Harley-Davidson Reports Record Fourth Quarter and 17th Consecutive Record Year
Harley-Davidson Reports Record Fourth Quarter and 17th Consecutive Record Year
Net Income of $580 Million on Revenue of $4.1 Billion
MILWAUKEE, Jan. 21, 2003;Harley-Davidson, Inc. today announced record revenue and earnings
for its fourth quarter and year ended December 31, 2002. Revenue for the
quarter was $1.03 billion compared with $905.9 million in the year-ago
quarter, a 13.3 percent increase. Net income for the quarter was
$150.9 million, an increase of 27.5 percent over the year ago quarter. Fourth
quarter diluted earnings per share (EPS) were 49 cents, a 25.6 percent
increase compared with last year's 39 cents. Revenue for the full year was
$4.1 billion, compared with $3.4 billion in 2001, a 20.1 percent increase.
Net income for the year was $580.2 million, a 32.5 percent increase versus
last year's $437.7 million, while diluted EPS for the full year were $1.90, a
32.9 percent increase compared with $1.43 in 2001.
"The year 2002 was our 17th consecutive year of record revenue and net
income," said Jeffrey L. Bleustein, chairman and chief executive officer of
Harley-Davidson, Inc. "Worldwide retail sales of Harley-Davidson(R)
motorcycles were strong in 2002 with 15.9 percent unit growth over the prior
year. Strong demand for our products gives us confidence in maintaining our
production goal of 289,000 Harley-Davidson motorcycles for 2003."
"We believe that the excitement surrounding our 100th Anniversary
celebration combined with the strength of the underlying fundamentals of our
motorcycle business are helping us continue to grow -- even in the face of a
weak global economy. We are fulfilling the dreams of many new customers as we
welcome them into the Harley-Davidson family," said Bleustein.
Motorcycles and Related Products Segment -- Fourth Quarter Results
Revenue from Harley-Davidson motorcycles was $820.3 million, an increase
of $86.1 million or 11.7 percent over the same period last year. Fourth
quarter shipments of Harley-Davidson motorcycles totaled 65,970 units. The
Company had four fewer workdays in the fourth quarter of 2002 compared with
2001, yet shipped 2,435 more units, or 3.8 percent more than the same period
last year.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor
Parts and Genuine Motor Accessories, totaled $129.9 million, an increase of
$18.5 million, or 16.6 percent over the year-ago quarter. Revenue from
General Merchandise, which consists of MotorClothes(TM) apparel and
collectibles, totaled $54.8 million, an increase of $7.3 million or 15.4
percent. Revenue from 100th Anniversary P&A products was $12.7 million and
revenue from General Merchandise associated with the 100th Anniversary was
$12.5 million. "We are very pleased with sales of our 100th Anniversary
products, but we realize that not all of these were incremental because some
substitution from standard offerings to commemorative anniversary products did
occur," said Bleustein.
Fourth quarter gross margin was 36.1 percent of revenue, up from 34.5
percent last year. Gross margin improved primarily due to wholesale
motorcycle price increases, favorable product mix and foreign exchange
effects.
Fourth quarter operating margin for the Motorcycles and Related Products
Segment was 20.7 percent of revenue, which was better than last year's fourth
quarter operating margin of 18.6 percent. The increase in operating margin
was driven primarily by the increase in gross margin.
Retail Sales Data
Harley-Davidson retail motorcycle sales for the year grew in the U.S.
(18.3 percent), Europe (7.6 percent) and Japan (5.9 percent) compared to the
same period last year. The most recent available data is listed in the
accompanying tables.
Financial Services Segment -- Fourth Quarter Results
Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-
Davidson, Inc., reported fourth quarter operating income of $25.4 million, up
$8.4 million or 49 percent compared to the year-ago quarter.
"Harley-Davidson Financial Services had a fantastic quarter and year, both
in financial performance and in helping to make the dream of owning a Harley-
Davidson motorcycle a reality," said Bleustein. The subsidiary benefited from
the increase in Harley-Davidson's U.S. motorcycle sales, growing acceptance of
its consumer financing program and decreased cost of funds due to lower market
interest rates.
