Harley-Davidson Resets Business to Execute The Hardwire Strategic Plan
"2020 was an extraordinary year in many ways and our team navigated many challenges. We managed COVID-19 impacts, kept our community well-being at the forefront, protected liquidity and delivered
2020 Highlights and Results
- Delivered full year diluted EPS of
$0.01 and adjusted diluted EPS of$0.77 - Executed COVID-19 response:
- prioritized employee well-being
- provided support to our customers and dealers
- maintained sufficient cash and liquidity
- achieved
$250 million of cash savings versus planned spending in 2020
- Increased cash flow from operations
$310 million from 2019 to$1.2 billion - Paid dividends of
$0.44 per share for the full year - Overhauled and reset the cost structure of the business through The Rewire actions; effectively lowering our cost base by approximately
$115 million - Delivered additional The Rewire results:
- Streamlined product portfolio reducing planned number of models by 30 percent
- Re-set motorcycle model year launch timing to align with seasonality
- Exited 39 markets to sharpen focus on the approximately 50 highest-potential markets
- Optimized dealer network, reducing total network by approximately 160 net global dealers in 2020
- Dealer year-end inventory reduced 59 percent, driving improvements in motorcycle transaction prices and enhancing motorcycle value
The company continues its H-D#1 culture evolution to drive a high-performing and winning organization guided by its vision and mission.
The Rewire and H-D#1 efforts set the company on a new course and provide a solid foundation to execute its long-term strategic plan, The
$ in millions (except EPS) |
4th quarter |
Full-Year |
||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
|
Revenue |
|
|
(32)% |
|
|
(24)% |
Net Income / (Loss) |
( |
|
nm |
|
|
nm |
GAAP Diluted EPS |
( |
|
nm |
|
|
nm |
Adjusted Diluted EPS |
( |
|
nm |
|
|
(77)% |
Consolidated Revenue was down 32 percent in the fourth quarter and down 24 percent for the full year over 2019. Bottom-line results reflect a loss for the quarter and nominal net income for the full year with Financial Services segment operating income offsetting Motorcycles and Related Products segment operating losses for the year.
Motorcycles and Related Products Segment Results
$ in millions |
4th quarter |
Full-Year |
||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
|
Motorcycle Shipments (thousands) |
20.9 |
40.5 |
(48)% |
145.2 |
213.9 |
(32)% |
Revenue |
|
|
(39)% |
|
|
(29)% |
Gross Margin |
21.6% |
25.2% |
(3.7) pts. |
25.4% |
29.4% |
(4.0) pts. |
Operating Income / (Loss) |
( |
( |
nm |
( |
|
nm |
Operating Margin |
-37.0% |
-5.3% |
(31.7) pts. |
-5.7% |
6.3% |
(12.0) pts. |
Dealer Retail Motorcycle Unit Sales (thousands) |
33.3 |
38.8 |
(14)% |
180.2 |
218.3 |
(17)% |
Revenue from the Motorcycles and Related Products segment was down during the fourth quarter primarily due to lower wholesale shipments versus prior year as the company continued its aggressive approach to supply and inventory management and reset the timing of delivery of new model year motorcycles. Fourth quarter global retail motorcycle sales also reflected the impact of tight inventory and the model year shift.
Fourth quarter gross margin was down 3.7 percentage points to prior year while fourth quarter operating margin finished below prior year due to the impact of volume deleverage and restructuring charges.
Financial Services Segment Results
$ in millions |
4th quarter |
Full-Year |
||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
|
Revenue |
|
|
(2)% |
|
|
0% |
Operating Income |
|
|
31% |
|
|
(26)% |
Financial Services segment operating income was up 31 percent over prior year in the fourth quarter, primarily driven by a decrease in the provision for loan losses. Full year operating income was down due to increases in the provision for loan losses taken earlier in 2020.
Other Results
Cash - Cash and cash equivalents were
Tax Rate - The company recorded an income tax benefit during 2020 driven by a pre-tax loss and favorable discrete income tax benefits recorded during the year.
