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 29, 1996
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 November 1, 1996 75,624,357 Shares
<PAGE>
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended September 29, 1996
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 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three months ended
Nine months ended
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $385,843 $327,096 $1,149,698 $977,613
Cost of goods sold 265,375 230,317 788,592 680,702
-------- ------- --------- -------
Gross profit 120,468 96,779 361,106 296,911
Operating income from financial
services 1,277 771 4,999 2,423
Selling, administrative and
engineering expenses (71,290) (60,568) (198,516) (169,692)
------- ------- --------- --------
Income from operations 50,455 36,982 167,589 129,642
Interest income - net 1,251 858 1,681 916
Other income (expense) - net 980 19 (801) (2,812)
------- -------- --------- --------
Income from continuing operations
before provision for income taxes 52,686 37,859 168,469 127,746
Provision for income taxes 19,482 14,416 62,323 47,295
------- -------- --------- --------
Income from continuing operations 33,204 23,443 106,146 80,451
Gain from discontinued operations,
net of tax - 247 - 251
------- -------- --------- --------
Net income $ 33,204 $ 23,690 $ 106,146 $ 80,702
======= ======== ========= ========
Weighted average common shares
outstanding 75,555 74,776 75,381 75,173
======= ======== ========= ========
Net income per common share:
Income from continuing operations $0.44 $0.32 $1.41 $1.07
Gain from discontinued operations,
net of tax - - - -
------- -------- -------- --------
Net income $0.44 $0.32 $1.41 $1.07
======= ======== ========= ========
Cash dividends per share $0.06 $0.05 $0.16 $0.13
======= ======== ========= ========
</TABLE>
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS
Sept. 29, Dec. 31, Sept. 24,
1996 1995 1995
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 114,046 $ 31,462 $ 47,796
Accounts receivable, net 176,622 134,210 164,826
Inventories (Note 2) 91,480 84,427 98,973
Other current assets 32,230 30,591 25,350
Net assets from discontinued
operations 11,830 56,548 43,424
--------- --------- --------
Total current assets 426,208 337,238 380,369
Finance receivables, net 312,329 213,444 -
Property, plant and equipment,
net 330,567 284,775 251,578
Goodwill 41,454 43,256 -
Other assets 85,573 66,949 74,805
Net assets from discontinued
operations 25,400 55,008 57,746
--------- --------- ---------
$1,221,531 $1,000,670 $764,498
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 837 $ 2,327 $ 3,762
Current maturities of
long-term debt 109 364 269
Accounts payable 107,455 102,563 87,313
Accrued expenses and other 150,286 127,956 103,330
--------- --------- --------
Total current liabilities 258,687 233,210 194,674
Finance debt 243,648 164,330 -
Postretirement health care
benefits 64,957 63,570 62,768
Other long-term liabilities 50,637 44,991 40,780
Contingencies (Note 5)
Total shareholders' equity 603,602 494,569 466,276
--------- --------- --------
$1,221,531 $1,000,670 $764,498
========= ========= ========
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended
Sept. 29, Sept. 24,
1996 1995
Cash flows from operating activities:
Net income $ 106,146 $80,702
Depreciation and amortization 39,464 28,935
Long-term employee benefits 2,984 3,944
Other-net 5,155 647
Net change in discontinued operations 16,321 15,972
Net change in other current assets and
current liabilities (31,196) (40,713)
-------- --------
Net cash provided by operating activities 138,874 89,487
Cash flows from investing activities:
Purchase of property and equipment (84,398) (66,234)
Finance receivables acquired or
originated (816,578) -
Finance receivables collected/sold 723,788 -
Proceeds from disposition of
discontinued segment 35,350 -
Net change in discontinued operations (1,779) (7,377)
Other - net (15,615) 989
-------- --------
Net cash used in investing activities (159,232) (72,622)
Cash flows from financing activities:
Reduction of long-term debt (255) (912)
Net increase (decrease) in notes payable (1,490) 2,676
Net increase in finance debt 79,318 -
Dividends paid (12,472) (9,784)
Stock repurchases - (39,972)
Issuance of stock under employee
stock and option plans 16,407 2,062
Net change in discontinued operations 21,434 1,121
--------- ---------
Net cash provided by (used in) financing
activities 102,942 (44,809)
--------- ---------
Net increase (decrease) in cash and
cash equivalents 82,584 (27,944)
Cash and cash equivalents:
At beginning of period 31,462 75,740
--------- -------
At end of period $ 114,046 $47,796
========= =======
<PAGE>
HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation and Use of Estimates
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 29, 1996 and September 24, 1995, 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, 1995.
