Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2017
 
 
Harley-Davidson, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Wisconsin
 
1-9183
 
39-1382325
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
3700 West Juneau Avenue, Milwaukee, Wisconsin 53208
(Address of principal executive offices, including zip code)
(414) 342-4680
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)
 








Item 2.02.
Results of Operations and Financial Condition.

On October 17, 2017, Harley-Davidson, Inc. (the “Company”) issued a press release (the “Press Release”) announcing the Company’s third quarter results for the financial period ended September 24, 2017. A copy of the Press Release is being furnished as Exhibit 99.1 to this Current Report.
 
Item 9.01.
Financial Statements and Exhibits.
(a)
Not applicable.
(b)
Not applicable.
(c)
Not applicable.
(d)
Exhibits. The following exhibit is being furnished herewith:

(99.1) Press Release of Harley-Davidson, Inc., dated October 17, 2017.







2





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
 
 
 
 
 
 
 
 
HARLEY-DAVIDSON, INC.
 
 
 
 
                                                                       Date: October 17, 2017
 
 
 
By:
 
/s/ Stephen W. Boettinger
 
 
 
 
 
 
Stephen W. Boettinger
 
 
 
 
 
 
Assistant Secretary


3
Exhibit

Exhibit 99.1



Harley-Davidson Announces Third Quarter 2017 Results

U.S. Market Share Up, Improved U.S. Dealer Inventory

MILWAUKEE, Oct. 17, 2017 - Harley-Davidson, Inc. (NYSE:HOG) third quarter 2017 diluted EPS decreased to $0.40 from $0.64 in the third quarter of 2016. Third quarter net income was $68.2 million on consolidated
revenue of $1.15 billion versus net income of $114.1 million on consolidated revenue of $1.27 billion in the third quarter of 2016.

“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 Harley-Davidson riders,” said Matt Levatich, president and CEO, Harley-Davidson, Inc. “Launching one hundred new high-impact motorcycles is a critical part of our 10-year journey, and the all new Softail line-up is a significant statement of our commitment.”

Harley-Davidson worldwide retail motorcycle sales were down 6.9 percent in the third quarter compared to the same period in 2016. Harley-Davidson U.S. retail motorcycle sales were down 8.1 percent compared to the year-
ago quarter, with the overall U.S. industry down 9.2 percent for the same period. Harley-Davidson's U.S. market share for the quarter was 53.1 percent in the 601cc-plus segment, up compared to the same quarter in 2016.
Harley-Davidson’s international retail motorcycle sales decreased 4.6 percent compared to the third quarter in
2016.

“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 2017 diluted EPS was $2.95, down 16.9 percent from $3.55 in the year-
ago period. Harley-Davidson 2017 net income was $513.4 million on consolidated revenue of $4.42 billion compared to nine-month 2016 net income of $645.0 million on consolidated revenue of $4.89 billion. For the
first nine months, worldwide retail motorcycle sales were down 6.1 percent compared to the same period in
2016.

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, Harley-Davidson's effective tax rate was 33.2 percent compared to 32.9
percent in the prior year period. The company now expects its full-year 2017 effective tax rate to be
approximately 33.4 percent.
    
Other Results
Cash and marketable securities totaled $683.1 million at the end of the third quarter, compared to $795.3
million a year ago. During the first nine months of 2017, Harley-Davidson generated $949.1 million of cash from operating activities compared to $927.8 million for the first nine months of 2016. The company paid a cash dividend of $0.365 per share for the third quarter of 2017, and a cumulative total of $1.095 per share for the
first nine months of 2017. On a discretionary basis, the company repurchased 4.5 million shares of its common stock during the third quarter of 2017 for $222 million. In the third quarter of 2017, there were 170.7 million weighted-average diluted common shares outstanding, compared to 179.3 million shares in the same period a
year ago. At the end of the period, 10.6 million shares remained on a board-approved share repurchase authorization.

Guidance
Harley-Davidson continues to expect to ship 241,000 to 246,000 motorcycles to dealers worldwide in 2017,
which is down approximately 6 percent to 8 percent from 2016. In the fourth quarter, the company expects to
ship 46,700 to 51,700 motorcycles compared to 42,414 motorcycles shipped in the year-ago period. The
company continues to expect full-year 2017 operating margin to be down approximately 1 percentage point compared to 2016. The company continues to expect 2017 capital expenditures to be $200 million to $220
million.







2



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 the Events and Presentations section. 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) 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

3



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.

Contact: Media, Katie Whitmore, +1-414-343-4480; Financial, Amy Giuffre, +1-414-343-8002





4



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,
2017
 
September 25,
2016
 
September 24,
2017
 
September 25,
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 and 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 provision for 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,
2017
 
December 31,
2016
 
September 25,
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,
2017
 
September 25,
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
)
Borrowings of asset-backed commercial paper
 
371,253

 
33,428

Repayments of asset-backed commercial paper
 
(129,690
)
 
(55,170
)
Net decrease in credit facilities and unsecured commercial paper
 
(225,038
)
 
(146,328
)
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)
 
 
Three months ended
 
Nine months ended
 
 
September 24,
2017
 
September 25,
2016
 
September 24,
2017
 
September 25,
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,
2017
 
September 30,
2016
 
September 30,
2017
 
September 30,
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,
2017
 
September 30,
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.