-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O1uHBmELeR578hQMrgAMxnPSDEJViP3jQS37tYv5SrM0qCdpzjNlOurSXlENcuT9 DbcwXmdXlZNXpMdLmRlYiw== 0000950152-99-009115.txt : 19991117 0000950152-99-009115.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950152-99-009115 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED INDUSTRIAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000109563 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES [5080] IRS NUMBER: 340117420 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02299 FILM NUMBER: 99753294 BUSINESS ADDRESS: STREET 1: 3600 EUCLID AVE CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2168818900 MAIL ADDRESS: STREET 1: 3600 EUCLID AVE CITY: CLEVELAND STATE: OH ZIP: 44115 FORMER COMPANY: FORMER CONFORMED NAME: BEARINGS INC /OH/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BROWN JIM STORES INC DATE OF NAME CHANGE: 19600201 10-Q 1 APPLIED INDUSTRIAL TECHNOLOGIES, INC. 10-Q 1 FORM 10 - Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [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 1-2299 ---------- APPLIED INDUSTRIAL TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0117420 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Applied Plaza, Cleveland, Ohio 44115 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 426-4000 ---------------- - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 Shares of common stock outstanding on October 31, 1999 20,939,360 ------------------------------------------- (No par value) 2 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX - -------------------------------------------------------------------------- Page No. Part I: FINANCIAL INFORMATION Item 1: Financial Statements Statements of Consolidated Income - 2 Three Months Ended September 30, 1999 and 1998 Consolidated Balance Sheets - 3 September 30, 1999 and June 30, 1999 Statements of Consolidated Cash Flows 4 Three Months Ended September 30, 1999 and 1998 Statements of Consolidated Shareholders' Equity - 5 Three Months Ended September 30, 1999 and Year Ended June 30, 1999 Notes to Consolidated Financial Statements 6 - 7 Item 2: Management's Discussion and Analysis of 8 - 13 Financial Condition and Results of Operations Part II: OTHER INFORMATION Item 1: Legal Proceedings 14 Item 5: Other Information 14 Item 6: Exhibits and Reports on Form 8-K 16 Signatures 17 3 PART I: FINANCIAL INFORMATION ITEM I: Financial Statements
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME --------------------------------- (Unaudited) (Thousands, except per share amounts) - ------------------------------------------------------------------------------------------------------------------------------- Three Months Ended September 30 1999 1998 -------------------------------------- Net Sales $ 380,671 $ 379,174 --------- --------- Cost and Expenses Cost of sales 286,906 288,538 Selling, distribution and administrative 81,680 85,864 --------- --------- 368,586 374,402 --------- --------- Operating Income 12,085 4,772 --------- --------- Interest Interest expense 2,255 2,658 Interest income (20) (186) --------- --------- 2,235 2,472 --------- --------- Income Before Income Taxes 9,850 2,300 --------- --------- Income Taxes Federal 3,600 854 State and local 388 88 --------- --------- 3,988 942 --------- --------- Net Income $ 5,862 $ 1,358 ========= ========= Net Income Per Share - Basic $ 0.28 $ 0.06 ========= ========= Net Income Per Share - Diluted $ 0.28 $ 0.06 ========= ========= Cash dividends per common share $ 0.12 $ 0.12 ========= =========
See notes to consolidated financial statements. 2 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands) - ---------------------------------------------------------------------------------------------------------------------------- September 30 June 30 1999 1999 --------- --------- (Unaudited) Assets Current assets Cash and temporary investments $ 15,254 $ 19,186 Accounts receivable, less allowance of $3,690 and $3,515 194,617 195,736 Inventories (at LIFO) 158,329 169,689 Other current assets 6,045 6,235 --------- --------- Total current assets 374,245 390,846 --------- --------- Property - at cost Land 12,293 12,316 Buildings 66,884 69,329 Equipment 96,910 96,011 --------- --------- 176,087 177,656 Less accumulated depreciation 72,330 70,417 --------- --------- Property - net 103,757 107,239 --------- --------- Goodwill 61,332 62,351 Other assets 13,840 13,913 --------- --------- TOTAL ASSETS $ 553,174 $ 574,349 ========= ========= Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 74,265 $ 78,836 Compensation and related benefits 25,632 19,692 Other accrued liabilities 35,001 33,588 --------- --------- Total current liabilities 134,898 132,116 Long-term debt 100,500 126,000 Other liabilities 22,479 22,647 --------- --------- TOTAL LIABILITIES 257,877 280,763 --------- --------- Shareholders' Equity Preferred stock - no par value; 2,500 shares authorized; none issued or outstanding Common stock - no par value; 50,000 shares authorized; 24,095 shares issued 10,000 10,000 Additional paid-in capital 82,726 82,599 Income retained for use in the business 249,360 246,026 Less 3,113 and 2,994 treasury shares - at cost (42,188) (40,140) Less unearned restricted common stock compensation (4,601) (4,899) --------- --------- TOTAL SHAREHOLDERS' EQUITY 295,297 293,586 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 553,174 $ 574,349 ========= =========
See notes to consolidated financial statements. 3 5
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (Amounts in thousands) Three Months Ended September 30 -------------------------------------------- 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 5,862 $ 1,358 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 4,562 3,967 Amortization of goodwill and restricted common stock compensation 1,320 1,178 Provision for losses on accounts receivable 568 554 Gain on sale of property (481) (96) Treasury shares contributed to employee benefit plans 1,009 1,283 Changes in current assets and liabilities, net of effects from acquisition of businesses: Accounts receivable 551 10,385 Inventories 11,360 (10,237) Other current assets 190 (2,967) Accounts payable and accrued expenses 2,610 9,431 Other - net 96 117 - -------------------------------------------------------------------------------------------------------------------------------- Net Cash provided by Operating Activities 27,647 14,973 - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Property purchases (2,801) (3,967) Proceeds from property sales 2,201 1,217 Net cash paid for acquisition of businesses (7,200) Deposits and other 70 9,820 - -------------------------------------------------------------------------------------------------------------------------------- Net Cash used in Investing Activities (530) (130) - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net