<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, 1997
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 February 27, 1998, was $183,821,293.
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of February 27, 1998, was 12,474,310.
"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, 1997. 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 17, 1998. 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,
Farmington, Missouri, Miamisburg and Celina, Ohio, Camp Hill and Harrisburg,
Pennsylvania, Sussex, 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
Huffy Bicycle Company, Huffy Sports Company, Royce Union Bicycle
Company, and True Temper Hardware Company comprise the Consumer
Products segment of the Company. Principal products within this
business segment include bicycles, basketball backboards and related
products, and lawn and garden tools. Sales of bicycles represented 44.4
percent, 43.2 percent, and 45.0 percent of consolidated revenues of the
Company for the years ended December 31, 1997, 1996 and 1995. Sales of
basketball backboards, poles, goals and related products represented
13.2 percent, 12.7 percent, and 15.2 percent of consolidated revenues
of the Company for the years ended December 31, 1997, 1996, and 1995.
Sales of lawn and garden tools represented 16.4 percent, 17.6 percent,
and 14.8 percent of consolidated revenues of the Company for the years
ended December 31, 1997, 1996, and 1995. 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. On April 21, 1997, Huffy sold the
assets of Gerry Baby Products Company and Gerry Wood Products Company
to Evenflo Company, Inc.
a. Products, Marketing and Distribution
------------------------------------
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
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. In
addition, in 1996, the Company purchased the Rebike business
which produces a line of recumbent style bicycles and in
December, 1997, the Company acquired the assets of Royce Union
Bicycle Company, Inc. which holds a leading market position in
the growing sporting goods distribution channel. Huffy(R)
bicycles are extensively advertised and are sold predominantly
through national and regional high volume retailers, a
distribution network accounting for approximately 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. In
1997, the Company purchased the business and assets of Sure
Shot(TM)/Hydra-Rib(TM) which
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produces basketball units for institutional and in-arena use.
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 88
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. In 1996, True Temper
acquired the Meaford wheelbarrow product line, solidifying True
Temper Hardware Company's position as the manufacturer of the
largest selling brand of wheelbarrows in North America. 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.
c. Patents, Trademarks and Licenses
--------------------------------
The patents, trademarks (including the registered trademarks
"Huffy", "Huffy Sports", "Royce Union", "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
"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
"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 "Huffy" or "True
Temper" trademarks for the products for which the Company uses
such trademarks.
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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. Sales of 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
-------------------------
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 residential, 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.
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 26.0 percent, 26.5 percent, and 25.0
percent, of consolidated revenues of the Company for the years ended
December 31, 1997, 1996, and 1995.
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.
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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 two customers aggregated over ten percent or more of the Company's
consolidated revenues from each such customer for the year ended December 31,
1997, 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, 1997, was 6,770
(2,673 employed by the Consumer Products Segment and 4,097 employed by the
Services for Retail Segment).
ITEM 2. PROPERTIES: Location and general character of the
principal plants and other materially important physical
properties of the Company as of January 1, 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Owned or
Expiration
Building Area Date
Location Description (Sq. Ft.) of Lease
- --------------------------------------------------------------------------------
<S> <S> <C> <C>
San Diego, California Offices (Services for Retail) 30,000 2004(1)
Farmington, Missouri Offices, manufacturing and
warehouse facility
(Consumer Products) 412,052 2014(2)
Celina, Ohio Offices, manufacturing and
warehouse facility
(Consumer Products) 822,000 Owned
Miamisburg, Ohio Offices and display facilities
(Corporate and Consumer
Products) 47,000 2003(3)
</TABLE>
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Owned or
Expiration
Building Area Date
Location Description (Sq. Ft.) of Lease
- --------------------------------------------------------------------------------
<S> <C> <C>
Miamisburg, Ohio Offices and warehouse 42,682 2001(4)
facility (Services for Retail)
Camp Hill, Offices, manufacturing and 391,690 2012(5)
Pennsylvania distribution facility
(Consumer Products)
Harrisburg, Offices and manufacturing 254,329 Owned
Pennsylvania facility (Consumer Products)
Sussex, Wisconsin Offices and manufacturing 192,000 2004(6)
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) 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.
(3) 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.
(4) Subject to one option to renew for an additional term of five years.
(5) Subject to one option to renew for an additional term of five years and an
option to purchase.
(6) Subject to an option to purchase during the term of or at the expiration of
the lease.
</TABLE>
There are no encumbrances on the Celina, Ohio, Harrisburg, Pennsylvania, 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, and Celina, Ohio
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 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 7 and 8
(Preferred Stock, and Common Stock and Common Stock Plans) to
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the consolidated financial statements, are contained in the Company's Annual
Report to Shareholders for the year ended December 31, 1997, 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, 1997, 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 6 (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, 1997, and are hereby incorporated herein by reference.
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 Operation, 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, 1997, 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 1998 Annual Meeting of
Shareholders, and is hereby incorporated herein by reference.
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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 March 9, 1998, were as follows:
- --------------------------------------------------------------------------------
Name Age Position Officer Since
- --------------------------------------------------------------------------------
Stanley H. Davis 53 Vice President - Human July, 1997
Resources and Organization
Development
Thomas A. Frederick 43 Vice President - Finance and December, 1994
Chief Financial Officer
Don R. Graber 54 Chairman of the Board, July, 1996
President and Chief
Executive Officer
Timothy G. Howard 51 Vice President - Controller September, 1978
Nancy A. Michaud 51 Vice President - General February, 1993
Counsel and Secretary
Prior to being elected Vice President-Human Resources and Organization
Development, Mr. Davis was Vice President-Human Resources and Organization
Development of Triangle Wire and Cable, Inc. and Vice President Administration
of Ocean View Capital, Inc. 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 Chairman, President and Chief Executive Officer in 1997,
Mr. Graber was President and Chief Operating Officer since 1996; prior thereto,
Mr. Graber was President of Worldwide Household Products Group and Group Vice
President of The Black and Decker Corporation from 1994; 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.
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 1998 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 section
entitled REPORT OF COMPENSATION COMMITTEE and the Performance Graph which is set
forth in the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders are not deemed to be incorporated by reference in this Form 10-K.
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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, 1998, 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 1998 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 1998 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:
Consolidated Balance Sheets as of December 31, 1997, and
1996.
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996, and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995.
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996, and 1995.
Notes to Consolidated Financial Statements.
The Annual Report to Shareholders for the year ended December 31,
1997, 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, 1997, 1996, and 1995.
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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, 1997, 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/ Don R. Graber Date: March 6, 1998
----------------------------
Don R. Graber
Chairman of the Board, President
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: March 6, 1998
- ----------------------------------------
Thomas A. Frederick
Vice President - Finance and Chief
Financial Officer (Principal
Financial Officer)
/s/ Timothy G. Howard Date: March 6, 1998
- ----------------------------------------
Timothy G. Howard
Vice President - Controller
(Principal Accounting Officer)
/s/ William A. Huffman Date: February 12, 1998
- ----------------------------------------
William A. Huffman, Director
/s/ Linda B. Keene Date: February 12, 1998
- ----------------------------------------
Linda B. Keene, Director
/s/ Jack D. Michaels Date: February 12, 1998
- ----------------------------------------
Jack D. Michaels, Director
/s/ Donald K. Miller Date: February 12, 1998
- ----------------------------------------
Donald K. Miller, Director
/s/ James F. Robeson Date: February 12, 1998
- ----------------------------------------
James F. Robeson, Director
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/s/ Patrick W. Rooney Date: February 12, 1998
- ----------------------------------------
Patrick W. Rooney, Director
/s/ Geoffrey W. Smith Date: February 12, 1998
- ----------------------------------------
Geoffrey W. Smith, Director
/s/ Thomas C. Sullivan Date: February 12, 1998
- ----------------------------------------
Thomas C. Sullivan, Director
/s/ Joseph P. Viviano Date: February 12, 1998
- ----------------------------------------
Joseph P. Viviano, Director
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INDEPENDENT AUDITORS' REPORT
----------------------------
ON FINANCIAL STATEMENT SCHEDULE
-------------------------------
The Board of Directors,
Huffy Corporation:
Under date of February 6, 1998, we reported on the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1997, and 1996, 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, 1997, as
contained in the 1997 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 1997. 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
March 18, 1998
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. 33-25487) pertaining to the 1988 Stock Option Plan and Restricted
Share Plan; (ii) the Form S-8 Registration Statement (No. 33-25143) pertaining
to the 1987 Director Stock Option Plan; (iii) the Form S-8 Registration
Statement (Nos. 33-28811 and 33-42724) pertaining to the 1989 Employee Stock
Purchase Plan; (iv) the Form S-8 Registration Statement (No. 33-44571)
pertaining to five company savings plans and (v) the Form S-8 Registration
Statement (No. 33-60900) pertaining to the W.I.S. Savings Plan of our report
dated February 6, 1998, relating to the consolidated balance sheets of Huffy
Corporation and subsidiaries as of December 31, 1997 and 1996 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, 1997, which report
appears in the 1997 Annual Report to Shareholders, which is incorporated by
reference in the Company's 1997 Annual Report on Form 10-K and our report dated
February 6, 1998, relating to the financial statement schedule for each of the
years in the three-year period ended December 31, 1997, which report appears in
the Company's 1997 Annual Report on Form 10-K.
/S/ KPMG PEAT MARWICK LLP
---------------------------------
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
March 18, 1998
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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, 1997 $1,437 2,085 (1,060) 2,462
Year ended December 31, 1996 $1,449 1,197 (1,209) 1,437
Year ended December 31, 1995 $1,493 943 (987) 1,449
Inventory obsolescence:
Year ended December 31, 1997 $2,181 2,541 (1,947) 2,775
Year ended December 31, 1996 $1,891 3,059 (2,769) 2,181
Year ended December 31, 1995 $2,160 1,191 (1,460) 1,891
Reserves which support the balance sheet
caption, Reserves
Restructuring Reserve:
Year ended December 31, 1997 - - - -
Year ended December 31, 1996 $1,830 - (1,830) -
Year ended December 31, 1995 $2,033 2,152[1] (2,355) 1,830
</TABLE>
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.
-15-
<PAGE> 16
INDEX TO EXHIBITS
-----------------
Exhibit Form 10-K
No. Exhibits
- ------- ------------------------------------------------- ----------
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
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 Second Amendment, dated as of December 30, 1997, ***
to Note Purchase Agreement, dated June 24, 1988,
among Huffy Corporation, The Prudential Insurance
Company of America and Pruco Life Insurance
Company
4.e 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.f 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.g 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.h 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
* 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, 1997.
-16-
<PAGE> 17
4.i Amendment, dated as of December 30, 1997, to 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
4.j 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 Form of Severance Pay Agreements, as revised and ***
restated, between Huffy Corporation and its
Officers
10.f 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.g Long Term Incentive Compensation Program ***
10.h 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
* 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, 1997.
-17-
<PAGE> 18
10.i 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.j 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.k 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.l Performance Incentive Plan of Huffy Corporation ***
for 1998
10.m Retirement Agreement, dated as of December 22, ***
1997, between Huffy Corporation and Richard L.
Molen
10.n Supplemental Benefit Agreement, dated as of June *
21, 1996, between Huffy Corporation and Don R.
Graber, incorporated by reference to Exhibit 10.u
to Form 10-K for the fiscal year ended December
31, 1996
10.o 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.p 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.q 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.r 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.s Fourth Amendment to Huffy Corporation ***
Supplemental/Excess Benefit Plan dated as of May
26, 1995
10.t Fifth Amendment to Huffy Corporation *
Supplemental/Excess Benefit Plan, effective as of
July 15, 1996, incorporated by reference to
Exhibit 10.z to Form 10-K for the fiscal year
ended December 31, 1996
* 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, 1997.
-18-
<PAGE> 19
10.u Sixth Amendment to Huffy Corporation ***
Supplemental/Excess Benefit Plan, effective as of
June 15, 1997
10.v Seventh Amendment to Huffy Corporation ***
Supplemental/Excess Benefit Plan, effective as of
December 22, 1997
10.w Form of Restricted Share Agreements between Huffy ***
Corporation and its Officers, subject to
shareholder approval of the Huffy Corporation 1998
Restricted Share Plan
10.x 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.y First Amendment to Huffy Corporation Master *
Benefit Trust Agreement as Restated, effective as
of July 25, 1996, incorporated by reference to
Exhibit 10.bb to Form 10-K for the fiscal year
ended December 31, 1996
10.z 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.aa 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.bb 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.cc Third Amendment to Huffy Corporation 1987 Director *
Stock Option Plan, effective as of February 15,
1996, incorporated by reference to Exhibit 10.ff
to Form 10-K for the fiscal year ended December
31, 1996
10.dd 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.ee Subscription Agreement between Huffy ***
Corporation and Don R. Graber
10.ff 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.gg First Amendment to Huffy Corporation 1990 *
Directors' Retirement Plan, effective as of
February 15, 1996, incorporated by reference to
Exhibit 10.ii to Form 10-K for the fiscal year
ended December 31, 1996
* 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, 1997.
-19-
<PAGE> 20
10.hh Second Amendment to Huffy Corporation 1990 *
Directors' Retirement Plan, effective as of
February 15, 1996, incorporated by reference to
Exhibit 10.jj to Form 10-K for the fiscal year
ended December 31, 1996
10.ii 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
OTHER FILINGS
-------------
13. Certain sections of the Annual Report to ***
Shareholders for fiscal year ended December 31,
1997
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:
Jurisdiction in
Name of Subsidiary which Incorporated
------------------- ------------------
Hufco Company Colorado
Hufco - Delaware Company Delaware
Huffy FSC, Inc. Virgin Islands
Huffy International Finance, N.V. Netherlands Antilles
Huffy Risk Management, Inc. Ohio
Huffy Service First, Inc. Ohio
Huffy Sports, Inc. Wisconsin
Royce Union Bicycle Company Ohio
Snugli-Canada, Ltd. British Columbia, Canada
True Temper Hardware Company Ohio
True Temper Limited Whites Cross, Cork, Ireland
Washington Inventory Service California
27. Financial Data Schedules ***
* 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, 1997.
-20-
<PAGE> 1
EXHIBIT 4.a
DESCRIPTION OF STOCK CERTIFICATE OF HUFFY CORPORATION
The graphics on the stock certificate are as follows: The face of the stock
certificate has a border design with a woman at the top center in a circle of
approximately one inch in diameter. The seal of Huffy Corporation is located in
the lower left corner.
The text on the face of the stock certificate reads as follows:
NUMBER SHARES
COMMON COMMON
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
HUFFY CORPORATION CUSIP 444356 10 9
THIS CERTIFICATE IS TRANSFERABLE IN CHICAGO, ILLINOIS OR IN NEW YORK, NEW
YORK
This certifies that
is the owner of
FULLY PAID AND NON ASSESSABLE COMMON SHARES, PAR VALUE $1 PER
SHARE, OF
Huffy Corporation, transferable on the books of the Company by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate and the shares represented hereby are issued
and shall be held subject to all the provisions of the Amended Articles of
Incorporation of the Company and all amendments thereto, copies of which are on
file with the Transfer Agents, to all of which the holder, by acceptance hereof
assents. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar. Witness the facsimile seal of the Company and
the facsimile signatures of its duly authorized officers.
