Worldwide Retail Sales Also at Record Levels
MILWAUKEE, July 13 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE: HDI) today announced record earnings per share (EPS) of 84 cents for
the quarter ended June 26, 2005 compared to 83 cents for the year ago quarter.
Revenue for the quarter was $1.333 billion compared with $1.328 billion in the
year ago quarter, a 0.4 percent increase. Net income for the quarter was
$237.4 million, slightly lower than last year's $247.2 million. During the
second quarter, the Company repurchased 17.7 million shares of its common
stock, in addition to the 2.9 million shares repurchased during the first
quarter of this year.
"Harley-Davidson had a successful second quarter," said Jim Ziemer, Chief
Executive Officer, Harley-Davidson, Inc. "The Company produced record revenue
despite lower motorcycle shipments compared to the year ago quarter. We
shipped 77,000 motorcycles to our dealers as planned, while retail sales of
Harley-Davidson(R) motorcycles grew to record levels of 114,000 units, up
nearly 6 percent compared to the same period last year. In addition, we
increased our stock repurchase investment to over $1 billion year-to-date.
Earnings per share were at an all-time high for any quarter in our history,"
said Ziemer.
"During the quarter, our dealers' retail sales continued to grow
worldwide. European demand for Harley-Davidson motorcycles drove an increase
of more than 23 percent in retail sales in that market. Retail sales in the
remainder of our international markets grew more than 11 percent compared to
last year's second quarter. In the U.S., sales of Harley-Davidson motorcycles
were at an all time high, up 3.2 percent over an exceptional increase of
nearly 19 percent in the year-ago quarter," said Ziemer.
"For the full year, the Company is on course to ship our target of 329,000
Harley-Davidson motorcycles, yielding a shipment growth rate of 3.7 percent.
At the end of the first quarter, we set expectations that this wholesale
shipment volume would drive earnings per share growth of 5 - 8 percent for the
year. Given the number of shares we repurchased during the first half of the
year, 2005 earnings per share growth is now anticipated to be in the 10 - 13
percent range," he said.
"Harley-Davidson's longer-term guidance remains at 7 - 9 percent annual
growth in motorcycle unit shipments, supporting earnings per share growth in
the mid-teens," said Ziemer.
Motorcycles and Related Products Segment
In line with prior guidance, motorcycle shipments during the second
quarter of 2005 totaled 77,128 units, down 6 percent compared to the second
quarter of 2004. Second quarter revenue from Harley-Davidson motorcycles was
just over $1.0 billion, 1.4 percent lower than the second quarter last year.
Second quarter revenue from Parts and Accessories (P&A), which consists of
Genuine Motor Parts(TM) and Genuine Motor Accessories(TM), totaled $237.8
million, a 3.3 percent increase over the year-ago quarter. For the longer
term, the Company expects P&A revenue to grow at a rate slightly faster than
the motorcycle unit growth rate.
General Merchandise revenue, which consists of MotorClothes(R) apparel and
collectibles, was $63.4 million in the second quarter, up 19.5 percent
compared to the same period last year. For the longer term, the Company
expects General Merchandise revenue to grow at a rate less than the motorcycle
unit growth rate.
Second quarter gross margin was 37.5 percent of revenue versus 37.9
percent in the year ago quarter. This slight decrease is due to lower
motorcycle shipments and higher raw material costs, which have been partially
offset by a stronger model mix. Higher operating expenses during the second
quarter resulted in an operating margin of 24.0 percent compared to 25.2
percent in the same quarter last year. On a year-to-date basis, operating
expenses as a percent of revenue were 13.5 percent in 2005 compared to 13.7
percent a year ago.
Motorcycle Retail Sales Data
Worldwide retail sales of Harley-Davidson motorcycles grew nearly 6
percent for the quarter, driven by strong performance in Europe and Japan
which increased 23.6 and 10.4 percent respectively. On an industry-wide basis
through May 2005, the 651+cc segment was down 2.6 percent in Europe, while the
heavyweight market in Japan was down 6.0 percent for the same period.
In the United States for the second quarter, Harley-Davidson retail
motorcycle sales finished up 3.2 percent compared to 2004. Similarly, the U.
S. heavyweight motorcycle market finished up 4.4 percent in the second
quarter. Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported operating income of
$51.0 million, up $2.0 million or 4.1 percent compared to the year-ago
quarter.
