Revenue, Earnings and Retail Motorcycle Sales reach all time highs
MILWAUKEE, Jan. 19 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE:HDI) today announced record revenue and earnings for its
fourth quarter and year ended December 31, 2005. Revenue for the
quarter was $1.34 billion compared with $1.22 billion in the
year-ago quarter, a 9.9 percent increase. Net income for the
quarter was $230.0 million compared to $209.0 million, an increase
of 10.1 percent over 2004. Fourth quarter diluted earnings per
share (EPS) were 84 cents, an 18.3 percent increase compared with
last year's 71 cents. Revenue for the full year was $5.34 billion,
compared with $5.02 billion in 2004, a 6.5 percent increase. Net
income for the year was $959.6 million, a 7.8 percent increase
versus last year's $889.8 million, while diluted EPS for the full
year were $3.41, a 13.7 percent increase compared with $3.00 in
2004. "Today Harley-Davidson is celebrating an exciting milestone
of twenty consecutive years of record revenue, earnings and retail
motorcycle sales," said Jim Ziemer, Chief Executive Officer. "As we
reflect on our performance in 2005, we had many accomplishments. We
shipped 329,000 motorcycles, which is a 3.7 percent increase over
the previous year. Worldwide retail sales of Harley-Davidson(R)
motorcycles increased 6.2 percent during 2005. Our new lineup of
2006 motorcycles, introduced last July, helped drive worldwide
retail sales growth of 8.3 percent in the second half of the year.
During 2005, our international motorcycle sales grew significantly
and motorcycle sales to women continued to increase, demonstrating
that our strategies in these areas are beginning to take hold,"
said Ziemer. "We believe the prospects for retail growth remain
strong and support a wholesale unit growth rate in the range of 5
to 9 percent annually and an annual EPS growth rate of 11 to 17
percent," said Ziemer. "Our Harley-Davidson motorcycle shipment
target for 2006 remains in the range of 348,000 to 352,000 units,
with planned wholesale shipments of 79,000 motorcycles during the
first quarter," he said. Motorcycles and Related Products Segment
-- Fourth Quarter Results Revenue from Harley-Davidson(R)
motorcycles was $1.09 billion, an increase of $95.7 million, or 9.6
percent over the same period last year. Shipments of
Harley-Davidson motorcycles totaled 87,588 units, an increase of
7,001 units, or 8.7 percent over last year's fourth quarter.
Revenue from Parts and Accessories (P&A), which consists of
Genuine Motor Parts and Genuine Motor Accessories, totaled $169.9
million, an increase of $12.0 million, or 7.6 percent over the
year-ago quarter. Revenue from General Merchandise, which consists
of MotorClothes(TM) apparel and collectibles, totaled $60.5
million, an increase of $5.6 million, or 10.2 percent. Growth rates
for P&A and General Merchandise fluctuate from quarter to
quarter. However, for the long term, the Company expects the growth
rate for P&A revenue 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. Gross margin for the fourth quarter of 2005 was
38.3 percent of revenue, up from 37.8 percent for the same period
in 2004. Consistent with the higher gross margin, operating margin
increased from 23.0 percent in 2004 to 23.4 percent in 2005.
