<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 June 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 Identification No.)
incorporation or organization)
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 July 31, 1999, the registrant had an aggregate of 49,699,331 shares of its
common stock outstanding.
<PAGE>
HA-LO INDUSTRIES, INC.
INDEX
<TABLE>
<S> <C> <C>
Part I. FINANCIAL INFORMATION Page Number
-----------
Item 1. Financial Statements.
Consolidated Balance Sheets as of June 30, 1999 and December
31, 1998. 2
Consolidated Statements of Income for the three months and
six months ended June 30, 1999 and 1998. 3
Consolidated Statements of Cash Flows for the six months
ended June 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 12
of Security Holders.
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
</TABLE>
1
<PAGE>
PART 1. FINANCIAL INFORMATION
HA-LO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands, except share amounts) 1999 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 28,142 $ 7,276
Short term investments 2,712 50,922
Receivables 166,686 168,806
Inventories 35,075 29,637
Prepaid expenses & deposits 17,983 15,139
---------------- ----------------
Total current assets 250,598 271,780
---------------- ----------------
PROPERTY AND EQUIPMENT, net 39,005 42,225
---------------- ----------------
OTHER ASSETS:
Intangible assets, net 69,165 26,621
Other 8,735 6,391
---------------- ----------------
Total other assets 77,900 33,012
---------------- ----------------
$ 367,503 $ 347,017
---------------- ----------------
---------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,914 $ 3,423
Book overdraft 54 287
Accounts payable 59,011 63,591
Accrued expenses 38,355 41,528
Due to related parties - 200
---------------- ----------------
Total current liabilities 99,334 109,029
---------------- ----------------
LONG-TERM DEBT 10,000 -
---------------- ----------------
DEFERRED LIABILITIES 2,974 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 213,987 198,228
Other (3,615) (2,508)
Retained earnings 44,823 39,771
---------------- ----------------
Total shareholders' equity 255,195 235,491
---------------- ----------------
$ 367,503 $ 347,017
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
HA-LO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
(in thousands, except per share amounts) 1999 1998 1999 1998
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 160,312 $ 138,238 $ 317,278 $ 263,052
COST OF SALES 105,187 89,292 207,434 171,965
-------------- ------------- ------------- -------------
Gross profit 55,125 48,946 109,844 91,087
SELLING EXPENSES 24,257 17,630 44,955 34,670
GENERAL AND ADMINISTRATIVE EXPENSES 29,439 19,615 56,748 38,050
NON-RECURRING CHARGES - 2,980 - 4,480
-------------- ------------- ------------- -------------
Income from operations 1,429 8,721 8,141 13,887
INTEREST INCOME(EXPENSE), NET (8) 19 279 (727)
-------------- ------------- ------------- -------------
Income before taxes 1,421 8,740 8,420 13,160
PROVISION FOR TAXES 568 3,142 3,368 5,032
-------------- ------------- ------------- -------------
NET INCOME FOR THE PERIOD $ 853 $ 5,598 $ 5,052 $ 8,128
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
PRO FORMA INCOME DATA:
Pro forma income tax expense 354 230
------------- -------------
PRO FORMA NET INCOME: $ 5,244 $ 7,898
------------- -------------
------------- -------------
EARNINGS PER SHARE (Pro forma in 1998):
Basic $ 0.02 $ 0.12 $ 0.10 $ 0.19
Diluted $ 0.02 $ 0.11 $ 0.10 $ 0.18
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 48,534 43,930 48,496 42,126
Diluted 49,090 45,957 49,131 44,083
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
HA-LO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
(in thousands) 1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period $ 5,052 $ 8,128
Adjustments to reconcile net income to net
cash used for operating activities-
Depreciation and amortization 6,640 4,420
Increase in cash surrender value (135) (83)
Increase (decrease) in deferred liabilities - other 483 (188)
Loss on disposal of property and equipment 50 97
Changes in assets and liabilities, net of effects
of acquired companies -
Receivables 13,446 6,485
Inventories (115) (5,408)
Prepaid expenses and deposits (1,363) (2,209)
Accounts payable, accrued expenses and
due to related parties (21,844) 4,265
------------- ------------
Net cash provided by operating activities 2,214 15,507
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (8,833) (10,772)
Proceeds on sale of property and equipment 9,374 170
Decrease (increase) in short-term investments 48,210 (908)
Decrease (increase) in other assets (2,546) 53
Cash paid for acquisitions, net of cash acquired (35,804) (3,811)
------------- ------------
Net cash provided (used) for investing activities 10,401 (15,268)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on long-term obligations 5,745 (42,960)
Increase (decrease) in book overdraft (232) 1,065
Net proceeds from issuance of common stock 3,964 123,036
Dividend payments of acquired companies - (2,647)
------------- ------------
Net cash provided by financing activities 9,477 78,494
------------- ------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (1,226) (459)
------------- ------------
NET INCREASE IN CASH AND EQUIVALENTS 20,866 78,274
CASH AND EQUIVALENTS, beginning of period 7,276 4,808
------------- ------------
CASH AND EQUIVALENTS, end of period $ 28,142 $ 83,082
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
HA-LO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 six month periods ended June
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 six months of 1999, options to acquire an aggregate of
1,702,031 shares of the Company's common stock were issued under the Company's
Stock Plans at exercise prices ranging from $9.19 to $24.00 per share.
