x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-0117420 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
Title of each class | Name of each exchange on which registered |
Common Stock, without par value | New York Stock Exchange |
Large accelerated filer X | Accelerated filer __ |
Non-accelerated filer __ | Smaller reporting company __ |
Class | Outstanding at August 15, 2013 |
Common Stock, without par value | 42,207,810 |
(1) | Applied Industrial Technologies, Inc. annual report to shareholders for the fiscal year ended June 30, 2013, portions of which are incorporated by reference into Parts I, II and IV of this Form 10-K, and |
(2) | Applied's proxy statement for the annual meeting of shareholders to be held October 29, 2013, portions of which are incorporated by reference into Parts II, III, and IV of this Form 10-K. |
Page | ||
Business | ||
Risk Factors | ||
Unresolved Staff Comments | ||
Properties | ||
Legal Proceedings | ||
Mine Safety Disclosures | ||
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | ||
Selected Financial Data | ||
Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Quantitative and Qualitative Disclosures about Market Risk | ||
Financial Statements and Supplementary Data | ||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | ||
Controls and Procedures | ||
Other Information | ||
Directors, Executive Officers and Corporate Governance | ||
Executive Compensation | ||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | ||
Certain Relationships and Related Transactions, and Director Independence | ||
Principal Accountant Fees and Services | ||
Exhibits and Financial Statement Schedules | ||
• | Applied's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, together with Section 16 insider beneficial stock ownership reports -- these documents are posted as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission |
• | Applied's Code of Business Ethics |
• | Applied's Board of Directors Governance Principles and Practices |
• | Applied's Director Independence Standards |
• | Charters for the Audit, Corporate Governance, and Executive Organization & Compensation Committees of Applied's Board of Directors |
• | Service Center-Based Distribution. We distribute a wide range of industrial products through service centers across North America, Australia, and New Zealand. Customers primarily purchase our products for scheduled maintenance of their machinery and equipment and for emergency repairs. |
• | Our Maintenance Supplies & Solutions service offering, which distributes industrial and maintenance supplies, |
• | Regional fabricated rubber shops, which modify and repair conveyor belts and make hose assemblies in accordance with customer requirements, and |
• | Rubber service field crews, which install and repair belts and rubber linings at customer locations. |
• | Fluid Power Businesses. Our specialized fluid power businesses primarily market products and services to customers within the businesses' geographic regions. In the United States, the businesses also market products and services through our service center network. In addition to distributing fluid power components, the businesses assemble fluid power systems and components, perform equipment repair, and offer technical advice to customers. Customers include firms purchasing for maintenance, repair, and operational needs, as well as for original equipment manufacturing applications. Our fluid power businesses include the following: |
United States | International | |
Air Draulics Engineering | Engineered Sales | Atelier P.V. Hydraulique (Canada) |
Air-Hydraulic Systems | FluidTech | HyPower (Canada) |
Applied Engineered Systems | HydroAir | Pro-Hydraulique (Canada) |
Bay Advanced Technologies | HyQuip | Vycmex (Mexico) |
Carolina Fluid Components | Kent Fluid Power | |
DTS Fluid Power | Power Systems | |
ESI Power Hydraulics | Spencer Fluid Power | |
Elect-Air |
• | changes in customer preferences for products and services of the nature, brands, quality, or cost sold by Applied; |
• | changes in customer procurement policies and practices; |
• | changes in the market prices for products and services relative to the costs of providing them; |
• | changes in operating expenses; |
• | organizational changes within the company; |
• | adverse regulation and legislation, both enacted and under consideration, including with respect to health care and federal tax policy (e.g., affecting the use of the LIFO inventory accounting method and the taxation of foreign-sourced income); |
• | 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; |
• | volatility of our stock price and the resulting impact on our consolidated financial statements; and |
• | changes in accounting policies and practices that could impact our financial reporting and increase compliance costs. |
Location of Principal Owned Real Property | Type of Facility |
Atlanta, Georgia | Distribution center and service center |
Florence, Kentucky | Distribution center |
Carlisle, Pennsylvania | Distribution center |
Fort Worth, Texas | Distribution center and rubber shop |
Location of Principal Leased Real Property | Type of Facility |
Cleveland, Ohio | Corporate headquarters |
Fontana, California | Distribution center, rubber shop, fluid power shop and service center |
Newark, California | Fluid power shop |
Denver, Colorado | Rubber shop and service center |
Lenexa, Kansas | Fluid power shop |
Chanhassen, Minnesota | Fluid power shop |
Billings, Montana | Fluid power shop |
Cleveland, Ohio (two locations) | Offices and warehouse |
Elyria, Ohio | Product return center and service center |
Portland, Oregon | Distribution center |
Kent, Washington | Offices, fluid power shop, and service center |
Longview, Washington | Service center, rubber shop and fluid power shop |
Appleton, Wisconsin | Offices, service center, and rubber shop |
Edmonton, Alberta | Service center and shop |
Winnipeg, Manitoba | Distribution center and service center |
Name | Positions and Experience | Age |
Neil A. Schrimsher | President (since August 2013) and Chief Executive Officer (since October 2011). From February 2010 to August 2011, Mr. Schrimsher was Executive Vice President of Cooper Industries plc (formerly NYSE: CBE), a global electrical products manufacturer, where he led Cooper's Electrical Products Group and headed numerous domestic and international growth initiatives. He was also President of Cooper Lighting, Inc. throughout the period from 2006 to December 2010. | 49 |
Thomas E. Armold | Vice President-Marketing and Strategic Accounts | 58 |
Todd A. Barlett | Vice President-Acquisitions and Global Business Development | 58 |
Fred D. Bauer | Vice President-General Counsel & Secretary | 47 |
Mark O. Eisele | Vice President-Chief Financial Officer & Treasurer | 56 |
Carl E. Will | Chief Commercial Officer since July 2013. From 2004 to January 2013, he served as an executive with Invacare Corporation (NYSE: IVC), which engages in the design, manufacture, and distribution of medical equipment and supplies worldwide. Most recently, he was Invacare's Senior Vice President-Global Commercial Operations from November 2010 to January 2013 and its Senior Vice President-North American Homecare from 2008 to November 2010. | 43 |
Period | (a) Total Number of Shares (1) | (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 (2) |
April 1, 2013 to April 30, 2013 | 1,300 | 40.96 | 1,300 | 1,141,500 |
May 1, 2013 to May 31, 2013 | — | — | — | 1,141,500 |
June 1, 2013 to June 30, 2013 | — | — | — | 1,141,500 |
Total | 1,300 | 40.96 | 1,300 | 1,141,500 |
(1) | During the quarter ended June 30, 2013, Applied purchased 317 shares in connection with an employee deferred compensation program. This purchase is not counted in the authorization in note (2). |
(2) | On October 25, 2011, the Board of Directors authorized the purchase of up to 1.5 million shares of Applied's common stock. We publicly announced the authorization that day. Purchases can be made in the open market or in privately negotiated transactions. The authorization is in effect until all shares are purchased, or the Board revokes or amends the authorization. |
Page No. | |||
Financial Statements: | |||
| Statements of Consolidated Income for the Years Ended June 30, 2013, 2012, and 2011 | 14 | |
| Statements of Consolidated Comprehensive Income for the Years Ended June 30, 2013, 2012, and 2011 | 15 | |
| Consolidated Balance Sheets at June 30, 2013 and 2012 | 16 | |
| Statements of Consolidated Cash Flows for the Years Ended June 30, 2013, 2012, and 2011 | 17 | |
| Statements of Consolidated Shareholders' Equity For the Years Ended June 30, 2013, 2012, and 2011 | 18 | |
| Notes to Consolidated Financial Statements for the Years Ended June 30, 2013, 2012, and 2011 | 19-37 | |
Reports of Independent Registered Public Accounting Firm | 38, 40 | ||
Supplementary Data: | |||
| Quarterly Operating Results | 41 |
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||
Equity compensation plans approved by security holders | 1,080,260 | $28.79 | * | |||
Equity compensation plans not approved by security holders | 0 | — | 0 | |||
Total | 1,080,260 | $28.79 | * |
* | The 2011 Long-Term Performance Plan was adopted to replace the 2007 Long-Term Performance Plan, and the 2007 Long-Term Performance Plan replaced the 1997 Long-Term Performance Plan. Stock options and stock appreciation rights remain outstanding under each of the 1997 and 2007 plans, but no new awards are made under those plans. The aggregate number of shares that remained available for awards under the 2011 Long-Term Performance Plan at June 30, 2013, was 1,647,794. The number of shares issuable under the Deferred Compensation Plan for Non-Employee Directors and the Deferred Compensation Plan depends on the dollar amount of participant contributions deemed invested in Applied common stock. |
| Statements of Consolidated Income for the Years Ended June 30, 2013, 2012, and 2011 | |
| Statements of Consolidated Comprehensive Income for the Years Ended June 30, 2013, 2012, and 2011 | |
| Consolidated Balance Sheets at June 30, 2013 and 2012 | |
| Statements of Consolidated Cash Flows for the Years Ended June 30, 2013, 2012, and 2011 | |
| Statements of Consolidated Shareholders' Equity For the Years Ended June 30, 2013, 2012, and 2011 | |
| Notes to Consolidated Financial Statements for the Years Ended June 30, 2013, 2012, and 2011 | |
| Reports of Independent Registered Public Accounting Firm | |
| Supplementary Data: | |
| Quarterly Operating Results |
Page No. | ||
| Report of Independent Registered Public Accounting Firm | 22 |
| Schedule II - Valuation and Qualifying Accounts | 23 |
* Asterisk indicates an executive compensation plan or arrangement. | |
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 Applied'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 Applied'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) 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 Applied'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, as most recently amended on February 4, 2013, between Applied and Prudential Investment Management, Inc. (assignee of The Prudential Insurance Company of America), conformed to show all amendments (filed as Exhibit 4.3 to Applied's Form 10-Q for the quarter ended March 31, 2013, SEC File No. 1-2299, and incorporated here by reference). |
4.3 | Credit Agreement dated as of May 15, 2012, among Applied Industrial Technologies, Inc., KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4 to Applied's Form 8-K dated May 17, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.1 | A written description of Applied's director compensation program is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October 29, 2013 under the caption “Director Compensation.” |
*10.2 | Deferred Compensation Plan for Non-Employee Directors (September 1, 2003 Restatement), the terms of which govern benefits vested as of December 31, 2004, for certain directors (filed as Exhibit 10(c) to Applied's Form 10-K for the year ended June 30, 2003, SEC File No. 1-2299, and incorporated here by reference). |
*10.3 | Deferred Compensation Plan for Non-Employee Directors (Post-2004 Terms) (filed as Exhibit 10.2 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.4 | Form of Director and Officer Indemnification Agreement entered into between Applied and each of its directors and executive officers (filed as Exhibit 10(g) to Applied's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). |
*10.5 | A written description of Applied's Life and Accidental Death and Dismemberment Insurance for executive officers (filed as Exhibit 10(d) to Applied's Form 10-K for the year ended June 30, 2007, SEC File No. 1-2299, and incorporated here by reference). |
*10.6 | A written description of Applied's Long-Term Disability Insurance for executive officers (filed as Exhibit 10(c) to Applied's Form 10-Q for the quarter ended December 31, 1997, SEC File No. 1-2299, and incorporated here by reference). |
*10.7 | Form of Change in Control Agreement between Applied and each of its executive officers, except for Neil A. Schrimsher and Carl E. Will (filed as Exhibit 99.1 to Applied's Form 8-K dated April 25, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.8 | Key Executive Restoration Plan, as amended and restated, for Applied's executive officers and list of participants (filed as Exhibit 10.1 to Applied's Form 8-K dated August 16, 2013, SEC File No. 1-2299, and incorporated here by reference). |
*10.9 | Supplemental Executive Retirement Benefits Plan (Restated Post-2004 Terms) in which the executive officers, except for Neil A. Schrimsher and Carl E. Will, participate (filed as Exhibit 10.1 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.10 | First Amendment to the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Plan (Restated Post-2004 Terms) (filed as Exhibit 10.1 to Applied's Form 8-K dated December 22, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.11 | Second 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 October 22, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.12 | Deferred Compensation Plan (September 1, 2003 Restatement), the terms of which govern benefits vested as of December 31, 2004, for Mark O. Eisele (filed as Exhibit 10(h) to Applied's Form 10-K for the year ended June 30, 2003, SEC File No. 1-2299, and incorporated here by reference). |
