Harley-Davidson 4Q Profit Up 9.7 Pct

MILWAUKEE -- Harley-Davidson Inc. said Thursday that strong international sales of its iconic motorcycles helped drive its fourth-quarter profit up 9.7 percent _ just a touch above Wall Street expectations _ but U.S. sales were flat.

President and chief executive officer Jim Ziemer pledged to ramp up dealer rallies and safety classes to bring in new riders, especially women and minorities, to shore up the sagging domestic market.

Shares of Harley-Davidson fell $1.26, or more than 1 percent, to $71.58 in afternoon trading on the New York Stock Exchange.

Net income for the quarter ended Dec. 31 totaled $252.4 million, or 97 cents per share, compared with a profit of $230 million, or 84 cents per share, a year ago. Revenue climbed 11.9 percent to $1.50 billion from $1.34 billion last year.

Analysts had expected a profit of 96 cents per share on revenue of $1.44 billion, according to a poll by Thomson Financial.

Worldwide retail sales of Harley-Davidson motorcycles grew 6.4 percent for the quarter. Shipments grew 6 percent to 92,848 units. Domestic sales gained only 0.3 percent, but Harley estimated the overall heavyweight motorcycle market was down 1.7 percent for the quarter. Overseas, sales of the bikes rose 29.4 percent, with Canada seeing an increase of 37.4 percent and Europe an increase of 31.2 percent for the quarter.

Over the past few years, Harley has improved overseas dealer networks and marketing programs, which in turn has boosted sales. There are about 1,300 dealers worldwide.

Dealers will hold more rallies and safety programs in the U.S. this year to bring in new riders, including women, Ziemer said. Fifteen years ago, 2 percent of Harley buyers were women. Last year, they made up 12 percent, he said.

"There's a pent up demand," Ziemer said in an interview. "Females want to get into the sport but want to find out how to learn to ride safely."

The Milwaukee-based company finished the year with revenue up 8.6 percent to $5.8 billion, compared with $5.34 billion in 2005. Shipments were up 6.1 percent to 349,196, compared with 3.7 percent shipment growth in 2005.

Net income for the year increased 8.7 percent to $1.04 billion, or $3.93 per share, compared with a profit of $959.6 million, or $3.41 per share, in 2005.

Analysts had predicted a profit of $3.92 per share on revenue of $5.75 billion, according to a poll by Thomson Financial.

For the year, motorcycle retail sales worldwide increased 8.5 percent. Domestic sales were up 5.9 percent, while international sales increased 18.6 percent. Sales in Japan were up 16.3 percent, and in Canada, 15.9 percent.

The company's new 2007 models, which came out in the third quarter, contributed to this year's sales increase, he said. That quarter marked the most extensive launch of new products in the company's history, with four new models and the new Twin Cam 96 engine.

Ziemer said Harley will keep improving its product line so it stays ahead of the competition. Top competitors include Honda, Kawasaki, Suzuki and BMW. Harley currently holds more than 49 percent annual market share of heavyweight motorcycles in the U.S. and more than 30 percent worldwide.

"You can't afford to stay still," Ziemer said.

During the quarter, the company repurchased 2.1 million shares at a cost of $151 million. It finished the year repurchasing 19.3 million shares at a cost of $1.06 billion.

Ziemer said Harley expects earnings per share to continue growing between 11 and 17 percent each year through 2009. The company expects to ship between 82,000 and 84,000 motorcycles in the first quarter this year, compared with 79,506 bikes shipped in last year's first quarter.

Robert W. Baird analyst Craig Kennison said in a research note that while Harley's domestic retail sales fell short of expectations, the company did gain market share in the slipping U.S. heavyweight motorcycle market.

Some analysts are concerned that Harley could lose ground domestically because the overall U.S. market is flat, said Tim Conder, a leisure analyst at A.G. Edwards & Sons. But he said the quarterly performance shows the motorcycle maker has staying power.

"The main point is, Harley is growing faster than the market," he said.

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