The operations of Holiday Rambler are classified as discontinued
operations. As such, certain prior-year balances have been reclassified
in order to conform to current-year presentation.
On November 14, 1995, the Company acquired substantially all of the common
stock and common stock equivalents of Eaglemark Financial Services, Inc.
(Eaglemark) that it did not already own. The Company has included the
results of operations of Eaglemark in its statement of income for the nine
months ended September 24, 1995 as though it had been acquired at the
beginning of the year and deducted the preacquisition earnings as part of
non-operating expense. Prior to December 31, 1995, the Company accounted
for its investment in Eaglemark using the equity method. The carrying
value of its investment in Eaglemark was approximately $9.8 million and is
included in other assets at September 24, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
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. 29, Dec. 31, Sept. 24,
1996 1995 1995
Components at the lower of cost,
first-in, first-out (FIFO), or
market:
Raw material & work-in-process $ 29,887 $ 32,284 $ 33,238
Finished goods 27,874 19,290 29,126
Parts & accessories 55,298 52,182 56,248
------- ------- -------
113,059 103,756 118,612
Excess of FIFO over LIFO 21,579 19,329 19,639
------- ------- -------
Inventories as reflected in
the accompanying condensed
consolidated balance sheets $ 91,480 $ 84,427 $ 98,973
======= ======= =======
Note 3 - Capital Stock
The Company has continuing authorization from its Board of Directors to
repurchase up to 4 million shares of the Company's outstanding common
stock. During the first quarter of 1995, the Company repurchased
1,650,000 shares of its common stock with cash on hand and short-term
borrowings. As a result, the Company has 2,350,000 million shares
available to repurchase under this authorization.
Note 4 - Supplemental noncash investing activities
On March 6, 1996, the Company sold substantially all of the assets of its
Holiday Rambler Recreational Vehicles Division to Monaco Coach Corporation
("Monaco"). Total consideration consisted of approximately $23 million in
cash, $3 million in preferred stock of Monaco, a $12 million note from a
Monaco subsidiary guaranteed by Monaco and assumption by Monaco of certain
liabilities of the acquired operations in the approximate amount of $47
million. The note was paid in full during the third quarter of 1996.
Note 5 - 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 $5 million of net
additional response costs at the Facility. The Company has established
reserves for this amount. The Company's estimate of additional response
costs is based on reports of environmental consultants retained by the
Company, the actual costs incurred to date and the estimated costs to
complete the necessary investigation and remediation activities. Response
costs are expected to be incurred over a period of approximately 10 years.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This section, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. In
addition to those statements specifically identified as forward looking
statements, statements that state the Company "expects," "plans,"
"anticipates," or "estimates" are forward looking statements. Actual
results might differ materially from those projected in such forward
looking statements. Actual results might be adversely affected by, among
other things, the factors identified on page 14 of this quarterly report.
