Julie Kho Neil A. Schrimsher - Chief Executive Officer, Director and Member of Executive Committee Benjamin J. Mondics - President and Chief Operating Officer Mark O. Eisele - Chief Financial Officer, Vice President and Treasurer

Jonathan Tanwanteng - CJS Securities, Inc. Matt Duncan - Stephens Inc., Research Division Adam William Uhlman - Cleveland Research Company John Anthony Baliotti - Janney Montgomery Scott LLC, Research Division Brett L. Linzey - KeyBanc Capital Markets Inc., Research Division Vineet Khanna - BB&T Capital Markets, Research Division Gregory W. Halter - LJR Great Lakes Review Derek Jose - Longbow Research LLC Brent D. Rakers - Wunderlich Securities Inc., Research Division

Welcome to the Fiscal 2013 Third Quarter Earnings Call for Applied Industrial Technologies. My name is Dawn, and I will be your operator for today's call. [Operator Instructions] Please note that the conference is being recorded. I will now turn the call over to Julie Kho. Julie, you may now begin.

Thanks, Dawn, and good morning, everyone. Welcome to the Applied Industrial Technologies' Fiscal 2013 Third Quarter Conference Call. Our earnings release was issued this morning before the market opened. If you haven't received it, you can retrieve it from our website at applied.com. A replay of today's broadcast will be available for the next 2 weeks as noted in the press release. Before I begin -- before we begin, I would like to remind everyone that we'll discuss Applied's business outlook during the conference call and make statements that are considered forward-looking. All forward-looking statements, including those made during the question-and-answer portion, speak only as of the date hereof and are based on current expectations that are subject to certain risks, including trends in the industrial sector of the economy, the success of our various business strategies and other risk factors identified in Applied's most recent periodic report and other filings made with the SEC, which are available at the Investor Relations section of our website at applied.com. Accordingly, actual results may differ materially from those expressed in the forward-looking statements. The company undertakes no obligation to update publicly or revise any forward-looking statement whether due to new information or events or otherwise. In compliance with SEC Regulation FD, this teleconference is being made available to the media and to the general public, as well as to analysts and to investors. Because the teleconference and its webcast are open to constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Our speakers today include Neil Schrimsher, Applied's Chief Executive Officer; Ben Mondics, our President and Chief Operating Officer; and Mark Eisele, our Chief Financial Officer. At this time, I will turn the call over to Neil. Neil A. Schrimsher: Thank you, Julie, and good morning, everyone. We appreciate you joining us today. Our release this morning shows our sales for the quarter were $621.7 million, up 2.7% over the prior year quarter. Net income for the quarter was $29.3 million, or $0.69 per share, basically flat as compared with the third quarter of 2012. Despite some economic uncertainty in the quarter and the modest sales growth, we achieved solid earnings, benefiting from our business investments, efficiency gains and disciplined cost controls. We are confident that we're driving the right actions for shareholder value, and we are committed to our long-range strategy, generating growth and profitability across our business. Let me share a few examples that demonstrate the ongoing work and targeted development that's occurring. Across our sales teams, we've seen a ramp up in the utilization of new selling tools that are helping to make our sales associates more effective, efficient and accountable for their activities. A consistent selling process across our organization is converting greater sales opportunities into results. Also, our commitment to expanding our products and solutions is visible with many of our best customers. Featured products and predictive maintenance offerings add to the discussions we're having with customers while addressing their current needs and delivering immediate product requirements. By leveraging our knowledge of the customers, their equipment and their operations, we gain opportunities to serve greater requirements. Our recent acquisition of Parts Associates, or PAI, builds on our maintenance supplies and solutions offering and is an area that's generating excitement with our associates and interest among our customers. Good progress has been made in the integration as well as partnering opportunities with our service centers. Maintenance supplies and solutions will continue to gain momentum going forward. Additionally, we are more fully leveraging our service capabilities and delivering value-added solutions throughout our Fluid Power business. We are strengthening existing customer relationships, building content on new platforms and gaining new customers, all serving to enhance our leadership position in the marketplace. We benefit greatly from having one of the largest teams of certified specialists, mechanics and technicians providing problem solving, system building and troubleshooting for our customers. Our continued development of these business opportunities and others combined with our debt-free position, strong balance sheet and a shared determination to realize our potential, positions us to profitably grow our business organically via acquisitions and through our technology investments. We are building on our 90-year legacy of strength in distribution, and we are well positioned in the industrial marketplace. We remain optimistic about the industrial economy for the 2013 calendar year and over our strategic planning horizon. For the fiscal year, we are maintaining our earnings guidance of $2.70 to $2.90 per share on sales growth expectations of 4% to 7%. I'll now turn it over to Ben for some comments on our operating performance for the quarter. Benjamin