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Applied Industrial Technologies Reports 29% Earnings Increase on 7.3% Sales Gain in Fiscal 2006 First Quarter, Raises Fiscal Year Guidance

Posted on: Wednesday, 12 October 2005, 09:00 CDT

CLEVELAND, Oct. 12 /PRNewswire-FirstCall/ -- Applied Industrial Technologies today reported record first quarter sales and earnings. For its fiscal 2006 first quarter, ended September 30, net income rose by 29.2 percent on a sales increase of 7.3 percent.

Net sales for the first quarter increased to $443,205,000 from $413,126,000 in the comparable period a year ago. Net income for the quarter increased to $16,850,000 or $0.54 per share compared to $13,040,000 or $0.43 per share last year. This represents the twelfth consecutive quarter of year- over-year increases in earnings per share of 25 percent or more. Both sales and earnings per share for the quarter were within previously issued guidance.

(Note: all per-share amounts have been adjusted to reflect the 3-for-2 stock split paid December 17, 2004.)

Commenting on the performance, Applied Chairman & Chief Executive Officer David L. Pugh said, "This was another solid quarter, and we once again were very pleased with our results, which were achieved in spite of more slowly paced economic conditions and temporary business disruptions caused by localized severe weather. Our margin initiatives have allowed us to continue excellent earnings leverage on a slowing rate of sales growth. We continue to execute the business fundamentals quite well.

"At this point, we see fiscal 2006 second quarter earnings per share in the range of $0.43 to $0.49 on sales of $440 million to $450 million. For fiscal 2006 as a whole, we are raising our earnings guidance to a range of $2.05 to $2.15 per share on improved sales of between $1.85 billion and $1.89 billion - up from previous guidance of $2.00 to $2.10 per share."

During the first quarter of 2006, the company purchased 295,900 shares of its common stock in open market transactions for $10.2 million. At September 30, 2005, the company had remaining authorization to repurchase more than 535,000 additional shares.

At September 30, Applied acquired the assets of Spencer Industries, Inc., a regional fluid power distributor headquartered in Kent, Wash. Its trailing 12-month sales were approximately $49 million. Spencer will operate as a subsidiary of Applied under the name Spencer Fluid Power Inc. and its operating results will be included starting in the second quarter.

Applied will host its first quarter conference call for investors and analysts at 4 p.m. ET today (Wednesday, October 12). To join in the call, dial 1-800-289-0493. 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 http://www.applied.com/ and will be archived there for 14 days. A replay of the teleconference will be available for two weeks at 1-888-203-1112 (passcode 4304253).

With more than 440 facilities and 4,500 employee-associates across North America, Applied Industrial Technologies is an industrial distributor that 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, 2005, Applied posted sales of $1.72 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. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are often identified by qualifiers such as "see,""guidance," and similar expressions. 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 Applied 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.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED INCOME (Amounts in Thousands, except per share data) Three Months Ended September 30 2005 2004 Net Sales $443,205 $413,126 Cost of sales 320,901 303,604 Gross Profit 122,304 109,522 Selling, distribution and administrative 94,502 88,019 Operating Income 27,802 21,503 Interest expense, net 772 1,303 Other (income) expense, net 150 (270) Income Before Income Taxes 26,880 20,470 Income Taxes 10,030 7,430 Net Income $16,850 $13,040 Net Income Per Share - Basic $0.56 $0.45 Net Income Per Share - Diluted $0.54 $0.43 Average Shares Outstanding - Basic 29,975 29,238 Average Shares Outstanding - Diluted 31,068 30,168 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 on periodic physical inventories and the effect of year-end inventory quantities on LIFO costs. (2) The Company acquired the assets of Spencer Industries on September 30, 2005 and have included them in the September 30, 2005 balance sheet. Results of operations will be included in the consolidated income statement beginning October 1, 2005. (3) Other (income) expense, net for the quarter ended September 30, 2004 includes a non-recurring gain of $716 related to the proceeds from life insurance policies. This gain was partially offset by other non- operating expense items. (4) All share and per share data have been restated to reflect a 3 for 2 stock split effective December 17, 2004. (5) Certain reclassifications have been made to prior year amounts to be consistent with the presentation in the current year. APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) September 30, June 30, 2005 2005 Assets Cash $96,791 $127,136 Accounts receivable, net of allowances of $6,300 and $6,500 215,020 202,226 Inventories 200,935 175,533 Other current assets 23,928 22,606 Total current assets 536,674 527,501 Property - net 71,219 71,441 Goodwill 51,971 51,083 Other assets 40,810 40,145 Total Assets $700,674 $690,170 Liabilities Accounts payable $105,409 $99,047 Other current liabilities 75,734 82,648 Total current liabilities 181,143 181,695 Long-term debt 76,779 76,977 Other liabilities 40,950 38,211 Total Liabilities 298,872 296,883 Shareholders' Equity 401,802 393,287 Total Liabilities and Shareholders' Equity $700,674 $690,170 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Amounts in Thousands) Three Months Ended September 30, 2005 2004 Cash provided from (used in) operations: Net income $16,850 $13,040 Items not requiring cash: Depreciation 3,198 3,499 Amortization 689 540 Other 2,848 3,567 Gain on sale of property (12) (291) Cash effect of changes in working capital (24,279) (20,401) Cash used in operations (706) (46) Investing Activities: Property purchases (1,670) (1,758) Proceeds from property sales 45 398 Acquisition of businesses, less cash acquired (15,735) Deposits and other 290 (877) Cash used in investing activities (17,070) (2,237) Financing Activities: Purchase of common stock for treasury (10,178) (5,987) Cash dividends paid (3,613) (2,753) Exercise of stock options 867 4,377 Cash used by financing activities (12,924) (4,363) Effect of exchange rate changes on cash 355 171 Decrease in cash (30,345) (6,475) Cash and temporary investments at beginning of period 127,136 69,667 Cash and temporary investments at end of period $96,791 $63,192

Applied Industrial Technologies

CONTACT: Investor Relations, Mark O. Eisele, Vice President - ChiefFinancial Officer, +1-216-426-4417, or Corporate, Richard C. Shaw, VicePresident - Communications, +1-216-426-4343, both of Applied IndustrialTechnologies

Web site: http://www.applied.com/

Source: PRNewswire-FirstCall

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