10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________ 

FORM 10-Q

 __________________________________________

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

For the quarterly period ended SEPTEMBER 30, 2013

OR

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

For the transition period from                 to                 

Commission File Number 1-2299

___________________________________________ 

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

___________________________________________ 

Ohio	34-0117420
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
One Applied Plaza, Cleveland, Ohio	44115
(Address of principal executive offices)	(Zip Code)

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

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

__________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x     No  o

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

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

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

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

There were 42,164,870 (no par value) shares of common stock outstanding on October 15, 2013.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX

			Page No.
Part I:	FINANCIAL INFORMATION
	Item 1:	Financial Statements
		Condensed Statements of Consolidated Income—Three Months Ended September 30, 2013 and 2012	2
		Condensed Statements of Consolidated Comprehensive Income—Three Months Ended September 30, 2013 and 2012	3
		Condensed Consolidated Balance Sheets—September 30, 2013 and June 30, 2013	4
		Condensed Statements of Consolidated Cash Flows—Three Months Ended September 30, 2013 and 2012	5
		Notes to Condensed Consolidated Financial Statements	6
		Report of Independent Registered Public Accounting Firm	11
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3:	Quantitative and Qualitative Disclosures About Market Risk	18
	Item 4:	Controls and Procedures	19
Part II:	OTHER INFORMATION
	Item 1:	Legal Proceedings	20
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 6:	Exhibits	21
Signatures			22

1

PART I: FINANCIAL INFORMATION

ITEM I: FINANCIAL STATEMENTS

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	September 30,
	2013			2012
Net Sales	$	605,305		$	610,519
Cost of Sales	435,510			445,986
Gross Profit	169,795			164,533
Selling, Distribution and Administrative, including depreciation	130,256			120,215
Operating Income	39,539			44,318
Interest Expense, net	61			25
Other (Income) Expense, net	(1,091		)	(459		)
Income Before Income Taxes	40,569			44,752
Income Tax Expense	13,725			15,220
Net Income	$	26,844		$	29,532
Net Income Per Share - Basic	$	0.64		$	0.70
Net Income Per Share - Diluted	$	0.63		$	0.70
Cash dividends per common share	$	0.23		$	0.21
Weighted average common shares outstanding for basic computation	42,157			41,966
Dilutive effect of potential common shares	480			511
Weighted average common shares outstanding for diluted computation	42,637			42,477

See notes to condensed consolidated financial statements.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended
	September 30,
	2013		2012
Net income per the condensed statements of consolidated income	$	26,844	$	29,532
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	550		9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs	95		218
Unrealized gain (loss) on investment securities available for sale	34		23
Total of other comprehensive income (loss), before tax	679		9,242
Income tax expense related to items of other comprehensive income	48		94
Other comprehensive income (loss), net of tax	631		9,148
Comprehensive income, net of tax	$	27,475	$	38,680

See notes to condensed consolidated financial statements.

3

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	September 30, 2013			June 30, 2013
ASSETS
Current assets
Cash and cash equivalents	$	76,877		$	73,164
Accounts receivable, less allowances of $7,582 and $7,737	320,281			329,880
Inventories	302,404			281,417
Other current assets	34,174			52,819
Total current assets	733,736			737,280
Property, less accumulated depreciation of $160,592 and $157,506	81,149			83,243
Intangibles, net	87,961			91,267
Goodwill	106,973			106,849
Deferred tax assets	20,568			21,026
Other assets	19,702			19,041
TOTAL ASSETS	$	1,050,089		$	1,058,706
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	131,195		$	136,575
Compensation and related benefits	45,373			63,899
Other current liabilities	49,007			45,426
Total current liabilities	225,575			245,900
Postemployment benefits	25,340			30,919
Other liabilities	24,552			22,272
TOTAL LIABILITIES	275,467			299,091
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	154,492			153,893
Income retained for use in the business	841,448			824,362
Treasury shares—at cost (12,031 and 12,044 shares)	(228,528		)	(225,219		)
Accumulated other comprehensive income (loss)	(2,790		)	(3,421		)
TOTAL SHAREHOLDERS’ EQUITY	774,622			759,615
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,050,089		$	1,058,706

See notes to condensed consolidated financial statements.

4

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	September 30,
	2013			2012
Cash Flows from Operating Activities
Net income	$	26,844		$	29,532
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property	3,431			3,022
Amortization of intangibles	3,249			3,055
Unrealized foreign exchange transactions gain	(291		)	(286		)
Amortization of stock options and appreciation rights	636			809
Loss (gain) on sale of property	35			(117		)
Other share-based compensation expense	754			1,035
Changes in assets and liabilities, net of acquisitions	(18,014		)	(13,456		)
Other, net	312			353
Net Cash provided by Operating Activities	16,956			23,947
Cash Flows from Investing Activities
Property purchases	(1,571		)	(3,892		)
Proceeds from property sales	183			243
Net cash paid for acquisition of businesses, net of cash acquired	—			(35,409		)
Net Cash used in Investing Activities	(1,388		)	(39,058		)
Cash Flows from Financing Activities
Purchases of treasury shares	(3,001		)	—
Dividends paid	(9,746		)	(8,867		)
Excess tax benefits from share-based compensation	1,516			1,168
Acquisition holdback payments	(606		)	(760		)
Exercise of stock options and appreciation rights	—			36
Net Cash used in Financing Activities	(11,837		)	(8,423		)
Effect of Exchange Rate Changes on Cash	(18		)	1,765
Increase (Decrease) in Cash and Cash Equivalents	3,713			(21,769		)
Cash and Cash Equivalents at Beginning of Period	73,164			78,442
Cash and Cash Equivalents at End of Period	$	76,877		$	56,673

See notes to condensed consolidated financial statements.

5

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Applied Industrial Technologies, Inc. (the “Company”, or “Applied”) as of September 30, 2013, and the results of its operations for the three month periods ended September 30, 2013 and 2012 and its cash flows for the three months ended September 30, 2013 and 2012, 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 month period ended September 30, 2013 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 $1.2 million of income for the month of June 2013 has been included within “Other (Income) Expense, net” on the Statement of Consolidated Income for the first quarter of fiscal 2014. The three months ended September 30, 2013 reflect the same results, had the financial statements been retrospectively adjusted, with the exception of net income which would have decreased $1.2 million. Net sales, operating income and net income for the three months ended September 30, 2012, would have decreased by $1.5 million, $0.8 million and $0.8 million respectively had the financial statements been retrospectively adjusted.

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.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2. GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill for the three month period ended September 30, 2013 are as follows:

	Service Center Based Distribution		Fluid Power Businesses		Total
Balance at July 1, 2013	$	105,920	$	929	$	106,849
Goodwill acquired during the period	—		—		—
Other, primarily currency translation	124		—		124
Balance at September 30, 2013	$	106,044	$	929	$	106,973

At September 30, 2013, accumulated goodwill impairment losses subsequent to fiscal year 2002, totaled $36,605 and related to the Fluid Power Businesses segment.

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

September 30, 2013	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	101,009	$	41,146	$	59,863
Trade names	26,436		8,987		17,449
Vendor relationships	15,352		5,684		9,668
Non-competition agreements	3,290		2,309		981
Total Intangibles	$	146,087	$	58,126	$	87,961

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

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

Estimated future amortization expense by fiscal year (based on the Company’s intangible assets as of September 30, 2013) is as follows: $9,700 for the remainder of 2014, $11,400 for 2015, $10,300 for 2016, $9,600 for 2017, $8,400 for 2018 and $7,500 for 2019.

7

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3. FAIR VALUE MEASUREMENTS

Marketable securities measured at fair value at September 30, 2013 and June 30, 2013 totaled $10,906 and $10,483, respectively. These marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the condensed consolidated balance sheets and their fair values were derived using quoted market prices (Level 1 in the fair value hierarchy).

4. SHAREHOLDERS' EQUITY

Accumulated Other Comprehensive Income (Loss)

Changes in the accumulated other comprehensive income (loss) for the three months ended September 30, 2013, is comprised of the following:

	Foreign currency translation adjustment		Unrealized gain (loss) on securities available for sale			Postemployment benefits			Total Accumulated other comprehensive income (loss)
Balance at July 1, 2013	$	360	$	(52	)	$	(3,729	)	$	(3,421	)
Other comprehensive income (loss)	550		23						573
Amounts reclassified from accumulated other comprehensive income (loss)						58			58
Net current-period other comprehensive income (loss), net of taxes	550		23			58			631
Balance at September 30, 2013	$	910	$	(29	)	$	(3,671	)	$	(2,790	)

Other Comprehensive Income (Loss)

Details of other comprehensive income (loss) are as follows:

	Three Months Ended September 30,
	2013						2012
	Pre-Tax Amount		Tax Expense (Benefit)		Net Amount		Pre-Tax Amount		Tax Expense (Benefit)		Net Amount
Foreign currency translation adjustments	$	550	$	—	$	550	$	9,001	$	—	$	9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs	95		37		58		218		85		133
Unrealized gain (loss) on investment securities available for sale	34		11		23		23		9		14
Other comprehensive income (loss)	$	679	$	48	$	631	$	9,242	$	94	$	9,148

Antidilutive Common Stock Equivalents

In the three month periods ended September 30, 2013 and 2012, stock options and stock appreciation rights related to the acquisition of 272 and 221 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive.

8

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.    BENEFIT PLANS

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

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended September 30,	2013			2012			2013			2012
Components of net periodic cost:
Service cost	$	19		$	19		$	12		$	20
Interest cost	295			315			35			47
Expected return on plan assets	(104		)	(101		)
Recognized net actuarial loss (gain)	153			184			(9		)	(13		)
Amortization of prior service cost	20			21			(68		)	27
Net periodic cost	$	383		$	438		$	(30	)	$	81

The Company contributed $5,108 to its pension benefit plans and $50 to its retiree health care plans in the three months ended September 30, 2013. Expected contributions for the remainder of fiscal 2014 are $1,600 for the pension benefit plans to fund scheduled retirement payments and $200 for retiree health care plans.

6. SEGMENT AND GEOGRAPHIC INFORMATION

The accounting policies of the Company’s reportable segments are generally the same as those used to prepare the condensed consolidated financial statements. Sales primarily from the Fluid Power Businesses segment to the Service Center Based Distribution segment of $5,533 and $3,735, in the three months ended September 30, 2013 and 2012, respectively, have been eliminated in the Segment Financial Information tables below.

Three Months Ended	Service Center Based Distribution		Fluid Power Businesses		Total
September 30, 2013
Net sales	$	492,072	$	113,233	$	605,305
Operating income for reportable segments	28,372		9,457		37,829
Assets used in business	841,770		208,319		1,050,089
Depreciation and amortization of property	2,999		432		3,431
Capital expenditures	1,394		177		1,571
September 30, 2012
Net sales	$	497,826	$	112,693	$	610,519
Operating income for reportable segments	33,720		10,536		44,256
Assets used in business	787,028		214,739		1,001,767
Depreciation and amortization of property	2,564		458		3,022
Capital expenditures	3,714		178		3,892

ERP related assets are included in assets used in business and capital expenditures within the Service Center Based Distribution segment. Within the geographic disclosures, these assets are included in the United States. Expenses associated with the ERP are included in Corporate and other expense (income), net, line in the reconciliation of operating income for reportable segments to the consolidated income before taxes table below.

9

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

	Three Months Ended
	September 30,
	2013			2012
Operating income for reportable segments	$	37,829		$	44,256
Adjustment for:
Intangible amortization—Service Center Based Distribution	1,495			1,223
Intangible amortization—Fluid Power Businesses	1,754			1,832
Corporate and other expense (income), net	(4,959		)	(3,117		)
Total operating income	39,539			44,318
Interest expense, net	61			25
Other (income) expense, net	(1,091		)	(459		)
Income before income taxes	$	40,569		$	44,752

The change in corporate and other expense (income), net is due to changes in the levels and amounts of expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.

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

	Three Months Ended
	September 30,
	2013		2012
Geographic Areas:
United States	$	501,051	$	499,536
Canada	69,747		74,211
Other countries	34,507		36,772
Total	$	605,305	$	610,519

Other countries consist of Mexico, Australia and New Zealand.

7. OTHER (INCOME) EXPENSE , NET

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

	Three Months Ended
	September 30,
	2013			2012
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(596	)	$	(441	)
Foreign currency transactions (gain) loss	605			(81		)
Elimination of one-month Canadian reporting lag effective July 1, 2013	(1,167		)	—
Other, net	67			63
Total other (income) expense, net	$	(1,091	)	$	(459	)

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Applied Industrial Technologies, Inc.

