-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qAA0CnqyI9djGk2nDINzRIO+2IEoK94S/brGPfd2t9T724YEp2XdAZwLYD/UgXjP oL34P1lyVe5hYVD+HTcXpQ== 0000950116-94-000021.txt : 19940225 0000950116-94-000021.hdr.sgml : 19940225 ACCESSION NUMBER: 0000950116-94-000021 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931128 FILED AS OF DATE: 19940224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT MANUFACTURING CO CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: 3950 IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08044 FILM NUMBER: 94512283 BUSINESS ADDRESS: STREET 1: 230 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2157327700 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission File November 28, 1993 No. 1-8044 HUNT MANUFACTURING CO. (Registrant) Pennsylvania 21-0481254 ------------------------ --------------------------------- (State of incorporation) (IRS Employer Identification No.) 230 South Broad Street Philadelphia, PA 19102-4167 - ---------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215)732-7700 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class: on which registered: --------------------- ----------------------- Common Shares, par value $.10 per share New York Stock Exchange Rights to Purchase Series A Junior New York Stock Exchange Participating Preferred Stock Securities registered pursuant to Section 12(g) of the Act: None 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- The aggregate market value of the registrant's Common Shares (its only voting stock) held by non-affiliates of the registrant as of February 1, 1994 was approximately $226,000,000. (Reference is made to p.13 herein for a statement of the assumptions upon which this calculation is based.) The number of shares of the registrant's Common Shares outstanding as of February 1, 1994 was 16,121,738. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the registrant's 1994 definitive proxy statement relating to its scheduled April 1994 Annual Meeting of Shareholders (which proxy statement is expected to be filed with the Commission not later than 120 days after the end of the registrant's last fiscal year) are incorporated by reference into Part III of this report. 2 PART I Item 1. Business General Hunt Manufacturing Co. and its subsidiaries (herein called the "Company", unless the context indicates otherwise) are primarily engaged in the manufacture and distribution of office products and art/craft products which the Company markets worldwide. Business Segments The following table sets forth the Company's net sales and operating profit by business segment for the last three fiscal years: 1993 1992 1991 -------- -------- -------- (In thousands) Net Sales: Office products....... $142,462 $126,101 $120,103 Art/Craft products.... 113,688 108,828 108,519 -------- -------- -------- Total........... $256,150 $234,929 $228,622 ======== ======== ======== Operating Profit: Office products....... $ 11,411 $ 8,541 $ 6,369 Art/Craft products.... 18,832 18,516 17,618 -------- -------- -------- Total........... $ 30,243 $ 27,057 $ 23,987 ======== ======== ======== - ------------- See Items 6 and 7 herein and Note 15 to Consolidated Financial Statements herein for further information concerning the Company's business segments (including information concerning identifiable assets). Office Products The Company has three major classes of office products: mechanical and electromechanical products; office furniture and related products; and desktop accessory products. The amounts and percentages of net sales of these product classes for the last three fiscal years were as follows: 1993 1992 1991 -------------- --------------- --------------- (Dollars in thousands) Product Class: Mechanical and Electromechanical.... $ 70,047 49% $ 62,323 49% $ 57,592 48% Office furniture....... 44,233 31 37,271 30 36,526 30 Desktop accessories.... 28,182 20 26,507 21 25,985 22 ------- --- -------- --- -------- --- Total.............. $142,462 100% $126,101 100% $120,103 100% ======== === ======== === ======== === 3 The Company's mechanical and electromechanical office products consist of a variety of items sold under the Company's BOSTON brand, including manual and electric pencil sharpeners; paper punches; paper trimmers and paper shredders; electric letter openers; spring clips used to hold sheets of paper; manual and electronic staplers; electric air cleaners and other related products. The Company's specialty office furniture and related products are designed primarily to meet specific needs created by new office technologies and are sold under the BEVIS brand name. These products include conference, computer, utility and folding tables; office chairs; bookcases and screen panels; metal and wood workstations for computer terminals, personal computers, word processors, printers and other similar electronic office equipment; and home/office furniture. The Company's desktop accessory products consist of an array of items marketed under its LIT-NING brand, including metal horizontal and vertical files, letter trays, desk organizers and paper sorting racks. Also included in desktop accessory products are a broad range of products that support the use of computers such as computer diskette storage devices, printer stands, mouse pads, and surge suppressors which are marketed under the MEDIAMATE brand name. The Company consistently has sought to expand its office products business through internal product development, the acquisition of distribution rights to products which complement or extend the Company's established lines, the acquisition of complementary businesses and through increased distribution of its office products to the general consumer. Examples of new office product introductions by the Company in recent years are BOSTON brand electronic staplers, various models of air cleaners, automatic personal paper shredder, and desk-top laminators; BEVIS UNIWORX, BEVIS ULTRAWORX and BEVIS MEGAWORX lines of modular offices furniture systems; BEVIS STACKAWAYS stackable chairs; MEDIAMATE LASERRAK printer stands; MEDIAMATE FASTRAC mouse pads; MEDIAMATE multi-media storage files and MEDIAMATE POWER TAMER surge suppressors. There are three major and generally distinct domestic markets for the Company's office products: commercial offices, home offices and the gen- eral consumer. The commercial line of the Company's office products is distributed primarily through a network of office supply wholesalers and dealers and office product superstores. Sales to the home office and the general consumer include mechanical and electromechanical products which are sold through large retail outlets, such as office superstores, drug and food chain stores, variety stores, discount chains, catalog showrooms and membership chains. The consumer market has increased significantly over the last few years primarily due to the dramatic growth of office superstores. A more limited line of products is sold to schools through specialized school supply distributors. 4 Art/Craft Products The Company manufactures and distributes three major classes of art/craft products: mounting and laminating products; art supplies; and hobby/craft products. The amounts and percentages of net sales of these three product classes for the last three fiscal years were as follows: 1993 1992 1991 ------------- ------------- ------------- (Dollars in thousands) Product Class: Mounting and laminating.... $ 68,734 61% $ 63,475 58% $ 61,851 57% Art supplies... 27,569 24 29,134 27 29,569 27 Hobby/craft.... 17,385 15 16,219 15 17,099 16 -------- --- --------- --- --------- --- Total......... $113,688 100% $108,828 100% $108,519 100% ======== === ======== === ======== === The Company's mounting and laminating products are used largely by picture framers, graphic artists, display designers and photo laboratories, and include a range of BIENFANG foam boards; TECHMOUNT dry mount adhesive products; pressure sensitive and dry mount adhesive products sold under the SEAL and ADEMCO-SEAL brands, as well as under the COLORMOUNT, SEALEZE and PRINT GUARD brand names; an array of mounting and laminating equipment sold under the CLEAR TECH, SEALEZE, and IMAGE SERIES brand names; and specialty tapes and films supplied under various private brands. The Company's art supply products are used primarily by commercial and amateur artists, and include commercial and fine art papers which the Company converts, finishes and sells under its BIENFANG brand; various types of X-ACTO brand knives and blades; SPEEDBALL paint markers and acrylic and water-color paints; and CONTE(1) pastels, crayons and related drawing products, for which the Company is the exclusive United States and Canadian distributor. The Company's hobby/craft products generally are used by hobbyists and craft enthusiasts and include SPEEDBALL print-making products; ACCENT MATS beveled-edge picture framing mats; SPEEDBALL ELEGANT WRITERS and PANACHE calligraphy products; and X-ACTO brand tools and kits. The Company consistently has sought to expand its art/craft business primarily through acquisitions of complementary businesses and of distribution rights to complementary products manufactured by others, through internal product development, and through increased distribution of its art/craft products to the general consumer. Major art/craft products introduced during - ------------ (1). Trademark of Conte S.A. 5 the last several fiscal years include BIENFANG colored foam board, as well as SINGLE STEP adhesive coated BIENFANG foam board; BIENFANG project display board; PANACHE calligraphy products; SPEEDBALL FABRIC PAINTERS non-toxic pen- type acrylic-based paint markers; TECHMOUNT dry mount adhesive products; CLEAR TECH pouch laminators; IMAGE SERIES large format laminators; CLEAR GUARD protective adhesive film; THERMASHIELD laminating film, and X-ACTO board cutter, self healing mats, hobby rulers and rotary cutters. The acquisition of the Graphic Arts Group from Bunzl plc during fiscal 1990 has significantly expanded the number of the Company's mounting and laminating products and enhanced the Company's position in the framing and photomounting markets. In 1993, the Company acquired IMAGE TECHNOLOGIES, Inc., a start-up company engaged in the development and production of large format laminators, which has allowed the Company to broaden its distribution into the digital imaging market. BIENFANG foam board has been particularly important, as it has allowed the Company to penetrate the picture framing and sign and display exhibit markets, yet it also holds wide appeal to the traditional customer groups in art supply and hobby/craft markets. The success of foam board has been attributable, in significant part, to the Company's ability to offer the end-user a variety of value-added foam board products, such as colored or adhesive coated foam board. Traditionally, the Company's art/craft products have been distributed primarily through wholesalers (framing, photomounting, art and hobby), dealers (specialized art supply and hobby/craft stores), general consumer-oriented retail outlets (primarily office product superstores and chain stores), industrial concerns (photo labs, screen printers) and through specialized school supply distributors. Over the last several years, consumer-oriented retail outlets have become an increasingly important distribution channel for the Company's art/craft products. Sales and Marketing General The Company has over 15,000 active customers, the ten largest of which (three being office product superstore chains) accounted for approximately 37% of its sales in fiscal 1993. The largest single customer accounted for approximately 7% of sales for that year. There is a continuing trend toward consolidation of wholesalers, dealers and superstores, resulting in an increasing percentage of the Company's sales being attributable to a smaller number of customers. See Item 7 of this report. Because most of the Company's sales are made from inventory, the Company customarily operates without a material backlog. The Company's sales generally are not subject to significant seasonal fluctuations. See Note 14 to Consolidated Financial Statements herein. 6 Domestic Operations Domestic marketing of the Company's office products and art/craft products is effected principally through six separate sales forces, one each for office products, furniture, computer accessory products, art/craft products, photomounting and mass market. The combined sales forces are comprised of over 30 Company salespeople and over 300 independent manufacturers' representatives. The Company maintains domestic distribution centers in Florence, Kentucky; Florence, Alabama; and Laredo, Texas, for office products; Naugatuck, Connecticut; and Cottage Grove, Wisconsin, for art/craft products; and in Statesville, North Carolina, for both office and art/craft products. Foreign Operations The Company distributes its products in more than 60 foreign markets through its own sales force of seven area sales managers and 18 salespersons, and through over 40 independent sales agents and over 150 distributors. Sales of office products and art/craft products represented approximately 47% and 53%, respectively, of the Company's export sales in fiscal 1993, with electrical and mechanical pencil sharpeners, paper punches, staplers, X-ACTO brand knives and blades, BIENFANG paper and foam board products and pressure sensitive and dry mount adhesive products accounting for the major portion of these sales. Sales from foreign operations were attributable to the Graphic Arts Group acquired in 1990 and included mounting and laminating products, as well as specialty tapes and films. See Note 15 to Consolidated Financial Statements herein for further information concerning the Company's foreign operations. The Company maintains distribution centers in Ontario, Canada; Basildon, England; and in Kornwestheim, Germany. Foreign operations are subject to the usual risks of doing business abroad, particularly currency fluctuations and foreign exchange controls. See also Note 1 to Consolidated Financial Statements herein for information concerning hedging. Manufacturing and Production The Company's operations include manufacturing and converting of products, as well as purchasing and assembly of various component parts. Excluding products for which it acts as a distributor, the vast majority of the Company's sales are of products which are either manufactured, converted or assembled by it. See Item 2 herein for information concerning the Company's manufacturing facilities. The Company customarily has more than one source of supply for its critical raw materials and component parts, and its businesses have not been materially hindered by shortages or increased prices for such items. 