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 September 24, 1995
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 1-9183
Harley-Davidson, Inc.
(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 October 20, 1995 77,269,617 Shares
<PAGE>
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended September 24, 1995
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements
of Income 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of
Cash Flows 5
Notes to Condensed Consolidated
Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
Sept 24, Sept 25, Sept 24, Sept 25,
1995 1994 1995 1994
Sales $427,005 $384,026 $1,303,242 $1,129,103
Cost of goods sold 316,205 277,514 958,758 818,943
------- -------- ---------- ----------
Gross profit 110,800 106,512 344,484 310,160
Selling, administrative
and engineering expenses 74,497 68,745 215,448 190,638
-------- ------- --------- ----------
Income from operations 36,303 37,767 129,036 119,522
Interest income
(expense) - net 198 137 (1,213) (230)
Other income - net 1,276 61 379 2,021
-------- --------- ---------- ---------
Income before provision
for income taxes 37,777 37,965 128,202 121,313
Provision for income taxes 14,064 14,192 47,500 42,106
-------- -------- ---------- ---------
Net income $ 23,713 $ 23,773 $ 80,702 $ 79,207
======== ========= ========== ==========
Weighted average common
shares outstanding 74,776 76,249 75,173 76,160
====== ====== ====== ======
Net income per common share $0.32 $0.31 $1.07 $1.04
===== ===== ===== =====
Cash dividends per share $0.05 $0.04 $0.13 $0.10
===== ===== ===== =====
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS
Sept 24, Dec. 31, Sept 25,
1995 1994* 1994
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 25,514 $ 59,285 $ 63,293
Accounts receivable, net 191,714 143,396 156,754
Inventories (Note 2) 180,329 173,420 159,473
Deferred income taxes 20,111 20,111 20,296
Prepaid expenses 11,168 9,424 8,261
-------- ------- -------
Total current assets 428,836 405,636 408,077
Property, plant and equipment, net 303,286 262,787 228,339
Deferred income taxes 22,924 22,924 16,276
Other assets 58,777 47,868 43,393
------- ------- -------
$813,823 $739,215 $696,085
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 21,794 $ 17,890 $ 15,103
Current maturities of
long-term debt 314 413 433
Accounts payable 85,903 63,988 64,083
Accrued expenses and other 135,130 133,987 133,015
------- ------- -------
Total current liabilities 243,141 216,278 212,634
Postretirement health care benefits 62,768 60,283 58,985
Other long-term liabilities 41,638 29,422 22,230
Contingencies (Note 4)
Stockholders' equity:
Common stock 778 772 771
Additional paid-in capital 153,131 150,728 141,565
Retained earnings 353,928 283,010 260,997
Cumulative foreign currency
translation adjustment 1,781 1,174 1,500
-------- ------- -------
509,618 435,684 404,833
Less:
Treasury stock, at cost (41,899) (1,581) (1,581)
Unearned compensation (1,443) (871) (1,016)
------- ------- --------
Total stockholders' equity 466,276 433,232 402,236
------- ------- -------
$813,823 $739,215 $696,085
======== ======== ========
* Condensed from audited financial statements.
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended
Sept 24, Sept 25,
1995 1994
Cash flows from operating activities:
Net income $80,702 $79,207
Depreciation and amortization 31,862 26,846
Long-term employee benefits 3,944 5,661
Loss on disposal of long-term assets 233 21
Equity in net loss of joint ventures 414 141
Deferred income taxes - (4,600)
Change in current assets and
current liabilities:
Accounts receivable (48,318) (70,723)
Inventories (6,909) (19,322)
Prepaid expenses (1,744) 1,310
Accounts payable and
accrued liabilities 23,058 27,705
------- ------
Net cash provided by operating activities 83,242 46,246
Cash flows from investing activities:
Purchase of property and equipment (73,443) (49,090)
Other - net 617 (3,076)
------ ------
Net cash used in investing activities (72,826) (52,166)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 441 -
Reduction of long-term debt (838) (328)
Net increase (decrease) in notes payable 3,904 (5,477)
Dividends paid (9,784) (7,620)
Stock repurchases (40,318) -
Issuance of stock under employee
stock and option plans 2,408 4,929
----- ------
Net cash used in financing activities (44,187) (8,496)
------- ------
Net decrease in cash and cash equivalents (33,771) (14,416)
Cash and cash equivalents:
At beginning of period 59,285 77,709
------- ------
At end of period $25,514 $63,293
======= =======
<PAGE>
HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The condensed interim consolidated financial statements included herein
have been prepared by Harley-Davidson, Inc. (the "Company") without audit.
