<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ______to______
Commission file number: 0-20758
HA-LO INDUSTRIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3573412
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5980 TOUHY AVENUE, NILES, ILLINOIS 60714
----------------------------------------
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (847)647-2300
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[ ].
As of October 31, 1999, the registrant had an aggregate of 48,718,186 shares of
its common stock outstanding.
<PAGE>
HA-LO INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1. Financial Statements.
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998. 2
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1999 and 1998. 3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998. 4
Notes to Financial Statements. 5
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders. 13
Item 6. Exhibits and Reports on Form 8-K. 13
Signatures 14
</TABLE>
1
<PAGE>
PART 1. FINANCIAL INFORMATION
HA-LO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands, except share amounts) 1999 1998
--------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,028 $ 7,276
Short term investments 845 50,922
Receivables 176,359 168,806
Inventories 37,650 29,637
Prepaid expenses & deposits 12,984 15,139
----------- ------------
Total current assets 241,866 271,780
----------- ------------
PROPERTY AND EQUIPMENT, net 37,218 42,225
----------- ------------
OTHER ASSETS:
Intangible assets, net 69,091 26,621
Other 6,441 6,391
----------- ------------
Total other assets 75,532 33,012
----------- ------------
$ 354,616 $ 347,017
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,681 $ 3,423
Book overdraft 801 287
Accounts payable 52,521 63,591
Accrued expenses
Other 34,802 41,528
Restructuring 9,459 -
Due to related parties - 200
----------- ------------
Total current liabilities 99,264 109,029
----------- ------------
LONG-TERM DEBT 5,900 -
ACCRUED RESTRUCTURING EXPENSES 12,530 -
DEFERRED LIABILITIES 3,208 2,497
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 10,000,000
shares authorized and none issued - -
Common stock, no par value; 100,000,000
shares authorized and 48,696,940 issued
and outstanding in 1999 and 47,780,742 in 1998 213,936 198,228
Other (4,462) (2,508)
Retained earnings 24,240 39,771
----------- ------------
Total shareholders' equity 233,714 235,491
----------- ------------
$ 354,616 $ 347,017
=========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
HA-LO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
(in thousands, except per share amounts) 1999 1998 1999 1998
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 147,306 $ 150,670 $ 464,584 $ 413,722
COST OF SALES 98,737 96,390 306,171 268,355
RESTRUCTURING CHARGES 2,653 - 2,653 -
-------------- -------------- -------------- -------------
Gross profit 45,916 54,280 155,760 145,367
SELLING EXPENSES 21,721 19,489 66,676 54,160
GENERAL AND ADMINISTRATIVE EXPENSES 31,370 21,937 88,118 59,987
NON-RECURRING CHARGES:
POOLING ACQUISITION EXPENSES - 2,656 - 5,636
RESTRUCTURING AND OTHER 27,347 - 27,347 1,500
-------------- -------------- -------------- -------------
Income (loss) from operations (34,522) 10,198 (26,381) 24,084
INTEREST INCOME, NET 217 1,219 496 493
-------------- -------------- -------------- -------------
Income (loss) before taxes (34,305) 11,417 (25,885) 24,577
PROVISION (BENEFIT) FOR TAXES (13,722) 4,569 (10,354) 9,601
-------------- -------------- -------------- -------------
NET INCOME (LOSS) $ (20,583) $ 6,848 $ (15,531) $ 14,976
============== ============== ============== =============
PRO FORMA INCOME DATA:
Pro forma provision for taxes - 229
--------------- ------------
PRO FORMA NET INCOME: $ 6,848 $ 14,747
=============== ============
EARNINGS (LOSS) PER SHARE (Pro forma in 1998):
Basic $ (0.42) $ 0.15 $ (0.32) $ 0.34
Diluted $ (0.42) $ 0.14 $ (0.32) $ 0.32
============== ============== ============== =============
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 48,685 47,126 48,559 43,793
Diluted 48,834 48,618 49,032 45,595
============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
HA-LO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
(in thousands) 1999 1998
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period $ (15,531) $ 14,976
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities-
Depreciation and amortization 10,570 6,367
Increase in cash surrender value (150) (227)
Increase in deferred liabilities - other 343 67
Loss on disposal of property and equipment 132 97
Changes in assets and liabilities, net of effects
of acquired companies -
Receivables 3,473 4,224
Inventories (2,690) (6,558)
Prepaid expenses and deposits 1,981 (3,829)
Accounts payable, accrued expenses and
accrued restructuring expenses (4,753) 1,725
--------------- --------------
Net cash provided (used) by operating activities (6,625) 16,842
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (11,298) (16,919)
Proceeds on sale of property and equipment 9,374 154
Decrease (increase) in short-term investments 50,077 (57,672)
Increase in other assets (3,200) (271)
Cash paid for acquisitions, net of cash acquired (35,334) (4,289)
--------------- --------------
Net cash provided (used) for investing activities 9,619 (78,997)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on long-term obligations 1,412 (49,627)
Increase (decrease) in book overdraft 515 (6,626)
Net proceeds from issuance of common stock 3,964 124,735
Dividend payments of acquired companies - (8,378)
Repurchase of common stock - (450)
--------------- --------------
Net cash provided by financing activities 5,891 59,654
--------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (2,133) 631
--------------- --------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 6,752 (1,870)
CASH AND EQUIVALENTS, beginning of period 7,276 4,717
--------------- --------------
CASH AND EQUIVALENTS, end of period $ 14,028 $ 2,847
=============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
HA-LO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1. BASIS OF PRESENTATION:
The accompanying financial statements have been prepared by the Company, without
audit, in accordance with generally accepted accounting principles for interim
financial information and in conjunction with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring matters) considered necessary for a fair
presentation have been included.
