Applied Industrial Technologies Inc: Form 10-K for the period ended Jun 30, 2026

In this Annual Report on Form 10-K for the year ended June 30, 2026 (this "Annual Report"), “Applied” refers to Applied Industrial Technologies, Inc., an Ohio corporation. References to “we,” “us,” “our,” and “the Company” refer to Applied and its subsidiaries. Headquartered in Cleveland, Ohio, Applied and its predecessor companies have engaged in business since 1923. Applied operates on a fiscal year ending June 30.

We are a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies and related maintenance supplies. Through our comprehensive network of approximately 6,900 employee associates and approximately 580 facilities including service center, fluid power, flow control, and automation operations, as well as repair shops and distribution centers, we offer a selection of more than 9.4 million stock keeping units with a focus on industrial bearings, power transmission products, fluid power components and systems, specialty flow control, and advanced factory automation solutions, as well as general maintenance products. Our customers use our products and services for both Maintenance, Repair, and Operations ("MRO"), Original Equipment Manufacturing ("OEM"), and new system install applications across a variety of end markets primarily in North America, as well as Australia, New Zealand, and Singapore.

Our internet address is www.applied.com (http://www.applied.com). The following documents are available free of charge via hyperlink from the investor relations area of our website:

• Applied's Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, together with Section 16 insider beneficial stock ownership reports - these documents are posted as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission;
• Applied's Code of Business Ethics;
• Applied's Board of Directors (our "Board" or "Board of Directors") Governance Principles and Practices;
• Applied's Director Independence Standards;
• Applied's Sustainability Report; and
• Charters for the Audit, Corporate Governance & Sustainability, and Executive Organization & Compensation Committees of Applied's Board of Directors.

The information available via hyperlink from our website is not incorporated into this Annual Report defined above.

GENERAL DEVELOPMENT OF BUSINESS

Information regarding current developments in our business can be found in Item 7 of this Annual Report defined above under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations.” This information is incorporated here by reference.

INDUSTRY POSITION AND VALUE PROPOSITION

We serve virtually all industrial markets that require technical expertise and service as our products and solutions are directly tied to companies’ production processes, efficiency initiatives, and most critical operating assets. While our business has evolved with a broader portfolio of solutions and entrance into new markets in recent years, our core remains primarily focused on connecting world-class industrial products and technologies from leading suppliers to our customers' most critical operating assets. As such, we are integral to our customers’ supply chains considering the direct exposure our solutions have on our customers’ core production equipment and plant capabilities, where high cost of failure, product specification, and system complexity require premier local service and inventory availability, application expertise, and aftermarket support. While we compete with other distributors and service providers offering products and solutions addressing the industrial supply chain, we believe our industry position and value proposition benefits from relative advantages tied to the following key attributes:

1) Deep technical expertise in providing solutions to critical motion control systems and related service offerings;

2) Leading positions in engineered fluid power and flow control solutions;

3) Advanced capabilities and an established footprint across advanced automation solutions;

4) Broad in-stock product offering, local inventory availability, and repair capabilities;

5) Extensive technical knowledge and domain expertise of our customers' facility and production equipment;

6) Tenured relationships with industrial customers and leading suppliers;

7) Scale and proximity of our operations relative to customer facilities;

8) Local entrepreneurial culture and continuous improvement focus;

9) Complementary offerings including indirect consumable supply inventory management;

10) Talent acquisition and development of technical sales associates, engineers, and service personnel;

11) Business systems and distribution capabilities; and

12) Strong financial liquidity and access to capital.

Across our Company, we focus on helping customers minimize their production downtime, improve machine performance, and reduce overall procurement and maintenance costs, as well as optimize the efficiency and safety of their facilities, equipment, and production processes. Within our Service Center segment, we respond to critical “break-fix” situations, that demand knowledge of a customer’s facility, localized inventory, timely delivery capabilities, service execution, and accountability. In our Engineered Solutions segment, we design, engineer, and integrate solutions focused on making a customer’s operations and equipment more productive, cost and energy-efficient, and automated.

We believe our products and solutions are increasingly critical within the industrial supply chain given increased manufacturing activity in the United States, reshoring or localization of supply chains across North America, a greater focus on supply chain resiliency, required maintenance and modernization on aged industrial equipment, technical labor constraints across customers' operations, more sophisticated production equipment and processes, a greater focus on plant floor optimization, and compliance and regulatory requirements.

INDUSTRY AND COMPETITION

We primarily compete within North America which we believe offers significant growth potential given our industry position, our established distribution and sales network, market fragmentation, and customer technical requirements, as well as various secular and structural growth tailwinds developing across the industrial sector. Growth within our industry is influenced by broader industrial production and capacity utilization, as well as inflation, labor dynamics, capital spending, geopolitical events, factory optimization initiatives, changes in industrial equipment technologies, and supply chain requirements.

The broader industrial distribution market is highly fragmented with participants varying in size, product focus, and capabilities. Our principal competitors are specialist and general line distributors of bearings, power transmission products, fluid power components and systems, flow control solutions, industrial rubber products, linear motion components, and automation solutions, and, to a lesser extent, providers of tools, safety products, and other industrial and maintenance supplies. These competitors include local, regional, national, and multinational operations. We also compete with OEMs and integrators. The identity and number of our competitors vary throughout the geographic, industry, and product markets we serve.

STRATEGIC GROWTH AND OPERATIONAL OPPORTUNITIES

• Exposure to Industrial Mega Trends. We are favorably positioned to benefit from various secular tailwinds developing across the North American industrial market. This includes localizing and reshoring supply chains to North America, required infrastructure investments, greater equipment maintenance and system modernization on aged industrial assets, automation adoption and physical artificial intelligence ("AI") integration, and skilled labor shortages at customer's facilities. In addition, energy efficiency initiatives are driving a focus on optimizing equipment through greater technical maintenance and component upgrades, while our expertise and access to fluid conveyance and robotic solutions are providing new growth opportunities in areas such as datacenter infrastructure and semiconductor manufacturing. We believe our North America focus and comprehensive portfolio of technical solutions including motion control, fluid power, specialty flow control, and automation solutions will play a critical role in supporting these growth tailwinds.
• Service Center Initiatives. Our network of service centers located close to industrial companies allows us to respond quickly and effectively to critical MRO situations involving direct production infrastructure and industrial equipment. We believe our technical domain expertise and access to core industrial equipment across our customers' facilities position us as a leading partner in supporting technical MRO and production requirements. This position is strengthening as we fully leverage and cross-sell our expanded portfolio of fluid power, flow control, automation, and consumables solutions. In addition, investments in technology, predictive analytics, talent, and shared service functions have streamlined operating processes while enhancing our business intelligence and sales force productivity. We are also augmenting our local technical service through greater shop and conveyance capabilities, as well as investing in our digital and e-commerce channels.
• Leading Fluid Power and Flow Control Position. We provide innovative fluid power and flow control solutions including systems design and engineering, electronic control integration, software programming, valve actuation, compliance consulting, fabrication and assembly, and dedicated service and repair. Demand for these solutions is increasing across a variety of industrial, off-highway mobile, technology, and process related applications as a result of greater focus on power consumption, plant efficiency and automation,

emissions control, remote monitoring, advancements in machining, regulatory and compliance standards, and data analytics. Of note, we expect to play a significant role in helping our OEM customers transition to electric-powered machinery given our leading engineering capabilities and supplier relationships. In addition, the ongoing build out of datacenter and semiconductor infrastructure is expanding the addressable market for fluid conveyance products and solutions, while demand for flow control solutions is benefiting from process infrastructure upgrades and energy transition efforts. Our strategy and teams are aligned to serve the rapid pace of innovation and investment developing across fluid power systems and process infrastructure in the coming years.

