Huffy and all of its subsidiaries have filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy code citing liquidity issues, significant operating losses associated with portions of its former Canadian operations, increasing public company costs, and mounting legacy costs associated with discontinued operations dating back to the 1950's.
In court documents obtained by SEW, total Huffy assets were listed at $138.7 million while total liabilities were $161.2 million. Total unsecured debt totaled $55.4 million. While Asian manufacturers accounted for the vast majority of the debt listed with the top 20 unsecured creditors, Huffy also owes four individuals more than $2.7 million in deferred compensation.
Earlier in the year Huffy sold its Backboard division to Russell Corp. for roughly $30 million, of which $19 million went to paying down debt. Huffy also sold its service business to National Product Services. Terms of this deal were not disclosed, but proceeds were said to have been used for repayment of debt and working capital.
Huffy indicated that it expects day-to-day operations to continue as usual during the reorganization. The company has received interim approval for up to $50 million in debtor-in-possession financing from Congress Financial Corporation to fund post-petition operating expenses, and supplier and employee obligations.
The DIP financing will surely be used to ensure goods get shipped for Spring, after Huffy was forced into cash-in-advance terms with the factories for the all-important Holiday shipping period that is all but done. The Company expects that employee medical, dental, life insurance, and other employee benefits will continue without disruption.
The court documents name five shareholders with more than 5% interest in the company, a list that includes Jamie Salter and Kenneth Finkelstein, founders of Gen-X and current Forzani employees; Wells Fargo; Key Corp.; and Dimensional Fund Advisors. There are currently 7,600 HUF shareholders with roughly 16.4 million shares outstanding.
Huffy will use the reorganization to focus on its Tommy Armour, Ram, and Teardrop golf businesses and the Huffy bicycle business, both of which they consider to be core competencies. But, Huffy has also filed expedited motions to continue to employ Development Specialists Inc. as financial advisors and Lazard Freres & Co. as an investment banker. This suggests that the company may be looking to sell off the action sports end of the business that includes the Lamar, LTD, and Sims snowboard brands, UltraWheels in-line skates, Hespeler hockey, and the Rage, Dukes, and Oxygen skateboard brands.