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HARLEY-DAVIDSON REPORTS RECORD FIRST QUARTER
MODERATES 2005 MOTORCYCLE SHIPMENT GROWTH FORECAST– Milwaukee, Wis., April 13, 2005 — Harley-Davidson, Inc. (NYSE: HDI) today announced record revenue and earnings for its first quarter ended March 27, 2005. Revenue for the quarter was $1.24 billion compared with $1.17 billion in the year-ago quarter, a 6.0 percent increase. First quarter diluted earnings per share (EPS) were 77 cents, a 13.2 percent increase compared with last year?s 68 cents.
?As I prepare to take on the role of Chief Executive at Harley-Davidson, I am pleased that the Company is on a strong footing, having achieved another record quarter,? said Jim Ziemer, Chief Financial Officer and CEO Elect, Harley-Davidson, Inc. ?Looking ahead, we expect Harley-Davidson?s business to continue to grow and 2005 to be our 20th consecutive record year.?
?At the same time, U.S. retail sales of Harley-Davidson motorcycles during the first quarter of 2005 have been relatively flat with the same period last year?falling short of our expectations. Despite our continued optimism for the year, we feel it is prudent to limit short-term production growth, maintaining demand in excess of supply. This action will result in a change to our previous guidance for both shipments and earnings growth for 2005. Our shipments are now planned to increase from last year?s 317,000 units to a target of 329,000 units compared to our original target of 339,000 units. Our 2005 earnings are expected to grow by approximately 5-8 percent in 2005 compared to our previous forecast of mid-teens earnings growth.?
?While this volume adjustment may prevent us from attaining our previous goal of 400,000 units in 2007, we see no reason to change our long-term unit growth projection of 7-9 percent annually based on just three winter months of sales data. Similarly, we are not changing our projection of mid-teens earnings growth other than for this year,? Ziemer added.
?For nineteen consecutive years, this management team has delivered record results, and I have the utmost confidence that the actions we are taking are appropriate and in our stakeholders? long-term interests,? said Jeff Bleustein, Chairman and Chief Executive Officer of Harley-Davidson, Inc.
Motorcycles and Related Products SegmentFirst quarter revenue from Harley-Davidson? motorcycles was $979.0 million, an increase of 6.5 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 76,716 units, up 2,626 units or 3.5 percent over last year.
First quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts? and Genuine Motor Accessories?, totaled $176.9 million, a 4.6 percent increase over the year-ago quarter. For the longer term, the Company expects P&A revenue to grow at a rate slightly faster than the motorcycle unit growth rate.
General Merchandise revenue, which consists of MotorClothes? apparel and collectibles, was $59.5 million in the first quarter, up 9.3 percent over the same period last year. For the longer term, the Company expects General Merchandise revenue to grow at a rate lower than the motorcycle unit growth rate.
First quarter gross margin for the Motorcycles and Related Products Segment was 37.6 percent of revenue, approximately the same as the year-ago quarter of 37.8 percent. Gross margin was negatively impacted by higher material costs, primarily metal surcharges; it benefited from favorable foreign currency exchange. Operating margin grew to 24.2 percent from 22.9 percent due to lower operating expenses.
Motorcycle Retail Sales DataIn the United States through March, Harley-Davidson retail motorcycle sales finished down approximately one percent compared to 2004. Similarly, the U. S. heavyweight motorcycle market declined 0.4 percent in the first quarter.
Worldwide retail sales of Harley-Davidson motorcycles grew 2.8 percent for the quarter, driven by strong performance in Europe and Japan, which increased 20.6 and 10.6 percent respectively. On an industry-wide basis through February 2005, the 651+cc segment grew slightly in Europe, while the heavyweight market in Japan was down for the same period. Data is listed in the accompanying tables.
Financial Services SegmentHarley-Davidson Financial Services (HDFS) reported operating income of $53.6 million, up $3.3 million or 6.5 percent compared to the year-ago quarter. HDFS continued to experience strong customer acceptance of its financial products.
During the quarter, HDFS sold $730 million in retail motorcycle loans and recorded a gain of $19.2 million. This compares with a gain of $25.2 million on $625 million of loans securitized during the first quarter of 2004. The gain of 2.6 percent as a percentage of loans sold is slightly above management?s guidance which is now 1.7 to 2.5 percent in the current interest rate environment.
Annualized credit losses on a managed portfolio basis increased during the quarter to 1.07 percent in 2005 from 0.77 percent in 2004 due to the combination of a higher incidence of losses and lower recovery rates. HDFS is maintaining its credit loss target of 1 percent or less of managed receivables.
