MILWAUKEE, April 17 /PRNewswire-FirstCall/ — Harley-Davidson, Inc. today announced its results for the first quarter ended March 30, 2008. Revenue for the quarter was $1.31 billion compared to $1.18 billion in the year-ago quarter, a 10.8 percent increase. Net income for the quarter was $187.6 million compared to $192.3 million, a decrease of 2.5 percent compared to the first quarter of 2007. First quarter diluted earnings per share (EPS) were $0.79, a 6.8 percent increase compared to last year’s $0.74.”With growing weakness in the economy, U.S. retail sales of Harley-Davidson(R) motorcycles were down 12.8 percent in the first quarter. Although these retail results are disappointing, Harley-Davidson’s U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14.0 percent,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.”We’ve said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year. In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units,” Ziemer said.”We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction.”"The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging,” Ziemer said.”Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength. We are a great company with an exceptionally powerful brand. We are optimistic about our long term business prospects and we will continue to invest in marketing, product development and our international business to drive future growth.”"For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18,” said Ziemer. This supersedes all previous guidance on earnings per share and other measures.The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.Motorcycles and Related Products Segment - First Quarter ResultsRevenue from Harley-Davidson motorcycles was $1.02 billion, an increase of $125.7 million or 14.1 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units or 6.1 percent compared to last year’s first quarter. Shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson’s production plants in York, Pa., that resulted in approximately four weeks of lost production at the facilities.Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of $6.3 million or 3.3 percent versus the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the year-ago quarter.Gross margin for the first quarter of 2008 was 36.4 percent of revenue compared to 35.9 percent for the first quarter last year. Operating margin remained unchanged at 20.0 percent in the first quarter of 2008 compared to the prior year.Motorcycle Retail Sales DataDuring the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007. First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent. Data is listed in the accompanying tables. Financial Services SegmentHarley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter. The decrease is primarily due to a reduction in income from securitization.Income Tax RateThe Company’s first quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2008 will be 35.5 percent.Cash FlowCash and marketable securities totaled $333.2 million as of March 30, 2008. Cash flow from operations was $146.8 million and capital expenditures were $43.2 million during the first quarter of 2008. For the full year of 2008, capital expenditures are now expected to be between $235 million and $250 million.Stock RepurchaseThe Company repurchased 2.6 million shares of its common stock at a cost of $100.1 million during the first quarter of 2008. On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.As of March 30, 2008, there were 20.5 million shares remaining on two board-approved share repurchase authorizations. An additional board-approved share repurchase authorization is in place to offset option exercises.Company BackgroundHarley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (Buell) and Harley-Davidson Financial Services (HDFS). Harley-Davidson Motor Company produces heavyweight motorcycles and offers a line of motorcycle parts, accessories, general merchandise and related services. HDMC manufactures five families of motorcycles: Touring, Dyna(R), Softail (R), Sportster (R) and VRSC(TM). Buell produces premium sport performance motorcycles and offers a line of motorcycle parts, accessories, and apparel. HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson and Buell dealers and customers.Forward-Looking StatementsThe Company intends that certain matters discussed in this release are “forward-looking statements” intended to qualify for the safe harbor 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,”"plans,” or “estimates” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward- looking statements and cautioned not to place undue reliance on such forward- looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.The Company’s ability to meet the targets and expectations noted depends upon, among other factors, the Company’s ability to (i) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (ii) manage production capacity and production changes, (iii) manage supply chain issues, (iv) provide products, services and experiences that are successful in the marketplace, (v) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (vi) sell all of its motorcycles and related products and services to its independent dealers, (vii) continue to develop the capabilities of its distributor and dealer network, (viii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (ix) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (x) manage access to reliable sources of capital and adjust to fluctuations in the cost of capital, (xi) adjust to regional and worldwide demographic trends and economic and political conditions, including healthcare inflation, pension reform and tax changes, (xii) anticipate consumer confidence in the economy, (xiii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS’ loan portfolio, (xiv) retain and attract talented