x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Ohio
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34-0117420
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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One Applied Plaza, Cleveland, Ohio
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44115
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
No.
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Part I:
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Item 1:
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Condensed Consolidated Balance Sheets—September 30, 201
3 and June 30, 2013
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Item 2:
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Item 3:
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Item 4:
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Part II:
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Item 1:
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Item 2:
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Item 6:
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PART I:
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FINANCIAL INFORMATION
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ITEM I:
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FINANCIAL STATEMENTS
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Three Months Ended
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||||||
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September 30,
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||||||
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2013
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2012
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Net Sales
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$
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605,305
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$
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610,519
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Cost of Sales
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435,510
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445,986
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Gross Profit
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169,795
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164,533
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Selling, Distribution and Administrative, including depreciation
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130,256
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120,215
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Operating Income
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39,539
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44,318
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Interest Expense, net
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61
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25
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Other (Income) Expense, net
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(1,091
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)
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(459
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)
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Income Before Income Taxes
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40,569
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44,752
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Income Tax Expense
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13,725
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15,220
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Net Income
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$
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26,844
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$
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29,532
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Net Income Per Share - Basic
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$
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0.64
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$
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0.70
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Net Income Per Share - Diluted
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$
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0.63
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$
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0.70
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Cash dividends per common share
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$
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0.23
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$
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0.21
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Weighted average common shares outstanding for basic computation
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42,157
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41,966
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Dilutive effect of potential common shares
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480
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511
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Weighted average common shares outstanding for diluted computation
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42,637
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42,477
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Three Months Ended
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||||||
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September 30,
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||||||
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2013
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2012
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Net income per the condensed statements of consolidated income
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$
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26,844
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$
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29,532
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Other comprehensive income (loss), before tax:
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Foreign currency translation adjustments
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550
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9,001
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Postemployment benefits:
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Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs
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95
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|
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218
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Unrealized gain (loss) on investment securities available for sale
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34
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23
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Total of other comprehensive income (loss), before tax
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679
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9,242
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Income tax expense related to items of other comprehensive income
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48
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94
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Other comprehensive income (loss), net of tax
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631
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9,148
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Comprehensive income, net of tax
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$
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27,475
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$
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38,680
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September 30,
2013 |
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June 30,
2013 |
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ASSETS
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Current assets
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Cash and cash equivalents
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$
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76,877
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$
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73,164
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Accounts receivable, less allowances of $7,582 and $7,737
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320,281
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329,880
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Inventories
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302,404
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281,417
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Other current assets
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34,174
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52,819
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Total current assets
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733,736
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737,280
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Property, less accumulated depreciation of $160,592 and $157,506
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81,149
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83,243
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Intangibles, net
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87,961
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91,267
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Goodwill
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106,973
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106,849
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Deferred tax assets
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20,568
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21,026
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Other assets
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19,702
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19,041
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TOTAL ASSETS
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$
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1,050,089
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$
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1,058,706
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities
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Accounts payable
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$
