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Applied Industrial Technologies Reports Record Results for Fiscal 2012 First Quarter

-- 27% Increase in Net Income
-- 10% Increase in Sales

CLEVELAND, Oct. 25, 2011 /PRNewswire via COMTEX/ --

Applied Industrial Technologies (NYSE: AIT) today reported first quarter fiscal 2012 sales and earnings for the three months ended September 30, 2011.

Net sales for the first quarter increased 9.9% to a record $579,574,000 from $527,501,000 in the comparable period a year ago. Net income for the quarter increased 27.1% to $26,382,000 or $0.61 per share compared to $20,755,000 or $0.48 per share last year.

Commenting on the Company's performance, Applied's Chairman & Chief Executive Officer David L. Pugh said, "We are pleased to report a solid start to the fiscal year with continued growth and profitability for the quarter. Our sales growth combined with a continuing emphasis on managing the operating fundamentals allowed us to post strong earnings.

"Of notable significance, we generated a first quarter operating margin of 7.5%, up from 6.6% a year ago. Our strong performance is a result of numerous ongoing strategic initiatives, including a continuing focus on cost control and asset management, that serve to increase our efficiency and productivity.

"As we look ahead, we see an industrial market that is experiencing real growth and offers continued opportunities for expansion," stated Benjamin J. Mondics, President and Chief Operating Officer for Applied. "Based on 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."

During the first quarter of fiscal 2012, the company purchased 640,000 shares of its common stock in open market transactions for $18.2 million.

On October 17, 2011, Applied announced that Neil A. Schrimsher, age 47, would succeed David L. Pugh as the Company's CEO. Mr. Pugh is retiring effective today after nearly 13 years of service to Applied. Mr. Schrimsher, formerly Executive Vice President of Cooper Industries, will assume those duties following today's annual shareholder meeting.

The Company will host its quarterly conference call for investors and analysts at 4 p.m. ET on October 25, 2011. To join the call, dial 1-800-774-6070 or 1-630-691-2753 (for International callers) using passcode 6908413. 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 6908413.

With approximately 470 facilities and 4,600 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 "see," "expect," "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
September 30,


2011

2010

Net Sales

$ 579,574

$ 527,501

Cost of sales

420,870

384,381

Gross Profit

158,704

143,120

Selling, distribution and administrative,



including depreciation

115,437

108,229

Operating Income

43,267

34,891

Interest expense, net

47

1,124

Other expense (income), net

1,932

(343)

Income Before Income Taxes

41,288

34,110

Income Tax Expense

14,906

13,355

Net Income

$ 26,382

$ 20,755

Net Income Per Share - Basic

$ 0.62

$ 0.49

Net Income Per Share - Diluted

$ 0.61

$ 0.48

Average Shares Outstanding - Basic

42,397

42,370

Average Shares Outstanding - Diluted

42,961

43,086




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 LIFO layer liquidation benefits recognized for the quarter ended September 30, 2011, nor
are any expected to be realized for the year ending June 30, 2012. We recorded $301 of LIFO layer
liquidation benefits in the quarter ended September 30, 2010.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)





September 30,
2011


June 30,
2011


Assets




Cash and cash equivalents

$ 73,218


$ 91,092

Accounts receivable, net of allowances of $7,428 and $7,016

289,450


290,751

Inventories

215,013


204,066

Other current assets

27,532


33,005

Total current assets

605,213


618,914

Property, net

73,079


69,014

Intangibles, net

86,661


89,551

Goodwill

76,783


76,981

Other assets

58,491


60,471

Total Assets

$ 900,227


$ 914,931





Liabilities




Accounts payable

$ 109,928


$ 108,509

Other accrued liabilities

97,025


106,179

Total current liabilities

206,953


214,688

Other liabilities

60,460


66,680

Total Liabilities

267,413


281,368

Shareholders' Equity

632,814


633,563

Total Liabilities and Shareholders' Equity

$ 900,227


$ 914,931

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(In thousands)










Three Months Ended
September 30,


2011


2010





Cash Flows from Operating Activities




Net income

$ 26,382


$ 20,755

Adjustments to reconcile net income to net cash provided




by operating activities:




Depreciation and amortization of property

2,818


2,713

Amortization of intangibles

2,809


2,787

Amortization of stock options and appreciation rights

633


1,259

Gain on sale of property

(386)


(10)

Other share-based compensation expense

1,260


996

Changes in assets and liabilities, net of acquisitions

(17,371)


(24,301)

Other, net

256


317

Net Cash provided by Operating Activities

16,401


4,516

Cash Flows from Investing Activities




Property purchases

(7,142)


(873)

Proceeds from property sales

637


41

Net cash paid for acquisition of businesses, net of cash acquired

(1,241)


(27,697)

Net Cash used in Investing Activities

(7,746)


(28,529)

Cash Flows from Financing Activities




Repayments under revolving credit facility



(50,000)

Purchases of treasury shares

(18,178)



Dividends paid

(8,099)


(7,206)

Excess tax benefits from share-based compensation

149


392

Exercise of stock options and appreciation rights

84


143

Net Cash used in Financing Activities

(26,044)


(56,671)

Effect of Exchange Rate Changes on Cash

(485)


(500)

Decrease in cash and cash equivalents

(17,874)


(81,184)

Cash and cash equivalents at beginning of period

91,092


175,777

Cash and Cash Equivalents at End of Period

$ 73,218


$ 94,593





Non-cash Investing Activities:




Property purchases, unpaid at September 30



$ 10,000

SOURCE Applied Industrial Technologies