Nov. 17, 2003 – Finance Digest
Harley 3Q sales decline, but earnings increase
Harley-Davidson, Inc. (NYSE: HDI) reported increased earnings but slightly lower revenues for the third quarter ended Sept. 28, 2003. The company earned net income of $190.1 million or diluted earnings per share of 62 cents, on revenues of $1.134 billion. That compares with earnings of $165.0 million, or 54 cents per diluted share, on revenues of $1.135 billion in the same quarter last year.
Harley-Davidson Financial Services, Inc. (HDFS) made a major contribution to earnings, reporting third quarter operating income of $46.2 million, up 55.7% from $29.7 million in the year-ago quarter.
Retail sales of Harley-Davidson motorcycles in the U.S. grew over 27% compared with last year’s third quarter and resulted in a decline in dealer inventories of nearly 12,000 units during the quarter, Harley said.
However, third quarter revenue from Harley-Davidson motorcycles was $844.3 million, an increase of 1.4% over last year. Worldwide shipments of Harley-Davidson motorcycles in the third quarter totaled 67,458 units compared 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 and represented a 4.3% increase, or $8.5 million, compared to the year-ago quarter. Third quarter revenue from General Merchandise, which consists of MotorClothes, apparel and collectibles, totaled $60.5 million, down 27.2% over the same period last year.
Third quarter gross margin improved from 34.9% of revenue in 2002 to 35.6% in 2003. Harley says gross margin was impacted primarily by foreign currency exchange rates. Third quarter operating margin of 21.3% increased from 19.6% in 2002, which the company says was a result of higher gross margin and the timing of operating expenses in 2002 and 2003.
For the ninth months ended Sept. 28, 2003, retail sales of Harley-Davidson motorcycles in the United States were up 12.9% while sales in Europe and Japan were up 9.5 and 12.6%, respectively, when compared with 2002.
3Q Polaris Earnings Climb 7%
Polaris Industries Inc. (NYSE:PII)(PSE:PII), Medina, Minn., posted net earnings of $39.5 million, a 7% increase over prior year third quarter net income of $37.1 million, for the three months ended Sept. 30, 2003. Earnings per diluted share were $1.74, an 11% increase over the prior year third quarter net income of $1.57 per diluted share.
Sales for the third quarter totaled a record $447.7 million, up 5% from the prior year’s third quarter sales of $428.0 million.
For the nine months ended Sept. 30, 2003, Polaris reported a 6% increase in net income to $72.9 million and a 12% increase in earnings per share to $3.24 per diluted share compared to $68.5 million or $2.89 per diluted share in the first nine months of 2002. Sales for the nine months ended Sept. 30, 2003 totaled $1,138.8 million, up 4% from $1,089.8 million in the comparable period of 2002.
Polaris said ATV sales for the quarter increased 14% over last year’s third quarter, and said dealer inventories of ATVs at Sept. 30, 2003 are at comparable levels to a year ago. Sales of Victory motorcycles increased 27% during the third quarter 2003 compared to last year’s third quarter. Victory motorcycle sales through Sept. 30, 2003, increased 53% from the comparable period in 2002.
PWC sales decreased 24% during the third quarter 2003 compared to the third quarter 2002, a drop the manufacturer blamed on the timing of shipments between the second and third quarter of 2003. Sales of PWC for the nine months ended Sept. 30, 2003 increased 12% from the comparable period in 2002, the company said. Snowmobile sales decreased 16% during the third quarter 2003 compared to the third quarter 2002. Sales of snowmobiles for the year to date period ended Sept. 30, 2003 are 36% lower than the same period last year.
Sales of Parts, Garments and Accessories (PG&A) increased 5% during the third quarter 2003 over the third quarter 2002, with sales of ATV and Victory related PG&A items showing strong double digit growth during the quarter, offset somewhat by lower snowmobile PG&A sales. Finally, income from financial services increased 87% to $7.3 million in the third quarter 2003, up from $3.9 million in the third quarter 2002.
Gross profit, as a percentage of sales, was 24.4% for the third quarter 2003, an improvement from 23.9% in the comparable quarter of 2002.
Tom Tiller, president and CEO, said the company expects sales growth for 2003 to be four to six percent, and full year 2003 earnings per share to be in the range of $4.85 to $4.90 per diluted share, a 10% to 12% increase over 2002.
Arctic Reports Increased Earnings
Arctic Cat, Inc., Thief River Falls, Minn., (Nasdaq:ACAT) reported net earnings of $21.6 million, or 98 cents per diluted share, for the second quarter of fiscal 2004, ended Sept. 30, 2003. This compares to net earnings of $20.5 million, or 91 cents per diluted share, during the same period of the prior year.
Second quarter sales were $237.7 million, which compares to $211.2 million for the same period last year.
Sales of Arctic Cat snowmobiles totaled $117.7 million in the 2004 second quarter, an increase of 17% versus sales of $100.7 million in the same period last year.
Second quarter ATV sales were up 14% to $91.6 million from last year’s $80.1 million, and parts, garments and accessories (PG&A) sales were $28.4 million compared to $30.4 million in the second quarter of last year.
“We experienced particularly strong orders for our new 650cc V-twin ATV, our most powerful ATV, and our DVX sports model,” said Chris Twomey, chairman and CEO.
For the six-month period, net sales were $314.8 million compared to $289.5 million in the first half of last year. Net earnings were $21.7 million, or 98 cents per diluted share, versus $22.5 million, or 98 cents per diluted share, for the prior year six-month period.
Year-to-date snowmobile sales were $152.4 million, up 3% from $147.8 million in the prior-year period, and year-to-date ATV sales increased 22% to $123.0 million. Six-month PG&A sales totaled $39.4 million versus $41.0 million in the previous-year period.
Arctic repurchased 843,000 shares of Class B stock from Suzuki Motor Corporation, or four percent of Arctic Cat’s total outstanding shares, during the second quarter. The buyback returned Suzuki’s ownership to just under 32%, or 6.7 million shares, of Arctic Cat’s common stock. The company has approximately 700,000 shares remaining under its board-authorized repurchase program.
Twomey said the company expects sales for the total fiscal year ending March 31, 2004, to grow by three percent to six percent and be in the range of $595 million to $607 million.
Full year diluted earnings per share are expected to be in the range of $1.39 to $1.41, Twomey said.
