8-K - AAON - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 06, 2023

AAON, INC.

(Exact name of Registrant as Specified in Charter)

Nevada			0-18953	87-0448736
(State or Other Jurisdiction			(Commission File Number: )	(IRS Employer Identification No.)
of Incorporation)
2425 South Yukon Ave.,	Tulsa,	Oklahoma		74107
(Address of Principal Executive Offices)				(Zip Code)

(Registrant's telephone number, including area code): (918) 583-2266

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AAON	NASDAQ

Item 2.02 Results of Operations and Financial Conditions.

On November 6, 2023, AAON, Inc. (the "Company") announced its financial and operating results and backlog for the third quarter ended September 30, 2023. A copy of the Company's press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company plans to host a teleconference at 5:15 P.M (Eastern Time) on November 6, 2023 to discuss these results. The accessible dial-in is 1-877-550-1858 for domestic callers. To access the listen-only webcast, please register at https://app.webinar.net/or1gZEMZANL. 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.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing.

Item 7.01 Regulation FD Disclosure.

On November 6, 2023, the Company issued the press release described above in Item 2.02 of this Current Report on Form 8-K. A copy of the press release is attached hereto as Exhibit 99.1.

All statements in the teleconference, other than historical financial information, may be deemed to be "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. Participants and 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.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
99.1	Press release dated November 6, 2023 announcing financial and operating results and backlog.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		AAON, INC.
Date:	November 6, 2023	By:	/s/ Luke A. Bomer
			Luke A. Bomer, Secretary

Document

Exhibit 99.1

AAON REPORTS THIRD QUARTER OF 2023 RESULTS

TULSA, OK, November 6, 2023 - 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 third quarter of 2023.

Gary Fields, President and CEO, stated, “The third quarter was another strong quarter for AAON. For a second straight quarter, we achieved both record net sales and gross profits. All three segments performed well. Our AAON Oklahoma and BASX segments both realized robust double digit organic net sales growth along with record gross profits, and our AAON Coil Products segment recorded its highest profits over the last four quarters. Across all three segments, improved productivity was a key factor to both production output and gross profit margins. Our manufacturing teams did a great job of improving the efficiency of our operations while continuing to add production capacity. Gross profit margin of 37.2% reflects these productivity gains along with incremental pricing. All in, our operations have never performed better as reflected in the results.”

Net sales for the third quarter of 2023 increased 28.6% to $312.0 million from $242.6 million in the third quarter of 2022. This marked the seventh straight quarter of record sales in the Company's history. The Company had a healthy backlog entering the quarter, which combined with improved operational efficiencies, contributed to year over year organic volume growth of approximately 11.9%. Supply chain disruptions continue to abate, also aiding to the rising production rates.

Gross profit margin in the quarter increased to 37.2%, up from 27.0% in the comparable quarter in 2022 and up from 33.1% in the previous quarter. The drivers for the quarter-over-quarter margin expansion were incremental pricing, improved operational efficiencies and improved overhead absorption.

Net income for the quarter was $48.1 million, an increase of $20.6 million or 75.0% compared to the prior year quarter. Earnings per diluted share for the three months ended September 30, 2023, was $0.58, an increase of 70.6% from the third quarter of 2022. Excluding the net impact of a one-time settlement, non-GAAP adjusted net income and earnings per diluted share were $53.2 million and $0.64, respectively, an approximate 90% increase in both over the prior year period.

Financial Highlights:	Three Months Ended <br> September 30,						%		Nine Months Ended <br> September 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	$	311,970		$	242,605		28.6	%	$	861,880		$	634,190		35.9	%
Gross profit	$	116,109		$	65,591		77.0	%	$	287,281		$	159,031		80.6	%
Gross profit margin	37.2		%	27.0		%			33.3		%	25.1		%
Operating income	$	64,664		$	36,700		76.2	%	$	163,610		$	80,163		104.1	%
Operating margin	20.7		%	15.1		%			19.0		%	12.6		%
Net income	$	48,078		$	27,473		75.0	%	$	130,574		$	61,478		112.4	%
Earnings per diluted share1	$	0.58		$	0.34		70.6	%	$	1.57		$	0.76		106.6	%
Diluted average shares1	83,393,054			80,938,074			3.0	%	83,275,208			80,882,798			3.0	%
1 Reflects three-for-two stock split effective August 16, 2023.
Financial Highlights:	Three Months Ended <br> September 30,						%		Nine Months Ended <br> September 30,						%
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	2023			2022			Change		2023			2022			Change
	(in thousands, except share and per share data)								(in thousands, except share and per share data)
Non-GAAP Measures
Non-GAAP adjusted net income2	$	53,188		$	27,473		93.6	%	$	136,082		$	61,478		121.4	%
Non-GAAP earnings per diluted share2	$	0.64		$	0.34		88.2	%	$	1.63		$	0.76		114.5	%
Adjusted EBITDA2	$	83,710		$	46,078		81.7	%	$	204,169		$	106,082		92.5	%
Adjusted EBITDA margin2	26.8		%	19.0		%			23.7		%	16.7		%
2 These are non-GAAP measures. See "Use of Non-GAAP Financial Measures" below for reconciliation to GAAP measures.

