| Financial Contact: | Mark Van Genderen (414) 343-8002 |
| Media Contact: | Bob Klein (414) 343-4433 |
HARLEY-DAVIDSON REPORTS 2007 THIRD QUARTER RESULTS
Milwaukee, Wis., October 19, 2007 — Harley-Davidson, Inc. (NYSE: HOG) today announced its results for the third quarter ended September 30, 2007. Revenue for the quarter was $1.54 billion compared to $1.64 billion in the year ago quarter, a 5.8 percent decrease. Net income for the quarter was $265.0 million compared to $312.7 million, a decrease of 15.3 percent versus the third quarter of 2006. Third quarter diluted earnings per share were $1.07, a 10.8 percent decrease compared to last year’s $1.20. During the third quarter the Company repurchased $509 million of its common stock.
“Harley-Davidson’s third quarter financial results are disappointing but not unexpected. In early September, we announced that we would reduce planned motorcycle shipments for the rest of 2007, and our results for the quarter are consistent with the Company’s revised guidance,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
“Worldwide retail sales of Harley-Davidson® motorcycles during the third quarter were virtually flat with the third quarter of 2006, down 0.2 percent. U.S. retail sales continued to be sluggish, finishing down 2.5 percent for the quarter, while retail sales in our international markets grew 8.8 percent during the period,” said Ziemer.
For the full year of 2007, the Company expects a shipment range of 328,000 to 332,000 Harley-Davidson motorcycles, compared to 349,196 units in 2006. The Company also expects a modest decline in revenue and lower operating margin in 2007. Diluted earnings per share for the full year are expected to decrease 4 to 6 percent compared to 2006.
Looking ahead to 2008, the Company anticipates that the U.S. retail motorcycle environment will continue to be challenging. It expects moderate revenue growth, lower operating margin and diluted earnings per share to grow between 4 and 7 percent compared to 2007.
“For the longer term, I am optimistic and confident about our future,” said Ziemer. “Harley-Davidson has a strong business model, and we will continue to manage the Company in a manner that strengthens our brand and contributes to lasting success for all of our stakeholders,” said Ziemer.
Motorcycles and Related Products Segment – Third Quarter Results
Revenue from Harley-Davidson motorcycles was $1.18 billion, a decrease of $110.7 million or 8.6 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 86,535 units, a decrease of 10,511 units or 10.8 percent compared to last year’s third quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $251.5 million, an increase of $3.1 million or 1.2 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes® apparel and collectibles, totaled $83.2 million, an increase of $11.9 million or 16.7 percent over the year-ago quarter.
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Gross margin for the third quarter of 2007 was 38.4 percent of revenue compared to 39.9 percent for the third quarter last year. Third quarter operating margin decreased to 23.2 percent from 26.5 percent in the third quarter of 2006.
Motorcycle Retail Sales Data
During the third quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 0.2 percent compared to the third quarter of 2006. U.S. retail sales of Harley-Davidson motorcycles decreased 2.5 percent for the quarter. The heavyweight motorcycle market in the U.S. decreased 4.4 percent for the same period.
Retail sales of Harley-Davidson motorcycles grew 8.8 percent in the Company’s international markets during the third quarter of 2007 compared to the third quarter of 2006. Third quarter retail sales increased 10.7 percent in Europe; Canada was down 7.7 percent; and Japan was up 9.1 percent. All other international markets combined were up 20.8 percent.
During the first nine months of 2007, worldwide retail sales of Harley-Davidson motorcycles decreased 0.9 percent compared to the prior year. In the U.S., Harley-Davidson dealer retail sales decreased 4.7 percent for the first nine months of the year; international sales increased by 12.9 percent for the same period. The U.S. heavyweight motorcycle market was down 4.4 percent for the first nine months of 2007.
Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported third quarter operating income of $49.5 million, a decrease of $5.7 million or 10.4 percent, compared to the year ago quarter. The decrease is primarily due to a lower securitization gain in the third quarter of 2007 versus the third quarter of 2006.
Income Tax Rate
The Company’s third quarter effective income tax rate was 35.5 percent compared to 36.0 percent in the same quarter last year. This decrease primarily reflects the reinstatement of the federal research and development tax credit.
Harley-Davidson, Inc. — Nine Month Results
For the first nine months of 2007, revenue totaled $4.34 billion, a 1.0 percent increase over the year-ago period. Diluted earnings per share were $2.95, a decrease of 0.3 percent compared to the same period last year.
Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 249,413 units, a 2.7 percent decrease compared to last year’s 256,348 units. Harley-Davidson motorcycle revenue was $3.33 billion, which is flat compared to last year. P&A revenue totaled $703.1 million, a 2.9 percent increase over last year’s $683.1 million. General Merchandise revenue totaled $232.0 million, a 12.2 percent increase compared to $206.9 million during the same period in 2006.
HDFS operating income was $173.6 million, a 6.5 percent increase over last year’s $163.1 million.