J. Mondics: Thanks, Neil. Let me begin by providing an overview of the industrial market and, specifically, the indices we follow, as they are typically a good indicator of the future manufacturing environment. Industrial production increased 0.4% in March. This follows a 1.1% increase in February. For the March quarter overall, industrial production moved up at an annual rate of 5%, its largest gain since the first quarter of 2012. For the 3 major industry groups, manufacturing output rose at an annual rate of 5.3%. The output at utilities also rose 5.3%, and mining was down slightly in the quarter. In March, manufacturing capacity utilization edged down 0.2 point to 76.4%, a rate that is 12.4 percentage points above its trough in June of 2009 but still 2.3 percentage points below its long-run average. The ISM manufacturing index fell to 50.7 in April, its second consecutive monthly decline. The March and April readings were weaker than expected but still above the expansionary threshold of 50. The index averaged 52.9 in the March quarter compared with 50.6 in the final 3 months of 2012. For the March quarter, the leading indicators were generally positive, sequentially and year-over-year. However, the indices weakened in March, and that weakness seems to be carrying over into April. Although we are currently seeing some softness in the industrial markets, we believe that the industrial economy will gradually strengthen throughout the calendar year. As Neil indicated, the activity and hard work continues as we prepare to close the final quarter of our fiscal year. I am encouraged by the daily actions of our dedicated associates that help us generate success for our customers and value for our shareholders. We remain committed to executing on our strategies for growth and profitability across our business today and over our strategic planning horizon. I will now turn the call over to Mark for a discussion of the quarter's financial results. Mark O. Eisele: Thanks, Ben. Good morning, everyone. I'll provide some additional insight regarding our third quarter fiscal 2013 financial performance. Our sales per day during the quarter was $9.9 million, or 5.1% above the prior year quarter. We had 1.5 fewer selling days in the March 2013 quarter compared to the prior year. On an overall basis, sales increased 2.7%. Acquisitions added 5.5% to sales, and favorable foreign currency fluctuations increased sales by 0.3%. In addition, we believe the impact of vendor price increases was less than 1% during the quarter. Our product mix during the quarter was 27.4% fluid power products and 72.6% industrial products. Third quarter sales in our Service Center-Based Distribution segment increased $19.9 million, or 4.1%. All of this increase was due to acquisitions. Sales in our Fluid Power businesses segment decreased $3.7 million, or 3.1% from the same period in the prior year. From a geographic perspective, sales in the third quarter from our U.S. operations were down 1.5% compared to the prior year quarter. Our sales increase from our Canadian operations was $5.2 million, or 7.9%, and all related to recent acquisitions. Consolidated sales from our other country operations, which include Mexico, Australia and New Zealand, were $18.9 million above the prior year, with virtually all of this increase from our Australia/New Zealand acquisition. Our gross profit percentage for the quarter was 28.1%, 40 basis points above prior year's third quarter. This increase was due to the impact of recent acquisitions operating at gross margins above our traditional core businesses. Our selling, distribution and administrative expenses as a percentage of sales was 21.1% for the quarter, 40 basis points above the prior year third quarter. On an absolute basis, SD&A increased $5.3 million, or 4.2%, compared to the prior year on a sales increase of 2.7%. Acquisitions added around 9% to our SD&A footprint, and our core operations had a year-over-year decline of around 4% in SD&A expenses. We continue to have a tight focus on our operating expense. ERP spending in fiscal 2013 continues to be in line with our expectations. Our effective tax rate has been stable throughout fiscal 2013 at 34.0%. We expect our tax rate for all of fiscal '13 to remain around 34.0%. Our consolidated balance sheet remains strong with shareholders equity of $738 million. Our after-tax return on assets for the quarter was 11.3%. Inventory has decreased from our December levels due to the sale of strategic purchases that were made prior to calendar year end. We believe our inventory levels should continue to decline slightly between now and June year end. Cash generated from operations was $40.2 million for the quarter compared to $31.8 million in the prior year quarter. Expectations are for solid cash generation for the rest of our fiscal year, consistent with our traditional cash cycle. While we did not purchase any shares of our stock in the open market during the March quarter, we have made some small purchases in the month of April. In summary, our third quarter financial performance continued to reflect the slightly softer sales environment than our original estimates, although we were able to post solid bottom line results. We feel we are well positioned and focused on executing our strategy to produce solid results for the remainder of our fiscal year and into fiscal 2014. Now I'll turn the call back to Neil for some final comments. Neil A. Schrimsher: Thanks, Mark. To conclude, we're working on closing our fiscal year and executing our long-range strategic plan, including leveraging our sales and marketing capabilities to expand our value-add with existing customers and to reach new customers, driving product expansion beyond our core offerings, building upon our Fluid Power leadership, extending our geographic reach, and generating continuous improvement across the business. While work remains, we're excited about the growth prospects, and we are fully committed to generating shareholder value. At this time, we'll open up the lines for questions.

