David Pugh - Chairman and Chief Executive Officer Ben Mondics - President and Chief Operating Officer Mark Eisele - Vice President and Chief Financial Officer

Matt Duncan - Stephens Adam Uhlman - Cleveland Research Jeff Hammond - KeyBanc Capital Holden Lewis - BB&T Richard Marshall - Longbow Research Brent Rakers - Morgan Keegan

Good afternoon. Welcome to the Applied Industrial Technologies third quarter 2008 financial earnings teleconference. All lines will be in a listen-only mode until the formal question-and-answer session. At that time instructions will be given. At the request of Applied Industrial Technologies today's conference call is being recorded. If you should have any objection you may disconnect at this time. Applied issued its third quarter earnings release early this morning before the market opened. You may retrieve a copy of the release by visiting the company's website at applied.com. A replay of today's teleconference will be available for the next two weeks as noted in the news release. Before we begin the teleconference, I would like to remind everyone that there will be discussion regarding Applied's business outlook, and there will be statements that are forward-looking. All forward-looking statements are based on current expectations regarding important risk factors, including trend in the industrial sector of the economy, the success of our various marketing strategies, and other risk factors identified in Applied's most recent periodic report and other filings made with the SEC. Accordingly actual results may differ materially from those expressed in the forward-looking statements. Our speakers today include, David Pugh, Chairman and CEO of Applied, who will discuss Applied's overall performance during the quarter. We'll also hear from Mark Eisele, Vice President and Chief Financial Officer, who will discuss the financial performance in detail, and Ben Mondics, President and Chief Operating Officer, who will discuss operational activity. I will now turn the call over to, David Pugh, Applied's, Chairman and CEO.

Thanks, Amanda. And thanks everyone for joining us today. I'm going to keep my comments brief this afternoon, and let Ben, discuss the fundamentals of what we are encountering in this challenging economic climate. While our market data and our business plan projected this quarter to be our weakest. We were still a bit disappointed with the extent of the slowdown that we experienced during the quarter. Coming off with a strong second quarter where we posted the 8.2% year-over-year sales increase, this 1.7% third quarter sales increase was a little bit weaker than we expected. I guess the only good news that we see in it is that, the operational controls showed up well as we continue to turn out double-digit increases in operating income. So we feel pretty solid about how we're managing in this process. At this time we don't see relief in sight for some of the key markets that have dragged us down. And there are indications that the decline is moving into more segments and signaling a general broad based slowdown. As you've heard and has been documented the housing segment is the most critically affected, and the input that we're getting from key customers in this industry, indicate that they expect the current rate of housing starts to linger through 2009. So there's a fair amount of uncertainty and anxiety among our customers. The combination of high energy prices and tight credit in the housing market are pulling in one direction. We've got the federal monetary policy and the stimulus package they are pulling another, whether they will offset each other is still to be seen. Now while we originally felt the fourth quarter would provide mild recovery, current indicators point towards additional slowing. So there's been a definite change since we last talked. And I'm going to let Ben and Mark, fill in the details and we're going to change the order just a little bit today because, I think you probably want to hear more about the what's and the why's of the marketplace than just the pure numbers. So I'm going to let Ben go first today. Ben Mondics - President and Chief Operating Officer: Thanks, Dave and good afternoon, everyone. We experienced a slowing of the economy during our third quarter and it affected many of the key industries that we serve. Not surprisingly, we saw decreased sales to the lumber and wood products segment, which is heavily tied to the housing market. A general slowdown, however, was also felt in the pulp and paper, and transportation equipment segment. On the upside, we saw strong increases in food products, metal mining, and cement, compared to year ago performance. We also saw good performance from rubber and plastic products, as well as the primary metals industries. Overall, the strength of these industries could not overcome the effect of the weaker markets to maintain the growth rate we had coming into the quarter. Government sales continued to produce a double-digit sales increase in keeping with our emphasis on developing this opportunity. Our sales force continues to expand their sales calls to include all types of government entities. Catalog sales continue to grow and year-to-date we've seen a 23% increase. We will shortly finish production on our 1,100 page 2008-2009 catalog, which will be distributed to customers starting in early July. The new catalog will include more than 40,000 products of all types. Putting all of these factors together resulted in a sales increase of 1% for our U.S. based service centers. Our U.S. fluid power companies increased their sales 5% compared to the prior years quarter. The VYCMEX acquisition in Mexico, and the fluid power related products sold through our service center businesses, have all contributed to the approximate 1% increase of fluid power sales as a component of our overall product mix. Although our Canadian sales increased 5.6% in U.S. dollars due to the impact of the currency translation factor, we continue to have our challenges in the forest products industries. We are, however, seeing some improvement in our fluid power business in Canada. Elsewhere, our Mexican and Puerto Rican operations are performing well, although they currently represent a small part of our business. Our Mexican operations including the VYCMEX acquisition, which we acquired in December, had double-digit increases over last years period. Our operations in Puerto Rico did as well. Looking at the fourth quarter ending June 30th, we believe the markets we serve will continue to be slow. The economic indices for March, including the ISM purchasing managers index and industrial production, showed a slight improvement over February. However, manufacturing capacity utilization is still below 80 and the ISM index is below 50 indicating some level of contraction. Some of our customers in the lumber and wood products segment report that they don't expect any significant recovery this calendar year. Putting it in perspective, housing starts peaked in 2005 with 2 million units. Since then it has been steadily falling with 1.4 million units reported in 2007. Going forward, the market is expected to drop below a million units in 2008 with some level of recovery possible in 2009. We believe that the slowdown will continue in our fourth quarter and we expect sales will be flat to slightly up. In anticipation, we have moved to keep our expenses and assets under control. In the face of a sluggish economy we will continue to balance our operating cost with our sales and position ourselves for a fair return on assets. Our continuous improvement programs are helping us find new and better ways of doing things. We have a strong team, a strong dedication to quality, and we have more than 600 improvement teams that work in our U.S. facilities, with many more in Canada and Mexico. These teams drive efficiencies in all areas of the Company, as indicated by our operating leverage. And we continue to see opportunities for improvement in sales growth, market share gain, and operating margins as a result. In summary, we have a good strategic plan at work which will help drive our top and bottom line results. Our employee associates are upbeat and working hard to generate profitable sales and efficient operations. I'll now turn the call over to, Mark Eisele for a discussion of our financial results.

