EXHIBIT 99.1
Applied Industrial Technologies Reports Fiscal 2014
Second Quarter Results and Increases Dividend
CLEVELAND, OHIO (January 30, 2014) - Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2014 sales and earnings for the three months ended December 31, 2013.
Net sales for the quarter were $581.9 million, a decrease of 1.3% compared with $589.5 million in the same quarter a year ago. Net income for the quarter was $25.9 million, or $0.61 per share, compared with $27.0 million, or $0.64 per share, in the second quarter of fiscal 2013.
For the six months ended December 31, 2013, sales decreased 1.1% to $1.19 billion from $1.20 billion in the same period last year. Net income was $52.8 million, or $1.24 per share, compared with $56.6 million, or $1.33 per share, last year.
Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “With weaker industrial demand in some key market segments, coupled with negative impacts on reported sales from foreign currency translation, our second quarter sales lagged the prior year. We remain disciplined on our operating costs and focused on driving continuous improvements across our business.
“Considering the current industrial macroeconomic indicators, we are well positioned to serve our customers’ needs in this improving marketplace throughout calendar 2014. We are maintaining our full-year fiscal 2014 guidance for earnings per share between $2.65 and $2.95 per share, on expected sales of $2.43 billion to $2.49 billion.”
In addition, Mr. Schrimsher announced that the Company's Board of Directors declared a $0.02, or 8.7%, increase in the quarterly cash dividend to $0.25 per common share. The dividend is payable on February 28, 2014, to shareholders of record on February 14, 2014. “We are committed to generating increased shareholder value through our strategic investments, our business execution and by returning cash to the shareholders with attractive dividends and through share repurchases.”
During the quarter, the Company purchased 226,100 shares of its common stock in open market transactions for $10.8 million. Fiscal year to date, the Company has purchased 286,800 shares for a total of $13.8 million. At December 31, 2013, the Company had remaining authorization to purchase 854,700 additional shares.
Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on Thursday, January 30. The call will be conducted by Neil A. Schrimsher, President & CEO, and Mark O. Eisele, CFO. To join the call, dial 1-800-754-1366 or 1-212-231-2928 (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 21703610.
With more than 500 facilities and 5,000 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 “guidance,” “expect,” “will,” and 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.
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For investor relations information, contact Mark O. Eisele, Vice President - Chief Financial Officer, at 216-426-4417. For corporate information, contact Julie A. Kho, Manager - Public Relations, at 216-426-4483.
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||
| CONDENSED STATEMENTS OF CONSOLIDATED INCOME | ||||
| (In thousands, except per share data) | ||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net Sales | $ 581,949 | $ 589,517 | $1,187,254 | $1,200,036 |
| Cost of sales | 418,566 | 426,598 | 854,076 | 872,584 |
| Gross Profit | 163,383 | 162,919 | 333,178 | 327,452 |
| Selling, distribution and administrative, | ||||
| including depreciation | 123,546 | 122,350 | 253,802 | 242,565 |
| Operating Income | 39,837 | 40,569 | 79,376 | 84,887 |
| Interest (income) expense, net | (152) | 15 | (91) | 40 |
| Other income, net | (270) | (427) | (1,361) | (886) |
| Income Before Income Taxes | 40,259 | 40,981 | 80,828 | 85,733 |
| Income Tax Expense | 14,350 | 13,938 | 28,075 | 29,158 |
| Net Income | $ 25,909 | $ 27,043 | $ 52,753 | $ 56,575 |
| Net Income Per Share - Basic | $ 0.62 | $ 0.64 | $ 1.25 | $ 1.35 |
| Net Income Per Share - Diluted | $ 0.61 | $ 0.64 | $ 1.24 | $ 1.33 |
| Average Shares Outstanding - Basic | 42,076 | 42,052 | 42,116 | 42,009 |
| Average Shares Outstanding - Diluted | 42,462 | �� 42,494 | 42,547 | 42,486 |
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 periods ended December 31, 2013 and 2012.
(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.
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Amounts in thousands) | ||||||
| December 31, | June 30, | |||||
| 2013 | 2013 | |||||
| Assets | ||||||
| Cash and cash equivalents | $ 66,584 | $ 73,164 | ||||
| Accounts receivable, net of allowances of $7,335 and $7,737 | 305,936 | 329,880 | ||||
| Inventories | 323,257 | 281,417 | ||||
| Other current assets | 54,702 | 52,819 | ||||
| Total current assets | 750,479 | 737,280 | ||||
| Property, net | 80,056 | 83,243 | ||||
| Goodwill | 111,356 | 106,849 | ||||
| Intangibles, net | 91,669 | 91,267 | ||||
| Other assets | 40,599 | 40,067 | ||||
| Total Assets | $ 1,074,159 | $ 1,058,706 | ||||
| Liabilities | ||||||
| Accounts payable | $ 140,869 | $ 136,575 | ||||
| Short-term debt | 15,000 | |||||
| Other accrued liabilities | 94,985 | 109,325 | ||||
| Total current liabilities | 250,854 | 245,900 | ||||
| Other liabilities | 49,826 | 53,191 | ||||
| Total Liabilities | 300,680 | 299,091 | ||||
| Shareholders' Equity | 773,479 | 759,615 | ||||
| Total Liabilities and Shareholders' Equity | $ 1,074,159 | $ 1,058,706 | ||||
| APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||
| CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS | ||||
| (In thousands) | ||||
| Six Months Ended | ||||
| December 31, | ||||
| 2013 | 2012 | |||
| Cash Flows from Operating Activities | ||||
| Net income | $ 52,753 | $ 56,575 | ||
| Adjustments to reconcile net income to net cash provided | ||||
| by operating activities: | ||||
| Depreciation and amortization of property | 6,792 | 6,036 | ||
| Amortization of intangibles | 6,330 | 6,207 | ||
| Amortization of stock options and appreciation rights | 931 | 1,197 | ||
| Gain on sale of property | (10) | (193) | ||
| Other share-based compensation expense | 2,286 | 1,982 | ||
| Changes in operating assets and liabilities, net of acquisitions | (36,996) | (42,766) | ||
| Other, net | 577 | (152) | ||
| Net Cash provided by Operating Activities | 32,663 | 28,886 | ||
| Cash Flows from Investing Activities | ||||
| Property purchases | (4,126) | (6,843) | ||
| Proceeds from property sales | 324 | 429 | ||
| Net cash paid for acquisition of businesses, net of cash acquired | (17,000) | (66,055) | ||
| Net Cash used in Investing Activities | (20,802) | (72,469) | ||
| Cash Flows from Financing Activities | ||||
| Borrowings under revolving credit facility | 15,000 | 33,000 | ||
| Purchase of treasury shares | (13,838) | |||
| Dividends paid | (19,471) | (17,737) | ||
| Excess tax benefits from share-based compensation | 2,057 | 1,461 | ||
| Acquisition holdback payments | (1,032) | (1,845) | ||
| Exercise of stock options and appreciation rights | 97 | 497 | ||
| Net Cash (used in) provided by Financing Activities | (17,187) | 15,376 | ||
| Effect of Exchange Rate Changes on Cash | (1,254) | 1,610 | ||
| Decrease in Cash and Cash Equivalents | (6,580) | (26,597) | ||
| Cash and Cash Equivalents at Beginning of Period | 73,164 | 78,442 | ||
| Cash and Cash Equivalents at End of Period | $ 66,584 | $ 51,845 | ||