<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
Registrant's telephone number, including area code: (937) 866-6251
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, as of January 2, 1997, was $188,768,795.
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of January 2, 1997, was 13,374,197.
"Index of Exhibits" at page 16 of this Report
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. The Huffy Corporation Annual Report to Shareholders for the year ended
December 31, 1996. Only such portions of the Annual Report as are
specifically incorporated by reference under Parts I, II and IV of this
Report shall be deemed filed as part of this Report.
2. The Huffy Corporation Proxy Statement for its Annual Meeting of
Shareholders on April 25, 1997. Only such portions of the Proxy
Statement as are specifically incorporated by reference under
Part III of this Report shall be deemed filed as part of this Report.
---------------
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PART I
ITEM 1. BUSINESS
Huffy Corporation, an Ohio corporation, and its subsidiaries (collectively
called "Huffy" or the "Company") are engaged in the design, manufacture and sale
of Consumer Products and the furnishing of Services for Retail. The Company's
executive offices are located in Miamisburg, Ohio and its principal business
offices and/or manufacturing facilities are located in San Diego, California;
Thornton, Colorado; Farmington, Missouri; Miamisburg and Celina, Ohio; Camp Hill
and Harrisburg, Pennsylvania; Sussex and Suring, Wisconsin; and Whites Cross,
Cork, Ireland.
The general development of business within each business segment (Consumer
Products and Services for Retail) is discussed in more detail below. See also
Part IV herein for financial information relating to each such business segment.
CONSUMER PRODUCTS
Gerry Baby Products Company, Gerry Wood Products Company (collectively,
the "Gerry Companies"), Huffy Bicycle Company, Huffy Sports Company,
and True Temper Hardware Company comprise the Consumer Products segment
of the Company. Principal products within this business segment include
juvenile products, bicycles, basketball backboards and related
products, and lawn and garden tools. Sales of juvenile products, which
also include tricycles, 12" and 16" bicycles and juvenile indoor
basketball units, represented 22.6 percent, 20.7 percent, and 21.0
percent of consolidated revenues of the Company for the years ended
December 31, 1996, 1995, and 1994. Sales of adult bicycles represented
31.2 percent, 33.8 percent, and 36.9 percent of consolidated revenues
of the Company for the years ended December 31, 1996, 1995, and 1994.
Sales of adult basketball backboards, poles, goals and related products
represented 10.2 percent, 12.2 percent and 10.8 percent of consolidated
revenues of the Company for the years ended December 31, 1996, 1995,
and 1994. Sales of lawn and garden tools represented 14.2 percent, 12.4
percent, and 12.1 percent of consolidated revenues of the Company for
the years ended December 31, 1996, 1995, and 1994. Although to date the
export business is not significant, the companies in the Consumer
Products segment participate in various foreign markets and are
actively involved in expanding export volume.
a. Products, Marketing and Distribution
------------------------------------
The Gerry Companies: Gerry Baby Products Company ("GBPC") and
Gerry Wood Products Company ("GWPC") which manufacture juvenile
products are both direct subsidiaries of the Company. The Gerry
Companies' headquarters and GBPC's principal manufacturing
facilities are located in Thornton, Colorado. GWPC is a
manufacturer of juvenile wooden products and is located in
Suring, Wisconsin. The "Gerry" and "Snugli" names are two
prominent brand names in the industry. Gerry(R) baby products
include a wide range of market entries, including car seats,
infant carriers, frame carriers, security gates, strollers,
toilet trainers, electronic baby monitors, and a broad line of
various wood juvenile products including high chairs, cribs,
changing tables and security gates sold under the "Nu-Line"
brand name prior to 1992 and under the Gerry(R) brand name since
1992. Snugli(R) baby products include infant carriers. All of
these juvenile products have wide distribution; the products are
marketed through all of the retail channels that sell juvenile
products: toy chains, warehouse clubs, catalog showrooms,
national and regional high volume retailers, and specialty
shops. In 1994, the Company discontinued its assembly operations
at its facilities located in Vancouver, British Columbia which
prior thereto had been operated through an indirect subsidiary
of the Company, Snugli-Canada, Ltd. In 1987, GBPC entered into a
joint venture known as Takata-Gerico Corporation ("TGC"), with
Takata Corporation of Japan, to manufacture children's car seats
in the
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United States for distribution by GBPC. The joint venture was
subsequently terminated by the parties' mutual agreement in
1992, and in connection with such termination GBPC purchased
certain assets of TGC.
Huffy Bicycle Company: The Huffy(R) bicycle brand is the largest
selling brand of bicycles sold in the United States. The full
line of Huffy(R) bicycles is produced by Huffy Bicycle Company,
a division of the Company, whose manufacturing facilities are
located in Celina, Ohio, and Farmington, Missouri. In 1994,
Huffy Bicycle Company opened the bicycle manufacturing facility
in Farmington, Missouri, to increase manufacturing flexibility,
capacity and market share, and to reduce costs. Included in the
Huffy(R) bicycle line are adult all purpose bicycles; adult all
terrain bicycles; a series of innovative boys' and girls' 20"
bicycles; a series of popular children's 12" and 16" sidewalk
bicycles; and tricycles. Huffy(R) bicycles are extensively
advertised and are sold predominantly through national and
regional high volume retailers, a distribution network
accounting for approximately 70 to 75 percent of all bicycles
sold in the United States. Approximately 90 percent of Huffy
Bicycle Company's bicycles are sold under the Huffy(R) brand
name with the balance being sold under private label brands.
Huffy Sports Company: Huffy Sports Company, a division of the
Company located in Sussex, Wisconsin, is the leading supplier of
basketball backboards, poles, goals, and related products and
juvenile indoor portable basketball units for use at home. Huffy
Sports Company products, many of which bear the logo of the
National Basketball Association ("NBA") as well as the Huffy
Sports(R) trademark, are sold predominately through national and
regional high volume retailers in the United States.
True Temper Hardware Company: True Temper Hardware Company, a
wholly-owned subsidiary of the Company, is headquartered in Camp
Hill, Pennsylvania. True Temper Hardware Company is one of three
leading suppliers of non-powered lawn and garden tools and snow
tools; products include long-handled shovels, hoes, forks,
wheelbarrows, snow shovels, and rakes for use in the home and in
agricultural, industrial and commercial businesses. In 1994,
True Temper Hardware Company discontinued manufacturing
spreaders and pruning tools and sold the assets used to produce
such products, including its Anderson, South Carolina
manufacturing facility. Manufacturing facilities are located in
Camp Hill and Harrisburg, Pennsylvania. True Temper Hardware
Company also owns four sawmill facilities located in Indiana,
New York, Pennsylvania, and Vermont. In addition, True Temper
Limited, an Irish Corporation and a wholly-owned subsidiary of
the Company, has offices and a manufacturing facility in Whites
Cross, Cork, Ireland. True Temper Hardware products are sold
both directly, and through wholesale distributors, to national
and regional high volume retailers and hardware stores. Over 89
percent of True Temper Hardware's products are sold under the
True Temper(R) and Jackson(R) names; the remainder are sold
under other names or under private labels. During 1994 and 1995,
the Company substantially completed a plan to restructure the
True Temper lawn and garden tool business to address
inefficiencies in the manufacturing process and to improve
future profitability of True Temper Hardware Company.
b. Suppliers
---------
Basic materials such as raw steel, steel and aluminum tubing,
plastic, wood, fabric, resins, ash timber, and welding materials
used in the manufacturing operations are purchased primarily
from domestic sources. Alternate sources are available for all
critical products and components, but the sudden loss of any
major supplier could, on a temporary basis, cause a negative
effect on the segment's operations.
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c. Patents, Trademarks and Licenses
--------------------------------
The patents, trademarks (including the registered trademarks
"Gerry", "Snugli", "Huffy", "Huffy Sports", "True Temper" and
"Jackson"), licenses (including the license to use the NBA logo)
and other proprietary rights of the companies in this segment
are deemed important to the Company. The loss by the Company of
its rights under any individual patent, trademark (other than
"Gerry", "Snugli", "Huffy" or "True Temper"), license or other
proprietary right used by this segment would not have a material
adverse effect on the Company or the segment. The loss of the
registered trademark "Gerry", "Snugli", "Huffy" or "True Temper"
could have a material adverse effect on the Company and this
segment. The Company has no reason to believe that anyone has
rights to either the "Gerry", "Snugli", "Huffy" or "True Temper"
trademark for the products in connection with which such
trademarks are used.
d. Seasonality and Inventory
-------------------------
Due to the relatively short lapse of time between placement of
orders for products and shipments, the Company normally does not
consider its backlog of orders as significant to this business
segment. Because of rapid delivery requirements of their
customers, the companies in this segment maintain significant
quantities of inventories of finished goods to meet their
customers' requirements. Juvenile products' sales, excluding
sales of juvenile bicycles, are not seasonal. Sales of juvenile
and adult bicycles are seasonal in that sales tend to be higher
in the Spring and Fall of each year. Basketball products tend to
have varying degrees of seasonality, none of which are
significant to the operations of the Company. Sales of lawn and
garden products and snow tools tend to be higher in the Spring
and Winter of each year, respectively.
e. Competition and Customers
-------------------------
There are numerous juvenile products competitors in the United
States market, six of which are deemed significant. The Gerry
Companies believe they are competitive because of their
continued efforts to provide innovative new products of high
quality at competitive costs and to support their products with
outstanding customer service. In the high volume retailer
bicycle business, Huffy Bicycle Company has numerous competitors
in the United States market, only two of which are deemed
significant. Although importers in the aggregate provide
significant competition, only one individual importer is deemed
a significant competitor. Even though competition among domestic
manufacturers and importers of bicycles is intense, Huffy
Bicycle Company believes it is cost competitive in the high
volume retailer bicycle market and maintains its position
through continued efforts to improve manufacturing efficiency
and product value. Huffy Bicycle Company's ability to provide
its customers with low cost, innovative new products has enabled
it to maintain its market position despite the marketing efforts
of domestic competitors and competitors from Taiwan, China, and
other nations. Huffy Sports Company has several competitors, but
only one is deemed significant. Huffy Sports Company maintains
its competitive position by offering its customers high quality,
innovative products at competitive prices and by supporting its
products with outstanding customer service. True Temper Hardware
Company has numerous competitors in the United States and
Canada, but considers only two competitors significant. True
Temper Hardware Company believes it remains competitive by
offering its customers in the home use, agricultural,
industrial, and commercial markets competitively priced, high
quality, innovative products. The loss by the Consumer Products
segment of either of its two largest customers could result in a
material adverse effect on the segment.
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SERVICES FOR RETAIL
Huffy Service First, Inc. ("HSF") and Washington Inventory Service
("WIS") each provide certain services to retailers. Inventory,
assembly, repair and merchandising services provided by WIS and HSF to
their customers represented 21.8 percent, 20.9 percent, and 19.2
percent of consolidated revenues of the Company for the years ended
December 31, 1996, 1995, and 1994 respectively.
a. Products, Marketing and Distribution
------------------------------------
Huffy Service First: HSF, a wholly-owned subsidiary of the
Company, headquartered in Miamisburg, Ohio, serves the needs of
major retailers in 50 states, Puerto Rico and the Virgin Islands
by providing in-store and in-home assembly and repair, and
in-store display services for a variety of products, including
among other things, bicycles, barbeque grills, physical fitness
equipment, lawnmowers, and furniture. HSF is the only assembly
service business of this kind available to high volume retailers
on a nationwide basis. HSF also offers merchandising services
(product resets and periodic maintenance of displays) to
manufacturers who supply high volume retailers.
Washington Inventory Service: WIS, a wholly-owned subsidiary of
the Company, headquartered in San Diego, California, provides
physical inventory services on a nationwide basis to meet the
financial reporting and inventory control requirements of high
volume retailers, drug stores, home centers, sporting goods
stores, specialty stores and grocery stores.
b. Seasonality
-----------
The demand for services provided by this business segment is
seasonal in that assembly service demand is generally strongest
in Spring and at the Winter holiday season, and inventory
service demand is generally strongest in the first and third
calendar quarters of the year.
c. Competition and Customers
-------------------------
Although WIS has numerous competitors in the United States
market, only one is significant. HSF has numerous competitors in
the United States market, none of which is deemed significant in
the in-store and in-home assembly service business; six are
deemed significant in the merchandising services. WIS and HSF
believe they remain competitive due to their nationwide network
of operations, competitive pricing and full service. The loss by
the Services for Retail Segment of either of its two largest
customers could result in a material adverse effect on the
segment.
Sales to Wal-Mart Stores, Inc. and Kmart Corporation aggregated over ten percent
or more of the Company's consolidated revenues from each such customer for the
year ended December 31, 1996, and the loss of either one of these customers
could have a material adverse effect on the Company and its subsidiaries as a
whole.
The number of persons employed full-time by the Company (excluding seasonal
employees in the Services for Retail Segment) as of December 31, 1996, was 8,020
(3,292 employed by the Consumer Products Segment and 4,728 employed by the
Services for Retail Segment).
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ITEM 2. PROPERTIES: Location and general character of the principal
plants and other materially important physical properties of the
Company as of January 1, 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Owned or
Expiration
Building Area Date
Location Description (Sq. Ft.) of Lease
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Diego, California Offices (Services for Retail) 30,000 2004(1)
Thornton, Colorado Offices, manufacturing and 386,000 2001(2)
warehouse facility
(Consumer Products)
Farmington, Missouri Offices, manufacturing and 412,052 2014(3)
warehouse facility
(Consumer Products)
Celina, Ohio Offices, manufacturing and 822,000 Owned
warehouse facility
(Consumer Products)
Miamisburg, Ohio Offices and display facilities 47,000 2003(4)
(Corporate and Consumer
Products)
Miamisburg, Ohio Offices and warehouse 42,682 2001(5)
facility (Services for
Retail)
Camp Hill, Offices, manufacturing and 391,690 2012(6)
Pennsylvania distribution facility
(Consumer Products)
Harrisburg, Offices and manufacturing 254,329 Owned
Pennsylvania facility (Consumer Products)
Suring, Wisconsin Offices and manufacturing 140,000 Owned
facility (Consumer Products)
Sussex, Wisconsin Offices and manufacturing 192,000 2004(7)
facility (Consumer Products)
Whites Cross, Cork, Offices and manufacturing 70,000 Owned
Ireland facility (Consumer Products)
<FN>
(1) Subject to two consecutive options to renew for additional terms of
five years each.
(2) Subject to an option to purchase at the expiration of the lease.
(3) The City of Farmington, Missouri financed the acquisition of the
premises through the issuance of Industrial Development Revenue Bonds
(Huffy Corporation Project) Series 1994 in the aggregate principal
amount of $20,000,000 and leased the premises to the Company. The
Company has an option to purchase during the term or at expiration of
the lease.
</TABLE>
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(4) Subject to an option to purchase during the term of or at the
expiration of the lease, and if the option is not exercised at the
expiration of the lease, the Company automatically receives an
extension of the term for up to 12 months or until the property is
sold, whichever time period is shorter.
(5) Subject to one option to renew for an additional term of five years.
(6) Subject to one option to renew for an additional term of five years and
an option to purchase.
(7) Subject to an option to purchase during the term of or at the
expiration of the lease.
There are no encumbrances on the Celina, Ohio; Harrisburg, Pennsylvania; Suring,
Wisconsin; and Whites Cross, Cork, Ireland properties which are owned. All of
the Company's facilities are in good condition and are considered suitable for
the purposes for which they are used. The Camp Hill, Pennsylvania; Celina, Ohio;
and Suring, Wisconsin, manufacturing facilities normally operate on a two full
shift basis, with third shift operations scheduled as needed to meet seasonal
production requirements. The Farmington, Missouri; and Harrisburg, Pennsylvania
manufacturing facilities normally operate on a two full shift basis. The
Thornton, Colorado; Whites Cross, Cork, Ireland; and Sussex, Wisconsin
manufacturing facilities normally operate on a one full shift basis, with second
shift operations scheduled as needed at the Sussex, Wisconsin facility.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party, nor is its property subject, to any material pending
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The market information and other related security holder matters pertaining to
the Common Stock of the Company set forth in Exhibit 13 under (i) the captions
entitled Common Stock and Shareholder Information, and (ii) notes 5 and 6
(Preferred Stock, and Common Stock and Common Stock Plans) to the consolidated
financial statements, are contained in the Company's Annual Report to
Shareholders for the year ended December 31, 1996, and are hereby incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected unaudited financial data for each of the last 10 calendar years set
forth in Exhibit 13 under the caption entitled Ten-Year Financial and Operating
Review (Unaudited) is contained in the Company's Annual Report to Shareholders
for the fiscal year ended December 31, 1996, and is hereby incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Discussion and analysis of financial condition and results of operations set
forth in Exhibit 13 under the caption entitled Management's Discussion and
Analysis of Financial Conditions and Results of Operations and note 4 (Lines of
Credit and Long-Term Obligations) to the consolidated financial statements,
are contained in the Company's Annual Report to Shareholders for the year ended
December 31, 1996, and are hereby incorporated herein by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information set forth in Exhibit 13 under the captions entitled
Independent Auditor's Report and Consolidated Balance Sheets, Consolidated
Statements of Operations, Consolidated Statements of Cash Flows, Consolidated
Statements of Shareholders' Equity, and Notes to Consolidated Financial
Statements, is contained in the Company's Annual Report to Shareholders for the
year ended December 31, 1996, and is hereby incorporated herein by reference.
See also the information contained in Item 14 of Part IV of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Company
- ------------------------
The name, age and background information for each of the Company's Directors is
set forth in the section entitled ELECTION OF DIRECTORS and the table therein
contained in the Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders, and is hereby incorporated herein by reference.
Executive Officers of the Company
- ---------------------------------
The Executive Officers are elected annually to their respective positions,
effective at the April meeting of the Board of Directors. The Executive Officers
of the Company at February 1, 1997, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name Age Position Officer Since
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas A. Frederick 42 Vice President - Finance and December, 1994
Chief Financial Officer
Don R. Graber 53 President and Chief July, 1996
Operating Officer
Timothy G. Howard 50 Vice President - Controller September, 1978
Nancy A. Michaud 50 Vice President - General February, 1993
Counsel and Secretary
Richard L. Molen 56 Chairman of the Board and January, 1979
Chief Executive Officer
Pamela J. Whipps 43 Vice President - Treasurer February, 1994
</TABLE>
Prior to being elected an Executive Officer in 1994, Mr. Frederick was President
and General Manager of Huffy Service First, Inc. Prior to being elected
President - Chief Operating Officer, Mr. Graber was
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President of Worldwide Household Products Group and Group Vice President of The
Black and Decker Corporation from 1994 to July, 1996; prior thereto, Mr. Graber
was President of the International Group of The Black and Decker Corporation
from 1991 to 1994. Prior to being elected Vice President - General Counsel and
Secretary in 1994, Ms. Michaud was Vice President - General Counsel and
Assistant Secretary of the Company; prior thereto, Ms. Michaud was General
Counsel and Assistant Secretary of the Company in 1993; prior thereto, Ms.
