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 28, 1997
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 7, 1997 152,294,677 Shares
<PAGE>
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended September 28, 1997
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>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three months ended
Nine months ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $444,222 $385,843 $1,315,403 $1,149,698
Cost of goods sold 299,044 265,375 881,687 788,592
------- -------- ---------- ---------
Gross profit 145,178 120,468 433,716 361,106
Operating income from financial services 3,460 1,277 9,025 4,999
Operating expenses (83,925) (71,290) (241,587) (198,516)
-------- -------- ---------- ---------
Income from operations 64,713 50,455 201,154 167,589
Interest income - net 1,928 1,251 5,594 1,681
Other income (expense) - net (1,404) 980 597 (801)
-------- -------- ----------- -----------
Income before provision for income taxes 65,237 52,686 207,345 168,469
Provision for income taxes 24,138 19,482 76,719 62,323
-------- -------- ----------- -----------
Net income $ 41,099 $ 33,204 $ 130,626 $ 106,146
======== ======== =========== ===========
Weighted average common shares outstanding 151,938 151,110 151,629 150,762
======== ======== =========== ===========
Net income per common share $0.27 $0.22 $0.86 $0.70
======== ======== =========== ===========
Cash dividends per share $0.03 $0.03 $0.10 $0.08
======== ======== =========== ===========
</TABLE>
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS
Sept. 28, Dec. 31, Sept. 29,
1997 1996 1996
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 105,365 $ 142,479 $ 114,046
Accounts receivable, net
(Note 2) 99,601 141,315 176,622
Finance receivables
(Note 2) 274,259 183,808 149,647
Inventories (Note 3) 112,144 101,386 91,480
Other current assets 42,030 44,141 32,230
Net assets from
discontinued operations - - 11,830
----------- ----------- -----------
Total current assets 633,399 613,129 575,855
Finance receivables, net 242,810 154,264 162,682
Property, plant and equipment,
net 473,699 409,434 330,567
Goodwill 39,254 40,900 41,454
Other assets 97,280 102,258 85,573
Net assets from
discontinued operations - - 25,400
----------- ----------- -----------
$1,486,442 $1,319,985 $1,221,531
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ 2,580 $ 946
Accounts payable 109,793 100,699 107,455
Accrued expenses and other 173,000 160,315 150,286
---------- ---------- ----------
Total current liabilities 282,793 263,594 258,687
Finance debt 280,919 258,065 243,648
Postretirement health
care benefits 67,819 65,801 64,957
Other long-term liabilities 66,764 69,805 50,637
Contingencies (Note 5)
Total shareholders' equity 788,147 662,720 603,602
---------- ---------- ----------
$1,486,442 $1,319,985 $1,221,531
========== ========== ==========
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended
Sept. 28, Sept. 29,
1997 1996
Cash flows from operating activities:
Net income $ 130,626 $ 106,146
Depreciation and amortization 51,305 39,464
Long-term employee benefits 3,893 2,984
Other-net 4,173 5,155
Net change in discontinued operations - 16,321
Net change in other current assets
and current liabilities 54,846 (29,137)
----------- ----------
Net cash provided by operating activities 244,843 140,933
Cash flows from investing activities:
Purchase of property and equipment (112,886) (84,398)
Finance receivables acquired or
originated (1,075,482) (823,892)
Finance receivables collected/sold 893,705 723,788
Proceeds from disposition of
discontinued segment - 35,350
Net change in discontinued operations - (1,779)
Other - net (5,778) (10,360)
---------- ----------
Net cash used in investing activities (300,441) (161,291)
Cash flows from financing activities:
Reduction of long-term debt (610) (255)
Net increase in notes payable (2,580) (1,490)
Net increase in finance debt 22,854 79,318
Dividends paid (15,569) (12,472)
Issuance of stock under employee
stock and option plans 14,389 16,407
Net change in discontinued operations - 21,434
----------- -----------
Net cash provided by financing activities 18,484 102,942
----------- -----------
Net increase (decrease) in cash and
cash equivalents (37,114) 82,584
Cash and cash equivalents:
At beginning of period 142,479 31,462
----------- ----------
At end of period $ 105,365 $ 114,046
=========== ==========
<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 28, 1997 and September 29, 1996, and the results
of operations for the three- and nine-month periods then ended. Certain
prior-year balances have been reclassified in order to conform to current-
year presentation. 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, 1996.
