Basis of Presentation

9 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Applied Industrial Technologies, Inc. (the “Company”, or “Applied”) as of March 31, 2014, and the results of its operations for the three and nine month periods ended March 31, 2014 and 2013 and its cash flows for the nine months ended March 31, 2014 and 2013, have been included. The condensed consolidated balance sheet as of June 30, 2013 has been derived from the audited consolidated financial statements at that date. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2013.

Operating results for the three and nine month periods ended March 31, 2014 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year ending June 30, 2014.

Change in Accounting Principle - Alignment of Canadian Subsidiary Reporting

Effective July 1, 2013, the Company aligned the consolidation of the Company’s Canadian subsidiary in the consolidated financial statements which previously included results on a one month reporting lag. The Company believes that this change in accounting principle is preferable as it provides contemporaneous reporting within our consolidated financial statements. In accordance with applicable accounting literature, the elimination of a one month reporting lag of a subsidiary is treated as a change in accounting principle and requires retrospective application. The Company has determined that the effect of this change is not material to the financial statements for all periods presented and therefore, the Company has not presented retrospective application of this change. The net impact of the lag elimination of $1,200 of income for the month of June 2013 has been included within “Other (Income) Expense, net” on the Statement of Consolidated Income for the nine months ended March 31, 2014. The three months ended March 31, 2014 reflect the same results, had the financial statements been retrospectively adjusted. The nine months ended March 31, 2014 reflect the same results, had the financial statements been retrospectively adjusted, with the exception of net income which would have decreased $1,200. Net sales, operating income and net income for the three months ended March 31, 2013, would have increased by $3,500, $800 and $700 respectively had the financial statements been retrospectively adjusted. Net sales, operating income and net income for the nine months ended March 31, 2013, would have increased by $500 and decreased by $400 and $400 respectively had the financial statements been retrospectively adjusted.

Change in Accounting Principle - Alignment of Mexican Subsidiary Reporting

Effective January 1, 2014, the Company aligned the consolidation of the Company’s Mexican subsidiary in the consolidated financial statements which previously included results on a one month reporting lag. The Company believes that this change in accounting principle is preferable as it provides contemporaneous reporting within our consolidated financial statements. In accordance with applicable accounting literature, the elimination of a one month reporting lag of a subsidiary is treated as a change in accounting principle and requires retrospective application. The Company has determined that the effect of this change is not material to the financial statements for all periods presented and therefore, the Company has not presented retrospective application of this change. The net impact of the lag elimination of $200 of income for the month of December 2013 has been included within “Other (Income) Expense, net” on the Statement of Consolidated Income for the three and nine monthsended March 31, 2014. The three months ended March 31, 2014 reflect the same results, had the financial statements been retrospectively adjusted, with the exception of net income which would have decreased $200. Net sales, operating income and net income for the nine months ended March 31, 2014 would have decreased by $1,100, $100 and $300 had the financial statements been retrospectively adjusted. Net sales, operating income and net income for the three months ended March 31, 2013, would have increased by $800, and decreased by $200 and $300 respectively had the financial statements been retrospectively adjusted. Net sales, operating income and net income for the nine months ended March 31, 2013, would have decreased by $1,000, $600 and $500 respectively had the financial statements been retrospectively adjusted.

Impact of Changes in Accounting Principle - Alignment of Subsidiary Reporting

The Company has determined that the effect of both the Canadian and Mexican reporting lag eliminations is not material to the financial statements for all periods presented and therefore, the Company has not presented retrospective application of these changes. All subsidiary reporting is now aligned with that of the consolidated financial statements.

Inventory

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

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the 2014 presentation.