<PAGE> 1
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
Commission file number 1-13059
JLK DIRECT DISTRIBUTION INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2896928
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1600 TECHNOLOGY WAY
P.O. BOX 231
LATROBE, PENNSYLVANIA 15650-0231
(Address of registrant's principal executive offices)
Registrant's telephone number, including area code: (724) 539-5000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title Of Each Class Outstanding at November 1, 1999
- ------------------------------------ -------------------------------
Class A Common Stock, par value $.01 4,273,390
Class B Common Stock, par value $.01 20,237,000
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JLK DIRECT DISTRIBUTION INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
Item No. Page
- -------- ----
PART I. FINANCIAL INFORMATION
1. Financial Statements:
Condensed Consolidated Statements of Income (Unaudited)
Three months ended September 30, 1999 and 1998..................... 1
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1999 and June 30, 1999............................... 2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended September 30, 1999 and 1998..................... 3
Notes to Condensed Consolidated Financial Statements
(Unaudited)........................................................ 4
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 7
PART II. OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders................11
6. Exhibits and Reports on Form 8-K...................................11
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JLK DIRECT DISTRIBUTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATIONS
Net sales $118,315 $131,762
Cost of goods sold 79,737 88,972
-------- --------
Gross profit 38,578 42,790
Operating expenses 31,599 36,376
-------- --------
Operating income 6,979 6,414
Interest expense and other 117 290
-------- --------
Income before provision for income taxes 6,862 6,124
Provision for income taxes 2,708 2,400
-------- --------
Net income $ 4,154 $ 3,724
======== ========
PER SHARE DATA
Basic earnings per share $ 0.17 $ 0.15
======== ========
Diluted earnings per share $ 0.17 $ 0.15
======== ========
Weighted average shares outstanding 24,510 24,511
======== ========
Diluted weighted average shares outstanding 24,510 24,511
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE> 4
JLK DIRECT DISTRIBUTION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 3,878 $ 2,807
Notes receivable from Kennametal 14,937 11,611
Accounts receivable, less allowance for doubtful
accounts of $996 and $981 54,993 53,680
Inventories 114,702 101,770
Deferred income taxes 6,818 6,818
Other current assets 92 52
-------- --------
Total current assets 195,420 176,738
-------- --------
Property, plant and equipment:
Land and buildings 6,437 6,318
Machinery and equipment 29,274 27,419
Less accumulated depreciation (9,383) (8,400)
-------- --------
Net property, plant and equipment 26,328 25,337
-------- --------
Other assets:
Intangible assets, less accumulated
amortization of $14,712 and $13,592 62,987 64,383
Deferred tax assets 7,110 7,377
Other 1,705 1,154
-------- --------
Total other assets 71,802 72,914
-------- --------
Total assets $293,550 $274,989
======== ========
LIABILITIES
Current liabilities:
Notes payable to banks $ 6,804 $ 7,737
Accounts payable 28,861 21,025
Due to Kennametal and affiliates 9,580 4,609
Income taxes payable 7,269 4,903
Accrued payroll and vacation pay 3,043 3,220
Other 7,547 6,927
-------- --------
Total current liabilities 63,104 48,421
-------- --------
Deferred income taxes 5,519 5,519
Other liabilities 5,033 5,175
-------- --------
Total liabilities 73,656 59,115
-------- --------
SHAREOWNERS' EQUITY
Preferred stock, $.01 par value; 25,000 shares authorized; none issued -- --
Class A Common Stock, $.01 par value; 75,000 shares authorized;
4,917 shares issued, 4,273 shares outstanding 49 49
Class B Common Stock, $.01 par value; 50,000 shares authorized;
20,237 shares issued and outstanding 202 202
Additional paid-in capital 182,822 182,822
Retained earnings 51,590 47,436
Treasury stock, at cost; 644 shares of Class A Common
Stock held (14,529) (14,529)
Accumulated other comprehensive loss (240) (106)
-------- --------
Total shareowners' equity 219,894 215,874
-------- --------
Total liabilities and shareowners' equity $293,550 $274,989
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 5
JLK DIRECT DISTRIBUTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,154 $ 3,724
Adjustments for noncash items:
Depreciation and amortization 2,300 2,099
Loss (gain) on sale of assets 282 (10)
Changes in certain assets and liabilities:
Accounts receivable (3,586) (2,606)
Proceeds from the sale of accounts receivable 2,110 --
Inventories (12,972) (2,434)
Accounts payable and accrued liabilities 15,423 (14,869)
Other (581) (130)
-------- --------
Net cash flow from (used for) operating activities 7,130 (14,226)
-------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,563) (3,112)
Notes receivable from Kennametal (3,326) 1,169
Other (41) 24
-------- --------
Net cash flow used for investing activities (4,930) (1,919)
