- Net Sales of $840.9 Million Up 1.2% YoY; Up 0.4% on an Organic
Daily Basis
- Net Income of $56.1 Million, or $1.42 Per Share
- Adjusted Net Income of $54.1 Million, or $1.37 Per Share;
Adjusted EBITDA of $86.8 Million
- Operating Cash Flow of $44.1 Million; Free Cash Flow of $40.3
Million
Applied Industrial Technologies (NYSE: AIT), a leading
value-added distributor and technical solutions provider of
industrial motion, fluid power, flow control, automation
technologies, and related maintenance supplies, today reported
results for its fiscal 2021 third quarter ended March 31, 2021.
Net sales for the quarter increased 1.2% to $840.9 million from
$830.8 million in the prior year. The change includes a 1.8%
increase from acquisitions and a 0.6% increase from foreign
currency translation, partially offset by a negative 1.6% impact
from one less selling day. Excluding these factors, sales increased
0.4% on an organic daily basis reflecting a 0.4% increase in the
Service Center segment and a 0.2% increase in the Fluid Power &
Flow Control segment. The Company reported net income of $56.1
million, or $1.42 per share. Results include non-routine income of
$2.6 million pre-tax. Excluding this income, the Company reported
non-GAAP adjusted net income of $54.1 million, or $1.37 per share,
and adjusted EBITDA of $86.8 million.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented “This was a solid quarter for Applied across
many fronts. Sales exceeded our expectations and grew slightly over
the prior year reflecting improving end-market demand and our
industry position. At the same time, we expanded gross margins and
leveraged a leaner cost structure that has been refined over the
past year. These dynamics more than offset the elimination of
various temporary cost actions and drove favorable earnings growth,
while our working capital initiatives continue to support cash
flow. Results highlight Applied’s strong execution and potential as
the next phase of the industrial economy unfolds.”
Mr. Schrimsher added, “Looking ahead, I believe we are entering
a favorable period for Applied and all stakeholders. Indications of
cyclical and secular demand tailwinds are building within legacy
and emerging market verticals. We are seeing greater break-fix and
maintenance activity across our service center network, as well as
stronger orders within our fluid power, specialty flow control, and
automation offerings. This is accelerating sales growth as we lap
prior year pandemic-related weakness, with month-to-date organic
sales in April up approximately 10% year over year. While supply
chain constraints and inflation are increasing industry-wide, we
are in a strong spot to manage through these early cycle dynamics
and continue to drive accretive growth opportunities going forward,
reflecting our leading technical position and strategy. Combined
with our cross-selling potential, self-help margin initiatives, and
strong balance sheet, we have a clear path to drive meaningful
value creation into fiscal 2022 and beyond.”
Outlook Based on month-to-date sales in April and
assuming normal seasonal patterns, the Company would project fiscal
2021 fourth quarter sales to increase 12% to 13% year over year on
an organic basis.
Dividend Today the Company announced that its Board of
Directors declared a quarterly cash dividend of $0.33 per common
share, payable on May 28, 2021, to shareholders of record on May
14, 2021.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on April 29, 2021. 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 1278031. 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 1278031.
