FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended SEPTEMBER 30, 2000 .

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from ___________ to ____________

Commission File Number 1-2299

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

                 Ohio                                         34-0117420
--------------------------------------------------------------------------------
  (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                    Identification Number)


      One Applied Plaza, Cleveland, Ohio                         44115
--------------------------------------------------------------------------------
    (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code: (216) 426-4000


(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Shares of common stock outstanding on OCTOBER 31, 2000 19,880,320


(No par value)

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      INDEX




---------------------------------------------------------------------
                                                                        Page No.
 Part I:    FINANCIAL INFORMATION

          Item 1:     Financial Statements

                      Statements of Consolidated Income -                  2
                      Three Months Ended September 30, 2000 and  1999

                      Consolidated Balance Sheets -                        3
                      September 30, 2000 and June 30, 2000

                      Statements of Consolidated Cash Flows                4
                      Three Months Ended September 30, 2000 and 1999

                      Statements of Consolidated Shareholders' Equity -    5
                      Three Months Ended September 30, 2000 and
                      Year Ended June 30, 2000

                      Notes to Consolidated Financial Statements         6 - 9


          Item 2:     Management's Discussion and Analysis of           10 - 14
                      Financial Condition and Results of Operations

          Item 3:     Quantitative and Qualitative Disclosures about
                      Market Risk                                          15


 Part II:    OTHER INFORMATION

          Item 1:    Legal Proceedings                                     16

          Item 5:    Other Information                                     16
          Item 6:    Exhibits and Reports on  Form 8-K                     18


 Signatures                                                                20


PART I: FINANCIAL INFORMATION

ITEM I: Financial Statements

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)

(Thousands, except per share amounts)

---------------------------------------------------------------------------------------------------------------


                                                                            Three Months Ended
                                                                               September 30
                                                                    2000                           1999
                                                         ------------------------------------------------------

 Net Sales                                               $              420,876         $              387,904
                                                         -----------------------        -----------------------

 Cost and Expenses
   Cost of sales                                                        316,422                        294,139
   Selling, distribution and
     administrative                                                      90,221                         81,680
                                                         -----------------------        -----------------------
                                                                        406,643                        375,819
                                                         -----------------------        -----------------------
 Operating Income                                                        14,233                         12,085
                                                         -----------------------        -----------------------

 Interest expense, net                                                    2,202                          2,235
                                                         -----------------------        -----------------------

 Income Before Income Taxes                                              12,031                          9,850
                                                         -----------------------        -----------------------

 Income Taxes
   Federal                                                                4,400                          3,600
   State and local                                                          400                            388
                                                         -----------------------        -----------------------
                                                                          4,800                          3,988
                                                         -----------------------        -----------------------

 Net Income                                              $                7,231         $                5,862
                                                         =======================        =======================

 Net Income Per Share - Basic                            $                 0.37         $                 0.28
                                                         =======================        =======================

 Net Income Per Share - Diluted                          $                 0.36         $                 0.28
                                                         =======================        =======================

 Cash dividends per common
   share                                                 $                 0.12         $                 0.12
                                                         =======================        =======================

See notes to consolidated financial statements.

2

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

--------------------------------------------------------------------------------------------------------------------------------
                                                                               September 30                         June 30
                                                                                        2000                          2000
                                                                               --------------------         --------------------
                                                                                     (Unaudited)

                                          Assets
 Current assets
     Cash and temporary investments                                            $            12,986          $            12,349
     Accounts receivable, less allowance
      of $4,166 and $3,800                                                                 213,283                      212,254
     Inventories  (at LIFO)                                                                172,412                      182,102
     Other current assets                                                                    7,071                        8,286
                                                                               --------------------         --------------------
 Total current assets                                                                      405,752                      414,991
                                                                               --------------------         --------------------
 Property - at cost
     Land                                                                                   12,193                       12,214
     Buildings                                                                              67,761                       67,630
     Equipment                                                                              93,199                       92,656
                                                                               --------------------         --------------------
                                                                                           173,153                      172,500
     Less accumulated depreciation                                                          78,212                       75,300
                                                                               --------------------         --------------------
 Property - net                                                                             94,941                       97,200
                                                                               --------------------         --------------------
 Goodwill                                                                                   69,676                       67,089
 Other assets                                                                               15,369                       15,387
                                                                               --------------------         --------------------

   TOTAL ASSETS                                                                $           585,738          $           594,667
                                                                               ====================         ====================

                           Liabilities and Shareholders' Equity
 Current liabilities
     Accounts payable                                                          $            84,456          $            93,587
     Compensation and related benefits                                                      20,672                       32,476
     Other accrued liabilities                                                              37,339                       33,796
                                                                               --------------------         --------------------
 Total current liabilities                                                                 142,467                      159,859
 Long-term debt                                                                            119,557                      112,168
 Other liabilities                                                                          23,150                       23,309
                                                                               --------------------         --------------------
   TOTAL LIABILITIES                                                                       285,174                      295,336
                                                                               --------------------         --------------------

 Shareholders' Equity
 Preferred stock - no par value;  2,500
     shares authorized; none issued or
     outstanding
 Common stock - no par value;  50,000
     shares authorized;  24,096 shares issued                                               10,000                       10,000
 Additional paid-in capital                                                                 83,401                       83,312
 Income retained for use in the business                                                   271,957                      267,145
 Treasury shares - at cost 4,203 and 4,017                                                 (61,423)                     (57,419)
 Unearned restricted common stock compensation                                              (3,371)                      (3,707)
                                                                               --------------------         --------------------
   TOTAL SHAREHOLDERS' EQUITY                                                              300,564                      299,331
                                                                               --------------------         --------------------

   TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                                                    $           585,738          $           594,667
                                                                               ====================         ====================

See notes to consolidated financial statements.

3

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)

(Amounts in thousands)

                                                                                                        Three Months Ended
                                                                                                           September 30

                                                                                                 2000                 1999
--------------------------------------------------------------------------------------------------------------------------------

Cash Flows from Operating Activities
    Net income                                                                             $         7,231      $         5,862
    Adjustments to reconcile net income to cash provided by
       operating activities:
       Depreciation                                                                                  4,117                4,562
       Amortization of goodwill and restricted common
           stock compensation                                                                        1,480                1,320
       Provision for losses on accounts receivable                                                     657                  568
       Gain on sale of property                                                                     (1,016)                (481)
       Treasury shares contributed to employee
           benefit plans                                                                             2,905                1,009
       Changes in current assets and liabilities, net of
         effects from acquisition of businesses:
           Accounts receivable                                                                        (149)                 551
           Inventories                                                                              10,930               11,360
           Other current assets                                                                      1,331                  190
           Accounts payable and accrued expenses                                                   (19,275)               2,610
       Other - net                                                                                     921                   96
--------------------------------------------------------------------------------------------------------------------------------
Net Cash provided by Operating Activities                                                            9,132               27,647
--------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
    Property purchases                                                                              (2,282)              (2,801)
    Proceeds from property sales                                                                     1,441                2,201
    Net cash paid for acquisition of businesses                                                     (5,491)
    Deposits and other                                                                                 567                   70
--------------------------------------------------------------------------------------------------------------------------------
Net Cash used in Investing Activities                                                               (5,765)                (530)
--------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
    Borrowings (repayments) under revolving credit agreements - net                                  7,389              (25,500)
    Dividends paid                                                                                  (2,419)              (2,528)
    Purchase of treasury shares                                                                     (8,100)              (3,061)
    Exercise of stock options                                                                          400                   40
--------------------------------------------------------------------------------------------------------------------------------
Net Cash used in Financing Activities                                                               (2,730)             (31,049)
--------------------------------------------------------------------------------------------------------------------------------
Increase (decrease ) in cash and temporary
    investments                                                                                        637               (3,932)
Cash and temporary investments
    at beginning of period                                                                          12,349               19,186
--------------------------------------------------------------------------------------------------------------------------------
Cash and Temporary Investments
    at End of Period                                                                       $        12,986      $        15,254
================================================================================================================================

