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Applied Industrial Technologies Reports Fiscal 2013 Second Quarter Results and Increases Dividend

January 31, 2013

CLEVELAND, Jan. 31, 2013 /PRNewswire/ — Applied Industrial Technologies (NYSE: AIT) today reported second quarter fiscal 2013 sales and earnings for the three months ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20130118/CL44936LOGO )

Net sales for the second quarter increased 3.4% to $589.5 million from $570.4 in the comparable period a year ago. Net income for the quarter increased to $27.0 million, or $0.64 per share, compared to $20.9 million, or $0.49 per share, last year.

For the six months ended December 31, 2012, sales increased 4.4% to $1.20 billion from $1.15 billion in the same period last year. Net income increased 19.6% to $56.6 million, or $1.33 per share, compared to $47.3 million, or $1.11 per share, last year.

Commenting on results, Applied’s Chief Executive Officer Neil A. Schrimsher said, “With a modest increase in sales, our cost controls and efficiency gains helped generate a solid increase in earnings and profitability for the quarter. Our gross profit margin of 27.6% reflects a 30 basis point improvement over last year’s second quarter, and our 6.9% operating margin represents a 110 basis point increase over the prior year period.

“While some of the recent macroeconomic headwinds will continue as we move into the second half of our fiscal year, we remain optimistic about the overall North American industrial economy for calendar 2013. We are focused on driving operating performance in the current environment and implementing programs that support our long-range strategic plan for growth and profitability – organically, via acquisition and through our technology investments.

“At the midpoint of our fiscal year, and given the current economic environment, we are now projecting earnings per share to be in the range of $2.70 to $2.90 on revenue growth expectations of 4% to 7%.”

In addition, Mr. Schrimsher announced today that the Company’s Board of Directors declared a 10% increase in the quarterly cash dividend to $0.23 per common share. The dividend is payable on February 28, 2013, to shareholders of record on February 15, 2013. “We are confident in our ongoing business position, and we are committed to generating increased shareholder value, including paying an attractive dividend.”

The Company will host its quarterly conference call for investors and analysts at 10 a.m. ET on January 31. The call will be conducted by CEO Neil A. Schrimsher, President & COO Benjamin J. Mondics, and Vice President & CFO Mark O. Eisele. To join the call, dial 1-888-771-4371 or 1-847-585-4405 (for International callers) prior to the scheduled start using passcode 34021417. 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 34021417.

With more than 500 facilities and 5,000 employee associates, Applied Industrial Technologies is a leading industrial distributor that offers more than four million parts to serve the needs 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 and inventory management solutions that provide added value to its customers. 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 “will,” “expect,” “project,” 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
                                     -------------------------------------------
                                        (In thousands, except per share data)

                         Three Months Ended         Six Months Ended
                            December 31,              December 31,
                                          2012                      2011                     2012        2011
                                          ----                      ----                     ----        ----
    Net Sales                         $589,517                  $570,397               $1,200,036  $1,149,971
    Cost of sales                      426,598                   414,928                  872,584     835,798
    -------------                      -------                   -------                  -------     -------
    Gross Profit                       162,919                   155,469                  327,452     314,173
    Selling,
     distribution and
     administrative,
       including
        depreciation                   122,350                   122,134                  242,565     237,571
       -------------                   -------                   -------                  -------     -------
    Operating Income                    40,569                    33,335                   84,887      76,602
    Interest expense,
     net                                    15                        10                       40          57
    Other (income)
     expense, net                         (427)                      778                     (886)      2,710
    --------------                        ----                       ---                     ----       -----
    Income Before Income
     Taxes                              40,981                    32,547                   85,733      73,835
    Income Tax Expense                  13,938                    11,612                   29,158      26,518
    Net Income                         $27,043                   $20,935                  $56,575     $47,317
    ----------                         -------                   -------                  -------     -------
    Net Income Per Share
     -Basic                              $0.64                     $0.50                    $1.35       $1.12
    ====================                 =====                     =====                    =====       =====
    Net Income Per Share
     -Diluted                            $0.64                     $0.49                    $1.33       $1.11
    ====================                 =====                     =====                    =====       =====
    Average Shares
     Outstanding -Basic                 42,052                    41,965                   42,009      42,181
    ===================                 ======                    ======                   ======      ======
    Average Shares
     Outstanding -
     Diluted                            42,494                    42,634                   42,486      42,801
    ==============                      ======                    ======                   ======      ======
         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 LIFO layer liquidation
     benefits recognized for the periods
     ended December 31, 2012 and 2011.

