SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ______.
Commission file number 1-2299
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Applied Industrial Technologies, Inc.
Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Applied Industrial Technologies, Inc.
One Applied Plaza
Cleveland, Ohio 44115-5056
FINANCIAL STATEMENTS AND EXHIBIT(S)
Page No.
(a) Financial Statements (in this Report)
-------------------- ----------------
Independent Auditors' Report 5
Statement of Net Assets Available
for Benefits --
December 31, 2001 and 2000 6
Statement of Changes in Net Assets
Available for Benefits --
Years Ended December 31, 2001
and 2000 7
Notes to Financial Statements --
Years Ended December 31,
2001 and 2000 8 - 12
Supplemental Schedule 13
(b) Exhibit(s)
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Independent Auditors' Consent 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan has duly caused this annual report to be signed on its behalf by the
undersigned, hereunto duly authorized.
APPLIED INDUSTRIAL TECHNOLOGIES,
INC. RETIREMENT SAVINGS PLAN
By: Applied Industrial
Technologies, Inc., as Plan
Administrator
By: /s/ John R. Whitten
-----------------------------------
Signature
John R. Whitten
-----------------------------------
Printed Name
Vice President
-----------------------------------
Title
Date: June 26, 2002
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
RETIREMENT SAVINGS PLAN
Financial Statements
For the Years Ended
December 31, 2001 and 2000,
Supplemental Schedule as of
December 31, 2001,
and Independent Auditors' Report
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2001 and 2000 3
Notes to Financial Statements 4 - 8
SUPPLEMENTAL SCHEDULE:
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)
As of December 31, 2001 9
INDEPENDENT AUDITORS' REPORT
Applied Industrial Technologies, Inc. Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Applied Industrial Technologies, Inc. Retirement Savings Plan (the
"Plan") as of December 31, 2001 and 2000, and the related statements of changes
in net assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2001 and 2000, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
table of contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
June 24, 2002
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
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2001 2000
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock (Note 4) $ 32,044,275 $ 35,021,791
Mutual funds 108,965,665 121,018,347
Common/collective funds 46,876,474 44,140,317
Loans to participants 7,379,531 7,053,621
------------ ------------
Total investments 195,265,945 207,234,076
Investment income receivable 22,025 13,655
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $195,287,970 $207,247,731
============ ============
See notes to financial statements.
2
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
2001 2000
ADDITIONS:
Contributions:
Participant $ 9,927,450 $ 9,650,488
Employer:
Applied Industrial Technologies, Inc. common stock 2,274,280 4,009,897
Cash 2,170,074 2,389,426
Investment income(loss):
Interest and dividends:
Common stock (Note 4) 840,057 807,381
Mutual funds 3,059,229 10,004,824
Common/collective funds (144) 1,319
-------------- -------------
Total dividends 3,899,142 10,813,524
Net (depreciation)/appreciation in fair value of investments:
Common stock (Note 4) (3,203,343) 6,517,008
Mutual funds (10,005,547) (19,867,875)
Common/collective funds (3,754,962) 90,783
-------------- -------------
Total net (depreciation)/appreciation in fair value of investments (16,963,852) (13,260,084)
Total investment loss (13,064,710) (2,446,560)
-------------- -------------
Total additions 1,307,094 13,603,251
DEDUCTIONS:
Distributions to participants 12,860,270 19,395,194
Administrative expenses 406,585 391,703
-------------- -------------
Total deductions 13,266,855 19,786,897
DECREASE IN NET ASSETS FOR THE YEAR (11,959,761) (6,183,646)
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF THE YEAR 207,247,731 213,431,377
-------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS, END OF THE YEAR $ 195,287,970 $ 207,247,731
============== =============
See notes to financial statements.
3
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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1. DESCRIPTION OF THE PLAN
The following description of the Applied Industrial Technologies, Inc.
Retirement Savings Plan (the "Plan") is provided for general purposes only.
Participants and users of the financial statements should refer to the Plan
document for more complete information.
GENERAL - The Plan was established for the purpose of encouraging and
assisting employees of Applied Industrial Technologies, Inc. and its
subsidiaries (the "Company") to provide long-term, tax-deferred savings for
retirement. The Plan is subject to the reporting and disclosure
requirements, the minimum participation and vesting standards, and the
fiduciary responsibility requirements of the Employee Retirement Income
Security Act of 1974.
