UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 27, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________________ to ____________________
Commission File Number 1-10793
Harley-Davidson, Inc.
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(Exact name of registrant as specified in its Charter)
Wisconsin 39-1382325
- - ------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Juneau Avenue, Milwaukee, Wisconsin 53208
- - --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (414) 342-4680
None
-----------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding as of May 8, 1994 38,095,176 Shares<PAGE>
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended March 27, 1994
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Page 2<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Harley-Davidson, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three months ended
March 27, March 28,
1994 1993
Sales $343,705 $269,585
Cost of goods sold 253,416 194,130
-------- --------
Gross profit 90,289 75,455
Selling, administrative and engineering
expenses 57,169 50,285
-------- --------
Income from operations 33,120 25,170
Interest expense - net (311) (481)
Other income - net 1,343 338
-------- --------
Income from operations before provision
for income taxes and accounting changes 34,152 25,027
Provision for income taxes 13,320 9,886
-------- --------
Income before accounting changes 20,832 15,141
Cumulative effect of accounting changes:
Postretirement health care benefits,
net of tax - (32,124)
Income taxes - 1,796
-------- --------
Net income (loss) $ 20,832 ($ 15,187)
======== ========
Weighted average common shares outstanding,
assuming no dilution 38,073 37,901
Earnings (loss) per common share, assuming no dilution:
Income before cumulative effect of accounting changes $0.55 $0.40
Cumulative effect of accounting changes:
Postretirement benefits - (0.85)
Income taxes - 0.05
----- -----
Net income (loss) $0.55 ($0.40)
===== ======
Cash dividends per share $0.06 $ -
Page 3<PAGE>
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
ASSETS
March 27, Dec. 31, March 28,
1994 1993* 1993
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 38,593 $ 77,709 $ 27,387
Accounts receivable, net of allowance
for doubtful accounts 146,565 86,031 112,678
Inventories (Note 2) 147,097 140,151 121,569
Deferred income taxes 20,296 20,296 18,105
Prepaid expenses 7,882 9,571 9,131
------- ------- -------
Total current assets 360,433 333,758 288,870
Property, plant and equipment, net 204,916 205,768 181,048
Deferred income taxes 11,676 11,676 10,306
Goodwill - - 55,907
Other assets 33,591 32,083 29,944
-------- -------- --------
$610,616 $583,285 $566,075
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 23,985 $ 20,580 $ 16,336
Current maturities of long-term debt 726 789 1,033
Accounts payable 55,366 56,350 57,379
Accrued expenses and other liabilities 113,648 113,043 106,775
------- ------- -------
Total current liabilities 193,725 190,762 181,523
Postretirement health care benefits 56,356 54,999 51,481
Other long-term liabilities 14,307 12,612 11,859
Contingencies (Note 3)
Stockholders' equity:
Common stock 385 385 385
Additional paid-in capital 140,187 137,150 131,709
Retained earnings 207,960 189,410 190,663
Cumulative foreign currency translation
adjustment 599 186 895
-------- -------- --------
349,131 327,131 323,652
Less treasury stock, at cost (1,582) (1,583) (1,024)
Unearned compensation (1,321) (636) (1,416)
-------- -------- --------
Total stockholders' equity 346,228 324,912 321,212
-------- -------- --------
$610,616 $583,285 $566,075
======== ======== ========
*Condensed from audited financial statements.
Page 4<PAGE> <PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended
March 27, March 28,
1994 1993
Cash flows from operating activities:
Net income (loss) $20,832 ($15,187)
Depreciation and amortization 9,644 8,850
Long-term employee benefits 2,091 52,223
Deferred income taxes - (22,333)
Loss on disposal of long-term assets 11 14
Other (432) -
Change in current assets and current liabilities:
Accounts receivable (60,534) (19,500)
Inventory (6,946) (19,398)
Prepaid expenses 1,689 486
Accounts payable and accrued liabilities (379) 11,886
------- -------
Net cash used in operating activities (34,024) (2,959)
Cash flows from investing activities:
Purchase of property and equipment (8,748) (5,326)
Investment in Eagle Credit Corporation - (10,000)
Other - net (688) 755
------- -------
Net cash used in investing activities (9,436) (14,571)
Cash flows from financing activities:
Increase (reduction) of long-term debt 183 (267)
Net increase in notes payable 3,405 403
Dividends paid (2,282) -
Issuance of stock under employee stock plans 3,038 659
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Net cash provided by financing activities 4,344 795
------- -------
Net decrease in cash and cash equivalents (39,116) (16,735)
Cash and cash equivalents:
At beginning of period 77,709 44,122
------- -------
At end of period $38,593 $27,387
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Page 5PAGE
<PAGE>
HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share amounts)
Note 1 - Basis of Presentation
The condensed interim consolidated financial statements included herein have
been prepared by the Company without audit. However, the foregoing statements
contain all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of Company management, necessary to present fairly the
consolidated financial position as of March 27, 1994 and March 28, 1993, and the
results of operations for the three month periods then ended.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Registrant Company's annual report on Form 10-K for the year ended
December 31, 1993.
