-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aw5gqOGr2BVqU8wIwJ88I8jFj8jXOkqDyli1f8zUwH5oPPiuMdbii9C9/mf3xqmw 1TRT9SV5H8qT3BTOv4LGJg== 0000793952-94-000011.txt : 19940601 0000793952-94-000011.hdr.sgml : 19940601 ACCESSION NUMBER: 0000793952-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940327 FILED AS OF DATE: 19940511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARLEY DAVIDSON INC CENTRAL INDEX KEY: 0000793952 STANDARD INDUSTRIAL CLASSIFICATION: 3751 IRS NUMBER: 391382325 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09183 FILM NUMBER: 94527309 BUSINESS ADDRESS: STREET 1: 3700 W JUNEAU AVE CITY: MILWAUKEE STATE: WI ZIP: 53208 BUSINESS PHONE: 4143424680 10-Q 1 1994 FIRST QUARTER FORM 10-Q 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 27, 1994 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 1-10793 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 May 8, 1994 38,095,176 Shares HARLEY-DAVIDSON, INC. Form 10-Q Index For the Quarter Ended March 27, 1994 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 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Part II. Other Information Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Page 2 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 March 27, March 28, 1994 1993 Sales $343,705 $269,585 Cost of goods sold 253,416 194,130 -------- -------- Gross profit 90,289 75,455 Selling, administrative and engineering expenses 57,169 50,285 -------- -------- Income from operations 33,120 25,170 Interest expense - net (311) (481) Other income - net 1,343 338 -------- -------- Income from operations before provision for income taxes and accounting changes 34,152 25,027 Provision for income taxes 13,320 9,886 -------- -------- Income before accounting changes 20,832 15,141 Cumulative effect of accounting changes: Postretirement health care benefits, net of tax - (32,124) Income taxes - 1,796 -------- -------- Net income (loss) $ 20,832 ($ 15,187) ======== ======== Weighted average common shares outstanding, assuming no dilution 38,073 37,901 Earnings (loss) per common share, assuming no dilution: Income before cumulative effect of accounting changes $0.55 $0.40 Cumulative effect of accounting changes: Postretirement benefits - (0.85) Income taxes - 0.05 ----- ----- Net income (loss) $0.55 ($0.40) ===== ====== Cash dividends per share $0.06 $ - Page 3 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands, except share amounts) ASSETS March 27, Dec. 31, March 28, 1994 1993* 1993 (Unaudited) (Unaudited) Current assets: Cash and cash equivalents $ 38,593 $ 77,709 $ 27,387 Accounts receivable, net of allowance for doubtful accounts 146,565 86,031 112,678 Inventories (Note 2) 147,097 140,151 121,569 Deferred income taxes 20,296 20,296 18,105 Prepaid expenses 7,882 9,571 9,131 ------- ------- ------- Total current assets 360,433 333,758 288,870 Property, plant and equipment, net 204,916 205,768 181,048 Deferred income taxes 11,676 11,676 10,306 Goodwill - - 55,907 Other assets 33,591 32,083 29,944 -------- -------- -------- $610,616 $583,285 $566,075 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 23,985 $ 20,580 $ 16,336 Current maturities of long-term debt 726 789 1,033 Accounts payable 55,366 56,350 57,379 Accrued expenses and other liabilities 113,648 113,043 106,775 ------- ------- ------- Total current liabilities 193,725 190,762 181,523 Postretirement health care benefits 56,356 54,999 51,481 Other long-term liabilities 14,307 12,612 11,859 Contingencies (Note 3) Stockholders' equity: Common stock 385 385 385 Additional paid-in capital 140,187 137,150 131,709 Retained earnings 207,960 189,410 190,663 Cumulative foreign currency translation adjustment 599 186 895 -------- -------- -------- 349,131 327,131 323,652 Less treasury stock, at cost (1,582) (1,583) (1,024) Unearned compensation (1,321) (636) (1,416) -------- -------- -------- Total stockholders' equity 346,228 324,912 321,212 -------- -------- -------- $610,616 $583,285 $566,075 ======== ======== ======== *Condensed from audited financial statements. Page 4 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three months ended March 27, March 28, 1994 1993 Cash flows from operating activities: Net income (loss) $20,832 ($15,187) Depreciation and amortization 9,644 8,850 Long-term employee benefits 2,091 52,223 Deferred income taxes - (22,333) Loss on disposal of long-term assets 11 14 Other (432) - Change in current assets and current liabilities: Accounts receivable (60,534) (19,500) Inventory (6,946) (19,398) Prepaid expenses 1,689 486 Accounts payable and accrued liabilities (379) 11,886 ------- ------- Net cash used in operating