HARLEY-DAVIDSON, INC. MILWAUKEE, Jan. 31, 2017 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) fourth quarter 2016 diluted EPS increased 22.7 percent to $0.27 compared to $0.22 in the same period of 2015. In the fourth quarter of 2016, net income was $47.2 million on consolidated revenue of $1.11 billion versus net income of $42.2 million on consolidated revenue of $1.18 billion in the year-ago period. Full-year 2016 diluted EPS increased 3.8 percent to $3.83 compared to diluted EPS of $3.69 in 2015. Full-year net income was $692.2 million on consolidated revenue of $6.0 billion versus net income of $752.2 million on consolidated revenue of $6.0 billion a year ago.
"The global competitive environment remains intense, but our 2016 results demonstrate that our increased investments to drive demand and bring impactful new products to market are working," said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. "We are energized by our resolve to compete and win in the U.S. and in major international markets. Our market share performance gives us great confidence in the strength of our long-term strategy."
For the full-year 2016, worldwide Harley-Davidson retail motorcycle sales were down 1.6 percent compared to 2015. U.S. retail sales decreased 3.9 percent, partially offset by international growth of 2.3 percent.
During 2016, the company reported its best-ever retail sales results in Asia Pacific and EMEA. In the 601+cc motorcycle market, the company grew its number one market share position in the U.S. and grew market share in Europe. The company added 40 new dealer points internationally and reported that U.S. dealers trained more than 65,000 new riders through the Harley-Davidson Riding Academy. The company also launched its model year 2017 lineup of motorcycles, featuring the new, highly-acclaimed Milwaukee-Eight(TM) engine, and upgraded suspension, on all new Touring motorcycles.
"Our long-term strategy is all about growing ridership in the U.S., growing reach and impact internationally, and growing share and profit in every market we serve," stated Levatich. "Our goal over the next 10 years is to build the next generation of Harley-Davidson riders worldwide."
Harley-Davidson Retail Motorcycle Sales
4th Quarter Full-Year
----------- ---------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
U.S. 26,077 26,044 0.1% 161,658 168,240 -3.9%
---- ------ ------ --- ------- ------- ----
Canada 1,257 1,255 0.2% 10,203 9,669 5.5%
------ ----- ----- --- ------ ----- ---
Latin
America 2,637 3,082 -14.4% 9,701 11,173 -13.2%
------- ----- ----- ----- ----- ------ -----
EMEA 7,891 7,689 2.6% 45,838 43,287 5.9%
---- ----- ----- --- ------ ------ ---
Asia
Pacific 8,748 8,787 -0.4% 32,889 32,258 2.0%
------- ----- ----- ---- ------ ------ ---
International
Total 20,533 20,813 -1.3% 98,631 96,387 2.3%
------------- ------ ------ ---- ------ ------ ---
Worldwide
Total 46,610 46,857 -0.5% 260,289 264,627 -1.6%
--------- ------ ------ ---- ------- ------- ----
In the fourth quarter, worldwide retail sales of new Harley-Davidson motorcycles declined 0.5 percent versus the prior year behind modest declines in some international markets partially offset by slight growth in the U.S.
Motorcycles and Related Products Segment Results
$ in thousands 4th Quarter Full-Year
-------------- ----------- ---------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Motorcycle
Shipments
(vehicles) 42,414 48,149 -11.9% 262,221 266,382 -1.6%
----------- ------ ------ ----- ------- ------- ----
Revenue
-------
Motorcycles $685,047 $751,383 -8.8% $4,122,113 $4,127,739 -0.1%
----------- -------- -------- ---- ---------- ---------- ----
Parts &
Accessories $169,445 $169,707 -0.2% $842,637 $862,645 -2.3%
------------ -------- -------- ---- -------- -------- ----
General
Merchandise $72,919 $79,356 -8.1% $284,583 $292,310 -2.6%
------------ ------- ------- ---- -------- -------- ----
Gross Margin
Percent 30.7% 31.9% -1.2 pts 35.1% 36.8% -1.7 pts
------------ ---- ---- -------- ---- ---- --------
Operating Income $9,271 $6,368 45.6% $773,406 $875,490 -11.7%
---------------- ------ ------ ---- -------- -------- -----
Operating Margin
Percent 1.0% 0.6% 0.4 pts 14.7% 16.5% -1.8 pts
---------------- --- --- ------- ---- ---- --------
Fourth quarter revenue from motorcycles and related products was down versus the prior year behind fewer motorcycle shipments. Operating margin as a percent of revenue increased in the quarter compared to the same period in 2015, resulting from lower SG&A.
