- Net Sales of $876.9 Million Up 16.7% YoY; Up 16.4% on an
Organic Daily Basis
- Net Income of $57.0 Million, or $1.46 Per Share; EBITDA of
$92.6 Million
- Quarterly Dividend Increased to $0.34 Per Share
- Raising Fiscal 2022 Guidance for Sales, EBITDA Margin, and
EPS
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 second quarter ended December 31,
2021.
Net sales for the quarter increased 16.7% to $876.9 million from
$751.3 million in the prior year. The change includes a 1.6%
increase from acquisitions and a 0.3% increase from foreign
currency translation, partially offset by a negative 1.6% impact
from one less selling day. Excluding these factors, sales increased
16.4% on an organic daily basis reflecting a 15.1% increase in the
Service Center segment and a 19.3% increase in the Fluid Power
& Flow Control segment. The Company reported net income of
$57.0 million, or $1.46 per share, and EBITDA of $92.6 million.
On a pre-tax basis, results include $4.7 million ($0.09 after tax
per share) of LIFO expense compared to $0.9 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 had a strong second quarter with sales,
EBITDA, and EPS increasing approximately 17%, 36%, and 49% over
prior-year adjusted levels, respectively. Sales growth accelerated
as the quarter progressed reflecting positive industrial activity
and solid execution across our expanding addressable market. At the
same time, our team is responding well to broader inflation and
supply chain dynamics with gross margins and EBITDA margins
improving during the quarter. Overall, the performance demonstrates
our operational focus and earnings potential as we leverage our
leading technical industry position and local domain expertise
across an expanding industrial backdrop.”
Mr. Schrimsher added, “Based on year-to-date results and our
favorable outlook, we are raising fiscal 2022 guidance for sales,
EBITDA margins, and EPS. Organic sales month to date in January are
up by a high single-digit percent year over year despite more
difficult comparisons, while order and backlog trends remain
strong. Although supply chain, inflationary, and COVID-19 related
challenges remain, we are well positioned in the current
environment as our internal capabilities and company-specific
growth potential have never been stronger.”
Fiscal 2022 Guidance The Company is raising guidance for
fiscal 2022 and now projects EPS of $5.70 to $5.90 (prior $5.00 to
$5.40), sales growth of 11.5% to 12.5% including 10.5% to 11.5% on
an organic basis (prior 8% to 10% including 7% to 9% organic), and
EBITDA margins of 10.1% to 10.3% (prior 9.7% to 9.9%). Guidance
does not assume contribution from potential future
acquisitions.
Share Repurchases During the quarter, the Company
purchased 35,000 shares of its common stock in open market
transactions for $3.5 million. At December 31, 2021, the Company
had remaining authorization to purchase approximately 353,000
additional shares.
Dividend Today the Company also announced that its Board
of Directors approved an increase in the quarterly cash dividend to
$0.34 per common share, payable on February 28, 2022, to
shareholders of record on February 15, 2022. This represents the
13th dividend increase since 2010.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on January 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 877-311-4351 (toll free) or
614-999-9139 (for International callers) using conference ID
9034797. 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 9034797.
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,” “assume”, “projects”, 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 December
31,
Six Months Ended December
31,
2021
2020
2021
2020
Net Sales
$
876,874
$
751,287
$
1,768,555
$
1,499,094
Cost of sales
619,249
541,753
1,255,590
1,073,779
Gross Profit
257,625
209,534
512,965
425,315
Selling, distribution and administrative expense, including
depreciation
179,448
162,428
360,174
325,901
Impairment expense
-
49,528
-
49,528
Operating Income (Loss)
78,177
(2,422
)
152,791
49,886
Interest expense, net
7,007
7,658
14,397
15,311
Other (income) expense, net
(869
)
88
(1,181
)
(89
)
Income (Loss) Before Income Taxes
72,039
(10,168
)
139,575
34,664
Income Tax Expense (Benefit)
15,013
(4,834
)
29,580
5,214
Net Income (Loss)
$
57,026
$
(5,334
)
$
109,995
$
29,450
Net Income (Loss) Per Share - Basic
$
1.48
$
(0.14
)
$
2.86
$
0.76
Net Income (Loss) Per Share - Diluted
$
1.46
$
(0.14
)
$
2.81
$
0.75
Average Shares Outstanding - Basic
38,456
38,781
38,479
38,751
Average Shares Outstanding - Diluted
39,122
39,233
39,104
39,165
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.2) In the quarter ended
December 31, 2020, the Company recognized a non-cash impairment
charge of $49.5 million and $7.8 million of other non-routine costs
as a result of reduced economic conditions and business alignment
initiatives related to a portion of the Service Center Based
Distribution segment exposed to oil and gas end markets. The
non-routine costs reduced gross profit by $7.4 million and
increased selling, distribution and administrative expense by $0.4
million. Combined, the non-cash impairment charge and non-routine
costs unfavorably impacted operating (loss) income by $57.3 million
and net (loss) income by $43.7 million.3) Due to the net loss
incurred by the Company during the quarter ended December 31, 2020,
the calculation of Net Loss Per Share - Diluted utilized the
Average Shares Outstanding - Basic, as using the Average Shares
Outstanding - Diluted would have been anti-dilutive.
