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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
November 28, 1993 No. 1-8044
HUNT MANUFACTURING CO.
(Registrant)
Pennsylvania 21-0481254
------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
230 South Broad Street
Philadelphia, PA 19102-4167
- ---------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215)732-7700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
--------------------- -----------------------
Common Shares, par value $.10 per share New York Stock Exchange
Rights to Purchase Series A Junior New York Stock Exchange
Participating Preferred Stock
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
---
The aggregate market value of the registrant's Common Shares (its
only voting stock) held by non-affiliates of the registrant as of February 1,
1994 was approximately $226,000,000. (Reference is made to p.13 herein for a
statement of the assumptions upon which this calculation is based.)
The number of shares of the registrant's Common Shares outstanding
as of February 1, 1994 was 16,121,738.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's 1994 definitive proxy statement
relating to its scheduled April 1994 Annual Meeting of Shareholders (which
proxy statement is expected to be filed with the Commission not later than 120
days after the end of the registrant's last fiscal year) are incorporated by
reference into Part III of this report.
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PART I
Item 1. Business
General
Hunt Manufacturing Co. and its subsidiaries (herein called the
"Company", unless the context indicates otherwise) are primarily engaged in
the manufacture and distribution of office products and art/craft products
which the Company markets worldwide.
Business Segments
The following table sets forth the Company's net sales and operating
profit by business segment for the last three fiscal years:
1993 1992 1991
-------- -------- --------
(In thousands)
Net Sales:
Office products....... $142,462 $126,101 $120,103
Art/Craft products.... 113,688 108,828 108,519
-------- -------- --------
Total........... $256,150 $234,929 $228,622
======== ======== ========
Operating Profit:
Office products....... $ 11,411 $ 8,541 $ 6,369
Art/Craft products.... 18,832 18,516 17,618
-------- -------- --------
Total........... $ 30,243 $ 27,057 $ 23,987
======== ======== ========
- -------------
See Items 6 and 7 herein and Note 15 to Consolidated Financial
Statements herein for further information concerning the Company's business
segments (including information concerning identifiable assets).
Office Products
The Company has three major classes of office products: mechanical
and electromechanical products; office furniture and related products; and
desktop accessory products. The amounts and percentages of net sales of these
product classes for the last three fiscal years were as follows:
1993 1992 1991
-------------- --------------- ---------------
(Dollars in thousands)
Product Class:
Mechanical and
Electromechanical.... $ 70,047 49% $ 62,323 49% $ 57,592 48%
Office furniture....... 44,233 31 37,271 30 36,526 30
Desktop accessories.... 28,182 20 26,507 21 25,985 22
------- --- -------- --- -------- ---
Total.............. $142,462 100% $126,101 100% $120,103 100%
======== === ======== === ======== ===
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The Company's mechanical and electromechanical office products
consist of a variety of items sold under the Company's BOSTON brand, including
manual and electric pencil sharpeners; paper punches; paper trimmers and paper
shredders; electric letter openers; spring clips used to hold sheets of paper;
manual and electronic staplers; electric air cleaners and other related
products. The Company's specialty office furniture and related products are
designed primarily to meet specific needs created by new office technologies
and are sold under the BEVIS brand name. These products include conference,
computer, utility and folding tables; office chairs; bookcases and screen
panels; metal and wood workstations for computer terminals, personal
computers, word processors, printers and other similar electronic office
equipment; and home/office furniture. The Company's desktop accessory
products consist of an array of items marketed under its LIT-NING brand,
including metal horizontal and vertical files, letter trays, desk organizers
and paper sorting racks. Also included in desktop accessory products are a
broad range of products that support the use of computers such as computer
diskette storage devices, printer stands, mouse pads, and surge suppressors
which are marketed under the MEDIAMATE brand name.
The Company consistently has sought to expand its office products
business through internal product development, the acquisition of distribution
rights to products which complement or extend the Company's established lines,
the acquisition of complementary businesses and through increased distribution
of its office products to the general consumer. Examples of new office
product introductions by the Company in recent years are BOSTON brand
electronic staplers, various models of air cleaners, automatic personal paper
shredder, and desk-top laminators; BEVIS UNIWORX, BEVIS ULTRAWORX and BEVIS
MEGAWORX lines of modular offices furniture systems; BEVIS STACKAWAYS
stackable chairs; MEDIAMATE LASERRAK printer stands; MEDIAMATE FASTRAC mouse
pads; MEDIAMATE multi-media storage files and MEDIAMATE POWER TAMER surge
suppressors.
There are three major and generally distinct domestic markets for
the Company's office products: commercial offices, home offices and the gen-
eral consumer. The commercial line of the Company's office products is
distributed primarily through a network of office supply wholesalers and
dealers and office product superstores. Sales to the home office and the
general consumer include mechanical and electromechanical products which are
sold through large retail outlets, such as office superstores, drug and food
chain stores, variety stores, discount chains, catalog showrooms and
membership chains. The consumer market has increased significantly over the
last few years primarily due to the dramatic growth of office superstores. A
more limited line of products is sold to schools through specialized school
supply distributors.
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Art/Craft Products
The Company manufactures and distributes three major classes of
art/craft products: mounting and laminating
products; art supplies; and hobby/craft products. The amounts and percentages
of net sales of these three product classes for the last three fiscal years
were as follows:
1993 1992 1991
------------- ------------- -------------
(Dollars in thousands)
Product Class:
Mounting and
laminating.... $ 68,734 61% $ 63,475 58% $ 61,851 57%
Art supplies... 27,569 24 29,134 27 29,569 27
Hobby/craft.... 17,385 15 16,219 15 17,099 16
-------- --- --------- --- --------- ---
Total......... $113,688 100% $108,828 100% $108,519 100%
======== === ======== === ======== ===
The Company's mounting and laminating products are used largely by
picture framers, graphic artists, display designers and photo laboratories,
and include a range of BIENFANG foam boards; TECHMOUNT dry mount adhesive
products; pressure sensitive and dry mount adhesive products sold under the
SEAL and ADEMCO-SEAL brands, as well as under the COLORMOUNT, SEALEZE and
PRINT GUARD brand names; an array of mounting and laminating equipment sold
under the CLEAR TECH, SEALEZE, and IMAGE SERIES brand names; and specialty
tapes and films supplied under various private brands. The Company's art
supply products are used primarily by commercial and amateur artists, and
include commercial and fine art papers which the Company converts, finishes
and sells under its BIENFANG brand; various types of X-ACTO brand knives and
blades; SPEEDBALL paint markers and acrylic and water-color paints; and
CONTE(1) pastels, crayons and related drawing products, for which the Company
is the exclusive United States and Canadian distributor. The Company's
hobby/craft products generally are used by hobbyists and craft enthusiasts and
include SPEEDBALL print-making products; ACCENT MATS beveled-edge picture
framing mats; SPEEDBALL ELEGANT WRITERS and PANACHE calligraphy products; and
X-ACTO brand tools and kits.
The Company consistently has sought to expand its art/craft business
primarily through acquisitions of complementary businesses and of distribution
rights to complementary products manufactured by others, through internal
product development, and through increased distribution of its art/craft
products to the general consumer. Major art/craft products introduced during
- ------------
(1). Trademark of Conte S.A.
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the last several fiscal years include BIENFANG colored foam board, as well as
SINGLE STEP adhesive coated BIENFANG foam board; BIENFANG project display
board; PANACHE calligraphy products; SPEEDBALL FABRIC PAINTERS non-toxic pen-
type acrylic-based paint markers; TECHMOUNT dry mount adhesive products; CLEAR
TECH pouch laminators; IMAGE SERIES large format laminators; CLEAR GUARD
protective adhesive film; THERMASHIELD laminating film, and X-ACTO board
cutter, self healing mats, hobby rulers and rotary cutters. The acquisition
of the Graphic Arts Group from Bunzl plc during fiscal 1990 has significantly
expanded the number of the Company's mounting and laminating products and
enhanced the Company's position in the framing and photomounting markets. In
1993, the Company acquired IMAGE TECHNOLOGIES, Inc., a start-up company
engaged in the development and production of large format laminators, which
has allowed the Company to broaden its distribution into the digital imaging
market. BIENFANG foam board has been particularly important, as it has
allowed the Company to penetrate the picture framing and sign and display
exhibit markets, yet it also holds wide appeal to the traditional customer
groups in art supply and hobby/craft markets. The success of foam board has
been attributable, in significant part, to the Company's ability to offer the
end-user a variety of value-added foam board products, such as colored or
adhesive coated foam board.
Traditionally, the Company's art/craft products have been
distributed primarily through wholesalers (framing, photomounting, art and
hobby), dealers (specialized art supply and hobby/craft stores), general
consumer-oriented retail outlets (primarily office product superstores and
chain stores), industrial concerns (photo labs, screen printers) and through
specialized school supply distributors. Over the last several years,
consumer-oriented retail outlets have become an increasingly important
distribution channel for the Company's art/craft products.
Sales and Marketing
General
The Company has over 15,000 active customers, the ten largest of
which (three being office product superstore chains) accounted for
approximately 37% of its sales in fiscal 1993. The largest single customer
accounted for approximately 7% of sales for that year. There is a continuing
trend toward consolidation of wholesalers, dealers and superstores, resulting
in an increasing percentage of the Company's sales being attributable to a
smaller number of customers. See Item 7 of this report.
Because most of the Company's sales are made from inventory, the
Company customarily operates without a material backlog. The Company's sales
generally are not subject to significant seasonal fluctuations. See Note 14
to Consolidated Financial Statements herein.
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Domestic Operations
Domestic marketing of the Company's office products and art/craft
products is effected principally through six separate sales forces, one each
for office products, furniture, computer accessory products, art/craft
products, photomounting and mass market. The combined sales forces are
comprised of over 30 Company salespeople and over 300 independent
manufacturers' representatives.
The Company maintains domestic distribution centers in Florence,
Kentucky; Florence, Alabama; and Laredo, Texas, for office products;
Naugatuck, Connecticut; and Cottage Grove, Wisconsin, for art/craft products;
and in Statesville, North Carolina, for both office and art/craft products.
Foreign Operations
The Company distributes its products in more than 60 foreign markets
through its own sales force of seven area sales managers and 18 salespersons,
and through over 40 independent sales agents and over 150 distributors.
Sales of office products and art/craft products represented
approximately 47% and 53%, respectively, of the Company's export sales in
fiscal 1993, with electrical and mechanical pencil sharpeners, paper punches,
staplers, X-ACTO brand knives and blades, BIENFANG paper and foam board
products and pressure sensitive and dry mount adhesive products accounting for
the major portion of these sales. Sales from foreign operations were
attributable to the Graphic Arts Group acquired in 1990 and included mounting
and laminating products, as well as specialty tapes and films. See Note 15 to
Consolidated Financial Statements herein for further information concerning
the Company's foreign operations.
The Company maintains distribution centers in Ontario, Canada;
Basildon, England; and in Kornwestheim, Germany.
Foreign operations are subject to the usual risks of doing business
abroad, particularly currency fluctuations and foreign exchange controls. See
also Note 1 to Consolidated Financial Statements herein for information
concerning hedging.
Manufacturing and Production
The Company's operations include manufacturing and converting of
products, as well as purchasing and assembly of various component parts.
Excluding products for which it acts as a distributor, the vast majority of
the Company's sales are of products which are either manufactured, converted
or assembled by it. See Item 2 herein for information concerning the
Company's manufacturing facilities.
The Company customarily has more than one source of supply for its
critical raw materials and component parts, and its businesses have not been
materially hindered by shortages or increased prices for such items.
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Competition
The Company does not have any single competitor which offers
substantially the same overall lines of either office products or art/craft
products as the Company. However, competition in a number of areas of the
Company's businesses, such as electric pencil sharpeners, paper punches,
staplers, office furniture, computer diskette storage and related accessory
products, paints and foam board, is substantial, and some of the Company's
competitors are larger and have considerably greater financial resources than
the Company.
Because of the fragmented nature of the office products and
art/craft products businesses, the multiple markets served by the Company, and
the dearth of published market data, the Company generally is not able to
determine with certainty its relative domestic or foreign market share for its
various products. Nevertheless, the Company believes that it is among the
leaders in domestic markets in a number of its products, including manual
pencil sharpeners; electric sharpeners; electronic staplers; metal paper
organizing products; BIENFANG foam board products; mounting and laminating
materials and equipment; X-ACTO brand knives and blades; calligraphy products;
and specialty commercial and fine art papers. The Company also believes that
it is among the leaders in the United Kingdom picture framing and
photomounting market for dry mounting products.
The Company considers product performance and brand recognition to
be important competitive factors in its businesses, but competitive pricing
and promotional discounts have become increasingly important, particularly in
the office products and certain mounting and laminating product areas.
Trademarks, Patents and Licenses
The Company's business is not dependent, to a material extent, upon
any patents. However, the Company regards its many trademarks as being of
substantial value in the marketing of its various products. The following
trademarks mentioned in this report are owned by the Company: ACCENT MATS (R),
ADEMCO-SEAL (TM), BEVIS (R), BEVIS (R) MEGAWORX (TM), BEVIS (R)
STACKAWAYS (TM), BEVIS (R) ULTRAWORX (TM), BEVIS (R) UNIWORX (TM),
BIENFANG (R), BOSTON (R), CLEAR GUARD (TM), CLEAR TECH (R), COLORMOUNT (R),
IMAGE SERIES (TM), LIT-NING (R), MEDIAMATE (R), MEDIAMATE (R) FASTRAC (R),
MEDIAMATE (R) LASERRAK (R), MEDIAMATE (R) POWER TAMER (TM), PANACHE (R),
PRINT GUARD (R), SEAL (R), SEALEZE (R), SINGLE STEP (R), SPEEDBALL (R),
SPEEDBALL (R) ELEGANT WRITERS (R), SPEEDBALL (R) FABRIC PAINTERS (TM),
TECHMOUNT (R), THERMASHIELD (TM) and X-ACTO (R).
