Huffy Corporation reported that a charge related to the settlement of two lawsuits against a former subsidiary led to losses for the fourth quarter and full year.
HUF said it lost $4.2 million, or 29 cents per share, in the 2002 fourth quarter, compared with a loss of $7.4 million, or 71 cents per share, in the year-earlier quarter. The settlement with Washington Inventory Service, a San Diego-based subsidiary that Huffy sold in 2000, resulted in an after-tax charge of $5.2 million, or 36 cents per share. Final court approval of the settlement is expected in the spring. Excluding the charge, HUF would have earned $1 million, or 7 cents per share, in the fourth quarter.
Sales for Q4 rose 48.2% to $126.1 million from $85.1 million a year ago. Much of the sales increase came from the acquisition of Gen-X Sports and McCalla Co., a retail services company based in Georgia that works primarily in the home improvement arena.
Gen-X clearly played a role in improving gross margins, with total GM for Q4 gaining 680 bps to 16.9% compared to 10.1% for the same period in 2001. For the full year, gross margins grew 580 bps to 17.8% compared to 12.1% for 2001.
Huffy ended the year with heavier inventories due to activities the company undertook to mitigate the risk of the west coast dock strike, but expects those non-seasonal goods to liquidate throughout 2003.
HUF posted its fourth annual loss in five years in 2002, reporting a loss of $1.4 million, or 12 cents per share, compared with a loss of $8.4 million, or 82 cents per share, in 2001. Total charges to the WIS settlement were $6 million, or 50 cents per share, for the year. Full-year sales rose 12.6% to $372.9 million from $331.1 million in 2001, driven largely by the Gen-X and McCalla acquisitions.
Huffy is estimating Q1 sales of $105 million, a 49% jump from the $70.4 million posted in Q1 2001. HUF sees a loss of 7 cents to 9 cents per share for Q1. The company reaffirmed its 2003 full-year forecast of earnings ranging from 55 cents to 65 cents per share and sales of $460 million to $480 million.
Kmart will be down to 10% of total sales – while maintaining share at the bankrupt retailer — as the company diversifies its customer base through the acquisitions.
The company told analysts that winter sports product sales, supported by a real winter in the east, continue strong for the first quarter. Inline skate has started the year “on the weak side.”
>>> Huffy will see results continue to improve as it diversifies into these higher margin apparel and service businesses. Look for more acquisition activity outside of hardlines area