During the quarter, HDFS sold $775 million in retail motorcycle loans and
recorded a gain of $14.0 million. This compares with a gain of $19.3 million
on $626 million of loans securitized during the second quarter of 2004. The
gain of 1.8 percent as a percentage of loans sold falls within management's
prior guidance. In this current competitive market and interest rate
environment, HDFS expects future gains in the range of 1.3 to 2.0 percent.
Annualized credit losses on a managed portfolio basis during the first six
months were 0.89 percent, compared to 0.63 percent in 2004. This increase is
a result of lower recovery rates and a higher incidence of loss. Management's
annualized credit loss target remains at 1 percent or less.
For the full year 2005, HDFS operating income is expected to be slightly
lower than that achieved in 2004. For the longer term, the Company expects
the HDFS operating income growth rate to be slightly higher than the Company's
motorcycle unit growth rate.
Harley-Davidson, Inc. - Six Month Results
For the first six months of 2005, revenue totaled $2.57 billion, a 3.0
percent increase over the year-ago period. Earnings per share were $1.62, an
increase of 6.6 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson
motorcycles were 153,844 units, a 1.5 percent decrease compared to last year's
156,124 units. Harley-Davidson motorcycle revenue was $1.99 billion, up 2.4
percent compared to last year's $1.94 billion. P&A revenue totaled $414.7
million, a 3.8 percent increase over last year's $399.3 million. General
Merchandise revenue totaled $122.9 million, a 14.3 percent increase compared
with $107.5 million during the same period in 2004.
HDFS operating income was $104.6 million, a 5.3 percent increase over last
year's $99.3 million.
Cash Flow
Cash and marketable securities decreased $876 million during the first six
months in 2005 as the Company repurchased $1.0 billion of its common stock,
contributed $102 million to post-retirement health care trusts, invested $75
million in capital expenditures and paid $80 million in dividends.
Recent Lawsuits - SEC Request for Information
On July 11, 2005, Harley-Davidson was advised by the Securities and
Exchange Commission (SEC) that it is inquiring into matters relating generally
to certain claims made in lawsuits recently filed by shareholders against the
Company. The lawsuits were filed subsequent to our April 13, 2005
announcement to reduce our planned Harley-Davidson motorcycle shipment growth
during 2005 by 10,000 units from our original target. The Company believes
the lawsuits are without merit.
The Company disclosed this matter in a Form 8-K filed with the SEC on July
12, 2005. In light of the pending shareholder litigation, the Company was not
surprised by the SEC's inquiry. The Company is cooperating with the SEC.
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 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 the
regulatory environment for its products, (ix) successfully adjust to
fluctuations in foreign currency exchange rates, interest rates and commodity
prices, (x) adjust to worldwide economic and political conditions, (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)
(Unaudited)
Three Months Ended Six Months Ended
June 26, June 27, June 26, June 27,
2005 2004 2005 2004
Net revenue $1,333,264 $1,327,808 $2,568,728 $2,493,509
Gross profit 500,434 503,416 964,717 943,545
Operating expenses 181,084 168,333 346,510 341,364
Operating income from
motorcycles and
related products 319,350 335,083 618,207 602,181
Financial services income 85,302 81,060 174,114 161,554
Financial services expense 34,281 32,053 69,534 62,234
Operating income from
financial services 51,021 49,007 104,580 99,320
Corporate expenses 7,012 5,034 14,286 9,523
Total operating income 363,359 379,056 708,501 691,978
Investment income and
other, net 4,689 4,264 11,818 8,521
Income before provision
for taxes 368,048 383,320 720,319 700,499
Provision for income taxes 130,657 136,079 255,713 248,678
Net income $237,391 $247,241 $464,606 $451,821
Earnings per common share:
Basic $0.85 $0.84 $1.62 $1.53
Diluted $0.84 $0.83 $1.62 $1.52
Weighted-average common
shares:
Basic 280,577 294,304 286,685 296,039
Diluted 281,181 296,396 287,493 298,135
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
June 26, Dec. 31, June 27,
2005 2004 2004
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $319,720 $275,159 $379,142