On August 20, 1997, the Company's Board of Directors declared a two-for-
one stock split for shareholders of record on September 12, 1997, payable
on September 26, 1997. Stock option agreements 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 have been adjusted to reflect
the stock split on a retroactive basis.
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 - Accounts receivable
Effective September 1, 1997, Eaglemark Financial Services (Eaglemark), a
majority-owned subsidiary, became responsible for all credit and
collection activities for the Motorcycles segment's domestic receivables.
As such, approximately $90 million of accounts receivable are classified
as finance receivables as of September 28, 1997. The presentation of
finance receivables has been changed to classify receivables representing
wholesale motorcycle and parts and accessories receivables and retail
finance receivables with maturities of less than one year as current.
Note 3 - 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. 28, Dec. 31, Sept. 29,
1997 1996 1996
Components at the lower
of cost, first-in, first-out
(FIFO), or market:
Raw material & work-in-
process $ 36,969 $ 33,275 $ 29,887
Finished goods 30,240 22,015 22,770
Parts & accessories 67,538 66,818 60,402
--------- --------- ---------
134,747 122,108 113,059
Excess of FIFO over LIFO 22,603 20,722 21,579
--------- --------- ---------
Inventories as reflected in the
accompanying condensed consolidated
balance sheets $112,144 $101,386 $ 91,480
======== ======== ========
Note 4 - Supplemental noncash investing activities
During 1996, the Company completed the sale of the Transportation Vehicles
segment resulting in a $22.6 million gain, net of applicable income taxes,
or $.15 per share, which was recorded in the fourth quarter. During the
first quarter of 1996, a division of the Transportation Vehicles segment
was sold for approximately $23 million in cash, $3 million in preferred
stock of the buyer, Monaco Coach Corporation ("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 $6 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.
Note 6 - Pending Accounting Change - Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating basic earnings
per share, the dilutive effect of stock options will be excluded. The
impact of Statement 128 on the calculation of basic and diluted earnings
per share for the quarters ended September 29, 1997 and September 28, 1996
is not expected to be material.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain matters discussed in this Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified as
such because the context of the statement will include words such as the
Company "believes," "anticipates," "expects," or "estimates" or words of
similar meaning. Similarly, statements that describe the Company's future
plans, objectives or goals are also forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties
which are described in close proximity to such statements and which could
cause actual results to differ materially from those anticipated as of the
date of this report. Shareholders, potential investors and other readers
are urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such forward-
looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Results of Operations for the Three Months Ended September 28, 1997
Compared to the Three Months Ended September 29, 1996
For the quarter ended September 28, 1997, consolidated net sales totaled
$444.2 million, a $58.4 million or 15.1% increase over the same period
last year. Net income and earnings per share for 1997 were $41.1 million
and $.27 on 151.9 million shares outstanding versus $33.2 million and $.22
on 151.1 million shares outstanding in 1996, increases of 23.8% and 23.1%,
respectively. All share and per share data have been adjusted to reflect
the two-for-one stock split effective September 12, 1997. 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 28, 1997
and September 29, 1996
Incr
1997 1996 (Decr) %
Motorcycle units
(excluding Buell) 31,503 28,013 3,490 12.5%
Net sales (in millions):
Motorcycles (excluding
Buell) $332.0 $285.9 $46.1 16.1%
Motorcycle Parts and
Accessories 74.1 62.1 12.0 19.3
General Merchandise 28.7 28.6 .1 .3
Other 9.4 9.2 .2 2.0
Total Motorcycles and
Related Products $444.2 $385.8 $58.4 15.1%
The Motorcycles segment reported record third quarter net sales driven by
a 12.5% 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 1996 was due to higher average daily production rates.
The Company continues to ramp-up motorcycle production capacity according
to plan. During the third quarter of 1997, motorcycle production averaged
540 units per day versus 490 units per day in the same period last year.
The Company announced that it expects daily motorcycle production to
average approximately 555 units per day in the fourth quarter.