borrowings under line-of-credit agreements 6,722 Repayments under revolving credit agreements - net (25,500) Dividends paid (2,528) (2,658) Purchase of treasury shares (3,061) (8,595) Exercise of stock options 40 34 - -------------------------------------------------------------------------------------------------------------------------------- Net Cash used in Financing Activities (31,049) (4,497) - -------------------------------------------------------------------------------------------------------------------------------- Increase (decrease ) in cash and temporary investments (3,932) 10,346 Cash and temporary investments at beginning of period 19,186 9,344 - -------------------------------------------------------------------------------------------------------------------------------- Cash and Temporary Investments at End of Period $ 15,254 $ 19,690 ================================================================================================================================ Supplemental Cash Flow Information Cash paid during the period for: Income taxes $ 2,882 $ 392 Interest $ 1,945 $ 2,553
See notes to consolidated financial statements. 4 6
APPLIED INDUSTIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ----------------------------------------------------- STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY For the Three Months Ended September 30, 1999 (Unaudited) and Year Ended June 30, 1999 (Thousands, except per share amounts ) Income Unearned Shares of Additional Retained Treasury Restricted Total Common Stock Common Paid-in for Use in Shares Common Stock Shareholders' Outstanding Stock Capital the Business - at Cost Compensation Equity - ----------------------------------------------------------------------------------------------------------------------------------- Balance at July 1, 1998 22,102 $ 10,000 $ 82,713 $ 236,109 $ (24,391) $ (4,929) $ 299,502 Net income 19,933 19,933 Cash dividends - $.48 per share (10,397) (10,397) Purchase of common stock for treasury (1,450) (21,746) (21,746) Treasury shares issued for: Retirement Savings Plan contributions 220 337 2,980 3,317 Exercise of stock options 109 (281) 1,442 1,161 Deferred compensation plans 24 55 309 364 Restricted common stock awards 96 (86) 1,266 (1,180) Amortization of restricted common stock compensation 28 1,210 1,238 Other (167) 381 214 - ---------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1999 21,101 10,000 82,599 246,026 (40,140) (4,899) 293,586 Net income 5,862 5,862 Cash dividends - $.12 per share (2,528) (2,528) Purchase of common stock for treasury (193) (3,061) (3,061) Treasury shares issued for: Retirement Savings Plan contributions 65 110 899 1,009 Exercise of stock options 3 2 38 40 Deferred compensation plans 6 20 76 96 Amortization of restricted common stock compensation 298 298 Other (5) (5) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 1999 20,982 $ 10,000 $ 82,726 $ 249,360 $ (42,188) $ (4,601) $ 295,297 ==================================================================================================================================
See notes to consolidated financial statements. 7 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except per share amounts) (Unaudited) - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 1999 and June 30, 1999, and the results of operations and cash flows for the three months ended September 30, 1999 and 1998. The results of operations for the three month period ended September 30, 1999 are not necessarily indicative of the results to be expected for the fiscal year. Cost of sales for interim financial statements are computed using estimated gross profit percentages which are adjusted throughout the year based upon available information. Adjustments to actual cost are made based on the annual physical inventory and the effect of year-end inventory quantities on LIFO costs. Certain reclassifications have been made to the prior year consolidated financial statements in order to be consistent with the presentation for the current year. 2. NET INCOME PER SHARE The following is a computation of the basic and diluted earnings per share:
Three Months Ended September 30 1999 1998 -------------------------------------- Net Income - ---------- Net income as reported in statements of consolidated income $ 5,862 $ 1,358 ==================================== Average Shares Outstanding - -------------------------- Weighted average common shares outstanding for basic computation 20,798 21,832 Dilutive effect of: Stock options 133 172 Performance Accelerated Restricted Stock (PARS) 51 5 -------------------------------------- Adjusted average common shares outstanding for diluted computation 20,982 22,009 ==================================== Net Income Per Share - -------------------- Net income per common share - basic $ 0.28 $ 0.06 ==================================== Net income per common share - diluted $ 0.28 $ 0.06 ====================================
6 8 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except per share amounts) (Unaudited) - -------------------------------------------------------------------------------- 3. SEGMENT INFORMATION The Company has identified one reportable segment: Service Center Based Distribution. The Service Center Based Distribution segment provides customers with solutions to their immediate maintenance repairs and original equipment manufacturing needs through the distribution of bearings, power transmission products and systems, industrial rubber products, linear motion products, fluid power components, general maintenance products and related specialty items. The Company also offers various levels of technical application support for these products and provides creative solutions to help customers minimize downtime and reduce overall procurement costs. The "Other" column consists of the aggregation of all other non-service center based distribution operations that sell directly to customers, including fluid power, electrical shop and fabricated rubber businesses and various electronic commerce businesses. The segments were established in fiscal 1999 primarily due to the acquisitions outside our core business segment and the related growth in these areas. The accounting policies of the segments are the same as those described in Note 1. Intersegment sales are not significant. All current segment operations are in the United States and Puerto Rico. The segment operations in Puerto Rico are not significant. SEGMENT FINANCIAL INFORMATION:
