Scooter x sales equals Huffy Corporation third quarter results within expected range
HUFFY CORPORATION today announced a net loss for the third quarter of $2.8 million or $0.27 per share of common stock, compared to net earnings of $5.2 million or $0.50 per common share for the third quarter of 2000. The loss from continuing operations for the third quarter was $2.8 million or $0.27 per common share, compared to earnings from continuing operations for the same period last year of $4.9 million or $0.47 per common share. Earnings during the third quarter of 2000 were favorably impacted by $1.4 million or $0.14 per common share as a result of the sale of surplus assets during the quarter, by earnings from discontinued operations and extraordinary gain.
For the nine-month period ended September 30, 2001, the net loss was $1.0 million or $0.10 per common share versus net income of $8.6 million or $0.84 per common share for the same period in 2000. The net loss from continuing operations for the nine-month period ended September 30, 2001, was $1.0 million or $0.10 per common share for the nine-month period, compared to net earnings of $4.4 million or $0.43 per common share for the same period last year. For the nine-month period ended September 30, 2000, discontinued operations contributed earnings of $4.9 million or $0.47 per common share while reconfiguration, refinancing, and extraordinary charges for the first nine months of 2000 generated a loss of $2.0 million of $0.20 per common share.
Net sales for the third quarter of 2001 were $77.9 million compared to net sales of $123.9 million for the third quarter of 2000, a decrease of $46.0 million or 37.1%, almost all attributable to lower sales of Micro(R) scooters. For the first nine months of 2001, sales were $246.0 million compared to sales of $346.0 million for the same period in 2000, a decrease of 28.9%. Gross margins for the third quarter were 9.8%, down approximately 44.3% from gross margins in the third quarter of 2000. Overall, gross margins were down 7.8 points during the third quarter versus the same period last year, with the majority of the decline coming from the lower scooter sales and a shift to lower price point sales in the bicycle business. On a year to date basis, corporate wide gross margins for continuing operations were 12.8%, a 2.7 point decrease when compared to gross margins for the first nine months of 2000.
In commenting on results for the third quarter, Don Graber, Chairman, President and CEO said, "When compared to the third quarter of 2000, one of the strongest quarters in the Company's history, we are obviously disappointed by this quarter's results. Huffy sold almost $44 million of scooters in the third quarter of 2000 and virtually no scooters in the third quarter of this year - that $44.0 million in scooter sales accounts for 95% of the difference in sales, year over year. The expenses related to the Schwinn/GT transaction, as anticipated, exceeded the amount recovered through the break-up fee by $0.8 million and the loss of the higher gross margins associated with scooters had a significant impact on the quarter.
"Despite the continued softness in the economy and the political uncertainty arising from the tragic events of September 11th, there were some bright spots in the quarter. Although the bicycle business continues to be soft, we are seeing strong sell through of new products, such as the new mini- bikes that are now arriving at retail. Sales in the combined basketball backboard and service businesses were up by 5.5% during the third quarter when compared to last year. Earnings in the backboard business were up by approximately 25% when compared to the third quarter in 2000. While the service business traditionally operates at levels close to break-even in the third quarter, this year excellent cost controls and aggressive pursuit of new business opportunities resulted in solid earnings for the quarter. Nonetheless, we continue to see a challenging retail environment and considerable uncertainty as to the direction of the economy over the next several months."
Graber concluded by saying, "We expect the fourth quarter to continue to be challenging as retailers delay or cancel current orders, seek extended payment terms from their suppliers and the instability of the political climate remains. We believe that the weak retail environment will contribute to weaker fourth quarter results than earlier forecast and anticipate that, for the year, earnings will be lower than the previously announced range of $0.00 to $0.12 per share, possibly leading to a modest loss. With cash and short-term investments of more than $14.0 million at the end of September, we nonetheless anticipate having cash in excess of $20.0 million at year-end, and remain well positioned to pursue opportunities to add to shareholder value. Our business model, our continuing emphasis on cost control and strong focus on cash generation have served us well thus far. However, given the current economic climate, we have raised our internal target for cost reductions, and are aggressively pursuing additional savings in both the cost-of-product and administrative areas. We fully expect to have lowered the annual SG&A spending rate by more than $10.0 million before the end of 2001. Finally, we will continue to work with Sheffield Merchant Banking Group, our external financial advisors, as we evaluate additional acquisition alternatives."
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Mark Harris contributes and publishes news editorial to http://www.the-scooters-report.com.
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