[LOGO] HUNT

2001 Annual
Report on
Form 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 2, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ______ to ______.

For the fiscal year ended December 2, 2001 Commission File No. 1-8044

HUNT CORPORATION
(Registrant)

Pennsylvania 21-0481254
(State of Incorporation) (IRS Employer Identification No.)

One Commerce Square,
2005 Market Street, Philadelphia, PA 19103-7085
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (215) 656-0300

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange on Which
Title of Each Class: Registered:
Common Shares, par value $.10 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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, and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. |_|

The aggregate market value of the registrant's common shares (its only voting
stock) held by non-affiliates of the registrant as of February 1, 2002 was
approximately $65,115,000. (Reference is made to the final paragraph of Part I
herein for a statement of the assumptions upon which this calculation is
based.)

The number of shares of the registrant's common shares outstanding as of
February 1, 2002 was 8,903,975.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's definitive proxy statement relating to
its scheduled April 2002 Annual Meeting of Shareholders (which proxy statement
is expected to be filed with the Commission not later than 120 days after the
end of the registrant's last fiscal year) are incorporated by reference into
Part III of this report.

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, including those related to future financial and
business performance, 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 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 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.

PART I

ITEM 1. BUSINESS

General

Hunt Corporation and its subsidiaries (herein called the "Company" unless the
context indicates otherwise) are primarily engaged in the manufacture and
distribution of consumer products which the Company markets worldwide. These
consumer products are sold through the office, art, and framing markets and
include a group of select BOSTON, X-ACTO, and BIENFANG brand products, STURDY
BOARD brand foam board, and HUNT brand project display board brand products,
as well as a line of finishing equipment, laminates, and adhesives.

(Note: All earnings per share amounts are presented on an after-tax, diluted
basis in Part I of this Form 10-K.)

Effective October 1, 2001, the Company sold its commercial Graphics Products
business and related assets to Neschen AG, a German manufacturer of self-
adhesive products, for approximately $32.0 million. The commercial Graphics
Products business included a full line of mounting and finishing products
consisting of large-format laminators, liquid laminators, and pressure-
sensitive and heat-activated laminates and adhesives sold through the
commercial graphics market, as well as the Company's European foam board
business. The Company recorded an after-tax loss of $25.4 million, or $2.83
per share, on this sale. The divested business, representing all of the
Company's foreign operations (excluding Canada) and some of its domestic
operations, had net sales of approximately $44.3 million in fiscal 2001
(through the effective date of divestiture), $73.0 million in fiscal 2000, and
$71.9 million in fiscal 1999. The commercial Graphics Products business is
presented as a discontinued operation in the accompanying Consolidated
Statements of Operations and Notes to Consolidated Financial Statements. See
Item 7 herein and Note 3 to the Consolidated Financial Statements herein for
further information.

Business Segments

As a result of the sale of the commercial Graphics Products business and its
impact on the Company's internal organizational structure, the Company now has
only a single reportable segment: Consumer Products. The Company has two major
classes of consumer products: office supplies and art/framing supplies. The
amounts and

percentages of net sales from continuing operations of these product classes
for the last three fiscal years are as follows:

2001 2000 1999
--------------- --------------- --------------

Product Class:
Office supplies.......................... $ 66,969 42% $ 72,088 41% $ 74,831 43%
Art/framing supplies..................... 93,901 58% 103,692 59% 98,162 57%
-------- --- -------- --- -------- ---
Total.................................... $160,870 100% $175,780 100% $172,993 100%
======== === ======== === ======== ===

The Company's office supplies products currently consist of a variety of items
sold primarily under the Company's BOSTON brand, including manual and electric
pencil sharpeners (which constitute a significant portion, approximately 60%,
of office supplies), manual and electric staplers, X-ACTO brand paper
trimmers, RAPID(1) manual and electric staplers, and other office supplies
products. Effective September 1, 1999, Schwan-STABILO Schwanhausser GmbH & Co.
terminated its distribution agreement with the Company relating to Schwan-
STABILO(2) highlighter markers and writing instruments, which accounted for most
of the decrease in office products net sales in fiscal 2000.

The Company's art/framing supplies products are used primarily by picture
framers, commercial and amateur artists, hobbyists, and craft enthusiasts and
include various types of X-ACTO brand knives and blades; X-ACTO brand tools
and kits; board products; CONTE(3) pastels, crayons and related drawing
products, for which the Company is the exclusive United States and Canadian
distributor; commercial and fine art papers which the Company converts,
finishes and sells under its BIENFANG brand name; PAINTERS paint markers, and
a line of finishing equipment, laminates, and adhesives currently sold under
the SEAL(4) brand name. Board products include STURDY BOARD brand foam boards
(which constitute a significant portion, somewhat less than 40%, of art/
framing supplies) and HUNT brand project display boards, which include project
display boards sold by the Company under a worldwide exclusive distribution
agreement with Showboard, Inc. Finishing equipment consists primarily of
mechanical and vacuum presses, and laminates and adhesives consist of
pressure-sensitive and heat-activated films and tissues sold in the framing
market.

The Company consistently has sought to expand its consumer products business
through internal product development, the acquisition of distribution rights
to products which complement or extend the Company's established lines, the
acquisition of complementary businesses, and through broadened distribution.
Examples of new consumer products introductions by the Company in recent years
are BOSTON brand electric and battery powered pencil sharpeners, lines of
staplers under the STANDUP and ORCA brands, and X-ACTO brand trimmers.

The Company's products are sold domestically primarily in the commercial
office, home office, framing, and the general consumer markets, chiefly
through large retail outlets, such as office products superstores, drug and
food chain stores, variety stores, discount chains, and membership chains, and
through office supply wholesalers and dealers and framing wholesalers. The
consumer market has increased significantly in recent years, largely due to
the dramatic growth of office products superstores and discount chains. A more
limited line of products is sold to schools through specialized school supply
distributors.

Sales and Marketing

General

The Company has more than 3,000 active customers, the ten largest of which
accounted for approximately 57% of its net sales in fiscal 2001. Three of
these ten largest customers were office products superstore chains. Wal-Mart
Stores, Inc. and Staples, Inc. accounted for 13% and 11%, respectively, of
total net sales for fiscal 2001. In

- ------------
(1) Trademark of Isaberg Rapid AB.
(2) Trademark of Schwan-STABILO Schwanhausser GmbH & Co.
(3) Trademark of Conte S.A.
(4) Trademark of Neschen AG which the Company has the right to continue to use
on certain products for a limited amount of time.

recent years there has been an increasing percentage of the Company's sales
attributable to a smaller number of customers with increased buying and
bargaining power. This increase in bargaining power has led to downward
pressure on selling prices for the Company's office supplies products and
board products. See Item 7 of this report.

The Company generally operates without a significant backlog because most of
its sales are made from inventory. The Company's sales generally are not
subject to significant seasonal fluctuations. See Note 17 to the Consolidated
Financial Statements herein.

Domestic Operations

Domestic marketing of the Company's products is effected principally through
two separate sales forces for retail and mass markets. The sales forces are
comprised primarily of the Company's own salespeople and independent
manufacturers' representatives. The Company currently maintains its primary
domestic distribution operations in Statesville, North Carolina.

Foreign Operations

The Company maintains distribution operations in Ontario, Canada, and also
distributes its products in more than 50 foreign markets, primarily through
its own sales force and through independent sales agents and distributors.
Export sales aggregated $15.2 million in fiscal 2001, as compared to $18.0
million and $16.2 million in fiscal 2000 and 1999, respectively. In fiscal
2001, approximately $10.8 million and $1.2 million of such sales were made in
Canada and Mexico, respectively. No other foreign country had sales greater
than $.4 million. In fiscal 2001, BOSTON brand electric and mechanical pencil
sharpeners, X-ACTO brand knives and blades, BIENFANG brand paper products, and
HUNT foam board products accounted for the major portion of export sales.

The Company's other foreign operations, including its European distribution
operations, were divested as part of the October 2001 sale of its commercial
Graphics Products business. See Item 7 herein and Note 3 to the Consolidated
Financial Statements herein for further information.

Foreign sales of the Company's products are subject to the usual risks of
doing business abroad, particularly currency fluctuations and foreign exchange
controls, as well as general economic conditions.

Manufacturing and Production

The Company's operations include manufacturing and converting of products, as
well as purchasing and assembly of various component parts. Excluding products
for which it acts as a distributor, the vast majority of the Company's sales
are of products which are manufactured, converted or assembled by the Company.
See Item 2 herein for information concerning the Company's major manufacturing
facilities.

The Company customarily has more than one source of supply for its critical
raw materials and component parts, and its consumer products business has not
been materially hindered by shortages of such items. The Company experienced
some cost reductions for certain of its raw materials, such as styrene plastic
and facing paper, during fiscal 2001; however, management is uncertain if this
trend will continue. See Item 7 herein.

Competition

The Company does not have any single competitor which offers substantially the
same overall lines of products as the Company. However, competition in a
number of areas of the Company's businesses, such as electric pencil
sharpeners, staplers, foam board, and finishing equipment, laminates, and
adhesives is substantial, and some of the Company's competitors are larger and
have considerably greater financial resources than the Company.

Because of the fragmented nature of the consumer products business, the
multiple markets served by the Company, and the absence of published market
data, the Company generally is not able to determine with certainty its
relative domestic or foreign market share for its various products.
Nevertheless, the Company believes that it is among the leaders in domestic
markets in a number of its products, including BOSTON brand manual and
electric pencil sharpeners, STURDY BOARD brand foam board products, HUNT brand
project display board products, and X-ACTO brand knives and blades.

The Company considers product performance and brand recognition to be
important competitive factors in its businesses, but competitive pricing and
promotional discounts also have become increasingly important factors.

Trademarks, Patents and Licenses

The Company's business is not dependent, to a material extent, upon any patents.
However, the Company regards its many trademarks as being of substantial value
in the marketing of its various products, particularly including BOSTON(R),
X-ACTO(R), BIENFANG(R), and HUNT(R). The following additional trademarks, some
of which are mentioned in this report, are owned by the Company: BULLDOG(R), THE
BUZZ(TM), CLASSIC STANDUP STAPLER(TM), DELUXE STANDUP STAPLER(TM), THE EXECUTIVE
STANDUP STAPLER(R), GRIP STANDUP STAPLER(TM), MIGHTY CORE(R), MIGHTY MITE(TM)
NAUTILUS(R), ORCA(R), PALM STANDUP STAPLER(TM), PAINTERS(R), POWERHOUSE(R),
ROCKET STANDUP(TM), SCHOOL PRO(TM), SHOWTIME(R), STANDUP(R), STURDY BOARD(R),
and ULTIMATE STANDUP STAPLER(TM).

As previously indicated, the Company also has been granted exclusive
distribution rights in designated territories with respect to various
products, including CONTE drawing products, RAPID manual and electric stapling
machines, and certain project display boards owned by Showboard, Inc. The
Company's distribution rights generally are of unlimited duration and may be
terminated or expire, in certain cases, with as little as approximately six
months notice from the grantor of such rights. While the Company's business is
not dependent upon any of these distribution rights (no line of such
distributed products having accounted for as much as 4% of the Company's net
sales in fiscal 2001), the loss of the right to market certain products could
have an adverse effect on the Company's profitability.

Research and Development

During fiscal 2001, the Company spent approximately $1.5 million on Company-
sponsored research and development, as compared with approximately $1.6
million in fiscal 2000 and $1.9 million in fiscal 1999.

Personnel

As of January 2002, the Company had approximately 900 full-time employees.

Environmental Matters

The Company is involved on a continuing basis in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions
has been named as a potentially responsible party for remediation of sites.
Expenses incurred by the Company to date relating to violations of and
compliance with environmental laws and permits and site remediation have not
been material. While it is impossible to predict with certainty, management
currently does not foresee such expenses in the future as having a material
effect on the Company's business, results of operations or financial
condition. See Note 15 to the Consolidated Financial Statements herein.

ITEM 2. PROPERTIES

The Company presently maintains its principal executive offices at One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103 in approximately
53,000 square feet of leased space under a sublease expiring in 2002. The
Company is currently in negotiations to extend its present lease. The
following table sets forth information with respect to certain of the other
facilities of the Company:

Primary Function Location Approximate Size Owned or Leased
- ---------------- --------------- --------------------- ------------------
Manufacturing & Offices Statesville, NC 219,000 sq. ft. bldg. (1)
on 13 acres

Manufacturing & Offices Statesville, NC 218,000 sq. ft. bldg. Owned
on 16 acres

Distribution & Offices Statesville, NC 320,000 sq. ft. bldg. Leased (exp. 2005)

Distribution & Offices Ontario, Canada 59,000 sq. ft. bldg. Leased (exp. 2006)

- ---------------

(1) A portion of this facility was financed by the issuance of industrial
revenue bonds, due 2004, by the Iredell County Industrial Facilities and
Pollution Control Financing Authority. The Authority retains title to the
property and leases it to the Company for rental payments equal to
principal and interest payments on the bonds. The Company has the option,
subject to certain conditions, to purchase the property for a nominal
consideration upon payment of the bonds.

In connection with the 2001 cost reduction plan, the Company vacated some of
the leased space of its executive offices and intends to vacate some of its
Ontario, Canada distribution facility. Subject to the preceding sentence, the
Company believes that the above facilities generally are adequately utilized
and suitable for the Company's present needs.

In addition, the Company has retained $4.6 million of assets (consisting of a
plant facility and vacant land) related to its fiscal 2001 divested commercial
Graphics Products business, all located in the United Kingdom. The Company is
actively pursuing the disposition of these non-strategic assets and expect to
achieve their sale within a reasonable period of time. See Note 3 to the
Consolidated Financial Statements herein and Item 7 of this report.

ITEM 3. PENDING LEGAL PROCEEDINGS

The Company is not aware of any material pending legal proceedings involving
the Company or its subsidiaries other than as set forth in Notes 15 and 20 to
the Consolidated Financial Statements herein and in Item 1- "Environmental
Matters" herein.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year covered by this report.

Additional Information

The following information is furnished in this Part I pursuant to Instruction
3 to Item 401(b) of Regulation S-K:

Executive Officers of the Company

Name Age Position
----------------- --- ----------------------------------------
Donald L. Thompson 60 Chairman of the Board and
Chief Executive Officer

John W. Carney 58 Vice President,
Chief Administrative Officer

Bradley P. Johnson 39 President and Chief Operating Officer

Dennis S. Pizzica 48 Vice President, Chief Financial Officer,
Treasurer, and Secretary

The executive officers of the Company customarily are elected annually by the
Board of Directors to serve, at the pleasure of the Board, for a period of one
year or until their successors are elected. All of the executive officers of
the Company, except for Messrs. Johnson and Pizzica, have served in varying
executive capacities with the Company for over five years.

As previously announced by the Company, Mr. Thompson plans to relinquish his
Chief Executive Officer position around mid-year 2002, and to continue to
serve as Chairman of the Board until the end of the fiscal year. This is part
of a planned implementation of an orderly executive leadership transition to a
smaller executive management structure. Mr. Johnson is Mr. Thompson's planned
successor. William E. Chandler, former Senior Vice President of Finance, Chief
Financial Officer, and Secretary, retired from the Company effective March 1,
2002. Mr. Pizzica is Mr. Chandler's successor. In addition, James P. Machut,
the former Vice President of Operations/Supply Chain Logistics, and Eugene A.
Stiefel, former Vice President, Information Services and Chief Information
Officer, separated from the Company effective March 1, 2002. The Company is
not planning to replace the positions previously held by Messrs. Machut and
Stiefel.