THREE MONTHS ENDED SEPTEMBER 30 ------------------------------------------------------------------------------- Service Center Based Total Distribution Other ------------------------- ---------------------- ------------------------ 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- Total net sales $380,671 $379,174 $366,000 $365,123 $ 14,671 $ 14,051 ---------------------- ---------------------- ---------------------- Segment operating profit $ 17,366 $ 16,651 $ 16,802 $ 16,179 $ 564 $ 472 ====================== ====================== Goodwill amortization 1,022 955 Corporate/Unallocated expense, net 4,259 10,924 ---------------------- Total operating profit 12,085 4,772 Interest expense, net 2,235 2,472 ---------------------- Income before taxes $ 9,850 $ 2,300 ====================== Assets used in the business $553,174 $615,034 $515,903 $588,685 $ 37,271 $ 35,725 ====================== ====================== ====================== Depreciation $ 4,562 $ 3,967 $ 4,407 $ 3,854 $ 155 $ 113 ====================== ====================== ====================== Capital Expenditures $ 2,801 $ 3,967 $ 2,771 $ 3,967 $ 30 ====================== ====================== ======== ======== Sales By Product Category: Three Months Ended September 30 ---------------------- 1999 1998 -------- --------- Industrial Products $267,946 $268,056 Engineered Systems Products 57,130 57,303 Fluid Power Products 37,851 35,643 Fabricated Rubber Products 17,744 18,172 ======== ======== $380,671 $379,174 ======== ========
7 9 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The following is Management's Discussion and Analysis of certain significant factors which have affected the Company's: (1) financial condition at September 30, 1999 and June 30, 1999, and (2) results of operations and cash flows during the periods included in the accompanying Statements of Consolidated Income and Consolidated Cash Flows. FINANCIAL CONDITION Liquidity and Working Capital - ----------------------------- Cash provided by operating activities was $27.6 million in the three months ended September 30, 1999. This compares to $15.0 million provided by operating activities in the same period a year ago. Cash flow from operations depends primarily upon generating operating income, controlling the investment in inventories and receivables, and managing the timing of payments to suppliers. The Company has continuing programs to monitor and control these investments. During the three month period ended September 30, 1999, inventories decreased approximately $11.4 million due to Company efforts to reduce inventory levels, while accounts receivable remained relatively stable. Net cash used in investing activities was $0.5 million in the three months ended September 30, 1999 from property purchases net of disposals. Net cash used in financing activities totaled $31.0 million in the three months ended September 30, 1999 as compared to $4.5 million for the period ended September 30, 1998. Cash provided from operations was used for net repayments under the Company's revolving credit agreements of $25.5 million. Working capital at September 30, 1999 was $239.3 million compared to $258.7 million at June 30, 1999. This decrease is primarily due to the decrease in inventory due to Company efforts to reduce inventory levels. Capital Resources - ----------------- Capital resources are obtained from income retained in the business, borrowings under the Company's credit facilities, and operating lease arrangements. Average combined borrowings were $104.3 million and $156.8 million for the three months ended September 30, 1999 and 1998, respectively. The weighted average interest rate on borrowings under revolving credit facilities for the three months ended September 30, 1999 decreased to 5.6% from an average rate of 5.9% for the three months ended September 30, 1998. The weighted average interest on 8 10 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- borrowing under other long-term debt agreements for the three months ended September 30, 1999 and 1998 was 7.1%. The Company has a committed revolving credit agreement with a five year term with a group of lending institutions. This agreement provides for unsecured borrowings of up to $150.0 million. The Company had $10.5 million of borrowings outstanding under this facility at September 30, 1999. Unused lines under this facility totaling $130.9 million are available to fund future acquisitions or other capital and operating requirements. The Company also has a $15.0 million short-term uncommitted line of credit with a commercial bank. The Company had no borrowings outstanding under this facility at September 30, 1999. Unused lines under this facility totaling $15.0 million are available to fund future acquisitions or other capital and operating requirements. The Board of Directors has authorized an ongoing program to purchase shares of the Company's common stock to fund employee benefit programs, stock option and award programs, and future acquisitions. These purchases are made in open market and negotiated transactions, from time to time, depending upon market conditions. The Company acquired 193,000 shares of its common stock for $3.1 million during the three months ended September 30, 1999. The Company has remaining authorization to repurchase 685,000 shares as of September 30, 1999. Management expects that capital resources provided from operations, available lines of credit, unused amounts under the committed revolving credit facility and operating leases will be sufficient to finance normal working capital needs, business acquisitions, enhancement of facilities and equipment, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained if desired. Year 2000 Readiness Disclosure - ------------------------------ The Company's progress in completing its Year 2000 activities is overseen by an executive task force made up of representatives from all key management areas. The task force in turn reports to the audit committee of the Board of Directors. Additionally, the Company has retained an outside Year 2000 consultant to provide an independent assessment of the Company's Year 2000 compliance and contingency planning efforts. The Company's plan for assessment, remediation, replacement and testing of those of its internal computer systems affected by the Year 2000 issue is proceeding on schedule. For business reasons, the Company's financial information systems have been replaced with a new Year 2000-compliant system, which is fully operational. In addition, all of the Company's critical computer systems, including the OMNEX(R) inventory and sales information system, customer billing system, and corporate information system, have been remediated and tested, and are now Year 2000 compliant. 