Harley-Davidson Roars Into Its Second Century With Another Record Quarter
MILWAUKEE, April 14 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 28, 2004. Revenue for the quarter was $1.17 billion compared with $1.11 billion in the year-ago quarter, a 4.7 percent increase. First quarter diluted earnings per share (EPS) was 68 cents, an 11.5 percent increase compared with last year's 61 cents.
"Harley-Davidson's first quarter performance clearly demonstrates that the Company is on track to deliver both the short and long-term performance objectives which we established earlier this year," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc.
"By almost any measure, we are off to a very strong start in 2004 continuing the momentum of our 100th Anniversary. We delivered solid financial performance this quarter, and our U.S. dealer network posted the highest first quarter retail sales for Harley-Davidson motorcycles in its history -- 13 percent ahead of last year. In addition, we achieved our first quarter motorcycle production target, setting the pace to reach our goal of 317,000 Harley-Davidson motorcycles by year-end."
"The Company's continuing strong performance supports our longer-range objectives to satisfy demand for 400,000 Harley-Davidson motorcycles in 2007 and to deliver an annual earnings growth rate in the mid-teens. Harley- Davidson's Board of Directors demonstrated their confidence in our stated direction by approving the repurchase of 7.8 million shares of stock during the quarter," said Bleustein.
Motorcycles and Related Products Segment
First quarter revenue from Harley-Davidson(R) motorcycles was $919 million, an increase of 4.8 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 74,090, up 3,482 units or 4.9 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 $169 million, a 5.8 percent increase over the year-ago quarter. When revenue from 100th Anniversary P&A products sold during the first quarter of 2003 is excluded, P&A revenue would have been up 15.9 percent. For the longer term, the Company expects P&A revenue 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 $54 million, down 3.7 percent over the same period last year. When revenue from 100th Anniversary General Merchandise products shipped in the first quarter of 2003 is excluded, General Merchandise revenue would have been up 12.7 percent. For the longer term, the Company expects General Merchandise to grow at a rate lower than the motorcycle unit growth rate.
First quarter gross margin for the Motorcycles and Related Products Segment was 37.8 percent of revenue compared to 36.2 percent in the first quarter of last year. First quarter gross margin was favorably impacted primarily by foreign currency exchange rates and to a lesser extent by operating efficiencies. Consistent with the higher gross margin, operating margin increased from 21.5 percent in 2003 to 22.9 percent in 2004.
Motorcycle Retail Sales Data
Harley-Davidson retail motorcycle sales for the quarter were up 11.6 percent worldwide driven by strong performance in the U.S. which was up 13.0 percent. 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 $50 million, up $7 million compared to the year-ago quarter, or 16.0 percent. The subsidiary continued to experience strong customer acceptance of its finance and insurance products.
HDFS sold $625 million in retail motorcycle loans during the quarter and recorded a gain of $25.2 million. This compares with a gain of $26.4 million on $550 million of loans securitized during the first quarter of 2003. The gain as a percentage of loans sold is within management's expectations of 3 to 4 percent in the current interest rate environment.
Annualized credit losses on a managed portfolio basis decreased during the quarter from 0.84 percent in 2003 to 0.77 percent in 2004.
For the longer term, the Company expects the HDFS operating income growth rate to be slightly higher than the Company's motorcycle unit growth rate.
Operations generated cash of more than $350 million during the quarter. The Company invested $31 million in capital expenditures, paid a dividend of $24 million and repurchased 7.8 million shares of its common stock for a total cost of $404 million.
