Harley reports strong quarter

Harley-Davidson, Inc. (NYSE:HDI) had plenty of good news for company followers heading into the big centennial celebration next month, when it announced record revenue and earnings for its second quarter ended June 29, 2003.
Revenue for the quarter was $1.22 billion compared with $1.00 billion in the year-ago quarter, a 21.8% increase. Second quarter diluted earnings per share (EPS) were 66 cents, a 40.4% increase compared with last year’s 47 cents.
Noting that its U.S. dealer network sold more motorcycles in this quarter than in any other quarter in the company’s 100-year history, Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc., said retail sales grew more than 14% compared with last year and outpaced the company’s wholesale shipments by over 11,000 units.
stock market responds
Investors jumped on Harley-Davidson stock following the announcement of strong June motorcycle sales by the Motorcycle Industry Council (MIC), encouraging reports by securities analysts and excitement over Harley earnings.
Tuesday, July 15, the day before it announced its earnings, Harley common climbed $1.89 to close at $43.68 on huge trading volume of 7.3 million shares. Average daily volume for Harley common is 3.4 million shares. Harley’s 52 week high is $54.99. Following its earnings announcement on July 16, Harley stock moved up $2.19 to $45.87 on trading of 9.4 million shares.
Motorcycle Results
Second quarter revenue from Harley-Davidson motorcycles was $955.4 million, an increase of 25.7% over last year. Worldwide shipments of Harley-Davidson motorcycles in the second quarter totaled 76,025 units, up 10,485 units or 16% over last year.
After exceeding its second quarter target by 600 units, the company is increasing its full year 2003 target for Harley-Davidson motorcycles from 290,000 to 290,600. The new target represents a 10.2% increase over the prior year. The new factory in York, Pa., is scheduled to begin ramping up in the third quarter as assembly of the Softail family of motorcycles is relocated to the new plant.
For the six-month period January through June 2003, retail sales of Harley-Davidson motorcycles in the U.S. were up 6.3%, when compared to the same period last year. Harley-Davidson retail sales in Europe and Japan were up 4.2% and 7.6%, respectively, when compared with 2002. Retail sales of Harley-Davidson motorcycles have outpaced the heavyweight motorcycle industry in all of the company’s major markets.
Second quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $204.2 million, a 20.9% increase, or $35.4 million more than the year-ago quarter. Anniversary related sales accounted for $16.5 million and are not expected to be significant in the second half of the year. For the full year 2003, the company expects P&A revenues to grow slightly faster than the motorcycle unit growth rate.
Second quarter revenue from General Merchandise, which consists of MotorClothes apparel and collectibles, totaled $43.7 million, down 14.9% or $7.6 million over the same period last year. During the second quarter of 2002, General Merchandise revenue benefited from $12 million in 100th Anniversary products. In 2003, shipments of 100th Anniversary merchandise were essentially completed in the first quarter. Given the strong prior year 100th Anniversary revenue, General Merchandise revenue for the full year 2003 is expected to be lower than in 2002.
Second quarter operating margin increased from 18.3% in 2002 to 21.9%. This increase was primarily driven by the second quarter gross margin, which was 36.4% of revenue compared with 33.5% in 2002. Gross margin was improved by wholesale motorcycle price increases, a richer product mix and foreign currency exchange rates. These positive factors were partially offset by higher retirement and health care costs.

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