<PAGE>
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 June 1, 1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
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HUNT MANUFACTURING CO.
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(Exact name of registrant as specified in its charter)
Pennsylvania 21-0481254
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Square 2005 Market Street, Philadelphia, PA 19103
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(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 July 8, 1997, there were outstanding 11,100,750 shares of the registrant's
common stock.
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HUNT MANUFACTURING CO.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
June 1, 1997 and December 1, 1996 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended June 1, 1997
and June 2, 1996 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 1, 1997 and June 2, 1996 5
Notes to Condensed Consolidated Financial
Statements 6 - 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 13
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE>
Part I - FINANCIAL INFORMATION Page 3
Item 1. Financial Statements
Hunt Manufacturing Co.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
June 1, December 1,
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,587 $ 1,528
Accounts receivable, less allowance for doubtful
accounts: 1997, $2,339 ; 1996, $1,809 43,999 48,912
Inventories:
Raw materials 10,361 10,888
Work in process 4,240 4,839
Finished goods 15,831 19,664
--------- ---------
Total inventories 30,432 35,391
Deferred income taxes 11,413 4,563
Prepaid expenses and other current assets 2,690 1,606
--------- ---------
Total current assets 93,121 92,000
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
1997, $45,351; 1996, $53,938 50,381 52,711
Intangible assets, net 33,814 24,977
Other assets 5,936 5,986
--------- ---------
Total assets $ 183,252 $ 175,674
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,746 $ --
Accounts payable 15,447 13,271
Accrued expenses:
Salaries, wages and commissions 3,384 5,284
Income taxes 6,173 3,770
Insurance 1,811 2,082
Compensated absences 2,238 2,145
Restructuring 6,343 --
Other 9,992 7,123
--------- ---------
Total current liabilities 47,134 33,675
Long-term debt, less current portion 62,675 64,559
Deferred income taxes 4,229 4,704
Other non-current liabilities 12,436 10,056
Commitments and contingencies
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: 1997 and 1996 -16,152,322 shares 1,615 1,615
Capital in excess of par value 6,434 6,434
Cumulative translation adjustment 239 894
Retained earnings 134,392 141,587
--------- ---------
142,680 150,530
Less cost of treasury stock:
1997 - 5,055,822 shares; 1996 - 5,178,127 shares (85,902) (87,850)
--------- ---------
Total stockholders' equity 56,778 62,680
--------- ---------
Total liabilities and stockholders' equity $ 183,252 $ 175,674
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Hunt Manufacturing Co.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
June 1, June 2, June 1, June 2,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 75,421 $ 81,225 $ 152,023 $ 154,893
Cost of sales 50,738 51,145 98,957 98,025
--------- --------- --------- ---------
Gross profit 24,683 30,080 53,066 56,868
Selling and shipping expenses 14,873 15,895 29,389 30,054
Administrative and general
expenses 8,666 7,686 17,982 14,709
Restructuring, impairment and other costs 10,913 -- 10,475 354
--------- --------- --------- ---------
(Loss) income from operations (9,769) 6,499 (4,780) 11,751
Interest expense 1,347 1,265 2,671 2,140
Other expense, net 213 194 207 214
--------- --------- --------- ---------
(Loss) income before income taxes (11,329) 5,040 (7,658) 9,397
(Benefit) provision for income taxes (4,335) 1,767 (3,063) 3,298
--------- --------- --------- ---------
Net (loss) income ($ 6,994) $ 3,273 ($ 4,595) $ 6,099
========= ========= ========= =========
Average shares of common
stock outstanding 11,055 10,968 11,031 11,954
========= ========= ========= =========
Net (loss) income per share ($ 0.63) $ 0.30 ($ 0.42) $ 0.51
========= ========= ========= =========
Dividends per common share $ 0.095 $ 0.095 $ 0.19 $ 0.19
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Hunt Manufacturing Co.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
June 1, June 2,
1997 1996
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (4,595) $ 6,099
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 4,588 4,689
Deferred income taxes (7,327) (45)
Loss on disposals of property, plant and equipment 131 451
Gain on sale of businesses (474) --
Provision (payments) for special charges, net 16,244 (1,029)
Issuance of stock under management incentive bonus
and stock grant plans 1,109 241
Changes in operating assets and liabilities, excluding
effects of acquisition and divestitures 7,548 (5,446)
-------- --------
Net cash provided by operating activities 17,224 4,960
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,410) (3,397)
Proceeds from sale of businesses 10,956 --
Acquisition of business (13,821) --
Other, net 20 (413)
-------- --------
Net cash used in investing activities (6,255) (3,810)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 13,000 76,200
Payments on long-term debt, including current maturities (19,147) (1,968)
Purchase of treasury stock -- (86,550)
Proceeds from exercise of stock options 332 69
Dividends paid (2,092) (2,084)
Other, net 35 (39)
-------- --------
Net cash used in financing activities (7,872) (14,372)
-------- --------
Effect of exchange rate changes on cash (38) 62
-------- --------
Net increase (decrease) in cash and cash equivalents 3,059 (13,160)
Cash and cash equivalents, beginning of period 1,528 15,503
-------- --------
Cash and cash equivalents, end of period $ 4,587 $ 2,343
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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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 of normal recurring accruals) necessary for a fair presentation of
the financial position at June 1, 1997 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 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%; however, Exhibit 11 to this report sets forth the
calculations of earnings per share amount on a primary and fully diluted per
share basis.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." The new statement replaces the "primary" and "fully diluted"
calculations currently used with "basic earnings per share" which includes only
actual shares outstanding and "diluted earnings per share" which includes the
effect of any common stock equivalents or other items that dilute earnings per
share. The new rules are effective for fiscal periods ending after December 15,
1997, with prior periods restated to comply with the new standards at that time.
If the Statement had been effective for the second quarter and first half of
fiscal 1997 and 1996, there would have been no significant change in earnings
per share as presented in the Condensed Consolidated Statements of Operations
and Exhibit 11 to this report.
3. In April, 1997, the Company announced a new strategy for growth and
restructuring plan designed to restore higher sales growth, profitability and to
reduce its cost structure. The cost reduction phase of the plan includes a
significant reduction of the Company's stock keeping units ("SKU's") and major
restructuring of its administrative and marketing and selling functions. In
conjunction with the implementation of the growth and restructuring plan, the
Company recorded a pre-tax charge to earnings of approximately $16.7 million in
the second quarter of fiscal 1997. This amount is allocated as follows in the
accompanying Condensed Consolidated Statements of Operations: $10.8 million to
restructuring and other costs as further described below and $5.9 million to
costs of sales related principally to inventory write downs and returns from the
reduction in SKU's. Amounts included in restructuring and other costs in the
accompanying Condensed Consolidated Statements of Operations represent cash and
non-cash items of $5.0 million and $5.8 million, respectively, and
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include employee severance costs, lease obligations, and other costs related to
the implementation of the growth and restructuring plan. Approximately $6.9
million of accrued cash items remain in the accompanying Condensed Consolidated
Balance Sheet at June 2, 1997.
