<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 August 29, 1999
--------------------------------------------------
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.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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 October 1, 1999, there were outstanding 10,401,041 shares of the
registrant's common stock.
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Page 2
HUNT CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
Condensed Consolidated Balance Sheets as of
August 29, 1999 and November 29, 1998 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended August 29, 1999
and August 30, 1998 4
Consolidated Statements of Comprehensive Income -
Three Months and Nine Months Ended August 29, 1999
and August 30, 1998 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended August 29, 1999 and August 30, 1998 6
Notes to Condensed Consolidated Financial
Statements 7 - 8
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 9 - 13
---------------------------------------------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 14
----------------------------------------------------------
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 15
-----------------
Item 6 - Exhibits and Reports on Form 8-K 15
--------------------------------
Signatures 16
----------
Exhibit Index 17
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Page 3
Part I - FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
Hunt Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
August 29, November 29,
ASSETS 1999 1998
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,672 $ 40,724
Accounts receivable, less allowance for doubtful
accounts: 1999, $1,466; 1998, $1,721 37,546 31,018
Inventories:
Raw materials 7,201 7,867
Work in process 3,235 3,033
Finished goods 9,989 10,704
--------- ---------
Total inventories 20,425 21,604
Deferred income taxes 4,158 4,769
Prepaid expenses and other current assets 1,041 1,402
--------- ---------
Total current assets 91,842 99,517
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
1999, $42,981; 1998, $37,818 46,389 49,917
Excess of acquisition costs over net assets acquired,
less accumulated amortization 24,122 26,021
Other assets 12,023 11,402
--------- ---------
Total assets $ 174,376 $ 186,857
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 32 $ 479
Accounts payable 8,702 12,503
Accrued expenses:
Salaries, wages and commissions 1,754 2,302
Income taxes 2,153 1,930
Other 14,062 17,742
--------- ---------
Total current 26,703 34,956
liabilities
Long-term debt, less current portion 56,985 57,741
Deferred income taxes 1,486 374
Other non-current liabilities 16,143 15,906
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: 1999 and 1998 -16,152,322 shares 1,615 1,615
Capital in excess of par value 6,434 6,434
Accumulated other comprehensive income (3,405) (1,099)
Retained earnings 161,939 158,316
--------- ---------
166,583 165,266
Less cost of treasury stock:
1999 - 5,747,681 shares; 1998 - 5,162,082 shares (93,524) (87,386)
--------- ---------
Total stockholders' equity 73,059 77,880
--------- ---------
Total liabilities and stockholders' equity $ 174,376 $ 186,857
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Page 4
Hunt Corporation
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
August 29, August 30, August 29, August 30,
1999 1998 1999 1998
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $61,143 $61,236 $182,696 $184,882
Cost of sales 38,198 37,994 113,282 113,340
------- ------- -------- --------
Gross profit 22,945 23,242 69,414 71,542
Selling, administrative and general expenses 18,614 18,338 56,566 56,313
Restructuring and other - (253) - (2,424)
------- ------- -------- --------
Income from operations 4,331 5,157 12,848 17,653
Interest expense 1,153 1,185 3,452 3,405
Other income, net (308) (586) (1,233) (2,476)
------- ------- -------- --------
Income from continuing operations before income taxes 3,486 4,558 10,629 16,724
Provision for income taxes 1,220 1,740 3,720 5,753
------- ------- -------- --------
Income from continuing operations 2,266 2,818 6,909 10,971
Discontinued operations:
Gain on sale of discontinued operations,
net of income taxes of $260 - 484 - 484
------- ------- -------- --------
Net income $2,266 $3,302 $6,909 $11,455
======= ======= ======== ========
Basic earnings per common share:
Income from continuing operations $.22 $.25 $.66 $.98
Gain on sale of discontinued operations - .04 - .04
======= ======= ======== ========
Net income per share $.22 $.29 $.66 $1.02
======= ======= ======== ========
Diluted earnings per common share:
Income from continuing operations $.22 $.24 $.66 $.93
Gain on sale of discontinued operations - .04 - .04
======= ======= ======== ========
Net income per share $.22 $.28 $.66 $.97
======= ======= ======== ========
Dividends per common share $.103 $.103 $.308 $.308
======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Page 5
Hunt Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
