0000897069-95-000094.txt : 19950809
0000897069-95-000094.hdr.sgml : 19950809
ACCESSION NUMBER: 0000897069-95-000094
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950625
FILED AS OF DATE: 19950808
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HARLEY DAVIDSON INC
CENTRAL INDEX KEY: 0000793952
STANDARD INDUSTRIAL CLASSIFICATION: MOTORCYCLES, BICYCLES & PARTS [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: 95559562
BUSINESS ADDRESS:
STREET 1: 3700 W JUNEAU AVE
CITY: MILWAUKEE
STATE: WI
ZIP: 53208
BUSINESS PHONE: 4143424680
10-Q
1
HARLEY-DAVIDSON 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 June 25, 1995
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 August 1, 1995 74,773,821 Shares
HARLEY-DAVIDSON, INC.
Form 10-Q Index
For the Quarter Ended June 25, 1995
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 4. Submission of Items to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit Index 19
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
Sales $486,548 $401,372 $876,237 $745,077
Cost of goods sold 357,461 288,013 642,553 541,429
-------- -------- -------- --------
Gross profit 129,087 113,359 233,684 203,648
Selling, administrative
and engineering expenses 75,366 64,724 140,951 121,893
-------- -------- ------- --------
Income from operations 53,721 48,635 92,733 81,755
Interest expense - net (1,034) (56) (1,411) (367)
Other income (expense)
- net 225 617 (897) 1,960
--------- --------- -------- --------
Income before provision
for income taxes 52,912 49,196 90,425 83,348
Provision for income taxes 19,561 14,594 33,436 27,914
-------- -------- -------- --------
Net income $ 33,351 $ 34,602 $ 56,989 $ 55,434
======== ======== ======== ========
Weighted average common
shares outstanding 74,751 76,162 75,379 76,114
======= ====== ====== ======
Net income per common share $0.45 $0.46 $0.76 $0.73
======= ====== ====== ======
Cash dividends per share $0.04 $0.03 $0.08 $0.06
======= ====== ====== ======
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS
June 25, Dec. 31, June 26,
1995 1994* 1994
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 43,663 $ 59,285 $ 97,740
Accounts receivable, net 189,143 143,396 143,639
Inventories (Note 2) 156,376 173,420 141,610
Deferred income taxes 20,111 20,111 20,296
Prepaid expenses 11,081 9,424 7,624
------- ------- --------
Total current assets 420,374 405,636 410,909
Property, plant and equipment, net 279,616 262,787 212,592
Deferred income taxes 22,924 22,924 16,276
Other assets 52,703 47,868 36,632
-------- -------- --------
$775,617 $739,215 $676,409
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 30,500 $ 17,890 $ 24,986
Current maturities of
long-term debt 279 413 573
Accounts payable 57,985 63,988 55,168
Accrued expenses and other 142,817 133,987 142,067
-------- -------- --------
Total current liabilities 231,581 216,278 222,794
Postretirement health care
benefits 61,960 60,283 57,653
Other long-term liabilities 34,679 29,422 15,383
Contingencies (Note 4)
Stockholders' equity:
Common stock 772 772 385
Additional paid-in capital 152,560 150,728 140,467
Retained earnings 333,954 283,010 240,276
Cumulative foreign currency
translation adjustment 3,525 1,174 1,203
-------- -------- --------
490,811 435,684 382,331
Less treasury stock, at cost (41,899) (1,581) (1,581)
Unearned compensation (1,515) (871) (171)
-------- --------- ---------
Total stockholders' equity 447,397 433,232 380,579
-------- -------- --------
$775,617 $739,215 $676,409
======== ======== =========
*Condensed from audited financial statements.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six months ended
June 25, June 26,
1995 1994
Cash flows from operating activities:
Net income $56,989 $55,434
Depreciation and amortization 21,328 17,595
Long-term employee benefits 2,423 4,864
(Gain) loss on disposal of
long-term assets (68) 15
Equity in net income of joint ventures (13) (843)
Deferred income taxes - (4,600)
Change in current assets and current
liabilities:
Accounts receivable (45,747) (57,608)
Inventories 17,044 (1,459)
Prepaid expenses (1,657) 1,947
Accounts payable and accrued
liabilities 2,827 27,842
------- ---------
Net cash provided by operating activities 53,126 43,187
Cash flows from investing activities:
Purchase of property and equipment (38,240) (24,156)
Other - net 1,658 (1,982)
--------- ---------
Net cash used in investing activities (36,582) (26,138)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 221 -
Reduction of long-term debt (810) (175)
Net increase in notes payable 12,610 4,406
Dividends paid (6,045) (4,568)
Stock repurchases (39,972) -
Issuance of stock under employee
stock and option plans 1,830 3,319
-------- --------
Net cash provided by (used in)
financing activities (32,166) 2,982
-------- --------
Net increase (decrease) in cash and
cash equivalents (15,622) 20,031
Cash and cash equivalents:
At beginning of period 59,285 77,709
-------- ---------
At end of period $43,663 $97,740
======== =========
HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
------------------------------
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 June 25, 1995 and June 26, 1994, and the results of
operations for the three- and six-month periods then ended. 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, 1994.