The Company also has been granted exclusive distribution rights in
designated territories with respect to various products, including CONTE
drawing products; air cleaners, fans and heaters which are manufactured by
other companies and sold by the Company under the BOSTON brand name; and
PERFECT DATA(2) computer cleaning products. Such rights customarily are granted
for limited periods, after which they expire or may be terminated at the
option of the grantor. The Company's distribution rights generally are of
limited duration (usually not in excess of five years) and may be terminated
- ----------
(2). Trademark of Perfect Data Corporation.
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or expire, in certain cases, with as little as approximately six months notice
from the grantor of such rights. While the Company's business is not
dependent upon any of these distribution rights (no line of such distributed
products having accounted for as much as 3% of the Company's net sales in
fiscal 1993), the loss of the right to market certain products could have an
adverse effect on the Company's profitability.
In December 1993, the Company entered into a distribution agreement
with Schwan-STABILO Schwanhausser GmbH & Co., a German manufacturer of writing
instruments and markers for the office and art markets, granting the Company
the exclusive right to market and distribute these products in the United
States.
Research and Development
During fiscal 1993, the Company spent approximately $1.7 million on
Company-sponsored research and development, as compared with approximately
$1.5 million in fiscal 1992 and $1.2 million in fiscal 1991.
Personnel
As of February 1, 1994, the Company had approximately 2,200 full-
time employees.
Environmental Matters
Prior to the Company's acquisition of Seal Products, Inc. ("Seal")
from Bunzl plc in May 1990, it was discovered that some hazardous waste
materials had been stored at Seal's premises located in Naugatuck,
Connecticut. In compliance with applicable state law, this environmental
condition was reported to the Connecticut Department of Environmental
Protection by Bunzl. Seal, which now is a subsidiary of the Company, may be
partially responsible under law for the environmental conditions on the
premises and any liabilities resulting therefrom. However, in connection with
the Company's acquisition of Seal, Bunzl agreed to take responsibility for
correcting such environmental conditions and, for a period of seven years, to
indemnify Seal and the Company for such resulting liabilities, subject to
certain limitations. Bunzl currently is in the process of remediating the
environmental conditions. It is believed that a substantial portion of the
remediation has been completed, although continued testing is planned.
The Company is also involved on a continuing basis in monitoring its
compliance with environmental laws and in making capital and operating
improvements necessary to comply with existing and anticipated environmental
requirements. Despite its efforts, the Company has been cited for occasional
violations or alleged violations of environmental laws or permits. Expenses
incurred by the Company to date relating to violations of and compliance with
environmental laws and permits have not been material. While it is impossible
to predict with certainty, management currently does not foresee such expenses
in the future as having a material effect on the Company's business, results
of operations or financial condition.
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Item 2. Properties
The Company presently maintains its principal executive offices at
230 South Broad Street, Philadelphia, PA 19102 in approximately 35,000 square
feet of leased space under a lease expiring in 1994.
The following table sets forth information with respect to certain
of the other facilities of the Company:
<TABLE>
<CAPTION>
Industry Primary Approximate Owned or
segment function Location size leased
- -------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Office Warehouse & Fresno, CA(1) 137,000 sq. Owned
Products Offices ft. in 3 bldgs.
on 9 acres
Manufacturing Florence, 108,000 sq. (2)
& Offices KY ft. bldg.
on 27 acres
Warehouse Florence, 202,000 sq. Leased
& Offices KY ft. bldg. (exp. 1996)
Manufacturing Florence, 266,000 sq. Owned (3)
& Offices AL ft. bldg.
on 24 acres
Manufacturing Nuevo Laredo, 47,000 sq. ft. Leased
& Offices Mexico in 2 bldgs. (exp. 1998)
Warehouse Laredo, 45,000 sq. Leased
& Offices TX ft. bldg. (exp. 1997)
-----------------------------------------------------
Art/Craft Manufacturing Statesville, 219,000 sq. (4)
Products & Offices NC ft. bldg.
on 13 acres
Manufacturing, Naugatuck, 86,000 sq. Leased
Warehouse & CT ft. bldg. (exp. 2000)
Offices on 15 acres
Manufacturing, Basildon, 64,000 sq. ft. Owned
Warehouse & England in two bldgs.
Offices on 3 acres
------------------------------------------------------
Office Manufacturing Statesville, 196,000 sq. Owned
Products & Offices NC ft. bldg.
and Art/Craft on 16 acres
Products
Warehouse Statesville, 190,000 sq. Leased
& Offices NC ft. bldg. (exp. 2005)
Warehouse Ontario, 52,000 sq. Leased
& Offices Canada ft. bldg. (exp. 1996)
</TABLE>
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(1) During fiscal 1992, the Company transferred the manufacturing (but not
the warehouse and distribution) function of this facility to Florence,
Kentucky, in connection with the relocation and consolidation of its LIT-NING
operations. See Note 2 to Consolidated Financial Statements herein for
additional information. Recently, the Company decided to transfer the
remaining warehouse and distribution function of this facility to Florence,
Kentucky, during fiscal 1994.
(2) The construction and expansion of this facility was financed by the
issuance of industrial revenue bonds by the City of Florence, Kentucky. The
City retains title to the property and leases it to the Company for rental
payments equal to principal and interest payments on the bonds. The Company
has the option, subject to certain conditions, to purchase the property.
During fiscal 1989 two of the three bond issues relating to this financing
matured. The third bond issue matured in fiscal 1993. In each instance, the
Company exercised its option to continue to lease from the City, at a nominal
consideration, the properties associated with the respective bond issues for a
period of ten years. See Notes 6 and 11 to Consolidated Financial Statements
herein for information concerning indebtedness and capital lease obligations
relating to various of the Company's facilities.
(3) A portion of this facility was financed by the issuance of industrial
revenue bonds by the City of Florence, Alabama, which are collateralized by a
plant facility and certain equipment.
(4) A portion of this facility was financed by the issuance of industrial
revenue bonds by the Iredell County Industrial Facilities and Pollution
Control Financing Authority. The Authority retains title to the property and
leases it to the Company for rental payments equal to principal and interest
payments on the bonds. The Company has the option, subject to certain
conditions, to purchase the property.
At present, the Company's facilities generally are believed to be
adequately utilized and suitable for the Company's present needs, except for
one warehouse facility that has excess capacity which the Company has
successfully subleased.
Item 3. Pending Legal Proceedings
There currently are no material pending legal proceedings (within
the meaning of the Form 10-K
Instructions), other than routine litigation incidental to the business of the
Company, to which the Company is a party or to which any of its property is
subject. See Note 11 to Consolidated Financial Statements herein and Item 1--
"Environmental Matters" herein.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders of the
Company during the fourth quarter of the fiscal year covered by this report.
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Additional Information
The following information is furnished in this Part I pursuant to
Instruction 3 to Item 401(b) of Regulation S-K:
Executive Officers of the Company
Name Age Position
---- --- --------
Ronald J. Naples 48 Chairman of the Board and
Chief Executive Officer
Robert B. Fritsch 62 President and Chief Operating Officer
John W. Carney 50 Vice President, Human Resources
William E. Chandler 50 Senior Vice President, Finance (Chief
Financial Officer), and Secretary
Roy M. Delizia 50 Vice President, Corporate Planning and
Development
Spencer W. O'Meara 47 Vice President and General
Manager
W. Ernest Precious 52 Vice President and General Manager
Robert K. Scribner 47 Vice President and General Manager
Eugene A. Stiefel 46 Vice President, Information Services
The executive officers of the Company customarily are elected
annually by the Board of Directors to serve, at the pleasure of the Board, for
a period of one year or until their successors are elected. All of the
executive officers of the Company, except for Messrs. Chandler, Scribner,
Delizia and Stiefel have served in varying executive capacities with the
Company for over five years.
Mr. Chandler was elected an executive officer of the Company in
February 1993. He joined the Company in September 1992 after three years at
Bally Manufacturing Corporation during which he held positions as Acting Chief
Financial Officer and Vice President, Financial Operations and Controller.
Prior to that, he served for three years at Household Manufacturing, Inc. as
Senior Vice President of Finance, Treasurer and Chief Financial Officer.
Mr. Scribner was elected an executive officer of the Company in
December 1990. He joined the Company in December 1986 as Vice President,
Sales and Marketing, Office Products.
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Messrs. Delizia and Stiefel were elected executive officers of the
Company in April 1993. Mr. Delizia joined the Company in October 1983 and has
served as Vice President, Corporate Development and Planning since 1987. Mr.
Stiefel joined the Company in February 1985 and has served as Vice President,
Information Services since 1987.
------------------------------------------
For the purposes of calculating the aggregate market value of the
shares of common stock of the Company held by nonaffiliates, as shown on the
cover page of this report, it has been assumed that all the outstanding shares
were held by nonaffiliates except for the shares held by directors and
officers of the Company. However, this should not be deemed to constitute an
admission that all directors and officers of the Company are, in fact,
affiliates of the Company, or that there are not other persons who may be
deemed to be affiliates of the Company. Further information concerning
shareholdings of officers, directors and principal shareholders is included in
the Company's definitive proxy statement filed or to be filed with the
Securities and Exchange Commission.
-----------------------------------------
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PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters
(a) The Company's common stock is traded on the New York Stock
Exchange (trading symbol "HUN"). The following
table sets forth the high and low quarterly sales prices of the Company's
common stock during the two most recent fiscal years (all as reported by The
Wall Street Journal):
Fiscal Quarter
1993
--------------------------------------------
First Second Third Fourth
----- ------ ----- ------
High $15 1/4 $16 1/4 $16 1/4 $16 3/8
Low 12 3/4 13 5/8 13 1/4 15 1/4
Fiscal Quarter
1992
--------------------------------------------
First Second Third Fourth
----- ------ ----- ------
High $17 1/8 $16 7/8 $16 1/8 $14 3/8
Low 13 5/8 14 1/8 12 1/4 11 1/4
See Note 10 to Consolidated Financial Statements herein for
information concerning certain Rights which were distributed by the Company to
shareholders in 1990 and which currently are deemed to be attached to the
Company's common stock.
(b) As of February 1, 1994, there were approximately 1,200 record
holders of the Company's common stock, which number does not include
shareholders whose shares were held in nominee name.
(c) During the past two fiscal years, the Company has paid regular
quarterly cash dividends on its common stock at the following rates per share:
1993 - $.0875 per quarter and 1992 - $.085 per quarter.
Certain of the Company's credit agreements contain restrictions on
the Company's present and future ability to pay dividends. See Note 6 to
Consolidated Financial Statements herein.
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Item 6. Selected Financial Data
The following table contains selected financial data for each of the
Company's last five fiscal years. This data
should be read in conjunction with the Company's Consolidated Financial
Statements (and related notes) appearing elsewhere in this report and with
Item 7 of this report.
Year Ended
--------------------------------------------------------
Nov. 28, Nov. 29, Dec. 1, Dec. 2, Dec. 3,
1993 1992 1991(1) 1990(2) 1989(3)
------- ------- ------- ------- -------
(In thousands, except per share data)
Net Sales $256,150 $234,929 $228,622 $220,099 $203,444
Net Income 14,928 13,302 9,586 12,011 18,804
Net Income
Per Share(4) .93 .83 .60 .75 1.17
Total Assets 156,317 144,170 151,824 154,361 127,947
Long-Term Debt 3,003 6,160 17,271 26,498 9,674
Cash Dividends
Per Share(4) .35 .34 .32 .31 .27
- -----------------------
(1) In the fourth quarter of fiscal 1991, the Company recorded a charge to
net income of approximately $2.7 million, or $.17 per share, for anticipated
costs relating to the relocation and consolidation of certain manufacturing
and distribution operations. See Note 2 to Consolidated Financial Statements
herein.
(2) The Company acquired the Graphic Arts Group from Bunzl plc on May 4,
1990. In addition, in the fourth quarter of fiscal 1990, the Company recorded
a charge to net income of approximately $1 million, or $.06 per share,
relating to the discontinuance of certain products.
(3) The Company acquired the Data Products Division of Amaray International
Corporation on June 23, 1989.
(4) Adjusted for stock splits.
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<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
The Company improved its already strong financial condition in
fiscal 1993, with net cash flow provided by operating activities increasing to
$23.2 million from $20.4 million and $19.9 million in fiscal 1992 and 1991,
respectively. These fiscal 1993 net cash flows were more than sufficient to
fund additions to property, plant and equipment of $10.3 million, to pay cash
dividends of $5.6 million and to reduce debt by $1.2 million. The percentage
of debt to equity was reduced to 5.3% at the end of fiscal 1993 from 6.9% and
18.1% at the end of
fiscal 1992 and 1991, respectively.
Working capital increased to $47.1 million at November 28, 1993 from
$45.5 million at November 29, 1992 as a net result of an $8.5 million increase
in current assets, partially offset by a $6.9 million increase in current
liabilities. The increase in current assets was primarily due to a $4.8
million increase in cash and cash equivalents, as well as to a $3 million
increase in inventories. Higher inventories were largely the result of new
products introduced in fiscal 1993, as well as higher anticipated sales
volume. Accounts receivable turnover improved in
fiscal 1993, and the balance of past due accounts was reduced significantly.
The increase in current liabilities was principally the result of higher
accounts payable (up $2.8 million), accrued salaries, wages and commissions
(up $2.0 million) and current portion of long-term debt balance (up $1.9
million). The accounts payable increase was due to timing of and payment for
raw materials received near the end of the fiscal year. The increase in
accrued salaries, wages and commissions was primarily due to higher management
incentive compensation accrued for fiscal 1993.
Management expects that expenditures for additions to property,
plant and equipment to increase capacity and productivity in fiscal 1994 will
approximate the level expended for such purposes in fiscal 1993.
The Company currently has line-of-credit agreements with three banks
providing for borrowing capacity totaling $45 million. There were no
borrowings under these line-of-credit agreements at the end of fiscal 1993.
Management believes that funds generated from operations combined with
existing credit agreements are sufficient to meet currently anticipated
working capital and other capital and financing requirements. If additional
resources are needed, management believes that the Company could obtain funds
at competitive costs.
