Harley-Davidson, Inc. Reports Record Second Quarter Sales and Earnings
13 July 1999
Harley-Davidson, Inc. Reports Record Second Quarter Sales and Earnings
MILWAUKEE, Wis., July 12 -- Harley-Davidson, Inc.
today announced record sales and earnings for its second quarter ended
June 27, 1999. The Company's second quarter sales were $608.7 million, an
increase of 17.7 percent over the second quarter last year. Earnings per share
for the second quarter were 44 cents, a 22.9 percent increase compared to last
year. "This is shaping up to be another record year," said Jeffrey L.
Bleustein, chairman and chief executive officer of Harley-Davidson, Inc.
"The worldwide heavyweight motorcycle market is in the midst of its eighth
consecutive year of growth," said Jeffrey L. Bleustein, chairman and chief
executive officer of Harley-Davidson, Inc. "Retail registration data through
May shows the worldwide (651cc+) motorcycle market grew 13.9 percent relative
to 1998, while registrations of Harley-Davidson(R) and Buell(R) motorcycles
grew 30.6 percent during the same period. In fact, our U.S., Europe and
Asia-Pacific markets are each experiencing double-digit retail registration
growth.
"Based on the market's growth and our manufacturing capabilities, we have
increased our production target for Harley-Davidson motorcycles for 1999 from
168,000 to 172,000 units. However, even with this planned production
increase, it is unlikely that the Company will be able to sustain a
thirty-plus percent rate of retail registration growth during the second half
of the year."
Motorcycles and Related Products Segment
Second quarter sales of Harley-Davidson motorcycles were $468.6 million,
an increase of 16.9 percent over the second quarter last year. Shipments of
Harley-Davidson motorcycles in the second quarter totaled 44,771 units, up
7,018 units or 18.6 percent over last year. With the increase in the
Company's 1999 production target, the third quarter production target is
42,000 units.
Buell motorcycle sales for the second quarter totaled $12.5 million on
shipments of 1,512 units, compared to $13.4 million on shipments of
1,497 units last year. During the second quarter, Buell motorcycle production
was interrupted for five weeks until the parts associated with its recall
campaign could be supplied to the market. As a result, Buell's motorcycle
production target for 1999 has been reduced by 300 units to 7,700.
Second quarter sales of Parts and Accessories (P&A), which consist of
Genuine Motor Parts(TM) and Genuine Motor Accessories(TM), totaled
$99.7 million, a 25.7 percent increase from the year-ago quarter. General
Merchandise second quarter sales, which consist of MotorClothes(R) apparel and
collectibles, totaled $27.3 million, up 21.2 percent over the same period last
year. The Company's long term P&A and General Merchandise sales growth target
continues to approximate the Harley-Davidson motorcycle unit growth target.
Second quarter gross margin was 35.0 percent of revenue, up from
34.3 percent of revenue last year. The increase in gross margin was due to a
higher mix of domestic motorcycle shipments and higher P&A growth, but
partially offset by a higher Sportster motorcycle mix.
Second quarter operating margin for the Motorcycles and Related Products
Segment was 16.5 percent of revenue, compared to 16.1 percent of revenue for
the same period last year. Operating expenses are planned to increase in the
second half of 1999 as the Company invests in new products and marketing
programs intended to enhance the Harley-Davidson and Buell motorcycle
ownership experiences. The Company's goal is to maintain operating margins
during the second half of 1999 comparable to the record levels achieved in the
second half of 1998.
Financial Services Segment
Eaglemark Financial Services, Inc. (Eaglemark), a subsidiary of
Harley-Davidson, Inc., reported second quarter operating income of
$9.1 million, up 43.5 percent compared to the year-ago quarter. Eaglemark is
benefiting from the increase in U.S. motorcycle retail sales as well as
increased market share of motorcycle retail installment lending, which grew
from 18.7 percent to 21.9 percent, year to date. The Company's goal is to
sustain Eaglemark's first half operating income growth rate of approximately
30 percent through the end of 1999.
Share Repurchase
During the second quarter, Harley-Davidson repurchased approximately
1.0 million shares of its common stock, under the Company's authorization to
repurchase shares to offset dilution caused by the exercise of stock options.
Six Month Results
For the six month period, sales totaled $1,167 million, an 18.7 percent
increase over the year-ago period. Diluted earnings per share were 82 cents,
an increase of 26.5 percent compared to the first six months last year.
Through the first six months of this year, Harley-Davidson motorcycle
revenue was $905.1 million, an 18.7 percent increase while Buell motorcycle
revenue was $28.6 million, an 11.3 percent increase, compared with the same
period in 1998.
For the first six months of 1999, P&A revenue totaled $174.7 million, a
22.5 percent increase while General Merchandise revenue totaled $56.7 million,
a 9.7 percent increase compared with the same period in 1998.