Financial Services Segment Results
$ in thousands 4th Quarter Full-Year
-------------- ----------- ---------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Revenue $177,577 $173,565 2.3% $725,082 $686,658 5.6%
------- -------- -------- --- -------- -------- ---
Operating
Income $60,139 $60,857 -1.2% $275,530 $280,205 -1.7%
--------- ------- ------- ---- -------- -------- ----
Financial services operating income fell 1.2 percent in the fourth quarter compared to the year ago period.
Income Tax Rate
For 2016, Harley-Davidson's effective tax rate was 32.4 percent compared to 34.6 percent the prior year. The lower effective tax rate is attributed to the successful closure of various tax audits in 2016.
Other Results
Cash and marketable securities amounted to $765.5 million at the end of 2016, compared to $767.4 million at the end of 2015. Harley-Davidson generated $1.17 billion of cash from operating activities in 2016 compared to $1.10 billion in 2015. On a discretionary basis, the company repurchased 1.7 million shares of its common stock during the fourth quarter of 2016 at a cost of $91.0 million. In 2016, Harley-Davidson repurchased 9.7 million shares of its common stock at a cost of $459.1 million. In the fourth quarter of 2016, there were 177.6 million weighted-average diluted common shares outstanding. At the end of 2016, 19.3 million shares remained on a board-approved share repurchase authorization.
Guidance
For 2017, Harley-Davidson anticipates full-year motorcycle shipments to be flat to down modestly in comparison to 2016. In the first quarter of 2017, Harley-Davidson expects to ship approximately 66,000 to 71,000 motorcycles.
Harley-Davidson expects full-year 2017 operating and gross margin as a percent of revenue to be approximately in line with 2016 and its full-year effective tax rate to be approximately 34.5 percent.
The company anticipates 2017 capital expenditures of $200 million to $220 million.
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 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 and business conditions, including changing capital, credit and retail markets, and the changing political environment, (iii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (iv) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (v) 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, (vi) develop and introduce products, services and experiences that are successful in the marketplace, (vii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (viii) 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, (ix) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (x) 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, (xi) 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, (xii) manage risks that arise through expanding international manufacturing, operations and sales, (xiii) adjust to tax reform, healthcare inflation and reform and pension reform, (xiv) manage through the effects inconsistent and unpredictable 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) manage its exposure to product liability claims and commercial or contractual disputes, (xix) execute its flexible production strategy, (xx) retain and attract talented employees, (xxi) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, 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,
2016 2015 2016 2015
---- ---- ---- ----
Motorcycles and related
products revenue $933,023 $1,007,070 $5,271,376 $5,308,744
Gross profit 286,809 320,932 1,851,666 1,952,460
Selling, administrative
and engineering expense 277,538 314,564 1,078,260 1,076,970
Operating income from
motorcycles & related
products 9,271 6,368 773,406 875,490
Financial services
revenue 177,577 173,565 725,082 686,658
Financial services
expense 117,438 112,708 449,552 406,453
Operating income from
financial services 60,139 60,857 275,530 280,205
------ ------ ------- -------
Operating income 69,410 67,225 1,048,936 1,155,695
Investment income 891 602 4,645 6,585
Interest expense 7,702 7,220 29,670 12,117
Income before income
taxes 62,599 60,607 1,023,911 1,150,163
Provision for income
taxes 15,420 18,411 331,747 397,956
Net income $47,179 $42,196 $692,164 $752,207
======= ======= ======== ========
Earnings per common
share:
Basic $0.27 $0.22 $3.85 $3.71
Diluted $0.27 $0.22 $3.83 $3.69
Weighted-average common
shares:
Basic 176,616 189,681 179,676 202,681
Diluted 177,642 190,621 180,535 203,686
Cash dividends per common
share $0.35 $0.31 $1.40 $1.24
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets(1)
(In thousands)
(Unaudited)
December 31, December 31,
2016 2015
---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $759,984 $722,209
