Harley-Davidson Reports Revenue and Earnings Growth for 2006
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Annual Worldwide Retail Sales Increase 8.5 Percent
MILWAUKEE, Jan. 18 -- Harley-Davidson, Inc. today announced its results for the fourth quarter and year ended December 31, 2006. Revenue for the quarter was $1.50 billion compared to $1.34 billion in the year-ago quarter, an 11.9 percent increase. Net income for the quarter was $252.4 million compared to $230.0 million, an increase of 9.7 percent over the fourth quarter of 2005. Fourth quarter diluted earnings per share (EPS) were $0.97, a 15.5 percent increase compared to last year's $0.84.
Revenue for the full year was $5.80 billion, compared with $5.34 billion in 2005, an 8.6 percent increase. Wholesale shipments of Harley-Davidson(R) motorcycles were 349,196 units for the year, a 6.1 percent increase compared to 2005. Net income for the year was $1.04 billion, an 8.7 percent increase versus last year's $959.6 million. Diluted EPS for the full year were $3.93, a 15.2 percent increase compared with $3.41 in 2005.
"After more than two decades of uninterrupted growth at Harley-Davidson, our dedicated employees and passionate dealers have once again delivered excellent results," said Jim Ziemer, Chief Executive Officer. "I couldn't ask for a more committed workforce and dealer network."
"In 2006, the Company's revenue and earnings surpassed 2005 results demonstrating continued growth. At the same time, our dealers achieved impressive Harley-Davidson motorcycle sales volumes. The enthusiastic worldwide response to the changes in our 2007 models contributed to an 8.5 percent increase in retail sales during the year," said Ziemer.
"Furthermore, the Company continued to return significant value to shareholders in 2006. We increased dividend payments by 22.5 percent over the prior year and repurchased 19.3 million shares of our common stock during 2006 at a cost of $1.06 billion."
"As we look to the future, we believe Harley-Davidson will deliver EPS growth in the range of 11 - 17 percent each year through 2009. On an annual basis we expect solid revenue growth, margin improvement, and the benefits of strong free cash flow to drive this earnings growth," said Ziemer.
The Company also expects to ship between 82,000 and 84,000 Harley-Davidson motorcycles for the first quarter of 2007.
Motorcycles and Related Products Segment - Fourth Quarter Results
Revenue from Harley-Davidson motorcycles was $1.22 billion, an increase of $135.6 million or 12.5 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 92,848 units, an increase of 5,260 units or 6.0 percent over last year's fourth quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $179.2 million, an increase of $9.3 million or 5.5 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $70.6 million, an increase of $10.1 million or 16.7 percent over the year-ago quarter.
Gross margin for the fourth quarter of 2006 was 38.0 percent of revenue compared to 38.3 percent for the fourth quarter last year. Fourth quarter operating margin decreased to 22.8 percent from 23.4 percent in the fourth quarter of 2005.
Motorcycle Retail Sales Data
During the fourth quarter, worldwide retail sales of Harley-Davidson motorcycles increased 6.4 percent over the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles increased 0.3 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 1.7 percent. Retail sales of Harley-Davidson motorcycles grew 29.4 percent in international markets during the fourth quarter of 2006 compared to the fourth quarter of 2005. Fourth quarter retail sales increased 31.2 percent in Europe; Japan was up 19.6 percent; Canada was up 37.4 percent and all other international markets combined were up 34.0 percent.
Worldwide retail sales of Harley-Davidson motorcycles increased 8.5 percent in 2006 compared to 2005. In the U.S., retail sales of Harley- Davidson motorcycles increased 5.9 percent while the U.S. heavyweight motorcycle market was up 4.9 percent for the same period. In our international markets, Harley-Davidson retail sales for the full year grew 18.6 percent. Retail sales in Europe increased 14.6 percent; Japan was up 16.3 percent; Canada was up 15.9 percent and all other international markets combined were up 34.3 percent.
