APPLIED INDUSTRIAL TECHNOLOGIES INC
For the period ended Sep 30, 2025. Filed Oct 28, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Oct 28, 2025
AIT$283.39+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0000109563-25-000039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-28.
0000109563-25-000107
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 79 previous paragraphs and 58 current paragraphs.
20 unchanged; 31 reworded; 6 added; 23 removed; 5 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Sales from our Engineered Solutions segment increased $67.9 million or 19.4%. Acquisitions within this segment increased sales by $69.2 million or 19.8%. Excluding the impact of businesses acquired, sales decreased $1.3 million or 0.4%, driven primarily due to the timing of project-related shipments.
Current report
Operating income increased$15.9 million or 14.0%, to $129.0 million in the current year quarter from $113.2 million during prior year quarter, and as a percent of sales increased to 10.8% from 10.3% during the prior year quarter.
Current report
The Company had net interest expense in the current year quarter of$1.0 million compared to net interest income of$0.6 millionin the prior year quarter.
Current report
Recent Developments
Current report
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. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, during the three months ended September 30, 2025, the Company evaluated all deferred tax balances under the newly enacted tax law and identified any other changes required to its financial statements as a result of the OBBBA. The provisions of the OBBBA did not have a material impact to our income tax expense or effective tax rate. We expect the provisions of the OBBBA to result in a reduction to our cash tax payments for our fiscal year ended June 30, 2026. The Company will continue to evaluate the impact of the OBBBA as additional guidance becomes available.
Current report
The decrease in cash provided by operating activities during the three months ended September 30, 2025 from the prior period is driven by a reduction in cash flows generated from working capital of$17.2 million, offset by improved operating results. The change in working capital year over year reflects modest increase in working capital in the current year quarter of$0.6 million as compared to working capital improvements generated in the prior year quarter of $16.6 million.
Removed paragraphs (23)
Previous report
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 of $282.1 million was funded using $276.1 million of available cash and the remaining $6.0 million will be funded within the next twelve months. Hydradyne is included in the Engineered Solutions segment.
Previous report
During the quarter ended March 31, 2025, sales increased $20.3 million or 1.8% compared to the prior year quarter, with sales from acquisitions adding $75.7 million or 6.6%, and unfavorable foreign currency translation reducing sales by $10.1 million or 0.9%. There were 63 selling days in the quarter ended March 31, 2025 and 63.5 selling days in the quarter ended March 31, 2024. Excluding the impact of businesses acquired and foreign currency translation, sales were down $45.3 million or 3.9% during the quarter, driven by a decrease of 3.1% primarily due to continued subdued demand due to economic uncertainty, in addition to a decrease of 0.8% due to the change in sales days.
Previous report
Sales from our Engineered Solutions segment increased $48.1 million or 13.5%. Acquisitions within this segment increased sales by $74.2 million or 20.8%. Excluding the impact of businesses acquired, sales decreased $26.1 million or 7.3%, driven by a decrease of 6.5% reflecting ongoing weakness across mobile fluid power OEM customers, and to a lesser extent, softer flow control and automation sales, as well as a decrease of 0.8% due to the change in sales days, offset by growth across the technology sector.
Previous report
Sales in our U.S. operations were up $15.1 million or 1.5%, as acquisitions added $65.5 million or 6.4%. Excluding the impact of businesses acquired, sales in the United States were down $50.4 million or 4.9%, driven by a 4.1% decrease from operations due to lower demand, in addition to a decrease of 0.8% due to the change in sales days. Sales from our Canadian operations decreased $1.9 million or 2.5%. Unfavorable foreign currency translation reduced Canadian sales by $4.5 million or 6.2%. Excluding the impact of foreign currency translation, Canadian sales increased $2.6 million or 3.7%, driven by an increase of 5.3% from operations due to higher demand, offset by a decrease of 1.6% due to the change in sales days. Sales in other countries increased $7.1 million or 12.7% from the prior year quarter, primarily due to acquisitions contributing $10.2 million or 18.3% along with an increase from operations of $2.5 million or 4.4%, offset by unfavorable foreign currency translation of $5.6 million or 10.0%.
