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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2002
Commission File No. 1-2299
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-0117420
-------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Applied Plaza, Cleveland, Ohio 44115
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 426-4000.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, without par value New York Stock Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, computed by reference to the price at which
the common equity was sold as of the close of business on August 27, 2002:
$281,516,053.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 27, 2002
----- ------------------------------
Common Stock, without par value 19,171,924
DOCUMENTS INCORPORATED BY REFERENCE
Listed hereunder are the documents, portions of which are incorporated by
reference, and the Parts of this Form 10-K into which such portions are
incorporated:
(1) Applied Industrial Technologies, Inc. Annual Report to shareholders
for the fiscal year ended June 30, 2002, portions of which are
incorporated by reference into Parts I, II and IV of this
Form 10-K; and,
(2) Applied Industrial Technologies, Inc. Proxy Statement dated
September 16, 2002, portions of which are incorporated by
reference into Parts III and IV of this Form 10-K.
1
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CAUTIONARY STATEMENT
--------------------
UNDER PRIVATE SECURITIES LITIGATION REFORM ACT
----------------------------------------------
THIS REPORT, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE,
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 "EXPECT," "BELIEVE," "INTEND," "WILL," AND SIMILAR
EXPRESSIONS. APPLIED 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
APPLIED'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 APPLIED OR ANY OTHER PERSON THAT
THE RESULTS EXPRESSED IN THE STATEMENTS WILL BE ACHIEVED. IN ADDITION, APPLIED
ASSUMES NO OBLIGATION PUBLICLY TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER BECAUSE OF NEW INFORMATION OR EVENTS, OR OTHERWISE.
APPLIED BELIEVES ITS PRIMARY RISK FACTORS INCLUDE, BUT ARE NOT LIMITED
TO, THOSE IDENTIFIED IN "NARRATIVE DESCRIPTION OF BUSINESS," IN PART I, ITEM 1,
SECTION (c), BELOW, AND THE FOLLOWING: CHANGES IN THE ECONOMY OR IN SPECIFIC
CUSTOMER INDUSTRY SECTORS; REDUCTION IN MANUFACTURING CAPACITY IN OUR TARGETED
GEOGRAPHIC MARKETS DUE TO CONSOLIDATION IN CUSTOMER INDUSTRIES OR THE TRANSFER
OF MANUFACTURING CAPACITY TO FOREIGN COUNTRIES; CHANGES IN INTEREST RATES;
CHANGES IN CUSTOMER PROCUREMENT POLICIES AND PRACTICES; CHANGES IN PRODUCT
MANUFACTURER SALES POLICIES AND PRACTICES; THE AVAILABILITY OF PRODUCTS AND
LABOR; CHANGES IN OPERATING EXPENSES; THE EFFECT OF PRICE INCREASES OR
DECREASES; THE VARIABILITY AND TIMING OF BUSINESS OPPORTUNITIES INCLUDING
ACQUISITIONS, ALLIANCES, CUSTOMER AGREEMENTS, AND SUPPLIER AUTHORIZATIONS; OUR
ABILITY TO REALIZE THE ANTICIPATED BENEFITS OF ACQUISITIONS AND MARKETING AND
OTHER BUSINESS STRATEGIES, INCLUDING ELECTRONIC COMMERCE AND CATALOG
INITIATIVES; THE INCURRENCE OF ADDITIONAL DEBT AND CONTINGENT LIABILITIES IN
CONNECTION WITH ACQUISITIONS; CHANGES IN ACCOUNTING POLICIES AND PRACTICES; THE
EFFECT OF ORGANIZATIONAL CHANGES WITHIN THE COMPANY; THE EMERGENCE OF NEW
COMPETITORS, INCLUDING FIRMS WITH GREATER FINANCIAL RESOURCES; RISKS AND
UNCERTAINTIES ASSOCIATED WITH APPLIED'S EXPANSION INTO FOREIGN MARKETS,
INCLUDING INFLATION RATES, RECESSIONS, AND FOREIGN CURRENCY EXCHANGE RATES;
ADVERSE RESULTS IN SIGNIFICANT LITIGATION MATTERS; ADVERSE REGULATION AND
LEGISLATION; AND THE OCCURRENCE OF EXTRAORDINARY EVENTS (INCLUDING PROLONGED
LABOR DISPUTES, NATURAL EVENTS AND ACTS OF GOD, FIRES, FLOODS, AND ACCIDENTS).
- --------------------------------------------------------------------------------
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PART I.
ITEM 1. BUSINESS.
---------
In this Annual Report on Form 10-K, "Applied" refers to Applied
Industrial Technologies, Inc. References to "we," "us," "our," and "the company"
refer to Applied and its subsidiaries.
The company is one of North America's leading distributors of
industrial products and fluid power products and systems. In addition, we
provide fluid power, mechanical, electrical, and rubber shop services, as well
as material handling components and systems. We offer technical application
support for our products and provide creative solutions to help customers
minimize downtime and reduce overall procurement costs. Although we do not
generally manufacture the products we sell, we do assemble and repair certain
products and systems. Our sales are primarily in the maintenance and repair
operations (MRO) markets, to customers in a wide range of industries,
principally in North America. We also sell in original equipment manufacturing
(OEM) markets.
Applied and its predecessor companies have been engaged in this
business since 1923. Applied was incorporated in Delaware in 1928 and
reincorporated in Ohio in 1988.
(a) General Development of Business.
--------------------------------
The company expanded its presence in Mexico through the October 2001
acquisition of Baleros Industriales, S.A. de C.V. The acquired company has been
integrated with the operations of our Applied Mexico subsidiary.
We also launched the 450-page Fluid Power Connection(TM) catalog of
hydraulic and pneumatic components, including air preparation components,
pneumatic cylinders and valves, fluid connectors, and hydraulic power units,
pumps, motors, brakes, gearboxes, filtration components, and cylinders.
Further information regarding developments in our business can be found
in our 2002 Annual Report to shareholders under the caption "Management's
Discussion and Analysis" on pages 10 through 13, which is incorporated here by
reference.
(b) Financial Information about Segments.
-------------------------------------
We have identified only one reportable business segment, service
center-based distribution. This business provides customers with solutions to
their maintenance, repair, and original equipment manufacturing needs by
distributing, through our service center network, bearings and seals, linear
motion products, power transmission products, fluid power products, industrial
rubber products, general maintenance products, and related specialty items. We
also offer technical product application support and provide creative solutions
to help customers minimize downtime and reduce overall procurement costs.
3
In addition to service center-based distribution, we operate several
smaller businesses that primarily sell their products and services directly to
customers rather than through the service centers. These operations include
specialized fluid power companies and the Engineered Systems and Automation
Division.
