Harley-Davidson Announces Fourth Quarter, Full-Year 2019 Results
2019 Highlights and Results
- Delivered fourth quarter GAAP diluted EPS of
$0.09 ; up year-over-year - Advanced More Roads plan, on-track for significant 2021 growth
- Increased focus on rider commitment; in the U.S., 527,000 riders joined in 2019, up year-over-year1
- Tempered worldwide year-over-year retail sales rate of decline
- Completed steps to mitigate the majority of recent EU and
China tariff impacts in 2020 - Completed key milestones of the manufacturing optimization initiative and exceeded expected full-year savings
- Repurchased
$286.7 million of shares; increased dividends 1.4 percent versus prior year to$1.50 per share
Fourth quarter 2019 GAAP diluted EPS was
Full-year 2019 GAAP diluted EPS was
"Our performance in Q4 and the full year was in line with our expectations and indicative of increased business stability driven by the tremendous efforts of our employees and dealers," said
Strategy to Build Riders; Accelerated plan for growth
More Roads to
The company plans to maintain its targeted investment and return profile and capital allocation strategy, while it funds strategic opportunities expected to drive significant revenue growth and expand operating margin starting in 2021.
In 2019,
- Asserted its leadership in the electrification of motorcycles with the launch of LiveWire™, the company's first electric motorcycle, and IRONe™, an electric-powered two-wheeler for kids
- Launched new high impact models and delivered significant technology to its class-leading model year 2020 motorcycles to inspire new and existing riders
- Commissioned
Thailand manufacturing facility and established aChina distribution center, increasing customer access with more competitive prices - Improved and expanded global ecommerce and digital capabilities
- Advanced good-to-great dealers – meeting its customer experience and sales conversion targets
- Honed and accelerated efforts to amplify brand and build committed riders; more riders joined
Harley-Davidson in the U.S. in 2019 compared to 2018 and the total pool ofHarley-Davidson riders in the U.S. grew to 3.1 million in 20191
"We see 2020 as the pivotal year in the transformation of
Manufacturing Optimization
Harley-Davidson Retail Motorcycle Sales
Vehicles |
4th Quarter |
Full-Year |
||||
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|
U.S. |
20,204 |
20,849 |
(3.1)% |
125,960 |
132,868 |
(5.2)% |
EMEA |
7,187 |
7,353 |
(2.3)% |
44,086 |
46,602 |
(5.4)% |
Asia Pacific |
7,691 |
7,244 |
6.2 % |
29,513 |
28,724 |
2.7 % |
Latin America |
2,513 |
2,515 |
(0.1)% |
9,768 |
10,167 |
(3.9)% |
Canada |
1,159 |
1,350 |
(14.1)% |
8,946 |
9,690 |
(7.7)% |
International Total |
18,550 |
18,462 |
0.5 % |
92,313 |
95,183 |
(3.0)% |
Worldwide Total |
38,754 |
39,311 |
(1.4)% |
218,273 |
228,051 |
(4.3)% |
U.S. retail sales rate declines continued to temper. The year-over-year retail sales rate of decline in the fourth quarter was the lowest in 12 quarters and the full-year retail sales rate of decline was the lowest since 2016. Fourth quarter 601+cc U.S. market share was up 1.0 percentage points, to 50.4 percent and full-year market share was 49.1 percent, down slightly versus 2018.
International retail sales were up slightly in the fourth quarter behind continued growth in emerging markets. Full-year international retail sales finished down 3.0 percent.
Motorcycles and Related Products Segment Results
$ in thousands |
4th Quarter |
Full-Year |
||||
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|
Motorcycle Shipments (vehicles) |
40,454 |
43,489 |
(7.0)% |
213,939 |
228,665 |
(6.4)% |
Revenue |
$874,095 |
$955,633 |
(8.5)% |
$4,572,678 |
$4,968,646 |
(8.0)% |
Motorcycles |
$666,287 |
$738,167 |
(9.7)% |
$3,538,269 |
$3,882,963 |
(8.9)% |
Parts & Accessories |
$129,266 |
$142,168 |
(9.1)% |
$713,400 |
$754,663 |
(5.5)% |
General Merchandise |
$57,187 |
$58,444 |
(2.2)% |
$237,566 |
$241,964 |
(1.8)% |
Gross Margin |
25.2% |
27.6% |
(2.3) pts. |
29.4% |
32.5% |
(3.2) pts. |
Operating (Loss) Income |
($46,460) |
($59,543) |
22.0% |
$289,620 |
$422,363 |
(31.4)% |
Operating Margin |
(5.3)% |
(6.2)% |
0.9 pts. |
6.3% |
8.5% |
(2.2) pts. |
Revenue from the Motorcycles and Related Products (Motorcycles) segment was down in the fourth quarter and on a full-year basis. Full-year operating income decreased primarily due to lower revenues and increased tariff costs, partially offset by lower SG&A and restructuring expense.