Previous report
Operating income increased $8.2 million or 6.8% over the prior year period. As a percent of sales, operating income increased to 11.1% during the quarter ended March 31, 2025 from 10.6% during the prior year quarter due to expanded gross profit, including from acquisitions, despite softer demand.
Previous report
Other expense (income), net was expense of $1.3 million for the current year quarter, which primarily included net unfavorable foreign currency transaction losses of $1.0 million. During the prior year quarter, other expense (income), net was income of $1.7 million, which primarily included unrealized gains on investments held by non-qualified deferred compensation trusts of $1.6 million.
Previous report
Results of Operations
Previous report
Nine Months Ended March 31, 2025 and 2024
Previous report
Sales from our Service Center Based Distribution segment, decreased $30.0 million or 1.3%. Acquisitions within this segment increased sales by$9.2 million or 0.4% and unfavorable foreign currency translation reduced sales by$18.8 million or 0.8%. Excluding the impact of businesses acquired and foreign currency translation, sales decreased $20.4 million or 0.9%, driven by a decrease of 1.7% from operations driven by softer MRO spending and capital maintenance projects, offset by an increase of 0.8% due to the change in sales days.
Previous report
Sales from our Engineered Solutions segment increased $50.0 million or 4.7%. Acquisitions within this segment increased sales by $108.4 million or 10.3%. Excluding the impact of businesses acquired, sales decreased $58.4 million or 5.6%, driven by a decrease of 6.4% reflecting ongoing weakness across mobile fluid power OEM customers, and to a lesser extent, softer flow control and automation sales, offset by an increase of 0.8% due to the change in sales days.
Previous report
Our gross profit margin was 30.2% in the nine months ended March 31, 2025 compared to 29.5% in the prior year period. The gross profit margin for the current year period was positi vely impacted by 24 basis points due to a $7.9 million decrease in LIFO expense as compared to the prior year period, in addition to a positive impact from recent acquisitions and ongoing margin expansion initiatives.
Previous report
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 19.3% of sales in the nine months ended March 31, 2025 compared to 18.8% in the prior year period, an increase of $21.1 million or 3.4% compared to the prior year period. SD&A from businesses acquired added $35.1 million or 5.6% of SD&A expenses, including $5.6 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates reduced SD&A during the nine months ended March 31, 2025 by $3.5 million or 0.6% compared to the prior year period. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A decreased $10.5 million or 1.6% during the nine months ended March 31, 2025 compared to the prior year period as total compensation decreased $18.8 million due to cost controls, efficiency gains, and lower incentive compensation based on company performance. This reduction in total compensation was offset by a $4.2 million increase in occupancy costs (excluding acquisitions) and a $1.7 million increase in bad debt expense during the nine months ended March 31, 2025 compared to the prior year period. All other expenses within SD&A were up $2.4 million.
Previous report
Operating income increased$7.0 million or 2.0% over the prior year period. As a percent of sales, operating income was 10.9% for thenine months ended March 31, 2025 compared to 10.7% for the prior year period.
Previous report
Operating income, as a percentage of sales for the Service Center Based Distribution segment, increased to 13.2% in the current year period from 12.7% in the prior year period. Operating income, as a percentage of sales for the Engineered Solutions segment, was 14.3% in both the current year and prior year periods.
Previous report
The Company had net interest income in the current year period of $0.7 million compared to net interest expense of $3.5 million in the prior year period due to reduced debt levels in fiscal 2025 coupled with greater interest income from higher cash balances and investment yields.
Previous report
The effective income tax rate was 22.1% for the nine months ended March 31, 2025 compared to 21.0% for the nine months ended March 31, 2024. The increase in the effective tax rate is primarily due to the reversal of a tax valuation allowance related to Mexico during the prior year period. We expect our full year tax rate for fiscal 2025 to be in the 22.0% to 23.0% range.
Previous report
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 of $282.1 million was funded using $276.1 million of available cash and the remaining $6.0 million will be funded within the next twelve months. Hydradyne is included in the Engineered Solutions segment.
