HARLEY-DAVIDSON, INC. 
By MILWAUKEE, Jan. 24, 2012 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE: HOG) reported a strong finish to 2011, with improved fourth-quarter performance capping a year of earnings and dealer retail sales growth.
Income from continuing operations was $54.6 million, or $0.24 per share, in the fourth quarter of 2011, compared to a loss of $42.1 million, or $0.18 per share from continuing operations in the year-ago quarter. For the full year 2011, income from continuing operations more than doubled to $548.1 million, or $2.33 per share, compared to income of $259.7 million, or $1.11 per share, from continuing operations in 2010.
Retail sales of new Harley-Davidson motorcycles grew 10.9 percent worldwide in the fourth quarter compared to the prior-year period, including an 11.8 percent increase in the U.S. For the full year 2011, new Harley-Davidson motorcycle retail sales rose 5.9 percent worldwide and 5.8 percent in the U.S.
On a segment basis, full-year operating income from Motorcycles and Related Products grew 48.2 percent on higher shipment volume and operating margin improvement, while operating income from Financial Services grew 47.8 percent on continued improvement in credit performance, compared to 2010.
"Our improved performance in 2011 is the result of the tremendous efforts of all of our employees, dealers and suppliers," said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc.
"Harley-Davidson is all about fulfilling dreams through remarkable motorcycles and extraordinary customer experiences. In 2011 we made strong progress at transforming our business to be more agile and effective than ever at exceeding customer expectations," Wandell said. "The changes underway across the organization will enable Harley-Davidson to be world class and customer led like never before, with shorter product development lead times, flexible manufacturing and an unmatched premium retail experience.
"At retail, we believe the solid improvement in new Harley-Davidson motorcycle sales reflects the strong appeal of our product lineup to a diverse customer base and the great efforts of our dealers, combined with results from our investments in growth opportunities across all regions and improved consumer confidence in the U.S. While we are encouraged by the retail sales trend, we continue to keep a close watch on the marketplace and remain cautious in our expectations for 2012," Wandell said.
Retail Harley-Davidson Motorcycle Sales
On a worldwide basis, dealers sold 40,359 new Harley-Davidson motorcycles in the fourth quarter of 2011, a 10.9 percent increase compared to 36,390 motorcycles sold in the year-ago period. Dealers sold 23,753 new Harley-Davidson motorcycles in the U.S., an 11.8 percent increase compared to the fourth quarter of 2010. In international markets, dealers sold 16,606 new Harley-Davidson motorcycles during the fourth quarter, an increase of 9.7 percent compared to the year-ago period.
For the full year, worldwide retail sales of new Harley-Davidson motorcycles increased 5.9 percent to 235,188 units, compared to sales of 222,110 units in 2010. U.S. retail sales of new Harley-Davidson motorcycles increased 5.8 percent to 151,683 units, and in international markets sales increased 6.1 percent to 83,505 units, for the full year compared to 2010. Industry-wide U.S. heavyweight new motorcycle (651cc-plus) retail unit sales increased 4.3 percent for the full year, compared to 2010.
Fourth-quarter and full-year data are listed in the accompanying tables.
Harley-Davidson Motorcycles and Related Products Segment Financial Results
Fourth-Quarter Segment Results: Revenue from Motorcycles during the fourth quarter of 2011 of $791.9 million was up 13.5 percent compared to the year-ago period. The Company shipped 50,730 motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 44,481 motorcycles in the fourth quarter of 2010.
Revenue from Motorcycle Parts and Accessories (P&A) totaled $161.2 million during the quarter, up 7.9 percent, and revenue from General Merchandise, which includes MotorClothes® Apparel and Accessories, was $69.3 million, up 12.8 percent compared to the year-ago period.
Gross margin was 31.2 percent in the fourth quarter of 2011, compared to 29.6 percent in the fourth quarter of 2010. Fourth-quarter operating margin from motorcycles and related products was 3.5 percent on operating income of $35.6 million. In 2010, the Company had an operating loss in the fourth quarter from motorcycles and related products of $6.8 million.
Twelve-Month Segment Results: For the full year of 2011, the Company shipped 233,117 motorcycles to dealers and distributors, a 10.7 percent increase compared to 210,494 units shipped in 2010.
Revenue from Motorcycles for the full year was $3.55 billion, a 13.3 percent increase compared to the year-ago period. Full-year P&A revenue was $816.6 million, a 9.0 percent increase compared to 2010. General Merchandise revenue was $274.1 million, a 5.8 percent increase compared to 2010.
Gross margin for the full year was 33.4 percent and operating margin was 12.0 percent, compared to 34.2 percent and 9.1 percent respectively in 2010.
