-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RvYgjCmqqJcZuOP9GgZx72t9UYi6uBmM/eG7aOIb/T6rS2ejUGuw1y1Q+BRywQQy 3EPGubIQnCVMt6EBK+YaMg== 0000950116-97-001298.txt : 19970715 0000950116-97-001298.hdr.sgml : 19970715 ACCESSION NUMBER: 0000950116-97-001298 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970601 FILED AS OF DATE: 19970714 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT MANUFACTURING CO CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08044 FILM NUMBER: 97639816 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157327700 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 1, 1997 ------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8044 ------------------------------------------------------- HUNT MANUFACTURING CO. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 21-0481254 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Square 2005 Market Street, Philadelphia, PA 19103 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone no., including area code (215) 656-0300 ------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of July 8, 1997, there were outstanding 11,100,750 shares of the registrant's common stock. Page 2 HUNT MANUFACTURING CO. INDEX Page PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of June 1, 1997 and December 1, 1996 3 Condensed Consolidated Statements of Operations - Three Months and Six Months Ended June 1, 1997 and June 2, 1996 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 1, 1997 and June 2, 1996 5 Notes to Condensed Consolidated Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 13 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 14 Item 6 - Exhibits and Reports on Form 8-K 15 Signatures 16 Exhibit Index 17 Part I - FINANCIAL INFORMATION Page 3 Item 1. Financial Statements Hunt Manufacturing Co. Condensed Consolidated Balance Sheets (Unaudited) (In thousands except share and per share amounts)
June 1, December 1, ASSETS 1997 1996 --------- --------- Current assets: Cash and cash equivalents $ 4,587 $ 1,528 Accounts receivable, less allowance for doubtful accounts: 1997, $2,339 ; 1996, $1,809 43,999 48,912 Inventories: Raw materials 10,361 10,888 Work in process 4,240 4,839 Finished goods 15,831 19,664 --------- --------- Total inventories 30,432 35,391 Deferred income taxes 11,413 4,563 Prepaid expenses and other current assets 2,690 1,606 --------- --------- Total current assets 93,121 92,000 Property, plant and equipment, at cost, less accumulated depreciation and amortization: 1997, $45,351; 1996, $53,938 50,381 52,711 Intangible assets, net 33,814 24,977 Other assets 5,936 5,986 --------- --------- Total assets $ 183,252 $ 175,674 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,746 $ -- Accounts payable 15,447 13,271 Accrued expenses: Salaries, wages and commissions 3,384 5,284 Income taxes 6,173 3,770 Insurance 1,811 2,082 Compensated absences 2,238 2,145 Restructuring 6,343 -- Other 9,992 7,123 --------- --------- Total current liabilities 47,134 33,675 Long-term debt, less current portion 62,675 64,559 Deferred income taxes 4,229 4,704 Other non-current liabilities 12,436 10,056 Commitments and contingencies Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares (including 50,000 shares of Series A Junior Participating Preferred); none issued -- -- Common stock, $.10 par value, 40,000,000 shares authorized; issued: 1997 and 1996 -16,152,322 shares 1,615 1,615 Capital in excess of par value 6,434 6,434 Cumulative translation adjustment 239 894 Retained earnings 134,392 141,587 --------- --------- 142,680 150,530 Less cost of treasury stock: 1997 - 5,055,822 shares; 1996 - 5,178,127 shares (85,902) (87,850) --------- --------- Total stockholders' equity 56,778 62,680 --------- --------- Total liabilities and stockholders' equity $ 183,252 $ 175,674 ========= =========
See accompanying notes to condensed consolidated financial statements. Page 4 Hunt Manufacturing Co. Condensed Consolidated Statements of Income (Unaudited) (In thousands except per share amounts)
Three Months Ended Six Months Ended ------------------------- ------------------------- June 1, June 2, June 1, June 2, 1997 1996 1997 1996 --------- --------- --------- --------- Net sales $ 75,421 $ 81,225 $ 152,023 $ 154,893 Cost of sales 50,738 51,145 98,957 98,025 --------- --------- --------- --------- Gross profit 24,683 30,080 53,066 56,868 Selling and shipping expenses 14,873 15,895 29,389 30,054 Administrative and general expenses 8,666 7,686 17,982 14,709 Restructuring, impairment and other costs 10,913 -- 10,475 354 --------- --------- --------- --------- (Loss) income from operations (9,769) 6,499 (4,780) 11,751 Interest expense 1,347 1,265 2,671 2,140 Other expense, net 213 194 207 214 --------- --------- --------- --------- (Loss) income before income taxes (11,329) 5,040 (7,658) 9,397 (Benefit) provision for income taxes (4,335) 1,767 (3,063) 3,298 --------- --------- --------- --------- Net (loss) income ($ 6,994) $ 3,273 ($ 4,595) $ 6,099 ========= ========= ========= ========= Average shares of common stock outstanding 11,055 10,968 11,031 11,954 ========= ========= ========= ========= Net (loss) income per share ($ 0.63) $ 0.30 ($ 0.42) $ 0.51 ========= ========= ========= ========= Dividends per common share $ 0.095 $ 0.095 $ 0.19 $ 0.19 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. Page 5 Hunt Manufacturing Co. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Six Months Ended ----------------------- June 1, June 2, 1997 1996 -------- -------- Cash flows from operating activities: Net (loss) income $ (4,595) $ 6,099 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 4,588 4,689 Deferred income taxes (7,327) (45) Loss on disposals of property, plant and equipment 131 451 Gain on sale of businesses (474) -- Provision (payments) for special charges, net 16,244 (1,029) Issuance of stock under management incentive bonus and stock grant plans 1,109 241 Changes in operating assets and liabilities, excluding effects of acquisition and divestitures 7,548 (5,446) -------- -------- Net cash provided by operating activities 17,224 4,960 -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (3,410) (3,397) Proceeds from sale of businesses 10,956 -- Acquisition of business (13,821) -- Other, net 20 (413) -------- -------- Net cash used in investing activities (6,255) (3,810) -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt 13,000 76,200 Payments on long-term debt, including current maturities (19,147) (1,968) Purchase of treasury stock -- (86,550) Proceeds from exercise of stock options 332 69 Dividends paid (2,092) (2,084) Other, net 35 (39) -------- -------- Net cash used in financing activities (7,872) (14,372) -------- -------- Effect of exchange rate changes on cash (38) 62 -------- -------- Net increase (decrease) in cash and cash equivalents 3,059 (13,160) Cash and cash equivalents, beginning of period 1,528 15,503 -------- -------- Cash and cash equivalents, end of period $ 4,587 $ 2,343 ======== ========
See accompanying notes to condensed consolidated financial statements. Page 6 Hunt Manufacturing Co. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. The accompanying condensed consolidated financial statements and related notes are unaudited; however, in management's opinion all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position at June 1, 1997 and the results of operations and cash flows for the periods shown have been made. Such statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by generally accepted accounting principles or those normally made in Form 10-K. 2. The earnings per share are calculated based on the weighted average number of common shares outstanding. Shares issuable under outstanding stock option, stock grant and long-term incentive compensation plans are common stock equivalents, but are not used in computing earnings per share because the dilutive effect would be less than 3%; however, Exhibit 11 to this report sets forth the calculations of earnings per share amount on a primary and fully diluted per share basis. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." The new statement replaces the "primary" and "fully diluted" calculations currently used with "basic earnings per share" which includes only actual shares outstanding and "diluted earnings per share" which includes the effect of any common stock equivalents or other items that dilute earnings per share. The new rules are effective for fiscal periods ending after December 15, 1997, with prior periods restated to comply with the new standards at that time. If the Statement had been effective for the second quarter and first half of fiscal 1997 and 1996, there would have been no significant change in earnings per share as presented in the Condensed Consolidated Statements of Operations and Exhibit 11 to this report. 3. In April, 1997, the Company announced a new strategy for growth and restructuring plan designed to restore higher sales growth, profitability and to reduce its cost structure. The cost reduction phase of the plan includes a significant reduction of the Company's stock keeping units ("SKU's") and major restructuring of its administrative and marketing and selling functions. In conjunction with the implementation of the growth and restructuring plan, the Company recorded a pre-tax charge to earnings of approximately $16.7 million in the second quarter of fiscal 1997. This amount is allocated as follows in the accompanying Condensed Consolidated Statements of Operations: $10.8 million to restructuring and other costs as further described below and $5.9 million to costs of sales related principally to inventory write downs and returns from the reduction in SKU's. Amounts included in restructuring and other costs in the accompanying Condensed Consolidated Statements of Operations represent cash and non-cash items of $5.0 million and $5.8 million, respectively, and Page 7 include employee severance costs, lease obligations, and other costs related to the implementation of the growth and restructuring plan. Approximately $6.9 million of accrued cash items remain in the accompanying Condensed Consolidated Balance Sheet at June 2, 1997. 4. During the first quarter of fiscal 1997, the Company realized a net gain of $.5 million pre-tax, or $.03 per share after-tax, on the divestitures of its Lit-Ning business and its Hunt Data Products' MediaMate and Calise' brand products. The net gain is included in restructuring and other costs in the accompanying Condensed Consolidated Statements of Operations. 5. In the first half of fiscal 1996, the Company recorded a pre-tax charge of $.4 million, or $.02 per share after-tax, relating to the Company's fiscal 1995 decision to reorganize, and relocate and consolidate certain manufacturing and distribution operations. This pre-tax charge is included in restructuring and other costs for the fiscal 1996 first half in the accompanying Condensed Consolidated Statements of Operations. Approximately $ .6 million of accruals for organizational changes and relocations and consolidation of operations is included in liabilities at the end of the second quarter of fiscal 1997, which principally relates to future severance-related payments. 6. During the second quarter of fiscal 1997, the Company completed its previously announced acquisition of all of the stock of Sallmetall B. V., a Dutch company, for approximately $14 million and the assumption of debt of approximately $6 million. Sallmetall's operations involve the design and assembly of laminating equipment and related adhesive film coating manufacturing. Sallmetall had sales of approximately $21 million for its fiscal year ended December 31, 1996. The acquisition was accounted for under the purchase method of accounting and was financed with borrowings under the Company's existing credit facility and from internal cash generation. The purchase price allocation is based upon preliminary appraisal values and management's estimates and is subject to reclassifications and adjustments in the future. Sallmetall's net sales were $2.8 million for the second quarter of fiscal 1997, which are included under the art/craft business segment. 7. During the second quarter and first half of fiscal 1997, inventory quantities were reduced, resulting in a liquidation of certain LIFO inventories carried at lower costs prevailing in prior years. The effect of these reductions was to increase net income by $459, or $.02 per share, and $759, or $.04 per share, in the second quarter and first half of fiscal 1997, respectively. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion includes certain forward-looking statements. Such forward-looking statements are subject to a number of factors, material risks and uncertainties, including those referred to herein and in the Company's Reports on Forms 10-K, 10-Q and 8-K and other filings with the Securities and Exchange Commission ("SEC"), which could cause actual results to differ materially from the forward-looking statements. In April, 1997, the Company announced a new strategy for growth and restructuring plan designed to restore higher levels of sales growth, profitability and to reduce its cost structure. Reference is made to the Company's Form 8-K filed with the SEC on April 8, 1997 for further information concerning such plan. Management believes that the cost reduction portion of the growth and restructuring plan will result in annual cost savings of approximately $18.0 million. Such annual cost savings are expected to commence in fiscal 1998, with approximately $8.0 million to be realized in fiscal 1997. The cost savings will result primarily from a significant reduction of the Company's SKU's and from a major restructuring of its administrative and marketing and selling functions. Although the Company expects realization of such cost savings, there is no assurance that these savings will be achieved. The Company's operating results for the second quarter and first half of fiscal 1997 include the effects of a pre-tax special charge of $16.7 million recorded in conjunction with the implementation of the growth and restructuring plan. The special charge includes employee severance costs, asset and inventory writedowns, recognition of future lease obligations, and other related costs. Approximately 42% of this special charge is for cash items, of which $6.9 million remains in the accompanying Condensed Consolidated Balance Sheet at June 2, 1997. The Company anticipates that the total charge relating to this growth and restructuring plan will range from $20 million to $23 million, or $1.08 to $1.25 per share after-tax. The remaining portion of the special charge is expected to be recognized over the balance of fiscal 1997. The special charge for the second quarter and first half of fiscal 1997 is included in the following categories in the Condensed Consolidated Statements of Operations (in thousands): Pre-Tax Dollar After-Tax Amount Per Share Amount -------------- ---------------- Restructuring and other costs $10,818 $.60 Cost of sales 5,895 .33 ------- --- Total $16,713 $.93 Other Developments - ------------------ During the second quarter of fiscal 1997, the Company completed its previously announced acquisition of all of the stock of Sallmetall B. V., a Dutch company, for approximately $14 million and the assumption of debt of approximately $6 million. See Note 6 to Condensed Consolidated Financial Statements herein. Page 9 Sallmetall's operations involve the design and assembly of laminating equipment and related adhesive film coating manufacturing. Management believes that the acquisition of this business will further strengthen the Company's position as a leading global supplier of print finishing systems and expand its activity in the growing market for wide format short-run digital imaging. In connection with the Company's strategic assessment, at the end of the first quarter of fiscal 1997 (on February 28, 1997), the Company sold its Lit-Ning Products business and its Hunt Data Products MediaMate and Calise brand products. The sales of these businesses resulted in a net pre-tax gain of $.5 million, or $.03 per share after-tax. The Condensed Consolidated Statements of Operations for the six months ended June 1, 1997 include the results of these businesses through the divestiture date. The combined sales of these business units were approximately $12 million and $24 million in the first half of fiscal 1997 and fiscal year 1996, respectively. The Company intends