Cleveland, Ohio

We have reviewed the accompanying condensed consolidated balance sheet of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of September 30, 2013, and the related condensed statements of consolidated income, consolidated comprehensive income and consolidated cash flows for the three month periods ended September 30, 2013 and 2012. These interim financial statements are the responsibility of the Company’s management.

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

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of June 30, 2013, and the related statements of consolidated income, consolidated comprehensive income, consolidated shareholders’ equity, and consolidated cash flows for the year then ended (not presented herein); and in our report dated August 20, 2013, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 2013 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP         

Cleveland, Ohio

November 8, 2013

11

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

With more than 5,000 associates across North America, Australia and New Zealand, Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” or “Our”) is a leading industrial distributor serving MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) 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 our customers. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the first quarter of fiscal 2014, business was conducted in the United States, Canada, Mexico, Puerto Rico, Australia and New Zealand from 521 facilities.

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

Overview

Sales for the quarter ended September 30, 2013decreased $5.2 million or 0.9% compared to the prior year quarter including the impact of one additional sales day, with acquisitions contributing $18.3 million or 3.0% and an unfavorable foreign currency translation of $2.6 milliondecreasing sales by 0.4%. Operating margin decreased to 6.5% of sales from 7.3% for the prior year quarter, largely driven by increases in SD&A as a percentage of sales which were only slightly offset by increases in gross profit margin. Net income of $26.8 milliondecreased9.1% compared to the prior year quarter. Shareholders' equity was $774.6 million at September 30, 2013, up from the June 30, 2013 level of $759.6 million. The current ratio was 3.3 to 1 at September 30, 2013 and 3.0 to 1 at June 30, 2013.

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

In the September quarter, Industrial Production rose at an annual rate of 2.3%. The MCU for September was 76.1, down slightly from the June 2013 reading of 76.2. The ISM PMI averaged 56.2 in the September quarter, an improvement from 50.9 in the June quarter, and above 50 (its expansionary threshold).

The number of Company associates was 5,132 at September 30, 2013, 5,109 at June 30, 2013, and 4,868 at September 30, 2012. The number of operating facilities totaled 521 at September 30, 2013, 522 at June 30, 2013 and 517 at September 30, 2012.

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APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended September 30, 2013 and 2012

The following table is included to aid in review of Applied's condensed statements of consolidated income.

	Three Months Ended September 30,				Change in $'s Versus Prior Period % Increase
	As a Percent of Net Sales
	2013		2012
Net Sales	100.0	%	100.0	%	(0.9	)%
Gross Profit	28.1	%	26.9	%	3.2	%
Selling, Distribution & Administrative	21.5	%	19.7	%	8.4	%
Operating Income	6.5	%	7.3	%	(10.8	)%
Net Income	4.4	%	4.8	%	(9.1	)%

During the quarter ended September 30, 2013, sales decreased$5.2 million or 0.9% compared to the prior year quarter, with acquisitions accounting for $18.3 million or 3.0%, and foreign currency translation decreasing sales by $2.6 million or 0.4%. There were 64 selling days in the quarter ended September 30, 2013 versus 63 selling days in the quarter ended September 30, 2012.

Sales from our Service Center Based Distribution segment, which, operates primarily in MRO markets, decreased$5.8 million or 1.2% during the quarter from the same period in the prior year, attributed to slow downs in sales to certain sectors of the industrial economy, primarily mining. Acquisitions within this segment had a positive impact on sales of $16.3 million or 3.3%.

Sales from our Fluid Power Businesses segment, which operates primarily in OEM markets, increased$0.5 million or 0.5% during the quarter from the same period in the prior year, primarily attributed to improved sales within one customer group in one of our Fluid Power Businesses. Acquisitions within this segment has a positive impact on sales of $2.0 million or 1.8%.

Sales in our U.S. operations were up$1.5 million or 0.3% with acquisitions adding $9.8 million or 2.0%. Sales from our Canadian operations decreased$4.5 million or 6.0%, with acquisitions adding $2.4 million or 3.2% and an unfavorable foreign currency translation decreasing Canadian sales by $1.7 million or 2.3%. Consolidated sales from our other country operations, which include Mexico, Australia and New Zealand, were $2.3 million or 6.2%below the prior year, including a positive acquisition impact of $6.1 million or 16.7% and an unfavorable foreign currency translation decreasing other country sales by $0.9 million or 2.4%.

During the quarter ended September 30, 2013, industrial products and fluid power products accounted for 70.5% and 29.5%, respectively, of sales as compared to 72.1% and 27.9%, respectively, for the same period in the prior year.

Our gross profit margin for the quarter was 28.1%, as compared to the prior year's quarter of 26.9%. The increase in gross profit margin is attributed to our recent acquisitions which operate at higher gross profit margin levels.

Selling, distribution and administrative expense (SD&A) consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, legal, and facility related expenses. SD&A was 21.5% of sales in the quarter ended September 30, 2013 compared to 19.7% in the prior year quarter. On an absolute basis, SD&A increased$10.0 million or 8.4% compared to the prior year quarter. Contributing to the increase in SD&A were acquisitions representing a $7.1 million or 5.9% while one additional sales day added approximately $1.9 million or 1.6%, therefore core SD&A increased only $1.0 million or 0.8%.

Operating income decreased10.8% or $4.8 million, and as a percent of sales decreased to 6.5% from 7.3% during the prior year quarter. The quarterly decrease in operating income primarily reflects lower sales levels coupled with higher SD&A as compared to the prior year quarter. The decline in the operating margin percentage is driven by lower sales coupled with an increase in SD&A as a percentage of sales to 21.5% versus 19.7% in the prior year quarter.

13

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Operating income as a percentage of sales for the Service Center Based Distribution segment decreased to 5.8% in the current year quarter, from 6.8% in the prior year quarter. This decrease is primarily attributable to lower sales levels coupled with increases in SD&A, offset somewhat by an increase in gross profit margin. The impact of SD&A increases represent 1.8% of the decrease while increases in gross profit margin offset 0.8% of the decrease in operating income as a percentage of sales.

Operating income as a percentage of sales for the Fluid Power Businesses decreased to 8.4% in the current year quarter from 9.3% in the prior year quarter. The impact of SD&A increases represent 0.7% of the decrease coupled with decreases in gross profit margin which contributed 0.2% of the decrease in operating income as a percentage of sales.

Other income was $1.1 million in the quarter which included unrealized gains on investments held by non-qualified deferred compensation trusts of $0.6 million, net unfavorable foreign currency transaction losses of $0.6 million as well as $1.2 million in income from the elimination of the one-month Canadian reporting lag. During the prior year quarter other income was $0.5 million which included unrealized gains on investments held by non-qualified deferred compensation trusts of $0.4 million and net favorable foreign currency transaction gains of $0.1 million.

The effective income tax rate was 33.8% for the quarter ended September 30, 2013 compared to 34.0% for the quarter ended September 30, 2012. We expect our full year tax rate to be in the 34.0% to 34.5% range.

As a result of the factors addressed above, net income decreased$2.7 million or 9.1% compared to the prior year quarter. Net income per share was $0.63 per share for the quarter ended September 30, 2013, compared to $0.70 in the prior year quarter.

Liquidity and Capital Resources

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At September 30, 2013 and at September 30, 2012, we had no outstanding borrowings. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, cash provided from operations, and the use of operating leases will be sufficient to finance normal working capital needs in each of the countries we operate in, payment of dividends, acquisitions, investments in properties, facilities and equipment, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.

The Company holds, from time to time, relatively significant cash and cash equivalent balances outside of the United States of America. The following table shows the Company's total cash as of September 30, 2013 by geographic location.

Country	Amount
United Sates	$	27,822
Canada	45,543
Other Countries	3,512
Total	$	76,877

To the extent cash in foreign countries is distributed to the U.S., it could become subject to U.S. income taxes. Foreign tax credits may be available to offset all or a portion of such taxes. For financial reporting purposes, the Company has provided for $2.8 million of U.S. income taxes on approximately $11.0 million of undistributed earnings from Canada.

The Company's working capital at September 30, 2013 was $508.2 million, compared to $491.4 million at June 30, 2013. The current ratio was 3.3 to 1 at September 30, 2013 and 3.0 to 1 at June 30, 2013.

14

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Net Cash Flows

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

	Three Months Ended September 30,
Net Cash Provided by (Used in):	2013			2012
Operating Activities	$	16,956		$	23,947
Investing Activities	(1,388		)	(39,058		)
Financing Activities	(11,837		)	(8,423		)
Exchange Rate Effect	(18		)	1,765
Increase (Decrease) in Cash and Cash Equivalents	$	3,713		$	(21,769	)

Net cash provided by operating activities was $17.0 million for the three months ended September 30, 2013 as compared to $23.9 million for the same period a year ago. The decrease is primarily the result of decreases in net income of $2.7 million coupled with increases in the utilization of working capital of $4.6 million.

Net cash used in investing activities during the three months ended September 30, 2013 was $1.4 million; $1.6 million was used for capital expenditures which were partially offset by $0.2 million of proceeds from property sales. In the three months ended September 30, 2012, investing activities used $39.1 million including $35.4 million for acquisitions and $3.9 million for capital expenditures. These uses of cash were partially offset by $0.2 million of proceeds from property sales.

Net cash used in financing activities was $11.8 million for the three months ended September 30, 2013. Financing activities included $9.7 million used to pay dividends, $3.0 million used for the purchase of treasury shares, as well as $0.6 million for acquisition holdback payments, offset by $1.5 million from tax benefits from share based compensation. During the same period in the prior year, financing activities used $8.4 million of cash including $8.9 million used to pay dividends as well as $0.8 million for acquisition holdback payments, offset by $1.2 million from tax benefits from share based compensation.

ERP (Enterprise Resource Planning) Project

In the second quarter of 2011 Applied commenced its ERP (SAP) project to transform the Company's technology platforms and enhance its business information and technology systems for future growth. We have deployed our solution in a portion of our Canadian and U.S. operations. Deployments have continued in the first quarter with further deployments planned for the remainder of fiscal 2014. We expect to complete the U.S. deployment in fiscal 2014.

Share Repurchases

The Board of Directors has authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. We acquired 60,700 shares of treasury stock on the open market in the three months ended September 30, 2013 for $3.0 million. At September 30, 2013, we had authorization to repurchase an additional 1,080,800 shares. We did not acquire any shares of treasury stock in the three months ended September 30, 2012.

Borrowing Arrangements

The Company has a five-year committed revolving credit agreement that expires in May 2017. This agreement provides for unsecured borrowings of up to $150.0 million. We had no borrowings outstanding under our revolving credit agreements at September 30, 2013 or September 30, 2012. At September 30, 2013 unused lines under this facility, net of outstanding letters of credit, totaled $141.3 million and were available to fund future acquisitions or other capital and operating requirements. Borrowings under this agreement would be at variable interest rates tied to either LIBOR, prime, or the bank’s cost of funds.

We also have an uncommitted long-term financing shelf facility which expires in February 2016 and enables us to borrow up to $125.0 million with terms of up to fifteen years. At September 30, 2013 we had no outstanding borrowings under this facility.

15

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Accounts Receivable Analysis

The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable:

	September 30,			June 30,
	2013			2013
Accounts receivable, gross	$	327,863		$	337,617
Allowance for doubtful accounts	7,582			7,737
Accounts receivable, net	$	320,281		$	329,880
Allowance for doubtful accounts, % of gross receivables	2.3		%	2.3		%
	For the three months ended September 30,
	2013			2012
Provision for losses on accounts receivable	$	112		$	224
Provision as a % of net sales	0.02		%	0.04		%

Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's locations.

On a consolidated basis, DSO was 47.6 at September 30, 2013 versus 46.4 at June 30, 2013. Accounts receivable decreased2.9% this year, compared to a 0.9%decrease in sales in the three months ended September 30, 2013. We primarily attribute the increase in DSO to slower payments associated with large contract accounts.

Approximately 3.3% of our accounts receivable balances are more than 90 days past due. On an overall basis, our provision for losses from uncollected receivables represents 0.02% of our sales in the three months ended September 30, 2013. Historically, this percentage is around 0.12%. Management believes the overall receivables aging and provision for losses on uncollected receivables are at reasonable levels.

Inventory Analysis

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. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis and uses inventory valued at current costs. The annualized inventory turnover for the period ended September 30, 2013 was 3.9 versus 4.1 at June 30, 2013. We believe our inventory turnover ratio in fiscal 2014 will remain similar to the fiscal 2013 levels.