Results of Operations
Comparison of Fiscal 1993 vs. 1992
Net Sales and Earnings. Net sales of $256.2 million for fiscal 1993
increased 9% from $234.9 million in fiscal 1992 due primarily to higher unit
volume largely attributable to new products. Average selling prices decreased
approximately 3% in fiscal 1993 from fiscal 1992 prices due to continuing
competitive pressures discussed below and to foreign currency exchange rate
changes of approximately 1%.
<PAGE>
<PAGE> 16
Office products sales increased 13% in fiscal 1993 to $142.5 million
from $126.1 million in fiscal 1992. This increase was led by higher sales of
office furniture products, which were
up 18.7%, primarily due to broadened distribution for these products gained in
fiscal 1993. Mechanical and electromechanical products sales grew by 12.4% in
fiscal 1993 due, in large part, to higher sales of Boston brand products, and
desktop accessory products were up 6.3% attributable principally to new
products, particularly MediaMate brand computer-related accessories. Export
sales of office products increased 5.2% in fiscal 1993 largely as a result of
higher sales in Canada.
Art/craft products sales of $113.7 million for fiscal 1993 increased
4.5% from fiscal 1992 sales of $108.8 million. This increase was the net
result of higher sales of mounting and laminating products (up 8.3%) and
hobby/craft products (up 7.2%), partially offset by lower sales of art
supplies (down 5.4%). The mounting and laminating sales increase was
principally attributable to higher sales of Seal brand laminating equipment.
The hobby/craft products sales increase was largely due to higher sales of
X-Acto brand knife and tool kits. The decrease in sales of art supplies was
attributable primarily to lower sales of Bienfang brand art paper products.
Export sales of art/craft products were essentially unchanged in fiscal 1993,
and foreign sales decreased 11.3% primarily due to a decrease in the value of
the British pound sterling. Excluding the effect of exchange rate changes,
foreign sales increased 3.2% in fiscal 1993.
Net income of $14.9 million for fiscal 1993 grew 12.2% from fiscal
1992 net income of $13.3 million, and earnings per share increased to $.93 in
fiscal 1993 from $.83 reported for fiscal 1992. Higher sales volume and lower
interest expense were significant factors leading to the earnings increase.
In December 1993 the Company was selected by Schwan-STABILO, a
prominent manufacturer based in Germany, to be the exclusive distributor in
the U. S. of its STABILO(R) BOSS(R) fluorescent highlighting markers and a
wide range of other products for the office, art and graphics markets. The
purchase of inventories and commencement of distribution is expected to
take place at the end of the first quarter of fiscal 1994.
Gross Profit. The Company's gross profit margin decreased to 40.1%
of net sales in fiscal 1993 from 40.7% in 1992. The domestic gross profit
margin decreased to 40.3% from 41%, and the foreign gross profit margin
decreased to 26.7% from 28.6% in 1993 and 1992, respectively. The overall
decrease was attributable to lower selling prices which were largely offset by
lower raw material costs, the favorable effect of higher sales volume
leveraging relatively fixed manufacturing overhead costs and lower employee
fringe benefit expenses. Management expects the pressure on selling prices to
continue due to the competitive environment for many of the Company's
products, and also expects upward pressure on costs for certain raw material
commodities, such as wood and steel, due to market conditions. Management
plans to continue to seek productivity and operating process improvements and
further cost reductions for other materials to offset these pressures.
Selling, Shipping, Administrative and General Expenses. Selling and
shipping expenses, as a percentage of net sales, were reduced to 20.6% in
fiscal 1993 from 21.1% in fiscal 1992 primarily as a result of lower sales
force commission expenses due, in part, to changes in customer sales mix.
<PAGE>
<PAGE> 17
Administrative and general expenses increased to $25.4 million in
fiscal 1993 from $23.1 million in fiscal 1992 primarily as a result of higher
management incentive compensation expenses and higher management consulting
fees.
Interest Expense. Interest expense was reduced to $.2 million in
fiscal 1993 from $1.1 million in fiscal 1992 due principally to debt reduction
at the end of fiscal 1992 and in fiscal 1993, as well as to an increase in
capitalized interest in fiscal 1993 related to additions to property, plant
and equipment.
Provision for Income Taxes. The Company's effective tax rate
decreased to 37.9% in fiscal 1993 from 38.4% in fiscal 1992 as a net result of
losses incurred by the European operations in fiscal 1992 which did not
generate offsetting tax benefits, partially offset by an increase in the U. S.
statutory corporate tax rate in fiscal 1993 from 34% to 35% retroactive to
January 1, 1993.
Environmental Matters. The Company is involved on a continuing
basis in monitoring its compliance with environmental laws and in making
capital and operating improvements necessary to comply with existing and
anticipated environmental requirements. Despite its efforts, the Company has
been cited for occasional violations or alleged violations of environmental
laws or permits. Expenses incurred by the Company to date relating to
violations of and compliance with environmental laws and permits have not been
material. While it is impossible to predict with certainty, management
currently does not foresee
such expenses in the future as having a material effect on the Company's
business, results of operations or financial condition (see Note 11 of the
Notes to Consolidated Financial Statements).
Comparison of Fiscal 1992 vs. 1991
Net Sales and Earnings. Net sales increased 2.8% to $234.9 million
in fiscal 1992 from $228.6 million in fiscal 1991. This increase was largely
the result of higher unit volume, as selling prices were essentially unchanged
in fiscal 1992 from those in fiscal 1991.
Office products sales of $126.1 million for fiscal 1992 increased 5%
from the $120.1 million for fiscal 1991. The increase was led by higher sales
of mechanical and electro-mechanical products, which grew by 8.2%, while
desktop accessory and office furniture products grew by 2%. The growth in
sales of mechanical and electromechanical products was primarily due to
higher sales of Boston brand products. Export sales of office products
increased 5.8% in fiscal 1992.
Art/craft products sales of $108.8 million in fiscal 1992 were
essentially unchanged from those in fiscal 1991 as a net result of higher
sales of mounting and laminating products (up 2.6%), offset by lower sales of
hobby/craft products (down 5.1%) and art supplies (down 1.5%). The decrease
in sales of hobby/craft products was due, in large part, to lower sales of
X-Acto brand knife and tool kits. Export sales of art/craft products
decreased 1.3% in fiscal 1992 and foreign sales decreased 7.2%. The foreign
sales decrease was attributable, in significant part, to the unfavorable
economic environment in the United Kingdom.
<PAGE>
<PAGE> 18
Net income of $13.3 million and earnings per share of $.83 for
fiscal 1992 increased by more than 38% from net income
of $9.6 million, or $.60 per share for fiscal 1991. The 1991 results included
an after-tax provision of $2.7 million, or $.17 per share, for the relocation
and consolidation of the Company's Lit-Ning office products operations in
California and distribution operations in the United Kingdom. Excluding this
provision, net income and earnings per share increased approximately 8% in
fiscal 1992 on a comparable basis with
fiscal 1991 results.
Gross Profit. The Company's gross profit was 40.7% of net sales in
fiscal 1992, which approximated the fiscal 1991 percentage. This was largely
the net result of higher gross profit percentages generated by the Company's
foreign operations, partially offset by lower gross profit percentages for the
domestic operations. The gross profit percentage increase for the Company's
foreign operations, which improved to 28.6% in
fiscal 1992 from 21.1% in fiscal 1991, was due to a decrease
in 1992 in write-offs of excess inventories incurred by the United Kingdom
operations as compared to 1991. These higher
write-offs, which depressed fiscal 1991 gross profits for the
foreign operations, related principally to inventories of laminating equipment
determined to be excess or obsolete. The gross profit percentage decrease for
the U. S. operations, which declined to 41% in fiscal 1992 from 42.2% in
fiscal 1991, was attributable to several factors, including higher raw
material costs and employee fringe benefit expenses, particularly health care
and workers' compensation insurance. These higher costs were not able to be
offset by higher selling prices because of the competitive environment in the
distribution channels for certain of the Company's products, particularly
office products and certain mounting and laminating products.
Selling, Shipping, Administrative and General Expenses. Selling and
shipping expenses, as a percentage of net sales, increased to 21.1% in fiscal
1992 from 20.4% in fiscal 1991, largely due to higher sales promotional
allowances, freight costs and new product development and packaging expenses.
Administrative and general expenses were reduced 1.7% in fiscal 1992
to $23.1 million from $23.5 million in fiscal 1991, which was principally
attributable to lower consulting fees and reductions in management incentive
compensation.
Interest Expense. Interest expense was reduced to $1.1 million in
fiscal 1992 from $2.1 million in fiscal 1991 due primarily to reduction of
long-term debt at the end of fiscal 1991 and during fiscal 1992 and, to a
lesser extent, to lower interest rates.
Provision for Income Taxes. The Company's effective tax rate
decreased to 38.4% in fiscal 1992 from 44% in fiscal 1991 attributable, in
large part, to a reduction in losses incurred by the European operations which
did not generate current offsetting tax benefits.
<PAGE>
<PAGE> 19
New Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," will require the calculation of deferred income
taxes using the asset and liability method, which includes a requirement for
adjustment of deferred tax balances for income tax rate changes. Future
years' net income will be subject to increased volatility depending upon the
frequency of tax rate changes. The Company will adopt the provisions of SFAS
No. 109 in the first quarter of fiscal 1994, and the cumulative effect of this
change of accounting principle for income taxes is expected to increase fiscal
1994 earnings per share by approximately $.05.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pension," requires accrual accounting for all postretirement
benefits other than pensions. When adopted in fiscal 1994, based on the
Company's current fringe benefit policies, the requirements of SFAS No. 106
are expected to have no impact on the results of operations or financial
condition of the Company.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
requires the accrual of postemployment benefits if the obligation is
attributable to employees' services already rendered, employees' rights to
those benefits accumulate or vest, payment of the benefits is probable and the
amount of the benefits can be reasonably estimated. When adopted in fiscal
year 1995, the Company currently does not believe SFAS No. 112 will have a
material effect on the results of its operations or financial condition.
Item 8. Financial Statements and Supplementary Data
Financial statements and supplementary financial information
specified by this Item, together with the report of Coopers & Lybrand thereon,
are presented following Item 14 of this report.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
Incorporated by Reference
The information called for by Item 10 "Directors and Executive
Officers of the Registrant" (other than the information concerning executive
officers set forth after Item 4 herein), Item 11 "Executive Compensation",
Item 12 "Security Ownership of Certain Beneficial Owners and Management" and
Item 13 "Certain Relationships and Related Transactions" is incorporated
herein by reference to the Company's definitive proxy statement for its Annual
Meeting of Shareholders scheduled to be held April 13, 1994, which definitive
proxy statement is expected to be filed with the Commission not later than 120
days after the end of the fiscal year to which this report relates.
<PAGE>
<PAGE> 20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Documents Filed as a part of the Report
1. Financial Statements:
--------------------
Pages
------
Report of Independent Accountants F-1
Consolidated Statements of
Income for the fiscal years
1993, 1992 and 1991 F-2
Consolidated Balance Sheets,
November 28, 1993 and
November 29, 1992 F-3
Consolidated Statements of
Stockholders' Equity for the
fiscal years 1993, 1992 and 1991 F-4
Consolidated Statements of
Cash Flows for the fiscal years
1993, 1992 and 1991 F-5
Notes to Consolidated Financial F-6-22
Statements
2. Financial Statement Schedules:
-----------------------------
II. Amounts Receivable from Related
Parties and Underwriters, Promoters,
and Employees Other Than Related
Parties for the fiscal years
1993, 1992, and 1991 F-23
V. Property, Plant and Equip-
ment for the fiscal years 1993,
1992 and 1991 F-24
VI. Accumulated Depreciation and
Amortization of Property, Plant
and Equipment for the fiscal years
1993, 1992 and 1991 F-25
VIII. Valuation and Qualifying
Accounts for the fiscal years
1993, 1992 and 1991 F-26
X. Supplementary Income State-
ment Information for the fiscal
years 1993, 1992 and 1991 F-27
<PAGE>
<PAGE> 21
All other schedules not listed above have been omitted,
since they are not applicable or are not required, or
because the required information is included in the
consolidated financial statements or notes thereto.
Individual financial statements of the Company have been
omitted, since the Company is primarily an operating
company and any subsidiary companies included in the
consolidated financial statements are directly or
indirectly wholly-owned and are not indebted to any
person, other than the parent or the consolidated
subsidiaries, in an amount which is material in relation
to total consolidated assets at the date of the latest
balance sheet filed, except indebtedness incurred in the
ordinary course of business which is not overdue and which
matures in one year.
3. Exhibits:
(3) Articles of incorporation and
bylaws:
(a) Restated Articles of Incorporation, as
amended (composite) (incorp. by ref. to Ex.
4(a) to Reg. Stmt. No. 33-6359 on Form
S-8).
(b) By-laws, as amended (incorp. by ref. to Ex.
4(b) to fiscal 1990 Form 10-K).
(4) Instruments, defining rights of security
holders, including indentures:
(a) Credit Agreement dated as of October 2,
1990, between the Company and The Chase
Manhattan Bank, N.A. (incorporated by
reference to Ex. 4.1 to third quarter
fiscal 1990 Form 10-Q).
(b) Credit Agreement dated as of October 2,
1990, between the Company and Mellon Bank
(East) PSFS, N.A. (incorp. by ref. to Ex.
4.2 to third quarter fiscal 1990 Form
10-Q).
(c) Credit Agreement dated as of October 2,
1990, between the Company and Philadelphia
National Bank, incorporated as CoreStates
Bank, N.A. (incorp. by ref. to Ex. 4.3 to
third quarter fiscal 1990 Form 10-Q).
