☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-0117420 | ||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
1 Applied Plaza | Cleveland | Ohio | 44115 | ||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Common Stock, without par value | AIT | New York Stock Exchange |
Large accelerated filer | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | Smaller reporting company | ☐ | |||||||||
Emerging growth company | ☐ |
Page | ||||||||
PART I | ||||||||
Business | ||||||||
Risk Factors | ||||||||
Unresolved Staff Comments | ||||||||
Properties | ||||||||
Legal Proceedings | ||||||||
Mine Safety Disclosures | ||||||||
PART II | ||||||||
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | ||||||||
Selected Financial Data | ||||||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
Quantitative and Qualitative Disclosures about Market Risk | ||||||||
Financial Statements and Supplementary Data | ||||||||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | ||||||||
Controls and Procedures | ||||||||
Other Information | ||||||||
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | ||||||||
PART III | ||||||||
Directors, Executive Officers and Corporate Governance | ||||||||
Executive Compensation | ||||||||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | ||||||||
Certain Relationships and Related Transactions, and Director Independence | ||||||||
Principal Accountant Fees and Services | ||||||||
PART IV | ||||||||
Exhibits and Financial Statement Schedules | ||||||||
Form 10-K Summary | ||||||||
Country | Associates | Segment | Associates | |||||||||||
United States | 4,598 | Service Center Based Distribution | 3,932 | |||||||||||
Canada | 628 | Fluid Power & Flow Control | 1,704 | |||||||||||
Other Countries | 721 | Other | 311 |
Country | Associates | Segment | Associates | |||||||||||
United States | 4,800 | Service Center Based Distribution | 4,050 | |||||||||||
Canada | 650 | Engineered Solutions | 1,850 | |||||||||||
Other Countries | 750 | Other | 300 |
Location of Principal Owned Real Property | Type of Facility | ||||
Cleveland, Ohio | Corporate headquarters | ||||
Atlanta, Georgia | Distribution center, service center, hose shop | ||||
Florence, Kentucky | Distribution center | ||||
Baldwinsville, New York | Offices, warehouse, and fluid power shop | ||||
Carlisle, Pennsylvania | Distribution center | ||||
Fort Worth, Texas | Distribution center and rubber shop |
Location of Principal Leased Real Property | Type of Facility | ||||
Fontana, California | Distribution center, rubber shop, fluid power shop, and service center | ||||
Newark, California | Fluid power shop | ||||
Midland, Michigan | Flow control shop | ||||
Strongsville, Ohio | Offices and warehouse | ||||
Portland, Oregon | Distribution center | ||||
Stafford, Texas | Offices, warehouse, and flow control shop | ||||
Longview, Washington | Service center, rubber shop, and fluid power shop | ||||
Nisku, Alberta | Offices, service center, shop, and | ||||
Saskatoon, Saskatchewan | Service center and shop |
Name | Positions and Experience | Age | ||||||
Neil A. Schrimsher | President since 2013 and Chief Executive Officer since 2011. | |||||||
Warren E. Hoffner | Vice President, General | |||||||
Kurt W. Loring | Vice President-Chief Human Resources Officer since 2014. | |||||||
Jon S. Ploetz | Vice President-General Counsel since March 2023. Prior to joining Applied, Mr. Ploetz was Vice President, Assistant General Counsel & Assistant Corporate Secretary at Harsco Corporation (NYSE: HSC) from 2018 to 2023, and Assistant General Counsel, Corporate & Securities prior to that. | 50 | ||||||
Jason W. Vasquez | Vice President-Sales & Marketing, U.S. Service Centers since June 2017. | 47 | ||||||
David K. Wells | Vice President-Chief Financial Officer & Treasurer since September 2017. He served as Vice President-Finance from May 2017 through August 2017. Prior to joining Applied, |
Period | (a) Total Number of Shares | (b) Average Price Paid per Share ($) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||||||||||
April 1, 2021 to April 30, 2021 | — | — | — | 864,618 | |||||||||||||||||||
May 1, 2021 to May 31, 2021 | 379,678 | 100.37 | 379,678 | 484,940 | |||||||||||||||||||
June 1, 2021 to June 30, 2021 | 20,322 | 97.37 | 20,322 | 464,618 | |||||||||||||||||||
Total | 400,000 | 100.22 | 400,000 | 464,618 |
Period | (a) Total Number of Shares | (b) Average Price Paid per Share ($) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||||||||||
April 1, 2023 to April 30, 2023 | — | — | — | 1,500,000 | |||||||||||||||||||
May 1, 2023 to May 31, 2023 | — | — | — | 1,500,000 | |||||||||||||||||||
June 1, 2023 to June 30, 2023 | — | — | — | 1,500,000 | |||||||||||||||||||
Total | — | — | — | 1,500,000 |
(In thousands, except per share amounts and statistical data) | (In thousands, except per share amounts and statistical data) | 2021 | 2020 | 2019 | 2018 (d) | 2017 | (In thousands, except per share amounts and statistical data) | 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Operations — Year Ended June 30 | Consolidated Operations — Year Ended June 30 | Consolidated Operations — Year Ended June 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales | Net sales | $ | 3,235,919 | $ | 3,245,652 | $ | 3,472,739 | $ | 3,073,274 | $ | 2,593,746 | Net sales | $ | 4,412,794 | $ | 3,810,676 | $ | 3,235,919 | $ | 3,245,652 | $ | 3,472,739 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization of property | Depreciation and amortization of property | 20,780 | 21,196 | 20,236 | 17,798 | 15,306 | Depreciation and amortization of property | 22,266 | 21,676 | 20,780 | 21,196 | 20,236 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization: | Amortization: | Amortization: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | Intangible assets | 34,365 | 41,553 | 41,883 | 32,065 | 24,371 | Intangible assets | 30,805 | 31,879 | 34,365 | 41,553 | 41,883 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SARs and stock options | SARs and stock options | 2,526 | 2,954 | 2,437 | 1,961 | 1,891 | SARs and stock options | 2,785 | 3,284 | 2,526 | 2,954 | 2,437 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (a) (b) (c) | Operating income (a) (b) (c) | 205,454 | 88,989 | 233,788 | 225,827 | 175,386 | Operating income (a) (b) (c) | 473,151 | 357,858 | 205,454 | 88,989 | 233,788 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (a) (b) (c) (e) | 144,757 | 24,042 | 143,993 | 141,625 | 133,910 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (a) (b) (c) | Net income (a) (b) (c) | 346,739 | 257,414 | 144,757 | 24,042 | 143,993 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share data: | Per share data: | Per share data: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income: | Net income: | Net income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic | Basic | 3.73 | 0.62 | 3.72 | 3.65 | 3.43 | Basic | 8.98 | 6.69 | 3.73 | 0.62 | 3.72 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted (a) (b) (c) | Diluted (a) (b) (c) | 3.68 | 0.62 | 3.68 | 3.61 | 3.40 | Diluted (a) (b) (c) | 8.84 | 6.58 | 3.68 | 0.62 | 3.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividend | Cash dividend | 1.30 | 1.26 | 1.22 | 1.18 | 1.14 | Cash dividend | 1.38 | 1.34 | 1.30 | 1.26 | 1.22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year-End Position — June 30 | Year-End Position — June 30 | Year-End Position — June 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Working capital | Working capital | $ | 768,875 | $ | 733,686 | $ | 724,344 | $ | 625,469 | $ | 572,789 | Working capital | $ | 1,106,463 | $ | 859,902 | $ | 768,875 | $ | 733,686 | $ | 724,344 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt (including portion classified as current) | 829,396 | 935,276 | 959,829 | 966,063 | 291,982 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total debt | Total debt | 622,248 | 689,495 | 829,396 | 935,276 | 959,829 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | Total assets | 2,271,807 | 2,283,551 | 2,331,697 | 2,285,741 | 1,387,595 | Total assets | 2,743,332 | 2,452,588 | 2,271,807 | 2,283,551 | 2,331,697 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | Shareholders’ equity | 932,546 | 843,542 | 897,034 | 814,963 | 745,256 | Shareholders’ equity | 1,458,437 | 1,149,355 | 932,546 | 843,542 | 897,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year-End Statistics — June 30 | Year-End Statistics — June 30 | Year-End Statistics — June 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current ratio | Current ratio | 2.8 | 2.7 | 2.7 | 2.4 | 2.8 | Current ratio | 3.0 | 2.7 | 2.8 | 2.7 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating facilities | Operating facilities | 568 | 580 | 600 | 610 | 552 | Operating facilities | 580 | 568 | 568 | 580 | 600 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders of record | Shareholders of record | 3,535 | 3,772 | 4,165 | 4,323 | 4,687 | Shareholders of record | 3,227 | 3,344 | 3,535 | 3,772 | 4,165 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on assets (a) (b) (c) (e) (f) | 6.4 | % | 1.0 | % | 6.3 | % | 8.0 | % | 10.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on equity (a) (b) (c) (e) (g) | 16.3 | % | 2.8 | % | 16.8 | % | 18.2 | % | 19.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on assets (a) (b) (c) (d) | Return on assets (a) (b) (c) (d) | 13.7 | % | 11.1 | % | 6.4 | % | 1.0 | % | 6.3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on equity (a) (b) (c) (e) | Return on equity (a) (b) (c) (e) | 26.6 | % | 24.7 | % | 16.3 | % | 2.8 | % | 16.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital expenditures | Capital expenditures | $ | 15,852 | $ | 20,115 | $ | 18,970 | $ | 23,230 | $ | 17,045 | Capital expenditures | $ | 26,476 | $ | 18,124 | $ | 15,852 | $ | 20,115 | $ | 18,970 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Returned to Shareholders During the Year | Cash Returned to Shareholders During the Year | Cash Returned to Shareholders During the Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid | Dividends paid | $ | 50,664 | $ | 48,873 | $ | 47,266 | $ | 45,858 | $ | 44,619 | Dividends paid | $ | 53,446 | $ | 51,805 | $ | 50,664 | $ | 48,873 | $ | 47,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases of treasury shares | Purchases of treasury shares | 40,089 | — | 11,158 | 22,778 | 8,242 | Purchases of treasury shares | 716 | 13,784 | 40,089 | — | 11,158 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | $ | 90,753 | $ | 48,873 | $ | 58,424 | $ | 68,636 | $ | 52,861 | Total | $ | 54,162 | $ | 65,589 | $ | 90,753 | $ | 48,873 | $ | 58,424 |
Index Reading | |||||||||||
Month | MCU | PMI | IP | ||||||||
June 2021 | 75.4 | 60.6 | 97.9 | ||||||||
May 2021 | 75.1 | 61.2 | 97.9 | ||||||||
April 2021 | 74.6 | 60.7 | 97.1 | ||||||||
March 2021 | 74.6 | 64.7 | 97.5 | ||||||||
December 2020 | 74.1 | 60.5 | 96.8 | ||||||||
September 2020 | 72.1 | 55.7 | 94.2 | ||||||||
June 2020 | 68.7 | 52.2 | 89.1 |
Index Reading | |||||||||||
Month | MCU | PMI | IP | ||||||||
June 2023 | 78.9 | 46.0 | 99.6 | ||||||||
May 2023 | 79.4 | 46.9 | 99.9 | ||||||||
April 2023 | 79.9 | 47.1 | 100.1 | ||||||||
March 2023 | 79.5 | 46.3 | 99.1 | ||||||||
December 2022 | 78.9 | 48.4 | 97.9 | ||||||||
September 2022 | 80.8 | 51.0 | 100.6 | ||||||||
June 2022 | 80.5 | 53.1 | 100.0 |
Year Ended June 30, As a % of Net Sales | Change in Sales in fiscal The following table shows changes in sales by reportable segment.
Sales Sales in our Engineered Solutions segment increased $200.9 million or 16.1%. Acquisitions within this segment, primarily Automation, Inc., increased sales 18 The following table shows changes in sales by geographical area. Other countries
Sales in our U.S. operations Our gross profit margin increased to 29.2% in fiscal 2023 compared to 29.0% in fiscal 2022. Gross profit margin expanded year over year primarily reflecting broad-based execution across the ongoing inflation and supply chain dynamics. The gross profit margin for the current year was The following table shows the changes in selling, distribution, and administrative expense (SD&A).
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management, and marketing and distribution of the Company’s products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, facility related expenses and expenses incurred in acquiring businesses. SD&A Operating income increased Operating income, 19 Segment operating income is impacted by changes in the amounts and levels of certain supplier support benefits and expenses allocated to the segments. The expense allocations include corporate charges for working capital, logistics support and other items and impact segment gross profit and operating expense. Other The effective income tax rate was As a result of the factors discussed above, net income for fiscal At June 30, The approximate number of Company employees was LIQUIDITY AND CAPITAL RESOURCES Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At June 30, The Company’s working capital at June 30, Net Cash Flows The following table is included to aid in review of Applied’s statements of consolidated cash are in thousands.
The
Net cash used in investing activities in fiscal 20 Net cash used in financing activities The increase in dividends over the year is the result of regular increases in our dividend payout rates. We paid dividends of Capital Expenditures We expect capital expenditures for fiscal Share Repurchases The Board of Directors has authorized the repurchase of shares of the Company’s stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. At June 30, the Company's common stock at an average price per share of $92.72. In fiscal 2021,we repurchased 400,000 shares of the Company's common stock at an average price per share of $100.22. Borrowing Arrangements A summary of long-term debt, including the current portion,
In In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”) 21 times, we may not be able to fully access the $250.0 million of funding available under the AR Securitization Facility. The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. At June 30, In 2014, the Company assumed $2.4 million of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency and matures in November 2024. The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At June 30, 2023. Accounts Receivable Analysis The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable (all dollar amounts are in thousands):
Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's locations. The Company experienced a significant increase in accounts receivable during fiscal 2023 commensurate with the increase in sales. On a consolidated basis, DSO was 22 Inventory Analysis Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Inventory increased throughout fiscal 2022 to meet increasing customer demand. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis and uses inventory valued at average costs. The annualized inventory turnover (using average costs) for the year ended June 30, CONTRACTUAL OBLIGATIONS The following table shows the approximate value of the Company’s contractual obligations and other commitments to make future payments as of June 30,
(1) Amounts represent estimated contractual interest payments on outstanding long-term debt obligations Purchase orders for inventory and other goods and services are not included in our estimates as we are unable to aggregate the amount of such purchase orders that represent enforceable and legally binding agreements specifying all significant terms. The previous table includes the gross liability for unrecognized income tax benefits including interest and penalties in the “Other” column as the Company is unable to make a reasonable estimate regarding the timing of cash settlements, if any, with the respective taxing authorities. CRITICAL ACCOUNTING POLICIES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates at a specific point in time that affect the amounts reported in the consolidated financial statements and disclosed in the accompanying notes. The Business and Accounting Policies note to the consolidated financial statements describes the significant accounting policies and methods used in preparation of the consolidated financial statements. Estimates are used for, but not limited to, determining the net carrying value of trade accounts receivable, inventories, recording self-insurance liabilities and other accrued liabilities. Estimates are also used in establishing opening balances in relation to purchase accounting. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. LIFO Inventory Valuation and Methodology Inventories are valued at the average cost method, using the last-in, first-out (LIFO) method for U.S. inventories, and the average cost method for foreign inventories. We adopted the link chain dollar value LIFO method for accounting for U.S. inventories in fiscal 1974. Approximately LIFO layers and/or liquidations are determined consistently year-to-year. See the Inventories note to the consolidated financial statements in Item 8 under the caption "Financial Statements and Supplementary Data," for further information. 23 Allowances for Slow-Moving and Obsolete Inventories We evaluate the recoverability of our slow-moving and inactive inventories at least quarterly. We estimate the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory, as well as assumptions regarding future demand. Our ability to recover our cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand and relationships with suppliers. A significant portion of the products we hold in inventory have long shelf lives and are not highly susceptible to obsolescence. As of June 30, Allowances for Doubtful Accounts We evaluate the collectibility of trade accounts receivable based on a combination of factors. Initially, we estimate an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is adjusted based on recent trends of certain customers and industries estimated to be a greater credit risk, trends within the entire customer pool and changes in the overall aging of accounts receivable. While we have a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. Accounts are written off against the allowance when it becomes evident that collection will not occur. As of June 30, Goodwill and Intangibles The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. Goodwill for acquired businesses is accounted for using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of the acquisition at their respective estimated fair values. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The judgments made in determining the estimated fair value assigned to each class of assets acquired, as well as the estimated life of each asset, can materially impact the net income of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As part of acquisition accounting, we recognize acquired identifiable intangible assets such as customer relationships, vendor relationships, trade names, and non-competition agreements apart from goodwill. Finite-lived identifiable intangibles are evaluated for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model. We evaluate goodwill for impairment at the reporting unit level annually as of January 1, and whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price. Each year, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If impairment is indicated in the qualitative assessment, or, if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach. The fair value of a reporting unit is compared with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Goodwill on our consolidated financial statements relates to both the Service Center Based Distribution segment and the 24 The fair values of the reporting units in accordance with the goodwill impairment test were determined using the income and market approaches. The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors, and requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates. The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA) and multiples that are applied to management’s forecasted revenues and EBITDA estimates. Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have fallen below their carrying values. Income Taxes Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. As of June 30, CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT This Form 10-K, including Management’s Discussion and Analysis, contains statements that are forward-looking based on management’s current expectations about the future. Forward-looking statements are often identified by qualifiers, such as “guidance”, “expect”, “believe”, “plan”, “intend”, “will”, “should”, “could”, “would”, “anticipate”, “estimate”, “forecast”, “may”, "optimistic" and derivative or similar words or expressions. Similarly, descriptions of objectives, strategies, plans, or goals are also forward-looking statements. These statements may discuss, among other things, expected growth, future sales, future cash flows, future capital expenditures, future performance, and the anticipation and expectations of the Company and its management as to future occurrences and trends. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in its rules, regulations, and releases. Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company’s control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of those statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company assumes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise, except as may be required by law. Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; continuing risks relating to the effects of the COVID-19 pandemic; inflationary or deflationary trends in the cost of products, energy, labor and other operating costs, and changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability (such as due to supply chain strains), changes in supplier distribution programs, inability of suppliers to perform, and transportation disruptions; We discuss certain of these matters and other risk factors more fully throughout our Form 10-K, as well as other of our filings with the Securities and Exchange Commission. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our market risk is impacted by changes in foreign currency exchange rates as well as changes in interest rates. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes. Foreign Currency Exchange Rate Risk Because we operate throughout North America, Australia and New Zealand and approximately During the course of the fiscal year, the Canadian, Interest Rate Risk Our primary exposure to interest rate risk results from our outstanding debt obligations with variable interest rates. The levels of fees and interest charged on our various debt facilities are based upon leverage levels and market interest rates. The Company uses interest rate swap instruments to mitigate variability in Our variable interest rate debt facilities outstanding include our five-year credit facility, which provides for a revolving credit facility with a capacity of up to For more information relating to borrowing and interest rates, see the “Liquidity and Capital Resources” section of “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and notes 6 and 7 to the consolidated financial statements in Item 8. That information is also incorporated here by reference. In addition, see Item 1A, “Risk Factors,” for additional risk factors relating to our business. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Applied Industrial Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of June 30, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill - Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using the income and market approaches. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA), and discount rates. The determination of the fair value using the market approach requires management to make significant estimates and assumptions related to the forecasts of future revenues, EBITDA and multiples that are applied to management’s forecasted revenues and EBITDA estimates. The goodwill balance was Given the nature of one of the 28 and the difference between its fair value and the carrying value, auditing management’s judgments regarding forecasts of future revenues and EBITDA, as well as selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates for the How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future revenues and EBITDA (“forecasts”), and the selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates (“market multiples”) for •We tested the effectiveness of controls over management’s goodwill impairment evaluation, such as controls related to management’s forecasts and the selection of the discount rate and market multiples used. •We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts. •We evaluated the reasonableness of management’s forecasts by comparing the current forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in industry reports for the various industries the reporting unit operates within. •With the assistance of our fair value specialists, we evaluated the discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management. •With the assistance of our fair value specialists, we evaluated the market multiples by evaluating the selected comparable publicly traded companies and the adjustments made for differences in growth prospects and risk profiles between the reporting unit and the comparable publicly traded companies. We tested the underlying source information and mathematical accuracy of the calculations. /s/ Deloitte & Touche LLP Cleveland, Ohio August We have served as the Company's auditor since 1966. STATEMENTS OF CONSOLIDATED INCOME (In thousands, except per share amounts)
See notes to consolidated financial statements. STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (In thousands)
See notes to consolidated financial statements. 31 CONSOLIDATED BALANCE SHEETS (In thousands)
See notes to consolidated financial statements. 32
STATEMENTS OF CONSOLIDATED CASH FLOWS (In thousands)
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (In thousands)
