MILWAUKEE, Oct. 16 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE: HOG) today announced its results for the third quarter ended September
28, 2008. Revenue for the quarter was $1.42 billion compared to $1.54 billion
in the year ago quarter, a 7.7 percent decrease. Net income for the quarter
was $166.5 million compared to $265.0 million in the third quarter 2007, a
decrease of 37.1 percent. Third quarter diluted earnings per share were
$0.71, a 33.6 percent decrease compared to last year's $1.07.
"In the U.S., dealer retail sales of new Harley-Davidson motorcycles in
the quarter were in line with our expectations," said Jim Ziemer, Chief
Executive Officer of Harley-Davidson, Inc. "Although Harley-Davidson retail
motorcycle sales in international markets overall continued to grow double
digits in the quarter, unit sales in several European countries slowed more
than we anticipated during September as a result of deteriorating economic
conditions. We continue to carefully monitor all markets in light of the
potential impact of the current economic realities."
For the full year 2008, the Company has narrowed its shipment expectations
to 303,500 to 306,000 Harley-Davidson motorcycles. The Company has narrowed
its expectations for diluted earnings per share for the full year to $3.00 to
$3.10 from the prior range of $3.00 to $3.18.
"We also have been able to maintain Harley-Davidson Financial Services'
position as a stable, consistent source of financing for dealers and retail
customers during these turbulent conditions in the credit markets," Ziemer
said. "Prudent management and customer access to credit will continue to be
priorities at HDFS."
"During the third quarter, we completed our acquisition of Italian
motorcycle maker MV Agusta Group, expanding our opportunities in Europe. Our
105th Anniversary Celebration at the end of August drew tremendous, highly
enthusiastic crowds. And we opened the Harley-Davidson Museum(TM), with its
broad appeal to riders and non-riders alike. So even in the midst of economic
uncertainty, we continue to broaden our appeal, plant seeds for the future and
give people unparalleled experiences and reasons to ride," Ziemer said.
"Going forward, we expect the global economy and consumer concerns to
continue to create challenges for Harley-Davidson through the end of the year
and in 2009. I remain confident about our future as we continue to manage and
reinvest in the business," said Ziemer.
Motorcycles and Related Products Segment -- Third Quarter Results
Revenue from Harley-Davidson motorcycles was $1.05 billion, a decrease of
$131.7 million or 11.1 percent versus the same period last year. Shipments of
Harley-Davidson motorcycles totaled 74,704 units, a decrease of 11,831 units
or 13.7 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 $259.0 million, an increase of
$7.5 million or 3.0 percent over the year-ago quarter. Revenue from General
Merchandise, which consists of MotorClothes(R) apparel and collectibles,
totaled $84.0 million, an increase of $0.8 million or 1.0 percent over the
year-ago quarter.
Gross margin for the third quarter of 2008 was 34.0 percent of revenue
compared to 38.4 percent for the third quarter last year. This decrease is
primarily due to higher product costs and the allocation of fixed costs over
fewer units than last year's third quarter. Third quarter operating margin
decreased to 16.4 percent from 23.2 percent in the third quarter of 2007.
Operating margin for the third quarter of 2008 includes the impact of a one-
time $16.6 million expense related to the value of acquired in-process
research and development at MV Agusta Group.
Motorcycle Retail Sales Data
During the third quarter, worldwide retail sales of Harley-Davidson
motorcycles decreased 9.6 percent compared to the third quarter of 2007. U.S.
retail sales of Harley-Davidson motorcycles decreased 15.5 percent for the
quarter. The heavyweight motorcycle market in the U.S. decreased 3.1 percent
for the same period.
Retail sales of Harley-Davidson motorcycles grew 11.3 percent in the
Company's international markets during the third quarter of 2008 compared to
the third quarter of 2007. Third quarter retail sales increased 12.4 percent
in Canada; the Europe Region was up 2.9 percent; the Asia Pacific Region was
up 17.5 percent; and the Latin America Region was up 41.6 percent.
During the first nine months of 2008, worldwide retail sales of Harley-
Davidson motorcycles decreased 6.0 percent compared to the prior year. In the
U.S., Harley-Davidson motorcycle retail sales decreased 11.9 percent for the
first nine months of the year while the U.S. heavyweight market was down 4.0
percent for the same period. International retail sales increased by 12.6
percent for the first nine months of 2008.
Third quarter and year-to-date data are listed in the accompanying tables.