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
December 31, 2021
June 30, 2021
Assets Cash and
cash equivalents
$
154,843
$
257,745
Accounts receivable, net
520,134
516,322
Inventories
399,763
362,547
Other current assets
68,878
59,961
Total current assets
1,143,618
1,196,575
Property, net
112,113
115,589
Operating lease assets, net
90,996
87,111
Intangibles, net
266,314
279,628
Goodwill
562,811
560,077
Other assets
49,857
32,827
Total Assets
$
2,225,709
$
2,271,807
Liabilities Accounts
payable
$
203,563
$
208,162
Current portion of long-term debt
40,182
43,525
Other accrued liabilities
156,110
176,013
Total current liabilities
399,855
427,700
Long-term debt
681,266
784,855
Other liabilities
122,899
126,706
Total Liabilities
1,204,020
1,339,261
Shareholders' Equity
1,021,689
932,546
Total Liabilities and Shareholders' Equity
$
2,225,709
$
2,271,807
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF
CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended December
31,
2021
2020
Cash Flows from Operating
Activities Net income
$
109,995
$
29,450
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
10,863
10,561
Amortization of intangibles
16,205
18,002
Impairment expense
-
49,528
Amortization of stock appreciation rights and options
2,516
1,328
Other share-based compensation expense
3,268
2,167
Changes in assets and liabilities, net of acquisitions
(61,066
)
52,005
Other, net
(517
)
(3,685
)
Net Cash provided by Operating Activities
81,264
159,356
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(6,974
)
(31,078
)
Capital expenditures
(7,510
)
(8,449
)
Proceeds from property sales
442
292
Other
(14,835
)
-
Net Cash used in Investing Activities
(28,877
)
(39,235
)
Cash Flows from Financing
Activities Net borrowings under revolving credit
facility
442,592
-
Long-term debt repayments
(550,371
)
(72,260
)
Interest rate swap settlement payments
(3,294
)
(549
)
Payment of debt issuance costs
(1,794
)
-
Purchases of treasury shares
(10,064
)
-
Dividends paid
(25,465
)
(24,899
)
Acquisition holdback payments
(1,070
)
(1,138
)
Taxes paid for shares withheld for equity awards
(4,093
)
(5,571
)
Exercise of stock appreciation rights and options
116
163
Net Cash used in Financing Activities
(153,443
)
(104,254
)
Effect of Exchange Rate Changes on Cash
(1,846
)
4,357
(Decrease) Increase in cash and cash equivalents
(102,902
)
20,224
Cash and Cash Equivalents at Beginning of Period
257,745
268,551
Cash and Cash Equivalents at End of Period
$
154,843
$
288,775
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 (loss) income
and Net (loss) income per share, GAAP financial measures, with
Adjusted Net income and Adjusted Net income per share, non-GAAP
financial measures: Three Months Ended December 31,
2020 Pre-tax Tax Effect Net of Tax Per
ShareDiluted Impact Tax Rate Net loss and net loss
per share
$
(10,168
)
$
(4,834
)
$
(5,334
)
$
(0.14
)
47.5
%
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
%
Adjusted net income and net income per share
$
47,132
$
8,782
$
38,350
$
0.98
18.6
%
Reconciliation of Net Income (Loss), a GAAP financial
measure, to EBITDA, a non-GAAP financial measure:
Three Months EndedDecember 31, Six Months EndedDecember
31,
2021
2020
2021
2020
Net Income (Loss)
$
57,026
$
(5,334
)
$
109,995
$
29,450
Interest expense, net
7,007
7,658
14,397
15,311
Income tax expense (benefit)
15,013
(4,834
)
29,580
5,214
Depreciation and amortization of property
5,436
5,209
10,863
10,561
Amortization of intangibles
8,084
8,276
16,205
18,002
EBITDA
$
92,566
$
10,975
$
181,040
$
78,538
Intangible and other impairment
-
49,528
-
49,528
Non-routine costs
-
7,772
-
7,772
Adjusted EBITDA
$
92,566
$
68,275
$
181,040
$
135,838
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 EndedDecember 31,
Six Months EndedDecember 31,
2021
2020
2021
2020
Net Cash provided by Operating Activities
$
32,622
$
77,514
$
81,264
$
159,356
Capital expenditures
(3,889
)
(4,852
)
(7,510
)
(8,449
)
Free Cash Flow
$
28,733
$
72,662
$
73,754
$
150,907
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/20220126006042/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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