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Applied Industrial Technologies Reports Fiscal 2017 Second Quarter Results and Increases Dividend

CLEVELAND, Jan. 26, 2017 (GLOBE NEWSWIRE) -- Applied Industrial Technologies (NYSE:AIT) today reported second quarter fiscal 2017 sales and earnings for the three months ended December 31, 2016.

Net sales for the quarter were $608.1 million, a decrease of 0.4% compared with $610.3 million in the same quarter a year ago. The overall sales decrease for the quarter is impacted by one less selling day which accounts for a 1.6% decline and unfavorable foreign currency translation of 0.5%, partially offset by a 1.3% increase from acquisition-related volume and 0.4% organic growth. Net income for the quarter was $24.1 million, or $0.61 per share, compared with $23.9 million, or $0.61 per share, in the second quarter of fiscal 2016.

For the six months ended December 31, 2016, sales were $1.23 billion, a decrease of 1.5% compared with $1.25 billion in the same period last year. Net income increased to $51.5 million from $48.2 million, and earnings per share increased 7.4% to $1.31 per share from $1.22 per share, last year.

Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “Midway through our fiscal year, we are pleased with the continued operational enhancements and efficiencies throughout our organization. We are also encouraged by the improving sales per day developments and remain focused on expanding our capabilities with new and existing customers.”

Outlook

“Entering the second half of our fiscal year, we are narrowing our earnings per share and sales guidance by raising the lower-end of the ranges,” he added. The updated full-year fiscal 2017 earnings per share guidance is between $2.50 and $2.60 per share on a sales change of negative 2.0% to up 1.0%.

Dividend

The Company’s Board of Directors increased the quarterly cash dividend to $0.29 per common share, representing the eighth dividend increase since 2010 and a cumulative increase of more than 70% in the quarterly dividend over this period. The dividend is payable on February 28, 2017, to shareholders of record on February 15, 2017.

Mr. Schrimsher concluded, “We are committed to driving the growth and continued success of Applied, generating shareholder value through our business performance, strategic acquisitions and returning cash via share buybacks and dividends.”

Share Repurchases

During the quarter, the Company purchased 52,500 shares of its common stock in open market transactions for $2.4 million. Fiscal year to date, the Company has purchased 117,500 shares for a total of $5.5 million. At December 31, 2016, the Company had remaining authorization to purchase 1,495,000 additional shares.

Conference Call Information

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 26, 2017. Neil A. Schrimsher – President & CEO, and Mark O. Eisele – CFO will discuss the Company's performance. To join the call, dial 1-800-630-0591 or 1-303-223-4384 (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 1-800-633-8284 or 1-402-977-9140 (International) using passcode 21841674.

About Applied Industrial Technologies

Founded in 1923, Applied Industrial Technologies is a leading industrial distributor 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 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.

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,
2016 2015 2016 2015
Net Sales$608,123 $610,346$1,232,971 $1,252,250
Cost of sales 435,667 437,179 882,185 898,071
Gross Profit 172,456 173,167 350,786 354,179
Selling, distribution and administrative,
including depreciation 134,800 134,805 269,912 274,791
Operating Income 37,656 38,362 80,874 79,388
Interest expense, net 2,100 2,158 4,246 4,345
Other expense, net (211) 55 (609) 1,059
Income Before Income Taxes 35,767 36,149 77,237 73,984
Income Tax Expense 11,682 12,202 25,781 25,746
Net Income$24,085 $23,947$51,456 $48,238
Net Income Per Share - Basic$0.62 $0.61$1.32 $1.22
Net Income Per Share - Diluted$0.61 $0.61$1.31 $1.22
Average Shares Outstanding - Basic 38,985 39,262 39,015 39,437
Average Shares Outstanding - Diluted 39,371 39,485 39,352 39,661

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 2017, we early adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. As part of this adoption, the condensed statement of consolidated cash flows for the six months ended December 31, 2015 has been restated resulting in an increase in net cash provided by operating activities and net cash used in financing activities of $0.9 million.

(3) During the first quarter of fiscal 2017, we adopted Accounting Standards Update No. 2015-03, simplifying the presentation of debt issue costs. The retrospective adoption of this standard resulted in the reclassification as of June 30, 2016 of unamortized debt issue costs of $0.1 million from other current assets to a reduction of current portion of long-term debt and $0.4 million from other assets to a reduction of long-term debt on the Company's condensed consolidated balance sheets.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
December 31,
2016
June 30,
2016
Assets
Cash and cash equivalents $ 62,857 $ 59,861
Accounts receivable, less allowances of $10,583 and $11,034 336,716 347,857
Inventories 349,020 338,221
Other current assets 33,839 35,582
Total current assets 782,432 781,521
Property, net 105,279 107,765
Goodwill 203,963 202,700
Intangibles, net 173,460 191,240
Deferred tax assets 12,424 12,277
Other assets 16,958 16,522
Total Assets $ 1,294,516 $ 1,312,025
Liabilities
Accounts payable $ 137,499 $ 148,543
Current portion of long-term debt 3,248 3,247
Other accrued liabilities 96,475 122,493
Total current liabilities 237,222 274,283
Long-term debt 323,940 324,583
Other liabilities 51,945 55,243
Total Liabilities 613,107 654,109
Shareholders' Equity 681,409 657,916
Total Liabilities and Shareholders' Equity$ 1,294,516 $ 1,312,025

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
Six Months Ended
December 31,
2016 2015
Cash Flows from Operating Activities
Net income $ 51,456 $ 48,238
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property 7,487 8,010
Amortization of intangibles 12,331 12,325
Amortization of stock appreciation rights and options 1,180 939
(Gain) loss on sale of property (1,581) 51
Other share-based compensation expense 1,278 954
Changes in assets and liabilities, net of acquisitions (27,252) (38,187)
Other, net 759 1,516
Net Cash provided by Operating Activities 45,658 33,846
Cash Flows from Investing Activities
Property purchases (6,710) (5,737)
Proceeds from property sales 2,648 194
Acquisition of businesses, net of cash acquired - (23,250)
Net Cash used in Investing Activities (4,062) (28,793)
Cash Flows from Financing Activities
Net borrowings under revolving credit facility 1,000 18,000
Long-term debt borrowings - 125,000
Long-term debt repayments (1,695) (97,006)
Purchases of treasury shares (5,478) (27,767)
Dividends paid (21,893) (21,369)
Excess tax benefits from share-based compensation - 49
Acquisition holdback payments (7,069) (10,614)
Taxes paid for shares withheld for equity awards (2,081) (903)
Exercise of stock appreciation rights and options 195 264
Net Cash used in Financing Activities (37,021) (14,346)
Effect of Exchange Rate Changes on Cash (1,579) (4,543)
Increase (decrease) in cash and cash equivalents 2,996 (13,836)
Cash and cash equivalents at beginning of period 59,861 69,470
Cash and Cash Equivalents at End of Period $ 62,857 $ 55,634

CONTACT INFORMATION INVESTOR RELATIONS Mark O. Eisele Vice President – Chief Financial Officer & Treasurer 216-426-4417 CORPORATE & MEDIA RELATIONS Julie A. Kho Manager, Public Relations 216-426-4483

Source:Applied Industrial Technologies, Inc