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) NOTE 1: BUSINESS AND ACCOUNTING POLICIES Business Applied Industrial Technologies, Inc. and subsidiaries (the “Company” or “Applied”) is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. Although the Company does not generally manufacture the products it sells, it does assemble and repair certain products and systems. Consolidation The consolidated financial statements include the accounts of Applied Industrial Technologies, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Foreign Currency The financial statements of the Company’s Canadian, Mexican, Australian and New Zealand subsidiaries are measured using local currencies as their functional currencies. Assets and liabilities are translated into U.S. dollars at current exchange rates, while income and expenses are translated at average exchange rates. Translation gains and losses are reported in other comprehensive Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. Marketable Securities The primary marketable security investments of the Company include money market and mutual funds held in a rabbi trust for a non-qualified deferred compensation plan. These are included in other assets in the consolidated balance sheets, are classified as trading securities, and are reported at fair value based on quoted market prices. Changes in the fair value of the investments during the period are recorded in other Concentration of Credit Risk The Company has a broad customer base representing many diverse industries across North America, Australia, New Zealand, and Singapore. As such, the Company does not believe that a significant concentration of credit risk exists in its accounts receivable. The Company’s cash and cash equivalents consist of deposits with commercial banks and regulated non-bank subsidiaries. While the Company monitors the creditworthiness of these institutions, a crisis in the financial systems could limit access to funds and/or result in the loss of principal. The terms of these deposits and investments provide that all monies are available to the Company upon demand. Accounts Receivable Accounts receivable are stated at their estimated net realizable value and consist of amounts billed or billable and currently due from customers. Allowances for Doubtful Accounts The Company maintains an allowance for doubtful accounts, which reflects management’s best estimate of probable losses based on an analysis of customer accounts, known troubled accounts, historical experience with write-offs, and other currently available evidence. experience. This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer 35 pool, and changes in the overall aging of accounts receivable. Accounts are written off against the allowance when it becomes evident collection will not occur. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. The allowance for doubtful accounts was Inventories Inventories are valued at average cost, using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. The Company adopted the link chain dollar value LIFO method of accounting for U.S. inventories in fiscal 1974. At June 30, The Company evaluates the recoverability of its slow moving and inactive inventories at least quarterly. The Company estimates the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory, as well as assumptions regarding future demand. The Company’s ability to recover its cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand, and relationships with suppliers. Historically, the Company’s inventories have demonstrated long shelf lives, are not highly susceptible to obsolescence, and, in certain instances, can be eligible for return under supplier return programs. Supplier Purchasing Programs The Company enters into agreements with certain suppliers providing inventory purchase incentives. The Company’s inventory purchase incentive arrangements are unique to each supplier and are generally annual programs ending at either the Company’s fiscal year end or the supplier’s year end; however, program length and ending dates can vary. Incentives are received in the form of cash or credits against purchases upon attainment of specified purchase volumes and are received either monthly, quarterly or annually. The incentives are generally a specified percentage of the Company’s net purchases based upon achieving specific purchasing volume levels. These percentages can increase or decrease based on changes in the volume of purchases. The Company accrues for the receipt of these inventory purchase incentives based upon cumulative purchases of inventory. The percentage level utilized is based upon the estimated total volume of purchases expected during the life of the program. Supplier programs are analyzed each quarter to determine the appropriateness of the amount of purchase incentives accrued. Upon program completion, differences between estimates and actual incentives subsequently received have not been material. Benefits under these supplier purchasing programs are recognized under the Company’s inventory accounting methods as a reduction of cost of sales when the inventories representing these purchases are recorded as cost of sales. Accrued incentives expected to be settled as a credit against future purchases are reported on the consolidated balance sheets as an offset to amounts due to the related supplier. Property and Related Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is included in selling, distribution and administrative expense in the accompanying statements of consolidated income. Buildings, building improvements and leasehold improvements are depreciated over ten to thirty years or the life of the lease if a shorter period, and equipment is depreciated over three to ten years. The Company capitalizes internal use software development costs in accordance with guidance on accounting for costs of computer software developed or obtained for internal use. Amortization of software begins when it is ready for its intended use, and is computed on a straight-line basis over the estimated useful life of the software, generally not to exceed twelve years. Capitalized software and hardware costs are classified as property on the consolidated balance sheets. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the asset group's recorded value cannot be recovered from undiscounted future cash flows. Impairment losses, if any, would be measured based upon the difference between the carrying amount of an asset group and its fair value. Goodwill and Intangible Assets Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized. Goodwill is reviewed for impairment annually as of January 1 or whenever changes in conditions indicate an evaluation should be completed. These conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. The Company utilizes the income and market approaches to determine the fair value of reporting units. Evaluating impairment requires significant judgment by management, 36 including estimated future operating results, estimated future cash flows, the long-term rate of growth of the business, and determination of an appropriate discount rate. While the Company uses available information to prepare the estimates and evaluations, actual results could differ significantly. The Company recognizes acquired identifiable intangible assets such as customer relationships, trade names, vendor relationships, and non-competition agreements apart from goodwill. Customer relationship identifiable intangibles are amortized using the sum-of-the-years-digits method or the expected cash flow method over estimated useful lives consistent with assumptions used in the determination of their value. Amortization of all other finite-lived identifiable intangible assets is computed using the straight-line method over the estimated period of benefit. Amortization of identifiable intangible assets is included in selling, distribution and administrative expense in the accompanying statements of consolidated income. Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model. Identifiable intangible assets with indefinite lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be completed. The Company does not currently have any indefinite-lived identifiable intangible assets. Self-Insurance Liabilities The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, business, automobile, general product liability and other claims. The Company accrues estimated losses including those incurred but not reported using actuarial calculations, models and assumptions based on historical loss experience. The Company also maintains a self-insured health benefits plan which provides medical benefits to U.S. based employees electing coverage under the plan. The Company estimates its reserve for all unpaid medical claims, including those incurred but not reported, based on historical experience, adjusted as necessary based upon management’s reasoned judgment. Revenue Recognition The Company primarily sells purchased products distributed through its network of service centers and recognizes revenue at a point in time when control of the product transfers to the customer, typically upon shipment from an Applied facility or directly from a supplier. For products that ship directly from suppliers to customers, Applied generally acts as the principal in the transaction and recognizes revenue on a gross basis. Revenue recognized over time is not significant. Revenue is measured as the amount of consideration expected to be received in exchange for the products and services provided, net of allowances for product returns, variable consideration, and any taxes collected from customers that will be remitted to governmental authorities. Shipping and handling costs are recognized in net sales when they are billed to the customer. The Company has elected to account for shipping and handling activities as fulfillment costs. There are no significant costs associated with obtaining customer contracts. Payment terms with customers vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates. Product returns are estimated based on historical return rates. The returns reserve was The Company estimates and recognizes variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services to a customer. The Company records variable consideration as an adjustment to the transaction price in the period it is incurred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. Shipping and Handling Costs The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution and administrative expense in the accompanying statements of consolidated income. Internal delivery costs in selling, distribution and administrative expense were approximately 37 Income Taxes Income taxes are determined based upon income and expenses recorded for financial reporting purposes. Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. Uncertain tax positions meeting a more-likely-than-not recognition threshold are recognized in accordance with Accounting Standards Codification (ASC) Topic 740 - Income Taxes. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in the provision for income taxes. Share-Based Compensation Share-based compensation represents the cost related to share-based awards granted to employees under the 2019 Long-Term Performance Plan, the 2015 Long-Term Performance Plan, Treasury Shares Shares of common stock repurchased by the Company are recorded at cost as treasury shares and result in a reduction of shareholders’ equity in the consolidated balance sheets. The Company uses the weighted-average cost method for determining the cost of shares reissued. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital. Derivatives The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Retirement Savings Plan Substantially all U.S. employees participate in the Applied Industrial Technologies, Inc. Retirement Savings Plan. Participants may elect 401(k) contributions of up to 50% of their compensation, subject to Internal Revenue Code maximums. The Company partially matches 401(k) contributions by participants. The Company suspended the 401(k) match starting in the fourth quarter of 2020 and restored it in the third quarter of fiscal 2021. The Company’s expense for matching of employees’ 401(k) contributions was $9,989, $9,149 and $3,945 Deferred Compensation Plans The Company has deferred compensation plans that enable certain employees of the Company to defer receipt of a portion of their compensation. Assets held in these rabbi trusts consist of investments in money market and mutual funds and Company common stock. 38 Post-employment Benefit Plans The Company provides the following post-employment benefits which, except for the Qualified Defined Benefit Retirement Plan and Key Executive Restoration Plan, are unfunded: Supplemental Executive Retirement Benefits Plan The Company has a non-qualified pension plan to provide supplemental retirement benefits to certain officers. Benefits are payable and determinable at retirement based upon a percentage of the participant’s historical compensation. The Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. The Company recorded net periodic benefit costs associated with the SERP of Key Executive Restoration Plan In fiscal 2012, the Company adopted the Key Executive Restoration Plan (KERP), a funded, non-qualified deferred compensation plan, to replace the SERP. The Company recorded Qualified Defined Benefit Retirement Plan The Retiree Health Care Benefits The Company provides health care benefits, through third-party policies, to eligible retired employees who pay a specified monthly premium. Premium payments are based upon current insurance rates for the type of coverage provided and are adjusted annually. Certain monthly health care premium payments are partially subsidized by the Company. Additionally, in conjunction with a fiscal 1998 acquisition, the Company assumed the obligation for a post-retirement medical benefit plan which provides health care benefits to eligible retired employees at no cost to the individual. The Company recorded net periodic benefits associated with these plans of The Company has determined that the related disclosures under ASC Topic 715 - Compensation, Retirement Benefits, for these post-employment benefit plans are not material to the consolidated financial statements. Leases The Company leases facilities for certain service centers, warehouses, distribution centers and office space. The Company also leases office equipment and vehicles. All leases are classified as operating. The Company’s leases expire at various dates through 39 NOTE 2: REVENUE RECOGNITION Disaggregation of Revenues The following tables present the Company's net sales by reportable segment and by geographic areas based on the location of the facility shipping the product for the years ended June 30,
The following tables present the Company’s percentage of revenue by reportable segment and major customer industry for the years ended June 30,
The following tables present the Company’s percentage of revenue by reportable segment and product line for the years ended June 30,
Contract Assets The Company’s contract assets consist of un-billed amounts resulting from contracts for which revenue is recognized over time using the cost-to-cost method, and for which revenue recognized exceeds the amount billed to the customer. Activity related to contract assets, which are included in other current assets on the consolidated balance sheet, is as follows:
The difference between the opening and closing balances of the Company's contract assets primarily results from the timing difference between the Company's performance and when the customer is billed. NOTE 3: BUSINESS COMBINATIONS The operating results of all acquired entities are included within the consolidated operating results of the Company from the date of each respective acquisition. Fiscal 2023 Acquisitions On March 31, 2023, the Company acquired substantially all of the net assets of Advanced Motion Systems Inc. (AMS), a western New York based provider of automation products, services, and engineered solutions focused on a full range of machine vision, robotics, and motion control products and technologies. AMS is included in the Engineered Solutions segment. The purchase price for the acquisition was $10,118, net tangible assets acquired were $1,768, and intangible assets including goodwill were $8,350 based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. On November 1, 2022, the Company acquired substantially all of the net assets of Automation, Inc., a Minneapolis, Minnesota based provider of automation products, services, and engineered solutions focused on machine vision, collaborative and mobile robotics, motion control, intelligent sensors, pneumatics, and other related products and solutions. Automation, Inc. is included in the Engineered Solutions segment. The purchase price for the acquisition was $25,667, net tangible assets acquired were $3,689, and intangible assets including goodwill were $21,978 based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The Company 42 funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. Fiscal 2022 Acquisitions On August 18, 2021, the Company acquired substantially all of the net assets of R.R. Floody Company (Floody), a Rockford, Illinois provider of high technology solutions for advanced factory automation. Floody is included in the Engineered Solutions segment. The purchase price for the acquisition was $8,038, net tangible assets acquired were $1,040, and intangible assets including goodwill were $6,998 based upon estimated fair values at the acquisition date. The purchase price includes $1,000 of acquisition holdback payments, of which $500 was paid during the year-ended June 30, 2023. The remaining balance of $500 is included in other current liabilities on the consolidated balance sheet as of June 30, 2023, and will be paid on the second anniversary of the acquisition date with interest at a fixed rate of 2.0% per annum. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. Fiscal 2021 Acquisitions On December 31, 2020, the Company acquired 100% of the outstanding shares of Gibson Engineering (Gibson), a Norwood, Massachusetts provider of automation products, services, and engineered solutions focused on machine vision, motion control, mobile and collaborative robotic solutions, intelligent sensors, and other related equipment. Gibson is included in the On October 5, 2020, the Company acquired substantially all of the net assets of Advanced Control Solutions (ACS), which operates four locations in Georgia, Tennessee and Alabama. ACS is a provider of automation products, services, and engineered solutions focused on machine vision equipment and software, mobile and collaborative robotic solutions, intelligent sensors, logic controllers, and other related equipment. ACS is included in the NOTE 4: INVENTORIES Inventories consist of the following:
The overall impact of LIFO layer liquidations increased gross profit by 43 NOTE 5: GOODWILL AND INTANGIBLES The changes in the carrying amount of goodwill for both the Service Center Based Distribution segment and the
The Company has eight (8) reporting units for which an annual goodwill impairment assessment was performed as of January 1, The fair values of the reporting units in accordance with the goodwill impairment test were determined using the income and market approaches. The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors, and requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA), and discount rates. The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, EBITDA, and multiples that are applied to management’s forecasted revenues and EBITDA estimates. The techniques used in the Company's impairment test have incorporated a number of assumptions that the Company believes to be reasonable and to reflect known market conditions at the measurement date. Assumptions in estimating future cash flows are subject to a degree of judgment. The Company makes all efforts to forecast future cash flows as accurately as possible with the information available at the measurement date. The Company evaluates the appropriateness of its assumptions and overall forecasts by comparing projected results of upcoming years with actual results of preceding years. Key assumptions (Level 3 in the fair value hierarchy) relate to pricing trends, inventory costs, customer demand, and revenue growth. A number of benchmarks from independent industry and other economic publications were also used. Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have fallen below their carrying values. Certain events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the Company’s reporting units may include such items as: (i) a decrease in expected future cash flows, specifically, a decrease in sales volume driven by a prolonged weakness in customer demand or other pressures adversely affecting our long-term sales trends; (ii) inability to achieve the sales from our strategic growth initiatives. At June 30, 44 The Company's identifiable intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off. During fiscal 2021, due to the economic downturn in the oil and gas end markets, the Company
During fiscal 2023, the Company acquired identifiable intangible assets with an acquisition cost allocation and weighted-average life as follows:
Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. Amortization of identifiable intangibles totaled NOTE 6: DEBT A summary of long-term debt, including the current portion, follows:
Revolving Credit Facility & Term Loan In Additionally, the Company had letters of credit outstanding credit agreement, in the amount of order to secure certain insurance obligations. Trade Receivable Securitization Facility In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”) Unsecured Shelf Facility At June 30, 46 Other Long-Term Borrowing In 2014, the Company assumed $2,359 of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency The table below summarizes the aggregate maturities of amounts outstanding under long-term borrowing arrangements for each of the next five years:
Covenants The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At June 30, NOTE 7: DERIVATIVES Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. In January 2019, the Company entered into an interest rate swap to mitigate variability in forecasted interest payments on $463,000 of the Company’s U.S. dollar-denominated unsecured variable rate debt. The notional amount declines over time. The interest rate swap effectively converts a portion of the floating rate interest payment into a fixed rate interest payment. The Company designated the interest rate swap as a pay-fixed, receive-floating interest rate swap instrument and is accounting for this derivative as a cash flow hedge. During the quarter ended December 31, 2020, the Company completed a transaction to amend and extend the interest rate swap agreement which resulted in an extension of the maturity date by an additional three years and a decrease of the weighted average fixed pay rate from 2.61% to 1.63%. The 47 made various ASC 848 elections related to changes in critical terms of the hedging relationship due to reference rate reform to not result in a dedesignation of the hedging relationship. As of May 31, 2023, the Company's interest rate swap agreement was indexed to SOFR. The interest rate swap NOTE 8: FAIR VALUE MEASUREMENTS Marketable securities measured at fair value at June 30, As of June 30, The revolving credit facility NOTE 9: INCOME TAXES Income Before Income Taxes The components of income before income taxes are as follows:
Provision The provision
Effective Tax Rates The following reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate:
Consolidated Balance Sheets Significant components of the Company’s deferred tax assets and liabilities are as follows:
As of June 30, Valuation allowances are provided against deferred tax assets where it is considered more-likely-than-not that the Company will not realize the benefit of such assets. The remaining net deferred tax asset is the amount management believes is more-likely-than-not of being realized. The realization of these deferred tax assets can be impacted by changes to tax laws, statutory tax rates and future income levels. As of June 30, Unrecognized Income Tax Benefits The Company and its subsidiaries file income tax returns in U.S. federal, various state, local and foreign jurisdictions. The following table sets forth the changes in the amount of unrecognized tax benefits for the years ended June 30,
The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. During The Company is subject to U.S. federal income tax examinations for the tax years The Company’s unrecognized income tax benefits are included in other liabilities in the consolidated balance sheets since payment of cash is not expected within one year, or as a reduction of a deferred tax asset. NOTE 10: SHAREHOLDERS’ EQUITY Treasury Shares At June 30, Accumulated Other Comprehensive Loss Changes in the accumulated other comprehensive loss for the years ended June 30,
Details of other comprehensive income are as follows:
Net Income Per Share Basic net income per share is based on the weighted-average number of common shares outstanding. Diluted net income per share includes the dilutive effect of potential common shares outstanding. Under the two-class method of computing net income per share, non-vested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. The Company’s participating securities include Restricted Stock Units ("RSUs") and restricted stock awards. The Company calculated basic and diluted net income per share under both the treasury stock method and the two-class method. For the years presented there were no material differences in the net income per share amounts calculated using the two methods. Accordingly, the treasury stock method is disclosed below. The following table presents amounts used in computing net income per share and the effect on the weighted-average number of shares of dilutive potential common shares:
Stock awards relating to NOTE 11: SHARE-BASED COMPENSATION Share-Based Incentive Plans Following approval by the Company's shareholders in October 2019, the 2019 Long-Term Performance Plan (the "2019 Plan") replaced the 2015 Long-Term Performance Plan. The 2019 Plan, which expires in 2024, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or, in the case of director awards, the Corporate Governance & Sustainability Committee of the Board of Directors (together referred to as the Committee) may determine to officers, other key employees and members of the Board of Directors. Grants are generally made at regularly scheduled committee meetings. Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs,
Such amounts are included in selling, distribution and administrative expense in the accompanying statements of consolidated income. The total income tax benefit recognized in the statements of consolidated income for share-based compensation plans was 52 The aggregate unrecognized compensation cost for share-based award programs with the potential to be paid at June 30,
Cost of these programs will be recognized as expense over the weighted-average remaining vesting period of Stock Appreciation Rights and Stock Options The weighted-average assumptions used for SARs and 2019
The expected life is based upon historical exercise experience of the officers, other key employees and members of the Board of Directors. The risk free interest rate is based upon U.S. Treasury zero-coupon bonds with remaining terms equal to the expected life of the SARs are redeemable solely in Company common stock. The exercise price of stock option awards may be settled by the holder with cash or by tendering Company common stock. A summary of SARs and stock options activity is presented below:
The weighted-average remaining contractual terms for SARs and stock options outstanding, exercisable, and expected to vest at June 30, The total fair value of shares vested during fiscal 2023, 2022, and 2021 53 Performance Shares Performance shares are paid in shares of Applied stock at the end of a three-year period provided the Company achieves goals established by the Committee. The number of Applied shares payable will vary depending on the level of the goals achieved. A summary of non-vested performance shares activity at June 30,
The Committee set three one-year goals for each of the Restricted Stock and Restricted Stock Units A summary of the status of the Company’s non-vested restricted stock and RSUs at June 30,
54 NOTE 12: LEASES The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, distribution and administrative expense on the statements of consolidated income. Operating lease costs and short-term lease costs were Information related to operating leases is as follows:
The table below summarizes the aggregate maturities of liabilities pertaining to operating leases with terms greater than one year for each of the next five years:
The Company maintains lease agreements for many of the operating facilities of businesses it acquires from previous owners. In many cases, the previous owners of the business acquired become employees of Applied and occupy management positions within those businesses. The payments under lease agreements of this nature totaled $1,500 in 2023, and $2,100 in NOTE 13: SEGMENT INFORMATION The Company's reportable segments are: Service Center Based Distribution and Engineered Solutions (formerly known as Fluid Power & Flow 55 customers’ machinery and equipment. The The accounting policies of the Company’s reportable segments are generally the same as those described in note 1. Intercompany sales, primarily from the Segment Financial Information
A reconciliation of operating income for reportable segments to the consolidated income before income taxes is as follows:
Fluctuations in corporate and other expense, net, are due to changes in corporate expenses, as well as in the amounts and levels of certain expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items. Geographic Information Long-lived assets are based on physical locations and are comprised of the net book value of property and right of use assets. Information by geographic area is as follows:
NOTE 14: COMMITMENTS AND CONTINGENCIES The Company is a party to various pending judicial and administrative proceedings. Based on circumstances currently known, the Company does not expect that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. NOTE 15: OTHER Other
NOTE 16: SUBSEQUENT EVENTS We have evaluated events and transactions occurring subsequent to June 30, ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures The Company's management, under the supervision and with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective. Management's Report on Internal Control over Financial Reporting The Management of Applied Industrial Technologies, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the President & Chief Executive Officer and the Vice President - Chief Financial Officer, Treasurer, & The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s Management and Board of Directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements. Because of inherent limitations, internal control over financial reporting can provide only reasonable, not absolute, assurance with respect to the preparation and presentation of the consolidated financial statements and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.
