Harley-Davidson Reports Another Record First Quarter
MILWAUKEE, April 16 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 30, 2003. Revenue for the quarter was $1.1 billion compared with $927.8 million in the year-ago quarter, a 20.0 percent increase. First quarter diluted earnings per share (EPS) were 61 cents, a 56.4 percent increase compared with last year's 39 cents.
"We are pleased with our outstanding results for the first quarter of 2003 as we continue to execute our long-term Plan for Sustainable Growth," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "While the long winter experienced by much of our nation has delayed some retail sales, dealer confidence and other measures that we use to track Harley-Davidson motorcycle demand remain strong."
"With these indicators in mind and with construction of our new factory in York, Pennsylvania proceeding to plan, we are raising our shipment target for 2003 from 289,000 to 290,000 Harley-Davidson motorcycles," added Bleustein. The Company's new target is a 10% increase over 2002.
Motorcycles and Related Products Segment
First quarter revenue from Harley-Davidson motorcycles was $876.5 million, an increase of 17.2 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 70,608 units, up 5,939 units or 9.2 percent over last year.
First quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts(TM) and Genuine Motor Accessories(TM), totaled $159.8 million, a 21.9 percent increase over the year-ago quarter. Total P&A revenue includes $13.9 million from sales of 100th Anniversary P&A products sold during the quarter. Shipments of 100th Anniversary P&A products will continue through the second quarter. For the second half of 2003, the Company expects P&A revenues to grow at a rate slightly faster than the motorcycle unit growth rate.
General Merchandise, which consists of MotorClothes(R) apparel and collectibles, had first quarter revenue of $56.5 million, up 33.6 percent over the same period last year, with revenue from 100th Anniversary General Merchandise products accounting for $8.3 million. Shipments of 100th Anniversary products in this product line are now essentially complete, and therefore General Merchandise revenue for the remainder of the year is expected to be lower than in 2002.
First quarter gross margin for the Motorcycles and Related Products Segment was 36.2 percent of revenue compared to 34.0 percent in the first quarter of last year. First quarter gross margin was favorably impacted by wholesale motorcycle price increases and a richer product mix that were associated with 100th Anniversary product lines. Additional favorability was realized from foreign currency exchange rates. Consistent with the higher gross margin, operating margin increased from 18.7 percent in 2002 to 21.5 percent in 2003.
Retail Sales Data
Harley-Davidson retail motorcycle sales for the quarter were down 3.2 percent in the U.S., but up 15.7 percent in Europe and up 12.9 percent in Japan compared to the same period last year. "While retail sales for the United States were lower in the first three months of the year, we and our independent dealer network believe that many customers have delayed purchasing their motorcycles until the weather improves. We look forward to the spring riding season kicking into gear," said Bleustein. Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley- Davidson, Inc., reported operating income of $43.4 million, up $31.2 million compared to the year-ago quarter. The subsidiary benefited from its previously announced plan to securitize retail installment loans for Harley- Davidson motorcycles in the first quarter of 2003.
HDFS sold $550 million in motorcycle loans during the quarter and recorded a gain of $26.4 million. The subsidiary realized a larger than expected gain on this sale due to a favorable interest rate environment and a larger transaction size. This compares with a gain of $5.0 million on $93 million of loans securitized during the first quarter of 2002, which was the remaining portion of the fourth quarter 2001 securitization.
Based on anticipated interest rates and the competitive financial services environment, the Company expects HDFS' full year 2003 operating income to be approximately 25 percent higher than in 2002. Over the longer term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.
Operations generated cash of more than $311 million. The Company invested $41.8 million in capital expenditures and paid a dividend of $10.6 million.
During the quarter, the Company repurchased 500,000 shares of its common stock.
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 and sport-touring motorcycles. Harley-Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.
