Applied Industrial Technologies Reports Fiscal 2016 First Quarter Results and Declares Dividend

CLEVELAND, Oct. 28, 2015 (GLOBE NEWSWIRE) — Applied Industrial Technologies (NYSE:AIT) today reported first quarter fiscal 2016 sales and earnings for the three months ended September 30, 2015.

Net sales for the quarter were $641.9 million, a decrease of 8.6% compared with $702.3 million in the same quarter a year ago. The overall sales decrease for the quarter reflects a 1.8% increase from acquisition-related volume offset by a negative 3.2% foreign currency translation impact and a 7.2% decrease in core underlying operations. This 7.2% decrease consists of a 2.3% decline in traditional core operations along with a 4.9% decrease attributable to sales from the upstream oil and gas subsidiaries. Net income for the quarter was $24.3 million, or $0.61 per share, compared with $29.1 million, or $0.70 per share, in the first quarter of fiscal 2015.

Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “Our first quarter results reflect the continued impact of reduced demand in many industrial end markets, most notably oil and gas, as well as headwinds from foreign currency translation. We continue to take a disciplined approach to controlling costs and driving improved efficiencies across our business.

“As a result of the continued weakness in some of our served markets, we are revising our full-year guidance and now expect earnings per share between $2.65 and $2.85 per share on a sales decrease of 5% to 7%.

“We are fully committed to generating shareholder value in any economic cycle through our business performance; expanding our product, service and solution offering; and creating opportunities with current and new customers. In addition, we will continue to optimize our capital allocation through dividends, share repurchases and acquisitions.  We are pleased with the recent acquisition of S. G. Morris Co., a strong strategic fit that further enhances our fluid power market leadership and provides additional growth opportunities.”

During the quarter, the Company purchased 451,100 shares of its common stock in open market transactions for $18.0 million. At September 30, 2015, the Company had remaining authorization to purchase 796,200 additional shares.

In addition, Mr. Schrimsher announced that the Company’s Board of Directors declared a quarterly cash dividend of $0.27 per common share, payable on November 30, 2015, to shareholders of record on November 16, 2015.

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on October 28. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company’s performance. To join the call, dial 1-800-939-4079 or 1-212-231-2919 (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 1-800-633-8625 or 1-402-977-9141 (International) using passcode 21777795.

Founded in 1923, 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. 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,” “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,
    2015     2014  
Net Sales $ 641,904   $ 702,325  
Cost of sales   460,892     507,393  
Gross Profit   181,012     194,932  
Selling, distribution and administrative,    
including depreciation   139,986     148,767  
Operating Income   41,026     46,165  
Interest expense, net   2,187     1,662  
Other expense, net   1,004     244  
Income Before Income Taxes   37,835     44,259  
Income Tax Expense   13,544     15,137  
Net Income $ 24,291   $ 29,122  
Net Income Per Share – Basic $ 0.61   $ 0.70  
Net Income Per Share – Diluted $ 0.61   $ 0.70  
Average Shares Outstanding – Basic   39,613     41,467  
Average Shares Outstanding – Diluted   39,842     41,829  
     
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 August 3, 2015, the Company acquired substantially all of the net assets of Atlantic Fasteners, a distributor of C-Class consumables including industrial fasteners and related industrial supplies in Agawam, MA for a purchase price of $12,500.  The financial results of the operations acquired have been included in the Service Center Based Distribution Segment as of the acquisition date.
 

 

             
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
             
             
             
        September 30, 
2015
  June 30, 
2015
         
             
Assets  
Cash and cash equivalents   $ 63,966     $ 69,470  
Accounts receivable, less allowances of $11,753 and $10,621   356,606       376,305  
Inventories     350,807       362,419  
Other current assets       42,527       51,111  
Total current assets     813,906       859,305  
Property, net     104,760       104,447  
Goodwill     248,580       254,406  
Intangibles, net     191,708       198,828  
Other assets       17,306       17,982  
Total Assets     $ 1,376,260     $ 1,434,968  
       
Liabilities        
Accounts payable   $ 142,636     $ 179,825  
Current portion of long-term debt     3,975       3,349  
Other accrued liabilities     111,686       126,898  
Total current liabilities       258,297       310,072  
Long-term debt       351,340       317,646  
Other liabilities       56,500       65,922  
Total Liabilities       666,137       693,640  
Shareholders’ Equity     710,123       741,328  
Total Liabilities and Shareholders’ Equity $ 1,376,260     $ 1,434,968  
     

 

           
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS  
(In thousands)  
           
 
  Three Months Ended 
September 30,
 
   
      2015       2014    
 
Cash Flows from Operating Activities  
Net income   $ 24,291     $ 29,122    
Adjustments to reconcile net income to net cash provided  
by operating activities:  
Depreciation and amortization of property     3,930       4,211    
Amortization of intangibles     6,083       6,491    
Amortization of stock appreciation rights and options     630       577    
Loss (Gain) on sale of property     90       (5 )  
Other share-based compensation expense     628       592    
Changes in assets and liabilities, net of acquisitions     (23,514 )     (58,891 )  
Other, net     2,450       (198 )  
Net Cash provided by (used in) Operating Activities     14,588       (18,101 )  
Cash Flows from Investing Activities  
Property purchases     (3,112 )     (3,100 )  
Proceeds from property sales     113       3    
Acquisition of businesses, net of cash acquired     (11,250 )     (129,810 )  
Net Cash used in Investing Activities     (14,249 )     (132,907 )  
Cash Flows from Financing Activities  
Net borrowings under revolving credit facility     35,000       34,000    
Long-term debt borrowings           120,238    
Long-term debt repayments     (681 )     (690 )  
Purchases of treasury shares     (17,956 )     (10,400 )  
Dividends paid     (10,745 )     (10,402 )  
Excess tax (shortfall) benefits from share-based compensation     (59 )     556    
Acquisition holdback payments     (7,857 )        
Net Cash (used in) provided by Financing Activities     (2,298 )     133,302    
Effect of Exchange Rate Changes on Cash     (3,545 )     (1,450 )  
Decrease in cash and cash equivalents     (5,504 )     (19,156 )  
Cash and cash equivalents at beginning of period     69,470       71,189    
Cash and Cash Equivalents at End of Period   $ 63,966     $ 52,033    
 

 

CONTACT: 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.