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): August 6, 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 August 6, 2004 regarding fourth quarter
and year-end 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: August 6, 2004
APPLIED INDUSTRIAL TECHNOLOGIES REPORTS 41.8% INCREASE
IN NET INCOME FOR FISCAL 2004 FOURTH QUARTER
CLEVELAND, Ohio, August 6, 2004 - Applied Industrial Technologies (NYSE: AIT)
today reported its net income rose by 41.8 percent on a sales increase of 8.8
percent in its fiscal 2004 fourth quarter, ended June 30. Earnings per share
rose by 37.5 percent in the quarter - the company's seventh consecutive quarter
of year-over-year increases of 25 percent or more.
Net sales for the quarter increased to $405,094,000 from $372,438,000 in the
comparable period a year ago. Net income for the quarter increased to
$10,895,000 or $0.55 per share compared to $7,684,000 or $0.40 per share last
year.
For the full fiscal 2004, sales increased by 3.6 percent to $1,517,004,000 from
$1,464,367,000 in fiscal 2003. Net income increased 58.7 percent for the year to
$31,471,000 compared to $19,832,000 last year. Net income per share was $1.60
compared to $1.03 in the previous year.
Commenting on the performance, Applied Chairman & Chief Executive Officer David
L. Pugh said, "These financial results, among the best in our company's history,
reflect operating improvements we have implemented over the past several years.
As sales increases from a rebounding economy in the fourth quarter exceeded our
initial expectations, we benefited from additional operating leverage that
magnified the impact on our bottom line.
"In particular, our efforts to control expenses and manage assets led to
significantly higher operating margins and returns for both the fourth quarter
and the full year.
"Sales improved in all regions of North America and from most of our customer
industries. We experienced especially strong increases in demand from the
industrial machinery and equipment, primary metals, lumber and wood products and
chemical sectors.
"We ended our fiscal 2004 with a strong balance sheet. Inventories are well
controlled, debt levels remain low and a cash balance of nearly $70 million
provides Applied flexibility to pursue opportunities for profitable growth and
enhancements to shareholder value.
"Looking ahead, we expect to see year-over-year sales increases in the range of
9 percent to 11 percent for the first quarter, and between 5 percent to 7
percent for the second quarter. We expect sales increases will moderate in the
second half, primarily because of comparisons to strong sales in the third and
fourth quarters of fiscal 2004.
"At this point, we see fiscal 2005 sales totaling between $1.57 billion and
$1.61 billion. Our initial earnings guidance is in the range of $.40 to $.50 per
share for the first quarter, and $1.80 to $2.00 per share for the full year."
During 2004, the company purchased 290,000 shares of its common stock for $6.3
million. At June 30, 2004, the company had remaining authorization to repurchase
more than 800,000 additional shares.
Applied will host its fourth quarter conference call at 1:30 p.m. on Friday,
August 6. To join in the call, dial 1-800-810-0924 and passcode 757196. The call
will be conducted by Chairman & CEO David L. Pugh, President & 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 757196) from
3 p.m. on August 6 through midnight on August 20.
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, 2004, the Company posted sales of $1.52 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," "will," "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.
######
For financial information, contact Mark O. Eisele, Vice President - Chief
Financial Officer at 216-426-4417. For Corporate information, contact Richard C.
Shaw, Vice President - Communications, at 216-426-4343.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED INCOME
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(Thousands, except per share data)
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Three Months Year Ended
Ended June 30 June 30
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2004 2003 2004 2003
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NET SALES $ 405,094 $ 372,438 $ 1,517,004 $ 1,464,367
Cost of sales 296,017 271,968 1,114,861 1,085,072
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GROSS PROFIT 109,077 100,470 402,143 379,295
Selling, distribution and administrative 90,755 89,534 350,695 343,041
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OPERATING INCOME 18,322 10,936 51,448 36,254
Interest expense, net 1,289 1,400 5,409 5,298
Other (income) expense, net (32) (2,268) (432) 24
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INCOME BEFORE INCOME TAXES 17,065 11,804 46,471 30,932
INCOME TAXES 6,170 4,120 15,000 11,100
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NET INCOME $ 10,895 $ 7,684 $ 31,471 $ 19,832
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NET INCOME PER SHARE - BASIC $ 0.56 $ 0.41 $ 1.64 $ 1.05
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NET INCOME PER SHARE - DILUTED $ 0.55 $ 0.40 $ 1.60 $ 1.03
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AVERAGE SHARES OUTSTANDING - BASIC 19,322 18,825 19,238 18,908
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AVERAGE SHARES OUTSTANDING - DILUTED 19,835 19,176 19,691 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 which 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. Fourth quarter adjustments in 2004 and 2003 increased gross
profit by $3,456 and $4,410, net income by $2,131 and $2,682 and net income
per share by $0.11 and $0.14 respectively. Reductions in inventories during
the fiscal years ended June 30, 2004 and 2003 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, 2004 and 2003
increased gross profit by $672 and $741, net income by $420 and $453 and
net income per share by $0.02 and $0.02 respectively.
(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
June 30, 2004 was $271, ($173 net of tax) or $0.01 per share. During the
year ended June 30, 2004, compensation expense recorded for stock-based
compensation was $1,586, ($1,074 net of tax) or $0.05 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. The settlement added
$1,600, or $0.08 per share, to earnings.
(4) During the quarter ended June 30, 2003, the Company recorded pre-tax gains
of $2,133 for an insurance claim settlement and $650 for the sale of
surplus real estate. Both items accounted for approximately $0.09 per share
of income in the fourth quarter.
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(Amount in Thousands)
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June 30, June 30,
2004 2003
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ASSETS
Cash $ 69,667 $ 55,079
Accounts receivable, less allowances of $6,400 and $6,100 190,815 173,915
Inventories 159,594 159,798
Other current assets 22,957 11,702
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Total current assets 443,033 400,494
Property - net 77,025 77,942
Goodwill 49,852 49,687
Other assets 26,931 25,281
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TOTAL ASSETS $ 596,841 $ 553,404
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LIABILITIES
Accounts payable $ 78,767 $ 75,411
Other current liabilities 72,562 65,724
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Total current liabilities 151,329 141,135
Long-term debt 77,767 78,558
Other liabilities 28,210 25,855
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TOTAL LIABILITIES 257,306 245,548
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SHAREHOLDERS' EQUITY 339,535 307,856
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 596,841 $ 553,404
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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amount in Thousands)
Year Ended June 30
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2004 2003
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CASH PROVIDED FROM OPERATIONS:
Net income $ 31,471 $ 19,832
Depreciation and amortization 17,043 15,957
Other 5,706 2,404
(Gain)loss on sale of property 13 (3,249)
Cash effect of changes in working capital (11,145) 28,976
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CASH PROVIDED FROM OPERATIONS 43,088 63,920
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INVESTING ACTIVITIES:
Property purchases (14,387) (12,794)
Proceeds from property sales 1,441 7,456
Net cash paid for acquisition of business (1,285) (10,255)
Deposits and other (1,589) (689)
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CASH USED IN INVESTING ACTIVITIES (15,820) (16,282)
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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
Change in cash overdrafts (2,557) 3,371
Purchase of common stock for treasury (6,336) (9,946)
Cash dividends paid (9,273) (9,154)
Exercise of stock options 8,336 3,307
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CASH USED IN FINANCING ACTIVITIES (12,680) (15,619)
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INCREASE IN CASH $ 14,588 $ 32,019
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