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| 8-K - FORM 8-K - APPLIED INDUSTRIAL TECHNOLOGIES INC | l41647e8vk.htm |
EXHIBIT 99.1
| Applied Industrial Technologies Reports | ||
| Fiscal 2011 Second Quarter Results | ||
| • | 100% Earnings Increase on 19% Sales Gain | |
| • | Sales and Earnings Guidance Raised | |
CLEVELAND, OHIO (January 21, 2011) — Applied Industrial Technologies (NYSE: AIT) today reported
second quarter fiscal 2011 sales and earnings for the three months ended December 31, 2010.
Net sales for the second quarter increased 18.7% to $529,517,000 from $446,253,000 in the
comparable period a year ago. Net income for the quarter increased 102% to $21,193,000 or $0.49
per share compared to $10,487,000 or $0.24 per share last year.
For the six months ended December 31, 2010, sales were $1,057,018,000 compared to $883,996,000 in
the same period last year. Net income was $41,948,000 or $0.97 per share compared to $21,674,000
or $0.51 per share, last year.
“We were once again pleased with the strength of our quarterly results, and with our ability to
efficiently convert sales increases to proportionately higher levels of profitability,” said David
L. Pugh, Applied’s Chairman & Chief Executive Officer. “Our strong performance is fueled by the
recovering industrial economy and, in particular, exceptional results within those segments of our
fluid power business that provide products and solutions for
automation and machine control applications.
“We continue to execute the business fundamentals quite well with a focus on cost control and
operational efficiency. We generated a second quarter operating margin of 6.2%, up from 4.2% in
the same quarter a year ago, further demonstrating that we are actively managing our business with
the increased pace of the economy. We also paid off the remainder of our existing debt, further
improving our capacity to grow our business for the future.
“We believe that we will continue to see moderate growth in our daily sales run rates from the
current levels throughout the remaining two quarters of our fiscal year. Based on the strength of
our second quarter performance, we are raising our earnings guidance for the full fiscal year 2011
and now expect to achieve earnings of $1.90 to $2.10 per share compared to our previous forecast of
$1.80 to $2.05 per share. We are raising the low end of our full-year sales guidance from
$2.05 billion to $2.15 billion and maintaining our high end estimate of $2.25 billion.”
The Company did not repurchase any shares during the quarter. At December 31, 2010, the Company
had remaining authorization to purchase 837,200 additional shares.
The Company will host its quarterly conference call for investors and analysts at 11 a.m. ET on
January 21, 2011. To join the call, dial 1-800-774-6070 or 1-630-691-2753 (for International
callers) using passcode 9629151. The call will be conducted by Chairman & CEO David Pugh, President
& COO Benjamin Mondics, and CFO Mark Eisele. A live audio webcast can be accessed online at
www.Applied.com. A replay of the call will be available for two weeks by dialing 1-888-843-7419 or
1-630-652-3042 (International) using passcode 9629151.
With approximately 470 facilities and 4,600 employee associates across North America,
Applied Industrial Technologies is an industrial distributor that offers more than 4 million
parts critical to the operations of MRO and OEM customers in virtually every industry.
In addition, Applied provides engineering, design and systems integration for industrial
and fluid power applications, as well as customized mechanical, fabricated rubber and
fluid power shop services. Applied also offers maintenance training, plus solutions to
meet inventory and storeroom management needs that help provide enhanced value to its
customers. For its fiscal year ended June 30, 2010, Applied posted sales of $1.89 billion.
Applied can be visited on the Internet at http://www.applied.com.
This press release contains statements that are forward-looking, as that term is defined by the
Securities and Exchange Commission in its rules, regulations and releases. Forward-looking
statements are often identified by qualifiers such as “see,” “expect,” “believe,” “will,”
“guidance,” and similar expressions. Applied intends that such forward-looking statements be
subject to the safe harbors created thereby. All forward-looking statements are based on current
expectations regarding important risk factors including trends in the industrial sector of the
economy, and other risk factors identified in Applied’s most recent periodic report and other
filings made with the Securities and Exchange Commission. Accordingly, actual results may differ
materially from those expressed in the forward-looking statements, and the making of such
statements should not be regarded as a representation by the Company or any other person that the
results expressed therein will be achieved. Applied assumes no obligation to update publicly or
revise any forward-looking statements, whether due to new information, or events, or otherwise,
except as required by law.
#####
For investor relations information, contact Mark O. Eisele, Vice President — Chief Financial
Officer, at 216-426-4417. For corporate information, contact Richard C. Shaw, Vice President —
Communications, at 216-426-4343.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(In thousands, except per share data)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(In thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
$ | 529,517 | $ | 446,253 | $ | 1,057,018 | $ | 883,996 | ||||||||
Cost of sales |
385,236 | 329,348 | 769,617 | 651,647 | ||||||||||||
| 144,281 | 116,905 | 287,401 | 232,349 | |||||||||||||
Selling, distribution and administrative,
including depreciation |
111,225 | 98,002 | 219,454 | 195,805 | ||||||||||||
Operating Income |
33,056 | 18,903 | 67,947 | 36,544 | ||||||||||||
Interest expense, net |
458 | 1,333 | 1,582 | 2,547 | ||||||||||||
Other expense (income), net |
(421 | ) | 58 | (764 | ) | (245 | ) | |||||||||
Income Before Income Taxes |
33,019 | 17,512 | 67,129 | 34,242 | ||||||||||||
Income Tax Expense |
11,826 | 7,025 | 25,181 | 12,568 | ||||||||||||
Net Income |
$ | 21,193 | $ | 10,487 | $ | 41,948 | $ | 21,674 | ||||||||
Net Income Per Share — Basic |
$ | 0.50 | $ | 0.25 | $ | 0.99 | $ | 0.51 | ||||||||
Net Income Per Share — Diluted |
$ | 0.49 | $ | 0.24 | $ | 0.97 | $ | 0.51 | ||||||||
Average Shares Outstanding — Basic |
42,411 | 42,298 | 42,391 | 42,287 | ||||||||||||
Average Shares Outstanding — Diluted |
43,298 | 42,830 | 43,217 | 42,793 | ||||||||||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Applied uses the last-in, first-out (LIFO) method of valuing U.S. inventory. An actual
valuation of inventory under the LIFO method can only be made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations
are based on management’s estimates of expected year-end inventory levels and costs and are subject
to the final year-end LIFO inventory determination.
