-----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, CeKzkkFVgh6dmzg0siOp29lbKErN2HAP1dWFK+Mbd8YcyychfJqr3/1OKoxHk0PM SJSuZYtXy5F3m70qnO6bVA== /in/edgar/work/0000950116-00-001632/0000950116-00-001632.txt : 20000713 0000950116-00-001632.hdr.sgml : 20000713 ACCESSION NUMBER: 0000950116-00-001632 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000528 FILED AS OF DATE: 20000712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT CORP CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: [3950 ] IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08044 FILM NUMBER: 671536 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 FORMER COMPANY: FORMER CONFORMED NAME: HUNT MANUFACTURING CO DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt 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 - -------------------------------------------------------------------------------- (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 1, 2000, there were outstanding 9,859,919 shares of the registrant's common stock. Page 2 HUNT CORPORATION INDEX
Page 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
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)
May 28, November 28, ASSETS 2000 1999 --------- --------- Current assets: 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 ========= =========
See accompanying notes to condensed consolidated financial statements. Page 4 Hunt Corporation Condensed Consolidated Statements of Income (Unaudited) (In thousands except per share amounts)
Three Months Ended Six Months Ended ------------------------- ------------------------- May 28, May 30, May 28, May 30, 2000 1999 2000 1999 --------- --------- --------- --------- 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 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. Page 5 Hunt Corporation Consolidated Statements of Comprehensive Income (Unaudited) (In thousands)
Three Months Ended Six Months Ended ------------------------- ------------------------- May 28, May 30, May 28, May 30, 2000 1999 2000 1999 ------- ------- ------- ------- 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 ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. Page 6 Hunt Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Six Months Ended ------------------------------ May 28, May 30, 2000 1999 -------- -------- 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 ======== ========
See accompanying notes to condensed consolidated financial statements. 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):
Three Months Ended ------------------ May 28, May 30, 2000 1999 ---- ---- 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 ====== ======
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):
Balance at Current Cash Non-Cash Balance at November 28, 1999 Provision Reductions Activity May 28, 2000 ------------------ --------- ---------- -------- ------------ 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 ======= ======== ====== === =======
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):
Balance at Cash Non-Cash Balance at November 28, 1999 Credits Reductions Activity May 28, 2000 ------------------ ------- ---------- -------- ------------ Lease Obligations $ 554 - $ (554) $ - $ - Severance 46 - (38) - 8 Other 296 $ (82) (40) - 174 ----- ------ ------ ----- ----- Total $ 896 $ (82) $ (632) $ - $ 182 ===== ====== ====== ===== =====
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 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.
Six Months Ended Consumer Graphics May 28, 2000 Products Products Corporate Consolidated ------------ -------- -------- --------- ------------ 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 ========= ========= ========= =========
Page 10
Six Months Ended Consumer Graphics May 30, 1999 Products Products Corporate Consolidated ------------------ ------------ --------- --------- ------------ 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 ========= =========== ========= =========
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 12
Three Months Six Months Ended Ended May 28, 2000 May 28, 2000 -------------------------- ------------------------- Per Share Per Share $ Amount $ Amount ------ ------- ------ ------- 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 ====== ======= ====== =======
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 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 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 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 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 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 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 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 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 21 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule for the quarter ended May 28, 2000 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAY-28-2000 MAY-28-2000 22,024 0 33,862 (848) 28,951 90,135 89,611 (46,576) 169,077 32,244 54,638 0 0 1,615 64,024 169,077 123,496 123,496 79,454 79,454 36,704 187 2,202 4,949 1,732 3,217 0 0 0 3,217 .32 .32
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