ADMINISTRATION - The Plan is administered by the Company. The Company's
powers and duties relate to making participant and employer contributions
to the Trust, establishing investment objectives, authorizing disbursements
from the Trust, and resolving any questions of Plan interpretation.
The assets of the Plan are maintained and administered by Key Trust Co. of
Ohio, N.A. acting as Trustee. The Trustee is responsible for the custody of
assets.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contributions and allocations of (a) the Company's
contributions and, (b) Plan earnings, and charged with an allocation of
administrative expenses. Allocations are based on participant
contributions, account balances, or can be per capita, as defined. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
PARTICIPATION AND CONTRIBUTIONS - All eligible employees may participate in
the Plan on the first day of the month following their hire when one hour
of service is performed during the first fifteen days of a calendar month.
Each employee who first completes an hour of service after the first
fifteen days of a calendar month shall become eligible as of the first
payroll period in the second month following the month in which the first
hour of service was completed.
Eligible employees may elect to make pretax contributions to the Plan
ranging from 1% to 15% of compensation. For those eligible employees who do
not make a compensation reduction election, their compensation shall be
automatically reduced by two percent and such shall be contributed on their
behalf to the Plan as contributions until superseded by a subsequent
contribution election. The Company may make additional contributions to the
Plan, including, but not limited to, matching contributions equal to a
percentage of participant pretax contributions not in excess of 6% of the
participant's compensation, and discretionary profit-sharing contributions
as determined annually. Matching employer contributions are determined
based upon the Company's earnings per share for the immediately preceding
calendar year quarter and the participant's investment elections. Except in
the case of death, disability, or retirement, a participant must be
employed as of the last day of the quarter to receive the Plan's quarter
match. The matching employer
4
contribution is updated annually based on the Company's June 30 fiscal year
end and is currently determined using the following schedule:
SUBSEQUENT QUARTER MATCHING CONTRIBUTION
----------------------------------------------------------------
$.25 $.35 $.50 $.75 $1.00
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QUARTERLY EPS
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Quarter Ended 9/30/01 .24 .31 .35 .38
Quarter Ended 12/31/01 Minimum .25 .32 .36 .39
Quarter Ended 3/31/02 Match .27 .35 .40 .42
Quarter Ended 6/30/02 .31 .39 .44 .46
------------------------ ----------------- ----------- ----------- ------------ ---------
The employer match on participant contributions to investment funds other
than the Company Stock fund was $.50, $.25, $.25, and $.35 for the four
2001 quarters, and $.25, $.50, $1.00, and $.50 for the four 2000 quarters,
respectively.
Matching Employer Contributions are made primarily in shares of Applied
Industrial Technologies, Inc. common stock to the Company Stock Fund.
Participants that elect to contribute to the Company Stock Fund receive an
additional 10% Bonus Match on participant's pretax contributions not in
excess of 6% of the participant's compensation. The Bonus Match is also
made primarily in shares of Applied Industrial Technologies, Inc common
stock to the Company Stock Fund.
The Company may also make a Profit-Sharing Contribution to the Plan
annually. Participants must be employed on June 30 of such Plan year and
have completed at least one year of service, as defined in the Plan
agreement, as of June 30 to be eligible to receive an allocation of the
Profit-Sharing Contribution. Additionally, the Company may contribute a
special Profit-Sharing Contribution to individuals who terminate employment
after attaining age 55 and completing ten years of service. Profit-Sharing
Contributions are allocated to each participant's Profit-Sharing
Contribution Account based upon the ratio of each participant's total
compensation to the aggregate compensation of all participants eligible to
receive a Profit-Sharing Contribution. The Profit-Sharing Contributions for
the years ended December 31, 2001 and 2000 were composed of $2,169,911 and
$2,389,348 in cash, and $217,089 and $270,653 in Applied Industrial
Technologies, Inc. common stock, respectively.
Contributions are excluded from participants' taxable income until such
amounts are received by them as a distribution from the Plan.