employees, (xv) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation and (xvi) implement and manage enterprise-wide information technology solutions and secure data contained in those systems.In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission.The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s independent dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company.In addition, the Company’s independent dealers and distributors may experience difficulties in selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors. Harley-Davidson, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) Three months ended March 30, April 1, 2008 2007 Net revenue $1,306,313 $1,178,875 Gross profit 476,137 423,046 Operating expenses 214,533 187,803 Operating income from motorcycles & related products 261,604 235,243 Financial services income 93,289 109,163 Financial services expense 58,382 50,226 Operating income from financial services 34,907 58,937 Corporate expenses 5,458 4,939 Income from operations 291,053 289,241 Investment income, net 2,042 8,915 Income before provision for income taxes 293,095 298,156 Provision for income taxes 105,514 105,846 Net income $187,581 $192,310 Earnings per common share: Basic $0.79 $0.75 Diluted $0.79 $0.74 Weighted-average common shares: Basic 237,078 257,326 Diluted 237,250 258,158 Cash dividends per common share $0.30 $0.21 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) March 30, December 31, April 1, 2008 2007 2007 ASSETS Current Assets: Cash and cash equivalents $332,639 $402,854 $310,010 Marketable securities 524 2,475 618,502 Accounts receivable, net 330,147 181,217 147,732 Finance receivables held for sale 729,814 781,280 297,885 Finance receivables held for investment, net 1,565,022 1,575,283 1,550,001 Inventories 441,205 349,697 369,418 Other current assets 187,436 174,508 122,627 Total current assets 3,586,787 3,467,314 3,416,175 Finance receivables held for investment, net 937,495 845,044 767,529 Other long-term assets 1,340,117 1,344,248 1,262,794 $5,864,399 $5,656,606 $5,446,498 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable & accrued liabilities $925,014 $785,124 $854,464 Current portion of finance debt 1,111,036 1,119,955 463,530 Total current liabilities 2,036,050 1,905,079 1,317,994 Finance debt 980,000 980,000 890,000 Postretirement healthcare benefits 199,978 192,531 203,514 Other long-term liabilities 216,946 203,505 199,503 Total shareholders’ equity 2,431,425 2,375,491 2,835,487 $5,864,399 $5,656,606 $5,446,498 Note: On January 1, 2008 the Company recorded a reduction to shareholders’ equity of $18.1 million ($11.2 million, net of tax) to adopt provisions of Statement of Financial Accounting Standard No. 158, “Employers” Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132( R )” that require sponsors of defined benefit pension and postretirement plans to measure the funded status of those plans as of the date of the year-end statement of financial position. Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three months ended March 30, April 1, 2008 2007 Net cash provided by operating activities $146,778 $519,624 Cash flows from investing activities: Capital expenditures (43,239) (40,775) Finance receivables held for investment, net (24,735) (12,940) Collection of retained securitization interests 10,796 14,493 Net change in marketable securities 2,019 40,622 Other, net 1,511 4,545 Net cash (used by) provided by investing activities (53,648) 5,945 Cash flows from financing activities: Net decrease in finance-credit facilities and commercial paper (9,392) (353,540) Dividends (71,023) (54,103) Purchase of common stock for treasury (100,096) (61,251) Excess tax benefits from share-based payments 312 1,157 Issuance of common stock under employee stock option plans 584 12,953 Net cash used by financing activities (179,615) (454,784) Effect of exchange rate changes on cash and cash equivalents 16,270 828 Net (decrease) increase in cash and cash equivalents (70,215) 71,613 Cash and cash equivalents: At beginning of period 402,854 238,397 At end of period $332,639 $310,010 Net Revenue and Motorcycle Shipment Data (Unaudited) (Unaudited) Three months ended March 30, April 1, 2008 2007 NET REVENUE (in thousands) Harley-Davidson(R) motorcycles $1,017,218 $891,518 Buell(R) motorcycles 22,075 21,655 Parts & Accessories 181,942 188,235 General Merchandise 84,006 76,112 Other 1,072 1,355 $1,306,313 $1,178,875 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 47,826 48,740 Export 24,042 19,021 Total 71,868 67,761 Motorcycle product mix: Touring 26,435 21,802 Custom 29,072 30,768 Sportster(R) 16,361 15,191 Total 71,868 67,761 BUELL UNITS Motorcycle shipments: Buell 2,392 2,558 Retail Sales of Harley-Davidson Motorcycles Year to Date March 2008 2007 Total Worldwide Retail Sales of Harley-Davidson Motorcycles 66,561 70,533 North America Region 49,255 55,473 United States 46,572 53,426 Canada 2,683 2,047 Europe Region (Includes Middle East and Africa) 10,149 9,415 Europe* 9,075 8,686 Other 1,074 729 Asia Pacific Region 5,300 4,434 Japan 2,738 2,292 Other 2,562 2,142 Latin America Region 1,857 1,211 Data Source (subject to update) Data source for all 2007 and 2008 retail sales figures shown above is sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning ret Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson Motorcycle Sales data. * Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Heavyweight Market Data Data Through Month Indicated 2008 2007 United States (1) (March) 93,155 108,337 Europe (2) (February) 47,764 39,785 (1) - United States industry data includes 651 cc models, derived from submission of motorcycle retail sales by each major manufacturer to an independent third party. (2) - Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 651 cc models, derived from information provided by Giral S.A., an independent agency.Harley-Davidson, Inc.