Note 2 - 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):
June 25, Dec. 31, June 26,
1995 1994 1994
Components at the lower of cost,
first-in, first-out (FIFO),
or market:
Raw material & work-in-process $ 58,253 $ 70,685 $ 51,007
Finished goods 66,719 69,745 68,012
Parts & accessories 53,513 52,554 40,689
-------- -------- --------
178,485 192,984 159,708
Excess of FIFO over LIFO 22,109 19,564 18,098
-------- -------- --------
Inventories as reflected in the
accompanying condensed
consolidated balance sheets $156,376 $173,420 $141,610
======== ======== ========
Note 3 - Capital Stock
----------------------
On August 17, 1994, The Company's Board of Directors declared a two-for-
one stock split effected in the form of a 100 percent stock dividend to
shareholders of record on August 29, 1994, payable on September 12, 1994.
Outstanding stock options and shares available under option plans 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, except
shares authorized, have been adjusted to reflect the stock split on a
retroactive basis.
The Company announced on March 9, 1995 that it intended to repurchase up
to 4 million shares of its outstanding common stock pursuant to authority
previously granted by its Board of Directors. During the first quarter,
the Company repurchased 1,650,000 shares of its common stock for
approximately $40 million. Related to this purchase, the Company borrowed
$20 million under a note which was repaid in full in June, 1995.
Note 4 - 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. The Navy has also agreed to reimburse the
Company for response costs the Company had incurred up to the date of 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 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.
The Company has been named as a defendant in a lawsuit filed in late
February 1995 by Lorillard Tobacco Company ("Lorillard") in the United
States District Court for the Southern District of New York. Lorillard
alleges that the Company acted in "bad faith" by attempting to terminate a
1986 license agreement that grants Lorillard the right to use the Harley-
Davidson name in the marketing of cigarettes. Lorillard seeks rescission
and claims restitutionary damages of $70 million, unspecified lost profits
and punitive damages of $250 million; alternatively, it seeks injunctive
relief to prevent termination of the license agreement. The Company has
denied any wrongdoing and is vigorously contesting Lorillard's claims in
this action. The Company filed an answer to the complaint on March 21,
1995, together with a counterclaim seeking to terminate the license
agreement. The Company asserts that Lorillard breached the license
agreement by failing to verify its financial condition as contractually
required, and depleted its assets through dividends to its parent company,
Loews, Inc., thereby compromising Lorillard's ability to meet its
indemnification obligations to the Company. The Company also disputes
Lorillard's entitlement to punitive damages under governing law and to
restitutionary damages, based on a release of damage claims amounting to
approximately $50 million, which release Lorillard gave to the Company in
1993. As this litigation is in a very preliminary stage, the Company
cannot predict the outcome of this matter with a reasonable degree of
certainty.