Certain information and footnote disclosures normally included in complete
financial statements have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission and generally
accepted accounting principles for interim financial information. 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 September 24, 1995 and September 25, 1994, and the results
of operations for the three- and nine-month periods then ended. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
Note 2 - Inventories
The Company values its inventories at the lower of cost, principally using
the last-in, first-out (LIFO) method, or market. Inventories consist of
the following (in thousands):
Sept 24, Dec. 31, Sept 25,
1995 1994 1994
Components at the lower of cost,
first-in, first-out (FIFO),
or market:
Raw material & work-in-process $ 73,984 $ 70,685 $ 60,910
Finished goods 69,423 69,745 68,607
Parts & accessories 60,305 52,554 49,069
------- ------- -------
203,712 192,984 178,586
Excess of FIFO over LIFO 23,383 19,564 19,113
------- ------- -------
Inventories as reflected in the
accompanying condensed consolidated
balance sheets $180,329 $173,420 $159,473
======== ======== ========
Note 3 - Capital Stock
On August 17, 1994, The Company's Board of Directors declared a two-for-
one stock split effected in the form of a 100 percent stock dividend to
shareholders of record on August 29, 1994, payable on September 12, 1994.
Outstanding stock options and shares available under option plans have
been adjusted to reflect the split. An amount equal to the par value of
the shares issued has been transferred from additional paid-in capital to
the common stock account. All references to number of shares, except
shares authorized, have been adjusted to reflect the stock split on a
retroactive basis.
The Company announced on March 9, 1995 that it intended to repurchase up
to 4 million shares of its outstanding common stock pursuant to authority
previously granted by its Board of Directors. During the first quarter,
the Company repurchased 1,650,000 shares of its common stock for
approximately $40 million. Related to this purchase, the Company borrowed
$20 million under a note which was repaid in full in June, 1995.
Note 4 - 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 in undertaking certain investigation
and remediation activities. In March 1995, the Company entered into a
settlement agreement (the Agreement) with the Navy. The Agreement calls
for the Navy and the Company to contribute amounts into a trust equal to
53% and 47%, respectively, of future costs associated with investigation
and remediation activities at the Facility (response costs). The trust
will administer the payment of the future response costs at the Facility
as covered by the Agreement. 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 response 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 settlement
agreement with the Navy and the settlement agreement with Minstar, the
Company estimates that it will incur approximately $6 million of net
additional response 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.
The Company and Lorillard Tobacco Company settled their trademark license
dispute by agreeing to discontinue the use of Harley-Davidson trademarks
on cigarettes by September 2001. The lawsuit brought by Lorillard in
which the Company had filed counterclaims was also dismissed. The
settlement does not involve the payment of compensatory amounts.
The Company (including its wholly-owned subsidiaries Harley-Davidson Motor
Company and H-D Michigan, Inc.), filed a lawsuit in May, 1995 against
Motorcycle Equities, Inc. ("MEI") in the United States District court for
the Eastern District of Wisconsin. The Company seeks a determination of
the parties' respective rights and obligations under a license agreement
with MEI for the Harley-Davidson Cafe in New York City. MEI has asserted
numerous counterclaims in the action and seeks damages of $500 million,
contending, among other things, that the Company breached the license
agreement and acted in bad faith by exercising its contractual right to
decide against expansion of the restaurant business in the continental
United States. The Company will vigorously contest MEI's counterclaims
and continue to seek a judgment declaring the parties rights and
obligations from the Court. As this litigation is in a very preliminary
stage, the Company cannot predict the outcome of this matter with a
reasonable degree of certainty.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Three Months Ended September 24, 1995
Compared to the Three Months Ended September 25, 1994
Motorcycle Units and Consolidated Net Sales
For the Three-Month Periods Ended
September 24, 1995 and September 25, 1994
Incr %
1995 1994 (Decr) Change
Motorcycle units
(excluding Buell) 25,012 22,503 2,509 11.1%
Net sales (in millions):
Motorcycles $247.3 $209.8 $37.5 17.9%
Motorcycle Parts and
Accessories 75.9 78.3 (2.4) (3.2)
Other 3.9 3.8 .1 2.6
Total Motorcycles
and Related Products 327.1 291.9 35.2 12.0
Recreational Vehicles 65.3 68.0 (2.6) (3.9)
Commercial Vehicles 33.2 20.8 12.4 59.8
Other 1.4 3.3 (2.0) (59.3)
Total Transportation
Vehicles 99.9 92.1 7.8 8.5
Harley-Davidson, Inc.
