10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________ 

FORM 10-Q

 __________________________________________

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

For the quarterly period ended DECEMBER 31, 2011

OR

o 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 incorporation or organization)	(I.R.S. Employer 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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o     No   x

There were 41,998,285 (no par value) shares of common stock outstanding on January 13, 2012.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX

			Page No.
Part I:	FINANCIAL INFORMATION
	Item 1:	Financial Statements
		Condensed Statements of Consolidated Income—Three and Six Months Ended December 31, 2011 and 2010	2
		Condensed Consolidated Balance Sheets—December 31, 2011 and June 30, 2011	3
		Condensed Statements of Consolidated Cash Flows—Six Months Ended December 31, 2011 and 2010	4
		Notes to Condensed Consolidated Financial Statements	5
		Report of Independent Registered Public Accounting Firm	11
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3:	Quantitative and Qualitative Disclosures About Market Risk	18
	Item 4:	Controls and Procedures	19
Part II:	OTHER INFORMATION
	Item 1:	Legal Proceedings	20
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 6:	Exhibits	20
Signatures			22
Exhibit Index
Exhibits

1

PART I: FINANCIAL INFORMATION

ITEM I: FINANCIAL STATEMENTS

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2011		2010			2011		2010
Net Sales	$	570,397	$	529,517		$	1,149,971	$	1,057,018
Cost of Sales	414,928		385,236			835,798		769,617
Gross Profit	155,469		144,281			314,173		287,401
Selling, Distribution and Administrative, including depreciation	122,134		111,225			237,571		219,454
Operating Income	33,335		33,056			76,602		67,947
Interest Expense, net	10		458			57		1,582
Other Expense (Income), net	778		(421		)	2,710		(764		)
Income Before Income Taxes	32,547		33,019			73,835		67,129
Income Tax Expense	11,612		11,826			26,518		25,181
Net Income	$	20,935	$	21,193		$	47,317	$	41,948
Net Income Per Share - Basic	$	0.50	$	0.50		$	1.12	$	0.99
Net Income Per Share - Diluted	$	0.49	$	0.49		$	1.11	$	0.97
Cash dividends per common share	$	0.19	$	0.17		$	0.38	$	0.34
Weighted average common shares outstanding for basic computation	41,965		42,411			42,181		42,391
Dilutive effect of potential common shares	669		887			620		826
Weighted average common shares outstanding for diluted computation	42,634		43,298			42,801		43,217

See notes to condensed consolidated financial statements.

2

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	December 31, 2011			June 30, 2011
ASSETS
Current assets
Cash and cash equivalents	$	70,512		$	91,092
Accounts receivable, less allowances of $7,376 and $7,016	280,700			290,751
Inventories	222,626			204,066
Other current assets	36,113			33,005
Total current assets	609,951			618,914
Property, less accumulated depreciation of $146,132 and $143,930	76,659			69,014
Intangibles, net	82,968			89,551
Goodwill	75,517			76,981
Deferred tax assets	36,604			43,447
Other assets	16,314			17,024
TOTAL ASSETS	$	898,013		$	914,931
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	105,591		$	108,509
Compensation and related benefits	51,930			65,413
Other current liabilities	41,443			40,766
Total current liabilities	198,964			214,688
Postemployment benefits	36,238			47,730
Other liabilities	16,625			18,950
TOTAL LIABILITIES	251,827			281,368
Shareholders’ Equity
Preferred stock—no par value; 2,500 shares authorized; none issued or outstanding
Common stock—no par value; 80,000 shares authorized; 54,213 shares issued	10,000			10,000
Additional paid-in capital	151,704			148,307
Income retained for use in the business	699,612			668,421
Treasury shares—at cost (12,220 and 11,611 shares)	(216,557		)	(198,224		)
Accumulated other comprehensive income	1,427			5,059
TOTAL SHAREHOLDERS’ EQUITY	646,186			633,563
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	898,013		$	914,931

See notes to condensed consolidated financial statements.

3

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	December 31,
	2011			2010
Cash Flows from Operating Activities
Net income	$	47,317		$	41,948
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property	5,598			5,496
Amortization of intangibles	5,544			5,678
Amortization of stock options and appreciation rights	1,139			1,569
Gain on sale of property	(492		)	(20		)
Other share-based compensation expense	2,523			2,110
Changes in assets and liabilities, net of acquisitions	(33,246		)	(37,934		)
Other, net	1,833			1,119
Net Cash provided by Operating Activities	30,216			19,966
Cash Flows from Investing Activities
Property purchases	(14,022		)	(13,804		)
Proceeds from property sales	981			124
Net cash paid for acquisition of businesses, net of cash acquired	(1,241		)	(27,739		)
Net Cash used in Investing Activities	(14,282		)	(41,419		)
Cash Flows from Financing Activities
Repayments under revolving credit facility				(50,000		)
Long-term debt repayment				(25,000		)
Settlements of cross-currency swap agreements				(12,752		)
Purchases of treasury shares	(18,990		)
Dividends paid	(16,077		)	(14,422		)
Excess tax benefits from share-based compensation	569			778
Exercise of stock options and appreciation rights	154			338
Net Cash used in Financing Activities	(34,344		)	(101,058		)
Effect of Exchange Rate Changes on Cash	(2,170		)	649
Decrease in cash and cash equivalents	(20,580		)	(121,862		)
Cash and cash equivalents at beginning of period	91,092			175,777
Cash and Cash Equivalents at End of Period	$	70,512		$	53,915

See notes to condensed consolidated financial statements.

4

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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 accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Applied Industrial Technologies, Inc. (the “Company”, or “Applied”) as of December 31, 2011, and the results of its operations for the three and six month periods ended December 31, 2011 and 2010 and its cash flows for the six months ended December 31, 2011 and 2010, have been included. The condensed consolidated balance sheet as of June 30, 2011 has been derived from the audited consolidated financial statements at that date. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2011.

Operating results for the three and six month periods ended December 31, 2011 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year ending June 30, 2012.

Inventory

The Company uses the last-in, first-out (LIFO) method of valuing U.S. inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination.

During the three and six month periods ended December 31, 2010, the Company recorded overall LIFO benefits of $1,823 and $2,124, respectively, and the LIFO reserves were reduced by the same amounts. No comparable benefits were recorded in the three and six month periods ended December 31, 2011.

2. GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill for the Service Center Based Distribution segment for the period ended December 31, 2011 are as follows:

Balance at July 1, 2011	$	76,981
Goodwill acquired during the period	336
Other, primarily currency translation	(1,800		)
Balance at December 31, 2011	$	75,517

At December 31, 2011, accumulated goodwill impairment losses, subsequent to fiscal year 2002, totaled $36,605 and related to the Fluid Power Businesses segment.

5

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

The Company’s intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:

December 31, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	77,160	$	26,105	$	51,055
Trade names	25,480		6,439		19,041
Vendor relationships	13,638		4,004		9,634
Non-competition agreements	4,654		2,706		1,948
Total Finite-Lived Intangibles	120,932		39,254		81,678
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	122,222	$	39,254	$	82,968

June 30, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	78,084	$	23,111	$	54,973
Trade names	25,944		5,666		20,278
Vendor relationships	14,211		3,696		10,515
Non-competition agreements	5,127		2,632		2,495
Total Finite-Lived Intangibles	123,366		35,105		88,261
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	124,656	$	35,105	$	89,551

Amounts include the impact of foreign currency translation. Fully amortized amounts are written off.

Estimated future amortization expense by fiscal year (based on the Company’s intangible assets as of December 31, 2011) is as follows: $5,500 for the remainder of 2012, $10,000 for 2013, $8,800 for 2014, $8,100 for 2015, $7,500 for 2016 and $6,900 for 2017.

3. FAIR VALUE MEASUREMENTS

Marketable securities measured at fair value at December 31, 2011 and June 30, 2011 totaled $10,156 and $10,881. These marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the condensed consolidated balance sheets and their fair values were derived using quoted market prices (Level 1 in the fair value hierarchy).

6

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

4. SHAREHOLDERS' EQUITY

Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:

	Three Months Ended December 31,
	2011			2010
Net income	$	20,935		$	21,193
Other comprehensive (loss) income:
Foreign currency translation adjustment	(8,117		)	3,088
Unrealized gain on investment securities available for sale, net of income tax of $18 and $43	29			59
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $180 and $212	287			341
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $344				846
Total comprehensive income	$	20,198		$	25,527

	Six Months Ended December 31,
	2011			2010
Net income	$	47,317		$	41,948
Other comprehensive (loss) income:
Foreign currency translation adjustment	(11,159		)	1,291
Unrealized (loss) gain on investment securities available for sale, net of income tax of $(64) and $68	(111		)	104
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $360 and $347	574			760
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $(82)				(184		)
Reclassification of interest expense into income, net of income tax of $116				200
Total comprehensive income	$	43,685		$	44,119

Antidilutive Common Stock Equivalents

In the three and six month periods ended December 31, 2011 and 2010, respectively, stock options and stock appreciation rights related to the acquisition of 251 and 102 shares of common stock in the three month periods and 276 and 297 shares of common stock in the six month periods were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive.

