- Fourth Quarter Net Sales of $1.2 Billion Up 9.1% YoY; Up 8.6%
on an Organic Basis
- Fourth Quarter Net Income of $92.2 Million, or $2.35 Per Share
Up 16.1% YoY
- Fourth Quarter EBITDA of $140.0 Million Up 16.7% YoY
- Full-Year Net Sales of $4.4 Billion Up 15.8% YoY; Up 15.7% on
an Organic Basis
- Full-Year Net Income of $346.7 Million, or $8.84 Per Share
- Full-Year Adjusted Net Income of $343.1 Million, or $8.75 Per
Share Up 32.9% YoY
- Full-Year EBITDA of $524.5 Million Up 28.1% YoY
- Establishes Fiscal 2024 Guidance and Updates Intermediate
Financial Objectives
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 fourth quarter and full year ended June
30, 2023.
Net sales for the quarter increased 9.1% to $1.2 billion from
$1.1 billion in the prior year. The change includes a 0.7% increase
from acquisitions, offset by a negative 0.2% impact from foreign
currency translation. Excluding these factors, sales increased 8.6%
on an organic basis reflecting a 9.1% increase in the Service
Center segment and a 7.5% increase in the Engineered Solutions
segment. The Company reported net income of $92.2 million, or
$2.35 per share, and EBITDA of $140.0 million. On a pre-tax basis,
results include $8.1 million ($0.15 after tax per share) of LIFO
expense compared to $10.8 million ($0.22 after tax per share) of
LIFO expense in the prior-year period.
For the twelve months ended June 30, 2023, sales of $4.4 billion
increased 15.8% compared with the prior year, or 15.7% on an
organic basis. Net income was $346.7 million, or $8.84 per share,
and EBITDA was $524.5 million. Non-GAAP adjusted net income was
$343.1 million, or $8.75 per share. On a pre-tax basis, full-year
results include $34.2 million ($0.66 after tax per share) of LIFO
expense compared to $26.5 million ($0.53 after tax per share) of
LIFO expense in the prior-year period.
Neil A. Schrimsher, Applied’s President & Chief Executive
Officer, commented, “We had a strong finish to fiscal 2023 with
fourth quarter sales, EBITDA, and EPS exceeding our expectations.
Sales grew a solid 9% organically over the prior year against
challenging comparisons. While broader end-market activity was more
mixed, underlying demand for our differentiated portfolio of
technical solutions and service capabilities remained firm as
secular tailwinds and our sales initiatives continue to gain
momentum. At the same time, we expanded gross margins by 35 basis
points over the prior year, produced double-digit EBITDA growth for
the tenth straight quarter, and generated record free cash flow.
Overall, fiscal 2023 was a pivotal year for our business with sales
exceeding $4 billion and EBITDA margins reaching record highs on
the back of top-tier organic growth, steadfast execution, and
ongoing expansion of our next-generation Automation platform. This
underlying performance further validates the power of the Applied
team and our position in today’s industrial economy.”
Mr. Schrimsher added, “Moving into fiscal 2024, we remain
focused on meeting the needs of our customers and continuing to
progress towards our long-term strategic objectives as we navigate
an uncertain macroeconomic backdrop. Through early August, organic
sales are up by a low single-digit percent compared to prior-year
levels. We expect broader market activity to moderate further near
term as customers normalize production levels and manage through a
higher interest rate environment. That said, we continue to believe
any near-term slowdown will be transitional and short in nature
given positive tailwinds underpinning the industrial sector, and a
greater focus on supply chain reliability and capacity investments.
In addition, we remain constructive on our growth potential beyond
cycle conditions considering our exposure to secular tailwinds,
sustained share gain opportunities, and continued momentum around
our cross-selling initiative. We also expect another meaningful
year of cash generation, which combined with our strong balance
sheet provides significant M&A fire power and capital
deployment capacity to enhance returns for all stakeholders.”
Fiscal 2024 Guidance and Updated Intermediate Financial
Objectives Today the Company is introducing fiscal 2024 EPS
guidance in the range of $8.80 to $9.55 based on sales growth of 0%
to 4% and EBITDA margins of 11.9% to 12.1%. Guidance incorporates
current economic uncertainty and assumptions of easing end-market
demand near term, as well as ongoing inflationary and supply chain
headwinds. Guidance does not assume contribution from potential
future acquisitions.
In addition, the Company is increasing its intermediate
financial objectives, and now targets sales of over $5.5 billion
and EBITDA margins of over 13%. 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, “Following our strong performance in
fiscal 2023, we will achieve our prior EBITDA margin goal of 12%
sooner than expected. In addition, our enhanced organic growth
profile and acquisition pipeline provide a clear path to further
scale our business in coming years as we build upon our leading
technical position across an expanding addressable market. Overall,
we remain extremely confident in 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. This
strategy and our updated objectives highlight a compelling outlook
for significant value creation long term.”
Conference Call Information Applied will host its
quarterly conference call for investors and analysts at 10 a.m. ET
on August 10, 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 800-951-6728 (toll free) or
212-231-2901 (for International callers) using conference ID
22027594. 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 800-633-8284 or 402-977-9140 (International) using
conference ID 22027594.
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,” “assume”, and
derivative or similar expressions. All forward-looking statements
are based on current expectations regarding important risk factors
including trends and events in the industrial sector of the economy
(such as the inflationary environment and supply chain strains),
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.
