-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NgJ8PwaVIuaAuHYaO+6i/69+vvXmT3aNIBcYY3OjVyk1qAHfMthJ6WW/yitnsX/3 zxaqJparxbSC1GvLSezGUw== 0000950116-96-000243.txt : 19960416 0000950116-96-000243.hdr.sgml : 19960416 ACCESSION NUMBER: 0000950116-96-000243 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960303 FILED AS OF DATE: 19960412 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT MANUFACTURING CO CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08044 FILM NUMBER: 96546518 BUSINESS ADDRESS: STREET 1: 230 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2157327700 MAIL ADDRESS: STREET 1: 230 S BROAD STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 3, 1996 ----------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8044 ------------------------------------------------------- HUNT MANUFACTURING CO. - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 21-0481254 - ----------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Square 2005 Market Street, Philadelphia, PA 19103 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone no., including area code (215) 656-0300 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- As of April 8, 1996 there were outstanding 10,968,145 shares of the registrant's common stock. Page 2 HUNT MANUFACTURING CO. INDEX Page ---- PART I - FINANCIAL INFORMATION --------------------- Item 1 - Financial Statements -------------------- Condensed Consolidated Balance Sheets as of March 3, 1996 and December 3, 1995 3 Condensed Consolidated Statements of Income - Three Months Ended March 3, 1996 and February 26, 1995 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 3, 1996 and February 26, 1995 5 Notes to Condensed Consolidated Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of --------------------------------------- Financial Condition and Results of Operations 8 - 10 --------------------------------------------- PART II OTHER INFORMATION ----------------- Item 6 - Exhibits and Reports on Form 8-K 11 -------------------------------- Signatures 12 ---------- Exhibit Index 13 ------------- Page 3 Part I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- Hunt Manufacturing Co. Condensed Consolidated Balance Sheets (Unaudited) (In thousands except share and per share amounts) March 3, December 3, ASSETS 1996 1995 --------- ----------- Current assets: Cash and cash equivalents $ 2,767 $ 15,503 Accounts receivable, less allowance for doubtful accounts: 1996, $2,142; 1995, $2,305 43,401 42,036 Inventories: Raw materials 12,324 12,561 Work in process 6,014 5,452 Finished goods 19,066 18,118 --------- --------- Total inventories 37,404 36,131 Deferred income taxes 5,039 4,938 Prepaid expenses and other current assets 1,580 1,484 --------- --------- Total current assets 90,191 100,092 Property, plant and equipment, at cost, less accumulated depreciation and amortization: 1996, $49,754; 1995, $48,111 51,559 52,008 Intangible assets, net 25,737 25,997 Other assets 5,357 4,713 --------- --------- Total assets $ 172,844 $ 182,810 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 5,344 $ 766 Accounts payable 12,644 10,759 Accrued expenses: Salaries, wages and commissions 3,286 5,446 Income taxes 4,968 3,064 Insurance 2,601 2,449 Compensated absences 1,622 1,673 Other 5,385 6,793 --------- --------- Total current liabilities 35,850 30,950 Long-term debt, less current portion 73,750 3,559 Deferred income taxes 4,172 4,520 Other non-current liabilities 7,271 7,588 --------- --------- Total liabilities 121,043 46,617 --------- --------- Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares (including 50,000 shares of Series A Junior Participating Preferred); none issued -- -- Common stock, $.10 par value, 40,000,000 shares authorized; issued: 1996 -16,152,322 shares; 1995 - 16,152,322 shares 1,615 1,615 Capital in excess of par value 6,434 6,434 Cumulative translation adjustment (1,026) (983) Retained earnings 132,613 131,216 --------- --------- 139,636 138,282 Less cost of treasury stock: 1996 - 5,184,177 shares; 1995 - 159,159 shares (87,835) (2,089) --------- --------- Total stockholders' equity 51,801 136,193 --------- --------- Total liabilities and stockholders' equity $ 172,844 $ 182,810 ========= ========= See accompanying notes to condensed consolidated financial statements. Page 4 Hunt Manufacturing Co. Condensed Consolidated Statements of Income (Unaudited) (In thousands except per share amounts) Three months ended --------------------------- March 3, February 26, 1996 1995 -------- ------------ Net sales $73,668 $70,530 Cost of sales 46,880 44,888 ------- ------- Gross profit 26,788 25,642 Selling and shipping expenses 14,159 13,905 Administrative and general expenses 7,023 6,513 Provision for special charges 354 -- ------- ------- Income from operations 5,252 5,224 Interest expense 875 28 Other expense (income), net 20 (75) ------- ------- Income before income taxes 4,357 5,271 Provision for income taxes 1,531 1,924 ------- ------- Net income $2,826 $3,347 ======= ======= Average shares of common stock outstanding 12,939 16,118 ======= ======= Earnings per common share $0.22 $0.21 ======= ======= Dividends per common share $0.095 $0.095 ======= ======= See accompanying notes to condensed consolidated financial statements. Page 5 Hunt Manufacturing Co. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three Months Ended ------------------------ March 3, February 26, 1996 1995 -------- ------------ Cash flows from operating activities: Net income $ 2,826 $ 3,347 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,336 2,250 Deferred income taxes (449) 184 Loss on disposals of property, plant and equipment 36 26 Payments for special charges, net of provision (939) (18) Issuance of stock under management incentive bonus and stock grant plans 241 152 Changes in operating assets and liabilities (2,449) (7,811) -------- -------- Net cash provided by (used for) operating activities 1,602 (1,870) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (1,438) (2,002) Other, net (221) -- -------- -------- Net cash used for investing activities (1,659) (2,002) -------- -------- Cash flows from financing activities: Proceeds from long-term debt 75,000 -- Payments of long-term debt, including current maturities (230) (234) Purchase of treasury stock (86,436) (1,189) Proceeds from exercise of stock options 69 274 Dividends paid (1,042) (1,530) Other, net (47) (46) -------- -------- Net cash used for financing activities (12,686) (2,725) -------- -------- Effect of exchange rate changes on cash 7 (24) -------- -------- Net decrease in cash and cash equivalents (12,736) (6,621) Cash and cash equivalents, beginning of period 15,503 13,807 -------- -------- Cash and cash equivalents, end of period $ 2,767 $ 7,186 ======== ======== Supplemental disclosures of cash flow information: Interest paid $ 776 $ 94 Income taxes paid 86 1,579 See accompanying notes to consolidated financial statements. Page 6 Hunt Manufacturing Co. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. The accompanying condensed consolidated financial statements and related notes are unaudited; however, in management's opinion all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position at March 3, 1996 and the results of operations and cash flows for the periods shown have been made. Such statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by generally accepted accounting principles or those normally made in Form 10-K. 2. The earnings per share are calculated based on the weighted average number of common shares outstanding. Shares issuable under outstanding stock option, stock grant and long-term incentive compensation plans are common stock equivalents, but are not used in computing earnings per share because the dilutive effect would be less than 3%. 3. The pre-tax special charge of $.4 million, or $.02 per share after tax, relates to the Company's previously-announced fiscal 1995 decision to relocate and consolidate certain manufacturing and distribution operations. Approximately $1.3 million of the provisions for organizational changes and relocation and consolidation of operations is included in liabilities at the end of the first quarter of fiscal 1996, which principally relates to future severance related payments. 4. In the first quarter of fiscal 1996, the Company purchased from Mary F. Bartol an aggregate of 2,150,165 of the Company's common shares for a cash purchase price of $16.32 per share in a private transaction. Mary F. Bartol is the widow of George E. Bartol III, the late Chairman of the Board, the mother-in-law of Gordon A. MacInnes, the current Chairman of the Board, and the mother of Victoria B. Vallely, another Director of the Company. In addition, later in the first quarter of fiscal 1996, the Company purchased 2,954,378 of its common shares at $17.00 net per share in cash in a tender offer. The aggregate purchase price (plus related expenses) of the shares purchased in the private transaction and in the tender offer was approximately $86.4 million. 