Harley-Davidson, Inc. Reports Q3 Earnings
13 October 1997
Harley-Davidson, Inc. Reports Record Third Quarter Earnings and 30th Consecutive Quarter Of Record Revenue
MILWAUKEE, Oct. 13 -- Harley-Davidson, Inc. today
announced record sales and earnings for its third quarter and nine month
period ended September 28, 1997.
For the third quarter, net sales totaled $444.2 million, a $58.4 million
or 15.1 percent increase compared to the year-ago quarter. Net income and
earnings per share were $41.1 million and 27 cents on 151.9 million shares
outstanding versus $33.2 million and 22 cents on 151.1 million shares
outstanding, increases of 23.8 percent and 23.1 percent, respectively. All
share and per share data have been adjusted to reflect the 2-for-1 stock split
effective September 12, 1997 .
"This is our 30th consecutive quarter of record revenue, and once again
earnings have grown faster than revenue," said Jeffrey L. Bleustein, president
and chief executive officer of Harley-Davidson, Inc. "The third quarter
results reflect the continued execution of our Plan 2003 - which calls for
creating worldwide demand for and being able to produce more than 200,000
motorcycles by the year 2003."
Compared to the year-ago quarter, the improved third quarter results are
attributable primarily to an increase in motorcycle unit shipments and
improved performance in the company's Parts and Accessories business. Third
quarter unit shipments totaled 31,503 units, up 3,490 units or 12.5 percent
from a year ago. Parts and Accessories sales totaled $74.1 million, a $12.0
million or 19.3 percent increase over the same period last year.
The Motor Company continues to ramp-up motorcycle production capacity
according to plan. The change-over to 1998 model-year motorcycles was
seamless, which enabled manufacturing to achieve its average daily production
schedule of 540 units for the third quarter and keeps the company on track to
meet its 1997 shipment target of 131,000 units. The scheduled production rate
for the fourth quarter has been increased to an average of 555 units per day.
Motorcycle inventory was approximately 350 units higher than plan at the
end of the quarter. This inventory increase occurred in our international
markets due to the timing of shipments. Inventory levels are expected to be
back on plan by the end of the fourth quarter.
Third quarter gross profit totaled $145.2 million or 32.7 percent of
revenue, compared to $120.5 million or 31.2 percent of revenue in 1996. The
gross margin improvement was primarily due to product mix and productivity
improvements driven by partnering efforts with our employees and suppliers and
by continued investments in our plants.
Third quarter operating income for the Motorcycle segment was $62.8
million or 14.1 percent of revenue, compared to $50.9 million or 13.2 percent
of revenue in 1996. The increase in operating margin was driven by the
improved gross margin which was partially offset by the planned increase in
spending in product development and distribution.
Market Review (Harley-Davidson motorcycles)
The most current data (through August) from the Motorcycle Industry
Council show that in the U.S. 651+cc market, Harley-Davidson holds a 45.8
percent market share, up from 43.6 percent in the year-ago period. The U.S.
651+cc motorcycle market grew at a 12.2 percent rate year-to-date.
Registrations for Harley-Davidson motorcycles in the U.S. were up 17.9 percent
through August. "The U.S. market continues to grow at a double-digit rate,
reaffirming our capacity expansion plans," said Bleustein. "At the same time,
we are making progress on our objective of narrowing the gap between supply
and demand to better serve our customers."
European data (through August) from Giral S.A. show Harley-Davidson
holding a 6.1 percent share of the 651+cc market, compared to 6.7 percent in
the year-ago period. The European 651+cc market grew at a 7.2 percent rate
year-to-date. Registrations for Harley-Davidson motorcycles in Europe were
down 2.2 percent through August. "Harley-Davidson motorcycle sales in Europe
continue to be soft," said Bleustein. "As we have stated previously, we do
not expect near-term growth in Europe. We are continuing to focus on country
specific marketing and sales promotions. In addition, we recently unveiled
two new motorcycles styled specifically for the European markets, which will
be introduced in early 1998. We remain confident that Europe offers long-term
growth opportunities for Harley-Davidson."
Parts and Accessories
Third quarter sales for Parts and Accessories (P&A), which consists of the
Genuine Motor Parts and Genuine Motor Accessories brands, totaled $74.1
million, a $12.0 million or 19.3 percent increase from the year-ago quarter.
