APPLIED INDUSTRIAL TECHNOLOGIES INC
For the period ended Dec 31, 2025. Filed Jan 27, 2026.
View on SEC.govAbout this filing
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.
Dec 31, 2025 · Filed Jan 27, 2026
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 2025-09-30; filed 2025-10-28.
0000109563-25-000107
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-12-31; filed 2026-01-27.
0000109563-26-000015
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 58 previous paragraphs and 79 current paragraphs.
23 unchanged; 30 reworded; 19 added; 4 removed; 1 previous and 7 current paragraphs rearranged.
Tables are not compared: 8 previous and 13 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 (19)
Current report
Sales from our Engineered Solutions segment increased $66.5 million or 19.1%. Acquisitions within this segment increased sales by $64.9 million or 18.6%. Excluding the impact of businesses acquired, sales increased $1.6 million, or 0.5%, primarily reflecting price contribution, as well as modest volume growth across fluid power mobile and industrial OEM customers, partially offset by lower flow control sales.
Current report
Our gross profit margin was 30.4% in the quarter ended December 31, 2025 compared to 30.6% in the prior year quarter. The gross profit margin for the current year quarter was negatively impacted by a $6.3 million increase in LIFO expense as compared to the prior year quarter, offset by positive mix from recent acquisitions as well as solid channel execution.
Current report
Mexico during the quarter ended December 31, 2025.
Current report
Results of Operations
Current report
Six Months Ended December 31, 2025 and 2024
Current report
During thesix months ended December 31, 2025, sales increased $190.6 million or 8.8%compared to the prior year period, with sales from acquisitions adding $133.0 million or 6.1% and favorable foreign currency translation accounting for an increase of $1.4 million or 0.1%. There were 126 selling days in both the six months ended December 31, 2025 and December 31, 2024. Excluding the impact of businesses acquiredand foreign currency translation, sales increased $56.2 million or 2.6%, primarily reflecting price contribution and volume growth in the Service Center segment.
Current report
Sales from our Service Center segment increased $56.2 million, or 3.8%. Acquisitions within this segment increased sales by$0.5 million or less than 0.1% and favorable foreign currency translation increased sales by$1.4 million or 0.1%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $54.3 million or 3.7%, primarily reflecting price contribution, as well as an increase in volumes tied to internal growth initiatives and firming demand.
Current report
Sales from our Engineered Solutions segment increased $134.4 million or 19.2%. Acquisitions within this segment increased sales by $132.5 million or 19.0%. Excluding the impact of businesses acquired, sales increased $1.9 million or 0.2%, primarily reflecting price contribution, offset by lower flow control sales.
Current report
Sales in our U.S. operations increased $193.9 million or 10.3%, as acquisitions added $133.0 million or 7.0%. Excluding the impact of businesses acquired, sales in the United States increased $60.9 million or 3.3%, reflecting price contribution and volume growth in the Service Center segment. Sales from our Canadian operations increased $0.5 million or 0.4%. Unfavorable foreign currency translation decreased Canadian sales by $0.4 million or 0.3%. Excluding the impact of foreign currency translation, Canadian sales were up$0.9 million or 0.7% primarily reflecting price contribution and modest volume growth. Sales in other countries decreased $3.8 million or 2.8%. Favorable foreign currency translation increased sales $1.8 million or 1.3%. Excluding the impact of foreign currency translation, sales in other countries decreased $5.6 million or 4.1% due primarily to lower demand in Mexico.
Current report
Operating income increased$18.2 million, or 7.8%, to $252.2 million in the current year period from $234.0 million during the prior year period, and as a percentage of sales decreased to 10.7% from 10.8% during the prior year period.
Current report
Operating income, as a percentage of sales for the Service Center segment, increased to 13.0% in the current year period from 12.6% in the prior year period. Operating income, as a percentage of sales for the Engineered Solutions segment, decreased to 11.3% in the current year period from 12.9% prior year periods, due to recent acquisitions.
Current report
The Company had net interest expense in the current year period of $1.9 million compared to net interest income of $1.6 million in the prior year period primarily reflecting lower interest income on lower cash balances as compared to the prior year period.
