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Applied Industrial Technologies Reports Fiscal 2017 Second Quarter Results and Increases Dividend
Company Raises Low End of Previous Outlook

CLEVELAND, Jan. 26, 2017 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported second quarter fiscal 2017 sales and earnings for the three months ended December 31, 2016.

Net sales for the quarter were $608.1 million, a decrease of 0.4% compared with $610.3 million in the same quarter a year ago. The overall sales decrease for the quarter is impacted by one less selling day which accounts for a 1.6% decline and unfavorable foreign currency translation of 0.5%, partially offset by a 1.3% increase from acquisition-related volume and 0.4% organic growth. Net income for the quarter was $24.1 million, or $0.61 per share, compared with $23.9 million, or $0.61 per share, in the second quarter of fiscal 2016.

For the six months ended December 31, 2016, sales were $1.23 billion, a decrease of 1.5% compared with $1.25 billion in the same period last year. Net income increased to $51.5 million from $48.2 million, and earnings per share increased 7.4% to $1.31 per share from $1.22 per share, last year.

Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “Midway through our fiscal year, we are pleased with the continued operational enhancements and efficiencies throughout our organization. We are also encouraged by the improving sales per day developments and remain focused on expanding our capabilities with new and existing customers.”

Outlook

“Entering the second half of our fiscal year, we are narrowing our earnings per share and sales guidance by raising the lower-end of the ranges,” he added. The updated full-year fiscal 2017 earnings per share guidance is between $2.50 and $2.60 per share on a sales change of negative 2.0% to up 1.0%.

Dividend

The Company’s Board of Directors increased the quarterly cash dividend to $0.29 per common share, representing the eighth dividend increase since 2010 and a cumulative increase of more than 70% in the quarterly dividend over this period. The dividend is payable on February 28, 2017, to shareholders of record on February 15, 2017.

Mr. Schrimsher concluded, “We are committed to driving the growth and continued success of Applied, generating shareholder value through our business performance, strategic acquisitions and returning cash via share buybacks and dividends.”

Share Repurchases

During the quarter, the Company purchased 52,500 shares of its common stock in open market transactions for $2.4 million. Fiscal year to date, the Company has purchased 117,500 shares for a total of $5.5 million. At December 31, 2016, the Company had remaining authorization to purchase 1,495,000 additional shares.

Conference Call Information

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 26, 2017. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company's performance. To join the call, dial 1-800-630-0591 or 1-303-223-4384 (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 21841674.

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,” “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  December 31, Six Months Ended  December 31,  
    2016     2015   2016     2015  
Net Sales $ 608,123   $ 610,346 $ 1,232,971   $ 1,252,250  
Cost of sales   435,667     437,179   882,185     898,071  
Gross Profit   172,456     173,167   350,786     354,179  
Selling, distribution and administrative,          
including depreciation   134,800     134,805   269,912     274,791  
Operating Income   37,656     38,362   80,874     79,388  
Interest expense, net   2,100     2,158   4,246     4,345  
Other expense, net   (211 )   55   (609 )   1,059  
Income Before Income Taxes   35,767     36,149   77,237     73,984  
Income Tax Expense   11,682     12,202   25,781     25,746  
Net Income $ 24,085   $ 23,947 $ 51,456   $ 48,238  
Net Income Per Share - Basic $ 0.62   $ 0.61 $ 1.32   $ 1.22  
Net Income Per Share - Diluted $ 0.61   $ 0.61 $ 1.31   $ 1.22  
Average Shares Outstanding - Basic   38,985     39,262   39,015     39,437  
Average Shares Outstanding - Diluted   39,371     39,485   39,352     39,661  
       

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 statement of consolidated cash flows for the six months ended December 31, 2015 has been restated resulting in an increase in net cash provided by operating activities and net cash used in financing activities of $0.9 million

(3) During the first quarter of fiscal 2017, we adopted Accounting Standards Update No. 2015-03, simplifying the presentation of debt issue costs. The retrospective adoption of this standard resulted in the reclassification as of June 30, 2016 of unamortized debt issue costs of $0.1 million from other current assets to a reduction of current portion of long-term debt and $0.4 million from other assets to a reduction of long-term debt on the Company's condensed consolidated balance sheets.

               
               
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Amounts in thousands)  
               
               
               
        December 31,
2016
  June 30,
2016
 
           
               
Assets    
  Cash and cash equivalents   $   62,857   $   59,861  
  Accounts receivable, less allowances of $10,583 and $11,034     336,716       347,857  
  Inventories       349,020       338,221  
  Other current assets         33,839       35,582  
  Total current assets       782,432       781,521  
  Property, net       105,279       107,765  
  Goodwill        203,963       202,700  
  Intangibles, net       173,460       191,240  
  Deferred tax assets       12,424       12,277  
  Other assets         16,958       16,522  
Total Assets     $   1,294,516   $   1,312,025  
         
Liabilities          
  Accounts payable   $   137,499   $   148,543  
  Current portion of long-term debt       3,248       3,247  
  Other accrued liabilities       96,475       122,493  
  Total current liabilities       237,222       274,283  
  Long-term debt         323,940       324,583  
  Other liabilities         51,945       55,243  
Total Liabilities         613,107       654,109  
Shareholders' Equity       681,409       657,916  
Total Liabilities and Shareholders' Equity $   1,294,516   $   1,312,025  
     

 

           
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS  
 (In thousands)  
           
 
  Six Months Ended
December 31,
 
   
      2016       2015    
 
Cash Flows from Operating Activities  
Net income   $   51,456     $   48,238    
Adjustments to reconcile net income to net cash provided  
  by operating activities:  
  Depreciation and amortization of property       7,487         8,010    
  Amortization of intangibles       12,331         12,325    
  Amortization of stock appreciation rights and options       1,180         939    
  (Gain) loss on sale of property       (1,581 )       51    
  Other share-based compensation expense       1,278         954    
  Changes in assets and liabilities, net of acquisitions       (27,252 )       (38,187 )  
  Other, net       759         1,516    
Net Cash provided by Operating Activities       45,658         33,846    
Cash Flows from Investing Activities  
  Property purchases       (6,710 )       (5,737 )  
  Proceeds from property sales       2,648         194    
  Acquisition of businesses, net of cash acquired       -          (23,250 )  
Net Cash used in Investing Activities     (4,062 )     (28,793 )  
Cash Flows from Financing Activities  
  Net borrowings under revolving credit facility     1,000       18,000    
  Long-term debt borrowings       -        125,000    
  Long-term debt repayments     (1,695 )     (97,006 )  
  Purchases of treasury shares     (5,478 )     (27,767 )  
  Dividends paid     (21,893 )     (21,369 )  
  Excess tax benefits from share-based compensation       -        49    
  Acquisition holdback payments       (7,069 )       (10,614 )  
  Taxes paid for shares withheld for equity awards       (2,081 )       (903 )  
  Exercise of stock appreciation rights and options       195         264    
Net Cash used in Financing Activities     (37,021 )     (14,346 )  
Effect of Exchange Rate Changes on Cash     (1,579 )     (4,543 )  
Increase (decrease) in cash and cash equivalents       2,996         (13,836 )  
Cash and cash equivalents at beginning of period       59,861         69,470    
Cash and Cash Equivalents at End of Period   $   62,857     $   55,634    
 
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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