7 Competition The Company does not have any single competitor which offers substantially the same overall lines of either office products or art/craft products as the Company. However, competition in a number of areas of the Company's businesses, such as electric pencil sharpeners, paper punches, staplers, office furniture, computer diskette storage and related accessory products, paints and foam board, is substantial, and some of the Company's competitors are larger and have considerably greater financial resources than the Company. Because of the fragmented nature of the office products and art/craft products businesses, the multiple markets served by the Company, and the dearth of published market data, the Company generally is not able to determine with certainty its relative domestic or foreign market share for its various products. Nevertheless, the Company believes that it is among the leaders in domestic markets in a number of its products, including manual pencil sharpeners; electric sharpeners; electronic staplers; metal paper organizing products; BIENFANG foam board products; mounting and laminating materials and equipment; X-ACTO brand knives and blades; calligraphy products; and specialty commercial and fine art papers. The Company also believes that it is among the leaders in the United Kingdom picture framing and photomounting market for dry mounting products. The Company considers product performance and brand recognition to be important competitive factors in its businesses, but competitive pricing and promotional discounts have become increasingly important, particularly in the office products and certain mounting and laminating product areas. Trademarks, Patents and Licenses The Company's business is not dependent, to a material extent, upon any patents. However, the Company regards its many trademarks as being of substantial value in the marketing of its various products. The following trademarks mentioned in this report are owned by the Company: ACCENT MATS (R), ADEMCO-SEAL (TM), BEVIS (R), BEVIS (R) MEGAWORX (TM), BEVIS (R) STACKAWAYS (TM), BEVIS (R) ULTRAWORX (TM), BEVIS (R) UNIWORX (TM), BIENFANG (R), BOSTON (R), CLEAR GUARD (TM), CLEAR TECH (R), COLORMOUNT (R), IMAGE SERIES (TM), LIT-NING (R), MEDIAMATE (R), MEDIAMATE (R) FASTRAC (R), MEDIAMATE (R) LASERRAK (R), MEDIAMATE (R) POWER TAMER (TM), PANACHE (R), PRINT GUARD (R), SEAL (R), SEALEZE (R), SINGLE STEP (R), SPEEDBALL (R), SPEEDBALL (R) ELEGANT WRITERS (R), SPEEDBALL (R) FABRIC PAINTERS (TM), TECHMOUNT (R), THERMASHIELD (TM) and X-ACTO (R). The Company also has been granted exclusive distribution rights in designated territories with respect to various products, including CONTE drawing products; air cleaners, fans and heaters which are manufactured by other companies and sold by the Company under the BOSTON brand name; and PERFECT DATA(2) computer cleaning products. Such rights customarily are granted for limited periods, after which they expire or may be terminated at the option of the grantor. The Company's distribution rights generally are of limited duration (usually not in excess of five years) and may be terminated - ---------- (2). Trademark of Perfect Data Corporation. 8 or expire, in certain cases, with as little as approximately six months notice from the grantor of such rights. While the Company's business is not dependent upon any of these distribution rights (no line of such distributed products having accounted for as much as 3% of the Company's net sales in fiscal 1993), the loss of the right to market certain products could have an adverse effect on the Company's profitability. In December 1993, the Company entered into a distribution agreement with Schwan-STABILO Schwanhausser GmbH & Co., a German manufacturer of writing instruments and markers for the office and art markets, granting the Company the exclusive right to market and distribute these products in the United States. Research and Development During fiscal 1993, the Company spent approximately $1.7 million on Company-sponsored research and development, as compared with approximately $1.5 million in fiscal 1992 and $1.2 million in fiscal 1991. Personnel As of February 1, 1994, the Company had approximately 2,200 full- time employees. Environmental Matters Prior to the Company's acquisition of Seal Products, Inc. ("Seal") from Bunzl plc in May 1990, it was discovered that some hazardous waste materials had been stored at Seal's premises located in Naugatuck, Connecticut. In compliance with applicable state law, this environmental condition was reported to the Connecticut Department of Environmental Protection by Bunzl. Seal, which now is a subsidiary of the Company, may be partially responsible under law for the environmental conditions on the premises and any liabilities resulting therefrom. However, in connection with the Company's acquisition of Seal, Bunzl agreed to take responsibility for correcting such environmental conditions and, for a period of seven years, to indemnify Seal and the Company for such resulting liabilities, subject to certain limitations. Bunzl currently is in the process of remediating the environmental conditions. It is believed that a substantial portion of the remediation has been completed, although continued testing is planned. The Company is also involved on a continuing basis in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits. Expenses incurred by the Company to date relating to violations of and compliance with environmental laws and permits have not been material. While it is impossible to predict with certainty, management currently does not foresee such expenses in the future as having a material effect on the Company's business, results of operations or financial condition. 9 Item 2. Properties The Company presently maintains its principal executive offices at 230 South Broad Street, Philadelphia, PA 19102 in approximately 35,000 square feet of leased space under a lease expiring in 1994. The following table sets forth information with respect to certain of the other facilities of the Company:
Industry Primary Approximate Owned or segment function Location size leased - -------- ----------- ------------ ------------ --------- Office Warehouse & Fresno, CA(1) 137,000 sq. Owned Products Offices ft. in 3 bldgs. on 9 acres Manufacturing Florence, 108,000 sq. (2) & Offices KY ft. bldg. on 27 acres Warehouse Florence, 202,000 sq. Leased & Offices KY ft. bldg. (exp. 1996) Manufacturing Florence, 266,000 sq. Owned (3) & Offices AL ft. bldg. on 24 acres Manufacturing Nuevo Laredo, 47,000 sq. ft. Leased & Offices Mexico in 2 bldgs. (exp. 1998) Warehouse Laredo, 45,000 sq. Leased & Offices TX ft. bldg. (exp. 1997) ----------------------------------------------------- Art/Craft Manufacturing Statesville, 219,000 sq. (4) Products & Offices NC ft. bldg. on 13 acres Manufacturing, Naugatuck, 86,000 sq. Leased Warehouse & CT ft. bldg. (exp. 2000) Offices on 15 acres Manufacturing, Basildon, 64,000 sq. ft. Owned Warehouse & England in two bldgs. Offices on 3 acres ------------------------------------------------------ Office Manufacturing Statesville, 196,000 sq. Owned Products & Offices NC ft. bldg. and Art/Craft on 16 acres Products Warehouse Statesville, 190,000 sq. Leased & Offices NC ft. bldg. (exp. 2005) Warehouse Ontario, 52,000 sq. Leased & Offices Canada ft. bldg. (exp. 1996)
10 (1) During fiscal 1992, the Company transferred the manufacturing (but not the warehouse and distribution) function of this facility to Florence, Kentucky, in connection with the relocation and consolidation of its LIT-NING operations. See Note 2 to Consolidated Financial Statements herein for additional information. Recently, the Company decided to transfer the remaining warehouse and distribution function of this facility to Florence, Kentucky, during fiscal 1994. (2) The construction and expansion of this facility was financed by the issuance of industrial revenue bonds by the City of Florence, Kentucky. The City retains title to the property and leases it to the Company for rental payments equal to principal and interest payments on the bonds. The Company has the option, subject to certain conditions, to purchase the property. During fiscal 1989 two of the three bond issues relating to this financing matured. The third bond issue matured in fiscal 1993. In each instance, the Company exercised its option to continue to lease from the City, at a nominal consideration, the properties associated with the respective bond issues for a period of ten years. See Notes 6 and 11 to Consolidated Financial Statements herein for information concerning indebtedness and capital lease obligations relating to various of the Company's facilities. (3) A portion of this facility was financed by the issuance of industrial revenue bonds by the City of Florence, Alabama, which are collateralized by a plant facility and certain equipment. (4) A portion of this facility was financed by the issuance of industrial revenue bonds by the Iredell County Industrial Facilities and Pollution Control Financing Authority. The Authority retains title to the property and leases it to the Company for rental payments equal to principal and interest payments on the bonds. The Company has the option, subject to certain conditions, to purchase the property. At present, the Company's facilities generally are believed to be adequately utilized and suitable for the Company's present needs, except for one warehouse facility that has excess capacity which the Company has successfully subleased. Item 3. Pending Legal Proceedings There currently are no material pending legal proceedings (within the meaning of the Form 10-K Instructions), other than routine litigation incidental to the business of the Company, to which the Company is a party or to which any of its property is subject. See Note 11 to Consolidated Financial Statements herein and Item 1-- "Environmental Matters" herein. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the security holders of the Company during the fourth quarter of the fiscal year covered by this report. 11 Additional Information The following information is furnished in this Part I pursuant to Instruction 3 to Item 401(b) of Regulation S-K: Executive Officers of the Company Name Age Position ---- --- -------- Ronald J. Naples 48 Chairman of the Board and Chief Executive Officer Robert B. Fritsch 62 President and Chief Operating Officer John W. Carney 50 Vice President, Human Resources William E. Chandler 50 Senior Vice President, Finance (Chief Financial Officer), and Secretary Roy M. Delizia 50 Vice President, Corporate Planning and Development Spencer W. O'Meara 47 Vice President and General Manager W. Ernest Precious 52 Vice President and General Manager Robert K. Scribner 47 Vice President and General Manager Eugene A. Stiefel 46 Vice President, Information Services The executive officers of the Company customarily are elected annually by the Board of Directors to serve, at the pleasure of the Board, for a period of one year or until their successors are elected. All of the executive officers of the Company, except for Messrs. Chandler, Scribner, Delizia and Stiefel have served in varying executive capacities with the Company for over five years. Mr. Chandler was elected an executive officer of the Company in February 1993. He joined the Company in September 1992 after three years at Bally Manufacturing Corporation during which he held positions as Acting Chief Financial Officer and Vice President, Financial Operations and Controller. Prior to that, he served for three years at Household Manufacturing, Inc. as Senior Vice President of Finance, Treasurer and Chief Financial Officer. Mr. Scribner was elected an executive officer of the Company in December 1990. He joined the Company in December 1986 as Vice President, Sales and Marketing, Office Products. 12 Messrs. Delizia and Stiefel were elected executive officers of the Company in April 1993. Mr. Delizia joined the Company in October 1983 and has served as Vice President, Corporate Development and Planning since 1987. Mr. Stiefel joined the Company in February 1985 and has served as Vice President, Information Services since 1987. ------------------------------------------ For the purposes of calculating the aggregate market value of the shares of common stock of the Company held by nonaffiliates, as shown on the cover page of this report, it has been assumed that all the outstanding shares were held by nonaffiliates except for the shares held by directors and officers of the Company. However, this should not be deemed to constitute an admission that all directors and officers of the Company are, in fact, affiliates of the Company, or that there are not other persons who may be deemed to be affiliates of the Company. Further information concerning shareholdings of officers, directors and principal shareholders is included in the Company's definitive proxy statement filed or to be filed with the Securities and Exchange Commission. ----------------------------------------- 13 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (a) The Company's common stock is traded on the New York Stock Exchange (trading symbol "HUN"). The following table sets forth the high and low quarterly sales prices of the Company's common stock during the two most recent fiscal years (all as reported by The Wall Street Journal): Fiscal Quarter 1993 -------------------------------------------- First Second Third Fourth ----- ------ ----- ------ High $15 1/4 $16 1/4 $16 1/4 $16 3/8 Low 12 3/4 13 5/8 13 1/4 15 1/4 Fiscal Quarter 1992 -------------------------------------------- First Second Third Fourth ----- ------ ----- ------ High $17 1/8 $16 7/8 $16 1/8 $14 3/8 Low 13 5/8 14 1/8 12 1/4 11 1/4 See Note 10 to Consolidated Financial Statements herein for information concerning certain Rights which were distributed by the Company to shareholders in 1990 and which currently are deemed to be attached to the Company's common stock. (b) As of February 1, 1994, there were approximately 1,200 record holders of the Company's common stock, which number does not include shareholders whose shares were held in nominee name. (c) During the past two fiscal years, the Company has paid regular quarterly cash dividends on its common stock at the following rates per share: 1993 - $.0875 per quarter and 1992 - $.085 per quarter. Certain of the Company's credit agreements contain restrictions on the Company's present and future ability to pay dividends. See Note 6 to Consolidated Financial Statements herein. 14 Item 6. Selected Financial Data The following table contains selected financial data for each of the Company's last five fiscal years. This data should be read in conjunction with the Company's Consolidated Financial Statements (and related notes) appearing elsewhere in this report and with Item 7 of this report. Year Ended -------------------------------------------------------- Nov. 28, Nov. 29, Dec. 1, Dec. 2, Dec. 3, 1993 1992 1991(1) 1990(2) 1989(3) ------- ------- ------- ------- ------- (In thousands, except per share data) Net Sales $256,150 $234,929 $228,622 $220,099 $203,444 Net Income 14,928 13,302 9,586 12,011 18,804 Net Income Per Share(4) .93 .83 .60 .75 1.17 Total Assets 156,317 144,170 151,824 154,361 127,947 Long-Term Debt 3,003 6,160 17,271 26,498 9,674 Cash Dividends Per Share(4) .35 .34 .32 .31 .27 - ----------------------- (1) In the fourth quarter of fiscal 1991, the Company recorded a charge to net income of approximately $2.7 million, or $.17 per share, for anticipated costs relating to the relocation and consolidation of certain manufacturing and distribution operations. See Note 2 to Consolidated Financial Statements herein. (2) The Company acquired the Graphic Arts Group from Bunzl plc on May 4, 1990. In addition, in the fourth quarter of fiscal 1990, the Company recorded a charge to net income of approximately $1 million, or $.06 per share, relating to the discontinuance of certain products. (3) The Company acquired the Data Products Division of Amaray International Corporation on June 23, 1989. (4) Adjusted for stock splits. 