<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 28, 2000
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
--------------------------------------------------------
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
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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 1, 2000, there were outstanding 9,859,919 shares of the registrant's
common stock.
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Page 2
HUNT CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
May 28, 2000 and November 28, 1999 3
Condensed Consolidated Statements of Income -
Three Months and Six Months Ended
May 28, 2000 and May 30, 1999 4
Consolidated Statements of Comprehensive Income -
Three Months and Six Months Ended
May 28, 2000 and May 30, 1999 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended May 28, 2000 and May 30, 1999 6
Notes to Condensed Consolidated Financial
Statements 7-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 17
Item 4 - Submission of Matters to a Vote of Security Holders 18
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit Index 21
</TABLE>
<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 28, November 28,
ASSETS 2000 1999
--------- ---------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 22,024 $ 36,897
Accounts receivable, less allowance for doubtful
accounts: 2000, $848; 1999, $967 33,014 33,445
Inventories:
Raw materials 10,295 6,966
Work in process 3,741 3,337
Finished goods 14,915 10,373
--------- ---------
Total inventories 28,951 20,676
Deferred income taxes 4,973 5,406
Prepaid expenses and other current assets 1,173 850
--------- ---------
Total current assets 90,135 97,274
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
2000, $46,576; 1999, $43,781 43,035 45,121
Excess of acquisition costs over net assets acquired, net 23,160 25,013
Other assets 12,747 12,221
--------- ---------
Total assets $ 169,077 $ 179,629
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 21 $ 23
Accounts payable 9,263 10,762
Accrued expenses:
Salaries, wages and commissions 2,771 3,584
Income taxes 1,859 1,481
Other 18,330 20,001
--------- ---------
Total current liabilities 32,244 35,851
Long-term debt, less current portion 54,638 56,647
Deferred income taxes 1,543 1,906
Other non-current liabilities 15,013 14,710
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: 2000 and 1999 -16,152,322 shares 1,615 1,615
Capital in excess of par value 6,434 6,434
Accumulated other comprehensive loss (5,779) (2,459)
Retained earnings 161,383 160,267
--------- ---------
163,653 165,857
Less cost of treasury stock:
2000 - 6,289,203 shares; 1999 - 5,987,383 shares (98,014) (95,342)
--------- ---------
Total stockholders' equity 65,639 70,515
--------- ---------
Total liabilities and stockholders' equity $ 169,077 $ 179,629
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Page 4
Hunt Corporation
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
May 28, May 30, May 28, May 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 62,863 $ 61,185 $ 123,496 $ 121,554
Cost of sales 40,738 37,498 79,454 75,085
--------- --------- --------- ---------
Gross profit 22,125 23,687 44,042 46,469
Selling, administrative and general expenses 19,996 19,538 37,877 37,947
Restructuring and other (171) -- (171) --
--------- --------- --------- ---------
Income from operations 2,300 4,149 6,336 8,522
Interest expense 1,058 1,111 2,202 2,300
Other income, net (319) (423) (815) (920)
--------- --------- --------- ---------
Income before income taxes 1,561 3,461 4,949 7,142
Provision for income taxes 546 1,211 1,732 2,499
--------- --------- --------- ---------
Net income $ 1,015 $ 2,250 $ 3,217 $ 4,643
========= ========= ========= =========
Net income per share - Basic $ .10 $ .22 $ .32 $ .44
========= ========= ========= =========
Net income per share - Diluted $ .10 $ .22 $ .32 $ .44
========= ========= ========= =========
Dividends per common share $ .102 $ .103 $ .205 $ .205
========= ========= ========= =========
</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 Six Months Ended
------------------------- -------------------------
May 28, May 30, May 28, May 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 1,015 $ 2,250 $ 3,217 $ 4,643
Comprehensive loss:
Foreign currency translation adjustments,
net of income tax benefits of $1,524 and $1,787
in 2000, and $318 and $766 in 1999,
respectively (3,319) (591) (2,830) (1,424)
------- ------- ------- -------
Other comprehensive loss (3,319) (591) (2,830) (1,424)
------- ------- ------- -------
Comprehensive income (loss) $(2,304) $ 1,659 $ 387 $ 3,219
======= ======= ======= =======
</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>
Six Months Ended
------------------------------
May 28, May 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,217 $ 4,643
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 4,454 4,536
Deferred income taxes 81 209
Loss on disposals of property, plant and equipment 44 4
Payments/credits for special charges (1,182) (1,171)
Issuance of stock under management incentive bonus
