<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 May 31, 1998
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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 CORPORATION.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (215) 656-0300
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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 1, 1998, there were outstanding 11,298,152 shares of the registrant's
common stock.
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Page 2
HUNT CORPORATION
INDEX
Page
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PART I - FINANCIAL INFORMATION
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Item 1 - Financial Statements
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Condensed Consolidated Balance Sheets as of
May 31, 1998 and November 30, 1997 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended May 31, 1998
and June 1, 1997 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended May 31, 1998 and June 1, 1997 5
Notes to Condensed Consolidated Financial
Statements 6 - 8
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 9 - 14
---------------------------------------------
PART II - OTHER INFORMATION
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Item 4 - Submission of Matters to a Vote of Security Holders 15
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Item 6 - Exhibits and Reports on Form 8-K 16
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Signatures 17
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Exhibit Index 18
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<PAGE>
Part I - FINANCIAL INFORMATION Page 3
Item 1. Financial Statements
Hunt Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
May 31, November 30,
ASSETS 1998 1997
--------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 45,704 $ 65,449
Accounts receivable, less allowance for doubtful
accounts: 1998, $2,246; 1997, $1,842 33,142 33,565
Inventories:
Raw materials 8,650 7,345
Work in process 3,013 2,845
Finished goods 11,674 9,962
--------- ---------
Total inventories 23,337 20,152
Deferred income taxes 5,708 9,107
Prepaid expenses and other current assets 2,417 2,051
--------- ---------
Total current assets 110,308 130,324
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
1998, $40,386; 1997, $38,738 47,734 42,973
Excess of acquisition costs over net assets acquired,
less accumulated amortization 25,844 26,906
Intangible assets, net 2,454 2,587
Other assets 8,138 6,732
--------- ---------
Total assets $ 194,478 $ 209,522
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,659 $ 2,203
Accounts payable 10,049 11,120
Accrued expenses:
Salaries, wages and commissions 2,695 4,675
Income taxes 5,850 14,089
Insurance 1,563 1,891
Compensated absences 1,913 2,116
Restructuring 4,498 9,385
Other 13,997 18,633
--------- ---------
Total current liabilities 45,224 64,112
Long-term debt, less current portion 53,307 54,096
Deferred income taxes 1,059 3,527
Other non-current liabilities 14,360 13,126
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: 1998 and 1997 -16,152,322 shares 1,615 1,615
Capital in excess of par value 6,434 6,434
Cumulative translation adjustment (728) 275
Retained earnings 156,774 151,093
--------- ---------
164,095 159,417
Less cost of treasury stock:
1998 - 4,866,320 shares; 1997 - 4,985,224 shares (83,567) (84,756)
--------- ---------
Total stockholders' equity 80,528 74,661
--------- ---------
Total liabilities and stockholders' equity $ 194,478 $ 209,522
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Page 4
Hunt Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------------------------------------------------
May 31, June 1, May 31, June 1,
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales $62,381 $62,372 $123,645 $123,776
Cost of sales 37,764 42,327 75,345 80,469
------------ ------------ ------------- -------------
Gross profit 24,617 20,045 48,300 43,307
Selling and shipping expenses 12,315 12,372 23,225 24,081
Administrative and general expenses 7,393 8,041 14,750 16,788
Restructuring and other (2,175) 10,842 (2,171) 10,404
------------ ------------ ------------- -------------
Income (loss) from operations 7,084 (11,210) 12,496 (7,966)
Interest expense 1,037 1,347 2,219 2,671
Other income, net (1,023) 266 (1,890) 231
------------ ------------ ------------- -------------
Income (loss) from continuing
operations before income taxes 7,070 (12,823) 12,167 (10,868)
Provision (benefit) for income taxes 2,230 (4,864) 4,013 (4,199)
------------ ------------ ------------- -------------
Income (loss) from continuing operations 4,840 (7,959) 8,154 (6,669)
Income from discontinued operations,
net of income taxes of $529
and $1,136, respectively - 965 - 2,074
------------ ------------ ------------- -------------
Net income (loss) $4,840 ($6,994) $8,154 ($4,595)
============ ============ ============= =============
Basic earnings per common share:
Income (loss) from continuing operations $.43 $(.73) $.73 $(.61)
Income from discontinued operations - .09 - .19
------------ ------------ ------------- -------------
Net income (loss) per share $.43 $(.64) $.73 $(.42)
============ ============ ============= =============
Diluted earnings per common share:
Income (loss) from continuing operations $.41 $(.73) $.69 $(.61)
Income from discontinued operations - .09 - .19
------------ ------------ ------------- -------------
Net income (loss) per share $.41 $(.64) $.69 $(.42)
============ ============ ============= =============
Dividends per common share $.103 $.095 $.205 $.190