(d) Rights Agreement dated as of August 8, 1990
(including as Exhibit A thereto the
Designation of Powers, Preferences, Rights
and Qualifications of Preferred Stock),
between the Company and Mellon Bank (East),
N.A., as original Rights Agent (incorp. by
<PAGE>
<PAGE> 22
ref. to Ex. 4.1 to August, 1990 Form 8-K)
and Assignment and Assumption Agreement
dated December 2, 1991, with American Stock
Transfer and Trust Company, as successor
Rights Agent (incorp. by ref. to Ex. 4(d)
to fiscal 1991 Form 10-K).
Miscellaneous long-term debt instruments
and credit facility agreements of the
Company, under which the underlying
authorized debt is equal to less than 10%
of the total assets of the Company and its
subsidiaries on a consolidated basis, may
not be filed as exhibits to this report.
The Company agrees to furnish to the
Commission, upon request, copies of any
such unfiled instruments.*
(10) Material contracts:
(a) Lease Agreement dated June 1, 1979 between
the Iredell County Industrial Facilities
and Pollution Control Financing Authority
and the Company (incorp. by ref. to Ex.
10(d) to fiscal 1988 Form 10-K).
(b) 1978 Stock Option Plan, as amended, of the
Company (incorp. by ref. to Ex. 28(a) to
Reg. Stat. No. 33-25947 on Form S-8).**
(c) 1983 Stock Option and Stock Grant Plan, as
amended, of the Company (incorp. by. ref.
to Ex. 10(c) to fiscal 1992 Form 10-K).**
(d) 1993 Stock Option and Stock Grant Plan of the
Company (incorp. by ref. to Ex. 10(d) to fiscal
1992 Form 10-K).**
(e) 1988 Long-Term Incentive Compensation Plan
of the Company (incorp. by ref. to Appendix
to 1988 Proxy Statement).**
(f) 1994 Non-Employee Directors' Stock Option Plan
(filed herewith).**
(g) Loan and Security Agreement dated
January 31, 1984, as amended, between the
Company and Ronald J. Naples (incorp. by
ref. to Ex. 10(h) to fiscal 1988 Form
10-K).**
(h) Loan and Security Agreement dated April 20,
1988 between the Company and Robert B.
Fritsch (incorp. by ref. to Ex. 10(i) to
fiscal 1988 Form 10-K).**
<PAGE>
<PAGE> 23
(i) (1) Form of Change in Control Agreement
between the Company and various officers of
the Company (incorp. by ref. to Ex. 10(h)
to fiscal 1992 Form 10-K) and (2) list of
executive officers who are parties (filed
herewith)**
(j) Employment-Severance Agreement between the
Company and William E. Chandler (filed
herewith).**
(k) (1) Supplemental Executive Benefits Plan of the
Company, effective April 16, 1992, and (2)
related Amended and Restated Trust Agreement,
effective February 17, 1993 (incorp. by ref. to
Ex. 10(j) to fiscal 1992 Form 10-K).**
(l) Master Agreement dated May 3, 1990 between
the Company and Bunzl Public Limited
Company (incorp. by ref. to Ex. 2(a) to May
1990 Form 8-K).
(m) Stock Acquisition Agreement dated May 3,
1990 between Seal Purchase Corp. and Bunzl
Graphic Arts, Inc. relating to Seal
(incorp. by ref. to Ex 2(b) to May 1990
Form 8-K).
(11) Statement re: computation of per share
earnings (filed herewith).
(21) Subsidiaries (filed herewith).
(23) Consent of Coopers & Lybrand to
incorporation by reference, in Registration
Statement No.s 33-70660, 33-25947, 33-6359
and 2-83144 on Form S-8, of their report on
the consolidated financial statements and
schedules included in this report (filed
herewith).
- ---------------
* Reference also is made to (i) Articles 5th, 6th, 7th and 8th of the
Company's composite Articles of Incorporation (Ex. 3(a) to this report),
and (ii) to Sections 1, 7 and 8 of the Company's By-laws (Ex. 3 (b) to
this report).
** Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year covered by this report.
---------------------------------------------
<PAGE>
<PAGE>
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders
and the Board of Directors of
Hunt Manufacturing Co.:
We have audited the accompanying consolidated financial statements and
the financial statement schedules of Hunt Manufacturing Co. and Subsidiaries
as listed in the index on pages 22 and 23 of this Form 10-K. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hunt
Manufacturing Co. and Subsidiaries as of November 28, 1993 and November 29,
1992, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended November 28, 1993 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects, the information required to be included therein.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 17, 1994
<PAGE>
<PAGE> 25
HUNT MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the fiscal years 1993, 1992 and 1991
(In thousands except per share amounts)
1993 1992 1991
-------- -------- --------
Net sales $256,150 $234,929 $228,622
Cost of sales 153,353 139,366 135,887
-------- -------- --------
Gross profit 102,797 95,563 92,735
Selling and shipping expenses 52,831 49,605 46,560
Administrative and general
expenses 25,405 23,064 23,466
Provision for relocation and
consolidation of operations - - 3,644
-------- -------- --------
Income from operations 24,561 22,894 19,065
Interest expense (less $283, $50
and $121 capitalized in 1993,
1992 and 1991, respectively) (242) (1,073) (2,098)
Interest income 190 422 630
Other expense, net (471) (634) (479)
--------- -------- ---------
Income before income taxes 24,038 21,609 17,118
Provision for income taxes 9,110 8,307 7,532
--------- -------- --------
Net Income $ 14,928 $ 13,302 $ 9,586
========= ======== ========
Average shares of common stock
outstanding 16,107 16,104 16,080
========= ======== ========
Earnings per common share $ .93 $ .83 $ .60
========= ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 26
HUNT MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 28, 1993 and November 29, 1992
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
1993 1992
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,778 $ 6,013
Accounts receivable, less allowance for doubtful
accounts: 1993, $2,643; 1992, $2,587 39,472 39,565
Inventories 27,960 25,007
Prepaid expenses and other current assets 2,632 1,717
-------- --------
Total current assets 80,842 72,302
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 46,617 42,655
Excess of acquisition cost over net assets
acquired, less accumulated amortization 17,054 16,651
Intangible assets, at cost, less accumulated amortization 9,965 11,174
Other assets 1,839 1,388
-------- --------
TOTAL ASSETS $156,317 $144,170
======== ========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 3,158 $ 1,210
Accounts payable 11,060 8,247
Accrued expenses:
Salaries, wages and commissions 8,412 6,442
Income taxes 4,992 4,142
Other 6,092 6,809
-------- --------
Total current liabilities 33,714 26,850
Long-term debt, less current portion 3,003 6,160
Deferred income taxes 1,230 1,686
Other non-current liabilities 2,103 2,018
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.10 par value, authorized 1,000,000
shares (including 50,000 shares of Series A Junior
Participating Preferred); none issued - -
Common, $.10 par value, authorized 20,000,000 shares;
issued: 1993 - 16,125,321 shares; 1992 - 16,114,848 shares 1,613 1,611
Capital in excess of par value 6,158 6,045
Cumulative translation adjustment (1,495) (1,136)
Retained earnings 110,290 101,366
Less cost of treasury stock:
1993 - 18,634 shares; 1992 - 32,926 shares (299) (430)
-------- --------
Total stockholders' equity 116,267 107,456
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $156,317 $144,170
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 27
HUNT MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the fiscal years 1993, 1992 and 1991
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock Capital in Cumulative
--------------------- Excess of Translation Retained
Issued Treasury Par Value Adjustments Earnings
-------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balances, December 2, 1990 (issued 16,114,848
shares; treasury 61,367 shares) $1,611 $(872) $6,042 $ 3,372 $ 89,386
Net Income 9,586
Cash dividends on common stock ($.32 per share) (5,l45)
Translation adjustments (1,997)
Purchase of treasury stock (1,000 shares) (11)
Tax benefit arising from stock grant transactions 3
Exercise of stock options (treasury 21,965 shares,
net of shares received as payment
upon exercise) 293 (132)
Issuance of stock grants (treasury 20,386 shares) 357 (109)
------- -------- ----------- ---------- ---------
Balances, December 1, 1991 (issued 16,114,848
shares; treasury 20,016 shares) 1,611 (233) 6,045 1,375 93,586
Net Income 13,.302
Cash dividends on common stock ($.34 per share) (5,456)
Translation adjustments (2,511)
Purchase of treasury stock (29,000 shares) (365)
Exercise of stock options (treasury 9,066 shares,
net of shares received as payment
upon exercise) 84 (83)
Issuance of stock grants (treasury 7,024 shares) 84 17
------- -------- ----------- ---------- ---------
Balances, November 29, 1992 (issued 16,114,848
shares; treasury 32,926 shares) 1,611 (430) 6,045 (1,136) 101,366
Net Income 14,928
Cash dividends on common stock ($.35 per share) (5,639)
Translation adjustments (359)
Purchase of treasury stock (22,200 shares) (308)
Exercise of stock options (issued 10,473 shares;
treasury 32,875 shares, net of shares received
as payment upon exercise) 2 393 113 (367)
Issuance of stock grants (treasury 3,617 shares) 46 2
------- -------- --------- ---------- ---------
Balances, November 28, 1993 (issued 16,125,321
shares; treasury 18,634 shares) $1,613 $(299) $6,158 $(1,495) $ 110,290
======= ======= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 28
HUNT MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the fiscal years 1993, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,928 $ 13,302 $ 9,586
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,664 7,558 7,467
Deferred income taxes (456) 626 (651)
Lose on disposals of property, plant and equipment 571 119 128
Provision (payments) for relocation and
consolidation of operations (400) (2,151) 3,644
Issuance of stock under management incentive bonus
and stock grant plans 48 101 250
Changes in operating assets and liabilities:
Accounts receivable (1) (710) (3,196)
Inventories (3,041) 2,976 1,399
Prepaid expenses and other current assets (922) (872) (316)
Accounts payable 2,847 (1,729) (278)
Accrued expenses 2,009 1,188 3,733
Other non-current assets and liabilities (50) 34 (1,878)
-------- -------- --------
Net cash provided by operating activities 23,197 20,442 19,888
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (10,339) (6,002) (4,949)
Acquisiton of businesses (1,051) - -
Other, net 2 (183) (18)
-------- -------- --------
Net cash used for investing activities (11,388) (6,185) (4,967)
-------- -------- --------
Cash flows from financing activities:
Payments of long-term debt including current maturities (1,209) (11,128) (9,176)
Purchases of treasury stock (308) (365) (11)
Proceeds from exercise of stock options 211 1 161
Dividends paid (5,639) (5,456) (5,145)
Other, net (49) 65 218
-------- -------- --------
Net cash used for financing activities (6,994) (16,883) (13,953)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents (50) (99) 238
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,765 (2,725) 1,206
Cash and cash equivalents, beginning of year 6,013 8,738 7,532
-------- -------- --------
Cash and cash equivalents, end of year $ 10,778 $ 6,013 $ 8,738
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 29
HUNT MANUFACTURING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Consolidation:
----------------------
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned.
Fiscal Year:
-----------
The Company's fiscal year ends on the Sunday nearest the end of November.
Fiscal year 1993 ended November 28, 1993; fiscal year 1992 ended November
29, 1992; and fiscal year 1991 ended December 1, 1991. All three fiscal
years are comprised of 52 weeks.
Cash Equivalents:
----------------
The Company considers all highly liquid temporary cash investments
purchased with a maturity of three months or less to be cash equivalents.
Inventories:
-----------
Inventories are valued at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for approximately half of the
inventories and by the first-in, first-out (FIFO) method for the remainder.
The Company uses the FIFO method of inventory valuation for certain
acquired businesses because the related products and operations are
separate and distinct from the Company's other businesses.
Property, Plant and Equipment:
-----------------------------
Expenditures for additions and improvements to property, plant and
equipment are capitalized, and normal repairs and maintenance are charged
to expense as incurred. The related cost and accumulated depreciation of
depreciable assets disposed of are eliminated from the accounts, and any
profit or loss is reflected in other expense, net.
Excess of Acquisition Cost Over Net Assets Acquired:
---------------------------------------------------
Excess of acquisition cost over net assets acquired relates principally to
the Company's acquisitions of X-Acto (1981), Bevis Custom Tables, Inc.
(1985), and the Graphic Arts Group of Bunzl plc (1990) and is amortized on
a straight-line basis over periods ranging from 20 to 40 years. The
Company's policy is to record an impairment loss against the net
unamortized excess of acquisition cost over net assets acquired in the
period when it is determined that the carrying amount of the net assets may
not be recoverable. This determination includes evaluation of factors such
as current market value, future asset utilization, business climate and
future cash flows expected to result from the use of the net assets.
<PAGE>
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies, continued:
-------------------------------------------
Depreciation and Amortization:
-----------------------------
Depreciation for financial reporting purposes is computed by the straight-
line method. Depreciation for tax purposes is computed principally using
accelerated methods. The costs of intangible assets are amortized on a
straight-line basis over their respective estimated useful lives, ranging
from five to thirty years. Amortization of assets under capital leases
which contain purchase options is provided over the assets' useful lives.
Other capital leases are amortized over the terms of the related leases or
asset lives, if shorter.
Currency Translation:
--------------------
The assets and liabilities of subsidiaries having a functional currency
other than the U.S. dollar are translated at the fiscal year-end exchange
rate, while elements of the income statement are translated at the weighted
average exchange rate for the fiscal year. The cumulative translation
adjustment is recorded as a separate component of stockholders' equity.
Gains and losses on foreign currency transactions are included in the
determination of net income as other expense, net. Such gains and losses
are not material for any of the years presented.
Income Taxes:
------------
Taxes on income are calculated under the deferred method pursuant to
Accounting Principles Board Opinion No. 11. Generally, the deferred method
recognizes income taxes on financial statement income, and the tax effect
of differences between financial income and taxable income is deferred at
tax rates in effect during the period. Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," will require the
calculation of deferred income taxes using the asset and liability method,
which includes a requirement for adjustment of deferred tax balances for
income tax rate changes. Future years' net income will be subject to
increased volatility depending upon the frequency of tax rate changes. The
Company will adopt the provisions of SFAS No. 109 in the first quarter of
fiscal 1994, and the cumulative effect of this change of accounting
principle for income taxes is expected to increase fiscal 1994 earnings per
share by approximately $.05.