Motorcycle Retail Sales Data Worldwide retail sales of
Harley-Davidson motorcycles increased 3.0 percent for the fourth
quarter of 2005 compared to the same period in 2004. For the full
year, worldwide retail sales increased 6.2 percent compared to
2004. U.S. retail sales of Harley-Davidson motorcycles increased
0.7 percent in the fourth quarter and 4.2 percent for the full
year. For the second six months of the year, U.S. retail sales grew
7.3 percent compared to 1.9 percent for the first six months of
2005. "We are pleased with retail sales growth in the U.S. market
during the second half of the year. The extensive enhancements made
to existing models, along with several brand new motorcycles for
the 2006 model year, are certainly generating excitement," said
Ziemer. Internationally, retail sales of Harley-Davidson
motorcycles grew 13.0 percent in the fourth quarter and 15.0
percent for the full year compared with 2004. Total retail sales
for 2005 increased in all of the Company's major international
markets. Data is listed in the accompanying tables. Financial
Services Segment Harley-Davidson Financial Services (HDFS) reported
fourth quarter operating income of $39.5 million, up 0.7 percent
compared to the year-ago quarter. A fourth quarter securitization
of $325 million in motorcycle retail loans resulted in a gain of
$4.2 million. The 1.3 percent gain on the securitization as a
percentage of loans sold is consistent with management's prior
guidance of 1.0 to 1.4 percent. Gains in the first quarter of 2006
are also expected to continue in that range. Given the relatively
small percentage of HDI operating income that is generated by
securitization gains, the Company is not providing guidance for
periods beyond the first quarter of 2006. Income related to
securitizations will continue to be reported in the Company's
annual report and SEC filings. For the long term, HDFS expects
operating income to be slightly higher than the Company's wholesale
unit shipment growth rate. Harley-Davidson, Inc. -- Twelve Month
Results For the fiscal year ended 2005, total Harley-Davidson
motorcycle shipments were 329,017 units compared with 317,289 units
in 2004, a 3.7 percent increase. Harley-Davidson motorcycle revenue
was $4.18 billion, an increase of $255.3 million, or 6.5 percent.
P&A revenue totaled $815.7 million, a $34.1 million, or a 4.4
percent increase, while General Merchandise revenue totaled $247.9
million, a $24.1 million or a 10.8 percent increase, compared with
2004. Full year operating income for HDFS was $191.6 million, an
increase of $3.0 million or 1.6 percent compared to 2004. Cash Flow
-- Twelve Month Results As of December 31, 2005, cash and
marketable securities were $1.05 billion, down from $1.61 billion
at December 31, 2004. During the year the Company invested $198.4
million in capital expenditures, repurchased 21.4 million shares of
Company stock for $1.05 billion, paid $173.8 million in dividends
and contributed $296.8 million to its retirement plans. Stock
Option Accounting On January 1, 2005, the Company began recognizing
expense related to its employee stock option awards before the
required implementation date of the Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No.
123 as revised in 2004. The Company accounted for these stock
options as equity instruments. However, SFAS No. 123 (revised 2004)
requires that stock options that may be settled for cash instead of
stock at the election of the holder upon the occurrence of a change
in control event be accounted for as a liability regardless of the
probability of the change in control event occurring. The Company
recently became aware of the applicability of the contingent cash
settlement feature of SFAS No. 123 (revised 2004) to its employee
stock compensation plans. Had the Company used the liability method
to account for stock option awards during 2005, operating income
would have increased by $37.8 million. Accordingly, income before
accounting changes net of tax would have been $983.0 million for
the year, an increase of $23.4 million compared to the Company's
reported amount of $959.6 million. In addition, on the January 1,
2005 adoption date of this accounting method, the Company would
have recorded a cumulative charge to income of $120.9 million or
$74.8 million net of tax for its adoption of the liability method.
