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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
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) |
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.
Page No. Part I: FINANCIAL INFORMATION Item 1: Financial Statements Condensed Statements of Consolidated Income - 2 Three Months and Six Months Ended December 31, 2000 and 1999 Condensed Consolidated Balance Sheets - 3 December 31, 2000 and June 30, 2000 Condensed Statements of Consolidated Cash Flows - 4 Six Months Ended December 31, 2000 and 1999 Notes to Condensed Consolidated Financial Statements 5 - 8 Item 2: Management's Discussion and Analysis of 9 - 11 Financial Condition and Results of Operations Item 3: Quantitative and Qualitative Disclosures About Market Risk 12 Part II: OTHER INFORMATION Item 1: Legal Proceedings 13 Item 6: Exhibits and Reports on Form 8-K 13 Signatures 15 |
PART I: FINANCIAL INFORMATION
ITEM I: Financial Statements
Three Months Ended Nine Months Ended March 31 March 31 2001 2000 2001 2000 ---------------------------- ----------------------------- Net Sales $ 408,839 $ 420,897 $1,235,153 $1,188,471 Cost of sales 306,802 317,875 924,760 898,997 ---------- ---------- ---------- ---------- 102,037 103,022 310,393 289,474 Selling, distribution and administrative 88,797 87,424 268,235 249,746 ---------- ---------- ---------- ---------- Operating Income 13,240 15,598 42,158 39,728 Interest expense, net 1,984 1,646 6,709 5,447 ---------- ---------- ---------- ---------- Income Before Income Taxes 11,256 13,952 35,449 34,281 Income Taxes 4,300 5,648 13,900 13,882 ---------- ---------- ---------- ---------- Net Income $ 6,956 $ 8,304 $ 21,549 $ 20,399 ========== ========== ========== ========== Net Income per share - Basic $ 0.36 $ 0.41 $ 1.10 $ 0.99 ========== ========== ========== ========== Net Income per share - Diluted $ 0.35 $ 0.40 $ 1.08 $ 0.98 ========== ========== ========== ========== Cash dividends per common share $ 0.12 $ 0.12 $ 0.36 $ 0.36 ========== ========== ========== ========== Weighted average common shares outstanding for basic computation 19,568 20,305 19,654 20,589 Dilutive effect of stock options and awards 312 222 325 227 ---------- ---------- ---------- ---------- Adjusted average common shares outstanding for diluted computation 19,880 20,527 19,979 20,816 ========== ========== ========== ========== |
See notes to condensed consolidated financial statements.
March 31 June 30 2001 2000 --------- --------- (Unaudited) Assets Current assets Cash and temporary investments $ 12,162 $ 12,349 Accounts receivable, less allowances of $4,400 and $3,800 198,576 212,254 Inventories (at LIFO) 210,313 182,102 Other current assets 9,211 8,286 --------- --------- Total current assets 430,262 414,991 Property, less accumulated depreciation of $73,349 and $75,300 90,698 97,200 Goodwill 67,062 67,089 Other assets 15,691 15,387 --------- --------- TOTAL ASSETS $ 603,713 $ 594,667 ========= ========= Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 104,581 $ 93,587 Other accrued liabilities 58,538 66,272 --------- --------- Total current liabilities 163,119 159,859 Long-term debt 110,789 112,168 Other liabilities 23,872 23,309 --------- --------- TOTAL LIABILITIES 297,780 295,336 --------- --------- 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 83,796 83,312 Income retained for use in the business 281,516 267,145 Treasury shares - at cost, 4,510 and 4,017 shares (67,136) (57,419) Unearned restricted common stock compensation (2,243) (3,707) --------- --------- TOTAL SHAREHOLDERS' EQUITY 305,933 299,331 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 603,713 $ 594,667 ========= ========= |
See notes to condensed consolidated financial statements.