Financial Services Segment Results
$ in thousands |
4th Quarter |
Full-Year |
||||
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|
Revenue |
$198,176 |
$190,229 |
4.2% |
$789,111 |
$748,229 |
5.5 % |
Operating Income |
$58,855 |
$63,286 |
(7.0)% |
$265,988 |
$291,160 |
(8.6)% |
Financial Services segment full-year operating income of
Other Results
Cash and marketable securities were
2020 Outlook
For the full-year 2020, the company expects the following:
- Motorcycles segment revenue of approximately
$4.53 to $4.66 billion . In the first quarter, the company expects Motorcycles segment revenue of approximately 1.09 to 1.17 billion - Motorcycles segment operating margin as a percent of revenue of approximately 7 to 8 percent
- Financial Services segment operating income approximately flat year-over-year
- Effective tax rate of approximately 24 to 25 percent
- Capital expenditures of approximately
$215 million to $235 million
1 Data and analysis based on IHS Markit Motorcycles in Operation (MIO) data for On-highway and Dual purpose bikes in the U.S. Snapshot based on data as of
Company Background
Webcast Presentation
Harley-Davidson will discuss fourth quarter and full-year 2019 results and its outlook 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 adjusted net income and adjusted diluted EPS excluding restructuring plan costs and the impact of recent EU and
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," "may," "will," "estimates," "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 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. 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) |
(Unaudited) |
||||||
Three months ended |
Twelve months ended |
|||||||
December 31, |
December 31, |
December 31, |
December 31, |
|||||
2019 |
2018 |
2019 |
2018 |
|||||
Motorcycles and Related Products revenue |
$ 874,095 |
$ 955,633 |
$ 4,572,678 |
$ 4,968,646 |
||||
Gross profit |
220,639 |
263,577 |
1,342,880 |
1,616,850 |
||||
Selling, administrative and engineering expense |
266,428 |
303,763 |
1,020,907 |
1,101,086 |
||||
Restructuring expense |
671 |
19,357 |
32,353 |
93,401 |
||||
Operating (loss) income from Motorcycles and Related Products |
(46,460) |
(59,543) |
289,620 |
422,363 |
||||
Financial Services revenue |
198,176 |
190,229 |
789,111 |
748,229 |
||||
Financial Services expense |
139,321 |
126,943 |
523,123 |
457,069 |
||||
Operating income from Financial Services |
58,855 |
63,286 |
265,988 |
291,160 |
||||
Operating income |
12,395 |
3,743 |
555,608 |
713,523 |
||||
Other income (expense), net |
4,657 |
1,530 |
16,514 |
3,039 |
||||
Investment income (loss) |
4,401 |
(1,679) |
16,371 |
951 |
||||
Interest expense |
7,774 |
7,704 |
31,078 |
30,884 |
||||
Income (loss) before income taxes |
13,679 |
(4,110) |
557,415 |
686,629 |
||||
Income tax provision (benefit) |
183 |
(4,605) |
133,780 |
155,178 |
||||
Net income |
$ 13,496 |
$ 495 |
$ 423,635 |
$ 531,451 |
||||
Earnings per share: |
||||||||
Basic |
$ 0.09 |
$ - |
$ 2.70 |
$ 3.21 |
||||
Diluted |
$ 0.09 |
$ - |
$ 2.68 |
$ 3.19 |
||||
Weighted-average shares: |
||||||||
Basic |
153,947 |
162,073 |
157,054 |
165,672 |
||||
Diluted |
154,913 |
163,014 |
157,804 |
166,504 |
||||
Cash dividends per share: |
$ 0.375 |
$ 0.370 |
$ 1.500 |
$ 1.480 |
Harley-Davidson, Inc. |
||||||||
Reconciliation of GAAP Amounts to Non-GAAP Amounts |
||||||||
(In thousands, except per share amounts) |
||||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Three months ended |
Twelve months ended |
|||||||
December 31, |
December 31, |
December 31, |
December 31, |
|||||
2019 |
2018 |
2019 |
2018 |
|||||
