Harley-Davidson, Inc. Reports Record Third Quarter in 2004
 2004 Harley XL |
Company on Track to Achieve Record Year and Previously Stated Long-term Targets
MILWAUKEE, Oct. 13 -- Harley-Davidson, Inc. today announced record earnings for its third quarter ended September 26, 2004. Third quarter diluted earnings per share (EPS) were 77 cents, a 24.2 percent increase compared with last year's 62 cents. Revenue for the quarter was $1.30 billion, which compares to $1.13 billion in the year-ago quarter.
"We are pleased to report that Harley-Davidson has once again produced record revenue and earnings for the quarter," said Jeffrey L. Bleustein, Chairman and Chief Executive Officer of Harley-Davidson, Inc. "Our financial results for the first nine months of the year position us to deliver another record year and are in line with our previously stated long-term targets."
"Retail sales of Harley-Davidson(R) motorcycles in the U.S. are up 7.1 percent on a year-to-date basis through September. As expected, third quarter retail sales were down compared with last year's third quarter. In 2003, our dealers had a phenomenal third quarter as our 100th Anniversary celebration drove motorcycle sales up 27 percent versus the prior year's performance," added Bleustein.
"We are enthusiastic about the reception of our recently introduced 2005 model year motorcycles, in particular the new Softail(R) Deluxe, the Screamin' Eagle(R) Custom Vehicles, the Sportster(R) 883 Low, and the redesigned Softail(R) Springer(R) Classic. Looking ahead to 2005, we expect demand for Harley-Davidson motorcycles to continue to grow and support a wholesale unit target of 339,000 motorcycles, which represents a 7 percent increase over this year's target," said Bleustein.
Motorcycles and Related Products Segment - Third Quarter Results
Third quarter revenue from Harley-Davidson motorcycles was $996.6 million, an increase of $152.3 million or 18.0 percent over last year. Worldwide shipments of Harley-Davidson motorcycles in the third quarter totaled 80,578 units, consistent with the Company's previously announced target of 80,500. The Company's 2004 shipment target for Harley-Davidson motorcycles remains 317,000 units.
Third quarter revenue from Parts & Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $224.4 million. This is an 8.0 percent increase, or $16.6 million more than the same quarter a year-ago.
Third quarter revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $61.4 million, up 1.4 percent or $0.8 million over the same period last year.
Growth rates for P&A and General Merchandise fluctuate from quarter to quarter. However, for the long term the Company expects the growth rate for P&A revenue to be slightly higher than Harley-Davidson's motorcycle unit growth rate, and the General Merchandise revenue growth rate is expected to be lower than the motorcycle unit growth rate.
Third quarter gross margin improved to 38.0 percent of revenue in 2004 compared to 35.6 percent of revenue in 2003. The increase in margin was primarily driven by a combination of foreign currency exchange rates, the full integration of the new Softail Plant in York, Pennsylvania and other operational efficiencies. Consistent with the higher gross margin, operating margin increased from 21.3 percent in 2003 to 23.6 percent in 2004.
Motorcycle Retail Data
"U.S. Harley-Davidson motorcycle retail sales for the third quarter were down 9.8 percent versus the same period last year, which was the largest retail sales quarter ever. Standing up to the challenge, our dealers recorded the second largest third quarter in Company history this year, even with the adverse weather-related issues that have plagued the Southeast during much of that time," said Bleustein. Retail sales of Harley-Davidson motorcycles in the United States were up 7.1 percent for the period January through September 2004 when compared to the same period last year.
In markets outside the U.S., retail sales of Harley-Davidson motorcycles were down slightly during the first nine months of 2004, declining 0.9 percent or 400 units from the same period last year. While retail sales of Harley-Davidson motorcycles are growing in many of the Company's international markets, dealers in select markets have seen decreases due to difficult economic and market conditions. Harley-Davidson retail motorcycle sales were down 5.1 percent in Europe, due largely to weakness in the German economy, and down 10.2 percent in Japan.
Data is listed in the accompanying tables. Financial Services Segment
Harley-Davidson Financial Services, Inc. (HDFS) reported third quarter operating income of $50.1 million, up 8.4 percent from $46.2 million in the year-ago quarter. The segment's performance was driven by continued strong marketplace acceptance of its finance and insurance products.
The Company's third quarter securitization of $625 million of motorcycle retail loans resulted in a gain of $13.8 million during the third quarter of 2004. The gain as a percentage of loans securitized was 2.2 percent, in line with the Company's previously stated guidance of 2.0 to 2.5 percent in the current competitive market and interest rate environment.
Annualized credit losses on a managed portfolio basis decreased during the first nine months of the year from 0.73 percent in 2003 to 0.69 percent in 2004.
Over the long term, the Company expects the HDFS growth rate in operating income to be slightly higher than the Company's motorcycle unit growth rate.
Harley-Davidson, Inc. - Nine Month Results
For the nine month period in 2004, revenue totaled $3.79 billion, a 9.5 percent increase over the year-ago period. Diluted earnings per share were $2.29, an increase of 20.5 percent compared to the same period last year.
Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 236,702, a 10.6 percent increase over last year's 214,091. Harley-Davidson motorcycle revenue was $2.94 billion, a 9.7 percent increase over $2.68 billion in revenue in 2003. P&A revenue totaled $623.7 million, a 9.1 percent increase over last year's $571.8 million. General Merchandise revenue totaled $168.8 million, a 5.1 percent increase compared with $160.7 million during the same period in 2003.
HDFS operating income was $149.4 million, an 11.5 percent increase compared with $134.0 million during last year's first nine months.
