AAON, INC. (NASDAQ-AAON), today announced its results for the first quarter of 2021.
Financial Highlights: Three Months Ended  March 31,   %
  2021   2020   Change
  (in thousands, except share and per share data)
Net sales $ 115,788     $ 137,483     (15.8 )%
Gross profit 33,157     42,947     (22.8 )%
Gross profit % 28.6 %   31.2 %    
Selling, general and admin. expenses $ 14,696     $ 15,214     (3.4 )%
SG&A % 12.7 %   11.1 %    
Net income 16,376     21,853     (25.1 )%
Net income % 14.1 %   15.9 %    
Effective Tax Rate 11.4 %   21.5 %    
Earnings per diluted share $ 0.30     $ 0.41     (26.8 )%
Diluted average shares 53,814,644     52,871,419     1.8 %
           
  March 31,   December 31, %
  2021   2020   Change
  (in thousands)    
Backlog $ 96,733     $ 74,417     30.0 %
Cash & cash equivalents & restricted cash 97,772     82,288     18.8 %
Total current liabilities 66,679     59,033     13.0 %

Net sales for the first quarter of 2021 decreased 15.8% to $115.8 million from $137.5 million in the first quarter of 2020. The year over year decline in net sales was partially attributable to fewer production days due to an extended holiday shutdown in early January and winter storm in February and is a reflection of our markets temporarily moderating at the end of 2020. Moreover, the prior year quarter was an all time record for the Company creating a tough relative comparison. The Company reported diluted EPS of $0.30, down 26.8% from $0.41 in the prior year period. The decline in EPS was largely due to the lower recognized revenue, partially offset by a lower effective tax rate. The lower tax rate compared to a year ago mainly related to a $1.8 million increase in excess tax benefits associated with stock awards.

The Company finished the quarter with a backlog of $96.7 million, down from $119.6 million one year ago but up from $74.4 million at the end of 2020. The sequential improvement reflects the improved demand that we experienced throughout the first quarter. New bookings in the quarter increased 21% compared to the same period one year ago. Demand has continued to strengthen through April. As of May 1, 2021, backlog was approximately $104.5 million.

Gary Fields, President and CEO, noted, "As we've mentioned in our prior releases, we were previously overwhelmed with customer orders and did not have the capacity to handle all these orders which lead to lengthy lead times in 2019. We spent most of that year adding several Salvagnini sheet metal fabrication machines and rearranging our production lines for more efficient production. In Longview, we started construction of our 224,000 square feet building which also housed additional Salvagninis and was completed in early 2021. As all this was happening, we had our lead times come down which resulted in a record breaking year in 2020. Although the pandemic caused new construction to slow down, our customers started to increase their replacement orders in early 2021 as demonstrated in the growth of our backlog."

Gary Fields, President and CEO, said, “Considering our soft backlog entering the quarter combined with the challenges we faced related to the new construction market as well as the adverse weather at both of our facilities in February, we are pleased with our performance in the first quarter of the year. The year over year decline in revenue and earnings was unsurprising considering the all-time record quarter we realized in the first quarter of 2020. We believe the fact that our performance in the first quarter of 2021 was very similar to the fourth quarter of 2020 suggests our business has stabilized and has already begun to pick up after some moderation we experienced at the end of last year.”

Mr. Fields added, “We are confident demand is improving. Our backlog at the beginning of May was up considerably from both the end 2020 and the end of the first quarter. Replacement demand is already improving as the economy recovers, and while the new construction market is still facing some challenges, we are beginning to see signs of stabilization. Inflation remains a challenge, but we are confident we will be able to maintain our margin through disciplined price management. In conclusion, as we look to the rest of the year, we continue to anticipate revenue and earnings will progressively improve throughout 2021.”

As of March 31, 2021, the Company had no debt and unrestricted cash and cash equivalents of $97.0 million, which is up from $79.0 million at the end of 2020. Capital expenditures during the first three months of 2021 were $16.4 million, as compared to $21.9 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 today at 4:15 P.M. (Eastern Time) to discuss the first quarter 2021 results. To participate, call 1-888-241-0551 (code 7788949); or, for rebroadcast available through May 13, 2021, call 1-855-859-2056 (code 7788949).