Marketable securities 5,519 45,192
Accounts receivable, net 285,106 247,405
Finance receivables, net 2,076,261 2,053,582
Inventories 499,917 585,907
Restricted cash 52,574 88,267
Other current assets 174,491 235,321
Total current assets 3,853,852 3,977,883
Finance receivables, net 4,759,197 4,814,571
Other long-term assets 1,277,191 1,180,523
$9,890,240 $9,972,977
========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
-----------------------------
Current liabilities:
Accounts payable & accrued
liabilities $721,970 $707,578
Short-term debt 1,055,708 1,201,380
Current portion of long-term
debt, net 1,084,884 838,349
Total current liabilities 2,862,562 2,747,307
Long-term debt, net 4,666,975 4,832,469
Pension and postretirement
healthcare liabilities 257,709 358,547
Other long-term liabilities 182,836 195,000
Total shareholders' equity 1,920,158 1,839,654
$9,890,240 $9,972,977
========== ==========
(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)
Twelve months ended
December 31, December 31,
2016 2015
---- ----
Net cash provided by
operating activities $1,174,339 $1,100,118
Cash flows from investing
activities:
Capital expenditures (256,263) (259,974)
Finance receivables, net (489,464) (614,945)
Proceeds from sale of
finance receivables 312,571 -
Net change in marketable
securities 40,014 11,507
Acquisition of business - (59,910)
Other 411 7,474
Net cash used by investing
activities (392,731) (915,848)
Cash flows from financing
activities:
Proceeds from issuance of
senior unsecured notes - 740,385
Proceeds from issuance of
medium-term notes 1,193,396 595,386
Repayments of medium-term
notes (451,336) (610,331)
Proceeds from
securitization debt - 1,195,668
Repayments of
securitization debt (665,400) (1,008,135)
Net (decrease) increase in
credit facilities and
unsecured commercial
paper (145,812) 469,473
Borrowings of asset-
backed commercial paper 62,396 87,442
Repayments of asset-
backed commercial paper (71,500) (72,727)
Net change in restricted
cash 43,495 11,410
Dividends paid (252,321) (249,262)
Purchase of common stock
for treasury (465,341) (1,537,020)
Excess tax benefits from
share-based payments 2,251 3,468
Issuance of common stock
under employee stock
option plans 15,782 20,179
Net cash used by financing
activities (734,390) (354,064)
Effect of exchange rate
changes on cash and cash
equivalents (9,443) (14,677)
Net increase (decrease) in
cash and cash equivalents $37,775 $(184,471)
======= =========
Cash and cash equivalents:
Cash and cash equivalents
-beginning of period $722,209 $906,680
Net increase (decrease) in
cash and cash equivalents 37,775 (184,471)
Cash and cash equivalents
-end of period $759,984 $722,209
======== ========
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,
2016 2015 2016 2015
---- ---- ---- ----
MOTORCYCLES AND RELATED
PRODUCTS REVENUE (in
thousands)
Motorcycles $685,047 $751,383 $4,122,113 $4,127,739
Parts & Accessories 169,445 169,707 842,637 862,645
General Merchandise 72,919 79,356 284,583 292,310
Other 5,612 6,624 22,043 26,050
$933,023 $1,007,070 $5,271,376 $5,308,744
======== ========== ========== ==========
MOTORCYCLE SHIPMENTS:
United States 20,131 28,804 161,839 170,688
International 22,283 19,345 100,382 95,694
Total 42,414 48,149 262,221 266,382
====== ====== ======= =======
MOTORCYCLE PRODUCT MIX:
Touring 17,943 19,414 107,410 114,768
Cruiser 14,852 17,454 93,422 89,207
Sportster(R) / Street 9,619 11,281 61,389 62,407
Total 42,414 48,149 262,221 266,382
====== ====== ======= =======
Worldwide Retail Sales of Harley-Davidson Motorcycles(1)
Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
United States 26,077 26,044 161,658 168,240
Europe(2) 6,734 6,174 39,942 36,894
EMEA - Other 1,157 1,515 5,896 6,393
----- ----- ----- -----
Total EMEA 7,891 7,689 45,838 43,287
Japan 2,648 2,506 10,279 9,700
Asia Pacific -
Other 6,100 6,281 22,610 22,558
----- ----- ------ ------
Total Asia
Pacific 8,748 8,787 32,889 32,258
Latin America 2,637 3,082 9,701 11,173
Canada 1,257 1,255 10,203 9,669
----- ----- ------ -----
Total
International
Retail Sales 20,533 20,813 98,631 96,387
Total Worldwide
Retail Sales 46,610 46,857 260,289 264,627
====== ====== ======= =======
(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. The EMEA Europe total for December 31,
2016 includes 618 units originally reported in the EMEA-
Other total for the six month period ended June 30, 2016.
(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,
2016 2015
---- ----
United States(2) 311,710 328,818
Europe(3) 391,936 351,773
(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
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SOURCE Harley-Davidson, Inc.
