<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarter Ended September 30, 1994
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- --------------
Commission file number 1-5325
------------------------
Huffy Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0326270
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Byers Road, Miamisburg, Ohio 45342
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(513) 866-6251
----------------------------------------------------
(Registrant's telephone number, including area code)
No Change
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding Shares: 13,998,376 as of November 8, 1994
------------------------- -------------------------
"Index of Exhibits" is page 11 herein
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). COMPANY FOR WHICH REPORT IS FILED:
--------------------
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 153,332 $ 167,232 $ 557,450 $ 602,326
Cost of sales 126,537 137,013 453,606 490,502
--------- --------- --------- ---------
Gross profit 26,795 30,219 103,844 111,824
Selling, general and administrative
expenses 22,061 24,104 75,029 81,450
--------- --------- --------- ---------
Operating profit 4,734 6,115 28,815 30,374
Other (income) expense
Interest expense, net 1,252 2,151 4,230 6,778
Other (212) 182 (458) 313
--------- --------- --------- ---------
Earnings before income taxes
and cumulative effect of
accounting change 3,694 3,782 25,043 23,283
Income taxes 1,092 1,474 9,635 9,197
--------- --------- --------- ---------
Earnings before cumulative
effect of accounting change 2,602 2,308 15,408 14,086
Cumulative effect of accounting
change, net of income taxes -- -- -- (1,084)
--------- --------- --------- ---------
Net earnings $ 2,602 $ 2,308 $ 15,408 $ 13,002
========= ========== ========= =========
(Continued....)
</TABLE>
Page 2 of 11
<PAGE> 3
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
- - -
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings per common share:
PRIMARY
Weighted average number of
common shares 14,675,383 12,866,681 14,710,976 12,818,404
========== ========== ========== ==========
Earnings per common share before
cumulative effect of
accounting change $ .18 $ .18 $ 1.05 $ 1.10
Cumulative effect of accounting
change, net of income taxes -- -- -- (.08)
---------- ---------- ---------- ----------
Net earnings per
common share $ .18 $ .18 $ 1.05 $ 1.02
========== ========== ========== ==========
FULLY DILUTED
Weighted average number of
common shares 14,675,383 14,853,476 14,710,976 14,798,667
========== ========== ========== ==========
Earnings per common share
before cumulative effect of
accounting change $ .18 $ .18 $ 1.05 $ 1.02
Cumulative effect of accounting
change, net of income taxes -- -- -- ( .07)
---------- ---------- ---------- ----------
Net earnings per
common share $ .18 $ .18 $ 1.05 $ .95
========== ========== ========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 3 of 11
<PAGE> 4
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
--------------- --------------
ASSETS
- - ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,669 $ 4,140
Accounts and notes receivable, net 103,649 93,268
Inventories 70,995 82,144
Prepaid expenses and federal income taxes 16,818 17,813
---------- ----------
Total current assets 206,131 197,365
--------- ---------
Property, plant and equipment, at cost 192,960 170,719
Less accumulated depreciation and amortization (110,320) (97,072)
-------- ----------
Net property, plant and equipment 82,640 73,647
Funds held for construction 11,325 --
Excess of cost over net assets acquired, net 25,909 26,555
Other assets 21,573 21,770
---------- ----------
$ 347,578 $ 319,337
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Notes payable $ -- $ 3,500
Current installments of long-term obligations 5,373 5,968
Accounts payable 52,174 43,713
Accrued expenses 45,147 37,466
Restructuring reserve 3,405 9,296
Other current liabilities 2,883 3,827
---------- ----------
Total current liabilities 108,982 103,770
---------- ----------
Long-term obligations, less current installments 62,018 43,211
Other long-term liabilities 34,889 36,327
Shareholders' equity:
Preferred stock -- --
Common stock 16,084 15,963
Additional paid-in capital 59,497 58,059
Retained earnings 87,617 75,920
---------- ---------
163,198 149,942
Less: cost of treasury shares (21,509) (13,913)
---------- ----------
Total shareholders' equity 141,689 136,029
--------- ---------
$ 347,578 $ 319,337
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 4 of 11
<PAGE> 5
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 15,408 $ 13,002
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 15,816 15,374
Loss on sale of property, plant & equipment 334 128
Changes in assets and liabilities:
Accounts and notes receivable, net (10,381) 11,119
Inventories 11,149 (9,277)
Prepaid expenses and federal income taxes 995 (243)
Other assets (921) (1,944)
Accounts payable 8,461 (1,935)
Accrued expenses 7,681 6,395
Restructuring reserve (5,891) --
Other current liabilities (953) 904
Other long-term liabilities (1,438) 894
Other (55) (534)
------------ ----------
Net cash provided by operating activities 40,205 33,883
======================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (24,896) (13,207)
Funds held for construction (11,325) --
Proceeds from sale of property, plant & equipment 1,631 120
------------ ----------
Net cash used in investing activities (34,590) (13,087)
======================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in short-term borrowings (3,500) (12,975)
Issuance of long-term obligations 21,023 30
Reduction of long-term obligations (2,811) (2,453)
Issuance of common shares 1,559 194
Purchase of treasury shares (7,596) --
Dividends paid (3,761) (2,837)
----------- ----------
Net cash used in financing activities 4,914 (18,041)
======================================================================================================
Net change in cash and cash equivalents 10,529 2,755
Cash and cash equivalents:
Beginning of period 4,140 3,489
----------- -----------
End of period $ 14,669 $ 6,244
======================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 5 of 11
<PAGE> 6
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands)
Note 1: Footnote disclosure which would substantially duplicate the
disclosure contained in the Annual Report to Shareholders for the
year ended December 31, 1993 has not been included. The unaudited
interim consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results for the periods presented and to present
fairly the consolidated financial position of Huffy Corporation as of
September 30, 1994. All such adjustments are of a normal recurring
nature.
