APPLIED INDUSTRIAL TECHNOLOGIES INC
For the period ended Sep 30, 2024. Filed Oct 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 25, 2024
AIT$283.39+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-26.
0000109563-24-000033
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-25.
0000109563-24-000104
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 59 current paragraphs.
26 unchanged; 30 reworded; 3 added; 14 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
Sales from our Engineered Solutions segment increased $0.6 million or 0.2%. Acquisitions within this segment increased sales by $16.5 million or 4.7%. Excluding the impact of businesses acquired, sales decreased $15.9 million or 4.5%, driven by a decrease of 6.1% due to softer demand across off-highway mobile fluid power OEM customers, and to a lesser extent, softer flow control and automation sales in July and August, offset by an increase of 1.6% due to additional sales volume from one additional sales day.
Current report
The increase in cash provided by operating activities during the three months ended September 30, 2024 from the prior period is due to changes in working capital for the period of $61.8 million, driven primarily by (amounts in thousands):
Current report
Net cash used in financing activities during the three months ended September 30, 2024 increased from the prior quarter primarily due to $10.0 million used to repurchase 52,000 shares of common stock which were taken into treasury in the current year quarter. No shares were repurchased in the prior year quarter.
Removed paragraphs (14)
Previous report
Sales from our Service Center Based Distribution segment, which operates primarily in MRO markets, increased $27.8 million or 3.6%. Acquisitions within this segment increased sales by $11.7 million or 1.5% and favorable foreign currency translation increased sales by $2.5 million or 0.3%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $13.6 million or 1.8%, driven by an increase of 2.6% from operations due to benefits from market position, sales process initiatives, and firm demand for technical MRO support across the U.S. manufacturing sector, offset by a 0.8% decrease due to the change in sales days.
Previous report
Sales from our Engineered Solutions segment decreased $13.4 million or 3.6%. Acquisitions within this segment increased sales by $1.4 million or 0.4%. Excluding the impact of businesses acquired, sales decreased $14.8 million or 4.0%, driven by a decrease of 3.2% from operations primarily as a result of ongoing declines within automation operations and lower fluid power sales, in addition to a 0.8% decrease due to the change in sales days. The decrease in sales was moderated by stronger growth across process flow control markets.
Previous report
Sales in our U.S. operations were up $24.4 million or 2.5%, as acquisitions added $13.1 million or 1.3%. Excluding the impact of businesses acquired, U.S. sales were up $11.3 million or 1.2%, driven by an increase of 2.0% from operations offset by 0.8% due to the change in sales days. Sales from our Canadian operations decreased $6.7 million or 8.4%. Favorable foreign currency translation increased Canadian sales by $0.4 million or 0.5%. Excluding the impact of foreign currency translation, Canadian sales decreased $7.1 million or 8.9%, driven by an decrease of 7.3% from operations, in addition to a 1.6% decrease due to the change in sales days. Consolidated sales from our other country operations, which include Mexico, Australia, New Zealand, and Singapore, decreased $3.3 million or 5.6% from the prior year. Favorable foreign currency translation increased other country sales by $2.1 million or 3.5%. Excluding the impact of currency translation, other country sales were down $5.4 million, or 9.1% during the quarter.
Previous report
Net income was$97.2 million for both the quarter ended March 31, 2024 and in the prior year quarter. Net income per share was $2.48 per share for the quarter ended March 31, 2024 compared to $2.47 per share in the prior year quarter.
Previous report
Results of Operations
Previous report
Nine Months Ended March 31, 2024 and 2023
Previous report
During thenine months ended March 31, 2024, sales increased $64.0 million or 2.0% compared to the prior year period, with sales from acquisitions adding $39.1 million or 1.2% and favorable foreign currency translation of $7.8 million increasing sales by 0.2%. There were 187.5 selling days in the nine months ended March 31, 2024 and 189 selling days in the nine months ended March 31, 2023. Excluding the impact of businesses acquiredand foreign currency translation, sales were up $17.1 million or 0.6% during the period, driven by an increase of 1.4% from operationsled by growth in our core Service Center operations as our technical industry position and internal initiatives are augmenting steady break-fix demand, offset by a 0.8% decrease due to the change in sales days.
