•Fourth Quarter Net Sales of $895.9 Million Up 23.6% YoY; Up 19.8% on an Organic Basis
•Fourth Quarter Net Income of $59.2 Million, or $1.51 Per Share; EBITDA of $94.8 Million
•Full-Year Net Sales of $3.2 Billion Down 0.3% YoY; Down 1.8% on an Organic Daily Basis
•Full-Year Net Income of $144.8 Million, or $3.68 Per Share
•Full-Year Adjusted Net Income of $186.4 Million, or $4.74 Per Share
•Full-Year Operating Cash Flow of $241.7 Million; Free Cash Flow of $225.8 Million
CLEVELAND, OHIO (August 17, 2021) - Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, today reported results for its fiscal 2021 fourth quarter and full year ended June 30, 2021.
Net sales for the quarter increased 23.6% to $895.9 million from $725.1 million in the prior year. The change includes a 2.1% increase from acquisitions and a 1.7% increase from foreign currency translation. Excluding these factors, sales increased 19.8% on an organic basis with similar increases reported across both the Service Center segment and Fluid Power & Flow Control segment. The Company reported net income of $59.2 million, or $1.51 per share, and EBITDA of $94.8 million. Results include a LIFO layer liquidation benefit, which favorably impacted EPS by $0.07 and gross profit by $3.7 million on a net basis during the quarter.
For the twelve months ended June 30, 2021, sales were $3.2 billion, a decrease of 0.3% compared with the prior year, or down 1.8% on an organic daily basis. Net income was $144.8 million or $3.68 per share on a reported basis. Non-GAAP adjusted net income was $186.4 million, or $4.74 per share. Full-year operating cash flow was $241.7 million, while free cash flow was $225.8 million or 121.1% of adjusted net income.
Neil A. Schrimsher, Applied's President & Chief Executive Officer, commented, 'We ended fiscal 2021 on a strong note with fourth quarter performance exceeding our expectations and achieving record quarterly earnings. Underlying demand continued to strengthen across both segments during the quarter reflecting sustained recovery in our core end markets and momentum generated from our internal growth initiatives. We are managing inflation well and controlling costs, while benefiting from productivity enhancements. Overall, I am extremely proud of what we accomplished during a challenging year. Our ability to deliver strong operational and financial performance while remaining fully invested in our long-term strategy during an unprecedented period is a testament to the strength of our Applied team, business model, and industry position.'
Mr. Schrimsher added, 'Entering early fiscal 2022, we are off to a positive start with organic sales through mid-August up by a high-teens percent over the prior year, and customer indications signaling sustained demand momentum. Our balance sheet is in a solid position, and we see favorable earnings potential beyond cycle fundamentals as we leverage our technical industry position and expanding addressable market. This includes supporting more of our customers' industrial technology and operational requirements through our cross-selling efforts, as well as the expansion of faster growing and higher margin industrial solutions. While industry-wide supply chain constraints and macro uncertainty remain,
we have multiple internal opportunities to drive solid earnings growth and stronger returns on capital in fiscal 2022 and beyond.'
Fiscal 2022 Guidance
The Company is reinstating its practice of providing formal full-year guidance. For the fiscal year ending June 30, 2022, the Company is introducing EPS guidance in the range of $5.00 to $5.40 based on sales growth of 8% to 10% including 7% to 9% on an organic basis, as well as EBITDA margins of 9.7% to 9.9%. Guidance assumptions include a steady industrial demand environment relative to current trends, ongoing inflationary headwinds including greater LIFO expense, and lingering uncertainty related to the COVID-19 pandemic. Guidance does not assume contribution from potential future acquisitions.
Share Repurchases
During the quarter, the Company purchased 400,000 shares of its common stock in open market transactions for $40.1 million. At June 30, 2021, the Company had remaining authorization to purchase approximately 465,000 additional shares.