Financial Services Segment
The Financial Services segment recorded operating income of $56.8 million in the fourth quarter of 2011, compared to operating income of $43.5 million in the year-ago quarter. The increase in fourth-quarter operating income was largely the result of continued improvement in credit performance at Harley-Davidson Financial Services. For the full year, operating income from financial services was $268.8 million, compared to operating income of $181.9 million in 2010.
Guidance
Harley-Davidson expects to ship 240,000 to 245,000 motorcycles to dealers and distributors worldwide in 2012, a three-to five-percent increase compared to 2011. In the first quarter of 2012, the Company expects to ship 58,000 to 63,000 motorcycles.
For the full year, Harley-Davidson expects gross margin to be between 34.75 percent and 35.75 percent. The Company expects capital expenditures of between $190 million and $210 million in 2012, which includes approximately $25 million to support restructuring activities.
Restructuring Update
In 2011, Harley-Davidson realized cumulative savings from restructuring activities initiated since early 2009 of $217 million, in line with company estimates of $210 million to $230 million. Upon completion, Harley-Davidson continues to expect restructuring activities to generate annual ongoing savings of $315 million to $335 million, beginning in 2014. For the full year 2011, Harley-Davidson incurred one-time restructuring costs of $68.0 million. The Company now expects all restructuring activities initiated since 2009 to result in one-time overall costs of $500 million to $520 million through 2013, including $50 million to $60 million in 2012, a $5 million reduction to the range previously provided.
Income Tax Rate
For the full year 2011, the Company's effective income tax rate from continuing operations was 30.9 percent, compared to 33.5 percent in 2010. The lower 2011 effective tax rate was mainly driven by a 2011 change in the Wisconsin income tax law associated with certain net operating losses, and a one-time tax charge in 2010 associated with the federal healthcare legislation. In 2012, the Company expects its full-year effective tax rate from continuing operations to be approximately 35.5 percent.
Cash Flow
Cash and marketable securities totaled $1.68 billion at year-end 2011, compared to $1.16 billion at year-end 2010. For full-year 2011, Harley-Davidson generated $885.3 million of cash provided by operating activities from continuing operations, compared to $1.16 billion in 2010. Capital expenditures for full-year 2011 were $189.0 million.
Share Repurchase
The Company repurchased 3.5 million shares of Harley-Davidson, Inc. common stock at a cost of $127.0 million during the fourth quarter of 2011. At year-end 2011, there were approximately 230.5 million shares of Harley-Davidson common stock outstanding and 18.6 million shares remaining on board-approved share repurchase authorizations.
Discontinued Operations
In the fourth quarter of 2011, Harley-Davidson recognized a $51.0 million benefit on income from discontinued operations, driven by the reversal of tax amounts reserved in prior years related to the divestiture of the Company's MV Agusta subsidiaries. The amounts had been reserved pending an agreement with the IRS on the tax treatment of the transaction. With the agreement, the Company anticipates no further financial adjustments related to MV Agusta.
Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Harley-Davidson Motor Company produces heavyweight custom, cruiser and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear and apparel, and general merchandise. 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 select European countries. 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 results on a Webcast at 8:00 a.m. CT today. The Webcast presentation will be posted prior to the call and can be accessed at http://investor.harley-davidson.com/. Click "Events and Presentations" under "Resources." The audio portion of today's call will also be posted at harley-davidson.com beginning approximately two hours after the conclusion of the call for one year. The audio may also be accessed until February 7, 2012 by calling 404-537-3406 or 855-859-2056 in the US, pin number36261875#.
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 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) effectively execute the Company's restructuring plans within expected costs and timing, (iii) implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (iv) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (v) anticipate the level of consumer confidence in the economy, (vi) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (vii) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (viii) successfully implement with our labor unions the agreements that we have executed with them that we believe will provide flexibility and cost-effectiveness to accomplish restructuring goals and long-term competitiveness, (ix) manage risks that arise through expanding international operations and sales, (x) manage supply chain issues, including any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xi) manage production capacity and production changes, (xii) provide products, services and experiences that are successful in the marketplace, (xiii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiv) manage the risks that our independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xv) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xvi) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xvii) sell all of its motorcycles and related products and services to its independent dealers, (xviii) continue to develop the capabilities of its distributor and dealer network, (xix) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xx) adjust to healthcare inflation and reform, pension reform and tax changes, (xxi) retain and attract talented employees, and (xxii) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation.
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.