Net income excluding restructuring plan costs and the impact of recent EU and China tariffs |
||||||||
Net income (GAAP) |
$ 13,496 |
$ 495 |
$ 423,635 |
$ 531,451 |
||||
Restructuring plan costs |
973 |
22,944 |
42,688 |
106,314 |
||||
Impact of recent EU and China tariffs |
20,881 |
13,363 |
97,852 |
23,675 |
||||
Tax effect of adjustments(1) |
(4,568) |
(8,804) |
(33,729) |
(31,522) |
||||
Adjustments, net of tax |
17,286 |
27,503 |
106,811 |
98,467 |
||||
Adjusted net income (non-GAAP) |
$ 30,782 |
$ 27,998 |
$ 530,446 |
$ 629,918 |
||||
Diluted EPS excluding restructuring plan costs and the impact of recent EU and China tariffs |
||||||||
Diluted EPS (GAAP) |
$ 0.09 |
$ - |
$ 2.68 |
$ 3.19 |
||||
Adjustments net of tax, per share |
0.11 |
0.17 |
0.68 |
0.59 |
||||
Adjusted diluted EPS (non-GAAP) |
$ 0.20 |
$ 0.17 |
$ 3.36 |
$ 3.78 |
||||
(1) The income tax effect of adjustments has been computed using the company's effective income tax rate |
Harley-Davidson, Inc. |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
December 31, |
December 31, |
|||||||
2019 |
2018 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 833,868 |
$ 1,203,766 |
||||||
Marketable securities |
- |
10,007 |
||||||
Accounts receivable, net |
259,334 |
306,474 |
||||||
Finance receivables, net |
2,272,522 |
2,214,424 |
||||||
Inventories, net |
603,571 |
556,128 |
||||||
Restricted cash |
64,554 |
49,275 |
||||||
Other current assets |
168,974 |
144,368 |
||||||
4,202,823 |
4,484,442 |
|||||||
Finance receivables, net |
5,101,844 |
5,007,507 |
||||||
Other long-term assets |
1,223,492 |
1,173,715 |
||||||
$10,528,159 |
$10,665,664 |
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ 876,668 |
$ 885,991 |
||||||
Short-term debt |
571,995 |
1,135,810 |
||||||
Current portion of long-term debt, net |
1,748,109 |
1,575,799 |
||||||
3,196,772 |
3,597,600 |
|||||||
Long-term debt, net |
5,124,826 |
4,887,667 |
||||||
Pension and postretirement healthcare liabilities |
128,651 |
202,229 |
||||||
Other long-term liabilities |
273,911 |
204,219 |
||||||
Shareholders' equity |
1,803,999 |
1,773,949 |
||||||
$10,528,159 |
$10,665,664 |
|||||||
Harley-Davidson, Inc. |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
Twelve months ended |
||||||||
December 31, |
December 31, |
|||||||
2019 |
2018 |
|||||||
Net cash provided by operating activities |
$ 868,272 |
$ 1,205,921 |
||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(181,440) |
(213,516) |
||||||
Finance receivables, net |
(347,605) |
(427,148) |
||||||
Acquisition of business |
(7,000) |
- |
||||||
Other investing activities |
27,919 |
(21,605) |
||||||
Net cash used by investing activities |
(508,126) |
(662,269) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of medium-term notes |
1,203,236 |
1,591,828 |
||||||
Repayments of medium-term notes |
(1,350,000) |
(877,488) |
||||||
Proceeds from securitization debt |
1,021,453 |
- |
||||||
Repayments of securitization debt |
(353,251) |
(257,869) |
||||||
Net decrease in credit facilities and unsecured commercial paper |
(563,453) |
(135,356) |
||||||
Borrowings of asset-backed commercial paper |
177,950 |
509,742 |
||||||
Repayments of asset-backed commercial paper |
(318,006) |
(212,729) |
||||||
Dividends paid |
(237,221) |
(245,810) |
||||||
Repurchase of common stock |
(296,520) |
(390,606) |
||||||
Issuance of common stock under employee stock option plans |
3,589 |
3,525 |
||||||
Net cash used by financing activities |
(712,223) |
(14,763) |
||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(2,305) |
(15,351) |
||||||
Net (decrease) increase in cash, cash equivalents and restricted cash |