9 11 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The Year 2000 issue also effects certain of the Company's non-critical computer systems and equipment containing embedded technology. The Company has largely completed its assessment, remediation and testing of these non-critical systems, with remaining work scheduled to be completed by various dates before the end of calendar year 1999. To date, following contacts with product suppliers, the Company has not identified any products regularly sold by the Company that are susceptible to the Year 2000 issue. The Company has sought written assurances from key product and service suppliers as to their Year 2000 compliance plans. Follow-up interviews are being conducted with those suppliers with whom the Company has the most significant relationships. The Company will consider appropriate measures, including substitution of suppliers, in the event that a supplier provides an inadequate response. If the Company's suppliers or customers fail to achieve Year 2000 compliance in a timely manner, then the Year 2000 issue could have a material adverse effect on the Company. For example, suppliers' failures to deliver products to the Company due to the Year 2000 issue could render the Company unable to fulfill commitments to customers unless those products or adequate substitutes can be secured elsewhere. Customers affected by the Year 2000 issue could reduce their volume of purchases from the Company or slow their payments for products already delivered. To reduce the risk of business interruption due to the Year 2000 issue, the Company is preparing contingency plans to address situations that may result from the failure of the Company or certain third parties (including utilities) to complete efforts necessary to achieve Year 2000 compliance on a timely basis. These plans are scheduled to be completed by various dates before the end of calendar year 1999. Despite its efforts, the Company will not be able to analyze fully the scope or nature of the risk represented by the failure of third parties, including suppliers and customers, to attain Year 2000 compliance. The Company expects, however, that the actions described in this section will significantly reduce the likelihood that the Year 2000 issue would have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows. Based on currently available information, the total cost of the Company's year 2000 activities is expected to be under $5 million, with approximately four-fifths of the total cost already incurred through September 30, 1999. The total amount spent to date includes a capital expenditure of approximately $1.6 million for the new Year 2000-compliant financial information system, which would have been acquired in the ordinary course, but whose acquisition was accelerated to ensure compliance by the end of calendar 1999. The effort to bring the Company's internal computer systems into compliance has largely been accomplished by redirecting internal programming 10 12 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- resources, with costs expensed as incurred. These costs, too, are included in the total cost estimate. Estimates of the Year 2000-related costs are based on numerous assumptions and there is no certainty that actual costs will not be significantly different from the estimates. To date, the costs of addressing the Year 2000 issue are not considered material to the Company's financial condition, results of operations or cash flows, and future costs are not expected to be material in such respects. The Company further anticipates that its current resources and sources of liquidity will be adequate to address the capital needs arising from its specific Year 2000 issues. RESULTS OF OPERATIONS - --------------------- A summary of the period-to-period changes in principal items included in the statements of consolidated income follows:
Increase (Decrease) (Dollars in Thousands, Except per Share Amounts) Three Months Ended September 30 1999 and 1998 Amount Change ------ ------ Net sales $1,497 0.4% Cost of sales (1,632) (0.6)% Selling, distribution and administrative expenses (4,184) (4.9)% Operating income 7,313 153.2% Interest expense - net (237) (9.6)% Income before income taxes 7,550 328.3% Income taxes 3,046 323.4% Net income 4,504 331.7% Net income per share - diluted .22 366.7%
11 13 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Three Months Ended September 30, 1999 and 1998 Net sales increased slightly from the prior year primarily due to acquisitions during fiscal 1999. Gross profit as a percentage of sales increased to 24.6% from 23.9%. This increase primarily is due to a change in product mix and higher discounts and allowances from suppliers. Selling, distribution and administrative expenses as a percent of sales, decreased to 21.5% from 22.6%. This change primarily relates to pretax restructuring and other special charges being recorded in the September 30, 1998 quarter of $5.4 million for costs of consolidation and workforce reductions. This charge decreased the September 30, 1998 net income by $3.2 million, or $.14 per share. Interest expense-net for the quarter decreased by 9.6% as compared to the prior year primarily as a result of a decrease in average borrowings. Income tax expense as a percentage of income before taxes was 40.5% for the quarter ended September 30, 1999 and 41.0% for the quarter ended September 30, 1998. This decrease is due to tax savings from lower effective state and local tax rates. As a result of the above factors, net income increased by 331.7% compared to the same quarter of last year. As a result of the impact of continued stock repurchases, net income per share - diluted increased $.22, or 366.7%. CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT - ------------------------------------------------------------------- Management's Discussion and Analysis contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in the statements will be achieved. Important risk factors include, but are not limited to, the following: changes in the economy or in specific customer industry sectors; changes in customer procurement policies and practices; changes in product manufacturer sales policies and practices; the availability of product and labor; changes in operating expenses; the effect of price increases or decreases; the variability and timing of business opportunities including acquisitions, alliances, customer agreements and supplier authorizations; the Company's ability to realize the anticipated benefits of the acquisitions and other business strategies, including electronic commerce initiatives; the 12 14 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------------ ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- incurrence of additional debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company; the emergence of new competitors, including firms with greater financial resources than the Company; adverse effects of the Year 2000 issue on businesses of the Company and its suppliers and customers; adverse results in significant litigation matters; adverse state and federal regulation and legislation; and the occurrence of extraordinary events (including prolonged labor disputes, natural events and acts of God, fires, floods and accidents). 