Cash Flow - Nine Month Results
Operations generated cash of $956.9 million. The Company invested $109.9 million in capital expenditures, declared dividends of $82.4 million and repurchased 10.6 million shares at a cost of $564.1 million.
Company Background
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. 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 motorcycles. Harley-Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.
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 Harley-Davidson motorcycles it plans 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, terrorism 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) (Unaudited)
Three Months Ended Nine Months Ended
Sep 26, Sep 28, Sep 26, Sep 28,
2004 2003 2004 2003
Net revenue $1,300,684 $1,133,641 $3,794,193 $3,466,204
Gross profit 494,568 403,290 1,438,113 1,249,540
Operating expenses 187,980 161,317 529,344 501,189
Operating income from
motorcycles & related
products 306,588 241,973 908,769 748,351
Financial services income 77,484 74,660 239,038 216,716
Financial services expense 27,410 28,447 89,644 82,680
Operating income from
financial services 50,074 46,213 149,394 134,036
Corporate expenses 3,348 3,367 12,871 12,023
Total operating income 353,314 284,819 1,045,292 870,364
Investment income and
other, net 1,699 5,365 10,220 12,835
Income before provision for
taxes 355,013 290,184 1,055,512 883,199
Provision for income taxes 126,030 100,112 374,708 304,701
Net income $228,983 $190,072 $680,804 $578,498
Earnings per common share:
Basic $0.78 $0.63 $2.30 $1.91
Diluted $0.77 $0.62 $2.29 $1.90
Weighted-average common
shares:
Basic 294,031 302,313 295,362 302,280
Diluted 295,824 304,580 297,357 304,493
Harley-Davidson, Inc.
Condensed Consolidated
Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
Sep 26, Dec 31, Sep 28,
2004 2003 2003
ASSETS
Current assets:
Cash and cash equivalents $1,009,528 $812,449 $942,021
Marketable securities 518,808 510,211 448,816
Accounts receivable, net 139,022 112,406 119,178
Finance receivables, net 998,114 1,001,990 814,837
Inventories 234,728 207,726 210,925
Other current assets 84,155 84,345 80,309
Total current assets 2,984,355 2,729,127 2,616,086
Finance receivables, net 581,296 735,859 704,430
Other long-term assets 1,364,723 1,458,102 1,180,078
Total assets $4,930,374 $4,923,088 $4,500,594
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
expenses $693,073 $631,468 $698,256
Current portion of finance
debt 109,179 324,305 337,657
Total current liabilities 802,252 955,773 1,035,913
Finance debt 670,000 670,000 380,000
Other long-term liabilities 220,461 212,179 225,509
Postretirement health care
benefits 144,917 127,444 121,886
Shareholders' equity 3,092,744 2,957,692 2,737,286
Total liabilities and
shareholders' equity $4,930,374 $4,923,088 $4,500,594
Harley-Davidson, Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
Sep 26, Sep 28,
2004 2003
Cash flows from operating activities:
Net income $680,804 $578,498
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 160,765 146,063
Provision for long-term employee
benefits 47,143 57,842
Provision for finance credit losses 2,420 2,708
Gain on current year securitizations (58,302) (70,831)
Collection of retained securitization
interests 97,494 82,671
Contributions to pension plans - (12,000)
Tax benefit of stock options 42,919 9,031
Other operating cash flows 18,387 8,211
Net changes in current assets and
current liabilities (34,768) 60,137
Total adjustments 276,058 283,832
Net cash provided by operating activities 956,862 862,330
Cash flows from investing activities:
Capital expenditures (109,874) (124,390)
Finance receivables, net 182,959 (33,680)
Net change in marketable securities (11,764) 63,461
Other, net (8,868) (206)
Net cash provided by (used in) investing
activities 52,453 (94,815)
Cash flows from financing activities:
Net decrease in finance debt (214,290) (53,595)
Dividends (82,411) (34,866)
Purchase of common stock for treasury (564,132) (30,563)
Issuance of common stock under
employee stock plans 48,597 12,602
Net cash used in financing activities (812,236) (106,422)
Net increase in cash and cash
equivalents 197,079 661,093
Cash and cash equivalents:
At beginning of period 812,449 280,928
At end of period $1,009,528 $942,021
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
Three Months Ended Nine Months Ended
Sep 26, Sep 28, Sep 26, Sep 28,
2004 2003 2004 2003
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $996,552 $844,264 $2,935,621 $2,676,196
Buell(R) motorcycles 18,318 20,471 63,510 55,985
Parts & Accessories 224,381 207,766 623,715 571,809
General Merchandise 61,352 60,520 168,828 160,658
Other 81 620 2,519 1,556
$1,300,684 $1,133,641 $3,794,193 $3,466,204
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 66,859 54,829 191,705 173,712
Export 13,719 12,629 44,997 40,379
Total 80,578 67,458 236,702 214,091
Motorcycle product mix:
Touring 21,818 21,071 68,253 60,471
Custom 39,857 33,011 116,128 113,259
Sportster(R) 18,903 13,376 52,321 40,361
Total 80,578 67,458 236,702 214,091
BUELL UNITS
Motorcycle shipments:
Buell 2,472 2,481 7,793 7,364
Year-to-date Heavyweight (651+ cc)
Motorcycle Retail Registrations (Units),
data through month indicated.
2004 2003 % change
United States
- H-D (September) 201,852 188,402 7.1%
- Industry (September) 419,267 392,755 6.8%
Europe
- H-D (September) 21,096 22,228 -5.1%
- Industry (August) 285,821 274,047 4.3%
Japan
- H-D (September) 7,563 8,419 -10.2%
- Industry (August) 31,175 32,511 -4.1%
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
(H-D) data.
Data for Europe includes registrations in Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal,
Spain, Sweden, 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