-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QhMNCi0pICzs2Fh6IjeiQ3s/hhCyCLDaFkmW1+Xfk435UYs+w2o1Y4mDBx9Vk/D6 ONsJRDz+RNaBSCx3lRAEJA== 0000897069-97-000334.txt : 19970814 0000897069-97-000334.hdr.sgml : 19970814 ACCESSION NUMBER: 0000897069-97-000334 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970813 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: 97658440 BUSINESS ADDRESS: STREET 1: 3700 W JUNEAU AVE CITY: MILWAUKEE STATE: WI ZIP: 53208 BUSINESS PHONE: 4143424680 10-Q 1 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 29, 1997 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, 1997 75,888,881 Shares HARLEY-DAVIDSON, INC. Form 10-Q Index For the Quarter Ended June 29, 1997 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 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-14 Part II. Other Information Item 1. Legal Proceedings 15 Item 4. Submission of Items to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Exhibit Index 17 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 29, June 30, June 29, June 30, 1997 1996 1997 1996 Sales $444,085 $392,804 $871,180 $763,855 Cost of goods sold 293,766 267,943 582,647 523,217 ------- ------- ------- ------- Gross profit 150,319 124,861 288,533 240,638 Operating income from financial services 3,346 1,990 5,565 3,722 Operating expenses (79,875) (63,742) (157,660) (127,226) ------- ------- ------- ------- Income from operations 73,790 63,109 136,438 117,134 Interest income - net 2,092 835 3,666 430 Other income (expense) - net 2,188 (532) 2,003 (1,781) ------- ------- ------- ------- Income before provision for income taxes 78,070 63,412 142,107 115,783 Provision for income taxes 28,886 23,464 52,581 42,841 ------- ------- ------- ------- Net income $ 49,184 $ 39,948 $ 89,526 $ 72,942 ======= ======= ======= ======= Weighted average common shares outstanding 75,779 75,475 75,737 75,294 ======= ======= ======= ======= Net income per common share $0.65 $0.53 $1.18 $0.97 ==== ==== ==== ==== Cash dividends per share $0.07 $0.05 $0.13 $0.10 ==== ==== ==== ==== Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) ASSETS June 29, Dec. 31, June 30, 1997 1996 1996 (Unaudited) (Unaudited) Current assets: Cash and cash equivalents $ 144,474 $ 142,479 $ 96,273 Accounts receivable, net 198,707 141,315 159,256 Inventories (Note 2) 101,437 101,386 80,316 Notes receivable - - 10,689 Other current assets 40,898 44,141 29,715 Net assets from discontinued operations - - 15,752 ------- ------- ------- Total current assets 485,516 429,321 392,001 Finance receivables, net 396,290 338,072 251,542 Property, plant and equipment, net 454,058 409,434 308,186 Goodwill 39,801 40,900 42,029 Other assets 97,708 102,258 84,512 Net assets from discontinued operations - - 26,105 --------- --------- --------- $1,473,373 $1,319,985 $1,104,375 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ - $ 2,580 $ 1,197 Accounts payable 117,405 100,699 96,565 Accrued expenses and other 170,716 160,315 137,988 ------- ------- ------- Total current liabilities 288,121 263,594 235,750 Finance debt 306,325 258,065 180,089 Postretirement health care benefits 67,167 65,801 64,514 Other long-term liabilities 70,021 69,805 51,006 Contingencies (Note 4) Total shareholders' equity 741,739 662,720 573,016 --------- --------- --------- $1,473,373 $1,319,985 $1,104,375 ========= ========= ========= Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six months ended June 29, June 30, 1997 1996 Cash flows from operating activities: Net income $ 89,526 $ 72,942 Depreciation and amortization 33,370 25,668 Long-term employee benefits 2,557 2,168 Other-net 2,256 3,145 Net change in discontinued operations - 11,103 Net change in other current assets and current liabilities (27,093) (23,735) ------- ------- Net cash provided by operating activities 100,616 91,291 Cash flows from investing activities: Purchase of property and equipment (76,279) (47,542) Finance receivables acquired or originated (577,542) (548,530) Finance receivables collected/sold 518,042 517,590 Proceeds from disposition of discontinued segment - 24,661 Net change in discontinued operations - (1,207) Other - net (2,914) (13,956) ------- ------- Net cash used in investing activities (138,693) (68,984) Cash flows from financing activities: Net decrease in notes payable (2,580) (1,494) Net increase in finance debt 48,260 15,759 Dividends paid (10,108) (7,806) Issuance of stock under employee stock and option plans 4,500 14,592 Net change in discontinued operations - 21,453 ------- ------- Net cash provided by financing activities 40,072 42,504 ------- ------- Net increase in cash and cash equivalents 1,995 64,811 Cash and cash equivalents: At beginning of period 142,479 31,462 ------- ------- At end of period $144,474 $ 96,273 ======= ======= 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 June 29, 1997 and June 30, 1996, and the results of operations for the three- and six-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, 1996. 