4. During the first quarter of fiscal 1997, the Company realized a net gain of
$.5 million pre-tax, or $.03 per share after-tax, on the divestitures of its
Lit-Ning business and its Hunt Data Products' MediaMate and Calise' brand
products. The net gain is included in restructuring and other costs in the
accompanying Condensed Consolidated Statements of Operations.
5. In the first half of fiscal 1996, the Company recorded a pre-tax charge of
$.4 million, or $.02 per share after-tax, relating to the Company's fiscal 1995
decision to reorganize, and relocate and consolidate certain manufacturing and
distribution operations. This pre-tax charge is included in restructuring and
other costs for the fiscal 1996 first half in the accompanying Condensed
Consolidated Statements of Operations. Approximately $ .6 million of accruals
for organizational changes and relocations and consolidation of operations is
included in liabilities at the end of the second quarter of fiscal 1997, which
principally relates to future severance-related payments.
6. During the second quarter of fiscal 1997, the Company completed its
previously announced acquisition of all of the stock of Sallmetall B. V., a
Dutch company, for approximately $14 million and the assumption of debt of
approximately $6 million. Sallmetall's operations involve the design and
assembly of laminating equipment and related adhesive film coating
manufacturing. Sallmetall had sales of approximately $21 million for its fiscal
year ended December 31, 1996. The acquisition was accounted for under the
purchase method of accounting and was financed with borrowings under the
Company's existing credit facility and from internal cash generation. The
purchase price allocation is based upon preliminary appraisal values and
management's estimates and is subject to reclassifications and adjustments in
the future. Sallmetall's net sales were $2.8 million for the second quarter of
fiscal 1997, which are included under the art/craft business segment.
7. During the second quarter and first half of fiscal 1997, inventory quantities
were reduced, resulting 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 $459, or $.02 per share, and $759, or $.04 per share, in
the second quarter and first half of fiscal 1997, respectively.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion includes certain forward-looking statements. Such
forward-looking statements are subject to a number of factors, material risks
and uncertainties, including those referred to herein and in the Company's
Reports on Forms 10-K, 10-Q and 8-K and other filings with the Securities and
Exchange Commission ("SEC"), which could cause actual results to differ
materially from the forward-looking statements.
In April, 1997, the Company announced a new strategy for growth and
restructuring plan designed to restore higher levels of sales growth,
profitability and to reduce its cost structure. Reference is made to the
Company's Form 8-K filed with the SEC on April 8, 1997 for further information
concerning such plan. Management believes that the cost reduction portion of the
growth and restructuring plan will result in annual cost savings of
approximately $18.0 million. Such annual cost savings are expected to commence
in fiscal 1998, with approximately $8.0 million to be realized in fiscal 1997.
The cost savings will result primarily from a significant reduction of the
Company's SKU's and from a major restructuring of its administrative and
marketing and selling functions. Although the Company expects realization of
such cost savings, there is no assurance that these savings will be achieved.
The Company's operating results for the second quarter and first half of fiscal
1997 include the effects of a pre-tax special charge of $16.7 million recorded
in conjunction with the implementation of the growth and restructuring plan. The
special charge includes employee severance costs, asset and inventory
writedowns, recognition of future lease obligations, and other related costs.
Approximately 42% of this special charge is for cash items, of which $6.9
million remains in the accompanying Condensed Consolidated Balance Sheet at June
2, 1997. The Company anticipates that the total charge relating to this growth
and restructuring plan will range from $20 million to $23 million, or $1.08 to
$1.25 per share after-tax. The remaining portion of the special charge is
expected to be recognized over the balance of fiscal 1997. The special charge
for the second quarter and first half of fiscal 1997 is included in the
following categories in the Condensed Consolidated Statements of Operations (in
thousands):
Pre-Tax Dollar After-Tax
Amount Per Share Amount
-------------- ----------------
Restructuring and other costs $10,818 $.60
Cost of sales 5,895 .33
------- ---
Total $16,713 $.93
Other Developments
- ------------------
During the second quarter of fiscal 1997, the Company completed its previously
announced acquisition of all of the stock of Sallmetall B. V., a Dutch company,
for approximately $14 million and the assumption of debt of approximately $6
million. See Note 6 to Condensed Consolidated Financial Statements herein.
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Sallmetall's operations involve the design and assembly of laminating equipment
and related adhesive film coating manufacturing. Management believes that the
acquisition of this business will further strengthen the Company's position as a
leading global supplier of print finishing systems and expand its activity in
the growing market for wide format short-run digital imaging.
In connection with the Company's strategic assessment, at the end of the first
quarter of fiscal 1997 (on February 28, 1997), the Company sold its Lit-Ning
Products business and its Hunt Data Products MediaMate and Calise brand
products. The sales of these businesses resulted in a net pre-tax gain of $.5
million, or $.03 per share after-tax. The Condensed Consolidated Statements of
Operations for the six months ended June 1, 1997 include the results of these
businesses through the divestiture date. The combined sales of these business
units were approximately $12 million and $24 million in the first half of fiscal
1997 and fiscal year 1996, respectively. The Company intends to divest certain
other assets which do not fit with its new strategy, which may include
divestiture of the Company's Bevis furniture operations.
Financial Condition
- -------------------
The Company's working capital decreased to $46.0 million at the end of the
second quarter of fiscal 1997 from $58.3 million at the end of fiscal 1996. The
decrease was largely attributable to the Company's special charge related to its
growth and restructuring plan previously discussed. The current ratio decreased
to 2.0 at June 1, 1997 from 2.7 at December 1, 1996, and debt capitalization
increased to 53% at the end of the second quarter of fiscal 1997 from 51% at the
end of fiscal 1996 primarily attributable to the reduction in earnings as a
result of the growth and restructuring plan special charge described above.
Available cash balances were sufficient to fund additions to property, plant and
equipment of $3.4 million, pay cash dividends of $2.1 million, reduce net
long-term debt by $6.1 million, and to partially fund the acquisition of
Sallmetall B. V. of $2.0 million.
Current assets decreased slightly to $93.1 million at the end of the second
quarter of fiscal 1997 from $92.0 million at the end of fiscal 1996, largely as
a net result of lower inventory and accounts receivable balances, offset by
higher cash and cash equivalent balances and deferred income taxes. Inventories
decreased from $35.4 million at December 1, 1996 to $30.4 million at June 1,
1997, due principally to the $5.9 million inventory write downs associated with
the restructuring plan and to the business divestitures mentioned above.
Accounts receivable decreased to $44.0 million at the end of the second quarter
of fiscal 1997 from $48.9 million at the end of fiscal 1996 due to several
factors, including lower sales for the second quarter of fiscal 1997 as compared
with those for the fourth quarter of fiscal 1996, and to divestitures of
businesses at the end of the first quarter of fiscal 1997. The $6.9 million
increase in deferred income taxes was due to temporary differences between
financial reporting purposes and income tax reporting purposes in connection
with the restructuring charge.