7

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

5. BENEFIT PLANS

On December 19, 2011, the Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. This action constitutes a plan curtailment.

The plan liability was remeasured in conjunction with the curtailment using a 3.5% discount rate and participant final average earnings through the curtailment date. The plan was last remeasured at June 30, 2011, using a 4.5% discount rate. This latest remeasurement resulted in an actuarial loss (recorded in other comprehensive income) of $302 ($492 loss, net of income tax of $190).

The curtailment is reflected in the Company's condensed consolidated balance sheets as: 1) a reduction to the overall SERP liability (included in postemployment benefits) of $8,860, 2) a reduction to deferred tax assets of $3,411 and 3) an increase in accumulated other comprehensive income of $5,449. Prior service costs previously recorded through accumulated other comprehensive income were reclassified into the condensed statements of consolidated income ($3,117 gross expense, net of income tax of $1,200). The gross expense is recorded in selling, distribution and administrative expense in the second quarter of fiscal 2012.

The following table provides summary disclosures of the net periodic postemployment costs recognized for the Company’s postemployment benefit plans:

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	127		$	115		$	8		$	10
Interest cost	588			564			59			59
Expected return on plan assets	(99		)	(96		)
Recognized net actuarial loss (gain)	265			362			(18		)	(21		)
Amortization of prior service cost	185			178			35			35
Curtailment loss	3,117
Net periodic cost	$	4,183		$	1,123		$	84		$	83

	Pension Benefits						Retiree Health Care Benefits
Six Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	254		$	230		$	15		$	20
Interest cost	1,176			1,129			118			118
Expected return on plan assets	(198		)	(192		)
Recognized net actuarial loss (gain)	529			724			(36		)	(42		)
Amortization of prior service cost	370			355			70			69
Curtailment loss	3,117
Net periodic cost	$	5,248		$	2,246		$	167		$	165

The Company contributed $370 to its pension benefit plans and $103 to its retiree health care plans in the six months ended December 31, 2011. Expected contributions for the remainder of fiscal 2012 are $3,850 for the pension benefit plans to fund scheduled retirement payments and $150 for retiree health care plans.

8

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

6. SEGMENT AND GEOGRAPHIC INFORMATION

The accounting policies of the Company’s reportable segments are the same as those used to prepare the condensed consolidated financial statements. Sales primarily from the Fluid Power Businesses segment to the Service Center Based Distribution segment of $3,708 and $4,202, in the three months ended December 31, 2011 and 2010, respectively, and $7,955 and $8,598 in the six months ended December 31, 2011 and 2010, respectively, have been eliminated in the tables below.

Segment Financial Information for the three months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	458,315	$	112,082	$	570,397
Operating income for reportable segments	29,280		10,151		39,431
Depreciation and amortization of property	2,353		427		2,780
Capital expenditures	6,546		334		6,880
December 31, 2010
Net sales	$	426,161	$	103,356	$	529,517
Operating income for reportable segments	25,288		9,875		35,163
Depreciation and amortization of property	2,286		497		2,783
Capital expenditures	12,832		99		12,931

Segment Financial Information for the six months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	922,173	$	227,798	$	1,149,971
Operating income for reportable segments	58,674		21,388		80,062
Assets used in the business	681,019		216,994		898,013
Depreciation and amortization of property	4,651		947		5,598
Capital expenditures	13,346		676		14,022
December 31, 2010
Net sales	$	850,114	$	206,904	$	1,057,018
Operating income for reportable segments	51,356		19,309		70,665
Assets used in the business	630,572		199,058		829,630
Depreciation and amortization of property	4,463		1,033		5,496
Capital expenditures	13,549		255		13,804

9

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

A reconciliation of operating income for reportable segments to the condensed consolidated income before income taxes is as follows:

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2011		2010			2011			2010
Operating income for reportable segments	$	39,431	$	35,163		$	80,062		$	70,665
Adjustment for:
Intangible amortization—Service Center Based Distribution	841		905			1,718			1,686
Intangible amortization—Fluid Power Businesses	1,894		1,986			3,826			3,992
Corporate and other expense (income), net	3,361		(784		)	(2,084		)	(2,960		)
Total operating income	33,335		33,056			76,602			67,947
Interest expense, net	10		458			57			1,582
Other expense (income), net	778		(421		)	2,710			(764		)
Income before income taxes	$	32,547	$	33,019		$	73,835		$	67,129

Corporate and other expense (income), net includes the SERP curtailment loss of $3,117 recognized in the second quarter of fiscal 2012. Additional fluctuations in corporate and other expense (income), net are due to changes in the levels and amounts of expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.

Net sales are presented in geographic areas based on the location of the company making the sale and are as follows:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2011		2010		2011		2010
Geographic Areas:
United States	$	478,222	$	450,951	$	965,650	$	910,244
Canada	73,502		63,329		147,075		117,410
Mexico	18,673		15,237		37,246		29,364
Total	$	570,397	$	529,517	$	1,149,971	$	1,057,018

7. OTHER EXPENSE (INCOME), NET

Other expense (income), net consists of the following:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2011			2010			2011		2010
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(374	)	$	(696	)	$	1,006	$	(1,505	)
Foreign currency transaction losses	1,047			31			1,556		149
Loss on cross-currency swap				162					368
Other, net	105			82			148		224
Total other expense (income), net	$	778		$	(421	)	$	2,710	$	(764	)

10

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The accompanying condensed consolidated financial statements of the Company have been reviewed by the Company’s independent registered public accounting firm, Deloitte & Touche LLP, whose report covering their reviews of the condensed consolidated financial statements follows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Applied Industrial Technologies, Inc.

Cleveland, Ohio

We have reviewed the accompanying condensed consolidated balance sheet of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2011, and the related condensed statements of consolidated income for the three-month and six-month periods ended December 31, 2011 and 2010, and of consolidated cash flows for the six-month periods ended December 31, 2011 and 2010. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of June 30, 2011, and the related statements of consolidated income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated August 17, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 2011 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP         

Cleveland, Ohio

February 2, 2012

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” or “Our”) is one of North America's largest industrial distributors serving MRO, OEM and Government markets. Applied is an authorized source for a diverse range of products, including bearings, power transmission components, fluid power components and systems, industrial rubber products, linear motion components, tools, safety products, and general maintenance and mill supply products.  The Company also provides customized shop services for mechanical, fabricated rubber and fluid power products, as well as services to meet storeroom management and maintenance training needs. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the second quarter of fiscal 2012, business was conducted in the United States, Canada, Mexico and Puerto Rico from 475 facilities.

The following is Management's Discussion and Analysis of significant factors which have affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed statements of consolidated income and consolidated cash flows.When reviewing the discussion and analysis set forth below, please note that the majority of SKUs we sell in any given period were not sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes in product mix and volume.

Overview

Consolidated net sales for the quarter ended December 31, 2011 increased $40.9 million or 7.7% compared to the prior year quarter, with acquisitions contributing $1.5 million or 0.3% and with unfavorable foreign currency translation of $0.9 million or 0.2% partially offsetting the increase. Operating margin decreased to 5.8% of net sales from 6.2% for the prior year quarter largely driven by increases in SD&A expenses. Net income of $20.9 million declined 1.2% compared to the prior year quarter. Shareholders' equity was $646.2 million at December 31, 2011 up from the June 30, 2011 level of $633.6 million. The current ratio was 3.1 to 1 at December 31, 2011 and 2.9 to 1 at June 30, 2011. Since November 30, 2010, we have had no borrowings outstanding under our existing credit facilities.

Applied monitors several economic indices that have been key indicators for industrial economic activity. These include the Manufacturing Capacity Utilization (MCU) index published by the Federal Reserve Board and the Purchasing Managers Index (PMI) published by the Institute for Supply Management (ISM). Historically, our performance correlates well with the MCU, which measures productivity and calculates a ratio of actual manufacturing output versus potential full capacity output. When manufacturing plants are running at a high rate of capacity, they tend to wear out machinery and require replacement parts. Our sales tend to lag the MCU on the upswing by up to six months and move closer in alignment with the declines.

These indices showed continued improvement in the industrial economy during the second quarter of fiscal 2012.  The MCU for December 2011 was 75.9, compared to 75.1 in September 2011 and 74.4 in June 2011.  The ISM PMI was 53.9 in December 2011 versus 51.6 in September 2011 and 55.3 in June 2011. While the index is still above 50, it is down from its year-long high of 61.4 in February 2011.  We believe that the U.S. industrial economy has settled into a moderate pace of growth which will continue throughout fiscal 2012.

The number of Company associates was 4,682 at December 31, 2011, 4,640 at June 30, 2011, and 4,655 at December 31, 2010. The number of operating facilities totaled 475 at December 31, 2011 and 473 at December 31, 2010.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended December 31, 2011 and 2010

The following table is included to aid in review of Applied's condensed statements of consolidated income. The percent increase (decrease) column represents the change in dollars compared to the same period in the prior year.