to divest certain other assets which do not fit with its new strategy, which may include divestiture of the Company's Bevis furniture operations. Financial Condition - ------------------- The Company's working capital decreased to $46.0 million at the end of the second quarter of fiscal 1997 from $58.3 million at the end of fiscal 1996. The decrease was largely attributable to the Company's special charge related to its growth and restructuring plan previously discussed. The current ratio decreased to 2.0 at June 1, 1997 from 2.7 at December 1, 1996, and debt capitalization increased to 53% at the end of the second quarter of fiscal 1997 from 51% at the end of fiscal 1996 primarily attributable to the reduction in earnings as a result of the growth and restructuring plan special charge described above. Available cash balances were sufficient to fund additions to property, plant and equipment of $3.4 million, pay cash dividends of $2.1 million, reduce net long-term debt by $6.1 million, and to partially fund the acquisition of Sallmetall B. V. of $2.0 million. Current assets decreased slightly to $93.1 million at the end of the second quarter of fiscal 1997 from $92.0 million at the end of fiscal 1996, largely as a net result of lower inventory and accounts receivable balances, offset by higher cash and cash equivalent balances and deferred income taxes. Inventories decreased from $35.4 million at December 1, 1996 to $30.4 million at June 1, 1997, due principally to the $5.9 million inventory write downs associated with the restructuring plan and to the business divestitures mentioned above. Accounts receivable decreased to $44.0 million at the end of the second quarter of fiscal 1997 from $48.9 million at the end of fiscal 1996 due to several factors, including lower sales for the second quarter of fiscal 1997 as compared with those for the fourth quarter of fiscal 1996, and to divestitures of businesses at the end of the first quarter of fiscal 1997. The $6.9 million increase in deferred income taxes was due to temporary differences between financial reporting purposes and income tax reporting purposes in connection with the restructuring charge. Page 10 Current liabilities increased to $47.1 million at the end of the second quarter of fiscal 1997 from $33.7 million at the end of fiscal 1996. This increase was largely attributable to the accrual associated with the restructuring charges recorded in the second quarter of fiscal 1997, as well as to accruals associated with the aforementioned business divestitures. The effect of unfavorable currency exchange rates for the British pound sterling (the functional currency of the Company's U. K. operations) was the principal cause for the $.7 million decrease in the cumulative translation adjustment account in stockholders' equity. Management believes that funds generated from operations, combined with the existing credit facility, will be sufficient to meet currently anticipated working capital and other capital and debt service requirements. Should the Company require additional funds, management believes that the Company could obtain them at competitive costs. Management currently expects that total 1997 expenditures for additions to property, plant and equipment to increase capacity and productivity will approximate $11.0 million, of which approximately $3.4 million has been expended through the first half of fiscal 1997. Results of Operations - --------------------- Net Sales Net sales of $75.4 million for the second quarter and $152.0 million for the first half of fiscal 1997 declined 7.1% and 1.9%, respectively, from the corresponding fiscal 1996 periods, largely due to the sale of the Lit-Ning and Hunt Data Products businesses at the end of the first quarter of fiscal 1997. Excluding the sales of the divested businesses, net sales were essentially unchanged for the second quarter of fiscal 1997 and grew 3.2% in the first half of fiscal 1997 when compared to the same periods in fiscal 1996. Net average selling prices increased 2.8% in the second quarter and 2.3% in the first half of fiscal 1997 from those in the same periods last year. Excluding the effect of currency exchange rate changes, net selling prices increases for the second quarter and first half of fiscal 1997 would have been 2.3% and 1.8%, respectively. Art/craft products sales increased 9.3% to $45.4 million in the second quarter and 11.4% to $85.3 million in the first half of fiscal 1997 from the same periods in fiscal 1996. The increases in art/craft products sales were attributable to higher sales of presentation graphics products (up 16% in the second quarter and 17% in the first half of fiscal 1997), partially offset by lower sales of art supplies products (down 4% and 1%) and hobby/craft products (down 18% and 6%) in the second quarter and first half of fiscal 1997, respectively, compared to the same periods in fiscal 1996. The increases in presentation graphics products sales were largely due to higher sales of mounting and laminating equipment and supplies, which includes the sales of products of Sallmetall (acquired near the end of March, 1997) and to higher sales of substrates related products (i. e., foam board and other board products). Excluding the sales from the Sallmetall business, presentation graphics products sales grew 7% and 12% in the second quarter and first half of fiscal 1997, respectively. The decreases in art supplies Page 11 products sales were due primarily to lower sales of fine art paper, X-Acto brand knives, and to lower sales of products targeted for discontinuation in connection with the product line rationalization and restructuring mentioned above, while the decreases in hobby/craft product sales were due largely to lower sales of products targeted for discontinuation. Export sales increased 6% in both the second quarter and first half of fiscal 1997 from the same periods in fiscal 1996. Foreign sales of art/craft products increased 34% in the second quarter and 29% in the first half of fiscal 1997 compared to the same periods in fiscal 1996, due primarily to higher sales of presentation graphics products in Europe, which include sales of products of Sallmetall and, to a lesser extent, to increases in the value of the British pound sterling. Excluding the effect of currency exchange rate changes and the sales of the Sallmetall business, foreign sales grew 3% and 10% in the second quarter and first half of fiscal 1997, respectively. Office products sales decreased 24.3% to $30.1 million in the second quarter and decreased 14.8% to $66.7 million in the first half of fiscal 1997 compared to the same fiscal 1996 periods. These decreases were principally attributable to lower sales of desktop accessories and supplies (down 80% and 54%), mechanical and electromechanical products (down 12% and 5%), and office furniture (down 8% and 5%) in the second quarter and first half of fiscal 1997, respectively, compared to the same periods in fiscal 1996. The divested Lit-Ning and Hunt Data Products businesses largely accounted for the desktop accessories and supplies products sales decreases. The decreases in mechanical and electromechanical products sales were primarily attributable to lower sales of products targeted for discontinuation in connection with the product line rationalization and restructuring previously discussed. The office furniture sales decreases were due principally to lower sales of folding tables. Export sales of office products declined by 3% in the second quarter of fiscal 1997 and grew by 2% in the first half of fiscal 1997. The decrease in the second quarter was the result of lower sales in Canada. Gross Profit - ------------ The Company's gross profit percentage decreased to 32.7% of net sales in the second quarter of fiscal 1997 from 37.0% in the second quarter of fiscal 1996 and decreased to 34.9% in the first half of fiscal 1997 from 36.7% in the first half of fiscal 1996. These decreases were primarily the result of the $5.9 million special charge recorded in cost of sales in the second quarter of fiscal 1997 in connection with the Company's growth and restructuring plan previously discussed. Excluding the effect of this special charge, gross profit percentages for the second