What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-08-12 compared with 2021-08-17 · 108 added, 137 removed, 930 unchanged (21% of the section changed)

7 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2022, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 12, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

Effective July 1, 2019, the Company adopted the new accounting standard related to leases using the optional transition method, which required application of the new guidance to only those leases that existed at the date of adoption.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates .

Goodwill - FCX Reporting Unit - Refer to Note 5 to the financial statements

Goodwill - Fluid Power & Flow Control Segment - Refer to Notes 1 and 5 to the financial statements

Critical Audit Matter Description

3 unchanged sentences

The determination of the fair value using the market approach requires management to make significant estimates and assumptions related to the forecasts of future revenues, EBITDA and multiples that are applied to management’s forecasted revenues and EBITDA estimates.

The goodwill balance was

$560.1 million as of June 30, 2021, of which $309.0 million related to the FCX reporting unit.

The fair value of the FCX reporting unit exceeded its carrying value by 14% as of the measurement date and, therefore, no impairment was recognized.

Given the nature of the FCX reporting unit’s operations, the sensitivity of the business to changes in the economy, the reporting unit’s historical performance as compared to projections, and the difference between its fair value and the carrying value, auditing management’s judgments regarding forecasts of future revenues and EBITDA, as well as selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates for the FCX reporting unit, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The goodwill balance was $563.2 million as of June 30, 2022, of which $352.2 million related to reporting units within the Fluid Power & Flow Control segment.

The fair value of all reporting units exceeded their carrying value by at least 25% as of the measurement date and, therefore, no impairment was recognized .

Given the nature of one of the reporting unit’s operations within the Fluid Power & Flow Control segment, the sensitivity of the reporting unit to changes in the economy, the reporting unit’s historical performance as compared to projections, and the difference between its fair value and the carrying value, auditing management’s judgments regarding forecasts of future revenues and EBITDA, as well as selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates for the reporting unit, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists .

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenues and EBITDA (“forecasts”), and the selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates (“market multiples”) for the FCX reporting unit included the following, among others:

Our audit procedures related to the forecasts of future revenues and EBITDA (“forecasts”), and the selection of the discount rate and selection of multiples applied to management’s forecasted revenues and EBITDA estimates (“market multiples”) for this reporting unit within the Fluid Power & Flow Control segment included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, such as controls related to management’s forecasts and the selection of the discount rate and market multiples used.

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Interest income ( 522 ) ( 215 ) ( 729 )

Other income, net ( 2,200 ) ( 2,782 ) ( 881 )

Other expense (income), net 1,805 ( 2,200 ) ( 2,782 )

Income before income taxes 329,790 177,062 55,236

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Actuarial gain (loss) on re-measurement 2,839 903 ( 2,192 )

Reclassification of actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs 270 ( 66 ) ( 306 )

Cumulative effect of adopting accounting standard — — ( 50 )

Reclassification of actuarial losses (gains) and prior service cost into other expense (income), net and included in net periodic pension costs 300 270 ( 66 )

Unrealized gain (loss) on cash flow hedge 26,204 3,250 ( 16,615 )

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Provision for losses on accounts receivable 3,193 6,540 14,055

Unrealized foreign exchange transaction losses (gains) 1,814 ( 1,357 ) 238

Other share-based compensation expense 8,558 6,454 4,000

Gain on sale of property ( 368 ) ( 1,157 ) ( 459 )

Other ( 1,752 ) 1,446 ( 2,514 )

Changes in operating assets and liabilities, net of acquisitions:

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Cash Flows from Investing Activities

Cash paid for acquisition of businesses, net of cash acquired ( 6,964 ) ( 30,230 ) ( 37,237 )

Capital expenditures ( 18,124 ) ( 15,852 ) ( 20,115 )

Proceeds from property sales 1,107 1,152 1,948

Cash paid for acquisition of businesses, net of cash acquired ( 30,230 ) ( 37,237 ) ( 37,526 )

Other — — 391

Life insurance proceeds 3,158 — —

Cash payments for loans on company-owned life insurance ( 14,835 ) — —

Cash used in Investing Activities ( 35,658 ) ( 44,930 ) ( 55,404 )

Cash Flows from Financing Activities

Net repayments under revolving credit facility — — ( 19,500 )

Net borrowings under revolving credit facility 410,592 — —

Borrowings under long-term debt facilities — 26,000 25,000

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( 49,305 ) ( 49,305 )

Purchases of common stock for treasury ( 192 ) ( 11,158 ) ( 11,158 )

Treasury shares issued for:

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Other comprehensive income (loss) 36,338 36,338

Cumulative effect of adopting accounting standards ( 3,275 ) ( 3,275 )

Cash dividends — $ 1.30 per share

( 50,992 ) ( 50,992 )

Purchases of common stock for treasury ( 400 ) ( 40,089 ) ( 40,089 )

Treasury shares issued for:

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dollars at current exchange rates, while income and expenses are translated at average exchange rates.