Thanks, Ben, good afternoon, everyone. Let me provide some additional insights for our third quarter financial performance. We were very pleased to achieve a 12% third quarter earnings per share increase or $0.55 versus $0.49. Sales for the third quarter were $530 million which represents a 1.7% improvement over last year's third quarter. We had 63.5 selling days this quarter compared to 64 days in the same period last year. On a sales per day basis, sales increased to 2.5% over last year. For the quarter U.S. service center sales per day were up 1.8%, while sales per day at our U.S. fluid power businesses were up 6.2%. We believe approximately 80% of this increase in sales for the U.S. service centers relates to the impact of passing along supplier price increases. Sales for our Canadian operations increased by 5.6% in the quarter, primarily as a result of favorable currency translation, in local currency, our Canadian service center sales were down 12.3%. While the Canadian fluid power businesses were flat. Our operations in Mexico, including VYCMEX acquired in December had a sales increase of 38.1%. VYCMEX represented approximately 28 percentage points of the increase. Our Puerto Rico operations also improved approximately 12% over the prior year quarter. During the quarter, our number of operating facilities decreased by 1 to 451 as a result of combining two Canadian locations. Our product mix during the quarter was 20.2% fluid power products and 79.8% industrial products. This represents an 80 basis point increase in the fluid power product percentage from last quarter. The gross profit percentage for the quarter was 27.3%, consistent with the guidance we've provided for fiscal 2008. This margin was 30 basis points higher than last year's third quarter. Our selling, distribution, and administrative expenses as a percent of sales improved to 20.1% for the quarter. This rate is 30 basis points lower than the third quarter of the prior fiscal year. We continue to see benefits from our overall focus on productivity improvements and cost control. Lower employee benefit and depreciation expenses were the main contributors to the improved percentages. We will, however, continue to invest in additional resources for our government and other growth programs in support of our ongoing corporate strategies. The absolute dollar increase in selling, distribution, and administration expenses for the quarter was less than 1% compared to a sales increase of 1.7%. Our expectation for SG&A in the fourth quarter is to be comparable with our third quarter run-rate with only a small potential increase. Our third quarter operating margin of 7.1% was 60 basis points above the 6.5% operating margin in the prior year third quarter. The higher gross profit percentage, along with improved rate of operating expenses to sales, were the significant factors contributing to the improved margin results. Our net interest expense was lower due to the retirement of $50 million of our debt near the end of our second quarter. The effective tax rate for the quarter was 36.7%, compared to 35.5% in the third quarter of last year. The higher rate is primarily due to a higher effective rate for state taxes in this period, and U.S. tax law changes which have eliminated certain deductions related to foreign income. Year-to-date, our tax rate is 37.2%, and we anticipate this to be our tax rate for the entire year. Our balance sheet remains solid, with shareholders equity at over $480 million and a current ratio of 3.3 to one. This ratio is consistent with the prior quarter and above the prior year level due to the debt retirement mentioned previously. Our return on assets rose to 19.8% for the quarter compared to 18.3% for the prior year quarter. As anticipated, inventory levels decreased to $10.4 million in the quarter, primarily due to the burn off of special inventory buys made towards the end of the calendar year. We expect inventory to decrease another $10 million by year-end. Projected inventory levels at June year-end should be approximately $10 million above our June 2007 levels, included in this increase of course, is the additional inventory related to the VYCMEX acquisition. Accounts receivable and day sales outstanding of approximately 40 days remain competitive. Cash provided from operations for the quarter was $11.3 million compared to $28.9 million for the prior year third quarter. This change in the third quarter reflects variability regarding the timing of certain income tax, and accounts payable payments. Year-to-date cash provided from operations is virtually double that of the prior year. Cash used for financing activities in the quarter included $12.2 million related to our ongoing stock repurchase program and $6.4 million of cash dividend payments. During the quarter we repurchased 435,000 shares of our common stock in open market transactions, and have remaining authorization to purchase 1.65 million additional shares. We believe that our fourth quarter sales will put us towards the lower end of our annual sales guidance of $2.1 to $2.18 billion. As we enter the final quarter of our year, we are tightening our annual EPS guidance to $2.15 to $2.25 per share. Now here is Dave for final comments.

