APPLIED INDUSTRIAL TECHNOLOGIES, INC. 
By CLEVELAND, Jan. 25, 2012 /PRNewswire-FirstCall/ -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2012 sales and earnings for the three months ended December 31, 2011.
Net sales for the second quarter increased 7.7% to $570,397,000 from $529,517,000 in the comparable period a year ago. Net income for the quarter was $20,935,000 or $0.49 per share compared to $21,193,000 or $0.49 per share last year. Earnings for the quarter were reduced by $4.4 million (pre-tax), or $0.07 per share, due to one-time costs resulting from two items: CEO transition expense and freezing the Company's Supplemental Executive Retirement Benefits Plan ("SERP").
"The curtailment of the SERP is one of our actions to better align executive compensation with broader shareholder interests. The changes will reduce costs associated with executive retirement compensation in the current fiscal year and going forward," said Neil A. Schrimsher, Applied's Chief Executive Officer.
For the six months ended December 31, 2011, sales were $1,149,971,000 compared to $1,057,018,000 in the same period last year. Net income was $47,317,000 or $1.11 per share compared to $41,948,000 or $0.97 per share, last year.
"We are encouraged about our business prospects for the remainder of the fiscal year, and based on our second quarter results and the current state of the industrial economy, we are maintaining our full fiscal 2012 guidance for earnings per share between $2.40 and $2.55, on expected sales of $2.35 billion to $2.45 billion," said Schrimsher.
"In addition to the day-to-day operation of our business, we are updating our long-range strategic plan to accelerate growth. We are in the process of identifying numerous organic growth opportunities with existing and new customers, targeting attractive vertical markets, expanding our product and solutions offering, and building the acquisition pipeline. Operationally, the plan will include generation of continuous improvement across our operating landscape today and benefits from leveraging our new ERP system over the strategic horizon.
"Applied has a strong business foundation. As a leadership team, we are confident in our ability to expand beyond our current offerings and existing geographies - generating strong shareholder value and benefits for all Applied stakeholders."
The Company will host its quarterly conference call for investors and analysts at 4 p.m. ET on January 25, 2012. To join the call, dial 1-800-927-0469 or 1-847-944-7323 (for International callers) using passcode 31437080. The call will be conducted by CEO Neil Schrimsher, President & COO Benjamin Mondics, and CFO Mark Eisele. A live audio webcast can be accessed online at www.Applied.com. A replay of the call will be available for two weeks by dialing 1-888-843-7419 or 1-630-652-3042 (International) using passcode 31437080.
With approximately 480 facilities and 4,700 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 4 million parts critical to the operations 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, plus solutions to meet inventory and storeroom management needs that help provide enhanced value to its customers. For its fiscal year ended June 30, 2011, Applied posted sales of $2.2 billion. Applied can be visited on the Internet at http://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. Forward-looking statements are often identified by qualifiers such as "will," "guidance," and similar expressions. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. 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 the Company 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, except as required by law.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
-------------------------------------------
(In thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
2011 2010 2011 2010
---- ---- ---- ----
Net
Sales $570,397 $529,517 $1,149,971 $1,057,018
Cost
of
sales 414,928 385,236 835,798 769,617
------ ------- ------- ------- -------
Gross
Profit 155,469 144,281 314,173 287,401
Selling,
distribution and
administrative,
including
depreciation 122,134 111,225 237,571 219,454
------------ ------- ------- ------- -------
Operating
Income 33,335 33,056 76,602 67,947
Interest
expense,
net 10 458 57 1,582
Other
expense
(income),
net 778 (421) 2,710 (764)
--------- --- ---- ----- ----
Income
Before
Income
Taxes 32,547 33,019 73,835 67,129
Income
Tax
Expense 11,612 11,826 26,518 25,181
Net
Income $20,935 $21,193 $47,317 $41,948
------- ------- ------- ------- -------
Net
Income
Per
Share
-
Basic $0.50 $0.50 $1.12 $0.99
======= ===== ===== ===== =====
Net
Income
Per
Share
-
Diluted $0.49 $0.49 $1.11 $0.97
======== ===== ===== ===== =====
Average
Shares
Outstanding
-
Basic 41,965 42,411 42,181 42,391
=========== ====== ====== ====== ======
Average
Shares
Outstanding
-
Diluted 42,634 43,298 42,801 43,217
=========== ====== ====== ====== ======
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 material LIFO layer liquidation benefits
recognized for the quarter ended December 31, 2011 and 2010,
nor are any
-------------------------------------------------------------
expected to be realized for the year ending June 30, 2012. We
recorded overall LIFO benefits in the quarter and six months
ended
--------------------------------------------------------------
December 31, 2010 of $1.8 million and $2.1 million,
respectively and LIFO reserves were reduced by the same
amount.
