APPLIED INDUSTRIAL TECHNOLOGIES INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Applied Industrial Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Applied Industrial Technologies, Inc. and subsidiaries (the "Company") as of June 30, 2026 and June 30, 2025, the related statements of consolidated income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended June 30, 2026, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2026 and June 30, 2025, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2026, in conformity with accounting principles generally accepted in the United States of America. 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, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 13, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. 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 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill - A reporting unit within the Engineered Solutions segment - Refer to Notes 1 and 5 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using the income and market approaches. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA), and discount rates. 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 fair value of all reporting units exceeded their carrying value as of the measurement date and, therefore, no impairment was recognized. Given the nature of operations for one reporting unit within the Engineered Solutions segment, the sensitivity of this reporting unit to changes in the economy, this 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 30 Table of Contents management’s forecasted revenues and EBITDA estimates for this 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 this reporting unit included the following, among others: • We tested the design, implementation, and operating 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. • We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s forecasts by comparing the current forecasts to (1) historical results, (2) internal communications to management and the Board of Directors at the reporting unit level and/or at a consolidated level, and (3) forecasted information included in industry reports for the various industries the reporting unit operates within. • With the assistance of our fair value specialists, we evaluated the discount rate and the long-term rate of return, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management. • With the assistance of our fair value specialists, we evaluated the market multiples by evaluating the selected comparable publicly traded companies and the adjustments made for differences in growth prospects and risk profiles between the reporting unit and the comparable publicly traded companies. We tested the underlying source information and mathematical accuracy of the calculations. Inventory - Refer to Notes 1 and 4 to the financial statements Critical Audit Matter Description As of June 30, 2026 , the Company holds inventory across a large number of locations, including distribution centers, service centers, repair shops and engineered solutions operations. The Company’s processes to track and determine consolidated inventory relies on a perpetual inventory system that varies by location based in part upon the information technology (IT) system relevant to the location. Auditing the existence of inventory requires significant effort and auditor judgment in testing due to the disaggregation of inventory across the locations and the processes and controls in place. Judgment relates to assessing whether we have obtained sufficient audit evidence, including determining the number of locations to visit. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the existence of inventory included the following, among others: • With the assistance of our IT specialists, we tested the design, implementation, and operating effectiveness of controls over management’s process to account for the physical existence of inventory, which included general IT controls as well as automated and manual business process controls. • We involved senior team members to determine the extent and number of location counts to test. • As part of our testing of the design, implementation, and operating effectiveness of controls and of inventory, we observed management’s count procedures at certain locations and obtained and evaluated management’s audit evidence over counts at certain locations. • We performed independent test counts at certain locations as of year-end. • We investigated any identified variations in inventory counts performed and considered the impact in the context of the inventory balance as a whole. /s/ DELOITTE & TOUCHE LLP Cleveland, Ohio August 13, 2026 We have served as the Company's auditor since 1966. 31 Table of Contents STATEMENTS OF CONSOLIDATED INCOME (In thousands, except per share amounts) Year Ended June 30, 2026 2025 2024 Net sales $ 4,966,686 $ 4,563,424 $ 4,479,406 Cost of sales 3,459,901 3,180,265 3,142,753 Gross profit 1,506,785 1,383,159 1,336,653 Selling, distribution, and administrative expense, including depreciation 957,316 884,630 840,830 Operating income 549,469 498,529 495,823 Interest expense 17,386 18,214 20,544 Interest income ( 9,448 ) ( 17,602 ) ( 17,713 ) Other income, net ( 2,743 ) ( 3,050 ) ( 5,138 ) Income before income taxes 544,274 500,967 498,130 Income tax expense 129,749 107,979 112,368 Net income $ 414,525 $ 392,988 $ 385,762 Net income per share — basic $ 11.09 $ 10.26 $ 9.98 Net income per share — diluted $ 10.95 $ 10.12 $ 9.83 See notes to consolidated financial statements. 32 Table of Contents STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (In thousands) Year Ended June 30, 2026 2025 2024 Net income per the statements of consolidated income $ 414,525 $ 392,988 $ 385,762 Other comprehensive loss, before tax: Foreign currency translation adjustments 2,740 ( 1,655 ) ( 12,544 ) Post-employment benefits: Actuarial gain (loss) on re-measurement 117 ( 42 ) ( 134 ) Reclassification of net actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs 7 ( 25 ) ( 117 ) Unrealized gain (loss) on cash flow hedge 262 ( 357 ) 5,958 Reclassification of interest from cash flow hedge into interest expense ( 8,141 ) ( 16,124 ) ( 18,683 ) Total other comprehensive loss, before tax ( 5,015 ) ( 18,203 ) ( 25,520 ) Income tax benefit related to items of other comprehensive income ( 1,905 ) ( 4,083 ) ( 3,250 ) Other comprehensive loss, net of tax ( 3,110 ) ( 14,120 ) ( 22,270 ) Comprehensive income $ 411,415 $ 378,868 $ 363,492 See notes to consolidated financial statements. 33 Table of Contents CONSOLIDATED BALANCE SHEETS (In thousands) June 30, 2026 2025 Assets Current assets Cash and cash equivalents $ 127,130 $ 388,417 Accounts receivable — net 831,244 769,699 Inventories 508,979 505,337 Other current assets 111,376 84,020 Total current assets 1,578,729 1,747,473 Property — at cost Land 13,900 14,083 Buildings 116,881 116,733 Equipment 266,280 253,354 Total property — at cost 397,061 384,170 Less accumulated depreciation 265,410 256,016 Property — net 131,651 128,154 Operating lease assets — net 213,199 188,654 Identifiable intangibles — net 312,814 348,600 Goodwill 704,700 699,374 Other assets 68,880 63,289 Total Assets $ 3,009,973 $ 3,175,544 Liabilities Current liabilities Accounts payable $ 341,094 $ 280,124 Compensation and related benefits 109,060 99,630 Other current liabilities 162,257 146,397 Total current liabilities 612,411 526,151 Long-term debt 262,300 572,300 Other liabilities 273,513 232,573 Total Liabilities 1,148,224 1,331,024 Shareholders’ Equity Preferred stock — no par value; 2,500 shares authorized; none issued or outstanding — — Common stock — no par value; 80,000 shares authorized; 54,213 shares issued; 36,803 and 37,868 shares outstanding, respectively 10,000 10,000 Additional paid-in capital 204,606 198,970 Retained earnings 2,788,709 2,447,931 Treasury shares — at cost ( 17,411 and 16,345 shares, respectively) ( 1,046,770 ) ( 720,695 ) Accumulated other comprehensive loss ( 94,796 ) ( 91,686 ) Total Shareholders’ Equity 1,861,749 1,844,520 Total Liabilities and Shareholders’ Equity $ 3,009,973 $ 3,175,544 See notes to consolidated financial statements. 34 Table of Contents STATEMENTS OF CONSOLIDATED CASH FLOWS (In thousands) Year Ended June 30, 2026 2025 2024 Cash Flows from Operating Activities Net income $ 414,525 $ 392,988 $ 385,762 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property 25,875 24,899 23,431 Amortization of intangibles 40,072 35,581 28,923 Deferred income taxes 26,264 ( 6,362 ) ( 1,074 ) Provision for losses on (recoveries of) accounts receivable 4,613 5,978 ( 205 ) Amortization of stock appreciation rights 5,519 4,713 3,448 Other share-based compensation expense 7,385 7,289 9,496 Other ( 1,267 ) 373 ( 1,309 ) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ( 66,422 ) ( 4,918 ) ( 1,925 ) Inventories ( 899 ) 29,181 18,387 Other operating assets ( 48,454 ) ( 11,448 ) ( 25,897 ) Accounts payable 56,886 2,169 ( 39,272 ) Other operating liabilities 19,985 11,942 ( 28,372 ) Cash provided by Operating Activities 484,082 492,385 371,393 Cash Flows from Investing Activities Cash paid for acquisition of businesses, net of cash acquired ( 11,424 ) ( 293,406 ) ( 72,090 ) Capital expenditures ( 23,565 ) ( 27,187 ) ( 24,864 ) Proceeds from property sales 1,090 1,841 576 Life insurance proceeds — — 971 Cash used in Investing Activities ( 33,899 ) ( 318,752 ) ( 95,407 ) Cash Flows from Financing Activities Repayments under revolving credit facility ( 310,000 ) — — Borrowings under revolving credit facility — — 408 Long-term debt repayments — ( 25,106 ) ( 25,251 ) Interest rate swap settlement receipts 5,765 12,095 14,470 Payment of debt issuance costs ( 1,611 ) — — Purchases of treasury shares ( 317,218 ) ( 152,837 ) ( 73,388 ) Dividends paid ( 72,598 ) ( 63,702 ) ( 55,879 ) Acquisition holdback payments ( 1,390 ) ( 1,210 ) ( 681 ) Exercise of stock appreciation rights and options — — 127 Taxes paid for shares withheld ( 14,487 ) ( 14,847 ) ( 16,274 ) Cash used in Financing Activities ( 711,539 ) ( 245,607 ) ( 156,468 ) Effect of exchange rate changes on cash 69 ( 226 ) ( 2,937 ) (Decrease) increase in cash and cash equivalents ( 261,287 ) ( 72,200 ) 116,581 Cash and cash equivalents at beginning of year 388,417 460,617 344,036 Cash and Cash Equivalents at End of Year $ 127,130 $ 388,417 $ 460,617 Supplemental Cash Flow Information Cash paid during the year for: Interest (includes interest rate swap settlements) 18,954 21,826 23,978 See notes to consolidated financial statements. 