Harley-Davidson, Inc. Reports Record Q2 Sales and Earnings
14 July 1998
Harley-Davidson, Inc. Reports Record Second Quarter Sales and Earnings
MILWAUKEE, July 13 -- Harley-Davidson, Inc. today
announced record sales and earnings for its second quarter ended June 28,
1998. This is Harley-Davidson's 33rd consecutive quarter of record sales, and
32nd out of the last 33 quarters of record earnings. The Company's second
quarter diluted earnings per share were 36 cents, an increase of 12.0 percent
over the same period last year. Total sales for the second quarter were
$517.2 million, a 16.5 percent increase over the year-ago period.
"In addition to delivering another record quarter, we also achieved
several significant milestones," said Jeffrey L. Bleustein, president and
chief executive officer of Harley-Davidson, Inc. "We celebrated our 95th
anniversary, introduced a new big twin engine -- the Twin Cam 88, and
announced plans to establish a motorcycle assembly operation in Brazil. These
events created a lot of excitement and are part of our strategy for continuing
to grow the worldwide demand for Harley-Davidson motorcycles."
Motorcycles and Related Products Segment
Second quarter sales of Harley-Davidson and Buell motorcycles were
$400.9 million and $13.4 million respectively. Harley-Davidson and Buell
motorcycle shipments were 37,753 units and 1,497 units respectively, increases
of 11.2 percent and 46.8 percent over the second quarter last year.
Production of Harley-Davidson's new engine began at the end of June. This
engine is expected to be included in approximately 45 percent of the 1999
model year Harley-Davidson motorcycles. Even with the complexities of
introducing and manufacturing a completely new engine, the total year
production target for Harley-Davidson motorcycles remains 148,000 units, and
the third quarter production target is 37,000 units.
Data through April/May show the worldwide 651cc+ motorcycle market grew
13.7 percent over the same period last year, while retail registrations of
Harley-Davidson and Buell motorcycles combined were up 6.3 percent.
Harley-Davidson did not grow as fast as the market during the first five
months of 1998 due to production capacity constraints, which resulted in
increased wholesale shipments of only 5.6 percent year-to-date through May.
The Company expects its fourth quarter average daily motorcycle production
rate to be at least 15 percent higher than the rate achieved during the first
quarter of 1998.
Second quarter sales for Parts and Accessories (P&A), which consists of
Genuine Motor Parts and Genuine Motor Accessories, totaled $79.3 million, a
25.9 percent increase from the year-ago quarter. General Merchandise second
quarter sales, which consists of MotorClothes apparel and collectibles,
totaled $22.5 million, an increase of 16.1 percent over the same period last
year. P&A and General Merchandise sales grew faster than anticipated during
the second quarter due in part to Harley-Davidson's 95th anniversary
celebration in June.
Gross margin for the second quarter was 34.3 percent up from 33.8 percent
in the second quarter of 1997. The gross margin improvement resulted from a
temporary lower Sportster motorcycle mix in the second quarter of 1998 due to
the transition of Sportster production from the York manufacturing plant to
the Kansas City manufacturing plant.
Second quarter operating margin for the Motorcycles and Related Products
Segment was 16.1 percent, or $83.2 million, compared to 16.3 percent, or
$72.5 million in 1997. As expected, the operating profit for the second
quarter and the first half of 1998 grew slower than revenue due to the
start-up expenses related to the two new manufacturing plants. With the two
new plants fully operational, operating profit should grow faster than revenue
for the second half of 1998. Second quarter operating margin was also
impacted by a $3.7 million nonrecurring charge for a voluntary recall of the
ignition switch on all 1994 through 1998 FL touring model motorcycles.
Harley-Davidson estimates that approximately 63,000 motorcycles are subject to
the recall.
Financial Services Segment
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of
Harley-Davidson, Inc., reported second quarter operating income of
$6.4 million versus $3.4 million in the year-ago quarter. This increase in
operating income was driven primarily by retail installment lending, as
Eaglemark increased both its market share and its profitability in this
business.
Six Month Results
For the six month period, sales totaled $983.7 million, a 12.9 percent
increase over the year-ago period. Diluted earnings per share were 65 cents,
an increase of 11.1 percent compared to last year.
For the first six months, P&A revenue totaled $142.6 million, a
21.4 percent increase, General Merchandise revenue totaled $51.7 million, an
18.0 percent increase, and Buell revenue totaled $25.7 million, a 34.0 percent
increase, over the year-ago period.
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 and sport-touring motorcycles. 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 28, June 29, June 28, June 29,
1998 1997 1998 1997
Net sales $517,164 $444,085 $983,691 $871,180
Gross profit 177,528 150,319 327,403 288,533
Operating income
Motorcycles and related
products 83,246 72,465 154,297 135,481
Financial services 6,355 3,346 8,940 5,565
Corporate expenses (2,362) (2,021) (5,191) (4,608)
Total 87,239 73,790 158,046 136,438
Interest income 612 2,092 1,386 3,666
Other income/(expense) (607) 2,188 (1,796) 2,003
Income before provision
for taxes 87,244 78,070 157,636 142,107
Provision for income taxes 31,843 28,886 57,537 52,581
Net income $55,401 $49,184 $100,099 $89,526
Earnings per common share:
Basic $.36 $.32 $.66 $.59
Diluted $.36 $.32 $.65 $.58
Weighted-average common shares:
Basic 151,930 151,406 151,883 151,321
Diluted 154,545 153,603 154,385 153,453
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
June 28, Dec. 31, June 29,
1998 1997 1997
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $154,475 $147,462 $144,474
Accounts and finance
receivables, net 393,583 396,126 357,256
Inventories 131,525 117,475 101,437
Other current assets 44,565 42,958 40,898
Total current assets 724,148 704,021 644,065
Finance receivables, net 346,097 249,346 237,741
Other long-term assets 675,756 645,534 571,567
Total assets $1,746,001 $1,598,901 $1,453,373
Liabilities and shareholders' equity
Current liabilities:
Current portion of finance
debt $125,951 $90,638 $56,325
Other current liabilities 294,454 271,050 268,121
Total current liabilities 420,405 361,688 324,446
Finance debt 280,000 280,000 250,000
Other long-term liabilities 63,308 62,131 70,021
Postretirement health care benefits 70,164 68,414 67,167
Total shareholders' equity 912,124 826,668 741,739
Total liabilities and
shareholders' equity $1,746,001 $1,598,901 $1,453,373
Harley-Davidson, Inc.
Motorcycle Shipment Data
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 28,768 25,629 52,650 48,211
Export 8,985 8,336 19,585 18,614
Total 37,753 33,965 72,235 66,825
Motorcycle product mix:
Touring 24.5% 21.3% 24.4% 20.9%
Custom 55.1 54.5 53.5 54.7
Sportster 20.4 24.2 22.1 24.4
Total 100.0 100.0 100.0 100.0
BUELL UNITS
Motorcycle shipments:
United States 810 516 1,287 1,118
Export 687 504 1,560 989
Total 1,497 1,020 2,847 2,107
651cc+ Motorcycle Retail Registrations (Units)
1998 1997 % change
UNITED STATES (through May) 98,579 87,078 13.2%
Harley-Davidson & Buell 43,955 41,005 7.2
EUROPE (through April) 117,364 106,998 9.7
Harley-Davidson & Buell 6,498 6,435 1.0
JAPAN/AUSTRALIA (through April) 24,310 17,300 40.5
Harley-Davidson & Buell 3,488 3,330 4.7
TOTAL 240,253 211,376 13.7
Harley-Davidson & Buell 53,941 50,770 6.3
Sources: Motorcycle Industry Council, Giral S.A., JAMA, ABS