[Operator Instructions] Our first question comes from Jon Tanwanteng from CJS Securities. Jonathan Tanwanteng - CJS Securities, Inc.: Just on the M&A front, on the last call, you said that you were setting your sights a bit higher. There have been a couple of deals since then. At least one of your peers in the distribution space apparently was very willing to buy at extremely high valuations. Can you give us an update in terms of the pipeline, time frames and size and potential prices you may or may not be willing to pay? Neil A. Schrimsher: As I'd say, Jon, from our standpoint, we're active from an M&A front. The pipeline is productive. We continue to have good reviews and good dialogues. We don't always control the timing. I've said before, we were active last year, both in number and dollars, and we want to be as active in 2013. I won't comment on others' activities in that. But we're going to continue to be a good, disciplined, strategic acquirer, and we think there's a lot of prospects and targets in this fragmented space that fits the priorities that we have. Jonathan Tanwanteng - CJS Securities, Inc.: Okay, got it. And then I guess on the gross margin side, you had a nice improvement there. What percent was actually due to the acquisitions? And how can we expect that to trend going forward? Mark O. Eisele: Jon, really, the increase in our gross margin percentage really was driven all because of our acquisitions, and they were at higher gross margin levels than, let's say, our core business. I'd say our core business gross profit percentage was relatively stable in the quarter. Jonathan Tanwanteng - CJS Securities, Inc.: Okay, got it. And then finally, on the SD&A side, do you expect that to trend down as a percentage of revenue given the integration of the acquisitions that you have now? Mark O. Eisele: That's hard to say. Obviously, we're going to keep a tight control on expenses. But the acquisitions, while they have -- help with our gross profit percent, some of them do have a higher level of expenses that -- to deliver that gross profit percent. But we're always looking to try to make those as most efficient and effective as possible. But we'll see.

Our next question comes from Matt Duncan from Stephens Inc. Matt Duncan - Stephens Inc., Research Division: First question I've got is about the month-to-month sales trends you guys are seeing and on how things have looked into April. It sounds like maybe you saw some improvement, I think you said in the Fluid Power business through the quarter. Was that the case across the whole business as well? Mark O. Eisele: Like we said in the press release, we saw throughout the quarter for the U.S. service centers as well as the U.S. Fluid Power groups, we saw improving sales per day, trends and run rates throughout the quarter. And I'd say, as we -- March through April, we saw rates that were stable compared to March. Matt Duncan - Stephens Inc., Research Division: So Mark, if things reach the point now where your organic sales are growing year-over-year, is it improved enough through the quarter to get to that point? Or are you still seeing year-over-year organic declines? I know you've got to be getting close to kind of flipping to growth here. Mark O. Eisele: These quarters are our most strong sales quarters from a seasonal perspective, the March quarter and the June quarter. So these improvements in our sales per day run rate, while they're nice to see, I mean, they were improving at a large percentage last year at the same time as well. So at this point in time, we continue to run slightly below our sales per day run rate from a year ago. But we continue to expect to see improvements throughout even the June quarter. Matt Duncan - Stephens Inc., Research Division: Okay. And then, Ben, you made the comment that, obviously, the economy's been a little bit choppy here, but your expectation is still for some slight improvement as we move through calendar '13. I'm hoping that maybe you can give us some insight sort of into what you guys are seeing and hearing from your customer base and from the end market that gives you the confidence that, that will play out that way. Benjamin J. Mondics: Yes. We are -- we're very fortunate that we serve a broad base of customers in many different markets, and we're constantly, daily talking to our customers both at the local level and at our larger strategic accounts at the corporate level. And I think we're hearing what everyone's hearing. There's caution, there's uncertainty. But at the same time, there's somewhat of an optimistic undertone. Our customers want to expand, they want to invest in their business, but they're uncertain about the direction of the macro economy. So regardless of the economic environment, we continue to see tremendous opportunities out there. And in these uncertain times, our customers are challenged to find ways to reduce their cost of operations, increase their productivity and looking to run their equipment longer before replacing. So that makes our role more important than ever. And we're focused on providing that support to our customers and their operations and help them to be competitive in a challenging environment. But overall, hear caution, uncertainty but with the undertone of optimism about the future. Matt Duncan - Stephens Inc., Research Division: Okay. And then last thing and I'll hop back in queue, you've got essentially 2 months now left in your year. The guidance range is still fairly wide at this point. Is there any help you might can give us on sort of where in that range you feel like things are tracking based on what you're seeing right now? Or would you rather just kind of leave the range out there and leave that up to our imaginations? Mark O. Eisele: Well, Matt, you guys have great imaginations out there. But our view is that we expect to fall within the range that we've provided from an EPS perspective, as well as from a sales perspective. Obviously, our quarterly sales numbers for the last several quarters have been on the -- nearer the lower end of the sales range than the higher end, and I would expect that to continue in the fourth quarter as well. But we didn't feel compelled that we should really change anything because we thought, well, we're going to be in the range, and we think that's okay.

