<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, 1998.
[ ] 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
- --------------------------------
Page No.
--------
(a) Financial Statements (in this Report)
-------------------- ----------------
Independent Auditors' Report 5
Statement of Net Assets Available 6
for Benefits -
December 31, 1998 and 1997
Statement of Changes in Net Assets 7
Available for Benefits -
Year Ended December 31, 1998
Statement of Changes in Net Assets 8
Available for Benefits -
Year Ended December 31, 1997
Notes to Financial Statements - 9
Years Ended December 31,
1998 and 1997
Supplemental Schedules 15
(b) Exhibit
-------
Independent Auditors' Consent 18
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 Finanicial
Officer & Treasurer
-------------------------------
Title
Date: June 25, 1999
<PAGE> 3
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
RETIREMENT SAVINGS PLAN
Financial Statements
For the Years Ended
December 31, 1998 and 1997,
Supplemental Schedules for the
For the Year Ended
December 31, 1998,
and Independent Auditors' Report
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
As of December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 1998 and 1997 3 - 4
Notes to Financial Statements 5 - 10
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes
As of December 31, 1998 11
Item 27d - Schedule of Reportable Transactions
For the Year Ended December 31, 1998 12 - 13
</TABLE>
<PAGE> 5
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, 1998 and 1997, 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,
1998 and 1997, 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, 1998 and reportable
transactions for the year ended December 31, 1998 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
Cleveland, Ohio
June 9, 1999
<PAGE> 6
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------Supplemental Information by Fund--------------------
American American
Company Fundamental Fidelity Hancock EuroPacific
December 31, 1998 Stock Investors Growth Equity Growth
(Note 2) (Note 2)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $ 21,492,012
Investment funds 571,454 $ 30,201,603 $ 14,866,835
Loans to participants
------------ ------------ ------------ ------------ ------------
Total investments 22,063,466 30,201,603 14,866,835
Receivables:
Contributions 26,967 36,457 25,019
Other 3,094
------------ ------------ ------------ ------------ ------------
Total receivables 30,061 36,457 25,019
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 22,093,527 $ 30,238,060 $ -- $ -- $ 14,891,854
============ ============ ============ ============ ============
December 31, 1997
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
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
---------------------Supplemental Information by Fund--------------------
Income Bond
Fund of Fixed Fund of Growth and Small Company
December 31, 1998 America Income America Income Stock
(Note 2) (Note 2)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock
Investment funds $ 34,111,998 $ 20,450,064 $ 6,257,120 $ 10,320,049 $ 7,337,276
Loans to participants
------------ ------------ ------------ ------------ ------------
Total investments 34,111,998 20,450,064 6,257,120 10,320,049 7,337,276
Receivables:
Contributions 17,390 72,616 6,138 4,437 11,843
Other
------------ ------------ ------------ ------------ ------------
Total receivables 17,390 72,616 6,138 4,437 11,843
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 34,129,388 $ 20,522,680 $ 6,263,258 $ 10,324,486 $ 7,349,119
============ ============ ============ ============ ============
December 31, 1997
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock
Investment funds $ 17,945,208 $ 14,157,189 $ 5,593,859
Loans to participants
------------ ------------ ------------ ------------ ------------
Total investments 17,945,208 14,157,189 5,593,859
Receivables - other
------------ ------------ ------------ ------------ ------------
Total assets 17,945,208 14,157,189 5,593,859
LIABILITIES:
Accrued administrative expenses 2,927 168
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 17,942,281 $ 14,157,189 $ 5,593,691 $ -- $ --
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
----Supplemental Information by Fund------
Growth Employee
December 31, 1998 Stock Loan Total
(Note 2)
<S> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $ 21,492,012
Investment funds $ 34,383,000 158,499,399
Loans to participants $ 5,984,658 5,984,658
------------ ------------ ------------
Total investments 34,383,000 5,984,658 185,976,069
Receivables:
Contributions 38,637 239,504
Other 3,094
------------ ------------ ------------
Total receivables 38,637 242,598
