- Net Sales of $980.7 Million Up 16.6% YoY; Up 14.7% on an
Organic Daily Basis
- Net Income of $68.3 Million, or $1.75 Per Share; EBITDA of
$108.6 Million
- 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 third quarter ended March 31, 2022.
Net sales for the quarter increased 16.6% to $980.7 million from
$840.9 million in the prior year. The change includes a 0.4%
increase from acquisitions and a 1.6% benefit from one extra
selling day, partially offset by a negative 0.1% impact from
foreign currency translation. Excluding these factors, sales
increased 14.7% on an organic daily basis reflecting a 13.6%
increase in the Service Center segment and a 17.1% increase in the
Fluid Power & Flow Control segment. The Company reported net
income of $68.3 million, or $1.75 per share, and EBITDA of
$108.6 million. On a pre-tax basis, results include $7.4 million
($0.14 after tax per share) of LIFO expense compared to $0.8
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 another strong quarter with sales and
earnings achieving new records. Underlying business momentum
strengthened further during the quarter, while our technical
industry position is supporting greater growth opportunities and
our ability to effectively manage through ongoing inflationary
pressures industry wide. Combined with solid cost leverage, EBITDA
grew more than 25% over the prior year and nearly 40% on a 2-year
stack basis, while EBITDA margin exceeded 11%, representing a key
milestone for the Company. In addition, free cash generation
increased year over year and sequentially inclusive of ongoing
working capital investment. This performance is driving strong
improvement in our returns on capital, and demonstrates Applied’s
increasingly favorable and differentiated position as requirements
and secular investments across the industrial supply chain continue
to expand.”
Mr. Schrimsher added, “Based on our third quarter performance
and our current outlook, we are raising fiscal 2022 guidance for
sales, EBITDA margins, and EPS for the second time this year.
Positive demand trends are persisting across our business with
organic sales month to date in April up by a low double-digit
percent year over year. While we continue to navigate an extremely
dynamic supply chain and inflationary environment, we expect
ongoing benefits from our operational execution, inventory
management, and internal margin initiatives. In addition, our
organic growth and incremental margin momentum is providing a path
to achieve our interim annual EBITDA margin target of 11%
potentially sooner than expected. Combined with our expanding
solutions in emerging areas of the industrial economy and balance
sheet flexibility, we remain poised to create significant value for
our customers, associates, and all stakeholders within any
operational environment.”
Fiscal 2022 Guidance The Company is raising guidance for
fiscal 2022 and now projects EPS of $6.15 to $6.25 (prior $5.70 to
$5.90), sales growth of 14.8% to 15.3% including 13.6% to 14.1% on
an organic basis (prior 11.5% to 12.5% including 10.5% to 11.5%
organic), and EBITDA margins of 10.5% to 10.6% (prior 10.1% to
10.3%). 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 March 31, 2022, the Company had
remaining authorization to purchase approximately 318,000
additional shares.
Dividend Today the Company announced that its Board of
Directors declared a quarterly cash dividend of $0.34 per common
share, payable on May 31, 2022, to shareholders of record on May
16, 2022.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on April 28, 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
2092603. 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 2092603.
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,” “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 Nine Months Ended
March 31,
March 31,
2022
2021
2022
2021
Net Sales
$
980,662
$
840,937
$
2,749,217
$
2,340,031
Cost of sales
693,338
593,712
1,948,928
1,667,491
Gross Profit
287,324
247,225
800,289
672,540
Selling, distribution and administrative expense, including
depreciation
191,481
172,758
551,655
498,659
Impairment expense
-
-
-
49,528
Operating Income
95,843
74,467
248,634
124,353
Interest expense, net
5,852
7,608
20,249
22,919
Other expense (income), net
469
(1,657
)
(712
)
(1,746
)
Income Before Income Taxes
89,522
68,516
229,097
103,180
Income Tax Expense
21,216
12,453
50,796
17,667
Net Income
$
68,306
$
56,063
$
178,301
$
85,513
Net Income Per Share - Basic
$
1.78
$
1.44
$
4.63
$
2.21
