NEWS & EVENTS

Harley-Davidson Reports Fourth Quarter And Full-Year 2015 Results

01/28/2016

MILWAUKEE, Jan. 28, 2016 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) full-year 2015 diluted earnings per share decreased 4.9 percent to $3.69 compared to diluted EPS of $3.88 in 2014. Net income was $752.2 million on consolidated revenue of $6.0 billion compared to full-year 2014 net income of $844.6 million on consolidated revenue of $6.23 billion. In the fourth quarter of 2015, diluted EPS was $0.22 compared to $0.35 in the prior year period. Fourth quarter net income was $42.2 million on consolidated revenue of $1.18 billion compared to net income of $74.5 million on consolidated revenue of $1.20 billion in the year-ago period.

"We are focused, with strength and resolve, on growing demand and building on our substantial market leadership position," said Matt Levatich, President and Chief Executive Officer, Harley-Davidson, Inc.  "Although we expect the macro-economic environment to remain challenging, we are confident we'll continue to lead with our powerful brand – not simply because of our substantial strengths but through our increased demand driving investments and our incredibly talented and passionate employees and dealers."

Throughout 2015, Harley-Davidson retail motorcycle sales were adversely affected by heightened competitive pressures including those arising from shifts in world currencies.

In October, the company unveiled plans to increase its customer-facing marketing investment, starting in 2016, by approximately 65 percent over 2015 levels, and to increase its investment in new product development by approximately 35 percent from 2015. These changes represent an approximate $70 million increase in investments to drive demand compared to 2015. The increased investments are focused in four areas: increasing product and brand awareness; growing new ridership in the U.S.; increasing and enhancing brand access; and accelerating the cadence and impact of new products.

Retail Harley-Davidson Motorcycle Sales


4th Quarter

Full Year

2015

2014

Change

2015

2014

Change

Americas Region







   U.S.

26,044

26,957

(3.4)%

168,240

171,079

(1.7)%

   Latin America

3,082

3,130

(1.5)%

11,173

11,652

(4.1)%

   Canada

1,255

1,118

12.3%

9,669

9,871

(2.0)%

Europe, Middle East, Africa (EMEA) Region

7,689

7,823

(1.7)%

43,287

45,323

(4.5)%

Asia Pacific Region

8,787

8,121

8.2%

32,258

30,074

7.3%

Worldwide Total

46,857

47,149

(0.6)%

264,627

267,999

(1.3)%

Retail Motorcycle Sales Highlights: In the fourth quarter, Harley-Davidson's U.S. market share was 51.4 percent in the 601cc-plus category, flat compared to the year ago period.

"Our U.S. market share stabilized as we began to ramp up marketing investment, and as we lapped the initial impact of heightened competitiveness and price discounting that began late in the fourth quarter of 2014," said Levatich.

Retail Harley-Davidson motorcycle sales in Canada grew 12.3 percent in the quarter, following the company's move to direct distribution in the market. The Asia Pacific region had its best year ever for dealer sales of new Harley-Davidson motorcycles. For the full year, Harley-Davidson was number one in market share in the 601cc-plus segment in the U.S., Canada, Australia, India and Japan.

Motorcycles and Related Products Segment Results

$ in thousands

4th Quarter

Full Year

2015

2014

Change

2015

2014

Change

Motorcycle Shipments (vehicles)

48,149

47,157

2.1%

266,382

270,726

-1.6%

Revenue







   Motorcycles

$751,383

$784,535

-4.2%

$4,127,739

$4,385,863

-5.9%

   Parts & Accessories

$169,707

$165,581

2.5%

$862,645

$875,019

-1.4%

   General Merchandise

$79,356

$75,044

5.7%

$292,310

$284,826

2.6%

Gross Margin Percent

31.9%

30.5%

1.4 pts

36.8%

36.4%

0.4 pts

Operating Income

$6,368

$35,885

-82.3%

$875,490

$1,003,147

-12.7%

Operating Margin Percent

0.6%

3.5%

-2.9 pts

16.5%

18.0%

-1.5 pts

Segment Results Key Drivers: During the fourth quarter, revenue from motorcycles and related products was down versus the prior year on unfavorable mix and currency exchange, partially offset by the benefit of higher shipments. The decrease in operating income for the quarter was primarily driven by higher SG&A spending, partially offset by a strong gross margin percent.

Financial Services Segment Results

$ in thousands

4th Quarter

Full Year

2015

2014

Change

2015

2014

Change

Revenue

$173,565

$169,007

2.7%

$686,658

$660,827

3.9%

Operating Income

$60,857

$62,448

-2.5%

$280,205

$277,836

0.9%

Segment Results Key Drivers: Financial services operating income fell slightly in the fourth quarter of 2015 compared to the year-ago period on a higher provision for retail credit loan losses, largely offset by strong net interest income.