Translation gains and losses are reported in other comprehensive loss in the statements of consolidated comprehensive income.

Gains and losses resulting from transactions denominated in foreign currencies are included in the statements of consolidated income as a component of other income, net.

Translation gains and losses are reported in other comprehensive income (loss) in the statements of consolidated comprehensive income.

Gains and losses resulting from transactions denominated in foreign currencies are included in the statements of consolidated income as a component of other expense (income), net.

The preparation of 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 amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period.

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These are included in other assets in the consolidated balance sheets, are classified as trading securities, and are reported at fair value based on quoted market prices.

Changes in the fair value of the investments during the period are recorded in other income, net in the statements of consolidated income.

Changes in the fair value of the investments during the period are recorded in other expense (income), net in the statements of consolidated income.

Concentration of Credit Risk

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Accounts receivable are stated at their estimated net realizable value and consist of amounts billed or billable and currently due from customers.

The Company maintains an allowance for doubtful accounts, which reflects management’s best estimate of probable losses based on an analysis of customer accounts, known troubled accounts, historical experience with write-offs, and other currently available evidence.

Allowances for Doubtful Accounts

The Company evaluates the collectibility of trade accounts receivable based on a combination of factors.

Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt

This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer pool, and changes in the overall aging of accounts receivable.

Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience.

This initial estimate is adjusted based on recent trends of customers and industries estimated to be greater credit risks, trends within the entire customer

pool, and changes in the overall aging of accounts receivable.

Accounts are written off against the allowance when it becomes evident collection will not occur.

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Share-Based Compensation

Share-based compensation represents the cost related to share-based awards granted to employees under the 2019 Long-Term Performance Plan, the 2015 Long-Term Performance Plan, the 2011 Long-Term Performance Plan, or the 2007 Long-Term Performance Plan.

The Company measures share-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost over the requisite service period.

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The Company partially matches 401(k) contributions by participants.

The Company suspended the 401(k) match starting in the fourth quarter of 2020 and restored it in the third quarter of fiscal 2021.

The Company’s expense for matching of employees’ 401(k) contributions was $ 9,149 , $ 3,945 and $ 5,959 during 2022, 2021 and 2020, respectively.

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The Company recorded net periodic benefit costs associated with the SERP of $ 450 , $ 401 , and $ 317 in fiscal 2022 , 2021 , and 2020, respectively.

The Company expects to make payments of approximately $ 800 under the SERP in fiscal 2022 and 2023, and approximately $ 200 in fiscal 2024.

The Company expects to make payments of approximately $ 800 under the SERP in fiscal 2023 and approximately $ 200 in fiscal 2024.

Key Executive Restoration Plan

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The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, distribution and administrative expense on the statements of consolidated income.

Recently Adopted Accounting Guidance

Accounting for current expected credit losses

In June 2016, the FASB issued its final standard on measurement of credit losses on financial instruments.

This standard, issued as ASU 2016-13, requires that an entity measure impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses.

This update is effective for annual and interim financial statement periods beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018.

In November 2018, April 2019, May 2019, November 2019, and February 2020, the FASB issued ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02, respectively, which clarify the guidance in ASU 2016-13.

The Company adopted the new guidance in the first quarter of fiscal 2021.

The adoption of this guidance did not have a material impact on the Company's financial statements or related disclosures.

Recently Issued Accounting Guidance

In December 2019, the FASB issued its final standard on simplifying the accounting for income taxes.

This standard, issued as ASU 2019-12, makes a number of changes meant to add or clarify guidance on accounting for income taxes.

This update is effective for annual and interim financial statement periods beginning after December 15, 2020, with early adoption permitted in any interim period for which financial statements have not yet been filed.

The Company has determined that this pronouncement will not have a material impact on its financial statements and related disclosures.