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 - 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 29, Dec. 31, June 30, 1997 1996 1996 Components at the lower of cost, first-in, first-out (FIFO), or market: Raw material & work-in- process $ 32,759 $ 33,275 $ 28,458 Finished goods 31,648 26,331 18,492 Parts & accessories 59,006 62,502 54,195 ------- ------- ------- 123,413 122,108 101,145 Excess of FIFO over LIFO 21,976 20,722 20,829 ------- ------- ------- Inventories as reflected in the accompanying condensed consolidated balance sheets $101,437 $101,386 $ 80,316 ======= ======= ======= Note 3 - Supplemental noncash investing activities During 1996, the Company completed the sale of the Transportation Vehicles segment resulting in a $22.6 million gain, net of applicable income taxes, or $.30 per share, which was recorded in the fourth quarter. During the first quarter of 1996, a division of the Transportation Vehicles segment was sold for approximately $23 million in cash, $3 million in preferred stock of the buyer, Monaco Coach Corporation ("Monaco"), a $12 million note from a Monaco subsidiary guaranteed by Monaco and assumption by Monaco of certain liabilities of the acquired operations in the approximate amount of $47 million. The note was paid in full during the third quarter of 1996. 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. 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'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 5 - Pending Accounting Change - Earnings per share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of basic and diluted earnings per share for the quarters ended June 29, 1997 and June 30, 1996 is not expected to be material. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 and which 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. Results of Operations for the Three Months Ended June 29, 1997 Compared to the Three Months Ended June 30, 1996 For the quarter ended June 29, 1997, consolidated net sales totaled $444.1 million, a $51.3 million or 13.1% increase over the same period last year. Net income and earnings per share for 1997 were $49.2 million and $.65 on 75.8 million shares outstanding versus $39.9 million and $.53 on 75.5 million shares outstanding in 1996, increases of 23.1% and 22.6%, respectively. 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 June 29, 1997 and June 30, 1996 Incr 1997 1996 (Decr) % Motorcycle units (excluding Buell) 33,965 30,852 3,113 10.1% Net sales (in millions): Motorcycles (excluding Buell) $351.3 $305.2 $46.1 15.1% Motorcycle Parts and Accessories 63.0 59.8 3.2 5.3 General Merchandise 19.4 18.5 .9 4.5 Other 10.4 9.3 1.1 11.1 Total Motorcycles and Related Products $444.1 $392.8 $51.3 13.1% The Motorcycles segment reported record second quarter net sales primarily driven by a 10.1% increase in motorcycle unit shipments. The increase in motorcycle unit shipments over the second quarter of 1996 was due to higher average daily production rates and improved operating efficiencies. During the second quarter of 1997, motorcycle production averaged 535 units per day versus 485 units per day in the same period last year. The Company announced that it expects daily motorcycle production to average approximately 540 units per day starting in the third quarter. Parts and Accessories (P & A) revenue of $63.0 million was up $3.2 million or 5.3% compared to the second quarter of 1996. At the annual dealer meeting at the end of July, the largest P & A new product introduction was well received by the Company's dealer network. The Company anticipates that the P & A revenue growth for 1997 will approximate the growth rate in motorcycle revenue. General Merchandise sales, which includes clothing and collectibles, totaled $19.4 million, up $.9 million, or 4.5%, compared to the second quarter of 1997. The Company does not anticipate any further growth in General Merchandise in 1997. Buell Distribution Corporation, a wholly-owned subsidiary of the Company, and the exclusive distributor of Buell Motorcycle Company (a 49% owned subsidiary), increased sales (included in "Other" in the above table) to approximately $10 million (1,020 units) in the second quarter of 1997 as compared to approximately $8 million (899 units) during the same period in 1996. Buell motorcycles were introduced in Japan during the second quarter of 1996 and were introduced in Europe during the first quarter of 1997. Gross Profit Gross profit increased $25.5 million, or 20.4%, compared to the second quarter of 1996 primarily due to an increase in motorcycle volume. The gross profit margin was 33.8% in 1997 as compared with 31.8% in 1996. The increase in the gross profit percentage was primarily due to operating efficiencies and a favorable product and market mix. Motorcycle shipments had a greater mix of custom motorcycles as well as a greater mix of international units sold through wholly owned distributors both of which generate higher margins. Operating Expenses For the