<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, 1997.
[ ] 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
<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, 1997 and 1996
Statement of Changes in Net Assets 7
Available for Benefits --
Year Ended December 31, 1997
Statement of Changes in Net Assets 8
Available for Benefits --
Year ended December 31, 1996
Notes to Financial Statements -- 9
Years Ended December 31,
1997 and 1996
Supplemental Schedules 15
(b) Exhibit(s)
----------
Independent Auditors' Consent 17
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-Chief Financial
Officer & Treasurer
------------------------------------
Title
Date: June 26, 1998
<PAGE> 3
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
Financial Statements
for the Years Ended
December 31, 1997 and 1996,
Supplemental Schedules
for the Year Ended
December 31, 1997,
and Independent Auditors' Report
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
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 - 10
SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1997
AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 11
Item 27d - Schedule of Reportable Transactions 12
<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
(the "Plan") as of December 31, 1997 and 1996, 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,
1997 and 1996, 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, 1997 and reportable
transactions for the year ended December 31, 1997 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 Rule 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 15, 1998
- -------------------
DELOITTE TOUCHE
TOHMATSU
- -------------------
<PAGE> 6
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
================================================================================
<TABLE>
<CAPTION>
--------------------------------------Supplemental Information by Fund---
APPLIED AMERICAN HANCOCK AMERICAN
STOCK FUNDAMENTAL FIDELITY EQUITY EUROPACIFIC
DECEMBER 31, 1997 FUND INVESTORS GROWTH FUND GROWTH
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $30,509,231
Investment funds 529,553 $26,537,287 $23,539,265 $5,074,373 $12,955,707
Loans to participants
----------- ----------- ----------- ---------- -----------
Total investments 31,038,784 26,537,287 23,539,265 5,074,373 12,955,707
Receivables - other 2,419
----------- ----------- ----------- ---------- -----------
Total assets 31,041,203 26,537,287 23,539,265 5,074,373 12,955,707
LIABILITIES:
Accrued administrative expenses 15,993 4,979 12,491 2,447
----------- ----------- ----------- ---------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $31,025,210 $26,532,308 $23,526,774 $5,074,373 $12,953,260
=========================================================================
<CAPTION>
----------------------------------------------------------
INCOME FIXED BOND EMPLOYEE
FUND OF INCOME FUND OF LOAN
DECEMBER 31, 1997 AMERICA FUND AMERICA FUND TOTAL
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $30,509,231
Investment funds $17,945,208 $14,157,189 $5,593,859 106,332,441
Loans to participants $ 4,151,235 4,151,235
----------- ----------- ---------- ------------ ------------
Total investments 17,945,208 14,157,189 5,593,859 4,151,235 140,992,907
Receivables - other 2,419
----------- ----------- ---------- ------------ ------------
Total assets 17,945,208 14,157,189 5,593,859 4,151,235 140,995,326
LIABILITIES:
Accrued administrative expenses 2,927 168 39,005
----------- ----------- ---------- ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $17,942,281 $14,157,189 $5,593,691 $ 4,151,235 $140,956,321
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------Supplemental Information by Fund------------
APPLIED AMERICAN HANCOCK AMERICAN
STOCK FUNDAMENTAL FIDELITY EQUITY EUROPACIFIC
DECEMBER 31, 1996 FUND INVESTORS GROWTH FUND GROWTH
<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 $11,791,013
Loans to participants
----------- ----------- ----------- ---------- -----------
Total investments 19,471,058 21,396,259 19,253,807 5,165,423 11,791,013
Receivables - other
----------- ----------- ----------- ---------- -----------
Total assets 19,471,058 21,396,259 19,253,807 5,165,423 11,791,013
LIABILITIES:
Accrued administrative expenses 24,649 4,893 3,176 852 2,698
----------- ----------- ----------- ---------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $19,446,409 $21,391,366 $19,250,631 $5,164,571 $11,788,315