August Changes in Internal Control Over Financial Reporting There have not been any changes in internal control over financial reporting during the quarter ended June 30, REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Applied Industrial Technologies, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of June 30, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Cleveland, Ohio August ITEM 9B. OTHER INFORMATION. During the fiscal quarter ended June 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item as to Applied's directors is incorporated by reference to Applied's proxy statement relating to the annual meeting of shareholders to be held October The information required by this Item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to Applied's proxy statement, under the caption “Delinquent Section 16(a) Reports." Applied has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of Applied's securities by directors, officers, and employees. Information regarding the composition of Applied’s audit committee and the identification of audit committee financial experts serving on the audit committee is incorporated by reference to Applied's proxy statement, under the caption “Corporate Governance.” ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Equity compensation plan information is incorporated herein by reference to Applied's proxy statement for the annual meeting of shareholders
Information concerning the security ownership of certain beneficial owners and management is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by this Item is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a)1. Financial Statements. The following consolidated financial statements, notes thereto, the reports of independent registered public accounting firm, and supplemental data are included in Item 8 of this report:
(a)2. Financial Statement Schedule. The following schedule is included in this Part IV, and is found in this report at the page indicated:
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. 63
64
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 the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each such instrument. ITEM 16. FORM 10-K SUMMARY. Not applicable. APPLIED INDUSTRIAL TECHNOLOGIES, INC. & SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, (in thousands)
(A)Amounts in the years ending June 30, (B)Amounts represent uncollectible accounts charged off. 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.
Date: August 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.
Date: August | Year Ended June 30, As a % of Net Sales | Change in Sales in fiscal The following table shows changes in sales by reportable segment.
Sales Sales in our Engineered Solutions segment increased $200.9 million or 16.1%. Acquisitions within this segment, primarily Automation, Inc., increased sales 18 The following table shows changes in sales by geographical area. Other countries
Sales in our U.S. operations Our gross profit margin increased to 29.2% in fiscal 2023 compared to 29.0% in fiscal 2022. Gross profit margin expanded year over year primarily reflecting broad-based execution across the ongoing inflation and supply chain dynamics. The gross profit margin for the current year was The following table shows the changes in selling, distribution, and administrative expense (SD&A).
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management, and marketing and distribution of the Company’s products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, facility related expenses and expenses incurred in acquiring businesses. SD&A Operating income increased Operating income, 19 Segment operating income is impacted by changes in the amounts and levels of certain supplier support benefits and expenses allocated to the segments. The expense allocations include corporate charges for working capital, logistics support and other items and impact segment gross profit and operating expense. Other The effective income tax rate was As a result of the factors discussed above, net income for fiscal At June 30, The approximate number of Company employees was LIQUIDITY AND CAPITAL RESOURCES Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At June 30, The Company’s working capital at June 30, Net Cash Flows The following table is included to aid in review of Applied’s statements of consolidated cash are in thousands.
The
Net cash used in investing activities in fiscal 20 Net cash used in financing activities The increase in dividends over the year is the result of regular increases in our dividend payout rates. We paid dividends of Capital Expenditures We expect capital expenditures for fiscal Share Repurchases The Board of Directors has authorized the repurchase of shares of the Company’s stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. At June 30, the Company's common stock at an average price per share of $92.72. In fiscal 2021,we repurchased 400,000 shares of the Company's common stock at an average price per share of $100.22. Borrowing Arrangements A summary of long-term debt, including the current portion,
In In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”) 21 times, we may not be able to fully access the $250.0 million of funding available under the AR Securitization Facility. The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. At June 30, In 2014, the Company assumed $2.4 million of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency and matures in November 2024. The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At June 30, 2023. Accounts Receivable Analysis The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable (all dollar amounts are in thousands):
Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's locations. The Company experienced a significant increase in accounts receivable during fiscal 2023 commensurate with the increase in sales. On a consolidated basis, DSO was 22 Inventory Analysis Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Inventory increased throughout fiscal 2022 to meet increasing customer demand. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis and uses inventory valued at average costs. The annualized inventory turnover (using average costs) for the year ended June 30, CONTRACTUAL OBLIGATIONS The following table shows the approximate value of the Company’s contractual obligations and other commitments to make future payments as of June 30,
(1) Amounts represent estimated contractual interest payments on outstanding long-term debt obligations Purchase orders for inventory and other goods and services are not included in our estimates as we are unable to aggregate the amount of such purchase orders that represent enforceable and legally binding agreements specifying all significant terms. The previous table includes the gross liability for unrecognized income tax benefits including interest and penalties in the “Other” column as the Company is unable to make a reasonable estimate regarding the timing of cash settlements, if any, with the respective taxing authorities. CRITICAL ACCOUNTING POLICIES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates at a specific point in time that affect the amounts reported in the consolidated financial statements and disclosed in the accompanying notes. The Business and Accounting Policies note to the consolidated financial statements describes the significant accounting policies and methods used in preparation of the consolidated financial statements. Estimates are used for, but not limited to, determining the net carrying value of trade accounts receivable, inventories, recording self-insurance liabilities and other accrued liabilities. Estimates are also used in establishing opening balances in relation to purchase accounting. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. LIFO Inventory Valuation and Methodology Inventories are valued at the average cost method, using the last-in, first-out (LIFO) method for U.S. inventories, and the average cost method for foreign inventories. We adopted the link chain dollar value LIFO method for accounting for U.S. inventories in fiscal 1974. Approximately LIFO layers and/or liquidations are determined consistently year-to-year. See the Inventories note to the consolidated financial statements in Item 8 under the caption "Financial Statements and Supplementary Data," for further information. 23 Allowances for Slow-Moving and Obsolete Inventories We evaluate the recoverability of our slow-moving and inactive inventories at least quarterly. We estimate the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory, as well as assumptions regarding future demand. Our ability to recover our cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand and relationships with suppliers. A significant portion of the products we hold in inventory have long shelf lives and are not highly susceptible to obsolescence. As of June 30, Allowances for Doubtful Accounts We evaluate the collectibility of trade accounts receivable based on a combination of factors. Initially, we estimate an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is adjusted based on recent trends of certain customers and industries estimated to be a greater credit risk, trends within the entire customer pool and changes in the overall aging of accounts receivable. While we have a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. Accounts are written off against the allowance when it becomes evident that collection will not occur. As of June 30, Goodwill and Intangibles The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. Goodwill for acquired businesses is accounted for using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of the acquisition at their respective estimated fair values. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The judgments made in determining the estimated fair value assigned to each class of assets acquired, as well as the estimated life of each asset, can materially impact the net income of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As part of acquisition accounting, we recognize acquired identifiable intangible assets such as customer relationships, vendor relationships, trade names, and non-competition agreements apart from goodwill. Finite-lived identifiable intangibles are evaluated for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model. We evaluate goodwill for impairment at the reporting unit level annually as of January 1, and whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price. Each year, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If impairment is indicated in the qualitative assessment, or, if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach. The fair value of a reporting unit is compared with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Goodwill on our consolidated financial statements relates to both the Service Center Based Distribution segment and the 24 The fair values of the reporting units in accordance with the goodwill impairment test were determined using the income and market approaches. The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors, and requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates. The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA) and multiples that are applied to management’s forecasted revenues and EBITDA estimates. Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have fallen below their carrying values. Income Taxes Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. As of June 30, CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT This Form 10-K, including Management’s Discussion and Analysis, contains statements that are forward-looking based on management’s current expectations about the future. Forward-looking statements are often identified by qualifiers, such as “guidance”, “expect”, “believe”, “plan”, “intend”, “will”, “should”, “could”, “would”, “anticipate”, “estimate”, “forecast”, “may”, "optimistic" and derivative or similar words or expressions. Similarly, descriptions of objectives, strategies, plans, or goals are also forward-looking statements. These statements may discuss, among other things, expected growth, future sales, future cash flows, future capital expenditures, future performance, and the anticipation and expectations of the Company and its management as to future occurrences and trends. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in its rules, regulations, and releases. Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company’s control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of those statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company assumes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise, except as may be required by law. Important risk factors include, but are not limited to, the following: risks relating to the operations levels of our customers and the economic factors that affect them; continuing risks relating to the effects of the COVID-19 pandemic; inflationary or deflationary trends in the cost of products, energy, labor and other operating costs, and changes in the prices for products and services relative to the cost of providing them; reduction in supplier inventory purchase incentives; loss of key supplier authorizations, lack of product availability (such as due to supply chain strains), changes in supplier distribution programs, inability of suppliers to perform, and transportation disruptions; We discuss certain of these matters and other risk factors more fully throughout our Form 10-K, as well as other of our filings with the Securities and Exchange Commission. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our market risk is impacted by changes in foreign currency exchange rates as well as changes in interest rates. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes. Foreign Currency Exchange Rate Risk Because we operate throughout North America, Australia and New Zealand and approximately During the course of the fiscal year, the Canadian, Interest Rate Risk Our primary exposure to interest rate risk results from our outstanding debt obligations with variable interest rates. The levels of fees and interest charged on our various debt facilities are based upon leverage levels and market interest rates. The Company uses interest rate swap instruments to mitigate variability in Our variable interest rate debt facilities outstanding include our five-year credit facility, which provides for a revolving credit facility with a capacity of up to For more information relating to borrowing and interest rates, see the “Liquidity and Capital Resources” section of “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and notes 6 and 7 to the consolidated financial statements in Item 8. That information is also incorporated here by reference. In addition, see Item 1A, “Risk Factors,” for additional risk factors relating to our business. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Applied Industrial Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of June 30, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill - Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using the income and market approaches. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA), and discount rates. The determination of the fair value using the market approach requires management to make significant estimates and assumptions related to the forecasts of future revenues, EBITDA and multiples that are applied to management’s forecasted revenues and EBITDA estimates. The goodwill balance was Given the nature of one of the 28 and the difference between its fair value and the carrying value, auditing management’s judgments regarding forecasts of future revenues and EBITDA, as well as selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates for the How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future revenues and EBITDA (“forecasts”), and the selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates (“market multiples”) for •We tested the effectiveness of controls over management’s goodwill impairment evaluation, such as controls related to management’s forecasts and the selection of the discount rate and market multiples used. •We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts. •We evaluated the reasonableness of management’s forecasts by comparing the current forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in industry reports for the various industries the reporting unit operates within. •With the assistance of our fair value specialists, we evaluated the discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management. •With the assistance of our fair value specialists, we evaluated the market multiples by evaluating the selected comparable publicly traded companies and the adjustments made for differences in growth prospects and risk profiles between the reporting unit and the comparable publicly traded companies. We tested the underlying source information and mathematical accuracy of the calculations. /s/ Deloitte & Touche LLP Cleveland, Ohio August We have served as the Company's auditor since 1966. STATEMENTS OF CONSOLIDATED INCOME (In thousands, except per share amounts)
See notes to consolidated financial statements. STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (In thousands)
See notes to consolidated financial statements. 31 CONSOLIDATED BALANCE SHEETS (In thousands)
See notes to consolidated financial statements. 32
STATEMENTS OF CONSOLIDATED CASH FLOWS (In thousands)
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (In thousands)
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) NOTE 1: BUSINESS AND ACCOUNTING POLICIES Business Applied Industrial Technologies, Inc. and subsidiaries (the “Company” or “Applied”) is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. Although the Company does not generally manufacture the products it sells, it does assemble and repair certain products and systems. Consolidation The consolidated financial statements include the accounts of Applied Industrial Technologies, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Foreign Currency The financial statements of the Company’s Canadian, Mexican, Australian and New Zealand subsidiaries are measured using local currencies as their functional currencies. Assets and liabilities are translated into U.S. dollars at current exchange rates, while income and expenses are translated at average exchange rates. Translation gains and losses are reported in other comprehensive Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. Marketable Securities The primary marketable security investments of the Company include money market and mutual funds held in a rabbi trust for a non-qualified deferred compensation plan. These are included in other assets in the consolidated balance sheets, are classified as trading securities, and are reported at fair value based on quoted market prices. Changes in the fair value of the investments during the period are recorded in other Concentration of Credit Risk The Company has a broad customer base representing many diverse industries across North America, Australia, New Zealand, and Singapore. As such, the Company does not believe that a significant concentration of credit risk exists in its accounts receivable. The Company’s cash and cash equivalents consist of deposits with commercial banks and regulated non-bank subsidiaries. While the Company monitors the creditworthiness of these institutions, a crisis in the financial systems could limit access to funds and/or result in the loss of principal. The terms of these deposits and investments provide that all monies are available to the Company upon demand. Accounts Receivable Accounts receivable are stated at their estimated net realizable value and consist of amounts billed or billable and currently due from customers. Allowances for Doubtful Accounts The Company maintains an allowance for doubtful accounts, which reflects management’s best estimate of probable losses based on an analysis of customer accounts, known troubled accounts, historical experience with write-offs, and other currently available evidence. experience. This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer 35 pool, and changes in the overall aging of accounts receivable. Accounts are written off against the allowance when it becomes evident collection will not occur. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. The allowance for doubtful accounts was Inventories Inventories are valued at average cost, using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. The Company adopted the link chain dollar value LIFO method of accounting for U.S. inventories in fiscal 1974. At June 30, The Company evaluates the recoverability of its slow moving and inactive inventories at least quarterly. The Company estimates the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory, as well as assumptions regarding future demand. The Company’s ability to recover its cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand, and relationships with suppliers. Historically, the Company’s inventories have demonstrated long shelf lives, are not highly susceptible to obsolescence, and, in certain instances, can be eligible for return under supplier return programs. Supplier Purchasing Programs The Company enters into agreements with certain suppliers providing inventory purchase incentives. The Company’s inventory purchase incentive arrangements are unique to each supplier and are generally annual programs ending at either the Company’s fiscal year end or the supplier’s year end; however, program length and ending dates can vary. Incentives are received in the form of cash or credits against purchases upon attainment of specified purchase volumes and are received either monthly, quarterly or annually. The incentives are generally a specified percentage of the Company’s net purchases based upon achieving specific purchasing volume levels. These percentages can increase or decrease based on changes in the volume of purchases. The Company accrues for the receipt of these inventory purchase incentives based upon cumulative purchases of inventory. The percentage level utilized is based upon the estimated total volume of purchases expected during the life of the program. Supplier programs are analyzed each quarter to determine the appropriateness of the amount of purchase incentives accrued. Upon program completion, differences between estimates and actual incentives subsequently received have not been material. Benefits under these supplier purchasing programs are recognized under the Company’s inventory accounting methods as a reduction of cost of sales when the inventories representing these purchases are recorded as cost of sales. Accrued incentives expected to be settled as a credit against future purchases are reported on the consolidated balance sheets as an offset to amounts due to the related supplier. Property and Related Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is included in selling, distribution and administrative expense in the accompanying statements of consolidated income. Buildings, building improvements and leasehold improvements are depreciated over ten to thirty years or the life of the lease if a shorter period, and equipment is depreciated over three to ten years. The Company capitalizes internal use software development costs in accordance with guidance on accounting for costs of computer software developed or obtained for internal use. Amortization of software begins when it is ready for its intended use, and is computed on a straight-line basis over the estimated useful life of the software, generally not to exceed twelve years. Capitalized software and hardware costs are classified as property on the consolidated balance sheets. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the asset group's recorded value cannot be recovered from undiscounted future cash flows. Impairment losses, if any, would be measured based upon the difference between the carrying amount of an asset group and its fair value. Goodwill and Intangible Assets Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized. Goodwill is reviewed for impairment annually as of January 1 or whenever changes in conditions indicate an evaluation should be completed. These conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. The Company utilizes the income and market approaches to determine the fair value of reporting units. Evaluating impairment requires significant judgment by management, 36 including estimated future operating results, estimated future cash flows, the long-term rate of growth of the business, and determination of an appropriate discount rate. While the Company uses available information to prepare the estimates and evaluations, actual results could differ significantly. The Company recognizes acquired identifiable intangible assets such as customer relationships, trade names, vendor relationships, and non-competition agreements apart from goodwill. Customer relationship identifiable intangibles are amortized using the sum-of-the-years-digits method or the expected cash flow method over estimated useful lives consistent with assumptions used in the determination of their value. Amortization of all other finite-lived identifiable intangible assets is computed using the straight-line method over the estimated period of benefit. Amortization of identifiable intangible assets is included in selling, distribution and administrative expense in the accompanying statements of consolidated income. Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model. Identifiable intangible assets with indefinite lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be completed. The Company does not currently have any indefinite-lived identifiable intangible assets. Self-Insurance Liabilities The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, business, automobile, general product liability and other claims. The Company accrues estimated losses including those incurred but not reported using actuarial calculations, models and assumptions based on historical loss experience. The Company also maintains a self-insured health benefits plan which provides medical benefits to U.S. based employees electing coverage under the plan. The Company estimates its reserve for all unpaid medical claims, including those incurred but not reported, based on historical experience, adjusted as necessary based upon management’s reasoned judgment. Revenue Recognition The Company primarily sells purchased products distributed through its network of service centers and recognizes revenue at a point in time when control of the product transfers to the customer, typically upon shipment from an Applied facility or directly from a supplier. For products that ship directly from suppliers to customers, Applied generally acts as the principal in the transaction and recognizes revenue on a gross basis. Revenue recognized over time is not significant. Revenue is measured as the amount of consideration expected to be received in exchange for the products and services provided, net of allowances for product returns, variable consideration, and any taxes collected from customers that will be remitted to governmental authorities. Shipping and handling costs are recognized in net sales when they are billed to the customer. The Company has elected to account for shipping and handling activities as fulfillment costs. There are no significant costs associated with obtaining customer contracts. Payment terms with customers vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates. Product returns are estimated based on historical return rates. The returns reserve was The Company estimates and recognizes variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services to a customer. The Company records variable consideration as an adjustment to the transaction price in the period it is incurred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. Shipping and Handling Costs The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution and administrative expense in the accompanying statements of consolidated income. Internal delivery costs in selling, distribution and administrative expense were approximately 37 Income Taxes Income taxes are determined based upon income and expenses recorded for financial reporting purposes. Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. Uncertain tax positions meeting a more-likely-than-not recognition threshold are recognized in accordance with Accounting Standards Codification (ASC) Topic 740 - Income Taxes. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in the provision for income taxes. Share-Based Compensation Share-based compensation represents the cost related to share-based awards granted to employees under the 2019 Long-Term Performance Plan, the 2015 Long-Term Performance Plan, Treasury Shares Shares of common stock repurchased by the Company are recorded at cost as treasury shares and result in a reduction of shareholders’ equity in the consolidated balance sheets. The Company uses the weighted-average cost method for determining the cost of shares reissued. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital. Derivatives The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Retirement Savings Plan Substantially all U.S. employees participate in the Applied Industrial Technologies, Inc. Retirement Savings Plan. Participants may elect 401(k) contributions of up to 50% of their compensation, subject to Internal Revenue Code maximums. The Company partially matches 401(k) contributions by participants. The Company suspended the 401(k) match starting in the fourth quarter of 2020 and restored it in the third quarter of fiscal 2021. The Company’s expense for matching of employees’ 401(k) contributions was $9,989, $9,149 and $3,945 Deferred Compensation Plans The Company has deferred compensation plans that enable certain employees of the Company to defer receipt of a portion of their compensation. Assets held in these rabbi trusts consist of investments in money market and mutual funds and Company common stock. 38 Post-employment Benefit Plans The Company provides the following post-employment benefits which, except for the Qualified Defined Benefit Retirement Plan and Key Executive Restoration Plan, are unfunded: Supplemental Executive Retirement Benefits Plan The Company has a non-qualified pension plan to provide supplemental retirement benefits to certain officers. Benefits are payable and determinable at retirement based upon a percentage of the participant’s historical compensation. The Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan (SERP) effective December 31, 2011. The Company recorded net periodic benefit costs associated with the SERP of Key Executive Restoration Plan In fiscal 2012, the Company adopted the Key Executive Restoration Plan (KERP), a funded, non-qualified deferred compensation plan, to replace the SERP. The Company recorded Qualified Defined Benefit Retirement Plan The Retiree Health Care Benefits The Company provides health care benefits, through third-party policies, to eligible retired employees who pay a specified monthly premium. Premium payments are based upon current insurance rates for the type of coverage provided and are adjusted annually. Certain monthly health care premium payments are partially subsidized by the Company. Additionally, in conjunction with a fiscal 1998 acquisition, the Company assumed the obligation for a post-retirement medical benefit plan which provides health care benefits to eligible retired employees at no cost to the individual. The Company recorded net periodic benefits associated with these plans of The Company has determined that the related disclosures under ASC Topic 715 - Compensation, Retirement Benefits, for these post-employment benefit plans are not material to the consolidated financial statements. Leases The Company leases facilities for certain service centers, warehouses, distribution centers and office space. The Company also leases office equipment and vehicles. All leases are classified as operating. The Company’s leases expire at various dates through 39 NOTE 2: REVENUE RECOGNITION Disaggregation of Revenues The following tables present the Company's net sales by reportable segment and by geographic areas based on the location of the facility shipping the product for the years ended June 30,
The following tables present the Company’s percentage of revenue by reportable segment and major customer industry for the years ended June 30,
The following tables present the Company’s percentage of revenue by reportable segment and product line for the years ended June 30,
Contract Assets The Company’s contract assets consist of un-billed amounts resulting from contracts for which revenue is recognized over time using the cost-to-cost method, and for which revenue recognized exceeds the amount billed to the customer. Activity related to contract assets, which are included in other current assets on the consolidated balance sheet, is as follows:
The difference between the opening and closing balances of the Company's contract assets primarily results from the timing difference between the Company's performance and when the customer is billed. NOTE 3: BUSINESS COMBINATIONS The operating results of all acquired entities are included within the consolidated operating results of the Company from the date of each respective acquisition. Fiscal 2023 Acquisitions On March 31, 2023, the Company acquired substantially all of the net assets of Advanced Motion Systems Inc. (AMS), a western New York based provider of automation products, services, and engineered solutions focused on a full range of machine vision, robotics, and motion control products and technologies. AMS is included in the Engineered Solutions segment. The purchase price for the acquisition was $10,118, net tangible assets acquired were $1,768, and intangible assets including goodwill were $8,350 based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. On November 1, 2022, the Company acquired substantially all of the net assets of Automation, Inc., a Minneapolis, Minnesota based provider of automation products, services, and engineered solutions focused on machine vision, collaborative and mobile robotics, motion control, intelligent sensors, pneumatics, and other related products and solutions. Automation, Inc. is included in the Engineered Solutions segment. The purchase price for the acquisition was $25,667, net tangible assets acquired were $3,689, and intangible assets including goodwill were $21,978 based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The Company 42 funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. Fiscal 2022 Acquisitions On August 18, 2021, the Company acquired substantially all of the net assets of R.R. Floody Company (Floody), a Rockford, Illinois provider of high technology solutions for advanced factory automation. Floody is included in the Engineered Solutions segment. The purchase price for the acquisition was $8,038, net tangible assets acquired were $1,040, and intangible assets including goodwill were $6,998 based upon estimated fair values at the acquisition date. The purchase price includes $1,000 of acquisition holdback payments, of which $500 was paid during the year-ended June 30, 2023. The remaining balance of $500 is included in other current liabilities on the consolidated balance sheet as of June 30, 2023, and will be paid on the second anniversary of the acquisition date with interest at a fixed rate of 2.0% per annum. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. Fiscal 2021 Acquisitions On December 31, 2020, the Company acquired 100% of the outstanding shares of Gibson Engineering (Gibson), a Norwood, Massachusetts provider of automation products, services, and engineered solutions focused on machine vision, motion control, mobile and collaborative robotic solutions, intelligent sensors, and other related equipment. Gibson is included in the On October 5, 2020, the Company acquired substantially all of the net assets of Advanced Control Solutions (ACS), which operates four locations in Georgia, Tennessee and Alabama. ACS is a provider of automation products, services, and engineered solutions focused on machine vision equipment and software, mobile and collaborative robotic solutions, intelligent sensors, logic controllers, and other related equipment. ACS is included in the NOTE 4: INVENTORIES Inventories consist of the following:
The overall impact of LIFO layer liquidations increased gross profit by 43 NOTE 5: GOODWILL AND INTANGIBLES The changes in the carrying amount of goodwill for both the Service Center Based Distribution segment and the
The Company has eight (8) reporting units for which an annual goodwill impairment assessment was performed as of January 1, The fair values of the reporting units in accordance with the goodwill impairment test were determined using the income and market approaches. The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors, and requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA), and discount rates. The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, EBITDA, and multiples that are applied to management’s forecasted revenues and EBITDA estimates. The techniques used in the Company's impairment test have incorporated a number of assumptions that the Company believes to be reasonable and to reflect known market conditions at the measurement date. Assumptions in estimating future cash flows are subject to a degree of judgment. The Company makes all efforts to forecast future cash flows as accurately as possible with the information available at the measurement date. The Company evaluates the appropriateness of its assumptions and overall forecasts by comparing projected results of upcoming years with actual results of preceding years. Key assumptions (Level 3 in the fair value hierarchy) relate to pricing trends, inventory costs, customer demand, and revenue growth. A number of benchmarks from independent industry and other economic publications were also used. Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have fallen below their carrying values. Certain events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the Company’s reporting units may include such items as: (i) a decrease in expected future cash flows, specifically, a decrease in sales volume driven by a prolonged weakness in customer demand or other pressures adversely affecting our long-term sales trends; (ii) inability to achieve the sales from our strategic growth initiatives. At June 30, 44 The Company's identifiable intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off. During fiscal 2021, due to the economic downturn in the oil and gas end markets, the Company
During fiscal 2023, the Company acquired identifiable intangible assets with an acquisition cost allocation and weighted-average life as follows:
Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. Amortization of identifiable intangibles totaled NOTE 6: DEBT A summary of long-term debt, including the current portion, follows:
Revolving Credit Facility & Term Loan In Additionally, the Company had letters of credit outstanding credit agreement, in the amount of order to secure certain insurance obligations. Trade Receivable Securitization Facility In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”) Unsecured Shelf Facility At June 30, 46 Other Long-Term Borrowing In 2014, the Company assumed $2,359 of debt as a part of the headquarters facility acquisition. The 1.50% fixed interest rate note is held by the State of Ohio Development Services Agency The table below summarizes the aggregate maturities of amounts outstanding under long-term borrowing arrangements for each of the next five years:
Covenants The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At June 30, NOTE 7: DERIVATIVES Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. In January 2019, the Company entered into an interest rate swap to mitigate variability in forecasted interest payments on $463,000 of the Company’s U.S. dollar-denominated unsecured variable rate debt. The notional amount declines over time. The interest rate swap effectively converts a portion of the floating rate interest payment into a fixed rate interest payment. The Company designated the interest rate swap as a pay-fixed, receive-floating interest rate swap instrument and is accounting for this derivative as a cash flow hedge. During the quarter ended December 31, 2020, the Company completed a transaction to amend and extend the interest rate swap agreement which resulted in an extension of the maturity date by an additional three years and a decrease of the weighted average fixed pay rate from 2.61% to 1.63%. The 47 made various ASC 848 elections related to changes in critical terms of the hedging relationship due to reference rate reform to not result in a dedesignation of the hedging relationship. As of May 31, 2023, the Company's interest rate swap agreement was indexed to SOFR. The interest rate swap NOTE 8: FAIR VALUE MEASUREMENTS Marketable securities measured at fair value at June 30, As of June 30, The revolving credit facility NOTE 9: INCOME TAXES Income Before Income Taxes The components of income before income taxes are as follows:
Provision The provision
Effective Tax Rates The following reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate:
Consolidated Balance Sheets Significant components of the Company’s deferred tax assets and liabilities are as follows:
As of June 30, Valuation allowances are provided against deferred tax assets where it is considered more-likely-than-not that the Company will not realize the benefit of such assets. The remaining net deferred tax asset is the amount management believes is more-likely-than-not of being realized. The realization of these deferred tax assets can be impacted by changes to tax laws, statutory tax rates and future income levels. As of June 30, Unrecognized Income Tax Benefits The Company and its subsidiaries file income tax returns in U.S. federal, various state, local and foreign jurisdictions. The following table sets forth the changes in the amount of unrecognized tax benefits for the years ended June 30,
The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. During The Company is subject to U.S. federal income tax examinations for the tax years The Company’s unrecognized income tax benefits are included in other liabilities in the consolidated balance sheets since payment of cash is not expected within one year, or as a reduction of a deferred tax asset. NOTE 10: SHAREHOLDERS’ EQUITY Treasury Shares At June 30, Accumulated Other Comprehensive Loss Changes in the accumulated other comprehensive loss for the years ended June 30,
Details of other comprehensive income are as follows:
Net Income Per Share Basic net income per share is based on the weighted-average number of common shares outstanding. Diluted net income per share includes the dilutive effect of potential common shares outstanding. Under the two-class method of computing net income per share, non-vested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. The Company’s participating securities include Restricted Stock Units ("RSUs") and restricted stock awards. The Company calculated basic and diluted net income per share under both the treasury stock method and the two-class method. For the years presented there were no material differences in the net income per share amounts calculated using the two methods. Accordingly, the treasury stock method is disclosed below. The following table presents amounts used in computing net income per share and the effect on the weighted-average number of shares of dilutive potential common shares:
Stock awards relating to NOTE 11: SHARE-BASED COMPENSATION Share-Based Incentive Plans Following approval by the Company's shareholders in October 2019, the 2019 Long-Term Performance Plan (the "2019 Plan") replaced the 2015 Long-Term Performance Plan. The 2019 Plan, which expires in 2024, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or, in the case of director awards, the Corporate Governance & Sustainability Committee of the Board of Directors (together referred to as the Committee) may determine to officers, other key employees and members of the Board of Directors. Grants are generally made at regularly scheduled committee meetings. Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs,
Such amounts are included in selling, distribution and administrative expense in the accompanying statements of consolidated income. The total income tax benefit recognized in the statements of consolidated income for share-based compensation plans was 52 The aggregate unrecognized compensation cost for share-based award programs with the potential to be paid at June 30,
Cost of these programs will be recognized as expense over the weighted-average remaining vesting period of Stock Appreciation Rights and Stock Options The weighted-average assumptions used for SARs and 2019
The expected life is based upon historical exercise experience of the officers, other key employees and members of the Board of Directors. The risk free interest rate is based upon U.S. Treasury zero-coupon bonds with remaining terms equal to the expected life of the SARs are redeemable solely in Company common stock. The exercise price of stock option awards may be settled by the holder with cash or by tendering Company common stock. A summary of SARs and stock options activity is presented below:
The weighted-average remaining contractual terms for SARs and stock options outstanding, exercisable, and expected to vest at June 30, The total fair value of shares vested during fiscal 2023, 2022, and 2021 53 Performance Shares Performance shares are paid in shares of Applied stock at the end of a three-year period provided the Company achieves goals established by the Committee. The number of Applied shares payable will vary depending on the level of the goals achieved. A summary of non-vested performance shares activity at June 30,
The Committee set three one-year goals for each of the Restricted Stock and Restricted Stock Units A summary of the status of the Company’s non-vested restricted stock and RSUs at June 30,
54 NOTE 12: LEASES The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, distribution and administrative expense on the statements of consolidated income. Operating lease costs and short-term lease costs were Information related to operating leases is as follows:
The table below summarizes the aggregate maturities of liabilities pertaining to operating leases with terms greater than one year for each of the next five years:
The Company maintains lease agreements for many of the operating facilities of businesses it acquires from previous owners. In many cases, the previous owners of the business acquired become employees of Applied and occupy management positions within those businesses. The payments under lease agreements of this nature totaled $1,500 in 2023, and $2,100 in NOTE 13: SEGMENT INFORMATION The Company's reportable segments are: Service Center Based Distribution and Engineered Solutions (formerly known as Fluid Power & Flow 55 customers’ machinery and equipment. The The accounting policies of the Company’s reportable segments are generally the same as those described in note 1. Intercompany sales, primarily from the Segment Financial Information
A reconciliation of operating income for reportable segments to the consolidated income before income taxes is as follows:
Fluctuations in corporate and other expense, net, are due to changes in corporate expenses, as well as in the amounts and levels of certain expenses being allocated to the segments. The expenses being allocated include corporate charges for working capital, logistics support and other items. Geographic Information Long-lived assets are based on physical locations and are comprised of the net book value of property and right of use assets. Information by geographic area is as follows:
NOTE 14: COMMITMENTS AND CONTINGENCIES The Company is a party to various pending judicial and administrative proceedings. Based on circumstances currently known, the Company does not expect that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. NOTE 15: OTHER Other
NOTE 16: SUBSEQUENT EVENTS We have evaluated events and transactions occurring subsequent to June 30, ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures The Company's management, under the supervision and with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective. Management's Report on Internal Control over Financial Reporting The Management of Applied Industrial Technologies, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the President & Chief Executive Officer and the Vice President - Chief Financial Officer, Treasurer, & The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s Management and Board of Directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements. Because of inherent limitations, internal control over financial reporting can provide only reasonable, not absolute, assurance with respect to the preparation and presentation of the consolidated financial statements and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.
August Changes in Internal Control Over Financial Reporting There have not been any changes in internal control over financial reporting during the quarter ended June 30, REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Applied Industrial Technologies, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Applied Industrial Technologies, Inc. and subsidiaries (the “Company”) as of June 30, We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Cleveland, Ohio August ITEM 9B. OTHER INFORMATION. During the fiscal quarter ended June 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item as to Applied's directors is incorporated by reference to Applied's proxy statement relating to the annual meeting of shareholders to be held October The information required by this Item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to Applied's proxy statement, under the caption “Delinquent Section 16(a) Reports." Applied has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of Applied's securities by directors, officers, and employees. Information regarding the composition of Applied’s audit committee and the identification of audit committee financial experts serving on the audit committee is incorporated by reference to Applied's proxy statement, under the caption “Corporate Governance.” ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Equity compensation plan information is incorporated herein by reference to Applied's proxy statement for the annual meeting of shareholders
Information concerning the security ownership of certain beneficial owners and management is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by this Item is incorporated by reference to Applied's proxy statement for the annual meeting of shareholders to be held October ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a)1. Financial Statements. The following consolidated financial statements, notes thereto, the reports of independent registered public accounting firm, and supplemental data are included in Item 8 of this report:
(a)2. Financial Statement Schedule. The following schedule is included in this Part IV, and is found in this report at the page indicated:
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. 63
64
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 the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each such instrument. ITEM 16. FORM 10-K SUMMARY. Not applicable. APPLIED INDUSTRIAL TECHNOLOGIES, INC. & SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, (in thousands)
(A)Amounts in the years ending June 30, (B)Amounts represent uncollectible accounts charged off. 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.
Date: August 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.
