<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5325
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Huffy Corporation
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(Exact name of registrant as specified in its charter)
Ohio 31-0326270
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Byers Road, Miamisburg, Ohio 45342
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(Address of principal executive offices) (Zip Code)
(937) 866-6251
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding Shares: 13,263,147 as of April 14, 1997
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"Index of Exhibits" is page 9 herein Page 1 of 9
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). COMPANY FOR WHICH REPORT IS FILED:
-------------------
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 171,927 $ 151,934
Cost of sales 144,505 123,790
------------ ------------
Gross profit 27,422 28,144
Selling, general and
administrative expenses 19,979 22,494
------------ ------------
Operating income 7,443 5,650
Other expense (income)
Interest expense 2,092 1,779
Interest income (18) (17)
Other 802 97
------------ ------------
Earnings before income taxes 4,567 3,791
Income tax expense 1,623 1,698
------------ ------------
Earnings from continuing
operations 2,944 2,093
Discontinued operations:
Earnings from discontinued
operations, net of income
tax expense of $249 and
$358 462 827
------------ ------------
Net earnings $ 3,406 $ 2,920
============ ============
Earnings per common share:
Weighted average
number of common shares 13,327,766 13,461,328
============ ============
Earnings from continuing
operations $ 0.22 $ 0.16
Discontinued operations $ 0.04 $ 0.06
------------ ------------
Net earnings per
common share $ 0.26 $ 0.22
============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 2 of 9
<PAGE> 3
HUFFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 618 $ 2,048
Accounts and notes receivable, net 131,349 81,175
Inventories 69,065 54,233
Prepaid expenses and federal income taxes 13,854 14,393
Net assets of discontinued operations 61,022 50,776
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Total current assets 275,908 202,625
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Property, plant and equipment, at cost 198,131 193,736
Less accumulated depreciation and amortization 118,793 114,846
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Net property, plant and equipment 79,338 78,890
Excess of cost over net assets acquired, net 13,450 13,556
Deferred federal income taxes 8,085 8,085
Other assets 4,875 5,111
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$ 381,656 $ 308,267
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable 70,520 38,910
Current installments of long-term obligations 7,593 7,593
Accounts payable 63,104 24,917
Accrued expenses and other current liabilities 44,246 42,107
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Total current liabilities 185,463 113,527
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Long-term obligations, less current installments 43,636 43,897
Other long-term liabilities 36,000 34,871
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Total liabilities 265,099 192,295
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Shareholders' equity:
Preferred stock -- --
Common stock 16,438 16,411
Additional paid-in capital 62,731 62,488
Retained earnings 78,957 76,845
Less: cost of treasury shares (41,569) (39,772)
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Total shareholders' equity 116,557 115,972
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$ 381,656 $ 308,267
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 3 of 9
<PAGE> 4
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings from continuing operations $ 2,944 $ 2,093
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 4,569 5,005
Loss on sale of property, plant and equipment -- 8
Changes in assets and liabilities:
Accounts and notes receivable, net (50,174) (46,574)
Inventories (14,832) (9,661)
Prepaid expenses and Federal income taxes 539 1,235
Other assets 163 263
Accounts payable 38,187 22,149
Accrued expenses and other current liabilities 2,147 1,567
Other long-term liabilities 1,129 2,380
Other (166) 76
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Net cash used in continuing operating activities (15,494) (21,459)
Discontinued operations:
Income from discontinued operations 462 827
Items not affecting cash, net 1,280 1,169
Cash used for discontinued operations (11,526) (8,021)
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Net cash used in discontinued operating activities (9,784) (6,025)
Net cash used in operating activities (25,278) (27,484)
======================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,837) (1,938)
Proceeds from sale of property, plant and equipment -- 6
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Net cash used in investing activities (4,837) (1,932)
======================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings 31,610 28,090
Reduction of long-term debt (261) (40)
Issuance of common shares 270 287
Purchase of treasury shares (1,797) --
Dividends paid (1,137) (1,143)
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Net cash provided by financing activities 28,685 27,194
======================================================================================
Net change in cash and cash equivalents
Cash and cash equivalents: (1,430) (2,222)
Beginning of the year 2,048 2,497
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End of the three month period $ 618 $ 275
======================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
Page 4 of 9
<PAGE> 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands)
Note 1: Footnote disclosure which would substantially duplicate the disclosure
contained in the Annual Report to Shareholders for the year ended
December 31, 1996 has not been included. The unaudited interim
consolidated financial statements reflect all adjustments which, in
the opinion of management, are necessary to a fair statement of the
results for the periods presented and to present fairly the
consolidated financial position of Huffy Corporation as of March 31,
1997. All such adjustments are of a normal recurring nature.
Note 2: Inventories of Huffy Bicycle Company and Huffy Sports Company are
valued using the dollar value LIFO method and, as a result, it is
impractical to separate inventory values between raw materials,
work-in-process and finished products on an interim basis.
Note 3: In March 1997, Huffy Corporation reached an agreement with Evenflo
Company, Inc. to sell the assets of its Denver-based juvenile products
business, Gerry Baby Products Company, for $73 million. The results
for Gerry Baby Products Company have been classified as discontinued
operations for all periods presented in the Consolidated Statements of
Earnings and Consolidated Statement of Cash Flow. The assets and
liabilities of discontinued operations have been classified in the
Consolidated Balance Sheets as "Net assets of discontinued
operations."