Nine Months Ended March 31 2001 2000 -------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 21,549 $ 20,399 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 16,923 17,433 Changes in operating assets and liabilities, net of effects from acquisition of businesses (9,880) 18,238 Other - net 3,840 2,237 -------------------------------------------------------------------------------------------- Net Cash provided by Operating Activities 32,432 58,307 -------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Property purchases (7,733) (6,919) Proceeds from property sales 3,453 4,190 Net cash paid for acquisition of businesses (5,491) (693) Deposits and other 523 (797) -------------------------------------------------------------------------------------------- Net Cash used in Investing Activities (9,248) (4,219) -------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Repayments under revolving credit agreements - net (20,665) (28,640) Long-term debt repayments (5,714) (5,714) Long-term debt borrowings 25,000 Dividends paid (7,178) (7,499) Purchases of treasury shares (15,487) (16,264) Other 673 108 -------------------------------------------------------------------------------------------- Net Cash used in Financing Activities (23,371) (58,009) -------------------------------------------------------------------------------------------- Decrease in cash and temporary investments (187) (3,921) Cash and temporary investments at beginning of period 12,349 19,186 -------------------------------------------------------------------------------------------- Cash and Temporary Investments at End of Period $ 12,162 $ 15,265 ============================================================================================ |
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to a fair statement of operations of the interim period have been made.
The results of operations for the three and nine month periods ended March 31, 2001 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, cost of sales 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.
2. SEGMENT INFORMATION
The accounting policies of the segments are the same as those used to prepare the condensed 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 5.3% of the total net sales of Applied and therefore are not presented separately. In addition, approximately 39% 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 MARCH 31, 2001 Net sales $382,907 $ 25,932 $408,839 Operating profit (loss) 10,591 (1,211) 9,380 Depreciation 3,542 242 3,784 Capital expenditures 3,089 222 3,311 ------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2000 Net sales $405,408 $ 15,489 $420,897 Operating profit (loss) 19,463 (459) 19,004 Depreciation 4,219 125 4,344 Capital expenditures 2,380 188 2,568 ------------------------------------------------------- |
A reconciliation from the segment operating profit to the condensed consolidated balances is as follows:
THREE MONTHS ENDED MARCH 31 ---------------------------------- 2001 2000 ---------------------------------- Operating profit for reportable segment $ 10,591 $ 19,463 Other operating loss (1,211) (459) Adjustments for: Goodwill amortization (1,280) (1,108) Corporate and other income (expense), net of allocations (a) 5,140 (2,298) ---------------------------------- Total operating profit 13,240 15,598 Interest expense, net 1,984 1,646 ---------------------------------- Income before income taxes $ 11,256 $ 13,952 ================================== |
SERVICE CENTER BASED DISTRIBUTION OTHER TOTAL ------------------------------------------------------------- NINE MONTHS ENDED MARCH 31, 2001 Net sales $1,159,972 $ 75,181 $1,235,153 Operating profit (loss) 32,899 (1,695) 31,204 Assets used in the business 561,710 42,003 603,713 Depreciation 11,714 628 12,342 Capital expenditures 6,549 1,184 7,733 ------------------------------------------------------------- NINE MONTHS ENDED MARCH 31, 2000 Net sales $1,144,338 $ 44,133 $1,188,471 Operating profit (loss) 51,441 (1,031) 50,410 Assets used in the business 525,748 36,421 562,169 Depreciation 12,981 380 13,361 Capital expenditures 6,610 309 6,919 ------------------------------------------------------------- |
A reconciliation from the segment operating profit to the condensed consolidated balances is as follows:
NINE MONTHS ENDED MARCH 31 ---------------------------------- 2001 2000 ---------------------------------- Operating profit for reportable segment $ 32,899 $ 51,441 Other operating loss (1,695) (1,031) Adjustments for: Goodwill amortization (3,781) (3,178) Corporate and other income (expense), net of allocations (a) 14,735 (7,504) ---------------------------------- Total operating profit 42,158 39,728 Interest expense, net 6,709 5,447 ---------------------------------- Income before income taxes $ 35,449 $ 34,281 ================================== |
(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 the segments and an increase in the Company's other income categories related to an increase in discounts and allowances from suppliers. The expenses being allocated include miscellaneous corporate charges for working capital, logistics support and other items.
3. 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 condensed consolidated financial statements from its acquisition date. Results of operations for this acquisition are immaterial for all periods presented. Goodwill, based on allocations of fair values to assets and liabilities acquired, of $3,700 recognized in connection with this combination, is being amortized over 15 years.