The Plan provides for Rollover Contributions (amounts previously
distributed to the participants from certain other tax-qualified plans) and
Transfer Contributions (assets transferred from certain other tax-qualified
plans) by or on behalf of an employee in accordance with procedures
established by the Company.
INVESTMENT OF CONTRIBUTIONS - Participants elect investment of
profit-sharing and pretax contributions in 1% increments in the Plan's
Company Stock Fund, American Fundamental Investors Fund, American
EuroPacific Growth Fund, Vanguard Asset Allocation Fund, EB MaGIC Fund,
Bond Fund of America, Growth Fund Portfolio, Franklin Small-Cap Growth II
Fund, Royce Total Return Fund, Lord Abbett Mid-Cap Value Fund, T Rowe Price
Mid-Cap Growth Fund, Alliance Growth and Income Fund, EB Equity Index Fund
or the MFS Mid-Cap Growth Fund. The portion of the Plan that is invested in
the Company Stock Fund is intended to be an Employee Stock Ownership Plan
(ESOP) under code section 4975 (e)(7) and ERISA section 407 (d)(6).
Participants may elect to change their investment elections
5
as to future contributions and may also elect to reallocate a portion or
all of their account balances among the investment funds in increments of
1% of the total amount to be reallocated. All such elections are filed with
the Trustee and become effective daily.
The value of the funds and the interest of individual participants under
each fund, are calculated daily (daily valuation).
VESTING AND DISTRIBUTIONS - Each participant is immediately and fully
vested in their participant contributions and earnings thereon.
Participants vest in Matching Employer Contributions and Profit-Sharing
Contributions at a rate of 25% for each year of eligible service, becoming
completely vested after four years, or at death, termination of employment
due to permanent and total disability, or normal or early retirement as
defined in the Plan.
Upon termination of employment, participants may receive lump sum or
installment distributions of their vested account balances as soon as
administratively possible. The Plan permits hardship withdrawals and
in-service distributions upon attainment of age 59-1/2.
Forfeitures of nonvested amounts are applied to reduce future Matching
Employer Contributions. Total forfeitures were $105,299 in 2001 and $92,907
in 2000.
LOANS - Participants may borrow from their 401(k) Contribution Accounts,
Rollover Contributions and Transferred Contributions a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50 percent of the aggregate
sum of the participants' accounts. Loan terms range from 1-5 years or up to
ten years, if for the purchase of a primary residence. Loans that
originated from merged plans are also reflected in the Employee Loan Fund
in the Plan's financial statements. These loans are to be repaid to the
Plan in accordance with their original terms. The loans are secured by the
balance in the participants' accounts and bear interest at rates prevailing
at the time the loans were made. Principal and interest are paid ratably
through bi-weekly payroll deductions.
PLAN TERMINATION - The Plan was adopted with the expectation that it will
continue indefinitely. The Company may, however, terminate the Plan at any
time and may amend the Plan from time to time. In the event of termination
of the Plan, all participants will immediately become fully vested in their
accounts.
TAX STATUS OF THE PLAN - The Plan obtained its latest determination letter
dated June 27, 1996, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the applicable requirements
of the Internal Revenue Code. The Plan has been amended since receiving
this determination letter. The Plan administrator and the Plan's tax
counsel believe that the Plan is designed and is currently being operated
in compliance with the applicable requirements of the Internal Revenue Code
and submitted a request for a new determination letter on February 28,
2002. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The accompanying financial statements have been
prepared on the accrual basis of accounting.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with
6
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and charges therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
VALUATION OF INVESTMENTS - Investments are accounted for at cost on the
trade-date and are reported in the statement of net assets available for
benefits at fair value. The investment in Applied Industrial Technologies,
Inc. common stock is valued using the year-end closing price listed by the
New York Stock Exchange. Investment funds are stated at values using
year-end closing prices for each of the funds or quoted market prices.
BENEFIT PAYMENTS - Distributions to participants are recorded by the Plan
when payments are made.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan are paid by
the Plan or the Company, as determined by the Company.
3. INVESTMENTS
The Plan provides that, in accordance with the investment objectives
established by the Company, the Trustee of the Plan shall hold, invest,
reinvest, manage and administer all assets of the Plan as a trust fund for
the exclusive benefit of participants and their beneficiaries.