Segment financial information can be found in the 2002 Annual Report to
shareholders in note 11 to the financial statements on pages 25 and 26, and that
information is incorporated here by reference.
(c) Narrative Description of Business.
----------------------------------
Overview. Our service centers, located in 47 states, five western
Canadian provinces, Puerto Rico, and Mexico, serve as our primary business
channel. As noted in "Financial Information about Segments," above, we also own
other operations that sell products and services directly to customers rather
than through the service centers.
Our U.S. operating structure is built around two platforms - industrial
products, and fluid power products and systems. The structure divides our U.S.
field operations into two primary business units:
- Industrial Products Unit. This unit includes all of the domestic
service centers, through which we distribute bearings and seals,
linear motion products, power transmission products, fluid power
components, industrial rubber products, general maintenance
products, and related specialty items, primarily for maintenance
and repair applications. In addition, the Industrial Products Unit
includes the company's regional fabricated rubber shops, which
modify and repair conveyor belts and provide hose assemblies in
accordance with customer requirements, and field crews that
perform belt and rubber lining installation and repair services at
customer locations. The Industrial Products Unit accounts for a
substantial majority of our field operations and sales dollars.
- Fluid Power Unit. This unit includes our specialized fluid power
businesses, which market their products and services directly to
customers rather than through the service center network. In
addition to distributing fluid power components, the businesses
operate shops that assemble fluid power systems and components,
perform equipment repair, and offer technical advice to customers.
Customers include businesses purchasing for maintenance and repair
applications, as well as for original equipment manufacturing
applications. The Fluid Power Unit operates in various geographic
areas throughout the United States under the following names: Air
and Hydraulics Engineering (Southeast), Air Draulics Engineering
(Mississippi Valley), Dees Fluid Power (Mid-Atlantic and
Northeast), Elect-Air (West Coast), Engineered Sales (Midwest),
ESI Power Hydraulics (Midwest), and Kent Fluid Power (West Coast).
4
In addition to the foregoing, we operate other businesses within
separate organizational structures. Among these businesses are the following:
- Our Canadian subsidiary, Applied Industrial Technologies Ltd.,
which operates service centers and shops in five western Canadian
provinces under the names Bearing & Transmission, HyPower, and B&T
Rubber.
- Our majority-owned Mexican subsidiary, Applied Mexico, S.A. de
C.V., with five service centers in Mexico, four of which operate
under the name Baleros Industriales.
- Our Puerto Rican subsidiary, Rafael Benitez Carrillo, Inc., which
operates three service centers.
- The Engineered Systems and Automation Division, which offers
electrical and mechanical design, fabrication, installation, and
support services, primarily in the U.S.
Products. We are one of North America's leading distributors of
industrial and fluid power products and systems. Industrial products include
bearings and seals, linear motion products, power transmission products,
industrial rubber products, general maintenance products, and related specialty
items. Fluid power products include hydraulic, pneumatic, lubrication, and
filtration components and systems.
These products are generally manufactured by other companies for whom
we serve as a non-exclusive distributor. In addition to products, our supplier
relationships offer access to technical product training, as well as sales and
marketing support. We believe that these relationships are generally good. The
loss of certain suppliers could have an adverse effect on our business.
Authorizations to represent suppliers may vary by geographic region.
Net sales by product category for the past three fiscal years can be
found in the 2002 Annual Report to shareholders in note 11 to the financial
statements on page 26, and that information is incorporated here by reference.
Services. Our service center associates advise and assist customers
with respect to product selection and application. We consider this advice and
assistance to be an integral part of our sales efforts. Beyond acting as a mere
distributor, we offer product and process solutions involving multiple
technologies. These solutions reduce production downtime, as well as overall
procurement and maintenance costs for customers. By providing high levels of
service, product and industry expertise, and technical support, while at the
same time offering competitive pricing, we believe we develop closer,
longer-lasting, and more profitable customer relationships.
Our sales associates include customer service representatives and
account managers, as well as product and industry specialists. Customer service
representatives receive, process, and expedite customer orders, provide product
and pricing information, and assist account managers in serving customers.
Account managers make on-site calls to current and potential customers to
provide product and price information, identify customer requirements, provide
recommendations, and assist in implementing equipment maintenance and storeroom
management programs, including our AppliedStore(R) storeroom replenishment
system. Using our Documented Value Added(R) software
5
program, account managers measure and document the value to the customer,
through cost savings and/or increased productivity, of our services and
recommendations. Product and industry specialists assist with applications in
their areas of technical expertise. We also have call centers for specific
product groups, staffed by technicians who provide consulting and training
services.
We maintain inventory levels at each service center tailored to the
local market it serves. These inventories consist of standard items as well as
other items that are specific to local customers' immediate needs. We also
maintain back-up inventory in nine distribution centers that directly support
our service center network and customer needs. The inventory maintained at our
facilities allows us to satisfy the just-in-time industrial product needs of our
customers.
In addition to product distribution-related services, we offer shop
services to customers. Our fabricated rubber shops modify and repair conveyor
belts and provide hose assemblies (also available at select service centers) in
accordance with customer requirements. Rubber service field crews perform belt
and rubber lining installation and repair services at customer locations in
certain geographic areas. We also offer, through an alliance with an outside
provider, mechanical shop services, including rebuilding and assembly of speed
reducers, pumps, valves, cylinders, and hydraulic motors, and custom machining.
Timely delivery of products to customers is an integral part of our
service. Service centers and distribution centers use the most effective method
of transportation available to meet customer needs, including our own delivery
vehicles, dedicated third-party logistics providers, as well as both surface and
air common carrier and courier services. These transportation services and
delivery vehicles also move products between suppliers, distribution centers,
and service centers to assure availability of merchandise for customer needs.
Our inventory and sales information systems enhance our ability to
serve customers. The point-of-sale OMNEX(R) computer system, on which U.S.
service centers operate, gives each service center on-line access to inventory
and sales history information. The system permits direct access for order entry,
pricing, order expediting, and order review. We also engage in electronic data
interchange (EDI) and electronic funds transfer (EFT) with participating
customers and suppliers.
We support our service center network with website and paper catalog
marketing channels. AppliedAccess(R) (www.applied-access.com) is our broad line
website, providing customers a convenient method to search for products in a
vast electronic database, view prices, check inventory levels, place orders, and
track order status. Our Maintenance America(R) specialty product catalog and
website (www.maintenanceamerica.com) facilitate the ordering of specialty
products used by maintenance professionals. And in fiscal 2002, we launched the
Fluid Power Connection(TM) catalog of hydraulic and pneumatic components and a
related website (www.fluidpowerconnection.com) to facilitate the ordering of
these products from our service centers.