Hedging:
-------
The Company enters into forward exchange contracts to hedge foreign
currency transactions on a continuing basis for periods generally
consistent with its committed exposure. Cash flows from hedges are
classified in the statement of cash flows in the same category as the item
being hedged.
<PAGE>
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies, continued:
--------------------------------------------
Earnings Per Share:
------------------
Earnings per share are calculated based on the weighted average number of
common shares outstanding. The effect of outstanding stock options and
stock grants is not material and has not been included in the calculation.
Employee Benefit Plans:
----------------------
The Company and its subsidiaries have non-contributory, defined benefit
pension plans covering the majority of their employees. It is the
Company's policy to fund pension contributions in accordance with the
requirements of the Employee Retirement Income Security Act of 1974. The
benefit formula used to determine pension costs is the final-average-pay
method.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," requires accrual accounting for all postretirement benefits
other than pensions. When adopted in fiscal year 1994, based on the
Company's current fringe benefit policies, the requirements of SFAS No. 106
are expected to have no impact on the results of operations or financial
condition of the Company.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," requires
the accrual of postemployment benefits if the obligation is attributable to
employees' services already rendered, employees' rights to those benefits
accumulate or vest, payment of the benefits is probable and the amount of
the benefits can be reasonably estimated. When adopted in fiscal year
1995, the Company currently does not believe SFAS No. 112 will have a
material effect on the results of its operations or financial condition.
2. Provision for Relocation and Consolidation of Operations:
--------------------------------------------------------
In the fourth quarter of fiscal year 1991, the Company recorded a provision
of $3.6 million (approximately $2.7 million after income taxes, or $.17 per
share) relating to the Company's decision to relocate and consolidate
certain operations. The pre-tax charge was comprised of a $2.7 million
provision for anticipated costs relating to the relocation and
consolidation of a Lit-Ning office products operation in California and a
$.9 million provision for the relocation and consolidation of distribution
operations in the United Kingdom. The provision included recognition of
future lease obligations, write-off of property, plant and equipment,
relocation costs, employee severance costs and other related costs.
<PAGE>
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
3. Inventories:
-----------
The classification of inventories at the end of fiscal years 1993 and 1992
is as follows:
1993 1992
---- ----
Finished goods $13,094 $11,554
Work in process 5,289 4,463
Raw materials 9,577 8,990
------- -------
$27,960 $25,007
======= =======
Inventories determined under the LIFO method were $13,299 and $13,120 at
November 28, 1993 and November 29, 1992, respectively. The current
replacement cost for these inventories exceeded the LIFO cost by $5,569 and
$6,237 at November 28, 1993 and November 29, 1992, respectively.
Inventory reductions in fiscal years 1993 and 1992 resulted in a
liquidation of certain LIFO inventories carried at lower costs prevailing
in prior years. The effect of these reductions was to increase net income
by $101, or $.01 per share, and $262, or $.02 per share, in fiscal years
1993 and 1992, respectively.
4. Property, Plant and Equipment:
-----------------------------
Property, plant and equipment at the end of fiscal years 1993 and 1992 is
as follows:
1993 1992
---- ----
Land and land improvements $ 3,698 $ 3,701
Buildings 17,434 16,779
Machinery and equipment 61,718 58,242
Leasehold improvements 661 706
Construction in progress 5,439 2,412
------- -------
88,950 81,840
Less accumulated depreciation
and amortization 42,333 39,185
------- -------
$46,617 $42,655
======= =======
<PAGE>
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
5. Intangible Assets:
-----------------
Intangible assets at the end of fiscal years 1993 and 1992 are as follows:
1993 1992
---- ----
Covenants not to compete $11,643 $11,545
Customer lists 1,510 1,510
Patents 1,533 1,528
Trademarks 1,400 1,411
Licensing agreements 1,154 1,154
Other 1,751 1,782
------- -------
18,991 18,930
Less accumulated amortization 9,026 7,756
------- -------
$ 9,965 $11,174
======= =======
6. Debt:
----
Credit Agreements and Lines of Credit:
-------------------------------------
At November 28, 1993, the Company had revolving credit agreements with
three banks that provide for unsecured borrowings up to $45 million which
expire October 2, 1995. There were no borrowings under these agreements at
November 28, 1993. Amounts borrowed under these agreements would be
converted to term loans upon expiration of the revolving credit termination
dates. Principal payments would be made in quarterly installments
beginning January 2, 1996 through October 2, 1999. Interest on borrowings
under these agreements are at varying rates based, at the Company's option,
on the banks' prime rate, certificate of deposit rate, or money market
rate, the London Interbank Offering Rate, or the as offered rate. None of
these agreements have compensating balance requirements. Commitment fees
of 1/8 of 1% are payable under these agreements.
Long-Term Debt:
--------------
Long-term debt at the end of fiscal years 1993 and 1992 is as follows:
1993 1992
---- ----
Term loan (a) $1,875 $2,813
Capitalized lease obligations
(see Note 11) 2,000 2,100
Industrial development revenue bonds (b) 1,559 1,559
Industrial development revenue bonds (c) 700 820
Other 27 78
------ ------
6,161 7,370
Less current portion 3,158 1,210
------ ------
$3,003 $6,160
====== ======
<PAGE>
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
Debt, continued:
----
(a) The principal of this term loan is payable in equal quarterly
installments of $234.4 through September 29, 1995. Interest on the
borrowing is payable quarterly at a rate of 10.93% per annum on the
outstanding principal amount of the loan.
(b) These bonds bear interest (3.9% at November 28, 1993) at 65% of the
lending bank's average daily prime rate and are payable on June 15,
1994.
(c) These bonds bear interest (4.536% at November 28, 1993) at 75.6% of
the lending bank's average daily prime rate. One bond with a
principal balance of $575 at November 28, 1993 is payable on May 1,
1994. The other bond with a principal balance of $125 is payable in
semiannual installments of $60 on November 1, 1994 and May 1, 1995 and
one payment of $5 on November 1, 1995. Both bonds are collateralized
by a plant facility and certain equipment.
The terms of certain financing agreements contain, among other provisions,
requirements for maintaining certain working capital and other financial
ratios, and restrictions on incurring additional indebtedness and obligate
the Company to equally and ratably collateralize the indebtedness undersuch
agreements if the Company grants or assumes certain liens on its assets.
Under the most restrictive covenants, dividends and purchases of capital
stock of the Company may not exceed, on a cumulative basis, 75% of the
cumulative net income of the Company at any time during the period
beginning November 28, 1983. As of November 28, 1993, $46 million was
available to the Company under this provision for future cash dividends and
future purchases of its own capital stock. In addition, as of November 28,
1993, the Company exceeded its minimum tangible net worth requirement of
$59 million by $30.2 million.
The capitalized lease obligations are collateralized by the property, plant
and equipment described in Note 11.
Aggregate annual maturities for all long-term debt, including the
capitalized leases, for each of the four fiscal years subsequent to
November 27, 1994 are as follows:
1995 - $1,353
1996 - 370
1997 - 400
1998 - 425
7. Income Taxes:
------------
Income before provision for income taxes consists of the following:
1993 1992 1991
---- ---- ----
Domestic $21,758 $20,341 $16,982
Foreign 2,280 1,268 136
------- ------- -------
$24,038 $21,609 $17,118
======= ======= =======
<PAGE>
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
7. Income Taxes, continued:
------------
The provision for income taxes consists of the following:
1993 1992 1991
---- ---- ----
Currently payable:
Federal $8,406 $6,694 $7,162
State 877 815 800
Foreign 283 159 221
------ ------ ------
9,566 7,668 8,183
Deferred (456) 639 (651)
------ ------ ------
$9,110 $8,307 $7,532
====== ====== ======
Deferred income taxes relate to the following timing differences between
amounts reported for financial accounting and income tax purposes:
1993 1992 1991
---- ---- ----
Depreciation $ 53 $ 119 $ 197
Provision for relocation
and consolidation of
operations 61 622 (975)
Other, net (570) (102) 127
----- ----- -----
$(456) $ 639 $(651)
===== ===== =====
The following is a reconciliation of the statutory federal income tax rate
with the Company's effective income tax rate:
1993 1992 1991
---- ---- ----
Statutory federal rate 34.9% 34.0% 34.0%
State income taxes, net of
federal tax benefit 2.2 2.6 2.5
Losses of foreign subsidiaries
with no current offsetting
tax benefit (including a
provision for relocation
and consolidation of foreign
operations of 1.8% in 1991) - 1.0 6.0
Other, net .8 .8 1.5
---- ---- ----
Effective tax rate 37.9% 38.4% 44.0%
==== ==== ====
As of November 28, 1993, the Company had a foreign net operating loss
carry-forward for financial reporting purposes of approximately $3.5
million, the benefit of which has not been reflected in the financial
statements. For tax return purposes, the Company has available
approximately $2.4 million of foreign tax operating loss carryforwards
which may be carried forward indefinitely, approximately $1 million of
which were acquired in connection with business acquisitions. The use of
foreign tax operating loss carryforwards acquired in connection with
business acquisitions is subject to approval by the foreign taxing
authorities.
<PAGE>
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
8. Employee Benefit Plans:
----------------------
Pension Plans:
-------------
Net pension costs for fiscal years 1993, 1992 and 1991 consist of the
following components:
1993 1992 1991
---- ---- ----
Service cost-benefits earned
during the period $1,580 $1,595 $1,379
Interest cost on projected
benefit obligation 1,852 1,672 1,415
Actual return on plan assets (1,863) (1,692) (3,342)
Net amortization and deferral 107 184 2,133
------ ------ ------
Net pension costs $1,676 $1,759 $1,585
====== ====== ======
Net amortization and deferral consists of the deferral of the excess of
actual return on assets over estimated return and amortization of the net
unrecognized transition asset on a straight-line basis, principally over
15 years.
The funded status of the Company's pension plans at September 30, 1993 and
1992 (dates of actuarial valuations) is as follows:
1993
-----------------------
Overfunded Underfunded 1992
---------- ----------- ----
Plan assets at fair value $24,327 $ 660 $22,356
------- ------- -------
Actuarial present value of
benefit obligations:
Vested 19,139 1,718 15,626
Non-vested 390 249 1,739
------- ------- -------
Accumulated benefit obligation 19,529 1,967 17,365
Effect of increase in compensation 7,288 875 6,973
------- ------- -------
Projected benefit obligation 26,817 2,842 24,338
------- ------- -------
Projected benefit obligation in excess
of plan assets (2,490) (2,182) (1,982)
Unrecognized net loss 2,612 486 731
Unrecognized transition asset (1,890) (22) (2,127)
Unrecognized prior service cost 857 1,218 2,255
------- ------- -------
Pension liability $ (911) $ (500) $(1,123)
======= ======= =======
The increase in the projected benefit obligation in fiscal 1993 was due
primarily to a decrease in the discount rate assumption. Plan assets
consist principally of common stocks and U.S. Government Agency
obligations. Pension costs are determined using the assumptions as of the
beginning of the year. The funded status is determined using the
assumptions as of the end of the year. Significant assumptions at year-
end include:
<PAGE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
8. Employee Benefit Plans, continued:
----------------------
Pension Plans:
------------- 1993 1992 1991
---- ---- ----
Discount rate 7.00% 7.75% 8.00%
Rate of increase in
compensation levels 6.00% 6.00% 6.00%
Expected long-term rate of
return on plan assets 7.50% 7.50% 7.50%
Supplemental Executive Retirement Plan:
--------------------------------------
In 1992 the Company instituted a nonqualified, Supplemental Executive
Retirement Plan covering all officers. Expenses of $331 and $325 in
fiscal years 1993 and 1992, respectively, relating to this plan were
actuarially determined and are included in the pension costs described
above.
Employee Savings Plan:
---------------------
The Company has a defined contribution 401(k) plan available to all
nonunion employees in the U.S. Contributions to the 401(k) plan by the
Company were $379, $300 and $260 for fiscal years 1993, 1992 and 1991,
respectively.
9. Stock Options, Stock Grant, Long-Term
Incentive Compensation and Bonus Plans:
--------------------------------------
In 1993 the Company adopted with shareholders' approval the 1993 Stock
Option and Stock Grant Plan, which is intended to replace the expired 1983
Stock Option and Stock Grant Plan. The 1993 plan authorized the issuance
of up to 1,750,000 common shares, of which up to 525,000 common shares may
be issued in the form of stock grants. The terms of the 1993 plan are
essentially similar to the terms of the 1983 plan described below. No
options were granted under this plan in fiscal year 1993.
The Company's 1983 Stock Option and Stock Grant Plan and the 1978 Stock
Option Plan expired by their terms in February 1993 and November 1988,
respectively, and, while incentive stock options granted under them remain
outstanding, no further options may be granted under these plans.
Under the 1983 plan, common shares were authorized for the granting of
incentive stock options, nonqualified stock options and stock grants to
key employees, provided that stock grants may be made for no more than
373,125 common shares. The option price of options granted under the plan
may not be less than the market value of the shares at the date granted.
Options may be granted for terms of between two and ten years and
generally become exercisable not less than one year following the date of
grant. Stock grants under this plan are subject to a vesting period or
periods of between one and five years from the date of grant. Common
shares were not actually issued to a grantee until such shares have vested
under the plan. The plan also provided for the payment of an annual cash
bonus to recipients of stock grants in an amount equal to the cash
dividends which would have been received had the shares not yet vested
<PAGE>
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
9. Stock Options, Stock Grant, Long-Term
Incentive Compensation and Bonus Plans, continued:
--------------------------------------
under the grant been actually held by the recipients. During fiscal
1987, the Company made a stock grant in the amount of 22,500 common shares
to a key employee. By its terms, this grant vested in four equal
installments of 5,625 shares each on April 22 of each year through 1991.
The charge to administrative and general expenses, including the cash
bonus, with respect to stock grants under the plan amounted to $28 in
fiscal year 1991.
