8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 10, 2010

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

OHIO	1-2299	34-0117420
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

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 or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On August 10, 2010, Applied Industrial Technologies, Inc. (“Applied”) issued an earnings release related to its year-end and fourth quarter ended June 30, 2010. The earnings release is attached as Exhibit 99.1 to this Report on Form 8-K.

The information in this Report on Form 8-K, including the Exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

Exhibit 99.1 — Earnings release of Applied Industrial Technologies, Inc. dated August 10, 2010.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. (Registrant)
By:	/s/ Fred D. Bauer
	Fred D. Bauer
	Vice President-General Counsel & Secretary

Date: August 10, 2010

EXHIBIT INDEX

Exhibit No.		Description
	99.1	The following exhibit is furnished with this Report on Form 8-K: Earnings release of Applied Industrial Technologies, Inc. dated August 10, 2010.

EX-99.1

EXHIBIT 99.1

Applied Industrial Technologies Reports

Fiscal 2010 Year-end and Fourth Quarter Results

CLEVELAND, Ohio, August 10, 2010 — Applied Industrial Technologies (NYSE: AIT) today reported results for its fourth quarter and fiscal 2010 year ended June 30, 2010.

Fiscal 2010 full-year sales were $1,893,208,000, down 1.6% from fiscal 2009 sales of $1,923,148,000. Net income for the year was $65,903,000 or $1.54 per share, compared to $42,260,000 or $0.99 per share in fiscal 2009, an increase in net income of 55.9%. Fiscal 2009 results included a non-cash goodwill impairment charge that reduced earnings by $0.54 per share. The charge was primarily associated with the August 2008 acquisition of Fluid Power Resource.

Net sales for the fourth quarter were $523,071,000, up 23.0% from prior year sales of $425,183,000 for the comparable period. Net income for the quarter was $27,704,000 or $0.64 per share, an improvement of 85% compared to last year’s fourth quarter adjusted to remove the impairment charge.

Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh said, “We began fiscal 2010 prepared for a tough industrial market. Our sales growth initiatives and operating disciplines helped us perform well during the first six months of the fiscal year despite ongoing weaknesses in the overall economy. We tightly managed expenses and assets which helped us take advantage of the significant sales increase we experienced in the second half as the economy improved. During the second half, and especially in the fourth quarter, our asset management efforts generated LIFO layer liquidation benefits that positively impacted our income statement.

“We are very pleased with our operating performance in fiscal 2010 and are looking forward to more improvement in fiscal 2011. Some industries such as housing are struggling. Manufacturing, which led the recovery, is relatively strong. While there is unusual uncertainty about where the industrial economy is headed over the next 12 months, we are still expecting growth in fiscal 2011. We expect earnings per share for fiscal 2011 to be in the range of $1.70 to $1.95, on expected sales of $2.05 billion to $2.25 billion.”

Applied will host its conference call for investors and analysts at 11 a.m. ET, today. The call will be conducted by Chairman & CEO David L. Pugh, President & COO Benjamin J. Mondics, and Vice President & CFO Mark O. Eisele. To join the call, dial 1-800-774-6070 (for US/Canada callers) or 1-630-691-2753 (for International callers) prior to the scheduled start using passcode 8221480. A live audio webcast can be accessed online at www.Applied.com. A replay of the call will be available for two weeks by dialing 1-888-843-8996 (for US/Canada callers) or 1-630-652-3044 (International) using passcode 8221480.

With approximately 460 facilities and 4,500 employee associates across North America, Applied Industrial Technologies is an industrial distributor that offers more than 4 million parts critical to the operations of MRO and OEM customers in virtually every industry. In addition, Applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber and fluid power shop services. Applied also offers maintenance training, plus solutions to meet inventory and storeroom management needs that help provide enhanced value to its customers. For its fiscal year ended June 30, 2010, Applied posted sales of $1.89 billion. Applied can be visited on the Internet at http://www.applied.com.

This press release contains statements that are forward-looking, as that term is defined by the Securities and Exchange Commission in its rules, regulations and releases. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are often identified by qualifiers such as “expect” and similar expressions. All forward-looking statements are based on current expectations regarding important risk factors including trends in the industrial sector of the economy, and other risk factors identified in Applied’s most recent periodic report and other filings made with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by Applied or any other person that the results expressed therein will be achieved. Applied assumes no obligation to update publicly or revise any forward-looking statements, whether due to new information, or events, or otherwise.

