SEC Filing | Harley-Davidson USA

View:

Download DOC

Download PDF

Download XLS

Download XBRL

hog-20200628

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)


Wisconsin			39-1382325
(State of organization)			(I.R.S. Employer Identification No.)

3700 West Juneau Avenue	Milwaukee	Wisconsin	53208
(Address of principal executive offices)			(Zip code)

Registrant's telephone number, including area code: (414) 342-4680

None

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock Par Value $.01 PER SHARE	HOG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding 153,241,253 shares of common stock as of July 31, 2020.

HARLEY-DAVIDSON, INC.

Form 10-Q

For The Quarter Ended June 28, 2020


Part I	Financial Information	3
Item 1.	Financial Statements	3
	Consolidated Statements of O perations	3
	Consolidated Statements of Comprehensive (Loss) Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders' Equity	8
	Notes to Consolidated Financial Statements	9
	1. Basis of presentation and use of estimates	9
	2. New accounting standards	9
	3. Revenue	11
	4. Restructuring activities	11
	5. Income taxes	13
	6. Earnings per share	13
	7. Additional balance sheet and cash flow information	14
	8. Finance receivables	15
	9. Goodwill, intangible and long-lived assets	20
	10. Derivative financial instruments and hedging activities	20
	11. Leases	23
	12. Debt	25
	13. Asset-backed financing	26
	14. Fair value	30
	15. Product warranty and recall campaigns	32
	16. Employee benefit plans	33
	17. Commitments and contingencies	33
	18. Accumulated other comprehensive loss	34
	19. Business segments	36
	20. Supplemental consolidating data	37

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	67
Part II	Other Information	68
Item 1.	Legal Proceedings	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 5.	Other Information	69
Item 6.	Exhibits	69
Signatures			70

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three months ended						Six months ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Revenue:
Motorcycles and Related Products	$	669,274	$	1,434,004	$	1,769,062	$	2,629,641
Financial Services	195,953		198,615		394,409		387,358
	865,227		1,632,619		2,163,471		3,016,999
Costs and expenses:
Motorcycles and Related Products cost of goods sold	561,646		979,266		1,342,514		1,827,464
Financial Services interest expense	62,187		52,673		114,660		104,997
Financial Services provision for credit losses	91,179		26,383		170,598		60,874
Selling, administrative and engineering expense	224,365		307,617		502,336		576,242
Restructuring expense	41,949		10,423		41,949		24,053
	981,326		1,376,362		2,172,057		2,593,630
Operating (loss) income	(116,099)		256,257		(8,586)		423,369
Other income, net	156		4,037		311		8,697
Investment income	5,757		3,571		410		9,929
Interest expense	7,769		7,784		15,524		15,515
(Loss) income before provision for income taxes	(117,955)		256,081		(23,389)		426,480
Income tax (benefit) provision	(25,738)		60,450		(867)		102,904
Net (loss) income	$	(92,217)	$	195,631	$	(22,522)	$	323,576
(Net loss) earnings per share:
Basic	$	(0.60)	$	1.23	$	(0.15)	$	2.03
Diluted	$	(0.60)	$	1.23	$	(0.15)	$	2.03
Cash dividends per share	$	0.020	$	0.375	$	0.400	$	0.750

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)


	Three months ended						Six months ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Net (loss) income	$	(92,217)	$	195,631	$	(22,522)	$	323,576
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	21,443		11,270		(13,012)		11,601
Derivative financial instruments	(6,309)		(11,923)		(26,154)		(12,364)

Pension and postretirement benefit plans	11,958		7,743		23,917		15,486
	27,092		7,090		(15,249)		14,723
Comprehensive (loss) income	$	(65,125)	$	202,721	$	(37,771)	$	338,299

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	(Unaudited)				(Unaudited)
	June 28, 2020		December 31, 2019		June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	3,856,597	$	833,868	$	924,638