Date: August | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | % Change | 2023 | 2022 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | Net Sales | 100.0 | % | 100.0 | % | (0.3) | % | Net Sales | 100.0 | % | 100.0 | % | 15.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Profit Margin | Gross Profit Margin | 28.9 | % | 28.9 | % | (0.2) | % | Gross Profit Margin | 29.2 | % | 29.0 | % | 16.3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling, Distribution & Administrative Expense | Selling, Distribution & Administrative Expense | 21.0 | % | 22.1 | % | (5.2) | % | Selling, Distribution & Administrative Expense | 18.4 | % | 19.7 | % | 8.6 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Income | Operating Income | 6.3 | % | 2.7 | % | 130.9 | % | Operating Income | 10.7 | % | 9.4 | % | 32.2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income | Net Income | 4.5 | % | 0.7 | % | 502.1 | % | Net Income | 7.9 | % | 6.8 | % | 34.7 | % |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | Sales (Decrease) Increase | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
Sales by Reportable Segment | 2021 | 2020 | ||||||||||||||||||
Service Center Based Distribution | $ | 2,199.5 | $ | 2,241.9 | $ | (42.4) | $ | — | $ | 16.5 | $ | (58.9) | ||||||||
Fluid Power & Flow Control | 1,036.4 | 1,003.7 | 32.7 | 44.1 | — | (11.4) | ||||||||||||||
Total | $ | 3,235.9 | $ | 3,245.7 | $ | (9.7) | $ | 44.1 | $ | 16.5 | $ | (70.3) |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | Sales Increase | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
Sales by Reportable Segment | 2023 | 2022 | ||||||||||||||||||
Service Center Based Distribution | $ | 2,966.8 | $ | 2,565.6 | $ | 401.2 | $ | — | $ | (16.3) | $ | 417.5 | ||||||||
Engineered Solutions | 1,446.0 | 1,245.1 | 200.9 | 20.0 | — | 180.9 | ||||||||||||||
Total | $ | 4,412.8 | $ | 3,810.7 | $ | 602.1 | $ | 20.0 | $ | (16.3) | $ | 598.4 |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | Sales (Decrease) Increase | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
Sales by Geographic Area | 2021 | 2020 | ||||||||||||||||||
United States | $ | 2,782.9 | $ | 2,819.4 | $ | (36.5) | $ | 44.1 | $ | — | $ | (80.6) | ||||||||
Canada | 255.4 | 248.6 | 6.8 | — | 11.6 | (4.8) | ||||||||||||||
Other countries | 197.7 | 177.7 | 20.0 | — | 4.9 | 15.1 | ||||||||||||||
Total | $ | 3,235.9 | $ | 3,245.7 | $ | (9.7) | $ | 44.1 | $ | 16.5 | $ | (70.3) |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | Sales Increase | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
Sales by Geographic Area | 2023 | 2022 | ||||||||||||||||||
United States | $ | 3,860.4 | $ | 3,299.8 | $ | 560.6 | $ | 20.0 | $ | — | $ | 540.6 | ||||||||
Canada | 315.5 | 291.5 | 24.0 | — | (16.0) | 40.0 | ||||||||||||||
Other Countries | 236.9 | 219.4 | 17.5 | — | (0.3) | 17.8 | ||||||||||||||
Total | $ | 4,412.8 | $ | 3,810.7 | $ | 602.1 | $ | 20.0 | $ | (16.3) | $ | 598.4 |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | SD&A Decrease | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
2021 | 2020 | |||||||||||||||||||
SD&A | $ | 680.5 | $ | 717.7 | $ | (37.2) | $ | 11.9 | $ | 4.9 | $ | (54.0) |
Amounts in millions | Amount of change due to | |||||||||||||||||||
Year ended June 30, | SD&A Increase | Acquisitions | Foreign Currency | Organic Change | ||||||||||||||||
2023 | 2022 | |||||||||||||||||||
SD&A | $ | 813.8 | $ | 749.1 | $ | 64.7 | $ | 6.4 | $ | (4.3) | $ | 62.6 |
Year Ended June 30, | |||||||||||
2021 | 2020 | ||||||||||
Net Cash Provided by: | |||||||||||
Operating Activities | $ | 241,697 | $ | 296,714 | |||||||
Investing Activities | (44,930) | (55,404) | |||||||||
Financing Activities | (213,037) | (78,238) | |||||||||
Exchange Rate Effect | 5,464 | (2,740) | |||||||||
(Decrease) Increase in Cash and Cash Equivalents | $ | (10,806) | $ | 160,332 |
Amounts in thousands | Year Ended June 30, | ||||||||||
2023 | 2022 | ||||||||||
Net Cash Provided by (Used in): | |||||||||||
Operating Activities | $ | 343,966 | $ | 187,570 | |||||||
Investing Activities | (60,833) | (35,658) | |||||||||
Financing Activities | (126,888) | (223,029) | |||||||||
Exchange Rate Effect | 3,317 | (2,154) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 159,562 | $ | (73,271) |
Accounts receivable | $ | ||||
Inventory | $ | ||||
Accounts payable | $ |
June 30, | 2021 | 2020 | |||||||||
Unsecured credit facility | $ | 550,250 | $ | 589,250 | |||||||
Trade receivable securitization facility | 188,300 | 175,000 | |||||||||
Series C notes | 40,000 | 120,000 | |||||||||
Series D Notes | 25,000 | 25,000 | |||||||||
Series E Notes | 25,000 | 25,000 | |||||||||
Other | 846 | 1,026 | |||||||||
Total debt | $ | 829,396 | $ | 935,276 | |||||||
Less: unamortized debt issuance costs | 1,016 | 1,487 | |||||||||
$ | 828,380 | $ | 933,789 |
June 30, | 2023 | 2022 | |||||||||
Revolving credit facility | $ | 383,592 | $ | 410,592 | |||||||
Trade receivable securitization facility | 188,300 | 188,300 | |||||||||
Series C Notes | — | 40,000 | |||||||||
Series D Notes | 25,000 | 25,000 | |||||||||
Series E Notes | 25,000 | 25,000 | |||||||||
Other | 356 | 603 | |||||||||
Total debt | $ | 622,248 | $ | 689,495 | |||||||
Less: unamortized debt issuance costs | 152 | 171 | |||||||||
$ | 622,096 | $ | 689,324 |
June 30, | 2021 | 2020 | |||||||||
Accounts receivable, gross | $ | 532,777 | $ | 463,659 | |||||||
Allowance for doubtful accounts | 16,455 | 13,661 | |||||||||
Accounts receivable, net | $ | 516,322 | $ | 449,998 | |||||||
Allowance for doubtful accounts, % of gross receivables | 3.1 | % | 2.9 | % | |||||||
Year Ended June 30, | 2021 | 2020 | |||||||||
Provision for losses on accounts receivable | $ | 6,540 | $ | 14,055 | |||||||
Provision as a % of net sales | 0.20 | % | 0.43 | % |
June 30, | 2023 | 2022 | |||||||||
Accounts receivable, gross | $ | 730,729 | $ | 673,951 | |||||||
Allowance for doubtful accounts | 22,334 | 17,522 | |||||||||
Accounts receivable, net | $ | 708,395 | $ | 656,429 | |||||||
Allowance for doubtful accounts, % of gross receivables | 3.1 | % | 2.6 | % | |||||||
Year Ended June 30, | 2023 | 2022 | |||||||||
Provision for losses on accounts receivable | $ | 5,619 | $ | 3,193 | |||||||
Provision as a % of net sales | 0.13 | % | 0.08 | % |
Total | Period Less Than 1 yr | Period 2-3 yrs | Period 4-5 yrs | Period Over 5 yrs | Other | ||||||||||||||||||||||||||||||
Operating leases | $ | 99,150 | $ | 29,853 | $ | 40,878 | $ | 17,009 | $ | 11,410 | — | ||||||||||||||||||||||||
Planned funding of post-retirement obligations | 9,400 | 900 | 1,100 | 500 | 6,900 | — | |||||||||||||||||||||||||||||
Unrecognized income tax benefit liabilities, including interest and penalties | 6,500 | — | — | — | — | 6,500 | |||||||||||||||||||||||||||||
Long-term debt obligations | 829,396 | 44,118 | 760,173 | 25,105 | — | — | |||||||||||||||||||||||||||||
Interest on long-term debt obligations (1) | 39,500 | 17,800 | 16,900 | 4,800 | — | — | |||||||||||||||||||||||||||||
Acquisition holdback payments | 3,538 | 2,569 | 969 | — | — | — | |||||||||||||||||||||||||||||
Total Contractual Cash Obligations | $ | 987,484 | $ | 95,240 | $ | 820,020 | $ | 47,414 | $ | 18,310 | $ | 6,500 |
Total | Period Less Than 1 yr | Period 2-3 yrs | Period 4-5 yrs | Period Over 5 yrs | Other | ||||||||||||||||||||||||||||||
Operating leases | $ | 113,251 | $ | 34,235 | $ | 44,995 | $ | 22,646 | $ | 11,375 | $ | — | |||||||||||||||||||||||
Planned funding of post-retirement obligations | 6,561 | 1,360 | 2,770 | 460 | 1,971 | — | |||||||||||||||||||||||||||||
Unrecognized income tax benefit liabilities, including interest and penalties | 5,900 | — | — | — | — | 5,900 | |||||||||||||||||||||||||||||
Long-term debt obligations | 622,248 | 25,251 | 25,105 | 571,892 | — | — | |||||||||||||||||||||||||||||
Interest on long-term debt obligations (1) | 68,000 | 22,300 | 34,000 | 11,700 | — | — | |||||||||||||||||||||||||||||
Acquisition holdback payments | 810 | 684 | 126 | — | — | — | |||||||||||||||||||||||||||||
Total Contractual Cash Obligations | $ | 816,770 | $ | 83,830 | $ | 106,996 | $ | 606,698 | $ | 13,346 | $ | 5,900 |
Year Ended June 30, | 2021 | 2020 | 2019 | |||||||||||||||||
Net sales | $ | 3,235,919 | $ | 3,245,652 | $ | 3,472,739 | ||||||||||||||
Cost of sales | 2,300,395 | 2,307,916 | 2,465,116 | |||||||||||||||||
Gross profit | 935,524 | 937,736 | 1,007,623 | |||||||||||||||||
Selling, distribution and administrative expense, including depreciation | 680,542 | 717,747 | 742,241 | |||||||||||||||||
Impairment expense | 49,528 | 131,000 | 31,594 | |||||||||||||||||
Operating income | 205,454 | 88,989 | 233,788 | |||||||||||||||||
Interest expense | 30,807 | 37,264 | 40,788 | |||||||||||||||||
Interest income | (215) | (729) | (600) | |||||||||||||||||
Other income, net | (2,200) | (2,782) | (881) | |||||||||||||||||
Income before income taxes | 177,062 | 55,236 | 194,481 | |||||||||||||||||
Income tax expense | 32,305 | 31,194 | 50,488 | |||||||||||||||||
Net income | $ | 144,757 | $ | 24,042 | $ | 143,993 | ||||||||||||||
Net income per share — basic | $ | 3.73 | $ | 0.62 | $ | 3.72 | ||||||||||||||
Net income per share — diluted | $ | 3.68 | $ | 0.62 | $ | 3.68 |
Year Ended June 30, | 2023 | 2022 | 2021 | |||||||||||||||||
Net sales | $ | 4,412,794 | $ | 3,810,676 | $ | 3,235,919 | ||||||||||||||
Cost of sales | 3,125,829 | 2,703,760 | 2,300,395 | |||||||||||||||||
Gross profit | 1,286,965 | 1,106,916 | 935,524 | |||||||||||||||||
Selling, distribution and administrative expense, including depreciation | 813,814 | 749,058 | 680,542 | |||||||||||||||||
Impairment expense | — | — | 49,528 | |||||||||||||||||
Operating income | 473,151 | 357,858 | 205,454 | |||||||||||||||||
Interest expense | 24,790 | 26,785 | 30,807 | |||||||||||||||||
Interest income | (3,151) | (522) | (215) | |||||||||||||||||
Other expense (income), net | 1,701 | 1,805 | (2,200) | |||||||||||||||||
Income before income taxes | 449,811 | 329,790 | 177,062 | |||||||||||||||||
Income tax expense | 103,072 | 72,376 | 32,305 | |||||||||||||||||
Net income | $ | 346,739 | $ | 257,414 | $ | 144,757 | ||||||||||||||
Net income per share — basic | $ | 8.98 | $ | 6.69 | $ | 3.73 | ||||||||||||||
Net income per share — diluted | $ | 8.84 | $ | 6.58 | $ | 3.68 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||||||||
Net income per the statements of consolidated income | $ | 144,757 | $ | 24,042 | $ | 143,993 | |||||||||||||||||
Other comprehensive income (loss), before tax: | |||||||||||||||||||||||
Foreign currency translation adjustments | 24,352 | (18,499) | 2,021 | ||||||||||||||||||||
Post-employment benefits: | |||||||||||||||||||||||
Actuarial gain (loss) on re-measurement | 903 | (2,192) | (372) | ||||||||||||||||||||
Reclassification of actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs | 270 | (66) | (306) | ||||||||||||||||||||
Cumulative effect of adopting accounting standard | 0 | 0 | (50) | ||||||||||||||||||||
Unrealized gain (loss) on cash flow hedge | 3,250 | (16,615) | (14,446) | ||||||||||||||||||||
Reclassification of interest from cash flow hedge into interest expense | 11,553 | 4,638 | 244 | ||||||||||||||||||||
Total other comprehensive income (loss), before tax | 40,328 | (32,734) | (12,909) | ||||||||||||||||||||
Income tax expense (benefit) related to items of other comprehensive loss | 3,990 | (3,190) | (3,246) | ||||||||||||||||||||
Other comprehensive income (loss), net of tax | 36,338 | (29,544) | (9,663) | ||||||||||||||||||||
Comprehensive income (loss) | $ | 181,095 | $ | (5,502) | $ | 134,330 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||||||||
Net income per the statements of consolidated income | $ | 346,739 | $ | 257,414 | $ | 144,757 | |||||||||||||||||
Other comprehensive income, before tax: | |||||||||||||||||||||||
Foreign currency translation adjustments | 7,723 | (9,862) | 24,352 | ||||||||||||||||||||
Post-employment benefits: | |||||||||||||||||||||||
Actuarial gain on re-measurement | 405 | 2,839 | 903 | ||||||||||||||||||||
Termination of pension plan | 1,031 | — | — | ||||||||||||||||||||
Reclassification of net actuarial losses and prior service cost into other expense (income), net and included in net periodic pension costs | 36 | 300 | 270 | ||||||||||||||||||||
Unrealized gain on cash flow hedge | 18,174 | 26,204 | 3,250 | ||||||||||||||||||||
Reclassification of interest from cash flow hedge into interest expense | (7,285) | 11,361 | 11,553 | ||||||||||||||||||||
Total other comprehensive income, before tax | 20,084 | 30,842 | 40,328 | ||||||||||||||||||||
Income tax expense related to items of other comprehensive income | 3,085 | 10,045 | 3,990 | ||||||||||||||||||||
Other comprehensive income, net of tax | 16,999 | 20,797 | 36,338 | ||||||||||||||||||||
Comprehensive income | $ | 363,738 | $ | 278,211 | $ | 181,095 |
June 30, | 2023 | 2022 | ||||||||||||
Assets | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | 344,036 | $ | 184,474 | ||||||||||
Accounts receivable, net | 708,395 | 656,429 | ||||||||||||
Inventories | 501,184 | 449,821 | ||||||||||||
Other current assets | 93,192 | 68,805 | ||||||||||||
Total current assets | 1,646,807 | 1,359,529 | ||||||||||||
Property — at cost | ||||||||||||||
Land | 14,219 | 14,319 | ||||||||||||
Buildings | 109,884 | 108,119 | ||||||||||||
Equipment, including computers and software | 219,979 | 204,473 | ||||||||||||
Total property — at cost | 344,082 | 326,911 | ||||||||||||
Less accumulated depreciation | 229,041 | 215,015 | ||||||||||||
Property — net | 115,041 | 111,896 | ||||||||||||
Operating lease assets, net | 100,677 | 108,052 | ||||||||||||
Identifiable intangibles, net | 235,549 | 250,590 | ||||||||||||
Goodwill | 578,418 | 563,205 | ||||||||||||
Other assets | 66,840 | 59,316 | ||||||||||||
Total Assets | $ | 2,743,332 | $ | 2,452,588 | ||||||||||
Liabilities | ||||||||||||||
Current liabilities | ||||||||||||||
Accounts payable | $ | 301,685 | $ | 259,463 | ||||||||||
Current portion of long-term debt | 25,170 | 40,174 | ||||||||||||
Compensation and related benefits | 98,740 | 91,166 | ||||||||||||
Other current liabilities | 114,749 | 108,824 | ||||||||||||
Total current liabilities | 540,344 | 499,627 | ||||||||||||
Long-term debt | 596,926 | 649,150 | ||||||||||||
Other liabilities | 147,625 | 154,456 | ||||||||||||
Total Liabilities | 1,284,895 | 1,303,233 | ||||||||||||
Shareholders’ Equity | ||||||||||||||
Preferred stock — no par value; 2,500 shares authorized; none issued or outstanding | — | — | ||||||||||||
Common stock — no par value; 80,000 shares authorized; 54,213 shares issued; 38,657 and 38,499 shares outstanding, respectively | 10,000 | 10,000 | ||||||||||||
Additional paid-in capital | 188,646 | 183,822 | ||||||||||||
Retained earnings | 1,792,632 | 1,499,676 | ||||||||||||
Treasury shares — at cost (15,556 and 15,714 shares, respectively) | (477,545) | (471,848) | ||||||||||||
Accumulated other comprehensive loss | (55,296) | (72,295) | ||||||||||||
Total Shareholders’ Equity | 1,458,437 | 1,149,355 | ||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 2,743,332 | $ | 2,452,588 |
June 30, | 2021 | 2020 | ||||||||||||
Assets | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | 257,745 | $ | 268,551 | ||||||||||
Accounts receivable, net | 516,322 | 449,998 | ||||||||||||
Inventories | 362,547 | 389,150 | ||||||||||||
Other current assets | 59,961 | 52,070 | ||||||||||||
Total current assets | 1,196,575 | 1,159,769 | ||||||||||||
Property — at cost | ||||||||||||||
Land | 14,399 | 14,339 | ||||||||||||
Buildings | 107,142 | 104,396 | ||||||||||||
Equipment, including computers and software | 198,374 | 195,220 | ||||||||||||
Total property — at cost | 319,915 | 313,955 | ||||||||||||
Less accumulated depreciation | 204,326 | 192,054 | ||||||||||||
Property — net | 115,589 | 121,901 | ||||||||||||
Operating lease assets, net | 87,111 | 90,636 | ||||||||||||
Identifiable intangibles, net | 279,628 | 343,215 | ||||||||||||
Goodwill | 560,077 | 540,594 | ||||||||||||
Other assets | 32,827 | 27,436 | ||||||||||||
Total Assets | $ | 2,271,807 | $ | 2,283,551 | ||||||||||
Liabilities | ||||||||||||||
Current liabilities | ||||||||||||||
Accounts payable | $ | 208,162 | $ | 186,270 | ||||||||||
Current portion of long-term debt | 43,525 | 78,646 | ||||||||||||
Compensation and related benefits | 77,657 | 61,887 | ||||||||||||
Other current liabilities | 98,356 | 99,280 | ||||||||||||
Total current liabilities | 427,700 | 426,083 | ||||||||||||
Long-term debt | 784,855 | 855,143 | ||||||||||||
Other liabilities | 126,706 | 158,783 | ||||||||||||
Total Liabilities | 1,339,261 | 1,440,009 | ||||||||||||
Shareholders’ Equity | ||||||||||||||
Preferred stock — no par value; 2,500 shares authorized; none issued or outstanding | 0 | 0 | ||||||||||||
Common stock — no par value; 80,000 shares authorized; 54,213 shares issued; 38,516 and 38,710 shares outstanding, respectively | 10,000 | 10,000 | ||||||||||||
Additional paid-in capital | 177,014 | 176,492 | ||||||||||||
Retained earnings | 1,294,413 | 1,200,570 | ||||||||||||
Treasury shares — at cost (15,697 and 15,503 shares, respectively) | (455,789) | (414,090) | ||||||||||||
Accumulated other comprehensive loss | (93,092) | (129,430) | ||||||||||||
Total Shareholders’ Equity | 932,546 | 843,542 | ||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 2,271,807 | $ | 2,283,551 |
Year Ended June 30, | 2021 | 2020 | 2019 | |||||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||||||
Net income | $ | 144,757 | $ | 24,042 | $ | 143,993 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
Impairment Expense | 49,528 | 131,000 | 31,594 | |||||||||||||||||
Depreciation and amortization of property | 20,780 | 21,196 | 20,236 | |||||||||||||||||
Amortization of intangibles | 34,365 | 41,553 | 41,883 | |||||||||||||||||
Amortization of stock appreciation rights and options | 2,526 | 2,954 | 2,437 | |||||||||||||||||
Deferred income taxes | (31,080) | (13,292) | 2,368 | |||||||||||||||||
Provision for losses on accounts receivable | 6,540 | 14,055 | 4,058 | |||||||||||||||||
Unrealized foreign exchange transaction losses (gains) | 1,814 | (1,357) | 238 | |||||||||||||||||
Other share-based compensation expense | 6,454 | 4,000 | 4,474 | |||||||||||||||||
Gain on sale of property | (368) | (1,157) | (459) | |||||||||||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||||||||
Accounts receivable | (59,119) | 74,437 | 8,465 | |||||||||||||||||
Inventories | 41,318 | 57,028 | (16,590) | |||||||||||||||||
Other operating assets | (5,262) | (5,268) | (7,738) | |||||||||||||||||
Accounts payable | 10,919 | (53,856) | (29,788) | |||||||||||||||||
Other operating liabilities | 18,525 | 1,379 | (24,570) | |||||||||||||||||
Cash provided by Operating Activities | 241,697 | 296,714 | 180,601 | |||||||||||||||||
