• Fourth Quarter Net Sales of $1.1 Billion Up 18.5% YoY; Up 18.7% on an Organic Basis
  • Fourth Quarter Net Income of $79.1 Million; EPS of $2.02 Up 34.4% YoY
  • Fourth Quarter EBITDA of $120.0 Million Up 26.5% YoY
  • Full-Year Net Sales of $3.8 Billion Up 17.8% YoY; Up 16.6% on an Organic Basis
  • Full-Year Net Income of $257.4 Million; EPS of $6.58 Up 38.8% YoY from Prior-Year Adjusted EPS
  • Full-Year EBITDA of $409.6 Million Up 29.0% YoY from Prior-Year Adjusted EBITDA
  • New 1.5 Million Share Repurchase Program Announced

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 2022 fourth quarter and full year ended June 30, 2022.

Net sales for the quarter increased 18.5% to $1.1 billion from $895.9 million in the prior year. The change includes a 0.3% increase from acquisitions, partially offset by a negative 0.5% impact from foreign currency translation. Excluding these factors, sales increased 18.7% on an organic basis reflecting a 21.0% increase in the Service Center segment and a 14.0% increase in the Fluid Power & Flow Control segment. The Company reported net income of $­­­79.1 million, or $2.02 per share, and EBITDA of $120.0 million. On a pre-tax basis, results include $10.8 million ($0.22 after tax per share) of LIFO expense compared to $3.7 million ($0.07 after tax per share) of LIFO income in the prior-year period.

For the twelve months ended June 30, 2022, sales of $3.8 billion increased 17.8% compared with the prior year, or 16.6% on an organic basis. Net income was $257.4 million, or $6.58 per share, and EBITDA was $409.6 million. On a pre-tax basis, full-year results include $26.5 million ($0.53 after tax per share) of LIFO expense compared to $0.9 million ($0.02 after tax per share) of LIFO income in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “We ended fiscal 2022 on a strong note with sales, EBITDA, and EPS all hitting new quarterly records. Sales growth accelerated during the quarter including strong performance in June, while gross margin execution and solid operating leverage drove strong EBITDA margin expansion and over 30% EPS growth despite ongoing inflationary and supply chain pressures. Overall, our consistent outperformance over the past year is a reflection of our talented associates, differentiated industry position, and operational discipline. I am extremely proud of our team and what we accomplished in fiscal 2022.”

Mr. Schrimsher added, “As we move into fiscal 2023, organic sales are up by a mid-teens percent through early August compared to prior-year levels, while order and backlog trends remain positive. We are mindful of greater economic uncertainty that has manifested in recent months, and know how to execute if industrial activity were to slow. That said, we have yet to see any meaningful signs of slowing and remain constructive considering structural demand tailwinds within our core end markets and channels, as well as momentum from our cross-selling initiatives. Further, our critical higher-engineered solutions, technical service reliability, and expanding automation platform are driving incremental growth opportunities as customers execute required investments and structural improvements throughout their operations. Combined with a healthy balance sheet supporting accretive M&A, we have multiple self-help opportunities to sustain favorable earnings growth and strong returns for all stakeholders going forward.”

Fiscal 2023 Guidance and Updated Intermediate Financial Objectives Today the Company is introducing fiscal 2023 EPS guidance in the range of $6.65 to $7.30 based on sales growth of 3% to 7% and EBITDA margins of 10.8% to 11.1%. Guidance incorporates current economic uncertainty, as well as ongoing inflationary and supply chain headwinds. Guidance does not assume contribution from potential future acquisitions.

In addition, the Company is establishing new intermediate financial objectives, and now targets sales of over $5 billion and EBITDA margins of over 12%. The Company expects to achieve these targets within the next five years or sooner depending on various factors including the trajectory of broader macro dynamics in coming years.

Mr. Schrimsher concluded, “Given our strong progress and execution in recent years, we are on track to achieve our prior EBITDA margin goal of 11% sooner than expected. We see significant potential to further scale our industry position and EBITDA margin profile in coming years given our multi-faceted strategy focused on enhancing and leveraging our core service center operations, while expanding across higher-engineered solutions tied to advanced automation, industrial power, and process technologies. We expect this strategy to present many new and relevant growth catalysts, and drive an ongoing evolution at Applied that will further solidify the Company as the premier technical provider of customer return-enhancing solutions and application expertise across critical industrial infrastructure.”