quarter and first half of fiscal 1997 would have been 40.5% and 38.8%, respectively. The improvements in gross profit percentages, before special charges, were due largely to inventory reductions, which resulted in a liquidation of certain LIFO inventories carried at lower costs prevailing in prior years, favorable product sales mix, net selling price increases, and, to some extent, realization of some cost savings stemming from the early stages of the restructuring plan implementation. Although the Company has realized recent selling price increases and stabilization of costs of some of its raw materials, management is uncertain if these conditions will continue. Page 12 Selling, Shipping, Administrative and General Expenses - ------------------------------------------------------ Selling and shipping expenses, as a percentage of net sales, remained essentially unchanged in the second quarter and first half of fiscal 1997 compared to the same periods in fiscal 1996. Administrative and general expenses increased $1.0 million, or 13%, in the second quarter and increased $3.3 million, or 22%, in the first half of fiscal 1997 compared to the prior year expense levels for the same periods. These increases were principally due to consulting fees related to assistance with the Company's strategic assessment of its operations ($1.0 million pre-tax, or $.06 per share after-tax) and to higher management incentive compensation expenses. Restructuring and Other Costs - ----------------------------- In the second quarter of fiscal 1997, the Company recorded a pre-tax special charge of $16.7 million, or $.93 per share after-tax, in connection with its growth and restructuring plan (previously discussed), of which $10.8 million, or $.60 per share, is included in restructuring and other costs in the accompanying Condensed Consolidated Statements of Operations. The cash and non-cash portions of the restructuring and other costs represent $5.0 million and $5.8 million, respectively, and include employee severance costs, lease obligations, and other related costs. Expenditures for cash restructuring items are planned to be substantially expended over the balance of fiscal 1997. Additionally, in the first half of fiscal 1997, the Company realized a net gain on business divestitures of $.5 million pre-tax, or $.03 per share after-tax, discussed above. In the first half of fiscal 1996, the Company recorded a pre-tax charge of $.4 million, or $.02 per share after-tax, relating to the Company's fiscal 1995 decision to relocate and consolidate certain manufacturing and distribution operations. Approximately $.6 million of accruals for organizational changes and relocation and consolidation of operations is included in liabilities at the end of the second quarter of fiscal 1997, which principally relates to future severance-related payments. Interest Expense - ---------------- Interest expense remained essentially unchanged for the second quarter of fiscal 1997 from the second quarter of fiscal 1996 and increased to $2.7 million in the first half of fiscal 1997 from $2.1 million in the first half of fiscal 1996. This increase was due to a higher average debt balance in the first half of fiscal 1997 as compared to the same period in fiscal 1996. (Benefit) Provision for Income Taxes - ------------------------------------ The Company recorded an income tax benefit of $4.3 million in the second quarter of fiscal 1997 due primarily to the restructuring charge recorded in the same period and the resolution of certain prior years' tax exposures. The Company's effective income Page 13 tax rates, resulting from this tax benefit, were 38.2% and 40% for the second quarter and first half of fiscal 1997, respectively, compared to 35.1% for both the second quarter and first half of fiscal 1996. New Accounting Standards - ------------------------ SFAS No. 128, "Earnings Per Share", changes the manner in which earnings per share amounts are calculated and presented. See Note 2 to Condensed Consolidated Financial Statements herein. Page 14 Part II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) and (c) The Company's Annual Meeting of Shareholders was held on April 16, 1997, and in connection therewith, proxies were solicited by management pursuant to Regulation 14 under the Securities Exchange Act of 1934. An aggregate of 10,996,454 shares of the Company's common stock ("Shares") were outstanding and entitled to vote at the meeting. At the meeting the following matters (not including ordinary procedural matters) were submitted to a vote of the holders of Shares, with the results indicated below: 1. Election of a class of three directors to serve until the Year 2000 Annual Meeting. The following persons, all of whom were serving as directors and were management's nominees for reelection, were reelected. There was no solicitation in opposition to such nominees. The tabulation of votes was as follows: ================================================================================ Withheld Nominee For (including any broker nonvotes) - -------------------------------------------------------------------------------- Jack Farber 9,988,182 273,970 - -------------------------------------------------------------------------------- Donald L. Thompson 9,870,746 391,406 - -------------------------------------------------------------------------------- Gordon A. MacInnes 9,867,828 394,324 ================================================================================ 2. Approval of amendment of the Company's 1993 Stock Option and Stock Grant Plan. The amendment to the Company's 1993 Stock Option and Stock Grant Plan was approved. The tabulation of votes was as follows: ================================================================================ Abstentions For Against (including any broker nonvotes) - -------------------------------------------------------------------------------- 6,873,495 2,402,200 989,457 ================================================================================ 3. Ratification of appointment of independent auditors. The appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors for fiscal 1997 was ratified. The tabulation of votes was as follows: ================================================================================ Abstentions For Against (including any broker nonvotes) - -------------------------------------------------------------------------------- 10,228,344 8,654 25,154 ================================================================================ Page 15 Item 6 -Exhibits and Reports on Form 8-K (a) Exhibits 10. Amended and Restated 1993 Stock Option and Stock Grant Plan* 11. Computation of Per Share Earnings 27. Financial Data Schedule (b) Reports on Form 8-K On March 28, 1997, the Company filed a Report on Form 8-K with the Securities and Exchange Commission, reporting, under Item 2 of said Report, the Company's acquisition of all of the outstanding stock of Sallmetall B.V., a Dutch company. On April 8, 1997, the Company filed a Report on Form 8-K with the Securities and Exchange Commission, reporting, under Item 5 of said Report, the adoption of the new strategy and restructuring plan. - ---------- *Indicates a management contract or compensatory plan or arrangement. Page 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUNT MANUFACTURING CO. Date July 14, 1997 By /s/ William E. Chandler ---------------------- ---------------------------- William E. Chandler Senior Vice President, Finance (Principal Financial and Accounting Officer) Date July 14, 1997 By /s/ Donald L. Thompson ---------------------- --------------------------- Donald L. Thompson Chairman of the Board and Chief Executive Officer Page 17 EXHIBIT INDEX Exhibit 10 - Amended and Restated 1993 Stock Option and Stock Grant Plan Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule EX-10 2 1993 STOCK OPTION AND STOCK GRANT PLAN Exhibit 10 HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN (As Amended and Restated, Effective January 1, 1997) 1. Purpose. The 1993 Stock Option and Stock Grant Plan (the "Plan") is designed to enable Hunt Manufacturing Co. (the "Company") and its subsidiaries to attract and retain capable officers and key management level employees and independent