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Applied Industrial Technologies Reports Fiscal 2015 Third Quarter Results and Declares Dividend
  • New Share Repurchase Plan Authorized

CLEVELAND, April 30, 2015 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported third quarter fiscal 2015 sales and earnings for the three months ended March 31, 2015.

Net sales for the quarter were $680.0 million, an increase of 10.0% compared with $618.0 million in the same quarter a year ago. Net income for the quarter was $28.6 million, or $0.70 per share, compared with $30.4 million, or $0.72 per share, in the third quarter of fiscal 2014. Prior year earnings reflect a $0.07 per share benefit from one-time tax benefits and a $0.02 per share benefit from other tax accrual reversals.

For the nine months ended March 31, 2015, sales increased 14.9% to $2.07 billion from $1.81 billion in the same period last year. Net income increased to $87.4 million from $83.1 million, and earnings per share increased 7.7% to $2.11 per share from $1.96 per share last year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "The third quarter presented some challenges, including a deceleration of industrial market demand and foreign exchange headwinds. Our overall sales increase for the quarter reflects a 10.6% increase from acquisition related volume coupled with a 1.3% rise in our core underlying operations, offset by a negative 1.9% foreign currency translation impact. We dealt with these challenges and headwinds in our top line growth through effective cost controls within the quarter, and we will take additional actions as we move towards completing our fiscal year.

"We are revising our full-year guidance range for earnings per share to between $2.80 and $2.95 per share, on a sales increase of 11.5% to 13%. Overall, Applied is well-positioned – with a strong foundation, expanding capabilities and a straightforward strategic plan. We are focused on meeting the product, service and solution needs of current and new industrial customers."

In addition, Mr. Schrimsher announced that the Company's Board of Directors declared a quarterly cash dividend of $0.27 per common share. The dividend is payable on May 29, 2015, to shareholders of record on May 15, 2015.

During the quarter, the Company purchased 870,200 shares of its common stock in open market transactions for $37.3 million. Fiscal year to date, the Company has purchased 1.3 million shares for a total of $59.2 million. On April 28, the Board of Directors approved a new authorization to repurchase up to 1.5 million shares, in open market and negotiated transactions, replacing the existing authorization.

"We are pleased with the Board's authorization of a new stock repurchase plan. This action reflects our continued confidence in the Company's growth opportunities and our ongoing commitment to enhance shareholder value," added Mr. Schrimsher.

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on Thursday, April 30. 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 21766597.

With more than 570 facilities and 5,900 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 "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 
March 31,
Nine Months Ended 
March 31,
  2015 2014 2015 2014
Net Sales  $ 679,994  $ 618,006  $ 2,074,021  $ 1,805,260
Cost of sales  492,631  446,786  1,496,013  1,300,862
Gross Profit  187,363  171,220  578,008  504,398
Selling, distribution and administrative, including depreciation  143,591  131,047  441,264  384,849
Operating Income  43,772  40,173  136,744  119,549
Interest (income) expense, net  2,121  (11)  5,738  (102)
Other (income) expense, net  (887)  (388)  (263)  (1,749)
Income Before Income Taxes  42,538  40,572  131,269  121,400
Income Tax Expense  13,928  10,178  43,830  38,253
Net Income  $ 28,610  $ 30,394  $ 87,439  $ 83,147
Net Income Per Share - Basic  $ 0.70  $ 0.73  $ 2.12  $ 1.98
Net Income Per Share - Diluted  $ 0.70  $ 0.72  $ 2.11  $ 1.96
Average Shares Outstanding - Basic  40,800  41,880  41,168  42,039
Average Shares Outstanding - Diluted  41,067  42,242  41,477  42,438

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 $132.5 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 $54.9 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 nine months ended March 31, 2014.

(4) During the quarter ended March 31, 2014, $2.8 million of tax reserves were reversed which reduced income tax expense by the same amount and resulted in an increase to earnings per share in the quarter of $0.07.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
 
  March 31, 
2015
June 30, 
2014
     
Assets    
Cash and cash equivalents  $ 55,165  $ 71,189
Accounts receivable, less allowances of $10,448 and $10,385  394,408  375,732
Inventories  381,085  335,747
Other current assets  55,359  53,480
Total current assets  886,017  836,148
Property, net  104,680  103,596
Goodwill  252,717  193,494
Intangibles, net  203,978  159,508
Other assets  18,761  41,423
Total Assets  $ 1,466,153  $ 1,334,169
     
Liabilities    
Accounts payable  $ 143,881  $ 172,401
Current portion of long-term debt  2,720  2,720
Other accrued liabilities  122,466  115,834
Total current liabilities  269,067  290,955
Long-term debt  386,956  167,992
Other liabilities  73,819  74,914
Total Liabilities  729,842  533,861
Shareholders' Equity  736,311  800,308
Total Liabilities and Shareholders' Equity  $ 1,466,153  $ 1,334,169
 
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
 
 
  Nine Months Ended 
March 31,
  2015 2014
     
Cash Flows from Operating Activities    
Net income  $ 87,439  $ 83,147
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of property  12,792  10,119
Amortization of intangibles  19,412  9,518
Amortization of stock appreciation rights and options  1,381  1,703
Loss on sale of property  45  37
Other share-based compensation expense  1,123  2,946
Changes in assets and liabilities, net of acquisitions  (83,601)  (60,451)
Other, net  721  (2,693)
Net Cash provided by Operating Activities  39,312  44,326
Cash Flows from Investing Activities    
Property purchases  (11,009)  (6,492)
Proceeds from property sales  451  348
Acquisition of businesses, net of cash acquired  (166,479)  (17,000)
Net Cash used in Investing Activities (177,037) (23,144)
Cash Flows from Financing Activities    
Net borrowings under revolving credit facility 51,000 30,000
Long-term debt borrowings 170,238  -- 
Long-term debt repayments (2,274)  -- 
Purchases of treasury shares (59,235) (23,992)
Dividends paid (31,807) (29,961)
Excess tax benefits from share-based compensation 538 2,525
Acquisition holdback payments  (995) (1,824)
Exercise of stock appreciation rights and options  232  95
Net Cash provided by (used in) Financing Activities 127,697 (23,157)
Effect of Exchange Rate Changes on Cash (5,996) (2,103)
Decrease in cash and cash equivalents  (16,024)  (4,078)
Cash and cash equivalents at beginning of period  71,189  73,164
Cash and Cash Equivalents at End of Period  $ 55,165  $ 69,086
CONTACT: For investor relations information, contact
         Mark O. Eisele, Vice President - Chief Financial Officer
         216-426-4417
         For corporate information, contact
         Julie A. Kho, Manager - Public Relations
         216-426-4483

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Applied Industrial Technologies