Backlog

September 30, 2023		June 30, 2023		September 30, 2022
(in thousands)
$	490,591	$	526,209	$	514,735

Gains in production efficiency continued throughout the quarter resulting in all time high production rates that have continued to improve lead times. Bookings increased quarter over quarter, but were intentionally outpaced by increases in production to draw down backlog to more appropriate levels. The Company finished the third quarter of 2023 with a backlog of $490.6 million, down 4.7% from $514.7 million a year ago, and down from $526.2 million at the end of the second quarter of 2023.

Mr. Fields concluded, “As we approach the end of this year, we are enthusiastic with the outlook. We are optimistic the fourth quarter and year end results will finish strong. Looking into next year, while there are pockets of our end-markets that are slowing, there are several that are very strong. Furthermore, we anticipate upcoming new refrigerant regulations will noticeably disrupt the industry in 2024, which we view as a positive. AAON thrives on challenges like this and we view it as another opportunity to take market share. Also, in relation to factors such as inflation, supply chain disruptions, workforce dynamics and internal leadership, we believe AAON is entering a more predictable manufacturing environment than we've seen in years, which will enable our productivity to further increase. Our organization has made major enhancements in the last few years, many of which have yet to be financially recognized. We are highly optimistic about the future and are excited to be able to create more value for all of our stakeholders.”

As of September 30, 2023, the Company had cash, cash equivalents and restricted cash of $22.5 million and a balance of $78.4 million on the revolving credit facility. Rebecca Thompson, CFO, commented, “Our cash flows are strengthening with our second straight quarter of cash flows from operating activities exceeding our capital expenditures. We also completed the repurchase of approximately 403,000 shares for $25.0 million during the quarter. As construction ramps at our Longview, Texas plant expansion, we anticipate spending down our restricted cash balance and using the funds to pay down our revolving line of credit. Our balance sheet remains strong with a current ratio of 3.0 and a leverage ratio of 0.33.”