Under the 1978 plan, options for 632,813 common shares were authorized for
the granting of options to key employees at option prices not less than
the market value of the common shares at the date of grant. Options
granted under this plan have terms of not more than ten years and
generally become exercisable not less than one year following the date of
grant.
Payment upon exercise of stock options under the 1993, 1983 and 1978 plans
may be by cash and/or by the Company's common stock in an amount
equivalent to the market value of the stock at the date exercised.
A summary of options under the Company's stock option plans is as follows:
1983 Plan 1978 Plan
--------------- -------------
1993 1992 1993 1992
---- ---- ---- ----
Outstanding, beginning of year 756,486 644,558 3,493 3,493
Options granted 148,200 132,850 - -
Options exercised (at an average
price per share of $10.47,
$7.77 and $6.22, respectively) (102,282) (17,022) (855) -
Options terminated (23,400) (3,900) - -
------- ------- ----- -----
Outstanding, end of year 779,004 756,486 2,638 3,493
======= ======= ===== =====
Average option price per share $13.43 $13.21 $10.58 $9.52
Outstanding exercisable options 506,754 511,526 2,638 3,493
Shares reserved for future
stock options and grants - 259,932 - -
In 1991 there were 22,429 and 2,193 options exercised at average prices of
$8.52 and $6.22 relating to the 1983 and 1978 plans, respectively.
The Company's 1988 Long-Term Incentive Compensation Plan provides for the
granting to management-level employees of long-term incentive awards,
which are payable in cash and/or by the Company's common stock at the end
of a designated performance period of from two to five years, based upon
the degree of attainment of pre-established performance standards during
the performance period. A maximum of 180,000 shares are authorized for
issuance under this plan. As of the end of fiscal 1993, an aggregate of
48,966 shares have been earned under this plan (13,394, 4,300 and 8,127
<PAGE>
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
9. Stock Options, Stock Grant, Long-Term
Incentive Compensation and Bonus Plans, continued:
--------------------------------------
shares in 1993, 1992 and 1991, respectively, and 23,145 shares in all
previous years), and an aggregate of 50,587 shares were subject to
outstanding unvested grants. There is no stated limitation on the
aggregate amount of cash payable under this plan, but the maximum amount
(in cash and/or shares) which may be paid to a participant under all
long-term incentive awards under the plan with respect to the same
performance period may not exceed 125% of the participant's base salary in
effect at the time the award initially was made. The charge to
administrative and general expenses relating to this plan was $563, $88
and $228 in fiscal years 1993, 1992 and 1991, respectively.
10. Shareholders' Rights Plan:
-------------------------
During fiscal 1990 the Company adopted a Shareholders' Rights Agreement
and declared a dividend of one right (a "Right") for each outstanding
share of the Company's common shares held of record as of the close of
business on August 22, 1990. The Rights initially are deemed to be
attached to the common stock and detach and become exercisable only if
(with certain exceptions and limitations) a person or group attempts to
obtain beneficial ownership of 15% or more of the Company's common shares
or is determined to be an "adverse person" by the Board of Directors of
the Company. Each Right, if and when it becomes exercisable, initially
will entitle holders of the Company's common shares to purchase one
one-thousandth of a share of Junior Participating Preferred Shares (Series
A, of which 50,000 shares currently are authorized for issuance) for $60,
subject to adjustment. The Rights will convert into the right to purchase
common shares or other securities or property of the Company or an
acquiring company in certain other potential or actual takeover
situations. The Rights are redeemable by the Company at $.01 per Right in
certain circumstances and expire, unless earlier exercised or redeemed, on
December 31, 2000.
11. Commitments and Contingencies:
-----------------------------
Leases:
------
Capitalized lease obligations (see Note 6) represent amounts payable under
leases which are, in substance, installment purchases. Property, plant
and equipment includes the following assets under capital leases:
1993 1992
---- ----
Land $ 314 $ 314
Buildings 2,632 2,632
Machinery and equipment 1,009 1,009
Accumulated depreciation (2,639) (2,531)
------- -------
$ 1,316 $ 1,424
======= =======
The Company has the option to purchase the above assets at any time during
the term of the leases for amounts sufficient to redeem and retire the
underlying lessor debt obligations.
<PAGE>
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
11. Commitments and Contingencies, continued:
-----------------------------
Leases, continued:
------
The minimum rental commitments under all noncancellable leases as of
November 28, 1993 are as follows:
Fiscal Operating Capitalized
Period Leases Leases
------ --------- ----------
1994 $ 3,539 $ 150
1995 2,779 562
1996 1,809 480
1997 1,406 448
1998 1,325 491
Thereafter 7,163 489
------- -----
Minimum lease payments $18,021 2,620
======= =====
Less interest 620
Present value of ------
minimum lease payments $2,000
======
Rent expense, including related real estate taxes charged to operations,
amounted to $4,217, $4,076 and $4,047 for fiscal years 1993, 1992 and 1991,
respectively.
Contingencies:
-------------
The Company has employment/severance (change in control) agreements with
its officers, as well as a severance policy covering Company employees
generally. Under such agreements and policy, severance payments and
benefits would become payable in the event of specified terminations of
employment following a change in control (as defined) of the Company. In
the event of a change in control of the Company and subsequent termination
of all employees, the maximum contingent severance liability would have
been approximately $14.3 million at November 28, 1993.
Prior to the acquisition of the Graphic Arts Group by the Company from
Bunzl plc in May 1990, it was discovered that some hazardous waste
materials had been stored on the premises of one of the Graphic Arts Group
companies, Seal, located in Naugatuck, Connecticut. In compliance with
applicable state law, this environmental condition was reported to the
Connecticut Department of Environmental Protection by Bunzl. Seal, which
is now a subsidiary of the Company, may be partially responsible under law
for the environmental conditions on the premises and any liabilities
resulting therefrom. However, in connection with the Company's acquisition
of Seal, Bunzl agreed to take responsibility for correcting such
environmental conditions and, for a period of seven years, to indemnify
Seal and the Company for such resulting liabilities, subject to certain
limitations. Management believes that this contingency will not have a
material effect on the Company's results of operations or financial
condition.
<PAGE>
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
11. Commitments and Contingencies, continued:
-----------------------------
Contingencies, continued:
-------------
The Company is also involved on a continuing basis in monitoring its
compliance with environmental laws and in making capital and operating
improvements necessary to comply with existing and anticipated
environmental requirements. Despite its efforts, the Company has been
cited for occasional violations or alleged violations of environmental laws
or permits. Expenses incurred by the Company to date relating to
violations of and compliance with environmental laws and permits have not
been material. While it is impossible to predict with certainty,
management currently does not foresee such expense in the future as having
a material effect on the Company's business, results of operations or
financial condition.
There are other contingent liabilities with respect to product warranties,
legal proceedings and other matters occurring in the normal course of
business. In the opinion of management, all such matters are adequately
covered by insurance or by accruals, and if not so covered, are without
merit or are of such kind, or involve such amounts, as would not have
significant effect on the financial condition or results of operations of
the Company, if disposed of unfavorably.
<PAGE>
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
12. Research and Development:
------------------------
Research and development expenses were approximately $1,657, $1,519, and
$1,153 in fiscal years 1993, 1992 and 1991, respectively.
13. Cash Flow Information:
---------------------
Cash payments for interest and income taxes (net of refunds) were as
follows:
1993 1992 1991
---- ---- ----
Interest paid $ 580 $ 863 $1,889
Income taxes 8,761 5,987 7,170
14. Quarterly Financial Data (unaudited):
------------------------------------
Results of operations for each of the quarters during fiscal years 1993 and
1992 are as follows:
1993
----
First Second Third Fourth Total
----- ------ ----- ------ -----
Net sales $57,117 $60,825 $65,021 $73,187 $256,150
Gross profit 22,465 24,701 25,702 29,929 102,797
Net income 2,533 3,544 3,856 4,995 14,928
Net income per share .16 .22 .24 .31 .93
1992
----
First Second Third Fourth Total
----- ------ ----- ------ -----
Net sales $53,016 $56,982 $61,795 $63,136 $234,929
Gross profit 21,275 23,037 24,940 26,311 95,563
Net income 2,191 3,219 3,854 4,038 13,302
Net income per share .14 .20 .24 .25 .83
15. Industry Segment Information:
----------------------------
The Company operates in two industry segments, Office Products and
Art/Craft Products. Total export sales aggregated $21,580 in fiscal 1993,
$20,919 in fiscal 1992 and $20,534 in fiscal 1991 of which $11,619,
$10,981 and $11,074 in fiscal years 1993, 1992 and 1991, respectively,
were made in Canada.
Operating profits include all revenues and expenses of the reportable
segment except for general corporate expenses, interest expense, interest
income, other expenses, other income and income taxes.
Identifiable assets are those assets used in the operations of each
business segment. Corporate assets include cash and miscellaneous other
assets not identifiable with any particular segment. Capital additions
include amounts related to acquisitions.
<PAGE>
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
15. Industry Segment Information, continued:
----------------------------
Office Art/Craft Corp.
Fiscal Year 1993 Products Products Assets Consolidated
---------------- -------- -------- ------ ------------
Net sales $142,462 $113,688 $256,150
======== ======== ========
Operating profit $ 11,411 $ 18,832 $ 30,243
======== ========
General corporate (5,682)
Interest expense (242)
Interest income 190
Other expense, net (471)
Income before income --------
taxes $ 24,038
========
Identifiable assets $ 74,098 $ 67,619 $ 14,600 $156,317
======== ======== ======== ========
Capital additions $ 5,559 $ 4,082 $ 698 $ 10,339
======== ======== ======== ========
Depreciation and
amortization $ 3,898 $ 3,234 $ 532 $ 7,664
======== ======== ======== ========
Office Art/Craft Corp.
Fiscal Year 1992 Products Products Assets Consolidated
---------------- -------- -------- ------ ------------
Net sales $126,101 $108,828 $234,929
======== ======== ========
Operating profit $ 8,541 $ 18,516 $ 27,057
======== ========
General corporate (4,163)
Interest expense (1,073)
Interest income 422
Other expense, net (634)
Income before income --------
taxes $ 21,609
========
Identifiable assets $ 69,894 $ 64,715 $ 9,561 $144,170
======== ======== ======== ========
Capital additions $ 3,666 $ 1,813 $ 523 $ 6,002
======== ======== ======== ========
Depreciation and
amortization $ 3,552 $ 3,521 $ 485 $ 7,558
======== ======== ======== ========
<PAGE>
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
15. Industry Segment Information, continued:
----------------------------
Office Art/Craft Corp.
Fiscal Year 1991 Products Products Assets Consolidated
---------------- -------- -------- ------ ------------
Net sales $120,103 $108,519 $228,622
======== ======== ========
Operating profit* $ 6,369 $ 17,618 $ 23,987
======== ========
General corporate (4,922)
Interest expense (2,098)
Interest income 630
Other expense, net (479)
Income before income --------
taxes $ 17,118
========
Identifiable assets $ 71,960 $ 68,292 $11,572 $151,824
======== ======== ======== ========
Capital additions $ 2,736 $ 1,875 $ 338 $ 4,949
======== ======== ======== ========
Depreciation and
amortization $ 3,528 $ 3,494 $ 445 $ 7,467
======== ======== ======== ========
* Includes the provision for relocation and consolidation of operations
which reduced the office products operating profit by $3.2 million and
art/craft products operating profit by $.4 million.
The Company's operations by geographical areas for fiscal years 1993, 1992
and 1991 are presented below. Intercompany sales to affiliates represent
products which are transferred between geographic areas on a basis
intended to reflect as nearly as possible the market value of the
products. Intercompany sales between areas were not material in fiscal
year 1991.
<TABLE>
<CAPTION>
Adjustments
and
Fiscal Year 1993 North America Europe Corporate Eliminations Consolidated
---------------- ------------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Customers $241,059 $15,091 - $256,150
Intercompany 2,941 1,640 $(4,581) -
-------- ------- ------- --------
Total $244,000 $16,731 $(4,581) $256,150
======== ======= ======= ========
Operating profit $ 30,203 $ 40 - $ 30,243
======== ======= ======= ========
Identifiable assets $124,841 $16,876 $14,600 - $156,317
======== ======= ======= ======= ========
</TABLE>
<PAGE>
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
15. Industry Segment Information, continued:
----------------------------
<TABLE>
<CAPTION>
Adjustments
and
Fiscal Year 1992 North America Europe Corporate Eliminations Consolidated
---------------- ------------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Customers $218,111 $16,818 - $234,929
Intercompany 2,241 1,230 $(3,471) -
-------- ------- ------- --------
Total $220,352 $18,048 $(3,471) $234,929
======== ======= ======= ========
Operating profit
(loss) $ 27,614 $ (557) - $ 27,057
======== ======= ======= ========
Identifiable assets $117,066 $17,543 $9,561 - $144,170
======== ======= ======= ======= ========
</TABLE>
Fiscal Year 1991 North America Europe Corporate Consolidated
------------- ------ --------- ------------
Net sales $210,687 $17,935 $228,622
======== ======= ========
Operating profit (loss)* $ 26,786 $(2,799) $ 23,987
======== ======= ========
Identifiable assets $117,791 $22,461 $11,572 $151,824
======== ======= ======= ========
* Includes the provision for relocation and consolidation of
operations which reduced operating profit in North America by $2.7
million and in Europe by $.9 million.
16. Financial Instruments:
---------------------
Off-Balance Sheet Risk:
----------------------
The Company had $992 in forward exchange contracts outstanding as of
November 28, 1993 to hedge accounts receivable denominated in Canadian
dollars. No forward exchange contracts were outstanding as of November
29, 1992. The forward exchange contracts generally have maturities which
do not exceed six months and require the Company to exchange Canadian
dollars for U.S. dollars at maturity at rates agreed to at the inception
of the contracts. Letters of credit are issued by the Company during the
ordinary course of business through major domestic banks as required by
certain vendor contracts. As of November 28, 1993 and November 29, 1992,
the Company had outstanding letters of credit for $511 and $1,426,
respectively.