	Three Months Ended December 31,
					Percent
	As a Percent of Net Sales				Increase
	2011		2010		(Decrease)
Net Sales	100.0	%	100.0	%	7.7	%
Gross Profit	27.3	%	27.2	%	7.8	%
Selling, Distribution & Administrative	21.4	%	21.0	%	9.8	%
Operating Income	5.8	%	6.2	%	0.8	%
Net Income	3.7	%	4.0	%	(1.2	)%

During the quarter ended December 31, 2011, net sales increased $40.9 million or 7.7% compared to the prior year quarter, with acquisitions accounting for $1.5 million or 0.3%, and foreign currency translation unfavorably reducing sales by $0.9 million or 0.2%. There were 61 selling days in both the 2011 and 2010 quarters.

Net sales from our Service Center Based Distribution segment, which is heavily focused on the MRO market, increased $32.2 million or 7.5% during the quarter from the same period in the prior year, primarily attributed to improvement in the industrial economy. Acquisitions within this segment increased sales by $1.5 million, or 0.4%.

Net sales from our Fluid Power Businesses segment, which is heavily focused on the OEM market, increased $8.7 million or 8.4% during the quarter from the same period in the prior year, primarily attributed to improvements in the industrial economy.

Improvements in the industrial economy helped drive sales increases in all of the geographic areas of the Company. Sales in our U.S. operations were up $27.3 million or 6.0%, with acquisitions accounting for $1.0 million or 0.2% of the U.S. increase. Sales from our Canadian operations increased $10.2 million or 16.1%. This increase includes $0.5 million from acquisitions and $0.4 million due to favorable foreign currency translation. Sales from our Mexican operations increased $3.4 million or 22.6%, despite unfavorable foreign currency translation of $1.3 million.

During the quarter ended December 31, 2011, industrial products and fluid power products accounted for 70.9% and 29.1%, respectively, of net sales as compared to 71.4% and 28.6%, respectively, for the same period in the prior year.

Our gross profit margin for the quarter increased to 27.3% compared to the prior year quarter's 27.2%. The improvement can be largely attributed to increased contribution from our U.S. service center point-of-sale margins, higher purchasing incentives, and lower scrap expense. These favorable impacts offset the non-recurrence of favorable LIFO benefits recorded in the second quarter of fiscal 2011.

Selling, distribution and administrative expense (SD&A) consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, legal, and facility related expenses. SD&A was 21.4% of net sales in the quarter ended December 31, 2011 compared to 21.0% in the prior year quarter. On an absolute basis, SD&A increased $10.9 million or 9.8% compared to the prior year quarter. The ERP project expenses were $4.2 million in the quarter ($3.5 million above the prior year quarter) and acquisitions added $0.5 million. Additionally, the Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. As a result, we incurred a curtailment loss of $3.1 million in the second quarter of fiscal 2012. Also increasing expenses were one time costs associated with our CEO transition of $1.3 million.

Operating income was up $0.3 million, but as a percent of sales decreased to 5.8% from 6.2% during the prior year quarter. Operating income as a percentage of sales for the Service Center Based Distribution segment increased to 6.4% in the current

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

year quarter, from 5.9% in the prior year quarter due to improved operating leverage on sales increases. The Fluid Power Businesses operating margins decreased to 9.1% in the current year quarter from 9.6% in the prior year quarter. This reduction can be attributed to lower sales volume in one of its businesses. Higher SD&A expenses including ERP project expenses, a curtailment loss, and CEO transition related expenses contributed to the decline in total company operating income.

Interest, net, is down $0.4 million due to repayment in the first half of fiscal 2011 of all borrowings under our credit facilities.

Other expense was $0.8 million in the quarter driven by foreign currency transaction losses of $1.0 million ($0.9 million of which are unrealized). These losses were partially offset by $0.4 million of unrealized gains on investments held by non-qualified deferred compensation trusts.

The effective income tax rate was 35.7% for the quarter ended December 31, 2011 compared to 35.8% for the quarter ended December 31, 2010. In the second quarter of fiscal 2011, we reversed a valuation allowance which reduced the effective income tax rate by 4%. This was partially offset by accrual of U.S. income taxes on Canadian subsidiaries' earnings which increased last year's second quarter effective tax rate by 2.3%. These items did not recur in fiscal 2012. The rate this quarter is impacted by a larger portion of pretax income coming from foreign jurisdictions taxed at lower rates, as well as lower effective state tax rates.

As a result of the factors addressed above, net income decreased $0.3 million or 1.2% compared to the prior year quarter. Net income per share was $0.49 per share for the quarter ended December 31, 2011, compared to $0.49 in the prior year quarter.

Six Months Ended December 31, 2011 and 2010

The following table is included to aid in review of Applied's condensed statements of consolidated income. The percent increase (decrease) column represents the change in dollars compared to the same period in the prior year.

	Six Months Ended December 31,
					Percent
	As a Percent of Net Sales				Increase
	2011		2010		(Decrease)
Net Sales	100.0	%	100.0	%	8.8	%
Gross Profit	27.3	%	27.2	%	9.3	%
Selling, Distribution & Administrative	20.7	%	20.8	%	8.3	%
Operating Income	6.7	%	6.4	%	12.7	%
Net Income	4.1	%	4.0	%	12.8	%

During the six months ended December 31, 2011, net sales increased $93.0 million or 8.8% compared to the same period in the prior year, with acquisitions accounting for $8.3 million or 0.8%, and favorable foreign currency translation adding $5.0 million or 0.5%. There were 125 selling days in both 2011 and 2010.

Net sales from our Service Center Based Distribution segment, which is heavily focused on the MRO market, increased $72.1 million or 8.5% during the same period in the prior year, primarily attributed to improvement in the industrial economy. Acquisitions within this segment increased sales by $8.3 million, or 1.0%.

Net sales from our Fluid Power Businesses segment, which is heavily focused on the OEM market, increased $20.9 million or 10.1% during the six months ended December 31, 2011 from the same period in the prior year, primarily attributed to improvements in the industrial economy.

Improvements in the industrial economy helped drive sales increases in all of the geographic areas of the Company. Sales in our U.S. operations were up $55.4 million or 6.1%, with acquisitions accounting for $3.8 million or 0.4% of the U.S. increase. Sales from our Canadian operations increased $29.7 million or 25.3%. This increase includes $5.0 million due to favorable foreign currency translation and $4.4 million from acquisitions. Sales from our Mexican operations increased $7.9 million or 26.8%, with a minimal year-to-date foreign currency translation impact.

During the six months ended December 31, 2011, industrial products and fluid power products accounted for 70.7% and 29.3%, respectively, of net sales as compared to 71.4% and 28.6%, respectively, for the same period in the prior year.

14

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Our gross profit margin for the period increased to 27.3% compared to the prior year period's 27.2%. The improvement can be largely attributed to increased contribution from our U.S. service center point-of-sale margins, higher purchasing incentives, and lower scrap expense. These favorable impacts offset the non-recurrence of favorable LIFO benefits recorded in the prior year.

SD&A was 20.7% of net sales in the six months ended December 31, 2011 compared to 20.8% in the prior year period. On an absolute basis, SD&A increased $18.1 million or 8.3% compared to the prior period. The ERP project expenses were $8.0 million in the six months ended December 31, 2011 ($7.2 million above the prior year period) and acquisitions added $3.2 million. Additionally, the Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the SERP effective December 31, 2011. As a result, we incurred a curtailment loss of $3.1 million in the second quarter of fiscal 2012. Also unfavorably increasing expenses were one time expenses associated with our CEO transition of $1.4 million.

Operating income increased $8.7 million to 6.7% during the period compared to 6.4% during the prior year period. Operating income as a percentage of sales for the Service Center Based Distribution segment increased to 6.4% in the current year period, from 6.0% in the prior year period. The Fluid Power Businesses operating margins increased to 9.4% in the current year period from 9.3% in the prior year period. These increases as compared to the prior year period reflect improved operating leverage on the increases in sales, although the Fluid Power Businesses segment is experiencing some sales volume declines in one of its businesses.

Interest, net, is down $1.5 million due to repayment in the first half of fiscal 2011 of all borrowings under our credit facilities.

Other expense was $2.7 million in the period and included $1.6 million of foreign currency transaction losses ($1.4 million of which are unrealized) and $1.0 million of unrealized losses on investments held by non-qualified deferred compensation trusts.

The effective income tax rate was 35.9% for the six months ended December 31, 2011 compared to 37.5% for the same period in the prior year. In fiscal 2011, we accrued U.S. income taxes on Canadian subsidiaries' earnings which increased the effective tax rate; this was partially offset by reversal of a valuation allowance in the second quarter of fiscal 2011. These items did not recur in fiscal 2012. The rate this year is impacted by a larger portion of pretax income coming from foreign jurisdictions taxed at lower rates, as well as lower effective state tax rates.

As a result of the factors addressed above, net income increased $5.4 million or 12.8% compared to the prior year period. Net income per share was $1.11 per share for the six months ended December 31, 2011, compared to $0.97 in the prior year quarter.

Liquidity and Capital Resources

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At December 31, 2011, we have no outstanding borrowings. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, cash provided from operations, and the use of operating leases will be sufficient to finance normal working capital needs in each of the countries we operate in, payment of dividends, acquisitions, investments in properties, 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 based on the Company's credit standing and financial strength.