Conference Call Information
Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on August 17, 2021. Neil A. Schrimsher - President & CEO, and David K. Wells - CFO will discuss the Company's performance. A supplemental investor presentation detailing latest quarter results and the Company's outlook is available for reference on the investor relations portion of the Company's website at www.applied.com.To join the call, dial 877-311-4351 (toll free) or 614-999-9139 (for International callers) using conference ID 8056208. 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 8056208.
About Applied®
Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO and OEM end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. 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 'see,' 'expect,' 'will,' 'guidance,' 'assume', 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, the effects of the health crisis associated with the COVID-19 pandemic on our business operations, results of operations, and financial condition, and other risk factors identified in Applied's most recent periodic report and other filings made with the Securities and Exchange Commission, many of which risks are amplified by circumstances arising out of the COVID-19 pandemic. 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
Ryan D. Cieslak
Director - Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended June 30,
Year Ended June 30,
2021
2020
2021
2020
Net Sales
$895,888
$725,076
$3,235,919
$3,245,652
Cost of sales
632,904
516,786
2,300,395
2,307,916
Gross Profit
262,984
208,290
935,524
937,736
Selling, distribution and administrative expense, including depreciation
181,883
161,262
680,542
717,747
Impairment expense
-
-
49,528
131,000
Operating Income
81,101
47,028
205,454
88,989
Interest expense, net
7,673
8,088
30,592
36,535
Other income, net
(454)
(1,139)
(2,200)
(2,782)
Income Before Income Taxes
73,882
40,079
177,062
55,236
Income Tax Expense
14,638
10,090
32,305
31,194
Net Income
$59,244
$29,989
$144,757
$24,042
Net Income Per Share - Basic
$1.53
$0.78
$3.73
$0.62
Net Income Per Share - Diluted
$1.51
$0.77
$3.68
$0.62
Average Shares Outstanding - Basic
38,692
38,691
38,758
38,658
Average Shares Outstanding - Diluted
39,347
38,988
39,296
38,999
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.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30,
June 30,
2021
2020
Assets
Cash and cash equivalents
$
257,745
$
268,551
Accounts receivable, net
516,322
449,998
Inventories
362,547
389,150
Other current assets
59,961
52,070
Total current assets
1,196,575
1,159,769
Property, net
115,589
121,901
Operating lease assets, net
87,111
90,636
Intangibles, net
279,628
343,215
Goodwill
560,077
540,594
Other assets
32,827
27,436
Total Assets
$
2,271,807
$
2,283,551
Liabilities
Accounts payable
$
208,162
$
186,270
Current portion of long-term debt
43,525
78,646
Other accrued liabilities
176,013
161,167
Total current liabilities
427,700
426,083
Long-term debt
784,855
855,143
Other liabilities
126,706
158,783
Total Liabilities
1,339,261
1,440,009
Shareholders' Equity
932,546
843,542
Total Liabilities and Shareholders' Equity
$
2,271,807
$
2,283,551
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
Year Ended June 30,
2021
2020
Cash Flows from Operating Activities
Net income
$
144,757
$
24,042
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property
20,780
21,196
Amortization of intangibles
34,365
41,553
Impairment expense
49,528
131,000
Amortization of stock appreciation rights and options
2,526
2,954
Other share-based compensation expense
6,454
4,000
Changes in assets and liabilities, net of acquisitions
6,381
73,720
Other, net
(23,094)
(1,751)
Net Cash provided by Operating Activities
241,697
296,714
Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired
(30,230)
(37,237)
Capital expenditures
(15,852)
(20,115)
Proceeds from property sales
1,152
1,948
Net Cash used in Investing Activities
(44,930)
(55,404)
Cash Flows from Financing Activities
Long-term debt borrowings
26,000
25,000
Long-term debt repayments
(131,883)
(49,553)
Interest rate swap settlement payments
(3,737)
-
Payment of debt issuance costs
(399)
(95)
Purchases of treasury shares
(40,089)
-