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131,195
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$
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136,575
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Compensation and related benefits
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45,373
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63,899
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Other current liabilities
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49,007
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45,426
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Total current liabilities
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225,575
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245,900
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Postemployment benefits
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25,340
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30,919
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Other liabilities
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24,552
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22,272
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TOTAL LIABILITIES
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275,467
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299,091
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Shareholders’ Equity
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Preferred stock—no par value; 2,500 shares authorized; none issued or outstanding
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—
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—
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Common stock—no par value; 80,000 shares authorized; 54,213 shares issued
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10,000
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10,000
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Additional paid-in capital
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154,492
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153,893
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Income retained for use in the business
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841,448
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824,362
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Treasury shares—at cost (12,031 and 12,044 shares)
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(228,528
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)
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(225,219
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)
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Accumulated other comprehensive income (loss)
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(2,790
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)
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(3,421
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)
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TOTAL SHAREHOLDERS’ EQUITY
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774,622
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759,615
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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$
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1,050,089
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$
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1,058,706
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Three Months Ended
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||||||
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September 30,
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||||||
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2013
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2012
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Cash Flows from Operating Activities
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Net income
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$
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26,844
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$
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29,532
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization of property
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3,431
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3,022
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Amortization of intangibles
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3,249
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3,055
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Unrealized foreign exchange transactions gain
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(291
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)
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(286
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)
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Amortization of stock options and appreciation rights
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636
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809
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Loss (gain) on sale of property
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35
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(117
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)
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Other share-based compensation expense
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754
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1,035
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Changes in assets and liabilities, net of acquisitions
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(18,014
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)
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(13,456
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)
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Other, net
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312
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353
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Net Cash provided by Operating Activities
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16,956
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23,947
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Cash Flows from Investing Activities
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Property purchases
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(1,571
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)
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(3,892
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)
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Proceeds from property sales
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183
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|
243
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Net cash paid for acquisition of businesses, net of cash acquired
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—
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(35,409
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)
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Net Cash used in Investing Activities
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(1,388
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)
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(39,058
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)
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Cash Flows from Financing Activities
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|
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|
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Purchases of treasury shares
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(3,001
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)
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—
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Dividends paid
|
|
(9,746
|
)
|
|
(8,867
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)
|
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Excess tax benefits from share-based compensation
|
|
1,516
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|
|
1,168
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|
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Acquisition holdback payments
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|
(606
|
)
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(760
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)
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Exercise of stock options and appreciation rights
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|
—
|
|
|
36
|
|
||
Net Cash used in Financing Activities
|
|
(11,837
|
)
|
|
(8,423
|
)
|
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Effect of Exchange Rate Changes on Cash
|
|
(18
|
)
|
|
1,765
|
|
||
Increase (Decrease) in Cash and Cash Equivalents
|
|
3,713
|
|
|
(21,769
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
|
73,164
|
|
|
78,442
|
|
||
Cash and Cash Equivalents at End of Period
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|
$
|
76,877
|
|
|
$
|
56,673
|
|
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1.
|
BASIS OF PRESENTATION
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2.
|
GOODWILL AND INTANGIBLES
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|
Service Center Based Distribution
|
|
Fluid Power Businesses
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|
Total
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||||||
Balance at July 1, 2013
|
$
|
105,920
|
|
|
$
|
929
|
|
|
$
|
106,849
|
|
Goodwill acquired during the period
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other, primarily currency translation
|
124
|
|
|
—
|
|
|
124
|
|
|||
Balance at September 30, 2013
|
$
|
106,044
|
|
|
$
|
929
|
|
|
$
|
106,973
|
|
September 30, 2013
|
|
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||
Finite-Lived Intangibles:
|
|
|
|
|
|
|
||||||
Customer relationships
|
|
$
|
101,009
|
|
|
$
|
41,146
|
|
|
$
|
59,863
|
|
Trade names
|
|
26,436
|
|
|
8,987
|
|
|
17,449
|
|
|||
Vendor relationships
|
|
15,352
|
|
|
5,684
|
|
|
9,668
|
|
|||
Non-competition agreements
|
|
3,290
|
|
|
2,309
|
|
|
981
|
|
|||
Total Intangibles
|
|
$
|
146,087
|
|
|
$
|
58,126
|
|
|
$
|
87,961
|
|
June 30, 2013
|
|
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||
Finite-Lived Intangibles:
|
|
|
|
|
|
|
||||||
Customer relationships
|
|
$
|
100,854
|
|
|
$
|
38,844
|
|
|
$
|
62,010
|
|
Trade names
|
|
26,690
|
|
|
8,643
|
|
|
18,047
|
|
|||
Vendor relationships
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|
15,433
|
|
|
5,443
|
|
|
9,990
|
|
|||
Non-competition agreements
|
|
4,743
|
|
|
3,523
|
|
|
1,220
|
|
|||
Total Intangibles
|
|
$
|
147,720
|
|
|
$
|
56,453
|
|
|
$
|
91,267
|
|
3.
|
FAIR VALUE MEASUREMENTS
|
4.