5. During the first quarter of fiscal 1996, the Company obtained a new five-year $125 million bank credit facility, consisting of a revolving credit facility in an amount up to $81.725 million, and an amortizing term loan in the amount of $43.275 million. The Company used borrowings of $75 million under this credit facility, together with cash on hand, to fund the shares repurchased from Mary F. Bartol and in the tender offer. (See Note 4 above.) This new credit facility replaced the revolving credit agreements (totalling $45 million) which were in effect at December 3, 1995. Page 7 Notes to Condensed Consolidated Financial Statements, continued (Unaudited) Long-term debt at the end of the first quarter of fiscal 1996 and at year-end 1995 is as follows: As of Mar. 3, Dec. 3, 1996 1995 ---------- ------ Term loan (a) $43,275 -- Revolving credit facility (b) 31,725 -- Line of credit 535 $ 766 Capitalized lease obligation 2,000 2,000 Industrial development revenue bond 1,559 1,559 ------- ------ 79,094 4,325 Less current portion 5,344 766 ------- ------- Long-term debt, less current portion $73,750 $3,559 ====== ====== (a) The term loan will amortize in twenty quarterly installments, consisting of four installments each of $1.202 million, $1.683 million, $2.404 million, $2.645 million, and $2.885 million, respectively. The first installment was due and paid on March 31, 1996, and the last installment is due and payable December 31, 2000. The interest rates under the term loan (6.06% at March 3,1996) are at the base rate or, at the option of the Company, LIBOR plus a margin of between 55 and 87.5 basis points, the margin to be adjusted quarterly based on the Company's leverage ratio (as defined in the credit facility). (b) The revolving credit facility matures on December 31, 2000. The interest rates under this facility (5.91% at March 3,1996) are at a base rate (defined as the higher of (i) the applicable prime rate of the bank and (ii) the federal funds rate plus 50 basis points) or, at the option of the Company, LIBOR plus a margin of between 40 and 72.5 basis points, the margin in each case to be adjusted quarterly based on the Company's leverage ratio (as defined in the credit facility). The new credit facility also contains certain representations, warranties, covenants, and conditions, including, but not limited to, requirements that the Company comply with certain financial covenants, including interest coverage, fixed charge coverage and leverage ratios, and maintenance of certain levels of net worth, and also contains limitations on liens, indebtedness, investments, changes in lines of business, acquisitions, transactions with affiliates, and modifications of certain documents. In addition, the new credit facility prohibits dividends and other distributions to shareholders unless a minimum fixed charge coverage ratio is satisfied after giving effect to such dividend or distribution; however, the Company does not presently anticipate that this dividend restriction will require any reduction from the Company's current dividend level. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------ Financial Condition - ------------------- The Company's working capital decreased to $54.3 million at the end of the first quarter of fiscal 1996 from $69.1 million at the end of fiscal 1995. The decrease was largely attributable to the Company's repurchases of its common stock discussed below. The current ratio decreased to 2.5 at March 3, 1996 from 3.2 at December 3, 1995, and debt capitalization percentage increased to approximately 60% at the end of the first quarter of fiscal 1996 from 3% at the end of fiscal 1995 as a net result of the purchases of the Company's common stock and the related debt assumed to finance the purchases. Available cash balances were used to fund a portion of the common stock purchases (approximately $10 million), additions to property, plant, and equipment of $1.4 million and to pay cash dividends of $1.0 million. Current assets decreased to $90.2 million at the end of the first quarter of fiscal 1996 from $100.1 million at the end of fiscal 1995, primarily as a result of a $12.7 million decrease in cash, attributable, in part, to the uses of cash mentioned above. Inventories grew from $36.1 million at December 3, 1995 to $37.4 million at March 3, 1996, due primarily to new products and stocking in anticipation of promotional sales expected in the second and third quarters. Current liabilities of $35.9 million at the end of the first quarter of fiscal 1996 increased from $31.0 million at the end of fiscal 1995. This increase was largely attributable to increases in the current portion of long-term debt and accounts payable, partially offset by decreases in accrued salaries, wages and commissions due principally to