SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2003.
[ ] 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.
Supplemental Defined Contribution Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Applied Industrial Technologies, Inc.
One Applied Plaza
Cleveland, Ohio 44115-5056
Financial Statements and Exhibit(s)
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Page No.
(in this Report)
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(a) Financial Statements
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Independent Auditors' Report 5
Statements of Net Assets Available
for Benefits --
December 31, 2003 and 2002 6
Statement of Changes in Net Assets
Available for Benefits --
Years Ended December 31,
2003, 2002 and 2001 7
Notes to Financial Statements --
Years Ended December 31,
2003, 2002 and 2001 8 - 11
(b) Exhibit(s)
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Independent Auditors' Consent 12
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. SUPPLEMENTAL DEFINED
CONTRIBUTION PLAN
By: Applied Industrial Technologies, Inc.,
as Plan Administrator
By: /s/ Michael L. Coticchia
--------------------------
Signature
Michael L. Coticchia
--------------------------
Printed Name
Vice President
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Title
Date: March 26, 2004
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
Financial Statements
As of December 31, 2003 and 2002 and
For each of the three Years in the period Ended
December 31, 2003, And
Independent Auditors' Report
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
As of December 31, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2003, 2002 and 2001 3
Notes to Financial Statements 4 - 7
INDEPENDENT AUDITORS' REPORT
Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan
We have audited the accompanying statements of net assets available for benefits
of the Applied Industrial Technologies, Inc. Supplemental Defined Contribution
Plan (the "Plan") as of December 31, 2003 and 2002, and the related statements
of changes in net assets available for benefits for each of the three years in
the period ended December 31, 2003. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
March 5, 2004
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 and 2002
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2003 2002
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc.
common stock $ 255,164 $ 230,895
Mutual funds 4,907,116 3,863,370
Common/collective fixed income funds 566,537 372,060
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Total investments 5,728,817 4,466,325
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NET ASSETS AVAILABLE FOR BENEFITS $5,728,817 $4,466,325
========== ==========
See notes to financial statements.
2
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
------------------------------------------------------------------------------
2003 2002 2001
ADDITIONS:
Participant Contributions $ 575,667 $ 366,053 $ 507,201
Investment income:
Dividends:
Common stock 5,325 6,328 12,244
Mutual funds 80,075 117,465 124,024
Common/collective fixed income funds 1,991 1 10
----------- ----------- -----------
Total dividends 87,391 123,794 136,278
Net appreciation/(depreciation) in market value of investments:
Common stock 50,729 1,573 (186,675)
Mutual funds 932,417 (753,297) (428,672)
Common/collective fixed income funds 468 -- (3,123)
----------- ----------- -----------
Total net appreciation/(depreciation) in
market value of investments 983,614 (751,724) (618,470)
----------- ----------- -----------
Total investment income/(loss) 1,071,005 (627,930) (482,192)
----------- ----------- -----------
Total additions/(deductions) 1,646,672 (261,877) 25,009
DEDUCTIONS:
Distributions to participants 357,810 319,241 346,271
Administrative expenses 26,370 19,362 14,911
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Total deductions 384,180 338,603 361,182
----------- ----------- -----------
INCREASE/(DECREASE) IN NET ASSETS
FOR THE YEAR 1,262,492 (600,480) (336,173)
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 4,466,325 5,066,805 5,402,978
NET ASSETS AVAILABLE FOR BENEFITS,
----------- ----------- -----------
END OF YEAR $ 5,728,817 $ 4,466,325 $ 5,066,805
=========== =========== ===========
See notes to financial statements.
3
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
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1. DESCRIPTION OF THE PLAN
The following description of the Applied Industrial Technologies, Inc.
Supplemental Defined Contribution Plan (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") effective January 1, 1996,
for the benefit of a select group of management or highly compensated
employees. This is a non-qualified plan and is subject to the claims of
creditors in the case of bankruptcy of Applied Industrial Technologies,
Inc.
ADMINISTRATION - The Plan is administered by the Company. The Company's
powers and duties relate to making participant and employer
contributions to the Plan's trust, establishing investment objectives,
authorizing disbursements from the trust, and resolving any questions
of Plan interpretation.
The assets of the Plan are administered by American Express Trust
Company acting as Trustee. The Trustee is responsible for the custody
of assets.
Effective March 1, 2003, American Express Trust Company and American
Express Retirement Services, is the new trustee and record keeper,
respectively, for the Applied Industrial Technologies, Inc.
Supplemental Defined Contribution Plan. The transfer of the assets from
Key Trust Co. of Ohio, N.A. to American Express Trust Company took
place on March 3, 2003. There was a "blackout period" from March 3,
2003 to April 1, 2003 during which time participants were unable to
exercise their rights related to the Plan.
PARTICIPANT ACCOUNTS - Each participant's account is credited with that
participant's contribution and allocations of 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 amount that can be
provided from the participant's vested account.