4. DEBT
During the quarter ended December 31, 2000, the Company refinanced $25,000 of its Canadian debt, previously financed under its revolving credit facility, through a private issuance of senior notes. Fixed interest of 7.98% is paid quarterly and principal is due at maturity in November 2010.
During the quarter ended December 31, 2000, the Company entered into two fixed 10 year cross currency swap agreements with a Canadian bank. The swaps were entered into in connection with the private placement borrowings effectively converting private placement debt from U.S. dollars to Canadian dollars, and from a fixed rate of 7.98% on the U.S. denominated debt to a fixed rate of 7.75% on the Canadian cross currency swaps. Terms and settlement dates mirror the terms of the private placement. In applying Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," one swap is designated as a cash flow hedge. The other swap is not considered a hedge. The fair value of the swap designated as a cash flow hedge was $1,154 at March 31, 2001. This fair value of the cash flow hedge is offset by the translation loss of the underlying debt obligation. At March 31, 2001, the fair value of the swap not designated as a cash flow hedge was $288 and recorded as an asset. The corresponding adjustment to earnings in the income statement was immaterial.
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 March 31, 2001 and June 30, 2000, and (2) results of operations and cash flows during the periods included in the accompanying Condensed Statements of Consolidated Income and Consolidated Cash Flows.
Cash provided by operating activities was $32.4 million in the nine months ended March 31, 2001. This compares to $58.3 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 nine month period ended March 31, 2001, inventories increased approximately $27.0 million from buying in advance of supplier price increases, and accounts receivable decreased $11.1 million due to lower sales volume and improved collection experience.
During the quarter ended December 31, 2000, the Company refinanced $25.0 million of its Canadian debt, previously financed under its revolving credit facility, through a private issuance of senior notes. Fixed interest of 7.98% is paid quarterly and principal is due at maturity in November 2010. In connection with the refinancing and to minimize currency translation exposure risks, the Company entered into fixed 10 year cross currency swap agreements with a Canadian bank. These agreements swapped the private placement borrowings from U.S. dollars to Canadian dollars, effectively converting from a fixed rate of 7.98% on the U.S. denominated debt to a fixed rate of 7.75% on the Canadian cross currency swaps.
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 $12.9 million of borrowings outstanding under this facility at March 31, 2001. 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 March 31, 2001. Unused lines under these facilities totaling $147.7 million 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 the Company's sole discretion, with terms of up to twelve years.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Board of Directors has authorized the purchase of 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 891,000 shares of its common stock for $15.5 million during the nine months ended March 31, 2001.
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Net sales decreased from the prior year primarily due to the slowdown in U.S. industrial activity. Gross profit as a percentage of sales increased to 25.0% from 24.5%. This increase primarily is due to a change in customer mix and higher discounts and allowances from suppliers.
Selling, distribution and administrative expenses as a percent of sales increased to 21.7% from 20.8%. This change primarily relates to higher bad debt expense and an increase in auto lease expense partially offset by lower auto depreciation expense due to a change in emphasis from owning to leasing vehicles.
Interest expense-net for the quarter increased by 20.5% as compared to the prior year primarily due to an increase in average borrowings.
Income tax expense as a percentage of income before taxes was 38.2% for the quarter ended March 31, 2001 and 40.5% for the quarter ended March 31, 2000. This decrease is due to lower effective state and local tax rates.
As a result of the above factors, net income decreased by 16.2% compared to the same quarter of last year. As a result of the impact of continued stock repurchases, net income per share - diluted decreased $.05, or 12.5%.
NINE MONTHS ENDED MARCH 31, 2001 AND 2000
Net sales increased from the prior year primarily due to acquisitions during fiscal 2000. Gross profit as a percentage of sales increased to 25.1% from 24.4%. This increase primarily is due to a change in customer mix and higher discounts and allowances from suppliers.
Selling, distribution and administrative expenses as a percent of sales increased to 21.7% from 21.0%. This change primarily relates to an increase in auto lease expense partially offset by lower auto depreciation expense due to a change in emphasis from owning to leasing vehicles. Also contributing to the increase were higher hospitalization, bad debt expenses and other benefit costs partially offset by lower incentive expenses.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest expense-net for the nine months ended March 31, 2001 increased by 23.2% as compared to the prior year primarily due to an increase in average borrowings.
