Harley-Davidson Sets Records for Quarterly Revenue and Earnings
U.S. Retail Sales of Harley-Davidson Motorcycles Climb 12.1% during the Quarter
MILWAUKEE, Oct. 12 -- Harley-Davidson, Inc. today announced record earnings for its third quarter ended September 25, 2005. Third quarter diluted earnings per share (EPS) were 96 cents, a 24.7 percent increase compared with 77 cents last year. Net income for the quarter was $265.0 million, up $36.0 million or 15.7 percent. Revenue for the quarter was $1.43 billion compared to $1.30 billion in the year-ago quarter.
"Harley-Davidson had a great third quarter," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. "Our motorcycles sold at a brisk pace in all of our worldwide markets. In the U.S., retail sales of Harley- Davidson(R) motorcycles rose 12 percent during the quarter, and in Europe and Japan, retail sales were up 11.5 percent and 13 percent, respectively. Year- to-date, Harley-Davidson worldwide retail sales were up approximately 7 percent."
"We are pleased with these third quarter retail sales results and the positive response to our exciting line of 2006 motorcycles," said Ziemer. "We introduced six brand new models and made significant enhancements to each of our motorcycle families this year, and the changes have been very well received by our dealers, the motorcycle press and our retail customers. Our third quarter results keep us on track with our previously disclosed guidance for 2005 and move us closer to achieving the Company's 20th consecutive year of record revenue and earnings," said Ziemer.
"Harley-Davidson's current performance is outstanding and we have great new products and customer experiences planned for next year. However, as we look ahead we are watching the economy carefully. Given the uncertainty related to consumer confidence, increasing fuel prices and rising interest rates, we are setting a shipment target range of 348,000 to 352,000 Harley- Davidson motorcycles for 2006. Consistent with this more conservative outlook, we are also broadening our long-term guidance on wholesale unit growth to 5 to 9 percent annually. This will support an annual earnings per share growth target in the range of 11 to 17 percent," said Ziemer.
Motorcycles and Related Products Segment - Third Quarter Results
Third quarter revenue from Harley-Davidson motorcycles was $1.11 billion, an increase of $113.6 million or 11.4 percent over last year. Worldwide wholesale shipments of Harley-Davidson motorcycles in the third quarter totaled 87,585 units, up 8.7 percent from the year-ago period. The Company's 2005 shipment target for Harley-Davidson motorcycles remains at 329,000 units.
Third quarter revenue from Parts & Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $231.2 million. This is a 3.0 percent increase, or $6.8 million more than the same quarter a year-ago.
Third quarter revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $64.5 million, up 5.1 percent or $3.2 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 39.2 percent of revenue in 2005 compared to 38.0 percent of revenue in 2004. The increase in margin was primarily driven by a favorable motorcycle product mix. Consistent with the higher gross margin, operating margin increased to 25.6 percent in 2005 from 23.6 percent in 2004.
Motorcycle Retail Data
During the third quarter, worldwide retail sales of Harley-Davidson motorcycles grew 12.1 percent. Sales of Harley-Davidson motorcycles outpaced the total industry in each of the Company's major markets. Data are listed in the accompanying tables.
On a year-to-date basis, Harley-Davidson motorcycle sales were up 5.0 percent in the U.S., 19.3 percent in Europe, and 11.4 percent in Japan.
Industry-wide sales in the 651+cc segment in the U.S. were up 4.3 percent year to date. Through August, retail sales in Europe were down 1.4 percent and in Japan, they were down 1.5 percent.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported third quarter operating income of $47.6 million, down 5.0 percent from $50.1 million in the year-ago quarter. This decrease was primarily driven by a lower securitization gain versus the third quarter of 2004.
The third quarter securitization of $650 million in motorcycle retail loans resulted in a gain of $9.2 million, which is $4.6 million less than the gain in the third quarter of 2004. The 1.4 percent gain on the securitization as a percentage of loans securitized is consistent with management's prior guidance. In the current competitive market and interest rate environment, HDFS expects fourth quarter securitization gains in the range of 1.0 to 1.4 percent.
