<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, 1996
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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: 13,419,328 as of October 31, 1996
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"Index of Exhibits" is page 9 herein
Page 1 of 10
<PAGE> 2
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 Nine Months Ended
September 30, September 30,
------------------------------------------ -------------------------------------------
1996 1995 1996 1995
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Net sales $ 151,563 $ 148,894 $ 537,651 $ 549,948
Cost of sales 127,082 131,492 441,125 466,264
------------------ ------------------ ------------------ -------------------
Gross profit 24,481 17,402 96,526 83,684
Selling, general and
administrative expenses 23,843 23,284 80,682 75,108
Restructuring costs -- (275) -- 1,840
------------------ ------------------ ------------------ -------------------
Operating income (loss) 638 (5,607) 15,844 6,736
Other expense (income)
Interest expense 1,614 1,821 5,433 6,362
Interest income (29) (17) (67) (83)
Other 108 94 (109) 94
------------------ ------------------ ------------------ -------------------
Earnings (loss) before
income taxes (1,055) (7,505) 10,587 363
Income tax expense (benefit) (797) (3,014) 3,327 90
------------------ ------------------ ------------------ -------------------
Net earnings (loss) (258) (4,491) 7,260 273
================== ================== ================== ===================
Earnings per common share:
Weighted average
number of common
shares 13,445,681 13,431,641 13,473,532 13,420,033
================== ================== ================== ===================
Net earnings (loss) per ($0.02) ($0.33) $0.54 $0.02
common share
================== ================== ================== ===================
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 2 of 10
<PAGE> 3
<TABLE>
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts In Thousands)
<CAPTION>
September 30, December 31,
1996 1995
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ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,509 $ 2,558
Accounts and notes receivable, net 97,437 81,242
Inventories 83,334 65,175
Prepaid expenses and federal income taxes 14,834 14,463
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Total current assets 197,114 163,438
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Property, plant and equipment, at cost 224,685 214,240
Less accumulated depreciation and amortization (136,008) (121,149)
---------------------- ----------------------
Net property, plant and equipment 88,677 93,091
Excess of cost over net assets acquired, net 24,354 24,953
Deferred federal income taxes 9,166 9,166
Other assets 7,944 7,898
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$ 327,255 $ 298,546
====================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable 17,530 5,750
Current installments of long-term obligations 7,332 7,685
Accounts payable 50,791 39,856
Accrued expenses and other current liabilities 52,024 47,058
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Total current liabilities 127,677 100,349
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Long-term obligations, less current installments 47,182 51,236
Other long-term liabilities 33,499 30,857
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Total liabilities 208,358 182,442
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Shareholders' equity:
Preferred stock -- --
Common stock 16,302 16,213
Additional paid-in capital 61,274 60,644
Retained earnings 79,516 75,701
Less: cost of treasury shares (38,195) (36,454)
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Total shareholders' equity 118,897 116,104
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$ 327,255 $ 298,546
====================== ======================
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 3 of 10
<PAGE> 4
<TABLE>
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 7,260 $ 273
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Provision for restructuring -- 212
Depreciation and amortization 17,803 17,689
Loss on sale of property, plant and equipment -- 3
Changes in assets and liabilities:
Accounts and notes receivable, net (16,195) 4,226
Inventories (18,159) 3,496
Prepaid expenses and Federal income taxes (371) 792
Other assets (967) (1,345)
Accounts payable 10,935 (295)
Accrued expenses and other current liabilities 4,966 (8,374)
Other long-term liabilities 2,642 143
Other (5) 64
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Net cash provided by operating activities 7,909 16,884
================================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,885) (19,042)
Proceeds from sale of property, plant and equipment 16 23
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Net cash used in investing activities (11,869) (19,019)
================================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings 11,780 10,060
Issuance of long-term obligations 95 155
Reduction of long-term debt (4,502) (1,884)
Issuance of common shares 719 428
Purchase of treasury shares (1,741) (2,447)
Dividends paid (3,440) (3,430)
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Net cash provided by financing activities 2,911 2,882
================================================================================================================================
Net change in cash and cash equivalents (1,049) 747
Cash and cash equivalents:
Beginning of the year 2,558 1,604
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End of the nine month period $ 1,509 $ 2,351
================================================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 4 of 10
<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, 1995 has not been included. The unaudited
interim consolidated financial statements reflect all adjustments
which, in the opinion of management, are 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, 1996. 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.
