UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 29, 1998
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)
(414) 342-4680
(Registrant's telephone number, including area code)
None
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock Outstanding as of May 11, 1998: 152,005,655 Shares
<PAGE>
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended March 29, 1998
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 2(c). Changes In Securities 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 Operations
(Unaudited)
(In thousands, except per share amounts)
Three months ended
Mar. 29, Mar. 30,
1998 1997
Sales $466,527 $427,095
Cost of goods sold 316,652 288,881
--------- --------
Gross profit 149,875 138,214
Operating income from financial services 2,585 2,219
Operating expenses (81,653) (77,785)
--------- --------
Income from operations 70,807 62,648
Interest income, net 774 1,574
Other expense, net (1,189) (185)
--------- --------
Income before provision for income taxes 70,392 64,037
Provision for income taxes 25,694 23,695
--------- --------
Net income $ 44,698 $ 40,342
========= ========
Earnings per common shares:
Basic $.29 $.27
==== ====
Diluted $.29 $.26
==== ====
Weighted-average common shares outstanding:
Basic 151,834 151,257
========= ========
Diluted 154,201 153,330
========= ========
Cash dividends per share $.035 $.030
===== =====
See accompanying notes.
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS
Mar. 29, Dec. 31, Mar. 30,
1998 1997 1997
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 95,236 $ 147,462 $ 113,548
Accounts receivable, net
(Note 2) 124,974 102,797 215,032
Finance receivables, net
(Note 2) 320,107 293,329 195,283
Inventories (Note 3) 128,869 117,475 93,440
Other current assets 41,219 42,958 40,631
---------- ---------- ----------
Total current assets 710,405 704,021 657,934
Finance receivables, net 334,916 249,346 222,836
Property, plant and equipment, net 535,566 528,869 418,175
Goodwill 46,039 38,707 40,349
Other assets 67,428 77,958 80,676
---------- ---------- ----------
$1,694,354 $1,598,901 $1,419,970
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 116,743 $ 106,112 $ 110,874
Accrued expenses and other 155,496 164,938 143,707
Current portion of finance debt 152,586 90,638 85,740
---------- ---------- ----------
Total current liabilities 424,825 361,688 340,321
Finance debt 280,000 280,000 250,000
Postretirement health care benefits 69,264 68,414 66,635
Other long-term liabilities 62,595 62,131 67,327
Contingencies (Note 9)
Total shareholders' equity 857,670 826,668 695,687
---------- ---------- ----------
$1,694,354 $1,598,901 $1,419,970
========== ========== ==========
See accompanying notes.
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended
Mar. 29, Mar. 30,
1998 1997
Cash flows from operating activities:
Net income $ 44,698 $ 40,342
Depreciation and amortization 19,064 16,631
Long-term employee benefits 3,063 1,073
Other-net 2,403 1,931
Net change in other current assets
and current liabilities (32,990) (48,694)
-------- --------
Net cash provided by operating activities 36,238 11,283
Cash flows from investing activities:
Purchase of property and equipment (21,546) (24,625)
Finance receivables acquired or originated (572,069) (279,700)
Finance receivables collected/sold 460,944 198,495
Other - net (236) (6,089)
-------- --------
Net cash used in investing activities (132,907) (111,919)
Cash flows from financing activities:
Net decrease in notes payable (8) (2,580)
Net increase in finance debt 61,948 77,675
Dividends paid (5,448) (4,671)
Stock repurchase (15,173) -
Issuance of stock under employee
stock and option plans 3,124 1,281
-------- --------
Net cash provided by financing activities 44,443 71,705
Net decrease in cash and cash equivalents (52,226) (28,931)
Cash and cash equivalents:
At beginning of period 147,462 142,479
-------- --------
At end of period $ 95,236 $113,548
======== =======
See accompanying notes.
<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 March 29, 1998 and March 30, 1997, and the results of
operations for the three-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, 1997.
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, Inc.
