Harley-Davidson Announces 2008 Second Quarter Results
Press Release:
MILWAUKEE, July 17 WI-Harley-2Q-Earns
MILWAUKEE, July 17 /PRNewswire-FirstCall/ — Harley-Davidson, Inc.
(NYSE: HOG) today announced its results for the second quarter ended June 29,
2008. Revenue for the quarter was $1.57 billion compared to $1.62 billion in
the year ago quarter, a 2.9 percent decrease. Net income was $222.8 million
compared to $290.5 million in the year ago quarter, a decrease of 23.3
percent. Second quarter diluted earnings per share (EPS) were $0.95, a 16.7
percent decrease compared to last year’s $1.14.
“During the second quarter we shipped 80,326 Harley-Davidson(R)
motorcycles to our dealers and distributors around the world. While this
result exceeds our guidance range of 76,000 to 80,000 units for the quarter,
it is a decrease of 15.6 percent from the year-ago period. This decrease
reflects the impact of the shipment reduction we announced April 17th in
response to ongoing weakness in the U.S. economy,” said Jim Ziemer, Chief
Executive Officer of Harley-Davidson, Inc.
“We expect U.S. economic conditions and ongoing consumer concerns to
continue to create challenges at least through the end of the year,” said
Ziemer. “We believe the actions we took to reduce shipments to our U.S.
dealers and our related workforce reduction position us appropriately for the
current economic environment. I am confident about our future as we continue
to manage and reinvest in the business for the long-term.”
“Last week, we announced our planned acquisition of the MV Agusta Group
and celebrated the grand opening of the Harley-Davidson Museum. Next Tuesday,
we introduce our exciting new 2009 motorcycles. A month from today, we kick
off our 105th Anniversary Celebration with the launch of the first of 105
motorcycle rides to Milwaukee from around the U.S. These are just some of the
ways we are positioning the Company for the future, strengthening bonds with
current customers and reaching out to new customers,” Ziemer said.
The Company expects to ship between 74,000 and 78,000 Harley-Davidson
motorcycles during the third quarter of 2008. For the full year of 2008,
Harley-Davidson still plans to ship between 303,500 and 307,500 units. The
Company continues to expect full-year EPS of $3.00 to $3.18, a decrease of 15
to 20 percent compared to 2007.
Motorcycles and Related Products Segment - Second Quarter Results
Revenue from Harley-Davidson motorcycles was $1.19 billion, a decrease of
$67.0 million or 5.3 percent versus the same period last year. Shipments of
Harley-Davidson motorcycles totaled 80,326 units, a decrease of 14,791 units
or 15.6 percent compared to last year’s second quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor
Parts and Genuine Motor Accessories, totaled $265.7 million, an increase of
$2.3 million or 0.9 percent over the year-ago quarter. Revenue from General
Merchandise, which consists of MotorClothes(R) apparel and collectibles,
totaled $76.8 million, an increase of $4.1 million or 5.6 percent over the
year-ago quarter.
Gross margin for the second quarter of 2008 was 35.7 percent of revenue
compared to 37.4 percent for the second quarter last year. Second quarter
operating margin decreased to 20.1 percent from 23.9 percent in the second
quarter of 2007. The Company’s gross and operating margins were adversely
impacted this quarter by the shipment volume reduction.
Motorcycle Retail Sales Data
During the second quarter, worldwide retail sales of Harley-Davidson
motorcycles decreased 3.6 percent compared to the prior year second quarter.
In the U.S., retail sales of Harley-Davidson motorcycles decreased 8.7 percent
for the quarter. The heavyweight motorcycle market in the U.S. increased 0.8
percent for the same period.
Retail sales of Harley-Davidson motorcycles grew 11.2 percent in
international markets during the second quarter of 2008 compared to the second
quarter of 2007. Second quarter retail sales increased 8.7 percent in Canada;
the Europe Region was up 9.0 percent; the Asia Pacific Region was up 7.3
percent; and the Latin America Region was up 67.1 percent.
Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported second quarter
operating income of $37.1 million, a decrease of $28.1 million or 43.0 percent
compared to the year-ago quarter. The decrease is primarily due to a $19.5
million reduction in securitization gain and a $6.3 million write-down of
retained securitization interests. Last year’s second quarter benefited from a
$950 million securitization transaction compared to no securitization
transaction during the second quarter of 2008.
Income Tax Rate
The Company’s second 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, 2007. Assuming the retroactive reinstatement of this tax credit,
the Company expects its full year effective tax rate in 2008 will be 35.5
percent.