REVENUE RECOGNITION

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Industrial Machinery 10.3 % 28.3 % 16.2 %

Food 13.5 % 2.9 % 10.1 %

Metals 11.2 % 7.4 % 9.9 %

Food 12.6 % 2.5 % 9.3 %

Forest Products 10.8 % 2.4 % 8.0 %

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Cement & Aggregate 7.6 % 1.0 % 5.5 %

Transportation 4.6 % 4.8 % 4.7 %

Oil & Gas 5.4 % 1.2 % 4.0 %

Transportation 4.1 % 3.3 % 3.8 %

Total 100.0 % 100.0 % 100.0 %

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Industrial Machinery 9.8 % 26.8 % 15.2 %

Food 12.2 % 3.1 % 9.4 %

Metals 10.5 % 6.8 % 9.3 %

Food 13.5 % 2.9 % 10.1 %

Forest Products 10.7 % 2.9 % 8.2 %

1 unchanged sentence

Cement & Aggregate 7.9 % 1.1 % 5.7 %

Transportation 4.6 % 4.4 % 4.5 %

Oil & Gas 3.9 % 1.1 % 3.0 %

Transportation 4.6 % 4.8 % 4.7 %

Total 100.0 % 100.0 % 100.0 %

3 unchanged sentences

Industrial Machinery 9.7 % 24.4 % 14.3 %

Food 10.6 % 2.7 % 8.3 %

Metals 11.1 % 7.2 % 9.9 %

Food 12.2 % 3.1 % 9.4 %

Forest Products 9.3 % 3.7 % 7.6 %

1 unchanged sentence

Cement & Aggregate 7.3 % 1.0 % 5.4 %

Transportation 4.8 % 3.1 % 4.3 %

Oil & Gas 7.5 % 1.6 % 5.7 %

Transportation 4.6 % 4.4 % 4.5 %

Total 100.0 % 100.0 % 100.0 %

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Fluid Power 12.8 % 37.2 % 20.8 %

Bearings, Linear & Seals 29.0 % 0.4 % 19.8 %

General Maintenance;

Hose Products 20.9 % 18.9 % 20.3 %

Bearings, Linear & Seals 29.2 % 0.4 % 19.8 %

Specialty Flow Control — % 32.9 % 10.7 %

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Fluid Power 13.2 % 38.0 % 21.2 %

Bearings, Linear & Seals 26.6 % 0.3 % 18.5 %

General Maintenance;

Hose Products 20.5 % 16.9 % 19.3 %

Bearings, Linear & Seals 29.0 % 0.4 % 19.8 %

Specialty Flow Control — % 37.2 % 11.9 %

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Fluid Power 13.4 % 39.0 % 21.3 %

Bearings, Linear & Seals 27.5 % 0.3 % 19.5 %

General Maintenance;

Hose Products 24.6 % 11.7 % 20.6 %

Bearings, Linear & Seals 26.6 % 0.3 % 18.5 %

Specialty Flow Control — % 39.5 % 12.2 %

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Fiscal 2022 Acquisitions

On August 18, 2021, the Company acquired substantially all of the net assets of R.R.

Floody Company (Floody), a Rockford, Illinois provider of high technology solutions for advanced factory automation.

Floody is included in the Fluid Power & Flow Control segment.

The purchase price for the acquisition was $ 8,038 , net tangible assets acquired were $ 1,040 , and intangible assets including goodwill were $ 6,998 based upon estimated fair values at the acquisition date.

The purchase price includes $ 1,000 of acquisition holdback payments, which are included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2022, and which will be paid on the first and second anniversaries of the acquisition date with interest at a fixed rate of 2.0 % per annum.

The Company funded this acquisition using available cash.

The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

Fiscal 2021 Acquisitions

On December 31, 2020, the Company acquired 100 % of the outstanding shares of Gibson Engineering (Gibson), a Norwood, Massachusetts provider of automation products, services, and engineered solutions focused on machine vision, motion control, mobile and collaborative robotic solutions, intelligent sensors, and other related equipment.

Gibson is included in the Fluid Power & Flow Control segment.

The purchase price for the acquisition was $ 15,450 , net tangible assets acquired were $ 1,030 , and intangible assets including goodwill were $ 14,420 based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment.

The purchase price includes $ 1,938 of acquisition holdback payments, which are included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2021, and which will be paid on the first and second anniversaries of the acquisition date with interest at a fixed rate of 1.0 % per annum.

The purchase price for the acquisition was $ 15,341 ,

net tangible assets acquired were $ 955 , and intangible assets including goodwill were $ 14,386 based upon estimated fair values at the acquisition date.

The purchase price includes $ 1,904 of acquisition holdback payments, of which $ 935 was paid during the year-ended June 30, 2022.

The remaining balance of $ 969 is included in other current liabilities on the consolidated balance sheet as of June 30, 2022, and will be paid on the second anniversary of the acquisition date with interest at a fixed rate of 1.0 % per annum.

