-----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, OffKZXd8R3VVRvjgDelPJfwNZ6O6fK4anCv5n21YdZOrzD29jQiOArpUUIJIpQvS FdgJemt13LKU/yjmaT7OvQ== 0000950116-99-001856.txt : 19991018 0000950116-99-001856.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950116-99-001856 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990829 FILED AS OF DATE: 19991012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT CORP 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: SEC FILE NUMBER: 001-08044 FILM NUMBER: 99726107 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157327700 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: HUNT MANUFACTURING CO DATE OF NAME CHANGE: 19920703 10-Q 1 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 August 29, 1999 -------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8044 ---------------------------------------------------------- HUNT CORPORATION. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 21-0481254 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Square 2005 Market Street, Philadelphia, PA 19103 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone no., including area code (215) 656-0300 --------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of October 1, 1999, there were outstanding 10,401,041 shares of the registrant's common stock. Page 2 HUNT CORPORATION INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements -------------------- Condensed Consolidated Balance Sheets as of August 29, 1999 and November 29, 1998 3 Condensed Consolidated Statements of Income - Three Months and Nine Months Ended August 29, 1999 and August 30, 1998 4 Consolidated Statements of Comprehensive Income - Three Months and Nine Months Ended August 29, 1999 and August 30, 1998 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended August 29, 1999 and August 30, 1998 6 Notes to Condensed Consolidated Financial Statements 7 - 8 Item 2 - Management's Discussion and Analysis of --------------------------------------- Financial Condition and Results of Operations 9 - 13 --------------------------------------------- Item 3 - Quantitative and Qualitative Disclosures about Market Risk 14 ---------------------------------------------------------- PART II - OTHER INFORMATION Item 1 - Legal Proceedings 15 ----------------- Item 6 - Exhibits and Reports on Form 8-K 15 -------------------------------- Signatures 16 ---------- Exhibit Index 17 ------------- Page 3 Part I - FINANCIAL INFORMATION --------------------- Item 1. Financial Statements -------------------- Hunt Corporation Condensed Consolidated Balance Sheets (Unaudited) (In thousands except share and per share amounts)
August 29, November 29, ASSETS 1999 1998 --------- --------- Current assets: Cash and cash equivalents $ 28,672 $ 40,724 Accounts receivable, less allowance for doubtful accounts: 1999, $1,466; 1998, $1,721 37,546 31,018 Inventories: Raw materials 7,201 7,867 Work in process 3,235 3,033 Finished goods 9,989 10,704 --------- --------- Total inventories 20,425 21,604 Deferred income taxes 4,158 4,769 Prepaid expenses and other current assets 1,041 1,402 --------- --------- Total current assets 91,842 99,517 Property, plant and equipment, at cost, less accumulated depreciation and amortization: 1999, $42,981; 1998, $37,818 46,389 49,917 Excess of acquisition costs over net assets acquired, less accumulated amortization 24,122 26,021 Other assets 12,023 11,402 --------- --------- Total assets $ 174,376 $ 186,857 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 32 $ 479 Accounts payable 8,702 12,503 Accrued expenses: Salaries, wages and commissions 1,754 2,302 Income taxes 2,153 1,930 Other 14,062 17,742 --------- --------- Total current 26,703 34,956 liabilities Long-term debt, less current portion 56,985 57,741 Deferred income taxes 1,486 374 Other non-current liabilities 16,143 15,906 Commitments and contingencies Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares (including 50,000 shares of Series A Junior Participating Preferred); none issued - - Common stock, $.10 par value, 40,000,000 shares authorized; issued: 1999 and 1998 -16,152,322 shares 1,615 1,615 Capital in excess of par value 6,434 6,434 Accumulated other comprehensive income (3,405) (1,099) Retained earnings 161,939 158,316 --------- --------- 166,583 165,266 Less cost of treasury stock: 1999 - 5,747,681 shares; 1998 - 5,162,082 shares (93,524) (87,386) --------- --------- Total stockholders' equity 73,059 77,880 --------- --------- Total liabilities and stockholders' equity $ 174,376 $ 186,857 ========= =========
See accompanying notes to condensed consolidated financial statements. Page 4 Hunt Corporation Condensed Consolidated Statements of Income (Unaudited) (In thousands except per share amounts)