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Page 10
Current liabilities increased to $47.1 million at the end of the second quarter
of fiscal 1997 from $33.7 million at the end of fiscal 1996. This increase was
largely attributable to the accrual associated with the restructuring charges
recorded in the second quarter of fiscal 1997, as well as to accruals associated
with the aforementioned business divestitures.
The effect of unfavorable currency exchange rates for the British pound sterling
(the functional currency of the Company's U. K. operations) was the principal
cause for the $.7 million decrease in the cumulative translation adjustment
account in stockholders' equity.
Management believes that funds generated from operations, combined with the
existing credit facility, will be sufficient to meet currently anticipated
working capital and other capital and debt service requirements. Should the
Company require additional funds, management believes that the Company could
obtain them at competitive costs. Management currently expects that total 1997
expenditures for additions to property, plant and equipment to increase capacity
and productivity will approximate $11.0 million, of which approximately $3.4
million has been expended through the first half of fiscal 1997.
Results of Operations
- ---------------------
Net Sales
Net sales of $75.4 million for the second quarter and $152.0 million for the
first half of fiscal 1997 declined 7.1% and 1.9%, respectively, from the
corresponding fiscal 1996 periods, largely due to the sale of the Lit-Ning and
Hunt Data Products businesses at the end of the first quarter of fiscal 1997.
Excluding the sales of the divested businesses, net sales were essentially
unchanged for the second quarter of fiscal 1997 and grew 3.2% in the first half
of fiscal 1997 when compared to the same periods in fiscal 1996. Net average
selling prices increased 2.8% in the second quarter and 2.3% in the first half
of fiscal 1997 from those in the same periods last year. Excluding the effect of
currency exchange rate changes, net selling prices increases for the second
quarter and first half of fiscal 1997 would have been 2.3% and 1.8%,
respectively.
Art/craft products sales increased 9.3% to $45.4 million in the second quarter
and 11.4% to $85.3 million in the first half of fiscal 1997 from the same
periods in fiscal 1996. The increases in art/craft products sales were
attributable to higher sales of presentation graphics products (up 16% in the
second quarter and 17% in the first half of fiscal 1997), partially offset by
lower sales of art supplies products (down 4% and 1%) and hobby/craft products
(down 18% and 6%) in the second quarter and first half of fiscal 1997,
respectively, compared to the same periods in fiscal 1996. The increases in
presentation graphics products sales were largely due to higher sales of
mounting and laminating equipment and supplies, which includes the sales of
products of Sallmetall (acquired near the end of March, 1997) and to higher
sales of substrates related products (i. e., foam board and other board
products). Excluding the sales from the Sallmetall business, presentation
graphics products sales grew 7% and 12% in the second quarter and first half of
fiscal 1997, respectively. The decreases in art supplies
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Page 11
products sales were due primarily to lower sales of fine art paper, X-Acto brand
knives, and to lower sales of products targeted for discontinuation in
connection with the product line rationalization and restructuring mentioned
above, while the decreases in hobby/craft product sales were due largely to
lower sales of products targeted for discontinuation. Export sales increased 6%
in both the second quarter and first half of fiscal 1997 from the same periods
in fiscal 1996. Foreign sales of art/craft products increased 34% in the second
quarter and 29% in the first half of fiscal 1997 compared to the same periods in
fiscal 1996, due primarily to higher sales of presentation graphics products in
Europe, which include sales of products of Sallmetall and, to a lesser extent,
to increases in the value of the British pound sterling. Excluding the effect of
currency exchange rate changes and the sales of the Sallmetall business, foreign
sales grew 3% and 10% in the second quarter and first half of fiscal 1997,
respectively.
Office products sales decreased 24.3% to $30.1 million in the second quarter and
decreased 14.8% to $66.7 million in the first half of fiscal 1997 compared to
the same fiscal 1996 periods. These decreases were principally attributable to
lower sales of desktop accessories and supplies (down 80% and 54%), mechanical
and electromechanical products (down 12% and 5%), and office furniture (down 8%
and 5%) in the second quarter and first half of fiscal 1997, respectively,
compared to the same periods in fiscal 1996. The divested Lit-Ning and Hunt Data
Products businesses largely accounted for the desktop accessories and supplies
products sales decreases. The decreases in mechanical and electromechanical
products sales were primarily attributable to lower sales of products targeted
for discontinuation in connection with the product line rationalization and
restructuring previously discussed. The office furniture sales decreases were
due principally to lower sales of folding tables. Export sales of office
products declined by 3% in the second quarter of fiscal 1997 and grew by 2% in
the first half of fiscal 1997. The decrease in the second quarter was the result
of lower sales in Canada.
Gross Profit
- ------------
The Company's gross profit percentage decreased to 32.7% of net sales in the
second quarter of fiscal 1997 from 37.0% in the second quarter of fiscal 1996
and decreased to 34.9% in the first half of fiscal 1997 from 36.7% in the first
half of fiscal 1996. These decreases were primarily the result of the $5.9
million special charge recorded in cost of sales in the second quarter of fiscal
1997 in connection with the Company's growth and restructuring plan previously
discussed. Excluding the effect of this special charge, gross profit percentages
for the second quarter and first half of fiscal 1997 would have been 40.5% and
38.8%, respectively. The improvements in gross profit percentages, before
special charges, were due largely to inventory reductions, which resulted in a
liquidation of certain LIFO inventories carried at lower costs prevailing in
prior years, favorable product sales mix, net selling price increases, and, to
some extent, realization of some cost savings stemming from the early stages of
the restructuring plan implementation. Although the Company has realized recent
selling price increases and stabilization of costs of some of its raw materials,
management is uncertain if these conditions will continue.
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Page 12
Selling, Shipping, Administrative and General Expenses
- ------------------------------------------------------
Selling and shipping expenses, as a percentage of net sales, remained
essentially unchanged in the second quarter and first half of fiscal 1997
compared to the same periods in fiscal 1996.
Administrative and general expenses increased $1.0 million, or 13%, in the
second quarter and increased $3.3 million, or 22%, in the first half of fiscal
1997 compared to the prior year expense levels for the same periods. These
increases were principally due to consulting fees related to assistance with the
Company's strategic assessment of its operations ($1.0 million pre-tax, or $.06
per share after-tax) and to higher management incentive compensation expenses.
Restructuring and Other Costs
- -----------------------------
In the second quarter of fiscal 1997, the Company recorded a pre-tax special
charge of $16.7 million, or $.93 per share after-tax, in connection with its
growth and restructuring plan (previously discussed), of which $10.8 million, or
$.60 per share, is included in restructuring and other costs in the accompanying
Condensed Consolidated Statements of Operations. The cash and non-cash portions
of the restructuring and other costs represent $5.0 million and $5.8 million,
respectively, and include employee severance costs, lease obligations, and other
related costs. Expenditures for cash restructuring items are planned to be
substantially expended over the balance of fiscal 1997. Additionally, in the
first half of fiscal 1997, the Company realized a net gain on business
divestitures of $.5 million pre-tax, or $.03 per share after-tax, discussed
above.
