<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, 1995
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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
- ------------------------------ -------------------
(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
--------------------------------------------------------------------------
(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: 13,433,000 as of October 31, 1995
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"Index of Exhibits" is page 10 herein Page 1 of 10
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). COMPANY FOR WHICH REPORT IS FILED:
--------------------
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1995 1994 1995 1994
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $148,894 $153,332 $549,948 $557,450
Cost of sales 131,492 126,537 466,264 453,606
----------- ---------- ----------- ----------
Gross profit 17,402 26,795 83,684 103,844
Selling, general and
administrative expenses 23,284 22,061 75,108 75,029
Restructuring costs (credits) (275) -- 1,840 --
---------- ---------- ----------- ----------
Operating profit (loss) (5,607) 4,734 6,736 28,815
Other expense (income)
Interest expense 1,821 1,509 6,362 4,567
Interest income (17) (257) (83) (337)
Other 94 (212) 94 (458)
---------- ---------- ----------- ----------
Earnings (loss) before income taxes (7,505) 3,694 363 25,043
Income tax expense (benefit) (3,014) 1,092 90 9,635
---------- ---------- ----------- ----------
Net earnings (loss) (4,491) 2,602 273 15,408
========== ========== =========== ==========
Earnings (loss) per common share:
Weighted average
number of common
shares 13,431,641 14,675,383 13,420,033 14,710,976
========== ========== ========== ==========
Net earnings
(loss) per
common share ($0.33) $0.18 $0.02 $1.05
========== ========== ========== ==========
<FN>
See accompanying notes to interim consolidated financial statements. Page 2 of 10
</TABLE>
<PAGE> 3
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
ASSETS ------------- -------------
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,351 $ 1,604
Accounts and notes receivable, net 101,576 105,802
Inventories 64,458 67,954
Prepaid expenses and federal income taxes 13,146 13,938
-------------- --------------
Total current assets 181,531 189,298
Property, plant and equipment, at cost 210,810 192,856
Less accumulated depreciation and amortization (118,380) (103,256)
-------------- -------------
Net property, plant and equipment 92,430 89,600
Excess of cost over net assets acquired, net 25,155 25,755
Deferred federal income taxes 8,719 8,719
Other assets 9,038 8,596
------------- -------------
$ 316,873 $ 321,968
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable 10,060 --
Current installments of long-term obligations 5,419 5,300
Accounts payable 43,558 43,853
Accrued expenses and other current liabilities 41,663 49,820
------------- -------------
Total current liabilities 100,700 98,973
Long-term obligations, less current installments 56,763 58,611
Other long-term liabilities 31,124 30,981
------------- -------------
Total liabilities 188,587 188,565
Shareholders' equity:
Preferred stock -- --
Common stock 16,208 16,166
Additional paid-in capital 60,541 60,155
Retained earnings 87,991 91,089
Less: cost of treasury shares (36,454) (34,007)
------------- -------------
Total shareholders' equity 128,286 133,403
------------- -------------
$ 316,873 $ 321,968
============= =============
<FN>
See accompanying notes to interim consolidated financial statements. Page 3 of 10
</TABLE>
<PAGE> 4
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net earnings $ 273 $ 15,408
Adjustments to reconcile net earnings to net cash
used in operating activities:
Restructuring costs (credits), net of payments 212 (5,891)
Depreciation and amortization 17,689 15,816
Loss on sale of property, plant and equipment 3 334
Changes in assets and liabilities:
Accounts and notes receivable, net 4,226 (10,381)
Inventories 3,496 11,149
Prepaid expenses and federal income taxes 792 995
Other assets (1,345) (921)
Accounts payable (295) 8,461
Accrued expenses and other current liabilities (8,374) 6,728
Other long-term liabilities 143 (1,438)
Other 64 (55)
---------- -----------
Net cash provided by operating activities 16,884 40,205
====================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,042) (24,896)
Funds held for construction -- (11,325)
Proceeds from sale of property, plant and equipment 23 1,631
---------- -----------
Net cash used in investing activities (19,019) (34,590)
====================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings 10,060 (3,500)
Issuance of long-term obligations 155 21,023
Reduction of long-term debt (1,884) (2,811)
Issuance of common shares 428 1,559
Purchase of treasury shares (2,447) (7,596)
(3,430) (3,761)
Dividends paid ---------- -----------
Net cash provided by financing activities 2,882 4,914
====================================================================================================================
Net change in cash and cash equivalents 747 10,529
Cash and cash equivalents:
Beginning of period 1,604 4,140
---------- -----------
End of period $ 2,351 $ 14,669
====================================================================================================================
<FN>
See accompanying notes to interim consolidated financial statements. Page 4 of 10
</TABLE>
<PAGE> 5
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, 1994 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 (the
"Company") as of September 30, 1995. All such adjustments are of a
normal recurring nature.