============ ============ ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Page 5
Hunt Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
May 31, June 1,
1998 1997
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 8,154 $ (4,595)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,102 4,588
Deferred income taxes 931 (7,327)
(Gain) loss on disposals of property, plant and equipment (10) 131
Gain on sale of businesses -- (474)
(Payments) provision for special charges (3,741) 16,244
Issuance of stock under management incentive bonus
and stock grant plans 197 1,109
Changes in operating assets and liabilities, including
effect of divestitures (20,411) 7,548
-------- --------
Net cash provided by (used in) operating activities (10,778) 17,224
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (8,998) (3,410)
Proceeds from sale of businesses -- 10,956
Acquisition of business -- (13,821)
Other, net -- 20
-------- --------
Net cash used in investing activities (8,998) (6,255)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,476 13,000
Reductions of long-term debt, including current maturities (770) (19,147)
Book overdrafts (777) --
Proceeds from exercise of stock options 1,487 332
Dividends paid (2,300) (2,092)
Other, net 41 35
-------- --------
Net cash provided by (used in) financing activities 157 (7,872)
-------- --------
Effect of exchange rate changes on cash (126) (38)
-------- --------
Net increase (decrease) in cash and cash equivalents (19,745) 3,059
Cash and cash equivalents, beginning of period 65,449 1,528
-------- --------
Cash and cash equivalents, end of period $ 45,704 $ 4,587
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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Hunt Corporation
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 May 31, 1998 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. During fiscal 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 simplifies the
standards for computing earnings per share by replacing the "primary" and "fully
diluted" calculations previously 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. Earnings per share amounts have been calculated in
accordance with SFAS No. 128 including the restatement of prior year amounts as
shown below:
<TABLE>
<CAPTION>
Three Months Ended
May 31, 1998 June 1, 1997
------------ ------------
<S> <C> <C>
Income (loss) from continuing operations $ 4,840 $(7,959)
Income from discontinued operations - 965
----------- -----------
Net income (loss) 4,840 (6,994)
Basic earnings per share:
Average common shares outstanding 11,281 11,055
Income (loss) from continuing operations $ .43 $ (.73)
Income from discontinued operations - .09
----------- -----------
Net income (loss) $ .43 $ (.64)
Diluted earnings per share:
Average common shares outstanding 11,28111,055
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants (antidilutive in 1997) 637 -
----------- -----------
Average common shares and dilutive
securities outstanding 11,918 11,055
Income (loss) from continuing operations $ .41 $(.73)
Income from discontinued operations - .09
----------- -----------
Net income (loss) $ .41 $ (.64)
</TABLE>
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Page 7
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1998 June 1, 1997
----------- -----------
<S> <C> <C>
Income (loss) from continuing operations $8,154 $(6,669)
Income from discontinued operations - 2,074
----------- -----------
Net income (loss) 8,154 (4,595)
Basic earnings per share:
Average common shares outstanding 11,240 11,031
Income (loss) from continuing operations $ .73 $ (.61)
Income from discontinued operations - .19
----------- -----------
Net income (loss) $ .73 $ (.42)
Diluted earnings per share:
Average common shares outstanding 11,24011,031
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants (antidilutive in 1997) 589 -
----------- -----------
Average common shares and dilutive
securities outstanding 11,829 11,031
Income (loss) from continuing operations $ .69 $ (.61)
Income from discontinued operations - .19
----------- -----------
Net income (loss) $ .69 $ (.42)
</TABLE>
3. During the second quarter of fiscal 1997, the Company initiated a new
strategy for growth and restructuring plan (the "strategic plan"). As a result,
the Company recorded a pretax charge to earnings of $26.8 million in fiscal 1997
of which 49% was for cash items. The following table sets forth the details and
the cumulative activity in the various accruals associated with the
restructuring plan in the Condensed Consolidated Balance Sheets at May 31, 1998
(in thousands):
<TABLE>
<CAPTION>
Accrual Balance Provision Cash Non-Cash Accrual Balance
at November 30, 1997 (Credit) Reductions Reductions at May 31, 1998
-------------------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Restructuring and
non-current liabilities $11,391 $(1,761) $(3,741) $(13) $5,876
PP&E, Inventory, and
intangible assets 2,091 - - (334) 1,757
------- -------- ------- ----- -----
Total $13,482 $(1,761) $(3,741) $(347) $7,633
</TABLE>
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Page 8
During the second quarter of fiscal 1998, the Company reduced its accruals
associated with the strategic plan by $1.8 million pretax (or $.11 per share
after tax on a basic basis and $.10 per share after tax on a diluted basis) due
primarily to lower than expected severance costs and a decision not to vacate a
leased facility. This amount is included in "Restructuring and other" in the
accompanying Condensed Consolidated Statements of Operations.
