- Net Sales of $840.9 Million Up 1.2% YoY; Up 0.4% on an Organic Daily Basis
- Net Income of $56.1 Million, or $1.42 Per Share
- Adjusted Net Income of $54.1 Million, or $1.37 Per Share; Adjusted EBITDA of $86.8 Million
- Operating Cash Flow of $44.1 Million; Free Cash Flow of $40.3 Million
Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, today reported results for its fiscal 2021 third quarter ended March 31, 2021.
Net sales for the quarter increased 1.2% to $840.9 million from $830.8 million in the prior year. The change includes a 1.8% increase from acquisitions and a 0.6% increase from foreign currency translation, partially offset by a negative 1.6% impact from one less selling day. Excluding these factors, sales increased 0.4% on an organic daily basis reflecting a 0.4% increase in the Service Center segment and a 0.2% increase in the Fluid Power & Flow Control segment. The Company reported net income of $56.1 million, or $1.42 per share. Results include non-routine income of $2.6 million pre-tax. Excluding this income, the Company reported non-GAAP adjusted net income of $54.1 million, or $1.37 per share, and adjusted EBITDA of $86.8 million.
Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented “This was a solid quarter for Applied across many fronts. Sales exceeded our expectations and grew slightly over the prior year reflecting improving end-market demand and our industry position. At the same time, we expanded gross margins and leveraged a leaner cost structure that has been refined over the past year. These dynamics more than offset the elimination of various temporary cost actions and drove favorable earnings growth, while our working capital initiatives continue to support cash flow. Results highlight Applied’s strong execution and potential as the next phase of the industrial economy unfolds.”
Mr. Schrimsher added, “Looking ahead, I believe we are entering a favorable period for Applied and all stakeholders. Indications of cyclical and secular demand tailwinds are building within legacy and emerging market verticals. We are seeing greater break-fix and maintenance activity across our service center network, as well as stronger orders within our fluid power, specialty flow control, and automation offerings. This is accelerating sales growth as we lap prior year pandemic-related weakness, with month-to-date organic sales in April up approximately 10% year over year. While supply chain constraints and inflation are increasing industry-wide, we are in a strong spot to manage through these early cycle dynamics and continue to drive accretive growth opportunities going forward, reflecting our leading technical position and strategy. Combined with our cross-selling potential, self-help margin initiatives, and strong balance sheet, we have a clear path to drive meaningful value creation into fiscal 2022 and beyond.”
Outlook
Based on month-to-date sales in April and assuming normal seasonal patterns, the Company would project fiscal 2021 fourth quarter sales to increase 12% to 13% year over year on an organic basis.
Dividend
Today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.33 per common share, payable on May 28, 2021, to shareholders of record on May 14, 2021.
Conference Call Information
Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on April 29, 2021. 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 1278031. 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 1278031.
About Applied®
Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO and OEM end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. 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 “believe,” “expect,” “will,” “outlook,” “project”, 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 effects of the health crisis associated with the COVID-19 pandemic on our business operations, results of operations, and financial condition, and other risk factors identified in Applied's most recent periodic report and other filings made with the Securities and Exchange Commission, many of which risks are amplified by circumstances arising out of the COVID-19 pandemic. 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 | ||||||||||
| (Unaudited) | ||||||||||
| (In thousands, except per share data) | ||||||||||
| Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||
2021 |
2020 |
|
2021 |
2020 |
||||||
| Net Sales | $ |
840,937 |
$ |
830,797 |
$ |
2,340,031 |
$ |
2,520,576 |
||
| Cost of sales |
|
593,712 |
|
594,045 |
|
1,667,491 |
|
1,791,130 |
||
| Gross Profit |
|
247,225 |
|
236,752 |
|
672,540 |
|
729,446 |
||
| Selling, distribution and administrative expense, | ||||||||||
| including depreciation |
|
172,758 |
|
183,702 |
|
498,659 |
|
556,485 |
||
| Intangible and other impairment |
|
- |
|
131,000 |
|
49,528 |
|
131,000 |
||
| Operating (Loss) Income |
|
74,467 |
|
(77,950) |
|
124,353 |
|
41,961 |
||
| Interest expense, net |
|
7,608 |
|
8,805 |
|
22,919 |
|
28,447 |
||
| Other income, net |
|
(1,657) |
|
(1,428) |
|
(1,746) |
|
(1,643) |
||
| Income (Loss) Before Income Taxes |
|
68,516 |
|
(85,327) |
|
103,180 |
|
15,157 |
||
| Income Tax Expense (Benefit) |
|
12,453 |
|
(2,550) |
|
17,667 |
|
21,104 |
||
| Net Income (Loss) | $ |
56,063 |
$ |
(82,777) |
$ |
85,513 |
$ |
(5,947) |
||
| Net Income (Loss) Per Share - Basic | $ |
1.44 |
$ |
(2.14) |
$ |
2.21 |
$ |
(0.15) |
||
| Net Income (Loss) Per Share - Diluted | $ |
1.42 |
$ |
(2.14) |
$ |
2.18 |
$ |
(0.15) |
||
| Average Shares Outstanding - Basic |
|
38,835 |
|
38,682 |
|
38,779 |
|
38,647 |
||
| Average Shares Outstanding - Diluted |
|
39,412 |
|
38,682 |
|
39,261 |
|
38,647 |
||
| 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 | ||||||||
| (Unaudited) | ||||||||
| (In thousands) | ||||||||
| March 31, 2021 |
June 30, 2020 |
|||||||
| Assets | ||||||||
| Cash and cash equivalents | $ |
304,016 |
$ |
268,551 |
||||
| Accounts receivable, net |
|
510,080 |
|
449,998 |
||||
| Inventories |
|
358,237 |
|
389,150 |
||||
| Other current assets |
|
54,023 |
|
52,070 |
||||
| Total current assets |
|
1,226,356 |
|
1,159,769 |
||||
| Property, net |
|
116,951 |
|
121,901 |
||||
| Operating lease assets, net |
|
84,062 |
|
90,636 |
||||
| Intangibles, net |
|
287,686 |
|
343,215 |
||||
| Goodwill |
|
559,196 |
|
540,594 |
||||
| Other assets |
|
31,137 |
|
27,436 |
||||
| Total Assets | $ |
2,305,388 |
$ |
2,283,551 |
||||
| Liabilities | ||||||||
| Accounts payable | $ |
217,252 |
$ |
186,270 |
||||
| Current portion of long-term debt |
|
78,644 |
|
78,646 |
||||
| Other accrued liabilities |
|
169,850 |
|
161,167 |
||||
| Total current liabilities |
|
465,746 |
|
426,083 |
||||
| Long-term debt |
|
773,404 |
|
855,143 |
||||
| Other liabilities |
|
131,331 |
|
158,783 |
||||
| Total Liabilities |
|
1,370,481 |
|
1,440,009 |
||||
| Shareholders' Equity |
|
934,907 |
|
843,542 |
||||
| Total Liabilities and Shareholders' Equity | $ |
2,305,388 |
$ |
2,283,551 |
||||
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||
| CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS | ||||||
| (Unaudited) | ||||||
| (In thousands) | ||||||
