Applied Industrial Technologies Inc 10-Q for FY2022 Q1

Applied Industrial Technologies Inc (AIT)

10-Q 2021-10-28 For: 2021-09-30

Added on April 10, 2026

About this 10-Q

Applied Industrial Technologies Inc filed this 10-Q on October 28, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $891.68M; up 19.2% from $747.81M a year earlier
Net income: $52.97M; up 52.3% from net income of $34.78M a year earlier
Diluted EPS: $1.36; up 52.8% from $0.89 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Ohio			34-0117420
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

One Applied Plaza	Cleveland	Ohio	44115
(Address of principal executive offices)			(Zip Code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, without par value	AIT	New York Stock Exchange


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐


	Three Months Ended
	September 30,
	2021		2020
Net sales	$	891,681	$	747,807
Cost of sales	636,341		532,026
Gross profit	255,340		215,781
Selling, distribution and administrative expense, including depreciation	180,726		163,473

Operating income	74,614		52,308
Interest expense, net	7,390		7,653
Other income, net	(312)		(177)
Income before income taxes	67,536		44,832
Income tax expense	14,567		10,048
Net income	$	52,969	$	34,784
Net income per share - basic	$	1.38	$	0.90
Net income per share - diluted	$	1.36	$	0.89
Weighted average common shares outstanding for basic computation	38,502		38,722
Dilutive effect of potential common shares	582		366
Weighted average common shares outstanding for diluted computation	39,084		39,088


	Three Months Ended
	September 30,
	2021		2020
Net income per the condensed statements of consolidated income	$	52,969	$	34,784

Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments	(7,182)		5,554
Post-employment benefits:
Reclassification of net actuarial losses and prior service cost into other income, net and included in net periodic pension costs	75		68


Unrealized gain (loss) on cash flow hedge	596		(17)
Reclassification of interest from cash flow hedge into interest expense	2,585		2,690
Total other comprehensive (loss) income, before tax	(3,926)		8,295
Income tax expense related to items of other comprehensive (loss) income	805		786
Other comprehensive (loss) income, net of tax	(4,731)		7,509
Comprehensive income, net of tax	$	48,238	$	42,293


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	September 30, 2021		June 30, 2021
ASSETS
Current assets
Cash and cash equivalents	$	247,313	$	257,745
Accounts receivable, net	530,824		516,322
Inventories	377,978		362,547
Other current assets	54,452		59,961
Total current assets	1,210,567		1,196,575
Property, less accumulated depreciation of $208,991 and $204,326	113,813		115,589
Operating lease assets, net	94,476		87,111
Identifiable intangibles, net	274,410		279,628
Goodwill	562,791		560,077
Other assets	47,123		32,827
TOTAL ASSETS	$	2,303,180	$	2,271,807

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	210,987	$	208,162
Current portion of long-term debt	88,401		43,525
Compensation and related benefits	65,509		77,657
Other current liabilities	101,930		98,356
Total current liabilities	466,827		427,700
Long-term debt	730,307		784,855
Other liabilities	129,476		126,706
TOTAL LIABILITIES	1,326,610		1,339,261
Shareholders’ equity
Preferred stock—no par value; 2,500 shares authorized; none issued or outstanding	—		—
Common stock—no par value; 80,000 shares authorized; 54,213 shares issued	10,000		10,000
Additional paid-in capital	179,574		177,014
Retained earnings	1,347,375		1,294,413
Treasury shares—at cost (15,756 and 15,697 shares, respectively)	(462,556)		(455,789)
Accumulated other comprehensive loss	(97,823)		(93,092)
TOTAL SHAREHOLDERS’ EQUITY	976,570		932,546
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,303,180	$	2,271,807


For the Period Ended September 30, 2021	Shares of Common Stock Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Shares- at Cost		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
Balance at June 30, 2021	38,516	$	10,000	$	177,014	$	1,294,413	$	(455,789)	$	(93,092)	$	932,546
Net income						52,969						52,969
Other comprehensive loss										(4,731)		(4,731)