/s/ Nancy A. Michaud /s/ Don R. Graber
Secretary Chairman of the Board, President and
Chief Executive Officer
The lower right corner contains the following language: Countersigned and
Registered: HARRIS TRUST AND SAVINGS BANK (Chicago) Transfer Agent and Registrar
The reverse side of the stock certificate reads as follows:
<PAGE> 2
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in an Amended and Restated Rights Agreement, dated as of December
16, 1988, as amended as of August 23, 1991, and as amended and restated as of
December 9, 1994, between Huffy Corporation and Harris Trust and Savings Bank,
the successor rights agent (the "Rights Agreement"). The Rights Agreements terms
are hereby incorporated herein by reference and a copy is on file at the
principal executive offices of Huffy Corporation. Under certain circumstances,
as set forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. Huffy
Corporation will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor. As
described in the Rights Agreement, Rights issued to any Person who becomes an
Acquiring Person (as defined in the Rights Agreement) shall become null and
void.
The following abbreviations, when used in the inscription on the face
on this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___ Custodian ___
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above list
THE COMPANY WILL MAIL TO THE HOLDER HEREOF (WITHOUT CHARGE
WITHIN FIVE DAYS AFTER RECEIPT OF WRITTEN REQUEST THEREFOR) A
COPY OF THE EXPRESS TERMS OF THE SHARES REPRESENTED BY THIS
CERTIFICATE, AND OF THE OTHER CLASS OR CLASSES AND SERIES OF
SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE.
For Value Received, ________________ hereby sell, assign and transfer
unto
Please insert social security or other
identifying number of assignee
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint _________________ Attorney to transfer the said shares on
the books of the within named Company with full power of substitution in the
premises.
Dated_________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in every
particular, without alteration or
enlargement, or any change whatever.
<PAGE> 1
EXHIBIT 4.d
Dated as of December 30, 1997
Huffy Corporation
P.O. Box 1204
Dayton, Ohio 45401
Attention: Ms. Pamela J. Whipps
Ladies and Gentlemen:
Reference is made to (i) that certain agreement dated June 24, 1988 (as amended
from time to time, the "Note Agreement") between Huffy Corporation, an Ohio
corporation (the "Company"), on the one hand, and The Prudential Insurance
Company of America ("Prudential Insurance") and Pruco Life Insurance Company
("Pruco"), on the other hand, and (ii) that certain Guaranty Agreement dated as
of August 1, 1994 (as amended from time to time, the "Guaranty Agreement") made
by the Company for the benefit of Prudential Insurance and any future holder of
the "Bonds" referred to therein. The Note Agreement and the Guaranty Agreement
are sometimes hereinafter collectively referred to as the "Agreements".
Prudential Insurance and Pruco are sometimes hereinafter collectively referred
to as "Prudential". Capitalized terms used herein and not otherwise defined
herein shall have the meanings specified in the Agreements.
As of the date hereof, Prudential Insurance and Pruco are the sole holders of
the Notes and Prudential Insurance is the sole holder of the Bonds and
consequently, in accordance with paragraph 11C of the Note Agreement and Section
7.3 of the Guaranty Agreement, are respectively entitled to enter into this
letter agreement amending the Note Agreement and Guaranty Agreement.
Consequently, pursuant to the request of the Company and in accordance with
paragraph 11C of the Note Agreement and Section 7.3 of the Guaranty Agreement,
the parties hereto hereby agree as follows:
SECTION 1. AMENDMENT. From and after the date this letter agreement
becomes effective in accordance with its terms, the Note Agreement and the
Guaranty Agreement are each hereby amended as follows:
1.1 Paragraph 6B of the Note Agreement and Section 3.2 of the
Guaranty Agreement are each hereby amended to delete the date "January 1, 1992"
appearing therein and to substitute therefor the date "January 1, 1999".
1.2 The definition of "Adjusted Consolidated Net Worth"
appearing in Paragraph 10A-1 of the Note Agreement and Section 6.2 of the
Guaranty Agreement are each hereby amended to delete the date "December 1, 1990"
appearing therein and to substitute therefor the date "January 1, 1998".
-1-
<PAGE> 2
Huffy Corporation
As of December 30, 1997
Page 2
SECTION 2. CONDITION PRECEDENT. This letter shall become effective as
of December 30, 1997 upon the return by the Company to Prudential of a
counterpart hereof duly executed by the Company and Prudential. This letter
should be returned to: Prudential Capital Group, Two Prudential Plaza, Suite
5600, Chicago, Illinois, Attention: Wiley S. Adams.
SECTION 3. REFERENCE TO AND EFFECT ON AGREEMENTS. Upon the
effectiveness of this letter, each reference to the respective Agreements in any
other document, instrument or agreement shall mean and be a reference to the
Note Agreement or Guaranty Agreement, as the case may be, as modified by this
letter. Except as specifically set forth in Section 1 of this letter agreement,
the Agreements shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
SECTION 4. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS OF SUCH STATE.
SECTION 5. COUNTERPARTS; SECTION TITLES. This letter agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. The section titles contained in this letter
agreement are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ P. Scott Von Fischer
-------------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ P. Scott Von Fischer
-------------------------------
Vice President
Agreed and accepted:
HUFFY CORPORATION
By: /s/ Pamela J. Whipps
-------------------------------
Vice President-Treasurer
-2-
<PAGE> 1
EXHIBIT 4.i
December 30, 1997
Huffy Corporation
P.O. Box 1204
Dayton, Ohio 45401
Attention: Ms. Pamela J. Whipps
Ladies & Gentlemen:
Reference is made to that certain agreement dated December 1, 1990 (as amended
from time to time, the "Note Agreement") between Huffy Corporation, an Ohio
corporation (the "Company"), on the one hand, and Nationwide Life Insurance
Company ("Nationwide"), Employers' Life Insurance Company of Wausau, and
Nationwide Life & Annuity Insurance Company. Capitalized terms used herein and
not otherwise defined herein shall have the meanings specified in the Agreement.
As of the date hereof, Nationwide, Employers Life Insurance Company and
Nationwide Life and Annuity Insurance Company are the sole holders of the Notes,
with Nationwide holding more than 51% of the note. Consequently, in accordance
with Section 7.1 of the Note Agreement, Nationwide is respectively entitled to
enter into this letter agreement amending the Note Agreement.
Consequently, pursuant to the request of the Company and in accordance with
Sections 7.1 and 7.3 of the Note Agreement, the parties hereto hereby agree as
follows:
SECTION 1. AMENDMENT. From and after the date of this letter agreement
becomes effective in accordance with its terms, the Note Agreement is hereby
amended as follows:
1.1 Section 5.8 of the Note Agreement is hereby amended to delete the
date "January 1, 1992" appearing therein and to substitute therefor the date
"January 1, 1999".
SECTION 2. CONDITION PRECEDENT. This letter shall become effective as
of December 30, 1997 upon the return by the Company to Nationwide Insurance
Company of a counterpart hereof duly executed by the Company and Nationwide.
This letter should be returned to: Nationwide Insurance Company, One Nationwide
Plaza, Columbus, OH 43215-2220, Attention: Steve Hesch.
SECTION 3. REFERENCE TO AND EFFECT ON AGREEMENTS. Upon the
effectiveness of this letter, each reference to the respective Note Agreement in
any other document, instrument or agreement shall mean and be a reference to the
Note Agreement, as the case may be, as modified by this letter. Except as
specially set forth in Section 1 of this letter agreement, the Note Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects.
-1-
<PAGE> 2
Huffy Corporation
As of December 30, 1997
Page 2
SECTION 4. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS OF SUCH STATE.
SECTION 5. COUNTERPARTS: SECTION TITLES. This letter agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. The section titles contained in this letter
agreement are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Very truly yours,
NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
BY: /s/ James W. Pruden
-------------------------------
Vice President
Municipal Securities
EMPLOYERS INSURANCE COMPANY OF WAUSAU
By: /s/ James W. Pruden
-------------------------------
Attorney-in-Fact
Agreed and accepted:
HUFFY CORPORATION
By: /s/ Pamela J. Whipps
-------------------------------
Vice President-Treasurer
-2-
<PAGE> 1
Exhibit 10.e
September 9, 1997
PERSONAL & CONFIDENTIAL
- ------------------------
- ------------------------
- ------------------------
Dear _________:
The Board of Directors considers you a key officer of Huffy Corporation (the
"Company"), and needs your best efforts, skills and dedication in the event of a
threat of a major change in the control of the Company to assure that the best
interests of all shareholders are protected, as determined by the Board of
Directors. The Board of Directors recognizes that the course of action which it
decides upon and which you will be responsible to implement may be contrary to
your own personal interests and needs. In order to assure the availability of
your best efforts, skills and dedication which would be required in such
difficult circumstances to obtain the most beneficial outcome for the
shareholders, the Company is willing to provide you with income protection in
the event of termination of your employment following a change in control of the
Company. Specifically, the Company shall be bound, in consideration of your
continued services, as follows:
1. Upon the occurrence of any of the three events (herein called
"Trigger Events") set out in Section 3 below, the Company
shall immediately compute the amount of Severance Payment, as
defined in Section 2 below, and the Company shall immediately:
(a) acquire and deliver to you a non-assignable
irrevocable letter of credit in an amount equal to
the Severance Payment naming you as a beneficiary
("Letter of Credit"). The Letter of Credit shall be
issued by a major commercial bank (e.g., Bank One,
NA), and shall be redeemable by you upon the terms
described herein for a period of two (2) years
following the occurrence of any of the events
described in Section 4(a). If needed, the Company
shall renew the Letter of Credit from time to time so
that you always have a current Letter of Credit.
(b) If the Company is unable to cause the Letter of
Credit to be promptly issued, the Company shall
immediately pay to an escrow account at Bank One, NA
(the "Escrow Agent") an amount equal to the Severance
Payment.
<PAGE> 2
September 9, 1997
Page 2
- -----------------
2. As used herein, Severance Payment shall mean an amount equal
to the sum of the following:
(a) three times your then current annual rate of salary,
plus
(b) three times the Profit Sharing Bonus Plan award for
which you are eligible based on your salary at the
time the Severance Payment is computed, payable at
the target level; plus
(c) three times the Long Term Incentive Plan award for
which you are eligible, payable at the target level
calculated on your salary at the time the Severance
Payment is computed, with all remaining years of the
cycles under the Long Term Incentive Plan to be
calculated on a pro-rata basis; plus
(d) unless an agreement has been entered into between you
and the Company whereby the Company agrees to
continue providing your then current benefits and
perquisites for a period of three (3) years following
severance of your employment, an amount equal to two
(2) times the Company's cost of providing three (3)
years of your then current benefits and perquisites
including, without limitation, life insurance,
executive and regular medical benefits, long term
disability insurance, deferred compensation, usage of
Company-owned or leased automobile (or an auto
allowance in lieu thereof), etc.; plus
(e) In the event that you become entitled to the
Severance Payment or any other benefits or payments
under this Letter Agreement or by reason of the
accelerated vesting of stock options under any of the
Company's stock option plans or other deferred
compensation plans, but specifically excluding
voluntary deferred compensation plans, hereinafter
defined as "Total Benefits", and in the event that
any of the Total Benefits will be subject to any
excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended from time to time or
any successor law, rule or regulation ("Excise Tax"),
the Company shall pay you an additional amount, in
addition to the Total Benefits, equal to the amount
of the Excise Tax imposed upon the Total Benefits.
3. The three Trigger Events are as follows:
(a) Common Stock of the Company has been acquired other
than directly from the Company in exchange for cash
or property by any person who thereby becomes the
owner of more than 20% of the Company's outstanding
shares of Common Stock;
<PAGE> 3
September 9, 1997
Page 3
- -----------------
(b) Any person has made a tender offer for, or a request
for invitations for tenders of, shares of Common
Stock of the Company; or
(c) Any person forwards or causes to be forwarded to
shareholders of the Company proxy statement(s) in any
period of twenty-four (24) consecutive months,
soliciting proxies to elect to the Board of Directors
of the Company two or more candidates who were not
nominated as candidates in a proxy statement
forwarded to shareholders during such period by the
Board of Directors of the Company.
4. If, after any Trigger Event occurs, your employment by the
Company terminates, voluntarily or involuntarily, for any
reason other than disability, retirement on or after the date
you reach normal retirement age, or death, upon your written
demand, you shall have the right to receive the Severance
Payment, subject to the conditions precedent described in
Section 4(a).
(a) Your right to demand such payment will arise only
when any one of the following events has occurred:
(i) Any person shall acquire other than directly
from the Company in exchange for cash or
property in excess of thirty percent (30%)
of the Company's outstanding shares of
Common Stock; or
(ii) There shall be a merger, consolidation or
other combination of the Company with one or
more other corporations as a result of which
more than forty-nine percent (49%) of the
voting stock of the merged, consolidated or
combined corporation is held by former
shareholders of the corporations (other than
the Company) which are parties to such
merger, consolidation or other combination;
or
(iii) Two or more persons, who were not nominated
as candidates for the Board of Directors of
the Company in proxy statements forwarded to
shareholders during any period of
twenty-four (24) consecutive months on
behalf of the Board of Directors of the
Company, are elected to the Board of
Directors of the Company by the shareholders
of the Company voting in person or by proxy,
and such persons so elected are nominated as
candidates for the Board of Directors in
proxy statements forwarded, or caused to be
forwarded, to the shareholders of the
Company during such period by any person
other than the Board of Directors of the
Company.
<PAGE> 4
September 9, 1997
Page 4
- ------------------
(b) If your employment is terminated, voluntarily or
involuntarily, for any reason after the occurrence of
an event enumerated in Section 3(a), (b) or (c)
above, but prior to the occurrence of an event
enumerated in Section 4(a), you shall forfeit your
right to any Severance Payment under this Agreement.
(c) The Severance Payment will be paid to you immediately
in one lump sum, either by your drawing upon the
Letter of Credit or by payment to you by the Escrow
Agent, as appropriate.
(d) Your right to make a demand hereunder shall terminate
upon the expiration or termination of two (2) years
from the date of the last of any of the events
described in Section 4(a), unless you have become
entitled to make and in fact have made, a demand
within that time period.
(e) The Severance Payment shall be recomputed as of the
time of the payment set forth in Section 4(c) and if
the recomputed amount is larger, the Company shall
immediately pay you the amount by which the
recomputed severance Payment exceeds the Severance
Payment paid in escrow or secured by the Letter of
Credit.