|
SHAREHOLDERS' EQUITY
|
|
|
Foreign currency translation adjustment
|
|
|
Unrealized gain (loss) on securities available for sale
|
|
|
Postemployment benefits
|
|
|
Total Accumulated other comprehensive income (loss)
|
|
||||
Balance at July 1, 2013
|
|
$
|
360
|
|
|
$
|
(52
|
)
|
|
$
|
(3,729
|
)
|
|
$
|
(3,421
|
)
|
Other comprehensive income (loss)
|
|
550
|
|
|
23
|
|
|
|
|
|
573
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
58
|
|
|
58
|
|||||||
Net current-period other comprehensive income (loss), net of taxes
|
|
550
|
|
|
23
|
|
|
58
|
|
|
631
|
|
||||
Balance at September 30, 2013
|
|
$
|
910
|
|
|
$
|
(29
|
)
|
|
$
|
(3,671
|
)
|
|
$
|
(2,790
|
)
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
|
Pre-Tax Amount
|
|
Tax Expense (Benefit)
|
|
Net Amount
|
|
Pre-Tax Amount
|
|
Tax Expense (Benefit)
|
|
Net Amount
|
||||||||||||
Foreign currency translation adjustments
|
|
$
|
550
|
|
|
$
|
—
|
|
|
$
|
550
|
|
|
$
|
9,001
|
|
|
$
|
—
|
|
|
$
|
9,001
|
|
Postemployment benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs
|
|
95
|
|
|
37
|
|
|
58
|
|
|
218
|
|
|
85
|
|
|
133
|
|
||||||
Unrealized gain (loss) on investment securities available for sale
|
|
34
|
|
|
11
|
|
|
23
|
|
|
23
|
|
|
9
|
|
|
14
|
|
||||||
Other comprehensive income (loss)
|
|
$
|
679
|
|
|
$
|
48
|
|
|
$
|
631
|
|
|
$
|
9,242
|
|
|
$
|
94
|
|
|
$
|
9,148
|
|
|
|
Pension Benefits
|
|
Retiree Health Care
Benefits
|
||||||||||||
Three Months Ended September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Components of net periodic cost:
|
|
|
|
|
|
|
|
|
||||||||
Service cost
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
12
|
|
|
$
|
20
|
|
Interest cost
|
|
295
|
|
|
315
|
|
|
35
|
|
|
47
|
|
||||
Expected return on plan assets
|
|
(104
|
)
|
|
(101
|
)
|
|
|
|
|
||||||
Recognized net actuarial loss (gain)
|
|
153
|
|
|
184
|
|
|
(9
|
)
|
|
(13
|
)
|
||||
Amortization of prior service cost
|
|
20
|
|
|
21
|
|
|
(68
|
)
|
|
27
|
|
||||
Net periodic cost
|
|
$
|
383
|
|
|
$
|
438
|
|
|
$
|
(30
|
)
|
|
$
|
81
|
|
6.
|
SEGMENT AND GEOGRAPHIC INFORMATION
|
Three Months Ended
|
|
Service Center Based Distribution
|
|
Fluid Power Businesses
|
|
Total
|
||||||
September 30, 2013
|
|
|
|
|
|
|
||||||
Net sales
|
|
$
|
492,072
|
|
|
$
|
113,233
|
|
|
$
|
605,305
|
|
Operating income for reportable segments
|
|
28,372
|
|
|
9,457
|
|
|
37,829
|
|
|||
Assets used in business
|
|
841,770
|
|
|
208,319
|
|
|
1,050,089
|
|
|||
Depreciation and amortization of property
|
|
2,999
|
|
|
432
|
|
|
3,431
|
|
|||
Capital expenditures
|
|
1,394
|
|
|
177
|
|
|
1,571
|
|
|||
|
|
|
|
|
|
|
||||||
September 30, 2012
|
|
|
|
|
|
|
||||||
Net sales
|
|
$
|
497,826
|
|
|
$
|
112,693
|
|
|
$
|
610,519
|
|
Operating income for reportable segments
|
|
33,720
|
|
|
10,536
|
|
|
44,256
|
|
|||
Assets used in business
|
|
787,028
|
|
|
214,739
|
|
|
1,001,767
|
|
|||
Depreciation and amortization of property
|
|
2,564
|
|
|
458
|
|
|
3,022
|
|
|||
Capital expenditures
|
|
3,714
|
|
|
178
|
|
|
3,892
|
|
|
|
Three Months Ended
|
||||||
|
|
September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Operating income for reportable segments
|
|
$
|
37,829
|
|
|
$
|
44,256
|
|
Adjustment for:
|
|
|
|
|
||||
Intangible amortization—Service Center Based Distribution
|
|
1,495
|
|
|
1,223
|
|
||
Intangible amortization—Fluid Power Businesses
|
|
1,754
|
|
|
1,832
|
|
||
Corporate and other expense (income), net
|
|
(4,959
|
)
|
|
(3,117
|
)
|
||
Total operating income
|
|
39,539
|
|
|
44,318
|
|
||
Interest expense, net
|
|
61
|
|
|
25
|
|
||
Other (income) expense, net
|
|
(1,091
|
)
|
|
(459
|
)
|
||
Income before income taxes
|
|
$
|
40,569
|
|
|
$
|
44,752
|
|
7.