Our next question comes from Adam Uhlman from Cleveland Research. Adam William Uhlman - Cleveland Research Company: Ben, I was wondering if you could go through some of the changes by customer category of demand trends since the quarter progressed between the different SIC codes that you track? Benjamin J. Mondics: Okay, Adam. For the end markets we serve, there are really 2 areas that stand out as being strong right now. First of all, the industries related to the resurgence in the housing industry are doing well. Mainly lumber and wood products but also cement, concrete and the related industries. Secondly, transportation equipment, automotive mainly. And the related industries like fabricated metal are doing well. And then the ones that stand out as struggling are mining, both coal mining, metal mining. And then also, the machinery manufacturing sector is having some challenges that -- on the equipment build side of the business. So generally, automotive, housing doing well; mining and manufacturing are having their struggles. Adam William Uhlman - Cleveland Research Company: Okay. And then the piece of the business that has that OEM exposure in the machinery, are you seeing any -- or hearing of any improving trends from those customers in terms of any kind of order visibility into the second quarter or further? Benjamin J. Mondics: It's a broad-based category. Everything from agricultural equipment to coal mining equipment to high tech. So each one is very different. And what we're seeing in our customer base is very similar to what you're hearing and reading about in the news. Adam William Uhlman - Cleveland Research Company: Okay, got you. And then, Neil, you had mentioned you've given the sales guys more selling tools. They've got a little bit more product to work with. I was wondering if you could expand a little bit about some of the changes that you've made on that front? And then related to that, if some -- if you could talk a little bit about your hiring expectations for adding feet on the street over the next year or so? Neil A. Schrimsher: Yes. I'd say overall, from a tool standpoint, some we're making them electronic and available to them. So faster access for quicker reviews. Others that we're doing that -- we take potential down to a customer level and look at our performance in total against the potential and across the category. So just the added visibility helps us focus in, in what products and solutions that we'd look to expand on. I think from a headcount standpoint, I don't think we expect great increases. We're just driving focus in some areas that we think we get good returns on. So in some -- many areas, there can be a redeployment of resources in that. They look market back to see where there's opportunities to make further investments in geographic markets. But I think the -- the thing in the model, right? Those -- the service centers, the areas, they run the income statements. They look at these investments as well. So we're not constraining it, but they look at where we're going to get return. And we fixed some areas to do it around Fluid Power, around maintenance supplies and some of the others, and we'll continue to do that. I think from kind of the macro headcount standpoint, I would not expect a great swelling in the numbers.

