Harley-Davidson Reports Another Record First Quarter
MILWAUKEE, April 16 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 30, 2003. Revenue for the quarter was $1.1 billion compared with $927.8 million in the year-ago quarter, a 20.0 percent increase. First quarter diluted earnings per share (EPS) were 61 cents, a 56.4 percent increase compared with last year's 39 cents.
"We are pleased with our outstanding results for the first quarter of 2003 as we continue to execute our long-term Plan for Sustainable Growth," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "While the long winter experienced by much of our nation has delayed some retail sales, dealer confidence and other measures that we use to track Harley-Davidson motorcycle demand remain strong."
"With these indicators in mind and with construction of our new factory in York, Pennsylvania proceeding to plan, we are raising our shipment target for 2003 from 289,000 to 290,000 Harley-Davidson motorcycles," added Bleustein. The Company's new target is a 10% increase over 2002.
Motorcycles and Related Products Segment
First quarter revenue from Harley-Davidson motorcycles was $876.5 million, an increase of 17.2 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 70,608 units, up 5,939 units or 9.2 percent over last year.
First quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts(TM) and Genuine Motor Accessories(TM), totaled $159.8 million, a 21.9 percent increase over the year-ago quarter. Total P&A revenue includes $13.9 million from sales of 100th Anniversary P&A products sold during the quarter. Shipments of 100th Anniversary P&A products will continue through the second quarter. For the second half of 2003, the Company expects P&A revenues to grow at a rate slightly faster than the motorcycle unit growth rate.
General Merchandise, which consists of MotorClothes(R) apparel and collectibles, had first quarter revenue of $56.5 million, up 33.6 percent over the same period last year, with revenue from 100th Anniversary General Merchandise products accounting for $8.3 million. Shipments of 100th Anniversary products in this product line are now essentially complete, and therefore General Merchandise revenue for the remainder of the year is expected to be lower than in 2002.
First quarter gross margin for the Motorcycles and Related Products Segment was 36.2 percent of revenue compared to 34.0 percent in the first quarter of last year. First quarter gross margin was favorably impacted by wholesale motorcycle price increases and a richer product mix that were associated with 100th Anniversary product lines. Additional favorability was realized from foreign currency exchange rates. Consistent with the higher gross margin, operating margin increased from 18.7 percent in 2002 to 21.5 percent in 2003.
Retail Sales Data
Harley-Davidson retail motorcycle sales for the quarter were down 3.2 percent in the U.S., but up 15.7 percent in Europe and up 12.9 percent in Japan compared to the same period last year. "While retail sales for the United States were lower in the first three months of the year, we and our independent dealer network believe that many customers have delayed purchasing their motorcycles until the weather improves. We look forward to the spring riding season kicking into gear," said Bleustein. Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley- Davidson, Inc., reported operating income of $43.4 million, up $31.2 million compared to the year-ago quarter. The subsidiary benefited from its previously announced plan to securitize retail installment loans for Harley- Davidson motorcycles in the first quarter of 2003.
HDFS sold $550 million in motorcycle loans during the quarter and recorded a gain of $26.4 million. The subsidiary realized a larger than expected gain on this sale due to a favorable interest rate environment and a larger transaction size. This compares with a gain of $5.0 million on $93 million of loans securitized during the first quarter of 2002, which was the remaining portion of the fourth quarter 2001 securitization.
Based on anticipated interest rates and the competitive financial services environment, the Company expects HDFS' full year 2003 operating income to be approximately 25 percent higher than in 2002. Over the longer term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.
Cash Flow
Operations generated cash of more than $311 million. The Company invested $41.8 million in capital expenditures and paid a dividend of $10.6 million.
Share Repurchase
During the quarter, the Company repurchased 500,000 shares of its common stock.
Company Background
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 and sport-touring motorcycles. Harley-Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.
Forward-Looking Statements
The Company intends that certain matters discussed in this release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets or goals are also forward-looking statements. Such forward- looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
The Company's ability to meet the targets and expectations noted depends upon, among other factors, the Company's ability to (i) continue to realize production efficiencies at its production facilities through the implementation of innovative manufacturing techniques and other means, (ii) successfully implement production capacity increases in its facilities, (iii) successfully introduce new products and services, (iv) avoid unexpected P&A /general merchandise supplier backorders, (v) sell all of the Harley-Davidson motorcycles it plans to produce, (vi) continue to develop the capacity of its distributor and dealer network, (vii) avoid unexpected changes in the regulatory environment for its products, (viii) successfully adjust to foreign currency exchange rate fluctuations, (ix) successfully adjust to interest rate fluctuations, and (x) successfully manage changes in the credit quality of HDFS's loan portfolio.