consultants who perform services for the Company and to provide an inducement to such personnel to promote the best interests of the Company and its subsidiaries by enabling and encouraging them, through the grant of incentive and nonqualified stock options ("Options") and/or stock ("Stock Grants") to acquire stock in the Company. As used in the Plan, the term "incentive stock options" means options which, at the time such options are granted under the Plan, qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and are designated as incentive stock options in the Option Agreement (as hereinafter defined). The term "nonqualified stock options" means all other options granted under the Plan. The term "subsidiary" means any corporation which, at the time an Option is granted or Stock Grant is made under the Plan, qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" contained in Section 424(f) of the Code, or any similar provision hereafter enacted, except that such term shall not include any corporation which is classified as a foreign corporation pursuant to Section 7701 of the Code. 2. Administration. The Plan shall be administered by the Company's Compensation Committee (the "Committee") which shall consist of not less than three non-employee directors (within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor thereto) who are also outside directors (within the meaning of Treas. Reg. ss. 1.162-27(e)(3), or any successor thereto) of the Company who shall be appointed by, and shall serve at the pleasure of, the Company's Board of Directors (the "Board"). Each member of the Committee, while serving as such, shall be deemed to be acting in his/her capacity as a director of the Company. The Committee shall have full authority to construe and interpret the Plan and, subject to the provisions of the Plan: to establish, amend, and rescind appropriate rules and regulations relating to the Plan; to take such action as may be appropriate or necessary to insure the continued qualification of any incentive stock options granted under the Plan; to select the persons to whom Options will be granted and/or Stock Grants made under the Plan; to grant Options and make Stock Grants and set the date of grant and other terms and conditions thereof; to make recommendations to the Board; and to take all such steps and make all such determinations in connection with the Plan and the Options granted and the Stock Grants made hereunder as it may deem necessary or advisable. All such rules, regulations, determinations, and interpretations of the Committee shall be final, conclusive, and binding on all persons. 3. Stock Subject to the Plan. Subject to the provisions of Section 8, up to an aggregate maximum of 3,500,000 of the Company's Common Shares, par value $.10 per share ("Shares"), shall be authorized for the grant of Options and/or Stock Grants under the Plan; provided, however, that, of such amount, not more than 525,000 Shares shall be available for Stock Grants, and further provided, that, no Eligible Employee (as hereinafter defined) or Consultant (as defined below) shall receive Options and/or Stock Grants for more than 300,000 Shares over any one-year period. Shares issuable under the Plan may be authorized but unissued Shares or reacquired Shares, as the Board shall determine. If any Option granted under the Plan expires or otherwise terminates, in whole or in part, without having been exercised, or if any Stock Grant hereunder is terminated, in whole or in part, the Shares subject to the unexercised portion of such Option and the unvested Shares covered by such Stock Grant shall be available for the granting of Options and Stock Grants under the Plan as fully as if such Shares had never been subject to an Option or a Stock Grant; provided, however, that: (a) If an Option is cancelled or if a Stock Grant is terminated, the Shares subject to the unexercised portion of such Option and/or the unvested Shares covered by such Stock Grant shall continue to be counted against the maximum number of Shares specified above which may be awarded to an Eligible Employee or Consultant during the one-year period in which the Option or Stock Grant was originally awarded, and (b) If the exercise price of an Option is reduced after the date of grant, the transaction shall be treated as a cancellation of the original Option and the grant of a new Option for purposes of such maximum. 4. Eligibility. Those persons eligible to participate in the Plan shall be the officers and other key management level employees of the Company and any of its subsidiaries ("Eligible Employees"), including directors who are also officers or key management level employees of the Company or any of its subsidiaries. Independent consultants who perform consulting services for the Company and any of its subsidiaries ("Consultants") -2- shall also be eligible to participate. Incentive stock options, nonqualified stock options, or Shares, or a combination thereof, may be granted under the Plan to an Eligible Employee, and nonqualified stock options and Shares, or a combination thereof, but not incentive stock options, may be granted under the Plan to a Consultant. In making any determination as to whether a given employee or Consultant shall receive a grant under the Plan, and in determining the size and nature of any such grant, the Committee shall take into account the duties of such employee or Consultant, his/her past, present, and potential contributions to the success of the Company and its subsidiaries, and such other factors as the Committee shall deem relevant in accomplishing the purposes of the Plan. 5. Grants, Terms and Conditions of Options. From time to time until the expiration or earlier termination of the Plan, the Committee may grant to Eligible Employees and/or Consultants ("Optionees") under the Plan such incentive and/or nonqualified stock options as it determines are warranted; provided, however, that grants of incentive and nonqualified options shall be separate and not in tandem; and provided further that incentive stock options shall not be granted to Consultants. Options granted pursuant to the Plan shall be in such form as the Committee, from time to time, shall approve, and shall be subject to the following terms and conditions: (a) Price. Except as provided in Subsection (j), the price per Share under each Option granted under the Plan shall be determined and fixed by the Committee in its discretion but shall not be less than the higher of 100 percent of the Fair Market Value of the Shares or the par value thereof on the date of grant of such Option. As used in the Plan, the term "Fair Market Value" shall mean: (i) If the principal market for the Shares is a registered securities exchange, the mean between the highest and lowest quoted selling prices of such Shares on the date of grant, or, if there are no such reported sales on that date, then on the last previous date (within a reasonable period prior to the date of grant) on which there were such reported sales; or (ii) Such other method of determining fair market value as shall be authorized by the Code, or the rules or regulations thereunder, and adopted by the Committee. (b) Term. Subject to earlier termination as provided in Subsections (c) through (g) and in Section 8, and except as otherwise provided in Subsection (j), the term of each Option shall not be less than two nor more than ten years from the date of grant. -3- (c) Exercise and Payment. Options shall be exercisable in such installments and on such dates, not less than one year from the date of grant, as the Committee may specify. Except as otherwise expressly provided in the Plan, Options shall be exercisable by an Optionee only while he/she remains in the employment of the Company or a subsidiary. Any Option Shares, the right to the purchase of which has accrued, may be purchased at any time up to the expiration or termination of the Option. Options may be exercised, in whole or in part, from time to time, by giving written notice of exercise to the Company at its principal office, specifying the number of Shares to be purchased and accompanied by payment in full of the aggregate purchase price for such Shares. Only full shares shall be issued, and any