Note 2: The Consolidated Statement of Earnings for the nine months ended
September 30, 1993 and the Consolidated Statement of Cash Flows for
the nine months ended September 30, 1993 have been restated to
reflect the adoption of Statement of Financial Accounting Standards
No. 112 "Employers Accounting for Postemployment Benefits" in the
fourth quarter of 1993, effective January 1, 1993.
Note 3: Inventories of Huffy Bicycle Company and Huffy Sports Company are
valued using the dollar value LIFO method and, as a result, it is
impractical to separate inventory values between raw materials,
work-in-process and finished products on an interim basis.
Note 4: The Company acquired a facility and began modifications necessary for
bicycle production in the third quarter of 1994. The new facility
will require a capital investment of approximately $23,000. On
August 1, 1994, the City of Farmington, Missouri issued and sold
Industrial Development Revenue Bonds (Huffy Corporation Project),
Series 1994 in the aggregate principal amount of $20,000 (the
"Bonds") to provide financing for the acquisition, construction and
installation of equipment and certain industrial facilities in
Farmington, Missouri (the "Site"). The Bonds bear interest at the
rate of 8.23% per annum payable in quarterly installments. The Bonds
mature in equal semi-annual installments over a fourteen year period
beginning in 2000. The Company has entered into a Lease Agreement
with the City of Farmington for the Site and a Guarantee Agreement
for the benefit of the holders of the Bonds, both effective as of
August 1, 1994.
As of September 30, 1994, approximately $11,700 had been invested in
facility construction. Remaining bond funds in the amount of $11,325
have been recorded as funds held for construction and are classified
as a long-term asset on the consolidated balance sheet.
Note 5: The Company received a general notice from the United States
Environmental Protection Agency (USEPA) indicating that the USEPA
considers the Company a potentially responsible party ("PRP") with
respect to claims involving the discharge of hazardous substances
into the environment. Currently, the Company, along with other PRP's
and the local California Water Quality Authority, are working with
the USEPA on a mutually satisfactory remedial plan. In the third
quarter of 1994, a pre-tax charge of $1,000 was provided for the
estimated future cost of remediation of such site. In the opinion of
Management, the amounts accrued related to this site, as well as
additional amounts previously accrued for other potential
environmental liabilities are adequate and, accordingly, ultimate
resolution of these matters are not expected to have a material
effect on the Company's consolidated financial position.
Note 6: Third quarter earnings include a credit to income for $1,800 related
to insurance proceeds.
Page 6 of 11
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994
COMPARED TO THE
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1993
(Dollar Amounts in Thousands, Except Per Share Data)
Net Earnings
- - ------------
Net earnings for Huffy Corporation ("Huffy" or "Company") for the quarter ended
September 30, 1994 were $2,602, up 12.7% compared to the same period last year.
Fully diluted earnings per share for the third quarter of 1994 and 1993 were
$.18 per common share. Reduced interest expense, due primarily to the
redemption of all of the company's outstanding 7 1/4% Convertible Subordinated
Debentures in the fourth quarter of 1993, contributed significantly to the
increased earnings in the third quarter of 1994 compared to the same period in
1993. Net earnings in the Recreation and Leisure Time Products and Juvenile
Products segments were below those reported for the the third quarter of 1993.
Net earnings in the Services for Retail segment were comparable to net earnings
reported for the third quarter of 1993.
Net earnings for the nine months ended September 30, 1994 were $15,408,
compared to $13,002 for the same period last year. Fully diluted earnings per
share for the nine months ended September 30, 1994 were $1.05 per common share,
compared to $.95 per common share for the same period last year. 1993 net
earnings and net earnings per common share include a one-time cumulative charge
of $1,084, or $.07 per common share, as a result of the adoption of Statement
of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits."