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition The Company improved its already strong financial condition in fiscal 1993, with net cash flow provided by operating activities increasing to $23.2 million from $20.4 million and $19.9 million in fiscal 1992 and 1991, respectively. These fiscal 1993 net cash flows were more than sufficient to fund additions to property, plant and equipment of $10.3 million, to pay cash dividends of $5.6 million and to reduce debt by $1.2 million. The percentage of debt to equity was reduced to 5.3% at the end of fiscal 1993 from 6.9% and 18.1% at the end of fiscal 1992 and 1991, respectively. Working capital increased to $47.1 million at November 28, 1993 from $45.5 million at November 29, 1992 as a net result of an $8.5 million increase in current assets, partially offset by a $6.9 million increase in current liabilities. The increase in current assets was primarily due to a $4.8 million increase in cash and cash equivalents, as well as to a $3 million increase in inventories. Higher inventories were largely the result of new products introduced in fiscal 1993, as well as higher anticipated sales volume. Accounts receivable turnover improved in fiscal 1993, and the balance of past due accounts was reduced significantly. The increase in current liabilities was principally the result of higher accounts payable (up $2.8 million), accrued salaries, wages and commissions (up $2.0 million) and current portion of long-term debt balance (up $1.9 million). The accounts payable increase was due to timing of and payment for raw materials received near the end of the fiscal year. The increase in accrued salaries, wages and commissions was primarily due to higher management incentive compensation accrued for fiscal 1993. Management expects that expenditures for additions to property, plant and equipment to increase capacity and productivity in fiscal 1994 will approximate the level expended for such purposes in fiscal 1993. The Company currently has line-of-credit agreements with three banks providing for borrowing capacity totaling $45 million. There were no borrowings under these line-of-credit agreements at the end of fiscal 1993. Management believes that funds generated from operations combined with existing credit agreements are sufficient to meet currently anticipated working capital and other capital and financing requirements. If additional resources are needed, management believes that the Company could obtain funds at competitive costs. Results of Operations Comparison of Fiscal 1993 vs. 1992 Net Sales and Earnings. Net sales of $256.2 million for fiscal 1993 increased 9% from $234.9 million in fiscal 1992 due primarily to higher unit volume largely attributable to new products. Average selling prices decreased approximately 3% in fiscal 1993 from fiscal 1992 prices due to continuing competitive pressures discussed below and to foreign currency exchange rate changes of approximately 1%. 16 Office products sales increased 13% in fiscal 1993 to $142.5 million from $126.1 million in fiscal 1992. This increase was led by higher sales of office furniture products, which were up 18.7%, primarily due to broadened distribution for these products gained in fiscal 1993. Mechanical and electromechanical products sales grew by 12.4% in fiscal 1993 due, in large part, to higher sales of Boston brand products, and desktop accessory products were up 6.3% attributable principally to new products, particularly MediaMate brand computer-related accessories. Export sales of office products increased 5.2% in fiscal 1993 largely as a result of higher sales in Canada. Art/craft products sales of $113.7 million for fiscal 1993 increased 4.5% from fiscal 1992 sales of $108.8 million. This increase was the net result of higher sales of mounting and laminating products (up 8.3%) and hobby/craft products (up 7.2%), partially offset by lower sales of art supplies (down 5.4%). The mounting and laminating sales increase was principally attributable to higher sales of Seal brand laminating equipment. The hobby/craft products sales increase was largely due to higher sales of X-Acto brand knife and tool kits. The decrease in sales of art supplies was attributable primarily to lower sales of Bienfang brand art paper products. Export sales of art/craft products were essentially unchanged in fiscal 1993, and foreign sales decreased 11.3% primarily due to a decrease in the value of the British pound sterling. Excluding the effect of exchange rate changes, foreign sales increased 3.2% in fiscal 1993. Net income of $14.9 million for fiscal 1993 grew 12.2% from fiscal 1992 net income of $13.3 million, and earnings per share increased to $.93 in fiscal 1993 from $.83 reported for fiscal 1992. Higher sales volume and lower interest expense were significant factors leading to the earnings increase. In December 1993 the Company was selected by Schwan-STABILO, a prominent manufacturer based in Germany, to be the exclusive distributor in the U. S. of its STABILO(R) BOSS(R) fluorescent highlighting markers and a wide range of other products for the office, art and graphics markets. The purchase of inventories and commencement of distribution is expected to take place at the end of the first quarter of fiscal 1994. Gross Profit. The Company's gross profit margin decreased to 40.1% of net sales in fiscal 1993 from 40.7% in 1992. The domestic gross profit margin decreased to 40.3% from 41%, and the foreign gross profit margin decreased to 26.7% from 28.6% in 1993 and 1992, respectively. The overall decrease was attributable to lower selling prices which were largely offset by lower raw material costs, the favorable effect of higher sales volume leveraging relatively fixed manufacturing overhead costs and lower employee fringe benefit expenses. Management expects the pressure on selling prices to continue due to the competitive environment for many of the Company's products, and also expects upward pressure on costs for certain raw material commodities, such as wood and steel, due to market conditions. Management plans to continue to seek productivity and operating process improvements and further cost reductions for other materials to offset these pressures. Selling, Shipping, Administrative and General Expenses. Selling and shipping expenses, as a percentage of net sales, were reduced to 20.6% in fiscal 1993 from 21.1% in fiscal 1992 primarily as a result of lower sales force commission expenses due, in part, to changes in customer sales mix. 17 Administrative and general expenses increased to $25.4 million in fiscal 1993 from $23.1 million in fiscal 1992 primarily as a result of higher management incentive compensation expenses and higher management consulting fees. Interest Expense. Interest expense was reduced to $.2 million in fiscal 1993 from $1.1 million in fiscal 1992 due principally to debt reduction at the end of fiscal 1992 and in fiscal 1993, as well as to an increase in capitalized interest in fiscal 1993 related to additions to property, plant and equipment. Provision for Income Taxes. The Company's effective tax rate decreased to 37.9% in fiscal 1993 from 38.4% in fiscal 1992 as a net result of losses incurred by the European operations in fiscal 1992 which did not generate offsetting tax benefits, partially offset by an increase in the U. S. statutory corporate tax rate in fiscal 1993 from 34% to 35% retroactive to January 1, 1993. Environmental Matters. The Company is involved on a continuing basis in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits. Expenses incurred by the Company to date relating to violations of and compliance with environmental laws and permits have not been material. While it is impossible to predict with certainty, management currently does not foresee such expenses in the future as having a material effect on the Company's business, results of operations or financial condition (see Note 11 of the Notes to Consolidated Financial Statements). Comparison of Fiscal 1992 vs. 1991 Net Sales and Earnings. Net sales increased 2.8% to $234.9 million in fiscal 1992 from $228.6 million in fiscal 1991. This increase was largely the result of higher unit volume, as selling prices were essentially unchanged in fiscal 1992 from those in fiscal 1991. Office products sales of $126.1 million for fiscal 1992 increased 5% from the $120.1 million for fiscal 1991. The increase was led by higher sales of mechanical and electro-mechanical products, which grew by 8.2%, while desktop accessory and office furniture products grew by 2%. The growth in sales of mechanical and electromechanical products was primarily due to higher sales of Boston brand products. Export sales of office products increased 5.8% in fiscal 1992. Art/craft products sales of $108.8 million in fiscal 1992 were essentially unchanged from those in fiscal 1991 as a net result of higher sales of mounting and laminating products (up 2.6%), offset by lower sales of hobby/craft products (down 5.1%) and art supplies (down 1.5%). The decrease in sales of hobby/craft products was due, in large part, to lower sales of X-Acto brand knife and tool kits. Export sales of art/craft products decreased 1.3% in fiscal 1992 and foreign sales decreased 7.2%. The foreign sales decrease was attributable, in significant part, to the unfavorable economic environment in the United Kingdom. 18 Net income of $13.3 million and earnings per share of $.83 for fiscal 1992 increased by more than 38% from net income of $9.6 million, or $.60 per share for fiscal 1991. The 1991 results included an after-tax provision of $2.7 million, or $.17 per share, for the relocation and consolidation of the Company's Lit-Ning office products operations in California and distribution operations in the United Kingdom. Excluding this provision, net income and earnings per share increased approximately 8% in fiscal 1992 on a comparable basis with fiscal 1991 results. Gross Profit. The Company's gross profit was 40.7% of net sales in fiscal 1992, which approximated the fiscal 1991 percentage. This was largely the net result of higher gross profit percentages generated by the Company's foreign operations, partially offset by lower gross profit percentages for the domestic operations. The gross profit percentage increase for the Company's foreign operations, which improved to 28.6% in fiscal 1992 from 21.1% in fiscal 1991, was due to a decrease in 1992 in write-offs of excess inventories incurred by the United Kingdom operations as compared to 1991. These higher write-offs, which depressed fiscal 1991 gross profits for the foreign operations, related principally to inventories of laminating equipment determined to be excess or obsolete. The gross profit percentage decrease for the U. S. operations, which declined to 41% in fiscal 1992 from 42.2% in fiscal 1991, was attributable to several factors, including higher raw material costs and employee fringe benefit expenses, particularly health care and workers' compensation insurance. These higher costs were not able to be offset by higher selling prices because of the competitive environment in the distribution channels for certain of the Company's products, particularly office products and certain mounting and laminating products. Selling, Shipping, Administrative and General Expenses. Selling and shipping expenses, as a percentage of net sales, increased to 21.1% in fiscal 1992 from 20.4% in fiscal 1991, largely due to higher sales promotional allowances, freight costs and new product development and packaging expenses. Administrative and general expenses were reduced 1.7% in fiscal 1992 to $23.1 million from $23.5 million in fiscal 1991, which was principally attributable to lower consulting fees and reductions in management incentive compensation. Interest Expense. Interest expense was reduced to $1.1 million in fiscal 1992 from $2.1 million in fiscal 1991 due primarily to reduction of long-term debt at the end of fiscal 1991 and during fiscal 1992 and, to a lesser extent, to lower interest rates. Provision for Income Taxes. The Company's effective tax rate decreased to 38.4% in fiscal 1992 from 44% in fiscal 1991 attributable, in large part, to a reduction in losses incurred by the European operations which did not generate current offsetting tax benefits. 19 New Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," will require the calculation of deferred income taxes using the asset and liability method, which includes a requirement for adjustment of deferred tax balances for income tax rate changes. Future years' net income will be subject to increased volatility depending upon the frequency of tax rate changes. The Company will adopt the provisions of SFAS No. 109 in the first quarter of fiscal 1994, and the cumulative effect of this change of accounting principle for income taxes is expected to increase fiscal 1994 earnings per share by approximately $.05. SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pension," requires accrual accounting for all postretirement benefits other than pensions. When adopted in fiscal 1994, based on the Company's current fringe benefit policies, the requirements of SFAS No. 106 are expected to have no impact on the results of operations or financial condition of the Company. SFAS No. 112, "Employers' Accounting for Postemployment Benefits," requires the accrual of postemployment benefits if the obligation is attributable to employees' services already rendered, employees' rights to those benefits accumulate or vest, payment of the benefits is probable and the amount of the benefits can be reasonably estimated. When adopted in fiscal year 1995, the Company currently does not believe SFAS No. 112 will have a material effect on the results of its operations or financial condition. Item 8. Financial Statements and Supplementary Data Financial statements and supplementary financial information specified by this Item, together with the report of Coopers & Lybrand thereon, are presented following Item 14 of this report. Item 9. Disagreements on Accounting and Financial Disclosure Not applicable. PART III Incorporated by Reference The information called for by Item 10 "Directors and Executive Officers of the Registrant" (other than the information concerning executive officers set forth after Item 4 herein), Item 11 "Executive Compensation", Item 12 "Security Ownership of Certain Beneficial Owners and Management" and Item 13 "Certain Relationships and Related Transactions" is incorporated herein by reference to the Company's definitive proxy statement for its Annual Meeting of Shareholders scheduled to be held April 13, 1994, which definitive proxy statement is expected to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates. 20 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Documents Filed as a part of the Report 1. Financial Statements: -------------------- Pages ------ Report of Independent Accountants F-1 Consolidated Statements of Income for the fiscal years 1993, 1992 and 1991 F-2 Consolidated Balance Sheets, November 28, 1993 and November 29, 1992 F-3 Consolidated Statements of Stockholders' Equity for the fiscal years 1993, 1992 and 1991 F-4 Consolidated Statements of Cash Flows for the fiscal years 1993, 1992 and 1991 F-5 Notes to Consolidated Financial F-6-22 Statements 2. Financial Statement Schedules: ----------------------------- II. Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties for the fiscal years 1993, 1992, and 1991 F-23 V. Property, Plant and Equip- ment for the fiscal years 1993, 1992 and 1991 F-24 VI. Accumulated Depreciation and Amortization of Property, Plant and Equipment for the fiscal years 1993, 1992 and 1991 F-25 VIII. Valuation and Qualifying Accounts for the fiscal years 1993, 1992 and 1991 F-26 X. Supplementary Income State- ment Information for the fiscal years 1993, 1992 and 1991 F-27 21 All other schedules not listed above have been omitted, since they are not applicable or are not required, or because the required information is included in the consolidated financial statements or notes thereto. Individual financial statements of the Company have been omitted, since the Company is primarily an operating company and any subsidiary companies included in the consolidated financial statements are directly or indirectly wholly-owned and are not indebted to any person, other than the parent or the consolidated subsidiaries, in an amount which is material in relation to total consolidated assets at the date of the latest balance sheet filed, except indebtedness incurred in the ordinary course of business which is not overdue and which matures in one year. 3. Exhibits: (3) Articles of incorporation and bylaws: (a) Restated Articles of Incorporation, as amended (composite) (incorp. by ref. to Ex. 4(a) to Reg. Stmt. No. 33-6359 on Form S-8). (b) By-laws, as amended (incorp. by ref. to Ex. 4(b) to fiscal 1990 Form 10-K). (4) Instruments, defining rights of security holders, including indentures: (a) Credit Agreement dated as of October 2, 1990, between the Company and The Chase Manhattan Bank, N.A. (incorporated by reference to Ex. 4.1 to third quarter fiscal 1990 Form 10-Q). (b) Credit Agreement dated as of October 2, 1990, between the Company and Mellon Bank (East) PSFS, N.A. (incorp. by ref. to Ex. 4.2 to third quarter fiscal 1990 Form 10-Q). (c) Credit Agreement dated as of October 2, 1990, between the Company and Philadelphia National Bank, incorporated as CoreStates Bank, N.A. (incorp. by ref. to Ex. 4.3 to third quarter fiscal 1990 Form 10-Q). (d) Rights Agreement dated as of August 8, 1990 (including as Exhibit A thereto the Designation of Powers, Preferences, Rights and Qualifications of Preferred Stock), between the Company and Mellon Bank (East), N.A., as original Rights Agent (incorp. by 22 ref. to Ex. 4.1 to August, 1990 Form 8-K) and Assignment and Assumption Agreement dated December 2, 1991, with American Stock Transfer and Trust Company, as successor Rights Agent (incorp. by ref. to Ex. 4(d) to fiscal 1991 Form 10-K). Miscellaneous long-term debt instruments and credit facility agreements of the Company, under which the underlying authorized debt is equal to less than 10% of the total assets of the Company and its subsidiaries on a consolidated basis, may not be filed as exhibits to this report. The Company agrees to furnish to the Commission, upon request, copies of any such unfiled instruments.* (10) Material contracts: (a) Lease Agreement dated June 1, 1979 between the Iredell County Industrial Facilities and Pollution Control Financing Authority and the Company (incorp. by ref. to Ex. 10(d) to fiscal 1988 Form 10-K). (b) 1978 Stock Option Plan, as amended, of the Company (incorp. by ref. to Ex. 28(a) to Reg. Stat. No. 33-25947 on Form S-8).** (c) 1983 Stock Option and Stock Grant Plan, as amended, of the Company (incorp. by. ref. to Ex. 10(c) to fiscal 1992 Form 10-K).** (d) 1993 Stock Option and Stock Grant Plan of the Company (incorp. by ref. to Ex. 10(d) to fiscal 1992 Form 10-K).** (e) 1988 Long-Term Incentive Compensation Plan of the Company (incorp. by ref. to Appendix to 1988 Proxy Statement).** (f) 1994 Non-Employee Directors' Stock Option Plan (filed herewith).** (g) Loan and Security Agreement dated January 31, 1984, as amended, between the Company and Ronald J. Naples (incorp. by ref. to Ex. 10(h) to fiscal 1988 Form 10-K).** (h) Loan and Security Agreement dated April 20, 1988 between the Company and Robert B. Fritsch (incorp. by ref. to Ex. 10(i) to fiscal 1988 Form 10-K).** 23 (i) (1) Form of Change in Control Agreement between the Company and various officers of the Company (incorp. by ref. to Ex. 10(h) to fiscal 1992 Form 10-K) and (2) list of executive officers who are parties (filed herewith)** (j) Employment-Severance Agreement between the Company and William E. Chandler (filed herewith).** (k) (1) Supplemental Executive Benefits Plan of the Company, effective April 16, 1992, and (2) related Amended and Restated Trust Agreement, effective February 17, 1993 (incorp. by ref. to Ex. 10(j) to fiscal 1992 Form 10-K).** (l) Master Agreement dated May 3, 1990 between the Company and Bunzl Public Limited Company (incorp. by ref. to Ex. 2(a) to May 1990 Form 8-K). (m) Stock Acquisition Agreement dated May 3, 1990 between Seal Purchase Corp. and Bunzl Graphic Arts, Inc. relating to Seal (incorp. by ref. to Ex 2(b) to May 1990 Form 8-K). (11) Statement re: computation of per share earnings (filed herewith). (21) Subsidiaries (filed herewith). (23) Consent of Coopers & Lybrand to incorporation by reference, in Registration Statement No.s 33-70660, 33-25947, 33-6359 and 2-83144 on Form S-8, of their report on the consolidated financial statements and schedules included in this report (filed herewith). - --------------- * Reference also is made to (i) Articles 5th, 6th, 7th and 8th of the Company's composite Articles of Incorporation (Ex. 3(a) to this report), and (ii) to Sections 1, 7 and 8 of the Company's By-laws (Ex. 3 (b) to this report). ** Indicates a management contract or compensatory plan or arrangement. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the last quarter of the fiscal year covered by this report. --------------------------------------------- 24 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Stockholders and the Board of Directors of Hunt Manufacturing Co.: We have audited the accompanying consolidated financial statements and the financial statement schedules of Hunt Manufacturing Co. and Subsidiaries as listed in the index on pages 22 and 23 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hunt Manufacturing Co. and Subsidiaries as of November 28, 1993 and November 29, 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 28, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects, the information required to be included therein. COOPERS & LYBRAND 2400 Eleven Penn Center Philadelphia, Pennsylvania January 17, 1994 25 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME for the fiscal years 1993, 1992 and 1991 (In thousands except per share amounts) 1993 1992 1991 -------- -------- -------- Net sales $256,150 $234,929 $228,622 Cost of sales 153,353 139,366 135,887 -------- -------- -------- Gross profit 102,797 95,563 92,735 Selling and shipping expenses 52,831 49,605 46,560 Administrative and general expenses 25,405 23,064 23,466 Provision for relocation and consolidation of operations - - 3,644 -------- -------- -------- Income from operations 24,561 22,894 19,065 Interest expense (less $283, $50 and $121 capitalized in 1993, 1992 and 1991, respectively) (242) (1,073) (2,098) Interest income 190 422 630 Other expense, net (471) (634) (479) --------- -------- --------- Income before income taxes 24,038 21,609 17,118 Provision for income taxes 9,110 8,307 7,532 --------- -------- -------- Net Income $ 14,928 $ 13,302 $ 9,586 ========= ======== ======== Average shares of common stock outstanding 16,107 16,104 16,080 ========= ======== ======== Earnings per common share $ .93 $ .83 $ .60 ========= ======== ======== See accompanying notes to consolidated financial statements. 26 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS November 28, 1993 and November 29, 1992 (In thousands except share and per share amounts)
1993 1992 --------- -------- ASSETS Current assets: Cash and cash equivalents $ 10,778 $ 6,013 Accounts receivable, less allowance for doubtful accounts: 1993, $2,643; 1992, $2,587 39,472 39,565 Inventories 27,960 25,007 Prepaid expenses and other current assets 2,632 1,717 -------- -------- Total current assets 80,842 72,302 Property, plant and equipment, at cost, less accumulated depreciation and amortization 46,617 42,655 Excess of acquisition cost over net assets acquired, less accumulated amortization 17,054 16,651 Intangible assets, at cost, less accumulated amortization 9,965 11,174 Other assets 1,839 1,388 -------- -------- TOTAL ASSETS $156,317 $144,170 ======== ======== LIABILITIES Current liabilities: Current portion of long-term debt $ 3,158 $ 1,210 Accounts payable 11,060 8,247 Accrued expenses: Salaries, wages and commissions 8,412 6,442 Income taxes 4,992 4,142 Other 6,092 6,809 -------- -------- Total current liabilities 33,714 26,850 Long-term debt, less current portion 3,003 6,160 Deferred income taxes 1,230 1,686 Other non-current liabilities 2,103 2,018 STOCKHOLDERS' EQUITY Capital Stock: Preferred, $.10 par value, authorized 1,000,000 shares (including 50,000 shares of Series A Junior Participating Preferred); none issued - - Common, $.10 par value, authorized 20,000,000 shares; issued: 1993 - 16,125,321 shares; 1992 - 16,114,848 shares 1,613 1,611 Capital in excess of par value 6,158 6,045 Cumulative translation adjustment (1,495) (1,136) Retained earnings 110,290 101,366 Less cost of treasury stock: 1993 - 18,634 shares; 1992 - 32,926 shares (299) (430) -------- -------- Total stockholders' equity 116,267 107,456 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $156,317 $144,170 ======== ========
See accompanying notes to consolidated financial statements. 27 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY for the fiscal years 1993, 1992 and 1991 (in thousands except share and per share amounts)
Common Stock Capital in Cumulative --------------------- Excess of Translation Retained Issued Treasury Par Value Adjustments Earnings -------- -------- ----------- ------------ --------- Balances, December 2, 1990 (issued 16,114,848 shares; treasury 61,367 shares) $1,611 $(872) $6,042 $ 3,372 $ 89,386 Net Income 9,586 Cash dividends on common stock ($.32 per share) (5,l45) Translation adjustments (1,997) Purchase of treasury stock (1,000 shares) (11) Tax benefit arising from stock grant transactions 3 Exercise of stock options (treasury 21,965 shares, net of shares received as payment upon exercise) 293 (132) Issuance of stock grants (treasury 20,386 shares) 357 (109) ------- -------- ----------- ---------- --------- Balances, December 1, 1991 (issued 16,114,848 shares; treasury 20,016 shares) 1,611 (233) 6,045 1,375 93,586 Net Income 13,.302 Cash dividends on common stock ($.34 per share) (5,456) Translation adjustments (2,511) Purchase of treasury stock (29,000 shares) (365) Exercise of stock options (treasury 9,066 shares, net of shares received as payment upon exercise) 84 (83) Issuance of stock grants (treasury 7,024 shares) 84 17 ------- -------- ----------- ---------- --------- Balances, November 29, 1992 (issued 16,114,848 shares; treasury 32,926 shares) 1,611 (430) 6,045 (1,136) 101,366 Net Income 14,928 Cash dividends on common stock ($.35 per share) (5,639) Translation adjustments (359) Purchase of treasury stock (22,200 shares) (308) Exercise of stock options (issued 10,473 shares; treasury 32,875 shares, net of shares received as payment upon exercise) 2 393 113 (367) Issuance of stock grants (treasury 3,617 shares) 46 2 ------- -------- --------- ---------- --------- Balances, November 28, 1993 (issued 16,125,321 shares; treasury 18,634 shares) $1,613 $(299) $6,158 $(1,495) $ 110,290 ======= ======= ========= ========= =========
See accompanying notes to consolidated financial statements. 28 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the fiscal years 1993, 1992 and 1991 (in thousands)
1993 1992 1991 -------- --------- -------- Cash flows from operating activities: Net income $ 14,928 $ 13,302 $ 9,586 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,664 7,558 7,467 Deferred income taxes (456) 626 (651) Lose on disposals of property, plant and equipment 571 119 128 Provision (payments) for relocation and consolidation of operations (400) (2,151) 3,644 Issuance of stock under management incentive bonus and stock grant plans 48 101 250 Changes in operating assets and liabilities: Accounts receivable (1) (710) (3,196) Inventories (3,041) 2,976 1,399 Prepaid expenses and other current assets (922) (872) (316) Accounts payable 2,847 (1,729) (278) Accrued expenses 2,009 1,188 3,733 Other non-current assets and liabilities (50) 34 (1,878) -------- -------- -------- Net cash provided by operating activities 23,197 20,442 19,888 -------- -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (10,339) (6,002) (4,949) Acquisiton of businesses (1,051) - - Other, net 2 (183) (18) -------- -------- -------- Net cash used for investing activities (11,388) (6,185) (4,967) -------- -------- -------- Cash flows from financing activities: Payments of long-term debt including current maturities (1,209) (11,128) (9,176) Purchases of treasury stock (308) (365) (11) Proceeds from exercise of stock options 211 1 161 Dividends paid (5,639) (5,456) (5,145) Other, net (49) 65 218 -------- -------- -------- Net cash used for financing activities (6,994) (16,883) (13,953) -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents (50) (99) 238 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 4,765 (2,725) 1,206 Cash and cash equivalents, beginning of year 6,013 8,738 7,532 -------- -------- -------- Cash and cash equivalents, end of year $ 10,778 $ 6,013 $ 8,738 ======== ======== ========
