Applied Industrial Technologies Inc 10-Q for FY2024 Q1

Applied Industrial Technologies Inc (AIT)

10-Q 2023-10-27 For: 2023-09-30

Added on April 10, 2026

About this 10-Q

Applied Industrial Technologies Inc filed this 10-Q on October 27, 2023, covering the quarter ended September 30, 2023 (FY2024 Q1).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.1B; up 3.1% from $1.06B a year earlier
Net income: $93.83M; up 22.0% from net income of $76.88M a year earlier
Diluted EPS: $2.39; up 21.3% from $1.97 a year earlier

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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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	Three Months Ended
	September 30,
	2023		2022
Net sales	$	1,095,188	$	1,062,405
Cost of sales	770,106		755,622
Gross profit	325,082		306,783
Selling, distribution and administrative expense, including depreciation	204,402		200,251

Operating income	120,680		106,532
Interest expense, net	1,320		6,480
Other expense, net	431		1,008
Income before income taxes	118,929		99,044
Income tax expense	25,103		22,164
Net income	$	93,826	$	76,880
Net income per share - basic	$	2.42	$	2.00
Net income per share - diluted	$	2.39	$	1.97
Weighted average common shares outstanding for basic computation	38,700		38,526
Dilutive effect of potential common shares	610		585
Weighted average common shares outstanding for diluted computation	39,310		39,111


	Three Months Ended
	September 30,
	2023		2022
Net income per the condensed statements of consolidated income	$	93,826	$	76,880

Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments	(6,270)		(11,437)
Post-employment benefits:
Reclassification of net actuarial (gains) losses and prior service cost into other expense, net and included in net periodic pension costs	(30)		8


Unrealized gain on cash flow hedge	3,634		12,310
Reclassification of interest from cash flow hedge into interest expense, net	(4,638)		796
Total other comprehensive (loss) income, before tax	(7,304)		1,677
Income tax expense related to items of other comprehensive (loss) income	(230)		3,312
Other comprehensive loss, net of tax	(7,074)		(1,635)
Comprehensive income, net of tax	$	86,752	$	75,245


☒			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, 2023		June 30, 2023
ASSETS
Current assets
Cash and cash equivalents	$	360,415	$	344,036
Accounts receivable, net	694,922		708,395
Inventories	507,641		501,184
Other current assets	81,287		93,192
Total current assets	1,644,265		1,646,807
Property, less accumulated depreciation of $233,340 and $229,041	113,704		115,041
Operating lease assets, net	102,144		100,677
Identifiable intangibles, net	237,102		235,549
Goodwill	586,478		578,418
Other assets	66,818		66,840
TOTAL ASSETS	$	2,750,511	$	2,743,332

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	259,790	$	301,685
Current portion of long-term debt	25,171		25,170
Compensation and related benefits	62,448		98,740
Other current liabilities	119,149		114,749
Total current liabilities	466,558		540,344
Long-term debt	596,883		596,926
Other liabilities	150,954		147,625
TOTAL LIABILITIES	1,214,395		1,284,895
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	185,986		188,646
Retained earnings	1,886,432		1,792,632
Treasury shares—at cost (15,458 and 15,556 shares, respectively)	(483,932)		(477,545)
Accumulated other comprehensive loss	(62,370)		(55,296)
TOTAL SHAREHOLDERS’ EQUITY	1,536,116		1,458,437
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,750,511	$	2,743,332


For the Period Ended September 30, 2023	Shares of Common Stock Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Shares- at Cost		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at June 30, 2023	38,657	$	10,000	$	188,646	$	1,792,632	$	(477,545)	$	(55,296)	$	1,458,437
Net income						93,826						93,826
Other comprehensive loss										(7,074)		(7,074)

Cash dividends — $0.35 per share						(23)						(23)

