19 slides from Applied Industrial Technologies's earnings presentation, Aug 12, 2020
Slide 1: We Keep Industry Running: Fiscal Q4 2020 Recap
We Keep Industry Running Fiscal Q4 2020 Recap August 12, 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation 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
Slide 3: Primary Messages from Management
Primary Messages from Management • Strong execution across Applied® in response to COVID-19 with operating model functioning well and limited business disruptions. • Effective cost control during Q4 with a 16% YoY organic decline in adj. SD&A expense and mid-teen decremental margins against a high-t
Slide 4: Recovery and Long-Term Growth Considerations
Recovery and Long-Term Growth Considerations • Our products and solutions should be increasingly critical across the industrial supply chain following the COVID-19 pandemic… Early-cycle Break/Fix Demand: Elevated customer requirements following an unprecedented period of plant shutdowns, idle equipm
Slide 5: Fiscal Q4 2020 Key Financial Highlights
Fiscal Q4 2020 Key Financial Highlights • Sales down 17.9% YoY o Down 18.4% on an organic basis o Acquisitions +1.5%, currency -1%, selling days neutral this quarter • Net Income of $30.0M and EPS of $0.77 • Non-GAAP Adjusted Net Income of $31.1M and Adjusted EPS of $0.80 o Excludes $1.5M (pre-tax)
Slide 6: Current Investor Discussion Points
Current Investor Discussion Points Discussion Point Update Detail All operating facilities open and operational; Effective response to COVID-19 across Applied ® continues to play a vital role in supporting 1. Applied® Operations organization with limited operational and essential industries while ad
Slide 7: Segment Results – Service Center Based Distribution
Segment Results – Service Center Based Distribution Service Center Distribution Sales, in Millions Segment Overview: Representing 69% of fiscal 2020 $629.1 sales - the segment includes our legacy distribution $603.2 $575.8 $574.4 operations including ~420 local service centers across North America,
Slide 8: Segment Results – Fluid Power & Flow Control
Segment Results – Fluid Power & Flow Control Fluid Power & Flow Control Sales, in Millions Segment Overview: Representing 31% of fiscal 2020 sales - the segment consists of 1) our Fluid $253.6 $253.2 $257.6 $256.4 Power network specializing in distributing, engineering, designing, integrating, and r
Slide 9: Adjusted Margin and Expense Highlights
Adjusted Margin and Expense Highlights Gross Profit, Adjusted SD&A, and Adjusted EBITDA Metrics Excluding LIFO • Gross margin down 43 bps YoY (1) $ in millions Q4 20 Q4 19 Chg YoY % Chg YoY o Excluding LIFO expense, down 70 bps YoY o Decline reflects unfavorable mix tied to softer Gross Profit $208.
Slide 10: Cash Flow and Balance Sheet Leverage
Cash Flow and Balance Sheet Leverage Free Cash Flow (in Millions) 250% • Fiscal 2020 cash from operations of Free cash flow as % of net income $300 Free cash flow As % of net income $296.7M; free cash flow of $276.6M Free cash flow, in millions $250 200% o FY20 free cash 186% of adjusted net income
Slide 11: Debt Outstanding and Maturity Schedule, as of 6/30/20
Debt Outstanding and Maturity Schedule, as of 6/30/20 • $935M of debt outstanding • ~$665M net of $269M of cash on hand • Paid down $40 million private placement note in July with excess cash • ~$250M of available capacity under undrawn revolver • $100M of available capacity on uncommitted shelf fac
Slide 12: Appendix: Number of Selling Days by Fiscal Quarter and Full Year
Appendix: Number of Selling Days by Fiscal Quarter and Full Year Q1 Q2 Q3 Q4 Year 2019 63.0 62.0 63.0 63.5 251.5 2020 64.0 62.0 64.0 63.5 253.5 2021 64.0 62.0 63.0 63.5 252.5 12
Slide 13: Appendix: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended June 30 (dollar amount in thousands) Q4 FY19 Q4 FY20 Service Center Based Distribution Segment: Net sales $ 629,120 $ 488,633 Operating income $ 69,065 $ 44,388 Non-routine costs - 1,040 Adjusted segment operating income $ 69,065
Slide 14: Appendix: Reconciliation of Adjusted Net Income and EPS
Appendix: Reconciliation of Adjusted Net Income and EPS Three Months Ended June 30, 2020 Per Share (dollar amount in thousands) Pre-tax Tax Effect Net of Tax Impact Tax Rate Net income and net income per share $ 40,079 $ 10,090 $ 29,989 $ 0.77 25.2% Non-routine costs 1,540 388 1,152 0.03 25.2% Adjus
Slide 15: Appendix: Reconciliation of Adjusted SD&A Expense
Appendix: Reconciliation of Adjusted SD&A Expense Three Months Ended June 30 (dollar amount in thousands) Q4 FY19 Q4 FY20 SD&A (Operating Expense) $ 185,376 $ 161,262 Non-routine costs - 1,540 Adjusted SD&A (Adjusted Operating Expense) $ 185,376 $ 159,722 15
Slide 16: Appendix: Reconciliation of EBITDA and Adjusted EBITDA
Appendix: Reconciliation of EBITDA and Adjusted EBITDA (dollar amount in thousands) Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Net Income $ 40,362 $ 48,938 $ 38,717 $ 16,535 $ 39,803 $ 38,799 $ 38,031 $ (82,777) $ 29,989 Interest expense, net 10,964 10,476 9,578 9,947 10
Slide 17: Appendix: Reconciliation of Adjusted EBITDA Margin
Appendix: Reconciliation of Adjusted EBITDA Margin (dollar amount in thousands) Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Net Sales $ 897,721 $ 864,515 $ 840,038 $ 885,443 $ 882,743 $ 856,404 $ 833,375 $ 830,797 $ 725,076 Adjusted EBITDA 87,001 82,480 76,048 84,596 87,5
Slide 18: Appendix: Reconciliation of Free Cash Flow
Appendix: Reconciliation of Free Cash Flow Three Months Ended June 30 (dollar amount in thousands) Q4 FY12 Q4 FY13 Q4 FY14 Q4 FY15 Q4 FY16 Q4 FY17 Q4 FY18 Q4 FY19 Q4 FY20 Cash provided by Operating Activities $ 28,451 $ 42,341 $ 65,784 $ 117,695 $ 70,718 $ 86,113 $ 99,426 $ 103,435 $ 127,090 Capital
Slide 19: Appendix: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Net Income $ 40,362 $ 48,938 $ 38,717 $ 16,535 $ 39,803 $ 38,799 $ 38,031 $ (82,777) $ 29,989 Interest expense, net 10,964 10,476 9,578 9,947 10,187 10,