Harley-Davidson Announces Third Quarter 2017 Results
"The continued weakness in the U.S. motorcycle industry only heightens our resolve and the intensity we are bringing to the quest to build the next generation of
"As the motorcycle industry leader – with dealer strength and rider passion and loyalty like no other – we believe we are uniquely positioned to build ridership and strengthen the sport of motorcycling. Not just in the U.S. but around the world. Our investments in new product and marketing are targeted to drive ridership growth. We have the strategies, plans and people to make it happen," said Levatich.
Through nine months,
Harley-Davidson Retail Motorcycle Sales |
||||||
In units as reported by H-D dealers |
3rd Quarter |
Nine Months |
||||
2017 |
2016 |
Change |
2017 |
2016 |
Change |
|
U.S. |
41,793 |
45,469 |
(8.1)% |
124,777 |
135,581 |
(8.0)% |
Canada |
2,575 |
2,663 |
(3.3)% |
8,763 |
8,946 |
(2.0)% |
Latin America |
2,306 |
2,605 |
(11.5)% |
7,003 |
7,064 |
(0.9)% |
EMEA |
10,078 |
10,224 |
(1.4)% |
37,475 |
37,947 |
(1.2)% |
Asia Pacific |
7,457 |
7,994 |
(6.7)% |
22,628 |
24,141 |
(6.3)% |
International Total |
22,416 |
23,486 |
(4.6)% |
75,869 |
78,098 |
(2.9)% |
Worldwide Total |
64,209 |
68,955 |
(6.9)% |
200,646 |
213,679 |
(6.1)% |
Harley-Davidson new retail motorcycle sales in the U.S. were down in the third quarter compared to the third quarter of 2016, primarily driven by weak industry conditions including the impacts of hurricanes in the southeast and Texas. International new retail motorcycle sales were also down in the quarter compared to the same period in 2016, driven by weak performance in Japan, Australia and Mexico. |
Motorcycles and Related Products Segment Results |
||||||
$ in thousands |
3rd Quarter |
Nine Months |
||||
2017 |
2016 |
Change |
2017 |
2016 |
Change |
|
Motorcycle Shipments (vehicles) |
41,662 |
48,611 |
(14.3)% |
194,300 |
219,807 |
(11.6)% |
Revenue |
||||||
Motorcycles |
653,345 |
788,856 |
(17.2)% |
3,023,480 |
3,437,066 |
(12.0)% |
Parts & Accessories |
229,709 |
231,279 |
(0.7)% |
636,232 |
673,192 |
(5.5)% |
General Merchandise |
72,687 |
65,289 |
11.3% |
191,540 |
211,664 |
(9.5)% |
Gross Margin |
28.8% |
33.6% |
(4.8)pts |
34.4% |
36.1% |
(1.7)pts |
Operating Income |
19,648 |
108,929 |
(82.0)% |
578,137 |
764,135 |
(24.3)% |
Operating Margin |
2.0% |
10.0% |
(8.0)pts |
14.9% |
17.6% |
(2.7)pts |
Revenue from the Motorcycles and Related Products segment was down in the third quarter of 2017 versus prior year largely due to decreased motorcycle shipments. Operating margin was down in the quarter versus prior year due to lower shipments, unfavorable mix and higher manufacturing costs. |
Financial Services Segment Results |
||||||
$ in thousands |
3rd Quarter |
Nine Months |
||||
2017 |
2016 |
Change |
2017 |
2016 |
Change |
|
Revenue |
189,059 |
183,183 |
3.2% |
550,314 |
547,505 |
0.5% |
Operating Income |
77,060 |
69,447 |
11.0% |
211,631 |
215,391 |
(1.7)% |
The Financial Services segment operating income was up 11 percent in the third quarter compared to the year ago period due to a lower provision for credit losses. |
Income Tax Rate
For the first nine months of 2017,
Other Results
Cash and marketable securities totaled
Guidance
Company Background
Conference Call and Webcast Presentation
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) 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, (iii) develop and introduce products, services and experiences that are successful in the marketplace, (iv) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (v) 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, (vi) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (vii) manage risks that arise through expanding international manufacturing, operations and sales, (viii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (ix) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (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, (xi) retain and attract talented employees, (xii) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (xiii) 