*10.13 | First Amendment to Deferred Compensation Plan (September 1, 2003 Restatement) (filed as Exhibit 10 to Applied's Form 10-Q for the quarter ended December 31, 2003, SEC File No. 1-2299, and incorporated here by reference). |
*10.14 | Deferred Compensation Plan (Post-2004 Terms) (filed as Exhibit 10.3 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.15 | 1997 Long-Term Performance Plan, as amended April 19, 2007 (filed as Exhibit 10(k) to Applied's Form 10-K for the year ended June 30, 2007, SEC File No. 1-2299, and incorporated here by reference). |
*10.16 | Section 409A Amendment to the 1997 Long-Term Performance Plan (filed as Exhibit 10.4 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.17 | 2007 Long-Term Performance Plan (filed as Exhibit 10 to Applied's Form 8-K dated October 23, 2007, SEC File No. 1-2299, and incorporated here by reference). |
*10.18 | Section 409A Amendment to the 2007 Long-Term Performance Plan (filed as Exhibit 10.5 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.19 | 2011 Long-Term Performance Plan (filed as Appendix to Applied's proxy statement for the annual meeting of shareholders held on October 25, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.20 | Supplemental Defined Contribution Plan (January 1, 1997 Restatement) the terms of which govern benefits vested as of December 31, 2004, for certain executive officers (filed as Exhibit 10(m) to Applied's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). |
*10.21 | First Amendment to Supplemental Defined Contribution Plan effective as of October 1, 2000 (filed as Exhibit 10(a) to Applied's Form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-2299, and incorporated here by reference). |
*10.22 | Second Amendment to Supplemental Defined Contribution Plan effective as of January 16, 2001 (filed as Exhibit 10(a) to Applied's Form 10-Q for the quarter ended March 31, 2001, SEC File No. 1-2299, and incorporated here by reference). |
*10.23 | Supplemental Defined Contribution Plan (Post-2004 Terms) (filed as Exhibit 10.6 to Applied's Form 10-Q for the quarter ended December 31, 2008, SEC File No. 1-2299, and incorporated here by reference). |
*10.24 | Non-Statutory Stock Option Award Terms and Conditions (Directors) (filed as Exhibit 10 to Applied's Form 8-K dated November 30, 2005, SEC File No. 1-2299, and incorporated here by reference). |
*10.25 | Restricted Stock Award Terms and Conditions (Directors) (filed as Exhibit 10.1 to Applied's Form 10-Q for the quarter ended March 31, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.26 | Stock Appreciation Rights Award Terms and Conditions (Officers) (August 2011 revision) (filed as Exhibit 10.02 to Applied's Form 8-K dated August 9, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.27 | Performance Shares Terms and Conditions (filed as Exhibit 10.04 to Applied's Form 8-K dated August 9, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.28 | Restricted Stock Units Terms and Conditions (filed as Exhibit 10.03 to Applied's Form 8-K dated August 9, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.29 | Management Incentive Plan General Terms (filed as Exhibit 10.01 to Applied's Form 8-K dated August 9, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.30 | Offer of Employment for Neil A. Schrimsher (filed as Exhibit 10.1 to Applied's Form 8-K dated October 17, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.31 | Severance Agreement for Neil A. Schrimsher (filed as Exhibit 10.2 to Applied's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.32 | Amendment to Severance Agreement for Neil A. Schrimsher (filed as Exhibit 10.2 to Applied's Form 8-K dated October 22, 2012, SEC File No. 1-2299, and incorporated here by reference). |
*10.33 | Change in Control Agreement for Neil A. Schrimsher (filed as Exhibit 10.3 to Applied's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.34 | Terms and Conditions for Inducement Restricted Units Award for Neil A. Schrimsher (filed as Exhibit 10.4 to Applied's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.35 | Terms and Conditions for Inducement Stock Appreciation Rights Award for Neil A. Schrimsher (filed as Exhibit 10.5 to Applied's Form 8-K dated October 31, 2011, SEC File No. 1-2299, and incorporated here by reference). |
*10.36 | Non-qualified Deferred Compensation Agreement between Applied and J. Michael Moore effective as of December 31, 1997 (filed as Exhibit 10(a) to Applied's Form 10-Q for the quarter ended March 31, 1998, SEC File No. 1-2299, and incorporated here by reference). |
*10.37 | Executive Retirement Agreement between Applied and Benjamin J. Mondics. |
10.38 | Lease dated as of March 1, 1996 between Applied and the Cleveland-Cuyahoga County Port Authority (filed as Exhibit 10(n) to Applied's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). |
13 | Applied's 2013 annual report to shareholders (not deemed “filed” as part of this Form 10-K except for those portions that are expressly incorporated by reference). |
21 | Applied's subsidiaries at June 30, 2013. |
23 | Consent of Independent Registered Public Accounting Firm. |
24 | Powers of attorney. |
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 |
COLUMN A | COLUMN B | COLUMN C | COLUMN D | COLUMN E | ||||||||||||||||||
DESCRIPTION | BALANCE AT BEGINNING OF PERIOD | ADDITIONS CHARGED TO COSTS AND EXPENSES | ADDITIONS (DEDUCTIONS) CHARGED TO OTHER ACCOUNTS | DEDUCTIONS FROM RESERVE | BALANCE AT END OF PERIOD | |||||||||||||||||
YEAR ENDED JUNE 30, 2013: | ||||||||||||||||||||||
Reserve deducted from assets to which it applies — accounts receivable allowances | $ | 8,332 | $ | 2,267 | $ | (104 | ) | (A) | $ | 2,758 | (B) | $ | 7,737 | |||||||||
YEAR ENDED JUNE 30, 2012: | ||||||||||||||||||||||
Reserve deducted from assets to which it applies — accounts receivable allowances | $ | 7,016 | $ | 3,915 | $ | 122 | (A) | $ | 2,721 | (B) | $ | 8,332 | ||||||||||
YEAR ENDED JUNE 30, 2011: | ||||||||||||||||||||||
Reserve deducted from assets to which it applies — accounts receivable allowances | $ | 6,379 | $ | 2,029 | $ | 111 | (A) | $ | 1,503 | (B) | $ | 7,016 |
(A) | Amounts represent reserves for the return of merchandise by customers. |
(B) | Amounts represent uncollectible accounts charged off. |
/s/ Neil A. Schrimsher | /s/ Mark O. Eisele | |
Neil A. Schrimsher President & Chief Executive Officer | Mark O. Eisele Vice President-Chief Financial Officer & Treasurer | |
/s/ Daniel T. Brezovec | ||
Daniel T. Brezovec Corporate Controller (Principal Accounting Officer) |
* | * | |
William G. Bares, Director | Thomas A. Commes, Director | |
* | * | |
Peter A. Dorsman, Director | L. Thomas Hiltz, Director | |
* | * | |
Edith Kelly-Green, Director | Dan P. Komnenovich, Director | |
* | * | |
John F. Meier, Director and Chairman | J. Michael Moore, Director | |
* | /s/ Neil A. Schrimsher | |
Vincent K. Petrella, Director | Neil A. Schrimsher, President & Chief Executive Officer and Director | |
* | * | |
Dr. Jerry Sue Thornton, Director | Peter C. Wallace, Director |
/s/ Fred D. Bauer |
Fred D. Bauer, as attorney in fact |
for persons indicated by “*” |
/s/ Benjamin J. Mondics | |
BENJAMIN J. MONDICS | Date: 6-18-13 |
APPLIED INDUSTRIAL TECHNOLOGIES | |
By: /s/ Neil A. Schrimsher | |
Its: CEO | Date: 6-18-2013 |
Year Ended June 30, As a % of Net Sales | Change in $'s Versus Prior Period | ||||||||
2013 | 2012 | % Increase | |||||||
Net Sales | 100.0 | % | 100.0 | % | 3.7 | % | |||
Gross Profit Margin | 27.7 | % | 27.6 | % | 4.4 | % | |||
Selling, Distribution & Administrative | 20.6 | % | 20.5 | % | 4.2 | % | |||
Operating Income | 7.2 | % | 7.1 | % | 4.8 | % | |||
Net Income | 4.8 | % | 4.6 | % | 8.6 | % |
Year Ended June 30, As a % of Net Sales | Change in $'s Versus Prior Period | ||||||||
2012 | 2011 | % Increase | |||||||
Net Sales | 100.0 | % | 100.0 | % | 7.3 | % | |||
Gross Profit Margin | 27.6 | % | 27.7 | % | 6.7 | % | |||
Selling, Distribution & Administrative | 20.5 | % | 20.9 | % | 5.1 | % | |||
Operating Income | 7.1 | % | 6.8 | % | 11.7 | % | |||
Net Income | 4.6 | % | 4.4 | % | 12.4 | % |
Country | Amount | |||
United Sates | $ | 27,222 | ||
Canada | 40,915 | |||
Mexico | 3,690 | |||
Australia | 1,018 | |||
New Zealand | 319 | |||
Total | $ | 73,164 |
Year Ended June 30, | ||||||||||||
Net Cash Provided by (Used in): | 2013 | 2012 | 2011 | |||||||||
Operating Activities | $ | 111,397 | $ | 90,422 | $ | 76,842 | ||||||
Investing Activities | (78,825 | ) | (39,434 | ) | (47,887 | ) | ||||||
Financing Activities | (38,025 | ) | (60,816 | ) | (116,523 | ) | ||||||
Exchange Rate Effect | 175 | (2,822 | ) | 2,883 | ||||||||
(Decrease) in Cash and Cash Equivalents | $ | (5,278 | ) | $ | (12,650 | ) | $ | (84,685 | ) |
June 30, | 2013 | 2012 | ||||
Accounts receivable, gross | $ | 337,617 | $ | 315,375 | ||
Allowance for doubtful accounts | 7,737 | 8,332 | ||||
Accounts receivable, net | $ | 329,880 | $ | 307,043 | ||
Allowance for doubtful accounts, % of gross receivables | 2.3 | % | 2.6 | % | ||
Year Ended June 30, | 2013 | 2012 | ||||
Provision for losses on accounts receivable | $ | 2,267 | $ | 3,915 | ||
Provision as a % of net sales | 0.09 | % | 0.16 | % |
Total | Period Less Than 1 yr | Period 2-3 yrs | Period 4-5 yrs | Period Over 5 yrs | Other | |||||||||||||
Operating leases | $ | 81,000 | $ | 26,700 | $ | 33,100 | $ | 12,000 | $ | 9,200 | ||||||||
Planned funding of post-retirement obligations | 38,200 | 6,900 | 12,100 | 4,000 | 15,200 | |||||||||||||
Unrecognized income tax benefit liabilities, including interest and penalties | 3,088 | 3,088 | ||||||||||||||||
Total Contractual Cash Obligations | $ | 122,288 | $ | 33,600 | $ | 45,200 | $ | 16,000 | $ | 24,400 | $ | 3,088 |
One-Percentage Point | ||||||||
Effect of change in: | Increase | Decrease | ||||||
Discount rate on liability | $ | (2,665 | ) | $ | 2,988 | |||
Discount rate on net periodic benefit cost | (165 | ) | 188 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Net Sales | $ | 2,462,171 | $ | 2,375,445 | $ | 2,212,849 | ||||||
Cost of Sales | 1,779,209 | 1,720,973 | 1,599,739 | |||||||||
Gross Profit | 682,962 | 654,472 | 613,110 | |||||||||
Selling, Distribution and Administrative, including depreciation | 506,563 | 486,077 | 462,347 | |||||||||
Operating Income | 176,399 | 168,395 | 150,763 | |||||||||
Interest Expense | 621 | 457 | 2,081 | |||||||||
Interest Income | (456 | ) | (466 | ) | (413 | ) | ||||||
Other Expense (Income), net | (1,431 | ) | 1,578 | (3,793 | ) | |||||||
Income Before Income Taxes | 177,665 | 166,826 | 152,888 | |||||||||
Income Tax Expense | 59,516 | 58,047 | 56,129 | |||||||||
Net Income | $ | 118,149 | $ | 108,779 | $ | 96,759 | ||||||
Net Income Per Share — Basic | $ | 2.81 | $ | 2.58 | $ | 2.28 | ||||||
Net Income Per Share — Diluted | $ | 2.78 | $ | 2.54 | $ | 2.24 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Net income per the statements of consolidated income | 118,149 | 108,779 | 96,759 | |||||||||
Other comprehensive income (loss), before tax: | ||||||||||||
Foreign currency translation adjustments | (1,358 | ) | (14,471 | ) | 10,011 | |||||||
Postemployment benefits: | ||||||||||||
Actuarial gain (loss) on remeasurement | 3,153 | (5,028 | ) | (930 | ) | |||||||
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs | 872 | 1,123 | 2,214 | |||||||||
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to plan curtailment | — | 8,860 | — | |||||||||
Reclassification of prior service cost into SD&A expense upon plan curtailment | — | 3,117 | — | |||||||||
Unrealized gain (loss) on investment securities available for sale | 10 | (220 | ) | (84 | ) | |||||||
Unrealized loss on cash flow hedges | — | — | (266 | ) | ||||||||
Reclassification of interest from cash flow hedge into interest expense | — | — | 316 | |||||||||
Total of other comprehensive income (loss), before tax | 2,677 | (6,619 | ) | 11,261 | ||||||||
Income tax expense related to items of other comprehensive income | 1,529 | 3,009 | 154 | |||||||||
Other comprehensive income (loss), net of tax | 1,148 | (9,628 | ) | 11,107 | ||||||||
Comprehensive income, net of tax | $ | 119,297 | $ | 99,151 | $ | 107,866 |
June 30, | 2013 | 2012 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 73,164 | $ | 78,442 | ||||
Accounts receivable, less allowances of $7,737 and $8,332 | 329,880 | 307,043 | ||||||
Inventories | 281,417 | 228,506 | ||||||
Other current assets | 52,819 | 51,771 | ||||||
Total current assets | 737,280 | 665,762 | ||||||
Property — at cost | ||||||||
Land | 10,125 | 10,245 | ||||||
Buildings | 75,463 | 74,477 | ||||||
Equipment, including computers and software | 155,161 | 147,004 | ||||||
Total Property — at cost | 240,749 | 231,726 | ||||||
Less accumulated depreciation | 157,506 | 148,623 | ||||||
Property — net | 83,243 | 83,103 | ||||||
Intangibles, net | 91,267 | 84,840 | ||||||
Goodwill | 106,849 | 83,080 | ||||||
Deferred tax assets | 21,026 | 26,424 | ||||||
Other assets | 19,041 | 18,974 | ||||||
Total Assets | $ | 1,058,706 | $ | 962,183 | ||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 136,575 | $ | 120,890 | ||||
Compensation and related benefits | 63,899 | 63,149 | ||||||
Other current liabilities | 45,426 | 46,130 | ||||||
Total current liabilities | 245,900 | 230,169 | ||||||
Postemployment benefits | 30,919 | 39,750 | ||||||
Other liabilities | 22,272 | 20,133 | ||||||
Total Liabilities | 299,091 | 290,052 | ||||||
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 | 153,893 | 150,070 | ||||||
Income retained for use in the business | 824,362 | 743,360 | ||||||
Treasury shares — at cost (12,044 and 12,246 shares) | (225,219 | ) | (226,730 | ) | ||||
Accumulated other comprehensive income (loss) | (3,421 | ) | (4,569 | ) | ||||
Total Shareholders’ Equity | 759,615 | 672,131 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 1,058,706 | $ | 962,183 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income | $ | 118,149 | $ | 108,779 | $ | 96,759 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization of property | 12,501 | 11,236 | 11,234 | |||||||||
Amortization of intangibles | 13,233 | 11,465 | 11,382 | |||||||||
