Harley-Davidson, Inc. Posts Record Second Quarter/First Half Sales and Earnings
14 July 1997
Harley-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.