EXHIBIT 99.1
Applied Industrial Technologies Reports
Record Annual Results for 2008
CLEVELAND, Ohio, August 8, 2008– Applied Industrial Technologies (NYSE: AIT) today reported sales and earnings for its fourth quarter and fiscal 2008 year ended June 30. Fiscal 2008 sales increased 3.7% to a record $2,089,456,000 from $2,014,109,000 in fiscal 2007. Net income for the year also established a new high as it rose 11% to $95,456,000 versus $86,022,000 in the previous year. Earnings per share increased 13.5% to $2.19 compared with $1.93 last year.
Net sales for the fourth quarter increased slightly to $529,745,000 from $528,025,000 in the comparable period a year ago. Net income for the quarter was $24,437,000 compared with $24,640,000 last year. The prior year quarter benefited from nonrecurring year end adjustments for self-insurance reserves. Fiscal 2008 fourth quarter earnings per share were $0.57 compared with $0.56 last year.
Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh said, “We are pleased with our fiscal 2008 performance having hit our sixth consecutive year of record sales and earnings. Our active management of inventory and other assets, productivity improvements, and implementation of cost controls have again yielded strong financial results.
“While our financial performance was strong, we definitely saw the effect of a slowing economy during the second half of our fiscal year with only half of our top thirty industries showing positive growth. Our sales to the forest products industry and the transportation industry, historically strong markets for us, were especially soft.
5
“Our operating margin continued to show strength, as we achieved 7.3% for both our fourth quarter and our full year. We also enjoyed significant cash flow, ending the year with $101,830,000 in cash, giving us a strong balance sheet with which to continue to pursue strategic growth opportunities. In the second half of our fiscal year, we strengthened our presence in Mexico with the acquisitions of VYCMEX and Suministros Industriales Enol. While these acquisitions had little impact on our 2008 sales and earnings, they will provide a nice boost going forward. Additionally, we recently reached an agreement to acquire Fluid Power Resource (FPR) and seven of its fluid power distribution businesses in the United States.
“Looking ahead to fiscal 2009, we expect certain segments of the economy to remain soft. We believe we will achieve earnings of $2.20 to $2.40 per share on sales of $2.13 to $2.24 billion. This guidance does not include any amounts from the pending acquisition of FPR.”
During 2008, the Company purchased 1,144,900 shares of the Company’s common stock on the open market for approximately $33,224,000. No shares were purchased during the fourth quarter. At June 30, 2008, the Company had remaining authorization to purchase 1,065,000 additional shares.
Applied will host its fourth quarter conference call for investors and analysts at 3 p.m. today. To join in the call, dial 1-888-581-9259, passcode 54843171. The call will be conducted by Chairman & CEO David L. Pugh, President & COO Benjamin J. Mondics, and CFO Mark O. Eisele. The call will also be webcast and can be accessed live online at http://www.applied.com and will be archived there for 14 days. A replay of the teleconference will be available for two weeks at 1-800-642-1687 (passcode 54843171).
Applied will hold its Annual Meeting of Shareholders on Tuesday, October 21, 2008, 10 a.m. ET, at its Corporate Headquarters, 1 Applied Plaza (E. 36th & Euclid Avenue), Cleveland, Ohio. August 22, 2008, is the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting.
6
With 459 facilities and 4,800 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. For its fiscal year ended June 30, 2008, Applied posted sales of $2.1 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 “looking ahead,” “expect,” “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.
#####
For investor relations information, contact Mark O. Eisele, Vice President – Chief Financial Officer, at 216-426-4417. For corporate information, contact Richard C. Shaw, Vice President – Communications, at 216-426-4343.