Mr. Johnson was named to the position of President and Chief Operating Officer
of the Company effective December 1, 2001. He joined the Company in May 1999
and previously served as Vice President/General Manager of Consumer Products
(May 1999-May 2000), Vice President/General Manager of Hunt Products (June
2000-December 2000), and Senior Vice President/General Manager of Hunt
Products (January 2001-November 2001). Prior to joining Hunt, Mr. Johnson was
General Manager of the Infant Feeding Business Unit at H. J. Heinz Company
from 1997 to 1999 and held several marketing related positions with Kimberly-
Clark Corporation from 1988 to 1997.

Mr. Pizzica was elected to the additional offices of Chief Financial Officer and
Secretary in February 2002, effective March 1, 2002. He joined the Company in
June 1975 and has been serving as Vice President and Treasurer.

_______________________________

For the purposes of calculating the aggregate market value of the common
shares of the Company held by nonaffiliates, as shown on the cover page of
this report, it has been assumed that all the outstanding shares were held by
nonaffiliates except for the shares held by directors and executive officers
of the Company. However, this should not be deemed to constitute an admission
that all directors and executive officers of the Company are, in fact,
affiliates of the Company, or that there are not other persons who may be
deemed to be affiliates of the Company. Further information concerning
shareholdings of executive officers, directors and principal shareholders is
included in the Company's definitive proxy statement filed or to be filed with
the Securities and Exchange Commission.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The Company's common shares are traded on the New York Stock Exchange (trading
symbol "HUN"). The following table sets forth the high and low quarterly sales
prices of the Company's common shares during the two most recent fiscal years
reported by The Wall Street Journal):

Fiscal Quarters
2001
---------------------------------
First Second Third Fourth
----- ------ ----- ------
High $7.60 $7.10 $7.90 $7.63
Low 3.50 5.06 5.34 5.55

Fiscal Quarters
2000
----------------------------------
First Second Third Fourth
------ ------ ------ ------
High $11.13 $10.63 $10.63 $9.25
Low 8.06 8.38 8.69 3.81

The Company's 1990 Rights Plan and the Rights distributed to shareholders
under such plan expired by their terms on December 31, 2000 and are no longer
deemed to be attached to the Company's common shares. See Note 14 to the
Consolidated Financial Statements herein.

As of February 1, 2002 there were approximately 500 record holders of the
Company's common shares, which number does not include shareholders whose
shares were held in nominee name.

During the past two fiscal years, the Company has paid regular quarterly cash
dividends on its common shares at $.1025 per quarter per share. There can be
no assurance, however, as to the payment or the amount of future dividends,
since they are periodically reviewed by the Company's Board of Directors and
are subject to possible change based upon the Company's earnings, financial
condition, and other factors. Certain of the Company's credit agreements
contain representations, warranties, covenants, and conditions, the violation
of which could result in restrictions on the Company's present and future
ability to pay dividends. See Note 10 to the Consolidated Financial Statements
herein.

During fiscal 2001, the Company issued from its Treasury an aggregate of
17,876 unregistered common shares under its non-employee director compensation
plan. Registration of such shares was not required because their issuance did
not involve a "sale" under Section 2(3) of the Securities Act of 1933, or,
alternatively, their issuance was exempt pursuant to the private offering
provisions of that Act and the rules thereunder.

ITEM 6. SELECTED FINANCIAL DATA

The following table contains selected financial data derived from the
Company's audited Consolidated Financial Statements for each of the last five
fiscal years. This data should be read in conjunction with the Company's
Consolidated Financial Statements (and related notes) appearing elsewhere in
this report and with Item 7 of this report.

The following data is on a continuing operations basis.

Year Ended
------------------------------------------------------
Dec. 2, Dec. 3, Nov. 28, Nov. 29, Nov. 30,
2001 (1) 2000 (2) 1999 (3) 1998 (4) 1997 (5)
-------- -------- -------- -------- --------
(In millions, except per share data)

Net sales................................................................ $160.9 $175.8 $173.0 $171.3 $182.9
Income (loss) from continuing
operations.............................................................. 3.3 4.1 9.6 12.6 (7.6)
Income (loss) from continuing
operations per common share (6):
Basic................................................................... .37 .42 .91 1.12 (.69)
Diluted................................................................. .37 .42 .91 1.09 (.69)
Total assets............................................................. 106.4 163.5 179.6 186.9 209.5
Long-term debt........................................................... 22.0 54.7 56.6 57.7 54.1
Cash dividends declared per share........................................ .41 .41 .41 .41 .38

- ---------------

(1) In fiscal 2001, the Company recorded charges of: (i) $2.7 million after
taxes ($.30 per share) for its 2001 cost reduction plan; (ii) $.3 million
after taxes ($.03 per share) of implementation costs in connection with the
Company's 1999 restructuring plan; (iii) $.1 million after taxes ($.01 per
share) for interest on a patent infringement suit judgment; and (iv) $25.4
million after taxes ($2.83 per share) in connection with the divestiture of
its commercial Graphics Products business. In fiscal 2001, the Company also
reduced by $.2 million after taxes ($.02 per share) some of the reserves
established in connection with its 1999 restructuring plan.

(2) In fiscal 2000, the Company recorded charges of: (i) $.2 million after
taxes ($.02 per share) of implementation costs in connection with the
Company's 1999 restructuring plan; and (ii) $2.5 million after taxes ($.25
per share) in connection with a patent infringement suit with respect to
one of the Company's minor products. The Company also reduced by $.1
million after taxes ($.01 per share) some of its reserves established in
connection with the Company's implementation of its 1999 restructuring
plan, and reduced by $.1 million after taxes ($.01 per share) some its
reserves in connection with its 1997 business divestitures.

(3) In fiscal 1999, the Company recorded a charge for the 1999 restructuring
plan of approximately $.5 million after taxes ($.05 per share). In
addition, the Company reduced by $.2 million after taxes ($.02 per share)
some of its reserves established in connection with the Company's
implementation of its 1997 strategic plan and reduced by $.3 million after
taxes ($.03 per share) some its reserves in connection with its 1997
business divestitures.

(4) In fiscal 1998, the Company on a net basis reduced by $2.4 million after
taxes ($.21 per share) some of its reserves established in connection with
the implementation of the strategic plan during fiscal 1997. In addition,
the Company reduced by $.5 million after taxes ($.04 per share) some of its
reserves established in connection with its 1997 business divestitures.

(5) In fiscal 1997, the Company recorded a charge for the 1997 strategic plan
of approximately $13.2 million after taxes ($1.19 per share) and other
related costs of $1.9 million after taxes ($.17 per share) and recorded a
net gain on sales of divested businesses (excluding discontinued
businesses) of $2.5 million after taxes ($.22 per share).

(6) The average common shares outstanding (diluted) during fiscal years 1997
through 2001 were as follows:

1997 - 11,079,000 shares

1998 - 11,556,000 shares

1999 - 10,493,000 shares

2000 - 9,908,000 shares

2001 - 8,976,000 shares

ITEM 7. 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 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 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.)

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial condition and results
of operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these consolidated financial
statements requires management 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, the
Company evaluates its estimates, including those related to customer programs,
product returns, bad debts, inventories, assets held for sale, intangible
assets, cash surrender value of life insurance policies, phantom stock, income
taxes, warranty obligations, restructuring, business divestitures, pensions
and other employee benefit plans or arrangements, environmental matters, and
contingencies and litigation. The Company 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.

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 when
related revenues are recognized.

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 assessments about current and future
demand and market conditions. If actual market conditions were to be less
favorable than those projected by management, additional inventory
reserves could 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.

Discontinued Operations, Cost Reduction and Restructuring Plans, and Related
Matters

Effective October 1, 2001, the Company sold its commercial Graphics Products
business and related assets to Neschen AG for approximately $32.0 million. The
Company recorded an after-tax loss of $25.4 million, or $2.83 per share, on
this sale. The divested business, representing all of the Company's foreign
operations (excluding Canada) and some of its domestic operations, had net
sales of approximately $44.3 million in fiscal 2001 (through the effective
date of divestiture), $73.0 million in fiscal 2000, and $71.9 million in
fiscal 1999. The commercial Graphics Products business is presented as a
discontinued operation in the accompanying Consolidated Statements of
Operations and Notes to Consolidated Financial Statements. As of December 2,
2001, approximately $7.1 million of this loss remains as an accrual in the
accompanying Consolidated Balance Sheets under liabilities. See Note 3 to the
Consolidated Financial Statements herein for further information.

In addition, the Company and Neschen AG entered into various product
manufacturing and transition services agreements whereby each party is
providing services to the other for a limited period of time (ranging from
four to twelve months) which services are billed at cost. The Company also
bills Neschen for management and other net fees. The parties have also entered
into various purchase and supply agreements for an initial period of one year
from the sale date.

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
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. 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 recording of charges
totaling $3.9 million pre-tax ($.30 per share) for that quarter. These charges
are classified as restructuring and other in the accompanying Consolidated
Statements of Operations, and include employee severance costs ($3.5 million),
recognition of future lease obligations ($.3 million), and other related
costs. Twelve positions were eliminated in fiscal 2001, and nineteen positions
are expected to be eliminated in the first half of fiscal 2002 in connection
with this cost reduction plan (not including 319 positions associated with the
sale of the divested business described above). Approximately 99% of the
fiscal 2001 cost reduction charge is for cash items, of which $3.9 million
remains accrued in the accompanying Consolidated Balance Sheet at December 2,
2001. In addition to the 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. These implementation costs consist primarily of employee severance and
outplacement costs. Included in the total employee severance costs referred to
above are costs related to the Company's executive leadership transition to a
smaller executive management structure more in keeping with the reduced size
and complexity of the Company's business following the sale of its commercial
Graphics Products business in October 2001. These transition severance costs
relate to the planned retirement of the Company's Chairman and Chief Executive
Officer and separation of other executive officers of the Company during
fiscal 2002. See Notes 3 and 4 to the Consolidated Financial Statements.

As a result of the above actions, management believes that the Company has
simplified its operations, and thus, is afforded greater potential strategic
options. These actions are also expected to improve the overall profitability
and financial strength of the Company's continuing operations.

During fiscal 1999, the Company initiated a comprehensive reorganization and
restructuring plan (the "1999 restructuring plan"), which resulted in
recognition of restructuring charges totaling $6.2 million pre-tax, of which

$.8 million pre-tax ($.05 per share) is included in restructuring and other in
the accompanying Consolidated Statements of Operations, with the remaining
$5.4 million pre-tax included in loss from discontinued business. The Company
completed the implementation of its 1999 restructuring plan in fiscal 2000.
See Note 4 to the Consolidated Financial Statements.

During fiscal 2001, the Company reduced by $.4 million pre-tax some of its
reserves in connection with the 1999 restructuring plan, of which $.2 million
pre-tax ($.02 per share) is included in restructuring and other in the
accompanying Consolidated Statements of Operations. These reserve reductions
related primarily to lower than anticipated severance costs. During fiscal
2000, the Company reduced by $.5 million pre-tax, of which $.2 million ($.01
per share) is included in restructuring and other in the accompanying
Consolidated Statements of Operations, and $.1 million pre-tax ($.01 per
share), respectively, some of its reserves for the 1999 restructuring plan and
reserves established in connection with the Company's 1997 strategic plan.
These reserve reductions related primarily to a decision not to vacate a
certain facility, final resolution of lease obligations for a vacant facility,
lower than anticipated severance costs, and lower than expected losses on
asset disposals.

During fiscal 1999, the Company reduced by $.6 million pre-tax ($.04 per
share) some of its reserves established in connection with the Company's
implementation of its 1997 strategic plan, of which $.3 million ($.02 per
share) is included in restructuring and other in the accompanying Consolidated
Statements of Operations. This reserve reduction related primarily to a final
resolution of lease obligations for a vacated facility and to lower than
expected severance costs.

During fiscal 2000, the Company reduced by $.1 million pre-tax ($.01 per
share) some of its reserves related to its 1997 business divestitures. These
reserve reductions related primarily to lower than anticipated inventory
returns and environmental reserves.

During fiscal 1999, the Company reduced by $.5 million pre-tax ($.03 per
share) some of its reserves established with respect to its 1997 business
divestitures. This reserve reduction was principally related to lower than
expected inventory returns.

The following discussion is on a continuing operations basis.

Comparison of Fiscal 2001 vs. 2000

The Company's 2001 fiscal year comprised 52 weeks compared to 53 weeks for
fiscal 2000.

Net Sales. Net sales from continuing operations decreased 8.5% to $160.9
million in fiscal 2001 from $175.8 million in fiscal 2000. This sales decrease
was largely due to lower sales of board products, framing products,
X-ACTO brand products, and BOSTON brand pencil sharpeners, which, in turn,
were largely attributable to the U.S. economic slowdown. Export sales
decreased 15.3% in fiscal 2001 from fiscal 2000, mainly due to lower sales in
Canada and Latin America.

Net sales from continuing operations decreased 15.5% during the fourth quarter
of fiscal 2001 as compared with the prior year fourth quarter due primarily to
the continuing slowdown in the U.S. and world economies, which was exacerbated
by the September 11, 2001 terrorist attacks in the U.S. This economic slowdown
prompted some of the Company's key customers to reduce their inventory and
purchasing levels, which, in turn, resulted and continues to result in lower
orders to and sales by the Company. Management is uncertain how long this
situation will continue.

In addition, the Company has a number of significant customers, including two
customers that together constituted approximately 24% of the Company's net
sales in fiscal 2001. See Note 19 to the Consolidated Financial Statements
herein. The loss of any of these significant customers could have an adverse
effect on the Company's results of operations, financial position, or cash
flows.

Gross Profit. The Company's gross profit ratio increased to 39.4% of net sales
in fiscal 2001 from 39.0% in fiscal 2000, while the gross margin dollars
decreased $5.2 million. The increase in gross profit ratio was primarily the
result of lower raw material costs and favorable last-in, first-out inventory
adjustments, partially offset by unfavorable fixed overhead absorption and
higher inventory obsolescence and other inventory adjustments. The decrease in
gross profit dollars was largely due to lower sales levels. The Company
experienced cost decreases

for some of its raw materials, such as styrene plastic and facing paper during
fiscal 2001. However, management is uncertain if this trend will continue.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses decreased $3.2 million, or 5.8%, in fiscal 2001 from
the previous year. The decrease was largely attributable to a special cash
award for Company employees in fiscal 2000 and to lower marketing and selling
and freight costs in fiscal 2001 as a result of lower sales, partially offset
by higher stock-based compensation expense.

Restructuring and Other. During the fourth quarter of fiscal 2001, the Company
recorded a charge of $3.9 million pre-tax ($.30 per share) in connection with
the Company's 2001 cost reduction plan, as previously discussed. This charge
is included in restructuring and other in the accompanying Consolidated
Statements of Operations. Approximately 99% of the restructuring charge is for
cash items and includes employee severance costs ($3.5 million), recognition
of future lease obligations ($.3 million), and other related costs. See Note 4
to the Consolidated Financial Statements herein for further information.

During fiscal 2000, the Company recorded a charge and related liability of
$3.8 million (including interest) in connection with a patent infringement
suit judgment with respect to one of its minor products. During fiscal 2001,
the Company recorded an additional $.1 million of interest expense related to
this litigation and subsequently made a payment to the plaintiff in the amount
of approximately $3.9 million with respect to this judgment.

In addition, during fiscal 2001 and 2000, the Company reduced by $.2 million
pre-tax ($.02 per share) and $.2 million pre-tax ($.01 per share),
respectively, some of its reserves relating to its 1999 restructuring plan.
These reserve reductions related primarily to lower than anticipated severance
costs and lower than expected losses on asset disposals. Also during fiscal
2000, the Company reduced by $.1 million pre-tax ($.01 per share) some of its
reserves related to its 1997 business divestitures. These reserve reductions
related primarily to lower than anticipated inventory returns and
environmental reserves.