• Automation Expansion Potential. We have worked extensively in recent years to expand our Automation position through various acquisitions and organic growth initiatives. Combined with our legacy capabilities in pneumatic and control applications, today our automation solutions represent a more meaningful part of our sales and growth centered on the design, assembly, integration, and distribution of machine vision, robotics, digital networking, and motion control technologies. We see significant potential to further scale our automation operations in coming years given our internal initiatives, our M&A pipeline, a growing addressable market, cross-selling opportunities, and a developing long-term aftermarket. We expect various secular tailwinds to positively influence demand including structural labor constraints, a heightened focus on safety and quality, and North American reshoring activity. We believe these dynamics will accelerate the adoption of collaborative and mobile robots, machine vision, and Internet of Things solutions, as well as require strong application and engineering support that aligns well with our market approach and value proposition.
• Cross-Selling Opportunity. Through various acquisitions and internal initiatives, we have expanded the breadth of technical products and solutions we offer to customers. From flow control products supporting process maintenance to emerging robotic technologies addressing labor and safety initiatives at our customers’ facilities, the full suite of technical solutions we offer today is meaningful to our value proposition. We believe our expanded solutions portfolio, scale, and technical expertise is enhancing our cross-selling opportunity and share gain potential as customers continue to consolidate their spend with more capable distributors. Considering the embedded customer base across our legacy service center network, and an addressable market of over $80 billion and growing, we believe our cross-selling initiative represents a significant long-term growth opportunity. This includes accelerating our ability to expand with strategic accounts and penetrate faster growing market verticals such as food & beverage, semiconductor, datacenters, life sciences, pharmaceutical, power generation, and alternative energy.
• Margin Expansion Focus. We have a number of initiatives focused on driving operational improvements throughout the organization. Systems investments in recent years including common enterprise resource planning platforms are supporting opportunities in leveraging shared services, refining our sales management process, and standardizing pricing and sourcing functions, in addition to continued optimization of our shop and distribution network and related analytics. We also see sustainable mix tailwinds driving margin expansion as we continue to grow our higher-margin Engineered Solutions segment, which is approaching 40% of our total sales. In addition, as our growth profile and operating efficiencies have strengthened, we are experiencing a greater level of operating leverage. Combined with our history of cost accountability, continuous improvement culture, and potential AI efficiency benefits, we see an ongoing opportunity to optimize our margin profile and cash generation in coming years.
• Industry Consolidation and Acquisition Opportunities. Our customers’ supply chain focus is intensifying as they manage increasingly complex service requirements. This includes technology advancements, structurally higher inflation, geopolitics, an increased focus on supply chain and operational continuity, and greater U.S. manufacturing activity. We believe these considerations are accelerating consolidation across our sector both organically and through acquisitions as customers increase business with larger, more capable distributors and smaller providers face rising operational requirements. We are favorably positioned to benefit from industry consolidation in the coming years considering technical requirements associated with our industry segment, combined with our balance sheet capacity, acquisition experience, and service capabilities. Of note, we expect acquisitions to remain an important element of our growth potential moving forward given high industry fragmentation, greater operational and technical requirements, and supplier authorizations within the markets we serve. We believe our sourcing strategy, industry relationships, and operational discipline are key to our acquisition success. Over the near to intermediate term, our acquisition priorities are primarily focused on our current offerings including the ongoing expansion of our Engineered Solutions segment, as well as opportunistic acquisitions across our Service Center segment that further enhance our organic growth profile, margin improvement, and value-added service capabilities.

OPERATIONS

Our distribution and sales network consists of approximately 420 facilities in our Service Center segment and approximately 160 facilities in our Engineered Solutions segment. This includes service centers, distribution centers, and facilities tied to our fluid power, flow control, and automation operations. Our service centers resemble local inventory hubs located in close proximity to our customers and focused primarily on technical-MRO related fulfillment and service needs. Our fluid power, flow control, and automation facilities support technical and shop-oriented services integral to the more specialized and integrated nature of the products and solutions we provide. Other operations and channels through which we market include inventory management services for indirect consumable supplies and digital solutions including our Applied.com website, electronic data interchange, and other electronic interfaces with customers' technology platforms and plant maintenance systems.

Our distribution centers provide daily service to our service centers, helping replenish inventories and shipping products directly to customers where appropriate. An efficient supply chain and timely delivery of our products is vital to our value proposition particularly when customers require products for emergency repairs. We utilize a combination of dedicated third-party transportation providers and our own delivery vehicles, as well as surface and air common carrier and courier services. Customers may also pick up items at our service centers. We maintain product inventory levels at each service center tailored to the local market. These inventories consist of standard items as well as other items specific to local customer demand.

Our operations are primarily based in the United States where 88% of our 2026 sales were generated. We also have international operations, the largest of which is in Canada (6% of 2026 sales) with the balance (6% of 2026 sales) in Mexico, Australia, New Zealand, Singapore, and Costa Rica.

SUPPLIERS

Products we distribute are generally supplied to us by manufacturers whom we serve as a non-exclusive distributor. The suppliers also may provide us product training, as well as sales and marketing support. Authorizations to represent particular suppliers and product lines vary by geographic region, particularly for our fluid power, flow control, and automation businesses. We believe our supplier relationships are generally good, and many have existed for decades. The disruption of relationships with certain suppliers, or the disruption of their operations, could adversely affect our business.

Our product suppliers typically confine their direct sales activities to large-volume transactions, mainly with large original equipment manufacturers. The suppliers generally do not sell maintenance and repair products directly to the customer but instead refer the customer to us or another distributor to fulfill this need.

MARKETS SERVED

We purchase products from thousands of product manufacturers and resell them to thousands of customers in a wide variety of industries, including food processing, aggregates, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as to government entities. Customers range from very large businesses, with which we may have multiple-location relationships, to small local businesses. We are not significantly dependent on a single customer or group of customers, the loss of which would have a material adverse effect on our business as a whole, and no single customer accounts for more than 5% of our 2026 sales.

SERVICES

We believe part of our success, differentiation, and competitive advantage is attributable to the comprehensive set of services and solutions we provide, which we view as critical given the technical nature and application of our core product offering of motion, power, control, and automation technologies. The foundation of our service capabilities lies with our technically-oriented associate team, which includes engineers, industry segment specialists, mechanics, technicians, fluid power specialists, as well as our systems, shop network, and supplier relationships. We believe knowledge and service capabilities relating to our core product offering are increasingly needed across our customer base given skilled labor constraints within their operations, maintenance requirements, and more sophisticated plant equipment and processes. Our services and solutions help customers minimize production downtime, improve machine performance, expand their engineering capabilities, and reduce overall procurement and maintenance costs. By providing high levels of service, product and industry expertise, and technical support, while at the same time offering product breadth and competitive pricing, we believe we develop stronger, longer-lasting, and more valuable customer relationships. See the Reportable Segments section for more detail on the various service solutions we provide to customers.

REPORTABLE SEGMENTS

We report results of operations in two segments: (1) Service Center and (2) Engineered Solutions. In 2026, our Service Center segment represented 64% of our total sales, while our Engineered Solutions segment represented 36% of our total sales.

Service Center. Our Service Center segment represents our MRO-focused distribution operations across North America, Australia, and New Zealand. This business operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of production equipment and motion control infrastructure. Products primarily include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses, as well as other related supplies for general operational needs of customers’ machinery and equipment.

Service center facilities are stocked with product inventory tailored to each local market and staffed with customer sales and service representatives, and account managers, as well as product and industry specialists. Customer sales and service representatives receive, process, and expedite customer orders, provide product information, and assist account managers in serving customers. Account managers make onsite calls to customers to provide product information, identify customer requirements, make recommendations, and assist in implementing equipment maintenance and storeroom management programs. Product and industry specialists assist with product applications in their areas of expertise. Service centers market product offerings with a suite of services that create additional value for the customer. This includes onsite training, product fabrication and repair, and inventory management solutions. We also provide analysis and measurement of productivity improvement and cost savings potential from these services through our Applied Documented Value-Added® (DVA®) reports.

In addition, the segment includes operations focused on certain end markets and indirect consumable supplies through vendor managed inventory solutions, as well as regional fabricated rubber shops and service field crews, which install, modify, and repair conveyor belts and rubber linings, and make hose assemblies in accordance with customer requirements.

Engineered Solutions. Our Engineered Solutions segment represents our operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies, engineered flow control products and services, and automation technologies. Within the United States, we believe we are the largest distributor and solutions provider of fluid power products, as well as one of the largest distributors and solutions providers of industrial flow control and advanced automation technologies.

Our fluid power operations offer products and services primarily used within industrial, mobile, and technology applications. Fluid power products include hydraulic and pneumatic technologies using liquids and gases to transmit power, typically in smaller spaces than other forms of power transmission. Hydraulic products offer high power-to-weight ratios, high torque at low speeds, and power reliability, while pneumatic products are focused on lightweight applications in need of speed and precision. Our fluid power products and solutions are commonly used for off-highway mobile equipment; stationary industrial equipment and machines at factories; marine and offshore equipment; factory automation; food processing equipment; packaging operations; and downstream energy process systems. Operations are supported by a team of certified fluid power specialists, mechanics, technicians, and engineers that provide technical services ranging from system design and integration, electronic control integration, hydraulic assemblies, repair and rebuild, manifold design and assembly, cylinder rebuilds, hose assembly, customized filtration solutions, software programming and repair, hydraulic system retrofits, and integration of autonomous and electrification features.

Our specialty flow control operations provide highly engineered process flow control products, solutions, and services. Products include pumps, valves, fittings, hoses, process instrumentation, actuators, motors, and filtration supplies which are used to control the flow of liquids and gases in mission-critical industrial applications. Process flow control systems are highly complex given the specified nature of applications in harsh industrial or high-purity operating environments. Our flow control products and services are focused on MRO-related applications; OEMs; and engineering, procurement, and construction firms across a variety of industries including chemicals, steel, power, oil and gas, pulp and paper, life sciences, pharmaceuticals, food and beverage, technology, and general industrials. Similar to our fluid power operations, our flow control offering includes technical service capabilities such as flow control systems integration, pump repair services, valve actuation, skid-mounted assembly, kitting, process instrumentation, parts fabrication, and compliance consulting. Our flow control solutions are also increasingly used in applications tied to infrastructure required for decarbonization initiatives, including providing technical support for the configuration, assembly, and testing of process systems.

Our advanced automation operations provide solutions focused on the design, engineering, assembly, integration, and distribution of machine vision, collaborative robots, mobile robots, RFID (radio-frequency identification), industrial networking, motion control, and machine learning technologies for OEMs, machine builders, integrators, and other industrial and technology end users. Products and solutions are used in discrete production environments and marketed across a variety of industries including semiconductor, medical, life sciences, biotechnology, automotive, datacenters, food and beverage, logistics, consumer packaging, metalworking, and general industrial. Our automation business helps customers develop, produce, and integrate machine and facility automation solutions using comprehensive technology and application knowledge. A core element of our strategy and value proposition within automation is our value-added and engineered solution capabilities, enabling us to provide in-depth consultative design, engineering, assembly, testing, and support services for various customer requirements.