|
OTHER (INCOME) EXPENSE , NET
|
|
|
Three Months Ended
|
||||||
|
|
September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan
|
|
$
|
(596
|
)
|
|
$
|
(441
|
)
|
Foreign currency transactions (gain) loss
|
|
605
|
|
|
(81
|
)
|
||
Elimination of one-month Canadian reporting lag effective July 1, 2013
|
|
(1,167
|
)
|
|
—
|
|
||
Other, net
|
|
67
|
|
|
63
|
|
||
Total other (income) expense, net
|
|
$
|
(1,091
|
)
|
|
$
|
(459
|
)
|
/s/ Deloitte & Touche LLP
|
|
Cleveland, Ohio
|
November 8, 2013
|
|
|
Three Months Ended September 30,
|
|
Change in $'s Versus Prior Period % Increase
|
|||||
|
|
As a Percent of Net Sales
|
|
||||||
|
|
2013
|
|
2012
|
|
||||
Net Sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
(0.9
|
)%
|
Gross Profit
|
|
28.1
|
%
|
|
26.9
|
%
|
|
3.2
|
%
|
Selling, Distribution & Administrative
|
|
21.5
|
%
|
|
19.7
|
%
|
|
8.4
|
%
|
Operating Income
|
|
6.5
|
%
|
|
7.3
|
%
|
|
(10.8
|
)%
|
Net Income
|
|
4.4
|
%
|
|
4.8
|
%
|
|
(9.1
|
)%
|
Country
|
|
Amount
|
||
United Sates
|
|
$
|
27,822
|
|
Canada
|
|
45,543
|
|
|
Other Countries
|
|
3,512
|
|
|
Total
|
|
$
|
76,877
|
|
|
|
Three Months Ended September 30,
|
||||||
Net Cash Provided by (Used in):
|
|
2013
|
|
2012
|
||||
Operating Activities
|
|
$
|
16,956
|
|
|
$
|
23,947
|
|
Investing Activities
|
|
(1,388
|
)
|
|
(39,058
|
)
|
||
Financing Activities
|
|
(11,837
|
)
|
|
(8,423
|
)
|
||
Exchange Rate Effect
|
|
(18
|
)
|
|
1,765
|
|
||
Increase (Decrease) in Cash and Cash Equivalents
|
|
$
|
3,713
|
|
|
$
|
(21,769
|
)
|
|
|
September 30,
|
June 30,
|
||||
|
|
2013
|
2013
|
||||
Accounts receivable, gross
|
|
$
|
327,863
|
|
$
|
337,617
|
|
Allowance for doubtful accounts
|
7,582
|
|
7,737
|
|
|||
Accounts receivable, net
|
$
|
320,281
|
|
$
|
329,880
|
|
|
Allowance for doubtful accounts, % of gross receivables
|
2.3
|
%
|
2.3
|
%
|
|||
|
|
|
|
||||
|
|
For the three months ended September 30,
|
|||||
|
|
2013
|
2012
|
||||
Provision for losses on accounts receivable
|
$
|
112
|
|
$
|
224
|
|
|
Provision as a % of net sales
|
|
0.02
|
%
|
0.04
|
%
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
Legal Proceedings
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
(a) Total Number of Shares
|
(b) Average Price Paid per Share ($)
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)(2)
|
||
July 1, 2013 to July 31, 2013
|
0
|
—
|
|
0
|
1,141,500
|
|
August 1, 2013 to August 31, 2013
|
25,000
|
48.66
|
|
25,000
|
1,116,500
|
|
September 1, 2013 to September 30, 2013
|
35,700
|
49.97
|
|
35,700
|
1,080,800
|
|
Total
|
60,700
|
49.43
|
|
60,700
|
1,080,800
|
|
(1)
|
On October 25, 2011, the Board of Directors authorized the purchase of up to 1.5 million shares of the Company's common stock. The Company publicly announced the authorization that day. Purchases can be made in the open market or in privately negotiated transactions.