<PAGE>
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(In thousands except share and per share amounts)
16. Financial Instruments, continued:
---------------------
Concentrations of Credit Risk:
-----------------------------
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of temporary cash
investments and trade receivables. The Company places its temporary cash
investments ($7.3 million and $4.5 million at November 28, 1993 and
November 29, 1992, respectively) with quality financial institutions and,
by policy, limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising
the Company's customer base, and their dispersion across many different
industries and geographies. Generally, the Company does not require
collateral or other security to support customer receivables.
Fair Value:
----------
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
Cash and cash equivalents -
-------------------------
The carrying amount approximates fair value because of the short
maturity of these instruments.
Debt (excluding capital lease obligations) -
------------------------------------------
The fair value of the Company's debt is estimated based on the
current rates offered to the Company for debt of the same remaining
maturities.
Forward exchange contracts -
--------------------------
The fair value of forward exchange contracts (used for hedging
purposes) approximates fair value because of the short maturity of
these instruments.
The estimated fair values of the Company's financial instruments at
November 28, 1993 are as follows:
Carrying Fair
Amount Value
-------- -----
Cash and cash equivalents $10,778 $10,778
Debt (excluding capital
lease obligations) 4,161 4,324
Forward exchange contracts 992 992
<PAGE>
<PAGE> 47
<TABLE>
<CAPTION>
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
for the fiscal years 1993, 1992 and 1991
Column A Column B Column C Column D Column E
-------- -------- -------- Deductions Balance at End of Period
---------- ------------------------
Balance at (1) (2) (1) (2)
Beginning Amounts Amounts Not
Name of Debtor Of Period Additions Collected Written Off Current Current
-------------- --------- --------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1993:
- ----
Ronald J. Naples, $582,644 - - - $48,773 $533,871 (A)
Chairman of the Board ======= ====== =======
and Chief Executive
Officer of the Company
1992:
- ----
Ronald J. Naples, $582,644 - - - - $582,644
Chairman of the Board ======= =======
and Chief Executive
Officer of the Company
1991:
- ----
Ronald J. Naples, $582,644 - - - - $582,644
Chairman of the Board ======= =======
and Chief Executive
Officer of the Company
<FN>
(A) The Company entered into an agreement with Mr. Naples pursuant to which the Company agreed to lend him each year, if he
so requests, an amount up to the total incremental taxes incurred by him for such year as a result of the vesting in him
of common stock under the Company's stock grant plan. Loans under this agreement at November 28, 1993 consist of the
following:
</TABLE>
<TABLE>
<CAPTION>
Outstanding Balance Due Date Interest Rate
------------------- -------- -------------
<S> <C> <C>
$ 48,773 2/07/94 4.64%
533,871 2/15/95 4.64%
--------
$582,644
========
<FN>
Interest is payable annually on December 31st. Such loans may be for terms of up to 10 years but are subject to
acceleration and mandatory prepayment in certain circumstances. The terms of the loans however, may be and have
been reset by mutual agreement of the parties at any time but not to exceed 10 years from origination of the subject
loan. Loans under this agreement are collateralized by common stock.
</TABLE>
<PAGE>
<PAGE> 48
<TABLE>
<CAPTION>
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT (A)
for the fiscal years 1993, 1992 and 1991
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other Balance at
Beginning Additions Changes (C) End of
Classification of Period at cost Retirements Add (Deduct) Period
-------------- --------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1993:
- ----
Land and land improvements $ 3,701 $ 43 $ - $ (46) $ 3,698
Buildings 16,779 721 10 (56) 17,434
Machinery and equipment 58,242 6,506 (E) 3,030 (F) - 61,718
Leasehold improvements 706 42 84 (3) 661
Construction in progress 2,412 3,027 (B) - - 5,439
------ ------ ----- ------ ------
TOTAL $81,840 $10,339 $3,124 $ (105) $88,950
====== ====== ===== ====== ======
1992:
- ----
Land and land improvements $ 4,055 - - $ (354) $ 3,701
Buildings 16,951 $ 240 $ 22 (390) 16,779
Machinery and equipment 56,350 4,046 (E) 1,101 (1,053) 58,242
Leasehold improvements 646 58 - 2 706
Construction in progress 754 1,658 (B) - - 2,412
------ ------ ----- ------ ------
TOTAL $78,756 $ 6,002 $1,123 $(1,795) $81,840
====== ====== ===== ====== ======
1991:
- ----
Land and land improvements $ 4,303 $ - - $ (248) $ 4,055
Buildings 16,701 852 $ 17 (585) 16,951
Machinery and equipment 52,210 6,411 (E) 719 (1,552) 56,350
Leasehold improvements 438 206 - - 646
Construction in progress 3,274 (2,520)(B) - - 754
------ ------ ----- ------ ------
TOTAL $76,926 $ 4,949 $ 736 $(2,385) (D) $78,756
====== ====== ===== ====== ======
<FN>
(A) Assets are depreciated on a straight-line basis. The estimated depreciable lives of the assets are as follows:
Factory buildings and components, 8 to 40 years
Machinery and equipment, 5 to 12 years
Autos and trucks, 4 years
Tools and dies, 6 years
Leasehold improvements, term of lease
(B) Represents net increase (decrease) for the year.
(C) Represents adjustments due to currency exchange rate changes for foreign assets and transfers between classification
accounts.
(D) Includes a $1,424 write-off of equipment in connection with the relocation and consolidation of certain manufacturing
and distribution operations.
(E) Increase attributable to machinery and equipment for new products and the upgrade, replacement and improvement of
existing manufacturing equipment.
(F) Attributable to the retirement of certain computer and manufacturing equipment, most of which was fully depreciated.
</TABLE>
<PAGE>
<PAGE> 49
<TABLE>
<CAPTION>
SCHEDULE VI. ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
for the fiscal years 1993, 1992 and 1991
(In thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions,
Balance at Charged to Other Balance at
Beginning Costs and Changes (A) End of
Classification of Period Expenses Retirements Add (Deduct) Period
-------------- ---------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1993:
- ----
Land improvements $ 352 $ 53 $ 405
Buildings 5,133 558 $ 5 $ (5) 5,681
Machinery and equipment 33,361 4,991 2,464 (C) 59 35,947
Leasehold improvements 339 47 84 (2) 300
------ ----- ----- ---- ------
$39,185 $5,649 $2,553 $ 52 $42,333
====== ===== ===== === ======
1992:
- ----
Land improvements $ 300 $ 52 - $ - $ 352
Buildings 4,624 555 $ 21 (25) 5,133
Machinery and equipment 29,878 5,031 983 (565) 33,361
Leasehold improvements 272 52 - 15 339
------ ----- ----- ---- ------
TOTAL $35,074 $5,690 $1,004 $(575) $39,185
====== ===== ===== ==== ======
1991:
- ----
Land improvements $ 252 $ 53 - $ (5) $ 300
Buildings 4,216 536 $ 17 (111) 4,624
Machinery and equipment 26,162 4,944 591 (637) 29,878
Leasehold improvements 158 113 - 1 272
------ ----- ----- ---- ------
TOTAL $30,788 $5,646 $ 608 $ 752 (B) $35,074
====== ===== ===== ==== ======
<FN>
(A) Includes adjustments due to currency exchange rate changes for foreign assets.
(B) Decrease due principally to a $718 write-off of equipment in connection with the
relocation and consolidation of certain manufacturing and distribution operations.
(C) Attributable to the retirement of certain computer and manufacturing equipment.
</TABLE>
<PAGE>
<PAGE> 50
<TABLE>
<CAPTION>
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years 1993, 1992 and 1991
(In thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
---------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expense Accounts Deductions Period
----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1993:
- ----
Allowance for doubtful accounts $2,587 $1,022 $ 3 $ 969 (A) $2,643
===== ===== === ===== =====
Reserve for inventory obsolescence $1,655 $1,598 - $1,017 $2,236
===== ===== ===== =====
1992:
- ----
Allowance for doubtful accounts $2,314 $1,182 (C) - $ 909 (A) $2,587
===== ===== ===== =====
Reserve for inventory obsolescence $1,788 $ 766 - $ 899 $1,655
===== ===== ===== =====
1991:
- ----
Allowance for doubtful accounts $1,870 $1,134 (B) $ - $ 690 (A) $2,314
===== ===== === ===== =====
Reserve for inventory obsolescence $2,214 $ 438 $ - $ 864 $1,788
===== ===== === ===== =====
<FN>
(A) Doubtful accounts written off, net of collection expenses.
(B) Increase principally due to provision for several doubtful accounts which were pending at the end of fiscal 1991.
(C) As in 1991, due to provision for several doubtful accounts pending at fiscal year end.
</TABLE>
<PAGE>
<PAGE> 51
<TABLE>
<CAPTION>
SCHEDULE X. SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the fiscal years 1993, 1992 and 1991
(In thousands)
Column A Column B
-------- --------
Item Charged to Costs and Expenses
---- -----------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $3,199 $2,825 $2,656
===== ===== =====
Depreciation and amortization
of intangible assets, pre-
operating costs and similar
deferrals:
Costs incurred in excess of
net assets acquired $ 505 $ 488 $ 466
===== ===== =====
Amortization of intangibles $1,276 $1,327 $1,302
===== ===== =====
Amortization of other assets $ 234 $ 53 $ 53
===== ===== =====
Taxes, other than income taxes:
Payroll taxes $3,791 $3,532 $3,319
===== ===== =====
Other taxes $ 569 $ 769 $ 781
===== ===== =====
Advertising costs $6,905 $6,120 $5,928
===== ===== =====
</TABLE>
<PAGE>
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 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.
Dated: February 22, 1994 By: /s/ Ronald J. Naples
--------------------------
Ronald J. Naples
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on behalf of the registrant and in the
capacities and on the dates indicated:
/s/ Ronald J. Naples
- ------------------------------ February 22, 1994
Ronald J. Naples
Chairman of the Board and
Chief Executive Officer
/s/ William E. Chandler
- ------------------------------ February 22, 1994
William E. Chandler
Senior Vice President,
Finance (Principal Financial and
Accounting Officer)
/s/ Vincent G. Bell, Jr.
- ------------------------------ February 22, 1994
Vincent G. Bell, Jr.
Director
/s/ Jack Farber
- ------------------------------ February 22, 1994
Jack Farber
Director
/s/ Robert B. Fritsch
- ------------------------------ February 22, 1994
Robert B. Fritsch
Director
/s/ William F. Hamilton, Ph.D.
- ------------------------------ February 22, 1994
William F. Hamilton, Ph.D.
Director
<PAGE>
<PAGE> 53
/s/ Mary R. Henderson
- ------------------------------ February 22, 1994
Mary R. (Nina) Henderson
Director
/s/ Gordon A. MacInnes, Jr.
- ------------------------------ February 16, 1994
Gordon A. MacInnes, Jr.
Director
/s/ Wilson D. McElhinny
- ------------------------------
Wilson D. McElhinny February 22, 1994
Director
/s/ Robert H. Rock
- ------------------------------ February 22, 1994
Robert H. Rock
Director
/s/ Roderic H. Ross
- ------------------------------ February 22, 1994
Roderic H. Ross
Director
- ------------------------------ February , 1994
Victoria B. Vallely
Director
<PAGE>
<PAGE>
<PAGE> 54
EXHIBIT INDEX
(Exhibits being filed with this Form 10-K)
(10) Material contracts:
(10)(f) 1994 Non-Employee Directors'
Stock Option Plan.
(10)(i) (1) Form of Change in Control
Agreement between the Company and
various officers of the Company
(incorp. by ref. to Ex. 10(h) to
fiscal 1992 Form 10-K and (2) list of
executive officers who are parties.
(10)(j) Employment-Severance Arrangement
between the Company and William E.
Chandler.
(11) Statement re: computation of per share earnings.
(21) Subsidiaries.
(23) Consent of Coopers and Lybrand to
incorporation by reference, in
Registration Statement No.s 33-70660,
33-25947, 33-6359 and 2-83144 on Form S-8,
of their report on the consolidated financial
statements and schedules included in this
report.
<PAGE>
<PAGE>
<PAGE> 55
EXHIBIT 10(f)
HUNT MANUFACTURING CO.
1994 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
1. Purpose
This 1994 Non-Employee Directors' Non-Qualified Stock Option Plan
(the "Plan") is intended to provide a means whereby Hunt Manufacturing Co.
(the "Company") through the grant to Non-Employee Directors (as defined in
Section 3 herein) of non-qualified stock options ("Options") to purchase
common shares of the Company, may attract and retain capable independent
directors and motivate them to promote the best interests of the Company and
Related Corporations.
For purposes of the Plan, a Related Corporation of the Company shall
mean either a corporate subsidiary of the Company, as defined in section
424(f) of the Internal Revenue Code of 1986, as amended ("Code"), or the
corporate parent of the Company, as defined in section 424(e) of the Code.
2. Administration
The Plan shall be administered by the Company's Compensation
Committee (the "Committee"), which shall consist of not less than two
directors of the Company who shall be appointed by, and shall serve at the
pleasure of, the Company's Board of Directors (the "Board"). Each member of
such Committee, while serving as such, shall be deemed to be acting in his or
her capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the
Plan, to interpret the Plan, but shall have no discretion with respect to the
selection of Non-Employee Directors to receive Options, the number of shares
subject to the Plan, setting the purchase price for shares subject to an
Option at other than fair market value, the method or methods for determining
the amount of Options to be granted to each Non-Employee Director, the timing
of grants hereunder or with respect to any other matter which would cause this
Plan to fail to comply with Rule 16b-3 under the Securities Exchange Act of
1934 (the "Exchange Act"). Subject to the foregoing, the Committee may
correct any defect, supply any omission and reconcile any inconsistency in
this Plan and in any Option granted hereunder in the manner and to the extent
it shall deem desirable. The Committee also shall have the authority to
establish such rules and regulations, not inconsistent with the provisions of
the Plan, for the proper administration of the Plan, and to amend, modify or
rescind any such rules and regulations, and to make such determinations and
interpretations under, or in connection with, the Plan, as it deems necessary
or advisable. All such rules, regulations, determinations and interpretations
shall be binding and conclusive upon the Company, its shareholders and all
Non-Employee Directors (including former Non-Employee Directors), and upon
their respective legal representatives, beneficiaries, successors and assigns
and upon all other persons claiming under or through any of them.