4. During the first quarter of fiscal 1997, the Company realized a net gain of
$.5 million pretax, 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" in the
accompanying Condensed Consolidated Statements of Operations. During the second
quarter of fiscal 1998, due to lower than anticipated inventory returns, the
Company reversed a contingent liability in the amount of $.4 million pretax (or
$.02 per share after tax on a basic and diluted basis) related to one of the
divested businesses. This amount is also included in "Restructuring and other"
in the accompanying Condensed Consolidated Statements of Operations.
5. In November 1997, the Company sold its Bevis office furniture business. Bevis
had sales of approximately $13.1 million and $28.3 million, and income after
taxes of $1.0 million and $2.1 million in the second quarter and the first half
of fiscal 1997, respectively. The Bevis business is presented as a discontinued
operation in the accompanying Condensed Consolidated Statements of Operations
and Notes to Condensed Consolidated Financial Statements.
6. The Company has been sued for patent infringement with respect to one of its
relatively minor products. After a jury trial, the U.S. District Court in the
Western District of Wisconsin recently entered judgment against the Company in
this matter and awarded damages to the plaintiffs in the amount of $3 million.
The plaintiffs also are seeking reimbursement for their legal fees and the costs
of the litigation. The Company and its patent legal counsel believe that the
decision was incorrect and that it will be reversed on appeal. Accordingly, the
Company has not accrued any liability in its financial statements associated
with this judgment. However, there can be no assurance that the Company will
prevail in this matter. In the event of an unfavorable final judgment against
the Company, management believes that it will not have a material impact on the
Company's financial position, but it could have a material effect on quarterly
or annual results of operations.
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Page 9
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 represent management's assessment based upon
information currently available, but are subject to risks and uncertainties
which could cause actual results to differ materially from those set forth in
the forward-looking statements. These risks and uncertainties include, but are
not limited to, the Company's ability to successfully complete the
implementation, and realize the anticipated growth and other benefits, of its
strategic plan on a timely basis, the effect of general economic conditions,
technological and other changes affecting the manufacture of and demand for the
Company's products, competitive and other pressures in the market place, and
other risks and uncertainties set forth herein and in the Company's Forms 10-K,
10-Q, and 8-K filings with the Securities and Exchange Commission.
In April 1997, the Company initiated a new strategy for growth and restructuring
plan (the "strategic plan") designed to restore higher levels of sales growth,
profitability and to reduce its cost structure. The cost reduction portion of
the strategic plan resulted in cost savings of approximately $7.3 million in
fiscal 1997 and management believes will result in cost savings of approximately
$18.0 million in fiscal 1998. Approximately $9.5 million of the anticipated
fiscal 1998 savings was realized in the first six months of fiscal 1998. The
cost savings have resulted and are expected to result primarily from a
significant reduction of the Company's stock keeping units, the rationalization
of manufacturing and warehouse facilities and from a major restructuring of its
administrative and marketing and selling functions, most of which actions were
accomplished during fiscal 1997. Although the Company expects realization of
such future cost savings, there is no assurance that they will be achieved. (See
Note 3 to Condensed Consolidated Financial Statements herein.)