35 Table of Contents STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (In thousands) For the Years Ended June 30, 2026, 2025 and 2024 Shares of Common Stock Outstanding Common Stock Additional Paid-In Capital Retained Earnings Treasury Shares- at Cost Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at June 30, 2023 38,657 $ 10,000 $ 188,646 $ 1,792,632 $ ( 477,545 ) $ ( 55,296 ) $ 1,458,437 Net income 385,762 385,762 Other comprehensive loss ( 22,270 ) ( 22,270 ) Cash dividends — $ 1.44 per share ( 56,560 ) ( 56,560 ) Purchases of common stock for treasury ( 398 ) ( 73,388 ) ( 73,388 ) Treasury shares issued for: Exercise of stock appreciation rights and options 73 ( 3,611 ) ( 3,886 ) ( 7,497 ) Performance share awards 54 ( 3,072 ) ( 3,487 ) ( 6,559 ) Restricted stock units 16 ( 905 ) ( 1,108 ) ( 2,013 ) Compensation expense — stock appreciation rights 3,448 3,448 Other share-based compensation expense 9,496 9,496 Other 7 ( 224 ) 4 145 ( 75 ) Balance at June 30, 2024 38,409 10,000 193,778 2,121,838 ( 559,269 ) ( 77,566 ) 1,688,781 Net income 392,988 392,988 Other comprehensive loss ( 14,120 ) ( 14,120 ) Cash dividends — $ 1.66 per share ( 66,910 ) ( 66,910 ) Purchases of common stock for treasury ( 656 ) ( 153,390 ) ( 153,390 ) Treasury shares issued for: Exercise of stock appreciation rights and options 36 ( 2,110 ) ( 2,710 ) ( 4,820 ) Performance share awards 34 ( 2,213 ) ( 3,294 ) ( 5,507 ) Restricted stock units 41 ( 2,301 ) ( 2,116 ) ( 4,417 ) Compensation expense — stock appreciation rights 4,713 4,713 Other share-based compensation expense 7,289 7,289 Other 4 ( 186 ) 15 84 ( 87 ) Balance at June 30, 2025 37,868 10,000 198,970 2,447,931 ( 720,695 ) ( 91,686 ) 1,844,520 Net income 414,525 414,525 Other comprehensive loss ( 3,110 ) ( 3,110 ) Cash dividends — $ 1.99 per share ( 73,948 ) ( 73,948 ) Purchases of common stock for treasury ( 1,163 ) ( 318,848 ) ( 318,848 ) Treasury shares issued for: Exercise of stock appreciation rights and options 55 ( 4,043 ) ( 3,237 ) ( 7,280 ) Performance share awards 25 ( 1,942 ) ( 2,905 ) ( 4,847 ) Restricted stock units 19 ( 1,283 ) ( 905 ) ( 2,188 ) Compensation expense — stock appreciation rights 5,519 5,519 Other share-based compensation expense 7,385 7,385 Other ( 1 ) 201 ( 180 ) 21 Balance at June 30, 2026 36,803 $ 10,000 $ 204,606 $ 2,788,709 $ ( 1,046,770 ) $ ( 94,796 ) $ 1,861,749 See notes to consolidated financial statements. 36 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) NOTE 1: BUSINESS AND ACCOUNTING POLICIES Business Applied Industrial Technologies, Inc. and subsidiaries (the “Company,” “Applied,” "us," "we," or "our") is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies and related maintenance supplies. We market our products with a set of service solutions including inventory management, engineering, design, assembly, repair, and systems integration, as well as customized mechanical, fabricated rubber, and shop services. Our customers use our products and services for both Maintenance, Repair, and Operations ("MRO"), Original Equipment Manufacturing ("OEM"), and new system installation applications across a variety of end markets primarily in North America, as well as Australia, New Zealand, and Singapore. The Company operates on a fiscal year ending June 30. Consolidation The consolidated financial statements include the accounts of Applied and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Foreign Currency The local currency of foreign operations is generally considered to be their functional currency. Assets and liabilities are translated into U.S. 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) income 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. Estimates 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. Actual results may differ from the estimates and assumptions used in preparing the consolidated financial statements. Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. Marketable Securities The primary marketable security investments of the Company include money market and mutual funds held in a rabbi trust for a non-qualified deferred compensation plan. 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. Concentration of Credit Risk The Company has a broad customer base representing many diverse industries across North America, Australia, New Zealand, and Singapore. As such, the Company does not believe that a significant concentration of credit risk exists in its accounts receivable. The Company’s cash and cash equivalents consist of deposits with commercial banks and regulated non-bank subsidiaries. While the Company monitors the creditworthiness of these institutions, a crisis in the financial systems could limit access to funds and/or result in the loss of principal. The terms of these deposits and investments provide that all monies are available to the Company upon demand. Accounts Receivable Accounts receivable are stated at their estimated net realizable value and consist of amounts billed or billable and currently due from customers. Allowances for Doubtful Accounts 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. 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 37 Table of Contents 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. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. The allowance for doubtful accounts was $ 15,455 and $ 16,462 at June 30, 2026 and 2025, respectively. Inventories Inventories are valued at average cost, using the last-in, first-out ("LIFO") method for U.S. inventories and the average cost method for foreign inventories. At June 30, 2026, approximately 13.2 % of the Co mpany’s domestic inventory dollars relate to LIFO layers added in the 1970s. The Company maintains five LIFO pools based on the following product groupings: bearings, power transmission products, rubber products, fluid power products, and other products. LIFO layers and/or liquidations are determined consistently year-to-year. The Company evaluates the recoverability of its slow moving and inactive inventories at least quarterly. The Company estimates the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, the physical condition of the inventory, as well as assumptions regarding future demand. The Company’s ability to recover its cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand, and relationships with suppliers. Historically, the Company’s inventories have demonstrated long shelf lives, are not highly susceptible to obsolescence, and, in certain instances, can be eligible for return under supplier return programs. Supplier Purchasing Programs The Company enters into agreements with certain suppliers providing inventory purchase incentives. The Company’s inventory purchase incentive arrangements are unique to each supplier and are generally annual programs ending at either the Company’s year end or the supplier’s year end; however, program length and ending dates can vary. Incentives are received in the form of cash or credits against purchases upon attainment of specified purchase volumes and are received either monthly, quarterly, or annually. The incentives are generally a specified percentage of the Company’s net purchases based upon achieving specific purchasing volume levels. These percentages can increase or decrease based on changes in the volume of purchases. The Company accrues for the receipt of these inventory purchase incentives based upon cumulative purchases of inventory. The percentage level utilized is based upon the estimated total volume of purchases expected during the life of the program. Supplier programs are analyzed each quarter to determine the appropriateness of the amount of purchase incentives accrued. Upon program completion, differences between estimates and actual incentives subsequently received have not been material. Benefits under these supplier purchasing programs are recognized under the Company’s inventory accounting methods as a reduction of cost of sales when the inventories representing these purchases are recorded as cost of sales. Accrued incentives expected to be settled as a credit against future purchases are reported on the consolidated balance sheets as an offset to amounts due to the related supplier. Property and Related Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is included in selling, distribution, and administrative expense in the accompanying statements of consolidated income. Buildings, building improvements and leasehold improvements are depreciated over ten to thirty years or the life of the lease if a shorter period, and equipment is depreciated over three to ten years . The Company capitalizes internal use software development costs in accordance with guidance on accounting for costs of computer software developed or obtained for internal use. Amortization of software begins when it is ready for its intended use and is computed on a straight-line basis over the estimated useful life of the software, generally not to exceed twelve years . Capitalized software and hardware costs are classified as property on the consolidated balance sheets. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the asset group's recorded value cannot be recovered from undiscounted future cash flows. Impairment losses, if any, would be measured based upon the difference between the carrying amount of an asset group and its fair value. Goodwill and Intangible Assets Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized. Goodwill is reviewed for impairment annually as of January 1 or whenever changes in conditions indicate an evaluation should be completed. These conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. The Company utilizes the income and market approaches to determine the fair value of reporting units. Evaluating impairment requires significant judgment by management, including estimated future operating results, estimated future cash flows, the long-term rate of growth of the 38 Table of Contents business, and determination of an appropriate discount rate. While the Company uses available information to prepare the estimates and evaluations, actual results could differ significantly. The Company recognizes acquired identifiable intangible assets such as customer relationships, trade names, vendor relationships, and non-competition agreements apart from goodwill. Customer relationship identifiable intangibles are amortized using the sum-of-the-years-digits method or the expected cash flow method over estimated useful lives consistent with assumptions used in the determination of their value. Amortization of all other finite-lived identifiable intangible assets is computed using the straight-line method over the estimated period of benefit. Amortization of identifiable intangible assets is included in selling, distribution, and administrative expense in the accompanying statements of consolidated income. Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model. Identifiable intangible assets with indefinite lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be completed. The Company does not currently have any indefinite-lived identifiable intangible assets. Self-Insurance Liabilities The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, business, automobile, general product liability and other claims. The Company accrues estimated losses including those incurred but not reported using actuarial calculations, models, and assumptions based on historical loss experience. The Company also maintains a self-insured health benefits plan which provides medical benefits to U.S. based employees electing coverage under the plan. The Company estimates its reserve for all unpaid medical claims, including those incurred but not reported, based on historical experience, adjusted as necessary based upon management’s reasoned judgment. Revenue Recognition The Company primarily sells purchased products distributed through its network of service centers and other facilities, and recognizes revenue at a point in time when control of the product transfers to the customer, typically upon shipment from an Applied facility or directly from a supplier. For products that ship directly from suppliers to customers, Applied generally acts as the principal in the transaction and recognizes revenue on a gross basis. Revenue recognized over time is not significant. Revenue is measured as the amount of consideration expected to be received in exchange for the products and services provided, net of allowances for product returns, variable consideration, and any taxes collected from customers that will be remitted to governmental authorities. Shipping and handling costs are recognized in net sales when they are billed to the customer. The Company has elected to account for shipping and handling activities as fulfillment costs. There are no significant costs associated with obtaining customer contracts. Payment terms with customers vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. Depending on the terms of the contracts with certain customers, the Company may receive payments from customers before the goods or services are delivered, typically as down payments for products to be delivered in the future. These amounts are recorded as contract liabilities (deferred revenue), included in other current liabilities on the consolidated balance sheet as the performance obligations have not yet been satisfied. Revenue is recognized when the Company satisfies its performance obligation by delivering the products to the customer. The Company’s contract assets consist of unbilled amounts resulting from contracts for which revenue is recognized over time using the cost-to-cost method, and for which revenue recognized exceeds the amount billed to the customer. Contract assets are included in other current assets on the consolidated balance sheet. The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits, or rebates. Product returns are estimated based on historical return rates. The product returns reserve was $ 12,230 and $ 10,869 at June 30, 2026 and 2025, respectively. The Company estimates and recognizes variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services 39 Table of Contents to a customer. The Company records variable consideration as an adjustment to the transaction price in the period it is incurred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. Shipping and Handling Costs The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution, and administrative expense in the accompanying statements of consolidated income. Internal delivery costs in selling, distribution, and administrative expense were approximately $ 21,850 , $ 26,440 , and $ 24,620 during 2026, 2025, and 2024, respectively. Income Taxes Income taxes are determined based upon income and expenses recorded for financial reporting purposes. Deferred income taxes are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes, giving consideration to enacted tax laws. The impact of uncertain tax positions are recognized in the provision for income taxes if that position is more-likely-than-not to be sustained upon examination by a taxing authority based upon the merits o f the position. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in the provision for income taxes. Income tax effects resulting from adjusting temporary differences recorded in accumulated other comprehensive loss are released when the circumstances on which they are based cease to exist. Share-Based Compensation Share-based compensation represents the cost related to share-based awards granted to employees under the Company's 2023 Long-Term Performance Plan or the 2019 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. Stock appreciation rights ("SARs") are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant and the fair values are determined using a Black-Scholes-Merton option pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate, and the expected dividend yield. SARs vest ratably over four years of continuous service and have ten-year contractual terms. The fair value of restricted stock awards ("RSAs"), restricted stock units ("RSUs"), and performance shares are based on the closing market price of Company common stock on the grant date. Treasury Shares Shares of common stock repurchased by the Company are recorded at cost as treasury shares and result in a reduction of shareholders’ equity in the consolidated balance sheets. The Company uses the weighted-average cost method for determining the cost of shares reissued. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital. In accordance with the Inflation Reduction Act of 2022, as amended, the Company is subject to a 1% excise tax on the net repurchase of its stock, which is recorded as a direct cost of the transaction in the period of repurchase. Derivatives The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. 40 Table of Contents Retirement Savings Plan Substantially all U.S. employees participate in the Applied Industrial Technologies, Inc. Retirement Savings Plan, a 401(k) plan. Participants may elect 401(k) contributions of up to 50 % of their compensation, subject to maximums set forth in the Internal Revenue Code of 1986, as amended. The Company partially matches 401(k) contributions by participants. The Company’s expense for matching of employees’ 401(k) contributions was $ 11,218 , $ 6,177 and $ 9,670 during 2026, 2025 and 2024, respectively. Deferred Compensation Plans The Company maintains deferred compensation plans that enable certain employees of the Company to defer receipt of a portion of their compensation. Rabbi trusts have been established to hold and provide a measure of security for investments that fund benefits payments under these plans. Assets held in these rabbi trusts consist of investments in money market and mutual funds and Company common stock. Post-employment Benefit Plans The Company provides the following post-employment benefits which, except for the Qualified Defined Benefit Retirement Plan and Key Executive Restoration Plan, are unfunded: Supplemental Executive Retirement Benefits Plan The Company has a non-qualified pension plan to provide supplemental retirement benefits to certain officers. Benefits are payable and determinable at retirement based upon a percentage of the participant’s historical compensation. The Executive Organization and Compensation Committee of the Board of Directors froze participant benefits (credited service and final average earnings) and entry into the Supplemental Executive Retirement Benefits Plan ("SERP") effective December 31, 2011. The Company recorded net periodic benefit costs associated with the SERP of $ 211 , $ 260 , and $ 289 during 2026 , 2025 , and 2024, respectively. The Company expects to make payments of approximately $ 49 under the SERP in 2027. Key Executive Restoration Plan During 2012, the Company adopted the Key Executive Restoration Plan ("KERP"), a funded, non-qualified deferred compensation plan, to replace the SERP. The Company recorded $ 403 , $ 820 , and $ 446 of expense associated with this plan during 2026 , 2025 , and 2024, respectively. Retiree Health Care Benefits The Company provides health care benefits through third-party policies, to eligible retired employees who pay a specified monthly premium. Premium payments are based upon current insurance rates for the type of coverage provided and are adjusted annually. Certain monthly health care premium payments are subsidized by the Company. The Company recorded net periodic benefits associated with these plans of $ 106 , $ 115 , and $ 186 during 2026 , 2025 , and 2024, respectively. The Company has determined that the related disclosures under ASC Topic 715 - Compensation, Retirement Benefits, for these post-employment benefit plans are not material to the consolidated financial statements. Leases The Company leases facilities for certain service centers, warehouses, distribution centers, and office space. The Company also leases office equipment and vehicles. All leases are considered to be operating leases. The Company’s leases expire at various dates through 2039, with terms ranging from 1 year to 15 years. Many of the Company’s real estate leases contain renewal provisions to extend lease terms for up to 5 years. The exercise of renewal options is solely at the Company’s discretion. The Company’s lease agreements do not contain material variable lease payments, residual value guarantees, or restrictive covenants. The Company does not recognize right-of-use assets or lease liabilities for short-term leases with initial terms of 12 months or less. All other leases are recorded on the balance sheet with right-of-use assets representing the right to use the underlying asset for the lease term and lease liabilities representing lease payment obligations. The Company’s leases do not provide implicit rates; therefore, the Company uses its incremental borrowing rate as the discount rate for measuring lease liabilities. Non-lease components are accounted for separately from lease components. 