Harley-Davidson, Inc. - Six Month Results
For the first six months of 2008, revenue totaled $2.88 billion, a 2.9
percent increase over the year-ago period. Earnings per share were $1.74, a
decrease of 7.9 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson
motorcycles were 152,194 units, a 6.6 percent decrease compared to last year’s
162,878 units. Harley-Davidson motorcycle revenue was $2.20 billion, up 2.7
percent compared to last year’s $2.15 billion. P&A revenue totaled $447.6
million, a 0.9 percent decrease from last year’s $451.6 million. General
Merchandise revenue totaled $160.8 million, an 8.0 percent increase compared
to $148.8 million during the same period in 2007.
HDFS operating income was $72.1 million, a 42.0 percent decrease from last
year’s $124.1 million.
Cash Flow
Cash and marketable securities totaled $803.9 million as of June 29, 2008.
Cash used by operations was $39.0 million during the first six months of 2008
compared to $1.06 billion of cash provided during the first half of 2007. This
decrease in cash flows from operations was a result of net proceeds from
securitization being $1.27 billion less than the same period in 2007. During
the first half of 2008, HDFS funded a greater percentage of its business with
proceeds from commercial paper and medium term notes than in the same period
last year. Capital expenditures were $99.6 million during the first six months
of 2008. For the full year of 2008, capital expenditures are expected to be
between $235 million and $250 million.
Stock Repurchase
The Company repurchased 1.3 million shares of its common stock at a cost
of $50.0 million during the second quarter of 2008. On June 29, 2008, the
Company had 235.3 million shares of common stock outstanding.
As of June 29, 2008, there were 19.3 million shares remaining on a board-
approved share repurchase authorization. An additional board-approved share
repurchase authorization is in place to offset option exercises.
Bank Credit Facilities
On July 16, 2008, Harley-Davidson, Inc. and Harley-Davidson Financial
Services entered into new bank credit facilities totaling $1.9 billion which
replace existing bank credit facilities of $1.7 billion. The new facilities
are comprised of a $950 million, 364-day facility and a $950 million, 3-year
facility.
Company Background
Harley-Davidson, Inc. is the parent company for the group of companies
doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle
Company (Buell) and Harley-Davidson Financial Services (HDFS). Harley-Davidson
Motor Company produces heavyweight motorcycles and offers a line of motorcycle
parts, accessories, general merchandise and related services. HDMC
manufactures five families of motorcycles: Touring, Dyna(R), Softail(R),
Sportster(R) and VRSC(TM). Buell produces premium sport performance
motorcycles and offers a line of motorcycle parts, accessories, and apparel.
HDFS provides wholesale and retail financing and insurance programs primarily
to Harley-Davidson and Buell 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 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, (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 and commodity prices, (x) manage
access to reliable sources of capital and adjust to fluctuations in the cost
of capital, (xi) adjust to regional and worldwide demographic trends and
economic and political conditions, including healthcare inflation, pension
reform and tax changes, (xii) anticipate consumer confidence in the economy,
(xiii) manage the credit quality, the loan servicing and collection
activities, and the recovery rates of HDFS’ loan portfolio, (xiv) retain and
attract talented employees, (xv) detect any issues with our motorcycles or
manufacturing processes to avoid delays in new model launches, recall
campaigns, increased warranty costs or litigation and (xvi) implement and
manage enterprise-wide information technology solutions and secure data
contained in those systems. Assuming the agreement to purchase MV Agusta Group
is consummated in a timely manner, Harley-Davidson may have challenges
successfully integrating and profitably operating it.