16

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

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

AND RESULTS OF OPERATIONS

Cautionary Statement Under Private Securities Litigation Reform Act

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

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

Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability, or changes in supplier distribution programs; the cost of products and energy and other operating costs; changes in customer preferences for products and services of the nature and brands sold by us; changes in customer procurement policies and practices; competitive pressures; our reliance on information systems; our ability to implement our ERP system in a timely, cost-effective, and competent manner, limiting disruption to our business, and to capture its planned benefits while maintaining an adequate internal control environment; the impact of economic conditions on the collectability of trade receivables; reduced demand for our products in targeted markets due to reasons including consolidation in customer industries and the transfer of manufacturing capacity to foreign countries; our ability to retain and attract qualified sales and customer service personnel and other skilled managers and professionals; our ability to identify and complete acquisitions, integrate them effectively, and realize their anticipated benefits; the variability and timing of new business opportunities including acquisitions, alliances, customer relationships, and supplier authorizations; the incurrence of debt and contingent liabilities in connection with acquisitions; our ability to access capital markets as needed on reasonable terms; disruption of operations at our headquarters or distribution centers; risks and uncertainties associated with our foreign operations, including volatile economic conditions, political instability, cultural and legal differences, and currency exchange fluctuations; the potential for goodwill and intangible asset impairment; changes in accounting policies and practices; organizational changes within the Company; the volatility of our stock price and the resulting impact on our consolidated financial statements; risks related to legal proceedings to which we are a party; adverse regulation and legislation, 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); and the occurrence of extraordinary events (including prolonged labor disputes, power outages, telecommunication outages, terrorist acts, earthquakes, extreme weather events, other natural disasters, fires, floods, and accidents). Other factors and unanticipated events could also adversely affect our business, financial condition or results of operations. We discuss certain of these matters more fully throughout our "Management's Discussion and Analysis" as well as other of our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended June 30, 2013 .

17

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk, see Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended June 30, 2013.

18

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 4: CONTROLS AND PROCEDURES

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

The Company has undertaken a multi-year ERP (SAP) project to transform the Company's technology platforms and enhance its business information and transaction systems with SAP enterprise resource planning software. The Company began to implement SAP in parts of its Canadian and U.S. businesses to support both accounting and operating activities. The implementation at operating locations is expected to continue through fiscal year 2014. All changes in the Company's key business applications and financial processes as a result of the continuing implementation of SAP are being evaluated by management. The Company is designing processes and internal controls to address changes in the Company's internal control over financial reporting as a result of the SAP implementation. This ongoing implementation presents transitional risks to maintaining adequate internal controls over financial reporting.

Other than as described above, management has not identified a change in internal control over financial reporting during the three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

19

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

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

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

Repurchases in the quarter ended September 30, 2013 were as follows:

Period	(a) Total Number of Shares	(b) Average Price Paid per Share ($)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)(2)
July 1, 2013 to July 31, 2013	0	—	0	1,141,500
August 1, 2013 to August 31, 2013	25,000	48.66	25,000	1,116,500
September 1, 2013 to September 30, 2013	35,700	49.97	35,700	1,080,800
Total	60,700	49.43	60,700	1,080,800

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

(2) During the quarter the Company purchased one hundred ninety-two shares in connection with the vesting of stock awards. This purchase is not counted in the authorization in note (1) above.

20

ITEM 6.    Exhibits

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to the Company’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference).
3.2	Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to the Company’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference).
4.1	Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference).
4.2	Private Shelf Agreement dated as of November 27, 1996, between the Company and Prudential Investment Management, Inc. (assignee of The Prudential Insurance Company of America), conformed to show all amendments (filed as Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended March 31, 2010, SEC File No. 1-2299, and incorporated here by reference).
4.3	Credit Agreement dated as of 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	Offer of Employment for Carl E. Will.
10.2	Severance Agreement for Carl E. Will.
10.3	Change in Control Agreement for Carl E. Will.
10.4	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).
15	Independent Registered Public Accounting Firm’s Awareness Letter.
18	Preferability letter from Independent Registered Public Accounting Firm Regarding Change in Accounting Principle.
31	Rule 13a-14(a)/15d-14(a) certifications.
32	Section 1350 certifications.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

21

SIGNATURES

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

		APPLIED INDUSTRIAL TECHNOLOGIES, INC.
		(Company)
Date:	November 8, 2013	By: /s/ Neil A.Schrimsher
		Neil A. Schrimsher
		Chief Executive Officer
Date:	November 8, 2013	By:/s/ Mark O. Eisele
		Mark O. Eisele
		Vice President-Chief Financial Officer & Treasurer

22

EX-10.1

EXHIBIT 10.1

June 27, 2013

Mr. Carl E. Will                    PERSONAL AND CONFIDENTIAL

[address redacted]

Re:     Offer of Employment: Chief Commercial Officer

Dear Carl:

On behalf of Applied Industrial Technologies, Inc. (“Applied”), I am pleased to present you with these proposed terms of your employment with Applied, commencing effective on July 22 or such earlier date in July as is determined by mutual agreement (the “Hire Date”):

1. Position. The Board of Directors will elect you Chief Commercial Officer. This is an executive officer position reporting directly to me.

2. Base Salary. As is the case with all Applied officers, compensation and benefits are set by the Board's Executive Organization & Compensation Committee (the “Committee”). Under current procedures, the Committee reviews annual base salaries in August, with any adjustment retroactive to July 1. Your starting annual base salary will be $400,000, and it is anticipated your next merit review would be effective July 1, 2014.

3. 2014 Annual Incentive. The Committee will designate you a participant in the Management Incentive Plan for the fiscal year ending June 30, 2014. The plan will provide for incentive payments based on the achievement of fiscal year goals, with payments, if any, distributed in August following the release of fiscal year-end audited financial results.

For fiscal 2014, your target incentive percentage will be 60% of your base salary, giving you a target incentive payment, if all target goals are met, of $240,000.

4. Long-Term Incentive Awards. You will be eligible for awards under Applied's Long-Term Performance Plan. Your targeted long-term incentive value for fiscal 2014 will be $400,000. In recent years, the Committee has awarded long-term incentive value to the executive officers through a combination of three-year performance shares, restricted stock units, and stock-settled stock appreciation rights. The programs are approved by the Committee annually, typically in August, and there is no guarantee that the long-term incentive vehicles or your targeted long-term incentive value will remain unchanged.

5. Severance Agreement. The Committee will provide you an executive severance agreement, which will provide you a severance benefit if your employment with Applied is terminated either by you “for good reason” or by Applied “without cause.” The executive severance agreement will expire on the first anniversary of the Hire Date. The benefit provided is an amount equal to your base salary for the lesser of six months or the period remaining until the first anniversary of the Hire Date.

6. Change in Control Agreement. You will also receive a change-in-control agreement. This agreement will provide that if, within two years following a change in control of Applied, your employment with Applied is terminated either by you “for good reason” or by Applied “without cause”, then you will receive a severance payment equal to one and one-half times your total compensation (base salary plus your targeted annual incentive pay), plus one and one-half years of continued benefits. You will not be entitled to payment under the executive severance agreement referenced in section 5, above, if you receive payment under the change in control agreement.

7. Key Executive Restoration Plan. You will be designated a participant in Applied's Key Executive Restoration Plan (the “KERP”). The plan is a non-qualified defined contribution arrangement under which Applied will contribute to a retirement account in your name (a) 8 percent of your calendar year pay (base salary plus annual incentive pay), minus (b) the amount of company contributions (both matching and profit sharing) made to the Retirement Savings Plan for the same period, as described below. Pursuant to the KERP, the account will vest 50% after three years of service, another 25% after four years, and will be fully vested after five years of service with Applied.

8. Other Executive Plans and Programs. As an Applied officer, you will be eligible to participate in the following executive plans and programs, during the periods such plans and programs are continued by Applied and as the same may be amended from time to time, on the same basis as other Applied officers:

a. Executive life insurance program;

b. Long-term disability program; and

c. Deferred Compensation Plan.

Neither a company car nor an automobile allowance is provided, but Applied will reimburse you for business mileage pursuant to company policy. Country club memberships are not included.

9. Vacation. Company policy currently provides officers five weeks' vacation per calendar year. For calendar 2013, your vacation eligibility will be prorated based on your Hire Date.

10. Other Associate Benefits. Among the normal benefits available to Applied employees are the following:

a. Health Care Program. We offer health care options currently administered by Anthem, and dental coverage administered by CIGNA. Because you become eligible for these benefits only after a waiting period, Applied will reimburse you for interim COBRA costs.

b. Retirement Savings Plan. Applied's section 401(k) plan provides for compensation deferral and a company match in Applied stock with respect to the first 6% of compensation deferred. A variety of investment options are available. The company match ranges from a minimum of 25% to a maximum of 100% per quarter based on Applied achieving certain net income hurdles. Applied also makes annual profit sharing contributions depending on Applied's profitability during the previous fiscal year. The company match and profit sharing contributions vest under the plan at the rate of 25% for each year of your employment with Applied.

c. Supplemental Defined Contribution Plan (the “Shadow Plan”). Highly compensated associates are eligible for the Shadow Plan, a non-qualified plan maintained in conjunction with the Retirement Savings Plan. The Shadow Plan provides you a vehicle for saving on a tax-deferred basis even if the tax laws limit the amount of contributions you can make to the Retirement Savings Plan.

11. Your Covenants.

a. Noncompetition Covenant. During your employment and the two-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree that you will not, directly or indirectly, with or through another individual or organization,

(i) whether as a shareholder (other than as the holder of less than 1% of the outstanding shares of a publicly held company), partner, member, director, officer, employee, agent or consultant, or in any other capacity, in competition with Applied or any of its affiliates, anywhere within the United States, Canada, Mexico, Australia, New Zealand, Singapore, or any other nation in which Applied or its affiliates hereafter conducts business, (a) distribute products that are the same or similar to products sold, designed, or distributed by Applied or any of its affiliates during the 12-month period preceding the date of termination of your relationships with Applied and its affiliates as an officer or employee, or (b) provide services that are the same or similar to services provided by Applied or any of its affiliates during the 12-month period preceding the date of termination of your relationships with Applied and its affiliates as an officer or employee; or

(ii) except with the prior written consent of Applied's Board of Directors, assume a position as a shareholder (other than as the holder of less than 1% of the outstanding shares of a publicly held company), partner, member, director, officer, employee, agent or consultant, or in any other capacity, with any of the following Applied product suppliers (or their affiliates): Baldor Electric, Eaton, Rexnord, SKF, and Timken.

b. Nonsolicitation Covenant. During your employment and the two-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree that you will not, directly or indirectly, with or through another individual or organization, induce, solicit or assist or facilitate the inducement or solicitation by any third person of

any employee, officer, agent, or representative of Applied to terminate his or her relationship with Applied or in any other way interfere with Applied's relationship with its employees, officers, agents, and representatives.

c. Confidential Information. During your employment and the five-year period following the date of termination of your relationships with Applied and its affiliates as an officer or employee, you covenant and agree to keep confidential and not disclose to others information relating to Applied or any of its affiliates, or their respective businesses, including, but not limited to, information regarding (i) customers or potential customers; (ii) vendors or suppliers; (iii) pricing structure and profit margins; (iv) business plans and strategies; (v) employees and payroll policies; (vi) computer systems; (vii) facilities or properties; and (viii) other proprietary, confidential or secret information relating to Applied or any of its affiliates (“Confidential Information”). You shall use all reasonable care to protect, and prevent unauthorized disclosure of, any Confidential Information unless such information (a) is now or becomes generally known or available to the public without any violation of this agreement; or (b) is required to be disclosed by applicable law or court or governmental order.

d. Remedies; Severability. You acknowledge that a breach of your covenants in this Section 11 would result in irreparable injury to Applied for which monetary damages alone would not be an adequate remedy. Therefore, you consent to the issuance of injunctive relief in the event of a breach of your covenants, in addition to any other remedies to which Applied may be entitled at law or in equity. In addition, if any provision of this Section 11 or the application of any provision to any person or circumstances shall be held to be excessively broad including without limitation, as to time, geographic area, or scope of activity, that provision shall be construed by limiting and reducing it so as to be enforceable to the maximum extent allowed by applicable law.

12. Your Representations. You represent to Applied that (a) entering into an employment relationship with Applied will not violate any provision of or result in a breach under any agreement to which you are a party or by which you are bound; (b) you are not a party to, or bound by, any agreement, understanding, covenant, policy, other arrangement, or fiduciary obligation, that would affect or limit your ability to provide services to, or to carry out your responsibilities with Applied, including without limitation any noncompetition, nonsolicitation, employment, consulting, or other agreement; and (c) you have not retained, nor will you use in connection with your employment with Applied, any proprietary or confidential information of any previous employer or other person or entity.

