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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 2003 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 1-2299
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-0117420
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(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]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No __
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 last business day of the registrant's most
recently completed second quarter (December 31, 2002): $346,746,317.
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 25, 2003
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Common Stock, without par value 19,137,614
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, 2003, 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 12, 2003, portions of which are incorporated by reference
into Parts III and IV of this Form 10-K.
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TABLE OF CONTENTS
Page
----
CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES 3
LITIGATION REFORM ACT
PART I 4
Item 1. Business 4
Item 2. Properties 10
Item 3. Pending Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
EXECUTIVE OFFICERS OF THE REGISTRANT 11
PART II 13
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Item 9A. Controls and Procedures 15
PART III 15
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 16
Item 13. Certain Relationships and Related Transactions 16
Item 14. Principal Accountant Fees and Services 16
PART IV 16
Item 15. Exhibits, Financial Statements, Financial Statement Schedules
and Reports on Form 8-K 16
INDEPENDENT AUDITORS' REPORT 22
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS 23
SIGNATURES 24
EXHIBITS
2
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 AND 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 OTHER BUSINESS
STRATEGIES; THE INCURRENCE OF 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).
3
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. 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
various 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 engaged in this business since
1923. Applied reincorporated in Ohio in 1988.
Applied's Internet address is www.applied.com. Our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports, together with Section 16 insider beneficial stock
ownership reports, are available free of charge at the investor relations area
of our website as soon as reasonably practicable after they are electronically
filed with, or furnished to, the Securities and Exchange Commission. The
information contained on our website is not intended to be incorporated into
this annual report on Form 10-K.
(a) General Development of Business.
In furtherance of our strategy to expand our geographic presence in North
America, we acquired the distribution business of Industrial Equipment Co. Ltd.,
operating in British Columbia and Alberta, Canada, in October 2002. The acquired
operations have been integrated with those of our existing Canadian business.
Further information regarding developments in our business can be found in
our 2003 Annual Report to shareholders under the caption "Management's
Discussion and Analysis" on pages 10 through 15, 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
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products, general maintenance and safety products, and tools. We also offer
technical product application support and provide creative solutions to help
customers minimize downtime and reduce overall procurement costs.
In addition to service center-based distribution, we operate several
specialized fluid power companies that primarily sell products and services
directly to customers rather than through the service centers.
Segment financial information can be found in the 2003 Annual Report to
shareholders in note 12 to the financial statements on pages 29 and 30, and that
information is incorporated here by reference.
(c) Narrative Description of Business.
Overview. Our field operating structure is built on two primary platforms -
industrial products, and fluid power products and systems:
- Industrial Products. Through our service centers, located in 47
states, four Canadian provinces, Puerto Rico, and Mexico, we
distribute to customers industrial products, including bearings and
seals, linear motion products, power transmission products, fluid
power components, industrial rubber products, general maintenance
and safety products, and tools, primarily for maintenance and repair
applications. In addition, we operate regional fabricated rubber
shops, which modify and repair conveyor belts and assemble hose
apparatuses in accordance with customer requirements, and rubber
service field crews, which install and repair belts and rubber
linings at customer locations. The industrial products business
accounts for a substantial majority of our field operations and
sales dollars. While the industrial products business operates in
the U.S. using the Applied Industrial Technologies trade name, we
also are known as Bearing & Transmission and IECO in Canada, Applied
Mexico in Mexico, and Rafael Benitez Carrillo in Puerto Rico.
- Fluid Power. Our specialized fluid power businesses primarily market
their products and services directly to customers, but also 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. Our fluid power
businesses operate in various geographic areas 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), HyPower (Western Canada), and Kent Fluid
Power (West Coast).
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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 and safety products, and tools. 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 product training, as well as sales and marketing
support. We believe that these relationships are generally good. The loss of
certain suppliers could adversely affect our business. Authorizations to
represent particular suppliers and product lines may vary by geographic region.
Net sales by product category for the past three fiscal years can be found
in the 2003 Annual Report to shareholders in note 12 to the financial statements
on page 30, and that information is incorporated here by reference.
Services. Our service center associates advise and assist customers with
respect to product selection and application, and industrial product inventory
management. 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 sales and service representatives
and account managers, as well as product and industry specialists. Customer
sales and 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 automated storeroom
replenishment system, AppliedSTORE Plus(SM). Account managers also measure and
document the value to the customer of cost savings and increased productivity
generated by our services and recommendations. Product and industry specialists
assist with applications in their areas of technical expertise.