TABLES FOLLOW
Harley-Davidson, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
(Unaudited) (Unaudited) (Unaudited)
Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2011 2010 2011 2010
---- ---- ---- ----
Motorcycles and related
products revenue $1,026,777 $917,076 $4,662,264 $4,176,627
Gross profit 320,451 271,066 1,555,976 1,427,403
Selling, administrative and
engineering expense 265,918 260,153 926,808 885,137
Restructuring expense 18,970 17,671 67,992 163,508
Operating income from
motorcycles & related
products 35,563 (6,758) 561,176 378,758
Financial services revenue 157,153 166,322 649,449 682,709
Financial services expense 100,336 122,844 380,658 500,836
Operating income from
financial services 56,817 43,478 268,791 181,873
------ ------ ------- -------
Operating income 92,380 36,720 829,967 560,631
Investment income 2,338 1,776 7,963 5,442
Interest expense 11,165 20,209 45,266 90,357
Loss on debt extinguishment 85,247 85,247
Income (loss) before income
taxes 83,553 (66,960) 792,664 390,469
Provision (benefit) for
income taxes 28,909 (24,884) 244,586 130,800
Income (loss) from continuing
operations 54,644 (42,076) 548,078 259,669
Income (loss) from
discontinued operations, net
of tax 51,036 (4,690) 51,036 (113,124)
Net income (loss) $105,680 $(46,766) $599,114 $146,545
======== ======== ======== ========
Earnings (loss) per common
share from continuing
operations:
Basic $0.24 $(0.18) $2.35 $1.11
Diluted $0.24 $(0.18) $2.33 $1.11
Income (loss) per common
share from discontinued
operations:
Basic $0.22 $(0.02) $0.22 $(0.48)
Diluted $0.22 $(0.02) $0.22 $(0.48)
Earnings (loss) per common
share:
Basic $0.46 $(0.20) $2.57 $0.63
Diluted $0.46 $(0.20) $2.55 $0.62
Weighted-average common
shares:
Basic 229,827 233,535 232,889 233,312
Diluted 231,968 233,535 234,918 234,787
Cash dividends per common
share $0.125 $0.10 $0.475 $0.40
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2011 2010
---- ----
ASSETS
------
Current
assets:
Cash and
cash
equivalents $1,526,950 $1,021,933
Marketable
securities 153,380 140,118
Accounts
receivable,
net 219,039 262,382
Finance
receivables,
net 1,168,603 1,080,432
Restricted
finance
receivables
held by
variable
interest
entities,
net 591,864 699,026
Inventories 418,006 326,446
Restricted
cash
held by
variable
interest
entities 229,655 288,887
Other
current
assets 234,709 247,402
Total
current
assets 4,542,206 4,066,626
Finance
receivables,
net 1,754,441 1,553,781
Restricted
finance
receivables
held by
variable
interest
entities,
net 2,271,773 2,684,330
Other
long-
term
assets 1,105,744 1,126,003
$9,674,164 $9,430,740
========== ==========
LIABILITIES
AND
SHAREHOLDERS'
EQUITY
-------------
Current
liabilities:
Accounts
payable
&
accrued
liabilities $819,885 $782,017
Short-
term
debt 838,486 480,472
Current
portion
of
long-
term
debt 399,916 -
Current
portion
of
long-
term
debt
held by
variable
interest
entities 640,331 751,293
Total
current
liabilities 2,698,618 2,013,782
Long-
term
debt 2,396,871 2,516,650
Long-
term
debt
held by
variable
interest
entities 1,447,015 2,003,941
Pension
and
postretirement
healthcare
liabilities 571,065 536,847
Other
long-
term
liabilities 140,339 152,654
Total
shareholders'
equity 2,420,256 2,206,866
$9,674,164 $9,430,740
========== ==========
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve months ended
December 31, December 31, December 31,
2011 2010 2009
---- ---- ----
Net cash provided by
operating activities
of continuing operations $885,291 $1,163,418 $609,010
Cash flows from investing
activities of continuing
operations:
Capital expenditures (189,035) (170,845) (116,748)
Finance receivables, net 138,025 416,430 (771,058)
Collection of retained
securitization interests 61,170
Net change in marketable
securities (12,532) (100,148) (39,685)
Other, net - - 2,834
Net cash (used by)
provided by investing
activities of continuing
operations (63,542) 145,437 (863,487)
Cash flows from financing
activities of continuing
operations:
Proceeds from issuance of
medium-term notes 387,865 - 496,514
Repayments of medium-term
notes - (200,000) -
Proceeds from issuance of
senior unsecured notes - - 595,026
Repayments of senior
unsecured notes - (380,757) -
Proceeds from
securitization debt 1,082,599 598,187 2,413,192
Repayments of
securitization debt (1,754,568) (1,896,665) (263,083)
Net increase (decrease) in
credit facilities and
unsecured commercial
paper 237,827 30,575 (1,083,331)
Net repayments of asset-
backed commercial paper (483) (845) (513,168)
Net change in restricted
cash 59,232 77,654 (167,667)
Dividends (111,011) (94,145) (93,807)