Three-Month Periods Ended June 29, 1997 and June 30, 1996 (Dollars in Millions) Incr 1997 1996 (Decr) % Motorcycles and Related Products $77.9 $61.7 $16.2 26.1% Corporate 2.0 2.0 0.0 0.0 Total operating expenses $79.9 $63.7 $16.2 25.3% Total operating expenses increased $16.2 million, or 25.3%, compared to the second quarter of 1996. The increase was largely related to increases in engineering of approximately $6 million, information systems of approximately $2 million, international operations of approximately $4 million and other increases due to motorcycle volume when compared to the same period last year. The Company is in the midst of the most extensive new product development program in the Company's history which is the primary reason for the increase in engineering expenses. Operating income from financial services The operating income of the Financial Services (Eaglemark Financial Services) segment was $3.3 million and $2.0 million in 1997 and 1996, respectively. This increase was primarily due to increased retail origination volume and corresponding increases in outstanding retail receivables. Other income (expense) Included in other income for the second quarter of 1997 is a one-time benefit related to the sale of the Monaco preferred stock which was acquired from the sale of the Transportation Vehicles segment. Consolidated income taxes The Company's effective income tax rate was 37.0% for the second quarter of 1997 and 1996. Results of Operations for the Six Months Ended June 29, 1997 Compared to the Six Months Ended June 30, 1996 For the six month period ended June 29, 1997, the Company recorded net sales of $871.2 million, a $107.3 million or 14.1% increase over the same period last year. Net income and earnings per share were $89.5 million and $1.18 on 75.8 million shares outstanding versus $72.9 million and $.97 on 75.3 million shares, increases of 22.7% and 21.6%, respectively. Motorcycle Unit Shipments and Net Sales For the Six-Month Periods Ended June 29, 1997 and June 30, 1996 Incr 1997 1996 (Decr) % Motorcycle units (excluding Buell) 66,825 60,923 5,902 9.7% Net sales (in millions): Motorcycles (excluding Buell) $688.8 $602.2 $86.6 14.4% Motorcycle Parts and Accessories 117.5 107.1 10.4 9.7 General Merchandise 43.8 39.4 4.4 11.1 Other 21.1 15.2 5.9 38.9 Total Motorcycles and Related Products $871.2 $763.9 $107.3 14.1% The 14.1% increase in revenue was primarily attributable to additional motorcycle unit shipments as worldwide demand for the Company's motorcycles continues to exceed supply. The most recent information available (through May) indicates a U.S. heavyweight (651+cc) market share of 46.6% compared to 44.7% for the same period in 1996. This same market has grown at a 9.5% rate year-to-date, while retail registrations for the Company's motorcycles (excluding Buell motorcycles) increased 14.1%. European data (through May) show the Company with a 5.8% share of the heavyweight (651+cc) market, down from 6.5% for the same period in 1996. The European market (651+cc) has grown at a 5.3% rate year-to-date, while retail registrations for the Company's motorcycles were down 6.5% compared to last year. The Company has focused, over the last two years, on upgrading the European infrastructure by installing new information systems, improving distribution, and developing a European management team. The Company's sales have plateaued in Europe and the Company believes it must provide more market specific products to increase its market share. As a result, the Company is implementing programs to deliver some market specific products by early 1998. Asia/Pacific (Japan and Australia) data (through May) show the Company with an 18.0% share of the heavyweight (651+cc) market, down from 20.2% for the same period in 1996. The Asia/Pacific market has grown at a 37.3% rate year-to-date, while retail registrations for the Company's motorcycles increased 23.2%. Parts and Accessories and General Merchandise sales increased 9.7% and 11.1% respectively, compared to the first six months of 1996. Buell Distribution Corporation increased sales (included in "Other" in the above table) to approximately $19 million (2,107 units) in the first six months of 1997 as compared to approximately $12 million (1,421 units) in the same period in 1996. Gross Profit Gross profit for the first six months of 1997 totaled $288.5 million, an increase of $47.9 million (19.9%) over the same period in 1996. The gross profit percentage was 33.1% in 1997 as compared with 31.5% for the first six months of 1996. The increase in the gross profit percentage was primarily due to operating efficiencies, a decrease in overtime, and a favorable product and market mix. Motorcycle shipments had a greater mix of custom motorcycles as well as a greater mix of international units sold through wholly owned distributors both of which generate higher margins. Operating Expenses For the Six-Month Periods Ended June 29, 1997 and June 30, 1996 (Dollars in Millions) Incr 