Amortization of stock appreciation rights and options | 2,317 | 2,058 | 2,473 | |||||||||
Deferred income taxes | 10,179 | 8,641 | 4,784 | |||||||||
Provision for losses on accounts receivable | 2,267 | 3,915 | 2,029 | |||||||||
Unrealized foreign exchange transaction (gains) losses | (1,410 | ) | 1,298 | — | ||||||||
Other share-based compensation expense | 3,444 | 4,308 | 3,158 | |||||||||
Shares issued for deferred compensation plans | 241 | 284 | 221 | |||||||||
Gain on sale of property | (321 | ) | (627 | ) | (765 | ) | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||
Accounts receivable | (15,721 | ) | (22,748 | ) | (36,271 | ) | ||||||
Inventories | (26,745 | ) | (28,511 | ) | (21,197 | ) | ||||||
Other operating assets | (7,857 | ) | (14,735 | ) | (11,185 | ) | ||||||
Accounts payable | 12,206 | 14,157 | 12,926 | |||||||||
Other operating liabilities | (11,086 | ) | (9,098 | ) | 1,294 | |||||||
Net Cash provided by Operating Activities | 111,397 | 90,422 | 76,842 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Property purchases | (12,214 | ) | (26,021 | ) | (20,431 | ) | ||||||
Proceeds from property sales | 979 | 1,258 | 1,326 | |||||||||
Net cash paid for acquisition of businesses, net of cash acquired of $0, $38 and $168 in 2013, 2012 and 2011, respectively | (67,590 | ) | (14,671 | ) | (30,504 | ) | ||||||
Other | — | — | 1,722 | |||||||||
Net Cash (used in) Investing Activities | (78,825 | ) | (39,434 | ) | (47,887 | ) | ||||||
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 | (53 | ) | (31,032 | ) | (6,085 | ) | ||||||
Dividends paid | (37,194 | ) | (33,800 | ) | (29,751 | ) | ||||||
Excess tax benefits from share-based compensation | 2,566 | 3,695 | 6,404 | |||||||||
Acquisition holdback payments | (3,843 | ) | — | — | ||||||||
Exercise of stock appreciation rights and options | 499 | 321 | 661 | |||||||||
Net Cash (used in) Financing Activities | (38,025 | ) | (60,816 | ) | (116,523 | ) | ||||||
Effect of Exchange Rate Changes on Cash | 175 | (2,822 | ) | 2,883 | ||||||||
(Decrease) in cash and cash equivalents | (5,278 | ) | (12,650 | ) | (84,685 | ) | ||||||
Cash and cash equivalents at beginning of year | 78,442 | 91,092 | 175,777 | |||||||||
Cash and Cash Equivalents at End of Year | $ | 73,164 | $ | 78,442 | $ | 91,092 | ||||||
Supplemental Cash Flow Information | ||||||||||||
Cash paid during the year for: | ||||||||||||
Income taxes | $ | 51,816 | $ | 53,463 | $ | 47,251 | ||||||
Interest | 501 | 672 | 2,248 |
For the Years Ended June 30, 2013, 2012 and 2011 | Shares of Common Stock Outstanding | Common Stock | Additional Paid-In Capital | Income Retained for Use in the Business | Treasury Shares- at Cost | Accumulated Other Compre-hensive Income (Loss) | Total Shareholders' Equity | ||||||||||||||||||||
Balance at July 1, 2010 | 42,376 | $ | 10,000 | $ | 143,185 | $ | 601,370 | $ | (193,468 | ) | $ | (6,048 | ) | $ | 555,039 | ||||||||||||
Net income | 96,759 | 96,759 | |||||||||||||||||||||||||
Other comprehensive income | 11,107 | 11,107 | |||||||||||||||||||||||||
Cash dividends — $0.70 per share | (29,751 | ) | (29,751 | ) | |||||||||||||||||||||||
Purchases of common stock for treasury | (190 | ) | (6,085 | ) | (6,085 | ) | |||||||||||||||||||||
Treasury shares issued for: | |||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 379 | (109 | ) | 706 | 597 | ||||||||||||||||||||||
Deferred compensation plans | 6 | 102 | 119 | 221 | |||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,473 | 2,473 | |||||||||||||||||||||||||
Other share-based compensation expense | 3,158 | 3,158 | |||||||||||||||||||||||||
Other | 31 | (502 | ) | 43 | 504 | 45 | |||||||||||||||||||||
Balance at June 30, 2011 | 42,602 | 10,000 | 148,307 | 668,421 | (198,224 | ) | 5,059 | 633,563 | |||||||||||||||||||
Net income | 108,779 | 108,779 | |||||||||||||||||||||||||
Other comprehensive (loss) | (9,628 | ) | (9,628 | ) | |||||||||||||||||||||||
Cash dividends — $0.80 per share | (33,800 | ) | (33,800 | ) | |||||||||||||||||||||||
Purchases of common stock for treasury | (997 | ) | (31,032 | ) | (31,032 | ) | |||||||||||||||||||||
Treasury shares issued for: | |||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 250 | (1,853 | ) | 1,448 | (405 | ) | |||||||||||||||||||||
Performance share awards | 91 | (2,664 | ) | 714 | (1,950 | ) | |||||||||||||||||||||
Deferred compensation plans | 9 | 128 | 156 | 284 | |||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,058 | 2,058 | |||||||||||||||||||||||||
Other share-based compensation expense | 4,308 | 4,308 | |||||||||||||||||||||||||
Other | 12 | (214 | ) | (40 | ) | 208 | (46 | ) | |||||||||||||||||||
Balance at June 30, 2012 | 41,967 | 10,000 | 150,070 | 743,360 | (226,730 | ) | (4,569 | ) | 672,131 | ||||||||||||||||||
Net income | 118,149 | 118,149 | |||||||||||||||||||||||||
Other comprehensive income | 1,148 | 1,148 | |||||||||||||||||||||||||
Cash dividends — $0.88 per share | (37,194 | ) | (37,194 | ) | |||||||||||||||||||||||
Purchases of common stock for treasury | (1 | ) | (53 | ) | (53 | ) | |||||||||||||||||||||
Treasury shares issued for: | |||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 129 | (175 | ) | 1,086 | 911 | ||||||||||||||||||||||
Restricted stock units | 53 | (1,675 | ) | 74 | (1,601 | ) | |||||||||||||||||||||
Deferred compensation plans | 5 | 131 | 110 | 241 | |||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,317 | 2,317 | |||||||||||||||||||||||||
Other share-based compensation expense | 3,444 | 3,444 | |||||||||||||||||||||||||
Other | 16 | (219 | ) | 47 | 294 | 122 | |||||||||||||||||||||
Balance at June 30, 2013 | 42,169 | $ | 10,000 | $ | 153,893 | $ | 824,362 | $ | (225,219 | ) | $ | (3,421 | ) | $ | 759,615 |
2013 | |||
Accounts receivable | $ | 7,514 | |
Inventories | 23,723 | ||
Other current assets | 217 | ||
Property | 1,090 | ||
Intangibles | 19,814 | ||
Goodwill | 24,324 | ||
Total assets acquired | 76,682 | ||
Accounts payable | 1,867 | ||
Other current liabilities | 6,192 | ||
Net assets acquired | 68,623 | ||
Purchase price | $ | 68,623 |
June 30, | 2013 | 2012 | ||||||
U.S. inventories at current cost | $ | 323,642 | $ | 302,465 | ||||
Foreign inventories at average cost | 103,483 | 70,797 | ||||||
427,125 | 373,262 | |||||||
Less: Excess of current cost over LIFO cost for U.S. inventories | 145,708 | 144,756 | ||||||
Inventories on consolidated balance sheets | $ | 281,417 | $ | 228,506 |
Service Center Based Distribution | Fluid Power Businesses | Total | |||||||
Balance at July 1, 2011 | $ | 76,981 | $ | 76,981 | |||||
Goodwill acquired during the year | 8,403 | 8,403 | |||||||
Other, primarily currency translation | (2,304 | ) | (2,304 | ) | |||||
Balance at June 30, 2012 | 83,080 | 83,080 | |||||||
Goodwill acquired during the year | 23,395 | $ | 929 | 24,324 | |||||
Other, primarily currency translation | (555 | ) | — | (555 | ) | ||||
Balance at June 30, 2013 | $ | 105,920 | $ | 929 | $ | 106,849 |
June 30, 2013 | Amount | Accumulated Amortization | Net Book Value | |||||||||
Finite-Lived Intangibles: | ||||||||||||
Customer relationships | $ | 100,854 | $ | 38,844 | $ | 62,010 | ||||||
Trade names | 26,690 | 8,643 | 18,047 | |||||||||
Vendor relationships | 15,433 | 5,443 | 9,990 | |||||||||
Non-competition agreements | 4,743 | 3,523 | 1,220 | |||||||||
Total Intangibles | $ | 147,720 | $ | 56,453 | $ | 91,267 |
June 30, 2012 | Amount | Accumulated Amortization | Net Book Value | |||||||||
Finite-Lived Intangibles: | ||||||||||||
Customer relationships | $ | 84,249 | $ | 29,905 | $ | 54,344 | ||||||
Trade names | 25,677 | 7,428 | 18,249 | |||||||||
Vendor relationships | 13,605 | 4,500 | 9,105 | |||||||||
Non-competition agreements | 4,740 | 2,888 | 1,852 | |||||||||
Total Finite-Lived Intangibles | 128,271 | 44,721 | 83,550 | |||||||||
Indefinite-Lived Trade Name | 1,290 | 1,290 | ||||||||||
Total Intangibles | $ | 129,561 | $ | 44,721 | $ | 84,840 |
Acquisition Cost Allocation | Weighted-Average Life | |||||
Customer relationships | $ | 16,755 | 18 years | |||
Trade names | 651 | 5 years | ||||
Vendor relationships | 2,138 | 10 years | ||||
Non-competition agreements | 270 | 4.5 years | ||||
Total Intangibles Acquired | $ | 19,814 | 16 years |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
U.S. | $ | 153,546 | $ | 137,667 | $ | 127,567 | ||||||
Foreign | 24,119 | 29,159 | 25,321 | |||||||||
Total income before income taxes | $ | 177,665 | $ | 166,826 | $ | 152,888 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Current: | ||||||||||||
Federal | $ | 38,859 | $ | 36,178 | $ | 36,799 | ||||||
State and local | 5,736 | 5,522 | 6,208 | |||||||||
Foreign | 4,742 | 7,706 | 8,338 | |||||||||
Total current | 49,337 | 49,406 | 51,345 | |||||||||
Deferred: | ||||||||||||
Federal | 10,277 | 8,577 | 5,648 | |||||||||
State and local | 346 | 503 | 169 | |||||||||
Foreign | (444 | ) | (439 | ) | (1,033 | ) | ||||||
Total deferred | 10,179 | 8,641 | 4,784 | |||||||||
Total | $ | 59,516 | $ | 58,047 | $ | 56,129 |
Year Ended June 30, | 2013 | 2012 | 2011 | ||||||
Statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
Effects of: | |||||||||
State and local taxes | 2.3 | % | 2.5 | % | 2.8 | % | |||
U.S. tax on foreign income, net | — | % | — | % | 1.8 | % | |||
Valuation allowance | — | % | — | % | (0.6 | )% | |||
Foreign income taxes | (2.3 | )% | (1.8 | )% | (1.0 | )% | |||
Deductible dividend | (0.5 | )% | (0.5 | )% | (0.5 | )% | |||
Other, net | (1.0 | )% | (0.4 | )% | (0.8 | )% | |||
Effective income tax rate | 33.5 | % | 34.8 | % | 36.7 | % |
June 30, | 2013 | 2012 | ||||||
Deferred tax assets: | ||||||||
Compensation liabilities not currently deductible | $ | 33,506 | $ | 37,341 | ||||
Expenses and reserves not currently deductible | 6,131 | 6,151 | ||||||
Goodwill and intangibles | 3,781 | 6,518 | ||||||
Net operating loss carryforwards (expiring in years 2027-2033) | 432 | 444 | ||||||
Foreign tax credits (expiring in years 2018, 2020, 2021) | 38 | 4,092 | ||||||
Other | 569 | 480 | ||||||
Total deferred tax assets | 44,457 | 55,026 | ||||||
Less: Valuation allowance | (11 | ) | (157 | ) | ||||
Deferred tax assets, net of valuation allowance | 44,446 | 54,869 | ||||||
Deferred tax liabilities: | ||||||||
Inventories | (9,057 | ) | (6,021 | ) | ||||
Unremitted foreign earnings | (2,804 | ) | (2,804 | ) | ||||
Depreciation and differences in property bases | (11,460 | ) | (11,602 | ) | ||||
Total deferred tax liabilities | (23,321 | ) | (20,427 | ) | ||||
Net deferred tax assets | $ | 21,125 | $ | 34,442 | ||||
The net deferred tax asset is classified as follows: | ||||||||
Other current assets | $ | 6,315 | $ | 12,189 | ||||
Deferred tax assets (long-term) | 21,026 | 26,424 | ||||||
Other liabilities | (6,216 | ) | (4,171 | ) | ||||
Net deferred tax assets | $ | 21,125 | $ | 34,442 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Unrecognized Income Tax Benefits at beginning of the year | $ | 1,539 | $ | 1,181 | $ | 1,842 | ||||||
Current year tax positions | 957 | 331 | 153 | |||||||||
Prior year tax positions | 790 | 398 | 50 | |||||||||
Expirations of statutes of limitations | (565 | ) | (371 | ) | (273 | ) | ||||||
Settlements | (66 | ) | — | (591 | ) | |||||||
Unrecognized Income Tax Benefits at end of year | $ | 2,655 | $ | 1,539 | $ | 1,181 |
Foreign currency translation adjustment | Unrealized gain (loss) on securities available for sale | Postemployment benefits | Total Accumulated other comprehensive income (loss) | |||||||||||||
Balance at June 30, 2012 | $ | 1,718 | $ | (58 | ) | $ | (6,229 | ) | $ | (4,569 | ) | |||||
Other comprehensive income (loss) | (1,358 | ) | 6 | 1,967 | 615 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | — | 533 | 533 | ||||||||||||
Net current-period other comprehensive income (loss), net of taxes | (1,358 | ) | 6 | 2,500 | 1,148 | |||||||||||
Balance at June 30, 2013 | $ | 360 | $ | (52 | ) | $ | (3,729 | ) | $ | (3,421 | ) |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||
Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | ||||||||||||||||||||||||||||
Foreign currency translation adjustments | $ | (1,358 | ) | $ | — | $ | (1,358 | ) | $ | (14,471 | ) | $ | — | $ | (14,471 | ) | $ | 10,011 | $ | (264 | ) | $ | 10,275 | |||||||||||||
Postemployment benefits: | ||||||||||||||||||||||||||||||||||||
Actuarial gain (loss) on remeasurement | 3,153 | 1,186 | 1,967 | (5,028 | ) | (1,954 | ) | (3,074 | ) | (930 | ) | (435 | ) | (495 | ) | |||||||||||||||||||||
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs | 872 | 339 | 533 | 1,123 | 432 | 691 | 2,214 | 850 | 1,364 | |||||||||||||||||||||||||||
Impact of reduction in postemployment benefit liability (as forecasted salary increases will not be realized) due to a plan curtailment | — | — | — | 8,860 | 3,411 | 5,449 | — | — | — | |||||||||||||||||||||||||||
Reclassification of prior service cost into SD&A expense upon plan curtailment | — | — | — | 3,117 | 1,200 | 1,917 | — | — | — | |||||||||||||||||||||||||||
Unrealized gain (loss) on investment securities available for sale | 10 | 4 | 6 | (220 | ) | (80 | ) | (140 | ) | (84 | ) | (31 | ) | (53 | ) | |||||||||||||||||||||
Unrealized loss on cash flow hedges | — | — | — | — | — | — | (266 | ) | (82 | ) | (184 | ) | ||||||||||||||||||||||||
Reclassification of interest from cash flow hedge into interest expense | — | — | — | — | — | — | 316 | 116 | 200 | |||||||||||||||||||||||||||
Other comprehensive income (loss) | $ | 2,677 | $ | 1,529 | $ | 1,148 | $ | (6,619 | ) | $ | 3,009 | $ | (9,628 | ) | $ | 11,261 | $ | 154 | $ | 11,107 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Net Income | $ | 118,149 | $ | 108,779 | $ | 96,759 | ||||||
Average Shares Outstanding: | ||||||||||||
Weighted-average common shares outstanding for basic computation | 42,060 | 42,139 | 42,433 | |||||||||
Dilutive effect of potential common shares | 482 | 684 | 821 | |||||||||
Weighted-average common shares outstanding for dilutive computation | 42,542 | 42,823 | 43,254 | |||||||||
Net Income Per Share — Basic | $ | 2.81 | $ | 2.58 | $ | 2.28 | ||||||
Net Income Per Share — Diluted | $ | 2.78 | $ | 2.54 | $ | 2.24 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
SARs and options | $ | 2,317 | $ | 2,058 | $ | 2,473 | ||||||
Performance shares | 1,074 | 1,983 | 1,705 | |||||||||
Restricted stock and RSUs | 2,370 | 2,325 | 1,453 | |||||||||
