HARLEY-DAVIDSON, INC. MILWAUKEE, Oct. 18, 2016 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) third quarter 2016 diluted earnings per share decreased 7.2 percent to $0.64 compared to diluted EPS of $0.69 in the same period in 2015. Net income was $114.1 million on consolidated revenue of $1.27 billion compared to net income of $140.3 million on consolidated revenue of $1.32 billion in the third quarter of 2015.
Harley-Davidson worldwide retail motorcycle sales in the third quarter were down 4.5 percent, primarily on weak U.S. industry trends. Harley-Davidson retail motorcycle sales in the U.S. were down 7.1 percent compared to the year-ago quarter, with the overall U.S. industry also down for the same period. Harley-Davidson's U.S. market share for the quarter was 52.3 percent in the 601cc-plus segment, essentially flat compared to the third quarter in 2015. Harley-Davidson international retail sales increased by 1.0 percent over the prior year quarter.
"We continue to effectively navigate a fiercely competitive environment and an ongoing weak U.S. industry," said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. "We are pleased with the positive results and the enthusiasm we've seen for our Model Year 2017 motorcycles, featuring the new Milwaukee-Eight engine. We are confident that the entire line-up will drive retail sales growth for the remainder of 2016 and position us well heading into the spring riding season next year."
The Milwaukee-Eight(TM) engine packs innovative technologies that deliver improved horsepower, torque, and comfort and enhanced sound. It was introduced on Touring motorcycles in August as part of the Model Year 2017 product launch. Response to the new model year motorcycles drove increased retail sales in September over prior year.
Through nine months, Harley-Davidson 2016 net income was $645.0 million on consolidated revenue of $4.89 billion compared to nine-month 2015 net income of $710.0 million on consolidated revenue of $4.81 billion. Diluted EPS was $3.55 compared to diluted EPS of $3.41 in the year-ago period. Worldwide retail motorcycle sales were down 1.9 percent compared to the same period in 2015. International retail sales were up 3.3 percent, offset by a decline of 4.7 percent in U.S. retail sales.
Recognizing the continued slower industry growth in the U.S., the company will streamline its operations in the fourth quarter of 2016. It expects to incur expenses of approximately $20 million to $25 million in the fourth quarter, primarily for employee separation and reorganization costs.
"Our value as a company and as a brand is the sum of 113 years of commitment to our riders and the freedom seekers we will inspire to ride in the future," said Levatich. "We remain intensely focused on growing the sport and delivering strong business results."
Retail Harley-Davidson Motorcycle Sales
$ in thousands 3rd Quarter Nine Months
-------------- ----------- -----------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Americas
Region
--------
U.S. 45,469 48,918 (7.1)% 135,581 142,196 (4.7)%
---- ------ ------ ----- ------- ------- -----
Canada 2,663 2,554 4.3% 8,946 8,414 6.3%
------ ----- ----- --- ----- ----- ---
Latin America 2,605 2,818 (7.6)% 7,064 8,091 (12.7)%
------------- ----- ----- ----- ----- ----- ------
Europe, Middle
East, Africa
(EMEA) Region 10,224 10,031 1.9% 37,947 35,598 6.6%
-------------- ------ ------ --- ------ ------ ---
Asia Pacific
Region 7,994 7,857 1.7% 24,141 23,471 2.9%
------------ ----- ----- --- ------ ------ ---
Worldwide
Total 68,955 72,178 (4.5)% 213,679 217,770 (1.9)%
--------- ------ ------ ----- ------- ------- -----
Retail sales in EMEA were up 1.9 percent in the third quarter and up 6.6 percent for the first nine months due to the popularity of Model Year 2016 cruiser motorcycles and our focus on driving demand through test rides. Asia Pacific retail sales were up 1.7 percent in the quarter and up 2.9 percent for the first nine months compared to 2015 behind strong growth in Australia and Japan.
Motorcycles and Related Products Segment Results
$ in thousands 3rd Quarter Nine Months
-------------- ----------- -----------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Motorcycle
Shipments
(vehicles) 48,611 53,472 (9.1)% 219,807 218,233 0.7%
----------- ------ ------ ----- ------- ------- ---
Revenue
-------
Motorcycles 788,856 812,398 (2.9)% 3,437,066 3,376,356 1.8%
----------- ------- ------- ----- --------- --------- ---
Parts &
Accessories 231,279 252,226 (8.3)% 673,192 692,938 (2.8)%
------------ ------- ------- ----- ------- ------- -----
General
Merchandise 65,289 69,008 (5.4)% 211,664 212,954 (0.6)%
------------ ------ ------ ----- ------- ------- -----
Gross Margin
Percent 33.6 34.6 (1.0)pts 36.1 37.9 (1.8)pts
------------ ---- ---- -------- ---- ---- --------
Operating Income 108,929 143,065 (23.9)% 764,135 869,122 (12.1)%
---------------- ------- ------- ------ ------- ------- ------
Operating Margin
Percent 10.0% 12.5% (2.5)pts 17.6% 20.2% (2.6)pts
---------------- ---- ---- -------- ---- ---- --------
Revenue from motorcycles and related products was down compared to the third quarter in 2015, primarily behind decreased motorcycle shipments. Operating margin as a percent of revenue decreased versus the prior year as a result of lower gross margin behind unfavorable manufacturing expense and higher year-over-year SG&A.