Supplemental Cash Flow Information
Cash paid during the period for:
     Income taxes                                                                          $         2,815      $         2,882
     Interest                                                                              $         1,954      $         1,945

See notes to consolidated financial statements.

4

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY

For the Three Months Ended September 30, 2000 (Unaudited) and Year Ended June 30, 2000


(Thousands, except per share amounts)

                                                                                  Income                   Unearned
                                             Shares of              Additional   Retained     Treasury    Restricted     Total
                                            Common Stock   Common    Paid-in    for Use in     Shares    Common Stock  Shareholders'
                                             Outstanding   Stock     Capital   the Business  - at Cost   Compensation    Equity
----------------------------------------------------------------------------------------------------------------------------------
Balance at July 1, 1999                          21,101   $ 10,000  $ 82,599     $ 246,026    $ (40,140)   $ (4,899)    $ 293,586
    Net income                                                                      31,048                                 31,048
    Cash dividends - $.48 per share                                                 (9,929)                                (9,929)
    Purchase of common stock
      for treasury                               (1,280)                                        (20,833)                  (20,833)
    Treasury shares issued for:
      Retirement Savings Plan contributions         210                  493                      2,921                     3,414
      Exercise of stock options                      22                    7                        294                       301
      Deferred compensation plans                    25                   66                        339                       405
    Amortization of restricted common
      stock compensation                                                  62                                  1,192         1,254
    Other                                                                 85                                                   85
----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000                         20,078     10,000    83,312       267,145      (57,419)     (3,707)      299,331
    Net income                                                                       7,231                                  7,231
    Cash dividends - $.12 per share                                                 (2,419)                                (2,419)
    Purchase of common stock
      for treasury                                 (470)                                         (8,100)                   (8,100)
    Treasury shares issued for:
      Retirement Savings Plan contributions         171                  445                      2,460                     2,905
      Exercise of stock options                      61                 (480)                       880                       400
      Deferred compensation plans                    55                  143                        778                       921
     Forfeiture of restricted common stock awards    (2)                 (19)                       (22)         41
    Amortization of restricted common
      stock compensation                                                                                        295           295
    Other
----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2000                    19,893   $ 10,000  $ 83,401     $ 271,957    $ (61,423)   $ (3,371)    $ 300,564
==================================================================================================================================

See notes to consolidated financial statements.

5

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)


1. BASIS OF PRESENTATION

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2000 and June 30, 2000, and the results of operations and cash flows for the three months ended September 30, 2000 and 1999.

The results of operations for the three month period ended September 30, 2000 are not necessarily indicative of the results to be expected for the fiscal year.

Cost of sales for interim financial statements are computed using estimated gross profit percentages which are adjusted throughout the year based upon available information. Adjustments to actual cost are made based on the annual physical inventory and the effect of year-end inventory quantities on LIFO costs.

The financial statements of the Company's Canadian subsidiaries are measured using local currency as the functional currency. Assets and liabilities of the Canadian subsidiaries are translated at exchange rates as of the balance sheet date. Sales, costs and expenses are translated at average exchange rates during each reporting period. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars were immaterial.

Effective July 1, 2000, the Company adopted Emerging Issues Task Force Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs." Accordingly, freight charged to customers is now classified as sales, whereas previously it was classified as an offset to cost of sales. All prior amounts have been restated to conform to the current presentation.

6

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)


2. NET INCOME PER SHARE

The following is a computation of the basic and diluted earnings per share:

                                                                                 Three Months Ended
                                                                                    September 30
                                                                             2000                    1999
                                                              -------------------------------------------------
NET INCOME
Net income as reported in statements of
    consolidated income                                                      $7,231                 $5,862
                                                              =================================================

AVERAGE SHARES OUTSTANDING
Weighted average common shares outstanding for basic
   computation                                                               19,734                 20,798
Dilutive effect of stock options and awards                                     282                    184
                                                              -------------------------------------------------
Adjusted average common shares outstanding for
   diluted computation                                                       20,016                 20,982
                                                              =================================================

NET INCOME PER SHARE
Net income per common share - basic                                           $0.37                  $0.28
                                                              =================================================
Net income per common share - diluted                                         $0.36                  $0.28
                                                              =================================================

3. SEGMENT INFORMATION

The Company has identified one reportable segment: Service Center Based Distribution. The Service Center Based Distribution segment provides customers with solutions to their immediate maintenance repairs and original equipment manufacturing needs through the distribution of industrial products including bearings, power transmission components, fluid power components, linear motion products, general maintenance and specialty items; engineered systems consisting of power transmission and electrical systems; fluid power products including hydraulic and pneumatic systems; and fabricated rubber products consisting of conveyor belting and industrial hose. The Company also offers various levels of technical application support for these products and provides creative solutions to help customers minimize downtime and reduce overall procurement costs. The "Other" column consists of all other non-service center based distribution operations that sell directly to customers, including fluid power, electrical shop and various electronic commerce businesses.

7

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)


The segments were established in fiscal 1999 primarily due to the acquisitions outside our core business segment and the related growth in these areas. The accounting policies of the segments are the same as those used to prepare the consolidated financial statements. Certain reclassifications have been made to prior year amounts to be consistent with the presentation in the current year. Intersegment sales are not significant. All current segment operating results are in the United States, Canada and Puerto Rico. The segment operations in Canada and Puerto Rico represent approximately 5.6% of the total net sales of Applied and therefore are not presented separately. In addition, over 37% of the Canadian operations' net sales are included in the "Other" segment relating to the fluid power business. The long-lived assets located outside of the United States are not material.