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  March 31,
    2021   2020
  (in thousands, except share and per share data)
Net sales   $ 115,788     $ 137,483  
Cost of sales   82,631     94,536  
Gross profit   33,157     42,947  
Selling, general and administrative expenses   14,696     15,214  
(Gain) loss on disposal of assets   —     (62 )
Income from operations   18,461     27,795  
Interest income, net   3     61  
Other income (expense), net   17     (27 )
Income before taxes   18,481     27,829  
Income tax provision   2,105     5,976  
Net income   $ 16,376     $ 21,853  
Earnings per share:        
Basic   $ 0.31     $ 0.42  
Diluted   $ 0.30     $ 0.41  
Weighted average shares outstanding:        
Basic   52,293,464     52,071,839  
Diluted   53,814,644     52,871,419  
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
  March 31, 2021   December 31, 2020
Assets (in thousands, except share and per share data)
Current assets:      
Cash and cash equivalents $ 97,047     $ 79,025  
Restricted cash 725     3,263  
Accounts receivable, net of allowance for credit losses of $493 and $506, respectively 52,579     47,387  
Income tax receivable 7,353     4,587  
Note receivable 32     31  
Inventories, net 84,040     82,219  
Prepaid expenses and other 3,631     3,739  
Total current assets 245,407     220,251  
Property, plant and equipment:      
Land 4,109     4,072  
Buildings 126,090     122,171  
Machinery and equipment 292,961     281,266  
Furniture and fixtures 19,971     18,956  
Total property, plant and equipment 443,131     426,465  
Less:  Accumulated depreciation 210,483     203,125  
Property, plant and equipment, net 232,648     223,340  
Goodwill and intangible assets, net 3,229     3,267  
Right of use assets 1,522     1,571  
Note receivable 578     579  
Total assets $ 483,384     $ 449,008  
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable $ 17,615     $ 12,447  
Accrued liabilities 49,064     46,586  
Total current liabilities 66,679     59,033  
Deferred tax liabilities 32,982     28,324  
Other long-term liabilities 4,312     4,423  
New market tax credit obligation 6,373     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, 52,423,579 and 52,224,767 issued and outstanding at March 31, 2021 and December 31, 2020, respectively 210     209  
Additional paid-in capital 10,957     5,161  
Retained earnings 361,871     345,495  
Total stockholders' equity 373,038     350,865  
Total liabilities and stockholders' equity $ 483,384     $ 449,008  
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
  Three Months Ended  March 31,
  2021   2020
Operating Activities (in thousands)
Net income $ 16,376     $ 21,853  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 7,398     6,002  
Amortization of debt issuance cost 10     10  
(Recovery of) provision for credit losses on accounts receivable, net of adjustments (13 )   294  
Provision for excess and obsolete inventories (194 )   (274 )
Share-based compensation 2,761     2,351  
(Gain) loss on disposition of assets —     (62 )
Foreign currency transaction (gain) loss (8 )   51  
Interest income on note receivable (6 )   (6 )
Deferred income taxes 4,658     (167 )
Changes in assets and liabilities:      
Accounts receivable (5,179 )   (2,789 )
Income taxes (2,766 )   772  
Inventories (1,627 )   1,020  
Prepaid expenses and other 108     (670 )
Accounts payable 4,904     2,742  
Deferred revenue 2,358     229  
Accrued liabilities 58     6,241  
Net cash provided by operating activities 28,838     37,597  
Investing Activities      
Capital expenditures (16,404 )   (21,877 )
Proceeds from sale of property, plant and equipment —     61  
Principal payments from note receivable 14     12  
Net cash used in investing activities (16,390 )   (21,804 )
Financing Activities      
Stock options exercised 9,438     4,497  
Repurchase of stock (5,185 )   (11,565 )
Employee taxes paid by withholding shares (1,217 )   (953 )
Net cash provided by (used in) financing activities 3,036     (8,021 )
Net increase in cash, cash equivalents and restricted cash 15,484     7,772  
Cash, cash equivalents and restricted cash, beginning of period 82,288     44,373  
Cash, cash equivalents and restricted cash, end of period $ 97,772     $ 52,145  

 

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