5. The Company may terminate the Letter of Credit or may withdraw
the amount so deposited with the Escrow Agent pursuant to
Section 1 when and only when (a) two (2) years have expired
from the date of the last of any of the events described in
Section 4(a) and no proper demand has been made during that
time or (b) five (5) years have expired after the most recent
event of the kind described in Section 3(a), (b) or (c) above
and no event described in Section 4(a) has occurred or if it
did occur, no proper demand has been made during that time, or
(c) your right to a payment under this Agreement has been
forfeited by you, whichever occurs first. If, before the
expiration of such period, there shall occur another event of
the kind described in Section 3(a), (b) or (c) above, the
Company will not be required to make an additional deposit.
6. The Company agrees to pay the charges of the Letter of Credit
and of the Escrow Agent for its services under this Agreement,
and the Company will be entitled to any interest or other
income arising from the amount so deposited by it.
7. The Letter of Credit will be subject to the issuing bank's
usual rules and procedures relating to letter of credit and
the Company will indemnify such bank against any loss or
liability for any action taken by it in good faith in
connection with the Letter of Credit.
<PAGE> 5
September 9, 1997
Page 5
- -----------------
8. The escrow arrangement will be subject to the Escrow Agent's
usual rules and procedures relating thereto, and the Company
will indemnify the Escrow Agent against any loss or liability
for any action taken by it in good faith in such capacity.
9. Nothing herein shall be deemed to prohibit either you or the
Company from terminating your employment at any time.
10. As used in this Agreement, "person" shall be deemed to have
the same meaning as when used in Section 13 of the Securities
Exchange Act of 1934. As used in this Agreement, "Company"
refers not only to Huffy Corporation but also to its
successors by merger or otherwise.
11. (a) You shall not be required to mitigate the amount
of any Severance Payment paid to you by seeking other
employment or otherwise, nor shall the amount of any
Severance Payment be reduced by any compensation
earned by you as the result of employment by another
employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company,
or otherwise.
(b) The Company will require any successor (whether
direct or indirect, by purchase, merger, share
exchange, consolidation or otherwise) to all or
substantially all of the business and/or assets of
the Company to assume expressly and to agree to
perform this Agreement in the same manner and to the
same extent that the Company would be required to
perform it if no such successor had taken place.
Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and
shall entitle you to a Severance Payment from the
Company in the same amount and on the same terms as
you would be entitled to hereunder after the
occurrence of any Trigger Event and one of the events
enumerated in Section 4(a) of this Agreement.
(c) After you have the right to receive the Severance
Payment, as provided for in Section 4 above, the
Company shall also pay to you, within thirty (30)
days after incurred by you, an amount equal to all
legal fees and expenses incurred by you as a result
of contesting or disputing your voluntary or
involuntary termination or in seeking to obtain or
enforce any right or benefit provided by this
Agreement or in connection with any tax audit or
proceeding to the extent attributable to the
application of section 4999 of the Internal Revenue
Code of 1986, as amended from time to time, to any
payment or benefit provided hereunder.
<PAGE> 6
September 9, 1997
Page 6
- -----------------
(d) Upon the occurrence of any event enumerated in
Section 4(a) of this Agreement, for the purpose of
determining the Supplemental/Excess Benefit payable
to you under the Company's Supplemental/Excess
Benefit Plan (the "SERP"), (i) your Credited Service
(as defined for purposes of the SERP) will be deemed
to have been increased by 36 months, and (ii) your
Supplemental/Excess Benefit will be fully vested and
nonforfeitable.
12. This Agreement cancels and supersedes, as of the date hereof,
the prior agreement between you and the Company, dated
February 12, 1994, as amended by letter dated September 9,
1997.
Please indicate your acceptance of this Agreement by signing one copy of this
letter in the space provided below and returning it to me. The other copy is for
your files.
Sincerely,
Huffy Corporation
By
---------------------------
Richard L. Molen
Chairman of the Board and
Chief Executive Officer
AGREED TO AND ACCEPTED this 9th
day of September, 1997.
- ------------------------------
<PAGE> 1
EXHIBIT 10.g
SUBJECT: LONG TERM INCENTIVE PLAN (Completely Revised)
POLICY
- ------
CERTAIN OFFICERS AND HUFFY COMPANY PRESIDENTS SHALL PARTICIPATE IN A LONG TERM
INCENTIVE PLAN OF COMPENSATION. THE PURPOSE OF THE LONG TERM INCENTIVE PLAN
SHALL BE TO PROVIDE AN INCENTIVE FOR LONG TERM PERFORMANCE AND BE COMPETITIVE
WITH THE MARKETPLACE.
<TABLE>
<CAPTION>
Award as a % of
Base Salary on January 1
------------------------
I. Participants Target Maximum
------------ ------ -------
<S> <C> <C> <C>
A. Chairman, President and Chief Executive 50% 100%
Officer
B. Vice President-General Counsel & 25% 50%
Secretary
Vice President-Finance and
Chief Financial Officer
Vice President and Controller
Vice President-Human Resources and
Organization Development
President & General Manager - HBC
President & General Manager - HSC
President & General Manager - HSF
President & General Manager - WIS
President & General Manager - TTH
<CAPTION>
II. Measurement
-----------
Based on performance of measures weighted as follows:
<S> <C>
Corporate Officers Huffy Company Presidents
------------------ ------------------------
1. Corporate RONA - 33 1/3% 1. Huffy Company RONA - 50%
2. EPS - 33 1/3% 2. Corporate EPS - 25%
3. TSR - 33 1/3% 3. Corporate TSR - 25%
</TABLE>
A. Award Cycle
-----------
The award cycle shall be rolling three year performance periods.
B. Salary Basis
------------
Awards under this plan are to be based upon the participant's
actual base salary as of January 1 of each new award cycle.
- -------------------------------------------------------------------------------
Part No. TS 136 Page 1 of 4
<PAGE> 2
- --------------------------------------------------------------------------------
SUBJECT: LONG TERM INCENTIVE PLAN (Completely Revised)
EXCEPTIONS: In order to transition from the prior long term
incentive plan to this new long term incentive plan the first
three performance periods and the percent of target award each
participant shall be eligible for will be as follows:
<TABLE>
<CAPTION>
% of Target Award Participant
Performance Period is Eligible for
------------------ ---------------
<S> <C>
1. 01/01/98 to 12/31/98 33 1/3%
2. 01/01/98 to 12/31/99 66 2/3%
3. 01/01/98 to 12/31/00 100 %
</TABLE>
C. Definitions
-----------
Corporate RONA: Consolidated RONA as defined in Policy number 128.
--------------
Huffy Company RONA: As defined in Policy number 128.
-------------------
EPS: Earnings per common share
TSR: Total Shareholder Return being (i) the annual average rate
of growth calculated as:
(Stock Price(EOY) + Dividends Declared) - Stock Price BOY = Rate
---------------------------------------------------------------
Stock Price (BOY)
(ii) adding such Rate increases and/or decreases for each
calendar year in the LTIP cycle and (iii) dividing the
result by the number of calendar years in the LTIP cycle.
STOCK PRICE(BOY): Beginning of your stock price means the arithmetic
average of the closing price of Huffy Common
Stock on each Friday during the calendar quarter
immediately preceding January 1 of the next
calendar year.
STOCK PRICE(EOY): End of year stock price means the arithmetic
average of the closing price of Huffy common
stock on each Friday during the final calendar
quarter of the year.
D. GOALS: Goals for each measure shall be the goals in the final year
of the performance period approved by the Compensation
Committee of the Board of Directors. (Note: TSR results for
any performance period shall be calculated as defined in the
preceding sections).
- -------------------------------------------------------------------------------
Part No. TS 136 Page 2 of 4
<PAGE> 3
<TABLE>
<CAPTION>
SUBJECT: LONG TERM INCENTIVE PLAN (Completely Revised)
E. Award Scales(1)
------------
Actual Huffy/Corporate % of Award
Results versus Goal Earned
------------------- ------
<S> <C> <C>
Less than 90% 0%
90% Threshold 50%
95% 75%
100% Target 100%
105% 133 1/3%
110% 166 2/3%
115% Maximum 200%
<FN>
1 Scale is linear between points and shall be interpolated to the nearest
1/10th of 1% to determine award level.
</TABLE>
III. Payment forms and Manner
------------------------
100% of the award earned under each award cycle shall be paid in cash as
soon as practicable following completion of an award cycle subject to
approval by the Compensation Committee of the Board of Directors of such
payments.
IV. Implementation
--------------
Individuals in an eligible position as of the first business day of the
calendar year will be eligible for 100% of the award cycle in such year
and a pro-rated portion of other award cycles currently in process.
Generally, individuals newly hired or newly promoted to an eligible
position after the first business day of the year will be eligible for a
pro-rated award for the award cycle commencing in the year of hire or
promotion and other award cycles currently in process based on the number
of full calendar quarters remaining in the award cycles. However, no
individual who becomes an eligible participant after June 30 will be
eligible for any award for the award cycle ending the year of hire or
promotion.
Current participants who are transferred or promoted to another position
will be eligible for pro-rated awards based on the number of full and
partial quarters worked in the old and new position for award cycles in
progress. However, transfers and promotions occurring after June 30 for an
award cycle ending in the year of transfer or promotion will be treated as
having worked in the old position for 100% of that award cycle.
- --------------------------------------------------------------------------------
Part No. TS 136 Page 3 of 4
<PAGE> 4
SUBJECT: LONG TERM INCENTIVE PLAN (Completely Revised)
Employees who are demoted to a non-eligible position for any reason other
than health will not be eligible for payment of any award for any award
cycle. If an employee is demoted to a non-eligible position due to health
reasons, and if deemed acceptable to the Chief Executive Officer in his
sole discretion, the employee will be eligible for a pro-rated award based
on the number of full calendar quarters during which the employee was in
an eligible position. However, no award will be earned for an award cycle
in which the employee was not an eligible participant for at least two
full calendar quarters.
Employees who terminate employment by reason of disability (as deemed
disabled by the Corporation's long-term disability insurance carrier),
early or normal retirement or by death shall be eligible for a pro-rated
award based on the number of full calendar years completed for any award
cycle.
Payments will be made to the estate of deceased participants.
V. Distribution
------------
Distribution shall be limited to Corporate Officers, Huffy Company
President and the Director of Corporate Human Resources.
/s/ Stanley H. Davis /s/ Don R. Graber
- ------------------------------------- -------------------------------------
Vice President - Human Resources and Chairman, President and
Organization Development Chief Executive Officer
- --------------------------------------------------------------------------------
Part No. TS 136 Page 4 of 4
<PAGE> 1
Subject: PERFORMANCE INCENTIVE PLAN - C 98 (REV)
Exhibit 10.l
POLICY
- ------
CERTAIN EXEMPT EMPLOYEES OF THE CORPORATION AND ITS SUBSIDIARIES SHALL BE GIVEN
CONSIDERATION FOR PAYMENT UNDER THE CORPORATION'S PERFORMANCE INCENTIVE 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 INCENTIVE
- -------------------
Incentive opportunity as a % of
I. Basis and Level of Awards Actual Base Salary
------------------------- ---------------------------
Thresh. Target Max. (REV.)
------- ------ -----
<S> <C> <C> <C> <C>
A. Chairman
--------
Corporate E.P.S. vs. PP 10.0% 20.0% 40.0% (REV.)
Corporate RONA vs. PP 10.0% 20.0% 40.0% (REV.)
------- ------ -----
20.0% 40.0% 80.0% (REV.)
B. Other Corporate Officers
------------------------
Corporate E.P.S. vs. PP 6.0% 12.0% 24.0% (REV.)
Corporate RONA vs. PP 6.0% 12.0% 24.0% (REV.)
------- ------ -----
12.0% 24.0% 48.0% (REV.)
C. Huffy Company Heads
-------------------
1. HBC, HSC, HSF TTH and WIS
Huffy Company RONA vs. PP 6.0% 12.0% 24.0% (REV.)
Huffy Company EBIT vs. PP 6.0% 12.0% 24.0% (REV.)
------- ------ -----
12.0% 24.0% 48.0% (REV.)
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 1 of 15
<PAGE> 2
Subject: PERFORMANCE INCENTIVE PLAN - C98
<TABLE>
<CAPTION>
D. Huffy Company Staffs
--------------------
1. HBC, HSC, WIS, TTH and HSF
<S> <C> <C> <C> <C>
Huffy Company RONA vs. PP 3.0% 6.0% 12.0% (REV.)
Huffy Company EBIT vs. PP 3.0% 6.0% 12.0% (REV.)
----- ----- -----
6.0% 12.0% 24.0% (REV.)
E. Corporate Exempt
----------------
1. Positions with 700 or more Hay points
Corporate E.P.S. vs. PP 3.0% 6.0% 12.0% (REV.)
Corporate RONA vs. PP 3.0% 6.0% 12.0% (REV.)
----- ----- -----
6.0% 12.0% 24.0% (REV.)
2. Positions with less than 700 Hay points
Corporate E.P.S. vs. PP 2.0% 4.0% 8.0% (REV.)
Corporate RONA vs. PP 2.0% 4.0% 8.0% (REV.)
----- ----- -----
4.0% 8.0% 16.0% (REV.)
F. Other Exempt
------------
1. Huffy Company Exempt (except HSF Exempt;
WIS Field Management (see Policy 128-A for
WIS Field Management personnel) and Exempt;
TTH Wood Mills Exempt Employees; and TTH
Sales Managers)
Huffy Company EBIT vs. PP 2.5% 5.0% 10.0% (REV.)
Huffy Company RONA vs. PP 2.5% 5.0% 10.0% (REV.)
----- ----- -----
5.0% 10.0% 20.0% (REV.)
2. HSF District Managers
District Gross Field Profit % vs. PP 0.625% 2.5% 5.0% (REV.)
District Gross Field Profit $ vs. PP 0.625% 2.5% 5.0% (REV.)
Huffy Company EBIT vs. PP 1.25 % 2.5% 5.0% (REV.)
Huffy Company RONA vs. PP 1.25 % 2.5% 5.0% (REV.)
------ ----- -----
3.75 % 10.0% 20.0% (REV.)
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 2 of 15
<PAGE> 3
<TABLE>
<CAPTION>
Subject: PERFORMANCE INCENTIVE PLAN - C 98
F. Other Exempt (Cont'd)
---------------------
<S> <C> <C> <C> <C>
3. HSF Area Managers (REV.)
(REV.)
Area Gross Field Margin % vs. PP 0.625% 2.5% 5.0% (REV.)
Area Gross Field Margin $ vs. PP 0.625% 2.5% 5.0% (REV.)
Huffy Company EBIT vs. PP 1.25 % 2.5% 5.0% (REV.)
Huffy Company RONA vs. PP 1.25 % 2.5% 5.0%
------ ----- -----
3.75 % 10.0% 20.0%
4. Zone Merchandising Managers
Zone AGMM*% vs. PP% 0.625% 2.5% 5.0% (REV.)
(*Adjusted Gross Merchandising Margin)
HSF EBIT vs. PP 0.625% 1.25% 2.5% (REV.)
HSF RONA vs. PP 0.625% 1.25% 2.5% (REV.)
