Harley-Davidson, Inc. Announces Record First Quarter Sales and Earnings
14 April 1997Harley-Davidson, Inc. Announces Record First Quarter Sales and Earnings
MILWAUKEE, April 14 -- Harley-Davidson, Inc. today announced record sales and earnings for its first quarter ended March 30, 1997. For the quarter, net sales totaled $427.1 million, a $56.0 million or 15.1 percent increase compared to the year-ago quarter. Net income and earnings per share were $40.3 million and 53 cents on 75.7 million shares outstanding versus $33.0 million and 44 cents on 75.1 million shares, increases of 22.3 percent and 21.3 percent, respectively. Compared to the year-ago quarter, the improved results are due to an increase in motorcycle unit shipments, improved manufacturing efficiencies, and higher sales in the Parts and Accessories business and the General Merchandise business. First quarter Harley-Davidson motorcycle unit shipments totaled 32,860 units, up 2,789 units or 9.3 percent from a year ago. Parts and Accessories sales totaled $54.4 million, a $7.2 million or 15.1 percent increase. General merchandise sales totaled $24.5 million, a $3.5 million or 16.9 percent increase. "We have consistently met our revenue and earnings growth objectives," said Rich Teerlink, chairman and chief executive officer of Harley-Davidson, Inc. "This quarter's record performance once again demonstrates that we are on course with our long term plan. We have increased our motorcycle production rate for the second quarter and are scheduled to average 535 units per day. Our 1997 production target remains at 130,000 units, which will provide double-digit motorcycle revenue growth." "Our manufacturing facilities continue to run smoothly as our daily production averaged 527 units for the first quarter, above the scheduled 520 units per day," said Teerlink. "We also benefited in the first quarter by eliminating the excess inventory in our French and German subsidiaries. In addition, we experienced a reduction in finished goods inventory at our York, Pa. plant, although we expect this inventory to build back up to normal levels during the second quarter." During the first quarter the Motor Company incurred two non-recurring expenses. Product liability expenses were $3 million higher in the first quarter when compared to the year-ago quarter. The primary contributor to this higher expense was an out-of-court settlement made during the first quarter. Also, a one-time $2 million signing bonus was paid to the union-represented employees at Harley-Davidson's York, PA operations as part of a new five-year labor agreement. Operating profit for the Motorcycle segment was $63.0 million or 14.8% of revenue, after the two non-recurring charges mentioned above. The operating margin improvement for the first quarter is due to a greater mix of custom motorcycles, a greater mix of international units sold through wholly owned distributors, and the continued smooth execution of production capacity expansion. "As we have said in the past, gross margins in 1997 will improve and these improvements will be reinvested in information systems, product development, and distribution initiatives," Teerlink said. "We still expect the 1997 full-year operating margin to be at the 1996 level." Market Review Year-end 1996 data show that in the U.S. 651+cc market, Harley-Davidson holds a 48.2 percent market share, compared to 47.7 percent in the year-ago period. The U.S. 651+cc market grew at a 9.6 percent rate in 1996. "The demand for Harley-Davidson motorcycles in the U.S. continues to exceed the supply allocated to our U.S. dealers," Teerlink said. "This has resulted in long waits for customers to purchase new Harley-Davidson motorcycles at or near manufacturer's suggested retail price. Our objective is to narrow the gap between demand and supply so our customers do not have to wait so long. Ideally, we would like to have new Harley-Davidson motorcycles on each dealer's showroom floor so potential customers can visit their local dealer to see a sample of the new models." European data for year-end 1996 show Harley-Davidson holding a 6.8 percent share of the 651+cc market, down from 7.4 percent in 1995. The European 651+cc market grew at an 8.4 percent rate in 1996. "The initial indications of our European initiatives look encouraging," said Teerlink. "According to our in-house retail tracking