- Fourth Quarter Net Sales of $1.1 Billion Up 18.5% YoY; Up 18.7%
on an Organic Basis
- Fourth Quarter Net Income of $79.1 Million; EPS of $2.02 Up
34.4% YoY
- Fourth Quarter EBITDA of $120.0 Million Up 26.5% YoY
- Full-Year Net Sales of $3.8 Billion Up 17.8% YoY; Up 16.6% on
an Organic Basis
- Full-Year Net Income of $257.4 Million; EPS of $6.58 Up 38.8%
YoY from Prior-Year Adjusted EPS
- Full-Year EBITDA of $409.6 Million Up 29.0% YoY from Prior-Year
Adjusted EBITDA
- New 1.5 Million Share Repurchase Program Announced
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 2022 fourth quarter and full year ended June
30, 2022.
Net sales for the quarter increased 18.5% to $1.1 billion from
$895.9 million in the prior year. The change includes a 0.3%
increase from acquisitions, partially offset by a negative 0.5%
impact from foreign currency translation. Excluding these factors,
sales increased 18.7% on an organic basis reflecting a 21.0%
increase in the Service Center segment and a 14.0% increase in the
Fluid Power & Flow Control segment. The Company reported net
income of $79.1 million, or $2.02 per share, and EBITDA of
$120.0 million. On a pre-tax basis, results include $10.8 million
($0.22 after tax per share) of LIFO expense compared to $3.7
million ($0.07 after tax per share) of LIFO income in the
prior-year period.
For the twelve months ended June 30, 2022, sales of $3.8 billion
increased 17.8% compared with the prior year, or 16.6% on an
organic basis. Net income was $257.4 million, or $6.58 per share,
and EBITDA was $409.6 million. On a pre-tax basis, full-year
results include $26.5 million ($0.53 after tax per share) of LIFO
expense compared to $0.9 million ($0.02 after tax per share) of
LIFO income in the prior-year period.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “We ended fiscal 2022 on a strong note with
sales, EBITDA, and EPS all hitting new quarterly records. Sales
growth accelerated during the quarter including strong performance
in June, while gross margin execution and solid operating leverage
drove strong EBITDA margin expansion and over 30% EPS growth
despite ongoing inflationary and supply chain pressures. Overall,
our consistent outperformance over the past year is a reflection of
our talented associates, differentiated industry position, and
operational discipline. I am extremely proud of our team and what
we accomplished in fiscal 2022.”
Mr. Schrimsher added, “As we move into fiscal 2023, organic
sales are up by a mid-teens percent through early August compared
to prior-year levels, while order and backlog trends remain
positive. We are mindful of greater economic uncertainty that has
manifested in recent months, and know how to execute if industrial
activity were to slow. That said, we have yet to see any meaningful
signs of slowing and remain constructive considering structural
demand tailwinds within our core end markets and channels, as well
as momentum from our cross-selling initiatives. Further, our
critical higher-engineered solutions, technical service
reliability, and expanding automation platform are driving
incremental growth opportunities as customers execute required
investments and structural improvements throughout their
operations. Combined with a healthy balance sheet supporting
accretive M&A, we have multiple self-help opportunities to
sustain favorable earnings growth and strong returns for all
stakeholders going forward.”
Fiscal 2023 Guidance and Updated Intermediate Financial
Objectives Today the Company is introducing fiscal 2023 EPS
guidance in the range of $6.65 to $7.30 based on sales growth of 3%
to 7% and EBITDA margins of 10.8% to 11.1%. Guidance incorporates
current economic uncertainty, as well as ongoing inflationary and
supply chain headwinds. Guidance does not assume contribution from
potential future acquisitions.
In addition, the Company is establishing new intermediate
financial objectives, and now targets sales of over $5 billion and
EBITDA margins of over 12%. The Company expects to achieve these
targets within the next five years or sooner depending on various
factors including the trajectory of broader macro dynamics in
coming years.
Mr. Schrimsher concluded, “Given our strong progress and
execution in recent years, we are on track to achieve our prior
EBITDA margin goal of 11% sooner than expected. We see significant
potential to further scale our industry position and EBITDA margin
profile in coming years given our multi-faceted strategy focused on
enhancing and leveraging our core service center operations, while
expanding across higher-engineered solutions tied to advanced
automation, industrial power, and process technologies. We expect
this strategy to present many new and relevant growth catalysts,
and drive an ongoing evolution at Applied that will further
solidify the Company as the premier technical provider of customer
return-enhancing solutions and application expertise across
critical industrial infrastructure.”
New Share Repurchase Program Authorization Today the
Company announced that its Board of Directors authorized a new
share buyback program to repurchase up to 1.5 million shares of the
Company’s common stock. The updated plan replaces the prior share
repurchase plan. Shares may be purchased in open market and
negotiated transactions.
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on August 11, 2022. 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 877-210-1510 (toll free) or
212-231-2905 (for International callers) using conference ID
22019772. 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 800-633-8625 or 402-977-9141 (International) using
conference ID 22019772.
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 “expect,” “will,” “targets,” “see,” “guidance,”
“assume”, “objectives,” 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 (such as the inflationary environment and
supply chain strains), 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.