Results of Operations for the Three Months Ended September 29, 1996
Compared to the Three Months Ended September 24, 1995
For the quarter ended September 29, 1996, consolidated net sales totaled
$385.8 million, a $58.7 million or 18.0% increase over the same period
last year. Net income and earnings per share for 1996 were $33.2 million
and $.44 on 75.6 million shares outstanding versus $23.7 million and $.32
on 74.8 million shares outstanding in 1995, increases of 40.1% and 37.5%,
respectively. All 1995 financial data have been restated to reflect the
classification of the Company's Transportation Vehicles segment to that of
a discontinued operation, as announced on January 22, 1996. Certain 1995
balances have also been reclassified to reflect the acquisition of
substantially all of the stock of Eaglemark Financial Services not
previously owned by the Company. All Harley-Davidson, Inc. sales are
generated by the Motorcycles and Related Products ("Motorcycles") segment.
Motorcycle Unit Shipments and Net Sales
For the Three-Month Periods Ended September 29, 1996
and September 24, 1995
Incr
1996 1995 (Decr) %
Motorcycle units
(excluding Buell) 28,013 25,012 3,001 12.0%
Net sales (in millions):
Motorcycles (excluding
Buell) $285.9 $247.3 $38.6 15.6%
Motorcycle Parts and
Accessories 90.5 75.9 14.6 19.3
Other 9.4 3.9 5.5 141.0
Total Motorcycles
and Related Products $385.8 $327.1 $58.7 18.0%
The Motorcycles segment reported record third quarter net sales driven by
a 12.0% increase in motorcycle unit shipments and a 19.3% increase in
Parts and Accessories. The increase in motorcycle unit shipments over the
third quarter of 1995 was due to higher average daily production rates.
During the third quarter of 1996, motorcycle production averaged 490 units
per day versus 430 units per day in the same period last year. The
Company announced that it expects daily motorcycle production to average
approximately 510 units per day in the fourth quarter.
Third quarter 1996 revenue from the Company's foreign subsidiaries was
negatively impacted by the strengthening of the U.S. dollar, resulting in
revenue decreases totaling approximately $4 million from the year-ago
quarter. The potential negative effect on earnings was largely offset by
the favorable impact of foreign exchange rates on foreign subsidiary
operating expenses and foreign currency hedging programs.
Sales of Buell motorcycles (which are distributed in the U.S. and Japan
through select Harley-Davidson dealers) increased to $7.4 million (846
units) in 1996 as compared to $2.5 million (222 units) in 1995. (Included
in "Other" in the above table.) Buell motorcycles were introduced in the
Japan market during the second quarter of 1996. Introduction into the
European market is planned during the first quarter of 1997.
The Company experienced a build-up of inventory (approximately 900 units)
at its wholly owned French and German distributors primarily due to
pricing disparities. In September, the Company adjusted prices in each
European market to move toward more consistent country-to-country pricing
and anticipates it will spend approximately $1.5 million on market
specific promotions in the fourth quarter of 1996. The Company has
adjusted the U.S. allocation of 1997 model year motorcycles to 72% of
total production, up from 70% in previous years, to take advantage of the
European inventory build-up to shorten the wait that many of its U.S.
customers have to endure.
Parts and Accessories revenue of $90.5 million increased $14.6 million or
19.3% compared to the third quarter of 1995. The combined sales of
Genuine Motor Parts and Genuine Motor Accessories totaled $61.9 million, a
$10.5 million or 20.4% increase compared to last year. MotorClothes
clothing and collectibles sales totaled $28.6 million, a $4.2 million or
17.1% increase. These increases are a result of well executed product
introductions, improved product delivery and shipping seasonal
MotorClothes products earlier than in previous years. The new product
offerings and price points introduced in the third quarter were well
received. The third quarter of 1995 was hindered by a decline in demand
for MotorClothes clothing and collectibles and backorder delays on Genuine
Motor Parts and Genuine Motor Accessories.
A comparison of Parts and Accessories sales for the fourth quarter of 1996
to the same period in 1995 will be unfavorable since the 1995 fourth
quarter was favorably impacted by the reduction of the unusually high
backlog carried over from the third quarter of 1995 and by four fewer
shipping days in the fourth quarter of 1996. However, the Company
anticipates that long-term Parts and Accessories revenue growth will
approximate the growth rate in motorcycle unit shipments.