We now have John Baliotti online from Janney Capital Markets. John Anthony Baliotti - Janney Montgomery Scott LLC, Research Division: Neil or maybe Ben, I don't know, you guys talked about the machinery side and the OEM side, and obviously they're seeing some softness. I think that's consistent with what we're hearing about capital -- large capital projects in the related businesses. But what are you seeing from the -- their behavior, those customers? Are they still de-stocking? Are they still operating hand-to-mouth? Or what kind of -- has there been any change in behavior over the last, I don't know, 3 to 6 months? Neil A. Schrimsher: Maybe I'll start. I think we get exposure to them a couple of ways, right? So we'd get exposure in Fluid Power, and so those could be in segments. Also in ag, maybe construction and some of those. And those are still looking productive as they build solutions. How we drive or increase our content on some of the programs that they have. But also, new programs that they may be developing, how we would expand our content. Think that kind of on our MRO side, that is a big catch-all category that would look, and kind of a mix of medium- and small-type customers in that area. And maybe some of the smaller ones are just looking at buying their most immediate requirements in that area. But I think the mid or the larger size, they'll continue to run their business and run their operations. And then I'd say outside of that category, if I can say kind of the customers in general, I'd still say some of the larger-sized, the productivity investments that they can make in their businesses generates some of the largest returns. So when they kind of -- not in the macro news in their business, you kind of see that continued planning going on, which gives us some optimism as we think about rest of '13 and really going into '14. John Anthony Baliotti - Janney Montgomery Scott LLC, Research Division: So you feel like the -- that they're going to work down number of distributors sort of to try to find some efficiency there as well? Neil A. Schrimsher: I think broadly in kind of all categories. I think customers are looking to buy from the better, fewer suppliers to consolidate their spend and manage that transactional cost in doing it. And I think that goes across really all of the segments. John Anthony Baliotti - Janney Montgomery Scott LLC, Research Division: What about on the fluid repair side? Are you seeing -- in the service area, are you seeing any changes in trends there? Neil A. Schrimsher: I don't know that I'm seeing changes in trends. It's a good segment of our business. We'd like to see it grow. When we're connected with a customer on service and repair, obviously, it makes us closer to them. It gives us a chance to do greater business. And in service and repair, the repair work tells a story. It tells a story on the operations, what's going on, what maybe could be improved in that area. So we like being connected on the service side because we think we can bring solutions across other pieces of equipment that may not yet be needing service that, that operation, as we do the repair and do the diagnostics, may be pointing us towards. So we like that involvement. John Anthony Baliotti - Janney Montgomery Scott LLC, Research Division: Yes. I mean, that's what I was wondering, because you mentioned earlier that customers are trying to do -- keep their equipment longer and make it last longer and that usually, for equipment machinery, it generally means more service MRO work. And obviously, there's a -- you get that margin trade-off versus, let's say, large projects. And it seems like that would be a nice trade-off for you for the time being. I'm sure you'd love to see the other business surge. But it seems like that's a nice place to be in the meantime. Neil A. Schrimsher: I think it's a pretty good trade-off for us. I think even more so, right, it's a good trade-off for the customers. Some will run to failure and others will be looking for solutions. And even when you've run to failure, if you can help them on some other pieces of the equipment, they will look at it. So I think it's great for our customers, and we're happy to participate.

Our next question comes from Brett Linzey from KeyBanc. Brett L. Linzey - KeyBanc Capital Markets Inc., Research Division: Back to the question regarding new products and solutions. I guess as we -- you've talked about that a lot over the last couple of quarters. As we look into your fiscal '14, how should we think about those opportunities adding to revenue outside of underlying market activity? Neil A. Schrimsher: Yes. We're just going through our refresh or update of our strategy, our look over the kind of 3-year horizon. I think in a lot of areas, we will continue product expansion work in categories that we pick. Further that development, continue to bring tools for our selling teams, work with those suppliers. And so in many regards, we will continue those in time. We say we represent 14 broad categories, and we want to keep pushing and expanding that out. For us, probably adding on to that is more in the back half of our '14 or into -- maybe even into '15. We're looking at being more focused on execution right now. Brett L. Linzey - KeyBanc Capital Markets Inc., Research Division: Okay, that's helpful. And then I guess, just on the pricing environment. What are you guys seeing, hearing from customers in terms of price? It sounds like realization in the quarter was a little bit below 1. I mean, what are your expectations as we look out over the next 12 months or so? Neil A. Schrimsher: I'd say that's kind of been consistent in the expectation. I mean, I'd describe the overall environment as a pretty stable pricing environment, kind of the normal activities that we would see with the start of a calendar year. I think that's really going to continue. I think there's some supplier activity, modest, in doing it, and we still believe we have the ability to pass those along as they come into our customer base. So I would expect price kind of stays in the area that it's at. Brett L. Linzey - KeyBanc Capital Markets Inc., Research Division: Okay. And then as it relates to the service and the Fluid Power comments, the sequential trends you've seen in some of the improvements there, I guess what's driving that source of outgrowth? Is it share gains? Is it what you're doing in the marketplace? Any color there would be helpful. Neil A. Schrimsher: I think the Fluid Power market's not bad overall, maybe a little bit of a decline. So perhaps we're performing a little bit better with the footprint and the capability that we have. I think a few of our subsidiaries are really doing well, and we think in a couple of those segments that have been maybe a little more challenged previously, they'll get a little better as we go forward and contribute to that. And so we're making there some investments to be in more facilities, more operations. So we just think that's going to continue. I think, overall, it's a big space. Maybe nearly $6 billion Fluid Power market that's distributor-served. So there's a lot of opportunity that's out there.

