Harley-Davidson Announces First Quarter 2019 Results
First Quarter 2019
- GAAP diluted EPS of
$0.80 per share, ahead of company expectations - Encouraged by U.S. retail sales performance; Harley-Davidson U.S. market share up
- Global dealer inventory down, well positioned for spring selling season
- Intensified brand focus; hired President,
Harley-Davidson Brand - Acquired StaCyc, a producer of electric-powered two-wheelers for kids
- Broadened reach with new Electra Glide® Standard at
$18,999 U.S. MSRP - Manufacturing optimization remained on-track
Thailand manufacturing strategy accelerated retail sales growth in ASEAN emerging markets- Increased dividend 1.4 percent, repurchased
$52.6 million of shares
First quarter 2019 GAAP diluted EPS was
"We are acting with agility and discipline to take full advantage of rapidly evolving global markets.
Strategy to Build the Next Generation of Riders
More Roads accelerated plan for growth
The More Roads to
During the quarter,
"In the short eight months since we announced our More Roads plan, we continue to accelerate our progress to build the next generation of
Building Riders
As
New, more diverse customers
- 278,000 new riders joined
Harley-Davidson in 2018 in the U.S. This group is the most diverse across age, ethnicity and gender in all of the yearsHarley-Davidson has tracked this data*
Impactful products broadening reach
- Expanded access to new customers in part with the launch of the new Electra Glide® Standard motorcycle at
$18,999 U.S. MSRP
Increased marketing support reached more consumers sooner and drove action -- increased traffic to H-D.com, brand awareness, trial and sales
- Media spend up nearly 90 percent, focused on increased brand awareness and driving sales
- Direct marketing up over 200 percent
- PR and Media Impression - 2 billion, up from 436 million
* Data and analysis based on IHS Markit Motorcycles in Operation (MIO) data for all CC's, On-Highway and Dual purpose motorcycles in the U.S. as of
Manufacturing
The company started supplying motorcycles to ASEAN (
To further improve its manufacturing operations and cost structure, in the first quarter of 2018 the company commenced its multi-year manufacturing optimization initiative anchored by the consolidation of its motorcycle assembly plant in
Harley-Davidson Retail Motorcycle Sales |
|||
Vehicles |
1st Quarter |
||
2019 |
2018 |
Change |
|
U.S. |
28,091 |
29,309 |
(4.2)% |
EMEA |
10,797 |
10,862 |
(0.6)% |
Asia Pacific |
6,074 |
6,329 |
(4.0)% |
Latin America |
2,241 |
2,506 |
(10.6)% |
Canada |
1,948 |
2,080 |
(6.3)% |
International Total |
21,060 |
21,777 |
(3.3)% |
Worldwide Total |
49,151 |
51,086 |
(3.8)% |
The U.S. 601+cc industry was down 4.7 percent in the first quarter compared to the same period in 2018.
Motorcycles and Related Products Segment Results |
|||
$ in thousands |
1st Quarter |
||
2019 |
2018 |
Change |
|
Motorcycle Shipments (vehicles) |
58,891 |
63,944 |
(7.9)% |
Revenue |
$1,195,637 |
$1,363,947 |
(12.3)% |
Motorcycles |
$964,575 |
$1,121,673 |
(14.0)% |
Parts & Accessories |
$ 159,703 |
$169,075 |
(5.5)% |
General Merchandise |
$ 55,401 |
$56,601 |
(2.1)% |
Gross Margin |
29.1% |
34.7% |
(5.6) pts. |
Operating Income |
$108,381 |
$172,838 |
(37.3)% |
Operating Margin |
9.1% |
12.7% |
(3.6) pts. |
Revenue from the Motorcycles segment was down in the first quarter behind lower shipments. Operating income decreased due to lower revenues, unfavorable product mix and increased tariffs, partially offset by lower SG&A and restructuring charges.