Michaud served as Senior Counsel of the Company. Prior to being elected Chairman
of the Board and Chief Executive Officer in July, 1996, Mr. Molen was Chairman
of the Board, President and Chief Executive Officer of the Company from 1994 to
July, 1996; prior thereto, Mr. Molen was President and Chief Executive Officer
of the Company in 1993; prior thereto, Mr. Molen served as President and Chief
Operating Officer of the Company. Prior to being elected Vice President -
Treasurer, Ms. Whipps was Treasurer and Director of Investor Relations in 1994;
prior thereto, Ms. Whipps served as Assistant Treasurer and Manager Investor
Relations of the Company.
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation set forth in the section entitled
EXECUTIVE COMPENSATION and the tables therein is contained in the Company's
Proxy Statement for its 1997 Annual Meeting of Shareholders, and is hereby
incorporated herein by reference. Notwithstanding anything to the contrary set
forth herein or in any of the Company's previous filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings, including this Form 10-K, the sections
entitled REPORT OF COMPENSATION COMMITTEE and the Performance Graph which are
set forth in the Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders are not deemed to be incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of shares of Common Stock of the Company beneficially owned by each
Director and by all Directors and Officers as a group as of January 2, 1997, set
forth in the section entitled SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT, and the table therein, is contained in the Company's Proxy
Statement for its 1997 Annual Meeting of Shareholders, and is hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain transactions with management set forth in the section
entitled CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS is contained in
the Company's Proxy Statement for its 1997 Annual Meeting of Shareholders, and
is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents
(1) The following Consolidated Financial Statements of the Company
included in the Company's Annual Report to Shareholders are
incorporated by reference as part of this Report at Item 8 hereof:
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Consolidated Balance Sheets as of December 31, 1996, and
1995.
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994.
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995, and 1994.
Notes to Consolidated Financial Statements.
The Annual Report to Shareholders for the year ended December 31,
1996, is not deemed to be filed as part of this Report, with the
exception of the items incorporated by reference in Items 1, 5, 6,
7 and 8 of this Report and those financial statements and notes
thereto listed above.
(2) The Accountants' Report on Consolidated Financial Statements and
the following Financial Statement Schedule of the Company is
included as part of this Report at Item 8 hereof:
Schedule II. Valuation and Qualifying Accounts - years
ended December 31, 1996, 1995, and 1994.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(3) The exhibits shown in "Index to Exhibits" are filed as a part of this
Report.
(b) Reports on Form 8-K
-------------------
During the fiscal quarter ended December 31, 1996, the Company filed no report
on Form 8-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Richard L. Molen Date: February 13, 1997
--------------------------------
Richard L. Molen
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Thomas A. Frederick Date: February 13, 1997
- -----------------------------------
Thomas A. Frederick
Vice President - Finance and Chief
Financial Officer (Principal
Financial Officer)
/s/ Timothy G. Howard Date: February 13, 1997
- -----------------------------------
Timothy G. Howard
Vice President - Controller
(Principal Accounting Officer)
/s/ Don R. Graber Date: February 13, 1997
- --------------------------------------
Don R. Graber, Director
/s/ Stephen P. Huffman Date: February 13, 1997
- ----------------------------------
Stephen P. Huffman, Director
/s/ Linda B. Keene Date: February 13, 1997
- --------------------------------------
Linda B. Keene, Director
/s/ Jack D. Michaels Date: February 13, 1997
- -------------------------------------
Jack D. Michaels, Director
/s/ Donald K. Miller Date: February 13, 1997
- ---------------------------------------
Donald K. Miller, Director
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/s/ James F. Robeson Date: February 13, 1997
- --------------------------------
James F. Robeson, Director
/s/ Patrick W. Rooney Date: February 13, 1997
- ---------------------------------
Patrick W. Rooney, Director
/s/ Geoffrey W. Smith Date: February 13, 1997
- ---------------------------------
Geoffrey W. Smith, Director
/s/ Thomas C. Sullivan Date: February 13, 1997
- ---------------------------------
Thomas C. Sullivan, Director
Date:
- -------------------------------------
Joseph P. Viviano, Director
/s/ Fred G. Wall Date: February 13, 1997
- -------------------------------------
Fred G. Wall, Director
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INDEPENDENT AUDITORS' REPORT
----------------------------
ON FINANCIAL STATEMENT SCHEDULE
-------------------------------
The Board of Directors,
Huffy Corporation:
Under date of February 12, 1997, we reported on the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1996, and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996, as
contained in the 1996 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
Annual Report on Form 10-K for the year 1996. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedule as listed in Part IV, Item
14(a)(2) of Form 10-K. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
February 12, 1997
----------------
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors,
Huffy Corporation:
We consent to the incorporation by reference in the Registration Statements, and
the Prospectuses constituting part thereof, of (i) the Form S-8 Registration
Statement (No. 2-95128) pertaining to the 1984 Stock Option Plan; (ii) the Form
S-8 Registration Statement (No. 33-25487) pertaining to the 1988 Stock Option
Plan and Restricted Share Plan; (iii) the Form S-8 Registration Statement (No.
33-25143) pertaining to the 1987 Director Stock Option Plan; (iv) the Form S-8
Registration Statement (Nos. 33-28811 and 33-42724) pertaining to the 1989
Employee Stock Purchase Plan; (v) the Form S-8 Registration Statement (No.
33-44571) pertaining to five company savings plans and (vi) the Form S-8
Registration Statement (No. 33-60900) pertaining to the W.I.S. Savings Plan of
our report dated February 12, 1997, relating to the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996,
which report appears in the 1996 Annual Report to Shareholders, which is
incorporated by reference in the Company's 1996 Annual Report on Form 10-K and
our report dated February 12, 1997, relating to the financial statement schedule
for each of the years in the three-year period ended December 31, 1996, which
report appears in the Company's 1996 Annual Report on Form 10-K.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
February 12, 1997
-14-
<PAGE> 15
HUFFY CORPORATION
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGED BALANCE
BEGINNING TO COSTS AND DEDUCTIONS AT END
OF PERIOD EXPENSES (NOTE) OF PERIOD
--------- -------- ------ ---------
<S> <C> <C> <C> <C>
Reserves deducted from assets to which they apply:
Allowance for doubtful accounts:
Year ended December 31, 1996 $1,789 1,180 (1,233) 1,736
Year ended December 31, 1995 $1,783 726 (720) 1,789
Year ended December 31, 1994 $2,382 - (599) 1,783
Inventory obsolescence:
Year ended December 31, 1996 $2,318 3,354 (3,304) 2,638
Year ended December 31, 1995 $2,843 2,902 (3,427) 2,318
Year ended December 31, 1994 $6,171 2,083 (5,411) 2,843
Reserves which support the balance sheet
caption, Reserves
Restructuring Reserve:
Year ended December 31, 1996 $1,830 - (1,830) -
Year ended December 31, 1995 $2,033 2,152[1] (2,355) 1,830
Year ended December 31, 1994 $9,296 - (7,263) 2,033
<FN>
Note: Represents accounts written off, less recoveries for allowance for
doubtful accounts.
Represents inventory written off, less scrap value for inventory
obsolescence.
[1]Represents net restructure charge for personnel reductions and the
negotiation of a concessionary labor contract.
</TABLE>
-15-
<PAGE> 16
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit Form 10-K
No. Exhibits
- ------- ---------
<S> <C> <C>
3.a Amended Articles of Incorporation, dated June 16, 1995, *
incorporated by reference to Exhibit (3)(I) to Form 10-Q for the
quarter ended June 30, 1995
3.b Code of Regulations, as amended, dated April 28, 1995, *
incorporated by reference to Exhibit (3)(ii) to Form 10-Q for the
quarter ended June 30, 1995
4.a Specimen Common Stock Certificate of Huffy Corporation, *
incorporated by reference to Exhibit 4.a to Form 10-K for the
fiscal year ended December 31, 1995
4.b Note Purchase Agreement, dated June 24, 1988, among Huffy *
Corporation, The Prudential Insurance Company of America and
Pruco Life Insurance Company, incorporated by reference to
Exhibit (4) to Form 10-Q for the fiscal quarter ended June 30,
1988
4.c Amendment, dated as of December 20, 1993, to Note Purchase *
Agreement, dated June 24, 1988, among Huffy Corporation, The
Prudential Insurance Company of America and Pruco Life Insurance
Company, incorporated by reference to Exhibit (4)(c) to Form 10-K
for the fiscal year ended December 31, 1993
4.d Rights Agreement, dated as of December 16, 1988, between Huffy *
Corporation and Bank One, Indianapolis, National Association,
incorporated by reference to Exhibit (4)(n) to Form 10-K for the
fiscal year ended December 31, 1988
4.e Amendment, dated as of August 23, 1991, to Rights Agreement, *
dated as of December 16, 1988, between Huffy Corporation and Bank
One, Indianapolis, National Association, incorporated by
reference to Form 8-K, dated August 23, 1991
4.f Amendment, dated as of December 9, 1994, to Rights Agreement, *
dated as of December 16, 1988, as amended August 23, 1991,
between Huffy Corporation and Bank One, Indianapolis, National
Association, incorporated by reference to Form 8-K, dated
December 22, 1994
4.g Note Agreement, dated as of December 1, 1990, among Huffy *
Corporation and Nationwide Life Insurance Company, Employees Life
Insurance Company of Wausaw and Financial Horizons Life Insurance
Company in connection with the issuance and sale of $30,000,000
Huffy Corporation 9.62% Senior Notes, Series A, due December 1,
2000, incorporated by reference to Exhibit (4)(j) to Form 10-K
for the fiscal year ended December 31, 1990
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-16-
<PAGE> 17
<TABLE>
<CAPTION>
<S> <S> <C>
4.h Credit Agreement, dated as of April 21, 1992, among Huffy *
Corporation, Bank One, Dayton, N.A., NBD Bank, N.A., Security
Pacific National Bank, and Society National Bank, individually
and as agent, in connection with revolving loans up to an
aggregate amount of $50,000,000 to Huffy Corporation,
incorporated by reference to Exhibit (4)(g) to Form 10-K for the
fiscal year ended December 31, 1992
10.a Lease, effective as of October 29, 1992, between SELCO Service *
Corporation and Gerry Baby Products Company, incorporated by
reference to Exhibit (10)(b) to Form 10-K for the fiscal year
ended December 31, 1992
10.b Lease, effective as of December 29, 1993, between SELCO Service *
Corporation and Huffy Corporation, incorporated by reference to
Exhibit (10)(c) to Form 10-K for the fiscal year ended December
31, 1993
10.c Special Deferred Compensation Agreements, as amended, between *
Huffy Corporation and certain of its officers and key employees,
in substantially the forms incorporated by reference to Exhibit
(ix) to Form 10-K for the fiscal year ended June 24, 1977, to
Exhibit (2) to Form 10-Q for the fiscal quarter ended September
23, 1983, and to Exhibit (19)(c) to Form 10-Q for the fiscal
quarter ended September 30, 1986
10.d Deferred Compensation Agreements, as amended, between Huffy *
Corporation and certain of its officers and key employees, in
substantially the forms incorporated by reference to Exhibit (vi)
to Form 10-K for the fiscal year ended June 29, 1979, and to
Exhibit (3) to Form 10-Q for the fiscal quarter ended September
23, 1983
10.e Severance Pay Agreements, between Huffy Corporation and certain *
of its officers, as amended, in substantially the forms
incorporated by reference to Exhibit (xi) to Form 10-K for the
fiscal year ended June 27, 1980, and to Exhibit 10(n) to Form
10-K for the fiscal year ended June 26, 1981
10.f Severance Pay Agreements, dated June 30, 1986, between Huffy *
Corporation and certain of its officers, in substantially the
form incorporated by reference to Exhibit (19)(a) to Form 10-Q
for the fiscal quarter ended June 30, 1986
10.g Description of Executive Medical Reimbursement Plan between Huffy *
Corporation and certain executive officers and key employees,
incorporated by reference to Exhibit (10)(n) to Form 10- K for
the fiscal year ended December 31, 1989
10.h Long Term Incentive Compensation Program, incorporated by *
reference to Exhibit 10.k to Form 10-K for the fiscal year ended
December 31, 1995
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C>
10.i Huffy Corporation 1984 Stock Option Plan, as amended, *
incorporated by reference to Exhibit A to the Company's Proxy
Statement, dated September 13, 1984, for the Annual Meeting of
Shareholders held October 19, 1984, and to Exhibit B to the
Company's Proxy Statement, dated March 13, 1992, for the Annual
Meeting of Shareholders held April 24, 1992
10.j Huffy Corporation Capital Accumulation Plan Participation *
Agreement, between Huffy Corporation and certain of its officers,
in substantially the forms incorporated by reference to Exhibit
(19)(a) to Form 10-Q for the fiscal quarter ended September 30,
1985, and to Exhibit 19(b) to Form 10-Q for the fiscal quarter
ended September 30, 1986
10.k Huffy Corporation Capital Accumulation Program Participation *
Agreement, between Huffy Corporation and certain of its
directors, in substantially the forms incorporated by reference
to Exhibit (19)(b) to Form 10-Q for the fiscal quarter ended
September 30, 1985, and to Exhibit 19(b) to Form 10-Q for the
fiscal quarter ended June 30, 1986
10.l Huffy Corporation 1993 CEO Long-Term Performance Plan, effective *
as of January 1, 1993, between Huffy Corporation and Richard L.
Molen, incorporated by reference to Exhibit (10) to Form 10-Q for
the fiscal quarter ended June 30, 1993
10.m Description of supplemental group life insurance arrangement *
between Huffy Corporation and certain officers and key employees,
incorporated by reference to Exhibit (10)(aa) to Form 10-K for
the fiscal year ended December 31, 1991
10.n Description of financial planning and tax preparation services *
between Huffy Corporation and certain officers and key employees,
incorporated by reference to Exhibit (10)(dd) to Form 10-K for
the fiscal year ended December 31, 1993
10.o Performance Incentive Plan of Huffy Corporation for 1997 ***
10.p 1987 Restricted Stock Unit Agreement, dated as of January 1, *
1987, between Huffy Corporation and Richard L. Molen,
incorporated by reference to Exhibit (10)(dd) to Form 10-K for
the fiscal year ended December 31, 1991
10.q Amendment No. 1 to 1987 Restricted Stock Unit Agreement dated *
July 12, 1988, between Huffy Corporation and Richard L. Molen,
incorporated by reference to Exhibit (10)(cc) to Form 10-K for
the fiscal year ended December 31, 1988
10.r Amendment No. 2 to 1987 Restricted Stock Unit Agreement, dated as *
of April 30, 1991, between Huffy Corporation and Richard L.
Molen, incorporated by reference to Exhibit (10)(ff) to Form 10-K
for the fiscal year ended December 31, 1991
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-18-
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
10.s Amendment No. 3 to 1987 Restricted Stock Unit Agreement dated as *
of July 12, 1991, between Huffy Corporation and Richard L. Molen,
incorporated by reference to Exhibit (10)(gg) to Form 10-K for
the fiscal year ended December 31, 1991
10.t Transition/Consulting Compensation Agreement dated as of June 13, ***
1996, between Huffy Corporation and Richard L. Molen
10.u Supplemental Benefit Agreement, dated as of June 21, 1996, ***
between Huffy Corporation and Don R. Graber
10.v Supplemental/Excess Benefit Plan, dated as of January 1, 1988, *
incorporated by reference to Exhibit (10)(aa) to Form 10-K for
the fiscal year ended December 31, 1987
10.w First Amendment to Huffy Corporation Supplemental/Excess Benefit *
Plan, effective as of January 1, 1988, incorporated by reference
to Exhibit (10)(ee) to Form 10-K for the fiscal year ended
December 31, 1990
10.x Second Amendment to Huffy Corporation Supplemental/Excess Benefit *
Plan, dated as of June 30, 1991, incorporated by reference to
Exhibit (10)(y) to Form 10-K for the fiscal year ended December
31, 1994
10.y Third Amendment to Huffy Corporation Supplemental/Excess Benefit *
Plan, dated as of June 27, 1994, incorporated by reference to
Exhibit (10)(2) to Form 10-K for the fiscal year ended December
31, 1994
10.z Fifth Amendment to Huffy Corporation Supplemental/Excess Benefit ***
Plan, effective as of July 15, 1996
10.aa Huffy Corporation Master Benefit Trust Agreement as Restated, *
dated June 9, 1995, incorporated by reference to Exhibit 10.aa
for Form 10-K for the fiscal year ended December 31, 1995
10.bb First Amendment to Huffy Corporation Master Benefit Trust ***
Agreement as Restated, effective as of July 25, 1996
10.cc Huffy Corporation 1987 Director Stock Option Plan, incorporated *
by reference to Exhibit 19(a) to Form 10-Q for the fiscal quarter
ended June 30, 1988
10.dd First Amendment to Huffy Corporation 1987 Director Stock Option *
Plan, effective as of April 30, 1991, incorporated by reference
to Exhibit (10)(nn) to Form 10-K for the fiscal year ended
December 31, 1991
10.ee Second Amendment to Huffy Corporation 1987 Director Stock Option *
Plan, effective as of December 15, 1991, incorporated by
reference to Exhibit (10)(oo) to Form 10-K for the fiscal year
ended December 31, 1991
10.ff Third Amendment to Huffy Corporation 1987 Director Stock Option ***
Plan, effective as of February 15, 1996
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
10.gg Huffy Corporation 1988 Stock Option Plan and Restricted Share *
Plan, as amended, incorporated by reference to Exhibit 19(b) to
Form 10-Q for the fiscal quarter ended June 30, 1988; to Exhibit A
to the Company's Proxy Statement dated March 13, 1992 for the
Annual Meeting of Shareholders held April 24, 1992; and to Annex I
to the Company's Proxy Statement dated March 7, 1996 for the
Annual Meeting of Shareholders held April 26, 1996
10.hh Huffy Corporation 1990 Directors' Retirement Plan incorporated by *
reference to Exhibit (10)(qq) to Form 10-K for the fiscal year
ended December 31, 1991
10.ii First Amendment to Huffy Corporation 1990 Directors' Retirement ***
Plan, effective as of February 15, 1996
10.jj Second Amendment to Huffy Corporation 1990 Directors' Retirement ***
Plan, effective as of February 15, 1996
10.kk Description of Huffy Corporation Executive Automobile Policy *
incorporated by reference to Exhibit 10(ii) to Form 10-K for the
fiscal year ended December 31, 1994
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-20-
<PAGE> 21
OTHER FILINGS
-------------
<TABLE>
<CAPTION>
<S> <C> <C>
13. Certain sections of the Annual Report to Shareholders for fiscal ***
year ended December 31, 1996
19. Schedule of certain documents substantially identical to filed ***
documents with parties thereto and other material differing
details
22. List of all direct and indirect Subsidiaries of the registrant:
</TABLE>
<TABLE>
<CAPTION>
Jurisdiction in
Name of Subsidiary which Incorporated
------------------ ------------------
<S> <C>
Gerry Baby Products Company Delaware
Hufco Company Colorado
Huffy FSC, Inc. Virgin Islands
Huffy International Finance, N.V. Netherland Antilles
Huffy Service First, Inc. Ohio
Gerry Wood Products Company Wisconsin
Snugli-Canada, Ltd. British Columbia, Canada
The Huffman Manufacturing Company Ohio
True Temper Hardware Company Ohio
True Temper Limited Whites Cross, Cork, Ireland
Washington Inventory Service California
27. Financial Data Schedules ***
<FN>
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1996.
