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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to __________
Commission file number 1-5325
HUFFY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 31-0326270
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Byers Road, Miamisburg, Ohio 45342
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 866-6251
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, as of February 1, 1999, was $162,616,472.
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of February 1, 1999, was 11,798,584.
"Index of Exhibits" at page 14 of this Report
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DOCUMENTS INCORPORATED BY REFERENCE
1. The Huffy Corporation Annual Report to Shareholders for the year ended
December 31, 1998. Only such portions of the Annual Report as are
specifically incorporated by reference under Parts I, II and IV of this
Report shall be deemed filed as part of this Report.
2. The Huffy Corporation Proxy Statement for its Annual Meeting of
Shareholders on April 22, 1999. Only such portions of the Proxy
Statement as are specifically incorporated by reference under Part III
of this Report shall be deemed filed as part of this Report.
PART I
ITEM 1. BUSINESS
Huffy Corporation, an Ohio corporation, and its subsidiaries (collectively
called "Huffy" or the "Company") are engaged in the design, manufacture and sale
of Consumer Products and the furnishing of Services for Retail. The Company's
executive offices are located in Miamisburg, Ohio and its principal business
offices and/or manufacturing facilities are located in San Diego, California,
Farmington, Missouri, Southaven, Mississippi, Miamisburg, Ohio, Camp Hill and
Harrisburg, Pennsylvania, Sussex, Wisconsin, and Whites Cross, Cork, Ireland.
The general development of business within each business segment (Consumer
Products and Services for Retail) is discussed in more detail below. See also
Part IV herein for financial information relating to each such business segment.
CONSUMER PRODUCTS
Huffy Bicycle Company, Huffy Sports Company, Royce Union Bicycle
Company, and True Temper Hardware Company comprise the Consumer
Products segment of the Company. Principal products within this
business segment include bicycles, basketball backboards and related
products, and lawn and garden tools. Sales of bicycles represented 42.7
percent, 44.4 percent, and 43.2 percent of consolidated revenues of the
Company for the years ended December 31, 1998, 1997, and 1996. Sales of
basketball backboards, poles, goals and related products represented
12.1 percent, 13.2 percent, and 12.7 percent of consolidated revenues
of the Company for the years ended December 31, 1998, 1997, and 1996.
Sales of lawn and garden tools represented 17.4 percent, 16.4 percent,
and 17.6 percent of consolidated revenues of the Company for the years
ended December 31, 1998, 1997, and 1996. Although to date the export
business is not significant, the companies in the Consumer Products
segment participate in various foreign markets and are actively
involved in expanding export volume. On April 21, 1997, Huffy sold the
assets of Gerry Baby Products Company and Gerry Wood Products Company
to Evenflo Company, Inc.
a. PRODUCTS, MARKETING AND DISTRIBUTION
Huffy Bicycle Company: The Huffy(R) bicycle brand is the
largest selling brand of bicycles sold in the United States.
Huffy(R) bicycles are both produced by Huffy Bicycle Company,
a division of the Company, whose manufacturing facilities are
located in Southaven, Mississippi and Farmington, Missouri,
and imported from Mexico, Taiwan and China. While imports
account for a substantial quantity of Huffy(R) bicycles, Huffy
Bicycle Company remains the largest U.S. manufacturer of
bicycles. Included in the Huffy(R) bicycle line are adult all
purpose bicycles; adult all terrain bicycles; a series of
innovative boys' and girls' 20" bicycles; a series of popular
children's 12" and 16" sidewalk bicycles; and tricycles. In
addition, in 1996, the Company purchased the Rebike business
which produces a line of recumbent style bicycles and in
December, 1997, the Company acquired the assets of Royce Union
Bicycle
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Company, Inc. which holds a leading market position in the
growing sporting goods distribution channel. Huffy(R) bicycles
are extensively advertised and are sold predominantly through
national and regional high volume retailers, a distribution
network accounting for approximately 75 percent of all
bicycles sold in the United States. Approximately 90 percent
of Huffy Bicycle Company's bicycles are sold under the
Huffy(R) brand name with the balance being sold under private
label brands.
Huffy Sports Company: Huffy Sports Company, a division of the
Company located in Sussex, Wisconsin, is the leading supplier
of basketball backboards, poles, goals, and related products
and juvenile indoor portable basketball units for use at home.
In 1997, the Company purchased the business and assets of Sure
Shot(TM)/Hydra-Rib(TM) which produces basketball units for
institutional and in-arena use. Huffy Sports Company products,
many of which bear the logo of the National Basketball
Association ("NBA") as well as the Huffy Sports(R) trademark,
are sold predominately through national and regional high
volume retailers in the United States.
