PRESS RELEASE
Hold for Release Instructions
Financial Contact: Patrick Davidson (414) 343-8002
Media Contact: Kathleen Lawler (414) 343-4587
HARLEY-DAVIDSON REPORTS RECORD THIRD QUARTER EARNINGS
Milwaukee, Wis., October 15, 2003 -- Harley-Davidson, Inc. (NYSE: HDI)
today announced record earnings for its third quarter ended September 28, 2003.
Third quarter diluted earnings per share (EPS) were 62 cents, a 14.8 percent
increase compared with last year's 54 cents. Revenue for the quarter was $1.134
billion, which compares to $1.135 billion in the year-ago quarter.
"I am pleased to report that we delivered our third quarter shipment
target for Harley-Davidson(R) motorcycles while starting up our new factory for
Softail(R) motorcycles in York, Pennsylvania," said Jeffrey L. Bleustein,
chairman and chief executive officer of Harley-Davidson, Inc. "Achieving total
revenues that equaled last year's record third quarter performance was also a
significant accomplishment since last year's quarter benefited from the
extraordinary impact of the introduction of our 100th Anniversary products."
Revenue growth in the third quarter of 2002 was 28.4 percent for motorcycles,
32.3 percent for Parts & Accessories (P&A) and 88.5 percent for General
Merchandise. "During this year's third quarter, we also successfully began
production of our new 2004 line of motorcycles, including a completely
redesigned Sportster(R) family," said Bleustein.
"Strong demand continued throughout the third quarter as our dealer
network sold Harley-Davidson motorcycles in record numbers. Retail sales of
Harley-Davidson motorcycles in the U.S. grew over 27 percent compared with last
year's third quarter and resulted in a decline in dealer inventories of nearly
12,000 units during the quarter," added Bleustein.
Continued strong demand for Harley-Davidson motorcycles and planned
increases in production capacity support the Company's new 2003 target of
291,000 units and a 2004 target of 317,000 units. The 2004 target represents an
8.9 percent increase over the 2003 target.
Motorcycles and Related Products Segment - Third Quarter Results
- ----------------------------------------------------------------
Third quarter revenue from Harley-Davidson motorcycles was $844.3
million, an increase of 1.4 percent over last year. Worldwide shipments of
Harley-Davidson motorcycles in the third quarter totaled 67,458 units, in line
with the Company's previously announced target of 67,500. This compares to last
year's third quarter shipments of 67,474 motorcycles.
Third quarter revenue from P&A, which consists of Genuine Motor Parts
and Genuine Motor Accessories, totaled $207.8 million. This is a 4.3 percent
increase, or $8.5 million more than the year-ago quarter.
Third quarter revenue from General Merchandise, which consists of
MotorClothes(TM) apparel and collectibles, totaled $60.5 million, down 27.2
percent over the same period last year.
Both P&A and General Merchandise revenue benefited from strong sales of
100th Anniversary products in 2002. Excluding the $46 million of revenue from
100th Anniversary
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Text - page 1
products, the P&A growth rate is 15.8 percent and the General Merchandise growth
rate is 3.5 percent over 2002's third quarter.
For the longer term, the Company expects the growth rate for P&A
revenues 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.
Third quarter gross margin improved from 34.9 percent of revenue in
2002 to 35.6 percent in 2003. Gross margin was impacted primarily by foreign
currency exchange rates. Third quarter operating margin of 21.3 percent
increased from 19.6 percent in 2002 . This increase was driven primarily by
higher gross margin and the timing of operating expenses in 2002 and 2003.
Motorcycle Retail Data - Nine Month Results
- -------------------------------------------
Retail sales of Harley-Davidson motorcycles in the United States were
up 12.9 percent for the period January through September 2003 when compared to
the same period last year. Harley-Davidson retail sales in Europe and Japan were
up 9.5 and 12.6 percent, respectively, when compared with 2002. Retail sales of
Harley-Davidson motorcycles have outpaced the heavyweight motorcycle industry in
the U.S., Europe and Japan as shown in the accompanying table.
Financial Services Segment
- --------------------------
Harley-Davidson Financial Services, Inc. (HDFS) reported third quarter
operating income of $46.2 million, up 55.7 percent from $29.7 million in the
year-ago quarter. The segment's performance was driven by continued strong
marketplace acceptance of its finance and insurance products as well as a
favorable interest rate environment.
The Company's third quarter securitization of $475 million of
motorcycle retail loans resulted in a gain of $22.2 million that compares to a
securitization of $390 million and a gain of $17.0 million during the third
quarter of 2002. The gain as a percentage of loans securitized increased from
4.36 percent in the third quarter of 2002 to 4.67 percent in the third quarter
of 2003, as HDFS continued to benefit in this low interest rate environment.