The results of operations for the three month and nine month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's financial statements and related notes in the
Company's 1998 Annual Report on Form 10-K.
NOTE 2. CAPITAL STOCK:
During the first nine months of 1999, options to acquire an aggregate of
2,376,953 shares of the Company's common stock were granted under the
Company's Stock Plans at exercise prices ranging from $5.94 to $24.00 per
share. Additionally, 471,481 options were exercised during the same period at
prices ranging from $1.51 to $19.17 per share.
Basic earnings per share is calculated using the average number of common shares
outstanding. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the effect of outstanding stock options
and warrants using the "treasury stock" method.
<TABLE>
<CAPTION>
(in thousands) Three months ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income(loss) (pro forma in 1998)
available to common
shareholders'(A) $(20,583) $ 6,848 $(15,531) $ 14,747
Average outstanding
Common stock (B) 48,685 47,126 48,559 43,793
Effect of stock options and warrants 149 1,492 473 1,802
---------- ---------- ---------- -----------
Common stock and common stock
equivalents (C) 48,834 48,618 49,032 45,595
========== ========== ========== ===========
Earnings per share:
Basic (A/B) $ (0.42) $ 0.15 $ (0.32) $ 0.34
========== ========== ========== ===========
Diluted (A/C) $ (0.42) $ 0.14 $ (0.32) $ 0.32
========== ========== ========== ===========
</TABLE>
5
<PAGE>
NOTE 3. STATEMENTS OF CASH FLOWS:
The supplemental schedule of non-cash activities for the nine months ended
September 30, 1999 and 1998 includes the following:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Issuance of common shares in connection with business acquisitions, net $ 9,895 $ 219
Liabilities assumed in connection with business acquisitions $20,579 $1,730
Recognition of tax benefits from options and restricted stock $ 1,903 $7,231
Write-off of assets in connection with restructuring $ 7,136 $ -
</TABLE>
NOTE 4: RESTRUCTURING AND OTHER CHARGES:
In July 1999, the Company adopted a plan to restructure its promotional product
operations and to a lesser extent its telemarketing and marketing service
divisions. The focus of the restructuring is to centralize back office
functions, consolidate distribution capabilities and information systems and
streamline the management reporting structure. The restructuring will result in
the elimination of approximately 200 positions and the consolidation and closing
of over 20 offices/warehouses.
During the third quarter of 1999, the Company recorded a charge to operations
of $30.0 million. Major components of the charge related to lease buyouts and
accruals, asset write-downs, severance and termination costs and other
charges. As of September 30, 1999, approximately 35 of the anticipated
employee terminations have occurred. This charge has had the effect of
reducing after tax earnings by $18.0 million or $0.37 per share. The Company
anticipates the restructuring will be completed by September 30, 2000.