1997 1996 (Decr) % Motorcycles and Related Products $153.1 $122.7 $30.4 24.7% Corporate 4.6 4.5 0.1 2.4 Total operating expenses $157.7 $127.2 $30.5 23.9% Total operating expenses of $157.7 million for the first six months of 1997 increased $30.5 million (23.9%) compared to the first six months of 1996. The increase was largely related to increases in engineering of approximately $7 million, information systems of approximately $3 million, international operations of approximately $6 million, product liability of approximately $3 million and other increases due to motorcycle volume when compared to the same period last year. The Company is in the midst of the most extensive new product development program in the Company's history which is the primary reason for the increase in engineering expenses. Operating income from financial services The operating income of the Financial Services segment was $5.6 million and $3.7 million in 1997 and 1996, respectively. This increase was primarily due to increased retail origination volume and corresponding increases in outstanding retail receivables. Other income (expense) Included in other income is a one-time benefit related to the sale of the Monaco preferred stock which was acquired from the sale of the Transportation Vehicles segment. Capitalized interest The Company capitalized approximately $1.8 million of interest during the first six months of 1997 in connection with its manufacturing expansion initiatives. The Company anticipates that it will capitalize approximately $1.9 million of additional interest during 1997. Consolidated income taxes The Company's effective income tax rate was 37.0% in the first six months of 1997 and 1996. 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. 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 meeting environmental compliance obligations. The Company anticipates that capital expenditures for equipment used to limit hazardous substances/pollutants during 1997 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. Liquidity and Capital Resources as of June 29, 1997 The Company generated $100.6 million of cash from operating activities during the first six months of 1997 compared to $91.3 million in the same period in 1996. Net income adjusted for depreciation contributed $122.9 million. This was offset by an increase in the Motorcycles segment's accounts receivable of $57.4 million compared to December 31, 1996. The following is a comparison of accounts receivable balances: June 29, 1997 Dec. 31, 1996 June 30, 1996 Dec. 31, 1995 Domestic $118.3 $ 59.5 $102.6 $ 53.6 Foreign 80.4 81.8 56.7 75.3 ----- ----- ----- ----- $198.7 $141.3 $159.3 $128.9 Historically, worldwide June accounts receivable are higher than worldwide December accounts receivable as a result of motorcycle volume increases, the annual shutdown during the last week of December and heavy shipments in June reflecting the end of the model year. Foreign accounts receivable increased $23.7 million when compared to June 30, 1996 primarily due to extended terms granted to European dealers. The Company is reviewing various European floorplanning programs which would be similar to those available in the United States. Capital expenditures amounted to $76.3 million and $47.5 million during the first six months of 1997 and 1996, respectively. The Company is pursuing a long-term manufacturing strategy to increase its motorcycle production capacity with a goal of having the capacity to manufacture in excess of 200,000 units per year by 2003. The strategy includes expansion in and near the Company's existing facilities and construction of a new manufacturing facility in Kansas City, Missouri. Construction of the Kansas City facility is on schedule and the first production is expected to occur in the first quarter of 1998. The following are forward looking statements: Due in part to this long- term manufacturing strategy, the Company anticipates 1997 capital expenditures will approximate $190-$210 million. Although the Company does not know the exact range of capital it will spend, it estimated the capital required in 1998 and 1999 will be in the range of $160-$180 million and $120-$140 million per year, respectively. The Company currently estimates it will have the capacity to produce at least 131,000 motorcycles in 1997, more than 145,000 motorcycles in 1998 and more than 160,000 motorcycles in 1999. The Company anticipates it will have the ability to fund all capital expenditures with internally generated funds and short-term financing. The Company's ability to reach these production capacity levels will depend upon, among other factors, the Company's ability to (i) continue to realize efficiencies in the utilization of existing facilities through implementation of innovative manufacturing techniques and other means, (ii) implement additions and changes to existing facilities, (iii) construct the new manufacturing facility such that it will be operational in 1998 and (iv) work with existing