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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 March 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5325
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Huffy Corporation
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(Exact name of registrant as specified in its charter)
Ohio 31-0326270
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Byers Road, Miamisburg, Ohio 45342
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(Address of principal executive offices) (Zip Code)
(513) 866-6251
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(Registrant's telephone number, including area code)
No Change
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(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
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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
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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: 14,781 038 as of April 28, 1994
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"Index of Exhibits" is page 10 herein Page 1 of 10
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). COMPANY FOR WHICH REPORT IS FILED:
--------------------
<TABLE>
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar Amounts in Thousands, Except Per Share Data)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1994 1993
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<S> <C> <C>
Net sales $189,220 $214,999
Cost of sales 153,234 175,427
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Gross profit 35,986 39,572
Selling, general and administrative expenses 26,381 29,201
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Operating profit 9,605 10,371
Other (income) expense
Interest expense, net 1,669 2,297
Other (225) 18
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Earnings before income taxes and cumulative
effect of accounting change 8,161 8,056
Income taxes 3,316 3,147
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Earnings before cumulative effect of accounting change 4,845 4,909
Cumulative effect of accounting change, net of income taxes -- (1,084)
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Net earnings $4,845 $3,825
=============== ==============
Earnings per common share:
PRIMARY
Weighted average number of common shares 14,899,397 12,782,245
============== ==============
Earnings per common share before cumulative effect of
accounting change $0.33 $0.38
Cumulative effect of accounting change, net of income taxes -- (.08)
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Net earnings per common share $0.33 $0.30
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FULLY DILUTED
Weighted average number of common shares 14,899,397 14,755,580
============== =============
Earnings per common share before cumulative effect of
accounting change $0.33 $0.35
Cumulative effect of accounting change, net of income taxes -- (.07)
-------------- ------------
Net earnings per common share $0.33 $0.28
============== ============
See accompanying notes to interim consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts In Thousands)
MARCH 31, DECEMBER 31,
1994 1993
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $486 $4,140
Accounts and notes receivable, net 147,569 93,268
Inventories 65,566 82,144
Prepaid expenses and Federal income taxes 16,143 17,813
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Total current assets 229,764 197,365
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Property, plant and equipment, at cost 172,953 170,719
Less accumulated depreciation and amortization (101,201) (97,072)
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Net property, plant and equipment 71,752 73,647
Excess of cost over net assets acquired, net 26,354 26,555
Other assets 21,763 21,770
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$349,633 $319,337
========= ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $27,250 $3,500
Current installments of long-term obligations 5,326 5,968
Accounts payable 49,629 43,713
Accrued expenses 35,285 37,466
Other current liabilities 13,997 13,123
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Total current liabilities 131,487 103,770
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Long-term obligations, less current installments 43,194 43,211
Other long-term liabilities 35,431 36,327
Shareholders' equity:
Preferred stock -- --
Common stock 15,977 15,963
Additional paid-in capital 58,169 58,059
Retained earnings 79,353 75,920
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153,499 149,942
Less: cost of treasury shares (13,978) (13,913)
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Total shareholders' equity 139,521 136,029
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$349,633 $319,337
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</TABLE>
See accompanying notes to interim consolidated financial statements.
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HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $4,845 $3,825
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 5,302 5,119
Gain on sale of property, plant & equipment (18) (52)
Changes in assets and liabilities:
Accounts and notes receivable, net (54,301) (38,776)
Inventories 16,578 (10,686)
Prepaid expenses and Federal income taxes 1,670 1,693
Other assets (371) (820)
Accounts payable 5,916 15,152
Accrued expenses (2,181) 3,243
Other current liabilities 865 5,641
Other long-term liabilities (896) 534
Other (156) (197)
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Net cash used in operating activities (22,747) (15,324)
______________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,350) (3,491)
Proceeds from sale of property, plant & equipment 1,540 62
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Net cash used in investing activities (2,810) (3,429)
______________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 23,750 19,330
Issuance of long-term obligations 3 77
Reduction of long-term debt (662) (14)
Issuance of common shares 124 69
Purchase of treasury shares (65) --
Dividends paid (1,247) (944)
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Net cash provided by financing activities 21,903 18,518
______________________________________________________________________________________________________
Net change in cash and cash equivalents (3,654) (235)
Cash and cash equivalents:
Beginning of the year 4,140 3,489
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End of the three month period $486 $3,254
______________________________________________________________________________________________________
See accompanying notes to interim consolidated financial statements.
</TABLE>
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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 of operations for the periods presented and to present fairly
the consolidated financial position of Huffy Corporation as of March
31, 1994. All such adjustments are of a normal recurring nature.
Note 2: The Consolidated Statement of Earnings and the Consolidated Statement
of Cash flows for the three months ended March 31, 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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Three Months Ended March 31, 1994
---------------------------------
Compared to the Three Months Ended March 31, 1993
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(Dollar Amounts in Thousands, Except Per Share Data)
Net Earnings
- - ------------
Net earnings for Huffy Corporation ("Huffy" or "Company") for the quarter ended
March 31, 1994 were $4,845 compared to $3,825 for the same period last year.
Fully diluted earnings per share for the first quarter were $.33 per common
share, compared to $.28 per common share during the first quarter of 1993. The
1993 net earnings included a one-time cumulative charge of $1,084, or $.07 per
common share, to reflect a change in accounting for postemployment benefits
upon adoption of Statement of Financial Accounting Standards (SFAS) No. 112.