HUMAN CAPITAL

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

At June 30, 2026, we had approximately 6,900 associates across seven countries, with geographic and segment distribution as follows:

Associate Recruitment, Development, and Retention. We strive to attract, develop, and retain high-performing associates with unique skills, ideas, capabilities, and experiences, to empower them to achieve their potential, and to provide them opportunities to increase their skills and responsibilities and advance their careers. Applied’s commitment to its associates is reflected in our investments in both development and talent management. All associates are encouraged to participate in training to improve existing skills and develop new capabilities to further their professional development and achieve their own goals. Training opportunities include a wide array of internally facilitated training courses (both skilled and competency based), supplier product training, and other third-party courses. Training is delivered through a modern social learning platform and in-person training. In addition to a formal annual performance review process, Applied leaders are encouraged to provide frequent, timely, and meaningful feedback to each associate, and we solicit input from our associates through various engagement surveys and other tools to obtain valuable insights into workplace culture and identify strengths and uncover areas for improvement.

Compensation, Benefits, and Well-Being Support. We seek to provide competitive compensation and benefits in order to attract and retain high-quality associates. In the United States, Applied offers comprehensive benefits with choices to fit our associates’ varied needs, including the following: medical, dental, vision, and prescription drug insurance; short and long-term disability benefits; life insurance plans; Section 401(k) retirement savings plan with company match; paid vacations and holidays; incentive programs in support of our pay for performance culture; an employee assistance program; and an educational reimbursement program. Similar benefits are offered to associates outside the United States to the extent considered appropriate through plans that meet local requirements. In addition to providing tools to our managers to help identify and provide resources on associate mental health needs, we continue our efforts to meet employees on their well-being journey through our Healthy You! program, which encourages associates to focus on their physical and mental wellness.

Workplace Culture. We are committed to fostering a workplace where all our associates can thrive. Our policies and practices promote equitable hiring, opportunities, and advancement and a workplace free from discrimination and harassment. We believe that a workplace that is respectful to all associates and that includes and fosters a wide range of skills, ideas, capabilities, and experiences serves as a cornerstone for a strong and resilient company.

Health and Safety. Applied is also committed to the safety and overall welfare of our associates. In the United States, all associates are required to complete specific assigned online training courses annually, which include offerings on workplace safety hazards and vehicle safety. In addition, role-specific training is assigned based on the types of hazards associates may face while carrying out their job function, such as training modules on operating in confined spaces, forklift operation, and lockout/tagout procedures. Our U.S. associates completed approximately 52,000 safety training courses during 2026, helping to raise awareness of workplace risks.

SEASONALITY

Our business exhibits minor seasonality. Sales per day during the first half of our year are historically slightly lower than in the second half due, in part, to the impact of customer plant shutdowns, summer vacations and holidays.

PATENTS, TRADEMARKS, TRADE NAMES, AND LICENSES

Customer recognition of our service marks and trade names, including Applied Industrial Technologies®, Applied®, and AIT®, as well as recently acquired trade names, is an important contributing factor to our sales. Patents and licenses are not of material importance to our business.

RAW MATERIALS AND GENERAL BUSINESS CONDITIONS

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

ENVIRONMENTAL LAWS

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

In addition to other information set forth in this report, you should carefully consider the following risk factors that could materially affect our business, financial condition, or results of operations and that could make an investment in Applied more speculative or risky. Certain risks are discussed in more detail in Item 7 under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations.” This information is incorporated here by reference. Because of the risk factors discussed herein, past financial performance should not be considered a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Cautionary Statements” in Item 7.

ECONOMIC AND INDUSTRY RISKS

Our business depends heavily on the operating levels of our customers and the factors that affect them, including general economic conditions. If our customers reduce their operating levels, we may experience pricing pressures, difficulty in managing inventory, challenges in forecasting, and other adverse effects. The markets for our products and services are subject to conditions or events that affect the demand for goods and materials that our customers produce. Consequently, demand for our products and services has been and will continue to be influenced by most of the same factors that affect demand for and production of customers' goods and materials.

When customers or prospective customers reduce production levels because of lower demand, increased supply, higher costs, supply chain or labor market disruptions, changes in interest rates, tight credit conditions, unfavorable currency exchange rates, governmental regulations or adverse trade policies, foreign competition, other competitive disadvantage, offshoring of production, geopolitical instability, or other reasons, their need for our products and services diminishes. Selling prices and terms of sale come under pressure, adversely affecting the profitability and the durability of customer relationships, and credit losses may increase. Inventory management becomes more difficult in times of economic uncertainty. Volatile economic and credit conditions also make it more difficult for us, as well as our customers and suppliers, to forecast and plan future business activities.

If our customers become unable or unwilling to pay amounts owed to us under unsecured trade credit arrangements it could materially and adversely affect our financial condition and results of operations. We extend unsecured trade credit to a broad range of customers across many industries. If our customers become financially distressed and experience deterioration in their cash flow or operating and financial performance due to economic downturns, competitive pressures, or reduced demand for their products, they may not be able to make scheduled payments, or may delay payment, of amounts due to us.

Supply chain disruptions could hinder our ability to meet demand, resulting in increased costs, or force us to find alternative suppliers which may be difficult to identify or more expensive to engage, thereby adversely affecting our results of operations, financial condition, and reputation. Our supply chain, including transportation availability, staffing, and cost, could be disrupted by natural or human-induced events or conditions, such as power or telecommunications outages; security incidents; terrorist attacks; war; other geopolitical events; public health crises; earthquakes; extreme weather events; fire; flood; other natural disasters; transportation disruption; labor actions, including strikes; raw materials shortages; financial problems or insolvency; trade regulations or actions; inadequate manufacturing capacity or utilization to meet demand; or other reasons beyond our control. These supply chain disruptions may result in increased costs which we may be unable to pass along to customers. In addition, if these disruptions cause us to look for acceptable alternative sources of products, they may cost more. These potential impairments to our ability to meet customer demand could result in lost sales, increased costs, reduced profitability, and damage to our reputation.

Consolidation in our customers' and suppliers' industries could impede our ability to negotiate favorable commercial terms in our purchase and sale contracts, placing pressure on our prices and leading to volatility in our sales, thereby adversely affecting our business and financial results. Consolidation continues among both our customers as well as our product suppliers. As customer industries consolidate or customers otherwise aggregate their purchasing power, a greater proportion of our sales could be derived from large volume contracts, which could adversely impact margins and other commercial terms that could allocate greater risk to us. Consolidation among customers can produce changes in their purchasing strategies, potentially shifting blocks of business among competing distributors and contributing to volatility in our sales and pressure on prices.

Similarly, continued consolidation among suppliers could reduce our ability to negotiate favorable pricing and other commercial terms for our inventory purchases, and we may be unable to take advantage of consolidation trends.

An increase in competition could decrease sales or earnings. We operate in a highly competitive, fragmented industry. Our principal competitors are specialist and general line distributors of bearings, power transmission products, fluid power components and systems, flow control solutions, automation technologies, industrial rubber products, linear motion components, tools, safety products, oilfield supplies, and other industrial and maintenance supplies. These competitors include local, regional, national, and multinational operations, and can include catalog and e-commerce companies. Competition is largely focused in the local service area and is generally based on product line breadth, product availability, service capabilities, and price. Existing competitors have, and future competitors may have, greater financial or other resources than we do, broader or more appealing product or service offerings, greater market presence, stronger relationships with key suppliers or customers, or better name recognition. If existing or future competitors seek to gain or to retain market share by aggressive pricing strategies or sales methods, business acquisition, or otherwise through competitive advantage, our sales and profitability could be adversely affected. Our success will also be affected by our ability to continue to provide competitive offerings as customer preferences or demands evolve, for example with respect to product and service types, brands, quality, or prices. Technological evolution or other factors can render product and service offerings obsolete, potentially impairing our competitive position and our inventory values.

Our operations outside the United States increase our exposure to global economic and political conditions and currency exchange volatility, which may negatively impact our profitability. Foreign operations contributed 12% of our sales in 2026. This presence outside the United States increases risks associated with exposure to more volatile economic conditions, political instability, cultural and legal differences in conducting business (including corrupt practices), economic and trade policy actions. In addition, our foreign operations' results are reported in local currency and then translated into U.S. dollars at applicable exchange rates, which opens us up to risks associated with potential currency exchange fluctuations. Fluctuations in exchange rates, devaluations, and limitations on the conversion of foreign currencies into U.S. dollars may result in decreased revenues or profits.

STRATEGIC AND OPERATIONAL RISKS

Our business could be adversely affected if we do not successfully execute our operational and growth strategies, including our strategies to grow our sales and earnings. We have numerous strategies and initiatives to grow sales, leveraging the breadth of our product offering, supplier relationships, and value-added technical capabilities to differentiate us from our competitors and improve our competitive position. We also continually seek to enhance gross margins, manage costs, and otherwise improve earnings. Many of our activities target improvements to the consistency of our operating practices across all of our facilities. The development and implementation of these activities and initiatives requires us to devote significant time and to expend, or in some cases divert, significant resources. We may incur unanticipated costs, fail to meet projected implementation timelines or otherwise implement an initiative effectively, or not fully realize an initiative’s objectives or expected benefits. Any such occurrence may decrease our profitability, cause us to not achieve short- or long-term financial goals, harm our competitive position, or otherwise adversely affect our results of operations or financial condition.

