|HARLEY-DAVIDSON THIRD QUARTER REPORT
October 22 2007.
Harley-Davidson has announced its results for the third quarter ended September 30, 2007.
Revenue for the quarter was $1.54 billion compared to $1.64 billion in the year ago quarter, a 5.8 percent decrease. Net income for the quarter was $265.0 million compared to $312.7 million, a decrease of 15.3 percent versus the third quarter of 2006. Third quarter diluted earnings per share were $1.07, a 10.8 percent decrease compared to last year's $1.20. During the third quarter the Company repurchased $509 million of its common stock.
"Harley-Davidson's third quarter financial results are disappointing but not unexpected. In early September, we announced that we would reduce planned motorcycle shipments for the rest of 2007, and our results for the quarter are consistent with the Company's revised guidance," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
"Worldwide retail sales of Harley-Davidson(R) motorcycles during the third quarter were virtually flat with the third quarter of 2006, down 0.2 percent. U.S. retail sales continued to be sluggish, finishing down 2.5 percent for the quarter, while retail sales in our international markets grew 8.8 percent during the period," said Ziemer.
For the full year of 2007, the Company expects a shipment range of 328,000 to 332,000 Harley-Davidson motorcycles, compared to 349,196 units in 2006. The Company also expects a modest decline in revenue and lower operating margin in 2007. Diluted earnings per share for the full year are expected to decrease 4 to 6 percent compared to 2006.
Looking ahead to 2008, the Company anticipates that the U.S. retail motorcycle environment will continue to be challenging. It expects moderate revenue growth, lower operating margin and diluted earnings per share to grow between 4 and 7 percent compared to 2007.
"For the longer term, I am optimistic and confident about our future," said Ziemer. "Harley-Davidson has a strong business model, and we will continue to manage the Company in a manner that strengthens our brand and contributes to lasting success for all of our stakeholders," said Ziemer.
Motorcycles and Related Products Segment - Third Quarter Results
Revenue from Harley-Davidson motorcycles was $1.18 billion, a decrease of $110.7 million or 8.6 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 86,535 units, a decrease of 10,511 units or 10.8 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 $251.5 million, an increase of $3.1 million or 1.2 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $83.2 million, an increase of $11.9 million or 16.7 percent over the year-ago quarter.
Gross margin for the third quarter of 2007 was 38.4 percent of revenue compared to 39.9 percent for the third quarter last year. Third quarter operating margin decreased to 23.2 percent from 26.5 percent in the third quarter of 2006.
Motorcycle Retail Sales Data
During the third quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 0.2 percent compared to the third quarter of 2006. U.S. retail sales of Harley-Davidson motorcycles decreased 2.5 percent for the quarter. The heavyweight motorcycle market in the U.S. decreased 4.4 percent for the same period.
Retail sales of Harley-Davidson motorcycles grew 8.8 percent in the Company's international markets during the third quarter of 2007 compared to the third quarter of 2006. Third quarter retail sales increased 10.7 percent in Europe; Canada was down 7.7 percent; and Japan was up 9.1 percent. All other international markets combined were up 20.8 percent.
During the first nine months of 2007, worldwide retail sales of Harley- Davidson motorcycles decreased 0.9 percent compared to the prior year. In the U.S., Harley-Davidson dealer retail sales decreased 4.7 percent for the first nine months of the year; international sales increased by 12.9 percent for the same period. The U.S. heavyweight motorcycle market was down 4.4 percent for the first nine months of 2007.