Previous report
The increase in cash provided by operating activities during the nine months ended March 31, 2025 from the prior period is due to changes in working capital for the periodof $82.8 million primarily driven by (amounts in thousands):
Previous report
Unsecured Shelf Facility
Previous report
At March 31, 2025 the Company had no remaining borrowings outstanding under its unsecured shelf facility agreement with Prudential Investment Management. Fees on this facility ranged from 0.25% to 1.25% per year based on the Company's leverage ratio at each quarter end. The “Series E” notes carried a fixed interest rate of 3.08%, and the remaining principal balance of$25.0 million was paid in October 2024.
Previous report
Other Long-Term Borrowing
Previous report
In 2014, the Company assumed$2.4 million 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.
Previous report
On a consolidated basis, DSO was 58.2 at March 31, 2025 compared to 56.2 June 30, 2024 due to timing of customer payments.
Reworded paragraphs (31)
Previous wording
Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” 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. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the third quarter of fiscal 2025, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Singapore, and Costa Rica from 619 facilities.
Current wording
Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” 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. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the first quarter of fiscal 2026, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Singapore, and Costa Rica from 594 facilities.
Previous wording
The following is Management's Discussion and Analysis of significant factors which have affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows. When reviewing the discussion and analysis set forth below, please note that the majority of SKUs (Stock Keeping Units) we sell in any given period are not necessarily sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes in product mix and volume.
Current wording
The following is Management's Discussion and Analysis of significant factors which affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows. When reviewing the discussion and analysis set forth below, please note that the stock keeping units ("SKUs") we sell in any given period may not necessarily be sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes in product mix and volume.
Previous wording
Consolidated sales for the quarter ended March 31, 2025 increased $20.3 million or 1.8% compared to the prior year quarter, with acquisitions contributing to sales growth by $75.7 million or 6.6%, and unfavorable foreign currency translation of $10.1 million reducing sales by 0.9%. The Company had operating income of $129.4 million, or operating margin of 11.1% of sales for the quarter ended March 31, 2025 compared to an operating income of $121.2 million, or operating margin of 10.6% of sales for the same quarter in the prior year. Net income of $99.8 million increased 2.7% compared to the prior year quarter.
Current wording
Consolidated sales for the quarter ended September 30, 2025 increased $100.6 million or 9.2% compared to the prior year quarter, with acquisitions increasing sales by $69.7 million or 6.3% and unfavorable foreign currency translation of $0.9 million reducing sales by 0.1%. Operating margin was 10.8% of sales for the quarter ended September 30, 2025 compared to 10.3% of sales for the same quarter in the prior year. Net income of $100.8 million increased 9.5% compared to the prior year quarter.
Previous wording
Applied monitors several economic indices that are key indicators for industrial economic activity in the United States. These include the Industrial Production (IP) and total industry Manufacturing Capacity Utilization (MCU) indices published by the Federal Reserve Board and the Purchasing Managers Index (PMI) published by the Institute for Supply Management (ISM). Historically, our performance correlates well with the MCU, which measures productivity and calculates a ratio of actual manufacturing output versus potential full capacity output. When manufacturing plants are running at a high rate of capacity, they tend to wear out machinery more frequently and require replacement parts.
Current wording
Applied monitors several economic indices that have been key indicators for industrial economic activity in the United States. These include the manufacturing Industrial Production (IP) and Manufacturing Capacity Utilization (MCU) indices published by the Federal Reserve Board and the Purchasing Managers Index (PMI) published by the Institute for Supply Management (ISM). Historically, our performance correlates well with the MCU, which measures productivity and calculates a ratio of actual manufacturing output versus potential full capacity output. When manufacturing plants are running at a high rate of capacity, they tend to wear out machinery more frequently and require replacement parts.
Previous wording
The MCU and IP indices have increased since December 2024. The MCU for March 2025 was 77.8, which is up from the December 2024 reading of 77.6 but down from the June 2024 reading of 78.2. The ISM PMI registered 49.0 in March 2025, down from the December 2024 reading of 49.2, but up from the June 2024 reading of 48.3, reflecting continued contraction in the U.S. manufacturing sector. The indices for the months during the current quarter, along with the indices for the prior fiscal year end and prior quarter end, were as follows:
Current wording
Through August 2025, the MCU index declined slightly since June 2025 while the IP index increased slightly since June 2025. The ISM PMI registered 49.1 in September 2025, up slightly from the June 2025 reading of 49.0. The indices available for the months during the current quarter, along with the indices for the prior fiscal year end, were as follows:
Previous wording
The number of Company employees was 6,818 at March 31, 2025, 6,562 at June 30, 2024, and 6,350 at March 31, 2024. The number of operating facilities totaled 619 at March 31, 2025, 590 at June 30, 2024, and 586 at March 31, 2024. The increases in employees and operating facilities are primarily due to the Hydradyne acquisition.
