Huffy Corporation announced that net earnings for the second quarter of 2003 were $2.8 million or $0.18 per common share, compared to net earnings of $1.3 million or $0.12 per common share for the second quarter of 2002.
For the six-month period ended June 30, 2003, net earnings were $1.4 million or $0.09 per common share versus earnings of $1.9 million or $0.18 per common share for the same period in 2002. Both second quarter and year-to-date earnings for the period ending June 30, 2003, include income from discontinued operations of $0.06 per common share, due to the reversal of certain charges taken in the fourth quarter of 2002 related to the class action settlement agreement with Washington Inventory Service and other parties.
Net sales for the second quarter of 2003 were $117.5 million compared to sales of $93.4 million for the second quarter of 2002, an increase of 25.8%. For the first six months of 2003, sales were $212.1 million compared to sales of $163.8 million for the same period of 2002, an increase of 29.5%. Gross margins for the second quarter were 21.6%, approximately a 3.4 percentage point improvement over the gross margin of 18.2% reported for the second quarter of 2002. On a year-to-date basis, corporate-wide gross margins were 21.3%, an improvement of approximately 3.6 percentage points when compared to gross margins of 17.7% for the first six months of 2002.
In commenting on the second quarter, Don R. Graber, Chairman, President and CEO said, “We are pleased that our second quarter earnings were in line with expectations despite a difficult retail environment. Our sales growth continues to be driven by the acquisition of Gen-X Sports and with new customers in the service segment, as well as by continued growth in Creative Retail Services. We are also pleased to report continued gross margin improvement, both when compared to the gross margins reported last year, as well as when compared to gross margins for the first quarter of 2003. Additionally, the final settlement related to Washington Inventory Service, a former subsidiary, proved to be less costly than originally estimated, resulting in the gain from discontinued operations reported this quarter.”
“In general, discussions with our retail partners indicate that while the balance of the year will continue to be somewhat challenging, they feel that softness in the retail cycle has probably reached its low point and retail sales should not deteriorate from current levels. Although we would like a more robust forecast of the retail marketplace, we have been pleased with the success of several of our recently launched new products and believe that this success bodes well for future growth. We continue to focus on sales growth with new customers and on our Continuous Rapid Improvement process as a key driver in controlling and reducing costs.”
Mr. Graber concluded by saying, “We recognize that the retail environment will continue to be challenging throughout 2003 with only modest retail improvement until 2004, but the Huffy team is dedicated and focused on executing our profitable growth plans. Historically, the third and fourth quarters are our strongest quarters. Order flow and bookings for new products as well as “winter products,” such as snowboards, skis and hockey equipment, are currently stronger than for the second half of 2002. Given this, we continue to be comfortable with sales in the $470.0 million to $480.0 million range and earnings per common share of $0.55 to $0.65 for the full year 2003. We will continue to strive towards our goal of becoming a larger player in the sporting goods arena and increasing shareholder value over the longer term.”
HUFFY CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands, except per share data) Quarter Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 Net sales $117,482 $93,413 $212,108 $163,798 Gross profit 25,352 17,031 45,238 29,032 % to net sales 21.6% 18.2% 21.3% 17.7% Selling, general and administrative expenses 21,632 13,847 41,930 24,375 Operating income 3,720 3,184 3,308 4,657 Other expense Interest expense, net 1,281 319 2,392 621 Other 174 762 340 966 1,455 1,081 2,732 1,587 Earnings (loss) before income taxes 2,265 2,103 576 3,070 Income tax expense (benefit) 452 828 115 1,171 Net earnings(loss) from continuing operations 1,813 1,275 461 1,899 Discontinued operations: Income (loss) from discontinued operations, net of income tax expense 958 - 958 - Net earnings (loss) $2,771 $1,275 $1,419 $1,899