activities (34,024) (2,959) Cash flows from investing activities: Purchase of property and equipment (8,748) (5,326) Investment in Eagle Credit Corporation - (10,000) Other - net (688) 755 ------- ------- Net cash used in investing activities (9,436) (14,571) Cash flows from financing activities: Increase (reduction) of long-term debt 183 (267) Net increase in notes payable 3,405 403 Dividends paid (2,282) - Issuance of stock under employee stock plans 3,038 659 ------- ------- Net cash provided by financing activities 4,344 795 ------- ------- Net decrease in cash and cash equivalents (39,116) (16,735) Cash and cash equivalents: At beginning of period 77,709 44,122 ------- ------- At end of period $38,593 $27,387 ======= ======= Page 5PAGE HARLEY-DAVIDSON, INC. Notes to Condensed Consolidated Financial Statements (In thousands, except share amounts) Note 1 - Basis of Presentation The condensed interim consolidated financial statements included herein have been prepared by the Company without audit. 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 27, 1994 and March 28, 1993, and the results of operations for the three month periods then ended. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company's annual report on Form 10-K for the year ended December 31, 1993. Note 2 - Inventories The Company values its inventories at the lower of cost, using the last-in, first-out (LIFO) method, or market. Inventories consist of the following: March 27, Dec. 31, March 28, 1994 1993 1993 Components at the lower of cost, first-in, first-out (FIFO), or market: Raw material & work-in-process $ 56,965 $ 54,155 $ 47,227 Finished goods 69,068 66,865 56,469 Parts & accessories 37,888 35,366 32,765 163,921 156,386 136,461 Excess of FIFO over LIFO 16,824 16,235 14,892 Inventories as reflected in the accompanying condensed consolidated balance sheets $147,097 $140,151 $121,569 Note 3 - 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. The Company is currently pursuing cost recovery litigation against the Navy and believes that the Navy, by virtue of its ownership and operation of the Facility, Page 6 Note 3 - Contingencies (continued) will ultimately be responsible for a substantial portion of the environmental remediation costs at the Facility. 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 investigation and remediation 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 estimate of the probable liability of the Navy, and the settlement agreement withMinstar, the Company estimates that it will incur approximately $4 million of additional remediation and related costs at the Facility. The Company has established reserves for this amount. The Company has also put certain of its insurance carriers on notice that it intends to make claims relating to the environmental contamination at the Facility. However, the Company is currently unable to determine the probable amount of recovery available, if any, under insurance policies. Note 4 - Investments The Company holds 49% investments in Eagle Credit Corporation (Eagle) and another investment. The Company accounts for these investments using the equity method. As of March 27, 1994, the Company's carrying value of its investment in these unconsolidated affiliates totaled $9.4 million which is included in the other assets classification in the accompanying condensed consolidated financial statements. The summarized information below represents an aggregation of the Company's unconsolidated affiliates. Three months ended March 27, 1994 -------- Earnings data Revenue $4,181 Gross profit 3,331 Operating income 882 Net income 882 Company's equity in net income 432 March 27, 1994 -------- Balance sheet data Current assets 107,669 Noncurrent assets 3,324 Current liabilities (27,834) Noncurrent liabilities (81,014) Page 7PAGE Item 2. HARLEY-DAVIDSON, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Three Months Ended March 27, 1994 Compared to the Three Months Ended March 28, 1993 Motorcycle Units and Consolidated Net Sales For the Three Month Periods Ended March 27, 1994 and March 28, 1993 Incr. 1994 1993 (Decr.) % ------ ------ ------ ---- Motorcycle units 23,056 19,502 3,554 18.2% Net sales (in millions): Motorcycles $209.1 $168.2 $40.9 24.3% Motorcycle Parts and Accessories 49.5 37.1 12.4 33.4 Total Motorcycles and Related Products 258.6 205.3 53.3 25.9 Recreational Vehicles 59.3 46.0 13.3 29.0 Commercial Vehicles 22.8 15.2 7.6 50.0 Other 3.0 3.1 (0.1) (3.2) Total Transportation Vehicles 85.1 64.3 20.8 32.4 Harley-Davidson, Inc. Consolidated Net Sales $343.7 $269.6 $74.1 27.5% The Company recorded record first quarter consolidated net sales. Both the