AAON(US:AAON)2024-08-01 20:15Sales Performance - For the three months ended June 30, 2024, total net sales reached $313.566 million, a significant increase from $283.957 million for the same period in 2023, representing a growth of approximately 10.4%[25] - Rooftop units generated $203.642 million in sales for the three months ended June 30, 2024, compared to $196.065 million in the same period of 2023, reflecting a year-over-year increase of about 3.0%[25] - The company reported total net sales of $575.665 million for the six months ended June 30, 2024, up from $549.910 million for the same period in 2023, indicating a growth of approximately 4.7%[27] - The sales of condensing units for the three months ended June 30, 2024, were $15.433 million, compared to $11.390 million in the same period of 2023, marking an increase of approximately 35.5%[25] - The net sales for the three months ended June 30, 2024, were $313.6 million, compared to $284.0 million for the same period in 2023, representing a 10.0% increase[103] - Gross profit for the three months ended June 30, 2024, was $113.1 million, up from $94.0 million in the same period of 2023, reflecting a 20.3% increase[103] - The Company recorded external sales of $225.7 million for AAON Oklahoma in the three months ended June 30, 2024, compared to $218.2 million in the same period of 2023[103] Revenue Recognition and Accounting Practices - The company recognizes revenue over time for customized products, as they do not have an alternative use without significant costs, ensuring revenue is aligned with contract performance obligations[29] - The estimated cost of maintaining product warranties is recorded at the time of sale, based on historical claims experience, ensuring accurate financial forecasting and liability management[32] - The company capitalizes on software development costs for internal use, amortizing these costs over an estimated useful life of one to six years, reflecting a strategic investment in technology[19] - The company evaluates its intangible assets for impairment at least annually, ensuring that the carrying values reflect current market conditions and operational performance[20] Financial Position and Liabilities - Accounts receivable increased to $150.641 million as of June 30, 2024, from $138.431 million at the end of 2023, with a net allowance for credit losses of $1.492 million[39] - Total inventories decreased to $182.988 million as of June 30, 2024, from $213.532 million at the end of 2023, with raw materials at $181.403 million[43] - The net value of intangible assets increased to $75.560 million as of June 30, 2024, from $68.053 million at the end of 2023, driven by capitalized internal-use software growth[44] - Warranty accrual balance increased to $21.632 million as of June 30, 2024, compared to $16.900 million at the end of 2023, reflecting higher warranty expenses[49] - The company has operating leases with right-of-use assets valued at $16.086 million as of June 30, 2024, up from $11.774 million at the end of 2023[35] - Accrued liabilities totaled $85,499 thousand as of June 30, 2024, slightly down from $85,508 thousand on December 31, 2023[51] - Other long-term liabilities increased to $21,170 thousand as of June 30, 2024, compared to $16,807 thousand on December 31, 2023[52] - The company had $85.9 million outstanding under the revolving credit facility as of June 30, 2024, up from $38.3 million on December 31, 2023[53] - The leverage ratio was 0.3 to 1.0 as of June 30, 2024, well below the maximum requirement of 3 to 1[54] Taxation - The provision for income taxes for the three months ended June 30, 2024, was $14,779 thousand, compared to $7,678 thousand for the same period in 2023[56] - The effective tax rate for the three months ended June 30, 2024, was 22.1%, significantly higher than 14.4% for the same period in 2023[58] - Income taxes paid in Q2 2024 were $28.359 million, a decrease from $33.471 million in Q2 2023[47] - The company has investment tax credit carryforwards of approximately $1.1 million, with expirations estimated from 2039 to 2043[57] Stock and Compensation - The company declared a three-for-two stock split effective August 16, 2023, impacting all share and per share information[60] - The total pre-tax compensation cost related to unvested stock options not yet recognized is $12.8 million, expected to be recognized over approximately 2.1 years[64] - The total share-based compensation expense for the six months ended June 30, 2024, was $8.451 million, compared to $7.823 million for the same period in 2023[74] - The company matched 175% up to 6% of employee contributions to the defined contribution plan, with contributions of $10.076 million for the six months ended June 30, 2024[75] - The discretionary profit sharing bonus plan pays approximately 8.5% of pre-tax profit to eligible employees, with a previous rate of 10% before January 1, 2024[76] - For the three months ended June 30, 2024, the profit sharing bonus plan and employee incentive plan expense was $6,477,000, compared to $5,952,000 for the same period in 2023, reflecting an increase of 8.8%[77] Debt and Interest - Interest paid in Q2 2024 was $153,000, significantly lower than $1.506 million in Q2 2023[47] - The weighted average interest rate on borrowings outstanding on the revolving credit facility was 6.6% for the three months ended June 30, 2024, compared to 6.3% for the same period in 2023[53] - A one percentage point increase in interest rates applicable to the company's outstanding debt would decrease annual income before taxes by approximately $0.9 million[148] Other Financial Activities - The Company received a $23.0 million NMTC allocation for the 2023 Project and secured low interest financing with potential future debt forgiveness[95] - The Company provided approximately $16.7 million to the 2023 Investor as a loan receivable, with a term of 25 years at an interest rate of 1.0%[95] - The 2024 NMTC transaction resulted in a $15.5 million NMTC allocation, with the Company providing approximately $11.0 million to the 2024 Investor[96] - The Company executed a five-year purchase commitment for refrigerants, with estimated minimum future payments of $5.3 million for 2024[99] - The Company incurred approximately $0.4 million of debt issuance costs related to the NMTC transactions, amortized over the life of the transaction[95] - The Company settled a litigation case with Havtech for $7.5 million, which was finalized on October 26, 2023[98] - Long-lived assets increased to $429.3 million as of June 30, 2024, compared to $381.7 million as of December 31, 2023[105] - The company is exposed to commodity price volatility and manages this risk through cancellable and noncancellable contracts with major suppliers for periods of six to 18 months[147]