Previous report
Sales from our Engineered Solutions segment decreased $16.2 million or 1.5%. Acquisitions within this segment increased sales by $12.4 million or 1.2%. Excluding the impact of businesses acquired, sales decreased $28.6 million or 2.7%, driven by a decrease of 1.9% from operations primarily as a result of ongoing declines within automation operations and lower fluid power sales, in addition to a decrease of 0.8% due to the change in sales days. The decrease in sales was moderated by stronger growth across process flow control markets.
Previous report
Our gross profit margin was 29.5% in the nine months ended March 31, 2024 compared to 29.1% in the prior year period. The gross profit margin for the current year period was positively impacted by 40 basis points due to a $13.4 million decrease in LIFO expense.
Previous report
Operating income increased$10.1 million, and as a percent of sales increased to 10.7% from 10.6% during the prior year period.
Previous report
Operating income, as a percentage of sales for the Service Center Based Distribution segment was 12.7% in both the current year and prior year period. Operating income, as a percentage of sales for the Engineered Solutions segment increased to 14.3% in the current year period from 13.9% in the prior year period.
Previous report
Other (income) expense, net was income of $4.2 million for the nine months ended March 31, 2024, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $3.0 million, net favorable foreign currency transaction gains of $0.5 million, and life insurance income of $0.8 million, offset by $0.1 million of other expense. During the prior year period, other (income) expense, net was expense of $1.6 million, which included foreign currency transaction losses of $2.2 million and other periodic post-employment of $1.4 million, primarily offset by unrealized gains on investments held by non-qualified deferred compensation trusts of $1.2 million and life insurance income of $0.6 million.
Previous report
The increase in cash provided by operating activities during the nine months ended March 31, 2024 is driven by increased operating results and by changes in working capital during the period. Changes in working capital between periods caused a$64.7 million increase in cash provided by operating activities, driven by (amounts in thousands):
Previous report
Net cash used in financing activities during the nine months ended March 31, 2024 decreased from the prior year period primarily due to a change in net debt activity, as there were $25.2 million of debt payments in the current year compared to $67.2 million in the prior year period. This was offset by $28.9 million of cash being used for the purchase of treasury shares during the nine months ended March 31, 2024 compared to $0.7 million used in the prior year period.
Reworded paragraphs (30)
Previous wording
With more than 6,300 employees across North America, Australia, New Zealand, and Singapore, Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” or “Our”) is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the third quarter of fiscal 2024, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, and Singapore from 586 facilities.
Current wording
With more than 6,500 employees across North & Central America, Australia, New Zealand, and Singapore, Applied Industrial Technologies (“Applied,” the “Company,” “we,” “us,” or “our”) is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the first quarter of fiscal 2025, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Singapore, and Costa Rica from 593 facilities.
Previous wording
The following is Management's Discussion and Analysis of significant factors which have affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows. When reviewing the discussion and analysis set forth below, please note that the majority of SKUs (Stock Keeping Units) we sell in any given period were not necessarily sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes in product mix and volume.
Current wording
The following is Management's Discussion and Analysis of significant factors which affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows. When reviewing the discussion and analysis set forth below, please note that the SKUs (Stock Keeping Units) we sell in any given period may not necessarily be sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes in product mix and volume.
Previous wording
Consolidated sales for the quarter ended March 31, 2024 increased $14.4 million or 1.3% compared to the prior year quarter, with acquisitions increasing sales by $13.1 million or 1.2% and favorable foreign currency translation of $2.5 million increasing sales by 0.2%. The Company had operating income of $121.2 million, or operating margin of 10.6% of sales for the quarter ended March 31, 2024 compared to an operating income of $126.9 million, or operating margin of 11.2% of sales for the same quarter in the prior year. The Company had net income of $97.2 million for both the quarter ended March 31, 2024 and in the prior year. The current ratio was 3.8 to 1 at March 31, 2024 and 3.0 to 1 at June 30, 2023.
Current wording
Consolidated sales for the quarter ended September 30, 2024 increased $3.8 million or 0.3% compared to the prior year quarter, with acquisitions increasing sales by $22.0 million or 2.0% and unfavorable foreign currency translation of $3.5 million reducing sales by 0.3%. Operating margin was 10.3% of sales for the quarter ended September 30, 2024 compared to 11.0% of sales for the same quarter in the prior year. Net income of $92.1 million decreased 1.9% compared to the prior year quarter.