Total compensation costs under award programs | $ | 5,761 | $ | 6,366 | $ | 5,631 |
Year Ended June 30, | 2013 | Expected Period of Recognition | ||||
SARs and options | $ | 2,193 | 2.5 | |||
Performance shares | 2,648 | 1.8 | ||||
Restricted stock and RSUs | 2,760 | 1.4 | ||||
Total unrecognized compensation costs under award programs | $ | 7,601 | 1.9 |
2013 | 2012 | 2011 | ||||||||||
Expected life, in years | 5.5 | 5.6 | 5.1 | |||||||||
Risk free interest rate | 0.9 | % | 1.1 | % | 1.6 | % | ||||||
Dividend yield | 2.5 | % | 2.5 | % | 2.5 | % | ||||||
Volatility | 43.3 | % | 44.2 | % | 46.2 | % | ||||||
Per share fair value of SARs and stock options granted during the year | $ | 13.11 | $ | 9.88 | $ | 9.78 |
Year Ended June 30, 2013 | Shares | Weighted-Average Exercise Price | |||||
(Share amounts in thousands) | |||||||
Outstanding, beginning of year | 1,228 | $ | 24.68 | ||||
Granted | 218 | 41.71 | |||||
Exercised | (349 | ) | 22.22 | ||||
Forfeited | (17 | ) | 31.56 | ||||
Outstanding, end of year | 1,080 | $ | 28.79 | ||||
Exercisable at end of year | 654 | $ | 25.47 |
Year Ended June 30, 2013 | Shares | Weighted-Average Grant-Date Fair Value | |||||
(Share amounts in thousands) | |||||||
Nonvested, beginning of year | 62 | $ | 28.80 | ||||
Awarded | 29 | 33.76 | |||||
Forfeitures | (1 | ) | 25.07 | ||||
Vested | — | — | |||||
Nonvested, end of year | 90 | $ | 30.45 |
Year Ended June 30, 2013 | Shares | Weighted-Average Grant-Date Fair Value | |||||
(Share amounts in thousands) | |||||||
Nonvested, beginning of year | 251 | $ | 28.50 | ||||
Granted | 41 | 42.05 | |||||
Forfeitures | (9 | ) | 30.34 | ||||
Vested | (105 | ) | 26.09 | ||||
Nonvested, end of year | 178 | $ | 32.96 |
Pension Benefits | Retiree Health Care Benefits | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of the year | $ | 47,151 | $ | 53,490 | $ | 5,148 | $ | 4,667 | ||||||||
Service cost | 78 | 289 | 80 | 30 | ||||||||||||
Interest cost | 1,260 | 2,047 | 188 | 237 | ||||||||||||
Plan participants’ contributions | — | — | 65 | 47 | ||||||||||||
Benefits paid | (6,183 | ) | (4,144 | ) | (254 | ) | (256 | ) | ||||||||
Amendments | (17 | ) | 150 | (1,788 | ) | — | ||||||||||
Actuarial (gain) loss during year | (1,625 | ) | 4,179 | 280 | 423 | |||||||||||
Curtailment | — | (8,860 | ) | — | — | |||||||||||
Benefit obligation at end of year | $ | 40,664 | $ | 47,151 | $ | 3,719 | $ | 5,148 | ||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | $ | 6,439 | $ | 6,056 | $ | — | $ | — | ||||||||
Actual gain (loss) on plan assets | 424 | (30 | ) | — | — | |||||||||||
Employer contributions | 6,017 | 4,557 | 189 | 209 | ||||||||||||
Plan participants’ contributions | — | — | 65 | 47 | ||||||||||||
Benefits paid | (6,183 | ) | (4,144 | ) | (254 | ) | (256 | ) | ||||||||
Fair value of plan assets at end of year | $ | 6,697 | $ | 6,439 | $ | — | $ | — | ||||||||
Funded status at end of year | $ | (33,967 | ) | $ | (40,712 | ) | $ | (3,719 | ) | $ | (5,148 | ) |
Pension Benefits | Retiree Health Care Benefits | |||||||||||||||
June 30, | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Amounts recognized in the consolidated balance sheets: | ||||||||||||||||
Other current liabilities | $ | 6,666 | $ | 6,018 | $ | 220 | $ | 220 | ||||||||
Postemployment benefits | 27,301 | 34,694 | 3,499 | 4,928 | ||||||||||||
Net amount recognized | $ | 33,967 | $ | 40,712 | $ | 3,719 | $ | 5,148 | ||||||||
Amounts recognized in accumulated other comprehensive income (loss): | ||||||||||||||||
Net actuarial (loss) gain | $ | (7,732 | ) | $ | (10,112 | ) | $ | 65 | $ | 398 | ||||||
Prior service cost | (196 | ) | (279 | ) | 1,760 | (135 | ) | |||||||||
Total amounts recognized in accumulated other comprehensive (loss) income | $ | (7,928 | ) | $ | (10,391 | ) | $ | 1,825 | $ | 263 |
Pension Benefits | ||||||||
June 30, | 2013 | 2012 | ||||||
Projected benefit obligations | $ | 40,664 | $ | 47,151 | ||||
Accumulated benefit obligations | 40,664 | 47,151 | ||||||
Fair value of plan assets | 6,697 | 6,439 |
Pension Benefits | Retiree Health Care Benefits | |||||||||||||||||||||||
Year Ended June 30, | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | ||||||||||||||||||
Service cost | $ | 78 | $ | 289 | $ | 460 | $ | 80 | $ | 30 | $ | 39 | ||||||||||||
Interest cost | 1,260 | 2,047 | 2,232 | 188 | 237 | 235 | ||||||||||||||||||
Expected return on plan assets | (403 | ) | (396 | ) | (385 | ) | — | — | — | |||||||||||||||
Recognized net actuarial loss (gain) | 735 | 644 | 1,449 | (53 | ) | (72 | ) | (83 | ) | |||||||||||||||
Amortization of prior service cost | 83 | 412 | 710 | 107 | 139 | 139 | ||||||||||||||||||
Recognition of prior service cost upon plan curtailment | — | 3,117 | — | — | — | — | ||||||||||||||||||
Net periodic cost | $ | 1,753 | $ | 6,113 | $ | 4,466 | $ | 322 | $ | 334 | $ | 330 |
Pension Benefits | Retiree Health Care Benefits | |||||||||||
June 30, | 2013 | 2012 | 2013 | 2012 | ||||||||
Assumptions used to determine benefit obligations at year end: | ||||||||||||
Discount rate | 3.0 | % | 2.8 | % | 4.0 | % | 4.0 | % | ||||
Assumptions used to determine net periodic benefit cost: | ||||||||||||
Discount rate | 2.8 | % | 3.5 | % | 4.0 | % | 5.5 | % | ||||
Expected return on plan assets | 7.0 | % | 7.5 | % | N/A | N/A | ||||||
Rate of compensation increase | N/A | 5.5 | % | N/A | N/A |
One-Percentage Point | ||||||||
Increase | Decrease | |||||||
Effect on total service and interest cost components of periodic expense | $ | 59 | $ | (47 | ) | |||
Effect on postretirement benefit obligation | 339 | (295 | ) |
Target Allocation | Fair Value | ||||||||||
2013 | 2012 | ||||||||||
Asset Class: | |||||||||||
Equity securities (Level 1) | 40 – 70% | $ | 3,189 | $ | 3,735 | ||||||
Debt securities (Level 2) | 20 – 50% | 3,208 | 2,382 | ||||||||
Other | 0 – 20% | 300 | 322 | ||||||||
Total | 100 | % | $ | 6,697 | $ | 6,439 |
During Fiscal Years | Pension Benefits | Retiree Health Care Benefits | ||||||
2014 | $ | 7,000 | $ | 250 | ||||
2015 | 6,700 | 230 | ||||||
2016 | 5,600 | 250 | ||||||
2017 | 1,800 | 330 | ||||||
2018 | 2,300 | 400 | ||||||
2019 through 2023 | 12,500 | 1,470 |
During Fiscal Years | |||
2014 | $ | 26,700 | |
2015 | 19,700 | ||
2016 | 13,400 | ||
2017 | 7,900 | ||
2018 | 4,100 | ||
Thereafter | 9,200 | ||
Total minimum lease payments | $ | 81,000 |
Service Center Based Distribution | Fluid Power Businesses | Total | ||||||||||
Year Ended June 30, 2013 | ||||||||||||
Net sales | $ | 2,003,440 | $ | 458,731 | $ | 2,462,171 | ||||||
Operating income for reportable segments | 138,484 | 41,083 | 179,567 | |||||||||
Assets used in the business | 859,547 | 199,159 | 1,058,706 | |||||||||
Depreciation and amortization of property | 10,692 | 1,809 | 12,501 | |||||||||
Capital expenditures | 10,415 | 1,799 | 12,214 | |||||||||
Year Ended June 30, 2012 | ||||||||||||
Net sales | $ | 1,904,564 | $ | 470,881 | $ | 2,375,445 | ||||||
Operating income for reportable segments | 135,240 | 43,236 | 178,476 | |||||||||
Assets used in the business | 731,915 | 230,268 | 962,183 | |||||||||
Depreciation and amortization of property | 9,403 | 1,833 | 11,236 | |||||||||
Capital expenditures | 24,339 | 1,682 | 26,021 | |||||||||
Year Ended June 30, 2011 | ||||||||||||
Net sales | $ | 1,770,798 | $ | 442,051 | $ | 2,212,849 | ||||||
Operating income for reportable segments | 115,798 | 41,793 | 157,591 | |||||||||
Assets used in the business | 700,486 | 214,445 | 914,931 | |||||||||
Depreciation and amortization of property | 9,152 | 2,082 | 11,234 | |||||||||
Capital expenditures | 19,392 | 1,039 | 20,431 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Operating income for reportable segments | $ | 179,567 | $ | 178,476 | $ | 157,591 | ||||||
Adjustments for: | ||||||||||||
Intangible amortization — Service Center Based Distribution | 5,829 | 3,834 | 3,384 | |||||||||
Intangible amortization — Fluid Power Businesses | 7,404 | 7,631 | 7,998 | |||||||||
Corporate and other income, net | (10,065 | ) | (1,384 | ) | (4,554 | ) | ||||||
Total operating income | 176,399 | 168,395 | 150,763 | |||||||||
Interest (income) expense, net | 165 | (9 | ) | 1,668 | ||||||||
Other expense (income), net | (1,431 | ) | 1,578 | (3,793 | ) | |||||||
Income before income taxes | $ | 177,665 | $ | 166,826 | $ | 152,888 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Industrial | $ | 1,776,172 | $ | 1,680,926 | $ | 1,559,859 | ||||||
Fluid power | 685,999 | 694,519 | 652,990 | |||||||||
Net sales | $ | 2,462,171 | $ | 2,375,445 | $ | 2,212,849 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Net Sales: | ||||||||||||
United States | $ | 2,017,168 | $ | 2,009,317 | $ | 1,891,700 | ||||||
Canada | 298,269 | 292,913 | 260,015 | |||||||||
Other Countries | 146,734 | 73,215 | 61,134 | |||||||||
Total | $ | 2,462,171 | $ | 2,375,445 | $ | 2,212,849 |
June 30, | 2013 | 2012 | 2011 | |||||||||
Long-Lived Assets: | ||||||||||||
United States | $ | 210,289 | $ | 198,076 | $ | 191,947 | ||||||
Canada | 44,290 | 42,624 | 29,893 | |||||||||
Other Countries | 26,780 | 10,323 | 13,706 | |||||||||
Total | $ | 281,359 | $ | 251,023 | $ | 235,546 |
Year Ended June 30, | 2013 | 2012 | 2011 | |||||||||
Unrealized (gain) loss on assets held in rabbi trust for a non-qualified deferred compensation plan | $ | (1,280 | ) | $ | 36 | $ | (2,016 | ) | ||||
Benefit from payouts on corporate-owned life insurance policies | — | — | (1,722 | ) | ||||||||
Foreign currency transaction (gains) losses | (143 | ) | 1,592 | (541 | ) | |||||||
Loss on cross-currency swap | — | — | 368 | |||||||||
Other, net | (8 | ) | (50 | ) | 118 | |||||||
Total other expense (income), net | $ | (1,431 | ) | $ | 1,578 | $ | (3,793 | ) |
Neil A. Schrimsher | Mark O. Eisele | |
President & Chief Executive Officer | Vice President - Chief Financial Officer & Treasurer | |
Daniel T. Brezovec | ||
Corporate Controller |
Per Common Share | ||||||||||||||||||||||||
Net Sales | Gross Profit | Operating Income | Net Income | Net Income | Cash Dividend | |||||||||||||||||||
2013 | ||||||||||||||||||||||||
First Quarter | $ | 610,519 | $ | 164,533 | $ | 44,318 | $ | 29,532 | $ | 0.70 | $ | 0.21 | ||||||||||||
Second Quarter | 589,517 | 162,919 | 40,569 | 27,043 | 0.64 | 0.21 | ||||||||||||||||||
Third Quarter | 621,654 | 174,400 | 43,477 | 29,302 | 0.69 | 0.23 | ||||||||||||||||||
Fourth Quarter | 640,481 | 181,110 | 48,035 | 32,272 | 0.76 | 0.23 | ||||||||||||||||||
$ | 2,462,171 | $ | 682,962 | $ | 176,399 | $ | 118,149 | $ | 2.78 | $ | 0.88 | |||||||||||||
2012 | ||||||||||||||||||||||||
First Quarter | $ | 579,574 | $ | 158,704 | $ | 43,267 | $ | 26,382 | $ | 0.61 | $ | 0.19 | ||||||||||||
Second Quarter | 570,397 | 155,469 | 33,335 | 20,935 | 0.49 | 0.19 | ||||||||||||||||||
Third Quarter | 605,461 | 167,613 | 42,019 | 29,418 | 0.69 | 0.21 | ||||||||||||||||||
Fourth Quarter | 620,013 | 172,686 | 49,774 | 32,044 | 0.75 | 0.21 | ||||||||||||||||||
$ | 2,375,445 | $ | 654,472 | $ | 168,395 | $ | 108,779 | $ | 2.54 | $ | 0.80 | |||||||||||||
2011 | ||||||||||||||||||||||||
First Quarter | $ | 527,501 | $ | 143,120 | $ | 34,891 | $ | 20,755 | $ | 0.48 | $ | 0.17 | ||||||||||||
Second Quarter | 529,517 | 144,281 | 33,056 | 21,193 | 0.49 | 0.17 | ||||||||||||||||||
Third Quarter | 565,970 | 156,566 | 38,201 | 26,536 | 0.61 | 0.17 | ||||||||||||||||||
Fourth Quarter | 589,861 | 169,143 | 44,615 | 28,275 | 0.65 | 0.19 | ||||||||||||||||||
$ | 2,212,849 | $ | 613,110 | $ | 150,763 | $ | 96,759 | $ | 2.24 | $ | 0.70 |
Price Range | ||||||||||||||
Shares Traded | Average Daily Volume | High | Low | |||||||||||
2013 | ||||||||||||||
First Quarter | 12,149,000 | 196,000 | $ | 44.86 | $ | 34.67 | ||||||||
Second Quarter | 12,434,700 | 201,600 | 42.54 | 36.52 | ||||||||||
Third Quarter | 11,238,700 | 187,300 | 45.67 | 42.02 | ||||||||||
Fourth Quarter | 11,295,800 | 176,500 | 49.44 | 40.39 | ||||||||||
2012 | ||||||||||||||
First Quarter | 26,284,500 | 410,700 | $ | 36.77 | $ | 24.50 | ||||||||
Second Quarter | 19,521,900 | 309,900 | 36.07 | 25.63 | ||||||||||
Third Quarter | 15,756,700 | 254,100 | 42.01 | 34.78 | ||||||||||
Fourth Quarter | 16,697,600 | 265,000 | 41.79 | 34.44 | ||||||||||
2011 | ||||||||||||||
First Quarter | 18,731,300 | 292,700 | $ | 31.08 | $ | 24.15 | ||||||||
Second Quarter | 22,875,900 | 357,400 | 33.34 | 29.00 | ||||||||||
Third Quarter | 17,150,600 | 276,600 | 34.92 | 30.36 | ||||||||||
Fourth Quarter | 19,014,600 | 301,800 | 36.01 | 31.94 |
2013 | 2012 | 2011 | 2010 | 2009(a) | ||||||||||||||||
Consolidated Operations — Year Ended June 30 | ||||||||||||||||||||
Net sales | $ | 2,462,171 | $ | 2,375,445 | $ | 2,212,849 | $ | 1,893,208 | $ | 1,923,148 | ||||||||||
Depreciation and amortization of property | 12,501 | 11,236 | 11,234 | 11,465 | 12,736 | |||||||||||||||
Amortization: | ||||||||||||||||||||
Intangible assets | 13,233 | 11,465 | 11,382 | 10,151 | 46,260 | |||||||||||||||
SARs and stock options | 2,317 | 2,058 | 2,473 | 3,020 | 3,702 | |||||||||||||||
Operating income | 176,399 | 168,395 | 150,763 | 110,050 | 72,493 | |||||||||||||||
Net income | 118,149 | 108,779 | 96,759 | 65,903 | 42,260 | |||||||||||||||
Per share data: | ||||||||||||||||||||
Net income: | ||||||||||||||||||||
Basic | 2.81 | 2.58 | 2.28 | 1.56 | 1.00 | |||||||||||||||
Diluted | 2.78 | 2.54 | 2.24 | 1.54 | 0.99 | |||||||||||||||
Cash dividend | $ | 0.88 | 0.80 | 0.70 | 0.60 | 0.60 | ||||||||||||||
Year-End Position — June 30 | ||||||||||||||||||||
Working capital | $ | 491,380 | $ | 435,593 | $ | 404,226 | $ | 347,528 | $ | 369,038 | ||||||||||
Long-term debt (including long-term debt classified as current) | 75,000 | 75,000 | ||||||||||||||||||
Total assets | 1,058,706 | 962,183 | 914,931 | 891,520 | 809,328 | |||||||||||||||
Shareholders’ equity | 759,615 | 672,131 | 633,563 | 555,039 | 508,102 | |||||||||||||||
Year-End Statistics — June 30 | ||||||||||||||||||||
Current ratio | 3.0 | 2.9 | 2.9 | 2.3 | 3.4 | |||||||||||||||
Operating facilities | 522 | 476 | 474 | 455 | 464 | |||||||||||||||
Shareholders of record | 6,319 | 6,225 | 6,208 | 5,884 | 6,329 | |||||||||||||||
Return on assets (b) | 11.6 | % | 11.8 | % | 11.1 | % | 7.9 | % | 7.7 | % | ||||||||||
Return on equity (c) | 16.5 | % | 16.7 | % | 16.3 | % | 12.4 | % | 8.4 | % | ||||||||||
Capital expenditures (d) | $ | 12,214 | $ | 26,021 | $ | 20,431 | $ | 7,216 | $ | 6,988 | ||||||||||