<TABLE>
<CAPTION>
(in thousands) 9/30/99
Expensed Utilized Accrual
-------- -------- -------
<S> <C> <C> <C>
Facility consolidation $14,994 $ 267 $14,727
Asset write-downs 8,954 4,928 4,026
Severance and termination costs 3,528 601 2,927
Other charges 2,524 2,215 309
-------- -------- -------
Total $30,000 $8,011 $21,989
======== ======== =======
</TABLE>
6
<PAGE>
NOTE 5: BUSINESS SEGMENTS:
The Company's reportable segments are strategic business units that offer
different products and services. Summarized financial information by business
segment follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in thousands) 1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Promotional products $ 112,781 $ 115,476 $ 355,505 $ 322,798
Marketing services 20,696 20,520 62,690 46,844
Telemarketing 13,829 14,674 46,389 44,080
--------- --------- --------- ---------
Total $ 147,306 $ 150,670 $ 464,584 $ 413,722
========= ========= ========= =========
Operating income(loss):*
Promotional products $ (35,610) $ 5,135 $ (32,297) $ 19,295
Marketing services 570 4,360 3,823 3,292
Telemarketing 518 703 2,093 1,497
--------- --------- --------- ---------
Total $ (34,522) $ 10,198 $ (26,381) $ 24,084
========= ========= ========= =========
</TABLE>
* includes the effect of the non-recurring charges.
NOTE 6: COMPREHENSIVE INCOME (LOSS):
The Company's comprehensive income (loss) includes net income (loss) and
unrealized gains and losses from currency translation. The calculation of total
comprehensive income (loss) for the three month and nine month periods ending
September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
(in thousands) Three months ended Nine months ended
September 30, September 30,
------------------------------------------------------------------
1999 1998 1999 1998
---- ---- ---- -----
<S> <C> <C> <C> <C>
Net income(loss) (pro forma in 1998) $(20,583) $ 6,848 $(15,531) $ 14,747
Other comprehensive gain (loss),
net of taxes (544) 654 (1,280) 378
---------- ---------- ---------- ----------
Comprehensive income (loss)
$(21,127) $ 7,502 $(16,811) $ 15,125
========== ========== ========== ==========
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Net sales for the third quarter of 1999 decreased 2.2% to $147.3 million
compared to $150.7 million in the corresponding quarter of 1998. Approximately
77%, 14% and 9% of net sales were attributed to the promotional product,
marketing services and telemarketing segments, respectively in both 1999 and
1998. Revenues from acquired companies were approximately $20 million in the
third quarter of 1999. The internal sales decline for the quarter compared to
prior year was slightly greater than 15%. The primary reasons for the internal
sales decline were an unexpected shifting of some marketing services revenue
from the third to the fourth quarter of 1999 and certain consumer premium sales
which did not materialize as expected.
Recurring gross profit decreased to 33.0% of net sales ($48.6 million) in the
third quarter of 1999 compared to 36.0%($54.3 million) in the third quarter
of 1998. The decreased percentage is primarily due to a change in promotional
products sales mix. In the third quarter of 1999, a greater proportion of
sales was generated from lower margin European subsidiaries than a year ago.
Also affecting the comparison is some higher margin consumer premium business
included in the third quarter of 1998, which did not recur in 1999. Including
the $2.7 million non-recurring cost of sales charge, gross profit decreased
to 31.2% ($45.9 million). This charge relates to inventory write-downs
associated with the Company's warehouse consolidation plan.
Selling expenses as a percentage of net sales increased to 14.7% in the third
quarter of 1999 ($21.7 million) compared to 12.9% in the third quarter of 1998
($19.5 million). The increase in the percentage is again due to mix in the
promotional products segment. In 1999, a greater percentage of sales were
subject to commissions compared to the same period last year. In addition, a
larger portion of selling expenses is fixed in 1999 compared to 1998.
General and administrative expenses as a percentage of net sales were 21.3% in
the third quarter of 1999 ($31.4 million) compared to 14.6% in the third quarter
of 1998 ($21.9 million). The increase in the percentage is reflective of fixed
cost investments, primarily people, facilities and computer systems, necessary
to support projected sales levels that were not achieved.
The Company reported an operating loss of $34.5 million in 1999 compared to
operating income of $10.2 million in 1998. Excluding the non-recurring
restructuring charge of $30 million in 1999 (see Note 4) and the
non-recurring acquisition charge of $2.7 million in 1998, the Company
recorded a recurring operating loss of $4.5 million for the third quarter of
1999 versus recurring operating income of $12.9 million for the same period
last year.
In the third quarter of 1999 the Company had net interest income of $217,000
compared to $1.2 million in net interest income during the third quarter of
1998. In 1998 the Company had short term investments of over $50 milliion.
These funds have subsequently been used primarily to fund business expansion.