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 in the statements of consolidated income. Asset Retirement Obligations The Company records a liability to recognize the legal obligation to remove an asset when the legal liability arises. The liability is recorded for the present value of the ultimate obligation by discounting the estimated future cash flows using a credit-adjusted risk-free interest rate. The liability is accreted over time, with the accretion charged to expense within selling, distribution, and administrative expense, including depreciation. An asset equal to the fair 41 Table of Contents value of the liability is recorded concurrent with the liability and depreciated over the life of the underlying asset. As of June 30, 2026, the Company's asset retirement obligation reserve was $ 4.5 million. Recently Adopted Accounting Guidance In December 2023, the Financial Accounting Standards Board ("FASB") issued its final Accounting Standard Update ("ASU") to improve income tax disclosures. This standard, issued as ASU 2023-09, requires public business entities to annually disclose specific categories in the income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. This update is effective for annual periods beginning after December 15, 2024 and permits adoption on a prospective or retrospective basis. We elected to adopt on a retrospective basis. The adoption of the ASU only affected the Company's income taxes disclosures and did not affect the consolidated financial statements. See the Income Tax note for further information. Recently Issued Accounting Guidance In December 2025, the FASB issued its final ASU which makes improvements to the Accounting Standards Codification ("ASC") in response to feedback from stakeholders. This standard, issued as ASU 2025-12, specifically updates the Codification for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. This update is effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures. In December 2025, the FASB issued its final ASU which amends and clarifies the interim disclosure requirements associated with ASC Topic 270 - Interim Reporting. This standard, issued as ASU 2025-11, provides clarity about current requirements to help entities determine whether disclosures not specified in ASC 270 should be provided in interim reporting periods. This update is effective for interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures. In September 2025, the FASB issued its final ASU which amends certain aspects of existing guidance on the accounting for and disclosure of software costs. This standard, issued as ASU 2025-06, removes all references to project stages throughout existing accounting literature and clarifies the threshold entities apply to begin capitalizing costs. This update is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted as of the beginning of an annual period. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures. In July 2025, the FASB issued its final standard which amends the guidance on the measurement of credit losses for accounts receivable and contract assets. This standard, issued as ASU 2025-05, provides a practical expedient to assume that current conditions as of the balance sheet date will persist through the reasonable and supportable forecast period for eligible assets. Entities will still be required to adjust historical data used in the estimation of expected credit losses to reflect current conditions. The amendments will be effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures. In November 2024, the FASB issued its final standard on the Disaggregation of Income Statement Expenses ("DISE"). This standard, issued as ASU 2024-03, requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. This update is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. The requirements can be applied prospectively with the option for retrospective application. The Company is currently evaluating the impacts of this guidance on its financial statements and related disclosures. NOTE 2: REVENUE RECOGNITION Disaggregation of Revenues The following tables present the Company's net sales by reportable segment and by geographic areas based on the location of the facility shipping the product for the years ended June 30, 2026, 2025, and 2024. Other countries consist of Mexico, Australia, New Zealand, Singapore, and Costa Rica. 42 Table of Contents Year Ended June 30, 2026 Service Center Engineered Solutions Total Geographic Areas: United States $ 2,682,055 $ 1,703,275 $ 4,385,330 Canada 300,817 — 300,817 Other Countries 201,359 79,180 280,539 Total $ 3,184,231 $ 1,782,455 $ 4,966,686 Year Ended June 30, 2025 Service Center Engineered Solutions Total Geographic Areas: United States $ 2,524,036 $ 1,476,918 $ 4,000,954 Canada 296,661 — 296,661 Other Countries 193,651 72,158 265,809 Total $ 3,014,348 $ 1,549,076 $ 4,563,424 Year Ended June 30, 2024 Service Center Engineered Solutions Total Geographic Areas: United States $ 2,540,427 $ 1,391,762 $ 3,932,189 Canada 310,210 — 310,210 Other Countries 205,918 31,089 237,007 Total $ 3,056,555 $ 1,422,851 $ 4,479,406 The following tables present the Company’s percentage of revenue by reportable segment and major customer industry for the years ended June 30, 2026, 2025, and 2024: Year Ended June 30, 2026 Service Center Engineered Solutions Total General Industry 34.8 % 44.3 % 38.1 % Industrial Machinery 8.1 % 25.5 % 14.3 % Food 15.4 % 2.8 % 10.9 % Metals 11.8 % 6.7 % 9.9 % Forest Products 11.7 % 1.9 % 8.2 % Chem/Petrochem 2.5 % 11.1 % 5.6 % Cement & Aggregate 7.4 % 1.3 % 5.3 % Transportation 3.5 % 4.5 % 3.9 % Oil & Gas 4.8 % 1.9 % 3.8 % Total 100.0 % 100.0 % 100.0 % 43 Table of Contents Year Ended June 30, 2025 Service Center Engineered Solutions Total General Industry 34.5 % 40.0 % 36.4 % Industrial Machinery 8.3 % 23.3 % 13.3 % Food 15.4 % 3.2 % 11.3 % Metals 11.0 % 7.3 % 9.8 % Forest Products 12.2 % 3.2 % 9.1 % Chem/Petrochem 2.8 % 14.6 % 6.8 % Cement & Aggregate 7.3 % 1.4 % 5.3 % Transportation 3.6 % 4.9 % 4.1 % Oil & Gas 4.9 % 2.1 % 3.9 % Total 100.0 % 100.0 % 100.0 % Year Ended June 30, 2024 Service Center Engineered Solutions Total General Industry 35.0 % 38.7 % 36.2 % Industrial Machinery 8.2 % 24.2 % 13.3 % Food 15.0 % 2.8 % 11.1 % Metals 10.9 % 7.9 % 10.0 % Forest Products 12.0 % 3.2 % 9.2 % Chem/Petrochem 2.7 % 16.0 % 6.9 % Cement & Aggregate 7.4 % 1.3 % 5.5 % Transportation 3.7 % 4.2 % 3.8 % Oil & Gas 5.1 % 1.7 % 4.0 % Total 100.0 % 100.0 % 100.0 % The following tables present the Company’s percentage of revenue by reportable segment and product line for the years ended June 30, 2026, 2025, and 2024: Year Ended June 30, 2026 Service Center Engineered Solutions Total Power Transmission 37.2 % 8.6 % 27.0 % General MRO & Other 22.4 % 26.0 % 23.7 % Fluid Power 14.6 % 37.2 % 22.7 % Bearings, Linear & Seals 25.8 % 0.8 % 16.8 % Specialty Flow Control — % 27.4 % 9.8 % Total 100.0 % 100.0 % 100.0 % 44 Table of Contents Year Ended June 30, 2025 Service Center Engineered Solutions Total Power Transmission 37.5 % 9.8 % 28.2 % General MRO & Other 22.3 % 22.3 % 22.2 % Fluid Power 14.4 % 34.9 % 21.3 % Bearings, Linear & Seals 25.8 % 0.4 % 17.3 % Specialty Flow Control — % 32.6 % 11.0 % Total 100.0 % 100.0 % 100.0 % Year Ended June 30, 2024 Service Center Engineered Solutions Total Power Transmission 37.7 % 11.3 % 29.4 % General MRO & Other 22.1 % 17.2 % 20.5 % Fluid Power 14.1 % 36.3 % 21.1 % Bearings, Linear & Seals 26.1 % 0.4 % 18.0 % Specialty Flow Control — % 34.8 % 11.0 % Total 100.0 % 100.0 % 100.0 % Contract Assets and Liabilities Activity related to contract assets and contract liabilities, which are included in other current assets and other current liabilities on the consolidated balance sheet, is as follows: June 30, 2026 June 30, 2025 $ Change % Change Contract assets $ 28,702 $ 11,659 $ 17,043 146.2 % Contract liabilities 30,648 29,244 1,404 4.8 % The change in balances noted above of the Company's contract assets primarily results from the timing difference between the Company's performance and when the customer is billed. NOTE 3: BUSINESS COMBINATIONS The operating results of all acquired entities are included within the consolidated operating results of the Company from the date of each respective acquisition. 2026 Acquisitions On January 17, 2026, the Company acquired substantially all the net assets of Thompson Industrial Supply ("Thompson"), a Los Angeles, California based provider of industrial bearings, power transmission, hydraulics, pneumatics, linear motion products, and service solutions. Thompson is included in the Service Center segment. The purchase price for Thompson was $ 9,000 , net tangible assets acquired were $ 1,414 , identifiable intangible assets were $ 3,800 , and goodwill was $ 3,786 ; the values are based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The areas that remain open primarily relate to working capital adjustments. The purchase accounting will be finalized within one year from the acquisition date. The purchase price includes $ 1,350 of acquisition holdback payments, which is included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2026, and will be paid on the first and 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. The results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements. There was an additional acquisition in the year that was not material for disclosure. 45 Table of Contents 2025 Acquisitions On December 31, 2024, the Company acquired all of the membership interests of Hydradyne, LLC ("Hydradyne"), a Dallas, Texas based provider of fluid power solutions and value-added services including product offerings in hydraulics, pneumatics, electromechanical, instrumentation, filtration, and fluid conveyance. The purchase price was $ 282,136 , which was funded using available cash. Hydradyne is included in the Engineered Solutions segment. The following table summarizes the assets acquired and liabilities assumed in connection with this acquisition based on their fair values at the acquisition date. Hydradyne Acquisition Cash and cash equivalents $ 13,146 Accounts receivable 42,436 Inventories 44,085 Other current assets 996 Property, net 6,483 Operating lease assets 52,257 Identifiable intangible assets 126,050 Goodwill 68,217 Other assets 111 Total assets acquired $ 353,781 Accounts payable and accrued liabilities 15,771 Other current liabilities 4,546 Other liabilities 51,328 Net assets acquired $ 282,136 During 2026, the Company recorded purchase accounting working capital adjustments related to the Hydradyne acquisition, which decreased the fair value of net tangible assets acquired by $ 314 , and increased goodwill by $ 314 . The acquired goodwill is expected to be deductible for income tax purposes. The Company incurred $ 1,608 in third-party costs pertaining to the acquisition of Hydradyne, which are included in selling, distribution, and administration expense in the statement of consolidated income for the year ended June 30, 2025. Net sales and net income from the