See accompanying notes to consolidated financial statements. 29 HUNT MANUFACTURING CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share and per share amounts) 1. Summary of Significant Accounting Policies: ------------------------------------------ Basis of Consolidation: ---------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Fiscal Year: ----------- The Company's fiscal year ends on the Sunday nearest the end of November. Fiscal year 1993 ended November 28, 1993; fiscal year 1992 ended November 29, 1992; and fiscal year 1991 ended December 1, 1991. All three fiscal years are comprised of 52 weeks. Cash Equivalents: ---------------- The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Inventories: ----------- Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately half of the inventories and by the first-in, first-out (FIFO) method for the remainder. The Company uses the FIFO method of inventory valuation for certain acquired businesses because the related products and operations are separate and distinct from the Company's other businesses. Property, Plant and Equipment: ----------------------------- Expenditures for additions and improvements to property, plant and equipment are capitalized, and normal repairs and maintenance are charged to expense as incurred. The related cost and accumulated depreciation of depreciable assets disposed of are eliminated from the accounts, and any profit or loss is reflected in other expense, net. Excess of Acquisition Cost Over Net Assets Acquired: --------------------------------------------------- Excess of acquisition cost over net assets acquired relates principally to the Company's acquisitions of X-Acto (1981), Bevis Custom Tables, Inc. (1985), and the Graphic Arts Group of Bunzl plc (1990) and is amortized on a straight-line basis over periods ranging from 20 to 40 years. The Company's policy is to record an impairment loss against the net unamortized excess of acquisition cost over net assets acquired in the period when it is determined that the carrying amount of the net assets may not be recoverable. This determination includes evaluation of factors such as current market value, future asset utilization, business climate and future cash flows expected to result from the use of the net assets. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 1. Summary of Significant Accounting Policies, continued: ------------------------------------------- Depreciation and Amortization: ----------------------------- Depreciation for financial reporting purposes is computed by the straight- line method. Depreciation for tax purposes is computed principally using accelerated methods. The costs of intangible assets are amortized on a straight-line basis over their respective estimated useful lives, ranging from five to thirty years. Amortization of assets under capital leases which contain purchase options is provided over the assets' useful lives. Other capital leases are amortized over the terms of the related leases or asset lives, if shorter. Currency Translation: -------------------- The assets and liabilities of subsidiaries having a functional currency other than the U.S. dollar are translated at the fiscal year-end exchange rate, while elements of the income statement are translated at the weighted average exchange rate for the fiscal year. The cumulative translation adjustment is recorded as a separate component of stockholders' equity. Gains and losses on foreign currency transactions are included in the determination of net income as other expense, net. Such gains and losses are not material for any of the years presented. Income Taxes: ------------ Taxes on income are calculated under the deferred method pursuant to Accounting Principles Board Opinion No. 11. Generally, the deferred method recognizes income taxes on financial statement income, and the tax effect of differences between financial income and taxable income is deferred at tax rates in effect during the period. Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," will require the calculation of deferred income taxes using the asset and liability method, which includes a requirement for adjustment of deferred tax balances for income tax rate changes. Future years' net income will be subject to increased volatility depending upon the frequency of tax rate changes. The Company will adopt the provisions of SFAS No. 109 in the first quarter of fiscal 1994, and the cumulative effect of this change of accounting principle for income taxes is expected to increase fiscal 1994 earnings per share by approximately $.05. Hedging: ------- The Company enters into forward exchange contracts to hedge foreign currency transactions on a continuing basis for periods generally consistent with its committed exposure. Cash flows from hedges are classified in the statement of cash flows in the same category as the item being hedged. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 1. Summary of Significant Accounting Policies, continued: -------------------------------------------- Earnings Per Share: ------------------ Earnings per share are calculated based on the weighted average number of common shares outstanding. The effect of outstanding stock options and stock grants is not material and has not been included in the calculation. Employee Benefit Plans: ---------------------- The Company and its subsidiaries have non-contributory, defined benefit pension plans covering the majority of their employees. It is the Company's policy to fund pension contributions in accordance with the requirements of the Employee Retirement Income Security Act of 1974. The benefit formula used to determine pension costs is the final-average-pay method. SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," requires accrual accounting for all postretirement benefits other than pensions. When adopted in fiscal year 1994, based on the Company's current fringe benefit policies, the requirements of SFAS No. 106 are expected to have no impact on the results of operations or financial condition of the Company. SFAS No. 112, "Employers' Accounting for Postemployment Benefits," requires the accrual of postemployment benefits if the obligation is attributable to employees' services already rendered, employees' rights to those benefits accumulate or vest, payment of the benefits is probable and the amount of the benefits can be reasonably estimated. When adopted in fiscal year 1995, the Company currently does not believe SFAS No. 112 will have a material effect on the results of its operations or financial condition. 2. Provision for Relocation and Consolidation of Operations: -------------------------------------------------------- In the fourth quarter of fiscal year 1991, the Company recorded a provision of $3.6 million (approximately $2.7 million after income taxes, or $.17 per share) relating to the Company's decision to relocate and consolidate certain operations. The pre-tax charge was comprised of a $2.7 million provision for anticipated costs relating to the relocation and consolidation of a Lit-Ning office products operation in California and a $.9 million provision for the relocation and consolidation of distribution operations in the United Kingdom. The provision included recognition of future lease obligations, write-off of property, plant and equipment, relocation costs, employee severance costs and other related costs. 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 3. Inventories: ----------- The classification of inventories at the end of fiscal years 1993 and 1992 is as follows: 1993 1992 ---- ---- Finished goods $13,094 $11,554 Work in process 5,289 4,463 Raw materials 9,577 8,990 ------- ------- $27,960 $25,007 ======= ======= Inventories determined under the LIFO method were $13,299 and $13,120 at November 28, 1993 and November 29, 1992, respectively. The current replacement cost for these inventories exceeded the LIFO cost by $5,569 and $6,237 at November 28, 1993 and November 29, 1992, respectively. Inventory reductions in fiscal years 1993 and 1992 resulted 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 $101, or $.01 per share, and $262, or $.02 per share, in fiscal years 1993 and 1992, respectively. 4. Property, Plant and Equipment: ----------------------------- Property, plant and equipment at the end of fiscal years 1993 and 1992 is as follows: 1993 1992 ---- ---- Land and land improvements $ 3,698 $ 3,701 Buildings 17,434 16,779 Machinery and equipment 61,718 58,242 Leasehold improvements 661 706 Construction in progress 5,439 2,412 ------- ------- 88,950 81,840 Less accumulated depreciation and amortization 42,333 39,185 ------- ------- $46,617 $42,655 ======= ======= 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 5. Intangible Assets: ----------------- Intangible assets at the end of fiscal years 1993 and 1992 are as follows: 1993 1992 ---- ---- Covenants not to compete $11,643 $11,545 Customer lists 1,510 1,510 Patents 1,533 1,528 Trademarks 1,400 1,411 Licensing agreements 1,154 1,154 Other 1,751 1,782 ------- ------- 18,991 18,930 Less accumulated amortization 9,026 7,756 ------- ------- $ 9,965 $11,174 ======= ======= 6. Debt: ---- Credit Agreements and Lines of Credit: ------------------------------------- At November 28, 1993, the Company had revolving credit agreements with three banks that provide for unsecured borrowings up to $45 million which expire October 2, 1995. There were no borrowings under these agreements at November 28, 1993. Amounts borrowed under these agreements would be converted to term loans upon expiration of the revolving credit termination dates. Principal payments would be made in quarterly installments beginning January 2, 1996 through October 2, 1999. Interest on borrowings under these agreements are at varying rates based, at the Company's option, on the banks' prime rate, certificate of deposit rate, or money market rate, the London Interbank Offering Rate, or the as offered rate. None of these agreements have compensating balance requirements. Commitment fees of 1/8 of 1% are payable under these agreements. Long-Term Debt: -------------- Long-term debt at the end of fiscal years 1993 and 1992 is as follows: 1993 1992 ---- ---- Term loan (a) $1,875 $2,813 Capitalized lease obligations (see Note 11) 2,000 2,100 Industrial development revenue bonds (b) 1,559 1,559 Industrial development revenue bonds (c) 700 820 Other 27 78 ------ ------ 6,161 7,370 Less current portion 3,158 1,210 ------ ------ $3,003 $6,160 ====== ====== 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) Debt, continued: ---- (a) The principal of this term loan is payable in equal quarterly installments of $234.4 through September 29, 1995. Interest on the borrowing is payable quarterly at a rate of 10.93% per annum on the outstanding principal amount of the loan. (b) These bonds bear interest (3.9% at November 28, 1993) at 65% of the lending bank's average daily prime rate and are payable on June 15, 1994. (c) These bonds bear interest (4.536% at November 28, 1993) at 75.6% of the lending bank's average daily prime rate. One bond with a principal balance of $575 at November 28, 1993 is payable on May 1, 1994. The other bond with a principal balance of $125 is payable in semiannual installments of $60 on November 1, 1994 and May 1, 1995 and one payment of $5 on November 1, 1995. Both bonds are collateralized by a plant facility and certain equipment. The terms of certain financing agreements contain, among other provisions, requirements for maintaining certain working capital and other financial ratios, and restrictions on incurring additional indebtedness and obligate the Company to equally and ratably collateralize the indebtedness undersuch agreements if the Company grants or assumes certain liens on its assets. Under the most restrictive covenants, dividends and purchases of capital stock of the Company may not exceed, on a cumulative basis, 75% of the cumulative net income of the Company at any time during the period beginning November 28, 1983. As of November 28, 1993, $46 million was available to the Company under this provision for future cash dividends and future purchases of its own capital stock. In addition, as of November 28, 1993, the Company exceeded its minimum tangible net worth requirement of $59 million by $30.2 million. The capitalized lease obligations are collateralized by the property, plant and equipment described in Note 11. Aggregate annual maturities for all long-term debt, including the capitalized leases, for each of the four fiscal years subsequent to November 27, 1994 are as follows: 1995 - $1,353 1996 - 370 1997 - 400 1998 - 425 7. Income Taxes: ------------ Income before provision for income taxes consists of the following: 1993 1992 1991 ---- ---- ---- Domestic $21,758 $20,341 $16,982 Foreign 2,280 1,268 136 ------- ------- ------- $24,038 $21,609 $17,118 ======= ======= ======= 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 7. Income Taxes, continued: ------------ The provision for income taxes consists of the following: 1993 1992 1991 ---- ---- ---- Currently payable: Federal $8,406 $6,694 $7,162 State 877 815 800 Foreign 283 159 221 ------ ------ ------ 9,566 7,668 8,183 Deferred (456) 639 (651) ------ ------ ------ $9,110 $8,307 $7,532 ====== ====== ====== Deferred income taxes relate to the following timing differences between amounts reported for financial accounting and income tax purposes: 1993 1992 1991 ---- ---- ---- Depreciation $ 53 $ 119 $ 197 Provision for relocation and consolidation of operations 61 622 (975) Other, net (570) (102) 127 ----- ----- ----- $(456) $ 639 $(651) ===== ===== ===== The following is a reconciliation of the statutory federal income tax rate with the Company's effective income tax rate: 1993 1992 1991 ---- ---- ---- Statutory federal rate 34.9% 34.0% 34.0% State income taxes, net of federal tax benefit 2.2 2.6 2.5 Losses of foreign subsidiaries with no current offsetting tax benefit (including a provision for relocation and consolidation of foreign operations of 1.8% in 1991) - 1.0 6.0 Other, net .8 .8 1.5 ---- ---- ---- Effective tax rate 37.9% 38.4% 44.0% ==== ==== ==== As of November 28, 1993, the Company had a foreign net operating loss carry-forward for financial reporting purposes of approximately $3.5 million, the benefit of which has not been reflected in the financial statements. For tax return purposes, the Company has available approximately $2.4 million of foreign tax operating loss carryforwards which may be carried forward indefinitely, approximately $1 million of which were acquired in connection with business acquisitions. The use of foreign tax operating loss carryforwards acquired in connection with business acquisitions is subject to approval by the foreign taxing authorities. 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 8. Employee Benefit Plans: ---------------------- Pension Plans: ------------- Net pension costs for fiscal years 1993, 1992 and 1991 consist of the following components: 1993 1992 1991 ---- ---- ---- Service cost-benefits earned during the period $1,580 $1,595 $1,379 Interest cost on projected benefit obligation 1,852 1,672 1,415 Actual return on plan assets (1,863) (1,692) (3,342) Net amortization and deferral 107 184 2,133 ------ ------ ------ Net pension costs $1,676 $1,759 $1,585 ====== ====== ====== Net amortization and deferral consists of the deferral of the excess of actual return on assets over estimated return and amortization of the net unrecognized transition asset on a straight-line basis, principally over 15 years. The funded status of the Company's pension plans at September 30, 1993 and 1992 (dates of actuarial valuations) is as follows: 1993 ----------------------- Overfunded Underfunded 1992 ---------- ----------- ---- Plan assets at fair value $24,327 $ 660 $22,356 ------- ------- ------- Actuarial present value of benefit obligations: Vested 19,139 1,718 15,626 Non-vested 390 249 1,739 ------- ------- ------- Accumulated benefit obligation 19,529 1,967 17,365 Effect of increase in compensation 7,288 875 6,973 ------- ------- ------- Projected benefit obligation 26,817 2,842 24,338 ------- ------- ------- Projected benefit obligation in excess of plan assets (2,490) (2,182) (1,982) Unrecognized net loss 2,612 486 731 Unrecognized transition asset (1,890) (22) (2,127) Unrecognized prior service cost 857 1,218 2,255 ------- ------- ------- Pension liability $ (911) $ (500) $(1,123) ======= ======= ======= The increase in the projected benefit obligation in fiscal 1993 was due primarily to a decrease in the discount rate assumption. Plan assets consist principally of common stocks and U.S. Government Agency obligations. Pension costs are determined using the assumptions as of the beginning of the year. The funded status is determined using the assumptions as of the end of the year. Significant assumptions at year- end include: 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 8. Employee Benefit Plans, continued: ---------------------- Pension Plans: ------------- 1993 1992 1991 ---- ---- ---- Discount rate 7.00% 7.75% 8.00% Rate of increase in compensation levels 6.00% 6.00% 6.00% Expected long-term rate of return on plan assets 7.50% 7.50% 7.50% Supplemental Executive Retirement Plan: -------------------------------------- In 1992 the Company instituted a nonqualified, Supplemental Executive Retirement Plan covering all officers. Expenses of $331 and $325 in fiscal years 1993 and 1992, respectively, relating to this plan were actuarially determined and are included in the pension costs described above. Employee Savings Plan: --------------------- The Company has a defined contribution 401(k) plan available to all nonunion employees in the U.S. Contributions to the 401(k) plan by the Company were $379, $300 and $260 for fiscal years 1993, 1992 and 1991, respectively. 