See Notes 3 and 4 of the Notes to Consolidated Financial Statements.

Interest Expense. Interest expense decreased to $4.1 million in fiscal 2001
from $4.2 million in fiscal 2000 due to lower average debt borrowings in
fiscal 2001.

Interest Income. Interest income decreased $.5 million in fiscal 2001 from
fiscal 2000 due to lower interest rates and lower average cash balances.

Other Income and Expense. Other income, net was $.3 million in fiscal 2001
compared to other expense, net of $.3 million in fiscal 2000 due principally
to management and other net fees billed to Neschen AG for services rendered in
connection with the Company's transition services agreements with Neschen AG
in fiscal 2001.

Provision for Income Taxes. The Company's effective tax rate for continuing
operations decreased to 29.5% in fiscal 2001 from 37.2% in fiscal 2000,
primarily due to resolution of prior years' tax exposures and to lower amounts
not deductible for tax purposes. See Note 11 to the Consolidated Financial
Statements.

Comparison of Fiscal 2000 vs. 1999

The Company's 2000 fiscal year comprised 53 weeks compared to 52 weeks for
fiscal 1999.

Net Sales. Net sales from continuing operations increased 1.6% to $175.8
million in fiscal 2000 from $173.0 million in fiscal 1999. This sales increase
was primarily the result of broader distribution in current sales channels,
expanded placement of existing products and the introduction of new products,
partially offset by lower net selling prices, and lower sales of X-ACTO brand
products and to the termination (effective September 1, 1999) of the Company's
distribution agreement with respect to Schwan-STABILO highlighter markers and
writing instruments. Export sales increased 10.8% in fiscal 2000 as compared
to fiscal 1999, principally due to higher sales in Latin America and Canada.

Gross Profit. The Company's gross profit margin decreased to 39.0% of net sales
in fiscal 2000 from 41.5% in fiscal 1999, due to the net result of unfavorable
production efficiencies and higher materials costs, partially offset by
favorable customer and product mix and lower variable overhead spending.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses decreased $.2 million, or .4%, in fiscal 2000 from the
previous year. This decrease was largely attributable to lower promotional
advertising and packaging development costs, lower discretionary marketing
spending, and lower professional services expenses, partially offset by a
special cash award to the Company's employees.

Restructuring and Other. The Company recorded pre-tax special charges on a
continuing operations basis of $6.2 million pre-tax in connection with the
Company's 1999 restructuring plan, of which $.8 million pre-tax ($.05 per
share) is included in restructuring and other in the accompanying Consolidated
Statements of Operations, with the remaining $5.4 million pre-tax included in
the loss from discontinued business.

In addition, during fiscal 1999, the Company reduced by $.6 million pre-tax
($.04 per share) some of its reserves established in connection with its 1997
strategic plan. This reserve reduction related primarily to a lease facility
settlement and to lower than expected severance costs.

The Company also reduced, during fiscal 1999, by $.5 million pre-tax ($.03 per
share) some of its reserves with respect to its 1997 business divestitures.
The reserve reduction was principally related to lower than expected inventory
returns.

Interest Expense. Interest expense increased to $4.2 million in fiscal 2000
from $4.1 million in fiscal 1999 due to lower interest capitalized in fiscal
2000.

Interest Income. Interest income decreased $.2 million in fiscal 2000 from
fiscal 1999 due to lower average cash balances.

Provision for Income Taxes. The Company's effective tax rate for continuing
operations increased to 37.2% in fiscal 2000 from 32.9% in fiscal 1999,
primarily due to higher amounts not deductible for tax purposes. See Note 11
to the Consolidated Financial Statements.

Financial Condition

Working capital decreased to $40.6 million at the end of fiscal 2001 from
$56.4 million at the end of fiscal 2000 largely as a result of the Company's
fiscal 2001 divestiture of its commercial Graphics Products business and costs
related to the 2001 cost reduction plan previously discussed. The Company's
debt/capitalization ratio decreased to 42.1% at the end of fiscal 2001 from
46.9% at the end of fiscal 2000 as a net result of the reduction of long-term
debt, the reduction in earnings from the sale of the divested business, and
the 2001 cost reduction plan discussed above. Funds from operations, proceeds
received from the sale of a divested business, and available cash balances
were sufficient during fiscal 2001 to enable the Company to reduce debt by
$27.7 million, net; to pay $3.9 million in satisfaction of a patent
infringement judgment; to fund the repurchase of $3.7 million of the Company's
common shares; to fund additions to property, plant and equipment of $3.6
million; to pay cash dividends of $3.6 million; and to make cash payments
related to the 1999 restructuring plan of $.4 million.

The decrease in current assets from $88.3 million at the end of fiscal 2000 to
$72.8 million at the end of fiscal 2001, as well as the decreases in accounts
receivable and inventories were due primarily to the sale of the divested
business. Other current assets increased to $14.1 million at the end of fiscal
2001 from $2.6 million at the end of fiscal 2000 due largely to an increase in
income tax refund receivables ($3.6 million), a reclassification from
property, plant and equipment to assets held for sale of certain assets ($4.6
million) relating to the divested business (but not included in the sale to
Neschen AG), and to a receivable due from Neschen AG for transitional
manufacturing, distribution, and administrative services performed in
connection with the sale of the divested business.

The decrease in non-current assets of $41.6 million was also due largely to
the business divestiture.

Current liabilities of $32.2 million at the end of fiscal 2001 increased from
$31.9 million at the end of fiscal 2000. This slight increase was due to the
reclassification of a portion of long-term debt to current, accruals
associated with the Company's 2001 cost reduction plan, and accruals
associated with the sale of the divested business, partially offset by the
payment of the patent infringement litigation accrual and reductions of
accounts payable and accruals as a result of the business divestiture.

Other non-current liabilities increased to $14.1 million at the end of fiscal
2001 from $12.5 million at the end of fiscal 2000 due to several factors,
including accruals associated with the 2001 cost reduction charges and the
sale of the divested business, and to an increase in the Company's
Supplemental Executive Benefits Plan liability, partially offset by lower
pension accruals.

The $6.8 million decrease in the accumulated other comprehensive loss account
in stockholders' equity was due to the elimination of the foreign currency
translation adjustment account as a result of the sale of the divested
business and to a favorable minimum pension liability adjustment.

In fiscal 2001 and 2000, the Company repurchased 941,290 and 352,600 shares,
respectively, of its stock at a cost of $3.7 million and $3.2 million,
respectively. The diluted average common shares outstanding decreased from
9,908,000 shares in fiscal 2000 to 8,976,000 shares in fiscal 2001. These and
other previously repurchased shares are held by the Company as treasury stock
to be used for company stock-based compensation plans and other general
company purposes.

As a result of the divestiture of its commercial Graphics Products business in
October 2001, the Company was required to modify its existing debt arrangement
with its senior note holders and banks. In November 2001, the Company reached
an agreement with its senior note holders to modify, in certain respects, the
terms of the senior notes, subject to, among other things, the Company's
securing and maintaining a $25 million bank credit facility. These
modifications included: (i) a principal repayment on the senior notes of $25
million at par; (ii) an increase in the interest rate on the remaining balance
of the senior notes from 7.86% to 8.36%; (iii) changes to certain covenant
requirements; and (iv) certain restrictions on the Company's ability to
repurchase its common stock. The Company used $25 million of the proceeds from
the sale of the divested business to reduce the $50 million senior note debt
then outstanding. As of December 2, 2001, the Company had received a
commitment from two banks for a new $25 million bank credit facility to
replace the existing $50 million credit facility. On December 21, 2001, the
Company finalized the bank credit agreement with the banks. The terms of the
new credit facility include, among other things, LIBOR based loans, financial
and other covenant requirements substantially similar to the existing bank
credit facility, and limitations on borrowings based on levels of accounts
receivable, inventory, and fixed assets. See Note 10 to the Consolidated
Financial Statement. There were no outstanding borrowings under the new credit
facility as of December 2, 2001.

The Company's ability to comply with various of its debt covenants 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. See Note 10 to the Consolidated Financial Statements.

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 in the future, management believes that the Company
could obtain them at competitive costs.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") approved the
issuance of Statements of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations"; SFAS No. 142, "Goodwill and Other Intangible Assets";
and SFAS No. 143, "Accounting for Asset Retirement Obligations."

SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16,
"Business Combinations." The most significant changes made by SFAS No. 141 are
requiring the purchase method of accounting for all business combinations
initiated after June 30, 2001, establishing specific criteria for the
recognition of intangible assets separately from goodwill, and requiring that
unallocated negative goodwill be written off immediately as an

extraordinary gain. The Company does not expect a material impact from the
adoption of SFAS No. 141 on its consolidated financial statements.

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 provisions of SFAS No. 142 will
be effective for fiscal years beginning after December 15, 2001. 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. The Company does not expect a
material impact from the adoption of SFAS No. 142 on its consolidated
financial statements.

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.

Environmental Matters

The Company is involved, on a continuing basis, in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions
has been named a potentially responsible party for the remediation of sites.
Expenses incurred by the Company for all years presented in the accompanying
consolidated financial statements relating to violations of and compliance
with environmental laws and permits and site remediation have not been
material. While it is impossible to predict with certainty, management
currently does not foresee such expenses in the future as having a material
effect on the Company's business, results of operations, or financial
condition. See Note 15 to the Consolidated Financial Statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

It is the Company's policy to enter into forward exchange contracts
transactions only to the extent necessary to achieve the desired objectives of
management in limiting the Company's exposure to the various market risks
discussed in item 7 herein. However, the Company does not hedge all of its
market risk exposure in a manner that would completely eliminate the impact of
changes in interest rates and foreign exchange rates on the Company's net
income. The Company does not expect that its results of operations or
financial position will be materially affected by these risk management
strategies.

As a result of the sale of the commercial Graphics Products business in
October 2001, the Company's exposure to the impact of foreign currency
exchange rate fluctuations has been greatly reduced. The Company plans to
continue to enter into foreign exchange forward contracts to reduce risks
associated with its Canadian dollar transactions. As of December 2, 2001, the
Company had a one-month Canadian forward exchange contract with a notional
value of approximately $1.9 million outstanding. There were no forward
exchange contracts outstanding

as of December 3, 2000. The Company does not hold or purchase any foreign
currency contracts for trading purposes.

In the normal course of operations, the Company also faces other risks that
are either nonfinancial or nonquantifiable. Such risks principally include
changes in economic or political conditions, other risks associated with
foreign operations, commodity price risk and litigation risks.

Interest Rate Risk Management

See Item 7 -- "Financial Condition" and Note 10 to the Consolidated Financial
Statements.

Foreign Exchange Risk Management

See Note 1 to the Consolidated Financial Statements.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and supplementary financial information listed in the
index appearing under Item 14(a) 1 & 2 herein, together with the reports of
PricewaterhouseCoopers LLP thereon, are set forth following the signature
pages below.

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

Incorporated by Reference

The information called for by Item 10, "Directors and Executive Officers of
the Registrant" (other than the information concerning executive officers set
forth after Item 4 herein); Item 11, "Executive Compensation"; Item 12,
"Security Ownership of Certain Beneficial Owners and Management"; and Item 13,
"Certain Relationships and Related Transactions" is incorporated herein by
reference to the following sections of the Company's definitive proxy
statement for its Annual Meeting of Shareholders scheduled to be held April
17, 2002, which definitive proxy statement is expected to be filed with the
Commission not later than 120 days after the end of the fiscal year to which
this report relates:

Form 10-K Item No. Proxy Statement Section
- ------------------ -----------------------

Item 10............................... Proposal 1. "ELECTION OF DIRECTORS"; "ADDITIONAL
INFORMATION - Section 16(a) Beneficial Ownership Reporting
Compliance"

Item 11............................... Proposal 1. "ELECTION OF DIRECTORS - Compensation of
Directors"; "ADDITIONAL INFORMATION - Executive
Compensation" (not including "Compensation Committee
Report on Executive Compensation and Report on Repricing
of Options" and "Ten-Year Option Repricings")

Item 12............................... Proposal 1. "ADDITIONAL INFORMATION - Common Share
Ownership by Certain Beneficial Owners and Management"

Item 13............................... Not applicable

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of the Report
Pages
1. Financial Statements: -----

Report of Independent Accountants F-1

Consolidated Statements of Operations
for the fiscal years 2001, 2000, and 1999 F-2

Consolidated Balance Sheets,
December 2, 2001 and December 3, 2000 F-3

Consolidated Statements of Stockholders' Equity
for the fiscal years 2001, 2000, and 1999 F-4

Consolidated Statements of Comprehensive Income (Loss)
for the fiscal years 2001, 2000, and 1999 F-5

Consolidated Statements of Cash Flows
for the fiscal years 2001, 2000, and 1999 F-6

Notes to Consolidated Financial Statements F-7 - F-28

2. Financial Statement Schedule

Schedule II. Valuation and Qualifying Accounts
for the fiscal years 2001, 2000, and 1999 F-29

All other schedules not listed above have been omitted, since they are
not applicable or are not required, or because the required information
is included in the consolidated financial statements or notes thereto.
Individual financial statements of the Company have been omitted, since
the Company is primarily an operating company and any subsidiary
companies included in the consolidated financial statements are directly
or indirectly wholly-owned and are not indebted to any person, other than
the parent or the consolidated subsidiaries, in an amount which is
material in relation to total consolidated assets at the date of the
latest balance sheet filed, except indebtedness incurred in the ordinary
course of business which is not overdue and which matures in one year.

3. Exhibits:

(2) Agreements relating to sale of commercial Graphics Products business:

(a) Form of Asset Purchase Agreement (U.S.) dated October 7, 2001,
between the Company and two of its subsidiaries and Neschen AG and
three of its subsidiaries.

(b) Form of UK Asset Purchase Agreement dated October 7, 2001, between
the Company and one of its subsidiaries and Neschen AG and one of
its subsidiaries.

(c) Form of Asset Purchase Agreement (The Netherlands) dated October 9,
2001, between the Company and two of its subsidiaries and Neschen AG
and one of its subsidiaries.

(d) Form of Share Purchase Agreement (Hong Kong) dated October 9, 2001,
between Hunt Holdings Inc. and two other subsidiaries of the Company
and Neschen International B.V.

(e) Form of Employee and Employee Benefits Transitional Agreement dated
October 9, 2001, between the Company and two subsidiaries of Neschen
AG.

(f) Form of Product Manufacturing and Transition Services Agreement
dated October 9, 2001, between the Company and three subsidiaries of
Neschen AG.

(g) Form of Purchase and Supply Agreement (Foamboard) dated October 9,
2001, between the Company and three subsidiaries of Neschen AG.

(h) Form of Purchase and Supply Agreement (Framing Consumables) dated
October 9, 2001, between the Company and three subsidiaries of
Neschen AG.

(Exhibits 2(a) through (h) are incorp. by ref. to Exs. 2(a) through
(h), respectively, to Form 10-Q for quarter ended September 2,
2001.)

Certain schedules and similar attachments to, and as described in,
the above exhibits 2(a) through 2(h) have not been filed with the
Commission, but the Company agrees to furnish supplementally to the
Commission a copy of any omitted schedule upon request. (A list of
schedules so omitted is set forth as Ex. 2 to Form 8-K filed October
9, 2001.)

(3) Articles of incorporation and bylaws:

(a) Restated Articles of Incorporation (incorp. by ref. to Ex. 3(a) to
January 2001 Form 8-K).

(b) By-laws, as amended (incorp. by ref. to Ex. 3(b) to January 2001
Form 8-K).

(4) Instruments defining rights of security holders, including
indentures:*

(a) (1) Note Purchase Agreement dated as of August 1, 1996 between the
Company and several insurance companies (refiled herewith) and (2)
Consent and Amendment to Note Agreement dated as of November 14,
2001 (filed herewith).

(b) Credit Agreement dated as of December 21, 2001 between the Company
and First Union National Bank, Fleet National Bank, and other
lenders (filed herewith).

Miscellaneous long-term debt instruments and credit facility
agreements of the Company, under which the underlying authorized
debt is equal to less than 10% of the total assets of the Company
and its subsidiaries on a consolidated basis, may not be filed as
exhibits to this report. The Company agrees to furnish to the
Commission, upon request, copies of any such unfiled instruments.

(10) Material contracts:

(a) Lease Agreement dated June 1, 1979 and First Supplemental Lease
Agreement dated as of July 31, 1994 between the Iredell County
Industrial Facilities and Pollution Control Financing Authority and
the Company (incorp. by ref. to Ex. 10(a) to fiscal 1999 Form 10-K).

(b) 1983 Stock Option and Stock Grant Plan, as amended, of the Company
(refiled herewith).**

(c)(1) 1993 Stock Option and Stock Grant Plan of the Company, as amended
(incorp. by ref. to Ex. 10(c) to Form 10-Q for quarter ended
September 3, 2000); (2) Addendum relating to options granted
December 16, 1999 (incorp. by ref. to Ex.10(c)(2) to fiscal 2000
Form 10-K); and (3) Description of January 2001 stock grants
(incorp. by ref. to Ex.10(c)(3) to fiscal 2000 Form 10-K).**

(d) 1994 Non-Employee Directors' Stock Option Plan (incorp. by ref. to
Ex. 10(d) to fiscal 1999 Form 10-K).**

(e) 1997 Non-Employee Director Compensation Plan (incorp. by ref. to Ex.
10(f) to fiscal 1997 Form 10-K).**

(f)(1) Form of Change in Control Agreement between the Company and
various officers of the Company (incorp. by ref. to Ex.10(f)(1) to
fiscal 2000 Form 10-K) and (2) list of executive officers who are
parties (filed herewith).**

(g)(1) Form of Supplemental Executive Benefits Plan ("SEBP") of the
Company effective January 1, 1997, (incorp. by ref. to Ex. 10(g)(1)
of fiscal 1998 Form 10-K); (2) Amendment No. 1 to SEBP (incorp. by
ref. to Ex. 10(g)(2) of fiscal 1999 Form 10-K); and (3) form of
related Amended and Restated Trust Agreement, effective January 1,
1997 (incorp. by ref. to Ex. 10(g)(2) to fiscal 1998

Form 10-K; (4) Amendment No. 2 to SEBP (incorp. by ref. to Ex.
10(g)(4) to fiscal 2000 Form 10-K); (5) Amendment No. 3 to SEBP
(incorp. by ref. to Ex. 10(g)(5) to fiscal 2000 Form 10-K); and (6)
Amendment No. 4 to SEBP (filed herewith).**

(h)(1) Employment Agreement, dated as of April 8, 1996, between the
Company and Donald L. Thompson (refiled herewith); (2) Amendment No.
1 dated October 1, 1999 to employment Agreement; (3) Amendment,
effective June 28, 2000, to Appendix A to Employment Agreement; and
(4) Nonqualified Stock Option Agreement dated June 28, 2000
(Exhibits 10(h)(2), (3), and (4) are incorp. by ref. to Exs.
10(h)(2), (3), and (4), respectively, to Form 10-Q for quarter ended
September 3, 2000); and (5) Transition and Separation Agreement
dated November 30, 2001 (filed herewith).**

(i)(1) Officer Severance Plan (incorp. by ref. to Ex. 10 to Form 10-Q
for quarter ended February 28, 1999.); (2) Form of Agreement under
the Officer Severance Plan; and (3) list of departing executives
whose arrangements are eventually as provided under the Office
Severance Plan and Form of Agreement (Exhibits 10(i)(2) and (3)
filed herewith).**

(j) Supplemental Deferred Compensation Agreement, dated as of February
6, 2002 between the Company and John W. Carney (filed herewith).**

(k) Form of arrangement between the Company and Bradley P. Johnson
(filed herewith).**

(21) Subsidiaries (filed herewith).

(23) Consent of PricewaterhouseCoopers LLP to incorporation by reference in
registration statements on Form S-8 of their report on the consolidated
financial statements and schedule included in this report (filed
herewith).

* Reference also is made to (1) Articles 5th, 6th, 7th, and 8th of the
Company's Restated Articles of Incorporation (ex. 3(a) to this report)
and (2) Sections 1 and 6 of the Company's By-laws (Ex. 3(b) to this
report).

**Indicates a management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

During the fourth quarter of fiscal 2001, the Company filed two reports
on Form 8-K with the Securities and Exchange Commissions, relating to
the Company's sale of its commercial Graphics Products business.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

HUNT CORPORATION

Dated: February 25, 2002 By: \s\ Donald L. Thompson

Donald L. Thompson
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacities
and on the dates indicated:

\s\ Donald L. Thompson February 25, 2002
_____________________________
Donald L. Thompson
Chairman and Chief
Executive Officer

\s\ William E. Chandler February 25, 2002
_____________________________
William E. Chandler
Senior Vice President, Finance
(Principal Financial Officer)

\s\ John Fanelli III February 25, 2002
_____________________________
John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)

\s\ Donald D. Belcher February 25, 2002
_____________________________
Donald D. Belcher
Director

\s\ Ursula M. Burns February 25, 2002
_____________________________
Ursula M. Burns
Director

\s\ Jack Farber February 25, 2002
_____________________________
Jack Farber
Director

\s\ William F. Hamilton, Ph.D. February 25, 2002
_____________________________
William F. Hamilton, Ph.D.
Director

\s\ Mary R. Henderson February 25, 2002
_____________________________
Mary R. (Nina) Henderson
Director

\s\ Bradley P. Johnson February 25, 2002
_____________________________
Bradley P. Johnson
Director

\s\ Gordon A. MacInnes February 25, 2002
_____________________________
Gordon A. MacInnes
Director

\s\ Robert H. Rock February 25, 2002
_____________________________
Robert H. Rock
Director

\s\ Victoria B. Vallely February 25, 2002
_____________________________
Victoria B. Vallely
Director

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and
the Board of Directors of
Hunt Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 19 present fairly, in all material
respects, the financial position of Hunt Corporation and its subsidiaries at
December 2, 2001 and December 3, 2000, and the results of their operations and
their cash flows for each of the three years in the period ended December 2,
2001, in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under item 14(a)(2) on page 19 presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our
audits. We conducted our audits in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, PA
January 29, 2002

F-1

HUNT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
for the fiscal years 2001, 2000, and 1999
(In thousands except per share amounts)

2001 2000 1999
(52 weeks) (53 weeks) (52 weeks)
---------- ---------- ----------

Net sales................................................................................. $160,870 $175,780 $172,993
Cost of sales............................................................................. 97,478 107,232 101,220
-------- -------- --------
Gross profit......................................................................... 63,392 68,548 71,773
Selling, general and administrative expenses.............................................. 51,841 55,055 54,891
Restructuring and other................................................................... 3,841 3,735 (74)
-------- -------- --------
Income from operations............................................................... 7,710 9,758 16,956
Interest expense.......................................................................... (4,055) (4,163) (4,114)
Interest income........................................................................... 768 1,271 1,439
Other income (expense), net............................................................... 251 (276) (28)
-------- -------- --------
Income from continuing operations
before income taxes................................................................ 4,674 6,590 14,253
Provision for income taxes................................................................ 1,378 2,453 4,689
-------- -------- --------
Income from continuing operations.................................................... 3,296 4,137 9,564
Discontinued operations:
Loss from discontinued business, net of income tax benefits
of $652, $1,433, and $2,033 in 2001, 2000, and 1999,
respectively........................................................................... (2,444) (2,168) (3,137)
Loss on disposal of discontinued business,
net of income tax benefit of $6,777.................................................... (25,378) -- --
-------- -------- --------
Net income (loss).................................................................... $(24,526) $ 1,969 $ 6,427
======== ======== ========
Basic earnings per common share:
Income from continuing operations...................................................... $ 0.37 $ 0.42 $ 0.91
Loss from discontinued business........................................................ (0.27) (0.22) (0.30)
Loss on disposal of discontinued business.............................................. (2.84) -- --
-------- -------- --------
Net income (loss) per share.......................................................... $ (2.74) $ 0.20 $ 0.61
======== ======== ========
Diluted earnings per common share:
Income from continuing operations...................................................... $ 0.37 $ 0.42 $ 0.91
Loss from discontinued business........................................................ (0.27) (0.22) (0.30)
Loss on disposal of discontinued business.............................................. (2.83) -- --
-------- -------- --------
Net income (loss) per share.......................................................... $ (2.73) $ 0.20 $ 0.61
======== ======== ========

See accompanying notes to consolidated financial statements.

F-2

HUNT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 2, 2001 and December 3, 2000
(In thousands except share and per share amounts)

2001 2000
-------- --------

ASSETS
Current assets:
Cash and cash equivalents............................ $ 25,966 $ 23,878
Accounts receivable, less allowance for doubtful
accounts: 2001 - $1,031; 2000 - $873 ............... 17,486 35,058
Inventories.......................................... 9,389 21,823
Deferred income taxes................................ 5,834 4,966
Prepaid expenses and other current assets............ 14,101 2,590
--------- --------
Total current assets .............................. 72,776 88,315
Property, plant and equipment, net ..................... 24,188 41,216
Excess of acquisition cost over net assets acquired,
net ................................................ 754 22,117
Intangible assets, net ................................. 65 2,416
Other assets ........................................... 8,604 9,468
--------- --------
TOTAL ASSETS ...................................... $ 106,387 $163,532
========= ========
LIABILITIES
Current liabilities:
Current portion of debt.............................. $ 5,000 $ --
Accounts payable..................................... 4,428 7,876
Accrued expenses:
Salaries, wages and commissions .................... 1,291 2,460
Income taxes ....................................... 638 1,297
Insurance .......................................... 1,690 1,843
Compensated absences ............................... 2,315 2,871
Restructuring ...................................... 2,175 862
Other .............................................. 14,667 14,698
--------- --------
Total current liabilities ......................... 32,204 31,907
Long-term debt, less current portion ................... 22,000 54,682
Deferred income taxes .................................. 1,004 2,434
Other non-current liabilities .......................... 14,106 12,539
Commitments and contingencies (see Note 15)

STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.10 par value, authorized 1,000,000
shares; none issued ................................ -- --
Common, $.10 par value, authorized 40,000,000 shares;
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 ................... -- (6,840)
Retained earnings ...................................... 129,695 158,044
Less cost of treasury stock: 2001 - 7,248,347 shares;
2000 - 6,324,933 shares ............................ (101,649) (98,261)
--------- --------
Total stockholders' equity ........................ 37,073 61,970
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 106,387 $163,532
========= ========

See accompanying notes to consolidated financial statements.

F-3

HUNT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the fiscal years 2001, 2000, and 1999
(In thousands except share and per share amounts)

Common Stock Capital in Accumulated Other
------------------ Excess of Comprehensive Retained
Issued Treasury Par Value Income (Loss) Earnings
------ --------- ---------- ----------------- --------

Balances, November 29, 1998
(issued 16,152,322 shares;
treasury 5,162,082 shares)................................... $1,615 $ (87,386) $6,434 $(1,099) $158,316
Net income..................................................... 6,427
Cash dividends on common stock
($.41 per share)............................................. (4,317)
Translation adjustments
(net of tax benefit of $1,005)............................... (2,437)
Minimum pension adjustment
(net of tax expense of $475)................................. 1,077
Purchase of treasury shares
(838,500 shares)............................................. (8,171)
Issuance of stock grants
(13,199 treasury shares)..................................... 215 (159)
------ --------- ------ ------- --------
Balances, November 28, 1999
(issued 16,152,322 shares;
treasury 5,987,383 shares)................................... 1,615 (95,342) 6,434 (2,459) 160,267
Net income..................................................... 1,969
Cash dividends on common stock
($.41 per share)............................................. (4,067)
Translation adjustments
(net of tax benefit of $2,338)............................... (4,518)
Minimum pension adjustment
(net of tax expense of $71).................................. 137
Tax benefit of stock option transactions....................... 978
Purchase of treasury shares
(352,600 shares)............................................. (3,165)
Issuance of stock grants
(15,050 treasury shares)..................................... 246 (125)
------ --------- ------ ------- --------
Balances, December 3, 2000
(issued 16,152,322 shares;
treasury 6,324,933 shares)................................... 1,615 (98,261) 7,412 (6,840) 158,044
Net loss....................................................... (24,526)
Cash dividends on common stock
($.41 per share)............................................. (3,645)
Translation adjustments
(net of tax expense of $2,742)............................... 6,509
Minimum pension adjustment
(net of tax expense of $139)................................. 331
Purchase of treasury shares
(941,290 shares)............................................. (3,680)
Issuance of stock grants
(treasury 17,876 shares)..................................... 292 (178)
------ --------- ------ ------- --------
Balances, December 2, 2001
(issued 16,152,322 shares;
treasury 7,248,347 shares)................................... $1,615 $(101,649) $7,412 $ -- $129,695
====== ========= ====== ======= ========

See accompanying notes to consolidated financial statements.

F-4

HUNT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
for the fiscal years 2001, 2000 and 1999
(In thousands)

2001 2000 1999
-------- ------- -------

Net income (loss)................................................................................. $(24,526) $ 1,969 $ 6,427
Comprehensive income (loss):
Foreign currency translation adustments, net of income tax expense (benefit) of $2,742, ($2,338),
and ($1,005) in 2001, 2000 and 1999, respectively.............................................. 6,509 (4,518) (2,437)
Minimum pension liability adustments, net of income tax expense of $139, $71, and $475 in 2001,
2000 and 1999, respectively.................................................................... 331 137 1,077
-------- ------- -------
Other comprehensive income (loss)................................................................. 6,840 (4,381) (1,360)
-------- ------- -------
Comprehensive income (loss)....................................................................... $(17,686) $(2,412) $ 5,067
======== ======= =======

See accompanying notes to consolidated financial statements.

F-5

HUNT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the fiscal years 2001, 2000 and 1999
(in thousands)

2001 2000 1999
-------- -------- --------

Cash flows from operating activities:
Net income (loss)............................................................................... $(24,526) $ 1,969 $ 6,427
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................................................................ 7,391 8,604 8,540
Provision for inventory obsolescence......................................................... 2,211 1,007 828
Provision (credit) for doubtful accounts..................................................... 374 (52) 161
Deferred income taxes........................................................................ (2,473) 948 312
Loss on disposal of property, plant and equipment............................................ 125 247 120
Loss (gain) on sale of businesses............................................................ 32,155 (133) (554)
Provision (payments/credits) for special charges............................................. 3,073 (4,675) 3,495
Provision (payment) for patent infringement litigation....................................... (3,919) 3,815 --
Issuance of stock under management incentive bonus
and stock grant plans 114 118 56
Changes in operating assets and liabilities,
net of acquisition of businesses:
Accounts receivable........................................................................ 11,419 (2,256) (2,962)
Inventories................................................................................ (584) (3,083) (90)
Prepaid expenses and other current assets.................................................. (7,116) (1,888) 525
Accounts payable........................................................................... (3,543) (2,436) (1,607)
Accrued expenses........................................................................... (1,771) (822) 297
Other non-current assets and liabilities................................................... (2,694) 641 (679)
-------- -------- --------
Net cash provided by operating activities................................................ 10,236 2,004 14,869
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment................................................... (3,580) (6,439) (4,879)
Proceeds from sale of businesses............................................................. 32,069 -- --
Acquisition of businesses.................................................................... -- (417) (1,435)
Other, net................................................................................... (200) 63 339
-------- -------- --------
Net cash provided by (used for) investing activities..................................... 28,289 (6,793) (5,975)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................................................... 9,919 13,229 16,132
Reduction of long-term debt, including current maturities.................................... (37,658) (14,642) (17,301)
Book overdrafts.............................................................................. (1,522) 498 1,128
Purchases of treasury stock.................................................................. (3,680) (3,163) (8,171)
Dividends paid............................................................................... (3,645) (4,066) (4,317)
Other, net................................................................................... -- (2) (29)
-------- -------- --------
Net cash used for financing activities................................................... (36,586) (8,146) (12,558)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents.................................... 149 (84) (163)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents............................................ 2,088 (13,019) (3,827)
Cash and cash equivalents, beginning of year.................................................... 23,878 36,897 40,724
-------- -------- --------
Cash and cash equivalents, end of year.......................................................... $ 25,966 $ 23,878 $ 36,897
======== ======== ========

See accompanying notes to consolidated financial statements.