(Eaglemark), a majority-owned subsidiary, became responsible for all
credit and collection activities for the Motorcycles and Related Products
segment's domestic receivables. As such, approximately $102.8 million of
accounts receivable are classified as finance receivables as of March 29,
1998. 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):
Mar. 29, Dec. 31, Mar. 30,
Components at the lower of cost, 1998 1997 1997
first-in, first-out (FIFO), or market:
Raw material & work-in-process $ 38,887 $ 37,597 $ 32,675
Finished goods 32,587 26,756 16,238
Parts & accessories 80,175 75,735 65,876
-------- -------- --------
151,649 140,088 114,789
Excess of FIFO over LIFO 22,780 22,613 21,349
-------- -------- --------
Inventories as reflected in the
accompanying condensed consolidated
balance sheets $128,869 $117,475 $ 93,440
======== ======== ========
Note 4 - Acquisition of Business
In February 1998, the Company acquired substantially all of the remaining
common stock of Buell Motorcycle Company ("BMC"), a company in which it
held a 49% interest since 1993. The acquisition was a stock-for-stock
transaction accounted for as a purchase in which 37,640 shares of the
Company's Common Stock (valued at approximately $1 million) were exchanged
for the BMC interest. Prior to the acquisition, the Company accounted for
its investment in BMC using the equity method. Pro-forma financial
information would not be materially different from the financial
statements as reported and as a result have not been presented.
Note 5 - Earnings Per Share
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings
Per Share." Earnings per share amounts for all prior periods presented
have been restated to conform to the Statement 128 requirements. All
share and per share data have been adjusted to reflect the stock split
described in Note 8. The following table sets forth the computation for
basic and diluted earnings per share (in thousands, except per share
amounts):
Three months ended
Mar. 29, Mar. 30,
1998 1997
Numerator
Net income used in computing
basic and diluted earnings per share $44,698 $40,342
======= =======
Denominator
Denominator for basic earnings per share -
weighted-average common shares 151,834 151,257
Effect of dilutive securities - employee stock
options and nonvested stock 2,367 2,073
------- -------
Denominator for diluted earnings per share-
adjusted weighted-average shares 154,201 153,330
======= =======
Basic earnings per share $.29 $.27
==== ====
Diluted earnings per share $.29 $.26
==== ====
Note 6 - Internal Use Software
Effective January 1, 1998, the Company adopted the SOP, "Accounting for
Costs of Computer Software Developed or Obtained for Internal Use." The
SOP requires the Company to capitalize certain costs incurred in
connection with developing or obtaining internal-use software.
Approximately $1.3 million of costs associated with internal-use software
were capitalized for the three months ended March 29, 1998.
Note 7 - Business Segments
The Company operates in two business segments: Motorcycles and Related
Products and Financial Services. The Company's reportable segments are
strategic business units that offer different products and services. They
are managed separately based on the fundamental differences in their
operations. Effective December 31, 1997, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information." The Statement requires the Company to disclose selected
segment information on an interim basis, this information is set forth
below (in thousands):
Three months ended
Mar. 29, Mar. 30,
1998 1997
Net sales:
Motorcycles and Related Products $466,527 $427,095
Financial Services n/a n/a
-------- --------
$466,527 $427,095
======== ========
Income from operations:
Motorcycles and Related Products $71,051 $63,016
Financial Services 2,585 2,219
General corporate expenses (2,829) (2,587)
-------- --------
$70,807 $62,648
======== ========
Note 8 - Capital Stock
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.
During the first quarter, the Company repurchased 600,000 shares of its
common stock for approximately $15 million.
Note 9 - 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 con-
tamination 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.(1) 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 10 - Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components. The
adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Statement 130 requires the Company's foreign
currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform
to the requirements of Statement 130. During the three months ended March
29, 1998 and March 30, 1997, total comprehensive income, which was
comprised of net income and foreign currency translation adjustments,
amounted to approximately $42.0 and $44.5 million, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Three Months Ended March 29, 1998
Compared to the Three Months Ended March 30, 1997
For the quarter ended March 29, 1998, consolidated net sales totaled
$466.5 million, a $39.4 million or 9.2% increase over the same period last
year. Net income and diluted earnings per share for 1998 were $44.7
million and $.29 on 154.2 million weighted-average shares outstanding
versus $40.3 million and $.26 on 153.3 million weighted-average shares
outstanding in 1997, increases of 10.8% and 10.2%, 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 March 29, 1998 and March 30, 1997
Incr
1998 1997 (Decr) %
Harley-Davidson motorcycle units 34,482 32,860 1,622 4.9%
Buell motorycle units 1,350 1,087 263 24.2
Total motorcyle units 35,832 33,947 1,885 5.6%
Net sales (in millions):
Harley-Davidson motorcycles $361.3 $337.5 $23.8 7.1%
Buell motorcycles 12.3 9.6 2.7 28.0
Total motorcycles 373.6 347.1 26.5 7.6%
Motorcycle Parts and Accessories 63.3 54.4 8.9 16.2
General Merchandise 29.2 24.4 4.8 19.5
Other .4 1.2 (.8) (66.7)
Total Motorcycles and
Related Products $466.5 $427.1 $39.4 9.2%
The Motorcycles segment reported record first quarter net sales. Net
sales increases were primarily driven by a 5.6% increase in motorcycle
unit shipments over the first quarter of 1997. The increase in Harley-
Davidson motorcycle unit shipments was due to an increase in production in
the first quarter of 1998, despite fewer production days. This was the
result of higher average daily production rates which were achieved in
connection with the ongoing implementation of the Company's manufacturing
strategy.