The Company's working capital at December 31, 2011 was $411.0 million, compared to $404.2 million at June 30, 2011. The current ratio was 3.1 to 1 at December 31, 2011 and 2.9 to 1 at June 30, 2011.

The Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the SERP effective December 31, 2011. This reduced postemployment benefits by $8.9 million and deferred tax assets by $3.4 million in the condensed consolidated balance sheet.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Net Cash Flows

The following table is included to aid in review of Applied's condensed statements of consolidated cash flows; all amounts are in thousands.

	Six Months Ended December 31,
Net Cash Provided by (Used in):	2011			2010
Operating Activities	$	30,216		$	19,966
Investing Activities	(14,282		)	(41,419		)
Financing Activities	(34,344		)	(101,058		)
Exchange Rate Effect	(2,170		)	649
Decrease in Cash and Cash Equivalents	$	(20,580	)	$	(121,862	)

Improved net income generated approximately half of the increase in net cash provided by operating activities over the prior year with quarterly variability in working capital contributing the rest.

Net cash used in investing activities during the current year was $14.3 million; $14.0 million was used for capital expenditures and $1.2 million for acquisitions. These uses of cash were partially offset by $1.0 million of proceeds from property sales. In the six months ended December 31, 2010, we used $41.4 million; $27.7 million was used for acquisitions and $13.8 million for capital expenditures.

Net cash used in financing activities was $34.3 million for the six months ended December 31, 2011. We used $19.0 million to repurchase 664,100 shares of treasury stock and $16.1 million to pay dividends. In the first half of fiscal 2011, financing activities used $101.1 million of cash; we repaid $50.0 million under our revolving credit facility, $25.0 million under our private placement debt and $12.8 million related to the associated cross-currency swaps. Additionally, we paid dividends of $14.4 million. The increase in the dividend payments relates to our increased dividend rate to $0.19 per share versus $0.17 per share in the prior year quarter.

ERP Project

In the second quarter of fiscal 2011, Applied commenced its ERP project to transform the Company's technology platforms and enhance its business information and transaction systems for future growth. We expect the total implementation spend related to this project will be in the upper end of our previously stated range of $70.0 million to $75.0 million over a three to four year period. In fiscal 2011, project spend totaled $21.1 million ($12.5 million capital and $8.6 million expense). During the current quarter, spending on the project totaled $9.0 million ($4.8 million capital and $4.2 million expense). On a year-to-date basis, spending on the project for fiscal 2012 totaled $18.5 million ($10.5 million capital and $8.0 million expense). We expect spending in fiscal year 2012 to reach $36.0 million to $40.5 million ($19.0 million to $21.5 million capital and $17.0 million to $19.0 million expense). We have deployed our solution in a portion of our Canadian operations and are preparing for further deployments in Canada during this fiscal year. U.S. deployments are planned for fiscal 2013 and 2014.

Share Repurchases

In October 2011, the Board of Directors authorized the repurchase of 1.5 million shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. We acquired 24,100 shares of treasury stock on the open market in the three months ended December 31, 2011 for $0.8 million under this new authorization. At December 31, 2011, we had authorization to repurchase an additional 1,475,900 shares. Through the six months ended December 31, 2011, we acquired 664,100 shares of treasury stock on the open market for $19.0 million.

Borrowing Arrangements

We have a $150.0 million revolving credit facility with a group of banks expiring in June 2012, which we intend to renew. There are no borrowings outstanding under this facility at December 31, 2011. At December 31, 2011, unused lines under this facility, net of outstanding letters of credit, total $143.1 million and are available to fund future acquisitions or other capital and operating requirements.

We also have an uncommitted long-term financing shelf facility which expires in February 2013 and enables us to borrow up to $100.0 million with terms of up to fifteen years. At December 31, 2011, there were no outstanding borrowings under this agreement.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Cautionary Statement Under Private Securities Litigation Reform Act

Management's Discussion and Analysis and other sections of this report, including documents incorporated by reference, 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 "guidance," "expect," "believe," "plan," "intend," "will," "should," "could," "would," "anticipate," "estimate," "forecast," "may," and derivative or similar words or expressions. Similarly, descriptions of objectives, strategies, plans, or goals are also forward-looking statements. These statements may discuss, among other things, expected growth, future sales, future cash flows, future capital expenditures, future performance, and the anticipation and expectations of the Company and its management as to future occurrences and trends. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in its rules, regulations and releases.

Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company's control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of those 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 assumes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise, except as may be required by law.

Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability, or changes in supplier distribution programs; the cost of products and energy and other operating costs; changes in customer preferences for products and services of the nature and brands sold by us; changes in customer procurement policies and practices; the potential for product shortages if suppliers are unable to fulfill in a timely manner increased demand in the economic recovery; competitive pressures; our reliance on information systems; our ability to implement our ERP system in a timely, cost-effective, and competent manner, and to capture its planned benefits while maintaining an adequate internal control environment; the impact of economic conditions on the collectability of trade receivables; reduced demand for our products in targeted markets due to reasons including consolidation in customer industries and the transfer of manufacturing capacity to foreign countries; our ability to retain and attract qualified sales and customer service personnel; our ability to identify and complete acquisitions, integrate them effectively, and realize their anticipated benefits; the variability and timing of new business opportunities including acquisitions, alliances, customer relationships, and supplier authorizations; the incurrence of debt and contingent liabilities in connection with acquisitions; our ability to access capital markets as needed on reasonable terms; disruption of operations at our headquarters or distribution centers; risks and uncertainties associated with our foreign operations, including volatile economic conditions, political instability, cultural and legal differences, and currency exchange fluctuations; the potential for goodwill and intangible asset impairment; changes in accounting policies and practices; organizational changes within the Company; the volatility of our stock price and the resulting impact on our consolidated financial statements; risks related to legal proceedings to which we are a party; adverse regulation and legislation, including potential changes in tax regulations (e.g., those affecting the use of the LIFO inventory accounting method and the taxation of foreign-sourced income); and the occurrence of extraordinary events (including prolonged labor disputes, natural events and acts of God, terrorist acts, fires, floods, and accidents). Other factors and unanticipated events could also adversely affect our business, financial condition or results of operations. We discuss certain of these matters more fully in our Annual Report on Form 10-K for the year ended June 30, 2011.

17

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has evaluated its exposure to various market risk factors, including its primary market risk exposure through the effects of changes in exchange rates. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes.

For quantitative and qualitative disclosures about market risk, see Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended June 30, 2011.

18

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 4: CONTROLS AND PROCEDURES

The Company's management, under the supervision and with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective.

During the second quarter of fiscal 2012, there were no changes in the Company's internal controls or in other factors that materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

19

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is a party to pending legal proceedings with respect to various product liability, negligence, and other matters. Although it is not possible to predict the outcome of these proceedings or the range of possible loss, the Company believes, based on circumstances currently known, that the likelihood is remote that the ultimate resolution of any of these proceedings will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases in the quarter ended December 31, 2011 were as follows:

Period	(a) Total Number of Shares	(b) Average Price Paid per Share ($)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 1, 2011 to October 31, 2011	—	—	—	1,500,000
November 1, 2011 to November 30, 2011	400	33.87	400	1,499,600
December 1, 2011 to December 31, 2011	23,700	33.62	23,700	1,475,900
Total	24,100	33.63	24,100	1,475,900

(1) On October 25, 2011, the Board of Directors authorized the purchase of up to 1.5 million shares of the Company's common stock. The Company publicly announced the authorization that day. Purchases can be made in the open market or in privately negotiated transactions.

ITEM 6. Exhibits

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to the Company’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference).
3.2	Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference).
4.1	Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).
4.2	Private Shelf Agreement dated as of November 27, 1996, between the Company and Prudential Investment Management, Inc. (assignee of The Prudential Insurance Company of America), conformed to show all amendments (filed as Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended March 31, 2010, SEC File No. 1-2299, and incorporated here by reference).
4.3	Credit Agreement dated as of June 3, 2005 among the Company, KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4.7 to the Company’s Form 10-Q dated February 9, 2010, SEC File No. 1-2299, and incorporated here by reference).

20

4.4	First Amendment Agreement dated as of June 6, 2007, among the Company, KeyBank National Association as Agent, and various financial institutions, amending June 3, 2005 Credit Agreement (filed as Exhibit 4 to the Company’s Form 8-K dated June 11, 2007, SEC File No. 1-2299, and incorporated here by reference).
10.1	Offer of Employment dated October 14, 2011 for Neil A. Schrimsher (filed as Exhibit 10.1 to the Company's Form 8-K dated October 17, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.2	General Terms for Annual Incentive Plan for Neil A. Schrimsher (filed as Exhibit 10.1 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.3	Severance Agreement for Neil A. Schrimsher (filed as Exhibit 10.2 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.4	Change in Control Agreement for Neil A. Schrimsher (filed as Exhibit 10.3 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.5	Terms and Conditions for Inducement Restricted Stock Units Award for Neil A. Schrimsher (filed as Exhibit 10.4 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.6	Terms and Conditions for Inducement Stock Appreciation Rights Award for Neil A. Schrimsher (filed as Exhibit 10.5 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.7	First Amendment to the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Plan (Restated Post-2004 Terms) (filed as Exhibit 10.1 to the Company's Form 8-K dated December 22, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.8	Applied Industrial Technologies, Inc. Key Executive Restoration Plan (Effective January 1, 2012) and List of Participants (filed as Exhibit 10.2 to the Company's Form 8-K dated December 22, 2011, SEC File No. 1-2299, and incorporated here by reference).
15	Independent Registered Public Accounting Firm’s Awareness Letter.
31	Rule 13a-14(a)/15d-14(a) certifications.
32	Section 1350 certifications.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

The Company will furnish a copy of any exhibit described above and not contained herein upon payment of a specified reasonable fee which shall be limited to the Company’s reasonable expenses in furnishing the exhibit.

