- Net Sales of $1.1 Billion Up 1.3% YoY; Up 0.7% on an Organic
Daily Basis
- Net Income of $97.2 Million, or $2.48 Per Share; EBITDA of
$135.7 Million
- Operating Cash Flow of $84.2 Million; Free Cash Flow of $76.7
Million
- Signed Definitive Agreement to Acquire Grupo Kopar, Expanding
Automation Platform
- Updating Fiscal 2024 Guidance
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 2024 third quarter ended March 31, 2024.
Net sales for the quarter of $1.1 billion increased 1.3% over
the prior year. The change includes a 1.2% increase from
acquisitions and a 0.2% increase from foreign currency translation,
partially offset by a negative 0.8% selling day impact. Excluding
these factors, sales increased 0.7% on an organic daily basis
reflecting a 2.6% increase in the Service Center segment and a 3.2%
decrease in the Engineered Solutions segment. The Company reported
net income of $97.2 million, or $2.48 per share, and EBITDA of
$135.7 million. On a pre-tax basis, results include $4.8 million
($0.10 after tax per share) of LIFO expense compared to $8.2
million ($0.16 after tax per share) of LIFO expense in the
prior-year period.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “Third quarter sales exceeded our expectations
with the year-over-year trend gradually improving as the quarter
progressed. Growth was led by our core Service Center operations
where our technical industry position and internal initiatives are
augmenting steady break-fix demand. This encouraging trend is a
favorable indicator for our broader business and growth potential
moving forward. In addition, we remain positive on our Engineered
Solutions segment ahead of fiscal 2025 considering a constructive
outlook across technology, automation, and process markets. Lastly,
EBITDA margins were impacted by unfavorable expense absorption and
mix against modest sales growth during the quarter. We expect these
headwinds to alleviate near-term, and we remain on track to achieve
record cash generation for the year.”
Mr. Schrimsher added, “I’m also excited to announce a key
strategic step in the expansion of our automation platform with an
agreement to acquire Grupo Kopar (Kopar), a provider of emerging
automation technologies and engineered solutions primarily across
Mexico. In addition to expanding our automation footprint with a
market leader in this key growth geography, Kopar has strong
alignment with our strategy focused on high-value robotics, machine
vision, and IIoT applications. The acquisition will add
approximately 200 new associates to our growing automation team and
is expected to close in the coming weeks. Overall, we see
significant potential and synergies building across our automation
platform that stand to enhance our growth and earnings potential
into fiscal 2025 and beyond. We look forward to welcoming Kopar to
Applied and leveraging their capabilities going forward.”
Updated Fiscal 2024 Guidance For fiscal 2024, the Company
now projects EPS of $9.55 to $9.70 on an adjusted basis (prior
$9.35 to $9.70), sales growth of 1.5% to 2.5% (prior 1% to 3%)
including 0.5% to 1.5% on an organic daily basis (prior 0% to 2%),
and EBITDA margins of 12.0% to 12.1% (prior 12.1% to 12.3%).
Updated adjusted EPS guidance excludes the $3.0 million tax benefit
recorded in the fiscal 2024 second quarter related to a deferred
tax valuation allowance adjustment. Guidance incorporates current
economic uncertainty and assumptions of easing end-market demand
near term, as well as ongoing inflationary headwinds. Guidance does
not assume contribution from Kopar (pending the transaction close)
or future acquisitions.
Dividend Today the Company announced that its Board of
Directors declared a quarterly cash dividend of $0.37 per common
share, payable on May 31, 2024, to shareholders of record on May
15, 2024.
Conference Call Information The Company will host a
conference call at 10 a.m. ET today to discuss the quarter’s
results and outlook. A live audio webcast and supplemental
presentation can be accessed on our Investor Relations site at
https://ir.applied.com. To join by telephone, dial 888-660-6573
(toll free) or 929-203-0881 using conference ID 6868675. Replays of
the call will be available via webcast, as well as by telephone for
one week by dialing 800-770-2030 (toll free) or 647-362-9199 using
conference ID 6868675.
