MRO Magazine

Applied reveals it paid $18 million for IECO

Saskatoon, Sask. -- Jan. 21, 2003 -- Applied Industrial Technologies Ltd. of Saskatoon, Sask., has revealed it paid...


Industry

January 21, 2003
By MRO Magazine
MRO Magazine

Industries

Saskatoon, Sask. — Jan. 21, 2003 — Applied Industrial Technologies Ltd. of Saskatoon, Sask., has revealed it paid “approximately US$12 million” or about C$18 million to acquire the distribution business of Industrial Equipment Co. Ltd. (IECO), a privately held distributor based in Vancouver, B.C. The transaction was completed Oct. 7, 2002.

IECO distributed a full range of industrial products, including bearings, power transmission components, seals, hose, filtration products and fluid power products. The acquisition included 16 facilities throughout British Columbia and Alberta. Together in 2001, these facilities generated sales of more than C$35million.

The acquisition price, which was previously unreleased, was posted in Applied’s fiscal 2003 second quarter report. The quarter ended December 31, 2002.

“The operations of IECO are being integrated with Applied Industrial Technologies Ltd., Applied’s wholly owned Canadian subsidiary,” according to the second-quarter report. “With annual sales of approximately $20 million, these 16 additional service centre locations will strengthen Applied’s presence in Alberta and British Columbia.”

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Headquartered in Saskatoon, Sask., Applied Industrial Technologies Ltd. operates as Bearing & Transmission and Hypower and now has 54 locations serving the western Canadian marketplace. It is a wholly-owned subsidiary of Cleveland, Ohio-based Applied Industrial Technologies.

On Jan. 15, 2003, the parent firm reported improved sales and earnings for the second quarter. Net sales for the quarter were $355,707,000, up 2.3% from the same period a year ago. Net income for the quarter increased 32% to $3,860,000. Earnings per share increased by 33% to $0.20 per share.

For the six months ended Dec. 31, 2002, sales increased 1.1% to $723,726,000 from the same period last year. Net income was $7,765,000 or $0.40 per share versus a loss of $(4,293,000) or $(0.23) per share. The prior half-year earnings include the effect of a non-cash charge of $12,100,000 for impaired goodwill associated with the company’s fluid power business.

Commenting on results, Applied chairman & chief executive officer David L. Pugh said, “We achieved sales slightly above the higher end of our expectations for the quarter, despite a very difficult economic and competitive environment. We are determined to outperform the general industrial economy through aggressive selling, disciplined asset management and operational excellence focused on delivering products and services accurately and on time.

Industrial economy remains weak

“The industrial economy remains weak across the board, with no significant rebound expected through the remainder of our 2003 fiscal year.

“Selling, distribution and administrative expenses as a per cent of sales increased by approximately 0.3% in the second quarter from higher personnel, benefit and insurance costs. These additional costs were offset partially in our second quarter SD&A by a benefit of approximately $1.2 million, or $0.04 per share, from gains on sales of unneeded real estate. Real estate and other property gains of $2.6 million increased earnings per share by approximately $0.08 for the six months ended December 31, 2002. Our cash flow and balance sheet remain strong. Our current ratio at December 31st was 2.9 to 1 and our ratio of debt, net of cash to equity, was 0.18 to 1.

“Looking ahead, sales guidance for our fiscal third quarter is $365 million to $375 million. Earnings per share are forecast to be within a range of $0.15 to $0.20. We continue to maintain full fiscal 2003 guidance for earnings between $0.75 to $0.90 per share on sales ranging from $1.45 billion to $1.5 billion.”

Shares being repurchased

For the six months ended December 31, 2002, the company repurchased 232,000 shares of stock for $3.9 million. At December 31, 2002, board authorization was in place to repurchase up to 579,000 additional shares.

For its fiscal year ended June 30, 2002, the company posted sales of $1.45 billion. Applied can be visited on the Internet at www.applied.com .

By Bill Roebuck, Editor