payments of incentive compensation in the first quarter of fiscal 1996, which had been accrued at the end of fiscal 1995, and other accrued expenses due primarily to payments associated with the provision for special charges discussed below. During the first quarter of fiscal 1996, the Company purchased an aggregate of 5.1 million of its common shares in a private transaction and a subsequent tender offer. The price of the common shares acquired in the private transaction and tender offer, including related expenses, aggregated $86.4 million. The Company also obtained a new five-year $125 million credit facility, of which $75 million was used to finance the aforementioned repurchases. This new credit facility replaced the revolving credit agreements which were in effect at the end of fiscal 1995. Management believes that funds generated from operations combined with the new credit facility will be sufficient to meet currently anticipated working capital and other capital and debt service requirements. Should the Company require additional funds, management believes that the Company could obtain them at competitive costs. Management expects that total 1996 expenditures for additions to property, plant, and equipment to increase capacity and productivity will approximate $11.0 million, of which approximately $1.4 million has been expended through the first quarter of fiscal 1996. Page 9 Results of Operations - --------------------- Net Sales - --------- Net sales in the first quarter of fiscal 1996 grew 4.4% to $73.7 million from $70.5 million in the first quarter of fiscal 1995. This increase was due to higher selling prices (up 2.7%) and higher unit volume (up 1.7%). The first quarter sales increase was comprised of a 13.9% increase in sales of art/craft products, which grew to $35.1 million from first quarter fiscal 1995 sales of $30.8 million, partially offset by a 2.8% decrease in sales of office products, which decreased to $38.6 million compared to first quarter of fiscal 1995 sales of $39.7 million. The art/craft products sales increase was led by a 20.3% increase in sales of presentation graphics products. Higher sales of mounting and laminating equipment and supplies, as well as growth in the digital imaging market were contributing factors for this sales increase. Sales of art supplies products and hobby/craft products were essentially unchanged in the first quarter of fiscal 1996 compared to the same period in fiscal 1995. First quarter fiscal 1996 export sales of art/craft products were down 4.5% compared to the first quarter of fiscal 1995, largely as a result of lower sales in Latin America, the Middle East, and Europe. Foreign sales of art/craft products continue to increase significantly, growing 37.4% in the first quarter of fiscal 1996, due primarily to higher sales of presentation graphics products in Europe, which includes sales of products of Centafoam (acquired in late April, 1995). Excluding the sales from the Centafoam business, foreign sales grew 16.2% in the first quarter of fiscal 1996. The office products sales decrease in the first quarter of fiscal 1996 was attributable to lower sales of mechanical and electromechanical products (down 9.9%) and desktop accessories and supplies (down 9.2%), partially offset by higher sales of office furniture products (up 9.4%). The decrease in sales of mechanical and electromechanical products in the first quarter of fiscal 1996 was largely due to lower sales of Boston brand products, particularly paper shredders, pencil sharpeners and manual staplers. The decrease in Boston brand products sales was principally attributable to lost distribution of certain of these products at some of the Company's large superstore customers and resulting loss of market share for such products. Management is taking measures aimed at stemming the continuing loss of market share for certain of its mechanical and elctromechanical products but it is uncertain whether it will be successful in so doing. Export sales of office products grew by 36.8% in the first quarter of fiscal 1996, primarily as a result of higher sales in Latin America (particularly Mexico and Puerto Rico). Gross Profit - ------------ The Company's gross profit margin percentage of 36.4% of net sales in the first quarter of fiscal 1996 remained unchanged from the first quarter of fiscal 1995 due to a combination of factors: net selling price increases offset by changes in product sales mix (i. e., higher sales for certain office furniture products and higher foreign sales, which yield lower gross profit percentages than many of the Company's other