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Results for the fourth quarter and full year were impacted by a $36.6 million non-cash goodwill impairment charge which is primarily associated with goodwill from the August 2008 acquisition of Fluid Power Resource.
Fiscal 2009 sales decreased 8.0% to $1.9 billion from $2.1 billion in fiscal 2008. Net income for the year decreased to $42.3 million, or $0.99 per share, versus $95.5 million, or $2.19 per share, in the previous year. On a non-GAAP basis, excluding the impairment charge, net income for fiscal 2009 was $65.3 million, or $1.53 per share.
Net sales for the fourth quarter declined 19.7% to $425.2 million from $529.7 million in the comparable period a year ago. Net loss for the quarter was $8.0 million, or $0.19 per share, compared to net income of $24.4 million, or $0.57 per share, last year. On a non-GAAP basis, excluding the impairment charge, net income for the fourth quarter was $15.0 million, or $0.35 per share.
On a non-GAAP basis, excluding the impairment charge, operating income for fiscal 2009 and the fourth quarter was $109.1 million, or 5.7% of sales, and $21.9 million, or 5.2% of sales, respectively.
Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh said, "As we expected, our fiscal fourth quarter operating performance reflected the impact of the worsening global recession on our customers, which resulted in significantly lower sales.
"We began making significant adjustments to our cost structure last fall and accelerated our efforts in December with aggressive actions aimed at controlling costs, managing assets, and preserving margins. As a result, and in spite of the difficult economic environment, we generated $81 million in cash from operations in fiscal 2009. We have always managed the business conservatively, focusing on cash generation and maintaining a healthy balance sheet to protect the interests of shareholders. Considering the shape of the economy and much of the U.S. industrial sector, we believe we are protected in the short term and are in a solid strategic position for the long term.
"Looking ahead to fiscal 2010, we expect the majority of the markets we serve will remain soft, and we will continue to see competitive pricing pressure. Accordingly, we will continue to take actions to adjust our cost structure and to manage assets. While there is speculation that the general economy will improve over the next 12 months, we have yet to see an upturn in sales trends and therefore will continue to manage conservatively going forward. Given this uncertainty and lack of visibility, we expect earnings per share for fiscal 2010 to be in the range of $0.90 to $1.30, a wider range than typically provided, on expected sales of $1.65 billion to $1.85 billion."
In addition to reporting results that are determined in accordance with generally accepted accounting principles in the U.S. (GAAP), the Company is also reporting non-GAAP results of operations that excludes the charge for goodwill impairment. This non-GAAP information complements the results provided in accordance with GAAP, and supplies investors with relevant and useful data about the Company's ongoing operations.
Applied will host its conference call for investors and analysts on Friday, August 7, 2009, at 1 p.m. ET. To join the call, dial 1-800-446-2782 or 1-847-413-3235 (for International callers) using passcode 24990347. The call will be conducted by Chairman & CEO David L. Pugh, President & COO Ben J. Mondics, and CFO Mark O. Eisele.
The call will also be webcast and can be accessed live online at http://www.applied.com and will be archived there for 14 days. A replay of the teleconference will be available for two weeks at 1-888-843-8996 (passcode 24990347).
Applied will hold its Annual Meeting of Shareholders on Tuesday, October 20, 2009, 10 a.m. ET, at its Corporate Headquarters, 1 Applied Plaza (E. 36th & Euclid Avenue), Cleveland, Ohio. August 24, 2009, is the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting.
With approximately 460 facilities and 4,700 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 3 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, 2009, Applied posted sales of $1.9 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 "looking ahead, "expect," "believe," "will," 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.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
-------------------------------------------
(Amounts in thousands, except per share data)
---------------------------------------------
Three Months Ended Year Ended
June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales $425,183 $529,745 $1,923,148 $2,089,456
Cost of sales 308,946 386,509 1,403,138 1,520,173
------- ------- --------- ---------
116,237 143,236 520,010 569,283
Selling, distribution
and administrative,
including depreciation 94,340 104,581 410,912 416,459
Goodwill impairment 36,605 36,605
------ ------ ------ -------
Operating Income
(Loss) (14,708) 38,655 72,493 152,824
Interest expense, net 1,254 366 4,424 882
Other (income)
expense, net (868) (326) 2,255 227
---- ---- ----- ---
Income (Loss) Before
Income Taxes (15,094) 38,615 65,814 151,715
Income Tax (Benefit)
Expense (7,064) 14,178 23,554 56,259
------ ------ ------ ------
Net (Loss) Income $(8,030) $24,437 $42,260 $95,456
------- ------- ------- -------
Net (Loss) Income Per
Share - Basic $(0.19) $0.58 $1.00 $2.23
====== ===== ===== =====
Net (Loss) Income Per
Share - Diluted $(0.19) $0.57 $0.99 $2.19
====== ===== ===== =====
Average Shares
Outstanding - Basic 42,272 42,297 42,287 42,797
====== ====== ====== ======
Average Shares
Outstanding -
Diluted 42,768 42,967 42,794 43,552
====== ====== ====== ======
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Cost of sales for interim financial statements are computed using
estimated gross profit percentages which are adjusted throughout the
year based upon available information. Adjustments to actual cost are
primarily made based on periodic physical inventory and the effect of
year end inventory quantities on LIFO costs. Reductions in year end
inventories during the fiscal years ended June 30, 2009 and 2008
resulted in liquidations of LIFO inventory quantities carried at lower
costs prevailing in prior years. The effect of these liquidations for
the years ended June 30, 2009 and 2008 increased gross profit by $4,419
and $626, net income by $2,693 and $383 and net income per share by
$0.06 and $0.01.
