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Applied Industrial Technologies Reports Fiscal 2010 Third Quarter Results

CLEVELAND, April 22, 2010 /PRNewswire via COMTEX/ --Applied Industrial Technologies (NYSE: AIT) today reported sales and earnings for its fiscal 2010 third quarter, ended March 31, 2010.

Net sales for the third quarter increased 7.6% to $486,141,000 compared to $451,647,000 in the same period last year. Net income for the quarter increased 43% to $16,525,000 or $0.39 per share compared to $11,560,000 or $0.27 per share last year.

For the nine months ended March 31, 2010, sales were $1,370,137,000 compared to $1,497,965,000 in the same period last year. Net income was $38,199,000 or $0.89 per share compared to $50,290,000 or $1.17 per share, last year.

Commenting on the Company's performance, Applied Chairman & Chief Executive Officer David L. Pugh said, "We were very pleased to see a return to growth and increasing profitability in the quarter. While the comparables were relatively easy, it is still encouraging to see broad-scale activity in the industries we serve. As we talk with our customers and our suppliers, we are cautiously optimistic for moderate economic recovery through the remainder of our fiscal year.

"Even with our sales improvement, we are continuing to focus on the fundamentals of our business with tight cost control and asset management. Our asset management effort is an example of the process improvements we have made during the recession that will be beneficial to our business going forward. During the quarter, our balance sheet showed good improvement as our efforts to reduce inventories and to manage receivables helped us generate strong cash flow.

"For fiscal 2010, we are raising our guidance and now expect earnings per share to be in the range of $1.18 to $1.33 on sales of $1.85 billion to $1.90 billion." Previously, the Company's guidance was for earnings per share of $0.95 to $1.25 on sales of $1.75 to $1.85 billion.

During the quarter, the Company purchased 117,000 shares of its common stock in open market transactions for $2.74 million. At March 31, 2010, the Company had remaining authorization to repurchase 880,100 additional shares.

Applied will host its conference call for investors and analysts at 2 p.m. ET today, Thursday, April 22. The call will be conducted by Chairman & CEO David L. Pugh, President & COO Benjamin J. Mondics and Vice President & CFO Mark O. Eisele. To join the call, dial 1-888-517-2458 (for US/Canada callers) or 1-847-413-3538 (for International callers) prior to the scheduled start using passcode 8221480. A live audio webcast can be accessed online at http://www.applied.com/. A replay of the teleconference will be available for two weeks by dialing 1-888-843-8996 or 1-630-652-3044 using passcode 8221480.

With approximately 460 facilities and 4,500 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 3 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, 2009, Applied posted sales of $1.9 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 "expect" 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.

               APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                    CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                    -------------------------------------------
                   (Amounts in thousands, except per share data)


                                 Three Months Ended      Nine Months Ended
                                      March 31,              March 31,
                                   2010       2009        2010        2009
                                   ----       ----        ----        ----
    Net Sales                  $486,141   $451,647  $1,370,137  $1,497,965
    Cost of sales               355,785    329,401   1,007,432   1,094,192
    -------------               -------    -------   ---------   ---------
                                130,356    122,246     362,705     403,773
    Selling, distribution and
     administrative,            103,319    101,227     299,124     316,572
    -------------------------   -------    -------     -------     -------
      including depreciation
      ----------------------
    Operating Income             27,037     21,019      63,581      87,201
    Interest expense, net         1,374      1,183       3,921       3,170
    Other (income) expense,
     net                           (397)        83        (642)      3,123
    -----------------------        ----        ---        ----       -----
    Income Before Income Taxes   26,060     19,753      60,302      80,908
    Income Tax Expense            9,535      8,193      22,103      30,618
    Net Income                  $16,525    $11,560     $38,199     $50,290
    ----------                  -------    -------     -------     -------
    Net Income Per Share -
     Basic                        $0.39      $0.27       $0.90       $1.19
    ======================        =====      =====       =====       =====
    Net Income Per Share -
     Diluted                      $0.39      $0.27       $0.89       $1.17
    ======================        =====      =====       =====       =====
    Average Shares Outstanding
     -Basic                      42,321     42,244      42,298      42,292
    ==========================   ======     ======      ======      ======
    Average Shares Outstanding
     -Diluted                    42,902     42,662      42,812      42,800
    ==========================   ======     ======      ======      ======



    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.