------ ----- -----
1.875% 5.00% 10.0% (REV.)
5. Merchandising Operations Manager
Gross Merchandising Profit % vs. PP% 1.25% 5.0% 10.0% (REV.)
HSF EBIT vs. PP 1.25% 2.5% 5.0% (REV.)
HSF RONA vs. PP 1.25% 2.5% 5.0% (REV.)
------ ----- -----
3.75% 10.0% 20.0% (REV.)
6. HSF Other Exempt
Huffy Company EBIT vs. PP 2.5% 5.0% 10.0% (REV.)
Huffy Company RONA vs. PP 2.5% 5.0% 10.0% (REV.)
---- ----- -----
5.0% 10.0% 20.0% (REV.)
7. TTH Wood Mills Exempt
Huffy Company EBIT vs. PP 2.5% 5.0% 10.0%* (REV.)
Huffy Company RONA vs. PP 2.5% 5.0% 10.0%* (REV.)
Huffy Company Gainsharing Plan 0.0% -- 12.0%* (REV.)
---- ----- -----
5.0% 10.0% 20.0%* (REV.)
<FN>
* Either category of incentive payment may pay up to the maximum award shown,
but the maximum total incentive payable shall not exceed 20.0%.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 3 of 15
<PAGE> 4
<TABLE>
<CAPTION>
Subject: PERFORMANCE INCENTIVE PLAN - C 98
(REV.)
Thresh. Target Max.
------- ------ -----
<S> <C> <C> <C> <C>
9. All WIS exempt positions with Manager or
Director titles (excluding WIS National Sales
Manager and WIS Field Management Personnel)
Huffy Company EBIT vs. PP 2.5% 5.0% 10.0% (REV.)
Huffy Company RONA vs. PP 2.5% 5.0% 10.0% (REV.)
------- ------ -----
5.0% 10.0% 20.0% (REV.)
10. Other WIS Exempt and WIS Service
Managers, and WIS Managers in
Training (excluding WIS Field
Management and WIS National Sales
Manager
Huffy Company EBIT vs. PP 1.25% 2.5% 5.0% (REV.)
Huffy Company RONA vs. PP 1.25% 2.5% 5.0% (REV.)
------- ------ -----
2.50% 5.0% 10.0% (REV.)
</TABLE>
II. Corporate Internal Audit Staff
------------------------------
Corporate Internal Audit staff are members of the Corporate Exempt category
and incentive recommendations will generally be made on that basis. Such
incentive recommendations will be subject to approval by the Audit
Committee of the Board of Directors.
III. Award Scales(1)
---------------
<TABLE>
<CAPTION>
Huffy Company (excluding HSF) RONA vs. Plan
Huffy Company EBIT vs. Plan % of Targeted
Corporate RONA vs. Plan Award Earned(2)
--------------------------- -------------
<S> <C> <C>
Under 90% -0-
90% Threshold 50
95% 75
100% Target 100
105% 133 1/3
110% 166 2/3
115% Maximum 200
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 4 of 15
<PAGE> 5
<TABLE>
<CAPTION>
Subject: PERFORMANCE INCENTIVE PLAN - C 98
Corporate RONA vs. Plan % of Targeted
Corporate EPS vs. Plan Award Earned(2)
----------------------- --------------- (REV.)
<S> <C> <C>
Under 90% -0-
85% Threshold 25
90% 50 (REV.)
95% 75 (REV.)
100% Target 100
110% 150
120% Maximum 200 (REV.)
(REV.)
% of Targeted
HSF RONA vs. Plan Award Earned(2)
----------------- --------------
<S> <C> <C>
Under 90% -0-
90% Threshold 50
95% 75
100% Target 100
105% 150
110% Maximum 200
HSF District Gross % of Targeted
Field Profit $ vs. PP Award Earned(2)
--------------------- --------------
<S> <C> <C>
Under 90% -0-
90 25
100 100
110+ 200
HSF Area Gross Field % of Targeted
Margin $ vs. PP Award Earned
-------------------- ------------
<S> <C> <C>
Under 90% -0-
90 25
100 100
110+ 200
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 5 of 15
<PAGE> 6
Subject: PERFORMANCE INCENTIVE PLAN - C 98
<TABLE>
<CAPTION>
HSF District Gross Field Profit % vs. PP % of Targeted
HSF Area Gross Field Margin % vs. PP Award Earned
------------------------------------ ------------
<S> <C> <C>
Greater than -1.00% below -0-
-1.00 Threshold 25
-0.67 50
-0.33 75
Profit Plan% Target 100
+0.5 133
+1.0 167
+1.5 Maximum 200
</TABLE>
<TABLE>
<CAPTION>
HSF Merchandising Actual Gross Field Profit Percent vs. PP%
-----------------------------------------------------------
<S> <C> <C>
Greater than 1.00% below 0
1.00 Threshold 25
0.67 50
0.33 75
Profit Plan % Target 100
+0.5 133
+1.0 167
+1.5 Maximum 200
</TABLE>
<TABLE>
<CAPTION>
Zone AGMM*% vs. PP%
-------------------
<S> <C> <C>
Greater than 1.00% below 0
--1.00 Threshold 25
--0.67 50
--0.33 75
Profit Plan % Target 100
+0.5 133
+1.0 167
+1.5 Maximum 200
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 incentive
target which varies by level of employee. Refer to Section I.
</TABLE>
- --------------------------------------------------------------------------------
Part No. TS 136 Page 6 of 15
<PAGE> 7
Subject: PERFORMANCE INCENTIVE PLAN - C 98
IV. Positions Covered
A. Corporate Officers and Huffy Company Presidents
Corporate Officers
------------------
Chairman, President and CEO (REV.)
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 - Washington Inventory Service
President and General Manager - Huffy Service First, Inc.
President and General Manager - True Temper Hardware Company
B. Huffy Company Staff
* HBC
---
V.P./G.M. - Celina
V.P. Marketing
V.P. Controller
V.P. Global Sourcing and Logistics
V.P. Human Resources
V.P. Sales
V.P. Engineering
V.P. Operations (REV.)
* HSC
---
V.P. Sales
V.P. Controller
V.P. Materials Management
V.P. Global Operations
V.P. Marketing & New Business Development (REV.)
* HSF
---
V.P. Operations
V.P. Controller
V.P. Sales/Marketing
V.P. Human Resources
General Counsel
V.P. Merchandising
- --------------------------------------------------------------------------------
Part No. TS 136 Page 7 of 15
<PAGE> 8
Subject: PERFORMANCE INCENTIVE PLAN - C 98
* WIS
---
V.P. Operations
V.P. Finance and Controller
V.P. Technology & Information Systems
V.P. Sales and Account Management
V.P. Human Resources
* TTH
---
V.P. Sales and Service (REV)
V.P. Operations
V.P. Controller
V.P. Human Resources
Managing Director, TT Ireland
Director, Marketing (REV)
Director, Information Services and Technology (REV)
V. Individual Personal Objectives
------------------------------
<TABLE>
<CAPTION>
Incentive Opportunity as a % of
Actual Base Salary
-------------------------------
Below
Position Threshold Threshold Maximum
-------- --------- --------- -------
<S> <C> <C> <C>
A. Chairman, President & CEO 0% 10.0% 20.0%
------------------------
B. Corporate Officers and
----------------------
Huffy Company Heads 0% 6.0% 12.0%
----------------------
</TABLE>
<TABLE>
<CAPTION>
Incentive Opportunity as a % of
Actual Base Salary
-------------------------------
Below
Position Threshold Threshold Maximum
-------- --------- --------- -------
<S> <C> <C> <C>
D. Huffy Company Staff 0% 3.0% 6.0%
-------------------
E. 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 incentive measured on this
basis, the following implementation procedure will be used:
- --------------------------------------------------------------------------------
Part No. TS 136 Page 8 of 15
<PAGE> 9
Subject: PERFORMANCE INCENTIVE PLAN - C 98
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.)
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 shall develop no more than 7 to 8 objectives. (REV.)
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.
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.
- --------------------------------------------------------------------------------
Part No. TS 136 Page 9 of 15
<PAGE> 10
Subject: PERFORMANCE INCENTIVE PLAN - C 98
4. Personal Objectives Schedule
----------------------------
Upon Approval by The CEO's objectives shall be communicated to
Compensation the Corporate Officers and Huffy Company
Committee Presidents 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.
10 days later Corporate Officers' and Huffy Company
Presidents' objectives shall be approved by the
CEO. Corporate Officers and Huffy Company
Presidents shall communicate their approved (REV.)
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.
5. Personal Objectives Results Schedule
------------------------------------
First Friday in Corporate Staff and Other Corporate Exempt shall
December submit 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.
- --------------------------------------------------------------------------------
Part No. TS 136 Page 10 of 15
<PAGE> 11
Subject: PERFORMANCE INCENTIVE PLAN - C 98
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 provides Compensation Committee of Board of
Directors with results for evaluation and (REV.)
approval.
5 days later Corporate Staff and Other Corporate Exempt and
personnel 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 the CEO
for evaluation and approval. (REV.)
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:
- --------------------------------------------------------------------------------
Part No. TS 136 Page 11 of 15
<PAGE> 12
Subject: PERFORMANCE INCENTIVE PLAN - C 98
All Corporate Exempt
- --------------------
Corporate E.P.S. less than - No bonus shall be paid for
50% of Target E.P.S. for performance of personal
Corporate bonus purposes objectives
Corporate E.P.S. at least - 50% of calculated bonus for
50%, but less than 75%, of performance of personal
Target E.P.S. for Corporate bonus objectives shall be paid
purposes
Corporate E.P.S. 75% or - 100% of calculated bonus for
greater of Target E.P.S. performance of personal
for Corporate bonus purposes objectives
Huffy Companies
- ---------------
Huffy Company EBIT less than 50% of - No bonus shall be paid for
approved Huffy Company Profit Plan performance of personal
objectives
Huffy Company EBIT at least 50%, but - 50% of calculated bonus for
less than 75%, of approved Huffy performance of personal
Company Profit Plan objectives shall be paid
Huffy Company EBIT 75% or greater of - 100% of calculated bonus for
approved Huffy company Profit Plan performance of personal
objectives shall be paid
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 incentive opportunity.
New 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 incentive opportunity.
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
incentive opportunity shown below:
- --------------------------------------------------------------------------------
Part No. TS 136 Page 12 of 15
<PAGE> 13
Subject: PERFORMANCE INCENTIVE PLAN - C 98
Percentage of Annual
Hire Date Incentive Opportunity
--------- ---------------------
During 1st quarter 75%
During 2nd quarter 50%
During 3rd quarter 25%
During 4th quarter 0%
Transfers, Promotions or Demotions: Individuals transferred, promoted or
demoted during the calendar year shall have incentive opportunity as
follows:
Calculation Based on
--------------------
Old Oppor. New Oppor.
---------- ----------
Old Actual New Actual
---------- ----------
Base Salary Base Salary
----------- -----------
Old. Opp. Level New Opp. Level
--------------- --------------
Transferred, Promoted or Demoted
During 1st Quarter 25% 75%
During 2nd Quarter 50% 50%
During 3rd Quarter 75% 25%
During 4th Quarter 100% 0%
Note: Non-exempt and/or hourly employees promoted to exempt positions
are eligible for incentive 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 incentive 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
incentive purposes as if they were effective the last day of the
prior 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 (date check is
issued) 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 THESE CIRCUMSTANCES, SUCH
EMPLOYEES MUST HAVE BEEN ON THE PAYROLL AT THE BEGINNING OF THE
CALENDAR YEAR IN ORDER TO QUALIFY FOR INCENTIVE 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 INCENTIVE OPPORTUNITY AS
FOLLOWS:
- --------------------------------------------------------------------------------
Part No. TS 136 Page 13 of 15
<PAGE> 14
Subject: PERFORMANCE INCENTIVE PLAN - C 98
Incentive as percent payment
----------------------------
Termination Date of full Incentive 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 incentive is
being calculated and who met the requirement of
being on the active payroll during the year will be
given consideration for an incentive payment on
basis of the following percentage of full incentive
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 (in particular, requests for exceptions
involving transfers and new hires when approval for such
transfer or new hire has been obtained).
2. Payment
-------
Except as noted below, payment for Performance Incentive
shall be annual and shall occur in March of each year for
the prior calendar year's results.
3. Calculations
------------
All incentive calculations will be rounded up to the
nearest $25.00 increment and the minimum incentive payment
to be paid will be $125.00 per employee, provided employee
is eligible for incentive and such incentive is approved.
- --------------------------------------------------------------------------------
Part No. TS 136 Page 14 of 15
<PAGE> 15
Subject: PERFORMANCE INCENTIVE PLAN - C 98
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 128-A, 128-B and 128-C which is restricted to
Corporate Officers, President and General Manager of WIS, and President and
General Manager of HSF. (REV.)
/s/ Stanley H. Davis /s/ Don R. Graber
- ------------------------------------ -----------------------------------
Vice President, Human Resources and Chairman, President And Chief Executive
Organization Development Officer
- --------------------------------------------------------------------------------
Part No. TS 136 Page 15 of 15
<PAGE> 1
Exhibit 10.m
December 22, 1997 RETIREMENT AGREEMENT
Mr. Richard L. Molen
1970 Kresswood Circle
Kettering, OH 45419
Dear Dick:
This letter set forth the terms and conditions under which you have agreed to
resign as Chief Executive Officer, Chairman of the Board of Directors and a
member of the Board of Directors of Huffy Corporation (the "Retirement
Agreement"), all effective on December 29, 1997.
In consideration of the foregoing agreement, Huffy Corporation agrees
as follows:
A. Richard L. Molen's base salary, bonus and Long Term Incentive
Plan payment earned through December 29, 1997, shall be paid
as calculated for all other Officers even though not employed
on the date of payment.
B. In consideration to the five year Non-Competition Agreement
set forth below and his cooperation and consultation as an
independent contractor on Azusa Superfund matters and FTC/TRU
litigation, the Corporation shall pay Richard L. Molen
$2,000,000.00 on or about January 5, 1998. Richard L. Molen
acknowledges as an independent contractor he is responsible
for payment of taxes on such amount and hereby indemnifies the
Corporation for any taxes or penalties resulting from failure
to pay such taxes.
<PAGE> 2
Mr. Richard L. Molen
December 22, 1997
Page 2
C. Huffy Corporation will make the payments in accordance with
Section 3(b) and allow the deferrals in Section 3(c) of the
Transition/Consulting Compensation Agreement which section
survives termination and which agreement is attached hereto.
D. Richard L. Molen agrees to the Non-Competition Section 4 of
such Transition/ Consulting Compensation Agreement.
Except as otherwise set forth herein, the Transition/Consulting Compensation
Agreement, dated June 13, 1996, and all benefits and his obligations thereunder,
shall be terminated, including, without limitation, Section 3 (a) which will be
null and void, except as to those benefits available to other retirees,
generally, of Huffy Corporation.
