Harley-Davidson Reports Third Quarter 2016 Earnings

Dienstag, 18.10.2016 12:55 von

PR Newswire

MILWAUKEE, Oct. 18, 2016 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) third quarter 2016 diluted earnings per share decreased 7.2 percent to $0.64 compared to diluted EPS of $0.69 in the same period in 2015. Net income was $114.1 million on consolidated revenue of $1.27 billion compared to net income of $140.3 million on consolidated revenue of $1.32 billion in the third quarter of 2015.

Harley-Davidson worldwide retail motorcycle sales in the third quarter were down 4.5 percent, primarily on weak U.S. industry trends. Harley-Davidson retail motorcycle sales in the U.S. were down 7.1 percent compared to the year-ago quarter, with the overall U.S. industry also down for the same period. Harley-Davidson's U.S. market share for the quarter was 52.3 percent in the 601cc-plus segment, essentially flat compared to the third quarter in 2015. Harley-Davidson international retail sales increased by 1.0 percent over the prior year quarter.

"We continue to effectively navigate a fiercely competitive environment and an ongoing weak U.S. industry," said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. "We are pleased with the positive results and the enthusiasm we've seen for our Model Year 2017 motorcycles, featuring the new Milwaukee-Eight engine. We are confident that the entire line-up will drive retail sales growth for the remainder of 2016 and position us well heading into the spring riding season next year."

The Milwaukee-Eight™ engine packs innovative technologies that deliver improved horsepower, torque, and comfort and enhanced sound. It was introduced on Touring motorcycles in August as part of the Model Year 2017 product launch. Response to the new model year motorcycles drove increased retail sales in September over prior year.

Through nine months, Harley-Davidson 2016 net income was $645.0 million on consolidated revenue of $4.89 billion compared to nine-month 2015 net income of $710.0 million on consolidated revenue of $4.81 billion. Diluted EPS was $3.55 compared to diluted EPS of $3.41 in the year-ago period. Worldwide retail motorcycle sales were down 1.9 percent compared to the same period in 2015. International retail sales were up 3.3 percent, offset by a decline of 4.7 percent in U.S. retail sales.

Recognizing the continued slower industry growth in the U.S., the company will streamline its operations in the fourth quarter of 2016. It expects to incur expenses of approximately $20 million to $25 million in the fourth quarter, primarily for employee separation and reorganization costs.

"Our value as a company and as a brand is the sum of 113 years of commitment to our riders and the freedom seekers we will inspire to ride in the future," said Levatich. "We remain intensely focused on growing the sport and delivering strong business results."

Retail Harley-Davidson Motorcycle Sales

$ in thousands

3rd Quarter

Nine Months

2016

2015

Change

2016

2015

Change

Americas Region







   U.S.

45,469

48,918

(7.1)%

135,581

142,196

(4.7)%

   Canada

2,663

2,554

4.3%

8,946

8,414

6.3%

   Latin America

2,605

2,818

(7.6)%

7,064

8,091

(12.7)%

Europe, Middle East, Africa (EMEA) Region

10,224

10,031

1.9%

37,947

35,598

6.6%

Asia Pacific Region

7,994

7,857

1.7%

24,141

23,471

2.9%

Worldwide Total

68,955

72,178

(4.5)%

213,679

217,770

(1.9)%

Retail sales in EMEA were up 1.9 percent in the third quarter and up 6.6 percent for the first nine months due to the popularity of Model Year 2016 cruiser motorcycles and our focus on driving demand through test rides. Asia Pacific retail sales were up 1.7 percent in the quarter and up 2.9 percent for the first nine months compared to 2015 behind strong growth in Australia and Japan.

Motorcycles and Related Products Segment Results

$ in thousands

3rd Quarter

Nine Months

2016

2015

Change

2016

2015

Change

Motorcycle Shipments (vehicles)

48,611

53,472

(9.1)%

219,807

218,233

0.7%

Revenue







   Motorcycles

788,856

812,398

(2.9)%

3,437,066

3,376,356

1.8%

   Parts & Accessories

231,279

252,226

(8.3)%

673,192

692,938

(2.8)%

   General Merchandise

65,289

69,008

(5.4)%

211,664

212,954

(0.6)%

Gross Margin Percent

33.6

34.6

(1.0)pts

36.1

37.9

(1.8)pts

Operating Income

108,929

143,065

(23.9)%

764,135

869,122

(12.1)%

Operating Margin Percent

10.0%

12.5%

(2.5)pts

17.6%

20.2%

(2.6)pts

Revenue from motorcycles and related products was down compared to the third quarter in 2015, primarily behind decreased motorcycle shipments. Operating margin as a percent of revenue decreased versus the prior year as a result of lower gross margin behind unfavorable manufacturing expense and higher year-over-year SG&A.