</TABLE>
-21-
<PAGE> 1
PERFORMANCE INCENTIVE PLAN -- C97 EXHIBIT 10.r
POLICY
- ------
CERTAIN EXEMPT EMPLOYEES OF THE CORPORATION AND ITS SUBSIDIARIES SHALL BE GIVEN
CONSIDERATION FOR PAYMENT UNDER THE CORPORATION'S PROFIT SHARING BONUS PLAN
PROVIDED THEY HAVE COMPLETED SIX (6) MONTHS OF SERVICE BY CALENDAR YEAR
END.
PAYMENTS WILL BE CONSIDERED ON THE BASIS OF CORPORATE AND HUFFY COMPANY
FINANCIAL RESULTS AND, FOR SOME POSITIONS, INDIVIDUAL PERFORMANCE AGAINST
OBJECTIVES.
THE SCHEDULES SET FORTH BELOW ARE GUIDELINES ONLY AND PAYMENTS MAY BE MODIFIED
OR OMITTED BY MANAGEMENT, OR BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS, IN THEIR SOLE DISCRETION.
PAYMENTS SHALL BE MADE ONLY TO EMPLOYEES WITH AT LEAST "MEETS SOME BUT NOT
ALL PERFORMANCE REQUIREMENTS" JOB EVALUATION.
<TABLE>
<CAPTION>
FINANCIAL BONUS
- ---------------
Bonus opportunity as a % of
I. Basis and Level of Awards Actual Base Salary
------------------------- -----------------------------
Min. Target Max.
--- ------ ---
<S> <C> <C> <C>
A. Chairman and President
----------------------
Corporate E.P.S. vs. PP 0 20.0% 40.0%
Corporate RONA vs. PP 0 20.0% 40.0%
----- ----- -----
0% 40.0% 80.0%
B. Other Corporate Officers
------------------------
Corporate E.P.S. vs. PP 0 12.00% 24.0%
Corporate RONA vs. PP 0 12.00% 24.0%
----- ----- -----
0% 24.00% 48.0%
C. Huffy Company Heads
-------------------
1. HBC, HSC, HSF, TTH and WIS
Huffy Company RONA vs. PP 0 12.0% 24.0%
Huffy Company EBIT vs. PP 0 12.0% 24.0%
----- ----- -----
0% 24.0% 48.0%
</TABLE>
Page 1 of 15
<PAGE> 2
<TABLE>
C. Huffy Company Heads (Cont'd) Min. Target Max.
------------------- --- ------ ---
<S> <C> <C> <C>
2. GBPC
Huffy Company (without GWPC)
RONA vs. PP 0 9.6% 19.2%
GWPC RONA vs. PP 0 2.4% 4.8%
Huffy Company (without GWPC) EBIT vs. PP 0 9.6% 19.2%
GWPC EBIT vs. PP 0 2.4% 4.8%
--- ------ -----
0% 24.0% 48.0%
D. Huffy Company Staffs
--------------------
1. HBC, HSC, WIS, TTH and HSF
Huffy Company RONA vs. PP 0 6.0% 12.0%
Huffy Company EBIT vs. PP 0 6.0% 12.0%
--- ------ -----
0% 12.0% 24.0%
2. GWPC Vice President & General Manager
GWPC EBIT vs. PP 0 6.0% 12.0%
GWPC RONA vs. PP 0 6.0% 12.0%
--- ------ -----
0% 12.0% 24.0%
3. GBPC Staff (excluding GWPC V.P./General Manager)
Huffy Company (without GWPC) EBIT vs. PP 0 4.8% 9.6%
Huffy Company (without GWPC) RONA vs. PP 0 4.8% 9.6%
GWPC RONA vs. PP 0 1.2% 2.4%
GWPC EBIT vs. PP 0 1.2% 2.4%
--- ------ -----
0% 12.0% 24.0%
E. Corporate Exempt
----------------
1. Positions with 700 or more Hay points
Corporate E.P.S. vs. PP 0 6.0% 12.0%
Corporate RONA vs. PP 0 6.0% 12.0%
--- ------ -----
0% 12.0% 24.0%
</TABLE>
Page 2 of 15
<PAGE> 3
<TABLE>
E. Corporate Exempt (Cont'd) Min. Target Max.
---------------- --- ------ ---
<S> <C> <C> <C> <C>
2. Positions with less than 700 Hay points
Corporate E.P.S. vs. PP 0% 4.0% 8.0%
Corporate RONA vs. PP 0% 4.0% 8.0%
---- ------ ------
0% 8.0% 16.0%
F. Other Exempt
------------
1. Huffy Company Exempt (except HSF Exempt;
GBPC Exempt; GWPC Exempt; WIS Field
Management (see Policy 701-B for WIS Field
Management personnel) and Exempt; TTH
Canadian District Sales Manager and TTH
Wood Mills Exempt Employees)
Huffy Company EBIT vs. PP 0% 5.0% 10.0%
Huffy Company RONA vs. PP 0% 5.0% 10.0%
---- ------ -----
0% 10.0% 20.0%
2. HSF District Managers
District Gross Field Profit % vs. PP 0 2.5% 5.0%
District Gross Field Profit $ vs. PP 0 2.5% 5.0%
Huffy Company EBIT vs. PP 0 2.5% 5.0%
Huffy Company RONA vs. PP 0 2.5% 5.0%
---- ------ -----
0% 10.0% 20.0%
3. HSF Area Managers
Area Gross Field Margin % vs. PP 0 2.5% 5.0%
Area Gross Field Margin $ vs. PP 0 5.0% 5.0%
Huffy Company EBIT vs. PP 0 2.5% 5.0%
Huffy Company RONA vs. PP 0 2.5% 5.0%
---- ------ -----
0% 10.0% 20.0%
4. HSF Zone Merchandising Managers (Rev.)
Zone AGMM% vs. PP 0 2.5% 5.0% (Rev.)
HSF EBIT vs. PP 0 1.25% 2.5% (Rev.)
HSF RONA vs. PP 0 1.25% 2.5% (Rev.)
---- ------ -----
0% 5.00% 10.0% (Rev.)
5. Merchandising Operations Managers (Rev.)
Gross Merchandising Profit% 0 5.0% 10.0% (Rev.)
HSF EBIT vs. PP 0 2.5% 5.0% (Rev.)
HSF RONA vs. PP 0 2.5% 5.0% (Rev.)
---- ------ -----
0% 10.0% 20.0% (Rev.)
6. HSF Other Exempt
Huffy Company EBIT vs. PP 0 5.0% 10.0%
Huffy Company RONA vs. PP 0 5.0% 10.0%
---- ------ -----
0% 10.0% 20.0%
</TABLE>
Page 3 of 15
<PAGE> 4
<TABLE>
<CAPTION>
Min. Target Max.
---- ------ ----
<S> <C> <C> <C>
7. GBPC Financial Staff (including
all Denver-based MIS, Credit and
Accounting employees except for MIS
LAN Administrator and Cost Accountant)
Huffy Company (without GWPC) EBIT vs. PP 0 4.0% 8.0%
Huffy Company (without GWPC) RONA vs. PP 0 4.0% 8.0%
GWPC RONA vs. PP 0 1.0% 2.0%
GWPC EBIT vs. PP 0 1.0% 2.0%
---- ------ ------
0% 10.0% 20.0%
8. GBPC Director - Sales, GBPC Director -
Marketing, GBPC Director - International
Sales and Marketing, GBPC Sales
Administrator, GBPC Consumer Relations
Supervisor, GBPC Sales Managers, GBPC
Customer Service Manager, GBPC Business
Line Manager for GWPC, GBPC Manager of
Design
Huffy Company (without GWPC) EBIT vs. PP 0 4.0% 8.0%
Huffy Company (without GWPC) RONA vs. PP 0 4.0% 8.0%
GWPC RONA vs. PP 0 1.0% 2.0%
GWPC EBIT vs. PP 0 1.0% 2.0%
---- ------ ------
0% 10.0% 20.0%
9. Other GBPC Exempt
Huffy Company (without GWPC) EBIT vs. PP 0 5.0% 10.0%
Huffy Company (without GWPC) RONA vs. PP 0 5.0% 10.0%
---- ------ ------
0% 10.0% 20.0%
10. GWPC Exempt
GWPC EBIT vs. PP 0 5.0% 10.0%
GWPC RONA vs. PP 0 5.0% 10.0%
---- ------ ------
0% 10.0% 20.0%
</TABLE>
Page 4 of 15
<PAGE> 5
<TABLE>
Min. Target Max.
--- ------ ---
<S> <C> <C> <C>
11. TTH Canadian District Sales Manager
Net Sales $ vs. Sales Objective $* 0% 10.0% 20.0%
--- ------ -----
0% 10.0% 20.0%
</TABLE>
* Threshold payment of 2% applies when 90% of pre-established Sales Objective $
are attained, 10% when 100% of Sales Objective $ are attained, and 20% when
110% of Sales Objective $ are obtained.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12. TTH Wood Mills Exempt
Huffy Company EBIT vs. PP 0 5.0% 10.0%*
Huffy Company RONA vs. PP 0 5.0% 10.0%*
Huffy Company Gainsharing Plan 0 -- 12.0%*
--- ------ -----
0% 10.0% 20.0%*
* Either category of bonus payment may pay up to the maximum award shown, but
the maximum total bonus payable shall not exceed 20.0%.
</TABLE>
<TABLE>
13. All WIS exempt positions with Manager or
Director titles (excluding WIS National Account
Manager; WIS National Sales Manager; and
WIS Field Management Personnel)
<S> <C> <C> <C>
Huffy Company EBIT vs. PP 0 5.0% 10.0%
Huffy Company RONA vs. PP 0 5.0% 10.0%
--- ------ -----
0 10.0% 20.0%
14. WIS National Account Manager
Huffy Company EBIT vs. PP 0 5.0% 10.0%
Huffy Company RONA vs. PP 0 5.0% 10.0%
--- ------ -----
0% 10.0% 20.0%
15. Other WIS Exempt and WIS Service
Managers, and WIS Managers in
Training (excluding WIS Field
Management; WIS National Account
Manager and WIS National Sales
Manager
</TABLE>
Page 5 of 15
<PAGE> 6
<TABLE>
<CAPTION>
Min. Target Max.
--- ------ ---
<S> <C> <C> <C>
Huffy Company EBIT vs. PP 0 2.5% 5.0%
Huffy Company RONA vs. PP 0 2.5% 5.0%
--- ------ -----
0 5.0% 10.0%
</TABLE>
II. Corporate Internal Audit Staff
------------------------------
Corporate Internal Audit staff are members of the Corporate Exempt
category and bonus recommendations will generally be made on that basis.
Such bonus recom-mendations will be subject to approval by the Audit
Committee of the Board of Directors.
III. Award Scales(1)
---------------
<TABLE>
<CAPTION>
Huffy Company RONA vs. Plan
Huffy Company EBIT vs. Plan % of Targeted
Corporate RONA vs. Plan Award Earned(2)
---------------------------------------------------- ---------------
<S> <C>
A separate letter will be sent to each Huffy
Company with their applicable award scale.
</TABLE>
<TABLE>
<CAPTION>
% of Targeted
Corporate EPS vs. Plan Award Earned(2)
------------------------------------------------------ ---------------
<S> <C>
The 1997 award scale is maintained by the
Vice President and Controller.
</TABLE>
<TABLE>
<CAPTION>
HSF District Gross % of Targeted
Field Profit $ vs. PP Award Earned(2)
--------------------- ---------------
<S> <C>
Under 90% -0-
90 25
100 100
110+ 200
</TABLE>
<TABLE>
<CAPTION>
HSF Area Gross Field % of Targeted
Margin $ vs. PP Award Earned
------------------------ ------------
<S> <C>
Under 90% -0-
90 25
100 100
110+ 200
</TABLE>
Page 6 of 15
<PAGE> 7
<TABLE>
<CAPTION>
% of Targeted
Award Earned
------------
HSF District Gross Field Profit % vs. PP
HSF Area Gross Field Margin % vs. PP
- ------------------------------------
<S> <C> <C>
Greater than -1.00% below -0-
-1.00 Threshold 25
-0.67 50
-0.33 75
PP% Target 100
+0.5 133
+1.0 167
+1.5 Maximum 200
% of Targeted
Award Earned
------------
HSF Zone Merchandising Managers
- ------------------------------------
Greater than -1.00% below -0- (REV.)
-1.00 25 (REV.)
-0.67 50 (REV.)
-0.33 75 (REV.)
PP% 100 (REV.)
+0.5 133 (REV.)
+1.0 167 (REV.)
+1.5 200 (REV.)
</TABLE>
1. The scales are sliding. When actual performance falls between the
points on the scale, it will be adjusted to the nearest 1/10th of 1%
and interpolated to determine the award level.
2. Percent of targeted award earned is used as a multiple of bonus
target which varies by level of employee. Refer to Section I.
IV. Positions Covered
A. Corporate Officers and Huffy Company Presidents
Corporate Officers
------------------
Chairman of the Board, President & CEO
Vice President - Finance and CFO
Vice President - Controller
Vice President - General Counsel and Secretary
Vice President - Treasurer and Director, Investor Relations
Huffy Company Presidents
------------------------
President and General Manager - Huffy Bicycle Company
President and General Manager - Huffy Sports Company
President and General Manager - Gerry Baby Products Company
President and General Manager - Washington Inventory Service
President and General Manager - Huffy Service First, Inc.
President and General Manager - True Temper Hardware Company
Page 7 of 15
<PAGE> 8
B. Huffy Company Staff
<TABLE>
<S> <C>
- HBC
---
V.P./G.M. - Celina
V.P./G.M. - Farmington
V.P. Marketing
V.P. Controller
V.P. Plant Operations and Logistics
V.P. Human Resources
V.P. Sales
- HSC
---
V.P. Sales and Marketing
V.P. Controller
V.P. Product Engineering/Quality Assurance
V.P. Manufacturing
V.P. Materials Management
- GBPC
----
V.P. Sales/Marketing/Design
V.P. Controller
V.P. Operations and Engineering
V.P. Human Resources
V.P. General Manager - GWPC
V.P. and Corporate Counsel
- HSF
---
V.P. Operations
V.P. Controller
V.P. Sales/Marketing
V.P. Human Resources
- WIS
---
V.P. Operations
V.P. Finance and Controller
V.P. Technology & Information Systems
V.P. Sales and Account Management
</TABLE>
Page 8 of 15
<PAGE> 9
- TTH
---
V.P. Sales and Marketing
V.P. Operations
V.P. Controller
V.P. Human Resources
Managing Director, TT Ireland
V. Individual Personal Objectives
------------------------------
<TABLE>
<CAPTION>
Bonus Opportunity as a % of
Actual Base Salary
---------------------------------------
Below
Position Threshold Threshold Maximum
-------- --------- --------- -------
<S> <C> <C> <C> <C>
A. Chairman and President 0% 10.0% 20.0%
-----------------------
B. Corporate Officers and
----------------------
Huffy Company Heads 0% 6.0% 12.0%
-------------------
C. Huffy Company Staff 0% 3.0% 6.0%
-------------------
D. Corporate Exempt
----------------
1. Positions with 700 or
more Hay Points 0% 3.0% 6.0%
2. Positions with less than
700 Hay Points 0% 2.0% 4.0%
</TABLE>
For those individuals who have a portion of their bonus measured on this basis,
the following implementation procedure will be used:
1. Each individual will draw up objectives covering the calendar year
based on supporting the supervisor's objectives and his own.
2. These objectives should have the following characteristics:
a) Not be associated with EBIT or RONA goals in the Profit Plan.
(Financial goals for such things as cost reduction or similar
projects are appropriate goals.)
Page 9 of 15
<PAGE> 10
<TABLE>
<CAPTION>
<S> <C> <C>
b) Be as specific and as measurable as to successful attainment as
possible. (A project need not be completed in the calendar year.
The objective can be to obtain a specific status in the project
by calendar year end.)
c) 1) Chairman and President shall each develop no more than 7 to 8 (Rev.)
objectives.
2) Other Corporate Officers and Huffy Company Presidents shall
each develop no more than 6 objectives.
3) Huffy Company Staff and Corporate Officer Direct Reports in
positions with 700 or more Hay points and Other Corporate
Exempt shall each develop no more than 3 objectives.
d) A "degree of difficulty" should be assigned to each objective on
the basis of 1 to 10.
</TABLE>
3. The objectives and degrees of difficulty shall be reviewed between the
individual and his supervisor and agreement reached on:
a) Completeness of list
b) State of objectives
c) Degree of difficulty
It is the supervisor's responsibility to ensure that there is some
consistency in the measurement of "degree of difficulty" among all his
subordinates, and the Corporate Officer's responsibility to review for
consistency in measurement of "degree of difficulty" among Huffy
Company Staff personnel within his function.
<TABLE>
<CAPTION>
4. Personal Objectives Schedule
----------------------------
<S> <C>
Upon Approval by The CEO's and COO's objectives shall be communicated to
Compensation the Corporate Officers and Huffy Company Presidents
Committee promptly following approval by Compensation Committee of
the Board of Directors.
15 days later Corporate Officers and Huffy Company Presidents shall
develop their objectives and submit them to their
respective supervisor.
</TABLE>
Page 10 of 15
<PAGE> 11
<TABLE>
<S> <C> <C>
Corporate Officers' and Huffy Company Presidents'
10 days later objectives shall be approved by their respective
immediate supervisors. Corporate Officers and Huffy
Company Presidents shall communicate their approved
objectives to their respective Corporate Officer Direct
Reports in positions with 700 or more Hay points
("Corporate Staff") and Other Corporate Exempt and Huffy
Company Staffs ("Huffy Staff").