Previous wording
The MCU (total industry) index decreased since December 2023, while the IP index increased since December 2023. The MCU for March 2024 was 78.4, which is down from the December and June 2023 revised readingsof 78.7 and 78.9, respectively. The ISM PMI registered 50.3 in March, up from both the December 2023 reading of 47.1 and the June 2023 reading of 46.4. The indices for the months during the current quarter, along with the indices for the prior fiscal year end and prior quarter end, were as follows:
Current wording
The MCU (total industry) and IP indices declined slightly since June 2024. The ISM PMI registered 47.2 in September, down from the June 2024 reading of 48.5. The indices for the months during the current quarter, along with the indices for the prior fiscal year end, were as follows:
Previous wording
The number of Company employees was 6,350 at March 31, 2024, 6,223 at June 30, 2023, and 6,184 at March 31, 2023. Thenumber of operating facilities totaled 586 at March 31, 2024, 577 at June 30, 2023, and 567 at March 31, 2023.
Current wording
The number of Company employees was 6,549 at September 30, 2024, 6,562 at June 30, 2024, and 6,359 at September 30, 2023. The number of operating facilities totaled 593 at September 30, 2024, 590 at June 30, 2024 and 589 at September 30, 2023.
Previous wording
During the quarter ended March 31, 2024, sales increased $14.4 million or 1.3% compared to the prior year quarter, with sales from acquisitions adding $13.1 million or 1.2%, and favorable foreign currency translation accounting for a increase of $2.5 million or 0.2%. There were 63.5 selling days in the quarter ended March 31, 2024 and 64 selling days in the quarter ended March 31, 2023. Excluding the impact of businesses acquired and foreign currency translation, sales were down $1.2 million or 0.1% during the quarter, reflecting an increase from operations of 0.7% led by growth in our core Service Center operations as our technical industry position and internal initiatives are augmenting steady break-fix demand, offset by a 0.8% decrease due to the change in sales days.
Current wording
During the quarter ended September 30, 2024, sales increased $3.8 million or 0.3% compared to the prior year quarter, with sales from acquisitions adding $22.0 million or 2.0% and unfavorable foreign currency translation accounting for a decrease of $3.5 million or 0.3%. There were 64 selling days in the quarter ended September 30, 2024 and 63 selling days in the quarter ended September 30, 2023. Excluding the impact of businesses acquired and foreign currency translation, sales were down $14.7 million or 1.4% during the quarter, driven by a decrease of 3.0% primarily due to lower operating activity in the Engineered Solutions segment although demand improved during the quarter, offset by an increase of 1.6% due to one additional sales day.
Previous wording
Sales from our Service Center Based Distribution segment, which operates primarily in MRO markets, increased $80.2 million or 3.7%. Acquisitions within this segment increased sales by$26.7 million or 1.2% and favorable foreign currency translation increased sales by$7.8 million or 0.4%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $45.7 million or 2.1%, driven by an increase of 2.9% from operations due to benefits from market position, sales process initiatives, and firm demand for technical MRO support across the U.S. manufacturing sector, offset by a 0.8% decrease due to the change in sales days.
Current wording
Sales from our Service Center Based Distribution segment, which operates primarily in MRO markets, increased $3.2 million or 0.4%. Acquisitions within this segment increased sales by $5.5 million or 0.7%. Unfavorable foreign currency translation reduced sales by $3.5 million or 0.5%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $1.2 million or 0.2%, driven by an increase of 1.6% due to one additional sales day, offset by a decrease of 1.4% primarily driven by softer MRO spending and capital maintenance projects early in the quarter.
Previous wording
The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, and Singapore (amounts in millions).
Current wording
The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, Singapore, and Costa Rica (amounts in millions).
Previous wording
Sales in our U.S. operations were up $77.7 million or 2.7%, as acquisitions added $39.1 million or 1.4%. Excluding the impact of businesses acquired, U.S. sales were up $38.6 million or 1.3%, driven by an increase of 2.1% from operations offset by a 0.8% decrease due to the change in sales days. Sales from our Canadian operations decreased $8.7 million or 3.7%. Unfavorable foreign currency translation decreased Canadian sales by $2.0 million or 0.9%. Excluding the impact of foreign currency translation, Canadian sales were down $6.7 million or 2.8%, driven by a decrease of 1.7% from operations and by a 0.8% decrease due to the change in sales days. Consolidated sales from our other country operations, which include Mexico, Australia, New Zealand, and Singapore, decreased $5.0 million or 2.8% from the prior year. Favorable foreign currency translation increased other country sales by $9.8 million or 5.6%. Excluding the impact of currency translation, other country sales were down $14.8 million, or 8.4%, during the period.