Revenue for the first nine months of 1997 from the Company's foreign
subsidiaries was negatively impacted by the strengthening of the U.S.
dollar resulting in revenue decreases totaling approximately $14 million
compared to the same period of 1996. The third quarter impact alone
accounted for approximately $5 milion of this decrease. The negative
impact on pre-tax earnings, althouh lessened because of spending in
foreign currency and hedging programs, was a decrease of approximately $9
million for the first nine months of 1997 compared to 1996 with the third
quarter accounting for approximately $5 million of this decrease.
Parts and Accessories (P&A) revenue, which consists of the Genuine Motor
Parts and Genuine Motor Accessories brands, of $74.1 million was up $12.0
million or 19.3% compared to the third quarter of 1996. The record number
of product introductions at the annual July dealer meeting contributed to
the growth in the quarterly revenue. The Company anticipates that long-
term P&A revenue growth will approximate the year-to-date growth rate of
13 percent.
General Merchandise sales, which includes clothing and collectibles,
totaled $28.7 million, approximately the same as the third quarter of
1996. Although the annual meeting generated better than expected orders
for General Merchandise, many of the orders were forward-buys to be
delivered in 1998.
Buell Distribution Corporation, a wholly-owned subsidiary of the Company,
and the exclusive distributor of Buell Motorcycle Company (a 49% owned
subsidiary), increased sales (included in "Other" in the above table) to
approximately $9 million (1,014 units) in the third quarter of 1997 as
compared to approximately $7 million (846 units) during the same period in
1996. Buell motorcycles were introduced in Japan during the second
quarter of 1996 and were introduced in Europe during the first quarter of
1997.
Gross Profit
Gross profit increased $24.7 million, or 20.5%, compared to the third
quarter of 1996 primarily due to an increase in motorcycle volume. The
gross profit margin was 32.7% in 1997 as compared with 31.2% in 1996. The
increase in the gross profit percentage was primarily due to product mix
and productivity improvements driven by continued investments in the
manufacturing plants and by partnering efforts with the Company's
employees and suppliers. In addition, the annual model year change-over
went smoothly.
Operating Expenses
For the Three-Month Periods Ended September 28, 1997
and September 29, 1996
(Dollars in Millions)
Incr
1997 1996 (Decr) %
Motorcycles and Related Products $82.4 $69.6 $12.8 18.4%
Corporate 1.5 1.7 (0.2) (10.6)
Total operating expenses $83.9 $71.3 $12.6 17.7%
Total operating expenses increased $12.6 million, or 17.7%, compared to
the third quarter of 1996. The increase was largely related to increases
in product development of approximately $4 million, information systems of
approximately $1 million, international operations of approximately $3
million and other increases due to motorcycle volume when compared to the
same period last year. 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.
Operating income from financial services
The operating income of the Financial Services (Eaglemark) segment was $3.5
million and $1.3 million in 1997 and 1996, respectively. This increase was
primarily due to increased wholesale and retail origination volume and
corresponding increases in outstanding wholesale and retail receivables.
During the third quarter of 1997, Eaglemark introduced the Harley-Davidson
VISA Chrome card as a replacement for the private label Harley Card which
could only be used at Harley-Davidson dealerships. As of September 28,
1997, approximately 105,000 cards have been issued.
Results of Operations for the Nine Months Ended September 28, 1997
Compared to the Nine Months Ended September 29, 1996
For the nine month period ended September 28, 1997, the Company recorded
net sales of $1.3 billion, a $165.7 million or 14.4% increase over the
same period last year. Net income and earnings per share were $130.6
million and $.86 on 151.6 million shares outstanding versus $106.1 million
and $.70 on 150.8 million shares, increases of 23.1% and 22.4%,
respectively.