SEGMENT FINANCIAL INFORMATION:

                                                               SERVICE CENTER
                                                             BASED DISTRIBUTION          OTHER              TOTAL
                                                             --------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 2000
Total net sales                                                         $396,848          $24,028            $420,876
Operating profit (loss)                                                   11,916             (13)              11,903
Assets used in the business                                              545,707           40,031             585,738
Depreciation                                                               3,917              200               4,117
Capital Expenditures                                                       2,176              106               2,282
                                                             --------------------------------------------------------

THREE MONTHS ENDED SEPTEMBER 30, 1999
Total net sales                                                         $374,360          $13,544            $387,904
Operating profit (loss)                                                   16,909            (333)              16,576
Assets used in the business                                              515,903           37,271             553,174
Depreciation                                                               4,407              155               4,562
Capital Expenditures                                                       2,771               30               2,801
                                                             --------------------------------------------------------

A reconciliaion from the segment operating profit to the consolidated balances is as follows:

THREE MONTHS ENDED
SEPTEMBER 30

                                                           2000          1999
                                                   --------------- -------------
Operating profit for
    Reportable segment                                    $11,916       $16,909
Other operating profit (loss)                                 (13)         (333)
Adjustments for:
    Goodwill amortization                                  (1,185)       (1,022)
    Corporate and other income (expense), net of
       allocations (a)                                      3,515        (3,469)
                                                   --------------- -------------
Total operating profit                                     14,233        12,085
Interest expense, net                                       2,202         2,235
                                                   --------------- -------------
Income before taxes                                       $12,031        $9,850
                                                   =============== =============

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)


(a) The change in the amounts of corporate and other income (expense), net of allocations, is due to various changes in the levels and amounts of expenses being allocated to segments. The Company's general guidelines are to fully allocate these corporate items.

Net sales by product category are as follows:

                                                          THREE MONTHS ENDED SEPTEMBER 30
                                                     -------------------------------------------
                                                                 2000                    1999
                                                     -------------------------------------------
Industrial Products                                            $287,619                $273,217
Engineered Systems and Automation                                64,849                  58,253
Fluid Power                                                      50,106                  38,341
Fabricated Rubber Products                                       18,302                  18,093
                                                     -------------------------------------------
                                                               $420,876                $387,904
                                                     ===========================================

4. BUSINESS COMBINATIONS

During the quarter ended September 30, 2000, the Company acquired the stock of a distributor of fluid power products for a total purchase price of $7,300. The acquisition was accounted for as a purchase and the results of the business' operations are included in the accompanying consolidated financial statements from its acquisition date. Results of operations for this acquisition are not material for all periods presented. Goodwill, based on preliminary allocations of fair values to assets and liabilities acquired of $3,700 recognized in connection with this combination, is being amortized over 15 years.

9

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following is Management's Discussion and Analysis of certain significant factors which have affected the Company's: (1) financial condition at September 30, 2000 and June 30, 2000, and (2) results of operations and cash flows during the periods included in the accompanying Statements of Consolidated Income and Consolidated Cash Flows.

FINANCIAL CONDITION

LIQUIDITY AND WORKING CAPITAL
Cash provided by operating activities was $9.1 million in the three months ended September 30, 2000. This compares to $27.6 million provided by operating activities in the same period a year ago.

Cash flow from operations depends primarily upon generating operating income, controlling the investment in inventories and receivables, and managing the timing of payments to suppliers. The Company has continuing programs to monitor and control these investments. During the three month period ended September 30, 2000, inventories decreased approximately $10.9 million due to Company efforts to reduce inventory levels, and accounts receivable remained relatively stable. Accounts payable and accrued expenses decreased $19.3 million primarily due to payments of compensation related liabilities.

Net cash used in investing activities was $5.8 million in the three months ended September 30, 2000, primarily attributable to the acquisition of a fluid power distributor.

Net cash used in financing activities totaled $2.7 million in the three months ended September 30, 2000 as compared to $31.0 million for the period ended September 30, 1999. During the period ended September 30, 1999, cash provided from operations was used for net repayments under the Company's revolving credit agreements of $25.5 million.

Working capital at September 30, 2000 was $263.3 million compared to $255.1 million at June 30, 2000. This increase is primarily due to the use of long-term debt to finance operations and acquisitions.

CAPITAL RESOURCES
Capital resources are obtained from income retained in the business, borrowings under the Company's credit facilities, and operating lease arrangements. Average combined borrowings were $111.4 million and $104.3 million for the three months ended September 30, 2000 and 1999, respectively. The weighted average interest rate on borrowings under revolving credit facilities for the three months ended September 30, 2000 increased to 6.6% from an average rate of 5.6% for the three months ended September 30, 1999 due to the general overall increase in short-term interest rates in the U.S. economy. The weighted average interest on borrowing under other long-term debt agreements for the three months ended September 30, 2000 and 1999 was 7.0% and 7.1%, respectively.

10

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The Company has a committed revolving credit agreement expiring November, 2003 with a group of lending institutions. This agreement provides for unsecured borrowings of up to $150.0 million. The Company had $41.0 million of borrowings outstanding under this facility at September 30, 2000. Unused lines under this facility totaling $99.5 million are available to fund future acquisitions or other capital and operating requirements. The Company also has a $15.0 million short-term uncommitted line of credit with a commercial bank. The Company had no borrowings outstanding under this facility at September 30, 2000. Unused lines under this facility are available to fund future acquisitions or other capital and operating requirements.

In October 2000, the Company entered into an agreement with the Prudential Insurance Company of America for an uncommitted shelf facility to borrow up to $100 million in additional long-term financing, at its sole discretion, with terms of up to twelve years.

During the quarter ending December 31, 2000, the Company expects to refinance a portion of its debt under its revolving credit facility through an institutional private placement of long-term notes.

The Board of Directors has authorized an ongoing program to purchase shares of the Company's common stock to fund employee benefit programs, stock option and award programs, and future acquisitions. These purchases are made in open market and negotiated transactions, from time to time, depending upon market conditions. The Company acquired 470,000 shares of its common stock for $8.1 million during the three months ended September 30, 2000. Effective October 17, 2000, the Company's Board of Directors authorized the Company to acquire up to an additional 1.0 million shares of company stock.

Management expects that capital resources provided from operations, available lines of credit, unused amounts under the committed revolving credit facility and operating leases will be sufficient to finance normal working capital needs, business acquisitions, enhancement of facilities and equipment, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained if desired.

11

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

A summary of the period-to-period changes in principal items included in the statements of consolidated income follows:

                                                  Increase (Decrease)
                                (Dollars in Thousands, Except per Share Amounts)

                                                   Three Months Ended
                                                      September 30
                                                     2000 and 1999

                                            Amount                    Change
                                            ------                    ------
Net sales                                  $32,972                      8.5%

Cost of sales                               22,283                      7.6%

Selling, distribution and
administrative expenses                      8,541                     10.5%

Operating income                             2,148                     17.8%

Interest expense - net                         (33)                    (1.5)%

Income before income taxes                   2,181                     22.1%

Income taxes                                   812                     20.4%

Net income                                   1,369                     23.4%

Net income per share - diluted                 .08                     28.6%

12

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Three Months Ended September 30, 2000 and 1999

Net sales increased from the prior year primarily due to acquisitions during fiscal 2000. Gross profit as a percentage of sales increased to 24.8% from 24.2%. This increase primarily is due to a change in product mix and higher discounts and allowances from suppliers.

Selling, distribution and administrative expenses as a percent of sales, increased to 21.4% from 21.1%. This change primarily relates to an increase in hospitalization expenses and 401K company match.

Interest expense-net for the quarter decreased by 1.5% as compared to the prior year primarily due to a decrease in long-term debt.