Loss of key supplier authorizations, lack of product availability, or changes in distribution programs could adversely affect our sales and earnings. Our business depends on maintaining an immediately available supply of various products to meet customer demand. Many of our relationships with key product suppliers are longstanding, but are terminable by either party. The loss of key supplier authorizations or a substantial decrease in the availability of their products (including due to supply chain disruptions, as noted above), could put us at a competitive disadvantage and have a material adverse effect on our business.

In addition, as a distributor, we face the risk of key product suppliers changing their relationships with distributors generally, or us in particular, in a manner that adversely impacts us. For example, key suppliers could change the following: the prices we must pay for their products relative to other distributors or relative to competing brands; the geographic or product line breadth of distributor authorizations; the number of distributor authorizations; supplier purchasing incentive or other support programs; product purchase or stocking expectations; or the extent to which the suppliers seek to serve end users directly.

The purchasing incentives we earn from product suppliers can be impacted if we reduce our purchases in response to declining customer demand which may adversely affect our profitability. Certain product suppliers offer their distributors, including us, incentives for purchasing their products. In addition to market, customer account-specific, or transaction-specific incentives, certain suppliers pay incentives to us for attaining specific purchase volumes during a program period. In some cases, to earn incentives, we must achieve year-over-year growth in purchases with the supplier. When customer demand for products declines, we may be less inclined to build inventory to take advantage of certain incentive programs, thereby potentially adversely impacting our profitability.

Volatility in product, energy, labor, and other costs can affect our profitability and our relationships with our suppliers and customers. Our business, including our pricing levels, is subject to fluctuations in various costs across our product and service offerings. Product manufacturers may adjust the prices of products we distribute for many reasons, including changes in their costs for raw materials, components, energy, labor, and tariffs and taxes on imports. Our own distribution costs vary with changes in the pricing of fuel for our sales and delivery vehicles, freight expenses including tariffs and taxes on imports, and utility expenses for our facilities. After the cost of the products we sell, labor costs are our largest expense. We may experience labor shortages and higher labor costs as a result of a tightening labor market as well as salary and wage inflationary pressures in the environments in which we operate. Our ability to pass along increases in our costs in a timely manner to our customers depends on our ability to execute pricing changes, market conditions, and contractual limitations. Failing to timely pass along price increases (particularly in an inflationary environment), or not maintaining sales volume while increasing prices, could significantly reduce our profitability. It could also place pressure on, or even damage, our relationships with our customers, suppliers, and other third-party service providers.

While increases in the cost of products, labor, or energy could be damaging to us, decreases in those costs, particularly if severe, could also adversely impact us by creating deflation in selling prices, which could cause our gross profit margin to deteriorate. Changes in energy or raw materials costs can also adversely affect customers. For example, declines in oil, gas, and coal prices may negatively impact customers operating in those industries and, consequently, reduce our sales to those customers.

Changes in customer or product mix and downward pressure on sales prices could cause our gross profit percentage to fluctuate or decline. Because we serve thousands of customers in many end markets and offer millions of products with varying profitability levels, changes in our customer or product mix could cause our gross profit percentage to fluctuate or decline. Downward pressure on sales prices could also cause our gross profit percentage to fluctuate or decline. We can experience downward pressure on sales prices because of deflation, pressure from customers to reduce costs, shifts in customer preference to less costly products, or increased competition.

Our ability to transact business is highly reliant on information systems. A disruption or security breach could materially affect our business, financial condition, or results of operations. We depend on information systems to, among other things, process customer orders, manage inventory and accounts receivable collections, purchase products, manage accounts payable processes, ship products to customers on a timely basis, maintain cost-effective operations, provide superior service to customers, conduct business communications, and compile financial results. A serious, prolonged disruption of our information systems due to man-made or natural causes, including power or telecommunications outage, or breach in security, could materially impair fundamental business processes, increase expenses, decrease sales, or otherwise reduce earnings.

We are vulnerable to the growing threat of damage or intrusion from computer viruses or other cyber-attacks, including ransomware and business e-mail compromise, on our information systems due to our reliance on our information systems. These existing threats continue to grow and evolve, and any compromise of our information systems or those of businesses with which we interact, that results in regulated data or confidential information being accessed, obtained, damaged, disclosed, destroyed, modified, lost, or used by unauthorized persons could harm our reputation. It may also expose us to regulatory actions, supplier or customer attrition, remediation expenses, and claims from customers, suppliers, employees, financial institutions, and other persons, any of which could materially affect our business, financial condition, or results of operations.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage information systems or data on such systems change frequently and are becoming increasingly sophisticated, particularly with the expanded use of artificial intelligence, we may be unable to anticipate these techniques or implement adequate measures to prevent unauthorized access to our information systems. Even if we detect a cybersecurity incident, the nature and extent of that cybersecurity incident may not be immediately clear. Based on the sophistication of the threat and the size and complexity of our information system, among other factors, an investigation into a cybersecurity incident could take a significant amount of time and money to complete. In addition, while an investigation is ongoing, we may not know the full extent of the harm caused by the threat, and such harm may spread both internally and externally to third parties. These factors may inhibit our ability to provide rapid, complete, and reliable information about cybersecurity incidents to third parties, as well as the public. It may also be unclear how best to contain and remediate any harm caused by a cybersecurity incident. Any or all of these factors could further increase the costs and consequences of a cybersecurity incident to our business and materially impact our financial condition and results of operations.

Our information technology and enterprise risk management efforts cannot eliminate all systemic risk. Breaches of our systems could not only cause business disruption, but could also result in the theft of funds; the theft, loss, or disclosure of proprietary or confidential information; or the breach of customer, supplier, or employee information. A security incident involving our systems or even an inadvertent failure to comply with data privacy and security laws and regulations could negatively impact our sales, damage our reputation, and cause us to incur unanticipated legal liability, remediation costs, and other losses and expenses.

Acquisitions are a key component of our anticipated growth. We may not be able to identify or complete future acquisitions, integrate them effectively into our operations, or realize their anticipated benefits. Many industries we serve are mature. As a result, acquisitions have been, and will continue to be, important to our growth. While we wish to continue to make acquisitions, we may not be able to identify and to negotiate suitable acquisitions, to obtain financing for them on satisfactory terms, or to otherwise complete acquisitions. In addition, existing and future competitors, as well as private equity firms, increasingly compete with us for acquisitions, which can increase the cost of potential acquisitions and reduce the number of suitable opportunities. Acquisitions made by competitors can also adversely impact our market position.

We seek acquisition opportunities that complement and expand our operations; however, substantial costs, delays, or other difficulties related to integrating acquisitions could adversely affect our business or financial results. For example, we could face significant challenges in consolidating functions, integrating information systems, personnel, and operations, and implementing procedures and controls in a timely and efficient manner.

Further, even if we successfully integrate an acquired business with our operations, we may not be able to realize cost savings, sales, profit levels, or other benefits that we anticipate, either as to amount or in the time frame we expect. Our ability to realize anticipated benefits may be affected by a number of factors, including the following: our ability to achieve planned operating results, reduce duplicative expenses and inventory effectively, and consolidate facilities; economic and market conditions; the incurrence of significant integration costs or charges in order to achieve those benefits; our ability to retain key product supplier authorizations, customer relationships, and employees; our ability to address competitive, distribution, and regulatory challenges arising from entering into new markets (geographic, product, service, end-industry, or otherwise), especially those in which we may have limited or no direct experience; and exposure to unknown or contingent liabilities of the acquired company. In addition, acquisitions could place significant demand on our administrative, operational, and financial resources.

An interruption of operations at our headquarters or distribution centers, or in our means of transporting product, could adversely impact our business. Our business depends on maintaining operating activity at our headquarters and distribution centers and being able to receive and deliver product in a timely manner. A serious, prolonged interruption due to power or telecommunications outages, security incidents, terrorist attacks, war, public health emergencies, earthquakes, extreme weather events, other natural disasters, fire, flood, transportation disruption, or other interruptions could damage our relationships and reputation, and have a material adverse effect on our business and financial results.

FINANCIAL AND REPORTING RISKS

Our indebtedness entails debt service commitments that could adversely affect our ability to fulfill our obligations and could limit or reduce our flexibility. As of June 30, 2026, we had total debt obligations outstanding of $262.3 million. Our ability to service our debt and fund our other liquidity needs will depend on our ability to generate cash in the future. Our debt commitments may (i) require us to dedicate a substantial portion of our cash flows from operations to the payment of debt service, reducing the availability of our cash flow to fund planned capital expenditures, pay dividends, repurchase our shares, complete other acquisitions or strategic initiatives, and other general corporate purposes; (ii) limit our ability to obtain additional financing in the future (either at all or on satisfactory terms) to enable us to react to changes in our business or execute our growth strategies; and (iii) place us at a competitive disadvantage compared to other companies in our industry that may have lower levels of indebtedness. Additionally, our inability to comply with covenants in the instruments governing our debt could result in an event of default. Any of the foregoing events or circumstances relating to our indebtedness may adversely affect our business, financial position, or results of operations and may cause our stock price to decline.

In addition, changes to the credit markets could result in credit markets tightening or create an instance where obtaining additional or replacement financing could be more difficult and the cost of issuing new debt or replacing a credit facility could increase.