Three Months Ended Nine Months Ended -------------------------- -------------------------- August 29, August 30, August 29, August 30, 1999 1998 1999 1998 ---------- ---------- ---------- --------- Net sales $61,143 $61,236 $182,696 $184,882 Cost of sales 38,198 37,994 113,282 113,340 ------- ------- -------- -------- Gross profit 22,945 23,242 69,414 71,542 Selling, administrative and general expenses 18,614 18,338 56,566 56,313 Restructuring and other - (253) - (2,424) ------- ------- -------- -------- Income from operations 4,331 5,157 12,848 17,653 Interest expense 1,153 1,185 3,452 3,405 Other income, net (308) (586) (1,233) (2,476) ------- ------- -------- -------- Income from continuing operations before income taxes 3,486 4,558 10,629 16,724 Provision for income taxes 1,220 1,740 3,720 5,753 ------- ------- -------- -------- Income from continuing operations 2,266 2,818 6,909 10,971 Discontinued operations: Gain on sale of discontinued operations, net of income taxes of $260 - 484 - 484 ------- ------- -------- -------- Net income $2,266 $3,302 $6,909 $11,455 ======= ======= ======== ======== Basic earnings per common share: Income from continuing operations $.22 $.25 $.66 $.98 Gain on sale of discontinued operations - .04 - .04 ======= ======= ======== ======== Net income per share $.22 $.29 $.66 $1.02 ======= ======= ======== ======== Diluted earnings per common share: Income from continuing operations $.22 $.24 $.66 $.93 Gain on sale of discontinued operations - .04 - .04 ======= ======= ======== ======== Net income per share $.22 $.28 $.66 $.97 ======= ======= ======== ======== Dividends per common share $.103 $.103 $.308 $.308 ======= ======= ======== ========
See accompanying notes to condensed consolidated financial statements. Page 5 Hunt Corporation Consolidated Statements of Comprehensive Income (Unaudited) (In thousands)
Three Months Ended Nine Months Ended -------------------------- -------------------------- August 29, August 30, August 29, August 30, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net income $ 2,266 $ 3,302 $ 6,909 $11,455 Other comprehensive (loss) income: Foreign currency translation adjustments, net of income taxes of $41 and $807 in 1999, and ($137) and $222 in 1998, respectively (75) 221 (1,499) (423) ------- ------- ------- ------- Comprehensive income $ 2,191 $ 3,523 $ 5,410 $11,032 ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. Page 6 Hunt Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Nine Months Ended ------------------------------- August 29, August 30, 1999 1998 ---------- ---------- Cash flows from operating activities: Net income $ 6,909 $ 11,455 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,741 6,306 Deferred income taxes 1,741 877 Loss (gain) on disposals of property, plant and equipment 4 (13) Gain on sale of businesses - (1,394) Payments/credits for special charges (1,595) (6,805) Issuance of stock under management incentive bonus and stock grant plans - 252 Changes in operating assets and liabilities (11,995) (23,130) -------- -------- Net cash provided by (used in) operating activities 1,805 (12,452) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (3,067) (12,352) Other, net (32) - -------- -------- Net cash used in investing activities (3,099) (12,352) -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt 11,812 5,446 Payments on long-term debt, including current maturities (12,575) (2,501) Book overdrafts (438) (225) Purchases of treasury stock (6,138) (941) Proceeds from exercise of stock options - 1,813 Dividends paid (3,255) (3,460) Other, net (33) 185 -------- -------- Net cash (used in) provided by financing activities (10,627) 317 -------- -------- Effect of exchange rate changes on cash (131) (10) -------- -------- Net decrease in cash and cash equivalents (12,052) (24,497) Cash and cash equivalents, beginning of period 40,724 65,449 -------- -------- Cash and cash equivalents, end of period $ 28,672 $ 40,952 ======== ========
Page 7 Hunt Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) 1. The accompanying condensed consolidated financial statements and related notes are unaudited; however, in management's opinion all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position at August 29, 1999 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. In the first quarter of fiscal 1999, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and display of the components of comprehensive income in the financial statements. See Consolidated Statements of Comprehensive Income in the foregoing financial statements. 3. A reconciliation of weighted average common shares outstanding to weighted average of common shares outstanding assuming dilution in calculating the earnings per share is shown below (in thousands): Three Months Ended August 29, August 30, 1999 1998 ---- ---- Average common shares outstanding - basic 10,405 11,284 Add: common equivalent shares representing shares issuable upon exercise of stock options and stock grants 2 426 ------ ------ Average common shares and dilutive securities outstanding 10,407 11,710 ====== ====== Nine Months Ended August 29, August 30, 1999 1998 ---- ---- Average common shares outstanding - basic 10,541 11,255 Add: common equivalent shares representing shares issuable upon exercise of stock options and stock grants 7 532 ------ ------ Average common shares and dilutive securities outstanding 10,548 11,787 ====== ====== Page 8 4. The following table sets forth the details and the cumulative activity in the various accruals and reserves associated with the prior years' restructuring plan in the Condensed Consolidated Balance Sheet at August 29,1999 (in thousands):