True Temper Hardware Company: True Temper Hardware Company, a
wholly-owned subsidiary of the Company, is headquartered in
Camp Hill, Pennsylvania. True Temper Hardware Company is a
leading supplier of non-powered lawn and garden tools and snow
tools; products include long-handled shovels, hoes, forks,
wheelbarrows, snow shovels, and rakes for use in the home and
in agricultural, industrial and commercial businesses. In
1994, True Temper Hardware Company discontinued manufacturing
spreaders and pruning tools and sold the assets used to
produce such products, including its Anderson, South Carolina
manufacturing facility. Manufacturing facilities are located
in Camp Hill and Harrisburg, Pennsylvania and Pettisville,
Ohio. True Temper Hardware Company also owns four sawmill
facilities located in Indiana, New York, Pennsylvania, and
Vermont. In addition, True Temper Limited, an Irish
Corporation and a wholly-owned subsidiary of the Company, has
offices and a manufacturing facility in Whites Cross, Cork,
Ireland. True Temper Hardware products are sold both directly,
and through wholesale distributors, to national and regional
high volume retailers and hardware stores. Over 88 percent of
True Temper Hardware's products are sold under the True
Temper(R) and Jackson(R) names; the remainder are sold under
other names or under private labels. In 1998, True Temper
Hardware Company acquired the stock of Lantz Manufacturing
Company which manufactures consumer leaf rakes, snow shovels,
lawn edging and splash blocks. In 1996, True Temper acquired
the Meaford wheelbarrow product line, solidifying True Temper
Hardware Company's position as the manufacturer of the largest
selling brand of wheelbarrows in North America. During 1994
and 1995, the Company substantially completed a plan to
restructure the True Temper lawn and garden tool business to
address inefficiencies in the manufacturing process and to
improve future profitability of True Temper Hardware Company.
b. SUPPLIERS
Basic materials such as raw steel, steel and aluminum tubing,
plastic, wood, fabric, resins, ash timber, and welding
materials used in the manufacturing operations are purchased
primarily from domestic sources. Alternate sources are
available for all critical products and components, but the
sudden loss of any major supplier could, on a temporary basis,
cause a negative effect on the segment's operations.
c. PATENTS, TRADEMARKS AND LICENSES
The patents, trademarks (including the registered trademarks
"Huffy", "Huffy Sports", "Royce Union", "True Temper" and
"Jackson"), licenses (including the license to use the NBA
logo) and other proprietary rights of the companies in this
segment are deemed important to the Company. Generally, the
NBA license has five year terms which are renegotiated upon
termination. The
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loss by the Company of its rights under any individual patent,
trademark (other than "Huffy" or "True Temper"), license or
other proprietary right used by this segment would not have a
material adverse effect on the Company or the segment. The
Company's patents, by law, have a limited life, and patent
rights expire periodically. The loss of the registered
trademark "Huffy" or "True Temper" could have a material
adverse effect on the Company and this segment. The Company
has no reason to believe that anyone has rights to either the
"Huffy" or "True Temper" trademarks for the products for which
the Company uses such trademarks.
d. SEASONALITY AND INVENTORY
Due to the relatively short lapse of time between placement of
orders for products and shipments, the Company normally does
not consider its backlog of orders as significant to this
business segment. Because of rapid delivery requirements of
their customers, the companies in this segment maintain
significant quantities of inventories of finished goods to
meet their customers' requirements. Sales of bicycles are
seasonal in that sales tend to be higher in the Spring and
Fall of each year. Basketball products tend to have varying
degrees of seasonality, none of which are significant to the
operations of the Company. Sales of lawn and garden products
and snow tools tend to be higher in the Spring and Winter of
each year, respectively.
e. COMPETITION AND CUSTOMERS
In the high volume retailer bicycle business, Huffy Bicycle
Company has numerous competitors in the United States market,
one of which is a major competitor. Although importers in the
aggregate provide significant competition, currently, two
importers are major competitors. Even though competition among
domestic manufacturers and importers of bicycles is intense,
Huffy Bicycle Company believes it is cost competitive in the
high volume retailer bicycle market and maintains its position
through continued efforts to improve manufacturing efficiency
and product value. Huffy Bicycle Company's ability to provide
its customers with low cost, innovative new products has
enabled it to maintain its market position despite the
marketing efforts of domestic competitors and competitors from
Taiwan, China, and other nations. Huffy Sports Company has
several competitors, one of which is currently a major
competitor. Huffy Sports Company maintains its competitive
position by offering its customers high quality, innovative
products at competitive prices and by supporting its products
with outstanding customer service. True Temper Hardware
Company has numerous competitors in the United States and
Canada, two of which are currently major competitors. True
Temper Hardware Company believes it remains competitive by
offering its customers in the residential, agricultural,
industrial, and commercial markets competitively priced, high
quality, innovative products. The loss by the Consumer
Products segment of either of its two largest customers could
result in a material adverse effect on the segment.