Richard L. Molen shall be entitled to exercise his outstanding stock options in
accordance with the terms of such options and the plans related thereto until
December 11, 2001.
Richard L. Molen will be named an additional insured on the Director/Officer
insurance for two years following December 29, 1997.
In addition:
1. Richard L. Molen's retirement benefits in excess of the Defined
Benefit Plan shall be funded 50% in cash in accordance with the
Sixth Amendment to the Huffy Corporation Supplemental/Excess
Benefit Plan and 50% in stock in accordance with the Restricted
Share Plan; provided that if the Restricted Share Plan is not
approved by the Shareholders of the Corporation the remaining
50% will be paid as an annuity under the terms of the
Supplemental/Excess Benefit Plan.
2. Richard L. Molen shall have access to his Huffy Corporation
Office through January 31, 1998 at which time any computer
links to the Huffy Corporation office will be terminated.
3. Richard L. Molen may retain his home office equipment.
4. Richard L. Molen may stay on the Huffy Foundation through
December 31, 2000.
<PAGE> 3
Mr. Richard L. Molen
December 22, 1997
Page 3
5. Richard L. Molen will receive credit for service and
compensation he would have otherwise received had he remained
an employee through December 31, 1998 under the Corporation's
defined benefit (qualified and non qualified) plans, as
reflected in the Seventh Amendment to the Supplemental/Excess
Benefit Plan.
6. The Huffy Corporation Board of Directors and you will put a
positive tone as to your resignation.
In consideration of the foregoing, Huffy Corporation will expect you to execute
and return to the Corporation a Standard Release and Waiver in the form attached
hereto.
This contract supersedes all other contracts, understandings and discussions
with the Corporation whether written or oral, except as set forth herein and the
attached Release and Waiver Agreement.
If the foregoing is acceptable, please sign and return the enclosed copy of this
letter.
I hereby agree to and accept the terms of this letter.
/s/ Richard L. Molen /s/ Thomas C. Sullivan
- ------------------------------ --------------------------------
Richard L. Molen Thomas C. Sullivan, Chairman
Compensation Committee
<PAGE> 1
Exhibit 10.S
FOURTH AMENDMENT TO
HUFFY CORPORATION
SUPPLEMENTAL/EXCESS BENEFIT PLAN
--------------------------------
WHEREAS, Huffy Corporation (the "Sponsor") maintains the Huffy
Corporation Supplemental/Excess Benefit Plan (the "Plan"), effective January 1,
1988, as amended; and
WHEREAS, the Sponsor desires to amend the Plan;
NOW, THEREFORE, the Sponsor adopts the following amendments to the Plan.
1. Effective September 5, 1994, Section III of the Plan shall be amended
so as to provide Harry A. Shaw III the "Rule of 85", in accordance with the
terms of Section 5 of the Transition Compensation Agreement between Harry A.
Shaw and the Sponsor, dated as of February 15, 1993.
2. Effective April 24, 1995, Section III of the Plan shall be amended so
as to provide John L. Mariotti ("Mariotti") the benefit credit under the Plan
set forth in Section 3.b. of a SETTLEMENT AND GENERAL RELEASE between the
Sponsor and Mariotti, dated April 24, 1995.
IN WITNESS WHEREOF, the Sponsor has caused this instrument to be executed
as of this 26th day of May, 1995.
HUFFY CORPORATION
By /s/ Nancy A. Michaud
-----------------------------------
Nancy A. Michaud
Vice President - General Counsel
and Secretary
<PAGE> 1
EXHIBIT 10.u
SIXTH AMENDMENT TO THE
HUFFY CORPORATION SUPPLEMENTAL/EXCESS BENEFIT PLAN
WHEREAS, Huffy Corporation (the "Sponsor") maintains the Huffy
Corporation Supplemental/Excess Benefit Plan (the "Plan") effective January 1,
1988; and
WHEREAS, the Sponsor desires to amend the Plan;
NOW, THEREFORE, the Sponsor adopts the following amendment to the Plan
effective June 13, 1997:
I. The Plan shall be amended by changing the term "Change of Control" to
read "Change in Control" in each instance in which it appears.
II. Article I of the Plan shall be amended by adding Sections 1.15, 1.16,
1.17 and 1.18 to read as follows:
1.15 "Senior Executive Participant" shall mean a Participant
who is, as of June 13, 1997, or any subsequent date, an officer of
Huffy Corporation, or a president and general manager of a Huffy
Corporation operating division or subsidiary.
1.16 "Vested Benefit" means the portion of a Participant's
Supplemental/Excess Benefit which has become non-forfeitable in the
manner described in Section 6.6.
1.17 "Offset Benefit" shall mean the portion of a Senior
Executive Participant's Supplemental/Excess Benefit which has been
replaced by benefits provided under an Offset Plan, as described in
Article IV.
1.18 "Offset Plan" shall mean any plan or program designated
by the Committee as intended to offset benefits provided under the
Plan.
III. Article III of the Plan shall be amended by restating the first
paragraph of the Article to read as follows:
A Participant's Supplemental/Excess Benefit will equal (i)
$2,500 per year, plus the Accrued Retirement Pension he would have
earned under the Retirement Plan but for the Amended Benefit Formula,
Compensation Limitation and ERISA Limitation; reduced (but not below 0)
by the sum of (ii) the Accrued Retirement Pension he has earned under
the Retirement Plan and (iii) the Participant's Offset Benefit. The
Accrued Retirement Pension attributable to any period of time during
which a Participant failed to accrue benefits under the Retirement Plan
will be calculated in accordance with Exhibit B; the reduction
described in clauses "(ii)" and "(iii)" of the preceding sentence will
apply only to the extent a Participant has actually participated in the
Retirement Plan or received a grant (or, to the extent required by
applicable law, a shareholder-approved grant) under the Offset Plan, as
applicable.
1
<PAGE> 2
IV. Article III of the Plan shall be amended by adding the following
paragraph at the end of the Article:
Upon the occurrence of a Change in Control, the Accrued
Retirement Pension and Supplemental/Excess Benefit of any Senior
Executive Participant shall be calculated by using an amount of
Credited Service which is 36 months greater than the amount of Credited
Service with which the Senior Executive Participant would, but for the
application of this paragraph, have been credited. Any other provision
of this Article III to the contrary notwithstanding, the portion of a
Participant's Supplemental/Excess Benefit which is attributable to the
operation of this paragraph shall be payable under this Plan and shall
not be reduced by the Participant's Purchased Benefit.
V. Article IV of the Plan shall be amended and restated in its entirety as
follows:
ARTICLE IV
----------
OFFSET BENEFIT
--------------
From time to time certain Senior Executive Participants may
receive grants of benefits pursuant to an Offset Plan. Subject to the
approval (to the extent required under applicable law) of the Offset
Plan by the shareholders of the Sponsor, upon receipt of such a grant,
a portion of the Supplemental/Excess Benefit shall be deemed to have
been replaced by the benefits granted pursuant to the Offset Plan. The
rate of such replacement shall be determined at the time of the grant
in accordance with the formula specified in the Offset Plan or the
instrument under which the grant is made to the Senior Executive
Participant.
VI. Article V of the Plan shall be amended in its entirety to read as follows:
ARTICLE V
---------
PAYMENT OF BENEFITS
-------------------
5.1 Time of Payment. Unless a Participant has elected to defer
payment under Section 5.2, payment of the Supplemental/Excess Benefit
shall be made to a Senior Executive Participant as of the first day of
the month following the latest of the dates described in subsections
(a), (b) or, with respect to Richard L. Molen ("Molen") only, (c);
(a) the Senior Executive Participant's Severance
from Service,
(b) the earliest of (i) the date on which the
Participant has reached the Early Retirement Date or Normal
Retirement Date under the Retirement Plan, (ii) the closing
date of a Change in Control, or (iii) the date of the
Participant's death, or
2
<PAGE> 3
(c) with respect only to Molen, the earliest date on
which his Supplemental/Excess Benefit may be payable without
causing his total remuneration from the Sponsor to exceed the
limitations on "excessive employee remuneration" imposed by
Section 162(m) of the Code (or any successor provision).
Provided, however, that this subsection (c) shall be
disregarded in the event of a Change in Control. In the event
that payment of Molen's Supplemental/Excess Benefit is
deferred as a result of the operation of this subsection (c),
Molen shall receive a partial payment of the
Supplemental/Excess Benefit equal to the greatest amount which
would not cause his total remuneration from the Sponsor to
exceed the limitations imposed by Section 162(m) of the Code.
Interest shall accrue on any amount deferred under this
subsection at the rate approved from time to time by the
Company Compensation Committee for voluntary deferrals.
5.2 Form of Payment.
----------------
(a) For any Participant for whom payment of the
Supplemental/Excess Benefit commenced prior to June 13, 1997
or who is not a Senior Executive Participant, payment shall be
made or shall continue to be made under the form of payment in
effect or otherwise applicable as of June 12, 1997.
(b) For any Senior Executive Participant, payment of
the Actuarial Equivalent of the Senior Executive Participant's
Supplemental/Excess Benefit shall be made at the time and in
the optional form of payment elected by the Participant. For
this purpose, optional forms of payment shall include (i) any
form of payment which is permissible under the Retirement
Plan, or (ii) to the extent otherwise permitted under this
Section 5.2, a single lump sum payment.
(c) If a Senior Executive Participant Severs from
Service within two years following a Change in Control and
begins to receive the Supplemental/Excess Benefit on or after
reaching age 58, then in determining the Actuarial Equivalent
of the Senior Executive Participant's Supplemental/Excess
Benefit for the purposes of this Section, amounts payable to
the Senior Executive Participant will not be reduced to
reflect distributions before the Normal Retirement Date, but
will be reduced to reflect distributions in a form other than
the normal form of benefit. For any Senior Executive
Participant not described in the preceding sentence, the
Supplemental/Excess Benefit shall be reduced to an Actuarial
Equivalent (as defined in Exhibit B).
(d) For the purposes of this section 5.2, any
election of an optional form of payment by a Participant shall
become effective on the 180th day after it is received by the
Sponsor. In the event that no election of an optional form of
payment has become effective on the date on which payment of
the Participant's Supplemental/Excess Benefit is scheduled to
commence, a Participant's Supplemental/Excess Benefit shall be
paid in the form of a single lump sum payment. Notwithstanding
any election by a Participant of an optional form of payment,
any Supplemental/Excess Benefit which first becomes payable
subsequent to a Change in Control shall be paid in the form of
a single lump sum payment.
3
<PAGE> 4
(e) If a Participant elects to defer payment of the
Supplemental/Excess Benefit pursuant to the provisions of this
section 5.2, the amount of the Supplemental/Excess Benefit
shall be increased so that the amount payable to the
Participant is the Actuarial Equivalent of the
Supplemental/Excess Benefit which would otherwise have become
payable.
VII. Article VI of the Plan shall be amended by adding the following
sentence to the end of Section 6.6:
Provided, however, that upon the occurrence of a Change in Control, the
Supplemental/Excess Benefit of any Senior Executive Participant shall
be fully vested.
VIII. Exhibit B to the Plan shall be amended by deleting paragraph (c) from
the definition of the term "Actuarial Equivalent" which appears therein
and substituting in its place the following:
(c) For the purpose of calculating lump sum payments
under Article V, the interest rate used to determine the
Actuarial Equivalent as of any date shall be the prevailing
effective annual yield (as determined by the Sponsor) on U.S.
Treasury securities which mature on or as close as reasonably
possible to the Participant's Projected Retirement Date. For
this purpose, a Participant's Projected Retirement Date shall
mean the earlier of (i) the date on which the Participant will
reach the Normal Retirement Date, or (ii) for a Participant
who has reached age 58, the date on which the sum of the
Participant's age and Period of Service equals 85. In the
event that the date of determination precedes the
Participant's Projected Retirement Date by fewer than 90 days,
the interest rate used to determine Actuarial Equivalent shall
be the effective annual yield on 90 day U.S. Treasury
securities. The mortality table used to calculate lump sum
payments under Article V shall be the UP-1984 Mortality Table,
set back three years for joint and survivor beneficiaries, or
such other table as may be designated by the Sponsor from time
to time.
IX. In all other respects, the Plan shall remain unchanged. Provided,
however, that this Amendment and the Plan may be amended and/or
restated, without further action by the Board of Directors of the
Sponsor, as the President or Secretary of the Sponsor deems necessary
to clarify and eliminate inconsistencies in the Plan.
IN WITNESS WHEREOF, the Sponsor has caused this instrument to be
executed as of this 15th day of June, 1997.
HUFFY CORPORATION
By: /s/ Nancy A. Michaud
----------------------------------------
Title: Vice President - General Counsel
------------------------------------
and Secretary
4
<PAGE> 1
Exhibit 10.v
SEVENTH AMENDMENT TO THE
HUFFY CORPORATION SUPPLEMENTAL/EXCESS BENEFIT PLAN
WHEREAS, Huffy Corporation (the "Sponsor") maintains the Huffy
Corporation Supplemental/Excess Benefit Plan (the "Plan") effective January 1,
1998; and
WHEREAS, the Sponsor desires to amend the Plan;
NOW, THEREFORE, the Sponsor adopts the following amendment to the Plan
effective as of December 1, 1997;
I. Article III of the Plan shall be amended by adding the following
paragraph to the end of the Article:
For the purpose of calculating the Supplemental/Excess Benefit
of Participant Richard L. Molen ("Molen"), the Accrued
Retirement Pension, as determined for purposes of clause (i)
of this first paragraph of this Article, shall be determined
as if Molen had remained an Eligible Employee and had
continued to earn Compensation (including regular
compensation, at the rate in effect on December 18, 1997, and
any bonus or incentive compensation which Molen would have
received) and Years of Credited Service until incurring a
Severance from Service on December 31, 1998.
II. In all other respects, the Plan shall remain unchanged.
IN WITNESS WHEREOF, the Sponsor has caused this instrument to be
executed as of this 22nd day of December, 1997.
HUFFY CORPORATION
By: /s/ Nancy A. Michaud
----------------------------------------
Title: Vice President - General Counsel
------------------------------------
and Secretary
<PAGE> 1
Exhibit 10.w
FORM OF RESTRICTED SHARE AGREEMENT
----------------------------------
This Restricted Share Agreement (the "Agreement") is made and effective as of
this 13th day of June, 1997 by and between Huffy Corporation, an Ohio
corporation (the "Sponsor") and _________ (the "Recipient") pursuant to the
terms and conditions contained herein and in the Sponsor's 1998 Restricted
Share Retirement Plan (the "Plan") under the following circumstances:
A. The purpose of the Plan is to work in conjunction with the
Sponsor's Supplemental/Excess Benefit Plan (the "SERP") to
provide certain deferred retirement benefits for key management
employees in the form of the Sponsor's Common Stock granted as
Restricted Shares, thereby encouraging such employees to
increase overall shareholder value.
B. The Compensation Committee of the Board of Directors of the
Sponsor (the "Committee") granted the Recipient an award of
________________ Restricted Shares of the Sponsor's
Common Stock pursuant to the Plan.