Accounts receivable, net	271,431		259,334		325,306
Finance receivables, net of allowance of $75,563, $43,006, and $40,446	1,901,620		2,272,522		2,362,125
Inventories, net	429,339		603,571		470,610
Restricted cash	189,712		64,554		82,248
Other current assets	163,135		168,974		147,234
	6,811,834		4,202,823		4,312,161
Finance receivables, net of allowance of $335,452, $155,575, and $154,550	5,078,371		5,101,844		5,232,280
Property, plant and equipment, net	816,989		847,382		855,998
Prepaid pension costs	73,589		56,014		—
Goodwill	64,192		64,160		64,449
Deferred income taxes	141,566		101,204		134,639
Lease assets	53,031		61,618		54,913
Other long-term assets	116,580		93,114		85,876
	$	13,156,152	$	10,528,159	$	10,740,316
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	317,462	$	294,380	$	324,464
Accrued liabilities	604,210		582,288		615,905
Short-term debt	1,547,388		571,995		405,695
Current portion of long-term debt, net	2,186,037		1,748,109		2,396,188
	4,655,097		3,196,772		3,742,252
Long-term debt, net	6,488,499		5,124,826		4,650,176
Lease liabilities	36,394		44,447		38,365
Pension liabilities	57,033		56,138		92,750
Postretirement healthcare liabilities	69,964		72,513		92,539

Other long-term liabilities	225,460		229,464		213,593
Commitments and contingencies (Note 17)
Shareholders’ equity:
Preferred stock, none issued	—		—		—
Common stock	1,834		1,828		1,827
Additional paid-in-capital	1,494,259		1,491,004		1,474,819
Retained earnings	2,031,329		2,193,997		2,210,318
Accumulated other comprehensive loss	(552,198)		(536,949)		(614,961)
Treasury stock, at cost	(1,351,519)		(1,345,881)		(1,161,362)
	1,623,705		1,803,999		1,910,641
	$	13,156,152	$	10,528,159	$	10,740,316

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)


	(Unaudited)				(Unaudited)
	June 28, 2020		December 31, 2019		June 30, 2019
Balances held by consolidated variable interest entities (Note 13):
Finance receivables, net - current	$	631,474	$	291,444	$	320,710
Other assets	$	2,430	$	2,420	$	1,533
Finance receivables, net - non-current	$	2,531,323	$	1,027,179	$	1,240,081
Restricted cash - current and non-current	$	199,748	$	63,812	$	79,436
Current portion of long-term debt, net	$	750,474	$	317,607	$	360,269
Long-term debt, net	$	2,251,473	$	937,212	$	1,106,736

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six months ended
	June 28, 2020		June 30, 2019
Net cash provided by operating activities (Note 7)	$	610,203	$	496,232
Cash flows from investing activities:
Capital expenditures	(67,026)		(83,229)
Origination of finance receivables	(1,869,569)		(2,064,899)
Collections on finance receivables	1,785,698		1,768,829


Sales and redemptions of marketable securities	—		10,007
Acquisition of business	—		(7,000)
Other investing activities	(381)		11,717
Net cash used by investing activities	(151,278)		(364,575)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	1,396,602		546,655
Repayments of medium-term notes	(1,400,000)		(750,000)


Proceeds from securitization debt	2,064,450		1,021,353
Repayments of securitization debt	(369,613)		(113,806)
Borrowings of asset-backed commercial paper	225,187		23,373
Repayments of asset-backed commercial paper	(143,306)		(155,286)
Net increase (decrease) in unsecured commercial paper	831,354		(728,606)
Net increase in credit facilities	150,000		—
Deposits	17,995		—
Dividends paid	(61,917)		(120,841)
Repurchase of common stock	(7,156)		(104,621)

Issuance of common stock under share-based plans	41		833
Net cash provided (used) by financing activities	2,703,637		(380,946)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(382)		3,439
Net increase (decrease) in cash, cash equivalents and restricted cash	$	3,162,180	$	(245,850)

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	3,162,180		(245,850)
Cash, cash equivalents and restricted cash, end of period	$	4,067,546	$	1,013,898

Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents	$	3,856,597	$	924,638
Restricted cash	189,712		82,248
Restricted cash included in Other long-term assets	21,237		7,012
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	4,067,546	$	1,013,898

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share amounts)

(Unaudited)


	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
	Issued Shares	Balance
Balance, December 31, 2019	182,816,536	$	1,828	$	1,491,004	$	2,193,997	$	(536,949)	$	(1,345,881)	$	1,803,999
Net income	—	—		—		69,695		—		—		69,695
Other comprehensive loss, net of tax (Note 18)	—	—		—		—		(42,341)		—		(42,341)
Dividends ($0.380 per share)	—	—		—		(58,817)		—		—		(58,817)
Repurchase of common stock	—	—		—		—		—		(7,071)		(7,071)
Share-based compensation	585,053	6		4,137		—		—		604		4,747
Cumulative effect of change in accounting (Note 2)	—	—		—		(78,229)		—		—