and stock grant plans 59 --
Changes in operating assets and liabilities (11,909) (7,600)
-------- --------
Net cash provided by (used) for operating activities (5,236) 621
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,032) (2,359)
Acquisition of business (60) (25)
-------- --------
Net cash used for investing activities (3,092) (2,384)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 4,627 8,678
Payments on long-term debt, including current maturities (6,199) (7,952)
Book overdrafts 60 (247)
Purchases of treasury stock (2,784) (6,138)
Dividends paid (2,049) (2,185)
Other, net (57) (31)
-------- --------
Net cash used for financing activities (6,402) (7,875)
-------- --------
Effect of exchange rate changes on cash (143) (156)
-------- --------
Net decrease in cash and cash equivalents (14,873) (9,794)
Cash and cash equivalents, beginning of period 36,897 40,724
-------- --------
Cash and cash equivalents, end of period $ 22,024 $ 30,930
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<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 May 28, 2000 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. A reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution in calculating the earnings
per share is shown below (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 28, May 30,
2000 1999
---- ----
<S> <C> <C>
Average common shares outstanding - basic 9,914 10,424
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants 11 1
------ ------
Average common shares and dilutive
securities outstanding 9,925 10,425
====== ======
Six Months Ended
----------------
May 28, May 30,
2000 1999
---- ----
Average common shares outstanding - basic 9,969 10,609
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants 14 3
------ ------
Average common shares and dilutive
securities outstanding 9,983 10,612
====== ======
</TABLE>
<PAGE>
Page 8
3. The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the Company's 1999 restructuring
plan in the Condensed Consolidated Balance Sheet at May 28, 2000 (in thousands):
<TABLE>
<CAPTION>
Balance at Current Cash Non-Cash Balance at
November 28, 1999 Provision Reductions Activity May 28, 2000
------------------ --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Severance $ 2,539 - $ (349) $ - $ 2,190
Lease Obligations 1,766 - (35) - 1,731
Fixed Assets 1,581 - (22) - 1,559
Other 177 - (61) - 116
------- -------- ------ --- -------
Total $ 6,063 - $ (467) $ - $ 5,596
======= ======== ====== === =======
</TABLE>
In addition to the above, the Company reduced its 1997 business divestiture
reserves by $.1 million, principally related to inventory returns and
environmental reserves.
4. The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the Company's 1997 strategic plan
in the Condensed Consolidated Balance Sheet at May 28, 2000 (in thousands):
<TABLE>
<CAPTION>
Balance at Cash Non-Cash Balance at
November 28, 1999 Credits Reductions Activity May 28, 2000
------------------ ------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Lease Obligations $ 554 - $ (554) $ - $ -
Severance 46 - (38) - 8
Other 296 $ (82) (40) - 174
----- ------ ------ ----- -----
Total $ 896 $ (82) $ (632) $ - $ 182
===== ====== ====== ===== =====
</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 verdict has been appealed,
and a decision of the Court of Appeals is expected within the relatively near
future. 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 14 to the Consolidated Financial Statements included in the
Company's 1999 Form 10-K.)
<PAGE>
Page 9
6. During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 requires selected information about
reportable segments in interim financial reports that is consistent with that
made available to management to assess performance. The Company operates in two
reportable business segments, each of which is a strategic business that is
managed separately because each business develops, manufactures and sells
distinct products. The business segments consist of consumer products (including
office and art supplies) and graphics products (including supplies and
equipment). The Company's management evaluates performance based on several
factors. However, the primary measurement focus is "operating income" excluding
restructuring, net gain on divestitures, costs incurred in connection with the
implementation of the 1999 restructuring plan and any other unusual items.
The following table presents information about the Company's
reportable segments. Intersegment sales are not significant. Operating income
includes all revenues and expenses of the reportable segment except for
restructuring, net gain on divestitures, costs incurred in connection with the
implementation of the 1999 restructuring plan, interest expense, interest
income, other expenses, other income, and income taxes, which are excluded from
the measure of segment profitability reviewed by Company's management.
Identifiable assets are those assets used in the operations of each business
segment. Corporate assets include cash and miscellaneous other assets not
identifiable with any particular segment.