F-6

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share and per share amount, unless otherwise
indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Significant intercompany
accounts and transactions have been eliminated. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The Company's fiscal year ends on the Sunday
nearest the end of November. Fiscal year 2001 ended December 2, 2001; fiscal
year 2000 ended December 3, 2000; and fiscal year 1999 ended November 28,
1999. Fiscal years 2001 and 1999 comprised 52 weeks, while fiscal year 2000
comprised 53 weeks.

As a result of the Company's sale of its commercial Graphics Products business
effective October 1, 2001, the commercial Graphics Products business is
presented as a discontinued operation in the accompanying Consolidated
Statements of Operations and certain prior year amounts have been reclassified
to reflect the discontinued operations, as described in Note 3 to the
Consolidated Financial Statements.

Cash and Cash Equivalents:
The Company considers all highly liquid temporary cash investments purchased
with a maturity of three months or less to be cash equivalents. The Company's
cash management program utilizes zero balance accounts. Accordingly, all book
overdraft balances have been reclassified to other accrued expenses in the
accompanying Consolidated Balance Sheets. These balances amounted to $2.6
million at December 2, 2001 and $4.1 million at December 3, 2000.

Revenue Recognition:
In fiscal 2001, the Company adopted Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." This SAB summarizes certain of
the staff's views in applying generally accepted accounting principles to
selected revenue recognition issues and provides guidance with respect to the
recognition, presentation, and disclosure of revenue in the financial
statements. The Company recognizes revenue when products are shipped and title
has passed to the customer. Provisions for estimated product returns and
warranty costs are accrued in the period of revenue recognition. The adoption
of SAB No. 101 did not have a significant impact on the Company's results of
operations or financial position.

In fiscal 2001, the Company adopted Issue No. 00-10, "Accounting for Shipping
and Handling Fees and Costs," of the Emerging Issues Task Force ("EITF"), a
subcommittee of the Financial Accounting Standards Board ("FASB"). This Issue
requires that amounts billed to customers related to shipping and handling
costs be classified as revenues and all expenses related to shipping and
handling be classified as cost of products sold. Historically, the Company has
netted the amounts billed to customers against shipping and handling costs in
selling, general and administrative expenses. In accordance with the adoption
of this issue, net sales and selling, general and administrative expenses have
been restated, resulting in increases of $.2 million, $.1 million, and $.1
million for fiscal years 2001, 2000, and 1999, respectively. The Company's
shipping and handling costs are included in selling, general and
administrative expenses. These costs were $15.0 million, $16.9 million, and
$15.8 million in fiscal 2001, 2000, and 1999, respectively.

Inventories:
Inventories are valued at the lower of cost or market. Cost was determined by
the last-in, first-out ("LIFO") method for 73% and 39% of the inventories in
2001 and 2000, respectively. Cost of the remaining inventories is determined
using the first-in, first-out ("FIFO") method. The Company uses the FIFO
method of inventory valuation for certain product lines because the related
products and operations are separate and distinct. Inventory

F-7

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)

related to the 2001 business divestiture was accounted for using the FIFO
method of valuation, which accounts for the significant increase in the
inventory valued using the LIFO method as of December 2, 2001.

Property, Plant and Equipment:
Expenditures for additions and improvements to property, plant and equipment
are capitalized, and normal repairs and maintenance are charged to expense as
incurred. The related cost and accumulated depreciation of depreciable assets
disposed of are eliminated from the accounts, and any profit or loss is
reflected in restructuring and other in the Consolidated Statements of
Operations. Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying value of the asset.

Excess of Acquisition Cost Over Net Assets Acquired and Other Intangible
Assets:
Excess of acquisition cost over net assets acquired relates principally to the
Company's acquisition of X-Acto in 1981. The Company's policy is to record an
impairment loss against the net unamortized excess of acquisition cost over
net assets acquired and net other intangible assets in the period when it is
determined that the carrying amount of the net assets may not be recoverable.
The Company performs this evaluation on a quarterly basis. This determination
includes evaluation of factors such as current market value, future asset
utilization, business climate, and future net cash flows (undiscounted and
without interest) expected to result from the use of the net assets.

Depreciation and Amortization:
Depreciation for financial reporting purposes is computed using the straight-
line method over the estimated useful life of the asset as follows: buildings,
12 to 40 years; machinery and equipment, 3 to 12 years; and leasehold
improvements over the lease term. Depreciation for tax purposes is computed
principally using accelerated methods. The excess of acquisition cost over net
assets acquired is amortized on a straight-line basis over 40 years. The costs
of other intangible assets are amortized on a straight-line basis over periods
ranging from 5 to 30 years. Amortization of assets under capital leases that
contain purchase options is provided over the assets' useful lives. Other
capital leases are amortized over the terms of the related leases or asset
lives, if shorter.

Currency Translation:
The assets and liabilities of subsidiaries having a functional currency other
than the U.S. dollar are translated at the fiscal year-end exchange rate,
while elements of the income statement are translated at the weighted average
exchange rate for the fiscal year. The cumulative translation adjustment is
recorded as a separate component of stockholders' equity. Gains and losses on
foreign currency transactions are included in the determination of net income
and are reflected in other expense, net. Such gains and losses were not
material in any of the years presented in the consolidated financial
statements.

Advertising Costs:
The Company expenses advertising costs as incurred to selling, general and
administrative expense. Total advertising expense was $.4 million, $.5
million, and $.7 million in fiscal 2001, 2000, and 1999, respectively.

Research and Development Costs:
Research and development costs relating to both future and present products
are charged to selling, general and administrative expense when incurred.
These expenses were approximately $1.5 million, $1.6 million, and $1.9 million
in fiscal years 2001, 2000, and 1999, respectively.

F-8

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)

Income Taxes:
Income tax expense is based on pre-tax financial accounting income. Deferred
tax assets and liabilities are recognized for the expected tax consequences of
temporary differences between the tax basis of assets and liabilities and
their reported amounts. The Company records a valuation allowance for deferred
tax assets if, based on available evidence, it is more likely than not that
some portion or all of such assets will not be realized.

Derivatives:
Derivative financial instruments are used to hedge risk caused by fluctuating
currency. The Company periodically enters into forward exchange contracts to
hedge foreign currency transactions for periods generally consistent with its
committed exposure. These transactions were not material in any of the years
presented in the consolidated financial statements. As of December 2, 2001,
the Company had a one-month Canadian forward exchange contract with a notional
value of approximately $1.9 million outstanding. There were no forward exchange
contracts outstanding as of December 3, 2000. Cash flows from hedges are
classified in the Consolidated Statements of Cash Flows in the same category as
the item being hedged. The Company does not hold or issue financial instruments
for trading purposes.

Earnings (Loss) Per Share:
Basic earnings per share is computed by dividing net earnings (loss) by the
weighted average of common shares outstanding during the year. Diluted
earnings per share reflects the potential dilution of securities that could
share in earnings, including stock options. Common equivalent shares are
excluded from the computation in periods in which they have an anti-dilutive
effect. The diluted earnings per share does not assume the exercise of options
that would have an anti-dilutive effect on earnings per share. All earnings
per share amounts are presented on an after-tax, diluted basis unless
otherwise noted. A reconciliation of weighted average of common shares
outstanding to weighted average of common shares outstanding assuming dilution
is shown below:

2001 2000 1999
--------- --------- ----------

Average common shares outstanding-basic ........................................ 8,936,342 9,905,440 10,488,442
Add: common equivalent shares representing shares issuable upon exercise of
stock options and stock grants................................................ 39,275 2,959 3,766
--------- --------- ----------
Average common shares and dilutive securities outstanding ...................... 8,975,617 9,908,399 10,492,208
========= ========= ==========

Comprehensive Income:
The Company applies Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," which requires disclosure of
comprehensive income. Comprehensive income includes net income, as well as
other comprehensive income consisting of unrealized gains and losses which
bypass the traditional income statement and are recorded directly into a
separate section of shareholders' equity on the balance sheet. The components
of other comprehensive income for the Company consist of unrealized gains and
losses relating to the translation of foreign currency financial statements
and additional minimum pension liability adjustment.

Employee Benefit Plans:
The Company and its subsidiaries have non-contributory, qualified defined
benefit pension plans covering the majority of their employees. It is the
Company's policy to fund pension contributions in accordance with the
requirements of the Employee Retirement Income Security Act of 1974. The
benefit formula used to determine pension costs is the final-average-pay
method.

F-9

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)

The Company also has a nonqualified Supplemental Executive Benefit Plan
("SEBP") which provides supplemental defined benefits in conjunction with its
qualified pension plan. The SEBP has an elective deferral feature with a
Company matching contribution of 25% of an officer's elective deferral of up
to 6% of the officer's compensation. The Company purchases variable universal
life insurance policies to facilitate the funding of the SEBP. The Company is
the sole owner and beneficiary of such policies. As of December 2, 2001 and
December 3, 2000, the cash surrender value of these policies was $8.3 million
and $8.7 million, respectively. These amounts are classified as other assets
in the accompanying Consolidated Balance Sheets.

The Company applies SFAS No. 132, "Employer's Disclosures about Pensions and
Other Postretirement Benefits," which does not change the measurement or
recognition of those plans, but does require the Company to disclose
additional information on changes in the benefit obligations and fair values
of plan assets, and eliminates certain disclosures that are no longer useful.

The Company has a defined contribution 401(k) plan. For participating
employees, the Company matches 25 cents for each dollar contributed to a
maximum of 6% of pre-tax compensation, subject to limitations of the plan and
the Internal Revenue Code.

Stock-Based Compensation Plans:
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock-based compensation. SFAS No. 123, "Accounting for
Stock-Based Compensation," provides the option of either continuing the
Company's current method of accounting for stock-based compensation or
adopting the fair value method of accounting. The Company has elected to
continue accounting for stock-based compensation under APB No. 25.

Environmental Matters:
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are also expensed. The Company records liabilities for
environmental costs when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. The liability for future
environmental remediation costs is evaluated on a quarterly basis by
management. Generally, the timing of these accruals coincides with the earlier
of the completion of a feasibility study or the Company's commitment to a plan
of action based on the then-known facts. Recoveries of expenditures are
recognized as a receivable only when they are estimable and probable.

Segment Information:
The Company applies SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" and uses the management approach to report segment
results and operations. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. As a
result of the sale of the commercial Graphics Products business in fiscal 2001
and its impact on the Company's internal organizational structure, the Company
now has only a single reportable segment: Consumer Products. The Company,
however, discloses information about products and services, geographic areas,
and major customers.

2. NEW ACCOUNTING STANDARDS:
In June 2001, the FASB approved Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations"; SFAS No. 142, "Goodwill and Other
Intangible Assets"; and SFAS No. 143, "Accounting for Asset Retirement
Obligations."

F-10

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

2. NEW ACCOUNTING STANDARDS: -- (Continued)

combinations initiated after June 30, 2001, establishing specific criteria for
the recognition of intangible assets separately from goodwill, and requiring
that unallocated negative goodwill be written off immediately as an
extraordinary gain. The Company does not expect a material impact from the
adoption of SFAS No. 141 on its consolidated financial statements.

3. DISCONTINUED OPERATIONS:
Effective October 1, 2001, the Company sold its commercial Graphics Products
business and related assets to Neschen AG, a German manufacturer of self
adhesive products. The sales price, which was determined by arms' length
negotiation between the parties, was approximately $32.0 million. The Company
recorded an after-tax loss of $25.4 million, or $2.83 per share, related to
this sale. This charge includes the loss on the sale of assets (net of
proceeds), severance costs, recognition of future lease obligations, and other
related costs. As of December 2, 2001, approximately $7.1 million of this
loss remains as an accrual in the accompanying Consolidated Balance Sheets under
other accrued expenses ($5.4 million) and non-current liabilities ($1.7
million). The divested business had net sales of approximately $44.3 million,
$73.0 million, and $71.9 million in fiscal years 2001, 2000, and 1999,
respectively.

The Company has retained $4.6 million of assets related to the divested
business but not included in the sale to Neschen AG. These assets have been
reclassified from property, plant and equipment to assets held for sale
(included in other current assets in the accompanying Consolidated Balance
Sheets). The Company is actively pursuing the disposition of these non-
strategic assets and expects to achieve their sale within a reasonable period
of time.

The divested business has been accounted for as a discontinued operation, and
accordingly, has been segregated in the accompanying Consolidated Statements
of Operations, and prior periods have been reclassified to conform to the
current year's presentation. However, prior periods' Consolidated Balance
Sheets, Consolidated Statements of Comprehensive Income (Loss), and
Consolidated Statements of Cash Flows have not been reclassified.

F-11

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

3. DISCONTINUED OPERATIONS: -- (Continued)

During fiscal 2001, the Company recorded a tax benefit of $.5 million after-
tax ($.05 per share) resulting from a resolution of a prior year tax exposure
in connection with a 1997 divestiture. This item is included in the total tax
benefit recorded for loss on disposal of discontinued business.

4. RESTRUCTURING AND OTHER:
Restructuring and other on a continuing operations basis for fiscal years
2001, 2000, and 1999 consists of the following:

2001 2000 1999
------ ------ -----

Cost reduction plan ....................................................................... $3,858 - -
Restructuring ............................................................................. (235) $ (180) $ 462
Patent infringement litigation costs ...................................................... 102 3,815 -
Net gain on divestitures .................................................................. - (133) (554)
Loss on disposal of property, plant & equipment ........................................... 116 233 18
------ ------ -----
$3,841 $3,735 $ (74)
====== ====== =====

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
and resulted in the recognition of charges totaling $3.9 million pre-tax in
fiscal 2001. These charges include employee severance costs ($3.5 million),
recognition of future lease obligations ($.3 million), and other related
costs. Twelve positions were eliminated in fiscal 2001, and nineteen positions
are expected to be eliminated in the first half of fiscal 2002 in connection
with this cost reduction plan. In addition to the cost reduction charges
related to this plan, the Company expects to spend a total of approximately
$1.0 million for implementation costs over the next three fiscal years. These
implementation costs will be recorded as period costs as incurred and will
consist primarily of employee severance and outplacement costs. Included in
the total employee severance costs are costs related to the Company's
executive leadership transition to a smaller executive management structure
more in keeping with the reduced size and complexity of the Company's business
following the sale of its commercial Graphics Products business in October
2001. These transition severance costs relate to the planned retirement of the
Company's Chairman and Chief Executive Officer and separation of other
executive officers of the Company during fiscal 2002.