During the first quarter of 1998, the Company produced approximately
34,700 Harley-Davidson motorcycles, an average of 569 units per day
compared to an average of 527 units per day in the same period last year.
The Company has a second quarter production target of 38,000 units, an
average of approximately 600 units per day.(1)
At the end of the first quarter, the Company was ahead of schedule in its
effort to ramp-up the new Sportster motorcycle manufacturing plant in
Kansas City. As of April 1, 1998, all Sportster motorcycles are being
produced in Kansas City, and the Company's plant in York, PA is preparing
to increase its production of the Company's larger cruiser motorcycles.
In February 1998, the Company acquired substantially all of the common
stock of Buell Motorcycle Company ("BMC"), a company in which it held a
49% interest since 1993. Buell Distribution Company, the exclusive
distributor for BMC, has been a wholly-owned subsidiary of the Company
since 1993.
Sales of Parts and Accessories (P & A), which consists of General Motor
Parts and Genuine Motor Accessories, totaled $63.3 million, up $8.9
million or 16.2% compared to the first quarter of 1997. This increase in
sales was driven primarily by the accessories business.
General Merchandise sales, which includes clothing and collectibles,
totaled $29.2 million, up $4.8 million, or 19.5%, compared to the first
quarter of 1997. This growth was driven by the introduction of a new
denim product line and the Spring MotorClothes product line. The Company
does not expect to maintain this level of growth throughout 1998.(1)
Gross Profit
Gross profit increased $11.7 million, or 8.4%, compared to the first
quarter of 1997 primarily due to an increase in motorcycle volume. The
gross profit margin was 32.1% in 1998 as compared with 32.4% in 1997. The
decrease in gross profit margin was due primarily to the start-up of the
new manufacturing plant in Kansas City, the transition to the new
powertrain manufacturing plant in Milwaukee and increased depreciation due
to the significant investment in capacity expansion. The Company expects
it will continue to incur some costs associated with the transition into
the new manufacturing facility as it becomes fully operational in the
second quarter of 1998. Gross profit in the first quarter of 1997 was
also negatively impacted by a $2 million one-time expense associated with
a signing bonus paid to the union-represented employees at the Company's
York, PA operations, as part of the five-year labor agreement.
Operating Expenses
For the Three Month Periods Ended March 29, 1998 and March 30, 1997
(Dollars in Millions)
Incr
1998 1997 (Decr) %
Motorcycles and Related Products $78.9 $75.2 $3.7 4.9%
Corporate 2.8 2.6 .2 7.7
Total operating expenses $81.7 $77.8 $3.9 5.0%
Total operating expenses increased $3.9 million, or 5.0%, compared to the
first quarter of 1997. The increase in operating expenses was largely
related to increased motorcycle volumes. Operating expenses in the first
quarter of 1997 include the impact of $3 million in product liability
expenses primarily due to an out-of-court settlement.
Operating income from financial services
The operating income of the Financial Services segment was $2.6 million
and $2.2 million in the first quarters of 1998 and 1997, respectively.
Eaglemark experienced growth in all of it business lines, which was
partially offset by promotion expense for the Harley-Davidson Chrome VISA
Card.
Capitalized interest
There was no interest capitalized during the first quarter of 1998. The
Company capitalized $1.0 million of interest during the first quarter of
1997.
