Applied Industrial Technologies, Inc. (AIT)
F3Q09 (Qtr End 03/31/09) Earnings Call
April 23, 2009 4:00 pm ET
Richard Shaw - VP, Communications
David Pugh - Chairman and CEO
Ben Mondics - President and COO
Mark Eisele - VP and CFO
Matt Duncan - Stephens, Inc.
Jeff Hammond - KeyBanc Capital Markets
Adam Uhlman - Cleveland Research Company
Joe Mondello - Sidoti & Company
Jason Rodgers - Great Lakes Review
Brent Rakers - Morgan Keegan
Holden Lewis - BB&T Capital Markets
Previous Statements by AIT
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I would like to introduce Mr. Richard Shaw, Applied’s Vice President, Communications and Learning. Mr. Shaw you may begin.
Thank you, Jamie, and good afternoon to all our listeners today. On behalf of Applied Industrial Technologies, I would like to thank you for joining our fiscal 2009 third quarter conference call this afternoon.
You should have already received our earnings release that we issued this morning before the market opened. If you have not received it, you can retrieve it by visiting our website at applied.com. A replay of today's broadcast will be available for the next two weeks as noted in the archived information that’s contained in the news release.
Before we begin I would like to remind everyone that we will discuss Applied’s business outlook during this conference call and make statements that are forward-looking. All forward-looking statements are based on current expectations regarding important risk factors, including trends in the industrial sector of the economy, the success of our various marketing strategies, and other risk factors identified in Applied's to most periodic report and also with other filings made with the SEC. Accordingly, actual results may differ materially from those expressed in the forward-looking statements.
This conference call is the copyrighted property of Applied Industrial Technologies and any copying, rebroadcast publication, posting, transcription, or distribution of any portion of the call without Applied’s express written consent is prohibited.
Our speakers today include David Pugh, Chairman and CEO of Applied, who will discuss our overall performance during the quarter. You will also hear form Mark Eisele, Vice President and Chief Financial Officer, who will discuss our financial performance in detail, and Ben Mondics, our President and Chief Operating Officer, who will discuss operational activities.
Getting us started today is David Pugh.
Thanks, Rick. Good we with you guys again. Wish you were in better market circumstances. We are going to be somewhat brief in our remarks today because of the macro economics of what we do not control greatly overpowers the macro economics of what we do control and those macro economics are visible, already visible for everybody to see.
Let me just start by saying that this is as tough an environment as I have seen in my 38 years of business.
This morning we released our 2009 results under the circumstances it was a decent performance. There were no real surprises for us, the rate of market deterioration for the quarter met our worst expectations, presume line of indicators but it was very poor.
In our January conference call we said we were that we are operating in a difficult economic environment and that forecasting beyond the quarter with any degree of accuracy was nearly impossible. And I could just say ditto to that without any fear of contradiction for this quarter. Although the majority of our markets are in decline right now and while it is difficult to see where things are going to stabilize. I still believe that we are agile enough to continue to identify and to maximize new opportunities quickly.
Financial strength and strategic agility are what we are stressing and dealing with the situation that I see is still in total flux. The best that can be said is that the rate of market decline or the second derivative may be slowing. We have not seen nor can we see a return to growth at this point.
The economic indicators that we follow still show a contracting market and we lag that market in a recovery. As one would expect margin pressures have accelerated as we are experiencing more demands from our customers while our suppliers have no room to move.
As their unit prices rise with a drop in volume. This is a tough squeeze that our industry must handle well now in order to protect the future. So sales to continue their decline, the fear and uncertainty driven by job losses the decimation of personal savings and the lack of affordable credit has caused the consumer withdrawal which has had a big impact on our markets.
When things do begin to return to our growth mode we do not see a balance, but rather slow and gradual recovery. I expect consumers to be somewhat skeptical as they renter the market.
Keeping in mind we generally lag recovery by 3 to 6 months, I think we are looking at least the first quarter of calendar 2010 before we see things even start to improve. So that leaves us like a lot of other companies with the challenge of creating earnings in an environment without an economic tailwind.
But you know what we have been there before and we have good managers and operating in this type of climate. Our cost controls are going to be vital in response to the unavoidable drop in sales. We have made and we will continue to make appropriate adjustments to our cost structure, while working to maintain the critical mass that we need to service customers in the short term and to assure our ability to maximize our position for recovery over the longer term.