Cash dividends — $0.33 per share						—						—
Purchases of common stock for treasury	(77)							(6,537)				(6,537)
Treasury shares issued for:
Exercise of stock appreciation rights and options	3			(116)				8				(108)
Performance share awards	5			(222)				(73)				(295)
Restricted stock units	12			(572)				(120)				(692)
Compensation expense — stock appreciation rights and options				1,907								1,907
Other share-based compensation expense				1,563								1,563
Other	(2)					(7)		(45)				(52)
Balance at September 30, 2021	38,457	$	10,000	$	179,574	$	1,347,375	$	(462,556)	$	(97,823)	$	976,570


For the Period Ended September 30, 2020	Shares of Common Stock Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Shares- at Cost		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
Balance at June 30, 2020	38,710	$	10,000	$	176,492	$	1,200,570	$	(414,090)	$	(129,430)	$	843,542
Net income						34,784						34,784
Other comprehensive income										7,509		7,509
Cash dividends — $0.32 per share						(18)						(18)

Treasury shares issued for:
Exercise of stock appreciation rights and options	13			(277)				12				(265)
Performance share awards	22			(985)				(20)				(1,005)
Restricted stock units	15			(593)				96				(497)
Compensation expense — stock appreciation rights and options				693								693
Other share-based compensation expense				677								677
Other						15		(29)				(14)
Balance at September 30, 2020	38,760	$	10,000	$	176,007	$	1,235,351	$	(414,031)	$	(121,921)	$	885,406


	Three Months Ended September 30,
	2021						2020
	Service Center Based Distribution		Fluid Power & Flow Control		Total		Service Center Based Distribution		Fluid Power & Flow Control		Total
Geographic Areas:
United States	$	479,164	$	285,044	$	764,208	$	415,242	$	228,815	$	644,057
Canada	74,566		—		74,566		56,896		—		56,896
Other countries	47,141		5,766		52,907		41,146		5,708		46,854
Total	$	600,871	$	290,810	$	891,681	$	513,284	$	234,523	$	747,807


	September 30, 2021		June 30, 2021		$ Change		% Change
Contract assets	$	14,563	$	15,178	$	(615)	(4.1)	%


September 30, 2021	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Identifiable Intangibles:
Customer relationships	$	354,332	$	149,454	$	204,878
Trade names	105,621		39,349		66,272
Vendor relationships	11,414		10,018		1,396
Other	2,321		457		1,864
Total Identifiable Intangibles	$	473,688	$	199,278	$	274,410


	Acquisition Cost Allocation		Weighted-Average life
Customer relationships	$	1,884	20.0
Trade names	879		15.0
Other	251		6.5
Total Identifiable Intangibles	$	3,014	17.4


	September 30, 2021		June 30, 2021
Term Loan	$	540,500	$	550,250
Trade receivable securitization facility	188,300		188,300
Series C notes	40,000		40,000
Series D notes	25,000		25,000
Series E notes	25,000		25,000
Other	786		846
Total debt	$	819,586	$	829,396
Less: unamortized debt issuance costs	878		1,016
	$	818,708	$	828,380


	Three Months Ended
	September 30,
	2021		2020
Cash Flows from Operating Activities
Net income	$	52,969	$	34,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property	5,427		5,352
Amortization of intangibles	8,121		9,726


Amortization of stock options and appreciation rights	1,907		693

Other share-based compensation expense	1,563		677
Changes in operating assets and liabilities, net of acquisitions	(20,404)		24,559
Other, net	(941)		6,051
Net Cash provided by Operating Activities	48,642		81,842
Cash Flows from Investing Activities
Net cash paid for acquisitions, net of cash acquired	(7,094)		—
Cash payments for loans on company-owned life insurance	(14,835)		—
Capital expenditures	(3,621)		(3,597)
Proceeds from property sales	48		193

Net Cash used in Investing Activities	(25,502)		(3,404)
Cash Flows from Financing Activities


Long-term debt repayments	(9,811)		(62,450)

