STOCK TITAN

Applied Industrial Technologies Reports Fiscal 2023 Second Quarter Results

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
  • Net Sales of $1.1 Billion Up 20.9% YoY; Up 21.1% on an Organic Basis
  • Net Income of $80.5 Million; EPS of $2.05 Up 40.8% YoY
  • EBITDA of $125.5 Million Up 35.6% YoY
  • Quarterly Dividend Increased to $0.35 Per Share
  • Raising Fiscal 2023 Guidance

CLEVELAND--(BUSINESS WIRE)-- 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 2023 second quarter ended December 31, 2022.

Net sales for the quarter increased 20.9% to $1.1 billion from $876.9 million in the prior year. The change includes a 0.5% increase from acquisitions, offset by a negative 0.7% impact from foreign currency translation. Excluding these factors, sales increased 21.1% on an organic basis across both the Service Center segment and Engineered Solutions segment. The Company reported net income of $­­­80.5 million, or $2.05 per share, and EBITDA of $125.5 million. On a pre-tax basis, results include $8.9 million ($0.17 after tax per share) of LIFO expense compared to $4.7 million ($0.09 after tax per share) of LIFO expense in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “We had another solid quarter with organic sales growth exceeding 21% against difficult comparisons. The broader U.S. manufacturing environment remained productive during the quarter, and we continue to benefit from our internal sales initiatives, industry position, and channel capabilities. This is presenting recurring growth opportunities across both legacy and new market verticals. From technical MRO support to advanced engineered solutions, we are playing a broader and more integral role across the industrial supply chain as customers embrace service requirements and investments. Concurrently, we continue to control costs and leverage operational enhancements, resulting in record EBITDA margins and notable EPS growth. Overall, these results further demonstrate our enhanced growth profile and earnings power as we capitalize on our strategy and various secular, structural, and company-specific tailwinds.”

Mr. Schrimsher added, “Based on our second quarter performance and updated outlook, we are raising fiscal 2023 guidance for sales, EBITDA margins, and EPS. While order rates are gradually normalizing and macro uncertainty is persisting, I am encouraged by our performance year to date and ongoing company-specific growth and margin opportunities moving forward. Organic sales are up by a low-twenty percent month to date in January compared to prior-year levels. Underlying industrial sector fundamentals within North America remain favorable long term, and we expect ongoing benefits from a more diverse mix of growth tailwinds tied to our channel strategy and business evolution in recent years. In addition, our cash generation and balance sheet provide capacity to supplement our growth going forward. This includes the ongoing build-out of our advanced automation platform, as highlighted by the acquisition of Automation, Inc. in early November 2022. Overall, I am proud of our team’s continued effort, and we look forward to further showcasing the strength of our differentiated industry position into the second half of fiscal 2023 and beyond.”

Updated Fiscal 2023 Guidance

For fiscal 2023, the Company now projects EPS of $8.10 to $8.50 (prior $6.90 to $7.55), sales growth of 13% to 15% (prior 5% to 9% including 6% to 10% on an organic basis) and EBITDA margins of 11.5% to 11.7% (prior 10.9% to 11.2%). Guidance incorporates ongoing economic uncertainty, inflationary pressures, and supply chain headwinds. Guidance does not assume contribution from potential future acquisitions.

Dividend

Today the Company also announced that its Board of Directors approved an increase in the quarterly cash dividend to $0.35 per common share, payable on February 28, 2023, to shareholders of record on February 15, 2023. This represents the 14th dividend increase since 2010.

Conference Call Information

Applied will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 26, 2023. 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 877-248-0132 (toll free) or 212-231-2902 (for International callers) using conference ID 22024595. 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 22024595.

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,” “guidance,” “projects,” “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 (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
December 31,

 

Six Months Ended
December 31,

 

2022

 

2021

 

 

 

2022

 

2021

 

Net Sales

$

1,060,280

$

876,874

 

$

2,122,685

$

1,768,555

 

Cost of sales

 

751,775

 

619,249

 

 

1,507,397

 

1,255,590

 

Gross Profit

 

308,505

 

257,625

 

 

615,288

 

512,965

 

Selling, distribution and administrative expense,
including depreciation

 

195,612

 

179,448

 

 

395,863

 

360,174

 

Operating Income

 

112,893

 

78,177

 

 

219,425

 

152,791

 

Interest expense, net

 

6,185

 

7,007

 

 

12,665

 

14,397

 

Other expense (income), net

 

758

 

(869

)

 

1,766

 

(1,181

)

Income Before Income Taxes

 

105,950

 

72,039

 

 

204,994

 

139,575

 

Income tax expense

 

25,493

 

15,013

 

 

47,657

 

29,580

 

Net Income

$

80,457

$

57,026

 

$

157,337

$

109,995

 

Net Income Per Share - Basic

$

2.09

$

1.48

 

$

4.08

$

2.86

 

Net Income Per Share - Diluted

$

2.05

$

1.46

 

$

4.02

$

2.81

 

Average Shares Outstanding - Basic

 

38,579

 

38,456

 

 

38,552

 

38,479

 

Average Shares Outstanding - Diluted

 

39,208

 

39,122

 

 

39,162

 

39,104

 

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)
 
 

December 31,

2022

June 30,

2022

 
Assets
Cash and cash equivalents

$

165,538

$

184,474

Accounts receivable, net

 

654,510

 

656,429

Inventories

 

523,021

 

449,821

Other current assets

 

79,183

 

68,805

Total current assets

 

1,422,252

 

1,359,529

Property, net

 

112,790

 

111,896

Operating lease assets, net

 

105,797

 

108,052

Intangibles, net

 

246,739

 

250,590

Goodwill

 

572,319

 

563,205

Other assets

 

63,007

 

59,316

Total Assets

$

2,522,904

$

2,452,588

 
Liabilities
Accounts payable

$

250,407

$

259,463

Current portion of long-term debt

 

25,189

 

40,174

Other accrued liabilities

 

171,609

 

199,990

Total current liabilities

 

447,205

 

499,627

Long-term debt

 

624,052

 

649,150

Other liabilities

 

155,771

 

154,456

Total Liabilities

 

1,227,028

 

1,303,233

Shareholders' Equity

 

1,295,876

 

1,149,355

Total Liabilities and Shareholders' Equity

$

2,522,904

$

2,452,588

 
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
 
Six Months Ended
December 31,

 

2022

 

 

2021

 

 
Cash Flows from Operating Activities
Net income

$

157,337

 

$

109,995

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property

 

11,033

 

 

10,863

 

Amortization of intangibles

 

15,519

 

 

16,205

 

Provision for losses on accounts receivable

 

9,573

 

 

1,328

 

Amortization of stock appreciation rights and options

 

1,871

 

 

2,516

 

Other share-based compensation expense

 

4,001

 

 

3,268

 

Changes in assets and liabilities, net of acquisitions

 

(111,542

)

 

(61,066

)

Other, net

 

1,031

 

 

(1,845

)

Net Cash provided by Operating Activities

 

88,823

 

 

81,264

 

Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired

 

Applied Industrial Technologies, Inc.

NYSE:AIT

AIT Rankings

AIT Latest News

AIT Stock Data

7.47B
38.60M
1.25%
94.54%
1.71%
Industrial Machinery and Equipment Merchant Wholesalers
Wholesale Trade
Link
United States of America
CLEVELAND