NOW, THEREFORE, the parties hereto agree as follows:
1. Restricted Period
-----------------
a. Notwithstanding any other provision of the Plan or the
SERP, the Restricted Shares shall not vest until the last
of the following to occur: (i) receipt of the approval of
the Plan by the Sponsor's shareholders and (ii) when the
Recipient vests in his or her benefits under the SERP.
Unless and until vested, Restricted Shares granted
hereunder may not be sold, margined, assigned,
transferred, pledged or otherwise encumbered by the
Recipient without the prior consent of the Committee.
Notwithstanding the foregoing, the Restricted Shares shall
not vest until the earliest date on which the
Participant's Supplemental/Excess Benefit may be payable
without causing the Participant's total remuneration from
the Sponsor to exceed the limitations on "excessive
employee remuneration" imposed by Section 162(m) of the
Code (or any successor provision). In the event that
payment of a Participant's Supplemental/Excess Benefit is
deferred as a result of the operation of this subsection
(a), a Participant shall receive a partial payment of the
Supplemental/Excess Benefit equal to the greatest amount
which would not cause the Participant's total remuneration
from the Sponsor to exceed the limitations imposed by
Section 162(m) of the Code.
b. Unless a specific grant of Restricted Shares shall have
been approved prior to grant by the Committee within the
meaning of Rule 16b-3(d)(1) of the Securities and Exchange
Act ("SEA"), then, notwithstanding any other provision of
the Plan, the SERP, or this Agreement, the Restricted
Shares which are the subject of such grant shall not vest
for a period of six months after the date of grant.
c. The grant which is the subject of this Agreement was
approved by the Committee
<PAGE> 2
within the meaning of Rule 16b-3(d)(1) of the SEA and,
thus, the six month period required for vesting, as set
forth in Section 1 (b) above, is not applicable.
2. Termination of Employment
-------------------------
If Recipient ceases to be an employee of the Sponsor or a
subsidiary of the Sponsor prior to the vesting of any Restricted
Shares for any cause other than (i) death, (ii) disability,
(iii) retirement under any pension plan for salaried employees,
or (iv) at any time following a Change in Control of the
Sponsor, all Restricted Shares which are not vested shall, upon
such termination of employment, be forfeited and returned to the
Sponsor; provided however, that in the event his or her
employment is terminated at the request of the Sponsor or by
action of the Sponsor, the Committee shall determine that these
Restricted Shares not yet vested in accordance with the last
paragraph of Section 1(a) shall vest immediately on such
termination free of restrictions and shall not be forfeited. If
a Recipient ceases to be an employee of the Sponsor or a
subsidiary of the Sponsor prior to the vesting of any Restricted
Shares by reason of death, disability, retirement under any
pension plan for salaried employees, or following a Change in
Control of the Sponsor, all Restricted Shares then held by him
or her shall immediately vest. The Committee may at any time in
its sole discretion accelerate or waive all or any portion of
the restrictions remaining in respect of the Restricted Shares.
3. Rights as Shareholder
---------------------
a. Recipient is a shareholder of record with respect to the
Restricted Shares as of the effective date hereof and,
subject to the Plan and this Agreement, has all of the
rights of a shareholder with respect to the Restricted
Shares so granted including, without limitation, the right
to vote the Restricted Shares at any meeting of the
shareholders, to receive dividends declared and paid
thereon, if any, and to receive all communications
furnished by the Sponsor to its shareholder. Any dividends
other than cash paid or distributed with respect to such
shares will be distributed to the Recipient, free and
clear of restrictions under the Plan or this Agreement.
b. The certificate representing the Restricted Shares may
bear a legend necessary to reflect the restrictions on
such shares.
4. Withholding Taxes
-----------------
a. Any federal, state or local withholding taxes attributable
to a grant of Restricted Shares which are payable by
Recipient shall be paid to the Sponsor by Recipient at the
time of the grant in cash or, in the form of the surrender
of other shares of Common Stock owned by Recipient or the
withholding of some of the Restricted Shares from the
grant. All such shares so surrendered or withheld shall be
valued at Fair Market Value on the date surrendered or
withheld.
5. General Provisions
-----------------
a. This Agreement constitutes the entire agreement between
the parties and supersedes and cancels any other
agreement, representation or communication, whether oral
or written, between the parties hereto relating to the
transactions
<PAGE> 3
contemplated herein or the subject matter hereof, provided
that this Agreement is subject to the terms of the Plan,
which terms are incorporated herein by reference.
Recipient agrees to be bound to the terms of the Plan. In
the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall
control.
b. All notices and other communications from any party hereto
to any other party hereto shall be sent either by
facsimile with written confirmation following via
first-class mail, or via first-class mail or certified
mail, postage prepaid, to Issuer at its principal offices
at 225 Byers Road, Miamisburg, Ohio 45342, Attention: Vice
President - General Counsel and Secretary and to Recipient
at his or her address as found on the records of the
Sponsor.
c. No term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
d. The headings in this Agreement are for the purposes of
convenience of reference only and shall not be deemed to
constitute a part hereof.
e. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of
Ohio.
f. All capitalized terms not defined herein shall have the
meaning set forth in the Plan.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date
first above written.
RECIPIENT HUFFY CORPORATION (SPONSOR)
By:
--------------------------------
- ---------------------------
Its:
-------------------------------
<PAGE> 1
EXHIBIT 10.ee
SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (the "Agreement") is made and effective this 25th
day of July, 1997 by and between Huffy Corporation, an Ohio corporation (the
"Issuer"), and Don R. Graber (the "Subscriber") pursuant to the terms and
conditions contained herein and in the Issuer's 1988 Stock Option Plan and
Restricted Share Plan ("1988 Plan"), under the following conditions:
A. The Subscriber was granted an award of 90,000 restricted shares of the
Issuer's Common Stock at a purchase price of $1.00 per share, and is
eligible to purchase such restricted shares at the rate of one-third of
total grant on and after July 25, 1997, another one-third of the total
grant on and after July 25, 1998, and the final one-third on and after
July 25, 1999.
B. The Subscriber now wishes to enter into this Agreement to purchase those
30,000 restricted shares available for purchase on and after July 25,
1997.
NOW, THEREFORE, the parties hereto agree as follows:
1. SECURITIES PURCHASED. Issuer hereby agrees to sell and Subscriber agrees
to purchase 30,000 Restricted Shares of the Issuer's Common Stock with
$1.00 par value (the "Restricted Shares") at an aggregate cash purchase
price of $30,000, being $1.00 per share (the "Purchase Price"), payable
upon the terms contained herein.
2. PAYMENT TERMS.
a. The Purchase Price shall be paid in full by the Subscriber on or
before July 25, 2007 (a) by setting off against such Purchase
Price one hundred percent (100%) of the cash dividends payable
with respect to the Restricted Shares (no profit sharing or other
bonuses to which the Subscriber becomes entitled after the date of
subscription shall be set off against the Purchase Price) and (b)
in cash in United States Dollars (including check, bank draft or
money order). The Subscriber shall have the right to prepay all or
any part of the Purchase Price by cash payments to the Issuer at
any time. The Board of Directors may not call for payment of any
unpaid portion of the Purchase Price prior to ten (10) years from
the date of the subscription. No interest will be charged to the
Subscriber on the unpaid balance of the Purchase Price.
b. Each installment of the Purchase Price paid pursuant to this
Agreement shall be credited pro rata among the Restricted Shares
which are the subject of this Agreement, and no portion of the
Restricted Shares shall be deemed fully paid until the Purchase
Price of all of the Restricted Shares which are the subject of
this Agreement is paid in full.
<PAGE> 2
3. DEFAULT.
In case of default in the payment of the Purchase Price, the Issuer
shall, subject to compliance with Section 1701.35 of the Ohio Revised
Code, after thirty (30) days' notice setting forth such default has been
given to the Subscriber by certified mail at the Subscriber's address on
the Issuer's books, release the Restricted Shares from subscription and
treat as retired the shares subject to the subscription which have not
been fully paid. In such event, the Subscriber shall no longer be liable
for the unpaid portion of the Purchase Price and shall receive a refund
of any portion of the Purchase Price paid pursuant to this Agreement
prior to such default, without interest.
4. RESTRICTED PERIOD.
a. The Restricted Shares may only be purchased from July 25, 1997
through July 25, 2007. The "Restricted Period" shall commence on
July 25, 1997 and shall continue until the earlier of July 25,
2007 or payment in full of the Purchase Price. The Restricted
Shares may not be sold, margined, assigned, transferred, pledged
or otherwise encumbered during the Restricted Period.
b. The Subscriber will recognize income at the time such restrictions
lapse in an amount equal to the difference between the fair market
value of the Restricted Shares at the time such restrictions lapse
and the Purchase Price paid by the Subscriber for the Restricted
Shares (including dividends on the Restricted Shares set off
against the Purchase Price), less any amounts of such payments
treated as interest under the imputed interest rules, which rules
treat part of the Purchase Price payments as interest since
interest is not otherwise stated to be due on the deferred
Purchase Price. The federal income tax basis for the shares will
be the amount paid for the shares plus the income recognized.
c. The dividends will be recognized by the Subscriber as income
either when the restrictions on the Restricted Shares lapse or
when, in the case of any default in payment by the Subscriber or
termination of employment of the Subscriber, such dividends
previously set off against the Purchase Price are refunded to the
Subscriber.
5. TERMINATION OF EMPLOYMENT.
a. If the Subscriber ceases to be an employee of the Issuer or a
subsidiary during the Restricted Period for any cause other than
(i) death, (ii) disability, (iii) retirement under any pension
plan for salaried employees, or (iv) within three (3) months
following a Change in Control of the Company (as defined in the
1988 Plan), all Restricted Shares which are subject to the
restrictions set forth in Section 4(a) shall, upon such
termination of employment, be forfeited and returned to the
Issuer. If a Subscriber ceases to be an employee of the Issuer or
a subsidiary during the Restricted Period by reason of death,
disability, retirement under any pension plan for salaried
employees, or within three (3) months following a Change in
Control of the Issuer (as defined in the 1988 Plan), the
restrictions set forth in Section 4(a) shall terminate. The
Compensation Committee of the Issuer's Board of Directors may at
any time and in its sole discretion accelerate or waive the
restrictions remaining in respect of the Restricted Shares.
-2-
<PAGE> 3
b. Upon termination of employment of Subscriber for any reason
whatsoever, including retirement or death, the Subscriber or his
legal representative may elect, within three (3) months after the
happening of such event, to pay the entire balance due upon the
Purchase Price of the Restricted Shares which are freed of
restrictions and not forfeited pursuant to the previous paragraph,
and thereupon receive delivery of the stock certificate. If such
payment shall not be made within such period, the Company will
treat the failure to pay as a default in payment of the Purchase
Price as provided in Section 3 of this Agreement.
6. RIGHTS AS SHAREHOLDER.
The Subscriber will become a shareholder of record as of the date set
forth above and shall have the right to vote the Restricted Shares at any
meeting of the Issuer's shareholders, to receive dividends declared and
paid thereon, if any, and to receive all communications furnished by the
Issuer to its shareholders. All cash dividends payable with respect to
the Restricted Shares will be credited to and applied against the unpaid
balance of the Purchase Price.
7. GENERAL PROVISIONS.
a. This Agreement constitutes the entire agreement between the
parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated
herein or the subject matter hereof.
b. All notices and other communications from any party hereto to any
other party hereto shall be sent either by facsimile with written
confirmation following via first-class mail, or via first-class
mail or certified mail, postage prepaid, to Issuer at its
principal offices at 225 Byers Road, Miamisburg, Ohio 45342,
Attention: Vice President General Counsel and Secretary and to
Subscriber at his address as found on the records of the Issuer.
c. No term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought.
d. The headings in this Agreement are for the purposes of convenience
of reference only and shall not be deemed to constitute a part
hereof.
e. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Ohio.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date
first above written.