------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 34,421,637 $ 5,984,658 $186,218,667
============ ============ ============
December 31, 1997
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc. common stock $ 30,509,231
Investment funds 106,332,441
Loans to participants $ 4,151,235 4,151,235
------------ ------------ ------------
Total investments 4,151,235 140,992,907
Receivables - other 2,419
------------ ------------ ------------
Total assets 4,151,235 140,995,326
LIABILITIES:
Accrued administrative expenses 39,005
------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ -- $ 4,151,235 $140,956,321
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE> 7
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
-----------------Supplemental Information by Fund---------------
American
Company Fundamental Fidelity Hancock
Stock Investors Growth Equity
(Note 2)
<S> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 1,450,959 $ 2,541,689
Employer:
Applied Industrial Technologies, Inc. Common Stock 2,424,304
Cash 505,305
Net assets transferred from Invetech 401k plan (Note 1)
Investment income 616,360 2,854,279 $ 212,585
Net appreciation in fair value of investments 1,391,673
------------ ------------ ------------ ------------
Total additions 4,491,623 7,292,946 212,585
DEDUCTIONS:
Distributions to participants 1,947,537 2,202,941
Administrative expenses 43,241 64,948
Net depreciation in fair value of investments 15,360,571 127,288 $ 35,239
------------ ------------ ------------ ------------
Total deductions 17,351,349 2,267,889 127,288 35,239
INTERFUND TRANSFERS 3,928,043 (1,319,305) (23,612,071) (5,039,134)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FOR THE YEAR (8,931,683) 3,705,752 (23,526,774) (5,074,373)
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1997 31,025,210 26,532,308 23,526,774 5,074,373
============ ============ ============ ============
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1998 $ 22,093,527 $ 30,238,060 $ -- $ --
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
--------------Supplemental Information by Fund---------------
American Income Bond
EuroPacific Fund of Fixed Fund of
Growth America Income America
(Note 2)
<S> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 1,598,449 $ 1,398,792 $ 1,390,495 $ 556,735
Employer:
Applied Industrial Technologies, Inc. Common Stock
Cash 345,152 238,879 681,666 77,198
Net assets transferred from Invetech 401k plan (Note 1) 524,051 17,312,782 3,709,541
Investment income 827,060 3,845,556 22,279 501,167
Net appreciation in fair value of investments 1,143,624 1,069,954
------------ ------------ ------------ ------------
Total additions 4,438,336 22,796,009 6,873,935 1,135,100
DEDUCTIONS:
Distributions to participants 1,080,069 2,587,954 2,454,778 1,330,874
Administrative expenses 34,245 119,073 18,365 14,142
Net depreciation in fair value of investments 653,200 200,677
------------ ------------ ------------ ------------
Total deductions 1,114,314 3,360,227 2,473,143 1,545,693
INTERFUND TRANSFERS (1,385,428) (3,248,675) 1,964,699 1,080,160
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FOR THE YEAR 1,938,594 16,187,107 6,365,491 669,567
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1997 12,953,260 17,942,281 14,157,189 5,593,691
============ ============ ============ ============
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1998 $ 14,891,854 $ 34,129,388 $ 20,522,680 $ 6,263,258
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
-------------------Supplemental Information by Fund----------------------
Growth and Small Company Growth Employee
Income Stock Stock Loan Total
(Note 2) (Note 2) (Note 2)
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 336,621 $ 875,766 $ 2,576,958 $ 12,726,464
Employer:
Applied Industrial Technologies, Inc. Common Stock 2,424,304
Cash 37,123 130,694 520,718 2,536,735
Net assets transferred from Invetech 401k plan (Note 1) 7,140,779 2,868,553 3,834,333 $ 1,105,291 36,495,330
Investment income 12,334 108,058 1,294,444 494,014 10,788,136
Net appreciation in fair value of investments 2,210,401 6,982,022 12,797,674
------------ ------------ ------------ ------------ ------------
Total additions 9,737,258 3,983,071 15,208,475 1,599,305 77,768,643
DEDUCTIONS:
Distributions to participants 460,568 661,831 2,342,947 361,744 15,431,243
Administrative expenses 4,818 19,089 80,902 398,823
Net depreciation in fair value of investments 299,256 16,676,231
------------ ------------ ------------ ------------ ------------
Total deductions 465,386 980,176 2,423,849 361,744 32,506,297
INTERFUND TRANSFERS 1,052,614 4,346,224 21,637,011 595,862
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FOR THE YEAR 10,324,486 7,349,119 34,421,637 1,833,423 45,262,346