    (2)  On December 19, 2011, the Executive
     Organization and Compensation Committee
     of the Board of Directors froze
     participant benefits (credited service
     and final average earnings) and entry
     into the Supplemental Executive
     Retirement Benefits Plan (SERP)
     effective December 31, 2011.  As a
     result, we incurred a curtailment loss
     of approximately $3.1 million in the
     quarter ended December 31, 2011.

    ---

                                     APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                              -------------------------------------
                                                     (Amounts in thousands)

                                                                    December 31,            June 30,
                                                                                   2012                 2012
                                                                                   ----                 ----

    Assets
      Cash and cash equivalents                                                 $51,845              $78,442
      Accounts receivable, net of
       allowances of $8,106 and $8,332                                          304,628              307,043
      Inventories                                                               294,651              228,506
      Other current assets                                                       46,820               51,771
      --------------------                                                       ------               ------
           Total current assets                                                 697,944              665,762
      Property, net                                                              85,596               83,103
      Goodwill                                                                  105,026               83,080
      Intangibles, net                                                          100,914               84,840
      Other assets                                                               48,146               45,398
      ------------                                                               ------               ------
    Total Assets                                                             $1,037,626             $962,183
    ============                                                             ==========             ========

    Liabilities
      Accounts payable                                                         $123,796             $120,890
      Short-term debt                                                            33,000
      Other accrued liabilities                                                  98,698              109,279
      -------------------------                                                  ------              -------
           Total current liabilities                                            255,494              230,169
      Other liabilities                                                          60,020               59,883
      -----------------                                                          ------               ------
    Total Liabilities                                                           315,514              290,052
    -----------------                                                           -------              -------
    Shareholders' Equity                                                        722,112              672,131
    --------------------                                                        -------              -------
    Total Liabilities and Shareholders'
     Equity                                                                  $1,037,626             $962,183
    ===================================                                      ==========             ========
                              APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                                  CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                                  -----------------------------------------------
                                                   (In thousands)

                                                     Six Months Ended
                                                       December 31,
                                                       ------------
                                                                    2012                2011
                                                                    ----                ----

    Cash Flows from
     Operating Activities
    Net income                                                   $56,575             $47,317
    Adjustments to
     reconcile net income
     to net cash provided
       by operating
        activities:
       Depreciation and
        amortization of
        property                                                   6,036               5,598
       Amortization of
        intangibles                                                6,207               5,544
       Amortization of stock
        options and
        appreciation rights                                        1,197               1,139
       Gain on sale of
        property                                                    (193)               (492)
       Other share-based
        compensation expense                                       1,982               2,523
       Changes in operating
        assets and
        liabilities, net of
        acquisitions                                             (42,766)            (33,246)
       Other, net                                                   (152)              1,833
       ----------
    Net Cash provided by
     Operating Activities                                         28,886              30,216
    ---------------------                                         ------              ------
    Cash Flows from
     Investing Activities
       Property purchases                                         (6,843)            (14,022)
       Proceeds from property
        sales                                                        429                 981
       Net cash paid for
        acquisition of
        businesses, net of
        cash acquired                                            (63,165)             (1,241)
       Deposits into escrow
        accounts for
        acquisition holdback
        payments                                                  (2,890)
       ---------------------                                      ------
    Net Cash used in
     Investing Activities                                        (72,469)            (14,282)
    ---------------------                                        -------             -------
    Cash Flows from
     Financing Activities
       Borrowings under
        revolving credit
        facility                                                  33,000
       Purchase of treasury
        shares                                                                       (18,990)
       Dividends paid                                            (17,737)            (16,077)
       Excess tax benefits
        from share-based
        compensation                                               1,461                 569
       Acquisition holdback
        payments                                                  (1,845)
       Exercise of stock
        options and
        appreciation rights                                          497                 154
       --------------------                                          ---                 ---
    Net Cash provided by
     (used in) Financing
     Activities                                                   15,376             (34,344)
    --------------------                                          ------             -------
    Effect of Exchange Rate
     Changes on Cash                                               1,610              (2,170)
    Decrease in Cash and
     Cash Equivalents                                            (26,597)            (20,580)
    Cash and Cash
     Equivalents at
     Beginning of Period                                          78,442              91,092
    --------------------                                          ------              ------
    Cash and Cash
     Equivalents at End of
     Period                                                      $51,845             $70,512
    ======================                                       =======             =======

SOURCE Applied Industrial Technologies


Source: PR Newswire