August 29, August 30, August 29, August 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 2,266 $ 3,302 $ 6,909 $11,455
Other comprehensive (loss) income:
Foreign currency translation adjustments,
net of income taxes of $41 and $807 in 1999,
and ($137) and $222 in 1998, respectively (75) 221 (1,499) (423)
------- ------- ------- -------
Comprehensive income $ 2,191 $ 3,523 $ 5,410 $11,032
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Page 6
Hunt Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
August 29, August 30,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,909 $ 11,455
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,741 6,306
Deferred income taxes 1,741 877
Loss (gain) on disposals of property, plant and equipment 4 (13)
Gain on sale of businesses - (1,394)
Payments/credits for special charges (1,595) (6,805)
Issuance of stock under management incentive bonus
and stock grant plans - 252
Changes in operating assets and liabilities (11,995) (23,130)
-------- --------
Net cash provided by (used in) operating activities 1,805 (12,452)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,067) (12,352)
Other, net (32) -
-------- --------
Net cash used in investing activities (3,099) (12,352)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 11,812 5,446
Payments on long-term debt, including current maturities (12,575) (2,501)
Book overdrafts (438) (225)
Purchases of treasury stock (6,138) (941)
Proceeds from exercise of stock options - 1,813
Dividends paid (3,255) (3,460)
Other, net (33) 185
-------- --------
Net cash (used in) provided by financing activities (10,627) 317
-------- --------
Effect of exchange rate changes on cash (131) (10)
-------- --------
Net decrease in cash and cash equivalents (12,052) (24,497)
Cash and cash equivalents, beginning of period 40,724 65,449
-------- --------
Cash and cash equivalents, end of period $ 28,672 $ 40,952
======== ========
</TABLE>
<PAGE>
Page 7
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 August 29, 1999 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. In the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for the reporting and display of the
components of comprehensive income in the financial statements. See Consolidated
Statements of Comprehensive Income in the foregoing financial statements.
3. A reconciliation of weighted average common shares outstanding to weighted
average of common shares outstanding assuming dilution in calculating the
earnings per share is shown below (in thousands):
Three Months Ended
August 29, August 30,
1999 1998
---- ----
Average common shares outstanding - basic 10,405 11,284
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants 2 426
------ ------
Average common shares and dilutive
securities outstanding 10,407 11,710
====== ======
Nine Months Ended
August 29, August 30,
1999 1998
---- ----
Average common shares outstanding - basic 10,541 11,255
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants 7 532
------ ------
Average common shares and dilutive
securities outstanding 10,548 11,787
====== ======
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4. The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the prior years' restructuring
plan in the Condensed Consolidated Balance Sheet at August 29,1999 (in
thousands):
<TABLE>
<CAPTION>
Balance at Current Cash Non-Cash Balance at
November 29, 1998 Provision Reductions Activity August 29, 1999
------------------ --------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Lease Obligations $ 1,873 - $ (670) $ (8) $ 1,195
Severance 722 - (554) - 168
Inventory 400 - (186) (34) 180
Fixed Assets 235 - - - 235
Other 487 - (185) - 302
- ----- ------- --- --------- ---- -------
Total $ 3,717 - $ (1,595) $(42) $ 2,080
======= ==== ======== ==== =======
</TABLE>
5. The Company has been sued for patent infringement with respect to one of its
minor products. After a jury trial during the Company's second quarter of fiscal
1998, the U.S. District in the Western District of Wisconsin entered judgment
against the Company in this matter and awarded damages to the plaintiffs in the
amount of $3.3 million, plus interest and costs. The Company and its patent
legal counsel believe that the verdict against the Company was incorrect and
that it will be reversed on appeal. Accordingly, the Company has not recorded
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. (See also Note 15 to the Consolidated Financial Statements included
in the Company's 1998 Form 10-K.)
6. On October 4, 1999, the Company acquired the business and assets of Axiom
Graphics Manufacturing, Inc. ("Axiom") for an insignificant cash payment and
future considerations. Axiom is a manufacturer, distributor and marketer of a
line of liquid laminating machines and wet separator finishing devices for the
large format print industry. Pro forma presentation of the effect of the
acquisition has not been made since the effect is not material to the Company's
results of operations or financial condition.