Current wording
Sales in the United States were down $2.1 million or 0.2%, as acquisitions added $10.1 million or 1.0%. Excluding the impact of businesses acquired, U.S. sales were down $12.2 million or 1.2%, driven by a 2.8% decrease from operations, offset by an increase of 1.6% due to one additional sales day. Sales in Canada decreased $3.8 million or 5.1%. Unfavorable foreign currency translation decreased Canadian sales by $1.3 million or 1.6%. Excluding the impact of foreign currency translation, Canadian sales were down $2.5 million or 3.5%, driven by a 5.1% decrease from operations, offset by an increase of 1.6% due to one additional sales day. Sales in other countries increased $9.7 million or 16.0% from the prior year quarter primarily due to acquisitions contributing $11.9 million or 19.7%, offset by unfavorable foreign currency translation of $2.2 million or 3.7%.
Previous wording
Our gross profit margin was 29.5% in the quarter ended March 31, 2024 compared to 29.4% in the prior year quarter. The gross profit margin for the current year quarter was positively impacted by 30 basis points due to a $3.4 million decrease in LIFO expense.
Current wording
Our gross profit margin was 29.6% in the quarter ended September 30, 2024 compared to 29.7% in the prior period. Gross profit margin contracted year over year primarily due to the favorable impact of vendor rebates in the prior year, offset by 24 basis points favorable impact in the current year quarter due to a $2.6 million decrease in LIFO expense.
Previous wording
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 18.9% of sales in the quarter ended March 31, 2024 compared to 18.2% in the prior year quarter. SD&A increased $10.8 million or 5.3% compared to the prior year quarter. Changes in foreign currency exchange rates had the effect of increasing SD&A during the quarter ended March 31, 2024 by $0.4 million or 0.2% compared to the prior year quarter. SD&A from businesses acquired added $3.5 million or 1.7% of SD&A expenses, including $0.3 million of intangibles amortization related to acquisitions. Excluding the impact of businesses acquired and the unfavorable currency translation impact, SD&A increased $6.9 million or 3.4% during the quarter ended March 31, 2024 compared to the prior year quarter. Bad debt expense increased $4.9 million in the current quarter, primarily tied to income in the prior year quarter due to collection of past due receivables. All other expenses within SD&A were up $2.0 million.
Current wording
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 19.3% of sales in the quarter ended September 30, 2024 compared to 18.7% in the prior year quarter, an increase of$7.5 million or 3.7% compared to the prior year quarter. SD&A from businesses acquired added $6.6 million or 3.2% of SD&A expenses, including $0.9 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates had the effect of decreasing SD&A during the quarter ended September 30, 2024 by $0.7 million or 0.3% compared to the prior year quarter. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A increased $1.6 million or 0.8% during the quarter ended September 30, 2024 compared to the prior year quarter.
Previous wording
Operating income decreased $5.7 million, and as a percent of sales, decreased to 10.6% from 11.2% during the prior year quarter.
Current wording
Operating income decreased $7.5 million or 6.2%, and as a percent of sales decreased to 10.3% from 11.0% during the prior year quarter.
Previous wording
Operating income, as a percentage of sales for the Service Center Based Distribution segment decreased to 12.7% in the current year quarter from 13.5% in the prior year quarter. Operating income, as a percentage of sales for the Engineered Solutions segment decreased to 13.9% in the current year quarter from 14.0% in the prior year quarter.
Current wording
Operating income, as a percentage of sales for the Service Center Based Distribution segment decreased to 12.6% in the current year quarter from 13.0% in the prior year quarter. Operating income as a percentage of sales for the Engineered Solutions segment decreased to 13.8% in the current year quarter from 14.2% in the prior year quarter.
Previous wording
Interest expense, net decreased $4.5 million from the prior year quarter primarily due to reduced debt levels and greater interest income from higher cash balances and investment yields.