13 15 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. ----------------- Applied Industrial Technologies, Inc. and/or one of its subsidiaries is a defendant in various product- and employment-related lawsuits. Based on circumstances presently known, the Company believes that these cases are not material to its business or financial condition. ITEM 5. Other Information. ----------------- (a) Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- At the Annual Meeting of Shareholders of the Company held on October 19, 1999, there were 20,993,104 shares of common stock entitled to vote. The Shareholders voted on the matters submitted to the meeting as follows: 1. Election of three persons to be directors of Class III for a term of three years: For Withheld --- -------- William E. Butler 18,441,739 812,216 Russell R. Gifford 18,454,755 799,198 L. Thomas Hiltz 18,623,349 630,604 Directors of Class I, consisting of Thomas A. Commes, John C. Dannemiller, J. Michael Moore, and Jerry Sue Thornton, serve until the expiration of their term of office in 2000 and Directors of Class II, consisting of William G. Bares, Roger D. Blackwell, Russel B. Every, and John J. Kahl, serve until the expiration of their term of office in 2001. 2. Amendment of the Company's Code of Regulations to increase the maximum size of the Board of Directors from 12 to 14 directors. For Withheld Abstain --- -------- ------- 18,503,875 409,019 260,060 3. Ratification of management's appointment of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending June 30, 2000. 14 16 For Withheld Abstain --- -------- ------- 19,234,114 9,751 10,090 Discretionary voting was authorized as to the three matters submitted. There were no broker non-votes. (b) Election of Officers. --------------------- At its Organizational Meeting held on October 19, 1999, the Board of Directors elected the following officers of the Company: John C. Dannemiller Chairman & Chief Executive Officer David L. Pugh President & Chief Operating Officer Todd A. Barlett Vice President-Alliance Systems Donald L. Chargin Vice President-Sales & Field Operations Mark O. Eisele Vice President & Controller James T. Hopper Vice President-Information Systems Justin M. Jacobi Vice President-Marketing & Strategic Planning Bill L. Purser Vice President-Chief Marketing Officer Jeffrey A. Ramras Vice President-Logistics Richard C. Shaw Vice President-Communications, Organizational Learning & Quality Standards Robert C. Stinson Vice President-Chief Administrative Officer, General Counsel & Secretary John R. Whitten Vice President-Chief Financial Officer & Treasurer Fred D. Bauer Assistant Secretary Jody A. Chabowski Assistant Controller Michael L. Coticchia Assistant Secretary Alan M. Krupa Assistant Treasurer
15 17 ITEM 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits. --------- Exhibit No. Description ----------- ------------- 3(a) Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 8, 1998 (filed as Exhibit 3(a) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference). 3(b) Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999. 4(a) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(b) $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(b) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(c) Amendment to $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(g) to the Company's Form 10-Q for the quarter ended March 31, 1996, SEC File No. 1-2299, and incorporated here by reference). 4(d) $50,000,000 Private Shelf Agreement dated as of November 27, 1996, as amended on January 30, 1998, between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(f) to the Company's Form 10-Q for the quarter ended March 31, 1998, SEC File No. 1-2299, and incorporated here by reference). 16 18 4(e) $150,000,000 Credit Agreement dated as of November 5, 1998 among the Company, KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference). 4(f) Rights Agreement, dated as of February 2, 1998, between the Company and Harris Trust and Savings Bank, as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (filed as Exhibit No. 1 to the Company's Registration Statement on Form 8-A filed July 20, 1998, SEC File No. 1-2299, and incorporated here by reference). 27 Financial Data Schedule. (b) The Company did not file, nor was it required to file, a Report on Form 8-K with the Securities and Exchange Commission during the quarter ended September 30, 1999. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. APPLIED INDUSTRIAL TECHNOLOGIES, INC. (Company) Date: November 15, 1999 By: /s/ David L. Pugh ------------------------------------------ David L. Pugh President & Chief Operating Officer Date: November 15, 1999 By: /s/ Mark O. Eisele ------------------------------------------ Mark O. Eisele Vice President & Controller 17 19 APPLIED INDUSTRIAL TECHNOLOGIES, INC. EXHIBIT INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 EXHIBIT NO. DESCRIPTION PAGE 3(a) Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 8, 1998. (filed as Exhibit 3(a) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC File No. 1-2299, and incorporated here by reference). 3(b) Code of Regulations of Applied Industrial Attached Technologies, Inc., as amended October 19, 1999. 4(a) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(b) $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(b) to the Company's Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4(c) Amendment to $80,000,000 Maximum Aggregate Principal Amount Note Purchase and Private Shelf Facility dated October 31, 1992 between the Company and The Prudential Insurance Company of America (filed as Exhibit 4(g) to the Company's Form 10-Q for the quarter ended March 31, 1996, SEC File No. 1-2299, and incorporated here by reference). 4(d) $50,000,000 Private Shelf Agreement dated as of November 27, 1996, as amended on January 30, 1998, between the Company and The Prudential 20 Insurance Company of America (filed as Exhibit 4(f) to the Company's Form 10-Q for the quarter ended March 31, 1998, SEC File No. 1-2299, and incorporated here by reference). 4(e) $50,000,000 Credit Agreement dated as of November 5, 1998 among Applied, KeyBank National Association as Agent, and various financial institutions (filed as Exhibit 4(e) to the Company's Form 10-Q for the quarter ended September 30, 1998, SEC file No. 1-2299, and incorporated here by reference). 4(f) Rights Agreement, dated as of February 2, 1998, between the Company and Harris Trust and Savings Bank, as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (filed as Exhibit No. 1 to the Company's Registration Statement on Form 8-A filed July 20, 1998, SEC File No. 1-2299, and incorporated here by reference). 