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Applied Industrial Technologies Reports Fiscal 2015 Second Quarter Results and Raises Dividend
- EPS of $0.72; 19% Sales Gain
- Quarterly Dividend Increase of 8%

CLEVELAND, Jan. 29, 2015 /PRNewswire/ -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2015 sales and earnings for the three months ended December 31, 2014.

Net sales for the quarter were $691.7 million, an increase of 18.9% compared with $581.9 million in the same quarter a year ago. Net income for the quarter increased to $29.7 million from $25.9 million, and earnings per share rose 18.0% to $0.72 per share, compared with $0.61 per share in the second quarter of fiscal 2014.   

For the six months ended December 31, 2014, sales increased 17.4% to $1.39 billion from $1.19 billion in the same period last year. Net income increased to $58.8 million from $52.8 million, and earnings per share increased 13.7% to $1.41 per share from $1.24 per share last year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "Applied is a strong, diversified industrial distributor, and we are pleased with the continued sales and earnings growth in the second quarter. Our overall sales increase reflects 15.8% of acquisition related volume coupled with a 4.5% rise in our core underlying operations, offset by a negative foreign currency translation impact of 1.4%.

"Looking forward, we see an industrial economic environment that continues to present opportunities for organic and acquired growth. While the recent decline in oil prices creates some challenges, we are fully engaged in executing our acquisition integration plans as well as our broader growth initiatives across our industrial served markets.

"Entering the second half of fiscal 2015, we are narrowing our full-year guidance range for earnings per share to between $2.95 and $3.10 per share, on a sales increase of 13% to 15%. Our leadership team and dedicated associates remain focused on serving our customers, achieving our strategic objectives, and delivering our commitments in the second half of fiscal 2015."

In addition, Mr. Schrimsher announced that the Company's Board of Directors declared an 8% increase in the quarterly cash dividend to $0.27 per common share. The dividend is payable on February 27, 2015, to shareholders of record on February 13, 2015. This is the Company's sixth dividend increase since 2010, representing a cumulative increase of 80% in the quarterly dividend over this five-year period. "Increasing our dividend reflects confidence in our business position and a commitment to generating increased shareholder value."

During the quarter, the Company purchased 249,900 shares of its common stock in open market transactions for $11.5 million. Fiscal year to date, the Company has purchased 463,900 shares for a total of $21.9 million. At December 31, 2014, the Company had remaining authorization to purchase 1,382,500 additional shares.

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on Thursday, January 29. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company's performance. To join the call, dial 1-800-755-1805 or
1-212-231-2910 (for International callers). A live audio webcast can be accessed online through the investor relations portion of the Company's website at www.applied.com.
A replay of the call will be available for two weeks by dialing 1-800-633-8284 or
1-402-977-9140 (International) using passcode 21758815.

With more than 560 facilities and 5,800 employee associates, Applied Industrial Technologies is a leading industrial distributor that offers more than five million parts to serve the needs 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 and inventory management solutions that provide added value to its customers. Applied can be visited on the Internet at 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. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are often identified by qualifiers such as "see," "guidance," and derivative or similar expressions. 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 Applied 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.

  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,


2014

2013

2014

2013

Net Sales

$      691,702

$          581,949

$ 1,394,027

$ 1,187,254

Cost of sales

495,989

418,566

1,003,382

854,076

Gross Profit

195,713

163,383

390,645

333,178

Selling, distribution and administrative,





   including depreciation

148,906

123,546

297,673

253,802

Operating Income

46,807

39,837

92,972

79,376

Interest (income) expense, net

1,955

(152)

3,617

(91)

Other (income) expense, net

380

(270)

624

(1,361)

Income Before Income Taxes

44,472

40,259

88,731

80,828

Income Tax Expense

14,765

14,350

29,902

28,075

Net Income

$        29,707

$              25,909

$       58,829

$       52,753

Net Income Per Share - Basic

$            0.72

$                  0.62

$           1.42

$           1.25

Net Income Per Share - Diluted

$            0.72

$                  0.61

$           1.41

$           1.24

Average Shares Outstanding - Basic

41,228

42,076

41,348

42,116

Average Shares Outstanding - Diluted

41,533

42,462

41,678

42,547











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.


