Applied Industrial Technologies Reports Fiscal 2011 Second Quarter Results

CLEVELAND, Jan. 21, 2011 /PRNewswire-FirstCall/ -- Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2011 sales and earnings for the three months ended December 31, 2010.  

Net sales for the second quarter increased 18.7% to $529,517,000 from $446,253,000 in the comparable period a year ago.  Net income for the quarter increased 102% to $21,193,000 or $0.49 per share compared to $10,487,000 or $0.24 per share last year.

For the six months ended December 31, 2010, sales were $1,057,018,000 compared to $883,996,000 in the same period last year.  Net income was $41,948,000 or $0.97 per share compared to $21,674,000 or $0.51 per share, last year.

"We were once again pleased with the strength of our quarterly results, and with our ability to efficiently convert sales increases to proportionately higher levels of profitability," said David L. Pugh, Applied's Chairman & Chief Executive Officer.  "Our strong performance is fueled by the recovering industrial economy and, in particular, exceptional results within those segments of our fluid power business that provide products and solutions for automation and machine control applications.

"We continue to execute the business fundamentals quite well with a focus on cost control and operational efficiency.  We generated a second quarter operating margin of 6.2%, up from 4.2% in the same quarter a year ago, further demonstrating that we are actively managing our business with the increased pace of the economy.  We also paid off the remainder of our existing debt, further improving our capacity to grow our business for the future.

"We believe that we will continue to see moderate growth in our daily sales run rates from the current levels throughout the remaining two quarters of our fiscal year.  Based on the strength of our second quarter performance, we are raising our earnings guidance for the full fiscal year 2011 and now expect to achieve earnings of $1.90 to $2.10 per share compared to our previous forecast of $1.80 to $2.05 per share.  We are raising the low end of our full-year sales guidance from $2.05 billion to $2.15 billion and maintaining our high end estimate of $2.25 billion."  

The Company did not repurchase any shares during the quarter.  At December 31, 2010, the Company had remaining authorization to purchase 837,200 additional shares.

The Company will host its quarterly conference call for investors and analysts at 11 a.m. ET on January 21, 2011. To join the call, dial 1-800-774-6070 or 1-630-691-2753 (for International callers) using passcode 9629151. The call will be conducted by Chairman & CEO David Pugh, President & COO Benjamin Mondics, and CFO Mark Eisele. A live audio webcast can be accessed online at www.Applied.com. A replay of the call will be available for two weeks by dialing 1-888-843-7419 or 1-630-652-3042 (International) using passcode 9629151.

With approximately 470 facilities and 4,600 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 4 million parts critical to the operations of 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, plus solutions to meet inventory and storeroom management needs that help provide enhanced value to its customers. For its fiscal year ended June 30, 2010, Applied posted sales of $1.89 billion. Applied can be visited on the Internet at http://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. Forward-looking statements are often identified by qualifiers such as "see," "expect," "believe," "will," "guidance," and similar expressions. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. 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 the Company 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, except as required by law.

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.

There were no material LIFO layer liquidation benefits recognized for the period ended December 31, 2010.   During the quarter and six months ended December 31, 2009, the Company recorded a LIFO benefit as part of a LIFO layer liquidation, that reduced cost of goods sold by $1.8 million and $2.5 million, respectively, and reduced the LIFO reserve by the same amount.  The overall effect of the LIFO layer liquidations during the quarter and six months ending December 31, 2009 increased gross profit by $5.7 million and $10.0 million respectively.  

(2)  In July and August 2010, the Company completed two acquisitions for an aggregate cash purchase price of $32 million.  UZ Engineered Products (UZ) is a distributor of industrial supply products for maintenance, repair, and operational needs, in the government and commercial sectors, throughout the US and Canada.  SCS Supply Group, Inc. (SCS) is a distributor of bearings, power transmission, electrical, fluid power products and industrial supplies in Canada.  

Results of operations for the acquired businesses are included in the Company’s Service Center Based Distribution segment results of operations from the date of closing.

SOURCE Applied Industrial Technologies

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