The Fluid Power Unit businesses operate independently of the service
centers, but as product distributors, share the same focus on customer service.
Product and application recommendations, inventory availability, and delivery
speed are all key to the fluid power businesses' success. The
6
businesses distinguish themselves, though, from most component distributors by
also offering engineering, design, fabrication, and installation services. Each
business has account managers with extensive technical knowledge, who handle
sophisticated projects for customers primarily within the business' geographic
region.
Our operations contrast with those of our product manufacturers because
the manufacturers generally confine their direct sales activities to
large-volume transactions with original equipment manufacturers, which
incorporate the components purchased into the products they make. The
manufacturers generally do not sell replacement components directly to the
customer but instead refer the customer to us or another distributor. There is
no assurance that this practice will continue, however, and any discontinuance
of this practice could have an adverse effect on our business.
Markets and Methods of Distribution. We purchase from several thousand
product manufacturers and resell the products to customers in a wide variety of
industries, including agriculture and food processing, automotive, chemical
processing, forest products, industrial machinery and equipment, mining, primary
metals, transportation, and utilities. Customers range from the largest
industrial concerns in North America to the smallest. We are not significantly
dependent on a single customer or group of customers, the loss of which would
have a material adverse effect on our business as a whole, and no single
customer accounts for more than 4% of our net sales.
We have witnessed continued consolidation in recent years in various
customer industries. In addition, we continue to observe instances of
manufacturing capacity being transferred to foreign countries. Each of these
trends could result in reduced manufacturing capacity in our targeted geographic
markets and, consequently, reduced demand for our products and services in those
markets.
In recent years, there has been a trend among large industrial
customers towards reducing the number of their suppliers of maintenance and
replacement products. We have responded to this trend by expanding our
geographic reach, broadening our product offering, and developing new methods
for marketing our products. There can be no guarantee, however, that this trend
will not have an adverse effect on our business.
Customers have also increasingly demonstrated a desire to order
products through electronic catalogs and Internet-based procurement systems. We
have responded to this trend by developing avenues, such as the AppliedAccess(R)
website, described above, to provide customers the flexibility to order through
their preferred procurement method.
Some customers have turned to e-commerce software providers and
Internet marketplaces to facilitate purchases from multiple suppliers through
one electronic interface. We believe that our product and services offerings,
geographic breadth, and related immediate and accurate product fulfillment
capabilities position us to grow our market share through relationships with
selected e-commerce companies. On the other hand, it is possible that emerging
electronic procurement models may tend to devalue distributor services such as
product selection and application-specific
7
advice, and to narrow product sales margins. At this time, it is too early to
assess the long-term impact of this trend on our business.
Competition. We consider our business to be highly competitive. In
addition, our markets present few economic or technological barriers to entry,
contributing to the high fragmentation of market share in our industry.
Longstanding supplier and customer relationships and our associates' experience
do, however, support our competitive position. Competition is based generally on
product and service offerings, product availability, price, and having a local
presence.
Our principal competitors are other specialized bearing, power
transmission, industrial rubber, fluid power, linear motion, and specialty item
distributors, and, to a lesser extent, mill supply and catalog companies. These
competitors include local, regional, national, and international operations. We
also compete with original equipment manufacturers and their distributors in the
sale of maintenance and replacement components. Some competitors have greater
financial resources than we do. The identity and number of our competitors vary
throughout the geographic and product markets in which we conduct business.
Although we are one of the leading distributors in North America for
the major product categories we carry, our market share for those products in
any given geographic area may be relatively small compared to the portion of the
market served by original equipment manufacturers and other distributors.
Backlog and Seasonality. Because of our product resources and
distribution network, we do not have a substantial backlog of orders, nor are
backlog orders significant at any given time. We do not consider our overall
business to be seasonal.
Patents, Trademarks, and Licenses. Customer recognition of our service
marks and trade names, including Applied Industrial Technologies(R), Applied(R),
and AIT(R), is an important contributing factor to our sales. Patents and
licenses are not of material importance to our business.
Raw Materials and General Business Conditions. Our operations are
dependent on general industrial activities and economic conditions and would be
adversely affected by the unavailability of raw materials to our suppliers,
prolonged labor disputes experienced by suppliers or customers, or by any
recession or depression that has an adverse effect on industrial activity
generally or on key customer industries served by us.
Number of Employees. On June 30, 2002, we had 4,508 employees.
Working Capital. Our working capital position is disclosed in the
financial statements referred to at Item 15 on page 16 of this Report and is
discussed in "Management's Discussion and Analysis" in the 2002 Annual Report to
shareholders on page 11.
We require substantial working capital related to accounts receivable
and inventories. Significant amounts of inventory are carried to meet rapid
delivery requirements of customers. We
8
generally require all payments for sales on account within 30 days. Returns are
not considered to have a material effect on our working capital requirements. We
believe these practices are consistent with industry practices.
Environmental Laws. We believe that compliance with federal, state and
local laws regulating the discharge of materials into the environment or
otherwise relating to environmental protection will not have a material adverse
effect on our capital expenditures, earnings, or competitive position.
(d) Financial Information about Geographic Areas.
---------------------------------------------
Sales by our Canadian and Mexican operations represented 5.5% of our
total net sales in fiscal 2002 and 4.7% in 2001. Long-lived assets located
outside the United States are not and have not been material.
Our U.S. operations' export sales during the fiscal year ended June 30,
2002, and prior fiscal years, were less than 2% of net sales, and were not
concentrated in a specific geographic area.
Additional information regarding our foreign operations is included in
the 2002 Annual Report to shareholders in note 11 to the financial statements on
page 25, and in "Quantitative and Qualitative Disclosures About Market Risk" on
page 13, and that information is incorporated here by reference.
ITEM 2. PROPERTIES.
-----------
We own or lease the properties in which our offices, service centers,
distribution centers, and shops are located. At June 30, 2002, we owned real
properties at 164 locations and leased 261 locations. Certain locations contain
multiple operations, such as a shop and a distribution center.