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,” “see,” “assume,” “will,” “guidance”
and derivative or similar expressions. All forward-looking
statements are based on current expectations regarding important
risk factors including trends and events in the industrial sector
of the economy (such as the inflationary environment and supply
chain strains), 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. 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,
2024
2023
2024
2023
Net Sales
$
1,146,390
$
1,132,035
$
3,318,731
$
3,254,720
Cost of sales
808,144
798,917
2,338,313
2,306,314
Gross Profit
338,246
333,118
980,418
948,406
Selling, distribution and administrative expense, including
depreciation
217,040
206,207
623,938
602,070
Operating Income
121,206
126,911
356,480
346,336
Interest expense, net
265
4,773
3,502
17,438
Other (income) expense, net
(1,724
)
(142
)
(4,217
)
1,624
Income Before Income Taxes
122,665
122,280
357,195
327,274
Income tax expense
25,448
25,093
74,924
72,750
Net Income
$
97,217
$
97,187
$
282,271
$
254,524
Net Income Per Share - Basic
$
2.51
$
2.52
$
7.29
$
6.60
Net Income Per Share - Diluted
$
2.48
$
2.47
$
7.18
$
6.49
Average Shares Outstanding - Basic
38,675
38,617
38,707
38,574
Average Shares Outstanding - Diluted
39,252
39,268
39,291
39,203
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)
March 31,
2024 June 30,2023 Assets Cash and cash equivalents
$
456,533
$
344,036
Accounts receivable, net
710,195
708,395
Inventories
503,910
501,184
Other current assets
97,044
93,192
Total current assets
1,767,682
1,646,807
Property, net
115,325
115,041
Operating lease assets, net
95,569
100,677
Intangibles, net
220,840
235,549
Goodwill
588,713
578,418
Other assets
66,814
66,840
Total Assets
$
2,854,943
$
2,743,332
Liabilities Accounts
payable
$
271,185
$
301,685
Current portion of long-term debt
25,107
25,170
Other accrued liabilities
172,114
213,489
Total current liabilities
468,406
540,344
Long-term debt
571,862
596,926
Other liabilities
145,651
147,625
Total Liabilities
1,185,919
1,284,895
Shareholders' Equity
1,669,024
1,458,437
Total Liabilities and Shareholders' Equity
$
2,854,943
$
2,743,332
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
Nine Months EndedMarch 31,
2024
2023
Cash Flows from Operating
Activities Net income
$
282,271
$
254,524
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
17,567
16,598
Amortization of intangibles
21,601
23,189
Provision for losses on accounts receivable
1,001
4,676
Amortization of stock appreciation rights and options
2,570
2,322
Other share-based compensation expense
7,508
7,419
Changes in assets and liabilities, net of acquisitions
(77,403
)
(142,092
)
Other, net
(2,956
)
(2,609
)
Net Cash provided by Operating Activities
252,159
164,027
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(21,440
)
(35,667
)
Capital expenditures
(17,354
)
(20,809
)
Proceeds from property sales
514
226
Net Cash used in Investing Activities
(38,280
)
(56,250
)
Cash Flows from Financing
Activities Net repayments under revolving credit
facility
-
(27,000
)
Long-term debt repayments
(25,188
)
(40,185
)
Interest rate swap settlement receipts
10,839
5,501
Purchases of treasury shares
(28,875
)
(716
)
Dividends paid
(41,524
)
(39,829
)
Acquisition holdback payments
(681
)
(1,510
)
Taxes paid for shares withheld for equity awards
(15,874
)
(7,914
)
Exercise of stock appreciation rights and options
127
127
Net Cash used in Financing Activities
(101,176
)
(111,526
)
Effect of Exchange Rate Changes on Cash
(206
)
1,402
Increase (decrease) in cash and cash equivalents
112,497
(2,347
)
Cash and Cash Equivalents at Beginning of Period
344,036
184,474
Cash and Cash Equivalents at End of Period
$
456,533
$
182,127
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 and Adjusted Net
income per share, non-GAAP financial measures:
Three Months Ended March 31, 2023 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net income and net income per share
$
122,280
$
25,093
$
97,187
$
2.47
20.5
%
Tax valuation allowance adjustment, net
-
3,657
(3,657
)
(0.09
)
3.0
%
Adjusted net income and net income per share
$
122,280
$
28,750
$
93,530
$
2.38
23.5
%
Nine Months Ended March 31, 2024 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net income and net income per share
$
357,195
$
74,924
$
282,271
$
7.18
21.0
%
Tax valuation allowance adjustment
-
3,046
(3,046
)
(0.08
)
0.8
%
Adjusted net income and net income per share
$
357,195
$
77,970
$
279,225
$
7.10
21.8
%
Nine Months Ended March 31, 2023 Pre-tax
Tax Effect Net of Tax Per ShareDiluted Impact
Tax Rate Net income and net income per share
$
327,274
$
72,750
$
254,524
$
6.49
22.2
%
Tax valuation allowance adjustment, net
-
3,657
(3,657
)
(0.09
)
1.1
%
Adjusted net income and net income per share
$
327,274
$
76,407
$
250,867
$
6.40
23.3
%
Reconciliation of Net Income, a GAAP financial measure, to
EBITDA, a non-GAAP financial measure:
Three Months EndedMarch 31, Nine Months EndedMarch
31,
2024
2023
2024
2023
Net Income
$
97,217
$
97,187
$
282,271
$
254,524
Interest expense, net
265
4,773
3,502
17,438
Income tax expense
25,448
25,093
74,924
72,750
Depreciation and amortization of property
5,802
5,565
17,567
16,598
Amortization of intangibles
6,951
7,670
21,601
23,189
EBITDA
$
135,683
$
140,288
$
399,865
$
384,499
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, 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,
2024
2023
2024
2023
Net Cash provided by Operating Activities
$
84,192
$
75,204
$
252,159
$
164,027
Capital expenditures
(7,491
)
(7,992
)
(17,354
)
(20,809
)
Free Cash Flow
$
76,701
$
67,212
$
234,805
$
143,218
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/20240425684444/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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