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Cash Flow
Cash and marketable securities totaled $456.7 million as of September 30, 2007. Cash flow from operations was $1.37 billion, and capital expenditures were $139.4 million during the first nine months of 2007. For the full year of 2007, capital expenditures are now expected to be between $250 million and $275 million.
Stock Repurchase
The Company repurchased 9.7 million shares of its common stock at a cost of $509.0 million during the third quarter of 2007. On a year to date basis through September 30, 2007, the Company has repurchased 17.3 million shares for a total cost of $1.00 billion. On September 30, 2007, the Company has 241.5 million shares of common stock outstanding.
As of September 30, 2007, there are 6.2 million shares remaining on a board-approved share repurchase authorization. An additional board-approved share repurchase authorization is in place to offset option exercises.
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.
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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 capabilities 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, commodity prices and credit availability, (x) manage regional and worldwide demographic trends and economic and political conditions, including healthcare inflation, pension reform and tax changes, (xi) anticipate consumer confidence in the economy, (xii) manage the credit quality and recovery rates of HDFS’s loan portfolio, (xiii) retain and attract talented employees, (xiv) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation and (xv) implement and manage enterprise-wide information technology solutions and secure data contained in those systems.
In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, 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
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Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
| Three months ended | Nine months ended | |||||||||||||
| September 30, 2007 | September 24, 2006 | September 30, 2007 | September 24, 2006 | |||||||||||
Net revenue | $ | 1,541,401 | $ | 1,635,916 | $ | 4,340,494 | $ | 4,298,053 | ||||||
| Gross profit | 591,353 | 652,255 | 1,619,566 | 1,661,795 | ||||||||||
| Operating expenses | 233,068 | 218,243 | 639,512 | 590,503 | ||||||||||
| Operating income from motorcycles & related products | 358,285 | 434,012 | 980,054 | 1,071,292 | ||||||||||
Financial services income | 98,471 | 97,344 | 319,964 | 291,812 | ||||||||||
| Financial services expense | 49,002 | 42,154 | 146,349 | 128,734 | ||||||||||
| Operating income from financial services | 49,469 | 55,190 | 173,615 | 163,078 | ||||||||||
Corporate expenses | 2,292 | 5,215 | 13,763 | 16,723 | ||||||||||
| Income from operations | 405,462 | 483,987 | 1,139,906 | 1,217,647 | ||||||||||
| Investment income and other, net | 5,353 | 4,659 | 19,432 | 17,861 | ||||||||||
| Income before provision for income taxes | 410,815 | 488,646 | 1,159,338 | 1,235,508 | ||||||||||
| Provision for income taxes | 145,849 | 175,912 | 411,572 | 444,781 | ||||||||||
| Net income | $ | 264,966 | $ | 312,734 | $ | 747,766 | $ | 790,727 | ||||||
Earnings per common share: | ||||||||||||||
| Basic | $ | 1.07 | $ | 1.20 | $ | 2.96 | $ | 2.96 | ||||||
| Diluted | $ | 1.07 | $ | 1.20 | $ | 2.95 | $ | 2.96 | ||||||
Weighted-average common shares: | ||||||||||||||
| Basic | 247,057 | 260,270 | 252,513 | 266,772 | ||||||||||
| Diluted | 247,614 | 261,229 | 253,263 | 267,525 | ||||||||||
Cash dividends per common share | $ | 0.30 | $ | 0.21 | $ | 0.76 | $ | 0.60 | ||||||
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Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
| (Unaudited) September 30, 2007 | December 31, 2006 | (Unaudited) September 24, 2006 | |||||||||
ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 401,385 | $ | 238,397 | $ | 506,139 | |||||
| Marketable securities | 55,355 | 658,133 | 446,543 | ||||||||
| Accounts receivable, net | 185,208 | 143,049 | 149,951 | ||||||||
| Finance receivables held for sale | 431,843 | 547,106 | 100,109 | ||||||||
| Finance receivables held for investment, net | 1,275,590 | 1,554,260 | 1,273,841 | ||||||||
| Inventories | 376,950 | 287,798 | 281,536 | ||||||||
| Other current assets | 130,126 | 121,890 | 124,837 | ||||||||
| Total current assets | 2,856,457 | 3,550,633 | 2,882,956 | ||||||||
Finance receivables held for investment, net | 861,138 | 725,957 | 706,695 | ||||||||
| Other long-term assets | 1,253,365 | 1,255,560 | 1,443,411 | ||||||||
| $ | 4,970,960 | $ | 5,532,150 | $ | 5,033,062 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable & accrued liabilities | $ | 962,250 | $ | 763,186 | $ | 880,294 | |||||