Operating profit for the first quarter of 1994 was $9,605 compared to $10,371
for the same period in 1993. The most significant factor contributing to the
reduction in operating profit occurred at Huffy Bicycle Company in the
Recreation and Leisure Time Products segment. Huffy Bicycle Company experienced
soft retail sales reflecting market conditions and retail customers' increased
emphasis on inventory management. This loss in earnings at Huffy Bicycle
Company was partially offset by increased earnings at True Temper Hardware
Company through improved operating margins and increased manufacturing
efficiency. The Services for Retail and Juvenile Products segments had earnings
comparable with the first quarter of 1993.
Net Sales
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Net sales for the quarter ended March 31, 1994 were $189,220, down 12% from net
sales of $214,999 for the same quarter in 1993. The decrease in net sales
occurred predominately in the Recreation and Leisure Time Products segment.
Huffy Bicycle Company net sales were impacted by a soft retail sales
environment resulting from 1993 retail year end inventory carryover with some
customers, a shift in product mix to lower priced juvenile bicycles, and
inclement weather which delayed seasonal spring sales. The Juvenile Products
segment also had slightly lower sales due to a sluggish retail market. In the
Services for Retail segment both Washington Inventory Service and Huffy Service
First, Inc had increased sales due to increased market penetration and
distribution.
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Gross Profit
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Gross profit for the quarter ended March 31, 1994 was $35,986, a 9% decrease
from the $39,572 achieved in the first quarter of 1993. The dollar decrease in
gross profit was due primarily to the decreased sales volume at Huffy Bicycle
Company in the Recreation and Leisure Time Products segment, 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 the reduction of
fixed manufacturing costs, related to the restructuring of True Temper's
operations in 1993. The gross profit for the Juvenile Products and Services for
Retail segments was consistent with prior years.
Gross profit as a percentage of net sales for the first quarter of 1994 was
19.0% compared to 18.4% for the same quarter in 1993. The improvement in gross
margin as a percentage of net sales is due primarily to reductions in fixed
manufacturing expenses and improvements in manufacturing efficiency at True
Temper Hardware Company. This was partially offset at Huffy Bicycle Company due
to a change in sales mix from the first quarter of 1993 and higher fixed costs
per unit created by lower production levels. Gross profit as a percentage of
net sales increased in the Juvenile Products segment due primarily to the
increased operating efficiency of Gerry Baby Products Company's new
manufacturing facility coupled with the introduction of new products.
Selling General and Administrative Expenses
- - -------------------------------------------
Selling, general and administrative expenses were $26,381 for the first quarter
of 1994 compared to $29,201 for the same period in 1993. The dollar decrease in
selling, general and administrative expenses 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 a
reduction in bad debt expense and successful cost reduction efforts. At True
Temper Hardware Company, the decrease was the result of a reduction in bad debt
expense, liability claims, and restructuring adjustments related to the second
quarter shut-down of manufacturing facilities in Anderson, South Carolina.
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 quarter of 1994, the Company charged $613 against the restructuring
reserve. The charges related primarily to current year operating losses of
product lines which will be discontinued in the second quarter as a part of the
restructuring plan and other administrative costs of the manufacturing
facilities located in Anderson, South Carolina.
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Net Interest Expense
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Net interest expense for the first quarter of 1994 decreased by $628 or 27.3%,
from the first quarter of 1993 due to the call for redemption and subsequent
conversion in October, 1993 of the Company's 7 1/4% Convertible Subordinated
Debentures.
Liquidity and Capital Resources
- - -------------------------------
The Company's liquidity and capital resources remained substantially unchanged
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 increases in both
current assets and current liabilities attributable to seasonal changes in the
operations of its businesses.
PART II -- OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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The Annual Meeting of Shareholders of the Company was held on April
15, 1994. At such meeting, the Shareholders of the Company elected
William K. Hall, Stephen P. Huffman, Donald K. Miller, Richard L.
Molen and Fred G. Wall, each for a three year term expiring in 1997,
Jack D. Michaels and James F. Robeson, each for a two year term
expiring in 1996, and Linda B. Keene for a one year term expiring in
1995. Votes were cast as follows: FOR: William K. Hall
(12,786,918), Stephen P. Huffman (12,786,138), Linda B. Keene
(12,776,816), Jack D. Michaels (12,777,922), Donald L. Miller
(12,785,174), Richard L. Molen (12,769,194), James F. Robeson
(12,775,859), and Fred G. Wall (12,785,387); WITHHELD (INCLUDING
BROKER NON-VOTES): William K. Hall (121,070), Stephen P. Huffman
(121,850), Linda B. Keene (131,172), Jack D. Michaels (130,066),
Donald K. Miller (122,814), Richard L. Molen (138,794), James F.
Robeson (132,129), and Fred G. Wall (122,601). The shareholders also
ratified the appointment of KPMG Peat Marwick as the Company's
independent public accountants for calendar year 1994. In connection
with such ratification, there were 12,537,052 votes cast for
ratification, 32,958 cast against, and 337,978 cast to abstain
(including broker non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits - The Exhibits, as shown in the "Index of Exhibits"
attached hereto as page 10, 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.
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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)
May 3, 1994 /s/ Timothy G. Howard
- - ------------------ ---------------------------------
Date Timothy G. Howard
Vice President and Controller
(Principal Accounting Officer)
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INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Item
- - ------- --------------------------------------------
<S> <C>
(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) Not applicable
(99) Not applicable
</TABLE>
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