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Applied Industrial Technologies Reports Fiscal 2014 Fourth Quarter and Year-End Results

CLEVELAND, Aug. 13, 2014 /PRNewswire/ -- Applied Industrial Technologies (NYSE: AIT) today reported results for its fourth quarter and fiscal 2014 year ended June 30, 2014.

Net sales for the quarter were $654.6 million, an increase of 2.2% compared with $640.5 million in the same quarter a year ago. Net income for the quarter was $29.7 million, or $0.71 per share, compared with $32.3 million, or $0.76 per share, in the fourth quarter of fiscal 2013.

For the 12 months ended June 30, 2014, sales were $2.460 billion, essentially flat compared to $2.462 billion last year. Net income was $112.8 million, or $2.67 per share, compared with $118.1 million, or $2.78 per share, in the prior year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "Fiscal 2014 was a significant year of transition with our ERP deployments and acquisition activity. We enter fiscal 2015 with a great deal of momentum, especially when considering our recent acquisitions of Knox Oil Field Supply and Reliance Industrial Products. We have significantly enhanced our capabilities to serve North American oil and gas markets, and these acquisitions will add approximately $240 million of annual sales to our fiscal 2015 results.

"Overall, the new fiscal year includes many opportunities to accelerate our growth and profitability – organically, via continued acquisition activity, and through our investments in technology and talent. We have a strong foundation, expanding capabilities, and a straightforward strategic plan to execute, and we are energized about the year ahead.

"Looking forward, we expect to see improvements in our service center operations and fluid power businesses, supported by an improving industrial economic environment. For fiscal 2015, we are forecasting a sales increase of 13% to 16% and earnings per share in the range of $2.95 to $3.20 per share. Included in these numbers are our recent acquisitions which will provide a 10% sales increase in fiscal 2015, along with an expected EPS boost of $0.17 to $0.22 per share."

During the fourth quarter, the Company purchased 264,900 shares of its common stock in open market transactions for $12.7 million. During the full fiscal year, the Company purchased 759,900 shares for $36.7 million. At June 30, 2014, the Company had remaining authorization to purchase 381,600 additional shares. 

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on August 13. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company's performance. To join the call, dial 1-800-755-1805 or 1-212-231-2910 (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 21727485.

With more than 560 facilities and 5,700 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 "will," "expect," "forecast," 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 performance of acquired businesses, 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

June 30,

Year Ended

June 30,


2014

2013

2014

2013

Net Sales

$654,618

$640,481

$2,459,878

$2,462,171

Cost of sales

472,090

459,371

1,772,952

1,779,209

Gross Profit

182,528

181,110

686,926

682,962

Selling, distribution and administrative,





   including depreciation

137,719

133,075

522,568

506,563

Operating Income

44,809

48,035

164,358

176,399

Interest expense, net

351

18

249

165

Other (income) expense, net

(404)

482

(2,153)

(1,431)

Income Before Income Taxes

44,862

47,535

166,262

177,665

Income Tax Expense

15,188

15,263

53,441

59,516

Net Income

$  29,674

$  32,272

$   112,821

$   118,149

Net Income Per Share - Basic

$      0.71

$      0.77

$         2.69

$         2.81

Net Income Per Share - Diluted

$      0.71

$      0.76

$         2.67

$         2.78

Average Shares Outstanding - Basic

41,652

42,125

41,942

42,060

Average Shares Outstanding - Diluted

42,014

42,608

42,331

42,542







  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 period ended June 30, 2014. During the June 30, 2013 quarter, the Company realized LIFO layer liquidation benefits of $6.3 million from certain inventory quantity levels decreasing. Additional scrap expense of $3.0 million above our normal scrap rate was also recorded in the June 30, 2013 quarter.


(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.


 (3) During the quarter ended March 31, 2014, $2.8 million of tax reserves were reversed which reduced income tax expense by the same amount and resulted in an increase to earnings per share in the quarter of $0.07.


(4) During the quarter ended June 30, 2014, the Company acquired 100% of the outstanding stock of Reliance Industrial Products, headquartered in Nisku, Alberta, Canada, with operations in Western Canada and the Western United States, for a total purchase price of $188.5 million. The reasons for the acquisition are to provide the Company enhanced capabilities to serve the upstream oil and gas industry in the United States and Canada. A distributor of fluid conveyance and oilfield supplies, this business is included in the Service Center Based Distribution segment. The Company funded the acquisition by using cash in Canada of $31.9 million, existing revolving credit facilities of $36.6 million and a new $100.0 million five year term loan facility, with the remainder of $20.0 million to be paid in equal amounts as acquisition holdback on the first two anniversaries of the acquisition.


 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)










June 30,

2014


June 30,

2013





Assets




  Cash and cash equivalents

$              71,189


$              73,164

  Accounts receivable, net of allowances of $10,385 and $7,737

375,732


329,880

  Inventories

335,747


281,417

  Other current assets

53,480


52,819

       Total current assets

836,148


737,280

  Property, net

103,596


83,243

  Goodwill 

193,494


106,849

  Intangibles, net

159,508


91,267

  Other assets

41,423


40,067

Total Assets

$         1,334,169


$         1,058,706





Liabilities




  Accounts payable

$            172,401


$            136,575

  Current portion of long-term debt

2,720


-

  Other accrued liabilities

115,834


109,325

       Total current liabilities

290,955


245,900

  Long-term debt

167,992


-

  Other liabilities

74,914


53,191

Total Liabilities

533,861


299,091

Shareholders' Equity

800,308


759,615

Total Liabilities and Shareholders' Equity

$         1,334,169


$         1,058,706

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

 (In thousands)













Year Ended 



June 30,



2014


2013






Cash Flows from Operating Activities





Net income


$112,821


$118,149

Adjustments to reconcile net income to net cash provided





   by operating activities:





   Depreciation and amortization of property


13,977


12,501

   Amortization of intangibles


14,023


13,233

   Amortization of stock options and appreciation rights


1,808


2,317

   Gain on sale of property


(53)


(321)

   Other share-based compensation expense


2,864


3,685

   Changes in operating assets and liabilities, net of acquisitions


(31,295)


(49,203)

   Other, net


(4,035)


11,036

Cash provided by Operating Activities


110,110


111,397

Cash Flows from Investing Activities





   Property purchases


(20,190)


(12,214)

   Proceeds from property sales


877


979

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


(184,324)


(67,590)

Cash used in Investing Activities


(203,637)


(78,825)

Cash Flows from Financing Activities





   Net borrowings under revolving credit facility


69,000


-

   Long-term debt borrowings


100,000


-

   Long term debt repayment


(647)


-

   Purchase of treasury shares


(36,732)


(53)

   Dividends paid


(40,410)


(37,194)

   Excess tax benefits from share-based compensation


2,674


2,566

   Acquisition holdback payments


(1,839)


(3,843)

   Exercise of stock options and appreciation rights


96


499

Cash provided by (used in) Financing Activities


92,142


(38,025)

Effect of Exchange Rate Changes on Cash


(590)


175

Decrease in Cash and Cash Equivalents


(1,975)


(5,278)

Cash and Cash Equivalents at Beginning of Period


73,164


78,442

Cash and Cash Equivalents at End of Period


$  71,189


$  73,164

SOURCE Applied Industrial Technologies

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