For more information regarding borrowing and interest rates, see the following sections in this Form 10-K: “Liquidity and Capital Resources” in Item 7 under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations;” Item 7A under the caption “Quantitative and Qualitative Disclosures about Market Risk;” and Notes 6 and 7 to the consolidated financial statements, included in Item 8 under the caption “Financial Statements and Supplementary Data.” That information is incorporated here by reference.

Our ability to maintain effective internal control over financial reporting may be insufficient to allow us to accurately report our financial results or prevent fraud, and this could cause our financial statements to become materially misleading and adversely affect the trading price of our common stock. We require effective internal control over financial reporting in order to provide reasonable assurance with respect to our financial reports and to effectively prevent fraud. Internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, collusion, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we cannot provide reasonable assurance with respect to our financial statements and effectively prevent fraud, our financial statements could be materially misstated which could adversely affect the trading price of our common stock.

If we are not able to maintain the adequacy of our internal control over financial reporting, or if we are unable to implement (or experience difficulty in implementing) required new or improved controls, our business, financial condition, and operating results could be harmed. Any material weakness could affect investor confidence in the accuracy and completeness of our financial statements. As a result, our ability to obtain any additional financing, or additional financing on favorable terms, could be materially and adversely impacted. This, in turn, could materially harm our business, financial condition, and the market value of our common stock and require us to incur additional costs to improve our internal control systems and procedures. In addition, perceptions of the Company among customers, suppliers, lenders, investors, securities analysts, and others could also be damaged.

Goodwill, long-lived, and other intangible assets recorded as a result of our acquisitions could become impaired and negatively impact our operating results and profitability. We review goodwill and long-lived assets, including property, plant, equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. In addition, we review goodwill on a reporting unit basis annually for impairment in our third quarter. Factors which may cause an impairment of long-lived assets include significant changes in the manner of use of these assets, negative industry or market trends, significant underperformance relative to historical or projected future operating results, or a likely sale or disposal of the asset before the end of its estimated useful life.

As of June 30, 2026, our balance sheet includes $704.7 million of goodwill and $312.8 million of other intangible assets, net. The techniques used in our qualitative assessments for impairment and goodwill impairment tests incorporate a number of estimates and assumptions that are subject to change. Any changes to these assumptions and estimates due to market conditions or otherwise may lead to an outcome where impairment charges would be required in future periods.

GENERAL RISK FACTORS

Our business depends on our ability to attract, develop, motivate, and retain qualified employees. Our success depends on hiring, developing, motivating, and retaining key employees, including executive, managerial, sales, professional, and other personnel. We may have difficulty identifying and hiring qualified personnel. In addition, we may have difficulty retaining such personnel once hired, and key people may leave and compete against us. With respect to sales and customer service positions in particular, we greatly benefit from having employees who are familiar with the products and services we sell, and their applications, as well as with our customer and supplier relationships. The loss of key employees or our inability to attract and retain other qualified workers could disrupt or adversely affect our business. In addition, our operating results could be adversely affected by increased competition for employees, shortages of qualified workers, higher employee turnover (including through retirement as the workforce ages), or increased employee compensation or benefit costs.

We are subject to complex laws, rules, and regulations and any failure to comply could result in the imposition of sanctions or other penalties, or the institution of litigation, any of which may have a material adverse effect on our business. We are subject to a wide array of laws and regulations, including with respect to taxes, international trade including import and export requirements, anti-bribery and anti-corruption laws, anti-competition laws, employment laws, and data privacy laws. We are also subject to governmental audits and inquiries in the normal course of business operations. Changes in the legal and regulatory environment in which we operate, including any governing body's responses to any legal or regulatory changes enacted by the United States, could adversely and materially affect our operating results.

In addition, from time to time, we are involved in lawsuits or other legal proceedings that arise in the normal course of business operations. In the past, these proceedings have related to product liability claims, commercial disputes, personal injuries, and employment-related matters. We expect to continue to be involved in legal proceedings in the ordinary course of business in the future. The defense and ultimate outcome of such proceedings may result in higher operating expenses, the inability to participate in existing or future government contracts, or other adverse consequences, any of which could have a material adverse effect on our business, financial condition, or results of operations.

In addition, we could face claims or additional costs arising from our compliance with regulatory requirements, including those relating to the following: our status as a public company; our government contracts; tax compliance; our engagement in international trade; and our collection, storage, or transmission of personal data.

We maintain insurance policies that provide limited coverage for some, but not all, of the potential risks and liabilities associated with our business. The policies are subject to limits, deductibles, and exclusions that result in our retention of a level of risk on a self-insured basis.

A global or regional health pandemic or epidemic has and in the future could negatively impact our business, results of operations and financial condition. The emergence, severity, magnitude, and duration of global or regional pandemics, epidemics, or other health crises are uncertain and difficult to predict. The COVID-19 pandemic created significant volatility, uncertainty, and economic disruption, and resulted in lost or delayed sales to us, and we experienced business disruptions as we modified our business practices. A similar pandemic or other epidemic, together with preventive measures taken to contain or mitigate such crises, could impact our results of operations and financial condition in a variety of ways, such as: impact our customers such that the demand for our products and services could change; disrupt our supply chain and impact the ability of our suppliers to provide products as required; disrupt or limit our ability to sell and provide our products and services and otherwise limit our ability to operate or otherwise operate effectively; increase incremental costs resulting from the adoption of preventive measures and compliance with regulatory requirements; create financial hardship on customers, including by creating restrictions on their ability to pay for our services and products; result in closures of our facilities or the facilities of our customers or suppliers; and reduce customer demand on purchasing incentives we earn from suppliers.

In addition, a pandemic or other public health emergency could impact the proper functioning of financial and capital markets, foreign currency exchange rates, product and energy costs, labor supply and costs, and interest rates. Any pandemic or other public health emergency could also amplify the other risks and uncertainties described in this Annual Report.

We cannot reasonably predict the ultimate impact of any pandemic or other public health emergency, including the extent of any adverse impact on our business, results of operations and financial condition, which will depend on, among other things, the duration and spread; the impact of governmental regulations that may be imposed in response; the effectiveness of actions taken to contain or mitigate the outbreak, the availability, safety and efficacy of vaccines, including against emerging variants of the infectious disease; and global economic conditions.

RISK MANAGEMENT AND STRATEGY

Our cybersecurity program is informed by various industry frameworks, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework, and our security management is ISO/IEC 27001:2022 certified. Our management, with oversight from our Board, performs an annual enterprise-wide risk assessment (ERA) to identify key existing and emerging risks. One of the main risks identified and assessed annually through this process is cybersecurity and data privacy, which remains a key focus for us and our Board.

We maintain multiple layers of security designed to detect and block cybersecurity events, as well as employ a dedicated team of cybersecurity personnel and professionals, who assist our Vice President – Information Technology in helping to assess, identify, monitor, detect and manage cybersecurity risks, threats, vulnerabilities, and incidents. Further, we have various processes and programs designed to manage cybersecurity risks associated with our use of third-party vendors and suppliers.

When we implement significant changes to our information systems, we conduct risk-based security and privacy impact assessments and deploy technical safeguards that are designed to reasonably protect our technology and information systems from cybersecurity threats. We actively monitor and proactively research potential cybersecurity threats to our information systems, and we use what we learn to evolve our security controls over time to mitigate risks posed by such threats.

We also engage third party service providers when necessary to both expand our capabilities and capacity as well as assess the effectiveness of our cybersecurity program, including hosting regular table-top exercises meant to evaluate and improve the overall effectiveness of our cybersecurity program.

Our Incident Response Plan provides a framework for responding to cybersecurity incidents. The plan governs activities such as preparation, detection, coordination, eradication, and recovery, as well as appropriate escalations to our senior management and Board and disclosure under applicable rules and regulations. The Incident Response Plan is routinely reviewed and updated as appropriate by our Vice President – Information Technology and other senior management members.

We provide recurring mandatory information security training (which includes cybersecurity training) to our associates based on access, risk, roles, and behaviors.

Overall, we implement, develop, and maintain systems and operate programs that seek to prevent and mitigate the impact of cybersecurity incidents. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage information systems or data on such systems, change frequently, we must continually monitor and update these systems and programs. See “Risk Factors” in Item 1A of Part I in this Annual Report for additional information on risks related to our business, including risks related to cybersecurity incidents and privacy and data protection.

GOVERNANCE

Our Vice President – Information Technology leads our assessment and management of cybersecurity risk. Reporting directly to our President & Chief Executive Officer, the incumbent is a member of our senior management team, providing cybersecurity updates to that group monthly, with more frequent updates as needed. He has more than 35 years of experience within industrial distribution, the majority of which was focused on managing and maintaining information systems. In addition, he leads a team of individuals that focus on monitoring our information systems and data for intentional and unintentional actions that could cause harm to our information systems or the data on such systems.

As indicated above, we, with oversight from the Board, perform an annual ERA and cybersecurity is among the main risks identified by the ERA for Board-level oversight. Our full Board has oversight of our efforts in cybersecurity and meets regularly with our Vice President – Information Technology (three times during 2026) on our cybersecurity risks and programs. The Board is also updated as needed on cybersecurity threats, incidents, or new developments in our cybersecurity risk profile.

We believe having a local presence is important to serving our customers; therefore, we maintain service centers and other operations in local markets throughout the countries in which we operate. At June 30, 2026, we owned 109 and leased 433 real properties. Certain properties house more than one operation.

