What changed in this filing

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Item 1. Business

2022-08-12 compared with 2021-08-17 · 20 added, 26 removed, 164 unchanged (22% of the section changed)

7 unchanged sentences

Our internet address is www.applied.com.

The following documents are available free of charge via hyperlink from the investor relations area of our website:

The following documents are available via hyperlink from the investor relations area of our website:

• Applied's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, together with Section 16 insider beneficial stock ownership reports - these documents are posted as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission

2 unchanged sentences

• Applied's Director Independence Standards

• Charters for the Audit, Corporate Governance, and Executive Organization & Compensation Committees of Applied's Board of Directors

• Charters for the Audit, Corporate Governance & Sustainability, and Executive Organization & Compensation Committees of Applied's Board of Directors

The information available via hyperlink from our website is not incorporated into this annual report on Form 10-K.

16 unchanged sentences

A primary focus for our service center network is responding to a critical “break-fix” situation, which requires knowledge of a customer’s facility, localized inventory, timely delivery capabilities, service execution, and accountability.

In addition, our fluid power, flow control, and automation operations design, engineer, and integrate solutions focused on making a customer’s operations and equipment more productive, cost-efficient, and

We believe our products and solutions are increasingly critical within the industrial supply chain given an aging and tighter customer labor force, more sophisticated production equipment and processes, a greater focus on plant floor optimization, and compliance and regulatory requirements.

In addition, our fluid power, flow control, and automation operations design, engineer, and

integrate solutions focused on making a customer’s operations and equipment more productive, cost-efficient, and automated.

We believe our products and solutions are increasingly critical within the industrial supply chain given increased manufacturing activity in the U.S., potential reshoring or localization of supply chains across North America, greater supply chain investments following the pandemic, an aging and tighter customer labor force, more sophisticated production equipment and processes, a greater focus on plant floor optimization, and compliance and regulatory requirements.

INDUSTRY AND COMPETITION

19 unchanged sentences

We believe we have a favorable position to capture this addressable market given our technical product focus, service capabilities, embedded customer relationships and knowledge across direct production infrastructure and equipment, and existing supplier relationships.

Following several business acquisitions made since fiscal 2020, we now offer products and solutions focused on the design, assembly, integration, and distribution of machine vision, robotic technologies, and motion control.

Following several business acquisitions made in recent years, we now offer products and solutions focused on the design, assembly, integration, and distribution of machine vision, robotics, digital networking, and motion control technologies.

Our emerging growth across these areas is diversifying our end-market exposure with greater penetration into technology, life sciences, logistics, and food and beverage industries.

3 unchanged sentences

We have a number of initiatives focused on driving operational improvements throughout the organization.

Systems investments in recent years including common ERP platforms are supporting opportunities in leveraging shared services, refining our sales management process, and standardizing pricing and sourcing functions, while we continue to optimize our shop and distribution network and analytics.

Systems investments in recent years including common ERP platforms are supporting opportunities in leveraging shared services, refining our

sales management process, and standardizing pricing and sourcing functions, while we continue to optimize our shop and distribution network and analytics.

We also remain focused on achieving margin synergies across our operations following expansion into flow control and automation.

This includes enhanced pricing functions, leveraging vendor procurement, freight savings, and refined cost management.

Combined with

growth in more profitable areas of our business and our history of cost accountability, we see ongoing opportunity to optimize our margin profile and cash generation in coming years.

Combined with growth in more profitable areas of our business and our history of cost accountability, we see ongoing opportunity to optimize our margin profile and cash generation in coming years.

• Pursue value-creating acquisitions to supplement growth and strengthen industry position .

26 unchanged sentences

The suppliers generally do not sell maintenance and repair products directly to the customer, but instead refer the customer to us or another distributor.

We purchase from thousands of product manufacturers and resell the products to thousands of customers in a wide variety of industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as to government entities.

technology, transportation, and utilities, as well as to government entities.

Customers range from very large businesses, with which we may have multiple-location relationships, to very small ones.

