UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 15, 2004
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
OHIO 1-2299 34-0117420
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(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification No.)
One Applied Plaza, Cleveland, Ohio 44115
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (216) 426-4000.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Attached to this filing and incorporated by reference herein is the
text of registrant's press release dated April 15, 2004 regarding third quarter
results.
None of the contents of this Form 8-K should be deemed incorporated by
reference into a Securities Act registration statement.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Registrant)
By: /s/ Fred D. Bauer
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Fred D. Bauer
Vice President-General Counsel
& Secretary
Date: April 15, 2004
APPLIED INDUSTRIAL TECHNOLOGIES REPORTS
INCREASED SALES AND EARNINGS FOR ITS THIRD QUARTER,
RAISES GUIDANCE FOR FOURTH QUARTER
CLEVELAND, OH (April 15, 2004) - Applied Industrial Technologies (NYSE: AIT)
today reported significantly improved financial results for its fiscal 2004
third quarter, which ended March 31, 2004. Sales and earnings exceeded
management's previous guidance.
Net sales for the quarter were $391,053,000, up 6.2% compared with $368,203,000
in the same period a year ago. Net income for the quarter increased 142.1% to
$10,611,000 from $4,383,000 last year. Earnings per share increased by 134.8% to
$0.54 from $0.23 per share in the third quarter of 2003. The third quarter of
fiscal 2003 did include non-operating charges of $1.7 million, or $0.06 per
share, to provide for potential losses on investments and advances to an
affiliated company.
The third quarter of 2004 includes non-recurring tax benefits primarily from a
late-March settlement with the Internal Revenue Service related to audits of the
company's 1997 and 1998 tax returns as well as acceptance by the IRS of tax
refund claims for 1999, 2000, and 2001. These items added $1,587,000, or $0.08
per share, to quarterly earnings.
For the nine months ended March 31, 2004, sales increased 1.8% to $1,111,910,000
from $1,091,929,000 in the same period last year. Net income increased 69.4% to
$20,576,000 or $1.05 per share versus $12,148,000, or $0.63 per share, last
year.
Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh
said, "Riding the tide of a strengthening economy, our sales growth across North
America accelerated throughout the quarter and exceeded even our most optimistic
forecasts. This drove greater-than-expected operating earnings. We are
benefiting from the additional earnings potential created in our business by
aggressive actions taken over the past two years to improve margins, manage
assets and contain costs. Our gross margin, return on assets, and SD&A as a
percent of sales all improved during the third quarter from year-ago levels.
"This enhanced level of operating discipline and efficiency has allowed us to
provide positive results even in a difficult economy. We will be working hard to
improve our profit levels as the industrial economy rebounds.
"Looking ahead, sales guidance for our fiscal fourth quarter is $385 million to
$400 million. Recognizing our gains in margin improvement and cost containment,
earnings per share are expected to come in within a range of $0.45 to $0.50.
Thus, for the full fiscal year ended June 30, 2004, we expect earnings per share
to come in within the range of $1.50 to $1.55."
For the nine months ended March 31, 2004, the company repurchased 287,000 shares
of stock for $6.2 million. At March 31, board authorization was in place to
repurchase up to 841,000 additional shares.
Applied will host its third quarter conference call at 4 p.m. today (Thursday,
April 15). To join in the call, dial 1-800-810-0924 and passcode 624852. The
call will be conducted by Chairman and CEO David L. Pugh, President and COO Bill
L. Purser, and CFO Mark O. Eisele. The call will also be webcast and can be
accessed live online at www.applied.com and will be archived there for 14 days.
A replay of the teleconference will be available at 1-888-203-1112, passcode
624852 from 7 p.m. on April 15 through 12 midnight on April 30.
With more than 430 facilities and 4,300 employee associates across North
America, Applied Industrial Technologies offers more than 2 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. For its fiscal year ended June
30, 2003, the Company posted sales of $1.46 billion. Applied can be visited on
the Internet at 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
"expect," "guidance," "see" 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.
(A financial summary is attached.)
