Harley-Davidson, Inc. Reports Record Fourth Quarter
20 January 1999
Harley-Davidson, Inc. Reports Record Fourth Quarter and 13th Consecutive Year of Record Revenue and Earnings
1998 Earnings Increased 22% on 17% higher revenue
MILWAUKEE, Jan. 19 -- Harley-Davidson, Inc. today
reported record revenue and earnings for its fourth quarter and year ended
December 31, 1998, marking the thirteenth consecutive year of record revenue
and earnings. Fourth quarter diluted earnings per share (EPS) were 39 cents,
an increase of 40.0 percent from the year-ago period, on revenue of
$563.1 million. For the full year, diluted EPS were $1.38 on revenue of
$2,064.0 million, an increase of 22.1 percent and 17.1 percent respectively.
This is the sixth consecutive year EPS from continuing operations have grown
faster than revenue.
"Harley-Davidson's record results again in 1998 will not surprise those
who understand what drives our company," said Jeffrey L. Bleustein, chairman
and chief executive officer of Harley-Davidson, Inc. "Our performance has
been consistent and predictable for thirteen years running. This sustainable
growth results from vigorous attention to the fundamentals: product
development, innovative marketing, and state of the art manufacturing
strategies.
"During the past year, we celebrated our 95th Anniversary with a marketing
initiative that imprinted our brand on hundreds of thousands of prospective
customers. We also successfully completed the transition to two new
manufacturing facilities which have already significantly increased our
capacity, and we introduced a completely new Twin Cam 88 engine into our Dyna
and Touring motorcycle models. These were tremendous accomplishments and they
enable us to look forward to another record year in 1999."
Motorcycles and Related Products Segment
Fourth quarter sales of Harley-Davidson motorcycles were $449.9 million,
an increase of 24.3 percent over the fourth quarter last year. Shipments of
Harley-Davidson motorcycles in the fourth quarter totaled 42,155 units, up
8,198 units or 24.1 percent over last year. The fourth quarter shipments of
Harley-Davidson motorcycles exceeded the company's previously announced target
by approximately 3,000 units. The additional units were produced with
significant overtime expense. This action was taken in recognition of growing
U.S. demand, rapid expansion of the worldwide heavyweight market, and the
impact of constrained supply on the Company's U.S. marketshare.
Total sales of Harley-Davidson motorcycles in 1998 were $1,595.4 million,
an increase of 15.4 percent over 1997. Total shipments of Harley-Davidson
motorcycles in 1998 were 150,818 units, a 14.0 percent increase over 1997.
For 1999, Harley-Davidson's motorcycle production target has been increased to
167,000 units, and the first quarter production target is 40,500 units.
Buell motorcycle sales for the fourth quarter totaled $18.6 million on
shipments of 2,418 units, compared to $11.8 million on shipments of 1,294
units last year. For the full year, Buell sales were $53.5 million on
shipments of 6,334 units, increases over 1997 of 32.8 percent and 43.5 percent
respectfully. In 1998 the average price per Buell motorcycle decreased as a
result of new product offerings. For 1999, Buell's motorcycle production
target has been increased to 7,500 units.
Worldwide retail registration data available through October/November show
the heavyweight (651cc+) motorcycle market grew 13.8 percent over the same
period last year. Worldwide retail registrations for Harley-Davidson and
Buell motorcycles grew 14.3 percent over the same period last year (see table
for more information). This is the second consecutive year that the worldwide
market and Harley-Davidson/Buell have grown more than 13 percent.
Fourth quarter sales of Parts and Accessories (P&A), which consist of
Genuine Motor Parts and Genuine Motor Accessories, totaled $64.3 million, a
27.7 percent increase from the year-ago quarter. P&A sales for the total year
were $297.1 million, a 22.8 percent increase over 1997. General Merchandise
fourth quarter sales, which consist of MotorClothes apparel and collectibles,
totaled $29.3 million, an increase of 30.1 percent over the same period last
year. General Merchandise sales for the year were $114.5 million, a 20.4
percent increase over 1997.
During 1998, both P&A and General Merchandise benefited from increased
dealer floor traffic due to Harley-Davidson's 95th anniversary celebration.
Going forward, the Company's target for P&A and General Merchandise growth is
approximately the same as motorcycle unit growth.
Fourth quarter gross margin was 34.1 percent of revenue, the same as last
year. For the year, gross margin was 33.5 percent of revenue, up from
33.3 percent in 1997. The Company was able to achieve a record gross margin
while incurring the expenses related to bringing two new manufacturing
facilities on-line and the introduction of the new Twin Cam 88 engine.
Fourth quarter operating margin for the Motorcycles and Related Products
Segment was 16.0 percent of revenue, or $90.3 million, compared to
15.0 percent of revenue for the same period last year. For the year,
operating margin for the Motorcycles and Related Products Segment was a record
15.7 percent of revenue, or $324.4 million, up from 15.1 percent in 1997. The
increase in operating margin in 1998 was driven by the improved gross margin
and administrative expenses growing at a rate slower than revenue.
Financial Services Segment
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of
Harley-Davidson, Inc,. reported fourth quarter operating income of
$7.7 million versus $3.8 million in the year-ago quarter. For the total year,
operating income was $20.2 million compared to $12.4 million in 1997.
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.
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,
1998 1997 1998 1997
(unaudited)
Net sales $563,067 $447,166 $2,063,956 $1,762,569
Gross profit 192,128 152,501 690,670 586,217
Operating income
Motorcycles and
related products 90,281 67,249 324,448 265,486
Financial services 7,672 3,788 20,211 12,355
Corporate expenses (2,522) (1,730) (11,043) (7,838)
Total 95,431 69,307 333,616 270,003
Interest income 1,386 1,819 3,828 7,871
Other income/(expense) (707) (2,169) (1,215) (1,572)
Income before provision
for taxes 96,110 68,957 336,229 276,302
Provision for
income taxes 35,082 25,513 122,729 102,232
Net income $61,028 $43,444 $213,500 $174,070
Earnings per common share:
Basic $.40 $.29 $1.40 $1.15
Diluted $.39 $.28 $1.38 $1.13
Weighted-average
common shares:
Basic 152,675 152,150 152,227 151,650
Diluted 155,051 154,481 154,703 153,948
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
Dec 31, Dec 31,
1998 1997
Assets
Current assets:
Cash and cash equivalent $165,170 $147,462
Accounts receivable, net 113,417 102,797
Finance receivables, net 360,341 293,329
Inventories 155,616 117,475
Other current assets 50,419 42,958
Total current assets 844,963 704,021
Finance receivables, net 319,427 249,346
Other long-term assets 755,819 645,534
Total assets $1,920,209 $1,598,901
Liabilities and stockholders' equity
Current portion of finance debt $146,742 $90,638
Other current liabilities 321,773 271,050
Total current liabilities 468,515 361,688
Finance debt 280,000 280,000
Other long-term liabilities 69,700 62,131
Postretirement health care benefits 72,083 68,414
Total shareholders' equity 1,029,911 826,668
Total liabilities and
shareholders' equity $1,920,209 $1,598,901
Harley-Davidson, Inc.
Motorcycle Shipment Data
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
1998 1997 1998 1997
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 31,126 24,982 110,902 96,216
Export 11,029 8,975 39,916 36,069
Total 42,155 33,957 150,818 132,285
Motorcycle product mix:
Touring 29.1% 24.2% 26.1% 22.7%
Custom 48.8 52.6 51.3 53.5
Sportster 22.1 23.2 22.6 23.8
Total 100.0% 100.0% 100.0% 100.0%
BUELL UNITS
Motorcycle shipments 2,418 1,294 6,334 4,415
651cc+ Motorcycle Retail Registrations (Units)
1998 1997 % change
UNITED STATES (through Nov.) 214,194 181,417 18.1%
Harley-Davidson & Buell 103,908 89,351 16.3
EUROPE (through Oct.) 255,310 234,022 9.1
Harley-Davidson & Buell 15,906 14,978 6.2
JAPAN/AUSTRALIA (through Nov.) 64,433 53,831 19.7
Harley-Davidson & Buell 9,879 9,146 8.0
TOTAL 533,937 469,270 13.8
Harley-Davidson & Buell 129,693 113,475 14.3%
Sources: Motorcycle Industry Council, Giral S.A., JAMA, ABS