Harley-Davidson Announces 2007 Second Quarter Results
2008 Model Motorcycles Introduced
MILWAUKEE, July 19 -- Harley-Davidson, Inc. today announced its results for the second quarter ended July 1, 2007. Revenue for the quarter was $1.62 billion compared to $1.38 billion in the year ago quarter, a 17.7 percent increase. Net income for the quarter was $290.5 million compared to $243.4 million, an increase of 19.3 percent over the second quarter of 2006. Second quarter diluted earnings per share (EPS) were $1.14, a 25.3 percent increase compared to last year's $0.91. During the second quarter the Company repurchased $429.9 million of its common stock.
"During the second quarter, we shipped 95,117 Harley-Davidson(R) motorcycles to our dealers around the world, driving strong financial results," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. "On the retail side of the business, our dealers' sales were down 1.2 percent worldwide during the quarter, with U.S. dealers' sales down 5.5 percent and international retail sales growing at double digit rates. Retail sales in every major country in Europe were up during the quarter, resulting in 13.7 percent growth in total European sales. Japan, Canada, and all other international markets grew at a combined rate of 13.4 percent," he said.
"Last week at our annual dealer meeting in Nashville, Tennessee, we introduced our new line of 2008 models including the spectacular, limited edition 105th Anniversary motorcycles. A new Dyna Fat Bob(TM) motorcycle, along with the ground-breaking new Rocker(TM) and the Rocker(TM) C models, completely redefine the custom motorcycle category. And to top that off, we unveiled significant new features for our touring motorcycles, a major power increase for the VRSC(TM) models, and the first liquid-cooled Buell(R) motorcycle, the 1125R. Products like these reaffirm our heavyweight category leadership," said Ziemer.
The Company expects to ship between 91,000 and 95,000 Harley-Davidson motorcycles during the third quarter of 2007. For the full year of 2007, Harley-Davidson continues to expect EPS growth in the range of 4 - 6 percent compared to 2006 based on moderate revenue growth, lower operating margin, and the benefits of our strong free cash flow. Looking ahead to 2008 and 2009, the Company expects solid revenue growth, operating margin improvement and the continued benefits of strong free cash flow to drive EPS growth in the range of 11 - 17 percent.
"While we remain comfortable with this guidance, U.S. retail sales of Harley-Davidson motorcycles in the first half of the year have not met our expectations. As a result, we will continue to closely monitor the retail environment and regularly assess our planned wholesale shipments throughout the remainder of 2007," said Ziemer.
Motorcycles and Related Products Segment - Second Quarter Results
Revenue from Harley-Davidson motorcycles was $1.25 billion, an increase of $226.4 million or 22.0 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 95,117 units, an increase of 15,321 units or 19.2 percent compared to last year's second quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $263.4 million, an increase of $11.7 million or 4.6 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $72.7 million, an increase of $5.6 million or 8.4 percent over the year-ago quarter.
Gross margin for the second quarter of 2007 was 37.4 percent of revenue compared to 37.5 percent for the second quarter last year. Second quarter operating margin increased to 23.8 percent from 23.6 percent in the second quarter of 2006.
Motorcycle Retail Sales Data
During the second quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 1.2 percent compared to the prior year second quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 5.5 percent for the quarter. The heavyweight motorcycle market in the U.S. decreased 6.2 percent for the same period. Retail sales of Harley-Davidson motorcycles grew 13.6 percent in international markets during the second quarter of 2007 compared to the second quarter of 2006. Second quarter retail sales increased 13.7 percent in Europe; Canada was up 9.9 percent; and Japan was up 5.2 percent. All other international markets combined were up 27.4 percent.
Data is listed in the accompanying tables. Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported second quarter operating income of $65.2 million, an increase of $9.0 million or 15.9 percent compared to the year-ago quarter. The increase is primarily due to a higher securitization gain, increased net interest income and growth in fee income.
Income Tax Rate
The Company's second quarter effective income tax rate was 35.5 percent compared to 36.0 percent in the same quarter last year. This decrease primarily reflects the reinstatement of the federal research and development tax credit.
Harley-Davidson, Inc. - Six Month Results
For the first six months of 2007, revenue totaled $2.80 billion, a 5.1 percent increase over the year-ago period. Earnings per share were $1.89, an increase of 6.8 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson motorcycles were 162,878 units, a 2.2 percent increase compared to last year's 159,302 units. Harley-Davidson motorcycle revenue was $2.15 billion, up 5.4 percent compared to last year's $2.04 billion. P&A revenue totaled $451.6 million, a 3.9 percent increase over last year's $434.7 million. General Merchandise revenue totaled $148.8 million, a 9.7 percent increase compared to $135.6 million during the same period in 2006.
HDFS operating income was $124.1 million, a 15.1 percent increase over last year's $107.9 million.
Cash Flow
Cash and marketable securities totaled $723.4 million as of July 1, 2007. Cash flow from operations was $1.06 billion, and capital expenditures were $86.0 million during the first six months of 2007. For the full year of 2007, capital expenditures are expected to be between $300 million and $325 million.
Stock Repurchase
The Company repurchased 6.7 million shares of its common stock at a cost of $429.9 million during the second quarter of 2007. On July 1, 2007, the Company had 251.2 million shares of common stock outstanding.