Guidance
Harley-Davidson expects to ship 269,000 to 274,000 motorcycles in 2016, an approximate 1 percent to 3 percent increase from 2015 shipments. In the first quarter of 2016, the company expects to ship 78,000 to 83,000 motorcycles compared to 79,589 motorcycles shipped in the year-ago period. The company expects full-year 2016 operating margin of approximately 16 to 17 percent for the Motorcycles segment. The company expects 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.

Income Tax Rate
For the full year 2015, Harley-Davidson's effective tax rate was 34.6 percent compared to 34.2 percent in 2014. The company expects its full-year 2016 effective tax rate will be approximately 34.5 percent.             

Cash Flow
Cash and marketable securities totaled $767.4 million at year-end 2015 compared to $964.0 million at year-end 2014. In 2015, Harley-Davidson generated $1.10 billion of cash from operating activities compared to $1.15 billion in 2014. On a discretionary basis, the company repurchased 12.7 million shares of Harley-Davidson, Inc. common stock during the fourth quarter of 2015 at a cost of $642.4 million. For the full year 2015, Harley-Davidson repurchased 27.9 million shares of its common stock at a cost of $1.53 billion, partially funded by a $750 million debt issuance. In the fourth quarter of 2015, there were approximately 190.6 million weighted-average diluted Harley-Davidson common shares outstanding. At the end of 2015, 9.0 million shares remained on board-approved share repurchase authorizations.

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 beginning 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 conditions, including changing capital, credit and retail markets, and political events, (iii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (iv) 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, (v) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (vi) 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, (vii) develop and introduce products, services and experiences that are successful in the marketplace, (viii) manage risks that arise through expanding international manufacturing, operations and sales,  (ix) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles,  (x) 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, (xi) manage the impact that prices for and supply of used motorcycles may have on retail sales of new motorcycles, (xii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xiii) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xiv) prevent and detect any issues with its motorcycles or any associated manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation and adverse effects on its reputation and brand strength, (xv) manage its exposure to product liability claims and commercial or contractual disputes, (xvi) implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities,  (xvii) execute its flexible production strategy,   (xviii) adjust to healthcare inflation and reform, pension reform and tax changes, (xix) retain and attract talented employees, (xx) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, (xxi) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, 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,



2015


2014


2015


2014










Motorcycles and related products revenue


$      1,007,070


$      1,031,150


$      5,308,744


$      5,567,681

Gross profit


320,932


314,210


1,952,460


2,025,080

Selling, administrative and engineering expense


314,564


278,325


1,076,970


1,021,933

  Operating income from motorcycles & related products


6,368


35,885


875,490


1,003,147










Financial services revenue


173,565


169,007


686,658


660,827

Financial services expense


112,708


106,559


406,453


382,991

  Operating income from financial services


60,857


62,448


280,205


277,836










Operating income


67,225


98,333


1,155,695


1,280,983

Investment income


602


1,559


6,585


6,499

Interest expense


7,220


15


12,117


4,162

Income before income taxes


60,607


99,877


1,150,163


1,283,320

Provision for income taxes


18,411


25,402


397,956


438,709

Net income


$           42,196


$           74,475


$         752,207


$         844,611










Earnings per common share:









  Basic


$              0.22


$              0.35


$              3.71


$              3.90

  Diluted


$              0.22


$              0.35


$              3.69


$              3.88










Weighted-average common shares:









  Basic


189,681


213,064


202,681


216,305

  Diluted


190,621


214,439


203,686


217,706










Cash dividends per common share


$            0.310


$            0.275


$            1.240


$            1.100



















 






Harley-Davidson, Inc.

Condensed Consolidated Balance Sheets

(In thousands)








(Unaudited)





December 31,


December 31,



2015


2014






ASSETS





Current assets:





    Cash and cash equivalents


$         722,209


$         906,680

    Marketable securities


45,192


57,325

    Accounts receivable, net


247,405


247,621

    Finance receivables, net


2,053,582


1,916,635

    Inventories


585,907


448,871

    Restricted cash


88,267


98,627

    Other current assets


240,592


272,336

Total current assets


3,983,154


3,948,095






Finance receivables, net


4,814,571


4,516,246

Other long-term assets


1,193,442


1,063,756



$      9,991,167


$      9,528,097






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





    Accounts payable & accrued liabilities


$         707,578


$         646,185

    Short-term debt


1,201,380


731,786

    Current portion of long-term debt


843,620


1,011,315

Total current liabilities


2,752,578


2,389,286






Long-term debt


4,845,388


3,761,528

Pension and postretirement healthcare liabilities


358,547


279,192

Other long-term liabilities


195,000


188,805






Total shareholders' equity


1,839,654


2,909,286



$      9,991,167


$      9,528,097
















 






Harley-Davidson, Inc.

