AAON, INC. (NASDAQ-AAON), today announced its results for the fourth quarter of 2020.
Financial Highlights: Three Months Ended  December 31,   %   Years Ending   December 31,   %
  2020   2019   Change   2020   2019   Change
  (in thousands, except share and per share data)   (in thousands, except share and per share data)
Net sales $ 116,700     $ 122,574     (4.8 )%   $ 514,551     $ 469,333     9.6 %
Gross profit 33,923     36,381     (6.8 )%   155,849     119,425     30.5 %
Gross profit % 29.1 %   29.7 %       30.3 %   25.4 %    
Selling, general and admin. expenses $ 14,622     $ 13,114     11.5 %   $ 60,491     $ 52,077     16.2 %
SG&A % 12.5 %   10.7 %       11.8 %   11.1 %    
Net income* 18,892     17,273     9.4 %   79,009     53,711     47.1 %
Net income % 16.2 %   14.1 %       15.4 %   11.4 %    
Effective Tax Rate 26.6 %   25.6 %       22.5 %   19.9 %    
Earnings per diluted share* $ 0.35     $ 0.33     6.1 %   $ 1.49     $ 1.02     46.1 %
Diluted average shares 53,469,759     52,701,202     1.5 %   53,061,169     52,635,415     0.8 %
*Includes $4.1 million or $0.08 per share related to a gain from insurance proceeds            
             
  December 31,   December 31, %            
  2020   2019   Change            
  (in thousands)                
Backlog $ 74,417     $ 142,747     (47.9 )%            
Cash & cash equivalents & restricted cash 82,288     44,373     85.4 %            
Total current liabilities 59,033     56,028     5.4 %            

Net sales for the fourth quarter 2020 decreased to $116.7 million from $122.6 million in 2019 primarily as a result of this year's six additional days of planned plant holiday closure at the end of December 2020. The Company reported diluted EPS of $0.35, up 6.1% from $0.33 in the prior year period. The Company had a gain of $4.1 million, net of profit sharing and taxes, associated with insurance proceeds related to a damaged roof incurred by adverse weather earlier in the year, which impacted our diluted EPS by $0.08.

The Company finished the quarter with a backlog of $74.4 million. The decline in backlog was related to initiatives made to improve productivity and lead times to meet customer delivery expectations. New bookings in the quarter increased 6% compared to the same period one year ago. As of February 1, 2021, our backlog was approximately $103.8 million, compared to $129.2 million at February 1, 2020.

For the twelve months ending December 31, 2020, sales were a record $514.6 million, an increase of 9.6% compared with $469.3 million in 2019. Diluted earnings per share increased 46.1% to $1.49.

Gary Fields, President and CEO, said, "We are pleased to report all-time record sales and earnings in 2020 compared to any other year in our Company's history. I am especially proud we achieved these results in a year that presented many challenges to the Company and our end-markets. Achieving organic sales growth of nearly 10% while simultaneously improving our gross margins by 490 basis points to 30.3% is truly an achievement. At the same time, we continued to invest in growth as our capex spend for the year was up 82.4%, amounting to 13.2% of sales."

Mr. Fields continued, "Our fourth quarter results demonstrate demand slowed as we finished the year. The outlook for 2021 continues to present uncertainty, especially for the first half of the year. Architectural billings and nonresidential construction starts in 2020 suggest new construction demand will be soft, particularly in end-markets significantly impacted by the COVID-19 pandemic such as the hospitality and office building markets."

Mr. Fields added, "However, new bookings in the fourth quarter still grew year-over-year 6% and demand so far in 2021 has been surprisingly solid. Furthermore, we are starting to see positive signs in our replacement business and certain end-markets like data centers, warehouses and healthcare. We are also well positioned to take advantage of our customers' increased focus on indoor air quality to address COVID challenges, which we expect will drive incremental demand. Finally, ongoing progress in our transition from entrepreneurial leadership to a collaborative team-based management approach, a strengthening sales channel, improved productivity and lead times, new capacity at our Longview, Texas facility and a strong product development pipeline keeps us optimistic on the outlook of our business. While we believe demand will be soft to start the year, we think activity should be moderate in the first half and then accelerate in the second half."

The Company finished 2020 in a strong financial position as evidenced by a current ratio of 3.7:1 at December 31, 2020. We had no debt and unrestricted cash and cash equivalents of $79.0 million as of December 31, 2020. Our capital expenditures during the twelve months ended December 31, 2020 were $67.8 million, as compared to $37.2 million for the same period a year ago, and we anticipate our full-year 2021 capital expenditures will total approximately $70.7 million.

The Company will host a conference call today at 4:15 P.M. (Eastern Time) to discuss the fourth quarter 2020 results. To participate, call 1-833-674-0554 (code 3448509); or, for rebroadcast available through March 5, 2021, call 1-855-859-2056 (code 3448509).

