Applied Industrial Technologies Reports Fiscal 2019 Second Quarter Results
Source: Nasdaq GlobeNewswire / 24 Jan 2019 06:30:23 America/New_York
- Net Sales of $840.0M, Up 25.9% Year-Over-Year
- Net Income of $38.7M; EPS of $0.99 Up 25.3% Year-Over-Year
- EBITDA of $76.0M, 9.1% of Sales; Up 60 bps Year-Over-Year
- Quarterly Dividend Increased to $0.31 Per Share
- Full-Year Guidance Revised to Reflect Current Business Conditions
CLEVELAND, Jan. 24, 2019 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2019 sales and earnings for the three months ended December 31, 2018.
Net sales for the quarter grew 25.9% to $840.0 million from $667.2 million in the same quarter a year ago. The overall sales increase for the quarter reflects a 21.3% increase from acquisition-related volume and a 1.6% benefit from a higher number of selling days in the quarter, partially offset by a negative 0.7% foreign currency translation impact. Excluding these factors, days adjusted organic growth was 3.7% in the quarter. Net income for the quarter increased 25.1% to $38.7 million from $31.0 million, and earnings per share rose 25.3% to $0.99 per share, compared to $0.79 per share in the prior year quarter. EBITDA for the quarter of $76.0 million increased 34.6% versus the prior year quarter.
For the six months ended December 31, 2018, sales were $1.70 billion, an increase of 26.5% compared with $1.35 billion in the same period last year. Net income increased to $87.7 million from $64.7 million, and earnings per share increased 35.2% to $2.23 per share from $1.65 per share, last year.
Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “While we are pleased to post year-over-year increases in our second quarter results, we did experience some deceleration as we progressed through the quarter. The contributing factors included significantly weaker sales in the final week of the calendar year, combined with some softness and project delays in our fluid power businesses tied to technology markets (electronic equipment and component manufacturers). Additionally, we experienced an adverse impact on our margins from a LIFO inventory charge related to more pronounced inflation experienced in the quarter.”
Mr. Schrimsher added, “Given the moderating industrial environment and current fluid power market dynamics, we are revising our full-year fiscal 2019 sales and earnings per share guidance to between $4.45 and $4.65 per share on a sales increase of 12.5% to 15.0%. The sales guidance includes a nearly 2.0% to 4.0% increase in second-half daily sales rates compared to the first half, excluding acquisitions. This assumes second-half Fluid Power & Flow Control daily sales rates essentially consistent with the first half of the fiscal year, and a 3.0% to 5.0% increase in the second-half daily sales rates in our Service Center Segment.”
The Company’s Board of Directors increased the quarterly cash dividend to $0.31 per common share, representing the 10th dividend increase since 2010. The dividend is payable on February 28, 2019, to shareholders of record on February 15, 2019.
Mr. Schrimsher concluded, “We are fully committed to generating shareholder value and leveraging our expanding product, service and solution offering to drive profitable growth. We are pleased to recognize the one-year anniversary of the FCX Performance acquisition along with the recent addition of Fluid Power Sales announced in November. These businesses further enhance our capabilities and differentiation to serve new and existing customers, and we will remain active in acquisitions as we move through calendar 2019.”
Conference Call Information
Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 24, 2019. 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 2388424. 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 2388424.
Founded in 1923, Applied Industrial Technologies is a leading distributor of bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, and other industrial supplies, serving 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, fluid power, and flow control shop services. Applied also offers storeroom services and inventory management solutions that provide added value to its customers. 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 “guidance,” “assume,” “will” 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, 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.