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,
2022
2021
2022
2021
Net Sales
$
1,061,459
$
895,888
$
3,810,676
$
3,235,919
Cost of sales
754,832
632,904
2,703,760
2,300,395
Gross Profit
306,627
262,984
1,106,916
935,524
Selling, distribution and administrative expense, including
depreciation
197,403
181,883
749,058
680,542
Impairment expense
-
-
-
49,528
Operating Income
109,224
81,101
357,858
205,454
Interest expense, net
6,014
7,673
26,263
30,592
Other expense (income), net
2,517
(454
)
1,805
(2,200
)
Income Before Income Taxes
100,693
73,882
329,790
177,062
Income Tax Expense
21,580
14,638
72,376
32,305
Net Income
$
79,113
$
59,244
$
257,414
$
144,757
Net Income Per Share - Basic
$
2.06
$
1.53
$
6.69
$
3.73
Net Income Per Share - Diluted
$
2.02
$
1.51
$
6.58
$
3.68
Average Shares Outstanding - Basic
38,471
38,692
38,471
38,758
Average Shares Outstanding - Diluted
39,101
39,347
39,105
39,296
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, 2022 June 30, 2021
Assets Cash and
cash equivalents
$
184,474
$
257,745
Accounts receivable, net
656,429
516,322
Inventories
449,821
362,547
Other current assets
68,805
59,961
Total current assets
1,359,529
1,196,575
Property, net
111,896
115,589
Operating lease assets, net
108,052
87,111
Intangibles, net
250,590
279,628
Goodwill
563,205
560,077
Other assets
59,316
32,827
Total Assets
$
2,452,588
$
2,271,807
Liabilities Accounts
payable
$
259,463
$
208,162
Current portion of long-term debt
40,174
43,525
Other accrued liabilities
199,990
176,013
Total current liabilities
499,627
427,700
Long-term debt
649,150
784,855
Other liabilities
154,456
126,706
Total Liabilities
1,303,233
1,339,261
Shareholders' Equity
1,149,355
932,546
Total Liabilities and Shareholders' Equity
$
2,452,588
$
2,271,807
APPLIED INDUSTRIAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
Year Ended June 30,
2022
2021
Cash Flows from Operating
Activities Net income
$
257,414
$
144,757
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
21,676
20,780
Amortization of intangibles
31,879
34,365
Impairment expense
-
49,528
Amortization of stock appreciation rights and options
3,284
2,526
Other share-based compensation expense
8,558
6,454
Changes in assets and liabilities, net of acquisitions
(151,858
)
6,381
Other, net
16,617
(23,094
)
Net Cash provided by Operating Activities
187,570
241,697
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(6,964
)
(30,230
)
Capital expenditures
(18,124
)
(15,852
)
Proceeds from property sales
1,107
1,152
Other
(11,677
)
-
Net Cash used in Investing Activities
(35,658
)
(44,930
)
Cash Flows from Financing
Activities Net borrowings under revolving credit
facility
410,592
-
Borrowings under long-term debt facilities
-
26,000
Long-term debt repayments
(550,493
)
(131,883
)
Interest rate swap settlement payments
(5,703
)
(3,737
)
Payment of debt issuance costs
(1,956
)
(399
)
Purchases of treasury shares
(13,784
)
(40,089
)
Dividends paid
(51,805
)
(50,664
)
Acquisition holdback payments
(2,361
)
(2,345
)
Taxes paid for shares withheld for equity awards
(8,074
)
(10,083
)
Exercise of stock appreciation rights and options
555
163
Net Cash used in Financing Activities
(223,029
)
(213,037
)
Effect of Exchange Rate Changes on Cash
(2,154
)
5,464
Decrease in cash and cash equivalents
(73,271
)
(10,806
)
Cash and Cash Equivalents at Beginning of Period
257,745
268,551
Cash and Cash Equivalents at End of Period
$
184,474
$
257,745
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 andAdjusted Net income
per share, non-GAAP financial measures:
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
%
Impairment expense
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
%
Reconciliation of Net Income, a GAAP financial measure, to
EBITDA, a non-GAAP financial measure:
Three Months Ended June
30,
Year Ended June 30,
2022
2021
2022
2021
Net Income
$
79,113
$
59,244
$
257,414
$
144,757
Interest expense, net
6,014
7,673
26,263
30,592
Income tax expense
21,580
14,638
72,376
32,305
Depreciation and amortization of property
5,461
5,139
21,676
20,780
Amortization of intangibles
7,783
8,127
31,879
34,365
EBITDA
$
119,951
$
94,821
$
409,608
$
262,799
Impairment expense
-
-
-
49,528
Non-routine costs
-
-
-
7,772
Non-routine income
-
-
-
(2,609
)
Adjusted EBITDA
$
119,951
$
94,821
$
409,608
$
317,490
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 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,
2022
2021
2022
2021
Cash provided by Operating Activities
$
53,747
$
38,288
$
187,570
$
241,697
Capital expenditures
(6,450
)
(3,675
)
(18,124
)
(15,852
)
Free Cash Flow
$
47,297
$
34,613
$
169,446
$
225,845
Free cash flow is defined as net cash provided by operating
activities less capital expenditures, a non-GAAP financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220811005089/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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