Harley-Davidson Delivers Solid Third Quarter Financial Results
"Harley-Davidson delivered a solid third quarter and we have seen many of our
Third Quarter 2021 Highlights and Results
- GAAP diluted EPS of
$1.05 , up$0.27 over Q3 2020 - Total HDI revenue grew 17 percent behind increased shipments and favorable motorcycle unit mix
- Motorcycles and Related Products (Motorcycles) segment operating margin was 8.4 percent, which was 3.6 percentage points better than Q3 2020; driven by unit mix, pricing and reduced restructuring expense offsetting the cost increases across the supply chain and the impact of EU tariffs
- Financial Services segment operating income growth of
$15 million over Q3 2020 driven by lower interest expense - Launched Sportster® S, the all-new Sportster motorcycle built on the Revolution® Max platform
Third Quarter 2021 Results
|
nm – not meaningful |
|||||
$ in millions (except EPS) |
3rd quarter |
9 months |
||||
2021 |
2020 |
Change |
2021 |
2020 |
Change |
|
Revenue |
|
|
17% |
|
|
30% |
Net Income |
|
|
36% |
|
|
nm |
GAAP Diluted EPS |
|
|
35% |
|
|
nm |
Adjusted Diluted EPS |
|
|
12% |
|
|
nm |
Q3 consolidated revenue was up 17 percent versus Q3 2020 driven by growth in the Motorcycles segment thanks to stronger unit sales and a favorable unit mix. Total net income growth of 36 percent was driven by growth across both the Motorcycles and the Financial Services segments.
Motorcycles and Related Products Segment Results |
nm – not meaningful |
|||||
$ in millions |
3rd quarter |
9 months |
||||
2021 |
2020 |
Change |
2021 |
2020 |
Change |
|
Motorcycle Shipments (thousands) |
47.9 |
43.0 |
12% |
159.4 |
124.3 |
28% |
Revenue |
|
|
20% |
|
|
36% |
Motorcycles |
|
|
29% |
|
|
44% |
Parts & Accessories |
|
|
(3)% |
|
|
12% |
General Merchandise |
|
|
0% |
|
|
14% |
Gross Margin |
26.7% |
29.8% |
(3.1) pts. |
30.6% |
26.1% |
4.4 pts. |
Operating Income |
|
|
109% |
|
|
nm |
Operating Margin |
8.4% |
4.8% |
3.6 pts. |
13.7% |
0.4% |
13.3 pts. |
Revenue from the Motorcycles segment was up significantly during the third quarter of 2021 primarily driven by a 12 percent increase in wholesale shipments, favorable motorcycle unit mix and pricing. Parts & Accessories third quarter revenue was down slightly while General Merchandise was flat to Q3 2020 as both businesses faced strong prior year Q3 comparisons as dealers reopened after pandemic-related closures.
Third quarter gross margin was down 3 percentage points to Q3 prior year as a margin benefit attributed from stronger volume, profitable mix and pricing was more than offset by the negative cost headwinds across the supply chain and higher EU tariffs (2.5 percentage point impact). Q3 operating margin finished up versus prior year as the company's comparison period included heavier Rewire restructuring charges.
Harley-Davidson Retail Motorcycle Sales |
||||||
Motorcycles (thousands) |
3rd quarter |
9 months |
||||
2021 |
2020 |
Change |
2021 |
2020 |
Change |
|
|
33.9 |
33.2 |
2% |
114.8 |
92.0 |
25% |
EMEA |
9.4 |
11.2 |
(16)% |
24.6 |
29.9 |
(18)% |
|
6.5 |
7.6 |
(15)% |
18.3 |
20.3 |
(10)% |
|
1.0 |
1.8 |
(41)% |
2.6 |
4.8 |
(45)% |
Worldwide Total |
50.8 |
53.8 |
(6)% |
160.3 |
147.0 |
9% |
Global retail motorcycle sales in the third quarter (down 6 percent to prior year) were impacted by the strategic decisions made as part of the Rewire strategy, including the exit of unprofitable product segments and markets, as well as, macro supply chain challenges, including slower shipping times to the international markets.
Financial Services Segment Results |
||||||
$ in millions |
3rd quarter |
9 months |
||||
2021 |
2020 |
Change |
2021 |
2020 |
Change |
|
Revenue |
|
|
2% |
|
|
(0)% |
Operating Income |
|
|
17% |
|
|
169% |
Financial Services segment operating income was up over prior year in the third quarter, primarily driven by lower interest expense.
Other Results
Harley-Davidson generated
Tax Rate - The company's year-to-date effective tax rate was 23 percent.