The following table sets forth the details and the cumulative activity in the
various accruals associated with the 2001 cost reduction plan in the
Consolidated Balance Sheets from December 4, 2000 to December 2, 2001:

Balance at Balance at
December 4, Current Cash Non-Cash December 2,
2000 Provision Credits Reductions Activity 2001
----------- --------- ------- ---------- -------- -----------

Lease obligations ................................ - $ 257 - - - $ 257
Severance ........................................ - 3,513 - - - 3,513
Fixed assets ..................................... - 38 - - - 38
Other ............................................ - 50 - - - 50
--- ------ --- --- --- ------
Total ............................................ - $3,858 - - - $3,858
=== ====== === === === ======

F-12

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

4. RESTRUCTURING AND OTHER: -- (Continued)

During fiscal 2000, the Company recorded a charge and related liability of
$3.8 million pre-tax (including interest and other costs) in connection with a
patent infringement suit judgment. During fiscal 2001, the Company recorded
interest charges of $.1 million pre-tax and made a payment of approximately
$3.9 million to the plaintiff in satisfaction of this judgment.

During fiscal 1999, a comprehensive reorganization and restructuring plan (the
"1999 restructuring plan") was approved by the Company's Board of Directors.
This plan resulted in recognition of restructuring charges totaling $6.2
million pre-tax, of which $.8 million is included in restructuring and other
in the accompanying Consolidated Statements of Operations, with the remainder
included in loss from discontinued business. The major components of this plan
included creating manufacturing centers of excellence, outsourcing the
Company's European distribution activities, consolidating its U.S.
distribution activities, and focusing its product offering and marketing
efforts. The restructuring charges included employee severance costs ($2.6
million), recognition of future lease obligations ($1.8 million), fixed asset
writedowns ($1.6 million), and other related costs.

In addition to such restructuring charges, the Company spent $.3 million pre-
tax in fiscal 2001 and $.3 million pre-tax for implementation costs of this
plan in fiscal 2000 (recorded as period costs as incurred).

During fiscal 2001, the Company reduced by $.4 million pre-tax some of its
reserves in connection with the Company's implementation of its 1999
restructuring plan, of which amount $.2 million pre-tax is included in
restructuring and other in the accompanying Consolidated Statements of
Operations. These reserve reductions related primarily to lower than
anticipated severance costs.

During fiscal 2000, the Company reduced by $.5 million pre-tax some of its
reserves established in connection with the Company's implementation of its
1999 restructuring plan, of which amount $.2 million pre-tax is included in
restructuring and other in the accompanying Consolidated Statements of
Operations. These reserve reductions related primarily to a decision not to
vacate a certain facility, final resolution of lease obligations for a vacant
facility, lower than anticipated severance costs, and lower than expected
losses on asset disposals.

The following table sets forth the details and the cumulative activity in the
various accruals associated with the 1999 restructuring plan in the
Consolidated Balance Sheets from November 30, 1998 to December 2, 2001:

Balance at Balance at
November 30, Current Cash Non-Cash November 28,
1998 Provision Credits Reductions Activity 1999
------------ --------- ------- ---------- -------- ------------

Lease obligations .............................. - $1,772 - $ (6) - $1,766
Severance ...................................... - 2,593 - (54) - 2,539
Fixed assets ................................... - 1,584 - (3) - 1,581
Other .......................................... - 257 - (80) - 177
--- ------ --- ----- --- ------
Total .......................................... - $6,206 - $(143) - $6,063
=== ====== === ===== === ======

Balance at Balance at
November 29, Current Cash Non-Cash December 3,
1999 Provision Credits Reductions Activity 2000
------------ --------- ------- ---------- -------- -----------

Lease obligations ............................... $1,766 - $(117) $(1,400) - $ 249
Severance ....................................... 2,539 - (119) (1,630) - 790
Fixed assets .................................... 1,581 - (124) (212) $(1,225) 20
Other ........................................... 177 - (116) (61) - -
------ --- ----- ------- ------- ------
Total ........................................... $6,063 - $(476) $(3,303) $(1,225) $1,059
====== === ===== ======= ======= ======

F-13

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

4. RESTRUCTURING AND OTHER: -- (Continued)

Balance at Balance at
December 4, Current Cash Non-Cash December 2,
2000 Provision Credits Reductions Activity 2001
----------- --------- ------- ---------- -------- -----------

Lease obligations ................................ $ 249 - - - - $ 249
Severance ........................................ 790 - (348) (419) - 23
Fixed assets ..................................... 20 - (7) (11) (2) -
Other ............................................ - - - - - -
------ --- ---- ---- --- -----
Total ............................................ $1,059 - (355) (430) (2) $ 272
====== === ==== ==== === =====

During fiscal 2000, the Company completed the implementation its 1997 strategy
for growth and restructuring (the "1997 strategic plan") designed to restore
higher levels of sales growth and profitability and to reduce its cost
structure. During fiscal 2000 and 1999, the Company reduced by $.1 million
pre-tax and $.6 million pre-tax, respectively some of its reserves established
in connection with its 1997 strategic plan restructuring. The reserve
reduction in fiscal 2000 related primarily to lower than expected losses on
asset disposals and is included in loss from discontinued operations. The
reserve reduction in fiscal 1999 related primarily to a final resolution of
lease obligations for a vacant facility and to lower than expected severance
costs, and $.3 million pre-tax of this amount is included in restructuring and
other in the accompanying Consolidated Statements of Operations.

The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the 1997 strategic plan in the
dated Balance Sheets from November 30, 1998 to December 3, 2000:

Balance at Balance at
November 30, Current Cash Non-Cash November 28,
1998 Provision Credits Reductions Activity 1999
------------ --------- ------- ---------- -------- ------------

Inventory ...................................... $ 400 - - $ (370) $ (30) -
Lease obligations .............................. 1,873 - $(467) (847) (5) $554
Severance ...................................... 722 - (103) (573) - 46
Fixed assets ................................... 235 - (17) - (218) -
Other .......................................... 487 - - (191) - 296
------ --- ----- ------- ------ ----
Total .......................................... $3,717 - $(587) $(1,981) ($253) $896
====== === ===== ======= ====== ====

Balance at Balance at
November 29, Current Cash Non-Cash December 3,
1999 Provision Credits Reductions Activity 2000
------------ --------- ------- ---------- -------- -----------

Lease obligations ............................... $554 - - $(554) - -
Severance ....................................... 46 - - (46) - -
Other ........................................... 296 - $(83) (213) -
---- --- ---- ----- --- ---
Total ........................................... $896 - $(83) $(813) - -
==== === ==== ===== === ===

During fiscal 2000 and 1999, the Company reduced by $.1 million pre-tax and
$.5 million pre-tax, respectively, some of its reserves established with
respect to its 1997 business divestitures. These reductions were principally
related to lower than expected inventory returns and environmental reserves.

5. BUSINESS ACQUISITIONS:
In October 1999, the Company acquired the business and assets of Axiom
Graphics Manufacturing, Inc. ("Axiom") for $1.4 million and future contingent
considerations. This acquisition was accounted for under the purchase method
of accounting and was financed by internal cash generation. The excess of
purchase price over the fair value of the net assets acquired was
approximately $1.3 million, to be amortized on a straight line basis for 15
years. This amount was written off in fiscal 2001 in connection with the sale
of divested business. Axiom

F-14

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

5. BUSINESS ACQUISITIONS: -- (Continued)

was included in the disposition of the commercial Graphics Products business
in fiscal 2001, and its results of operations are included in discontinued
operations in the Company's Consolidated Statements of Operations from the
date of acquisition.

6. INVENTORIES:
The classification of inventories, net of reserves at the end of fiscal years
2001 and 2000 is as follows:

2001 2000
------ -------

Finished goods ............................................. $2,973 $10,593
Work in progress ........................................... 1,440 2,784
Raw materials .............................................. 4,976 8,446
------ -------
$9,389 $21,823
====== =======

Inventories determined under the LIFO method were $10,653 and $10,773 at
December 2, 2001 and December 3, 2000, respectively. The current replacement
cost for these inventories exceeded the LIFO cost by $3,772 and $4,234 at
December 2, 2001 and December 3, 2000, respectively.

Inventory quantities were reduced in fiscal years 2001, 2000, and 1999,
resulting in a liquidation of LIFO inventories carried at lower costs
prevailing in prior years. The effect of these reductions was to increase net
income by $51 ($.01 per share), $237 ($.02 per share), and $236 ($.02 per
share), in fiscal years 2001, 2000, and 1999, respectively.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets at the end of fiscal years 2001 and
2000 were comprised of the following items:

2001 2000
------- ------

Income tax refund receivable ............................... $ 5,088 $1,494
Assets held for sale ....................................... 4,580 -
Receivable from Neschen AG ................................. 3,282 -
Other ...................................................... 1,151 1,096
------- ------
$14,101 $2,590
======= ======

See Note 3 for discussion of receivable from Neschen AG and assets held for
sale. See Note 11 for information regarding the income tax refund receivable.

8. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, net, at the end of fiscal years 2001 and 2000
is as follows:

2001 2000
------- -------

Land and land improvements ................................ $ 324 $ 2,275
Buildings ................................................. 8,397 14,795
Machinery and equipment ................................... 55,632 67,284
Leasehold improvements .................................... 776 803
Construction in progress .................................. 1,607 2,066
------- -------
66,736 87,223
Less accumulated depreciation and amortization ............ 42,548 46,007
------- -------
$24,188 $41,216
======= =======

F-15

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

8. PROPERTY, PLANT AND EQUIPMENT: -- (Continued)

Depreciation expense was $5,129, $5,290, and $5,338 for fiscal years 2001,
2000, and 1999, respectively.

9. EXCESS OF ACQUISITION COST OVER NET ASSETS ACQUIRED AND INTANGIBLE
ASSETS, NET:
Excess of acquisition cost over net assets acquired at the end of fiscal years
2001 and 2000 is as follows:

2001 2000
------ -------

Excess of acquisition cost over net assets
acquired.................................................. $1,603 $29,642
Less accumulated amortization .............................. 849 7,525
------ -------
$ 754 $22,117
====== =======

The significant decrease in excess of acquisition cost over net assets
acquired in fiscal 2001 was due to the 2001 business divestiture.

Intangible assets, net, at the end of fiscal years 2001 and 2000 are as
follows:

2001 2000
------ ------

Covenants not to compete .................................... - $2,728
Patents ..................................................... $1,436 1,530
Trademarks .................................................. 74 1,159
Licensing agreements ........................................ 492 492
Other ....................................................... 105 2,295
------ ------
2,107 8,204
Less accumulated amortization ............................... 2,042 5,788
------ ------
$ 65 $2,416
====== ======

The significant decrease in intangible assets in fiscal 2001 was due to the
2001 business divestiture.

10. DEBT:
As a result of the divestiture of its commercial Graphics Products business in
October 2001, the Company was required to modify its existing debt arrangement
with its senior note holders and banks. In November 2001, the Company reached
an agreement with its senior note holders to modify, in certain respects, the
terms of the senior notes, subject to, among other things, the Company's
securing and maintaining a $25 million bank credit facility. These
modifications included: (1) a principal repayment on the senior notes of $25
million at par, (2) an increase in the interest rate on the remaining balance
of the senior notes from 7.86% to 8.36%, (3) changes to certain covenant
requirements, and (4) certain restrictions on the Company's ability to
repurchase its common stock. The Company used $25 million of the proceeds from
the sale of the divested business to reduce the $50 million senior note debt
then outstanding. As of December 2, 2001, the Company had received a
commitment from two banks for a new $25 million bank credit facility to
replace the existing $50 million credit facility. On December 21, 2001, the
Company finalized the bank credit agreement with the banks. The terms of the
new credit facility include, among other things, LIBOR based loans, covenant
requirements substantially similar to the existing bank credit facility, and
limitations on borrowings based on levels of accounts receivable, inventory,
and fixed assets. There were no outstanding borrowings under the new credit
facility as of December 2, 2001.

F-16

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

10. DEBT: -- (Continued)

Debt at the end of fiscal years 2001 and 2000 was as follows:

2001 2000
------- -------

Senior notes (a) .......................................... $25,000 $50,000
Revolving credit facility ................................. - 2,676
Capitalized lease obligations (b) ......................... 2,000 2,006
------- -------
27,000 54,682
Less current portion ...................................... 5,000 -
------- -------
Long-term portion ......................................... $22,000 $54,682
======= =======

(a) The senior notes are payable in five annual payments of $5
million beginning August 1, 2002 and bear interest at a
rate of 8.36%.
(b) The capitalized lease obligations are collateralized by
the property, plant and equipment described in Note 15.

The senior notes and credit facility contain certain representations,
warranties, covenants and conditions, including, but not limited to,
requirements that the Company comply with certain financial covenants,
including fixed charge coverage, leverage ratios, borrowing base ratios, and
maintenance of certain levels of net worth; limitations on liens,
indebtedness, investments, changes in lines of business, acquisitions,
transactions with affiliates and modifications of certain documents; and
restrictions on the Company's ability to repurchase its common stock. The
Company was in compliance with its debt covenants at December 2, 2001 and
December 3, 2000.

Aggregate annual maturities for all long-term debt, including the capitalized
leases, for each of the four fiscal years subsequent to December 1, 2002 are
as follows:

2003 $5,000 2005 $5,000
2004 $7,000 2006 $5,000

11. INCOME TAXES:
Income from continuing operations before provision for income taxes consists
of the following:

2001 2000 1999
------ ------ -------

Domestic ............................................................................ $3,926 $4,941 $12,364
Foreign ............................................................................. 748 1,649 1,889
------ ------ -------
$4,674 $6,590 $14,253
====== ====== =======

F-17

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

11. INCOME TAXES: -- (Continued)

The provision for income taxes from continuing operations consists of the
following:

2001 2000 1999
------ ------ ------

Currently payable:
Federal............................................................................. $ (188) $2,680 $ 992
State............................................................................... 67 131 101
Foreign............................................................................. 60 80 103
------ ------ ------
(61) 2,891 1,196
Deferred............................................................................ 1,439 (438) 3,493
------ ------ ------
$1,378 $2,453 $4,689
====== ====== ======

The following is a reconciliation of the statutory federal income tax rate
with the Company's effective income tax rate from continuing operations:

2001 2000 1999
----- ---- ----

Statutory federal rate .................................................................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit ............................................ .9 1.3 .5
Effect of life insurance policies ......................................................... 6.0 5.6 (.2)
Tax benefit of foreign sales corporation .................................................. (1.7) (2.0) (.9)
Resolution of certain prior years' tax exposures .......................................... (10.8) (3.7) (1.0)
Other, net ................................................................................ .1 1.0 (.5)
----- ---- ----
Effective rate from continuing operations ................................................. 29.5% 37.2% 32.9%
===== ==== ====

The significant components of deferred tax assets and liabilities at December
2, 2001 and December 3, 2000 consist of:

2001 2000
-------------------- --------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------

Inventories ....................................................... $ 662 - $ 808 -
Accrued expenses .................................................. 3,591 $ 325 3,500 $ 225
Allowance for doubtful accounts ................................... 377 - 241 224
Net operating loss carryforwards .................................. 1,802 - 754 -
Pensions .......................................................... 3,318 350 3,399 -
Minimum pension liability adjustment .............................. - - 171 -
Depreciation and amortization ..................................... 57 4,184 - 5,853
------ ------ ------ ------
9,807 4,859 8,873 6,302
Valuation allowance ............................................... (118) - (39) -
------ ------ ------ ------
$9,689 $4,859 $8,834 $6,302
====== ====== ====== ======

Included in the above table for December 2, 2001 and December 3, 2000 are
deferred tax assets of $4,251 and $514 respectively, relating to the
discontinued operations.