The Company funded this acquisition using available cash.

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The purchase price for the acquisition was $ 36,642 , net tangible assets acquired were $ 9,540 , and

intangible assets including goodwill was $ 27,102 based upon estimated fair values at the acquisition date.

intangible assets including goodwill were $ 27,102 based upon estimated fair values at the acquisition date.

Company funded this acquisition using available cash.

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acquired entity are not material in relation to the Company's consolidated financial statements.

Fiscal 2019 Acquisitions

On March 4, 2019, the Company acquired substantially all of the net assets of MilRoc Distribution (MilRoc) and Woodward Steel (Woodward).

MilRoc is an Oklahoma based distributor of oilfield specific products, namely pumps and valves, as well as equipment repair services and industrial parts to the oil & gas industry.

Woodward is an Oklahoma based steel supplier to the oil & gas and agriculture industries.

MilRoc and Woodward are both included in the Service Center Based Distribution segment.

The purchase price for the acquisition was $ 35,000 , net tangible assets acquired were $ 17,788 , and intangible assets including goodwill was $ 17,212 based upon estimated fair values at the acquisition date.

The purchase price includes $ 4,375 of acquisition holdback payments, of which $ 1,244 and $ 1,666 were paid during fiscal 2021 and 2020, respectively.

The remaining balance of $ 1,465 is included in other current liabilities on the consolidated balance sheet as of June 30, 2021, and which will be paid on the third anniversary of the acquisition date with interest at a fixed rate of 2.0 % per annum.

The Company funded this acquisition using available cash.

The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

On November 2, 2018, the Company acquired substantially all of the net assets of Fluid Power Sales, Inc.

(FPS), a Baldwinsville, New York based manufacturer and distributor of fluid power components, specializing in the engineering and fabrication of manifolds and power units.

FPS is included in the Fluid Power & Flow Control segment.

The purchase price for the acquisition was $ 8,066 , net tangible assets acquired were $ 4,151 , and goodwill was $ 3,915 based upon estimated fair values at the acquisition date.

The purchase price included $ 1,200 of acquisition holdback payments, of which $ 600 was paid during fiscal years 2021 and 2020.

The Company funded this acquisition using available cash.

The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

Holdback Liabilities for Acquisitions

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Balance at July 1, 2020 $ 208,570 $ 332,024 $ 540,594

Goodwill adjusted/acquired during the year ( 3,393 ) 14,667 11,274

Impairment — ( 131,000 ) ( 131,000 )

Goodwill acquired during the year — 15,757 15,757

Other, primarily currency translation 3,726 — 3,726

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The Company has eight ( 8 ) reporting units for which an annual goodwill impairment assessment was performed as of January 1, 2022.

The Company concluded that seven ( 7 ) of the reporting units’ fair values exceeded their carrying amounts by at least 25 % as of January 1, 2021.

The fair value of the final reporting unit, which is comprised of the FCX Performance Inc.

(FCX) operations, exceeded its carrying value by 14 %.

The FCX reporting unit has a goodwill balance of $ 309,012 as of June 30, 2021.

The Company had eight ( 8 ) reporting units for which an annual goodwill impairment assessment was performed as of January 1, 2020.

The Company concluded that seven ( 7 ) of the reporting units’ fair values exceeded their carrying amounts by at least 10 % as of January 1, 2020.

Specifically, the Canada reporting unit's fair value exceeded its carrying value by 12 %, and the Mexico reporting unit's fair value exceeded its carrying value by 14 %.

The carrying value of the final reporting unit, which is comprised of the FCX operations, exceeded the fair value, resulting in goodwill impairment of $ 131,000 .

The non-cash impairment charge was the result of the overall decline in the industrial economy, specifically slower demand in FCX's end markets, which led to reduced spending by customers and reduced revenue expectations.

The Company concluded that all of the reporting units’ fair values exceeded their carrying amounts by at least 25 % as of January 1, 2022.

The fair values of the reporting units in accordance with the goodwill impairment test were determined using the income and market approaches.

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The Company has three asset groups that have significant exposure to oil and gas end markets.

Due to the prolonged economic downturn in these end markets, the Company determined during the second quarter of fiscal 2021 that certain carrying values may not be recoverable.

Due to the economic downturn in these end markets, the Company determined during the second quarter of fiscal 2021 that certain carrying values may not be recoverable.

The Company determined that an impairment existed in two of the three asset groups as the asset groups' carrying values exceeded the sum of the undiscounted cash flows.