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) Three Months Ended March 28, March 30, 2004 2003 Net revenue $1,165,701 $1,113,691 Gross profit 440,129 403,032 Operating expenses 173,031 163,407 Operating income from motorcycles & related products 267,098 239,625 Financial services income 80,494 70,769 Financial services expense 30,181 27,412 Operating income from financial services 50,313 43,357 Corporate expenses 4,489 4,473 Total operating income 312,922 278,509 Interest income, net 4,970 5,957 Other income (expense), net (713) (216) Income before provision for taxes 317,179 284,250 Provision for income taxes 112,599 98,066 Net income $204,580 $186,184 Earnings per common share: Basic $0.69 $0.62 Diluted $0.68 $0.61 Weighted-average common shares: Basic 297,832 302,364 Diluted 299,932 304,560 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) March 28, Dec. 31, March 30, 2004 2003 2003 ASSETS Current assets: Cash and cash equivalents $590,643 $812,449 $395,943 Marketable securities 512,044 510,211 494,742 Accounts receivable, net 132,270 112,406 117,907 Finance receivables, net 1,172,532 1,001,990 1,050,330 Inventories 222,811 207,726 214,419 Other current assets 76,975 84,345 75,851 Total current assets 2,707,275 2,729,127 2,349,192 Finance receivables, net 558,737 735,859 451,973 Other long-term assets 1,423,958 1,458,102 1,198,609 Total assets $4,689,970 $4,923,088 $3,999,774 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & accrued expenses $699,958 $631,468 $654,343 Current portion of finance debt 195,703 324,305 300,060 Total current liabilities 895,661 955,773 954,403 Finance debt 670,000 670,000 380,000 Other long-term liabilities 223,018 212,179 157,194 Postretirement health care benefits 134,091 127,444 110,761 Shareholders' equity 2,767,200 2,957,692 2,397,416 Total liabilities and shareholders' equity $4,689,970 $4,923,088 $3,999,774 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended March 28, March 30, 2004 2003 Cash flows from operating activities: Net income $204,580 $186,184 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 50,947 45,877 Non cash expenses 30,576 18,233 Current year gain on securitizations (25,240) (26,423) Collection of retained securitization interests 30,942 18,558 Contributions to the pension plans - - Other operating cash flows 9,108 1,978 Net changes in current assets and current liabilities 49,977 47,690 Net cash provided by operating activities 350,890 292,097 Cash flows from investing activities: Capital expenditures (30,990) (41,796) Finance receivables, net 11,955 (32,268) Net increase in marketable securities (971) 19,601 Other, net (266) (1,759) Net cash used in investing activities (20,272) (56,222) Cash flows from financing activities: Net (decrease) increase in finance debt (140,522) (91,193) Dividends paid (23,587) (10,610) Purchase of common stock for treasury (403,519) (20,164) Issuance of common stock under employee stock plans 15,204 1,107 Net cash used in financing activities (552,424) (120,860) Net (decrease) increase in cash and cash equivalents (221,806) 115,015 Cash and cash equivalents: At beginning of period 812,449 280,928 At end of period $590,643 $395,943 Harley-Davidson, Inc. Net Revenue and Motorcycle Shipment Data (Unaudited) Three Months Ended March 28, March 30, 2004 2003 NET REVENUE (in thousands) Harley-Davidson(R) motorcycles $918,806 $876,507 Buell(R) motorcycles 22,083 20,498 Parts & Accessories 169,188 159,844 General Merchandise 54,408 56,475 Other 1,216 367 Total net sales $1,165,701 $1,113,691 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 59,744 56,952 Export 14,346 13,656 Total 74,090 70,608 Motorcycle product mix: Touring 21,404 18,488 Custom 34,039 34,313 VRSC 2,825 4,659 Sportster(R) 15,822 13,148 Total 74,090 70,608 BUELL UNITS Motorcycle shipments: Buell (excluding Blast) 2,186 2,356 Buell Blast 417 585 2,603 2,941 Year-to-date Heavyweight (651+ cc) Motorcycle Retail Registrations (Units), data through month indicated. 2004 2003 % change United States - H-D (March) 54,216 47,992 13.0% - Industry (March) 102,407 94,170 8.7% Europe - H-D (March) 5,376 5,367 0.2% - Industry (February) 32,202 33,852 -4.9% Japan - H-D (March) 1,929 2,137 -9.7% - Industry (February) 4,350 5,284 -17.7% Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson (H-D) data. Industry data for Europe includes sales in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Data Sources: (subject to update) United States: Motorcycle Industry Council, Europe: Company reports, Giral S.A. Japan: Company reports, Industry sources