The following were our principal owned real properties (each of which has more than 50,000 square feet of floor space) at June 30, 2026:

Our principal leased real properties (each of which has more than 50,000 square feet of floor space) at June 30, 2026, were:

The properties in Baldwinsville, Newark, Midland, Stafford, Austin, Houston, and Fort Worth are used in our Engineered Solutions segment. The Fontana, Longview and Appleton properties are used in both the Service Center segment and the Engineered Solutions segment. The remaining properties are used in the Service Center segment.

We consider our properties generally sufficient to meet our requirements for office space and inventory stocking.

A service center's size is primarily influenced by the amount and types of inventory required to meet customers' needs.

When opening new operations, we have tended to lease rather than purchase real property. We do not consider any service center, distribution center, or shop property to be material because we believe that if it becomes necessary or desirable to relocate an operation, other suitable property could be found.

In addition to the above operating facilities, we own or lease certain properties which, in the aggregate, are not material and are either for sale, lease, or sublease to third parties due to a relocation or closing. We also may lease or sublease unused portions of buildings to others.

From time to time, Applied and/or one of our subsidiaries may be a party to pending legal proceedings with respect to product liability, commercial, personal injury, employment, and other routine litigation matters incidental to our business. Although it is not possible to predict the outcome of these proceedings or the range of reasonably possible loss associated with any of them, we do not expect, based on circumstances currently known, that the ultimate resolution of any of these proceedings will have, either individually or in the aggregate, a material adverse effect on Applied's consolidated financial position, results of operations, or cash flows.

AND RESULTS OF OPERATIONS.

We are 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 Maintenance, Repair & Operations ("MRO") and Original Equipment Manufacturer ("OEM") 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 2026, business was conducted primarily in North America, as well as, Australia, New Zealand, and Singapore from 580 facilities.

The following is Management's Discussion and Analysis of significant factors that have affected our financial condition, results of operations, and cash flows during the periods included in the accompanying consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows in Item 8 under the caption "Financial Statements and Supplementary Data." When reviewing the discussion and analysis set forth, please note that a significant number of SKUs ("Stock Keeping Units") we sell, or the products we sell in our Engineered Solutions segment, in any given period were not 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 due to volumes, product mix and price.

OVERVIEW

Our 2026 consolidated sales were $5.0 billion, an increase of $403.3 million or 8.8% compared to the prior year, with acquisitions contributing to sales growth by $142.2 million or 3.1% and favorable foreign currency translation of $15.9 million increasing sales by 0.3%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $245.2 million or 5.4% during the year due to higher volumes of approximately $136.2 million and the remainder from positive price contribution. The Company generated operating income of $549.5 million, or operating margin of 11.1% of sales for the year ended June 30, 2026, compared to operating income of $498.5 million, or operating margin of 10.9% of sales in the prior year. The Company generated net income of $414.5 million and $393.0 million during the years ended June 30, 2026 and 2025, respectively. Our diluted earnings per share was $10.95 in 2026 compared to $10.12 in 2025.

Shareholders’ equity was $1,861.7 million at June 30, 2026 compared to $1,844.5 million at June 30, 2025. Working capital decreased $255.0 million from June 30, 2025 to $966.3 million at June 30, 2026. The current ratio was 2.6 to 1 and 3.3 to 1 at June 30, 2026 and 2025, respectively.

Applied monitors several economic indices that are key indicators for industrial economic activity in the United States. These include the Manufacturing Industrial Production ("MIP") 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.

The MCU and PMI indices increased since June 2025, while the MIP index decreased slightly over the fiscal year. The ISM PMI registered 53.3 in June 2026, an increase from the June 2025 reading of 49.0. A reading above 50 generally indicates expansion in the U.S. manufacturing sector. The indices for the months during the most recent quarter, along with the indices for the prior year end and prior quarter ends, were as follows:

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RESULTS OF OPERATIONS

This section provides comparisons of material changes in the consolidated financial statements for the years ended June 30, 2026 and 2025. For the comparison of the years ended June 30, 2025 and 2024, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2025 Annual Report on Form 10-K. We disclose segment information that is consistent with the way in which management operates and views Applied.

The following table is included to aid in review of Applied’s statements of consolidated income.

Sales in 2026 were $5.0 billion, which was $403.3 million or 8.8% above the prior year, with sales from acquisitions adding $142.2 million or 3.1% and favorable foreign currency translation increasing sales by $15.9 million or 0.3%. There were 252.5 selling days in both 2026 and 2025. Excluding the impact of businesses acquired and foreign currency translation, sales were up $245.2 million or 5.4% during the year, due to higher volumes of approximately $136.2 million and the remainder from positive price contribution.

The following table shows changes in sales by reportable segment.

Amounts in millions

Sales from our Service Center segment, which operates primarily in MRO markets, increased $169.9 million, or 5.6%, compared to the prior year. Acquisitions within this segment increased sales by $5.9 million or 0.2% and favorable foreign currency translation increased sales by $15.9 million or 0.5%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $148.1 million or 4.9% during the year, due to higher volumes of approximately $80.1 million reflecting volume growth across the United States and the remainder from positive price contribution.

Sales from our Engineered Solutions segment increased $233.4 million or 15.1%. Acquisitions within this segment increased sales $136.3 million or 8.8%. Excluding the impact of businesses acquired, sales increased $97.1 million or 6.3%, due to higher volumes of approximately $56.1 million primarily reflecting stronger demand across our fluid power and automation operations, as well as positive price contribution.

The following table shows changes in sales by geographical area. Other countries include Mexico, Australia, New Zealand, Singapore, and Costa Rica.

Amounts in millions

Sales in our U.S. operations increased $384.4 million or 9.6%, with acquisitions contributing $142.2 million or 3.6%. Excluding the impact of businesses acquired, sales in the United States were up $242.2 million or 6.0%, reflecting volume growth of $136.2 million and price contribution across both the Service Center and Engineered Solutions segments. Sales from our Canadian operations increased $4.2 million or 1.4%. Favorable foreign currency translation increased Canadian sales by $3.0 million or 1.0%. Excluding the impact of foreign currency translation, Canadian sales were up $1.2 million or 0.4%. Sales in other countries increased $14.7 million or 5.5%, primarily due to favorable foreign currency translation increasing sales by $12.9 million or 4.8%. Excluding the impact of foreign currency translation, other countries' sales were up $1.8 million or 0.7%.

Our gross profit margin was 30.3% in both 2026 and 2025. The gross profit margin for the current year was negatively impacted by 0.3% due to higher LIFO expense as compared to the prior year. This was offset by price contribution and channel execution, as well as favorable mix impacts from the growth in revenues in the Engineered Solutions segment.

Segment gross profit margin for the Service Center segment was 29.2% in both 2026 and 2025, as a 0.2% negative margin impact from higher LIFO expense was offset by price and channel execution. Segment gross profit margin for the Engineered Solutions segment decreased to 32.4% during the current year compared to 32.5% in 2025, as acquisition growth increased margins by 0.3%, which was more than offset by higher LIFO expense that negatively impacted margins by 0.3%.

The following table shows the changes in selling, distribution, and administrative expense, including depreciation ("SD&A").

Amounts in millions

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, and facility-related expenses. SD&A increased $72.7 million or 8.2% during 2026 compared to 2025. As a percentage of sales, SD&A was 19.3% during 2026 compared to 19.4% in 2025. SD&A from businesses acquired added $41.4 million or 4.7%, including $10.2 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates increased SD&A by $3.2 million or 0.4% compared to 2025. Excluding the impact of businesses acquired and the impact from foreign currency translation, SD&A increased $28.1 million or 3.1% during 2026 compared to 2025 primarily due to higher compensation costs.

Segment SD&A for the Service Center segment increased $17.5 million, to $503.2 million during 2026 from $485.7 million during 2025 primarily due to higher compensation costs. As a percentage of sales, segment SD&A was 15.8% in 2026 compared to 16.1% in 2025. Segment SD&A for the Engineered Solutions segment increased $51.7 million, to $367.0 million during 2026 from $315.2 million during 2025, which reflects an increase of $43.7 million from acquisitions completed within this segment in 2025, coupled with higher compensation costs. As a percentage of sales, segment SD&A was 20.6% in 2026 compared to 20.3% in 2025.

Operating income increased $50.9 million, or 10.2%, to $549.5 million during 2026 from $498.5 million during 2025, and as a percentage of sales, increased to 11.1% from 10.9%.

Segment operating income for the Service Center segment increased $32.7 million to $426.1 million during 2026, from $393.5 million during 2025 primarily due to higher gross profit driven by stronger revenues, partially offset by higher SD&A expenses. As a percentage of sales, segment operating income increased to 13.4% in 2026 from 13.1% in 2025. Segment operating income for the Engineered Solutions segment increased $21.8 million to $210.5 million during 2026 from $188.7 million during 2025 due to incremental gross profit driven by stronger revenues and the impact from recent acquisitions, partially offset by higher SD&A expenses. As a percentage of sales, segment operating income decreased to 11.8% in 2026 from 12.2% in the prior year.

The Company had net interest expense in 2026 of $7.9 million compared to net interest expense of $0.6 million in 2025 primarily reflecting higher net interest expense following the January 2026 maturity of our interest rate swap, as well as lower interest income on reduced cash balances as compared to the prior year.