Thanks Mark. Now I guess there we have it, it's a mild disappointment in sales, and we brought solid earnings out of it. As we move forward, we're going to have to expect to get more sales from non-traditional sources. Many of the unexpected disappointments are simply opportunities in disguise. And to view this from a positive aspect, I would expect that this market climate would increase our M&A opportunities. We are going to adjust our sales to make sure, we get through this temporary storm, and stay on course for the long haul. Amanda, we'd open it for questions now.

(Operator Instructions) Your first question comes from Matt Duncan with Stephens. Matt Duncan - Stephens: Good afternoon, guys.

Hi, Matt.

Hi, Matt. Matt Duncan - Stephens: The first question I've got is, as you alluded to some of the additional markets where you're seeing some weakness, and it sounded like most of them were still kind of housing or transportation related. So I'm wondering if you can maybe flush out for us a little bit kind of what, some of these additional end markets are that are starting to show weakness? And maybe the timing of when you started to see that, and kind of what your customers in those markets are telling you to expect for the next year or two?

Hi, Matt. This is Ben. I guess, we track SIC codes, and looking at the largest category, which is also the most general industrial machinery and equipment, we have been tracking from the June quarter to September, through December in an upward trend and turned down sharply in the March quarter. So look at that one in general as a general economic indicator for the markets we serve, and that one turned down. And number of other ones, like I mentioned earlier, the forest products both pulp and paper, and lumber and wood products turned down transportation equipment turned down; a number of the other smaller categories for us. We did have some positives with primary metals, food, and the cement industry. So some positives, but the negatives definitely out weighed the positives. Matt Duncan - Stephens: And at this point and I don't know if you're really ready to comment too much on fiscal '09. But we're only a couple of months away from the start of your fiscal 2009. Maybe even if you just wanted to talk about the rest of calendar '08, what are your expectations for sales growth? Is this kind of low single-digit, 1%, 2%, kind of the range we need to be thinking in or do we need to maybe think that there's even a possibility things could turn negative? I'm just kind of curious based on what you're hearing from your customers, what you guys are thinking about the next, call it 12 to 18 months?