| Nine Months Ended March 31, |
||||||
2021 |
2020 |
|||||
| Cash Flows from Operating Activities | ||||||
| Net income (loss) | $ |
85,513 |
$ |
(5,947) |
||
| Adjustments to reconcile net income to net cash provided | ||||||
| by operating activities: | ||||||
| Depreciation and amortization of property |
|
15,641 |
|
15,997 |
||
| Amortization of intangibles |
|
26,238 |
|
31,671 |
||
| Intangible and other impairment |
|
49,528 |
|
131,000 |
||
| Amortization of stock appreciation rights and options |
|
1,930 |
|
2,217 |
||
| Other share-based compensation expense |
|
4,660 |
|
2,046 |
||
| Changes in assets and liabilities, net of acquisitions |
|
33,574 |
|
1,406 |
||
| Other, net |
|
(13,675) |
|
(8,766) |
||
| Net Cash provided by Operating Activities |
|
203,409 |
|
169,624 |
||
| Cash Flows from Investing Activities | ||||||
| Acquisition of businesses, net of cash acquired |
|
(30,023) |
|
(37,237) |
||
| Capital expenditures |
|
(12,177) |
|
(16,223) |
||
| Proceeds from property sales |
|
691 |
|
1,809 |
||
| Net Cash used in Investing Activities |
|
(41,509) |
|
(51,651) |
||
| Cash Flows from Financing Activities | ||||||
| Long-term debt borrowings |
|
- |
|
25,000 |
||
| Long-term debt repayments |
|
(82,070) |
|
(39,803) |
||
| Interest rate swap settlement payments |
|
(2,122) |
|
- |
||
| Payment of debt issuance costs |
|
(399) |
|
(22) |
||
| Dividends paid |
|
(37,772) |
|
(36,420) |
||
| Acquisition holdback payments |
|
(2,344) |
|
(2,440) |
||
| Taxes paid for shares withheld for equity awards |
|
(5,990) |
|
(2,604) |
||
| Exercise of stock appreciation rights and options |
|
163 |
|
330 |
||
| Net Cash used in Financing Activities |
|
(130,534) |
|
(55,959) |
||
| Effect of Exchange Rate Changes on Cash |
|
4,099 |
|
(4,769) |
||
| Increase in cash and cash equivalents |
|
35,465 |
|
57,245 |
||
| Cash and Cash Equivalents at Beginning of Period |
|
268,551 |
|
108,219 |
||
| Cash and Cash Equivalents at End of Period | $ |
304,016 |
$ |
165,464 |
||
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES |
||||||
SUPPLEMENTAL INFORMATION
|
||||||
(Unaudited) |
||||||
(In thousands) |
||||||
| The Company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting of non-GAAP financial measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provide 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 these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP financial measures reflect 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. |
Reconciliation of Net income (loss) and Net income (loss) per share, GAAP financial measures, with Adjusted Net income and
|
|||||||||||||||||
| Three Months Ended March 31, 2021 | |||||||||||||||||
| Pre-tax | Tax Effect | Net of Tax | Per Share Diluted Impact |
Tax Rate | |||||||||||||
| Net income and net income per share | $ |
68,516 |
$ |
12,453 |
$ |
56,063 |
$ |
1.42 |
18.2% |
||||||||
| Non-routine income |
|
(2,609) |
|
(613) |
|
(1,996) |
|
(0.05) |
23.5% |
||||||||
| Adjusted net income and net income per share | $ |
65,907 |
$ |
11,840 |
$ |
54,067 |
$ |
1.37 |
18.0% |
||||||||
| Three Months Ended March 31, 2020 | |||||||||||||||||
| Pre-tax | Tax Effect | Net of Tax | Per Share Diluted Impact |
Tax Rate | |||||||||||||
| Net loss and net loss per share | $ |
(85,327) |
$ |
(2,550) |
$ |
(82,777) |
$ |
(2.14) |
3.0% |
||||||||
| Intangible and other impairment |
|
131,000 |
|
12,200 |
|
118,800 |
|
3.07 |
9.3% |
||||||||
| Non-routine costs |
|
5,997 |
|
1,396 |
|
4,601 |
|
0.12 |
23.3% |
||||||||
| Non-routine tax benefit |
|
- |
|
1,010 |
|
