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 9, 2011

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

OHIO	1-2299	34-0117420
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. 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.

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 (see General Instruction A.2. below):

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

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

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

¨ 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 9, 2011, Applied Industrial Technologies, Inc. (“Applied”) issued an earnings release related to its year-end and fourth quarter ended June 30, 2011. 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 – Press release of Applied Industrial Technologies, Inc. dated August 9, 2011.

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 9, 2011

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 9, 2011.

EX-99.1

Exhibit 99.1

Applied Industrial Technologies Reports

Record Sales and Earnings for

Fiscal 2011

CLEVELAND, Ohio, August 9, 2011 – Applied Industrial Technologies (NYSE: AIT) today reported results for its fourth quarter and fiscal 2011 year ended June 30, 2011.

Fiscal 2011 full-year sales were a record $2,212,849,000, up 16.9% from fiscal 2010 sales of $1,893,208,000. Net income for the year was a record $96,759,000, or $2.24 per share, compared with $65,903,000, or $1.54 per share in fiscal 2010, an increase in net income of 46.8%.

Quarterly performance also set new records with net sales for the fourth quarter of $589,861,000, up 12.8% from $523,071,000 in the prior-year quarter. Net income for the quarter was $28,275,000 or $0.65 per share, up 2.1% from $27,704,000 or $0.64 in the same quarter last year. Comparing 2011 fourth quarter net income to the same period last year, 2011 included $4.8 million of expense for the development of Applied’s new ERP system, an expense which did not occur in fiscal 2010. Additionally, last year’s fourth quarter net income was bolstered by a substantially higher LIFO layer liquidation benefit.

Commenting on results, Applied Chairman & Chief Executive Officer David L. Pugh said, “We had an excellent year, turning in our highest year-over-year percentage sales increase since 1998, and exceeding all expectations on net income. Our sales growth initiatives during the year were very effective and, combined with our attention to detail and our balanced approach to operating fundamentals, enabled us to generate strong earnings growth.

“For the second year in a row, our asset management efforts positioned us to record LIFO benefits and provided excellent cash flow. We ended the year debt free, which puts us in an excellent position to pursue accretive acquisitions.

“We have made good progress on our ERP implementation. We are on-time and on-budget as I would have expected given our advance planning and the level of oversight we have extended to the project.” Pugh continued, “First implementation with certain of our Canadian businesses is expected by calendar year end, and we will then roll it out to other North American businesses over the next two years. We fully expect that the new system will contribute to greater productivity, enhanced profitability, improved visibility, and more efficient overall operation of Applied’s business.

“Looking forward, we believe we’ll see continued improvement in our results, although at a slower pace than we have recently experienced due to tougher comparables and a weaker industrial economy. Based on these expectations, we are providing earnings per share guidance for fiscal 2012 in the range of $2.40 to $2.55, on expected sales of $2.35 billion to $2.45 billion.”

During the quarter, the Company purchased 46,800 shares of its common stock in open market transactions for $1.6 million. For the full fiscal year, purchases totaled 189,600 shares for $6.1 million. At June 30, 2011, the Company had remaining authorization to purchase 647,600 additional shares.

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 6908413. 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 1-888-843-7419 (for US/Canada callers) or 1-630-652-3042 (International) using passcode 6908413.

With approximately 470 facilities and 4,600 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, 2011, Applied posted sales of $2.2 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,” “believe,” “will,” “guidance,” 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

(In thousands, except per share data)

	Three Months Ended June 30,					Year Ended June 30,
	2011			2010		2011			2010
Net Sales	$	589,861		$	523,071	$	2,212,849		$	1,893,208
Cost of sales		420,719			370,054		1,599,739			1,377,486
		169,142			153,017		613,110			515,722
Selling, distribution and administrative, including depreciation		124,528			106,548		462,347			405,672
Operating Income		44,614			46,469		150,763			110,050
Interest expense, net		34			1,537		1,668			5,458
Other (income) expense, net		(384	)		217		(3,793	)		(425	)
Income Before Income Taxes		44,964			44,715		152,888			105,017
Income Tax Expense		16,689			17,011		56,129			39,114
Net Income	$	28,275		$	27,704	$	96,759		$	65,903
Net Income Per Share - Basic	$	0.67		$	0.65	$	2.28		$	1.56
Net Income Per Share - Diluted	$	0.65		$	0.64	$	2.24		$	1.54
Average Shares Outstanding - Basic		42,504			42,352		42,433			42,312
Average Shares Outstanding - Diluted		43,267			43,076		43,254			42,861

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.

