Harley-Davidson Reports Record Third Quarter Earnings
MILWAUKEE, Oct. 15, 2003 -- Harley-Davidson, Inc. today announced record earnings for its third quarter ended September 28, 2003. Third quarter diluted earnings per share (EPS) were 62 cents, a 14.8 percent increase compared with last year's 54 cents. Revenue for the quarter was $1.134 billion, which compares to $1.135 billion in the year-ago quarter.
"I am pleased to report that we delivered our third quarter shipment target for Harley-Davidson(R) motorcycles while starting up our new factory for Softail(R) motorcycles in York, Pennsylvania," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "Achieving total revenues that equaled last year's record third quarter performance was also a significant accomplishment since last year's quarter benefited from the extraordinary impact of the introduction of our 100th Anniversary products." Revenue growth in the third quarter of 2002 was 28.4 percent for motorcycles, 32.3 percent for Parts & Accessories (P&A) and 88.5 percent for General Merchandise. "During this year's third quarter, we also successfully began production of our new 2004 line of motorcycles, including a completely redesigned Sportster(R) family," said Bleustein.
"Strong demand continued throughout the third quarter as our dealer network sold Harley-Davidson motorcycles in record numbers. Retail sales of Harley-Davidson motorcycles in the U.S. grew over 27 percent compared with last year's third quarter and resulted in a decline in dealer inventories of nearly 12,000 units during the quarter," added Bleustein.
Continued strong demand for Harley-Davidson motorcycles and planned increases in production capacity support the Company's new 2003 target of 291,000 units and a 2004 target of 317,000 units. The 2004 target represents an 8.9 percent increase over the 2003 target.
Motorcycles and Related Products Segment - Third Quarter Results
Third quarter revenue from Harley-Davidson motorcycles was $844.3 million, an increase of 1.4 percent over last year. Worldwide shipments of Harley-Davidson motorcycles in the third quarter totaled 67,458 units, in line with the Company's previously announced target of 67,500. This compares to last year's third quarter shipments of 67,474 motorcycles.
Third quarter revenue from P&A, which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $207.8 million. This is a 4.3 percent increase, or $8.5 million more than the year-ago quarter.
Third quarter revenue from General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $60.5 million, down 27.2 percent over the same period last year.
Both P&A and General Merchandise revenue benefited from strong sales of 100th Anniversary products in 2002. Excluding the $46 million of revenue from 100th Anniversary products, the P&A growth rate is 15.8 percent and the General Merchandise growth rate is 3.5 percent over 2002's third quarter.
For the longer term, the Company expects the growth rate for P&A revenues to be slightly higher than Harley-Davidson's motorcycle unit growth rate, and the General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate.
Third quarter gross margin improved from 34.9 percent of revenue in 2002 to 35.6 percent in 2003. Gross margin was impacted primarily by foreign currency exchange rates. Third quarter operating margin of 21.3 percent increased from 19.6 percent in 2002. This increase was driven primarily by higher gross margin and the timing of operating expenses in 2002 and 2003.
Motorcycle Retail Data - Nine Month Results
Retail sales of Harley-Davidson motorcycles in the United States were up 12.9 percent for the period January through September 2003 when compared to the same period last year. Harley-Davidson retail sales in Europe and Japan were up 9.5 and 12.6 percent, respectively, when compared with 2002. Retail sales of Harley-Davidson motorcycles have outpaced the heavyweight motorcycle industry in the U.S., Europe and Japan as shown in the accompanying table.
Financial Services Segment
Harley-Davidson Financial Services, Inc. (HDFS) reported third quarter operating income of $46.2 million, up 55.7 percent from $29.7 million in the year-ago quarter. The segment's performance was driven by continued strong marketplace acceptance of its finance and insurance products as well as a favorable interest rate environment.
The Company's third quarter securitization of $475 million of motorcycle retail loans resulted in a gain of $22.2 million that compares to a securitization of $390 million and a gain of $17.0 million during the third quarter of 2002. The gain as a percentage of loans securitized increased from 4.36 percent in the third quarter of 2002 to 4.67 percent in the third quarter of 2003, as HDFS continued to benefit in this low interest rate environment.
Annualized credit losses on a managed portfolio basis increased slightly in the first nine months of the year from 0.68 percent in 2002 to 0.73 percent in 2003.
The Company is raising its expectation for HDFS's operating income for 2003 to be approximately 55 percent higher than in 2002. Over the long term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.
Cash Flow - Nine Month Results
Operations generated cash of $862.3 million. The Company invested $124.4 million in capital expenditures, declared dividends of $34.9 million and repurchased 750,000 shares valued at $30.6 million.
Harley-Davidson, Inc. - Nine Month Results
For the nine month period, revenue totaled $3.466 billion, a 13.1 percent increase over the year-ago period. Diluted earnings per share were $1.90, an increase of 34.8 percent compared to the same period last year.
Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 214,091, an 8.3 percent increase over last year's 197,683. Harley-Davidson motorcycle revenue was $2.676 billion, a 14.3 percent increase over $2.341 billion in revenue in 2002. P&A revenue totaled $571.8 million, a 14.5 percent increase over last year's $499.3 million. General Merchandise revenue totaled $160.7 million, a 9.1 percent decrease compared with $176.7 million during the same period in 2002.
