Applied Industrial Technologies Inc Stock

Applied Industrial Technologies, Inc. operates as a distributor and solutions provider of industrial motion, power, control, and automation technologies.

The company, through its comprehensive network of approximately 6,200 employee associates and approximately 580 facilities, including service center, fluid power, flow control, and automation operations, as well as repair shops and distribution centers, offers a selection of more than 8.8 million stock keeping units with a focus on industrial bearings, power transmission products, fluid power components and systems, specialty flow control, and advanced factory automation solutions.

The company markets its products with a set of service solutions, including inventory management, engineering, design, assembly, repair, and systems integration, as well as customized mechanical, fabricated rubber, and shop services. The company’s customers use its products and services for both MRO (maintenance, repair, and operating) and OEM (original equipment manufacturing) applications across a variety of end markets primarily in North America, as well as Australia, New Zealand, and Singapore.

The company is a leading distributor of products, including bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, tools, safety products, and other industrial and maintenance supplies.

Strategy

The key elements of the company’s strategic growth are to capture market share across its core service center network; extend its leading fluid power and flow control position as demand for comprehensive solutions grows; expand automation platform and develop growth around emerging industrial technologies; and pursue value-creating acquisitions to supplement growth and strengthen industry position.

Operations

The company’s distribution and sales network consists of approximately 450 locations in its Service Center Distribution segment and approximately 130 locations in its Engineered Solutions segment. This includes service centers, distribution centers, and facilities tied to the company’s fluid power, flow control, and automation operations. The company’s service centers resemble local inventory hubs located in close proximity to its customers and focused primarily on MRO related fulfillment and service needs. The company’s fluid power, flow control, and automation locations support technical and shop-oriented services integral to the more specialized and integrated nature of the products and solutions they provide. Other operations and channels the company markets through include inventory management services for indirect consumable supplies and digital solutions, including its Applied.com website, electronic data interchange (EDI) and other electronic interfaces with customers' technology platforms and plant maintenance systems.

The company’s distribution centers provide daily service to its service centers, helping replenish inventories and shipping products directly to customers where appropriate. An efficient supply chain and timely delivery of the company’s products is vital to its value proposition particularly when customers require products for emergency repairs. The company utilizes dedicated third-party transportation providers, its own delivery vehicles, as well as surface and air common carrier and courier services. Customers may also pick up items at its service centers. The company maintains product inventory levels at each service center tailored to the local market. These inventories consist of standard items, as well as other items specific to local customer demand.

The company’s operations are primarily based in the U.S. where 87% of its fiscal 2023 (year ended June 30, 2023) sales were generated. The company also has international operations, the largest of which is in Canada (7% of fiscal 2023 sales) with the balance (6% of fiscal 2023 sales) in Mexico, Australia, New Zealand, and Singapore.

Markets

The company purchases from thousands of product manufacturers and resell the products to thousands of customers in a wide variety of industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as to government entities.

Segments

The company operates through two segments, Service Center Based Distribution and Engineered Solutions.

Service Center Based Distribution

This segment includes its legacy MRO distribution operations across North America, Australia, and New Zealand. This business operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of motion control infrastructure and production equipment. Products primarily include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses, as well as other related supplies for general operational needs of customers’ machinery and equipment.

Service center locations are stocked with product inventory tailored to each local market and staffed with customer sales and service representatives, account managers, as well as product and industry specialists. Customer sales and service representatives receive, process, and expedite customer orders, provide product information, and assist account managers in serving customers. Account managers make onsite calls to customers to provide product information, identify customer requirements, make recommendations, and assist in implementing equipment maintenance and storeroom management programs. Industry specialists assist with product applications in their areas of expertise. Service centers market product offerings with a suite of services that create additional value for the customer. This includes onsite training, product fabrication and repair, and inventory management solutions. The company also provides analysis and measurement of productivity improvement and cost savings potential from these services through its Applied Documented Value-Added (DVA) reports.

The segment includes operations focused on certain end markets and indirect consumable supplies through vendor managed inventory solutions, as well as regional fabricated rubber shops and service field crews, which install, modify, and repair conveyor belts and rubber linings, and make hose assemblies in accordance with customer requirements.

Engineered Solutions

This segment includes the company’s operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies, and engineered flow control products and services. The company is the largest distributor and solutions provider of fluid power and industrial flow control products and solutions in the U.S. The segment also includes the company’s operations that focus on advanced automation solutions, including machine vision, robotics, motion control, and smart technologies.

The company’s fluid power operations offer products and services primarily used within industrial, off-highway mobile, and technology applications. Fluid power products include hydraulic and pneumatic technologies using liquids and gases to transmit power, typically in smaller spaces than other forms of power transmission. Hydraulic products offer high power to weight ratios, high torque at low speeds, and power reliability, while pneumatic products are focused on lightweight applications in need of speed and precision. The company’s fluid power products and solutions are commonly used for off-highway equipment, heavy industrial equipment and machines at factories, marine and offshore equipment, factory automation, food processing equipment, packaging operations, and downstream energy process systems. Operations are supported by a team of certified fluid power specialists, mechanics, technicians, and engineers that provide technical services ranging from system design and integration, electronic control integration, hydraulic assemblies, repair and rebuild, manifold design and assembly, customized filtration solutions, software programming and repair, and hydraulic system retrofits, and integration of autonomous and electrification features.

The company’s specialty flow control operations provide highly engineered process flow control products, solutions, and services. Products include pumps, valves, fittings, hoses, process instrumentation, actuators, and filtration supplies which are used to control the flow of liquids and gases in mission-critical industrial applications. The company’s flow control products and services are focused on MRO related applications; OEMs; and engineering, procurement, and construction (EPC) firms across a variety of industries, including chemicals, steel, power, oil and gas, pulp and paper, life sciences, pharmaceuticals, food and beverage, and general industrials. Similar to its fluid power operations, the company’s flow control offering includes technical service capabilities, such as flow control systems integration, repair services, valve actuation, process instrumentation, pipe and hose fabrication, and compliance consulting. The company’s flow control solutions are increasingly used in applications tied to required infrastructure for decarbonization initiatives, including providing technical support for the configuration, assembly, and testing of process systems.

The company’s advanced automation operations provide solutions focused on the design, assembly, integration, and distribution of machine vision, collaborative robots, mobile robots, RFID, industrial networking, and machine learning technologies for OEMs, machine builders, integrators, and other industrial and technology end users. Products and solutions are marketed across a variety of industries, including technology, medical, life sciences, biotechnology, data centers, food and beverage, logistics, consumer, and general industrial. The company’s automation business helps customers develop, produce, and integrate machine and facility automation solutions using comprehensive technology and application knowledge. A core element of the company’s strategy and value proposition within automation is its value-added and engineered solution capabilities, enabling it to provide in-depth consultative, design, engineering, assembly, testing, and support services for various customer requirements.

Seasonality

The company’s business has exhibited minor seasonality. In particular, sales per day during the first half of its fiscal year (year ended June 2023) have historically been slightly lower than the second half due, in part, to the impact of customer plant shutdowns, summer vacations and holidays.

Patents, Trademarks, Trade Names, and Licenses

The company’s service marks and trade names are Applied Industrial Technologies, Applied, and AIT.

History

Applied Industrial Technologies, Inc. was founded in 1923.