Purchases of treasury shares	(6,537)		—
Interest rate swap settlement payments	(1,644)		—
Dividends paid	(12,712)		(12,415)
Acquisition holdback payments	(135)		(521)

Taxes paid for shares withheld for equity awards	(1,141)		(1,797)
Net Cash used in Financing Activities	(31,980)		(77,183)
Effect of Exchange Rate Changes on Cash	(1,592)		1,254
(Decrease) Increase in Cash and Cash Equivalents	(10,432)		2,509
Cash and Cash Equivalents at Beginning of Period	257,745		268,551
Cash and Cash Equivalents at End of Period	$	247,313	$	271,060


	Three Months Ended September 30,
	2021						2020
	Service Center Based Distribution		Fluid Power & Flow Control		Total		Service Center Based Distribution		Fluid Power & Flow Control		Total
General Industry	34.6	%	38.9	%	35.9	%	36.0	%	39.4	%	37.0	%
Industrial Machinery	10.3	%	29.0	%	16.4	%	9.4	%	26.7	%	14.9	%
Metals	11.0	%	7.4	%	9.9	%	10.2	%	7.0	%	9.2	%
Food	12.5	%	2.5	%	9.3	%	14.1	%	3.0	%	10.7	%
Forest Products	10.4	%	2.5	%	7.8	%	10.8	%	2.9	%	8.3	%
Chem/Petrochem	3.4	%	13.8	%	6.8	%	3.5	%	13.3	%	6.6	%
Cement & Aggregate	8.5	%	1.1	%	6.1	%	7.7	%	1.1	%	5.6	%
Oil & Gas	5.2	%	1.2	%	3.9	%	3.6	%	1.2	%	2.8	%
Transportation	4.1	%	3.6	%	3.9	%	4.7	%	5.4	%	4.9	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended September 30,
	2021						2020
	Service Center Based Distribution		Fluid Power & Flow Control		Total		Service Center Based Distribution		Fluid Power & Flow Control		Total
Power Transmission	37.7	%	10.1	%	28.7	%	37.7	%	7.6	%	28.3	%
Fluid Power	12.7	%	37.6	%	20.8	%	13.1	%	39.1	%	21.3	%
General Maintenance; Hose Products	20.6	%	18.8	%	20.0	%	20.2	%	13.8	%	18.1	%
Bearings, Linear & Seals	29.0	%	0.4	%	19.7	%	29.0	%	0.4	%	20.0	%
Specialty Flow Control	—	%	33.1	%	10.8	%	—	%	39.1	%	12.3	%
Total	100	%	100	%	100	%	100	%	100	%	100	%


Three Months Ended	Service Center Based Distribution		Fluid Power & Flow Control		Total
September 30, 2021
Net sales	$	600,871	$	290,810	$	891,681
Operating income for reportable segments	64,653		34,805		99,458
Assets used in business	1,349,654		953,526		2,303,180
Depreciation and amortization of property	4,379		1,048		5,427
Capital expenditures	3,097		524		3,621

September 30, 2020
Net sales	$	513,284	$	234,523	$	747,807
Operating income for reportable segments	49,901		25,861		75,762
Assets used in business	1,283,031		966,222		2,249,253
Depreciation and amortization of property	4,395		957		5,352
Capital expenditures	3,088		509		3,597


	Three Months Ended September 30, 2021
	Foreign currency translation adjustment		Post-employment benefits		Cash flow hedge		Total Accumulated other comprehensive (loss) income
Balance at June 30, 2021	$	(80,838)	$	(3,673)	$	(8,581)	$	(93,092)
Other comprehensive (loss) income	(7,188)		—		450		(6,738)
Amounts reclassified from accumulated other comprehensive (loss) income	—		57		1,950		2,007

Net current-period other comprehensive (loss) income	(7,188)		57		2,400		(4,731)
Balance at September 30, 2021	$	(88,026)	$	(3,616)	$	(6,181)	$	(97,823)