(1,010) |
|
(0.03) |
N/M |
||||||||
| Adjusted net income and net income per share | $ |
51,670 |
$ |
12,056 |
$ |
39,614 |
$ |
1.02 |
23.3% |
||||||||
| Nine Months Ended March 31, 2021 | |||||||||||||||||
| Pre-tax | Tax Effect | Net of Tax | Per Share Diluted Impact |
Tax Rate | |||||||||||||
| Net income and net income per share | $ |
103,180 |
$ |
17,667 |
$ |
85,513 |
$ |
2.18 |
17.1% |
||||||||
| Intangible and other impairment |
|
49,528 |
|
11,769 |
|
37,759 |
|
0.96 |
23.8% |
||||||||
| Non-routine costs |
|
7,772 |
|
1,847 |
|
5,925 |
|
0.15 |
23.8% |
||||||||
| Non-routine income |
|
(2,609) |
|
(613) |
|
(1,996) |
|
(0.05) |
23.5% |
||||||||
| Adjusted net income and net income per share | $ |
157,871 |
$ |
30,670 |
$ |
127,201 |
$ |
3.24 |
19.4% |
||||||||
| Nine Months Ended March 31, 2020 | |||||||||||||||||
| Pre-tax | Tax Effect | Net of Tax | Per Share Diluted Impact |
Tax Rate | |||||||||||||
| Net loss and net loss per share | $ |
15,157 |
$ |
21,104 |
$ |
(5,947) |
$ |
(0.15) |
139.2% |
||||||||
| Intangible and other impairment |
|
131,000 |
|
12,200 |
|
118,800 |
|
3.07 |
9.3% |
||||||||
| Non-routine costs |
|
7,452 |
|
1,747 |
|
5,705 |
|
0.15 |
23.4% |
||||||||
| Non-routine tax benefit |
|
- |
|
1,010 |
|
(1,010) |
|
(0.03) |
N/M |
||||||||
| Adjusted net income and net income per share | $ |
153,609 |
$ |
36,061 |
$ |
117,548 |
$ |
3.04 |
23.5% |
||||||||
| Reconciliation of Net Income, a GAAP financial measure, to EBITDA, a non-GAAP financial measure: | |||||||||||||||||
| Three Months Ended March 31, |
Nine Months Ended March 31, |
||||||||||||||||
|
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|||||||||
| Net Income (Loss) | $ |
56,063 |
$ |
(82,777) |
$ |
85,513 |
$ |
(5,947) |
|||||||||
| Interest expense, net |
|
7,608 |
|
8,805 |
|
22,919 |
|
28,447 |
|||||||||
| Income tax expense (benefit) |
|
12,453 |
|
(2,550) |
|
17,667 |
|
21,104 |
|||||||||
| Depreciation and amortization of property |
|
5,080 |
|
5,380 |
|
15,641 |
|
15,997 |
|||||||||
| Amortization of intangibles |
|
8,236 |
|
10,048 |
|
26,238 |
|
30,617 |
|||||||||
| EBITDA | $ |
89,440 |
$ |
(61,094) |
$ |
167,978 |
$ |
90,218 |
|||||||||
| Intangible and other impairment |
|
- |
|
131,000 |
|
49,528 |
|
131,000 |
|||||||||
| Non-routine costs |
|
- |
|
5,997 |
|
7,772 |
|
7,452 |
|||||||||
| Non-routine income |
|
(2,609) |
|
- |
|
(2,609) |
|
- |
|||||||||
| Adjusted EBITDA | $ |
86,831 |
$ |
75,903 |
$ |
222,669 |
$ |
228,670 |
|||||||||
| The Company defines EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization, a non-GAAP finanical measure. Adjusted EBITDA excludes items that may not be indicative of core operating results, a non-GAAP financial measure. |
|||||||||||||||||
| Reconciliation of Net Cash provided by Operating activities, a GAAP financial measure, to Free Cash Flow, a non-GAAP financial measure: | |||||||||||||||||
| Three Months Ended March 31, |
Nine Months Ended March 31, |
||||||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||||
| Net Cash provided by Operating Activities | $ |
44,053 |
$ |
64,725 |
$ |
203,409 |
$ |
169,624 |
|||||||||
| Capital expenditures |
|
(3,728) |
|
(4,258) |
|
(12,177) |
|
(16,223) |
|||||||||
| Free Cash Flow | $ |
40,325 |
$ |
60,467 |
$ |
191,232 |
$ |
153,401 |
|||||||||
| Free cash flow is defined as net cash provided by operating activities less property purchases, a non-GAAP financial measure. | |||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005262/en/
Contacts
Ryan D. Cieslak
Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