Consolidated Net Sales $427.0 $384.0 $43.0 11.2%
The Company reported consolidated net sales of $427.0 million during the
third quarter of 1995, a $43.0 million (11.2%) increase over the third
quarter of 1994. Both the Motorcycles and Related Products segment (the
"Motorcycles segment") and the Transportation Vehicles segment contributed
to the increase.
Net sales increases in the Motorcycles segment were driven primarily by
motorcycle production and shipment increases. Motorcycle unit shipments
increased 11.1% compared to the same quarter in 1994 due to an average
production rate for the quarter of 430 units per day (compared to
approximately 380 units in 1994).
The manufacturing capacity improvements at the two major facilities
continue to be ahead of schedule. Accordingly, the Company announced that
it plans to increase daily motorcycle production to an average of 455
units per day for the remainder of the year and attain 1995 and 1996
shipments of at least 104,000 and 115,000 units, respectively.
Parts and Accessories sales totaled $75.9 million during the third quarter
of 1995, a $2.4 million (3.2%) decrease from the same period last year.
MotorClothes (and collectibles) sales were down $5.6 million or 18.7%.
While orders for Genuine Motor Accessories (mechanical accessories) during
the third quarter of 1995 were in line with expectations, revenue growth
was below expectations. Genuine Motor Parts (service parts) revenues
during the third quarter of 1995 were in line with expectations.
MotorClothes has historically been the fastest growing part of the Parts
and Accessories business. Management believes that the decrease in
MotorClothes sales and a corresponding drop in MotorClothes orders taken
at the July 1995 dealer show are largely attributable to declines in
retail floor traffic in U.S. Harley-Davidson dealerships and customer
buying habits that have led to the general slowdown in the U.S. retail
apparel industry. Floor traffic has been negatively affected by the lack
of new motorcycle inventory in the dealerships. Without new motorcycles
on display, many potential customers are not being drawn into the
dealerships. The maturation of the Company's designer store program is
also having an impact on MotorClothes sales growth. The opening of new
designer stores typically results in increased floor traffic and a
substantial increase in MotorClothes orders. 414 domestic dealers out of
594 have already completed at least one designer store remodeling. The
Company does not anticipate that the rate of new designer store openings
will significantly increase for the foreseeable future.
Sales of Genuine Motor Accessories (and to a lesser extent sales of
MotorClothes) were constrained by shipping delays. Although the orders
taken at the July 1995 dealer show met our expectations, some of the most
popular products were not originally scheduled to be available for
shipping until between 30 and 180 days after the show. In addition, in
some cases the Company and its suppliers have been unable to meet the
original schedule. Since many dealers were waiting for delivery of their
July dealer show orders, reorder activity in the third quarter of 1995 was
reduced. In the third quarter of 1994, substantially all of the products
for which orders were taken at the July dealer show were immediately
available for shipping.
The Company initiated several promotional programs and product incentives
in the third quarter of 1995 that will run through the fourth quarter to
encourage dealers to build floor traffic. Management is developing an
improved system to better monitor dealer inventories and retail traffic so
that the Company can be more responsive to changes in retail demand and
dealer needs.
The Transportation Vehicles segment recorded 1995 third quarter net sales
of $99.9 million, a $7.8 million (8.5%) increase over the same period
during 1994. The Recreational Vehicles division's sales decreased $2.6
million (3.9%) primarily due to a shift in mix from the high end "Class A"
motorhomes to the low end towables units.