8
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Net sales for the first nine months of 1999 increased 12.3% to $464.6 million
compared to $413.7 million in the corresponding period of 1998. Approximately
77%, 13% and 10% of net sales were attributed to the promotional product,
marketing services and telemarketing segments, respectively. This compares to
78%, 11% and 11%, respectively for the same period last year. Revenues from
acquired companies were approximately $60 million in the first nine months of
1999. This translates into an internal sales decline for the first nine
months of approximately 2%.
Recurring gross profit as a percentage to net sales decreased to 34.1% ($158.4
million) in the first nine months of 1999 compared to 35.1% ($145.4 million) in
the corresponding period of 1998. The decrease in the percentage relates
primarily to a change in the promotional products sales mix as discussed above.
Including the $2.7 million non-recurring cost of sales charge discussed in the
quarterly analysis, gross profit decreased to 33.5% ($155.8 million) in 1999.
Selling expenses as a percentage of net sales increased to 14.4% in the first
nine months of 1999 ($66.7 million) compared to 13.1% in the corresponding
period of 1998 ($54.2 million). The increase was due to the same reasons
discussed during the three month period.
General and administrative expenses as a percentage of net sales increased to
19.0% in the first nine months of 1999 ($88.1 million) compared to 14.5% in the
corresponding period of 1998 ($60.0 million). The increase is due to the same
reasons discussed during the three month period above.
The Company recorded an operating loss of $26.4 million in 1999 compared to
operating income of $24.1 million in 1998. Excluding the non-recurring charges
described in the paragraph above, the Company recorded recurring operating
income of $3.6 million for the first nine months of 1999 versus recurring
operating income of $31.2 million for the same period last year.
In the first nine months of 1999 the Company had net interest income of
$496,000, compared to $493,000 of net interest expense in the corresponding
period of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has an unsecured revolving line of credit (the "Revolver")
totaling $75 million which matures on March 1, 2000. The facility bears
interest at either prime less .25% or LIBOR plus between .5% and 1.5% based
on a defined ratio. The agreement contains certain financial covenants that
the Company must meet, including current ratio, minimum tangible net worth,
maximum leverage and a fixed charge ratio. The Company is currently either in
compliance or has obtained waivers for these covenants. The Company has
started the process of negotiating a new credit facility to replace the
current Revolver when it expires. Management believes that a new credit
facility can be obtained at terms materially similar to the current Revolver.
In addition to the facility discussed above, one of the Company's European
subsidiaries has revolving credit facilities with several
9
<PAGE>
banks. These facilities provide for borrowings of up to $5 million at rates
ranging from 8-13% and are generally unsecured.
As of September 30, 1999, the Company's working capital was $142.6 million
compared to $162.8 million at December 31, 1998. Capital expenditures for
property and equipment were approximately $11.2 million for the first nine
months of 1999, and management expects capital expenditures to be approximately
$15 million for the full year of 1999, excluding acquisitions.
The Company anticipates that approximately half of the $30 million restructuring
charge will result in cash expenditures in the future. The Company anticipates
its current level of cash and cash equivalents as well as future operating cash
flows and funds available under its credit facilities will be adequate to
satisfy its cash needs for the foreseeable future.
YEAR 2000 READINESS DISCLOSURE
Certain computer programs written with two digits rather than four to define the
applicable year may experience problems handling dates near the end of and
beyond the year 1999 (Year 2000 failure dates). This may cause computer
applications to fail or create erroneous results unless corrective measures are
taken. The Year 2000 problem can arise at any point in the Company's supply,
distribution and financial chains.
At the direction of its Board of Directors, the Company formed a Year 2000
Committee in 1998 to assess its state of Year 2000 readiness and address Year
2000 issues that may affect its business. In determining whether a system is
Year 2000 compliant, the Company has adopted The British Standards
Institution "Definition of Year 2000 Conformity Requirements", contained in
BSI Publication PD2000-1.
The Company's Year 2000 program has been conducted in phases, described as
follows:
Inventory Phase. Identify hardware, software, processes or devices that
use or process date information.
Assessment Phase. Identify Year 2000 date processing deficiencies and
related implications.
Planning Phase. Determine for each deficiency an appropriate solution
and budget. Schedule resources and develop testing plans.
Implementation Phase. Implement designed solutions. Conduct appropriate
systems testing.
The Company has substantially completed all phases. Virtually all of business
critical systems are considered Year 2000 ready by virtue of being engineered
with four digit century fields or having already completed a process of
modification and testing.
