<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 June 30, 1997
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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 (IRS Employer
Incorporation or organization) Identification No.)
225 Byers Road, Miamisburg, Ohio 45342
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(Address of principal executive offices)(Zip Code)
(937) 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
--- ---
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: 12,738,334 as of July 30, 1997
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"Index of Exhibits" is page 10 herein Page 1 of 10
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<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 Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $213,101 $166,452 $385,028 $318,386
Cost of sales 175,644 135,234 320,149 259,024
-------- -------- -------- --------
Gross profit 37,457 31,218 64,879 59,362
Selling, general and
administrative expenses 26,441 23,070 46,420 45,564
-------- -------- -------- --------
Operating income 11,016 8,148 18,459 13,798
Other expense (income)
Interest expense 1,024 1,988 3,116 3,767
Interest income (58) (21) (76) (38)
Other 590 (243) 1,392 (146)
-------- -------- -------- --------
Earnings before income taxes 9,460 6,424 14,027 10,215
Income tax expense 3,230 1,995 4,853 3,693
-------- -------- -------- --------
Earnings from continuing
operations 6,230 4,429 9,174 6,522
Discontinued operations:
Earnings (loss) from discontinued
operations, net of income tax
expense (benefit) of ($707), $73,
($458) and $431 (1,275) 169 (813) 996
Gain on disposal of discontinued
operations, net of income tax expense
of $4,481 541 -- 541 --
-------- -------- -------- --------
Net earnings $ 5,496 $ 4,598 $ 8,902 $ 7,518
======== ======== ======== ========
Earnings per common share:
Weighted average number of
common shares 12,886,150 13,513,558 13,106,958 13,487,457
========== ========== ========== ==========
Earnings from continuing operations $0.49 $0.33 $0.70 $0.48
Earnings (loss) from discontinued
operations ($0.06) $0.01 ($0.02) $0.08
-------- -------- -------- --------
Net earnings per common share $0.43 $0.34 $0.68 $0.56
======== ======== ======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 2 of 10
<PAGE> 3
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,443 $ 2,048
Accounts and notes receivable, net 129,257 81,175
Inventories 56,348 54,233
Prepaid expenses and federal income taxes 15,581 14,393
Net assets of discontinued operations -- 50,776
-------- --------
Total current assets 216,629 202,625
-------- --------
Property, plant and equipment, at cost 199,379 193,736
Less accumulated depreciation and amortization 120,820 114,846
-------- --------
Net property, plant and equipment 78,559 78,890
Excess of cost over net assets acquired, net 13,341 13,556
Deferred federal income taxes 8,810 8,085
Other assets 4,963 5,111
-------- --------
$322,302 $308,267
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable -- 38,910
Current installments of long-term obligations 7,593 7,593
Accounts payable 53,003 24,917
Accrued expenses and other current liabilities 68,706 42,107
-------- --------
Total current liabilities 129,302 113,527
-------- --------
Long-term obligations, less current installments 43,611 43,897
Other long-term liabilities 36,642 34,871
-------- --------
Total liabilities 209,555 192,295
-------- --------
Shareholders' equity:
Preferred stock -- --
Common stock 16,443 16,411
Additional paid-in capital 62,775 62,488
Retained earnings 83,266 76,845
Less: cost of treasury shares (49,737) (39,772)
-------- --------
Total shareholders' equity 112,747 115,972
-------- --------
$322,302 $308,267
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 3 of 10
<PAGE> 4
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings from continuing operations $ 9,174 $ 6,522
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 9,173 9,822
Loss on sale of property, plant and equipment 254 --
Deferred federal income tax benefit (4,038) --
Changes in assets and liabilities:
Accounts and notes receivable, net (48,082) (27,329)
Inventories (2,115) (6,287)
Prepaid expenses and federal income taxes 2,125 1,279
Other assets 2 459
Accounts payable 28,086 13,424
Accrued expenses and other current liabilities 26,599 6,974
Other long-term liabilities 1,771 3,107
Other (212) 94
-------- --------
Net cash provided by continuing operating
activities 22,737 8,065
Discontinued operations:
Gain on disposal of discontinued operations 541 --
Earnings (loss) from discontinued operations (813) 996
Items not affecting cash, net 1,516 2,339
Cash provided by (used in) discontinued
operations 49,260 (9,615)
-------- --------
Net cash provided by (used in)
discontinued operating activities 50,504 (6,280)
Net cash provided by operating activities 73,241 1,785
======================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,804) (5,397)
Proceeds from sale of property, plant
and equipment 69 16
-------- --------
Net cash used in investing activities (8,735) (5,381)
======================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in shot-term borrowings (38,910) 2,920
Reduction of long-term debt (286) (164)
Issuance of common shares 319 692
Purchase of treasury shares (9,965) --
Dividends paid (2,269) (2,291)
-------- --------
Net cash provided by (used in)
financing activities (51,111) 1,157
======================================================================================
Net change in cash and cash equivalents
Cash and cash equivalent: 13,395 (2,439)
Beginning of the year 2,048 2,497
-------- --------
End of the six month period $ 15,443 $ 58
======================================================================================
</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, 1996 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 June 30, 1997. 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: On April 21, 1997, Huffy Corporation sold the assets of its Denver-based
juvenile products business, Garry Baby Products Company, for $73 million
to Evenflo Company, Inc. The results for Gerry Baby Products Company
have been classified as discontinued operations for all periods
presented in the Consolidated Statements of Earnings and Consolidated
Statements of Cash Flow. The assets and liabilities of discontinued
operations at December 31, 1996 have been classified in the Consolidated
Balance Sheets as "Net assets of discontinued operations."