Cash Flows from Investing Activities | ||||||||||||||||||||
Capital expenditures | (15,852) | (20,115) | (18,970) | |||||||||||||||||
Proceeds from property sales | 1,152 | 1,948 | 1,003 | |||||||||||||||||
Cash paid for acquisition of businesses, net of cash acquired | (30,230) | (37,237) | (37,526) | |||||||||||||||||
Other | 0 | 0 | 391 | |||||||||||||||||
Cash used in Investing Activities | (44,930) | (55,404) | (55,102) | |||||||||||||||||
Cash Flows from Financing Activities | ||||||||||||||||||||
Net repayments under revolving credit facility | 0 | 0 | (19,500) | |||||||||||||||||
Borrowings under long-term debt facilities | 26,000 | 25,000 | 175,000 | |||||||||||||||||
Long-term debt repayments | (131,883) | (49,553) | (161,738) | |||||||||||||||||
Interest rate swap settlement payments | (3,737) | 0 | 0 | |||||||||||||||||
Payment of debt issuance costs | (399) | (95) | (775) | |||||||||||||||||
Purchases of treasury shares | (40,089) | 0 | (11,158) | |||||||||||||||||
Dividends paid | (50,664) | (48,873) | (47,266) | |||||||||||||||||
Acquisition holdback payments | (2,345) | (2,440) | (2,610) | |||||||||||||||||
Exercise of stock appreciation rights and options | 163 | 330 | 0 | |||||||||||||||||
Taxes paid for shares withheld | (10,083) | (2,607) | (3,492) | |||||||||||||||||
Cash used in Financing Activities | (213,037) | (78,238) | (71,539) | |||||||||||||||||
Effect of exchange rate changes on cash | 5,464 | (2,740) | 109 | |||||||||||||||||
(Decrease) increase in cash and cash equivalents | (10,806) | 160,332 | 54,069 | |||||||||||||||||
Cash and cash equivalents at beginning of year | 268,551 | 108,219 | 54,150 | |||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 257,745 | $ | 268,551 | $ | 108,219 | ||||||||||||||
Supplemental Cash Flow Information | ||||||||||||||||||||
Cash paid during the year for: | ||||||||||||||||||||
Income taxes | 64,394 | 41,162 | 54,294 | |||||||||||||||||
Interest | 27,492 | 36,648 | 40,142 |
Year Ended June 30, | 2023 | 2022 | 2021 | |||||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||||||
Net income | $ | 346,739 | $ | 257,414 | $ | 144,757 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
Impairment Expense | — | — | 49,528 | |||||||||||||||||
Depreciation and amortization of property | 22,266 | 21,676 | 20,780 | |||||||||||||||||
Amortization of intangibles | 30,805 | 31,879 | 34,365 | |||||||||||||||||
Amortization of stock appreciation rights and options | 2,785 | 3,284 | 2,526 | |||||||||||||||||
Deferred income taxes | (5,716) | 15,176 | (31,080) | |||||||||||||||||
Provision for losses on accounts receivable | 5,619 | 3,193 | 6,540 | |||||||||||||||||
Other share-based compensation expense | 9,576 | 8,558 | 6,454 | |||||||||||||||||
Other | 1,145 | (1,752) | 1,446 | |||||||||||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||||||||
Accounts receivable | (51,059) | (145,519) | (59,119) | |||||||||||||||||
Inventories | (42,977) | (92,425) | 41,318 | |||||||||||||||||
Other operating assets | (25,254) | (4,982) | (5,262) | |||||||||||||||||
Accounts payable | 37,682 | 53,597 | 10,919 | |||||||||||||||||
Other operating liabilities | 12,355 | 37,471 | 18,525 | |||||||||||||||||
Cash provided by Operating Activities | 343,966 | 187,570 | 241,697 | |||||||||||||||||
Cash Flows from Investing Activities | ||||||||||||||||||||
Cash paid for acquisition of businesses, net of cash acquired | (35,785) | (6,964) | (30,230) | |||||||||||||||||
Capital expenditures | (26,476) | (18,124) | (15,852) | |||||||||||||||||
Proceeds from property sales | 1,428 | 1,107 | 1,152 | |||||||||||||||||
Life insurance proceeds | — | 3,158 | — | |||||||||||||||||
Cash payments for loans on company-owned life insurance | — | (14,835) | — | |||||||||||||||||
Cash used in Investing Activities | (60,833) | (35,658) | (44,930) | |||||||||||||||||
Cash Flows from Financing Activities | ||||||||||||||||||||
Repayments under revolving credit facility | (27,000) | — | — | |||||||||||||||||
Net borrowings under revolving credit facility | — | 410,592 | — | |||||||||||||||||
Borrowings under long-term debt facilities | — | — | 26,000 | |||||||||||||||||
Long-term debt repayments | (40,247) | (550,493) | (131,883) | |||||||||||||||||
Interest rate swap settlement receipts (payments) | 8,800 | (5,703) | (3,737) | |||||||||||||||||
Payment of debt issuance costs | — | (1,956) | (399) | |||||||||||||||||
Purchases of treasury shares | (716) | (13,784) | (40,089) | |||||||||||||||||
Dividends paid | (53,446) | (51,805) | (50,664) | |||||||||||||||||
Acquisition holdback payments | (1,510) | (2,361) | (2,345) | |||||||||||||||||
Exercise of stock appreciation rights and options | 127 | 555 | 163 | |||||||||||||||||
Taxes paid for shares withheld | (12,896) | (8,074) | (10,083) | |||||||||||||||||
Cash used in Financing Activities | (126,888) | (223,029) | (213,037) | |||||||||||||||||
Effect of exchange rate changes on cash | 3,317 | (2,154) | 5,464 | |||||||||||||||||
Increase (decrease) in cash and cash equivalents | 159,562 | (73,271) | (10,806) | |||||||||||||||||
Cash and cash equivalents at beginning of year | 184,474 | 257,745 | 268,551 | |||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 344,036 | $ | 184,474 | $ | 257,745 | ||||||||||||||
Supplemental Cash Flow Information | ||||||||||||||||||||
Cash paid during the year for: | ||||||||||||||||||||
Income taxes | $ | 108,084 | $ | 53,301 | $ | 64,394 | ||||||||||||||
Interest (includes interest rate swap settlements) | $ | 22,567 | $ | 20,164 | $ | 27,492 |
For the Years Ended June 30, 2021, 2020 and 2019 | Shares of Common Stock Outstanding | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Shares- at Cost | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | 38,703 | $ | 10,000 | $ | 169,383 | $ | 1,129,678 | $ | (403,875) | $ | (90,223) | $ | 814,963 | |||||||||||||||||||||||||||||||
Net income | 143,993 | 143,993 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (9,663) | (9,663) | ||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of adopting accounting standards | 3,056 | 3,056 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.22 per share | (47,621) | (47,621) | ||||||||||||||||||||||||||||||||||||||||||
Purchases of common stock for treasury | (192) | (11,158) | (11,158) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 30 | (1,069) | (59) | (1,128) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 18 | (844) | (301) | (1,145) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 23 | (1,057) | (120) | (1,177) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,437 | 2,437 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 4,474 | 4,474 | ||||||||||||||||||||||||||||||||||||||||||
Other | 15 | (393) | 42 | 354 | 3 | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 38,597 | 10,000 | 172,931 | 1,229,148 | (415,159) | (99,886) | 897,034 | |||||||||||||||||||||||||||||||||||||
Net income | 24,042 | 24,042 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (29,544) | (29,544) | ||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of adopting accounting standards | (3,275) | (3,275) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.26 per share | (49,305) | (49,305) | ||||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 43 | (730) | 71 | (659) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 36 | (1,540) | 362 | (1,178) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 17 | (671) | 213 | (458) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,954 | 2,954 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 4,000 | 4,000 | ||||||||||||||||||||||||||||||||||||||||||
Other | 17 | (452) | (40) | 423 | (69) | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 38,710 | 10,000 | 176,492 | 1,200,570 | (414,090) | (129,430) | 843,542 | |||||||||||||||||||||||||||||||||||||
Net income | 144,757 | 144,757 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 36,338 | 36,338 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.30 per share | (50,992) | (50,992) | ||||||||||||||||||||||||||||||||||||||||||
Purchases of common stock for treasury | (400) | (40,089) | (40,089) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 152 | (6,379) | (2,009) | (8,388) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 22 | (985) | (20) | (1,005) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 19 | (740) | 95 | (645) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights and options | 2,526 | 2,526 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 6,454 | 6,454 | ||||||||||||||||||||||||||||||||||||||||||
Other | 13 | (354) | 78 | 324 | 48 | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 38,516 | $ | 10,000 | $ | 177,014 | $ | 1,294,413 | $ | (455,789) | $ | (93,092) | $ | 932,546 |
For the Years Ended June 30, 2023, 2022 and 2021 | Shares of Common Stock Outstanding | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Shares- at Cost | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 38,710 | $ | 10,000 | $ | 176,492 | $ | 1,200,570 | $ | (414,090) | $ | (129,430) | $ | 843,542 | |||||||||||||||||||||||||||||||
Net income | 144,757 | 144,757 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 36,338 | 36,338 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.30 per share | (50,992) | (50,992) | ||||||||||||||||||||||||||||||||||||||||||
Purchases of common stock for treasury | (400) | (40,089) | (40,089) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 152 | (6,379) | (2,009) | (8,388) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 22 | (985) | (20) | (1,005) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 19 | (740) | 95 | (645) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights | 2,526 | 2,526 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 6,454 | 6,454 | ||||||||||||||||||||||||||||||||||||||||||
Other | 13 | (354) | 78 | 324 | 48 | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 38,516 | 10,000 | 177,014 | 1,294,413 | (455,789) | (93,092) | 932,546 | |||||||||||||||||||||||||||||||||||||
Net income | 257,414 | 257,414 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 20,797 | 20,797 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.34 per share | (52,175) | (52,175) | ||||||||||||||||||||||||||||||||||||||||||
Purchases of common stock for treasury | (149) | (13,784) | (13,784) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 104 | (3,945) | (2,132) | (6,077) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 5 | (222) | (73) | (295) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 12 | (598) | (138) | (736) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights | 3,284 | 3,284 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 8,558 | 8,558 | ||||||||||||||||||||||||||||||||||||||||||
Other | 11 | (269) | 24 | 68 | (177) | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 38,499 | 10,000 | 183,822 | 1,499,676 | (471,848) | (72,295) | 1,149,355 | |||||||||||||||||||||||||||||||||||||
Net income | 346,739 | 346,739 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 16,999 | 16,999 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends — $1.38 per share | (53,887) | (53,887) | ||||||||||||||||||||||||||||||||||||||||||
Purchases of common stock for treasury | (8) | (716) | (716) | |||||||||||||||||||||||||||||||||||||||||
Treasury shares issued for: | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock appreciation rights and options | 92 | (4,256) | (3,773) | (8,029) | ||||||||||||||||||||||||||||||||||||||||
Performance share awards | 23 | (1,290) | (758) | (2,048) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock units | 34 | (1,712) | (932) | (2,644) | ||||||||||||||||||||||||||||||||||||||||
Compensation expense — stock appreciation rights | 2,785 | 2,785 | ||||||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | 9,576 | 9,576 | ||||||||||||||||||||||||||||||||||||||||||
Other | 17 | (279) | 104 | 482 | 307 | |||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | 38,657 | $ | 10,000 | $ | 188,646 | $ | 1,792,632 | $ | (477,545) | $ | (55,296) | $ | 1,458,437 |
Year Ended June 30, 2021 | |||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 1,768,965 | $ | 1,013,894 | $ | 2,782,859 | |||||
Canada | 255,360 | 0 | 255,360 | ||||||||
Other countries | 175,208 | 22,492 | 197,700 | ||||||||
Total | $ | 2,199,533 | $ | 1,036,386 | $ | 3,235,919 |
Year Ended June 30, 2023 | |||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 2,441,281 | $ | 1,419,140 | $ | 3,860,421 | |||||
Canada | 315,499 | — | 315,499 | ||||||||
Other Countries | 210,062 | 26,812 | 236,874 | ||||||||
Total | $ | 2,966,842 | $ | 1,445,952 | $ | 4,412,794 |
Year Ended June 30, 2020 | |||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 1,833,275 | $ | 986,125 | $ | 2,819,400 | |||||
Canada | 248,610 | 0 | 248,610 | ||||||||
Other countries | 160,064 | 17,578 | 177,642 | ||||||||
Total | $ | 2,241,949 | $ | 1,003,703 | $ | 3,245,652 |
Year Ended June 30, 2022 | |||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 2,081,566 | $ | 1,218,184 | $ | 3,299,750 | |||||
Canada | 291,530 | — | 291,530 | ||||||||
Other Countries | 192,508 | 26,888 | 219,396 | ||||||||
Total | $ | 2,565,604 | $ | 1,245,072 | $ | 3,810,676 |
Year Ended June 30, 2019 | |||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 2,009,479 | $ | 1,007,280 | $ | 3,016,759 | |||||
Canada | 271,305 | 0 | 271,305 | ||||||||
Other countries | 172,121 | 12,554 | 184,675 | ||||||||
Total | $ | 2,452,905 | $ | 1,019,834 | $ | 3,472,739 |
Year Ended June 30, 2021 | |||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||
Geographic Areas: | |||||||||||
United States | $ | 1,768,965 | $ | 1,013,894 | $ | 2,782,859 | |||||
Canada | 255,360 | — | 255,360 | ||||||||
Other Countries | 175,208 | 22,492 | 197,700 | ||||||||
Total | $ | 2,199,533 | $ | 1,036,386 | $ | 3,235,919 |
Year Ended June 30, 2021 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
General Industry | 35.8 | % | 40.0 | % | 37.2 | % | |||||||||||
Industrial Machinery | 9.8 | % | 26.8 | % | 15.2 | % | |||||||||||
Food | 13.5 | % | 2.9 | % | 10.1 | % | |||||||||||
Metals | 10.5 | % | 6.8 | % | 9.3 | % | |||||||||||
Forest Products | 10.7 | % | 2.9 | % | 8.2 | % | |||||||||||
Chem/Petrochem | 3.3 | % | 13.6 | % | 6.6 | % | |||||||||||
Cement & Aggregate | 7.9 | % | 1.1 | % | 5.7 | % | |||||||||||
Transportation | 4.6 | % | 4.8 | % | 4.7 | % | |||||||||||
Oil & Gas | 3.9 | % | 1.1 | % | 3.0 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2023 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
General Industry | 34.0 | % | 41.2 | % | 36.2 | % | |||||||||||
Industrial Machinery | 9.8 | % | 26.1 | % | 15.2 | % | |||||||||||
Food | 13.2 | % | 2.7 | % | 9.8 | % | |||||||||||
Metals | 10.6 | % | 7.5 | % | 9.6 | % | |||||||||||
Forest Products | 12.1 | % | 2.8 | % | 9.1 | % | |||||||||||
Chem/Petrochem | 2.8 | % | 13.9 | % | 6.4 | % | |||||||||||
Cement & Aggregate | 7.8 | % | 1.3 | % | 5.7 | % | |||||||||||
Oil & Gas | 6.0 | % | 1.4 | % | 4.5 | % | |||||||||||
Transportation | 3.7 | % | 3.1 | % | 3.5 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2020 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
General Industry | 35.0 | % | 41.2 | % | 36.8 | % | |||||||||||
Industrial Machinery | 9.7 | % | 24.4 | % | 14.3 | % | |||||||||||
Food | 12.2 | % | 3.1 | % | 9.4 | % | |||||||||||
Metals | 11.1 | % | 7.2 | % | 9.9 | % | |||||||||||
Forest Products | 9.3 | % | 3.7 | % | 7.6 | % | |||||||||||
Chem/Petrochem | 3.3 | % | 13.4 | % | 6.4 | % | |||||||||||
Cement & Aggregate | 7.3 | % | 1.0 | % | 5.4 | % | |||||||||||
Transportation | 4.6 | % | 4.4 | % | 4.5 | % | |||||||||||
Oil & Gas | 7.5 | % | 1.6 | % | 5.7 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2022 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
General Industry | 34.9 | % | 40.1 | % | 36.7 | % | |||||||||||
Industrial Machinery | 10.3 | % | 28.3 | % | 16.2 | % | |||||||||||
Food | 12.6 | % | 2.5 | % | 9.3 | % | |||||||||||
Metals | 11.2 | % | 7.4 | % | 9.9 | % | |||||||||||
Forest Products | 10.8 | % | 2.4 | % | 8.0 | % | |||||||||||
Chem/Petrochem | 3.1 | % | 13.8 | % | 6.6 | % | |||||||||||
Cement & Aggregate | 7.6 | % | 1.0 | % | 5.5 | % | |||||||||||
Oil & Gas | 5.4 | % | 1.2 | % | 4.0 | % | |||||||||||
Transportation | 4.1 | % | 3.3 | % | 3.8 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2019 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
General Industry | 33.7 | % | 43.0 | % | 36.3 | % | |||||||||||
Industrial Machinery | 10.4 | % | 21.8 | % | 13.8 | % | |||||||||||
Food | 10.6 | % | 2.7 | % | 8.3 | % | |||||||||||
Metals | 12.6 | % | 9.4 | % | 11.6 | % | |||||||||||
Forest Products | 8.0 | % | 3.1 | % | 6.6 | % | |||||||||||
Chem/Petrochem | 3.1 | % | 13.8 | % | 6.3 | % | |||||||||||
Cement & Aggregate | 6.7 | % | 1.0 | % | 5.0 | % | |||||||||||
Transportation | 4.8 | % | 3.1 | % | 4.3 | % | |||||||||||
Oil & Gas | 10.1 | % | 2.1 | % | 7.8 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2021 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
General Industry | 35.8 | % | 40.0 | % | 37.2 | % | |||||||||||
Industrial Machinery | 9.8 | % | 26.8 | % | 15.2 | % | |||||||||||
Food | 13.5 | % | 2.9 | % | 10.1 | % | |||||||||||
Metals | 10.5 | % | 6.8 | % | 9.3 | % | |||||||||||
Forest Products | 10.7 | % | 2.9 | % | 8.2 | % | |||||||||||
Chem/Petrochem | 3.3 | % | 13.6 | % | 6.6 | % | |||||||||||
Cement & Aggregate | 7.9 | % | 1.1 | % | 5.7 | % | |||||||||||
Oil & Gas | 3.9 | % | 1.1 | % | 3.0 | % | |||||||||||
Transportation | 4.6 | % | 4.8 | % | 4.7 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2021 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
Power Transmission | 37.3 | % | 7.5 | % | 27.8 | % | |||||||||||
Fluid Power | 13.2 | % | 38.0 | % | 21.2 | % | |||||||||||
Bearings, Linear & Seals | 29.0 | % | 0.4 | % | 19.8 | % | |||||||||||
General Maintenance; Hose Products | 20.5 | % | 16.9 | % | 19.3 | % | |||||||||||
Specialty Flow Control | 0 | % | 37.2 | % | 11.9 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2023 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
Power Transmission | 37.3 | % | 10.6 | % | 28.5 | % | |||||||||||
General Maintenance; Hose Products | 21.1 | % | 19.3 | % | 20.6 | % | |||||||||||
Fluid Power | 13.3 | % | 34.3 | % | 20.2 | % | |||||||||||
Bearings, Linear & Seals | 28.3 | % | 0.4 | % | 19.1 | % | |||||||||||
Specialty Flow Control | — | % | 35.4 | % | 11.6 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2020 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
Power Transmission | 35.4 | % | 9.5 | % | 27.4 | % | |||||||||||
Fluid Power | 13.4 | % | 39.0 | % | 21.3 | % | |||||||||||
Bearings, Linear & Seals | 26.6 | % | 0.3 | % | 18.5 | % | |||||||||||
General Maintenance; Hose Products | 24.6 | % | 11.7 | % | 20.6 | % | |||||||||||