Hydradyne acquisition included in the Company's results since December 31, 2024, the date of the acquisition, were $ 124,529 and $ 4,366 , respectively, for the year ended June 30, 2025 . The following unaudited pro forma consolidated results of operations are prepared as if the Hydradyne acquisition (including the related acquisition costs) occurred at the beginning of 2024: Pro forma, year ended June 30, 2025 2024 Sales $ 4,692,742 $ 4,748,187 Net income 397,254 387,766 Diluted net income per share 10.23 9.88 The pro forma amounts are calculated after applying the Company's accounting policies and adjusting the results to reflect additional amortization that would have been recorded assuming the fair value adjustments to identified intangible assets were applied as of July 1, 2023. Additional amortization of $ 5,473 and $ 11,454 is included in the pro forma results for 2025 and 2024, respectively. In addition, pro forma adjustments of $ 5,643 and $ 11,285 for 2025 and 2024, respectively, were made for interest income that would not have been earned as a result of the cash used for the acquisition. The pro forma net income amounts also incorporate an adjustment to the recorded income tax expense for the income tax effect of the pro forma adjustments described above. These pro forma results of operations do not include any anticipated synergies or other effects of the planned integration of Hydradyne; accordingly, such pro forma adjustments do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred as of the date indicated or that may result in the future. The Company funded the following acquisitions using available cash. The results of operations for the acquired entities were not material in relation to the Company's consolidated financial statements. 46 Table of Contents On May 1, 2025, the Company acquired substantially all of the net assets of IRIS Factory Automation ("IRIS"), an Aurora, Illinois based provider of automation products, services, and turn-key productized solutions focused on optimizing material handling and traceability workflows across production environments. IRIS is included in the Engineered Solutions segment. The purchase price for IRIS was $ 14,696 , net liabilities assumed were $ 144 , identifiable intangible assets were $ 7,810 , and goodwill was $ 7,030 ; the values are based upon their fair values at the acquisition date. On August 1, 2024, the Company acquired substantially all of the net assets of Total Machine Solutions ("TMS"), a Fairfield, New Jersey based provider of electrical and mechanical power transmission products and solutions including bearings, drives, motors, conveyor components, and related repair services. TMS is included in the Service Center segment. The purchase price for TMS was $ 6,025 , net tangible assets acquired were $ 1,115 , identifiable intangible assets were $ 2,738 , and goodwill was $ 2,172 based upon their fair values at the acquisition date. On August 1, 2024, the Company acquired 100 % of the outstanding shares of Stanley Proctor, a Twinsburg, Ohio based provider of hydraulic, pneumatic, measurement, control, and instrumentation components, as well as fluid power engineered systems. Stanley Proctor is included in the Engineered Solutions segment. The purchase price for Stanley Proctor was $ 3,924 , net tangible assets acquired were $ 362 , identifiable intangible assets were $ 1,725 , and goodwill was $ 1,837 based upon their fair values at the acquisition date. 2024 Acquisitions The Company funded the following acquisitions using available cash. The results of operations for the acquired entities were not material in relation to the Company's consolidated financial statements. On May 1, 2024, the Company acquired 100 % of the outstanding shares of Grupo Kopar ("Kopar"), a Monterrey, Mexico based provider of emerging automation technologies and engineered solutions. Kopar is included in the Engineered Solutions segm ent. The purchase price for the acquisition was $ 61,870 , net liabilities assumed were $ 4,089 , and intangible assets including goodwill were $ 65,959 based upon their fair values at the acquisition date. On September 1, 2023, the Company acquired substantially all of the net assets of Bearing Distributors, Inc. ("BDI"), a Columbia, South Carolina based provider of bearings, power transmission, industrial motion products, and related service and repair capabilities. BDI is included in the Service Center segment. The purchase price for the acquisition was $ 17,926 , net tangible assets acquired we re $ 4,102 , and intangible assets including goodwill were $ 13,824 based upon their fair values at the acquisition date. The purchase price includes $ 1,800 of acquisition holdback payments, of which $ 900 was paid during 2025 , and the remaining $ 900 was paid during 2026 . On August 1, 2023, the Company acquired substantially all of the net assets of Cangro Industries, Inc. ("Cangro"), a Farmingdale, New York based provider of bearings, power transmission, industrial motion products, and related service and repair capabilities. Cangro is included in the Service Center segment. The purchase price for the acquisition was $ 6,219 , net tangible assets acquired were $ 2,070 , and intangible assets including goodwill were $ 4,149 based upon their fair values at the acquisition date. The purchase price includes $ 930 of acquisition holdback payments, of which $ 620 was paid through 2026. The remaining balance of $ 310 is included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2026, and will be paid on the third anniversaries of the acquisition date with interest at a fixed rate of 1.0 % per annum. NOTE 4: INVENTORIES Inventories consist of the following: June 30, 2026 2025 U.S. inventories at average cost $ 605,942 $ 587,479 Foreign inventories at average cost 157,468 150,534 Total inventories at average cost 763,410 738,013 Less: Excess of average cost over LIFO cost for U.S. inventories 254,431 232,676 Inventories $ 508,979 $ 505,337 The overall impact of LIFO layer liquidations increased gross profit by $ 1,575 , $ 393 , and $ 1,160 in 2026, 2025, and 2024, respectively. 47 Table of Contents NOTE 5: GOODWILL AND INTANGIBLES The changes in the carrying amount of goodwill for both the Service Center segment and the Engineered Solutions segment for the years ended June 30, 2026 and 2025 are as follows: Service Center Engineered Solutions Total Balance at July 1, 2024 $ 219,574 $ 399,821 $ 619,395 Goodwill acquired during the year 2,262 77,847 80,109 Other, primarily currency translation ( 130 ) — ( 130 ) Balance at June 30, 2025 221,706 477,668 699,374 Goodwill acquired during the year 4,293 1,555 5,848 Other, primarily currency translation ( 522 ) — ( 522 ) Balance at June 30, 2026 $ 225,477 $ 479,223 $ 704,700 During 2026, the Company recorded purchase accounting working capital adjustments, which increased the purchase price by $ 696 , increased Goodwill by $ 1,555 and decreased the fair value of net tangible assets acquired by $ 859 . The Company has eight ( 8 ) reporting units for which an annual goodwill impairment assessment was performed as of January 1, 2026. Based on the assessment performed, the Company concluded that the fair value of all of the reporting units exceeded their carrying amount as of January 1, 2026, therefore no impairment exists. At June 30, 2026 and 2025, accumulated goodwill impairment losses subsequent to 2002 totaled $ 64,794 related to the Service Center segment and $ 167,605 related to the Engineered Solutions segment. The Company's identifiable intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following: June 30, 2026 Amount Accumulated Amortization Net Book Value Finite-Lived Intangibles: Customer relationships $ 508,292 $ 258,375 $ 249,917 Trade names 108,357 48,969 59,388 Other 6,651 3,142 3,509 Total Finite-Lived Intangibles $ 623,300 $ 310,486 $ 312,814 June 30, 2025 Amount Accumulated Amortization Net Book Value Finite-Lived Intangibles: Customer relationships $ 510,834 $ 233,392 $ 277,442 Trade names 108,344 41,585 66,759 Other 6,902 2,503 4,399 Total Finite-Lived Intangibles $ 626,080 $ 277,480 $ 348,600 Amounts include the impact of foreign currency translation. Fully amortized finite-lived identifiable intangible assets are written off in the period when they become fully amortized. During 2026, the Company acquired identifiable intangible assets with an acquisition cost allocation and weighted-average life as follows: Acquisition Cost Allocation Weighted-Average Life Customer relationships $ 4,297 20.0 Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable. 48 Table of Contents Amortization of identifiable intangibles totaled $ 40,072 , $ 35,581 , and $ 28,923 during 2026, 2025, and 2024, respectively, and is included in selling, distribution, and administrative expense in the statements of consolidated income. Estimated future amortization expense by year (based on the Company’s identifiable intangible assets as of June 30, 2026) for the next five years are as follows: $ 37,400 for 2027, $ 34,900 for 2028, $ 32,800 for 2029, $ 30,800 for 2030, and $ 28,700 for 2031. NOTE 6: DEBT A summary of long-term debt is as follows: June 30, 2026 2025 Revolving credit facility $ 74,000 $ 384,000 Trade receivable securitization facility 188,300 188,300 Total debt $ 262,300 $ 572,300 Revolving Credit Facility In October 2025, 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 future acquisitions, 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 $ 800,000 . The new revolving credit facility also provides for a $ 25,000 sublimit for swing line loans and a $ 50,000 sublimit for letters of credit. 