Purchase of common stock
for treasury (224,548) (1,706) (1,920)
Excess tax benefits from
share-based payments 6,303 3,767 170
Issuance of common stock
under employee stock
option plans 7,840 7,845 11
Net cash used by financing
activities of continuing
operations (308,944) (1,856,090) 1,381,937
Effect of exchange rate
changes on cash and cash
equivalents
of continuing operations (7,788) 4,940 6,789
Net increase (decrease) in
cash and cash equivalents
of continuing operations 505,017 (542,295) 1,134,249
Cash flows from
discontinued operations:
Cash flows from operating
activities of
discontinued operations - (71,073) (71,298)
Cash flows from investing
activities of
discontinued operations - - (18,805)
Effect of exchange rate
changes on cash and cash
equivalents
of discontinued operations - (1,195) (1,208)
- (72,268) (91,311)
--- ------- -------
Net increase (decrease) in
cash and cash equivalents $505,017 $(614,563) $1,042,938
======== ========= ==========
Cash and cash equivalents:
Cash and cash equivalents
-beginning of period $1,021,933 $1,630,433 $568,894
Cash and cash equivalents
of discontinued
operations -beginning of
period - 6,063 24,664
Net increase (decrease) in
cash and cash equivalents 505,017 (614,563) 1,042,938
Less: Cash and cash
equivalents of
discontinued operations -
end of period (6,063)
Cash and cash equivalents
-end of period $1,526,950 $1,021,933 $1,630,433
========== ========== ==========
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,
2011 2010 2011 2010
---- ---- ---- ----
MOTORCYCLES AND RELATED
PRODUCTS REVENUE (in
thousands)
Harley-Davidson( R )
motorcycles $791,917 $697,781 $3,553,291 $3,136,987
Buell( R ) motorcycles 67 4,546 1,256 16,280
Parts & Accessories 161,182 149,395 816,569 749,240
General Merchandise 69,315 61,458 274,124 259,125
Other 4,296 3,896 17,024 14,995
$1,026,777 $917,076 $4,662,264 $4,176,627
========== ======== ========== ==========
MOTORCYCLE SHIPMENTS:
Harley-Davidson
---------------
United States 33,625 27,617 152,180 131,636
International 17,105 16,864 80,937 78,858
Total Harley-Davidson 50,730 44,481 233,117 210,494
====== ====== ======= =======
Buell 10 63 274 2,614
=== === === =====
MOTORCYCLE PRODUCT MIX:
Harley-Davidson
---------------
Touring 21,592 18,514 92,002 81,927
Custom 19,933 17,835 91,459 87,158
Sportster( R ) 9,205 8,132 49,656 41,409
Total Harley-Davidson 50,730 44,481 233,117 210,494
====== ====== ======= =======
Worldwide Retail Sales of Harley-Davidson Motorcycles
Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
2011 2010 2011 2010
---- ---- ---- ----
North America
Region
-------------
United States 23,753 21,246 151,683 143,391
Canada 1,214 1,022 10,502 10,376
Total North
America
Region 24,967 22,268 162,185 153,767
Europe Region
(Includes
Middle East
and Africa)
-------------
Europe* 5,997 5,938 39,334 37,378
Other 1,059 731 5,006 3,810
Total Europe
Region 7,056 6,669 44,340 41,188
Asia Pacific
Region
------------
Japan 2,574 2,951 10,401 11,405
Other 3,270 2,750 11,015 9,582
Total Asia
Pacific
Region 5,844 5,701 21,416 20,987
Latin America
Region 2,492 1,752 7,247 6,168
------------- ----- ----- ----- -----
Total
Worldwide
Retail Sales 40,359 36,390 235,188 222,110
====== ====== ======= =======
Data Source (subject to
update)
-----------------------
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.
Only Harley-Davidson( R ) motorcycles are
included in the Harley-Davidson
Motorcycle Sales data.
* Europe data includes Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Italy,
Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom.
Heavyweight Motorcycle Registration Data(1)
Twelve months ended
December 31, December 31,
2011 2010
---- ----
United
States(2) 271,018 259,733
Eleven months ended
November 30, November 30,
2011 2010
---- ----
Europe(3) 284,853 294,351
1 - Heavyweight data includes
street legal 651+cc models. Street
legal 651+cc models include on-
highway, dual purpose models and
three-wheeled vehicles.
2 -United States data is derived
from information provided by
Motorcycle Industry Council (MIC).
This third party data is subject
to revision and update. Prior
periods have been adjusted to
include all dual purpose models
that were previously excluded.
3 - Europe data includes Austria,
Belgium, Denmark, Finland, France,
Germany, Greece, Italy,
Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, and
the United Kingdom. Industry
retail motorcycle registration
data includes 651+cc models
derived from information provided
by Association des Constructeurs
Europeens de Motocycles (ACEM), an
SOURCE Harley-Davidson, Inc.