Annualized credit losses on a managed portfolio basis increased
slightly in the first nine months of the year from 0.68 percent in 2002 to 0.73
percent in 2003.
The Company is raising its expectation for HDFS's operating income for
2003 to be approximately 55 percent higher than in 2002. Over the long term, the
Company expects the HDFS growth rate to be slightly higher than the Company's
motorcycle unit growth rate.
Cash Flow - Nine Month Results
- ------------------------------
Operations generated cash of $862.3 million. The Company invested
$124.4 million in capital expenditures, declared dividends of $34.9 million and
repurchased 750,000 shares valued at $30.6 million.
Harley-Davidson, Inc. - Nine Month Results
- ------------------------------------------
For the nine month period, revenue totaled $3.466 billion, a 13.1
percent increase over the year-ago period. Diluted earnings per share were
$1.90, an increase of 34.8 percent compared to the same period last year.
Through the first nine months of this year, shipments of
Harley-Davidson motorcycles were 214,091, an 8.3 percent increase over last
year's 197,683. Harley-Davidson motorcycle revenue was $2.676 billion, a 14.3
percent increase over $2.341 billion in revenue in 2002. P&A revenue
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Text - page 2
totaled $571.8 million, a 14.5 percent increase over last year's $499.3 million.
General Merchandise revenue totaled $160.7 million, a 9.1 percent decrease
compared with $176.7 million during the same period in 2002.
For the first nine months, HDFS operating income was $134.0 million, a
$55.2 million increase over last year's first nine months.
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 and sport-touring
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
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 undertakes no 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 through the
implementation of innovative manufacturing techniques and other means, (ii)
successfully implement production capacity increases in its facilities, (iii)
successfully introduce new products and services, (iv) avoid unexpected P&A
/general merchandise supplier backorders, (v) sell all of the Harley-Davidson
motorcycles it plans to produce, (vi) continue to develop the capacity of its
distributor and dealer network, (vii) avoid unexpected changes in the regulatory
environment for its products, (viii) successfully adjust to foreign currency
exchange rate fluctuations, (ix) successfully adjust to interest rate
fluctuations, and (x) successfully manage changes in the credit quality of
HDFS's loan portfolio.
In addition, the Company could experience delays in the operation of
manufacturing facilities as a result of work stoppages, difficulty with
suppliers, natural causes, terrorism or other factors. Risk factors are also
disclosed in documents previously filed by the Company with the Securities and
Exchange Commission.
TABLES FOLLOW
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Text - page 3
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
Sep 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
---- ---- ---- ----
Net revenue $ 1,133,641 $ 1,135,499 $ 3,466,204 $ 3,064,438
Gross profit 403,290 396,850 1,249,540 1,047,215
Operating expenses 161,317 174,635 501,189 468,952
---------- ---------- ---------- ----------
Operating income from
motorcycles & related products 241,973 222,215 748,351 578,263
Financial services income 74,660 55,669 216,716 157,509
Financial services expense 28,447 25,990 82,680 78,639
---------- ---------- ---------- ----------
Operating income from financial services 46,213 29,679 134,036 78,870
Corporate expenses 3,367 2,420 12,023 9,619
---------- ---------- ---------- ----------
Total operating income 284,819 249,474 870,364 647,514
Interest income, net 5,640 4,894 17,985 11,555
Other income (expense), net (275) (2,433) (5,150) (3,564)
---------- ---------- ---------- ----------
Income before provision for taxes 290,184 251,935 883,199 655,505
Provision for income taxes 100,112 86,918 304,701 226,149
---------- ---------- ---------- ----------
Net income $ 190,072 $ 165,017 $ 578,498 $ 429,356
========== ========== ========== =========
Earnings per common share:
Basic $ 0.63 $ 0.55 $ 1.91 $ 1.42
Diluted $ 0.62 $ 0.54 $ 1.90 $ 1.41
Weighted-average common shares:
Basic 302,313 302,109 302,280 302,264
Diluted 304,580 304,783 304,493 305,198
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Financial Tables - page 1
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
Sep 28, Dec 31, Sep 29,
2003 2002 2002
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 942,021 $ 280,928 $ 642,099
Marketable securities 448,816 514,800 205,255
Accounts receivable, net 119,178 108,694 112,040
Finance receivables, net 814,837 855,771 813,596
Inventories 210,925 218,156 212,870