Additionally, 469,090 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (pro forma in 1998)
available to common
shareholders'(A) $ 853 $ 5,244 $ 5,052 $ 7,898
------- ------- ------- -------
------- ------- ------- -------
Average outstanding
Common stock: (B) 48,534 43,930 48,496 42,126
Effect of stock options and warrants 556 2,027 635 1,957
------- ------- ------- -------
Common stock and common stock
equivalents (C) 49,090 45,957 49,131 44,083
------- ------- ------- -------
------- ------- ------- -------
Earnings per share:
Basic (A/B) $ 0.02 $ 0.12 $ 0.10 $ 0.19
------- ------- ------- -------
------- ------- ------- -------
Diluted (A/C) $ 0.02 $ 0.11 $ 0.10 $ 0.18
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
5
<PAGE>
NOTE 3. STATEMENTS OF CASH FLOWS:
The supplemental schedule of non-cash activities for the six months ended June
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 $ 18,642 $ 1,730
Recognition of tax benefits from options and
restricted stock $ 1,899 $ 3,916
</TABLE>
NOTE 4. RELATED-PARTY TRANSACTIONS:
A member of the Board of Directors renders acquisition consulting services to
the Company pursuant to an agreement. The director's compensation is directly
contingent upon the successful completion of an acquisition. During the second
quarter of 1999, the director earned approximately $408,000 and was granted
11,549 options at fair market value under this agreement.
In June 1999 the Company received approximately $9.5 million in connection with
its exercised option to sell an office and warehouse facility to the Vice
Chairman of the Board. No gain or loss was recognized as a result of this sale.
NOTE 5. BUSINESS COMBINATIONS:
In April 1999, the Company completed the acquisition of substantially all of the
assets of Incentive Merchandising Corporation, a privately owned promotional
products company headquartered in Cleveland, Ohio, for approximately $1.4
million in cash, excluding transaction expenses. The transaction includes a
three year earn-out period in which the Company may incur an additional $1.4
million payment if certain profit levels are attained.
In May 1999, the Company completed the acquisitions of substantially all assets
and assumed certain liabilities of two promotional products companies, The
Dalton Group and Lesco Corporation, for an aggregate of approximately $3.5
million in cash, excluding transaction expenses.
In June 1999, the Company completed the acquisition of Hogberg International
A.S., a privately owned promotional products company headquartered in Ulset,
Norway, primarily through the assumption of approximately $1.0 million of net
liabilities.
Goodwill is being amortized on a straight-line basis over 15 years. The
consolidated financial statements include the results of these acquired
companies since the date of acquisition.
