Revenue, Earnings and Retail Motorcycle Sales reach all time highs
Select financial data reported in the text of this press release is presented
on the basis described in the Stock Option Accounting section below.
MILWAUKEE, Jan. 19 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE: HDI) today announced record revenue and earnings for its fourth quarter
and year ended December 31, 2005. Revenue for the quarter was $1.34 billion
compared with $1.22 billion in the year-ago quarter, a 9.9 percent increase.
Net income for the quarter was $230.0 million compared to $209.0 million, an
increase of 10.1 percent over 2004. Fourth quarter diluted earnings per share
(EPS) were 84 cents, an 18.3 percent increase compared with last year's 71
cents.
Revenue for the full year was $5.34 billion, compared with $5.02 billion
in 2004, a 6.5 percent increase. Net income for the year was $959.6 million,
a 7.8 percent increase versus last year's $889.8 million, while diluted EPS
for the full year were $3.41, a 13.7 percent increase compared with $3.00 in
2004.
"Today Harley-Davidson is celebrating an exciting milestone of twenty
consecutive years of record revenue, earnings and retail motorcycle sales,"
said Jim Ziemer, Chief Executive Officer. "As we reflect on our performance
in 2005, we had many accomplishments. We shipped 329,000 motorcycles, which
is a 3.7 percent increase over the previous year. Worldwide retail sales of
Harley-Davidson(R) motorcycles increased 6.2 percent during 2005. Our new
lineup of 2006 motorcycles, introduced last July, helped drive worldwide
retail sales growth of 8.3 percent in the second half of the year. During
2005, our international motorcycle sales grew significantly and motorcycle
sales to women continued to increase, demonstrating that our strategies in
these areas are beginning to take hold," said Ziemer.
"We believe the prospects for retail growth remain strong and support a
wholesale unit growth rate in the range of 5 to 9 percent annually and an
annual EPS growth rate of 11 to 17 percent," said Ziemer. "Our
Harley-Davidson motorcycle shipment target for 2006 remains in the range of
348,000 to 352,000 units, with planned wholesale shipments of 79,000
motorcycles during the first quarter," he said.
Motorcycles and Related Products Segment -- Fourth Quarter Results
Revenue from Harley-Davidson(R) motorcycles was $1.09 billion, an increase
of $95.7 million, or 9.6 percent over the same period last year. Shipments of
Harley-Davidson motorcycles totaled 87,588 units, an increase of 7,001 units,
or 8.7 percent over last year's fourth quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor
Parts and Genuine Motor Accessories, totaled $169.9 million, an increase of
$12.0 million, or 7.6 percent over the year-ago quarter. Revenue from General
Merchandise, which consists of MotorClothes(TM) apparel and collectibles,
totaled $60.5 million, an increase of $5.6 million, or 10.2 percent.
Growth rates for P&A and General Merchandise fluctuate from quarter to
quarter. However, for the long term, the Company expects the growth rate for
P&A revenue to be slightly higher than Harley-Davidson's motorcycle unit
growth rate, and the General Merchandise growth rate is expected to be lower
than the motorcycle unit growth rate.
Gross margin for the fourth quarter of 2005 was 38.3 percent of revenue,
up from 37.8 percent for the same period in 2004. Consistent with the higher
gross margin, operating margin increased from 23.0 percent in 2004 to 23.4
percent in 2005.
Motorcycle Retail Sales Data
Worldwide retail sales of Harley-Davidson motorcycles increased 3.0
percent for the fourth quarter of 2005 compared to the same period in 2004.
For the full year, worldwide retail sales increased 6.2 percent compared to
2004.
U.S. retail sales of Harley-Davidson motorcycles increased 0.7 percent in
the fourth quarter and 4.2 percent for the full year. For the second six
months of the year, U.S. retail sales grew 7.3 percent compared to 1.9 percent
for the first six months of 2005.
"We are pleased with retail sales growth in the U.S. market during the
second half of the year. The extensive enhancements made to existing models,
along with several brand new motorcycles for the 2006 model year, are
certainly generating excitement," said Ziemer.
Internationally, retail sales of Harley-Davidson motorcycles grew 13.0
percent in the fourth quarter and 15.0 percent for the full year compared with
2004. Total retail sales for 2005 increased in all of the Company's major
international markets.
Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported fourth quarter
operating income of $39.5 million, up 0.7 percent compared to the year-ago
quarter.
A fourth quarter securitization of $325 million in motorcycle retail loans
resulted in a gain of $4.2 million. The 1.3 percent gain on the
securitization as a percentage of loans sold is consistent with management's
prior guidance of 1.0 to 1.4 percent. Gains in the first quarter of 2006 are
also expected to continue in that range. Given the relatively small
percentage of HDI operating income that is generated by securitization gains,
the Company is not providing guidance for periods beyond the first quarter of
2006. Income related to securitizations will continue to be reported in the
Company's annual report and SEC filings.
For the long term, HDFS expects operating income to be slightly higher
than the Company's wholesale unit shipment growth rate.
Harley-Davidson, Inc. -- Twelve Month Results
For the fiscal year ended 2005, total Harley-Davidson motorcycle shipments
were 329,017 units compared with 317,289 units in 2004, a 3.7 percent
increase. Harley-Davidson motorcycle revenue was $4.18 billion, an increase
of $255.3 million, or 6.5 percent.
P&A revenue totaled $815.7 million, a $34.1 million, or a 4.4 percent
increase, while General Merchandise revenue totaled $247.9 million, a $24.1
million or a 10.8 percent increase, compared with 2004.
Full year operating income for HDFS was $191.6 million, an increase of
$3.0 million or 1.6 percent compared to 2004.
Cash Flow -- Twelve Month Results
As of December 31, 2005, cash and marketable securities were $1.05
billion, down from $1.61 billion at December 31, 2004. During the year the
Company invested $198.4 million in capital expenditures, repurchased 21.4
million shares of Company stock for $1.05 billion, paid $173.8 million in
dividends and contributed $296.8 million to its retirement plans.
Stock Option Accounting
On January 1, 2005, the Company began recognizing expense related to its
employee stock option awards before the required implementation date of the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 123 as revised in 2004. The Company accounted for these
stock options as equity instruments. However, SFAS No. 123 (revised 2004)
requires that stock options that may be settled for cash instead of stock at
the election of the holder upon the occurrence of a change in control event be
accounted for as a liability regardless of the probability of the change in
control event occurring.
The Company recently became aware of the applicability of the contingent
cash settlement feature of SFAS No. 123 (revised 2004) to its employee stock
compensation plans. Had the Company used the liability method to account for
stock option awards during 2005, operating income would have increased by
$37.8 million. Accordingly, income before accounting changes net of tax would
have been $983.0 million for the year, an increase of $23.4 million compared
to the Company's reported amount of $959.6 million. In addition, on the
January 1, 2005 adoption date of this accounting method, the Company would
have recorded a cumulative charge to income of $120.9 million or $74.8 million
net of tax for its adoption of the liability method.
On January 11, 2006, FASB voted to seek public comment on a proposed FASB
Staff Position (FSP) to require companies to classify employee stock options
with contingent cash settlement features as equity awards provided the
contingent event, such as a change in control event, is not considered
probable of occurring. This classification would be consistent with the
amounts reported with respect to outstanding stock options in connection with
the Company's original adoption of SFAS No. 123 (revised 2004) on January 1,
2005, and in subsequent interim periods.
The Company believes that the proposed FSP is a strong indication that
classification of its stock option awards as equity instruments will be
appropriate upon finalization of the FSP. As a result, all financial data
reported in this press release is presented on a U.S. GAAP basis adjusted for
the anticipated ratification of the proposed FSP. In the event the FSP is not
finalized as expected, the Company will reflect such effects on the year and
the quarters in its annual report and 10-K filing for the year ended December
31, 2005.
Company Background
Harley-Davidson, Inc. is the parent company for the group of companies
doing business as Harley-Davidson Motor Company, Buell Motorcycle Company and
Harley-Davidson Financial Services. 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 motorcycles.
Harley-Davidson Financial Services provides wholesale and retail financing and
insurance programs to Harley-Davidson dealers and their retail customers.