The Company (including its wholly-owned subsidiaries Harley-Davidson Motor
Company and H-D Michigan, Inc.), filed a lawsuit in May, 1995 against
Motorcycle Equities, Inc. ("MEI") in the United States District court for
the Eastern District of Wisconsin. The Company seeks a determination of
the parties' respective rights and obligations under a license agreement
with MEI for the Harley-Davidson Cafe in New York City. MEI has asserted
numerous counterclaims in the action and seeks damages of $500 million,
contending, among other things, that the Company breached the license
agreement and acted in bad faith by exercising its contractual right to
decide against expansion of the restaurant business in the continental
United States. The Company will vigorously contest MEI's counterclaims
and continue to seek a judgment declaring the parties rights and
obligations from the Court. As this litigation is in a very preliminary
stage, the Company cannot predict the outcome of this matter with a
reasonable degree of certainty.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Three Months Ended June 25, 1995
Compared to the Three Months Ended June 26, 1994
Motorcycle Units and Consolidated Net Sales
For the Three-Month Periods Ended June 25, 1995 and June 26, 1994
Incr %
1995 1994 (Decr) Change
Motorcycle units 28,167 25,006 3,161 12.6%
Net sales (in millions):
Motorcycles $274.8 $231.1 $43.7 18.9%
Motorcycle Parts and
Accessories 75.1 64.4 10.7 16.7
Other 5.7 1.4 4.3 307.1
Total Motorcycles and
Related Products 355.6 296.9 58.7 19.8
Recreational Vehicles 90.2 74.9 15.3 20.4
Commercial Vehicles 38.3 26.3 12.0 45.8
Other 2.4 3.3 (0.9) (27.5)
Total Transportation
Vehicles 130.9 104.5 26.4 25.2
Harley-Davidson, Inc.
Consolidated Net Sales $486.5 $401.4 $85.1 21.2%
The Company reported consolidated net sales of $486.5 million during the
second quarter of 1995, a $85.1 million (21.2%) increase over the second
quarter of 1994. Both the Motorcycles and Related Products segment (the
"Motorcycles segment") and the Transportation Vehicles segment contributed
to the increase.
Net sales increases in the Motorcycles segment were driven primarily by
motorcycle production and shipment increases as well as a 16.7% increase
in the Parts and Accessories business. Motorcycle unit shipments increased
12.6% compared to the same quarter in 1994 due to an average production
rate for the quarter of 430 units per day (compared to approximately 380
units in 1994). An increase in Buell motorcycle unit shipments also
contributed approximately $3.7 million in additional revenue (included in
"Other" in the above table).
The Company's second quarter average production rate of 430 units per day
exceeded the scheduled production rate of 420 units per day. Accordingly,
the Company announced that it plans to increase daily motorcycle
production to an average of 430 units per day for the remainder of the
year and attain 1995 shipments of at least 103,000 units.
The Parts and Accessories business contributed approximately $10.7 million
to the overall consolidated net sales increase. This change represents a
16.7% percent increase in Parts and Accessories net sales compared to the
second quarter of 1994. Although this rate of growth is lower than the
growth experienced on a quarterly basis over the last year, management
believes it is a better indicator of the long-term growth potential of the
Parts and Accessories business.
The Transportation Vehicles segment recorded 1995 second quarter net sales
of $130.9 million, a $26.4 million (25.2%) increase over the same period
during 1994. The Recreational Vehicles division generated $15.3 million of
the change primarily through volume increases.
The Commercial Vehicles division recorded record quarterly sales of $38.3
million during the second quarter of 1995, a $12.0 million (45.8%)
increase over the second quarter of 1994. The increase is due to fleet
contracts awarded in late 1994, as well as a $35 million fleet contract
with Federal Express Corporation which was started in April, 1995 and will
be completed by year-end.
Consolidated Gross Profit
For the Three-Month Periods Ended June 25, 1995 and June 26, 1994
(Dollars in Millions)
Percent Percent
Incr of sales of sales
1995 1994 (Decr) 1995 1994
Motorcycles and
Related Products $109.7 $93.6 $16.1 30.9% 31.5%
Transportation
Vehicles 19.4 19.8 (.4) 14.8 18.9
Consolidated Harley-
Davidson, Inc. $129.1 $113.4 $15.7 26.5% 28.2%
Consolidated gross profit increased $15.7 million (13.8%) compared to the
second quarter of 1994. The Motorcycles segment gross profit increased
primarily due to volume increases in motorcycle unit shipments. Compared
to the second quarter of 1994, the segment's gross profit percentage was
negatively impacted by the mix of motorcycle shipments, which included a
higher percentage of entry level Sportsters, as well as touring models.
The Transportation Vehicles segment's gross profit remained relatively
constant but its gross profit percentage decreased 4.1% during the second
quarter of 1995 compared to the same quarter in 1994. The Recreational
Vehicles division was responsible for a majority of the decrease,
primarily due to operating inefficiencies caused by previously announced
production cutbacks. In addition, a shift in mix to lower margin towables
units from "Class A" motorhomes had a negative impact on gross margins.