New Share Repurchase Program Authorization Today the Company announced that its Board of Directors authorized a new share buyback program to repurchase up to 1.5 million shares of the Company’s common stock. The updated plan replaces the prior share repurchase plan. Shares may be purchased in open market and negotiated transactions.

Conference Call Information Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on August 11, 2022. 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 877-210-1510 (toll free) or 212-231-2905 (for International callers) using conference ID 22019772. 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 800-633-8625 or 402-977-9141 (International) using conference ID 22019772.

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 “expect,” “will,” “targets,” “see,” “guidance,” “assume”, “objectives,” 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 (such as the inflationary environment and supply chain strains), 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,

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net Sales

$

1,061,459

$

895,888

 

$

3,810,676

$

3,235,919

 

Cost of sales

 

754,832

 

 

632,904

 

 

2,703,760

 

 

2,300,395

 

Gross Profit

 

306,627

 

 

262,984

 

 

1,106,916

 

 

935,524

 

Selling, distribution and administrative expense, including depreciation

 

197,403

 

 

181,883

 

 

749,058

 

 

680,542

 

Impairment expense

 

-

 

 

-

 

 

-

 

 

49,528

 

Operating Income

 

109,224

 

 

81,101

 

 

357,858

 

 

205,454

 

Interest expense, net

 

6,014

 

 

7,673

 

 

26,263

 

 

30,592

 

Other expense (income), net

 

2,517

 

 

(454

)

 

1,805

 

 

(2,200

)

Income Before Income Taxes

 

100,693

 

 

73,882

 

 

329,790

 

 

177,062

 

Income Tax Expense

 

21,580

 

 

14,638

 

 

72,376

 

 

32,305

 

Net Income

$

79,113

 

$

59,244

 

$

257,414

 

$

144,757

 

Net Income Per Share - Basic

$

2.06

 

$

1.53

 

$

6.69

 

$

3.73

 

Net Income Per Share - Diluted

$

2.02

 

$

1.51

 

$

6.58

 

$

3.68

 

Average Shares Outstanding - Basic

 

38,471

 

 

38,692

 

 

38,471

 

 

38,758

 

Average Shares Outstanding - Diluted

 

39,101

 

 

39,347

 

 

39,105

 

 

39,296

 

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, 2022 June 30, 2021     Assets Cash and cash equivalents

$

184,474

$

257,745

Accounts receivable, net

 

656,429

 

 

516,322

 

Inventories

 

449,821

 

 

362,547

 

Other current assets

 

68,805

 

 

59,961

 

Total current assets

 

1,359,529

 

 

1,196,575

 

Property, net

 

111,896

 

 

115,589

 

Operating lease assets, net

 

108,052

 

 

87,111

 

Intangibles, net

 

250,590

 

 

279,628

 

Goodwill

 

563,205

 

 

560,077

 

Other assets

 

59,316

 

 

32,827

 

Total Assets

$

2,452,588

 

$

2,271,807

 

  Liabilities Accounts payable

$

259,463

 

$

208,162

 

Current portion of long-term debt

 

40,174

 

 

43,525

 

Other accrued liabilities

 

199,990

 

 

176,013

 

Total current liabilities

 

499,627

 

 

427,700

 

Long-term debt

 

649,150

 

 

784,855

 

Other liabilities

 

154,456

 

 

126,706

 

Total Liabilities

 

1,303,233

 

 

1,339,261

 

Shareholders' Equity

 

1,149,355

 

 

932,546

 

Total Liabilities and Shareholders' Equity

$

2,452,588

 

$

2,271,807

 

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (In thousands)  

Year Ended June 30,

 

2022

 

 

 

2021

 

  Cash Flows from Operating Activities Net income

$

257,414

 

$

144,757

 

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property

 

21,676

 

 

20,780

 