Dividends - The company paid cash dividends of
Outlook
For the full-year 2021, the company now expects:
- Financial Services segment operating income growth of 95 to 105 percent, an increase from the previously communicated range of 75 to 85 percent.
- Capital expenditures of
$135 million to$150 million , a decrease from the previously communicated range of$190 million to$225 million .
Additionally, our full-year 2021 Motorcycles segment guidance remains unchanged relative to prior guidance. The company continues to expect:
- Motorcycles segment revenue growth to be 30 to 35 percent.
- GAAP Motorcycles segment operating income margin of 6 to 8 percent given the EU's decision to keep the current tariff at 31 percent while tariff negotiations occur.
Cash allocation priorities remain to first fund growth through The
Company Background
Webcast
Harley-Davidson will discuss its financial results and 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 Disclosure
This press release includes financial measures that have not been calculated in accordance with
The non-GAAP measures included in this press release are adjusted net income and adjusted diluted EPS. These non-GAAP measures exclude restructuring plan costs and the impact of
Cautionary Note Regarding Forward-Looking Statements
The company intends that certain matters discussed in this press 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," "targets," "intends," "forecasts," "sees," 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 press 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 are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are only made as of the date of this press release, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic; and (ii) the company's ability to: (A) execute its business plans and strategies, including The
The company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, 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 Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of COVID-19, or other factors.
In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior, HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers and the favorable impact of recent federal stimulus payments, as well as actions that the company has taken and could take that impact motorcycle values. Refer to "Risk Factors" under Item 1A of the company's Annual Report on Form 10-K for the year ended
### (HOG-F)
|
||||||||
Condensed Consolidated Statements of Operations |
||||||||
(In thousands, except per share amounts) |
||||||||
(Unaudited) |
||||||||
Three months ended |
Nine months ended |
|||||||
|
|
|
|
|||||
2021 |
2020 |
2021 |
2020 |
|||||
Motorcycles and Related Products revenue |
$ 1,160,618 |
$ 964,029 |
$ 3,724,225 |
$ 2,733,091 |
||||
Gross profit |
310,425 |
287,233 |
1,137,961 |
713,781 |
||||
Selling, administrative and engineering expense |
212,243 |
196,912 |
626,211 |
618,912 |
||||
Restructuring expense |
517 |
43,581 |
731 |
84,586 |
||||
Operating income from Motorcycles and Related Products |
97,665 |
46,740 |
511,019 |
10,283 |
||||
Financial Services revenue |
204,692 |
201,655 |
595,650 |
596,064 |
||||
Financial Services expense |
98,047 |
110,177 |
275,487 |
475,771 |
||||
Financial Services restructuring expense |
98 |
334 |
436 |
1,278 |
||||
Operating income from Financial Services |
106,547 |
91,144 |
319,727 |
119,015 |
||||
Operating income |
204,212 |
137,884 |
830,746 |
129,298 |
||||
Non-operating expense, net |
(6,723) |
(4,956) |
(17,053) |
(19,759) |
||||
Income before income taxes |
197,489 |
132,928 |
813,693 |
109,539 |
||||
Provision for income taxes |
34,516 |
12,710 |
185,236 |
11,843 |
||||
Net income |
$ 162,973 |
$ 120,218 |
$ 628,457 |
$ 97,696 |
||||
Earnings per share: |
||||||||
Basic |
$ 1.06 |
$ 0.78 |
$ 4.09 |
$ 0.64 |
||||
Diluted |
$ 1.05 |
$ 0.78 |
$ 4.06 |
$ 0.64 |
||||
Weighted-average shares: |
||||||||
Basic |
153,863 |
153,252 |
153,700 |
153,153 |
||||
Diluted |
155,117 |
153,915 |
154,903 |
153,790 |