-------- --------
FINANCING ACTIVITIES
Borrowings under (repayments of) notes payable to banks (933) 3,660
Notes payable to Kennametal -- 12,244
Purchase of treasury stock -- (332)
-------- --------
Net cash flow from (used for) financing activities (933) 15,572
-------- --------
Effect of exchange rate changes on cash (196) (8)
-------- -------
CASH AND EQUIVALENTS
Net increase (decrease) in cash and equivalents 1,071 (581)
Cash and equivalents, beginning 2,807 4,715
-------- --------
Cash and equivalents, ending $ 3,878 $ 4,134
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 236 $ 162
Income taxes paid 181 367
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 6
JLK DIRECT DISTRIBUTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. The condensed consolidated financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements included in the company's
1999 Annual Report on Form 10-K. The condensed consolidated balance sheet as
of June 30, 1999 has been derived from the audited balance sheet included in
the company's 1999 Annual Report on Form 10-K. These interim statements are
unaudited; however, management believes that all adjustments necessary for a
fair presentation have been made and all adjustments are normal, recurring
adjustments. The results for the three months ended September 30, 1999 are
not necessarily indicative of the results to be expected for the full fiscal
year.
2. The accompanying condensed consolidated financial statements of JLK Direct
Distribution Inc. include the operations of J&L America, Inc. (J&L), a
previously wholly-owned subsidiary of Kennametal Inc. (Kennametal), and Full
Service Supply (FSS), which previously had been operated as a program of
Kennametal. Prior to April 1, 1997, the company had no separate legal status
or existence. Kennametal incorporated the company as a Pennsylvania
corporation under the name "JLK Direct Distribution Inc." in April 1997.
Kennametal currently owns 83 percent of the outstanding stock of the company.
3. Comprehensive income for the three months ended September 30, 1999 and 1998
is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Net income $ 4,154 $ 3,724
Foreign currency translation adjustments (134) (8)
---------- ----------
Comprehensive income $ 4,020 $ 3,716
========== ==========
</TABLE>
Accumulated other comprehensive loss consists solely of cumulative foreign
currency translation adjustments.
4. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. The company must adopt the standard by the
beginning of the first quarter of fiscal 2001. SFAS No. 133 establishes
accounting and reporting standards requiring all derivative instruments
(including certain derivative instruments imbedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
their fair value. SFAS No. 133 requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. The
company currently is evaluating the effects of SFAS No. 133 and does not
believe that the adoption will have a material effect on the financial
statements or results of operations of the company.
5. In connection with fiscal 1998 and 1997 acquisitions, the company entered
into employee retention and non-compete agreements. The remaining liability
for these agreements, and other similar agreements from previous
acquisitions, at September 30, 1999 and June 30, 1999 recorded in other
current liabilities was $2.4 million and $2.5 million, respectively, and in
other liabilities was $2.7 million and $2.9 million, respectively.
4
<PAGE> 7
JLK DIRECT DISTRIBUTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. The company engages in business transactions with Kennametal and its
subsidiaries. Products purchased for resale from Kennametal and its
subsidiaries and sales to these entities were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
1999 1998
---- ----
<S> <C> <C>
Purchases from Kennametal and subsidiaries $27,658 $12,109
Sales to Kennametal and subsidiaries 2,336 2,743
</TABLE>
The company receives from Kennametal certain warehouse, management
information systems, financial and administrative services pursuant to
certain agreements between the company and Kennametal. Other agreements
between the company and Kennametal include a non-competition and corporate
opportunities allocation agreement, tax-sharing agreement, trademark license
agreement, product supply agreement and others, as more fully described in
the company's 1999 Annual Report on Form 10-K. All amounts incurred by
Kennametal on behalf of the company are reflected in operating expenses in
the accompanying statements of income. Costs charged to the company by
Kennametal under these agreements were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Administrative services agreement $ 1,409 $ 1,263
Warehousing agreement 120 967
Shared facilities agreement (16) 159
Lease agreement 26 26
---------- ----------
Total costs charged by Kennametal $ 1,539 $ 2,415
========== ==========
</TABLE>
Under the Intercompany Debt/Investment and Cash Management Agreement with
Kennametal, the company earned interest income of $0.3 million for the three
months ended September 30, 1999. The company incurred interest expense of
$0.2 million for the three months ended September 30, 1998.