In the first half of fiscal 1996, the Company recorded a pre-tax charge of $.4
million, or $.02 per share after-tax, relating to the Company's fiscal 1995
decision to relocate and consolidate certain manufacturing and distribution
operations. Approximately $.6 million of accruals for organizational changes and
relocation and consolidation of operations is included in liabilities at the end
of the second quarter of fiscal 1997, which principally relates to future
severance-related payments.
Interest Expense
- ----------------
Interest expense remained essentially unchanged for the second quarter of fiscal
1997 from the second quarter of fiscal 1996 and increased to $2.7 million in the
first half of fiscal 1997 from $2.1 million in the first half of fiscal 1996.
This increase was due to a higher average debt balance in the first half of
fiscal 1997 as compared to the same period in fiscal 1996.
(Benefit) Provision for Income Taxes
- ------------------------------------
The Company recorded an income tax benefit of $4.3 million in the second quarter
of fiscal 1997 due primarily to the restructuring charge recorded in the same
period and the resolution of certain prior years' tax exposures. The Company's
effective income
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Page 13
tax rates, resulting from this tax benefit, were 38.2% and 40% for the second
quarter and first half of fiscal 1997, respectively, compared to 35.1% for both
the second quarter and first half of fiscal 1996.
New Accounting Standards
- ------------------------
SFAS No. 128, "Earnings Per Share", changes the manner in which earnings per
share amounts are calculated and presented. See Note 2 to Condensed Consolidated
Financial Statements herein.
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Page 14
Part II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) and (c)
The Company's Annual Meeting of Shareholders was held on April
16, 1997, and in connection therewith, proxies were solicited by management
pursuant to Regulation 14 under the Securities Exchange Act of 1934. An
aggregate of 10,996,454 shares of the Company's common stock ("Shares") were
outstanding and entitled to vote at the meeting. At the meeting the following
matters (not including ordinary procedural matters) were submitted to a vote of
the holders of Shares, with the results indicated below:
1. Election of a class of three directors to serve until the Year 2000
Annual Meeting. The following persons, all of whom were serving as
directors and were management's nominees for reelection, were
reelected. There was no solicitation in opposition to such nominees.
The tabulation of votes was as follows:
================================================================================
Withheld
Nominee For (including any broker nonvotes)
- --------------------------------------------------------------------------------
Jack Farber 9,988,182 273,970
- --------------------------------------------------------------------------------
Donald L. Thompson 9,870,746 391,406
- --------------------------------------------------------------------------------
Gordon A. MacInnes 9,867,828 394,324
================================================================================
2. Approval of amendment of the Company's 1993 Stock Option and Stock
Grant Plan. The amendment to the Company's 1993 Stock Option and Stock
Grant Plan was approved. The tabulation of votes was as follows:
================================================================================
Abstentions
For Against (including any broker nonvotes)
- --------------------------------------------------------------------------------
6,873,495 2,402,200 989,457
================================================================================
3. Ratification of appointment of independent auditors. The appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors for
fiscal 1997 was ratified. The tabulation of votes was as follows:
================================================================================
Abstentions
For Against (including any broker nonvotes)
- --------------------------------------------------------------------------------
10,228,344 8,654 25,154
================================================================================
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Page 15
Item 6 -Exhibits and Reports on Form 8-K
(a) Exhibits
10. Amended and Restated 1993 Stock Option and Stock Grant Plan*
11. Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
On March 28, 1997, the Company filed a Report on Form 8-K with the
Securities and Exchange Commission, reporting, under Item 2 of said Report, the
Company's acquisition of all of the outstanding stock of Sallmetall B.V., a
Dutch company.
On April 8, 1997, the Company filed a Report on Form 8-K with the
Securities and Exchange Commission, reporting, under Item 5 of said Report, the
adoption of the new strategy and restructuring plan.
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*Indicates a management contract or compensatory plan or arrangement.
<PAGE>
Page 16
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 July 14, 1997 By /s/ William E. Chandler
---------------------- ----------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial and Accounting Officer)
Date July 14, 1997 By /s/ Donald L. Thompson
---------------------- ---------------------------
Donald L. Thompson
Chairman of the Board
and Chief Executive Officer
<PAGE>
Page 17
EXHIBIT INDEX
Exhibit 10 - Amended and Restated 1993 Stock Option and Stock Grant Plan
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
<PAGE>
Exhibit 10
HUNT MANUFACTURING CO.
1993 STOCK OPTION AND STOCK GRANT PLAN
(As Amended and Restated, Effective January 1, 1997)
1. Purpose.
The 1993 Stock Option and Stock Grant Plan (the "Plan") is
designed to enable Hunt Manufacturing Co. (the "Company") and its subsidiaries
to attract and retain capable officers and key management level employees and
independent consultants who perform services for the Company and to provide an
inducement to such personnel to promote the best interests of the Company and
its subsidiaries by enabling and encouraging them, through the grant of
incentive and nonqualified stock options ("Options") and/or stock ("Stock
Grants") to acquire stock in the Company.
As used in the Plan, the term "incentive stock options" means
options which, at the time such options are granted under the Plan, qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and are designated as incentive
stock options in the Option Agreement (as hereinafter defined). The term
"nonqualified stock options" means all other options granted under the Plan. The
term "subsidiary" means any corporation which, at the time an Option is granted
or Stock Grant is made under the Plan, qualifies as a subsidiary of the Company
under the definition of "subsidiary corporation" contained in Section 424(f) of
the Code, or any similar provision hereafter enacted, except that such term
shall not include any corporation which is classified as a foreign corporation
pursuant to Section 7701 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 three
non-employee directors (within the meaning of Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor thereto)
who are also outside directors (within the meaning of Treas. Reg. ss.
1.162-27(e)(3), or any successor thereto) 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 the Committee, while serving as such, shall be deemed
to be acting in his/her capacity as a director of the Company.
The Committee shall have full authority to construe and
interpret the Plan and, subject to the provisions of the Plan: to establish,
amend, and rescind appropriate rules and regulations relating to the Plan; to
take such action as may be appropriate or necessary to insure the continued
qualification of any incentive stock options granted
<PAGE>
under the Plan; to select the persons to whom Options will be granted and/or
Stock Grants made under the Plan; to grant Options and make Stock Grants and set
the date of grant and other terms and conditions thereof; to make
recommendations to the Board; and to take all such steps and make all such
determinations in connection with the Plan and the Options granted and the Stock
Grants made hereunder as it may deem necessary or advisable. All such rules,
regulations, determinations, and interpretations of the Committee shall be
final, conclusive, and binding on all persons.
