• Announces Progress in Building Riders

  • Initiates Manufacturing Optimization

  • Expands Product Development Through Increased Investment in Electric Motorcycle Technology

 

MILWAUKEEJan. 30, 2018 — Harley-Davidson, Inc. (NYSE:HOG) fourth quarter 2017 diluted EPS decreased to $0.05 from $0.27 in the fourth quarter of 2016. Fourth quarter 2017 net income was $8.3 million on consolidated revenue of $1.23 billion versus net income of $47.2 million on consolidated revenue of $1.11 billion in the fourth quarter of 2016. Fourth quarter 2017 revenue was up on higher shipments. Net income and EPS were adversely impacted by a $53.1 million income tax charge related to the enactment of the 2017 Tax Cuts and Jobs Act and a $29.4 million pre-tax charge for a voluntary product recall.

Full-year 2017 diluted EPS decreased to $3.02 from $3.83 in 2016. Full-year net income was $521.8 million on consolidated revenue of $5.65 billion versus net income of $692.2 million on consolidated revenue of $6.00 billion a year ago.

Harley-Davidson worldwide retail motorcycle sales were down 6.7 percent in 2017 compared to 2016. U.S. retail sales decreased 8.5 percent and international retail sales were down 3.9 percent.

“Our actions to address the current environment through disciplined supply and cost management position us well as we drive to achieve our long-term objectives to build the next generation of Harley-Davidson riders globally,” said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc.  “We finished 2017 with over 32,000 more Harley-Davidson riders in the U.S. than one year ago, and we delivered another year of strong cash generation and cash returns to our shareholders.”

Objective to Build Riders Globally
As the company executed against its long-term objective to build the next generation of Harley-Davidson riders globally, 57 new international dealer points were added in 2017, and U.S. dealers trained more than 62,000 riders through the Harley-Davidson Riding Academy. The company also maintained its number one 601+cc motorcycle market share position in countries including the U.S., CanadaJapanAustralia and India for 2017.

The company also launched its model year 2018 lineup of motorcycles, featuring the all-new, highly-acclaimed Softail® motorcycles featuring the powerful Milwaukee-Eight® engine. Harley-Davidson remains fully committed to investing in product development to inspire new riders through redefining its product in traditional spaces and expanding into new spaces. The company is on target to launch its first electric motorcycle within 18 months. Today, the company announces it will invest more aggressively to lead in the application of electric motorcycle technology to inspire ridership among a new audience.

“The EV motorcycle market is in its infancy today, but we believe premium Harley-Davidson electric motorcycles will help drive excitement and participation in the sport globally,” stated Levatich. “As we expand our EV capabilities and commitment, we get even more excited about the role electric motorcycles will play in growing our business.”

Manufacturing Optimization
Harley-Davidson plans to further improve its manufacturing operations and cost structure by commencing a multi-year manufacturing optimization initiative anchored by the consolidation of its motorcycle assembly plant in Kansas City, Mo. into its plant in York, Pa. The company expects to incur restructuring and other consolidation costs of $170 to $200 million and capital investment of approximately $75 million over the next two years and expects ongoing annual cash savings of $65 to $75 million after 2020.

“The decision to consolidate our final assembly plants was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment. Our Kansas City assembly operations will leave a legacy of safety, quality, collaboration and manufacturing leadership,” stated Levatich.

Harley-Davidson Retail Motorcycle Sales

4th Quarter

Full-Year

2017

2016

% Change

2017

2016

% Change

U.S.

23,195

26,077

(11.1)

147,972

161,658

(8.5)

Canada

1,318

1,257

4.9

10,081

10,203

(1.2)

Latin America

2,449

2,637

(7.1)

9,452

9,701

(2.6)

EMEA  

7,460

7,891

(5.5)

44,935

45,838

(2.0)

Asia Pacific

7,720

8,748

(11.8)

30,348

32,889

(7.7)

International Total

18,947

20,533

(7.7)

94,816

98,631

(3.9)

Worldwide Total

42,142

46,610

(9.6)

242,788

260,289

(6.7)

In the fourth quarter, Harley-Davidson worldwide retail motorcycle sales declined 9.6 percent versus the prior year. Harley-Davidson U.S. retail motorcycle sales were down 11.1 percent and the overall industry was down 6.5 percent compared to the year-ago quarter. Harley-Davidson U.S. market share was 50.8 percent in the 601+cc segment in the fourth quarter.

Motorcycles and Related Products Segment Results

$ in thousands

4th Quarter

Full-Year

2017

2016

% Change

2017

2016

% Change

Motorcycle Shipments (vehicles)

47,198

42,414

11.3

241,498

262,221

(7.9)

Revenue

 Motorcycles

$801,726

$685,047

17.0

$3,825,206

$4,122,113

(7.2)

 Parts & Accessories

$168,131

$169,445

(0.8)

$804,363

$842,637

(4.5)

 General Merchandise

$71,236

$72,919

(2.3)

$262,776

$284,583

(7.7)

Gross Margin Percent

30.9%

30.7%

0.2 pts.

