- Net Sales of $856.4 Million Down 0.9% YoY; Down 5.2% on an
Organic Daily Basis
- EPS of $1.00; Non-GAAP Adjusted EPS of $1.02 Excluding
Non-Routine Expense
- Cash Flow from Operations of $50.0 Million; Free Cash Flow of
$45.1 Million
- Fiscal 2020 Guidance Reaffirmed on a Non-GAAP Adjusted
Basis
Applied Industrial Technologies (NYSE: AIT), a leading
value-added distributor and technical solutions provider of
industrial motion, fluid power, flow control, and automation
technologies, today reported results for its first quarter of
fiscal 2020, ended September 30, 2019.
Net sales decreased 0.9% to $856.4 million from $864.5 million
in the prior year quarter. The change in sales includes a 2.8%
increase from acquisitions and a positive 1.6% selling day impact,
partially offset by a negative 0.1% from foreign currency
translation. Excluding these factors, sales decreased 5.2% on an
organic daily basis. Net income was $38.8 million, or $1.00 per
share, compared to $48.9 million, or $1.24 per share, in the prior
year quarter. Results include a non-routine expense of $1.5 million
pre-tax, or $0.02 per share, reflecting recent cost initiatives in
response to the slower environment. Excluding this non-routine
expense, non-GAAP adjusted EPS was $1.02.
Commenting on the results, Applied’s President & Chief
Executive Officer Neil A. Schrimsher said, “Our first quarter
finished as expected with our team effectively managing through
slower industrial demand. Ongoing execution on gross margin helped
balance softer sales, and our working capital initiatives drove
seasonally strong free cash flow. While the demand environment
remains subdued and uncertain, our sales trends are exhibiting some
stabilization on a sequential basis and should benefit from easier
comparisons going forward. We are also off to a solid start with
our late August acquisition of Olympus Controls and encouraged by
the growth developing around their premier automation capabilities.
Lastly, recent cost actions are expected to have a more meaningful
impact into the fiscal second quarter as we continue to leverage
our systems investments and expense discipline in the current
environment. We expect these and other self-help opportunities to
benefit our earnings trajectory near-term, and position the Company
to deliver on its longer-term commitments.”
Outlook
Mr. Schrimsher concluded, “With performance running largely in
line with our fiscal 2020 outlook but end-market uncertainty
persisting, we reaffirm our guidance for non-GAAP adjusted EPS of
$4.20 to $4.50 on a change in sales of down 2% to up 2%, including
down 5% to down 1% on an organic daily basis. The adjusted EPS
range excludes fiscal first quarter non-routine expenses. In
addition, we reiterate our free cash flow guidance of $200 million
to $220 million, or up 30% at the mid-point.”
“Overall, our team is executing well to start the year. Our
operational discipline and internal initiatives are providing a
path to navigate against slower demand, sustain gross margin
enhancement, and deliver on our cash expectations. In addition, we
are intensely focused on generating greater value for our customers
and shareholders in coming years by leveraging our unique technical
and solutions-based position within an increasingly complex and
labor-constrained industrial supply chain. We are confident in
Applied’s growth and earnings potential for the balance of fiscal
2020 and beyond.”
Dividend
Today the Company also announced that its Board of Directors
declared a quarterly cash dividend of $0.31 per common share,
payable on November 29, 2019, to shareholders of record on November
15, 2019.
Conference Call Information
Applied will host its quarterly conference call for investors
and analysts at 10 a.m. ET on October 30, 2019. Neil A. Schrimsher
– President & CEO, and David K. Wells – CFO will discuss the
Company's performance. A supplemental investor deck detailing
latest quarter results is available for reference on the investor
relations portion of the Company’s website at www.applied.com. To
join the call, dial 877-311-4351 (toll free) or 614-999-9139 (for
International callers) using conference ID 5794068. 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 855-859-2056 or
800-585-8367 (both toll free), or 404-537-3406 (International)
using conference ID 5794068.
About Applied®
Founded in 1923, Applied Industrial Technologies is a leading
value-added distributor of bearings, power transmission products,
engineered fluid power components and systems, specialty flow
control solutions, automation technologies, and other industrial
supplies, serving MRO and OEM customers in virtually every
industry. In addition, Applied provides engineering, design and
systems integration for industrial, fluid power, and flow control
applications, as well as customized mechanical, fabricated rubber,
fluid power, and flow control shop services. Applied also offers
storeroom services 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 “expect,” “should,” “outlook,” “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 September
30,
2019
2018
Net Sales
$
856,404
$
864,515
Cost of sales
604,944
612,662
Gross Profit
251,460
251,853
Selling, distribution and administrative, including depreciation
190,294
185,514
Operating Income
61,166
66,339
Interest expense, net
10,059
10,476
Other income, net
-
(239
)
Income Before Income Taxes
51,107
56,102
Income Tax Expense
12,308
7,164
Net Income
$
38,799
$
48,938
Net Income Per Share - Basic
$
1.00
$
1.26
Net Income Per Share - Diluted
$
1.00
$
1.24
Average Shares Outstanding - Basic
38,611
38,714
Average Shares Outstanding - Diluted
38,961
39,364
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, 2019, the Company
adopted ASC 842 – accounting for leases. Adoption of the new
standard resulted in the recognition of right-of-use assets and
lease liabilities of $83.5 million and $89.8 million, respectively,
on July 1, 2019. In addition, the adoption resulted in an
adjustment to opening retained earnings of approximately $3.3
million, net of tax, on July 1, 2019 primarily due to the
impairment of certain leases in Canada.
