Applied Industrial Technologies Reports Fiscal 2010 Second Quarter Results

Jan 20, 2010, 07:00 ET from Applied Industrial Technologies

CLEVELAND, Jan. 20 /PRNewswire-FirstCall/ -- Applied Industrial Technologies (NYSE: AIT) today reported sales and earnings for its fiscal 2010 second quarter, ended December 31, 2009.  

Net sales for the second quarter decreased 11% to $446,253,000 compared to $502,412,000 in the same period last year. Net income for the quarter was $10,487,000 or $0.24 per share compared to $16,194,000 or $0.38 per share last year.  

For the six months ended December 31, 2009, sales were $883,996,000 compared to $1,046,318,000 in the same period last year.  Net income was $21,674,000 or $0.51 per share compared to $38,730,000 or $0.90 per share, last year.

Commenting on the Company's performance, Applied Chairman & Chief Executive Officer David L. Pugh said, "The general market continues to be difficult.  While some sectors have shown improvement in activity, there is a concern that it may be a transient response to stimulus initiatives.  Other sectors, especially those impacted by new construction, are still declining.  Overall, demand is low and tight competition has lead to gross margin pressure. Business activity is consistent with our expectations for a slow, protracted economic recovery.

"Remaining nimble in such an environment is essential.  Our efforts remain focused on the underlying fundamentals of our business with an emphasis on tight cost control and conservative asset management.  The Company is stable and our cash position is strong and well-positioned for the long-term.

"For fiscal 2010, we now expect earnings per share to be in the range of $0.95 to $1.25 on sales of $1.75 billion to $1.85 billion."

The Company did not repurchase any shares during the quarter.  At December 31, 2009, the Company had remaining authorization to purchase 997,100 additional shares.

Applied will host its conference call for investors and analysts at 4 p.m. ET today, Wednesday, January 20. The call will be conducted by Chairman & CEO David L. Pugh, President & COO Benjamin J. Mondics and Vice President & CFO Mark O. Eisele. To join the call, dial 1-866-352-2112 (for US/Canada callers) or 1-630-691-2779 (for International callers) prior to the scheduled start using passcode 6506299.  A live audio webcast can be accessed online at www.Applied.com. A replay of the teleconference will be available for two weeks by dialing 1-888-843-8996 using passcode 6506299.

With approximately 460 facilities and 4,600 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 3 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, 2009, Applied posted sales of $1.9 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 "expect" 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

(Amounts in thousands, except per share data)

Three Months Ended December 31,

Six Months Ended December 31,

2009

2008

2009

2008

Net Sales

$                 446,253 

$              502,412 

$              883,996 

$             1,046,318 

Cost of sales

329,348 

366,943 

651,647 

764,791 

116,905 

135,469 

232,349 

281,527 

Selling, distribution and administrative,

  including depreciation

98,002 

106,662 

195,805 

215,345 

Operating Income

18,903 

28,807 

36,544 

66,182 

Interest expense, net

1,333 

1,302 

2,547 

1,987 

Other expense (income), net

58 

2,225 

(245)

3,040 

Income Before Income Taxes

17,512 

25,280 

34,242 

61,155 

Income Tax Expense

7,025 

9,086 

12,568 

22,425 

Net Income

$                     10,487 

$                16,194 

$                21,674 

$                  38,730 

Net Income Per Share - Basic

$                         0.25 

$                    0.38 

$                    0.51 

$                      0.92 

Net Income Per Share - Diluted

$                         0.24 

$                    0.38 

$                    0.51 

$                      0.90 

Average Shares Outstanding - Basic

42,298 

42,316 

42,287 

42,316 

Average Shares Outstanding - Diluted

42,830 

42,798 

42,793 

42,873 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) The Company uses the last-in, first-out (“LIFO”) method of valuing U.S. inventory.  An actual valuation of inventory under the LIFO method can be made only 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.  The Company is estimating reductions in certain U.S. inventories during fiscal 2010 which would result in the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years.

The Company recorded LIFO income of $1.8 million and $2.5 million during the quarter and six months ended December 31, 2009, respectively, which reduced the overall LIFO reserve by the same amount.  The effect of LIFO layer liquidations during the current quarter and six months increased gross profit by $5.7 million and $10.0 million, respectively.  There were no comparable LIFO layer liquidations recorded for the quarter and six months ended December 31, 2008.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31, 2009

June 30, 2009

Assets

 Cash and cash equivalents

$               104,203

$              27,642

 Accounts receivable, less allowances of $6,264 and $6,464

211,920

198,792

 Inventories

201,872

254,690

 Other current assets

28,859

44,470

      Total current assets

546,854

525,594

 Property, net

59,845

62,735

 Intangibles, net

91,024

95,832

 Goodwill

63,100

63,108

 Other assets

65,317

62,059

Total Assets

$               826,140

$            809,328

Liabilities

 Accounts payable

$                 82,354

$              80,655

 Short-term debt

75,000

5,000

 Other accrued liabilities

85,235

70,901

      Total current liabilities

242,589

156,556

 Long-term debt

75,000

 Other liabilities

61,395

69,670

Total Liabilities

303,984

301,226

Shareholders' Equity

522,156

508,102

Total Liabilities and Shareholders' Equity

$               826,140

$            809,328

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(In thousands)

Six Months Ended

December 31,

2009

2008

Cash Flows from Operating Activities

 Net income

$               21,674 

$  38,730 

 Adjustments to reconcile net income to net cash provided

   by operating activities:

   Depreciation

5,770 

6,273 

   Amortization of intangibles

5,047 

4,135 

   Share-based compensation

2,898 

2,744 

   Gain on sale of property

(116)

(209)

   Treasury shares contributed to employee benefit

       and deferred compensation plans

154 

263 

   Changes in assets and liabilities, net of

       acquisitions

59,705 

(20,886)

   Other, net

531 

1,418 

Net Cash provided by Operating Activities

95,663 

32,468 

Cash Flows from Investing Activities

 Property purchases

(2,951)

(4,265)

 Proceeds from property sales

421 

323 

 Net cash paid for acquisition of businesses, net of

   cash acquired

(100)

(172,019)

Net Cash used in Investing Activities

(2,630)

(175,961)

Cash Flows from Financing Activities

 Net short-term (repayments) borrowings under revolving credit facility

(5,000)

61,000 

 Borrowings under revolving credit facility classified as long-term

50,000 

 Purchase of treasury shares

(1,210)

 Dividends paid

(12,699)

(12,699)

 Excess tax benefits from share-based compensation

251 

261 

 Exercise of stock options and appreciation rights

205 

241 

Net Cash (used in) provided by Financing Activities

(17,243)

97,593 

Effect of Exchange Rate Changes on Cash

771 

(9,310)

Increase (decrease) in cash and cash equivalents

76,561 

(55,210)

Cash and cash equivalents at beginning of period

27,642 

101,830 

Cash and Cash Equivalents at End of Period

$             104,203 

$  46,620 

SOURCE Applied Industrial Technologies



RELATED LINKS

http://www.applied.com