30 days later Huffy Staff personnel shall have submitted and received
approval of their objectives from their respective Huffy
Company President. Corporate Staff shall have submitted
and received approval of their objectives from their
respective Corporate Officer. Other Corporate Exempt
shall have submitted and received approval of their
objectives from their respective Corporate Staff
supervisor or, if applicable, supervising Corporate
Officer.
</TABLE>
5. Personal Objectives Results Schedule
------------------------------------
<TABLE>
<S> <C> <C>
First Friday in Corporate Staff and Other Corporate Exempt shall submit
December their results for the year ending for evaluation to the
appropriate Corporate Officer and immediate supervisor,
respectively, and, with respect to Huffy Staff, to their
Huffy Company President.
10 days later Personal objective results for Corporate Staff, Other
Corporate Exempt and Huffy Company Staff shall have been
reviewed and have received comments as follows:
- Corporate Officers shall comment to their Corporate
Staff and Other Corporate Exempt, if immediately
supervised.
- Supervisors of Other Corporate Exempt.
- Huffy Company Presidents to Huffy Staff.
10 days later CEO and COO provide Compensation Committee of Board of
Directors with their results for evaluation and approval.
</TABLE>
Page 11 of 15
<PAGE> 12
<TABLE>
<S> <C> <C>
Corporate Staff and Other Corporate Exempt and personnel
5 days later results shall be approved by their immediate supervisors.
Huffy Staff personnel results shall be approved by Huffy
Company Presidents. Corporate Officers and Huffy Company
Presidents shall submit their results for the year ending
to their immediate supervisor for evaluation and
approval.
Feb. 1 The evaluation and approval of personal objectives
results are to be completed.
6. The participant shall evaluate his own performance and then submit the
evaluation to his supervisor who shall review and approve the
evaluation.
This score is not binding. The supervisor shall use his judgment to
arrive at a final rating. However, ONLY performance on the written
objectives shall be evaluated, not performance on any other
matters.
7. Each individual shall be informed by his supervisor of his performance
rating but only AFTER all approvals have been secured.
8. Notwithstanding the foregoing, payments for personal objectives
performance are expressly conditioned upon and made subject to the
following base financial criteria:
(A) ALL CORPORATE OFFICERS, HUFFY COMPANY PRESIDENTS, HUFFY STAFF,
CORPORATE STAFF AND OTHER CORPORATE EXEMPT.
A separate letter outlining the parameters of Personal
Objectives eligibility shall be forwarded to each Huffy
Company President and Corporate Officer.
</TABLE>
VI. Implementation
--------------
1. Eligibility
-----------
All exempt employees on the payroll on or before the first business day
of the calendar year shall be eligible for consideration for a full
bonus opportunity.
Hires: Employee coming on the payroll after the first business day
of the calendar year but on or before the first business day
of July will be eligible for consideration for one-half
the annual bonus opportunity.
Page 12 of 15
<PAGE> 13
Exception: HSF Regional Operations, District and Area
Managers, and eligible WIS personnel hired after
January 1 of the calendar year shall be eligible
for consideration for the percentage of annual
bonus opportunity shown below:
<TABLE>
<CAPTION>
Percentage of Annual
Hire Date Bonus Opportunity
--------- -----------------------
<S> <C> <C> <C>
During 1st quarter 75%
During 2nd quarter 50%
During 3rd quarter 25%
During 4th quarter 0%
</TABLE>
Transfers, Promotions or Demotions: Individuals transferred, promoted
or demoted during the calendar year shall have bonus opportunity as
follows:
<TABLE>
<CAPTION>
Calculation Based on
--------------------
Old Oppor. New Oppor.
---------- ----------
Old Actual New Actual
---------- ----------
Base Salary Base Salary
----------- -----------
Old. Opp. Level New Opp. Level
--------------- --------------
<S> <C> <C>
Transferred, Promoted or Demoted
During 1st Quarter 25% 75%
During 2nd Quarter 50% 50%
During 3rd Quarter 75% 25%
During 4th Quarter 100% 0%
</TABLE>
Note: Non-exempt and/or hourly employees promoted to exempt
positions are eligible for bonus consideration as above but
only for those quarters in which they held exempt positions.
Also, status changes (including transfers, promotions and
demotions, but excluding new hires) for bonus eligible
employees at WIS which are effective for the first pay period
beginning on or after the first day of the quarter shall be
treated for bonus purposes as if they were effective the
first day of the quarter.
Terminations: To be eligible to receive the Profit Sharing payment
for a calendar year, an employee must be on the
active payroll at the time payment for that calendar
year is made OR HAVE BEEN TERMINATED DUE TO A
CURTAILMENT OF PRODUCTION BETWEEN JULY 1 OF THAT
CALENDAR YEAR AND THE DATE OF BONUS PAYMENT, HAVING MET
ALL ELIGIBILITY REQUIREMENTS OF THE PLAN AND HAVING
PERFORMED ALL DUTIES AND RESPONSIBILITIES IN AT LEAST
AN AVERAGE MANNER. UNDER
Page 13 of 15
<PAGE> 14
THESE CIRCUMSTANCES, SUCH EMPLOYEES MUST HAVE BEEN ON THE PAYROLL
AT THE BEGINNING OF THE CALENDAR YEAR IN ORDER TO QUALIFY FOR
BONUS FOR THAT CALENDAR YEAR. APPROVAL OF THE CEO IS REQUIRED IN
ALL SUCH CASES. EXEMPT EMPLOYEES TERMINATED DUE TO A CURTAILMENT
OF PRODUCTION SHALL BE ELIGIBLE FOR BONUS OPPORTUNITY AS
FOLLOWS:
BONUS AS PERCENT PAYMENT
TERMINATION DATE OF FULL BONUS OPPORTUNITY
JULY 1 - SEPTEMBER 30 50%
OCTOBER I - DECEMBER 31 75%
JANUARY 1 - DATE OF PAYMENT 100%
Death or Retirement: Employees who retired or died during or after
the calendar year for which bonus is being
calculated and who met the requirement of
being on the active payroll during the year
will be given consideration for a bonus
payment on basis of the following percentage
of full bonus opportunity: retired or died in
1st Qtr - 25%; 2nd Qtr 50%; 3rd Qtr - 75%;
4th Qtr - 100%.
Payment for deceased employees shall be made
to the beneficiary designated under the
Salaried Employees Group Term Life
Insurance Plan.
Active payroll is defined as receiving wages
(recorded on the Federal W-2 form) from the
Corporation or one of the Huffy Companies.
Except for those terminated or retiring or
deceased employees described above, employees
absent for any reason and not receiving wages
(as defined above) are not considered on
the active payroll.
Exception to the eligibility requirements must be approved by the CEO
at the time approval is obtained for transfer or hire.
2. Payment
-------
Except as noted below, payment for Profit Sharing shall be annual and
shall occur in March of each year for the prior calendar year's
results.
3. Calculations
------------
All bonus calculations will be rounded up to the nearest $25.00
increment and the minimum bonus payment to be paid will be $125.00 per
employee, provided employee is eligible for bonus and such bonus is
approved.
Page 14 of 15
<PAGE> 15
Definitions
-----------
Consolidated RONA Profit after tax after cost of plan plus
----------------- tax affected interest expense divided by
the twelve (12) month rolling average of
total assets less current liabilities
excluding all interest bearing debt.
E.P.S. Earnings per common share.
------
Huffy Company RONA Earnings before interest and taxes, tax
------------------ affected at the current profit plan tax
rate, divided by the twelve (12) month
rolling average of total assets other
than goodwill less current liabilities
excluding all interest bearing debt.
EBIT Earnings before interest and taxes.
----
Actual Base Salary Employee's actual base salary as of the
------------------ January 1 of the calendar year for which
bonus is calculated.
Promotion 15% upward difference in Hay points
--------- (see Corporate Policy 113).
Demotion 15% downward difference in Hay points
-------- (see Corporate Policy 113).
Transfer A change in position with substantially
-------- different duties and responsibilities
which does not constitute a promotion or
demotion.
Distribution of This Policy
- ---------------------------
Restricted to Corporate Officers, Huffy Company Presidents, Huffy Company
Staff, and Corporate Officers Direct Reports in positions with 700 or more
Hay points, except for Policy 701-B and 701-C which is restricted to
Corporate Officers and President and General Manager of WIS.
/s/ DONALD R. SCHEICK /s/ RICHARD L. MOLEN
____________________________________ ____________________________________
Director, Corporate Human Resources Chairman and Chief Executive Officer
Page 15 of 15
<PAGE> 1
Exhibit 10.t
TRANSITION/CONSULTING COMPENSATION AGREEMENT
--------------------------------------------
This Transition/Consulting Compensation Agreement is dated as of June 13, 1996,
by and between HUFFY CORPORATION, an Ohio corporation, with principal offices at
225 Byers Road, Miamisburg, Ohio 45342 ("Huffy") and RICHARD L. MOLEN, an
individual residing at Dayton, Ohio 45429 ("Molen"), under the following
circumstances:
A. Molen currently serves as Chairman of the Board of Directors and Chief
Executive Officer of Huffy and, as part of a planned management
transition, plans to relinquish his position as Chief Executive Officer
and to retire in accordance with the "Rule of 85" under the Huffy
Salaried Employees' Retirement Plan from employment by Huffy on December
31, 1998 (the period from June 13, 1996 through December 31, 1998, being
referred to as the "Transition Period").
B. Molen and Huffy desire to reach certain agreements with respect to
Molen's compensation and benefits in connection with such management
transition.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties agree as follows:
1. TRANSITION PERIOD. Effective June 13, 1996, Molen shall receive a grant
award of 100,000 Non-Qualified Stock Options ("NQSOs"), without
accompanying stock appreciation rights, for shares of Common Stock under
the 1988 Stock Option and Restricted Share Plan ("1988 Plan"), at the
closing market price of Huffy Corporation Common Stock on June 13, 1996.
The NQSOs by their terms expire June 13, 2006, and may be exercised at
the rate of one-third of the total grant after June 13, 1998, another
one-third after June 13, 1999, and the final one-third after June 13,
2000. No additional options shall be granted to Molen under the 1988
Plan or any successor plan during or after the Transition Period.
Effective May 1, 1997, subject to acceptable performance and the terms
of this Agreement, Molen's annual base salary shall be increased to
$525,000 through December 31, 1998, the date of his retirement. Except
as otherwise set forth in this Section 1, and subject to Sections 4 and
5 herein, Molen shall be entitled to participate in all other
Officer/employee plans in accordance with the terms of those plans
during the Transition Period.
2. POST TRANSITION PERIOD. During the period commencing January 1, 1999,
and ending on December 31, 2000, Molen shall, subject to election by the
Board of Directors, serve as Chairman of the Board of Directors and
shall consult with the Company as determined by the Chief Executive
Officer of Huffy and approved by the Board of Directors. Molen shall
meet with the Chief Executive Officer each January, beginning January,
1999, and review and agree on the various responsibilities, projects or
assignments to be undertaken by Molen during that period, including,
<PAGE> 2
Page 2
without limitation, responsibilities in assisting the Chief Executive
Officer with Management transition and liaison with the Board of
Directors. Such responsibilities, projects or assignments, number of
days to be worked and such allocation of the days to be worked, and
secretarial assistance needed, if any, shall be subject to review and
approval by the Board of Directors.
During such period, Molen shall receive, as consulting fees for such
work, a monthly amount computed by dividing his annual base salary on
December 31, 1998, by twelve (12) and then multiplying the result by the
following appropriate percentage:
DURING THE PERIOD PERCENTAGE
----------------- ----------
January 1, 1999 - December 31, 1999 66 2/3%
January 1, 2000 - December 31, 2000 33 1/3%
In addition, Molen shall also receive the following compensation.
(i) Under the Huffy Profit Sharing Bonus Plan, (i) on or about March
1, 2000, an amount equal to 66 2/3%, and (ii) on or about March
1, 2001, an amount equal to 33 1/3% of the Huffy Profit Sharing
Bonus earned by Molen, if any, in 1998 and paid in 1999.
(ii) Under the Long Term Incentive Plan, 100% of the payment, if any,
earned by Molen for the award cycle ending December 31, 1998 and
66 2/3% of the payment, if any, that would have been earned by
Molen as Chief Executive Officer for the award cycle ending
December 31, 1999. The benefit for each such award cycle shall
be determined in accordance with the plan and paid to Molen when
paid to other Huffy Officers.
On and after his retirement on December 31, 1998, Molen shall be
entitled to receive the retirement benefits then provided under the
provisions of the Huffy Salaried Employees' Retirement Plan and the
Huffy Supplemental/Excess Benefits Plan. In addition, Molen shall be
entitled to participate in the employee health care plan and in life,
AD&D and travel insurance on the same basis as other early retirees
under the Huffy Salaried Employees' Retirement Plan who are under the
age of 65, excluding, however, any group insurance available to Molen as
a non-employee Director. Except as otherwise provided in this Agreement,
after December 31, 1998, Molen shall be entitled only to those benefits
and to participate in those plans and programs available to other then
retirees of Huffy and/or to non-employee Directors of Huffy.
Except as set forth in this Agreement, commencing January 1, 2001, and
continuing until his retirement from the Board of Directors, pursuant to
the Board of Directors' retirement policy, Molen shall, subject to
election by the Board of Directors, serve in such position and for such
compensation as determined by the Board of Directors.
<PAGE> 3
Page 3
3. MODIFIED COMPENSATION PROGRAMS. The following programs will be modified
with respect to Molen as follows:
a. The 1993 CEO Long-Term Performance Plan between Huffy and Molen
shall be amended to allow all of the Performance Awards (as
defined in such Plan) to be earned during the entire Performance
Period (as defined in such Plan) set forth in Section 4.b.
therein, unless Molen dies or becomes disabled.
b. The 1987 Restricted Stock Unit Agreement between Huffy and Molen
shall be revised to amend the definition of "Termination Date" to
allow each Account (as defined in such plan) to be paid ten years
following the Award Date (as defined in such plan), unless Molen
dies or becomes disabled.
c. The Huffy Corporation Voluntary Deferred Compensation Agreements
between the Corporation and Molen may, at the election of Molen,
be amended to extend the Termination Date(s) (as defined in such
Agreements) to up to December 31, 2013, subject to those
conditions imposed by the Corporate Benefits Advisory Committee
relating to amendments to change the Termination Date(s).
4. NON-COMPETITION. Molen agrees that during the period that compensation
and/or benefits are being paid to him hereunder and for a period of five
(5) years thereafter, without the prior written approval of the Board of
Directors of Huffy, he shall not, either as a consultant, shareholder,
joint venturer, partner, officer, employee, licensee, licensor, agent,
solicitor, distributor, creditor, advisor, principal, director, dealer,
representative or in any other capacity, in any way engage or
participate, directly or indirectly, (a) in any business which is a
major customer of Huffy or any of its affiliated or subsidiary
companies, or the successors or any of the related interests of any of
them, (b) in any business which competes against any of the businesses
engaged in or contemplated by Huffy or any of its affiliated or
subsidiary companies, or the successors or any of the related interests
of any of them (it being understood and agreed that the business
activities of Huffy and its affiliated and subsidiary companies are
carried on throughout the world), or (c) in any business which seeks to
purchase or otherwise acquire, merge, consolidate or otherwise combine
with, or otherwise achieve control of Huffy or any of its affiliated or
subsidiary companies. In the event of any violation of this restrictive
covenant, Huffy may, to the extent permitted by law, forthwith
discontinue the payment of any or all further compensation provided in
Sections 1, 2 and/or 3 herein as well as benefits under the
Supplemental/Excess Benefit Plan and/or may enforce such restrictive
covenants by specific performance in any court of competent jurisdiction
in the world and/or in an action for monetary damages. If any court of
competent jurisdiction shall determine either the period or the
territory covered by this restrictive covenant is unreasonable, said
restrictive covenant shall not be deemed to be null, void and of no
effect, but shall be reformed by said court to impose a reasonable
period or a reasonable territorial limitation, as the case may be.
5. WAIVER, AMENDMENT. Any waiver, alteration or modification of any of the
provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid
<PAGE> 4
Page 4
unless in writing, signed by the parties and approved by the Board of
Directors of Huffy.
6. STATE OF LAW. This Agreement shall be governed by the laws of the State
of Ohio in all respects. If any provision hereof is contrary to or
prohibited by or deemed invalid under federal, state or local law, such
provision shall, if the parties agree, be amended to comply with
applicable law, or if no such agreement, be inapplicable and deemed
omitted.
7. ASSIGNMENT. This Agreement shall inure to the benefit of and bind the
parties hereto and their respective legal representatives, successors
and assigns; provided, however, that Molen shall not assign this
Agreement or any of his rights hereunder without the prior written
consent of Huffy.
8. NOTICES. Notices hereunder shall be deemed given upon receipt of same
by certified or registered mail, with postage prepaid, addressed as
follows:
If to Huffy, to:
Huffy Corporation
P.O. Box 1204
Dayton, OH 45401
Attention: Secretary
If to Molen, to:
Richard L. Molen
Dayton, OH 45429
Any party may change its or his address for purposes of notices
hereunder by notice duly given to the other party as provided above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
/S/ Richard L. Molen
----------------------------
Richard L. Molen
HUFFY CORPORATION
By: /S/ Nancy A. Michaud
------------------------
Vice President - General
Counsel and Secretary
<PAGE> 1
Exhibit 10.u
June 21, 1996 REVISED 9-6-96
--------------
Mr. Donald R. Graber
Dear Don:
Don, this letter will confirm the verbal agreement we reached June 20, 1996
regarding your pension benefits as well as long term disability arrangements
during the first three years of your employment.
1. You will not be eligible to draw, under any circumstances, pension
benefits until your 57th birthday.
2. If you are involuntarily terminated by Huffy at any time during
your first three years of employment for reasons other than
disability, you will be eligible to begin receiving an annual pension
benefit at age 57 of $115,000 per year, less taxes. This benefit will
be considered a Married Participant Annuity, which means that if you
predecease your spouse, she will be entitled to receive a survivor
benefit equal to one-half the benefit paid to you while you were alive
or $57,500. This provision is subject to Paragraph 21. d. of the
Employment letter, dated June 11, 1996.
3. If you should become totally and permanently disabled at any time
during the first three years of your employment, you will remain on
disability until age 65, at which time you will commence pension
benefits of $115,000 per year, less taxes, adjusted to age 65 using the
Huffy Corporation Supplemental/Excess Benefit Plan early commencement
reduction factor of 4%. Thus, at age 65 you would begin receiving a
pension benefit of $169,118. This benefit will be considered a Married
Participant Annuity as described in paragraph #2 above.
<PAGE> 2
Mr. Donald R. Graber
June 21, 1996
Page Two
4. Assuming you continue to work for Huffy until you elect to retire, your
total annual pension benefit will be capped at $250,000, less taxes.