(2) On July 1, 2014, the Company acquired 100% of the outstanding stock of Knox Oil Field Supply Inc. ("Knox"), headquartered in San Angelo, Texas, for a purchase price of $132.0 million.
    On July 1, 2014, the Company acquired substantially all of the net assets of Rodamientos y Derivados del Norte S.A de C.V., a Mexican distributor of bearings and power transmission products and related products, and Great Southern Bearings / Northam Bearings, a Western Australia distributor of bearings and power transmission products. On November 3, 2014, the Company acquired Ira Pump and Supply Inc., a Texas distributor of oilfield pumps and supplies. The combined total purchase price of these acquisitions was $54.6 million.
    The financial results of the operations acquired have been included in the Service Center Based Distribution Segment as of the acquisition date.


 (3) Effective July 1, 2013, the Company aligned the consolidation of the Company's Canadian subsidiaries in the consolidated financial statements which previously included results on a one month reporting lag. The Company has determined that the effect of this change is not material to the financial statements for all periods presented and therefore has not presented retrospective application of this change. The net impact of the lag elimination was $1.2 million of additional income and has been included within "Other (income) expense, net" on the Condensed Statements of Consolidated Income for the six months ended December 31, 2013.

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


























December 31, 
2014


June 30, 
2014













Assets







  Cash and cash equivalents


$             33,184


$       71,189

  Accounts receivable, less allowances of $10,767 and $10,385

385,326


375,732

  Inventories



401,474


335,747

  Other current assets



57,773


53,480

       Total current assets


877,757


836,148

  Property, net



107,352


103,596

  Goodwill 




260,256


193,494

  Intangibles, net



216,305


159,508

  Other assets



18,780


41,423

Total Assets



$       1,480,450


$ 1,334,169








Liabilities







  Accounts payable



$          150,938


$     172,401

  Current portion of long-term debt


2,720


2,720

  Other accrued liabilities


117,993


115,834

       Total current liabilities


271,651


290,955

  Long-term debt



346,636


167,992

  Other liabilities



80,497


74,914

Total Liabilities



698,784


533,861

Shareholders' Equity


781,666


800,308

Total Liabilities and Shareholders' Equity

$       1,480,450


$ 1,334,169

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

 (In thousands)













Six Months Ended
December 31,





2014


2013






Cash Flows from Operating Activities





Net income


$           58,829


$        52,753

Adjustments to reconcile net income to net cash provided





   by operating activities:





   Depreciation and amortization of property


8,331


6,792

   Amortization of intangibles


13,059


6,330

   Amortization of stock appreciation rights and options


825


931

   Gain on sale of property


(4)


(10)

   Other share-based compensation expense


679


2,286

   Changes in assets and liabilities, net of acquisitions


(80,863)


(36,996)

   Other, net


317


577

Net Cash provided by Operating Activities


1,173


32,663

Cash Flows from Investing Activities





   Property purchases


(7,806)


(4,126)

   Proceeds from property sales


187


324

   Acquisition of businesses, net of cash acquired


(165,646)


(17,000)

Net Cash used in Investing Activities


(173,265)


(20,802)

Cash Flows from Financing Activities





   Net borrowings under revolving credit facility


10,000


15,000

   Long-term debt borrowings


170,241


-

   Long-term debt repayments


(1,597)


-

   Purchases of treasury shares


(21,849)


(13,838)

   Dividends paid


(20,742)


(19,471)

   Excess tax benefits from share-based compensation


906


2,057

   Acquisition holdback payments


(287)


(1,032)

   Exercise of stock appreciation rights and options


120


97

Net Cash provided by (used in) Financing Activities


136,792


(17,187)

Effect of Exchange Rate Changes on Cash


(2,705)


(1,254)

Decrease in cash and cash equivalents


(38,005)


(6,580)

Cash and cash equivalents at beginning of period


71,189


73,164

Cash and Cash Equivalents at End of Period


$           33,184


$        66,584

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/applied-industrial-technologies-reports-fiscal-2015-second-quarter-results-and-raises-dividend-300027360.html

SOURCE Applied Industrial Technologies

For investor relations information, contact Mark O. Eisele, Vice President - Chief Financial Officer, at 216-426-4417. For corporate information, contact Julie A. Kho, Manager - Public Relations, at 216-426-4483.