HARLEY-DAVIDSON ANNOUNCES FIRST QUARTER
RESULTS
Milwaukee, WI (April 12, 2006) - 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® 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™ 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.
TABLES FOLLOW
|
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
acitivies: |
|
|
|
|
|
|
| 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®
motorcycles |
|
$1,008,542 |
|
$978,951 |
|
|
| Buell® 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® |
|
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®
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 |
|
|
|
|