	Three Months Ended September 30, 2020
	Foreign currency translation adjustment		Post-employment benefits		Cash flow hedge		Total Accumulated other comprehensive (loss) income
Balance at June 30, 2020	$	(105,094)	$	(4,564)	$	(19,772)	$	(129,430)
Other comprehensive income (loss)	5,439		—		(13)		5,426
Amounts reclassified from accumulated other comprehensive (loss) income	—		51		2,032		2,083
Net current-period other comprehensive income	5,439		51		2,019		7,509
Balance at September 30, 2020	$	(99,655)	$	(4,513)	$	(17,753)	$	(121,921)


	Index Reading
Month	MCU	PMI	IP
September 2021	75.2	61.1	98.7
August 2021	76.2	59.9	99.4
July 2021	76.3	59.5	99.8
June 2021	75.6	60.6	98.1


	Three Months Ended September 30,				Change in $'s Versus Prior Period - % Decrease
	As a Percent of Net Sales
	2021		2020
Net sales	100.0	%	100.0	%	19.2	%
Gross profit	28.6	%	28.9	%	18.3	%
Selling, distribution & administrative expense	20.3	%	21.9	%	10.6	%
Operating income	8.4	%	7.0	%	42.6	%
Net income	5.9	%	4.7	%	52.3	%


Sales by Reportable Segment	Three Months Ended September 30,				Sales Increase		Amount of change due to
	Three Months Ended September 30,								Foreign Currency		Organic Change
	2021		2020				Acquisitions		Foreign Currency		Organic Change
Service Center Based Distribution	$	600.9	$	513.3	$	87.6	$	—	$	6.0	$	81.6
Fluid Power & Flow Control	290.8		234.5		56.3		15.4		—		40.9
Total	$	891.7	$	747.8	$	143.9	$	15.4	$	6.0	$	122.5


	Three Months Ended September 30,				SD&A Increase		Amount of change due to
	Three Months Ended September 30,								Foreign Currency		Organic Change
	2021		2020				Acquisitions		Foreign Currency		Organic Change
SD&A	$	180.7	$	163.5	$	17.2	$	4.5	$	1.6	$	11.1


	Three Months Ended September 30,
Net Cash Provided by (Used in):	2021		2020
Operating Activities	$	48,642	$	81,842
Investing Activities	(25,502)		(3,404)
Financing Activities	(31,980)		(77,183)
Exchange Rate Effect	(1,592)		1,254
(Decrease) Increase in Cash and Cash Equivalents	$	(10,432)	$	2,509


Accounts receivable	$	(16,294)
Inventory	$	(45,237)
Accounts payable	$	10,710


	September 30, 2021		June 30, 2021
Unsecured credit facility	$	540,500	$	550,250
Trade receivable securitization facility	188,300		188,300
Series C notes	40,000		40,000
Series D notes	25,000		25,000
Series E notes	25,000		25,000
Other	786		846
Total debt	$	819,586	$	829,396
Less: unamortized debt issuance costs	878		1,016
	$	818,708	$	828,380


	September 30,			June 30,
	2021			2021
Accounts receivable, gross	$	547,296		$	532,777
Allowance for doubtful accounts	16,472			16,455
Accounts receivable, net	$	530,824		$	516,322
Allowance for doubtful accounts, % of gross receivables	3.0		%	3.1		%

	Three Months Ended September 30,
	2021			2020
Provision for losses on accounts receivable	$	798		$	5,098
Provision as a % of net sales	0.09		%	0.68		%


Period	(a) Total Number of Shares	(b) Average Price Paid per Share ($)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2021 to July 31, 2021	510	$89.07	0	464,618
August 1, 2021 to August 31, 2021	0	$0.00	0	464,618
September 1, 2021 to September 30, 2021	76,658	$85.27	76,658	387,960
Total	77,168	$85.30	76,658	387,960


Exhibit No.						Description
3.1						Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to the Company’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference).

3.2						Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference).

4.1						Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).


4.2						Amended and Restated Note Purchase and Private Shelf Agreement dated as of October 30, 2019, between Applied and PGIM, Inc. (formerly known as Prudential Investment Management, Inc.), and certain of its affiliates (filed as Exhibit 10.1 to the Company's Form 8-K filed November 5, 2019, SEC File No. 1-2299, and incorporated here by reference).