The Commercial Vehicles division recorded quarterly sales of $33.2
million during the third quarter of 1995, a $12.4 million (59.8%) increase
over the third quarter of 1994. The increase is largely a result of the
continuing work on the major contract with Federal Express Corporation.
Although the Commercial Vehicles division had an excellent third quarter,
the division is feeling the negative impact of the nearly five-week-long
Teamsters strike against Ryder Automotive Carrier Group Inc., the trucking
company that delivers truck chassis used to make walk-in vans, such as
those built for Federal Express. The strike ended early in the fourth
quarter and will have an effect on the Commercial Vehicles division's
fourth quarter results since the division lost three weeks of production
on its major product lines.
Consolidated Gross Profit
For the Three-Month Periods Ended
September 24, 1995 and September 25, 1994
(Dollars in Millions)
Percent Percent
Incr of sale of sales
1995 1994 (Decr) 1995 1994
Motorcycles and
Related Products $ 96.8 $ 90.3 $6.5 29.6% 30.9%
Transportation
Vehicles 14.0 16.2 (2.2) 14.0 17.6
Consolidated Harley-
Davidson, Inc. $110.8 $106.5 $4.3 25.9% 27.7%
Consolidated gross profit increased $4.3 million (4.0%) compared to the
third quarter of 1994. The Motorcycles segment gross profit increased
primarily due to volume increases in motorcycle unit shipments. Compared
to the third quarter of 1994, the segment's gross profit percentage was
negatively impacted by an additional $3 million in new model year start-up
costs, approximately $3 million in lost margin from lower than anticipated
Parts and Accessories sales and additional costs from the continuation of
the manufacturing expansion strategy.
The Transportation Vehicles segment's gross profit decreased $2.2 million
(13.5%) and its gross profit percentage decreased to 14.0% during the
third quarter of 1995 from 17.6% in the same quarter in 1994. Both the
Recreational Vehicles division and the Commercial Vehicles division were
responsible for the decrease in the gross profit percentage. The
Commercial Vehicles division's gross margin decreased primarily due to
operating inefficiencies incurred in adding production capacity. The
Recreational Vehicles division incurred a shift in mix to lower margin
towables units from "Class A" motorhomes which had a negative impact on
gross margins. In addition, the previously announced travel trailer
recall resulted in a charge of approximately $1 million in the third
quarter.
Consolidated Operating Expenses
For the Three-Month Periods Ended September 24, 1995
and September 25, 1994
(Dollars in Millions)
Incr %
1995 1994 (Decr) Change
Motorcycles and
Related Products $58.9 $52.5 $6.4 12.3%
Transportation
Vehicles 13.5 14.1 (.6) (4.1)
Corporate 2.1 2.1 - -
Consolidated Harley-
Davidson, Inc. $74.5 $68.7 $5.8 8.4%
Consolidated operating expenses increased $5.8 million, or 8.4%, compared
to the third quarter of 1994. Increases in the Motorcycles segment were
primarily volume related. Other areas of increased spending included
engineering, information services, international operations and product
warranty.
The Transportation Vehicles segment operating expenses decreased slightly
during the third quarter of 1995 compared to the third quarter of 1994.
Promotional programs covering the high end "Class A" motorhomes will be in
place for the fourth quarter and are expected to result in higher
promotional expenses for the fourth quarter of 1995 compared to the same
quarter last year.
Results of Operations for the Nine Months Ended September 24, 1995
Compared to the Nine Months Ended September 25, 1994
Motorcycle Units and Consolidated Net Sales
For the Nine-Month Periods Ended
September 24, 1995 and September 25, 1994
Incr %
1995 1994 (Decr) Change
Motorcycle units
(excluding Buell) 76,830 70,565 6,265 8.9%
Net sales (in millions):
Motorcycles $747.0 $648.2 $98.8 15.2%
Motorcycle Parts and
Accessories 216.5 192.3 24.2 12.6
Other 14.1 6.9 7.2 104.3
Total Motorcycles
and Related Products 977.6 847.4 130.2 15.4
Recreational
Vehicles 218.1 202.2 15.9 7.9
Commercial Vehicles 101.1 69.9 31.2 44.6
Other 6.4 9.6 (3.2) (33.3)
Total Transportation
Vehicles 325.6 281.7 43.9 15.6
Harley-Davidson, Inc.