13. Other Conditions. This offer is contingent on Applied receiving (a) reports satisfactory to Applied regarding executive background and credit checks conducted on you and your submission to Applied's standard pre-hire drug test (which we will arrange to be taken at a facility near your home), and (b) your completed officer questionnaire satisfactory to Applied.

14. Miscellaneous. This offer letter shall be construed in accordance with the laws of the State of Ohio. Except as expressly provided herein, your employment shall be subject to all employment policies and procedures applicable to Applied associates generally. As with the other Applied officers, you will not have an employment agreement assuring continued employment. Officers serve at the will of the Board of Directors.

Carl, we are very excited about the contribution you can make to the company. We have exciting times ahead and a significant number of opportunities for success. In addition, I feel there are plenty of opportunities that will continue to challenge you in the years ahead. You have a great background that makes you well suited for this position at this important time in the company's history.

Please acknowledge your acceptance of our offer and your agreement to the matters set forth in this letter by signing and returning the enclosed extra copy of this letter. If you have any questions, please call me.

	Cordially,
	/s/ Neil A. Schrimsher
	Chief Executive Officer
Enclosure
I acknowledge, accept, and agree to this offer to commence employment.
Date: 6/27/2013	/s/ Carl E. Will
	Carl E. Will

EX-10.2

EXHIBIT 10.2

SEVERANCE AGREEMENT

Applied Industrial Technologies, Inc.

One Applied Plaza

Cleveland, Ohio 44115

August 13, 2013

Mr. Carl E. Will

[address redacted]

Dear Carl:

As a material inducement to you joining Applied Industrial Technologies, Inc. (the “Company”), the parties desire to set forth in this Severance Agreement (the “Agreement”) their mutual agreements concerning the terms and conditions of any severance benefits in the event your employment with the Company is terminated during the period ending on July 22, 2014 (the “Term”).

Nothing herein shall be construed to prevent either you or the Company from terminating your employment at any time, for cause or otherwise, subject only to the specific payment, if any, and other provisions hereinafter set forth in this Agreement.

1.Employment. The Company hereby agrees to employ you, and you agree to serve, as the Company’s Chief Commercial Officer during the Term. In the event your employment with the Company is terminated, the parties hereby agree that (a) you shall be entitled to severance payments from the Company only to the extent specifically provided for herein and (b) the Company’s obligation to make any severance payments to you hereunder shall be conditioned upon your satisfaction of all terms and conditions relating to such payment. Notwithstanding the foregoing, if your employment with the Company is terminated for any reason, you shall be entitled to payment of all compensation and benefits earned and fully vested through your Date of Termination (as hereinafter defined) in accordance with the terms of any plan, agreement or terms and conditions relating to such compensation or benefits and that no such amount shall be deemed to be a severance payment.

2.Severance Payment Amount.

(a)If your employment with the Company is terminated within the Term, either by you for Good Reason or by the Company Without Cause, you shall be entitled to a severance payment equal to your base salary for the lesser of (i) six months or (ii) the period from your Date of Termination through the end of the Term. You acknowledge that no severance payment shall be due under this Agreement to the extent you receive or are legally entitled to receive severance payments under any other agreement, plan or arrangement with the Company; provided, however, you may give notice to the Company of your election to decline severance payments hereunder in favor of severance payments under any other agreement, plan or arrangement with the Company or to accept severance payments hereunder and, thereby, decline severance payments under any other agreement, plan or arrangement with the Company.

(b)For purposes of this Agreement the term “Without Cause” shall mean termination of your employment for reasons other than your death, Retirement, Disability or Cause. For purposes of this Agreement, “Cause” shall mean:

(i)the willful and continued failure by you to perform substantially your duties with the Company or one of its affiliates (other than for Disability or Good Reason), after a written demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or

(ii)the willful engagement by you in illegal conduct or gross misconduct involving moral turpitude that is materially and demonstrably injurious to the Company.

For purposes of this Section 2(b), no act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without your reasonable belief that such action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given you pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company. Termination of your employment with the Company shall not be deemed to be for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, you are guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail;

(c)For purposes of this Agreement, “Good Reason” shall mean:

(i)a material diminution in your authority, duties, or responsibilities;

(ii)a material diminution in the authority, duties, or responsibilities of the person to whom you reported immediately prior to the Effective Date;

(iii)a material diminution by the Company of your annual base salary that was provided to you by the Company immediately prior to the Effective Date; or

(iv)a material change in the geographic location where you provide service to the Company.

provided that, for purposes of this Section 2(c), Good Reason shall be interpreted to comply with Treas. Reg. §1.409A-1(n)(2)(ii) and shall not have occurred unless you give the Company notice within 90 days of the initial existence of the condition claimed by you in good faith to constitute Good Reason and the Company has at least 30 days in which to remedy the condition and provided further that such separation from service occurs no later than six months after one or more of the conditions constituting “Good Reason” occurs. For purposes of this Agreement, “Good Reason” shall not exist if you have given your prior written consent to any of the events that would otherwise constitute “Good Reason”.

(d)For purposes of this Agreement, except in the case of death, your “Date of Termination” shall be the earlier of the date specified by either you or the Company in a written notice of termination to the other party hereto or the date that you incur a Separation from Service

for purposes of Section 409A of the Internal Revenue Code, as amended, and the regulations issued thereunder (“Section 409A”).

3.Form and Time of Severance Payment.

(a)Form of Severance Payment. Any severance payment made hereunder shall be paid in cash in a lump sum payment (or payments) at the time(s) provided in Section 3(b).

(b)Time of Payment(s).

(i)Specified Employee. In the event that on your Date of Termination you are a “specified employee” within the meaning of Section 409A (“Specified Employee”), the portion of your severance payment that does not exceed the amount specified in Treas. Reg. §1.409A-1(b)(9)(iii)(A) shall be paid within the first five business days following your Date of Termination and the remaining portion of your severance payment shall be made on the first day of the seventh calendar month following your Date of Termination. Each payment of your severance payment made hereunder shall be deemed to be a separate payment for purposes of applying the provisions of Section 409A.

(ii)Not Specified Employee. If you are not a Specified Employee on your Date of Termination, the Company will pay the amount described in Section 2(a) hereof within the first five business days following your Date of Termination.

(iii)Notwithstanding the foregoing, in the event that any portion of your severance benefit is not excluded from the definition of deferred compensation under Section 409A, such portion of your severance benefit shall begin to be paid in the later of the taxable year in which it would otherwise be payable under this Agreement or the taxable year required under Internal Revenue Service Notice 2010-80 (or subsequently issued guidance) regarding operational compliance with Section 409A.

4.No Mitigation Required. You shall not be required to mitigate the amount of any payment or benefit provided for in Section 2(a) by seeking other employment or otherwise.

5.Nonmerger of Restrictive Covenants. Regardless of whether any severance payment is payable to you pursuant to Section 2(a) of this Agreement, as a material inducement to the Company to enter into this Agreement, you specifically acknowledge that the covenants contained in Section 11 of your Offer of Employment executed as of June 27, 2013 (the “Offer of Employment”) shall survive termination of your employment and that no provision of any plan, agreement, award or other arrangement with the Company that contains covenants of a similar subject matter shall be deemed to amend, modify or terminate said covenants, except and solely to the extent specifically provided for by reference to such Section and Offer of Employment. In the event more than one plan, agreement, award or other arrangement with the Company contains covenants of a similar subject matter to those set forth in Section 11 of the Offer of Employment, the most favorable provisions to the Company of each such covenant, taken as a whole, shall govern.

6.Release of All Claims. The Company’s obligation to make any payment under Section 2(a) of this Agreement shall be conditioned upon your delivering, in a form reasonably satisfactory to the Company, a release of all claims or causes of action that may have arisen out of your employment or the termination of his employment, any transaction, or any state of facts existing on or prior to the Date of Termination, including, but not limited to, any and all claims and causes of action arising under any

severance plan, policy, or practice of the Company, against the Company or any of its affiliates, subsidiaries, successors, assigns, shareholders, employees, insurers, officers, directors, or agents, be they common law or statutory, legal or equitable, in contract or tort including claims under Title VII of the Civil Rights Act of 1964, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, the Uniformed Services Employment and Reemployment Rights Act, the Age Discrimination in Employment Act, the Fair Labor Standards, Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, the Americans With Disabilities Act, and the fair employment practices acts and all other employment laws of the various states arising out of or relating in any way to your employment with the Company or the termination of that employment.

7.Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

8.Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Except as otherwise provided herein, this Agreement constitutes the entire agreement between the Company and you with respect to the subject matter hereof and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to its conflict of laws provisions.

9.Validity. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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

11.Jurisdiction. In the event of any dispute or controversy arising under or in connection with this Agreement, you and the Company hereby irrevocably consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Cuyahoga County) or the United States District Court for the Northern District of Ohio.

12.Non‑Alienation. No benefit under this Agreement shall at any time be subject in any manner to alienation or encumbrance. If you attempt to, or shall, alienate or in any way encumber your rights or benefits under the Agreement, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by you, your interest in all such benefits shall automatically terminate and the same shall be

held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Company may select.

13.Taxes. The Company (or any agent of the Company) shall report all income required to be reported, and withhold from any payment under the Agreement the amount of withholding taxes due, in the opinion of the Company, in respect of such income or payment and shall take any other action as may be necessary, in the opinion of the Company, to satisfy all obligations for the reporting of such income and payment of such taxes. Except as specifically provided herein, the Company shall not be held liable for any taxes, penalties, interest, or other monetary amounts owed by a Participant or other person, including any taxes, penalties, and/or interest under Section 409A, as a result of the payment or deferral of any amounts under the Agreement. Although the Company shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under Section 409A, tax treatment of any payment under this Agreement is not warranted or guaranteed. The obligation of the Company shall constitute the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company.

[The balance of this page has been left blank intentionally]

If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of the letter which will then constitute our agreement on this subject.

	Very truly yours,
	APPLIED INDUSTRIAL TECHNOLOGIES, INC.
	By: /s/ Neil A. Schrimsher
	Date: August 13, 2013
ACCEPTED AND AGREED TO:
/s/ Carl E. Will CARL E. WILL

EX-10.3

EXHIBIT 10.3

CHANGE IN CONTROL AGREEMENT

Applied Industrial Technologies, Inc.

One Applied Plaza

Cleveland, Ohio 44115

August 13, 2013

Mr. Carl E. Will

[address redacted]

Dear Carl:

Applied Industrial Technologies, Inc. (the “Company”) considers it essential to the best interest of the Company and its shareholders that the Company’s management be encouraged to remain with the Company and to continue to devote their full attention to the Company’s business. The Company recognizes that the possibility of a change in control of the Company may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Company’s Board of Directors (the “Board”) has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company’s management, including you, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a change in control of the Company.

In order to induce you to remain in the employ of the Company until the termination of your employment in conjunction with a “Change in Control” of the Company (as defined in Section 2 hereof), this letter agreement (“Agreement”) sets forth the severance benefits that the Company agrees will be provided to you in the event your employment with the Company is terminated within the two year period immediately following any change in control of the Company either by you for “Good Reason” or by the Company “Without Cause” (both as defined in Section 3 hereof). In the event that a change in control of the Company does not occur, your severance benefits, if any, shall be determined without regard to this Agreement.

Nothing herein shall be construed so as to prevent either you or the Company from terminating your employment at any time, for cause or otherwise, subject only to the specific payment and other provisions hereinafter set forth in this Agreement in the event that a Change in Control of the Company occurs prior to the date your termination becomes effective. In addition, this Agreement shall be deemed terminated, and of no further force and effect, in the event that you cease to be a Board-elected officer or an appointed officer of the Company prior to a Change in Control. You hereby specifically acknowledge that your employment by the Company is employment-at-will, subject to termination by you, or by the Company, at any time with or without cause. You also acknowledge that such employment-at-will status cannot be modified except in a specific writing that has been authorized or ratified by the Board.

1. Continued Employment. The parties agree that you have advised the Company that, in consideration of, among other things, the Company’s entering into this Agreement with you, it is your present intention to remain in the employ of the Company unless and until there occurs a Change in Control.

2. Change in Control. No benefits shall be payable hereunder unless a Change in Control occurs and your employment with the Company is terminated within two years thereafter either by you for Good Reason or by the Company Without Cause. This Agreement is not intended to apply to termination of your employment by reason of Death, Disability or Retirement (as defined in Section 3 hereof). For purposes of this Agreement, a “Change in Control” of the Company shall mean:

(a) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction;

(b) The Company sells all or substantially all of its assets to any other corporation or other legal person, and, immediately after such sale, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale;

(c) There is a report filed or required to be filed on Schedule 13D or Schedule TO (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 30% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company (“Voting Stock”);

(d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or

(e) If during any period of two consecutive years, individuals who at the beginning of any such period are the directors of the Company cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this subparagraph (e), each director who is first elected, or first nominated for election by the Company’s shareholders, by a vote of at least two-thirds of the directors of the Company (or a committee thereof) then still in office who were directors of the Company at the beginning of any such period will be deemed to have been a director of the Company at the beginning of such period.