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, (xiv) adjust to tax reform, healthcare inflation and reform and pension reform, (xv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xvi) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xvii) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xviii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xix) manage its exposure to product liability claims and commercial or contractual disputes, (xx) execute its flexible production strategy, (xxi) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, and (xxii) 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 24, |
September 25, |
September 24, |
September 25, |
||||
2017 |
2016 |
2017 |
2016 |
||||
Motorcycles and related products revenue |
$ 962,136 |
$ 1,091,630 |
$ 3,867,982 |
$ 4,338,353 |
|||
Gross profit |
276,975 |
367,019 |
1,330,083 |
1,564,857 |
|||
Selling, administrative and engineering expense |
257,327 |
258,090 |
751,946 |
800,722 |
|||
Operating income from motorcycles & related products |
19,648 |
108,929 |
578,137 |
764,135 |
|||
Financial services revenue |
189,059 |
183,183 |
550,314 |
547,505 |
|||
Financial services expense |
111,999 |
113,736 |
338,683 |
332,114 |
|||
Operating income from financial services |
77,060 |
69,447 |
211,631 |
215,391 |
|||
Operating income |
96,708 |
178,376 |
789,768 |
979,526 |
|||
Investment income |
1,083 |
2,300 |
2,539 |
3,754 |
|||
Interest expense |
7,896 |
7,706 |
23,295 |
21,968 |
|||
Income before income taxes |
89,895 |
172,970 |
769,012 |
961,312 |
|||
Provision for income taxes |
21,686 |
58,905 |
255,567 |
316,327 |
|||
Net income |
$ 68,209 |
$ 114,065 |
$ 513,445 |
$ 644,985 |
|||
Earnings per common share: |
|||||||
Basic |
$ 0.40 |
$ 0.64 |
$ 2.96 |
$ 3.57 |
|||
Diluted |
$ 0.40 |
$ 0.64 |
$ 2.95 |
$ 3.55 |
|||
Weighted-average common shares: |
|||||||
Basic |
169,850 |
178,438 |
173,362 |
180,779 |
|||
Diluted |
170,688 |
179,320 |
174,303 |
181,582 |
|||
Cash dividends per common share |
$ 0.365 |
$ 0.350 |
$ 1.095 |
$ 1.050 |
|||
Harley-Davidson, Inc. |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(In thousands) |
|||||||
(Unaudited) |
(Unaudited) |
||||||
September 24, |
December 31, |
September 25, |
|||||
2017 |
2016 |
2016 |
|||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ 683,134 |
$ 759,984 |
$ 790,284 |
||||
Marketable securities |
- |
5,519 |
5,038 |
||||
Accounts receivable, net |
343,124 |
285,106 |
346,176 |
||||
Finance receivables, net |
2,058,168 |
2,076,261 |
2,205,644 |
||||
Inventories |
469,091 |
499,917 |
426,547 |
||||
Restricted cash |
52,209 |
52,574 |
65,088 |
||||
Other current assets |
182,416 |
174,491 |
263,567 |
||||
Total current assets |
3,788,142 |
3,853,852 |
4,102,344 |
||||
Finance receivables, net |
5,042,857 |
4,759,197 |
4,944,322 |
||||
Other long-term assets |
1,257,360 |
1,277,191 |
1,165,560 |
||||
$ 10,088,359 |
$ 9,890,240 |
$ 10,212,226 |
|||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable & accrued liabilities |
$ 851,075 |
$ 721,970 |
$ 798,127 |
||||
Short-term debt |
834,875 |
1,055,708 |
1,055,428 |
||||
Current portion of long-term debt, net |
1,530,401 |
1,084,884 |
700,152 |
||||
Total current liabilities |
3,216,351 |
2,862,562 |
2,553,707 |
||||
Long-term debt, net |
4,607,791 |
4,666,975 |
5,170,609 |
||||
Pension and postretirement healthcare liabilities |
215,396 |
257,709 |
303,319 |
||||
Other long-term liabilities |
192,001 |
182,836 |
192,223 |
||||
Total shareholders' equity |
1,856,820 |
1,920,158 |
1,992,368 |
||||
$ 10,088,359 |
$ 9,890,240 |
$ 10,212,226 |
|||||
Harley-Davidson, Inc. |
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
(Unaudited) |
(Unaudited) |
||||||
Nine months ended |
|||||||
September 24, |
September 25, |
||||||
2017 |
2016 |
||||||
Net cash provided by operating activities |
$ 949,075 |
$ 927,809 |
|||||
Cash flows from investing activities: |
|||||||
Capital expenditures |
(114,022) |
(162,726) |
|||||
Finance receivables, net |
(447,250) |
(569,013) |
|||||
Proceeds from sale of finance receivables |
- |
312,571 |
|||||
