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, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
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HUNT CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 21-0481254
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Commerce Square 2005 Market Street, Philadelphia, PA 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code 215-656-0300
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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
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As of April 1, 2002, there were outstanding 8,917,375 shares of the registrant's
common stock.
HUNT CORPORATION
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of 3
March 3, 2002 and December 2, 2001
Condensed Consolidated Statements of Income - 4
Three Months Ended March 3, 2002 and March 4, 2001
Consolidated Statements of Comprehensive Income - Three Months Ended 5
March 3, 2002 and March 4, 2001
Condensed Consolidated Statements of Cash Flows - 6
Three Months Ended March 3, 2002 and March 4, 2001
Notes to Condensed Consolidated Financial 7 - 9
Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 17
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 18
Part I - FINANCIAL INFORMATION Page 3
Item 1. Financial Statements
Hunt Corporation
Condensed Consolidated Balance Sheets
(In thousands except share and per share amounts)
March 3, December 2,
ASSETS 2002 2001
--------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 27,502 $ 25,966
Accounts receivable, less allowance for doubtful
accounts: 2002, $746; 2001, $1,031 20,325 17,486
Inventories:
Raw materials 2,923 2,973
Work in process 1,431 1,440
Finished goods 4,698 4,976
--------- ---------
Total inventories 9,052 9,389
Deferred income taxes 4,366 5,834
Prepaid expenses and other current assets 10,191 14,101
--------- ---------
Total current assets 71,436 72,776
Property, plant and equipment, less
accumulated depreciation and amortization:
2002, $43,484; 2001, $42,548 23,374 24,188
Goodwill 754 754
Intangible assets 65 65
Other assets 8,472 8,604
--------- ---------
Total assets $ 104,101 $ 106,387
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,000 $ 5,000
Accounts payable 3,112 4,428
Accrued expenses 20,383 22,776
--------- ---------
Total current liabilities 28,495 32,204
Long-term debt, less current portion 22,000 22,000
Deferred income taxes 847 1,004
Other non-current liabilities 14,048 14,106
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, authorized 1,000,000
shares; none issued -- --
Common stock, $.10 par value, 40,000,000 shares
authorized; issued: 2001 and 2000 -16,152,322 shares 1,615 1,615
Capital in excess of par value 7,412 7,412
Accumulated other comprehensive loss (10) --
Retained earnings 131,147 129,695
--------- ---------
140,164 138,722
Less cost of treasury stock:
2002 - 7,236,347 shares; 2001 - 7,248,347 shares; (101,453) (101,649)
--------- ---------
Total stockholders' equity 38,711 37,073
--------- ---------
Total liabilities and stockholders' equity $ 104,101 $ 106,387
========= =========
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
-----------------------------
March 3, March 4,
2002 2001
--------- --------
Net sales $ 40,496 $ 42,263
Cost of sales 24,536 24,883
-------- --------
Gross profit 15,960 17,380
Selling, general, and administrative expenses 12,181 12,685
Restructuring and other 81 41
-------- --------
Income from operations 3,698 4,654
Interest expense 561 1,073
Interest and other income, net (671) (197)
-------- --------
Income from continuing operations
before income taxes 3,808 3,778
Provision for income taxes 1,352 1,278
-------- --------
Income from continuing operations 2,456 2,500
-------- --------
Discontinued operations:
Loss from discontinued business,
net of tax benefit of $64 -- (821)
-------- --------
Net income $ 2,456 $ 1,679
======== ========
Basic earnings per common share:
Income from continuing operations $ 0.28 $ 0.28
Loss from discontinued business -- (0.09)
-------- --------
Net income per share - Basic $ 0.28 $ 0.19
======== ========
Diluted earnings per common share:
Income from continuing operations $ 0.27 $ 0.27
Loss from discontinued business -- (0.09)
-------- --------
Net income per share - Diluted $ 0.27 $ 0.18
======== ========
Dividends per common share $ 0.103 $ 0.103
======== ========
See accompanying notes to condensed consolidated financial statements.
