Huffy Posts Q1 Loss as SGandA Increases Outpace Sales Gains

Huffy Corporation announced a loss for the first quarter of $1.4 million or $0.09 per common share, compared to earnings of $0.6 million or $0.06 per common share for the first quarter of 2002.

Net sales for the first quarter of 2003 increased by 34% to $94.6 million when compared to sales of $70.4 million for the first quarter of 2002. Gross margins for the first quarter increased by 3.9 percentage points to 21.0% when compared to the 17.1% gross margin reported for the first quarter of 2002. Selling, general and administrative expense as a percentage of sales increased 6.5 percentage points to 21.5% compared to 15.0% in the first quarter of 2002.

Don R. Graber, Chairman, President and CEO, commented, “We are pleased that results for the quarter were in line with previous guidance. The first quarter is traditionally our lowest sales quarter, plus this year, we made the decision to increase our investment in brand development by enhancing advertising, trade show participation and new product promotional spending. We believe this investment in brand development will provide tangible benefits over the balance of the year.”

Mr. Graber continued, “The significant sales growth during the quarter was gratifying given the continued difficult economic and retail environment. Both the Gen-X and McCalla acquisitions made substantial contributions to sales growth. Additionally, we were pleased with our margin improvement in the quarter and expect that trend to continue throughout 2003. We kept our expenses under control for the quarter, excluding the previously mentioned spending for advertising, trade show participation and new product promotional activities. During the quarter we launched a strong flow of new products such as the new Tommy Armour 845 Silverback(TM) golf clubs, the Canopy Trike(TM), the new putting green line, and the Green Machine(TM). Our plan calls for additional new product launches during the second quarter. In our retail service business, we signed an amended long-term contract with a major customer during the first quarter. We anticipate that this contract will generate in excess of $100 million in revenues over the next three years.”

“We believe the current economic environment and world political issues will continue to make the future difficult to predict. Retailers continue to be cautious in their inventory planning and we expect that trend to continue until consumer confidence strengthens.” Mr. Graber further commented, “Despite this, we currently expect sales in the $470.0 million range and earnings per share in the $0.55 to $0.65 range for the full year 2003.”

Mr. Graber concluded, “We will continue to focus on growing our business through new product introductions, expansion of current product categories and strategic acquisitions. We remain optimistic about the long-term prospects of our company and the industry and will continue to strive towards our goal of becoming a larger player in the sporting goods market and retail service segment.”

                                HUFFY CORPORATION
                      CONSOLIDATED STATEMENTS OF EARNINGS
                  (Dollars in thousands, except per share data)

                                                      Three Months Ended
                                                            March 31,
                                                     2003              2002

    Net sales                                      $94,626           $70,385
    Gross profit                                    19,886            12,001
            % to net sales                           21.0%             17.1%
    Selling, general and administrative
     expenses                                       20,298            10,528

    Operating income (loss)                           (412)            1,473

    Other expense
       Interest expense, net                         1,111               302
       Other                                           166               204
                                                     1,277               506

    Earnings (loss) before income taxes             (1,689)              967

    Income tax expense (benefit)                      (337)              343

       Net earnings (loss)                         ($1,352)             $624