and new suppliers to expand their capacity. However, there is no assurance that the Company will continue to find means to realize additional efficiencies. In addition, the Company could experience delays in making additions and changes to existing facilities and/or constructing the new manufacturing facility as a result of risks normally associated with the construction and operation of new manufacturing facilities, including unanticipated problems in construction, 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 of the measures the Company intends to take to implement its strategy could also impact adversely the capital expenditure estimates referred to above. Moreover, there is no assurance that the Company will have the ability to sell all of the motorcycles it has the capacity to produce. The Company (excluding Eaglemark Financial Services, Inc.) currently has nominal levels of long-term debt and has lines of credit of approximately $46 million, of which approximately $40 million remained available at June 29, 1997. Eaglemark finances its business through a secured commercial paper program, a revolving credit facility, a commercial paper conduit facility and asset-backed securitizations. Eaglemark issues short-term commercial paper secured by wholesale motorcycle finance receivables with maximum issuance available of $175 million of which approximately $101 million was outstanding at June 29, 1997. Maturities of commercial paper issued range from 1 to 60 days. Eaglemark has in place a $150 million revolving credit facility, of which approximately $139 million was outstanding at June 29, 1997, to fund primarily United States and Canadian retail loan originations. Borrowings under the facility are limited to 110% of the outstanding loan balance of eligible receivables. The amount of net eligible receivables at June 29, 1997 was approximately $166 million. Eaglemark also has a $75 million commercial paper conduit facility, of which approximately $66 million was outstanding at June 29, 1997, secured by the outstanding loan balance of eligible retail motorcycle receivables. The amount of net eligible receivables at June 29, 1997 was approximately $69 million. During the second quarter, Eaglemark securitized and sold approximately $100 million of its retail motorcycle installment loans to investors with limited recourse with servicing rights being retained by Eaglemark. The Company expects that the future growth of Eaglemark will be primarily financed from internally generated funds, additional capital contributions from the Company, bank lines of credit, and continuation of its commercial paper and securitization programs. The Company has continuing authorization from its Board of Directors to repurchase up to 2,350,000 shares of the Company's outstanding common stock. The Company's Board of Directors declared two cash dividends during the first six months of 1997 including, most recently, a $.07 per share cash dividend declared on May 3, 1997 payable June 27, 1997 to shareholders of record June 16. Part II - OTHER INFORMATION HARLEY-DAVIDSON, INC. FORM 10-Q June 29, 1997 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 4 to the accompanying condensed consolidated financial statements. Item 4. Submission of Items to a Vote of Security Holders (a) The Company's Annual Meeting of Shareholders was held on May 3, 1997. (b) At the Company's Annual Meeting of Shareholders, the following directors were elected for terms expiring in 2000 by the vote indicated: Shares Shares Voted Withholding in Favor of Authority Vaughn L. Beals, Jr. 64,552,189 2,520,498 Jeffrey L. Bleustein 64,569,241 2,503,446 Donald A. James 64,568,592 2,504,095 James A. Norling 64,691,750 2,380,937 (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 Ratification of Ernst & Young LLP as the Company's independent auditors 66,771,331 139,428 161,928 There were no broker non-votes with respect to the foregoing matters. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule for June 29, 1997 (b) Reports on Form 8-K None Part II - Other Information HARLEY-DAVIDSON, INC. Form 10-Q June 29, 1997 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: 8/13/97 by: /s/ James L. Ziemer James L. Ziemer Vice President and Chief Financial Officer (Principal Financial Officer) 8/13/97 by: /s/ James M. Brostowitz James M. Brostowitz Vice President, Controller (Principal Accounting Officer) and Treasurer Exhibit Index Exhibit No. Description Page 27 Financial Data Schedule for June 29, 1997 17 EX-27 2 EXHIBIT 27 - FINANCIAL DATA SCHEDULE FOR 1997
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARLEY-DAVIDSON, INC. AS OF AND FOR THE SIX MONTHS ENDED JUNE 29,1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-29-1997 144,474 0 200,625 1,918 101,437 485,516 783,438 329,380 1,473,373 288,121 0 783 0 0 740,956 1,473,373 871,180 871,180 582,647 582,647 (2,003) 0 (3,666) 142,107 52,581 89,526 0 0 0 89,526 1.18 1.18
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