Page 5
Hunt Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
Three Months Ended
---------------------------------
March 3, March 4,
2002 2001
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Net income $ 2,456 $ 1,679
Other comprehensive income (loss):
Foreign currency translation adjustments, net of
income tax expense of $913 - 1,261
Currency hedging adjustments, net of income tax
benefit of $7 (10) -
------------ -------------
Other comprehensive income (loss) (10) 1,261
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Comprehensive income $ 2,446 $ 2,940
============ =============
See accompanying notes to condensed consolidated financial statements.
Page 6
Hunt Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
---------------------------
March 3, March 4,
2002 2001
-------- --------
Cash flows from operating activities:
Net income $ 2,456 $ 1,679
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,196 1,987
Deferred income taxes 1,311 71
(Gain) loss on disposals of property, plant and equipment 124 (10)
Provision for patent infringement litigation -- 52
Payments/credits for special charges (382) (119)
Changes in operating assets and liabilities (1,425) (1,378)
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Net cash provided by operating activities 3,280 2,282
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Cash flows from investing activities:
Additions to property, plant and equipment (514) (1,028)
Acquisition of business -- (92)
Other, net 13 10
-------- --------
Net cash used for investing activities (501) (1,110)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 2,106
Payments on long-term debt, including current maturities -- (1,984)
Proceeds from exercise of stock options 105 --
Book overdrafts (382) (2,213)
Purchases of treasury stock -- (3,680)
Dividends paid (913) (912)
Other, net -- (12)
-------- --------
Net cash used for financing activities (1,190) (6,695)
-------- --------
Effect of exchange rate changes on cash (53) 53
-------- --------
Net increase (decrease) in cash and cash equivalents 1,536 (5,470)
Cash and cash equivalents, beginning of period 25,966 23,878
-------- --------
Cash and cash equivalents, end of period $ 27,502 $ 18,408
======== ========
See accompanying notes to condensed consolidated financial statements.
Page 7
Hunt Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed consolidated financial statements and related
notes are unaudited; however, in management's opinion all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the financial position at March 3, 2002 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. Effective October 1, 2001, the Company sold its commercial Graphics Products
business and related assets. The divested business had net sales of
approximately $14.5 million and an after-tax loss of $.8 million in the first
quarter of fiscal 2001. The divested business is presented as a discontinued
operation in the accompanying Condensed Consolidated Statements of Income.
However, the Consolidated Statements of Comprehensive Income and Condensed
Consolidated Statements of Cash Flows have not been restated for the fiscal 2001
first quarter.
3. A reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution in calculating the earnings
per share is shown below (in thousands):
Three Months Ended
--------------------------
March 3, March 4,
2002 2001
----------- -----------
Average common shares outstanding-basic 8,905 9,062
Add: common equivalent shares representing
shares issuable upon exercise of stock options
and stock grants 85 26
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Average common shares and dilutive securities
outstanding 8,990 9,088
=========== ===========
Page 8
Hunt Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the Company's 2001 cost reduction
plan in the Condensed Consolidated Balance Sheet at March 3, 2002 (in
thousands):
Balance at Balance at
December 2, Cash Non-Cash March 3,
2001 Credits Activity Activity 2002
--------------- ------------ --------------- ------------- -----------
Lease obligations $256 - (64) - $192
Severance 3,513 - (258) - 3,255
Fixed assets 38 - - (27) 11
Other 51 - (38) - 13
--------------- ------------ --------------- ------------- -----------
Total $3,858 - (360) (27) $3,471
=============== ============ =============== ============= ===========
The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the Company's 1999 restructuring
plan in the Condensed Consolidated Balance Sheet at March 3, 2002 (in
thousands):
Balance at Balance at
December 2, Cash Non-Cash March 3,
2001 Credits Activity Activity 2002
--------------- ------------ --------------- ------------- -----------
Lease obligations $249 - - - $249
Severance 23 (10) (13) - -
--------------- ------------ --------------- ------------- -----------
Total $272 (10) (13) - $249
=============== ============ =============== ============= ===========
5. As a result of the sale of the commercial Graphics Products business in
fiscal 2001 (see Note 2) and its impact on the Company's internal organizational
structure, the Company now has only a single reportable segment: Consumer
Products. All of the Company's long-lived assets are located in North America.