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 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) Three Months Ended March 30, March 31, 2003 2002 Net revenue $1,113,691 $927,845 Gross profit 403,032 315,277 Operating expenses 163,407 142,150 Operating income from motorcycles & related products 239,625 173,127 Financial services income 70,769 41,691 Financial services operating expense 27,412 29,540 Operating income from financial services 43,357 12,151 Corporate expenses 4,473 3,555 Total operating income 278,509 181,723 Interest income, net 5,957 2,246 Other income (expense), net (216) (765) Income before provision for taxes 284,250 183,204 Provision for income taxes 98,066 63,206 Net income $186,184 $119,998 Earnings per common share: Basic $0.62 $0.40 Diluted $0.61 $0.39 Weighted-average common shares: Basic 302,364 302,475 Diluted 304,560 305,618 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) March 30, Dec. 31, March 31, 2003 2002 2002 ASSETS Current assets: Cash and cash equivalents $242,712 $280,928 $378,535 Marketable securities 647,973 514,800 201,193 Accounts receivable, net 117,907 108,694 152,083 Finance receivables, net 1,050,330 855,771 738,396 Inventories 214,419 218,156 183,632 Other current assets 75,851 88,237 78,475 Total current assets 2,349,192 2,066,586 1,732,314 Finance receivables, net 451,973 589,809 582,366 Other long-term assets 1,198,609 1,204,822 1,084,624 Total assets $3,999,774 $3,861,217 $3,399,304 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & accrued expenses $654,343 $607,473 $532,183 Current portion of finance debt 300,060 382,579 366,286 Total current liabilities 954,403 990,052 898,469 Finance debt 380,000 380,000 380,000 Other long-term liabilities 157,194 152,831 179,068 Postretirement health care benefits 110,761 105,419 94,744 Shareholders' equity 2,397,416 2,232,915 1,847,023 Total liabilities and shareholders' equity $3,999,774 $3,861,217 $3,399,304 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands, except per share amounts) March 30, March 31, 2003 2002 Cash flows from operating activities: Net income $186,184 $119,998 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 45,877 42,601 Non cash expenses 20,211 13,009 Contributions to the pension plans - - Net changes in current assets and current liabilities 59,239 (6,723) Net cash provided by operating activities 311,511 168,885 Cash flows from investing activities: Capital expenditures (41,796) (53,358) Finance receivables, net (51,682) (285,568) Net increase in marketable securities (133,630) (5,182) Other, net (1,759) 722 Net cash used in investing activities (228,867) (343,386) Cash flows from financing activities: Net (decrease) increase in finance debt (91,193) 149,235 Dividends paid (10,610) (9,238) Purchase of common stock for treasury (20,164) (29,620) Issuance of common stock under employee stock plans 1,107 3,221 Net cash used in financing activities (120,860) 113,598 Net (decrease) increase in cash and cash equivalents (38,216) (60,903) Cash and cash equivalents: At beginning of period 280,928 439,438 At end of period $242,712 $378,535 Harley-Davidson, Inc. Net Revenue and Motorcycle Shipment Data Three Months Ended March 30, March 31, 2003 2002 NET REVENUE (in thousands) Harley-Davidson(R) motorcycles $876,507 $747,926 Buell(R) motorcycles 20,498 6,309 Parts & Accessories 159,844 131,143 General Merchandise 56,475 42,269 Other 367 198 Total net sales $1,113,691 $927,845 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 56,952 51,363 Export 13,656 13,306 Total 70,608 64,669 Motorcycle product mix: Touring 18,488 17,318 Custom 34,313 31,863 VRSC 4,659 3,160 Sportster(R) 13,148 12,328 Total 70,608 64,669 BUELL UNITS Motorcycle shipments: Buell (excluding Blast) 2,356 429 Buell Blast 585 901 2,941 1,330 Year-to-date Heavyweight (651+ cc) Motorcycle Retail Registrations (Units), data through month indicated. 2003 2002 % change United States - H-D (March) 47,929 49,507 -3.2% - Industry (March) 94,170 100,782 -6.6% Europe - H-D * (March) 5,380 4,651 15.7% - Industry (February) 31,874 37,159 -14.2% Japan - H-D (March) 2,137 1,892 12.9% - Industry (February) 5,284 5,402 -2.2% Only Harley-DavidsonR 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