Our next question comes from Vineet Khanna from BB&T Capital Markets. Vineet Khanna - BB&T Capital Markets, Research Division: First question in regards to gross margin. I know you guys said all of the contribution was from M&A, and the core business was stable. Was there no benefit from kind of the strategic purchases that you guys did at the end of the calendar year? Mark O. Eisele: Some of the strategic purchases we did obviously did help with some of our supplier incentives for that. But from a year-over-year perspective, we did not see an improvement from that. So the benefits we get from our purchasing initiatives are relatively stable throughout the year for the quarters, and we didn't see a real change for that to help push up our overall gross profit percentage for the quarter. Vineet Khanna - BB&T Capital Markets, Research Division: Okay. And then I guess, kind of related in regards to the gross margin, can you kind of speak to the sustainability going forward? Do you think this 2-8 is a level? I know this is kind of your seasonal high. But moving forward, where do you see gross margin going? Mark O. Eisele: We continue to work hard on our gross profit percentage, and we continue to see opportunities to improve our gross profit percentage now, as well as into the future. So we're looking at this as -- to continue. I mean, I can't guarantee it's going to continue, but we're going to work hard at it. Vineet Khanna - BB&T Capital Markets, Research Division: Okay. And then I guess for fiscal quarter -- or fiscal fourth quarter, do you have any idea what acquired revenues should look like, give or take? Mark O. Eisele: Correct. Yes. The past quarter that we just wrapped up, it was 5.5%. We did have, a year ago, in the March quarter, 2 acquisitions in Eastern Canada that are rolling off for that. So it will be a smaller number in the fourth quarter compared to the third quarter, and I think it'll probably be in the -- probably 4.5% to 5% range. Vineet Khanna - BB&T Capital Markets, Research Division: Okay. And then could you guys kind of speak to the uses of cash? You had great cash for this quarter with no buybacks. And I know you said you guys did a few this quarter. Are you just sort of more focused on building cash for M&A? Or... Mark O. Eisele: Yes. I'd say we look at those all in a balance. I mean, last quarter, we increased our dividend rate for the shareholders, and we do want to continue to look at share buybacks throughout the time periods. But also, as we've talked before, we have a lot of M&A opportunities, and we have a lot of dry powder available for those to do M&A. So we're not necessarily not doing one of those to save money for another. We're trying to maximize our use of cash in each of those areas. Vineet Khanna - BB&T Capital Markets, Research Division: And then just last quick question. In regards to the other income line, could you guys just kind of break that out, what the components of that were? Mark O. Eisele: Yes. In other income, there's a couple of items on that regarding some foreign currency items, as well as some gains on our assets within our various deferred compensation plans. I don't have that -- I should have that really handy. Here -- yes, I've got it right here. Okay. I just had to find it. I think that most of those were from gains on assets held and ran by trusts, was about $600,000 for this quarter. A year ago, it was much larger for those gains. And so that's why we saw the small decrease in the gains that we see for the quarter.

Our next question comes from Greg Halter from Great Lakes Review. Gregory W. Halter - LJR Great Lakes Review: Yes. Wondered if you could discuss the receivables and inventories levels? If you could strip out the acquisitions on a core basis? Mark O. Eisele: Yes. From the inventory levels, we have done a bunch of inventory acquisitions so far during this fiscal year, and that's added approximately $25 million of inventory from those acquisitions. And so the rest of the inventory increase from June 30 to March is through additional property -- or inventory additions for growth initiatives. And from a receivables perspective, the receivable amounts that we have added from acquisitions is probably a little bit south of $10 million. And so the rest of the receivables change relates to our core operations. Gregory W. Halter - LJR Great Lakes Review: Okay. And regarding your capital spending for the year, it's obviously down significantly from last year at this point so far. What are your thoughts for the full year '13? And any early guesstimate for fiscal '14? Mark O. Eisele: Right. We are on track for our overall capital spend over the summer. I believe we talked about what our perspective was and what we'd spend for the whole year. I don't recall exactly what the numbers are right now, but I believe it was in the $12 million to $14 million range of total CapEx. So we think we'll still fall within that range. The decreases, we have lower amounts of assets being capitalized in relation to -- relationship to our ERP project. As far as fiscal 2014 goes, we are in the beginning stages of our overall budget process for that. And I wouldn't want to hazard a guess for this, but my perspective is it should be relatively constant to or comparable to what our numbers are coming out for fiscal 2013. Gregory W. Halter - LJR Great Lakes Review: Okay. That's a good segue into the ERP system. Where do you stand on that in terms of implementation? And what kind of problems have you encountered so far? Neil A. Schrimsher: I'd say, hey, we continue the phased deployments around our distribution centers, so most recently had one. And really, our plans are to continue those phased deployments around our distribution centers throughout calendar 2013. Gregory W. Halter - LJR Great Lakes Review: And I'm glad the answer to the second question was none. Neil A. Schrimsher: There you go. Gregory W. Halter - LJR Great Lakes Review: It's what I like to hear. And Neil, I know when we met a while back, you were in the throes of visiting the regions and the centers and so forth. I think there's 32 or so. Have you made it through all those? And what's your impression now that you've been there for some time? Neil A. Schrimsher: Hey, I continue to be impressed around our business, our position, the quality of our associates. And when we get deep with customers, we're adding real value and we've got opportunities to continue to build on that. So that's encouraging. In the U.S., spending time with our Canadian teams, Fluid Power groups, and even Australia. And we'll see those guys again here very shortly in the coming weeks.