Results of Operations
Net Sales
Net sales from continuing operations of $62.4 million for the second quarter and
$123.6 million for the first half of fiscal 1998 were essentially unchanged from
the corresponding fiscal periods of 1997. However, excluding the sales of
businesses divested and products rationalized in fiscal 1997, net sales would
have increased 9% and 14% in the second quarter and first half of fiscal 1998
compared to the same periods of fiscal 1997. These increases were largely
attributable to higher sales of presentation products (up 8% for the second
quarter and 14% for the first half) and consumer products (up 11% for the second
quarter and 14% for the first half). The increases in presentation products were
the result of higher sales of foam board and related board products, mounting
and laminating supplies products, while the increases in consumer products were
due to higher sales of pencil sharpeners.
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Page 10
Export sales decreased 1% and 6% in the second quarter and first half of 1998,
respectively, compared to the same prior year periods. Excluding the sales of
divested businesses and product rationalization, export sales would have
increased 11% and 13% over the second quarter and first half of fiscal 1997,
respectively. Foreign sales decreased 4% in the second quarter and increased 4%
in the first half of fiscal 1998 compared to the same periods of fiscal 1997.
Excluding the effects of Sallmetall (acquired near the end of March 1997) and
product rationalization, foreign sales would have decreased 12% and 12% from the
same prior year periods. The Company has continued to experience some softness
in demand for its products (particularly presentation products) in Asia, which
management believes, is primarily as a result of the current economic situation
there. Management is uncertain as to the extent that the unsettled conditions in
Asia will affect the Company's business in the future.
Gross Profit
The Company's gross profit percentage increased to 39.5% of net sales in the
second quarter of fiscal 1998 from 32.1% in the second quarter of fiscal 1997
and increased to 39.1% in the first half of 1998 compared to 35.0% in the first
half of fiscal 1997. These increases 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 strategic plan. Excluding the effect of
this special charge, gross profit percentages for the second quarter and first
half of fiscal 1997 would have been 41.6% and 39.8%, respectively. The decrease
in the second quarter gross profit percentage from the adjusted gross profit
percentage in the prior year period was the result of higher than anticipated
start-up costs related to the Company's new substrate facility in the United
Kingdom, unfavorable manufacturing variances incurred at its Statesville, North
Carolina facilities, lower net selling prices, and to changes in customer mix.
These higher costs were partially offset by the cost saving initiatives
undertaken as part of the Company's strategic plan.
Selling, Shipping, Administrative and General Expenses
Selling and shipping expenses, as a percentage of net sales, decreased slightly
to 19.7% and 18.8%, respectively, for the second quarter and first half of
fiscal 1998 compared to 19.8% and 19.5% for the same periods of fiscal 1997.
These decreases were principally due to lower marketing administration expenses
primarily due to reductions in personnel resulting from the Company's strategic
plan, and to lower promotional expenses, partially offset by higher field sales
costs.
Administrative and general expenses decreased $.6 million, or 8%, in the second
quarter of fiscal 1998 compared to the second quarter of fiscal 1997 due to
personnel reductions and to lower management incentive compensation, partially
offset by higher consulting fees, and higher legal expenses related to the
patent infringement litigation previously mentioned. (See Note 4 to the
Condensed Consolidated Financial Statements herein). Administrative and general
expenses decreased $2.0 million, or 12%, in the first half of fiscal 1998
compared to the first half of fiscal 1997 primarily due to prior year consulting
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Page 11
fees related to the Company's strategic plan ($1.0 million pretax, or $.06 per
share after tax on a basic and diluted basis) and to current year capitalization
of costs ($.6 million pretax), previously expensed, in connection with the
adoption of Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."
Restructuring and Other
In the second quarter of fiscal 1998, the Company reduced by $1.8 million ($1.2
million after taxes, or $.11 per share on a basic basis and $.10 per share on a
diluted basis) some of its reserves established in connection with the Company's
implementation of its plan during fiscal 1997. The reserve reduction related
primarily to lower than expected severance costs and a decision not to vacate a
leased facility.