In 2005, HDFS operating income is expected to be slightly lower than that achieved in 2004 primarily due to a highly competitive marketplace and an increasing interest rate environment. For the longer term, the Company expects the HDFS operating income growth rate to be slightly higher than the Company?s motorcycle unit growth rate.
Stock Option AccountingOn January 1, 2005 the Company adopted new accounting rules requiring it to recognize expense related to the fair value of its employee stock option awards. Total stock compensation expense recognized by the Company during the first quarter of 2005 was $7.0 million.
Shipment GuidanceHarley-Davidson is revising its previous guidance and now plans to ship 329,000 Harley-Davidson motorcycles in 2005. This 329,000 unit target represents a 3.7 percent growth rate over 2004 shipments. The Company believes that this 10,000 unit reduction will occur almost entirely in the second quarter and will involve reducing planned production of 2005 Model Year motorcycles. Revised quarterly shipments are expected to be as follows: 77,000 units in the second quarter, 87,500 units in the third quarter and 87,500 units in the fourth quarter.
BIKERNET STEALTH REPORT–Not a lot to report on this week. I am waiting for the town planning meeting next Tuesday and hopefully I can report next week that everything has been approved for STEALTH BIKE WORKS. The red tape you have to go through is crazy!
Have any of you noticed how at the H-D dealers, that their customers are called “ENTHUSIASTS” now. I see it in their adds, t.v. commercials etc. What’s up with this? Maybe the factory has told them not to use the term biker? Who knows? I guess the bikers are customers at the independent shops.
I am sure most of you watched the biker build off award show a couple of weeks ago. I have heard mixed reviews on the show. Good and bad around here. I thought the show was pretty cool. As to whether you like the bikes or the guys who build them, you have to agree that they all are very talented. My favorite guys are Russell Mitchell, Billy Lane, The Detroit Bros. and Indian Larry’s crew. I like the style of bike these guys build. All of the bikes are cool in their own way and these guys have done a lot of good for the industry. I guess too, that Jesse James opened a lot of doors as far as “bike t.v.” goes, to make these shows possible.
Like I said there is not a lot to report this week. I have my crew in place to finish the building next week after the town planning meeting. These guys are what bikers and brotherhood used to be about and still should be about. My good friends Shorty, Little Mikey, Chopper John, Dennis, Jay, and Ben have all volunteered their services to get the shop up and running. No money exchanged hands, they did it because they know what being a biker is about and also because they believe in the shop and what it can become. Thanks in advance to all of you!
So I guess that is a wrap for this week. Hopefully next week I will have GREAT news about STEALTH BIKE WORKS! Keep us in mind as we face the powers that be next Tuesday!
Until next time,
STEALTHMAN
Inspired by the 1928 shovel project, thanks. I just finish it and I hope you like it.
Jim Theis
SPECIAL OLYMPICS POKER RUN–First I would like to thanks West Coast Choppers, Wiley-X, EyeRide, Johnny Suede, Indian Larry, HondaHog, Tribal Motor Works, and so many others for all your generous donations of t-shirt, sunglasses, goggles, hats, motorcycle flag holders, posters, helmets, etc. to last years Special Olympics Poker Run.
It’s about that time again to contact all those that have supported us in the past with donations to our Special Olympics Poker Run. I’m contacting you all again because you were so generous in the past and have helped to make this annual event so special for the riders as well as the Special Olympic athletes.
Special Olympics can only continue to operate through donations from businesses and private citizens, so I have agreed to organize this Poker Run again this year, and solicit items for our Chinese Auction.
I’ve enclosed some important information in the email that you may need for you tax records, and also our Mission Statement.You can send any donations to me at the address listed below, and if you have any further questions you can contact me at (724) 730 – 2957.
Thanks so much for you time, consideration and help.
Rev. Michael T. Wimer
Pres. Pa. Chapter Messiah’s Disciples Motorcycle Ministry
5 East Hazelcroft Ave.
New Castle, Pa. 16105
(724) 730 – 2957 cell
mikewimer@dynatektelecom.com – (office email)
Special Olympics Pennsylvania, Inc. is a 501(c)(03) public charity with aEIN:23-2078543 tax number.
Our Mission Statement is to provide year round sports training and athletic competition in a variety of Olympic-type sports for children and adults with mental retardation. Giving them continuing opportunities to develop physical fitness, demonstrate courage, experience joy and participate in the sharing of gifts, skills, and friendships with their families and other Special Olympics athletes and their communities.
