- Net Sales of $1.1 Billion Up 19.1% YoY; Up 19.4% on an Organic
Basis
- Net Income of $76.9 Million; EPS of $1.97 Up 45.0% YoY
- EBITDA of $118.7 Million Up 34.2% YoY
- Raising Fiscal 2023 Guidance Following First Quarter
Performance
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 2023 first quarter ended September 30,
2022.
Net sales for the quarter increased 19.1% to $1.1 billion from
$891.7 million in the prior year. The change includes a 0.2%
increase from acquisitions, partially offset by a negative 0.5%
impact from foreign currency translation. Excluding these factors,
sales increased 19.4% on an organic basis. The Company reported net
income of $76.9 million, or $1.97 per share, and EBITDA of
$118.7 million. On a pre-tax basis, results include $9.1 million
($0.18 after tax per share) of LIFO expense compared to $3.6
million ($0.07 after tax per share) of LIFO expense in the
prior-year period.
During the quarter, the Company renamed its Fluid Power &
Flow Control segment to Engineered Solutions. The name was changed
to reflect the evolution in the segment’s business profile, scope
of products and solutions, and value proposition. Organic sales
growth during the quarter was 20.3% in the Service Center segment
and 17.8% in the Engineered Solutions segment.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “The first quarter was a strong start to our
fiscal year with sales and EBITDA growth sustaining solid momentum
across both segments. Demand within our served end markets remains
relatively firm, and we are executing well on internal initiatives
aimed at expanding our organic growth potential long term. At the
same time, we remain focused on managing inflationary pressures and
leveraging our operating structure. This is reflected by gross
margin and EBITDA margin expansion, and a 45% year-over-year
increase in EPS during the quarter. Overall, these results provide
further evidence of our execution and the supportive tailwinds from
our differentiated industry position, footprint, and strategy.”
Mr. Schrimsher added, “We are raising fiscal 2023 guidance
following strong first quarter performance. Organic sales month to
date in October are up by approximately 20% year over year, and
customer feedback remains generally constructive. We are mindful of
ongoing macro uncertainty that could slow industrial activity and
growth in coming quarters. Combined with ongoing inflationary and
supply chain considerations, we remain prudent with our outlook
near term. That said, our industry position and diversified
end-market mix provides strong support, and our teams and
initiatives are aligned to successfully execute our strategy in any
environment. Lastly, our balance sheet and cash flow potential
provide significant capacity to supplement our market position and
earnings potential through strategic growth investments.”
Updated Fiscal 2023 Guidance For fiscal 2023, the Company
now projects EPS of $6.90 to $7.55 (prior $6.65 to $7.30), sales
growth of 5% to 9% including 6% to 10% on an organic basis (prior
3% to 7%) and EBITDA margins of 10.9% to 11.2% (prior 10.8% to
11.1%). Guidance incorporates ongoing economic uncertainty,
inflationary pressures, and supply chain headwinds. Guidance does
not assume contribution from potential future acquisitions.
Dividend Today the Company also announced that its Board
of Directors declared a quarterly cash dividend of $0.34 per common
share, payable on November 30, 2022, to shareholders of record on
November 15, 2022.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on October 27, 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 800-732-5617 (toll free) or
212-231-2919 (for International callers) using conference ID
22020903. 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 22020903.
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 “will,” “guidance,” “projects,” “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 (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
EndedSeptember 30,
2022
2021
Net Sales
$
1,062,405
$
891,681
Cost of sales
755,622
636,341
Gross Profit
306,783
255,340
Selling, distribution and administrative expense, including
depreciation
200,251
180,726
Operating Income
106,532
74,614
Interest expense, net
6,480
7,390
Other income, net
1,008
(312
)
Income Before Income Taxes
99,044
67,536
Income tax expense
22,164
14,567
Net Income
$
76,880
$
52,969
Net Income Per Share - Basic
$
2.00
$
1.38
Net Income Per Share - Diluted
$
1.97
$
1.36
Average Shares Outstanding - Basic
38,526
38,502
Average Shares Outstanding - Diluted
39,111
39,084
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)
September30, 2022 June 30,2022 Assets Cash and cash equivalents
$
147,575
$
184,474
Accounts receivable, net
674,136
656,429
Inventories
490,099
449,821
Other current assets
78,686
68,805
Total current assets
1,390,496
1,359,529
Property, net
110,539
111,896
Operating lease assets, net
103,037
108,052
Intangibles, net
242,741
250,590
Goodwill
561,477
563,205
Other assets
65,884
59,316
Total Assets
$
2,474,174
$
2,452,588
Liabilities Accounts
payable
$
277,224
$
259,463
Current portion of long-term debt
181
40,174
Other accrued liabilities
173,858
199,990
Total current liabilities
451,263
499,627
Long-term debt
649,103
649,150
Other liabilities
152,368
154,456
Total Liabilities
1,252,734
1,303,233
Shareholders' Equity
1,221,440
1,149,355
Total Liabilities and Shareholders' Equity
$
2,474,174
$
2,452,588
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
Three Months EndedSeptember 30,
2022
2021
Cash Flows from Operating
Activities Net income
$
76,880
$
52,969
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
5,481
5,427
Amortization of intangibles
7,705
8,121
Provision for losses on accounts receivable
3,994
798
Amortization of stock appreciation rights and options
1,424
1,907
Other share-based compensation expense
1,939
1,563
Changes in assets and liabilities, net of acquisitions
(72,071
)
(20,404
)
Other, net
591
(1,739
)
Net Cash provided by Operating Activities
25,943
48,642
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
-
(7,094
)
Capital expenditures
(5,554
)
(3,621
)
Proceeds from property sales
56
48
Cash payments for loans on company-owned life insurance
-
(14,835
)
Net Cash used in Investing Activities
(5,498
)
(25,502
)
Cash Flows from Financing
Activities Long-term debt repayments
(40,061
)
(9,811
)
Interest rate swap settlement receipts (payments)
294
(1,644
)
Purchases of treasury shares
(716
)
(6,537
)
Dividends paid
(13,100
)
(12,712
)
Exercise of stock appreciation rights and options
126
-
Acquisition holdback payments
(660
)
(135
)
Taxes paid for shares withheld for equity awards
(1,401
)
(1,141
)
Net Cash used in Financing Activities
(55,518
)
(31,980
)
Effect of Exchange Rate Changes on Cash
(1,826
)
(1,592
)
Decrease in cash and cash equivalents
(36,899
)
(10,432
)
Cash and Cash Equivalents at Beginning of Period
184,474
257,745
Cash and Cash Equivalents at End of Period
$
147,575
$
247,313
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, a GAAP financial measure, to EBITDA, a non-GAAP financial
measure: Three Months EndedSeptember 30,
2022
2021
Net Income
$
76,880
$
52,969
Interest expense, net
6,480
7,390
Income tax expense
22,164
14,567
Depreciation and amortization of property
5,481
5,427
Amortization of intangibles
7,705
8,121
EBITDA
$
118,710
$
88,474
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 Net Cash provided by Operating activities, a
GAAP financial measure, to Free Cash Flow, a non-GAAP financial
measure: Three Months EndedSeptember 30,
2022
2021
Net Cash provided by Operating Activities
$
25,943
$
48,642
Capital expenditures
(5,554
)
(3,621
)
Free Cash Flow
$
20,389
$
45,021
Free cash flow is defined as net cash provided by operating
activities less capital expenditures, a non-GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221027005146/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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