Our principal owned real properties (each of which has more than 20,000
square feet of floor space) at June 30, 2002 were:
- the distribution center in Atlanta, Georgia
- the distribution center in Florence, Kentucky
- the service center in West Monroe, Louisiana
- the service center and rubber shop in Omaha, Nebraska
- the distribution center in Portland, Oregon (operations were moved
to a new leased facility in July 2002)
- the distribution center in Carlisle, Pennsylvania
Our principal leased real properties (each of which has more than
20,000 square feet of floor space) at June 30, 2002 were:
9
- the corporate headquarters facility in Cleveland, Ohio
- the distribution center and rubber shop in Fontana, California
- the service center in Long Beach, California
- the service center in San Jose, California
- the rubber shop in Tracy, California
- the distribution center and service center in Denver, Colorado
- the rubber shop in Denver, Colorado
- the fluid power sales office and warehouse in Joppa, Maryland
- the service center in Grand Rapids, Michigan
- the service center and mechanical and fluid power shop in Iron
Mountain, Michigan
- the service center in Kansas City, Missouri
- the inventory return center in Elyria, Ohio
- the new distribution center in Portland, Oregon (commenced
operations in July 2002)
- the distribution center and rubber shop in Fort Worth, Texas
- the service center in Longview, Washington
- the distribution center, fluid power shop, and rubber shop in
Longview, Washington
- the offices, service center, and rubber shop in Appleton,
Wisconsin
- the service center in Milwaukee, Wisconsin
- the service center and distribution center in Winnipeg, Manitoba
- the offices and fluid power shop in Saskatoon, Saskatchewan
Except for the Saskatoon fluid power shop and the Joppa, Maryland
facility, all of the properties listed above are used in our service
center-based distribution segment. The Winnipeg and Longview facilities are used
in operations both inside and outside the service center-based distribution
segment.
We consider our properties generally sufficient to meet our
requirements for office space and inventory stocking. A service center's size is
primarily influenced by the amount of inventory the service center requires to
meet its customers' needs. We use all of our owned and leased properties except
for certain properties which in the aggregate are not material and are either
for sale, lease, or sublease to third parties due to a relocation or closing. We
also may lease or sublease to others unused portions of buildings.
In recent years, when opening new locations, we have emphasized leasing
rather than owning real property. We do not consider any of our service center,
distribution center, or shop properties to be material, because we believe that
if it becomes necessary or desirable to relocate one of those operations, other
suitable property could be found.
ITEM 3. PENDING LEGAL PROCEEDINGS.
--------------------------
Applied and/or one of its subsidiaries is a party to various pending
judicial and administrative proceedings. Based on circumstances currently known,
we do not believe that any
10
liabilities that may result from these proceedings are reasonably likely to have
a material adverse effect on our consolidated financial position, results of
operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
No matters were submitted to a vote of Applied's security holders
during the last quarter of fiscal 2002.
EXECUTIVE OFFICERS OF THE REGISTRANT.
-------------------------------------
Applied's executive officers are elected by the Board of Directors for
a term of one year, or until their successors are chosen and qualified, at the
Board's organizational meeting held immediately following the annual meeting of
shareholders. The following is a list of the executive officers and a
description of their business experience during the past five years. Except as
otherwise stated, the positions and offices indicated are with Applied, and the
persons were elected to their current positions on October 16, 2001:
David L. Pugh. Mr. Pugh is Chairman & Chief Executive Officer
(since October 2000) and has served as a member of the Board of
Directors since January 2000. He was President & Chief Executive
Officer (from January 2000 to October 2000), and prior to that was
President & Chief Operating Officer (from January 1999 to January
2000). Prior to joining Applied, he was Senior Vice President of the
Industrial Control Group (from 1996 to 1998) of Rockwell Automation, a
division of Rockwell International Corporation. In that position, he
was responsible for a global manufacturing operation encompassing three
business groups, 5,000 employees, and 13 operating locations. He is 53
years of age.
Bill L. Purser. Mr. Purser is President & Chief Operating
Officer (since October 2000). Prior to that he was Vice President-Chief
Marketing Officer (from February 1999 to October 2000), and Vice
President-Marketing & National Accounts (from 1996 to February 1999).
He is 59 years of age.
Todd A. Barlett. Mr. Barlett is Vice President-Global Business
Development (since October 2000). He had served as Vice
President-Alliance Systems (from August 1999 to October 2000), Vice
President-National Accounts & Alliance Systems (from August 1998 to
August 1999), and Vice President-Southeast Area (from 1995 to August
1998). He is 47 years of age.
Fred D. Bauer. Mr. Bauer is Vice President-General Counsel
(since April 2002) and Secretary (since October 2001). He had served as
Vice President-Legal Services (from May 2000 to April 2002) and
Assistant Secretary (from 1994 to October 2001), and had also been
Assistant General Counsel (from 1994 to May 2000). He is 36 years of
age.
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Robert A. Christensen. Mr. Christensen is Vice President-Unit
President, Fluid Power (since November 2000). Prior to that he was Vice
President-Fluid Power Business Development (from April to November
2000) and Director of Fluid Power Products (from 1994 to April 2000).
He is 61 years of age.
Michael L. Coticchia. Mr. Coticchia is Vice President-Human
Resources and Administration (since April 2002). Prior to that, he
served as Vice President-Human Resources and Risk Management (from
October 1998 to April 2002) and Assistant Secretary (from 1990 to
January 2002), and had also been Director-Human Resources and Risk
Management (from 1994 to October 1998). He is 40 years of age.
Mark O. Eisele. Mr. Eisele is Vice President & Controller
(since October 1997). He was Controller (from 1992 to October 1997). He
is 45 years of age.
James T. Hopper. Mr. Hopper is Vice President-Chief
Information Officer (since January 2000). He had served as Vice
President-Information Systems (from 1995 to January 2000). He is 59
years of age.
Jeffrey A. Ramras. Mr. Ramras is Vice President-Marketing and
Supply Chain Management (since September 2002). He had served as Vice
President-Supply Chain Management (from January 2000 to September 2002)
and as Vice President-Logistics (from 1995 to January 2000). He is 47
years of age.
Richard C. Shaw. Mr. Shaw is Vice President-Communications and
Learning (since January 2000). He had served as Vice
President-Communications, Organizational Learning & Quality Standards
(from 1996 to January 2000). He is 53 years of age.
John R. Whitten. Mr. Whitten is Vice President-Chief Financial
Officer & Treasurer (since October 1997). He was Vice President-Finance
& Treasurer (from 1992 to October 1997). He is 56 years of age.
PART II.
--------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDER MATTERS.
--------------------
Applied's Common Stock, without par value, is listed for trading on the
New York Stock Exchange under the ticker symbol AIT. The information concerning
the principal market for Applied's Common Stock, the quarterly stock prices and
dividends for the fiscal years ended June 30, 2002, 2001, and 2000 and the
number of shareholders of record as of August 16, 2002 is set forth in the 2002
Annual Report to shareholders on page 29, under the caption "Quarterly Operating
Results and Market Data," and that information is incorporated here by
reference.