Current report
As a result of the factors addressed above, net income for the six months ended December 31, 2025 increased $10.8 million or 5.8%compared to the prior year period. Diluted net income per share was $5.14 per share for the six months ended December 31, 2025 compared to $4.76 per share in the prior year period, an increase of 8.0%.
Current report
The decrease in cash provided by operating activities during the six months ended December 31, 2025 from the prior period is due to changes in working capital for the periodof$27.7 million primarily driven by (amounts in thousands):
Current report
Revolving Credit Facility
Current report
The new credit facility replaced the Company's previous credit facility agreement. Unused lines under the previous facility, net of outstanding letters of credit of$0.2 million to secure certain insurance obligations, totaled$515.7 million at June 30, 2025, and were available to fund future acquisitions or other capital and operating requirements. The interest rate on the term loan was 5.23% as of June 30, 2025.
Current report
The Company paid$1.6 million of debt issuance costs related to the new revolving credit facility in the three months ended December 31, 2025, which are included in other current assets and other assets on the condensed consolidated balance sheet as of December 31, 2025 and will be amortized over the five-year term of the new credit facility. The Company analyzed the unamortized debt issuance costs related to the previous credit facility under ASC Topic 470 -Debt. As a result of this analysis, less than $0.1 million of unamortized debt issuance costs were expensed and included within interest expense, net on the condensed statements of consolidated income in the three months ended December 31, 2025, and$0.8 million of unamortized debt issuance costs were rolled forward into the new credit facility and will be amortized over the five-year term of the new credit facility.
Current report
Cash Flow Hedge Maturity
Current report
As disclosed in Footnote 6 to this Form 10-Q, the interest rate swap the Company entered into in January 2019 matures on January 31, 2026. As a result of the maturity of this agreement, we estimate future interest expense could increase by approximately $3.5 million on a quarterly basis, based on current market rates, and outstanding borrowings as of December 31, 2025. The Company may use available cash to reduce outstanding borrowings under its revolving credit facility to mitigate the impact of higher interest costs.
Removed paragraphs (4)
Previous 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.
Previous 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.
Previous report
Revolving Credit Facility & Term Loan
Previous report
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.”
Reworded paragraphs (30)
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 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.
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 second quarter of fiscal 2026, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Singapore, and Costa Rica from 591 facilities.
Previous 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.
Current 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 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.
Previous 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.
Current wording
Consolidated sales for the quarter ended December 31, 2025 increased $90.0 million or 8.4% compared to the prior year quarter, with acquisitions contributing to sales growth by $64.9 million or 6.0%, including favorable foreign currency translation of $2.2 million or 0.2%. The Company had operating income of $123.2 million, or operating margin of 10.6% of sales for the quarter ended December 31, 2025 compared to an operating income of $120.9 million, or operating margin of 11.3% of sales for the same quarter in the prior year. Net income of $95.3 million increased 2.2% compared to the prior year quarter.
Previous 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.
Current 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 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
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:
Current wording
Through December 2025, both the MCU and IP indices declined slightly since September 2025. The MCU for December 2025 was 75.6, which is down from the September and June 2025 readings of 75.9 and 76.8, respectively. The ISM PMI registered 47.9 in December 2025, down from the September and June 2025 readings of 49.1 and 49.0, respectively. 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:
Previous 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.
Current wording
The number of Company employees was 6,794 at December 31, 2025, 6,837 at June 30, 2025, and 6,916 at December 31, 2024. The number of operating facilities totaled 591 at December 31, 2025, 596 at June 30, 2025, and 624 at December 31, 2024.
Previous 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.
Current wording
During the quarter ended December 31, 2025, sales increased $90.0 million or 8.4% compared to the prior year quarter, with sales from acquisitions adding $64.9 million or 6.0%, and favorable foreign currency translation increasing sales by $2.2 million or 0.2%. There were 62 selling days in both the quarters ended December 31, 2025 and December 31, 2024. Excluding the impact of businesses acquired and foreign currency translation, sales increased $22.9 million or 2.2% during the quarter primarily reflecting price contribution and modest volume growth in the Service Center segment.
Previous 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.