Cash Returned to Shareholders During the Year | ||||||||||||||||||||
Dividends Paid | $ | 37,194 | $ | 33,800 | $ | 29,751 | $ | 25,416 | $ | 25,378 | ||||||||||
Purchases of Treasury Shares | $ | 53 | $ | 31,032 | $ | 6,085 | $ | 3,929 | $ | 1,210 | ||||||||||
Total | $ | 37,247 | $ | 64,832 | $ | 35,836 | $ | 29,345 | $ | 26,588 |
(a) | The goodwill impairment charge in fiscal 2009 reduced operating income by $36,605, net income by $23,000 and net income per share by $0.54. |
(b) | Return on assets is calculated as net income divided by monthly average assets, exclusive of the goodwill impairment. |
(c) | Return on equity is calculated as net income divided by the average shareholders’ equity (beginning of the year and end of the year divided by 2). |
(d) | Capital expenditures for fiscal 2013, 2012 and 2011 include $5.6 million, $16.7 million and $12.5 million related to the ERP project, respectively. |
Name | Jurisdiction of Incorporation or Organization | |
* Air-Hydraulic Systems, Inc. | Minnesota | |
* Air Draulics Engineering Co. | Tennessee | |
AIT Canada, ULC | Nova Scotia | |
AIT International Inc. | Ohio | |
Applied Australia Holdings Pty Ltd. | Australia | |
Applied Canada, ULC | Nova Scotia | |
Applied Canada Holdings, ULC | Nova Scotia | |
* Applied Fluid Power Holdings, LLC | Ohio | |
Applied Industrial Technologies - CA LLC | Delaware | |
Applied Industrial Technologies - Capital, Inc. | Delaware | |
Applied Industrial Technologies - Dixie, Inc. | Tennessee | |
Applied Industrial Technologies, LP | Ontario | |
Applied Industrial Technologies Limited | New Zealand | |
Applied Industrial Technologies - PA LLC | Pennsylvania | |
Applied Industrial Technologies - PACIFIC LLC | Delaware | |
Applied Industrial Technologies Pty Ltd. | Australia | |
Applied Luxembourg, S.a.r.l. | Luxembourg | |
* Applied México, S.A. de C.V. (97%-owned by subsidiaries of Applied Industrial Technologies, Inc.) | Mexico | |
Applied Mexico Holdings, S.A. de C.V. | Mexico | |
Applied Northern Holdings, ULC | Nova Scotia | |
Applied Nova Scotia Company | Nova Scotia | |
Applied US, L.P. | Delaware | |
BER International, Inc. | Barbados | |
* Bay Advanced Technologies, LLC | Ohio | |
Bearing Sales & Services Inc. | Washington | |
* Bearings & Oil Seals Specialists Inc. | Canada | |
Bearings Pan American, Inc. | Ohio | |
* Carolina Fluid Components, LLC | Ohio | |
* DTS Fluid Power, LLC | Ohio | |
* ESI Acquisition Corporation (d/b/a Engineered Sales, Inc., ESI Power Hydraulics, and Applied Engineered Systems) | Ohio | |
* FluidTech, LLC | Ohio | |
* HydroAir Hughes, LLC | Ohio | |
* HyQuip, LLC | Ohio | |
* PAI, LLC | Ohio | |
* Power Systems, LLC | Ohio | |
* Rafael Benitez Carrillo Inc. | Puerto Rico | |
* Solutions Industrielles ULC | Canada | |
* Specialites Industrielles Harvey ULC | Quebec | |
* Spencer Fluid Power, Inc. | Ohio | |
* UZ Engineered Products Inc. | Canada (Federal) | |
* UZ Engineered Products LLC | Ohio | |
* VYCMEX Mexico, S.A. de C.V. | Mexico | |
* Operating companies that do not conduct business under Applied Industrial Technologies trade name |
Date: August 13, 2013 | By: /s/ William G. Bares |
Date: August 13, 2013 | By: /s/ T. A. Commes |
Date: August 13, 2013 | By: /s/ Peter A. Dorsman |
Date: August 13, 2013 | By: /s/ L. Thomas Hiltz |
Date: August 13, 2013 | By: /s/ Edith Kelly-Green |
Date: August 13, 2013 | By: /s/ Dan P. Komnenovich |
Date: August 13, 2013 | By: /s/ John F. Meier |
Date: August 13, 2013 | By: /s/ J. Michael Moore |
Date: August 13, 2013 | By: /s/ Vincent K. Petrella |
Date: August 13, 2013 | By: /s/ Jerry Sue Thornton |
Date: August 13, 2013 | By: /s/ Peter C. Wallace |
1. | I have reviewed this annual report on Form 10-K of Applied Industrial Technologies, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): | |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 20, 2013 | /s/ Neil A. Schrimsher | |
Neil A. Schrimsher | ||
President & Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Applied Industrial Technologies, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): | |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 20, 2013 | /s/ Mark O. Eisele | |
Mark O. Eisele | ||
Vice President-Chief Financial Officer & Treasurer |
(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 President & Chief Executive Officer | Mark O. Eisele Vice President-Chief Financial Officer & Treasurer | |
Dated: August 20, 2013 |
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Segment and Geographic Information Textuals (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Segment and Geographic Information (Textuals) [Abstract] | |||
Sales primarily from businesses segment | $ 20,217 | $ 18,097 | $ 17,665 |
Segment Reporting Information [Line Items] | |||
Reclassification of prior service cost into SD&A expense upon plan curtailment | 0 | (3,117) | 0 |
Pension Benefits [Member]
|
|||
Segment Reporting Information [Line Items] | |||
Reclassification of prior service cost into SD&A expense upon plan curtailment | $ 0 | $ 3,117 | $ 0 |
Other Expense (Income), Net (Details) (USD $)
In Thousands, unless otherwise specified |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2011
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Other (income) expense, net | ||||
Unrealized (gain) loss on assets held in rabbi trust for a non-qualified deferred compensation plan | $ (1,280) | $ 36 | $ (2,016) | |
Benefit from payouts on corporate-owned life insurance policies | (1,722) | 0 | 0 | (1,722) |
Foreign currency transaction (gains) losses | (143) | 1,592 | (541) | |
Loss on cross-currency swap | 0 | 0 | 368 | |
Other, net | (8) | (50) | 118 | |
Total other expense (income), net | (1,431) | 1,578 | (3,793) | |
Other (Income) Expense, Net (Textuals) [Abstract] | ||||
Benefits in life insurance policies acquired in 1998 acquisition | 12,300 | |||
Net cash surrender value in life insurance policies acquired in 1998 acquisition | 3,400 | |||
Benefit from payouts on corporate-owned life insurance policies | $ 0 | $ 0 | $ (1,722) |
Shareholders' Equity
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY Treasury Shares At June 30, 2013, 596 shares of the Company’s common stock held as treasury shares were restricted as collateral under escrow arrangements relating to change in control and director and officer indemnification agreements. Accumulated Other Comprehensive Income (Loss) Changes in the accumulated other comprehensive income (loss) for the year ended June 30, 2013, is comprised of the following:
Other Comprehensive Income (Loss) Details of other comprehensive income (loss) are as follows:
Net Income Per Share The following is a computation of basic and diluted earnings per share:
Stock appreciation rights and options relating to the acquisition of 212, 140 and 176 shares of common stock were outstanding at June 30, 2013, 2012 and 2011, respectively, but were not included in the computation of diluted earnings per share for the fiscal years then ended as they were anti-dilutive. |
Business and Accounting Policies
|
12 Months Ended |
---|---|
Jun. 30, 2013
|
|
Accounting Policies [Abstract] | |
Significant Accounting Policies | BUSINESS AND ACCOUNTING POLICIES Business Applied Industrial Technologies, Inc. and subsidiaries (the “Company” or “Applied”) is a leading industrial distributor serving Maintenance Repair & Operations (MRO) and Original Equipment Manufacturer (OEM) customers in virtually every industry. In addition, Applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber and fluid power shop services. Applied also offers maintenance training and inventory management solutions that provide added value to its customers. Although the Company does not generally manufacture the products it sells, it does assemble and repair certain products and systems. Consolidation The consolidated financial statements include the accounts of Applied Industrial Technologies, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The financial results of the Company’s Canadian and Mexican subsidiaries are included in the consolidated financial statements for the twelve months ended May 31. Foreign Currency The financial statements of the Company’s Canadian, Mexican, Australian and New Zealand subsidiaries are measured using local currencies as their functional currencies. Assets and liabilities are translated into U.S. dollars at current exchange rates, while income and expenses are translated at average exchange rates. Translation gains and losses are reported in other comprehensive income (loss) in the statements of consolidated comprehensive income. Gains and losses resulting from transactions denominated in foreign currencies are included in the statements of consolidated income as a component of other expense (income), net. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. Marketable Securities The primary marketable security investments of the Company include money market and mutual funds held in a rabbi trust for a non-qualified deferred compensation plan. These are included in other assets in the consolidated balance sheets, are classified as trading securities, and reported at fair value based on quoted market prices. Changes in the fair value of the investments during the period are recorded in other expense (income), net in the statements of consolidated income. Concentration of Credit Risk The Company has a broad customer base representing many diverse industries primarily across North America, Australia and New Zealand. As such, the Company does not believe that a significant concentration of credit risk exists in its accounts receivable. The Company’s cash and cash equivalents consist of deposits with commercial banks and regulated non-bank subsidiaries. While Applied monitors the creditworthiness of these institutions, a crisis in the financial systems could limit access to funds and/or result in the loss of principal. The terms of these deposits and investments provide that all monies are available to the Company upon demand. Allowances for Doubtful Accounts The Company evaluates the collectibility of trade accounts receivable based on a combination of factors. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer pool and changes in the overall aging of accounts receivable. Accounts are written off against the allowance when it becomes evident collection will not occur. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. Inventories Inventories are valued at the lower of cost or market, using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. The Company adopted the link chain dollar value LIFO method of accounting for U.S. inventories in fiscal 1974. At June 30, 2013, approximately 31% of the Company’s domestic inventory dollars relate to LIFO layers added in the 1970s. The Company maintains five LIFO pools based on the following product groupings: bearings, power transmission products, rubber products, fluid power products and other products. LIFO layers and/or liquidations are determined consistently year-to-year. The Company evaluates the recoverability of its slow moving or obsolete inventories at least quarterly. The Company estimates the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory as well as assumptions regarding future demand. The Company’s ability to recover its cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand and relationships with suppliers. Historically, the Company’s inventories have demonstrated long shelf lives, are not highly susceptible to obsolescence and can be eligible for return under various supplier return programs. Supplier Purchasing Programs The Company enters into agreements with certain suppliers providing inventory purchase incentives. The Company’s inventory purchase incentive arrangements are unique to each supplier and are generally annual programs ending at either the Company’s fiscal year end or the supplier’s year end; however, program length and ending dates can vary. Incentives are received in the form of cash or credits against purchases upon attainment of specified purchase volumes and are received either monthly, quarterly or annually. The incentives are generally a specified percentage of the Company’s net purchases based upon achieving specific purchasing volume levels. These percentages can increase or decrease based on changes in the volume of purchases. The Company accrues for the receipt of these inventory purchase incentives based upon cumulative purchases of inventory. The percentage level utilized is based upon the estimated total volume of purchases expected during the life of the program. Supplier programs are analyzed each quarter to determine the appropriateness of the amount of purchase incentives accrued. Upon program completion, differences between estimates and actual incentives subsequently received have not been material. Benefits under these supplier purchasing programs are recognized under the Company’s LIFO inventory accounting method as a reduction of cost of sales when the inventories representing these purchases are recorded as cost of sales. Accrued incentives expected to be settled as a credit against future purchases are reported on the consolidated balance sheet as an offset to amounts due to the related supplier. Property and Related Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is included in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Buildings, building improvements and leasehold improvements are depreciated over ten to thirty years or the life of the lease if a shorter period, and equipment is depreciated over three to ten years. The Company capitalizes internal use software development costs in accordance with guidance on accounting for costs of computer software developed or obtained for internal use. Amortization of software begins when it is ready for its intended use, and is amortized on a straight-line basis over the estimated useful life of the software, generally not to exceed twelve years. Capitalized software and hardware costs are classified as property on the consolidated balance sheets. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the recorded value cannot be recovered from undiscounted future cash flows. Impairment losses, if any, would be measured based upon the difference between the carrying amount and the fair value of the assets. Goodwill and Intangible Assets Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized. Goodwill is reviewed for impairment annually as of January 1 or whenever changes in conditions indicate an evaluation should be completed. These conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. The Company utilizes discounted cash flow models and market multiples for comparable businesses to determine the fair value of reporting units. Evaluating impairment requires significant judgment by management, including estimated future operating results, estimated future cash flows, the long-term rate of growth of the business, and determination of an appropriate discount rate. While the Company uses available information to prepare the estimates and evaluations, actual results could differ significantly. The Company recognizes acquired intangible assets such as customer relationships, trade names, vendor relationships, and non-competition agreements apart from goodwill. Customer relationship intangibles are amortized using the sum-of-the-years-digits method over estimated useful lives consistent with assumptions used in the determination of their value. Amortization of all other finite-lived intangible assets is computed using the straight-line method over the estimated period of benefit. Amortization of intangible assets is included in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. Intangible assets with indefinite lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be completed. Self-Insurance Liabilities The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, business, automobile, general product liability and other claims. The Company accrues estimated losses including those incurred but not reported using actuarial calculations, models and assumptions based on historical loss experience. The Company maintains a self-insured health benefits plan, which provides medical benefits to U.S. based employees electing coverage under the plan. The Company estimates its reserve for all unpaid medical claims including those incurred but not reported based on historical experience, adjusted as necessary based upon management’s reasoned judgment. Revenue Recognition Sales are recognized when the sales price is fixed, collectibility is reasonably assured and the product’s title and risk of loss is transferred to the customer. Typically, these conditions are met when the product is shipped to the customer. The Company charges shipping and handling fees when products are shipped or delivered to a customer, and includes such amounts in net sales. The Company reports its sales net of actual sales returns and the amount of reserves established for anticipated sales returns based on historical rates. Sales tax collected from customers is excluded from net sales in the accompanying statements of consolidated income. Shipping and Handling Costs The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Internal delivery costs in selling, distribution and administrative expenses were approximately $15,650, $15,500 and $15,400 for the fiscal years ended June 30, 2013, 2012 and 2011, respectively. Income Taxes Income taxes are determined based upon income and expenses recorded for financial reporting purposes. Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. Uncertain tax positions meeting a more-likely-than-not recognition threshold are recognized in accordance with the Income Taxes topic of the ASC (Accounting Standards Codification). The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in the provision for income taxes. Share-Based Compensation Share-based compensation represents the cost related to share-based awards granted to associates under either the 2011 Plan or the 2007 Plan. The Company measures share-based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost over the requisite service period. Non-qualified stock appreciation rights (SARs) and stock options are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant and the fair values are determined using a Black-Scholes option pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield. SARs and stock option awards generally vest over four years of continuous service and have ten-year contractual terms. The fair value of restricted stock awards, restricted stock units (RSUs), and performance shares are based on the closing market price of Company common stock on the grant date. Treasury Shares Shares of common stock repurchased by the Company are recorded at cost as treasury shares and result in a reduction of shareholders’ equity in the consolidated balance sheets. The Company uses the weighted-average cost method for determining the cost of shares reissued. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the 2013 presentation. New Accounting Pronouncement In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (ASC Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU No. 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income by the respective line items of net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The update is effective for financial statement periods beginning after December 15, 2012 with early adoption permitted. The Company has chosen to early adopt this standard and has updated its 2013 annual report to conform to the requirements of ASU No. 2013-02. |
Schedule II - Valuation and Qualifying Accounts
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Jun. 30, 2013
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Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VALUATION AND QUALIFYING ACCOUNTS | APPLIED INDUSTRIAL TECHNOLOGIES, INC. & SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, 2013, 2012 AND 2011 (in thousands)
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Benefit Plans 4 (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
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Jun. 30, 2013
|
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One-Percentage Point Change in Assumed Health Care Cost Trend Rates | |
Effect on total service and interest cost components of periodic expense (Increase) | $ 59 |
Effect on total service and interest cost components of periodic expense (Decrease) | (47) |
Effect on postretirement benefit obligation (Increase) | 339 |
Effect on postretirement benefit obligation (Decrease) | $ (295) |
Share - Based Compensation (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Compensation costs charged to expense under award programs | |||
Total compensation costs under award programs | $ 5,761 | $ 6,366 | $ 5,631 |
Stock Options and Stock Appreciation Rights [ Member]
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Compensation costs charged to expense under award programs | |||
Total compensation costs under award programs | 2,317 | 2,058 | 2,473 |
Performance Shares [Member]
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Compensation costs charged to expense under award programs | |||
Total compensation costs under award programs | 1,074 | 1,983 | 1,705 |
Restricted stock and Restricted Stock units [Member]
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Compensation costs charged to expense under award programs | |||
Total compensation costs under award programs | $ 2,370 | $ 2,325 | $ 1,453 |
Share - Based Compensation
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Share-Based Incentive Plans The 2011 Plan, which expires in 2016, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or the Corporate Governance Committee of the Board of Directors (the Committee) may determine to officers, other key associates and members of the Board of Directors. Grants are generally made by the Committee at regularly scheduled meetings. Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs, stock options, performance shares, restricted stock, and RSUs) are summarized in the table below:
Such amounts are included in SD&A in the accompanying statements of consolidated income. It has been the practice of the Company to issue shares from treasury to satisfy requirements of awards paid with shares. The aggregate unrecognized compensation cost for share-based award programs paid (or with the potential to be paid) at June 30, 2013 are summarized in the table below:
Cost of these programs will be recognized as expense over the weighted-average remaining vesting period of 1.9 years. The aggregate number of shares of common stock which may be awarded under the 2011 Plan is 2,000; shares available for future grants at June 30, 2013 were 1,648. Stock Appreciation Rights and Stock Options The weighted-average assumptions used for SARs and stock option grants issued in fiscal 2013, 2012 and 2011 are:
The expected life is based upon historical exercise experience of the officers, other key associates and members of the Board of Directors. The risk free interest rate is based upon U.S. Treasury zero-coupon bonds with remaining terms equal to the expected life of the SARs and stock options. The assumed dividend yield has been estimated based upon the Company’s historical results and expectations for changes in dividends and stock prices. The volatility assumption is calculated based upon historical daily price observations of the Company’s common stock for a period equal to the expected life. SARs are redeemable solely in Company common stock. The exercise price of stock option awards may be settled by the holder with cash or by tendering Company common stock. A summary of SARs and stock options activity is presented below:
The weighted-average remaining contractual terms for SARs and stock options outstanding and exercisable at June 30, 2013 were 6.3 and 5.0 years, respectively. The aggregate intrinsic values of SARs and stock options outstanding and exercisable at June 30, 2013 were $21,104 and $14,958, respectively. The aggregate intrinsic value of the SARs and stock options exercised during fiscal 2013, 2012 and 2011 was $7,135, $13,747 and $18,526, respectively. The total fair value of shares vested during fiscal 2013, 2012 and 2011 was $2,135, $4,266 and $2,645, respectively. Performance Shares Performance shares are intended to provide incentives to achieve three-year goals. Performance shares pay out in shares of Applied stock at the end of a three-year period provided the Company achieves the established goals. The number of Applied shares payable will vary depending on the level of the goals achieved. A summary of nonvested performance shares activity at June 30, 2013 is presented below:
The Committee set three one-year goals for each of the 2013, 2012 and 2011 grants. Each fiscal year during the three-year term has its own separate goals, tied to the Company’s earnings before interest, tax, depreciation, and amortization (EBITDA) and after-tax return on assets (ROA). Achievement during any particular fiscal year is awarded and “banked” for payout at the end of the three-year term. Based upon the outstanding grants as of June 30, 2013, the maximum number of shares which could be earned in future periods was 70. Restricted Stock and Restricted Stock Units Restricted stock award recipients are entitled to receive dividends on, and have voting rights with respect to their respective shares, but are restricted from selling or transferring the shares prior to vesting. Restricted stock awards vest over periods of one to four years. RSUs are grants valued in shares of Applied stock, but shares are not issued until the grants vest three years from the award date, assuming continued employment with Applied. Applied pays dividend equivalents on RSUs on a current basis. A summary of the status of the Company’s nonvested restricted stock and RSUs at June 30, 2013 is presented below:
Performance Grants Prior to the establishment of the performance shares as incentive compensation, performance grants were used to reward performance. All performance periods had expired by June 30, 2011. During fiscal 2011, the Company recorded $1,020 of compensation expense for achievement relative to the total shareholder return-based goals of the Company’s performance grants. |
Income Taxes 2 (Details)
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12 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Reconciliations of federal statutory income tax rate and Company's effective income tax rate: | |||
Statutory income tax rate | 35.00% | 35.00% | 35.00% |
State and local taxes | 2.30% | 2.50% | 2.80% |
U.S. tax on foreign income, net | 0.00% | 0.00% | 1.80% |
Valuation allowance | 0.00% | 0.00% | (0.60%) |
Foreign income taxes | (2.30%) | (1.80%) | (1.00%) |
Deductible dividend | (0.50%) | (0.50%) | (0.50%) |
Other, net | (1.00%) | (0.40%) | (0.80%) |
Effective income tax rate | 33.50% | 34.80% | 36.70% |
Inventories (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Inventory [Line Items] | |||
Effect of LIFO Inventory Liquidation on Income | $ 6,300 | $ 3,400 | $ 12,300 |
Items Of Inventories | |||
U.S. inventories at current cost | 323,642 | 302,465 | |
Foreign inventories at average cost | 103,483 | 70,797 | |
Inventory, Gross, Total | 427,125 | 373,262 | |
Less: Excess of current cost over LIFO cost for U.S. inventories | 145,708 | 144,756 | |
Inventories on consolidated balance sheets | $ 281,417 | $ 228,506 |
Inventories (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items of Inventories | Inventories consist of the following:
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Business Combinations FY2013 Assets Acquired (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The following table summarizes the fair values of assets acquired and liabilities assumed for fiscal 2013:
The purchase price includes $1,015 which has been deferred, and will be paid as acquisition holdback payments in future periods. Additional 2013 pro-forma information has not been included since it is not material. |
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Components of income before income taxes | |||
U.S. | $ 153,546 | $ 137,667 | $ 127,567 |
Foreign | 24,119 | 29,159 | 25,321 |
Income Before Income Taxes | $ 177,665 | $ 166,826 | $ 152,888 |
Segment and Geographic Information (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment financial information |