Motorcycles and Related Products segment and the Transportation Vehicles segment contributed to the increase. Net sales increases in the Motorcycles and Related Products segment were primarily volume related. Motorcycle unit shipments increased 18.2% over the first quarter of 1993 due to production increases (daily scheduled build rate of 345 during the first quarter of 1993 compared to 365 during the first quarter of 1994) and a decrease in motorcycle unit inventories compared to the end of the fourth quarter of 1993. During the first quarter of 1994, motorcycle production met or exceed the scheduled 365 units per day build rate. Accordingly, the Company announced that it had increased the scheduled build rate to 380 units per day effective as of the beginning of the second quarter. Despite the increase in unit production, demand for the Company's motorcycles continues to exceed supply. The Company's independent domestic dealers have reported customer orders on all remaining 1994 model year allocations and in some cases are reporting customer orders for all of their anticipated 1995 model year (production beginning in July, 1994) allocations. The Parts and Accessories business revenues grew 33.4% compared to the first quarter of 1993, due primarily to the MotorClothes product line. The MotorClothes product line comprised approximately 35% of all revenues generated Page 8 by the Parts and Accessories business during 1993 and is currently the fastest growing portion of the parts and accessories product line. The Transportation Vehicles segment recorded strong revenue growth for the first quarter of 1994. The Recreational Vehicles division's revenue increases were generated by volume increases, primarily in the motorized "Class A" products. During the most recent six month period for which data is available (September 1993 - February 1994), the Recreational Vehicle division reported a 41.6% increase in Class A registrations compared to a 21.6% industry-wide increase during the same period. This higher increase was largely the result of new marketing and distribution initiatives implemented over the last year. The Commercial Vehicles division also reported strong growth compared to the first quarter of 1993. First quarter revenues were enhanced by a substantial backlog at the close of 1993 that was carried into the first quarter of 1994. The Commercial Vehicle division reported that it was awarded a contract to manufacture 1,875 units of various configurations for Federal Express. This contract represents the largest contract in the division's history and is expected to generate revenues of approximately $20 million over the remainder of the year. Consolidated Gross Profit For the Three Month Periods Ended March 27, 1994 and March 28, 1993 (Dollars in Millions) Percent Percent of sales of sales 1994 1993 Change 1994 1993 ---- ---- ------ -------- -------- Motorcycles and Related Products $76.8 $63.9 $12.9 29.7% 31.1% Transportation Vehicles 13.5 11.6 1.9 15.9 18.1 Consolidated Harley-Davidson, Inc. $90.3 $75.5 $14.8 26.3% 28.0% Consolidated gross profit increased $14.8 million (19.7%) compared to the first quarter of 1993. The Motorcycles and Related Products segment was responsible for a majority of the increase. The Motorcycles and Related Products segment's gross profit percentage decreased slightly compared to the first quarter of 1993. Several factors contributed to the change including, additional costs associated with progress on the reorganization and enhancements of the York, Pennsylvania and Wauwatosa, Wisconsin manufacturing facilities and overtime from weather related make-up days. The respective manufacturing facility reorganizations are a part of the Company's comprehensive three year manufacturing strategy announced during the third quarter of 1993. The Transportation Vehicles segment also recorded a volume related increase in gross profit compared to the first quarter of 1993. The Recreational Vehicles division experienced a shift in product mix within the "Class A" products toward lower margin units, largely offsetting its volume related increases. The Commercial Vehicles division's gross profit percentage remained unchanged compared to the first quarter of 1993. Page 9PAGE Consolidated Operating Expenses For the Three Month Periods Ended March 27, 1994 and March 28, 1993 (Dollars in Millions) 1994 1993 Change % ---- ---- ------ ----- Motorcycles and Related Products $41.8 $36.4 $5.4 14.9% Transportation Vehicles 13.3 12.2 1.1 9.2 Corporate 2.1 1.7 .4 19.5 Consolidated Harley-Davidson, Inc. $57.2 $50.3 $6.9 13.7% Consolidated operating expenses increased 13.7% compared to the first