6. Effective December 3, 2001, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets." Under this SFAS, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized, but will be
subject to periodic reviews for impairment. As a result, effective December 3,
2001, the Company no longer amortizes goodwill or intangible assets with
indefinite lives. Within six months of adopting SFAS No. 142, the Company will
complete a transitional impairment review to identify whether there is an
impairment to goodwill or indefinite-lived intangible assets using a fair value
methodology. Any impairment loss resulting from the transitional impairment test
will be reflected as the cumulative effect of a change in accounting principle,
retroactive to the first quarter of fiscal 2002. The Company does not expect a
material impact on its consolidated financial statements from the adoption of
SFAS No. 142.
Page 9
Hunt Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company's indefinite-lived intangible assets consist of trademarks,
and the Company has no amortizable intangible assets.
In conformity with SFAS No. 142, the results of prior periods have not
been restated. The following is a reconciliation of the Company's net income and
earnings per share for the three months ended March 3, 2002 and March 4, 2001:
March 3, March 4,
2002 2001
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Net income:
As reported $2,456 $1,679
Amortization expense - goodwill - 185
Amortization expense - intangible assets - 25
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Adjusted net income $2,456 $1,889
============ ===========
Basic earnings per share:
As reported $.28 $.19
Amortization expense - goodwill - .02
Amortization expense - intangible assets - -
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Adjusted earnings per share - Basic $.28 $.21
============ ===========
Diluted earnings per share:
As reported $.27 $.18
Amortization expense - goodwill - .02
Amortization expense - intangible assets - -
------------ -----------
Adjusted earnings per share - Diluted $.27 $.20
============ ===========
Page 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements contained in this report are 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 benefits of its restructuring and
cost reduction plans on a timely basis; the effect of, and changes in, worldwide
general economic conditions, including the severity and duration of any economic
slowdown; price and availability of raw materials; foreign exchange rates;
technological and other changes affecting the manufacture of and demand for the
Company's products; competitive and other pressures in the marketplace; acts of
terrorism; and other risks and uncertainties set forth herein and in the
Company's 2001 Form 10-K and as may be set forth in the Company's subsequent
press releases and/or Forms 10-Q, 8-K, and other filings with the Securities and
Exchange Commission.
(Note: All earnings per share amounts in Management's Discussion and Analysis
are presented on an after-tax, diluted basis.)
In November 2001, the Company initiated a cost reduction plan (the "2001 cost
reduction plan") designed to reduce the Company's cost structure. This plan
resulted primarily from the sale of the commercial Graphics Products business to
Neschen AG in October 2001 and is expected to generate approximately $3.9
million of annualized pre-tax cost savings in fiscal 2002 and annualized pre-tax
cost savings of approximately $4.7 million in future years. Pre-tax cost savings
realized in the first quarter of 2002 were approximately $.5 million, or $.04
per share. Although the Company expects to realize such future cost savings,
there is no assurance that such future cost savings will actually be achieved.
The adoption of the 2001 cost reduction plan in the fourth quarter of fiscal
2001 resulted in the recognition of charges totaling $3.9 million pre-tax ($.30
per share) in that quarter which included employee severance costs, recognition
of future lease obligations, and other related costs. In addition to the fiscal
2001 fourth quarter charges related to this plan, the Company expects to spend a
total of approximately $1.0 million for implementation costs (which will be
recorded as period costs as incurred) over the next three fiscal years. During
the first quarter of fiscal 2002, the Company recognized $.1 million, or $.01
per share, of such implementation costs (consisting of outplacement expenses).