systems, all countries except Germany are showing higher motorcycle registrations for the first quarter of 1997 compared to last year." Parts and Accessories First quarter Genuine Motor Parts and Genuine Motor Accessories (P&A) sales totaled $54.4 million, a $7.2 million or 15.1 percent increase from the year-ago quarter. "We experienced a few problems in the fourth quarter, but rebounded nicely in the first quarter," Teerlink said. "As we have said in the past, we may experience quarter-to-quarter fluctuations, but we still expect the long-term growth in P&A revenue to approximate the growth rate in motorcycle revenue." General Merchandise General Merchandise, which consists of MotorClothes apparel and collectibles, sales of $24.5 million were up $3.5 million or a 16.9 percent increase from the year-ago quarter. "The increase is primarily due to filling backorders from the fourth quarter," commented Teerlink. "We still expect 1997 to be a rebuilding year for our General Merchandise business and do not expect additional growth. We recently hired a new vice president of General Merchandise, who brings 20+ years of experience and proven leadership in the apparel and retail environment to Harley-Davidson." Buell Buell Distribution Corporation, a wholly-owned subsidiary of Harley-Davidson, Inc., and the exclusive distributor of Buell Motorcycle Company (a 49 percent owned subsidiary), reported first quarter sales of 1,087 units or $9.6 million, versus 522 units or $4.5 million in the year-ago quarter. "We started selling Buell motorcycles in Europe and shipped 314 units during the first quarter," Teerlink said. "The response from the Buell dealers, motorcycle press, and riding public has been positive." Eaglemark Financial Services Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of Harley-Davidson, Inc., reported first quarter operating income of $2.2 million versus $1.7 million in the year-ago quarter, a 28.1 percent increase. "Eaglemark continues to grow," said Teerlink. "They increased their market share of retail installment lending on Harley-Davidson motorcycles to 19 percent, from 16 percent last year." Harley-Davidson Motor Company, the only major U.S.-based motorcycle manufacturer, produces heavyweight motorcycles and a complete line of motorcycle parts, accessories, apparel, and general merchandise. Eaglemark Financial Services, Inc. provides wholesale and retail financing, insurance and credit card programs to Harley-Davidson dealers and customers and similar programs for other leisure products manufacturers. Harley-Davidson, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) Three Months Ended Mar. 30, Mar. 31, 1997 1996 Net sales $427,095 $371,051 Operating income 62,648 54,025 Interest income/(expense) 1,574 (405) Other income/(expense) (185) (1,249) Income before provision for taxes 64,037 52,371 Provision for income taxes 23,695 19,377 Net income $ 40,342 $ 32,994 Earnings per share $.53 $.44 Shares outstanding 75,699 75,113 Segment Data Three Months Ended Mar. 30, Mar. 31, 1997 1996 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 22,582 21,043 Export 10,278 9,028 Total 32,860 30,071 BUELL UNITS Motorcycle shipments 1,087 522 OPERATING INCOME (Thousands) Motorcycles and Related Products $63,016 $54,770 Financial Services 2,219 1,732 Corporate expenses (2,587) (2,477) Total $62,648 $54,025 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) Mar. 30, Mar. 31, 1997 1996 Assets Current assets: Cash and cash equivalents $ 110,637 $ 39,577 Accounts receivable 215,032 157,786 Inventories 93,440 85,758 Other current assets 40,631 41,128 Net assets from discontinued operations 0 22,833 Total current assets 459,740 347,082 Finance subsidiary receivables, net 418,119 270,762 Other long-term assets 559,200 418,090 Net assets from discontinued operations 0 26,981 Total assets $1,437,059 $1,062,915 Liabilities and stockholders' equity Current liabilities: Notes payable and current maturities $ 1,029 $ 1,298 Other current liabilities 270,641 216,667 Total current liabilities 271,670 217,965 Finance subsidiary debt 335,740 196,657 Other long-term liabilities 67,327 50,746 Postretirement health care benefits 66,635 63,980 Total stockholders' equity 695,687 533,567 Total liabilities and stockholders' equity $1,437,059 $1,062,915 SOURCE Harley-Davidson, Inc.
CONTACT: Rod Copes of Harley-Davidson, Inc., 414-343-8002