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): August 5, 2021

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 August 5, 2021, AAON, Inc. (the "Company") announced its financial and operating results and backlog for the second quarter ended June 30, 2021. 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 9:00 A.M (Eastern Time) on August 6, 2021 to discuss these results. To access the call, please dial 1-888-241-0551 (code 6788945). A replay of the call will be available through August 13, 2021 at 1-855-859-2056 (code 6788945).

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 August 5, 2021, 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 “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 August 5, 2021 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:	August 5, 2021	By:	/s/ Luke A. Bomer
			Luke A. Bomer, Secretary

Document

Exhibit 99.1

AAON REPORTS RECORD SALES FOR THE SECOND QUARTER OF 2021 AND A ROBUST INCREASE IN BACKLOG

TULSA, OK, August 5, 2021 - AAON, INC. (NASDAQ-AAON), today announced its results for the second quarter of 2021.

Financial Highlights:	Three Months Ended <br> June 30,						%		Six Months Ended <br> June 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	$	143,876		$	125,596		14.6	%	$	259,664		$	263,079		(1.3)	%
Gross profit	42,107			38,131			10.4	%	75,264			81,078			(7.2)	%
Gross profit %	29.3		%	30.4		%			29.0		%	30.8		%
Selling, general and admin. expenses	$	16,895		$	15,939		6.0	%	$	31,591		$	31,153		1.4	%
SG&A %	11.7		%	12.7		%			12.2		%	11.8		%
Net income	20,615			17,804			15.8	%	36,991			39,657			(6.7)	%
Net income %	14.3		%	14.2		%			14.2		%	15.1		%
Effective Tax Rate	18.3		%	20.0		%			15.4		%	20.8		%
Earnings per diluted share	$	0.38		$	0.34		11.8	%	$	0.69		$	0.75		(8.0)	%
Diluted average shares	53,603,932			52,750,401			1.6	%	53,736,134			52,885,491			1.6	%
EBITDA, a non-GAAP measure	$	32,777		$	28,562		14.8	%	$	58,653		$	62,332		(5.9)	%
	June 30,			June 30,			%
	2021			2020			Change
	(in thousands)
Backlog	$	138,131		$	103,508		33.4	%
Cash & cash equivalents & restricted cash	112,119			70,845			58.3	%

Net sales for the three months ended June 30, 2021 increased 14.6% to an all time record high of $143.9 million from $125.6 million in the same period in 2020. The year over year increase in net sales was driven by robust replacement demand broadly across the nonresidential building market that increased our volume 24.6%. The return to historical employee attendance levels helped drive our production up year over year which led to an increase in our overall revenues even as our product mix shifted to lower priced units. The Company reported diluted EPS of $0.38, up 11.8% from $0.34 in the prior year period. The increase in EPS was driven by the higher revenue, improved productivity, lower SG&A expenses as a percent of sales and a lower tax rate, partially offset by inflationary cost pressures. The lower tax rate compared to a year ago was associated with lower corporate income tax rates in the state of Oklahoma that were signed into law during the quarter. This resulted in a one-time benefit of $0.8 million, and will also lower our effective rate starting in 2022.

The Company finished the quarter with a backlog of $138.1 million, up from $103.5 million one year ago and up from $96.7 million at the end of the first quarter of 2021. The sequential improvement in backlog reflects the improved demand that we experienced throughout the second quarter. New bookings in the quarter increased approximately 70% compared to the same period one year ago.

Gary Fields, President and CEO, stated "Our performance in the second quarter was better than we expected. Organic sales growth of 14.6% was particularly noteworthy. Unlike much of the commercial HVAC market that faced a very easy year over year comparison due to the effects the pandemic had on the market in the second quarter of 2020, we did not face such a comparison. Our sales in the second quarter of 2020 were up year over year 5% versus the commercial market being down approximately 20%-25%. We were also pleased with our gross profit performance, especially considering the inflationary challenges of tight labor markets and increased raw material costs. We will continue to improve productivity and increase prices to counteract these cost pressures."

Mr. Fields continued “Looking to the second half of the year, we are optimistic sales and earnings growth will accelerate. The backlog at the end of the second quarter was up 33.4% from a year ago and 42.8% from the end of the first quarter, which positions us well. Order trends are robust and we show no sign of slowing. We are particularly optimistic considering the new construction market has yet to recover from the pandemic-related downturn. That said, we are seeing early signs of a strong recovery in new construction project planning. In addition to robust demand, we are optimistic our gross profit will continue to improve. Our disciplined pricing strategy combined with expected productivity improvements should drive higher gross and operating profits. Lastly, we continue to manage the business for the long-term as we maintain a positive outlook on the fundamentals of the company over the next several years.”

As of June 30, 2021, the Company had no debt and unrestricted cash and cash equivalents of $111.4 million, which is up from $79.0 million at the end of 2020. Capital expenditures during the first six months of 2021 were $33.2 million, as compared to $33.5 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 on August 6, 2021 at 9:00 A.M. (Eastern Time) to discuss the second quarter 2021 results. To participate, call 1-888-241-0551 (code 6788945); or, for rebroadcast available through August 13, 2021, call 1-855-859-2056 (code 6788945).

