<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 26, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
HUNT MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
Pennsylvania 21-0481254
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Square 2005 Market Street, Philadelphia, PA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (215) 656-0300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of April 3, 1995 there were outstanding 15,965,222 shares of the registrant's
common stock.
<PAGE> 2
HUNT MANUFACTURING CO.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
---------------------
Item 1 - Financial Statements
--------------------
Condensed Consolidated Balance Sheets as of
February 26, 1995 and November 27, 1994 3
Condensed Consolidated Statements of Income -
Three Months ended February 26, 1995 and
February 27, 1994 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended February 26, 1995 and
February 27, 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 7-9
---------------------------------------------
PART II - OTHER INFORMATION
-----------------
Item 5 - Other Information 10
-----------------
Item 6 - Exhibits and Reports on Form 8-K 11
--------------------------------
Signatures 12
----------
Exhibit Index 13
-------------
Exhibit 11 - Computation of Per Share Earnings 14
----------------------------------------------
Exhibit 27 - Financial Data Schedule 15
------------------------------------
<PAGE> 3
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Hunt Manufacturing Co.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
February 26, November 27,
ASSETS 1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................................. $ 7,186 $ 13,807
Accounts receivable, less allowance for doubtful
accounts: 1995, $2,866; 1994, $2,510 .................................................... 41,582 41,390
Inventories:
Raw materials ......................................................................... 11,786 10,501
Work in process ....................................................................... 6,409 5,807
Finished goods ........................................................................ 18,620 17,242
--------- ---------
Total inventories ................................................................... 36,815 33,550
Deferred income taxes ..................................................................... 5,577 5,051
Prepaid expenses and other current asse ................................................... 1,614 1,520
--------- ---------
Total current assets ................................................................ 92,774 95,318
Property, plant and equipment, at cost, less accumulated depreciation and
amortization:
1995, $47,660; 1994, $46,163 ................................................................. 50,089 49,729
Intangible assets, net ......................................................................... 25,568 25,982
Other assets ................................................................................... 2,784 2,356
--------- ---------
Total assets .................................................................. $ 171,215 $ 173,385
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ......................................................... $ 768 $ 1,003
Accounts payable .......................................................................... 9,213 9,782
Accrued expenses:
Salaries, wages and commissions ......................................................... 3,448 5,742
Income taxes ............................................................................ 4,644 4,464
Insurance ............................................................................... 2,313 2,430
Compensated absences .................................................................... 1,699 1,741
Other ................................................................................... 5,230 5,553
--------- ---------
Total current liabilities ........................................................... 27,315 30,715
Long-term debt, less current portion ........................................................... 3,559 3,559
Deferred income taxes .......................................................................... 5,039 4,331
Other non-current liabilities .................................................................. 4,686 5,546
--------- ---------
Total liabilities ............................................................. 40,599 44,151
--------- ---------
Stockholders' equity:
Preferred stock, $.10 par value, authorized 1,000,000
shares (including 50,000 shares of Series A Junior
Participating Preferred); none issued ................................................... -- --
Common stock, $.10 par value, 40,000,000 shares
authorized; issued: 1995 -16,152,322 shares;
1994 - 16,130,068 shares ................................................................ 1,615 1,613
Capital in excess of par value ............................................................ 6,426 6,217
Cumulative translation adjustment ......................................................... (313) (639)
Retained earnings ......................................................................... 124,034 122,518
--------- ---------
131,762 129,709
Less cost of treasury stock:
1995 - 98,900 shares; 1994 - 29,945 shares .................................................... (1,146) (475)
--------- ---------
Total stockholders' equity .................................................... 130,616 129,234
--------- ---------
Total liabilities and Stockholders' Equity ................................. $ 171,215 $ 173,385
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
Hunt Manufacturing Co.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended
--------------------------
February 26, February 27,
1995 1994
------------ ------------
<S> <C> <C>
Net sales ................................................................. $ 70,530 $ 64,550
Cost of sales ............................................................. 44,888 39,395
-------- --------
Gross profit ........................................................... 25,642 25,155
Selling and shipping expenses ............................................. 13,905 13,362
Administrative and general
expenses ................................................................. 6,513 6,867
-------- --------
Income from operations .................................................. 5,224 4,926
Interest expense .......................................................... 28 71
Other expense (income), net ............................................... (75) 50
-------- --------
Income before income taxes and cumulative
effect of accounting change ......................................... 5,271 4,805
Provision for income taxes ................................................ 1,924 1,802
-------- --------
Income before cumulative effect of
accounting change ................................................... 3,347 3,003
Cumulative effect of change in