Forward-Looking Statements
The Company intends that certain matters discussed in this release are
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or "estimates" or words of similar meaning.
Similarly, statements that describe the Company's future plans, objectives,
targets or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those anticipated as of the date of
this release. Certain of such risks and uncertainties are described below.
Shareholders, potential investors, and other readers are urged to consider
these factors in evaluating the forward-looking statements and cautioned not
to place undue reliance on such forward-looking statements. The forward-
looking statements included in this release are only made as of the date of
this release, and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
The Company's ability to reach targeted production objectives and to
increase or sustain growth rates in various areas depends upon, among other
factors, (i) continued realization of production efficiencies at its
manufacturing facilities; (ii) successful implementation of production
capacity increases in its facilities; (iii) the sale of all motorcycles the
Company has the capacity to produce; (iv) product availability; and (v)
successful introduction of new products. In addition, the Company could
experience delays in the operation of manufacturing facilities, work
stoppages, difficulty with suppliers, natural causes or other factors. Risk
factors are also disclosed in securities documents previously filed by the
Company with the Securities and Exchange Commission.
Harley-Davidson, Inc. is the parent company for Harley-Davidson Motor
Company, Buell Motorcycle Company and Eaglemark Financial Services, Inc.
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
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
Net sales $608,716 $517,164 $1,167,283 $983,691
Gross profit 212,994 177,528 402,128 327,403
Operating income
Motorcycles and
related products 100,140 83,246 191,617 154,297
Financial services 9,118 6,355 11,760 8,940
Corporate expenses (2,624) (2,362) (5,426) (5,191)
Total operating income 106,634 87,239 197,951 158,046
Interest income, net 1,992 612 3,481 1,386
Other income(expense), net (641) (607) (463) (1,796)
Income before provision
for taxes 107,985 87,244 200,969 157,636
Provision for income taxes 39,415 31,843 73,355 57,537
Net income $ 68,570 $ 55,401 $ 127,614 $100,099
Earnings per common share:
Basic $.45 $ .36 $.83 $ .66
Diluted $.44 $ .36 $.82 $ .65
Weighted-average common
shares:
Basic 153,081 151,930 153,064 151,883
Diluted 155,606 154,545 155,646 154,385
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
June 27, Dec 31, June 28,
1999 1998 1998
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $209,984 $165,170 $154,475
Accounts receivable, net 100,813 113,417 91,336
Finance receivables, net 369,218 360,341 302,247
Inventories 149,060 155,616 131,525
Other current assets 49,745 50,419 44,565
Total current assets 878,820 844,963 724,148
Finance receivables, net 426,000 319,427 346,097
Other long-term assets 757,370 755,819 675,756
Total assets $2,062,190 $1,920,209 $1,746,001
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of finance debt $217,655 $146,742 $125,951
Other current liabilities 324,273 321,773 294,454
Total current liabilities 541,928 468,515 420,405
Finance debt 280,000 280,000 280,000
Other long-term liabilities 62,895 69,700 63,308
Postretirement health care benefits 73,934 72,083 70,164
Shareholders' equity 1,103,433 1,029,911 912,124
Total liabilities and
shareholders' equity $2,062,190 $1,920,209 $1,746,001
Harley-Davidson, Inc.
Net Sales and Motorcycle
Shipment Data
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
NET SALES (in thousands)
Harley-Davidson(R)
motorcycles $468,559 $400,890 $905,083 $762,218
Buell(R) motorcycles 12,518 13,380 28,565 25,659
Parts & Accessories 99,714 79,321 174,749 142,604
General Merchandise 27,255 22,485 56,706 51,691
Other 670 1,088 2,180 1,519
Total net sales $608,716 $517,164 $1,167,283 $983,691
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 35,641 28,768 65,776 52,650
Export 9,130 8,985 20,176 19,585
Total 44,771 37,753 85,952 72,235
Motorcycle product mix:
Touring 27.1% 24.5% 27.0% 24.4%
Custom 49.8 55.1 50.1 53.5
Sportster(R) 23.1 20.4 22.9 22.1
Total 100.0 100.0 100.0 100.0
BUELL UNITS
Motorcycle shipments 1,512 1,497 3,525 2,847
651cc+ Motorcycle Retail Registrations (Units), thru May.
1999 1998 % change
UNITED STATES 126,607 98,579 +28.4
HDI 59,408 43,955 +35.2
EUROPE 166,162 152,279 +9.1
HDI 10,037 8,756 +14.6
JAPAN/AUSTRALIA 27,515 30,314 -9.2
HDI 5,001 4,312 +16.0
TOTAL 320,284 281,172 +13.9
HDI 74,446 57,023 +30.6
HDI includes both Harley-Davidson and Buell motorcycles
Sources: Motorcycle Industry Council, Giral S.A., JAMA, ABS