<PAGE>
<PAGE> 56
No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted under it.
3. Eligibility
The persons who shall be eligible to receive Options under the Plan
shall be Non-Employee Directors, which term shall mean those directors of the
Company who:
(i) are not employees of the Company or any Related Corporation;
and
(ii) have not been employees of the Company or any Related
Corporation during the immediately preceding 12-month period.
4. Stock Subject to the Plan
Options may be granted under the Plan to purchase up to a maximum of
90,000 Common Shares, par value $.10 per share ("Common Shares" or "Shares"),
subject to adjustment as provided in Section 7 herein. Shares issuable under
the Plan may be authorized but unissued Shares or reacquired Shares, and the
Company may purchase Shares required for this purpose, from time to time, if
it deems such purchase to be advisable.
If any Option granted under the Plan expires or otherwise
terminates, in whole or in part, for any reason whatever (including, without
limitation, a Non-Employee Director's surrender thereof) without having been
exercised, the Shares subject to the unexercised portion of such Option shall
continue to be available for the granting of Options under the Plan as fully
as if such Shares had never been subject to an Option.
5. Granting of Options
Subject to Section 9 herein, an Option to purchase 5,000 Shares (as
adjusted pursuant to Section 7 herein) automatically shall be granted:
(i) On January 26, 1994 to each director who is a Non-Employee
Director on such date; and
(ii) Upon the date a person who was not a Non-Employee Director on
January 26, 1994 subsequently becomes a Non-Employee Director, whether by
reason of his or her subsequent election by shareholders, appointment by
the Board to be a director or, if applicable, the expiration of the 12-
month period specified in Section 3(ii) herein with respect to a present
or future director who had previously been an employee of the Company or
any Related Corporation; provided, however, that if a Non-Employee
Director who previously received a grant of Options ceases to be a Non-
Employee Director but subsequently again becomes a Non-Employee Director,
such person shall not be eligible to receive a second grant of Options
under this Section 5.
<PAGE>
<PAGE> 57
6. Terms and Conditions of Options
Options granted pursuant to the Plan shall be non-qualified Options
not intended to qualify under section 422 of the Code and shall be subject to
the following terms and conditions:
(a) Price. The exercise price shall be the greater of 100% of the
fair market value of the optioned Shares, or the par value thereof, on the
date the Option is granted. As used in the Plan, fair market value shall
mean: (i) if the principal market for the Shares is a registered securities
exchange, the mean between the highest and lowest quoted selling prices of
such Shares on such exchange on the date of grant, or, if there are no such
reported sales on that date but there are sales on dates within a reasonable
period both before and after the date of grant, the weighted average of the
means between the highest and lowest sales on the nearest date before and the
nearest date after the date of grant, or (ii) if clause (i) above is
inapplicable, such other method of determining fair market value as shall be
authorized by the Code, or the rules or regulations thereunder, and adopted by
the Committee.
Where the fair market value of the optioned Shares is determined
under clause (i) above, the average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant shall be weighted inversely by the respective numbers of trading days
between the selling dates and the date of grant (i.e., the valuation date), in
accordance with Treas. Reg. * 20.2031-2(b)(1).
(b) Term. Subject to earlier termination as provided in Subsection
(d) below and in Section 7 herein, the stated term of each Option shall be ten
years from the date of grant.
(c) Exercise. Options shall be exercisable in five equal annual
installments commencing one year after the date of grant. Except as otherwise
provided in Subsections (d) and (e) below and Section 7 herein, Options shall
only be exercisable by a Non-Employee Director while he or she remains a
director of the Company. Any Option Shares, the right to the purchase which
has accrued, may be purchased at any time up to the expiration or termination
of the Option. Exercisable Options may be exercised, in whole or in part,
from time to time by giving written notice of exercise to the Company at its
principal office, specifying the number of Shares to be purchased and
accompanied by payment in full of the aggregate price for such Shares. Only
full Shares shall be issued under the Plan, and any fractional Share which
might otherwise be issuable upon exercise of an Option granted hereunder shall
be forfeited.
The Option price shall be payable in cash or its equivalent.
(d) Effect of Ceasing to be a Director. If a Non-Employee Director
ceases to be a director of the Company for any reason, his or her then
outstanding Option shall continue to mature in accordance with its terms
(except that if such cessation is due to death, such then outstanding Option
immediately shall accelerate and become exercisable in full), and shall remain
outstanding and exercisable, but only for a period of one year following such
cessation as a director or until the earlier expiration of the stated term of
such Option or its earlier termination pursuant to Section 7 herein.
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(e) Non-Transferability. No Option shall be assignable or
transferable by a Non-Employee Director otherwise than by will or by the laws
of descent and distribution, and during the lifetime of a Non-Employee
Director, his or her Option shall be exercisable only by him or her or by his
or her guardian or legal representative. If a Non-Employee Director is
married at the time of exercise and if the Non-Employee Director so requests
at the time of exercise, the certificate or certificates for the Option Shares
shall be registered in the name of the Non-Employee Director and the Non-
Employee Director's spouse, jointly, with right of survivorship.
(f) Rights as a Shareholder. A holder of an Option shall have no
rights as a shareholder with respect to any Shares covered by such Option
until the issuance of a stock certificate for such Shares to such holder.
(g) Listing and Registration of Shares. Each Option shall be
subject to the requirement that, if at any time the Committee shall determine,
in its discretion, that the listing, registration or qualification of the
Shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the
granting of such Option or the purchase of Shares thereunder, or that action
by the Company or by the Non-Employee Director should be taken in order to
obtain an exemption from any such requirement, no such Option may be
exercised, in whole or in part, unless and until such listing, registration,
qualification, consent, approval, or action shall have been effected,
obtained, or taken under conditions acceptable to the Committee. Without
limiting the generality of the foregoing, each Non-Employee Director or his or
her legal representative or beneficiary may also be required to give
satisfactory assurance that Shares purchased upon exercise of an Option are
being purchased for investment and not with a view to distribution, and
certificates representing such Shares may be legended accordingly.
(h) Option Agreements. Options granted under the Plan shall be
evidenced by a written document or documents (an "Option Agreement") in such
form as the Committee shall, from time to time, approve, which Option
Agreement shall contain such provisions, not inconsistent with the provisions
of the Plan as the Committee shall deem advisable. Each Non-Employee Director
shall enter into, and be bound by, an Option Agreement.
7. Capital Adjustments, Acceleration and Cancellation of Options
The number of Shares which may be issued under the Plan, as stated
in Section 4 herein, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the Option price per Share
under such outstanding Options), shall, subject to the provisions of section
424(a) of the Code, be adjusted proportionately to reflect any stock dividend,
stock split, share combination, or similar change in the capitalization of the
Company.
In the event of a corporate transaction (as that term is described
in section 424(a) of the Code and the Treasury Regulations issued thereunder,
such as, for example, a merger, consolidation, acquisition of property or
stock, separation, reorganization, or liquidation), and, provision is not made
for the continuance and assumption of Options under the Plan, or the
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substitution for such Options of new Options to acquire securities or other
property to be delivered in connection with the transaction, all unexercised
Options shall accelerate and become fully exercisable, but all unexercised
Options shall terminate on the day immediately prior to the consummation of
such corporate transaction. The Committee shall give the holders of
outstanding Options not less than ten days prior written notice of any such
acceleration and termination pursuant to this Section 7, and such outstanding
Options thereafter may be exercised in whole or in part up to and including
the date of such termination or until their earlier stated expiration date or
their earlier termination pursuant to Section 6(d) herein.
8. Amendment or Discontinuance of the Plan
The Board from time to time may suspend or discontinue the Plan or
amend it in any respect whatsoever; provided, however, that an amendment to
the Plan shall require shareholder approval (given in compliance with Rule
16b-3 under the Exchange Act) if such amendment would materially:
(i) increase the benefits accruing to Non-Employee Directors
under the Plan;
(ii) increase the number of Shares which may be issued to Non-
Employee Directors under the Plan other than as provided in Section
7 herein; or
(iii)modify the requirements as to eligibility to participate
in the Plan.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder. Further, the provisions of the
Plan establishing the directors eligible to receive Options under the Plan,
the timing of the grants of such Options, the purchase price for Shares
subject to Options, the number of Shares covered by each Option, the method or
methods for determining the amount of Options to be granted to each Non-
Employee Director, and any other provision of the Plan which, if amended more
than once every six months, would cause the Plan to fail to comply with Rule
16b-3 under the Exchange Act, shall not be amended more than once every six
months.
9. Effective Date and Duration
The Plan shall become effective on January 26, 1994, the date on
which it was adopted by the Board; provided, however, that if the Plan is not
approved by the shareholders of the Company in the manner required by Rule
16b-3 under the Exchange Act within one year after said date, the Plan and all
Options granted hereunder shall be null and void.
Unless earlier terminated as provided in the Plan, the Plan shall
terminate absolutely at 12:00 midnight on January 25, 2004, and no Options
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hereunder shall be granted thereafter. Nothing contained in this Section 9,
however, shall terminate or affect the continued existence of rights created
under Options issued hereunder and then outstanding which by their terms
extend beyond such date.
10. Miscellaneous
(a) Governing Law. The operation of, and the rights of Non-
Employee Directors under, the Plan, the Option Agreements and any Options
granted hereunder shall be governed by applicable Federal law, and otherwise
by the laws of the Commonwealth of Pennsylvania.
(b) Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to be
granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option, and then his or her
rights shall be only such as are provided by the Option Agreement.
(c) Application of Funds. The proceeds received by the Company
from the sale of Shares pursuant to Options granted under the Plan shall be
used for general corporate purposes.
(d) No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon a Non-Employee Director to exercise such
Option.
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EXHIBIT 10(i)(2)
The Company has Change in Control Agreements (with the indicated
variations on pp. 7 and 8) in essentially the form attached with various of
its officers, including the following executive officers:
Executive Officers
------------------
Name Title
---- -----
Ronald J. Naples Chairman and Executive Officer
John W. Carney Vice President, Human Resources
William E. Chandler Senior Vice President, Finance (Chief Financial
Officer) and Secretary
Roy M. Delizia Vice President, Corporate Planning and
Development
Robert B. Fritsch President and Chief Operating Officer
Spencer W. O'Meara Vice President and General Manager
W. Ernest Precious Vice President and General Manager
Robert K. Scribner Vice President and General Manager
Eugene A. Stiefel Vice President, Information Services
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EXHIBIT 10(j)
WILLIAM E. CHANDLER
-------------------
Severance Arrangement
The Company has a severance arrangement with William E. Chandler, Senior
Vice President, Finance and Chief Financial Officer of the Company. Under the
terms of this arrangement the Company is obligated to pay Mr. Chandler
severance equivalent to up to two years' base compensation if he is terminated
within varying periods up to five years from his date of hire (September 1992)
as a result of top management turnover or for any other reason other than his
death, disability, voluntary resignation or discharge for cause. Mr. Chandler
also is party to a Change in Control Agreement with the Company (see Exhibit
10(h) to the Company's fiscal 1992 Annual Report on Form 10-K), and in the
event of a termination of Mr. Chandler's employment which is covered under the
terms of such Change in Control Agreement, the terms of that Change in Control
Agreement would supersede the severance arrangement previously described in
this paragraph.
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Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share earnings)
Nov. 28, 1993 Nov. 29, 1992 Dec. 1, 1991
------------- ------------- ------------
PRIMARY PER SHARE EARNINGS
- --------------------------
Earnings applicable
to primary per
share earnings $14,928 $13,302 $ 9,586
======= ======= =======
Average number of
common shares
outstanding 16,107 16,104 16,080
Add - common equivalent
shares representing
shares issuable upon
exercise of stock
options and stock
grants 146 112 127
Average shares used to ------- ------- -------
calculate primary
per share earnings 16,253 16,216 16,207
======= ======= =======
Primary per share
earnings $ .92 $ .82 $ .59
======= ======= =======
FULLY DILUTED PER SHARE EARNINGS
- --------------------------------
Earnings applicable to
fully diluted per
share earnings $14,928 $13,302 $ 9,586
======= ======= =======
Average number of
common shares
outstanding 16,107 16,104 16,080
Add - common equivalent
shares representing
shares issuable upon
exercise of stock
options and stock
grants 167 132 139
Average shares used to ------- ------- -------
calculate fully diluted
per share earnings 16,274 16,236 16,219
======= ======= =======
Fully diluted per share
earnings $ .92 $ .82 $ .59
======= ======= =======
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EXHIBIT 21
SUBSIDIARIES
OF
HUNT MANUFACTURING CO.
----------------------
Hunt Holdings, Inc., a Delaware Corporation
Hunt X-Acto, Inc., a Pennsylvania Corporation
Bevis Custom Furniture, Inc., an Alabama Corporation
Seal Products, Inc., a Delaware Corporation
Hunt Europe, Ltd., a United Kingdom Corporation
The Company holds all of the outstanding capital stock of Hunt Holdings, Inc.
Hunt Holdings, Inc., in turn, holds all of outstanding capital stock of Hunt
X-Acto, Inc., Bevis Custom Furniture, Inc., Seal Products, Inc. and Hunt
Europe, Ltd.
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Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in Registration
Statements Number 33-70660, Number 33-25947, Number 33-6359 and
Number 2-83144 on Form S-8 dated October 21, 1993, December 7,
1988, June 29, 1986 and April 8, 1983, respectively, of our report
dated January 17, 1994 on our audits of the consolidated financial
statements and financial statement schedules of Hunt Manufacturing
Co. (Company) as of November 28, 1993 and November 28, 1992 and for
each of the three years in the period ended November 28, 1993 which
report is included in the Company's Annual Report on Form 10-K.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1994
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