Income tax expense as a percentage of income before taxes was 39.9% for the quarter ended September 30, 2000 and 40.5% for the quarter ended September 30, 1999. This decrease is due to lower effective state and local tax rates.

As a result of the above factors, net income increased by 23.4% compared to the same quarter of last year. As a result of the impact of continued stock repurchases, net income per share - diluted increased $.08, or 28.6%.

CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT

Management's Discussion and Analysis and other sections of this Form 10-Q contain statements that are forward-looking, based on management's current expectations about the future. The words "expect", "believe", and similar expressions identify forward-looking statements. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. All forward-looking statements are based on current expectations regarding important risk factors. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company undertakes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise.

13

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Important risk factors include, but are not limited to, the following: changes in the economy or in specific customer industry sectors; changes in customer procurement policies and practices; changes in product manufacturer sales policies and practices; the availability of product and labor; changes in operating expenses; the effect of price increases or decreases; the variability and timing of business opportunities including acquisitions, alliances, customer agreements and supplier authorizations; the Company's ability to realize the anticipated benefits of acquisitions and other business strategies, including electronic commerce initiatives; the incurrence of additional debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company; the emergence of new competitors, including firms with greater financial resources than the Company; adverse results in significant litigation matters; adverse state and federal regulation and legislation; and the occurrence of extraordinary events (including prolonged labor disputes, natural events and acts of God, fires, floods and accidents).

14

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We have evaluated the Company's exposure to various market risk factors, including but not limited to, interest rate, foreign currency exchange and commodity price risks. The Company is primarily affected by market risk exposure through the effect of changes in interest rates. The Company manages interest rate risk through the use of a combination of fixed rate long-term debt and variable rate borrowings under its committed revolving credit agreement. Variable rate borrowings under its committed revolving credit agreement totaled $41.0 million at September 30, 2000. A 1% increase or decrease in interest rates under this agreement would not have a material impact on our operations, financial position, or cash flows. During the quarter ending December 31, 2000, the Company expects to refinance a portion of this debt through an institutional placement of long-term notes.

The Company's Canadian subsidiaries are measured using local currency as the functional currency. The impact on the Company's future earnings from exposure to changes in foreign currency exchange rates is immaterial.

We do not currently utilize derivative financial instruments to hedge against changes in any market risk factors. During the quarter ending December 31, 2000, the Company expects to enter into foreign currency hedges in conjunction with private placement of debt.

15

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Applied Industrial Technologies, Inc. and/or one of its subsidiaries is a defendant in various product- and employment-related lawsuits. Based on circumstances presently known, the Company believes that these cases are not material to its business or financial condition.

ITEM 5. OTHER INFORMATION.

(a) SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At the Company's Annual Meeting of Shareholders held on October 17, 2000, there were 19,812,784 shares of common stock entitled to vote. The Shareholders voted on the matters submitted to the meeting as follows:

1.       Election of three persons to be directors of Class I for a
         term of three years:

                                        For                   Withheld
                                        ---                   --------

         Thomas A. Commes            17,573,416               203,388
         J. Michael Moore            17,556,880               219,924
         Dr. Jerry S. Thornton       17,397,952               378,852

In August 2000, the Board had reduced the size of Class I from four to three directors.

The terms of the Class II directors, including William G. Bares, Dr. Roger D. Blackwell, Russel B. Every and John J. Kahl, and of the Class III directors, including William E. Butler, Russell R. Gifford, L. Thomas Hiltz, and David L. Pugh, continued after the meeting.

Subsequently, in November 2000, John J. Kahl, a Class II director, resigned from the Board.

16

2. Ratification of the Board of Directors' appointment of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending June 30, 2001.

   For             Withheld          Abstain
   ---             --------          -------

17,731,228          12,946           32,630

Discretionary voting was authorized as to the two matters submitted.

There were no broker non-votes.

(b) ELECTION OF OFFICERS.

At its Organizational Meeting held on October 17, 2000, the Board of Directors elected the following officers of the Company:

David L. Pugh        Chairman & Chief Executive Officer
Bill L. Purser       President & Chief Operating Officer
Todd A. Barlett      Vice President-Global Business Development
Donald L. Chargin    Vice President-Unit President, Industrial
                          Products
Mark O. Eisele       Vice President & Controller
James T. Hopper      Vice President-Chief Information Officer
Justin M. Jacobi     Vice President-Unit President, Fluid Power
                          Products (resigned on October 30, 2000)
Jeffrey A. Ramras    Vice President-Supply Chain Management
Richard C. Shaw      Vice President-Communications & Learning
Robert C. Stinson    Vice President-Chief Administrative Officer,
                          General Counsel & Secretary
John R. Whitten      Vice President-Chief Financial Officer &
                          Treasurer
Fred D. Bauer        Assistant Secretary
Jody A. Chabowski    Assistant Controller

Michael L. Coticchia Assistant Secretary Alan M. Krupa Assistant Treasurer

17

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS.

EXHIBIT NO. DESCRIPTION

3(a) Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc. (filed as Exhibit 3(a) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference).

3(b) 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(a) Certificate of Merger of Bearings, Inc. (Ohio) 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(b) $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(b) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).

4(c) Amendment to $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(g) to the Company's Form 10-Q for the quarter ended March 31, 1996, SEC File No. 1-2299, and incorporated here by reference).

18

4(d)     Private Shelf Agreement dated as of November 27, 1996, as
         amended on January 30, 1998, between the Company and The
         Prudential Insurance Company of America (filed as Exhibit 4(f)
         to the Company's Form 10-Q for the quarter ended March 31,
         1998, SEC File No. 1-2299, and incorporated here by
         reference).

4(e)     Amendment dated October 24, 2000 to November 27, 1996 Private
         Shelf Agreement between the Company and The Prudential
         Insurance Company of America.

4(f)     $150,000,000 Credit Agreement dated as of November 5, 1998
         among the Company, KeyBank National Association as Agent, and
         various financial institutions (filed as Exhibit 4(e) to the
         Company's Form 10-Q for the quarter ended September 30, 1998,
         SEC File No. 1-2299, and incorporated here by reference).

4(g)     Rights Agreement, dated as of February 2, 1998, between the
         Company and Harris Trust and Savings Bank, as Rights Agent,
         which includes as Exhibit B thereto the Form of Rights
         Certificate (filed as Exhibit No. 1 to the Company's
         Registration Statement on Form 8-A filed July 20, 1998, SEC
         File No. 1-2299, and incorporated here by reference).

10(a)    First Amendment to the Applied Industrial Technologies, Inc.
         Supplemental Defined Contribution Plan (January 1, 1997
         Restatement), effective as of October 1, 2000.

10(b)    Second Amendment to the Applied Industrial Technologies, Inc.
         Deferred Compensation Plan (January 1, 1997 Restatement),
         effective as of October 1, 2000.

10(c)    Second Amendment to the Applied Industrial Technologies, Inc.
         Supplement Executive Retirement Benefits Plan (July 1, 1997
         Restatement), effective as of October 1, 2000.

10(d)    Non-Competition and Confidentiality Agreement between Applied
         Industrial Technologies, Inc. and John C. Dannemiller,
         effective as of October 31, 2000.