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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 within the
meaning of the Private Securities Litigation Act of 1995. 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, and changes in, worldwide 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; the
impact of Year 2000 issues; the outcome of litigation in which the Company is
engaged (including that referenced in Note 5 to Condensed Consolidated Financial
Statements above); and other risks and uncertainties set forth herein and in the
Company's Forms 10-Q, 10-K 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. Although the Company believes
that its plan to achieve higher growth and profitability will be successful in
the long term and that most of the cost savings resulting from the strategic
plan will continue in future years, there can be no assurance that such will be
the case. (See Note 4 to Condensed Consolidated Financial Statements herein.)
Further, the Company has been currently assessing and considering changes in its
management and operating structures, particularly within its graphics business
unit. The results of this process are expected to be known before the end of the
Company's 1999 fiscal year-end.
Results of Operations
- ---------------------
Net Sales
- ---------
Net sales of $61.1 million for the third quarter and $182.7 million for the
first nine months of fiscal 1999 declined .2% and 1.2%, respectively, from the
corresponding fiscal periods of fiscal 1998. These decreases were largely due to
lower sales of graphics products (down 2% for the third quarter and 4% for the
first nine months), partially offset by higher sales of consumer products (up 2%
for the third quarter and 3% for the first nine months). In addition, net sales
were adversely impacted by lower net selling prices in the third quarter and
first nine months of fiscal 1999 compared to last year, as well as by a general
softness in demand for some of the Company's graphics products. The decreases in
graphics products for the periods were largely the result of lower mounting and
laminating equipment products sales (down 16% and 17%, respectively),
specifically wide-format machines, and foam board sales (down 3% and 5%,
respectively). The increases in consumer products sales were due primarily to
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Page 10
higher sales of pencil sharpeners and staplers. Export sales decreased 12% and
29% in the third quarter and first nine months of fiscal 1999, respectively,
compared to the same prior year periods. The decreases in export sales were
largely attributable to lower sales in board products. Foreign sales decreased
8% in the third quarter and first nine months of fiscal 1999 compared to the
same periods of fiscal 1998.
Management is uncertain as to how long and to what extent the softness in demand
for its graphics products will continue. Management believes that there are
efforts in place for the graphics products business as well as new graphics
product programs that should begin showing benefits in the fourth quarter of
fiscal 1999. However, there can be no assurance that such will be the case.
Gross Profit
- ------------
The Company's gross profit percentage decreased to 37.5% of net sales in the
third quarter of fiscal 1999 from 38% in the third quarter of fiscal 1998 and
decreased to 38% in the first nine months of fiscal 1999 compared to 38.7% in
the first nine months of fiscal 1998. Restructuring recoveries of $.2 million
and $.4 million associated with inventory returns in connection with the
Company's strategic plan were recorded in cost of sales in the third quarter and
first nine months of fiscal 1998, respectively. Excluding the effects of these
recoveries, the Company's adjusted gross profit percentages of net sales would
have been 37.6% and 38.5% for the third quarter and first nine months of fiscal
1998, respectively. The decreases in the third quarter and first nine months
gross profit percentages from the adjusted gross profit percentages in the prior
year periods were the result of lower net selling prices, unfavorable product
and customer mix, and lower unit sales. These items were partially offset by
favorable production efficiencies. Management expects the pressure on net
selling prices attributable to the growing bargaining power of the Company's
largest customers, such as office products superstores, to continue. The
Company's raw material cost increases have remained below the rate of inflation
for the past several years; however, management is uncertain how long this will
continue.
Selling, Administrative and General Expenses
- --------------------------------------------
Selling, administrative and general expenses increased slightly during the third
quarter and first nine months of fiscal 1999 compared to the same periods of
fiscal 1998. These increases were principally due to higher administrative and
general costs (resulting from severance costs and higher professional services
expenses and research and development costs), partially offset by lower
marketing and selling expenses (due primarily to lower promotional advertising,
marketing research and product distribution costs).
Restructuring and Other
- -----------------------
During the third quarter and first nine months of fiscal 1998, respectively, the
Company reduced by $.3 million pretax ($.2 million after taxes, or $.01 per
share on a basic and diluted basis) and by $.6 million pretax ($.4 million after
taxes, or $.02 per share on a basic and diluted basis) some of its reserves
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Page 11
established in connection with the Company's 1997 business divestitures. The
reserve reductions related principally to lower than anticipated inventory
returns and other accruals. In addition, in the first nine months 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
strategic plan during fiscal 1997. The reserve reduction related primarily to
lower than expected severance costs and a decision not to vacate a leased
facility.
