Harley-Davidson, Inc. Posts Record Second Quarter/First Half Sales and Earnings
14 July 1997Harley-Davidson, Inc. Posts Record Second Quarter/First Half Sales and Earnings
MILWAUKEE, Wis., July 14 -- Harley-Davidson, Inc. today announced record sales and earnings for its second quarter and first half ended June 29, 1997. For the quarter, net sales totaled $444.1 million, a $51.3 million or 13.1 percent increase compared to the year-ago quarter. Net income and earnings per share were $49.2 million and 65 cents on 75.8 million shares outstanding versus $39.9 million and 53 cents on 75.5 million shares outstanding, increases of 23.1 percent and 22.6 percent, respectively. "This is our 29th consecutive quarter of record revenues, and once again earnings have grown faster than revenue," said Rich Teerlink, chairman of Harley-Davidson, Inc. "Jeff Bleustein was instrumental in developing our long-term strategic plan which calls for continued growth in revenue and earnings, and in his new role as president and chief executive officer of Harley-Davidson, Inc, he will have the opportunity to implement that plan." "This quarter's record performance was driven primarily by increased motorcycle unit shipments, improved operating efficiencies, and a favorable product and market mix compared to the year-ago quarter," said Bleustein. Second quarter Harley-Davidson motorcycle unit shipments totaled 33,965 units, up 3,113 units or 10.1 percent from a year ago. Parts and Accessories sales totaled $63.0 million, a $3.2 million or 5.3 percent increase. General Merchandise sales totaled $19.4 million, a $0.8 million or 4.5 percent increase. "Our daily production averaged 535 units for the second quarter, as scheduled," said Bleustein. "Our manufacturing facilities continue to improve their quality, predictability, and operating efficiencies. As a result, we have increased our 1997 motorcycle production target to 131,000 units, 12,000 units more than our 1996 production and an increase of 1,000 units over our prior target. To achieve this higher production, we have increased our production rate starting in the third quarter and are scheduled to average 540 units per day." Second quarter gross profit totaled $150.3 million or 33.8 percent of revenue, compared to $124.9 million or 31.8 percent of revenue in 1996. "The gross margin improvement was primarily due to operating efficiencies and a favorable product and market mix," continued Bleustein. "The operating efficiencies are driven by partnering efforts with our employees and productivity improvements realized from investments in our plants. Motorcycle shipments had a greater mix of custom motorcycles as well as a greater mix of international units sold through wholly owned distributors." Second quarter operating income for the Motorcycle segment was $72.5 million or 16.3 percent of revenue, compared to $63.1 million or 16.1 percent of revenue in 1996. "Operating margins improved slightly even as we continued our increased investment in information systems and product development," said Bleustein. "We are currently in the midst of the most extensive new product development program in the Company's history." Market Review (Harley-Davidson motorcycles) The most current data (through May) show that in the U.S. 651+cc market, Harley-Davidson holds a 46.6 percent market share, compared to 44.7 percent in the year-ago period. The U.S. 651+cc motorcycle market grew at a 9.5 percent rate year-to-date. Registrations for Harley-Davidson motorcycles in the U.S. were up 14.1 percent through May. "It's still our goal to narrow the gap between demand and supply so our customers do not have to wait up to a year or more for a new motorcycle," said Bleustein. European data (through May) show Harley-Davidson holding a 5.8 percent share of the 651+cc market, down from 6.5 percent in the year-ago period. The European 651+cc market grew at a 5.3 percent rate year-to-date. Harley-Davidson motorcycle registrations were down 6.5 percent compared to last year. "We now realize that the near-term growth in Europe for Harley-Davidson motorcycles will be slower than we originally thought," said Bleustein. "Over the past two years we have upgraded our infrastructure in Europe by installing new information systems, improving our distribution, and developing a European management team. Through our close relationships with our distributors, dealers and customers, we have learned that in addition to continuing to upgrade our infrastructure, we will need to adapt our products more specifically to European markets. Some of these initiatives