Current wording
The Company had net interest income in the current year quarter of$0.6 million compared to net interest expense of$1.3 millionin the prior year quarter due to reduced debt levels and greater interest income from higher cash balances and investment yields.
Previous wording
Other (income) expense, net was income of $1.7 million for the current year quarter, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $1.6 million and life insurance income of $0.5 million, offset by unfavorable foreign currency transaction losses of $0.4 million. During the prior year quarter, other (income) expense, net was income of $0.1 million, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $1.0 million and life insurance income of $0.4 million, offset by unfavorable foreign currency transaction losses of $1.3 million.
Current wording
Other (income) expense, net, which represents certain non-operating items of income and expense, was income of $2.3 million in the current year quarter compared to expense of $0.4 million in the prior year quarter. Current quarter income primarily consists of unrealized gains on investments held by non-qualified deferred compensation trusts of $1.2 million, foreign currency transaction gains of $0.9 million, and other income of $0.2 million. Other expense, net in the prior year quarter consisted primarily of unrealized losses on investments held by non-qualified deferred compensation trusts of $0.6 million, offset by $0.2 million of other income.
Previous wording
The effective income tax rate was 21.0% for the nine months ended March 31, 2024 compared to 22.2% for the nine months ended March 31, 2023. The decrease in the effective tax rate is primarily due to the reversal of a tax valuation allowance related to Mexico during the nine months ended March 31, 2024, as well as compensation-related deductions during the nine months ended March 31, 2024. We expect our full year tax rate for fiscal 2024 to be in the 22.0% to 23.0% range.
Current wording
The effective income tax rate was 20.7% for the quarter ended September 30, 2024 compared to 21.1% for the quarter ended September 30, 2023. The decrease in the effective tax rate over the prior year is primarily due to an increase in compensation-related deductions during the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023. We expect our full year tax rate for fiscal 2025 to be in the 23.0% to 24.0% range.
Previous wording
As a result of the factors addressed above, net income for the nine months ended March 31, 2024 increased $27.7 million compared to the prior year period. Net income was $7.18 per share for the nine months ended March 31, 2024 compared to $6.49 per share in the prior year period.
Current wording
As a result of the factors addressed above, net income for the quarter ended September 30, 2024 decreased $1.8 million or 1.9% compared to the prior year quarter. Diluted net income per share was $2.36 per share for the quarter ended September 30, 2024 compared to $2.39 per share in the prior year quarter, a decrease of 1.3%.
Previous wording
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At March 31, 2024, we had total debt obligations outstanding of $597.1 million compared to $622.2 million at June 30, 2023. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, and cash provided from operations will be sufficient to finance normal working capital needs in each of the countries in which we operate, payment of dividends, acquisitions, investments in properties, facilities and equipment, debt service, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.
Current wording
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. We had total debt obligations outstanding of $597.3 million at September 30, 2024 compared to $597.4 million at June 30, 2024. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, and cash provided from operations will be sufficient to finance normal working capital needs in each of the countries in which we operate, payment of dividends, acquisitions, investments in properties, facilities and equipment, debt service, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.
Previous wording
The Company's working capital at March 31, 2024 was $1,299.3 million, compared to $1,106.5 million at June 30, 2023. The current ratio was 3.8 to 1 at March 31, 2024 and 3.0 to 1 at June 30, 2023.
Current wording
The Company's working capital at September 30, 2024 was $1,331.3 million, compared to $1,268.8 million at June 30, 2024. The current ratio was 3.8 to 1 at September 30, 2024 and 3.5 to 1 at June 30, 2024.
Previous wording
Net cash used in investing activities during the nine months ended March 31, 2024 decreased from the prior period primarily due to $21.4 million used for the acquisitions of Cangro Industries, Inc. and Bearing Distributors, Inc. in the current year compared to $35.7 million used for the acquisitions of Automation, Inc. and Advanced Motion Systems Inc., in the prior year period.
Current wording
Net cash used in investing activities during the three months ended September 30, 2024 decreased from the prior period primarily due to $10.5 million used for acquisitions in thecurrent year quarter compared to $21.4 million used for acquisitions in the prior year quarter.