Current wording
The number of Company employees was 6,794 at September 30, 2025, 6,837 at June 30, 2025, and 6,549 at September 30, 2024. The number of operating facilities totaled 594 at September 30, 2025, 596 at June 30, 2025 and 593 at September 30, 2024.
Previous wording
During thenine months ended March 31, 2025, sales increased $20.0 million or 0.6%compared to the prior year period, with sales from acquisitions adding $117.6 million or 3.5% and unfavorable foreign currency translation accounting for a decrease of $18.8 million or 0.6%. There were 189 selling days in the nine months ended March 31, 2025 and 187.5 selling days in the nine months ended March 31, 2024. Excluding the impact of businesses acquiredand foreign currency translation, sales were down $78.8 million or 2.3% during the period, driven by a decrease of 3.1% from operations primarily due to continued subdued demand due to economic uncertainty, offset by an increase of 0.8% due to the change in the sales days.
Current wording
During the quarter ended September 30, 2025, sales increased $100.6 million or 9.2% compared to the prior year quarter, with sales from acquisitions adding $69.7 million or 6.3% and unfavorable foreign currency translation accounting for a decrease of $0.9 million or 0.1%. There were 64 selling days in both the quarter ended September 30, 2025 and September 30, 2024. Excluding the impact of businesses acquired and foreign currency translation, sales were up $31.8 million or 3.0% during the quarter due to higher demand in the Service Center segment due to firming technical MRO demand and stronger price contribution.
Previous wording
Sales from our Service Center Based Distribution segment, which operates primarily in MRO markets, decreased $27.8 million or 3.5%. Acquisitions within this segment increased sales by $1.5 million or 0.2% and unfavorable foreign currency translation decreased sales by $10.1 million or 1.3%. Excluding the impact of businesses acquired and foreign currency translation, sales decreased $19.2 million or 2.4%, driven by a decrease of 1.6% primarily driven by softer MRO spending and capital maintenance projects, as well as a decrease of 0.8% due to the change in sales days.
Current wording
Sales from our Service Center segment, which operates primarily in MRO markets, increased $32.7 million or 4.4%. Acquisitions within this segment increased sales by $0.5 million or 0.1%. Unfavorable foreign currency translation reduced sales by $0.9 million or 0.1%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $33.1 million or 4.4%, driven by firming technical MRO demand.
Previous wording
Sales in our U.S. operations were down $2.0 million or 0.1%, as acquisitions added $82.7 million or 2.8%. Excluding the impact of businesses acquired, sales in the United States were down $84.7 million or 2.9%, driven by a 3.7% decrease from operations due to lower demand, offset by an increase of 0.8% due to the change in sales days. Sales from our Canadian operations decreased $5.1 million or 2.2%. Unfavorable foreign currency translation decreased Canadian sales by $8.0 million or 3.5%. Excluding the impact of foreign currency translation, Canadian sales were up$2.9 million or 1.3%, driven primarily by an increase in sales days. Sales in other countries increased $27.1 million or 15.8% from the prior year, primarily due to acquisitions contributing $34.9 million or 20.3%, along with an increase from operations of $3.0 million or 1.8%, offset by unfavorable foreign currency translation of $10.8 million or 6.3%.
Current wording
Sales in our U.S. operations increased $99.3 million or 10.4%, as acquisitions added $69.7 million or 7.3%. Excluding the impact of businesses acquired, sales in the United States were up $29.6 million or 3.1% due to higher demand in the Service Center segment. Sales in Canada increased $3.8 million or 5.4%. Unfavorable foreign currency translation decreased Canadian sales by $0.7 million or 0.9%. Excluding the impact of foreign currency translation, Canadian sales were up $4.5 million or 6.3% due to higher demand in the Service Center segment. Sales in other countries decreased $2.5 million or 3.6% from the prior year quarter. Unfavorable foreign currency translation of $0.3 million or 0.4%. Excluding the impact of foreign currency translation, sales in other countries were down $2.3 million or 3.2% due primarily to lower demand in Mexico.