Thanks again and God Bless.
Rev. Mike
THE ROCK– THIS IS AWESOME!!!I’m told that there is a huge rock near a gravel pit on Hwy. 25 in rural Iowa. For generations, kids have painted slogans, names, and obscenities on this rock, changing it’s character many times. A few months back, the rock received it’s latest paint job, and since then it has been left completely undisturbed. It’s quite an impressive sight. Be sure to scroll down and check out the multiple photos (all angles) of the rock. I thought the flag was draped over the rock, but it’s not. It’s actually painted on the rock too.
Here’s the artist, Ray “Bubba” Sorensen.
AWESOME Work, RAY…Thank you!
“God Bless America” & “Our Soldier’s &Vet’s”
CR Thompson
PROFAB ? YOUR STOPPING POWER–As usual, Profab Metalwerks will get right down to the product. Eliminate the need for a rear brake while enhancing the look of your bike with the new Pro-Tranz Brake. The innovative Pro-Tranz Brake is a direct bolt-on brake application for RSD-brake applications. It comes complete with a polished S&S brake disc, hydraulic clutch, 2-piston caliper, new chain sprocket, and S&S hardware. The Pro-Tranz brake is chain only, that’s right-no belts, no need to change any seal, you don’t even have to drain the oil. Already used by many top builders, one being Doug Keim on the Hard Rock tour, it’s rearing to stop your ride.
For more information, contact: Profab Metalwerks, (866) 683-2228, or online at http://www.profabmetalwerks.com.
Tell ?em Bikernet sent you.
NEW FROM PRO ONE – INTERNAL BRAKE LINE CONVERSION–Pro-One has just released what is certainly one of the most noteworthy custom innovations in years. Developed and manufactured by the world-renowned B.I.G.S. group, the revolutionary B.I.G.S NEW GENERATION BRAKE SYSTEM. is an internal brake line kit that locates all but a very short, well hidden line, to the inside of the fork tube(s). The system is compatible with most bikes with plunger style forks and can be used on both new and used front ends. The internal line kit conversion can be installed in forks up to 20″ over stock and is works with single or dual brake layouts. Extensively tested, the system has passed the rigid standards of, and been approved by, the European TUV. Available exclusively through PRO-ONE, the B.I.G.S NEW GENERATION BRAKE SYSTEM offers precisely controllable braking power and a brake-hose-free front end.
For complete details on this exciting new braking system call 800-884-4173 or visit http://www.pro-one.com
V-ROD ROAD RAGE– BASSANI has just released their record setting ROAD RAGE system for the Harley-Davidson V-ROD. Available for all V-ROD models, these aggressive 2 into 1 pipes feature a stepped diameter layout tapering from 1 3/4″ to 1 7/8.”. Tuned for a rider friendly wide power band, the V-ROD ROAD RAGE exits through BASSANI’S dyno proven true reverse cone megaphone fit with a unique polished billet aluminum end cap.
These pipes emit a comfortable exhaust note at normal riding levels, but tweak the throttle and it’s sure to bring your hair to attention. The complete system comes complete with custom mounting hardware and retails for $519.00. Available exclusively from North County Customs at 866-439-4287 or visit http://www.bassanipipes.com
HARLEY-DAVIDSON STOCK PLUNGES ON OUTLOOK–
Slowdown in shipments raises warning flags for analysts
Harley-Davidson stock took the worst spill in its history Wednesday after the famed “hog” maker throttled back its 2005 production schedule, saying sales had fallen short of expectations in the first quarter.
The warning overshadowed news of an 11 percent rise in quarterly earnings, and raised questions among analysts about the long-term growth outlook and strategy for Harley-Davidson.
“Management attributed the cuts to slow first-quarter sales, but we think the issue may run deeper than that,? said RBC Capital analyst Ed Aaron. ?We think Harley?s underlying (production) growth rate is lower than either management or investors perceive.”
The century-old motorcycle maker, based in Milwaukee, said it would cut 2005 production by 10,000 units from its original forecast and now plans to ship 329,000 bikes this year, up just 3.7 percent from a year ago.
Harley’s chief financial officer Jim Ziemer, who will take over as CEO this month, said the shortfall in sales was mostly due to poor U.S. weather. He tried to reassure the market that demand exceeds supply and that inventories are in good shape, adding that the first quarter is not indicative of the year?s trends.