During the assessment phase, the Company identified several computer systems and
voice telecommunications switches that were not Year 2000 compliant. With the
exception of a small number of voice telecommunications systems, remediation for
which is scheduled for the fourth quarter, the Company has implemented Year 2000
modifications on all non-compliant systems. The Company currently believes that
Year
10
<PAGE>
2000 compliance will be achieved in all material respects prior to any
anticipated Year 2000 failure date.
The Company has initiated communications with its product suppliers and other
key business partners to determine their Year 2000 readiness. The Company
believes that due to its large and diverse promotional product supplier base,
the risks resulting from potential problems of any such supplier are minimal.
However, the failure of any one key business partner (including providers of
transportation, electricity, telephone, water or gas services) to modify or
replace their affected systems could have materially adverse impacts on the
Company's business, operations or financial condition in the future.
Based on the information gathered during the assessment and planning phases, the
Company believes that the costs of achieving Year 2000 compliance, including
costs to modify, convert and test systems, will be less than $750,000. Costs
incurred during 1998 and the first nine months of 1999 were less than $600,000.
All costs relating to the Year 2000 Issue will be funded through operating cash
flow. The cost of conversions and project completion dates are based on
management's best estimates and are updated periodically as additional
information becomes available.
The Company is continuing to prepare contingency plans to minimize the impact of
operational or product supply chain disruptions resulting from the Year 2000
problem. Contingency plans for all of the Company's operations will be finalized
during the fourth quarter of 1999 and may include securing alternate sources of
product supply, adopting workaround procedures, and other appropriate measures.
In addition to key business partner and product supply chain risks, the Company
is aware that it may face unanticipated Year 2000 problems as a result of any
business or company acquired in 1999 or 2000 that is not already Year 2000
compliant. The Company believes these risks can be mitigated through conversion
of non-compliant systems to Year 2000 compliant systems as part of overall
acquisition integration plans.
FORWARD-LOOKING STATEMENTS
Statements contained in this Management's Discussion and Analysis of
Financial Condition and the Results of Operations regarding the amount and
nature of planned capital expenditures, the seasonality of the Company's
future business, the Company's belief that available cash will be sufficient
to satisfy its future needs, expected costs to be incurred in relation to
Year 2000 issues, estimated restructuring charges, obtaining new credit
facility at terms materially similar to current Revolver and HA-LO'S
anticipated profitability in 1999 are forward-looking statements that involve
substantial risks and uncertainties. Following are important factors that
could cause the Company's actual results to differ materially from those
implied by such forward-looking statements: The Company's growth will be
dependent, in large part, upon its ability to hire, motivate and retain high
quality sales representatives. The Company does not maintain its own
manufacturing facilities and is dependent upon domestic and foreign
manufacturers for its supply of promotional products. The promotional
products, marketing services and telemarketing industries are very
competitive. The Company has experienced and may continue to experience rapid
growth, which growth has placed and may place significant demands on its
management and resources. Increased profitability will depend upon the
Company's ability to manage its growth and to integrate acquired companies
into its existing operations. Readers are encouraged to review HA-LO'S 1998
11
<PAGE>
Annual Report on Form 10-K and quarterly reports on Form 10-Q for other
important factors that may cause actual results to differ materially
from those implied in these forward looking-statements.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 - Financial Data Schedule for the nine month period ended
September 30, 1999.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
September 30, 1999.
13
<PAGE>
SIGNATURE
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.
HA-LO INDUSTRIES, INC.
Dated: November 15, 1999 /s/ GREGORY J. KILREA
------------------------------
Gregory J. Kilrea
Duly Authorized Officer
and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND BALANCE SHEETS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH SEPTEMBER 30, 1999 FORM 10Q REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,028
<SECURITIES> 845
<RECEIVABLES> 179,635
<ALLOWANCES> 3,276
<INVENTORY> 37,650
<CURRENT-ASSETS> 241,866
<PP&E> 68,188
<DEPRECIATION> 30,970
<TOTAL-ASSETS> 354,616
<CURRENT-LIABILITIES> 99,264
<BONDS> 5,900
0
0
<COMMON> 213,936
<OTHER-SE> 19,778
<TOTAL-LIABILITY-AND-EQUITY> 354,616
<SALES> 464,584
<TOTAL-REVENUES> 464,584
<CGS> 308,824
<TOTAL-COSTS> 308,824
<OTHER-EXPENSES> 180,160
<LOSS-PROVISION> 824
<INTEREST-EXPENSE> 1,485
<INCOME-PRETAX> (25,885)
<INCOME-TAX> (10,354)
<INCOME-CONTINUING> (15,531)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,531)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
