AAON(AAON) - 2023 Q4 - Annual Report

Sales and Market Performance - In 2023, foreign sales accounted for approximately $39.9 million, representing 3.4% of net sales, compared to$ 27.6 million (3.1%) in 2022 and $14.8 million (3.0%) in 2021[12] - Major customer Texas AirSystems accounted for approximately 13.8% of sales in 2023, with additional sales through affiliated groups contributing 2.3%[23] - The company has seen a shift in sales patterns, with sales becoming more constant throughout the year due to increased demand and backlog[33] Business Segments and Strategy - The company operates through three business segments: AAON Oklahoma, AAON Coil Products, and BASX, focusing on HVAC systems and solutions[9] - The company emphasizes a business strategy of mass semi-customization, leveraging flexible manufacturing systems to produce highly configurable HVAC equipment[11] - The integration of acquired businesses is a key strategy for realizing synergies and cost savings, contributing to overall financial performance[6] Product Performance and Innovation - The performance characteristics of products range in cooling capacity from 2 to 261 tons and heating capacity from 7,200 to 4,500,000 BTUs, with many products exceeding minimum efficiency standards[15] - The company’s products are engineered for performance and flexibility, with a focus on meeting evolving regulatory standards in the HVAC industry[29] - The company’s innovative ASHPs are capable of operating in ambient temperatures as low as zero degrees Fahrenheit, addressing the demand for building decarbonization[13] Research and Development - The company’s research and development efforts are focused on energy performance, durability, efficiency, and indoor air quality, ensuring compliance with various regulatory standards[12] - Research and development expenses were approximately$ 43.7 million in 2023, reflecting a commitment to product performance and innovation[29] - The company operates a unique research and development laboratory, the NAIC, which includes capabilities for testing large HVAC systems, enhancing its competitive edge in the industry[29] Sustainability and Environmental Responsibility - The company achieved Platinum level in the Sustainability Alliance Scor3card program in both 2023 and 2022, indicating high performance in sustainability metrics[36] - Approximately 36% of the company's energy portfolio is currently derived from renewable sources, with ongoing efforts to increase this percentage[36] - The company is committed to reducing greenhouse gas emissions and increasing the percentage of non-fossil fuel powered units produced[36] Employee and Operational Growth - The total number of employees increased to 3,856 as of February 20, 2024, up from 3,666 in 2023 and 2,881 in 2022[38] - The company offers competitive employee benefits, including a 401(k) plan with a 175% employer match and a profit-sharing bonus plan[38] - The company has a program to enhance service capabilities across its North America representative network, providing training and business plan assistance[20] Manufacturing and Supply Chain - The company has multiple suppliers for raw materials, ensuring adequate supply to meet manufacturing requirements for the foreseeable future[26] - The company’s controls division provides factory-developed control options that enhance the unique features of its HVAC products, ensuring compliance with safety and quality standards[15] Backlog and Order Fulfillment - The company's backlog as of February 1, 2024, was approximately $507.7 million, with lead times for fulfilling orders generally around 11 weeks[24] - The backlog as of February 1, 2024, was approximately$ 507.7 million, with lead times to fulfill orders generally around 11 weeks[24] Waste Management and Recycling - The company successfully diverted over 694 tons of waste from landfills in 2023 through partnerships with waste-to-energy facilities, compared to 668 tons in 2022 and 460 tons in 2021[36] - The company recycled over 13,678 tons of metal at its Tulsa and Longview facilities in 2023, compared to 14,928 tons in 2022 and 13,793 tons in 2021[36]