Worldwide Retail Sales of Harley-Davidson Motorcycles Increase 6.9 Percent
MILWAUKEE, April 12 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE: HDI) today announced record revenue and earnings for its first
quarter ended March 26, 2006. Revenue for the quarter was $1.29 billion
compared with $1.24 billion in the year-ago quarter, a 4.0 percent
increase. Net income for the quarter was $234.6 million compared to $227.2
million, an increase of 3.2 percent over the first quarter of 2005. First
quarter diluted earnings per share (EPS) were $0.86, an 11.7 percent
increase compared with last year's $0.77.
"Harley-Davidson is off to an excellent start for 2006, having achieved
record revenue and earnings," said Jim Ziemer, President and Chief
Executive Officer, Harley-Davidson, Inc. "In addition, our dealers
continued their retail sales growth momentum from the second half of 2005
as motorcycle sales increased by approximately 7 percent worldwide in the
first quarter. With the increased seasonality in our business, we are
pleased with this retail sales performance," said Ziemer.
Harley-Davidson's second quarter shipment plan is 78,000 2006 model
year motorcycles. Production in the second quarter will also include
approximately 13,000 2007 models to prepare for the new model introduction
in mid July; however, these 2007 motorcycles will not be shipped until the
third quarter.
The Company's wholesale shipment target for the calendar year 2006
remains between 348,000 and 352,000 Harley-Davidson(R) motorcycles. "We
believe that 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.
Motorcycles and Related Products Segment -- First Quarter Results
Revenue from Harley-Davidson motorcycles was $1.01 billion, an increase
of $29.6 million, or 3.0 percent over the same period last year. Shipments
of Harley-Davidson motorcycles totaled 79,506 units, an increase of 2,790
units, or 3.6 percent over last year's first quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine
Motor Parts and Genuine Motor Accessories, totaled $182.9 million, an
increase of $6.0 million, or 3.4 percent over the year-ago quarter. Revenue
from General Merchandise, which consists of MotorClothes(TM) apparel and
collectibles, totaled $68.6 million, an increase of $9.1 million, or 15.3
percent.
For the long term, the Company expects the growth rate for P&A revenue
to be slightly higher than Harley-Davidson's motorcycle shipment growth
rate, and the General Merchandise growth rate is expected to be lower than
the motorcycle shipment growth rate.
Gross margin for the first quarter of 2006 was 38.4 percent of revenue,
up from 37.6 percent for the same period in 2005. Operating margin
increased from 24.2 percent in the first quarter of 2005 to 24.3 percent in
the first quarter of 2006.
Motorcycle Retail Sales Data
Worldwide retail sales of Harley-Davidson motorcycles increased 6.9
percent for the first quarter of 2006 compared to the same period in 2005.
In the U.S., retail sales of Harley-Davidson motorcycles increased 5.8
percent for the quarter. The heavyweight motorcycle market in the U.S.
increased 6.8 for the same period.
Retail sales of Harley-Davidson motorcycles grew 11.6 percent in
international markets during the first quarter of 2006 compared with the
first quarter of 2005. First quarter retail sales were up 16.3 percent in
Japan and 6.6 percent in Europe.
Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported first quarter
operating income of $51.6 million, a decrease of $1.9 million, or 3.6
percent, compared to the year-ago quarter. This decrease was primarily due
to a lower year-over-year gain on the current securitization.
The first quarter securitization of $730 million in motorcycle retail
loans resulted in a gain of $8.6 million, compared to the first quarter
2005 gain of $19.2 million. The 1.2 percent gain as a percentage of loans
sold is consistent with management's prior guidance for the first quarter
of 2006 of 1.0 to 1.4 percent.
For the long term, the Company expects the HDFS operating income growth
rate to be slightly higher than the growth rate of Harley-Davidson
motorcycle shipments.
Income Tax Rate
The Company's first quarter effective income tax rate was 36.0 percent
compared to 35.5 percent in the same quarter last year. This increase was
due to the expiration of the federal research and development tax credit as
of December 31, 2005. The Company expects its annual effective tax rate in
2006 to be 35.5 percent assuming the retroactive reinstatement of this tax
credit.
Cash Flow
Cash and marketable securities totaled $1.11 billion as of March 26,
2006, an increase of $65.7 million during the first quarter. Cash flow from
operations was $365.2 million and capital expenditures were $36.0 million
during the first quarter.
Stock Repurchase
The Company repurchased 2.1 million shares of its common stock at a
cost of $107.1 million during the first quarter of 2006. These shares were
repurchased under an authorization from the Company's Board of Directors to
buy back 20 million shares. A total of 17.9 million shares remain under
this authorization.
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 manage
operating costs including materials, labor and overhead, (ii) manage
production capacity and production changes, (iii) manage 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 retail customers and attract new retail 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) manage changes and prepare for requirements in
legislative and regulatory environments for its products, services and
operations, (ix) 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) 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. Other
factors are described in risk factors that the Company has disclosed in
documents previously filed with the Securities and Exchange Commission.
