<PAGE>
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 28, 1994
------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
--------------------------------------------------
HUNT MANUFACTURING CO.
- - - ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 21-0481254
- - - ------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
230 South Broad Street, Philadelphia, PA 19102
- - - ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (215) 732-7700
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of October 5, 1994 there were outstanding 16,100,123 shares of the
registrant's common stock.
<PAGE>
<PAGE> 2
Page 2
HUNT MANUFACTURING CO.
INDEX
Page
PART I - FINANCIAL INFORMATION ----
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
August 28, 1994 and November 28, 1993 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months ended August 28, 1994 and
August 29, 1993 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended August 28, 1994 and
August 29, 1993 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
Exhibit 11 - Computation of Per Share Earnings 14
Exhibit 27 - Financial Data Schedule 15
<PAGE>
<PAGE> 3
Part I -- Financial Information Page 3
Item 1 -- Financial Statements
Hunt Manufacturing Co.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
August 28, November 28,
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,635 $ 10,778
Accounts receivable, less allowance for doubtful
accounts: 1994, $2,736; 1993, $2,643 44,185 39,472
Inventories:
Raw materials 11,075 9,577
Work in process 6,430 5,289
Finished goods 19,476 13,094
---------- ----------
Total inventories 36,981 27,960
Deferred income taxes 4,667 -
Prepaid expenses and other current assets 1,709 2,632
---------- ----------
Total current assets 92,177 80,842
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
1994, $45,613; 1993, $42,333 47,981 46,617
Intangible assets, net 26,100 27,019
Other assets 2,089 1,839
---------- ----------
Total assets $ 168,347 $ 156,317
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,058 $ 3,158
Accounts payable 11,488 11,060
Accrued expenses:
Salaries, wages and commissions 8,222 8,412
Income taxes 6,033 4,992
Other 6,336 6,092
---------- ----------
Total current liabilities 33,137 33,714
Long-term debt, less current portion 3,798 3,003
Deferred income taxes 4,266 1,230
Other non-current liabilities 2,799 2,103
---------- ----------
Total liabilities 44,000 40,050
---------- ----------
Stockholders' equity:
Preferred stock, $.10 par value, authorized 1,000,000
shares (including 50,000 shares of Series A Junior
Participating Preferred); none issued - -
Common stock, $.10 par value, 40,000,000 shares
authorized; issued: 1994 - 16,130,068 shares;
1993 - 16,125,321 shares 1,613 1,613
Capital in excess of par value 6,218 6,158
Cumulative translation adjustment (963) (1,495)
Retained earnings 118,135 110,290
---------- ----------
125,003 116,566
Less cost of treasury stock:
1994 - 41,045 shares; 1993 - 18,634 shares (656) (299)
---------- ----------
Total stockholders' equity 124,347 116,267
Total liabilities and stcokholders ---------- ----------
equity $ 168,347 $ 156,317
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 4
Page 4
Hunt Manufacturing Co.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------- --------------------
August 28, August 29, August 28, August 29,
1994 1993 1994 1993
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $75,765 $65,021 $209,338 $182,963
Cost of sales 46,415 39,319 126,967 110,095
------- ------- ------- -------
Gross profit 29,350 25,702 82,371 72,868
Selling and shipping expenses 15,294 12,950 43,235 38,151
Administrative and general
expenses 6,782 5,934 20,468 17,976
------- ------- ------- -------
Income from operations 7,274 6,818 18,668 16,741
Interest expense 63 137 210 400
Other expense, net 296 346 376 361
------- ------- ------- -------
Income before income taxes and
cumulative effect of accounting
change 6,915 6,335 18,082 15,980
Provision for income taxes 2,524 2,479 6,600 6,047
------- ------- ------- -------
Income before cumulative effect of
accounting change 4,391 3,856 11,482 9,933
Cumulative effect of change in
accounting for income taxes - - 795 -
------- ------- ------- -------
Net income $4,391 $3,856 $12,277 $9,933
======= ======= ======= =======
Average shares of common
stock outstanding 16,087 16,109 16,104 16,108
======= ======= ======= =======
Earnings per common share:
Income before cumulative effect of
accounting change $0.27 $0.24 $0.71 $0.62