For the first nine months, HDFS operating income was $134.0 million, a $55.2 million increase over last year's first nine months.
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 and sport-touring motorcycles. Harley-Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.
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 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
Net revenue $1,133,641 $1,135,499 $3,466,204 $3,064,438
Gross profit 403,290 396,850 1,249,540 1,047,215
Operating expenses 161,317 174,635 501,189 468,952
Operating income from
motorcycles & related
products 241,973 222,215 748,351 578,263
Financial services income 74,660 55,669 216,716 157,509
Financial services
expense 28,447 25,990 82,680 78,639
Operating income from
financial services 46,213 29,679 134,036 78,870
Corporate expenses 3,367 2,420 12,023 9,619
Total operating income 284,819 249,474 870,364 647,514
Interest income, net 5,640 4,894 17,985 11,555
Other income (expense), net (275) (2,433) (5,150) (3,564)
Income before provision
for taxes 290,184 251,935 883,199 655,505
Provision for income
taxes 100,112 86,918 304,701 226,149
Net income $190,072 $165,017 $578,498 $429,356
Earnings per common share:
Basic $0.63 $0.55 $1.91 $1.42
Diluted $0.62 $0.54 $1.90 $1.41
Weighted-average common
shares:
Basic 302,313 302,109 302,280 302,264
Diluted 304,580 304,783 304,493 305,198
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
Sep 28, Dec 31, Sep 29,
2003 2002 2002
ASSETS
Current assets:
Cash and cash equivalents $942,021 $280,928 $642,099
Marketable securities 448,816 514,800 205,255
Accounts receivable, net 119,178 108,694 112,040
Finance receivables, net 814,837 855,771 813,596
Inventories 210,925 218,156 212,870
Other current assets 80,309 88,237 88,009
Total current assets 2,616,086 2,066,586 2,073,869
Finance receivables, net 704,430 589,809 508,269
Other long-term assets 1,180,078 1,204,822 1,151,476
Total assets $4,500,594 $3,861,217 $3,733,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $698,256 $607,473 $714,855
Current portion of finance debt 337,657 382,579 223,141
Total current liabilities 1,035,913 990,052 937,996
Finance debt 380,000 380,000 380,000
Other long-term liabilities 225,509 152,831 186,910
Postretirement health care benefits 121,886 105,419 100,552
Shareholders' equity 2,737,286 2,232,915 2,128,156
Total liabilities and shareholders'
equity $4,500,594 $3,861,217 $3,733,614
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
Sep 28, Sep 29,
2003 2002
Cash flows from operating activities:
Net income $578,498 $429,356
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 146,063 131,666
Non-cash expenses 60,550 45,654
Current year gain on securitizations (70,831) (43,423)
Collection of retained securitization
interests 82,671 57,627
Contributions to pension plans (12,000) (53,761)
Other operating cash flows 17,242 13,376
Net changes in current assets and
current liabilities 60,137 140,523
Net cash provided by operating
activities 862,330 721,018
Cash flows from investing activities:
Capital expenditures (124,390) (182,654)
Finance receivables, net (33,680) (268,163)
Net change in marketable securities 63,461 (9,244)
Other, net (206) 14,804
Net cash used in investing activities (94,815) (445,257)
Cash flows from financing activities:
Net (decrease) increase in finance debt (53,595) 6,090
Dividends (34,866) (30,706)
Purchase of common stock for treasury (30,563) (56,814)
Issuance of common stock under
employee stock plans 12,602 8,330
Net cash used in financing activities (106,422) (73,100)
Net increase in cash and cash
equivalents 661,093 202,661
Cash and cash equivalents:
At beginning of period 280,928 439,438
At end of period $942,021 $642,099
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
Three Months Ended Nine Months Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $844,264 $832,726 $2,676,196 $2,340,759
Buell(R) motorcycles 20,471 19,151 55,985 45,426
Parts & Accessories 207,766 199,284 571,809 499,273
General Merchandise 60,520 83,137 160,658 176,715
Other 620 1,201 1,556 2,265
$1,133,641 $1,135,499 $3,466,204 $3,064,438
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 54,829 54,721 173,712 158,598
Export 12,629 12,753 40,379 39,085
Total 67,458 67,474 214,091 197,683
Motorcycle product mix:
Touring 21,071 18,382 60,471 52,802
Custom 29,781 31,394 101,000 93,008
VRSC 3,230 4,724 12,259 13,248
Sportster(R) 13,376 12,974 40,361 38,625
Total 67,458 67,474 214,091 197,683
BUELL UNITS
Motorcycle shipments:
Buell (excluding Blast) 2,393 1,933 6,553 4,368
Buell Blast 88 1,240 811 3,444
2,481 3,173 7,364 7,812
Year-to-date Heavyweight (651+ cc)
Motorcycle Retail Registrations (Units),
data through month indicated.
2003 2002 % change
United States
- H-D (September) 187,392 165,968 12.9%
- Industry (August) 357,205 341,843 4.5%
Europe
- H-D * (September) 22,228 20,302 9.5%
- Industry (August) 246,130 258,044 -4.6%
Japan
- H-D (September) 8,420 7,477 12.6%
- Industry (August) 32,511 34,637 -6.1%
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: (data subject to update)
United States: Company reports, Motorcycle Industry Council
Europe: Company reports, Giral S.A.
Japan: Company reports, Industry sources