33.6%

35.1%

(1.5) pts.

Operating Income

$37,821

$9,271

307.9

$615,958

$773,406

(20.4)

Operating Margin Percent

3.6%

1.0%

2.6 pts.

12.5%

14.7%

(2.2) pts.

Fourth quarter revenue from motorcycles and related products was up versus the prior year behind higher motorcycle shipments. Operating margin as a percent of revenue increased in the quarter compared to the same period in 2016.

Financial Services Segment Results

$ in thousands

4th Quarter

Full-Year

2017

2016

% Change

2017

2016

% Change

Revenue

$181,883

$177,577

2.4

$732,197

$725,082

1.0

Operating Income

$63,674

$60,139

5.9

$275,305

$275,530

(0.1)

Financial services operating income increased 5.9 percent in the fourth quarter compared to the year ago period.

Income Tax Rate
For 2017, Harley-Davidson’s effective tax rate was 39.6 percent compared to 32.4 percent in the prior year. The increased tax rate was largely due to the impact of the write-down of deferred tax assets related to the 2017 Tax Cuts and Jobs Act.

The Company expects its 2018 full-year effective tax rate to be approximately 23.5 to 25.0 percent, down considerably behind the expected benefit of the new tax legislation.

Other Results
Cash and marketable securities were $687.5 million at the end of 2017, compared to $765.5 million at the end of 2016. Harley-Davidson generated $1.01 billion of cash from operating activities in 2017 compared to $1.17 billion in 2016. On a discretionary basis, Harley-Davidson repurchased 8.7 million shares of its common stock at a cost of $456.1 million during 2017. During the fourth quarter of 2017, 169.2 million weighted-average diluted common shares were outstanding. At the end of 2017, 10.6 million shares remained on a board-approved share repurchase authorization.

2018 Outlook
For 2018, Harley-Davidson anticipates full-year motorcycle shipments to be approximately 231,000 to 236,000 motorcycles. In the first quarter of 2018, Harley-Davidson expects to ship approximately 60,000 to 65,000 motorcycles.

Harley-Davidson expects full-year 2018 operating margin as a percent of revenue to be approximately 9.5 to 10.5 percent including manufacturing optimization costs of $120 to $140 million.

The company anticipates 2018 capital expenditures of $250 million to $270 million which includes approximately $50 million to support manufacturing optimization.

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 fourth quarter and full-year 2017 results on a webcast at 8:00 a.m. CT today. The webcast login and supporting slides can be accessed at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio will be posted by approximately 10:00 a.m. CT.

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) execute its strategy of growing ridership, globally, (iii) effectively execute its manufacturing optimization initiative within expected costs and timing, (iv) develop and introduce products, services and experiences that are successful in the 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, (vi) 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, (vii) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (viii) manage risks that arise through expanding international manufacturing, operations and sales, (ix) successfully execute the company’s manufacturing strategy, including its flexible production strategy, (x) 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, and carry out any product programs or recalls within expected costs and timing, (xi) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness, (xii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xiii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS’ loan portfolio, (xiv) retain and attract talented employees, (xv) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (xvi) 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, (xvii) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the company’s business, (xviii) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xix) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xx) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xxi) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xxii) manage its exposure to product liability claims and commercial or contractual disputes, and (xxiii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations.

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)

Three months ended

Twelve months ended

December 31,

December 31,

December 31,

December 31,

2017

2016

2017

2016

Motorcycles and related products revenue

$    1,047,045

$      933,023

$    4,915,027

$    5,271,376

Gross profit

323,261

286,809

1,653,344

1,851,666

Selling, administrative and engineering expense

285,440

277,538

1,037,386

1,078,260

  Operating income from motorcycles & related products

37,821

9,271

615,958

773,406

Financial services revenue

181,883

177,577

732,197

725,082

Financial services expense

118,209

117,438

456,892

449,552

  Operating income from financial services

63,674

60,139

275,305

275,530

Operating income

101,495

69,410

891,263

1,048,936

Investment income

1,041

891

3,580

4,645

Interest expense

7,709

7,702

31,004

29,670

Income before income taxes

94,827

62,599

863,839

1,023,911

Provision for income taxes

86,513

15,420

342,080

331,747

Net income

$          8,314

$        47,179

$      521,759

$      692,164

Earnings per common share:

  Basic

$           0.05

$           0.27

$           3.03

$           3.85

  Diluted

$           0.05

$           0.27

$           3.02

$           3.83

Weighted-average common shares:

  Basic

168,271

176,616

171,995

179,676

  Diluted

169,195

177,642

172,932

180,535

Cash dividends per common share

$         0.365

$         0.350

$         1.460

$         1.400

 

Harley-Davidson, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

December 31,

2017

2016

ASSETS

Current assets:

    Cash and cash equivalents

$      687,521

$      759,984

    Marketable securities

5,519

    Accounts receivable, net

329,986

285,106

    Finance receivables, net

2,105,662

2,076,261

    Inventories

538,202

499,917

    Restricted cash

47,518

52,574

    Other current assets

175,853

174,491

Total current assets

3,884,742

3,853,852

Finance receivables, net

4,859,424

4,759,197

Other long-term assets

1,228,506

1,277,191

$    9,972,672

$    9,890,240

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

    Accounts payable & accrued liabilities

$      757,419

$      721,970

    Short-term debt

1,273,482

1,055,708

    Current portion of long-term debt, net

1,127,269

1,084,884

Total current liabilities

3,158,170

2,862,562

Long-term debt, net

4,587,258

4,666,975

Pension and postretirement healthcare liabilities

173,359

257,709

Other long-term liabilities

209,608

182,836

Total shareholders’ equity

1,844,277

1,920,158

$    9,972,672

$    9,890,240

 

Harley-Davidson, Inc.