Cumulative effect of change in
accounting for income taxes - - 0.05 -
------- ------- ------- -------
Net income per share $0.27 $0.24 $0.76 $0.62
======= ======= ======= =======
Dividends per common share $0.09 $0.0875 $0.27 $0.2625
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 5
Page 5
Hunt Manufacturing Co. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
August 28, August 29,
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,277 $ 9,933
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,371 6,049
Cumulative effect of change in accounting
for income taxes (795) -
Deferred income taxes (832) 1
Loss on disposal of property, plant and equipment 160 155
Payments relating to relocation and consolidation of
operations (114) (269)
Issuance of stock under management incentive bonus
and stock grant plans 184 48
Changes in operating assets and liabilities (10,689) (8,035)
-------- --------
Net cash provided by operating activities 6,562 7,882
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (6,080) (7,295)
Other, net (325) (856)
-------- --------
Net cash used for investing activities (6,405) (8,151)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt - 1,000
Payments on long-term debt, including current maturities (1,306) (889)
Purchase of treasury stock (729) (308)
Proceeds from exercise of stock options 160 205
Dividends paid (4,345) (4,229)
Other, net (40) (83)
-------- --------
Net cash used for financing activities (6,260) (4,304)
-------- --------
Effect of exchange rate changes on cash (40) (102)
-------- --------
Net decrease in cash and cash equivalents (6,143) (4,675)
Cash and cash equivalents, beginning of period 10,778 6,013
-------- --------
Cash and cash equivalents, end of period $ 4,635 $ 1,338
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 304 $ 399
Income taxes paid 6,459 5,731
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 6
Page 6
Hunt Manufacturing Co.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed consolidated financial
statements and related notes are unaudited; however, in
management's opinion all adjustments (consisting primarily of
normal recurring accruals) necessary for a fair presentation of
the financial position at August 28, 1994 and the results of
operations and cash flows for the periods shown have been made.
Such statements are presented in accordance with the requirements
of Form 10-Q and do not include all disclosures normally required
by generally accepted accounting principles or those normally
made in the Form 10-K.
2. The earnings per share are calculated based on the weighted
average number of common shares outstanding. Shares
issuable under outstanding stock option, stock grant and
long-term incentive compensation plans are common stock
equivalents, but are not used in computing earnings per
share because the dilutive effect would be less than 3%.
3. Effective November 29, 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes." The adoption of SFAS No.
109 changed the Company's method of accounting for income
taxes from the deferred method under Accounting Principles
Board Opinion No. 11 to an asset and liability approach.
The effect of adopting SFAS No. 109 has been recognized
immediately as the effect of a change in accounting
principle and increased net income in the first quarter and
for the first nine months of fiscal 1994 by $795, or $.05
per share. Prior financial statements have not been
restated. The increase in net income results primarily
from adjusting deferred tax balances to current tax rates.
The significant components of deferred tax assets and
liabilities at November 29, 1993 consist of:
Assets Liabilities
------ -----------
Inventories $2,007 --
Accrued expenses 1,498 --
Allowance for doubtful accounts 958 --
Net operating loss carryforwards-foreign 804 --
Pensions 385 --
Net operating loss carryforwards-
state and local 278 --
Depreciation and amortization -- $5,283
------ ------
Subtotal $5,930 $5,283
Valuation allowance (1,082) --
------ ------
Total $4,848 $5,283
====== ======
4. On August 1, 1994 the Company refinanced a $2.0 million
industrial development revenue bond that had an original maturity
date of June 1, 1999 and an original interest rate of 7.5%. The
refinanced bond has one principal payment at maturity on June 15,
2004. The interest rate for each quarter will be established on
the first day of the quarter at the lower of the ninety day LIBOR
rate or 75% of the prime rate. The rate in effect as of August
28, 1994 was 4.813%.
