Harley-Davidson Announces Q1 Results
13 April 1998Harley-Davidson, Inc. Announces Record First Quarter Earnings and 32nd Consecutive Quarter of Record Sales
MILWAUKEE, April 13 -- Harley-Davidson, Inc. today announced record sales and earnings for its first quarter ended March 29, 1998. This is Harley-Davidson's 32nd consecutive quarter of record sales, and 31st out of the last 32 quarters of record earnings. The Company's first quarter diluted earnings per share were 29 cents, an increase of 10.2 percent over last year. Total sales for the first quarter were $466.5 million, a 9.2 percent increase compared to last year. "We achieved another quarter of record performance even as we incurred the start-up costs of two new plants," said Jeffrey L. Bleustein, president and chief executive officer of Harley-Davidson, Inc. "I am also pleased to report the ramp-up of our new Sportster motorcycle manufacturing plant in Kansas City, Mo. is ahead of schedule. In fact, all of our Sportster motorcycles are now being produced in Kansas City, and our plant in York, Pa. is preparing to increase production of our larger cruiser motorcycles. This is a significant milestone in our capacity expansion efforts, and it demonstrates the capabilities of our employees and our commitment to sustaining our growth." Motorcycles and Related Products Segment First quarter sales of Harley-Davidson and Buell motorcycles were $361.3 million and $12.3 million respectively. Harley-Davidson and Buell motorcycle shipments were 34,482 units and 1,350 units respectively, increases of 4.9 percent and 24.2 percent over the first quarter last year. The Harley-Davidson motorcycle production target for 1998 has been increased to 148,000 units, and the second quarter production target is 38,000 units. The gross margin for the first quarter was 32.1 percent of revenue, compared to 32.4 percent of revenue in 1997. This anticipated decline in gross margin was due primarily to the start-up of the new manufacturing plant in Kansas City and the transition to the new powertrain manufacturing plant in Milwaukee. The Company expects similar start-up expenses to continue through the second quarter of this year. First quarter operating margin for the Motorcycles and Related Products Segment was 15.2 percent of revenue, or $71.1 million, compared to 14.8 percent of revenue, or $63.0 million in 1997. Year-end 1997 data show the United States 651cc+ motorcycle market grew 14.8 percent over 1996, while retail registrations of Harley-Davidson and Buell motorcycles combined were up 16.8 percent. (See attached table for detail data) The European 651cc+ market grew 11.4 percent in 1997, while registrations of Harley-Davidson and Buell motorcycles combined increased 4.6 percent over 1996. The Company believes the introduction of two new Europe specific Harley-Davidson motorcycle models, a new European marketing campaign, a full year of Buell sales, and additional dealers will result in increased sales for 1998. Additionally, John Russell was recently hired as the Vice President, Managing Director Europe, and comes to Harley-Davidson with extensive sales and marketing experience in the European automotive industry. First quarter sales for Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $63.3 million, a 16.2 percent increase from the year-ago quarter. General Merchandise first quarter sales, which consists of MotorClothes apparel and collectibles, totaled $29.2 million, an increase of 19.5 percent over 1997. This growth was driven by the introduction of both a new denim product line in January and the Spring MotorClothes product line. The Company does not expect to maintain this level of growth throughout 1998. Financial Services Segment Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of Harley-Davidson, Inc., reported first quarter operating income of $2.6 million versus $2.2 million in the year-ago quarter. Eaglemark experienced growth in all areas of its business, which was partially offset by promotional expenses for the Harley-Davidson Chrome VISA Card. 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. Buell Motorcycle Company produces sport and sport-touring motorcycles. 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 (In thousands, except per share amounts) Three Months Ended Mar. 29, Mar. 30, 1998 1997 Net sales $466,527 $427,095 Gross profit 149,875 138,216 Operating income Motorcycles and Related Products 71,051 63,016 Financial Services 2,585 2,219 Corporate expenses (2,829) (2,587) Total 70,807 62,648 Interest income 774 1,574 Other expense (1,189) (185) Income before provision for taxes 70,392 64,037 Provision for income taxes 25,694 23,695 Net income $44,698 $40,342 Earnings per common share: Basic $.29 $.27 Diluted $.29 $.26 Weighted average common shares: Basic 151,834 151,257 Diluted 154,201 153,330 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) Mar. 29, Dec. 31, Mar. 30, 1998 1997 1997 Assets Current assets: Cash and cash equivalents $95,236 $147,462 $113,548 Accounts and finance receivables, net 445,081 396,126 410,315 Inventories 128,869 117,475 93,440 Other current assets 41,219 42,958 40,631 Total current assets 710,405 704,021 657,934 Finance receivables, net 334,916 249,346 222,836 Other long-term assets 649,033 645,534 539,200 Total assets $1,694,354 $1,598,901 $1,419,970 Liabilities and stockholders' equity Current liabilities: Current portion of finance debt $152,586 $90,638 $85,740 Other current liabilities 272,239 271,050 254,581 Total current liabilities 424,825 361,688 340,321 Finance debt 280,000 280,000 250,000 Other long-term liabilities 62,595 62,131 67,327 Postretirement health care benefits 69,264 68,414 66,635 Total stockholders' equity 857,670 826,668 695,687 Total liabilities and stockholders' equity $1,694,354 $1,598,901 $1,419,970 Harley-Davidson, Inc. Motorcycle Shipment Data Three Months Ended Mar. 29, Mar. 30, 1998 1997 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 23,882 22,582 Export 10,600 10,278 Total 34,482 32,860 Motorcycle product mix: Touring 24.3% 20.4% Custom 51.9 55.0 Sportster 23.8 24.6 Total 100.0% 100.0% BUELL UNITS Motorcycle shipments: United States 477 602 Export 873 485 Total 1,350 1,087 651cc+ Motorcycle Retail Registrations (Units) 12 Months Through December 1997 1996 % change UNITED STATES 190,236 165,696 14.8% Harley-Davidson 93,491 79,936 17.0 Buell 1,912 1,740 9.9 Total Harley-Davidson, Inc. 95,403 81,676 16.8 EUROPE 250,293 224,688 11.4 Harley-Davidson 15,286 15,347 -0.4 Buell 771 0 na Total Harley-Davidson, Inc. 16,057 15,347 4.6 JAPAN/AUSTRALIA 58,880 37,417 57.4 Harley-Davidson 9,686 8,190 18.3 Buell 426 182 134.1 Total Harley-Davidson, Inc. 10,112 8,372 20.8 TOTAL 499,409 427,801 16.7 Harley-Davidson 118,463 103,473 14.5 Buell 3,109 1,922 61.8 Total Harley-Davidson, Inc. 121,572 105,395 15.4% Sources: Motorcycle Industry Council (1997), R.L. Polk (1996), Giral S.A., JAMA, ABS SOURCE Harley-Davidson, Inc.