“We are taking a precautionary measure by moderating our 2005 shipment schedule to maintain that demand remains in excess of supply,” he said in a conference call. ?We still have great confidence for the retail sales environment for 2005 ? we just have to moderate wholesale shipments this year.”
But many analysts on the call continued to seek other reasons for the productions cuts, raising questions about dealer?s inventory levels and higher credit losses. Tony Gikas, an analyst for Piper Jaffray & Co., said his checks with dealers suggested trends had been weakening for eight months.
“There is less confidence in forward bike sales, the level of dealers seeing bikes exceeding expectations is on the decline, and inventories were high,? said Gikas, who has a “market perform? rating on the stock. ?Management is still overly optimistic on the longer-term opportunity, … and what the story lacked today was strategy.”
But Jake Balzer, a senior equity analyst at Guzman & Co., called it ?a pretty ugly announcement.?
He questioned whether Harley was still too optimistic in its long-term forecasts, which call for unit sales growth of 7 to 9 percent, and earnings growth in the mid-teens.
?The slowdown may already be here,” Balzer said. “Everybody just needs to pare down their expectations for this company.”
Balzer said Harley?s chief obstacle is its older demographic of buyers ? baby boomers with disposable income.
?This baby boomer generation, they?ve got a lot of money, and they?ve spent a lot of money on things like this,” he said. “There?s going to be a lag time between the time when they stop buying bikes and the time when they pass that money on to the next generation as an inheritance and they start buying bikes.”
For the first quarter, net income rose to $227.2 million, or 77 cents a share, from $204.6 million, or 68 cents a share, a year earlier ? topping analysts? estimates by a penny. Revenue climbed 6 percent to $1.24 billion.
Worldwide sales of motorcycles rose 2.8 percent in the quarter, driven by strong results from Europe and Japan. But retail sales in the U.S. fell about 1 percent from a year earlier.That resulted in the company?s decision to trim production and cut its earnings growth outlook for the year to about 5 percent to 8 percent, compared with analyst expectations of about 12 percent growth.
Ziemer said the cutback in production, which will take place almost entirely in the second quarter, will cut earnings for the period due to inefficiencies stemming from the disruption.
While the company stood by its long-term growth projections, it backed away from a target of shipping 400,000 bikes in 2007.
“We are still seeing increases in demand, but we are also seeing greater increases in supply,? Gikas said. ?I still think there are additional risks to production later this year and certainly to their outlook for 2006 and 2007.”
Ted Parrish, a co-portfolio manager of Henssler Equity Fund, said he sold the fund?s stake in Harley-Davidson earlier this month.
“At this stage in the recovery, if and when consumers do decide to pullback on spending, a product considered somewhat upscale that is relying on the marginal consumer to step up to buy (it) is in jeopardy of having a slip-up like they just did,” he said.
MSNBC News Services Reuters and The Associated Press contributed to this story.
Bob T.
I CAN SMELL THE WEEKEND–And damn it smells good. It’s warm ridingweather and the whiff of Laughlin is creeping over the desert. Thisweekend’s devoted to finishing the Sturgis Chop to the point of teardown.Next week parts fly to the powdercoater, if I’m lucky. We’re shooting PrunoGirls on the Harbor for an article in Hot Bike or Street Chopper on Sunday.
Oh, Sinwu, Layla and Coral handled the news again this week,while I wrote a feature on Matt Hotch for the August Issue of HOT BIKE.Yesterday was our final deadline. Only three articles short, mine, aterrific piece on how to pick Big Inch Engines. I don’t like the Crate Motortitle. Their too fine to be called Crates, as if they’re all cast-ironproduction engines kicked out of overseas sweat-shop plants. When it comesto big inch engines, the August issue will show you the way. Oh, and Dr.Toph is still dialing in his Victory Vegas road test. He’s ridden it forseveral months and fought with the factory for spec material. He’s astickler for complete stories and I’m pacing the halls for its arrival.
This issue packs in Daytona coverage, seven hot bike features, afeature on the first American motorcycle manufacturer, Storze performancefrontends and Heartlands 250 wide tire install. Hang on. Get ready for theweekend. Find a girl to haul into the desert next weekend or meet you at thefront door upon your return. Next week I ‘ll tell you about the HOT BIKEorganized ride to Sturgis. It’s coming together. We’ll meet in Phoenix,spend the night in Durango, Aspen and Cheyenne before riding into Deadwood.Four days on the road with the editors, a charity ride to support theCrazyhorse monument and maybe breast cancer. We’ll have a helluva good timeand anyone can come along.
Ride forever,
Bandit