Consolidated Net Sales $1,303.2 $1,129.1 $174.1 15.4%
The Company reported record net sales for the first nine months of $1.3
billion, an increase of $174.1 million (15.4%) compared to the first nine
months of 1994. Net sales increases were generated by both the Motorcycles
segment and the Transportation Vehicles segment.
Worldwide demand within the Motorcycles segment continues to outweigh
supply in virtually all markets in which the Company competes. The most
recent information available (through July) indicates a U.S. heavyweight
(751cc+) market share of 52.6% compared to 54.2% for the same period in
1994. The decrease in market share is attributable to the Company's
capacity constraints in a growing market. The U.S. heavyweight market is
up 12% through July and is continuing to grow faster than the Company's
production capacity.
Sales of Buell motorcycles (which have been distributed to select Harley-
Davidson dealers through the Company's wholly-owned subsidiary, Buell
Distribution Corporation, beginning in the third quarter of 1994)
contributed approximately $8 million of additional revenues in the first
nine months of 1995 as compared to the same period in 1994. (Included in
the "Other" category).
Overall, net sales of the Parts and Accessories business increased 12.6%
compared to the first nine months of 1994. The rate of increase is lower
than experienced last year due to the same factors that affected the third
quarter results described above. Management believes that the Parts and
Accessories business, in the aggregate, should grow at a rate similar to
the annual growth in motorcycle unit shipments for the foreseeable future.
The Transportation Vehicles segment recorded net sales of $325.6 million
during the first nine months of 1995, an increase of $43.9 million (15.6%)
compared to the first nine months of 1994. The Recreational Vehicles
division's net sales increased primarily due to volume increases in the
first and second quarters. The Recreational Vehicles division's retail
sales are outperforming the recreational vehicle industry in a difficult
year. Industry-wide, Class A motorhome registrations are down 5.8% and
towable registrations are down .8% through July. During the same period,
Holiday Rambler's Class A unit retail sales are up 6.0% and market share
is 6.2% versus 5.5% in 1994. Holiday Rambler's towable retail unit sales
are up 15.4% and market share is 2.5% versus 2.1% in 1994.
The Commercial Vehicles division recorded a $31.2 million (44.6%) increase
in net sales during the first nine months of 1995 compared to the same
period in 1994. The division benefited from a shift in mix to its higher
priced walk-in units as a result of several large fleet contracts
(including Federal Express Corporation).
Consolidated Gross Profit
For the Nine-Month Periods Ended September 24, 1995
and September 25, 1994
(Dollars in Millions)
Percent Percent
Incr of sales of sales
1995 1994 (Decr) 1995 1994
Motorcycles and
Related Products $296.9 $260.7 $36.2 30.4% 30.8%
Transportation
Vehicles 47.6 49.4 (1.8) 14.6 17.6
Consolidated
Harley-Davidson,
Inc. $344.5 $310.1 $34.4 26.4% 27.5%
Consolidated gross profit for the first nine months of 1995 totaled $344.5
million, an increase of $34.4 million (11.1%) over the same period in
1994.
The Motorcycles segment reported a $36.2 million (13.9%) increase for the
period. The segment's gross profit percentage remained essentially
unchanged at 30.4% for the period compared to the first nine months of
1994. Gross profit benefited primarily from the increase in volume. This
benefit was offset by additional costs related to continued machinery
rearrangement in the Company's three motorcycle manufacturing facilities
in support of the production capacity and product quality increases, as
well as a shift in mix toward touring models.
The Transportation Vehicles segment recorded gross profit of $47.6 million
during the first nine months of 1995 which was down slightly compared to
the first nine months of 1994. The segment's gross profit margin was 14.6%
for the nine-month period ended September 24, 1995 as compared with 17.6%
for the same period last year. The Recreational Vehicles division's
margin decreased primarily due to operating inefficiencies caused by
previously announced production cutbacks in the first and second quarters
of 1995. The Commercial Vehicles division's margin decreased due to
production inefficiencies in preparation of the heavy production schedule
due to the large contracts as well as lost production caused by the
Teamsters strike. The inefficiencies (such as a new leased facility, new
employees, training, etc.) offset the benefits from an increase in volume
and a favorable shift in mix toward higher-margin walk-in units in the
Commercial Vehicles division.