SERVICES FOR RETAIL
Huffy Service First, Inc. ("HSF") and Washington Inventory Service
("WIS") each provide certain services to retailers. Inventory,
assembly, repair and merchandising services provided by WIS and HSF to
their customers represented 27.8 percent, 26.0 percent, and 26.5
percent, of consolidated revenues of the Company for the years ended
December 31, 1998, 1997, and 1996.
a. PRODUCTS, MARKETING AND DISTRIBUTION
Huffy Service First: HSF, a wholly-owned subsidiary of the
Company, headquartered in Miamisburg, Ohio, serves the needs
of major retailers in 50 states, Puerto Rico and the Virgin
Islands by providing in-store and
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in-home assembly and repair, and in-store display services for
a variety of products, including, among other things,
bicycles, barbeque grills, physical fitness equipment,
lawnmowers, and furniture. HSF is the only assembly service
business of this kind available to high volume retailers on a
nationwide basis. HSF also offers merchandising services
(product resets and periodic maintenance of displays) to
manufacturers who supply high volume retailers.
Washington Inventory Service: WIS, a wholly-owned subsidiary
of the Company, headquartered in San Diego, California,
provides physical inventory services on a nationwide basis to
meet the financial reporting and inventory control
requirements of high volume retailers, drug stores, home
centers, sporting goods stores, specialty stores and grocery
stores. In 1998, WIS began providing its inventory services to
retailers in Brazil. Also in 1998, WIS acquired the assets of
Inventory Auditors, Inc. to provide expanded service coverage
to national retailers.
b. SEASONALITY
The demand for services provided by this business segment is
seasonal in that assembly service demand is generally
strongest in Spring and at the Winter holiday season, and
inventory service demand is generally strongest in the first
three calendar quarters of the year.
c. COMPETITION AND CUSTOMERS
Although WIS has numerous competitors in the United States
market, only one is a major competitor. HSF has numerous
competitors in the United States market, none of which is a
major national competitor in the in-store and in-home assembly
service business and six of which are major competitors in the
merchandising services business. WIS and HSF believe they
remain competitive due to their nationwide network of
operations, competitive pricing and full service. The loss by
the Services for Retail Segment of either of its two largest
customers could result in a material adverse effect on the
segment.
Sales to two customers aggregated over ten percent or more of the Company's
consolidated revenues from each such customer for the year ended December 31,
1998, and the loss of either one of these customers could have a material
adverse effect on the Company and its subsidiaries as a whole.
The number of persons employed full-time by the Company (excluding seasonal
employees in the Services for Retail Segment) as of December 31, 1998, was 3,702
(1,623 employed by the Consumer Products Segment and 2,051 employed by the
Services for Retail Segment).
ITEM 2. PROPERTIES: Location and general character of the principal
plants and other materially important physical properties of
the Company as of January 1, 1999.
OWNED OR
EXPIRATION
BUILDING AREA DATE
LOCATION DESCRIPTION (SQ. FT.) OF LEASE
- -------- ----------- --------- --------
San Diego, California Offices (Services for Retail) 30,000 2004(1)
Southaven, Mississippi Offices and manufacturing 106,000 2008
facility (Consumer Products)
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OWNED OR
EXPIRATION
BUILDING AREA DATE
LOCATION DESCRIPTION (SQ. FT.) OF LEASE
- -------- ----------- --------- --------
Farmington, Missouri Offices, manufacturing and 412,052 2014(2)
warehouse facility
(Consumer Products)
Miamisburg, Ohio Offices and display 47,000 2003(3)
facility (Corporate
and Consumer Products)
Miamisburg, Ohio Offices and warehouse 42,682 2001(4)
facility (Services for
Retail)
Camp Hill, Pennsylvania Offices, manufacturing 391,690 2012(5)
and distribution facility
(Consumer Products)
Harrisburg, Pennsylvania Offices and manufacturing 254,329 Owned
facility (Consumer Products)
Sussex, Wisconsin Offices and manufacturing 192,000 2004(6)
facility (Consumer Products)
Whites Cross, Cork, Offices and manufacturing 70,000 Owned
Ireland facility (Consumer Products)
(1) Subject to two consecutive options to renew for additional terms of
five years each.
(2) The City of Farmington, Missouri financed the acquisition of the
premises through the issuance of Industrial Development Revenue Bonds
(Huffy Corporation Project) Series 1994 in the aggregate principal
amount of $20,000,000 and leased the premises to the Company. The
Company has an option to purchase during the term or at expiration of
the lease.
(3) Subject to an option to purchase during the term of or at the
expiration of the lease, and if the option is not exercised at the
expiration of the lease, the Company automatically receives an
extension of the term for up to 12 months or until the property is
sold, whichever time period is shorter.
(4) Subject to one option to renew for an additional term of five years.
(5) Subject to one option to renew for an additional term of five years and
an option to purchase.
(6) Subject to an option to purchase during the term of or at the
expiration of the lease.