As of December 2, 2001, the Company had federal net operating loss
carryforwards of approximately $4,953 that may be carried forward for 20
years.

The valuation allowance of approximately $118 as of December 2, 2001 has been
provided to reduce state net operating losses to a level which, more likely
than not, will be realized. The net change in the total valuation allowance
for the year ended December 2, 2001 was an increase of approximately $79
principally due to state tax loss carryforwards which are not likely to be
realized.

F-18

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

12. EMPLOYEE BENEFIT PLANS:

Pension Plans:
Net pension costs for fiscal years 2001, 2000, and 1999 consist of the
following:

2001 2000 1999
------- ------- -------

Service cost ...................................................................... $ 1,721 $ 2,021 $ 2,612
Interest cost ..................................................................... 3,789 3,843 3,744
Expected return on plan assets .................................................... (4,838) (4,681) (4,101)
Net amortization & deferral ....................................................... (981) (430) 238
Net curtailment gain .............................................................. (323) (33) -
Net settlement loss ............................................................... 956 1 -
------- ------- -------
Net periodic benefit cost ......................................................... $ 324 $ 721 $ 2,493
======= ======= =======

During fiscal 2001, the Company realized a net curtailment gain of $323
resulting from the divestiture of the commercial Graphics Products business.
In addition, in fiscal 2001, the Company realized a settlement loss relating
to its United Kingdom pension plan resulting from the business divestiture.
Approximately $.7 million of the aggregate of settlement loss and net
curtailment gain is included in the loss on disposal of discontinued business.
During fiscal 2000, the Company realized a net curtailment gain of $33
resulting from a U.S. plant closing that occurred as part of its 1999
restructuring plan.

The reconciliations of the beginning and ending balances of benefit
obligations and fair value of plan assets and the funded status of the plans
at September 30, 2001 and 2000 (dates of actuarial valuations) are as follows:

2001 2000
------- -------

Change in benefit obligation:
Benefit obligation at beginning of year.................. $51,831 $52,461
Service cost............................................. 1,721 2,021
Interest cost............................................ 3,789 3,843
Participants' contributions.............................. 109 127
Amendments............................................... 2,023 -
Actuarial gain........................................... (608) (3,771)
Benefits paid............................................ (2,510) (1,886)
Exchange rate changes.................................... 33 (665)
Curtailments............................................. (1,665) (153)
Settlements.............................................. (314) (146)
------- -------
Benefit obligation at end of year........................ $54,409 $51,831
======= =======

2001 2000
------- -------

Change in plan assets:
Fair value of plan assets at beginning of year........... $55,387 $53,129
Actual return on plan assets............................. (5,419) 4,054
Employer contributions................................... 638 705
Participants' contributions.............................. 109 127
Benefits paid............................................ (2,510) (1,885)
Exchange rate changes.................................... 26 (597)
Settlements.............................................. (314) (146)
------- -------
Fair value of assets at end of year...................... $47,917 $55,387
======= =======

F-19

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

12. EMPLOYEE BENEFIT PLANS: -- (Continued)

2001 2000
------- --------

Reconciliation of funded status:
Funded status........................................... $(6,493) $ 3,555
Unrecognized net actuarial gain......................... (1,123) (10,231)
Unrecognized prior service cost......................... 2,005 900
Unrecognized transition asset........................... (223) (371)
Other................................................... 45 59
------- --------
Net amount recognized................................... $(5,789) $ (6,088)
======= ========

Amounts recognized in the Consolidated Balance Sheets are as follows:

2001 2000
------- -------

Pension benefit cost..................................... $ 946 $ 80
Accrued benefit liability................................ (6,735) (7,196)
Intangible assets........................................ - 526
Deferred income taxes liability.......................... - 171
Accumulated other comprehensive income................... - 331
------- -------
Net amount recognized.................................... $(5,789) $(6,088)
======= =======

Significant weighted average assumptions as of the dates of actuarial
valuations include:

2001 2000
---- ----

Discount rate 7.50% 8.00%
Expected return on plan assets................................. 9.00% 9.00%
Rate of compensation increase.................................. 5.00% 5.00%

The projected benefit obligations for the pension plans with accumulated
benefits obligations in excess of plan assets were $54,409 and $7,176 for
fiscal years 2001 and 2000, respectively. The accrued benefit liabilities for
these plans were $6,735 and $5,787, and the fair values of plan assets were
$47,917 and $0 for fiscal years 2001 and 2000, respectively.

The Company recognizes a minimum pension liability for underfunded plans. As
of September 30, 2001, no minimum pension liability was required since the
accumulated benefit obligation less the plan assets does not exceed the net
amount recognized.

Supplemental Executive Benefits Plan:
The Company has a nonqualified, Supplemental Executive Benefits Plan that
covers all officers. Expenses of $949, $1,068, and $1,194, in fiscal years
2001, 2000, and 1999, respectively, relating to this Plan were actuarially
determined and are included in the pension costs described above.
Contributions to the elective salary deferral feature of the plan by the
Company were $45, $50, and $48 for fiscal years 2001, 2000, and 1999,
respectively.

Employee Savings Plan:
The Company has a defined contribution 401(k) plan available to its employees
in the United States. Contributions to the 401(k) plan by the Company were
$303, $317, and $312 for fiscal years 2001, 2000, and 1999, respectively.

13. STOCK-BASED COMPENSATION PLANS:
The 1993 Stock Option and Stock Grant Plan which replaced the expired 1983
Stock Option and Stock Grant Plan, authorizes the issuance of up to 3,500,000
common shares for the granting of incentive stock options,

F-20

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

13. STOCK-BASED COMPENSATION PLANS: -- (Continued)

nonqualified stock options, and stock grants to the Company's directors and
key employees. A maximum of 525,000 common shares under the 1993 plan may be
issued in the form of stock grants. The limit on the aggregate number of
options and/or stock grants that can be granted to any one individual in any
one-year period is 300,000 shares. The option price of options granted under
the plan may not be less than the fair market value of the shares at the date
granted. Options may be granted for terms of between two and ten years and
generally become exercisable not less than one year following the date of
grant. Stock grants under the 1993 plan are subject to a vesting period or
periods of between one and five years from the date of grant. Common shares
subject to a stock grant are not actually issued to a grantee until such
shares have vested under the plan. The plan also provides for the payment of
an annual cash bonus to grantees of stock grants in an amount equal to the
cash dividends which would have been received had the shares not yet vested
under the grant been actually held by the grantees. Stock options and stock
grants under the plan are subject to possible acceleration of vesting and
earlier termination in certain circumstances.

The Company's 1983 Stock Option and Stock Grant Plan expired by its terms in
February 1993, and although incentive stock options and nonqualified stock
options granted under that plan remain outstanding, no further options may be
granted under the plan. The terms of the 1983 plan are essentially similar to
the terms of the 1993 plan described above.

Payment upon exercise of stock options under the 1993 and 1983 plans may be in
cash and/or in common shares of the Company in an amount equivalent to the
fair market value of the stock at the date exercised.

The Company's 1994 Non-Employee Directors' Stock Option Plan authorizes the
granting at fair market value of up to an aggregate of 90,000 common shares to
non-officer directors of the Company. This plan provides for one-time
automatic grants of non-qualified options to purchase 5,000 common shares (at
a per share price equal to the fair market value of a common share on the
grant date of the option) to each of the non-officer directors of the Company.
Options granted under this plan extend for a term of ten years from the grant
date (subject to earlier termination in certain circumstances) and become
exercisable at the rate of 20% per year over five years from the grant date
(subject to acceleration in certain circumstances).

The Company also has a 1997 Non-Employee Director Compensation Plan for non-
employee directors of the Company. The plan includes a compensation package
for the Company's non-officer directors which provides for basic directors'
fees to be paid in a combination of cash and the Company's common shares. In
addition, the plan provides for annual grants to each non-employee director of
non-qualified stock options to purchase up to 2,000 common shares at the fair
market value of such shares on the date of grant. These options vest after two
years (subject to possible acceleration) and extend for ten years (subject to
possible earlier termination).

A summary of options under the Company's 1993 Stock Option and Stock Grant
Plan, the 1994 Non-Employee Directors' Stock Option Plan, and the 1997 Non-
Employee Director Compensation Plan is as follows:

2001 2000 1999
--------- --------- ---------

Outstanding, beginning of year .............................................. 2,009,351 1,948,677 1,913,027
Options granted ............................................................. 214,600 486,100 139,200
Options terminated .......................................................... (741,617) (425,426) (103,550)
--------- --------- ---------
Outstanding, end of year .................................................... 1,482,334 2,009,351 1,948,677
========= ========= =========
Average option price per share .............................................. $13.01 $15.06 $17.27
Outstanding exercisable options, end of year ................................ 1,069,134 1,485,251 792,023
Shares reserved for future stock
options and grants......................................................... 1,790,735 1,331,990 1,392,664

F-21

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

13. STOCK-BASED COMPENSATION PLANS: -- (Continued)

A summary of options under the Company's 1983 Stock Option and Stock Grant
Plan is as follows:

2001 2000 1999
------- ------- -------

Outstanding, beginning of year .................................................... 99,233 161,633 170,933
Options expired ................................................................... (21,633) (18,200) -
Options terminated ................................................................ (26,000) (44,200) (9,300)
------- ------- -------
Outstanding, end of year .......................................................... 51,600 99,233 161,633
======= ======= =======
Average option price per share .................................................... $14.12 $13.59 $14.66
Outstanding exercisable options, end of year ...................................... 51,600 99,233 161,633
Shares reserved for future stock options and grants ............................... - - -

The following table summarizes information about options outstanding at
December 2, 2001 under the Company's 1993 and 1983 Stock Option and Stock
Grant Plans, the 1994 Non-Employee Directors' Stock Option Plan, and the 1997
Non-Employee Director Compensation Plan:

Options Outstanding Options Exercisable
---------------------------------------------------------------------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Exercisable Exercise
--------------- at 12/2/01 (years) Price at 12/2/01 Price
----------- ---------------- -------- ----------- --------

$ 4.00 - $ 6.11 ....................................... 169,300 9.1 $ 4.22 -- $ --
$ 8.41 - $11.41........................................ 521,100 8.2 $ 9.39 280,200 $ 9.84
$13.06 - $18.69........................................ 735,752 4.1 $16.64 732,752 $16.64
$20.88 - $24.84........................................ 107,782 6.3 $23.44 107,782 $23.44
--------- --- ------ --------- ------
$ 4.00 - $24.84........................................ 1,533,934 6.2 $13.29 1,120,734 $15.60

Other:
During 2001, the Company made stock grants under the 1993 Stock Option and
Stock Grant Plan of 199,311 common shares to certain executive officers
(excluding the chief executive officer) and other officers. By their terms,
these grants vest in five years, subject to earlier vesting if specified
profit before tax levels are attained by the Company, and in certain other
circumstances, including a change in control of the Company, but not sooner
than two years from the date of grant. As of December 2, 2001, the number of
these outstanding grants had been reduced to 68,272 common shares as a result
of terminations related to the sale of the divested business and the 2001 cost
reduction plan. The net charges to general and administrative expense with
respect to these grants were $64 in fiscal 2001.

The Company has a long-term incentive compensation agreement with Donald L.
Thompson, Chairman of the Board and Chief Executive Officer, entered into at
the time he joined the Company in fiscal 1996. On June 28, 2000, the Company
amended its agreement with Mr. Thompson to replace his stock account
consisting of 175,000 phantom shares of common stock of the Company (fully
vested) with a deferred cash account with an opening balance equal to the
closing value of the stock account on June 28, 2000, determined on the basis
of the fair market value of a share of the Company's common stock on such date
($9.6875) multiplied by 175,000. Prior to Mr. Thompson's termination of
employment, the amount in his deferred cash account will be decreased by
$175,000 for each $1.00 decline in the price of the Company's common stock
below the $9.6875 stock value and will be subsequently increased by $175,000
for each $1.00 increase in the price of the Company's common stock up to, but
not in excess of, the $9.6875 stock value. Mr. Thompson will, however,
continue to be credited with dividend amounts as if he were still credited
with 175,000 phantom shares. In addition, on June 28, 2000, the Company
granted to Mr. Thompson stock options under the Company's 1993 Stock Option
and Stock Grant Plan

F-22

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

13. STOCK-BASED COMPENSATION PLANS: -- (Continued)

for 175,000 common shares at an option price of $9.6875 per share, which was
the fair market value of such common shares at the date of grant. The charges
(credits) to general and administrative expenses with respect to this plan
were $642, $(727), and $(531) in fiscal years 2001, 2000, and 1999,
respectively.

The Company has adopted the disclosure requirements of SFAS No. 123
"Accounting for Stock-Based Compensation," and as permitted under SFAS No.
123, applies APB No. 25 and related interpretations in accounting for its
stock option plans, and accordingly does not record compensation costs. If the
Company had elected, beginning in fiscal 1997, to recognize compensation cost
based on fair value of the options granted at grant date as prescribed by SFAS
No. 123, earnings and earnings per share would have approximated the pro forma
amounts shown below:

2001 2000 1999
-------- ------ ------

Earnings:
As reported:
Income from continuing operations................................................ $ 3,296 $4,137 $9,564
Net income (loss)................................................................ $(24,526) $1,969 $6,427
Pro forma:
Income from continuing operations................................................ $ 3,010 $3,454 $8,422
Net income (loss)................................................................ $(24,812) $1,286 $5,285
Basic earnings per share:
As reported:
Income from continuing operations................................................ $ .37 $ .42 $ .91
Net income (loss)................................................................ $ (2.74) $ .20 $ .61
Pro forma:
Income from continuing operations................................................ $ .34 $ .35 $ .80
Net income (loss)................................................................ $ (2.78) $ .13 $ .50
Diluted earnings per share:
As reported:
Income from continuing operations................................................ $ .37 $ .42 $ .91
Net income (loss)................................................................ $ (2.73) $ .20 $ .61
Pro forma:
Income from continuing operations................................................ $ .34 $ .35 $ .80
Net income (loss)................................................................ $ (2.76) $ .13 $ .50

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

2001 2000 1999
----- ----- -----

Expected dividend yield ................................................................. 9.95% 4.50% 4.21%
Risk-free interest rate ................................................................. 5.03% 5.87% 5.45%
Expected volatility ..................................................................... 38.08% 33.47% 29.99%
Expected life (in years) ................................................................ 4.0 3.6 4.4

The weighted average estimated fair values of employee stock options granted
during fiscal 2001, 2000, and 1999 were $.68, $2.08, and $2.18 per share,
respectively. These pro forma disclosures are not likely to be representative
of the effects on earnings and earnings per common share in future years,
because, among other things, they do not take into consideration pro forma
compensation expense related to grants made prior to the Company's fiscal year
1997.

F-23

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

14. SHAREHOLDERS' RIGHTS PLAN:

The Company's 1990 Rights Agreement and the Rights distributed to the
Company's shareholders under that Agreement expired by their terms on December
31, 2000, and the Company Series A Junior Participating Preferred Stock
authorized for possible issuance pursuant to the Rights has ceased to be a
series of stock which the Company is authorized to issue.

15. COMMITMENTS AND CONTINGENCIES:

Leases:
The capitalized lease obligations (see Note 10) represent amounts payable
under leases that are, in substance, installment purchases. Property, plant
and equipment includes the following assets under capital leases:

2001 2000
------- -------

Land ...................................................... $ 152 $ 152
Buildings ................................................. 1,356 1,356
Machinery and equipment ................................... 455 466
Accumulated depreciation .................................. (1,811) (1,816)
------- -------
$ 152 $ 158
======= =======

The Company has the option to purchase the above assets at any time during the
terms of the leases for amounts sufficient to redeem and retire the underlying
lessor debt obligations. The capitalized lease obligations have various
principal payments that mature no later than June 15, 2004.