Data is listed in the accompanying tables. Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported fourth quarter operating income of $47.6 million, an increase of $8.1 million or 20.7 percent compared to the year-ago quarter. The increase is primarily due to higher wholesale and retail net interest income.
Income Tax Rate
The Company's fourth quarter effective income tax rate was 35.1 percent compared to 35.5 percent in the same quarter last year. This decrease primarily reflects the retroactive reinstatement of the federal research and development tax credit. The Company's full year effective tax rate in 2006 was 35.8 percent.
Harley-Davidson, Inc. - Twelve Month Results
For the fiscal year ended 2006, revenue totaled $5.80 billion, an 8.6 percent increase over 2005. EPS were $3.93, an increase of 15.2 percent compared to 2005.
Shipments of Harley-Davidson motorcycles were 349,196 units in 2006, a 6.1 percent increase compared to last year's 329,017 units. Harley-Davidson motorcycle revenue was $4.55 billion, up 8.8 percent compared to last year's $4.18 billion. P&A revenue totaled $862.3 million, a 5.7 percent increase over last year's $815.7 million. General Merchandise revenue totaled $277.5 million, a 12.0 percent increase compared to $247.9 million during 2005.
Motorcycle segment gross margin for the full year was 38.5 percent of revenue compared to 38.2 percent for 2005. Full year 2006 operating margin increased to 24.4 percent from 24.3 percent compared to the prior year.
HDFS operating income was $210.7 million, a 10.0 percent increase over last year's $191.6 million.
Cash Flow
Cash and marketable securities totaled $896.5 million as of December 31, 2006. Cash flow from operations was $761.8 billion and capital expenditures were $219.6 million during 2006. In 2007, capital expenditures are expected to be between $300 million and $325 million.
Stock Repurchase
The Company repurchased 2.1 million shares of its common stock at a cost of $151.0 million during the fourth quarter of 2006. For the full year of 2006, the Company repurchased 19.3 million shares of its common stock at a
cost of $1.06 billion. On December 31, 2006, the Company had 258,052,356 shares of common stock outstanding.
As of December 31, 2006, there are 22.8 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.
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 motorcycles. Harley- Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and their retail customers.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited) (Unaudited) (Unaudited)
Three months ended Twelve months ended
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
Net revenue $1,502,633 $1,342,335 $5,800,686 $5,342,214
Gross profit 571,052 514,510 2,232,847 2,040,499
Operating expenses 227,987 199,854 818,490 740,634
Operating income from
motorcycles & related
products 343,065 314,656 1,414,357 1,299,865
Financial services income 93,079 76,060 384,891 331,618
Financial services expense 45,433 36,595 174,167 139,998
Operating income from
financial services 47,646 39,465 210,724 191,620
Corporate expenses 5,838 3,473 22,561 21,474
Total operating income 384,873 350,648 1,602,520 1,470,011
Investment income and
other, net 3,859 6,009 21,720 17,748
Income before provision
for income taxes 388,732 356,657 1,624,240 1,487,759
Provision for income taxes 136,306 126,613 581,087 528,155
Net income $252,426 $230,044 $1,043,153 $959,604
Earnings per common share:
Basic $0.98 $0.84 $3.94 $3.42
Diluted $0.97 $0.84 $3.93 $3.41
Weighted-average common
shares:
Basic 258,138 274,182 264,453 280,303
Diluted 259,158 274,837 265,273 281,035
Cash dividends per common
share $0.21 $0.18 $0.81 $0.625
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2006 2005
ASSETS
Current Assets:
Cash and cash equivalents $238,397 $140,975
Marketable securities 658,133 905,197
Accounts receivable, net 143,049 122,087
Finance receivables held for sale 547,106 299,373
Finance receivables held for