21

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: February 2, 2012	By:  /s/ Neil A. Schrimsher
	Neil A. Schrimsher
	Chief Executive Officer
Date: February 2, 2012	By:   /s/ Mark O. Eisele
	Mark O. Eisele
	Vice President-Chief Financial Officer & Treasurer

22

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

EXHIBIT INDEX

TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2011

EXHIBIT NO.	DESCRIPTION
3.1	Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to the Company’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference).
3.2	Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference).
4.1	Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).
4.2	Private Shelf Agreement dated as of November 27, 1996, between the Company and Prudential Investment Management, Inc. (assignee of The Prudential Insurance Company of America), conformed to show all amendments (filed as Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended March 31, 2010, SEC File No. 1-2299, and incorporated here by reference).
4.3	Credit Agreement dated as of June 3, 2005 among the Company, KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4.7 to the Company’s Form 10-Q dated February 9, 2010, SEC File No. 1-2299, and incorporated here by reference).
4.4	First Amendment Agreement dated as of June 6, 2007, among the Company, KeyBank National Association as Agent, and various financial institutions, amending June 3, 2005 Credit Agreement (filed as Exhibit 4 to the Company’s Form 8-K dated June 11, 2007, SEC File No. 1-2299, and incorporated here by reference).
10.1	Offer of Employment dated October 14, 2011 for Neil A. Schrimsher (filed as Exhibit 10.1 to the Company's Form 8-K dated October 17, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.2	General Terms for Annual Incentive Plan for Neil A. Schrimsher (filed as Exhibit 10.1 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.3	Severance Agreement for Neil A. Schrimsher (filed as Exhibit 10.2 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.4	Change in Control Agreement for Neil A. Schrimsher (filed as Exhibit 10.3 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.5	Terms and Conditions for Inducement Restricted Stock Units Award for Neil A. Schrimsher (filed as Exhibit 10.4 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.6	Terms and Conditions for Inducement Stock Appreciation Rights Award for Neil A. Schrimsher (filed as Exhibit 10.5 to the Company's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.7	First Amendment to the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Plan (Restated Post-2004 Terms) (filed as Exhibit 10.1 to the Company's Form 8-K dated December 22, 2011, SEC File No. 1-2299, and incorporated here by reference).
10.8	Applied Industrial Technologies, Inc. Key Executive Restoration Plan (Effective January 1, 2012) and List of Participants (filed as Exhibit 10.2 to the Company's Form 8-K dated December 22, 2011, SEC File No. 1-2299, and incorporated here by reference).

23

15	Independent Registered Public Accounting Firm’s Awareness Letter.	Attached
31	Rule 13a-14(a)/15d-14(a) certifications.	Attached
32	Section 1350 certifications.	Attached
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

24

EX-15

EXHIBIT 15

February 2, 2012

Applied Industrial Technologies, Inc.

One Applied Plaza

Euclid Avenue at East 36th Street

Cleveland, Ohio 44115

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Applied Industrial Technologies, Inc. and subsidiaries for the periods ended December 31, 2011 and 2010, as indicated in our report dated February 2, 2012; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended December 31, 2011, is incorporated by reference in Registration Statement Nos. 33-53361, 33-53401, 33-65509, 333-83809, 333-69002, 333-124574, 333-138053, 333-138054, and 333-149183 on Forms S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP

Cleveland, Ohio

EX-31

EXHIBIT 31

Certifications of Disclosure in Quarterly Report on Form 10-Q

I, Neil A. Schrimsher, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 2, 2012	By:    /s/ Neil A. Schrimsher
	Neil A. Schrimsher
	Chief Executive Officer

I, Mark O. Eisele, Vice President-Chief Financial Officer & Treasurer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Applied Industrial Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 2, 2012	By:    /s/ Mark O. Eisele
	Mark O. Eisele
	Vice President-Chief Financial Officer & Treasurer

EX-32

EXHIBIT 32

[The following certification accompanies Applied Industrial Technologies'

Quarterly Report on Form 10-Q for the quarter ended December 31, 2011, and is not filed, as provided in applicable SEC releases.]

Certification of Principal Executive Officer and

Principal Financial Officer Pursuant to

18 U.S.C. 1350

In connection with the Form 10-Q (the “Report”) of Applied Industrial Technologies, Inc.    (the “Company”) for the period ending December 31, 2011, we, Neil A. Schrimsher, Chief Executive Officer, and Mark O. Eisele, Vice President-Chief Financial Officer & Treasurer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Neil A. Schrimsher	/s/ Mark O. Eisele
Neil A.Schrimsher	Mark O. Eisele
Chief Executive Officer	Vice President-Chief Financial Officer & Treasurer
Date: February 2, 2012

[A signed original of this written statement required by Section 906 has been provided to Applied Industrial Technologies, Inc. and will be retained by Applied Industrial Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]

XML

Benefit Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Pension Benefits [Member]
Components of net periodic cost:
Service cost	$ 127	$ 115	$ 254	$ 230
Interest cost	588	564	1,176	1,129
Expected return on plan assets	(99)	(96)	(198)	(192)
Recognized net actuarial loss (gain)	265	362	529	724
Amortization of prior service cost	185	178	370	355
Curtailment loss	3,117		3,117
Net periodic cost	4,183	1,123	5,248	2,246
Retiree Health Care Benefits [Member]
Components of net periodic cost:
Service cost	8	10	15	20
Interest cost	59	59	118	118
Recognized net actuarial loss (gain)	(18)	(21)	(36)	(42)
Amortization of prior service cost	35	35	70	69
Curtailment loss
Net periodic cost	$ 84	$ 83	$ 167	$ 165

XML

Shareholders' Equity

6 Months Ended

Dec. 31, 2011

Equity [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:

	Three Months Ended December 31,
	2011			2010
Net income	$	20,935		$	21,193
Other comprehensive (loss) income:
Foreign currency translation adjustment	(8,117		)	3,088
Unrealized gain on investment securities available for sale, net of income tax of $18 and $43	29			59
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $180 and $212	287			341
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $344				846
Total comprehensive income	$	20,198		$	25,527

	Six Months Ended December 31,
	2011			2010
Net income	$	47,317		$	41,948
Other comprehensive (loss) income:
Foreign currency translation adjustment	(11,159		)	1,291
Unrealized (loss) gain on investment securities available for sale, net of income tax of $(64) and $68	(111		)	104
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $360 and $347	574			760
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $(82)				(184		)
Reclassification of interest expense into income, net of income tax of $116				200
Total comprehensive income	$	43,685		$	44,119

Antidilutive Common Stock Equivalents

In the three and six month periods ended December 31, 2011 and 2010, respectively, stock options and stock appreciation rights related to the acquisition of 251 and 102 shares of common stock in the three month periods and 276 and 297 shares of common stock in the six month periods were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive.

XML

Segment and Geographic Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Net sales are presented in geographic areas
Net Sales	$ 570,397	$ 529,517	$ 1,149,971	$ 1,057,018
United States [Member]
Net sales are presented in geographic areas
Net Sales	478,222	450,951	965,650	910,244
Canada [Member]
Net sales are presented in geographic areas
Net Sales	73,502	63,329	147,075	117,410
Mexico [Member]
Net sales are presented in geographic areas
Net Sales	$ 18,673	$ 15,237	$ 37,246	$ 29,364

XML

Segment and Geographic Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income	$ 33,335	$ 33,056	$ 76,602	$ 67,947
Adjustment for:
Intangible amortization			5,544	5,678
Corporate and other expense (income), net	3,361	(784)	(2,084)	(2,960)
Interest expense, net	10	458	57	1,582
Other expense (Income), net	778	(421)	2,710	(764)
Income Before Income Taxes	32,547	33,019	73,835	67,129
Operating Segments [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income	39,431	35,163	80,062	70,665
Service Center Based Distribution [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income	29,280	25,288	58,674	51,356
Adjustment for:
Intangible amortization	841	905	1,718	1,686
Fluid Power Businesses [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income	10,151	9,875	21,388	19,309
Adjustment for:
Intangible amortization	$ 1,894	$ 1,986	$ 3,826	$ 3,992

XML

Segment and Geographic Information (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Segment and Geographic Information (Textuals) [Abstract]
Sales primarily from businesses segment	$ 3,708	$ 4,202	$ 7,955	$ 8,598
Curtailment loss			$ 3,117

XML

Other Expense (Income), Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Other expense (income), net
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$ (374)	$ (696)	$ 1,006	$ (1,505)
Foreign currency transaction losses	1,047	31	1,556	149
Loss on cross-currency swap		162		368
Other, net	105	82	148	224
Total other expense (income), net	$ 778	$ (421)	$ 2,710	$ (764)

XML

Fair Value Measurements

6 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Marketable securities measured at fair value at December 31, 2011 and June 30, 2011 totaled $10,156 and $10,881. These marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the condensed consolidated balance sheets and their fair values were derived using quoted market prices (Level 1 in the fair value hierarchy).