We maintain inventory levels at each service center tailored to the local
market. These inventories consist of standard items as well as other items that
are specific to local customers' immediate needs. We also maintain backup
inventory in eight distribution centers. The inventory maintained at our
facilities allows us to satisfy our customers' just-in-time product needs.
In addition to product distribution-related services, we offer shop
services. Our fabricated rubber shops modify and repair conveyor belts and
provide hose assemblies (also available at select service centers and
distribution centers) in accordance with customer requirements, and field crews
6
install and repair belts and rubber lining onsite at customer locations in
certain geographic areas. Other shop services include the rebuilding and
assembly of speed reducers, pumps, valves, cylinders, and electric 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 transportation 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 websites and paper catalogs.
AppliedACCESS(R), available at www.applied-access.com, is our broad line
website, providing customers a convenient method to search for products in an
electronic database, view prices, check inventory levels, place orders, and
track order status. Our Maintenance America(R) product catalog and website,
www.maintenanceamerica.com, facilitate the purchase of general maintenance and
safety products, and tools. And our Fluid Power Connection(R) catalog of
hydraulic and pneumatic components, along with a related website,
www.fluidpowerconnection.com, facilitate buying these products from our service
centers. All of the websites and catalogs are also accessible through
www.applied.com.
The fluid power businesses generally 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 businesses
distinguish themselves, though, from most component distributors by also
offering engineering, design, system fabrication, installation, and repair
services. Each business has account managers with extensive technical knowledge,
who handle sophisticated projects for customers primarily within the business'
geographic region. The businesses also provide additional technical support to
our service centers.
Our operations contrast with those of our product manufacturers because
the manufacturers generally confine their direct sales activities to
large-volume transactions, mainly 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 its discontinuance
could adversely affect our business.
7
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, with whom we may have multiple-location
relationships, 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
and customer industry markets and, consequently, reduced demand for our products
and services in those markets.
In recent years, there has been a trend among large 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 websites described
above, to provide customers the flexibility to order through their preferred
electronic procurement method. There can be no guarantee, however, that we will
recover our development costs.
Competition. We consider our business to be highly competitive. In
addition, our markets present few economic or technological barriers to entry,
contributing to a high fragmentation of market share in our industry.
Longstanding supplier and customer relationships, geographic coverage, and our
associates' experience do, however, support our competitive position.
Competition is based generally on product and service offerings, product
availability, price, catalogs, and having a local presence.
Our principal competitors are other bearing, power transmission,
industrial rubber, fluid power, linear motion, and general maintenance and
safety product 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 compete.
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
8
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 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 August 31, 2003, we had 4,355 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 2003 Annual Report to
shareholders on page 12.
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 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 generally
consistent among companies in our industry.
Environmental Laws. We believe that compliance with 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.
Net sales by our Canadian and Mexican operations represented 6.8% of our
total net sales in fiscal 2003, 5.5% in 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,
2003, 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
2003 Annual Report to shareholders in note 12 to the financial statements on
page 29, and in "Quantitative and
9
Qualitative Disclosures About Market Risk" on page 15, 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, 2003, we owned real
properties at 154 locations and leased 265 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, 2003 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 Carlisle, Pennsylvania
Our principal leased real properties (each of which has more than 20,000
square feet of floor space) at June 30, 2003 were:
- the corporate headquarters facility in Cleveland, Ohio
- the distribution center, rubber shop, and service center in Fontana,
California
- the service center in Long Beach, California
- the service center in San Jose, California
- the rubber shop and fluid power shop in Tracy, California
- the distribution center and service center in Denver, Colorado
- the fluid power sales office and warehouse in Joppa, Maryland
- the service center in Grand Rapids, Michigan
- the service center and fluid power shop in Iron Mountain, Michigan
- the service center and offices in Romulus, Michigan
- the service center in Kansas City, Missouri
- the inventory return center in Elyria, Ohio
- the distribution center in Portland, Oregon
- the distribution center and rubber shop in Fort Worth, Texas
- the service center in Longview, Washington
- the rubber shop in Longview, Washington
- the offices, service center, and rubber shop in Appleton, Wisconsin
- the service center in Milwaukee, Wisconsin
- the service center in Delta, British Columbia
- the service center and distribution center in Winnipeg, Manitoba
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- the offices and fluid power shop in Saskatoon, Saskatchewan
- the service center in Monterrey, Mexico
Except for the Joppa facility, all of the properties listed above are used
in our service center-based distribution segment. The Tracy, Longview, Delta,
Saskatoon, and Winnipeg 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
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 tended to lease
rather than own 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 an operation, other suitable
property could be found.