accounting for income taxes ......................................... -- 795
-------- --------
Net income ............................................................. $ 3,347 $ 3,798
======== ========
Average shares of common
stock outstanding ...................................................... 16,118 16,114
======== ========
Earnings per common share:
Income before cumulative effect of
accounting change ................................................... $ 0.21 $ 0.19
Cumulative effect of change in
accounting for income taxe ......................................... -- 0.05
-------- --------
Net income per share ...................................................... $ 0.21 $ 0.24
======== ========
Dividends per common share ................................................ $ 0.095 $ 0.090
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
Hunt Manufacturing Co. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
February 26, February 27,
1995 1994
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................................. $ 3,347 $ 3,798
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................................... 2,250 2,215
Cumulative effect of change in accounting
for income taxes ............................................................... -- (795)
Deferred income taxes ............................................................. 184 --
Loss on disposal of property, plant and equipment ................................. 26 49
Payments relating to relocation and consolidation of
operations .................................................................... (18) (63)
Issuance of stock under management incentive bonus
and stock grant plans ......................................................... 152 184
Changes in operating assets and liabilities ....................................... (7,811) (4,425)
--------- ---------
Net cash provided by (used for) operating activities ......................... (1,870) 963
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment .......................................... (2,002) (2,025)
Other, net .......................................................................... -- (22)
--------- ---------
Net cash used for investing activities ....................................... (2,002) (2,047)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt, including current maturities ............................ (234) (235)
Purchases of treasury stock ......................................................... (1,189) --
Proceeds from exercise of stock options ............................................. 274 93
Dividends paid ...................................................................... (1,530) (1,450)
Other, net .......................................................................... (46) (68)
--------- ---------
Net cash used for financing activities ....................................... (2,725) (1,660)
--------- ---------
Effect of exchange rate changes on cash ................................................ (24) --
--------- ---------
Net decrease in cash and cash equivalents .............................................. (6,621) (2,744)
Cash and cash equivalents, beginning of period ......................................... 13,807 10,778
--------- ---------
Cash and cash equivalents, end of period ............................................... $ 7,186 $ 8,034
========= =========
Supplemental disclosures of cash flow information:
Interest paid ....................................................................... $ 94 $ 82
Income taxes paid ................................................................... 1,579 843
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
Hunt Manufacturing Co.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed consolidated financial statements and related
notes are unaudited; however, in management's opinion all adjustments
(consisting primarily of normal recurring accruals) necessary for a fair
presentation of the financial position at February 26, 1995 and the results
of operations and cash flows for the periods shown have been made. Such
statements are presented in accordance with the requirements of Form 10-Q
and do not include all disclosures normally required by generally accepted
accounting principles or those normally made in the Form 10-K.
2. The earnings per share are calculated based on the weighted average number
of common shares outstanding. Shares issuable under outstanding stock
option, stock grant and long-term incentive compensation plans are common
stock equivalents, but are not used in computing earnings per share because
the dilutive effect would be less than 3%.
3. Effective November 29, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." The
adoption of SFAS No. 109 changed the Company's method of accounting for
income taxes from the deferred method under Accounting Principles Board
Opinion No. 11 to an asset and liability approach. The effect of adopting
SFAS No. 109 was recognized immediately as the effect of a change in
accounting principle and increased net income in the first quarter of fiscal
1994 by $795,000 or $.05 per share. The increase in net income results
primarily from adjusting deferred tax balances to current tax rates.
<PAGE> 7
Item 2. Management's Discussions and Analysis of Financial Condition
and Results of Operations
Financial Condition
In the first quarter of fiscal 1995, the Company's working capital position
showed improvement compared to the Company's 1994 fiscal year end, increasing to
$65.5 million at February 26, 1995 from $64.6 million at November 27, 1994. The
Company also continued to reduce its percentage of debt to equity (down to 3.3%
from 3.5%) and increase its current ratio (up to 3.4 from 3.1) at those
respective dates. Cash flows of $1.9 million were used for operating activities
in the first quarter of fiscal 1995 due primarily to a reduction of current
liabilities combined with an increase in inventories, discussed below. Available
cash balances were used to fund additions to property, plant and equipment of
$2.0 million, pay cash dividends of $1.5 million and to purchase approximately
86,000 shares of the Company's common stock for $1.2 million for use in the
Company's various compensation plans.
At the end of the first quarter of fiscal 1995, current assets decreased to
$92.8 million from $95.3 million at the end of fiscal 1994 largely as a result
of a $6.6 million decrease in cash attributable, in part, to the uses of cash
mentioned in the discussion of cash flows above. Inventories grew from $33.6
million at November 27, 1994 to $36.8 million at February 26, 1995, primarily as
a result of lower than anticipated sales of certain office products, such as
mechanical and electromechanical products, but also due to higher inventories
needed to service increases in sales of presentation graphics products and
office furniture. In addition, there was an increase in some raw material
purchases in advance of future supplier price increases.