Condensed Consolidated Statements of Cash Flows

 (In thousands)

(Unaudited)

Twelve months ended

December 31,

December 31,

2017

2016

Net cash provided by operating activities

$    1,005,061

$    1,174,339

Cash flows from investing activities:

  Capital expenditures

(206,294)

(256,263)

  Finance receivables, net

(363,637)

(489,464)

  Proceeds from sale of finance receivables

312,571

  Net change in marketable securities

6,916

40,014

  Other

547

411

Net cash used by investing activities

(562,468)

(392,731)

Cash flows from financing activities:

  Proceeds from issuance of medium-term notes

893,668

1,193,396

  Repayments of medium-term notes

(800,000)

(451,336)

  Repayments of securitization debt

(444,671)

(665,400)

  Net increase (decrease) in credit facilities and unsecured commercial paper

212,809

(145,812)

  Borrowings of asset-backed commercial paper

469,932

62,396

  Repayments of asset-backed commercial paper

(176,227)

(71,500)

  Net change in restricted cash

8,458

43,495

  Dividends paid

(251,862)

(252,321)

  Purchase of common stock for treasury

(465,263)

(465,341)

  Excess tax benefits from share-based payments

2,251

  Issuance of common stock under employee stock option plans

11,353

15,782

Net cash used by financing activities

(541,803)

(734,390)

Effect of exchange rate changes on cash and cash equivalents

26,747

(9,443)

Net (decrease) increase in cash and cash equivalents

$      (72,463)

$        37,775

Cash and cash equivalents:

  Cash and cash equivalents – beginning of period

$      759,984

$      722,209

  Net (decrease) increase in cash and cash equivalents

(72,463)

37,775

  Cash and cash equivalents – end of period

$      687,521

$      759,984

 

Motorcycles and Related Products Revenue and

 Motorcycle Shipment Data

(Unaudited)

(Unaudited)

(Unaudited)

Three months ended

Twelve months ended

December 31,

December 31,

December 31,

December 31,

2017

2016

2017

2016

MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands)

  Motorcycles

$      801,726

$      685,047

$    3,825,206

$    4,122,113

  Parts & Accessories

168,131

169,445

804,363

842,637

  General Merchandise

71,236

72,919

262,776

284,583

  Other

5,952

5,612

22,682

22,043

$    1,047,045

$      933,023

$    4,915,027

$    5,271,376

MOTORCYCLE SHIPMENTS:

    United States

26,475

20,131

144,893

161,839

    International

20,723

22,283

96,605

100,382

      Total 

47,198

42,414

241,498

262,221

MOTORCYCLE PRODUCT MIX:

    Touring

19,353

17,943

99,745

107,410

    Cruiser

19,651

14,852

87,344

93,422

    Sportster®/ Street

8,194

9,619

54,409

61,389

      Total

47,198

42,414

241,498

262,221

 

Worldwide Retail Sales of Harley-Davidson Motorcycles(1)

Three months ended

Twelve months ended

December 31,

December 31,

December 31,

December 31,

2017

2016

2017

2016

United States

23,195

26,077

147,972

161,658

Europe(2)

6,462

6,734

39,773

39,942

EMEA – Other

998

1,157

5,162

5,896

  Total EMEA

7,460

7,891

44,935

45,838

Japan

2,512

2,648

9,506

10,279

Asia Pacific – Other

5,208

6,100

20,842

22,610

  Total Asia Pacific

7,720

8,748

30,348

32,889

Latin America

2,449

2,637

9,452

9,701

Canada

1,318

1,257

10,081

10,203

  Total International Retail Sales

18,947

20,533

94,816

98,631

  Total Worldwide Retail Sales

42,142

46,610

242,788

260,289

(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 the Company does not regularly verify the information that its dealers supply. 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)

Twelve months ended

December 31,

December 31,

2017

2016

United States(2) 

288,802

311,710

Europe(3)

390,619

391,936

(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. 

 

One thought on “Harley-Davidson Announces Fourth Quarter, Full-Year 2017 Results

  1. And in 2018 they are still missing a large segment of riders.” Baby Boomers.” There is still a lot of us that like bling and shiny colors. Beside a couple annivs.115 there are a lot of very dull and bland colors. I don’t think the millenials really care what you change. This is just my opinion, but when I walk into the showroom I see a lot of bikes that look blah. Bring back mysterious red and I will buy new. Thanks Roger

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