MV Agusta
On August 8, 2008, the Company completed the purchase of the privately-
held Italian motorcycle maker MV Agusta Group. The Company acquired 100
percent of MV Agusta Group shares for total consideration of 68.3 million
euros ($105.1 million), which includes the satisfaction of existing bank debt
for 47.5 million euros ($73.2 million). As a result of the acquisition, the
Company recorded $87.9 million of goodwill and the $16.6 million one-time
expense related to the value of acquired in-process research and development.
These results are included in the quarterly financial data.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) operating income for the third
quarter was $35.6 million, a decrease of $13.9 million or 28.0 percent
compared to the year-ago quarter. The decrease is primarily due to a $9.4
million write-down of finance receivables held for sale to fair value. In
addition, last year's third quarter included a $3.5 million securitization
gain compared to no securitization transaction during the third quarter of
2008.
Income Tax Rate
The Company's third quarter effective income tax rate was 38.2 percent
compared to 35.5 percent in the same quarter last year. The third quarter
increase was due primarily to a non-deductible in-process research and
development charge for MV Agusta Group and the expiration of the federal
research and development tax credit as of December 31, 2007. In October 2008,
the federal research and development tax credit was reinstated for two years
retroactive to January 1, 2008 continuing through December 31, 2009. The
Company expects its full year effective income tax rate in 2008 will be
approximately 35.5 percent.
Harley-Davidson, Inc. -- Nine Month Results
For the first nine months of 2008, revenue totaled $4.30 billion, a 0.9
percent decrease from the year-ago period. Diluted earnings per share were
$2.45, a decrease of 16.9 percent compared to the same period last year.
Through the first nine months of this year, shipments of Harley-Davidson
motorcycles were 226,898 units, a 9.0 percent decrease compared to last year's
249,413 units. Harley-Davidson motorcycle revenue was $3.26 billion, which is
down 2.2 percent compared to last year's $3.33 billion. P&A revenue totaled
$706.6 million, a 0.5 percent increase over last year's $703.1 million.
General Merchandise revenue totaled $244.8 million, a 5.5 percent increase
compared to $232.0 million during the same period in 2007.
HDFS operating income was $107.7 million, a 38.0 percent decrease from
last year's $173.6 million.
Cash Flow
Cash and marketable securities totaled $504.9 million as of September 28,
2008. Cash used by operations was $221.2 million, and capital expenditures
were $153.7 million during the first nine months of 2008. For the full year
of 2008, capital expenditures are still expected to be between $235 million
and $250 million.
Stock Repurchase
The Company repurchased 2.5 million shares of its common stock at a cost
of $100.1 million during the third quarter of 2008. On September 28, 2008,
the Company had 232.8 million shares of common stock outstanding.
As of September 28, 2008, there were 16.7 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 (HDMC), Buell Motorcycle
Company (Buell), Harley-Davidson Financial Services (HDFS) and MV Agusta Group
(MVAG). 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. MVAG produces premium, high-performance sport motorcycles sold
under the MV Agusta(R) brand and lightweight sport motorcycles sold under the
Cagiva(R) brand.
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, (xvi) implement and manage
enterprise-wide information technology solutions and secure data contained in
those systems, and (xvii) successfully integrate and profitably operate MV
Agusta Group.
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. All of these risk factors are impacted by the current
turbulent capital, credit and retail markets.
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 operating their businesses and 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 Nine months ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
2008 2007 2008 2007
Net revenue $1,422,834 $1,541,401 $4,301,716 $4,340,494
Gross profit 484,072 591,353 1,522,133 1,619,566
Operating expenses 250,046 233,068 710,420 639,512
Operating income from
motorcycles & related
products 234,026 358,285 811,713 980,054
Financial services income 111,966 98,471 312,095 319,964
Financial services expense 76,333 49,002 204,408 146,349
Operating income from
financial services 35,633 49,469 107,687 173,615
Corporate expenses 1,657 2,292 14,482 13,763
Income from operations 268,002 405,462 904,918 1,139,906
Investment income, net 2,751 5,353 7,033 19,432
Interest expense 1,226 - 1,226 -