The table below illustrates this:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASSUMED CALCULATED ANNUAL ANNUAL RETIREMENT BENEFIT
RETIREMENT AGE RETIREMENT BENEFIT ACTUALLY PAYABLE
-------------- ------------------ ----------------
- --------------------------------------------------------------------------------
<S> <C> <C>
61 $237,400 $237,400
- --------------------------------------------------------------------------------
62 277,800 250,000
- --------------------------------------------------------------------------------
63 318,200 "
- --------------------------------------------------------------------------------
64 358,000 "
- --------------------------------------------------------------------------------
65 398,000 "
- --------------------------------------------------------------------------------
</TABLE>
Such pension benefit will be treated as a Married Participant Annuity as
outlined in paragraph #2 of this letter.
Don, I believe this accurately reflects our discussion. If so, please indicate
your agreement by signing as provided for below.
Sincerely,
/s/ RICHARD L. MOLEN
Richard L. Molen
Chairman, President & CEO
cc: Don Scheick
I ACCEPT THE FOREGOING: /s/ DONALD R. GRABER 6/24/96
------------------------ ------------
DONALD R. GRABER DATE
<PAGE> 3
EXHIBIT C
---------
The Employer shall grant Graber two (2) years of additional Credited Service
under the Retirement Plan for each one (1) full year of Actual Service under the
Retirement Plan completed during Graber's first five years of employment with
the Employer. For purposes of this Exhibit C only, Actual Service shall mean
service while on the active payroll, salary continuation or long-term
disability. Thus, upon Graber's fifth anniversary with the Employer, Graber
shall have ten (10) years of additional Credited Service in addition to the five
(5) years of Actual Service completed, for a total of fifteen (15) years of
Credited Service.
Notwithstanding the foregoing, if his employment is involuntarily terminated
during his first three years of employment for any reason (including a change of
control), excluding only total and permanent disability (as discussed below) and
voluntary resignation, in such event, Graber will be eligible to begin receiving
an annual pension benefit beginning at age 57 of $115,000, less taxes, at age
57. Such pension shall be considered to be in the form of a 50% Joint and
Survivor Married Participant Annuity. If Graber dies prior to the attainment of
age 57, subject to the foregoing, his surviving spouse shall be paid an annual
annuity equal to one-half of the $115,000 (or $57,500) at such time as Graber
would have reached age 57. Upon retirement, Graber may elect an alternate
payment option, as permitted under the Retirement Plan, which option shall be
calculated in accordance with the provisions of the Retirement Plan. This means
the $115,000 annual benefit payable to Graber and, following his death, to his
spouse, should she survive, shall be actuarially adjusted consistent with the
option elected.
In addition, if Graber should become totally and permanently disabled, as
determined by the insurance carrier for the long-term disability policy
maintained by the Employer, which is then in effect, or, if none, as determined
by the Retirement Committee, at any time during the first three years of his
employment with the Employer, he shall receive payment of long-term disability
payments based on his salary at the time of such disability in accordance with
the terms of the long-term disability policy then in effect until age 65. At age
65, he shall receive pension benefits of $169,118 per annum, being $115,000 per
annum at age 57, adjusted to its age 65 equivalent using the Plan's early
commencement reduction factor of 4% per annum. Such $169,118 pension payment
will be considered to be in the form of a 50% Joint and Survivor Married
Participant Annuity as described in the preceding paragraph.
Finally, provided Graber remains continuously employed past his third
anniversary date of employment by the Employer, Graber may then elect to retire,
in his sole discretion, in accordance with the Retirement Plan's terms. Graber's
annual pension benefit under the Plan upon termination of employment for any
reason or retirement shall not exceed the lesser of the annual pension benefit
calculated under the Plan (Column I) or $250,000 (see Column II), less taxes,
and such annual pension benefit shall be treated as a 50% Joint and Survivor
Married Participant Annuity, unless an alternate payment option is elected in
accordance with Retirement Plan's terms in which case such option election shall
be actuarially adjusted consistent with the option elected.
<PAGE> 4
EXHIBIT C (CONT'D)
---------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COLUMN I
EXAMPLE OF COLUMN II
ASSUMED CALCULATED EXAMPLE OF
EXAMPLE OF ANNUAL PENSION BENEFIT ACTUAL ANNUAL PENSION
RETIREMENT AGE UNDER PLAN BENEFIT PAYABLE
-------------- ---------- ---------------
- --------------------------------------------------------------------------------
<S> <C> <C>
61 $237,400 $237,400
- --------------------------------------------------------------------------------
62 $277,800 $250,000
- --------------------------------------------------------------------------------
63 $318,200 $250,000
- --------------------------------------------------------------------------------
64 $358,000 $250,000
- --------------------------------------------------------------------------------
65 $398,000 $250,000
- --------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 1
Exhibit 10.z
FIFTH AMENDMENT
TO THE
HUFFY CORPORATION SUPPLEMENTAL/EXCESS BENEFIT PLAN
WHEREAS, Huffy Corporation ("Employer") maintains the Huffy Corporation
Supplemental/Excess Benefit Plan, ("Plan") effective January 1, 1988, and
WHEREAS, the Employer desires to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows effective as of July 25, 1996:
1. Article III, Amount of Supplemental/Excess Benefit, is hereby revised by
adding the following additional provision:
Mr. Don R. Graber ("Graber"), an employee of the Employer and a
Participant, shall have those benefits determined in accordance
with this Plan, except as amended by Exhibit C, attached hereto
and made a part hereof.
2. Defined capitalized terms not otherwise defined herein shall have the
meanings set forth in the Plan. Except as set forth herein and in the
First Amendment, Second Amendment, Third Amendment and Fourth Amendment
to the Plan, the Plan remains unamended and is affirmed.
IN WITNESS WHEREOF, the Sponsor has caused this instrument to be executed as of
the 25th day of July, 1996.
HUFFY CORPORATION
By: /S/ Nancy Michaud
--------------------------------
Nancy A. Michaud
Vice President - General Counsel
and Secretary
<PAGE> 1
Exhibit 10.bb
FIRST AMENDMENT TO
HUFFY CORPORATION MASTER BENEFIT TRUST
AGREEMENT AS RESTATED
--------------------------------------
WHEREAS, Huffy Corporation (the "Company") and Bank One Trust Company, N.A. (the
"Trustee") entered into a Master Benefit Trust Agreement as Restated, effective
June 9, 1995 (the "Agreement");
WHEREAS, the Company and the Trustee desire to amend the Agreement;
NOW, THEREFORE, the Company and the Trustee adopt the following Amendment to the
Agreement, effective January 1, 1996:
1. SCHEDULE B. Schedule B is hereby amended to include the following plan:
Deferred Compensation Plan II, effective January 1, 1996.
2. AFFIRMATION. Except as set forth in this Amendment, the Agreement remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Amendment to be
executed as of the date first written above.
HUFFY CORPORATION
By: /S/ NANCY A. MICHAUD
----------------------------------
Its: VICE PRESIDENT - GENERAL COUNSEL
----------------------------------
AND SECRETARY
---------------
BANK ONE TRUST COMPANY, N.A.
By: /S/ LOUIS W. FELDMANN, III
----------------------------------
Its: VICE PRESIDENT
----------------------------------
<PAGE> 1
Exhibit 10.ff
THIRD AMENDMENT TO HUFFY CORPORATION
1987 DIRECTOR STOCK OPTION PLAN
------------------------------------
This Third Amendment is made and effective as of February 15, 1996 to the 1987
Director Stock Option Plan (the "Plan"), adopted on April 15, 1988 by the
Shareholders of Huffy Corporation (the "Company"), as amended April 30, 1990 and
December 15, 1991, under the following circumstances:
A. The Company desires to amend the Plan (and the Plan so allows such
amendment without Shareholder approval) so that option grants may be
designated by the Committee at dates other than July 1; and
B. On February 15, 1996, the Board of Directors approved amending the Plan,
in accordance with the terms set forth below.
NOW, THEREFORE, the Plan shall be amended as follows:
1. DEFINITIONS. All capitalized terms herein, unless otherwise specifically
defined in this Amendment, shall have the meanings given to them in the
Plan.
2. AMENDMENT. Section 6(a) of the Plan is hereby amended in its entirety to
read as set forth below:
"(a) In addition to any options granted pursuant to Section 5
hereof, options shall be granted automatically on July 1
and/or on such other date(s) as may be designated by the
Committee from time to time as date(s) to grant such
options (or, if any such date is not a business day, on
the next succeeding business day) of any year to any
Outside Director who, at least six (6) months prior to any
such date(s), files with the Secretary of the Company an
irrevocable election to receive an option in lieu of all
or any part (in multiples of $1,000) of Annual Retainer
fees to be earned in the then current Plan Year (I.E., the
year beginning ---- July 1 and ending June 30; herein
referred to as a "Plan Year")."
3. EFFECTIVE DATE AND AFFIRMATION. This Amendment shall be effective as of
February 15, 1996. Except as amended hereby and the amendments contained
in the First Amendment and Second Amendment to the Plan, dated April 30,
1990 and December 15, 1991, respectively, the Plan remains unchanged and
in full force and effect.
<PAGE> 2
Page 2
IN WITNESS WHEREOF, this Third Amendment has been executed as of February 15,
1996.
HUFFY CORPORATION
By /S/ Nancy A. Michaud
--------------------------
<PAGE> 1
Exhibit 10.ii
FIRST AMENDMENT TO HUFFY CORPORATION
1990 DIRECTORS' RETIREMENT PLAN
------------------------------------
This Amendment is made and effective as of February 15, 1996 to Huffy
Corporation 1990 Directors' Retirement Plan (the "Plan"), approved and adopted
on January 27, 1990 by the Board of Directors of Huffy Corporation (the
"Company"), under the following circumstances:
A. The Plan provides that an annual benefit is to be paid on the Payment
Date, as defined in the Plan, to an Eligible Director after his or her
retirement from the Board beginning after the Director reaches age sixty
(60); however, several members of the Board will reach age sixty (60)
before retirement from the Board and will not receive payment until after
retirement;
B. Section 9 of the Plan permits the Board of Directors to amend the Plan at
any time; and
C. On February 15, 1996, the Board of Directors approved amending the Plan in
accordance with the terms set forth below.
NOW, THEREFORE, the Plan shall be amended as follows:
1. DEFINITIONS. All capitalized terms herein, unless otherwise specifically
defined in this Amendment, shall have the meanings given to them in the
Plan.
2. AMENDMENT. The first paragraph of Section 5 of the Plan is hereby amended
in its entirety to read as set forth below:
"SECTION 5. COMMENCEMENT AND DURATION OF ANNUAL BENEFIT
The Annual Benefit shall be paid to an Eligible Director after
his or her retirement from the Board of Directors beginning on
the first Payment Date occurring on the later of (i) the
Director reaching age sixty (60) or (ii) the Director retiring
from the Board of Directors, unless some other year is
specified by the Eligible Director, as provided in this
Section 5, but shall not commence (a) before the later of the
year the Eligible Director may receive payment as provided in
(i) and (ii) above, or (b) after the year such Eligible
Director attains age seventy (70)."
3. EFFECTIVE DATE AND AFFIRMATION. This Amendment shall be effective as of
February 15, 1996. Except as amended hereby, the Plan remains unchanged
and in full force and effect.
<PAGE> 2
Page 2
IN WITNESS WHEREOF, this First Amendment has been executed as of February 15,
1996.
HUFFY CORPORATION
By /S/ Nancy A. Michaud
---------------------
<PAGE> 1
Exhibit 10.jj
SECOND AMENDMENT TO HUFFY CORPORATION
1990 DIRECTORS' RETIREMENT PLAN
-------------------------------------
This Second Amendment is made and effective as of February 15, 1996 to the Huffy
Corporation 1990 Directors' Retirement Plan (the "Plan"), adopted on January 27,
1990 by the Board of Directors of Huffy Corporation (the "Company"), as amended
by the First Amendment of even date herewith, under the following circumstances:
A. Section 9 of the Plan permits the Board of Directors to amend and/or
terminate the Plan at any time; and
B. On February 15, 1996, the Board of Directors approved that, effective
April 26, 1996, the Plan is amended to discontinue the Plan, on the terms
and conditions set forth below.
NOW, THEREFORE, the Plan shall be amended as follows:
1. DEFINITIONS. All capitalized terms herein, unless otherwise specifically
defined in this Amendment, shall have the meanings given to them in the
Plan.
2. AMENDMENT. Section 3, BENEFIT AND ELIGIBILITY, shall be amended in its
entirety, as set forth below:
"This Plan shall apply to Directors retiring after January 27,
1990, the effective date of the Plan. Effective April 26, 1996,
the Plan is terminated with then current, partially-vested
Directors to be credited for service through the end of their
current three-year term and with retirement benefits for vested
former Directors and vested current Directors to be paid in
accordance with the Plan's terms. A Director shall qualify as an
Eligible Director if such Director upon retirement from the Board
of Directors, in accordance with the preceding sentence, satisfies
either of the following criteria: (i) the Director is a
non-employee Director who has served five (5) years or more as a
Director, or (ii) the Director is a former employee Director who
has served five (5) years or more as a Director after retirement
or termination of service as an Employee of the Corporation."
3. AMENDMENT. The first sentence in Section 9 is hereby amended in its
entirety as follows:
"SECTION 9. EFFECTIVE DATE; AMENDMENT AND TERMINATION; AND
EXPENSES. The Plan shall become effective as of January 27, 1990
and shall terminate effective as of April 26, 1996, subject to the
provisions of Section 3 and this Section 9."
<PAGE> 2
Page 2
4. EFFECTIVE DATE AND AFFIRMATION. This Amendment shall be effective as of
February 15, 1996. Except as amended hereby and the amendment contained in
the First Amendment of even date herewith, the Plan remains unchanged and
in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been executed as of February 15,
1996.
HUFFY CORPORATION
By /S/ Nancy A. Michaud
---------------------
<PAGE> 1
Exhibit 13
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL AND OPERATING REVIEW (UNAUDITED)
(Dollar amounts in thousands, except per share data)
1996 1995 1994
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $701,879 $684,752 $719,485
Gross profit 117,973 96,049 128,607
Selling, general, and administrative expenses 102,378 97,769 96,696
Operating income (loss) [1] 15,595 (7,098) 32,845
Other (income) expense, net [2] (517) 35 (688)
Earnings (loss) before interest, taxes, and
cumulative effect of accounting changes 16,112 (7,133) 33,533
Interest expense, net 7,261 7,906 5,897
Earnings (loss) before income taxes and
cumulative effect of accounting changes 8,851 (15,039) 27,636
Income tax expense (benefit) 2,394 (4,582) 10,209
Earnings (loss) before cumulative effect of accounting changes 6,457 (10,457) 17,427
Cumulative effect of accounting changes, net of income taxes -- -- --
Net earnings (loss) 6,457 (10,457) 17,427
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share: [3]
Primary .48 (.78) 1.20
Fully diluted [4] .48 (.78) 1.20
- -----------------------------------------------------------------------------------------------------------------------------
Common dividends declared 4,582 4,577 4,861
Common dividends per share .34 .34 .34
Capital expenditures for plant and equipment 17,683 24,365 35,737
Weighted average common shares outstanding:
Primary 13,452 13,424 14,519
Fully diluted 13,452 13,424 14,519
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR END
Total assets 316,025 298,546 321,968
Working capital 64,865 63,089 90,325
Net investment in plant and equipment 89,759 93,091 89,600
Notes payable 38,910 5,750 --
Long-term obligations 43,897 51,236 58,611
Shareholders' equity 115,972 116,104 133,403
Equity per share 8.67 8.64 9.85
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS
Net cash provided by (used in) operating activities (2,652) 31,008 43,009
Net cash used in investing activities (17,657) (24,330) (34,012)
Net cash provided by (used in) financing activities 19,872 (5,724) (11,533)
Net change in cash and cash equivalents (437) 954 (2,536)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND MISCELLANEOUS
Net profit margin (before cumulative effect of accounting changes) 0.9% N/A 2.4%
Average working capital turnover 10.1 8.3 7.8
Return on net assets 5.1% N/A 8.9%
Return on beginning shareholders' equity 5.6% N/A 12.8%
Current ratio 1.5 1.6 1.9
Debt/total capital 30.7% 33.7% 32.4%
- -------------------------------------------------------------------------------------------------------------------------------
Number of common shareholders 3,570 3,688 4,196
</TABLE>
<PAGE> 2
[1] Operating loss in 1995 includes a net restructure provision of $5,378
related to personnel reductions and the negotiation of a concessionary
labor contract. Operating income in 1994 includes a restructure credit of
$934 related to a 1993 charge. Operating income in 1993 includes a
provision of $28,755 for restructuring the Company's lawn and garden tools
business.
[2] Other (income) expense, net includes the following: October 1988 - $5,584
loss on sale of capital stock of Raleigh Cycle Company of America.
[3] The 1993 net loss per share is computed using actual average outstanding
shares. In 1992 the assumed conversion of the 7.25% Convertible
Subordinated Debentures was antidilutive, and therefore, the per share
amounts reported for primary and fully diluted are the same.
[4] The 1993 loss per share before cumulative effect of accounting changes is
($.30). The 1992 fully diluted earnings per share before the cumulative
effect of accounting changes is $.89.