XML

Condensed Statements of Consolidated Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Income Statement [Abstract]
Net Sales	$ 570,397	$ 529,517	$ 1,149,971	$ 1,057,018
Cost of Sales	414,928	385,236	835,798	769,617
Gross Profit	155,469	144,281	314,173	287,401
Selling, Distribution and Administrative, including depreciation	122,134	111,225	237,571	219,454
Operating Income	33,335	33,056	76,602	67,947
Interest expense, net	10	458	57	1,582
Other expense (Income), net	778	(421)	2,710	(764)
Income Before Income Taxes	32,547	33,019	73,835	67,129
Income Tax Expense	11,612	11,826	26,518	25,181
Net Income	$ 20,935	$ 21,193	$ 47,317	$ 41,948
Net Income Per Share - Basic	$ 0.50	$ 0.50	$ 1.12	$ 0.99
Net Income Per Share - Diluted	$ 0.49	$ 0.49	$ 1.11	$ 0.97
Cash dividends per common share	$ 0.19	$ 0.17	$ 0.38	$ 0.34
Weighted average common shares outstanding for basic computation	41,965	42,411	42,181	42,391
Dilutive effect of potential common shares	669	887	620	826
Weighted average common shares outstanding for diluted computation	42,634	43,298	42,801	43,217

XML

Basis of Presentation

6 Months Ended

Dec. 31, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Applied Industrial Technologies, Inc. (the “Company”, or “Applied”) as of December 31, 2011, and the results of its operations for the three and six month periods ended December 31, 2011 and 2010 and its cash flows for the six months ended December 31, 2011 and 2010, have been included. The condensed consolidated balance sheet as of June 30, 2011 has been derived from the audited consolidated financial statements at that date. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2011.

Operating results for the three and six month periods ended December 31, 2011 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year ending June 30, 2012.

Inventory

The Company uses the last-in, first-out (LIFO) method of valuing U.S. inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination.

During the three and six month periods ended December 31, 2010, the Company recorded overall LIFO benefits of $1,823 and $2,124, respectively, and the LIFO reserves were reduced by the same amounts. No comparable benefits were recorded in the three and six month periods ended December 31, 2011.

XML

Goodwill and Intangibles (Details Textuals) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2011
Goodwill and Intangibles (Textuals) [Abstract]
Amortization expense for the remainder of 2012	$ 5,500
Amortization expense for 2013	10,000
Amortization expense for 2014	8,800
Amortization expense for 2015	8,100
Amortization expense for 2016	7,500
Amortization expense for 2017	6,900
Fluid Power Businesses [Member]
Goodwill [Line Items]
Accumulated goodwill impairment losses	$ 36,605

XML

Shareholders' Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Components of comprehensive income (loss)
Net income	$ 20,935	$ 21,193	$ 47,317	$ 41,948
Other comprehensive (loss) income:
Foreign currency translation adjustment	(8,117)	3,088	(11,159)	1,291
Unrealized (loss) gain on investment securities available for sale, net of income tax	29	59	(111)	104
Tax effect of Unrealized (loss) gain on investment securities available for sale	18	43	(64)	68
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax	287	341	574	760
Tax effect on Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs)	180	212	360	347
Actuarial loss on remeasurement, net of income tax	(302)		(302)
Tax effect of actuarial loss on remeasurement	(190)		(190)
Impact of reduction in postemployment benefit liability (as future forecasted salary increases will not be realized) due to the plan curtailment, net of income tax	5,449		5,449
Tax Effect on Other Comprehensive Income, Impact of Reduction in Postemployment Benefit Liability Due to the Plan Curtailment	3,411		3,411
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax	1,917		1,917
Tax Effect on Other Comprehensive Income, Reclassification of Prior Service Cost into Selling, Distribution and Administrative Expense Upon Plan Curtailment	1,200		1,200
Cash flow hedging activity, net of income tax		846		(184)
Tax effect of Cash flow hedging activity		344		(82)
Reclassification of pension and postemployment expense into income, net of income tax				200
Tax effect of Reclassification of interest expense into income				116
Total comprehensive income	$ 20,198	$ 25,527	$ 43,685	$ 44,119
Stock option and stock appreciation rights related to acquisition	251	102	276	297

XML

Goodwill and Intangibles

6 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLES

GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill for the Service Center Based Distribution segment for the period ended December 31, 2011 are as follows:

Balance at July 1, 2011	$	76,981
Goodwill acquired during the period	336
Other, primarily currency translation	(1,800		)
Balance at December 31, 2011	$	75,517

At December 31, 2011, accumulated goodwill impairment losses, subsequent to fiscal year 2002, totaled $36,605 and related to the Fluid Power Businesses segment.

The Company’s intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:

December 31, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	77,160	$	26,105	$	51,055
Trade names	25,480		6,439		19,041
Vendor relationships	13,638		4,004		9,634
Non-competition agreements	4,654		2,706		1,948
Total Finite-Lived Intangibles	120,932		39,254		81,678
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	122,222	$	39,254	$	82,968

June 30, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	78,084	$	23,111	$	54,973
Trade names	25,944		5,666		20,278
Vendor relationships	14,211		3,696		10,515
Non-competition agreements	5,127		2,632		2,495
Total Finite-Lived Intangibles	123,366		35,105		88,261
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	124,656	$	35,105	$	89,551

Amounts include the impact of foreign currency translation. Fully amortized amounts are written off.

Estimated future amortization expense by fiscal year (based on the Company’s intangible assets as of December 31, 2011) is as follows: $5,500 for the remainder of 2012, $10,000 for 2013, $8,800 for 2014, $8,100 for 2015, $7,500 for 2016 and $6,900 for 2017.

XML

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Jun. 30, 2011
Current assets
Cash and cash equivalents	$ 70,512	$ 91,092
Accounts receivable, less allowances of $7,376 and $7,016	280,700	290,751
Inventories	222,626	204,066
Other current assets	36,113	33,005
Total current assets	609,951	618,914
Property, less accumulated depreciation of $146,132 and $143,930	76,659	69,014
Intangibles, net	82,968	89,551
Goodwill	75,517	76,981
Deferred tax assets	36,604	43,447
Other assets	16,314	17,024
TOTAL ASSETS	898,013	914,931
Current liabilities
Accounts payable	105,591	108,509
Compensation and related benefits	51,930	65,413
Other current liabilities	41,443	40,766
Total current liabilities	198,964	214,688
Postemployment benefits	36,238	47,730
Other liabilities	16,625	18,950
TOTAL LIABILITIES	251,827	281,368
Shareholders' Equity
Preferred stock—no par value; 2,500 shares authorized; none issued or outstanding
Common stock -no par value; 80,000 shares authorized; 54,213 shares issued	10,000	10,000
Additional paid-in capital	151,704	148,307
Income retained for use in the business	699,612	668,421
Treasury shares - at cost (12,220 and 11,611 shares)	(216,557)	(198,224)
Accumulated other comprehensive income	1,427	5,059
TOTAL SHAREHOLDERS' EQUITY	646,186	633,563
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 898,013	$ 914,931

XML

Segment and Geographic Information (Tables)

6 Months Ended

Dec. 31, 2011

Segment Reporting [Abstract]

Segment financial information

Segment Financial Information for the three months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	458,315	$	112,082	$	570,397
Operating income for reportable segments	29,280		10,151		39,431
Depreciation and amortization of property	2,353		427		2,780
Capital expenditures	6,546		334		6,880
December 31, 2010
Net sales	$	426,161	$	103,356	$	529,517
Operating income for reportable segments	25,288		9,875		35,163
Depreciation and amortization of property	2,286		497		2,783
Capital expenditures	12,832		99		12,931

Segment Financial Information for the six months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	922,173	$	227,798	$	1,149,971
Operating income for reportable segments	58,674		21,388		80,062
Assets used in the business	681,019		216,994		898,013
Depreciation and amortization of property	4,651		947		5,598
Capital expenditures	13,346		676		14,022
December 31, 2010
Net sales	$	850,114	$	206,904	$	1,057,018
Operating income for reportable segments	51,356		19,309		70,665
Assets used in the business	630,572		199,058		829,630
Depreciation and amortization of property	4,463		1,033		5,496
Capital expenditures	13,549		255		13,804

Reconciliation of operating income for reportable segments to the consolidated income before income taxes

A reconciliation of operating income for reportable segments to the condensed consolidated income before income taxes is as follows:

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2011		2010			2011			2010
Operating income for reportable segments	$	39,431	$	35,163		$	80,062		$	70,665
Adjustment for:
Intangible amortization—Service Center Based Distribution	841		905			1,718			1,686
Intangible amortization—Fluid Power Businesses	1,894		1,986			3,826			3,992
Corporate and other expense (income), net	3,361		(784		)	(2,084		)	(2,960		)
Total operating income	33,335		33,056			76,602			67,947
Interest expense, net	10		458			57			1,582
Other expense (income), net	778		(421		)	2,710			(764		)
Income before income taxes	$	32,547	$	33,019		$	73,835		$	67,129

Net sales are presented in geographic areas

Net sales are presented in geographic areas based on the location of the company making the sale and are as follows:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2011		2010		2011		2010
Geographic Areas:
United States	$	478,222	$	450,951	$	965,650	$	910,244
Canada	73,502		63,329		147,075		117,410
Mexico	18,673		15,237		37,246		29,364
Total	$	570,397	$	529,517	$	1,149,971	$	1,057,018

XML

Document and Entity Information (USD $)	6 Months Ended
	Dec. 31, 2011	Jan. 13, 2012	Dec. 31, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	APPLIED INDUSTRIAL TECHNOLOGIES INC
Entity Central Index Key	0000109563
Document Type	10-Q
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,339,175,832
Entity Common Stock, Shares Outstanding (actual number)		41,998,285

XML

Other Expense (Income), Net (Tables)

6 Months Ended

Dec. 31, 2011

Other Income and Expenses [Abstract]

Other expense (income), net

Other expense (income), net consists of the following:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2011			2010			2011		2010
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(374	)	$	(696	)	$	1,006	$	(1,505	)
Foreign currency transaction losses	1,047			31			1,556		149
Loss on cross-currency swap				162					368
Other, net	105			82			148		224
Total other expense (income), net	$	778		$	(421	)	$	2,710	$	(764	)

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Jun. 30, 2011
Current assets
Accounts receivable, allowances	$ 7,376	$ 7,016
Noncurrent asset
Less accumulated depreciation	$ 146,132	$ 143,930
Shareholders' Equity
Preferred stock, par value
Preferred stock, shares authorized	2,500	2,500
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
Common stock, shares authorized	80,000	80,000
Common stock, shares issued	54,213	54,213
Treasury shares, at cost	12,220	11,611

XML

Other Expense (Income), Net

6 Months Ended

Dec. 31, 2011

Other Income and Expenses [Abstract]

OTHER EXPENSE (INCOME), NET

OTHER EXPENSE (INCOME), NET

Other expense (income), net consists of the following:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2011			2010			2011		2010
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(374	)	$	(696	)	$	1,006	$	(1,505	)
Foreign currency transaction losses	1,047			31			1,556		149
Loss on cross-currency swap				162					368
Other, net	105			82			148		224
Total other expense (income), net	$	778		$	(421	)	$	2,710	$	(764	)

XML

Segment and Geographic Information

6 Months Ended

Dec. 31, 2011

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

The accounting policies of the Company’s reportable segments are the same as those used to prepare the condensed consolidated financial statements. Sales primarily from the Fluid Power Businesses segment to the Service Center Based Distribution segment of $3,708 and $4,202, in the three months ended December 31, 2011 and 2010, respectively, and $7,955 and $8,598 in the six months ended December 31, 2011 and 2010, respectively, have been eliminated in the tables below.

Segment Financial Information for the three months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	458,315	$	112,082	$	570,397
Operating income for reportable segments	29,280		10,151		39,431
Depreciation and amortization of property	2,353		427		2,780
Capital expenditures	6,546		334		6,880
December 31, 2010
Net sales	$	426,161	$	103,356	$	529,517
Operating income for reportable segments	25,288		9,875		35,163
Depreciation and amortization of property	2,286		497		2,783
Capital expenditures	12,832		99		12,931

Segment Financial Information for the six months ended:

	Service Center Based Distribution		Fluid Power Businesses		Total
December 31, 2011
Net sales	$	922,173	$	227,798	$	1,149,971
Operating income for reportable segments	58,674		21,388		80,062
Assets used in the business	681,019		216,994		898,013
Depreciation and amortization of property	4,651		947		5,598
Capital expenditures	13,346		676		14,022
December 31, 2010
Net sales	$	850,114	$	206,904	$	1,057,018
Operating income for reportable segments	51,356		19,309		70,665
Assets used in the business	630,572		199,058		829,630
Depreciation and amortization of property	4,463		1,033		5,496
Capital expenditures	13,549		255		13,804

A reconciliation of operating income for reportable segments to the condensed consolidated income before income taxes is as follows:

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2011		2010			2011			2010
Operating income for reportable segments	$	39,431	$	35,163		$	80,062		$	70,665
Adjustment for:
Intangible amortization—Service Center Based Distribution	841		905			1,718			1,686
Intangible amortization—Fluid Power Businesses	1,894		1,986			3,826			3,992
Corporate and other expense (income), net	3,361		(784		)	(2,084		)	(2,960		)
Total operating income	33,335		33,056			76,602			67,947
Interest expense, net	10		458			57			1,582
Other expense (income), net	778		(421		)	2,710			(764		)
Income before income taxes	$	32,547	$	33,019		$	73,835		$	67,129

Corporate and other expense (income), net includes the SERP curtailment loss of $3,117 recognized in the second quarter of fiscal 2012. Additional fluctuations in corporate and other expense (income), net are due to changes in the levels and amounts of expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.

Net sales are presented in geographic areas based on the location of the company making the sale and are as follows:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2011		2010		2011		2010
Geographic Areas:
United States	$	478,222	$	450,951	$	965,650	$	910,244
Canada	73,502		63,329		147,075		117,410
Mexico	18,673		15,237		37,246		29,364
Total	$	570,397	$	529,517	$	1,149,971	$	1,057,018

XML

Fair Value Measurements (Details) (Level 1 [Member], Recurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Jun. 30, 2011
Level 1 [Member] | Recurring [Member]
Fair Value Measurements (Textuals) [Line Items]
Marketable securities	$ 10,156	$ 10,881

XML

Basis of Presentation (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Basis of Presentation (Textuals) [Abstract]
LIFO Benefits	$ 0	$ 1,823,000	$ 0	$ 2,124,000

XML

Shareholders' Equity (Tables)

6 Months Ended

Dec. 31, 2011

Equity [Abstract]

Components of comprehensive income (loss)

The components of comprehensive income (loss) are as follows:

	Three Months Ended December 31,
	2011			2010
Net income	$	20,935		$	21,193
Other comprehensive (loss) income:
Foreign currency translation adjustment	(8,117		)	3,088
Unrealized gain on investment securities available for sale, net of income tax of $18 and $43	29			59
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $180 and $212	287			341
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $344				846
Total comprehensive income	$	20,198		$	25,527

	Six Months Ended December 31,
	2011			2010
Net income	$	47,317		$	41,948
Other comprehensive (loss) income:
Foreign currency translation adjustment	(11,159		)	1,291
Unrealized (loss) gain on investment securities available for sale, net of income tax of $(64) and $68	(111		)	104
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into selling, distribution and administrative expense (included in net periodic pension costs), net of income tax of $360 and $347	574			760
Actuarial loss on remeasurement, net of income tax of $(190)	(302		)
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to the plan curtailment, net of income tax of $3,411	5,449
Reclassification of prior service cost into selling, distribution and administrative expense upon plan curtailment, net of income tax of $1,200	1,917
Cash flow hedging activity, net of income tax of $(82)				(184		)
Reclassification of interest expense into income, net of income tax of $116				200
Total comprehensive income	$	43,685		$	44,119

XML

Basis of Presentation (Policies)

6 Months Ended

Dec. 31, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Inventory

Inventory

The Company uses the last-in, first-out (LIFO) method of valuing U.S. inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination.