Summarized balance sheet data for discontinued operations is as follows:
(Dollar Amounts in Thousands) December 31,
1996
---------
Current assets $ 34,301
Property, plant & equipment, net 10,869
Other assets 13,364
---------
Total assets $ 58,534
Current liabilities 7,758
---------
Net assets $ 50,776
=========
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<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997
COMPARED TO THE
THREE AND SIX MONTHS ENDED JUNE 30, 1996
(Dollar Amounts in Thousands, Except Per Share Data)
NET EARNINGS
Huffy Corporation ("Huffy" or "Company") had net earnings from continuing
operations of $6,230, or $0.49 per common share for the quarter ended June 30,
1997, compared to $4,429, or $0.33 per common share for the same period last
year. The improvement in net earnings is primarily due to a company-wide focus
on cost reduction. The net earnings from continuing operations excludes results
and gain from the Company's juvenile products business which was sold to
Evenflo Company, Inc. on April 21, 1997. The juvenile products business had net
sales of $4,359 and a net loss of $1,275, or $0.10 per common share, compared
to net sales of $33,103 and net earnings of $169, or $0.01 per common share for
the second quarter of 1996. The gain on the sale of the juvenile products
business was $541, or $0.04 per common share.
Net earnings from continuing operations for the six months ended June 30, 1997
were $9,174, or $0.70 per common share compared to $6,522, or $0.48 per common
share for the same period last year. The net earnings from continuing
operations excludes operating results and gain from the sale of the juvenile
products business. The juvenile products business had net sales of $37,180 and
a net loss of $813, or $0.06 per common share, compared to net sales of $67,702
and net earnings of $996, or $0.08 per common share for the first six months of
1996. The gain on the sale of the juvenile products business was $541, or $0.04
per common share.
NET SALES
Net sales for the quarter ended June 30, 1997 were $213,101, up 28% from
$166,452 for the same quarter in 1996. Net sales for the six months ended June
30, 1997 were $385,028, a 21% increase from net sales of $318,386 for the same
period last year. During the second quarter and for the six months, net sales
in the Consumer Products segment increased due to strong seasonal demand for
bicycles and basketball systems, combined with increased market penetration and
new customer distribution in the wheelbarrow portion of the lawn and garden
business. In the Services
Page 6 of 10
<PAGE> 7
for Retail segment, net sales increased due to increased market penetration in
both the inventory service and product assembly and supplier services business.
GROSS PROFIT
Gross profit for the quarter ended June 30, 1997 was $37,457, up from the
$31,218 achieved in the second quarter of 1996. Expressed as a percentage of
net sales, gross profit for the second quarter of 1997 was 17.6% compared to
18.8% for the second quarter of 1996. The increase in gross profit dollars in
both the Consumer Products segment and the Services for Retail was due to the
increased sales volume. The gross profit as a percentage of sales was
negatively impacted in the Consumer Products segment, primarily in the lawn and
garden tool business by a shift in mix. In the Services for Retail segment,
gross profit as a percentage of sales decreased due to competitive market
pressures, and inefficiencies associated with new customer startup in the
inventory service business.
Gross profit for the six months ended June 30, 1997 was $64,879, or 16.9% of
net sales, versus $59,362, or 18.6% of net sales for the same period in 1996.
Both the Consumer Products and Services for Retail segments contributed to the
increase in gross profit for the first six months of 1997. This increase in
gross profit dollars was primarily volume driven on both segments. Gross profit
expressed as a percent of net sales declined versus the prior year in the
Consumer Products segment due to customer demand for a less favorable mix of
products, while the Services for Retail segment was unfavorably impacted by new
customer startup inefficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $26,441 for the second
quarter of 1997, compared to $23,070 for the same period in 1996. For the six
months ended June 30, 1997, selling, general and administrative expenses were
$46,420 versus $45,564 for the same period in 1996. The increase in selling,
general and administrative expenses for the quarter and six months is primarily
due to volume related commissions and customer service costs.