Balance at Current Cash Non-Cash Balance at November 29, 1998 Provision Reductions Activity August 29, 1999 ------------------ --------- ---------- -------- --------------- Lease Obligations $ 1,873 - $ (670) $ (8) $ 1,195 Severance 722 - (554) - 168 Inventory 400 - (186) (34) 180 Fixed Assets 235 - - - 235 Other 487 - (185) - 302 - ----- ------- --- --------- ---- ------- Total $ 3,717 - $ (1,595) $(42) $ 2,080 ======= ==== ======== ==== =======
5. The Company has been sued for patent infringement with respect to one of its minor products. After a jury trial during the Company's second quarter of fiscal 1998, the U.S. District in the Western District of Wisconsin entered judgment against the Company in this matter and awarded damages to the plaintiffs in the amount of $3.3 million, plus interest and costs. The Company and its patent legal counsel believe that the verdict against the Company was incorrect and that it will be reversed on appeal. Accordingly, the Company has not recorded any liability in its financial statements associated with this judgment. However, there can be no assurance that the Company will prevail in this matter. In the event of an unfavorable final judgment against the Company, management believes that it will not have a material impact on the Company's financial position, but it could have a material effect on quarterly or annual results of operations. (See also Note 15 to the Consolidated Financial Statements included in the Company's 1998 Form 10-K.) 6. On October 4, 1999, the Company acquired the business and assets of Axiom Graphics Manufacturing, Inc. ("Axiom") for an insignificant cash payment and future considerations. Axiom is a manufacturer, distributor and marketer of a line of liquid laminating machines and wet separator finishing devices for the large format print industry. Pro forma presentation of the effect of the acquisition has not been made since the effect is not material to the Company's results of operations or financial condition. Page 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------------- The following discussion includes certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements represent management's assessment based upon information currently available, but are subject to risks and uncertainties which could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's ability to successfully complete the implementation, and realize the anticipated growth and other benefits, of its strategic plan on a timely basis; the effect of, and changes in, worldwide general economic conditions; technological and other changes affecting the manufacture of and demand for the Company's products; competitive and other pressures in the market place; the impact of Year 2000 issues; the outcome of litigation in which the Company is engaged (including that referenced in Note 5 to Condensed Consolidated Financial Statements above); and other risks and uncertainties set forth herein and in the Company's Forms 10-Q, 10-K and 8-K filings with the Securities and Exchange Commission. In April 1997, the Company initiated a new strategy for growth and restructuring plan (the "strategic plan") designed to restore higher levels of sales growth, profitability and to reduce its cost structure. Although the Company believes that its plan to achieve higher growth and profitability will be successful in the long term and that most of the cost savings resulting from the strategic plan will continue in future years, there can be no assurance that such will be the case. (See Note 4 to Condensed Consolidated Financial Statements herein.) Further, the Company has been currently assessing and considering changes in its management and operating structures, particularly within its graphics business unit. The results of this process are expected to be known before the end of the Company's 1999 fiscal year-end. Results of Operations - --------------------- Net Sales - --------- Net sales of $61.1 million for the third quarter and $182.7 million for the first nine months of fiscal 1999 declined .2% and 1.2%, respectively, from the corresponding fiscal periods of fiscal 1998. These decreases were largely due to lower sales of graphics products (down 2% for the third quarter and 4% for the first nine months), partially offset by higher sales of consumer products (up 2% for the third quarter and 3% for the first nine months). In addition, net sales were adversely impacted by lower net selling prices in the third quarter and first nine months of fiscal 1999 compared to last year, as well as by a general softness in demand for some of the Company's graphics products. The decreases in graphics products for the periods were largely the result of lower mounting and laminating equipment products