On April 18, industrial supply company Applied Industrial Technologies (NYSE:AIT) released its third-quarter earnings for the period ended March 31.

  • Cost cutting and share buybacks turned marginal sales growth into pretty nice earnings growth.
  • The company didn't say much in the press release, but it did reiterate its guidance for earnings and sales of $1.82 per share and $2.04 billion, respectively, for the year.
  • Based on the volume of recommendations in Motley Fool CAPS, I am guessing most of you don't know much about the industrial supply sector. Here's a taste: Grainger (NYSE:GWW) is a three-star stock, while Applied Industrial Technologies, MSM Industrial Direct (NYSE:MSM), and Fastenal (NASDAQ:FAST) are all five-star stocks. Find out why Fools in the community intelligence database love them by checking out CAPS today.

(Figures in millions, except per-share data)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$521.1

$497.2

4.8%

Net Profit

$21.7

$20.0

8.5%

EPS

$0.49

$0.43

14.0%

Diluted Shares

44.4

45.9

(3.3%)

Get back to basics with the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

27.0%

27.5%

(0.5)

Operating Margin

6.5%

6.5%

0.0

Net Margin

4.2%

4.0%

0.2

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.

$85.0

$76.2

11.5%

Accounts Rec.

$250.3

$236.0

6.1%

Inventory

$207.0

$208.1

(0.5%)

Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$99.7

$102.9

(3.1%)

Total Debt

$83.1

$76.4

8.8%

The balance sheet reflects the company's health.

Cash Flow Highlights

YTD 2007

YTD 2006

Change

Cash From Ops.

$32.8

$11.4

187.7%

Capital Expenditures

$8.1

$6.8

19.1%

Free Cash Flow

$24.7

$4.6

437.0%

Free cash flow is a Fool's best friend.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, retail editor David Meier did not own stock in any of the companies mentioned. Fool rules are here.