SALE OF JUVENILE PRODUCTS BUSINESS
On April 21, 1997, the Company sold the assets of its juvenile products
business, Gerry Baby Products Company to Evenflo Company, Inc., for $73 million.
LIQUIDITY AND CAPITAL RESOURCES
There have been no other significant changes in the Company's liquidity and
capital resources as of June 30, 1997 from those discussed in the Company's
Annual Report on Form 10-K for the year
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<PAGE> 8
ended December 31, 1996. 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 second quarter of 1997 was $1,024 or $964 lower than
interest expense for the same quarter of 1996. Interest expense for the six
months ended June 30, 1997 was $3,116 versus $3,767 for the same period of
1996. The decrease in interest expense is the result of the scheduled
reductions in long term debt, and reduced levels of short-term borrowings made
possible by the Gerry Baby Products Company sale.
ENVIRONMENTAL
As disclosed in the Company's Annual Report to Shareholders for the year ended
December 31, 1996, the Company, along with others, has been designated as a
potentially responsible party (PRP) by the U.S. Environmental Protection Agency
(the "EPA") with respect to claims involving the discharge of hazardous
substances into the environment in the Baldwin Park operable unit of the San
Gabriel Valley Superfund site ("Superfund"). Currently, the Company, along with
other PRP's, the San Gabriel Basin Water Quality Authority and numerous local
water districts are working with the EPA on a mutually satisfactory remedial
plan. In developing its estimate of environmental remediation costs, the
Company considers, among other things, currently available technological
solutions, alternative cleanup methods and risk-based assessments of the
contamination and, as applicable, an estimation of its proportionate share of
remediation costs. The Company may also make use of external consultants, and
consider, when available, estimates by other PRP's and governmental agencies
and information regarding the financial viability of other PRP's. On May 15,
1997, the Company, along with other PRP's, received special notice letters from
the EPA requesting a good faith offer of remediation for the Superfund. Such
response is currently due on August 29, 1997. Based upon information currently
available, the Company believes it is unlikely that it will incur substantial
previously unanticipated costs as a result of failure by other PRP's to satisfy
their responsibilities for remediation costs.
Page 8 of 10
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on April 25,
1997. At such meeting the Shareholders of the Company elected as
Directors W. Anthony Huffman, Donald K. Miller, Richard L. Molen, and
Joseph P. Viviano, each for a three year term expiring in 2000, and Don
R. Grager for a one year term expiring in 1998. Shares were voted as
follows: FOR: Don R. Graber (12,097,427), W. Anthony Huffman
(12,087,895), Donald K. Miller (12,096,158), Richard L. Molen
(12,077,222), and Joseph P. Vivano (12,039,163); WITHHELD (INCLUDING
BROKER NON-VOTES); Don R. Graber (64,833), W. Anthony Huffman (74,365),
Donald K. Miller (66,102), Richard L. Molen (85,038), and Joseph P.
Vivano (123,097)
In addition, the Shareholders also ratified the appointment of KPMG Peat
Marwick LLP as the Company's independent public accountants for calendar
year 1997. In connection with such ratification, there were 12,107,073
shares voted for ratification, 20,805 cast against, and 34,382 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. During the quarter ended June 30, 1997, the Company filed one report
on Form 8-K, dated April 21, 1997, reporting the sale of Gerry Baby
Products Company and Gerry Wood Products Company to Evenflo
Company, Inc.
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
July 30, 1997 /s/ Timothy G. Howard
- ------------- ------------------------------
Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 9 of 10
<PAGE> 10
INDEX OF EXHIBITS
Exhibit
No. Item
- ------- --------------------------------
(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
Page 10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,443
<SECURITIES> 0
<RECEIVABLES> 131,446
<ALLOWANCES> (2,189)
<INVENTORY> 56,348
<CURRENT-ASSETS> 216,629
<PP&E> 199,379
<DEPRECIATION> (120,820)
<TOTAL-ASSETS> 322,302
<CURRENT-LIABILITIES> 129,302
<BONDS> 0
0
0
<COMMON> 16,443
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 322,302
<SALES> 385,028
<TOTAL-REVENUES> 385,028
<CGS> 320,149
<TOTAL-COSTS> 366,569
<OTHER-EXPENSES> 1,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,116
<INCOME-PRETAX> 14,027
<INCOME-TAX> 4,853
<INCOME-CONTINUING> 9,174
<DISCONTINUED> (272)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,902
<EPS-PRIMARY> .68
<EPS-DILUTED> 0
</TABLE>