Motorcycle Unit Shipments and Net Sales
For the Nine-Month Periods Ended September 28, 1997 and September 29, 1996
Incr
1997 1996 (Decr) %
Motorcycle units
(excluding
Buell) 98,328 88,936 9,392 10.6%
Net sales (in millions):
Motorcycles (excluding
Buell) $1,020.8 $888.0 $132.8 15.0%
Motorcycle Parts and
Accessories 191.6 169.2 22.4 13.2
General Merchandise 72.5 68.1 4.4 6.6
Other 30.5 24.4 6.1 25.0
Total Motorcycles and
Related Products $1,315.4 $1,149.7 $165.7 14.4%
The 14.4% 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 September) indicates a U.S. heavyweight (651+cc) market
share of 46.5% compared to 44.9% for the same period in 1996. This same
market has grown at a 12.0% rate year-to-date while retail registrations
for the Company's motorcycles (excluding Buell motorcycles) increased
16.2%. European data (through September) show the Company with a 6.1%
share of the heavyweight (651+cc) market, down from 6.6% for the same
period in 1996. The European market (651+cc) has grown at a 8.3% rate
year-to-date, while retail registrations for the Company's motorcycles
were about the same as last year. The Company has focused, over the last
two years, on upgrading the European infrastructure by installing new
information systems, improving distribution, and developing a European
management team. The Company does not expect near-term growth in Europe
and is therefore, continuing to implement country specific marketing and
sales promotions. In addition, the Company recently unveiled two new
motorcycles styled specifically for the European markets, which will be
introduced in early 1998. Asia/Pacific (Japan and Australia) data
(through September) show the Company with a 15.4% share of the heavyweight
(651+cc) market, down from 20.6% for the same period in 1996. The
Asia/Pacific market has grown at a 54.6% rate year-to-date, while retail
registrations for the Company's motorcycles increased 15.2%.
Parts and Accessories and General Merchandise sales increased 13.2% and
6.6% respectively, compared to the first nine months of 1996.
Buell Distribution Corporation increased sales (included in "Other" in the
above table) to approximately $28 million (3,121 units) in the first nine
months of 1997 as compared to approximately $19 million (2,267 units) in
the same period in 1996.
Gross Profit
Gross profit for the first nine months of 1997 totaled $433.7
million, an increase of $72.6 million (20.1%) over the same period in
1996. The gross profit percentage was 33.0% in 1997 as compared with
31.4% for the first nine months of 1996. The increase in the gross profit
percentage was primarily due to product mix and productivity improvements
driven by continued investments in the manufacturing plants and by
partnering efforts with the Company's employees and suppliers.
Operating Expenses
For the Nine-Month Periods Ended September 28, 1997 and September 29, 1996
(Dollars in Millions)
Incr
1997 1996 (Decr) %
Motorcycles and Related Products $235.5 $192.3 $43.2 22.4%
Corporate 6.1 6.2 (.1) (1.2)
Total operating expenses $241.6 $198.5 $43.1 21.7%
Operating expenses of $241.6 million for the first nine months of 1997
increased $43.1 million (21.7%) compared to the first nine months of 1996.
The increase was largely related to increases in product development of
approximately $11 million, information systems of approximately $4
million, international operations of approximately $10 million, product
liability of approximately $3 million and other increases due to
motorcycle volume when compared to the same period last year. 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 $9.0 million and
$5.0 million in 1997 and 1996, respectively. This increase was primarily
due to increased wholesale and retail origination volume and corresponding
increases in outstanding wholesale and retail receivables. Through nine
months, Eaglemark financed 19 percent of new Harley-Davidson motorcycles
sold in the U.S., versus 16 percent in the same period last year.
Other income (expense)
Included in other income is a one-time benefit related to the sale of the
Monaco preferred stock which was acquired from the sale of the
Transportation Vehicles segment.
Capitalized interest
The Company capitalized approximately $2.8 million of interest during the
first nine months of 1997 in connection with its manufacturing expansion
initiatives. The Company anticipates approximately $.8 million of
capitalized interest will be incurred in the fourth quarter of 1997.
Consolidated income taxes
The Company's effective income tax rate approximated 37.0% in the first nine
months of 1997 and 1996.
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 $6 million of net additional
costs related to the remediation effort. The Company has established
reserves for this amount. 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 1997 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 28, 1997
The Company generated $244.8 million of cash from operating activities
during the first nine months of 1997 compared to $140.9 million in the
same period in 1996. Net income adjusted for depreciation contributed
$181.9 million. The Motorcycles segment's receivable balance at September
28, 1997 of $99.6 million was decreased by approximately $90 million due
to the transfer of the Motorcycles segment's domestic receivables to
Eaglemark (see Note 2). As such, finance receivables increased by this
same amount.
Capital expenditures amounted to $112.9 million and $84.4 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. Construction of the
Kansas City facility is on schedule and the first production is expected
to occur in the first quarter of 1998.
