Harley-Davidson, Inc. Reports Record Q3 Revenue and Earnings
13 October 1998
Harley-Davidson, Inc. Reports Record Third Quarter Revenue and Earnings MILWAUKEE, Oct. 12 -- Harley-Davidson, Inc. today
announced record revenue and earnings for its third quarter ended
September 27, 1998. This is Harley-Davidson's 34th consecutive quarter of
record revenue, and 33rd out of the last 34 quarters of record earnings.
Revenue for the third quarter was $517.2 million, a 16.4 percent increase over
the year-ago period. The Company's earnings grew faster than revenue during
the third quarter, as diluted earnings per share were 34 cents, an increase of
26.9 percent over the same period last year.
"We delivered another record quarter, even as we began production of our
new engine, the Twin Cam 88, in a new facility utilizing new manufacturing
equipment and processes," said Jeffrey L. Bleustein, president and chief
executive officer of Harley-Davidson, Inc. "We accomplished all of this and
we increased our average daily production rate during the third quarter. This
is a tremendous achievement and it demonstrates the outstanding capabilities
of our employees and our supply chain partners."
Motorcycles and Related Products Segment
Third quarter Harley-Davidson motorcycle sales were $383.3 million, an
increase of 15.5 percent over the third quarter last year. Shipments of
Harley-Davidson motorcycles in the third quarter totaled 36,428 units, a
15.6 percent increase over last year's 31,503 units. The Company ended the
quarter approximately one production day short of the previously announced
37,000 unit production target as a result of some delays encountered during
the new engine production ramp-up. The Company expects to produce 148,000
Harley-Davidson motorcycles during 1998.
Buell motorcycle sales for the third quarter totaled $9.2 million on
shipments of 1,069 units, compared to $9.3 million and 1,014 units last year.
Buell experienced a slower than expected production ramp-up of its new 1999
motorcycle models, but still expects to produce 5,500 motorcycles in 1998.
Retail registration data through July/August show the worldwide
heavyweight (651cc+) motorcycle market grew 15.2 percent over the same period
last year, and that the United States, Europe and Asia Pacific each grew at
double-digit rates (see table for details). During the same period, worldwide
retail registrations for Harley-Davidson and Buell motorcycles grew
12.9 percent over last year. Harley-Davidson registrations did not grow as
fast as the market due to production capacity constraints. Also, performance
motorcycles, which represent the largest and fastest growing segment of the
worldwide heavyweight motorcycle market, is a segment the Company is just
entering with its Buell motorcycles.
Third quarter sales for Parts and Accessories (P&A), which consist of
Genuine Motor Parts and Genuine Motor Accessories, totaled $90.2 million, a
21.7 percent increase from the year-ago quarter. General Merchandise third
quarter sales, which consist of MotorClothes apparel and collectibles, totaled
$33.5 million, an increase of 16.6 percent over the same period last year.
During the third quarter, both P&A and General Merchandise benefited from
dealers replenishing their stores after brisk retail sales surrounding
Harley-Davidson's 95th anniversary celebration in June.
The gross margin for the third quarter improved to 33.1 percent up from
32.7 percent in the third quarter of 1997. As expected, the gross margin
compared to last year was favorable, as 1997 contained significant start-up
expenses relating to the two new manufacturing plants.
Third quarter operating margin for the Motorcycles and Related Products
Segment was 15.4 percent, or $79.9 million, compared to 14.1 percent, or
$62.8 million in 1997. The higher operating margin was a result of improved
gross margin and lower than anticipated expenses primarily in the areas of
engineering and risk management.
Financial Services Segment
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of
Harley-Davidson, Inc., reported third quarter operating income of $3.6 million
versus $3.0 million in the year-ago quarter.
Nine Month Results
For the nine-month period, Harley-Davidson, Inc. revenue totaled
$1,500.9 million, a 14.1 percent increase over the year-ago period. Diluted
earnings per share were 99 cents, an increase of 16.1 percent compared to the
nine-month period last year.
Through nine months, P&A revenue totaled $232.8 million, a 21.5 percent
increase, General Merchandise revenue totaled $85.2 million, a 17.4 percent
increase, and Buell motorcycle revenue totaled $34.9 million, a 22.5 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.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 1997
Net sales $517,198 $444,222 $1,500,889 $1,315,403
Gross profit 171,139 145,178 498,542 433,716
Operating income
Motorcycles and
related products 79,870 62,750 234,167 198,236
Financial services 3,599 3,002 12,539 8,567
Corporate expenses (3,330) (1,497) (8,521) (6,107)
Total 80,139 64,255 238,185 200,696
Interest income 1,056 2,386 2,442 6,052
Other income/(expense) 1,287 (1,404) (508) 597
Income before provision
for taxes 82,482 65,237 240,119 207,345
Provision for
income taxes 30,110 24,138 87,647 76,719
Net income $52,372 $41,099 $152,472 $130,626
Earnings per common share:
Basic $ .34 $ .27 $ 1.00 $ .86
Diluted $ .34 $ .27 $.99 $ .85
Weighted-average common shares:
Basic 152,434 151,792 152,069 151,481
Diluted 154,903 154,178 154,558 153,761
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Sept 27, Dec 31, Sept 28,
1998 1997 1997
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalent $122,146 $147,462 $105,365
Accounts and finance
receivables, net 450,229 396,126 373,860
Inventories 145,019 117,475 112,144
Other current assets 52,105 42,958 42,030
Total current assets 769,499 704,021 633,399
Finance receivables, net 352,866 249,346 242,810
Other long-term assets 695,492 645,534 590,233
Total assets $1,817,857 $1,598,901 $1,466,442
Liabilities and shareholders'
equity
Current portion of
finance debt $132,413 $90,638 $30,919
Other current liabilities 302,177 271,050 262,793
Total current liabilities 434,590 361,688 293,712
Finance debt 280,000 280,000 250,000
Other long-term liabilities 63,510 62,131 66,764
Postretirement health care
benefits 70,605 68,414 67,819
Total shareholders' equity 969,152 826,668 788,147
Total liabilities and
shareholders' equity $1,817,857 $1,598,901 $1,466,442
Harley-Davidson, Inc.
Motorcycle Shipment Data
Three Months Ended Nine Months Ended
Sept 27, Sept 28, Sept 27, Sept 28,
1998 1997 1998 1997
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 27,126 23,023 79,776 71,234
Export 9,302 8,480 28,887 27,094
Total 36,428 31,503 108,663 98,328
Motorcycle product mix:
Touring 26.3% 25.2% 25.1% 22.2%
Custom 49.9 51.8 52.3 53.8
Sportster 23.8 23.0 22.6 24.0
Total 100.0 100.0 100.0 100.0
BUELL UNITS
Motorcycle shipments 1,069 1,014 3,916 3,121
651cc+ Motorcycle Retail Registrations (Units)
1998 1997 % change
UNITED STATES
(through August) 169,090 144,576 17.0%
Harley-Davidson & Buell 76,190 67,347 13.1
EUROPE (through July) 208,335 187,514 11.1
Harley-Davidson & Buell 12,801 11,761 8.8
JAPAN/AUSTRALIA
(through August) 50,322 39,309 28.0
Harley-Davidson & Buell 7,488 6,337 18.2
TOTAL 427,747 371,399 15.2
Harley-Davidson & Buell 96,479 85,445 12.9
Sources: Motorcycle Industry Council, Giral S.A., JAMA, ABS