There are no encumbrances on the Harrisburg, Pennsylvania, and Whites Cross,
Cork, Ireland properties which are owned. All of the Company's facilities are in
good condition and are considered suitable for the purposes for which they are
used. The Camp Hill, Pennsylvania manufacturing facility normally operates on a
two full shift basis, with third shift operations scheduled as needed to meet
seasonal production requirements. The Southaven, Mississippi, Farmington,
Missouri, and Harrisburg, Pennsylvania manufacturing facilities normally operate
on a two full shift basis. The Whites Cross, Cork, Ireland and Sussex, Wisconsin
manufacturing facilities normally operate on a one full shift basis, with second
shift operations scheduled as needed at the Sussex, Wisconsin facility.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party, nor is its property subject, to any material pending
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The market information and other related security holder matters pertaining to
the Common Stock of the Company set forth in Exhibit 13 under (i) the captions
entitled Common Stock and Shareholder Information, and (ii) notes 7 and 8
(Preferred Stock, and Common Stock and Common Stock Plans) to the consolidated
financial statements, are contained in the Company's Annual Report to
Shareholders for the year ended December 31, 1998, and are hereby incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected unaudited financial data for each of the last five calendar years set
forth in Exhibit 13 under the caption entitled Five-Year Financial and Operating
Review (Unaudited) is contained in the Company's Annual Report to Shareholders
for the fiscal year ended December 31, 1998, and is hereby incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Discussion and analysis of financial condition and results of operations set
forth in Exhibit 13 under the caption entitled Management's Discussion and
Analysis of Financial Conditions and Results of Operations and note 6 (Lines of
Credit and Long-Term Obligations) to the consolidated financial statements, are
contained in the Company's Annual Report to Shareholders for the year ended
December 31, 1998, and are hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information set forth in Exhibit 13 under the captions entitled
Independent Auditor's Report and Consolidated Balance Sheets, Consolidated
Statements of Operation, Consolidated Statements of Cash Flows, Consolidated
Statements of Shareholders' Equity, and Notes to Consolidated Financial
Statements, is contained in the Company's Annual Report to Shareholders for the
year ended December 31, 1998, and is hereby incorporated herein by reference.
See also the information contained in Item 14 of Part IV of this Report.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
The name, age and background information for each of the Company's Directors is
set forth in the section entitled ELECTION OF DIRECTORS and the table therein
contained in the Company's Proxy Statement for its 1999 Annual Meeting of
Shareholders, and is hereby incorporated herein by reference.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers are elected annually to their respective positions,
effective at the April meeting of the Board of Directors. The Executive Officers
of the Company at February 1, 1999, were as follows:
NAME AGE POSITION OFFICER SINCE
- ---- --- -------- -------------
Stanley H. Davis 51 Vice President - Human July, 1997
Resources and Organization
Development
Thomas A. Frederick 44 Vice President - Finance, December, 1994
Chief Financial Officer and
Treasurer
Don R. Graber 55 Chairman of the Board, July, 1996
President and Chief
Executive Officer
Timothy G. Howard 52 Vice President - Controller September, 1978
Nancy A. Michaud 52 Vice President - General February, 1993
Counsel and Secretary
Prior to being elected Vice President-Human Resources and Organization
Development, Mr. Davis was Vice President-Human Resources and Organization
Development of Triangle Wire and Cable, Inc. and Vice President Administration
of Ocean View Capital, Inc. Prior to being elected Vice President - Finance,
Chief Financial Officer and Treasurer in 1998, Mr. Frederick was Vice President
- - Finance and Chief Financial Officer. Prior to being elected Chairman,
President and Chief Executive Officer in 1997, Mr. Graber was President and
Chief Operating Officer since 1996; prior thereto, Mr. Graber was President of
Worldwide Household Products Group and Group Vice President of The Black and
Decker Corporation from 1994. Prior to being elected Vice President - General
Counsel and Secretary in 1994, Ms. Michaud was Vice President - General Counsel
and Assistant Secretary of the Company.
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation set forth in the section entitled
EXECUTIVE COMPENSATION and the tables therein, is contained in the Company's
Proxy Statement for its 1999 Annual Meeting of Shareholders, and is hereby
incorporated herein by reference. Notwithstanding anything to the contrary set
forth herein or in any of the Company's previous filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings, including this Form 10-K, the section
entitled REPORT OF COMPENSATION COMMITTEE and the
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Performance Graphs which are set forth in the Company's Proxy Statement for its
1999 Annual Meeting of Shareholders are not deemed to be incorporated by
reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of shares of Common Stock of the Company beneficially owned by each
Director and by all Directors and Officers as a group as of January 2, 1999, set
forth in the section entitled SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT, and the table therein, is contained in the Company's Proxy
Statement for its 1999 Annual Meeting of Shareholders, and is hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain transactions with management set forth in the section
entitled CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS is contained in
the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders, and
is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS
(1) The following Consolidated Financial Statements of the Company
included in the Company's Annual Report to Shareholders are
incorporated by reference as part of this Report at Item 8
hereof:
Consolidated Balance Sheets as of December 31, 1998,
and 1997.
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997, and 1996.