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Information concerning securities authorized for issuance under
Applied's equity compensation plans is set forth in Applied's proxy statement
dated September 16, 2002 under the caption, "Equity Compensation Plan
Information" on page 10, and that information is incorporated here by reference.
ITEM 6. SELECTED FINANCIAL DATA.
------------------------
The summary of selected financial data for the last five years is set
forth in the 2002 Annual Report to shareholders in the table on pages 30 and 31
under the caption "10 Year Summary" and is incorporated here by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
------------------------------------
"Management's Discussion and Analysis" is set forth in the 2002 Annual
Report to shareholders on pages 10 through 13 and is incorporated here by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
----------------------------------------
ABOUT MARKET RISK.
------------------
The disclosures about market risk required by this item are set forth
in Applied's 2002 Annual Report to shareholders on page 13, which information is
incorporated here by reference. For further information relating to borrowing
and interest rates, see the Liquidity and Capital Resources section of
"Management's Discussion and Analysis" and Notes 5 and 6 to the Consolidated
Financial Statements in Applied's 2002 Annual Report to shareholders on pages
11, 20 and 21, respectively, which information is incorporated here by
reference. In addition, please see "Cautionary Statement under Private
Securities Litigation Reform Act" at page 2, above, for additional risk factors
relating to our business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
The following consolidated financial statements and supplementary data
of Applied and its subsidiaries and the independent auditors' report listed
below, which are included in the 2002 Annual Report to shareholders at the pages
indicated, are incorporated here by reference and filed with this Report:
13
Caption Page No.
------- --------
Financial Statements:
Statements of Consolidated Income 14
for the Years Ended
June 30, 2002, 2001, and 2000
Consolidated Balance Sheets 15
June 30, 2002 and 2001
Statements of Consolidated Cash Flows 16
for the Years Ended
June 30, 2002, 2001, and 2000
Statements of Consolidated Shareholders' 17
Equity for the Years Ended
June 30, 2002, 2001, and 2000
Notes to Consolidated Financial Statements 18 - 26
for the Years Ended
June 30, 2002, 2001, and 2000
Independent Auditors' Report 27
Supplementary Data:
Quarterly Operating Results and 29
Market Data
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
---------------------------------------
Not applicable.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
The information required by this Item as to Applied's directors is set
forth in Applied's Proxy Statement dated September 16, 2002 on pages 4 through 6
under the caption "Election of Directors" and is incorporated here by reference.
The information required by this Item as to
14
Applied's executive officers has been furnished in this Report on pages 11 and
12 in Part I, after Item 4, under the caption "Executive Officers of the
Registrant." The information required by this Item as to compliance with Section
16(a) of the Securities Exchange Act of 1934 is set forth in Applied's Proxy
Statement on page 24 under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" and is incorporated here by reference.
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
The information required by this Item is set forth in Applied's Proxy
Statement dated September 16, 2002, under the captions "Summary Compensation" on
page 8, "Option Grants in Last Fiscal Year," "Aggregated Option Exercises and
Fiscal Year-End Option Value Table," and "Long-Term Incentive Plans - Awards in
Last Fiscal Year" on pages 9 and 10, "Estimated Retirement Benefits Under
Supplemental Executive Retirement Benefits Plan" on page 11, "Deferred
Compensation Plan," "Officer Retention Program," and "Change in Control
Agreements and Other Related Arrangements" on pages 11 through 13, and
"Compensation of Directors" and "Deferred Compensation Plan for Non-Employee
Directors" on page 17, and is incorporated here by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
-------------------------------------------
Information concerning the security ownership of certain beneficial
owners and management and related stockholder matters is set forth in Applied's
proxy statement dated September 16, 2002, under the captions "Beneficial
Ownership of Certain Applied Shareholders and Management" on page 7 and "Equity
Compensation Plan Information" on page 10, and is incorporated here by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Information concerning certain relationships and related transactions
is set forth under the caption "Certain Relationships and Related Transactions"
on page 18 of Applied's Proxy Statement dated September 16, 2002 and is
incorporated here by reference.
ITEM 14. CONTROLS AND PROCEDURES.
------------------------
There have not been any significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation of those controls.
15
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
----------------------------------------------------
SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------
(a)1. Financial Statements.
---------------------
The following consolidated financial statements, notes thereto, the
independent auditors' report, and supplemental data are included in the 2002
Annual Report to shareholders on pages 14 through 27 and page 29, and are
incorporated by reference in Item 8 of this Report.
Caption
-------
Statements of Consolidated Income for the
Years Ended June 30, 2002, 2001, and 2000
Consolidated Balance Sheets at
June 30, 2002 and 2001
Statements of Consolidated Cash Flows for
the Years Ended June 30, 2002, 2001, and 2000
Statements of Consolidated Shareholders'
Equity for the Years Ended June 30, 2002,
2001, and 2000
Notes to Consolidated Financial Statements
for the Years Ended June 30, 2002, 2001, and 2000
Independent Auditors' Report
Supplementary Data:
Quarterly Operating Results and Market Data
(a)2. Financial Statement Schedule.
-----------------------------
The following report and schedule are included in this Part IV, and are
found in this Report at the pages indicated:
16
Caption Page No.
------- --------
Independent Auditors' Report 22
Schedule II - Valuation and 23
Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions, are not
applicable, or the required information is included in the consolidated
financial statements and notes thereto.
(a)3. Exhibits.
---------
* Asterisk indicates an executive compensation plan or
arrangement.
Exhibit
No. Description
--- -----------
3(a) Amended and Restated Articles of Incorporation of
Applied Industrial Technologies, Inc., as amended
on October 8, 1998 (filed as Exhibit 3(a) to
Applied's Form 10-Q for the quarter ended
September 30, 1998, SEC File No. 1-2299, and
incorporated here by reference).
3(b) Code of Regulations of Applied Industrial
Technologies, Inc., as amended on October 19, 1999
(filed as Exhibit 3(b) to Applied's Form 10-Q for
the quarter ended September 30, 1999, SEC File No.
1-2299, and incorporated here by reference).
4(a) Certificate of Merger of Bearings, Inc. (Ohio) and
Bearings, Inc. (Delaware) filed with the Ohio
Secretary of State on October 18, 1988, including
an Agreement and Plan of Reorganization dated
September 6, 1988 (filed as Exhibit 4(a) to
Applied's Registration Statement on Form S-4 filed
May 23, 1997, Registration No. 333-27801, and
incorporated here by reference).