The Commercial Vehicles division also incurred production inefficiencies
in preparation of the heavy upcoming production schedule.
Consolidated Operating Expenses
For the Three-Month Periods Ended June 25, 1995 and June 26, 1994
(Dollars in Millions)
Incr %
1995 1994 (Decr) Change
Motorcycles and
Related Products $55.5 $46.5 $9.0 19.3%
Transportation
Vehicles 18.3 15.0 3.3 22.0
Corporate 1.6 3.2 (1.6) (50.3)
Consolidated Harley-
Davidson, Inc. $75.4 $64.7 $10.7 16.4%
Consolidated operating expenses increased $10.7 million, or 16.4%,
compared to the second quarter of 1994. Increases in the Motorcycles
segment were primarily volume related. Other areas of increased spending
included engineering and international operations.
The Transportation Vehicles segment recorded a $3.3 million, or 22.0%
increase in operating expenses during the second quarter of 1995 compared
to the second quarter of 1994. The primary area of increase was the
promotional programs launched in March in response to weaker than expected
market conditions in the recreational vehicles industry.
Consolidated income taxes
-------------------------
The Company's effective income tax rate for the second quarter of 1995
approximated 37.0% compared to 39.0%, excluding a one-time benefit of $4.6
million related to the legal reorganization and recapitalization of the
Transportation Vehicles segment, during the second quarter of 1994. The
decrease is primarily due to a 1994 corporate restructuring which resulted
in lower income taxes.
Results of Operations for the Six Months Ended June 25, 1995
Compared to the Six Months Ended June 26, 1994
Motorcycle Units and Consolidated Net Sales
For the Six-Month Periods Ended June 25, 1995 and June 26, 1994
Incr %
1995 1994 (Decr) Change
Motorcycle units 51,818 48,062 3,756 7.8%
Net sales (in
millions):
Motorcycles $499.6 $438.4 $61.2 14.0%
Motorcycle Parts
and Accessories 140.6 113.9 26.7 23.4
Other 10.3 3.2 7.1 221.9
Total Motorcycles
and Related
Products 650.5 555.5 95.0 17.1
Recreational
Vehicles 152.8 134.2 18.6 13.8
Commercial Vehicles 67.9 49.1 18.8 38.2
Other 5.0 6.3 (1.3) (19.7)
Total Transportation
Vehicles 225.7 189.6 36.1 19.0
Harley-Davidson, Inc.
Consolidated Net Sales $876.2 $745.1 $131.1 17.6%
The Company reported record net sales for the first six months of $876.2
million, an increase of $131.1 million (17.6%) compared to the first six
months of 1994. Net sales increases were generated by both the Motorcycles
segment and the Transportation Vehicles segment.
Worldwide demand within the Motorcycles segment continues to outweigh
supply in virtually all markets in which the Company competes. The most
recent information available (through May) indicates a U.S. heavyweight
(751cc+) market share of 54.4% compared to 56.7% for the same period in
1994. The decrease in market share is attributable to the Company's
capacity constraints in a growing market.
Sales of Buell motorcycles (which have been distributed to select Harley-
Davidson dealers through the Company's wholly-owned subsidiary, Buell
Distribution Corporation, beginning in the third quarter of 1994)
contributed approximately $7 million of additional revenues in the first
six months of 1995 as compared to the same period in 1994. (Included in
the "Other" category).
Overall, net sales of the Parts and Accessories business increased 23.4%
compared to the first six months of 1994. The increase is primarily
volume related.
The Transportation Vehicles segment recorded net sales of $225.7 million
during the first six months of 1995, an increase of $36.1 million (19.0%)
compared to the first six months of 1994. The Recreational Vehicles
division increased primarily due to volume increases. The Recreational
Vehicles division is outperforming the recreational vehicle industry in a
difficult year. Industry-wide, Class A motorhome registrations are down
6.2% and towable registrations are down 1.1% through April. During the
same period, Holiday Rambler's Class A unit retail sales are up 4.0% and
market share is 5.5% versus 4.9% in 1994. Holiday Rambler's towable
retail unit sales are up 13.0% and market share is 2.5% versus 2.2% in
1994.