Notwithstanding the events specified in subparagraphs (c) and (d) above, unless otherwise determined in a specific case by majority vote of the Board, a “Change in Control” shall not be deemed to have occurred solely because (i) the Company, (ii) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities or interest, or (iii) any Company-sponsored

employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 30% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

The first date upon which a Change in Control takes place shall be known as the “Effective Date.” Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if your employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by you that such termination (i) was at the request of a third party who had taken steps reasonably calculated to effect a Change in Control or (ii) was by the Company and arose with or in anticipation of a Change in Control, then for all purposes of this Agreement, your employment shall be deemed to have been terminated by the Company Without Cause under Section 3(f) of this Agreement and the “Effective Date” shall mean the date immediately prior to the Date of Termination (as defined in Section 3 hereof).

3. Termination of Employment. Your employment with the Company shall or may be terminated, as the case may be, for any of the following reasons; provided that in each case such termination of employment constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations issued thereunder (“Separation from Service”):

(a)Death. Termination of your employment with the Company due to your death;

(b)Retirement. Termination of your employment with the Company at or after the attainment of age sixty-five (65);

(c)Disability. Termination of your employment with the Company either by you or the Company after you are physically or mentally incapacitated for a period of one hundred eighty (180) consecutive days such that you cannot substantially perform your duties of employment with the Company on a full-time basis;

(d)Cause. Termination of your employment with the Company at any time for Cause. For purposes of this Agreement, “Cause” shall mean:

(i)the willful and continued failure by you to perform substantially your duties with the Company or one of its affiliates (other than for Disability or Good Reason), after a written demand for substantial performance is delivered to you by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that you have not substantially performed your duties, or

(ii)the willful engagement by you in illegal conduct or gross misconduct involving moral turpitude that is materially and demonstrably injurious to the Company.

For purposes of this Section 3(d), no act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without your reasonable belief that such action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given you pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief

Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company. Termination of your employment with the Company shall not be deemed to be for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, you are guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail;

(e)(A)409A Good Reason. You may separate from service with the Company for 409A Good Reason, provided that the notice and cure requirements set forth below are satisfied and provided further that such separation from service occurs no later than two years after one or more of the conditions constituting “409A Good Reason” occurs. For purposes of this Agreement, “409A Good Reason” shall mean:

(i)a material diminution in your authority, duties, or responsibilities;

(ii)a material diminution in the authority, duties, or responsibilities of the person to whom you reported immediately prior to the Effective Date;

(iii)a material diminution by the Company of your annual base salary that was provided to you by the Company immediately prior to the Effective Date;

(iv)a material change in the geographic location where you provide service to the Company; or

(v)any failure by the Company to comply with and satisfy Section 11 of this Agreement;

provided that, for purposes of this Section 3(e), 409A Good Reason shall not have occurred unless you give the Company notice within 90 days of the initial existence of the condition claimed by you in good faith to constitute 409A Good Reason and the Company has at least 30 days in which to remedy the condition.

(B) Other Good Reason. You may terminate your employment with the Company for Other Good Reason. For purposes of this Agreement, “Other Good Reason” shall mean:

(i)the assignment of any duties inconsistent in any respect with your position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by you;

(ii)any failure by the Company to continue to provide you with an annual base salary, employee benefits and an opportunity to earn incentive and bonus compensation equal or greater to that which was provided to you by the Company immediately prior to the Effective Date other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after the receipt of notice thereof given by you;

(iii)the Company’s requiring you to be based at or generally work from any location other than the location that you were based at or generally worked from prior to the Effective Date or the Company’s requiring you to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; or

(iv)any failure by the Company to comply with and satisfy Section 11 of this Agreement.

For purposes of this Section 3(e)(B), your good faith determination of “Other Good Reason” shall be conclusive. You shall specify in your notice of separation from service with the Company under Section 3(e)(A) or termination of employment under Section 3(e)(B) whether your separation or termination is for 409A Good Reason or Other Good Reason. If you fail to specify whether your notice is given pursuant to Section 3(e)(A) or Section 3(e)(B), the Company will presume that the notice is given pursuant to Section 3(e)(B). Collectively, 409A Good Reason and Other Good Reason may be collectively referred to herein as “Good Reason.” For purposes of this Agreement, “Good Reason” shall not exist if you have given your prior written consent to any of the events that would otherwise constitute “Good Reason”.

(f)Without Cause. The Company may terminate your employment with the Company Without Cause. For purposes of this Agreement the term “Without Cause” shall mean termination of your employment for reasons other than for Death, Retirement, Disability or Cause. Notwithstanding any provision herein to the contrary, if, at any time prior to a Change in Control of the Company, you receive notice from the Company that you will be terminated Without Cause and will receive severance benefits under another arrangement between you and the Company, no benefits shall be payable to you hereunder.

(g)Date of Termination. Except in the case of Death, termination of your employment shall be effective as of the earlier of the date specified by either you or the Company in a written notice of termination (“Notice of Termination”) to the other party hereto or the date that you incur a Separation from Service (hereinafter referred to as the “Date of Termination”).

4. Severance Pay.

(a)Amount of Severance Pay. If a Change in Control of the Company occurs and within two years thereafter your employment with the Company is terminated either by you for Good Reason or by the Company Without Cause, then in addition to all other benefits which you have earned prior to such termination or to which you are otherwise entitled, the Company shall pay to you the following amounts:

(i)your full base salary earned through the Date of Termination at the rate in effect ten days prior to the date Notice of Termination is given, to the extent not theretofore paid;

(ii)an amount equal to the product of (A) the higher of your annual base salary in effect prior to the Effective Date or your annual base salary at the highest rate in effect at any time since any Change in Control of the Company (including any annual base salary amounts deferred under any non-qualified deferred compensation program of the Company and any elective contributions of annual base salary that are made by or on behalf of you under any plan maintained by the Company that are not includible in gross income under

Section 125 or 402(e) (3) of the Internal Revenue Code of 1986, as amended, but excluding moving or educational reimbursement expenses, amounts realized from the exercise of any stock options or stock appreciation rights (“SARs”) or the vesting of other equity awards, and imputed income attributable to any fringe benefit) and (B) the lesser of the number one-and-one-half (1½) or a fraction the numerator of which is the number of months from and including the month in which the Date of Termination occurs to and including the month in which you would attain the age sixty-five and the denominator of which is twelve;

(iii)in lieu of annual incentive compensation, commissions, and bonuses that would otherwise be payable, an amount equal to the product of (A) your target annual incentive compensation, commissions, and bonuses (excluding amounts realized from the exercise of any stock options or SARs or the vesting of other equity awards), based on the deemed achievement of performance goals at the 100% level, for the then-current fiscal year of the Company and (B) the lesser of the number one-and-one-half (1½) or a fraction the numerator of which is the number of months from and including the month in which the Date of Termination occurs to and including the month in which you would attain the age sixty-five and the denominator of which is twelve; and

(iv)in lieu of either shares of Common Stock of the Company, without par value (“Company Shares”) issuable upon exercise of options (“Options”) and Company Shares issuable pursuant to any SARs, if any, granted to you under any Company stock option or equity incentive plan (which Options or SARs shall be deemed canceled upon the making of the payment herein referred to), you shall receive an amount in cash equal to the aggregate spread between the exercise prices of all such Options and the aggregate value of such SARs that are outstanding and held by you that are then fully vested or exercisable and the mean of the high and low trading prices of Company Shares on the New York Stock Exchange on the Date of Termination;

provided, however, in the event it is determined that any payment or distribution to or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement or similar right (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then in lieu of such Payments, you shall be entitled to elect to receive the greatest amount of Payments to which you are entitled without triggering the Excise Tax and Applied will reasonably cooperate with you in designating those particular types of Payments (e.g., welfare benefits, cash compensation, or outplacement benefits) that shall be paid and those that shall be forfeited or rescinded so as to avoid triggering the Excise Tax.

(b)Form of Severance Payment. Severance amounts hereunder shall be paid in cash in a lump sum payment (or payments) at the time(s) provided in Section 4(c).

(c)Time of Payment(s).

(i)Specified Employee. If at the Date of Termination you are a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder (“Specified Employee”), no payment shall be made hereunder prior to the first day that is six months after the Date of Termination;

provided that the Specified Employee six-month delay under this Section 4(c)(i) shall be effective only to the extent that payment would constitute “nonqualified deferred compensation” under Section 409A of the Internal Revenue Code, as amended, and the regulations issued thereunder (“Section 409A”). Any lump sum payment that is subject to the Specified Employee six-month delay shall be paid within the first five business days after the expiration of such six-month delay. Any amount that is not “nonqualified deferred compensation” under Section 409A shall be paid within the first five business days after the Date of Termination. Notwithstanding any other provision of this Section 4(c)(i), any payment under paragraph (iii) of Section 4(a) shall not be paid before the later of (1) the first five business days after the Date of Termination, or (2) the expiration of the Specified Employee six-month delay, if applicable.

(ii)Not Specified Employee. If you are not a Specified Employee at the Date of Termination, the Company will pay the amounts described in Section 4(a) hereof within the first five business days following the Date of Termination.

(d)No Age or Service Credit. You shall not be entitled to any additional age or service credits under any of the Company’s employee benefit or retirement plans for any period after the Date of Termination of your employment.

5. Welfare Benefit Plans.

(a)If a Change in Control of the Company occurs and within two years thereafter your employment with the Company is terminated either by you for Good Reason or by the Company Without Cause, then, in all cases subject to Sections 5(b) and 5(c), the Company shall maintain in full force and effect, for the continued benefit of you and your dependents, medical-related employee benefit plans, programs and arrangements in which you were entitled to participate immediately prior to the Date of Termination for the lesser of (i) one-and-one-half (1½) years from the Date of Termination or (ii) that number of years equal to a fraction (A) the numerator of which is the number of months from and including the month in which the Date of Termination occurs to and including the month in which you would attain the age sixty-five and (B) the denominator of which is twelve; provided that your continued participation is possible under the general terms and provisions of such welfare plans, programs and arrangements. In the event that your participation in any such welfare plan, program or arrangement is barred, or any such plan, program or arrangement is discontinued or the benefits thereunder materially reduced, the Company shall arrange to provide you with benefits substantially similar to those which you were entitled to receive under such plans, programs and arrangements immediately prior to the Date of Termination.

(b)Notwithstanding the provisions of Section 5(a), to the extent that any welfare benefits involve reimbursements or in-kind benefits:

(i)The amount of expenses eligible for reimbursement and the provision of in-kind benefits during any calendar year shall not affect the amount of expenses eligible for reimbursement or the provision of in-kind benefits in any other calendar year;

(ii)The reimbursement of an eligible expense shall be made on or before December 31 of the calendar year following the calendar year in which the expense was incurred; and

(iii)The right to reimbursement or right to in-kind benefit shall not be subject to liquidation or exchange for another benefit.

(c)Notwithstanding the provisions of Section 5(a), if at the Date of Termination you are a Specified Employee, no benefits shall be provided hereunder prior to the first day that is six months after the Date of Termination; provided that the Specified Employee six-month delay under this Section 5(c) shall be effective only to the extent that benefits would constitute “nonqualified deferred compensation” under Section 409A. Any benefits subject to the Specified Employee six-month delay shall commence within the first five business days after the expiration of such six-month delay. Any benefits that are not “nonqualified deferred compensation” under Section 409A or not subject to the Specified Employee six-month delay shall commence within the first business day after the Date of Termination.

6. Outplacement Services. If a Change in Control of the Company occurs and within two years thereafter your employment with the Company is terminated either by you for Good Reason or by the Company Without Cause, then the Company shall provide you reasonable outplacement services for a period of up to one year of a nature customarily provided at your executive officer level.

7. No Mitigation Required. You shall not be required to mitigate the amount of any payment or benefit provided for in Section 4 or 5 by seeking other employment or otherwise. Notwithstanding the foregoing, benefits otherwise receivable under Section 5 of this Agreement shall be reduced to the extent that and for any period during which you receive substantially similar benefits from another employer.