During the quarter and year ended June 30, 2011, the Company recorded overall LIFO benefits of $2.8 million and $5.3 million, respectively and the LIFO reserves were reduced by the same amounts. These reductions resulted from some effective supplier price decreases in the first half of our fiscal year as well as LIFO layer liquidation benefits (of $9.6 million for the quarter and $12.3 million for the year) from certain inventory quantity levels decreasing. If inventory levels had remained constant, additional LIFO expense in the amount of the layer liquidation would have been recorded.

In the prior year, overall LIFO benefits were $16.2 million for the quarter and were $23.5 million for the year. These benefits resulted from decreases in inventory quantities which generated LIFO layer liquidation benefits of $23.1 million for the quarter and $42.7 million for the year to date.

(2) During the year end June 30, 2011, the Company received death benefits under two life insurance policies and realized a gain (included in other (income) expense, net) of $1.7 million.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

	June 30, 2011		June 30, 2010
Assets
Cash and cash equivalents	$	91,092	$	175,777
Accounts receivable, net of allowances of $7,016 and $6,379		290,751		246,402
Inventories		204,066		173,253
Other current assets		33,005		23,428
Total current assets		618,914		618,860
Property, net		69,014		58,471
Intangibles, net		89,551		85,916
Goodwill		76,981		63,405
Other assets		60,471		64,868
Total Assets	$	914,931	$	891,520
Liabilities
Accounts payable	$	108,509	$	94,529
Short-term debt				75,000
Other accrued liabilities		106,179		101,803
Total current liabilities		214,688		271,332
Other liabilities		66,680		65,149
Total Liabilities		281,368		336,481
Shareholders’ Equity		633,563		555,039
Total Liabilities and Shareholders’ Equity	$	914,931	$	891,520

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(In thousands)

	Year Ended June 30,
	2011			2010
Cash Flows from Operating Activities
Net income	$	96,759		$	65,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property		11,234			11,465
Amortization of intangibles		11,382			10,151
Amortization of stock options and appreciation rights		2,473			3,020
Gain on sale of property		(765	)		(198	)
Other share-based compensation		3,379			2,361
Changes in assets and liabilities, net of acquisitions		(54,433	)		86,710
Other, net		6,813			4,912
Net Cash provided by Operating Activities		76,842			184,324
Cash Flows from Investing Activities
Property purchases		(20,431	)		(7,216	)
Proceeds from property sales		1,326			532
Net cash paid for acquisition of businesses, net of cash acquired		(30,504	)		(100	)
Other		1,722
Net Cash used in Investing Activities		(47,887	)		(6,784	)
Cash Flows from Financing Activities
Repayments under revolving credit facility		(50,000	)		(5,000	)
Long-term debt repayments		(25,000	)
Purchases of treasury shares		(6,085	)		(3,929	)
Settlements of cross currency swap agreements		(12,752	)
Dividends paid		(29,751	)		(25,416	)
Excess tax benefits from share-based compensation		6,404			2,492
Exercise of stock options and appreciation rights		661			1,339
Net Cash used in Financing Activities		(116,523	)		(30,514	)
Effect of Exchange Rate Changes on Cash		2,883			1,109
(Decrease) increase in cash and cash equivalents		(84,685	)		148,135
Cash and cash equivalents at beginning of period		175,777			27,642
Cash and Cash Equivalents at End of Period	$	91,092		$	175,777