<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE
STOCK PURCHASE, SAVINGS AND SIMILAR
PLANS PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996.
[ ] 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
<PAGE> 2
Financial Statements and Exhibit(s)
- -----------------------------------
Page No.
(a) Financial Statements (in this Report)
-------------------- ----------------
Independent Auditors' Report 5
Statement of Net Assets Available 6
for Benefits --
December 31, 1996 and 1995
Statement of Changes in Net Assets 7
Available for Benefits --
Year Ended December 31, 1996
Statement of Changes in Net Assets 8
Available for Benefits --
Year ended December 31, 1995
Notes to Financial Statements -- 9
Years Ended December 31,
1996 and 1995
Supplemental Schedules 14
(b) Exhibit(s)
----------
Independent Auditors' Consent 16
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 C. Dannemiller
-----------------------------------
Signature
John C. Dannemiller
-------------------------------------
Printed Name
Chairman, Chief Executive Officer
& President
-------------------------------------
Title
Date: June 27, 1997
<PAGE> 3
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
(FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
Financial Statements
for the Years Ended
December 31, 1996 and 1995,
Supplemental Schedules
for the Year Ended
December 31, 1996,
and Independent Auditors' Report
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS
PLAN
(FORMERLY BEARINGS, INC. RETIREMENT SAVING PLAN)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995
AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available
for Benefits 3 - 4
Notes to Financial Statements 5
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1996
AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 10
Item 27d - Schedule of Reportable Transactions 11
<PAGE> 5
[DELOITTE & TOUCHE LLP LETTERHEAD]
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 (formerly
Bearings, Inc. Retirement Savings Plan) (the "Plan") as of December 31, 1996 and
1995, 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 generally accepted auditing
standards. 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,
1996 and 1995, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1996 and reportable
transactions for the year ended December 31, 1996 are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements, but are 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. The supplemental information by fund in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of the individual funds. The
supplemental schedules and supplemental information by fund are the
responsibility of the Plan's management. Such supplemental schedules and
supplemental information by fund have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
June 20, 1997
<PAGE> 6
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN (FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
====================================================================================================================================
-------------------------Supplemental Information by Fund---------------------
APPLIED AMERICAN HANCOCK
STOCK FUNDAMENTAL FIDELITY EQUITY
DECEMBER 31, 1996 FUND INVESTORS GROWTH FUND
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $19,370,616
Investment funds 100,442 $21,396,259 $19,253,807 $5,165,423
Loans to participants
---------------------------------------------------------------
Total investments 19,471,058 21,396,259 19,253,807 5,165,423
Receivables - other
---------------------------------------------------------------
Total assets 19,471,058 21,396,259 19,253,807 5,165,423
LIABILITIES:
Accrued administrative expenses 24,649 4,893 3,176 852
---------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $19,446,409 $21,391,366 $19,250,631 $5,164,571
===============================================================
-------------------------Supplemental Information by Fund---------------------
COMPANY EMPLOYEE AMERICAN AMERICAN
STOCK STOCK FUNDAMENTAL FIDELITY EUROPACIFIC
DECEMBER 31, 1995 FUND FUND INVESTORS GROWTH GROWTH
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $11,232,322 $4,469,488
Investment funds 267 42,042 $6,968,276 $6,932,115 $4,029,866
Loans to participants
----------------------------------------------------------------------------
Total investments 11,232,589 4,511,530 6,968,276 6,932,115 4,029,866
Receivables:
Contributions 375,210
Transfer from Profit-Sharing Trust
Other 57 6,506
----------------------------------------------------------------------------
Total assets 11,607,856 4,518,036 6,968,276 6,932,115 4,029,866
LIABILITIES:
Accrued administrative expenses 4 14,907 1,158 1,155 658
----------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $11,607,852 $4,503,129 $6,967,118 $6,930,960 $4,029,208
