Harley-Davidson Reports First Quarter Results
Company Reduces Full Year Shipments and Revises Guidance
MILWAUKEE, April 17 -- Harley-Davidson, Inc. today announced its results for the first quarter ended March 30, 2008. Revenue for the quarter was $1.31 billion compared to $1.18 billion in the year-ago quarter, a 10.8 percent increase. Net income for the quarter was $187.6 million compared to $192.3 million, a decrease of 2.5 percent compared to the first quarter of 2007. First quarter diluted earnings per share (EPS) were $0.79, a 6.8 percent increase compared to last year's $0.74.
"With growing weakness in the economy, U.S. retail sales of Harley-Davidson(R) motorcycles were down 12.8 percent in the first quarter. Although these retail results are disappointing, Harley-Davidson's U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14.0 percent," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
"We've said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year. In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units," Ziemer said.
"We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction."
"The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging," Ziemer said.
"Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength. We are a great company with an exceptionally powerful brand. We are optimistic about our long term business prospects and we will continue to invest in marketing, product development and our international business to drive future growth."
"For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18," said Ziemer. This supersedes all previous guidance on earnings per share and other measures.
The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.
Motorcycles and Related Products Segment - First Quarter Results
Revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of $125.7 million or 14.1 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units or 6.1 percent compared to last year's first quarter. Shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson's production plants in York, Pa., that resulted in approximately four weeks of lost production at the facilities.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of $6.3 million or 3.3 percent versus the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the year-ago quarter.
Gross margin for the first quarter of 2008 was 36.4 percent of revenue compared to 35.9 percent for the first quarter last year. Operating margin remained unchanged at 20.0 percent in the first quarter of 2008 compared to the prior year.
Motorcycle Retail Sales Data
During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.
Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007. First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent.Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter. The decrease is primarily due to a reduction in income from securitization.
Income Tax Rate
The Company's first quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2008 will be 35.5 percent.
Cash and marketable securities totaled $333.2 million as of March 30, 2008. Cash flow from operations was $146.8 million and capital expenditures were $43.2 million during the first quarter of 2008. For the full year of 2008, capital expenditures are now expected to be between $235 million and $250 million.
The Company repurchased 2.6 million shares of its common stock at a cost of $100.1 million during the first quarter of 2008. On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.
As of March 30, 2008, there were 20.5 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.
Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (Buell) and Harley-Davidson Financial Services (HDFS). Harley-Davidson Motor Company produces heavyweight motorcycles and offers a line of motorcycle parts, accessories, general merchandise and related services. HDMC manufactures five families of motorcycles: Touring, Dyna(R), Softail (R), Sportster (R) and VRSC(TM). Buell produces premium sport performance motorcycles and offers a line of motorcycle parts, accessories, and apparel. HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson and Buell dealers and customers.