On January 11, 2006, FASB voted to seek public comment on a
proposed FASB Staff Position (FSP) to require companies to classify
employee stock options with contingent cash settlement features as
equity awards provided the contingent event, such as a change in
control event, is not considered probable of occurring. This
classification would be consistent with the amounts reported with
respect to outstanding stock options in connection with the
Company's original adoption of SFAS No. 123 (revised 2004) on
January 1, 2005, and in subsequent interim periods. The Company
believes that the proposed FSP is a strong indication that
classification of its stock option awards as equity instruments
will be appropriate upon finalization of the FSP. As a result, all
financial data reported in this press release is presented on a
U.S. GAAP basis adjusted for the anticipated ratification of the
proposed FSP. In the event the FSP is not finalized as expected,
the Company will reflect such effects on the year and the quarters
in its annual report and 10-K filing for the year ended December
31, 2005. 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. 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
effectively manage operating costs including materials, labor and
overhead, (ii) successfully manage production capacity and
production changes, (iii) avoid unexpected 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 customers and attract new 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 capacity of
its distributor and dealer network, (viii) avoid unexpected changes
and prepare for known requirements in legislative and regulatory
environments for its products and operations, (ix) successfully
adjust to fluctuations in foreign currency exchange rates, interest
rates and commodity prices, (x) adjust to worldwide economic and
political conditions, including changes in fuel prices and interest
rates, (xi) successfully manage the credit quality and recovery
rates of HDFS's loan portfolio, (xii) retain and attract talented
employees and (xiii) detect any defects in our motorcycles to
minimize delays in new model launches, recall campaigns, increased
warranty costs or litigation. In addition, the Company could
experience delays in the operation of manufacturing facilities as a
result of work stoppages, natural causes, terrorism or other
factors. 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. Risk factors are also disclosed in documents
previously filed by the Company with the Securities and Exchange
Commission. Harley-Davidson, Inc. Condensed Consolidated Statements
of Income (In thousands, except per share amounts) Three Months
Ended Twelve Months Ended (Unaudited) (Unaudited) (Unaudited) Dec
31, Dec 31, Dec 31, Dec 31, 2005 2004 2005 2004 Net revenue
$1,342,335 $1,220,997 $5,342,214 $5,015,190 Gross profit 514,510
461,422 2,040,499 1,899,535 Operating expenses 199,854 180,672
740,634 710,016 Operating income from motorcycles & related
products 314,656 280,750 1,299,865 1,189,519 Financial services
income 76,060 66,224 331,618 305,262 Financial services expense
36,595 27,018 139,998 116,662 Operating income from financial
services 39,465 39,206 191,620 188,600 Corporate expenses 3,473
3,757 21,474 16,628 Total operating income 350,648 316,199
1,470,011 1,361,491 Investment income and other, net 6,009 7,775
17,748 17,995 Income before provision for taxes 356,657 323,974
1,487,759 1,379,486 Provision for income taxes 126,613 115,012
528,155 489,720 Net income $ 230,044 $ 208,962 $ 959,604 $ 889,766
Earnings per common share: Basic $0.84 $0.71 $3.42 $3.02 Diluted
$0.84 $0.71 $3.41 $3.00 Weighted-average common shares: Basic
274,182 294,014 280,303 295,008 Diluted 274,837 295,406 281,035
296,852 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets
(In thousands) (Unaudited) Dec 31, Dec 31, 2005 2004 ASSETS Current
assets: Cash and cash equivalents $ 140,975 $ 275,159 Marketable
securities 905,197 1,336,909 Accounts receivable, net 122,087
121,333 Finance receivables, net 1,641,766 1,624,038 Inventories
221,418 226,893 Other current assets 122,319 98,854 Total current
assets 3,153,762 3,683,186 Finance receivables, net 600,831 488,262
Other long-term assets 1,509,141 1,311,845 Total assets $5,263,734
$5,483,293 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable & accrued expenses $ 668,139 $
677,255 Current portion of finance debt 204,973 495,441 Total
current liabilities 873,112 1,172,696 Finance debt 1,000,000
800,000 Other long-term liabilities 246,042 142,278 Postretirement
health care benefits 60,975 149,848 Shareholders' equity 3,083,605
3,218,471 Total liabilities and shareholders' equity $5,263,734
$5,483,293 Note: Certain prior year balances have been reclassified
in order to conform with the current year presentation.