Current liabilities of $27.3 million at the end of the first quarter of fiscal
1995 decreased from $30.7 million at the end of fiscal 1994. This was largely
attributable to a decrease in accrued salaries, wages and commissions from $5.7
million at fiscal year end 1994 to $3.4 million at the end of the first fiscal
quarter of 1995 largely as a result of the payment of incentive compensation in
the first quarter of fiscal 1995 which had been accrued at the end of fiscal
1994.
There were no borrowings under the Company's line-of-credit agreements of $45
million at February 26, 1995. Management expects that cash generated from
operations, other available cash, and credit agreements will be sufficient to
meet the Company's currently anticipated working capital and other investing and
financing needs.
Results of Operations
Net Sales
Record first quarter net sales of $70.5 million for fiscal 1995 grew 9.3% from
$64.6 million in the first quarter of fiscal 1994. This increase was primarily
driven by higher unit volume as prices remained essentially unchanged.
<PAGE> 8
Net Sales, continued
The increase in sales resulted from a 13.3% increase in sales of art/craft
products, which grew to $30.8 million from first quarter of fiscal 1994 sales of
$27.2 million, and a 6.4% increase in sales of office products, which grew to
$39.8 million compared to the first quarter of fiscal 1994 sales of $37.4
million.
The growth in sales of presentation graphics products had the most impact on the
increase in art/craft sales for the first quarter of fiscal 1995. Sales of these
products increased 20.9% from the first quarter of fiscal 1994 largely due to
higher sales in Europe, growth in the digital imaging market and increases in
sales of certain mounting and laminating products. Sales of hobby/craft products
increased 13.9% in the first quarter aided by some new craft products but were
offset by an 8.1% decrease in sales of art supplies resulting chiefly from lower
sales of the Company's X-Acto(R) brand products.
First quarter fiscal 1995 export sales of art/craft products were down 2.7%
compared to the first quarter of fiscal 1994 largely as a result of the currency
exchange effect of a weaker Canadian dollar. Excluding this effect, export sales
of these products for the first quarter were flat. Foreign sales of art/craft
products (predominantly presentation graphics in Europe) increased 36.1% in the
first quarter of fiscal 1995 compared to the same period of fiscal 1994. Some of
this increase is a result of the exchange effect of a stronger British pound.
Office products sales increases in the first quarter of fiscal 1995 were
attributable to significant increases in sales of office furniture (up 25.4%)
and desktop accessories and supplies (up 16.6%) compared to the first quarter of
fiscal 1994. These increases were partially offset by a decrease in sales of
mechanical and electromechanical products (down 9%). The increase in furniture
sales was primarily a result of higher sales of Bevis(R) brand furniture,
particularly computer-related furniture, folding tables and bookcases. A full
quarter of sales of Schwan-STABILO(R) highlighter markers in fiscal 1995,
compared to a partial quarter of sales in fiscal 1994, was the primarily cause
of the increase in sales of desktop accessories and supplies. (Sales resulting
from the Company's acquisition of distribution rights to these products started
in February 1994.) The decrease in sales of mechanical and electromechanical
products in the first quarter of fiscal 1995 versus the first quarter of fiscal
1994 was a result of several factors, the most significant of which was the
timing of orders and promotional activities from retail customers such as office
products superstores. Export sales of office products grew by 4.9% in the first
quarter of fiscal 1995 primarily as a result of higher sales in Canada. Some of
the effect of this increase was offset by the negative currency exchange impact
of a weaker Canadian dollar.
<PAGE> 9
Gross Profit
The Company's gross profit margin decreased to 36.4% of net sales in the first
quarter of fiscal 1995 from 39.0% in the first quarter of fiscal 1994. This
decrease was the result of the convergence of several factors: sales mix,
particularly higher sales of lower margin products such as certain office
furniture and presentation graphics products, higher raw material costs and flat
selling prices. Higher costs for commodities such as wood, paper, styrene
plastic and packaging materials have had the greatest impact on raw material
cost increases. Management expects these raw material price increases to
continue in 1995, but also anticipates some flexibility in the Company's ability
to raise its own selling prices later in the fiscal year as most of the
Company's competitors face the same cost increases.
Selling, Shipping, Administrative and General Expenses
Selling and shipping expenses decreased to 19.7% of net sales for the first
quarter of fiscal 1995 from 20.7% in the first quarter of fiscal 1994 largely
due to the implementation of process improvements which have resulted in both
lower commissions and transportation costs.
First quarter of fiscal 1995 administrative and general expenses were down 5.2%
compared to the first quarter of fiscal 1994 as a result of lower management
incentive compensation expenses, lower fringe benefits and a reduction in
consulting fees.
Interest Expense
Interest expense decreased to $28,000 for the first quarter of fiscal 1995 from
$71,000 for the first quarter of fiscal 1994 due to reductions in long-term
debt.