|
(2)
|
During the quarter the Company purchased one hundred ninety-two shares in connection with the vesting of stock awards. This purchase is not counted in the authorization in note (1) above.
|
Exhibit No.
|
|
Description
|
3.1
|
|
Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to the Company’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference).
|
|
|
|
3.2
|
|
Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference).
|
|
|
|
4.1
|
|
Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).
|
|
|
|
4.2
|
|
Private Shelf Agreement dated as of November 27, 1996, between the Company and Prudential Investment Management, Inc. (assignee of The Prudential Insurance Company of America), conformed to show all amendments (filed as Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended March 31, 2010, SEC File No. 1-2299, and incorporated here by reference).
|
|
|
|
4.3
|
|
Credit Agreement dated as of May 15, 2012, among Applied Industrial Technologies, Inc., KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4 to Applied's Form 8-K dated May 17, 2012, SEC File No. 1-2299, and incorporated here by reference).
|
|
|
|
10.1
|
|
Offer of Employment for Carl E. Will.
|
|
|
|
10.2
|
|
Severance Agreement for Carl E. Will.
|
|
|
|
10.3
|
|
Change in Control Agreement for Carl E. Will.
|
|
|
|
10.4
|
|
Key Executive Restoration Plan, as amended and restated, for Applied's executive officers and list of participants (filed as Exhibit 10.1 to Applied's Form 8-K dated August 16, 2013, SEC File No. 1-2299, and incorporated here by reference).
|
|
|
|
15
|
|
Independent Registered Public Accounting Firm’s Awareness Letter.
|
|
|
|
18
|
|
Preferability letter from Independent Registered Public Accounting Firm Regarding Change in Accounting Principle.
|
|
|
|
31
|
|
Rule 13a-14(a)/15d-14(a) certifications.
|
|
|
|
32
|
|
Section 1350 certifications.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
|
|
|
(Company)
|
|
|
|
Date:
|
November 8, 2013
|
By:
/s/ Neil A.Schrimsher
|
|
|
Neil A. Schrimsher
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
Date:
|
November 8, 2013
|
By:
/s/ Mark O. Eisele
|
|
|
Mark O. Eisele
|
|
|
Vice President-Chief Financial Officer & Treasurer
|
1.
|
Position
. The Board of Directors will elect you Chief Commercial Officer. This is an executive officer position reporting directly to me.
|
2.
|
Base Salary
. As is the case with all Applied officers, compensation and benefits are set by the Board's Executive Organization & Compensation Committee (the “Committee”). Under current procedures, the Committee reviews annual base salaries in August, with any adjustment retroactive to July 1. Your starting annual base salary will be $400,000, and it is anticipated your next merit review would be effective July 1, 2014.
|
3.
|
2014 Annual Incentive
. The Committee will designate you a participant in the Management Incentive Plan for the fiscal year ending June 30, 2014. The plan will provide for incentive payments based on the achievement of fiscal year goals, with payments, if any, distributed in August following the release of fiscal year-end audited financial results.
|
4.