As of July 1, 2007, there are 15.2 million shares remaining on a board- approved share repurchase authorization. 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
(Unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
July 1, June 25, July 1, June 25,
2007 2006 2007 2006
Net revenue $1,620,218 $1,377,047 $2,799,093 $2,662,137
Gross profit 605,167 516,326 1,028,213 1,009,540
Operating expenses 218,812 191,358 406,444 372,260
Operating income from
motorcycles & related
products 386,355 324,968 621,769 637,280
Financial services income 112,330 98,567 221,493 194,468
Financial services expense 47,121 42,310 97,347 86,580
Operating income from
financial services 65,209 56,257 124,146 107,888
Corporate expenses 6,532 6,751 11,471 11,508
Total operating income 445,032 374,474 734,444 733,660
Investment income and
other, net 5,335 5,885 14,079 13,202
Income before provision
for income taxes 450,367 380,359 748,523 746,862
Provision for income taxes 159,877 136,929 265,723 268,869
Net income $290,490 $243,430 $482,800 $477,993
Earnings per common share:
Basic $1.15 $0.91 $1.89 $1.77
Diluted $1.14 $0.91 $1.89 $1.77
Weighted-average common
shares:
Basic 253,155 267,487 255,240 270,133
Diluted 254,017 268,130 256,087 270,783
Cash dividends per common
share $0.25 $0.21 $0.46 $0.39
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
July 1, December 31, June 25,
2007 2006 2006
ASSETS
Current Assets:
Cash and cash equivalents $416,084 $238,397 $391,967
Marketable securities 307,347 658,133 612,508
Accounts receivable, net 163,369 143,049 150,526
Finance receivables held for sale 381,927 547,106 233,167
Finance receivables held for
investment, net 1,318,025 1,554,260 1,101,587
Inventories 344,969 287,798 292,757
Other current assets 122,342 121,890 114,613
Total current assets 3,054,063 3,550,633 2,897,125
Finance receivables held for
investment, net 817,027 725,957 678,938
Other long-term assets 1,250,504 1,255,560 1,467,266
$5,121,594 $5,532,150 $5,043,329
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
liabilities $872,283 $763,186 $739,510
Current portion of finance debt 204,817 832,491 34,605
Total current liabilities 1,077,100 1,595,677 774,115
Finance debt 975,000 870,000 1,000,000
Postretirement healthcare benefits 205,767 201,126 67,801
Other long-term liabilities 205,883 108,610 233,580
Total shareholders' equity 2,657,844 2,756,737 2,967,833
$5,121,594 $5,532,150 $5,043,329
* The Company's adoption of Financial Accounting Standards Board
Interpretation No. 48 (FIN 48) effective 1/1/07 resulted in a decrease to
shareholders' equity of $16.1 million.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six months ended
July 1, June 25,
2007 2006
Net cash provided by operating
activities $1,062,455 $825,619
Cash flows from investing activities:
Capital expenditures (86,016) (89,124)
Finance receivables held for
investment, net (70,128) (54,485)
Collection of retained
securitization interests 43,241 26,227
Net change in marketable securities 352,477 293,623
Other, net 3,582 1,719
Net cash provided by investing
activities 243,156 177,960
Cash flows from financing activities:
Net decrease in finance-credit
facilities and commercial paper (535,990) (161,437)
Dividends (116,650) (104,494)
Purchase of common stock for
treasury (491,103) (499,543)
Excess tax benefits from share-
based payments 2,932 1,547
Issuance of common stock under
employee stock option plans 20,621 8,176
Net cash used by financing activities (1,120,190) (755,751)
Effect of exchange rate changes on
cash and cash equivalents (7,734) 3,164
Net increase in cash and cash
equivalents 177,687 250,992
Cash and cash equivalents:
At beginning of period 238,397 140,975
At end of period $416,084 $391,967
Net Revenue and Motorcycle
Shipment Data
(Unaudited)
Three months ended Six months ended
July 1, June 25, July 1, June 25,
2007 2006 2007 2006
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $1,254,163 $1,027,800 $2,145,681 $2,036,342
Buell(R) motorcycles 28,613 29,347 50,268 53,403
Parts & Accessories 263,373 251,703 451,608 434,652
General Merchandise 72,714 67,071 148,826 135,622
Other 1,355 1,126 2,710 2,118
$1,620,218 $1,377,047 $2,799,093 $2,662,137
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 67,951 58,052 116,691 118,322
Export 27,166 21,744 46,187 40,980
Total 95,117 79,796 162,878 159,302
Motorcycle product mix:
Touring 34,671 27,336 56,473 54,873
Custom 39,320 36,714 70,088 72,508
Sportster(R) 21,126 15,746 36,317 31,921
Total 95,117 79,796 162,878 159,302
BUELL UNITS
Motorcycle shipments:
Buell 3,179 3,539 5,737 6,576
Retail Sales of Harley-Davidson Motorcycles
Year to Date June 30, 2007
2007 2006
United States 145,282 154,041
Europe* 24,293 20,635
Japan 6,220 6,217
Canada 9,578 8,646
All other markets 9,063 7,406
Total Retail Sales of Harley-
Davidson Motorcycles 194,436 196,945
Data Source (subject to update)
Data source for all 2006 and 2007 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 ret
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 Market Data
Data Through Month Indicated
2007 2006
United States(1) (June) 307,755 321,839
Europe(2) (May) 205,041 195,529
(1) - United States industry data includes 651+cc models, derived from
submission of motorcycle retail sales by each major manufacturer to an
independent third party.
(2) - Europe data includes Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom. Industry retail motorcycle
registration data includes 651+cc models, derived from information
provided by Giral S.A., an independent agency.
FCMN Contact: travis.thatcher@harley-davidson.com