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 InformationJoseph MondilloDirector of Investor RelationsPhone: (617) 877-6346Email: joseph.mondillo@aaon.com 

AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
  Three Months Ended  December 31,   Years Ending   December 31,
  2020   2019   2020   2019
  (in thousands, except share and per share data)
Net sales $ 116,700     $ 122,574     $ 514,551     $ 469,333  
Cost of sales 82,777     86,193     358,702     349,908  
Gross profit 33,923     36,381     155,849     119,425  
Selling, general and administrative expenses 14,622     13,114     60,491     52,077  
(Gain) loss on disposal of assets and insurance recoveries (6,417 )   41     (6,478 )   337  
Income from operations 25,718     23,226     101,836     67,011  
Interest income, net (2 )   17     88     66  
Other income (expense), net 31     (30 )   51     (46 )
Income before taxes 25,747     23,213     101,975     67,031  
Income tax provision 6,855     5,940     22,966     13,320  
Net income $ 18,892     $ 17,273     $ 79,009     $ 53,711  
Earnings per share:              
Basic $ 0.36     $ 0.33     $ 1.51     $ 1.03  
Diluted $ 0.35     $ 0.33     $ 1.49     $ 1.02  
Cash dividends declared per common share: $ 0.19     $ 0.16     $ 0.38     $ 0.32  
Weighted average shares outstanding:              
Basic 52,240,829     52,094,125     52,168,679     52,079,865  
Diluted 53,469,759     52,701,202     53,061,169     52,635,415  
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
  December 31, 2020   December 31, 2019
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 79,025     $ 26,797  
Restricted cash 3,263     17,576  
Accounts receivable, net of allowance for credit losses of $506 and $353, respectively 47,387     67,399  
Income tax receivable 4,587     772  
Note receivable 31     29  
Inventories, net 82,219     73,601  
Prepaid expenses and other 3,739     1,375  
Total current assets 220,251     187,549  
Property, plant and equipment:      
Land 4,072     3,274  
Buildings 122,171     101,113  
Machinery and equipment 281,266     236,087  
Furniture and fixtures 18,956     16,862  
Total property, plant and equipment 426,465     357,336  
Less:  Accumulated depreciation 203,125     179,242  
Property, plant and equipment, net 223,340     178,094  
Intangible assets, net 38     272  
Goodwill 3,229     3,229  
Right of use assets 1,571     1,683  
Note receivable 579     597  
Total assets $ 449,008     $ 371,424  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Revolving credit facility $     $  
Accounts payable 12,447     11,759  
Accrued liabilities 46,586     44,269  
Total current liabilities 59,033     56,028  
Deferred tax liabilities 28,324     15,297  
Other long-term liabilities 4,423     3,639  
New market tax credit obligation 6,363     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, 52,224,767 and 52,078,515 issued and outstanding at December 31, 2020 and December 31, 2019, respectively 209     208  
Additional paid-in capital 5,161     3,631  
Retained earnings 345,495     286,301  
Total stockholders' equity 350,865     290,140  
Total liabilities and stockholders' equity $ 449,008     $ 371,424  
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
  Years Ending   December 31,
  2020   2019
Operating Activities (in thousands)
Net income $ 79,009     $ 53,711  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 25,634     22,766  
Amortization of debt issuance cost 43     7  
Provision for credit losses on accounts receivable, net of adjustments 153     91  
Provision for excess and obsolete inventories 1,108     1,454  
Share-based compensation 11,342     11,799  
(Gain) loss on disposition of assets (6,478 )   337  
Foreign currency transaction (gain) loss (12 )   (27 )
Interest income on note receivable (24 )   (25 )
Deferred income taxes 13,027     6,038  
Changes in assets and liabilities:      
   Accounts receivable 19,859     (13,412 )
   Income taxes (3,815 )   5,129  
   Inventories (9,726 )   2,557  
   Prepaid expenses and other (2,364 )   (329 )
   Accounts payable (2,155 )   280  
   Deferred revenue 1,010     425  
   Accrued liabilities 2,203     7,124  
Net cash provided by operating activities 128,814     97,925  
Investing Activities      
Capital expenditures (67,802 )   (37,166 )
Proceeds from sale of property, plant and equipment 60     69  
Insurance proceeds 6,417      
Investment in certificates of deposits     (6,000 )
Maturities of certificates of deposits     6,000  
Principal payments from note receivable 52     51  
Net cash used in investing activities (61,273 )   (37,046 )
Financing Activities      
Proceeds from financing obligation, net of issuance costs     6,614  
Payment related to financing costs     (301 )
Stock options exercised 21,418     12,625  
Repurchase of stock (30,060 )   (19,586 )
Employee taxes paid by withholding shares (1,169 )   (1,207 )
Dividends paid to stockholders (19,815 )   (16,645 )
Net cash used in financing activities (29,626 )   (18,500 )
Net increase in cash, cash equivalents and restricted cash 37,915     42,379  
Cash, cash equivalents and restricted cash, beginning of period 44,373     1,994  
Cash, cash equivalents and restricted cash, end of period $ 82,288     $ 44,373  
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