- Fourth Quarter Net Sales of $895.9 Million Up 23.6% YoY; Up
19.8% on an Organic Basis
- Fourth Quarter Net Income of $59.2 Million, or $1.51 Per Share;
EBITDA of $94.8 Million
- Full-Year Net Sales of $3.2 Billion Down 0.3% YoY; Down 1.8% on
an Organic Daily Basis
- Full-Year Net Income of $144.8 Million, or $3.68 Per Share
- Full-Year Adjusted Net Income of $186.4 Million, or $4.74 Per
Share
- Full-Year Operating Cash Flow of $241.7 Million; Free Cash Flow
of $225.8 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 fourth quarter and full year ended June
30, 2021.
Net sales for the quarter increased 23.6% to $895.9 million from
$725.1 million in the prior year. The change includes a 2.1%
increase from acquisitions and a 1.7% increase from foreign
currency translation. Excluding these factors, sales increased
19.8% on an organic basis with similar increases reported across
both the Service Center segment and Fluid Power & Flow Control
segment. The Company reported net income of $59.2 million, or $1.51
per share, and EBITDA of $94.8 million. Results include a LIFO
layer liquidation benefit, which favorably impacted EPS by $0.07
and gross profit by $3.7 million on a net basis during the
quarter.
For the twelve months ended June 30, 2021, sales were $3.2
billion, a decrease of 0.3% compared with the prior year, or down
1.8% on an organic daily basis. Net income was $144.8 million or
$3.68 per share on a reported basis. Non-GAAP adjusted net income
was $186.4 million, or $4.74 per share. Full-year operating cash
flow was $241.7 million, while free cash flow was $225.8 million or
121.1% of adjusted net income.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “We ended fiscal 2021 on a strong note with
fourth quarter performance exceeding our expectations and achieving
record quarterly earnings. Underlying demand continued to
strengthen across both segments during the quarter reflecting
sustained recovery in our core end markets and momentum generated
from our internal growth initiatives. We are managing inflation
well and controlling costs, while benefiting from productivity
enhancements. Overall, I am extremely proud of what we accomplished
during a challenging year. Our ability to deliver strong
operational and financial performance while remaining fully
invested in our long-term strategy during an unprecedented period
is a testament to the strength of our Applied team, business model,
and industry position.”
Mr. Schrimsher added, “Entering early fiscal 2022, we are off to
a positive start with organic sales through mid-August up by a
high-teens percent over the prior year, and customer indications
signaling sustained demand momentum. Our balance sheet is in a
solid position, and we see favorable earnings potential beyond
cycle fundamentals as we leverage our technical industry position
and expanding addressable market. This includes supporting more of
our customers’ industrial technology and operational requirements
through our cross-selling efforts, as well as the expansion of
faster growing and higher margin industrial solutions. While
industry-wide supply chain constraints and macro uncertainty
remain, we have multiple internal opportunities to drive solid
earnings growth and stronger returns on capital in fiscal 2022 and
beyond.”
Fiscal 2022 Guidance The Company is reinstating its
practice of providing formal full-year guidance. For the fiscal
year ending June 30, 2022, the Company is introducing EPS guidance
in the range of $5.00 to $5.40 based on sales growth of 8% to 10%
including 7% to 9% on an organic basis, as well as EBITDA margins
of 9.7% to 9.9%. Guidance assumptions include a steady industrial
demand environment relative to current trends, ongoing inflationary
headwinds including greater LIFO expense, and lingering uncertainty
related to the COVID-19 pandemic. Guidance does not assume
contribution from potential future acquisitions.
Share Repurchases During the quarter, the Company
purchased 400,000 shares of its common stock in open market
transactions for $40.1 million. At June 30, 2021, the Company had
remaining authorization to purchase approximately 465,000
additional shares.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on August 17, 2021. Neil A. Schrimsher – President & CEO, and
David K. Wells – CFO will discuss the Company's performance. A
supplemental investor presentation detailing latest quarter results
and the Company’s outlook 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
8056208. 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 8056208.