8. Noncompetition, Nonsolicitation and Nondisparagement. If a Change in Control occurs and within two years thereafter your employment with the Company is terminated either by you for Good Reason or by the Company Without Cause, and you are receiving payments from the Company pursuant to this Agreement, then for a period of three years from the Date of Termination of your employment you agree that without the written consent of the Company, you will not, either directly or indirectly, (a) engage in, make any investment in, advise, assist or render any services to any person or entity in competition with the business of the Company or its subsidiaries, (b) solicit for employment or hire any individual who was employed by the Company or its subsidiaries at any time on or after that date which is six (6) months prior to the Date of Termination of your employment, or directly or indirectly, entice, solicit or seek to induce or influence any such individual to leave his or her employment, or (c) disparage the Company or its subsidiaries, or any of their respective directors, officers or associates, either publicly or privately, or otherwise make statements that cast any of the Company or its subsidiaries, or any of their respective directors, officers or associates, in an unfavorable light. Notwithstanding the foregoing, you may own less than one percent of the combined voting power of all issued and outstanding voting securities of any publicly held corporation whose stock is traded on a major stock exchange.

9. Confidential Information. You hereby agree that you shall not at any time (whether employed by the Company or not), either directly or indirectly, disclose or make known to any person or entity any confidential information, trade secret, or proprietary information that you acquired during the course of your employment with the Company which shall not have become public knowledge (other than by your actions in violation of this Agreement). You further agree that upon the termination of your employment with the Company or at any time upon the request of the Company you shall deliver to the Company any and all literature, documents, correspondence, and other materials and records furnished to or acquired by you from the Company during the course of your employment with the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to you under this Agreement.

10. Security. To secure payment of the benefits herein provided for, the Company agrees to maintain in the Company’s name an irrevocable escrow account in the form of an unfunded rabbi trust (the “Escrow Account”) at a national bank that is (a) a legal business entity organized and doing business under the laws of the United States or any State thereof, in good standing, having an office in the State of Ohio, that is authorized under such laws to exercise corporate trust powers and that has at the time of its appointment a combined capital and surplus of at least One Billion Dollars ($1,000,000,000) or (b) an affiliate of a national bank described in clause (a) of this sentence (the “Bank”), and to keep on deposit in the Escrow Account cash, securities or property with a fair market value, if any, as shall at all times be at least equal to the required security hereinafter provided for. The maximum amount of required security to be kept on deposit at any time shall be (A) an amount equal to three times your annualized Base Compensation (defined as your annual base salary and your target annual incentive compensation (based on achievement of performance goals at the 100% level)), with such amount to be recalculated each November to reflect changes in your annualized Base Compensation, or (B) if there has been a determination with your written consent or by a final arbitral award rendered in accordance with this Agreement that a specific lesser amount fully secures the Company’s obligations under this Agreement, or that the Company has fully performed its obligations under this Agreement, then such specific lesser amount or, in the case that the Company has fully performed its obligations under this Agreement, nothing. The full maximum amount of required security shall be kept on deposit at all times after there shall have been a Change in Control. Unless and until such a Change in Control shall have occurred, however, the Company shall only be obliged to maintain on deposit in the Escrow Account 50% of the maximum amount of required security. Amounts deposited in the Escrow Account shall be paid out by the Bank only to you, in such amounts as the Company shall certify in good faith to the Bank as amounts that the Company is in default in paying to you under this Agreement, or to the Company, to the extent that the amount on deposit exceeds the maximum amount of required security as specified by the Company in good faith to the Bank or in a final settlement or judgment relating to this Agreement.

11. Successors, Binding Agreement. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession that constitutes a Change in Control shall be a breach of this Agreement and shall entitle you to compensation from the Company, upon a termination by you for Other Good Reason in accordance with Section 3(e)(B), in the same amount and on the same terms as you would be entitled hereunder under Section 4. As used in this Agreement “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 11 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisees, legatees, or other designee or, if there be no such designee, to your estate within 90 days of your death; provided that where such 90-day period begins in one calendar year and ends in another calendar year, your devisees, legatees, other designee, or estate shall not be entitled to designate the taxable year of payment.

12. Continued Status as Elected Officer or Appointed Officer. Notwithstanding anything to the contrary elsewhere contained in this Agreement, if you cease to be a Board-elected officer or an

appointed officer of the Company prior to a Change in Control, this Agreement shall be deemed terminated and of no further force and effect.

13. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

14. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board; provided, that the Company shall have the right to terminate its obligations to you under this Agreement by written notice given to you at any time prior to a Change in Control, so long as such termination is not done in anticipation of or in connection with a Change in Control. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the Company and you with respect to the subject matter hereof and, except to the extent a specific compensation program provides for benefits upon a Change in Control relative to that program, which provisions shall remain in effect, no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. Without limiting the generality of the foregoing, this Agreement supersedes and replaces in its entirety any prior agreement relating to the subject matter hereof. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to its conflict of laws provisions.

15. Validity. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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

17. Jurisdiction. In the event of any dispute or controversy arising under or in connection with this Agreement, you and the Company hereby irrevocably consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Cuyahoga County) or the United States District Court for the Northern District of Ohio.

18. Legal Fees and Expenses.

(a)It is the intent of the Company that you shall not be required to incur the expenses associated with the enforcement of your rights under this Agreement by arbitration, litigation, other legal action or negotiation to resolve any disputes because the cost and expenses thereof would substantially detract from the benefits intended to be extended to you hereunder. Accordingly, if it should appear to you that the Company has failed to comply with any of its obligations under this Agreement or in the event the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any arbitration or litigation designed

to deny, or to recover from, you the benefits intended to be provided to you hereunder, the Company irrevocably authorizes you from time to time to retain counsel of your choice, at the expense of the Company, to represent you in connection with the initiation or defense of any arbitration, litigation, other legal action or negotiation to resolve any disputes whether by or against the Company or any director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to your entering into an attorney-client relationship with such counsel, and in that connection the Company and you agree that a confidential relationship shall exist between you and such counsel. The Company shall also pay or cause to be paid and shall be solely responsible for any and all attorneys’ and related fees and expenses incurred by you as a result of the Company’s failure to perform this Agreement or any provision hereof (including this Section 18) or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision hereof.

(b)The payment or reimbursement of fees and expenses under this Section 18 shall be subject to the following conditions:

(i)You must incur any expense authorized by this Section 18 no later than three years after the Date of Termination;

(ii)The amount eligible for reimbursement and the provision of in-kind benefits during any calendar year shall not affect the amount eligible for reimbursement or the provision of in-kind benefits in any other calendar year;

(iii)The reimbursement of an eligible expense shall be made on or before December 31 of the calendar year following the calendar year in which the expense was incurred; and

(iv)The right to reimbursement or right to in-kind benefit shall not be subject to liquidation or exchange for another benefit.

(c)Notwithstanding the provisions of this Section 18, if at the Date of Termination you are a Specified Employee, no payment or reimbursement shall be provided under Section 18 prior to the first day that is six months after the Date of Termination; provided that the Specified Employee six-month delay under this Section 18 shall be effective only to the extent that payment or reimbursement would constitute “nonqualified deferred compensation” under Section 409A. Any payment or reimbursement otherwise due under this Section 18 and subject to the Specified Employee six-month delay shall commence within the first five business days after the expiration of such six-month delay. Any payment or reimbursement that is not “nonqualified deferred compensation” under Section 409A or not subject to the Specified Employee six-month delay shall be paid or reimbursed as otherwise provided herein.

19. Non‑Alienation. No benefit under this Agreement shall at any time be subject in any manner to alienation or encumbrance. If you attempt to, or shall, alienate or in any way encumber your rights or benefits under the Agreement, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by you, your interest in all such benefits shall automatically terminate and the same shall be held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Company may select.

20. Taxes. The Company (or any agent of the Company) shall report all income required to be reported, and withhold from any payment under the Agreement the amount of withholding taxes due, in the opinion of the Company, in respect of such income or payment and shall take any other action as may be necessary, in the opinion of the Company, to satisfy all obligations for the reporting of such income and payment of such taxes. Except as specifically provided herein, the Company shall not be held liable for any taxes, penalties, interest, or other monetary amounts owed by a Participant or other person, including any taxes, penalties, and/or interest under Section 409A, as a result of the payment or deferral of any amounts under the Agreement. Although the Company shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under Section 409A, tax treatment of payment under this Agreement is not warranted or guaranteed.

21. This Agreement is intended to be treated as an unfunded deferred compensation arrangement under the Code. The obligation of the Company shall constitute the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company.

[The balance of this page has been left blank intentionally]

If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of the letter which will then constitute our agreement on this subject.

	Very truly yours,
	APPLIED INDUSTRIAL TECHNOLOGIES, INC.
	By:/s/ Neil A. Schrimsher
	Date: August 13, 2013
ACCEPTED AND AGREED TO:
/s/ Carl E. Will CARL E. WILL

EX-15

EXHIBIT 15

November 8, 2013

Applied Industrial Technologies, Inc.

One Applied Plaza

Euclid Avenue at East 36th Street

Cleveland, Ohio 44115

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Applied Industrial Technologies, Inc. and subsidiaries for the periods ended September 30, 2013 and 2012, as indicated in our report dated November 8, 2013; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, is incorporated by reference in Registration Statement Nos. 33-53401, 33-53361, 33-65509, 333-83809, 333-69002, 333-124574, 333-138053, 333-138054, 333-149183, and 333-179354 on Forms S-8.

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

/s/ Deloitte & Touche LLP

Cleveland, Ohio

EX-18

EXHIBIT 18

November 8, 2013

Applied Industrial Technologies, Inc.

1 Applied Plaza

Cleveland, OH 44115

Dear Sirs/Madams:

At your request, we have read the description included in your Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarter ended September 30, 2013, of the facts relating to the change in accounting principle related to the elimination of the one-month reporting lag for your Canadian subsidiary, Applied Industrial Technologies, LP. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of the Company, that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances.

We have not audited any consolidated financial statements of Applied Industrial Technologies, Inc. and its consolidated subsidiaries as of any date or for any period subsequent to June 30, 2013. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of the Company, or on the financial position, results of operations, or cash flows of Applied Industrial Technologies, Inc. and its consolidated subsidiaries as of any date or for any period subsequent to June 30, 2013.

Yours truly,

/s/ Deloitte & Touche LLP

Cleveland, OH

EX-31

EXHIBIT 31

Certifications of Disclosure in Quarterly Report on Form 10-Q

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

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

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

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

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

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

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

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

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (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: November 8, 2013	By: /s/ Neil A. Schrimsher
	Neil A. Schrimsher
	President and Chief Executive Officer

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

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

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

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

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

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

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

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

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (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: November 8, 2013	By: /s/ Mark O. Eisele
	Mark O. Eisele
	Vice President-Chief Financial Officer & Treasurer

EX-32

EXHIBIT 32

[The following certification accompanies Applied Industrial Technologies'

Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and is not filed, as provided in applicable SEC releases.]

Certification of Principal Executive Officer and

Principal Financial Officer Pursuant to

18 U.S.C. 1350

In connection with the Form 10-Q (the “Report”) of Applied Industrial Technologies, Inc. (the “Company”) for the period ending September 30, 2013, we, Neil A. Schrimsher, President and Chief Executive Officer, and Mark O. Eisele, Vice President-Chief Financial Officer & Treasurer of the Company, certify that:

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

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

/s/ Neil A. Schrimsher	/s/ Mark O. Eisele
Neil A.Schrimsher	Mark O. Eisele
President and Chief Executive Officer	Vice President-Chief Financial Officer & Treasurer
Date: November 8, 2013

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

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Benefit Plans (Tables)

3 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Net periodic costs

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

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended September 30,	2013			2012			2013			2012
Components of net periodic cost:
Service cost	$	19		$	19		$	12		$	20
Interest cost	295			315			35			47
Expected return on plan assets	(104		)	(101		)
Recognized net actuarial loss (gain)	153			184			(9		)	(13		)
Amortization of prior service cost	20			21			(68		)	27
Net periodic cost	$	383		$	438		$	(30	)	$	81

XML

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013
Current assets
Cash and cash equivalents	$ 76,877	$ 73,164
Accounts receivable, less allowances of $7,582 and $7,737	320,281	329,880
Inventories	302,404	281,417
Other current assets	34,174	52,819
Total current assets	733,736	737,280
Property, less accumulated depreciation of $160,592 and $157,506	81,149	83,243
Intangibles, net	87,961	91,267
Goodwill	106,973	106,849
Deferred tax assets	20,568	21,026
Other assets	19,702	19,041
TOTAL ASSETS	1,050,089	1,058,706
Current liabilities
Accounts payable	131,195	136,575
Compensation and related benefits	45,373	63,899
Other current liabilities	49,007	45,426
Total current liabilities	225,575	245,900
Postemployment benefits	25,340	30,919
Other liabilities	24,552	22,272
TOTAL LIABILITIES	275,467	299,091
Shareholders’ Equity
Preferred stock—no par value; 2,500 shares authorized; none issued or outstanding	0	0
Common stock—no par value; 80,000 shares authorized; 54,213 shares issued	10,000	10,000
Additional paid-in capital	154,492	153,893
Income retained for use in the business	841,448	824,362
Treasury shares—at cost (12,031 and 12,044 shares)	(228,528)	(225,219)
Accumulated other comprehensive income (loss)	(2,790)	(3,421)
TOTAL SHAREHOLDERS’ EQUITY	774,622	759,615
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 1,050,089	$ 1,058,706