Consolidated Operating Expenses
For the Nine-Month Periods Ended September 24, 1995
and September 25, 1994
(Dollars in Millions)
Incr %
1995 1994 (Decr) Change
Motorcycles and Related $164.3 $140.8 $23.5 16.7%
Products
Transportation Vehicles 45.7 42.4 3.3 7.8
Corporate 5.4 7.4 (2.0) (27.1)
Consolidated Harley- $215.4 $190.6 $24.8 13.0%
Davidson, Inc.
Consolidated Operating expenses of $215.4 million for the first nine
months of 1995 increased $24.8 million (13.0%) compared to the first nine
months of 1994. The Motorcycles segment generated the majority of the
increase due to increases in volume, product warranty, information
services, marketing and international operations. The Transportation
Vehicles segment increase was generally the result of product development,
quality, advertising and promotional program expenses.
Consolidated income taxes
The Company's effective income tax rate approximated 37.0% in 1995
compared to 38.5%, excluding a one-time benefit of $4.6 million related to
the legal reorganization and recapitalization of the Transportation
Vehicles segment, during 1994. The reorganization and recapitalization
resulted in lower income taxes.
Environmental
The Company's policy is to comply with all applicable environmental laws
and regulations and has a compliance program in place to monitor, and
report on, environmental issues. The Company has reached settlement
agreements with its former parent (Minstar) and the U.S. Navy regarding
the remediation of the Company's manufacturing facility in York, PA and
currently estimates that it will incur approximately $6 million of net
additional costs related to the remediation of the York facility. The
Company has established reserves for this amount. See Note 4 of the notes
to 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 for equipment used to limit
hazardous substances/ pollutants during 1995 will approximate $1 million.
The Company does not expect that expenditures related to environmental
matters will have a material effect on future operating results or cash
flows.
Liquidity and Capital Resources as of September 24, 1995
The Company generated $83.2 million of cash from operating activities
during the first nine months of 1995. Working capital items, primarily
accounts receivable, had a negative impact on cash flows. Consolidated
accounts receivable at September 24, 1995 increased approximately 34% over
the balance at December 31, 1994. The increase is the result of an
approximate increase of 15% in consolidated revenues and approximately $10
million of additional foreign receivables which generally have longer
terms. Additionally, the Motorcycles segment, which was responsible for a
majority of the increase, had a 35% increase in September shipments
compared to December 31, 1994. This is significant because domestic
motorcycle shipments generally have thirty-day terms.
Capital expenditures amounted to $73.4 million and $49.1 million during
the first nine months of 1995 and 1994, respectively. The Company
anticipates 1995 capital expenditures will approximate $110 million. The
Company anticipates funding these expenditures with internally generated
funds.
The Company announced on March 9, 1995 that it intended to repurchase up
to 4 million shares of its outstanding common stock pursuant to authority
previously granted by its Board of Directors. During the first quarter,
the Company repurchased 1,650,000 shares of its common stock with cash on
hand and short-term borrowings. The note was repaid in full in June,
1995. No purchases were made in the second or third quarters.
The Company currently has nominal levels of long-term debt and has
existing lines of credit of approximately $48 million, of which
approximately $26 million remained available at September 24, 1995.
The Company's Board of Directors declared three cash dividends during the
first nine months of 1995 including, most recently, a $.05 cash dividend
declared on August 23, 1995 payable September 11, 1995 to shareholders of
record September 1 ( a 25% increase over the prior dividend).
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
September 24, 1995
Item 1. Legal Proceedings
The Company and Lorillard Tobacco Company settled their trademark license
dispute by agreeing to discontinue the use of Harley-Davidson trademarks
on cigarettes by September 2001. The lawsuit brought by Lorillard in
which the Company had filed counterclaims was also dismissed. The
settlement does not involve the payment of compensatory amounts.
The Company (including its wholly-owned subsidiaries Harley-Davidson Motor
Company and H-D Michigan, Inc.), filed a lawsuit in May, 1995 against
Motorcycle Equities, Inc. ("MEI") seeking a determination of the parties'
respective rights and obligations under a license agreement for the
Harley-Davidson Cafe in New York City.