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 “see,” “expect,” “will,” “guidance,” “assume”,
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 Ended June
30,
Year Ended June 30,
2021
2020
2021
2020
Net Sales
$
895,888
$
725,076
$
3,235,919
$
3,245,652
Cost of sales
632,904
516,786
2,300,395
2,307,916
Gross Profit
262,984
208,290
935,524
937,736
Selling, distribution and administrative expense, including
depreciation
181,883
161,262
680,542
717,747
Impairment expense
-
-
49,528
131,000
Operating Income
81,101
47,028
205,454
88,989
Interest expense, net
7,673
8,088
30,592
36,535
Other income, net
(454
)
(1,139
)
(2,200
)
(2,782
)
Income Before Income Taxes
73,882
40,079
177,062
55,236
Income Tax Expense
14,638
10,090
32,305
31,194
Net Income
$
59,244
$
29,989
$
144,757
$
24,042
Net Income Per Share - Basic
$
1.53
$
0.78
$
3.73
$
0.62
Net Income Per Share - Diluted
$
1.51
$
0.77
$
3.68
$
0.62
Average Shares Outstanding - Basic
38,692
38,691
38,758
38,658
Average Shares Outstanding - Diluted
39,347
38,988
39,296
38,999
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.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In
thousands)
June 30, 2021 June 30, 2020
Assets Cash and cash
equivalents
$
257,745
$
268,551
Accounts receivable, net
516,322
449,998
Inventories
362,547
389,150
Other current assets
59,961
52,070
Total current assets
1,196,575
1,159,769
Property, net
115,589
121,901
Operating lease assets, net
87,111
90,636
Intangibles, net
279,628
343,215
Goodwill
560,077
540,594
Other assets
32,827
27,436
Total Assets
$
2,271,807
$
2,283,551
Liabilities Accounts
payable
$
208,162
$
186,270
Current portion of long-term debt
43,525
78,646
Other accrued liabilities
176,013
161,167
Total current liabilities
427,700
426,083
Long-term debt
784,855
855,143
Other liabilities
126,706
158,783
Total Liabilities
1,339,261
1,440,009
Shareholders' Equity
932,546
843,542
Total Liabilities and Shareholders' Equity
$
2,271,807
$
2,283,551
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
Year Ended June 30,
2021
2020
Cash Flows from Operating
Activities Net income
$
144,757
$
24,042
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
20,780
21,196
Amortization of intangibles
34,365
41,553
Impairment expense
49,528
131,000
Amortization of stock appreciation rights and options
2,526
2,954
Other share-based compensation expense
6,454
4,000
Changes in assets and liabilities, net of acquisitions
6,381
73,720
Other, net
(23,094
)
(1,751
)
Net Cash provided by Operating Activities
241,697
296,714
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(30,230
)
(37,237
)
Capital expenditures
(15,852
)
(20,115
)
Proceeds from property sales
1,152
1,948
Net Cash used in Investing Activities
(44,930
)
(55,404
)
Cash Flows from Financing
Activities Long-term debt borrowings
26,000
25,000
Long-term debt repayments
(131,883
)
(49,553
)
Interest rate swap settlement payments
(3,737
)
-
Payment of debt issuance costs
(399
)
(95
)
Purchases of treasury shares
(40,089
)
-
Dividends paid
(50,664
)
(48,873
)
Acquisition holdback payments
(2,345
)
(2,440
)
Taxes paid for shares withheld for equity awards
(10,083
)
(2,607
)
Exercise of stock appreciation rights and options
163
330
Net Cash used in Financing Activities
(213,037
)
(78,238
)
Effect of Exchange Rate Changes on Cash
5,464
(2,740
)
Increase in cash and cash equivalents
(10,806
)
160,332
Cash and Cash Equivalents at Beginning of Period
268,551
108,219
Cash and Cash Equivalents at End of Period
$
257,745
$
268,551
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATIONRECONCILIATION 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 and Net income per share, GAAP
financial measures, with Adjusted Net income andAdjusted Net income
per share, non-GAAP financial measures: Three Months
Ended June 30, 2020 Pre-tax Tax Effect Net of
Tax Per ShareDiluted Impact Tax Rate Net
income and net income per share
$
40,079
$
10,090
$
29,989
$
0.77
25.2
%
Non-routine costs
1,540
388
1,152
0.03
25.2
%
Adjusted net income and net income per share
$
41,619
$
10,478
$
31,141
$
0.80
25.2
%
Year Ended June 30, 2021 Pre-tax Tax
Effect Net of Tax Per ShareDiluted Impact Tax
Rate Net income and net income per share
$
177,062
$
32,305
$
144,757
$
3.68
18.2
%
Impairment expense
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
$
231,753
$
45,308
$
186,445
$
4.74
19.6
%
Year Ended June 30, 2020 Pre-tax Tax
Effect Net of Tax Per ShareDiluted Impact Tax
Rate Net income and net income per share
$
55,236
$
31,194
$
24,042
$
0.62
56.5
%
Impairment expense
131,000
12,200
118,800
3.04
9.3
%
Non-routine costs
8,992
2,135
6,857
0.18
23.7
%
Non-routine tax benefit
-
1,010
(1,010
)
(0.03
)
N/M
Adjusted net income and net income per share
$
195,228
$
46,539
$
148,689
$
3.81
23.8
%
Reconciliation of Net Income, a GAAP financial measure, to
EBITDA, a non-GAAP financial measure:
Three Months Ended June
30,
Year Ended June 30,
2021
2020
2021
2020
Net Income
$
59,244
$
29,989
$
144,757
$
24,042
Interest expense, net
7,673
8,088
30,592
36,535
Income tax expense
14,638
10,090
32,305
31,194
Depreciation and amortization of property
5,139
5,199
20,780
21,196
Amortization of intangibles
8,127
9,882
34,365
40,499
EBITDA
$
94,821
$
63,248
$
262,799
$
153,466
Impairment expense
-
-
49,528
131,000
Non-routine costs
-
1,540
7,772
8,992
Non-routine income
-
-
(2,609
)
-
Adjusted EBITDA
$
94,821
$
64,788
$
317,490
$
293,458
The Company defines EBITDA as Earnings from operations
before Interest, Taxes, Depreciation, and Amortization, a non-GAAP
financial measure. Adjusted EBITDA excludes items that may not be
indicative of core operating results, a non-GAAP financial measure.
Reconciliation of Cash provided by Operating activities,
a GAAP financial measure, to Free Cash Flow, a non-GAAP financial
measure: Three Months EndedJune 30, Year
EndedJune 30,
2021
2020
2021
2020
Cash provided by Operating Activities
$
38,288
$
127,090
$
241,697
$
296,714
Capital expenditures
(3,675
)
(3,892
)
(15,852
)
(20,115
)
Free Cash Flow
$
34,613
$
123,198
$
225,845
$
276,599
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/20210817005295/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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