quarter of 1993 and compared favorably to a consolidated revenue increase of 27.5%. Increases in the Motorcycles and Related Products segment were largely related to increased motorcycle and parts and accessories volumes. There were no significant areas of unusual expense increase during the period. Operating expenses in the Recreational Vehicles division increased moderately compared to the first quarter of 1993. Increases in research and development costs and selling and promotional programs were partially offset by the reduction of goodwill amortization and lower product related costs compared to the first quarter of 1993. The reduction in goodwill amortization resulted from the goodwill writedown recorded by the Company during the fourth quarter of 1993. The Recreational Vehicles division has been investing heavily in research and development and has added engineering expertise to its workforce. The increased engineering costs and new marketing initiatives should have a long- term benefit, but will have a negative impact on current year earnings performance. CONSOLIDATED INCOME TAXES The Company's effective income tax rate for the first quarter of 1994 approximated 39.0% compared to 39.5% during the first quarter of 1993. ENVIRONMENTAL The Company's policy is to comply with applicable environmental laws and regulations. The Company has a compliance program in place to monitor, and report on, environmental issues. The Company is currently involved with its former parent (Minstar) and the U.S. Navy in cost recovery litigation surrounding the remediation of the Company's manufacturing facility in York, PA. The Company currently estimates that it will be responsible for approximately $4 million related to the remediation of the York facility. The Company has established reserves for this amount (refer to footnote 3 to the accompanying 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 environmental compliance. The Company anticipates that capital expenditures Page 10 for equipment used to limit hazardous substances/pollutants during 1994 will approximate $2 million. Liquidity and Capital Resources as of March 27, 1994 The Company reported negative cash flows from operating activities of approximately $34 million during the quarter compared to approximately $3 million of negative cash flows during the first quarter of 1993. Cash flows from higher earnings compared to 1993 were offset primarily by increases in receivable and inventory balances. Motorcycles and Related Products segment receivable balances increased during the first quarter of 1994 as a result of volume increases in both motorcycles and parts and accessories. In addition, the Company generally experiences an increase in receivable balances during the first quarter as a result of their comparison to lower balances at the close of the fourth quarter that result from a normal holiday shut-down. Inventory increases occurred primarily in the Recreational Vehicles division where its wholly owned retail stores added approximately $6.5 million of additional inventory during the first quarter of 1994 in preparation for the spring selling season. Investing activities utilized approximately $9.4 million during the first quarter of 1994. Capital expenditures amounted to $8.7 million and $5.3 million during the first quarters of 1994 and 1993, respectively. The Company anticipates 1994 capital expenditures will approximate $90 million. The Company anticipates funding these expenditures with internally generated funds. The Company currently has nominal levels of long-term debt and lines of credit of approximately $45 million. As of March 27, 1994, approximately $38 million of the lines of credit remained available. On February 6, 1994, the Company's Board of Directors declared a cash dividend of $.06 per share payable February 28, 1994 to shareholders of record February 14. Page 11PAGE Part II - OTHER INFORMATION HARLEY-DAVIDSON, INC. FORM 10-Q March 27, 1994 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 3 to the accompanying condensed consolidated financial statements. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. Page 12PAGE Part II - Other Information HARLEY-DAVIDSON, INC. Form 10-Q March 27, 1994 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: 5/11/94 /s/ James L. Ziemer ---------------- ------------------------- James L. Ziemer Vice President and Chief Financial Officer (Principal Financial Officer) 5/11/94 /s/ James M. Brostowitz --------------- ------------------------- James M. Brostowitz Vice President, Controller (Principal Accounting Officer) and Treasurer Page 13PAGE -----END PRIVACY-ENHANCED MESSAGE-----