products) and lower sales and production volume of Boston brand products. Although the Company has realized the positive effects of its recent selling price increases and, to some extent, stabilization of costs of some of its raw materials, management is uncertain if these conditions will continue in 1996. Page 10 Selling, Shipping, Administrative and General Expenses - ------------------------------------------------------ Selling and shipping expenses decreased to 19.2% of net sales for the first quarter of fiscal 1996 from 19.7% in the first quarter of fiscal 1995, largely due to lower advertising expenses and transportation costs. First quarter of fiscal 1996 administrative and general expenses were up 7.8% compared to the first quarter of fiscal 1995 primarily as a result of higher management incentive compensation expenses and fees for professional services. Provision for Special Charges - ----------------------------- In the first quarter of fiscal 1996, the Company recorded a pre-tax charge of $.4 million, or $.02 per share after tax, relating to the Company's previously-announced fiscal 1995 decision to relocate and consolidate certain manufacturing and distribution operations. Approximately $1.3 million of the provisions for organizational changes and relocation and consolidation of operations is included in liabilities at the end of the first quarter of fiscal 1996, which principally relates to future severance related payments. Interest Expense - ---------------- Interest expense increased to $875,000 for the first quarter of fiscal 1996 from $28,000 in the first quarter of fiscal 1995 due to significant borrowings under the new credit facility discussed previously. Provision for Income Taxes - -------------------------- The Company's effective tax rate decreased to 35.1% in the first quarter of fiscal 1996 from the 36.5% rate incurred in the first quarter of fiscal 1995. This decrease was largely the result of lower state and local effective tax rates. Page 11 Item 6 - Exhibits and Reports on Form 8-K ---------------------------------- (a) Exhibits -------- 11. Computation of Per Share Earnings 27. Financial Data Schedule (b) Reports on Form 8-K ------------------- On January 2, 1996, the Company filed a Report on Form 8-K with the Securities and Exchange Commission, reporting, under Item 5 of said Report, the Company's purchase of an aggregate of 2,150,165 of its common shares from Mary F. Bartol, widow of George E. Bartol III, the late Chairman of the Board of the Company. Page 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUNT MANUFACTURING CO. Date April 12, 1996 By /s/ William E. Chandler -------------------- --------------------------- William E. Chandler Senior Vice President, Finance (Principal Financial and Accounting Officer) Date April 12, 1996 By /s/ Robert B. Fritsch -------------------- ------------------------ Robert B. Fritsch President and Chief Executive Officer Page 13 EXHIBIT INDEX Exhibit 11 - Computation of Per Share Earnings --------------------------------- Exhibit 27 - Financial Data Schedule ----------------------- EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 Computation of Per Share Earnings (Unaudited) (In thousands except per share amounts) Three Months Ended --------------------------- March 3, February 26, 1996 1995 -------- ------------ Primary per share earnings - -------------------------- Earnings applicable to primary per share earnings $2,826 $3,347 ====== ====== Average number of common shares outstanding 12,939 16,118 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 196 87 ------ ------ Average shares used to calculate primary per share earnings 13,135 16,205 ====== ====== Primary per share earnings $0.22 $0.21 ====== ====== Fully diluted per share earnings - -------------------------------- Earnings applicable to fully diluted per share earnings $2,826 $3,347 ====== ====== Average number of common shares outstanding 12,939 16,118 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 214 89 ------ ------ Average shares used to calculate fully diluted per share earnings 13,153 16,207 ====== ====== Net fully diluted per share earnings $0.21 $0.21 ====== ====== See accompanying notes to consolidated financial statements. EX-27 3 FINANCIAL DATA SCHEDULE
5 0000049146 HUNT MANUFACTURING CO. U.S. DOLLARS 1,000 3-MOS DEC-01-1996 DEC-04-1995 MAR-03-1996 .00001 2,767 0 45,543 (2,142) 37,404 90,191 101,313 (49,754) 172,844 35,850 73,750 0 0 1,615 50,186 172,844 73,668 73,668 46,880 46,880 21,554 2 875 4,357 1,531 2,826 0 0 0 2,826 .22 .21
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