Net Income Per Share - Diluted
$
1.75
$
1.42
$
4.56
$
2.18
Average Shares Outstanding - Basic
38,453
38,835
38,470
38,779
Average Shares Outstanding - Diluted
39,098
39,412
39,102
39,261
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, June 30, 2022 2021
Assets Cash and cash
equivalents
$
188,084
$
257,745
Accounts receivable, net
618,079
516,322
Inventories
425,373
362,547
Other current assets
63,504
59,961
Total current assets
1,295,040
1,196,575
Property, net
111,166
115,589
Operating lease assets, net
95,049
87,111
Intangibles, net
258,501
279,628
Goodwill
563,751
560,077
Other assets
60,064
32,827
Total Assets
$
2,383,571
$
2,271,807
Liabilities
Accounts payable
$
247,639
$
208,162
Current portion of long-term debt
40,166
43,525
Other accrued liabilities
176,551
176,013
Total current liabilities
464,356
427,700
Long-term debt
681,197
784,855
Other liabilities
139,624
126,706
Total Liabilities
1,285,177
1,339,261
Shareholders' Equity
1,098,394
932,546
Total Liabilities and Shareholders' Equity
$
2,383,571
$
2,271,807
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF
CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
March 31,
2022
2021
Cash Flows from Operating
Activities Net income
$
178,301
$
85,513
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
16,215
15,641
Amortization of intangibles
24,096
26,238
Impairment expense
-
49,528
Amortization of stock appreciation rights and options
2,897
1,930
Other share-based compensation expense
6,064
4,660
Changes in operating assets and liabilities, net of acquisitions
(106,136
)
33,574
Other, net
12,386
(13,675
)
Net Cash provided by Operating Activities
133,823
203,409
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(6,974
)
(30,023
)
Capital expenditures
(11,674
)
(12,177
)
Proceeds from property sales
494
691
Life insurance proceeds
3,159
-
Cash payments for loans on company-owned life insurance
(14,835
)
-
Net Cash used in Investing Activities
(29,830
)
(41,509
)
Cash Flows from Financing
Activities Net borrowings under revolving credit
facility
442,592
-
Long-term debt repayments
(550,432
)
(82,070
)
Interest rate swap settlement payments
(4,812
)
(2,122
)
Payment of debt issuance costs
(1,956
)
(399
)
Purchases of treasury shares
(13,604
)
-
Dividends paid
(38,612
)
(37,772
)
Acquisition holdback payments
(2,361
)
(2,344
)
Taxes paid for shares withheld for equity awards
(4,405
)
(5,990
)
Exercise of stock options and appreciation rights
224
163
Net Cash used in Financing Activities
(173,366
)
(130,534
)
Effect of Exchange Rate Changes on Cash
(288
)
4,099
(Decrease) Increase in cash and cash equivalents
(69,661
)
35,465
Cash and Cash Equivalents at Beginning of Period
257,745
268,551
Cash and Cash Equivalents at End of Period
$
188,084
$
304,016
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, 2021
Pre-tax Tax Effect Net of Tax Per
ShareDilutedImpact Tax Rate Net income and net income
per share
$
68,516
$
12,453
$
56,063
$
1.42
18.2
%
Non-routine income
(2,609
)
(613
)
(1,996
)
0.05
23.5
%
Adjusted net income and net income per share
$
65,907
$
11,840
$
54,067
$
1.37
18.0
%
Nine Months Ended March 31, 2021 Pre-tax
Tax Effect Net of Tax Per ShareDilutedImpact
Tax Rate Net income and net income per share
$
103,180
$
17,667
$
85,513
$
2.18
17.1
%
Intangible and other impairment
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
$
157,871
$
30,670
$
127,201
$
3.24
19.4
%
Reconciliation of Net Income, a GAAP financial
measure, to EBITDA, a non-GAAP financial measure:
Three Months Ended
Nine Months Ended
March 31,
March 31,
2022
2021
2022
2021
Net Income
$
68,306
$
56,063
$
178,301
$
85,513
Interest expense, net
5,852
7,608
20,249
22,919
Income tax expense
21,216
12,453
50,796
17,667
Depreciation and amortization of property
5,352
5,080
16,215
15,641
Amortization of intangibles
7,891
8,236
24,096
26,238
EBITDA
$
108,617
$
89,440
$
289,657
$
167,978
Intangible and other impairment
-
-
-
49,528
Non-routine costs
-
-
-
7,772
Non-routine income
-
(2,609
)
-
(2,609
)
Adjusted EBITDA
$
108,617
$
86,831
$
289,657
$
222,669
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 Ended Nine Months Ended
March 31,
March 31,
2022
2021
2022
2021
Net Cash provided by Operating Activities
$
52,559
$
44,053
$
133,823
$
203,409
Capital expenditures
(4,164
)
(3,728
)
(11,674
)
(12,177
)
Free Cash Flow
$
48,395
$
40,325
$
122,149
$
191,232
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/20220428005233/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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