The following are forward looking statements: Due in part to this long-
term manufacturing strategy, the Company anticipates 1997 capital
expenditures will approximate $190-$210 million. Although the Company
does not know the exact range of capital it will spend, it estimated the
capital required in 1998 and 1999 will be in the range of $160-$180
million and $120-$140 million per year, respectively. The Company
currently estimates it will have the capacity to produce at least 131,000
motorcycles in 1997, more than 145,000 motorcycles in 1998 and more than
160,000 motorcycles in 1999. 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 efficiencies in the utilization of existing facilities through
implementation of innovative manufacturing techniques and other means,
(ii) implement additions and changes to existing facilities, (iii)
construct the new manufacturing facility such that it will be operational
in 1998 and (iv) work with existing and new suppliers to expand their
capacity. 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 lines of credit of approximately $46 million, of which
approximately $40 million remained available at September 28, 1997.
Eaglemark finances its business through a secured commercial paper
program, a revolving credit facility, a commercial paper conduit facility
and asset-backed securitizations. Eaglemark issues short-term commercial
paper secured by wholesale motorcycle finance receivables with maximum
issuance available of $175 million of which approximately $107 million was
outstanding at September 28, 1997. Maturities of commercial paper issued
range from 1 to 60 days. Eaglemark has in place a $150 million revolving
credit facility, of which approximately $110 million was outstanding at
September 28, 1997, to fund primarily United States and Canadian retail
loan originations. Borrowings under the facility are limited to 110% of
the outstanding loan balance of eligible receivables. The amount of net
eligible receivables at September 28, 1997 was approximately $186 million.
Eaglemark also has a $75 million commercial paper conduit facility, of
which approximately $64 million was outstanding at September 28, 1997,
secured by the outstanding loan balance of eligible retail motorcycle
receivables. The amount of net eligible receivables at September 28,
1997 was approximately $67 million. During the third quarter, Eaglemark
securitized and sold approximately $100 million of its retail motorcycle
installment loans to investors with limited recourse with servicing rights
being retained by Eaglemark. The Company expects that the future growth
of Eaglemark will be primarily financed from internally generated funds,
bank lines of credit, and continuation of its commercial paper and
securitization programs.
The Company has continuing authorization from its Board of Directors to
repurchase up to 4,700,000 shares of the Company's outstanding common
stock.
The Company's Board of Directors declared three cash dividends during the
first nine months of 1997 including, most recently, a $.07 per share
($.035 on a post-split basis) cash dividend declared on August 20, 1997,
paid September 26, 1997 to shareholders of record on September 12.
<PAGE>
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
September 28, 1997
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 Financial Data Schedule for September 28, 1997
(b) Reports on Form 8-K
None
<PAGE>
Part II - Other Information
HARLEY-DAVIDSON, INC.
Form 10-Q
September 28, 1997
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: 11/12/97 by: /s/ James L. Ziemer
James L. Ziemer
Vice President and Chief
Financial Officer (Principal
Financial Officer)
11/12/97 by: /s/ James M. Brostowitz
James M. Brostowitz
Vice President, Controller
(Principal Accounting Officer)
and Treasurer
<PAGE>
Exhibit Index
Exhibit No. Description Page
27 Financial Data Schedule for September 28, 1997 18
<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 28,1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-28-1997
<CASH> 105,365
<SECURITIES> 0
<RECEIVABLES> 375,805
<ALLOWANCES> 1,945
<INVENTORY> 112,144
<CURRENT-ASSETS> 633,399
<PP&E> 819,054
<DEPRECIATION> 345,355
<TOTAL-ASSETS> 1,486,442
<CURRENT-LIABILITIES> 282,793
<BONDS> 0
<COMMON> 1,572
0
0
<OTHER-SE> 786,575
<TOTAL-LIABILITY-AND-EQUITY> 1,486,442
<SALES> 1,315,403
<TOTAL-REVENUES> 1,315,403
<CGS> 881,687
<TOTAL-COSTS> 881,687
<OTHER-EXPENSES> (597)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,594)
<INCOME-PRETAX> 207,345
<INCOME-TAX> 76,719
<INCOME-CONTINUING> 130,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,626
<EPS-PRIMARY> .86<F1>
<EPS-DILUTED> .86
<FN>
<F1> On August 20, 1997, the Company's Board of Directors declared a two-
for-one stock split for shareholders of record on September 12, 1997,
payable on September 26, 1997. Prior Financial Data Schedules have not
been restated for the split.
</TABLE>