<PAGE>
<PAGE> 7
Page 7
Item 2. Management's Discussions and Analysis of Financial
Condition and Results of Operations
Financial Condition
In the first nine months of fiscal 1994, the Company continued
to enhance its already strong financial condition by improving
it's working capital position, increasing it to $59.0 million at
August 28, 1994 from $47.1 million at November 28, 1993, while
reducing the percentage of debt to equity (down to 3.9% from 5.3%
at those respective dates). Cash flows of $6.6 million provided
by operating activities in the first nine months of fiscal 1994,
combined with available cash balances, were sufficient to fund
additions to property, plant and equipment of $6.1 million, pay
cash dividends of $4.3 million and pay down $1.3 million in debt.
The Company's current assets increased $11.3 million to $92.2
million at the end of the third quarter of fiscal 1994 from $80.8
million at the end of fiscal 1993 primarily as a result of
increases in inventories and accounts receivable, partially
offset by a decrease in the cash balance. The increase in
inventories to $37.0 million at August 28, 1994 from $28.0
million at November 28, 1993 was principally attributable to the
following: the replenishment of certain key inventory items in
anticipation of fall promotional sales, the purchase of
inventories relating to an exclusive distribution agreement with
Schwan-STABILO(R) and additional inventories for new products.
The increase in accounts receivable to $44.2 million at the end
of the third quarter from $39.5 million at the end of fiscal 1993
was due to higher sales as well as to an increase in promotional
sales with extended payment terms. Cash and cash equivalents
decreased to $4.6 million at August 28, 1994 from $10.8 million
at November 28, 1993 primarily as a result of the increase in
inventories as well as to the payment of cash dividends and
additions to property, plant and equipment.
Current liabilities of $33.1 million at the end of the third
quarter of fiscal 1994 decreased slightly from $33.7 million at
the end of fiscal 1993, primarily as a result of a decrease in
the current portion of long-term debt offset by an increase in
accrued income taxes. On June 15, 1994, the Company refinanced
$1.6 million of industrial development revenue bonds that were
due on that date which resulted in the reclassification of this
debt from current to long-term. The new maturity date is June 5,
1999. In addition to the aforementioned, on August 1, 1994 the
Company refinanced a $2.0 million industrial development revenue
bond which has one principal payment at maturity on June 15,
2004. (See Note 5 of "Notes to Condensed Consolidated Financial
Statements").
There were no borrowings under the Company's line-of-credit
agreements at August 28, 1994. These line-of-credit agreements
with three banks total $45 million. Management expects that cash
generated from operations along with available cash balances
(combined with credit agreements) will be sufficient to meet the
Company's currently
<PAGE>
<PAGE> 8
Page 8
Financial Condition, continued
anticipated working capital and other investing and financing
needs. Should the Company require additional funds, management
believes that the Company could obtain them at competitive costs.
Results of Operations
Net Sales
Net sales for the third quarter of fiscal 1994 grew by 16.5% to
$75.8 million from $65.0 million in the third quarter of fiscal
1993. In the first nine months of fiscal 1994 net sales
increased by 14.4% to $209.3 million from $183.0 million in the
first nine months of fiscal 1993. Higher unit volume caused
these increases as selling prices through the third quarter of
fiscal 1994 remained flat compared to the first nine months of
fiscal 1993. Due to competitive pressures expected to continue
through the remainder of fiscal 1994 and into 1995, management
does not expect to achieve significant selling price increases.
Office products sales increased 16.2% to $42.0 million in the
third quarter and 16.2% to $118.1 million in the first nine
months of fiscal 1994 compared to the same fiscal 1993 periods.
Sales of desktop accessories and supplies were up 24.8% and
16.2%, mechanical and electromechanical products were up 14.3%
and 14.6% and office furniture was up 14.4% and 18.8% in the
third quarter and first nine months of fiscal 1994, respectively,
as compared with the same periods of fiscal 1993. The Company's
sales of Schwan-STABILO(R) writing, marking and other products
(the distribution rights to which were acquired in fiscal 1993)
accounted for most of the growth in desktop accessories and
supplies. The sales growth in office furniture was due primarily
to broadened distribution for the Company's Bevis(R) brand
products, a trend which began in fiscal 1993 as a result of the
consolidation of the Company's office products under one brand
name. An increase in sales of Boston(R) brand products,
particularly electric pencil sharpeners, accounted for most of
the growth in mechanical and electromechanical products. Export
sales of office products decreased by 6.2% in the third quarter,
but grew by 6.2% in the first nine months of fiscal 1994 compared
to the same periods of fiscal 1993, after adjusting for the
effects of a weaker Canadian dollar.