N/A - Not Applicable.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C>
$757,863 $703,345 $678,936 $516,744 $449,389 $335,713 $340,551
138,288 122,608 132,485 102,545 84,638 62,847 67,328
102,493 95,163 92,499 69,957 57,972 45,511 46,726
7,040 27,445 39,986 32,588 26,666 17,336 20,602
1,379 (497) 482 (370) (605) 5,704 352
5,661 27,942 39,504 32,958 27,271 11,632 20,250
8,739 9,321 8,047 4,390 3,467 3,856 3,048
(3,078) 18,621 31,457 28,568 23,804 7,776 17,202
755 6,778 11,630 10,561 8,811 3,240 7,111
(3,833) 11,843 19,827 18,007 14,993 4,536 10,091
(1,084) (7,628) -- -- -- -- --
(4,917) 4,215 19,827 18,007 14,993 4,536 10,091
- ----------------------------------------------------------------------------------------------------------------------------
(.38) .33 1.52 1.37 1.17 .36 .81
(.38) .33 1.41 1.28 1.11 .36 .78
- -------------------------------------------------------------------------------------------------------------------------------
4,175 3,809 3,740 3,461 3,071 2,613 2,333
.31 .30 .29 .27 .24 .20 .19
21,322 23,914 24,509 9,832 14,143 14,786 6,806
13,023 12,903 13,056 13,157 12,882 12,641 12,441
13,023 12,903 15,114 15,179 14,271 13,376 13,415
- -------------------------------------------------------------------------------------------------------------------------------
319,337 335,328 316,577 297,310 234,532 183,255 149,259
93,595 91,308 99,110 87,558 80,189 45,884 61,649
73,647 80,020 72,226 65,423 45,659 41,360 27,895
3,500 18,975 -- -- -- -- --
43,211 74,918 80,208 84,348 57,525 37,196 15,181
136,029 117,687 124,997 106,747 95,645 80,776 78,914
9.27 9.35 9.68 8.39 7.43 6.50 6.35
- -------------------------------------------------------------------------------------------------------------------------------
41,422 11,417 15,169 16,356 24,344 23,862 10,697
(21,182) (22,374) (21,784) (61,974) (12,642) (38,215) (6,428)
(19,589) 5,984 (6,774) 15,596 24,819 16,869 (3,159)
651 (4,973) (13,389) (30,022) 36,521 2,516 1,110
- -------------------------------------------------------------------------------------------------------------------------------
N/A 1.7% 2.9% 3.5% 3.3% 1.4% 3.0%
8.2 7.4 7.3 6.2 6.9 6.2 5.9
N/A 4.1% 11.5% 13.8% 13.7% 6.7% 12.5%
N/A 3.4% 18.6% 18.8% 18.6% 5.7% 14.7%
1.9 1.8 2.0 2.0 2.1 1.8 2.2
26.6% 40.5% 40.3% 45.7% 40.5% 33.3% 17.3%
- -------------------------------------------------------------------------------------------------------------------------------
3,760 3,883 3,016 2,410 2,473 2,180 2,173
</TABLE>
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND
SHAREHOLDERS, HUFFY CORPORATION:
===============================================================================
We have audited the accompanying consolidated balance sheets of Huffy
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Huffy
Corporation and subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- ----------------------------
KPMG Peat Marwick LLP
February 12, 1997
Cincinnati, Ohio
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands, except per share data)
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
================================================================================
The Company recorded net earnings of $6,457 in 1996, compared to a net
loss of $10,457 reported in 1995. The 1995 net loss included an after-tax
restructure charge of $3,496 to reflect severance and related costs associated
with a reduction of the Company's corporate and Huffy Bicycle Company workforce
and other costs associated with a new concessionary labor contract at the
Company's Celina, Ohio bicycle manufacturing facility.
Net earnings per share of common stock were $.48 in 1996 compared to a
net loss of $.78 in 1995. If the net loss were adjusted to exclude the impact of
the restructuring charge in 1995, net loss per common share would have been $.52
in 1995.
Net Sales
Net sales in 1996 were $701,879, a 2.5% increase over net sales of
$684,752 in 1995. Net sales in the Consumer Products segment increased by 1.2%
over 1995. Net sales were positively impacted 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. This
increase was partially offset by lower sales volume for the basketball business
resulting from unseasonable weather during the Spring selling season.
In the Services for Retail segment, net sales increased by 7.2% over
1995, 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.
Gross Profit
Consolidated gross profit for 1996 was $117,973, or 16.8% of net sales,
compared to $96,049, or 14.0% of net sales reported for 1995.
The increase in gross profit in the Consumer Products segment resulted
primarily from lower labor costs and improved productivity in the bicycle
business. In the Services for Retail segment, gross profit margins increased due
to improved labor efficiency in the inventory services business.
Consolidated gross profit in total and as a percentage of sales varies
by quarter due to normal seasonal fluctuations at several Huffy Companies. True
Temper Hardware Company typically experiences lower sales in the third quarter
due to the seasonal nature of its products. Lower gross profit percentages in
the fourth quarter are typically caused by seasonal fluctuations at Huffy
Bicycle Company and Washington Inventory Service. Huffy Bicycle Company
typically stops production for a period during December to prevent inventory
build-up. The fixed costs associated with this shutdown reduce fourth quarter
profitability. Washington Inventory Service also experiences a significant
unfavorable seasonal impact during the fourth quarter as retailers typically do
not conduct inventories during the Christmas season, causing low fourth quarter
sales volume and reduced gross profit.
Selling, General, and
Administrative Expenses
Selling, general, and administrative expenses in 1996 were $102,378, a
4.7% increase over 1995. The increase in selling, general and administrative
expense is primarily due to higher incentive accruals.
Net Interest Expense
Net interest expense was $7,261, a $645 decrease over net interest
expense for 1995. The decrease in interest expense is due primarily to principal
reduction in long-term debt.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
================================================================================
The Company recorded a net loss of $10,457 in 1995, compared to net
earnings of $17,427 reported in 1994. The 1995 net loss included an after-tax
restructure charge of $3,496 to reflect the severance and related costs
associated with a reduction of the Company's corporate and Huffy Bicycle Company
workforce and other costs associated with a new concessionary labor contract at
the Company's Celina, Ohio bicycle manufacturing facility.
The net loss per share of common stock was $.78 in 1995. If the net
loss was adjusted to exclude the impact of the restructuring charge in 1995,
net loss per common share would have been $.52 in 1995 compared to net earnings
per common share of $1.20 in 1994.
Net Sales
Net sales in 1995 were $684,752, a 4.8% decrease over net sales of
$719,485 in 1994. Net sales decreased in the Consumer Products segment due
primarily to the softness at retail, a continued shift to lower specification
and promotionally priced products, and intensified price and product
competition.
The decrease in net sales in the Consumer Products segment occurred
primarily at the Huffy Bicycle Company, where sales were lower than 1994 due to
a soft retail environment, significant pricing competition at the retail level,
and continued dumping of bicycles by the People's Republic of China. True Temper
Hardware Company's and Gerry Baby products Company's sales were below 1994
levels primarily as a result of soft retail and a very competitive market
environment.
<PAGE> 5
In the Services for Retail segment, Huffy Service First had record
sales due primarily to growth in its Assembly Services market segment.
Gross Profit
Consolidated gross profit for 1995 was $96,049, or 14.0% of net sales,
compared to $128,607, or 17.9% reported for 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 as a result of lower unit volume sales, an
intensely competitive retail environment, continued shifting of consumer
preference to promotionally priced product, and pricing pressure caused by the
continued dumping of bicycles in the United States by the People's Republic of
China. Gross margin as a percentage of net sales declined at Huffy Sports
Company and True Temper Hardware Company as a result of a shift in mix to lower
margin product and increased material costs. Intense competition and a strong
commitment to maintain market share caused the gross margin to decline at Gerry
Baby Products Company. In the Services for Retail segment, gross margin as a
percentage of net sales declined slightly from 1994 levels due primarily to
increased labor and transportation costs at Washington Inventory Service.
Selling, General, and
Administrative Expenses
Selling, general, and administrative expenses in 1995 were $97,769, a
1.1% increase over 1994. Volume related reductions in selling, general, and
administrative expenses and lower incentive compensation in 1995 were offset by
increased advertising expenditure and increased expenses related to the addition
of the Company's Farmington, Missouri bicycle manufacturing facility.
Net Interest Expense
Net interest expense was $7,906, a $2,009 increase over net interest
expense for 1994. The increase in net interest expense was primarily caused by
the issuance of industrial development bonds used to finance the acquisition of
the Company's Farmington, Missouri bicycle facility in the third quarter of
1994.
LIQUIDITY AND CAPITAL RESOURCES
===============================================================================
The financial condition of the Company remained strong during 1996.
Company operations have historically provided a strong, positive cash flow
which, along with the credit facilities maintained, provides adequate liquidity
to meet the Company's operational needs. Cash used in operations amounted to
$2,652 in 1996, compared to cash provided by operations of $31,008 in 1995 and
$43,009 in 1994. A 22% increase in fourth quarter sales volume for 1996 compared
to 1995, and a build up of inventory needed to meet customer demand in the first
quarter of 1997 caused a significant decrease in cash flows from operations in
1996.
Committed and uncommitted short-term lines of credit total $120,000 of
which $38,910 was outstanding at December 31, 1996. The Company believes that
its capital structure provides the financial flexibility to obtain additional
financing that may be necessary to fund future growth.
Funds expended for capital additions and improvements totaled $17,683
in 1996 compared to $24,365 in 1995 and $35,737 in 1994. Capital expenditures in
1994 and 1995 included the acquisition and construction of a new bicycle
production facility in Farmington, Missouri. In 1997, capital expenditures are
expected to be approximately $24,000, reflecting continuing investment in new
products and technology.
The Company's debt to total capital ratio decreased to 30.7% at
December 31, 1996 compared to 33.7% at December 31, 1995 due to the scheduled
repayment of long-term obligations.
RESTRUCTURING ACTIVITY
===============================================================================
During 1995, the Company recorded a restructure charge of $5,378
($3,496 after-tax). The restructure plan included a charge of $715 related to a
30% reduction in the Company's Corporate Staff, $1,280 related to a reduction in
administrative and hourly employment at the Huffy Bicycle Company, and a charge
of $3,883, which included a pension curtailment expense of $3,226, related to
the negotiation of a concessionary labor contract at the Company's Celina, Ohio
bicycle manufacturing facility. The restructure charge was offset by a $500
restructure credit recorded to reflect revised cost estimates for certain items
in a 1993 restructure charge. The restructure plan was substantially completed
during 1995 with all activity completed as of December 31, 1996.
OTHER MATTERS
================================================================================
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. Currently, the Company, along with other PRPs, the San Gabriel
Basin Water Quality Authority and numerous local water districts are working
with the EPA on a mutually satisfactory remedial plan.
The total accrual for estimated environmental remediation costs related
to the Superfund site and other potential environmental liabilities is
approximately $3,200 at December 31, 1996. Management expects that the majority
of expenditures relating to costs currently accrued will be made over the next
two to ten years. As a result of factors such as the continuing evolution of
environmental laws and regulatory requirements, the availability and application
of technology, the identification of presently unknown remediation sites and the
allocation of costs among PRPs, estimated costs for future environmental
compliance and remediation are necessarily imprecise and it is not possible to
fully predict the amount or timing of future costs of environmental remediation
requirements which may subsequently be determined.
<PAGE> 6
Based upon information presently available, such future costs are not
expected to have a material adverse effect on the Company's financial condition,
liquidity, or its ongoing results of operations. However, such costs could be
material to results of operations in a future period.
INFLATION
===============================================================================
Inflation rates in the United States have not had a significant impact
on the Company's operating results for the three years ended December 31, 1996.
The impact on the Company is minimized as a result of rapid turnover of
inventories and partially offset by cost reduction programs and increased
operating efficiency.
<PAGE> 7
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
December 31, 1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,121 $ 2,558
Receivables:
Trade 92,597 75,523
Taxes and other 5,212 7,508
-------- --------
97,809 83,031
Less allowance for doubtful accounts 1,736 1,789
-------- --------
Net receivables 96,073 81,242
Inventories 72,657 65,175
Deferred federal income taxes 8,666 8,901
Prepaid expenses 6,633 5,562
-------- --------
Total current assets 186,150 163,438
-------- --------
Property, Plant, and Equipment, at Cost:
Land and land improvements 1,667 1,667
Buildings and improvements 38,654 38,049
Machinery and equipment 146,256 138,834
Office furniture, fixtures, and equipment 30,009 28,565
Leasehold improvements 3,189 4,179
Construction in progress 8,605 2,946
-------- --------
228,380 214,240
Less accumulated depreciation and amortization 138,621 121,149
-------- --------
Net property, plant, and equipment 89,759 93,091
Other Assets:
Excess of cost over net assets acquired, net of
accumulated amortization of $7,163 in 1996
and $6,363 in 1995 24,153 24,953
Deferred federal income taxes 8,085 9,166
Other 7,878 7,898
-------- --------
$316,025 $298,546
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 38,910 $ 5,750
Current installments of long-term obligations 7,593 7,685
Accounts payable 31,506 39,856
Accrued expenses:
Salaries, wages, and other compensation 17,035 16,526
Insurance 14,011 12,457
Other 9,583 13,732
--------- ---------
Total accrued expenses 40,629 42,715
Other current liabilities 2,647 4,343
--------- ---------
Total current liabilities 121,285 100,349
Long-term obligations, less current installments 43,897 51,236
Pension liability 8,850 7,922
Postretirement benefits other than pensions 16,826 16,216
Other liabilities 9,195 6,719
--------- ---------
Total liabilities 200,053 182,442
--------- ---------
Shareholders' Equity:
Preferred stock, par value $1 per share
Authorized 1,000,000 shares -- --
Common stock, par value $1 per share
Authorized 60,000,000 shares; issued 16,411,343
shares in 1996 and 16,213,065 shares in 1995 16,411 16,213
Additional paid-in capital 62,488 60,644
Retained earnings 81,436 79,561
Minimum pension liability adjustment (4,028) (3,247)
Cumulative translation adjustment (563) (613)
--------- ---------
155,744 152,558
Less cost of 3,038,396 treasury shares
in 1996 and 2,775,096 in 1995 39,772 36,454
--------- ---------
Total shareholders' equity 115,972 116,104
--------- ---------
$316,025 $298,546
--------- ---------
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except share data)
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Net sales $ 701,879 $ 684,752 $ 719,485
Cost of sales 583,906 588,703 590,878
----------- ----------- -----------
Gross profit 117,973 96,049 128,607
Selling, general, and administrative expenses 102,378 97,769 96,696
Restructuring costs (credits) -- 5,378 (934)
----------- ----------- -----------
Operating income (loss) 15,595 (7,098) 32,845
Other expense (income)
Interest expense 7,343 7,996 6,425
Interest income (82) (90) (528)
Other (517) 35 (688)
----------- ----------- -----------
6,744 7,941 5,209
----------- ----------- -----------
Earnings (loss) before income taxes 8,851 (15,039) 27,636
Income tax expense (benefit) 2,394 (4,582) 10,209
----------- ----------- -----------
Net earnings (loss) 6,457 (10,457) 17,427
----------- ----------- -----------
EARNINGS (LOSS) PER COMMON SHARE:
Weighted average number of common shares 13,452,008 13,423,784 14,518,671
Net earnings (loss) per common share $ .48 $ (.78) $ 1.20
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 6,457 $(10,457) $ 17,427
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Restructuring costs (credits), net of payments -- (203) (7,263)
Depreciation and amortization 22,904 22,419 20,222
Loss on sale of property, plant, and equipment 11 443 135
Deferred federal income tax expense (benefit) 1,736 (689) 6,062
Increase (decrease) in cash resulting from changes in:
Receivables, net (14,831) 24,560 (12,534)
Inventories (7,482) 2,779 14,190
Prepaid expenses (1,071) (74) (119)
Other assets (1,379) (1,978) (1,040)
Accounts payable (8,350) (3,997) 140
Accrued expenses (2,086) (1,889) 7,138
Other current liabilities (1,697) (674) (535)
Postretirement benefits other than pensions 610 734 472
Other long-term liabilities 2,476 -- (1,910)
Other 50 34 624
-------- -------- --------
Net cash provided by (used in) operating activities (2,652) 31,008 43,009
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,683) (24,365) (35,737)
Proceeds from sale of property, plant, and equipment 26 35 1,725
-------- -------- --------
Net cash used in investing activities (17,657) (24,330) (34,012)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable 33,160 5,750 (3,500)
Issuance of long-term obligations 94 150 20,666
Reduction of long-term obligations (7,525) (5,140) (5,934)
Issuance of common shares 2,042 536 2,299
Purchase of treasury shares (3,318) (2,447) (20,094)
Dividends paid (4,581) (4,573) (4,970)
-------- -------- --------
Net cash provided by (used in) financing activities 19,872 (5,724) (11,533)
-------- -------- --------
Net change in cash and cash equivalents (437) 954 (2,536)
Cash and cash equivalents:
Beginning of year 2,558 1,604 4,140
-------- -------- --------
End of year $ 2,121 $ 2,558 $ 1,604
-------- -------- --------
Cash paid (refunded) during the year for:
Interest $ 7,500 $ 8,655 $ 6,368
Income taxes (3,131) (2,415) 11,050
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except share data)
Minimum
Additional Pension Cumulative
Common Paid-In Retained Liability Translation Treasury
Stock Capital Earnings Adjustment Adjustment Stock
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 15,963 58,059 82,029 (4,839) (1,270) (13,913)
Net earnings 17,427
Issuance of 202,717 shares in
connection with common
stock plans 203 2,096
Common dividends $.34
per share (4,861)
Purchase of 1,326,346
treasury shares (20,094)
Minimum pension liability
adjustment 1,980
Foreign currency
translation adjustment 623
------- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1994 $16,166 $60,155 $94,595 $(2,859) $ (647) $(34,007)
Net (loss) (10,457)
Issuance of 47,039 shares
in connection with common
stock plans 47 489
Common dividends $.34
per share (4,577)
Purchase of 159,103
treasury shares (2,447)
Minimum pension liability
adjustment (388)
Foreign currency
translation adjustment 34
------- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1995 $16,213 $60,644 $ 79,561 $(3,247) $ (613) $(36,454)
Net earnings 6,457
Issuance of 198,278 shares
in connection with common
stock plans 198 1,844
Common dividends $.34
per share (4,582)
Purchase of 263,300
treasury shares (3,318)
Minimum pension liability
adjustment (781)
Foreign currency
translation adjustment 50
------- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996 $16,411 $62,488 $ 81,436 $(4,028) $ (563) $(39,772)
------- ------- ------- ------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
[1] SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
===============================================================================
[a] Consolidation -- The consolidated financial statements include the
accounts of Huffy Corporation and its subsidiaries. All intercompany
transactions and balances have been eliminated.
[b] Cash and Cash Equivalents -- Cash equivalents consist principally
of short-term money market instruments, with original maturities of three months
or less.
[c] Concentrations of Credit Risk -- Financial instruments which
potentially expose the Company to concentrations of credit risk, as defined by
Statement of Financial Accounting Standards (SFAS) No. 105, consist primarily of
trade accounts receivable. In the normal course of business, Huffy extends
credit to various companies in the retail industry where certain concentrations
of credit risk exist. These concentrations of credit risk may be similarly
affected by changes in economic or other conditions and may, accordingly, impact
Huffy's overall credit risk. However, management believes that consolidated
accounts receivable are well diversified, thereby reducing potential material
credit risk, and that the allowance for doubtful accounts is adequate to absorb
estimated losses as of December 31, 1996.
[d] Inventories -- Inventories are valued at cost (not in excess of
market) determined by the last-in, first-out (LIFO) method for all bicycle and
basketball inventories. Baby products and lawn and garden tools inventories are
valued on the first-in, first-out (FIFO) method. At December 31, 1996 and 1995,
37% and 51%, respectively, of the Company's inventories were valued using the
LIFO method.
[e] Property, Plant, and Equipment -- Depreciation and amortization of
plant and equipment is provided on the straight-line method.