Financial Services Segment Results |
|||
$ in thousands |
1st Quarter |
||
2019 |
2018 |
Change |
|
Revenue |
$188,743 |
$178,174 |
5.9% |
Operating Income |
$58,731 |
$63,579 |
(7.6)% |
Financial Services segment first quarter earnings of
Other Results
Cash and marketable securities were
2019 Outlook
For the full-year 2019, the company continues to expect:
- Motorcycle shipments to be approximately 217,000 to 222,000 motorcycles. In the second quarter, the company expects to ship approximately 65,500 to 70,500 motorcycles
- Motorcycles segment operating margin as a percent of revenue to be approximately 8.0 to 9.0 percent
- Financial Services segment operating income to be down year-over-year
- Effective tax rate of approximately 24.0 to 25.0 percent
- Capital expenditures of
$225 million to $245 million including approximately$20 million to support manufacturing optimization
Company Background
Webcast Presentation
Harley-Davidson will discuss first quarter results on an audio webcast at 8:00 a.m. CT today. The webcast login and supporting slides can be accessed at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio replay will be available by approximately
Non-GAAP Measures
This press release includes financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP) and are therefore referred to as non-GAAP financial measures. The non-GAAP measures described below are intended to be considered by users as supplemental information to the equivalent GAAP measures, to aid investors in better understanding the company's financial results. The company believes that these non-GAAP measures provide useful perspective on underlying business results and trends, and a means to assess period-over-period results. These non-GAAP measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as similarly titled measures used by other companies due to possible differences in method and in items or events being adjusted.
The non-GAAP measures included in this press release are diluted EPS excluding restructuring plan costs and the impact of incremental tariffs and net income excluding restructuring plan costs and the impact of incremental tariffs. Restructuring plan costs include restructuring expenses as presented in the consolidated statements of income and costs associated with temporary inefficiencies incurred in connection with the manufacturing optimization plan included in Motorcycles and related products cost of goods sold. The impact of incremental tariffs include incremental
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", "strategy", "future", "may", "goals", or "estimates" or words of similar meaning. Similarly, statements that describe future plans, strategies, 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 above depends upon, among other factors, the company's ability to (i) execute its business plans and strategies, including the elements of the More Roads to
The company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Further, actual foreign currency exchange rates may vary from underlying assumptions. 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
### (HOG-F)
Harley-Davidson, Inc. |
||||
Condensed Consolidated Statements of Income |
||||
(In thousands, except per share amounts) |
||||
(Unaudited) |
(Unaudited) |
|||
Three months ended |
||||
March 31, |
April 1, |
|||
2019 |
2018 |
|||
Motorcycles and Related Products revenue |
$ 1,195,637 |
$ 1,363,947 |
||
Gross profit |
347,439 |
473,773 |
||
Selling, administrative and engineering expense |
225,428 |
254,093 |
||
Restructuring expense |
13,630 |
46,842 |
||
Operating income from Motorcycles and Related Products |
108,381 |
172,838 |
||
Financial Services revenue |
188,743 |
178,174 |
||
Financial Services expense |