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June 30, 2022 2021

Revolving credit facility $ 410,592 $ —

Term Loan — 550,250

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Revolving Credit Facility & Term Loan

In January 2018, the Company refinanced its existing credit facility and entered into a new five-year credit facility with a group of banks expiring in January 2023.

This agreement provides for a $ 780,000 unsecured term loan and a $ 250,000 unsecured revolving credit facility.

Fees on this facility range from 0.10 % to 0.20 % per year based upon the Company's leverage ratio at each quarter end.

Borrowings under this agreement carry variable interest rates tied to either LIBOR or prime at the Company's discretion.

The Company had no amount outstanding under the revolver as of June 30, 2021 and June 30, 2020.

Unused lines under this facility, net of outstanding letters of credit of $ 200 and $ 1,873 , respectively, to secure certain insurance obligations, totaled $ 249,800 and $ 248,127 at June 30, 2021 and June 30, 2020, respectively, and were available to fund future acquisitions or other capital and operating requirements.

The interest rate on the term loan was 1.88 % and 1.94 % as of June 30, 2021 and June 30, 2020, respectively.

Additionally, the Company had letters of credit outstanding with a separate bank, not associated with the revolving

credit agreement, in the amount of $ 4,540 and $ 4,475 as of June 30, 2021 and June 30, 2020, respectively, in

order to secure certain insurance obligations.

In December 2021, the Company entered into a new five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes.

This agreement provides a $ 900,000 unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to $ 500,000 .

Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on net leverage ratio or LIBOR plus a margin that ranges from 80 to 155 basis points based on the net leverage ratio.

Unused lines under this facility, net of outstanding letters of credit of $ 200 to secure certain insurance obligations, totaled $ 489,208 at June 30, 2022, and were available to fund future acquisitions or other capital and operating requirements.

The interest rate on the revolving credit facility was 2.81 % as of June 30, 2022.

The new credit facility replaced the Company's previous credit facility agreement.

The Company used its initial borrowings on the new revolving credit facility along with cash on hand of $ 98,206 to extinguish the term loan balance outstanding under the previous credit facility of $ 540,500 .

The Company had no amount outstanding under the revolver at June 30, 2021.

Unused lines under the previous facility, net of outstanding letters of credit of $ 200 to secure certain insurance obligations, totaled $ 249,800 at June 30, 2021.

The interest rate on the term loan was 1.88 % as of June 30, 2021.

The Company paid $ 1,956 of debt issuance costs related to the new revolving credit facility in the year ended June 30, 2022, which are included in other current assets and other assets on the consolidated balance sheet as of June 30, 2022 and will be amortized over the five-year term of the new credit facility.

The Company analyzed the unamortized debt issuance costs related to the previous credit facility under Accounting Standards Codification (ASC) Topic 470 - Debt.

As a result of this analysis, $ 118 of unamortized debt issuance costs were expensed and included within interest expense on the statements of consolidated income for the year ended June 30, 2022, and $ 540 of unamortized debt issuance costs were rolled forward into the new credit facility and were reclassified from the current portion of long-term debt and long-term debt into other current assets and other assets on the consolidated balance sheet as of June 30, 2022, and will be amortized over the five-year term of the new credit facility.

Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of $ 4,735 and $ 4,540 as of June 30, 2022 and June 30, 2021, respectively, in order to secure certain insurance obligations.

Trade Receivable Securitization Facility

4 unchanged sentences

operations’ trade accounts receivable.

The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.

uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.

Borrowings under this facility carry variable interest rates tied to LIBOR.

The interest rate on the AR Securitization Facility as of June 30, 2022 and June 30, 2021 was 2.60 % and 1.20 %, respectively.

The termination date of the AR Securitization is now March 26, 2024.

The new termination date of the AR Securitization Facility is March 26, 2024.

Unsecured Shelf Facility

At June 30, 2021 and June 30, 2020, the Company had borrowings outstanding under its unsecured shelf facility agreement with Prudential Investment Management of $ 90,000 and $ 170,000 , respectively.

At June 30, 2022 and June 30, 2021, the Company had borrowings outstanding under its unsecured shelf facility agreement with Prudential Investment Management of $ 90,000 .

Fees on this facility range from 0.25 % to 1.25 % per year based on the Company's leverage ratio at each quarter end.

The "Series C" notes, which had an original principal amount of $ 120,000 , carry a fixed interest rate of 3.19 %.

During Fiscal 2021, two principal payments of $ 40,000 each were made on the "Series C" notes and the remaining balance of $ 40,000 is due in July 2022.

