Harley-Davidson Inc. on April 19 announced its results for the first quarter ended April 1. During the quarter, a three-week strike occurred at the company's
Revenue for the quarter was $1.18 billion compared to $1.29 billion in the year-ago quarter, an 8.3 percent decrease. Net income for the quarter was $192.3 million compared to $234.6 million, a decrease of 18.0 percent compared to the first quarter of 2006. First-quarter diluted earnings per share (EPS) were $0.74, a 14.0 percent decrease compared to last year's $0.86.
"We anticipated that first-quarter results would be lower than last year due to the strike," said Jim Ziemer, chief executive officer of Harley- Davidson. "Nobody wants a strike and no one wins in a strike – not our employees, dealers, customers, suppliers or our shareholders. Now that the strike is behind us, our employees are focused on moving ahead, and with the new contract, we are better positioned for the future.
"In 2007, Harley-Davidson expects EPS growth in the range of 4 to 6 percent compared to 2006 based on moderate revenue growth, lower operating margin and the benefits of our strong free cash flow. Looking ahead to 2008 and 2009, we expect solid revenue growth, operating margin improvement and the continued benefits of our strong free cash flow to drive EPS growth in the range of 11 to 17 percent.”
The company expects to ship between 94,000 and 97,000 Harley-Davidson motorcycles in the second quarter of 2007.
Motorcycles and Related Products Segment – First-Quarter Results
Revenue from Harley-Davidson motorcycles was $891.5 million, a decrease of $117.0 million (-11.6 percent) vs. the same period last year. Shipments of Harley-Davidson motorcycles totaled 67,761 units, a decrease of 11,745 units (-14.8 percent) compared to last year's first quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $188.2 million, an increase of $5.3 million (2.9 percent) over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes apparel and collectibles, totaled $76.1 million, an increase of $7.6 million (11.0 percent) over the year-ago quarter.
Gross margin for the first quarter of 2007 was 35.9 percent of revenue compared to 38.4 percent for the first quarter last year. First-quarter operating margin decreased to 20.0 percent from 24.3 percent in the first quarter of 2006. The changes in both gross margin and operating margin are primarily due to the strike.
Motorcycle Retail Sales Data
During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 1.3 percent compared to the prior year quarter. In the
"We never like to see a retail sales decline," said Ziemer, "but first-quarter sales are not necessarily indicative of sales for the full year. We continue to expect positive worldwide retail sales growth for 2007."
Retail sales of Harley-Davidson motorcycles grew 16.5 percent in international markets during the first quarter of 2007 compared to the first quarter of 2006. First-quarter retail sales increased 25.7 percent in Europe;
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported first-quarter operating income of $58.9 million, an increase of $7.3 million (14.2 percent) compared to the year-ago quarter. The increase is primarily due to higher wholesale and retail net interest income and higher fee income.
Income Tax Rate
The company's first-quarter effective income tax rate was 35.5 percent compared to 36.0 percent in the same quarter last year. This decrease primarily reflects the reinstatement of the federal research and development tax credit.
Cash Flow
Cash and marketable securities totaled $929 million as of April 1. Cash flow from operations was $520 million and capital expenditures were $41 million during the first quarter of 2007. For the full year of 2007, capital expenditures are expected to be between $300 million and $325 million.
Stock Repurchase
The company repurchased 870,000 shares of its common stock at a cost of $61.2 million during the first quarter of 2007. On April 1, the company had 257,470,381 shares of common stock outstanding.
As of April 1, there are 21.9 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.