============================================================================
<CAPTION>
===========================================================================
-------------------------Supplemental Information by Fund---------------------
AMERICAN INCOME FIXED BOND EMPLOYEE
EUROPACIFIC FUND OF INCOME FUND OF LOAN
DECEMBER 31, 1996 GROWTH AMERICA FUND AMERICA FUND TOTAL
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $19,370,616
Investment funds $11,791,013 $15,468,610 $13,580,200 $4,971,044 91,726,798
Loans to participants $2,428,041 2,428,041
------------------------ ---------------------------------------------------
Total investments 11,791,013 15,468,610 13,580,200 4,971,044 2,428,041 113,525,455
Receivables - other 236 236
------------------------ ---------------------------------------------------
Total assets 11,791,013 15,468,610 13,580,436 4,971,044 2,428,041 113,525,691
LIABILITIES:
Accrued administrative expenses 2,698 3,519 1,139 40,926
------------------------ ---------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $11,788,315 $15,465,091 $13,580,436 $4,969,905 $2,428,041 $113,484,765
=============================================================================
----------------------Supplemental Information by Fund------------------------
INCOME FIXED BOND EMPLOYEE PROFIT
FUND OF INCOME FUND OF LOAN SHARING
DECEMBER 31, 1995 AMERICA FUND AMERICA FUND TRUST TOTAL
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $15,701,810
Investment funds $3,881,238 $4,352,820 $1,087,136 27,293,760
Loans to participants $1,080,344 1,080,344
------------------------- --------------------------------------------------
Total investments 3,881,238 4,352,820 1,087,136 1,080,344 44,075,914
Receivables:
Contributions 375,210
Transfer from Profit-Sharing Trust $50,896,948 50,896,948
Other 158 6,721
------------------------- --------------------------------------------------
Total assets 3,881,238 4,352,978 1,087,136 1,080,344 50,896,948 95,354,793
LIABILITIES:
Accrued administrative expenses 642 177 18,701
------------------------- --------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $3,880,596 $4,352,978 $1,086,959 $1,080,344 $50,896,948 $95,336,092
=============================================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 7
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN (FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1996
===================================================================================================================================
----------------------SUPPLEMENTAL INFORMATION BY FUND-------------------
APPLIED AMERICAN HANCOCK AMERICAN INCOME
STOCK FUNDAMENTAL FIDELITY EQUITY EUROPACIFIC FUND OF
FUND INVESTORS GROWTH FUND GROWTH AMERICA
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 1,422,870 $ 1,919,150 $ 1,922,493 $ 305,828 $ 1,296,903 $ 945,108
Employer:
Applied Industrial Technologies , Inc. Common Stock 2,193,178
Net asssets received from Mainline Industrial
Distributors, Inc.
Profit Sharing and Investment Plan 570,934 641,179 1,143,904
Investment income 378,555 326,314 165,132 1,232 192,651 784,323
Net appreciation in fair value of investments 3,222,461 2,590,223 437,603 1,544,802 1,241,578
----------- ----------- ----------- ---------- ----------- -----------
Total additions 3,994,603 6,038,859 5,319,027 744,663 3,034,356 4,114,913
DEDUCTIONS:
Distributions to participants 1,381,700 1,170,569 855,214 233,070 578,626 918,760
Net assets transferred to Aviation Sales Company 78,425 70,868 117,647 9,107 21,120 23,310
Net depreciation in fair value of investments 621,315
Administrative expenses 44,040 51,995 48,637 13,781 29,496 36,970
----------- ----------- ----------- ---------- ----------- -----------
Total deductions 2,125,480 1,293,432 1,021,498 255,958 629,242 979,040
INTERFUND TRANSFERS 1,466,305 9,678,821 8,022,142 4,675,866 5,353,993 8,448,622
----------- ----------- ----------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 3,335,428 14,424,248 12,319,671 5,164,571 7,759,107 11,584,495
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1995 16,110,981 6,967,118 6,930,960 0 4,029,208 3,880,596
----------- ----------- ----------- ---------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $19,446,409 $21,391,366 $19,250,631 $5,164,571 $11,788,315 $15,465,091
=========== =========== =========== ========== =========== ===========
<CAPTION>
=================================================================
-----------------------------------------------------------------
FIXED BOND EMPLOYEE PROFIT
INCOME FUND OF LOAN SHARING
FUND AMERICA FUND TRUST TOTAL
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 1,456,155 $ 261,730 $ 9,530,237
Employer:
Applied Industrial Technologies , Inc. Common Stock 2,193,178
Net asssets received from Mainline Industrial
Distributors, Inc.