3)
On August 21, 2019, the Company
acquired 100% of the outstanding shares of Olympus Controls, a
Portland, Oregon based full-service provider of innovative
technologies and complete engineered solutions for original
equipment manufacturers, machine builders, integrators, and end
users. Olympus Controls is included in the Fluid Power & Flow
Control segment. The purchase price for the acquisition was $34.9
million.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands)
September 30,
June 30,
2019
2019
Assets Cash and cash
equivalents
$
98,204
$
108,219
Accounts receivable, net
529,330
540,902
Inventories
465,165
447,555
Other current assets
52,224
51,462
Total current assets
1,144,923
1,148,138
Property, net
125,094
124,303
Operating lease assets
86,557
-
Goodwill
671,476
661,991
Intangibles, net
374,871
368,866
Other assets
26,811
28,399
Total Assets
$
2,429,732
$
2,331,697
Liabilities Accounts
payable
$
229,368
$
237,289
Current portion of long-term debt
93,912
49,036
Other accrued liabilities
155,442
137,469
Total current liabilities
478,722
423,794
Long-term debt
859,172
908,850
Other liabilities
164,613
102,019
Total Liabilities
1,502,507
1,434,663
Shareholders' Equity
927,225
897,034
Total Liabilities and Shareholders' Equity
$
2,429,732
$
2,331,697
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES CONDENSED STATEMENTS OF
CONSOLIDATED CASH FLOWS (In thousands)
Three Months Ended
September 30,
2019
2018
Cash Flows from Operating
Activities Net income
$
38,799
$
48,938
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
5,223
4,981
Amortization of intangibles
10,374
10,921
Amortization of stock appreciation rights and options
773
651
Other share-based compensation expense
919
1,043
Changes in assets and liabilities, net of acquisitions
(8,682
)
(53,184
)
Other, net
2,612
(1,553
)
Net Cash provided by Operating Activities
50,018
11,797
Cash Flows from Investing
Activities Property purchases
(4,946
)
(3,173
)
Proceeds from property sales
88
77
Acquisition of businesses, net of cash acquired
(35,703
)
-
Net Cash used in Investing Activities
(40,561
)
(3,096
)
Cash Flows from Financing
Activities Net borrowings (repayments) under revolving
credit facility
-
(19,500
)
Long-term debt borrowings
-
175,000
Long-term debt repayments
(4,934
)
(146,934
)
Debt issuance costs
-
(685
)
Dividends paid
(11,985
)
(11,334
)
Acquisition holdback payments
(201
)
(219
)
Taxes paid for shares withheld for equity awards
(1,754
)
(3,203
)
Net Cash used in Financing Activities
(18,874
)
(6,875
)
Effect of Exchange Rate Changes on Cash
(598
)
432
(Decrease) increase in cash and cash equivalents
(10,015
)
2,258
Cash and cash equivalents at beginning of Period
108,219
54,150
Cash and Cash Equivalents at End of Period
$
98,204
$
56,408
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
(In thousands)
The Company supplemented the reporting of
financial information determined under U.S. generally accepted
accounting principles (GAAP) with reporting of non-GAAP financial
measures. The Company believes that these non-GAAP measures provide
meaningful information to assist shareholders in understanding
financial results, assessing prospects for future performance, and
provide a better baseline for analyzing trends in our underlying
businesses. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial
measures with other companies' non-GAAP financial measures having
the same or similar names. These non-GAAP financial measures should
not be considered in isolation or as a substitute for reported
results. These non-GAAP financial measures reflect an additional
way of viewing aspects of operations that, when viewed with GAAP
results, provide a more complete understanding of the business. The
Company strongly encourages investors and shareholders to review
company financial statements and publicly filed reports in their
entirety and not to rely on any single financial measure.
Reconciliation of Net Income, a GAAP financial measure, to
EBITDA, a non-GAAP financial measure:
Three Months Ended September
30,
2019
2018
Net Income
$
38,799
$
48,938
Interest expense, net
10,059
10,476
Income tax expense
12,308
7,164
Depreciation and amortization of property
5,223
4,981
Amortization of intangibles
10,374
10,921
EBITDA
$
76,763
$
82,480
Non-routine costs
1,455
-
Adjusted EBITDA
$
78,218
$
82,480
The Company defines EBITDA as Earnings
from operations before Interest, Taxes, Depreciation, and
Amortization, a non-GAAP financial measure. EBITDA excludes items
that may not be indicative of core operating results.
Reconciliation of Net Income and Net Income Per Share - Diluted,
GAAP financial measures, with Adjusted Net Income and Adjusted Net
Income Per Share (or Adjusted EPS), non-GAAP financial
measures:
Net Income Impact
Per Share - Diluted
Impact
Three Months Ended September
30,
Three Months Ended September
30,
2019
2018
2019
2018
Net Income and Net Income Per Share
$
38,799
$
48,938
$
1.00
$
1.24
Adjustments: Non-routine costs
1,104
-
0.02
-
Adjusted Net Income and Adjusted EPS
$
39,903
$
48,938
$
1.02
$
1.24
Adjusted Net Income and Adjusted EPS
excludes items that may not be indicative of core operating
results.
Reconciliation of Net Cash provided by Operating activities, a
GAAP financial measure, to Free Cash Flow, a non-GAAP financial
measure:
Three Months Ended September
30,
2019
2018
Net Cash provided by Operating Activities
$ 50,018
$ 11,797
Capital expenditure
(4,946)
(3,173)
Free Cash Flow
$ 45,072
$ 8,624
Free cash flow is defined as net cash
provided by operating activities less capital expenditures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191030005272/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
Applied Industrial Techn... (NYSE:AIT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Applied Industrial Techn... (NYSE:AIT)
Historical Stock Chart
From Jul 2023 to Jul 2024