Previous wording
The Board of Directors has authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. During the three months ended March 31, 2024, the Company acquired 100,053 shares of treasury stock on the open market for $18.2 million. During the nine months ended March 31, 2024, the Company acquired 163,000 shares of treasury stock on the open market for $28.9 million. During the three months ended March 31, 2023, the Company did not acquire any shares of treasury stock on the open market. During the nine months ended March 31, 2023, the Company acquired 8,000 shares of treasury stock for $0.7 million. At March 31, 2024, we had authorization to repurchase 1,337,000 additional shares.
Current wording
The Board of Directors has authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. During the three months ended September 30, 2024, the Company acquired 52,000 shares of the Company's common stock on the open market at an average price per share of $191.92. During the three months ended September 30, 2023, the Company did not acquire any shares of the Company's common stock on the open market. At September 30, 2024, we had authorization to repurchase 1,050,000 shares.
Previous wording
In December 2021, the Company entered into a new revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes. The revolving credit facility provides a $900.0 million unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to $500.0 million. In May 2023, the Company and the administrative agent entered into an amendment to the credit facility to replace LIBOR as a reference rate available for use in the computation of interest and replace it with SOFR. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on net leverage ratio or SOFR plus a margin that ranges from 80 to 155 basis points based on the net leverage ratio. Unused lines under this facility, net of outstanding letters of credit of $0.2 million to secure certain insurance obligations, totaled $516.2 million at March 31, 2024 and June 30, 2023, and were available to fund future acquisitions or other capital and operating requirements. The interest rate on the revolving credit facility was 6.23% and 6.11% as of March 31, 2024 and June 30, 2023, respectively.
Current wording
In December 2021, the Company entered into a five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes. The revolving credit facility provides a$900.0 million unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to$500.0 million. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on net leverage ratio or SOFR plus a margin that ranges from 80 to 155 basis points based on the net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled$515.8 million and$515.8 million at September 30, 2024 and June 30, 2024, respectively, and are available to fund future acquisitions or other capital and operating requirements. These amounts are net of outstanding letters of credit of$0.2 million at September 30, 2024 and June 30, 2024, to secure certain insurance obligations. The interest rate on the revolving credit facility was 5.75% and 6.24% as of September 30, 2024 and June 30, 2024, respectively.
Previous wording
Additionally, the Company had letters of credit outstanding with separate banks, not associated with the revolving credit agreement, in the amount of $4.0 million as of March 31, 2024 and June 30, 2023 in order to secure certain insurance obligations.
Current wording
Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of$5.3 million and$4.0 million as of September 30, 2024 and June 30, 2024, respectively, in order to secure certain insurance obligations.
Previous wording
In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”). On March 26, 2021, the Company amended the AR Securitization Facility to expand the eligible receivables, which increased the maximum availability to $250.0 million and increased the fees on the AR Securitization Facility to 0.98% per year. On August 4, 2023, the Company amended the AR Securitization Facility, extended the term to August 4, 2026, and reduced the drawn fees to 0.90% per year. Availability is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable being transferred and, therefore, at certain times, we may not be able to fully access the $250.0 million of funding available under the AR Securitization Facility. The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. In May 2023, the Company entered into an amendment to the AR Securitization Facility to replace LIBOR as a reference rate available for use in the computation of interest and replace it with SOFR, therefore borrowings under this facility carry variable interest rates tied to SOFR. The interest rate on the AR Securitization Facility as of March 31, 2024 and June 30, 2023 was 6.33% and 6.16%, respectively.
Current wording
In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”). The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. The AR Securitization Facility's maximum borrowing capacity is$250.0 million, fees on amounts borrowed are 0.90% per year, and the term goes to August 4, 2026. Borrowing capacity is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable portfolio and, therefore, at certain times, we may not be able to fully access the$250.0 million of borrowing capacity available under the AR Securitization Facility. Borrowings under the AR Securitization Facility carry variable interest rates tied to SOFR. The interest rate on the AR Securitization Facility as of September 30, 2024 and June 30, 2024 was 5.85% and 6.35%, respectively.
Previous wording
At March 31, 2024 and June 30, 2023, the Company had borrowings outstanding under its unsecured shelf facility agreement with Prudential Investment Management of $25.0 million and $50.0 million, respectively. Fees on this facility range from 0.25% to 1.25% per year based on the Company's leverage ratio at each quarter end. The "Series D" notes carried a fixed interest rate of 3.21%, and the remaining principal balance of $25.0 million was paid in October 2023. The “Series E” notes have a principal amount of $25.0 million, carry a fixed interest rate of 3.08%, and are due in October 2024.