fractional share which might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. The purchase price of Option Shares shall be payable: (i) In cash or its equivalent; (ii) If the Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares previously acquired by the Optionee (provided that if such Shares are statutory option stock, as defined in Section 424(c)(3) of the Code, such Shares have been held by the Optionee for a period which is not less than the holding period described in Section 422(a)(1) or 423(a)(1) of the Code, as applicable); (iii) If and to the extent the Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares newly acquired by the Optionee upon exercise of such Option (which surrender or delivery shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option); or (iv) If and to the extent the Committee, in its discretion, permits, by delivering a properly executed notice of exercise of the Option to the Company and a broker, with irrevocable instructions to the broker promptly to deliver to the Company the amount of sale or loan proceeds necessary to pay the exercise price of the Option (the sale of Shares pursuant to such instructions shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option). In the event such purchase price is paid, in whole or in part, with Shares, the portion of the purchase price so paid shall be equal to the Fair Market Value, on the date of exercise of the Option, of the Shares surrendered or delivered in payment of such purchase price. -4- (d) Termination of Optionee's Employment. If an Optionee's employment by the Company and its subsidiaries is terminated prior to the expiration date of his/her Option by either party for any reason, with or without cause, other than by reason of death, disability, or retirement (as provided in Subsections (e), (f), and (g)), such Option shall terminate immediately upon such termination of employment, provided that the Committee, in its discretion, may extend the period for exercise following any such termination of employment, to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of such termination, for up to three months, but not beyond the expiration date of such Option. Notwithstanding the foregoing, in the event an Optionee's employment is terminated as contemplated in this Subsection and Options held by him/her have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's termination of employment. For purposes of the Plan, a leave of absence of one year or less which has been expressly approved by the Board shall not be deemed to constitute a termination of employment. A leave of absence longer than one year shall be deemed to constitute a termination of employment, unless the Committee determines otherwise. For purposes of this Section 5, an Optionee who is a Consultant shall be deemed to have terminated employment if such person's consulting relationship with the Company and its subsidiaries is terminated. (e) Death of Optionee. If an Optionee's employment is terminated (within the meaning of Subsection (d)) by reason of his/her death prior to the expiration of his/her Option, or if an Optionee shall die following his/her termination of employment but prior to the expiration date of his/her Option or expiration of the period determined under Subsection (d), (f), or (g), if earlier, such Option may be exercised, by the Optionee's estate, personal representative, or beneficiary who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her death, at any time prior to the earlier of: (i) One year following the date of the Optionee's death, or (ii) The expiration date of such Option (which, in the case of death following a termination of employment pursuant to Subsection (d), (f), or (g), shall be deemed to mean the expiration of the exercise period determined thereunder). Notwithstanding the foregoing, in the event that an Optionee's employment is terminated by his/her death and Options held by him/her have not -5- yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's death. (f) Disability of Optionee. If an Optionee shall become permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code) and his/her employment with the Company and its subsidiaries is terminated (within the meaning of Subsection (d)) as a consequence of such disability prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of such termination of employment, at any time prior to the earlier of: (i) One year following the date of the Optionee's termination of employment, or (ii) The expiration date of such Option. Notwithstanding the foregoing, if at the time of termination of an Optionee's employment due to disability, Options held by such Optionee have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's termination of employment. (g) Retirement of Optionee. If an Optionee retires in accordance with the retirement policy of the Company, or with the express consent of the Board, prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her retirement, at any time prior to the earlier of: (i) Three months after the date of retirement, or (ii) The expiration date specified in such Option. Notwithstanding the foregoing, the Committee may, in its discretion, extend the period for exercise following an Optionee's retirement for up to nine additional months, but not beyond the expiration date of such Option, despite the fact that such an extension would prevent an Option from qualifying as an incentive stock option under the Code and/or in the event that any Options held by a retiring Optionee have not yet become exercisable in accordance with their terms, allow all -6- or a part of such Options to be exercised pursuant to this Subsection provided that such Options have been outstanding for at least one year at the time of the Optionee's retirement. (h) Transferability. No Option intended to be an incentive stock option shall be assignable or transferable by an Optionee otherwise than by will or by the laws of descent and distribution. Unless otherwise permitted by the Committee, all other Options shall not be assignable or transferable by an Optionee otherwise than by will or by the laws of descent and distribution. A transferred Option shall continue to be subject to the same terms and conditions as were applicable to such Option immediately prior to transfer, and the Optionee shall remain subject to tax withholding under Section 5(l) with respect to such Option. The events of termination of employment of Section 5 shall also continue to be applied with respect to the original Optionee, following which events the transferred Option shall be exercisable by the transferee only to the extent, and for the periods specified in, Sections 5(c), (d), (e), (f) and (g). (i) Rights as a Stockholder. An Optionee shall have no rights as a stockholder with respect to any Shares covered by his/her Option until the issuance of a stock certificate to him/her representing such Shares. (j) Ten Percent Shareholder. Notwithstanding any other provision of the Plan, if an Eligible Employee owns more than ten percent of the total combined voting power of all shares of stock of the Company or of a Related Corporation at the time an incentive stock option is granted to such Eligible Employee, the incentive stock option price shall not be less than 110 percent of the Fair Market Value of the optioned Shares on the date the incentive stock option is granted, and such incentive stock option by its terms shall not be exercisable after the expiration of five years from the date the incentive stock option is granted. As used in this Plan, the term "Related Corporation" shall mean a subsidiary or a corporate parent of the Company as defined in Section 424 of the Code. (k) Annual Limit on Grant of Incentive Stock Options. The aggregate Fair Market Value (determined as of the time an incentive stock option is granted) of the Shares with respect to which incentive stock options are exercisable for the first time during any calendar year (under this Plan and any other incentive stock option plan of the Company or a Related Corporation) shall not exceed $100,000. (l) Use of Shares to Satisfy Tax Obligation. When an Optionee is required to pay to the Company or a Related Corporation an amount required to be withheld under applicable