Treasury shares issued for:
Exercise of stock appreciation rights and options	32			(1,681)				(1,912)				(3,593)
Performance share awards	54			(3,072)				(3,487)				(6,559)
Restricted stock units	13			(726)				(910)				(1,636)
Compensation expense — stock appreciation rights and options				844								844
Other share-based compensation expense				1,976								1,976
Other	(1)			(1)		(3)		(78)				(82)
Balance at September 30, 2023	38,755	$	10,000	$	185,986	$	1,886,432	$	(483,932)	$	(62,370)	$	1,536,116


For the Period Ended September 30, 2022	Shares of Common Stock Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Shares- at Cost		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at June 30, 2022	38,499	$	10,000	$	183,822	$	1,499,676	$	(471,848)	$	(72,295)	$	1,149,355
Net income						76,880						76,880
Other comprehensive loss										(1,635)		(1,635)
Cash dividends — $0.34 per share
Purchases of common stock for treasury	(8)							(716)				(716)
Treasury shares issued for:
Exercise of stock appreciation rights and options	21			(860)				(366)				(1,226)
Performance share awards	23			(1,290)				(758)				(2,048)
Restricted stock units	33			(1,668)				(902)				(2,570)
Compensation expense — stock appreciation rights and options				1,424								1,424
Other share-based compensation expense				1,939								1,939
Other	3			(19)		(5)		61				37
Balance at September 30, 2022	38,571	$	10,000	$	183,348	$	1,576,551	$	(474,529)	$	(73,930)	$	1,221,440


	Three Months Ended September 30,
	2023						2022
	Service Center Based Distribution		Engineered Solutions		Total		Service Center Based Distribution		Engineered Solutions		Total
Geographic Areas:
United States	$	617,262	$	342,096	$	959,358	$	584,880	$	336,609	$	921,489
Canada	75,300		—		75,300		79,770		—		79,770
Other countries	53,971		6,559		60,530		53,338		7,808		61,146
Total	$	746,533	$	348,655	$	1,095,188	$	717,988	$	344,417	$	1,062,405


	September 30, 2023		June 30, 2023		$ Change		% Change
Contract assets	$	13,085	$	17,911	$	(4,826)	(26.9)	%


September 30, 2023	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Identifiable Intangibles:
Customer relationships	$	371,613	$	193,915	$	177,698
Trade names	91,006		33,764		57,242
Vendor relationships	1,931		1,926		5
Other	3,446		1,289		2,157
Total Identifiable Intangibles	$	467,996	$	230,894	$	237,102


	Acquisition Cost Allocation		Weighted-Average life
Customer relationships	$	7,471	20.0
Trade names	2,660		15.0
Other	100		5.0
Total Identifiable Intangibles	$	10,231	18.5


	September 30, 2023		June 30, 2023
Revolving credit facility	$	383,592	$	383,592
Trade receivable securitization facility	188,300		188,300

Series D notes	25,000		25,000
Series E notes	25,000		25,000
Other	294		356
Total debt	$	622,186	$	622,248
Less: unamortized debt issuance costs	132		152
	$	622,054	$	622,096


	Three Months Ended September 30,
	2023						2022
	Service Center Based Distribution		Engineered Solutions		Total		Service Center Based Distribution		Engineered Solutions		Total
General Industry	34.7	%	37.4	%	35.5	%	34.4	%	39.9	%	36.1	%
Industrial Machinery	8.9	%	25.2	%	14.1	%	9.9	%	27.1	%	15.5	%
Food	13.7	%	3.0	%	10.3	%	12.8	%	2.8	%	9.6	%
Metals	10.7	%	8.1	%	9.9	%	11.0	%	7.9	%	10.0	%
Forest Products	12.5	%	3.8	%	9.7	%	11.4	%	2.6	%	8.6	%
Chem/Petrochem	2.7	%	16.1	%	7.0	%	3.0	%	13.8	%	6.5	%
Cement & Aggregate	7.1	%	1.2	%	5.2	%	7.8	%	1.5	%	5.7	%
Oil & Gas	6.0	%	1.6	%	4.6	%	5.7	%	1.3	%	4.3	%
Transportation	3.7	%	3.6	%	3.7	%	4.0	%	3.1	%	3.7	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended September 30,
	2023						2022
	Service Center Based Distribution		Engineered Solutions		Total		Service Center Based Distribution		Engineered Solutions		Total
Power Transmission	37.6	%	10.1	%	28.9	%	37.4	%	10.1	%	28.6	%
Fluid Power	14.1	%	38.7	%	21.9	%	12.9	%	35.5	%	20.2	%
General Maintenance, Hose Products & Other	21.3	%	16.3	%	19.8	%	21.6	%	15.3	%	19.5	%
Bearings, Linear & Seals	27.0	%	0.5	%	18.5	%	28.1	%	0.3	%	19.1	%
Specialty Flow Control	—	%	34.4	%	10.9	%	—	%	38.8	%	12.6	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%