Our next question comes from Derek Jose from Longbow Research. Derek Jose - Longbow Research LLC: I was wondering what the average manufacturer's price increase was at the beginning of calendar 2013? Mark O. Eisele: Derek, I don't have that off the top of my head. All manufacturers do not necessarily have calendar year-end price increases, but many do. I would say the average increase that we probably saw was anywhere from 2% to 4% on average on their book of business. Derek Jose - Longbow Research LLC: Okay. And then with the price realization, correct me if I'm wrong, of 1%, is price currently a headwind for gross margin until you can do price increases in your new fiscal year -- new year? Mark O. Eisele: No. The reason that our impact of price increases is lower than what the average manufacturer has is that with the number of SKUs that we carry and the randomness of customer demand, that oftentimes we're selling an SKU in the current quarter that we didn't sell in the prior year. So what's the impact of the price increase on that SKU? It's almost indeterminable. So what we see is for the SKUs that we are selling year-over-year, the average increase for those averages out to under 1%, but that doesn't mean we're not passing along the 2% to the 4% price increase for everything that we do sell. So we're not absorbing those. Those are getting pushed through. Derek Jose - Longbow Research LLC: Okay. Because one of your other public competitors the other day basically said that they have been having trouble passing through the price increases from the beginning of the year. So you're saying that you're not having trouble? Mark O. Eisele: Well, let me say that no customer ever likes a price increase. And so obviously, it's always a challenge, and it's work to push these through. But I will say our systems generally, automatically, push these increases through at the time of increase so that we have that in front of the customers on that day. And so our sales reps have conversations with customers in preparation of those increases. And that's just the way we do business. Neil A. Schrimsher: And what, half of what we sell would go one time a year. Oftentimes, it's in a break-fix environment. So -- I mean, I'll go back to the pricing environment is stable for us. That'd be our characterization. Derek Jose - Longbow Research LLC: Okay. If then we're looking out for the next quarter and through the next year, the demand right now isn't obviously what you want it to be, and you have a very wide range. If we're looking at you getting price increases going forward, what does demand have to kind of pick up for you to be able to seamlessly pass through your own price increases for your fiscal '14? Mark O. Eisele: Derek, I think our model is that, with demand even being relatively flat, we'll be able to pass through the price increases that our suppliers are passing through to us. And we will take opportunistic -- opportunities for margin enhancement to improve our gross margin perspective on sales as well through that period. We see opportunities there. Derek Jose - Longbow Research LLC: Okay. And then just lastly, with the ERP system, one of the advantages you have talked about in the past is kind of getting a better feel on being able to accurately price to each individual customer. When do you think you will start being able to see maybe a little bit of contribution to gross margin from the ERP system if right now you're getting full growth of gross margin from the acquisitions? Neil A. Schrimsher: Yes. Derek, I would say the potential is with the visibility for real-time pricing, some of the analytics to help to have guidelines and kind of adherence to those, especially in a random product environment. And we expect, as we continue to deploy out, that we have the opportunity for those benefits. Some of the work that we do in preparation really has us updating price guides and files. And just the readiness work helps us be faster and better responsed. And then the system's kind of give us some visibility for more real-time review and visibility to pricing and opportunity maybe to coach or to reinforce going forward. But as we deploy out around our distribution centers in these phased environments, we'll have more and more of that opportunity. Derek Jose - Longbow Research LLC: Okay. Will you have enough resources deployed to see an effect by first half of fiscal '14? Neil A. Schrimsher: First half of '14? Well, we would say, again, with volume that we have, we expect pricing and we expect our margins to continue to improve as we go along. That's what we work at, and price will be one part of that contribution.