Note 2: 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 3: During the second quarter of 1995, the Company recorded a pre-tax
restructure charge of $2,115, or $.10 per common share. The
restructure plan includes a 25% reduction in the fixed cost
employment structure of Huffy Bicycle Company as well as a 30%
reduction in the Company's corporate staff. The restructure charge
is comprised of severance and outplacement services for approximately
75 employees. As of September 30, 1995, 38 employees had been
terminated and $637 charged against the reserve.
Note 4: As a result of the continued concentration of sales to high volume
retailers in the juvenile products industry, and the similarity and
growing importance of markets, marketing methods, and channels of
distribution of all of the Company's manufactured products, the
Company has reclassified its operations into the following business
segments:
- Consumer Products: Bicycles, basketball related equipment,
lawn and garden tools, and juvenile products.
- Services for Retail: In-store assembly, repair and display
services, and inventory counting services.
Page 5 of 10
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED TO THE
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994
(Dollar Amounts in Thousands, Except Per Share Data)
Huffy Corporation ("Huffy" or "Company") recorded a net loss of $4,491, or $.33
per common share, for the quarter ended September 30, 1995, compared to net
earnings of $2,602, or $.18 per common share for the same period last year.
The soft retail environment, combined with increased raw material prices and a
product mix shift to promotionally priced products, continued through the third
quarter and negatively impacted earnings.
Net earnings for the nine months ended September 30, 1995 were $273, or $.02
per common share, compared to $15,408, or $1.05 per common share, for the same
period last year. Net earnings for the nine months ended September 30, 1995
include a charge of $2,115, or $.10 per common share, to reflect the cost to
reduce the fixed cost employment structure at Huffy Bicycle Company and to
reengineer and reduce the Company's corporate office staff. The restructuring
charge was partially offset by a restructuring credit of $275 at True Temper
Hardware Company. The remaining decrease in net earnings is due primarily to
continued margin deterioration in the bicycle industry, a continued shift to
lower priced products at retail, and reduced sales margins in all product
companies resulting from soft retail sales.
NET SALES
- ---------
Net sales for the quarter ended September 30, 1995 were $148,894, down 2.9%
from the net sales of $153,332 for the same quarter in 1994. Net sales
decreased in the Consumer Products segment due primarily to the softness at
retail, and a continued shift to lower specification and promotionally priced
products, and intensified price and product competition. In the Services for
Retail segment, net sales were comparable to the previous year.
Net sales for the nine months ended September 30, 1995 were $549,948, a 1.3%
decrease from net sales of $557,450 for the same period last year. The
decrease in net sales occurred in the Consumer Products segment. Huffy Bicycle
Company net sales were lower than last year
Page 6 of 10
<PAGE> 7
due to a soft retail sales environment, significant pricing competition at the
retail level, and continued dumping of bicycles by the People's Republic of
China. Gerry Baby Products' sales were below last year primarily as a result
of soft retail during the period, and a very competitive market environment.
In the Services for Retail segment, Huffy Service First had record sales due
primarily to growth in its consumer product assembly market segment.
GROSS PROFIT
- ------------
Gross profit for the quarter ended September 30, 1995 was $17,402, down
substantially from the $26,795 achieved in the third quarter of 1994.
Expressed as a percentage of net sales, gross profit for the third quarter of
1995 was 11.7% compared to 17.5% for the third quarter of 1994. The decrease
in gross profit as a percentage of net sales occurred primarily in the Consumer
Products segment. Huffy Bicycle Company continued to experience declining
profit margins caused by a highly competitive retail environment, a consumer
preference for promotional product, and pricing pressure caused by the
continued dumping of bicycles in the USA by the People's Republic of China.