6
<PAGE>
NOTE 6: 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 June 30, Six months ended June 30,
(in thousands) 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Promotional products $ 120,220 $ 109,331 $ 242,723 $ 207,322
Marketing services 23,344 13,247 41,994 26,324
Telemarketing 16,748 15,660 32,561 29,406
--------- --------- --------- ---------
Total $ 160,312 $ 138,238 $ 317,278 $ 263,052
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating income:
Promotional products $ (2,228) $ 9,475 $ 3,313 $ 14,160
Marketing services 2,604 (1,446) 3,253 (1,067)
Telemarketing 1,053 692 1,575 794
--------- --------- --------- ---------
Total $ 1,429 $ 8,721 $ 8,141 $ 13,887
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
NOTE 7: COMPREHENSIVE INCOME:
The Company's comprehensive income includes net income and unrealized gains and
losses from currency translation. The calculation of total comprehensive income
for the three month and six month periods ending June 30, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
(in thousands) Three months ended Six months ended
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (pro forma in 1998)
$ 853 $ 5,244 $ 5,052 $ 7,898
Other comprehensive gain (loss),
net of taxes 727 (244) (736) (275)
------- ------- ------- -------
Comprehensive income $ 1,580 $ 5,000 $ 4,316 $ 7,623
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
NOTE 8: SUBSEQUENT EVENT
In July 1999, the Company announced its intention to restructure its
operations. The focus of the restructuring will be to consolidate back office
functions, consolidate distribution capabilities and information systems and
streamline the management reporting structure. The Company expects the
restructuring to result in a one-time charge of between $25 to $30 million.
The charge, which will be incurred in the third quarter of 1999, will
primarily relate to lease cancellations, employee termination costs and asset
write-downs. Approximately half of this charge is expected to result in cash
outlays over the next twelve months. The Company intends to finalize the
restructuring plan in the third quarter of 1999.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Net sales for the second quarter of 1999 increased 16.0% to $160.3 million
compared to $138.2 million in the corresponding quarter of 1998. Approximately
75%, 15% and 10% of net sales were attributed to the promotional product,
marketing services and telemarketing segments, respectively. This compares to
79%, 10% and 11%, respectively for the same period last year. Substantially all
the revenue growth was from acquisitions in the second quarter of 1999.
Gross profit decreased to 34.4% of net sales ($55.1 million) in the second
quarter of 1999 from 35.4% of net sales ($48.9 million) in the second quarter of
1998. The decrease was due primarily to a change in the mix of the promotional
products business and the loss of certain higher margin revenue in the second
quarter of 1999.
Selling expenses as a percentage of net sales increased to 15.1% in the second
quarter of 1999 ($24.3 million) compared to 12.8% in the second quarter of 1998
($17.6 million). The increase was attributable primarily to fixed cost
investments, primarily people, to support projected promotional product sales
volume and incremental investments aimed at enhancing the HA-LO brand.
General and administrative expenses as a percentage of net sales were 18.4% in
the second quarter of 1999 ($29.4 million) compared to 14.2% in the second
quarter of 1998 ($19.6 million). The increase in the percentage was due to a
higher proportion of revenues from the marketing services segment and
investments made to support projected promotional products growth. The marketing
services segment has a higher ratio of general and administrative expenses to
revenues. Costs to support projected promotional products volume were primarily
related to personnel, facilities and systems.
Operating income decreased to $1.4 million in 1999 from $8.7 million in 1998.
Recurring operating income as a percentage of net sales decreased to 0.9% in the
second quarter of 1999 compared to 8.5% in 1998. The decrease was reflective of
investments made to support sale volumes which did not materialize in the
quarter.
Operating results for the second quarter of 1998 include non-recurring charges
of $3.0 million related to an acquisition accounted for as pooling-of-interests.
In the second quarter of 1999 the Company had net interest expense of $8,000
compared to $19,000 in net interest income during the second quarter of 1998.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Net sales for the first six months of 1999 increased 20.6% to $317.3 million
compared to $263.1 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
79%, 10% and 11%, respectively for the
8
<PAGE>
same period last year. Of the $54.2 million increase in net sales,
approximately $13.5 million was due to internal growth with the remainder due
to acquisitions.
Gross profit as a percentage to net sales remained a constant 34.6%. Gross
profit was $109.8 million in the first six months of 1999 compared to $91.1
million in the corresponding period of 1998. The Company realized higher gross
margin percentages in the marketing services and telemarketing services which
were offset by lower gross profit margins in the promotional products segment.
Selling expenses as a percentage of net sales increased to 14.2% in the first
six months of 1999 ($45.0 million) compared to 13.2% in the corresponding period
of 1998 ($34.7 million). The increase was due to the same reasons discussed
during the three month period above.
General and administrative expenses as a percentage of net sales increased to
17.9% in the first six months of 1999 ($56.7 million) compared to 14.5% in the
corresponding period of 1998 ($38.1 million). The increase was due to the same
reasons discussed during the three month period above.
Operating income decreased to $8.1 million in 1999 from $13.9 million in 1998.
Recurring operating income as a percentage of net sales decreased to 2.6% in the
first six months of 1999 compared to 7.0% in 1998.
