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| 8-K - 8-K - APPLIED INDUSTRIAL TECHNOLOGIES INC | d287331d8k.htm |
Exhibit 99.1
Applied Industrial Technologies Reports
Fiscal 2012 Second Quarter Results
CLEVELAND, OHIO (January 25, 2012) – Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2012 sales and earnings for the three months ended December 31, 2011.
Net sales for the second quarter increased 7.7% to $570,397,000 from $529,517,000 in the comparable period a year ago. Net income for the quarter was $20,935,000 or $0.49 per share compared to $21,193,000 or $0.49 per share last year. Earnings for the quarter were reduced by $4.4 million (pre-tax), or $0.07 per share, due to one-time costs resulting from two items: CEO transition expense and freezing the Company’s Supplemental Executive Retirement Benefits Plan (“SERP”).
“The curtailment of the SERP is one of our actions to better align executive compensation with broader shareholder interests. The changes will reduce costs associated with executive retirement compensation in the current fiscal year and going forward,” said Neil A. Schrimsher, Applied’s Chief Executive Officer.
For the six months ended December 31, 2011, sales were $1,149,971,000 compared to $1,057,018,000 in the same period last year. Net income was $47,317,000 or $1.11 per share compared to $41,948,000 or $0.97 per share, last year.
“We are encouraged about our business prospects for the remainder of the fiscal year, and based on our second quarter results and the current state of the industrial economy, we are maintaining our full fiscal 2012 guidance for earnings per share between $2.40 and $2.55, on expected sales of $2.35 billion to $2.45 billion,” said Schrimsher.
“In addition to the day-to-day operation of our business, we are updating our long-range strategic plan to accelerate growth. We are in the process of identifying numerous organic growth opportunities with existing and new customers, targeting attractive vertical markets, expanding our product and solutions offering, and building the acquisition pipeline. Operationally, the plan will include generation of continuous improvement across our operating landscape today and benefits from leveraging our new ERP system over the strategic horizon.
“Applied has a strong business foundation. As a leadership team, we are confident in our ability to expand beyond our current offerings and existing geographies – generating strong shareholder value and benefits for all Applied stakeholders.”
The Company will host its quarterly conference call for investors and analysts at 4 p.m. ET on January 25, 2012. To join the call, dial 1-800-927-0469 or 1-847-944-7323 (for International callers) using passcode 31437080. The call will be conducted by CEO Neil Schrimsher, 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 31437080.
With approximately 480 facilities and 4,700 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, 2011, Applied posted sales of $2.2 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 “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.
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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)
| Three Months Ended December 31, |
Six Months Ended December 31, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net Sales |
$ | 570,397 | $ | 529,517 | $ | 1,149,971 | $ | 1,057,018 | ||||||||
| Cost of sales |
414,928 | 385,236 | 835,798 | 769,617 | ||||||||||||
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| Gross Profit |
155,469 | 144,281 | 314,173 | 287,401 | ||||||||||||
| Selling, distribution and administrative, including depreciation |
122,134 | 111,225 | 237,571 | 219,454 | ||||||||||||
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| Operating Income |
33,335 | 33,056 | 76,602 | 67,947 | ||||||||||||
| Interest expense, net |
10 | 458 | 57 | 1,582 | ||||||||||||
| Other expense (income), net |
778 | (421 | ) | 2,710 | (764 | ) | ||||||||||
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| Income Before Income Taxes |
32,547 | 33,019 | 73,835 | 67,129 | ||||||||||||
| Income Tax Expense |
11,612 | 11,826 | 26,518 | 25,181 | ||||||||||||
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| Net Income |
$ | 20,935 | $ | 21,193 | $ | 47,317 | $ | 41,948 | ||||||||
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| Net Income Per Share - Basic |
$ | 0.50 | $ | 0.50 | $ | 1.12 | $ | 0.99 | ||||||||
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| Net Income Per Share - Diluted |
$ | 0.49 | $ | 0.49 | $ | 1.11 | $ | 0.97 | ||||||||
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| Average Shares Outstanding - Basic |
41,965 | 42,411 | 42,181 | 42,391 | ||||||||||||
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| Average Shares Outstanding - Diluted |
42,634 | 43,298 | 42,801 | 43,217 | ||||||||||||
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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 quarter ended December 31, 2011 and 2010, nor are any expected to be realized for the year ending June 30, 2012. We recorded overall LIFO benefits in the quarter and six months ended December 31, 2010 of $1.8 million and $2.1 million, respectively and LIFO reserves were reduced by the same amount.
