Harley-Davidson Announces Fourth Quarter, Full-Year 2017 Results
Full-year 2017 diluted EPS decreased to
"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
Objective to Build Riders Globally
As the company executed against its long-term objective to build the next generation of
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.
"The EV motorcycle market is in its infancy today, but we believe premium
Manufacturing Optimization
"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
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,
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,
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
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,
The company anticipates 2018 capital expenditures of $250 million to
Company Background
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
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. |
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(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. |
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(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. |
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SOURCE
Media, Michael Pflughoeft, +1-414-343-7100; Financial, Amy Giuffre, +1-414-343-8002