Current wording
At September 30, 2024 and June 30, 2024, the Company had borrowings outstanding under its unsecured shelf facility agreement with Prudential Investment Management of$25.0 million. Fees on this facility range from 0.25% to 1.25% per year based on the Company's leverage ratio at each quarter end. The “Series E” notes have a principal amount of$25.0 million, carry a fixed interest rate of 3.08%, and are due on October 30, 2024.
Previous wording
In 2014, the Company assumed $2.4 million of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency, and matures in November 2024.
Current wording
In 2014, the Company assumed$2.4 million of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency, and matures in November 2024.
Previous wording
The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At March 31, 2024, the most restrictive of these covenants required that the Company have net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined). At March 31, 2024, the Company's net indebtedness was less than 0.4 times consolidated income before interest, taxes, depreciation and amortization (as defined). The Company was in compliance with all financial covenants at March 31, 2024.
Current wording
The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At September 30, 2024, the most restrictive of these covenants required that the Company have net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined). At September 30, 2024, the Company's net indebtedness was less than 0.2 times consolidated income before interest, taxes, depreciation and amortization (as defined). The Company was in compliance with all financial covenants at September 30, 2024.
Previous wording
As of March 31, 2024, approximately 1.8% of our accounts receivable balances are more than 90 days past due, compared to 2.5% at June 30, 2023. On an overall basis, our provision for losses on accounts receivable represents 0.03% of sales for the nine months ended March 31, 2024 compared to 0.14% of sales for the nine months ended March 31, 2023. The decrease primarily relates to provisions recorded in the prior year for customer credit deterioration and bankruptcies primarily in the U.S. operations of the Service Center Based Distribution segment, as well as improved collections performance. Historically, this percentage is around 0.10% to 0.15%. Management believes the overall receivables aging and provision for losses on accounts receivable are at reasonable levels.
Current wording
On a consolidated basis, DSO was 56.6 at September 30, 2024 compared to 56.2 at June 30, 2024. As of September 30, 2024, 1.6% of our accounts receivable balances are more than 90 days past due, compared to 1.5% at June 30, 2024. On an overall basis, our provision for losses from uncollected receivables represents 0.10% of our sales in the three months ended September 30, 2024, compared to 0.08% of sales for the three months ended September 30, 2023. The increase primarily relates to recoveries recorded in the prior year primarily in the U.S. operations of the Service Center Based Distribution segment. Historically, this percentage is around 0.10% to 0.15%. Management believes the overall receivables aging and provision for losses on uncollected receivables are at reasonable levels.
Previous wording
Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis, and believes that using average costs to determine the inventory turnover ratio instead of LIFO costs provides a more useful analysis. The annualized inventory turnover based on average costs was 4.3 for the period ended March 31, 2024 and 4.4 for the period ended June 30, 2023.
Current wording
Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis, and believes that using average costs to determine the inventory turnover ratio instead of LIFO costs provides a more useful analysis. The annualized inventory turnover based on average costs was 4.3 for both the quarters ended September 30, 2024 and June 30, 2024.