Financial Services Segment Results
$ in thousands 3rd Quarter Nine Months
-------------- ----------- -----------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Revenue 183,183 177,109 3.4% 547,505 513,093 6.7%
------- ------- ------- --- ------- ------- ---
Operating
Income 69,447 72,771 (4.6)% 215,391 219,348 (1.8)%
--------- ------ ------ ----- ------- ------- -----
Operating income from financial services was down 4.6 percent in the third quarter compared to the year ago period.
Guidance
Harley-Davidson continues to expect to ship 264,000 to 269,000 motorcycles in 2016, which is approximately down 1 percent to up 1 percent from 2015. In the fourth quarter of 2016, the company expects to ship 44,200 to 49,200 motorcycles compared to 48,149 motorcycles shipped in the year-ago period. The company continues to expect full-year 2016 operating margin of approximately 15 to 16 percent for the Motorcycles segment. The company continues to expect 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.
Income Tax Rate
For the first nine months, Harley-Davidson's effective tax rate was 32.9 percent compared to 34.8 percent in 2015. The company continues to expect its full-year 2016 effective tax rate will be approximately 33 percent.
Cash Flow
Cash and marketable securities totaled $795.3 million at the end of the third quarter, compared to $1.42 billion a year ago. During the first nine months of the year, Harley-Davidson generated $927.8 million of cash from operating activities compared to $1.02 billion for the same period in 2015.
Shareholder Returns
In the third quarter, the company paid a cash dividend of $0.35 per share. During the same time period, on a discretionary basis, the company repurchased 2.1 million shares of Harley-Davidson common stock for $104.6 million. Also in the third quarter, there were approximately 179.3 million weighted-average diluted shares outstanding, compared to approximately 204.6 million shares in the year-ago quarter. As of September 25, 2016, a total of 20.9 million shares remained on board-approved share repurchase authorizations.
Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Since 1903, Harley-Davidson Motor Company has fulfilled dreams of personal freedom with custom, cruiser and touring motorcycles, riding experiences and events and a complete line of Harley-Davidson motorcycle parts, accessories, general merchandise, riding gear and apparel. Harley-Davidson Financial Services provides wholesale and retail financing, insurance, extended service and other protection plans and credit card programs to Harley-Davidson dealers and riders in the U.S., Canada and other select international markets. For more information, visit Harley-Davidson's Web site at www.harley-davidson.com.
Conference Call and Webcast Presentation
Harley-Davidson will discuss third-quarter results on a Webcast at 8:00 a.m. CT today. The supporting slides will be posted prior to the call and can be accessed at http://investor.harley-davidson.com under "Events and Presentations." The audio portion of today's call will also be posted approximately two hours after the call concludes.
Forward-Looking Statements
The company intends that certain matters discussed in this release are "forward-looking statements" intended to qualify for the safe harbor 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," "plans," or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
The company's ability to meet the targets and expectations noted depends upon, among other factors, the company's ability to (i) execute its business strategy, (ii) manage through changes in general economic conditions, including changing capital, credit and retail markets, and political events, (iii) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (iv) drive demand by executing its marketing strategy of appealing to and growing sales to multi-generational and multi-cultural customers worldwide in an increasingly competitive marketplace, (v) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles and collections, (vi) develop and introduce products, services and experiences that are successful in the marketplace, (vii) balance production volumes for its new motorcycles with consumer demand, including in circumstances where competitors may be supplying new motorcycles to the market in excess of demand at reduced prices, (viii) prevent and detect any issues with its motorcycles or any associated manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, (ix) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (x) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xi) effectively execute reorganization actions within expected costs and realize the expected benefits of those actions, (xii) continue to develop the capabilities of its distributors and dealers and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xiii) manage risks that arise through expanding international manufacturing, operations and sales, (xiv) manage through the effects inconsistent and unpredictable weather and weather patterns may have on retail sales of motorcycles, (xv) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xvi) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xvii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xviii) retain and attract talented employees, (xix) manage its exposure to product liability claims and commercial or contractual disputes, (xx) execute its flexible production strategy, (xxi) adjust to healthcare inflation and reform, pension reform and tax changes, (xxii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, and (xxiii) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness.