Annual depreciation and amortization rates are as follows:
Land improvements 5 -- 10%
Buildings and improvements 2-1/2 -- 10%
Machinery and equipment 5 -- 33-1/3%
Office furniture, fixtures, and equipment 10 -- 33-1/3%
Leasehold improvements 4-1/2 -- 33-1/3%
[f] Amortization of Intangibles -- The excess of cost over net assets
acquired is amortized on a straight-line basis over forty years. The carrying
value of goodwill is reviewed at each balance sheet date to determine whether
goodwill has been impaired. If this review indicates that goodwill will not be
recoverable, as determined based on projected undiscounted future cash flows of
the entity acquired, the Company's carrying value of goodwill would be reduced
by the estimated impairment.
[g] Disclosures About the Fair Value of Financial Instruments -- The
carrying amount of cash and cash equivalents, trade receivables, trade accounts
payable, notes payable, and accrued expenses approximates fair value due to the
short maturity of these instruments. The fair value of the Company's long-term
debt obligations is disclosed in Note (4).
[h] Earnings (Loss) Per Common Share -- Net earnings (loss) per share
of common stock is based upon the weighted average number of shares of common
stock outstanding during the year. No effect has been given to options
outstanding under the Company's Stock Option Plans as no material dilutive
effect would result from the issuance of these shares.
[i] Foreign Currency Translation -- The functional currency of the
Company's non-U.S. subsidiaries is the local currency. Adjustments resulting
from the translation of financial statements are reflected as a separate
component of shareholders' equity.
[j] Use of Estimates -- Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
[k] Stock Option Plans -- Prior to January 1, 1996, the Company
accounted for its stock option plan in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
<PAGE> 13
[2] RESTRUCTURING PROVISION
================================================================================
During 1995, the Company recorded a restructure charge of $5,378
($3,496 after-tax). The restructure plan included a charge of $715 related to a
30% reduction in the Company's Corporate Staff, $1,280 related to a reduction
in administrative and hourly employment at the Huffy Bicycle Company, and a
charge of $3,883, which includes a pension curtailment expense of $3,226,
related to the negotiation of a concessionary labor contract at the Company's
Celina, Ohio bicycle manufacturing facility. The restructure reserve, which is
included with other current liabilities at December 31, 1995, includes $657 of
contract settlement charges and $1,173 of unpaid severance and related
expenditures, all of which were expended during 1996.
During 1994, the Company substantially completed a restructuring of its
lawn and garden tools business. A restructure credit of $934 in 1994 and $500 in
1995 was recorded to reflect the revised cost estimates for certain items
included in the 1993 charge. All activity related to the restructure of the
Company's lawn and garden tools business was completed as of December 31, 1995.
[3] INVENTORIES
================================================================================
<TABLE>
<CAPTION>
The components of inventories are as follows:
1996 1995
<S> <C> <C>
Finished goods $42,811 $31,715
Work-in-process 9,473 10,587
Raw materials and supplies 28,368 31,729
------- -------
80,652 74,031
Excess of FIFO cost over
LIFO inventory value (7,995) (8,856)
------- -------
$72,657 $65,175
======= =======
</TABLE>
During 1996, inventory quantities were reduced, which resulted in a
liquidation of LIFO inventory carried at lower costs which prevailed in prior
years. The effect of the liquidation for 1996 was to decrease cost of goods sold
by approximately $845 and to increase net earnings by $558. There were no
liquidations of LIFO inventories in 1995.
[4] LINES OF CREDIT AND LONG-TERM OBLIGATIONS
================================================================================
During 1996, the Company had a short-term committed line of credit with
various banks in the form of a $50,000 revolving credit agreement, expiring
December 31, 1997. The Company also had $70,000 in uncommitted lines of credit
on a no fee basis, of which $38,910 was outstanding at December 31, 1996.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Unsecured notes payable:
Average borrowings $23,246 $15,441
Maximum at any month end 41,430 45,580
Weighted average rate 4.77% 6.15%
Long-term obligations are summarized as follows:
1996 1995
Unsecured notes payable:
9.62% due serially through 2000 $18,000 $21,000
9.81% due serially through 1998 8,400 12,400
8.23% Industrial Development Bonds
due serially from 2000 through 2014 20,000 20,000
Other 5,090 5,521
------- -------
51,490 58,921
Less current installments 7,593 7,685
------- -------
$43,897 $51,236
======= =======
</TABLE>
Certain of the loan agreements contain covenants which, among other
things, require the Company to maintain current assets equal to 150% of current
liabilities, limit the percentage of capitalization from funded debt, and
require that certain levels of net worth be maintained.
Principal payments required on long-term obligations during each of the
years 1998 through 2001 are approximately $7,757, $6,376, $7,660, and $1,678,
respectively.
The estimated fair value of the Company's long-term obligations at
December 31, 1996 and 1995 was approximately $54,504 and $64,500, respectively.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. Fair value
estimates were based on the amount of future cash flows discounted using the
Company's current borrowing rate for loans of comparable maturity. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
[5] PREFERRED STOCK
================================================================================
Under the Company's Amended Articles of Incorporation, there are
1,000,000 authorized, unissued shares of Cumulative Preferred Stock, $1.00 par
value. Subject to certain limitations, the Articles provide that the Board of
Directors may fix the conditions of each series of Preferred Stock.
The Company entered into a Rights Agreement with its transfer agent in
1988, as amended in 1991 and 1994, and the Board of Directors declared a
dividend of one Preferred Share Purchase Right for each outstanding share of the
Company's Common Stock. Upon the occurrence of certain events, Preferred Share
Purchase Rights entitle the holder to purchase, at a price of $60.00, one
one-hundredth of a share of Series C Cumulative Preferred Stock, subject to
adjustment. The Rights become exercisable only if a person or group acquires 15%
or more of the Company's Common Stock or announces a tender offer for 15% or
more of the Common Stock. Under certain circumstances, all Rights holders,
except the person or group holding 15% or more of the Company's Common Stock,
will be entitled to purchase a number of shares of the Company's Common Stock
having a market value of twice the Right's current exercise price. Alternately,
if the Company is acquired in a merger or other business combination, after the
Rights become exercisable the Rights will entitle the holder to buy a number of
the acquiring company's common shares having a market value at that time of
twice each Right's current exercise price.
<PAGE> 14
Further, after a person or group acquires 15% or more (but less than
50%) of the Company's outstanding Common Stock, the Company's Board of Directors
may exchange part or all of the Rights (other than the Rights held by the
acquiring person or group) for shares of Common Stock. The Rights expire
December 9, 2004 and may be redeemed by the Company for $.01 per Right at any
time prior to the acquisition by a person or group of 15% or more of the
Company's Common Stock.
[6] COMMON STOCK AND COMMON STOCK PLANS
================================================================================
At December 31, 1996, the Company has four stock-based compensation
plans which are described below. The Company applies APB Opinion No. 25 and
related Interpretations in Accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and its
stock purchase plan except for options issued below fair market value. The
compensation cost that has been charged against income for options issued below
fair market value was $246 and $0 for 1996 and 1995, respectively. Had
compensation cost for the Company's stock-based compensation plans been
determined consistent with FASB Statement No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
1996 1995
Net earnings (loss) As Reported $ 6,457 $(10,457)
Pro Forma 6,228 (10,523)
Net earnings (loss)
per common share As Reported $ 0.48 $ (0.78)
Pro Forma 0.46 (0.78)
Due to the phase-in period for applying the disclosure requirements of
SFAS No. 123, the pro forma information provided above is not likely to be
representative of the effects on reported net earnings for future years.
The Company has three fixed option plans. The 1988 Stock Option Plan
and Restricted Share Plan authorizes the issuance of non-qualified stock
options, restricted shares, incentive stock options, and stock appreciation
rights, although no incentive stock options or stock appreciation rights have
been issued. Under the 1984 Stock Option Plan, both incentive stock options and
non-qualified stock options were granted; however, only non-qualified stock
options remain outstanding and exercisable. Under both plans, the exercise price
of each non-qualified stock option equals the market price of the Company's
stock on the date of grant, and such option's maximum term is ten years. Options
vest at the end of the first through fifth years.
The 1987 Director Stock Option Plan authorizes the automatic issuance
of non-qualified stock options to members of the Board of Directors who are not
employees of the Company. Directors can elect to receive discounted stock
options in lieu of all or part of the annual retainer fee. The total number of
shares issued under the Plan shall not exceed 337,500 shares, and such shares
cannot include stock appreciation rights. Under the 1987 Director Stock Option
Plan, options vest at the end of the third, fourth and fifth years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: dividend yield of
2.4% for all years; expected volatility of 30.0% for all years; risk free
interest rates from 5.5 to 6.8% for all plans and years; and expected lives of
5.8 years for all plans.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1996, 1995, and 1994, changes during the years ended on those dates
is presented below:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994 1994
Number Weighted-Average Number Weighted-Average Number Weighted-Average
of Shares Exercise Price of Shares Exercise Price of Shares Exercise Price
1988 AND 1984 PLANS
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 957,156 $ 12.67 816,404 $ 13.58 826,225 $ 13.16
Granted at fair value 433,409 13.11 336,080 10.98 237,966 14.38
Granted below fair value 90,000 1.00 -- -- -- --
Forfeited (44,503) 13.99 (156,719) 14.85 (144,832) 15.67
Exercised (157,415) 8.82 (38,609) 8.56 (102,955) 8.99
--------- -------- ------- ------- ------- -------
Outstanding at December 31 1,278,647 $ 12.42 957,156 $ 12.67 816,404 $ 13.58
--------- -------- ------- ------- ------- -------
Exercisable at December 31 302,695 $ 14.32 377,233 $ 12.04 334,590 $ 10.86
--------- -------- ------- ------- ------- -------
Weighted-average fair value
of options granted during
the year;
Issued at fair value on
grant date $ 4.21 $ 3.34
Issued below fair value
on grant date $ 9.02 $ --
1987 DIRECTOR STOCK OPTION PLAN
Outstanding at January 1 184,877 $ 12.42 179,727 $ 12.75 113,142 $ 10.58
Granted 7,241 1.00 6,293 1.00 66,585 16.45
Exercised (3,236) .80 (1,143) 1.00 -- --
--------- -------- ------- ------- ------- -------
Outstanding at December 31 188,882 $ 12.44 184,877 $ 12.42 179,727 $ 12.75
--------- -------- ------- ------- ------- -------
Exercisable at December 31 175,348 $ 13.32 111,999 $ 10.67 107,238 $ 11.09
--------- -------- ------- ------- ------- -------
Weighted-average fair value of
options granted during the year $ 10.56 $ 12.51
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------------- ----------------------------------
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Price at 12/31/96 Life Price at 12/31/96 Price
1988 & 1984 PLANS
<S> <C> <C> <C> <C> <C> <C>
$ 0 to 1 90,000 9.6 Years $ 1.00 -- $ --
7 to 9 37,968 1.5 Years 8.12 37,968 8.12
10 to 12 456,582 8.4 Years 11.01 87,348 10.75
13 to 16 560,624 8.9 Years 14.05 80,088 14.89
19 to 20 133,473 6.2 Years 19.35 97,291 19.48
--------- --------- --------- ----- ------- -----
$ 0 to 20 1,278,647 8.3 Years 12.42 302,695 14.32
1987 DIRECTOR STOCK OPTION PLAN
$ 0 to 1 31,382 7.4 Years $ 0.99 17,848 $ 0.98
11 to 18 157,500 4.3 Years 14.72 157,500 14.72
--------- --------- --------- ----- ------- -----
$ 0 to 18 188,882 4.8 Years 12.44 175,348 13.32
</TABLE>
The 1989 Employee Stock Purchase Plan, as amended, authorizes the
offering and sale to employees of up to 975,000 shares of the Company's common
stock at a price approximately 90% of the closing price of the common stock on
the offering date. Under the plan, the Company sold 37,627 shares and 7,350
shares to employees in 1996 and 1995, respectively. At December 31, 1996, rights
to purchase 72,911 shares were outstanding under this plan at an exercise price
of $11.81 per share and 528,935 additional shares were available for issuance.
Under FASB Statement No. 123, compensation cost is recognized for the
fair value of the employee's purchase rights, which was estimated using the
Black-Scholes model with the following assumptions for 1996 and 1995,
respectively: dividend yield of 2.4% for all years; an expected life of one year
for all years; a risk free interest rate of 5.6% for 1995 grants and 6.2% for
1996 grants, and expected volatility of 30.0% for all years. The
weighted-average fair value of those purchase rights granted in 1996 and 1995
were $2.41 and $2.28, respectively.
[7] COMMITMENTS AND CONTINGENCIES
================================================================================
The Company leases certain manufacturing and warehouse facilities,
office space, machinery, and vehicles under cancellable and non-cancellable
operating leases, most of which expire within ten years and may be renewed by
the Company. Rent expense under such arrangements totaled approximately $7,750,
$7,450, and $6,950 in 1996, 1995, and 1994, respectively.
Future minimum rental commitments under non-cancellable operating
leases at December 31, 1996 are as follows:
Amount
1997 $ 6,435
1998 5,469
1999 5,009
2000 4,595
2001 2,975
Thereafter 14,111
-------
Total minimum payments $38,594
=======
The Company is subject to a number of lawsuits, investigations, and
claims arising out of the conduct of its business primarily related to
commercial transactions and product liability. While it is not feasible to
predict the outcome of all pending suits and claims, management is of the
opinion that their ultimate disposition will not have a material adverse effect
upon the consolidated financial position, liquidity, or ongoing results of
operations of the Company.
[8] ENVIRONMENTAL EXPENDITURES
================================================================================
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Remediation costs that relate to an
existing condition caused by past operations are accrued when it is probable
that these costs will be incurred and can be reasonably estimated.
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 PRPs, 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 PRPs. 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 PRPs to satisfy their responsibilities for
remediation costs.
<PAGE> 16
The Company has recorded environmental accruals, based upon the
information available, that are adequate to satisfy known remediation
requirements. The total accrual for estimated environmental remediation costs
related to the Superfund site and other potential environmental liabilities is
approximately $3,200 at December 31, 1996. This accrual has not been discounted,
and does not reflect any possible future third party recoveries. Management
expects that the majority of expenditures relating to costs currently accrued
will be made over the next two to ten years. As a result of factors such as the
continuing evolution of environmental laws and regulatory requirements, the
availability and application of technology, the identification of presently
unknown remediation sites, and the allocation of costs among potentially
responsible parties, estimated costs for future environmental compliance and
remediation are necessarily imprecise and it is not possible to fully predict
the amount or timing of future costs of environmental remediation requirements
which may subsequently be determined.
Based upon information presently available, such future costs are not
expected to have a material adverse effect on the Company's financial condition,
liquidity, or its ongoing results of operations. However, such costs could be
material to results of operations in a future period.
[9] BENEFIT PLANS
================================================================================
The Company sponsors defined benefit pension plans covering certain
salaried and hourly employees. Benefits to salaried employees are based upon the
highest three consecutive years of earnings out of their last ten years of
service; benefits to hourly workers are based upon their years of credited
service. Contributions to the plans reflect benefits attributed to employees'
service to date and also to services expected to be provided in the future. Plan
assets consist primarily of common and preferred stocks, common stock index
funds, investment grade corporate bonds, and U.S. government obligations.
In accordance with SFAS No. 87, the Company has recorded an additional
minimum pension liability of $8,850 at December 31, 1996 and $7,922 at December
31, 1995, representing the excess of unfunded accumulated benefit obligations
over previously recorded pension cost liabilities. A corresponding amount is
recognized as an intangible asset except to the extent that these additional
liabilities exceed related unrecognized prior service cost and net transition
obligation, in which case the increase in liabilities is charged directly to
shareholders' equity. The change in the excess minimum pension liability, net of
income taxes, resulted in a charge to equity of $781 in 1996 and $388 in 1995.
Net pension cost included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost benefits earned
during the period $ 2,738 $ 2,506 $ 3,256
Interest cost on projected
benefit obligation 6,248 5,292 4,882
Actual return on plan assets (9,100) (9,066) 629
Net amortization and deferral 3,835 4,907 (4,759)
------- ------- -------
Net periodic pension cost $ 3,721 $ 3,639 $ 4,008
======= ======= =======
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate 7.5% 7.25% 8.5%
Rate of return on assets 9.5% 9.5% 9.5%
Rate of increase in compensation 5.0% 5.0% 5.0%
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheets at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1996 1995 1995
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Vested benefit obligation $ 30,119 $ 41,378 $24,925 $38,466
------- -------- ------- --------
Accumulated benefit obligation 32,838 45,727 26,688 42,954
------- -------- ------- --------
Projected benefit obligation for service rendered to date 39,649 47,725 32,161 45,526
Plan assets at fair value 38,831 34,738 32,803 30,485
------- -------- ------- --------
Plan assets in excess of (less than) projected benefit
obligation (818) (12,987) 642 (15,041)
Unamortized transition asset (1,869) (380) (2,037) (557)
Unrecognized prior service cost (363) 3,231 (656) 3,595
Unrecognized net loss 3,922 7,929 3,704 7,378
Adjustment required to recognize minimum liability -- (8,850) -- (7,922)
------- -------- ------- --------
Pension costs prepaid (accrued) at year end $ 872 $(11,057) $ 1,653 $(12,547)
======= ======== ======= ========
</TABLE>
<PAGE> 17
In connection with the negotiation of a concessionary labor contract at
the Company's Celina, Ohio bicycle manufacturing facility, future benefits were
suspended under one of the Company's defined benefit plans and a curtailment
charge of $3,226 was included in restructure costs in 1995. The suspended plan
was replaced with participation in a multiemployer defined benefit plan.
Contributions to the multiemployer plan totalled $811 in 1996.
The Company maintains defined contribution retirement plans covering
its eligible employees under Section 401(k) of the Internal Revenue Code. The
purpose of these defined contribution plans is generally to provide additional
financial security during retirement by providing employees with an incentive to
make regular savings. The Company's contributions to the plans are based on
employee contributions and were $843, $755, and $920 in 1996, 1995, and 1994,
respectively.
[10] OTHER POSTRETIREMENT BENEFIT PLANS
================================================================================
In addition to the Company's defined benefit pension plans, the Company
sponsors several defined benefit health care and life insurance plans that
provide postretirement medical, dental, and life insurance benefits to full-time
employees who meet minimum age and service requirements. The plans are
contributory, with retiree contributions adjusted annually, and contain other
cost-sharing features such as deductibles and coinsurance. The Company's policy
is to fund the cost of medical benefits in amounts determined at the discretion
of management.
The Company also sponsors a deferred compensation plan for the benefit
of highly compensated management employees. The eligible employees make
contributions to the plan and receive postretirement benefits based upon a
stated rate of return on those contributions. The Company's policy is to fund
the cost of the benefits in amounts determined at the discretion of management.