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Reconciliation of operating income for reportable segments to the consolidated income before income taxes | A reconciliation of operating income for reportable segments to the consolidated income before income taxes is as follows:
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Net sales by product category | Net sales by product category are as follows:
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Information by geographic area | Information by geographic area is as follows:
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Share - Based Compensation (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of share based compensation expense | The 2011 Plan, which expires in 2016, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or the Corporate Governance Committee of the Board of Directors (the Committee) may determine to officers, other key associates and members of the Board of Directors. Grants are generally made by the Committee at regularly scheduled meetings. Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs, stock options, performance shares, restricted stock, and RSUs) are summarized in the table below:
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Schedule of Unrecognized Compensation Cost, Nonvested Awards [Table Text Block] | The aggregate unrecognized compensation cost for share-based award programs paid (or with the potential to be paid) at June 30, 2013 are summarized in the table below:
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Weighted-average assumptions used for SARs and stock option grants issued | The weighted-average assumptions used for SARs and stock option grants issued in fiscal 2013, 2012 and 2011 are:
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Summary of SARs and stock option activity | A summary of SARs and stock options activity is presented below:
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Performance Shares [Member]
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the performance shares and restricted stock activity | A summary of nonvested performance shares activity at June 30, 2013 is presented below:
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Restricted stock and Restricted Stock units [Member]
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the performance shares and restricted stock activity | A summary of the status of the Company’s nonvested restricted stock and RSUs at June 30, 2013 is presented below:
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Benefit Plans 1 (Details) (Pension Benefits [Member], USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Jun. 30, 2012
|
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Pension Benefits [Member]
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Information for pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets | ||
Projected benefit obligations | $ 40,664 | $ 47,151 |
Accumulated benefit obligations | 40,664 | 47,151 |
Fair value of plan assets | $ 6,697 | $ 6,439 |
Segment and Geographic Information (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Segment financial information | |||
Net Sales | $ 2,462,171 | $ 2,375,445 | $ 2,212,849 |
Operating income for reportable segments | 176,399 | 168,395 | 150,763 |
Assets used in the business | 1,058,706 | 962,183 | |
Depreciation and amortization of property | 12,501 | 11,236 | 11,234 |
Capital expenditures | 12,214 | 26,021 | 20,431 |
Service Center Based Distribution Segment [Member]
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Segment financial information | |||
Net Sales | 2,003,440 | 1,904,564 | 1,770,798 |
Operating income for reportable segments | 138,484 | 135,240 | 115,798 |
Assets used in the business | 859,547 | 731,915 | 700,486 |
Depreciation and amortization of property | 10,692 | 9,403 | 9,152 |
Capital expenditures | 10,415 | 24,339 | 19,392 |
Fluid Power Businesses [Member]
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Segment financial information | |||
Net Sales | 458,731 | 470,881 | 442,051 |
Operating income for reportable segments | 41,083 | 43,236 | 41,793 |
Assets used in the business | 199,159 | 230,268 | 214,445 |
Depreciation and amortization of property | 1,809 | 1,833 | 2,082 |
Capital expenditures | 1,799 | 1,682 | 1,039 |
Reportable Segment [Member]
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Segment financial information | |||
Net Sales | 2,462,171 | 2,375,445 | 2,212,849 |
Operating income for reportable segments | 179,567 | 178,476 | 157,591 |
Assets used in the business | 1,058,706 | 962,183 | 914,931 |
Depreciation and amortization of property | 12,501 | 11,236 | 11,234 |
Capital expenditures | $ 12,214 | $ 26,021 | $ 20,431 |
Debt (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
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Jun. 30, 2013
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Debt Instrument [Line Items] | |
Line of credit facility unsecured borrowings amount | $ 150,000 |
Line of credit facility, amount outstanding | 8,696 |
Line of Credit Facility, Remaining Borrowing Capacity | 141,304 |
Additional long-term financing under uncommitted shelf facility agreement amount | $ 125,000 |
Ratio of consolidated income before interest, taxes, depreciation and amortization to net interest expense | 300.00% |
Minimum [Member]
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Debt Instrument [Line Items] | |
Fees on credit facility | 0.09% |
Maximum [Member]
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Debt Instrument [Line Items] | |
Fees on credit facility | 0.175% |
Benefit Plans 6 (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
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Pension Benefits [Member]
|
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Estimated future benefit payments | |
2014 | $ 7,000 |
2015 | 6,700 |
2016 | 5,600 |
2017 | 1,800 |
2018 | 2,300 |
2019 through 2023 | 12,500 |
Retiree Health Care Benefits [Member]
|
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Estimated future benefit payments | |
2014 | 250 |
2015 | 230 |
2016 | 250 |
2017 | 330 |
2018 | 400 |
2019 through 2023 | $ 1,470 |
Business and Accounting Policies (Policies)
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12 Months Ended |
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Jun. 30, 2013
|
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Accounting Policies [Abstract] | |
Business | Business Applied Industrial Technologies, Inc. and subsidiaries (the “Company” or “Applied”) is a leading industrial distributor serving Maintenance Repair & Operations (MRO) and Original Equipment Manufacturer (OEM) customers in virtually every industry. In addition, Applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber and fluid power shop services. Applied also offers maintenance training and inventory management solutions that provide added value to its customers. Although the Company does not generally manufacture the products it sells, it does assemble and repair certain products and systems. |
Consolidation | Consolidation The consolidated financial statements include the accounts of Applied Industrial Technologies, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The financial results of the Company’s Canadian and Mexican subsidiaries are included in the consolidated financial statements for the twelve months ended May 31. |
Foreign Currency | Foreign Currency The financial statements of the Company’s Canadian, Mexican, Australian and New Zealand subsidiaries are measured using local currencies as their functional currencies. Assets and liabilities are translated into U.S. dollars at current exchange rates, while income and expenses are translated at average exchange rates. Translation gains and losses are reported in other comprehensive income (loss) in the statements of consolidated comprehensive income. Gains and losses resulting from transactions denominated in foreign currencies are included in the statements of consolidated income as a component of other expense (income), net. |
Use of Estimates, Policy [Policy Text Block] | Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. |
Marketable Securities | Marketable Securities The primary marketable security investments of the Company include money market and mutual funds held in a rabbi trust for a non-qualified deferred compensation plan. These are included in other assets in the consolidated balance sheets, are classified as trading securities, and reported at fair value based on quoted market prices. Changes in the fair value of the investments during the period are recorded in other expense (income), net in the statements of consolidated income. |
Concentration of Credit Risk | Concentration of Credit Risk The Company has a broad customer base representing many diverse industries primarily across North America, Australia and New Zealand. As such, the Company does not believe that a significant concentration of credit risk exists in its accounts receivable. The Company’s cash and cash equivalents consist of deposits with commercial banks and regulated non-bank subsidiaries. While Applied monitors the creditworthiness of these institutions, a crisis in the financial systems could limit access to funds and/or result in the loss of principal. The terms of these deposits and investments provide that all monies are available to the Company upon demand. |
Allowances for Doubtful Accounts | Allowances for Doubtful Accounts The Company evaluates the collectibility of trade accounts receivable based on a combination of factors. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer pool and changes in the overall aging of accounts receivable. Accounts are written off against the allowance when it becomes evident collection will not occur. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts |
Inventories | Inventories Inventories are valued at the lower of cost or market, using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. The Company adopted the link chain dollar value LIFO method of accounting for U.S. inventories in fiscal 1974. At June 30, 2013, approximately 31% of the Company’s domestic inventory dollars relate to LIFO layers added in the 1970s. The Company maintains five LIFO pools based on the following product groupings: bearings, power transmission products, rubber products, fluid power products and other products. LIFO layers and/or liquidations are determined consistently year-to-year. The Company evaluates the recoverability of its slow moving or obsolete inventories at least quarterly. The Company estimates the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory as well as assumptions regarding future demand. The Company’s ability to recover its cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand and relationships with suppliers. Historically, the Company’s inventories have demonstrated long shelf lives, are not highly susceptible to obsolescence and can be eligible for return under various supplier return programs |
Supplier Purchasing Programs | Supplier Purchasing Programs The Company enters into agreements with certain suppliers providing inventory purchase incentives. The Company’s inventory purchase incentive arrangements are unique to each supplier and are generally annual programs ending at either the Company’s fiscal year end or the supplier’s year end; however, program length and ending dates can vary. Incentives are received in the form of cash or credits against purchases upon attainment of specified purchase volumes and are received either monthly, quarterly or annually. The incentives are generally a specified percentage of the Company’s net purchases based upon achieving specific purchasing volume levels. These percentages can increase or decrease based on changes in the volume of purchases. The Company accrues for the receipt of these inventory purchase incentives based upon cumulative purchases of inventory. The percentage level utilized is based upon the estimated total volume of purchases expected during the life of the program. Supplier programs are analyzed each quarter to determine the appropriateness of the amount of purchase incentives accrued. Upon program completion, differences between estimates and actual incentives subsequently received have not been material. Benefits under these supplier purchasing programs are recognized under the Company’s LIFO inventory accounting method as a reduction of cost of sales when the inventories representing these purchases are recorded as cost of sales. Accrued incentives expected to be settled as a credit against future purchases are reported on the consolidated balance sheet as an offset to amounts due to the related supplier |
Property and related Depreciation and Amortization | Property and Related Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is included in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Buildings, building improvements and leasehold improvements are depreciated over ten to thirty years or the life of the lease if a shorter period, and equipment is depreciated over three to ten years. The Company capitalizes internal use software development costs in accordance with guidance on accounting for costs of computer software developed or obtained for internal use. Amortization of software begins when it is ready for its intended use, and is amortized on a straight-line basis over the estimated useful life of the software, generally not to exceed twelve years. Capitalized software and hardware costs are classified as property on the consolidated balance sheets. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the recorded value cannot be recovered from undiscounted future cash flows. Impairment losses, if any, would be measured based upon the difference between the carrying amount and the fair value of the assets |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized. Goodwill is reviewed for impairment annually as of January 1 or whenever changes in conditions indicate an evaluation should be completed. These conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. The Company utilizes discounted cash flow models and market multiples for comparable businesses to determine the fair value of reporting units. Evaluating impairment requires significant judgment by management, including estimated future operating results, estimated future cash flows, the long-term rate of growth of the business, and determination of an appropriate discount rate. While the Company uses available information to prepare the estimates and evaluations, actual results could differ significantly. The Company recognizes acquired intangible assets such as customer relationships, trade names, vendor relationships, and non-competition agreements apart from goodwill. Customer relationship intangibles are amortized using the sum-of-the-years-digits method over estimated useful lives consistent with assumptions used in the determination of their value. Amortization of all other finite-lived intangible assets is computed using the straight-line method over the estimated period of benefit. Amortization of intangible assets is included in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. Intangible assets with indefinite lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be completed |