(2) During the quarter ended June 30, 2009, the Company performed an
interim impairment test, which indicated that goodwill in the fluid
power segment was impaired at June 30, 2009. Therefore, the Company
recorded a non-cash impairment charge that decreased operating income
by $36,605, net income by $23,000 and net income per share by $0.54.
(3) During the quarter ended June 30, 2009, the Company reduced income
tax expense by $1.3 million due to tax benefits that are not expected to
re-occur in fiscal 2010. Additionally, adjustments in the quarter
reduced SD&A expenses $3.5 million related to the reversal of prior
years' long-term incentive accruals and other items not expected to re-
occur. These items combined to increase net income per share by $0.08.
(4) At the end of August 2008, we completed the acquisition of Fluid
Power Resource, LLC, including seven fluid power businesses for a cost
of $166.9 million. The results of operations have been included in
the condensed statements of consolidated income as of the acquisition
date. Preliminary purchase accounting allocations, including amounts
for goodwill and intangible assets, have been updated to reflect
current information in the condensed consolidated balance sheet as of
June 30, 2009.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Amounts in thousands)
June 30, June 30,
2009 2008
Assets
Cash and cash equivalents $27,642 $101,830
Accounts receivable, net
of allowances of $6,464
and $6,119 198,792 245,119
Inventories 254,690 210,723
Other current assets 44,470 48,525
------ ------
Total current assets 525,594 606,197
Property, net 62,735 64,997
Intangibles, net 95,832 19,164
Goodwill 63,108 64,685
Other assets 62,059 43,728
------ ------
Total Assets $809,328 $798,771
======== ========
Liabilities
Accounts payable $80,655 $109,822
Short-term debt 5,000
Other accrued liabilities 70,901 87,189
------ ------
Total current
liabilities 156,556 197,011
Long-term debt 75,000 25,000
Other liabilities 69,670 74,685
------ ------
Total Liabilities 301,226 296,696
------- -------
Shareholders' Equity 508,102 502,075
------- -------
Total Liabilities and
Shareholders' Equity $809,328 $798,771
======== ========
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------
(Amounts in thousands)
Year Ended June 30,
-------------------
2009 2008
---- ----
Cash Flows from Operating Activities
Net income $42,260 $95,456
Adjustments to reconcile net income to net
cash provided by operating activities:
Goodwill impairment 36,605
Depreciation 12,736 12,776
Amortization of intangibles 9,655 1,663
Share-based compensation 4,092 3,376
Gain on sale of property (320) (1,214)
Treasury shares contributed to employee
benefit and deferred compensation plans 410 812
Changes in operating assets and liabilities,
net of acquisitions (12,836) 1,043
Other, net (11,302) (3,609)
------- ------
Net Cash provided by Operating Activities 81,300 110,303
------ -------
Cash Flows from Investing Activities
Property purchases (6,988) (8,410)
Proceeds from property sales 757 1,372
Net cash paid for acquisition of businesses,
net of cash acquired (172,199) (22,105)
Other 2,304
-------- -----
Net Cash used in Investing Activities (178,430) (26,839)
-------- -------
Cash Flows from Financing Activities
Net short-term borrowings under revolving
credit facility 5,000
Borrowings under revolving credit facility
classified as long-term 50,000
Long-term debt repayments (50,000)
Purchases of treasury shares (1,210) (33,224)
Dividends paid (25,378) (25,728)
Excess tax benefits from share-based
compensation 802 3,761
Exercise of stock options 408 1,664
Other (1,120)
------ --------
Net Cash provided by (used in) Financing
Activities 28,502 (103,527)
------ --------
Effect of Exchange Rate Changes on Cash (5,560) 2,228
------ -----
Decrease in cash and cash equivalents (74,188) (17,835)
Cash and cash equivalents at beginning of period 101,830 119,665
------- -------
Cash and Cash Equivalents at End of Period $27,642 $101,830
======= ========
SOURCE Applied Industrial Technologies
http://www.applied.com
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