Art/craft products sales increased by 16.9% to $33.7 million in
the third quarter and 12.2% to $91.2 million in the first nine
months of fiscal 1994 compared to the same periods in fiscal
1993. Presentation graphics products[1] continue to make a
significant contribution to sales in the art/craft segment.
Sales in this product class grew 26.8% in the third quarter and
22.6% in the first nine months of fiscal 1994 from the fiscal
1993 amounts for the same periods. These increases are due to
higher sales of Seal(R) brand mounting and
-------------
[1] Mounting and laminating products were renamed
"presentation graphics" in the first quarter of fiscal 1994 to
better describe an expanded product offering in this major
product class.
<PAGE>
<PAGE> 9
Page 9
Results of Operations, continued
laminating equipment, including sales of products of Image
Technologies, Inc. (acquired in the third quarter of fiscal
1993), and Bienfang(R) brand foam board. Sales of hobby/craft
products also increased, growing by 13.5% and 2.7% for the third
quarter and first nine months of fiscal 1994, respectively, but
were partially offset by lower sales of art supplies (down 3.5%
in the third quarter and 6.5% in the first nine months of fiscal
1994) when compared to the same periods in fiscal 1993. The
declining sales of art supplies was largely the result of lower
sales of X-Acto(R) brand products, a trend which management
believes is likely to continue. Export sales of art/craft
products grew 20.9% in the third quarter and 7.5% for the first
nine months of fiscal 1994 (after adjusting for the exchange
effect of a weaker Canadian dollar). The increase for the third
quarter was due to higher export sales to the Far East, Europe
and Latin America. Foreign sales of art/craft products increased
substantially, by growing 62.2% in the third quarter and 45.1%
for the first nine months of fiscal 1994 when compared to the
same fiscal periods in 1993. These increases were due primarily
to higher sales of presentation graphics products in the United
Kingdom largely as a result of new products and improved economic
conditions.
Sales to date for the fourth quarter are running at the same level
as the comparable period in fiscal 1993 fourth quarter, which is
below the rate experienced in the third quarter of fiscal 1994.
Gross Profit
The Company's gross profit margin decreased to 38.7% of net sales
in the third quarter of fiscal 1994 from 39.5% in the third
quarter of fiscal 1993 and decreased to 39.3% in the first nine
months of fiscal year 1994 from 39.8% in the first nine months of
fiscal year 1993. These decreases were primarily the result of
changes in product sales mix and higher raw material costs
combined with flat selling prices. Higher costs for wood,
plastic and corrugated packaging materials are expected to
continue in the fourth quarter of 1994 and into 1995.
Selling, Shipping, Administrative and General Expenses
Selling and shipping expenses increased to 20.2% of net sales for
the third quarter of fiscal 1994 from 19.9% in the third quarter
of fiscal 1993, and remained essentially flat at 20.7% of net
sales for the first nine months of fiscal 1994 compared to 20.9%
in the first nine months of fiscal 1993. The higher rate for the
third quarter was largely due to start up costs for advertising
and promotional literature relating to the Schwan-STABILO(R)
product line. For the first nine months of fiscal 1994, these
costs were offset by lower sales force commissions as a result of
changes in customer sales mix.
Administrative and general expenses were up 14.3%, or $.9
million, in the third quarter and 13.9%, or $2.5 million, in the
first nine months of fiscal 1994 as compared to the prior year
<PAGE>
<PAGE> 10
Page 10
Selling, Shipping, Administrative and General Expenses, continued
expense levels for the same periods. These increases were
largely a result of higher management incentive compensation
related to the improvement in earnings and investments in
management training and new product development.