SUBSCRIBER HUFFY CORPORATION (ISSUER)
/s/ Don R. Graber By: /s/ Nancy A. Michaud
- ----------------------------- ---------------------------------
Don R. Graber Its: Vice President - General Counsel
and Secretary
-3-
<PAGE> 1
Exhibit 13
Huffy Corporation
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data)
December 31, 1997 1996
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,142 $ 2,048
Receivables:
Trade 107,269 77,463
Taxes and other 5,150 5,149
-------- --------
112,419 82,612
Less allowance for doubtful accounts 2,462 1,437
-------- --------
Net receivables 109,957 81,175
Inventories 81,692 54,233
Deferred federal income taxes 13,576 8,666
Prepaid expenses 5,489 5,727
Net assets of discontinued operations -- 50,776
-------- --------
Total current assets 212,856 202,625
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, AT COST:
Land and land improvements 1,502 1,518
Buildings and improvements 36,350 37,013
Machinery and equipment 133,276 121,259
Office furniture, fixtures, and equipment 24,585 23,117
Leasehold improvements 3,478 3,189
Construction in progress 7,533 7,640
-------- --------
206,724 193,736
Less accumulated depreciation and amortization 127,258 114,846
-------- --------
Net property, plant, and equipment 79,466 78,890
OTHER ASSETS:
Excess of cost over net assets acquired, net of
accumulated amortization of $3,921 in 1997
and $3,453 in 1996 21,355 13,556
Deferred federal income taxes 4,773 8,085
Other 5,043 5,111
-------- --------
$323,493 $308,267
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 2
<TABLE>
<CAPTION>
December 31, 1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable $ 43,000 $ 38,910
Current installments of long-term obligations 7,786 7,593
Accounts payable 40,280 24,917
Accrued expenses:
Salaries, wages, and other compensation 14,849 16,065
Insurance 11,216 14,011
Other $ 15,299 $ 9,384
--------- ---------
Total accrued expenses 41,364 39,460
Other current liabilities $ 8,060 $ 2,647
--------- ---------
Total current liabilities $ 140,490 $ 113,527
--------- ---------
Long-term obligations, less current installments 36,184 43,897
Pension liability 6,791 8,850
Postretirement benefits other than pensions 17,300 16,826
Other liabilities $ 9,889 $ 9,195
--------- ---------
Total liabilities $ 210,654 $ 192,295
--------- ---------
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 16,475,114
shares in 1997 and 16,411,343 shares in 1996 16,475 16,411
Additional paid-in capital 63,885 62,488
Retained earnings 87,246 81,436
Minimum pension liability adjustment (3,894) (4,028)
Cumulative translation adjustment (1,050) (563)
--------- ---------
162,662 155,744
Less cost of 3,757,408 treasury shares in 1997
and 3,038,396 in 1996 49,823 39,772
--------- ---------
Total shareholders' equity 112,839 115,972
--------- ---------
$ 323,493 $ 308,267
========= =========
</TABLE>
<PAGE> 3
Huffy Corporation
CONSOLIDATED STATEMENTS OF OPERATION
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Net sales $ 694,490 $ 579,670 $ 572,454
Cost of sales $ 581,649 $ 484,782 $ 497,601
------------ ------------ ------------
Gross profit 112,841 94,888 74,853
Selling, general, and administrative expenses 91,838 80,058 76,722
Restructuring costs $ -- $ -- $ 5,378
------------ ------------ ------------
Operating income (loss) 21,003 14,830 (7,247)
Other expense (income)
Interest expense 5,725 5,873 6,615
Interest income (211) (82) (90)
Other $ 994 $ 481) $ 102
------------ ------------ ------------
$ 6,508 $ 5,310 $ 6,627
------------ ------------ ------------
Earnings (loss) before income taxes 14,495 9,520 (13,874)
Income tax expense (benefit) $ 4,066 $ 2,596 $ (4,359)
------------ ------------ ------------
Earnings (loss) from continuing operations $ 10,429 $ 6,924 $ (9,515)
------------ ------------ ------------
Discontinued operations:
Loss from discontinued operations, net of
income tax benefit of $458 in 1997,
$202 in 1996, and $223 in 1995 $ (813) $ (467) $ (942)
Gain on disposal of discontinued operations,
net of income tax of $4,490 in 1997 $ 559 $ -- $ --
------------ ------------ ------------
Net earnings (loss) $ 10,175 $ 6,457 $ (10,457)
------------ ------------ ------------
EARNINGS (LOSS) PER COMMON SHARE:
Basic
Weighted average number of common shares 12,894,600 13,449,143 13,422,152
Earnings (loss) from continuing operations $ .81 $ .51 $ (.71)
Loss from discontinued operations (.02) (.03) (.07)
------------ ------------ ------------
Net earnings (loss) per common share $ .79 $ .48 $ (.78)
------------ ------------ ------------
Diluted
Weighted average number of common shares
and common stock equivalents 13,062,174 13,577,862 13,532,630
Earnings (loss) from continuing operations $ .80 $ .51 $ (.70)
Loss from discontinued operations $ (.02) $ (.03) $ (.07)
------------ ------------ ------------
Net earnings (loss) per common share $ .78 $ .48 $ (.77)
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
Huffy Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands)
Years Ended December 31, 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings (loss) from continuing operations $ 010,429 $ (06,924 $ (9,515)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Restructuring credits, net of payments -- -- (203)
Depreciation and amortization 17,666 18,417 18,382
Loss on sale of property, plant, and equipment 246 14 428
Deferred federal income tax expense (benefit) (1,671) 1,736 (689)
Increase (decrease) in cash resulting from changes in:
Receivables, net (20,699) (16,492) 22,820
Inventories (26,524) 114 2,925
Prepaid expenses 435 (965) 321
Other assets (2,098) 283 (509)
Accounts payable 15,363 (7,832) (4,328)
Accrued expenses 1,975 (854) (5,263)
Other current liabilities 5,413 (1,697) 2,439
Postretirement benefits other than pensions 474 610 734
Other long-term liabilities 694 2,476 --
Other $ (487) $ 50 $ 34
--------- --------- --------
Net cash provided by continuing operating activities $ 1,216 $ (02,784 $ 27,576
--------- --------- --------
Discontinued operations:
Gain on disposal of discontinued operations 559 -- --
Loss from discontinued operations (813) (467) (942)
Items from discontinued operations 1,516 4,501 4,024
Cash provided by (used in) discontinued operations $ 49,260 $ (12,474) $ (2,760)
--------- --------- --------
Net cash provided by (used in) discontinued
operating activities $ 50,522 $ (8,440) $ 322
--------- --------- --------
Net cash provided by (used in) operating activities $ 51,738 $ (5,656) $,27,898
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,493) (14,684) (21,232)
Proceeds from sale of property, plant, and equipment $ 294 $ 19 $ 31
Acquisitions of businesses $ (17,989) $ -- $ --
--------- --------- --------
Net cash used in investing activities $ (35,188) $ (14,665) $ (21,201)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 4,090 33,160 5,750
Issuance of long-term obligations 96 94 150
Reduction of long-term obligations (7,616) (7,525) (5,140)
Issuance of common shares 1,461 2,042 536
Purchase of treasury shares (10,051) (3,318) (2,447)
Dividends paid $ (4,436) $ (4,581) $ (4,573)
--------- --------- --------
Net cash provided by (used in) financing activities $ (16,456) $ (19,872 $ (5,724)
--------- --------- --------
Net change in cash and cash equivalents 94 (449) 973
Cash and cash equivalents:
Beginning of year $ 2,048 $ 2,497 $ 1,524
--------- --------- --------
End of year $ 2,142 $ 2,048 $ (02,497
--------- --------- --------
Cash paid (refunded) during the year for:
Interest $ 6,744 $ 7,385 $ (08,548
Income taxes 6,042 (3,131) (2,415)
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per 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, 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)
Net earnings 10,175
Issuance of 63,771 shares in
connection with common
stock plans 64 1,397
Common dividends $.34
per share (4,365)
Purchase of 783,500
treasury shares (10,051)
Minimum pension liability
adjustment 134
Foreign currency
translation adjustment (487)
------- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997 $16,475 $63,885 $87,246 $(3,894) $(1,050) $(49,823)
======= ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
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] Reclassification -- The accompanying consolidated financial statements
and notes for 1996 and 1995 have been reclassified to identify separately the
earnings, net assets, and cash flows of the Company's discontinued juvenile
products business.
[c] Cash and Cash Equivalents -- Cash equivalents consist principally of
short-term money market instruments with original maturities of three months or
less.
[d] 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, 1997.
[e] 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. Lawn and garden tools inventories are valued on the
first-in, first-out (FIFO) method. At December 31, 1997 and 1996, 60% and 49%,
respectively, of the Company's inventories were valued using the LIFO method.
[f] 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%
[g] Amortization of Intangibles -- The excess of cost over net assets
acquired is amortized on a straight-line basis over fifteen to 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.
[h] 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 (6).
[i] Earnings (Loss) Per Common Share -- Effective December 31, 1997, the
Company adopted SFAS No. 128 "Earnings Per Share" which simplifies the standards
for computing earnings per share. Quarterly earnings per share have been
restated to reflect the adoption, however, there was no material impact on the
Company's previously reported earnings per share. Earnings (loss) per share of
common stock is based upon the weighted average number of shares of common stock
outstanding during the year. Diluted earnings (loss) per share is computed based
on the weighted average number of shares of common stock and common stock
equivalents outstanding.
[j] 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.
[k] 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.
[l] 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-
23
<PAGE> 7
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.
[2] ACQUISITIONS
In 1997, the Company made several acquisitions to add product lines to
current businesses. In December, the Company acquired the assets of Royce Union
Bicycle Company, Inc. which holds a leading market position in the growing
sporting goods distribution channel. In July, the Company purchased the business
and assets of Sure Shot International, Inc. and Hydra-Rib, Inc. which produce
basketball units for institutional and in-arena use. The financial position and
earnings for these companies were immaterial to the Company's consolidated
financial statements.
[3] DISCONTINUED OPERATIONS
On April 21, 1997, the Company sold the assets of its Denver-based juvenile
products business, Gerry Baby Products Company, for $73 million to Evenflo
Company, Inc. The results of Gerry Baby Products Company have been classified as
discontinued operations for all periods presented in the Consolidated Statements
of Operations and Consolidated Statements of Cash Flows. The assets and
liabilities of discontinued operations at December 31, 1996 have been classified
in the Consolidated Balance Sheets as "Net assets of discontinued operations."
Summarized balance sheet data for discontinued operations is as follows:
<TABLE>
<CAPTION>
1996
<S> <C>
Current assets $34,301
Property, plant & equipment, net 10,869
Other assets 13,364
-------
Total assets 58,534
Current liabilities 7,758
-------
Net assets $50,776
=======
</TABLE>
[4] 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.
In 1995 a restructure credit of $500 was recorded to reflect the revised cost
estimates for certain items included in the 1993 lawn and garden tools
restructuring. All activity related to the restructure of the Company's lawn and
garden tools business was completed as of December 31, 1995.
[5] INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Finished goods $43,518 $31,370
Work-in-process 13,699 8,467
Raw materials and supplies $30,505 $22,391
------- -------
87,722 62,228
Excess of FIFO cost over LIFO inventory
value $(6,030) $(7,995)
------- -------
$81,692 $54,233
======= =======
</TABLE>
[6] LINES OF CREDIT AND LONG-TERM OBLIGATIONS
During 1997, 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, 1999. The Company also had $70,000 in uncommitted lines of credit
on a no fee basis, of which $43,000 was outstanding at December 31, 1997.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Unsecured notes payable:
Average borrowings $16,152 $23,246
Maximum at any month end 70,520 41,430
Weighted average rate 5.99% 4.77%
</TABLE>
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
Unsecured notes payable:
<S> <C> <C> <C>
9.62% due serially through 2000 $15,000 $18,000
9.81% due serially through 1998 4,400 8,400
8.23% Industrial Development Bonds
due serially from 2000 through 2014 20,000 20,000
Other $ 4,570 $05,090
------- -------
43,970 51,490
Less current installments $ 7,786 $77,593
------- -------
$36,184 $43,897
======= =======
</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 1999 through 2002 are approximately $6,406, $7,677, $1,678, and $1,697,
respectively.
The estimated fair value of the Company's long-term obligations at December
31, 1997 and 1996 was approximately $47,225 and $54,504, 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.
<PAGE> 8
[7] 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.
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.
[8] COMMON STOCK AND COMMON STOCK PLANS
At December 31, 1997, the Company has three 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
$432, $246, and $0 for 1997, 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:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C> <C>
Net earnings (loss) As Reported $10,175 $6,457 $(10,457)
Pro Forma 9,741 6,228 (10,523)
Net earnings (loss)
per common share As Reported $ .78 $ .48 $ (.77)
Pro Forma .75 .46 (.77)
</TABLE>
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.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1997, 1996, and 1995, changes during the years ended on those dates
is presented below:
<TABLE>
<CAPTION>
1997 1997 1996 1996 1995 1995
NUMBER WEIGHTED-AVERAGE Number Weighted-Average Number Weighted-Average
OF SHARES EXERCISE PRICE of Shares Exercise Price of Shares Exercise Price
1988 PLAN
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 1,278,647 $ 12.42 957,156 $ 12.67 816,404 $ 13.58
Granted at fair value 272,399 14.34 433,409 13.11 336,080 10.98
Granted below fair value 0 0.00 90,000 1.00 -- --
Forfeited (168,510) 13.66 (44,503) 13.99 (156,719) 14.85
Exercised (55,221) $ 19.76 (157,415) $ 18.82 (38,609) $,18.56
---------- ---------- ---------- ---------- ------- ----------
Outstanding at December 31 1,327,315 $ 12.75 1,278,647 $ 12.42 957,156 $ 12.67
---------- ---------- ---------- ---------- ------- ----------
Exercisable at December 31 422,962 $ 13.51 302,695 $ 14.32 377,233 $ 12.04
---------- ---------- ---------- ---------- ------- ----------
Weighted-average fair value
of options granted during
the year;
Issued at fair value on
grant date $ 04.42 $ 04.21 $ 03.34
Issued below fair value on
grant date -- $ 09.02 --
1987 DIRECTOR STOCK OPTION PLAN
Outstanding at January 1 188,882 $ 12.44 184,877 $ 12.42 179,727 $ 12.75
Granted at fair value 50,625 13.00 0 -- 0 --
Granted below fair value 4,728 1.00 7,241 1.00 6,293 1.00
Forfeited 0 -- 0 -- 0 --
Exercised .(417) $ 1.00 (3,236) $ .80 (1,143) 1.00
---------- ---------- ---------- ---------- ------- ----------
Outstanding at December 31 243,818 $ 12.35 188,882 $ 12.44 184,877 $ 12.42
---------- ---------- ---------- ---------- ------- ----------
Exercisable at December 31 181,224 $ 12.92 175,348 $ 13.32 111,999 $ 10.67
========== ========== ========== ========== ======= ==========
Weighted-average fair value of
options granted during the year -- $ 10.56 $ 12.51
</TABLE>
25
<PAGE> 9
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------- ----------------------------
Average Weighted Weighted
Range of NUMBER Remaining Average NUMBER Average
Exercise OUTSTANDING Contractual Exercise EXERCISABLE Exercise
Price AT 12/31/97 Life Price AT 12/31/97 Price
<S> <C> <C> <C> <C> <C>
1988 PLAN
$000 to 1 90,000 8.6 Years $01.00 30,000 $01.00
7 to 9 12,497 1.0 Years 8.75 12,497 8.75
10 to 12 372,382 7.5 Years 11.03 119,561 10.94
13 to 16 734,221 8.6 Years 14.10 162,338 14.50
019 to 20 0,118,215 5.6 Years 019.13 098,566 019.40
--------- --------- --------- ------ ------- ------
$00 to 20 1,327,315 8.0 Years $12.75 422,962 $13.51
1987 DIRECTOR STOCK OPTION PLAN
$000 to 1 35,693 6.8 Years $00.99 23,724 $00.98
11 to 18 208,125 4.8 Years 014.30 157,500 014.72
--------- --------- --------- ------ ------- ------
$00 to 18 243,818 5.1 Years $12.35 181,224 $12.92
</TABLE>
The Company has two 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 plan, 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 1997, 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.
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 8,133 shares, 37,627 shares, and 7,350
shares to employees in 1997, 1996, and 1995, respectively. At December 31, 1997,
rights to purchase 44,714 shares were outstanding under this plan at an exercise
price of $14.12 per share and 550,298 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 1997, 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 5.7% for 1997 grants, 6.2% for 1996
grants and 5.6% for 1995 grants, and expected volatility of 30.0% for all years.
The weighted-average fair value of those purchase rights granted in 1997, 1996,
and 1995 were $1.85, $2.41, and $2.28, respectively.
[9] EARNINGS PER SHARE
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(Numerator) (Denominator) Amount
1997
BASIC EPS
<S> <C> <C> <C>
Net earnings available to
common shareholders $10,175 12,894,600 $.79
EFFECT OF DILUTIVE SECURITIES
Stock options -- 167,574
------- -----------
DILUTED EPS
Earnings available to common
shareholders and assumed
conversions $10,175 13,062,174 $.78
------- ----------- ----
Income Shares Per Share
(Numerator) (Denominator) Amount
1996
BASIC EPS
Net earnings available to
common shareholders $06,457 13,449,143 $.48
EFFECT OF DILUTIVE
SECURITIES
Stock options $ -- 128,719
------- ----------- ----
DILUTED EPS
Earnings available to common
shareholders and assumed
conversions $ 6,457 13,577,862 $.48
======= =========== ====
</TABLE>
26
<PAGE> 10
Income Shares Per Share
(Numerator) (Denominator) Amount
1995
<TABLE>
<CAPTION>
BASIC EPS
<S> <C> <C> <C>
Net loss available to
common shareholders $(10,457) 13,422,152 ($.78)
EFFECT OF DILUTIVE SECURITIES
Stock options $ -- 110,478
-------- ----------
DILUTED EPS
Earnings available to common
shareholders and assumed
conversions $(10,457) 13,532,630 ($.77)
======== ========== =====
</TABLE>
Options to purchase 224,785, 812,222, and 502,644 shares
of common stock were outstanding in 1997, 1996, and 1995, respectively, but were
not included in the computation of diluted EPS because the options' exercise
price was greater than the average market price of the common shares.