Consolidated income taxes
The Company's effective income tax rate was 36.5% and 37.0% for the first
quarter of 1998 and 1997, respectively.
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.(1) 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.
See Note 9 of the notes to condensed consolidated financial statements.
Recurring costs associated with managing hazardous substances and
pollution in on-going operations have not been 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 1998 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.(1)
Impact of Year 2000
In 1997, the Company completed an assessment of the computer system issues
associated with the Year 2000 and began to modify or replace portions of
its software so that its computer systems will function properly with
respect to dates in the year 2000 and thereafter. The Company is also
working with its significant suppliers and financial institutions to
ensure that those parties have appropriate plans to remediate Year 2000
issues where their systems interface with the Company's systems or
otherwise impact its operations. The Company is assessing the extent to
which its operations are vulnerable should those organizations fail to
properly remediate their computer systems.
The Company's comprehensive Year 2000 initiative is being managed by a
team of internal staff with the assistance of outside consultants. The
team's activities are designed to ensure that there is no adverse effect
on the Company's core business operations and that transactions with
suppliers and financial institutions are fully supported. The Company is
well under way with these efforts, which are scheduled to be completed by
mid-1999. While the Company believes its planning efforts are adequate to
address its Year 2000 concerns, there can be no guarantee that the systems
of other companies on which the Company's systems and operations rely will
be converted on a timely basis and will not have a material adverse effect
on the Company. The cost of the Year 2000 initiatives (which will be
expensed as incurred) is estimated to be approximately $11 million of
which approximately $1 million has been incurred in the first quarter of
1998 and $3 million since the initiative began in 1997.(1)
The costs of the project and the date on which the Company believes it
will complete Year 2000 modifications are forward-looking statements and
are based on management's best estimates, which were derived utilizing
numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can
be no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
Liquidity and Capital Resources
During the first quarter of 1998, the Company recorded cash flows from
operating activities of $36.2 million compared to $11.3 million during the
same period in 1997. Net income adjusted for depreciation contributed
$63.8 million in 1998 compared to $57.0 million in 1997. Accounts
receivable for the Motorcycles segment increased approximately $20 million
in 1998 compared to $74 million, in the first quarter of 1997. The
Motorcycles segment generally experiences increases in receivable balances
during the first quarter over prior year-end balances primarily due to the
effect of the annual December shut-down on quarter-end shipping patterns.
The comparatively lower increase in accounts receivables in 1998 reflects
the transfer of domestic receivables to Eaglemark after September 1, 1997.
At that time, Eaglemark became responsible for all credit and collection
activities for the Motorcycles segment's domestic accounts receivable. As
such, finance receivables reflect a comparatively larger increase during
the first quarter of 1998 than during 1997; this increase is included in
cash from investing activities.
Capital expenditures amounted to $21.5 million and $24.6 million during
the first quarter of 1998 and 1997, respectively. For the past two years,
the Company has been implementing a manufacturing strategy to, among other
things, increase its motorcycle production capacity. The construction of
a new manufacturing facility in Kansas City, Missouri, and the move into a
new powertrain plant in Milwaukee were both completed in 1997. In
addition, expansion in and near the Company's existing facilities was
completed. The Company continues to invest capital as it ramps-up
production at its new facilities and reconfigures its existing facilities
to prepare for the planned increase in production.
Although the Company does not know the exact amount of capital
expenditures it will incur, it estimates the capital expenditures in 1998
will be in the range of $180-$200 million and in 1999 will be in the range
of $120-$140 million.(1) The Company plans to continue to increase its
motorcycle production capacity to be able to sustain its annual double-
digit unit production growth.(1) The Harley-Davidson motorcycle production
target for 1998 is 148,000 units.(1) The Company anticipates it will have
the ability to fund all capital expenditures with internally generated
funds and short-term financing.(1)
The Company's ability to reach the 1998 quarterly and annual target
production 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 in its new and existing facilities, and (iii) sell all
of the motorcycles it has the capacity to produce. However, there is no
assurance that the Company will continue to realize additional
efficiencies. In addition, the Company could experience delays in making
changes to existing facilities and the new manufacturing facilities as a
result of risks normally associated with the operation of new and existing
manufacturing facilities, including 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 could also impact adversely the Company's
capital expenditure estimates.