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 EndedJune
30, Year EndedJune 30,
2023
2022
2023
2022
Net Sales
$
1,158,074
$
1,061,459
$
4,412,794
$
3,810,676
Cost of sales
819,515
754,832
3,125,829
2,703,760
Gross Profit
338,559
306,627
1,286,965
1,106,916
Selling, distribution and administrative expense, including
depreciation
211,744
197,403
813,814
749,058
Operating Income
126,815
109,224
473,151
357,858
Interest expense, net
4,201
6,014
21,639
26,263
Other expense, net
77
2,517
1,701
1,805
Income Before Income Taxes
122,537
100,693
449,811
329,790
Income tax expense
30,322
21,580
103,072
72,376
Net Income
$
92,215
$
79,113
$
346,739
$
257,414
Net Income Per Share - Basic
$
2.39
$
2.06
$
8.98
$
6.69
Net Income Per Share - Diluted
$
2.35
$
2.02
$
8.84
$
6.58
Average Shares Outstanding - Basic
38,646
38,471
38,592
38,471
Average Shares Outstanding - Diluted
39,270
39,101
39,220
39,105
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,
2023 June 30, 2022 Assets Cash and cash equivalents
$
344,036
$
184,474
Accounts receivable, net
708,395
656,429
Inventories
501,184
449,821
Other current assets
93,192
68,805
Total current assets
1,646,807
1,359,529
Property, net
115,041
111,896
Operating lease assets, net
100,677
108,052
Intangibles, net
235,549
250,590
Goodwill
578,418
563,205
Other assets
66,840
59,316
Total Assets
$
2,743,332
$
2,452,588
Liabilities Accounts
payable
$
301,685
$
259,463
Current portion of long-term debt
25,170
40,174
Other accrued liabilities
213,489
199,990
Total current liabilities
540,344
499,627
Long-term debt
596,926
649,150
Other liabilities
147,625
154,456
Total Liabilities
1,284,895
1,303,233
Shareholders' Equity
1,458,437
1,149,355
Total Liabilities and Shareholders' Equity
$
2,743,332
$
2,452,588
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
Year Ended June 30,
2023
2022
Cash Flows from Operating
Activities Net income
$
346,739
$
257,414
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property
22,266
21,676
Amortization of intangibles
30,805
31,879
Provision for losses on accounts receivable
5,619
3,193
Amortization of stock appreciation rights and options
2,785
3,284
Other share-based compensation expense
9,576
8,558
Changes in assets and liabilities, net of acquisitions
(69,253
)
(151,858
)
Other, net
(4,571
)
13,424
Net Cash provided by Operating Activities
343,966
187,570
Cash Flows from Investing
Activities Acquisition of businesses, net of cash
acquired
(35,785
)
(6,964
)
Capital expenditures
(26,476
)
(18,124
)
Proceeds from property sales
1,428
1,107
Other
-
(11,677
)
Net Cash used in Investing Activities
(60,833
)
(35,658
)
Cash Flows from Financing
Activities Net repayments under revolving credit
facility
(27,000
)
-
Net borrowings under revolving credit facility
-
410,592
Long-term debt repayments
(40,247
)
(550,493
)
Interest rate swap settlement receipts (payments)
8,800
(5,703
)
Payment of debt issuance costs
-
(1,956
)
Purchases of treasury shares
(716
)
(13,784
)
Dividends paid
(53,446
)
(51,805
)
Acquisition holdback payments
(1,510
)
(2,361
)
Taxes paid for shares withheld for equity awards
(12,896
)
(8,074
)
Exercise of stock appreciation rights and options
127
555
Net Cash used in Financing Activities
(126,888
)
(223,029
)
Effect of Exchange Rate Changes on Cash
3,317
(2,154
)
Increase (decrease) in cash and cash equivalents
159,562
(73,271
)
Cash and Cash Equivalents at Beginning of Period
184,474
257,745
Cash and Cash Equivalents at End of Period
$
344,036
$
184,474
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, 2023 Pre-tax Tax Effect
Net of Tax Per ShareDiluted Impact Tax Rate
Net income and net income per share
$
449,811
$
103,072
$
346,739
$
8.84
22.9
%
Tax valuation allowance adjustment, net
-
3,657
(3,657
)
(0.09
)
0.8
%
Adjusted net income and net income per share
$
449,811
$
106,729
$
343,082
$
8.75
23.7
%
Reconciliation of Net Income, a GAAP
financial measure, to EBITDA, a non-GAAP financial measure:
Three Months EndedJune 30,
Year EndedJune 30,
2023
2022
2023
2022
Net Income
$
92,215
$
79,113
$
346,739
$
257,414
Interest expense, net
4,201
6,014
21,639
26,263
Income tax expense
30,322
21,580
103,072
72,376
Depreciation and amortization of property
5,668
5,461
22,266
21,676
Amortization of intangibles
7,616
7,783
30,805
31,879
EBITDA
$
140,022
$
119,951
$
524,521
$
409,608
The Company defines EBITDA as Earnings from
operations before Interest, Taxes, Depreciation, and Amortization,
a non-GAAP financial measure. 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 EndedJune
30, Year EndedJune 30,
2023
2022
2023
2022
Net Cash provided by Operating Activities
$
179,939
$
53,747
$
343,966
$
187,570
Capital expenditures
(5,667
)
(6,450
)
(26,476
)
(18,124
)
Free Cash Flow
$
174,272
$
47,297
$
317,490
$
169,446
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/20230810879999/en/
Ryan D. Cieslak Director – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com
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