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Harley-Davidson Reports Fourth Quarter, Full-Year 2016 Results
Market Share Gains in the U.S. While Industry Sales Decline

MILWAUKEE, Jan. 31, 2017 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) fourth quarter 2016 diluted EPS increased 22.7 percent to $0.27 compared to $0.22 in the same period of 2015. In the fourth quarter of 2016, net income was $47.2 million on consolidated revenue of $1.11 billion versus net income of $42.2 million on consolidated revenue of $1.18 billion in the year-ago period. Full-year 2016 diluted EPS increased 3.8 percent to $3.83 compared to diluted EPS of $3.69 in 2015. Full-year net income was $692.2 million on consolidated revenue of $6.0 billion versus net income of $752.2 million on consolidated revenue of $6.0 billion a year ago. 

"The global competitive environment remains intense, but our 2016 results demonstrate that our increased investments to drive demand and bring impactful new products to market are working," said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. "We are energized by our resolve to compete and win in the U.S. and in major international markets. Our market share performance gives us great confidence in the strength of our long-term strategy."

For the full-year 2016, worldwide Harley-Davidson retail motorcycle sales were down 1.6 percent compared to 2015. U.S. retail sales decreased 3.9 percent, partially offset by international growth of 2.3 percent.  

During 2016, the company reported its best-ever retail sales results in Asia Pacific and EMEA. In the 601+cc motorcycle market, the company grew its number one market share position in the U.S. and grew market share in Europe. The company added 40 new dealer points internationally and reported that U.S. dealers trained more than 65,000 new riders through the Harley-Davidson Riding Academy. The company also launched its model year 2017 lineup of motorcycles, featuring the new, highly-acclaimed Milwaukee-Eight™ engine, and upgraded suspension, on all new Touring motorcycles.

"Our long-term strategy is all about growing ridership in the U.S., growing reach and impact internationally, and growing share and profit in every market we serve," stated Levatich. "Our goal over the next 10 years is to build the next generation of Harley-Davidson riders worldwide."

Harley-Davidson Retail Motorcycle Sales


4th Quarter

Full-Year

2016

2015

Change

2016

2015

Change

U.S.

26,077

26,044

0.1%

161,658

168,240

-3.9%

Canada

1,257

1,255

0.2%

10,203

9,669

5.5%

Latin America

2,637

3,082

-14.4%

9,701

11,173

-13.2%

EMEA  

7,891

7,689

2.6%

45,838

43,287

5.9%

Asia Pacific

8,748

8,787

-0.4%

32,889

32,258

2.0%

International Total

20,533

20,813

-1.3%

98,631

96,387

2.3%

Worldwide Total

46,610

46,857

-0.5%

260,289

264,627

-1.6%

In the fourth quarter, worldwide retail sales of new Harley-Davidson motorcycles declined 0.5 percent versus the prior year behind modest declines in some international markets partially offset by slight growth in the U.S.

Motorcycles and Related Products Segment Results

$ in thousands

4th Quarter

Full-Year

2016

2015

Change

2016

2015

Change

Motorcycle Shipments (vehicles)

42,414

48,149

-11.9%

262,221

266,382

-1.6%

Revenue







 Motorcycles

$685,047

$751,383

-8.8%

$4,122,113

$4,127,739

-0.1%

 Parts & Accessories

$169,445

$169,707

-0.2%

$842,637

$862,645

-2.3%

 General Merchandise

$72,919

$79,356

-8.1%

$284,583

$292,310

-2.6%

Gross Margin Percent

30.7%

31.9%

-1.2 pts

35.1%

36.8%

-1.7 pts

Operating Income

$9,271

$6,368

45.6%

$773,406

$875,490

-11.7%

Operating Margin Percent

1.0%

0.6%

0.4 pts

14.7%

16.5%

-1.8 pts

Fourth quarter revenue from motorcycles and related products was down versus the prior year behind fewer motorcycle shipments. Operating margin as a percent of revenue increased in the quarter compared to the same period in 2015, resulting from lower SG&A.

Financial Services Segment Results

$ in thousands

4th Quarter

Full-Year

2016

2015

Change

2016

2015

Change

Revenue

$177,577

$173,565

2.3%

$725,082

$686,658

5.6%

Operating Income

$60,139

$60,857

-1.2%

$275,530

$280,205

-1.7%

Financial services operating income fell 1.2 percent in the fourth quarter compared to the year ago period.