||||
Cash dividends per share: |
$ 0.15 |
$ 0.02 |
$ 0.45 |
$ 0.42 |
|
||||||||
Reconciliation of GAAP Amounts to Non-GAAP Amounts |
||||||||
(In thousands, except per share amounts) |
||||||||
(Unaudited) |
||||||||
Three months ended |
Nine months ended |
|||||||
|
|
|
|
|||||
2021 |
2020 |
2021 |
2020 |
|||||
Net income excluding restructuring plan costs and the impact of EU tariffs |
||||||||
Net income (GAAP) |
$ 162,973 |
$ 120,218 |
$ 628,457 |
$ 97,696 |
||||
Restructuring plan costs |
615 |
43,915 |
1,167 |
85,864 |
||||
Impact of EU tariffs |
25,562 |
1,825 |
44,281 |
17,732 |
||||
Tax effect of adjustments(a) |
(5,563) |
(4,091) |
(10,126) |
(19,333) |
||||
Adjustments net of tax |
20,614 |
41,649 |
35,322 |
84,263 |
||||
Adjusted net income (non-GAAP) |
$ 183,587 |
$ 161,867 |
$ 663,779 |
$ 181,959 |
||||
Diluted EPS excluding restructuring plan costs and the impact of EU tariffs |
||||||||
Diluted EPS (GAAP) |
$ 1.05 |
$ 0.78 |
$ 4.06 |
$ 0.64 |
||||
Adjustments net of tax, per share |
0.13 |
0.27 |
0.23 |
0.55 |
||||
Adjusted diluted EPS (non-GAAP) |
$ 1.18 |
$ 1.05 |
$ 4.29 |
$ 1.19 |
||||
(a) The income tax effect has been computed using the estimated income tax rate for these adjustments |
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(In thousands) |
||||||||
(Unaudited) |
(Unaudited) |
|||||||
|
|
|
||||||
2021 |
2020 |
2020 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 2,061,303 |
$ 3,257,203 |
$ 3,560,950 |
|||||
Accounts receivable, net |
282,627 |
143,082 |
232,845 |
|||||
Finance receivables, net |
1,540,822 |
1,509,539 |
1,701,478 |
|||||
Inventories, net |
475,314 |
523,497 |
322,375 |
|||||
Restricted cash |
153,873 |
131,642 |
160,155 |
|||||
Other current assets |
194,481 |
280,470 |
178,931 |
|||||
4,708,420 |
5,845,433 |
6,156,734 |
||||||
Finance receivables, net |
5,322,436 |
4,933,469 |
5,142,014 |
|||||
Other long-term assets |
1,168,948 |
1,231,699 |
1,233,527 |
|||||
$ 11,199,804 |
$ 12,010,601 |
$ 12,532,275 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ 982,068 |
$ 848,118 |
$ 850,385 |
|||||
Short-term deposits |
92,626 |
79,965 |
29,999 |
|||||
Short-term debt |
749,620 |
1,014,274 |
1,227,763 |
|||||
Current portion of long-term debt, net |
1,605,798 |
2,039,597 |
2,109,284 |
|||||
3,430,112 |
3,981,954 |
4,217,431 |
||||||
Long-term debt, net |
4,876,292 |
5,932,933 |
6,171,676 |
|||||
Other long-term liabilities |
559,506 |
372,929 |
373,270 |
|||||
Shareholders' equity |
2,333,894 |
1,722,785 |
1,769,898 |
|||||
$ 11,199,804 |
$ 12,010,601 |
$ 12,532,275 |
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
Nine months ended |
||||||||
|
|
|||||||
2021 |
2020 |
|||||||
Net cash provided by operating activities |
$ 925,551 |
$ 1,135,068 |
||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(61,476) |
(92,295) |
||||||
Finance receivables, net |
(476,556) |
(143,093) |
||||||
Other investing activities |
2,485 |
334 |
||||||
Net cash used by investing activities |
(535,547) |
(235,054) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of medium-term notes |
- |
1,396,602 |
||||||
Repayments of medium-term notes |
(1,400,000) |
(1,400,000) |
||||||
Proceeds from securitization debt |
1,169,910 |
2,064,450 |
||||||
Repayments of securitization debt |
(1,013,820) |
(735,885) |
||||||
Net (decrease) increase in unsecured commercial paper |
(261,978) |
509,978 |
||||||
Net increase in credit facilitites |
- |
150,000 |
||||||
Borrowings of asset-backed commercial paper |
27,406 |
225,187 |
||||||
Repayments of asset-backed commercial paper |
(206,671) |
(236,846) |
||||||
Net increase in deposits |
210,144 |
29,992 |
||||||
Dividends paid |
(69,316) |
(65,002) |
||||||
Repurchase of common stock |
(11,545) |
(7,895) |
||||||
Issuance of common stock under employee stock option plans |
4,324 |
96 |
||||||
Net cash (used) provided by financing activities |
(1,551,546) |
1,930,677 |
||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(11,050) |
6,071 |
||||||