The "Series C" notes carry a fixed interest rate of 3.19 %, and the re maining balance of $ 40,000 was paid in July 2022.

The "Series D" notes have a remaining principal amount of $ 25,000 , carry a fixed interest rate of 3.21 %, and are due in October 2023.

2 unchanged sentences

In 2014, the Company assumed $ 2,359 of debt as a part of the headquarters facility acquisition.

The 1.50 % fixed interest rate note is held by the State of Ohio Development Services Agency, maturing in May 2024.

The 1.50 % fixed interest rate note is held by the State of Ohio Development Services Agency and matures in November 2024.

The table below summarizes the aggregate maturities of amounts outstanding under long-term borrowing arrangements for each of the next five years:

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For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

Amounts reported in accumulated other

comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

In January 2019, the Company entered into an interest rate swap to mitigate variability in forecasted interest payments on $ 463,000 of the Company’s U.S.

3 unchanged sentences

During the quarter ended December 31, 2020, the Company completed a transaction to amend and extend the interest rate swap agreement which resulted in an extension of the maturity date by an additional three years and a decrease of the weighted average fixed pay rate from 2.61 % to 1.63 %.

The new pay-fixed interest rate swap is considered a hybrid instrument with a financing component and an embedded at-market derivative that was designated as a cash flow hedge.

The pay-fixed interest rate swap is considered a hybrid instrument with a financing component and an embedded at-market derivative that was designated as a cash flow hedge.

The interest rate swap converts $ 409,000 of variable rate debt to a rate of 2.75 % as of June 30, 2022.

The interest rate swap converted $ 420,000 of variable rate debt to a rate of 3.38 % as of June 30, 2021.

The fair value (Level 2 in the fair value hierarchy) of the interest rate cash flow hedge was $ 14,346 and $ 26,179 as of June 30, 2021 and June 30, 2020, respectively, which is included in other current liabilities and other liabilities in the consolidated balance sheet.

Amounts reclassified from other comprehensive income (loss), before tax to interest expense, net totaled $ 11,553 and $ 4,638 for the years ended June 30, 2021 and 2020, respectively.

The fair value (Level 2 in the fair value hierarchy) of the interest rate cash flow hedge was $ 17,827 as of June 30, 2022, which is included in other current assets and other assets in the consolidated balance sheet.

The fair value (Level 2 in the fair value hierarchy) of the interest rate cash flow hedge was $ 14,346 as of June 30, 2021, which is included in other current liabilities and other liabilities in the consolidated balance sheet.

Amounts reclassified from other comprehensive income (loss), before tax to interest expense totaled $ 11,361 and $ 11,553 for the years ended June 30, 2022 and 2021, respectively.

FAIR VALUE MEASUREMENTS

3 unchanged sentences

As of June 30, 2022, the carrying value of the Company's fixed interest rate debt outstanding under its unsecured shelf facility agreement with Prudential Investment Management approximates fair value (Level 2 in the fair value hierarchy).

The revolving credit facility and the term loan contain variable interest rates and their carrying values approximate fair value (Level 2 in the fair value hierarchy).

The revolving credit facility contains variable interest rates and its carrying value approximates fair value (Level 2 in the fair value hierarchy).

Income Before Income Taxes

4 unchanged sentences

Income before income taxes $ 329,790 $ 177,062 $ 55,236

The provision (benefit) for income taxes consists of:

The provision for income taxes consists of:

Year Ended June 30, 2022 2021 2020

47 unchanged sentences

Leases ( 26,509 ) ( 22,475 )

Hedging instrument ( 6,446 ) —

Depreciation and differences in property bases ( 9,760 ) ( 6,214 )

11 unchanged sentences

The realization of these deferred tax assets can be impacted by changes to tax laws, statutory tax rates and future income levels.

During the years ended June 30, 2021 and 2020, the Company recorded a valuation allowance of $ 267 and $ 2,124 , respectively, related to certain deferred tax assets in Canada due to the uncertainty in realizing these net deferred tax assets.

The Company evaluates the realization of its deferred tax assets each quarter throughout the year.

D uring the years ended June 30, 2022 and 2021, the Company released a valuation allowance of $ 2,270 and recorded a valuation allowance of $ 267 , respectively, related to certain deferred tax assets in Canada.

The total valuation allowance provided against the deferred tax assets in Canada is $ 6,228 and $ 8,498 as of June 30, 2022 and 2021, respectively.

17 unchanged sentences

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes.