The Recreation and Leisure Time Products segment has experienced a decline in
both sales and operating profits in the nine months ended September 30, 1994
compared to the same period in 1993. Huffy Bicycle Company was negatively
impacted by highly competitive pricing at the retail level, and a shift in mix
to lower priced juvenile bikes. Additionally, Huffy Sports Company's operating
earnings were down in comparison to the prior year primarily as a result of
increased raw material costs. These decreased earnings were partially offset
by increased earnings at True Temper Hardware Company, caused by a favorable
shift in product mix, growth of market share in seasonal product lines, and
improvements in manufacturing productivity.
Operating profits in the Juvenile Products segment were lower than the same
period in 1993 due primarily to increased raw material costs and increased
costs for customer service.
The Services for Retail segment benefited from an increase in year to year
earnings at Washington Inventory Service resulting from increased volume caused
by the continuing market shift to more complex inventory requirements, more
inventory cycle counts, and a shift from in-house inventory crews to external
service crews. Huffy Service First experienced significant growth in earnings
as a result of increased market penetration in both the consumer product
assembly and in the supplier services business.
Net Sales
- - ---------
Net sales for the quarter ended September 30, 1994 were $153,332, down 8.3%
from the net sales level of $167,232 for the same quarter in 1993. The
decrease occurred primarily in the Recreation and Leisure Time Products segment
due to a shift in product mix to lower priced juvenile bikes at Huffy Bicycle
Company, an intensely competitive retail environment in both the bicycle and
basketball backboard markets, and the discontinuance of certain unprofitable
product lines at True Temper Hardware Company,. The sales decrease in the
Recreation and Leisure Time Products
Page 7 of 11
<PAGE> 8
segment was partially offset by higher sales volume in both the Juvenile
Products and the Services for Retail segments.
Net sales for the nine months ended September 30, 1994 were $557,450, a 7.5%
decrease from net sales of $602,326 for the same period last year. The
decrease in net sales occurred predominately in the Recreation and Leisure Time
Products segment. In this segment, Huffy Bicycle Company net sales were lower
than last year due to a soft retail sales environment resulting from 1993
retail year end inventory carryover with some customers and a shift in product
mix to lower priced juvenile bicycles. In addition, the discontinuance of
certain product lines at True Temper Hardware Company in 1994 also influenced
year to year comparisons. The Juvenile Products segment also had slightly
lower sales due to a sluggish retail market. Net sales decreases in the
Recreation and Leisure Time Products and Juvenile Products segments were
partially offset by increased sales in the Services for Retail segment.
Gross Profit
- - ------------
Gross profit for the quarter ended September 30, 1994 was $26,795, down 11.3%
from the $30,219 achieved in the third quarter of 1993. Expressed as a
percentage of net sales, gross profit for the third quarter of 1994 was 17.5%
compared to 18.1% for the third quarter of 1993. The decrease in gross profit
dollars occurred primarily in the Recreation and Leisure Time Products segment.
Within this segment, the gross profit dollar and percentage decrease occurred
primarily at Huffy Bicycle Company, due to competitive pricing in the market
and a shift in mix to lower margin product. The decrease in gross profit at
Huffy Bicycle Company was partially offset by increased gross profit at True
Temper Hardware Company resulting from a favorable shift in product mix and
improved manufacturing efficiency.
Gross profit for the nine months ended September 30, 1994 was $103,844, or
18.6% of net sales, versus $111,824, or 18.6% of net sales, for the same period
in 1993. The dollar decrease in gross profit was due primarily to decreased
volume in the Recreation and Leisure Time Products segment, offset by improved
profit margins in the Juvenile Products and Services for Retail segments.
Within the Recreation and Leisure Time Products segment, dollar decreases in
gross profit at Huffy Bicycle Company were partially offset by a dollar
increase in gross profit at True Temper Hardware Company. The increase at True
Temper Hardware Company was due primarily to reductions in fixed manufacturing
expenses and improvements in manufacturing efficiency as a result of
restructuring the lawn and garden tools business.
Selling, General and Administrative Expenses
- - --------------------------------------------
Selling, general and administrative expenses were $22,061 for the third quarter
of 1994, compared to $24,104 for the same period of 1993. Expressed as a
percentage of net sales, selling, general and administrative expenses were
14.4% for both the third quarter of 1994 and 1993.
Selling, general and administrative expenses for the nine months ended
September 30, 1994 were $75,029 versus $81,450 for the same period in 1993.
Expressed as a percentage of net sales, selling, general & administrative
expenses were 13.5% for the nine months ending September 30, 1994 and 1993.