Gross Profit
Gross profit increased $23.7 million, or 24.5%, compared to the third
quarter of 1995 primarily due to an increase in motorcycle volume. The
gross profit margin was 31.2% in 1996 as compared with 29.6% in 1995. The
increase in the gross profit percentage was due primarily to a shift in
mix from the entry level Sportster models to the higher-margin custom
models. In addition, the annual model year change-over was the smoothest
in recent memory and overtime was considerably lower than in the third
quarter of 1995.
Operating Expenses
For the Three-Month Periods Ended September 29, 1996
and September 24, 1995
(Dollars in Millions)
Incr
1996 1995 (Decr) %
Motorcycles and
Related Products $69.6 $58.4 $ 11.2 19.3%
Corporate 1.7 2.2 (0.5) (24.2)
Total operating
expenses $71.3 $60.6 $10.7 17.7%
Operating expenses increased $10.7 million, or 17.7%, compared to the
third quarter of 1995. An early retirement program in connection with the
new Parts and Accessories Distribution Center resulted in a charge of
$2.5 million in the third quarter of 1996. A product recall on fuel
valves resulted in a $1.1 million charge in 1996 for estimated repair
costs. The remaining increase was related to increased motorcycle volumes
and increases in engineering and information services expenses when
compared to the same period last year.
Operating income from financial services
The operating income of the Financial Services (Eaglemark Financial
Services) segment was $1.3 million and $.8 million in 1996 and 1995,
respectively. This increase was primarily due to increased wholesale and
retail origination volume and corresponding increases in outstanding
wholesale and retail receivables.
Capitalized interest
The Company capitalized approximately $900,000 of interest during the
third quarter of 1996 in connection with its manufacturing expansion
initiatives. The Company anticipates approximately $1 million of
capitalized interest will be incurred in the fourth quarter of 1996.
Results of Operations for the Nine Months Ended September 29, 1996
Compared to the Nine Months Ended September 24, 1995
For the nine month period ended September 29, 1996, the Company recorded
net sales of $1.2 billion, a $172.1 million or 17.6% increase over the
same period last year. Net income and earnings per share were $106.1
million and $1.41 on 75.4 million shares outstanding versus $80.7 million
and $1.07 on 75.2 million shares, increases of 31.5% and 31.8%,
respectively. All 1995 financial data have been restated to reflect the
reclassification of the Company's Transportation Vehicles segment to that
of a discontinued operation. Certain 1995 balances have also been
reclassified to reflect the acquisition of substantially all of the stock
of Eaglemark Financial Services not previously owned by the Company.
Motorcycle Unit Shipments and Net Sales
For the Nine-Month Periods Ended September 29, 1996 and September 24, 1995
Incr
1996 1995 (Decr) %
Motorcycle units
(excluding Buell) 88,936 76,830 12,106 15.8%
Net sales (in
millions):
Motorcycles
(excluding Buell) $888.0 $747.0 $141.0 18.9%
Motorcycle Parts and
Accessories 236.4 216.5 19.9 9.2
Other 25.3 14.1 11.2 79.4
Total Motorcycles
and Related
Products $1,149.7 $977.6 $172.1 17.6%
The 17.6% increase in revenue was primarily attributable to additional
motorcycle unit shipments as worldwide demand for the Company's
motorcycles continues to exceed supply. The most recent information
available (through August) indicates a U.S. heavyweight (751cc+) market
share of 51.4% compared to 52.3% for the same period in 1995. This same
market has grown at a 15.3% rate year-to-date. European data (through
August) shows the Company with a 9.2% share of the heavyweight market,
down from 10.6% for the same period in 1995. The European market (751cc+)
has grown at a 13.3% rate year-to-date, while retail registrations for the
Company's motorcycles are about the same as last year. While our year-to-
date shipments in most European markets are up compared to last year, our
shipments to Germany and France, which are two of our larger markets, are
down, resulting in a 6.9% year-over-year increase in total European
shipments.