7
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Amounts in thousands, except per share data)
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net Sales | $ | 529,745 | $ | 528,025 | $ | 2,089,456 | $ | 2,014,109 | ||||||||
Cost of sales | 386,509 | 385,830 | 1,520,173 | 1,466,057 | ||||||||||||
143,236 | 142,195 | 569,283 | 548,052 | |||||||||||||
Selling, distribution and administrative, including depreciation | 104,581 | 103,595 | 416,459 | 413,041 | ||||||||||||
Operating Income | 38,655 | 38,600 | 152,824 | 135,011 | ||||||||||||
Interest expense, net | 366 | 354 | 882 | 2,360 | ||||||||||||
Other (income) expense, net | (326 | ) | (82 | ) | 227 | (1,179 | ) | |||||||||
Income Before Income Taxes | 38,615 | 38,328 | 151,715 | 133,830 | ||||||||||||
Income Tax Expense | 14,178 | 13,688 | 56,259 | 47,808 | ||||||||||||
Net Income | $ | 24,437 | $ | 24,640 | $ | 95,456 | $ | 86,022 | ||||||||
Net Income Per Share — Basic | $ | 0.58 | $ | 0.57 | $ | 2.23 | $ | 1.97 | ||||||||
Net Income Per Share — Diluted | $ | 0.57 | $ | 0.56 | $ | 2.19 | $ | 1.93 | ||||||||
Average Shares Outstanding — Basic | 42,297 | 43,089 | 42,797 | 43,630 | ||||||||||||
Average Shares Outstanding — Diluted | 42,967 | 43,935 | 43,552 | 44,495 | ||||||||||||
(1) | Cost of sales for interim financial statements are computed using estimated gross profit percentages which are adjusted throughout the year based upon available information. Adjustments to actual cost are primarily made based on periodic physical inventory and the effect of year end inventory quantities on LIFO costs. Reductions in year end inventories during the fiscal years ended June 30, 2008 resulted in liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years. The effect of these liquidations for the year ended June 30, 2008 increased gross profit by $626, net income by $383 and diluted net income per share by $0.01. There were no LIFO layer liquidations for fiscal 2007. | |
(2) | On July 14, 2008, Applied Industrial Technologies, Inc., entered into an agreement to acquire certain assets of Fluid Power Resource, LLC, including seven fluid power businesses for cash consideration of $169.0 million. The Company intends to fund the acquisition by drawing down its existing revolving credit facility and from its available cash. These businesses employ 455 people and for the year ended December 31, 2007 had sales of approximately $244.0 million. Results of operations acquired will be included in the Company’s results of operations from the date of closing. |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 30, 2008 | June 30, 2007 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 101,830 | $ | 119,665 | ||||
Accounts receivable, less allowances of $6,119 and $6,134 | 245,119 | 248,698 | ||||||
Inventories | 210,723 | 199,886 | ||||||
Other current assets | 48,525 | 32,284 | ||||||
Total current assets | 606,197 | 600,533 | ||||||
Property — net | 64,997 | 67,788 | ||||||
Goodwill | 64,685 | 57,550 | ||||||
Other assets | 62,892 | 51,498 | ||||||
Total Assets | $ | 798,771 | $ | 777,369 | ||||
Liabilities | ||||||||
Accounts payable | $ | 109,822 | $ | 97,166 | ||||
Long-term debt payable within one year | 50,395 | |||||||
Other accrued liabilities | 87,189 | 87,449 | ||||||
Total current liabilities | 197,011 | 235,010 | ||||||
Long-term debt | 25,000 | 25,000 | ||||||
Other liabilities | 74,685 | 66,376 | ||||||
Total Liabilities | 296,696 | 326,386 | ||||||
Shareholders’ Equity | 502,075 | 450,983 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 798,771 | $ | 777,369 | ||||
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amounts in thousands)
Year Ended June 30, | ||||||||
2008 | 2007 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 95,456 | $ | 86,022 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 12,776 | 13,489 | ||||||
Share-based compensation | 3,376 | 2,927 | ||||||
Amortization of intangibles | 1,663 | 1,045 | ||||||
Gain on sale of property | (1,214 | ) | (334 | ) | ||||
Changes in assets and liabilities, net of acquisitions | 1,043 | (28,392 | ) | |||||
Other, net | (2,797 | ) | (3,832 | ) | ||||
Net Cash provided by Operating Activities | 110,303 | 70,925 | ||||||
Cash Flows from Investing Activities | ||||||||
Property purchases | (8,410 | ) | (11,192 | ) | ||||
Proceeds from property sales | 1,372 | 1,275 | ||||||
Net cash paid for acquisition of businesses | (22,105 | ) | ||||||
Other | 2,304 | (302 | ) | |||||
Net Cash used in Investing Activities | (26,839 | ) | (10,219 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Long-term debt repayment | (50,000 | ) | ||||||
Purchase of treasury shares | (33,224 | ) | (33,988 | ) | ||||
Dividends paid | (25,728 | ) | (20,970 | ) | ||||
Excess tax benefits from share-based compensation | 3,761 | 3,885 | ||||||
Exercise of stock options | 1,664 | 2,663 | ||||||
Net Cash used in Financing Activities | (103,527 | ) | (48,410 | ) | ||||
Effect of Exchange Rate Changes on Cash | 2,228 | 941 | ||||||
(Decrease) increase in cash and cash equivalents | (17,835 | ) | 13,237 | |||||
Cash and cash equivalents at beginning of period | 119,665 | 106,428 | ||||||
Cash and Cash Equivalents at End of Period | $ | 101,830 | $ | 119,665 | ||||