In addition, the company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed with the Securities and Exchange Commission.
The company's ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the company's independent dealers to sell its motorcycles and related products and services to retail customers. The company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the company. In addition, the company's independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Three months ended Nine months ended
September 25, September 27, September 25, September 27,
2016 2015 2016 2015
---- ---- ---- ----
Motorcycles and related
products revenue $1,091,630 $1,140,321 $4,338,353 $4,301,674
Gross profit 367,019 394,039 1,564,857 1,631,528
Selling, administrative
and engineering expense 258,090 250,974 800,722 762,406
Operating income from
motorcycles & related
products 108,929 143,065 764,135 869,122
Financial services
revenue 183,183 177,109 547,505 513,093
Financial services
expense 113,736 104,338 332,114 293,745
Operating income from
financial services 69,447 72,771 215,391 219,348
------ ------ ------- -------
Operating income 178,376 215,836 979,526 1,088,470
Investment income 2,300 3,211 3,754 5,983
Interest expense 7,706 4,879 21,968 4,897
Income before income
taxes 172,970 214,168 961,312 1,089,556
Provision for income
taxes 58,905 73,821 316,327 379,545
Net income $114,065 $140,347 $644,985 $710,011
======== ======== ======== ========
Earnings per common
share:
Basic $0.64 $0.69 $3.57 $3.43
Diluted $0.64 $0.69 $3.55 $3.41
Weighted-average common
shares:
Basic 178,438 203,598 180,779 207,255
Diluted 179,320 204,580 181,582 208,282
Cash dividends per common
share $0.35 $0.31 $1.05 $0.93
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets(1)
(In thousands)
(Unaudited) (Unaudited)
September 25, December 31, September 27,
2016 2015 2015
---- ---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $790,284 $722,209 $1,368,554
Marketable securities 5,038 45,192 47,358
Accounts receivable, net 346,176 247,405 294,054
Finance receivables, net 2,205,644 2,053,582 2,068,873
Inventories 426,547 585,907 466,657
Restricted cash 65,088 88,267 113,499
Other current assets 263,567 235,321 251,225
Total current assets 4,102,344 3,977,883 4,610,220
Finance receivables, net 4,944,322 4,814,571 5,009,473
Other long-term assets 1,165,560 1,180,523 1,092,341
$10,212,226 $9,972,977 $10,712,034
=========== ========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
-----------------------------
Current liabilities:
Accounts payable & accrued
liabilities $798,127 $707,578 $781,246
Short-term debt 1,055,428 1,201,380 990,049
Current portion of long-term
debt, net 700,152 838,349 885,889
Total current liabilities 2,553,707 2,747,307 2,657,184
Long-term debt, net 5,170,609 4,832,469 5,040,644
Pension and postretirement
healthcare liabilities 303,319 358,547 254,864
Other long-term liabilities 192,223 195,000 199,669
Total shareholders' equity 1,992,368 1,839,654 2,559,673
$10,212,226 $9,972,977 $10,712,034
=========== ========== ===========
(1) ASU 2015-03
Interest -
Imputation of
Interest
(Subtopic
835-30)
Simplifying
the
Presentation
of Debt
Issuance
Costs was
adopted
retrospectively
on January 1,
2016. Debt
issuance
costs in
Other current
assets and
Other long-
term assets
have been
reclassified
to Current-
portion of
long-term
debt, net and
Long-term
debt, net for
2015 balances
to reflect
the adoption
of the new
guidance.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) (Unaudited)
Nine months ended
September 25, September 27,
2016 2015
---- ----
Net cash provided by
operating activities $927,809 $1,020,957
Cash flows from investing
activities:
Capital expenditures (162,726) (139,054)
Finance receivables, net (569,013) (719,472)
Proceeds from sale of
finance receivables 312,571 -
Net change in marketable
securities 40,014 9,500
Acquisition of business - (59,910)
Other 251 5,172
Net cash used by investing
activities (378,903) (903,764)
Cash flows from financing
activities:
Proceeds from issuance of
senior unsecured notes - 740,949
Proceeds from issuance of
medium-term notes 1,193,396 595,386
Repayments of medium-term
notes (451,336) (600,000)
Proceeds from
securitization debt - 1,195,668