27       Financial Data Schedule.

19

(b) The Company did not file, nor was it required to file, a Report on Form 8-K with the Securities and Exchange Commission during the quarter ended September 30, 2000.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Company)

Date:  November 13, 2000            By: /s/ DAVID L. PUGH
                                       -----------------------
                                        David L. Pugh
                                        Chairman & Chief Executive Officer


Date:  November 13, 2000            By: /s/ JOHN R. WHITTEN
                                       -------------------------
                                        John R. Whitten
                                        Vice President-Chief Financial Officer
                                          & Treasurer

20

                   APPLIED INDUSTRIAL TECHNOLOGIES, INC.

                               EXHIBIT INDEX
           TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000

EXHIBIT NO.          DESCRIPTION                                         PAGE

   3(a)     Amended and Restated Articles of Incorporation of
            Applied Industrial Technologies, Inc. (filed as
            Exhibit 3(a) to the Company's Form 10-Q for the
            quarter ended September 30, 1998, SEC File No.
            1-2299, and incorporated here by reference).

   3(b)     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(a)     Certificate of Merger of Bearings, Inc. (Ohio) 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(b)     $80,000,000 Maximum Aggregate Principal Amount Note
            Purchase and Private Shelf Facility dated October 31,
            1992 between the Company and The Prudential Insurance
            Company of America (filed as Exhibit 4(b) to the
            Company's Registration Statement on Form S-4 filed
            May 23, 1997, Registration No. 333-27801, and
            incorporated here by reference).

   4(c)     Amendment to $80,000,000 Maximum Aggregate Principal
            Amount Note Purchase and Private Shelf Facility dated
            October 31, 1992 between the Company and The
            Prudential Insurance Company of America (filed as
            Exhibit 4(g) to the Company's Form 10-Q for the
            quarter ended March 31, 1996, SEC File No. 1-2299,
            and incorporated here by reference).

   4(d)     Private Shelf Agreement dated as of November 27,
            1996, as amended on January 30, 1998, between the
            Company and The Prudential Insurance Company of
            America (filed as Exhibit 4(f) to the Company's Form
            10-Q for the quarter ended March 31, 1998, SEC File
            No. 1-2299, and incorporated here by reference).

   4(e)     Amendment dated October 24, 2000 to November 27, 1996
            Private Shelf Agreement between the Company and The
            Prudential Insurance Company of America.                 Attached

   4(f)     $150,000,000 Credit Agreement dated as of November 5,
            1998 among the Company, KeyBank National Association
            as Agent, and various financial institutions (filed
            as Exhibit 4(e) to the Company's Form 10-Q for the
            quarter ended September 30, 1998, SEC File No.
            1-2299, and incorporated here by reference).

   4(g)     Rights Agreement, dated as of February 2, 1998,
            between the Company and Harris Trust and Savings
            Bank, as Rights Agent, which includes as Exhibit B
            thereto the Form of Rights Certificate (filed as
            Exhibit No. 1 to the Company's Registration Statement
            on Form 8-A filed July 20, 1998, SEC File No. 1-2299,
            and incorporated here by reference).

   10(a)    First Amendment to the Applied Industrial
            Technologies, Inc. Supplemental Defined Contribution
            Plan (January 1, 1997 Restatement), effective as of
            October 1, 2000.                                         Attached

   10(b)    Second Amendment to the Applied Industrial
            Technologies, Inc. Deferred Compensation Plan
            (January 1, 1997 Restatement), effective as of
            October 1, 2000.                                         Attached

   10(c)    Second Amendment to the Applied Industrial
            Technologies, Inc. Supplement Executive Retirement
            Benefits Plan (July 1, 1997 Restatement), effective
            as of October 1, 2000.                                   Attached

   10(d)    Non-Competition and Confidentiality Agreement between
            Applied Industrial Technologies, Inc. and John C.
            Dannemiller, effective as of October 31, 2000.           Attached

   27       Financial Data Schedule.                                 Attached


EXHIBIT 4(e)

October 24, 2000

Applied Industrial Technologies, Inc.
One Applied Plaza
Cleveland, Ohio 44115
Attention: John R. Whitten
Vice President-Finance

Re: AMENDMENT TO PRIVATE SHELF AGREEMENT

Ladies and Gentlemen:

Reference is made to that certain Private Shelf Agreement dated as of November 27, 1996 (as amended from time to time, the "NOTE AGREEMENT") between Applied Industrial Technologies, Inc., an Ohio corporation formerly known as Bearings, Inc. (the "COMPANY"), and The Prudential Insurance Company of America ("PRUDENTIAL"), pursuant to which the Company issued and sold and Prudential purchased the Company's 6.60% Series B Notes in the original aggregate principal amount of $50,000,000, due December 8, 2007. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Note Agreement.

Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the Note Agreement, the parties hereto agree as follows:

SECTION 1. AMENDMENT. From and after the date this letter becomes effective in accordance with its terms, the Note Agreement is amended as follows:

1.1 The cover page to the Note Agreement and paragraph 1 of the Note Agreement is each hereby amended to delete in its entirety the amount "$50,000,000" appearing therein and to substitute therefor the amount "$150,000,000".

1.2 Paragraph 2B of the Note Agreement is amended to delete in its entirety clause (i) thereof and to substitute therefor the following: "(i) October 24, 2003, and".


Applied Industrial Technologies, Inc.
October 24, 2000

Page 2

1.3 Paragraph 2H(1) of the Note Agreement is deleted in its entirety and the following is hereby substituted therefor:

"2H(1) ISSUANCE FEE. On each Private Shelf Closing Day, the Company agrees to pay Prudential in immediately available funds a fee (the "ISSUANCE FEE") in an amount equal to 0.10% of the aggregate principal amount of Notes sold on such Private Shelf Closing Day". The Issuance Fee for the Series B Notes has been previously paid in full as agreed by the parties.

1.4 The Company and Prudential expressly agree and acknowledge that as of the date hereof the Available Facility Amount is $100,000,000.
NOTWITHSTANDING THE FOREGOING, THIS AMENDMENT AND THE NOTE AGREEMENT HAVE BEEN ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.

SECTION 2. REPRESENTATION AND WARRANTY. The Company hereby represents and warrants that no Default or Event of Default exists under the Note Agreement as of the date hereof.

SECTION 3. CONDITIONS PRECEDENT. This letter shall be deemed effective as of the date hereof upon (i) the return on or before October 31, 2000 by the Company to Prudential of a counterpart hereof duly executed by the Company and Prudential, and (ii) the payment of a $45,000 non-refundable structuring fee to The Prudential Insurance Company of America. Upon execution hereof by the Company, this letter should be returned to: Prudential Capital Group, Two Prudential Plaza, Suite 5600, Chicago, Illinois 60601, Attention: Wiley S. Adams.

SECTION 4. REFERENCE TO AND EFFECT ON NOTE AGREEMENT. Upon the effectiveness of this letter, each reference to the Note Agreement in any other document, instrument or agreement shall mean and be a reference to the Note Agreement as modified by this letter. Except as specifically set forth in
Section 1 hereof, the Note Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.

SECTION 5. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.


