EXHIBIT 99
APPLIED INDUSTRIAL TECHNOLOGIES REPORTS
94% INCREASE IN SECOND QUARTER EPS,
REVISES FULL YEAR GUIDANCE UPWARD
CLEVELAND, OHIO (JANUARY 14, 2005) - Applied Industrial Technologies (NYSE: AIT)
today reported record earnings for its second quarter and first half ended
December 31, 2004. Applied's net income and earnings per share rose by 94
percent on a sales increase of 12.4 percent for its fiscal 2005 second quarter.
This represents the ninth consecutive quarter in which Applied's per-share
earnings have increased by 25 percent or more.
Net sales for the quarter were $404,139,000 compared with $359,711,000 in the
same period a year ago. Net income for the quarter increased to $9,980,000 from
$5,133,000. Earnings per share increased to $0.33 from $0.17 per share last year
and was consistent with Applied's previous guidance.
(Note: all per-share amounts have been adjusted to reflect a 3-for-2 stock split
paid December 17, 2004.)
For the six months ended December 31, 2004, sales increased 13.4 percent to
$817,265,000 from $720,857,000 in the same period last year. Net income
increased 131 percent to $23,020,000, or $0.76 per share, versus $9,965,000, or
$0.34 per share, last year.
Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh
said, "We were once again pleased with the strength of our quarterly results,
and with our ability to convert sales increases to proportionately higher levels
of profitability. This was a direct result of the continued focus on our core
strategies of profitable sales growth, cost containment and asset management.
"Sales continued strong across all geographic regions, product technologies and
customer industries. Productivity improvements served as an offset to margin
pressures created by inflation in vendor prices, as well as a shift in our
product and customer mix.
"Selling, distribution and administrative expenses for the second quarter stayed
essentially flat compared to last year, even with a sales increase of more than
12 percent. We continued to actively manage our expenses with special attention
paid to discretionary spending, helping to raise our operating margin to 4.3
percent this quarter, compared with 2.6 percent in the same period last year.
"At this point, we believe our fiscal 2005 third quarter sales will be in the
range of $430 to $440 million, with earnings per share of $0.37 to $0.41. Sales
for all of fiscal 2005 are expected in the range of between $1.68 billion and
$1.70 billion. Based on our stronger
sales forecast, we are raising our EPS guidance for the full fiscal year and now
expect to earn $1.55 to $1.62 per share compared to our previous guidance of
$1.43 to $1.57."
Through the first six months of fiscal 2005, the company purchased 357,000
shares of its common stock for $7.2 million. At December 31, 2004, the company
had remaining authorization to repurchase approximately 1,001,000 additional
shares.
Applied will host its second quarter conference call at 11 a.m. on Friday,
January 14. To join in the call, dial 1-800-289-0569 and use passcode 215409.
The call will be conducted by Chairman & CEO David L. Pugh, President & COO Bill
L. Purser and CFO Mark O. Eisele. The call will also be Web cast 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 at 1-888-203-1112
(passcode 215409) from 12:30 p.m. on January 14 through midnight on January 28.
With more than 430 facilities and 4,300 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. For its fiscal year ended June
30, 2004, Applied posted sales of $1.52 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
"expect," "will," "believe," "should" 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 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.
#####
For financial 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.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Thousands, except per share data)
Three Months Ended Six Months Ended
December 31 December 31
----------------------- ------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
NET SALES $ 404,139 $ 359,711 $ 817,265 $ 720,857
Cost of sales 300,191 264,545 603,795 532,214
--------- --------- --------- ---------
GROSS PROFIT 103,948 95,166 213,470 188,643
Selling, distribution, and administrative 86,725 85,916 174,744 170,397
--------- --------- --------- ---------
OPERATING INCOME 17,223 9,250 38,726 18,246
Interest expense, net 1,331 1,405 2,634 2,723
Other (income) expense, net 112 (108) (158) 58
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 15,780 7,953 36,250 15,465
INCOME TAXES 5,800 2,820 13,230 5,500
--------- --------- --------- ---------
NET INCOME $ 9,980 $ 5,133 $ 23,020 $ 9,965
========= ========= ========= =========
NET INCOME PER SHARE - BASIC $ 0.34 $ 0.18 $ 0.78 $ 0.35
========= ========= ========= =========
NET INCOME PER SHARE - DILUTED $ 0.33 $ 0.17 $ 0.76 $ 0.34
========= ========= ========= =========
AVERAGE SHARES OUTSTANDING - BASIC 29,580 28,840 29,409 28,675
========= ========= ========= =========
AVERAGE SHARES OUTSTANDING - DILUTED 30,671 29,455 30,470 29,310
========= ========= ========= =========
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 on periodic physical inventories and the effect of
year-end inventory quantities on LIFO costs.
(2) All share and per share data have been restated to reflect a 3 for 2
stock split effective December 17, 2004.
(3) Other (income) expense, net for the quarters ended December 31, 2004
and 2003 include mark-to-market losses of $534 and $247, respectively,
on a US/Canadian dollar cross currency swap which is not designated as
a hedge.
(4) Certain reclassifications have been made to prior year amounts to be
consistent with presentation in the current year.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amount in Thousands)
<Table>
<Caption>
December 31, 2004 June 30, 2004
----------------- -------------
ASSETS
Cash $ 57,305 $ 69,667
Accounts receivable, less allowances of $6,450 and $6,400 190,904 190,815
Inventories 192,121 159,594
Other current assets 22,684 22,957
-------- --------
Total current assets 463,014 443,033
Property - net 73,561 77,025
Goodwill 50,846 49,852
Other assets 24,978 26,931
-------- --------
TOTAL ASSETS $612,399 $596,841
======== ========
LIABILITIES
Accounts payable $ 74,551 $ 78,767
Other current liabilities 62,717 72,562
-------- --------
Total current liabilities 137,268 151,329
Long-term debt 77,372 77,767
Other liabilities 31,020 28,210
-------- --------
TOTAL LIABILITIES 245,660 257,306
-------- --------
SHAREHOLDERS' EQUITY 366,739 339,535
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $612,399 $596,841
======== ========
</Table>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amount in Thousands)
<Table>
<Caption>
Six Months Ended December 31
--------------------------------
2004 2003
-------- --------
CASH PROVIDED FROM OPERATIONS:
Net income $ 23,020 $ 9,965
Items not requiring cash:
Depreciation and amortization 8,044 8,410
Other 5,097 3,380
Gain on sale of property (531) (89)
Cash effect of changes in working capital (38,331) (28,283)
-------- --------
CASH USED IN OPERATIONS (2,701) (6,617)
-------- --------
INVESTING ACTIVITIES:
Property purchases (3,973) (10,311)
Proceeds from property sales 1,661 594
Net cash paid for acquisition of business (1,285)
Deposits and other (1,095) (693)
-------- --------
CASH USED IN INVESTING ACTIVITIES (3,407) (11,695)
-------- --------
FINANCING ACTIVITIES:
Borrowings and repayments of notes payable - net (2,850)
Change in cash overdrafts (1,563) (6,333)
Purchase of common stock for treasury (7,234) (2,091)
Cash dividends paid (5,539) (4,610)
Exercise of stock options 7,556 3,557
-------- --------
CASH USED IN FINANCING ACTIVITIES (6,780) (12,327)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 526 (39)
-------- --------
DECREASE IN CASH $(12,362) $(30,678)
======== ========
</Table>