Profit Sharing and Investment Plan 63,250 $ 87,699 2,506,966
Investment income 4,086 362,625 164,620 2,379,538
Net appreciation in fair value of investments 753,989 9,790,656
----------- ---------- ---------- ------------ ------------
Total additions 2,277,480 624,355 252,319 26,400,575
DEDUCTIONS:
Distributions to participants 2,305,834 411,964 65,060 ($ 1,466,612) 6,454,185
Net assets transferred to Aviation Sales Company 45,753 9,613 375,843
Net depreciation in fair value of investments 51,889 462,877 1,136,081
Administrative expenses 25,479 12,947 22,448 285,793
----------- ---------- ---------- ------------ ------------
Total deductions 2,377,066 486,413 65,060 (981,287) 8,251,902
INTERFUND TRANSFERS 9,327,044 3,745,004 1,160,438 (51,878,235)
----------- ---------- ---------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 9,227,458 3,882,946 1,347,697 (50,896,948) 18,148,673
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1995 4,352,978 1,086,959 1,080,344 50,896,948 95,336,092
----------- ---------- ---------- ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $13,580,436 $4,969,905 $2,428,041 $ 0 $113,484,765
=========== ========== ========== ============ ============
</TABLE>
See notes to financial statements.
3
<PAGE> 8
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN (FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1995
====================================================================================================================================
----------------------SUPPLEMENTAL INFORMATION BY FUND--------------
COMPANY EMPLOYEE AMERICAN AMERICAN
STOCK STOCK FUNDAMENTAL FIDELITY EUROPACIFIC
FUND FUND INVESTORS GROWTH GROWTH
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 734,343 $ 1,156,597 $ 1,229,711 $ 827,024
Employer:
Cash $ 31
Applied Industrial Technologies, Inc. Common Stock 2,696,649
Net assets to be received from the
Profit-Sharing Trust
Investment income 166,170 83,288 14,586 39,421 48,912
Net appreciation in fair value of investments 2,686,038 1,119,037 1,540,307 1,748,986 390,614
------------ ------------ ------------ ------------ ------------
Total additions 5,548,888 1,936,668 2,711,490 3,018,118 1,266,550
DEDUCTIONS:
Distributions to participants 697,522 209,688 508,039 395,766 287,506
Administrative expenses 19,901 8,677 21,456 20,495 14,206
------------ ------------ ------------ ------------ ------------
Total deductions 717,423 218,365 529,495 416,261 301,712
INTERFUND TRANSFERS (106,367) 113,320 85,404 (364,042)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 4,831,465 1,611,936 2,295,315 2,687,261 600,796
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1994 6,776,387 2,891,193 4,671,803 4,243,699 3,428,412
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1995 $ 11,607,852 $ 4,503,129 $ 6,967,118 $ 6,930,960 $ 4,029,208
============ ============ ============ ============ ============
<CAPTION>
--------------------------------------------------------------
INCOME FIXED BOND EMPLOYEE PROFIT
FUND OF INCOME FUND OF LOAN SHARING
AMERICA FUND AMERICA FUND TRUST TOTAL
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 619,894 $ 930,240 $ 190,181 $ 5,687,990
Employer:
Cash 31
Applied Industrial Technologies, Inc. Common Stock 2,696,649
Net assets to be received from the
Profit-Sharing Trust $ 50,896,948 50,896,948
Investment income 211,218 608 82,151 $ 31,515 677,869
Net appreciation in fair value of investments 657,192 305,697 86,366 8,534,237
---------- ----------- ----------- ----------- ------------ ------------
Total additions 1,488,304 1,236,545 358,698 31,515 50,896,948 68,493,724
DEDUCTIONS:
Distributions to participants 433,924 747,279 201,992 1,844 3,483,560
Administrative expenses 11,960 19,756 3,635 120,086
---------- ----------- ----------- ----------- ------------ ------------
Total deductions 445,884 767,035 205,627 1,844 3,603,646
INTERFUND TRANSFERS 17,133 (755,186) 3,465 1,006,273
---------- ----------- ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 1,059,553 (285,676) 156,536 1,035,944 50,896,948 64,890,078
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1994 2,821,043 4,638,654 930,423 44,400 30,446,014
---------- ----------- ----------- ----------- ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1995 $3,880,596 $ 4,352,978 $ 1,086,959 $ 1,080,344 $ 50,896,948 $ 95,336,092
========== =========== =========== =========== ============ ============
</TABLE>
See notes to financial statements.