will take longer than others, but we remain confident that Europe offers long-term growth opportunities for Harley-Davidson." Parts and Accessories Second quarter Genuine Motor Parts and Genuine Motor Accessories (P&A) sales totaled $63.0 million, a $3.2 million or 5.3 percent increase from the year-ago quarter. "Second quarter P&A sales were a little lower than we anticipated, but our long-term goal for P&A growth to approximate the growth rate in motorcycle revenue remains unchanged," explained Bleustein. "At our annual dealer meeting at the end of July, we will have the largest P&A new product introduction in the Company's history." General Merchandise General Merchandise, which consists of MotorClothes apparel and collectibles, sales totaled $19.4 million, up $0.8 million or 4.5 percent from the year-ago quarter. "We were pleased with the second quarter General Merchandise sales, but we remain in a rebuilding mode for the rest of 1997," said Bleustein. 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 second quarter sales of 1,020 units or $9.6 million, versus 899 units or $7.6 million in the year-ago quarter. "Buell is meeting our expectations and the brand is building a good following," Bleustein said. "Buell plans to broaden its exposure this year by providing over 20,000 demo rides to potential customers." Eaglemark Financial Services Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of Harley-Davidson, Inc., reported second quarter operating income of $3.3 million versus $2.0 million in the year-ago quarter, a 68.1 percent increase. "The significant increase in operating income was driven by retail products and services," said Bleustein. "Eaglemark increased their U.S. market share of retail installment lending on new Harley-Davidson motorcycles to 19 percent year-to-date, from 16 percent in the year-ago period." First Half Results For the six month period, net sales totaled $871.2 million, a $107.3 million or 14.1 percent increase over the year-ago period. Net income and earnings per share were $89.5 million and $1.18 on 75.8 million shares outstanding versus $72.9 million and 97 cents on 75.3 million shares outstanding, increases of 22.7 percent and 21.6 percent, respectively. For the first six months, P&A revenue totaled $117.5 million, a $10.4 million or 9.7 percent increase, and General Merchandise revenue totaled $43.8 million, a $4.4 million or 11.1 percent in crease over the year-ago period. 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. TABLES FOLLOW Harley-Davidson, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) Three Months Ended Six Months Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 Net sales $444,085 $392,804 $871,180 $763,855 Gross profit 150,319 124,861 288,533 240,638 Operating income 73,790 63,109 136,438 117,134 Interest income 2,092 835 3,666 430 Other income/(expense) 2,188 (532) 2,003 (1,781) Income before provision for taxes 78,070 63,412 142,107 115,783 Provision for income taxes 28,886 23,464 52,581 42,841 Net income $ 49,184 $ 39,948 $ 89,526 $ 72,942 Earnings per share $.65 $.53 $1.18 $.97 Shares outstanding 75,779 75,475 75,820 75,294 Segment Data Three Months Ended Six Months Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 25,629 21,431 48,211 42,474 Export 8,336 9,421 18,614 18,449 Total 33,965 30,852 66,825 60,923 BUELL UNITS Motorcycle shipments 1,020 899 2,107 1,421 OPERATING INCOME (Thousands) Motorcycles and Related Products $72,465 $63,144 $135,481 $117,914 Financial Services 3,346 1,990 5,565 3,722 Corporate expenses (2,021) (2,025) (4,608) (4,502) Total $73,790 $63,109 $136,438 $117,134 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) June 29, June 30, 1997 1996 (unaudited) (unaudited) Assets Current assets: Cash and cash equivalents$144,474 $96,273 Accounts receivable 198,707 159,256 Inventories 101,437 80,316 Other current assets 40,898 40,404 Net assets from discontinued operations 0 15,752 Total current assets 485,516 392,001 Finance subsidiary receivables, net 396,290 251,542 Other long-term assets 591,567 434,727 Net assets from discontinued operations 0 26,105 Total assets $1,473,373 $1,104,375 Liabilities and stockholders' equity Current liabilities: Notes payable and current maturities $61 $1,197 Other current liabilities 288,060 234,553 Total current liabilities 288,121 235,750 Finance subsidiary debt 306,325 180,089 Other long-term liabilities70,021 51,006 Postretirement health care benefits 67,167 64,514 Total stockholders' equity741,739 573,016 Total liabilities and stockholders' equity $1,473,373 $1,104,375 SOURCE Harley-Davidson, Inc.