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Applied Industrial Technologies Reports Fiscal 2017 First Quarter Results
  • Net Income of $27.4 Million Up 12.7%; EPS of $0.70 Up 14.8%
  • Reaffirms Full-Year Earnings Guidance
  • Announces New Stock Repurchase Plan

CLEVELAND, Oct. 26, 2016 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported first quarter fiscal 2017 sales and earnings for the three months ended September 30, 2016.

Net sales for the quarter were $624.8 million, a decrease of 2.7% compared with $641.9 million in the same quarter a year ago. The overall sales decrease for the quarter reflects a 2.4% increase from acquisition-related volume, offset by a 4.8% decrease in our underlying operations and a negative 0.3% foreign currency translation impact. Of the 4.8% decrease in underlying operations, 2.8% is attributable to sales in our upstream oil and gas subsidiaries with the remainder associated with sales in our traditional core operations. Net income for the quarter was $27.4 million, or $0.70 per share, compared with $24.3 million, or $0.61 per share, in the first quarter of fiscal 2016.

Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “We had a solid start to our fiscal year with positive impacts from operational improvements, restructuring activities and our Working Together, Winning Together approach to business – serving our customers, enhancing our value-add capabilities and delivering on our commitment to generate benefits for all Applied stakeholders.”

Balance Sheet and Liquidity

During the quarter, the Company purchased 65,000 shares of its common stock in open market transactions for $3.0 million. On October 24, the Board of Directors authorized the repurchase of up to an additional 1.5 million shares of the Company’s common stock – a plan that replaces the prior share repurchase plan. The shares may be purchased in open market and negotiated transactions. “This additional authorization reflects the Board’s continued confidence in the Company’s financial strength and strategic plan, and our ongoing commitment to generating increased shareholder value,” added Mr. Schrimsher.

Dividend

Mr. Schrimsher announced that the Company’s Board of Directors declared a quarterly cash dividend of $0.28 per common share, payable on November 30, 2016, to shareholders of record on November 15, 2016.

Outlook

The Company maintained its full-year fiscal 2017 earnings guidance of between $2.40 and $2.60 per share on a sales change of negative 3.0% to up 1.0%.

Mr. Schrimsher concluded, “In the current industrial economic environment, we are committed to helping ourselves – through our business performance; expanding our product, service and solution offerings; and creating opportunities with new and existing customers. While we are maintaining our full-year earnings guidance, our bias is above the midpoint of our projected range. We do anticipate traditional seasonality coupled with fewer sales days in our second quarter, along with ongoing benefits from our restructuring activities. In addition, we expect some cost increases from our talent initiatives and technology investments as we move through fiscal 2017.”

Conference Call Information

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on October 26. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company's performance. To join the call, dial 1-877-256-6029 or 1-303-223-4372 (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 21818766.

About Applied Industrial Technologies

Founded in 1923, Applied Industrial Technologies is a leading industrial distributor serving 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. For more information, visit 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,” “anticipate,” “expect,” “will” 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 
September 30,
 
    2016     2015    
Net Sales $ 624,848   $ 641,904    
Cost of sales   446,518     460,892    
Gross Profit   178,330     181,012    
Selling, distribution and administrative, including depreciation   135,112     139,986    
Operating Income   43,218     41,026    
Interest expense, net   2,146     2,187    
Other (income) expense, net   (398 )   1,004    
Income Before Income Taxes   41,470     37,835    
Income Tax Expense   14,099     13,544    
Net Income $ 27,371   $ 24,291    
Net Income Per Share - Basic $ 0.70   $ 0.61    
Net Income Per Share - Diluted $ 0.70   $ 0.61    
Average Shares Outstanding - Basic   39,044     39,613    
Average Shares Outstanding - Diluted   39,382     39,842    
   
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) During the first quarter of fiscal 2017, we early adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. As part of this adoption, the condensed consolidated cash flow statement for the three months ended September 30, 2015 has been restated resulting in an increase in net cash provided by operating activities and net cash used in financing activities of $0.5 million.  
   

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Amounts in thousands)  
               
               
               
  September 30, 
2016
  June 30, 
2016
 
   
               
Assets    
Cash and cash equivalents   $ 58,022     $ 59,861    
Accounts receivable, less allowances of $11,628 and $11,034   347,286       347,857    
Inventories     342,044       338,221    
Other current assets       30,009       35,582    
Total current assets     777,361       781,521    
Property, net     106,283       107,765    
Goodwill     205,537       202,700    
Intangibles, net     181,465       191,240    
Other assets       28,793       28,799    
Total Assets     $ 1,299,439     $ 1,312,025    
         
Liabilities          
Accounts payable   $ 149,007     $ 148,543    
Current portion of long-term debt     3,248       3,247    
Other accrued liabilities     112,046       122,493    
Total current liabilities     264,301       274,283    
Long-term debt       301,771       324,583    
Other liabilities       52,919       55,243    
Total Liabilities       618,991       654,109    
Shareholders' Equity     680,448       657,916    
Total Liabilities and Shareholders' Equity $ 1,299,439     $ 1,312,025    
     

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS  
(In thousands)  
             
 
  Three Months Ended 
September 30,
 
   
        2016       2015    
 
Cash Flows from Operating Activities    
Net income     $ 27,371     $ 24,291    
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of property       3,650       3,930    
Amortization of intangibles       6,237       6,083    
Amortization of stock appreciation rights and options       809       630    
(Gain) loss on sale of property       (1,068 )     90    
Other share-based compensation expense       555       628    
Changes in assets and liabilities, net of acquisitions       2,835       (23,012 )  
Other, net       1,475       2,450    
Net Cash provided by Operating Activities       41,864       15,090    
Cash Flows from Investing Activities    
Property purchases       (2,999 )     (3,112 )  
Proceeds from property sales       1,747       113    
Acquisition of businesses, net of cash acquired       -       (11,250 )  
Net Cash used in Investing Activities       (1,252 )     (14,249 )  
Cash Flows from Financing Activities    
Net (repayments) borrowings under revolving credit facility       (22,000 )     35,000    
Long-term debt repayments       (838 )     (681 )  
Purchases of treasury shares       (3,048 )     (17,956 )  
Dividends paid       (10,943 )     (10,745 )  
Tax shortfall from share-based compensation       -       (59 )  
Acquisition holdback payments       (4,444 )     (7,857 )  
Taxes paid for shares withheld for equity awards       (987 )     (502 )  
Exercise of stock appreciation rights and options       108       -    
Net Cash used in Financing Activities       (42,152 )     (2,800 )  
Effect of Exchange Rate Changes on Cash       (299 )     (3,545 )  
Decrease in cash and cash equivalents       (1,839 )     (5,504 )  
Cash and cash equivalents at beginning of period       59,861       69,470    
Cash and Cash Equivalents at End of Period     $ 58,022     $ 63,966    
 

 

 

CONTACT INFORMATION

INVESTOR RELATIONS
Mark O. Eisele
Vice President – Chief Financial Officer & Treasurer
216-426-4417

CORPORATE & MEDIA RELATIONS
Julie A. Kho
Manager, Public Relations
216-426-4483

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Applied Industrial Technologies, Inc



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