<TABLE>
<CAPTION>
Six Months Ended Consumer Graphics
May 28, 2000 Products Products Corporate Consolidated
------------ -------- -------- --------- ------------
<S> <C> <C> <C>
Net external sales $ 50,252 $ 73,244 $ 123,496
========= ========= =========
Operating income $ 7,299 $ 4,481 $ (3,387) $ 8,393
========= ========= =========
Restructuring and
net gain on
divestitures $ 133 $ 82 $ -- 215
========= ========= =========
Implementation costs $ -- $ (2,095) $ (177) (2,272)
========= ========= ========= ---------
Income from operations $ 6,336
Interest expense (2,202)
Interest income 795
Other income, net 20
---------
Income from continuing
operations before
income taxes $ 4,949
=========
Identifiable assets $ 35,610 $ 95,274 $ 38,193 $ 169,077
========= ========= ========= =========
</TABLE>
<PAGE>
Page 10
<TABLE>
<CAPTION>
Six Months Ended Consumer Graphics
May 30, 1999 Products Products Corporate Consolidated
------------------ ------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Net external sales $ 52,521 $ 69,033 $ 121,554
========= ========= =========
Operating income $ 9,100 $ 3,173 $ (3,751) $ 8,522
========= ========= =========
Restructuring and
net gain on
divestitures $ -- $ -- $ -- --
========= ========= =========
Implementation costs $ -- $ -- $ -- --
========= ========= ========= ---------
Income from operations $ 8,522
Interest expense (2,300)
Interest income 734
Other income, net 186
---------
Income from continuing
operations before
income taxes $ 7,142
=========
Identifiable assets $ 38,020 $ 94,284 $ 45,845 $ 178,149
========= =========== ========= =========
</TABLE>
<PAGE>
Page 11
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 restructuring and strategic plans
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 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 1999 Form
10-K and as may be set forth in the Company's subsequent Forms 10-Q, 8-K and
other filings with the Securities and Exchange Commission.
In October 1999, the Company initiated a comprehensive reorganization and
restructuring plan (the "1999 restructuring plan"). The major components of the
1999 restructuring plan include (with principal emphasis on the Company's
Graphics Products business) creating manufacturing centers of excellence,
outsourcing the Company's European distribution activities and consolidating its
U. S. distribution activities, and focusing its product offering and marketing
efforts. In addition to the restructuring charges of $6.2 million relating to
this plan recognized in the fourth quarter of fiscal 1999, the Company has
revised its projections upwardly and now expects to spend approximately $4.7
million for implementation costs (which will be recorded as period costs as
incurred) of this plan. Approximately $4.3 million is expected to be incurred in
fiscal 2000. The total estimated implementation costs of $4.7 million is
approximately $1.7 million higher than planned and is primarily the result of
higher than anticipated manufacturing and operating costs. These costs
principally represent air freight costs of products from the Company's European
operations which are sold in the U. S.; outsourcing costs of some converting
operations; and higher material substitution costs. Management believes that
these costs were appropriate in order to protect its service levels and customer
base in the face of higher demand for its products in the U. S. and Europe. In
addition, management anticipates that these manufacturing and operating costs
will continue in the third quarter of fiscal 2000 but expects productivity
improvements as the integration of the manufacturing operations into the
Company's Statesville, North Carolina facility is completed. During the second
quarter and the first half of fiscal 2000, the Company recognized $2.0 and $2.3
million of such implementation costs. These implementation costs consisted
primarily of the above described manufacturing and operating costs, employee
retention bonuses and training, project consulting, and other costs and are
included in the Condensed Statements of Income for the three months and six
months ended May 28, 2000 as follows (in millions except per share data):
<PAGE>
Page 12
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
May 28, 2000 May 28, 2000
-------------------------- -------------------------
Per Share Per Share
$ Amount $ Amount
------ ------- ------ -------
<S> <C> <C> <C> <C>
Cost of sales $ 1.1 $ .07 $ 1.2 $ .08
Selling, administrative
& general expenses .9 .06 1.1 .07
------ ------- ------ -------
Total $ 2.0 $ .13 $ 2.3 $ .15
====== ======= ====== =======
</TABLE>
The Company has substantially completed the consolidation of its manufacturing
operations and distribution activities in the U. S. and the outsourcing of its
European distribution activities. During the second half of fiscal 2000, the
Company plans to consolidate its European manufacturing operations with expected
completion by early fiscal 2001. (See Note 3 to Condensed Consolidated Financial
Statements herein.)
The estimated pre-tax cost savings to be generated from the 1999 restructuring
plan are expected to be approximately $1.7 million in fiscal 2000, principally
during the second half of the year, and are expected to grow to $5.3 million in
fiscal 2001 and $5.7 million per year thereafter. Although the Company expects
realization of such future costs savings, there can be no assurance that they
will be achieved. (Note: All earnings per share amounts included in Management's
Discussion and Analysis are presented on an after-tax, diluted basis.)
