PRESS RELEASES

Press Release

View printer-friendly version
Applied Industrial Technologies Reports Fiscal 2012 Second Quarter Results

CLEVELAND, Jan. 25, 2012 /PRNewswire-FirstCall/ -- 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.

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,


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

Gross Profit

155,469

144,281

314,173

287,401

Selling, distribution and administrative,





  including depreciation

122,134

111,225

237,571

219,454

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)

Income Before Income Taxes

32,547

33,019

73,835

67,129

Income Tax Expense

11,612

11,826

26,518

25,181

Net Income

$                  20,935

$                        21,193

$                 47,317

$                 41,948

Net Income Per Share - Basic

$                      0.50

$                            0.50

$                     1.12

$                     0.99

Net Income Per Share - Diluted

$                      0.49

$                            0.49

$                     1.11

$                     0.97

Average Shares Outstanding - Basic

41,965

42,411

42,181

42,391

Average Shares Outstanding - Diluted

42,634

43,298

42,801

43,217











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


Assets





 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

      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

Total Assets


$                    898,013


$                    914,931






Liabilities





 Accounts payable


$                    105,591


$                    108,509

 Other accrued liabilities


93,373


106,179

      Total current liabilities


198,964


214,688

 Other liabilities


52,863


66,680

Total Liabilities


251,827


281,368

Shareholders' Equity


646,186


633,563

Total Liabilities and Shareholders' Equity


$                    898,013


$                    914,931



APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(In thousands)








Six Months Ended



December 31,



2011


2010






Cash Flows from Operating Activities





Net income


$                      47,317


$                   41,948

Adjustments to reconcile net income to net cash provided





  by operating activities:





  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

Net Cash provided by Operating Activities


30,216


19,966

Cash Flows from Investing Activities





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)

Net Cash used in Investing Activities


(14,282)


(41,419)

Cash Flows from Financing Activities





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

Net Cash used in Financing Activities


(34,344)


(101,058)

Effect of Exchange Rate Changes on Cash


(2,170)


649

Decrease in cash and cash equivalents


(20,580)


(121,862)

Cash and cash equivalents at beginning of period


91,092


175,777

Cash and Cash Equivalents at End of Period


$                      70,512


$                   53,915



SOURCE Applied Industrial Technologies

For investor relations information, contact Mark O. Eisele, Vice President - Chief Financial Officer, +1-216-426-4417; For corporate information, contact Richard C. Shaw, Vice President - Communications, +1-216-426-4343