27 Financial Data Schedule. Attached EX-3.B 2 EXHIBIT 3B 1 EXHIBIT 3(b) CODE OF REGULATIONS OF APPLIED INDUSTRIAL TECHNOLOGIES, INC. MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETING. All meetings of the shareholders shall be held at the offices of the Corporation in the City of Cleveland, Ohio, or elsewhere, within or without the State of Ohio, as may be decided from time to time by the Board of Directors and indicated in the notice of the meeting. SECTION 2. ANNUAL MEETING. The annual meeting of shareholders of the Corporation shall be held at 1:30 p.m., on the first Tuesday after the fifteenth day of October in each year, if not a legal holiday, but if a legal holiday, then on the next succeeding business day, or such other time and date as may be determined by the Board of Directors. Directors shall be elected thereat to succeed the directors whose terms are expiring that year, and such other business transacted as may be specified in the notice of the meeting, or as may properly be brought before the meeting. In the event that the annual meeting is not held or if directors are not elected thereat, a special meeting may be called and held for that purpose. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may be held on any business day when called by the Chairman of the Board, the President, the Board of Directors at a meeting, a majority of the directors acting without a meeting, or by holders of not less than fifty percent (50%) of the outstanding voting stock of the Corporation. SECTION 4. NOTICE OF MEETINGS. A written or printed notice of every annual or special meeting of the shareholders stating the time, place and purposes thereof shall be given to each shareholder entitled to vote thereat and to each shareholder entitled to notice as provided by law, which notice unless served upon a shareholder in person shall be mailed to his last address appearing on the records of the Corporation, not less than seven (7) days nor more than sixty (60) days prior to the date of the meeting. It shall be the duty of the Secretary to give written notice of the annual meeting, and of each special meeting when requested to do so by the officer, directors or shareholders calling such meeting. Any shareholder may waive in writing any notice of any meeting required to be given by law or under these Regulations and, by attendance or voting at any meeting without protesting the lack of proper notice, shall be deemed to have waived notice thereof. 2 SECTION 5. SHAREHOLDERS' LIST. A complete list of the shareholders entitled to vote at a meeting of shareholders, arranged in alphabetical order, with the address of each and the number of shares held of record by each, shall be prepared by or at the instance of the Secretary and be available during the whole time of the meeting for inspection by any shareholder who is present. SECTION 6. VOTING AND PROXIES. At all meetings of shareholders, only such shareholders shall be entitled to vote in person or by proxy, who appear upon the records of the Corporation as the holders of stock at the time possessing voting power, or if a record date be fixed as hereinafter provided, those appearing as such on such record date. Except as otherwise provided in the Corporation's Articles of Incorporation, at each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing, subscribed by such shareholder and bearing a date not more that eleven (11) months prior to said meeting unless such instrument specifies the date on which it is to expire or the length of time it is to continue in force. SECTION 7. QUORUM AND ADJOURNMENTS. Except as may be otherwise required by law or by the Articles of Incorporation or by these Regulations, the holders of a majority of the then outstanding shares entitled to vote at a shareholders' meeting shall constitute a quorum to hold such meeting; provided, however, that any meeting duly called, whether a quorum is present or otherwise may, by vote of the holders of a majority of the voting stock represented thereat, adjourn from time to time and from place to place without notice other than by announcement at such meeting. DIRECTORS SECTION 8. NUMBER. The number of directors of the Corporation may be determined by the vote of the holders of a majority of the shares represented at any annual meeting or special meeting called for the purpose of electing directors or by resolution adopted by affirmative vote of a majority of the directors then in office, provided that the number of directors shall in no event be fewer than nine (9) nor more then fourteen (14). When so fixed, such number shall continue to be the authorized number of directors until changed by the shareholders or directors by vote as aforesaid. No decrease in the number of directors shall have the effect of removing any director prior to the expiration of the term for which he was elected. 2 3 SECTION 9. CLASSIFICATION, ELECTION AND TERM OF OFFICE. The directors shall be divided into three (3) classes, designated Class I, Class II, and Class III, as nearly equal in size as possible, and one of the classes shall be elected for a three-year term of office at each annual shareholders meeting. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of such class, but in no case will a decrease in the number of directors in a particular class shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and his successor shall be elected and shall qualify, subject, however, to prior death, resignation, or removal from office. SECITON 10. REMOVAL. Except as otherwise provided by law, all the Directors or all the Directors of a particular class, or any individual Director, may be removed from office with or without assigning any cause, by the affirmative vote of at least eighty percent (80%) of the outstanding voting stock present in person or represented by proxy, entitled to vote in respect thereof, at an annual meeting or at any special meeting duly called. SECTION 11. VACANCIES. Whenever any vacancy shall occur among the directors, the remaining Directors shall constitute the directors of the Corporation until such vacancy is filled or until the number of Directors is changed pursuant to Section 8 hereof. Except in cases where a Director is removed as provided by law and these Regulations and his successor is elected by the shareholders, the remaining directors may, by a vote of a majority of their number, fill any vacancy for the unexpired term. A majority of the Directors then in office may also fill any vacancy that results from an increase in the number of Directors. SECTION 12. ORGANIZATION MEETING. Immediately after each annual meeting of the shareholders, or each special meeting held in lieu thereof, the Board of Directors, including the newly elected members, if a quorum thereof is present, shall hold an organization meeting at the same place or at such other place within a 10 mile radius as may have been fixed by the Chairman of the Board or the President prior to such meeting of the shareholders, provided that the Directors and nominees present are advised of the different location, for the purpose of electing officers and transacting any other business. Notice of such meeting need not be given. If for any reason such organization meeting is not held at such time, a special meeting for such purpose shall be held as soon thereafter as practicable. 