==========================================================================
<CAPTION>
----------------------------------------------------------
INCOME FIXED BOND EMPLOYEE
FUND OF INCOME FUND OF LOAN
DECEMBER 31, 1996 AMERICA FUND AMERICA FUND TOTAL
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $ 19,370,616
Investment funds $15,468,610 $13,580,200 $4,971,044 91,726,798
Loans to participants $ 2,428,041 2,428,041
----------- ----------- ---------- ----------- ------------
Total investments 15,468,610 13,580,200 4,971,044 2,428,041 113,525,455
Receivables - other 236 236
----------- ----------- ---------- ----------- ------------
Total assets 15,468,610 13,580,436 4,971,044 2,428,041 113,525,691
LIABILITIES:
Accrued administrative expenses 3,519 1,139 40,926
----------- ----------- ---------- ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS $15,465,091 $13,580,436 $4,969,905 $ 2,428,041 $113,484,765
========================================================================
</TABLE>
See notes to financial statements
2
<PAGE> 7
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
--------------------------SUPPLEMENTAL INFORMATION BY FUND---------------------
APPLIED AMERICAN HANCOCK AMERICAN
STOCK FUNDAMENTAL FIDELITY EQUITY EUROPACIFIC
FUND INVESTORS GROWTH FUND GROWTH
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 942,587 2,495,580 $ 2,386,335 $ 623,514 $ 1,656,123
Employer 3,244,770
Investment income 485,640 3,119,020 2,626,619 58 1,116,625
Net appreciation in fair value of investments 8,417,981 2,548,796 1,979,707 211,666
----------- ------------ ------------ ----------- ------------
Total additions 13,090,978 8,163,396 6,992,661 835,238 2,772,748
DEDUCTIONS:
Distributions to participants 2,136,698 2,182,326 1,339,100 294,659 968,576
Administrative expenses 53,079 54,630 49,208 11,386 30,276
Net depreciation in fair value of investments 22,624
----------- ------------ ------------ ----------- ------------
Total deductions 2,189,777 2,236,956 1,388,308 306,045 1,021,476
INTERFUND TRANSFERS 677,600 (785,498) (1,328,210) (619,391) (586,327)
----------- ------------ ------------ ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 11,578,801 5,140,942 4,276,143 (90,198) 1,164,945
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 19,446,409 21,391,366 19,250,631 5,164,571 11,788,315
----------- ------------ ------------ ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1997 $31,025,210 $ 26,532,308 $ 23,526,774 $ 5,074,373 $ 12,953,260
=========== ============ ============ =========== ============
<CAPTION>
----------------------------------------------------------------------------
INCOME FIXED BOND EMPLOYEE
FUND OF INCOME FUND OF LOAN
AMERICA FUND AMERICA FUND TOTAL
ADDITIONS:
Contributions:
Employees $ 1,128,818 $ 1,519,015 $ 422,960 $11,174,932
Employer 3,244,770
Investment income 2,139,906 1,431 362,432 $ 279,574 10,131,305
Net appreciation in fair value of investments 1,198,544 840,133 93,502 15,290,329
------------ ----------- ----------- ----------- ------------
Total additions 4,467,268 2,360,579 878,894 279,574 39,841,336
DEDUCTIONS:
Distributions to participants 1,750,665 2,234,601 1,027,942 145,726 12,080,293
Administrative expenses 35,424 21,979 10,881 266,863
Net depreciation in fair value of investments 22,624
------------ ----------- ----------- ----------- ------------
Total deductions 1,786,089 2,256,580 1,038,823 145,726 12,369,780
INTERFUND TRANSFERS (203,989) 472,754 783,715 1,589,346
------------ ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 2,477,190 576,753 623,786 1,723,194 27,471,556
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 15,465,091 13,580,436 4,969,905 2,428,041 113,484,765
------------ ----------- ----------- ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1997 $ 17,942,281 $14,157,189 $ 5,593,691 $ 4,151,235 $140,956,321
============ =========== =========== =========== ============
</TABLE>
See notes to financial statements.
3
<PAGE> 8
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
-------------------------SUPPLEMENTAL INFORMATION BY FUND---------------
APPLIED AMERICAN HANCOCK AMERICAN
STOCK FUNDAMENTAL FIDELITY EQUITY EUROPACIFIC
FUND INVESTORS GROWTH FUND GROWTH
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employees $ 1,422,870 $ 1,919,150 $ 1,922,493 $ 305,828 $ 1,296,903
Employer:
Applied Industrial Technologies , Inc. Common
Stock 2,193,178
Net assets received from
Mainline Industrial Distributors, Inc.