Three Months Ended	Service Center Based Distribution		Engineered Solutions		Total
September 30, 2023
Net sales	$	746,533	$	348,655	$	1,095,188
Operating income for reportable segments	96,881		49,595		146,476
Assets used in business	1,749,309		1,001,202		2,750,511
Depreciation and amortization of property	4,436		1,281		5,717
Capital expenditures	3,634		706		4,340

September 30, 2022
Net sales	$	717,988	$	344,417	$	1,062,405
Operating income for reportable segments	88,809		45,534		134,343
Assets used in business	1,460,896		1,013,278		2,474,174
Depreciation and amortization of property	4,449		1,032		5,481
Capital expenditures	3,565		1,989		5,554


	Index Reading
Month	MCU	PMI	IP
September 2023	79.7	49.0	99.8
August 2023	79.5	47.6	99.4
July 2023	79.6	46.4	99.5
June 2023	78.9	46.0	99.1


	Three Months Ended September 30, 2023
	Foreign currency translation adjustment		Post-employment benefits		Cash flow hedge		Total Accumulated other comprehensive (loss) income
Balance at June 30, 2023	$	(83,099)	$	(197)	$	28,000	$	(55,296)
Other comprehensive (loss) income	(6,292)		—		2,744		(3,548)
Amounts reclassified from accumulated other comprehensive (loss) income	—		(24)		(3,502)		(3,526)

Net current-period other comprehensive (loss) income	(6,292)		(24)		(758)		(7,074)
Balance at September 30, 2023	$	(89,391)	$	(221)	$	27,242	$	(62,370)


	Three Months Ended September 30, 2022
	Foreign currency translation adjustment		Post-employment benefits		Cash flow hedge		Total Accumulated other comprehensive (loss) income
Balance at June 30, 2022	$	(90,738)	$	(1,303)	$	19,746	$	(72,295)
Other comprehensive (loss) income	(11,521)		—		9,280		(2,241)
Amounts reclassified from accumulated other comprehensive (loss) income	—		6		600		606
Net current-period other comprehensive (loss) income	(11,521)		6		9,880		(1,635)
Balance at September 30, 2022	$	(102,259)	$	(1,297)	$	29,626	$	(73,930)


	Three Months Ended September 30,				Change in $'s Versus Prior Period - % Increase
	As a Percent of Net Sales
	2023		2022
Net sales	100.0	%	100.0	%	3.1	%
Gross profit	29.7	%	28.9	%	6.0	%
Selling, distribution & administrative expense	18.7	%	18.8	%	2.1	%
Operating income	11.0	%	10.0	%	13.3	%
Net income	8.6	%	7.2	%	22.0	%


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
	2023		2022				Acquisitions		Foreign Currency		Organic Change
Service Center Based Distribution	$	746.5	$	718.0	$	28.5	$	3.9	$	2.5	$	22.1
Engineered Solutions	348.7		344.4		4.3		7.7		—		(3.4)
Total	$	1,095.2	$	1,062.4	$	32.8	$	11.6	$	2.5	$	18.7