The Company experienced a build-up of inventory at its wholly owned French
and German distributors primarily due to pricing disparities. In
September, the Company adjusted prices in each European market to move
toward more consistent country-to-country pricing and anticipates it will
spend approximately $1.5 million on market specific promotions in the
fourth quarter of 1996. The Company has adjusted the U.S. allocation of
1997 model year motorcycles to 72% of total production, up from 70% in
previous years, to take advantage of the European inventory build-up to
shorten the wait that many of its U.S. customers have to endure.
Sales of Buell motorcycles (which are distributed in the U.S. and Japan
through select Harley-Davidson dealers) contributed approximately $10
million of additional revenues in the first nine months of 1996 as
compared to the same period in 1995. (Included in "Other" in the above
table.)
Overall, net sales of the Parts and Accessories business increased 9.2%
compared to the first nine months of 1995. The combination of Genuine
Motor Parts and Genuine Motor Accessories increased $23.1 million or 15.9%
while MotorClothes clothing and collectibles was down $3.2 million or
4.4%.
Gross Profit
Gross profit for the first nine months of 1996 totaled $361.1 million, an
increase of $64.2 million (21.6%) over the same period in 1995. The gross
profit percentage was 31.4% in 1996 as compared with 30.4% for the first
nine months of 1995. A shift in mix away from the lower-margin Sportster
models to the higher-margin custom models and from MotorClothes clothing
and collectibles to Genuine Motor Parts and Genuine Motor Accessories
contributed to the increase.
Operating Expenses
For the Nine-Month Periods Ended September 29, 1996 and September 24, 1995
(Dollars in Millions)
Incr
1996 1995 (Decr) %
Motorcycles and Related
Products $192.3 $164.3 $28.0 17.1%
Corporate 6.2 5.4 .8 14.3
Total operating
expenses $198.5 $169.7 $28.8 17.0%
Operating expenses of $198.5 million for the first nine months of 1996
increased $28.8 million (17.0%) compared to the first nine months of 1995.
The increase was largely related to increased motorcycle volumes, as well
as increases in warranty, engineering, and information systems expenses.
An early retirement program in connection with the new Parts and
Accessories Distribution Center resulted in a charge of $2.5 million in
the third quarter of 1996.
Operating income from financial services
The operating income of the Financial Services segment was $5.0 million
and $2.4 million in 1996 and 1995, respectively. This increase was
primarily due to increased wholesale and retail origination volume and
corresponding increases in outstanding wholesale and retail receivables.
Consolidated income taxes
The Company's effective income tax rate approximated 37.0% in the first
nine months of 1996 and 1995.
Discontinued operations
The operations for the Transportation Vehicles segment have been
classified as discontinued operations. The sale of the Recreational
Vehicles division and ten of the fourteen Holiday World stores was
completed in the first quarter of 1996. The disposition of the remaining
businesses (Commercial Vehicles division and B&B Molders) is expected to
be finalized during 1996. The Company does not anticipate a loss on the
discontinuance of the Transportation Vehicles segment.
Environmental
The Company's policy is to comply with all applicable environmental laws
and regulations, and the Company has a compliance program in place to
monitor, and report on, environmental issues. The Company has reached
settlement agreements with its former parent (Minstar, successor to AMF
Incorporated) and the U.S. Navy regarding groundwater remediation at the
Company's manufacturing facility in York, Pennsylvania and currently
estimates that it will incur approximately $5 million of net additional
costs related to the remediation effort. The Company has established
reserves for this amount. There is no assurance that actual remediation
costs to the Company will not exceed the Company's current estimate of
such costs. While the Company believes that its current estimate of
remediation costs is reasonable, this estimate is based on preliminary
information and is subject to revision as the ongoing remediation effort
moves forward. See Note 5 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 meeting environmental compliance
obligations. The Company anticipates that capital expenditures for
equipment used to limit hazardous substances/pollutants during 1996 will
approximate $1 million. The Company does not expect that these
expenditures related to environmental matters will have a material effect
on future operating results or cash flows.