Income Tax Rate
For 2016, Harley-Davidson's effective tax rate was 32.4 percent compared to 34.6 percent the prior year. The lower effective tax rate is attributed to the successful closure of various tax audits in 2016.

Other Results
Cash and marketable securities amounted to $765.5 million at the end of 2016, compared to $767.4 million at the end of 2015. Harley-Davidson generated $1.17 billion of cash from operating activities in 2016 compared to $1.10 billion in 2015. On a discretionary basis, the company repurchased 1.7 million shares of its common stock during the fourth quarter of 2016 at a cost of $91.0 million. In 2016, Harley-Davidson repurchased 9.7 million shares of its common stock at a cost of $459.1 million. In the fourth quarter of 2016, there were 177.6 million weighted-average diluted common shares outstanding. At the end of 2016, 19.3 million shares remained on a board-approved share repurchase authorization.

Guidance       
For 2017, Harley-Davidson anticipates full-year motorcycle shipments to be flat to down modestly in comparison to 2016. In the first quarter of 2017, Harley-Davidson expects to ship approximately 66,000 to 71,000 motorcycles. 

Harley-Davidson expects full-year 2017 operating and gross margin as a percent of revenue to be approximately in line with 2016 and its full-year effective tax rate to be approximately 34.5 percent.

The company anticipates 2017 capital expenditures of $200 million to $220 million.

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 fourth quarter and full-year 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 "Events and Presentations." 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) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (iii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (iv) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (v) 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, (vi) develop and introduce products, services and experiences that are successful in the marketplace, (vii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (viii) 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, (ix) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (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) 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, (xii) manage risks that arise through expanding international manufacturing, operations and sales, (xiii) adjust to tax reform, healthcare inflation and reform and pension reform, (xiv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xv) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xvi) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xvii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xviii) manage its exposure to product liability claims and commercial or contractual disputes, (xix) execute its flexible production strategy, (xx) retain and attract talented employees, (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)





Three months ended


Twelve months ended



December 31,


December 31,


December 31,


December 31,



2016


2015


2016


2015










Motorcycles and related products revenue


$      933,023


$   1,007,070


$   5,271,376


$   5,308,744

Gross profit


286,809


320,932


1,851,666


1,952,460

Selling, administrative and engineering expense


277,538


314,564


1,078,260


1,076,970

  Operating income from motorcycles & related products


9,271


6,368


773,406


875,490










Financial services revenue


177,577


173,565


725,082


686,658

Financial services expense


117,438


112,708


449,552


406,453

  Operating income from financial services


60,139


60,857


275,530


280,205










Operating income


69,410


67,225


1,048,936


1,155,695

Investment income


891


602


4,645


6,585

Interest expense


7,702


7,220


29,670


12,117

Income before income taxes


62,599


60,607


1,023,911


1,150,163

Provision for income taxes


15,420


18,411


331,747


397,956

Net income


$        47,179


$        42,196


$      692,164


$      752,207










Earnings per common share:









  Basic


$           0.27


$           0.22


$           3.85


$           3.71

  Diluted


$           0.27


$           0.22


$           3.83


$           3.69










Weighted-average common shares:









  Basic


176,616


189,681


179,676


202,681

  Diluted


177,642


190,621


180,535


203,686










Cash dividends per common share


$           0.35


$           0.31


$           1.40


$           1.24

 


Harley-Davidson, Inc.

Condensed Consolidated Balance Sheets(1)

(In thousands)












(Unaudited)









December 31,


December 31,







2016


2015














ASSETS









Current assets:









    Cash and cash equivalents


$      759,984


$      722,209





    Marketable securities


5,519


45,192





    Accounts receivable, net


285,106


247,405





    Finance receivables, net


2,076,261


2,053,582





    Inventories


499,917


585,907





    Restricted cash


52,574


88,267





    Other current assets


174,491


235,321





Total current assets


3,853,852


3,977,883














Finance receivables, net


4,759,197


4,814,571





Other long-term assets


1,277,191


1,180,523







$   9,890,240


$   9,972,977














LIABILITIES AND SHAREHOLDERS' EQUITY









Current liabilities:









    Accounts payable & accrued liabilities


$      721,970


$      707,578





    Short-term debt


1,055,708


1,201,380





    Current portion of long-term debt, net


1,084,884


838,349





Total current liabilities


2,862,562


2,747,307














Long-term debt, net


4,666,975


4,832,469





Pension and postretirement healthcare liabilities


257,709


358,547





Other long-term liabilities


182,836


195,000














Total shareholders' equity


1,920,158


1,839,654







$   9,890,240


$   9,972,977














(1)  ASU 2015-03 Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs was adopted retrospectively on January 1, 2016. Debt issuance costs in Other current assets and Other long-term assets have been reclassified to Current-portion of long-term debt, net and Long-term debt, net for 2015 balances to reflect the adoption of the new guidance.