Federal, state, or local income tax or similar laws in -7- connection with the exercise of nonqualified stock options under the Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Optionee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which shares shall be valued, for this purpose, at their Fair Market Value on the date of exercise of the nonqualified stock option (or, if later, the date on which the Optionee recognizes ordinary income with respect to such exercise). If Shares acquired by exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (m) Option Agreement and Further Conditions. Each Optionee shall enter into, and be bound by the terms of, a stock option agreement (the "Option Agreement") which shall include or incorporate by reference the terms of the Option and the Plan and which shall contain such other terms, conditions, and restrictions not inconsistent with the Plan (or, in the case of incentive stock options, the provisions of Section 422(b) of the Code) as the Committee shall determine. Without limiting the generality of the foregoing, the Committee, in its discretion, may impose further conditions upon the exercisability of Options, and restrictions on transferability and repurchase rights with respect to Shares issued upon exercise of Options. 6. Terms and Conditions of Stock Grants. From time to time until the expiration or earlier termination of the Plan, the Committee may make such Stock Grants under the Plan to Eligible Employees and/or Consultants ("Grantees") as it determines are warranted. Stock Grants shall be subject to the following terms and conditions: (a) Vesting Period. The Committee shall establish one or more vesting periods ("Vesting Periods") with respect to the Shares covered by a Stock Grant. The length of such Vesting Period shall be within the discretion of the Committee, except that (subject to Subsection (c) and Section 8) such period or periods shall not be less than one year nor more than five years from the date of grant. Subject to the provisions of this Section 6, Shares subject to a Stock Grant shall vest in the Grantee upon the expiration of the Vesting Period with respect to such Shares. (b) Bonus Payment. For so long as a Grantee's Stock Grant remains outstanding and unvested, the Company shall pay to the Grantee a cash bonus equal to the dividends which the Grantee would have received from the Company had he/she actually held the Shares represented by the unvested portion -8- of his/her Stock Grant. Such payments shall be made within 60 days following the end of each fiscal quarter of the Company with respect to any dividends which may have been paid by the Company on its Shares during such quarter, and will constitute wages subject to withholding for Federal income tax purposes. (c) Termination. (i) Death, Disability, or Retirement. If, prior to the expiration of the Vesting Period with respect to Shares subject to a Stock Grant ("Unvested Shares"), a Grantee's employment with the Company and its subsidiaries is terminated by reason of his/her death, or by reason of his/her disability or retirement (as provided in Sections 5(f) and (g), respectively), then in each such case there shall immediately be vested in the Grantee, or in his/her beneficiary or estate, that number of full Shares that bears the same ratio to all the Grantee's Unvested Shares having the same Vesting Period as the number of the days which have elapsed from the date of the original Stock Grant of such Shares to the date of such termination of the Grantee's employment bears to the total number of days in the Vesting Period with respect to such Shares. [An example of the operation of the preceding sentence is set forth in the Appendix to the Plan.] The remainder of the Grantee's Stock Grant not vested pursuant to the preceding sentence shall immediately terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of such remaining Unvested Shares also be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. For purposes of this Section 6, a Grantee who is a Consultant shall be deemed to have terminated employment if such person's consulting relationship with the Company and its subsidiaries is terminated. (ii) Other Terminations of Employment. If a Grantee's employment is terminated (within the meaning of Paragraph (i)) for any reason other than his/her death, disability, or retirement as aforesaid, the unvested portion of the Grantee's Stock Grant shall immediately terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of the Grantee's Unvested Shares be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. (d) Delivery of Certificates. Upon the vesting of a Stock Grant, the Company shall promptly issue certificates representing the vested Shares to the Grantee or to his/her beneficiary or estate. Only full shares shall be issued, and any fractional shares which might otherwise be issuable pursuant to a Stock Grant shall be forfeited. -9- (e) Transferability. Unless otherwise permitted by the Committee, no Stock Grant shall be assignable or transferable by a Grantee otherwise than by will or by the laws of descent and distribution. A transferred Stock Grant shall continue to be subject to the same terms and conditions as were applicable to such Stock Grant immediately prior to transfer, and the Grantee shall remain subject to tax withholding under Section 6(g) with respect to such Stock Grant. The events of termination of employment of Section 6 shall also continue to be applied with respect to the original Grantee, following which events the transferred Stock Grant shall become vested in the transferee only to the extent provided in Section 6(c). (f) Rights as a Stockholder. A Grantee shall have no rights as a stockholder with respect to any Shares covered by a Stock Grant until the issuance of a stock certificate to him/her representing such Shares. (g) Use of Shares to Satisfy Tax Obligation. When a Grantee is required to pay the Company or a Related Corporation an amount required to be withheld under applicable Federal, state, or local income tax or similar laws in connection with the vesting of a Stock Grant under this Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Grantee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which Shares shall be valued, for this purpose, at their Fair Market Value on the date of vesting of the Stock Grant (or, if later, the date on which the Grantee recognizes ordinary income with respect to such Stock Grant). If Shares acquired by exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (h) Stock Grant Agreement. Each Grantee shall enter into, and be bound by the terms of, a Stock Grant Agreement (the "Stock Grant Agreement") which shall include or incorporate by reference the terms of the Stock Grant and of the Plan and which shall contain such other terms, conditions, and restrictions not inconsistent with the Plan as the Committee shall determine. 7. Listing and Registration of Shares. Each Option and each Stock Grant under the Plan shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the Shares covered thereby upon any securities exchange or under the laws of any jurisdiction, or the consent or approval of any regulatory body, is -10- necessary or desirable as a condition of, or in connection with, the granting of such Option, the making of such Stock Grant, or the purchase or vesting of Shares thereunder, then no such Option may be exercised in whole or in part, and no certificate representing Shares shall be issued pursuant to such Stock Grant, unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained, on conditions acceptable to the Board. Each Optionee and Grantee, or his/her legal representative or beneficiaries, also may be required to give satisfactory assurance that Shares purchased upon exercise of an Option or received pursuant to a Stock Grant are being acquired for investment and not with a view to distribution, and certificates representing such Shares may be legended accordingly. 