3. Stock Subject to the Plan.
Subject to the provisions of Section 8, up to an aggregate
maximum of 3,500,000 of the Company's Common Shares, par value $.10 per share
("Shares"), shall be authorized for the grant of Options and/or Stock Grants
under the Plan; provided, however, that, of such amount, not more than 525,000
Shares shall be available for Stock Grants, and further provided, that, no
Eligible Employee (as hereinafter defined) or Consultant (as defined below)
shall receive Options and/or Stock Grants for more than 300,000 Shares over any
one-year period. Shares issuable under the Plan may be authorized but unissued
Shares or reacquired Shares, as the Board shall determine. If any Option granted
under the Plan expires or otherwise terminates, in whole or in part, without
having been exercised, or if any Stock Grant hereunder is terminated, in whole
or in part, the Shares subject to the unexercised portion of such Option and the
unvested Shares covered by such Stock Grant shall be available for the granting
of Options and Stock Grants under the Plan as fully as if such Shares had never
been subject to an Option or a Stock Grant; provided, however, that:
(a) If an Option is cancelled or if a Stock Grant is
terminated, the Shares subject to the unexercised portion of such
Option and/or the unvested Shares covered by such Stock Grant shall
continue to be counted against the maximum number of Shares specified
above which may be awarded to an Eligible Employee or Consultant during
the one-year period in which the Option or Stock Grant was originally
awarded, and
(b) If the exercise price of an Option is reduced
after the date of grant, the transaction shall be treated as a
cancellation of the original Option and the grant of a new Option for
purposes of such maximum.
4. Eligibility.
Those persons eligible to participate in the Plan shall be the
officers and other key management level employees of the Company and any of its
subsidiaries ("Eligible Employees"), including directors who are also officers
or key management level employees of the Company or any of its subsidiaries.
Independent consultants who perform consulting services for the Company and any
of its subsidiaries ("Consultants")
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<PAGE>
shall also be eligible to participate. Incentive stock options, nonqualified
stock options, or Shares, or a combination thereof, may be granted under the
Plan to an Eligible Employee, and nonqualified stock options and Shares, or a
combination thereof, but not incentive stock options, may be granted under the
Plan to a Consultant. In making any determination as to whether a given employee
or Consultant shall receive a grant under the Plan, and in determining the size
and nature of any such grant, the Committee shall take into account the duties
of such employee or Consultant, his/her past, present, and potential
contributions to the success of the Company and its subsidiaries, and such other
factors as the Committee shall deem relevant in accomplishing the purposes of
the Plan.
5. Grants, Terms and Conditions of Options.
From time to time until the expiration or earlier termination
of the Plan, the Committee may grant to Eligible Employees and/or Consultants
("Optionees") under the Plan such incentive and/or nonqualified stock options as
it determines are warranted; provided, however, that grants of incentive and
nonqualified options shall be separate and not in tandem; and provided further
that incentive stock options shall not be granted to Consultants. Options
granted pursuant to the Plan shall be in such form as the Committee, from time
to time, shall approve, and shall be subject to the following terms and
conditions:
(a) Price. Except as provided in Subsection (j), the
price per Share under each Option granted under the Plan shall be
determined and fixed by the Committee in its discretion but shall not
be less than the higher of 100 percent of the Fair Market Value of the
Shares or the par value thereof on the date of grant of such Option. As
used in the Plan, the term "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 the
date of grant, or, if there are no such reported sales on that
date, then on the last previous date (within a reasonable
period prior to the date of grant) on which there were such
reported sales; or
(ii) 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.
(b) Term. Subject to earlier termination as provided
in Subsections (c) through (g) and in Section 8, and except as
otherwise provided in Subsection (j), the term of each Option shall not
be less than two nor more than ten years from the date of grant.
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<PAGE>
(c) Exercise and Payment. Options shall be
exercisable in such installments and on such dates, not less than one
year from the date of grant, as the Committee may specify. Except as
otherwise expressly provided in the Plan, Options shall be exercisable
by an Optionee only while he/she remains in the employment of the
Company or a subsidiary. Any Option Shares, the right to the purchase
of which has accrued, may be purchased at any time up to the expiration
or termination of the Option. 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 purchase
price for such Shares. Only full shares shall be issued, and any
fractional share which might otherwise be issuable upon exercise of an
Option granted hereunder shall be forfeited. The purchase price of
Option Shares shall be payable:
(i) In cash or its equivalent;
(ii) If the Committee, in its discretion,
permits, in whole or in part through the surrender or delivery
of Shares previously acquired by the Optionee (provided that
if such Shares are statutory option stock, as defined in
Section 424(c)(3) of the Code, such Shares have been held by
the Optionee for a period which is not less than the holding
period described in Section 422(a)(1) or 423(a)(1) of the
Code, as applicable);
(iii) If and to the extent the Committee, in
its discretion, permits, in whole or in part through the
surrender or delivery of Shares newly acquired by the Optionee
upon exercise of such Option (which surrender or delivery
shall constitute a disqualifying disposition in the case of an
Option which is an incentive stock option); or
(iv) If and to the extent the Committee, in
its discretion, permits, by delivering a properly executed
notice of exercise of the Option to the Company and a broker,
with irrevocable instructions to the broker promptly to
deliver to the Company the amount of sale or loan proceeds
necessary to pay the exercise price of the Option (the sale of
Shares pursuant to such instructions shall constitute a
disqualifying disposition in the case of an Option which is an
incentive stock option).
In the event such purchase price is paid, in whole or
in part, with Shares, the portion of the purchase price so paid shall
be equal to the Fair Market Value, on the date of exercise of the
Option, of the Shares surrendered or delivered in payment of such
purchase price.
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<PAGE>
(d) Termination of Optionee's Employment. If an
Optionee's employment by the Company and its subsidiaries is terminated
prior to the expiration date of his/her Option by either party for any
reason, with or without cause, other than by reason of death,
disability, or retirement (as provided in Subsections (e), (f), and
(g)), such Option shall terminate immediately upon such termination of
employment, provided that the Committee, in its discretion, may extend
the period for exercise following any such termination of employment,
to the extent of the number of Shares with respect to which the
Optionee could have exercised it on the date of such termination, for
up to three months, but not beyond the expiration date of such Option.
Notwithstanding the foregoing, in the event an Optionee's employment is
terminated as contemplated in this Subsection and Options held by
him/her have not yet become exercisable in accordance with their terms,
the Committee, in its discretion, may allow all or a part of such
Options to be exercised pursuant to this Subsection, provided that such
Options have been outstanding for at least one year at the time of the
Optionee's termination of employment. For purposes of the Plan, a leave
of absence of one year or less which has been expressly approved by the
Board shall not be deemed to constitute a termination of employment. A
leave of absence longer than one year shall be deemed to constitute a
termination of employment, unless the Committee determines otherwise.
For purposes of this Section 5, an Optionee who is a Consultant shall
be deemed to have terminated employment if such person's consulting
relationship with the Company and its subsidiaries is terminated.