[10] 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 $7,523, $6,308, and
$5,911 in 1997, 1996, and 1995, respectively.
Future minimum rental commitments under non-cancellable operating leases at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
AMOUNT
<S> <C>
1998 $05,746
1999 5,126
2000 4,436
2001 3,329
2002 2,191
Thereafter $12,430
-------
Total minimum payments $33,258
=======
</TABLE>
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.
[11] 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 PRPs 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.
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
$5,100 and $3,200 for 1997 and 1996, respectively. This accrual has not been
discounted, and 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.
[12] 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 amount
of minimum pension liability of $6,791 at
27
<PAGE> 11
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheets at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1997 1996 1996
ASSETS EXCEED ACCUMULATED Assets Exceed Accumulated
ACCUMULATED BENEFITS EXCEED Accumulated Benefits Exceed
BENEFITS ASSETS Benefits Assets
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
<S> <C> <C> <C> <C>
Vested benefit obligation $31,649 $(47,110 $30,119 $41,378
------- -------- ------- -------
Accumulated benefit obligation $33,995 $(51,929 $32,838 $(45,727
------- -------- ------- -------
Projected benefit obligation for service rendered to date 39,184 54,618 39,649 47,725
Plan assets at fair value $41,716 $(43,740 $38,831 $(34,738
------- -------- ------- -------
Plan assets in excess of (less than) projected benefit
obligation 2,532 (10,878) (818) (12,987)
Unamortized transition asset (1,654) (250) (1,869) (380)
Unrecognized prior service cost (383) 1,667 (363) 3,231
Unrecognized net loss 1,797 7,736 3,922 7,929
Adjustment required to recognize minimum liability $ -- $ (6,791) $ -- $ (8,850)
------- -------- ------- -------
Pension costs prepaid (accrued) at year end $ 2,292 $ (8,516) $ 872 $(11,057)
======= ======== ======= ========
</TABLE>
December 31, 1997 and $8,850 at December 31, 1996, 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 credit to
equity of $134 in 1997 and a charge to equity of $781 in 1996.
Net pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost benefits earned
during the period $ (2,254) $(2,738) $(2,506)
Interest cost on projected
benefit obligation 6,478 6,248 5,292
Actual return on plan assets (12,218) (9,100) (9,066)
Net amortization and deferral $ 5,405 $ 3,835 $(4,907
--------- ------- -------
Net periodic pension cost $ 1,919 $ 3,721 $(3,639)
========= ======= =======
Actuarial assumptions:
Weighted average discount rate 7.5% 7.5% 7.25%
Rate of return on assets 9.5% 9.5% 9.5%
Rate of increase in compensation 5.0% 5.0% 5.0%
</TABLE>
In connection with the sale of Gerry Baby Products Company, future benefits
were suspended for its employees under one of the Company's defined benefit
plans and a curtailment gain of $851 was included in the gain on disposal of
discontinued operations.
The Company's Celina, Ohio facility participates in a multiemployer defined
benefit plan. Contributions to the multiemployer plan totaled $1,025 in 1997 and
$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 $807, $843, and $755 in 1997, 1996, and 1995,
respectively.
[13] 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, 1997 by $1,736 and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the year ended December 31, 1997 by $205.
The following table presents the plans' funded status reconciled with amounts
recognized in the Company's Consolidated Balance Sheets at December 31, 1997 and
1996 and the net periodic postretirement benefit cost recorded in the Company's
1997 and 1996 Consolidated Statements of Operations:
28
<PAGE> 12
<TABLE>
<CAPTION>
HEALTH CARE AND DEFERRED
LIFE INSURANCE COMPENSATION
PLANS PLAN TOTAL
1997
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
<S> <C> <C> <C>
Retirees $ 6,045 $ (6,419 $ 12,464
Fully eligible active plan
participants 1,103 78 1,181
Other active plan participants $ 6,045 $ 0 $ 06,045
-------- -------- --------
13,193 6,497 19,690
UNRECOGNIZED NET GAIN (LOSS) $ 726 $ (3,116) (2,390)
-------- -------- --------
Postretirement benefits
other than pensions accrued
at year end $ 13,919 $ 3,381 $ 17,300
======== ======== ========
NET PERIODIC POSTRETIREMENT BENEFIT
COST:
Service cost $ 469 $ -- $ 469
Interest cost 932 333 1,265
Net amortization (3) -- $ (3)
-------- -------- --------
Net periodic postretirement
benefit cost $ 1,398 $ 333 $ 1,731
======== ======== ========
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate
used to determine postretirement
benefit obligation 7.25% 7.25%
</TABLE>
<TABLE>
<CAPTION>
Health Care and Deferred
Life Insurance Compensation
Plans Plan Total
1996
<S> <C> <C> <C>
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 -- $ 55,653
-------- -------- --------
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 $ 00,494 $ -- $ 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%
</TABLE>
[14] INCOME TAXES
The provisions for federal and state income taxes attributable to income from
continuing operations consist of:
<TABLE>
<CAPTION>
1997 1996 1995
Current tax expense (benefit):
<S> <C> <C> <C>
Federal $ 5,047 $ 2,050 $ (3,548)
State 102 (141) (53)
Foreign $ 23 $,0045 $(00,--
-------- -------- --------
5,172 1,954 (3,601)
Deferred tax expense (benefit) $ (1,106) $,0642 $ (758)
-------- -------- --------
Total tax expense (benefit) $ 4,066 $ 2,596 $ (4,359)
======== ======== ========
</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
1993.
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, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
DEFERRED TAX ASSETS:
<S> <C> <C>
Allowance for doubtful accounts $ 842 $ 584
Inventory obsolescence reserve 909 867
Workers' compensation 1,946 2,000
Product liability 1,624 2,053
Deferred compensation 1,622 1,658
Accrued vacation 1,055 1,148
Pension liability 2,626 3,060
Postretirement benefits other
than pensions 6,055 5,889
Environmental reserves 1,797 1,123
Severance reserves 624 721
Other liabilities and reserves $ 3,076 $ 1,798
------- -------
Total deferred tax assets $22,176 $20,901
------- -------
DEFERRED TAX LIABILITIES:
Property, plant, and equipment 2,977 3,650
Other assets $ 850 $ 500
Total deferred tax liabilities $ 3,827 $ 4,150
------- -------
Net deferred tax asset $18,349 $16,751
======= =======
</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, attributable to continuing operations.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Earnings (loss) before income
taxes from continuing operations $14,495 $9,520 $(13,874)
------- ------ --------
Tax provision computed at
statutory rate $ 4,928 $3,237 $(4,856)
Increase (reduction) in taxes
due to:
Impact of foreign losses for
which a current tax benefit
is not available (237) (54) 220
State income taxes (net of
federal tax benefit) 67 (48) (19)
Goodwill amortization 136 136 140
Foreign sales corporation (182) (210) (180)
Insurance proceeds (320) -- --
Non-deductible meals and
entertainment 385 353 310
Tax credits (138) (132) --
Refunds of prior year
income taxes (531) (545) --
Miscellaneous (42) (141) 26
------- ------ -------
Actual tax provision $04,066 $2,596 $(4,359)
======= ====== =======
</TABLE>
29
<PAGE> 13
[15] BUSINESS SEGMENTS
Huffy Corporation is a diversified manufacturer and supplier of bicycles,
basketball backboards, lawn and garden tools, and inventory, assembly, and
supplier services. Bicycles and basketball backboards 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. The Company has
classified its operations into the following business segments:
o CONSUMER PRODUCTS -- bicycles, basketball backboards and related products,
and lawn and garden tools.
o SERVICES FOR RETAIL -- in-store assembly, repair, and display services as
well as inventory counting services.
A summary of the Company's 1997, 1996, and 1995 operations by business
segment is as follows:
<TABLE>
<CAPTION>
EARNINGS (LOSS) DEPRECIATION
BEFORE INCOME IDENTIFIABLE AND CAPITAL
SALES TAXES ASSETS AMORTIZATION EXPENDITURES
1997
<S> <C> <C> <C> <C> <C>
Consumer Products $514,286 $(,16,239 $253,727 $13,333 $13,149
Services for Retail 181,556 9,101 44,257 3,924 4,265
Eliminations (1,352)
Interest expense (5,725)
Interest income 211
General corporate 581,251 (5,331) 25,509 409 79
-------- --------- -------- ------- -------
$694,490 $ 14,495 $323,493 $17,666 $17,493
======== ========= ======== ======= =======
1996
Consumer Products $425,994 $,13,409 $194,270 $13,859 $10,829
Services for Retail 153,933 7,251 39,775 4,132 3,725
Eliminations (257)
Interest expense (5,873)
Interest income 82
General corporate (5,349) 23,446 426 130
-------- --------- -------- ------- -------
$579,670 $ 9,520 $257,491 $18,417 $14,684
======== ========= ======== ======= =======
1995
Consumer Products $429,332 $..(6,216)[1] $186,592 $14,101 $17,149
Services for Retail 143,587 4,819 37,060 3,766 3,997
Eliminations (465)
Interest expense (6,615)
Interest income 90
General corporate (5,952)[1] 22,583 515 086
-------- --------- -------- ------- -------
$572,454 $ (13,874) $246,235 $18,382 $21,232
======== ========= ======== ======= =======
</TABLE>
[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.
In 1997, two customers individually accounted for 27% and 11% of total
consolidated net sales. In 1996, two customers individually accounted for 16%
and 13% of total consolidated net sales. In 1995, two customers individually
accounted for 13% and 12% of total consolidated net sales.
In June 1997, the FASB issued No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments. The Company has not yet
determined what changes, if any, will be required to its industry segment
disclosure.
30
<PAGE> 14
[16] QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total[1]
1997
<S> <C> <C> <C> <C> <C>
Net sales $ 171,927 $ 213,101 $ 149,996 $ 159,466 $ 694,490
Gross profit 27,422 37,457 23,465 24,497 112,841
Earnings from continuing operations 2,944 6,230 997 258 10,429
Discontinued operations 462 (734) 8 -- (254)
------------ --------- --------- ------------ ------------
Net earnings 3,406 5,496 1,015 258 10,175
EARNINGS PER COMMON SHARE:
Basic
Earnings from continuing operations $ .22 $ .49 $ .08 $ .02 $ .81
Discontinued operations (.04) -- (.06) -- (.02)
------------ --------- --------- ------------ ------------
Net earnings per common share $ .26 $ .43 $ .08 $ .02 $ .79
Diluted
Earnings from continuing operations $ .22 $ .49 $ .08 $ .02 $ .80
Discontinued operations .03 (.06) -- -- (.02)
------------ --------- --------- ------------ ------------
Net earnings per common share $ .25 $ 43 $ .08 $ .02 $ .78
1996
Net sales $ 151,934 $ 166,452 $ 120,822 $ 140,462 $ 579,670
Gross profit 28,144 31,218 19,658 15,868 94,888
Earnings from continuing operations 2,093 4,429 205 197 6,924
Discontinued operations 827 169 (463) (1,000) (467)
------------ --------- --------- ------------ ------------
Net earnings (loss) 2,920 4,598 (258) (803) 6,457
EARNINGS PER COMMON SHARE:
Basic
Earnings from continuing operations $ .16 $ .33 $ .02 $ .01 $ .51
Discontinued operations 06 .01 (.04) (.07) (.03)
------------ --------- --------- ------------ ------------
Net earnings (loss) per common share $ .22 $ .34 $ (.02) $ (.06) $ .48
Diluted
Earnings from continuing operations $ .16 $ .33 $ .02 $ .01 $ .51
Discontinued operations .06 .01 (.04) (.07) (.03)
------------ --------- --------- ------------ ------------
Net earnings (loss) per common share $ .22 $ .34 $ (.02) $ (.06) $ .48
</TABLE>
[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.
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 Corporation
Common Stock during the years ended December 31, 1997 and 1996 were as follows:
Year ended December 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK DIVIDENDS
PRICE RANGE DECLARED
QUARTER HIGH LOW
<S> <C> <C> <C> <C> <C>
FIRST $14-7/8 $12-3/4 $.085
SECOND 14-3/4 12-3/4 .085
THIRD 16-1/2 14-1/8 .085
FOURTH 16-15/16 13-1/16 $.085
-----
TOTAL $.340
======
</TABLE>
Year ended December 31, 1996
<TABLE>
<CAPTION>
Common Stock Dividends
Price Range Declared
Quarter High Low
<S> <C> <C> <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>
As of December 31, 1997 there were 12,717,706 shares of Huffy Corporation
Common Stock outstanding and there were 3,127 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, 1997 totaled 5,698,800 shares. The average number of common shares
outstanding during this period was approximately 12,895,000 shares.
31
<PAGE> 1
Exhibit 19
Schedule of certain documents substantially
identical to filed documents with parties thereto
and other material differing details
19.a Parties to Severence Pay Agreement, in substantially the form set forth
in Exhibit 10.e to Form 10-K for the fiscal year ended December 31,
1997:
Stanley H. Davis
Paul R. D'Aloia
Thomas A. Frederick
Carol A. Gebhart
Don R. Graber
Timothy G. Howard
Nancy A. Michaud
Christopher W. Snyder
John M. Stoner
I. Edward Tonkon II
19.b Parties to Restricted Share Agreement in substantially the form set
forth in Exhibit 10.w to Form-K for the fiscal year ended December 31,
1997:
Paul R. D'Aloia
Thomas A. Frederick
Carol A. Gebhart
Don R. Graber
Timothy G. Howard
Nancy A. Michaud
Richard L. Molen
Christopher W. Snyder
John M. Stoner
I. Edward Tonkon II
Pamela J. Whipps
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,142
<SECURITIES> 0
<RECEIVABLES> 112,419
<ALLOWANCES> (2,462)
<INVENTORY> 81,692
<CURRENT-ASSETS> 212,856
<PP&E> 206,724
<DEPRECIATION> (127,258)
<TOTAL-ASSETS> 323,493
<CURRENT-LIABILITIES> 140,490
<BONDS> 36,184
0
0
<COMMON> 16,475
<OTHER-SE> 96,364
<TOTAL-LIABILITY-AND-EQUITY> 323,493
<SALES> 694,490
<TOTAL-REVENUES> 694,490
<CGS> 581,649
<TOTAL-COSTS> 673,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,025
<INTEREST-EXPENSE> 5,725
<INCOME-PRETAX> 14,495
<INCOME-TAX> 4,066
<INCOME-CONTINUING> 10,429
<DISCONTINUED> (254)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,175
<EPS-PRIMARY> .79
<EPS-DILUTED> .78
</TABLE>