Plan investments exceeding 5% of net assets available for benefits as of
December 31, 2001 and 2000 were as follows:
Description of
Investment 2001 2000
----------------- ------------------
EB MaGIC Fund $ 38,968,727 $ 34,267,939
Applied Industrial Technologies, Inc. Common Stock 32,044,275 35,021,791
Fundamental Investors Fund 28,786,421 35,258,519
EuroPacific Growth Fund 14,205,889 17,145,480
Bond Fund of America 11,801,309 -
Franklin Small Cap Growth II Fund 10,907,527 14,478,932
7
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to nonparticipant-directed investments is as
follows as of and for the years ended December 31:
2001 2000
--------------------------------
NET ASSETS:
Common stock $ 32,044,275 $ 35,021,791
Money market funds 302,918 457,155
------------ ------------
$ 32,347,193 $ 35,478,946
============ ============
CHANGE IN NET ASSETS:
Contributions $ 3,188,859 $ 5,082,946
Dividends 840,057 807,381
Net (depreciation)/appreciation in fair value (3,203,343) 6,517,008
Benefits paid to participants (1,970,224) (2,429,876)
Transfers to participant-directed investments (1,987,102) (2,677,968)
------------ ------------
$ (3,131,753) $ 7,299,491
============ ============
******
8
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
SCHEDULE H, LINE 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
--------------------------------------------------------------------------------
IDENTITY OF ISSUER, BORROWER, DESCRIPTION OF INVESTMENT COST CURRENT
LESSOR OR SIMILAR PARTY VALUE
* Key Trust Company of Ohio, NA EB MaGIC Fund - 2,555,058 units $ 34,748,814 $ 38,968,727
* Applied Industrial Tech., Inc. Common Stock - 1,718,884 shares 28,038,411 32,044,275
The American Funds Group American Fundamental Investors Fund - 1,048,864 shares 28,238,178 28,786,421
The American Funds Group American EuroPacific Growth Fund - 528,779 shares 15,097,723 14,205,889
The American Funds Group Bond Fund of America - 922,855 shares 12,077,090 11,801,309
Franklin Templeton Franklin Small Cap Growth II Fund - 1,098,628 shares 11,337,148 10,907,527
The Vanguard Group Vanguard Asset Allocation Fund - 406,110 shares 9,705,997 8,854,255
T. Rowe Price T Rowe Price Mid-Cap Growth Fund - 216,253 shares 8,755,955 8,518,939
Wilshire Target Fund Wilshire Target Fund - 263,275 shares 11,369,443 7,949,614
Vanguard Growth Index Fund Vanguard Growth Index Fund - 295,110 shares 10,726,194 7,793,848
* Key Trust Company of Ohio, NA EB Equity Index Fund - 95,859 units 7,118,309 7,526,372
* Participant Loans Participant Loans (with interest rates 7,379,531 7,379,531
ranging from 5.75% to 11.50% and
maturity dates ranging from January
2002 to July 2027)
Harbor Fund Harbor Capital Appreciation Fund - 246,743 shares 8,418,566 7,212,285
Alliance Growth & Income Alliance Growth & Income Fund - 369,043 shares 1,347,091 1,328,331
Lord Abbett Mid-Cap Value Lord Abbett Mid-Cap Value Fund - 42,926 shares 729,902 745,932
Royce Total Return Royce Total Return - 57,325 shares 479,546 492,341
MFS Mid-Cap Growth MFS Mid-Cap Growth Fund - 33,671 shares 356,403 368,973
* Key Trust Company of Ohio, NA EB Money Market - 303,570 units 303,570 303,570
* Key Trust Company of Ohio, NA Victory Financial Reserves Fund - 77,806 units 77,806 77,806
---------------------
Total $195,265,945
=====================
* Represents a party-in-interest
9
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-65513, 33-42623, and 333-83809 of Applied Industrial Technologies, Inc. on
Form S-8 of our report dated June 24, 2002, appearing in this Annual Report on
Form 11-K of the Applied Industrial Technologies, Inc. Retirement Savings Plan
for the year ended December 31, 2001.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
June 27, 2002