4
<PAGE> 9
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN (FORMERLY
BEARINGS, INC. RETIREMENT SAVINGS PLAN)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
Effective January 1, 1997, the Bearings, Inc. Retirement Savings Plan
became known as the Applied Industrial Technologies, Inc. Retirement
Savings Plan (the "Plan"). The Profit-Sharing Trust was merged into the
Plan in July 1995. The following description of the Plan is provided for
general information purposes only. Participants and users of the financial
statements should refer to the Plan document for more complete information.
GENERAL - The Plan was established by Applied Industrial Technologies, Inc.
and its subsidiaries (the "Company") for the purpose of encouraging and
assisting employees 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 employee and employer contributions to
the Trustee, 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 contribution and allocations of (a) the Company's
contribution and, (b) Plan earnings, and charged with an allocation of
administrative expenses. Allocations are based on participant earnings or
account balances, 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 employees are eligible to participate
in the Plan on the first day of the month following their hire.
Eligible employees may elect to make Salary Savings Contributions to the
Plan ranging from 1% to 15% of compensation. The Company makes a Matching
Employer Contribution to the Plan equal to a percentage of the Salary
Savings Contributions not in excess of 6% of the participant's
compensation. 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. The Matching Employer
Contribution is updated annually and is currently determined using the
following schedule:
5
<PAGE> 10
<TABLE>
<CAPTION>
CORPORATE EARNINGS PER QUARTERLY MATCHING
SHARE FOR IMMEDIATELY CONTRIBUTION
PRECEDING QUARTER EMPLOYEE STOCK FUND OTHER FUNDS
<S> <C> <C>
$.45 or less 35% 25%
$.46 to $.53 45% 35%
$.54 to $.60 60% 50%
$.61 to $.66 85% 75%
$.67 and above 110% 100%
</TABLE>
The employer match on participant contributions to other funds was 35%,
75%, 100%, and 25% for the four 1996 quarters, and 35%, 50%, 100%, and 35%
for the four 1995 quarters, respectively.
Matching Employer Contributions are made primarily in shares of Applied
Industrial Technologies, Inc. common stock.
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
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. 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 Contribution made to the Plan for the year ended December
31,1996 was $2,076,514.
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 their Salary
Savings Contributions in 5% increments in the Plan's Fixed Income Fund,
American Fundamental Investors Fund, Fidelity Growth Fund, American
EuroPacific Growth Fund, Income Fund of America, Bond Fund of America, John
Hancock Equity Fund or the Employee Stock Fund. All Matching Employer
Contributions are invested in the Applied Industrial Technologies, Inc.
Stock Fund. Participants may elect to change their investment elections 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 5% of
the total amount to be reallocated. All such elections are filed with the
Trustee and become effective daily.
Effective January, 1996 participants elected the investment of their past
Profit-Sharing Contributions in a manner similar to and among the same
investment fund options as their Salary Savings Contribution.
The value of the funds and the interest of individual participants under
each fund, are calculated daily (daily valuation).
6
<PAGE> 11
VESTING AND DISTRIBUTIONS - Each participant is immediately and fully
vested in all Salary Savings 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 service, participants may receive lump sum
distributions of their vested account balances no later than 60 days after
the end of the Plan year in which they terminate employment with the
Company. Distributions upon retirement may be received as a lump sum or as
installments in accordance with the participant's election. Participants
may also apply for hardship withdrawals from their Salary Savings
Contributions, subject to adherence to Internal Revenue Service regulations
and approval by the Company.
Beginning January 1996, forfeitures of nonvested amounts are applied to
reduce future Matching Employer Contributions. Total forfeitures were
$168,136 in 1996.
LOANS - Beginning July 1, 1995, participants may borrow from their 401(k)
Contribution Accounts 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 participant's
accounts. Loan transactions are treated as a transfer to (from) the
investment funds from (to) the Employee Loan Fund. Loan terms range from
1-5 years or up to ten years, if for the purchase of a primary residence.
Loans originating from merged plans (the King Bearing Profit Sharing and
Savings Plan and the IBT 401k Plan) 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 participant's 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. Interest rates range from
7.00% to 10.00%. Investments in participant loans are stated at estimated
fair value based on amounts estimated to be recoverable.
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 the
value of all Matching Employer Contributions and Profit Sharing
Contributions made on their behalf.
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 and restated since
receiving this determination letter. The Plan administrator and the Plan's
tax counsel believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, no provision for income taxes has been included in
the Plan's financial statements.