(e) Death of Optionee. If an Optionee's employment is
terminated (within the meaning of Subsection (d)) by reason of his/her
death prior to the expiration of his/her Option, or if an Optionee
shall die following his/her termination of employment but prior to the
expiration date of his/her Option or expiration of the period
determined under Subsection (d), (f), or (g), if earlier, such Option
may be exercised, by the Optionee's estate, personal representative, or
beneficiary who acquired the right to exercise such Option by bequest
or inheritance or by reason of the death of the Optionee, in whole or
in part, but only to the extent of the number of Shares with respect to
which the Optionee could have exercised it on the date of his/her
death, at any time prior to the earlier of:
(i) One year following the date of the
Optionee's death, or
(ii) The expiration date of such Option
(which, in the case of death following a termination of
employment pursuant to Subsection (d), (f), or (g), shall be
deemed to mean the expiration of the exercise period
determined thereunder).
Notwithstanding the foregoing, in the event that an
Optionee's employment is terminated by his/her death and Options held
by him/her have not
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<PAGE>
yet become exercisable in accordance with their terms, the Committee,
in its discretion, may allow all or a part of such Options to be
exercised pursuant to this Subsection, provided that such Options have
been outstanding for at least one year at the time of the Optionee's
death.
(f) Disability of Optionee. If an Optionee shall
become permanently and totally disabled (within the meaning of Section
22(e)(3) of the Code) and his/her employment with the Company and its
subsidiaries is terminated (within the meaning of Subsection (d)) as a
consequence of such disability prior to the expiration date of his/her
Option, such Option may be exercised by the Optionee, in whole or in
part, but only to the extent of the number of Shares with respect to
which the Optionee could have exercised it on the date of such
termination of employment, at any time prior to the earlier of:
(i) One year following the date of the
Optionee's termination of employment, or
(ii) The expiration date of such Option.
Notwithstanding the foregoing, if at the time of
termination of an Optionee's employment due to disability, Options held
by such Optionee have not yet become exercisable in accordance with
their terms, the Committee, in its discretion, may allow all or a part
of such Options to be exercised pursuant to this Subsection, provided
that such Options have been outstanding for at least one year at the
time of the Optionee's termination of employment.
(g) Retirement of Optionee. If an Optionee retires in
accordance with the retirement policy of the Company, or with the
express consent of the Board, prior to the expiration date of his/her
Option, such Option may be exercised by the Optionee, in whole or in
part, but only to the extent of the number of Shares with respect to
which the Optionee could have exercised it on the date of his/her
retirement, at any time prior to the earlier of:
(i) Three months after the date of
retirement, or
(ii) The expiration date specified in such
Option.
Notwithstanding the foregoing, the Committee may, in
its discretion, extend the period for exercise following an Optionee's
retirement for up to nine additional months, but not beyond the
expiration date of such Option, despite the fact that such an extension
would prevent an Option from qualifying as an incentive stock option
under the Code and/or in the event that any Options held by a retiring
Optionee have not yet become exercisable in accordance with their
terms, allow all
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<PAGE>
or a part of such Options to be exercised pursuant to this Subsection
provided that such Options have been outstanding for at least one year
at the time of the Optionee's retirement.
(h) Transferability. No Option intended to be an
incentive stock option shall be assignable or transferable by an
Optionee otherwise than by will or by the laws of descent and
distribution. Unless otherwise permitted by the Committee, all other
Options shall not be assignable or transferable by an Optionee
otherwise than by will or by the laws of descent and distribution.
A transferred Option shall continue to be subject to
the same terms and conditions as were applicable to such Option
immediately prior to transfer, and the Optionee shall remain subject to
tax withholding under Section 5(l) with respect to such Option. The
events of termination of employment of Section 5 shall also continue to
be applied with respect to the original Optionee, following which
events the transferred Option shall be exercisable by the transferee
only to the extent, and for the periods specified in, Sections 5(c),
(d), (e), (f) and (g).
(i) Rights as a Stockholder. An Optionee shall have
no rights as a stockholder with respect to any Shares covered by
his/her Option until the issuance of a stock certificate to him/her
representing such Shares.
(j) Ten Percent Shareholder. Notwithstanding any
other provision of the Plan, if an Eligible Employee owns more than ten
percent of the total combined voting power of all shares of stock of
the Company or of a Related Corporation at the time an incentive stock
option is granted to such Eligible Employee, the incentive stock option
price shall not be less than 110 percent of the Fair Market Value of
the optioned Shares on the date the incentive stock option is granted,
and such incentive stock option by its terms shall not be exercisable
after the expiration of five years from the date the incentive stock
option is granted. As used in this Plan, the term "Related Corporation"
shall mean a subsidiary or a corporate parent of the Company as defined
in Section 424 of the Code.
(k) Annual Limit on Grant of Incentive Stock Options.
The aggregate Fair Market Value (determined as of the time an incentive
stock option is granted) of the Shares with respect to which incentive
stock options are exercisable for the first time during any calendar
year (under this Plan and any other incentive stock option plan of the
Company or a Related Corporation) shall not exceed $100,000.
(l) Use of Shares to Satisfy Tax Obligation. When an
Optionee is required to pay to the Company or a Related Corporation an
amount required to be withheld under applicable Federal, state, or
local income tax or similar laws in
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<PAGE>
connection with the exercise of nonqualified stock options under the
Plan, the Committee may, in its discretion and subject to such rules as
it may adopt, permit the Optionee to satisfy the obligation, in whole
or in part, by electing to have the Company withhold Shares (or by
returning to the Company previously held Shares), which shares shall be
valued, for this purpose, at their Fair Market Value on the date of
exercise of the nonqualified stock option (or, if later, the date on
which the Optionee recognizes ordinary income with respect to such
exercise). If Shares acquired by exercise of an incentive stock option
are used for such purpose, and if the holding period requirements of
Section 422(a)(1) of the Code have not been met with respect to such
Shares, the use of such Shares to satisfy the withholding obligation
will be a disqualifying disposition of such Shares.
(m) Option Agreement and Further Conditions. Each
Optionee shall enter into, and be bound by the terms of, a stock option
agreement (the "Option Agreement") which shall include or incorporate
by reference the terms of the Option and the Plan and which shall
contain such other terms, conditions, and restrictions not inconsistent
with the Plan (or, in the case of incentive stock options, the
provisions of Section 422(b) of the Code) as the Committee shall
determine. Without limiting the generality of the foregoing, the
Committee, in its discretion, may impose further conditions upon the
exercisability of Options, and restrictions on transferability and
repurchase rights with respect to Shares issued upon exercise of
Options.
6. Terms and Conditions of Stock Grants.
From time to time until the expiration or earlier termination
of the Plan, the Committee may make such Stock Grants under the Plan to Eligible
Employees and/or Consultants ("Grantees") as it determines are warranted. Stock
Grants shall be subject to the following terms and conditions:
(a) Vesting Period. The Committee shall establish one
or more vesting periods ("Vesting Periods") with respect to the Shares
covered by a Stock Grant. The length of such Vesting Period shall be
within the discretion of the Committee, except that (subject to
Subsection (c) and Section 8) such period or periods shall not be less
than one year nor more than five years from the date of grant. Subject
to the provisions of this Section 6, Shares subject to a Stock Grant
shall vest in the Grantee upon the expiration of the Vesting Period
with respect to such Shares.