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1998, 1997, and 1996.
Notes to Consolidated Financial Statements.
The Annual Report to Shareholders for the year ended December
31, 1998, is not deemed to be filed as part of this Report,
with the exception of the items incorporated by reference in
Items 1, 5, 6, 7 and 8 of this Report and those financial
statements and notes thereto listed above.
(2) The Accountants' Report on Consolidated Financial Statements
and the following Financial Statement Schedule of the Company
is included as part of this Report at Item 8 hereof:
Schedule II. Valuation and Qualifying Accounts - years ended
December 31, 1998, 1997, and 1996.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been
omitted.
(3) The exhibits shown in "Index to Exhibits" are filed as a part
of this Report.
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(b) REPORTS ON FORM 8-K
During the fiscal quarter ended December 31, 1998, the Company filed no report
on Form 8-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HUFFY CORPORATION
By /s/ Don R. Graber
---------------------------------
Don R. Graber Date: February 11, 1999
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Thomas A. Frederick
- --------------------------------- Date: February 11, 1999
Thomas A. Frederick
Vice President - Finance, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Timothy G. Howard
- --------------------------------- Date: February 11, 1999
Timothy G. Howard
Vice President - Controller
(Principal Accounting Officer)
/s/ William A. Huffman
- --------------------------------- Date: February 11, 1999
William A. Huffman, Director
/s/ Linda B. Keene
- --------------------------------- Date: February 11, 1999
Linda B. Keene, Director
/s/ Jack D. Michaels
- --------------------------------- Date: February 11, 1999
Jack D. Michaels, Director
/s/ Donald K. Miller
- --------------------------------- Date: February 11, 1999
Donald K. Miller, Director
/s/ James F. Robeson
- --------------------------------- Date: February 11, 1999
James F. Robeson, Director
- ---------------------------------
Patrick W. Rooney, Director
/s/ Thomas C. Sullivan
- --------------------------------- Date: February 11, 1999
Thomas C. Sullivan, Director
/s/ Joseph P. Viviano
- --------------------------------- Date: February 11, 1999
Joseph P. Viviano, Director
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INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors,
Huffy Corporation:
Under date of February 4, 1999, we reported on the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1998, and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998, as
contained in the 1998 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
Annual Report on Form 10-K for the year 1998. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedule as listed in Part IV, Item
14(a)(2) of Form 10-K. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
Cincinnati, Ohio /s/ KPMG LLP
February 4, 1999 ---------------------------
KPMG LLP
INDEPENDENT AUDITORS' CONSENT
The Board of Directors,
Huffy Corporation:
We consent to the incorporation by reference in the Registration Statements, and
the Prospectuses constituting part thereof, of (i) the Form S-8 Registration
Statement (No. 333-62903) pertaining to the Master Deferred Compensation Plan;
(ii) the Form S-8 Registration Statement (No. 333-52095) pertaining to the 1998
Director Stock Option Plan, the 1998 Key Employee Stock Plan, and the 1998
Restricted Share Plan; (iii) the Form S-8 Registration Statement (No. 333-52077)
pertaining to the 1998 Key Employee Non-Qualified Stock Plan (iv) the Form S-8
Registration Statement (No. 33-25487) pertaining to the 1988 Stock Option Plan
and Restricted Share Plan; (v) the Form S-8 Registration Statement (No.
33-25143) pertaining to the 1987 Director Stock Option Plan; (vi) the Form S-8
Registration Statement (Nos. 33-28811 and 33-42724) pertaining to the 1989
Employee Stock Purchase Plan; (vii) the Form S-8 Registration Statement (No.
33-44571) pertaining to five company savings plans and (viii) the Form S-8
Registration Statement (No. 33-60900) pertaining to the W.I.S. Savings Plan of
our report dated February 4, 1999, relating to the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998,
which report appears in the 1998 Annual Report to Shareholders, which is
incorporated by reference in the Company's 1998 Annual Report on Form 10-K and
our report dated February 4, 1999, relating to the financial statement schedule
for each of the years in the three-year period ended December 31, 1998, which
report appears in the Company's 1998 Annual Report on Form 10-K.
Cincinnati, Ohio /s/ KPMG LLP
February 4, 1999 ---------------------------
KPMG LLP
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HUFFY CORPORATION
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
OF PERIOD EXPENSES (NOTE) OF PERIOD
--------- -------- ------ ---------
Reserves deducted from assets to which they apply:
Allowance for doubtful accounts:
Year ended December 31, 1998 $2,462 373 (411) 2,424
Year ended December 31, 1997 $1,437 2,085 (1,060) 2,462
Year ended December 31, 1996 $1,449 1,197 (1,209) 1,437
Inventory obsolescence:
Year ended December 31, 1998 $2,775 938 (757) 2,956
Year ended December 31, 1997 $2,181 2,541 (1,947) 2,775
Year ended December 31, 1996 $1,891 3,059 (2,769) 2,181
Reserves which support the balance sheet caption,
Reserves Restructuring
Reserve:
Year ended December 31, 1998 - - - -
Year ended December 31, 1997 - - - -
Year ended December 31, 1996 $1,830 - (1,830) -
Note: Represents accounts written off, less recoveries for allowance for
doubtful accounts. Represents inventory written off, less scrap value
for inventory obsolescence.