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 as such because
the context of the statement will include words such as the Company
"believes," "anticipates," "expects," "plans," or "estimates" or words of
similar meaning. Similarly, statements that describe future plans,
objectives, outlooks, targets, guidance 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
disclaims any obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
The Company's ability to meet the targets and expectations noted depends
upon, among other factors, the Company's ability to (i) continue to realize
production efficiencies at its production facilities and effectively manage
operating costs including materials, labor and overhead, (ii) successfully
manage production capacity and production changes, (iii) avoid unexpected
supply chain issues, (iv) provide products, services and experiences that are
successful in the marketplace, (v) develop and implement sales and marketing
plans that retain existing customers and attract new customers in an
increasingly competitive marketplace, (vi) sell all of its motorcycles and
related products and services to its independent dealers and distributors,
(vii) continue to develop the capacity of its distributor and dealer network,
(viii) avoid unexpected changes and prepare for known requirements in
legislative and regulatory environments for its products and operations, (ix)
successfully adjust to fluctuations in foreign currency exchange rates,
interest rates and commodity prices, (x) adjust to worldwide economic and
political conditions, including changes in fuel prices and interest rates,
(xi) successfully manage the credit quality and recovery rates of HDFS's loan
portfolio, (xii) retain and attract talented employees and (xiii) detect any
defects in our motorcycles to minimize delays in new model launches, recall
campaigns, increased warranty costs or litigation. In addition, the Company
could experience delays in the operation of manufacturing facilities as a
result of work stoppages, natural causes, terrorism or other factors.
The Company's ability to sell all of its motorcycles and related products
and services also depends on the ability of the Company's independent dealer
network to sell them to retail customers. The Company depends on the
capability of its independent dealers and distributors to develop and
implement effective retail sales plans to create demand for the motorcycles
and related products and services they purchase from the Company.
In addition, the Company's independent dealers and distributors may
experience difficulties in selling Harley-Davidson motorcycles and related
products and services as a result of weather, economic conditions or other
factors.
Risk factors are also disclosed in documents previously filed by the
Company with the Securities and Exchange Commission.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
(Unaudited) (Unaudited) (Unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004
Net revenue $1,342,335 $1,220,997 $5,342,214 $5,015,190
Gross profit 514,510 461,422 2,040,499 1,899,535
Operating expenses 199,854 180,672 740,634 710,016
Operating income from
motorcycles & related
products 314,656 280,750 1,299,865 1,189,519
Financial services income 76,060 66,224 331,618 305,262
Financial services
expense 36,595 27,018 139,998 116,662
Operating income from
financial services 39,465 39,206 191,620 188,600
Corporate expenses 3,473 3,757 21,474 16,628
Total operating income 350,648 316,199 1,470,011 1,361,491
Investment income and
other, net 6,009 7,775 17,748 17,995
Income before provision
for taxes 356,657 323,974 1,487,759 1,379,486
Provision for income
taxes 126,613 115,012 528,155 489,720
Net income $ 230,044 $ 208,962 $ 959,604 $ 889,766
Earnings per common share:
Basic $0.84 $0.71 $3.42 $3.02
Diluted $0.84 $0.71 $3.41 $3.00
Weighted-average common
shares:
Basic 274,182 294,014 280,303 295,008
Diluted 274,837 295,406 281,035 296,852
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
Dec 31, Dec 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $ 140,975 $ 275,159
Marketable securities 905,197 1,336,909
Accounts receivable, net 122,087 121,333
Finance receivables, net 1,641,766 1,624,038
Inventories 221,418 226,893
Other current assets 122,319 98,854
Total current assets 3,153,762 3,683,186
Finance receivables, net 600,831 488,262
Other long-term assets 1,509,141 1,311,845
Total assets $5,263,734 $5,483,293
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 668,139 $ 677,255
Current portion of finance debt 204,973 495,441