sales (down 16% and 17%, respectively), specifically wide-format machines, and foam board sales (down 3% and 5%, respectively). The increases in consumer products sales were due primarily to Page 10 higher sales of pencil sharpeners and staplers. Export sales decreased 12% and 29% in the third quarter and first nine months of fiscal 1999, respectively, compared to the same prior year periods. The decreases in export sales were largely attributable to lower sales in board products. Foreign sales decreased 8% in the third quarter and first nine months of fiscal 1999 compared to the same periods of fiscal 1998. Management is uncertain as to how long and to what extent the softness in demand for its graphics products will continue. Management believes that there are efforts in place for the graphics products business as well as new graphics product programs that should begin showing benefits in the fourth quarter of fiscal 1999. However, there can be no assurance that such will be the case. Gross Profit - ------------ The Company's gross profit percentage decreased to 37.5% of net sales in the third quarter of fiscal 1999 from 38% in the third quarter of fiscal 1998 and decreased to 38% in the first nine months of fiscal 1999 compared to 38.7% in the first nine months of fiscal 1998. Restructuring recoveries of $.2 million and $.4 million associated with inventory returns in connection with the Company's strategic plan were recorded in cost of sales in the third quarter and first nine months of fiscal 1998, respectively. Excluding the effects of these recoveries, the Company's adjusted gross profit percentages of net sales would have been 37.6% and 38.5% for the third quarter and first nine months of fiscal 1998, respectively. The decreases in the third quarter and first nine months gross profit percentages from the adjusted gross profit percentages in the prior year periods were the result of lower net selling prices, unfavorable product and customer mix, and lower unit sales. These items were partially offset by favorable production efficiencies. Management expects the pressure on net selling prices attributable to the growing bargaining power of the Company's largest customers, such as office products superstores, to continue. The Company's raw material cost increases have remained below the rate of inflation for the past several years; however, management is uncertain how long this will continue. Selling, Administrative and General Expenses - -------------------------------------------- Selling, administrative and general expenses increased slightly during the third quarter and first nine months of fiscal 1999 compared to the same periods of fiscal 1998. These increases were principally due to higher administrative and general costs (resulting from severance costs and higher professional services expenses and research and development costs), partially offset by lower marketing and selling expenses (due primarily to lower promotional advertising, marketing research and product distribution costs). Restructuring and Other - ----------------------- During the third quarter and first nine months of fiscal 1998, respectively, the Company reduced by $.3 million pretax ($.2 million after taxes, or $.01 per share on a basic and diluted basis) and by $.6 million pretax ($.4 million after taxes, or $.02 per share on a basic and diluted basis) some of its reserves Page 11 established in connection with the Company's 1997 business divestitures. The reserve reductions related principally to lower than anticipated inventory returns and other accruals. In addition, in the first nine months of fiscal 1998, the Company reduced by $1.8 million ($1.2 million after taxes, or $.11 per share on a basic basis and $.10 per share on a diluted basis) some of its reserves established in connection with the Company's implementation of its strategic plan during fiscal 1997. The reserve reduction related primarily to lower than expected severance costs and a decision not to vacate a leased facility. Other Income, Net - ----------------- Other income, net, decreased $.3 million in the third quarter of fiscal 1999 and $1.2 million in the first nine months of fiscal 1999 compared to the third quarter and first nine months of fiscal 1998. These decreases were due to lower interest income resulting from lower average cash balances and the forgiveness of a loan ($.4 million pretax) at one of the Company's foreign operations during fiscal 1998. These decreases were partially offset by gains from Canadian currency exchange rate fluctuations in 1999. Provision for Income Taxes - -------------------------- The Company's effective income tax rate was 35% for the third quarter and first nine months of fiscal 1999 compared to 38.2% and 34.4%, respectively, for the third quarter and first nine months of fiscal 1998. The lower third quarter of fiscal 1999 effective tax rate was due primarily to favorable resolutions of prior years' tax exposures. Discontinued Operations - ----------------------- In the third quarter of fiscal 1998, the Company