For measurement purposes, in 1997, a 9.25% health care cost trend rate
was assumed for expenses of participants under age 65; this rate was assumed to
decrease gradually to 5.5% by the year 2002 and remain at that level thereafter.
In addition, for 1997 a 7.25% health care cost trend rate was assumed for
expenses of participants over age 65; this rate was assumed to decrease
gradually to 5.5% by the year 2000 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the amounts
reported. For example, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1996 by $2,233 and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the year ended December 31, 1996 by $239.
The following table presents the plans' funded status reconciled with
amounts recognized in the Company's Consolidated Balance Sheets at December 31,
1996 and 1995 and the net periodic postretirement benefit cost recorded in the
Company's 1996 and 1995 Consolidated Statements of Operations:
<TABLE>
<CAPTION>
Health Care and Deferred
Life Insurance Compensation
Plans Plan Total
<S> <C> <C> <C>
1996
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION:
Retirees $ 5,484 $2,645 $ 8,129
Fully eligible active plan
participants 1,063 2,200 3,263
Other active plan participants 5,653 -- 5,653
------- ------ -------
12,200 4,845 17,045
UNRECOGNIZED NET GAIN (LOSS) 1,349 (1,568) (219)
------- ------ -------
Postretirement benefits
other than pensions accrued
at year end 13,549 3,277 16,826
======= ====== =======
NET PERIODIC POSTRETIREMENT
BENEFIT COST:
Service cost $ 494 $ -- $ 494
Interest cost 871 338 1,209
Net amortization (3) -- (3)
------- ------ -------
Net periodic postretirement
benefit cost $ 1,362 $ 338 $ 1,700
======= ====== =======
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate
used to determine postretirement
benefit obligation 7.50% 7.50%
Health Care and Deferred
Life Insurance Compensation
Plans Plan Total
1995
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION:
Retirees $ 5,290 $2,022 $ 7,312
Fully eligible active plan
participants 1,081 1,601 2,682
Other active plan participants 6,927 -- 6,927
------- ------ -------
13,298 3,623 16,921
UNRECOGNIZED NET LOSS (360) (345) (705)
------- ------ -------
Postretirement benefits
other than pensions accrued
at year end $12,938 $3,278 $16,216
======= ====== =======
NET PERIODIC POSTRETIREMENT
BENEFIT COST:
Service cost $ 504 $ -- $ 504
Interest cost 979 262 1,241
Net amortization (3) -- (3)
------- ------ -------
Net periodic postretirement
benefit cost $ 1,480 $ 262 $ 1,742
======= ====== =======
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate
used to determine postretirement
benefit obligation 7.25% 7.25%
</TABLE>
<PAGE> 18
[11] INCOME TAXES
================================================================================
The provisions for federal and state income taxes attributable to
income from continuing operations before cumulative effect of accounting change
consist of:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 704 $(4,399) $ 2,971
State (114) 498 1,150
Foreign 68 8 26
------ -------- -------
658 (3,893) 4,147
Deferred tax expense (benefit) 1,736 (689) 6,062
------ -------- -------
Total tax expense (benefit) $2,394 $(4,582) $10,209
====== ======== =======
</TABLE>
The Company and its domestic subsidiaries file a consolidated U.S.
federal income tax return. Such returns have been audited or settled through the
year 1991.
Management expects that the Company's future levels of taxable income
will be sufficient to fully utilize the net deferred tax asset. Therefore, a
valuation allowance has not been established.
The components of the net deferred tax asset as of December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
DEFERRED TAX ASSETS:
Allowance for doubtful accounts $ 584 $ 603
Inventory obsolescence reserve 867 795
Workers' compensation 2,000 1,585
Product liability 2,053 2,063
Deferred compensation 1,658 1,578
Accrued vacation 1,148 1,197
Restructuring reserves -- 284
Pension liability 3,060 2,866
Postretirement benefits other
than pensions 5,889 5,679
Environmental reserves 1,123 902
Severance reserves 721 1,142
Other liabilities and reserves 1,798 3,797
------ ------
Total deferred tax assets 20,901 22,491
------ ------
DEFERRED TAX LIABILITIES:
Property, plant, and equipment 3,650 2,416
Other assets 500 2,008
------ ------
Total deferred tax liabilities 4,150 4,424
------ ------
Net deferred tax asset $16,751 $18,067
======= =======
</TABLE>
The following table accounts for the difference between the actual tax
provision and the amounts obtained by applying the statutory U.S. federal income
tax rate to the earnings (loss) before income taxes and cumulative effect of
accounting change.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Earnings (loss) before income
taxes and cumulative effect of
accounting change $ 8,851 $(15,039) $ 27,636
------- -------- --------
Tax provision computed at
statutory rate $ 3,009 $ (5,264) $ 9,673
Increase (reduction) in taxes
due to:
Impact of foreign losses for
which a current tax benefit
is not available (54) 220 302
State income taxes (net of
federal tax benefit) 62 84 748
Goodwill amortization 262 270 270
Foreign sales corporation (268) (202) (218)
Insurance proceeds -- -- (670)
Non-deductible meals and
entertainment 370 323 274
Tax credits (184) -- --
Refunds of prior year
income taxes (756) -- --
Miscellaneous (47) (13) (170)
------- -------- --------
Actual tax provision $ 2,394 $ (4,582) $ 10,209
======= ======== ========
</TABLE>
[12] BUSINESS SEGMENTS
================================================================================
Huffy Corporation is a diversified manufacturer and supplier of
bicycles, basketball backboards, lawn and garden tools, juvenile products, and
inventory, assembly, and supplier services. Bicycles, basketball and juvenile
products are sold predominantly through national and regional high volume
retailers in the United States. Lawn and garden products are sold both directly
and through wholesale distributors to national and regional high volume
retailers in the United States. In-store and in-home assembly and repair, and
in-store display services are provided to major retailers in fifty states,
Puerto Rico, and the Virgin Islands. Merchandising services (product resets
and periodic maintenance of displays) are marketed to manufacturers who
supply high volume retailers. Physical inventory services are marketed on a
nationwide basis to mass retailers, drug stores, home centers, sporting goods
stores, specialty stores, and grocery stores.
<PAGE> 19
The Company has classified its operations into the following business
segments:
- - Consumer Products -- juvenile products, bicycles, basketball backboards
and related products, and lawn and garden tools.
- - Services for Retail -- in-store assembly, repair, and display services as
well as inventory counting services.
A summary of the Company's 1996, 1995, and 1994 operations by business
segment is as follows:
<TABLE>
<CAPTION>
Earnings (Loss) Depreciation
Before Income Identifiable and Capital
Sales Taxes Assets Amortization Expenditures
1996
<S> <C> <C> <C> <C> <C>
Consumer Products $548,203 $ 13,283 $254,554 $18,360 $13,828
Services for Retail 153,933 7,251 39,775 4,132 3,725
Eliminations (257)
Interest expense (7,343)
Interest income 82
General corporate (4,422) 21,696 412 130
-------- ---------- -------- ------- -------
$701,879 $ 8,851 $316,025 $22,904 $17,683
======== ========== ======== ======= =======
1995
Consumer Products $541,630 $ (6,945)[1] $239,623 $18,125 $20,282
Services for Retail 143,587 4,819 37,060 3,766 3,997
Eliminations (465)
Interest expense (7,996)
Interest income 90
General corporate (5,007)[1] 21,863 528 86
-------- ---------- -------- ------- -------
$684,752 $(15,039) $298,546 $22,419 $24,365
======== ========== ======== ======= =======
1994
Consumer Products $581,251 $ 29,314 $262,157 $15,830 $31,933
Services for Retail 139,637 8,632 40,089 3,833 3,627
Eliminations (1,403)
Interest expense (6,425)
Interest income 528
General corporate (4,413) 19,722 559 177
-------- ---------- -------- ------- -------
$719,485 $ 27,636 $321,968 $20,222 $35,737
======== ========== ======== ======= =======
<FN>
[1] Includes a net restructure charge of $4,663 in the Consumer Products
segment related to personnel reductions and the related negotiation of a
concessionary labor contract and $715 in general corporate expenses
related to personnel reductions.
</TABLE>
In 1996, two customers each accounted for 15% of total consolidated net
sales. In 1995, two customers individually accounted for 13% and 12% of total
consolidated net sales. In 1994, three customers individually accounted for 13%,
12%, and 10% of total consolidated net sales.
<PAGE> 20
[13] QUARTERLY FINANCIAL DATA (UNAUDITED)
- -----------------------------------------
Quarterly financial data for the years 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total[1]
1996
<S> <C> <C> <C> <C> <C>
Net sales $186,533 $199,555 $151,563 $164,228 $701,879
Gross profit 34,823 37,222 24,481 21,447 117,973
Net earnings (loss) 2,920 4,598 (258) (803) 6,457
EARNINGS PER COMMON SHARE $ .22 $ .34 $ (.02) $ (.06) $ .48
======== ======== ======== ======== ========
1995
Net sales $200,653 $200,401 $148,894 $134,804 $684,752
Gross profit 36,426 29,856 17,402 12,365 96,049
Net earnings (loss)[2] 4,415 349 (4,491) (10,730) (10,457)
EARNINGS (LOSS) PER COMMON SHARE $ .33 $ .03 $ (.33) $ (.80) $ (.78)
======== ======== ======== ======== ========
<FN>
[1] Quarterly per share amounts are computed independently for each quarter
and the full year based upon the respective weighted average number of
common shares outstanding and may not equal the total for the year.
[2] Net earnings (loss) includes a restructure charge of $2,115 in the second
quarter, a restructure credit of $275 in the third quarter, and a net
restructure charge of $3,538 in the fourth quarter.
</TABLE>
COMMON STOCK
- ------------
Huffy Corporation Common Stock is traded on the New York Stock
Exchange. Cash dividends declared and the quarterly high and low prices of Huffy
Common Stock during the years ended December 31, 1996 and 1995 were as follows:
Year ended December 31, 1996
<TABLE>
<CAPTION>
Common Stock Dividends
Price Range Declared
QUARTER HIGH LOW
<S> <C> <C> <C>
First $11-5/8 $10-1/4 $.085
Second 14 10-5/8 .085
Third 13-3/4 11-1/8 .085
Fourth 14-7/8 12-3/4 .085
-----
Total $.340
=====
</TABLE>
Year ended December 31, 1995
<TABLE>
<CAPTION>
Common Stock Dividends
Price Range Declared
QUARTER HIGH LOW
<S> <C> <C> <C>
First $15-7/8 $ 15 $.085
Second 15-3/8 12-1/2 .085
Third 13-1/4 11-1/8 .085
Fourth 11-5/8 10 .085
-----
Total $.340
=====
</TABLE>
As of December 31, 1996 there were 13,372,947 shares of Huffy
Corporation Common Stock outstanding and there were 3,570 shareholders of
record. Management estimates an additional 8,500 shareholders hold their stock
in nominee name. Trading volume of the Company's Common Stock during the twelve
months ended December 31, 1996 totaled 7,519,400 shares. The average number of
common shares outstanding during this period was approximately 13,452,000
shares.
<PAGE> 21
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
- ------------------
RICHARD L. MOLEN
Chairman of the Board and Chief Executive Officer
DON R. GRABER
President and Chief Operating Officer
STEPHEN P. HUFFMAN
Retired Vice President - Planning and Human Resources of Blue Diamond Growers
LINDA B. KEENE
Vice President - Market Development of American Express Financial Advisors
JACK D. MICHAELS
Chairman, President and Chief Executive Officer of
HON INDUSTRIES Inc.
DONALD K. MILLER
Chairman of Greylock Financial Inc.
JAMES F. ROBESON
Herbert E. Markley Visiting Scholar in Business at Miami University and
consultant to various distribution companies
PATRICK W. ROONEY
Chairman of the Board, President and Chief Executive Officer of Cooper Tire &
Rubber Company
GEOFFREY W. SMITH
Vice President of LTI Ventures Leasing Corporation
THOMAS C. SULLIVAN
Chairman and Chief Executive Officer of RPM, Inc.
JOSEPH P. VIVIANO
President and Chief Operating Officer of Hershey Foods Corporation
FRED G. WALL
Chairman of Madsen Wire Products, Inc. and consultant to various manufacturing
companies
COMMITTEES OF THE BOARD OF DIRECTORS
- ------------------------------------
AUDIT COMMITTEE:
Donald K. Miller (Chairman), Linda B. Keene,
James F. Robeson, and Geoffrey W. Smith
COMPENSATION COMMITTEE:
Fred G. Wall (Chairman), Stephen P. Huffman,
Jack D. Michaels, Patrick W. Rooney, and
Thomas C. Sullivan
NOMINATING AND GOVERNANCE COMMITTEE:
Jack D. Michaels (Chairman), James F. Robeson,
and Joseph P. Viviano
CORPORATE OFFICERS
- ------------------
RICHARD L. MOLEN
Chairman of the Board and Chief Executive Officer
DON R. GRABER
President and Chief Operating Officer
THOMAS A. FREDERICK
Vice President - Finance and Chief Financial Officer
TIMOTHY G. HOWARD
Vice President - Controller
NANCY A. MICHAUD
Vice President - General Counsel and Secretary
PAMELA J. WHIPPS
Vice President - Treasurer
COMPANY PRESIDENTS
- ------------------
PAUL R. D'ALOIA
Huffy Sports Company
CAROL A. GEBHART
Washington Inventory Service
DARYLE A. LOVETT
Gerry Baby Products Company
CHRISTOPHER W. SNYDER
Huffy Bicycle Company
JOHN M. STONER, JR.
True Temper Hardware Company
I. EDWARD TONKON II
Huffy Service First, Inc.
[RECYCLE LOGO] This annual report has been produced on recycled paper.
<PAGE> 22
SHAREHOLDER INFORMATION
ANNUAL MEETING
- --------------
The Annual Meeting of Shareholders will be held April 25, 1997 at 10:00
a.m., Eastern Daylight Time, at the True Temper Hardware Company, 465 Railroad
Avenue, Camp Hill, Pennsylvania. Shareholders are cordially invited to attend.
STOCK EXCHANGE
- --------------
New York Stock Exchange, Symbol HUF
PRIMARY BUSINESS LOCATIONS
- --------------------------
Huffy Corporation
225 Byers Road
Miamisburg, Ohio 45342
(937) 866-6251
Huffy Bicycle Company
225 Byers Road
Miamisburg, Ohio 45342
(937) 866-6251
Gerry Baby Products Company
1500 East 128th Avenue
Thornton, Colorado 80241
(303) 457-0926
True Temper Hardware Company
465 Railroad Avenue
Camp Hill, Pennsylvania 17001
(717) 737-1500
Huffy Sports Company
N53 W24700 S. Corporate Circle
Sussex, Wisconsin 53089
(414) 820-3440
Washington Inventory Service
9265 Sky Park Court, Ste. 100
San Diego, California 92123
(619) 565-8111
Huffy Service First, Inc.
8521 Gander Creek Drive
Miamisburg, Ohio 45342
(937) 438-3664
ADDITIONAL OPERATING LOCATIONS
- ------------------------------
- Celina, Ohio
- Cork, Ireland
- Farmington, Missouri
- Harrisburg, Pennsylvania
- North Vernon, Indiana
- Pine Valley, New York
- Suring, Wisconsin
- Union City, Pennsylvania
- Wallingford, Vermont
TRANSFER AGENT AND
REGISTRAR FOR COMMON STOCK
- --------------------------
Key Bank
KeyCorp Shareholder Services, Inc.
P.O. Box 6477
Cleveland, Ohio 44101
(800) 542-7792
DIVIDENDS
- ---------
Dividends are payable quarterly as declared by the Board of Directors.
Huffy has paid a dividend on its Common Stock each year since becoming publicly
traded on November 15, 1966.
DIVIDEND REINVESTMENT
- ---------------------
A dividend reinvestment program is available to holders of Huffy
Corporation Common Stock. Shareholders interested in participating should
contact either the transfer agent or Huffy Corporation, P.O. Box 1204, Dayton,
Ohio 45401, Attention: Vice President - Treasurer.
AUDITORS
- --------
KPMG Peat Marwick LLP
FORM 10-K
- ---------
Shareholders interested in obtaining Huffy Corporation's Annual Report
or Form 10-K filed with the Securities and Exchange Commission may obtain a copy
by writing Huffy Corporation, P.O. Box 1204, Dayton, Ohio 45401, Attention: Vice
President - Treasurer.
SHAREHOLDER COMMUNICATIONS
- --------------------------
Communications concerning lost certificates, transfer requirements,
address changes, and Common Stock dividend checks should be sent to Key Bank,
KeyCorp Shareholder Services, Inc., P.O. Box 6477, Cleveland, Ohio 44101, (800)
542-7792.
The Management of Huffy Corporation welcomes comments and suggestions
from shareholders and investors. Call the Vice President - Treasurer, (937)
866-6251.
<PAGE> 1
EXHIBIT 19
Schedule of certain documents
substantially identical to filed documents
with parties thereto and other material
differing details
-----------------------------
(19)(a) Additional parties to Special Deferred Compensation Agreement, as
amended, in substantially the forms incorporated by reference to Exhibit
(ix) to Form 10-K for the fiscal year ended June 24, 1977, to Exhibit
(2) to Form 10-Q for the fiscal quarter ended September 23, 1983, and to
Exhibit (19)(c) to Form 10-Q for the fiscal quarter ended September 30,
1986:
Paul R. D'Aloia
Don R. Graber
I. Edward Tonkon
(19)(b) Additional parties to Severance Pay Agreement, as amended, in
substantially the form incorporated by reference to Exhibit (xi) to Form
10-K for the fiscal year ended June 27, 1980, and to Exhibit 10(n) to
Form 10-K for the fiscal year ended June 26, 1991:
Paul R. D'Aloia
I. Edward Tonkon
(19)(c) Additional party to Severance Pay Agreement, in substantially the form
incorporated by reference to Exhibit (19)(a) to Form 10-Q for the fiscal
quarter ended June 20, 1986:
Don R. Graber
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,121
<SECURITIES> 0
<RECEIVABLES> 92,597
<ALLOWANCES> (1,736)
<INVENTORY> 72,657
<CURRENT-ASSETS> 186,150
<PP&E> 228,380
<DEPRECIATION> (138,621)
<TOTAL-ASSETS> 316,025
<CURRENT-LIABILITIES> 121,285
<BONDS> 43,897
0
0
<COMMON> 16,411
<OTHER-SE> 139,333
<TOTAL-LIABILITY-AND-EQUITY> 316,025
<SALES> 701,879
<TOTAL-REVENUES> 701,879
<CGS> 583,906
<TOTAL-COSTS> 583,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,180
<INTEREST-EXPENSE> 7,343
<INCOME-PRETAX> 8,851
<INCOME-TAX> 2,394
<INCOME-CONTINUING> 6,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,457
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