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 or Secured Overnight Financing Rate ("SOFR") plus a margin that ranges from 80 to 155 basis points, both of which are based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled $ 825,757 at June 30, 2026 which is available to fund future acquisitions or other capital and operating requirements. This amount is net of outstanding letters of credit of $ 243 at June 30, 2026 to secure certain insurance obligations. The interest rate on the revolving credit facility was 4.44 % as of June 30, 2026. The new credit facility replaced the Company's previous revolving credit facility. Borrowing capacity under the previous facility, net of outstanding letters of credit of $ 209 to secure certain insurance obligations, totaled $ 515,791 at June 30, 2025. The interest rate on the previous revolving credit facility was 5.23 % as of June 30, 2025. The Company paid $ 1,611 of debt issuance costs related to the new revolving credit facility in the year ended 2026, which are included in other current assets and other assets on the consolidated balance sheet as of June 30, 2026 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. As a result of this analysis, $ 47 of unamortized debt issuance costs were expensed and included within interest expense, net in the statements of consolidated income in the twelve months ended June 30, 2026, and $ 804 of unamortized debt issuance costs were deferred related to the new credit facility 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 $ 5,336 as of June 30, 2026 and 2025, in order to secure certain insurance obligations. Trade Receivable Securitization Facility On July 10, 2025, the Company amended its existing trade receivable securitization facility (the "AR Securitization Facility") and extended its maturity to July 10, 2028. The AR Securitization Facility effectively increases the Company's borrowing capacity by collateralizing a portion of the amount of the U.S. operations' trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt. The AR Securitization Facility's maximum borrowing capacity is $ 250,000 and fees on amounts borrowed are 0.90 % per year. Borrowing capacity is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable portfolio and, therefore, at certain times, we may not be able to fully access the $ 250,000 of borrowing capacity available under the AR Securitization Facility. Borrowings under the AR Securitization Facility carry variable interest rates tied to SOFR. The interest rate on the AR Securitization Facility as of June 30, 2026 and 2025 was 4.55 % and 5.32 %, respectively. Other Long-Term Borrowing In 2014, the Company assumed $ 2,359 of debt as a part of the headquarters facility acquisition. The 1.50 % fixed interest rate note, held by the State of Ohio Development Services Agency, was fully paid in November 2024. 49 Table of Contents The table below summarizes the aggregate maturities of amounts outstanding under long-term borrowing arrangements for each of the next five years: Year Ended June 30, Aggregate Maturity 2027 $ — 2028 — 2029 188,300 2030 — 2031 74,000 Covenants The credit facility contains restrictive covenants regarding liquidity, financial ratios, and other covenants. At June 30, 2026, the most restrictive of these covenants required that the Company have net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined). At June 30, 2026, the Company's net indebtedness was less than 0.2 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). The Company was in compliance with all financial covenants at June 30, 2026. NOTE 7: DERIVATIVES Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative instrument 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. This reclassification occurs when 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. dollar-denominated unsecured variable rate debt. The notional amount declined over time to $ 384,000 as principal payments were made. The interest rate swap effectively converted a portion of the floating rate interest payment into a fixed rate interest payment. The Company designated the interest rate swap as a pay-fixed, receive-floating interest rate swap instrument and was accounting for this derivative as a cash flow hedge. During 2021, the Company completed a transaction to amend and extend the interest rate swap agreement which resulted in an extension of the maturity date to January 31, 2026. The pay-fixed interest rate swap was considered a hybrid instrument with a financing component and an embedded at-market derivative that was designated as a cash flow hedge. The weighted average fixed pay rate is 1.58 % and the interest rate swap was indexed to SOFR. The Company made various accounting elections related to changes in critical terms of the hedging relationship due to reference rate reform to preserve the hedging relationship. Realized gains and losses of the actual monthly settlement activity of the interest rate swap is included within interest income or expense in the condensed consolidated statements of operations. The Company historically reflected the unrealized changes in fair value of the interest rate swap at each reporting period in other comprehensive income 50 Table of Contents and a derivative asset or liability was recognized at each reporting period in the Company’s consolidated balance sheets for the interest rate swap. The interest rate swap matured as scheduled in January 2026 and as such, the derivative asset was derecognized. There were no amounts remaining in accumulated other comprehensive income related to this hedge as of June 30, 2026. The interest rate swap converted $ 384,000 of variable rate debt to a fixed rate of 2.48 % as of June 30, 2025. The fair value (Level 2 in the fair value hierarchy) of the interest rate cash flow hedge was $ 5,503 as of June 30, 2025, which was included in other current assets in the consolidated balance sheet. Amounts reclassified from other comprehensive loss, before tax, to interest expense was income of $ 8,141 , $ 16,124 , and $ 18,683 for 2026, 2025, and 2024, respectively. NOTE 8: FAIR VALUE MEASUREMENTS Marketable securities measured at fair value at June 30, 2026 and 2025 totaled $ 30,685 and $ 25,628 , respectively. The majority of these marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the consolidated balance sheets and their fair values were determined using quoted market prices (Level 1 in the fair value hierarchy). In addition, the Company holds Corporate-Owned Life Insurance ("COLI") policies on certain retired employees, which are valued at the cash surrender value of the policies (Level 3 in the fair value hierarchy). The fair value of the COLI policies totaled $ 21,660 and $ 20,817 , at June 30, 2026 and 2025, respectively, and are included in other assets on the consolidated balance sheets. At both June 30, 2026 and 2025, the Company had no fixed interest rate debt outstanding. The revolving credit facility and the AR Securitization Facility contain variable interest rates and their carrying values approximate their fair values (Level 2 in the fair value hierarchy). The carrying value of our cash and cash equivalents, trade accounts receivable, and accounts payable approximate fair value because of the short-term maturity of these financial instruments. NOTE 9: INCOME TAXES Income Before Income Taxes The components of income before income taxes are as follows: Year Ended June 30, 2026 2025 2024 U.S. $ 513,009 $ 475,266 $ 467,785 Foreign 31,265 25,701 30,345 Income before income taxes $ 544,274 $ 500,967 $ 498,130 Provision for Income Taxes The provision for income taxes consists of: Year Ended June 30, 2026 2025 2024 Current: Federal $ 78,575 $ 87,700 $ 86,501 State and local 20,179 18,525 23,016 Foreign 4,731 8,116 3,925 Total current 103,485 114,341 113,442 Deferred: Federal 20,802 ( 4,432 ) ( 791 ) State and local 3,331 ( 310 ) 1,159 Foreign 2,131 ( 1,620 ) ( 1,442 ) Total deferred 26,264 ( 6,362 ) ( 1,074 ) Provision for income taxes $ 129,749 $ 107,979 $ 112,368 51 Table of Contents Effective Tax Rates The following reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate: Year Ended June 30, 2026 2025 2024 Amount Percent Amount Percent Amount Percent U.S. federal statutory tax rate $ 114,298 21.0 % $ 105,203 21.0 % $ 104,607 21.0 % State and local income taxes, net of federal income tax effect 1,2,3 18,559 3.4 14,409 2.9 19,981 4.0 Foreign tax effects 7,966 1.5 6,939 1.4 1,307 0.4 Effect of cross-border tax laws ( 1,206 ) ( 0.2 ) ( 2,822 ) ( 0.6 ) ( 3,482 ) ( 0.7 ) Foreign tax credits ( 6,830 ) ( 1.3 ) ( 5,813 ) ( 1.2 ) ( 2,808 ) ( 0.6 ) Tax credits 742 0.1 ( 2,503 ) ( 0.5 ) ( 2,471 ) ( 0.5 ) Nontaxable or nondeductible items 2,033 0.4 1,631 0.4 2,459 0.5 Share-based payments ( 5,762 ) ( 1.1 ) ( 5,634 ) ( 1.1 ) ( 5,909 ) ( 1.2 ) Changes in unrecognized tax benefits ( 17 ) — ( 3,257 ) ( 0.7 ) ( 1,559 ) ( 0.3 ) Other adjustments ( 34 ) — ( 174 ) — 243 — Effective tax rate $ 129,749 23.8 % $ 107,979 21.6 % $ 112,368 22.6 % 1 State taxes in the following states make up more than 50% of the tax effect in this category for 2026; California, Wisconsin, Minnesota, Illinois, Michigan, Iowa, Indiana, New York, Pennsylvania and Oregon. 2 State taxes in the following states make up more than 50% of the tax effect in this category for 2025; California, Wisconsin, Minnesota, Illinois, Michigan, Iowa, Indiana and New York. 3 State taxes in the following states make up more than 50% of the tax effect in this category for 2024; California, Wisconsin, Minnesota, Illinois, Michigan, Iowa, Indiana, New York, Pennsylvania and Oregon. The components of income taxes paid globally are as follows: Year ended June 30, 2026 2025 2024 Federal taxes paid $ 77,257 $ 80,799 $ 86,000 State taxes paid 20,592 18,143 25,499 Foreign taxes paid 11,097 8,779 4,812 Total income taxes paid $ 108,946 $ 107,721 $ 116,311 52 Table of Contents Deferred Income Tax Assets and Liabilities Significant components of the Company’s deferred income tax assets and liabilities are as follows: June 30, 2026 2025 Deferred tax assets: Compensation liabilities not currently deductible $ 20,989 $ 20,331 Other expenses and reserves not currently deductible 19,558 17,430 Leases 41,697 36,054 Foreign tax credit 4,945 — Net operating loss carryforwards 2,774 5,388 Capitalization of R&D costs 2,538 22,284 Other 348 2,281 Total deferred tax assets 92,849 103,768 Less: Valuation allowance 51 853 Total deferred tax assets, net of valuation allowance 92,798 102,915 Deferred tax liabilities: Inventories ( 26,915 ) ( 20,376 ) Goodwill and intangibles ( 65,715 ) ( 64,062 ) Leases ( 41,470 ) ( 35,933 ) Hedging instrument — ( 1,906 ) Depreciation and differences in property bases ( 13,943 ) ( 10,530 ) Total deferred tax liabilities ( 148,043 ) ( 132,807 ) Net deferred tax liabilities $ ( 55,245 ) $ ( 29,892 ) Net deferred tax liabilities are classified as follows: Other assets $ 8,676 $ 12,263 Other liabilities ( 63,921 ) ( 42,155 ) Net deferred tax liabilities $ ( 55,245 ) $ ( 29,892 ) As of June 30, 2026 and 2025, the Company had foreign net operating loss carryforwards of approximately $ 9,862 and $ 19,426 , respectively, the tax benefit of which is approximately $ 2,645 and $ 5,289 , respectively. These loss carryforwards will expire at various dates beginning in 2036. As of June 30, 2026 and 2025, the Company had state net operating loss carryforwards, the tax benefit of which is approximately $ 129 and $ 99 , respectively, which will expire at various dates beginning in 2038. Valuation allowances are provided against deferred tax assets where it is considered more-likely-than-not that the Company will not realize the benefit of such assets. The remaining net deferred tax asset is the amount management believes is more-likely-than-not of being realized. The realization of these deferred tax assets can be impacted by changes to tax laws, statutory tax rates, and future income levels. The Company evaluates the realization of its deferred tax assets each quarter throughout the year. D uring 2026 and 2025, the Company recorded a net tax (benefit) expense related to the change in valuation allowances of $( 802 ) and $ 695 , respectively. The total valuation allowance provided against the deferred tax assets is $ 51 and $ 853 as of June 30, 2026 and 2025, respectively. As of June 30, 2026, the Company had accumulated undistributed earnings of non-U.S. subsidiaries of approximately $ 103,672 . The vast majority of such earnings have previously been subjected to the one-time transition tax or the Global Intangible Low Taxed Income ("GILTI") inclusion. Therefore, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign withholding and state income taxes. In addition, we expect foreign tax credits would be available to either offset or partially reduce the tax cost in the event of a distribution. During 2026, the Company removed its permanent reinvestment assertion related to two of its non-U.S. entities. The tax cost associated with this change was not significant. For other non-U.S. entities, we continue to intend to indefinitely reinvest earnings generated by these entities and expect future cash generation in the United States to be sufficient to meet future cash needs. 