In the second quarter of fiscal 1997, the Company recorded a pretax special
charge of $16.7 million, or $.93 per share after tax, in connection with its
strategic plan, of which $10.8 million, or $.60 per share, is included in
"Restructuring and other" in the accompanying Condensed Consolidated Statements
of Operations. Additionally, in the first half of fiscal 1997, the Company
realized a net gain on business divestitures of $.5 million pretax, or $.03 per
share after tax on a basic and diluted basis. During the second quarter of
fiscal 1998, due to lower than anticipated inventory returns, the Company
reversed a contingent liability in the amount of $.4 million ($.3 million after
taxes, or $.02 per share on a basic and diluted basis) related to one of the
divested businesses.
Interest Expense
Interest expense decreased $.3 million, or 23%, in the second quarter of fiscal
1998 from the second quarter of fiscal 1997 and $.5 million, or 17%, in the
first half of fiscal 1998 compared to the first half of fiscal 1997 due to a
lower average debt balance.
Other Income, Net
The increase in other income, net, of $1.3 million in the second quarter of
fiscal 1998 and $2.1 million in the first half of fiscal 1998 compared to the
second quarter and first half of fiscal 1997 was due to higher interest income
resulting from higher average cash balances and the forgiveness of a loan ($.4
million pretax) at one of the Company's foreign operations.
Provision for Income Taxes
The Company's effective income tax rate from continuing operations was 31.5% and
33.0% for the second quarter and first half of fiscal 1998, respectively,
compared to 37.9% and 38.6% for the second quarter and first half of 1997. The
effective rate decreases were due primarily to favorable resolutions of prior
years' tax exposures.
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Page 12
Financial Condition
The Company's working capital decreased to $65.1 million at the end of the
second quarter of fiscal 1998 from $66.2 million at the end of fiscal 1997. The
current ratio increased to 2.4 at May 31, 1998 from 2.0 at November 30, 1997.
The Company's debt/capitalization percentage decreased slightly to 42% at the
end of the second quarter of fiscal 1998 compared to 43% at the end of fiscal
1997. Available cash balances were sufficient during the first half of fiscal
1998 to fund additions to property, plant and equipment of $9.0 million and to
pay cash dividends of $2.3 million.
Current assets decreased to $110.3 million at the end of the second quarter of
fiscal 1998 from $130.3 million at the end of fiscal 1997, largely as a result
of lower cash and cash equivalent balances and deferred income taxes, partially
offset by higher inventory. The decrease in cash and cash equivalents was
largely due to income tax payments in connection with the net gains on business
divestitures, capital expenditures and payments associated with the strategic
plan. Inventories increased to $23.3 million at May 31, 1998 from $20.2 million
at November 30, 1997, due principally to seasonal buildup of inventory and other
anticipated sales volume. The $3.4 million decrease in deferred income taxes was
due to temporary differences between reporting for financial and income tax
purposes in connection with the restructuring charges.
Current liabilities decreased to $45.2 million at the end of the second quarter
of fiscal 1998 from $64.1 million at the end of fiscal 1997. This decrease was
largely attributable to the payments of income taxes and reductions in the
accruals associated with the Company's business divestitures and strategic plan.
The effect of unfavorable currency exchange rates for the British pound sterling
and the Dutch guilder (the functional currencies of the Company's U.K. and
Holland operations, respectively) was the principal cause for the $1.0 million
decrease in the cumulative translation adjustment account in stockholders'
equity.
The Company has a revolving credit agreement of $75 million and a line of credit
agreement of $2.5 million. There was $2.4 million borrowed under these credit
facilities as of May 31, 1998. Management believes that funds generated from
operations, combined with the existing credit facilities, 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 fiscal 1998 expenditures for additions to property, plant and
equipment to increase capacity and productivity will approximate $16 million, of
which approximately $9.0 million has been expended through the first half of
fiscal 1998.
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Page 13
Readiness for Year 2000
The Company has taken actions to understand the nature and extent of the work
required to make its systems and infrastructure Year 2000 compliant. The Company
began work several years ago to prepare its financial, information and other
computer-based systems for the Year 2000, including replacing and/or updating
existing legacy systems. The Company has completed the necessary modifications
to most of its critical systems and applications, and to date, the project is
proceeding on schedule and is expected to be completed during 1999.The Company
continues to evaluate the estimated future costs associated with these efforts
based on actual experience but does not currently anticipate that such costs
will have a material impact on the Company's results of operations or financial
position. The Company has also initiated formal communications with its
significant suppliers and customers to determine the extent to which the Company
might be impacted by those third parties' failure to be Year 2000 compliant.