Profit Sharing and Investment Plan 570,934 641,179
Investment income 378,555 326,314 165,132 1,232 192,651
Net appreciation in fair value of investments 3,222,461 2,590,223 437,603 1,544,802
----------- ----------- ----------- ---------- -----------
Total additions 3,994,603 6,038,859 5,319,027 744,663 3,034,356
DEDUCTIONS:
Distributions to participants 1,381,700 1,170,569 855,214 233,070 578,626
Net assets transferred to Aviation Sales Company 78,425 70,868 117,647 9,107 21,120
Net depreciation in fair value of investments 621,315
Administrative expenses 44,040 51,995 48,637 13,781 29,496
----------- ----------- ----------- ---------- -----------
Total deductions 2,125,480 1,293,432 1,021,498 255,958 629,242
INTERFUND TRANSFERS 1,466,305 9,678,821 8,022,142 4,675,866 5,353,993
----------- ----------- ----------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 3,335,428 14,424,248 12,319,671 5,164,571 7,759,107
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1995 16,110,981 6,967,118 6,930,960 0 4,029,208
----------- ----------- ----------- ---------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $19,446,409 $21,391,366 $19,250,631 $5,164,571 $11,788,315
=========== =========== =========== ========== ===========
<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 $ 945,108 $ 1,456,155 $ 261,730 $9,530,237
Employer:
Applied Industrial Technologies , Inc. Common
Stock 2,193,178
Net assets received from
Mainline Industrial Distributors, Inc.
Profit Sharing and Investment Plan 1,143,904 63,250 $ 87,699 2,506,966
Investment income 784,323 4,086 362,625 164,620 2,379,538
Net appreciation in fair value of investments 1,241,578 753,989 9,790,656
----------- ----------- ---------- ---------- ------------ ------------
Total additions 4,114,913 2,277,480 624,355 252,319 26,400,575
DEDUCTIONS:
Distributions to participants 918,760 2,305,834 411,964 65,060 ($ 1,466,612) 6,454,185
Net assets transferred to Aviation Sales Company 23,310 45,753 9,613 375,843
Net depreciation in fair value of investments 51,889 462,877 1,136,081
Administrative expenses 36,970 25,479 12,947 22,448 285,793
----------- ----------- ---------- ---------- ------------ ------------
Total deductions 979,040 2,377,066 486,413 65,060 (981,287) 8,251,902
INTERFUND TRANSFERS 8,448,622 9,327,044 3,745,004 1,160,438 (51,878,235) 0
----------- ----------- ---------- ---------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 11,584,495 9,227,458 3,882,946 1,347,697 (50,896,948) 18,148,673
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
----------- ----------- ---------- ---------- ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $15,465,091 $13,580,436 $4,969,905 $2,428,041 $ 0 $113,484,765
=========== =========== ========== ========== ============ ============
</TABLE>
See notes to financial statements.
4
<PAGE> 9
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ----------------------------------------------------------------------------
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 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>
$.37 or less 35% 25%
$.38 to $.42 45% 35%
$.43 to $.47 60% 50%
$.48 to $.52 85% 75%
$.53 and above 110% 100%
</TABLE>
The employer match on participant contributions to other funds was 35%,
50%, 100%, and 25% for the four 1997 quarters, and 35%, 75%, 100%, and
25% for the four 1996 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, 1997 and 1996 was $2,386,622 and $2,076,514,
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 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 Applied Industrial
Technologies, Inc. Stock Fund. All Matching Employer Contributions are
invested in the Applied Industrial Technologies, Inc. Stock Fund. The
portion of the Plan that is invested in the Applied Industrial
Technologies, Inc. Stock Fund is intended to be an Employee stock
ownership Plan (ESOP) under code section 4975 (e)(7) and ERISA section
704 (d)(16). 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.
6
<PAGE> 11
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 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. Participants that have
attained age 59 1/2 may also receive a distribution of their account
upon request.