Condensed Consolidated Statements of Cash Flows

 (In thousands)




(Unaudited)





Twelve months ended



December 31,


December 31,



2015


2014






Net cash provided by operating activities


$      1,100,118


$      1,146,677






Cash flows from investing activities:





  Capital expenditures


(259,974)


(232,319)

  Finance receivables, net


(614,945)


(555,178)

  Net change in marketable securities


11,507


41,010

  Acquisition of business


(59,910)


-

  Other


7,474


1,837

Net cash used by investing activities


(915,848)


(744,650)






Cash flows from financing activities:





  Repayment of senior unsecured notes


-


(303,000)

  Proceeds from issuance of senior unsecured notes


740,385


-

  Proceeds from issuance of medium-term notes


595,386


991,835

  Repayments of medium-term notes


(610,331)


(526,431)

  Proceeds from securitization debt


1,195,668


847,126

  Repayments of securitization debt


(1,008,135)


(834,856)

  Net increase in credit facilities and unsecured commercial paper


469,473


63,945

  Borrowings of asset-backed commercial paper


87,442


84,907

  Repayments of asset-backed commercial paper


(72,727)


(77,800)

  Net change in restricted cash


11,410


22,755

  Dividends paid


(249,262)


(238,300)

  Purchase of common stock for treasury


(1,537,020)


(615,602)

  Excess tax benefits from share-based payments


3,468


11,540

  Issuance of common stock under employee stock option plans


20,179


37,785

Net cash used by financing activities


(354,064)


(536,096)






Effect of exchange rate changes on cash and cash equivalents


(14,677)


(25,863)






Net decrease in cash and cash equivalents


$       (184,471)


$       (159,932)






Cash and cash equivalents:





  Cash and cash equivalents - beginning of period


$         906,680


$      1,066,612

  Net decrease in cash and cash equivalents


(184,471)


(159,932)

  Cash and cash equivalents - end of period


$         722,209


$         906,680






 











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,



2015


2014


2015


2014

MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands)









  Motorcycles


$         751,383


$         784,535


$      4,127,739


$      4,385,863

  Parts & Accessories


169,707


165,581


862,645


875,019

  General Merchandise


79,356


75,044


292,310


284,826

  Other


6,624


5,990


26,050


21,973



$      1,007,070


$      1,031,150


$      5,308,744


$      5,567,681










MOTORCYCLE SHIPMENTS:









    United States


28,804


28,554


170,688


173,994

    International


19,345


18,603


95,694


96,732

      Total 


48,149


47,157


266,382


270,726










MOTORCYCLE PRODUCT MIX:









    Touring


19,414


22,364


114,768


122,481

    Cruiser(1)


17,454


15,324


89,207


91,426

    Sportster® / Street


11,281


9,469


62,407


56,819

      Total


48,149


47,157


266,382


270,726















(1) Category previously referred to as "Custom" motorcycle units, as used in this table, include Dyna®, Softail®, V-Rod® and CVO models.


 










Worldwide Retail Sales of Harley-Davidson Motorcycles(1)












Three months ended


Twelve months ended



December 31,


December 31,


December 31,


December 31,



2015


2014


2015


2014

Americas Region









  United States


26,044


26,957


168,240


171,079

  Canada


1,255


1,118


9,669


9,871

  Latin America


3,082


3,130


11,173


11,652

    Total Americas Region


30,381


31,205


189,082


192,602










Europe, Middle East and Africa Region (EMEA)









  Europe(2)


6,174


6,115


36,894


38,491

  Other


1,515


1,708


6,393


6,832

    Total EMEA Region


7,689


7,823


43,287


45,323










Asia Pacific Region









  Japan


2,506


2,751


9,700


10,775

  Other


6,281


5,370


22,558


19,299

    Total Asia Pacific Region


8,787


8,121


32,258


30,074










    Total Worldwide Retail Sales


46,857


47,149


264,627


267,999










    Total International Retail Sales


20,813


20,192


96,387


96,920












(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.



(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,



2015


2014

United States(2) 


328,818


313,627

Europe(3)


351,735


319,801








(1) Data includes on-road 601+cc models. On-road 601+cc models include on-highway, 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-and-full-year-2015-results-300211052.html

SOURCE Harley-Davidson, Inc.

Media, Tony Macrito, +1-414-343-4512; Financial, Amy Giuffre, +1-414-343-8002