Exhibit 99
APPLIED INDUSTRIAL TECHNOLOGIES REPORTS INCREASES IN INCOME AND SALES
FOR ITS FOURTH QUARTER AND FISCAL 2003 YEAR END
CLEVELAND, OHIO (August 8, 2003) - Applied Industrial Technologies (NYSE: AIT)
today reported earnings per share of $0.40 for its fiscal fourth quarter ended
June 30, 2003, which was in line with the company's previously provided guidance
of $0.37 to $0.43.
Net sales for the quarter increased slightly to $372,438,000 from $369,487,000
in the comparable period a year ago. Net income for the quarter increased to
$7,684,000 or $0.40 per share compared to $4,241,000 or $0.22 per share last
year.
For the full fiscal 2003, sales increased to $1,464,367,000 from $1,446,569,000
in fiscal 2002. Net income was $19,832,000 or $1.03 per share, versus $2,655,000
or $0.13 per share in the previous year. Full-year earnings in the prior year
include the effect of a non-cash charge of $12,100,000, or $0.63 per share, for
impaired goodwill (resulting from the application of SFAS 142) associated with
the company's fluid power business.
Applied's fourth quarter 2003 results included previously announced pre-tax
gains of $2.1 million for an insurance claim settlement and $650,000 for the
sale of surplus real estate. Together, these items accounted for about $0.09 per
share of reported fourth quarter earnings.
Commenting on the performance, Applied Chairman & Chief Executive Officer David
L. Pugh said, "Results for the fourth quarter reflect steady improvement in our
margin management during a period where sales growth is proving to be very
challenging. While our domestic core business continues to be weak, we had very
positive improvements in our Canadian operations and in our fluid power
business.
"Our industry saw demand slacken in response to the continuing economic problems
in the domestic manufacturing economy, and we do not foresee any noticeable
recovery in the near future.
"Our balance sheet reflects solid efforts by all of our associates to better
manage assets by continually improving processes. Inventories declined, and cash
generation was strong. The quality initiatives in place at all levels are
providing sustainable earnings growth through operating excellence.
-More-
Our initial guidance for the first quarter of fiscal 2004 is for earnings to be
between $0.20 and $0.25 per share on sales of $360 to $370 million as we expect
domestic markets to be flat to down slightly. For the full fiscal 2004, we see
earnings between $1.10 and $1.20 per share on sales ranging from $1.45 billion
to $1.5 billion."
During 2003, the company purchased 581,000 shares of its common stock for $9.9
million. In July 2003, Applied's Board of Directors approved a new authorization
to repurchase up to 1 million shares or approximately 5% of the currently
outstanding shares. This authorization replaced the previous authorization.
Applied will host its fourth quarter conference call at 10 a.m. on Monday,
August 11. To join in the call, dial 1-800-810-0924 and passcode 467278. The
call will be conducted by Chairman & CEO David L. Pugh, President & 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 seven
days. A replay of the teleconference will be available at 1-888-203-1112 from 1
p.m. on August 11 through midnight on August 25.
With more than 430 facilities and 4300 employee associates 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. Applied can be visited on the Internet at
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," "guidance," "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, 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 & Treasurer, at 216/426-4245.