Other income, net, represents certain non-operating items of income and expense, and was $2.7 million of income in 2026 compared to $3.1 million of income in 2025. Other income, net for 2026 primarily consists of unrealized gains on investments held by non-qualified deferred compensation trusts of $4.3 million, life insurance income of $0.9 million and other income of $0.3 million, offset by foreign currency transaction losses of $2.6 million and other periodic post-employment costs of $0.1 million. Other income, net for 2025 consisted primarily of unrealized gains on investments held by non-qualified deferred compensation trusts of $2.7 million, life insurance income of $0.8 million, and other income of $0.2 million, offset by foreign currency transaction losses of $0.5 million and other periodic post-employment costs of $0.1 million.

The effective income tax rate was 23.8% for 2026 compared to 21.6% for 2025. The increase in the effective tax rate is primarily due to an increase of 0.8% resulting from higher discrete tax expense from changes in estimates related to prior year tax returns identified as part of the preparation of our tax returns, coupled with an increase of 0.7% resulting from lower benefit from changes in unrecognized tax benefits due to expirations of statutes of limitations in the prior year and an increase of 0.5% resulting from lower benefit from the research and development tax credit due to lower qualifying activities in 2026.

As a result of the factors discussed above, net income for 2026 increased $21.5 million from 2025. Diluted net income per share was $10.95 per share for 2026 compared to $10.12 per share for 2025, an increase of 8.2%.

At June 30, 2026, we had approximately 580 operating facilities versus 600 at June 30, 2025. The approximate number of Company employees was 6,900 at June 30, 2026 and 6,800 at June 30, 2025.

RECENT DEVELOPMENTS

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, as amended, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Company is required to recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which the legislation is enacted. As of June 30, 2026, the Company completed its evaluation and as a result, did not have any material adjustments to its financial statements resulting from the enactment of the OBBBA.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. At June 30, 2026, we had total debt obligations outstanding of $262.3 million compared to $572.3 million at 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, for the next 12 months and beyond, 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.

The Company’s working capital at June 30, 2026 was $966.3 million compared to $1,221.3 million at June 30, 2025. The decline is primarily due to lower cash and cash equivalents on hand at June 30, 2026 as a result of debt repayments and share repurchases. The current ratio was 2.6 to 1 at June 30, 2026 and 3.3 to 1 at June 30, 2025.

Net Cash Flows

The following table is included to aid in review of Applied’s statements of consolidated cash flows.

Amounts in thousands

Cash provided by operating activities during 2026 declined $8.3 million as compared to the prior year primarily due to an increase in working capital of $65.8 million offset by higher net income of $21.5 million and higher deferred tax provision of $32.6 million reflecting the reduction of the deferred tax asset associated with capitalized R&D costs due to changes from the OBBBA. The increase in working capital was primarily due to higher accounts receivable of $61.5 million due to stronger revenues generated in the second half of 2026 as compared to 2025.

Net cash used in investing activities during 2026 decreased compared to 2025 primarily due to $11.4 million used for acquisitions in 2026 compared to $293.4 million used for acquisitions during 2025.

Net cash used in financing activities during 2026 increased compared to 2025 primarily due to $317.2 million of cash used to repurchase 1,162,863 shares of common stock in 2026 compared to $152.8 million used to repurchase 655,791 shares of common stock in 2025, coupled with higher net long-term debt repayments in the current year of $310.0 million as compared to $25.1 million in the prior year. Further, $72.6 million of cash was used for dividend payments in 2026 compared to $63.7 million of cash used for dividend payments in 2025. The increase in dividends over the year is the result of regular increases in our dividend payout rates. We paid aggregate dividends of $1.94 and $1.66 per share in 2026 and 2025, respectively.

Capital Expenditures

We expect capital expenditures for 2027 to be in the $35.0 million to $40.0 million range, primarily consisting of capital associated with focused investments for growth and information technology equipment maintenance.

Share Repurchases

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. On April 22, 2026, the Board of Directors authorized the repurchase of up to 3.0 million shares of the Company's common stock, replacing the prior authorization. At June 30, 2026, we had authorization to repurchase 2,854,252 shares.

In 2026, we acquired 1,162,863 shares of the Company's common stock on the open market for $317.2 million. In 2025, we acquired 655,791 shares of the Company's common stock on the open market for $152.8 million. Subsequent to June 30, 2026, we acquired 105,285 shares of the Company's common stock on the open market for $34.7 million.

Borrowing Arrangements

A summary of long-term debt is as follows (amounts are in thousands):

In October 2025, the Company entered into a new five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for future acquisitions, ongoing working capital and other general corporate purposes. This agreement provides a $900.0 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 or Secured Overnight Financing Rate ("SOFR") plus a margin that ranges from 80 to 155 basis points, both of which are based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled $825.8 million at June 30, 2026 which is available to fund future acquisitions or other capital and operating requirements. This amount is net of outstanding letters of credit of $0.2 million at June 30, 2026 to secure certain insurance obligations. The interest rate on the revolving credit facility was 4.44% as of June 30, 2026.

The new credit facility replaced the Company's previous revolving credit facility. Borrowing capacity under the previous facility, net of outstanding letters of credit of $0.2 million to secure certain insurance obligations, totaled $515.8 million at June 30, 2025. The interest rate on the previous revolving credit facility was 5.23% as of June 30, 2025.

The Company paid $1.6 million of debt issuance costs related to the new revolving credit facility in 2026, which are included in other current assets and other assets on the consolidated balance sheet as of June 30, 2026 and will be amortized over the five-year term of the new credit facility. The Company analyzed the unamortized debt issuance costs related to the previous credit facility. As a result of this analysis, less than $0.1 million of unamortized debt issuance costs were expensed and included within interest expense, net in the statements of consolidated income in the twelve months ended June 30, 2026, and $0.8 million of unamortized debt issuance costs were deferred related to the new credit facility and will be amortized over the five-year term of the new credit facility.

Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of $5.3 million as of June 30, 2026 and 2025 in order to secure certain insurance obligations.

On July 10, 2025, the Company amended its existing trade receivable securitization facility (the "AR Securitization Facility") and extended its maturity to July 10, 2028. The AR Securitization Facility effectively increases the Company's borrowing capacity by collateralizing a portion of the amount of the U.S. operations' trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt. The AR Securitization Facility's maximum borrowing capacity is $250.0 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 June 30, 2026 and 2025 was 4.55% and 5.32%, respectively.

The credit facility contains restrictive covenants regarding liquidity, financial ratios, and other covenants. At June 30, 2026, the most restrictive of these covenants required that the Company have net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined). At June 30, 2026, the Company's net indebtedness was less than 0.2 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). The Company was in compliance with all financial covenants at June 30, 2026.

Cash Flow Hedge Maturity

As disclosed in Note 7, the interest rate swap the Company entered into in January 2019 matured on January 31, 2026. The Company reduced outstanding borrowings under its revolving credit facility by a net $310.0 million, using available cash to mitigate the impact of higher interest costs due to the maturity of this instrument.

Accounts Receivable Analysis

The following table is included to aid in the analysis of accounts receivable and the associated provision for losses on accounts receivable (all dollar amounts are in thousands):

24

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.

On a consolidated basis, DSO was 55.3 at June 30, 2026 versus 56.6 at June 30, 2025. Approximately 1.1% of our accounts receivable balances are more than 90 days past due at June 30, 2026 compared to 2.1% at June 30, 2025.

On an overall basis, we recorded modest provisions for losses on uncollected receivables representing 0.09% of our sales for the year ended June 30, 2026, compared to 0.13% of sales for the year ended June 30, 2025. This change is primarily in the U.S. operations of the Service Center segment due to fewer past-due accounts receivable balances past due. 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.

Inventory Analysis

Inventories are valued using the 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 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 4.5 and 4.3 for the years ended June 30, 2026 and 2025, respectively.

CONTRACTUAL OBLIGATIONS

The following table shows the approximate value of the Company’s contractual obligations and other commitments to make future payments as of June 30, 2026 (in thousands):

(1) Amounts represent estimated contractual interest payments on outstanding long-term debt obligations. Rates in effect as of June 30, 2026 are used for variable rate debt.

Purchase orders for inventory and other goods and services are not included in our estimates as we are unable to aggregate the amount of such purchase orders that represent enforceable and legally binding agreements specifying all significant terms. The previous table includes the gross liability for unrecognized income tax benefits including interest and penalties in the “Other” column as the Company is unable to make a reasonable estimate regarding the timing of cash settlements, if any, with the respective taxing authorities.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions, and estimates at a specific point in time that affect the amounts reported in the consolidated financial statements and disclosed in the accompanying notes. The Business and Accounting Policies note to the consolidated financial statements describes the significant accounting policies and methods used in preparation of the consolidated financial statements. Estimates are used for, but are not limited to, determining the net carrying value of trade accounts receivable, inventories, recording self-insurance liabilities, and other accrued liabilities. Estimates are also used in establishing opening balances in relation to purchase accounting. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the consolidated financial statements.

LIFO Inventory Valuation and Methodology

Inventories are valued at the average cost method, using the LIFO method for U.S. inventories, and the average cost method for foreign inventories. We adopted the link chain dollar value LIFO method for accounting for U.S. inventories in 1974. Approximately 13.2% of our domestic inventory dollars relate to LIFO layers added in the 1970s. The excess of average cost over LIFO cost is $254.4 million as reflected in our consolidated balance sheet at June 30, 2026. The Company maintains five LIFO pools based on the following product groupings: bearings, power transmission products, rubber products, fluid power products, and other products.

