
) |
|
|
1 |
|
|
(15 |
) |
|
|
(61 |
) |
|
Income from operations |
20,137 |
|
|
|
26,131 |
|
|
63,810 |
|
|
|
76,118 |
|
|
Interest (expense) income, net |
(10 |
) |
|
|
10 |
|
|
(11 |
) |
|
|
90 |
|
|
Other (expense) income, net |
(19 |
) |
|
|
15 |
|
|
37 |
|
|
|
20 |
|
|
Income before taxes |
20,108 |
|
|
|
26,156 |
|
|
63,836 |
|
|
|
76,228 |
|
|
Income tax provision |
4,527 |
|
|
|
5,696 |
|
|
11,264 |
|
|
|
16,111 |
|
|
Net income |
$ |
15,581 |
|
|
|
$ |
20,460 |
|
|
$ |
52,572 |
|
|
|
$ |
60,117 |
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
|
$ |
0.39 |
|
|
$ |
1.00 |
|
|
|
$ |
1.15 |
|
|
Diluted |
$ |
0.29 |
|
|
|
$ |
0.38 |
|
|
$ |
0.98 |
|
|
|
$ |
1.14 |
|
|
Cash dividends declared per common share: |
$ |
— |
|
|
|
$ |
— |
|
|
$ |
0.19 |
|
|
|
$ |
0.19 |
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
52,420,711 |
|
|
|
52,260,551 |
|
|
52,392,300 |
|
|
|
52,174,705 |
|
|
Diluted |
53,546,513 |
|
|
|
53,151,295 |
|
|
53,664,997 |
|
|
|
52,955,049 |
|
|
AAON, Inc. and Subsidiaries |
Consolidated Balance Sheets |
(Unaudited) |
|
September 30, 2021 |
|
December 31, 2020 |
Assets |
(in thousands, except share and per share data) |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
101,813 |
|
|
$ |
79,025 |
|
Restricted cash |
660 |
|
|
3,263 |
|
Accounts receivable, net of allowance for credit losses of $477 and
$506, respectively |
58,756 |
|
|
47,387 |
|
Income tax receivable |
1,999 |
|
|
4,587 |
|
Note receivable |
32 |
|
|
31 |
|
Inventories, net |
104,553 |
|
|
82,219 |
|
Prepaid expenses and other |
2,802 |
|
|
3,739 |
|
Total current assets |
270,615 |
|
|
220,251 |
|
Property, plant and equipment: |
|
|
|
Land |
5,016 |
|
|
4,072 |
|
Buildings |
131,327 |
|
|
122,171 |
|
Machinery and equipment |
299,226 |
|
|
281,266 |
|
Furniture and fixtures |
21,679 |
|
|
18,956 |
|
Total property, plant and equipment |
457,248 |
|
|
426,465 |
|
Less: Accumulated depreciation |
216,667 |
|
|
203,125 |
|
Property, plant and equipment, net |
240,581 |
|
|
223,340 |
|
Goodwill and intangible assets, net |
3,229 |
|
|
3,267 |
|
Right of use assets |
1,421 |
|
|
1,571 |
|
Note receivable |
557 |
|
|
579 |
|
Total assets |
$ |
516,403 |
|
|
$ |
449,008 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
25,940 |
|
|
$ |
12,447 |
|
Accrued liabilities |
48,266 |
|
|
46,586 |
|
Total current liabilities |
74,206 |
|
|
59,033 |
|
Deferred tax liabilities |
31,090 |
|
|
28,324 |
|
Other long-term liabilities |
4,434 |
|
|
4,423 |
|
New market tax credit obligation |
6,394 |
|
|
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,
52,420,486 and 52,224,767 issued and outstanding at
September 30, 2021 and December 31, 2020, respectively |
210 |
|
|
209 |
|
Additional paid-in capital |
11,966 |
|
|
5,161 |
|
Retained earnings |
388,103 |
|
|
345,495 |
|
Total stockholders' equity |
400,279 |
|
|
350,865 |
|
Total liabilities and stockholders' equity |
$ |
516,403 |
|
|
$ |
449,008 |
|
AAON, Inc. and Subsidiaries |
Consolidated Statements of Cash Flows |
(Unaudited) |
|
Nine Months Ended September
30, |
|
2021 |
|
2020 |
Operating Activities |
(in thousands) |
Net income |
$ |
52,572 |
|
|
$ |
60,117 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
22,532 |
|
|
18,971 |
|
Amortization of debt issuance cost |
31 |
|
|
31 |
|
Provision for credit losses on accounts receivable, net of
adjustments |
— |
|
|
193 |
|
Provision for excess and obsolete inventories |
378 |
|
|
1,776 |
|
Share-based compensation |
8,784 |
|
|
8,546 |
|
(Gain) loss on disposition of assets |
(15 |
) |
|
(61 |
) |
Foreign currency transaction (gain) loss |
(1 |
) |
|
18 |
|
Interest income on note receivable |
(19 |
) |
|
(19 |
) |
Deferred income taxes |
2,766 |
|
|
7,676 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
(11,369 |
) |
|
5,011 |
|
Income taxes |
2,588 |
|
|
(3,142 |
) |
Inventories |
(22,712 |
) |
|
(6,994 |
) |
Prepaid expenses and other |
937 |
|
|
(598 |
) |
Accounts payable |
16,390 |
|
|
3,654 |
|
Deferred revenue |
316 |
|
|
1,128 |
|
Accrued liabilities |
1,525 |
|
|
688 |
|
Net cash provided by operating activities |
74,703 |
|
|
96,995 |
|
Investing Activities |
|
|
|
Capital expenditures |
(42,636 |
) |
|
(48,955 |
) |
Proceeds from sale of property, plant and equipment |
19 |
|
|
61 |
|
Principal payments from note receivable |
41 |
|
|
38 |
|
Net cash used in investing activities |
(42,576 |
) |
|
(48,856 |
) |
Financing Activities |
|
|
|
Stock options exercised |
14,573 |
|
|
18,519 |
|
Repurchase of stock |
(15,014 |
) |
|
(21,390 |
) |
Employee taxes paid by withholding shares |
(1,537 |
) |
|
(1,130 |
) |
Cash dividends paid to stockholders |
(9,964 |
) |
|
(9,910 |
) |
Net cash used in financing activities |
(11,942 |
) |
|
(13,911 |
) |
Net increase in cash, cash equivalents and restricted
cash |
20,185 |
|
|
34,228 |
|
Cash, cash equivalents and restricted cash, beginning of
period |
82,288 |
|
|
44,373 |
|
Cash, cash equivalents and restricted cash, end of
period |
$ |
102,473 |
|
|
$ |
78,601 |
|
Use of Non-GAAP Financial
MeasuresTo 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.
EBITDAEBITDA (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 September
30, |
|
Nine Months Ended September
30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(in thousands) |
Net Income, a GAAP measure |
$ |
15,581 |
|
|
$ |
20,460 |
|
|
$ |
52,572 |
|
|
$ |
60,117 |
|
Depreciation and amortization |
7,608 |
|
|
6,631 |
|
|
22,532 |
|
|
18,971 |
|
Interest expense (income), net |
10 |
|
|
(10 |
) |
|
11 |
|
|
(90 |
) |
Income tax expense |
4,527 |
|
|
5,696 |
|
|
11,264 |
|
|
16,111 |
|
EBITDA, a non-GAAP measure |
$ |
27,726 |
|
|
$ |
32,777 |
|
|
$ |
86,379 |
|
|
$ |
95,109 |
|
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