The Commercial Vehicles division recorded an $18.8 million (38.2%)
increase in net sales during the first six months of 1995 compared to the
same period in 1994. The division benefited from volume increases and a
shift in mix to its higher priced walk-in units as a result of several
large fleet contracts.
Consolidated Gross Profit
For the Six-Month Periods Ended June 25, 1995 and June 26, 1994
(Dollars in Millions)
Percent Percent
Incr of sales of sales
1995 1994 (Decr) 1995 1994
Motorcycles and Related $200.1 $170.4 $29.7 30.8% 30.7%
Products
Transportation Vehicles 33.6 33.3 .3 14.9 17.5
Consolidated Harley-
Davidson, Inc. $233.7 $203.7 $30.0 26.7% 27.3%
Consolidated gross profit for the first six months of 1995 totaled $233.7
million, an increase of $30.0 million (14.7%) over the same period in
1994.
The Motorcycles segment reported a $29.7 million (17.4%) increase for the
period. The segment's gross profit percentage remained essentially
unchanged at 30.8% for the period compared to the first six months of
1994. The gross profit percentage benefitted primarily from the increase
in volume. This benefit was offset by additional costs related to
continued machinery rearrangement in the Company's three motorcycle
manufacturing facilities in support of the production capacity and product
quality increases, as well as a shift in mix toward lower-margin touring
models and entry level Sportsters.
The Transportation Vehicles segment recorded gross profit of $33.6 million
during the first six months of 1995 which was basically unchanged compared
to the first six months of 1994. The segment's gross profit margin was
14.9% for the six-month period ended June 25, 1995 as compared with 17.5%
for the same period last year. The Recreational Vehicles division's
margin decreased primarily due to operating inefficiencies caused by
previously announced production cutbacks. The Commercial Vehicles
division's margin decreased due to production inefficiencies in
preparation of the heavy upcoming production schedule. These
inefficiencies offset the benefits from an increase in volume and a
favorable shift in mix toward higher-margin walk-in units in the
Commercial Vehicles division.
Consolidated Operating Expenses
For the Six-Month Periods Ended June 25, 1995 and June 26, 1994
(Dollars in Millions)
Incr %
1995 1994 (Decr) Change
Motorcycles and
Related Products $105.4 $88.3 $17.1 19.4%
Transportation
Vehicles 32.2 28.3 3.9 13.7
Corporate 3.4 5.3 (1.9) (36.1)
Consolidated Harley-
Davidson, Inc. $141.0 $121.9 $19.1 15.6%
Consolidated Operating expenses of $141.0 million for the first six months
of 1995 increased $19.1 million (15.6%) compared to the first six months
of 1994. The Motorcycles segment generated the majority of the increase
related primarily to volume increases, as well as increases in warranty,
marketing, engineering and international operations. The Transportation
Vehicles segment increase was generally the result of product development,
quality, advertising and promotional programs discussed earlier.
Consolidated income taxes
-------------------------
The Company's effective income tax rate approximated 37.0% compared to
39.0%, excluding a one-time benefit of $4.6 million related to the legal
reorganization and recapitalization of the Transportation Vehicles
segment, in the same period in 1994 as previously discussed.
Environmental
-------------
The Company's policy is to comply with all applicable environmental laws
and regulations and has a compliance program in place to monitor, and
report on, environmental issues. The Company has reached settlement
agreements with its former parent (Minstar) and the U.S. Navy regarding
the remediation of the Company's manufacturing facility in York, PA and
currently estimates that it will incur approximately $6 million of net
additional costs related to the remediation of the York facility. The
Company has established reserves for this amount. See Note 4 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 environmental compliance. The Company
anticipates that capital expenditures for equipment used to limit
hazardous substances/ pollutants during 1995 will approximate $1 million.
The Company does not expect that expenditures related to environmental
matters will have a material effect on future operating results or cash
flows.
Liquidity and Capital Resources as of June 25, 1995
---------------------------------------------------
The Company generated $53.1 million of cash from operating activities
during the first six months of 1995. Working capital items had a negative
impact on cash flows. The Motorcycles segment's raw material and work-in-
process inventories decreased due to the completion of the 1995 model year
production before the normal July shutdown. The Transportation Vehicles
segment's inventory balances decreased approximately $9 million. The net
decrease is a result of a decrease in raw material and work-in-process in
the Recreational Vehicles division due to the end of the 1995 model year
and an increase in same categories in the Commercial Vehicles division due
to the increase of large fleet contracts. Accounts receivable increased
in both segments primarily due to volume increases and heavy June
shipments.