          Applied began a planned effort to reduce excess inventories in July
          of 2009 and we estimate that certain U.S. inventories will be
          reduced during fiscal 2010.  These reductions will result in the
          liquidation of LIFO inventory quantities carried at lower costs
          prevailing in prior years.  As a result, a LIFO benefit reduced our
          cost of goods sold by $4.8 million in the third quarter and by $7.3
          million for the nine months ended March 31, 2010, equating to a
          $0.07 and a $0.11 earnings per share benefit, respectively.  The
          overall LIFO reserves were reduced by the same amounts.

          If inventory levels had remained constant with the June 30, 2009
          levels, instead of recording the benefit as described in the above
          paragraph, the Company would have recorded LIFO expense of $4.8
          million in the three months and $12.3 million for the nine months
          ended March 31, 2010.

          The overall impact of LIFO layer liquidations during the three and
          nine months ended March 31, 2010, increased gross profit by $9.6
          million and $19.6 million, respectively.  There were no comparable
          LIFO layer liquidations recorded for the prior year periods ended
          March 31, 2009.


          APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                  -------------------------------------
                              (In thousands)


                                                 March 31,         June 30,
                                                       2010              2009

    Assets
      Cash and cash equivalents                    $156,266           $27,642
      Accounts receivable, less allowances of
       $6,561 and $6,464                            238,713           198,792
      Inventories                                   174,330           254,690
      Other current assets                           21,179            44,470
      --------------------                           ------            ------
           Total current assets                     590,488           525,594
      Property, net                                  58,200            62,735
      Intangibles, net                               88,505            95,832
      Goodwill                                       63,230            63,108
      Other assets                                   66,284            62,059
      ------------                                   ------            ------
    Total Assets                                   $866,707          $809,328
    ============                                   ========          ========

    Liabilities
      Accounts payable                              $97,421           $80,655
      Short-term debt                                75,000             5,000
      Other accrued liabilities                     100,210            70,901
      -------------------------                     -------            ------
           Total current liabilities                272,631           156,556
      Long-term debt                                                   75,000
      Other liabilities                              61,195            69,670
      -----------------                              ------            ------
    Total Liabilities                               333,826           301,226
    -----------------                               -------           -------
    Shareholders' Equity                            532,881           508,102
    --------------------                            -------           -------
    Total Liabilities and Shareholders'
     Equity                                        $866,707          $809,328
    ===================================            ========          ========


             APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                -----------------------------------------------
                                 (In thousands)



                                                      Nine Months Ended
                                                          March 31,
                                                          ---------
                                                      2010            2009
                                                      ----            ----

    Cash Flows from Operating Activities
      Net income                                   $38,199         $50,290
      Adjustments to reconcile net income to net
       cash provided
        by operating activities:
        Depreciation                                 8,613           9,622
        Amortization of intangibles                  7,555           6,952
        Share-based compensation                     3,978           3,582
        Gain on sale of property                      (104)           (215)
        Treasury shares contributed to employee
         benefit                                       200             336
          and deferred compensation plans
        Changes in assets and liabilities, net of
         acquisitions                               97,079         (14,864)
        Other, net                                     500          (1,204)
        ----------                                     ---          ------
    Net Cash provided by Operating Activities      156,020          54,499
    -----------------------------------------      -------          ------
    Cash Flows from Investing Activities
      Property purchases                            (4,163)         (5,377)
      Proceeds from property sales                     443             416
      Net cash paid for acquisition of
       businesses, net of cash acquired               (100)       (172,170)
    Net Cash used in Investing Activities           (3,820)       (177,131)
    -------------------------------------           ------        --------
    Cash Flows from Financing Activities
      Net short-term (repayments) borrowings
       under revolving credit facility              (5,000)         50,000
      Borrowings under revolving credit facility
       classified as long-term                                      50,000
      Purchase of treasury shares                   (2,738)         (1,210)
      Dividends paid                              (19,054)         (19,037)
      Excess tax benefits from share-based
       compensation                                  1,383             308
      Exercise of stock options and appreciation
       rights                                          873             269
      Other                                                         (1,119)
                                                                    ------
    Net Cash (used in) provided by Financing
     Activities                                   (24,536)          79,211
    ----------------------------------------       -------          ------
    Effect of Exchange Rate Changes on Cash            960         (10,193)
    Increase (decrease) in cash and cash
     equivalents                                   128,624         (53,614)
    Cash and cash equivalents at beginning of
     period                                         27,642         101,830
    -----------------------------------------       ------         -------
    Cash and Cash Equivalents at End of Period    $156,266         $48,216
    ==========================================    ========         =======




SOURCE Applied Industrial Technologies