9. Stock Options, Stock Grant, Long-Term Incentive Compensation and Bonus Plans: -------------------------------------- In 1993 the Company adopted with shareholders' approval the 1993 Stock Option and Stock Grant Plan, which is intended to replace the expired 1983 Stock Option and Stock Grant Plan. The 1993 plan authorized the issuance of up to 1,750,000 common shares, of which up to 525,000 common shares may be issued in the form of stock grants. The terms of the 1993 plan are essentially similar to the terms of the 1983 plan described below. No options were granted under this plan in fiscal year 1993. The Company's 1983 Stock Option and Stock Grant Plan and the 1978 Stock Option Plan expired by their terms in February 1993 and November 1988, respectively, and, while incentive stock options granted under them remain outstanding, no further options may be granted under these plans. Under the 1983 plan, common shares were authorized for the granting of incentive stock options, nonqualified stock options and stock grants to key employees, provided that stock grants may be made for no more than 373,125 common shares. The option price of options granted under the plan may not be less than the market value of the shares at the date granted. Options may be granted for terms of between two and ten years and generally become exercisable not less than one year following the date of grant. Stock grants under this plan are subject to a vesting period or periods of between one and five years from the date of grant. Common shares were not actually issued to a grantee until such shares have vested under the plan. The plan also provided for the payment of an annual cash bonus to recipients of stock grants in an amount equal to the cash dividends which would have been received had the shares not yet vested 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 9. Stock Options, Stock Grant, Long-Term Incentive Compensation and Bonus Plans, continued: -------------------------------------- under the grant been actually held by the recipients. During fiscal 1987, the Company made a stock grant in the amount of 22,500 common shares to a key employee. By its terms, this grant vested in four equal installments of 5,625 shares each on April 22 of each year through 1991. The charge to administrative and general expenses, including the cash bonus, with respect to stock grants under the plan amounted to $28 in fiscal year 1991. Under the 1978 plan, options for 632,813 common shares were authorized for the granting of options to key employees at option prices not less than the market value of the common shares at the date of grant. Options granted under this plan have terms of not more than ten years and generally become exercisable not less than one year following the date of grant. Payment upon exercise of stock options under the 1993, 1983 and 1978 plans may be by cash and/or by the Company's common stock in an amount equivalent to the market value of the stock at the date exercised. A summary of options under the Company's stock option plans is as follows: 1983 Plan 1978 Plan --------------- ------------- 1993 1992 1993 1992 ---- ---- ---- ---- Outstanding, beginning of year 756,486 644,558 3,493 3,493 Options granted 148,200 132,850 - - Options exercised (at an average price per share of $10.47, $7.77 and $6.22, respectively) (102,282) (17,022) (855) - Options terminated (23,400) (3,900) - - ------- ------- ----- ----- Outstanding, end of year 779,004 756,486 2,638 3,493 ======= ======= ===== ===== Average option price per share $13.43 $13.21 $10.58 $9.52 Outstanding exercisable options 506,754 511,526 2,638 3,493 Shares reserved for future stock options and grants - 259,932 - - In 1991 there were 22,429 and 2,193 options exercised at average prices of $8.52 and $6.22 relating to the 1983 and 1978 plans, respectively. The Company's 1988 Long-Term Incentive Compensation Plan provides for the granting to management-level employees of long-term incentive awards, which are payable in cash and/or by the Company's common stock at the end of a designated performance period of from two to five years, based upon the degree of attainment of pre-established performance standards during the performance period. A maximum of 180,000 shares are authorized for issuance under this plan. As of the end of fiscal 1993, an aggregate of 48,966 shares have been earned under this plan (13,394, 4,300 and 8,127 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 9. Stock Options, Stock Grant, Long-Term Incentive Compensation and Bonus Plans, continued: -------------------------------------- shares in 1993, 1992 and 1991, respectively, and 23,145 shares in all previous years), and an aggregate of 50,587 shares were subject to outstanding unvested grants. There is no stated limitation on the aggregate amount of cash payable under this plan, but the maximum amount (in cash and/or shares) which may be paid to a participant under all long-term incentive awards under the plan with respect to the same performance period may not exceed 125% of the participant's base salary in effect at the time the award initially was made. The charge to administrative and general expenses relating to this plan was $563, $88 and $228 in fiscal years 1993, 1992 and 1991, respectively. 10. Shareholders' Rights Plan: ------------------------- During fiscal 1990 the Company adopted a Shareholders' Rights Agreement and declared a dividend of one right (a "Right") for each outstanding share of the Company's common shares held of record as of the close of business on August 22, 1990. The Rights initially are deemed to be attached to the common stock and detach and become exercisable only if (with certain exceptions and limitations) a person or group attempts to obtain beneficial ownership of 15% or more of the Company's common shares or is determined to be an "adverse person" by the Board of Directors of the Company. Each Right, if and when it becomes exercisable, initially will entitle holders of the Company's common shares to purchase one one-thousandth of a share of Junior Participating Preferred Shares (Series A, of which 50,000 shares currently are authorized for issuance) for $60, subject to adjustment. The Rights will convert into the right to purchase common shares or other securities or property of the Company or an acquiring company in certain other potential or actual takeover situations. The Rights are redeemable by the Company at $.01 per Right in certain circumstances and expire, unless earlier exercised or redeemed, on December 31, 2000. 11. Commitments and Contingencies: ----------------------------- Leases: ------ Capitalized lease obligations (see Note 6) represent amounts payable under leases which are, in substance, installment purchases. Property, plant and equipment includes the following assets under capital leases: 1993 1992 ---- ---- Land $ 314 $ 314 Buildings 2,632 2,632 Machinery and equipment 1,009 1,009 Accumulated depreciation (2,639) (2,531) ------- ------- $ 1,316 $ 1,424 ======= ======= The Company has the option to purchase the above assets at any time during the term of the leases for amounts sufficient to redeem and retire the underlying lessor debt obligations. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 11. Commitments and Contingencies, continued: ----------------------------- Leases, continued: ------ The minimum rental commitments under all noncancellable leases as of November 28, 1993 are as follows: Fiscal Operating Capitalized Period Leases Leases ------ --------- ---------- 1994 $ 3,539 $ 150 1995 2,779 562 1996 1,809 480 1997 1,406 448 1998 1,325 491 Thereafter 7,163 489 ------- ----- Minimum lease payments $18,021 2,620 ======= ===== Less interest 620 Present value of ------ minimum lease payments $2,000 ====== Rent expense, including related real estate taxes charged to operations, amounted to $4,217, $4,076 and $4,047 for fiscal years 1993, 1992 and 1991, respectively. Contingencies: ------------- The Company has employment/severance (change in control) agreements with its officers, as well as a severance policy covering Company employees generally. Under such agreements and policy, severance payments and benefits would become payable in the event of specified terminations of employment following a change in control (as defined) of the Company. In the event of a change in control of the Company and subsequent termination of all employees, the maximum contingent severance liability would have been approximately $14.3 million at November 28, 1993. Prior to the acquisition of the Graphic Arts Group by the Company from Bunzl plc in May 1990, it was discovered that some hazardous waste materials had been stored on the premises of one of the Graphic Arts Group companies, Seal, located in Naugatuck, Connecticut. In compliance with applicable state law, this environmental condition was reported to the Connecticut Department of Environmental Protection by Bunzl. Seal, which is now a subsidiary of the Company, may be partially responsible under law for the environmental conditions on the premises and any liabilities resulting therefrom. However, in connection with the Company's acquisition of Seal, Bunzl agreed to take responsibility for correcting such environmental conditions and, for a period of seven years, to indemnify Seal and the Company for such resulting liabilities, subject to certain limitations. Management believes that this contingency will not have a material effect on the Company's results of operations or financial condition. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 11. Commitments and Contingencies, continued: ----------------------------- Contingencies, continued: ------------- The Company is also involved on a continuing basis in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits. Expenses incurred by the Company to date relating to violations of and compliance with environmental laws and permits have not been material. While it is impossible to predict with certainty, management currently does not foresee such expense in the future as having a material effect on the Company's business, results of operations or financial condition. There are other contingent liabilities with respect to product warranties, legal proceedings and other matters occurring in the normal course of business. In the opinion of management, all such matters are adequately covered by insurance or by accruals, and if not so covered, are without merit or are of such kind, or involve such amounts, as would not have significant effect on the financial condition or results of operations of the Company, if disposed of unfavorably. 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 12. Research and Development: ------------------------ Research and development expenses were approximately $1,657, $1,519, and $1,153 in fiscal years 1993, 1992 and 1991, respectively. 13. Cash Flow Information: --------------------- Cash payments for interest and income taxes (net of refunds) were as follows: 1993 1992 1991 ---- ---- ---- Interest paid $ 580 $ 863 $1,889 Income taxes 8,761 5,987 7,170 14. Quarterly Financial Data (unaudited): ------------------------------------ Results of operations for each of the quarters during fiscal years 1993 and 1992 are as follows: 1993 ---- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $57,117 $60,825 $65,021 $73,187 $256,150 Gross profit 22,465 24,701 25,702 29,929 102,797 Net income 2,533 3,544 3,856 4,995 14,928 Net income per share .16 .22 .24 .31 .93 1992 ---- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $53,016 $56,982 $61,795 $63,136 $234,929 Gross profit 21,275 23,037 24,940 26,311 95,563 Net income 2,191 3,219 3,854 4,038 13,302 Net income per share .14 .20 .24 .25 .83 15. Industry Segment Information: ---------------------------- The Company operates in two industry segments, Office Products and Art/Craft Products. Total export sales aggregated $21,580 in fiscal 1993, $20,919 in fiscal 1992 and $20,534 in fiscal 1991 of which $11,619, $10,981 and $11,074 in fiscal years 1993, 1992 and 1991, respectively, were made in Canada. Operating profits include all revenues and expenses of the reportable segment except for general corporate expenses, interest expense, interest income, other expenses, other income and income taxes. 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. Capital additions include amounts related to acquisitions. 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 15. Industry Segment Information, continued: ---------------------------- Office Art/Craft Corp. Fiscal Year 1993 Products Products Assets Consolidated ---------------- -------- -------- ------ ------------ Net sales $142,462 $113,688 $256,150 ======== ======== ======== Operating profit $ 11,411 $ 18,832 $ 30,243 ======== ======== General corporate (5,682) Interest expense (242) Interest income 190 Other expense, net (471) Income before income -------- taxes $ 24,038 ======== Identifiable assets $ 74,098 $ 67,619 $ 14,600 $156,317 ======== ======== ======== ======== Capital additions $ 5,559 $ 4,082 $ 698 $ 10,339 ======== ======== ======== ======== Depreciation and amortization $ 3,898 $ 3,234 $ 532 $ 7,664 ======== ======== ======== ======== Office Art/Craft Corp. Fiscal Year 1992 Products Products Assets Consolidated ---------------- -------- -------- ------ ------------ Net sales $126,101 $108,828 $234,929 ======== ======== ======== Operating profit $ 8,541 $ 18,516 $ 27,057 ======== ======== General corporate (4,163) Interest expense (1,073) Interest income 422 Other expense, net (634) Income before income -------- taxes $ 21,609 ======== Identifiable assets $ 69,894 $ 64,715 $ 9,561 $144,170 ======== ======== ======== ======== Capital additions $ 3,666 $ 1,813 $ 523 $ 6,002 ======== ======== ======== ======== Depreciation and amortization $ 3,552 $ 3,521 $ 485 $ 7,558 ======== ======== ======== ======== 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 15. Industry Segment Information, continued: ---------------------------- Office Art/Craft Corp. Fiscal Year 1991 Products Products Assets Consolidated ---------------- -------- -------- ------ ------------ Net sales $120,103 $108,519 $228,622 ======== ======== ======== Operating profit* $ 6,369 $ 17,618 $ 23,987 ======== ======== General corporate (4,922) Interest expense (2,098) Interest income 630 Other expense, net (479) Income before income -------- taxes $ 17,118 ======== Identifiable assets $ 71,960 $ 68,292 $11,572 $151,824 ======== ======== ======== ======== Capital additions $ 2,736 $ 1,875 $ 338 $ 4,949 ======== ======== ======== ======== Depreciation and amortization $ 3,528 $ 3,494 $ 445 $ 7,467 ======== ======== ======== ======== * Includes the provision for relocation and consolidation of operations which reduced the office products operating profit by $3.2 million and art/craft products operating profit by $.4 million. The Company's operations by geographical areas for fiscal years 1993, 1992 and 1991 are presented below. Intercompany sales to affiliates represent products which are transferred between geographic areas on a basis intended to reflect as nearly as possible the market value of the products. Intercompany sales between areas were not material in fiscal year 1991.