[1] Represents net restructure charge for personnel reductions and the
negotiation of a concessionary labor contract.
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14
INDEX TO EXHIBITS
EXHIBIT FORM 10-K
NO. EXHIBITS
--- --------
3.a Amended Articles of Incorporation, dated June 16, 1995, incorporated by
reference to Exhibit (3)(i) to Form 10-Q for the quarter ended June 30, 1995 *
3.b Code of Regulations, as amended, dated April 28, 1995, incorporated by reference
to Exhibit (3)(ii) to Form 10-Q for the quarter ended June 30, 1995 *
4.a Specimen Common Stock Certificate of Huffy Corporation, incorporated by
reference to Exhibit 4(a) to Form 10-K for the year ended December 31, 1997 *
4.b Note Purchase Agreement, dated June 24, 1988, among Huffy Corporation, The
Prudential Insurance Company of America and Pruco Life Insurance Company,
incorporated by reference to Exhibit (4) to Form 10-Q for the fiscal quarter
ended June 30, 1988 *
4.c Amendment, dated as of December 20, 1993, to Note Purchase Agreement, dated June
24, 1988, among Huffy Corporation, The Prudential Insurance Company of America
and Pruco Life Insurance Company, incorporated by reference to Exhibit (4)(c) to
Form 10-K for the fiscal year ended December 31, 1993 *
4.d Second Amendment, dated as of December 30, 1997, to Note Purchase Agreement,
dated June 24, 1988, among Huffy Corporation, The Prudential Insurance Company
of America and Pruco Life Insurance Company, incorporated by reference to
Exhibit 4(d) to Form 10-K for the fiscal year ended December 31, 1997 *
4.e Rights Agreement, dated as of December 16, 1988, between Huffy Corporation and
Bank One, Indianapolis, National Association, incorporated by reference to
Exhibit (4)(n) to Form 10-K for the fiscal year ended December 31, 1988 *
4.f Amendment, dated as of August 23, 1991, to Rights Agreement, dated as of
December 16, 1988, between Huffy Corporation and Bank One, Indianapolis,
National Association, incorporated by reference to Form 8-K, dated August 23,
1991 *
4.g Amendment, dated as of December 9, 1994, to Rights Agreement, dated as of
December 16, 1988, as amended August 23, 1991, between Huffy Corporation and
Bank One, Indianapolis, National Association, incorporated by reference to Form
8-K, dated December 22, 1994 *
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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15
4.h Note Agreement, dated as of December 1, 1990, among Huffy Corporation and
Nationwide Life Insurance Company, Employees Life Insurance Company of Wausaw
and Financial Horizons Life Insurance Company in connection with the issuance
and sale of $30,000,000 Huffy Corporation 9.62% Senior Notes, Series A, due
December 1, 2000, incorporated by reference to Exhibit (4)(j) to Form 10-K for
the fiscal year ended December 31, 1990 *
4.i Amendment, dated as of December 30, 1997, to Note Agreement, dated as of
December 1, 1990, among Huffy Corporation and Nationwide Life Insurance Company,
Employees Life Insurance Company of Wausaw and Financial Horizons Life Insurance
Company in connection with the issuance and sale of $30,000,000 Huffy
Corporation 9.62% Senior Notes, Series A, due December 1, 2000, incorporated by
reference to Exhibit 4.i to Form 10-K for the fiscal year ended December 31,
1997 *
4.j Credit Agreement, dated as of April 21, 1992, among Huffy Corporation, Bank One,
Dayton, N.A., NBD Bank, N.A., Security Pacific National Bank, and Society
National Bank, individually and as agent, in connection with revolving loans up
to an aggregate amount of $50,000,000 to Huffy Corporation, incorporated by
reference to Exhibit (4)(g) to Form 10-K for the fiscal year ended December 31,
1992 *
10.a Lease, effective as of December 29, 1993, between SELCO Service Corporation and
Huffy Corporation, incorporated by reference to Exhibit (10)(c) to Form 10-K for
the fiscal year ended December 31, 1993 *
10.b Special Deferred Compensation Agreements, as amended, between Huffy Corporation
and certain of its officers and key employees, in substantially the forms
incorporated by reference to Exhibit (ix) to Form 10-K for the fiscal year ended
June 24, 1977, to Exhibit (2) to Form 10-Q for the fiscal quarter ended
September 23, 1983, and to Exhibit (19)(c) to Form 10-Q for the fiscal quarter
ended September 30, 1986 *
10.c Deferred Compensation Agreements, as amended, between Huffy Corporation and
certain of its officers and key employees, in substantially the forms
incorporated by reference to Exhibit (vi) to Form 10-K for the fiscal year ended
June 29, 1979, and to Exhibit (3) to Form 10-Q for the fiscal quarter ended
September 23, 1983 *