# # # #
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
- -------------------------------------------------------------------------------
(Thousands, except per share data)
Three Months Ended Year Ended
June 30 June 30
------------------------ -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
NET SALES $ 372,438 $ 369,487 $1,464,367 $1,446,569
Cost of sales 271,968 275,111 1,085,072 1,080,879
---------- ---------- ---------- ----------
GROSS PROFIT 100,470 94,376 379,295 365,690
Selling, distribution and administrative 89,534 85,519 343,041 334,856
---------- ---------- ---------- ----------
OPERATING INCOME 10,936 8,857 36,254 30,834
Interest expense, net 1,400 1,713 5,298 6,738
Other (2,268) 483 24 341
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 11,804 6,661 30,932 23,755
INCOME TAXES 4,120 2,420 11,100 9,000
---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 7,684 4,241 19,832 14,755
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING (12,100)
---------- ---------- ---------- ----------
NET INCOME $ 7,684 $ 4,241 $ 19,832 $ 2,655
========== ========== ========== ==========
NET INCOME PER SHARE - BASIC
Before cumulative effect of change in accounting $ 0.41 $ 0.22 $ 1.05 $ 0.77
Cumulative effect of change in accounting (0.63)
---------- ---------- ---------- ----------
NET INCOME PER SHARE - BASIC $ 0.41 $ 0.22 $ 1.05 $ 0.14
========== ========== ========== ==========
NET INCOME PER SHARE - DILUTED
Before cumulative effect of change in accounting $ 0.40 $ 0.22 $ 1.03 $ 0.76
Cumulative effect of change in accounting (0.63)
---------- ---------- ---------- ----------
NET INCOME PER SHARE - DILUTED $ 0.40 $ 0.22 $ 1.03 $ 0.13
========== ========== ========== ==========
AVERAGE SHARES OUTSTANDING - BASIC 18,825 19,026 18,908 19,079
========== ========== ========== ==========
AVERAGE SHARES OUTSTANDING - DILUTED 19,176 19,366 19,222 19,417
========== ========== ========== ==========
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. Fourth quarter adjustments in 2003 and 2002 increased gross
profit by $4,410 and $3,171; net income by $2,682 and $1,868 and diluted
net income per share by $.14 and $.10 respectively. Reductions in year end
inventories during the fiscal years ended June 30, 2003 and 2002 resulted
in liquidations of LIFO inventory quantities carried at lower costs
prevailing in prior years. The effect of these liquidations for the years
ended June 30, 2003 and 2002 increased gross profit by $741 and $915; net
income by $453 and $546 and diluted net income per share by $.02 and $.03
respectively.
(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. 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 January 1, 2003 test resulted in no additional impairment of goodwill
required to be recorded at this time.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amount in Thousands)
June 30, June 30,
2003 2002
-------- --------
(Unaudited)
ASSETS
Cash $ 55,079 $ 23,060
Accounts receivable, less allowances of $6,100 and $5,600 173,915 180,904
Inventories 159,798 166,083
Other current assets 11,702 11,011
-------- --------
Total current assets 400,494 381,058
Property - net 77,942 83,095
Goodwill 49,687 46,410
Other assets 25,281 24,003
-------- --------
TOTAL ASSETS $553,404 $534,566
======== ========
LIABILITIES
Accounts payable $ 75,411 $ 76,316
Other current liabilities 65,724 54,098
-------- --------
Total current liabilities 141,135 130,414
Long-term debt 78,558 83,478
Other liabilities 25,855 22,527
-------- --------
TOTAL LIABILITIES 245,548 236,419
-------- --------
SHAREHOLDERS' EQUITY 307,856 298,147
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $553,404 $534,566
======== ========
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Amount in Thousands)
Year Ended June 30
--------------------
2003 2002
-------- --------
CASH PROVIDED FROM OPERATIONS:
Net income $ 19,832 $ 2,655
Items not requiring cash:
Cumulative effect of accounting change 12,100
Depreciation and amortization expense 15,957 17,793
Other 2,101 2,732
Gain on sale of property (3,249) (1,327)
Cash effect of changes in working capital 32,650 34,995
-------- --------
CASH PROVIDED FROM OPERATIONS 67,291 68,948
-------- --------
INVESTING ACTIVITIES:
Property purchases (12,794) (10,050)
Proceeds from property sales 7,456 3,610
Net cash paid for acquisition of business (10,255) (2,574)
Deposits and other (689) 274
-------- --------
CASH USED IN INVESTING ACTIVITIES (16,282) (8,740)
-------- --------
FINANCING ACTIVITIES:
Borrowings and repayments of notes payable - net (21,350)
Repayment of long-term debt (5,714) (11,429)
Proceeds from termination of interest rate swap 2,517 2,038
Purchase of common stock for treasury (9,946) (14,318)
Cash dividends paid (9,154) (9,270)
Exercise of stock options 3,307 3,200
-------- --------
CASH USED IN FINANCING ACTIVITIES (18,990) (51,129)
-------- --------
INCREASE IN CASH $ 32,019 $ 9,079
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