Previous wording
Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; continuing risks relating to the effects of the COVID-19 pandemic; inflationary or deflationary trends in the cost of products, energy, labor and other operating costs, and changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability (such as due to supply chain strains), changes in supplier distribution programs, inability of suppliers to perform, and transportation disruptions; changes in customer preferences for products and services of the nature and brands sold by us; changes in customer procurement policies and practices; competitive pressures; our reliance on information systems and risks relating to their proper functioning, the security of those systems, and the data stored in or transmitted through them; the impact of economic conditions on the collectability of trade receivables; reduced demand for our products in targeted markets due to reasons including consolidation in customer industries; our ability to retain and attract qualified sales and customer service personnel and other skilled executives, managers and professionals; our ability to identify and complete acquisitions, integrate them effectively, and realize their anticipated benefits; the variability, timing and nature of new business opportunities including acquisitions, alliances, customer relationships, and supplier authorizations; the incurrence of debt and contingent liabilities in connection with acquisitions; our ability to access capital markets as needed on reasonable terms; disruption of operations at our headquarters or distribution centers; risks and uncertainties associated with our foreign operations, including volatile economic conditions, political instability, cultural and legal differences, and currency exchange fluctuations; the potential for goodwill and intangible asset impairment; changes in accounting policies and practices; our ability to maintain effective internal control over financial reporting; organizational changes within the Company; risks related to legal proceedings to which we are a party; potentially adverse government regulation, legislation, or policies, both enacted and under consideration, including with respect to federal tax policy, labor policy, international trade, data privacy and security, and government contracting; and the occurrence of extraordinary events (including prolonged labor disputes, power outages, telecommunication outages, terrorist acts, war, public health emergency, earthquakes, extreme weather events, other natural disasters, fires, floods, and accidents). Other factors and unanticipated events could also adversely affect our business, financial condition, or results of operations. Risks can also chang…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; the impact that widespread illness, health epidemics, or general health concerns could have; inflationary or deflationary trends in the cost of products, energy, labor and other operating costs, and changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability (such as due to supply chain strains), changes in supplier distribution programs, inability of suppliers to perform, and transportation disruptions; changes in customer preferences for products and services of the nature and brands sold by us; changes in customer procurement policies and practices; competitive pressures; our reliance on information systems and risks relating to their proper functioning, the security of those systems, and the data stored in or transmitted through them; the impact of economic conditions on the collectability of trade receivables; reduced demand for our products in targeted markets due to reasons including consolidation in customer industries; our ability to retain and attract qualified sales and customer service personnel and other skilled executives, managers and professionals; our ability to identify and complete acquisitions, integrate them effectively, and realize their anticipated benefits; the variability, timing and nature of new business opportunities including acquisitions, alliances, customer relationships, and supplier authorizations; the incurrence of debt and contingent liabilities in connection with acquisitions; our ability to access capital markets as needed on reasonable terms; disruption of operations at our headquarters or distribution centers; risks and uncertainties associated with our foreign operations, including volatile economic conditions, political instability, cultural and legal differences, and currency exchange fluctuations; the potential for goodwill and intangible asset impairment; changes in accounting policies and practices; our ability to maintain effective internal control over financial reporting; organizational changes within the Company; risks related to legal proceedings to which we are a party; potentially adverse government regulation, legislation, or policies, both enacted and under consideration, including with respect to federal tax policy, international trade, data privacy and security, and government contracting; and the occurrence of extraordinary events (including prolonged labor disputes, power outages, telecommunication outages, terrorist acts, war, public health emergency, earthquakes, extreme weather events, other natural disasters, fires, floods, and accidents). Other factors and unanticipated events could also adversely affect our business, financial condition, or results of operations. Risks ca…
Excerpt shortened here; the source contains the full paragraph.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
The effective income tax rate was 20.7% for the quarter ended March 31, 2024 compared to 20.5% for the quarter ended March 31, 2023.
Previous report — wording carried elsewhere
The following table is included to aid in review of Applied's condensed statements of consolidated income.
Previous report — wording carried elsewhere
The following table shows changes in sales by reportable segment (amounts in millions).
Previous report — wording carried elsewhere
The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, and Singapore (amounts in millions).
Previous report — wording carried elsewhere
The following table shows the changes in selling, distribution and administrative expense (SD&A) (amounts in millions).
Previous report — wording carried elsewhere
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 18.8% of sales in the nine months ended March 31, 2024 compared to 18.5% in the prior year period. SD&A increased $21.9 million or 3.6% compared to the prior year period. Changes in foreign currency exchange rates had the effect of increasing SD&A during the nine months ended March 31, 2024 by $0.9 million or 0.2% compared to the prior year period. SD&A from businesses acquired added $10.8 million or 1.8% of SD&A expenses, including $1.1 million of intangibles amortization related to acquisitions. Excluding the impact of businesses acquired and the unfavorable currency translation impact, SD&A increased $10.2 million or 1.6% during the nine months ended March 31, 2024 compared to the prior year period. Excluding the impact of acquisitions, total compensation increased $6.1 million during the nine months ended March 31, 2024 primarily due to annual calendar year merit increases. All other expenses within SD&A were up $4.1 million.
Previous report — wording carried elsewhere
Interest expense, net decreased $13.9 million from the prior year period primarily due to reduced debt levels and greater interest income from higher cash balances and investment yields.
Previous report — wording carried elsewhere
On a consolidated basis, DSO was 55.8 at March 31, 2024 compared to 55.1 June 30, 2023.