The dollar decrease in selling, general and administrative expenses for both
the third quarter and the nine months ended September 30, 1994, occurred
primarily in the Recreation and Leisure Time Products segment at Huffy Bicycle
Company and True Temper Hardware Company. The decrease at Huffy Bicycle
Company was due to successful cost reduction efforts, and a reduction in bad
debt expense. At True Temper Hardware Company, the decrease was primarily the
result of the restructuring of the lawn and garden tools business, but was also
impacted by a reduction in bad debt expense.
Page 8 of 11
<PAGE> 9
The Company received a general notice from the United States Environmental
Protection Agency (USEPA) indicating that the USEPA considers the Company a
potentially responsible party ("PRP") with respect to claims involving the
discharge of hazardous substances into the environment. Currently, the
Company, along with other PRP's and the local California Water Quality
Authority, are working with the USEPA on a mutually satisfactory remedial plan.
In the third quarter of 1994, a pre-tax charge of $1,000 was provided for the
estimated future cost of remediation of such site. In the opinion of
Management, the amounts accrued related to this site, as well as additional
amounts previously accrued for other potential environmental liabilities are
adequate and, accordingly, ultimate resolution of these matters are not
expected to have a material effect on the Company's consolidated financial
position.
Third quarter earnings include a credit to income for $1,800 related to the
accrual of insurance proceeds.
Restructuring Reserve
- - ---------------------
The estimate recorded in the Company's 1993 Annual Report for restructuring the
Company's lawn and garden tools business remains substantially unchanged.
During the first nine months of 1994, the Company charged $5,891 against the
restructuring reserve. The charges related primarily to current year operating
losses of product lines which have been discontinued as a part of the
restructuring plan, and other administrative costs associated with
restructuring the business.
Liquidity and Capital Resources
- - -------------------------------
The Company acquired a facility and began modifications necessary for bicycle
production in the third quarter of 1994. The new facility will require a
capital investment of approximately $23,000. On August 1, 1994, the City of
Farmington, Missouri issued and sold Industrial Development Revenue Bonds
(Huffy Corporation Project), Series 1994 in the aggregate principal amount of
$20,000 (the "Bonds") to provide financing for the acquisition, construction
and installation of equipment and certain industrial facilities in Farmington,
Missouri (the "Site"). The Bonds bear interest at the rate of 8.23% per annum
payable in quarterly installments. The Bonds mature in equal semi-annual
installments over a fourteen year period beginning in 2000. The Company has
entered into a Lease Agreement with the City of Farmington for the Site and a
Guarantee Agreement for the benefit of the holders of the Bonds, both effective
as of August 1, 1994.
As of September 30, 1994, approximately $11,700 had been invested in facility
construction. Remaining bond funds in the amount of $11,325 have been recorded
as funds held for construction and are classified as a long-term asset on the
consolidated balance sheet.
On September 4, 1994 the Company's Board of Directors authorized the purchase
of up to $20,000 of the Company's common stock. As of September 30, 1994,
302,700 shares had been repurchased.
There have been no other significant changes in the Company's liquidity and
capital resources as of September 30, 1994 from those discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993. The
Company's balance sheet reflects fluctuations in both current assets and
current liabilities attributable to seasonal changes in the operations of its
businesses.
Page 9 of 11
<PAGE> 10
PART II -- OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits - The Exhibits, as shown in the "Index of
Exhibits", attached hereto as page 11, are filed as a part
of this Report.
b. No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUFFY CORPORATION, registrant
November 8, 1994 /s/ Timothy G. Howard
- - ----------------------- ---------------------------
Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 10 of 11
<PAGE> 11
INDEX OF EXHIBITS
Exhibit
No. Item
- - ------- ---------------------
(2) Not applicable
(4) Not applicable
(10) Not applicable
(11) Not applicable
(15) Not applicable
(18) Not applicable
(19) Not applicable
(22) Not applicable
(23) Not applicable
(24) Not applicable
(27) Financial Data Schedule
(99) Not applicable
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 14,669
<SECURITIES> 0
<RECEIVABLES> 106,604
<ALLOWANCES> (2,955)
<INVENTORY> 70,995
<CURRENT-ASSETS> 206,131
<PP&E> 192,960
<DEPRECIATION> (110,320)
<TOTAL-ASSETS> 347,578
<CURRENT-LIABILITIES> 108,982
<BONDS> 62,018
<COMMON> 16,084
0
0
<OTHER-SE> 147,114
<TOTAL-LIABILITY-AND-EQUITY> 347,578
<SALES> 557,450
<TOTAL-REVENUES> 557,450
<CGS> 453,606
<TOTAL-COSTS> 453,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 470
<INTEREST-EXPENSE> 4,230
<INCOME-PRETAX> 25,043
<INCOME-TAX> 9,635
<INCOME-CONTINUING> 15,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,408
<EPS-PRIMARY> $1.05
<EPS-DILUTED> $1.05
</TABLE>