PARTICIPATION AND CONTRIBUTIONS - Participation in the Plan is limited
to select management or highly compensated employees of the Company and
whose contributions under the Applied Industrial Technologies, Inc.
Retirement Savings Plan (the "Retirement Savings Plan") are limited.
There are no limits to the amount they can contribute. Participants may
elect to transfer excess contributions from the Retirement Savings
Plan. The company makes Supplemental Matching Contributions equal to
the amount that matching contributions under the Retirement Savings
Plan are limited each year due to Sections 401(k) and 401(m) of the
Internal Revenue Code.
4
Supplemental Matching Contributions are segregated in the Matching
Contributions Account and are invested in the Company Stock Fund.
Non-participant directed investments included in the Company Stock Fund
were $ 33,073 and $ 26,790 at December 31, 2003 and 2002, respectively.
During the years ended December 31, 2003, 2002 and 2001, there were no
Supplemental Matching Contributions made to the plan.
Contributions are excluded from participants' taxable income until such
amounts are received by them as a distribution from the Plan.
INVESTMENT OF CONTRIBUTIONS - Participants elect investment of their
contributions in 1% increments in the American Fundamental Investors
Fund, EuroPacific Growth Fund, Pimco Total Return Fund, AXP S&P 500
Index Fund, AXP Cash Management Fund, Calamos Growth Fund, Harbor
Capital Appreciation, Vanguard Growth Index Fund, Wilshire Large
Company Growth Portfolio, Alliance Growth and Income Fund, T Rowe Price
Mid-Cap Growth Fund, Vanguard Asset Allocation Fund, Franklin Small-Cap
Growth Fund, Royce Total Return Fund, or the Lord Abbett Mid-Cap Value
Fund. Participants may 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 1%
of the total amount to be reallocated. All such elections are filed
with the Trustee and become effective daily.
The value of the funds and the interest of individual participants
under each fund are calculated daily (daily valuation).
VESTING AND DISTRIBUTIONS - Each participant is immediately and fully
vested in all participant contributions and earnings thereon.
Participants vest in Supplemental Matching 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
Supplemental Salary Savings Contributions, subject to adherence to
Internal Revenue Service regulations and approval by the Company.
Forfeitures of non-vested amounts are applied to reduce future
Supplemental Matching Contributions. There were no forfeitures in 2003,
2002 or 2001.
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 Supplemental Matching Employer
Contributions made on their behalf.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The accompanying financial statements have been
prepared on the accrual basis of accounting.
5
USE OF ESTIMATES - The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and changes
therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
VALUATION OF INVESTMENTS - Investments are accounted for at cost on the
trade-date and are reported in the statement of net assets available
for benefits at fair value. The investment in Company common stock is
valued using the year-end closing price listed by the New York Stock
Exchange. Investment funds are stated at fair values using year-end
closing price for each of the funds or quoted market prices.
RISK AND UNCERTAINTIES - In general, investment securities are exposed
to various risks, such as interest rate, credit and overall market
volatility risks. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the
values of investment securities could occur in the near term, and such
changes could materially affect the amounts reported in the statements
of net assets available for benefits and statement of changes in net
assets available for benefits.
BENEFITS PAYABLE - Distributions to participants are recorded by the
Plan when payments are made.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan are paid
by the Plan or the Company, as determined by the Company.
INCOME TAXES - The Plan is not qualified under Section 401(a) of the
Internal Revenue Code. Applied Industrial Technologies, Inc. is subject
to federal income taxes arising from taxable income of the Plan.
Accordingly, no provision for federal income taxes is included in the
financial statements of the Plan.
3. INVESTMENTS
The Plan provides that, in accordance with the investment objectives
established by the Company, the Trustee of the Plan shall hold, invest,
reinvest, manage and administer all assets of the Plan as a trust fund
for the exclusive benefit of participants and their beneficiaries.
Plan investments exceeding 5% of net assets available for benefits as
of December 31, 2003 and 2002, respectively, were as follows:
Description of 2003 2002
Investment
Applied Industrial Technologies, Inc. Common Stock $ 255,164 $ 230,895
American Fundamental Investors Fund 320,412 246,819
Franklin Small-Cap Growth Fund 346,307 223,412
Growth Fund Portfolio 511,404 430,219
6
Financial Reserves Fund -- 372,060
EuroPacific Growth Fund 922,728 754,252
T Rowe Price Mid-Cap Growth Fund 936,376 627,928
Royce Total Return Fund -- 224,613
Pimco Total Return Fund 996,872 1,036,816
AXP Cash Management Fund 566,537 --
**********
7
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
033-65509 of Applied Industrial Technologies, Inc. on Form S-8 of our report
dated March 5, 2004, relating to the financial statements of the Applied
Industrial Technologies, Inc. Supplemental Defined Contribution Plan as of
December 31, 2003 and 2002 and for each of the three years ended December 31,
2003, appearing in this Annual Report on Form 11-K of the Applied Industrial
Technologies, Inc. Supplemental Defined Contribution Plan for the year ended
December 31, 2003.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
March 25, 2004