Annualized credit losses on a managed portfolio basis increased during the first nine months of 2005 to 0.97 percent from 0.69 percent in 2004. The increase is due to lower recovery rates and a higher incidence of loss.
For the full year 2005, HDFS expects operating income to be approximately equal to that achieved 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 first nine months of 2005, revenue totaled $4.00 billion, a 5.4 percent increase over the year-ago period. Diluted earnings per share were $2.57, an increase of 12.2 percent compared to the same period last year. Net income for the nine months was $729.6 million, up $48.8 million or 7.2 percent.
Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 241,429 units, a 2.0 percent increase over last year's 236,702 units. Harley-Davidson motorcycle revenue was $3.10 billion, a 5.4 percent increase over $2.94 billion in revenue in 2004. P&A revenue totaled $645.8 million, a 3.5 percent increase over last year's $623.7 million. General Merchandise revenue totaled $187.4 million, an 11.0 percent increase compared with $168.8 million during the same period in 2004.
HDFS operating income was $152.2 million, a 1.8 percent increase compared with $149.4 million during the first nine months of 2004.
Cash Flow - Nine Month Results
Operations generated almost $1 billion of cash during the first nine months of 2005. This cash flow along with prior cash reserves enabled the Company to make a $102 million contribution to the post-retirement health care trusts, invest $122 million in capital expenditures, pay $124 million in dividends and repurchase $1 billion of common stock. The Company repurchased 20.6 million shares of its common stock at an average cost of $49 per share during the first and second quarters of 2005.
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.
Harley-Davidson, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) (Unaudited) Three Months Ended Nine Months Ended Sep 25, Sep 26, Sep 25, Sep 26, 2005 2004 2005 2004 Net revenue $1,431,151 $1,300,684 $3,999,879 $3,794,193 Gross profit 561,272 494,568 1,525,989 1,438,113 Operating expenses 194,270 187,980 540,780 529,344 Operating income from motorcycles & related products 367,002 306,588 985,209 908,769 Financial services income 81,444 77,484 255,558 239,038 Financial services expense 33,869 27,410 103,403 89,644 Operating income from financial services 47,575 50,074 152,155 149,394 Corporate expenses 3,715 3,348 18,001 12,871 Total operating income 410,862 353,314 1,119,363 1,045,292 Investment income and other, net (79) 1,699 11,739 10,220 Income before provision for taxes 410,783 355,013 1,131,102 1,055,512 Provision for income taxes 145,829 126,030 401,542 374,708 Net income $264,954 $228,983 $729,560 $680,804 Earnings per common share: Basic $0.97 $0.78 $2.58 $2.30 Diluted $0.96 $0.77 $2.57 $2.29 Weighted-average common shares: Basic 274,415 294,031 282,519 295,362 Diluted 275,460 295,824 283,406 297,357 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) Sep 25, Dec. 31, Sep 26, 2005 2004 2004 ASSETS Current assets: Cash and cash equivalents $437,007 $275,159 $484,578 Marketable securities 580,826 1,336,909 1,043,758 Accounts receivable, net 139,759 121,333 139,022 Finance receivables, net 1,161,289 1,207,124 998,114 Inventories 232,240 226,893 234,728 Other current assets 114,568 98,854 84,155 Total current assets 2,665,689 3,266,272 2,984,355 Finance receivables, net 784,785 905,176 581,296 Other long-term assets 1,243,994 1,311,845 1,364,723 Total assets $4,694,468 $5,483,293 $4,930,374 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & accrued expenses $863,210 $677,255 $693,073 Current portion of finance debt - 495,441 109,179 Total current liabilities 863,210 1,172,696 802,252 Finance debt 776,626 800,000 670,000 Other long-term liabilities 134,786 142,278 220,461 Postretirement healthcare benefits 57,732 149,848 144,917 