2. DESCRIPTION OF THE SEPARATE FUNDS
The Trustee maintains separate accounts for each Plan participant and
invests such participant's contributions, as directed by the participant,
in one or more of the following funds:
- - Applied Industrial Technologies, Inc. Stock Fund consists of investments in
the common stock of Applied Industrial Technologies, Inc. and temporary
investments in the Trustee's EB Money Market Fund.
- - The American Fundamental Investors Fund consists of shares of Fundamental
Investors, Inc. common stock, which invest in mature stocks designed with
the objective of growth from price appreciation and income from dividends.
7
<PAGE> 12
- - The Fidelity Growth Fund consists of shares of Advisors Institutional
Equity Growth Fund, which invests in stocks with the objective of capital
appreciation.
- - John Hancock Equity Fund consists of shares of John Hancock Special Equity
Fund, which invests in stocks of emerging growth companies.
- - The American EuroPacific Growth Fund consists of shares of the EuroPacific
Growth Fund, which invests in stocks from companies located outside the
U.S. with the objective of capital appreciation.
- - The Income Fund of America Fund consists of shares of Income Fund of
America, which invests in stocks and bonds with the objective of maximizing
current income from dividends and interest.
- - The Fixed Income Fund consists of units of the Trustee's PRISM MaGIC Fund,
which invests in a combination of guaranteed investment contracts and cash
equivalents, and temporary investments in the Trustee's EB Money Market
Fund.
- - The Bond Fund of America Fund consists of shares of the Bond Fund of
America, which invests in government and corporate bonds.
Company Matching Employer Contributions are invested in the Applied
Industrial Technologies, Inc. Stock Fund which consists of investments in
the common stock of Applied Industrial Technologies, Inc., limited to a
maximum of one million shares, and temporary investments in the Trustee's
EB Money Market Fund. In 1996, the Company Stock Fund and Employee Stock
Fund were combined to form the Applied Industrial Technologies, Inc. Stock
Fund.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - Each fund of the Trust is accounted for separately.
The accounts of these funds are maintained, and the accompanying financial
statements have been prepared, on the accrual basis of accounting.
USE OF ESTIMATES - In preparing the financial statement in conformity with
generally accepted accounting principles, the Plan's administrator is
required to make estimates and assumption that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
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 price for each of the funds or quoted market prices.
TRANSFER FROM PROFIT-SHARING TRUST - In 1995, a receivable was recorded
for the estimated net assets to be transferred from the Profit Sharing
Trust. The receivable for the assets to be transferred from the
Profit-Sharing Trust represents the value of the participant account
balances held in the Profit-Sharing Trust at December 31, 1995 reduced by
$1,477,109 of distributions payable for anticipated participant-initiated
benefits payments that were to be paid out of the Profit-Sharing Trust
prior to the final transfer to the Plan. In 1996, the activity in the
Profit Sharing Trust Fund represents differences in the actual benefit
payments and investment earnings from the amounts estimated at December 31,
1995 through the date of the final transfer to the other investment funds
of the Plan from the Profit Sharing Trust in accordance with participant
elections. In addition, the anticipated participant-initiated benefit
8
<PAGE> 13
payments referred to above were paid out subsequent to the transfer of the
Profit-Sharing Fund by the other funds of the Plan.
BENEFIT PAYMENTS - Distributions to participants are recorded by the Plan
when payments are made.
ADMINISTRATIVE EXPENSES - Certain administrative expenses of the Plan were
paid by the Plan including trustee fees paid to the Plan Trustee. The
Company paid other administrative costs of the Plan, including the
salaries, benefits and other costs of Company employees involved in
administering the Plan.
4. 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 are detailed in the supplemental schedule of assets held
for investment purposes which is attached to these financial statements.
Plan investments exceeding 5% of net assets available for benefits as of
December 31,1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Description of
Investment 1996 1995
------------------------------
<S> <C> <C>
Applied Industrial Technologies, Inc.
Common Stock $ 19,471,058 $ 15,701,810
PRISM MaGIC Fund $ 13,580,200 $ 4,352,820
American Fundamental Investors, Inc. $ 21,396,259 $ 6,968,276
Advisors Institutional Equity Growth Fund $ 19,253,807 $ 6,932,115
American EuroPacific Growth Fund $ 11,791,013 $ 4,029,866
Income Fund of America $ 15,468,610 $ 3,881,238
</TABLE>
5. TRANSFER FROM MAINLINE INDUSTRIAL DISTRIBUTORS, INC. PROFIT SHARING AND
INVESTMENT PLAN
Effective January 1, 1996, the Mainline Industrial Distributors, Inc.