Matt, this is Mark. Actually, we're in the middle right now of our annual budget process when we look at our fiscal 2009. And it would be premature I think, for us to comment on what that is until we complete our stuff.

Yeah, and as for the fourth quarter Mark, gave you guidance toward the lower end of the sales. Matt Duncan - Stephens: Okay. It kind of implies maybe a 2% type number for the fourth quarter. Okay. Next question I've got is given that things are kind of getting more challenging a little bit quicker than maybe you had thought. Can you talk about some of the steps that you're taking to right size the business from an expense standpoint for a more challenging economic environment? What are some of the things you guys are focused on to help continue the earnings power of your business in this revenue environment?

Well, it's the traditional stuff, and it's simply absorbing attrition where we can, rather than we were replacing every loss. It is watching the assets, it is watching discretionary spending, it is looking at the strategic programs that are out there, and determining which ones have immediate impact in trying to decide whether the longer term ones, which ones we pull back on, which ones we don't. We're not pulling back on government we said that, we're still solidly in that. That's going to be a long-term key segment for us. But we have a number of things that we have been doing as we have been putting our toe into the water in certain market expansions. We can pull back on some of those, and have some areas for conservatism here. Matt Duncan - Stephens: Dave, come on the government point there. Are you guys still thinking government can do you kind of up $25 million this year versus last?

Yeah, Matt, this is Ben. We will be in that range, we'll be slightly under that probably. And we'll end up I think we said, we were at $50 million last year; we will be in 70 to75 at the end of the year. Matt Duncan - Stephens: Okay and then two more quick things. First Mark, what were the sales from VYCMEX in quarter, what were their revenues?

Of the 1.7% sales increase that we had through the quarter, VYCMEX was a little under between 0.2 and 0.3 percentage points, so a little under $1.5 million. Matt Duncan - Stephens: Okay, and then last thing. Dave, you alluded to this a little bit, but the acquisition landscape. It sounds like you're thinking may be M&A could get a little bit easier in a tougher economy. Are you seeing signs of that yet, or is that just kind of what you think you might expect to see if things do get meaningfully tougher here?

We have seen good signs of it. I just went over with our board today a pretty good list, not only we're seeing signs of things opening up, we're seeing some of the multiples come down and being a strategic buyer with pretty good balance sheet. We feel like, we are one of the key players to be able to take advantage on this. Matt Duncan - Stephens: Okay, thanks for the comments guys.

Thank you.

Your next question comes from Adam Uhlman with Cleveland Research.

Adam, are you there?

Adam? Adam Uhlman - Cleveland Research: Can you hear me?

Yeah, okay. Adam Uhlman - Cleveland Research: Yeah, Mark a question for you on the SG&A line. There are pretty surprising performance here, you pointed out depreciation expense and benefits expense helping hold that flat year-over-year. Could you talk about some of the other bigger categories in the SG&A line as well, how did that perform?

Well, I will call general broad based declines on many of the categories within our SG&A expenses and so; we continue to demonstrate that we're going to be focused on cost controls. Obviously, within any of the numbers you have some pluses, you have some minuses within the numbers, some of the pluses would be, obviously, we're adding SG&A for the VYCMEX acquisition, SG&A does increase because of the Canadian currency translation, it helps on the sales top line, but it also increases the SG&A expense at the same levels for that too. And as we mentioned I think at the last quarter, where we were seeing some increases in, let's say bad debt reserves and items of that nature. We saw a slight increase in that again for this quarter as well. So I think those are some of the main things that we're pluses and minuses. But we ended up basically almost at the exact same total dollars as we did a year ago in SG&A. Adam Uhlman - Cleveland Research: Okay, and then the second question here for you is, we've seen steel costs go up quite a bit recently. Could you talk about what you are hearing from your vendors in terms of pending price increases, or have you seen any announcements set so far here into the fourth quarter?

We haven't seen anything outrageous. We're seeing the normal price increases that on a normal schedule with may be a slightly higher percentage increase than the last couple of years.

But I think we still are seeing basically just like Ben said a normal schedule. If the supplier is doing once a year increase, we're still seeing at about that same anniversary date as a general rule. Adam Uhlman - Cleveland Research: Okay, great. Thanks.