Conference Call

The Company will host a conference call and webcast today at 5:15 P.M. EST to discuss the third 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. To access the listen-only webcast, please register at https://app.webinar.net/or1gZEMZANL. 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 <br> September 30,				Nine Months Ended <br> September 30,
	2023		2022		2023		2022
	(in thousands, except share and per share data)
Net sales	$	311,970	$	242,605	$	861,880	$	634,190
Cost of sales	195,861		177,014		574,599		475,159
Gross profit	116,109		65,591		287,281		159,031
Selling, general and administrative expenses	51,470		28,891		123,684		78,880
Loss (gain) on disposal of assets	(25)		—		(13)		(12)
Income from operations	64,664		36,700		163,610		80,163
Interest expense, net	(1,266)		(954)		(3,959)		(1,694)
Other income, net	93		54		370		295
Income before taxes	63,491		35,800		160,021		78,764
Income tax provision	15,413		8,327		29,447		17,286
Net income	$	48,078	$	27,473	$	130,574	$	61,478
Earnings per share:
Basic1	$	0.59	$	0.34	$	1.61	$	0.77
Diluted1	$	0.58	$	0.34	$	1.57	$	0.76
Cash dividends declared per common share1:	$	0.08	$	—	$	0.24	$	0.13
Weighted average shares outstanding:
Basic1	81,418,800		79,777,987		81,140,473		79,543,925
Diluted1	83,393,054		80,938,074		83,275,208		80,882,798
1 Reflects three-for-two stock split effective August 16, 2023.
AAON, Inc. and Subsidiaries
---	---	---	---	---
Consolidated Balance Sheets
(Unaudited)
	September 30, 2023		December 31, 2022
Assets	(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents	$	212	$	5,451
Restricted cash	22,323		498
Accounts receivable, net of allowance for credit losses of $385 and $477, respectively	160,108		127,158
Inventories, net	214,507		198,939
Contract assets	25,306		15,151
Prepaid expenses and other	2,836		1,919
Total current assets	425,292		349,116
Property, plant and equipment:
Land	15,296		8,537
Buildings	193,684		169,156
Machinery and equipment	381,271		342,045
Furniture and fixtures	41,488		30,033
Total property, plant and equipment	631,739		549,771
Less: Accumulated depreciation	274,909		245,026
Property, plant and equipment, net	356,830		304,745
Intangible assets, net	61,901		64,606
Goodwill	81,892		81,892
Right of use assets	12,252		7,123
Other long-term assets	6,376		6,421
Total assets	$	944,543	$	813,903
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	29,917	$	45,513
Accrued liabilities	90,986		78,630
Contract liabilities	19,576		21,424
Total current liabilities	140,479		145,567
Revolving credit facility, long-term	78,420		71,004
Deferred tax liabilities	14,744		18,661
Other long-term liabilities	16,247		11,508
New market tax credit obligation	12,169		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, 81,231,513 and 80,137,776 issued and outstanding at September 30, 2023 and December 31, 2022, respectively1	325		322
Additional paid-in capital	109,874		98,735
Retained earnings1	572,285		461,657
Total stockholders' equity	682,484		560,714
Total liabilities and stockholders' equity	$	944,543	$	813,903
1 Reflects three-for-two stock split effective August 16, 2023.
AAON, Inc. and Subsidiaries
---	---	---	---	---
Consolidated Statements of Cash Flows
(Unaudited)
	Nine Months Ended <br> September 30,
	2023		2022
Operating Activities	(in thousands)
Net income	$	130,574	$	61,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33,439		25,624
Amortization of debt issuance cost	57		32
Amortization of right of use assets	166		191
(Recoveries of) provision for credit losses on accounts receivable, net of adjustments	(92)		300
Provision for excess and obsolete inventories, net of write-offs	2,979		1,380
Share-based compensation	12,102		10,229
Gain on disposition of assets	(13)		(12)
Foreign currency transaction loss	—		42
Interest income on note receivable	(15)		(17)
Deferred income taxes	(3,917)		(563)
Changes in assets and liabilities:
Accounts receivable	(32,040)		(63,593)
Income tax receivable	(12,472)		3,782
Inventories	(18,547)		(47,998)
Contract assets	(10,155)		(3,843)
Prepaid expenses and other long-term assets	(896)		(70)
Accounts payable	(15,631)		18,616
Contract liabilities	(1,848)		24,249
Extended warranties	2,049		730
Accrued liabilities and other long-term liabilities	21,405		12,857
Net cash provided by operating activities	107,145		43,414
Investing Activities
Capital expenditures	(82,900)		(41,586)
Cash paid for building	—		(22,000)
Cash paid in business combination, net of cash acquired	—		(249)
Proceeds from sale of property, plant and equipment	129		12
Principal payments from note receivable	39		41
Net cash used in investing activities	(82,732)		(63,782)
Financing Activities
Proceeds from financing obligation, net of issuance costs	6,061		—
Payment related to financing costs	(398)		—
Borrowings under revolving credit facility	444,072		151,103
Payments under revolving credit facility	(436,656)		(114,812)
Principal payments on financing lease	—		(115)
Stock options exercised	25,251		10,990
Repurchase of stock	(25,009)		(7,943)
Employee taxes paid by withholding shares	(1,202)		(978)
Cash dividends paid to stockholders	(19,946)		(10,096)
Net cash (used in) provided by financing activities	(7,827)		28,149
Net increase in cash, cash equivalents and restricted cash	16,586		7,781
Cash, cash equivalents and restricted cash, beginning of period	5,949		3,487
Cash, cash equivalents and restricted cash, end of period	$	22,535	$	11,268

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.

Non-GAAP Adjusted Net Income

The Company defines non-GAAP adjusted net income as net income adjusted for any one-time events, such as litigation settlements, net of profit sharing and tax effect, in the periods presented.

The following table provides a reconciliation of net income (GAAP) to non-GAAP adjusted net income for the periods indicated:

	Three Months Ended <br> September 30,				Nine Months Ended <br> September 30,
	2023		2022		2023		2022
	(in thousands)
Net income, a GAAP measure	$	48,078	$	27,473	$	130,574	$	61,478
Litigation settlement	7,500		—		7,500		—
Profit sharing effect	(750)		—		(750)		—
Tax effect	(1,640)		—		(1,242)		—
Non-GAAP adjusted net income	$	53,188	$	27,473	$	136,082	$	61,478
Non-GAAP adjusted earnings per diluted share1	$	0.64	$	0.34	$	1.63	$	0.76
1 Reflects three-for-two stock split effective August 16, 2023.

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.

Adjusted EBITDA is calculated as EBITDA adjusted by items in non-GAAP adjusted net income, above, except for taxes, as taxes are already excluded from EBITDA.

The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and Adjusted EBITDA (non-GAAP) for the periods indicated:

	Three Months Ended <br> September 30,						Nine Months Ended <br> September 30,
	2023			2022			2023			2022
	(in thousands)
Net income, a GAAP measure	$	48,078		$	27,473		$	130,574		$	61,478
Depreciation and amortization	12,203			9,324			33,439			25,624
Interest expense, net	1,266			954			3,959			1,694
Income tax expense	15,413			8,327			29,447			17,286
EBITDA, a non-GAAP measure	$	76,960		$	46,078		$	197,419		$	106,082
Litigation settlement	7,500			—			7,500			—
Profit sharing effect1	(750)			—			(750)			—
Adjusted EBITDA, a non-GAAP measure	$	83,710		$	46,078		$	204,169		$	106,082
Adjusted EBITDA margin	26.8		%	19.0		%	23.7		%	16.7		%
1Profit sharing effect of litigation settlement in the respective period.