Previous wording
Our gross profit margin was 30.5% in the quarter ended March 31, 2025 compared to 29.5% in the prior year quarter. The gross profit margin for the current year quarter was positively impacted by 22 basis points due to a $2.6 million decrease in LIFO expense as compared to the prior year quarter, in addition to a positive impact from recent acquisitions and ongoing margin expansion initiatives.
Current wording
Our gross profit margin was 30.1% in the quarter ended September 30, 2025 compared to 29.6% in the prior period. The gross profit margin for the current year period was positively impacted by 34 basis points from recent acquisitions and solid channel execution.
Previous wording
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 19.4% of sales in the quarter ended March 31, 2025 compared to 18.9% in the prior year quarter, an increase of $8.9 million or 4.1% compared to the prior year quarter. SD&A from businesses acquired added $24.5 million or 11.3% of SD&A expenses, including $3.7 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates reduced SD&A during the quarter ended March 31, 2025 by $2.0 million or 0.9% compared to the prior year quarter. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A decreased $13.6 million or 6.3% during the quarter ended March 31, 2025 compared to the prior year quarter, as total compensation decreased $13.5 million primarily due to cost controls, efficiency gains, and lower incentive compensation based on company performance. All other expenses within SD&A were down $0.1 million.
Current wording
SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, facility related expenses and expenses incurred in acquiring businesses. SD&A was 19.4% of sales in the quarter ended September 30, 2025 compared to 19.3% in the prior year quarter, an increase of $20.5 million or 9.7% compared to the prior year quarter. SD&A from businesses acquired added $19.3 million or 9.1%, including $3.1 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates had the effect of decreasing SD&A during the quarter ended September 30, 2025 by $0.2 million or 0.1% compared to the prior year quarter. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A increased $1.4 million or 0.7% during the quarter ended September 30, 2025 compared to the prior year quarter primarily due to higher compensation costs.
Previous wording
Operating income, as a percentage of sales for the Service Center Based Distribution segment, increased to 14.1% in the current year quarter from 12.7% in the prior year quarter. Operating income, as a percentage of sales for the Engineered Solutions segment, decreased to 13.3% in the current year quarter from 13.9% in the prior year quarter.
Current wording
Operating income, as a percentage of sales for the Service Center segment increased to 13.3% in the current year quarter from 12.5% in the prior year quarter. Operating income as a percentage of sales for the Engineered Solutions segment decreased to 11.0% in the current year quarter from 11.8% in the prior year quarter.
Previous wording
Other expense (income), net was income of $1.8 million for the nine months ended March 31, 2025, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $0.7 million, life insurance income of $0.7 million, net favorable foreign currency transaction gains of $0.2 million, and $0.2 million of other income. During the prior year period, other expense (income), net was income of $4.2 million, which primarily consisted of unrealized gains on investments held by non-qualified deferred compensation trusts of $3.0 million and life insurance income of $0.8 million.
Current wording
Other income, net, which represents certain non-operating items of income and expense, was income of $0.5 million in the current year quarter compared to income of $2.3 million in the prior year quarter. Current quarter income primarily consists of unrealized gains on investments held by non-qualified deferred compensation trusts of $1.5 million, offset by foreign currency transaction losses of $1.0 million. Other income, net in the prior year quarter consisted primarily of unrealized gains on investments held by non-qualified deferred compensation trusts of $1.2 million and foreign currency transaction gains of $0.9 million.
Previous wording
The effective income tax rate was 21.6% for the quarter ended March 31, 2025 compared to 20.7% for the quarter ended March 31, 2024. The increase in the effective tax rate is primarily due to a decrease in compensation-related deductions during the quarter ended March 31, 2025 compared to the prior year quarter.