About Applied® Applied Industrial Technologies is a
leading value-added distributor and technical solutions provider of
industrial motion, fluid power, flow control, automation
technologies, and related maintenance supplies. Our leading brands,
specialized services, and comprehensive knowledge serve MRO and OEM
end users in virtually all industrial markets through our
multi-channel capabilities that provide choice, convenience, and
expertise. 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 “believe,” “expect,” “will,” “outlook,”
“project”, 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, the effects of the health crisis associated
with the COVID-19 pandemic on our business operations, results of
operations, and financial condition, and other risk factors
identified in Applied's most recent periodic report and other
filings made with the Securities and Exchange Commission, many of
which risks are amplified by circumstances arising out of the
COVID-19 pandemic. 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
(Unaudited) (In thousands, except per share data)
Three
Months EndedMarch 31, Nine Months EndedMarch 31,
2021
2020
2021
2020
Net Sales
$
840,937
$
830,797
$
2,340,031
$
2,520,576
Cost of sales
593,712
594,045
1,667,491
1,791,130
Gross Profit
247,225
236,752
672,540
729,446
Selling, distribution and administrative expense, including
depreciation
172,758
183,702
498,659
556,485
Intangible and other impairment
-
131,000
49,528
131,000
Operating (Loss) Income
74,467
(77,950)
124,353
41,961
Interest expense, net
7,608
8,805
22,919
28,447
Other income, net
(1,657)
(1,428)
(1,746)
(1,643)
Income (Loss) Before Income Taxes
68,516
(85,327)
103,180
15,157
Income Tax Expense (Benefit)
12,453
(2,550)
17,667
21,104
Net Income (Loss)
$
56,063
$
(82,777)
$
85,513
$
(5,947)
Net Income (Loss) Per Share - Basic
$
1.44
$
(2.14)
$
2.21
$
(0.15)
Net Income (Loss) Per Share - Diluted
$
1.42
$
(2.14)
$
2.18
$
(0.15)
Average Shares Outstanding - Basic
38,835
38,682
38,779
38,647
Average Shares Outstanding - Diluted
39,412
38,682
39,261
38,647
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 bemade at the end of each year based on the
inventory levels and costs at that time. Accordingly, interim LIFO
calculations are based onmanagement's estimates of expected
year-end inventory levels and costs and are subject to the final
year-end LIFO inventory determination.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In
thousands)
March 31,2021 June 30,2020
Assets Cash and
cash equivalents
$
304,016
$
268,551
Accounts receivable, net
510,080
449,998
Inventories
358,237
389,150
Other current assets
54,023
52,070
Total current assets
1,226,356
1,159,769
Property, net
116,951
121,901
Operating lease assets, net
84,062
90,636
Intangibles, net
287,686
343,215
Goodwill
559,196
540,594
Other assets
31,137
27,436
Total Assets
$
2,305,388
$
2,283,551
Liabilities Accounts
payable
$
217,252
$
186,270
Current portion of long-term debt
78,644
78,646
Other accrued liabilities
169,850
161,167
Total current liabilities
465,746
426,083
Long-term debt
773,404
855,143
Other liabilities
131,331
158,783
Total Liabilities
1,370,481
1,440,009
Shareholders' Equity
934,907
843,542
Total Liabilities and Shareholders' Equity
$
2,305,388
$
2,283,551
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND
SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS (Unaudited) (In thousands)
Nine Months
EndedMarch 31,
2021
2020
Cash Flows from Operating
Activities Net income (loss)
$
85,513
$
(5,947)
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
15,641
15,997
Amortization of intangibles
26,238
31,671
Intangible and other impairment
49,528
131,000
Amortization of stock appreciation rights and options
1,930
2,217
Other share-based compensation expense
4,660
2,046
Changes in assets and liabilities, net of acquisitions
33,574
1,406
Other, net
(13,675)
(8,766)
Net Cash provided by Operating Activities
203,409
169,624
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(30,023)
(37,237)
Capital expenditures
(12,177)
(16,223)
Proceeds from property sales
691
1,809
Net Cash used in Investing Activities
(41,509)
(51,651)
Cash Flows from Financing