Dividends paid
(50,664)
(48,873)
Acquisition holdback payments
(2,345)
(2,440)
Taxes paid for shares withheld for equity awards
(10,083)
(2,607)
Exercise of stock appreciation rights and options
163
330
Net Cash used in Financing Activities
(213,037)
(78,238)
Effect of Exchange Rate Changes on Cash
5,464
(2,740)
Increase in cash and cash equivalents
(10,806)
160,332
Cash and Cash Equivalents at Beginning of Period
268,551
108,219
Cash and Cash Equivalents at End of Period
$
257,745
$
268,551
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
The Company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting of non-GAAP financial measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review company financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Reconciliation of Net income and Net income per share, GAAP financial measures, with Adjusted Net income and
Adjusted Net income per share, non-GAAP financial measures:
Three Months Ended June 30, 2020
Pre-tax
Tax Effect
Net of Tax
Per Share
Diluted Impact
Tax Rate
Net income and net income per share
$40,079
$10,090
$29,989
$0.77
25.2
%
Non-routine income
1,540
388
1,152
0.03
25.2
%
Adjusted net income and net income per share
$41,619
$10,478
$31,141
$0.80
25.2
%
Year Ended June 30, 2021
Pre-tax
Tax Effect
Net of Tax
Per Share
Diluted Impact
Tax Rate
Net income and net income per share
$177,062
$32,305
$144,757
$3.68
18.2
%
Intangible and other impairment
49,528
11,769
37,759
0.96
23.8
%
Non-routine costs
7,772
1,847
5,925
0.15
23.8
%
Non-routine income
(2,609)
(613)
(1,996)
(0.05)
23.5
%
Adjusted net income and net income per share
$231,753
$45,308
$186,445
$4.74
19.6
%
Year Ended June 30, 2020
Pre-tax
Tax Effect
Net of Tax
Per Share
Diluted Impact
Tax Rate
Net income and net income per share
$55,236
$31,194
$24,042
$0.62
56.5
%
Impairment expense
131,000
12,200
118,800
3.04
9.3
%
Non-routine costs
8,992
2,135
6,857
0.18
23.7
%
Non-routine tax benefit
-
1,010
(1,010)
(0.03)
N/M
Adjusted net income and net income per share
$195,228
$46,539
$148,689
$3.81
23.8
%
Reconciliation of Net Income, a GAAP financial measure, to EBITDA, a non-GAAP financial measure:
Three Months Ended June 30,
Year Ended
June 30,
2021
2020
2021
2020
Net Income
$
59,244
$
29,989
$
144,757
$
24,042
Interest expense, net
7,673
8,088
30,592
36,535
Income tax expense
14,638
10,090
32,305
31,194
Depreciation and amortization of property
5,139
5,199
20,780
21,196
Amortization of intangibles
8,127
9,882
34,365
40,499
EBITDA
$
94,821
$
63,248
$
262,799
$
153,466
Impairment expense
-
-
49,528
131,000
Non-routine costs
-
1,540
7,772
8,992
Non-routine income
-
-
(2,609)
-
Adjusted EBITDA
$
94,821
$
64,788
$
317,490
$
293,458
The Company defines EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization, a non-GAAP financial measure. Adjusted EBITDA excludes items that may not be indicative of core operating results, a non-GAAP financial measure.
Reconciliation of Net Cash provided by Operating activities, a GAAP financial measure, to Free Cash Flow, a non-GAAP financial measure:
Three Months Ended
June 30,
Year Ended
June 30,
2021
2020
2021
2020
Net Cash provided by Operating Activities
$
38,288
$
127,090
$
241,697
$
296,714
Capital expenditures
(3,675)
(3,892)
(15,852)
(20,115)
Free Cash Flow
$
34,613
$
123,198
$
225,845
$
276,599
Free cash flow is defined as net cash provided by operating activities less property purchases, a non-GAAP financial measure.
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Applied Industrial Technologies Inc. published this content on 17 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2021 13:33:10 UTC.
Applied Industrial Technologies, Inc. is a value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. The Companyâs segments include Service Center Based Distribution and Engineered Solutions. The Service Center Based Distribution segment operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of motion control infrastructure and production equipment. Its products include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses. The Engineered Solutions segment includes its operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies, and engineered flow control products and services.