Beginning January 1996, forfeitures of nonvested amounts are applied to
reduce future Matching Employer Contributions. Total forfeitures were
$103,060 in 1997.
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 lessor 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.
7
<PAGE> 12
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. Fund, which invest in mature stocks
designed with the objective of growth from price appreciation and
income from dividends.
- 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 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.
8
<PAGE> 13
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 assumptions 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 the Profit Sharing Trust
Fund was merged into 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 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.
9
<PAGE> 14
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, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Description of
Investment 1997 1996
------------------ ------------------
<S> <C> <C>
Applied Industrial Technologies, Inc.
Common Stock $ 30,509,231 $ 19,370,616
PRISM MaGIC Fund $ 14,157,189 $ 13,580,200
American Fundamental Investors, Inc. $ 26,537,287 $ 21,396,259
Advisors International Equity Growth Fund $ 23,539,265 $ 19,253,807
American EuroPacific Growth Fund $ 12,955,707 $ 11,791,013
Income Fund of America $ 17,945,208 $ 15,468,610
</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.
7. SUBSEQUENT EVENTS
Effective January 1, 1998, the Invetech Company Profit Sharing 401(k)
Retirement Plan was merged into the Plan.
Effective January 1, 1998, the EB S & P 500 Equity Index Fund was added.
This fund invests in the 500 largest companies in the U.S. Market. The
Fidelity Advisor Growth Fund was changed to the Growth Fund Portfolio,
which is a combination of three growth stock mutual funds. The Hancock
Special Equities Fund is being replaced by the Franklin Small Cap Growth
Fund.
******
10
<PAGE> 15
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSET HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
IDENTITY OF ISSUER, BORROWER, DESCRIPTION OF INVESTMENT COST CURRENT
LESSOR OR SIMILAR PARTY VALUE
<S> <C> <C> <C>
APPLIED STOCK FUND
------------------
* Applied Industrial Tech., Inc. Common Stock - 1,140,207 shares $ 17,992,466 $30,509,231
* EB Money Market 529,553 529,553
AMERICAN FUNDAMENTAL INVESTORS
------------------------------
Fundamental Investors, Inc. Common Stock - 968,332 shares 21,866,203 26,537,287
FIDELITY ADVISOR GROWTH FUND
----------------------------
Advisors International Equity Advisors Instl. Equity Growth Fund -
Growth Fund 501,744 shares 19,320,313 23,539,265
HANCOCK EQUITY FUND John Hancock Special Equity Fund 195,771 4,653,359 5, 074,373
------------------- shares
AMERICAN EUROPACIFIC GROWTH FUND
--------------------------------
EuroPacific EuroPacific Growth Fund - 497,819
shares 11,879,549 12,955,707
INCOME FUND OF AMERICA
----------------------
Income Fund of America Income Fund of America - 1,009,695
units 16,117,847 17,945,208
BOND FUND OF AMERICA
--------------------
Bond Fund of America Bond Fund of America - 399,549
shares 5,497,775 5,593,859
FIXED INCOME FUND
-----------------
* Key Trust PRISM MaGIC Fund -1,166,891 units 12,848,894 14,157,189
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) 4,151,235 4,151,235
---------
TOTAL INVESTMENTS $140,992,907
============
</TABLE>
* Represents a party-in-interest.
11
<PAGE> 16
APPLIED INDUSTRIAL TECHNOLOGIES RETIREMENT SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<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> <C>
(Series of Transactions)
Key Trust EB Money Market Fund $8,922,167 None $8,922,167
Key Trust EB Money Market Fund $8,761,594 None 8,761,594
<CAPTION>
(h) (i)
CURRENT VALUE
OF ASSET ON NET GAIN
TRANSACTION DATE OR (LOSS)
<S> <C>
$8,922,167 N/A
8,761,594 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.
12
<PAGE> 17
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 15, 1998, appearing in this Annual Report on Form 11-K of
the Applied Industrial Technologies, Inc. Retirement Savings Plan for the year
ended December 31, 1997.
/s/DELOITTE & TOUCHE LLP
June 29, 1998