Activities Long-term debt borrowings
-
25,000
Long-term debt repayments
(82,070)
(39,803)
Interest rate swap settlement payments
(2,122)
-
Payment of debt issuance costs
(399)
(22)
Dividends paid
(37,772)
(36,420)
Acquisition holdback payments
(2,344)
(2,440)
Taxes paid for shares withheld for equity awards
(5,990)
(2,604)
Exercise of stock appreciation rights and options
163
330
Net Cash used in Financing Activities
(130,534)
(55,959)
Effect of Exchange Rate Changes on Cash
4,099
(4,769)
Increase in cash and cash equivalents
35,465
57,245
Cash and Cash Equivalents at Beginning of Period
268,551
108,219
Cash and Cash Equivalents at End of Period
$
304,016
$
165,464
APPLIED
INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL
INFORMATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
(Unaudited)
(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 (loss) and Net income (loss) per
share, GAAP financial measures, with Adjusted Net income and
Adjusted Net income per share, non-GAAP financial measures:
Three Months Ended March 31, 2021 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net income and net income per share
$
68,516
$
12,453
$
56,063
$
1.42
18.2%
Non-routine income
(2,609)
(613)
(1,996)
(0.05)
23.5%
Adjusted net income and net income per share
$
65,907
$
11,840
$
54,067
$
1.37
18.0%
Three Months Ended March 31, 2020 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net loss and net loss per share
$
(85,327)
$
(2,550)
$
(82,777)
$
(2.14)
3.0%
Intangible and other impairment
131,000
12,200
118,800
3.07
9.3%
Non-routine costs
5,997
1,396
4,601
0.12
23.3%
Non-routine tax benefit
-
1,010
(1,010)
(0.03)
N/M
Adjusted net income and net income per share
$
51,670
$
12,056
$
39,614
$
1.02
23.3%
Nine Months Ended March 31, 2021 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net income and net income per share
$
103,180
$
17,667
$
85,513
$
2.18
17.1%
Intangible and other impairment
49,528
11,769
37,759
0.96
23.8%
Non-routine costs
7,772
1,847
5,925
0.15
23.8%
Non-routine income
(2,609)
(613)
(1,996)
(0.05)
23.5%
Adjusted net income and net income per share
$
157,871
$
30,670
$
127,201
$
3.24
19.4%
Nine Months Ended March 31, 2020 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net loss and net loss per share
$
15,157
$
21,104
$
(5,947)
$
(0.15)
139.2%
Intangible and other impairment
131,000
12,200
118,800
3.07
9.3%
Non-routine costs
7,452
1,747
5,705
0.15
23.4%
Non-routine tax benefit
-
1,010
(1,010)
(0.03)
N/M
Adjusted net income and net income per share
$
153,609
$
36,061
$
117,548
$
3.04
23.5%
Reconciliation of Net Income, a GAAP financial measure,
to EBITDA, a non-GAAP financial measure: Three Months
EndedMarch 31, Nine Months EndedMarch 31,
2021
2020
2021
2020
Net Income (Loss)
$
56,063
$
(82,777)
$
85,513
$
(5,947)
Interest expense, net
7,608
8,805
22,919
28,447
Income tax expense (benefit)
12,453
(2,550)
17,667
21,104
Depreciation and amortization of property
5,080
5,380
15,641
15,997
Amortization of intangibles
8,236
10,048
26,238
30,617
EBITDA
$
89,440
$
(61,094)
$
167,978
$
90,218
Intangible and other impairment
-
131,000
49,528
131,000
Non-routine costs
-
5,997
7,772
7,452
Non-routine income
(2,609)
-
(2,609)
-
Adjusted EBITDA
$
86,831
$
75,903
$
222,669
$
228,670
The Company defines EBITDA as Earnings from operations
before Interest, Taxes, Depreciation, and Amortization, a non-GAAP
finanicalmeasure. Adjusted EBITDA excludes items that may not be
indicative of core operating results, a non-GAAP financial measure.
Reconciliation of Net Cash provided by Operating
activities, a GAAP financial measure, to Free Cash Flow, a non-GAAP
financial measure: Three Months EndedMarch 31,
Nine Months EndedMarch 31,
2021
2020
2021
2020
Net Cash provided by Operating Activities
$
44,053
$
64,725
$
203,409
$
169,624
Capital expenditures
(3,728)
(4,258)
(12,177)
(16,223)
Free Cash Flow
$
40,325
$
60,467
$
191,232
$
153,401
Free cash flow is defined as net cash provided by operating
activities less property purchases, a non-GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210429005262/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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