reduced by $.7 million pretax ($.5 million after taxes, or $.04 per share on a basic and diluted basis) some of its accruals established in connection with the Company's discontinued office furniture business due to the favorable resolution of certain contingent liabilities established at the time of divestiture. Financial Condition - ------------------- The Company's working capital increased to $65.1 million at the end of the third quarter of fiscal 1999 from $64.6 million at the end of fiscal 1998. The current ratio increased to 3.4 at August 29, 1999 from 2.9 at November 29, 1998. The Company's debt/capitalization percentage increased to 44% at the end of the third quarter of fiscal 1999 compared to 43% at the end of fiscal 1998. Available cash balances were sufficient during the first nine months of fiscal 1999 to fund additions to property, plant and equipment of $3.1 million, to pay cash dividends of $3.3 million, and to fund the repurchase of $6.1 million of the Company's common shares. Current assets decreased to $91.8 million at the end of the third quarter of fiscal 1999 from $99.5 million at the end of fiscal 1998 largely as a result of lower cash and cash equivalent, and inventory balances, partially offset by higher accounts receivable balances. The decrease in cash and cash equivalents was largely due to the repurchase of the Company's common shares, payments of Page 12 dividends, capital expenditures and payments associated with the strategic plan. Inventories decreased to $20.4 million at August 29, 1999 from $21.6 million at November 29, 1998, due primarily to inventory reductions in Europe. The $6.5 million increase in accounts receivable was largely due to timing of payments by major customers and seasonal dating and promotional programs. Current liabilities decreased to $26.7 million at the end of the third quarter of fiscal 1999 from $35.0 million at the end of fiscal 1998. This decrease was largely attributable to the timing of accounts payable and interest payments, as well as reductions in the accruals associated with the Company's strategic plan. The effect of unfavorable currency exchange rates for the British pound sterling and the Dutch guilder (the functional currencies of the Company's U.K. and Holland operations, respectively) was the principal cause for the $2.3 million decrease in the cumulative translation adjustment account in stockholders' equity. The Company has a revolving credit agreement of $75 million and a line of credit agreement of $2.5 million. There was $4.6 million borrowed under these credit facilities as of August 29, 1999. Management believes that funds generated from operations, combined with the existing credit facilities, will be sufficient to meet currently anticipated working capital and other capital and debt service requirements. Should the Company require additional funds, management believes that the Company could obtain them at competitive costs. Management currently expects that total fiscal 1999 expenditures for additions to property, plant and equipment to increase capacity and productivity will approximate $5 million, of which approximately $3.1 million has been expended through the first nine months of fiscal 1999. Year 2000 Update - ---------------- The Company has substantially completed its work to mitigate the Year 2000 ("Y2K") issue. These efforts involve assessment, identification of non-compliant systems, remediation, testing, and verification, including replacing and/or updating existing systems, as well as establishing contingency plans relating to Y2K risks. The Company has also substantially completed the necessary modifications to its critical and ancillary systems and applications. To date, the project is proceeding on schedule and is expected to be completed by the end of fiscal 1999. The Company has also contacted significant suppliers and customers to identify and coordinate the remediation of any Y2K issues they may have which might affect the Company, and the Company is still in the process of determining the Company's vulnerability if these companies should fail to remediate their Y2K issues. The Company's costs incurred to date in addressing the Y2K issues have not been significant and are being funded through operating cash flows. The total implementation costs (relating principally to new hardware and software) capitalized to date are $5.5 million, which should represent substantially all of the capitalized costs to be incurred. These costs not only addressed Y2K Page 13 issues but also provided for operational efficiencies and cost reductions. The Company continues to evaluate future costs associated with these efforts based on actual experience but does not currently anticipate that such costs will have a material impact on the Company's results of operations or financial position. It is difficult to identify or prepare for the absolute worst case Y2K scenario. However, the most likely worst case scenario for the Company would include, among other things, temporary slowdowns of operations at the Company's