acquisitions, integrate them effectively, and realize their 
anticipated benefits; the variability and timing of new business 
opportunities including acquisitions, alliances, customer 
relationships, and supplier authorizations; the incurrence  of debt 
and contingent liabilities in connection with acquisitions; our 
ability to access capital markets as needed on reasonable terms; 
disruption of operations at our headquarters or distribution 
centers; risks and uncertainties associated with our foreign 
operations, including volatile economic conditions, political 
instability, cultural and legal differences, and currency exchange 
fluctuations; the potential for goodwill and intangible asset 
impairment; changes in accounting policies and practice s; 
organizational changes within the Company; the volatility of our 
stock price and the resulting impact on our consolidated financial 
statements; risks related to legal proceedings to which we are a 
party; adverse regulation and legislation, including potential 
changes in tax regulations (e.g., those affecting the use of the 
LIFO inventory accounting method and the taxation of foreign-
sourced income); and the occurrence of extraordinary events 
(including  prolonged labor disputes, natural events and acts of 
God, terrorist acts, fires, floods, and accidents).  Other factors 
and unanticipated events could also adversely affect our business, 
financial condition or results of operations.  We discuss certain of 
these matters more fully throughout our “Management’s 
Discussion and Analysis” as we ll as other of our filings with the 
Securities and Exchange Commission, including our Annual 
Report on Form 10-K for the year ended June 30, 2012. 
 
9 
 
QUANTITATIVE AND QUALITATIVE 
DISCLOSURES ABOUT MARKET RISK 
Our market risk is impacted by changes in foreign currency  
exchange rates and to a lesser extent by changes in interest rates.  
We occasionally utilize derivative instruments as part of our overall 
financial risk management policy, but do not use derivative 
instruments for speculative or trading purposes.  We do not  
currently have any outstanding derivative instruments. 
Foreign Currency Exchange Rate Risk  
Since we operate throughout North America and approximately 15% 
of our fiscal year 2012 net sales were generated ou tside 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 
accumulated other comprehensive income (loss) 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 the 
functional currency are recognized in the statements of 
consolidated income as a component of othe r expense (income), 
net.  Applied does not currently hedge the net investments in  
our foreign operations. 
During the course of the fisca l year, the Canadian and Mexican 
foreign exchange rates to the U.S. dollar decreased by 6% and 
17%, respectively.  In the twelve months ended June 30, 2012,  
we experienced foreign currency translation losses totaling 
$14.5 million, which were included in accumulated other 
comprehensive income (loss).  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 from 
the levels experienced during the year-ended June 30, 2012 of the 
U.S. do llar relative to foreign currencies that affect the Company 
would have resulted in a $2.2 million decrease in net income for