Liquidity and Capital Resources as of September 29, 1996
The Company generated $138.9 million of cash from operating activities
during the first nine months of 1996 compared to $89.5 million in the same
period in 1995. Net income adjusted for depreciation contributed $36.0
million of the increase in cash from operating activities. The
Motorcycles segment's receivable balance at September 29, 1996 increased
$42.4 million compared to December 31, 1995 ($48.6 million at September
24, 1995 compared to December 31, 1994) as a result of motorcycle volume
increases and the end of the year has traditionally lower receivables due
to the annual shutdown during the last week of December. The results of
discontinued operations, especially the sale of the Recreational Vehicles
Division, had a positive impact on total cash flows of approximately $56
million. This was partially offset by the Financial Services segment's
activity which negatively impacted cash flow by approximately $15 million.
Capital expenditures amounted to $84.4 million and $66.2 million during
the first nine months of 1996 and 1995, respectively. The Company is
pursuing a long-term manufacturing strategy to increase its motorcycle
production capacity with a goal of having the capacity to manufacture in
excess of 200,000 units per year by 2003. The strategy includes expansion
in and near the Company's existing facilities and construction of a new
manufacturing facility in Kansas City, Missouri.
The fourth quarter is expected to have heavy capital spending as evidenced
by the month of October in which the Company incurred approximately $36
million in capital expenditures for continued construction on its
manufacturing facility in Kansas City, the purchase of a manufacturing
facility in Menomonee Falls, Wisconsin to expand its powertrain operations
and manufacturing expansion initiatives at its other facilities.
The following are forward looking statements: Due in part to this long-
term manufacturing strategy, the Company anticipates 1996 capital
expenditures will approximate $170-$190 million, and the Company currently
estimates that 1997 capital expenditures will be in the range of $180-$210
million and 1998 capital expenditures will be in the range of $120-$140
million. To the extent that 1996 spending levels are lower than currently
anticipated, planned 1997 expenditures will be correspondingly higher.
The Company currently estimates it will have the capacity to produce at
least 118,000 motorcycles in 1996, 127,000-130,000 units in 1997 and
145,000-150,000 units in 1998. The Company anticipates it will have the
ability to fund all capital expenditures with internally generated funds
and short-term financing.
The Company's ability to reach these production capacity levels will
depend upon, among other factors, the Company's ability to (i) continue to
realize production efficiencies at its existing production facilities
through implementation of innovative manufacturing techniques and other
means, (ii) successfully implement production capacity increases to its
existing facilities and (iii) successfully construct and open the new
manufacturing facility such that it will be fully operational in 1998.
However, there is no assurance that the Company will continue to find
means to realize additional efficiencies. In addition, the Company could
experience delays in making additions and changes to existing facilities
and/or constructing the new manufacturing facility as a result of risks
normally associated with the construction and operation of new
manufacturing facilities, including unanticipated problems in
construction, delays in the delivery of machinery and equipment or
difficulties in making such machinery and equipment operational, work
stoppages, difficulties with suppliers, natural causes or other factors.
These risks, potential delays and uncertainties regarding the actual costs
of the measures the Company intends to take to implement its strategy
could also impact adversely the capital expenditure estimates referred to
above. Moreover, there is no assurance that the Company will have the
ability to sell all of the motorcycles it has the capacity to produce.
The Company (excluding Eaglemark) currently has nominal levels of long-
term debt and has available lines of credit of approximately $49 million,
of which approximately $39 million remained available at September 29,
1996.