Self-Insurance Liabilities | Self-Insurance Liabilities The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, business, automobile, general product liability and other claims. The Company accrues estimated losses including those incurred but not reported using actuarial calculations, models and assumptions based on historical loss experience. The Company maintains a self-insured health benefits plan, which provides medical benefits to U.S. based employees electing coverage under the plan. The Company estimates its reserve for all unpaid medical claims including those incurred but not reported based on historical experience, adjusted as necessary based upon management’s reasoned judgment |
Revenue Recognition | Revenue Recognition Sales are recognized when the sales price is fixed, collectibility is reasonably assured and the product’s title and risk of loss is transferred to the customer. Typically, these conditions are met when the product is shipped to the customer. The Company charges shipping and handling fees when products are shipped or delivered to a customer, and includes such amounts in net sales. The Company reports its sales net of actual sales returns and the amount of reserves established for anticipated sales returns based on historical rates. Sales tax collected from customers is excluded from net sales in the accompanying statements of consolidated income |
Shipping and Handling Costs | Shipping and Handling Costs The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution and administrative expenses in the accompanying statements of consolidated income. Internal delivery costs in selling, distribution and administrative expenses were approximately $15,650, $15,500 and $15,400 for the fiscal years ended June 30, 2013, 2012 and 2011, respectively |
Income Taxes | Income Taxes Income taxes are determined based upon income and expenses recorded for financial reporting purposes. Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. Uncertain tax positions meeting a more-likely-than-not recognition threshold are recognized in accordance with the Income Taxes topic of the ASC (Accounting Standards Codification). The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in the provision for income taxes |
Share-Based Compensation | Share-Based Compensation Share-based compensation represents the cost related to share-based awards granted to associates under either the 2011 Plan or the 2007 Plan. The Company measures share-based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost over the requisite service period. Non-qualified stock appreciation rights (SARs) and stock options are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant and the fair values are determined using a Black-Scholes option pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield. SARs and stock option awards generally vest over four years of continuous service and have ten-year contractual terms. The fair value of restricted stock awards, restricted stock units (RSUs), and performance shares are based on the closing market price of Company common stock on the grant date |
Treasury Shares | Treasury Shares Shares of common stock repurchased by the Company are recorded at cost as treasury shares and result in a reduction of shareholders’ equity in the consolidated balance sheets. The Company uses the weighted-average cost method for determining the cost of shares reissued. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital |
Reclassifications [Text Block] | Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the 2013 presentation. |
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | New Accounting Pronouncement In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (ASC Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU No. 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income by the respective line items of net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The update is effective for financial statement periods beginning after December 15, 2012 with early adoption permitted. The Company has chosen to early adopt this standard and has updated its 2013 annual report to conform to the requirements of ASU No. 2013-02 |
Business Combinations
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Jun. 30, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS The Company acquired the following distributors and fluid power businesses to complement and extend its business over a broader geographic area. The results of operations for these acquisitions are not material for any year presented. Results of operations of acquired businesses are included in the accompanying consolidated financial statements from their respective acquisition dates. Fiscal 2013 Acquisitions In December 2012, the Company acquired substantially all of the net assets of Norma Bearings, Inc., a distributor of bearings and power transmission products, located in Laval, Quebec. The acquired business is included in the Service Center Based Distribution segment. In December 2012, the Company acquired substantially all of the net assets of Parts Associates, Inc., a distributor of maintenance supplies and solutions, headquartered in Cleveland, Ohio. The acquired business is included in the Service Center Based Distribution segment. In November 2012, the Company acquired substantially all of the net assets of Hyquip, Inc., a Wisconsin distributor of a broad line of hydraulic, rubber and plastic industrial hose and tubing, plus related accessories. The acquired business is included in the Fluid Power Businesses segment. In September 2012, the Company acquired 100% of the outstanding stock of Bearings & Oil Seals Specialists Inc., a distributor of gaskets, seals, bearing and power transmission products, located in Hamilton, Ontario. The acquired business is included in the Service Center Based Distribution segment. In August 2012, the Company acquired 100% of the outstanding stock of SKF Group's company-owned distribution business in Australia and New Zealand ("Applied Australia"). As one of the largest bearing suppliers in these markets, Applied Australia also distributes seals, lubrication products, and power transmission products. The acquired business is included in the Service Center Based Distribution segment. The following table summarizes the fair values of assets acquired and liabilities assumed for fiscal 2013:
The purchase price includes $1,015 which has been deferred, and will be paid as acquisition holdback payments in future periods. Additional 2013 pro-forma information has not been included since it is not material. Fiscal 2012 Acquisitions In February 2012, the Company acquired Solutions Industrielles Chicoutimi, which provides bearings, power transmission products and repair services, and Spécialités Industrielles Harvey, which distributes bearings and power transmission products, plus hydraulic, pneumatic and electrical components. In August 2011, the Company acquired Chaines-Plus, a distributor of bearings, power transmission and related products. These distributors are all located in Quebec, Canada. The acquired businesses are included in the Service Center Based Distribution segment. The overall purchase price for these acquisitions was $18,493, tangible assets acquired was $1,549 and intangibles, including goodwill was $16,944. The purchase price includes $3,738 which was deferred, and will be paid as acquisition holdback payments in subsequent periods. Fiscal 2011 Acquisitions In May 2011, the Company acquired Gulf Coast Bearing & Supply Co., a full line bearing and power transmission distributor, located in the U.S. In July 2010, the Company acquired UZ Engineered Products, a distributor of industrial supply products for maintenance, repair and operational needs, in government and commercial sectors, throughout the U.S. and Canada. In August 2010, the Company acquired SCS Supply Group, a distributor of bearings, power transmission components, electrical components, fluid power products and industrial supplies located in Ontario, Canada. The acquired businesses are included in the Service Center Based Distribution segment. The overall purchase price for these acquisitions was $35,072, tangible assets acquired was $8,417 and intangibles, including goodwill was $26,655. The purchase price includes $2,792 which was deferred, and will be paid as acquisition holdback payments in subsequent periods. |
Statements of Consolidated Shareholders' Equity Statements of Consolidated Shareholders' Equity (Parenthetical) (USD $)
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Cash dividends (usd per share) | $ 0.88 | $ 0.80 | $ 0.70 |
Goodwill and Intangibles Goodwill and Intangilbes 2 (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
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Jun. 30, 2013
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Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Cost Allocation | $ 19,814 |
Weighted-Average Life (in years) | 16 years |
Customer Relationships [Member]
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Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Cost Allocation | 16,755 |
Weighted-Average Life (in years) | 18 years |
Trade names [Member]
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Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Cost Allocation | 651 |
Weighted-Average Life (in years) | 5 years |
Vendor Relationships [Member]
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Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Cost Allocation | 2,138 |
Weighted-Average Life (in years) | 10 years |
Non-competition agreements [Member]
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Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Cost Allocation | $ 270 |
Weighted-Average Life (in years) | 4 years 6 months |
Goodwill and Intangibles (Tables)
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Jun. 30, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the carrying amount of goodwill by reportable segment |
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Amortization details resulting from business combinations | The Company's intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off. During fiscal year 2013 the Company re-categorized its previously indefinite-lived trade name to finite-lived trade names and as a result began amortizing it. |
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Schedule of purchase price allocation and associated weighted average life | During 2013, the Company acquired intangible assets with a preliminary acquisition cost allocation and weighted-average life as follows:
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Benefit Plans (Tables)
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Jun. 30, 2013
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General Discussion of Pension and Other Postretirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in benefit obligations, plan assets and funded status for the post employment plans | The following table sets forth the changes in benefit obligations and plan assets during the year and the funded status for the postemployment plans at June 30:
The amounts recognized in the consolidated balance sheets and in accumulated other comprehensive income (loss) for the postemployment plans were as follows:
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Information for pension plans with projected benefit obligations in excess of plan assets | The following table provides information for pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets:
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Net periodic costs | The net periodic costs are as follows:
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Weighted-average actuarial assumptions used to determine benefit obligations and net periodic benefit cost | The weighted-average actuarial assumptions used to determine benefit obligations and net periodic benefit cost for the plans were as follows:
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One-Percentage Point Change in Assumed Health Care Cost Trend Rates | A one-percentage point change in the assumed health care cost trend rates would have had the following effects as of June 30, 2013 and for the year then ended:
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Defined Benefit Plan Asset Information | Following are the fair values and target allocation as of June 30:
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Estimated future benefit payments | The following benefit payments, which reflect expected future service, as applicable, are expected to be paid in each of the next five years and in the aggregate for the subsequent five years:
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Leases (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2011
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Minimum Annual Rental Commitments Under Non Cancelable Operating Leases | |||
2014 | $ 26,700 | ||
2015 | 19,700 | ||
2016 | 13,400 | ||
2017 | 7,900 | ||
2018 | 4,100 | ||
Thereafter | 9,200 | ||
Total minimum lease payments | 81,000 | ||
Leases (Textuals) [Abstract] | |||
Rental expenses of operating leases | $ 36,300 | $ 31,200 | $ 31,400 |
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