EXHIBIT 99
APPLIED INDUSTRIAL TECHNOLOGIES REPORTS
64% INCREASE IN EARNINGS PER SHARE
ON IMPROVED SALES FOR ITS THIRD QUARTER
CLEVELAND, OH (April 16, 2003) - Applied Industrial Technologies (NYSE: AIT)
today reported financial results for its fiscal 2003 third quarter, which ended
March 31, 2003. Sales were within the range of previously provided guidance
while earnings exceeded the upper end of the guidance range.
Net sales for the quarter were $368,203,000, up 1.8% compared with $361,542,000
in the same period a year ago. Net income for the quarter increased 62% to
$4,383,000 from $2,707,000 last year. Earnings per share increased by 64% to
$0.23 from $0.14 per share in the third quarter of fiscal 2002.
For the nine months ended March 31, 2003, sales increased 1.4% to $1,091,929,000
from $1,077,082,000 in the same period last year. Net income was $12,148,000 or
$0.63 per share versus a loss of $(1,586,000) or $(0.09) per share last year.
The prior year's nine-month earnings included the effect of a non-cash charge of
$12,100,000 after tax, or $0.63 per share, for impaired goodwill (resulting from
the initial application of SFAS 142) associated with the company's fluid power
business.
Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh
said, "While sales growth continues to be restrained in a weak economy, we are
seeing positive results in our efforts to improve profit margins. Gross profit
margin for the third quarter was 26.5%, an improvement of about 90 basis points
over our second quarter result. Our gross profit improvement was driven by a
broad range of management actions that included enhanced supply chain management
resulting in improved vendor rebates, improved recovery of freight costs and a
more favorable mix of sales.
"It is particularly meaningful to note that our efforts in inventory management
have allowed us to make significant gains in recent quarters in on-time
performance while reducing our average inventory levels. Good asset management
continues to be a key focus as we move through uncertain economic times. Our
costs remain well controlled, although we did record non-operating charges of
approximately $1.7 million during the quarter related to a provision for losses
and loan guarantees of an affiliated company.
"Our cash flow and balance sheet remain strong. Accounts receivable and
long-term debt have shown year-to-year improvement. Our current ratio at March
31, 2003 was 2.9 to 1. Our ratio of debt to equity (net of cash) was 0.18 to 1.
"The industrial economy remains weak across the board, with no significant
rebound expected during the final quarter of our 2003 fiscal year. In fact,
recent economic indicators are very disappointing for the short term.
"Looking ahead, we are maintaining sales guidance for our fiscal fourth quarter
of $365 million to $375 million. However, given our efforts in margin
improvement, we are raising our earnings forecast for the quarter to a range of
$0.25 to $0.30, and for the full fiscal year ended June 30, 2003, we expect
earnings per share to be within the range of $0.88 to $0.93."
For the nine months ended March 31, 2003, the company repurchased 577,000 shares
of its common stock for $9.9 million. At March 31, board authorization was in
place to repurchase up to 338,000 additional shares.
Applied will host its third quarter conference call at 4 p.m. today (Wednesday,
April 16). To join in the call, dial 1-800-946-0782 and passcode 376483. The
call will be conducted by Chairman and CEO David L. Pugh, President and COO Bill
L. Purser, and CFO John R. Whitten. The call will also be webcast and can be
accessed live online at www.applied.com and will be archived there for 14 days.
A replay of the teleconference will be available at 1-888-203-1112 from 7 p.m.
on April 16 through 12 midnight on April 30.
With more than 450 facilities and 4,400 employees across North America, Applied
Industrial Technologies offers more than 2 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, 2002, the
company posted sales of $1.45 billion. 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. Forward-looking statements are often identified by qualifiers such as
"expect," "believe," "guidance," "forecast," "see" 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, the success of our various marketing and operational
strategies, 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.
(A financial summary is attached.)
For more information, contact John R. Whitten, Vice President-Chief Financial
Officer and Treasurer, at 216/426-4245.