The minimum rental commitments under all noncancellable leases as of December
2, 2001 are as follows:

Operating
Fiscal Period Operating Leases
------------- ----------------

2002 ........................................................ $2,045
2003 ........................................................ 1,042
2004 ........................................................ 816
2005 ........................................................ 448
2006 ........................................................ 15
Thereafter .................................................. -
------
Minimum lease payments ...................................... $4,366
======

Rent expense, including related real estate taxes charged to operations,
amounted to $3,205, $3,544 and $3,398 for fiscal years 2001, 2000, and 1999,
respectively.

Contingencies:

The Company has employment/severance (change in control) agreements with its
officers under which severance payments and benefits would become payable in
the event of specified terminations of employment following a change in
control (as defined) of the Company. The Company also has termination policies
applicable to officers and other employees which provide severance payments
and benefits in the event of certain terminations of employment. In the event
of a change in control of the Company and subsequent termination of all
employees, the maximum contingent severance liability would have been
approximately $13.2 million at December 2, 2001.

The Company is involved on a continuing basis in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions
has been named as a potentially responsible party for the remediation of
sites. Expenses incurred by the Company to date relating to violations of and
compliance with environmental laws and permits and site remediation have not
been material. While it is impossible to predict

F-24

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

15. COMMITMENTS AND CONTINGENCIES: -- (Continued)

with certainty, management currently does not foresee such expense in the
future as having a material effect on the Company's business, results of
operations, or financial condition.

There are other contingent liabilities with respect to product warranties,
legal proceedings, and other matters occurring in the normal course of
business. In the opinion of management, all such matters are adequately
covered by insurance or by accruals, and if not so covered, are without merit
or are of such kind, or involve such amounts, as would not have significant
effect on the financial condition or results of operations of the Company, if
disposed of unfavorably.

16. CASH FLOW INFORMATION:
Cash payments (receipts) for interest and income taxes (net of refunds) were
as follows:

2001 2000 1999
------ ------ ------

Interest paid (net of amounts capitalized of $103, $167, and $104 in fiscal years
2001, 2000, and 1999, respectively) .................................................. $4,786 $4,503 $4,661
Income taxes ......................................................................... $ (558) $ 864 $2,934

Excluded from the accompanying Consolidated Statements of Cash Flows are the
effects of certain non-cash investing and financing activities as follows:

2001 2000 1999
---- ---- ----

Fair value of assets acquired .............................................................. -- -- $441
Liabilities assumed or created ............................................................. -- -- 361

17. QUARTERLY FINANCIAL DATA (UNAUDITED):
Quarterly financial data for each of the quarters during fiscal years 2001 and
2000 are as follows:

2001
----------------------------------------
First Second Third Fourth
------- ------- --------- -------

Net sales ............................................................................. $42,263 $39,135 $ 42,743 $36,729
Gross profit .......................................................................... 17,380 15,783 15,689 14,540
Income (loss) from continuing operations .............................................. 2,500 1,179 1,151 (1,534)
Loss from discontinued operations ..................................................... (821) (196) (1,132) (295)
Gain (loss) on sale of discontinued operations ........................................ -- -- (27,715) 2,337
------- ------- --------- -------
Net income (loss) ..................................................................... 1,679 983 (27,696) 508

Basic earnings per common share:
Income (loss) from continuing operations .............................................. $ .28 $ .13 $. 13 $ (.17)
Loss from discontinued operations ..................................................... (.09) (.02) (.13) (.03)
Gain (loss) on sale of discontinued operations ........................................ -- -- (3.11) .26
------- ------- --------- -------
Net income (loss) per share ........................................................... $ .19 $ .11 $ (3.11) $ .06
======= ======= ========= =======
Diluted earnings per common share:
Income (loss) from continuing operations .............................................. $ .27 $ .13 $ .13 $ (.17)
Loss from discontinued operations ..................................................... (.09) (.02) (.13) (.03)
Gain (loss) on sale of discontinued operations ........................................ -- -- (3.09) .26
------- ------- --------- -------
Net income (loss) per share ........................................................... $ .18 $ .11 $ (3.09) $ .06
======= ======= ========= =======

F-25

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

17. QUARTERLY FINANCIAL DATA (UNAUDITED): -- (Continued)

2000
--------------------------------------
First Second Third Fourth
------- ------- ------- -------

Net sales ............................................................................... $43,737 $41,797 $46,801 $43,445
Gross profit ............................................................................ 16,855 16,122 18,754 16,817
Income from continuing operations ....................................................... 2,260 956 302 619
Income (loss) from discontinued operations .............................................. (58) 59 (1,590) (579)
------- ------- ------- -------
Net income (loss) ....................................................................... 2,202 1,015 (1,288) 40

Basic earnings per common share:
Income from continuing operations ....................................................... $ .23 $ .10 $ .03 $ .06
Loss from discontinued operations ....................................................... (.01) - (.16) (.06)
------- ------- ------- -------
Net income (loss) per share ............................................................. $ .22 $ .10 $ (.13) -
======= ======= ======= =======
Diluted earnings per common share:
Income from continuing operations ....................................................... $ .23 $ .10 $ .03 $ .06
Loss from discontinued operations ....................................................... (.01) - (.16) (.06)
------- ------- ------- -------
Net income (loss) per share ............................................................. $ .22 $ .10 $ (.13) -
======= ======= ======= =======

The sum of the quarterly income (loss) per share data may not be the same as
income (loss) per share for the year due to changes in the number of average
outstanding shares. The third quarters of fiscal years 2001 and 2000 include
13 weeks and 14 weeks, respectively.

The first quarter of fiscal 2001 net income includes pre-tax expenses of $.2
million ($.01 per share) for implementation costs in connection with the 1999
restructuring plan and a pre-tax charge of $.1 million ($.01 per share) for
accrued interest relating to the patent infringement litigation. (See Notes 4
and 20.)

The second quarter of fiscal 2001 net income includes pre-tax expenses of $.1
million ($.01 per share) for implementation costs in connection with the 1999
restructuring plan and a pre-tax charge of $.1 million ($.01 per share) for
accrued interest relating to the patent infringement litigation. (See Notes 4
and 20.)

During the third quarter of fiscal 2001, the Company recorded an estimated
after-tax loss of $28.2 million, or $3.16 per share, related to the sale of
its commercial Graphics Products business, which sale was completed in the
fourth quarter of fiscal 2001. In addition, the Company recorded a tax benefit
of $.5 million after-tax ($.05 per share) resulting from a resolution of a
prior year tax exposure in connection with a 1997 divestiture. This item is
included in the total tax benefit recorded for loss on disposal of a
discontinued business. (See Note 3.) The third quarter of fiscal 2001 net loss
includes pre-tax expenses of $.1 million ($.01 per share) for implementation
costs in connection with the 1999 restructuring plan and credits of $.2
million pre-tax ($.02 per share) relating to reductions of some of the
reserves related to the 1999 restructuring plan. (See Note 4.)

The fourth quarter of 2001 net income includes pre-tax charges of $3.9
million, or $.30 per share, relating to the 2001 cost reduction plan. In
addition, the Company adjusted its effective tax rate due to the fourth
quarter loss from continuing operations from a 33.2% tax expense in the first
nine months of fiscal 2001 to 29.5% for the full year. The effect of this
change in estimate was a decrease in the fourth quarter loss from continuing
operations of $.7 million, or $.08 per share. See Note 11. The Company also
adjusted its estimated after-tax loss related to the 2001 sale of the divested
business to reflect certain closing and tax adjustments.

The first quarter of fiscal 2000 net income includes pre-tax expenses of $.1
million ($.01 per share) for implementation costs in connection with the 1999
restructuring plan.

The second quarter of fiscal 2000 net income includes pre-tax expenses of $.2
million ($.01 per share) for implementation costs in connection with the 1999
restructuring plan. In addition, the Company reduced by $.1

F-26

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

17. QUARTERLY FINANCIAL DATA (UNAUDITED): -- (Continued)

million pre-tax ($.01 per share) some of its reserves related to its 1997
strategic plan and its 1997 business divestitures. (See Note 4.)

The third quarter of fiscal 2000 net income includes pre-tax expenses of $.1
million ($.01 per share) for implementation costs in connection with the 1999
restructuring plan and a pre-tax charge of $3.6 million ($.24 per share)
relating to a patent infringement suit with respect to one of the Company's
minor products. (See Notes 4 and 20.)

The fourth quarter of fiscal 2000 net income includes a pre-tax charge of $.2
million ($.01 per share) for accrued interest relating to the patent
infringement litigation. In addition, the Company reduced by $.2 million pre-
tax ($.01 per share) some of its reserves related to the 1999 restructuring
plan and 1997 strategic plan. (See Notes 4 and 20.)

18. INDUSTRY SEGMENT INFORMATION:
During fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 requires the
presentation of descriptive information about reportable segments that is
consistent with that made available to management to assess performance. As a
result of the sale of the commercial Graphics Products business in fiscal 2001
(see Note 3) 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' long-lived assets are located in North America.

Total export sales aggregated $15.2 million, $18.0 million, and $16.2 million
in fiscal years 2001, 2000, and 1999, respectively, of which $10.8 million,
$11.3 million, and $10.5 million in fiscal years 2001, 2000, and 1999,
respectively, originated in Canada. The Company's two largest customers
together accounted for 24%, 22%, and 20% of net sales in fiscal years 2001,
2000, and 1999, respectively.

19. FINANCIAL INSTRUMENTS:
Off-Balance Sheet Risk:

Letters of credit are issued by the Company during the ordinary course of
business through major domestic banks as required by certain vendor contracts.
As of December 2, 2001 and December 3, 2000, the Company had outstanding
letters of credit for $1 million.

Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments ($20.7 million
and $21.4 million at December 2, 2001 and December 3, 2000, respectively) with
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.

The Company provides credit, in the normal course of business, to a large
number of distributors and retailers and generally does not require collateral
or other security to support customer receivables. Management believes that
concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer base
and their dispersion across many different industries and geographies.
However, the Company's ten largest customers accounted for approximately 57%
and 46% of accounts receivable at December 2, 2001 and December 3, 2000, and
net sales to the Company's two largest customers together were 24%, 22%, and
20% of total net sales for fiscal 2001, 2000, and 1999, respectively. The
Company performs ongoing credit evaluations of its customers, maintains
allowances for potential credit losses, and carries credit insurance coverage
for most of its large customer accounts.

F-27

HUNT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands except per share and per share amount, unless otherwise
indicated)

19. FINANCIAL INSTRUMENTS: -- (Continued)

Fair Value:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:

Cash and cash equivalents -- The carrying amount approximates fair value
because of the short maturity of these instruments.

Debt (excluding capital lease obligations) -- The fair value of the Company's
debt is estimated based on the current rates offered to the Company for debt
of the same remaining maturities.

Forward exchange contracts -- The Company entered into a one-month Canadian
forward exchange contract with a notional value of approximately $1.9 million.
The contract has no carrying value since it was entered into at fair market
value on the last day of fiscal 2001.

The estimated fair values of the Company's financial instruments as of
December 2, 2001 and December 3, 2000 are as follows:

2001 2000
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------

Cash and cash equivalents ............................................................. $25,966 $25,966 $23,878 $23,878
Debt (excluding capital lease obligations) ............................................ $25,000 $26,222 $52,676 $56,211

20. PATENT INFRINGEMENT LITIGATION:

Several years ago, the Company was sued for patent infringement with respect to
one of its minor products. After a jury trial in 1998, a judgment was entered
against the Company in the amount of $3.3 million, plus interest and costs. The
verdict was appealed, and contrary to the expectations of the Company and its
patent counsel, a three-judge panel of the U.S. Court of Appeals affirmed the
judgment in July 2000. Subsequently, a request filed with the Court of Appeals
to have the case reconsidered by all twelve judges of such court was denied in
October 2000. As a result, the Company recorded a liability of $3.8 million
pre-tax (including interest and other costs) in fiscal 2000. The Company then
petitioned for a review of the decision by the Supreme Court of the United
States, which petition was denied in April 2001. The Company recorded an
additional liability of $.1 million pre-tax for interest costs relating to this
matter in fiscal 2001. All amounts recorded relating to this matter are included
in the accompanying Consolidated Statements of Operations under restructuring
and other. During the fiscal 2001 third quarter, the Company made a payment to
the plaintiff in the amount of approximately $3.9 million in satisfaction of
this judgment. However, the Company and its patent counsel continue to pursue
other options for overturning the verdict.

F-28

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years 2001, 2000, and 1999
(in thousands)

Column A
- -------- Column B Column C Column D Column E
--------- Additions --------- ---------
-----------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Classification Of Period Expenses Accounts Deductions Period
- -------------- ---------- ---------- ---------- ---------- ----------

2001:
Allowance for doubtful accounts............................... $ 873 $ 374 $ 121(E) $ 337(A) $1,031
====== ====== ======= ====== ======
Reserve for customer returns and deductions................... $ 926 $ 57 $ (145)(E) $ 133(B) $ 705
====== ====== ======= ====== ======
Reserve for inventory obsolescence............................ $2,022 $2,211 $(1,891)(E) $ 984(C) $1,358
====== ====== ======= ====== ======
2000:
Allowance for doubtful accounts............................... $ 967 $ (51) - $ 43(A) $ 873
====== ====== ======= ====== ======
Reserve for customer returns and deductions................... $1,101 $ 11 - $ 186(B) $ 926
====== ====== ======= ====== ======
Reserve for inventory obsolescence............................ $2,262 $1,007 - $1,247(C) $2,022
====== ====== ======= ====== ======
1999:
Allowance for doubtful accounts............................... $1,721 $ 161 $ 14(D) $ 929(A) $ 967
====== ====== ======= ====== ======
Reserve for customer returns and deductions................... $1,060 $ 176 - $ 135(B) $1,101
====== ====== ======= ====== ======
Reserve for inventory obsolescence............................ $2,432 $ 828 - $ 998(C) $2,262
====== ====== ======= ====== ======

(A) Doubtful accounts written off, net of collection expenses and reclasses.
(B) Primarily credits issued to customers.
(C) Largely the result of programs to dispose of fully reserved obsolete
inventory. Amount is net of
recoveries.
(D) Primarily due to business acquisitions.
(E) Primarily due to business divestiture.

F-29

EXHIBIT INDEX
(of Exhibits filed herewith)

(4)(a)(1) Note Purchase Agreement dated as of August 1, 1996 between the
Company and several insurance companies

(4)(a)(2) Consent and Amendment to Note Agreement dated as of November 14,
2001

(4)(b) Credit Agreement dated as of December 21, 2001 between the Company
and First Union National Bank, Fleet National Bank, and other
lenders

(10)(b) 1983 Stock Option and Stock Grant Plan, as amended, of the Company

(10)(f)(2) List of Executive Officers Who Are Parties to Change of Control
Agreements

(10)(g)(6) Amendment No. 4 to Supplemental Executive Benefits Plan

(10)(h)(1) Employment Agreement, dated as of April 8, 1996, between the Company
and Donald L. Thompson

(10)(h)(5) Transition and Separation Agreement dated November 30, 2001

(10)(i)(2) Form of Agreement under the Officer Severance Plan

(10)(i)(3) List of Departing Executive Officers Whose Arrangements are
Essentially as Provided Under the Officer Severance Plan and Form of
Agreement

(10)(j) Supplemental Deferred Compensation Agreement, dated as of February
6, 2002 between the Company and John W. Carney

(10)(k) Form of Arrangement between the Company and Bradley P. Johnson

(21) Subsidiaries

(23) Consent of PricewaterhouseCoopers LLP