|
Long-Term Incentive Awards
. You will be eligible for awards under Applied's Long-Term Performance Plan. Your targeted long-term incentive value for fiscal 2014 will be $400,000. In recent years, the Committee has awarded long-term incentive value to the executive officers through a combination of three-year performance shares, restricted stock units, and stock-settled stock appreciation rights. The programs are approved by the Committee annually, typically in August, and there is no guarantee that the long-term incentive vehicles or your targeted long-term incentive value will remain unchanged.
|
5.
|
Severance Agreement
. The Committee will provide you an executive severance agreement, which will provide you a severance benefit if your employment with Applied is terminated either by you “for good reason” or by Applied “without cause.” The executive severance agreement will expire on the first anniversary of the Hire Date. The benefit provided is an amount equal to your base salary for the lesser of six months or the period remaining until the first anniversary of the Hire Date.
|
6.
|
Change in Control Agreement
. You will also receive a change-in-control agreement. This agreement will provide that if, within two years following a change in control of Applied, your employment with Applied is terminated either by you “for good reason” or by Applied “without cause”, then you will receive a severance payment equal to one and one-half times your total compensation (base salary plus your targeted annual incentive pay), plus one and one-half years of continued benefits. You will not be entitled to payment under the executive severance agreement referenced in section 5, above, if you receive payment under the change in control agreement.
|
7.
|
Key Executive Restoration Plan
. You will be designated a participant in Applied's Key Executive Restoration Plan (the “KERP”). The plan is a non-qualified defined contribution arrangement under which Applied will contribute to a retirement account in your name (a) 8 percent of your calendar year pay (base salary plus annual incentive pay), minus (b) the amount of company contributions (both matching and profit sharing) made to the Retirement Savings Plan for the same period, as described below. Pursuant to the KERP, the account will vest 50% after three years of service, another 25% after four years, and will be fully vested after five years of service with Applied.
|
8.
|
Other Executive Plans and Programs
. As an Applied officer, you will be eligible to participate in the following executive plans and programs, during the periods such plans and programs are continued by Applied and as the same may be amended from time to time, on the same basis as other Applied officers:
|
a.
|
Executive life insurance program;
|
b.
|
Long-term disability program; and
|
c.
|
Deferred Compensation Plan.
|
9.
|
Vacation
. Company policy currently provides officers five weeks' vacation per calendar year. For calendar 2013, your vacation eligibility will be prorated based on your Hire Date.
|
10.
|
Other Associate Benefits
. Among the normal benefits available to Applied employees are the following:
|
a.
|
Health Care Program.
We offer health care options currently administered by Anthem, and dental coverage administered by CIGNA. Because you become eligible for these benefits only after a waiting period, Applied will reimburse you for interim COBRA costs.
|
b.
|
Retirement Savings Plan
. Applied's section 401(k) plan provides for compensation deferral and a company match in Applied stock with respect to the first 6% of compensation deferred. A variety of investment options are available. The company match ranges from a minimum of 25% to a maximum of 100% per quarter based on Applied achieving certain net income hurdles. Applied also makes annual profit sharing contributions depending on Applied's profitability during the previous fiscal year. The company match and profit sharing contributions vest under the plan at the rate of 25% for each year of your employment with Applied.
|
c.
|
Supplemental Defined Contribution Plan (the “Shadow Plan”)
. Highly compensated associates are eligible for the Shadow Plan, a non-qualified plan maintained in conjunction with the Retirement Savings Plan. The Shadow Plan provides you a vehicle for saving on a tax-deferred basis even if the tax laws limit the amount of contributions you can make to the Retirement Savings Plan.
|
11.
|
Your Covenants
.
|
a.