New Accounting Standards
During the first half of fiscal 1998, the Company adopted several 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).
SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", provides guidance in accounting for the
costs of computer software developed or obtained for internal use and
for determining if computer software is for internal use.
SOP 96-1, "Environmental Remediation Liabilities," provides guidance on
specific accounting issues that are present in the recognition,
measurement, display and disclosure of environmental remediation
liabilities. The adoption of this statement does not have a material
impact on the Company's results of operations or financial position.
During 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 requires that the components
of comprehensive income be reported in the financial statements. The statement
is effective for fiscal years beginning after December 15, 1997.
During 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 requires the reporting of
segment information utilizing the approach that the Company uses to manage its
internal organization. Also, SFAS 131 requires the reporting of segment
information on a condensed basis for interim periods beginning in fiscal 1999.
The statement is effective for fiscal years beginning after December 15, 1997.
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Page 14
During February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS No. 132 does not change
the measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan
assets, and eliminates certain disclosures that are no longer as useful. The
statement is effective for fiscal years beginning after December 15, 1997, but
earlier application is encouraged.
During April 1998, The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the
Costs of Start-up Activities." SOP 98-5 provides guidance on the financial
reporting on start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
standard is effective for fiscal years beginning after December 15, 1998.
Earlier application is encouraged.
During June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes new procedures for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing standards. The statement is effective for fiscal years
beginning after June 15, 1999, but earlier application is permitted as of the
beginning of any fiscal quarter subsequent to June 15, 1998.
The adoption of SFAS Nos. 130, 131, 132, 133, and SOP 98-5 are not expected to
have any impact on the Company's consolidated results of operations, financial
position or cash flows.
<PAGE>
Page 15
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 15,
1998, and in connection therewith, proxies were solicited by management pursuant
to Regulation 14 under the Securities Exchange Act of 1934. An aggregate of
11,244,600 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 four directors to serve until the 2001 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)
------- --- -------------------------------
William F. Hamilton, Ph.D. 10,251,873 38,688
Mary R. (Nina) Henderson 10,272,600 17,961
Wilson D. McElhinny 10,271,973 18,588
Roderic H. Ross 10,272,841 17,720
2. Ratification of independent auditors. The appointment of Coopers &
Lybrand L.L.P. (Coopers & Lybrand L.L.P. has since merged with Price
Waterhouse to become PricewaterhouseCoopers LLP.) as the Company's
independent auditors for fiscal 1998 was ratified. The tabulation of
votes was as follows:
Abstentions
For Against (including any broker nonvotes)
--- ------- -------------------------------
10,100,787 169,866 19,908
<PAGE>
Page 16
Item 6 -Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule for the six months ended May 31, 1998.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
Page 17
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 CORPORATION.
Date July 14, 1998 By /s/ William E. Chandler
------------------------- --------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial Officer)
Date July 14, 1998 By /s/ Donald L. Thompson
------------------------- -------------------------
Donald L. Thompson
Chairman of the Board
and Chief Executive Officer
Date July 14, 1998 By /s/ John Fanelli III
------------------------- -----------------------
John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)
<PAGE>
Page 18
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule for the six months ended May 31, 1998.
-------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> MAY-31-1998
<CASH> 45,704
<SECURITIES> 0
<RECEIVABLES> 35,388
<ALLOWANCES> (2,246)
<INVENTORY> 23,337
<CURRENT-ASSETS> 110,308
<PP&E> 88,120
<DEPRECIATION> (40,386)
<TOTAL-ASSETS> 194,478
<CURRENT-LIABILITIES> 45,224
<BONDS> 53,307
0
0
<COMMON> 1,615
<OTHER-SE> 78,913
<TOTAL-LIABILITY-AND-EQUITY> 194,478
<SALES> 123,645
<TOTAL-REVENUES> 123,645
<CGS> 75,345
<TOTAL-COSTS> 75,345
<OTHER-EXPENSES> 33,749
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 2,219
<INCOME-PRETAX> 12,167
<INCOME-TAX> 4,013
<INCOME-CONTINUING> 8,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,154
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.69
</TABLE>