Our last question comes from Brent Rakers from Wunderlich Securities. Brent D. Rakers - Wunderlich Securities Inc., Research Division: I think I'm, first, maybe going to try to follow up some of the ERP questions. I think, and you can remind me if I'm incorrect, but has Applied given any sort of cost-savings benefits from ERP or gross margin target benefits? Neil A. Schrimsher: Hey, Brent, this is Neil. And I would say we haven't. As I've said before, it's hard to parse out, right, what's a benefit from ERP, what's a benefit of readiness actions, what's a benefit of other continuous improvement projects. So what we say is we'll talk about our business benefits overall and the improvements that we're making. And trying to attribute what's due to an ERP or what's from some other action in our business, we're probably not that good to do that. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Okay. So no plans obviously to do that even upon completion? Neil A. Schrimsher: Agreed. Yes. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Okay, okay. And then just for clarity, because -- on some of Mark's numbers on the acquisitions with the different geographies, could you maybe give a better sense -- maybe in particular what the Australian business did in the quarter in terms of revenue? Mark O. Eisele: I would say we had around -- $18 million to $20 million was revenue increase due to the Australia/New Zealand. I do not have that number right in front of me here. But we did say, and we will say in our 10-Q when we disclose our others -- our other country revenue, that all of the increase that you're seeing in that disclosure is Australia and New Zealand. And we basically were doubling that information in there. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Okay. And then, again, just another maybe point of clarity on some of your gross margin comments, if I'm backing into the numbers correctly, you're saying that the collective, and I think there's 5 different acquisitions that flow through the numbers this period, does that come to like a mid-30s gross margin on those businesses? Mark O. Eisele: I don't have that number right in front of me, Brent, but it is at a higher rate than our traditional rate, which was in the 27.5% range. And that was the -- enabled us to then show the 28.1% for this quarter. So yes, they are, virtually all of them, higher. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Okay. And then just, I guess, 2 other questions. I think when you initially made the SKF acquisition, there was comment that they would be -- I think it was a general comment that they would be accretive. When you walk through the gross margin and SG&A disclosures, the acquisitions kind of net out to pretty neutral to EPS. Could you maybe address how SKF was performing? And if the other acquisitions are dilutive, that, that may be dragging down that overall appearance of SKF accretion benefit? Neil A. Schrimsher: Yes. I can say -- I'll talk to Australia and New Zealand. I think the team continues to perform very well. Obviously, there's characterizations of that economy being a 2-speed economy, right? All the resource-related parts of the market and the all other, with the resource markets traditionally being the strongest. Obviously, they're not immune to some of the activity in mining and some of the other. For us, so we're very excited about our opportunities that we have there. So we acquired in the August time frame. So really the work that has gone on is some of the integration, but really, all the readiness work on product expansion. So we've got a real nice opportunity to continue to build out that power transmission platform there and some other product categories in time. So there's probably 8 going on in what I'd characterize more as Phase 1. There's probably some works accelerating already on Phase 2. So we're going to have more products, more solutions to be taking to good customers in that environment. Now some of it's in the face of a little less demand. But we -- in maybe the core products. But now we're bringing much broader solutions to those customers. So we're liking the businesses very much. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Okay. And then just final question, and I'm not sure if it relates to competitive -- competitiveness or end markets or what have you. But it seems like if you look at your December organic numbers and you look at your March organic numbers and you look at your 3 other public peers, your numbers look I think maybe significantly stronger than all of your peers. Any comment as to what might be driving that? Any company-specific initiatives? I mean, I know we know the bigger-picture initiatives, but maybe even more color on end markets, particularly with regards to the lumber forest products? Maybe the magnitude of the strength in that business? Neil A. Schrimsher: Yes, I'm not too sure that it's just any one end market driven in doing it. We like our initiatives, that they're really based around kind of fundamentals and execution in that. And I'd say, too, right, I mean, these are big markets with a fragmented distribution. So there's opportunities for growth via acquisitions to consolidate. But it's a big space out there. We don't look just at 1, 2, 3 companies doing it. We're probably more focused on our customers and those opportunities.

Thank you. I will now turn the call back over to Neil Schrimsher for closing remarks. Neil A. Schrimsher: All right. I want to thank everyone for joining us today and the interest in Applied. And we look forward to talking with you throughout the quarter.

Thanks again for taking the time to join us. We look forward to speaking with you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.