This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Harley-Davidson, Inc. (HOG) on January 22, 2008.
Management:
President of Harley-Davidson Financial Services: Saiyid T. Naqvi
President, Chief Executive Officer, Director: James L. Ziemer
Chief Financial Officer, Vice President: Thomas E. Bergmann
Director, Investor Relations: Amy Giuffre
Key Investors Issues
- EPS were 78 cents a share compared to 97 cents a share last year.
- Net profit was $186.1 million compared to $252.4 million last year.
- Sales fell 7.7% to $1.39 billion.
Fourth Quarter Highlights
The company implemented previously announced plan to reduce wholesale motorcycle shipments during the quarter, which resulted in lower shipments, revenue, and earnings for the fourth quarter of 2007 compared to the fourth quarter of 2006.
- Specifically, revenue was $1.39 billion, or down 7.7% compared to the year-ago quarter.
- Net income was $186.1 million, a decrease of 26.3%.
- Earnings per share were 78 cents per share, or down 19.6%.
- The company bought back 3.2 million shares of common stock at a cost of $153.3 million. This brought total share repurchases activity for 2007 to 20.4 million shares at a total cost of $1.153 billion.
For the motorcycles and related products segment compared to the fourth quarter of 2006, wholesale Harley-Davidson motorcycle shipments were 81,206 units, a decrease of 12.5%.
Domestic shipments of 59,092 units were down 20.7% from the fourth quarter of 2006. This shipment volume represented 72.8% of the total volume shipped to worldwide dealers, down from 80.2% a year ago.
International shipments of 22,114 units were up 20.5% compared to the same quarter last year. International shipments grew to 27.2% of total worldwide fourth quarter shipment volume compared to 19.8% in the fourth quarter of 2006.
Looking at shipment mix, touring volume was 35.9% compared to 35% in 2006.
- Custom shipment volume, representing softail, Dyna, and VRSE motorcycles was 43% compared to 48.1% for the fourth quarter of 2006.
- Sportster motorcycle mix was 21.1% of the total mix for the fourth quarter of 2007, compared to 16.9% during the fourth quarter last year.
- While mix is ultimately derived from customer demand, the company will continue to manage the mix and carefully balance shipments among the touring, custom, and Sportster families. The company will continue to deliver innovative touring products to fortify leading model family and reinvest in custom with products such as the new Rocker, Rocker C, and the just introduced Crossbones.
- Investments in Sportster will continue to support youth and new customer outreach initiatives.
Revenue from Harley-Davidson motorcycles was $1.12 billion, or down 8.6% compared to last year’s fourth quarter.
- Average revenue per unit increased by $590, or 4.5% from the year-ago period. This increase was primarily due to increased model year pricing, favorable foreign currency exchange rates, and favorable mix within families, primarily driven by 105th anniversary models.
- Revenue from parts and accessories was $165.2 million, or a decrease of 7.8% from the year-ago quarter, primarily due to lower motorcycle retail sales.
- General merchandise had another great quarter, with revenue at $73.4 million, an increase of 4%, or $2.8 million.
- Gross margin was 35.7% of revenue, down from 38% in the fourth quarter of 2006. There were a number of factors that negatively affected margins, including the allocation of fixed cost of fewer units, increased model content, and raw material surcharges.
- Operating margin was 18.1%, down from 22.5% in the fourth quarter of 2006, as higher product development and marketing spend drove higher year-over-year operating expenses on lower revenue.
On a worldwide basis, retail sales of Harley-Davidson motorcycles by dealers were down 6.1% compared to a year ago.
- In the U.S., retail sales of new Harley-Davidson motorcycles decreased 14.2% compared to the same period in 2006. Overall, the U.S. 651-plus CC motorcycle market decreased 9%.
- Outside of the U.S., dealers’ impressive overall growth continues with fourth quarter retail sales increasing 17.4%. Europe was once again strong with a year-over-year sales increase of 10.9%, Japan was up 4.5%, Canada was up 45.9%, or 605 units, primarily due to better product availability during the quarter. The remaining 45 or so countries where motorcycles are sold were up a collective 28.6%.
Harley-Davidson Financial Services delivered operating income of $38.6 million, a decrease of $9.1 million or 19.1% compared to last year’s fourth quarter.