Other current assets 80,309 88,237 88,009
----------- ---------- ----------
Total current assets 2,616,086 2,066,586 2,073,869
Finance receivables, net 704,430 589,809 508,269
Other long-term assets 1,180,078 1,204,822 1,151,476
----------- ---------- ---------
Total assets $ 4,500,594 $ 3,861,217 $ 3,733,614
=========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 698,256 $ 607,473 $ 714,855
Current portion of finance debt 337,657 382,579 223,141
----------- ---------- ----------
Total current liabilities 1,035,913 990,052 937,996
Finance debt 380,000 380,000 380,000
Other long-term liabilities 225,509 152,831 186,910
Postretirement health care benefits 121,886 105,419 100,552
Shareholders' equity 2,737,286 2,232,915 2,128,156
----------- ---------- ----------
Total liabilities and shareholders' equity $ 4,500,594 $ 3,861,217 $ 3,733,614
=========== ========== ==========
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Financial Tables - page 2
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
-----------------
Sep 28, Sep 29,
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 578,498 $ 429,356
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 146,063 131,666
Non-cash expenses 60,550 45,654
Current year gain on securitizations (70,831) (43,423)
Collection of retained securitization interests 82,671 57,627
Contributions to pension plans (12,000) (53,761)
Other operating cash flows 17,242 13,376
Net changes in current assets and current liabilities 60,137 140,523
-------- --------
Net cash provided by operating activities 862,330 721,018
Cash flows from investing activities:
Capital expenditures (124,390) (182,654)
Finance receivables, net (33,680) (268,163)
Net change in marketable securities 63,461 (9,244)
Other, net (206) 14,804
-------- --------
Net cash used in investing activities (94,815) (445,257)
Cash flows from financing activities:
Net (decrease) increase in finance debt (53,595) 6,090
Dividends (34,866) (30,706)
Purchase of common stock for treasury (30,563) (56,814)
Issuance of common stock under employee stock plans 12,602 8,330
-------- --------
Net cash used in financing activities (106,422) (73,100)
Net increase in cash and cash equivalents 661,093 202,661
Cash and cash equivalents:
At beginning of period 280,928 439,438
-------- --------
At end of period $ 942,021 $ 642,099
======== ========
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Financial Tables - page 3
Harley-Davidson, Inc.
Net Revenue and Motorcycle
Shipment Data
Three Months Ended Nine Months Ended
------------------ -----------------
Sep 28, Sep 29, Sep 28, Sep 29,
2003 2002 2003 2002
---- ---- ---- ----
NET REVENUE (in thousands)
Harley-Davidson(R)motorcycles $ 844,264 $ 832,726 $ 2,676,196 $ 2,340,759
Buell(R)motorcycles 20,471 19,151 55,985 45,426
Parts & Accessories 207,766 199,284 571,809 499,273
General Merchandise 60,520 83,137 160,658 176,715
Other 620 1,201 1,556 2,265
----------- ---------- ---------- ----------
$ 1,133,641 $ 1,135,499 $ 3,466,204 $ 3,064,438
=========== ========== ========== ==========
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 54,829 54,721 173,712 158,598
Export 12,629 12,753 40,379 39,085
----------- ---------- ---------- ----------
Total 67,458 67,474 214,091 197,683
=========== ========== ========== ==========
Motorcycle product mix:
Touring 21,071 18,382 60,471 52,802
Custom 29,781 31,394 101,000 93,008
VRSC 3,230 4,724 12,259 13,248
Sportster(R) 13,376 12,974 40,361 38,625
----------- ---------- ---------- ----------
Total 67,458 67,474 214,091 197,683
=========== ========== ========== ==========
BUELL UNITS
Motorcycle shipments:
Buell (excluding Blast) 2,393 1,933 6,553 4,368
Buell Blast 88 1,240 811 3,444
----------- ---------- ---------- ----------
2,481 3,173 7,364 7,812
=========== ========== ========== ==========
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Financial Tables - page 4
Year-to-date Heavyweight (651+ cc)
Motorcycle Retail Registrations (Units),
data through month indicated.
2003 2002 % change
---- ---- --------
nited States
- - H-D (September) 187,392 165,968 12.9%
- - Industry (August) 357,205 341,843 4.5%
Europe
- - H-D * (September) 22,228 20,302 9.5%
- - Industry (August) 246,130 258,044 -4.6%
Japan
- - H-D (September) 8,420 7,477 12.6%
- - Industry (August) 32,511 34,637 -6.1%
Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson (H-D)
data.
H-D * Includes Harley-Davidson sales in all European countries.
Industry data for Europe includes sales only in Austria, Belgium, France,
Germany, Italy, Netherlands, Spain, Switzerland and United Kingdom.
Data Sources: (data subject to update)
- --------------------------------------
United States: Company reports, Motorcycle Industry Council,
Europe: Company reports, Giral S.A.
Japan: Company reports, Industry sources
Harley-Davidson, Inc. - 3rd Quarter 2003 Press Release Financial Tables - page 5