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Shareholders' Equity

3 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

Accumulated Other Comprehensive Income (Loss)

Changes in the accumulated other comprehensive income (loss) for the three months ended September 30, 2013, is comprised of the following:

	Foreign currency translation adjustment		Unrealized gain (loss) on securities available for sale			Postemployment benefits			Total Accumulated other comprehensive income (loss)
Balance at July 1, 2013	$	360	$	(52	)	$	(3,729	)	$	(3,421	)
Other comprehensive income (loss)	550		23						573
Amounts reclassified from accumulated other comprehensive income (loss)						58			58
Net current-period other comprehensive income (loss), net of taxes	550		23			58			631
Balance at September 30, 2013	$	910	$	(29	)	$	(3,671	)	$	(2,790	)

Other Comprehensive Income (Loss)

Details of other comprehensive income (loss) are as follows:

	Three Months Ended September 30,
	2013						2012
	Pre-Tax Amount		Tax Expense (Benefit)		Net Amount		Pre-Tax Amount		Tax Expense (Benefit)		Net Amount
Foreign currency translation adjustments	$	550	$	—	$	550	$	9,001	$	—	$	9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs	95		37		58		218		85		133
Unrealized gain (loss) on investment securities available for sale	34		11		23		23		9		14
Other comprehensive income (loss)	$	679	$	48	$	631	$	9,242	$	94	$	9,148

Antidilutive Common Stock Equivalents

In the three month periods ended September 30, 2013 and 2012, stock options and stock appreciation rights related to the acquisition of 272 and 221 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive.

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Fair Value Measurements Fair Value Disclosures (Details) (Fair Value, Measurements, Recurring [Member], Fair Value, Inputs, Level 1 [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, Fair Value Disclosure	$ 10,906	$ 10,483

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Segment and Geographic Information (Tables)

3 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment financial information

Three Months Ended	Service Center Based Distribution		Fluid Power Businesses		Total
September 30, 2013
Net sales	$	492,072	$	113,233	$	605,305
Operating income for reportable segments	28,372		9,457		37,829
Assets used in business	841,770		208,319		1,050,089
Depreciation and amortization of property	2,999		432		3,431
Capital expenditures	1,394		177		1,571
September 30, 2012
Net sales	$	497,826	$	112,693	$	610,519
Operating income for reportable segments	33,720		10,536		44,256
Assets used in business	787,028		214,739		1,001,767
Depreciation and amortization of property	2,564		458		3,022
Capital expenditures	3,714		178		3,892

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

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

	Three Months Ended
	September 30,
	2013			2012
Operating income for reportable segments	$	37,829		$	44,256
Adjustment for:
Intangible amortization—Service Center Based Distribution	1,495			1,223
Intangible amortization—Fluid Power Businesses	1,754			1,832
Corporate and other expense (income), net	(4,959		)	(3,117		)
Total operating income	39,539			44,318
Interest expense, net	61			25
Other (income) expense, net	(1,091		)	(459		)
Income before income taxes	$	40,569		$	44,752

The change in corporate and other expense (income), net is due to changes in the levels and amounts of expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.

Net sales are presented in geographic areas

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

	Three Months Ended
	September 30,
	2013		2012
Geographic Areas:
United States	$	501,051	$	499,536
Canada	69,747		74,211
Other countries	34,507		36,772
Total	$	605,305	$	610,519

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Benefit Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Pension Benefits [Member]
Components of net periodic cost:
Service cost	$ 19	$ 19
Interest cost	295	315
Expected return on plan assets	(104)	(101)
Recognized net actuarial loss (gain)	153	184
Amortization of prior service cost	20	21
Net periodic cost	383	438
Retiree Health Care Benefits [Member]
Components of net periodic cost:
Service cost	12	20
Interest cost	35	47
Recognized net actuarial loss (gain)	(9)	(13)
Amortization of prior service cost	(68)	27
Net periodic cost	$ (30)	$ 81

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Shareholders' Equity (Details Textuals ) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Shareholders' Equity (Tables) [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	272	221
Other comprehensive income (loss):
Foreign currency translation adjustments, before Tax	$ 550	$ 9,001
Foreign currency translation adjustments, Tax	0	0
Foreign currency translation adjustments, Net of Tax	550	9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs, before Tax	95	218
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs, Tax	37	85
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs, Net Of Tax	58	133
Unrealized gain (loss) on investment securities available for sale, before Tax	34	23
Unrealized gain (loss) on investment securities available for sale, Tax	11	9
Unrealized gain (loss) on investment securities available for sale, Net of Tax	23	14
Other comprehensive income (loss), before Tax	679	9,242
Other comprehensive income (loss), Tax	48	94
Other comprehensive income (loss), net of tax	$ 631	$ 9,148

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Segment and Geographic Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Net sales are presented in geographic areas
Net Sales	$ 605,305	$ 610,519
United States [Member]
Net sales are presented in geographic areas
Net Sales	501,051	499,536
Canada [Member]
Net sales are presented in geographic areas
Net Sales	69,747	74,211
Other countries [Member]
Net sales are presented in geographic areas
Net Sales	$ 34,507	$ 36,772

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Shareholders' Equity Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Balance at June 30, 2013	$ (3,421)
Other Comprehensive Income (Loss), Unrealized gain (loss) on securities available for sale	23	14
Net current-period other comprehensive income (loss), net of taxes, Foreign currency translation adjustment	550	9,001
Net current-period other comprehensive income (loss), net of taxes, Total accumulated other comprehensive income (loss)	631	9,148
Balance at September 30, 2013	(2,790)
Foreign Currency Translation Adjustment [Member]
Balance at June 30, 2013	360
Other Comprehensive Income (Loss), Foreign currency translation adjustment	550
Amounts reclassified from accumulated other comprehensive income (loss)
Net current-period other comprehensive income (loss), net of taxes, Foreign currency translation adjustment	550
Balance at September 30, 2013	910
Unrealized gain (loss) on securities available for sale [Member]
Balance at June 30, 2013	(52)
Other Comprehensive Income (Loss), Unrealized gain (loss) on securities available for sale	23
Amounts reclassified from accumulated other comprehensive income (loss)
Net current-period other comprehensive income (loss), net of taxes, Unrealized gain (loss) on securities available for sale	23
Balance at September 30, 2013	(29)
Postemployment benefits [Member]
Balance at June 30, 2013	(3,729)
Other Comprehensive Income (Loss), Postemployment benefits,
Amounts reclassified from accumulated other comprehensive income (loss)	58
Net current-period other comprehensive income (loss), net of taxes, Postemployment benefits	58
Balance at September 30, 2013	(3,671)
Total accumulated other comprehensive income (loss) [Member]
Balance at June 30, 2013	(3,421)
Other Comprehensive Income (Loss), Total accumulated other comprehensive income (loss)	573
Amounts reclassified from accumulated other comprehensive income (loss)	58
Net current-period other comprehensive income (loss), net of taxes, Total accumulated other comprehensive income (loss)	631
Balance at September 30, 2013	$ (2,790)

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Condensed Statements of Consolidated Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows from Operating Activities
Net income	$ 26,844	$ 29,532
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property	3,431	3,022
Amortization of intangibles	3,249	3,055
Unrealized foreign exchange transactions gain	(291)	(286)
Amortization of stock options and appreciation rights	636	809
Loss (gain) on sale of property	35	(117)
Other share-based compensation expense	754	1,035
Changes in assets and liabilities, net of acquisitions	(18,014)	(13,456)
Other, net	312	353
Net Cash provided by Operating Activities	16,956	23,947
Cash Flows from Investing Activities
Property purchases	(1,571)	(3,892)
Proceeds from property sales	183	243
Net cash paid for acquisition of businesses, net of cash acquired	0	(35,409)
Net Cash used in Investing Activities	(1,388)	(39,058)
Cash Flows from Financing Activities
Purchases of treasury shares	(3,001)	0
Dividends paid	(9,746)	(8,867)
Excess tax benefits from share-based compensation	1,516	1,168
Acquisition holdback payments	(606)	(760)
Exercise of stock options and appreciation rights	0	36
Net Cash used in Financing Activities	(11,837)	(8,423)
Effect of Exchange Rate Changes on Cash	(18)	1,765
Increase (Decrease) in Cash and Cash Equivalents	3,713	(21,769)
Cash and Cash Equivalents at Beginning of Period	73,164	78,442
Cash and Cash Equivalents at End of Period	$ 76,877	$ 56,673

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Goodwill and Intangibles

3 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLES

GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill for the three month period ended September 30, 2013 are as follows:

	Service Center Based Distribution		Fluid Power Businesses		Total
Balance at July 1, 2013	$	105,920	$	929	$	106,849
Goodwill acquired during the period	—		—		—
Other, primarily currency translation	124		—		124
Balance at September 30, 2013	$	106,044	$	929	$	106,973

At September 30, 2013, accumulated goodwill impairment losses subsequent to fiscal year 2002, totaled $36,605 and related to the Fluid Power Businesses segment.

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

September 30, 2013	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	101,009	$	41,146	$	59,863
Trade names	26,436		8,987		17,449
Vendor relationships	15,352		5,684		9,668
Non-competition agreements	3,290		2,309		981
Total Intangibles	$	146,087	$	58,126	$	87,961

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

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

Estimated future amortization expense by fiscal year (based on the Company’s intangible assets as of September 30, 2013) is as follows: $9,700 for the remainder of 2014, $11,400 for 2015, $10,300 for 2016, $9,600 for 2017, $8,400 for 2018 and $7,500 for 2019.

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Benefit Plans

3 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

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

	Pension Benefits						Retiree Health Care Benefits
Three Months Ended September 30,	2013			2012			2013			2012
Components of net periodic cost:
Service cost	$	19		$	19		$	12		$	20
Interest cost	295			315			35			47
Expected return on plan assets	(104		)	(101		)
Recognized net actuarial loss (gain)	153			184			(9		)	(13		)
Amortization of prior service cost	20			21			(68		)	27
Net periodic cost	$	383		$	438		$	(30	)	$	81

The Company contributed $5,108 to its pension benefit plans and $50 to its retiree health care plans in the three months ended September 30, 2013. Expected contributions for the remainder of fiscal 2014 are $1,600 for the pension benefit plans to fund scheduled retirement payments and $200 for retiree health care plans.

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Fair Value Measurements

3 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Marketable securities measured at fair value at September 30, 2013 and June 30, 2013 totaled $10,906 and $10,483, respectively. These marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the condensed consolidated balance sheets and their fair values were derived using quoted market prices (Level 1 in the fair value hierarchy).

