Harley-Davidson, Inc. Announces Record Fourth Quarter and 12th Consecutive Year of Record Sales and Earnings
22 January 1998
Harley-Davidson, Inc. Announces Record Fourth Quarter and 12th Consecutive Year of Record Sales and Earnings
MILWAUKEE, Jan. 22 -- Harley-Davidson, Inc. today
announced record sales and earnings for its fourth quarter and year ended
December 31, 1997, marking the twelfth consecutive year of record sales and
earnings. The Company's fourth quarter basic earnings per share (EPS) from
continuing operations were 29 cents, an increase of 16.0 percent from the
year-ago period, on sales of $447.2 million. For the full year, basic EPS
from continuing operations were $1.15 on sales of $1,762.6 million, increases
over 1996 of 21.1 percent and 15.1 percent respectively. This is the fifth
consecutive year EPS from continuing operations have grown faster than sales.
"We are proud to announce another record year for Harley-Davidson, Inc.,"
said Jeffrey L. Bleustein, president and chief executive officer of
Harley-Davidson, Inc. "And we did much more than deliver record financial
results in 1997; we also laid the foundation for Harley-Davidson's future
growth. In 1997 we invested over $180 million in capital, focused on
expanding and improving our physical infrastructure to allow continued
double-digit growth. We successfully brought on line two new manufacturing
plants, a new distribution center and a new product development center. We
are looking forward with great anticipation to 1998, our 95th anniversary
year, and a year in which we will begin to realize the benefits of these
investments."
Fourth quarter Harley-Davidson motorcycle shipments totaled 33,957 units,
up 4,122 units over the fourth quarter last year. The production for the
quarter was 32,770 units, exceeding the target of 32,190 units. Shipments
exceeded production in the fourth quarter resulting in a decrease in worldwide
finished goods inventory.
Total Harley-Davidson motorcycle shipments in 1997 were 132,285 units, an
11.4 percent increase over 1996. On January 6, 1998 the new plant in Kansas
City, Mo. began producing Sportster motorcycles. The new plant will gradually
increase production and take over building all Sportster motorcycles by the
end of the second quarter of 1998. Once the Kansas City plant is fully
operational, the York, Pa. plant will use its Sportster capacity to produce
more of the larger cruiser and touring motorcycles. The motorcycle production
target for 1998 has been increased to 147,000 units, and the production target
for the first quarter is 34,000 units.
Fourth quarter gross margin was 34.1 percent of revenue, compared to
33.8 percent of revenue in 1996. For the year, gross margin was 33.3 percent
of revenue, up from 32.0 percent in 1996. Total year gross margin improvement
was primarily due to price increases, product mix and productivity
improvements.
Fourth quarter operating margin for the Motorcycle segment was
15.0 percent of revenue, or $67.2 million, compared to 15.5 percent of revenue
in 1996. For the year, operating margin for the Motorcycle segment was
15.1 percent of revenue, or $265.5 million, up from 14.9 percent in 1996. The
increase in operating margin in 1997 was driven by the improved gross margin,
which was partially offset by the planned increase in spending in product and
market development and information systems.
Through October, 1997, the most current data available, the worldwide
651cc+ motorcycle market grew 13.8 percent over the same period last year.
Retail registrations for Harley-Davidson motorcycles were up 12.1 percent over
the same period. (See attached table for detail data)
Within the Asia/Pacific region, retail registration data is only available
for Japan and Australia. Currently, the 651cc+ motorcycle market in the other
countries within this region is relatively small. In 1997 Harley-Davidson
shipped a total of 655 motorcycles to these countries, up from 495 motorcycles
in 1996.
Other Operations
Fourth quarter sales for Parts and Accessories (P&A), which consists of
the Genuine Motor Parts and Genuine Motor Accessories brands, totaled
$50.3 million, a 19.7 percent increase from the year-ago quarter. P&A sales
for total year 1997 were $241.9 million, a 14.5 percent increase over 1996 -
which is consistent with the long-term growth target for the P&A business.
General Merchandise fourth quarter sales, which consists of MotorClothes
apparel and collectibles, totaled $22.5 million, approximately the same as the
year-ago quarter. General Merchandise sales for the year were $95.1 million,
a 4.8 percent increase over 1996. This modest growth in 1997 exceeded our
expectations during a rebuilding year for the General Merchandise business.
Many changes were initiated in the General Merchandise business during 1997
and the Company expects these to result in improved growth in 1998.
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 fourth quarter sales of
1,294 units or $11.8 million, versus 495 units or $4.1 million in the year-ago
quarter. For the year, sales totaled 4,415 units or $40.3 million, versus
2,762 units and $23.3 million in 1996.
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of
Harley-Davidson, Inc., reported fourth quarter operating income of
$3.8 million versus $2.8 million in the year-ago quarter. For the total year
operating income was $12.4 million, compared to $7.8 million in 1996. This
increase in operating income came from all aspects of the business, including:
wholesale and retail lending, and insurance services.
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
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
1997 1996 1997 1996
Net sales $447,166 $381,529 $1,762,569 $1,531,227
Gross profit 152,501 128,988 586,217 490,094
Operating income 69,307 60,856 270,003 228,446
Interest income 1,819 1,628 7,871 3,309
Other expense (2,169) (3,332) (1,572) (4,133)
Income from continuing
operations before
provision for taxes 68,957 59,152 276,302 227,622
Provision for income taxes 25,513 21,890 102,232 84,213
Income from continuing
operations 43,444 37,262 174,070 143,409
Discontinued operations:
Gain on disposition, net -- 22,619 -- 22,619
Net income $43,444 $59,881 $174,070 $166,028
Basic earnings per share:
Income from continuing
operations $.29 $.25 $1.15 $.95
Income from discontinued
operations -- .15 -- .15
Net income per share $.29 $.40 $1.15 $1.10
Weighted average shares
outstanding 152,150 151,282 151,650 150,915
Diluted earnings per share:
Income from continuing
operations $.28 $.24 $1.13 $.94
Income from discontinued
operations -- .15 -- .15
Net income per share $.28 $.39 $1.13 $1.09
Weighted average shares
outstanding 154,395 153,532 153,948 152,925
Earnings per share is presented according to SFAS No. 128, "Earnings per
Share," which requires reporting both basic and diluted earnings per
share.
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Dec 31, Dec 31,
1997 1996
Assets
Current assets:
Cash and cash equivalents $147,462 $142,479
Accounts and finance receivables, net 396,126 325,123
Inventories 117,475 101,386
Other current assets 42,958 44,141
Total current assets 704,021 613,129
Finance receivables, net 249,346 154,264
Other long-term assets 645,534 532,592
Total assets $1,598,901 $1,299,985
Liabilities and stockholders' equity
Current portion of finance debt $90,638 $8,065
Other current liabilities 271,050 243,033
Total current liabilities 361,688 251,098
Finance debt 280,000 250,000
Other long-term liabilities 62,131 70,366
Postretirement health care benefits 68,414 65,801
Total stockholders' equity 826,668 662,720
Total liabilities and
stockholders' equity $1,598,901 $1,299,985
Harley-Davidson, Inc.
Segment Data
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
1997 1996 1997 1996
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 24,982 21,289 96,216 84,114
Export 8,975 8,546 36,069 34,657
Total 33,957 29,835 132,285 118,771
Motorcycle product mix:
Touring 24.2% 21.2% 22.7% 20.5%
Custom 52.6 53.7 53.5 53.2
Sportster 23.2 25.1 23.8 26.3
Total 100.0% 100.0% 100.0% 100.0%
BUELL UNITS
Motorcycle shipments 1,294 495 4,415 2,762
OPERATING INCOME (Thousands)
Motorcycles and Related Products $67,249 $59,325 $265,486 $228,093
Financial Services 3,788 2,802 12,355 7,801
Corporate expenses (1,730) (1,271) (7,838) (7,448)
Total $69,307 $60,856 $270,003 $228,446
651cc+ Motorcycle Retail Registrations (Units)
1997 1996 % change
UNITED STATES (through Nov.) 180,750 162,596 11.2%
Harley-Davidson 87,530 76,876 13.9
EUROPE (through Oct.) 233,828 211,757 10.4
Harley-Davidson 14,240 14,168 0.5
JAPAN/AUSTRALIA (through Oct.) 49,863 33,688 48.0
Harley-Davidson 7,893 6,748 17.0
WORLDWIDE 464,441 408,041 13.8
Harley-Davidson 109,663 97,792 12.1%
Sources: Motorcycle Industry Council, Giral S.A., JAMA, ABS
SOURCE Harley-Davidson, Inc.