Pension Plan Activities
During the quarter, the Company contributed $100 million to its various
pension plans, which brought the total year contribution to $154 million,
compared with a contribution of $19 million in 2001. The Company also
responded to current market conditions by lowering its pension plan discount
rate from 8.0 to 7.25 percent.
Cash Flow
Operations generated cash of more than $779 million in 2002, providing the
Company the ability to invest $324 million in capital expenditures, repurchase
1.1 million shares of company stock for $57 million, pay $41 million in
dividends and contribute $154 million to the Company's pension plans, even as
the Company increased cash and marketable securities by $160 million.
Twelve Month Results
For the fiscal year ended 2002, total Harley-Davidson motorcycle shipments
were 263,653 units compared with 234,461 units in 2001, a 12.5 percent
increase. Harley-Davidson motorcycle revenue was $3.16 billion, an increase
of $489.7 million or 18.3 percent.
P&A revenue totaled $629.2 million, a 23.5 percent increase, while General
Merchandise revenue totaled $231.5 million, a 41.2 percent increase compared
with 2001.
On a longer-term basis, the Company expects the growth rate for P&A
revenues to be slightly higher than the Harley-Davidson motorcycle unit growth
rate. The General Merchandise growth rate is expected to be lower than the
motorcycle unit growth rate over the long term.
Full year operating income for HDFS was $104.2 million, an increase of
$43.0 million or 70.1 percent compared to 2001. The Company expects 2003 HDFS
operating income to grow approximately 20 percent over 2002 performance.
Harley-Davidson, Inc. is the parent company for the group of companies
doing business as Harley-Davidson Motor Company, Buell Motorcycle Company and
Harley-Davidson Financial Services, Inc. Harley-Davidson Motor Company, the
only major U.S.-based motorcycle manufacturer, produces heavyweight
motorcycles and offers a complete line of motorcycle parts, accessories,
apparel, and general merchandise. Buell Motorcycle Company produces sport and
sport-touring motorcycles. Harley-Davidson Financial Services, Inc. provides
wholesale and retail financing and insurance programs to Harley-Davidson
dealers and customers.
Forward-Looking Statements
The Company intends that certain matters discussed in this release are
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because
the context of the statement will include words such as the Company
"believes," "anticipates," "expects" or "estimates" or words of similar
meaning. Similarly, statements that describe future plans, objectives,
outlooks, targets or goals are also forward-looking statements. Such forward-
looking statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated as of the
date of this release. Certain of such risks and uncertainties are described
below. Shareholders, potential investors, and other readers are urged to
consider these factors in evaluating the forward-looking statements and
cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements included in this release are only made as of the
date of this release, and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.
The Company's ability to meet the targets and expectations noted depends
upon, among other factors, the Company's ability to (i) continue to realize
production efficiencies at its production facilities through the
implementation of innovative manufacturing techniques and other means, (ii)
successfully implement production capacity increases in its facilities, (iii)
successfully introduce new products and services, (iv) avoid unexpected P&A
/general merchandise supplier backorders, (v) sell all of the motorcycles it
has the capacity to produce, (vi) continue to develop the capacity of its
distributor and dealer network, (vii) avoid unexpected changes in the
regulatory environment for its products, (viii) successfully adjust to foreign
currency exchange rate fluctuations, (ix) successfully adjust to interest rate
fluctuations, and (x) successfully manage changes in the credit quality of
HDFS's loan portfolio.