|
Noncompetition Covenant
. During your employment and the two-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree that you will not, directly or indirectly, with or through another individual or organization,
|
(i)
|
whether as a shareholder (other than as the holder of less than 1% of the outstanding shares of a publicly held company), partner, member, director, officer, employee, agent or consultant, or in any other capacity, in competition with Applied or any of its affiliates, anywhere within the United States, Canada, Mexico, Australia, New Zealand, Singapore, or any other nation in which Applied or its affiliates hereafter conducts business, (a) distribute products that are the same or similar to products sold, designed, or distributed by Applied or any of its affiliates during the 12-month period preceding the date of termination of your relationships with Applied and its affiliates as an officer or employee, or (b) provide services that are the same or similar to services provided by Applied or any of its affiliates during the 12-month period preceding the date of termination of your relationships with Applied and its affiliates as an officer or employee; or
|
(ii)
|
except with the prior written consent of Applied's Board of Directors, assume a position as a shareholder (other than as the holder of less than 1% of the outstanding shares of a publicly held company), partner, member, director, officer, employee, agent or consultant, or in any other capacity, with any of the following Applied product suppliers (or their affiliates): Baldor Electric, Eaton, Rexnord, SKF, and Timken.
|
b.
|
Nonsolicitation Covenant
. During your employment and the two-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree that you will not, directly or indirectly, with or through another individual or organization, induce, solicit or assist or facilitate the inducement or solicitation by any third person of
|
c.
|
Confidential Information
. During your employment and the five-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree to keep confidential and not disclose to others information relating to Applied or any of its affiliates, or their respective businesses, including, but not limited to, information regarding (i) customers or potential customers; (ii) vendors or suppliers; (iii) pricing structure and profit margins; (iv) business plans and strategies; (v) employees and payroll policies; (vi) computer systems; (vii) facilities or properties; and (viii) other proprietary, confidential or secret information relating to Applied or any of its affiliates (“Confidential Information”). You shall use all reasonable care to protect, and prevent unauthorized disclosure of, any Confidential Information unless such information (a) is now or becomes generally known or available to the public without any violation of this agreement; or (b) is required to be disclosed by applicable law or court or governmental order.
|
d.
|
Remedies; Severability
. You acknowledge that a breach of your covenants in this Section 11 would result in irreparable injury to Applied for which monetary damages alone would not be an adequate remedy. Therefore, you consent to the issuance of injunctive relief in the event of a breach of your covenants, in addition to any other remedies to which Applied may be entitled at law or in equity. In addition, if any provision of this Section 11 or the application of any provision to any person or circumstances shall be held to be excessively broad including without limitation, as to time, geographic area, or scope of activity, that provision shall be construed by limiting and reducing it so as to be enforceable to the maximum extent allowed by applicable law.
|
14.
|
Miscellaneous
. This offer letter shall be construed in accordance with the laws of the State of Ohio. Except as expressly provided herein, your employment shall be subject to all employment policies and procedures applicable to Applied associates generally. As with the other Applied officers, you will not have an employment agreement assuring continued employment. Officers serve at the will of the Board of Directors.
|
|
Cordially,
|
|
|
|
|
|
/s/ Neil A. Schrimsher
|
|
Chief Executive Officer
|
Enclosure
|
|
|
|
I acknowledge, accept, and agree to this offer to commence employment.
|
|
|
|
Date: 6/27/2013
|
/s/ Carl E. Will
|
|
Carl E. Will
|
|
|
|
Very truly yours,
|
|
|
|
|
|
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
/s/ Neil A. Schrimsher
|
|
|
Date: August 13, 2013
|
|
|
|
|
ACCEPTED AND AGREED TO:
|
||
|
|
|
/s/ Carl E. Will
CARL E. WILL
|
|
|
Very truly yours,
|
|
|
|
|
|
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
/s/ Neil A. Schrimsher
|
|
|
Date: August 13, 2013
|
|
|
|
|
ACCEPTED AND AGREED TO:
|
||
|
|
|
/s/ Carl E. Will
CARL E. WILL
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 8, 2013
|
By:
/s/ Neil A. Schrimsher
|
|
Neil A. Schrimsher
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 8, 2013
|
By:
/s/ Mark O. Eisele
|
|
Mark O. Eisele
|
|
Vice President-Chief Financial Officer & Treasurer
|
|
|
|
/s/ Neil A. Schrimsher
|
|
/s/ Mark O. Eisele
|
Neil A.Schrimsher
|
|
Mark O. Eisele
|
President and Chief Executive Officer
|
|
Vice President-Chief Financial Officer & Treasurer
|
|
|
|
|
|
|
Date: November 8, 2013
|
|
|
|
|
|