Adjustments and Fiscal Year 1993 North America Europe Corporate Eliminations Consolidated ---------------- ------------- ------ --------- ------------ ------------ Net sales: Customers $241,059 $15,091 - $256,150 Intercompany 2,941 1,640 $(4,581) - -------- ------- ------- -------- Total $244,000 $16,731 $(4,581) $256,150 ======== ======= ======= ======== Operating profit $ 30,203 $ 40 - $ 30,243 ======== ======= ======= ======== Identifiable assets $124,841 $16,876 $14,600 - $156,317 ======== ======= ======= ======= ========
45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 15. Industry Segment Information, continued: ----------------------------
Adjustments and Fiscal Year 1992 North America Europe Corporate Eliminations Consolidated ---------------- ------------- ------ --------- ------------ ------------ Net sales: Customers $218,111 $16,818 - $234,929 Intercompany 2,241 1,230 $(3,471) - -------- ------- ------- -------- Total $220,352 $18,048 $(3,471) $234,929 ======== ======= ======= ======== Operating profit (loss) $ 27,614 $ (557) - $ 27,057 ======== ======= ======= ======== Identifiable assets $117,066 $17,543 $9,561 - $144,170 ======== ======= ======= ======= ========
Fiscal Year 1991 North America Europe Corporate Consolidated ------------- ------ --------- ------------ Net sales $210,687 $17,935 $228,622 ======== ======= ======== Operating profit (loss)* $ 26,786 $(2,799) $ 23,987 ======== ======= ======== Identifiable assets $117,791 $22,461 $11,572 $151,824 ======== ======= ======= ======== * Includes the provision for relocation and consolidation of operations which reduced operating profit in North America by $2.7 million and in Europe by $.9 million. 16. Financial Instruments: --------------------- Off-Balance Sheet Risk: ---------------------- The Company had $992 in forward exchange contracts outstanding as of November 28, 1993 to hedge accounts receivable denominated in Canadian dollars. No forward exchange contracts were outstanding as of November 29, 1992. The forward exchange contracts generally have maturities which do not exceed six months and require the Company to exchange Canadian dollars for U.S. dollars at maturity at rates agreed to at the inception of the contracts. Letters of credit are issued by the Company during the ordinary course of business through major domestic banks as required by certain vendor contracts. As of November 28, 1993 and November 29, 1992, the Company had outstanding letters of credit for $511 and $1,426, respectively. 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) 16. Financial Instruments, continued: --------------------- Concentrations of Credit Risk: ----------------------------- Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments ($7.3 million and $4.5 million at November 28, 1993 and November 29, 1992, respectively) with quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base, and their dispersion across many different industries and geographies. Generally, the Company does not require collateral or other security to support customer receivables. Fair Value: ---------- The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and cash equivalents - ------------------------- The carrying amount approximates fair value because of the short maturity of these instruments. Debt (excluding capital lease obligations) - ------------------------------------------ The fair value of the Company's debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities. Forward exchange contracts - -------------------------- The fair value of forward exchange contracts (used for hedging purposes) approximates fair value because of the short maturity of these instruments. The estimated fair values of the Company's financial instruments at November 28, 1993 are as follows: Carrying Fair Amount Value -------- ----- Cash and cash equivalents $10,778 $10,778 Debt (excluding capital lease obligations) 4,161 4,324 Forward exchange contracts 992 992 47
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES for the fiscal years 1993, 1992 and 1991 Column A Column B Column C Column D Column E -------- -------- -------- Deductions Balance at End of Period ---------- ------------------------ Balance at (1) (2) (1) (2) Beginning Amounts Amounts Not Name of Debtor Of Period Additions Collected Written Off Current Current -------------- --------- --------- --------- ----------- ------- ------- 1993: - ---- Ronald J. Naples, $582,644 - - - $48,773 $533,871 (A) Chairman of the Board ======= ====== ======= and Chief Executive Officer of the Company 1992: - ---- Ronald J. Naples, $582,644 - - - - $582,644 Chairman of the Board ======= ======= and Chief Executive Officer of the Company 1991: - ---- Ronald J. Naples, $582,644 - - - - $582,644 Chairman of the Board ======= ======= and Chief Executive Officer of the Company (A) The Company entered into an agreement with Mr. Naples pursuant to which the Company agreed to lend him each year, if he so requests, an amount up to the total incremental taxes incurred by him for such year as a result of the vesting in him of common stock under the Company's stock grant plan. Loans under this agreement at November 28, 1993 consist of the following:
Outstanding Balance Due Date Interest Rate ------------------- -------- ------------- $ 48,773 2/07/94 4.64% 533,871 2/15/95 4.64% -------- $582,644 ======== Interest is payable annually on December 31st. Such loans may be for terms of up to 10 years but are subject to acceleration and mandatory prepayment in certain circumstances. The terms of the loans however, may be and have been reset by mutual agreement of the parties at any time but not to exceed 10 years from origination of the subject loan. Loans under this agreement are collateralized by common stock.
48
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT (A) for the fiscal years 1993, 1992 and 1991 (In thousands) Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at Other Balance at Beginning Additions Changes (C) End of Classification of Period at cost Retirements Add (Deduct) Period -------------- --------- --------- ----------- ------------ --------- 1993: - ---- Land and land improvements $ 3,701 $ 43 $ - $ (46) $ 3,698 Buildings 16,779 721 10 (56) 17,434 Machinery and equipment 58,242 6,506 (E) 3,030 (F) - 61,718 Leasehold improvements 706 42 84 (3) 661 Construction in progress 2,412 3,027 (B) - - 5,439 ------ ------ ----- ------ ------ TOTAL $81,840 $10,339 $3,124 $ (105) $88,950 ====== ====== ===== ====== ====== 1992: - ---- Land and land improvements $ 4,055 - - $ (354) $ 3,701 Buildings 16,951 $ 240 $ 22 (390) 16,779 Machinery and equipment 56,350 4,046 (E) 1,101 (1,053) 58,242 Leasehold improvements 646 58 - 2 706 Construction in progress 754 1,658 (B) - - 2,412 ------ ------ ----- ------ ------ TOTAL $78,756 $ 6,002 $1,123 $(1,795) $81,840 ====== ====== ===== ====== ====== 1991: - ---- Land and land improvements $ 4,303 $ - - $ (248) $ 4,055 Buildings 16,701 852 $ 17 (585) 16,951 Machinery and equipment 52,210 6,411 (E) 719 (1,552) 56,350 Leasehold improvements 438 206 - - 646 Construction in progress 3,274 (2,520)(B) - - 754 ------ ------ ----- ------ ------ TOTAL $76,926 $ 4,949 $ 736 $(2,385) (D) $78,756 ====== ====== ===== ====== ====== (A) Assets are depreciated on a straight-line basis. The estimated depreciable lives of the assets are as follows: Factory buildings and components, 8 to 40 years Machinery and equipment, 5 to 12 years Autos and trucks, 4 years Tools and dies, 6 years Leasehold improvements, term of lease (B) Represents net increase (decrease) for the year. (C) Represents adjustments due to currency exchange rate changes for foreign assets and transfers between classification accounts. (D) Includes a $1,424 write-off of equipment in connection with the relocation and consolidation of certain manufacturing and distribution operations. (E) Increase attributable to machinery and equipment for new products and the upgrade, replacement and improvement of existing manufacturing equipment. (F) Attributable to the retirement of certain computer and manufacturing equipment, most of which was fully depreciated.
49
SCHEDULE VI. ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT for the fiscal years 1993, 1992 and 1991 (In thousands) Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Additions, Balance at Charged to Other Balance at Beginning Costs and Changes (A) End of Classification of Period Expenses Retirements Add (Deduct) Period -------------- ---------- ----------- ----------- ------------ --------- 1993: - ---- Land improvements $ 352 $ 53 $ 405 Buildings 5,133 558 $ 5 $ (5) 5,681 Machinery and equipment 33,361 4,991 2,464 (C) 59 35,947 Leasehold improvements 339 47 84 (2) 300 ------ ----- ----- ---- ------ $39,185 $5,649 $2,553 $ 52 $42,333 ====== ===== ===== === ====== 1992: - ---- Land improvements $ 300 $ 52 - $ - $ 352 Buildings 4,624 555 $ 21 (25) 5,133 Machinery and equipment 29,878 5,031 983 (565) 33,361 Leasehold improvements 272 52 - 15 339 ------ ----- ----- ---- ------ TOTAL $35,074 $5,690 $1,004 $(575) $39,185 ====== ===== ===== ==== ====== 1991: - ---- Land improvements $ 252 $ 53 - $ (5) $ 300 Buildings 4,216 536 $ 17 (111) 4,624 Machinery and equipment 26,162 4,944 591 (637) 29,878 Leasehold improvements 158 113 - 1 272 ------ ----- ----- ---- ------ TOTAL $30,788 $5,646 $ 608 $ 752 (B) $35,074 ====== ===== ===== ==== ====== (A) Includes adjustments due to currency exchange rate changes for foreign assets. (B) Decrease due principally to a $718 write-off of equipment in connection with the relocation and consolidation of certain manufacturing and distribution operations. (C) Attributable to the retirement of certain computer and manufacturing equipment.
50
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS for the fiscal years 1993, 1992 and 1991 (In thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions --------- Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expense Accounts Deductions Period ----------- ---------- ----------- ---------- ---------- ---------- 1993: - ---- Allowance for doubtful accounts $2,587 $1,022 $ 3 $ 969 (A) $2,643 ===== ===== === ===== ===== Reserve for inventory obsolescence $1,655 $1,598 - $1,017 $2,236 ===== ===== ===== ===== 1992: - ---- Allowance for doubtful accounts $2,314 $1,182 (C) - $ 909 (A) $2,587 ===== ===== ===== ===== Reserve for inventory obsolescence $1,788 $ 766 - $ 899 $1,655 ===== ===== ===== ===== 1991: - ---- Allowance for doubtful accounts $1,870 $1,134 (B) $ - $ 690 (A) $2,314 ===== ===== === ===== ===== Reserve for inventory obsolescence $2,214 $ 438 $ - $ 864 $1,788 ===== ===== === ===== ===== (A) Doubtful accounts written off, net of collection expenses. (B) Increase principally due to provision for several doubtful accounts which were pending at the end of fiscal 1991. (C) As in 1991, due to provision for several doubtful accounts pending at fiscal year end.
51
SCHEDULE X. SUPPLEMENTARY INCOME STATEMENT INFORMATION for the fiscal years 1993, 1992 and 1991 (In thousands) Column A Column B -------- -------- Item Charged to Costs and Expenses ---- ----------------------------- 1993 1992 1991 ---- ---- ---- Maintenance and repairs $3,199 $2,825 $2,656 ===== ===== ===== Depreciation and amortization of intangible assets, pre- operating costs and similar deferrals: Costs incurred in excess of net assets acquired $ 505 $ 488 $ 466 ===== ===== ===== Amortization of intangibles $1,276 $1,327 $1,302 ===== ===== ===== Amortization of other assets $ 234 $ 53 $ 53 ===== ===== ===== Taxes, other than income taxes: Payroll taxes $3,791 $3,532 $3,319 ===== ===== ===== Other taxes $ 569 $ 769 $ 781 ===== ===== ===== Advertising costs $6,905 $6,120 $5,928 ===== ===== =====
52 SIGNATURES Pursuant to the requirements of Section 13 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. Dated: February 22, 1994 By: /s/ Ronald J. Naples -------------------------- Ronald J. Naples Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacities and on the dates indicated: /s/ Ronald J. Naples - ------------------------------ February 22, 1994 Ronald J. Naples Chairman of the Board and Chief Executive Officer /s/ William E. Chandler - ------------------------------ February 22, 1994 William E. Chandler Senior Vice President, Finance (Principal Financial and Accounting Officer) /s/ Vincent G. Bell, Jr. - ------------------------------ February 22, 1994 Vincent G. Bell, Jr. Director /s/ Jack Farber - ------------------------------ February 22, 1994 Jack Farber Director /s/ Robert B. Fritsch - ------------------------------ February 22, 1994 Robert B. Fritsch Director /s/ William F. Hamilton, Ph.D. - ------------------------------ February 22, 1994 William F. Hamilton, Ph.D. Director 53 /s/ Mary R. Henderson - ------------------------------ February 22, 1994 Mary R. (Nina) Henderson Director /s/ Gordon A. MacInnes, Jr. - ------------------------------ February 16, 1994 Gordon A. MacInnes, Jr. Director /s/ Wilson D. McElhinny - ------------------------------ Wilson D. McElhinny February 22, 1994 Director /s/ Robert H. Rock - ------------------------------ February 22, 1994 Robert H. Rock Director /s/ Roderic H. Ross - ------------------------------ February 22, 1994 Roderic H. Ross Director - ------------------------------ February , 1994 Victoria B. Vallely Director EX-99 2 EXHIBIT INDEX 54 EXHIBIT INDEX (Exhibits being filed with this Form 10-K) (10) Material contracts: (10)(f) 1994 Non-Employee Directors' Stock Option Plan. (10)(i) (1) Form of Change in Control Agreement between the Company and various officers of the Company (incorp. by ref. to Ex. 10(h) to fiscal 1992 Form 10-K and (2) list of executive officers who are parties. (10)(j) Employment-Severance Arrangement between the Company and William E. Chandler. (11) Statement re: computation of per share earnings. (21) Subsidiaries. (23) Consent of Coopers and Lybrand to incorporation by reference, in Registration Statement No.s 33-70660, 33-25947, 33-6359 and 2-83144 on Form S-8, of their report on the consolidated financial statements and schedules included in this report. EX-10 3 EXHIBIT 10(F) 55 EXHIBIT 10(f) HUNT MANUFACTURING CO. 1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN 1. Purpose This 1994 Non-Employee Directors' Non-Qualified Stock Option Plan (the "Plan") is intended to provide a means whereby Hunt Manufacturing Co. (the "Company") through the grant to Non-Employee Directors (as defined in Section 3 herein) of non-qualified stock options ("Options") to purchase common shares of the Company, may attract and retain capable independent directors and motivate them to promote the best interests of the Company and Related Corporations. For purposes of the Plan, a Related Corporation of the Company shall mean either a corporate subsidiary of the Company, as defined in section 424(f) of the Internal Revenue Code of 1986, as amended ("Code"), or the corporate parent of the Company, as defined in section 424(e) 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 two directors 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 such Committee, while serving as such, shall be deemed to be acting in his or her capacity as a director of the Company. The Committee shall have full authority, subject to the terms of the Plan, to interpret the Plan, but shall have no discretion with respect to the selection of Non-Employee Directors to receive Options, the number of shares subject to the Plan, setting the purchase price for shares subject to an Option at other than fair market value, the method or methods for determining the amount of Options to be granted to each Non-Employee Director, the timing of grants hereunder or with respect to any other matter which would cause this Plan to fail to comply with Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). Subject to the foregoing, the Committee may correct any defect, supply any omission and reconcile any inconsistency in this Plan and in any Option granted hereunder in the manner and to the extent it shall deem desirable. The Committee also shall have the authority to establish such rules and regulations, not inconsistent with the provisions of the Plan, for the proper administration of the Plan, and to amend, modify or rescind any such rules and regulations, and to make such determinations and interpretations under, or in connection with, the Plan, as it deems necessary or advisable. All such rules, regulations, determinations and interpretations shall be binding and conclusive upon the Company, its shareholders and all Non-Employee Directors (including former Non-Employee Directors), and upon their respective legal representatives, beneficiaries, successors and assigns and upon all other persons claiming under or through any of them. 56 No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. 