Applied Industrial Technologies Reports Fiscal 2016 Second Quarter Results And Increases Dividend

CLEVELAND, Jan. 28, 2016 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported second quarter fiscal 2016 sales and earnings for the three months ended December 31, 2015.

Net sales for the quarter were $610.3 million, a decrease of 11.8% compared with $691.7 million in the same quarter a year ago. The overall sales decrease for the quarter reflects a 1.8% increase from acquisition-related volume offset by a negative 3.1% foreign currency translation impact and a 10.5% decrease in core underlying operations. This 10.5% decrease consists of a 3.8% decline attributable to sales in traditional core operations and a 6.7% decline attributable to sales by the upstream oil and gas subsidiaries. Net income for the quarter was $23.9 million, or $0.61 per share, compared with $29.7 million, or $0.72 per share, in the second quarter of fiscal 2015.

For the six months ended December 31, 2015, sales decreased 10.2% to $1.25 billion from $1.39 billion in the same period last year. Net income was $48.2 million, or $1.22 per share, compared to $58.8 million, or $1.41 per share, last year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "In our second quarter, we experienced a continuation of the economic and market headwinds that have been affecting our business, including reduced demand in oil and gas and other industrial end markets, as well as the negative impact of foreign currency translation. We will continue our disciplined approach to controlling costs and driving improved efficiencies across our business.

"Based on the current industrial economic environment and continued weakness in some of our served markets, we are revising our full-year guidance to include earnings per share between $2.45 and $2.60 per share on a sales decrease of 8% to 10%.

"We remain fully committed to generating shareholder value in any economic cycle through our business performance; expanding our product, service and solution offering; and creating opportunities with current and new customers. In addition, we will continue to optimize our capital allocation through dividends, share repurchases and acquisitions. We are pleased with the recent acquisition of HUB Industrial Supply, an excellent strategic fit that further strengthens and diversifies our Maintenance Supplies & Solutions¿ business."

During the quarter, the Company purchased 250,000 shares of its common stock in open market transactions for $9.8 million. Fiscal year to date, the Company has purchased 701,100 shares for a total of $27.8 million. At December 31, 2015, the Company had remaining authorization to purchase 546,200 additional shares.

In addition, Mr. Schrimsher announced that the Company's Board of Directors declared a $0.01 increase in the quarterly cash dividend to $0.28 per common share. The dividend is payable on February 29, 2016, to shareholders of record on February 16, 2016.  This marks the Company's seventh dividend increase since 2010, representing a cumulative increase of more than 85% in the quarterly dividend over this six-year period. "Increasing our dividend demonstrates confidence in our ongoing cash generation and profitable growth strategies, as well as our steadfast commitment to increasing shareholder value."

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 28. Neil A. Schrimsher - President & CEO, and Mark O. Eisele - CFO will discuss the Company's performance. To join the call, dial 1-800-931-6428 or 1-212-231-2913 (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 1-800-633-8625 or 1-402-977-9141 (International) using passcode 21802812.

Founded in 1923, 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. For more information, visit 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," "will," and derivative or 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.

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,  
    2015     2014     2015     2014    
Net Sales $   610,346   $   691,702   $   1,252,250   $   1,394,027    
Cost of sales     437,179       495,989       898,071       1,003,382    
Gross Profit     173,167       195,713       354,179       390,645    
Selling, distribution and administrative,          
  including depreciation     134,805       148,906       274,791       297,673    
Operating Income     38,362       46,807       79,388       92,972    
Interest expense, net     2,158       1,955       4,345       3,617    
Other expense, net     55       380       1,059       624    
Income Before Income Taxes     36,149       44,472       73,984       88,731    
Income Tax Expense     12,202       14,765       25,746       29,902    
Net Income $   23,947   $   29,707   $   48,238   $   58,829    
Net Income Per Share - Basic $   0.61   $   0.72   $   1.22   $   1.42    
Net Income Per Share - Diluted $   0.61   $   0.72   $   1.22   $   1.41    
Average Shares Outstanding - Basic     39,262       41,228       39,437       41,348    
Average Shares Outstanding - Diluted     39,485       41,533       39,661       41,678    
       

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.