29 unchanged sentences

Hydraulic products offer high power to weight ratios, high torque at low speeds, and power reliability, while pneumatic products are focused on lightweight applications in need of speed and precision.

Our fluid power products and solutions are commonly used for off-highway equipment, heavy industrial equipment and machines at factories, marine and offshore equipment, factory automation, food processing equipment, packaging operations, and downstream energy process systems.

Our fluid power products and solutions are commonly used for off-highway equipment, heavy industrial equipment and machines at factories, marine and offshore equipment,

factory automation, food processing equipment, packaging operations, and downstream energy process systems.

Operations are supported by a team of certified fluid power specialists, mechanics, technicians, and engineers that provide technical services ranging from system design and integration, electronic control integration, hydraulic assemblies, repair and rebuild, manifold design and assembly, customized filtration solutions, software programming and repair, and hydraulic system retrofits.

10 unchanged sentences

We attribute our business success to talented, dedicated employee associates who live our Core Values of integrity, respect, customer focus, commitment to excellence, accountability, innovation, continuous improvement, and teamwork.

At June 30, 2021, we had approximately 5,947 associates, with geographic and segment counts as follows:

At June 30, 2022, we had approximately 6,100 associates across six countries, with geographic and segment counts as follows:

United States

13 unchanged sentences

paid vacations and holidays;

incentive programs;

incentive programs in support of our pay for performance culture;

an employee assistance program;

3 unchanged sentences

We employ multiple initiatives to recruit, train, and advance diverse associates.

In the area of recruitment, for example, we engage in on-campus events and targeted recruitment strategies that increase our exposure to diverse populations in order to promote enhanced diversity in our hiring.

In the area of recruitment, for example, we engage in on-campus events and targeted recruitment strategies, including networking with diverse professional groups, that increase our exposure to diverse populations in order to promote enhanced diversity in our hiring.

Health and Safety .

Applied is also committed to the safety and well-being of our associates.

In the U.S., all associates are required to complete specific assigned online training courses annually, which include offerings on workplace safety hazards and vehicle safety.

In the U.S., all associates are required to complete specific assigned online training courses annually, which include offerings on

workplace safety hazards and vehicle safety.

In addition, role-specific training is assigned based on the types of hazards associates may face while carrying out their job function, such as training modules on operating in confined spaces, forklift operation, and lockout/tagout procedures.

In our most recent fiscal year, our U.S.

associates completed nearly 14,000 such safety training courses.

associates complete over 10,000 such safety training courses annually, helping to raise awareness of workplace risks.

From the onset of the COVID-19 pandemic, we focused on protecting our associates’ health and safety, while ensuring our continued capability to serve our customers.

1 unchanged sentence

We implemented significant changes to ensure a safe operating environment for our associates and to protect our customers and communities, including remote work as feasible, social distancing protocols, heightened sanitation procedures, and masking policies.

BACKLOG AND SEASONALITY

Backlog orders are not material to our business as a whole, although they are a more important factor for our fluid power, flow control, and automation businesses.

Our business has exhibited minor seasonality.

6 unchanged sentences

We would be adversely affected by the unavailability of raw materials to our suppliers, prolonged labor disputes experienced by suppliers or customers, or by events or conditions that have an adverse effect on industrial activity generally in the markets we serve or on key customer industries.

WORKING CAPITAL

Our working capital position is discussed in Item 7 under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations.” This information is incorporated here by reference.

We require substantial working capital related to accounts receivable and inventories.

Significant amounts of inventory are carried to meet customers' delivery requirements.

We generally require payments for sales on account within 30 days.

Returns are not considered to have a material effect on our working capital requirements.

We believe these practices are generally consistent among companies in our industry.

ENVIRONMENTAL LAWS

We believe that compliance with laws regulating the discharge of materials into the environment or otherwise relating to environmental protection will not have a material adverse effect on our capital expenditures, earnings, or competitive position.

We believe that compliance with government regulations relating to the discharge of materials into the environment or otherwise relating to environmental protection will not have a material adverse effect on our capital expenditures, earnings, or competitive position.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business