Net (decrease) increase in cash, cash equivalents and restricted cash |
$ (1,172,592) |
$ 2,836,762 |
||||||
Cash, cash equivalents and restricted cash: |
||||||||
Cash, cash equivalents and restricted cash, beginning of period |
$ 3,409,168 |
$ 905,366 |
||||||
Net (decrease) increase in cash, cash equivalents and restricted cash |
(1,172,592) |
2,836,762 |
||||||
Cash, cash equivalents and restricted cash, end of period |
$ 2,236,576 |
$ 3,742,128 |
||||||
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows: |
||||||||
Cash and cash equivalents |
$ 2,061,303 |
$ 3,560,950 |
||||||
Restricted cash |
153,873 |
160,155 |
||||||
Restricted cash included in Other long-term assets |
21,400 |
21,023 |
||||||
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows |
$ 2,236,576 |
$ 3,742,128 |
Motorcycles and Related Products Revenue and Motorcycle Shipment Data |
||||||||
(Unaudited) |
||||||||
Three months ended |
Nine months ended |
|||||||
|
|
|
|
|||||
2021 |
2020 |
2021 |
2020 |
|||||
MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands) |
||||||||
Motorcycles |
$ 885,626 |
$ 684,344 |
$ 2,931,669 |
$ 2,030,447 |
||||
Parts & accessories |
204,506 |
209,808 |
577,035 |
513,201 |
||||
General merchandise |
49,424 |
49,356 |
155,378 |
136,321 |
||||
Licensing |
8,481 |
8,894 |
22,865 |
21,826 |
||||
Other |
12,581 |
11,627 |
37,278 |
31,296 |
||||
$ 1,160,618 |
$ 964,029 |
$ 3,724,225 |
$ 2,733,091 |
|||||
|
27,919 |
25,284 |
104,190 |
69,359 |
||||
WORLDWIDE MOTORCYCLE SHIPMENTS |
||||||||
Grand American Touring(a) |
21,988 |
17,230 |
79,485 |
52,656 |
||||
Cruiser(b) |
16,531 |
14,775 |
52,117 |
42,660 |
||||
Adventure Touring |
4,507 |
- |
8,555 |
- |
||||
Sportster®/ Street |
4,915 |
10,978 |
19,262 |
29,009 |
||||
47,941 |
42,983 |
159,419 |
124,325 |
|||||
(a)Includes CVOTMand Trike |
||||||||
(b)Includes Softail® and LiveWire® |
Motorcycles and Related Products Gross Profit |
||||||||
(Unaudited) |
||||||||
The estimated impact of significant factors affecting the comparability of gross profit from 2020 to 2021 were as follows (in millions): |
||||||||
Three months |
Nine months |
|||||||
2020 gross profit |
$ 287 |
$ 714 |
||||||
Volume |
32 |
203 |
||||||
Price and sales incentives, net of related costs |
15 |
39 |
||||||
Foreign currency exchange rates and hedging |
8 |
33 |
||||||
Shipment mix |
44 |
169 |
||||||
Raw material prices |
(25) |
(46) |
||||||
Manufacturing and other costs |
(51) |
26 |
||||||
23 |
424 |
|||||||
2021 gross profit |
$ 310 |
$ 1,138 |
Financial Services - Finance Receivables Allowance for Credit Losses |
||||||||
(Unaudited) |
||||||||
Three months ended |
Nine months ended |
|||||||
|
|
|
|
|||||
2021 |
2020 |
2021 |
2020 |
|||||
Balance, beginning of period |
$ 358,811 |
$ 411,015 |
$ 390,936 |
$ 198,581 |
||||
Cumulative effect of change in accounting(a) |
- |
- |
- |
100,604 |
||||
Provision for credit losses |
11,208 |
7,835 |
4,935 |
178,433 |
||||
Charge-offs, net of recoveries |
(14,185) |
(10,148) |
(40,037) |
(68,916) |
||||
Balance, end of period |
$ 355,834 |
$ 408,702 |
$ 355,834 |
$ 408,702 |
||||
(a)On |
Worldwide Retail Sales of Harley-Davidson Motorcycles(a) |
||||||||
(Unaudited) |
||||||||
Three months ended |
Nine months ended |
|||||||
|
|
|
|
|||||
2021 |
2020 |
2021 |
2020 |
|||||
|
31,699 |
31,304 |
107,421 |
86,376 |
||||
|
2,158 |
1,915 |
7,403 |
5,668 |
||||
|
33,857 |
33,219 |
114,824 |
92,044 |
||||
EMEA |
9,389 |
11,184 |
24,580 |
29,878 |
||||
|
6,484 |
7,631 |
18,263 |
20,271 |
||||
|
1,048 |
1,768 |
2,620 |
4,760 |
||||
Total worldwide retail sales |
50,778 |
53,802 |
160,287 |
146,953 |
||||
(a)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. |
View original content to download multimedia:https://www.prnewswire.com/news-releases/harley-davidson-delivers-solid-third-quarter-financial-results-301409613.html
SOURCE
Media Contact: Jenni Coats, jenni.coats@Harley-Davidson.com, 414.343.7902; Financial Contact: Shawn Collins, shawn.collins@Harley-Davidson.com, 414.343.8002