Provision for Income Taxes
The Company's effective tax rate decreased to 36.5% for the third
quarter and first nine months of fiscal 1994 from the 39.1% and
37.8% rates incurred in the third quarter and first nine months
of fiscal 1993, respectively. This decrease was the result of
several factors including lower state and local effective tax
rates and profitability improvements by the European operations,
which utilize net operating loss carryforwards.
Accounting Change
The Company adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes," the cumulative effect of which increased net
income by $.8 million, or $.05 per share, for the first nine
months of fiscal 1994.
<PAGE>
<PAGE> 11
Page 11
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during
the fiscal quarter to which this report relates.
<PAGE>
<PAGE> 12
Page 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HUNT MANUFACTURING CO.
Date October 11, 1994 By /s/ William E. Chandler
----------------------- ------------------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
Date October 11, 1994 By /s/ Ronald J. Naples
----------------------- ------------------------------------
Ronald J. Naples
Chairman of the Board and
Chief Executive Officer
<PAGE>
<PAGE> 13
Page 13
EXHIBIT INDEX
Page
----
Exhibit 11 - Computation of Per Share Earnings 14
Exhibit 27 - Financial Data Schedule 15
<PAGE>
<PAGE> 14
Exhibit 11 Page 14
Computation of Per Share Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------- ---------------------
August 28, August 29, August 28, August 29,
1994 1993 1994 1993
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before cumulative effect of
accounting change $4,391 $3,856 $11,482 $9,933
Cumulative effect of change in
accounting for income taxes - - 795 -
--------- -------- -------- --------
Net income $4,391 $3,856 $12,277 $9,933
========= ======== ======== ========
Primary per share earnings
Average number of common shares
outstanding 16,087 16,109 16,104 16,108
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 177 135 196 136
--------- -------- -------- --------
Average shares used to calculate
primary per share earnings 16,264 16,244 16,300 16,244
========= ======== ======== ========
Primary per share earnings before
change in accounting for income
taxes $0.27 $0.24 $0.70 $0.61
========= ======== ======== ========
Cumulative effect of change in
accounting for income taxes - - 0.05 -
--------- -------- -------- --------
Net primary per share earnings $0.27 $0.24 $0.75 $0.61
========= ======== ======== ========
Fully diluted per share earnings
Average number of common shares
outstanding 16,087 16,109 16,104 16,108
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 181 191 209 163
--------- -------- -------- --------
Average shares used to calculate
fully diluted per share earnings 16,268 16,300 16,313 16,271
========= ======== ======== ========
Fully diluted per share earnings
before change in accounting for
income taxes $0.27 $0.24 $0.70 $0.61
========= ======== ======== ========
Cumulative effect of change in
accounting for income taxes - - 0.05 -
--------- -------- -------- --------
Net fully diluted per share
earnings $0.27 $0.24 $0.75 $0.61
========= ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049146
<NAME> HUNT MANUFACTURING CO
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> NOV-27-1994
<PERIOD-START> MAY-30-1994
<PERIOD-END> AUG-28-1994
<CASH> 4635000
<SECURITIES> 0
<RECEIVABLES> 46921000
<ALLOWANCES> (2736000)
<INVENTORY> 36981000
<CURRENT-ASSETS> 92177000
<PP&E> 93594000
<DEPRECIATION> (45613000)
<TOTAL-ASSETS> 168347000
<CURRENT-LIABILITIES> 33137000
<BONDS> 3798000
<COMMON> 1613000
0
0
<OTHER-SE> 122734000
<TOTAL-LIABILITY-AND-EQUITY> 168347000
<SALES> 209338000
<TOTAL-REVENUES> 209338000
<CGS> 126967000
<TOTAL-COSTS> 126967000
<OTHER-EXPENSES> 63517000
<LOSS-PROVISION> 562000
<INTEREST-EXPENSE> 210000
<INCOME-PRETAX> 18082000
<INCOME-TAX> 6600000
<INCOME-CONTINUING> 11482000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 795000
<NET-INCOME> 12277000
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