(2) On December 19, 2011, the Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. As a result, we incurred a curtailment loss of approximately $3.1 million in the second quarter of fiscal 2012. Curtailment of the plan is expected to reduce pension costs in future periods.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
| December 31, 2011 |
June 30, 2011 |
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| Assets |
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| Cash and cash equivalents |
$ | 70,512 | $ | 91,092 | ||||
| Accounts receivable, net of allowances of $7,376 and $7,016 |
280,700 | 290,751 | ||||||
| Inventories |
222,626 | 204,066 | ||||||
| Other current assets |
36,113 | 33,005 | ||||||
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| Total current assets |
609,951 | 618,914 | ||||||
| Property, net |
76,659 | 69,014 | ||||||
| Intangibles, net |
82,968 | 89,551 | ||||||
| Goodwill |
75,517 | 76,981 | ||||||
| Other assets |
52,918 | 60,471 | ||||||
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| Total Assets |
$ | 898,013 | $ | 914,931 | ||||
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| Liabilities |
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| Accounts payable |
$ | 105,591 | $ | 108,509 | ||||
| Other accrued liabilities |
93,373 | 106,179 | ||||||
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| Total current liabilities |
198,964 | 214,688 | ||||||
| Other liabilities |
52,863 | 66,680 | ||||||
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| Total Liabilities |
251,827 | 281,368 | ||||||
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| Shareholders’ Equity |
646,186 | 633,563 | ||||||
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| Total Liabilities and Shareholders’ Equity |
$ | 898,013 | $ | 914,931 | ||||
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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
| Six Months Ended December 31, |
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| 2011 | 2010 | |||||||
| Cash Flows from Operating Activities |
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| Net income |
$ | 47,317 | $ | 41,948 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization of property |
5,598 | 5,496 | ||||||
| Amortization of intangibles |
5,544 | 5,678 | ||||||
| Amortization of stock options and appreciation rights |
1,139 | 1,569 | ||||||
| Gain on sale of property |
(492 | ) | (20 | ) | ||||
| Other share-based compensation expense |
2,523 | 2,110 | ||||||
| Changes in assets and liabilities, net of acquisitions |
(33,246 | ) | (37,934 | ) | ||||
| Other, net |
1,833 | 1,119 | ||||||
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| Net Cash provided by Operating Activities |
30,216 | 19,966 | ||||||
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| Cash Flows from Investing Activities |
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| Property purchases |
(14,022 | ) | (13,804 | ) | ||||
| Proceeds from property sales |
981 | 124 | ||||||
| Net cash paid for acquisition of businesses, net of cash acquired |
(1,241 | ) | (27,739 | ) | ||||
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| Net Cash used in Investing Activities |
(14,282 | ) | (41,419 | ) | ||||
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| Cash Flows from Financing Activities |
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| Repayments under revolving credit facility |
(50,000 | ) | ||||||
| Long-term debt repayments |
(25,000 | ) | ||||||
| Settlements of cross currency swap agreements |
(12,752 | ) | ||||||
| Purchase of treasury shares |
(18,990 | ) | ||||||
| Dividends paid |
(16,077 | ) | (14,422 | ) | ||||
| Excess tax benefits from share-based compensation |
569 | 778 | ||||||
| Exercise of stock options and appreciation rights |
154 | 338 | ||||||
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| Net Cash used in Financing Activities |
(34,344 | ) | (101,058 | ) | ||||
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| Effect of Exchange Rate Changes on Cash |
(2,170 | ) | 649 | |||||
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| Decrease in cash and cash equivalents |
(20,580 | ) | (121,862 | ) | ||||
| Cash and cash equivalents at beginning of period |
91,092 | 175,777 | ||||||
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| Cash and Cash Equivalents at End of Period |
$ | 70,512 | $ | 53,915 | ||||
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