Income before provision
for income taxes 269,527 410,815 910,725 1,159,338
Provision for income taxes 102,986 145,849 333,816 411,572
Net income $166,541 $264,966 $576,909 $747,766
Earnings per common share:
Basic $0.71 $1.07 $2.45 $2.96
Diluted $0.71 $1.07 $2.45 $2.95
Weighted-average common
shares:
Basic 233,081 247,057 235,068 252,513
Diluted 233,420 247,614 235,321 253,263
Cash dividends per common
share $0.33 $0.30 $0.96 $0.76
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
Sept. 28, Dec. 31, Sept. 30,
2008 2007 2007
ASSETS
Current assets:
Cash and cash equivalents $504,385 $402,854 $401,385
Marketable securities 524 2,475 55,355
Accounts receivable, net 331,388 181,217 185,208
Finance receivables held for sale 2,245,015 781,280 431,843
Finance receivables held for
investment, net 1,115,035 1,575,283 1,275,590
Inventories 401,277 349,697 376,950
Other current assets 222,890 174,508 130,126
Total current assets 4,820,514 3,467,314 2,856,457
Finance receivables held for
investment, net 906,244 845,044 861,138
Other long-term assets 1,472,979 1,344,248 1,253,365
$7,199,737 $5,656,606 $4,970,960
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
liabilities $1,070,770 $785,124 $962,250
Current portion of debt 1,138,982 1,119,955 250,168
Total current liabilities 2,209,752 1,905,079 1,212,418
Debt 2,033,000 980,000 980,000
Postretirement healthcare benefits 207,810 192,531 207,957
Other long-term liabilities 248,816 203,505 207,582
Total shareholders' equity 2,500,359 2,375,491 2,363,003
$7,199,737 $5,656,606 $4,970,960
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)
Nine months ended
September 28, September 30,
2008 2007
Net cash (used by) provided by
operating activities ($221,222) $1,368,257
Cash flows from investing activities:
Capital expenditures (153,687) (139,437)
Finance receivables held for investment,
net (111,250) (92,147)
Collection of retained securitization
interests 75,379 87,827
Net change in marketable securities 2,019 604,927
Acquisition of business, net of
cash acquired (95,224) -
Other, net (1,192) 1,696
Net cash (used by) provided by investing
activities (283,955) 462,866
Cash flows from financing activities:
Proceeds from issuance of medium term notes 993,550 -
Net decrease in finance-credit facilities
and commercial paper (86,519) (506,938)
Revolving debt 175,057 -
Dividends (225,243) (189,093)
Purchase of common stock for
treasury (250,008) (1,000,133)
Excess tax benefits from share-based
payments 301 3,057
Issuance of common stock under employee
stock option plans 1,179 21,429
Net cash provided by (used by) financing
activities 608,317 (1,671,678)
Effect of exchange rate changes on cash
and cash equivalents (1,609) 3,543
Net increase in cash and cash equivalents 101,531 162,988
Cash and cash equivalents:
At beginning of period 402,854 238,397
At end of period $504,385 $401,385
Net Revenue and Motorcycle
Shipment Data
(Unaudited)
Three months ended Nine months ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
2008 2007 2008 2007
NET REVENUE (in thousands)
Harley-Davidson( R )
motorcycles $1,050,969 $1,182,628 $3,255,333 $3,328,309
Buell( R ) motorcycles 26,111 22,527 89,704 72,795
Parts & Accessories 259,033 251,499 706,640 703,107
General Merchandise 84,034 83,185 244,830 232,011
Other 2,687 1,562 5,209 4,272
$1,422,834 $1,541,401 $4,301,716 $4,340,494
HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 49,953 65,756 149,228 182,447
International 24,751 20,779 77,670 66,966
Total 74,704 86,535 226,898 249,413
Motorcycle product mix:
Touring 24,008 28,461 75,691 84,934
Custom 34,322 39,488 105,316 109,576
Sportster( R ) 16,374 18,586 45,891 54,903
Total 74,704 86,535 226,898 249,413
BUELL UNITS
Motorcycle shipments:
Buell 2,760 2,639 9,224 8,376
Retail Sales of Harley-Davidson Motorcycles
Three months ended Nine months ended
Sept. 28 Sept. 30 Sept. 28, Sept. 30
2008 2007 2008 2007
North America Region
United States 59,000 69,810 189,437 215,092
Canada 3,682 3,277 14,552 12,855
Total North America Region 62,682 73,087 203,989 227,947
Europe Region (Includes Middle East
and Africa)
Europe* 8,481 8,301 34,284 32,594
Other 1,006 920 3,483 2,675
Total Europe Region 9,487 9,221 37,767 35,269
Asia Pacific Region
Japan 4,697 3,808 11,502 10,028
Other 2,310 2,156 7,722 6,816
Total Asia Pacific Region 7,007 5,964 19,224 16,844
Latin America Region 1,776 1,254 6,034 3,902
Total Worldwide Retail Sales 80,952 89,526 267,014 283,962
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
Nine months ended
September 30, September 30,
2008 2007
United States(1) 425,731 443,511
Eight months ended
August 31, August 31,
2008 2007
Europe(2) 323,139 311,164
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. Europe market data is
reported on a one-month lag.
SOURCE Harley-Davidson, Inc.