Your next question comes from Jeff Hammond with KeyBanc Capital. Jeff Hammond - KeyBanc Capital: Hi, guys.

Hi, Jeff. Jeff Hammond - KeyBanc Capital: Hey, just to follow-up on the raw material issue. Do you think or what's your level of concern that the price increases get harder to put through in this tougher environment?

I guess in the last couple of years, we haven't seen it anymore difficult than it's been, so really no change in the environment there.

Jeff, I think we've gotten more disciplined in doing it. So it comes with the territory, and I think the world is getting used to a few prices going up these days, if you filled up your gas tank lately. Jeff Hammond - KeyBanc Capital: In terms of the deceleration in the growth rate any major variation between your national account customers versus your smaller customers?

Jeff, we've done well on the national account piece, better than the remainder of the account piece. Jeff Hammond - KeyBanc Capital: And would you say that, as you talk to your customers, would you say that it's more that they're reading the same headlines as you and they're sitting on their hands may be tightening inventories, or that they're actually seeing a particular weakness?

I think a little bit of both. And I guess back to your earlier question too on the national accounts versus the others, the national accounts are something that's easily identifiable segments of business and the other piece is more of the broad base.

Jeff, just as a comment. We've sat around and compared this a little bit to October of 2000, where we came out of that quarter feeling very good, and all of a sudden things dropped pretty quickly. Back then, inventories had gone up pretty high. Right now manufacturing inventories have started to move up, but haven't spiked up. And I think that people still have 2000 fresh enough in their minds that they're pulling in their horns as demand decreases rather than trying to go into denial. So we're seeing is some slowdown with the demand this time and I don't think we're going to run into that extremely high level of inventories that we did last time. Jeff Hammond - KeyBanc Capital: Okay, and then I guess final question. I mean, looking at some of your peers and competitors in the industrial distribution space, it seems like their quarters may be held in a little bit better relative to previous quarter trends. I know, it's hard to gauge share quarter-to-quarter, but I'm just wondering if you see any aberration within the quarter, or your market share dynamics that might explain that?

Jeff, good question and one we would expect to get. We don't really comment on our performance relative to other industrial distributors. We believed our results are inline with the economic indicators that we track, and they're in line with a number of our suppliers results for the quarter also. Jeff Hammond - KeyBanc Capital: Okay. Thanks guys.

Thank you.

Thank you.

Your next question comes from Holden Lewis with BB&T. Holden Lewis - BB&T: Are you able to hear me?

Yes, Holden. Holden Lewis - BB&T: Talking about the gross margin for a bit, this was the first quarter that you had managed to see sort of year-over-year gross margin increases. Can you talk a little bit about the degree to which pricing may have contributed, the degree to which may be the pre-buy may have contributed. And then talk about may be Q4 and may be sort of how we should be thinking beyond that in terms of your rebate in light of some softer revenues, perhaps softer inventory buys. If you could just give a little bit of color on those topics that would be great.

Okay, Holden, yeah, his is Mark. Let me try to knock those off one at a time here. As we went into fiscal 2008 even over the last summer, we had stated that we thought we'd get 27.3% gross margin percentage, we were knocking on that the first two quarters and in our guidance after the December quarter, we talked about that that was our expectation in the fourth quarter too, also third quarter as well. So, we were able to accomplish that. Some of the reasons we did accomplish that is that yeah, we did get better for point-of-sale pricing and saw more stabilization with that, compared to a year ago, so that helped some. The situation with the year end special buys that calendar year blips we have every year. So, I don't think that's really had a change this year compared to prior years. We see that impact on a regular basis; it's almost a seasonal thing for us. As we go forward then looking at into the future for the impact of supplier purchasing incentives, something that we're talking a lot about right now, and that's something that is one of the things that we want to make sure that we can maintain and/or expand our benefits there, but with this environment that we're going into may be a slowing economic environment that definitely will be more challenging. I think I got all your questions there. Holden Lewis - BB&T: Yes, I think that covers it well.

Thanks. Holden Lewis - BB&T: Did you get the rebates this year that were equal to last year and were those sort of on par? Did you improve them, this wasn't exactly an easy year, but how did the rebates trend this year versus last year?