3 4 SECTION 13. REGULAR MEETINGS. Regular meetings of the Board of Directors for the transaction of any business may be held at such times and places as may be determined by the Board of Directors. The Secretary shall give to each director at least five (5) days written notice of each such meeting. SECTION 14. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place upon call by the Chairman of the Board, the President, or any five directors. Notice of each such meeting shall be given to each director by letter, telegram or telephone or in person not less than forty-eight (48) hours prior to such meeting; provided, however, that such notice shall be deemed to have been waived by the Directors attending or voting at any such meeting, without protesting the lack of proper notice, and may be waived in writing, or by telegram by any Director either before or after such meeting. Unless otherwise limited in the notice thereof, any business may be transacted at any organization, regular or special meeting. SECTION 15. QUORUM. At all meetings of the Board of Directors a majority of the Directors in office at the time shall constitute a quorum for the transaction of business. SECTION 16. COMPENSATION. If so determined by the Board of Directors, all or any members of the Board of Directors or of any committee of the Board shall be paid for their services and given such benefits as may be determined from time to time by the Board of Directors; and such compensation may be in addition to that received by any director or any member of a committee as an officer or employee of the Corporation. Non-resident members may be reimbursed for expenses reasonably incurred by them in attending such meetings. COMMITTEES SECTION 17. APPOINTMENT. The Board of Directors may from time to time, by resolution passed by a majority of the whole Board, appoint certain of its members, but not less than three (3) in any case, to act as a committee or committees in the intervals between meetings of the Board and may delegate to such committee or committees any of the authority of the Board, however conferred (subject to the control and direction of the Board) other than the power to fill any vacancy among the Directors or in any committee of the Directors. The authority of any committee of the directors shall be subject to any limitations and conditions set by the Board. Any act or authorization of an act by any such committee within the authority delegated to it shall be as effective for all purposes, as the act or authorized action of the Directors. All action or authorization of action by any committee shall be reported to the Board of Directors at its first meeting thereafter, and, if the rights of third parties have not intervened, shall be subject to revision or recession by the Board. In every case, the affirmative vote of a majority or the consent of all of the members of 4 5 a committee shall be necessary for the approval of any action, but action may be taken by a committee without a formal meeting or written consent. SECTION 18. EXECUTIVE COMMITTEE. In particular, the Board of Directors may create from its membership and define the powers and duties of an Executive Committee. During the intervals between meetings of the Board of Directors, the Executive Committee shall possess and may exercise under the control and direction of the Board all of the powers of the Board of Directors in the management and control of the business of the Corporation. All action taken by the Executive Committee shall be reported to the Board of Directors at it first meeting thereafter, and, if the rights of third parties have not intervened, shall be subject to revision or recession by the Board. In every case, the affirmative vote of a majority or the consent of all of the members of the Executive Committee shall be necessary for the approval of any action, but action may be taken by the Executive Committee without a formal meeting or written consent. The Executive Committee shall meet at the call of any member thereof. OFFICERS SECTION 19. OFFICERS DESIGNATED. The officers of the Corporation shall be elected by the Board of Directors at their organization meeting or at a special meeting held in lieu thereof. The officers of the Corporation shall consist of the President, a Secretary and a Treasurer, and, if so determined by the Board of Directors, a Chairman of the Board, one or more Vice Presidents, a Controller and such other officers and assistant officers as the Board may determine. The Chairman of the Board shall be elected from among the directors. The other officers may, but need not be, elected from among the Directors. Any two offices may be held by the same person, but in any case where the action of more than one officer is required no one person shall act in more than one capacity. SECTION 20. TENURE OF OFFICE. The officers of the Corporation shall hold office until the next organization meeting of the Board of Directors and until their respective successors are chosen and qualified, except in case of resignation, death or removal. The Board of Directors may remove any officer at any time with or without cause by a majority vote of the directors in office at the time. A vacancy, however created, in any office may be filled by the Board of Directors. SECTION 21. POWERS AND DUTIES OF OFFICERS IN GENERAL. The powers and duties of the officers shall be exercised in all cases subject to such directions as the Board of Directors may see fit to give. The respective powers and duties hereinafter set forth are subject to alteration by the Board of Directors. The Board of Directors is also authorized to delegate the duties of any officer to any other officer, employee or committee and to require the performance of duties in addition to those provided for herein. 5 6 SECTION 22. CHAIRIMAN OF THE BOARD. The Chairman of the Board shall preside at meetings of the Board of Directors and, if the Chairman of the Board is the chief executive officer of the Corporation, at meetings of the shareholders. SECTION 23. PRESIDENT. The President shall preside at all meetings of the shareholders and directors where the Chairman of the Board does not preside. SECTION 24. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, in the order designated by the Board of Directors, shall perform the duties of the President. If so determined by the Board of Directors, a Vice President may be designated as being in charge of a specified function or of a specified division. SECTION 25. SECRETARY, TREASURER AND CONTROLLER. The Secretary, the Treasurer and the Controller (if any) shall perform such duties as are indicated by their respective titles, subject to the provisions of Section 21 above. The Secretary shall have custody of the corporate seal and shall have the duty to record the proceedings of the shareholders and directors in a book to be kept for that purpose. SECITON 26. OTHER OFFICERS. All other officers shall have such powers and duties as may be prescribed by the Board of Directors or, in the absence of their action, by the respective officers having supervision over them. SECTION 27. COMPENSATION. The Board of Directors is authorized to determine, or to provide the method of determining, or to empower a special committee of its members to determine, the compensation of all officers. SECTION 28. SIGNING CHECKS AND OTHER INSTRUMENTS. The Board of Directors is authorized to determine, or to provide the method of determining, the manner in which deeds, contracts and other obligations and instruments of the Corporation shall be signed. However, persons doing business with the Corporation shall be entitled to rely upon the action of the Chairman of the Board, the President, any Vice President, the Secretary, the Treasurer or the Controller in executing contracts and other obligations and instruments, other than deeds, of the Corporation as having been duly authorized and to rely upon the action of any two (2) of the Chairman of the Board, the President, any Vice President 6 7 and the Secretary or any Assistant Secretary in executing deeds in the name of the Corporation as having been duly authorized. The Board of Directors of the Corporation is authorized to designate depositories of the funds of the Corporation and to determine, or provide the method of determining, the manner in which checks, notes, bills of exchange and similar instruments shall be signed, countersigned or endorsed. INDEMNIFICATION SECTION 29. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify any Director or officer, any former Director or officer of the Corporation and any person who is or has served at the request of the Corporation as a director, officer or trustee of another corporation, partnership, joint venture, trust, or other enterprise (and his heirs, executors and administrators) against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him by reason of the fact that he is or was such director, officer or trustee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent and according to the procedures and requirements set forth in the Ohio General Corporation Law as the same may be in effect from time to time. The indemnification provided for herein shall not be deemed to restrict the right of the Corporation to (i) indemnify employees, agents and others as permitted by such Law, (ii) purchase and maintain insurance or provide similar protection on behalf of directors, officers or such other persons against liabilities asserted against them or expenses incurred by them arising out of their service to the Corporation as contemplated herein, and (iii) enter into agreements with such directors, officers, employees, agents or others indemnifying them against any and all liabilities (or such lesser indemnification as may be provided in such agreements) asserted against them or incurred by them arising out of their service to the Corporation as contemplated herein. CORPORATE SEAL SECTION 30. The corporate seal of the Corporation shall be circular in form and shall have inscribed thereon the name of the Corporation. PROVISIONS IN ARTICLES OF INCORPORATION SECTION 31. PROVISIONS IN ARTICLES OF INCORPORATION. These Regulations are at all times subject to the provisions of the Articles of Incorporation of the Corporation as the same may be in effect from time to time. 7 8 LOST CERTIFICATES SECTION 32. LOST CERTIFICATES. The Directors may direct, or establish procedures for, the issuance of a new certificate in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon such terms and conditions as they may deem advisable. RECORD DATES SECTION 33. RECORD DATES. For any lawful purpose, including, without limitation, the determination of the shareholders who are entitled to: (i) receive notice of or to vote at a meeting of shareholders; (ii) receive payment of any dividend or distribution; (iii) receive or exercise rights or purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to contract rights with respect thereto; or (iv) participate in the execution of written consents, waivers, or releases, the directors may fix a record date which shall not be a date earlier than the date on which the record date is fixed and, in the cases provided for in clauses (i), (ii) and (iii) above, shall not be more than sixty (60) nor fewer than ten (10) days, unless the Articles of Incorporation specify a shorter or a longer period for such purpose, preceding the date of the meeting of the shareholders, or the date fixed for the payment of any dividend or distribution, or the date fixed for the receipt or the exercise of rights, as the case may be. FISCAL YEAR SECTION 34. The fiscal year of the Corporation shall end on June 30 unless and until the Board of Directors shall otherwise determine. AMENDMENTS SECTION 35. AMENDMENTS. (a) These Regulations may be altered, changed or amended in any respect or superseded by new Regulations in whole or in part, by the affirmative vote of the holders of a majority of the voting stock of the Corporation present in person or by proxy at an annual or special meeting called for such purpose. (b) Notwithstanding the provisions of Section 35(a) hereof and notwithstanding the fact that a lesser percentage may be specified by law or in any agreement with any national securities exchange or any other provision of these Regulations, the amendment, alteration, change or repeal of, or adoption of any provisions inconsistent with, Section 8, 9, or 10 of these Regulations shall require the affirmative vote of at least eighty percent (80%) of the outstanding voting stock of the Corporation, present in person or by proxy, 8 9 at any annual meeting or special meeting duly called for the purpose of acting on any such amendment, alteration, change, repeal or adoption, unless such amendment, alteration, change, repeal or adoption has been recommended by at least two-thirds of the Board of Directors of the Corporation then in office, in which event the provisions of Section 35(a) hereof shall apply. 9 EX-27 3 EXHIBIT 27
5 1,000 3-MOS JUN-30-2000 JUL-01-1999 SEP-30-1999 15,254 0 198,307 3,690 158,329 374,245 176,087 72,330 553,174 134,898 100,500 0 0 10,000 285,297 553,174 380,761 380,761 286,906 286,906 81,680 568 2,235 9,850 3,988 5,862 0 0 0 5,862 0.28 0.28
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