4.3						Amendment No. 1 to Amended and Restated Note Purchase and Private Shelf Agreement dated as of March 26, 2021 between Applied Industrial Technologies, Inc. and PGIM, Inc. (formerly known as Prudential Investment Management, Inc.), and certain of its affiliates (filed as Exhibit 4.3 to Applied's Form 10-Q for the quarter ended March 31, 2021, SEC File No. 1-2299, and incorporated here by reference).

4.4						Request for Purchase dated May 30, 2014 and 3.19% Series C Notes dated July 1, 2014, under Amended and Restated Note Purchase and Private Shelf Agreement, between Applied Industrial Technologies, Inc. and PGIM, Inc. (filed as Exhibit 10.1 to the Company's Form 8-K filed July 2, 2014, SEC File No. 1-2299, and incorporated here by reference).

4.5						Credit Agreement dated as of January 31, 2018, among Applied Industrial Technologies, Inc., KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 10.1 to the Company's Form 8-K filed February 6, 2018, SEC File No. 1-2299, and incorporated here by reference).

4.6						First Amendment to Credit Agreement dated as of March 26, 2021, among Applied Industrial Technologies, Inc., Key Bank National Association as Agent, and various financial institutions (filed as Exhibit 4.6 to Applied's Form 10-Q for the quarter ended March 31, 2021, SEC File No. 1-2299, and incorporated here by reference) .

4.7						Receivables Financing Agreement dated as of August 31, 2018 among AIT Receivables LLC, as borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent and the additional persons from time to time party thereto, as lenders (filed as Exhibit 10.1 to the Company's Form 8-K filed September 6, 2018, SEC File No. 1-2299, and incorporated here by reference).

4.8						Amendment No. 1 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty dated as of March 26, 2021 among AIT Receivables LLC, as borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent and the additional persons from time to time party thereto, as lenders (filed as Exhibit 10.2 to Applied's Form 8-K filed March 29, 2021, SEC File No. 1-2299, and incorporated here by reference).

4.9						Purchase and Sale Agreement dated as of August 31, 2018 among various entities listed on Schedule I thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied's Form 8-K filed September 6, 2018, SEC File No. 1-2299, and incorporated here by reference).

4.10						Amendment No. 1 to Purchase and Sale Agreement dated as of November 19, 2018 among Applied Industrial Technologies, Inc. and various of its affiliates, as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 4.10 to Applied's Form 10-Q for the quarter ended March 31, 2021, SEC File No. 1-2299, and incorporated here by reference).

4.11						Amendment No. 2 to Purchase and Sale Agreement dated as of March 26, 2021, among various entities listed on Schedule 1 thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc, as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied's Form 8-K filed March 29, 2021, SEC File No. 1-2299, and incorporated here by reference).

10.1						Schedule of executive officer participants in the Key Executive Restoration Plan, as amended and restated.

31						Rule 13a-14(a)/15d-14(a) certifications

32						Section 1350 certifications

101						The following financial information from Applied Industrial Technologies Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Statements of Consolidated Income, (ii) the Condensed Statements of Consolidated Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Statements of Consolidated Cash Flows, (v) the Condensed Statements of Shareholders' Equity, and (vi) the Notes to Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		APPLIED INDUSTRIAL TECHNOLOGIES, INC.
		(Company)

Date:	October 28, 2021	By: /s/ Neil A. Schrimsher
		Neil A. Schrimsher
		President & Chief Executive Officer


Date:	October 28, 2021	By: /s/ David K. Wells
		David K. Wells
		Vice President-Chief Financial Officer & Treasurer


Date: October 28, 2021			By: /s/ Neil A. Schrimsher
			Neil A. Schrimsher
			President & Chief Executive Officer



/s/ Neil A. Schrimsher						/s/ David K. Wells
Neil A. Schrimsher						David K. Wells
President & Chief Executive Officer						Vice President-Chief Financial Officer & Treasurer


Date: October 28, 2021