Interest Rate Risk  QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK  Foreign Currency Exchange Rate Risk  13 Applied Industrial Technologies, Inc. and Subsidiaries We repaid the debt that was outstanding at June 30, 2010 during  fiscal 2011, thus, at June 30, 2012, we were not exposed to  interest rate fluctuations on outstanding debt. We monitor  depository institutions that hold our cash and cash equivalents,  primarily for safety of principal and secondarily for maximizing yield  on those funds. We diversify our cash and cash equivalents among  counterparties to minimize exposure to any of these entities.$_{ }$ 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.  Since we operate throughout North America and approximately 15%  of our fiscal year 2012 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  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 other expense (income),  net. Applied does not currently hedge the net investments in our foreign operations.  During the course of the fiscal 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. dollar relative to foreign currencies that affect the Company  would have resulted in a $2.2 million decrease in net income for  the year ended June 30, 2012. A 10% weakening from the levels  experienced during the year ended June 30, 2012 of the U.S. dollar  relative to foreign currencies that affect the Company would have  resulted in a $2.2 million increase in net income for the year ended June 30, 2012.