For additional financial information, contact Mark O. Eisele, Vice President -
Chief Financial Officer & Treasurer, at 216/426-4417. For corporate information,
contact Richard C. Shaw, Vice President - Communications, at 216/426-4343.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
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(Thousands, except per share data)
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Three Months Ended Nine Months Ended
March 31 March 31
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2004 2003 2004 2003
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NET SALES $ 391,053 $ 368,203 $1,111,910 $ 1,091,929
Cost of sales 286,630 270,471 818,844 813,104
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GROSS PROFIT 104,423 97,732 293,066 278,825
Selling, distribution and administrative 89,543 87,578 259,940 253,507
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OPERATING INCOME 14,880 10,154 33,126 25,318
Interest expense, net 1,397 1,295 4,120 3,898
Other (458) 1,966 (400) 2,292
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INCOME BEFORE INCOME TAXES 13,941 6,893 29,406 19,128
INCOME TAXES 3,330 2,510 8,830 6,980
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NET INCOME $ 10,611 $ 4,383 $ 20,576 $ 12,148
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NET INCOME PER SHARE - BASIC $ 0.55 $ 0.23 $ 1.07 $ 0.64
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NET INCOME PER SHARE - DILUTED $ 0.54 $ 0.23 $ 1.05 $ 0.63
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AVERAGE SHARES OUTSTANDING - BASIC 19,296 18,833 19,176 18,935
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AVERAGE SHARES OUTSTANDING - DILUTED 19,656 19,090 19,571 19,222
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Cost of sales for interim financial statements is computed using estimated
gross profit percentages that are adjusted throughout the year based upon
available information. Adjustments to actual cost are primarily made based
upon physical inventories and the effect of year-end inventory quantities
on LIFO costs.
(2) Effective July 1, 2003, the Company adopted the fair value recognition
provisions of SFAS 123, "Accounting for Stock-Based Compensation," using
the modified prospective method for the transition. Under the modified
prospective method, stock based compensation cost recognized during this
fiscal year is the same as that which would have been recognized had the
fair value recognition provisions been applied to all awards granted after
July 1, 1995. The compensation expense recorded during the quarter ended
March 31, 2004 was $629 or $.02 per share. During the nine months ended
March 31, 2004, compensation expense recorded for stock based compensation
was $1,315 or $.04 per share.
(3) During the quarter ended March 31, 2004, the Company recorded non-recurring
tax benefits primarily from a settlement with the Internal Revenue Service
related to audits of our 1997 and 1998 tax returns and the acceptance by
the IRS of tax refund claims for 1999, 2000, and 2001. These items added
$1,587, or $0.08 per share, to net income.
(4) During the quarter ended March 31, 2003, the Company recorded a liability
of $1,700 to provide for potential losses on investments and advances for
iSource Performance Materials L.L.C. (iSource) of which the Company is a
minority owner. iSource is a certified minority-owned distributor of
standard-use industrial specialty and general maintenance items requiring
special shipping and handling. In accordance with FIN 46, "Consolidation of
Variable Interest Entities," iSource's financial statements were
consolidated with the Company's beginning in July 2003. The effect of the
consolidation was not material to the Company's consolidated financial
statements.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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(Amount in Thousands)
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March 31, June 30,
2004 2003
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ASSETS
Cash $ 33,386 $ 55,079
Accounts receivable, less allowances of $6,600 and $6,100 190,932 173,915
Inventories 178,209 159,798
Other current assets 15,751 11,702
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Total current assets 418,278 400,494
Property - net 78,662 77,942
Goodwill 49,934 49,687
Other assets 26,486 25,281
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TOTAL ASSETS $ 573,360 $ 553,404
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LIABILITIES
Accounts payable $ 80,714 $ 75,411
Other current liabilities 62,579 65,724
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Total current liabilities 143,293 141,135
Long-term debt 77,965 78,558
Other liabilities 26,464 25,855
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TOTAL LIABILITIES 247,722 245,548
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SHAREHOLDERS' EQUITY 325,638 307,856
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 573,360 $ 553,404
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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amount in Thousands)
Nine Months Ended March 31
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2004 2003
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CASH PROVIDED FROM OPERATIONS:
Net income $ 20,576 $ 12,148
Items not requiring cash:
Depreciation and amortization 12,882 11,925
Other 4,109 1,960
Gain on sale of property (102) (2,702)
Cash effect of changes in working capital (35,077) 7,546
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CASH PROVIDED FROM OPERATIONS 2,388 30,877
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INVESTING ACTIVITIES:
Property purchases (11,916) (9,348)
Proceeds from property sales 1,004 5,947
Net cash paid for acquisition of business (1,285) (10,255)
Deposits and other (966) 1,579
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CASH USED IN INVESTING ACTIVITIES (13,163) (12,077)
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FINANCING ACTIVITIES:
Borrowings and repayments of notes payable - net (2,850)
Repayment of long-term debt (5,714)
Proceeds from termination of interest rate swap 2,517
Purchase of common stock for treasury (6,258) (9,872)
Cash dividends paid (6,945) (6,877)
Exercise of stock options 5,135 2,011
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CASH USED BY FINANCING ACTIVITIES (10,918) (17,935)
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INCREASE (DECREASE) IN CASH $ (21,693) $ 865
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