(b) Bonus Payment. For so long as a Grantee's Stock
Grant remains outstanding and unvested, the Company shall pay to the
Grantee a cash bonus equal to the dividends which the Grantee would
have received from the Company had he/she actually held the Shares
represented by the unvested portion
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<PAGE>
of his/her Stock Grant. Such payments shall be made within 60 days
following the end of each fiscal quarter of the Company with respect to
any dividends which may have been paid by the Company on its Shares
during such quarter, and will constitute wages subject to withholding
for Federal income tax purposes.
(c) Termination.
(i) Death, Disability, or Retirement. If,
prior to the expiration of the Vesting Period with respect to
Shares subject to a Stock Grant ("Unvested Shares"), a
Grantee's employment with the Company and its subsidiaries is
terminated by reason of his/her death, or by reason of his/her
disability or retirement (as provided in Sections 5(f) and
(g), respectively), then in each such case there shall
immediately be vested in the Grantee, or in his/her
beneficiary or estate, that number of full Shares that bears
the same ratio to all the Grantee's Unvested Shares having the
same Vesting Period as the number of the days which have
elapsed from the date of the original Stock Grant of such
Shares to the date of such termination of the Grantee's
employment bears to the total number of days in the Vesting
Period with respect to such Shares. [An example of the
operation of the preceding sentence is set forth in the
Appendix to the Plan.] The remainder of the Grantee's Stock
Grant not vested pursuant to the preceding sentence shall
immediately terminate, except that the Committee, if it
determines that the circumstances warrant, may direct that all
or a portion of such remaining Unvested Shares also be vested
in the Grantee, subject to such further terms and conditions,
if any, as the Committee may determine. For purposes of this
Section 6, a Grantee who is a Consultant shall be deemed to
have terminated employment if such person's consulting
relationship with the Company and its subsidiaries is
terminated.
(ii) Other Terminations of Employment. If a
Grantee's employment is terminated (within the meaning of
Paragraph (i)) for any reason other than his/her death,
disability, or retirement as aforesaid, the unvested portion
of the Grantee's Stock Grant shall immediately terminate,
except that the Committee, if it determines that the
circumstances warrant, may direct that all or a portion of the
Grantee's Unvested Shares be vested in the Grantee, subject to
such further terms and conditions, if any, as the Committee
may determine.
(d) Delivery of Certificates. Upon the vesting of a
Stock Grant, the Company shall promptly issue certificates representing
the vested Shares to the Grantee or to his/her beneficiary or estate.
Only full shares shall be issued, and any fractional shares which might
otherwise be issuable pursuant to a Stock Grant shall be forfeited.
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<PAGE>
(e) Transferability. Unless otherwise permitted by
the Committee, no Stock Grant shall be assignable or transferable by a
Grantee otherwise than by will or by the laws of descent and
distribution.
A transferred Stock Grant shall continue to be
subject to the same terms and conditions as were applicable to such
Stock Grant immediately prior to transfer, and the Grantee shall remain
subject to tax withholding under Section 6(g) with respect to such
Stock Grant. The events of termination of employment of Section 6 shall
also continue to be applied with respect to the original Grantee,
following which events the transferred Stock Grant shall become vested
in the transferee only to the extent provided in Section 6(c).
(f) Rights as a Stockholder. A Grantee shall have no
rights as a stockholder with respect to any Shares covered by a Stock
Grant until the issuance of a stock certificate to him/her representing
such Shares.
(g) Use of Shares to Satisfy Tax Obligation. When a
Grantee is required to pay the Company or a Related Corporation an
amount required to be withheld under applicable Federal, state, or
local income tax or similar laws in connection with the vesting of a
Stock Grant under this Plan, the Committee may, in its discretion and
subject to such rules as it may adopt, permit the Grantee to satisfy
the obligation, in whole or in part, by electing to have the Company
withhold Shares (or by returning to the Company previously held
Shares), which Shares shall be valued, for this purpose, at their Fair
Market Value on the date of vesting of the Stock Grant (or, if later,
the date on which the Grantee recognizes ordinary income with respect
to such Stock Grant). If Shares acquired by exercise of an incentive
stock option are used for such purpose, and if the holding period
requirements of Section 422(a)(1) of the Code have not been met with
respect to such Shares, the use of such Shares to satisfy the
withholding obligation will be a disqualifying disposition of such
Shares.
(h) Stock Grant Agreement. Each Grantee shall enter
into, and be bound by the terms of, a Stock Grant Agreement (the "Stock
Grant Agreement") which shall include or incorporate by reference the
terms of the Stock Grant and of the Plan and which shall contain such
other terms, conditions, and restrictions not inconsistent with the
Plan as the Committee shall determine.
7. Listing and Registration of Shares.
Each Option and each Stock Grant under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration, or qualification of the Shares
covered thereby upon any securities exchange or under the laws of any
jurisdiction, or the consent or approval of any regulatory body, is
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<PAGE>
necessary or desirable as a condition of, or in connection with, the granting of
such Option, the making of such Stock Grant, or the purchase or vesting of
Shares thereunder, then no such Option may be exercised in whole or in part, and
no certificate representing Shares shall be issued pursuant to such Stock Grant,
unless and until such listing, registration, qualification, consent, or approval
shall have been effected or obtained, on conditions acceptable to the Board.
Each Optionee and Grantee, or his/her legal representative or beneficiaries,
also may be required to give satisfactory assurance that Shares purchased upon
exercise of an Option or received pursuant to a Stock Grant are being acquired
for investment and not with a view to distribution, and certificates
representing such Shares may be legended accordingly.
8. Adjustment Upon Changes in Capitalization, Mergers,
and Other Events.
The number of Shares which may be issued under the Plan and
the maximum number of Shares with respect to which Options and/or Stock Grants
may be awarded to any Eligible Employee or Consultant under the Plan, both as
stated in Section 3, and the number of Shares issuable upon exercise of
outstanding Options (as well as the exercise price per Share under such
outstanding Options) or issuable upon vesting of outstanding Stock Grants shall
be adjusted, as may be determined appropriate by the Committee (which
determination shall be subject to ratification by the Board), to reflect any
stock dividend, stock split, share combination, or similar change in the
capitalization of the Company.