LIFO layers and/or liquidations are determined consistently year-to-year. See the Inventories note to the

consolidated financial statements in Item 8 under the caption "Financial Statements and Supplementary Data,"

for further information.

Allowances for Slow-Moving and Obsolete Inventories

We evaluate the recoverability of our slow-moving and inactive inventories at least quarterly. We estimate the recoverable cost of such inventory by product type while considering factors such as its age, historic and current demand trends, and the physical condition of the inventory, as well as assumptions regarding future demand. Our ability to recover our cost for slow moving or obsolete inventory can be affected by such factors as general market conditions, future customer demand, and relationships with suppliers. A significant portion of the products we hold in inventory have long shelf lives and are not highly susceptible to obsolescence.

As of June 30, 2026 and 2025, the Company's reserve for slow-moving or obsolete inventories was $51.0 million and $50.5 million, respectively, recorded in inventories in the consolidated balance sheets.

Allowances for Doubtful Accounts

We evaluate the collectability of trade accounts receivable based on a combination of factors. Initially, we estimate an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is adjusted based on recent trends of certain customers and industries estimated to be a greater credit risk, trends within the entire customer pool, and changes in the overall aging of accounts receivable. While we have a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults, and therefore, the need to revise estimates for bad debts. Accounts are written off against the allowance when it becomes evident that collection will not occur.

As of June 30, 2026 and 2025, our allowance for doubtful accounts was 1.8% and 2.1% of gross receivables, respectively. Our provision for losses on accounts receivable was $4.6 million and $6.0 million in 2026 and 2025, respectively.

Goodwill and Intangibles

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. Goodwill for acquired businesses is accounted for using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of the acquisition at their respective estimated fair values. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The judgments made in determining the estimated fair value assigned to each class of assets acquired, as well as the estimated life of each asset, can materially impact the net income of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As part of acquisition accounting, we recognize acquired identifiable intangible assets such as customer relationships, vendor relationships, trade names, and non-competition agreements apart from goodwill. Finite-lived identifiable intangibles are evaluated for impairment when changes in conditions indicate carrying value may not be recoverable. If circumstances require a finite-lived intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to the carrying value of the asset. If the carrying value of the finite-lived intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value determined through a discounted cash flow model.

We evaluate goodwill for impairment at the reporting unit level annually as of January 1, and whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit, or sustained decrease in share price. Each year, we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If impairment is indicated in the qualitative assessment, or if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach. The fair value of a reporting unit is compared with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Goodwill on our consolidated financial statements relates to both the Service Center and the Engineered Solutions segments. The Company has eight (8) reporting units for which an annual goodwill impairment assessment was performed as of January 1, 2026. Based on the assessment performed, we concluded that the fair value of all of the reporting units exceeded their carrying amount as of January 1, 2026, therefore no impairment exists.

The fair values of the reporting units in accordance with the annual goodwill impairment assessment were determined using the income and market approaches. The income approach employs the discounted cash flow method reflecting projected cash flows expected to be generated by market participants and then adjusted for time value of money factors, and requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates. The market approach utilizes an analysis of comparable publicly traded companies and requires management to make significant estimates and assumptions related to the forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and multiples that are applied to management’s forecasted revenues and EBITDA estimates.

Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where impairment charges would be required in future periods. Specifically, actual results may vary from the forecasts used in an annual goodwill impairment assessment and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ due to prevailing market conditions. Further, continued adverse market conditions could result in the recognition of impairment if we determine that the fair value of a reporting unit has fallen below its carrying value.

CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT

This Annual Report on Form 10-K, including 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,” “potential,” "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.

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.

Important risk factors include, but are not limited to, the following: risks relating to the operating levels of our customers and the factors that affect them, including general economic conditions, changes in supply and demand, supply chain and labor challenges, unfavorable exchange rates, adverse governmental regulations and trade policies, and other factors; the potential inability or unwillingness of our customers to pay amounts owed to us under unsecured trade credit arrangements; supply chain disruptions; consolidation in our customers' and suppliers' industries and our potential inability to negotiate favorable contract terms as a result; competitive pressures; the risks associated with our global operations, including exposure to global economic and political conditions, currency exchange volatility, and differing cultural and legal norms and practices; our ability to execute our operational and growth strategies and the risks associated therewith, including the expenditure of significant resources and the potential failure of Applied to successfully or effectively implement such strategies; loss of key supplier authorizations, lack of product availability (such as due to supply chain strains), and changes in supplier distribution programs; reduction in supplier inventory purchase incentives; volatility in product, energy, labor, and other costs, including as a result of tariffs and other trade policies; changes in customer or product mix and downward pressure on sales prices; our reliance on information systems and risks relating to their proper functioning, cybersecurity, and data; our ability to identify and complete acquisitions, integrate them effectively, and realize their anticipated benefits; the variability, timing and nature of new business opportunities including acquisitions, alliances, customer relationships, and supplier authorizations; the incurrence of debt and contingent liabilities in connection with acquisitions; an interruption of operations at our headquarters or distribution centers, or in the transportation of products; risks related to our level of indebtedness and debt service commitments, including potential reduction in the availability of our cash flow to fund operations, limitations on our ability to obtain additional financing in the future, and competitive disadvantages; our ability to maintain effective internal control over financial reporting; the potential for goodwill, long-lived, and other intangible asset impairment; our ability to attract, hire, and retain qualified sales and customer service personnel and other skilled executives, managers, and professionals, and to successfully execute succession plans for key employees; legal and regulatory risks, including those resulting from changes and variations in law across the jurisdictions in which we operate, litigation, and compliance with complex regulatory schemes; and global or regional health epidemics and other public health emergencies.

We discuss certain of these matters and other risk factors more fully throughout our Form 10-K, as well as other of our filings with the Securities and Exchange Commission.

Our market risk is impacted by changes in foreign currency exchange rates as well as changes in interest rates.

We occasionally utilize derivative instruments as part of our overall financial risk management policy, and do not use derivative instruments for speculative or trading purposes.

Foreign Currency Exchange Rate Risk

As we operate throughout North America, Singapore, Australia and New Zealand, and approximately 12% of our 2026 net sales were generated outside the United States, foreign currency exchange rates can impact our financial position, results of operations, and competitive position. The financial statements of foreign subsidiaries are translated into their U.S. dollar equivalents at end-of-period exchange rates for assets and liabilities, while income and expenses are translated at average monthly exchange rates. Translation gains and losses are components of other comprehensive income as reported in the statements of consolidated comprehensive income. Transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than any of our subsidiaries' functional currency are recognized in the statements of consolidated income as a component of other income, net. We do not currently hedge the net investments in our foreign operations.

During the course of the year, the Canadian and New Zealand currency exchange rates weakened in relation to the U.S. dollar by 3.7% and 6.7%, respectively, while the Mexican and Australian currency exchange rates strengthened in relation to the U.S. dollar by 7.7% and 5.5%, respectively. During 2026, we experienced net foreign currency translation gains totaling $2.7 million, which were included in other comprehensive income. We utilize a sensitivity analysis to measure the potential impact on earnings based on a hypothetical 10% change in foreign currency rates. A 10% strengthening of the U.S. dollar relative to foreign currencies that affect the Company from the levels experienced during 2026 would have resulted in a $2.7 million decrease in net income to our 2026 results.

Interest Rate Risk

Our primary exposure to interest rate risk results from our outstanding debt obligations with variable interest rates. The levels of fees and interest charged on our various debt facilities are based upon our leverage level and market interest rates. We used interest rate swap instruments to mitigate variability in forecasted interest rates.

Our variable interest rate debt facilities outstanding include our five-year credit facility, which provides for a revolving credit facility with a capacity of up to $900.0 million in borrowings with $74.0 million outstanding at June 30, 2026, and a $250.0 million trade receivable securitization facility, of which $188.3 million was outstanding at June 30, 2026. In January 2019, we entered into an interest rate swap on $463.0 million of our U.S. dollar-denominated unsecured variable rate debt. The interest rate swap matured as scheduled in January 2026 and as such, the derivative asset was derecognized. We had total average variable interest rate bank borrowings of $483.3 million during 2026. The impact of a hypothetical 1.0% increase in the interest rates on our average variable interest rate bank borrowings would have resulted in a $4.8 million increase in interest expense.

For more information relating to borrowing and interest rates, see the “Liquidity and Capital Resources” section of “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and Notes 6 and 7 to the consolidated financial statements in Item 8 of this Annual Report. That information is also incorporated here by reference. In addition, see Item 1A, “Risk Factors,” of this Annual Report for additional risk factors relating to our business.

Evaluation of Disclosure Controls and Procedures

The Company's management, under the supervision and with the participation of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

The management of Applied Industrial Technologies, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the President & CEO and the Vice President - CFO & Treasurer, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and Board of Directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of inherent limitations, internal control over financial reporting can provide only reasonable, not absolute, assurance with respect to the preparation and presentation of the consolidated financial statements and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2026. This evaluation was based on the criteria set forth in the framework "Internal Control - Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management determined that the Company’s internal control over financial reporting was effective as of June 30, 2026.

The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

August 13, 2026

Changes in Internal Control Over Financial Reporting

There have not been any changes in internal control over financial reporting during 2026 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Applied Industrial Technologies, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Applied Industrial Technologies, Inc. and subsidiaries (the "Company") as of June 30, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2026, of the Company and our report dated August 13, 2026, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio

August 13, 2026