7. On March 31, 1999, the company sold the assets of the steel mill business of
its subsidiary, Strong Tool Co., for approximately $1.6 million. There was no
significant impact on earnings as a result of this sale. The steel mill
business had annual sales of approximately $18.0 million. As this business
was marginally profitable, the effect on net income and diluted earnings per
share as a result of this sale is not material.
8. On June 18, 1999, Kennametal entered into an agreement with a financial
institution whereby Kennametal securitizes, on a continuous basis, an
undivided interest in a pool of Kennametal's domestic trade accounts
receivable. Pursuant to this agreement, at September 30, 1999, the company
sold $20.8 million of its domestic accounts receivable to Kennametal, in
exchange for a note receivable from Kennametal consistent with the
Intercompany Debt/Investment and Cash Management Agreement. The costs
incurred by the company under this program were $0.3 million as a result of
the discount on the sale of the accounts receivable and are accounted for as
a component of Interest Expense and Other.
5
<PAGE> 8
JLK DIRECT DISTRIBUTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. The company reports two segments consisting of J&L and FSS. The company's
external sales, intersegment sales and operating income by segment for the
three months ended September 30, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1999 1998
---- ----
<S> <C> <C>
External sales:
J&L $ 87,707 $101,246
FSS 30,608 30,516
-------- --------
Total external sales $118,315 $131,762
======== ========
Intersegment sales:
J&L $ 580 $ 529
FSS -- --
-------- --------
Total intersegment sales $ 580 $ 529
======== ========
Total sales:
J&L $ 88,287 $101,775
FSS 30,608 30,516
-------- --------
Total sales $118,895 $132,291
======== ========
Operating income:
J&L $ 4,933 $ 3,628
FSS 2,046 2,786
-------- --------
Total operating income $ 6,979 $ 6,414
======== ========
</TABLE>
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
NET SALES
Net sales for the September 1999 quarter were $118.3 million, a decrease of 10
percent from $131.8 million last year, reflecting the continuing slowdown in
industrial demand. Excluding the divestiture of the Strong Tool steel mill
business, sales were down seven percent from last year.
J&L sales totaled $87.7 million for the September quarter, a decrease of 13
percent from the prior year. Sales were affected by reduced industrial activity
across North America and continued weakness in the oil and gas industries.
Excluding the divestiture of the Strong Tool steel mill business, sales were
down nine percent from last year. Additionally, the new 2000 J&L Industrial
Supply catalog was launched in September.
Sales for FSS were flat for the quarter compared to last year as the ability to
ramp up new programs was impacted by start-up issues related to the
implementation of the new business system. In addition, a higher number of plant
shutdowns occurred during the months of July and August of 1999 than in the
prior year. The company provided FSS programs to 163 customers covering 262
different facilities at September 30, 1999, compared to 123 customers covering
203 different facilities at September 30, 1998.
GROSS PROFIT
Gross profit for the September 1999 quarter was $38.6 million, a decrease of 10
percent from $42.8 million in the prior year due to the sales decline. Gross
profit margin for the September 1999 quarter was 32.6 percent compared to 32.5
percent in the prior year. The gross profit margin at J&L increased from last
year's level due to increased margins in Europe coupled with the elimination of
lower margin sales from the Strong Tool steel mill business. The gross profit
margin in the FSS business was relatively flat compared to a year ago.
OPERATING EXPENSES
Operating expenses for the September 1999 quarter were $31.6 million, a decrease
13 percent from $36.4 million in the prior year. Operating expenses as a
percentage of sales were 26.7 percent compared to 27.6 percent in the prior
year. Operating expenses decreased primarily as a result of cost-reduction
actions implemented in November 1998. These cost-reduction actions involved
selected workforce reductions, facility consolidations and closings, and other
measures.
Also included in operating expenses were charges from Kennametal for
warehousing, administrative, financial and management information systems
services provided to the company. Charges from Kennametal were $1.5 million in
the September 1999 quarter, a decrease of 36 percent from $2.4 million in the
prior year. The decline in total charges from Kennametal resulted from the
reduction in warehouse charges due to J&L taking over the operation of several
warehouses previously operated by Kennametal and the closure of another
commonly-operated facility.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
INTEREST EXPENSE AND OTHER
Included in interest expense and other is net interest income from Kennametal of
$0.3 million and net interest expense of $0.2 million, during the first quarter
of fiscal 2000 and 1999, respectively. Also included in interest expense and
other is the loss on sale of accounts receivable to Kennametal of $0.3 million
in connection with Kennametal's accounts receivable securitization program.