During 2021, 2020, and 2019, the Company recognized $ 144 , $ 256 , and $ 161 of expense, respectively, for interest and penalties related to unrecognized income tax benefits in its statements of consolidated income.

During 2022, 2021, and 2020, the Company recognized $( 362 ), $ 144 , and $ 256 of (income) expense, respectively, for interest and penalties related to unrecognized income tax benefits in its statements of consolidated income.

The Company had a liability for penalties and interest of $ 876 , $ 1,238 , and $ 1,094 as of June 30, 2022, 2021, and 2020, respectively.

10 unchanged sentences

Changes in the accumulated other comprehensive loss for the years ended June 30, 2022, 2021, and 2020, are comprised of the following amounts, shown net of taxes:

Foreign currency translation adjustment Unrealized gain (loss) on securities available for sale Post-employment benefits Cash flow hedge Total accumulated other comprehensive loss

Foreign currency translation adjustment Post-employment benefits Cash flow hedge Total accumulated other comprehensive loss

Balance at July 1, 2019 $ ( 86,330 ) $ ( 2,852 ) $ ( 10,704 ) $ ( 99,886 )

Other comprehensive income (loss) 1,644 — ( 327 ) ( 10,887 ) ( 9,570 )

Amounts reclassified from accumulated other comprehensive loss — — ( 226 ) 183 ( 43 )

Cumulative effect of adopting accounting standards — ( 50 ) — — ( 50 )

Net current-period other comprehensive income (loss) 1,644 ( 50 ) ( 553 ) ( 10,704 ) ( 9,663 )

Balance at June 30, 2019 ( 86,330 ) — ( 2,852 ) ( 10,704 ) ( 99,886 )

Other comprehensive loss ( 18,764 ) ( 1,662 ) ( 12,572 ) ( 32,998 )

6 unchanged sentences

Balance at June 30, 2021 ( 80,838 ) ( 3,673 ) ( 8,581 ) ( 93,092 )

Other Comprehensive Loss

Details of other comprehensive loss are as follows:

Other comprehensive (loss) income ( 9,900 ) 2,142 19,770 12,012

Amounts reclassified from accumulated other comprehensive loss — 228 8,557 8,785

Net current-period other comprehensive (loss) income ( 9,900 ) 2,370 28,327 20,797

Balance at June 30, 2022 $ ( 90,738 ) $ ( 1,303 ) $ 19,746 $ ( 72,295 )

Other Comprehensive Income (Loss)

Details of other comprehensive income (loss) are as follows:

Year Ended June 30, 2022 2021 2020

Pre-Tax Amount Tax Expense Net Amount Pre-Tax Amount Tax Expense (Benefit) Net Amount Pre-Tax Amount Tax Expense (Benefit) Net Amount

Pre-Tax Amount Tax Expense Net Amount Pre-Tax Amount Tax Expense Net Amount Pre-Tax Amount Tax Expense (Benefit) Net Amount

Foreign currency translation adjustments

2 unchanged sentences

Actuarial gain (loss) on re-measurement 2,839 697 2,142 903 216 687 ( 2,192 ) ( 530 ) ( 1,662 )

Reclassification of actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs 270 66 204 ( 66 ) ( 16 ) ( 50 ) ( 306 ) ( 80 ) ( 226 )

Reclassification of actuarial losses (gains) and prior service cost into other expense (income), net and included in net periodic pension costs 300 72 228 270 66 204 ( 66 ) ( 16 ) ( 50 )

Unrealized gain (loss) on cash flow hedge 26,204 6,434 19,770 3,250 770 2,480 ( 16,615 ) ( 4,043 ) ( 12,572 )

1 unchanged sentence

11,361 2,804 8,557 11,553 2,842 8,711 4,638 1,134 3,504

Cumulative effect of adopting accounting standard

— — — — — — ( 50 ) — ( 50 )

Other comprehensive loss

$ 40,328 $ 3,990 $ 36,338 $ ( 32,734 ) $ ( 3,190 ) $ ( 29,544 ) $ ( 12,909 ) $ ( 3,246 ) $ ( 9,663 )

Other comprehensive income (loss) $ 30,842 $ 10,045 $ 20,797 $ 40,328 $ 3,990 $ 36,338 $ ( 32,734 ) $ ( 3,190 ) $ ( 29,544 )

Net Income Per Share

19 unchanged sentences

Following approval by the Company's shareholders in October 2019, the 2019 Long-Term Performance Plan (the "2019 Plan") replaced the 2015 Long-Term Performance Plan.