Current wording
Sales from our Service Center segment, which operates primarily in MRO markets, increased $23.5 million or 3.2%. Favorable foreign currency translation increased sales by $2.2 million or 0.3%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $21.3 million or 2.9%, primarily reflecting price contribution, as well as a modest increase in volumes tied to internal growth initiatives and firming demand.
Previous 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.
Current wording
Sales in our U.S. operations increased $94.6 million or 10.2%, as acquisitions added $64.9 million or 7.0%. Excluding the impact of businesses acquired, sales in the United States increased $29.7 million or 3.2% due primarily to stronger price contribution and modest volume growth in the Service Center segment. Sales from our Canadian operations decreased $3.3 million or 4.2%. Favorable foreign currency translation increased Canadian sales by $0.2 million or 0.3%. Excluding the impact of foreign currency translation, Canadian sales decreased $3.5 million or 4.5% due to softer end-market demand in the Service Center segment. Sales in other countries decreased $1.3 million or 1.9%. Favorable foreign currency translation increased sales $2.0 million or 3.1%. Excluding the impact of foreign currency translation, sales in other countries decreased $3.3 million or 4.9% due primarily to lower demand in Mexico.
Previous 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.
Current 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 19.8% of sales in the quarter ended December 31, 2025 compared to 19.3% in the prior year quarter, an increase of $22.9 million or 11.1% compared to the prior year quarter. SD&A from businesses acquired added $19.7 million or 9.5% of SD&A expenses, including $3.1 million of intangibles amortization related to these acquisitions. Changes in foreign currency exchange rates increased SD&A during the quarter ended December 31, 2025 by $0.4 million or 0.2% compared to the prior year quarter. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A increased $2.8 million or 1.4% during the quarter ended December 31, 2025 compared to the prior year quarter primarily due to higher compensation costs.
Previous wording
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 wording
Operating income increased $2.3 million or 1.9%, to$123.2 million in the current year quarter from $120.9 million during the prior year quarter, and as a percent of sales decreased to 10.6% from 11.3% during the prior year quarter.
Previous 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.
Current wording
Operating income, as a percentage of sales for the Service Center segment, decreased to 12.6% 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 11.5% in the current year quarter from 14.0% in the prior year quarter, due to recent acquisitions.
Previous wording
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 wording
The Company had net interest expense in the current year period of $0.9 million compared to net interest income of $0.9 million in the prior year period primarily reflecting lower interest income on lower cash balances as compared to the prior year period.
Previous 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.
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 $0.8 million in the prior year quarter. Current quarter income primarily consists of unrealized gains on investments held by non-qualified deferred compensation trusts of $0.5 million. Other income, net in the prior quarter consisted primarily of unrealized gains on investments held by non-qualified deferred compensation trusts of $0.2 million and foreign currency transaction gains of $0.3 million.
Previous 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.
Current wording
The effective income tax rate was 22.3% for the quarter ended December 31, 2025 compared to 23.9% for the quarter ended December 31, 2024. The decrease in the effective tax rate is primarily due to the reversal of a tax valuation allowance related to
Previous 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%.
Current wording
As a result of the factors addressed above, net income for the quarter ended December 31, 2025 increased$2.1 million or 2.2% compared to the prior year quarter. Diluted net income per share was $2.51 per share for the quarter ended December 31, 2025 compared to $2.39 per share in the prior year quarter, an increase of 5.0%.
Previous 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.
Current wording
Our gross profit margin was 30.3% in the six months ended December 31, 2025 compared to 30.1% in the prior year period. The gross profit margin for the current year period was positively impacted by favorable acquisition mix and solid channel execution, partially offset by a $6.9 million increase in LIFO expense as compared to the prior year period.
Previous wording
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 wording
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 six months ended December 31, 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.
Previous 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.
Current wording
The Company's working capital at December 31, 2025 was $1,273.0 million, compared to $1,221.3 million at June 30, 2025. The current ratio was 3.7 to 1 at December 31, 2025 and 3.3 to 1 at June 30, 2025.
Previous 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.
Current wording
Net cash used in investing activities during the six months ended December 31, 2025 decreased from the prior period primarily due to $2.4 million used for acquisitions in the six months ended December 31, 2025 compared to$273.1 million used for acquisitions in the prior year period.
Previous 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.