10.d Master Deferred Compensation Plan, incorporated by reference to Exhibit 4 to
Form S-8, dated August 28, 1998 *
10.e. Form of Severance Pay Agreements, as revised and restated, between Huffy
Corporation and its Officers, incorporated by reference to Exhibit 10.e to Form
10-K for the fiscal year ended December 31, 1997 *
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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16
10.f. Description of Executive Medical Reimbursement Plan between Huffy Corporation
and certain executive officers and key employees, incorporated by reference to
Exhibit (10)(n) to Form 10-K for the fiscal year ended December 31, 1989 *
10.g Long Term Incentive Compensation Program, incorporated by reference to Exhibit
10.g to Form 10-K for the fiscal year ended December 31, 1997 *
10.h Huffy Corporation Capital Accumulation Plan Participation Agreement, between Huffy
Corporation and certain of its officers, in substantially the forms incorporated
by reference to Exhibit (19)(a) to Form 10-Q for the fiscal quarter ended
September 30, 1985, and to Exhibit 19(b) to Form 10-Q for the fiscal quarter ended
September 30, 1986 *
10.i Huffy Corporation Capital Accumulation Program Participation Agreement, between
Huffy Corporation and certain of its directors, in substantially the forms
incorporated by reference to Exhibit (19)(b) to Form 10-Q for the fiscal
quarter ended September 30, 1985, and to Exhibit 19(b) to Form 10-Q for the
fiscal quarter ended June 30, 1986 *
10.j Description of supplemental group life insurance arrangement between Huffy
Corporation and certain officers and key employees, incorporated by reference
to Exhibit (10)(aa) to Form 10-K for the fiscal year ended December 31, 1991 *
10.k Description of financial planning and tax preparation services between Huffy
Corporation and certain officers and key employees, incorporated by reference
to Exhibit (10)(dd) to Form 10-K for the fiscal year ended December 31, 1993 *
10.l Performance Incentive Plan of Huffy Corporation incorporated by reference to
Exhibit 10.1 to Form 10-K for the fiscal year ended December 31, 1997 *
10.m Supplemental Benefit Agreement, dated as of June 21, 1996, between Huffy
Corporation and Don R. Graber, incorporated by reference to Exhibit 10.u to
Form 10-K for the fiscal year ended December 31, 1996 *
10.n Supplemental/Excess Benefit Plan, dated as of January 1, 1988, incorporated by
reference to Exhibit (10)(aa) to Form 10-K for the fiscal year ended December
31, 1987 *
10.o First Amendment to Huffy Corporation Supplemental/Excess Benefit Plan,
effective as of January 1, 1988, incorporated by reference to Exhibit (10)(ee)
to Form 10-K for the fiscal year ended December 31, 1990 *
10.p Second Amendment to Huffy Corporation Supplemental/Excess Benefit Plan, dated
as of June 30, 1991, incorporated by reference to Exhibit (10)(y) to Form 10-K
for the fiscal year ended December 31, 1994 *
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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17
10.q Third Amendment to Huffy Corporation Supplemental/Excess Benefit Plan, dated as
of June 27, 1994, incorporated by reference to Exhibit (10)(2) to Form 10-K for
the fiscal year ended December 31, 1994 *
10.r Fourth Amendment to Huffy Corporation Supplemental/Excess Benefit Plan dated as
of May 26, 1995, incorporated by reference to Exhibit 10.s to Form 10-K for the
fiscal year ended December 31, 1997 *
10.s Fifth Amendment to Huffy Corporation Supplemental/Excess Benefit Plan,
effective as of July 15, 1996, incorporated by reference to Exhibit 10.z to
Form 10-K for the fiscal year ended December 31, 1996 *
10.t Sixth Amendment to Huffy Corporation Supplemental/Excess Benefit Plan,
effective as of June 15, 1997, incorporated by reference to Exhibit 10.u to
Form 10-K for the fiscal year ended December 31, 1997 *
10.u Seventh Amendment to Huffy Corporation Supplemental/Excess Benefit Plan,
effective as of December 22, 1997, incorporated by reference to Exhibit 10.v to
Form 10-K for the fiscal year ended December 31, 1997 *
10.v Huffy Corporation 1998 Restricted Share Plan, effective April 17, 1998,
incorporated by reference to Exhibit 3 to the Company's Proxy Statement dated
March 5, 1998 for the Annual Meeting of Shareholders held April 17, 1998 *
10.w Form of Restricted Share Agreements between Huffy Corporation and its Officers,
incorporated by reference to Exhibit 10.w to Form 10-K for the fiscal year
ended December 31, 1997 *
10.x Huffy Corporation Master Benefit Trust Agreement as Restated, dated June 9,
1995, incorporated by reference to Exhibit 10.aa for Form 10-K for the fiscal
year ended December 31, 1995 *