Additional information regarding our properties is included in the 2003
Annual Report to shareholders in note 11 to the financial statements on pages
28-29, and that information is incorporated here by reference.
ITEM 3. PENDING LEGAL PROCEEDINGS.
Applied and/or one of its subsidiaries is a party to various judicial and
administrative proceedings. Based on circumstances currently known, we do not
believe that any 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 2003.
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
11
otherwise stated, the positions and offices indicated are with Applied, and the
persons were elected to their current positions on October 22, 2002:
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. He is 54 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 60 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 January 2000 to October 2000) and Vice President-National
Accounts & Alliance Systems (from 1998 to January 2000). He is 48 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 37 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 41 years of age.
Mark O. Eisele. Mr. Eisele is Vice President & Controller (since
1997). He is 46 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 60 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 48
years of age.
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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 55 years of age.
John R. Whitten. Mr. Whitten is Vice President-Chief Financial
Officer (since 1997) and Treasurer (since 1992). He is 57 years of age.
Mr. Whitten has announced his retirement, effective at December 31, 2003.
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. Information concerning the
principal market for Applied's common stock, the quarterly stock prices and
dividends for the fiscal years ended June 30, 2003, 2002, and 2001 and the
number of shareholders of record as of August 25, 2003 is set forth in the 2003
Annual Report to shareholders on page 33, under the caption "Quarterly Operating
Results and Market Data," and that information is incorporated here by
reference.
Information concerning securities authorized for issuance under Applied's
equity compensation plans is set forth in Applied's proxy statement dated
September 12, 2003 under the caption, "Equity Compensation Plan Information" on
page 13, 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 2003 Annual Report to shareholders in the table on pages 34 and 35
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 2003 Annual
Report to shareholders on pages 10 through 15 and is incorporated here by
reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
The disclosures about market risk required by this item are set forth in
Applied's 2003 Annual Report to shareholders on page 15, 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 6 and 7 to the Consolidated
Financial Statements in Applied's 2003 Annual Report to shareholders on pages
11-12, 24 and 25, respectively, which information is incorporated here by
reference. In addition, please see "Cautionary Statement under Private
Securities Litigation Reform Act" at page 3, 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 2003 Annual Report to shareholders at the pages
indicated, are incorporated here by reference and filed with this Report:
Caption Page No.
------- --------
Financial Statements:
Statements of Consolidated Income 16
for the Years Ended
June 30, 2003, 2002, and 2001
Consolidated Balance Sheets 17
June 30, 2003 and 2002
Statements of Consolidated Cash Flows 18
for the Years Ended
June 30, 2003, 2002, and 2001
Statements of Consolidated Shareholders' 19
Equity for the Years Ended
June 30, 2003, 2002, and 2001
Notes to Consolidated Financial Statements 20 - 30
for the Years Ended
June 30, 2003, 2002, and 2001
Independent Auditors' Report 31
14
Supplementary Data:
Quarterly Operating Results and 33
Market Data
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Management, under the supervision and with the participation of the chief
executive officer and the chief financial officer, has evaluated Applied's
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the CEO and the CFO have concluded that the
disclosure controls and procedures are effective in timely alerting them to
material information about Applied required to be included in our Exchange Act
reports.
Management has not identified any change in internal control over
financial reporting occurring during the fourth quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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 12, 2003 on pages 4 through 7
under the caption "Election of Directors" and is incorporated here by reference.
The information required by this Item as to Applied's executive officers has
been furnished in this Report on pages 11 through 13 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 21 under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated here by reference.
Applied has a code of ethics, entitled the Code of Business Ethics, that
applies to our employees, including our chief executive officer, chief financial
officer, and controller. The Code of Business Ethics is posted at the investor
relations area of our website, www.applied.com.