Shareholders' equity 2,862,114 3,218,471 3,092,744 Total liabilities and shareholders' equity $4,694,468 $5,483,293 $4,930,374 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine months ended Sep 25, Sep 26, 2005 2004 Cash flows from operating activities: Net income $729,560 $680,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 159,773 160,765 Provision for long-term employee benefits 62,224 47,143 Gain on current year securitizations (42,355) (58,302) Net change in wholesale finance receivables 17,529 23,811 Contributions to pension & postretirement plans (109,000) - Tax benefit from the exercise of stock options - 42,919 Other 18,438 25,788 Net changes in current assets and current liabilities 144,369 20,055 Total adjustments 250,978 262,179 Net cash provided by operating activities 980,538 942,983 Cash flows from investing activities: Capital expenditures (122,128) (109,874) Finance receivables, net 93,967 99,344 Collection of retained securitization interests 84,766 97,494 Net change in marketable securities 755,268 (53,594) Other, net (10,586) (8,868) Net cash provided by investing activities 801,287 24,502 Cash flows from financing activities: Net decrease in finance debt (510,720) (214,290) Dividends (124,330) (82,411) Purchase of common stock for treasury (1,014,645) (564,132) Excess tax benefits from share based payments 5,319 - Issuance of common stock under employee stock plans 24,399 48,597 Net cash used in financing activities (1,619,977) (812,236) Net increase in cash and cash equivalents 161,848 155,249 Cash and cash equivalents: At beginning of period 275,159 329,329 At end of period $437,007 $484,578 Note: Certain prior year amounts have been reclassified to conform to the current year presentation. Harley-Davidson, Inc. Net Revenue and Motorcycle Shipment Data Three Months Ended Nine Months Ended Sep 25, Sep 26, Sep 25, Sep 26, 2005 2004 2005 2004 NET REVENUE (in thousands) Harley-Davidson(R) motorcycles $1,110,173 $996,552 $3,095,229 $2,935,621 Buell(R) motorcycles 25,267 18,318 71,241 63,510 Parts & Accessories 231,161 224,381 645,819 623,715 General Merchandise 64,506 61,352 187,375 168,828 Other 44 81 215 2,519 $1,431,151 $1,300,684 $3,999,879 $3,794,193 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 72,249 66,859 192,124 191,705 Export 15,336 13,719 49,305 44,997 Total 87,585 80,578 241,429 236,702 Motorcycle product mix: Touring 29,492 21,818 81,103 68,253 Custom 40,730 39,857 110,376 116,128 Sportster(R) 17,363 18,903 49,950 52,321 Total 87,585 80,578 241,429 236,702 BUELL UNITS Motorcycle shipments: Buell 2,914 2,472 8,450 7,793 Retail Sales of Harley-Davidson Motorcycles Three Months ended 9/30 Nine Months ended 9/30 2005 2004 2005 2004 United States 67,107 59,888 210,790 200,826 Europe* 6,819 6,118 25,172 21,096 Japan 3,070 2,714 8,428 7,563 Canada 2,725 2,689 10,700 9,978 All other markets 2,647 2,089 8,177 6,829 Total 82,368 73,498 263,267 246,292 Data Source (subject to update) Data source for all 2005 retail sales figures shown above is sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning retail sales and this information is subject to revision. 2004 retail sales figures shown above conform to sales warranty and registration information as of September 30, 2004 and vary from previously published Motorcycle Industry Council data. * Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal Spain, Sweden, Switzerland, and the United Kingdom
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson Motorcycle Sales data.
Heavyweight (651+ cc) Market Industry Data Data Through Month Indicated 2005 2004 United States (September) 437,102 419,267 Europe* (August) 281,978 285,821 Japan (August) 30,704 31,175 Data Source (subject to update) United States: Motorcycle Industry Council Europe: Giral S.A. Japan: JAIA * Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal Spain, Sweden, Switzerland, and the United Kingdom