Dividends– The company paid cash dividends of
Company Background
Webcast
Harley-Davidson will discuss its financial results, strategic plan and outlook on a webcast today from 8-9:30 a.m. CT. The webcast log-in and a slide presentation supporting the discussion will be available 30 minutes prior to the audio webcast at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio replay will be available at approximately
Non-GAAP Disclosure
This press release includes financial measures that have not been calculated in accordance with
The non-GAAP measures included in this press release are adjusted net (loss) income and adjusted diluted EPS excluding restructuring plan costs and the impact of tariffs. Restructuring plan costs include restructuring expenses as presented in the consolidated statements of operations and costs associated with temporary inefficiencies incurred in connection with the manufacturing optimization initiative included in Motorcycles and Related Products cost of goods sold. The impact of tariffs includes incremental
Cautionary Note Regarding Forward-Looking Statements
The company intends that certain matters discussed in this press 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 by reference to this footnote or because the context of the statement will include words such as the company "believes," "anticipates," "expects," "plans," "may," "will," "estimates," "targets," "intend," "is on-track" or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments 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 press 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 are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are only made as of the date of this press release, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic and (ii) the company's ability to: (A) execute its business plans and strategies, including The
The company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed with the
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 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, the impact of COVID-19, or other factors. In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actions that the company has taken and could take that impact motorcycle values. Refer to "Risk Factors" under Item 1A of the company's Annual Report on Form 10-K for the year ended
|
||||||||
Condensed Consolidated Statements of Operations |
||||||||
(In thousands, except per share amounts) |
||||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
||||||
Three months ended |
Twelve months ended |
|||||||
|
|
|
|
|||||
2020 |
2019 |
2020 |
2019 |
|||||
Motorcycles and Related Products revenue |
$ 530,963 |
$ 874,095 |
$ 3,264,054 |
$ 4,572,678 |
||||
Gross profit |
114,528 |
220,639 |
828,309 |
1,342,880 |
||||
Selling, administrative and engineering expense |
276,409 |
266,428 |
895,321 |
1,020,907 |
||||
Restructuring expense |
34,524 |
671 |
119,110 |
32,353 |
||||
Operating (loss) income from Motorcycles and Related Products |
(196,405) |
(46,460) |
(186,122) |
289,620 |
||||
Financial Services revenue |
194,259 |
198,176 |
790,323 |
789,111 |
||||
Financial Services expense |
107,852 |
139,321 |
583,623 |
523,123 |
||||
Financial Services restructuring expense |
9,621 |
- |
10,899 |
- |
||||
Operating income from Financial Services |
76,786 |
58,855 |
195,801 |
265,988 |
||||
Operating (loss) income |
(119,619) |
12,395 |
9,679 |
555,608 |
||||
Non-operating (expense) income, net |
(5,650) |
1,284 |
(25,409) |
1,807 |
||||
(Loss) income before income taxes |
(125,269) |
13,679 |
(15,730) |
557,415 |
||||
Income tax (benefit) provision |
(28,871) |
183 |
(17,028) |
133,780 |
||||
Net (loss) income |
$ (96,398) |
$ 13,496 |
$ 1,298 |
$ 423,635 |
||||
(Net loss) earnings per share: |
||||||||
Basic |
$ (0.63) |
$ 0.09 |
$ 0.01 |
$ 2.70 |
||||
Diluted |
$ (0.63) |
$ 0.09 |
$ 0.01 |
$ 2.68 |
||||
Weighted-average shares: |
||||||||
Basic |
153,281 |
153,947 |
153,186 |
157,054 |
||||
Diluted |
153,281 |
154,913 |
153,908 |
157,804 |
||||
Cash dividends per share: |
$ 0.020 |
$ 0.375 |
$ 0.440 |
$ 1.500 |
||||
|
||||||||
Reconciliation of GAAP Amounts to Non-GAAP Amounts |
||||||||
(In thousands, except per share amounts) |
||||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Three months ended |
Twelve months ended |
|||||||
|
|
|
|
|||||
2020 |
2019 |
2020 |
2019 |
|||||
Net (loss) income excluding restructuring plan costs and the impact of tariffs |
||||||||
Net (loss) income (GAAP) |
$ (96,398) |
$ 13,496 |
$ 1,298 |
$ 423,635 |
||||
Restructuring plan costs |
44,145 |
973 |
130,009 |
42,688 |
||||
Impact of incremental tariffs |
2,055 |
20,881 |
24,452 |
97,852 |
||||
Tax effect of adjustments(a) |
(17,585) |
(4,568) |
(37,071) |
(33,729) |
||||
Adjustments net of tax |
28,615 |
17,286 |
117,390 |
106,811 |
||||
Adjusted net (loss) income (non-GAAP) |
$ (67,783) |
$ 30,782 |
$ 118,688 |
$ 530,446 |
||||
Diluted EPS excluding restructuring plan costs and the impact of tariffs |
||||||||
Diluted EPS (GAAP) |
$ (0.63) |
$ 0.09 |
$ 0.01 |
$ 2.68 |
||||
Adjustments net of tax, per share |
0.19 |
0.11 |
0.76 |
0.68 |