Results of Operations
Net Sales
Net sales of $62.9 million for the second quarter and $123.5 million for the
first half of fiscal 2000 increased 3% and 2%, respectively, from the
corresponding fiscal periods of fiscal 1999. These increases were largely due to
higher sales of graphics products (up 8% for the second quarter and 6% for the
first half), partially offset by lower sales of consumer products (down 5% for
the second quarter and 4% for the first half). In addition, sales were adversely
impacted by lower net selling prices in the second quarter and first half of
fiscal 2000 compared to last year, primarily within the consumer products
business, as well as by the effects of unfavorable exchange rates for the Dutch
guilder (the functional currency of the Company's Netherlands operations) and
the British pound sterling (the functional currency of the Company's U. K.
operations). The increase in graphics products sales was due to higher sales of
supplies products (up 11% and 8%, respectively), consisting of films, adhesives,
and board products (up 5% and 7%, respectively). The decrease in consumer
products sales was due primarily to the termination by Schwan-STABILO
Schwanhausser GmbH & Co. of its distribution agreement with the Company
(effective September 1, 1999) relating to highlighter markers and writing
instruments, and to lower net selling prices. Export sales increased 4% and 7%,
respectively, in the second quarter and first half of fiscal 2000 compared to
<PAGE>
Page 13
the same periods of fiscal 1999. Foreign sales increased 5% in the second
quarter of fiscal 2000 and decreased 7% in the first half of fiscal 2000
compared to the same prior year periods. Although the Company believes that it
will see sales growth for the balance of fiscal 2000 due principally to new
product programs, third party alliances, and other programs, there is no
assurance that such sales growth will be achieved.
Gross Profit
The Company's gross profit percentage decreased to 35.2% of net sales in the
second quarter of fiscal 2000 from 38.7% in the second quarter of fiscal 1999
and decreased to 35.7% in the first half of fiscal 2000 compared to 38.2% in the
first half of fiscal 1999. These decreases were primarily the result of
implementation costs related to the 1999 restructuring plan of $1.1 million and
$1.2 million recorded in costs of sales in the second quarter and first half of
fiscal 2000, respectively. Excluding the effects of these costs, the gross
profit percentages for the second quarter and first half of fiscal 2000 would
have been 37.0% and 36.7%, respectively. The remaining decreases in gross profit
percentages and dollars were principally the result of higher product costs,
lower net selling prices, and unfavorable customer and product mix. Management
expects the pressure on net selling prices, attributable in large part to the
growing bargaining power of the Company's largest customers such as the office
superstores, to continue during fiscal 2000. The Company has experienced
significant cost increases for some of its raw materials, such as styrene
plastic and corrugated packaging materials, during the first half of fiscal 2000
and is uncertain if this trend will continue. As a result, management has
initiated cost reduction measures, planned selling price increases, and other
programs in an effort to offset these cost increases. In addition, the Company
expects cost savings in the second half of fiscal 2000 from the 1999
restructuring plan to help mitigate these cost increases as well as improve
profit percentages.
Selling, Administrative and General Expenses
Selling, administrative and general expenses, as a percentage of net sales,
decreased to 31.8% and 30.7%, respectively, for the second quarter and first
half of fiscal 2000 compared to 31.9% and 31.2% for the same periods of fiscal
1999. These percentage decreases were principally due to lower administrative
and general costs (due to lower professional services expenses and lower
research and development costs) partially offset by higher marketing and selling
expenses (due primarily to higher freight related costs, travel and
entertainment expenses, and relocation and recruiting costs). In addition, the
selling, administrative and general expenses include implementation costs
related to the 1999 restructuring plan of $.9 million and $1.1 million,
respectively, for the second quarter and first half of fiscal 2000.
Restructuring and Other
In the second quarter of fiscal 2000, the Company reduced by $.2 million, or
$.01 per share, some of its reserves related to its 1997 strategic plan and its
1997 business divestitures. The reserve reductions were principally related to
lower than anticipated losses on asset disposals, inventory returns and
environmental reserves.
<PAGE>
Page 14
Provision for Income Taxes
The Company's effective income tax rate was 35% for the second quarter and first
half of fiscal 2000 and 1999.