See Notes 2 and 4 to the Condensed Consolidated Financial Statements.
As a result of the sale of the commercial Graphics Products business, management
believes that the Company has simplified its operations, and thus, is afforded
greater potential strategic options. The sale and related cost reduction plan
are also expected to improve the overall profitability and financial strength of
the Company's continuing operations. As noted in the Company's proxy statement
relating to its 2002 Annual Meeting, the Company's Board of Directors in the
past has reviewed and evaluated, and continues to review and evaluate, various
possible strategies that the Company might pursue to strengthen the Company and
enhance shareholder value. Such potential strategies range from growing the
Company, through internal development, joint ventures, and/or acquisitions, to
selling some or all of the Company.
Page 11
Results of Operations
The following discussion is on a continuing operations basis.
Net Sales
Net sales from continuing operations of $40.5 million for the fiscal 2002 first
quarter decreased 4.2% from the first quarter of fiscal 2001 due to lower sales
of office supplies products (down 12%), partially offset by higher sales of
art/framing products (up 1%). Export sales decreased 11% in the fiscal 2002
first quarter compared to the same prior year period due to lower sales in
Canada and Latin America. Management believes that the decrease in sales was due
primarily to a continuing uncertain U.S. economy, which has prompted some of the
Company's key customers to reduce their inventory and purchasing levels, which,
in turn, resulted in lower orders to and sales by the Company. Although
management expects sales to improve in the second half of fiscal 2002 in
conjunction with an anticipated economic rebound in the U.S., there is no
assurance that such sales growth will be achieved.
Gross Profit
The Company's gross profit percentage decreased to 39.4% of net sales in the
first quarter of fiscal 2002 from 41.1% in the first quarter of fiscal 2001, and
gross margin dollars decreased $1.4 million from the same prior year period. The
decrease in the gross profit percentage relative to the prior year period was
primarily the result of unfavorable fixed overhead absorption, lower net selling
prices, sales of a higher proportion of lower margin products, and an increase
in inventory valuation adjustments, partially offset by favorable purchase price
variances. The decrease in gross margin dollars in the fiscal 2002 first quarter
was due largely to lower sales volume compared to the same prior year period.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses decreased $.5 million, or 4.0%, in
the first quarter of fiscal 2002 compared to the prior year first quarter as the
net result of lower marketing and selling expenses, partially offset by higher
general and administrative expenses. The decrease in marketing and selling
expenses was due to lower salaries and benefits expenses attributable to the
costs savings resulting from the 2001 divestiture of the Company's commercial
Graphics Products business, reduced discretionary marketing spending, and to
lower sales volume, partially offset by higher freight costs. The increase in
general and administrative expenses was due principally to an increase in
incentive compensation expense, partially offset by lower bad debt expense, and
by a lesser reduction in the cash surrender value of officers' life insurance
policies than was the case in the fiscal 2001 first quarter.
Selling, general, and administrative expenses, as a percentage of net sales,
were 30.1% and 30.0% in the first quarters of fiscal 2002 and 2001,
respectively.
Page 12
Restructuring and Other
During the first quarter of fiscal 2002, the Company reduced by $10,000 a
reserve related to its 1999 restructuring plan, and reversed an accrual of
$33,000 established in connection with the implementation of the 1999
restructuring plan. These reductions reflected lower than anticipated severance
expense. During the first quarter of fiscal 2001, the Company recorded an
interest charge of $51,000 in connection with a previously reported patent
infringement suit judgment.
The Company also recorded a net loss on disposals of property, plant and
equipment of $124,000 during the first quarter of fiscal 2002 compared to a net
gain of $10,000 in the same period of fiscal 2001.