130,012 |
114,595 |
||
Operating income from Financial Services |
58,731 |
63,579 |
||
Operating income |
167,112 |
236,417 |
||
Other income (expense), net |
4,660 |
220 |
||
Investment income |
6,358 |
1,203 |
||
Interest expense |
7,731 |
7,690 |
||
Income before income taxes |
170,399 |
230,150 |
||
Provision for income taxes |
42,454 |
55,387 |
||
Net income |
$ 127,945 |
$ 174,763 |
||
Earnings per common share: |
||||
Basic |
$ 0.80 |
$ 1.04 |
||
Diluted |
$ 0.80 |
$ 1.03 |
||
Weighted-average common shares: |
||||
Basic |
159,311 |
168,139 |
||
Diluted |
160,026 |
169,174 |
||
Cash dividends per common share |
$ 0.375 |
$ 0.370 |
Harley-Davidson, Inc. |
||||
Reconciliation of GAAP amounts to Non-GAAP amounts |
||||
(In thousands, except per share amounts) |
||||
(Unaudited) |
(Unaudited) |
|||
Three months |
Three months |
|||
March 31, |
April 1, |
|||
2019 |
2018 |
|||
Net income excluding restructuring plan costs and the impact of incremental tariffs |
||||
Net income (GAAP) |
$ 127,945 |
$ 174,763 |
||
Restructuring plan costs |
17,210 |
47,574 |
||
Impact of incremental tariffs |
20,977 |
- |
||
Tax effect of adjustments(1) |
(9,260) |
(11,537) |
||
Adjustments net of tax |
28,927 |
36,037 |
||
Adjusted net income (Non-GAAP) |
$ 156,872 |
$ 210,800 |
||
Diluted earnings per share excluding restructuring plan costs and the impact of incremental tariffs |
||||
Diluted earnings per share (GAAP) |
$ 0.80 |
$ 1.03 |
||
Adjustments net of tax, per share |
0.18 |
0.21 |
||
Adjusted diluted earnings per share (Non-GAAP) |
$ 0.98 |
$ 1.24 |
(1)The income tax effect of adjustments has been computed using the company's effective income tax rate excluding discrete items. |
Harley-Davidson, Inc. |
||||||
Condensed Consolidated Balance Sheets |
||||||
(In thousands) |
||||||
(Unaudited) |
(Unaudited) |
|||||
March 31, |
December 31, |
April 1, |
||||
2019 |
2018 |
2018 |
||||
ASSETS |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ 749,600 |
$ 1,203,766 |
$ 753,517 |
|||
Marketable securities |
10,003 |
10,007 |
- |
|||
Accounts receivable, net |
353,541 |
306,474 |
355,107 |
|||
Finance receivables, net |
2,443,899 |
2,214,424 |
2,341,918 |
|||
Inventories |
595,806 |
556,128 |
564,571 |
|||
Restricted cash |
43,471 |
49,275 |
54,569 |
|||
Other current assets |
177,761 |
144,368 |
150,472 |
|||
Total current assets |
4,374,081 |
4,484,442 |
4,220,154 |
|||
Finance receivables, net |
4,994,693 |
5,007,507 |
4,784,524 |
|||
Other long-term assets |
1,211,839 |
1,173,715 |
1,272,943 |
|||
$ 10,580,613 |
$ 10,665,664 |
$ 10,277,621 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Current liabilities: |
||||||
Accounts payable and accrued liabilities |
$ 1,025,089 |
$ 885,991 |
$ 885,448 |
|||
Short-term debt |
1,192,925 |
1,135,810 |
1,036,976 |
|||
Current portion of long-term debt, net |
1,372,050 |
1,575,799 |
1,872,679 |
|||
Total current liabilities |
3,590,064 |
3,597,600 |
3,795,103 |
|||
Long-term debt, net |
4,744,694 |
4,887,667 |
4,108,511 |
|||
Pension and postretirement healthcare liabilities |
192,759 |
202,229 |
167,952 |
|||
Other long-term liabilities |
255,485 |
204,219 |
210,106 |
|||
Total shareholders' equity |
1,797,611 |
1,773,949 |
1,995,949 |
|||
$ 10,580,613 |
$ 10,665,664 |
$ 10,277,621 |
Harley-Davidson, Inc. |
||||
Condensed Consolidated Statements of Cash Flows |
||||
(In thousands) |
||||
(Unaudited) |
(Unaudited) |
|||
Three months ended |
||||
March 31, |
April 1, |
|||
2019 |
2018 |
|||
Net cash provided by operating activities |
$ 32,671 |
$ 191,594 |
||
Cash flows from investing activities: |
||||
Capital expenditures |
(35,255) |
(28,436) |
||
Finance receivables, net |
(35,548) |
11,733 |
||
Acquisition of business |
(7,000) |
- |
||
Other |
603 |
(4,948) |