Note 2 - Inventories
The Company values its inventories at the lower of cost, using the last-in,
first-out (LIFO) method, or market. Inventories consist of the following:
March 27, Dec. 31, March 28,
1994 1993 1993
Components at the lower of cost, first-in,
first-out (FIFO), or market:
Raw material & work-in-process $ 56,965 $ 54,155 $ 47,227
Finished goods 69,068 66,865 56,469
Parts & accessories 37,888 35,366 32,765
163,921 156,386 136,461
Excess of FIFO over LIFO 16,824 16,235 14,892
Inventories as reflected in the
accompanying condensed consolidated
balance sheets $147,097 $140,151 $121,569
Note 3 - Contingencies
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at
its York, Pennsylvania facility (the Facility). The Facility was formerly used
by the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company
purchased the facility from AMF in 1981. Although the Company is not certain as
to the extent of the environmental contamination at the Facility, it is working
with the Pennsylvania Department of Environmental Resources. The Company is
currently pursuing cost recovery litigation against the Navy and believes that
the Navy, by virtue of its ownership and operation of the Facility,
Page 6<PAGE>
Note 3 - Contingencies (continued)
will ultimately be responsible for a substantial portion of the environmental
remediation costs at the Facility. In addition, in March 1991 the Company
entered into a settlement agreement with Minstar related to certain
indemnification obligations assumed by Minstar in connection with the Company's
purchase of the Facility. Pursuant to this settlement, Minstar is obligated
to reimburse the Company for a portion of its investigation and remediation
costs at the Facility. Although substantial uncertainty exists concerning the
nature and scope of the environmental remediation that will ultimately be
required at the Facility, based on preliminary information currently available
to the Company and taking into account the Company's estimate of the probable
liability of the Navy, and the settlement agreement withMinstar, the Company
estimates that it will incur approximately $4 million of additional remediation
and related costs at the Facility. The Company has established reserves for this
amount. The Company has also put certain of its insurance carriers on notice
that it intends to make claims relating to the environmental contamination
at the Facility. However, the Company is currently unable to determine the
probable amount of recovery available, if any, under insurance policies.
Note 4 - Investments
The Company holds 49% investments in Eagle Credit Corporation (Eagle) and
another investment. The Company accounts for these investments using the equity
method. As of March 27, 1994, the Company's carrying value of its investment in
these unconsolidated affiliates totaled $9.4 million which is included in the
other assets classification in the accompanying condensed consolidated financial
statements. The summarized information below represents an aggregation of the
Company's unconsolidated affiliates.
Three months ended
March 27,
1994
--------
Earnings data
Revenue $4,181
Gross profit 3,331
Operating income 882
Net income 882
Company's equity in net income 432
March 27,
1994
--------
Balance sheet data
Current assets 107,669
Noncurrent assets 3,324
Current liabilities (27,834)
Noncurrent liabilities (81,014)
Page 7PAGE
<PAGE>
Item 2. HARLEY-DAVIDSON, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations for the Three Months Ended March 27, 1994
Compared to the Three Months Ended March 28, 1993
Motorcycle Units and Consolidated Net Sales
For the Three Month Periods Ended March 27, 1994 and March 28, 1993
Incr.
1994 1993 (Decr.) %
------ ------ ------ ----
Motorcycle units 23,056 19,502 3,554 18.2%
Net sales (in millions):
Motorcycles $209.1 $168.2 $40.9 24.3%
Motorcycle Parts and Accessories 49.5 37.1 12.4 33.4
Total Motorcycles and Related Products 258.6 205.3 53.3 25.9
Recreational Vehicles 59.3 46.0 13.3 29.0
Commercial Vehicles 22.8 15.2 7.6 50.0
Other 3.0 3.1 (0.1) (3.2)
Total Transportation Vehicles 85.1 64.3 20.8 32.4
Harley-Davidson, Inc. Consolidated Net Sales $343.7 $269.6 $74.1 27.5%
The Company recorded record first quarter consolidated net sales. Both the
Motorcycles and Related Products segment and the Transportation Vehicles
segment contributed to the increase.
Net sales increases in the Motorcycles and Related Products segment were
primarily volume related. Motorcycle unit shipments increased 18.2% over
the first quarter of 1993 due to production increases (daily scheduled build
rate of 345 during the first quarter of 1993 compared to 365 during the first
quarter of 1994) and a decrease in motorcycle unit inventories compared to
the end of the fourth quarter of 1993.
During the first quarter of 1994, motorcycle production met or exceed the
scheduled 365 units per day build rate. Accordingly, the Company announced that
it had increased the scheduled build rate to 380 units per day effective as of
the beginning of the second quarter.
Despite the increase in unit production, demand for the Company's motorcycles
continues to exceed supply. The Company's independent domestic dealers have
reported customer orders on all remaining 1994 model year allocations and in
some cases are reporting customer orders for all of their anticipated 1995
model year (production beginning in July, 1994) allocations.
The Parts and Accessories business revenues grew 33.4% compared to the first
quarter of 1993, due primarily to the MotorClothes product line. The
MotorClothes product line comprised approximately 35% of all revenues generated
Page 8<PAGE>
by the Parts and Accessories business during 1993 and is currently the fastest
growing portion of the parts and accessories product line.
The Transportation Vehicles segment recorded strong revenue growth for the first
quarter of 1994. The Recreational Vehicles division's revenue increases were
generated by volume increases, primarily in the motorized "Class A" products.
During the most recent six month period for which data is available (September
1993 - February 1994), the Recreational Vehicle division reported a 41.6%
increase in Class A registrations compared to a 21.6% industry-wide increase
during the same period. This higher increase was largely the result of new
marketing and distribution initiatives implemented over the last year.
The Commercial Vehicles division also reported strong growth compared to the
first quarter of 1993. First quarter revenues were enhanced by a substantial
backlog at the close of 1993 that was carried into the first quarter of 1994.
The Commercial Vehicle division reported that it was awarded a contract to
manufacture 1,875 units of various configurations for Federal Express. This
contract represents the largest contract in the division's history and is
expected to generate revenues of approximately $20 million over the remainder
of the year.
Consolidated Gross Profit
For the Three Month Periods Ended March 27, 1994 and March 28, 1993
(Dollars in Millions)
Percent Percent
of sales of sales
1994 1993 Change 1994 1993
---- ---- ------ -------- --------
Motorcycles and Related Products $76.8 $63.9 $12.9 29.7% 31.1%
Transportation Vehicles 13.5 11.6 1.9 15.9 18.1
Consolidated Harley-Davidson, Inc. $90.3 $75.5 $14.8 26.3% 28.0%
Consolidated gross profit increased $14.8 million (19.7%) compared to the first
quarter of 1993. The Motorcycles and Related Products segment was responsible
for a majority of the increase. The Motorcycles and Related Products segment's
gross profit percentage decreased slightly compared to the first quarter of
1993. Several factors contributed to the change including, additional costs
associated with progress on the reorganization and enhancements of the York,
Pennsylvania and Wauwatosa, Wisconsin manufacturing facilities and overtime
from weather related make-up days. The respective manufacturing facility
reorganizations are a part of the Company's comprehensive three year
manufacturing strategy announced during the third quarter of 1993.
The Transportation Vehicles segment also recorded a volume related increase in
gross profit compared to the first quarter of 1993. The Recreational Vehicles
division experienced a shift in product mix within the "Class A" products
toward lower margin units, largely offsetting its volume related increases. The
Commercial Vehicles division's gross profit percentage remained unchanged
compared to the first quarter of 1993.
Page 9PAGE
<PAGE>
Consolidated Operating Expenses
For the Three Month Periods Ended March 27, 1994 and March 28, 1993
(Dollars in Millions)
1994 1993 Change %
---- ---- ------ -----
Motorcycles and Related Products $41.8 $36.4 $5.4 14.9%
Transportation Vehicles 13.3 12.2 1.1 9.2
Corporate 2.1 1.7 .4 19.5
Consolidated Harley-Davidson, Inc. $57.2 $50.3 $6.9 13.7%
Consolidated operating expenses increased 13.7% compared to the first quarter of
1993 and compared favorably to a consolidated revenue increase of 27.5%.
Increases in the Motorcycles and Related Products segment were largely related
to increased motorcycle and parts and accessories volumes. There were no
significant areas of unusual expense increase during the period.
Operating expenses in the Recreational Vehicles division increased moderately
compared to the first quarter of 1993. Increases in research and development
costs and selling and promotional programs were partially offset by the
reduction of goodwill amortization and lower product related costs compared to
the first quarter of 1993. The reduction in goodwill amortization resulted
from the goodwill writedown recorded by the Company during the fourth quarter of
1993. The Recreational Vehicles division has been investing heavily in research
and development and has added engineering expertise to its workforce. The
increased engineering costs and new marketing initiatives should have a long-
term benefit, but will have a negative impact on current year earnings
performance.
CONSOLIDATED INCOME TAXES
The Company's effective income tax rate for the first quarter of 1994
approximated 39.0% compared to 39.5% during the first quarter of 1993.
ENVIRONMENTAL
The Company's policy is to comply with applicable environmental laws and
regulations. The Company has a compliance program in place to monitor, and
report on, environmental issues. The Company is currently involved with its
former parent (Minstar) and the U.S. Navy in cost recovery litigation
surrounding the remediation of the Company's manufacturing facility in York,
PA. The Company currently estimates that it will be responsible for
approximately $4 million related to the remediation of the York facility.
The Company has established reserves for this amount (refer to footnote 3 to
the accompanying condensed consolidated financial statements).
Recurring costs associated with managing hazardous substances and pollution in
on-going operations are not material.
The Company regularly invests in equipment to support and improve its various
manufacturing processes. While the Company considers environmental matters in
capital expenditure decisions, and while some capital expenditures also act to
improve environmental compliance, only a small portion of the Company's annual
capital expenditures relate to equipment which has the sole purpose of
environmental compliance. The Company anticipates that capital expenditures
Page 10<PAGE>
for equipment used to limit hazardous substances/pollutants during 1994 will
approximate $2 million.
Liquidity and Capital Resources as of March 27, 1994
The Company reported negative cash flows from operating activities of
approximately $34 million during the quarter compared to approximately
$3 million of negative cash flows during the first quarter of 1993. Cash flows
from higher earnings compared to 1993 were offset primarily by increases
in receivable and inventory balances. Motorcycles and Related Products segment
receivable balances increased during the first quarter of 1994 as a result of
volume increases in both motorcycles and parts and accessories. In addition,
the Company generally experiences an increase in receivable balances during
the first quarter as a result of their comparison to lower balances at the
close of the fourth quarter that result from a normal holiday shut-down.
Inventory increases occurred primarily in the Recreational Vehicles division
where its wholly owned retail stores added approximately $6.5 million of
additional inventory during the first quarter of 1994 in preparation for the
spring selling season.
Investing activities utilized approximately $9.4 million during the first
quarter of 1994. Capital expenditures amounted to $8.7 million and $5.3 million
during the first quarters of 1994 and 1993, respectively. The Company
anticipates 1994 capital expenditures will approximate $90 million. The
Company anticipates funding these expenditures with internally generated funds.
The Company currently has nominal levels of long-term debt and lines of credit
of approximately $45 million. As of March 27, 1994, approximately $38 million of
the lines of credit remained available.
On February 6, 1994, the Company's Board of Directors declared a cash dividend
of $.06 per share payable February 28, 1994 to shareholders of record
February 14.
Page 11PAGE
<PAGE>
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
March 27, 1994
Item 1. Legal Proceedings
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at its
York, Pennsylvania facility. See footnote 3 to the accompanying condensed
consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Page 12PAGE
<PAGE>
Part II - Other Information
HARLEY-DAVIDSON, INC.
Form 10-Q
March 27, 1994
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARLEY-DAVIDSON, INC.
Date: 5/11/94 /s/ James L. Ziemer
---------------- -------------------------
James L. Ziemer
Vice President and Chief Financial
Officer (Principal Financial Officer)
5/11/94 /s/ James M. Brostowitz
--------------- -------------------------
James M. Brostowitz
Vice President, Controller
(Principal Accounting Officer) and
Treasurer
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