#####

For investor relations information, contact Mark O. Eisele, Vice President — Chief Financial Officer, at 216-426-4417. For corporate information, contact Richard C. Shaw, Vice President — Communications, at 216-426-4343.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Amounts in thousands, except per share data)

	Three Months Ended					Year Ended
	June 30,					June 30,
	2010		2009			2010			2009
Net Sales	$	523,071	$	425,183		$	1,893,208		$	1,923,148
Cost of sales		370,054		308,946			1,377,486			1,403,138
		153,017		116,237			515,722			520,010
Selling, distribution and administrative, including depreciation		106,548		94,340			405,672			410,912
Goodwill impairment				36,605						36,605
Operating Income (Loss)		46,469		(14,708	)		110,050			72,493
Interest expense, net		1,537		1,254			5,458			4,424
Other expense (income), net		217		(868	)		(425	)		2,255
Income (Loss) Before Income Taxes		44,715		(15,094	)		105,017			65,814
Income Tax Expense (Benefit)		17,011		(7,064	)		39,114			23,554
Net Income (Loss)	$	27,704	$	(8,030	)	$	65,903		$	42,260
Net Income (Loss) Per Share — Basic	$	0.65	$	(0.19	)	$	1.56		$	1.00
Net Income (Loss) Per Share — Diluted	$	0.64	$	(0.19	)	$	1.54		$	0.99
Average Shares Outstanding — Basic		42,352		42,272			42,312			42,287
Average Shares Outstanding — Diluted		43,124		42,768			42,917			42,794

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Applied uses the last-in, first-out (LIFO) method of valuing U.S. inventory. An actual valuation of inventory under the LIFO method can only be made 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.

Applied began a planned effort to reduce certain excess U.S. inventories in July of 2009 and continued the effort throughout fiscal 2010. These reductions resulted in the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years. As a result, a LIFO benefit reduced our cost of goods sold by $16.2 million in the fourth quarter and by $23.5 million for the year ended June 30, 2010, equating to a $0.23 and a $0.33 earnings per share benefit, respectively. The overall LIFO reserves were reduced by the same amounts.

If inventory levels had remained constant with the June 30, 2009 levels, instead of recording the benefit as described in the above paragraph, the Company would have recorded LIFO expense of $6.9 million in the three months and $19.2 million for the year ended June 30, 2010.

The overall impact of LIFO layer liquidations during the three months and year ended June 30, 2010, increased gross profit by $23.1 million and $42.7 million, respectively. LIFO layer liquidations recorded in fiscal 2009 increased gross profit by $4.4 million.

(2) In the fiscal 2009 fourth quarter, the Company recorded a non-cash impairment charge that decreased operating income by $36,605, net income by $23,000 and net income per share by $0.54.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

	June 30,		June 30,
	2010		2009
Assets
Cash and cash equivalents	$	175,777	$	27,642
Accounts receivable, net of allowances of $6,379 and $6,464		246,402		198,792
Inventories		173,253		254,690
Other current assets		23,428		44,470
Total current assets		618,860		525,594
Property, net		58,471		62,735
Intangibles, net		85,916		95,832
Goodwill		63,405		63,108
Other assets		64,868		62,059
Total Assets	$	891,520	$	809,328
Liabilities
Accounts payable	$	94,529	$	80,655
Short-term debt		75,000		5,000
Other accrued liabilities		101,803		70,901
Total current liabilities		271,332		156,556
Long-term debt				75,000
Other liabilities		65,149		69,670
Total Liabilities		336,481		301,226
Shareholders’ Equity		555,039		508,102
Total Liabilities and Shareholders’ Equity	$	891,520	$	809,328

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Amounts in thousands)

	Year Ended June 30,
	2010			2009
Cash Flows from Operating Activities
Net income	$	65,903		$	42,260
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill impairment					36,605
Depreciation		11,465			12,736
Amortization of intangibles		10,151			9,655
Amortization of stock options and appreciation rights		3,020			3,702
Gain on sale of property		(198	)		(320	)
Treasury shares contributed to employee benefit and deferred compensation plans and other share-based compensation		2,361			800
Changes in operating assets and liabilities, net of acquisitions		86,710			(12,836	)
Other, net		4,912			(11,302	)
Net Cash provided by Operating Activities		184,324			81,300
Cash Flows from Investing Activities
Property purchases		(7,216	)		(6,988	)
Proceeds from property sales		532			757
Net cash paid for acquisition of businesses, net of cash acquired		(100	)		(172,199	)
Net Cash used in Investing Activities		(6,784	)		(178,430	)
Cash Flows from Financing Activities
Net short-term (repayments) borrowings under revolving credit facility		(5,000	)		5,000
Borrowings under revolving credit facility classified as long-term					50,000
Purchases of treasury shares		(3,929	)		(1,210	)
Dividends paid		(25,416	)		(25,378	)
Excess tax benefits from share-based compensation		2,492			802
Exercise of stock options and appreciation rights		1,339			408
Other					(1,120	)
Net Cash provided by (used in) Financing Activities		(30,514	)		28,502
Effect of Exchange Rate Changes on Cash		1,109			(5,560	)
Increase (decrease) in cash and cash equivalents		148,135			(74,188	)
Cash and cash equivalents at beginning of period		27,642			101,830
Cash and Cash Equivalents at End of Period	$	175,777		$	27,642