In the event the Company is liquidated or a corporate
transaction described in Section 424(a) of the Code and the Treasury Regulations
issued thereunder (including, for example, a merger, consolidation, acquisition
of property or stock, separation, or reorganization) occurs, each outstanding
Option and Stock Grant shall be assumed by the surviving or successor
corporation, if any; provided, however, that the Committee, in its discretion,
may terminate all or a portion of the outstanding Options and/or Stock Grants if
it determines that such termination would be in the best interests of the
Company. If the Committee decides to terminate an outstanding Option by reason
of such liquidation or corporate transaction, the Committee shall give the
holder thereof not less than 21 days' prior notice of any such termination, and
such outstanding Option may be exercised up to, and including, the date
immediately preceding such termination, if the Option has not otherwise expired,
and if it is then exercisable under the Option Agreement. With respect to any
Option which has not yet become exercisable, the Committee also, in its
discretion, may allow an Optionee to exercise such Option, in whole or in part
(if it has not otherwise terminated or expired). If the Committee decides to
terminate an outstanding Stock Grant by reason of such liquidation or corporate
transaction, the Stock Grant shall vest on such termination date to the same
extent as is provided in the first sentence of Section 6(c)(i). The Committee,
in its discretion, may also immediately vest all or a portion of the remaining
unvested Shares under any Stock Grant which is to be so determined.
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The Committee, in its discretion, may also change the number
of Shares issuable upon exercise of outstanding Options (as well as the exercise
price per Share under such outstanding Options) and Shares covered by
outstanding Stock Grants to reflect any such corporate transaction, provided, in
the case of an incentive stock option, that any such change is made in
accordance with Section 424(a) of the Code and is excluded from the definition
of "modification" under Section 424(h) of the Code.
Notwithstanding any other provisions of the Plan, the
Committee, in its discretion, may accelerate, in whole or in part, the date on
which Options become exercisable and/or the vesting of any Stock Grant in the
event that the Committee determines that a change in control of the Company has
occurred or is likely to occur.
9. Amendment or Discontinuance of the Plan.
The Board, from time to time, may suspend or discontinue the
Plan or amend it, and the Committee may amend any outstanding Options and Stock
Grants, in any respect whatsoever; provided, however, that, without the approval
of the holders of at least a majority of the votes cast at a duly held
stockholders' meeting at which a quorum representing a majority of the
outstanding shares of the Company is, either in person or by proxy, present and
voting on the action:
(a) The class of individuals eligible to receive
Options or Stock Grants shall not be changed;
(b) The maximum number of Shares with respect to
which grants may be made under the Plan shall not be increased
otherwise than as permitted under Section 8;
(c) The limitations on the price at which Options may
be granted shall not be changed; and
(d) The duration of the Plan, as specified in Section
12, shall not be extended.
Notwithstanding the foregoing, no such suspension,
discontinuance, or amendment shall impair the rights of any holder of an
outstanding Option or Stock Grant without the consent of such holder.
10. Absence of Rights.
The recommendation or selection of an Eligible Employee or
Consultant as a recipient of an Option or a Stock Grant under the Plan shall not
entitle such person to any Option or Stock Grant unless and until the grant
actually has been made by
-12-
<PAGE>
appropriate action of the Committee; and any such grant is subject to the
provisions of the Plan. Further, the granting of an Option or the making of a
Stock Grant to a person shall not entitle that person to continued employment by
the Company or its subsidiaries, and the Company shall have the absolute right,
in its discretion, to retire such person in accordance with its retirement
policies or otherwise to terminate his/her employment, whether or not such
termination may result in a partial or total termination of his/her Option or of
his/her Stock Grant.
11. Application of Funds.
The funds received by the Company upon the exercise of Options
and otherwise under the Plan shall be used for general corporate purposes.
12. Effective Date and Duration.
The Plan became effective on February 7, 1993. Unless earlier
terminated as provided in the Plan, the Plan shall terminate at 12:00 midnight
on February 6, 2003, and no Options or Stock Grants shall be granted or made
thereafter. However, termination of the Plan shall not affect any Options or
Stock Grants theretofore granted or made, which Options and Stock Grants shall
remain in effect in accordance with their terms and the terms of the Plan.
-13-
<PAGE>
APPENDIX
Accelerated Vesting Pursuant to Section 6(c) of the Plan
Example: If a Stock Grant of 30,000 shares is made to a
Grantee on February 10, 1996, to vest in three annual increments of 10,000
Shares each on February 10, 1997, 1998, and 1999, respectively, and if the
Grantee, while still an employee of the Company, should die on August 10, 1997,
the number of Shares vested would be 22,465, calculated as follows:
1. The 10,000 Share increment scheduled to vest on February
10, 1997, would already have vested in full.
2. The 10,000 Share increment scheduled to vest on February
10, 1998, would vest automatically as to 7,479 Shares (i.e., out of the
total Vesting Period of 730 days with respect to such Shares, 546 days
would have elapsed; 546/730 = .747945 x 10,000 Shares = 7,479 Shares).
3. The 10,000 Share increment scheduled to vest on February
10, 1999, would vest automatically as to 4,986 Shares (i.e., out of the
total Vesting Period of 1,095 days with respect to such Shares 546 days
would have elapsed; 546/1,095 = .498630 x 10,000 Shares = 4,986
Shares).
-14-
<PAGE>
Exhibit 11
Computation of Per Share Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 1, June 2, June 1, June 2,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary per share (losses) earnings
(Losses) earnings applicable to primary
per share (losses) earnings ($ 6,994) $ 3,273 ($ 4,595) $ 6,099
======== ======== ======== ========
Average number of common shares
outstanding 11,055 10,968 11,031 11,954
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 305 206 290 201
-------- -------- -------- --------
Average shares used to calculate
primary per share (losses) earnings 11,360 11,174 11,321 12,155
======== ======== ======== ========
Primary per share (losses) earnings ($ 0.62) $ 0.29 ($ 0.41) $ 0.50
======== ======== ======== ========
Fully diluted per share (losses) earnings
(Losses) earnings applicable to fully diluted
per share (losses) earnings ($ 6,994) $ 3,273 ($ 4,595) $ 6,099
======== ======== ======== ========
Average number of common shares
outstanding 11,055 10,968 11,031 11,954
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 329 210 309 212
-------- -------- -------- --------
Average shares used to calculate
fully diluted per share (losses) earnings 11,384 11,178 11,340 12,166
======== ======== ======== ========
Net fully diluted per share (losses) earnings ($ 0.61) $ 0.29 ($ 0.41) $ 0.50
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-01-1997
<CASH> 4,587
<SECURITIES> 0
<RECEIVABLES> 46,338
<ALLOWANCES> (2,339)
<INVENTORY> 30,432
<CURRENT-ASSETS> 93,121
<PP&E> 95,732
<DEPRECIATION> (45,351)
<TOTAL-ASSETS> 183,252
<CURRENT-LIABILITIES> 47,134
<BONDS> 62,675
0
0
<COMMON> 1,615
<OTHER-SE> 55,163
<TOTAL-LIABILITY-AND-EQUITY> 183,252
<SALES> 152,023
<TOTAL-REVENUES> 152,023
<CGS> 98,957
<TOTAL-COSTS> 98,957
<OTHER-EXPENSES> 57,541
<LOSS-PROVISION> 512
<INTEREST-EXPENSE> 2,671
<INCOME-PRETAX> (7,658)
<INCOME-TAX> (3,063)
<INCOME-CONTINUING> (4,595)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,595)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