Current wording
Net cash used in financing activities during the six months ended December 31, 2025 increased from the prior year period primarily due to $143.4 million of cash used to repurchase 550,636 shares of common stock during the six months ended December 31, 2025 compared to $30.1 million used to repurchase 127,376 shares of common stock in the prior year period. This was partially offset by lower long-term debt repayments in the current year period of $25.1 million.
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. 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.
Current wording
The Board of Directors 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 December 31, 2025, we had authorization to repurchase 749,364 shares. During the three months ended December 31, 2025, the Company acquired 346,500 shares of the Company's common stock on the open market for $89.0 million. During thesix months ended December 31, 2025, the Company acquired 550,636 shares of the Company's common stock on the open market for $143.4 million. During the three months ended December 31, 2024, the Company acquired 75,376 shares of treasury stock on the open market for $20.0 million. During thesix months ended December 31, 2024, the Company acquired 127,376 shares of treasury stock on the open market for $30.0 million.
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 $515.7 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.
Current wording
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 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$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. 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 at December 31, 2025 and is available to fund future acquisitions or other capital and operating requirements. This amount is net of outstanding letters of credit of$0.3 million at December 31, 2025 to secure certain insurance obligations. The interest rate on the revolving credit facility was 4.52% as of December 31, 2025.
Previous 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.
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 December 31, 2025 and June 30, 2025, to secure certain insurance obligations.
Previous 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.
Current 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 December 31, 2025 and June 30, 2025 was 4.63% and 5.32%, respectively. On July 10, 2025, the Company amended the AR Securitization Facility and extended the term to July 10, 2028, with no substantial changes in other terms.
Previous 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.
Current wording
The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At December 31, 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 December 31, 2025, the Company's net indebtedness was less than 0.3 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). The Company was in compliance with all financial covenants at December 31, 2025.
Previous 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):
Current 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):
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 operations.
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 locations.
Previous 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.
Current wording
On a consolidated basis, DSO was 54.7 at December 31, 2025 compared to 56.2 June 30, 2025. As of December 31, 2025, approximately 3.5% 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 provisions losses on uncollected receivables representing 0.01% of sales for the six months ended December 31, 2025 compared to provision for losses of 0.17% of sales for the six months ended December 31, 2024. This change is primarily in the U.S. operations of the Service Center segment. 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.
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 period ended September 30, 2025 and 4.4 for the period ended June 30, 2025.
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 4.4 for both the periods ended December 31, 2025 and June 30, 2025.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
The following table is included to aid in review of Applied's condensed statements of consolidated income.
Current report — wording carried from elsewhere
The following table shows changes in sales by reportable segment (amounts in millions).
Current report — wording carried from 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).
Current report — wording carried from elsewhere
The following table shows the changes in selling, distribution and administrative expense (SD&A) (amounts in millions).
Current report — wording carried from elsewhere
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 19.6% of sales in the six months ended December 31, 2025 compared to 19.3% in the prior year period, an increase of $43.4 million or 10.4% compared to the prior year period. SD&A from businesses acquired added $38.9 million or 9.3% of SD&A expenses, including $6.1 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates increased SD&A during the six months ended December 31, 2025 by $0.2 million or 0.1% compared to the prior year period. Excluding the impact of businesses acquired and the unfavorable currency translation impact, SD&A increased $4.3 million or 1.0% during the six months ended December 31, 2025 compared to the prior year period primarily due to higher compensation costs.
Current report — wording carried from elsewhere
Other expense (income), net was income of $1.1 million for the six months ended December 31, 2025, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $1.9 million and $0.4 million of other income offset by foreign currency transaction losses of$1.2 million. During the prior year period, other expense (income), net was income of $3.0 million, which primarily consisted of unrealized gains on investments held by non-qualified deferred compensation trusts of $1.5 million and foreign currency transaction gains of $1.2 million.
Current report — wording carried from elsewhere
The effective income tax rate was 22.0% for the six months ended December 31, 2025 compared to 22.3% for the six months ended December 31, 2024. We expect our full year tax rate for fiscal 2026 to be in the 23.0% to 24.0% range.
Rearranged previous paragraphs (1)
Previous report — wording carried 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.