Other Income, Net
- -----------------
Other income, net, decreased $.3 million in the third quarter of fiscal 1999 and
$1.2 million in the first nine months of fiscal 1999 compared to the third
quarter and first nine months of fiscal 1998. These decreases were due to lower
interest income resulting from lower average cash balances and the forgiveness
of a loan ($.4 million pretax) at one of the Company's foreign operations during
fiscal 1998. These decreases were partially offset by gains from Canadian
currency exchange rate fluctuations in 1999.
Provision for Income Taxes
- --------------------------
The Company's effective income tax rate was 35% for the third quarter and first
nine months of fiscal 1999 compared to 38.2% and 34.4%, respectively, for the
third quarter and first nine months of fiscal 1998. The lower third quarter of
fiscal 1999 effective tax rate was due primarily to favorable resolutions of
prior years' tax exposures.
Discontinued Operations
- -----------------------
In the third quarter of fiscal 1998, the Company reduced by $.7 million pretax
($.5 million after taxes, or $.04 per share on a basic and diluted basis) some
of its accruals established in connection with the Company's discontinued office
furniture business due to the favorable resolution of certain contingent
liabilities established at the time of divestiture.
Financial Condition
- -------------------
The Company's working capital increased to $65.1 million at the end of the third
quarter of fiscal 1999 from $64.6 million at the end of fiscal 1998. The current
ratio increased to 3.4 at August 29, 1999 from 2.9 at November 29, 1998. The
Company's debt/capitalization percentage increased to 44% at the end of the
third quarter of fiscal 1999 compared to 43% at the end of fiscal 1998.
Available cash balances were sufficient during the first nine months of fiscal
1999 to fund additions to property, plant and equipment of $3.1 million, to pay
cash dividends of $3.3 million, and to fund the repurchase of $6.1 million of
the Company's common shares.
Current assets decreased to $91.8 million at the end of the third quarter of
fiscal 1999 from $99.5 million at the end of fiscal 1998 largely as a result of
lower cash and cash equivalent, and inventory balances, partially offset by
higher accounts receivable balances. The decrease in cash and cash equivalents
was largely due to the repurchase of the Company's common shares, payments of
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dividends, capital expenditures and payments associated with the strategic plan.
Inventories decreased to $20.4 million at August 29, 1999 from $21.6 million at
November 29, 1998, due primarily to inventory reductions in Europe. The $6.5
million increase in accounts receivable was largely due to timing of payments by
major customers and seasonal dating and promotional programs.
Current liabilities decreased to $26.7 million at the end of the third quarter
of fiscal 1999 from $35.0 million at the end of fiscal 1998. This decrease was
largely attributable to the timing of accounts payable and interest payments, as
well as reductions in the accruals associated with the Company's 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 $2.3 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 $4.6 million borrowed under these credit
facilities as of August 29, 1999. 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 1999 expenditures for additions to property, plant and
equipment to increase capacity and productivity will approximate $5 million, of
which approximately $3.1 million has been expended through the first nine months
of fiscal 1999.
Year 2000 Update
- ----------------
The Company has substantially completed its work to mitigate the Year 2000
("Y2K") issue. These efforts involve assessment, identification of non-compliant
systems, remediation, testing, and verification, including replacing and/or
updating existing systems, as well as establishing contingency plans relating to
Y2K risks.
The Company has also substantially completed the necessary modifications to its
critical and ancillary systems and applications. To date, the project is
proceeding on schedule and is expected to be completed by the end of fiscal
1999.
The Company has also contacted significant suppliers and customers to identify
and coordinate the remediation of any Y2K issues they may have which might
affect the Company, and the Company is still in the process of determining the
Company's vulnerability if these companies should fail to remediate their Y2K
issues.
The Company's costs incurred to date in addressing the Y2K issues have not been
significant and are being funded through operating cash flows. The total
implementation costs (relating principally to new hardware and software)
capitalized to date are $5.5 million, which should represent substantially all
of the capitalized costs to be incurred. These costs not only addressed Y2K
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Page 13
issues but also provided for operational efficiencies and cost reductions. The
Company continues to evaluate 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.
It is difficult to identify or prepare for the absolute worst case Y2K scenario.