There were no material LIFO layer liquidation benefits recognized for the period ended December 31,
2010. During the quarter and six months ended December 31, 2009, the Company recorded a LIFO
benefit as part of a LIFO layer liquidation, that reduced cost of goods sold by $1.8 million and
$2.5 million, respectively, and reduced the LIFO reserve by the same amount. The overall effect of
the LIFO layer liquidations during the quarter and six months ending December 31, 2009 increased
gross profit by $5.7 million and $10.0 million respectively.
(2) In July and August 2010, the Company completed two acquisitions for an aggregate cash
purchase price of $32 million. UZ Engineered Products (UZ) is a distributor of industrial supply
products for maintenance, repair, and operational needs, in the government and commercial sectors,
throughout the US and Canada. SCS Supply Group, Inc. (SCS) is a distributor of bearings, power
transmission, electrical, fluid power products and industrial supplies in Canada.
Results of operations for the acquired businesses are included in the Company’s Service Center
Based Distribution segment results of operations from the date of closing.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
| December 31, | June 30, | |||||||
| 2010 | 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 53,915 | $ | 175,777 | ||||
Accounts receivable, net of allowances of $6,308 and $6,379 |
250,671 | 246,402 | ||||||
Inventories |
194,991 | 173,253 | ||||||
Other current assets |
29,392 | 23,428 | ||||||
Total current assets |
528,969 | 618,860 | ||||||
Property, net |
67,357 | 58,471 | ||||||
Intangibles, net |
93,389 | 85,916 | ||||||
Goodwill |
74,587 | 63,405 | ||||||
Other assets |
65,328 | 64,868 | ||||||
Total Assets |
$ | 829,630 | $ | 891,520 | ||||
Liabilities |
||||||||
Accounts payable |
$ | 86,957 | $ | 94,529 | ||||
Short-term debt |
75,000 | |||||||
Other accrued liabilities |
85,183 | 101,803 | ||||||
Total current liabilities |
172,140 | 271,332 | ||||||
Other liabilities |
68,249 | 65,149 | ||||||
Total Liabilities |
240,389 | 336,481 | ||||||
Shareholders’ Equity |
589,241 | 555,039 | ||||||
Total Liabilities and Shareholders’ Equity |
$ | 829,630 | $ | 891,520 | ||||
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2010 | 2009 | |||||||
Cash Flows from Operating Activities |
||||||||
Net income |
$ | 41,948 | $ | 21,674 | ||||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||
Depreciation |
5,496 | 5,770 | ||||||
Amortization of intangibles |
5,678 | 5,047 | ||||||
Amortization of stock options and appreciation rights |
1,569 | 2,275 | ||||||
(Gain) loss on sale of property |
(20 | ) | (116 | ) | ||||
Treasury shares contributed to employee benefit, deferred
compensation and other share-based compensation plans |
2,110 | 777 | ||||||
Changes in assets and liabilities, net of acquisitions |
(37,934 | ) | 59,705 | |||||
Other, net |
1,119 | 531 | ||||||
Net Cash provided by Operating Activities |
19,966 | 95,663 | ||||||
Cash Flows from Investing Activities |
||||||||
Property purchases |
(13,804 | ) | (2,951 | ) | ||||
Proceeds from property sales |
124 | 421 | ||||||
Net cash paid for acquisition of businesses, net of cash acquired |
(27,739 | ) | (100 | ) | ||||
Net Cash used in Investing Activities |
(41,419 | ) | (2,630 | ) | ||||
Cash Flows from Financing Activities |
||||||||
Repayments under revolving credit facility |
(50,000 | ) | (5,000 | ) | ||||
Long-term debt repayments |
(25,000 | ) | ||||||
Settlements of cross currency swap agreements |
(12,752 | ) | ||||||
Dividends paid |
(14,422 | ) | (12,699 | ) | ||||
Excess tax benefits from share-based compensation |
778 | 251 | ||||||
Exercise of stock options and appreciation rights |
338 | 205 | ||||||
Net Cash used in Financing Activities |
(101,058 | ) | (17,243 | ) | ||||
Effect of Exchange Rate Changes on Cash |
649 | 771 | ||||||
(Decrease) increase in cash and cash equivalents |
(121,862 | ) | 76,561 | |||||
Cash and cash equivalents at beginning of period |
175,777 | 27,642 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 53,915 | $ | 104,203 | ||||