INCOME TAXES AND NET INCOME
The effective tax rate was 39.5 percent for the September 1999 quarter compared
to 39.2 percent in the prior year. Net income increased 12 percent to $4.2
million for the September 1999 quarter from $3.7 million in the same quarter a
year ago. This increase is attributable to continuing cost containment efforts.
LIQUIDITY AND CAPITAL RESOURCES
The company's primary capital needs have been to fund working capital
requirements, the addition of new products and FSS programs, and the
implementation of the new business system. The company's primary sources of
financing have been cash from operations and the Intercompany Debt/Investment
and Cash Management Agreement with Kennametal. The company anticipates that cash
flows from operations and the Intercompany Debt/Investment and Cash Management
Agreement with Kennametal will be adequate to support its operations for the
foreseeable future.
Compared to the prior year, the increase in net cash from operations was
realized despite a $12.7 million investment in inventory purchased from
Kennametal during the first quarter of fiscal 2000. This purchase was necessary
in order for JLK to have access to Kennametal's branded inventory for sale to
FSS customers subsequent to the implementation of the new business system for
FSS.
Net cash used for investing activities was $4.9 million for the three months
ended September 30, 1999. The change in net cash used for investing activities
resulted from an increase in a note receivable from Kennametal as a result of
the accounts receivable securitization program partially offset by decreased
capital expenditures.
Net cash flow used for financing activities was $0.9 million for the three
months ended September 30, 1999 and reflected the repayment of amounts borrowed
under notes payable to banks. Financing activities in the prior year include
amounts borrowed under notes payable to banks and a note payable to Kennametal,
which were used to fund working capital needs.
In June 1998, the company initiated a stock repurchase program to repurchase,
from time-to-time, up to a total of 20 percent, or approximately 1.0 million
shares, of its outstanding Class A Common Stock. During the three months ended
September 30, 1998, the company repurchased 15,000 Class A shares at a total
cost of approximately $0.3 million. The repurchases were made in the open market
or in negotiated or other permissible transactions. The repurchase of common
stock was financed principally by available funds and short-term borrowings.
FINANCIAL CONDITION
The company's financial condition continues to remain strong. Total assets were
$293.6 million at September 30, 1999, up seven percent from $275.0 million at
June 30, 1999. Net working capital increased to $132.3 million at September 30,
1999, up three percent from $128.3 million at June 30, 1999. The company
decreased its debt levels to $6.8 million at September 30, 1999 due to increased
cash from operations.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
YEAR 2000
The company continues to address its exposure relative to year 2000 issues for
both information and non-information technology systems. A committee actively
monitors the status of the readiness program of the company and its
subsidiaries. Overall, the company believes that 95 percent of the tasks
identified to remediate the year 2000 exposure have been completed for both
information and non-information technology systems, with the remainder to be
completed by November 1999.
The company completed an assessment regarding the impact of this issue on its
existing information systems and determined that while not all systems were year
2000 compliant, those non-compliant systems could be modified to become year
2000 compliant. Due to the fact that the company was operating on several
different information systems, the company decided to implement a new business
system, HK System's Enterprise Information System (Enterprise System), in order
to have all existing operations on one integrated system. The Enterprise System
also is year 2000 compliant. The company is implementing the Enterprise System
in two phases and, in August 1999, completed all of the tasks identified to
remediate the year 2000 exposure in the FSS business.
The second phase is expected to be initiated in early 2000, and tested and
completed thereafter. Due to the timing of the completion of this phase, the
company has modified the existing non-compliant business systems to ensure the
catalog operations are supported by a year 2000 compliant information system.
Successful testing of these modifications was performed in September 1999.
The company also has substantially completed an assessment of the impact of this
issue on its non-information technology systems, including the company's
personal computers, embedded technology in equipment used in operations, and
other non-information technology items. Any non-compliant systems have been
substantially remedied, either through replacement of or modification to the
existing systems.
The company estimates the total year 2000 expenditures to be approximately $11.3
to $12.3 million, with the majority being spent on the implementation of the
company's new business system. Included in the total costs are expenditures to
rectify non-compliant personal computers, embedded technology in equipment used
in operations, and various non-information technology items, which are estimated
to be $0.2 million. These costs include both internal and external personnel
costs related to the assessment, remediation and implementation processes, as
well as the cost of purchasing certain hardware and software. There can be no
guarantee that these estimates will be achieved and actual results could differ
from those planned.