--------------------------------------------------------
(2) On December 19, 2011, the Executive Organization and
Compensation Committee of the Board of Directors froze
participant
---------------------------------------------------------
benefits (credited service and final average earnings) and
entry into the Supplemental Executive Retirement Benefits
Plan (SERP) effective
----------------------------------------------------------
December 31, 2011. As a result, we incurred a curtailment
loss of approximately $3.1 million in the second quarter of
fiscal 2012.
------------------------------------------------------------
Curtailment of the plan is expected to reduce pension costs in
future periods.
--------------------------------------------------------------
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Amounts in thousands)
December 31, June 30,
------------ --------
2011 2011
---- ----
Assets
Cash and cash equivalents $70,512 $91,092
Accounts receivable, net of
allowances of $7,376 and
$7,016 280,700 290,751
Inventories 222,626 204,066
Other current assets 36,113 33,005
-------------------- ------ ------
Total current assets 609,951 618,914
Property, net 76,659 69,014
Intangibles, net 82,968 89,551
Goodwill 75,517 76,981
Other assets 52,918 60,471
------------ ------ ------
Total Assets $898,013 $914,931
============ ======== ========
Liabilities
Accounts payable $105,591 $108,509
Other accrued liabilities 93,373 106,179
------------------------- ------ -------
Total current liabilities 198,964 214,688
Other liabilities 52,863 66,680
----------------- ------ ------
Total Liabilities 251,827 281,368
----------------- ------- -------
Shareholders' Equity 646,186 633,563
-------------------- ------- -------
Total Liabilities and
Shareholders' Equity $898,013 $914,931
===================== ======== ========
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------
(In thousands)
Six Months Ended
December 31,
------------
2011 2010
---- ----
Cash Flows from Operating
Activities
Net income $47,317 $41,948
Adjustments to reconcile
net income to net cash
provided
by operating activities:
Depreciation and
amortization of property 5,598 5,496
Amortization of
intangibles 5,544 5,678
Amortization of stock
options and appreciation
rights 1,139 1,569
Gain on sale of property (492) (20)
Other share-based
compensation expense 2,523 2,110
Changes in assets and
liabilities, net of
acquisitions (33,246) (37,934)
Other, net 1,833 1,119
---------- -----
Net Cash provided by
Operating Activities 30,216 19,966
--------------------- ------ ------
Cash Flows from Investing
Activities
Property purchases (14,022) (13,804)
Proceeds from property
sales 981 124
Net cash paid for
acquisition of
businesses, net of cash
acquired (1,241) (27,739)
------------------------ ------ -------
Net Cash used in Investing
Activities (14,282) (41,419)
-------------------------- ------- -------
Cash Flows from Financing
Activities
Repayments under revolving
credit facility (50,000)
Long-term debt repayments (25,000)
Settlements of cross
currency swap agreements (12,752)
Purchase of treasury
shares (18,990)
Dividends paid (16,077) (14,422)
Excess tax benefits from
share-based compensation 569 778
Exercise of stock options
and appreciation rights 154 338
------------------------- --- ---
Net Cash used in Financing
Activities (34,344) (101,058)
-------------------------- ------- --------
Effect of Exchange Rate
Changes on Cash (2,170) 649
Decrease in cash and cash
equivalents (20,580) (121,862)
Cash and cash equivalents
at beginning of period 91,092 175,777
------------------------- ------ -------
Cash and Cash Equivalents
at End of Period $70,512 $53,915
========================= ======= =======
SOURCE Applied Industrial Technologies