	Three Months Ended September 30,				SD&A Increase		Amount of change due to
	Three Months Ended September 30,								Foreign Currency		Organic Change
	2023		2022				Acquisitions		Foreign Currency		Organic Change
SD&A	$	204.4	$	200.3	$	4.1	$	3.3	$	0.2	$	0.6


	Three Months Ended September 30,
Net Cash Provided by (Used in):	2023		2022
Operating Activities	$	66,209	$	25,943
Investing Activities	(25,657)		(5,498)
Financing Activities	(22,483)		(55,518)
Exchange Rate Effect	(1,690)		(1,826)
Increase (Decrease) in Cash and Cash Equivalents	$	16,379	$	(36,899)


	September 30,			June 30,
	2023			2023
Accounts receivable, gross	$	717,619		$	730,729
Allowance for doubtful accounts	22,697			22,334
Accounts receivable, net	$	694,922		$	708,395
Allowance for doubtful accounts, % of gross receivables	3.2		%	3.1		%

	Three Months Ended September 30,
	2023			2022
Provision for losses on accounts receivable	$	867		$	3,994
Provision as a % of net sales	0.08		%	0.38		%


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) (2)
July 1, 2023 to July 31, 2023	524	$148.26	0	1,500,000
August 1, 2023 to August 31, 2023	0	$0.00	0	1,500,000
September 1, 2023 to September 30, 2023	0	$0.00	0	1,500,000
Total	524	$0.00	0	1,500,000


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						Amendment No. 2 to Amended and Restated Note Purchase and Private Shelf Agreement, dated as of December 9, 2021, between Applied and PGIM, Inc., (filed as Exhibit 10.2 to the Company's Form 8-K filed December 14, 2021, SEC File No. 1-2299, and incorporated here by reference).

4.5						Amendment No. 3 to Amended and Restated Note Purchase and Private Shelf Agreement, dated October 28, 2022, between Applied and PGIM, Inc., (filed as Exhibit 10.1 to the Company's Form 8-K filed November 1, 2022, SEC File No. 1-2299, and incorporated here by reference).

4.6						Credit Agreement dated as of December 9, 2021, 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 December 14, 2021, SEC File No. 1-2299, and incorporated here by reference).

4.7						First Amendment Agreement, dated as of May 12, 2023, among Applied Industrial Technologies, Inc., KeyBank National Association as Agent, and the Lenders set forth therein (filed as Exhibit 4.7 to Applied’s Form 10-K for the fiscal year ended June 30, 2023, SEC File No. 1-2299, and incorporated here by reference).

4.8						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).

4.9						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).

4.10						Amendment No. 2 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of May 12, 2023, by and among AIT Receivables, LLC, Applied Industrial Technologies, Inc., PNC Bank, National Association, Regions Bank, and PNC Capital Markets LLC (filed as Exhibit 4.10 to Applied’s Form 10-K for the fiscal year ended June 30, 2023, SEC File No. 1-2299, and incorporated here by reference).

4.11						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).

4.12						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).

4.13						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).

4.14						Amendment No. 3 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty dated as of August 6, 2023 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 Applied’s Form 8-K filed August 9, 2023, SEC File No. 1-2299, and incorporated here by reference).

4.15						Amendment No. 3 to Purchase and Sale Agreement dated as of August 4, 2023 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 August 9, 2023, SEC File No. 1-2299, and incorporated here by reference).

10.1						Applied Industrial Technologies, Inc. 2023 Long-Term Performance Plan, as approved by the Shareholders on October 24, 2023.

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, 2023 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 27, 2023	By: /s/ Neil A. Schrimsher
		Neil A. Schrimsher
		President & Chief Executive Officer


Date:	October 27, 2023	By: /s/ David K. Wells
		David K. Wells
		Vice President-Chief Financial Officer, Treasurer, & Principal Accounting Officer


Date: October 27, 2023			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, & Principal Accounting Officer

Date: October 27, 2023