Specialty Flow Control | 0 | % | 39.5 | % | 12.2 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2022 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
Power Transmission | 37.1 | % | 10.6 | % | 28.4 | % | |||||||||||
General Maintenance; Hose Products | 20.9 | % | 18.9 | % | 20.3 | % | |||||||||||
Fluid Power | 12.8 | % | 37.2 | % | 20.8 | % | |||||||||||
Bearings, Linear & Seals | 29.2 | % | 0.4 | % | 19.8 | % | |||||||||||
Specialty Flow Control | — | % | 32.9 | % | 10.7 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2019 | |||||||||||||||||
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
Power Transmission | 33.9 | % | 1.6 | % | 24.4 | % | |||||||||||
Fluid Power | 13.5 | % | 39.4 | % | 21.1 | % | |||||||||||
Bearings, Linear & Seals | 27.5 | % | 0.3 | % | 19.5 | % | |||||||||||
General Maintenance; Hose Products | 25.1 | % | 5.3 | % | 19.3 | % | |||||||||||
Specialty Flow Control | 0 | % | 53.4 | % | 15.7 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
Year Ended June 30, 2021 | |||||||||||||||||
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
Power Transmission | 37.3 | % | 7.5 | % | 27.8 | % | |||||||||||
General Maintenance; Hose Products | 20.5 | % | 16.9 | % | 19.3 | % | |||||||||||
Fluid Power | 13.2 | % | 38.0 | % | 21.2 | % | |||||||||||
Bearings, Linear & Seals | 29.0 | % | 0.4 | % | 19.8 | % | |||||||||||
Specialty Flow Control | — | % | 37.2 | % | 11.9 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
June 30, 2021 | June 30, 2020 | $ Change | % Change | |||||||||||
Contract assets | $ | 15,178 | $ | 8,435 | $ | 6,743 | 79.9 | % |
June 30, 2023 | June 30, 2022 | $ Change | % Change | |||||||||||
Contract assets | $ | 17,911 | $ | 18,050 | $ | (139) | (0.8) | % |
June 30, | 2021 | 2020 | ||||||||||||
U.S. inventories at average cost | $ | 387,456 | $ | 431,866 | ||||||||||
Foreign inventories at average cost | 126,945 | 112,795 | ||||||||||||
514,401 | 544,661 | |||||||||||||
Less: Excess of average cost over LIFO cost for U.S. inventories | 151,854 | 155,511 | ||||||||||||
Inventories on consolidated balance sheets | $ | 362,547 | $ | 389,150 |
June 30, | 2023 | 2022 | ||||||||||||
U.S. inventories at average cost | $ | 558,299 | $ | 487,555 | ||||||||||
Foreign inventories at average cost | 158,165 | 141,176 | ||||||||||||
716,464 | 628,731 | |||||||||||||
Less: Excess of average cost over LIFO cost for U.S. inventories | 215,280 | 178,910 | ||||||||||||
Inventories on consolidated balance sheets | $ | 501,184 | $ | 449,821 |
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
Balance at July 1, 2019 | $ | 213,634 | $ | 448,357 | $ | 661,991 | |||||||||||
Goodwill adjusted/acquired during the year | (3,393) | 14,667 | 11,274 | ||||||||||||||
Impairment | 0 | (131,000) | (131,000) | ||||||||||||||
Other, primarily currency translation | (1,671) | 0 | (1,671) | ||||||||||||||
Balance at June 30, 2020 | 208,570 | 332,024 | 540,594 | ||||||||||||||
Goodwill acquired during the year | 0 | 15,757 | 15,757 | ||||||||||||||
Other, primarily currency translation | 3,726 | 0 | 3,726 | ||||||||||||||
Balance at June 30, 2021 | $ | 212,296 | $ | 347,781 | $ | 560,077 |
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
Balance at July 1, 2021 | $ | 212,296 | $ | 347,781 | $ | 560,077 | |||||||||||
Goodwill acquired during the year | — | 3,984 | 3,984 | ||||||||||||||
Other, primarily currency translation | (1,286) | 430 | (856) | ||||||||||||||
Balance at June 30, 2022 | 211,010 | 352,195 | 563,205 | ||||||||||||||
Goodwill acquired during the year | — | 14,517 | 14,517 | ||||||||||||||
Other, primarily currency translation | 221 | 475 | 696 | ||||||||||||||
Balance at June 30, 2023 | $ | 211,231 | $ | 367,187 | $ | 578,418 |
June 30, 2021 | Amount | Accumulated Amortization | Net Book Value | ||||||||||||||
Finite-Lived Intangibles: | |||||||||||||||||
Customer relationships | $ | 353,028 | $ | 143,862 | $ | 209,166 | |||||||||||
Trade names | 104,780 | 37,626 | 67,154 | ||||||||||||||
Vendor relationships | 11,469 | 9,859 | 1,610 | ||||||||||||||
Other | 2,070 | 372 | 1,698 | ||||||||||||||
Total Intangibles | $ | 471,347 | $ | 191,719 | $ | 279,628 |
June 30, 2023 | Amount | Accumulated Amortization | Net Book Value | ||||||||||||||
Finite-Lived Intangibles: | |||||||||||||||||
Customer relationships | $ | 364,572 | $ | 188,804 | $ | 175,768 | |||||||||||
Trade names | 108,301 | 50,823 | 57,478 | ||||||||||||||
Vendor relationships | 9,861 | 9,744 | 117 | ||||||||||||||
Other | 3,347 | 1,161 | 2,186 | ||||||||||||||
Total Intangibles | $ | 486,081 | $ | 250,532 | $ | 235,549 |
June 30, 2020 | Amount | Accumulated Amortization | Net Book Value | ||||||||||||||
Finite-Lived Intangibles: | |||||||||||||||||
Customer relationships | $ | 426,017 | $ | 162,965 | $ | 263,052 | |||||||||||
Trade names | 111,453 | 34,815 | 76,638 | ||||||||||||||
Vendor relationships | 11,329 | 8,934 | 2,395 | ||||||||||||||
Other | 2,078 | 948 | 1,130 | ||||||||||||||
Total Intangibles | $ | 550,877 | $ | 207,662 | $ | 343,215 |
June 30, 2022 | Amount | Accumulated Amortization | Net Book Value | ||||||||||||||
Finite-Lived Intangibles: | |||||||||||||||||
Customer relationships | $ | 353,836 | $ | 166,623 | $ | 187,213 | |||||||||||
Trade names | 105,629 | 44,637 | 60,992 | ||||||||||||||
Vendor relationships | 11,320 | 10,533 | 787 | ||||||||||||||
Other | 2,321 | 723 | 1,598 | ||||||||||||||
Total Intangibles | $ | 473,106 | $ | 222,516 | $ | 250,590 |
Acquisition Cost Allocation | Weighted-Average Life | ||||||||||
Customer relationships | $ | 10,390 | 20.0 | ||||||||
Trade names | 3,840 | 15.0 | |||||||||
Other | 1,090 | 5.9 | |||||||||
Total Intangibles Acquired | $ | 15,320 | 17.7 |
Acquisition Cost Allocation | Weighted-Average Life | ||||||||||
Customer relationships | $ | 11,176 | 20.0 | ||||||||
Trade names | 3,610 | 15.0 | |||||||||
Other | 1,025 | 6.7 | |||||||||
Total Intangibles Acquired | $ | 15,811 | 18.0 |
June 30, | 2021 | 2020 | |||||||||
Term Loan | $ | 550,250 | $ | 589,250 | |||||||
Trade receivable securitization facility | 188,300 | 175,000 | |||||||||
Series C Notes | 40,000 | 120,000 | |||||||||
Series D Notes | 25,000 | 25,000 | |||||||||
Series E Notes | 25,000 | 25,000 | |||||||||
Other | 846 | 1,026 | |||||||||
Total debt | $ | 829,396 | $ | 935,276 | |||||||
Less: unamortized debt issuance costs | 1,016 | 1,487 | |||||||||
$ | 828,380 | $ | 933,789 |
June 30, | 2023 | 2022 | |||||||||
Revolving credit facility | $ | 383,592 | $ | 410,592 | |||||||
Trade receivable securitization facility | 188,300 | 188,300 | |||||||||
Series C Notes | — | 40,000 | |||||||||
Series D Notes | 25,000 | 25,000 | |||||||||
Series E Notes | 25,000 | 25,000 | |||||||||
Other | 356 | 603 | |||||||||
Total debt | $ | 622,248 | $ | 689,495 | |||||||
Less: unamortized debt issuance costs | 152 | 171 | |||||||||
$ | 622,096 | $ | 689,324 |
Fiscal Year | Aggregate Maturity | ||||
2022 | $ | 44,118 | |||
2023 | 546,622 | ||||
2024 | 213,551 | ||||
2025 | 25,105 | ||||
Fiscal Year | Aggregate Maturity | ||||
2024 | $ | 25,251 | |||
2025 | 25,105 | ||||
2026 | — | ||||
2027 | 571,892 | ||||
2028 | — | ||||
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
U.S. | $ | 152,202 | $ | 36,161 | $ | 204,462 | |||||||||||
Foreign | 24,860 | 19,075 | (9,981) | ||||||||||||||
Income before income taxes | $ | 177,062 | $ | 55,236 | $ | 194,481 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
U.S. | $ | 423,316 | $ | 287,367 | $ | 152,202 | |||||||||||
Foreign | 26,495 | 42,423 | 24,860 | ||||||||||||||
Income before income taxes | $ | 449,811 | $ | 329,790 | $ | 177,062 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 46,685 | $ | 31,149 | $ | 34,437 | |||||||||||
State and local | 11,035 | 7,580 | 7,965 | ||||||||||||||
Foreign | 5,665 | 5,757 | 5,718 | ||||||||||||||
Total current | 63,385 | 44,486 | 48,120 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | (24,168) | (8,594) | 6,265 | ||||||||||||||
State and local | (4,740) | (3,098) | 1,947 | ||||||||||||||
Foreign | (2,172) | (1,600) | (5,844) | ||||||||||||||
Total deferred | (31,080) | (13,292) | 2,368 | ||||||||||||||
Total | $ | 32,305 | $ | 31,194 | $ | 50,488 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 84,294 | $ | 40,608 | $ | 46,685 | |||||||||||
State and local | 19,026 | 10,188 | 11,035 | ||||||||||||||
Foreign | 5,468 | 6,404 | 5,665 | ||||||||||||||
Total current | 108,788 | 57,200 | 63,385 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | (1,881) | 12,467 | (24,168) | ||||||||||||||
State and local | (84) | 2,659 | (4,740) | ||||||||||||||
Foreign | (3,751) | 50 | (2,172) | ||||||||||||||
Total deferred | (5,716) | 15,176 | (31,080) | ||||||||||||||
Total | $ | 103,072 | $ | 72,376 | $ | 32,305 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
Effects of: | |||||||||||||||||
State and local taxes | 3.2 | 6.4 | 4.4 | ||||||||||||||
U.S. federal tax reform/CARES Act NOL carryback | 0 | (1.8) | (0.3) | ||||||||||||||
Goodwill impairment | 0 | 31.4 | 0 | ||||||||||||||
Stock compensation | (2.5) | (1.3) | (0.5) | ||||||||||||||
GILTI/FDII | 0.1 | 3.6 | 0.7 | ||||||||||||||
R & D credit | (1.5) | (1.2) | (0.4) | ||||||||||||||
U.S. tax on foreign income, net | (0.5) | (3.1) | 0.5 | ||||||||||||||
Impact of foreign operations | 0 | 1.6 | (0.6) | ||||||||||||||
Non-deductibles/Deductible dividend | 0 | 0.6 | 0.4 | ||||||||||||||
Interest deduction | (1.1) | (4.0) | (1.2) | ||||||||||||||
Valuation allowance | 0.1 | 2.6 | 2.9 | ||||||||||||||
Other, net | (0.6) | 0.7 | (0.9) | ||||||||||||||
Effective income tax rate | 18.2 | % | 56.5 | % | 26.0 | % |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
Effects of: | |||||||||||||||||
State and local taxes | 3.5 | 3.3 | 3.2 | ||||||||||||||
Stock compensation | (1.0) | (1.5) | (2.5) | ||||||||||||||
GILTI/FDII | (0.2) | 0.2 | 0.1 | ||||||||||||||
R & D credit | (0.4) | (0.4) | (1.5) | ||||||||||||||
U.S. tax on foreign income, net | — | (0.4) | (0.5) | ||||||||||||||
Impact of foreign operations | 0.2 | 0.4 | — | ||||||||||||||
Non-deductibles/Deductible dividend | 0.6 | 0.2 | — | ||||||||||||||
Interest deduction | (0.4) | (0.6) | (1.1) | ||||||||||||||
Valuation allowance | (0.6) | (0.6) | 0.1 | ||||||||||||||
Other, net | 0.2 | 0.3 | (0.6) | ||||||||||||||
Effective income tax rate | 22.9 | % | 21.9 | % | 18.2 | % |
June 30, | 2021 | 2020 | |||||||||
Deferred tax assets: | |||||||||||
Compensation liabilities not currently deductible | $ | 17,436 | $ | 17,252 | |||||||
Other expenses and reserves not currently deductible | 18,676 | 15,272 | |||||||||
Leases | 23,126 | 24,016 | |||||||||
Net operating loss carryforwards | 9,262 | 8,859 | |||||||||
Hedging instrument | 2,794 | 6,406 | |||||||||
Other | 799 | 757 | |||||||||
Total deferred tax assets | $ | 72,093 | $ | 72,562 | |||||||
Less: Valuation allowance | (8,542) | (7,494) | |||||||||
Deferred tax assets, net of valuation allowance | $ | 63,551 | $ | 65,068 | |||||||
Deferred tax liabilities: | |||||||||||
Inventories | $ | (9,215) | $ | (8,284) | |||||||
Goodwill and intangibles | (38,534) | (58,506) | |||||||||
Leases | (22,475) | (23,407) | |||||||||
Depreciation and differences in property bases | (6,214) | (13,018) | |||||||||
Total deferred tax liabilities | (76,438) | (103,215) | |||||||||
Net deferred tax liabilities | $ | (12,887) | $ | (38,147) | |||||||
Net deferred tax liabilities are classified as follows: | |||||||||||
Other assets | $ | 6,373 | $ | 4,749 | |||||||
Other liabilities | (19,260) | (42,896) | |||||||||
Net deferred tax liabilities | $ | (12,887) | $ | (38,147) |
June 30, | 2023 | 2022 | |||||||||
Deferred tax assets: | |||||||||||
Compensation liabilities not currently deductible | $ | 17,726 | $ | 19,131 | |||||||
Other expenses and reserves not currently deductible | 18,215 | 17,143 | |||||||||
Leases | 26,345 | 26,688 | |||||||||
Net operating loss carryforwards | 6,809 | 7,371 | |||||||||
Capitalization of R&D costs | 11,646 | — | |||||||||
Other | 381 | 563 | |||||||||
Total deferred tax assets | $ | 81,122 | $ | 70,896 | |||||||
Less: Valuation allowance | (3,459) | (6,271) | |||||||||
Deferred tax assets, net of valuation allowance | $ | 77,663 | $ | 64,625 | |||||||
Deferred tax liabilities: | |||||||||||
Inventories | $ | (15,174) | $ | (13,728) | |||||||
Goodwill and intangibles | (52,463) | (46,513) | |||||||||
Leases | (26,179) | (26,509) | |||||||||
Hedging instrument | (9,081) | (6,446) | |||||||||
Depreciation and differences in property bases | (9,757) | (9,760) | |||||||||
Total deferred tax liabilities | (112,654) | (102,956) | |||||||||
Net deferred tax liabilities | $ | (34,991) | $ | (38,331) | |||||||
Net deferred tax liabilities are classified as follows: | |||||||||||
Other assets | $ | 9,990 | $ | 5,677 | |||||||
Other liabilities | (44,981) | (44,008) | |||||||||
Net deferred tax liabilities | $ | (34,991) | $ | (38,331) |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Unrecognized Income Tax Benefits at beginning of the year | $ | 4,955 | $ | 4,979 | $ | 3,988 | |||||||||||
Current year tax positions | 285 | 105 | 105 | ||||||||||||||
Prior year tax positions | 620 | 177 | 1,151 | ||||||||||||||
Expirations of statutes of limitations | (630) | (306) | (265) | ||||||||||||||
Unrecognized Income Tax Benefits at end of year | $ | 5,230 | $ | 4,955 | $ | 4,979 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Unrecognized Income Tax Benefits at beginning of the year | $ | 4,926 | $ | 5,230 | $ | 4,955 | |||||||||||
Current year tax positions | 622 | 505 | 285 | ||||||||||||||
Prior year tax positions | (86) | (83) | 620 | ||||||||||||||
Expirations of statutes of limitations | (641) | (726) | (630) | ||||||||||||||
Unrecognized Income Tax Benefits at end of year | $ | 4,821 | $ | 4,926 | $ | 5,230 |
Foreign currency translation adjustment | Unrealized gain (loss) on securities available for sale | Post-employment benefits | Cash flow hedge | Total accumulated other comprehensive loss | |||||||||||||||||||||||||
Balance at July 1, 2018 | $ | (87,974) | $ | 50 | $ | (2,299) | $ | 0 | $ | (90,223) | |||||||||||||||||||
Other comprehensive income (loss) | 1,644 | 0 | (327) | (10,887) | (9,570) | ||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 0 | (226) | 183 | (43) | ||||||||||||||||||||||||
Cumulative effect of adopting accounting standards | 0 | (50) | 0 | 0 | (50) | ||||||||||||||||||||||||
Net current-period other comprehensive income (loss) | 1,644 | (50) | (553) | (10,704) | (9,663) | ||||||||||||||||||||||||
Balance at June 30, 2019 | (86,330) | 0 | (2,852) | (10,704) | (99,886) | ||||||||||||||||||||||||
Other comprehensive loss | (18,764) | 0 | (1,662) | (12,572) | (32,998) | ||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 0 | (50) | 3,504 | 3,454 | ||||||||||||||||||||||||
Net current-period other comprehensive loss | (18,764) | 0 | (1,712) | (9,068) | (29,544) | ||||||||||||||||||||||||
Balance at June 30, 2020 | (105,094) | 0 | (4,564) | (19,772) | (129,430) | ||||||||||||||||||||||||
Other comprehensive income | 24,256 | 0 | 687 | 2,480 | 27,423 | ||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 0 | 204 | 8,711 | 8,915 | ||||||||||||||||||||||||
Net current-period other comprehensive income | 24,256 | 0 | 891 | 11,191 | 36,338 | ||||||||||||||||||||||||
Balance at June 30, 2021 | $ | (80,838) | $ | 0 | $ | (3,673) | $ | (8,581) | $ | (93,092) |
Foreign currency translation adjustment | Post-employment benefits | Cash flow hedge | Total accumulated other comprehensive loss | ||||||||||||||||||||
Balance at July 1, 2020 | $ | (105,094) | $ | (4,564) | $ | (19,772) | $ | (129,430) | |||||||||||||||
Other comprehensive income | 24,256 | 687 | 2,480 | 27,423 | |||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 204 | 8,711 | 8,915 | |||||||||||||||||||
Net current-period other comprehensive income | 24,256 | 891 | 11,191 | 36,338 | |||||||||||||||||||
Balance at June 30, 2021 | (80,838) | (3,673) | (8,581) | (93,092) | |||||||||||||||||||
Other comprehensive (loss) income | (9,900) | 2,142 | 19,770 | 12,012 | |||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 228 | 8,557 | 8,785 | |||||||||||||||||||
Net current-period other comprehensive (loss) income | (9,900) | 2,370 | 28,327 | 20,797 | |||||||||||||||||||
Balance at June 30, 2022 | (90,738) | (1,303) | 19,746 | (72,295) | |||||||||||||||||||
Other comprehensive income | 7,639 | 1,082 | 13,759 | 22,480 | |||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 24 | (5,505) | (5,481) | |||||||||||||||||||
Net current-period other comprehensive income | 7,639 | 1,106 | 8,254 | 16,999 | |||||||||||||||||||
Balance at June 30, 2023 | $ | (83,099) | $ | (197) | $ | 28,000 | $ | (55,296) |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | Pre-Tax Amount | Tax Expense | Net Amount | Pre-Tax Amount | Tax Expense | Net Amount | |||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | $ | 7,723 | $ | 84 | $ | 7,639 | $ | (9,862) | $ | 38 | $ | (9,900) | $ | 24,352 | $ | 96 | $ | 24,256 | |||||||||||||||||||||||||||||||||||
Post-employment benefits: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Actuarial gain on re-measurement | 405 | 100 | 305 | 2,839 | 697 | 2,142 | 903 | 216 | 687 | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of actuarial losses and prior service cost into other expense (income), net and included in net periodic pension costs | 36 | 12 | 24 | 300 | 72 | 228 | 270 | 66 | 204 | ||||||||||||||||||||||||||||||||||||||||||||
Termination of pension plan | 1,031 | 254 | 777 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on cash flow hedge | 18,174 | 4,415 | 13,759 | 26,204 | 6,434 | 19,770 | 3,250 | 770 | 2,480 | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of interest from cash flow hedge into interest expense | (7,285) | (1,780) | (5,505) | 11,361 | 2,804 | 8,557 | 11,553 | 2,842 | 8,711 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | $ | 20,084 | $ | 3,085 | $ | 16,999 | $ | 30,842 | $ | 10,045 | $ | 20,797 | $ | 40,328 | $ | 3,990 | $ | 36,338 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Tax Amount | Tax Expense | Net Amount | Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | Pre-Tax Amount | Tax Expense (Benefit) | Net Amount | |||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | $ | 24,352 | $ | 96 | $ | 24,256 | $ | (18,499) | $ | 265 | $ | (18,764) | $ | 2,021 | $ | 377 | $ | 1,644 | |||||||||||||||||||||||||||||||||||