Page 5 of 10
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(Dollar Amounts in Thousands, Except Per Share Data)
NET EARNINGS (LOSS)
- -------------------
Huffy Corporation ("Huffy" or "Company") recorded a net loss of $258, or $0.02
per common share for the quarter ended September 30, 1996 compared to a net loss
of $4,491 or $.033 per common share for the same period last year. The
improvement in net earnings is primarily due to a company-wide focus on low cost
production and strong market share gains which resulted from complete,
well-merchandised product line offerings designed to meet customer needs.
Net earnings for the nine months ended September 30, 1996 were $7,260 compared
to $273 for the same period last year. Net earnings per common share for the
nine months ended September 30, 1996 were $0.54 per common share, compared to
$0.02 per common share for the same period last year. Net earnings for 1995
include restructure charges, net of credits, of $1,840, or $0.08 per common
share.
NET SALES
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Net sales for the quarter ended September 30, 1996 were $151,563, up slightly
from the net sales level of $148,894 for the same quarter in 1995. Net sales for
the nine months ended September 30, 1996 were $537,651, a 2.2% decrease from net
sales of $549,948 for the same period last year. For the nine months ended
September 30, 1996, net sales in the Consumer Products segment were negatively
impacted by the sale of a heavier mix of juvenile and promotional products in
the bicycle business and lower sales volume for the basketball business
resulting from unseasonable weather during the Spring selling season. This
decrease was partially offset by increased sales of lawn and garden and juvenile
products, reflecting market gains as a result of new product introductions and
increased market penetration in existing product lines. In the Services for
Retail segment, net sales increased primarily as a result of continued market
share gains in the non-bike and in-home assembly business and increased market
penetration in the inventory services business.
Page 6 of 10
<PAGE> 7
GROSS PROFIT
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Gross profit for the quarter ended September 30, 1996 was $24,481, up from the
$17,402 achieved in the third quarter of 1995. Expressed as a percentage of net
sales, gross profit for the third quarter of 1996 was 16.2% compared to 11.7%
for the third quarter of 1995. The increase in gross profit in the Consumer
Products segment occurred primarily in the bicycle business, and was due to
improved productivity and lower labor costs. Partially offsetting this favorable
performance in the bicycle business was a decrease in gross profit dollars in
the basketball business resulting from lower sales volume. In the Services for
Retail segment, gross margin increased primarily due to improved labor
efficiency in the inventory services business.
Gross profit for the nine months ended September 30, 1996 was $96,526, or 18.0%
of net sales, versus $83,684, or 15.2% of net sales for the same period in 1995.
The increase in gross margin percentage resulted primarily from lower production
costs in the bicycle business and productivity gains in the lawn and garden
business. In the Services for Retail segment, gross profit margins improved from
1995 levels due primarily to increased labor efficiency in the inventory
services business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses were $23,843 for the third quarter
of 1996, compared to $23,284 for the same period of 1995. For the nine months
ended September 30, 1996, selling, general and administrative expenses were
$80,682 versus $75,108 for the same period in 1995. The increase in selling,
general and administrative expense for the quarter and nine months ended
September 30, 1996 is primarily due to increased advertising expenditures in the
Consumer Products segment and higher incentive compensation accruals.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
There have been no other significant changes in the Company's liquidity and
capital resources as of September 30, 1996 from those discussed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. The Company's
balance sheet reflects fluctuations in both current assets and current
liabilities attributable to seasonal changes in the operations of its
businesses.
INTEREST EXPENSE
- ----------------
Interest expense for the third quarter of 1996 was $1,614 versus $1,821 for the
same quarter of 1995. Interest expense for the nine months ended September 30,
1996 was $5,433, or $929 lower than interest expense for the same period of
1995. This decrease in interest expense is due to principal reductions in
long-term debt and lower average short-term borrowings.
Page 7 of 10
<PAGE> 8
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.
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, 1996 /s/ Timothy G. Howard
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Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 8 of 10
<PAGE> 9
<TABLE>
INDEX OF EXHIBITS
<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 9 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION FROM THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,509
<SECURITIES> 0
<RECEIVABLES> 99,421
<ALLOWANCES> (1,984)
<INVENTORY> 83,334
<CURRENT-ASSETS> 197,114
<PP&E> 224,685
<DEPRECIATION> (136,008)
<TOTAL-ASSETS> 327,255
<CURRENT-LIABILITIES> 127,677
<BONDS> 47,182
<COMMON> 16,302
0
0
<OTHER-SE> 102,595
<TOTAL-LIABILITY-AND-EQUITY> 327,255
<SALES> 537,651
<TOTAL-REVENUES> 537,651
<CGS> 441,125
<TOTAL-COSTS> 441,125
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 778
<INTEREST-EXPENSE> 5,433
<INCOME-PRETAX> 10,587
<INCOME-TAX> 3,327
<INCOME-CONTINUING> 7,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,260
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