investment, net 1,554,260 1,342,393
Inventories 287,798 221,418
Other current assets 121,890 113,794
Total current assets 3,550,633 3,145,237
Finance receivables held for
investment, net 725,957 600,831
Other long-term assets 1,255,560 1,509,141
$5,532,150 $5,255,209
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
expenses $763,186 $668,139
Current portion of finance debt 832,491 204,973
Total current liabilities 1,595,677 873,112
Finance debt 870,000 1,000,000
Postretirement healthcare benefits 201,126 60,975
Other long-term liabilities 108,610 237,517
Total shareholders' equity * 2,756,737 3,083,605
$5,532,150 $5,255,209
* The Company's adoption of Statement of Financial Accounting Standards
No. 158 (effective 12/31/06) resulted in a $253.9 million after-tax
reduction to shareholders' equity.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve months ended
December December December
31, 2006 31, 2005 31, 2004
Net cash provided by operating
activities $761,780 $962,614 $835,831
Cash flows from investing activities:
Capital expenditures (219,602) (198,389) (213,550)
Finance receivables held for
investment, net (151,624) (156,438) (134,571)
Collection of retained
securitization interests 101,641 115,346 125,732
Net change in marketable securities 253,512 431,075 (349,042)
Other, net (19,186) 2,246 (6,561)
Net cash (used) provided by investing
activities (35,259) 193,840 (577,992)
Cash flows from financing activities:
Proceeds from issuance of medium
term notes - 199,974 -
Net increase (decrease) in finance-
credit facilities and commercial
paper 493,125 (280,694) 305,047
Dividends (212,914) (173,785) (119,232)
Purchase of common stock for
treasury (1,061,968) (1,054,615) (564,132)
Excess tax benefits from share-
based payments 18,933 6,065 -
Issuance of common stock under
employee stock option plans 125,801 31,264 62,171
Net cash used by financing activities (637,023) (1,271,791) (316,146)
Effect of exchange rate changes on
cash and cash equivalents 7,924 (18,847) 4,137
Net increase (decrease) in cash and
cash equivalents 97,422 (134,184) (54,170)
Cash and cash equivalents:
At beginning of period 140,975 275,159 329,329
At end of period $238,397 $140,975 $275,159
Net Revenue and Motorcycle
Shipment Data
(Unaudited) (Unaudited) (Unaudited)
Three months ended Twelve months ended
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $1,223,861 $1,088,286 $4,553,561 $4,183,515
Buell(R) motorcycles 27,401 21,828 102,227 93,069
Parts & Accessories 179,151 169,859 862,251 815,678
General Merchandise 70,617 60,486 277,490 247,861
Other 1,603 1,876 5,157 2,091
$1,502,633 $1,342,335 $5,800,686 $5,342,214
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 74,492 74,383 273,212 266,507
Export 18,356 13,205 75,984 62,510
Total 92,848 87,588 349,196 329,017
Motorcycle product mix:
Touring 32,530 29,090 123,444 110,193
Custom 44,591 38,233 161,195 148,609
Sportster(R) 15,727 20,265 64,557 70,215
Total 92,848 87,588 349,196 329,017
BUELL UNITS
Motorcycle shipments:
Buell 3,355 2,716 12,460 11,166
Retail Sales of Harley-Davidson Motorcycles
Year to Date (December 31, 2006)
2006 2005
United States 268,366 253,414
Europe* 33,786 29,482
Japan 13,284 11,420
Canada 13,514 11,660
All other markets 15,031 11,193
Total Retail Sales of Harley-
Davidson Motorcycles 343,981 317,169
Data Source (subject to update)
Data source for all 2005 and 2006 retail sales figures shown above is sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning retail sales, and this information is subject to revision.
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson Motorcycle Sales data.
* Data for Europe include Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom
Heavyweight (651 + cc) Market Data
Data Through Month Indicated
2006 2005
United States (December) 542,991 517,562
Europe* (November) 365,889 340,485
Data Source
United States: Motorcycle Industry Council
Europe: Giral S.A.
* Data for Europe include Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom