Huffy Corporation reported that net income for the third quarter of 2003 was $2.9 million or $0.18 per common share, compared to earnings of $0.9 million or $0.08 per common share for the same period last year.
Net income for the nine-month period ended September 30, 2003 was $4.3 million or $0.28 per common share, compared to net income of $2.8 million or $0.26 per common share reported for the same period in 2002. The third quarter and year-to-date earnings for the period ending September 30, 2003 include income from discontinued operations of $0.03 per common share, and $0.10 per share, respectively, due to the recoveries against certain charges taken in the third and fourth quarter of 2002 related to a class action settlement agreement with Washington Inventory Service and other parties.
The third quarter and year- to-date earnings for the period ending September 30, 2002 include charges related to discontinued operations of $0.06 per common share related to the class action settlement mentioned above.
Net sales for the third quarter were $106.7 million, compared to sales of $83.0 million for the third quarter of 2002, an increase of approximately 28.6%.
For the nine-month period ended September 30, 2003, net sales were $318.9 million, compared to net sales of $246.8 million reported for the same period last year, an increase of approximately 29.2%. Much of the sales increase is attributable to the acquisition of Gen-X Sports late in the third quarter of 2002. Corporate wide gross margins for the third quarter of 2003 were 18.9% compared to gross margins of 19.2% for the same period in 2002. On a year-to-date basis, corporate wide gross margins were 20.5% compared to gross margins of 18.2% for the prior year.
Commenting on the quarter, Don Graber, Chairman and CEO said, “As we indicated in September, sales in August and the early part of September were below anticipated levels, particularly in the in-line skate, action sports, backboard and opportunity businesses. While sales of other product lines were in line with expectations, and sales in the service segment were strong, they did not offset the softness in the above mentioned product lines. In addition, due to a supplier interruption, we had to reschedule some snowboard deliveries from September into October and we missed some product shipments due to consolidating our warehouses from two locations into one West Coast operation. We believe that the impact of these interruptions is behind us, with the supply interruption resolved and warehouse operations running efficiently, we are well-positioned to meet our expected shipments for the remainder of the year.”
Mr. Graber continued, “In spite of a difficult retail environment, the service segment turned in a strong quarter, with earnings substantially above those of last year. Margins for the third quarter were slightly down when compared to previous quarters and last year as the result of softness in the backboard business, the slippage of some snowboard sales into the fourth quarter, and overall lower than expected sales in action sports and the opportunity business. Despite the overall lower sales and margin pressure, earnings from continuing operations were as forecast, the result of a continuing focus on cost containment and the recovery of legal expenses from prior periods that resulted in lower SG&A expenses during the quarter. For the full year, we anticipate that sales will be in the $450.0 million to $460.0 million range, with earnings from continuing operations in the range of $0.34 to $0.38 per common share. Net income for the year is expected to be in the range of $0.44 to $0.48 per common share, as a result of the favorable impact of the final settlement related to Washington Inventory Service.”
Mr. Graber concluded, “This was a difficult quarter that included several one-time issues, but we believe that the combination of management changes, both at the senior management level, with the appointment of Paul D'Aloia to the Chief Operating Officer role, and at the business level, has put our most talented management team in the right place. In the meantime, we continue to focus our efforts on improving earnings from continuing operations and we remain dedicated to fulfilling our strategic vision of creating value for our shareholders and evolving towards our goal of being a much larger entity serving the retail and sporting goods channels.”
HUFFY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
Quarter Ended Nine Months Ended
Sept. 27, Sept. 30, Sept. 27, Sept. 30,
2003 2002 2003 2002
Net sales $106,743 $83,028 $318,851 $246,826
Gross profit 20,223 15,955 65,461 44,987
% to net sales 18.9% 19.2% 20.5% 18.2%
Selling, general and
administrative expenses 16,486 12,826 58,416 37,201
Operating income 3,737 3,129 7,045 7,786
Other expense
Interest expense, net 1,455 287 3,847 908
Other (630) 419 (290) 1,385
825 706 3,557 2,293
Earnings before income
taxes 2,912 2,423 3,488 5,493
Income tax expense 583 754 698 1,925
Net earnings from
continuing operations 2,329 1,669 2,790 3,568
Discontinued operations:
Income (loss) from
discontinued
operations, net of
income taxes 589 (723) 1,547 (723)
Net earnings $2,918 $946 $4,337 $2,845
Earnings per common
share:
DILUTED:
Earnings from
operations $0.15 $0.14 $0.18 $0.32
Earnings (loss) from
discontinued
operations $0.03 ($0.06) $0.10 ($0.06)
Net earnings per common
share $0.18 $0.08 $0.28 $0.26
