• Net Sales of $891.7 Million Up 19.2% YoY; Up 16.3% on an Organic Basis
  • Net Income of $53.0 Million, or $1.36 Per Share; EBITDA of $88.5 Million
  • Operating Cash Flow of $48.6 Million; Free Cash Flow of $45.0 Million
  • Fiscal 2022 Guidance Maintained Including EPS of $5.00 to $5.40

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 first quarter ended September 30, 2021.

Net sales for the quarter increased 19.2% to $891.7 million from $747.8 million in the prior year. The change includes a 2.1% increase from acquisitions and a 0.8% increase from foreign currency translation. Excluding these factors, sales increased 16.3% on an organic basis reflecting a 15.9% increase in the Service Center segment and a 17.4% increase in the Fluid Power & Flow Control segment. The Company reported net income of $53.0 million, or $1.36 per share, and EBITDA of $88.5 million. On a pre-tax basis, results include $3.6 million ($0.07 after tax per share) of LIFO expense compared to $1.1 million ($0.02 after tax per share) of LIFO expense in the prior year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “We started fiscal 2022 on a positive note with sales, EBITDA, and EPS all achieving record first quarter levels. We are effectively managing through industrial supply chain and inflationary headwinds year to date. This is highlighted by solid organic growth and EBITDA margin expansion during the quarter, as well as a build in inventory levels supporting near-term growth opportunities. At the same time, our cash generation remains strong and we continue to execute on our strategic growth plan, including expansion of our automation platform with the August 2021 acquisition of R.R. Floody Company.”

Mr. Schrimsher added, “Looking ahead, supply chain and inflationary pressures across the industrial sector present ongoing uncertainty to our near-term outlook. That said, underlying demand remains resilient entering our fiscal second quarter with organic sales up by a mid-teens percent year over year so far in October, while order and backlog trends are encouraging. We believe our leading technical industry position, local service capabilities, and evolution into new industrial technologies and solutions is a competitive advantage being reinforced by current macro and supply chain dynamics. Combined with balance sheet capacity, we have considerable self-help growth and earnings potential that we are intensely focused on capturing in fiscal 2022 and beyond.”

Fiscal 2022 Guidance The Company is maintaining guidance for fiscal 2022 including EPS of $5.00 to $5.40, sales growth of 8% to 10% (7% to 9% on an organic basis), and EBITDA margins of 9.7% to 9.9%. Guidance does not assume contribution from potential future acquisitions.

Share Repurchases During the quarter, the Company purchased 76,658 shares of its common stock in open market transactions for $6.5 million. At September 30, 2021, the Company had remaining authorization to purchase approximately 388,000 additional shares.

Dividend Today the Company also announced that its Board of Directors declared a quarterly cash dividend of $0.33 per common share, payable on November 30, 2021, to shareholders of record on November 15, 2021.

Conference Call Information Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on October 27, 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 2896840. 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 2896840.

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,” “will,” “guidance,” “assume”, “looking ahead”, 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 September 30,

2021

2020

Net Sales

$

891,681

 

$

747,807

 

Cost of sales

 

636,341

 

 

532,026

 

Gross Profit

 

255,340

 

 

215,781

 

Selling, distribution and administrative expense, including depreciation

 

180,726

 

 

163,473

 

Operating Income

 

74,614

 

 

52,308

 

Interest expense, net

 

7,390

 

 

7,653

 

Other income, net

 

(312

)

 

(177

)

Income Before Income Taxes

 

67,536

 

 

44,832

 

Income tax expense

 

14,567

 

 

10,048

 

Net Income

$

52,969

 

$

34,784

 

Net Income Per Share - Basic

$

1.38

 

$

0.90

 

Net Income Per Share - Diluted

$

1.36

 

$

0.89

 

Average Shares Outstanding - Basic

 

38,502

 

 

38,722

 

Average Shares Outstanding - Diluted

 

39,084

 

 

39,088

 

  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)   September 30,2021 June 30,2021     Assets Cash and cash equivalents

$

247,313

$

257,745

Accounts receivable, net

 

530,824

 

516,322

Inventories

 

377,978

 

362,547

Other current assets

 

54,452

 

59,961

Total current assets

 

1,210,567

 

1,196,575

Property, net

 

113,813

 

115,589

Operating lease assets, net

 

94,476

 

87,111

Intangibles, net

 

274,410

 

279,628

Goodwill

 

562,791

 

560,077

Other assets

 

47,123

 

32,827

Total Assets

$

2,303,180

$

2,271,807

  Liabilities Accounts payable

$

210,987

$

208,162

Current portion of long-term debt

 

88,401

 

43,525

Other accrued liabilities

 

167,439

 

176,013

Total current liabilities

 

466,827

 

427,700

Long-term debt

 

730,307

 

784,855

Other liabilities

 

129,476

 

126,706

Total Liabilities

 

1,326,610

 

1,339,261

Shareholders' Equity

 

976,570

 

932,546

Total Liabilities and Shareholders' Equity

$

2,303,180

$

2,271,807

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (In thousands)   Three Months EndedSeptember 30,  

2021

2020

  Cash Flows from Operating Activities Net income

$

52,969

 

$

34,784

 

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

 

5,427

 

 

5,352

 

Amortization of intangibles

 

8,121

 

 

9,726

 

Amortization of stock appreciation rights and options

 

1,907

 

 

693

 

Other share-based compensation expense

 

1,563

 

 

677

 

Changes in assets and liabilities, net of acquisitions

 

(20,404

)

 

24,559

 

Other, net

 

(941

)

 

6,051

 

Net Cash provided by Operating Activities

 

48,642

 

 

81,842

 

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

 

(7,094

)

 

-

 

Capital expenditures

 

(3,621

)

 

(3,597

)

Proceeds from property sales

 

48

 

 

193

 

Cash payments for loans on company-owned life insurance

 

(14,835

)

 

-

 

Net Cash used in Investing Activities

 

(25,502

)

 

(3,404

)

Cash Flows from Financing Activities Long-term debt repayments

 

(9,811

)

 

(62,450

)

Interest rate swap settlement payments

 

(1,644

)

 

-

 

Purchases of treasury shares

 

(6,537

)

 

-

 

Dividends paid

 

(12,712

)

 

(12,415

)

Acquisition holdback payments

 

(135

)

 

(521

)

Taxes paid for shares withheld for equity awards

 

(1,141

)

 

(1,797

)

Net Cash used in Financing Activities

 

(31,980

)

 

(77,183

)

Effect of Exchange Rate Changes on Cash

 

(1,592

)

 

1,254

 

(Decrease) Increase in cash and cash equivalents

 

(10,432

)

 

2,509

 

Cash and Cash Equivalents at Beginning of Period

 

257,745

 

 

268,551

 

Cash and Cash Equivalents at End of Period

$

247,313

 

$

271,060

 

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,

2021

2020

Net Income

$

52,969

 

$

34,784

 

Interest expense, net

 

7,390

 

 

7,653

 

Income tax expense

 

14,567

 

 

10,048

 

Depreciation and amortization of property

 

5,427

 

 

5,352

 

Amortization of intangibles

 

8,121

 

 

9,726

 

EBITDA

$

88,474

 

$

67,563

 

  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,

2021

2020

Net Cash provided by Operating Activities

$

48,642

 

$

81,842

 

Capital expenditures

 

(3,621

)

 

(3,597

)

Free Cash Flow

$

45,021

 

$

78,245

 

  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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