Marketable securities 416,202 1,336,909 933,862
Accounts receivable, net 138,413 121,333 130,606
Finance receivables, net 1,046,489 1,207,124 954,918
Inventories 225,778 226,893 217,711
Other current assets 102,578 98,854 81,814
Total current assets 2,249,180 3,266,272 2,698,053
Finance receivables, net 752,363 905,176 633,450
Other long-term assets 1,264,515 1,311,845 1,393,237
Total assets $4,266,058 $5,483,293 $4,724,740
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $628,695 $677,255 $654,477
Current portion of finance debt 7,994 495,441 96,977
Total current liabilities 636,689 1,172,696 751,454
Finance debt 800,000 800,000 670,000
Other long-term liabilities 140,433 142,278 219,261
Postretirement health care benefits 54,652 149,848 139,909
Shareholders' equity 2,634,284 3,218,471 2,944,116
Total liabilities and shareholders'
equity $4,266,058 $5,483,293 $4,724,740
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six months ended
June 26, June 27,
2005 2004
Cash flows from operating activities:
Net income $464,606 $451,821
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 106,474 104,864
Provision for long-term employee
benefits 41,482 33,978
Gain on current year securitizations (33,170) (44,498)
Net change in wholesale finance
receivables 127,946 76,366
Contributions to pension &
postretirement plans (109,000) -
Tax benefit from the exercise of
stock options - 11,860
Other 18,232 17,994
Net changes in current assets and
current liabilities (54,839) 8,577
Total adjustments 97,125 209,141
Net cash provided by operating
activities 561,731 660,962
Cash flows from investing activities:
Capital expenditures (75,430) (64,205)
Finance receivables, net 146,545 52,023
Collection of retained securitization
interests 53,751 60,603
Net change in marketable securities 920,539 55,702
Other, net (9,934) (9,618)
Net cash provided by investing
activities 1,035,471 94,505
Cash flows from financing activities:
Net decrease in finance debt (485,085) (218,100)
Dividends paid (80,486) (53,010)
Purchase of common stock for treasury (1,014,645) (473,468)
Excess tax benefits from share based
payments 6,171 -
Issuance of common stock under
employee stock plans 21,404 38,924
Net cash used in financing activities (1,552,641) (705,654)
Net increase in cash and cash
equivalents 44,561 49,813
Cash and cash equivalents:
At beginning of period 275,159 329,329
At end of period $319,720 $379,142
Note: Certain prior year amounts have been reclassified to conform to
the current year presentation.
Harley-Davidson, Inc.
Net Revenue and Motorcycle Shipment Data
Three Months Ended Six Months Ended
June 26, June 27, June 26, June 27,
2005 2004 2005 2004
NET REVENUE (in thousands)
Harley-Davidson(R)
motorcycles $1,006,105 $1,020,263 $1,985,056 $1,939,069
Buell(R) motorcycles 25,925 23,109 45,974 45,192
Parts & Accessories 237,754 230,146 414,658 399,334
General Merchandise 63,406 53,068 122,869 107,476
Other 74 1,222 171 2,438
$1,333,264 $1,327,808 $2,568,728 $2,493,509
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 58,997 65,102 119,875 124,846
Export 18,131 16,932 33,969 31,278
Total 77,128 82,034 153,844 156,124
Motorcycle product mix:
Touring 26,519 25,028 51,590 46,432
Custom 35,371 39,407 69,657 76,271
Sportster(R) 15,238 17,599 32,597 33,421
Total 77,128 82,034 153,844 156,124
Retail Sales of Harley-Davidson Motorcycles
First Six Months 2005
2005 2004
United States 143,683 141,407
Europe* 18,353 14,978
Japan 5,358 4,849
Canada 7,975 7,289
All other markets 5,530 4,271
Total Harley-Davidson Sales 180,899 172,794
Data Source
Harley-Davidson(R) sales and warranty registrations provided by H-D
dealers and compiled by the Company
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
Motorcycle Sales data.
*Data for Europe includes Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal Spain, Sweden,
Switzerland, and the United Kingdom
Heavyweight (651+ cc) Market Data
Data Through Month Indicated
2005 2004
United States (June) 295,388 287,528
Europe* (May) 179,179 183,938
Japan (May) 17,198 18,287
Data Source
United States: Motorcycle Industry Council
Europe: Giral S.A.
Japan: JAIA
Data for remaining markets not available on a monthly basis
*Data for Europe includes 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; Media: Susan Walton, +1-414-343-7565
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