Eaglemark finances its business through commercial paper, through
revolving credit facilities and by securitizing its retail installment
loans. Eaglemark issues short-term commercial paper secured by either
wholesale or retail motorcycle finance receivables with maximum issuance
available of $225 million of which $145.5 million was outstanding at
September 29, 1996. Maturities of commercial paper issued range from 1 to
60 days. Eaglemark has in place a $120 million revolving credit facility
to fund primarily the United States and Canadian retail loan originations
of which approximately $101.6 million was outstanding at September 29,
1996. Borrowings under the facility are secured by, and limited to, a
percentage of eligible receivables ranging from 75% to 95% of the
outstanding loan balances. The Company expects the future growth of
Eaglemark will be financed from additional capital contributions from the
Company and a continuation of its programs of commercial paper and
securitizations.
The Company has continuing authorization from its Board of Directors to
repurchase up to 4 million shares of the Company's outstanding common
stock. During the first quarter of 1995, the Company repurchased
1,650,000 shares of its common stock with cash on hand and short-term
borrowings of $40 million. As a result, the Company has 2,350,000 million
shares available to repurchase under this authorization.
The Company's Board of Directors declared three cash dividends during the
first nine months of 1996 including, most recently, a $.06 per share cash
dividend declared on August 28, 1996 payable September 26, 1996 to
shareholders of record September 16 (a 20% increase over the prior
dividend).
<PAGE>
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
September 29, 1996
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 5 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
27.1 Financial Data Schedule for September 29, 1996
27.2 Restated Financial Data Schedule for September 24, 1995
(b) Reports on Form 8-K
None
<PAGE>
Part II - Other Information
HARLEY-DAVIDSON, INC.
Form 10-Q
September 29, 1996
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: 11/12/96 by: /s/ James L. Ziemer
James L. Ziemer
Vice President and Chief Financial
Officer (Principal Financial
Officer)
11/12/96 by: /s/ James M. Brostowitz
James M. Brostowitz
Vice President, Controller
(Principal Accounting Officer) and
Treasurer
<PAGE>
Exhibit Index
Exhibit No. Description Page
27.1 Financial Data Schedule for
September 29, 1996 18
27.2 Restated Financial Data Schedule
for September 24, 1995 19
<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 29,1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 114,046
<SECURITIES> 0
<RECEIVABLES> 178,475
<ALLOWANCES> 1,853
<INVENTORY> 91,480
<CURRENT-ASSETS> 426,208
<PP&E> 616,574
<DEPRECIATION> 286,007
<TOTAL-ASSETS> 1,221,531
<CURRENT-LIABILITIES> 258,687
<BONDS> 0
<COMMON> 781
0
0
<OTHER-SE> 602,821
<TOTAL-LIABILITY-AND-EQUITY> 1,221,531
<SALES> 1,149,698
<TOTAL-REVENUES> 1,149,698
<CGS> 788,592
<TOTAL-COSTS> 788,592
<OTHER-EXPENSES> 801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,681)
<INCOME-PRETAX> 168,469
<INCOME-TAX> 62,323
<INCOME-CONTINUING> 106,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,146
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RESTATED 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>
<RESTATED>
<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> 47,796
<SECURITIES> 0
<RECEIVABLES> 166,613
<ALLOWANCES> 1,787
<INVENTORY> 98,973
<CURRENT-ASSETS> 380,369
<PP&E> 492,503
<DEPRECIATION> 240,925
<TOTAL-ASSETS> 764,498
<CURRENT-LIABILITIES> 194,674
<BONDS> 0
<COMMON> 778
0
0
<OTHER-SE> 465,498
<TOTAL-LIABILITY-AND-EQUITY> 764,498
<SALES> 977,613
<TOTAL-REVENUES> 977,613
<CGS> 680,702
<TOTAL-COSTS> 680,702
<OTHER-EXPENSES> 2,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (916)
<INCOME-PRETAX> 127,746
<INCOME-TAX> 47,295
<INCOME-CONTINUING> 80,451
<DISCONTINUED> 251
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,702
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