 

Harley-Davidson, Inc.

Condensed Consolidated Statements of Cash Flows

 (In thousands)




(Unaudited)









Twelve months ended







December 31,


December 31,







2016


2015














Net cash provided by operating activities


$   1,174,339


$   1,100,118














Cash flows from investing activities:









  Capital expenditures


(256,263)


(259,974)





  Finance receivables, net


(489,464)


(614,945)





  Proceeds from sale of finance receivables


312,571


-





  Net change in marketable securities


40,014


11,507





  Acquisition of business 


-


(59,910)





  Other


411


7,474





Net cash used by investing activities


(392,731)


(915,848)














Cash flows from financing activities:









  Proceeds from issuance of senior unsecured notes


-


740,385





  Proceeds from issuance of medium-term notes


1,193,396


595,386





  Repayments of medium-term notes


(451,336)


(610,331)





  Proceeds from securitization debt


-


1,195,668





  Repayments of securitization debt


(665,400)


(1,008,135)





  Net (decrease) increase in credit facilities and unsecured commercial paper


(145,812)


469,473





  Borrowings of asset-backed commercial paper


62,396


87,442





  Repayments of asset-backed commercial paper


(71,500)


(72,727)





  Net change in restricted cash


43,495


11,410





  Dividends paid


(252,321)


(249,262)





  Purchase of common stock for treasury


(465,341)


(1,537,020)





  Excess tax benefits from share-based payments


2,251


3,468





  Issuance of common stock under employee stock option plans


15,782


20,179





Net cash used by financing activities


(734,390)


(354,064)














Effect of exchange rate changes on cash and cash equivalents


(9,443)


(14,677)














Net increase (decrease) in cash and cash equivalents


$        37,775


$    (184,471)














Cash and cash equivalents:









  Cash and cash equivalents - beginning of period


$      722,209


$      906,680





  Net increase (decrease) in cash and cash equivalents


37,775


(184,471)





  Cash and cash equivalents - end of period


$      759,984


$      722,209





 

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,



2016


2015


2016


2015

MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands)









  Motorcycles


$      685,047


$      751,383


$   4,122,113


$   4,127,739

  Parts & Accessories


169,445


169,707


842,637


862,645

  General Merchandise


72,919


79,356


284,583


292,310

  Other


5,612


6,624


22,043


26,050



$      933,023


$   1,007,070


$   5,271,376


$   5,308,744










MOTORCYCLE SHIPMENTS:









    United States


20,131


28,804


161,839


170,688

    International


22,283


19,345


100,382


95,694

       Total 


42,414


48,149


262,221


266,382










MOTORCYCLE PRODUCT MIX:









    Touring


17,943


19,414


107,410


114,768

    Cruiser


14,852


17,454


93,422


89,207

    Sportster® / Street


9,619


11,281


61,389


62,407

       Total


42,414


48,149


262,221


266,382

 


Worldwide Retail Sales of Harley-Davidson Motorcycles(1)












Three months ended


Twelve months ended



December 31,


December 31,


December 31,


December 31,



2016


2015


2016


2015










United States


26,077


26,044


161,658


168,240










Europe(2)


6,734


6,174


39,942


36,894

EMEA - Other


1,157


1,515


5,896


6,393

  Total EMEA


7,891


7,689


45,838


43,287










Japan


2,648


2,506


10,279


9,700

Asia Pacific - Other


6,100


6,281


22,610


22,558

  Total Asia Pacific


8,748


8,787


32,889


32,258










Latin America


2,637


3,082


9,701


11,173

Canada


1,257


1,255


10,203


9,669

  Total International Retail Sales


20,533


20,813


98,631


96,387

  Total Worldwide Retail Sales


46,610


46,857


260,289


264,627










(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 this information is subject to revision. The EMEA Europe total for December 31, 2016 includes 618 units originally reported in the EMEA-Other total for the six month period ended June 30, 2016.










(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,



2016


2015

United States(2) 


311,710


328,818

Europe(3)


391,936


351,773






(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. 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/harley-davidson-reports-fourth-quarter-full-year-2016-results-300399165.html

SOURCE Harley-Davidson, Inc.

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