XML

Goodwill and Intangibles (Tables)

6 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in the carrying amount of goodwill by reportable segment

The changes in the carrying amount of goodwill for the Service Center Based Distribution segment for the period ended December 31, 2011 are as follows:

Balance at July 1, 2011	$	76,981
Goodwill acquired during the period	336
Other, primarily currency translation	(1,800		)
Balance at December 31, 2011	$	75,517

Schedule of Intangible Assets

The Company’s intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:

December 31, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	77,160	$	26,105	$	51,055
Trade names	25,480		6,439		19,041
Vendor relationships	13,638		4,004		9,634
Non-competition agreements	4,654		2,706		1,948
Total Finite-Lived Intangibles	120,932		39,254		81,678
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	122,222	$	39,254	$	82,968

June 30, 2011	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	78,084	$	23,111	$	54,973
Trade names	25,944		5,666		20,278
Vendor relationships	14,211		3,696		10,515
Non-competition agreements	5,127		2,632		2,495
Total Finite-Lived Intangibles	123,366		35,105		88,261
Indefinite-Lived Trade Names	1,290				1,290
Total Intangibles	$	124,656	$	35,105	$	89,551

XML

Benefit Plans (Tables)

6 Months Ended

Dec. 31, 2011

Compensation and Retirement Disclosure [Abstract]

Net periodic costs

The following table provides summary disclosures of the net periodic postemployment costs recognized for the Company’s postemployment benefit plans:

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	127		$	115		$	8		$	10
Interest cost	588			564			59			59
Expected return on plan assets	(99		)	(96		)
Recognized net actuarial loss (gain)	265			362			(18		)	(21		)
Amortization of prior service cost	185			178			35			35
Curtailment loss	3,117
Net periodic cost	$	4,183		$	1,123		$	84		$	83

	Pension Benefits						Retiree Health Care Benefits
Six Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	254		$	230		$	15		$	20
Interest cost	1,176			1,129			118			118
Expected return on plan assets	(198		)	(192		)
Recognized net actuarial loss (gain)	529			724			(36		)	(42		)
Amortization of prior service cost	370			355			70			69
Curtailment loss	3,117
Net periodic cost	$	5,248		$	2,246		$	167		$	165

XML

Goodwill and Intangibles (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Jun. 30, 2011
Amortization details resulting from business combinations
Amount	$ 120,932	$ 123,366
Accumulated Amortization	39,254	35,105
Finite-Lived Intangibles Net Book Value	81,678	88,261
Intangible Assets Gross Excluding Goodwill	122,222	124,656
Total Intangible	82,968	89,551
Customer relationships [Member]
Amortization details resulting from business combinations
Amount	77,160	78,084
Accumulated Amortization	26,105	23,111
Finite-Lived Intangibles Net Book Value	51,055	54,973
Trade Names [Member]
Amortization details resulting from business combinations
Amount	25,480	25,944
Accumulated Amortization	6,439	5,666
Finite-Lived Intangibles Net Book Value	19,041	20,278
Vendor Relationships [Member]
Amortization details resulting from business combinations
Amount	13,638	14,211
Accumulated Amortization	4,004	3,696
Finite-Lived Intangibles Net Book Value	9,634	10,515
Non-competition agreements [Member]
Amortization details resulting from business combinations
Amount	4,654	5,127
Accumulated Amortization	2,706	2,632
Finite-Lived Intangibles Net Book Value	1,948	2,495
Indefinite-Lived Trade Names [Member]
Amortization details resulting from business combinations
Indefinite - Lived Trade Names	$ 1,290	$ 1,290

XML

Benefit Plans (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Dec. 31, 2011	Dec. 31, 2011	Jun. 30, 2011
Benefit Plans (Textuals) [Abstract]
Discount Rate	3.50%	3.50%	4.50%
Actuarial loss on remeasurement, net of income tax	$ (302)	$ (302)
Actuarial Loss on Remeasurement of Postemployment Benefits, Gross		492
Tax effect of actuarial loss on remeasurement	190	190
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Net Unamortized Gain (Loss) Arising During Period, before Tax		8,860
Tax Effect on Other Comprehensive Income, Impact of Reduction in Postemployment Benefit Liability Due to the Plan Curtailment	3,411	3,411
Impact of reduction in postemployment benefit liability (as future forecasted salary increases will not be realized) due to the plan curtailment, net of income tax	5,449	5,449
Other Comprehensive Income (Loss), Finalization of Pension and Non-Pension Postretirement Plan Valuation, before Tax		3,117
Tax Effect on Other Comprehensive Income, Reclassification of Prior Service Cost into Selling, Distribution and Administrative Expense Upon Plan Curtailment	1,200	1,200
Pension Benefits [Member]
Benefit Plans (Textuals) [Abstract]
Contribution to benefit plan		370
Expected contribution to benefit plans for remainder of fiscal year	3,850	3,850
Retiree Health Care Benefits [Member]
Benefit Plans (Textuals) [Abstract]
Contribution to benefit plan		103
Expected contribution to benefit plans for remainder of fiscal year	$ 150	$ 150

XML

Condensed Statements of Consolidated Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Cash Flows from Operating Activities
Net income	$ 47,317	$ 41,948
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property	5,598	5,496
Amortization of intangibles	5,544	5,678
Amortization of stock options and appreciation rights	1,139	1,569
Gain on sale of property	(492)	(20)
Other share-based compensation expense	2,523	2,110
Changes in assets and liabilities, net of acquisitions	(33,246)	(37,934)
Other, net	1,833	1,119
Net Cash provided by Operating Activities	30,216	19,966
Cash Flows from Investing Activities
Property purchases	(14,022)	(13,804)
Proceeds from property sales	981	124
Net cash paid for acquisition of businesses, net of cash acquired	(1,241)	(27,739)
Net Cash used in Investing Activities	(14,282)	(41,419)
Cash Flows from Financing Activities
Repayments under revolving credit facility		(50,000)
Long-term debt repayment		(25,000)
Settlements of cross currency swap agreements		(12,752)
Purchases of treasury shares	(18,990)
Dividends paid	(16,077)	(14,422)
Excess tax benefits from share-based compensation	569	778
Exercise of stock options and appreciation rights	154	338
Net Cash used in Financing Activities	(34,344)	(101,058)
Effect of Exchange Rate Changes on Cash	(2,170)	649
Decrease in cash and cash equivalents	(20,580)	(121,862)
Cash and cash equivalents at beginning of period	91,092	175,777
Cash and Cash Equivalents at End of Period	$ 70,512	$ 53,915

XML

Benefit Plans

6 Months Ended

Dec. 31, 2011

Compensation and Retirement Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

On December 19, 2011, the Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. This action constitutes a plan curtailment.

The plan liability was remeasured in conjunction with the curtailment using a 3.5% discount rate and participant final average earnings through the curtailment date. The plan was last remeasured at June 30, 2011, using a 4.5% discount rate. This latest remeasurement resulted in an actuarial loss (recorded in other comprehensive income) of $302 ($492 loss, net of income tax of $190).

The curtailment is reflected in the Company's condensed consolidated balance sheets as: 1) a reduction to the overall SERP liability (included in postemployment benefits) of $8,860, 2) a reduction to deferred tax assets of $3,411 and 3) an increase in accumulated other comprehensive income of $5,449. Prior service costs previously recorded through accumulated other comprehensive income were reclassified into the condensed statements of consolidated income ($3,117 gross expense, net of income tax of $1,200). The gross expense is recorded in selling, distribution and administrative expense in the second quarter of fiscal 2012.

The following table provides summary disclosures of the net periodic postemployment costs recognized for the Company’s postemployment benefit plans:

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	127		$	115		$	8		$	10
Interest cost	588			564			59			59
Expected return on plan assets	(99		)	(96		)
Recognized net actuarial loss (gain)	265			362			(18		)	(21		)
Amortization of prior service cost	185			178			35			35
Curtailment loss	3,117
Net periodic cost	$	4,183		$	1,123		$	84		$	83

	Pension Benefits						Retiree Health Care Benefits
Six Months Ended December 31,	2011			2010			2011			2010
Components of net periodic cost:
Service cost	$	254		$	230		$	15		$	20
Interest cost	1,176			1,129			118			118
Expected return on plan assets	(198		)	(192		)
Recognized net actuarial loss (gain)	529			724			(36		)	(42		)
Amortization of prior service cost	370			355			70			69
Curtailment loss	3,117
Net periodic cost	$	5,248		$	2,246		$	167		$	165

The Company contributed $370 to its pension benefit plans and $103 to its retiree health care plans in the six months ended December 31, 2011. Expected contributions for the remainder of fiscal 2012 are $3,850 for the pension benefit plans to fund scheduled retirement payments and $150 for retiree health care plans.

XML

Segment and Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Jun. 30, 2011
Segment financial information
Net Sales	$ 570,397	$ 529,517	$ 1,149,971	$ 1,057,018
Operating income for reportable segments	33,335	33,056	76,602	67,947
Assets used in the business	898,013	829,630	898,013	829,630	914,931
Depreciation and amortization of property	2,780	2,783	5,598	5,496
Capital expenditures	6,880	12,931	14,022	13,804
Operating Segments [Member]
Segment financial information
Operating income for reportable segments	39,431	35,163	80,062	70,665
Service Center Based Distribution [Member]
Segment financial information
Net Sales	458,315	426,161	922,173	850,114
Operating income for reportable segments	29,280	25,288	58,674	51,356
Assets used in the business	681,019	630,572	681,019	630,572
Depreciation and amortization of property	2,353	2,286	4,651	4,463
Capital expenditures	6,546	12,832	13,346	13,549
Fluid Power Businesses [Member]
Segment financial information
Net Sales	112,082	103,356	227,798	206,904
Operating income for reportable segments	10,151	9,875	21,388	19,309
Assets used in the business	216,994	199,058	216,994	199,058
Depreciation and amortization of property	427	497	947	1,033
Capital expenditures	$ 334	$ 99	$ 676	$ 255

XML

Goodwill and Intangibles (Details) (USD $) In Thousands, unless otherwise specified			6 Months Ended
	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2011 Service Center Based Distribution [Member]
Changes in the carrying amount of goodwill by reportable segment
Balance at July 1, 2011	$ 75,517	$ 76,981	$ 76,981
Goodwill acquired during the period			336
Other, primarily currency translation			(1,800)
Balance at December 31, 2011	$ 75,517	$ 76,981	$ 75,517