Income tax expense as a percentage of income before taxes was 39.2% for the nine months ended March 31, 2001 and 40.5% for the nine months ended March 31, 2000. This decrease is due to lower effective state and local tax rates.
As a result of the above factors, net income increased by 5.6% compared to the same period of last year. As a result of the impact of continued stock repurchases, net income per share - diluted increased $.10, or 10.2%.
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. Forward-looking statements are often identified by qualifiers such as "expect," "believe," "intend," and similar expressions. 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.
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).
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 $12.9 million at March 31, 2001. 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.
The Company protects its foreign currency exposure from the Canadian dollar, through the use of cross currency swap agreements as well as of foreign-currency denominated debt. Hedging of the US dollar denominated debt used to fund a substantial portion of Company's net investment in its Canadian operations is accomplished through the use of cross currency swaps. Any gain or loss on the hedging instrument offsets the gain or loss on the underlying debt. The impact on the Company's future earnings from exposure to changes in foreign currency exchange rates is expected to be immaterial.
PART II. OTHER INFORMATION
Applied Industrial Technologies, Inc. and/or one of its subsidiaries is a defendant in various contract, product and employment-related lawsuits. Based on circumstances currently known, the Company believes that these cases are not material to its business or financial condition.
(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). 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 1996 Private Shelf Agreement between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-2299, and incorporated here by reference). 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) Second Amendment to the Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan (January 1, 1997 Restatement). 10(b) Third Amendment to the Applied Industrial Technologies, Inc. Deferred Compensation Plan (January 1, 1997 Restatement). |
Certain instruments with respect to long-term debt have not been filed as exhibits as the total amount of securities authorized under any one of such instruments does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Commission a copy of each such instrument upon request.
(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 March 31, 2001.
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: May 11, 2001 By: /s/ John R. Whitten ------------------------------------- John R. Whitten Vice President-Chief Financial Officer & Treasurer Date: May 11, 2001 By: /s/ Mark O. Eisele ------------------------------------- Mark O. Eisele Vice President & Controller |
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001
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 1996 Private Shelf Agreement between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-2299, and incorporated here by reference). 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) Second Amendment to the Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan (January 1, 1997 Restatement). Attached 10(b) Third Amendment to the Applied Industrial Technologies, Inc. Deferred Compensation Plan (January 1, 1997 Restatement). Attached |
Certain instruments with respect to long-term debt have not been filed as exhibits as the total amount of securities authorized under any one of such instruments does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Commission a copy of each such instrument upon request.
Exhibit 10(a)
SECOND 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 January 16, 2001, the Plan is hereby amended in the respects hereinafter set forth:
1. Paragraph (24) of Section 1.1 of the Plan is hereby amended to provide as follows:
(24) The term "TRANSFERRED CONTRIBUTIONS" shall mean the contributions that are transferred from the Applied Deferred Compensation Plan prior to January 16, 2001, 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.
2. 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 prior to January 16, 2001, and that are transferred from the Applied Deferred Compensation Plan prior to January 16, 2001, pursuant to the procedures thereunder, and any adjustment thereto pursuant to Section 4.2.
3. 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; provided, however, that no such election may provide for any additional Transferred Contributions to be deemed to be invested in the Company Stock Fund. 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, other than the Company Stock Fund, designated by the Participant pursuant to procedures specified by the Company.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Robert C. Stinson --------------------------------- Title: Vice President |
Exhibit 10(b)
THIRD 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 two occasions; and
WHEREAS, the Company desires to again amend the Plan;
NOW, THEREFORE, effective as of January 16, 2001, the Plan is hereby amended in the following respects.
1. Paragraph (20) of Section 1.1 of the Plan is hereby amended to provide as follows:
(20) The term "Retired Participant" shall mean a Participant who terminates employment prior to January 16, 2001, with the Company and its Affiliates due to retirement after the attainment of age 55.
2. Section 3.4 of the Plan is hereby amended 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; provided, however, that no such election and transfer may be made after January 15, 2001.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Robert C. Stinson ---------------------------------- Title: Vice President |