||||
Adjusted diluted EPS (non-GAAP) |
$ (0.44) |
$ 0.20 |
$ 0.77 |
$ 3.36 |
||||
(a) The income tax effect has been computed using the estimated income tax rate for these adjustments |
||||||||
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
|
|
|||||||
2020 |
2019 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 3,257,203 |
$ 833,868 |
||||||
Accounts receivable, net |
143,082 |
259,334 |
||||||
Finance receivables, net |
1,509,539 |
2,272,522 |
||||||
Inventories, net |
523,497 |
603,571 |
||||||
Restricted cash |
131,642 |
64,554 |
||||||
Other current assets |
280,470 |
168,974 |
||||||
5,845,433 |
4,202,823 |
|||||||
Finance receivables, net |
4,933,469 |
5,101,844 |
||||||
Other long-term assets |
1,231,699 |
1,223,492 |
||||||
$ 12,010,601 |
|
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ 848,118 |
$ 876,668 |
||||||
Deposits |
79,965 |
- |
||||||
Short-term debt |
1,014,274 |
571,995 |
||||||
Current portion of long-term debt, net |
2,039,597 |
1,748,109 |
||||||
3,981,954 |
3,196,772 |
|||||||
Long-term debt, net |
5,932,933 |
5,124,826 |
||||||
Other long-term liabilities |
372,929 |
402,562 |
||||||
Shareholders' equity |
1,722,785 |
1,803,999 |
||||||
$ 12,010,601 |
|
|||||||
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
Twelve months ended |
||||||||
|
|
|||||||
2020 |
2019 |
|||||||
Net cash provided by operating activities |
$ 1,177,890 |
$ 868,272 |
||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(131,050) |
(181,440) |
||||||
Finance receivables, net |
42,803 |
(347,605) |
||||||
Acquisition of business |
- |
(7,000) |
||||||
Other investing activities |
21,464 |
27,919 |
||||||
Net cash used by investing activities |
(66,783) |
(508,126) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of medium-term notes |
1,396,602 |
1,203,236 |
||||||
Repayments of medium-term notes |
(1,400,000) |
(1,350,000) |
||||||
Proceeds from securitization debt |
2,064,450 |
1,021,453 |
||||||
Repayments of securitization debt |
(1,041,751) |
(353,251) |
||||||
Net increase (decrease) in unsecured commercial paper |
444,380 |
(563,453) |
||||||
Borrowings of asset-backed commercial paper |
225,187 |
177,950 |
||||||
Repayments of asset-backed commercial paper |
(318,828) |
(318,006) |
||||||
Deposits |
79,947 |
- |
||||||
Dividends paid |
(68,087) |
(237,221) |
||||||
Repurchase of common stock |
(8,006) |
(296,520) |
||||||
Issuance of common stock under employee stock option plans |
89 |
3,589 |
||||||
Net cash provided (used) by financing activities |
1,373,983 |
(712,223) |
||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
18,712 |
(2,305) |
||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
$ 2,503,802 |
$ (354,382) |
||||||
Cash, cash equivalents and restricted cash: |
||||||||
Cash, cash equivalents and restricted cash, beginning of period |
$ 905,366 |
$ 1,259,748 |
||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
2,503,802 |
(354,382) |
||||||
Cash, cash equivalents and restricted cash, end of period |
$ 3,409,168 |
$ 905,366 |
||||||
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows: |
||||||||
Cash and cash equivalents |
$ 3,257,203 |
$ 833,868 |
||||||
Restricted cash |
131,642 |
64,554 |
||||||
Restricted cash included in Other long-term assets |
20,323 |
6,944 |
||||||
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows |
$ 3,409,168 |
$ 905,366 |
||||||
Motorcycles and Related Products Revenue and Motorcycle Shipment Data |
||||||||
(Unaudited) |
||||||||
(Revenue in thousands) |
||||||||
Three months ended |
Twelve months ended |
|||||||
|
|
|
|
|||||
2020 |
2019 |
2020 |
2019 |
|||||
MOTORCYCLES AND RELATED PRODUCTS REVENUE |
||||||||
Motorcycles |
$ 319,959 |
$ 666,287 |
$ 2,350,407 |
$ 3,538,269 |
||||
Parts & accessories |
146,431 |
129,266 |
659,632 |
713,400 |
||||
General merchandise |
49,749 |
57,187 |
186,070 |
237,566 |
||||
Licensing |
7,924 |
8,818 |
29,750 |
35,917 |
||||
Other |
6,900 |
12,537 |
38,195 |
47,526 |
||||
$ 530,963 |
$ 874,095 |
$ 3,264,054 |
$ 4,572,678 |
|||||
WORLDWIDE MOTORCYCLE SHIPMENTS |
||||||||
Touring |
8,256 |
15,147 |
56,067 |
91,018 |
||||
Cruiser(a) |
7,724 |
16,685 |
55,229 |
76,052 |
||||
Sportster®/ Street |
4,941 |
8,622 |
33,950 |
46,869 |
||||
20,921 |
40,454 |
145,246 |
213,939 |
|||||
(a)Includes Softail®, CVOTM, and LiveWireTM |
||||||||
Worldwide Retail Sales of Harley-Davidson Motorcycles(a) |
||||||||
(Unaudited) |
||||||||
Three months ended |
Twelve months ended |
|||||||
|
|
|
|
|||||
2020 |
2019 |
2020 |
2019 |
|||||
|
17,274 |
20,204 |
103,650 |
125,960 |
||||
|
809 |
1,159 |
6,477 |
8,946 |
||||
|
18,083 |
21,363 |
110,127 |
134,906 |
||||
EMEA |
7,028 |
7,187 |
36,906 |
44,086 |
||||
|
6,949 |
7,691 |
27,220 |
29,513 |
||||
|
1,235 |
2,513 |
5,995 |
9,768 |
||||
Total worldwide retail sales |
33,295 |
38,754 |
180,248 |
218,273 |
||||
(a)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. |
### (HOG-F)
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SOURCE
Jenni Coats, jenni.coats@Harley-Davidson.com, 414.343.7902; Financial, Shannon Burns, shannon.burns@Harley-Davidson.com, 414.343.8002