- Net Sales of $840.0M, Up 25.9% Year-Over-Year
- Net Income of $38.7M; EPS of $0.99 Up 25.3% Year-Over-Year
- EBITDA of $76.0M, 9.1% of Sales; Up 60 bps Year-Over-Year
- Quarterly Dividend Increased to $0.31 Per Share
- Full-Year Guidance Revised to Reflect Current Business Conditions
CLEVELAND, Jan. 24, 2019 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2019 sales and earnings for the three months ended December 31, 2018.
Net sales for the quarter grew 25.9% to $840.0 million from $667.2 million in the same quarter a year ago. The overall sales increase for the quarter reflects a 21.3% increase from acquisition-related volume and a 1.6% benefit from a higher number of selling days in the quarter, partially offset by a negative 0.7% foreign currency translation impact. Excluding these factors, days adjusted organic growth was 3.7% in the quarter. Net income for the quarter increased 25.1% to $38.7 million from $31.0 million, and earnings per share rose 25.3% to $0.99 per share, compared to $0.79 per share in the prior year quarter. EBITDA for the quarter of $76.0 million increased 34.6% versus the prior year quarter.
For the six months ended December 31, 2018, sales were $1.70 billion, an increase of 26.5% compared with $1.35 billion in the same period last year. Net income increased to $87.7 million from $64.7 million, and earnings per share increased 35.2% to $2.23 per share from $1.65 per share, last year.
Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “While we are pleased to post year-over-year increases in our second quarter results, we did experience some deceleration as we progressed through the quarter. The contributing factors included significantly weaker sales in the final week of the calendar year, combined with some softness and project delays in our fluid power businesses tied to technology markets (electronic equipment and component manufacturers). Additionally, we experienced an adverse impact on our margins from a LIFO inventory charge related to more pronounced inflation experienced in the quarter.”
Outlook
Mr. Schrimsher added, “Given the moderating industrial environment and current fluid power market dynamics, we are revising our full-year fiscal 2019 sales and earnings per share guidance to between $4.45 and $4.65 per share on a sales increase of 12.5% to 15.0%. The sales guidance includes a nearly 2.0% to 4.0% increase in second-half daily sales rates compared to the first half, excluding acquisitions. This assumes second-half Fluid Power & Flow Control daily sales rates essentially consistent with the first half of the fiscal year, and a 3.0% to 5.0% increase in the second-half daily sales rates in our Service Center Segment.”
Dividend
The Company’s Board of Directors increased the quarterly cash dividend to $0.31 per common share, representing the 10th dividend increase since 2010. The dividend is payable on February 28, 2019, to shareholders of record on February 15, 2019.
Mr. Schrimsher concluded, “We are fully committed to generating shareholder value and leveraging our expanding product, service and solution offering to drive profitable growth. We are pleased to recognize the one-year anniversary of the FCX Performance acquisition along with the recent addition of Fluid Power Sales announced in November. These businesses further enhance our capabilities and differentiation to serve new and existing customers, and we will remain active in acquisitions as we move through calendar 2019.”
Conference Call Information
Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 24, 2019. Neil A. Schrimsher – President & CEO, and David K. Wells – CFO will discuss the Company's performance. A supplemental investor deck detailing latest quarter results 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 2388424. 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 2388424.
About Applied®
Founded in 1923, Applied Industrial Technologies is a leading distributor of bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, and other industrial supplies, serving MRO and OEM customers in virtually every industry. In addition, Applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber, fluid power, and flow control shop services. Applied also offers storeroom services and inventory management solutions that provide added value to its customers. 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 “guidance,” “assume,” “will” 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, 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.
CONTACT INFORMATION
INVESTOR RELATIONS
David K. Wells
Vice President – Chief Financial Officer & Treasurer
216-426-4755
CORPORATE & MEDIA RELATIONS
Julie A. Kho
Manager, Public Relations
216-426-4483
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | |||||||||||
| CONDENSED STATEMENTS OF CONSOLIDATED INCOME | |||||||||||
| (In thousands, except per share data) | |||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| Net Sales | $ | 840,038 | $ | 667,187 | $ | 1,704,553 | $ | 1,347,888 | |||
| Cost of sales | 597,178 | 478,827 | 1,209,840 | 967,104 | |||||||
| Gross Profit | 242,860 | 188,360 | 494,713 | 380,784 | |||||||
| Selling, distribution and administrative, | |||||||||||
| including depreciation | 181,895 | 141,645 | 367,409 | 282,232 | |||||||
| Operating Income | 60,965 | 46,715 | 127,304 | 98,552 | |||||||
| Interest expense, net | 9,578 | 2,139 | 20,054 | 4,305 | |||||||