Harley-Davidson, Inc. Condensed Consolidated Statements of Cash
Flows (In thousands) Twelve months ended (Unaudited) Dec 31, Dec
31, Dec 31, 2005 2004 2003 Cash flows from operating activities:
Net income $ 959,604 $ 889,766 $ 760,928 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation 205,705 214,112 196,918 Provision for long-term
employee benefits 94,328 62,806 76,422 Gain on current year
securitizations (46,581) (58,302) (82,221) Proceeds from
securitizations 2,450,920 1,847,895 1,724,060 Finance receivables
(held for sale) acquired or originated (2,447,320) (2,069,713)
(1,897,719) Finance receivables (held for sale) collected 124,462
84,310 107,510 Net change in wholesale finance receivables
(161,342) (154,124) (154,788) Contributions to pension &
postretirement plans (296,859) - (192,000) Tax benefit from the
exercise of stock options - 51,476 13,805 Other 82,678 (11,142)
62,232 Net changes in current assets and current liabilities
(5,085) (24,866) (18,644) Total adjustments 906 (57,548) (164,425)
Net cash provided by operating activities 960,510 832,218 596,503
Cash flows from investing activities: Capital expenditures
(198,389) (213,550) (227,230) Finance receivables, net (156,438)
(134,571) (47,287) Collection of retained securitization interests
115,346 125,732 118,113 Net change in marketable securities 431,075
(349,042) (393,548) Other, net (14,497) 1,189 9,690 Net cash
provided by (used in) investing activities 177,097 (570,242)
(540,262) Cash flows from financing activities: Net increase in
finance debt (80,720) 305,047 224,118 Dividends (173,785) (119,232)
(58,986) Purchase of common stock for treasury (1,054,615)
(564,132) (103,880) Excess tax benefits from share based payments
6,065 Issuance of common stock under employee stock plans 31,264
62,171 19,378 Net cash used in financing activities (1,271,791)
(316,146) 80,630 Net increase in cash and cash equivalents
(134,184) (54,170) 136,871 Cash and cash equivalents: At beginning
of period 275,159 329,329 192,458 At end of period $ 140,975 $
275,159 $ 329,329 Note: Certain prior year balances have been
reclassified in order to conform with the current year
presentation. Harley-Davidson, Inc. Net Revenue and Motorcycle
Shipment Data (unaudited) Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31, 2005 2004 2005 2004 NET REVENUE (in
thousands) Harley-Davidson(R) motorcycles $1,088,286 $ 992,611
$4,183,515 $3,928,232 Buell(R) motorcycles 21,828 15,519 93,069
79,029 Parts & Accessories 169,859 157,906 815,678 781,621
General Merchandise 60,486 54,884 247,861 223,712 Other 1,876 77
2,091 2,596 $1,342,335 $1,220,997 $5,342,214 $5,015,190
HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 74,383
68,902 266,507 260,607 Export 13,205 11,685 62,510 56,682 Total
87,588 80,587 329,017 317,289 Motorcycle product mix: Touring
29,090 25,052 110,193 93,305 Custom 38,233 38,035 148,609 154,163
Sportster(R) 20,265 17,500 70,215 69,821 Total 87,588 80,587
329,017 317,289 BUELL UNITS Motorcycle shipments: Buell 2,716 2,064
11,166 9,857 Retail Sales of Harley-Davidson Motorcycles Full Year
2005 2005 2004 United States 253,414 243,160 Europe* 29,482 24,594
Japan 11,420 10,283 Canada 11,660 11,200 All other markets 11,193
9,373 Total Harley-Davidson Sales 317,169 298,610 Data Source
(subject to update) Data source for all 2005 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 * Data for Europe include Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Italy, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, and the United Kingdom Only
Harley-Davidson(R) motorcycles are included in the Harley-Davidson
Motorcycle Sales data. Heavyweight (651+ cc) Market Industry Data
Data Through Month Indicated 2005 2004 United States (December)
517,562 494,045 Europe* (November) 330,726 332,706 Data Source
(subject to update) United States: Motorcycle Industry Council
Europe: Giral S.A. * Data for Europe include Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Italy, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland, and the United
Kingdom FCMN Contact: travis.thatcher@harley-davidson.com
DATASOURCE: Harley-Davidson, Inc. CONTACT: Financial Contact - Mark
Van Genderen, +1-414-343-8002, or Media Contact - Susan Walton,
+1-414-343-7565, both of Harley-Davidson, Inc. Web site:
http://www.harley-davidson.com/
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