In addition, the Company could experience delays in the operation of manufacturing facilities as a result of work stoppages, difficulty with suppliers, natural causes, terrorism or other factors. Risk factors are also disclosed in documents previously filed by the Company with the Securities and Exchange Commission.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 30, March 31,
2003 2002
Net revenue $1,113,691 $927,845
Gross profit 403,032 315,277
Operating expenses 163,407 142,150
Operating income from
motorcycles & related products 239,625 173,127
Financial services income 70,769 41,691
Financial services operating expense 27,412 29,540
Operating income from financial
services 43,357 12,151
Corporate expenses 4,473 3,555
Total operating income 278,509 181,723
Interest income, net 5,957 2,246
Other income (expense), net (216) (765)
Income before provision for taxes 284,250 183,204
Provision for income taxes 98,066 63,206
Net income $186,184 $119,998
Earnings per common share:
Basic $0.62 $0.40
Diluted $0.61 $0.39
Weighted-average common shares:
Basic 302,364 302,475
Diluted 304,560 305,618
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
March 30, Dec. 31, March 31,
2003 2002 2002
ASSETS
Current assets:
Cash and cash equivalents $242,712 $280,928 $378,535
Marketable securities 647,973 514,800 201,193
Accounts receivable, net 117,907 108,694 152,083
Finance receivables, net 1,050,330 855,771 738,396
Inventories 214,419 218,156 183,632
Other current assets 75,851 88,237 78,475
Total current assets 2,349,192 2,066,586 1,732,314
Finance receivables, net 451,973 589,809 582,366
Other long-term assets 1,198,609 1,204,822 1,084,624
Total assets $3,999,774 $3,861,217 $3,399,304
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
expenses $654,343 $607,473 $532,183
Current portion of finance debt 300,060 382,579 366,286
Total current liabilities 954,403 990,052 898,469
Finance debt 380,000 380,000 380,000
Other long-term liabilities 157,194 152,831 179,068
Postretirement health care benefits 110,761 105,419 94,744
Shareholders' equity 2,397,416 2,232,915 1,847,023
Total liabilities and shareholders'
equity $3,999,774 $3,861,217 $3,399,304
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, except per share amounts)
March 30, March 31,
2003 2002
Cash flows from operating activities:
Net income $186,184 $119,998
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 45,877 42,601
Non cash expenses 20,211 13,009
Contributions to the pension plans - -
Net changes in current assets and
current liabilities 59,239 (6,723)
Net cash provided by operating
activities 311,511 168,885
Cash flows from investing activities:
Capital expenditures (41,796) (53,358)
Finance receivables, net (51,682) (285,568)
Net increase in marketable securities (133,630) (5,182)
Other, net (1,759) 722
Net cash used in investing activities (228,867) (343,386)
Cash flows from financing activities:
Net (decrease) increase in finance debt (91,193) 149,235
Dividends paid (10,610) (9,238)
Purchase of common stock for treasury (20,164) (29,620)
Issuance of common stock under
employee stock plans 1,107 3,221
Net cash used in financing activities (120,860) 113,598
Net (decrease) increase in cash and
cash equivalents (38,216) (60,903)
Cash and cash equivalents:
At beginning of period 280,928 439,438
At end of period $242,712 $378,535
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
Three Months Ended
March 30, March 31,
2003 2002
NET REVENUE (in thousands)
Harley-Davidson(R) motorcycles $876,507 $747,926
Buell(R) motorcycles 20,498 6,309
Parts & Accessories 159,844 131,143
General Merchandise 56,475 42,269
Other 367 198
Total net sales $1,113,691 $927,845
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 56,952 51,363
Export 13,656 13,306
Total 70,608 64,669
Motorcycle product mix:
Touring 18,488 17,318
Custom 34,313 31,863
VRSC 4,659 3,160
Sportster(R) 13,148 12,328
Total 70,608 64,669
BUELL UNITS
Motorcycle shipments:
Buell (excluding Blast) 2,356 429
Buell Blast 585 901
2,941 1,330
Year-to-date Heavyweight (651+ cc)
Motorcycle Retail Registrations (Units),
data through month indicated.
2003 2002 % change
United States
- H-D (March) 47,929 49,507 -3.2%
- Industry (March) 94,170 100,782 -6.6%
Europe
- H-D * (March) 5,380 4,651 15.7%
- Industry (February) 31,874 37,159 -14.2%
Japan
- H-D (March) 2,137 1,892 12.9%
- Industry (February) 5,284 5,402 -2.2%
Only Harley-DavidsonR motorcycles are included in the Harley-Davidson
(H-D) data.
H-D * Includes Harley-Davidson sales in all European countries.
Industry data for Europe includes sales only in Austria, Belgium, France,
Germany, Italy,
Netherlands, Spain, Switzerland and United Kingdom.
Data Sources: (subject to update)
United States: Motorcycle Industry Council,
Europe: Company reports, Giral S.A.
Japan: Company reports, Industry sources