10.y First Amendment to Huffy Corporation Master Benefit Trust Agreement as
Restated, effective as of July 25, 1996, incorporated by reference to Exhibit
10.bb to Form 10-K for the fiscal year ended December 31, 1996 *
10.z Amendment No. 2 to Huffy Corporation Master Benefit Trust Agreement, dated
January 2, 1998 ***
10.aa Third Amendment to Huffy Corporation Master Benefit Trust Agreement, as
Restated, effective August 20, 1998 ***
10.bb Huffy Corporation 1987 Director Stock Option Plan, incorporated by reference to
Exhibit 19(a) to Form 10-Q for the fiscal quarter ended June 30, 1988 *
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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10.cc First Amendment to Huffy Corporation 1987 Director Stock Option Plan, effective
as of April 30, 1991, incorporated by reference to Exhibit (10)(nn) to Form
10-K for the fiscal year ended December 31, 1991 *
10.dd Second Amendment to Huffy Corporation 1987 Director Stock Option Plan,
effective as of December 15, 1991, incorporated by reference to Exhibit
(10)(oo) to Form 10-K for the fiscal year ended December 31, 1991 *
10.ee Third Amendment to Huffy Corporation 1987 Director Stock Option Plan, effective
as of February 15, 1996, incorporated by reference to Exhibit 10.ff to Form
10-K for the fiscal year ended December 31, 1996 *
10.ff Huffy Corporation 1998 Director Stock Option Plan, effective April 17, 1998,
incorporated by reference to Exhibit 1 to the Company's Proxy Statement dated
March 5, 1998 for the Annual Meeting of Shareholders held April 17, 1998 *
10.gg Huffy Corporation 1988 Stock Option Plan and Restricted Share Plan, as amended,
incorporated by reference to Exhibit 19(b) to Form 10-Q for the fiscal quarter
ended June 30, 1988; to Exhibit A to the Company's Proxy Statement dated March
13, 1992 for the Annual Meeting of Shareholders held April 24, 1992; and to
Annex I to the Company's Proxy Statement dated March 7, 1996 for the Annual
Meeting of Shareholders held April 26, 1996 *
10.hh Third Amendment to Huffy Corporation 1988 Stock Option Plan and Restricted
Share Plan, effective October 22, 1998 ***
10.ii Huffy Corporation 1998 Key Employee Stock Plan, effective April 17, 1998,
incorporated by reference to Exhibit 2 to the Company's Proxy Statement dated
March 5, 1998 for the Annual Meeting of Shareholders held April 17, 1998 *
10.jj First Amendment to Huffy Corporation 1998 Key Employee Stock Plan, effective
October 22, 1998 ***
10.kk Form of Subscription Agreement between Huffy Corporation and Don R. Graber,
incorporated by reference to Exhibit 10.ee to Form 10-K for the fiscal year
ended December 31, 1997 *
10.ll Huffy Corporation 1990 Directors' Retirement Plan incorporated by reference to
Exhibit (10)(qq) to Form 10-K for the fiscal year ended December 31, 1991 *
10.mm First Amendment to Huffy Corporation 1990 Directors' Retirement Plan, effective
as of February 15, 1996, incorporated by reference to Exhibit 10.ii to Form
10-K for the fiscal year ended December 31, 1996 *
10.nn Second Amendment to Huffy Corporation 1990 Directors' Retirement Plan,
effective as of February 15, 1996, incorporated by reference to Exhibit 10.jj
to Form 10-K for the fiscal year ended December 31, 1996 *
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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19
10.oo Description of Huffy Corporation Executive Automobile Policy incorporated by
reference to Exhibit 10(ii) to Form 10-K for the fiscal year ended December 31,
1994 *
OTHER FILINGS
13. Certain sections of the Annual Report to Shareholders for fiscal year ended
December 31, 1998 ***
19. Schedule of certain documents substantially identical to filed documents with
parties thereto and other material differing details ***
22. List of all direct and indirect Subsidiaries of the registrant:
Jurisdiction in
Name of Subsidiary which Incorporated
- ------------------ ------------------
Hufco Company Colorado
Hufco - Delaware Company Delaware
Huffy FSC, Inc. Virgin Islands
Huffy International Finance, N.V. Netherland Antilles
Huffy Risk Management, Inc. Ohio
Huffy Service First, Inc. Ohio
Huffy Sports, Inc. Wisconsin
Royce Union Bicycle Company Ohio
True Temper Hardware Company Ohio
True Temper Limited Whites Cross, Cork,
Ireland
Washington Inventory Service California
27. Financial Data Schedules ***
* Indicates that the exhibit is incorporated by reference into this Annual
Report on Form 10-K from a previous filing with the Commission.
*** Indicates that the exhibit is included as part of this Annual Report on
Form 10-K for the year ended December 31, 1998.
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