Current wording
The effective income tax rate was 21.6% for the quarter ended September 30, 2025 compared to 20.7% for the quarter ended September 30, 2024. The increase in the effective tax rate over the prior year is primarily due to a decrease in compensation-related deductions during the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024. We expect our full year tax rate for fiscal 2026 to be in the 23.0% to 24.0% range.
Previous wording
As a result of the factors addressed above, net income for the quarter ended March 31, 2025 increased$2.6 million or 2.7% compared to the prior year quarter. Diluted net income per share was $2.57 per share for the quarter ended March 31, 2025 compared to $2.48 per share in the prior year quarter, an increase of 3.6%.
Current wording
As a result of the factors addressed above, net income for the quarter ended September 30, 2025 increased $8.7 million or 9.5% compared to the prior year quarter. Diluted net income per share was $2.63 per share for the quarter ended September 30, 2025 compared to $2.36 per share in the prior year quarter, an increase of 11.4%.
Previous wording
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At March 31, 2025, we had total debt obligations outstanding of $572.3 million compared to $597.4 million at June 30, 2024. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, and cash provided from operations will be sufficient to finance normal working capital needs in each of the countries in which we operate, payment of dividends, acquisitions, investments in properties, facilities and equipment, debt service, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.
Current wording
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. We had total debt obligations outstanding of $572.3 million at both September 30, 2025 and June 30, 2025. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, and cash provided from operations will be sufficient to finance normal working capital needs in each of the countries in which we operate, payment of dividends, acquisitions, investments in properties, facilities and equipment, debt service, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.
Previous wording
The Company's working capital at March 31, 2025 was $1,217.2 million, compared to $1,268.8 million at June 30, 2024. The current ratio was 3.6 to 1 at March 31, 2025 and 3.5 to 1 at June 30, 2024.
Current wording
The Company's working capital at September 30, 2025 was $1,267.5 million, compared to $1,221.3 million at June 30, 2025. The current ratio was 3.5 to 1 at September 30, 2025 and 3.3 to 1 at June 30, 2025.
Previous wording
Net cash used in investing activities during the nine months ended March 31, 2025 increased from the prior period primarily due to $273.3 million used for acquisitions in the nine months ended March 31, 2025 compared to$21.4 million used for acquisitions in the prior year period.
Current wording
Net cash used in investing activities during the three months ended September 30, 2025 decreased from the prior period primarily due to$2.3 million used for acquisitions in thecurrent year quarter compared to $10.5 million used for acquisitions in the prior year quarter.
Previous wording
Net cash used in financing activities during the nine months ended March 31, 2025 increased from the prior year period primarily due to $79.8 million of cash used to repurchase shares of common stock during the nine months ended March 31, 2025 compared to $28.9 million used to repurchase shares of common stock in the prior year period.
Current wording
Net cash used in financing activities during the three months ended September 30, 2025 increased from the prior quarter primarily due to $53.2 million used to repurchase 204,136 shares of common stock in the current year quarter compared to $10.0 million used to repurchase 52,000 shares of common stock in the prior year quarter.
Previous wording
The Board of Directors has authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. During the three months ended March 31, 2025, the Company acquired 204,500 shares of the Company's common stock on the open market for $49.3 million. During the nine months ended March 31, 2025, the Company acquired 331,876 shares of the Company's common stock on the open market for $79.3 million. During the three months ended March 31, 2024, the Company acquired 100,053 shares of treasury stock on the open market for $18.2 million. During the nine months ended March 31, 2024, the Company acquired 163,000 shares of treasury stock on the open market for $28.9 million. At March 31, 2025, we had authorization to repurchase an additional 770,124 shares. On April 28, 2025 the Board of Directors authorized the repurchase of 1.5 million shares of the Company's stock under a new authorized program, replacing the prior authorized program.
Current wording
The Board of Directors has authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. At September 30, 2025, we had authorization to repurchase 1,095,864 shares. During the three months ended September 30, 2025, we purchased 204,136 shares of the Company's common stock on the open market at an average price per share of $260.49. During the three months ended September 30, 2024, we purchased 52,000 shares of the Company's common stock on the open market at an average price per share of $191.92.