In addition, the Company could experience delays in the operation of
manufacturing facilities as a result of work stoppages, difficulty with
suppliers, natural causes or other factors. Risk factors are also disclosed in
documents previously filed by the Company with the Securities and Exchange
Commission.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Net revenue $1,026,532 $905,887 $4,090,970 $3,406,786
Gross profit 370,626 312,883 1,417,841 1,152,971
Operating expenses 157,768 144,457 626,720 539,660
Operating income
from motorcycles
& related products 212,858 168,426 791,121 613,311
Financial services
income 53,991 49,064 211,500 181,545
Financial services
operating expense 28,634 32,094 107,273 120,272
Operating income from
financial services 25,357 16,970 104,227 61,273
Corporate expenses 3,027 2,944 12,646 12,083
Total operating income 235,188 182,452 882,702 662,501
Interest income, net 4,986 3,386 16,541 17,478
Other income (expense),
net (9,852) (3,762) (13,416) (6,524)
Income before
provision for taxes 230,322 182,076 885,827 673,455
Provision for
income taxes 79,461 63,726 305,610 235,709
Net income $150,861 $118,350 $580,217 $437,746
Earnings per common share:
Basic $0.50 $0.39 $1.92 $1.45
Diluted $0.49 $0.39 $1.90 $1.43
Weighted-average common
shares:
Basic 302,395 302,343 302,297 302,506
Diluted 305,037 305,512 305,158 306,248
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Dec. 31, Dec 31,
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $280,928 $439,438
Marketable securities 514,800 196,011
Accounts receivable, net 108,694 118,843
Finance receivables, net 855,771 656,421
Inventories 218,156 181,115
Other current assets 88,237 73,436
Total current assets 2,066,586 1,665,264
Finance receivables, net 589,809 379,335
Other long-term assets 1,204,822 1,073,896
Total assets $3,861,217 $3,118,495
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $607,473 $499,059
Current portion of finance debt 382,579 217,051
Total current liabilities 990,052 716,110
Finance debt 380,000 380,000
Other long-term liabilities 152,831 176,190
Postretirement health care benefits 105,419 89,912
Shareholders' equity 2,232,915 1,756,283
Total liabilities and shareholders' equity $3,861,217 $3,118,495
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, except per share amounts)
Dec. 31, Dec 31,
2002 2001
Cash flows from operating activities:
Net income $580,217 $437,746
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 175,778 153,061
Non cash expenses 123,360 107,534
Contributions to the pension plans (153,636) (19,294)
Net changes in current assets and
current liabilities 53,827 77,761
Net cash provided by operating activities 779,546 756,808
Cash flows from investing activities:
Capital expenditures (323,866) (290,381)
Finance receivables, net (398,768) (275,754)
Net increase in marketable securities (318,171) (196,011)
Other, net 22,813 (9,361)
Net cash used in investing activities (1,017,992) (771,507)
Cash flows from financing activities:
Net increase in finance debt 165,528 152,542
Dividends paid (41,457) (35,428)
Purchase of common stock for treasury (56,814) (111,552)
Issuance of common stock under employee
stock plans 12,679 28,839
Net cash used in financing activities 79,936 34,401
Net (decrease) increase in cash and
cash equivalents (158,510) 19,702
Cash and cash equivalents:
At beginning of period 439,438 419,736
At end of period $280,928 $439,438
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $820,287 $734,183 $3,161,046 $2,671,314
Buell(R) motorcycles 21,523 12,674 66,949 61,673
Parts & Accessories 129,929 111,454 629,202 509,623
General Merchandise 54,788 47,474 231,503 163,909
Other 5 102 2,270 267
Total net sales $1,026,532 $905,887 $4,090,970 $3,406,786
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 54,235 53,616 212,833 186,915
Export 11,735 9,919 50,820 47,546
Total 65,970 63,535 263,653 234,461
Motorcycle product mix:
Touring 17,911 17,557 70,713 65,403
Custom 30,753 30,584 123,761 116,541
VRSC 4,760 1,703 18,008 1,703
Sportster(R) 12,546 13,691 51,171 50,814
Total 65,970 63,535 263,653 234,461
BUELL UNITS
Motorcycle shipments:
Buell (excluding Blast) 2,519 1,208 6,887 6,436
Buell Blast 612 963 4,056 3,489
Total 3,131 2,171 10,943 9,925
Year-to-date Heavyweight (651+ cc)
Motorcycle Retail Registrations (Units),
data through month indicated.
2002 2001 % change
United States
- H-D (December) 209,944 177,414 +18.3
- Industry (December) 442,326 394,325 +12.2
Europe
- H-D * (December) 24,419 22,704 +7.6
- Industry (November) 296,611 285,785 +3.8
Japan
- H-D (December) 9,521 8,989 +5.9
- Industry (November) 43,798 45,470 -3.7
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
(H-D) data.
H-D * Includes Harley-Davidson sales in all European countries.
Industry data for Europe includes sales only in Austria, Belgium, France,
Germany, Italy, Netherlands, Spain, Switzerland and United Kingdom.
Data Sources: (subject to update)
United States: Motorcycle Industry Council
Europe: Company reports, Giral S.A.
Japan: Company reports, Industry sources