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1997 -- -- -- 4,151,235 140,956,321
============ ============ ============ ============ ============
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1998 $ 10,324,486 $ 7,349,119 $ 34,421,637 $ 5,984,658 $186,218,667
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE> 8
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----------------------
AMERICAN AMERICAN
COMPANY FUNDAMENTAL FIDELITY HANCOCK EUROPACIFIC
STOCK INVESTORS GROWTH EQUITY GROWTH
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 942,587 $ 2,065,725 $ 1,952,566 $ 550,964 $ 1,348,442
Employer:
Applied Industrial Technologies , Inc. Common Stock 3,244,770
Cash 429,855 433,769 72,550 307,681
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 677,599 (785,498) (1,328,210) (619,391) (586,327)
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FOR THE YEAR 11,578,800 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 $ 31,025,209 $ 26,532,308 $ 23,526,774 $ 5,074,373 $ 12,953,260
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
---------------------SUPPLEMENTAL INFORMATION BY FUND-------------------
INCOME BOND
FUND OF FIXED FUND OF EMPLOYEE
AMERICA INCOME AMERICA LOAN TOTAL
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 928,978 $ 881,968 $ 365,465 $ 9,036,695
Employer:
Applied Industrial Technologies , Inc. Common Stock 3,244,770
Cash 199,840 637,047 57,495 2,138,237
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 1,589,347
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FOR THE YEAR 2,477,190 576,753 623,786 1,723,195 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 $ 4,151,236 $140,956,321
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE> 9
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
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 Plan sponsor merged the Invetech Company
Profit Sharing 401(k) Retirement Plan (the "Invetech Plan") into the
Plan during 1998. Pursuant to the merger, all participants in the
Invetech Plan became entitled to participate in the Plan. Net assets
totaling $36,495,330 were transferred to the Plan in 1998. 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,
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 employees are eligible to
participate in the Plan on the first day of the month following their
hire.
Eligible employees may elect to make pretax contributions to the Plan
ranging from 1% to 15% of compensation. 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. The matching employer
contribution is updated annually and is currently determined using the
following schedule:
<PAGE> 10
<TABLE>
<CAPTION>
CORPORATE EARNINGS PER QUARTERLY MATCHING
SHARE FOR IMMEDIATELY CONTRIBUTION
PRECEDING QUARTER COMPANY STOCK FUND OTHER FUNDS
<S> <C> <C>
$.36 or less 35% 25%
$.37 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 25%,
35%, 35%, and 25% for the four 1998 quarters, and 35%, 50%, 100%, and
25% for the four 1997 quarters, respectively.
Matching Employer Contributions are 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 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, 1998 and 1997 was $2,861,878 and $2,386,622,
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 5% increments in the Plan's
Company Stock Fund, American Fundamental Investors Fund, Fidelity
Growth Fund, Hancock Equity Fund. American EuroPacific Growth Fund,
Income Fund of America, Fixed Income Fund, Bond Fund of America, Growth
and Income Fund, Small Company Stock Fund, or the Growth Stock 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 704 (d)(6). 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.
The value of the funds and the interest of individual participants
under each fund, are calculated daily (daily valuation).
<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 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 $78,463 in 1998 and
$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, the IBT 401k Plan, and the Invetech Company Profit
Sharing 401K Retirement 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.
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.
RECLASSIFICATION - Certain amounts in the 1997 financial statements
have been reclassified to conform to the 1998 classification.
<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 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. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
2. DESCRIPTION OF THE SEPARATE INVESTMENT 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:
- The Company 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 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.