Previous wording
In December 2021, the Company entered into a five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes. The revolving credit facility provides a$900.0 million unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to$500.0 million. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on the Company's net leverage ratio or Secured Overnight Financing Rate (SOFR) plus a margin that ranges from 80 to 155 basis points based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled$515.8 million at March 31, 2025 and June 30, 2024, and is available to fund future acquisitions or other capital and operating requirements. These amounts are net of outstanding letters of credit of$0.2 million at March 31, 2025 and June 30, 2024, to secure certain insurance obligations. The interest rate on the revolving credit facility was 5.22% and 6.24% as of March 31, 2025 and June 30, 2024, respectively.
Current wording
In December 2021, the Company entered into a five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes. The revolving credit facility provides a $900.0 million unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to $500.0 million. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on the Company's net leverage ratio or Secured Overnight Financing Rate (SOFR) plus a margin that ranges from 80 to 155 basis points based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled $515.7 million and $515.8 million at September 30, 2025 and June 30, 2025, respectively, and is available to fund future acquisitions or other capital and operating requirements. These amounts are net of outstanding letters of credit of $0.3 million and $0.2 million at September 30, 2025 and June 30, 2025, respectively, to secure certain insurance obligations. The interest rate on the revolving credit facility was 5.06% and 5.23% as of September 30, 2025 and June 30, 2025, respectively.
Previous wording
Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of$5.3 million and$4.0 million as of March 31, 2025 and June 30, 2024, respectively, in order to secure certain insurance obligations.
Current wording
Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of $5.3 million as of September 30, 2025 and June 30, 2025, to secure certain insurance obligations.
Previous wording
In August 2018, the Company established a trade receivable securitization facility (AR Securitization Facility). 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, effectively reducing borrowing costs. The AR Securitization Facility's maximum borrowing capacity is$250.0 million, fees on amounts borrowed are 0.90% per year, and the facility terminates on August 4, 2026. 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$250.0 million 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 March 31, 2025 and June 30, 2024 was 5.32% and 6.35%, respectively.
Current wording
In August 2018, the Company established a trade receivable securitization facility (the “AR Securitization Facility”). 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 $250.0 million 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 $250.0 million 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 September 30, 2025 and June 30, 2025 was 5.06% and 5.32%, respectively. On July 10, 2025, the Company amended the AR Securitization Facility and extended the term to July 10, 2028.
Previous wording
In 2019, the Company entered into an interest rate swap which mitigates variability in forecasted interest payments on $384.0 million of the Company’s U.S. dollar-denominated unsecured variable rate debt. For more information, see note 6, Derivatives, to the consolidated financial statements, included in Item 1 under the caption “Notes to Condensed Consolidated Financial Statements.”
Current wording
In 2019, the Company entered into an interest rate swap that expires in January 2026, which mitigates variability in forecasted interest payments on $384.0 million of the Company’s U.S. dollar-denominated unsecured variable rate debt. For more information, see Note 6, Derivatives, to the condensed consolidated financial statements, included in Item 1 under the caption “Notes to Condensed Consolidated Financial Statements.”
Previous wording
The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At March 31, 2025, the most restrictive of these covenants required that the Company maintain net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). At March 31, 2025, the Company's net indebtedness was less than 0.5 times consolidated income before interest, taxes, depreciation and amortization. The Company was in compliance with all financial covenants at March 31, 2025.
Current wording
The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At September 30, 2025, 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 in these agreements). At September 30, 2025, the Company's net indebtedness was less than 0.4 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). The Company was in compliance with all financial covenants at September 30, 2025.
Previous wording
The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable (amounts in thousands):
Current wording
The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable (all dollar amounts in thousands):
Previous wording
Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's locations.
Current wording
Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's operations.
Previous wording
As of March 31, 2025, approximately 1.8% of our accounts receivable balances are more than 90 days past due, compared to 1.5% at June 30, 2024. On an overall basis, our provision for losses on accounts receivable represents 0.08% of sales for the nine months ended March 31, 2025 compared to 0.03% of sales for the nine months ended March 31, 2024. The increase primarily relates to provisions recorded in the nine months ended March 31, 2025 for customer credit deterioration and bankruptcies primarily in the U.S. operations of the Service Center Based Distribution segment as well as recoveries recorded in the same operations in the nine months ended March 31, 2024. Historically, this percentage is between 0.10% to 0.15%. Management believes the overall receivables aging and provision for losses on accounts receivable are at reasonable levels.