Applied Industrial Technologies, Inc.
October 24, 2000

Page 3

SECTION 6. COUNTERPARTS; SECTION TITLES. This letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. The section titles contained in this letter are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

Very truly yours,

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA

By:  /s/ William S. Engelking
     -------------------------
              Vice President

AGREED AND ACCEPTED:

APPLIED INDUSTRIAL
TECHNOLOGIES, INC.

By: /s/John R. Whitten
    ---------------------
Title:  Vice President-Chief Financial Officer

And by: /S/Alan Krupa
        -------------
Title: Assistant Treasurer


EXHIBIT 10(a)

FIRST AMENDMENT
TO THE
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
(JANUARY 1, 1997 RESTATEMENT)

WHEREAS, Applied Industrial Technologies, Inc. (formerly known as Bearings, Inc. and hereinafter referred to as the "Company") established the Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan (formerly known as the Bearings, Inc. Supplemental Defined Contribution Plan and hereinafter referred to as the "Plan"), effective as of January 1, 1996, for the benefit of a select group of management or highly compensated employees; and

WHEREAS, effective as of January 1, 1997, the Plan was subsequently amended and restated; and

WHEREAS, the Company desires to amend said restated Plan;

NOW, THEREFORE, effective as of October 1, 2000, the Plan is hereby amended in the respects hereinafter set forth:

1. Section 1.1 of the Plan is hereby amended by the addition of Paragraph (23) at the end thereof to provide as follows:

(23) The term "APPLIED DEFERRED COMPENSATION PLAN" shall mean the Applied Industrial Technologies, Inc. Deferred Compensation Plan (formerly the Bearings, Inc. Deferred Compensation Plan), as amended from time to time.

2. Section 1.1 of the Plan is hereby amended by the addition of Paragraph (24) at the end thereof to provide as follows:

(24) The term "TRANSFERRED CONTRIBUTIONS" shall mean the contributions that are transferred from the Applied Deferred Compensation Plan pursuant to the terms thereof for crediting to the Separate Account of a Participant who is a Retired Participant under the Applied Deferred Compensation Plan.

3. Section 1.1 of the Plan is hereby amended by the addition of Paragraph (25) at the end thereof to provide as follows:

(25) The term "TRANSFERRED CONTRIBUTIONS ACCOUNT" shall mean the Separate Account to which Transferred Contributions of a Participant who is a Retired Participant under the Applied Industrial Technologies, Inc. Deferred Compensation Plan are credited in accordance with the provisions of Section 4.1 of the Plan.


4. Section 4.1 of the Plan is hereby amended to provide as follows:

4.1 TYPES OF SEPARATE ACCOUNTS. Each Participant shall have established in his name the following Separate Accounts which shall reflect the type of contributions credited to him pursuant to Article III or transferred to the Plan from his Deferral Account under the Applied Deferred Compensation Plan:

(a) a Supplemental 401(k) Account which shall reflect the Supplemental 401(k) Contributions credited to a Participant pursuant to Section 3.1 as well as any amount transferred from the King Bearing, Inc. Nonqualified Supplemental Executive Retirement Plan, and any adjustment thereto pursuant to Section 4.2; and

(b) a Supplemental Matching Account which shall reflect the Supplemental Matching Contributions credited to a Participant pursuant to Section 3.2, and any adjustment thereto pursuant to Section 4.2; and

(c) a Transferred Contributions Account which shall reflect any Transferred Contributions that are credited to a Participant who is also a Retired Participant under the terms of the Applied Deferred Compensation Plan and that are transferred from the Applied Deferred Compensation Plan pursuant to the procedures thereunder, and any adjustment thereto pursuant to Section 4.2.

5. Article IV of the Plan is hereby amended by the addition of Section 4.7 at the end thereof to provide as follows:

4.7 INVESTMENT OF TRANSFERRED CONTRIBUTIONS. Subject to procedures specified by the Company, each Participant who has Transferred Contributions credited to his Transferred Contributions Account shall elect the Funds in which such Transferred Contributions are to be deemed invested. In addition, each such Participant may elect to change the manner in which his Transferred Contributions are deemed to be invested in the form, time and manner specified by the Company. Upon receipt of any such election, the Company shall cause the crediting or transfer, as the case may be, of such Transferred Contributions among the Funds designated by the Participant pursuant to procedures specified by the Company.

6. Section 5.2 of the Plan is hereby amended to provide as follows:

5.2 METHOD OF DISTRIBUTION. Except as otherwise provided in Sections 5.3 and 5.4, the balance of a Participant's Separate Accounts shall be paid to the

2

Participant, or his Beneficiary, if applicable, in a single sum cash payment or in substantially equal annual installment payments over a period not in excess of three years and shall be determined as of the most recent Valuation Date; provided, however, that any Participant who has assets credited to a Transferred Contributions Account shall have the balance of his Separate Accounts paid over a period that is not in excess of ten years.

Executed at Cleveland, Ohio this 28th day of September , 2000.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

By:  /s/ Robert C. Stinson
   -----------------------------------
Title:  Vice President

3

EXHIBIT 10(b)

SECOND AMENDMENT
TO THE
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)

WHEREAS, the Applied Industrial Technologies, Inc. Deferred Compensation Plan (formerly known as the Bearings, Inc. Deferred Compensation Plan and hereinafter referred to as the "Plan") was established, effective as of July 1, 1993, by Applied Industrial Technologies, Inc. (formerly known as Bearings, Inc. and hereinafter referred to as the "Company") to provide key executives of the Company and its affiliates with a means by which to defer receipt of all or a portion of their incentive compensation payable under the Applied Industrial Technologies, Inc. Management Incentive Plan; and

WHEREAS, effective as of January 1, 1997, the Plan was amended and restated; and

WHEREAS, the Plan was subsequently amended on one occasion; and

WHEREAS, the Company desires to again amend the Plan;

NOW, THEREFORE, effective as of October 1, 2000, the Plan is hereby amended in the following respects.

1. Section 1.1 of the Plan is hereby amended by the addition of Paragraph (20) at the end thereof to provide as follows:

(20) The term "Retired Participant" shall mean a Participant who terminates employment with the Company and its Affiliates due to retirement after attainment of age 55.

2. Article III of the Plan is hereby amended by the addition of Section 3.4 at the end thereof to provide as follows:

3.4 DEFERRAL ACCOUNTS OF RETIRED PARTICIPANTS. A Retired Participant may elect no earlier than 90 days, and no later than 30 days, prior to his termination of employment due to retirement to have the balance of his Deferral Account transferred in kind to the Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan for administration thereof in accordance with the terms of such plan.

Executed at Cleveland, Ohio, this 28th day of September, 2000.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

By:   /s/ Robert C. Stinson
   ----------------------------------
   Title:  Vice President


EXHIBIT 10(c)

SECOND AMENDMENT
TO THE
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(JULY 1, 1997 RESTATEMENT)

WHEREAS, the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Plan (formerly known as the Bearings, Inc. Supplemental Executive Retirement Plan and hereinafter referred to as the "Plan") was established on January 21, 1988, by Applied Industrial Technologies, Inc.
(formerly known as Bearings, Inc. and hereinafter referred to as the "Company")
to provide supplemental retirement benefits for certain key executives of the Company; and

WHEREAS, effective as of July 1, 1997, the Plan was amended and restated; and

WHEREAS, the Plan was amended subsequently on one occasion; and

WHEREAS, the Company desires to again amend the Plan;

NOW, THEREFORE, effective as of October 1, 2000, the Plan is hereby amended in the respects hereinafter set forth.