Cash flows from operating and financing activities have provided, and should
continue to provide, funding for these expenditures. Through September 1999, the
company has incurred $9.3 million of the total costs, of which $8.3 million
relates to software licenses and hardware. The balance of the expenditures,
estimated at $2.0 to $3.0 million, will be incurred in fiscal 2000.
Management believes the most significant risk of the year 2000 issue could be an
interrupted supply of goods and services from the company's vendors. The company
has an ongoing effort to gain assurances and certifications of suppliers'
readiness programs. To date, the results of this effort indicate that the
company's suppliers are well positioned to provide the company with sufficient
goods and services in the year 2000. The company will continue to expand its
efforts to determine whether major third-party businesses and public and private
providers of infrastructure services, such as utilities, communications services
and transportation, will also be prepared for the year 2000, and attempt to
address any failures on their part to become year 2000 compliant.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
The company has developed contingency plans and actions for the year 2000 issues
related to both internal and external systems. Contingency plans involve
consideration of a number of possible actions, including, to the extent
necessary or justified, the selection of alternative service providers,
purchasing inventory from alternative certified vendors, the increase of safety
stock of major product lines and adjustment to staffing strategies. The company
will continue to modify these contingency plans as necessary to support its
operations into the year 2000.
There can be no guarantee that the efforts of the company or of third parties,
whose systems the company relies upon, will completely mitigate a year 2000
problem that could have a material adverse affect on the company's operations or
financial results. While such problems could affect important operations of the
company and its subsidiaries, either directly or indirectly, in a significant
manner, the company cannot at present estimate either the likelihood or the
potential cost of such failures. However, the company will continue to
aggressively pursue all of the year 2000 remediation activities discussed
herein.
OUTLOOK
In looking to the second quarter ending December 31, 1999, management expects
sales and earnings to be slightly higher than the September quarter. The
company's results should benefit from new cost reduction actions implemented at
the end of the September 1999 quarter, as well as the cost-reduction actions
implemented in November 1998. Management does not expect overall economic
conditions to strengthen in North America, but will remain focused on improving
the operating performance of the company.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements," as defined in Section 21E
of the Securities Exchange Act of 1934. Actual results may differ materially
from those expressed or implied in the forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited to,
the extent that the economic conditions in the United States and, to a lesser
extent, Europe, are not sustained, risks associated with integrating businesses,
demands on management resources, risks associated with international markets
such as currency exchange rates and competition and the effect of third party or
company failures to achieve timely remediation of year 2000 issues. The company
undertakes no obligation to publicly release any revisions to forward-looking
statements to reflect events or circumstances occurring after the date hereof.
10
<PAGE> 13
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
At the Annual Meeting of Shareowners on Tuesday, October 26, 1999, the
shareowners of the company voted on the election of directors and independent
public accountants. The following is the number of shares voted in favor of and
against each matter, and the number of shares having authority to vote on each
matter but withheld.
1. With respect to the votes cast for the election of directors whose terms
expire in 2000:
<TABLE>
<CAPTION>
For Withheld Broker Non-Vote
---------------------------------------------
<S> <C> <C> <C>
Richard C. Alberding 205,602,783 31,220 --
Jeffery M. Boetticher 205,612,783 21,220 --
Irwin L. Elson 205,518,383 115,620 --
H. Patrick Mahanes, Jr. 205,508,383 125,620 --
Aloysius T. McLaughlin, Jr. 205,612,783 21,220 --
William R. Newlin 205,508,383 125,620 --
Richard J. Orwig 205,508,383 125,620 --
Markos I. Tambakeras 205,518,383 115,620 --
</TABLE>
2. With respect to the election of the firm of Arthur Andersen LLP,
independent public accountants, to audit the financial statements of the
company and its subsidiary companies for the fiscal year ending June 30,
2000:
<TABLE>
<CAPTION>
For Against Abstained Broker Non-Vote
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Arthur Andersen LLP 205,625,523 2,180 6,300 --
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) Exhibits
(27) Financial Data Schedule for the three months ended September
30, 1999, submitted to the Securities and Exchange Commission in
electronic format. Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JLK DIRECT DISTRIBUTION INC.
Date: November 10, 1999 By: /s/ DIANA L. SCOTT
------------------
Diana L. Scott
Vice President,
Chief Financial Officer,
and Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1999 Condensed Consolidated Financial Statements (unaudited), and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
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0
0
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</TABLE>