Interest Expense
Interest expense in the fiscal 2002 first quarter decreased to $.6 million from
$1.1 million in the first quarter of fiscal 2001 due primarily to a principal
repayment of the Company's senior notes of $25 million during the fourth quarter
of fiscal 2001.
Interest and Other Income, net
Interest and other income, net increased to $.7 million in the fiscal 2002 first
quarter from $.2 million in the prior year first quarter due principally to
management and other net fees for transition services rendered in connection
with the Company's sale of its commercial Graphics Products business to Neschen
AG.
Provision for Income Taxes
The Company's effective income tax rate increased to 35.5% for the first quarter
of fiscal 2002 from 33.8% for the fiscal 2001 first quarter due principally to
the impact of decreased foreign sales corporation benefits and increased state
income taxes.
Financial Condition
The Company's working capital increased to $42.9 million from $40.6 million, and
its current ratio increased to 2.5 from 2.3, at the end of the first quarter of
fiscal 2002 from the end of fiscal 2001. The Company's debt/capitalization
percentage was 41% at the end of the fiscal 2002 first quarter compared to 42%
at the end of fiscal 2001. Funds from operations and available cash balances
were sufficient during the first quarter of fiscal 2002 to fund additions to
property, plant and equipment of $.5 million, to pay cash dividends of $.9
million, and to make cash payments of $.4 million related to the 2001 cost
reduction plan.
Current assets decreased to $71.4 million at the end of the first quarter of
fiscal 2002 from $72.8 million at the end of fiscal 2001, largely as a result of
a decrease in prepaid and other assets and deferred tax assets, partially offset
by higher cash and cash equivalents and higher accounts receivable balances. The
decrease in deferred tax assets was due primarily to current deductibility of
reserves related to the divested business. The decrease in prepaid and other
assets and the increase in cash and cash equivalents were due to the receipt of
income tax refunds, as well as the receipt of amounts due to the Company from
Neschen AG for transition services. Accounts receivable increased $2.8 million
from the $17.5 million balance at the end of fiscal 2001 due to higher sales in
the last month of the fiscal 2002 first quarter compared to the last month of
fiscal 2001, payments to customers pursuant to customer incentive programs
accrued at the end of fiscal 2001, and to lower bad debt reserve balances in the
first quarter of 2002.
Page 13
Current liabilities decreased to $28.5 million at the end of the first quarter
of fiscal 2002 from $32.2 million at the end of fiscal 2001. This decrease was
largely attributable to the timing of accounts payable payments ($1.3 million),
as well as to a decrease in accrued expenses ($2.4 million), primarily due to
settlement of amounts owed to Neschen AG in connection with the Company's 2001
divestiture of its commercial Graphics Products business, and to lower accrued
interest.
The Company has a revolving credit facility of $25 million. There were no
outstanding borrowings under this facility at March 3, 2002.
The Company's ability to comply with various of its debt covenants under its
credit facility and outstanding senior notes will depend largely on the
achievement of the Company's business plan, which, in turn, could be adversely
affected by the economic climate, competitive uncertainties, and other factors.
In the event that non-compliance with such debt covenants should occur or appear
to be likely, the Company would pursue various alternatives to successfully
resolve the non-compliance, which might include, among other things, seeking
debt covenant waivers or amendments, refinancing of debt, restricting payments
of future cash dividends, and/or reducing future capital expenditures. Although
the Company believes that it would be successful in resolving any such actual or
potential non-compliance with its debt covenants, there can be no assurance that
such would be the case.
Management believes that funds generated from operations, combined with its
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. While subject to change, management currently
expects that total fiscal 2002 expenditures for additions to property, plant and
equipment to increase capacity and productivity will be approximately $2.9
million, of which approximately $.5 million has been expended through the first
three months of fiscal 2002.