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Benefit Plans (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 30, 2013	Jun. 30, 2014
Pension Plans, Defined Benefit [Member]
Benefit Plans (Textuals) [Abstract]
Contribution to benefit plan	$ 5,108
Expected contribution to benefit plans for remainder of fiscal year		1,600
Retiree Health Care Benefits [Member]
Benefit Plans (Textuals) [Abstract]
Contribution to benefit plan	50
Expected contribution to benefit plans for remainder of fiscal year		$ 200

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Segment and Geographic Information (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Segment and Geographic Information (Textuals) [Abstract]
Sales primarily from businesses segment	$ 5,533	$ 3,735

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Condensed Statements of Consolidated Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Net income per the condensed statements of consolidated income	$ 26,844	$ 29,532
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	550	9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs	95	218
Unrealized gain (loss) on investment securities available for sale	34	23
Total of other comprehensive income (loss), before tax	679	9,242
Income tax expense related to items of other comprehensive income	48	94
Other comprehensive income (loss), net of tax	631	9,148
Comprehensive income, net of tax	$ 27,475	$ 38,680

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Basis of Presentation (Policies)

3 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

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 $1.2 million of income for the month of June 2013 has been included within “Other (Income) Expense, net” on the Statement of Consolidated Income for the first quarter of fiscal 2014. The three months ended September 30, 2013 reflect the same results, had the financial statements been retrospectively adjusted, with the exception of net income which would have decreased $1.2 million. Net sales, operating income and net income for the three months ended September 30, 2012, would have decreased by $1.5 million, $0.8 million and $0.8 million respectively had the financial statements been

Inventory

Inventory

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

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Condensed Consolidated Balance Sheets Parenthetical (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013
Accounts Receivable, allowances	$ 7,582	$ 7,737
Less accumulated depreciation	$ 160,592	$ 157,506
Preferred Stock, No Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	2,500,000	2,500,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares Authorized	80,000,000	80,000,000
Common Stock, Shares, Issued	54,213,000	54,213,000
Treasury Stock, Shares	12,031,000	12,044,000

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Condensed Statements of Consolidated Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Net Sales	$ 605,305	$ 610,519
Cost of Sales	435,510	445,986
Gross Profit	169,795	164,533
Selling, Distribution and Administrative, including depreciation	130,256	120,215
Operating Income	39,539	44,318
Interest Expense, net	61	25
Other (Income) Expense, net	(1,091)	(459)
Income Before Income Taxes	40,569	44,752
Income Tax Expense	13,725	15,220
Net Income	$ 26,844	$ 29,532
Net Income Per Share - Basic	$ 0.64	$ 0.70
Net Income Per Share - Diluted	$ 0.63	$ 0.70
Cash dividends per common share	$ 0.23	$ 0.21
Weighted average common shares outstanding for basic computation	42,157	41,966
Dilutive effect of potential common shares	480	511
Weighted average common shares outstanding for diluted computation	42,637	42,477

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Segment and Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013
Segment financial information
Net sales	$ 605,305	$ 610,519
Operating income for reportable segments	39,539	44,318
Assets used in business	1,050,089	1,001,767	1,058,706
Depreciation and amortization of property	3,431	3,022
Capital expenditures	1,571	3,892
Operating Segments [Member]
Segment financial information
Operating income for reportable segments	37,829	44,256
Assets used in business	1,050,089
Service Center Based Distribution [Member]
Segment financial information
Net sales	492,072	497,826
Operating income for reportable segments	28,372	33,720
Assets used in business	841,770	787,028
Depreciation and amortization of property	2,999	2,564
Capital expenditures	1,394	3,714
Fluid Power Businesses [Member]
Segment financial information
Net sales	113,233	112,693
Operating income for reportable segments	9,457	10,536
Assets used in business	208,319	214,739
Depreciation and amortization of property	432	458
Capital expenditures	$ 177	$ 178

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Goodwill and Intangibles (Details Textuals) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Goodwill and Intangibles (Textuals) [Abstract]
Amortization expense for the remainder of 2014	$ 9,700
Amortization expense for 2015	11,400
Amortization expense for 2016	10,300
Amortization expense for 2017	9,600
Amortization expense for 2018	8,400
Amortization expense for 2019	7,500
Fluid Power Businesses [Member]
Goodwill [Line Items]
Accumulated goodwill impairment losses	$ 36,605

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Other (Income) Expense, Net

3 Months Ended

Sep. 30, 2013

Other Income and Expenses [Abstract]

OTHER (INCOME) EXPENSE, NET

OTHER (INCOME) EXPENSE , NET

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

	Three Months Ended
	September 30,
	2013			2012
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(596	)	$	(441	)
Foreign currency transactions (gain) loss	605			(81		)
Elimination of one-month Canadian reporting lag effective July 1, 2013	(1,167		)	—
Other, net	67			63
Total other (income) expense, net	$	(1,091	)	$	(459	)

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Segment and Geographic Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income for reportable segments	$ 39,539	$ 44,318
Adjustment for:
Intangible amortization	3,249	3,055
Corporate and other expense (income), net	(4,959)	(3,117)
Interest Expense, net	61	25
Other (Income) Expense, net	(1,091)	(459)
Income before income taxes	40,569	44,752
Operating Segments [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income for reportable segments	37,829	44,256
Service Center Based Distribution [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income for reportable segments	28,372	33,720
Adjustment for:
Intangible amortization	1,495	1,223
Fluid Power Businesses [Member]
Reconciliation of operating income for reportable segments to the consolidated income before income taxes
Operating income for reportable segments	9,457	10,536
Adjustment for:
Intangible amortization	$ 1,754	$ 1,832

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Shareholders' Equity (Tables)

3 Months Ended

Sep. 30, 2013

Shareholders' Equity (Tables) [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Accumulated Other Comprehensive Income (Loss)

Changes in the accumulated other comprehensive income (loss) for the three months ended September 30, 2013, is comprised of the following:

	Foreign currency translation adjustment		Unrealized gain (loss) on securities available for sale			Postemployment benefits			Total Accumulated other comprehensive income (loss)
Balance at July 1, 2013	$	360	$	(52	)	$	(3,729	)	$	(3,421	)
Other comprehensive income (loss)	550		23						573
Amounts reclassified from accumulated other comprehensive income (loss)						58			58
Net current-period other comprehensive income (loss), net of taxes	550		23			58			631
Balance at September 30, 2013	$	910	$	(29	)	$	(3,671	)	$	(2,790	)

Schedule of Other Comprehensive Income (Loss) [Table Text Block]

Other Comprehensive Income (Loss)

Details of other comprehensive income (loss) are as follows:

	Three Months Ended September 30,
	2013						2012
	Pre-Tax Amount		Tax Expense (Benefit)		Net Amount		Pre-Tax Amount		Tax Expense (Benefit)		Net Amount
Foreign currency translation adjustments	$	550	$	—	$	550	$	9,001	$	—	$	9,001
Postemployment benefits:
Reclassification of actuarial losses and prior service cost into SD&A expense and included in net periodic pension costs	95		37		58		218		85		133
Unrealized gain (loss) on investment securities available for sale	34		11		23		23		9		14
Other comprehensive income (loss)	$	679	$	48	$	631	$	9,242	$	94	$	9,148

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Segment and Geographic Information

3 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

The accounting policies of the Company’s reportable segments are generally the same as those used to prepare the condensed consolidated financial statements. Sales primarily from the Fluid Power Businesses segment to the Service Center Based Distribution segment of $5,533 and $3,735, in the three months ended September 30, 2013 and 2012, respectively, have been eliminated in the Segment Financial Information tables below.

Three Months Ended	Service Center Based Distribution		Fluid Power Businesses		Total
September 30, 2013
Net sales	$	492,072	$	113,233	$	605,305
Operating income for reportable segments	28,372		9,457		37,829
Assets used in business	841,770		208,319		1,050,089
Depreciation and amortization of property	2,999		432		3,431
Capital expenditures	1,394		177		1,571
September 30, 2012
Net sales	$	497,826	$	112,693	$	610,519
Operating income for reportable segments	33,720		10,536		44,256
Assets used in business	787,028		214,739		1,001,767
Depreciation and amortization of property	2,564		458		3,022
Capital expenditures	3,714		178		3,892

ERP related assets are included in assets used in business and capital expenditures within the Service Center Based Distribution segment. Within the geographic disclosures, these assets are included in the United States. Expenses associated with the ERP are included in Corporate and other expense (income), net, line in the reconciliation of operating income for reportable segments to the consolidated income before taxes table below.

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

	Three Months Ended
	September 30,
	2013			2012
Operating income for reportable segments	$	37,829		$	44,256
Adjustment for:
Intangible amortization—Service Center Based Distribution	1,495			1,223
Intangible amortization—Fluid Power Businesses	1,754			1,832
Corporate and other expense (income), net	(4,959		)	(3,117		)
Total operating income	39,539			44,318
Interest expense, net	61			25
Other (income) expense, net	(1,091		)	(459		)
Income before income taxes	$	40,569		$	44,752

The change in corporate and other expense (income), net is due to changes in the levels and amounts of expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items.

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

	Three Months Ended
	September 30,
	2013		2012
Geographic Areas:
United States	$	501,051	$	499,536
Canada	69,747		74,211
Other countries	34,507		36,772
Total	$	605,305	$	610,519

Other countries consist of Mexico, Australia and New Zealand.

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Basis of Presentation

3 Months Ended

Sep. 30, 2013

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 September 30, 2013, and the results of its operations for the three month periods ended September 30, 2013 and 2012 and its cash flows for the three months ended September 30, 2013 and 2012, 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 month period ended September 30, 2013 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 $1.2 million of income for the month of June 2013 has been included within “Other (Income) Expense, net” on the Statement of Consolidated Income for the first quarter of fiscal 2014. The three months ended September 30, 2013 reflect the same results, had the financial statements been retrospectively adjusted, with the exception of net income which would have decreased $1.2 million. Net sales, operating income and net income for the three months ended September 30, 2012, would have decreased by $1.5 million, $0.8 million and $0.8 million respectively had the financial statements been retrospectively adjusted.

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.

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Other (Income) Expense, Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Other Income and Expenses [Abstract]
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$ (596)	$ (441)
Foreign currency transactions (gain) loss	605	(81)
Elimination of one-month Canadian reporting lag effective July 1, 2013	(1,167)
Other, net	67	63
Other (Income) Expense, net	$ (1,091)	$ (459)

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Other (Income) Expense, Net (Tables)

3 Months Ended

Sep. 30, 2013

Other Income and Expenses [Abstract]

Other expense (income), net

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

	Three Months Ended
	September 30,
	2013			2012
Unrealized (gain) loss on assets held in rabbi trust for a nonqualified deferred compensation plan	$	(596	)	$	(441	)
Foreign currency transactions (gain) loss	605			(81		)
Elimination of one-month Canadian reporting lag effective July 1, 2013	(1,167		)	—
Other, net	67			63
Total other (income) expense, net	$	(1,091	)	$	(459	)

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Goodwill and Intangibles (Tables)

3 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in the carrying amount of goodwill by reportable segment

The changes in the carrying amount of goodwill for the three month period ended September 30, 2013 are as follows:

	Service Center Based Distribution		Fluid Power Businesses		Total
Balance at July 1, 2013	$	105,920	$	929	$	106,849
Goodwill acquired during the period	—		—		—
Other, primarily currency translation	124		—		124
Balance at September 30, 2013	$	106,044	$	929	$	106,973

At September 30, 2013, accumulated goodwill impairment losses subsequent to fiscal year 2002, totaled $36,605 and related to the Fluid Power Businesses segment.

Schedule of Intangible Assets

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

September 30, 2013	Amount		Accumulated Amortization		Net Book Value
Finite-Lived Intangibles:
Customer relationships	$	101,009	$	41,146	$	59,863
Trade names	26,436		8,987		17,449
Vendor relationships	15,352		5,684		9,668
Non-competition agreements	3,290		2,309		981
Total Intangibles	$	146,087	$	58,126	$	87,961

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

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

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Goodwill and Intangibles (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013
Amortization details resulting from business combinations
Amount	$ 146,087	$ 147,720
Accumulated Amortization	58,126	56,453
Net Book Value	87,961	91,267
Customer relationships [Member]
Amortization details resulting from business combinations
Amount	101,009	100,854
Accumulated Amortization	41,146	38,844
Net Book Value	59,863	62,010
Trade Names [Member]
Amortization details resulting from business combinations
Amount	26,436	26,690
Accumulated Amortization	8,987	8,643
Net Book Value	17,449	18,047
Vendor Relationships [Member]
Amortization details resulting from business combinations
Amount	15,352	15,433
Accumulated Amortization	5,684	5,443
Net Book Value	9,668	9,990
Non-competition agreements [Member]
Amortization details resulting from business combinations
Amount	3,290	4,743
Accumulated Amortization	2,309	3,523
Net Book Value	$ 981	$ 1,220

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Basis of Presentation Change in Accounting Principle (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Income	$ 1,167
Sales Revenue, Net [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impact of Retrospective Adjustment	1,167	800
Net Sales Impact [Member] [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impact of Retrospective Adjustment		1,500
Operating Income Impact [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impact of Retrospective Adjustment		$ 800

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Document and Entity Information Document	3 Months Ended
	Sep. 30, 2013	Oct. 15, 2013
Document Information [Line Items]
Entity Registrant Name	APPLIED INDUSTRIAL TECHNOLOGIES INC
Entity Central Index Key	0000109563
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		42,164,870

XML

Goodwill and Intangibles (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013
Changes in the carrying amount of goodwill by reportable segment
Balance at July 1, 2013	$ 106,849
Goodwill acquired during the period	0
Other, primarily currency translation	124
Balance at September 30, 2013	106,973
Fluid Power Businesses [Member]
Changes in the carrying amount of goodwill by reportable segment
Balance at July 1, 2013	929
Other, primarily currency translation	0
Balance at September 30, 2013	929
Service Center Based Distribution Segment [Member]
Changes in the carrying amount of goodwill by reportable segment
Balance at July 1, 2013	105,920
Other, primarily currency translation	124
Balance at September 30, 2013	$ 106,044