Amortization of intangibles

 

31,879

 

 

34,365

 

Impairment expense

 

-

 

 

49,528

 

Amortization of stock appreciation rights and options

 

3,284

 

 

2,526

 

Other share-based compensation expense

 

8,558

 

 

6,454

 

Changes in assets and liabilities, net of acquisitions

 

(151,858

)

 

6,381

 

Other, net

 

16,617

 

 

(23,094

)

Net Cash provided by Operating Activities

 

187,570

 

 

241,697

 

Cash Flows from Investing Activities Acquisition of businesses, net of cash acquired

 

(6,964

)

 

(30,230

)

Capital expenditures

 

(18,124

)

 

(15,852

)

Proceeds from property sales

 

1,107

 

 

1,152

 

Other

 

(11,677

)

 

-

 

Net Cash used in Investing Activities

 

(35,658

)

 

(44,930

)

Cash Flows from Financing Activities Net borrowings under revolving credit facility

 

410,592

 

 

-

 

Borrowings under long-term debt facilities

 

-

 

 

26,000

 

Long-term debt repayments

 

(550,493

)

 

(131,883

)

Interest rate swap settlement payments

 

(5,703

)

 

(3,737

)

Payment of debt issuance costs

 

(1,956

)

 

(399

)

Purchases of treasury shares

 

(13,784

)

 

(40,089

)

Dividends paid

 

(51,805

)

 

(50,664

)

Acquisition holdback payments

 

(2,361

)

 

(2,345

)

Taxes paid for shares withheld for equity awards

 

(8,074

)

 

(10,083

)

Exercise of stock appreciation rights and options

 

555

 

 

163

 

Net Cash used in Financing Activities

 

(223,029

)

 

(213,037

)

Effect of Exchange Rate Changes on Cash

 

(2,154

)

 

5,464

 

Decrease in cash and cash equivalents

 

(73,271

)

 

(10,806

)

Cash and Cash Equivalents at Beginning of Period

 

257,745

 

 

268,551

 

Cash and Cash Equivalents at End of Period

$

184,474

 

$

257,745

 

 

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 and Net income per share, GAAP financial measures, with Adjusted Net income andAdjusted Net income per share, non-GAAP financial measures:  

Year Ended June 30, 2021

Pre-tax

 

Tax Effect

 

Net of Tax

 

Per Share Diluted 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

%

Reconciliation of Net Income, a GAAP financial measure, to EBITDA, a non-GAAP financial measure:

 

Three Months Ended June 30,

 

Year Ended June 30,

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net Income

$

79,113

 

$

59,244

 

$

257,414

 

$

144,757

 

Interest expense, net

 

6,014

 

 

7,673

 

 

26,263

 

 

30,592

 

Income tax expense

 

21,580

 

 

14,638

 

 

72,376

 

 

32,305

 

Depreciation and amortization of property

 

5,461

 

 

5,139

 

 

21,676

 

 

20,780

 

Amortization of intangibles

 

7,783

 

 

8,127

 

 

31,879

 

 

34,365

 

EBITDA

$

119,951

 

$

94,821

 

$

409,608

 

$

262,799

 

Impairment expense

 

-

 

 

-

 

 

-

 

 

49,528

 

Non-routine costs

 

-

 

 

-

 

 

-

 

 

7,772

 

Non-routine income

 

-

 

 

-

 

 

-

 

 

(2,609

)

Adjusted EBITDA

$

119,951

 

$

94,821

 

$

409,608

 

$

317,490

 

  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 Ended June 30,

 

Year Ended June 30,

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Cash provided by Operating Activities

$

53,747

 

$

38,288

 

$

187,570

 

$

241,697

 

Capital expenditures

 

(6,450

)

 

(3,675

)

 

(18,124

)

 

(15,852

)

Free Cash Flow

$

47,297

 

$

34,613

 

$

169,446

 

$

225,845

 

  Free cash flow is defined as net cash provided by operating activities less capital expenditures, a non-GAAP financial measure.

 

Ryan D. Cieslak Director – Investor Relations & Treasury 216-426-4887 / rcieslak@applied.com

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