53 Table of Contents Unrecognized Income Tax Benefits The Company and its subsidiaries file income tax returns in the U.S. federal, various state, local, and foreign jurisdictions. The following table sets forth the changes in the amount of unrecognized tax benefits for 2026, 2025, and 2024: Year Ended June 30, 2026 2025 2024 Unrecognized Income Tax Benefits at beginning of the year $ 918 $ 3,048 $ 4,821 Current year tax positions 85 85 105 Prior year tax positions 400 57 ( 412 ) Expirations of statutes of limitations ( 487 ) ( 2,272 ) ( 1,466 ) Unrecognized Income Tax Benefits at end of year $ 916 $ 918 $ 3,048 The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. During 2026, 2025, and 2024, the Company recognized $( 15 ), $( 1,060 ), and $ 296 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 $ 336 , $ 351 , and $ 1,411 as of June 30, 2026, 2025, and 2024, respectively. The Company anticipates a decrease to unrecognized income tax benefits within the next twelve months of approximately $ 472 , of which all would affect the effective income tax rate. Included in the balance of unrecognized income tax benefits at June 30, 2026, 2025, and 2024 are $ 808 , $ 809 , and $ 2,946 respectively, of income tax benefits that, if recognized, would affect the effective income tax rate. The Company is subject to U.S. federal income tax examinations for the tax years 2023 through 2025 and to state and local income tax examinations for the tax years 2020 through 2025. In addition, the Company is subject to foreign income tax examinations for the tax years 2019 through 2025. The Company’s unrecognized income tax benefits are included in other liabilities in the consolidated balance sheets since payment of cash is not expected within one year, or as a reduction of a deferred tax asset. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, as amended, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Company is required to recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which the legislation is enacted. As of June 30, 2026, the Company completed its evaluation and as a result, did not have any material adjustments to its financial statements resulting from the enactment of the OBBBA. 54 Table of Contents NOTE 10: SHAREHOLDERS’ EQUITY Treasury Shares At June 30, 2026, 128 shares of the Company’s common stock held as treasury shares were restricted as collateral under escrow arrangements relating to change in control, and director and officer indemnification agreements. Accumulated Other Comprehensive Loss Changes in the accumulated other comprehensive loss for the years ended June 30, 2026, 2025, and 2024, are composed of the following amounts, shown net of taxes: Foreign currency translation adjustment Post-employment benefits Cash flow hedge Total accumulated other comprehensive loss Balance at July 1, 2023 $ ( 83,099 ) $ ( 197 ) $ 28,000 $ ( 55,296 ) Other comprehensive (loss) income ( 12,467 ) ( 101 ) 4,499 ( 8,069 ) Amounts reclassified from accumulated other comprehensive loss — ( 93 ) ( 14,108 ) ( 14,201 ) Net current-period other comprehensive loss ( 12,467 ) ( 194 ) ( 9,609 ) ( 22,270 ) Balance at June 30, 2024 ( 95,566 ) ( 391 ) 18,391 ( 77,566 ) Other comprehensive loss ( 1,650 ) ( 33 ) ( 246 ) ( 1,929 ) Amounts reclassified from accumulated other comprehensive loss — ( 14 ) ( 12,177 ) ( 12,191 ) Net current-period other comprehensive loss ( 1,650 ) ( 47 ) ( 12,423 ) ( 14,120 ) Balance at June 30, 2025 ( 97,216 ) ( 438 ) 5,968 ( 91,686 ) Other comprehensive loss 2,766 87 198 3,051 Amounts reclassified from accumulated other comprehensive loss — 5 ( 6,166 ) ( 6,161 ) Net current-period other comprehensive income (loss) 2,766 92 ( 5,968 ) ( 3,110 ) Balance at June 30, 2026 $ ( 94,450 ) $ ( 346 ) $ — $ ( 94,796 ) Other Comprehensive Loss Details of other comprehensive (loss) income are as follows: Year Ended June 30, 2026 2025 2024 Pre-Tax Amount Tax (Benefit) Expense Net Amount Pre-Tax Amount Tax (Benefit) Expense Net Amount Pre-Tax Amount Tax (Benefit) Expense Net Amount Foreign currency translation adjustments $ 2,740 $ ( 26 ) $ 2,766 $ ( 1,655 ) $ ( 5 ) $ ( 1,650 ) $ ( 12,544 ) $ ( 77 ) $ ( 12,467 ) Post-employment benefits: Actuarial gain (loss) on re-measurement 117 30 87 ( 42 ) ( 9 ) ( 33 ) ( 134 ) ( 33 ) ( 101 ) Reclassification of net actuarial losses (gains) and prior service cost into other income, net and included in net periodic pension costs 7 2 5 ( 25 ) ( 11 ) ( 14 ) ( 117 ) ( 24 ) ( 93 ) Unrealized gain (loss) on cash flow hedge 262 64 198 ( 357 ) ( 111 ) ( 246 ) 5,958 1,459 4,499 Reclassification of interest from cash flow hedge into interest expense ( 8,141 ) ( 1,975 ) ( 6,166 ) ( 16,124 ) ( 3,947 ) ( 12,177 ) ( 18,683 ) ( 4,575 ) ( 14,108 ) Other comprehensive loss $ ( 5,015 ) $ ( 1,905 ) $ ( 3,110 ) $ ( 18,203 ) $ ( 4,083 ) $ ( 14,120 ) $ ( 25,520 ) $ ( 3,250 ) $ ( 22,270 ) 55 Table of Contents Net Income Per Share Basic net income per share is based on the weighted-average number of common shares outstanding. Diluted net income per share includes the dilutive effect of potential common shares outstanding. Under the two-class method of computing net income per share, non-vested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating s ecurities. The Company does not have awards considered to be participating securities, therefore the Company calculated basic and diluted net income per share under only the treasury stock method, w hich is disclosed below. The following table presents amounts used in computing net income per share and the effect on the weighted-average number of shares of dilutive potential common shares: Year Ended June 30, 2026 2025 2024 Net Income $ 414,525 $ 392,988 $ 385,762 Average Shares Outstanding: Weighted-average common shares outstanding for basic computation 37,377 38,289 38,672 Dilutive effect of potential common shares 480 527 585 Weighted-average common shares outstanding for dilutive computation 37,857 38,816 39,257 Net Income Per Share — Basic $ 11.09 $ 10.26 $ 9.98 Net Income Per Share — Diluted $ 10.95 $ 10.12 $ 9.83 Stock awards relating to 64 , 88 and 99 shares of common stock were outstanding at June 30, 2026, 2025 and 2024, respectively, but were not included in the computation of diluted earnings per share for the years then ended as they were anti-dilutive. NOTE 11: SHARE-BASED COMPENSATION Share-Based Incentive Plans Following approval by the Company's shareholders in October 2023, the 2023 Long-Term Performance Plan (the "2023 Plan") replaced the 2019 Long-Term Performance Plan. The 2023 Plan, which expires in 2028, 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, performance shares, RSAs, and RSUs) are summarized in the table below: Year Ended June 30, 2026 2025 2024 SARs $ 5,519 $ 4,713 $ 3,448 Performance shares 3,102 2,999 4,232 RSAs and RSUs 4,283 4,290 5,264 Total compensation costs under award programs $ 12,904 $ 12,002 $ 12,944 Such amounts are included in selling, distribution, and administrative expense in the accompanying statements of consolidated income. The total income tax benefit recognized in the statements of consolidated income for share-based compensation plans was $ 6,730 , $ 6,270 , and $ 5,885 during 2026, 2025, and 2024, respectively. It has been the practice of the Company to issue shares from treasury to satisfy requirements of awards paid with shares. The aggregate unrecognized compensation cost for share-based award programs with the potential to be paid at June 30, 2026 is summarized in the table below: June 30, 2026 Average Expected Period of Expected Recognition (Years) SARs $ 6,830 1.4 Performance shares 4,001 0.9 RSAs and RSUs 3,698 0.9 Total unrecognized compensation costs under award programs $ 14,529 1.1 56 Table of Contents Cost of these programs will be recognized as expense over the weighted-average remaining vesting period of 1.1 years. The aggregate number of shares of common stock which may be awarded under the 2023 Plan is 1,600 ; shares available for future grants at June 30, 2026 are 1,360 . Stock Appreciation Rights The weighted-average assumptions used for SARs grants issued during 2026, 2025, and 2024 are: Year Ended June 30, 2026 2025 2024 Expected life, in years 6.0 6.0 6.0 Risk free interest rate 3.9 % 3.7 % 4.1 % Dividend yield 0.7 % 0.8 % 1.0 % Volatility 33.1 % 37.3 % 37.0 % Per share fair value of SARs granted during the year $ 96.23 $ 78.15 $ 55.65 The expected life is based upon historical exercise experience of the officers, other key employees, and members of the Board of Directors. 