Capital expenditures amounted to $38.2 million and $24.2 million during
the first six months of 1995 and 1994, respectively. The Company
anticipates 1995 capital expenditures will approximate $100-$110 million.
The Company anticipates funding these expenditures with internally
generated funds.
The Company announced on March 9, 1995 that it intended to repurchase up
to 4 million shares of its outstanding common stock pursuant to authority
previously granted by its Board of Directors. During the first quarter,
the Company repurchased 1,650,000 shares of its common stock with cash on
hand and short-term borrowings. The note was repaid in full in June,
1995.
The Company currently has nominal levels of long-term debt and has
existing lines of credit of approximately $48 million, of which
approximately $22 million remained available at June 25, 1995.
The Company's Board of Directors declared two cash dividends during the
first six months of 1995 including, most recently, a $.04 cash dividend
declared on May 6, 1995 payable June 5, 1995 to shareholders of record May
24.
Part II - OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
June 25, 1995
Item 1. Legal Proceedings
--------------------------
The Company (including its wholly-owned subsidiaries Harley-Davidson Motor
Company and H-D Michigan, Inc.), filed a lawsuit in May, 1995 against
Motorcycle Equities, Inc. ("MEI") in the United States District court for
the Eastern District of Wisconsin. The Company seeks a determination of
the parties' respective rights and obligations under a license agreement
with MEI for the Harley-Davidson Cafe in New York City. MEI has asserted
numerous counterclaims in the action and seeks damages of $500 million,
contending, among other things, that the Company breached the license
agreement and acted in bad faith by exercising its contractual right to
decide against expansion of the restaurant business in the continental
United States. The Company will vigorously contest MEI's counterclaims
and continue to seek a judgment declaring the parties rights and
obligations from the Court. As this litigation is in a very preliminary
stage, the Company cannot predict the outcome of this matter with a
reasonable degree of certainty.
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 Company is a defendant in a lawsuit filed by Lorillard Tobacco Company
alleging that the Company acted in "bad faith" by attempting to terminate
a license agreement that grants Lorillard the right to use the Harley-
Davidson name in the marketing of cigarettes.
See footnote 4 to the accompanying condensed consolidated financial
statements for additional information on the above proceedings.
Item 4. Submission of Items to a Vote of Security Holders
----------------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held on May
6, 1995.
(b) At the Company's Annual Meeting of Shareholders, the
following directors were elected for terms expiring in 1998
by the vote indicated:
Shares
Shares Voted Withholding
in Favor of Authority
Barry K. Allen 62,631,058 403,783
Richard G. LeFauve 62,618,492 416,349
(c) Matters other than election of directors, brought for vote at
the Company's Annual Meeting of Shareholders, passed by the
vote indicated.
Shares Voted
For Against Abstained
Amendment to the Harley-Davidson, Inc.
Restated Articles of Incorporation 58,831,460 3,954,985 248,396
Adoption of the Harley-Davidson, Inc.
1995 Stock Option Plan 58,175,707 4,519,074 340,060
Ratification of Ernst & Young LLP
as the Company's independent
auditors 62,536,398 154,438 344,005
There were no broker non-votes with respect to the foregoing matters.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Harley-Davidson, Inc. 1995 Stock Option Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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: 8/8/95 /s/ James L. Ziemer
James L. Ziemer
Vice President and Chief
Financial Officer
(Principal Financial
Officer)
8/8/95 /s/ James M. Brostowitz
James M. Brostowitz
Vice President, Controller
(Principal Accounting
Officer) and Treasurer
Exhibit Index
Exhibit No. Description Page
10.1 Harley-Davidson, Inc. 1995 Stock Option Plan
(incorporated herein by reference to Exhibit A of
the Company's Proxy Statement dated March 31,
1995) -
27 Financial Data Schedule 20
EX-27
2
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-25-1995
43,663
0
191,336
2,193
156,376
420,374
539,693
260,077
775,617
231,581
0
772
0
0
446,625
775,617
876,237
876,237
642,553
642,553
141,848
0
1,411
90,425
33,436
56,989
0
0
0
56,989
.76
.76