- The 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 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 EB 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 consists of shares of the Bond Fund of
America, which invests in government and corporate bonds.
- The Growth and Income Fund consists of shares of the EB Equity Index
Fund, which invests with the objective of replicating the return of the
Standard & Poor's 500 Index, seeking a combination of capital
appreciation and dividend income.
- The Small Company Stock Fund consists of shares of the Franklin Small
Cap Growth Fund, which invests in small companies with the objective of
capital appreciation.
<PAGE> 13
- The Growth Stock Fund consists of shares in the Dreyfus Appreciation
Fund, the Enterprise Growth Fund, and the Harbor Capital Appreciation
Fund and seeks to achieve growth of capital by investing in growth
stocks through three stock mutual funds.
The Plan's investment options provide for nine separate investment
funds in 1998 and eight separate investment funds in 1997. Effective
January 1, 1998, the Growth and Income Fund was added, the Fidelity
Growth Fund was replaced by the Growth Stock Fund and the Hancock
Equity Fund was replaced by the Small Company Stock Fund.
Company Matching Employer Contributions are invested in the Company
Stock Fund which consists of investments in the common stock of Applied
Industrial Technologies, Inc., limited to a maximum of one million five
hundred thousand shares, and temporary investments in the Trustee's EB
Money Market 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 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 - Certain administrative expenses of the Plan
are paid by the Plan including trustee fees paid to the Plan Trustee.
The Company pays other administrative costs of the Plan, including the
salaries, benefits and other costs of Company employees involved in
administering the Plan and income taxes on investment earnings.
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.
<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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Description of
Investment 1998 1997
--------------------------------
<S> <C> <C>
Applied Industrial Technologies, Inc. $ 21,492,012 $ 30,509,231
Common Stock
Fundamental Investors Fund 30,196,057 26,537,287
Advisors Institutional Equity Growth Fund - 23,539,265
EuroPacific Growth Fund 14,863,312 12,955,707
Income Fund of America 34,105,225 17,945,208
EB MaGIC Fund 20,429,903 14,157,189
EB Equity Index Fund 10,318,828 -
Dreyfus Appreciation Fund 11,141,288 -
Enterprise Growth Fund 11,523,138 -
Harbor Capital Appreciation Fund 11,632,092 -
</TABLE>
******
<PAGE> 15
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
IDENTITY OF ISSUER, BORROWER, DESCRIPTION OF INVESTMENT COST CURRENT
LESSOR OR SIMILAR PARTY VALUE
COMPANY STOCK
-------------
<S> <C> <C> <C>
* Applied Industrial Tech., Inc. Common Stock - 1,548,974 shares $ 24,860,564 $ 21,492,012
* Key Trust Company of Ohio, NA EB Money Market - 571,454 units 571,454 571,454
AMERICAN FUNDAMENTAL INVESTORS
------------------------------
The American Funds Group Fundamental Investors Fund - 1,044,124 shares 25,072,810 30,196,057
* Key Trust Company of Ohio, NA EB Money Market - 5,546 units 5,546 5,546
AMERICAN EUROPACIFIC GROWTH
---------------------------
The American Funds Group EuroPacific Growth Fund - 523,356 shares 12,948,989 14,863,312
* Key Trust Company of Ohio, NA EB Money Market - 3,523 units 3,523 3,523
INCOME FUND OF AMERICA
----------------------
The American Funds Group Income Fund of America - 1,966,853 shares 33,386,733 34,105,225
