Applied Industrial Technologies(US:AIT)2025-05-01 20:13Financial Performance - Consolidated sales for the quarter ended March 31, 2025, increased by $20.3 million or 1.8% compared to the prior year quarter, with acquisitions contributing $75.7 million or 6.6% to sales growth[82] - Operating income for the quarter was $129.4 million, representing an operating margin of 11.1%, up from $121.2 million and 10.6% in the prior year quarter[82] - Net income for the quarter was $99.8 million, reflecting a 2.7% increase compared to the prior year quarter, with diluted net income per share rising to $2.57 from $2.48[101] - Net sales for the nine months ended March 31, 2025, increased by $20.0 million or 0.6% compared to the prior year, with acquisitions contributing $117.6 million or 3.5% to sales[103] - Net income for the nine months ended March 31, 2025, rose by $2.9 million or 1.0%, with diluted net income per share increasing to $7.33 from $7.18[118] Segment Performance - The Service Center Based Distribution segment saw a sales decrease of $27.8 million or 3.5%, while the Engineered Solutions segment experienced a sales increase of $48.1 million or 13.5%[89][90] - Sales from the Service Center Based Distribution segment decreased by $30.0 million or 1.3%, while the Engineered Solutions segment saw an increase of $50.0 million or 4.7%[105][106] Profitability Metrics - The gross profit margin improved to 30.5% in the current quarter from 29.5% in the prior year quarter, positively impacted by a decrease in LIFO expense and ongoing margin expansion initiatives[94] - Gross profit margin improved to 30.2% from 29.5% in the prior year, positively impacted by a $7.9 million decrease in LIFO expense[110] - Operating income increased by $7.0 million or 2.0%, with operating income as a percentage of sales at 10.9% compared to 10.7% in the prior year[113] Expenses and Taxation - Selling, distribution, and administrative expenses (SD&A) increased by $8.9 million or 4.1%, with SD&A as a percentage of sales rising to 19.4% from 18.9%[96] - The effective income tax rate increased to 21.6% for the quarter ended March 31, 2025, compared to 20.7% in the prior year quarter, primarily due to a decrease in compensation-related deductions[100] - The effective income tax rate increased to 22.1% from 21.0%, with an expected full-year tax rate for fiscal 2025 in the range of 22.0% to 23.0%[117] Debt and Financial Position - Total debt obligations decreased to $572.3 million from $597.4 million at June 30, 2024, reflecting improved financial strength[119] - As of March 31, 2025, total debt was $572.3 million, a decrease from $597.4 million on June 30, 2024[127] - The revolving credit facility has a borrowing capacity of $900 million, with $515.8 million available as of March 31, 2025[128] - The interest rate on the revolving credit facility was 5.22% as of March 31, 2025, down from 6.24% on June 30, 2024[128] - As of March 31, 2025, the company's net indebtedness was less than 0.5 times consolidated income before interest, taxes, depreciation, and amortization[133] Employee and Acquisition Information - The number of employees increased to 6,818 as of March 31, 2025, up from 6,350 a year earlier, largely due to the acquisition of Hydradyne[85] - The Company acquired Hydradyne for $282.1 million, funded primarily with available cash, enhancing its capabilities in fluid power solutions[83] - The company completed the acquisition of Hydradyne, LLC on December 31, 2024, and is in the process of integrating it[145] - Management is in the process of integrating and evaluating internal controls for Hydradyne, which will be excluded from the evaluation as of June 30, 2025[145] Legal Proceedings - The Company is involved in pending legal proceedings related to product liability, commercial, personal injury, and employment matters[147] - The Company does not expect the resolution of these legal proceedings to have a material adverse effect on its consolidated financial position or cash flows[147] Accounts Receivable and Inventory - Accounts receivable, gross, increased to $768.5 million as of March 31, 2025, compared to $737.9 million on June 30, 2024[134] - The allowance for doubtful accounts was 1.8% of gross receivables for both March 31, 2025, and June 30, 2024[134] - The provision for losses on accounts receivable represented 0.08% of net sales for the nine months ended March 31, 2025, compared to 0.03% for the same period in 2024[136] - The annualized inventory turnover ratio based on average costs was 4.3 for the periods ended March 31, 2025, and June 30, 2024[137] - Approximately 1.8% of accounts receivable balances were more than 90 days past due as of March 31, 2025, up from 1.5% on June 30, 2024[136] Internal Controls - There were no changes in internal control over financial reporting during the three months ended March 31, 2025, that materially affected the Company's internal controls[146]