8. Adjustment Upon Changes in Capitalization, Mergers, and Other Events. The number of Shares which may be issued under the Plan and the maximum number of Shares with respect to which Options and/or Stock Grants may be awarded to any Eligible Employee or Consultant under the Plan, both as stated in Section 3, and the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) or issuable upon vesting of outstanding Stock Grants shall be adjusted, as may be determined appropriate by the Committee (which determination shall be subject to ratification by the Board), to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. In the event the Company is liquidated or a corporate transaction described in Section 424(a) of the Code and the Treasury Regulations issued thereunder (including, for example, a merger, consolidation, acquisition of property or stock, separation, or reorganization) occurs, each outstanding Option and Stock Grant shall be assumed by the surviving or successor corporation, if any; provided, however, that the Committee, in its discretion, may terminate all or a portion of the outstanding Options and/or Stock Grants if it determines that such termination would be in the best interests of the Company. If the Committee decides to terminate an outstanding Option by reason of such liquidation or corporate transaction, the Committee shall give the holder thereof not less than 21 days' prior notice of any such termination, and such outstanding Option may be exercised up to, and including, the date immediately preceding such termination, if the Option has not otherwise expired, and if it is then exercisable under the Option Agreement. With respect to any Option which has not yet become exercisable, the Committee also, in its discretion, may allow an Optionee to exercise such Option, in whole or in part (if it has not otherwise terminated or expired). If the Committee decides to terminate an outstanding Stock Grant by reason of such liquidation or corporate transaction, the Stock Grant shall vest on such termination date to the same extent as is provided in the first sentence of Section 6(c)(i). The Committee, in its discretion, may also immediately vest all or a portion of the remaining unvested Shares under any Stock Grant which is to be so determined. -11- The Committee, in its discretion, may also change the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) and Shares covered by outstanding Stock Grants to reflect any such corporate transaction, provided, in the case of an incentive stock option, that any such change is made in accordance with Section 424(a) of the Code and is excluded from the definition of "modification" under Section 424(h) of the Code. Notwithstanding any other provisions of the Plan, the Committee, in its discretion, may accelerate, in whole or in part, the date on which Options become exercisable and/or the vesting of any Stock Grant in the event that the Committee determines that a change in control of the Company has occurred or is likely to occur. 9. Amendment or Discontinuance of the Plan. The Board, from time to time, may suspend or discontinue the Plan or amend it, and the Committee may amend any outstanding Options and Stock Grants, in any respect whatsoever; provided, however, that, without the approval of the holders of at least a majority of the votes cast at a duly held stockholders' meeting at which a quorum representing a majority of the outstanding shares of the Company is, either in person or by proxy, present and voting on the action: (a) The class of individuals eligible to receive Options or Stock Grants shall not be changed; (b) The maximum number of Shares with respect to which grants may be made under the Plan shall not be increased otherwise than as permitted under Section 8; (c) The limitations on the price at which Options may be granted shall not be changed; and (d) The duration of the Plan, as specified in Section 12, shall not be extended. Notwithstanding the foregoing, no such suspension, discontinuance, or amendment shall impair the rights of any holder of an outstanding Option or Stock Grant without the consent of such holder. 10. Absence of Rights. The recommendation or selection of an Eligible Employee or Consultant as a recipient of an Option or a Stock Grant under the Plan shall not entitle such person to any Option or Stock Grant unless and until the grant actually has been made by -12- appropriate action of the Committee; and any such grant is subject to the provisions of the Plan. Further, the granting of an Option or the making of a Stock Grant to a person shall not entitle that person to continued employment by the Company or its subsidiaries, and the Company shall have the absolute right, in its discretion, to retire such person in accordance with its retirement policies or otherwise to terminate his/her employment, whether or not such termination may result in a partial or total termination of his/her Option or of his/her Stock Grant. 11. Application of Funds. The funds received by the Company upon the exercise of Options and otherwise under the Plan shall be used for general corporate purposes. 12. Effective Date and Duration. The Plan became effective on February 7, 1993. Unless earlier terminated as provided in the Plan, the Plan shall terminate at 12:00 midnight on February 6, 2003, and no Options or Stock Grants shall be granted or made thereafter. However, termination of the Plan shall not affect any Options or Stock Grants theretofore granted or made, which Options and Stock Grants shall remain in effect in accordance with their terms and the terms of the Plan. -13- APPENDIX Accelerated Vesting Pursuant to Section 6(c) of the Plan Example: If a Stock Grant of 30,000 shares is made to a Grantee on February 10, 1996, to vest in three annual increments of 10,000 Shares each on February 10, 1997, 1998, and 1999, respectively, and if the Grantee, while still an employee of the Company, should die on August 10, 1997, the number of Shares vested would be 22,465, calculated as follows: 1. The 10,000 Share increment scheduled to vest on February 10, 1997, would already have vested in full. 2. The 10,000 Share increment scheduled to vest on February 10, 1998, would vest automatically as to 7,479 Shares (i.e., out of the total Vesting Period of 730 days with respect to such Shares, 546 days would have elapsed; 546/730 = .747945 x 10,000 Shares = 7,479 Shares). 3. The 10,000 Share increment scheduled to vest on February 10, 1999, would vest automatically as to 4,986 Shares (i.e., out of the total Vesting Period of 1,095 days with respect to such Shares 546 days would have elapsed; 546/1,095 = .498630 x 10,000 Shares = 4,986 Shares). -14- EX-11 3 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 Computation of Per Share Earnings (Unaudited) (In thousands except per share amounts)
Three Months Ended Six Months Ended ----------------------- ----------------------- June 1, June 2, June 1, June 2, 1997 1996 1997 1996 -------- -------- -------- -------- Primary per share (losses) earnings (Losses) earnings applicable to primary per share (losses) earnings ($ 6,994) $ 3,273 ($ 4,595) $ 6,099 ======== ======== ======== ======== Average number of common shares outstanding 11,055 10,968 11,031 11,954 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 305 206 290 201 -------- -------- -------- -------- Average shares used to calculate primary per share (losses) earnings 11,360 11,174 11,321 12,155 ======== ======== ======== ======== Primary per share (losses) earnings ($ 0.62) $ 0.29 ($ 0.41) $ 0.50 ======== ======== ======== ======== Fully diluted per share (losses) earnings (Losses) earnings applicable to fully diluted per share (losses) earnings ($ 6,994) $ 3,273 ($ 4,595) $ 6,099 ======== ======== ======== ======== Average number of common shares outstanding 11,055 10,968 11,031 11,954 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 329 210 309 212 -------- -------- -------- -------- Average shares used to calculate fully diluted per share (losses) earnings 11,384 11,178 11,340 12,166 ======== ======== ======== ======== Net fully diluted per share (losses) earnings ($ 0.61) $ 0.29 ($ 0.41) $ 0.50 ======== ======== ======== ========
EX-27 4 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JUN-01-1997 4,587 0 46,338 (2,339) 30,432 93,121 95,732 (45,351) 183,252 47,134 62,675 0 0 1,615 55,163 183,252 152,023 152,023 98,957 98,957 57,541 512 2,671 (7,658) (3,063) (4,595) 0 0 0 (4,595) (0.41) (0.41)
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