The Company (excluding Eaglemark Financial Services, Inc.) currently has
nominal levels of long-term debt and has lines of credit of approximately
$42.7 million, of which approximately $42.1 million remained available at
March 29, 1998.
Eaglemark finances its business through an unsecured commercial paper
program, revolving credit facilities, senior subordinated debt and asset-
backed securitizations. Eaglemark issues short-term commercial paper with
maximum issuance available of $500 million of which approximately $367
million was outstanding at March 29, 1998. Maturities of commercial paper
issued range from 1 to 270 days. Eaglemark has in place a $250 million
364-day revolving credit facility and a $250 million five-year revolving
credit facility of which approximately $35 million was outstanding at
March 29, 1998. The primary uses of the credit facilities are to provide
liquidity to the unsecured commercial paper program and to fund normal
business operations. Eaglemark has also issued $30 million of senior
subordinated notes which expire in 2007. As anticipated, no
securitization transactions were completed during the first quarter of
1998, however, Eaglemark anticipates that further securitization
transactions will be completed during the remainder of 1998, depending on
market conditions.(1) The Company expects that the future growth of
Eaglemark will be financed from internally generated funds, additional
capital contributions from the Company, bank lines of credit, and
continuation of its subordinated debt, commercial paper and securitization
programs.(1) The Company has a support agreement with Eaglemark, whereby
the Company agrees to provide Eaglemark with certain financial support
payments if required. The payments may be provided at the Company's
option either as a capital contribution or as a loan.
The Company has authorization from its Board of Directors to repurchase up
to 4,700,000 shares of the Company's outstanding common stock. In
addition, the Company has continuing authorization from its Board of
Directors to repurchase shares of the Company's outstanding common stock
under which the cumulative number of shares repurchased, at the time of
any repurchase, shall not exceed the sum of (i) the number of shares
issued in connection with the exercise of stock options occurring on or
after January 1, 1998 plus (ii) one percent of the issued and outstanding
common stock of the Company on January 1 of the current year, adjusted for
any stock split. During the first quarter of 1998, the Company
repurchased 600,000 shares of its common stock under the latter
authorization.
On February 20, 1998, the Company's Board of Directors declared a cash
dividend of $.035 per share payable March 27, 1998 to shareholders of
record March 17.
(1) Note regarding forward-looking statements
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 by reference to this footnote or 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 or elsewhere in this report, and 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.
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
March 29, 1998
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 9 to the accompanying condensed consolidated financial
statements for additional information on the above proceedings.
Item 2(c). Changes in Securities
On February 19, 1998, the Company issued 37,640 shares of its Common Stock
to less than 10 individuals in exchange for 490 shares of Class B Common
Stock of Buell Motorcycle Company ("BMC"), as a result of the transaction
the Company owns 98% of the outstanding common stock of BMC. The shares
of Common Stock of the Company were issued without registration under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on
the private placement exemption under Section 4(2) of the Securities Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for March 29, 1998
(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: May 13, 1998 /s/ James L. Ziemer
James L. Ziemer
Vice President and Chief Financial
Officer (Principal Financial Officer)
May 13, 1998 /s/ James M. Brostowitz
James M. Brostowitz
Vice President, Controller
(Principal Accounting Officer) and
Treasurer
<PAGE>
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule for March 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARLEY-DAVIDSON,
INC. AS OF AND FOR THE THREE MONTHS ENDED MARCH 29, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-29-1998
<CASH> 95,236
<SECURITIES> 0
<RECEIVABLES> 126,545
<ALLOWANCES> 1,571
<INVENTORY> 128,869
<CURRENT-ASSETS> 710,405
<PP&E> 918,887
<DEPRECIATION> 383,321
<TOTAL-ASSETS> 1,694,354
<CURRENT-LIABILITIES> 424,825
<BONDS> 0
0
0
<COMMON> 1,290
<OTHER-SE> 856,380
<TOTAL-LIABILITY-AND-EQUITY> 1,694,354
<SALES> 466,527
<TOTAL-REVENUES> 466,527
<CGS> 316,652
<TOTAL-COSTS> 316,652
<OTHER-EXPENSES> 1,189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (774)
<INCOME-PRETAX> 70,392
<INCOME-TAX> 25,694
<INCOME-CONTINUING> 44,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,698
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
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