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 its motorcycles and related products and
services and to meet its financial expectations also depends on the ability of
the Company’s independent dealers to sell its motorcycles and related products
and services to retail customers. The Company depends on the capability and
financial capacity 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 (In thousands, except per share amounts) (Unaudited) Three months ended Six months ended June 29, July 1,June 29,July 1, 2008200720082007 Net revenue$1,572,569 $1,620,218 $2,878,882 $2,799,093 Gross profit 561,924 605,167 1,038,061 1,028,213 Operating expenses245,841 218,641 460,374 406,444 Operating income from motorcycles & related products 316,083 386,526 577,687 621,769 Financial services income 106,840 112,330 200,129 221,493 Financial services expense 69,693 47,121 128,075 97,347 Operating income from financial services37,147 65,209 72,054 124,146 Corporate expenses 7,367 6,532 12,825 11,471 Income from operations345,863 445,203 636,916 734,444 Investment income, net 2,240 5,164 4,282 14,079 Income before provision for income taxes 348,103 450,367 641,198 748,523 Provision for income taxes125,316 159,877 230,830 265,723 Net income $222,787$290,490$410,368$482,800 Earnings per common share: Basic $0.95 $1.15 $1.74 $1.89 Diluted $0.95 $1.14 $1.74 $1.89 Weighted-average common shares: Basic 235,067 253,155 236,067 255,240 Diluted 235,314 254,017 236,277 256,087 Cash dividends per common share $0.33 $0.25 $0.63 $0.46 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) June 29,December 31, July 1, 2008 2007 2007 ASSETS Current Assets: Cash and cash equivalents $803,400$402,854$416,084 Marketable securities 524 2,475 307,347 Accounts receivable, net 290,139 181,217 163,369 Finance receivables held for sale1,617,817 781,280 381,927 Finance receivables held for investment, net 1,246,325 1,575,283 1,318,025 Inventories341,396 349,697 344,969 Other current assets 206,624 174,508 122,342 Total current assets 4,506,225 3,467,314 3,054,063 Finance receivables held for investment, net 934,534 845,044 817,027 Other long-term assets 1,342,994 1,344,248 1,250,504 $6,783,753 $5,656,606 $5,121,594 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & accrued liabilities $841,263$785,124$872,283 Current portion of finance debt927,934 1,119,955 204,817 Total current liabilities 1,769,197 1,905,079 1,077,100 Finance debt 2,050,000 980,000 975,000 Postretirement healthcare benefits 205,848 192,531 205,767 Other long-term liabilities 225,871 203,505 205,883 Total shareholders' equity 2,532,837 2,375,491 2,657,844 $6,783,753 $5,656,606 $5,121,594 Note: On January 1, 2008 the Company recorded a reduction to shareholders' equity of $18.1 million ($11.2 million, net of tax) to adopt provisions of Statement of Financial Accounting Standard No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132( R )" that require sponsors of defined benefit pension and postretirement plans to measure the funded status of those plans as of the date of the year-end statement of financial position. Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six months ended June 29, July 1, 2008 2007 Net cash (used by) provided by operating activities($39,016)$1,062,455 Cash flows from investing activities: Capital expenditures(99,597) (86,016) Finance receivables held for investment, net(73,365) (70,128) Collection of retained securitization interests18,607 43,241 Net change in marketable securities 2,019352,477 Other, net1,193 3,582 Net cash (used by) provided by investing activities(151,143) 243,156 Cash flows from financing activities: Proceeds from issuance of medium term notes 993,550 - Net decrease in finance-credit facilities and commercial paper (116,621) (535,990) Dividends (148,591) (116,650) Purchase of common stock for treasury (150,134) (491,103) Excess tax benefits from share- based payments 252 2,932 Issuance of common stock under employee stock option plans736 20,621 Net cash provided by (used by) financing activities 579,192 (1,120,190) Effect of exchange rate changes on cash and cash equivalents 11,513 (7,734) Net increase in cash and cash equivalents 400,546177,687 Cash and cash equivalents: At beginning of period 402,854238,397 At end of period $803,400 $416,084 Net Revenue and Motorcycle Shipment Data (Unaudited) Three months ended Six months ended June 29,July 1, June 29,July 1, 2008200720082007 NET REVENUE (in thousands) Harley-Davidson( R ) motorcycles $1,187,146 $1,254,163 $2,204,364 $2,145,681 Buell( R ) motorcycles 41,518 28,613 63,593 50,268 Parts & Accessories 265,665 263,373 447,607 451,608 General Merchandise76,790 72,714 160,796 148,826 Other 1,450 1,355 2,522 2,710 $1,572,569 $1,620,218 $2,878,882 $2,799,093 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States51,449 67,951 99,275 116,691 International28,877 27,166 52,919 46,187 Total 80,326 95,117 152,194 162,878 Motorcycle product mix: Touring 25,248 34,671 51,683 56,473 Custom 41,922 39,320 70,994 70,088 Sportster( R ) 13,156 21,126 29,517 36,317 Total 80,326 95,117 152,194 162,878 BUELL UNITS Motorcycle shipments: Buell 4,072 3,179 6,464 5,737 Retail Sales of Harley-Davidson Motorcycles Year to Date June 2008 2007 North America Region United States130,437 145,282 Canada10,870 9,578 Total North America Region 141,307 154,860 Europe Region (Includes Middle East and Africa) Europe* 25,80324,293 Other 2,477 1,755 Total Europe Region 28,28026,048 Asia Pacific Region Japan 6,805 6,220 Other 5,412 4,660 Total Asia Pacific Region 12,21710,880 Latin America Region 4,258 2,648 Total Worldwide Retail Sales 186,062 194,436 Data Source (subject to update) Data source for all 2007 and 2008 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(R) 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. Heavyweight Market Data Data Through Month Indicated 2008 2007 United States(1) (June) 294,141 307,755 Europe(2) (May) 212,627 205,041 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.
SOURCEÂ Harley-Davidson, Inc.