Profit Sharing and Investment Plan was merged into the Plan. Net assets
totaling $2,506,966 were transferred to the Plan in March 1996.
6. TRANSFER TO AVIATION SALES COMPANY 401(K) PLAN
On August 9, 1996, the Plan sponsor sold the assets of the Aircraft
Distribution Center of Dixie Bearings, Incorporated to Aviation Sales
Bearings Company. Coverage under the Plan was closed to any employee of the
Aircraft Distribution Center effective with the sale, and each such
participant became fully vested in their account balance. As of October 2,
1996, all assets and liabilities attributable to participants of the Plan
were transferred into the Aviation Sales Company 401(K) Plan.
******
9
<PAGE> 14
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
(FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
ITEM 27a - SCHEDULE OF ASSET HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
IDENTITY OF ISSUER, BORROWER, DESCRIPTION OF INVESTMENT COST CURRENT
LESSOR OR SIMILAR PARTY VALUE
APPLIED STOCK FUND
------------------
<S> <C> <C> <C> <C>
* Applied Industrial Tech., Inc. Common Stock - 698,173 shares $ 19,530,439 $19,370,616
* EB Money Market 100,442 100,442
FIXED INCOME FUND
-----------------
* Key Trust PRISM MaGIC Fund -1,186,437 units 12,516,401 13,311,897
* EB Money Market 268,539 268,539
AMERICAN FUNDAMENTAL INVESTORS
------------------------------
Fundamental Investors, Inc. Common Stock - 871,893 shares 18,538,641 21,396,259
FIDELITY ADVISOR GROWTH FUND
----------------------------
Advisors Institutional Equity Advisors Instl. Equity Growth Fund -
Growth Fund 452,924 shares 16,289,598 19,253,807
AMERICAN EUROPACIFIC GROWTH FUND
--------------------------------
EuroPacific EuroPacific Growth Fund - 452,803
shares 10,395,792 11,791,013
INCOME FUND OF AMERICA
----------------------
Income Fund of America Income Fund of America - 936,356
units 14,548,396 15,468,610
BOND FUND OF AMERICA
--------------------
Bond Fund of America Bond Fund of America - 361,530
shares 4,956,244 4,971,044
EMPLOYEE LOAN FUND Participant Loans (with interest rates
------------------ ranging from 7.00% to 10.00% and
* Participant Loans maturity dates ranging from June
1997 to July 2010) 2,428,041
HANCOCK EQUITY FUND John Hancock Special Equity Fund -
------------------- 209,041 shares 4,938,789 5,165,423
-----------
TOTAL INVESTMENTS $113,525,691
===========
<FN>
* Represents a party-in-interest.
</TABLE>
10
<PAGE> 15
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
(FORMERLY BEARINGS, INC. RETIREMENT SAVINGS PLAN)
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
EXPENSE
INCURRED COST
IDENTITY OF PURCHASE SELLING LEASE WITH OF
PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE RENTAL TRANSACTION ASSETS
<S> <C> <C> <C> <C> <C>
(SERIES OF TRANSACTIONS)
Key Trust EB Money Market Fund $ 6,745,853 None $ 6,745,853
EB Money Market Fund $ 6,418,915 None 6,418,915
<CAPTION>
(h) (i)
CURRENT VALUE
OF ASSET ON NET GAIN
TRANSACTION DATE OR (LOSS)
<S> <C>
$ 6,745,853 N/A
6,418,915 None
</TABLE>
NOTE - Reportable transactions are single transactions or a series of
transactions in the same issue that, when aggregated, are in excess of 5% of
the current value of plan assets at the beginning of the plan year.
11
<PAGE> 16
INDEPENDENT AUDITORS' CONSENT
Applied Industrial Technologies, Inc.
We consent to the incorporation by reference in Registration Statement Nos.
33-65513 and 33-42623 of Applied Industrial Technologies, Inc. on Form S-8 of
our report dated June 20, 1997, appearing in this Annual Report on Form 11-K of
the Applied Industrial Technologies, Inc. Retirement Savings Plan for the year
ended December 31, 1996.
/s/ DELOITTE & TOUCHE LLP
June 27, 1997
