Another Record?

A press release issued by Harley-Davidson:

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® motorcycles while starting up our new factory for Softail® 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® 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* 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 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 $862.6 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 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.
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George Obradovich
George Obradovich

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