facilities, whether due to an external power failure or otherwise, delays in receipt of supplies, failure to be able to serve customers, lost sales and failure of management controls. Although the Company believes that its systems will be fully operational and will not cause any material disruptions because of Y2K issues, there can be no assurance that this will be the case. Further, because of the uncertainties associated with assessing the potential effects of non-preparedness of suppliers and customers, there is a risk of a material adverse effect on the Company's future results of operations if these constituencies do not correct their Y2K problems, if any, on a timely basis. The Company plans to continue assessing these risks through reviews with its major suppliers and customers. The Company has substantially completed its contingency plans relating specifically to identified Y2K risks and developing cost estimates relating to these plans. The objectives of the contingency plans are to ensure business-critical processes are protected from disruption and will continue to function during and after the year 2000, and to ensure the Company's ability to produce an acceptable level of products and services is safeguarded in the event of failures of external systems and services. The contingency plans include, for example, securing alternative sources of supply, possible safety inventory levels and other backup procedures. Y2K contingency plans and related cost estimates will be reviewed and modified as additional information becomes available. New Accounting Standard - ----------------------- During the first quarter of fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and display of the components of comprehensive income in the financial statements. See the Consolidated Statements of Comprehensive Income in the financial statements herein. In June 1999, the Financial Accounting Standards Board approved issuance of a final statement to defer the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." Consequently, SFAS No. 133 will now be effective for fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to have a material effect on the Company's consolidated results of operations, financial position or cash flows. Subsequent Event - ---------------- On September 29, 1999, the Board of Directors of the Company authorized the Company to repurchase up to an additional $5 million of the Company's common stock over the next twelve months. The Company has repurchased, to date, 962,700 shares of the 1,000,000 shares previously authorized for repurchase since the beginning of fiscal 1998 by the Board of Directors. The purchases will be funded from available operating funds and the repurchased shares will be held as treasury stock to be used for Company stock-based compensation plans and for other general corporate purposes. On October 4, 1999, the Company acquired the business and assets of Axiom Graphics Manufacturing, Inc. ("Axiom"). Axiom is a manufacturer, distributor and marketer of a line of liquid laminating machines and wet separator finishing devices for the large format print industry. This acquisition is expected to be financed through funds generated from operations. Page 14 Item 3 - Quantitative and Qualitative Disclosures about Market Risk ---------------------------------------------------------- There have been no material changes in the Company's market risk from that set forth in the Company's fiscal 1998 Form 10-K. Page 15 PART II - OTHER INFORMATION ----------------- Item 1 - Legal Proceedings ----------------- Reference is made to Part I, Item 3 of the Company's fiscal 1998 Form 10-K and to Note 5 to the Condensed Consolidated Financial Statements herein. Item 6 - Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- 27 Financial Data Schedule for the quarter ended August 29, 1999. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter for which this report is filed. Page 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUNT CORPORATION. Date October 11, 1999 By /s/ William E. Chandler ----------------------------- ------------------------------------- William E. Chandler Senior Vice President, Finance (Principal Financial Officer) Date October 11, 1999 By /s/ Donald L. Thompson ----------------------------- ------------------------------------- Donald L. Thompson Chairman of the Board and Chief Executive Officer Date October 11, 1999 By /s/ John Fanelli III ----------------------------- ------------------------------------- John Fanelli III Vice President, Corporate Controller (Principal Accounting Officer) Page 17 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule for the quarter ended August 29, 1999 ------------------------------------------------------------- EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS NOV-30-1999 AUG-29-1999 28,672 0 39,012 (1,466) 20,425 91,842 89,370 (42,981) 174,376 26,703 56,985 0 0 1,615 71,444 174,376 182,696 182,696 113,282 113,282 56,205 361 3,452 10,629 3,720 6,909 0 0 0 6,909 .66 .66
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