Market Overview

Applied Industrial Technologies Reports Fiscal 2018 Second Quarter Results

Share:
  • Net Sales of $667.2 Million Up 9.7%
  • Net Income of $31.0 Million Up 28.5%; EPS of $0.79 Up 29.5%
  • Raises Full-year Guidance
  • Increases Quarterly Dividend to $0.30 Per Share

CLEVELAND, Jan. 25, 2018 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported second quarter fiscal 2018 sales and earnings for the three months ended December 31, 2017.

Net sales for the quarter grew 9.7% to $667.2 million from $608.1 million in the same quarter a year ago. The overall sales increase for the quarter reflects a 0.9% increase from acquisition-related volume and favorable foreign currency translation of 0.8%. Organic growth, excluding these factors, was 8.0% in the quarter. Net income for the quarter increased 28.5% to $31.0 million from $24.1 million, and earnings per share rose 29.5% to $0.79 per share, compared with $0.61 per share in the prior year quarter. Year-over-year EPS growth included a $0.02 per share net tax benefit primarily attributed to the combined impact of deferred tax remeasurement, transition tax, and tax rate reduction resulting from the recently enacted U.S. federal tax reform. 

For the six months ended December 31, 2017, sales were $1.35 billion, an increase of 9.3% compared with $1.23 billion in the same period last year. Net income increased to $64.7 million from $51.5 million, and earnings per share increased 26.1% to $1.65 per share from $1.31 per share, last year.

Commenting on the results, Applied's President & Chief Executive Officer Neil A. Schrimsher said, "We are off to an exciting start to the calendar year and our fiscal year second-half, celebrating 95 years of leadership in industrial distribution and further strengthening our position with the definitive agreement to acquire specialty flow control provider FCX Performance, Inc. Our solid second quarter results reflect broad-based execution across our business groups and a productive economic market environment."

Outlook

"In light of recent performance, U.S. tax reform and continued favorable industrial markets, we are raising our full-year earnings per share guidance to a range between $3.40 and $3.50 per share, on sales which are anticipated to be 6% to 7% higher year-over-year. Revised guidance includes approximately $0.11 EPS benefit from U.S. tax reform."

The Company also announced that the U.S. Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act with respect to the pending acquisition of FCX Performance, Inc. The proposed acquisition, announced on January 9, 2018, is expected to close on January 31, 2018.  Mr. Schrimsher added, "We will provide further guidance to include the partial year impact of results from the acquisition of FCX in conjunction with announcing the close of the transaction."

Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.30 per common share, an increase of $0.01 per common share over the prior quarter. The dividend is payable on February 28, 2018, to shareholders of record on February 15, 2018.

Mr. Schrimsher concluded, "We continue to strengthen our differentiated industrial distribution capabilities, including our critical core products offering, expanding value-added services, leadership in engineered fluid power solutions, growing geographic reach, and channels to market. Applied is well-positioned as the technical MRO distribution leader, and we are committed to generating profitable growth and enhancing value for all our stakeholders."

Share Repurchases

During the quarter, the Company purchased 145,800 shares of its common stock in open market transactions at an average share price of $61.84 for a total of $9.0 million. Fiscal year to date, the Company has purchased 393,300 shares for a total of $22.8 million. At December 31, 2017, the Company had remaining authorization to purchase 1,056,700 additional shares.

Conference Call Information

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 25. Neil A. Schrimsher – President & CEO, and David K. Wells – CFO will discuss the Company's performance. To join the call, dial 877-311-4351 (toll free) or 614-999-9139 (International) using conference ID 6863328. 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 855-859-2056 or 800-585-8367 (both toll free), or 404-537-3406 (International) using conference ID 6863328.

About Applied

Founded in 1923, Applied Industrial Technologies is a leading distributor of bearings, power transmission products, fluid power components, and other industrial supplies, serving 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 storeroom services 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," "anticipate," "expect," "will" and derivative or similar expressions. All forward-looking statements are based on current expectations regarding important risk factors, including the ability of Applied and FCX Performance, Inc. to close the pending transaction, 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. 

CONTACT INFORMATION

INVESTOR RELATIONS
David K. Wells
Vice President – Chief Financial Officer & Treasurer
216-426-4755

CORPORATE & MEDIA RELATIONS
Julie A. Kho
Manager, Public Relations
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,
    2017     2016     2017     2016  
Net Sales $   667,187   $   608,123   $   1,347,888   $   1,232,971  
Cost of sales     478,827       435,667       967,104       882,185  
Gross Profit     188,360       172,456       380,784       350,786  
Selling, distribution and administrative,        
  including depreciation     141,645       134,600       282,232       269,511  
Operating Income     46,715       37,856       98,552       81,275  
Interest expense, net     2,139       2,100       4,305       4,246  
Other income, net     (20 )     (11 )     (731 )     (208 )
Income Loss Before Income Taxes     44,596       35,767       94,978       77,237  
Income Tax Expense     13,646       11,682       30,307       25,781  
Net Income  $   30,950   $   24,085   $   64,671   $   51,456  
Net Income Per Share - Basic $   0.80   $   0.62   $   1.67   $   1.32  
Net Income Per Share - Diluted $   0.79   $   0.61   $   1.65   $   1.31  
Average Shares Outstanding - Basic     38,717       38,985       38,824       39,015  
Average Shares Outstanding - Diluted     39,206       39,371       39,270       39,352  
       
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) During the first quarter of fiscal 2018, we early adopted Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As a result of this adoption, the condensed statement of consolidated income for the three months and six months ended December 31, 2016 has been restated resulting in a decrease in selling, distribution and administrative expenses and increasing other income, net of $0.2 million and $0.4 million respectively; resulting in an increase to operating income for the same am
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