Net change in marketable securities |
6,916 |
40,014 |
|||||
Other |
356 |
251 |
|||||
Net cash used by investing activities |
(554,000) |
(378,903) |
|||||
Cash flows from financing activities: |
|||||||
Proceeds from issuance of medium-term notes |
893,668 |
1,193,396 |
|||||
Repayments of medium-term notes |
(400,000) |
(451,336) |
|||||
Repayments of securitization debt |
(367,298) |
(535,616) |
|||||
Net decrease in credit facilities and unsecured commercial paper |
(225,038) |
(146,328) |
|||||
Borrowings of asset-backed commercial paper |
371,253 |
33,428 |
|||||
Repayments of asset-backed commercial paper |
(129,690) |
(55,170) |
|||||
Net change in restricted cash |
3,767 |
30,981 |
|||||
Dividends paid |
(190,121) |
(190,387) |
|||||
Purchase of common stock for treasury |
(465,167) |
(374,234) |
|||||
Excess tax benefits from share-based payments |
- |
1,291 |
|||||
Issuance of common stock under employee stock option plans |
7,884 |
6,444 |
|||||
Net cash used by financing activities |
(500,742) |
(487,531) |
|||||
Effect of exchange rate changes on cash and cash equivalents |
28,817 |
6,700 |
|||||
Net (decrease) increase in cash and cash equivalents |
$ (76,850) |
$ 68,075 |
|||||
Cash and cash equivalents: |
|||||||
Cash and cash equivalents - beginning of period |
$ 759,984 |
$ 722,209 |
|||||
Net (decrease) increase in cash and cash equivalents |
(76,850) |
68,075 |
|||||
Cash and cash equivalents - end of period |
$ 683,134 |
$ 790,284 |
|||||
Motorcycles and Related Products Revenue and |
|||||||
Motorcycle Shipment Data |
|||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
||||
Three months ended |
Nine months ended |
||||||
September 24, |
September 25, |
September 24, |
September 25, |
||||
2017 |
2016 |
2017 |
2016 |
||||
MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands) |
|||||||
Motorcycles |
$ 653,345 |
$ 788,856 |
$ 3,023,480 |
$ 3,437,066 |
|||
Parts & Accessories |
229,709 |
231,279 |
636,232 |
673,192 |
|||
General Merchandise |
72,687 |
65,289 |
191,540 |
211,664 |
|||
Other |
6,395 |
6,206 |
16,730 |
16,431 |
|||
$ 962,136 |
$ 1,091,630 |
$ 3,867,982 |
$ 4,338,353 |
||||
MOTORCYCLE SHIPMENTS: |
|||||||
United States |
19,668 |
26,269 |
118,418 |
141,708 |
|||
International |
21,994 |
22,342 |
75,882 |
78,099 |
|||
Total |
41,662 |
48,611 |
194,300 |
219,807 |
|||
MOTORCYCLE PRODUCT MIX: |
|||||||
Touring |
14,674 |
23,295 |
80,392 |
89,467 |
|||
Cruiser |
17,292 |
13,986 |
67,693 |
78,570 |
|||
Sportster®/ Street |
9,696 |
11,330 |
46,215 |
51,770 |
|||
Total |
41,662 |
48,611 |
194,300 |
219,807 |
|||
Worldwide Retail Sales of Harley-Davidson Motorcycles(1) |
|||||||
Three months ended |
Nine months ended |
||||||
September 30, |
September 30, |
September 30, |
September 30, |
||||
2017 |
2016 |
2017 |
2016 |
||||
United States |
41,793 |
45,469 |
124,777 |
135,581 |
|||
Europe(2) |
8,970 |
8,807 |
33,311 |
32,841 |
|||
EMEA - Other |
1,108 |
1,417 |
4,164 |
5,106 |
|||
Total EMEA |
10,078 |
10,224 |
37,475 |
37,947 |
|||
Japan |
2,331 |
2,762 |
6,994 |
7,631 |
|||
Asia Pacific - Other |
5,126 |
5,232 |
15,634 |
16,510 |
|||
Total Asia Pacific |
7,457 |
7,994 |
22,628 |
24,141 |
|||
Latin America |
2,306 |
2,605 |
7,003 |
7,064 |
|||
Canada |
2,575 |
2,663 |
8,763 |
8,946 |
|||
Total International Retail Sales |
22,416 |
23,486 |
75,869 |
78,098 |
|||
Total Worldwide Retail Sales |
64,209 |
68,955 |
200,646 |
213,679 |
(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. The EMEA Europe total for the nine months ended September 30, 2016 includes 251 units originally reported in the EMEA - Other total. |
Motorcycle Registration Data(1) |
|||||
Nine months ended |
|||||
September 30, |
September 30, |
||||
2017 |
2016 |
||||
United States(2) |
243,718 |
263,479 |
|||
Europe(3) |
345,701 |
337,695 |
(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. |
View original content:http://www.prnewswire.com/news-releases/harley-davidson-announces-third-quarter-2017-results-300537583.html
SOURCE
Media, Katie Whitmore, +1-414-343-4480; Financial, Amy Giuffre, +1-414-343-8002