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.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three months ended
March 26, March 27,
2006 2005
Net revenue $1,285,090 $1,235,464
Gross profit 493,214 464,283
Operating expenses 180,902 165,426
Operating income from motorcycles &
related products 312,312 298,857
Financial services income 95,901 88,812
Financial services expense 44,270 35,253
Operating income from financial services 51,631 53,559
Corporate expenses 4,757 7,274
Total operating income 359,186 345,142
Interest income and other, net 7,317 7,129
Income before provision for income taxes 366,503 352,271
Provision for income taxes 131,940 125,056
Net income $234,563 $227,215
Earnings per common share:
Basic $0.86 $0.78
Diluted $0.86 $0.77
Weighted-average common shares:
Basic 272,966 293,148
Diluted 273,623 294,161
Cash dividends per common share $0.18 $0.125
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
March 26, December 31, March 27,
2006 2005 2005
ASSETS
Current Assets:
Cash and cash equivalents $196,464 $140,975 $200,379
Marketable securities 915,434 905,197 1,184,148
Accounts receivable, net 148,561 122,087 146,199
Finance receivables held for sale 131,389 299,373 222,802
Finance receivables held for
investment, net 1,546,417 1,342,393 1,386,665
Inventories 256,788 221,418 246,875
Other current assets 103,953 113,794 93,216
Total current assets 3,299,006 3,145,237 3,480,284
Finance receivables held for
investment, net 625,664 600,831 531,250
Other long-term assets 1,475,177 1,509,141 1,294,239
$5,399,847 $5,255,209 $5,305,773
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $841,676 $668,139 $801,525
Current portion of finance debt 93,610 204,973 264,360
Total current liabilities 935,286 873,112 1,065,885
Finance debt 1,000,000 1,000,000 800,000
Postretirement healthcare benefits 64,573 60,975 51,297
Other long-term liabilities 235,400 237,517 117,754
Total shareholders' equity 3,164,588 3,083,605 3,270,837
$5,399,847 $5,255,209 $5,305,773
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended
March 26, March 27,
2006 2005
Cash flows from operating activities:
Net income $234,563 $227,215
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 54,232 53,325
Provision for long-term employee benefits 24,482 12,112
Provision for share-based payments 5,289 7,020
Gain on current year securitizations (8,647) (19,201)
Net change in wholesale finance
receivables (201,948) (191,108)
Origination of retail finance
receivables held for sale (604,924) (527,040)
Collections on retail finance
receivables held for sale 25,749 30,754
Proceeds from securitization
of retail finance receivables 723,234 721,974
Contributions to pension and
postretirement plans (2,726) (109,000)
Other, net 1,553 (2,787)
Net changes in current assets
and current liabilities 114,344 74,098
Total adjustments 130,638 50,147
Net cash provided by operating activities 365,201 277,362
Cash flows from investing activities:
Capital expenditures (36,017) (39,025)
Finance receivables held for
investment, net (19,837) (76,850)
Collection of retained
securitization interests 6,960 26,330
Net change in marketable securities (9,626) 149,845
Other, net 4,373 (2,365)
Net cash (used) provided by
investing activities (54,147) 57,935
Cash flows from financing activities:
Net decrease in finance-credit
facilities and commercial paper (105,707) (222,642)
Dividends paid (48,955) (36,541)
Purchase of common stock for treasury (107,065) (175,796)
Excess tax benefits from
share-based payments 1,098 5,699
Issuance of common stock under
employee stock option plans 5,064 19,203
Net cash (used) by financing activities (255,565) (410,077)
Net increase (decrease) in cash and
cash equivalents 55,489 (74,780)
Cash and cash equivalents:
At beginning of period 140,975 275,159
At end of period $196,464 $200,379
Net Revenue and Motorcycle
Shipment Data
(unaudited)
Three Months Ended
March 26, March 27,
2006 2005
NET REVENUE (in thousands)
Harley-Davidson(R) motorcycles $1,008,542 $978,951
Buell(R) motorcycles 24,056 20,049
Parts & Accessories 182,949 176,904
General Merchandise 68,551 59,463
Other 992 97
$1,285,090 $1,235,464
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 60,270 60,878
Export 19,236 15,838
Total 79,506 76,716
Motorcycle product mix:
Touring 27,537 25,071
Custom 35,794 34,286
Sportster(R) 16,175 17,359
Total 79,506 76,716
BUELL UNITS
Motorcycle shipments:
Buell 3,037 2,469
Retail Sales of Harley-Davidson Motorcycles
Year to Date March
2006 2005
United States 56,805 53,707
Europe* 6,910 6,485
Japan 2,482 2,134
Canada 1,796 1,934
All other markets 3,497 2,601
Total Harley-Davidson Retail Sales 71,490 66,861
Data Source (subject to update)
Data source for all 2005 and 2006 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, and this information is
subject to revision.
* 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
2006 2005
United States (March) 109,137 102,177
Europe* (February) 33,278 31,820
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, Mark Van Genderen,
+1-414-343-8002; or Media, Susan Walton, +1-414-343-7565, both
for Harley-Davidson, Inc.
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