$ (354,382) |
$ 513,538 |
||||||
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 |
(354,382) |
513,538 |
||||||
Cash, cash equivalents and restricted cash, end of period |
$ 905,366 |
$ 1,259,748 |
||||||
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows: |
||||||||
Cash and cash equivalents |
$ 833,868 |
$ 1,203,766 |
||||||
Restricted cash |
64,554 |
49,275 |
||||||
Restricted cash included in Other long-term assets |
6,944 |
6,707 |
||||||
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows |
$ 905,366 |
$ 1,259,748 |
||||||
Adoption of New Accounting Standards |
||||||||
On January 1, 2019, the company adopted Accounting Standards Update 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 |
||||||||
(Revenue in thousands) |
||||||||
Three months ended |
Twelve months ended |
|||||||
December 31, |
December 31, |
December 31, |
December 31, |
|||||
2019 |
2018 |
2019 |
2018 |
|||||
MOTORCYCLES AND RELATED PRODUCTS REVENUE |
||||||||
Motorcycles |
$ 666,287 |
$ 738,167 |
$ 3,538,269 |
$ 3,882,963 |
||||
Parts & Accessories |
129,266 |
142,168 |
713,400 |
754,663 |
||||
General Merchandise |
57,187 |
58,444 |
237,566 |
241,964 |
||||
Licensing |
8,818 |
9,231 |
35,917 |
38,676 |
||||
Other |
12,537 |
7,623 |
47,526 |
50,380 |
||||
$ 874,095 |
$ 955,633 |
$ 4,572,678 |
$ 4,968,646 |
|||||
MOTORCYCLE SHIPMENTS |
||||||||
United States |
22,845 |
24,376 |
124,326 |
132,433 |
||||
International |
17,609 |
19,113 |
89,613 |
96,232 |
||||
40,454 |
43,489 |
213,939 |
228,665 |
|||||
MOTORCYCLE PRODUCT MIX |
||||||||
Touring |
15,147 |
17,817 |
91,018 |
101,942 |
||||
Cruiser(1) |
16,685 |
16,578 |
76,052 |
78,529 |
||||
Sportster®/ Street |
8,622 |
9,094 |
46,869 |
48,194 |
||||
40,454 |
43,489 |
213,939 |
228,665 |
|||||
(1) Includes Softail®, CVOTM, and LiveWireTM |
||||||||
Worldwide Retail Sales of Harley-Davidson Motorcycles(1) |
||||||||
Three months ended |
Twelve months ended |
|||||||
December 31, |
December 31, |
December 31, |
December 31, |
|||||
2019 |
2018 |
2019 |
2018 |
|||||
United States |
20,204 |
20,849 |
125,960 |
132,868 |
||||
Europe(2) |
6,115 |
6,212 |
38,441 |
41,179 |
||||
EMEA - Other |
1,072 |
1,141 |
5,645 |
5,423 |
||||
Total EMEA |
7,187 |
7,353 |
44,086 |
46,602 |
||||
Asia Pacific(3) |
4,534 |
4,303 |
17,753 |
18,429 |
||||
Asia Pacific - Other |
3,157 |
2,941 |
11,760 |
10,295 |
||||
Total Asia Pacific |
7,691 |
7,244 |
29,513 |
28,724 |
||||
Latin America |
2,513 |
2,515 |
9,768 |
10,167 |
||||
Canada |
1,159 |
1,350 |
8,946 |
9,690 |
||||
Total international retail sales |
18,550 |
18,462 |
92,313 |
95,183 |
||||
Total worldwide retail sales |
38,754 |
39,311 |
218,273 |
228,051 |
||||
(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) |
||||||||
Twelve months ended |
||||||||
December 31, |
December 31, |
|||||||
2019 |
2018 |
|||||||
United States(2) |
252,842 |
263,750 |
||||||
Europe(3) |
425,998 |
397,669 |
||||||
(1 ) Data includes on-road models with internal combustion engines with displacements greater than 600cc's and in the United States electric motorcycles with kilowatt peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street®500 motorcycles is not included in this table. |
||||||||
(2) United States industry data is derived from information provided by Motorcycle Industry Council. 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, an independent agency. This third-party data is subject to revision and update. |
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SOURCE
Jenni Coats, jenni.coats@Harley-Davidson.com, 414.343.7902, Financial Contact: Shannon Burns, shannon.burns@Harley-Davidson.com, 414.343.8002