However, the most likely worst case scenario for the Company would include,
among other things, temporary slowdowns of operations at the Company's
facilities, whether due to an external power failure or otherwise, delays in
receipt of supplies, failure to be able to serve customers, lost sales and
failure of management controls. Although the Company believes that its systems
will be fully operational and will not cause any material disruptions because of
Y2K issues, there can be no assurance that this will be the case. Further,
because of the uncertainties associated with assessing the potential effects of
non-preparedness of suppliers and customers, there is a risk of a material
adverse effect on the Company's future results of operations if these
constituencies do not correct their Y2K problems, if any, on a timely basis. The
Company plans to continue assessing these risks through reviews with its major
suppliers and customers.
The Company has substantially completed its contingency plans relating
specifically to identified Y2K risks and developing cost estimates relating to
these plans. The objectives of the contingency plans are to ensure
business-critical processes are protected from disruption and will continue to
function during and after the year 2000, and to ensure the Company's ability to
produce an acceptable level of products and services is safeguarded in the event
of failures of external systems and services. The contingency plans include, for
example, securing alternative sources of supply, possible safety inventory
levels and other backup procedures. Y2K contingency plans and related cost
estimates will be reviewed and modified as additional information becomes
available.
New Accounting Standard
- -----------------------
During the first quarter of fiscal 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for the
reporting and display of the components of comprehensive income in the financial
statements. See the Consolidated Statements of Comprehensive Income in the
financial statements herein.
In June 1999, the Financial Accounting Standards Board approved issuance of a
final statement to defer the effective date of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Consequently, SFAS No. 133 will
now be effective for fiscal years beginning after June 15, 2000. The adoption of
SFAS No. 133 is not expected to have a material effect on the Company's
consolidated results of operations, financial position or cash flows.
Subsequent Event
- ----------------
On September 29, 1999, the Board of Directors of the Company authorized the
Company to repurchase up to an additional $5 million of the Company's common
stock over the next twelve months. The Company has repurchased, to date, 962,700
shares of the 1,000,000 shares previously authorized for repurchase since the
beginning of fiscal 1998 by the Board of Directors. The purchases will be funded
from available operating funds and the repurchased shares will be held as
treasury stock to be used for Company stock-based compensation plans and for
other general corporate purposes.
On October 4, 1999, the Company acquired the business and assets of Axiom
Graphics Manufacturing, Inc. ("Axiom"). Axiom is a manufacturer, distributor and
marketer of a line of liquid laminating machines and wet separator finishing
devices for the large format print industry. This acquisition is expected to be
financed through funds generated from operations.
<PAGE>
Page 14
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
There have been no material changes in the Company's market risk from that set
forth in the Company's fiscal 1998 Form 10-K.
<PAGE>
Page 15
PART II - OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
-----------------
Reference is made to Part I, Item 3 of the Company's fiscal 1998 Form 10-K and
to Note 5 to the Condensed Consolidated Financial Statements herein.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
27 Financial Data Schedule for the quarter ended August 29, 1999.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
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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 CORPORATION.
Date October 11, 1999 By /s/ William E. Chandler
----------------------------- -------------------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial Officer)
Date October 11, 1999 By /s/ Donald L. Thompson
----------------------------- -------------------------------------
Donald L. Thompson
Chairman of the Board
and Chief Executive Officer
Date October 11, 1999 By /s/ John Fanelli III
----------------------------- -------------------------------------
John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)
<PAGE>
Page 17
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule for the quarter ended August 29, 1999
-------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> AUG-29-1999
<CASH> 28,672
<SECURITIES> 0
<RECEIVABLES> 39,012
<ALLOWANCES> (1,466)
<INVENTORY> 20,425
<CURRENT-ASSETS> 91,842
<PP&E> 89,370
<DEPRECIATION> (42,981)
<TOTAL-ASSETS> 174,376
<CURRENT-LIABILITIES> 26,703
<BONDS> 56,985
0
0
<COMMON> 1,615
<OTHER-SE> 71,444
<TOTAL-LIABILITY-AND-EQUITY> 174,376
<SALES> 182,696
<TOTAL-REVENUES> 182,696
<CGS> 113,282
<TOTAL-COSTS> 113,282
<OTHER-EXPENSES> 56,205
<LOSS-PROVISION> 361
<INTEREST-EXPENSE> 3,452
<INCOME-PRETAX> 10,629
<INCOME-TAX> 3,720
<INCOME-CONTINUING> 6,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,909
<EPS-BASIC> .66
<EPS-DILUTED> .66
</TABLE>