I think we're trending stable to a little bit up, but it may be on an overall basis for the entire year it might have an impact of 10 basis points, something like that. Holden Lewis - BB&T: Which is pretty good if I remember correctly, I think in fiscal '07 you had done a lot of pre-buying and there's a bunch of stuff in there that, I think really boosted the gross margin. I think when you started the year you were necessarily assuming getting flat rebates was considered to be somewhat of a task, if I remember correctly.

Yes, true. And as you know on these pre-buys when we have supplier purchase incentives on those that goes on to the balance sheet until those inventories are then sold off in the future for the net gross into the income statement.

Yes, Holden, it's not just a similar comparison year-over-year. Our purchasing group has also gotten more suppliers to jump in with us with regard to pricing support for various reasons. Holden Lewis - BB&T: Okay. And did you give any guidance on the fourth quarter gross margin? If I missed that I'm sorry.

No, I think we're going to take consistent with the overall annual guidance of around 27.2% to 27.3%. Holden Lewis - BB&T: Okay. And then lastly really quickly in conjunction with your comments about the general economy, are you seeing collections weaken or anything of that stuff?

I think the short answer is no, we have not. But I do think in the overall economy, this fiscal year, we have seen an up tick in bankruptcies from customers in the last two or three years, where those were minimal, and so that's impacting us. We are looking very closely at our credit exposure and credit situation to make sure that we don't have a deterioration that we're not on top of; but as of right now we have not seen a deterioration. Our aging of receivables is better today than it was a year ago, and better than two years ago. So we really haven't seen a noticeable shift, but we're very conscience of being on top of that.

Yes, Holden, Mark may be taking less credit than his guys deserve, because as the credit market tightened, we tightened our controls, and so it didn't just happen that this isn't getting away from us. We're certainly managing this thing properly and I give a lot of credit to his folks. Holden Lewis - BB&T: Okay, thank you.

Thank you.

Your next question comes from Richard Marshall with Longbow Research.

Richard?

Hello?

Is your mute button on, Richard? Richard Marshall - Longbow Research: Sorry. Can you hear me?

Yes. Richard Marshall - Longbow Research: Okay, great. Just a few things, a lot has been covered already. But just wondering if there were any particular product lines that did worse than expected this quarter?

No.

No, nothing that stands out. Richard Marshall - Longbow Research: Okay. So you point to any specific products that sold more slowly.

No. Richard Marshall - Longbow Research: Okay. You had mentioned automotive as a particularly weak category this quarter. I'm just wondering to what extent the American Axle strike might have played into this or that it might be more one time in nature that we could look towards improvement in that way in the near future?

Richard, I'm sure that there's some effect with the strike seem to have a trickle down effect. But I think that general low sales of vehicles and some of that specific customer issues we've had really played more into it than the American Axle, I think it's a one time event. Richard Marshall - Longbow Research: Okay. Also I guess in the past a lot of distributors have seen downturns as a time to may be pickup share. Do you see any opportunities out there to may be pickup some share during this period?

To the extent we make acquisitions we'll pickup share, but share typically doesn't trade hands in this industry that easily unless someone truly stumbles in their service. So I don't see the economy driving that. The only way we would see the changes is if we picked up more through the M&A. Richard Marshall - Longbow Research: Okay, great. And just the last thing, I guess you mentioned adding more sales people in the government business. I was wondering if you were also may be planning on reallocating any existing sales people to that business may be away from other areas?

Richard, yes, we've done that to some extent. We've hired people from the outside as well as redeployed some of our existing sales folks. Richard Marshall - Longbow Research: Okay, great. Thanks a lot.

Thank you.

Your next question comes from Brent Rakers with Morgan Keegan. Brent Rakers - Morgan Keegan: Good afternoon. A couple questions I think on the SG&A. First one just housekeeping question. Mark, do you have the quarter ending headcount numbers for AIT?

Brent, I don't have it here, but going off memory it's in our 10-Q next week, but I believe our headcount is virtually identical versus a year ago, and of course we have the VYCMEX acquisition in there too at the same point in time, and so we're still get exact same headcount from June of '07 to March of '08 and the VYCMEX acquisition probably added around 60 people, so… Brent Rakers - Morgan Keegan: Okay.