Financial Services Segment Results

$ in thousands

 3rd Quarter

Nine Months

2016

2015

Change

2016

2015

Change

Revenue

183,183

177,109

3.4%

547,505

513,093

6.7%

Operating Income

69,447

72,771

(4.6)%

215,391

219,348

(1.8)%

Operating income from financial services was down 4.6 percent in the third quarter compared to the year ago period.

Guidance
Harley-Davidson continues to expect to ship 264,000 to 269,000 motorcycles in 2016, which is approximately down 1 percent to up 1 percent from 2015. In the fourth quarter of 2016, the company expects to ship 44,200 to 49,200 motorcycles compared to 48,149 motorcycles shipped in the year-ago period. The company continues to expect full-year 2016 operating margin of approximately 15 to 16 percent for the Motorcycles segment. The company continues to expect 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.

Income Tax Rate
For the first nine months, Harley-Davidson's effective tax rate was 32.9 percent compared to 34.8 percent in 2015. The company continues to expect its full-year 2016 effective tax rate will be approximately 33 percent.

Cash Flow
Cash and marketable securities totaled $795.3 million at the end of the third quarter, compared to $1.42 billion a year ago. During the first nine months of the year, Harley-Davidson generated $927.8 million of cash from operating activities compared to $1.02 billion for the same period in 2015.

Shareholder Returns
In the third quarter, the company paid a cash dividend of $0.35 per share. During the same time period, on a discretionary basis, the company repurchased 2.1 million shares of Harley-Davidson common stock for $104.6 million. Also in the third quarter, there were approximately 179.3 million weighted-average diluted shares outstanding, compared to approximately 204.6 million shares in the year-ago quarter. As of September 25, 2016, a total of 20.9 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 third-quarter 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 conditions, including changing capital, credit and retail markets, and political events, (iii) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (iv) 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, (v) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles and collections, (vi) develop and introduce products, services and experiences that are successful in the marketplace, (vii) 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, (viii) 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, (ix) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (x) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xi) effectively execute reorganization actions within expected costs and realize the expected benefits of those actions, (xii) 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, (xiii) manage risks that arise through expanding international manufacturing, operations and sales, (xiv) manage through the effects inconsistent and unpredictable weather and 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) retain and attract talented employees, (xix) manage its exposure to product liability claims and commercial or contractual disputes, (xx) execute its flexible production strategy, (xxi) adjust to healthcare inflation and reform, pension reform and tax changes, (xxii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, and (xxiii) 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)


(Unaudited)



Three months ended


Nine months ended



September 25, 


September 27,


September 25, 


September 27,



2016


2015


2016


2015










Motorcycles and related products revenue


$    1,091,630


$   1,140,321


$    4,338,353


$   4,301,674

Gross profit


367,019


394,039


1,564,857


1,631,528

Selling, administrative and engineering expense


258,090


250,974


800,722


762,406

  Operating income from motorcycles & related products


108,929


143,065


764,135


869,122










Financial services revenue


183,183


177,109


547,505


513,093

Financial services expense


113,736


104,338


332,114


293,745

  Operating income from financial services


69,447


72,771


215,391


219,348










Operating income


178,376


215,836


979,526


1,088,470

Investment income


2,300


3,211


3,754


5,983

Interest expense


7,706


4,879


21,968


4,897

Income before income taxes


172,970


214,168


961,312


1,089,556

Provision for income taxes


58,905


73,821


316,327


379,545

Net income


$       114,065


$      140,347


$       644,985


$      710,011










Earnings per common share:









  Basic


$            0.64


$           0.69


$            3.57


$           3.43

  Diluted


$            0.64


$           0.69


$            3.55


$           3.41










Weighted-average common shares:









  Basic


178,438


203,598


180,779


207,255

  Diluted


179,320


204,580


181,582


208,282










Cash dividends per common share


$            0.35


$           0.31


$            1.05


$           0.93



















 


Harley-Davidson, Inc.

Condensed Consolidated Balance Sheets(1)

(In thousands)










(Unaudited)




(Unaudited)



September 25,


December 31,


September 27,



2016


2015


2015








ASSETS







Current assets:







    Cash and cash equivalents


$       790,284


$      722,209


$    1,368,554

    Marketable securities


5,038


45,192


47,358

    Accounts receivable, net


346,176


247,405


294,054

    Finance receivables, net


2,205,644


2,053,582


2,068,873

    Inventories


426,547


585,907


466,657

    Restricted cash


65,088


88,267


113,499

    Other current assets


263,567


235,321


251,225

Total current assets


4,102,344


3,977,883


4,610,220








Finance receivables, net


4,944,322


4,814,571


5,009,473

Other long-term assets


1,165,560


1,180,523


1,092,341



$  10,212,226


$   9,972,977


$  10,712,034








LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







    Accounts payable & accrued liabilities


$       798,127


$      707,578


$       781,246

    Short-term debt


1,055,428


1,201,380


990,049

    Current portion of long-term debt, net


700,152


838,349


885,889

Total current liabilities


2,553,707


2,747,307


2,657,184








Long-term debt, net


5,170,609


4,832,469


5,040,644

Pension and postretirement healthcare liabilities


303,319


358,547


254,864

Other long-term liabilities


192,223


195,000


199,669








Total shareholders' equity


1,992,368


1,839,654


2,559,673



$  10,212,226


$   9,972,977


$  10,712,034









(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)


(Unaudited)



Nine months ended



September 25,


September 27,



2016


2015






Net cash provided by operating activities


$       927,809


$   1,020,957






Cash flows from investing activities:





  Capital expenditures


(162,726)


(139,054)

  Finance receivables, net


(569,013)


(719,472)

  Proceeds from sale of finance receivables


312,571


-

  Net change in marketable securities


40,014


9,500

  Acquisition of business 


-


(59,910)

  Other


251


5,172

Net cash used by investing activities


(378,903)


(903,764)






Cash flows from financing activities:





  Proceeds from issuance of senior unsecured notes


-


740,949

  Proceeds from issuance of medium-term notes


1,193,396


595,386

  Repayments of medium-term notes


(451,336)


(600,000)

  Proceeds from securitization debt


-


1,195,668

  Repayments of securitization debt


(535,616)


(764,909)

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


(146,328)


258,734

  Borrowings of asset-backed commercial paper


33,428


69,191

  Repayments of asset-backed commercial paper


(55,170)


(55,124)

  Net change in restricted cash


30,981


(15,165)

  Dividends paid


(190,387)


(191,451)

  Purchase of common stock for treasury


(374,234)


(894,565)

  Excess tax benefits from share-based payments


1,291


2,878

  Issuance of common stock under employee stock option plans


6,444


16,755

Net cash (used by) provided by financing activities


(487,531)


358,347






Effect of exchange rate changes on cash and cash equivalents


6,700


(13,666)






Net increase in cash and cash equivalents


$        68,075


$      461,874






Cash and cash equivalents:





  Cash and cash equivalents - beginning of period


$       722,209


$      906,680

  Net increase in cash and cash equivalents


68,075


461,874

  Cash and cash equivalents - end of period


$       790,284


$   1,368,554






 

Motorcycles and Related Products Revenue and

 Motorcycle Shipment Data




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



Three months ended


Nine months ended



September 25,


September 27,


September 25,


September 27,



2016


2015


2016


2015

MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands)









  Motorcycles


$       788,856


$      812,398


$    3,437,066


$   3,376,356

  Parts & Accessories


231,279


252,226


673,192


692,938

  General Merchandise


65,289


69,008


211,664


212,954

  Other


6,206


6,689


16,431


19,426



$    1,091,630


$   1,140,321


$    4,338,353


$   4,301,674










MOTORCYCLE SHIPMENTS:









    United States


26,269


30,092


141,708


141,884

    International


22,342


23,380


78,099


76,349

      Total 


48,611


53,472


219,807


218,233










MOTORCYCLE PRODUCT MIX:









    Touring


23,295


21,994


89,467


95,354

    Cruiser


13,986


18,405


78,570


71,753

    Sportster® / Street


11,330


13,073


51,770


51,126

      Total


48,611


53,472


219,807


218,233
























 


Worldwide Retail Sales of Harley-Davidson Motorcycles(1)












Three months ended


Nine months ended



September 30,


September 30,


September 30,


September 30,



2016


2015


2016


2015

Americas Region









  United States


45,469


48,918


135,581


142,196

  Canada


2,663


2,554


8,946


8,414

  Latin America


2,605


2,818


7,064


8,091

    Total Americas Region


50,737


54,290


151,591


158,701










Europe, Middle East and Africa Region (EMEA)









  Europe(2)


8,807


8,441


32,590


30,720

  Other


1,417


1,590


5,357


4,878

    Total EMEA Region


10,224


10,031


37,947


35,598










Asia Pacific Region









  Japan


2,762


2,642


7,631


7,194

  Other


5,232


5,215


16,510


16,277

    Total Asia Pacific Region


7,994


7,857


24,141


23,471










    Total Worldwide Retail Sales


68,955


72,178


213,679


217,770










    Total International Retail Sales


23,486


23,260


78,098


75,574











(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)








Nine months ended



September 30,


September 30,



2016


2015

United States(2) 


263,479


279,013

Europe(3)


337,694


313,302







(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 Harley-Davidson, Inc.