Huffy Corporation announced that earnings from continuing operations for the fourth quarter of 2002 were $1.0 million or $0.07 per common share compared to a loss from continuing operations of $7.4 million or $0.71 per common share reported for the same period last year. Earnings from continuing operations, for the year ended December 31, 2002, were $4.6 million or $0.38 per common share compared to a loss from continuing operations of $8.4 million or $0.82 per common share for the year ended December 31, 2001.
The Company recorded an after-tax charge to earnings from discontinued operations related to Washington Inventory Service, as described below, in the fourth quarter of 2002 of $5.2 million or $0.36 per common share, resulting in a net loss for the fourth quarter of $4.2 million or $0.29 per common share compared to a net loss of $7.4 million or $0.71 per common share for the fourth quarter of 2001. The Company reported a net loss for the year ended December 31, 2002 of $1.4 million or $0.12 per common share which includes an after-tax charge to earnings from discontinued operations related to Washington Inventory Service of $6.0 million or $0.50 per common share. For the year ended December 31, 2001, the Company reported a net loss of $8.4 million or $0.82 per common share. The charge for discontinued operations related to the previously disclosed settlement, preliminarily approved by the Superior Court of California, of contractual obligations and related lawsuits involving Washington Inventory Service, which was sold in November 2000, and the Company for its period of ownership.
The loss from continuing operations for the fourth quarter of 2001 included a pre-tax restructuring charge of $3.7 million or $0.24 per common share. The net loss reported for the year ended December 31, 2001 of $8.4 million or $0.82 per common share included the pre-tax restructuring charge of $3.7 million or $0.24 per common share.
Net sales for the fourth quarter were $126.1 million, compared to sales of $85.1 million reported for the fourth quarter of 2001, an increase of approximately 48%. For the full year 2002, net sales were $372.9 million compared to net sales of $331.1 million reported for the previous year, an increase of approximately 13%. Corporate-wide gross margins for the fourth quarter of 2002 were 16.9% compared to gross margins of 10.1% for the same period in 2001. For the full year, corporate-wide gross margins were 17.8% compared to gross margins of 12.1% for the previous full year.
Net sales for the fourth quarter were $3.6 million above previous estimates levels with earnings for the quarter $0.03 higher than earlier anticipated due to higher sales and earnings reported by the service segment.
Commenting on results, Don R. Graber, Chairman, President and CEO, said, “We are pleased that fourth quarter sales and earnings from continuing operations came in slightly above the level we anticipated in early January – despite a difficult retail environment, the decline in normal replenishment orders and additional costs for freight, demurrage and special surcharges on ocean-going containers. The service segment finished the quarter and the year with solid sales increases when compared to the previous year. Sales gains were driven by internal growth and the acquisition of the McCalla companies that more than offset any decrease in sales to what has traditionally been their largest customer. Additionally, the sporting goods segment showed strong growth, driven primarily by the acquisition of Gen-X Sports, along with solid growth in the basketball backboard and inflatable area. Lastly, pending final court approval anticipated in the spring of 2003, we are pleased that the agreement reached with Washington Inventory Service and other parties has resolved these issues and put them behind us.”
Mr. Graber stated, “Although the margins in the core service segment have been impacted by the reorganization of one of its largest customers and by increased costs associated with the expansion of new services, overall, company-wide gross margins improved dramatically over the previous year. We expect to see benefits from our focus on cost reduction and operating efficiencies along with continued gross margin expansion in 2003. Despite substantial increases in post employment benefit expenses and insurance premiums, administrative expenses as a percentage of sales were flat with 2001.”
Mr. Graber continued, “We remain optimistic about the prospects for Huffy in 2003 and beyond. Through the acquisitions of Gen-X and McCalla companies last year, we have created a much stronger platform for growth, diversified our customer base and set the stage for the future. The enthusiastic reception of our new products, such as the Green Machine(TM), the Canopy Trike(TM), the Tommy Armour 845 Silverback(TM) golf line and the new Sims(R) snowboard line by media and retailers, is exciting.”
Mr. Graber concluded, “Given all of the uncertainty in the economy and political arena, we believe it is still prudent to be conservative in our guidance. The first quarter is historically our lowest sales period due to retailer’s weak sales levels and the inherent seasonality of our businesses. We anticipate the first quarter of 2003 to be in line with planned levels and based on current orders, we expect sales close to $105 million with a modest loss in the range of $0.07 to $0.09 per common share. Our outlook for the full year remains unchanged with the expectation for sales to be in the range of $460.0 to $480.0 million and earnings of $0.55 to $0.65 per common share.”
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
Quarter Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Net sales $126,070 $85,086 $372,896 $331,138
Gross profit 21,360 8,561 66,347 39,950
% to net sales 16.9% 10.1% 17.8% 12.1%
Selling, general and
administrative expenses 20,657 15,325 57,858 47,607
Plant closure &
manufacturing
reconfiguration 0 3,713 0 3,713
Operating income (loss) 703 (10,477) 8,489 (11,370)
Other expense
Interest expense, net 780 369 1,688 1,128
Other 251 187 1,636 303
1,031 556 3,324 1,431
Earnings (loss) before
income taxes (328) (11,033) 5,165 (12,801)
Income tax expense
(benefit) (1,352) (3,662) 573 (4,391)
Net earnings(loss) from
continuing operations 1,024 (7,371) 4,592 (8,410)
Discontinued operations:
Income (loss) from
discontinued
operations, net of
income tax expense
(benefit) (5,247) - (5,970) -
Net earnings (loss) ($4,223) ($7,371) ($1,378) ($8,410)