||
Net cash used by investing activities |
(77,200) |
(21,651) |
||
Cash flows from financing activities: |
||||
Proceeds from issuance of medium-term notes |
546,655 |
347,553 |
||
Repayments of medium-term notes |
(750,000) |
- |
||
Repayments of securitization debt |
(76,505) |
(67,955) |
||
Net increase (decrease) in credit facilities and unsecured commercial paper |
58,527 |
(234,145) |
||
Borrowings of asset-backed commercial paper |
- |
35,504 |
||
Repayments of asset-backed commercial paper |
(72,401) |
(45,907) |
||
Dividends paid |
(60,859) |
(62,731) |
||
Purchase of common stock for treasury |
(61,712) |
(72,968) |
||
Issuance of common stock under employee stock option plans |
616 |
1,719 |
||
Net cash used by financing activities |
(415,679) |
(98,930) |
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(409) |
2,034 |
||
Net (decrease) increase in cash, cash equivalents and restricted cash |
$ (460,617) |
$ 73,047 |
||
Cash, cash equivalents and restricted cash: |
||||
Cash, cash equivalents and restricted cash - beginning of period |
$ 1,259,748 |
$ 746,210 |
||
Net (decrease) increase in cash, cash equivalents and restricted cash |
(460,617) |
73,047 |
||
Cash, cash equivalents and restricted cash - end of period |
$ 799,131 |
$ 819,257 |
||
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheet: |
||||
Cash and cash equivalents |
$ 749,600 |
$ 753,517 |
||
Restricted cash |
43,471 |
54,569 |
||
Restricted cash included in other long-term assets |
6,060 |
11,171 |
||
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows |
$ 799,131 |
$ 819,257 |
Adoption of New Accounting Standards |
||||||||
On January 1, 2019, the Company adopted accounting standards update (ASU) 2016-02 Leases using the modified retrospective method. As a result, the Company recorded a right-of-use lease asset of approximately $60 million and a corresponding lease liability. |
Motorcycles and Related Products Revenue and |
||||
Motorcycle Shipment Data |
||||
(Unaudited) |
(Unaudited) |
|||
Three months ended |
||||
March 31, |
April 1, |
|||
2019 |
2018 |
|||
MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands) |
||||
Motorcycles |
$ 964,575 |
$ 1,121,673 |
||
Parts & Accessories |
159,703 |
169,075 |
||
General Merchandise |
55,401 |
56,601 |
||
Licensing |
8,577 |
8,358 |
||
Other |
7,381 |
8,240 |
||
$ 1,195,637 |
$ 1,363,947 |
|||
MOTORCYCLE SHIPMENTS: |
||||
United States |
34,505 |
38,797 |
||
International |
24,386 |
25,147 |
||
Total |
58,891 |
63,944 |
||
MOTORCYCLE PRODUCT MIX: |
||||
Touring |
25,043 |
30,857 |
||
Cruiser |
20,451 |
21,554 |
||
Sportster®/ Street |
13,397 |
11,533 |
||
Total |
58,891 |
63,944 |
||
Worldwide Retail Sales of Harley-Davidson Motorcycles(1) |
||||
Three months ended |
||||
March 31, |
March 31, |
|||
2019 |
2018 |
|||
United States |
28,091 |
29,309 |
||
Europe(2) |
9,508 |
9,716 |
||
EMEA - Other |
1,289 |
1,146 |
||
Total EMEA |
10,797 |
10,862 |
||
Asia Pacific(3) |
3,786 |
4,452 |
||
Asia Pacific - Other |
2,288 |
1,877 |
||
Total Asia Pacific |
6,074 |
6,329 |
||
Latin America |
2,241 |
2,506 |
||
Canada |
1,948 |
2,080 |
||
Total International Retail Sales |
21,060 |
21,777 |
||
Total Worldwide Retail Sales |
49,151 |
51,086 |
(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. |
||||||||
(3)Asia Pacific data includes Japan, Australia, New Zealand and Korea. |
Motorcycle Registration Data(1) |
||||
Three months ended |
||||
March 31, |
March 31, |
|||
2019 |
2018 |
|||
United States(2) |
54,324 |
57,026 |
||
Europe(3) |
111,317 |
93,217 |
(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. |
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SOURCE
Media, Patricia Sweeney, +1-414-343-8199; Financial, Shannon Burns, +1-414-343-8002