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Applied Industrial Technologies Reports Fiscal 2014 Second Quarter Results and Increases Dividend

CLEVELAND, Jan. 30, 2014 /PRNewswire/ -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2014 sales and earnings for the three months ended December 31, 2013.

Net sales for the quarter were $581.9 million, a decrease of 1.3% compared with $589.5 million in the same quarter a year ago. Net income for the quarter was $25.9 million, or $0.61 per share, compared with $27.0 million, or $0.64 per share, in the second quarter of fiscal 2013.

For the six months ended December 31, 2013, sales decreased 1.1% to $1.19 billion from $1.20 billion in the same period last year. Net income was $52.8 million, or $1.24 per share, compared with $56.6 million, or $1.33 per share, last year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "With weaker industrial demand in some key market segments, coupled with negative impacts on reported sales from foreign currency translation, our second quarter sales lagged the prior year. We remain disciplined on our operating costs and focused on driving continuous improvements across our business.

"Considering the current industrial macroeconomic indicators, we are well positioned to serve our customers' needs in this improving marketplace throughout calendar 2014.  We are maintaining our full-year fiscal 2014 guidance for earnings per share between $2.65 and $2.95 per share, on expected sales of $2.43 billion to $2.49 billion."

In addition, Mr. Schrimsher announced that the Company's Board of Directors declared a $0.02, or 8.7%, increase in the quarterly cash dividend to $0.25 per common share. The dividend is payable on February 28, 2014, to shareholders of record on February 14, 2014. "We are committed to generating increased shareholder value through our strategic investments, our business execution and by returning cash to the shareholders with attractive dividends and through share repurchases."

During the quarter, the Company purchased 226,100 shares of its common stock in open market transactions for $10.8 million. Fiscal year to date, the Company has purchased 286,800 shares for a total of $13.8 million. At December 31, 2013, the Company had remaining authorization to purchase 854,700 additional shares.

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on Thursday, January 30. The call will be conducted by Neil A. Schrimsher, President & CEO, and Mark O. Eisele, CFO. To join the call, dial 1-800-754-1366 or 1-212-231-2928 (for International callers). 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 1-800-633-8284 or 1-402-977-9140 (International) using passcode 21703610.

With more than 500 facilities and 5,000 employee associates, Applied Industrial Technologies is a leading industrial distributor that offers more than five million parts to serve the needs of 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 and fluid power shop services. Applied also offers maintenance training and inventory management solutions that provide added value to its customers. Applied can be visited on the Internet at 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," "expect," "will," and 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.






  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,


2013

2012

2013

2012

Net Sales

$      581,949

$          589,517

$ 1,187,254

$ 1,200,036

Cost of sales

418,566

426,598

854,076

872,584

Gross Profit

163,383

162,919

333,178

327,452

Selling, distribution and administrative,





   including depreciation

123,546

122,350

253,802

242,565

Operating Income

39,837

40,569

79,376

84,887

Interest (income) expense, net

(152)

15

(91)

40

Other income, net

(270)

(427)

(1,361)

(886)

Income Before Income Taxes

40,259

40,981

80,828

85,733

Income Tax Expense

14,350

13,938

28,075

29,158

Net Income

$        25,909

$            27,043

$       52,753

$       56,575

Net Income Per Share - Basic

$            0.62

$                 0.64

$           1.25

$           1.35

Net Income Per Share - Diluted

$            0.61

$                 0.64

$           1.24

$           1.33

Average Shares Outstanding - Basic

42,076

42,052

42,116

42,009

Average Shares Outstanding - Diluted

42,462

42,494

42,547

42,486






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. 

 

There were no LIFO layer liquidation benefits recognized for the periods ended December 31, 2013 and 2012.  
    

     (2)  Effective July 1, 2013, the Company aligned the consolidation of the Company's Canadian subsidiaries in the consolidated financial statements which previously included results on a one month reporting lag.  The Company has determined that the effect of this change is not material to the financial statements for all periods presented and therefore has not presented retrospective application of this change.  The net impact of the lag elimination was $1.2 million of additional income and has been included within "Other income, net" on the Condensed Statements of Consolidated Income effective July 1, 2013.

 

 








APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


























December 31, 
2013


June 30, 
2013













Assets







  Cash and cash equivalents


$          66,584


$          73,164

  Accounts receivable, net of allowances of $7,335 and $7,737

305,936


329,880

  Inventories



323,257


281,417

  Other current assets



54,702


52,819

       Total current assets


750,479


737,280

  Property, net



80,056


83,243

  Goodwill 




111,356


106,849

  Intangibles, net



91,669


91,267

  Other assets



40,599


40,067

Total Assets



$     1,074,159


$     1,058,706








Liabilities







  Accounts payable



$        140,869


$        136,575

  Short-term debt 



15,000



  Other accrued liabilities


94,985


109,325

       Total current liabilities


250,854


245,900

  Other liabilities



49,826


53,191

Total Liabilities



300,680


299,091

Shareholders' Equity


773,479


759,615

Total Liabilities and Shareholders' Equity

$     1,074,159


$     1,058,706








 






APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

 (In thousands)













Six Months Ended 



December 31,



2013


2012






Cash Flows from Operating Activities





Net income


$           52,753


$        56,575

Adjustments to reconcile net income to net cash provided





   by operating activities:





   Depreciation and amortization of property


6,792


6,036

   Amortization of intangibles


6,330


6,207

   Amortization of stock options and appreciation rights


931


1,197

   Gain on sale of property


(10)


(193)

   Other share-based compensation expense


2,286


1,982

   Changes in operating assets and liabilities, net of acquisitions


(36,996)


(42,766)

   Other, net


577


(152)

Net Cash provided by Operating Activities


32,663


28,886

Cash Flows from Investing Activities





   Property purchases


(4,126)


(6,843)

   Proceeds from property sales


324


429

   Net cash paid for acquisition of businesses, net of cash acquired


(17,000)


(66,055)

Net Cash used in Investing Activities


(20,802)


(72,469)

Cash Flows from Financing Activities





   Borrowings under revolving credit facility


15,000


33,000

   Purchase of treasury shares


(13,838)



   Dividends paid


(19,471)


(17,737)

   Excess tax benefits from share-based compensation


2,057


1,461

   Acquisition holdback payments


(1,032)


(1,845)

   Exercise of stock options and appreciation rights


97


497

Net Cash (used in) provided by Financing Activities


(17,187)


15,376

Effect of Exchange Rate Changes on Cash


(1,254)


1,610

Decrease in Cash and Cash Equivalents


(6,580)


(26,597)

Cash and Cash Equivalents at Beginning of Period


73,164


78,442

Cash and Cash Equivalents at End of Period


$           66,584


$        51,845

SOURCE Applied Industrial Technologies

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