* Key Trust Company of Ohio, NA EB Money Market - 6,773 units 6,773 6,773
FIXED INCOME FUND
-----------------
* Key Trust Company of Ohio, NA EB MaGIC Fund - 1,589,381 units 18,409,502 20,429,903
* Key Trust Company of Ohio, NA EB Money Market - 20,161 units 20,161 20,161
BOND FUND OF AMERICA
--------------------
The American Funds Group Bond Fund of America - 459,255 shares 6,330,813 6,250,875
* Key Trust Company of Ohio, NA EB Money Market - 6,245 units 6,245 6,245
GROWTH AND INCOME
-----------------
* Key Trust Company of Ohio, NA EB Equity Index Fund - 21,046 units 825,163 10,318,828
* Key Trust Company of Ohio, NA EB Money Market - 1,221 units 1,221 1,221
SMALL COMPANY STOCK
-------------------
Franklin Templeton Franklin Small Cap Growth - 325,090 shares 7,432,070 7,337,276
GROWTH STOCK
------------
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund - 264,827 shares 8,840,525 11,141,288
Enterprise Group of Funds, Inc. Enterprise Growth Fund - 546,898 shares 9,535,602 11,523,138
Harbor Fund Harbor Capital Appreciation Fund - 306,188 shares 9,412,473 11,632,092
* Key Trust Company of Ohio, NA EB Money Market - 86,482 units 86,482 86,482
EMPLOYEE LOAN FUND
------------------
* Participant Loans Participant Loans (with interest rates - 5,984,658
ranging from 7.00% to 11.50% and
maturity dates ranging from January
1999 to July 2027)
=============
TOTAL INVESTMENTS $ 185,976,069
=============
</TABLE>
* Represents a party-in-interest
<PAGE> 16
APPLIED INDUSTRIAL TECHNOLOGIES RETIREMENT SAVINGS PLAN
ITEM 27d-SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
IDENTITY OF PURCHASE SELLING LEASE EXPENSE INCURRED
PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE RENTAL WITH TRANSACTION
<S> <C> <C> <C> <C> <C>
SERIES OF TRANSACTIONS:
Key Trust of Ohio, NA EB Money Market Fund $ 24,003,133 None
The American Funds Group Fundemental Investors 6,968,641 None
The American Funds Group Income Fund of America 23,250,844 None
Key Trust of Ohio, NA EB MaGIC Fund 9,098,873 None
The American Funds Group Bond Fund of America 4,028,608 None
Key Trust of Ohio, NA EB Equity Index Fund 9,754,218 None
Franklin Templeton Franklin Small Cap Growth Fund 9,720,339 None
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 10,351,181 None
Enterprise Group of Funds, Inc Enterprise Growth Fund 11,122,883 None
Harbor Fund Harbor Capital Appreciation Fund 10,947,064 None
Key Trust of Ohio, NA EB Money Market Fund $23,852,935 None
The American Funds Group Fundemental Investors 4,696,565 None
The American Funds Group Income Fund of America 6,434,700 None
Fidelity Fidelity Growth Fund 23,610,225 None
Key Trust of Ohio, NA EB MaGIC Fund 3,896,114 None
The American Funds Group Bond Fund of America 3,138,960 None
Key Trust of Ohio, NA EB Equity Index Fund 1,645,791 None
Franklin Templeton Franklin Small Cap Growth Fund 2,083,808 None
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 1,685,189 None
Enterprise Group of Funds, Inc Enterprise Growth Fund 1,736,255 None
Harbor Fund Harbor Capital Appreciation Fund 1,685,189 None
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(a) (b) (g) (h) (i)
IDENTITY OF COST OF CURRENT VALUE OF ASSET NET GAIN
PARTY INVOLVED DESCRIPTION OF ASSET ASSETS ON TRANSACTION DATE OR (LOSS)
<S> <C> <C> <C> <C>
SERIES OF TRANSACTIONS:
Key Trust of Ohio, NA EB Money Market Fund $ 24,003,133 $ 24,003,133 N/A
The American Funds Group Fundemental Investors 6,968,641 6,968,641 N/A
The American Funds Group Income Fund of America 23,250,844 23,250,844 N/A
Key Trust of Ohio, NA EB MaGIC Fund 9,098,873 9,098,873 N/A