About AAON

AAON, 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 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> June 30,				Six Months Ended <br> June 30,
	2021		2020		2021		2020
	(in thousands, except share and per share data)
Net sales	$	143,876	$	125,596	$	259,664	$	263,079
Cost of sales	101,769		87,465		184,400		182,001
Gross profit	42,107		38,131		75,264		81,078
Selling, general and administrative expenses	16,895		15,939		31,591		31,153
(Gain) loss on disposal of assets	—		—		—		(62)
Income from operations	25,212		22,192		43,673		49,987
Interest (expense), income, net	(4)		19		(1)		80
Other income (expense), net	39		32		56		5
Income before taxes	25,247		22,243		43,728		50,072
Income tax provision	4,632		4,439		6,737		10,415
Net income	$	20,615	$	17,804	$	36,991	$	39,657
Earnings per share:
Basic	$	0.39	$	0.34	$	0.71	$	0.76
Diluted	$	0.38	$	0.34	$	0.69	$	0.75
Cash dividends declared per common share:	$	0.19	$	0.19	$	0.19	$	0.19
Weighted average shares outstanding:
Basic	52,432,822		52,099,694		52,389,989		52,160,348
Diluted	53,603,932		52,750,401		53,736,134		52,885,491
AAON, Inc. and Subsidiaries
---	---	---	---	---
Consolidated Balance Sheets
(Unaudited)
	June 30, 2021		December 31, 2020
Assets	(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents	$	111,427	$	79,025
Restricted cash	692		3,263
Accounts receivable, net of allowance for credit losses of $518 and $506, respectively	53,311		47,387
Income tax receivable	3,339		4,587
Note receivable	32		31
Inventories, net	87,399		82,219
Prepaid expenses and other	2,940		3,739
Total current assets	259,140		220,251
Property, plant and equipment:
Land	5,016		4,072
Buildings	129,607		122,171
Machinery and equipment	301,964		281,266
Furniture and fixtures	20,726		18,956
Total property, plant and equipment	457,313		426,465
Less: Accumulated depreciation	217,549		203,125
Property, plant and equipment, net	239,764		223,340
Goodwill and intangible assets, net	3,229		3,267
Right of use assets	1,472		1,571
Note receivable	579		579
Total assets	$	504,184	$	449,008
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	21,250	$	12,447
Dividends payable	9,970		—
Accrued liabilities	47,291		46,586
Total current liabilities	78,511		59,033
Deferred tax liabilities	31,071		28,324
Other long-term liabilities	4,493		4,423
New market tax credit obligation	6,383		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, 52,416,014 and 52,224,767 issued and outstanding at June 30, 2021 and December 31, 2020, respectively	210		209
Additional paid-in capital	10,998		5,161
Retained earnings	372,518		345,495
Total stockholders' equity	383,726		350,865
Total liabilities and stockholders' equity	$	504,184	$	449,008
AAON, Inc. and Subsidiaries
---	---	---	---	---
Consolidated Statements of Cash Flows
(Unaudited)
	Six Months Ended <br> June 30,
	2021		2020
Operating Activities	(in thousands)
Net income	$	36,991	$	39,657
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,924		12,340
Amortization of debt issuance cost	20		20
Provision for credit losses on accounts receivable, net of adjustments	12		76
Provision (recoveries) for excess and obsolete inventories	292		(193)
Share-based compensation	5,793		5,694
(Gain) loss on disposition of assets	—		(62)
Foreign currency transaction (gain) loss	(11)		30
Interest income on note receivable	(19)		(12)
Deferred income taxes	2,747		5,061
Changes in assets and liabilities:
Accounts receivable	(5,936)		10,929
Income taxes	1,248		(4,382)
Inventories	(5,472)		(11,617)
Prepaid expenses and other	799		(568)
Accounts payable	10,650		2,893
Deferred revenue	574		473
Accrued liabilities	300		2,423
Net cash provided by operating activities	62,912		62,762
Investing Activities
Capital expenditures	(33,157)		(33,510)
Proceeds from sale of property, plant and equipment	2		61
Principal payments from note receivable	29		25
Net cash used in investing activities	(33,126)		(33,424)
Financing Activities
Stock options exercised	11,848		14,173
Repurchase of stock	(10,271)		(15,937)
Employee taxes paid by withholding shares	(1,532)		(1,102)
Net cash provided by (used in) financing activities	45		(2,866)
Net increase in cash, cash equivalents and restricted cash	29,831		26,472
Cash, cash equivalents and restricted cash, beginning of period	82,288		44,373
Cash, cash equivalents and restricted cash, end of period	$	112,119	$	70,845

Use of Non-GAAP Financial Measures

To 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.

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.

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 <br> June 30,				Six Months Ended <br> June 30,
	2021		2020		2021		2020
	(in thousands)
Net Income, a GAAP measure	$	20,615	$	17,804	$	36,991	$	39,657
Depreciation and amortization	7,526		6,338		14,924		12,340
Interest expense (income), net	4		(19)		1		(80)
Income tax expense	4,632		4,439		6,737		10,415
EBITDA, a non-GAAP measure	$	32,777	$	28,562	$	58,653	$	62,332