"The record number of new products introduced at our annual dealer meeting at
the end of July were well received and resulted in better than expected
orders," explained Bleustein. "Although we were pleased with the P&A
performance in the third quarter, P&A year-to-date growth of 13.2 percent is
closer to the long-term growth potential of the P&A business."
General Merchandise
General Merchandise sales, which consists of MotorClothes apparel and
collectibles, totaled $28.7 million, approximately equal to sales in the year-
ago quarter. The annual dealer meeting also generated better than expected
orders for General Merchandise, but many of the orders were forward-buys to be
delivered in 1998. "We are making progress in the General Merchandise
business and expect to resume growth in 1998," Bleustein said.
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 third quarter sales of 1,014 units or
$9.3 million, versus 846 units or $7.2 million in the year-ago quarter. The
highlight of the Buell annual dealer meeting at the end of July was the
introduction of the new 101 horsepower Thunderstorm engine.
Eaglemark Financial Services
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of Harley-
Davidson, Inc., reported third quarter operating income of $3.5 million versus
$1.3 million in the year-ago quarter. Through nine months, Eaglemark financed
19 percent of new Harley-Davidson motorcycles sold in the U.S., versus 16
percent in the year-ago period.
Nine Month Results
For the nine month period, net sales totaled $1,315.4 million, a $165.7
million or 14.4 percent increase over the year-ago period. Net income and
earnings per share were $130.6 million and 86 cents on 151.6 million shares
outstanding versus $106.1 million and 70 cents on 150.8 million shares
outstanding, increases of 23.1 percent and 22.4 percent, respectively.
For the first nine months, P&A revenue totaled $191.6 million, a $22.4
million or 13.2 percent increase, and General Merchandise revenue totaled
$72.5 million, a $4.5 million or 6.6 percent increase over the year-ago
period.
Through the first nine months, Buell revenue totaled $28.5 million
compared to $19.2 million last year.
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.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
Sept 28, Sept 29, Sept 28, Sept 29,
1997 1996 1997 1996
Net sales $444,222 $385,843 $1,315,402 $1,149,698
Gross profit 145,178 120,468 435,064 361,106
Operating income 64,713 50,455 201,151 167,589
Interest income 1,928 1,251 5,594 1,681
Other income/(expense) (1,404) 980 599 (801)
Income before provision
for taxes 65,237 52,686 207,344 168,469
Provision for income
taxes 24,138 19,482 76,719 62,323
Net income $41,099 $33,204 $130,625 $106,146
Earnings per share $.27 $.22 $.86 $.70
Shares outstanding 151,938 151,110 151,629 150,762
Segment Data
Three Months Ended Nine Months Ended
Sept 28, Sept 29, Sept 28, Sept 29,
1997 1996 1997 1996
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 23,023 20,351 71,234 62,825
Export 8,480 7,662 27,094 26,111
Total 31,503 28,013 98,328 88,936
Motorcycle product mix:
Touring 25.2% 21.0% 22.2% 20.3%
Custom 51.8 52.7 53.8 53.1
Sportster 23.0 26.3 24.0 26.6
Total 100.0% 100.0% 100.0% 100.0%
BUELL UNITS
Motorcycle shipments 1,014 846 3,121 2,267
OPERATING INCOME (Thousands)
Motorcycles and Related
Products $62,750 $50,853 $198,231 $168,767
Financial Services 3,460 1,277 9,025 4,999
Corporate expenses (1,497) (1,675) (6,105) (6,177)
Total $64,713 $50,455 $201,151 $167,589
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Sept 28, Sept 29,
1997 1996
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $105,365 $114,046
Accounts and finance receivables, net 373,860 326,270
Inventories 112,144 91,480
Other current assets 42,030 32,230
Net assets from discontinued operations 0 11,830
Total current assets 633,399 575,856
Finance receivables, net 212,424 162,681
Other long-term assets 640,619 457,594
Net assets from discontinued operations 0 25,400
Total assets $1,486,442 $1,221,531
Liabilities and stockholders' equity
Current liabilities $282,793 $258,687
Finance debt 280,919 243,648
Other long-term liabilities 66,764 50,637
Postretirement health care benefits 67,819 64,957
Total stockholders' equity 788,147 603,602
Total liabilities and
stockholders' equity $1,486,442 $1,221,531
SOURCE Harley-Davidson, Inc.