Total current liabilities 873,112 1,172,696
Finance debt 1,000,000 800,000
Other long-term liabilities 246,042 142,278
Postretirement health care benefits 60,975 149,848
Shareholders' equity 3,083,605 3,218,471
Total liabilities and shareholders'
equity $5,263,734 $5,483,293
Note: Certain prior year balances have been reclassified in order to
conform with the current year presentation.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Twelve months ended
(Unaudited)
Dec 31, Dec 31, Dec 31,
2005 2004 2003
Cash flows from operating activities:
Net income $ 959,604 $ 889,766 $ 760,928
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 205,705 214,112 196,918
Provision for long-term employee
benefits 94,328 62,806 76,422
Gain on current year
securitizations (46,581) (58,302) (82,221)
Proceeds from securitizations 2,450,920 1,847,895 1,724,060
Finance receivables (held for sale)
acquired or originated (2,447,320) (2,069,713) (1,897,719)
Finance receivables (held for sale)
collected 124,462 84,310 107,510
Net change in wholesale finance
receivables (161,342) (154,124) (154,788)
Contributions to pension &
postretirement plans (296,859) - (192,000)
Tax benefit from the exercise of
stock options - 51,476 13,805
Other 82,678 (11,142) 62,232
Net changes in current assets and
current liabilities (5,085) (24,866) (18,644)
Total adjustments 906 (57,548) (164,425)
Net cash provided by operating
activities 960,510 832,218 596,503
Cash flows from investing activities:
Capital expenditures (198,389) (213,550) (227,230)
Finance receivables, net (156,438) (134,571) (47,287)
Collection of retained securitization
interests 115,346 125,732 118,113
Net change in marketable securities 431,075 (349,042) (393,548)
Other, net (14,497) 1,189 9,690
Net cash provided by (used in)
investing activities 177,097 (570,242) (540,262)
Cash flows from financing activities:
Net increase in finance debt (80,720) 305,047 224,118
Dividends (173,785) (119,232) (58,986)
Purchase of common stock for
treasury (1,054,615) (564,132) (103,880)
Excess tax benefits from share based
payments 6,065
Issuance of common stock under
employee stock plans 31,264 62,171 19,378
Net cash used in financing activities (1,271,791) (316,146) 80,630
Net increase in cash and cash
equivalents (134,184) (54,170) 136,871
Cash and cash equivalents:
At beginning of period 275,159 329,329 192,458
At end of period $ 140,975 $ 275,159 $ 329,329
Note: Certain prior year balances have been reclassified in order to
conform with the current year presentation.
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
(unaudited)
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $1,088,286 $ 992,611 $4,183,515 $3,928,232
Buell(R) motorcycles 21,828 15,519 93,069 79,029
Parts & Accessories 169,859 157,906 815,678 781,621
General Merchandise 60,486 54,884 247,861 223,712
Other 1,876 77 2,091 2,596
$1,342,335 $1,220,997 $5,342,214 $5,015,190
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 74,383 68,902 266,507 260,607
Export 13,205 11,685 62,510 56,682
Total 87,588 80,587 329,017 317,289
Motorcycle product mix:
Touring 29,090 25,052 110,193 93,305
Custom 38,233 38,035 148,609 154,163
Sportster(R) 20,265 17,500 70,215 69,821
Total 87,588 80,587 329,017 317,289
BUELL UNITS
Motorcycle shipments:
Buell 2,716 2,064 11,166 9,857
Retail Sales of Harley-Davidson Motorcycles
Full Year 2005
2005 2004
United States 253,414 243,160
Europe* 29,482 24,594
Japan 11,420 10,283
Canada 11,660 11,200
All other markets 11,193 9,373
Total Harley-Davidson Sales 317,169 298,610
Data Source (subject to update)
Data source for all 2005 retail sales figures shown above is sales
warranty and registration information provided by Harley-Davidson dealers
and compiled by the Company. The Company must rely on information that
its dealers supply concerning retail sales
* Data for Europe include Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
Motorcycle Sales data.
Heavyweight (651+ cc) Market Industry Data
Data Through Month Indicated
2005 2004
United States (December) 517,562 494,045
Europe* (November) 330,726 332,706
Data Source (subject to update)
United States: Motorcycle Industry Council
Europe: Giral S.A.
* Data for Europe include Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom
SOURCE Harley-Davidson, Inc.
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Related links:
http://www.harley-davidson.com
CONTACT:
Financial Contact - Mark Van Genderen,
+1-414-343-8002, or Media Contact - Susan Walton,
+1-414-343-7565, both of Harley-Davidson, Inc.
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