| Other (income) expense, net | 946 | (20 | ) | 707 | (731 | ) | |||||
| Income Before Income Taxes | 50,441 | 44,596 | 106,543 | 94,978 | |||||||
| Income Tax Expense | 11,724 | 13,646 | 18,888 | 30,307 | |||||||
| Net Income | $ | 38,717 | $ | 30,950 | $ | 87,655 | $ | 64,671 | |||
| Net Income Per Share - Basic | $ | 1.00 | $ | 0.80 | $ | 2.26 | $ | 1.67 | |||
| Net Income Per Share - Diluted | $ | 0.99 | $ | 0.79 | $ | 2.23 | $ | 1.65 | |||
| Average Shares Outstanding - Basic | 38,743 | 38,716 | 38,729 | 38,824 | |||||||
| Average Shares Outstanding - Diluted | 39,247 | 39,206 | 39,316 | 39,270 | |||||||
| 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 | |||||
| (In thousands) | |||||
| December 31, 2018 | June 30, 2018 | ||||
| Assets | |||||
| Cash and cash equivalents | $ | 79,827 | $ | 54,150 | |
| Accounts receivable, less allowances of $13,982 and $13,566 | 512,034 | 548,811 | |||
| Inventories | 445,881 | 422,069 | |||
| Other current assets | 44,041 | 32,990 | |||
| Total current assets | 1,081,783 | 1,058,020 | |||
| Property, net | 122,005 | 121,343 | |||
| Goodwill | 651,206 | 646,643 | |||
| Intangibles, net | 413,093 | 435,947 | |||
| Other assets | 21,901 | 23,788 | |||
| Total Assets | $ | 2,289,988 | $ | 2,285,741 | |
| Liabilities | |||||
| Accounts payable | $ | 232,558 | $ | 256,886 | |
| Current portion of long-term debt | 44,184 | 19,183 | |||
| Other accrued liabilities | 117,046 | 156,482 | |||
| Total current liabilities | 393,788 | 432,551 | |||
| Long-term debt | 923,410 | 944,522 | |||
| Other liabilities | 82,875 | 93,705 | |||
| Total Liabilities | 1,400,073 | 1,470,778 | |||
| Shareholders' Equity | 889,915 | 814,963 | |||
| Total Liabilities and Shareholders' Equity | $ | 2,289,988 | $ | 2,285,741 | |
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||
| CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS | ||||||
| (In thousands) | ||||||
| Six Months Ended December 31, | ||||||
| 2018 | 2017 | |||||
| Cash Flows from Operating Activities | ||||||
| Net income | $ | 87,655 | $ | 64,671 | ||
| Adjustments to reconcile net income to net cash provided | ||||||
| by operating activities: | ||||||
| Depreciation and amortization of property | 10,019 | 8,008 | ||||
| Amortization of intangibles | 21,912 | 11,526 | ||||
| Amortization of stock appreciation rights and options | 1,257 | 1,013 | ||||
| Gain on sale of property | (105 | ) | (333 | ) | ||
| Other share-based compensation expense | 2,351 | 1,577 | ||||
| Changes in assets and liabilities, net of acquisitions | (55,922 | ) | (65,007 | ) | ||
| Other, net | (1,587 | ) | (271 | ) | ||
| Net Cash provided by Operating Activities | 65,580 | 21,184 | ||||
| Cash Flows from Investing Activities | ||||||
| Property purchases | (7,096 | ) | (11,460 | ) | ||
| Proceeds from property sales | 244 | 596 | ||||
| Acquisition of businesses, net of cash acquired | (6,900 | ) | (5,014 | ) | ||
| Other | 391 | - | ||||
| Net Cash used in Investing Activities | (13,361 | ) | (15,878 | ) | ||
| Cash Flows from Financing Activities | ||||||
| Net borrowings (repayments) under revolving credit facility | (19,500 | ) | 23,000 | |||
| Long-term debt borrowings | 175,000 | - | ||||
| Long-term debt repayments | (151,868 | ) | (1,679 | ) | ||
| Debt issuance costs | (685 | ) | - | |||
| Purchases of treasury shares | - | (22,778 | ) | |||
| Dividends paid | (23,275 | ) | (22,571 | ) | ||
| Acquisition holdback payments | (2,275 | ) | (319 | ) | ||
| Taxes paid for shares withheld for equity awards | (3,318 | ) | (1,298 | ) | ||
| Net Cash used in Financing Activities | (25,921 | ) | (25,645 | ) | ||
| Effect of Exchange Rate Changes on Cash | (621 | ) | 606 | |||
| Increase (decrease) in cash and cash equivalents | 25,677 | (19,733 | ) | |||
| Cash and cash equivalents at beginning of Period | 54,150 | 105,057 | ||||
| Cash and Cash Equivalents at End of Period | $ | 79,827 | $ | 85,324 | ||
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||||||||
| SUPPLEMENTAL INFORMATION | ||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||
| (In thousands) | ||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| Net Income | $ | 38,717 | $ | 30,950 | $ | 87,655 | $ | 64,671 | ||||
| Interest expense, net | 9,578 | 2,139 | 20,054 | 4,305 | ||||||||
| Income tax expense (benefit) | 11,724 | 13,646 | 18,888 | 30,307 | ||||||||
| Depreciation and amortization of property | 5,038 | 4,081 | 10,019 | 8,008 | ||||||||
| Amortization of intangibles | 10,991 | 5,695 | 21,912 | 11,526 | ||||||||
| EBITDA | $ | 76,048 | $ | 56,511 | $ | 158,528 | $ | 118,817 | ||||
| SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||
| The company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting EBITDA (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. The company believes that this non-GAAP measure provides meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provides 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 this financial measure with other companies' non-GAAP financial measures having the same or similar names. EBITDA should not be considered in isolation or as a substitute for reported results. This non-GAAP financial measure reflects 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. The reconciliation provided above reconciles EBITDA , a non-GAAP financial measure, with net income, a GAAP financial measure. | ||||||||||||