1. Section 6.1 of the Plan is hereby amended to provide as follows:

6.1 OPTIONAL METHODS OF PAYMENT. Subject to the provisions of Article VII, any Participant who becomes eligible under the Plan for a supplemental normal or early retirement benefit may, in lieu of any benefits otherwise payable under the Plan, elect to receive payment of such benefit in accordance with any one of the following options:

OPTION A A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his termination of employment with the continuance of a monthly benefit equal to one-half of such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided that such Contingent Annuitant is living at the time such Participant's benefit commences.

OPTION B A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his termination of employment with the continuance of a monthly benefit equal to three-quarters of such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided such Contingent Annuitant is living at the time such Participant's benefit commences.


OPTION C A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his termination of employment with the continuance of a monthly benefit equal to such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided such Contingent Annuitant is living at the time such Participant's benefit commences.

OPTION D A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his termination of employment with the continuance to the person or persons designated by him as his Term-Certain Beneficiary of such reduced amount after his death for the remainder, if any, of the ten-year period commencing with the date as of which the first payment of such monthly benefit is made, and with any monthly benefits remaining unpaid upon the death of the survivor of the Participant and his Term-Certain Beneficiary to be made to the estate of such survivor.

OPTION E A commercial annuity in the form of a single life annuity for the life of such Participant.

OPTION F A commercial annuity in the form of a cash refund annuity.

OPTION G A commercial annuity for a term certain of ten years and continuous for the life of the Participant if he survives such term certain and with the continuance to the persons designated by him of any benefits remaining unpaid upon his death.

OPTION H A commercial annuity payable for the life of such Participant with a survivor annuity for the life of his Contingent Annuitant which shall be equal to 50%, 75%, or 100% of the annuity payable during the joint lives of the Participant and his Contingent Annuitant.

OPTION I A single sum payment.

The Contingent Annuitant of a Participant under Option A, B, C, or H, or the Term-Certain Beneficiary under Option D or G shall be any person so designated by such Participant. The monthly payments to be made under any option shall be in an amount or amounts the actuarial value of which, on the date of commencement thereof or, if earlier, as of the Participant's Normal Retirement

-2-

Date, shall be the actuarial equivalent of the monthly benefits otherwise payable to the Participant under the Plan, in lieu of which the option was elected, taking into account the age of his Contingent Annuitant if any, and determined in accordance with the provisions of
Section 11.7. A Participant may revoke or elect to change any option made by him at any time prior to commencement of benefit payments. In any case where a benefit payable under the Plan is to be paid in the form of a commercial annuity, a commercial annuity contract shall be purchased from an insurance company selected by the Participant and distributed to such Participant. Upon the distribution of any amount used to purchase the annuity contract, the insurance company issuing such contract shall be solely responsible to the recipient of the contract for the annuity payments thereunder. All certificates for commercial annuity benefits shall be nontransferable, and no benefit thereunder may be sold, assigned, discounted, or pledged. Any commercial annuity purchased under the Plan shall contain such terms and provisions as may be necessary to satisfy the requirements under the Plan.

2. Section 6.3 of the Plan is hereby amended to provide as follows:

6.3 PAYMENT UNDER AN OPTION. A monthly benefit payment under Option A, B, C, or D shall be made to an eligible Participant at the same time as the monthly benefit payment otherwise payable to him under the Plan would have commenced. Monthly benefit payments which become payable to a Contingent Annuitant of a Participant under Option A, B, or C shall commence with the month following the month in which the death of such Participant occurs and shall be payable monthly thereafter during the life of the Contingent Annuitant, the last payment being for the month in which the death of the Contingent Annuitant occurs. Monthly payments which become payable hereunder to a Term-Certain Beneficiary of a Participant under Option D shall commence with the month following the month in which the death of such Participant occurs, and the last such monthly payment shall be made for the last month in the term certain; provided, however, that in the event that any such monthly payments become payable to the estate of any person or to a trust, a lump-sum amount shall be paid to such estate or trust in lieu thereof. Such lump-sum amount shall be equal to the present actuarial value of the aggregate monthly payments otherwise payable to such estate or trust in accordance with the provisions of Section 11.7. Any single sum payment under Option I shall be made to an eligible Participant not before the January 1st of the immediately following calendar year but in no circumstance later than January 15th of such year.

3. Section 11.7 of the Plan is hereby amended to provide as follows:

11.7 ACTUARIAL FACTORS. Supplemental retirement benefits of a Participant that are payable in a single sum form pursuant to the provisions of Sections 6.3, 7.3, or 8.2 shall be determined by using the interest rate on 30-year

-3-

U.S. Treasury bonds for the January immediately preceding the month in which the supplemental retirement benefit of a Participant under the Plan is to be paid in a lump sum form and the 1983 Group Annuity Mortality Table (without projection and a fixed blend of 50 percent of the male mortality and 50 percent of the female mortality rates). Actuarially equivalent benefits under the Plan for options other than Option I shall be determined using the UP-1984 Mortality Table with a 3-year setback and the Uniform Seniority Table and an 8% interest rate.

Executed at Cleveland, Ohio this 28th day of September , 2000.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

By:    /s/ Robert C. Stinson
   ---------------------------------
    Title:   Vice President


EXHIBIT 10(d)

NON-COMPETITION AND CONFIDENTIALITY AGREEMENT

THIS NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (the "Agreement") is made and entered into this 28th day of September, 2000, by and between APPLIED INDUSTRIAL TECHNOLOGIES, INC. (the "Company") and JOHN C. DANNEMILLER (the
"Executive"),

WITNESSETH:

WHEREAS, the Executive is currently serving as the Chairman of the Board of Directors of the Company; and

WHEREAS, the Executive has determined that he will resign as an employee of the Company effective October 31, 2000; and

WHEREAS, the Company desires to ensure that the Executive will not use his knowledge and experience during a certain period of time to compete with the Company or assist a competitor of the Company; and

WHEREAS, the Company and the Executive desire to make provision for payments that the Executive will be entitled to receive from the Company in consideration for the Executive's obligations and actions under this Agreement;

NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Company and the Executive agree as follows:

1. EFFECTIVE DATE OF AGREEMENT. This Agreement is effective as of October 31, 2000 (the "Effective Date") and shall continue in effect as provided herein.

2. RETIREMENT AND RESIGNATIONS. The Executive hereby:

(a) retires as an employee of the Company and of its subsidiaries as of the Effective Date,

(b) resigns from all boards and offices of any entity that is a subsidiary of or is otherwise related to or affiliated with the Company as of the Effective Date, and

(c) resigns from all administrative, fiduciary or other positions that the Executive may hold or has held with respect to arrangements or plans for, of, or relating to the Company as of the Effective Date.

