reviewed for impairment when changes in conditions indicate carrying value may not be recoverable.  Intangible assets with indefinite 
lives are reviewed for impairment on an annual basis or whenever changes in conditions indicate an evaluation should be  completed. 
Self-Insurance Liabilities 
The Company maintains business insurance programs with significant self-insured retention covering workers’ compensation, 
business, automobile, general product liability and other claims.  The Company accrues estimated losses including those incurred but 
not reported using actuarial calculations, models and assumptions based on historical loss experience.  The Company maintains a 
self-insured health benefits plan, which provide s medical benefits to U.S. based employees electing cover age under the plan.  The 
Company estimates its reserve for all unpaid medical claims including those incurred but not reported based on historical experience, 
adjusted as necessary based upon management’s reasoned judgment. 
Revenue Recognition 
Sales are recognized when the sales price is fixed, collectability is reasonably assured and the product’s title and risk of loss is 
transferred to the customer.  Typically, these conditions are met when the product is shipped to the customer.  The Company charges 
shipping and handling fees when products are shipped or delivered to a customer, and includes such amounts in net sales.  The 
Company reports its sales net of actual sales returns and the amount of reserves established for anticipated sales returns based on 
historical rates.  Sales tax collected from customers is excluded from net sales in the accompanying statements of consolidated income. 
Shipping and Handling Costs 
The Company records freight payments to third parties in cost of sales and internal delivery costs in selling, distribution and 
administrative expenses in the accompanying statements of consolidated income.  Internal delivery costs in selling, distribution and 
administrative expenses were approximately $15,500, $15,400 and $14,400 for the fiscal years ended June 30, 2012, 2011 and 
2010, respectively. 
Income Taxes 
Income taxes are determined based upon income an d expenses recorded for financial reporting purposes.  Deferred income taxes 
are recorded for estimated future tax effects of differences between the bases of assets and liabilities for financial reporting and 
income tax purposes, giving consideration to enacted tax laws.  Uncertain tax positions meeting a more- likely-than-not recognition 
threshold are recognized in accordance with the Income Taxes topic of the ASC.  The Company recognize s accrued interest and 
penalties related to unrecognized income tax benefits in the provisi on for income taxes. 
Share-Based Compensation 
Following approval by the Company's shareholders in October 2011, the 2011 Long-Term Performance Plan (the "2011 Plan") 
replaced the 2007 Long-Term Performance Plan (the "2007 Plan").  Share-based compensation represents the cost related to  
share-based awards granted to associates under either the 2011 Plan or the 2007 Plan.  The Company measures share-based 
compensation  cost at grant date, based on the estimated fair value of the award and recognizes the cost over the requisite service  
20 Applied Industrial Technologies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share amounts)
25358_AIT_Report_WT.indd   20 8/23/12   8:33 AM