The 2019 Plan, which expires in 2024, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or, in the case of director awards, the Corporate Governance Committee of the Board of Directors (together referred to as the Committee) may determine to officers, other key employees and members of the Board of Directors.

The 2019 Plan, which expires in 2024, provides for granting of SARs, stock options, stock awards, cash awards, and such other awards or combination thereof as the Executive Organization and Compensation Committee or, in the case of director awards, the Corporate Governance & Sustainability Committee of the Board of Directors (together referred to as the Committee) may determine to officers, other key employees and members of the Board of Directors.

Grants are generally made at regularly scheduled committee meetings.

Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs, stock options, performance shares, restricted stock, and RSUs) are summarized in the table below:

Compensation costs charged to expense under award programs paid (or to be paid) with shares (including SARs, performance shares, restricted stock, and RSUs) are summarized in the table below:

Year Ended June 30, 2022 2021 2020

SARs and options $ 2,526 $ 2,954 $ 2,440

SARs $ 3,284 $ 2,526 $ 2,954

Performance shares 4,549 2,494 854

6 unchanged sentences

June 30, 2022 Average Expected Period of Expected Recognition (Years)

SARs and options $ 2,848 2.1

SARs $ 2,204 2.4

Performance shares 5,531 1.7

5 unchanged sentences

Stock Appreciation Rights and Stock Options

The weighted-average assumptions used for SARs and stock option grants issued in fiscal 2021, 2020

and 2019 are:

The weighted-average assumptions used for SARs grants issued in fiscal 2022, 2021 and 2020 are:

2022 2021 2020

6 unchanged sentences

The risk free interest rate is based upon U.S.

Treasury zero-coupon bonds with remaining terms equal to the expected life of the SARs and stock options.

Treasury zero-coupon bonds with remaining terms equal to the expected life of the SARs.

The assumed dividend yield has been estimated based upon the Company’s historical results and expectations for changes in dividends and stock prices.

34 unchanged sentences

Restricted Stock and Restricted Stock Units

Restricted stock award recipients are entitled to receive dividends on, and have voting rights with respect to their respective shares, but are restricted from selling or transferring the shares prior to vesting.

Under the 2019 Plan, restricted stock award recipients have voting rights with respect to their shares, but are restricted from selling or transferring the shares prior to vesting;

dividends are accrued and paid upon vesting.

Restricted stock awards vest over periods of one to four years.

RSUs are grants valued in shares of Applied stock, but shares are not issued until the grants vest three to five years from the award date, assuming continued employment with Applied;

Applied primarily pays dividend equivalents on RSUs on a current basis, however dividend equivalents on RSU grants under the 2019 Plan will be paid upon vesting.

dividend equivalents on RSUs are accrued and paid upon vesting.

A summary of the status of the Company’s non-vested restricted stock and RSUs at June 30, 2022 is presented below:

73 unchanged sentences

Impairment — Service Center Based Distribution — 49,528 —

Goodwill Impairment — Fluid Power & Flow Control — 131,000 —

Impairment — Fluid Power & Flow Control — — 131,000

Corporate and other expense, net 68,788 57,642 59,972

1 unchanged sentence

Interest expense, net 26,263 30,592 36,535

Other income, net ( 2,200 ) ( 2,782 ) ( 881 )

Other expense (income), net 1,805 ( 2,200 ) ( 2,782 )

Income before income taxes $ 329,790 $ 177,062 $ 55,236

13 unchanged sentences

Based on circumstances currently known, the Company does not expect that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

OTHER INCOME, NET

Other income, net, consists of the following:

OTHER EXPENSE (INCOME), NET

Other expense (income), net, consists of the following:

Year Ended June 30, 2022 2021 2020

Unrealized gain on assets held in rabbi trust for a non-qualified deferred compensation plan

$ ( 4,048 ) $ ( 458 ) $ ( 689 )

Foreign currency transaction losses (gains) 2,091 ( 2,463 ) 334

Unrealized loss (gain) on assets held in rabbi trust for a non-qualified deferred compensation plan $ 2,612 $ ( 4,048 ) $ ( 458 )

Foreign currency transaction (gains) losses ( 65 ) 2,091 ( 2,463 )

Net other periodic post-employment costs (benefits) 610 283 ( 120 )

1 unchanged sentence

Other, net 22 ( 230 ) 26

Total other income, net $ ( 2,200 ) $ ( 2,782 ) $ ( 881 )

Total other expense (income), net $ 1,805 $ ( 2,200 ) $ ( 2,782 )

SUBSEQUENT EVENTS

3 unchanged sentences

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 8. Financial Statements and Supplementary Data