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. The assumed dividend yield has been estimated based upon the Company’s historical results and expectations for changes in dividends and stock prices. The volatility assumption is calculated based upon historical daily price observations of the Company’s common stock for a period equal to the expected life. SARs are redeemable solely in Company common stock. The exercise price of SARs may be settled by the holder with cash or by tendering Company common stock. A summary of SARs activity is presented below : Shares Weighted-Average Exercise Price Year Ended June 30, 2026 (Shares in thousands) Outstanding at beginning of year 710 $ 97.47 Granted 63 271.01 Exercised ( 111 ) 84.93 Forfeited ( 8 ) 185.38 Outstanding at end of year 654 $ 115.13 Exercisable at end of year 464 $ 81.95 Expected to vest at end of year 654 $ 115.05 The weighted-average remaining contractual terms for SARs outstanding, exercisable, and expected to vest at June 30, 2026 were 5.1 , 3.8 , and 5.1 years, respectively. The aggregate intrinsic values of SARs outstanding, exercisable, and expected to vest at June 30, 2026 were $ 145,921 $ 118,893 , and $ 145,872 , respectively. The aggregate intrinsic value of the SARs exercised during 2026, 2025, and 2024 was $ 20,935 , $ 12,982 , and $ 19,700 , respectively. The total fair value of shares vested during 2026, 2025, and 2024 was $ 4,477 , $ 3,219 , and $ 2,550 , respectively. Performance Shares Performance shares are paid in shares of Company stock at the end of a three-year period provided the Company achieves goals established by the Committee. The number of shares payable will vary depending on the level of the goals achieved. 57 Table of Contents A summary of non-vested performance shares activity at June 30, 2026 is presented below: Shares Weighted-Average Grant-Date Fair Value Year Ended June 30, 2026 (Shares in thousands) Non-vested at beginning of year 62 $ 117.80 Awarded 16 205.27 Vested ( 43 ) 100.04 Non-vested at end of year 35 $ 178.44 The Committee established three one-year goals for each of the 2026, 2025, and 2024 grants. Each year during the three-year term has its own separate goals, tied to the Company’s earnings before interest, tax, depreciation, and amortization ("EBITDA") and after-tax return on assets ("ROA"). Achievement during any particular year is awarded and the number of shares become fixed for future payout at the end of the three-year term. For the outstanding grants as of June 30, 2026, the maximum number of shares that could be earned in future periods was 34 . Restricted Stock Awards and Restricted Stock Units Under the 2023 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. RSAs vest over periods of one to four years . RSUs are grants valued in shares of the Company's stock, but shares are not issued until the grants vest three to four years from the award date, assuming continued employment with the Company. Dividend equivalents on RSUs are accrued and paid upon vesting. A summary of the status of the Company’s non-vested RSAs and RSUs at June 30, 2026 is presented below: Shares Weighted-Average Grant-Date Fair Value Year Ended June 30, 2026 (Share amounts in thousands) Non-vested at beginning of year 80 $ 142.41 Granted 21 274.13 Forfeitures ( 6 ) 184.43 Vested ( 32 ) 123.79 Non-vested at end of year 63 $ 191.71 NOTE 12: LEASES 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 in the statements of consolidated income. Operating lease costs and short-term lease costs were $ 66,745 and $ 1,021 , respectively, in 2026 and $ 47,591 and $ 14,458 , respectively, in 2025. Variable lease costs and sublease income were not material. Information related to operating leases is as follows: June 30, 2026 2025 Operating lease assets, net $ 213,199 $ 188,654 Operating lease liabilities Other current liabilities $ 52,913 $ 39,776 Other liabilities 168,231 158,544 Total operating lease liabilities $ 221,144 $ 198,320 June 30, 2026 2025 Weighted average remaining lease term (years) 5.7 6.6 Weighted average incremental borrowing rate 5.34 % 5.01 % 58 Table of Contents Year Ended June 30, 2026 2025 Cash paid for operating leases $ 65,558 $ 45,919 Right of use assets obtained in exchange for new operating lease liabilities 36,228 98,196 The table below summarizes the aggregate maturities of liabilities pertaining to operating leases with terms greater than one year for each of the next five years: Year Ended June 30, Maturity of Operating Lease Liabilities 2027 $ 62,171 2028 51,477 2029 41,236 2030 28,754 2031 20,705 Thereafter 58,482 Total lease payments 262,825 Less interest 41,681 Present value of lease liabilities $ 221,144 The Company maintains lease agreements for many of the operating facilities of businesses it acquires from previous owners. In many cases, the previous owners of the business acquired become employees of the Company and occupy management positions within those businesses. The payments under lease agreements of this nature totaled $ 2,537 in 2026, $ 2,100 in 2025, and $ 2,250 in 2024. NOTE 13: SEGMENT INFORMATION The Company's reportable segments are: Service Center and Engineered Solutions. These reportable segments contain the Company's various operating segments which have been aggregated based upon similar economic and operating characteristics. The Service Center segment operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of production equipment and motion control infrastructure. Products primarily include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses, as well as other related supplies for general operational needs of customers’ machinery and equipment. The Engineered Solutions segment includes our operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies, engineered flow control products and services, and automation technologies. The accounting policies of the Company’s reportable segments are as described in Note 1. The Company's chief operating decision maker ("CODM") is the chief executive officer. The CODM uses Segment Operating Income as the measure of segment profit and loss in measuring segment performance, determining how to allocate the Company's assets, evaluating performance in periodic reviews, and during the development of the annual budget and the regular forecasting process. The CODM considers budget-to-actual variances on a quarterly basis, as well as segment-specific forecasting, when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses the segment's net sales in measuring segment performance. In addition to the two reportable segments, there is a category of certain business activities and expenses, referred to as corporate & other, that does not constitute an operating segment. Corporate & other expense, net includes the cost of our corporate headquarters and corporate functions, primarily compensation and benefits, and related administrative expenses and other expenses not directly associated with any reportable segment. These corporate and other expenses reconcile segment operating income to total consolidated income before income taxes. 59 Table of Contents Segment Financial Information Year Ended June 30, 2026 Service Center Engineered Solutions Total Total sales $ 3,188,877 $ 1,850,911 $ 5,039,788 Less: Inter-segment sales 1 4,646 68,456 73,102 Net sales $ 3,184,231 $ 1,782,455 $ 4,966,686 Less segment expenses: Cost of sales 2,254,931 1,204,970 Selling, distribution, and administrative expense, including depreciation 2 503,176 366,961 Segment operating income $ 426,124 $ 210,524 $ 636,648 Corporate & other expense, net 87,179 Interest expense, net 7,938 Other income, net ( 2,743 ) Income before income taxes $ 544,274 Year Ended June 30, 2025 Service Center Engineered Solutions Total Total sales $ 3,017,254 $ 1,601,211 $ 4,618,465 Less: Inter-segment sales 1 2,906 52,135 55,041 Net sales $ 3,014,348 $ 1,549,076 $ 4,563,424 Less segment expenses: Cost of sales 2,135,158 1,045,107 Selling, distribution, and administrative expense, including depreciation 2 485,720 315,231 Segment operating income $ 393,470 $ 188,738 $ 582,208 Corporate & other expense, net 83,679 Interest expense, net 612 Other income, net ( 3,050 ) Income before income taxes $ 500,967 Year Ended June 30, 2024 Service Center Engineered Solutions Total Total sales $ 3,059,363 $ 1,472,617 $ 4,531,980 Less: Inter-segment sales 1 2,808 49,766 52,574 Net sales $ 3,056,555 $ 1,422,851 $ 4,479,406 Less segment expenses: Cost of sales 2,173,085 969,668 Selling, distribution, and administrative expense, including depreciation 2 486,476 272,074 Segment operating income $ 396,994 $ 181,109 $ 578,103 Corporate & other expense, net 82,280 Interest expense, net 2,831 Other income, net ( 5,138 ) Income before income taxes $ 498,130 1 The Company accounts for inter-segment sales using market rates. 2 Amortization of intangibles is recorded within selling, distribution, and administrative expense, and therefore included in segment operating income for all periods presented. 60 Table of Contents Supplemental Segment Financial Information Service Center Engineered Solutions Total Year Ended June 30, 2026 Assets used in the business $ 1,621,621 $ 1,388,352 $ 3,009,973 Depreciation and amortization of property 17,386 8,489 25,875 Amortization of intangibles 2,980 37,092 40,072 Capital expenditures 19,726 3,839 23,565 Year Ended June 30, 2025 Assets used in the business $ 1,765,631 $ 1,409,913 $ 3,175,544 Depreciation and amortization of property 17,492 7,407 24,899 Amortization of intangibles 3,144 32,437 35,581 Capital expenditures 22,544 4,643 27,187 Year Ended June 30, 2024 Assets used in the business $ 1,865,269 $ 1,086,641 $ 2,951,910 Depreciation and amortization of property 17,700 5,731 23,431 Amortization of intangibles 3,188 25,735 28,923 Capital expenditures 18,040 6,824 24,864 Geographic Information Long-lived assets are based on physical locations and are composed of the net book value of property and right of use assets. Information by geographic area is as follows: June 30, 2026 2025 Long-Lived Assets: United States $ 300,861 $ 269,218 Canada 29,666 33,230 Other Countries 14,323 14,360 Total $ 344,850 $ 316,808 NOTE 14: COMMITMENTS AND CONTINGENCIES The Company is a party to various pending judicial and administrative proceedings. 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. NOTE 15: OTHER INCOME, NET Other income, net, consists of the following: Year Ended June 30, 2026 2025 2024 Unrealized gain on assets held in rabbi trust for a non-qualified deferred compensation plan $ ( 4,262 ) $ ( 2,748 ) $ ( 3,300 ) Foreign currency transaction losses (gains) 2,599 529 ( 1,099 ) Net other periodic post-employment costs 114 145 114 Life insurance income, net ( 865 ) ( 772 ) ( 855 ) Other, net ( 329 ) ( 204 ) 2 Total other income, net $ ( 2,743 ) $ ( 3,050 ) $ ( 5,138 ) 61 Table of Contents NOTE 16: SUBSEQUENT EVENTS The Company evaluated events and transactions occurring subsequent to June 30, 2026 through the date the financial statements were issued. Subsequent to June 30, 2026, we acquired 105,285 shares of the Company's common stock on the open market for $ 34.7 million. 62 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.