15
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth in Applied's Proxy
Statement dated September 12, 2003, under the captions "Compensation of
Directors" on page 8, "Deferred Compensation Plan for Non-Employee Directors" on
page 9, "Summary Compensation" on page 11, "Option Grants in Last Fiscal Year"
and "Aggregated Option Exercises and Fiscal Year-End Option Values" on page 12,
"Long-Term Incentive Plans - Awards in Last Fiscal Year" on page 13, "Estimated
Retirement Benefits Under Supplemental Executive Retirement Benefits Plan" and
"Deferred Compensation Plan" on page 14, and "Change in Control Agreements and
Other Related Arrangements" on page 15, 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 12, 2003, under the captions "Beneficial Ownership of
Certain Applied Shareholders and Management" on page 10 and "Equity Compensation
Plan Information" on page 13, and is incorporated here by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for year ended June 30, 2003.
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 2003
Annual Report to shareholders on pages 16 through 31 and page 33, and are
incorporated by reference in Item 8 of this Report.
16
Caption
Statements of Consolidated Income for the
Years Ended June 30, 2003, 2002, and 2001
Consolidated Balance Sheets at
June 30, 2003 and 2002
Statements of Consolidated Cash Flows for
the Years Ended June 30, 2003, 2002, and 2001
Statements of Consolidated Shareholders'
Equity for the Years Ended June 30, 2003,
2002, and 2001
Notes to Consolidated Financial Statements
for the Years Ended June 30, 2003, 2002, and 2001
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:
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.
17
(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).
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).
18
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 12, 2003, SEC File No. 1-2299, on page 8,
under the caption "Compensation of Directors," and is
incorporated here by reference.
*10(c) Applied Deferred Compensation Plan for Non-Employee
Directors (September 1, 2003 Restatement).
*10(d) 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(e) 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(f) 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(g) Applied Supplemental Executive Retirement Benefits Plan
(January 1, 2002 Restatement) in which current and
certain former executive officers 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).
19
*10(h) Applied Deferred Compensation Plan (September 1, 2003
Restatement).
*10(i) 1997 Long-Term Performance Plan re-adopted by
Shareholders on October 22, 2002 (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(j) Amendment No. 1 to 1997 Long-Term Performance Plan,
effective as of August 8, 2003.
*10(k) 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(l) 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(m) 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(n) 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(o) 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(p) 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).
20
13 Applied 2003 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, 2003.
23 Independent auditors' consent.
24 Powers of attorney.
31 Rule 13a-14(a)/15d-14(a) certifications.
32 Section 1350 certifications.
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.
Applied filed one report on Form 8-K with the Securities and Exchange
Commission during the quarter ended June 30, 2003. In that report, filed on
April 16, 2003, Applied furnished its press release of that date regarding
financial results for the quarter ended March 31, 2003.
21
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Applied Industrial Technologies, Inc.
We have audited the consolidated financial statements of Applied
Industrial Technologies, Inc. and its subsidiaries (the "Company") as of June
30, 2003 and 2002, and for each of the years in the three year period ended June
30, 2003, and have issued our report thereon dated August 8, 2003 (which report
expresses an unqualified opinion and includes an explanatory paragraph
concerning the adoption of a new accounting principle in fiscal 2002); such
consolidated financial statements and report are included in your 2003 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 15(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 8, 2003
22
APPLIED INDUSTRIAL TECHNOLOGIES, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
(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 2003:
Reserve deducted from assets to
which it applies - accounts receivable
allowances $ 5,600 $ 2,510 $ 500(B) $ 2,510(A) $ 6,100
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)
(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
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 17, 2003
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 17, 2003
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-K FOR THE YEAR ENDED JUNE 30, 2003
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 12, 2003, SEC
File No. 1-2299, on page 8, under the caption "Compensation of
Directors," and is incorporated here by reference.
*10(c) Applied Deferred Compensation Plan for Non-Employee Directors
(September 1, 2003 Restatement). Attached
*10(d) 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(e) 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(f) 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(g) Applied Supplemental Executive Retirement Benefits Plan
(January 1, 2002 Restatement) in which current and 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(h) Applied Deferred Compensation Plan (September 1, 2003 Restatement).
Attached
*10(i) 1997 Long-Term Performance Plan re-adopted by Shareholders on
October 22, 2002 (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(j) Amendment No. 1 to 1997 Long-Term Performance Plan, effective as of
August 8, 2003. Attached
*10(k) 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(l) 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(m) 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(n) 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(o) 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(p) 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 2003 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, 2003. Attached
23 Independent Auditors' Consent. Attached
24 Powers of Attorney. Attached
31 Rule 13a-14(a)/15d-14(a) certifications. Attached
32 Section 1350 certifications. Attached