Current wording
On a consolidated basis, DSO was 56.5 at September 30, 2025 compared to 56.6 at June 30, 2025. As of September 30, 2025,1.7% of our accounts receivable balances are more than 90 days past due, compared to 2.1% at June 30, 2025. On an overall basis, we generated net recoveries on previously provisioned losses on uncollected receivables representing (0.14)% of our sales in the three months ended September 30, 2025, compared to provision for losses of 0.10% of sales for the three months ended September 30, 2024. This change is primarily in the U.S. operations of the Service Center segment. Historically, this percentage is around 0.10% to 0.15%. Management believes the overall receivables aging and provision for losses on uncollected receivables are at reasonable levels.
Previous wording
Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis, and believes that using average costs to determine the inventory turnover ratio instead of LIFO costs provides a more useful analysis. The annualized inventory turnover based on average costs was 4.3 for the periods ended March 31, 2025 and June 30, 2024.
Current wording
Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis, and believes that using average costs to determine the inventory turnover ratio instead of LIFO costs provides a more useful analysis. The annualized inventory turnover based on average costs was 4.3 for the period ended September 30, 2025 and 4.4 for the period ended June 30, 2025.
Previous wording
Management’s Discussion and Analysis contains statements that are forward-looking based on management’s current expectations about the future. Forward-looking statements are often identified by qualifiers, such as “guidance”, “expect”, “believe”, “plan”, “intend”, “will”, “should”, “could”, “would”, “anticipate”, “estimate”, “forecast”, “may”, "optimistic" and derivative or similar words or expressions. Similarly, descriptions of objectives, strategies, plans, or goals are also forward-looking statements. These statements may discuss, among other things, expected growth, future sales, future cash flows, future capital expenditures, future performance, and the anticipation and expectations of the Company and its management as to future occurrences and trends. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in its rules, regulations and releases.
Current wording
Management’s Discussion and Analysis contains statements that are forward-looking based on management’s current expectations about the future. Forward-looking statements are often identified by qualifiers, such as “guidance”, “expect”, “believe”, “plan”, “intend”, “will”, “should”, “could”, “would”, “anticipate”, “estimate”, “forecast”, “may”, "optimistic" and derivative or similar words or expressions. Similarly, descriptions of objectives, strategies, plans, or goals are also forward-looking statements. These statements may discuss, among other things, expected growth, future sales, future cash flows, future capital expenditures, future performance, and the anticipation and expectations of the Company and its management as to future occurrences and trends. The Company intends that the forward-looking statements be subject to the safe harbors established in the Private Securities Litigation Reform Act of 1995, as amended, and by the Securities and Exchange Commission in its rules, regulations and releases.
Previous wording
Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company’s control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of those statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company assumes no obligation publicly to update or revise any forward-looking statements, whether because of new information or events, or otherwise, except as may be required by law.
Current wording
Readers are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are based on current expectations regarding important risk factors, many of which are outside the Company’s control. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of those statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. In addition, the Company assumes no obligation to update or revise any forward-looking statements, whether because of new information or events, or otherwise, except as may be required by law.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On October 24, 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 ongoing working capital and other general corporate purposes. The new revolving credit facility provides a $900.0 million 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 $800.0 million. The new revolving credit facility also provides for a $25.0 million sublimit for swing line loans and a $50.0 million sublimit for letters of credit.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
The following table is included to aid in review of Applied's condensed statements of consolidated income.
Previous report — wording carried elsewhere
The following table shows changes in sales by reportable segment (amounts in millions).
Previous report — wording carried elsewhere
The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, Singapore, and Costa Rica (amounts in millions).
Previous report — wording carried elsewhere
The following table shows the changes in selling, distribution and administrative expense (SD&A) (amounts in millions).
Previous report — wording carried elsewhere
As a result of the factors addressed above, net income for the nine months ended March 31, 2025 increased $2.9 million or 1.0%compared to the prior year period. Diluted net income per share was $7.33 per share for the nine months ended March 31, 2025 compared to $7.18 per share in the prior year period.