| Current portion of finance debt | 250,168 | 832,491 | 96,374 | ||||||||
| Total current liabilities | 1,212,418 | 1,595,677 | 976,668 | ||||||||
Finance debt | 980,000 | 870,000 | 900,000 | ||||||||
| Postretirement healthcare benefits | 207,957 | 201,126 | 70,571 | ||||||||
| Other long-term liabilities | 207,582 | 108,610 | 239,452 | ||||||||
| Total shareholders' equity | 2,363,003 | 2,756,737 | 2,846,371 | ||||||||
| $ | 4,970,960 | $ | 5,532,150 | $ | 5,033,062 | ||||||
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Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Nine months ended | ||||||||
| September 30, 2007 | September 24, 2006 | |||||||
Net cash provided by operating activities | $ | 1,368,257 | $ | 1,283,580 | ||||
Cash flows from investing activities: | ||||||||
| Capital expenditures | (139,437 | ) | (137,468 | ) | ||||
| Finance receivables held for investment, net | (92,147 | ) | (75,710 | ) | ||||
| Collection of retained securitization interests | 87,827 | 73,974 | ||||||
| Net change in marketable securities | 604,927 | 464,641 | ||||||
| Other, net | 1,696 | 2,512 | ||||||
| Net cash provided by investing activities | 462,866 | 327,949 | ||||||
Cash flows from financing activities: | ||||||||
| Net decrease in finance-credit | ||||||||
| facilities and commercial paper | (506,938 | ) | (208,996 | ) | ||||
| Dividends | (189,093 | ) | (158,738 | ) | ||||
| Purchase of common stock for treasury | (1,000,133 | ) | (910,957 | ) | ||||
| Excess tax benefits from share-based payments | 3,057 | 3,550 | ||||||
| Issuance of common stock under employee | ||||||||
| stock option plans | 21,429 | 25,882 | ||||||
| Net cash used by financing activities | (1,671,678 | ) | (1,249,259 | ) | ||||
Effect of exchange rate changes on cash | ||||||||
| and cash equivalents | 3,543 | 2,894 | ||||||
Net increase in cash and cash equivalents | 162,988 | 365,164 | ||||||
Cash and cash equivalents: | ||||||||
| At beginning of period | 238,397 | 140,975 | ||||||
| At end of period | $ | 401,385 | $ | 506,139 | ||||
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Net Revenue and Motorcycle
Shipment Data
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||
| September 30, 2007 | September 24, 2006 | September 30, 2007 | September 24, 2006 | |||||||||||
NET REVENUE (in thousands) | ||||||||||||||
| Harley-Davidson® motorcycles | $ | 1,182,628 | $ | 1,293,358 | $ | 3,328,309 | $ | 3,329,700 | ||||||
| Buell® motorcycles | 22,527 | 21,423 | 72,795 | 74,826 | ||||||||||
| Parts & Accessories | 251,499 | 248,448 | 703,107 | 683,100 | ||||||||||
| General Merchandise | 83,185 | 71,251 | 232,011 | 206,873 | ||||||||||
| Other | 1,562 | 1,436 | 4,272 | 3,554 | ||||||||||
| $ | 1,541,401 | $ | 1,635,916 | $ | 4,340,494 | $ | 4,298,053 | |||||||
HARLEY-DAVIDSON UNITS | ||||||||||||||
| Motorcycle shipments: | ||||||||||||||
| United States | 65,756 | 80,398 | 182,447 | 198,720 | ||||||||||
| Export | 20,779 | 16,648 | 66,966 | 57,628 | ||||||||||
| Total | 86,535 | 97,046 | 249,413 | 256,348 | ||||||||||
Motorcycle product mix: | ||||||||||||||
| Touring | 28,461 | 36,041 | 84,934 | 90,914 | ||||||||||
| Custom | 39,488 | 44,096 | 109,576 | 116,604 | ||||||||||
| Sportster® | 18,586 | 16,909 | 54,903 | 48,830 | ||||||||||
| Total | 86,535 | 97,046 | 249,413 | 256,348 | ||||||||||
BUELL UNITS | ||||||||||||||
| Motorcycle shipments: | ||||||||||||||
| Buell | 2,639 | 2,529 | 8,376 | 9,105 | ||||||||||
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Retail Sales of Harley-Davidson Motorcycles
Year to Date September
| 2007 | 2006 | |||||||
United States | 215,092 | 225,623 | ||||||
| Europe* | 32,594 | 28,131 | ||||||
| Japan | 10,028 | 9,707 | ||||||
| Canada | 12,855 | 12,195 | ||||||
| All other markets | 13,393 | 10,989 | ||||||
Total Retail Sales of Harley-Davidson Motorcycles | 283,962 | 286,645 | ||||||
Data Source (subject to update)
Data source for all 2006 and 2007 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.
Only Harley-Davidson® motorcycles are included in the Harley-Davidson Motorcycle Sales data.
*Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom
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Heavyweight Market Data
Data Through Month Indicated
| 2007 | 2006 | |||||||
United States1 (September) | 443,511 | 463,859 | ||||||
| Europe2 (August) | 322,102 | 306,197 | ||||||
1 - United States industry data includes 651+cc models, derived from submission of motorcycle retail sales by each major manufacturer to an independent third party.
2 - Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 651+cc models, derived from information provided by Giral S.A., an independent agency.
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