(2)  On August 3, 2015, the Company acquired substantially all of the net assets of Atlantic Fasteners, a distributor of C-Class consumables including industrial fasteners and related industrial supplies in Agawam, MA for a purchase price of $12,500.  The financial results of the operations acquired have been included in the Service Center Based Distribution Segment as of the acquisition date.

On October 1, 2015, the Company acquired substantially all of the net assets of S.G. Morris Co., a distributor of hydraulic components throughout Ohio, Western Pennsylvania and West Virginia for a purchase price of $14,500. The financial results of the operations acquired have been included in the Fluid Power Businesses Segment as of the acquisition date.

(3)  In November 2015, the FASB issued its final standard for the balance sheet classification of deferred taxes.  The amendments in this standard require that deferred tax assets and liabilities be classified as noncurrent in the balance sheet.  This update is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted.  The Company has early adopted this standard in the second quarter of fiscal 2016 and has applied the new standard retrospectively to the prior period presented in the Condensed Consolidated Balance Sheets.  The impact of this change in accounting principle on balances previously reported as of June 30, 2015 was to decrease other current assets $13.3 million, increase other assets $10.9 million and decrease other liabilities $2.4 million.
               
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Amounts in thousands)  
               
               
               
        December 31, 2015   June 30, 2015  
           
               
Assets    
  Cash and cash equivalents   $   55,634     $   69,470    
  Accounts receivable, less allowances of $11,894 and $10,621     329,287         376,305    
  Inventories       359,726         362,419    
  Other current assets         36,177         37,816    
    Total current assets       780,824         846,010    
  Property, net       106,470         104,447    
  Goodwill        249,267         254,406    
  Intangibles, net       185,009         198,828    
  Other assets         28,825         28,865    
Total Assets     $   1,350,395     $   1,432,556    
         
Liabilities          
  Accounts payable   $   114,824     $   179,825    
  Current portion of long-term debt       3,350         3,349    
  Other accrued liabilities       103,200         126,898    
    Total current liabilities       221,374         310,072    
  Long-term debt         363,640         317,646    
  Other liabilities         57,814         63,510    
Total Liabilities         642,828         691,228    
Shareholders' Equity       707,567         741,328    
Total Liabilities and Shareholders' Equity $   1,350,395     $   1,432,556    
     

 
           
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS  
 (In thousands)  
           
 
  Six Months Ended December 31,  
   
      2015       2014    
 
Cash Flows from Operating Activities  
Net income   $   48,238     $   58,829    
Adjustments to reconcile net income to net cash provided  
  by operating activities:  
  Depreciation and amortization of property       8,010         8,331    
  Amortization of intangibles       12,325         13,059    
  Amortization of stock appreciation rights and options       939         825    
  Loss (gain) on sale of property       51         (4 )  
  Other share-based compensation expense       954         679    
  Changes in assets and liabilities, net of acquisitions       (39,090 )       (80,863 )  
  Other, net       1,516         317    
Net Cash provided by Operating Activities       32,943         1,173    
Cash Flows from Investing Activities  
  Property purchases       (5,737 )       (7,806 )  
  Proceeds from property sales       194         187    
  Acquisition of businesses, net of cash acquired       (23,250 )       (165,646 )  
Net Cash used in Investing Activities     (28,793 )     (173,265 )  
Cash Flows from Financing Activities  
  Net borrowings under revolving credit facility     18,000       10,000    
  Long-term debt borrowings     125,000       170,241    
  Long-term debt repayments     (97,006 )     (1,597 )  
  Purchases of treasury shares     (27,767 )     (21,849 )  
  Dividends paid     (21,369 )     (20,742 )  
  Excess tax benefits from share-based compensation     49       906    
  Acquisition holdback payments       (10,614 )       (287 )  
  Exercise of stock appreciation rights and options       264         120    
Net Cash (used in) provided by Financing Activities     (13,443 )     136,792    
Effect of Exchange Rate Changes on Cash     (4,543 )     (2,705 )  
Decrease in cash and cash equivalents       (13,836 )       (38,005 )  
Cash and cash equivalents at beginning of period       69,470         71,189    
Cash and Cash Equivalents at End of Period   $   55,634     $   33,184    
 

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