Summarized balance sheet data for discontinued operations is as
follows:
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands) March 31, December 31,
1997 1996
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<S> <C> <C>
Current assets $45,575 $34,301
Property, plant & equipment, net 11,460 10,869
Other assets 13,371 13,364
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Total assets $70,406 $58,534
Current liabilities 9,384 7,758
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Net assets $61,022 $50,776
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</TABLE>
Page 5 of 9
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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THREE MONTHS ENDED MARCH 31, 1997
COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1996
(Dollar Amounts in Thousands, Except Per Share Data)
NET EARNINGS
- ------------
Huffy Corporation ("Huffy" or "Company") had net earnings from continuing
operations of $2,944, or $0.22 per common share for the quarter ended March 31,
1997, compared to $2,093 or $0.16 per common share for the same period last
year. The improvement in net earnings is primarily due to a company-wide focus
on cost reduction. The net earnings from continuing operations excludes results
from the Company's juvenile products business which is in the process of being
sold to Evenflo Company, Inc. The juvenile products business had net sales of
$32,821 and net earnings of $462, or $0.04 per common share, compared to net
sales of $34,599 and net earnings of $827, or $0.06 per common share for the
first quarter of 1996.
NET SALES
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Net sales for the quarter ended March 31, 1997 were $171,927, an increase of
$19,993 from the sales level of $151,934 for the same quarter in 1996. For the
three months ended March 31, 1997 net sales in the Consumer Products segment
increased due to strong seasonal demand for bicycles and increased market
penetration in the lawn and garden business. In the Services for Retail segment,
net sales increased primarily in the product assembly and merchandising business
with continued growth opportunities in both the in-home assembly and
merchandising services.
GROSS PROFIT
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Gross profit for the quarter ended March 31, 1997 was $27,422, down from the
$28,144 achieved in the first quarter of 1996. Expressed as a percentage of net
sales, gross profit for the first quarter of 1997 was 15.9% compared to 18.5%
for the first quarter of 1996. The decrease in gross profit in the Consumer
Products segment occurred primarily in the lawn and garden tool business, and
was due to increased program expenses related to new customer distribution and
lower sales of higher margin snow tools due to a mild winter. Gross profit for
the segment was also negatively impacted by an increase in the volume of
promotional product sold in the bicycle business. In the
Page 6 of 9
<PAGE> 7
Services for Retail segment gross margins were down slightly due to competitive
market pressure in the inventory service business and a slow seasonal start in
bicycle assemblies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses were $19,979 for the first quarter
of 1997, compared to $22,494 for the same period of 1996. The decrease in
selling, general and administrative expense for the quarter ended March 31, 1997
is primarily due to decreased advertising expenditures in the Consumer Products
segment and administrative cost reductions in the inventory service business in
the Services for Retail segment, and an environmental insurance recovery.
SALE OF JUVENILE PRODUCTS BUSINESS
- ----------------------------------
In March 1997, the Company reached an agreement with Evenflo Company, Inc. to
sell the assets of its juvenile products business, Gerry Baby Products Company,
for $73 million. The transaction is expected to close during the second quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
There have been no other significant changes in the Company's liquidity and
capital resources as of March 31, 1997 from those discussed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996. The Company's
balance sheet reflects fluctuations in both current assets and current
liabilities attributable to seasonal changes in the operations of its
businesses.
INTEREST EXPENSE
- ----------------
Interest expense for the first quarter of 1997 was $2,092 versus $1,779 for the
same quarter of 1996. This increase in interest expense is due to higher average
short-term borrowings in the first quarter of 1997.
Page 7 of 9
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PART II -- OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits - The Exhibits, as shown in the "Index of Exhibits",
attached hereto as page 10, are filed as a part of this Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUFFY CORPORATION, registrant
April 16, 1997 /s/ Timothy G. Howard
- -------------------------------------- ------------------------
Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 8 of 9
<PAGE> 9
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Item
- -------- ----------------------------------------
<S> <C>
(2) Not applicable
(3) Not applicable
(4) Not applicable
(10) Not applicable
(11) Not applicable
(15) Not applicable
(18) Not applicable
(19) Not applicable
(22) Not applicable
(23) Not applicable
(24) Not applicable
(27) Financial Data Schedule
(99) Not applicable
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 618
<SECURITIES> 0
<RECEIVABLES> 133,074
<ALLOWANCES> (1,725)
<INVENTORY> 69,065
<CURRENT-ASSETS> 275,908
<PP&E> 198,131
<DEPRECIATION> 118,793
<TOTAL-ASSETS> 381,656
<CURRENT-LIABILITIES> 185,463
<BONDS> 0
0
0
<COMMON> 16,438
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 381,656
<SALES> 171,927
<TOTAL-REVENUES> 171,927
<CGS> 144,505
<TOTAL-COSTS> 164,484
<OTHER-EXPENSES> 802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,092
<INCOME-PRETAX> 4,567
<INCOME-TAX> 1,623
<INCOME-CONTINUING> 2,944
<DISCONTINUED> 462
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,406
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