Operating results for the first six months of 1998 included pretax non-recurring
charges of $4.5 million. Approximately $3.0 million was incurred to complete an
acquisition accounted for using the pooling-of-interests accounting method. The
remainder related to fire damage to an office and distribution facility and the
closing of a warehouse that was acquired as part of a 1997 acquisition.
In the first six months of 1999 the Company had net interest income of $279,000,
compared to $727,000 of net interest expense in the corresponding period of
1998. . The change was due to a portion of the proceeds received through the
May, 1998 public stock offering which were used to pay down debt and fund
acquisitions. Excess proceeds were invested in short term government
investments.
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 minimum tangible net worth, maximum leverage, and a fixed charge
ratio.
In addition to the facility discussed above, one of the Company's European
subsidiaries has revolving credit facilities with several banks. These
facilities provide for borrowings of up to $5 million at rates ranging from
8-13% and are generally unsecured.
As of June 30, 1999, the Company's working capital was $151.3 million
compared to $162.8 million at December 31, 1998. Capital expenditures for
property and equipment were approximately $8.8 million for the first six
months of 1999, and management expects capital expenditures to be
approximately $15 million for the full year of 1999, excluding acquisitions.
9
<PAGE>
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 Chief Information Officer of the Company has been appointed the
Year 2000 Project Executive.
The Company's Year 2000 program has been conducted in phases, described as
follows:
Inventory Phase. Identify hardware, software, processes or devices the
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 the inventory, assessment and planning
phases. The majority 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. The Company
plans to implement Year 2000 modifications or complete the conversion of all
non-compliant systems by the end of the third quarter. The Company currently
believes that Year 2000 compliance will be achieved in all material respects
prior to any anticipated Year 2000 failure date.
10
<PAGE>
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 in the range of $750,000.
Costs incurred during 1998 and the first half of 1999 were approximately
$500,000. 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 will 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 prepared during
the third and fourth quarters of 1999 and may include securing alternate sources
of product supply, adopting workaround procedures, and other appropriate
measures.
In addition to key business partners 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,
anticipated restructuring charges and cash requirements 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
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.
11
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on May 11, 1999, the
following proposals were adopted by the margins indicated.
1. To elect ten directors to serve until the next Annual Meeting
of Shareholders or until their successors are duly elected and
qualified.
<TABLE>
<CAPTION>
Number of Shares
For Withheld
<S> <C> <C>
Lou Weisbach 42,802,477 457,088
Linden D. Nelson 42,797,528 462,037
Seymour N. Okner 42,794,903 461,662
Richard A. Magid 42,802,477 457,088
David C. Robbins 42,802,477 457,088
Thomas Herskovits 42,841,315 418,250
Jordon R. Katz 42,799,477 460,088
Marshall J. Katz 42,798,477 461,088
Neil A. Ramo 42,915,302 344,263
Robert Sosnick 42,919,615 339,950
</TABLE>
1. To ratify the reappointment of the firm of Arthur Andersen LLP as the
Company's independent auditors for 1999.
For 43,209,417
Against 35,723
Abstained 14,425
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.0 - Financial Data Schedule for the six month period ended
June 30, 1999
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
June 30, 1999.
12
<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: August 13, 1999 /s/ GREGORY J. KILREA
---------------------------
Gregory J. Kilrea
Duly Authorized Officer
and Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND THE CONSOLIDATED INCOME
STATEMENT FOR THE SIX MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 28,142
<SECURITIES> 2,712
<RECEIVABLES> 169,839
<ALLOWANCES> 3,153
<INVENTORY> 35,075
<CURRENT-ASSETS> 250,598
<PP&E> 68,035
<DEPRECIATION> 29,030
<TOTAL-ASSETS> 367,503
<CURRENT-LIABILITIES> 99,334
<BONDS> 10,000
0
0
<COMMON> 213,987
<OTHER-SE> 41,208
<TOTAL-LIABILITY-AND-EQUITY> 367,503
<SALES> 317,278
<TOTAL-REVENUES> 317,278
<CGS> 207,434
<TOTAL-COSTS> 207,434
<OTHER-EXPENSES> 101,703
<LOSS-PROVISION> 509
<INTEREST-EXPENSE> 1,273
<INCOME-PRETAX> 8,420
<INCOME-TAX> 3,368
<INCOME-CONTINUING> 5,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,052
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