3. Eligibility The persons who shall be eligible to receive Options under the Plan shall be Non-Employee Directors, which term shall mean those directors of the Company who: (i) are not employees of the Company or any Related Corporation; and (ii) have not been employees of the Company or any Related Corporation during the immediately preceding 12-month period. 4. Stock Subject to the Plan Options may be granted under the Plan to purchase up to a maximum of 90,000 Common Shares, par value $.10 per share ("Common Shares" or "Shares"), subject to adjustment as provided in Section 7 herein. Shares issuable under the Plan may be authorized but unissued Shares or reacquired Shares, and the Company may purchase Shares required for this purpose, from time to time, if it deems such purchase to be advisable. If any Option granted under the Plan expires or otherwise terminates, in whole or in part, for any reason whatever (including, without limitation, a Non-Employee Director's surrender thereof) without having been exercised, the Shares subject to the unexercised portion of such Option shall continue to be available for the granting of Options under the Plan as fully as if such Shares had never been subject to an Option. 5. Granting of Options Subject to Section 9 herein, an Option to purchase 5,000 Shares (as adjusted pursuant to Section 7 herein) automatically shall be granted: (i) On January 26, 1994 to each director who is a Non-Employee Director on such date; and (ii) Upon the date a person who was not a Non-Employee Director on January 26, 1994 subsequently becomes a Non-Employee Director, whether by reason of his or her subsequent election by shareholders, appointment by the Board to be a director or, if applicable, the expiration of the 12- month period specified in Section 3(ii) herein with respect to a present or future director who had previously been an employee of the Company or any Related Corporation; provided, however, that if a Non-Employee Director who previously received a grant of Options ceases to be a Non- Employee Director but subsequently again becomes a Non-Employee Director, such person shall not be eligible to receive a second grant of Options under this Section 5. 57 6. Terms and Conditions of Options Options granted pursuant to the Plan shall be non-qualified Options not intended to qualify under section 422 of the Code and shall be subject to the following terms and conditions: (a) Price. The exercise price shall be the greater of 100% of the fair market value of the optioned Shares, or the par value thereof, on the date the Option is granted. As used in the Plan, 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 such exchange on the date of grant, or, if there are no such reported sales on that date but there are sales on dates within a reasonable period both before and after the date of grant, the weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of grant, or (ii) if clause (i) above is inapplicable, 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. Where the fair market value of the optioned Shares is determined under clause (i) above, the average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of grant shall be weighted inversely by the respective numbers of trading days between the selling dates and the date of grant (i.e., the valuation date), in accordance with Treas. Reg. * 20.2031-2(b)(1). (b) Term. Subject to earlier termination as provided in Subsection (d) below and in Section 7 herein, the stated term of each Option shall be ten years from the date of grant. (c) Exercise. Options shall be exercisable in five equal annual installments commencing one year after the date of grant. Except as otherwise provided in Subsections (d) and (e) below and Section 7 herein, Options shall only be exercisable by a Non-Employee Director while he or she remains a director of the Company. Any Option Shares, the right to the purchase which has accrued, may be purchased at any time up to the expiration or termination of the Option. Exercisable 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 price for such Shares. Only full Shares shall be issued under the Plan, and any fractional Share which might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. The Option price shall be payable in cash or its equivalent. (d) Effect of Ceasing to be a Director. If a Non-Employee Director ceases to be a director of the Company for any reason, his or her then outstanding Option shall continue to mature in accordance with its terms (except that if such cessation is due to death, such then outstanding Option immediately shall accelerate and become exercisable in full), and shall remain outstanding and exercisable, but only for a period of one year following such cessation as a director or until the earlier expiration of the stated term of such Option or its earlier termination pursuant to Section 7 herein. 58 (e) Non-Transferability. No Option shall be assignable or transferable by a Non-Employee Director otherwise than by will or by the laws of descent and distribution, and during the lifetime of a Non-Employee Director, his or her Option shall be exercisable only by him or her or by his or her guardian or legal representative. If a Non-Employee Director is married at the time of exercise and if the Non-Employee Director so requests at the time of exercise, the certificate or certificates for the Option Shares shall be registered in the name of the Non-Employee Director and the Non- Employee Director's spouse, jointly, with right of survivorship. (f) Rights as a Shareholder. A holder of an Option shall have no rights as a shareholder with respect to any Shares covered by such Option until the issuance of a stock certificate for such Shares to such holder. (g) Listing and Registration of Shares. Each Option shall be subject to the requirement that, if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the Shares covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the purchase of Shares thereunder, or that action by the Company or by the Non-Employee Director should be taken in order to obtain an exemption from any such requirement, no such Option may be exercised, in whole or in part, unless and until such listing, registration, qualification, consent, approval, or action shall have been effected, obtained, or taken under conditions acceptable to the Committee. Without limiting the generality of the foregoing, each Non-Employee Director or his or her legal representative or beneficiary may also be required to give satisfactory assurance that Shares purchased upon exercise of an Option are being purchased for investment and not with a view to distribution, and certificates representing such Shares may be legended accordingly. (h) Option Agreements. Options granted under the Plan shall be evidenced by a written document or documents (an "Option Agreement") in such form as the Committee shall, from time to time, approve, which Option Agreement shall contain such provisions, not inconsistent with the provisions of the Plan as the Committee shall deem advisable. Each Non-Employee Director shall enter into, and be bound by, an Option Agreement. 7. Capital Adjustments, Acceleration and Cancellation of Options The number of Shares which may be issued under the Plan, as stated in Section 4 herein, and the number of Shares issuable upon exercise of outstanding Options under the Plan (as well as the Option price per Share under such outstanding Options), shall, subject to the provisions of section 424(a) of the Code, be adjusted proportionately to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. In the event of a corporate transaction (as that term is described in section 424(a) of the Code and the Treasury Regulations issued thereunder, such as, for example, a merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation), and, provision is not made for the continuance and assumption of Options under the Plan, or the 59 substitution for such Options of new Options to acquire securities or other property to be delivered in connection with the transaction, all unexercised Options shall accelerate and become fully exercisable, but all unexercised Options shall terminate on the day immediately prior to the consummation of such corporate transaction. The Committee shall give the holders of outstanding Options not less than ten days prior written notice of any such acceleration and termination pursuant to this Section 7, and such outstanding Options thereafter may be exercised in whole or in part up to and including the date of such termination or until their earlier stated expiration date or their earlier termination pursuant to Section 6(d) herein. 8. Amendment or Discontinuance of the Plan The Board from time to time may suspend or discontinue the Plan or amend it in any respect whatsoever; provided, however, that an amendment to the Plan shall require shareholder approval (given in compliance with Rule 16b-3 under the Exchange Act) if such amendment would materially: (i) increase the benefits accruing to Non-Employee Directors under the Plan; (ii) increase the number of Shares which may be issued to Non- Employee Directors under the Plan other than as provided in Section 7 herein; or (iii)modify the requirements as to eligibility to participate in the Plan. Notwithstanding the foregoing, no such suspension, discontinuance or amendment shall materially impair the rights of any holder of an outstanding Option without the consent of such holder. Further, the provisions of the Plan establishing the directors eligible to receive Options under the Plan, the timing of the grants of such Options, the purchase price for Shares subject to Options, the number of Shares covered by each Option, the method or methods for determining the amount of Options to be granted to each Non- Employee Director, and any other provision of the Plan which, if amended more than once every six months, would cause the Plan to fail to comply with Rule 16b-3 under the Exchange Act, shall not be amended more than once every six months. 9. Effective Date and Duration The Plan shall become effective on January 26, 1994, the date on which it was adopted by the Board; provided, however, that if the Plan is not approved by the shareholders of the Company in the manner required by Rule 16b-3 under the Exchange Act within one year after said date, the Plan and all Options granted hereunder shall be null and void. Unless earlier terminated as provided in the Plan, the Plan shall terminate absolutely at 12:00 midnight on January 25, 2004, and no Options 60 hereunder shall be granted thereafter. Nothing contained in this Section 9, however, shall terminate or affect the continued existence of rights created under Options issued hereunder and then outstanding which by their terms extend beyond such date. 10. Miscellaneous (a) Governing Law. The operation of, and the rights of Non- Employee Directors under, the Plan, the Option Agreements and any Options granted hereunder shall be governed by applicable Federal law, and otherwise by the laws of the Commonwealth of Pennsylvania. (b) Rights. Neither the adoption of the Plan nor any action of the Board or the Committee shall be deemed to give any individual any right to be granted an Option, or any other right hereunder, unless and until the Committee shall have granted such individual an Option, and then his or her rights shall be only such as are provided by the Option Agreement. (c) Application of Funds. The proceeds received by the Company from the sale of Shares pursuant to Options granted under the Plan shall be used for general corporate purposes. (d) No Obligation to Exercise Option. The granting of an Option shall impose no obligation upon a Non-Employee Director to exercise such Option. EX-10 4 EXHIBIT 10(I)(2) 61 EXHIBIT 10(i)(2) The Company has Change in Control Agreements (with the indicated variations on pp. 7 and 8) in essentially the form attached with various of its officers, including the following executive officers: Executive Officers ------------------ Name Title ---- ----- Ronald J. Naples Chairman and Executive Officer John W. Carney Vice President, Human Resources William E. Chandler Senior Vice President, Finance (Chief Financial Officer) and Secretary Roy M. Delizia Vice President, Corporate Planning and Development Robert B. Fritsch President and Chief Operating Officer Spencer W. O'Meara Vice President and General Manager W. Ernest Precious Vice President and General Manager Robert K. Scribner Vice President and General Manager Eugene A. Stiefel Vice President, Information Services EX-10 5 EXHIBIT 10(J) 62 EXHIBIT 10(j) WILLIAM E. CHANDLER ------------------- Severance Arrangement The Company has a severance arrangement with William E. Chandler, Senior Vice President, Finance and Chief Financial Officer of the Company. Under the terms of this arrangement the Company is obligated to pay Mr. Chandler severance equivalent to up to two years' base compensation if he is terminated within varying periods up to five years from his date of hire (September 1992) as a result of top management turnover or for any other reason other than his death, disability, voluntary resignation or discharge for cause. Mr. Chandler also is party to a Change in Control Agreement with the Company (see Exhibit 10(h) to the Company's fiscal 1992 Annual Report on Form 10-K), and in the event of a termination of Mr. Chandler's employment which is covered under the terms of such Change in Control Agreement, the terms of that Change in Control Agreement would supersede the severance arrangement previously described in this paragraph. EX-11 6 EXHIBIT 11 63 Exhibit 11 COMPUTATION OF PER SHARE EARNINGS (In thousands except per share earnings) Nov. 28, 1993 Nov. 29, 1992 Dec. 1, 1991 ------------- ------------- ------------ PRIMARY PER SHARE EARNINGS - -------------------------- Earnings applicable to primary per share earnings $14,928 $13,302 $ 9,586 ======= ======= ======= Average number of common shares outstanding 16,107 16,104 16,080 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 146 112 127 Average shares used to ------- ------- ------- calculate primary per share earnings 16,253 16,216 16,207 ======= ======= ======= Primary per share earnings $ .92 $ .82 $ .59 ======= ======= ======= FULLY DILUTED PER SHARE EARNINGS - -------------------------------- Earnings applicable to fully diluted per share earnings $14,928 $13,302 $ 9,586 ======= ======= ======= Average number of common shares outstanding 16,107 16,104 16,080 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 167 132 139 Average shares used to ------- ------- ------- calculate fully diluted per share earnings 16,274 16,236 16,219 ======= ======= ======= Fully diluted per share earnings $ .92 $ .82 $ .59 ======= ======= ======= EX-21 7 EXHIBIT 21 64 EXHIBIT 21 SUBSIDIARIES OF HUNT MANUFACTURING CO. ---------------------- Hunt Holdings, Inc., a Delaware Corporation Hunt X-Acto, Inc., a Pennsylvania Corporation Bevis Custom Furniture, Inc., an Alabama Corporation Seal Products, Inc., a Delaware Corporation Hunt Europe, Ltd., a United Kingdom Corporation The Company holds all of the outstanding capital stock of Hunt Holdings, Inc. Hunt Holdings, Inc., in turn, holds all of outstanding capital stock of Hunt X-Acto, Inc., Bevis Custom Furniture, Inc., Seal Products, Inc. and Hunt Europe, Ltd. EX-23 8 EXHIBIT 23 65 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We consent to the incorporation by reference in Registration Statements Number 33-70660, Number 33-25947, Number 33-6359 and Number 2-83144 on Form S-8 dated October 21, 1993, December 7, 1988, June 29, 1986 and April 8, 1983, respectively, of our report dated January 17, 1994 on our audits of the consolidated financial statements and financial statement schedules of Hunt Manufacturing Co. (Company) as of November 28, 1993 and November 28, 1992 and for each of the three years in the period ended November 28, 1993 which report is included in the Company's Annual Report on Form 10-K. COOPERS & LYBRAND 2400 Eleven Penn Center Philadelphia, Pennsylvania February 22, 1994 -----END PRIVACY-ENHANCED MESSAGE-----