Provision for Income Taxes
The effective tax rate of the Company decreased to 36.5% for the first quarter
of fiscal 1995 from the 37.5% rate incurred in the first quarter of fiscal 1994.
This decrease was largely a result of lower state and local effective tax rates
and profitability improvements by the European operations, which could be offset
through the use of net operating loss carryforwards.
Accounting Change
In the first fiscal quarter of 1994, the Company adopted the provisions of SFAS
No. 109, "Accounting for Income Taxes," the cumulative effect of which increased
net income by $.8 million, or $.05 per share in that period.
<PAGE> 10
Item 5 - Other Information
On April 6, 1995, the Company announced that Ronald J. Naples, Chairman and
Chief Executive Officer, intends to relinquish his Chief Executive Officer title
after the Company's annual shareholder meeting on April 19. He will continue as
Chairman of the Board to assist in the transition to new leadership, expected to
be completed by mid-summer. Mr. Naples will remain available to the Company in
an advisory capacity for a period after stepping down as Chairman.
The Company's President, Robert B. Fritsch, will assume Chief Executive Officer
duties while the search for a new Chief Executive Officer is underway. Gordon A.
MacInnes, a long-time board member and chairman of the board's Executive
Committee, is expected to succeed Mr. Naples as Chairman of the Board.
<PAGE> 11
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the fiscal
quarter to which this report relates.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUNT MANUFACTURING CO.
Date April 6, 1995 By /s/ William E. Chandler
-----------------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial and Accounting
Officer)
Date April 6, 1995 By /s/ Ronald J. Naples
-----------------------------------
Ronald J. Naples
Chairman of the Board and
Chief Executive Officer
<PAGE> 13
EXHIBIT INDEX
Page
----
Exhibit 11 - Computation of Per Share Earnings 14
Exhibit 27 - Financial Data Schedule 15
<PAGE> 14
Exhibit 11
Computation of Per Share Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
February 26, February 27,
1995 1994
----------- -----------
<S> <C> <C>
Income before cumulative effect of
accounting change ........................................................ $ 3,347 $ 3,003
Cumulative effect of change in
accounting for income taxes .............................................. -- 795
------- -------
Net income .................................................................. $ 3,347 $ 3,798
======= =======
Primary per share earnings
- --------------------------
Average number of common shares
outstanding .............................................................. 16,118 16,114
Add - common equivalent shares representing shares
issuable upon exercise of stock options
and stock grants ......................................................... 87 189
------- -------
Average shares used to calculate
primary per share earnings ............................................... 16,205 16,303
======= =======
Primary per share earnings before
change in accounting for income
taxes .................................................................... $ 0.21 $ 0.18
======= =======
Cumulative effect of change in
accounting for income taxes .............................................. -- 0.05 *
------- -------
Net primary per share earnings .............................................. $ 0.21 $ 0.23
======= =======
Fully diluted per share earnings
- --------------------------------
Average number of common shares
outstanding .............................................................. 16,118 16,114
Add - common equivalent shares representing shares
issuable upon exercise of stock options
and stock grants ......................................................... 89 274
------- -------
Average shares used to calculate
fully diluted per share earnings ......................................... 16,207 16,388
======= =======
Fully diluted per share earnings
before change in accounting for
income taxes ............................................................. $ 0.21 $ 0.18
======= =======
Cumulative effect of change in
accounting for income taxes .............................................. -- 0.05 *
------- -------
Net fully diluted per share earnings ........................................ $ 0.21 $ 0.23
======= =======
</TABLE>
* The per share amounts pertaining to the cumulative effect of a change in
accounting for income taxes in 1994 were computed using the weighted average
number of common shares outstanding for the first quarter.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<CIK> 0000049146
<NAME> HUNT MANUFACTURING CO.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-03-1995
<PERIOD-START> NOV-28-1994
<PERIOD-END> FEB-26-1995
<EXCHANGE-RATE> .00001
<CASH> 7,186
<SECURITIES> 0
<RECEIVABLES> 44,448
<ALLOWANCES> (2,866)
<INVENTORY> 36,815
<CURRENT-ASSETS> 92,774
<PP&E> 97,749
<DEPRECIATION> (47,660)
<TOTAL-ASSETS> 171,215
<CURRENT-LIABILITIES> 27,315
<BONDS> 3,559
<COMMON> 1,615
0
0
<OTHER-SE> 129,001
<TOTAL-LIABILITY-AND-EQUITY> 171,215
<SALES> 70,530
<TOTAL-REVENUES> 70,530
<CGS> 44,888
<TOTAL-COSTS> 44,888
<OTHER-EXPENSES> 20,114
<LOSS-PROVISION> 229
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 5,271
<INCOME-TAX> 1,924
<INCOME-CONTINUING> 3,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,347
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