Critical Accounting Policies and Estimates
Critical accounting policies are those that involve subjective or complex
judgments, often as a result of the need to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those related to customer
programs, product returns, bad debts, inventories, valuation of long-lived
assets, assets held for sale, intangible assets, cash surrender value of life
insurance policies, deferred cash accounts, income taxes, warranty obligations,
restructuring, business divestitures, pensions and other employee benefit plans
or arrangements, environmental matters, and contingencies and litigation.
Management bases its estimates on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
Page 14
The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:
|o| The Company records estimated reductions to revenue for customer
programs including special promotions and other volume-based
incentives.
|o| The Company maintains allowances for doubtful accounts for estimated
losses resulting from the Company's review and assessment of its
customers' ability to make required payments. If the financial
condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances
might be required.
|o| The Company provides for estimated costs of future anticipated product
returns and warranty obligations based on historical experience.
|o| The Company maintains reserves for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about
future demand and market conditions. If actual market conditions are
less favorable than those projected by management, additional inventory
write-downs may be required.
|o| The Company holds life insurance policies for all of its officers in
connection with the Company's Supplemental Executive Benefits Plan. The
carrying value of these policies is subject to changes in market
conditions.
|o| The Company maintains an accrual for a deferred cash account in
connection with a long-term incentive compensation agreement with the
Company's Chief Executive Officer. The value of the deferred cash
account is tied to the Company's stock price. This accrual is subject
to changes in market conditions.
|o| The Company records a valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. While
the Company has considered future taxable income and ongoing prudent
and feasible tax planning strategies in assessing the need for the
valuation allowance, in the event that the Company were to determine
that it would be able to realize its deferred tax assets in the future
in excess of its net recorded amount, an adjustment to the deferred tax
asset would increase income in the period such determination was made.
Likewise, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the
period such determination was made.
Page 15
New Accounting Standards
Effective December 3, 2001, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 supersedes APB 17,
"Intangible Assets," and primarily addresses accounting for goodwill and
intangible assets subsequent to their acquisition (i.e., the post-acquisition
accounting). The most significant changes made by SFAS No. 142 are that goodwill
and indefinite lived intangible assets will no longer be amortized, goodwill
will be tested for impairment at least annually at the reporting unit level,
intangible assets deemed to have an indefinite life will be tested for
impairment at least annually, and the amortization period of intangible assets
with finite lives will no longer be limited to forty years. As a result of the
adoption of SFAS No. 142, the Company no longer amortizes goodwill or intangible
assets.
In June 2001, the Financial Accounting Standards Board ("FASB") approved the
issuance of Statements of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations." SFAS No. 143 requires that entities record as
a liability obligations associated with the retirement of a tangible long-lived
asset when such obligations are incurred, and capitalize the cost by increasing
the carrying amount of the related long-lived asset. SFAS No. 143 will be
effective for fiscal years beginning after June 15, 2002. The Company does not
expect a material impact from the adoption of SFAS No. 143 on its consolidated
financial statements.
In August 2001, the FASB approved the issuance of SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and certain parts of APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 establishes an accounting model based on SFAS No.
121 for long lived assets to be disposed of by sale, previously accounted for
under APB Opinion No. 30. This Statement is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the impact of the
adoption of this statement, but believes it will not materially affect the
Company's financial position or results of operations.
Page 16
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the Company's market risk from that set
forth in Part II, Item 7A of the Company's fiscal 2001 Form 10-K.
Page 17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Reference is made to Part I, Item 3 of the Company's fiscal 2001 Form 10-K.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(10)(c)(4) - Addendum to Stock Option Agreement dated December 20, 2000
between Hunt Corporation and Bradley P. Johnson.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
Page 18
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 April 16, 2002 By /s/ Dennis S. Pizzica
-------------------- ----------------------------------------
Dennis S. Pizzica
Vice President, Chief Financial Officer
Date April 16, 2002 By /s/ Donald L. Thompson
-------------------- ----------------------------------------
Donald L. Thompson
Chairman of the Board and
Chief Executive Officer
Date April 16, 2002 By /s/ John Fanelli III
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John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)