Post-employment benefits: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Actuarial gain (loss) on re-measurement | 903 | 216 | 687 | (2,192) | (530) | (1,662) | (372) | (45) | (327) | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs | 270 | 66 | 204 | (66) | (16) | (50) | (306) | (80) | (226) | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain (loss) on cash flow hedge | 3,250 | 770 | 2,480 | (16,615) | (4,043) | (12,572) | (14,446) | (3,559) | (10,887) | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of interest from cash flow hedge into interest expense | 11,553 | 2,842 | 8,711 | 4,638 | 1,134 | 3,504 | 244 | 61 | 183 | ||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of adopting accounting standard | 0 | 0 | 0 | 0 | 0 | 0 | (50) | 0 | (50) | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | $ | 40,328 | $ | 3,990 | $ | 36,338 | $ | (32,734) | $ | (3,190) | $ | (29,544) | $ | (12,909) | $ | (3,246) | $ | (9,663) |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Net Income | $ | 144,757 | $ | 24,042 | $ | 143,993 | |||||||||||
Average Shares Outstanding: | |||||||||||||||||
Weighted-average common shares outstanding for basic computation | 38,758 | 38,658 | 38,670 | ||||||||||||||
Dilutive effect of potential common shares | 538 | 341 | 490 | ||||||||||||||
Weighted-average common shares outstanding for dilutive computation | 39,296 | 38,999 | 39,160 | ||||||||||||||
Net Income Per Share — Basic | $ | 3.73 | $ | 0.62 | $ | 3.72 | |||||||||||
Net Income Per Share — Diluted | $ | 3.68 | $ | 0.62 | $ | 3.68 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Net Income | $ | 346,739 | $ | 257,414 | $ | 144,757 | |||||||||||
Average Shares Outstanding: | |||||||||||||||||
Weighted-average common shares outstanding for basic computation | 38,592 | 38,471 | 38,758 | ||||||||||||||
Dilutive effect of potential common shares | 628 | 634 | 538 | ||||||||||||||
Weighted-average common shares outstanding for dilutive computation | 39,220 | 39,105 | 39,296 | ||||||||||||||
Net Income Per Share — Basic | $ | 8.98 | $ | 6.69 | $ | 3.73 | |||||||||||
Net Income Per Share — Diluted | $ | 8.84 | $ | 6.58 | $ | 3.68 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
SARs and options | $ | 2,526 | $ | 2,954 | $ | 2,440 | |||||||||||
Performance shares | 2,494 | 854 | 2,082 | ||||||||||||||
Restricted stock and RSUs | 3,960 | 3,146 | 2,391 | ||||||||||||||
Total compensation costs under award programs | $ | 8,980 | $ | 6,954 | $ | 6,913 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
SARs | $ | 2,785 | $ | 3,284 | $ | 2,526 | |||||||||||
Performance shares | 5,302 | 4,549 | 2,494 | ||||||||||||||
Restricted stock and RSUs | 4,274 | 4,009 | 3,960 | ||||||||||||||
Total compensation costs under award programs | $ | 12,361 | $ | 11,842 | $ | 8,980 |
June 30, | 2021 | Average Expected Period of Expected Recognition (Years) | |||||||||
SARs and options | $ | 2,848 | 2.1 | ||||||||
Performance shares | 5,172 | 1.7 | |||||||||
Restricted stock and RSUs | 5,352 | 2.5 | |||||||||
Total unrecognized compensation costs under award programs | $ | 13,372 | 2.1 |
June 30, | 2023 | Average Expected Period of Expected Recognition (Years) | |||||||||
SARs | $ | 3,267 | 2.7 | ||||||||
Performance shares | 5,694 | 1.7 | |||||||||
Restricted stock and RSUs | 4,036 | 1.8 | |||||||||
Total unrecognized compensation costs under award programs | $ | 12,997 | 2.0 |
2021 | 2020 | 2019 | |||||||||||||||
Expected life, in years | 7.0 | 6.2 | 6.0 | ||||||||||||||
Risk free interest rate | 0.5 | % | 1.6 | % | 2.8 | % | |||||||||||
Dividend yield | 1.9 | % | 2.3 | % | 1.8 | % | |||||||||||
Volatility | 32.0 | % | 23.7 | % | 22.5 | % | |||||||||||
Per share fair value of SARs granted during the year | $17.97 | $10.12 | $16.15 |
2023 | 2022 | 2021 | |||||||||||||||
Expected life, in years | 6.2 | 6.4 | 7.0 | ||||||||||||||
Risk free interest rate | 2.9 | % | 1.0 | % | 0.5 | % | |||||||||||
Dividend yield | 1.3 | % | 1.5 | % | 1.9 | % | |||||||||||
Volatility | 35.5 | % | 34.3 | % | 32.0 | % | |||||||||||
Per share fair value of SARs granted during the year | $35.98 | $26.18 | $17.97 |
Shares | Weighted-Average Exercise Price | ||||||||||
Year Ended June 30, 2021 | |||||||||||
(Shares in thousands) | |||||||||||
Outstanding, beginning of year | 1,620 | $ | 51.07 | ||||||||
Granted | 68 | 69.05 | |||||||||
Exercised | (527) | 43.16 | |||||||||
Forfeited | (3) | 59.18 | |||||||||
Outstanding, end of year | 1,158 | $ | 55.70 | ||||||||
Exercisable at end of year | 728 | $ | 52.59 | ||||||||
Expected to vest at end of year | 1,152 | $ | 55.69 |
Shares | Weighted-Average Exercise Price | ||||||||||
Year Ended June 30, 2023 | |||||||||||
(Shares in thousands) | |||||||||||
Outstanding, beginning of year | 965 | $ | 61.85 | ||||||||
Granted | 112 | 104.33 | |||||||||
Exercised | (257) | 53.84 | |||||||||
Forfeited | (4) | 77.65 | |||||||||
Outstanding, end of year | 816 | $ | 70.11 | ||||||||
Exercisable at end of year | 537 | $ | 62.64 | ||||||||
Expected to vest at end of year | 810 | $ | 69.90 |
Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Year Ended June 30, 2021 | |||||||||||
(Shares in thousands) | |||||||||||
Non-vested, beginning of year | 56 | $ | 54.62 | ||||||||
Awarded | 46 | 53.53 | |||||||||
Vested | (37) | 51.50 | |||||||||
Non-vested, end of year | 65 | $ | 55.64 |
Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Year Ended June 30, 2023 | |||||||||||
(Shares in thousands) | |||||||||||
Non-vested, beginning of year | 131 | $ | 58.27 | ||||||||
Awarded | 73 | 74.10 | |||||||||
Forfeitures | (2) | 62.43 | |||||||||
Vested | (43) | 53.63 | |||||||||
Non-vested, end of year | 159 | $ | 96.37 |
Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Year Ended June 30, 2021 | |||||||||||
(Share amounts in thousands) | |||||||||||
Non-vested, beginning of year | 130 | $ | 59.91 | ||||||||
Granted | 94 | 71.28 | |||||||||
Forfeitures | (2) | 70.85 | |||||||||
Vested | (45) | 60.86 | |||||||||
Non-vested, end of year | 177 | $ | 65.57 |
Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Year Ended June 30, 2023 | |||||||||||
(Share amounts in thousands) | |||||||||||
Non-vested, beginning of year | 177 | $ | 69.23 | ||||||||
Granted | 37 | 108.60 | |||||||||
Forfeitures | (5) | 76.91 | |||||||||
Vested | (66) | 60.02 | |||||||||
Non-vested, end of year | 143 | $ | 83.35 |
June 30, | 2021 | 2020 | ||||||||||||
Operating lease assets, net | $ | 87,111 | $ | 90,636 | ||||||||||
Operating lease liabilities | ||||||||||||||
Other current liabilities | $ | 27,359 | $ | 27,231 | ||||||||||
Other liabilities | 64,248 | 67,926 | ||||||||||||
Total operating lease liabilities | $ | 91,607 | $ | 95,157 |
June 30, | 2023 | 2022 | ||||||||||||
Operating lease assets, net | $ | 100,677 | $ | 108,052 | ||||||||||
Operating lease liabilities | ||||||||||||||
Other current liabilities | $ | 31,173 | $ | 30,114 | ||||||||||
Other liabilities | 72,704 | 80,807 | ||||||||||||
Total operating lease liabilities | $ | 103,877 | $ | 110,921 |
June 30, | 2021 | 2020 | ||||||||||||
Weighted average remaining lease term (years) | 5.6 | 3.6 | ||||||||||||
Weighted average incremental borrowing rate | 3.26 | % | 3.45 | % |
June 30, | 2023 | 2022 | ||||||||||||
Weighted average remaining lease term (years) | 4.9 | 5.5 | ||||||||||||
Weighted average incremental borrowing rate | 3.67 | % | 2.92 | % |
Year Ended June 30, | 2021 | 2020 | ||||||||||||
Cash paid for operating leases | $ | 33,695 | $ | 34,642 | ||||||||||
Right of use assets obtained in exchange for new operating lease liabilities | $ | 25,556 | $ | 39,136 |
Year Ended June 30, | 2023 | 2022 | ||||||||||||
Cash paid for operating leases | $ | 35,545 | $ | 35,313 | ||||||||||
Right of use assets obtained in exchange for new operating lease liabilities | $ | 30,605 | $ | 50,743 |
Fiscal Year | Maturity of Operating Lease Liabilities | ||||
2022 | $ | 29,853 | |||
2023 | 22,982 | ||||
2024 | 17,896 | ||||
2025 | 10,462 | ||||
2026 | 6,547 | ||||
Thereafter | 11,410 | ||||
Total lease payments | 99,150 | ||||
Less interest | 7,543 | ||||
Present value of lease liabilities | $ | 91,607 |
Fiscal Year | Maturity of Operating Lease Liabilities | ||||
2024 | $ | 34,235 | |||
2025 | 25,253 | ||||
2026 | 19,742 | ||||
2027 | 14,230 | ||||
2028 | 8,416 | ||||
Thereafter | 11,375 | ||||
Total lease payments | 113,251 | ||||
Less interest | 9,374 | ||||
Present value of lease liabilities | $ | 103,877 |
Service Center Based Distribution | Fluid Power & Flow Control | Total | |||||||||||||||
Year Ended June 30, 2021 | |||||||||||||||||
Net sales | $ | 2,199,533 | $ | 1,036,386 | $ | 3,235,919 | |||||||||||
Operating income for reportable segments | 225,206 | 121,782 | 346,988 | ||||||||||||||
Assets used in the business | 1,332,720 | 939,087 | 2,271,807 | ||||||||||||||
Depreciation and amortization of property | 17,155 | 3,625 | 20,780 | ||||||||||||||
Capital expenditures | 13,735 | 2,117 | 15,852 | ||||||||||||||
Year Ended June 30, 2020 | |||||||||||||||||
Net sales | $ | 2,241,949 | $ | 1,003,703 | $ | 3,245,652 | |||||||||||
Operating income for reportable segments | 211,667 | 109,847 | 321,514 | ||||||||||||||
Assets used in the business | 1,314,011 | 969,540 | 2,283,551 | ||||||||||||||
Depreciation and amortization of property | 17,133 | 4,063 | 21,196 | ||||||||||||||
Capital expenditures | 17,063 | 3,052 | 20,115 | ||||||||||||||
Year Ended June 30, 2019 | |||||||||||||||||
Net sales | $ | 2,452,905 | $ | 1,019,834 | $ | 3,472,739 | |||||||||||
Operating income for reportable segments | 254,954 | 112,117 | 367,071 | ||||||||||||||
Assets used in the business | 1,265,093 | 1,066,604 | 2,331,697 | ||||||||||||||
Depreciation and amortization of property | 15,982 | 4,254 | 20,236 | ||||||||||||||
Capital expenditures | 16,475 | 2,495 | 18,970 |
Service Center Based Distribution | Engineered Solutions | Total | |||||||||||||||
Year Ended June 30, 2023 | |||||||||||||||||
Net sales | $ | 2,966,842 | $ | 1,445,952 | $ | 4,412,794 | |||||||||||
Operating income for reportable segments | 373,439 | 203,404 | 576,843 | ||||||||||||||
Assets used in the business | 1,736,393 | 1,006,939 | 2,743,332 | ||||||||||||||
Depreciation and amortization of property | 17,932 | 4,334 | 22,266 | ||||||||||||||
Capital expenditures | 15,390 | 11,086 | 26,476 | ||||||||||||||
Year Ended June 30, 2022 | |||||||||||||||||
Net sales | $ | 2,565,604 | $ | 1,245,072 | $ | 3,810,676 | |||||||||||
Operating income for reportable segments | 301,881 | 156,644 | 458,525 | ||||||||||||||
Assets used in the business | 1,455,293 | 997,295 | 2,452,588 | ||||||||||||||
Depreciation and amortization of property | 17,509 | 4,167 | 21,676 | ||||||||||||||
Capital expenditures | 14,486 | 3,638 | 18,124 | ||||||||||||||
Year Ended June 30, 2021 | |||||||||||||||||
Net sales | $ | 2,199,533 | $ | 1,036,386 | $ | 3,235,919 | |||||||||||
Operating income for reportable segments | 225,206 | 121,782 | 346,988 | ||||||||||||||
Assets used in the business | 1,332,720 | 939,087 | 2,271,807 | ||||||||||||||
Depreciation and amortization of property | 17,155 | 3,625 | 20,780 | ||||||||||||||
Capital expenditures | 13,735 | 2,117 | 15,852 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Operating income for reportable segments | $ | 346,988 | $ | 321,514 | $ | 367,071 | |||||||||||
Adjustments for: | |||||||||||||||||
Intangible amortization — Service Center Based Distribution | 5,426 | 12,385 | 13,639 | ||||||||||||||
Intangible amortization — Fluid Power & Flow Control | 28,938 | 29,168 | 28,244 | ||||||||||||||
Impairment — Service Center Based Distribution | 49,528 | 0 | 31,594 | ||||||||||||||
Goodwill Impairment — Fluid Power & Flow Control | 0 | 131,000 | 0 | ||||||||||||||
Corporate and other expense, net | 57,642 | 59,972 | 59,806 | ||||||||||||||
Total operating income | 205,454 | 88,989 | 233,788 | ||||||||||||||
Interest expense, net | 30,592 | 36,535 | 40,188 | ||||||||||||||
Other income, net | (2,200) | (2,782) | (881) | ||||||||||||||
Income before income taxes | $ | 177,062 | $ | 55,236 | $ | 194,481 |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Operating income for reportable segments | $ | 576,843 | $ | 458,525 | $ | 346,988 | |||||||||||
Adjustments for: | |||||||||||||||||
Intangible amortization — Service Center Based Distribution | 2,857 | 3,435 | 5,426 | ||||||||||||||
Intangible amortization — Engineered Solutions | 27,948 | 28,444 | 28,938 | ||||||||||||||
Impairment — Service Center Based Distribution | — | — | 49,528 | ||||||||||||||
Corporate and other expense, net | 72,887 | 68,788 | 57,642 | ||||||||||||||
Total operating income | 473,151 | 357,858 | 205,454 | ||||||||||||||
Interest expense, net | 21,639 | 26,263 | 30,592 | ||||||||||||||
Other expense (income), net | 1,701 | 1,805 | (2,200) | ||||||||||||||
Income before income taxes | $ | 449,811 | $ | 329,790 | $ | 177,062 |
June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Long-Lived Assets: | |||||||||||||||||
United States | $ | 173,335 | $ | 185,475 | $ | 112,812 | |||||||||||
Canada | 21,458 | 20,575 | 8,871 | ||||||||||||||
Other Countries | 7,907 | 6,487 | 2,619 | ||||||||||||||
Total | $ | 202,700 | $ | 212,537 | $ | 124,302 |
June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Long-Lived Assets: | |||||||||||||||||
United States | $ | 176,025 | $ | 178,522 | $ | 173,335 | |||||||||||
Canada | 29,817 | 31,728 | 21,458 | ||||||||||||||
Other Countries | 9,876 | 9,698 | 7,907 | ||||||||||||||
Total | $ | 215,718 | $ | 219,948 | $ | 202,700 |
Year Ended June 30, | 2021 | 2020 | 2019 | ||||||||||||||
Unrealized gain on assets held in rabbi trust for a non-qualified deferred compensation plan | $ | (4,048) | $ | (458) | $ | (689) | |||||||||||
Foreign currency transaction losses (gains) | 2,091 | (2,463) | 334 | ||||||||||||||
Net other periodic post-employment costs (benefits) | 283 | (120) | (85) | ||||||||||||||
Life insurance (income) expense, net | (296) | 233 | (479) | ||||||||||||||
Other, net | (230) | 26 | 38 | ||||||||||||||
Total other income, net | $ | (2,200) | $ | (2,782) | $ | (881) |
Year Ended June 30, | 2023 | 2022 | 2021 | ||||||||||||||
Unrealized (gain) loss on assets held in rabbi trust for a non-qualified deferred compensation plan | $ | (2,223) | $ | 2,612 | $ | (4,048) | |||||||||||
Foreign currency transaction losses (gains) | 3,284 | (65) | 2,091 | ||||||||||||||
Net other periodic post-employment costs | 1,470 | 610 | 283 | ||||||||||||||
Life insurance income, net | (668) | (1,374) | (296) | ||||||||||||||
Other, net | (162) | 22 | (230) | ||||||||||||||
Total other expense (income), net | $ | 1,701 | $ | 1,805 | $ | (2,200) |
/s/ Neil A. Schrimsher | /s/ David K. Wells | |||||||
President & Chief Executive Officer | Vice President - Chief Financial Officer, Treasurer, & |
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||||||||||||||||
Equity compensation plans approved by security holders | 1,151,872 | $55.69 | * | |||||||||||||||||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||||||||||||||||
Total | 1,151,872 | $55.69 | * |
• | Report of Independent Registered Public Accounting Firm | |||||||
• | Statements of Consolidated Income for the Years Ended June 30, | |||||||
• | Statements of Consolidated Comprehensive Income for the Years Ended June 30, | |||||||
• | Consolidated Balance Sheets at June 30, | |||||||
• | Statements of Consolidated Cash Flows for the Years Ended June 30, | |||||||
• | Statements of Consolidated Shareholders' Equity For the Years Ended June 30, | |||||||
• | Notes to Consolidated Financial Statements for the Years Ended June 30, | |||||||
• | Supplementary Data: |
Page No. | ||||||||
Schedule II - Valuation and Qualifying Accounts: Pg. |
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101 | The following financial information from Applied Industrial Technologies, Inc.'s Annual Report on Form 10-K for the year ended June 30, | ||||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
COLUMN A | COLUMN B | COLUMN C | COLUMN D | COLUMN E | ||||||||||||||||||||||||||||||||||
DESCRIPTION | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Additions (Deductions) Charged to Other Accounts | Deductions from Reserve | Balance at End of Period | |||||||||||||||||||||||||||||||||
Year Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 13,661 | $ | 6,540 | $ | 0 | $ | 3,746 | (B) | $ | 16,455 | |||||||||||||||||||||||||||
Returns reserve | 9,883 | 0 | (111) | (A) | 0 | 9,772 | ||||||||||||||||||||||||||||||||
$ | 23,544 | $ | 6,540 | $ | (111) | $ | 3,746 | $ | 26,227 | |||||||||||||||||||||||||||||
Year Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 10,498 | $ | 14,055 | $ | 0 | $ | 10,892 | (B) | $ | 13,661 | |||||||||||||||||||||||||||
Returns reserve | 7,265 | 0 | 2,618 | (A) | 0 | 9,883 | ||||||||||||||||||||||||||||||||
$ | 17,763 | $ | 14,055 | $ | 2,618 | $ | 10,892 | $ | 23,544 | |||||||||||||||||||||||||||||
Year Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 10,964 | $ | 4,058 | $ | 0 | $ | 4,524 | (B) | $ | 10,498 | |||||||||||||||||||||||||||
Returns reserve | 2,602 | 738 | 3,925 | (A) | 0 | 7,265 | ||||||||||||||||||||||||||||||||
$ | 13,566 | $ | 4,796 | $ | 3,925 | $ | 4,524 | $ | 17,763 |
COLUMN A | COLUMN B | COLUMN C | COLUMN D | COLUMN E | ||||||||||||||||||||||||||||||||||
DESCRIPTION | Balance at Beginning of Period | Additions Charged to Cost and Expenses | Additions (Deductions) Charged to Other Accounts | Deductions from Reserve | Balance at End of Period | |||||||||||||||||||||||||||||||||
Year Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 17,522 | $ | 5,619 | $ | — | $ | 807 | (B) | $ | 22,334 | |||||||||||||||||||||||||||
Returns reserve | 10,522 | — | 2,113 | (A) | — | 12,635 | ||||||||||||||||||||||||||||||||
$ | 28,044 | $ | 5,619 | $ | 2,113 | $ | 807 | $ | 34,969 | |||||||||||||||||||||||||||||
Year Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 16,455 | $ | 3,193 | $ | — | $ | 2,126 | (B) | $ | 17,522 | |||||||||||||||||||||||||||
Returns reserve | 9,772 | — | 750 | (A) | — | 10,522 | ||||||||||||||||||||||||||||||||
$ | 26,227 | $ | 3,193 | $ | 750 | $ | 2,126 | $ | 28,044 | |||||||||||||||||||||||||||||
Year Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
Reserve deducted from assets to which it applies — | ||||||||||||||||||||||||||||||||||||||
Accounts receivable: | ||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 13,661 | $ | 6,540 | $ | — | $ | 3,746 | (B) | $ | 16,455 | |||||||||||||||||||||||||||
Returns reserve | 9,883 | — | (111) | (A) | — | 9,772 | ||||||||||||||||||||||||||||||||
$ | 23,544 | $ | 6,540 | $ | (111) | $ | 3,746 | $ | 26,227 |
/s/ Neil A. Schrimsher | /s/ David K. Wells | |||||||
Neil A. Schrimsher President & Chief Executive Officer | David K. Wells Vice President-Chief Financial Officer, Treasurer, & | |||||||
Corporate Controller (Principal |
* | * | |||||||
Madhuri A. Andrews, Director | ||||||||
* | * | |||||||
Mary Dean Hall, Director | Dan P. Komnenovich, Director | |||||||
* | * | |||||||
Robert J. Pagano, Jr., Director | Vincent K. Petrella, Director | |||||||
* | /s/ Neil A. Schrimsher | |||||||
Joe A. Raver, Director | Neil A. Schrimsher, President & Chief Executive Officer and Director | |||||||
* | ||||||||
Peter C. Wallace, Director and Chairman |
/s/ | ||
for persons indicated by “*” |