4(b) Private Shelf Agreement dated as of November 27,
1996, as amended on January 30, 1998, between
Applied and The Prudential Insurance Company of
America (filed as Exhibit 4(f) to Applied's Form
10-Q for the quarter ended March 31, 1998, SEC
File No. 1-2299, and incorporated here by
reference).
17
4(c) Amendment dated October 24, 2000 to November 27,
1996 Private Shelf Agreement between Applied and
The Prudential Insurance Company of America (filed
as Exhibit 4(e) to Applied's Form 10-Q for the
quarter ended September 30, 2000, SEC File No.
1-2299, and incorporated here by reference).
4(d) $150,000,000 Credit Agreement dated as of November
5, 1998 among Applied, KeyBank National
Association as Agent, and various financial
institutions (filed as Exhibit 4(e) to Applied's
Form 10-Q for the quarter ended September 30,
1998, SEC File No. 1-2299, and incorporated here
by reference).
4(e) Rights Agreement, dated as of February 2, 1998,
between Applied and Computershare Investor
Services LLP (successor to Harris Trust and
Savings Bank), as Rights Agent, which includes as
Exhibit B thereto the Form of Rights Certificate
(filed as Exhibit No. 1 to Applied's Registration
Statement on Form 8-A filed July 20, 1998, SEC
File No. 1-2299, and incorporated here by
reference).
*10(a) Form of Change in Control Agreement (amended and
restated as of August 8, 2001) between Applied and
each of its executive officers (filed as Exhibit
10 to Applied's Form 10-Q for the quarter ended
December 31, 2001, SEC File No. 1-2299, and
incorporated here by reference).
*10(b) A written description of Applied's director
compensation program is found in Applied's Proxy
Statement dated September 16, 2002, SEC File No.
1-2299, on page 17, under the caption
"Compensation of Directors," and is incorporated
here by reference.
*10(c) Applied Deferred Compensation Plan for
Non-Employee Directors (January 1, 1997
Restatement) (filed as Exhibit 10(d) to Applied's
Registration Statement on Form S-4 filed May 23,
1997, Registration No. 333-27801, and incorporated
here by reference).
*10(d) First Amendment to Deferred Compensation Plan for
Non-Employee Directors (January 1, 1997
Restatement) dated May 1, 1998 (filed as Exhibit
10(d) to Applied's Form 10-K for the year ended
June 30, 1998, SEC File No. 1-2299, and
incorporated here by reference).
*10(e) A written description of Applied's Life and
Accidental Death and Dismemberment Insurance for
executive officers (filed as Exhibit 10(b) to
Applied's Form 10-Q for the quarter ended December
31, 1997, SEC File No. 1-2299, and incorporated
here by reference).
18
*10(f) A written description of Applied's Long-Term
Disability Insurance for executive officers (filed
as Exhibit 10(c) to Applied's Form 10-Q for the
quarter ended December 31, 1997, SEC File No.
1-2299, and incorporated here by reference).
*10(g) Form of Director and Officer Indemnification
Agreement entered into between Applied and each of
its directors and executive officers (filed as
Exhibit 10(g) to Applied's Registration Statement
on Form S-4 filed May 23, 1997, Registration No.
333-27801, and incorporated here by reference).
*10(h) Applied Supplemental Executive Retirement Benefits
Plan (January 1, 2002 Restatement) in which 7
executive officers (as well as certain former
executive officers) currently participate (filed
as Exhibit 10 to Applied's Form 10-Q for the
quarter ended March 31, 2002, SEC File No. 1-2299,
and incorporated here by reference).
*10(i) Applied Deferred Compensation Plan (January 1,
1997 Restatement) (filed as Exhibit 10(j) to
Applied's Registration Statement on Form S-4 filed
May 23, 1997, Registration No. 333-27801, and
incorporated here by reference).
*10(j) First Amendment to Deferred Compensation Plan
dated May 1, 1998 (filed as Exhibit 10(j) to
Applied's Form 10-K for the year ended June 30,
1998, SEC File No. 1-2299, and incorporated here
by reference).
*10(k) Second Amendment to Deferred Compensation Plan
effective as of October 1, 2000 (filed as Exhibit
10(b) to Applied's Form 10-Q for the quarter ended
September 30, 2000, SEC File No. 1-2299, and
incorporated here by reference).
*10(l) Third Amendment to Deferred Compensation Plan
effective as of January 16, 2001 (filed as Exhibit
10(b) to Applied's Form 10-Q for the quarter ended
March 31, 2001, SEC File No. 1-2299, and
incorporated here by reference).
*10(m) 1997 Long-Term Performance Plan adopted by
Shareholders on October 21, 1997 (filed as Exhibit
10(a) to Applied's Form 10-Q for the quarter ended
December 31, 1997, SEC File No. 1-2299, and
incorporated here by reference).
19
*10(n) Applied Supplemental Defined Contribution Plan
(January 1, 1997 Restatement) (filed as Exhibit
10(m) to Applied's Registration Statement on Form
S-4 filed May 23, 1997, Registration No.
333-27801, and incorporated here by reference).
*10(o) First Amendment to Applied Supplemental Defined
Contribution Plan effective as of October 1, 2000
(filed as Exhibit 10(a) to Applied's Form 10-Q for
the quarter ended September 30, 2000, SEC File No.
1-2299, and incorporated here by reference).
*10(p) Second Amendment to Applied Supplemental Defined
Contribution Plan effective as of January 16, 2001
(filed as Exhibit 10(a) to Applied's Form 10-Q for
the quarter ended March 31, 2001, SEC File No.
1-2299, and incorporated here by reference).
*10(q) Retention Program for James T. Hopper, Vice
President-Chief Information Officer, dated March
30, 2000 (filed as Exhibit 10(o) to Applied's Form
10-K for the year ended June 30, 2000, SEC File
No. 1-2299, and incorporated here by reference).
10(r) Lease dated as of March 1, 1996 between Applied
and the Cleveland-Cuyahoga County Port Authority
(filed as Exhibit 10(n) to Applied's Registration
Statement on Form S-4 filed May 23, 1997,
Registration No. 333-27801, and incorporated here
by reference).
*10(s) Consulting, Non-competition and Confidentiality
Agreement among Applied, Oak Grove Consulting
Group, Inc., and J. Michael Moore dated July 31,
1997 (filed as Exhibit 10(c) to Applied's Form
10-Q for the quarter ended September 30, 1997, SEC
File No. 1-2299, and incorporated here by
reference).
*10(t) Non-qualified Deferred Compensation Agreement
between Applied and J. Michael Moore effective as
of December 31, 1997 (filed as Exhibit 10(a) to
Applied's Form 10-Q for the quarter ended March
31, 1998, SEC File No. 1-2299, and incorporated
here by reference).