Net Income and Earnings Per Share
Net income of $1.0 million for the second quarter of fiscal 2000 decreased $1.3
million from the second quarter of fiscal 1999 and net income of $3.2 million
for the fiscal 2000 first half decreased $1.4 million from the first half of
fiscal 1999. Excluding the effects of special items recorded during the second
quarter and first half of fiscal 2000 in connection with the implementation of
the 1999 restructuring plan and reduction of reserves related to its 1997
business divestitures, earnings per share would have been $.22 and $.46 per
share during the second quarter and first half of fiscal 2000, respectively,
compared to $.22 and $.44 per share for the same periods last year. This
increase for the first half of fiscal 2000 was favorably impacted by lower
average common shares outstanding as a result of the Company's stock repurchase
program (average diluted common shares outstanding were 9,983,000 and 10,612,000
in the first half of fiscal 2000 and 1999, respectively).
Financial Condition
The Company's working capital decreased to $57.9 million from $61.4 million, and
its current ratio increased to 2.8 from 2.7, at the end of the second quarter of
fiscal 2000 from the end of fiscal 1999, respectively. The Company's
debt/capitalization percentage was 45% at the end of both the second quarter of
fiscal 2000 and at the end of fiscal 1999. Funds from operations and available
cash balances were sufficient during the first six months of fiscal 2000 to fund
additions to property, plant and equipment of $3.0 million, to pay cash
dividends of $2.0 million, to fund the repurchase of $2.8 million of the
Company's common shares, to fund a $1.6 million reduction of long-term debt, and
to make cash payments related to the 1999 restructuring and 1997 strategic plans
of $1.2 million.
Current assets decreased to $90.1 million at the end of the second quarter of
fiscal 2000 from $97.3 million at the end of fiscal 1999 largely as a result of
lower cash and cash equivalents, partially offset by higher inventory balances.
The decrease in cash and cash equivalents was largely due to items discussed in
the preceding paragraph. Inventories increased to $29.0 million at the end of
the second quarter from $20.7 million at the end of fiscal 1999 due primarily to
inventory build-up in connection with the 1999 restructuring plan and to higher
anticipated sales volume, primarily related to the Company's back-to-school
program.
Current liabilities decreased to $32.2 million at the end of the second quarter
of fiscal 2000 from $35.9 million at the end of fiscal 1999. This decrease was
largely attributable to the timing of accounts payable and interest payments,
<PAGE>
Page 15
the payment of a $1.0 million special performance award to Company employees
which had been accrued, and reductions in the accruals associated with the
Company's 1999 restructuring plan and the 1997 strategic plan. The effect of
unfavorable currency exchange rates for the Dutch guilder (the functional
currency of the Company's Netherlands operations) and the British pound sterling
(the functional currency of the Company's U. K. operations) was the principal
cause for the $3.3 million increase in the accumulated other comprehensive loss
account in stockholders' equity.
The Company has a revolving credit agreement of $75 million and a line of credit
at one of its foreign operations of 1.5 million British pounds sterling
(approximately $2.2 million). There were outstanding borrowings totaling $3.3
million under these credit facilities at May 28, 2000. 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 2000 expenditures for
additions to property, plant and equipment to increase capacity and productivity
will approximate $7.6 million, of which approximately $3.0 million has been
expended through the first six months of fiscal 2000.
<PAGE>
Page 16
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 1999 Form 10-K.
<PAGE>
Page 17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Reference is made to Part I, Item 3 of the Company's fiscal 1999 Form 10-K and
to Note 5 to the Condensed Consolidated Financial Statements herein.
<PAGE>
Page 18
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 19,
2000, and in connection therewith, proxies were solicited by management pursuant
to Regulation 14 under the Securities Exchange Act of 1934. An aggregate of
9,992,239 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 2003 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)
------------------------------------------------------------------------------
Ursula M. Burns 9,341,112 51,898
------------------------------------------------------------------------------
Jack Farber 9,344,098 48,912
------------------------------------------------------------------------------
Gordon A. MacInnes 9,344,116 48,894
------------------------------------------------------------------------------
Donald L. Thompson 9,342,749 50,261
------------------------------------------------------------------------------
2. Ratification of independent auditors. The appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for
fiscal 2000 was ratified. The tabulation of votes was as follows:
==============================================================================
Abstentions
For Against (including any broker nonvotes)
------------------------------------------------------------------------------
9,361,309 12,936 18,765
==============================================================================
<PAGE>
Page 19
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for the quarter ended May 28, 2000.
(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 20
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 12, 2000 By /s/ William E. Chandler
---------------------------- ----------------------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial Officer)
Date July 12, 2000 By /s/ Donald L. Thompson
----------------------------- ----------------------------------------
Donald L. Thompson
Chairman of the Board
and Chief Executive Officer
Date July 12, 2000 By /s/ John Fanelli III
----------------------------- ----------------------------------------
John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)
<PAGE>
Page 21
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule for the quarter ended May 28, 2000