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 4 to the accompanying condensed consolidated financial
statements for additional information on the above proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 Amendment to Rights Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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: 10/27/95 /s/ James L. Ziemer
James L. Ziemer
Vice President and Chief Financial
Officer (Principal Financial Officer)
10/27/95 /s/ James M. Brostowitz
James M. Brostowitz
Vice President, Controller (Principal
Accounting Officer) and Treasurer
<PAGE>
Exhibit Index
Exhibit No. Description Page
4 Amendment to Rights Agreement 19
27 Financial Data Schedule 21
Exhibit 4
AMENDMENT TO RIGHTS AGREEMENT
This amendment ("Amendment"), dated as of August 23, 1995,
between Harley-Davidson, Inc., a Wisconsin corporation (the "Company"),
and Firstar Trust Company (formerly known as First Wisconsin Trust
Company), as Rights Agent (the "Rights Agent"), to the Right Agreement,
dated as of August 6, 1990, as amended, between the Company and the Rights
Agent.
W I T N E S S E T H :
WHEREAS, the Company and the Rights Agent are parties to the
Rights Agreement, and pursuant to Section 26 of the Rights Agreement, the
Company may from time to time supplement or amend the Rights Agreement in
accordance with the provisions of Section 26 thereof;
WHEREAS, the Company wishes to amend the Rights Agreement to
change the Purchase Price (as defined in the Rights Agreement); and
WHEREAS, all acts and things necessary to make this amendment a
valid agreement, enforceable according to its terms, have been done and
performed, and the execution and delivery of this Amendment by the Company
and the Rights Agent have been in all respects duly authorized by the
Company and the Rights Agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined are
used as defined in the Rights Agreement.
2. The first sentence of Section 7(b) of the Rights Agreement
is hereby amended effective as of the date hereof to read in its entirety
as follows: "The Purchase Price shall initially be $300 for each one one-
hundredth (1/100) of a share of Preferred Stock issued pursuant to the
exercise of a Right."
3. The terms "Rights Agreement" and "Agreement" as used in the
Rights Agreement shall be deemed to refer to the Rights Agreement as
amended hereby.
4. This Amendment shall be deemed to be a contract made under
the laws of the State of Wisconsin and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
5. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but such counterparts
shall together constitute one and the same instrument.
6. In all respects not inconsistent with the terms and
provisions of this Amendment, the Rights Agreement is hereby ratified,
adopted, approved and confirmed. In executing and delivering this
Amendment, the Rights Agent shall be entitled to all of the rights
afforded to the Rights Agent under the terms and conditions of the Rights
Agreement.
7. If any term, provision, covenant or restriction of this
Amendment is held by a court of competent jurisdiction or other authority
to be invalid, illegal or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment, and of the
Rights Agreement, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
Attest: HARLEY-DAVIDSON, INC.
By:_____________________________ By:_______________________________
Michael B. Weiss Richard F. Teerlink
Assistant Secretary President and Chief Executive
Officer
Attest: FIRSTAR TRUST COMPANY
(f/k/a First Wisconsin Trust
Company)
By:_____________________________ By:_________________________________
Name: Name:
Title: Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF HARLEY-DAVIDSON, INC. AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 24, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-24-1995
<CASH> 25,514
<SECURITIES> 0
<RECEIVABLES> 194,000
<ALLOWANCES> 2,286
<INVENTORY> 180,329
<CURRENT-ASSETS> 428,836
<PP&E> 572,884
<DEPRECIATION> 269,598
<TOTAL-ASSETS> 813,823
<CURRENT-LIABILITIES> 243,141
<BONDS> 0
<COMMON> 778
0
0
<OTHER-SE> 465,498
<TOTAL-LIABILITY-AND-EQUITY> 813,823
<SALES> 1,303,242
<TOTAL-REVENUES> 1,303,242
<CGS> 958,758
<TOTAL-COSTS> 958,758
<OTHER-EXPENSES> 215,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,213
<INCOME-PRETAX> 128,202
<INCOME-TAX> 47,500
<INCOME-CONTINUING> 80,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,702
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