The Company hereby consents to and accepts said resignations, and the Company records shall so reflect.


3. PAYMENTS TO EXECUTIVE. In consideration of the promises of the Executive set forth in this Agreement, including without limitation Paragraph 4 and Paragraph 5 hereof, the Company shall pay to the Executive the annual sum of $50,000 by January 15th of each of the next five calendar years. Such annual payments to the Executive shall be made by check or direct deposit to an account designated by the Executive and shall be reduced by any applicable federal, state and local tax or other required withholding. In addition, the Company agrees to increase the portion of the Shares payable to the Executive under a Performance-Accelerated Restricted Stock Award Agreement dated August 7, 1997 to 75% and to pay such Shares to the Executive on February 6, 2002 or, if earlier, upon any Change in Control (as defined in said agreement) or death.

4. NON-COMPETITION; CERTAIN ACTIONS.

(a) The Executive agrees that for a period commencing on the Effective Date through the fifth anniversary of the Effective Date (the "Non-Compete Period"), the Executive shall not, directly or indirectly, own, manage, control or participate in the ownership, management, or control of, or be employed or engaged by or otherwise affiliated or associated as a consultant, independent contractor, director, or otherwise, with any other person, corporation, partnership, limited liability company, proprietorship, firm, association, or other business entity that manufactures, provides, sells, designs, or distributes products or services that are the same or similar products or services now, heretofore or hereafter provided, sold, designed or distributed by the Company or any of its affiliates within the markets and territory serviced by the Company, or any of its affiliates.

(b) The Executive agrees that during the Non-Compete Period, the Executive shall not, directly or indirectly, solicit the employment or assist in employing any person who on the Effective Date is an employee, officer or agent of the Company, or any of its affiliated, related or subsidiary entities. The Executive further agrees that he will not in any way interfere with the relationship between the Company and its customers, vendors and suppliers.

(c) The Executive agrees that the Executive will not, directly or indirectly, during the Non-Compete Period induce any person who is an employee, officer or agent of the Company, or any of its affiliates, to terminate such relationship.

(d) The Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Paragraph 4 and this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designated to eliminate competition which otherwise would be unfair to the Company, are fully required to protect the legitimate interests of the Company, and do not confer a benefit upon the Company disproportionate to the detriment to the Executive.

5. CONFIDENTIAL INFORMATION; STATEMENTS TO THIRD PARTIES. The Executive acknowledges and agrees that, in the performance of the Executive's duties as an officer and employee of the Company, the Executive was and may be brought into frequent contact with, had or may have had access to, and/or became or may become informed of confidential and

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proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"). The Executive acknowledges and agrees that Confidential Information includes, but is not limited to, information regarding: (i) customers or potential customers; (ii) vendors or suppliers; (iii) pricing structure and profit margins; (iv) employees and payroll policies; (v) computer systems; (vi) facilities or properties; and
(vii) other proprietary, confidential or secret information relating to the Company or any of its affiliates, or their respective businesses, products, activities or operating aspects. The Executive acknowledges and agrees that the Confidential Information of the Company gained by the Executive during the Executive's association with the Company was or will be developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. The Executive agrees that commencing on the Effective Date the Executive shall keep in strict confidence, and shall not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company without limitation as to when or how the Executive may have acquired such Confidential Information. The Executive further acknowledges and agrees that the Executive's obligation of confidentiality will survive, until and unless such Confidential Information of the Company has become, through no fault of the Executive, generally known to the public or the Executive is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure.

6. BREACH. The Executive acknowledges and agrees that the remedy at law available to the Company for breach by the Executive of any of the Executive's obligations under Paragraphs 4 and 5 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, the Executive acknowledges, consents and agrees that, in addition to any other rights or remedies which the Company may have at law, in equity or under this Agreement, upon adequate proof of Executive's violation of any provision of Paragraphs 4 or 5 of this Agreement, the Company will be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage.

7. CONTINUED AVAILABILITY AND COOPERATION. The Executive agrees to cooperate fully with the Company and with the Company's counsel in connection with any present and future actual or threatened litigation or administrative proceeding involving the Company that relates to events, occurrences or conduct occurring (or claimed to have occurred) during the period of the Executive's employment by the Company. The Executive shall be reimbursed by the Company for reasonable travel, lodging, telephone and similar expenses, as well as reasonable attorneys' fees (if independent legal counsel is necessary), incurred in connection with such cooperation, consultation and advice.

8. SUCCESSORS AND BINDING AGREEMENT.

(a) This Agreement will be binding upon and inure to the benefit of the Company and any successor of or to the Company, including, without limitation, any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such

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successor shall thereafter be deemed included in the definition of "the Company" for purposes of this Agreement), but will not otherwise be assignable or delegable by the Company.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. The death or disability (temporary or permanent) of the Executive following the execution and delivery of this Agreement will not affect or revoke this Agreement or excuse any of the obligations of the parties hereto.

(c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, operation of law or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement.

(d) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other party, assign or transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in subparagraph (a) or (b) of this Paragraph 8.

9. NOTICES. For all purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered, addressed to the Company (to the attention of the General Counsel) at its principal executive offices and to the Executive at his Executive's principal residence at 819 Tulip Lane, Sanibel, Florida, 33957, or to such other address as any party may have furnished to the other in writing and in accordance herewith. Notices of change of address shall be effective only upon receipt.

10. AMENDMENT AND WAIVER. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

11. GOVERNING LAW; JURISDICTION; VENUE. The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such state.

12. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which will nevertheless remain in full force and effect.

13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

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14. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used herein are for convenience and are not part of this Agreement and shall not be used in construing it.

15. FURTHER ASSURANCES. Each party hereto shall execute such additional documents, and do such additional things, as may reasonably be requested by the other party to effectuate the purposes and provisions of this Agreement.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date set forth above.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

Witness:                          By:    /s/ David L. Pugh
          ----------------------       ------------------------------
                                        Its: President & Chief Executive Officer



Witness:                                 /s/ John C. Dannemiller
          ----------------------  -----------------------------------------
                                             JOHN C. DANNEMILLER

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ARTICLE 5
MULTIPLIER: 1,000


PERIOD TYPE 3 MOS
FISCAL YEAR END JUN 30 2001
PERIOD START JUL 01 2000
PERIOD END SEP 30 2000
CASH 12,986
SECURITIES 0
RECEIVABLES 217,449
ALLOWANCES 4,166
INVENTORY 172,412
CURRENT ASSETS 405,752
PP&E 173,153
DEPRECIATION 78,212
TOTAL ASSETS 585,738
CURRENT LIABILITIES 142,467
BONDS 119,557
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 10,000
OTHER SE 290,564
TOTAL LIABILITY AND EQUITY 585,738
SALES 420,876
TOTAL REVENUES 420,876
CGS 316,422
TOTAL COSTS 316,422
OTHER EXPENSES 90,221
LOSS PROVISION 657
INTEREST EXPENSE 2,202
INCOME PRETAX 12,031
INCOME TAX 4,800
INCOME CONTINUING 7,231
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 7,231
EPS BASIC 0.37
EPS DILUTED 0.36