##
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED INCOME
-------------------------------------------
(Unaudited)
(Thousands, except per share data)
Three Months Ended Nine Months Ended
March 31 March 31
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2003 2002 2003 2002
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NET SALES $368,203 $361,542 $1,091,929 $1,077,082
Cost of sales 270,471 269,672 813,104 805,768
- ------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 97,732 91,870 278,825 271,314
Selling, distribution and administrative 87,578 86,037 253,507 249,337
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 10,154 5,833 25,318 21,977
Interest expense, net 1,295 1,378 3,898 5,025
Other 1,966 58 2,292 (142)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 6,893 4,397 19,128 17,094
INCOME TAXES 2,510 1,690 6,980 6,580
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 4,383 2,707 12,148 10,514
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING (12,100)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 4,383 $ 2,707 $ 12,148 $ (1,586)
==============================================================================================================================
NET INCOME (LOSS) PER SHARE - BASIC
Before cumulative effect of change in accounting $ 0.23 $ 0.14 $ 0.64 $ 0.55
Cumulative effect of change in accounting (0.63)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE - BASIC $ 0.23 $ 0.14 $ 0.64 $ (0.08)
==============================================================================================================================
NET INCOME (LOSS) PER SHARE - DILUTED
Before cumulative effect of change in accounting $ 0.23 $ 0.14 $ 0.63 $ 0.54
Cumulative effect of change in accounting (0.63)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE - DILUTED $ 0.23 $ 0.14 $ 0.63 $ (0.09)
==============================================================================================================================
AVERAGE SHARES OUTSTANDING - BASIC 18,833 18,960 18,935 19,096
==============================================================================================================================
AVERAGE SHARES OUTSTANDING - DILUTED 19,090 19,263 19,222 19,425
==============================================================================================================================
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Amount in Thousands)
- -------------------------------------------------------------------------------------------------------------------
March 31, June 30,
2003 2002
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Cash $ 23,925 $ 23,060
Accounts receivable, less allowances of $6,200 and $5,600 178,689 180,904
Inventories 171,463 166,083
Other current assets 10,374 11,011
- -------------------------------------------------------------------------------------------------------------------
Total current assets 384,451 381,058
Property - net 79,136 83,095
Goodwill 50,587 46,410
Other assets 21,954 24,003
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 536,128 $ 534,566
===================================================================================================================
LIABILITIES
Accounts payable $ 79,560 $ 76,316
Other current liabilities 51,611 54,098
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 131,171 130,414
Long-term debt 78,756 83,478
Other liabilities 26,262 22,527
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 236,189 236,419
- -------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY 299,939 298,147
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 536,128 $ 534,566
===================================================================================================================
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------
(Unaudited)
(Amount in Thousands)
Nine Months Ended March 31
--------------------------
2003 2002
- ---------------------------------------------------------------------------------
CASH PROVIDED FROM OPERATIONS:
Net income (loss) $ 12,148 $ (1,586)
Items not requiring cash:
Cumulative effect of accounting change 12,100
Depreciation and amortization 11,371 13,452
Other 2,295 2,154
Gain on sale of property (2,702) (466)
Cash effect of changes in working capital 7,765 21,077
- ---------------------------------------------------------------------------------
CASH PROVIDED FROM OPERATIONS 30,877 46,731
- ---------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Property purchases (9,348) (7,703)
Proceeds from property sales 5,947 1,829
Net cash paid for acquisition of business (10,255) (2,574)
Deposits and other 1,579 360
- ---------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (12,077) (8,088)
- ---------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings and repayments of notes payable - net (5,055)
Repayment of long-term debt (5,714) (5,714)
Proceeds from termination of interest rate swap 2,517 2,038
Purchase of common stock for treasury (9,872) (13,738)
Cash dividends paid (6,877) (6,966)
Other 2,011 1,524
- ---------------------------------------------------------------------------------
CASH USED IN FINANCING ACTIVITIES (17,935) (27,911)
- ---------------------------------------------------------------------------------
INCREASE IN CASH $ 865 $ 10,732
=================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Cost of sales for interim financial statements is computed using estimated
gross profit percentages which are adjusted throughout the year based upon
available information. Adjustments to actual cost are primarily made based
upon physical inventories and the effect of year-end inventory quantities
on LIFO costs.
(2) During July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") 142, "Goodwill and Other
Intangible Assets." Effective July 1, 2001, the Company adopted this
standard. Under SFAS 142, goodwill is no longer being amortized, but is
tested for impairment upon adoption and annually thereafter. The Company's
other intangible assets relate to non-competition agreements and continue
to be amortized over the lives of the agreements which primarily are five
years. Upon adoption of SFAS 142, a non-cash charge totaling $17,600,
$12,100 after tax, has been recorded as a change in accounting principle
effective July 1, 2001 to write-off the remaining goodwill relating to the
fluid power business. The Company has established January 1 as its annual
impairment testing date. The test resulted in no impairment of goodwill
required to be recorded at this time.