13 Applied 2002 Annual Report to shareholders (not
deemed "filed" as part of this Form 10-K except
for those portions that are expressly incorporated
by reference).
21 Applied's subsidiaries at June 30, 2002.
23 Independent Auditors' Consent.
20
24 Powers of attorney.
99(a) Statement Under Oath of Principal Executive
Officer Regarding Facts and Circumstances Relating
to Exchange Act Filings.
99(b) Statement Under Oath of Principal Financial
Officer Regarding Facts and Circumstances Relating
to Exchange Act Filings.
99(c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to 18 U.S.C.
1350.
Applied 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 Applied's reasonable expenses in furnishing the exhibit.
Certain instruments with respect to long-term debt have not been filed
as exhibits because the total amount of securities authorized under any one of
the instruments does not exceed 10 percent of the total assets of Applied and
its subsidiaries on a consolidated basis. Applied agrees to furnish to the
Securities and Exchange Commission, upon request, a copy of each such
instrument.
(b) Reports on Form 8-K.
--------------------
None during the quarter ended June 30, 2002.
21
INDEPENDENT AUDITORS' REPORT
----------------------------
Shareholders and Board of Directors
Applied Industrial Technologies, Inc.
We have audited the consolidated balance sheets of Applied Industrial
Technologies, Inc. and its subsidiaries (the "Company") as of June 30, 2002 and
2001, and the related statements of consolidated income, shareholders' equity,
and cash flows for each of the years in the three year period ended June 30,
2002 and have issued our report thereon dated August 6, 2002; such consolidated
financial statements and report are included in your 2002 Annual Report to
shareholders and are incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of the Company, listed in Item
14(a)2. This consolidated financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
August 6, 2002
22
APPLIED INDUSTRIAL TECHNOLOGIES, INC. & SUBSIDIARIES
----------------------------------------------------
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------------------------- -------- --------
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND OTHER FROM AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVE PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30 2002:
Reserve deducted from assets to
which it applies - accounts receivable
allowances $5,400 $4,488 $3,888 (A) $5,600
400 (B)
YEAR ENDED JUNE 30 2001:
Reserve deducted from assets to
which it applies - accounts receivable
allowances $3,800 $6,995 $700 (B) $6,500 (A) $5,400
405 (C)
YEAR ENDED JUNE 30 2000:
Reserve deducted from assets to
which it applies - accounts receivable
allowances $3,515 $3,058 $500 (B) $3,273 (A) $3,800
(A) Amounts represent uncollectible accounts charged off.
(B) Amounts represent reserves for the return of merchandise by customers.
(C) Represents reserves recorded through purchase accounting for acquisitions
made during the year.
- --------------------------------------------------------------------------------
SCHEDULE II
23
SIGNATURES
----------
Pursuant to the requirements of Section 13 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.
/s/ David L. Pugh /s/ Bill L. Purser
- ---------------------------------------- -----------------------------------
David L. Pugh, Chairman & Bill L. Purser, President &
Chief Executive Officer Chief Operating Officer
/s/ John R. Whitten /s/ Mark O. Eisele
- ---------------------------------------- -----------------------------------
John R. Whitten Mark O. Eisele
Vice President-Chief Financial Officer Vice President & Controller
& Treasurer (Principal Accounting Officer)
Date: September 23, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
* *
- ---------------------------------------- -----------------------------------
William G. Bares, Director Dr. Roger D. Blackwell, Director
* *
- ---------------------------------------- -----------------------------------
William E. Butler, Director Thomas A. Commes, Director
* *
- ---------------------------------------- -----------------------------------
Peter A. Dorsman, Director Russell R. Gifford, Director
* *
- ---------------------------------------- -----------------------------------
L. Thomas Hiltz, Director Edith Kelly-Green, Director
* /s/ David L. Pugh
- ---------------------------------------- -----------------------------------
J. Michael Moore, Director David L. Pugh, Chairman & Chief
Executive Officer and Director
* *
- ---------------------------------------- -----------------------------------
Dr. Jerry Sue Thornton, Director Stephen E. Yates, Director
/s/ Fred D. Bauer
- ----------------------------------------
Fred D. Bauer, as attorney in fact
for persons indicated by "*"
Date: September 23, 2002
24
CERTIFICATIONS
--------------
I, David L. Pugh, Chairman & Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of Applied Industrial
Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of 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 annual report; and,
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.
Date: September 23, 2002
/s/ David L. Pugh
---------------------------------------
David L. Pugh
Chairman & Chief Executive Officer
I, John R. Whitten, Vice President-Chief Financial Officer & Treasurer, certify
that:
1. I have reviewed this annual report on Form 10-K of Applied Industrial
Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of 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 annual report; and,
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.
Date: September 23, 2002
/s/ John R. Whitten
---------------------------------------
John R. Whitten
Vice President-Chief Financial Officer
& Treasurer
25
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-K FOR THE YEAR ENDED JUNE 30, 2002
Exhibit
No. Description
- --- -----------
3(a) Amended and Restated Articles of Incorporation of Applied
Industrial Technologies, Inc., as amended on October 8, 1998
(filed as Exhibit 3(a) to Applied's Form 10-Q for the quarter
ended September 30, 1998, SEC File No. 1-2299, and
incorporated here by reference).
3(b) Code of Regulations of Applied Industrial Technologies, Inc.,
as amended on October 19, 1999 (filed as Exhibit 3(b) to
Applied's Form 10-Q for the quarter ended September 30, 1999,
SEC File No. 1-2299, and incorporated here by reference).
4(a) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings,
Inc. (Delaware) filed with the Ohio Secretary of State on
October 18, 1988, including an Agreement and Plan of
Reorganization dated September 6, 1988 (filed as Exhibit 4(a)
to Applied's Registration Statement on Form S-4 filed May 23,
1997, Registration No. 333-27801, and incorporated here by
reference).
4(b) Private Shelf Agreement dated as of November 27, 1996, as
amended on January 30, 1998, between Applied and The
Prudential Insurance Company of America (filed as Exhibit 4(f)
to Applied's Form 10-Q for the quarter ended March 31, 1998,
SEC File No. 1-2299, and incorporated here by reference).
4(c) Amendment dated October 24, 2000 to November 27, 1996 Private
Shelf Agreement between Applied and The Prudential Insurance
Company of America (filed as Exhibit 4(e) to Applied's Form
10-Q for the quarter ended September 30, 2000, SEC File No.
1-2299, and incorporated here by reference).