The American Funds Group Bond Fund of America 4,028,608 4,028,608 N/A
Key Trust of Ohio, NA EB Equity Index Fund 9,754,218 9,754,218 N/A
Franklin Templeton Franklin Small Cap Growth Fund 9,720,339 9,720,339 N/A
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 10,351,181 10,351,181 N/A
Enterprise Group of Funds, Inc Enterprise Growth Fund 11,122,883 11,122,883 N/A
Harbor Fund Harbor Capital Appreciation Fund 10,947,064 10,947,064 N/A
Key Trust of Ohio, NA EB Money Market Fund 23,852,935 23,852,935 None
The American Funds Group Fundemental Investors 3,799,094 4,696,565 $ 897,471
The American Funds Group Income Fund of America 5,981,875 6,434,700 452,825
Fidelity Fidelity Growth Fund 19,531,053 23,610,225 4,079,172
Key Trust of Ohio, NA EB MaGIC Fund 3,538,265 3,896,114 357,849
The American Funds Group Bond Fund of America 3,163,892 3,138,960 (24,932)
Key Trust of Ohio, NA EB Equity Index Fund 1,502,555 1,645,791 143,236
Franklin Templeton Franklin Small Cap Growth Fund 2,288,270 2,083,808 (204,462)
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 1,503,367 1,685,189 181,822
Enterprise Group of Funds, Inc Enterprise Growth Fund 1,586,082 1,736,255 150,173
Harbor Fund Harbor Capital Appreciation Fund 1,534,592 1,685,189 150,597
</TABLE>
<PAGE> 17
APPLIED INDUSTRIAL TECHNOLOGIES RETIREMENT SAVINGS PLAN
ITEM 27d-SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
IDENTITY OF PURCHASE SELLING LEASE EXPENSE INCURRED
PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE RENTAL WITH TRANSACTION
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS:
Key Trust of Ohio, NA EB Money Market Fund $ 9,191,174 None
Key Trust of Ohio, NA EB Money Market Fund 7,139,037 None
Income Fund of America Income Fund of America 17,151,510 None
Key Trust of Ohio, NA EB Equity Index Fund 7,168,779 None
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 7,778,266 None
Enterprise Group of Funds, Inc Enterprise Growth Fund 9,191,174 None
Harbor Fund Harbor Capital Appreciation Fund 7,778,266 None
Key Trust of Ohio, NA EB Money Market Fund $ 7,077,483 None
Key Trust of Ohio, NA EB Money Market Fund 9,191,174 None
Fidelity Fidelity Growth Fund 23,401,338 None
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(a) (b) (g) (h) (i)
IDENTITY OF COST OF CURRENT VALUE OF ASSET NET GAIN
PARTY INVOLVED DESCRIPTION OF ASSET ASSETS ON TRANSACTION DATE OR (LOSS)
<S> <C> <C> <C> <C>
SINGLE TRANSACTIONS:
Key Trust of Ohio, NA EB Money Market Fund $ 9,191,174 $ 9,191,174 N/A
Key Trust of Ohio, NA EB Money Market Fund 7,139,037 7,139,037 N/A
Income Fund of America Income Fund of America 17,151,510 17,151,510 N/A
Key Trust of Ohio, NA EB Equity Index Fund 7,168,779 7,168,779 N/A
Dreyfus Appreciation Fund, Inc. Dreyfus Appreciation Fund 7,778,266 7,778,266 N/A
Enterprise Group of Funds, Inc Enterprise Growth Fund 9,191,174 9,191,174 N/A
Harbor Fund Harbor Capital Appreciation Fund 7,778,266 7,778,266 N/A
Key Trust of Ohio, NA EB Money Market Fund 7,077,483 7,077,483 None
Key Trust of Ohio, NA EB Money Market Fund 9,191,174 9,191,174 None
Fidelity Fidelity Growth Fund 19,320,313 23,401,338 $ 4,081,025
</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.
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Applied Industrial Technologies, Inc.
We consent to the incorporation by reference in Registration Statement No.
33-65513 and 33-42634 of Applied Industrial Technologies, Inc. on Form S-8 of
our report dated June 9, 1999, appearing in this Annual Report on Form 11-K of
the Applied Industrial Technologies, Inc. Retirement Savings Plan for the year
ended December 31, 1998.
/s/Deloitte & Touche LLP
Cleveland, Ohio
June 23, 1999