Gross margins declined at Huffy Sports Company and True Temper Hardware Company
as a result of a shift in mix to lower margin product. Gerry Baby Products
margins decreased due to a very competitive market environment which put
downward pressure on selling prices and margins. Gross profit for the Services
for Retail business segment were down slightly from the previous year due to
higher than expected labor related costs at Washington Inventory Service and
lower than expected bicycle assembly business at Huffy Service First.
Gross profit for the nine months ended September 30, 1995 was $83,684, or 15.2%
of net sales, versus $103,844, or 18.6% of net sales, for the same period in
1994. In the Consumer Products segment, declining gross margin percentages at
Huffy Bicycle Company, Huffy Sports Company, and Gerry Baby Products Company
were offset by continued improvement at True Temper Hardware Company. True
Temper Hardware Company benefited from additional improvements in operating
efficiency and market share gains in the long-handled garden tools segment, as
well as a $1,587 reduction in environmental reserves resulting from the
favorable resolution of certain contractual issues related to the Company's
purchase of the True Temper Hardware business in 1990.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses were $23,284 for the third quarter
of 1995, compared to $22,061 for the same period of 1994. Expressed as a
percentage of net sales,
Page 7 of 10
<PAGE> 8
selling, general and administrative expenses were 15.6% for the third quarter
of 1995, compared to 14.4% for the same period in 1994. Selling, general and
administrative expenses for the nine months ended September 30, 1995 were
$75,108, or 13.7% of net sales, versus $75,029, or 13.5% of net sales for the
same period in 1994. The increase in selling, general and administrative
expenses for the quarter and nine months ended September 30, 1995 is due
primarily to lower expenses in the third quarter of 1994 due to a credit to
income for insurance proceeds.
RESTRUCTURING COSTS
- -------------------
During the second quarter of 1995, the Company recorded a pre-tax restructure
charge of $2,115, or $.10 per common share. The restructure plan includes a
25% reduction in the fixed cost employment structure of Huffy Bicycle Company
as well as a 30% reduction in the Company's corporate staff. Reductions in the
Company's corporate staff occurred as the result of a desire to reduce fixed
costs, and further decentralize certain functions. Reductions in fixed costs
at Huffy Bicycle Company were made to bring overhead expense in line with
reduced sales levels and to help recover profitability. The restructure charge
is comprised of severance and outplacement services for approximately 75
employees. As of September 30, 1995, 38 employees had been terminated and $637
of severance and outplacement had been charged against the reserve.
INTEREST EXPENSE
- ----------------
Interest expense for the nine months ended September 30, 1995 was $6,362
compared to $4,567 for the same period in 1994. The increase in interest
expense is due to the following: the issuance of industrial development
revenue bonds used to finance the acquisition of the Company's Farmington,
Missouri bicycle facility in the third quarter of 1994; higher average
short-term borrowings in 1995; and higher short-term interest rates in the
first nine months of 1995 compared to the same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
There have been no other significant changes in the Company's liquidity and
capital resources as of September 30, 1995 from those discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. The
Company's balance sheet reflects fluctuations in both current assets and
current liabilities attributable to seasonal changes in the operation of its
businesses.
Page 8 of 10
<PAGE> 9
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 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.
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 14, 1995 /s/ Timothy G. Howard
- ------------------------------- ------------------------------------
Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 9 of 10
<PAGE> 10
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Item
- ------- ------------------------------------
<S> <C>
(2) Not applicable
(3) 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
</TABLE>
Page 10 of 10
<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, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,351
<SECURITIES> 0
<RECEIVABLES> 103,623
<ALLOWANCES> (2,047)
<INVENTORY> 64,458
<CURRENT-ASSETS> 181,531
<PP&E> 210,810
<DEPRECIATION> (118,380)
<TOTAL-ASSETS> 316,873
<CURRENT-LIABILITIES> 100,700
<BONDS> 56,763
<COMMON> 16,208
0
0
<OTHER-SE> 112,078
<TOTAL-LIABILITY-AND-EQUITY> 316,873
<SALES> 549,948
<TOTAL-REVENUES> 549,948
<CGS> 466,264
<TOTAL-COSTS> 466,264
<OTHER-EXPENSES> 1,840
<LOSS-PROVISION> 826
<INTEREST-EXPENSE> 6,362
<INCOME-PRETAX> 363
<INCOME-TAX> 90
<INCOME-CONTINUING> 273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 273
<EPS-PRIMARY> $.02
<EPS-DILUTED> 0
</TABLE>