David K. Wells
Vice President – Chief Financial Officer & Treasurer
CORPORATE & MEDIA RELATIONS
Julie A. Kho
Manager, Public Relations
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED INCOME (In thousands, except per share data) Three Months Ended
Six Months Ended
2018 2017 2018 2017 Net Sales $ 840,038 $ 667,187 $ 1,704,553 $ 1,347,888 Cost of sales 597,178 478,827 1,209,840 967,104 Gross Profit 242,860 188,360 494,713 380,784 Selling, distribution and administrative, including depreciation 181,895 141,645 367,409 282,232 Operating Income 60,965 46,715 127,304 98,552 Interest expense, net 9,578 2,139 20,054 4,305 Other (income) expense, net 946 (20 ) 707 (731 ) Income Before Income Taxes 50,441 44,596 106,543 94,978 Income Tax Expense 11,724 13,646 18,888 30,307 Net Income $ 38,717 $ 30,950 $ 87,655 $ 64,671 Net Income Per Share - Basic $ 1.00 $ 0.80 $ 2.26 $ 1.67 Net Income Per Share - Diluted $ 0.99 $ 0.79 $ 2.23 $ 1.65 Average Shares Outstanding - Basic 38,743 38,716 38,729 38,824 Average Shares Outstanding - Diluted 39,247 39,206 39,316 39,270 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 (In thousands) December 31,
Assets Cash and cash equivalents $ 79,827 $ 54,150 Accounts receivable, less allowances of $13,982 and $13,566 512,034 548,811 Inventories 445,881 422,069 Other current assets 44,041 32,990 Total current assets 1,081,783 1,058,020 Property, net 122,005 121,343 Goodwill 651,206 646,643 Intangibles, net 413,093 435,947 Other assets 21,901 23,788 Total Assets $ 2,289,988 $ 2,285,741 Liabilities Accounts payable $ 232,558 $ 256,886 Current portion of long-term debt 44,184 19,183 Other accrued liabilities 117,046 156,482 Total current liabilities 393,788 432,551 Long-term debt 923,410 944,522 Other liabilities 82,875 93,705 Total Liabilities 1,400,073 1,470,778 Shareholders' Equity 889,915 814,963 Total Liabilities and Shareholders' Equity $ 2,289,988 $ 2,285,741 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (In thousands) Six Months Ended
2018 2017 Cash Flows from Operating Activities Net income $ 87,655 $ 64,671 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property 10,019 8,008 Amortization of intangibles 21,912 11,526 Amortization of stock appreciation rights and options 1,257 1,013 Gain on sale of property (105 ) (333 ) Other share-based compensation expense 2,351 1,577 Changes in assets and liabilities, net of acquisitions (55,922 ) (65,007 ) Other, net (1,587 ) (271 ) Net Cash provided by Operating Activities 65,580 21,184 Cash Flows from Investing Activities Property purchases (7,096 ) (11,460 ) Proceeds from property sales 244 596 Acquisition of businesses, net of cash acquired (6,900 ) (5,014 ) Other 391 - Net Cash used in Investing Activities (13,361 ) (15,878 ) Cash Flows from Financing Activities Net borrowings (repayments) under revolving credit facility (19,500 ) 23,000 Long-term debt borrowings 175,000 - Long-term debt repayments (151,868 ) (1,679 ) Debt issuance costs (685 ) - Purchases of treasury shares - (22,778 ) Dividends paid (23,275 ) (22,571 ) Acquisition holdback payments (2,275 ) (319 ) Taxes paid for shares withheld for equity awards (3,318 ) (1,298 ) Net Cash used in Financing Activities (25,921 ) (25,645 ) Effect of Exchange Rate Changes on Cash (621 ) 606 Increase (decrease) in cash and cash equivalents 25,677 (19,733 ) Cash and cash equivalents at beginning of Period 54,150 105,057 Cash and Cash Equivalents at End of Period $ 79,827 $ 85,324 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands) Three Months Ended
Six Months Ended
2018 2017 2018 2017 Net Income $ 38,717 $ 30,950 $ 87,655 $ 64,671 Interest expense, net 9,578 2,139 20,054 4,305 Income tax expense (benefit) 11,724 13,646 18,888 30,307 Depreciation and amortization of property 5,038 4,081 10,019 8,008 Amortization of intangibles 10,991 5,695 21,912 11,526 EBITDA $ 76,048 $ 56,511 $ 158,528 $ 118,817 SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES The company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting EBITDA (Earnings from operations before Interest, Taxes, Depreciation, and Amortization), a non-GAAP financial measure. EBITDA excludes items that may not be indicative of core operating results. The company believes that this non-GAAP measure provides meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provides 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 this financial measure with other companies' non-GAAP financial measures having the same or similar names. EBITDA should not be considered in isolation or as a substitute for reported results. This non-GAAP financial measure reflects 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.
The reconciliation provided above reconciles EBITDA , a non-GAAP financial measure, with net income, a GAAP financial measure.
- Net Sales of $840.0M, Up 25.9% Year-Over-Year