4(d) $150,000,000 Credit Agreement dated as of November 5, 1998
among Applied, KeyBank National Association as Agent, and
various financial institutions (filed as Exhibit 4(e) to
Applied's Form 10-Q for the quarter ended September 30, 1998,
SEC File No. 1-2299, and incorporated here by reference).
4(e) Rights Agreement, dated as of February 2, 1998, between
Applied and Computershare Investor Services LLP (successor to
Harris Trust and Savings Bank), as Rights Agent, which
includes as Exhibit B thereto the Form of Rights Certificate
(filed as Exhibit No. 1 to Applied's Registration Statement on
Form 8-A filed July 20, 1998, SEC File No. 1-2299, and
incorporated here by reference).
*10(a) Form of Change in Control Agreement (amended and restated as
of August 8, 2001) between Applied and each of its executive
officers (filed as Exhibit 10 to Applied's Form 10-Q for the
quarter ended December 31, 2001, SEC File No. 1-2299, and
incorporated here by reference).
*10(b) A written description of Applied's director compensation
program is found in Applied's Proxy Statement dated September
16, 2002, SEC File No. 1-2299, on page 17, under the caption
"Compensation of Directors," and is incorporated here by
reference.
*10(c) Applied Deferred Compensation Plan for Non-Employee Directors
(January 1, 1997 Restatement) (filed as Exhibit 10(d) to
Applied's Registration Statement on Form S-4 filed May 23,
1997, Registration No. 333-27801, and incorporated here by
reference).
*10(d) First Amendment to Deferred Compensation Plan for Non-Employee
Directors (January 1, 1997 Restatement) dated May 1, 1998
(filed as Exhibit 10(d) to Applied's Form 10-K for the year
ended June 30, 1998, SEC File No. 1-2299, and incorporated
here by reference).
*10(e) A written description of Applied's Life and Accidental Death
and Dismemberment Insurance for executive officers (filed as
Exhibit 10(b) to Applied's Form 10-Q for the quarter ended
December 31, 1997, SEC File No. 1-2299, and incorporated here
by reference).
*10(f) A written description of Applied's Long-Term Disability
Insurance for executive officers (filed as Exhibit 10(c) to
Applied's Form 10-Q for the quarter ended December 31, 1997,
SEC File No. 1-2299, and incorporated here by reference).
*10(g) Form of Director and Officer Indemnification Agreement entered
into between Applied and each of its directors and executive
officers (filed as Exhibit 10(g) to Applied's Registration
Statement on Form S-4 filed May 23, 1997, Registration No.
333-27801, and incorporated here by reference).
*10(h) Applied Supplemental Executive Retirement Benefits Plan
(January 1, 2002 Restatement) in which 7 executive officers
(as well as certain former executive officers) currently
participate (filed as Exhibit 10 to Applied's Form 10-Q for
the quarter ended March 31, 2002, SEC File No. 1-2299, and
incorporated here by reference).
*10(i) Applied Deferred Compensation Plan (January 1, 1997
Restatement) (filed as Exhibit 10(j) to Applied's Registration
Statement on Form S-4 filed May 23, 1997, Registration No.
333-27801, and incorporated here by reference).
*10(j) First Amendment to Deferred Compensation Plan dated May 1,
1998 (filed as Exhibit 10(j) to Applied's Form 10-K for the
year ended June 30, 1998, SEC File No. 1-2299, and
incorporated here by reference).
*10(k) Second Amendment to Deferred Compensation Plan effective as of
October 1, 2000 (filed as Exhibit 10(b) to Applied's Form 10-Q
for the quarter ended September 30, 2000, SEC File No. 1-2299,
and incorporated here by reference).
*10(l) Third Amendment to Deferred Compensation Plan effective as of
January 16, 2001 (filed as Exhibit 10(b) to Applied's Form
10-Q for the quarter ended March 31, 2001, SEC File No.
1-2299, and incorporated here by reference).
*10(m) 1997 Long-Term Performance Plan adopted by Shareholders on
October 21, 1997 (filed as Exhibit 10(a) to Applied's Form
10-Q for the quarter ended December 31, 1997, SEC File No.
1-2299, and incorporated here by reference).
*10(n) Applied Supplemental Defined Contribution Plan (January 1,
1997 Restatement) (filed as Exhibit 10(m) to Applied's
Registration Statement on Form S-4 filed May 23, 1997,
Registration No. 333-27801, and incorporated here by
reference).
*10(o) First Amendment to Applied Supplemental Defined Contribution
Plan effective as of October 1, 2000 (filed as Exhibit 10(a)
to Applied's Form 10-Q for the quarter ended September 30,
2000, SEC File No. 1-2299, and incorporated here by
reference).
*10(p) Second Amendment to Applied Supplemental Defined Contribution
Plan effective as of January 16, 2001 (filed as Exhibit 10(a)
to Applied's Form 10-Q for the quarter ended March 31, 2001,
SEC File No. 1-2299, and incorporated here by reference).
*10(q) Retention Award Program for James T. Hopper, Vice
President-Chief Information Officer, dated March 30, 2000
(filed as Exhibit 10(o) to Applied's Form 10-K for the year
ended June 30, 2000, SEC File No. 1-2299, and incorporated
here by reference).
10(r) Lease dated as of March 1, 1996 between Applied and the
Cleveland-Cuyahoga County Port Authority (filed as Exhibit
10(n) to Applied's Registration Statement on Form S-4 filed
May 23, 1997, Registration No. 333-27801, and incorporated
here by reference).
*10(s) Consulting, Non-competition and Confidentiality Agreement
among Applied, Oak Grove Consulting Group, Inc., and J.
Michael Moore dated July 31, 1997 (filed as Exhibit 10(c) to
Applied's Form 10-Q for the quarter ended September 30, 1997,
SEC File No. 1-2299, and incorporated here by reference).
*10(t) Non-qualified Deferred Compensation Agreement between Applied
and J. Michael Moore effective as of December 31, 1997 (filed
as Exhibit 10(a) to Applied's Form 10-Q for the quarter ended
March 31, 1998, SEC File No. 1-2299, and incorporated here by
reference).
13 Applied 2002 Annual Report to shareholders (not deemed "filed"
as part of this Form 10-K except for those portions that are
expressly incorporated by reference). Attached
21 Applied's subsidiaries at June 30, 2002. Attached
23 Independent Auditors' Consent. Attached
24 Powers of Attorney. Attached
99(a) Statement Under Oath of Principal Executive Officer
Regarding Facts and Circumstances Relating to Exchange
Act Filings. Attached
99(b) Statement Under Oath of Principal Financial Officer
Regarding Facts and Circumstances Relating to Exchange
Act Filings. Attached
99(c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to 18 U.S.C.
1350. Attached