Repayments of
securitization debt (535,616) (764,909)
Net (decrease) increase in
credit facilities and
unsecured commercial
paper (146,328) 258,734
Borrowings of asset-
backed commercial paper 33,428 69,191
Repayments of asset-
backed commercial paper (55,170) (55,124)
Net change in restricted
cash 30,981 (15,165)
Dividends paid (190,387) (191,451)
Purchase of common stock
for treasury (374,234) (894,565)
Excess tax benefits from
share-based payments 1,291 2,878
Issuance of common stock
under employee stock
option plans 6,444 16,755
Net cash (used by)
provided by financing
activities (487,531) 358,347
Effect of exchange rate
changes on cash and cash
equivalents 6,700 (13,666)
Net increase in cash and
cash equivalents $68,075 $461,874
======= ========
Cash and cash equivalents:
Cash and cash equivalents
-beginning of period $722,209 $906,680
Net increase in cash and
cash equivalents 68,075 461,874
Cash and cash equivalents
-end of period $790,284 $1,368,554
======== ==========
Motorcycles and Related Products Revenue and
Motorcycle Shipment Data
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Three months ended Nine months ended
September 25, September 27, September 25, September 27,
2016 2015 2016 2015
---- ---- ---- ----
MOTORCYCLES AND RELATED
PRODUCTS REVENUE (in
thousands)
Motorcycles $788,856 $812,398 $3,437,066 $3,376,356
Parts & Accessories 231,279 252,226 673,192 692,938
General Merchandise 65,289 69,008 211,664 212,954
Other 6,206 6,689 16,431 19,426
$1,091,630 $1,140,321 $4,338,353 $4,301,674
========== ========== ========== ==========
MOTORCYCLE SHIPMENTS:
United States 26,269 30,092 141,708 141,884
International 22,342 23,380 78,099 76,349
Total 48,611 53,472 219,807 218,233
====== ====== ======= =======
MOTORCYCLE PRODUCT MIX:
Touring 23,295 21,994 89,467 95,354
Cruiser 13,986 18,405 78,570 71,753
Sportster(R) / Street 11,330 13,073 51,770 51,126
Total 48,611 53,472 219,807 218,233
====== ====== ======= =======
Worldwide Retail Sales of Harley-Davidson Motorcycles(1)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2016 2015 2016 2015
---- ---- ---- ----
Americas Region
United States 45,469 48,918 135,581 142,196
Canada 2,663 2,554 8,946 8,414
Latin America 2,605 2,818 7,064 8,091
Total Americas Region 50,737 54,290 151,591 158,701
Europe, Middle East
and Africa Region
(EMEA)
Europe(2) 8,807 8,441 32,590 30,720
Other 1,417 1,590 5,357 4,878
Total EMEA Region 10,224 10,031 37,947 35,598
Asia Pacific Region
Japan 2,762 2,642 7,631 7,194
Other 5,232 5,215 16,510 16,277
Total Asia Pacific
Region 7,994 7,857 24,141 23,471
Total Worldwide Retail
Sales 68,955 72,178 213,679 217,770
====== ====== ======= =======
Total International
Retail Sales 23,486 23,260 78,098 75,574
(1) Data source
for retail
sales
figures
shown above
is new sales
warranty and
registration
information
provided by
Harley-
Davidson
dealers and
compiled by
the Company.
The Company
must rely on
information
that its
dealers
supply
concerning
new retail
sales, and
this
information
is subject
to revision.
(2) Europe data
includes
Austria,
Belgium,
Denmark,
Finland,
France,
Germany,
Greece,
Italy,
Luxembourg,
Netherlands,
Norway,
Portugal,
Spain,
Sweden,
Switzerland,
and the
United
Kingdom.
Motorcycle Registration Data(1)
Nine months ended
September 30, September 30,
2016 2015
---- ----
United States(2) 263,479 279,013
Europe(3) 337,694 313,302
(1) Data includes
on-road
601+cc
models. On-
road 601+cc
models
include dual
purpose
models,
three-
wheeled
motorcycles
and
autocycles.
(2) United States
data is
derived from
information
provided by
Motorcycle
Industry
Council
(MIC). This
third party
data is
subject to
revision and
update.
(3) Europe data
includes
Austria,
Belgium,
Denmark,
Finland,
France,
Germany,
Greece,
Italy,
Luxembourg,
Netherlands,
Norway,
Portugal,
Spain,
Sweden,
Switzerland,
and the
United
Kingdom.
Industry
retail
motorcycle
registration
data includes
601+cc models
derived from
information
provided by
Association
des
Constructeurs
Europeens de
Motocycles
(ACEM), an
independent
agency. This
third-party
data is
subject to
revision and
update.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/harley-davidson-reports-third-quarter-2016-earnings-300346358.html
SOURCE Harley-Davidson, Inc.