Taking that into account we would have 60 less people in the same stores. Brent Rakers - Morgan Keegan: And then seasonally then that does tend to come down from the December quarter to the March quarter, is that correct?

I don't think we normally see that seasonally. Obviously, we would go back and look at the numbers, but I don't think there's anything we can point to say that's why that happens. It's just one of those things that does happen. Brent Rakers - Morgan Keegan: And then you had talked a lot about some different items within SG&A, but you also talked about how revenue fell short to some degree of your own expectations for the quarter. Do you have any sense or put a number to SG&A that pulled back may be for being $10 million to $15 million high on the revenue line. How much that translated into the SG&A number?

Brent, I don't have a specific number for that. Obviously, that's a big component. For instance, various incentive plans that we have throughout the organization are tied to performance, whether it be sales growth, profit growth, many different factors; and so once those factors slow down, then our incentive expense could theoretically go down somewhat and we did see that I call that part of our lower benefit costs for the organization. But I can't really tie it in and give you a direct link for a calculation on that. Brent Rakers - Morgan Keegan: Mark, do you have a sense of if you compare this March quarter year-over-year versus let's say the December quarter year-over-year, what the change was or what the benefit was to Applied in terms of that bonus accrual or that benefit cost?

I have not done that Brent. I'm sure I could calculate it. I just don't have that here. I've not done that analysis. Brent Rakers - Morgan Keegan: Okay and then just last question. You talked a lot in the past about relying heavily on the MCU in terms of a guide for your own business trends and you typically talked about three months to six month lag with that. Just kind of scanning the numbers, it looks like really the first kind of year-over-year pullback in that has just come in this March month. So it seems like this time, this contraction if you're really in that has happened much earlier. Do you have any may be commentary as to why that would be the case and may be make Applied more unique than may be some of your peers this time?

I don't think you could look at it, I think when you look at the MCU, we're looking at the run rate on the MCU and so we would have a lag from that and I think it speaks about seven months or eight months ago, I don't have it right in front of me, and it's been coming down since then. So, I think we're seeing impact of that. Brent Rakers - Morgan Keegan: And then I guess one last question then. When I look at the December quarter for Applied, it looks like you had some pretty good out performers may be versus some of the peers in that quarter. And then obviously, this March quarter looks like it's the opposite. To what level of conviction do you have that, when you talk about the further weakness possibly in June, to what conviction do you have that this is not, I would to say counter balancing a stronger December quarter as opposed to kind of the start of an economic pull back?

That's a great question Brent, and we haven't gone back and looked at that. Perhaps some of our customers did increase inventories in December, ahead of price increases coming in the first quarter of the year. So that's something for us to go back and look at. If you average the two quarters may be we shouldn't be as down in the office we are today.

And the other point to make as you know Brent, as we've talked in the past is that, we don't have a lot of visibility into the future, since our sales of replacement parts are basically when something breaks, they call us and we send the part for that. So we don't have a lot of backlog and things of that nature, it's a very random demand, so it's a challenge for us to look into the fourth quarter and beyond with a lot of certainty as we were talking about. Brent Rakers - Morgan Keegan: And I'm sorry just may be one follow-up comment, if may be Ben could comment on, I know Ben you talked a lot about specific industries that have weakened and all that. Could we get a better sense of breadth here, are we talking about four, five, six large customers that have really contracted, or are we talking about this being fairly broad based?

Yes, I think Brent if you look at as we look at the industries and look at the various SIC codes, where we're down is broad based. And as I mentioned earlier, our national account business is up more than the remainder of our business, so it gives us the indication is more broad based than any specific customers. Brent Rakers - Morgan Keegan: Okay. Thanks, Ben.

Thank you.

Thanks, Brent.

At this time, there are no further questions. I would now like to turn the call over to, Mr. David Pugh for closing remarks.

Amanda, thank you very much. And gentlemen, thank you for your questions today. Just remind you a pretty good team here is working on this. We're not hedgehogs, we have a few tricks to pull, and we're working at all levels on this. So stick with us, looking forward to next quarter. Thanks a bunch. Bye-bye.

This concludes today's Applied Industrial Technologies third quarter 2008 financial earnings teleconference. You may now disconnect.