Harley-Davidson Reports Third-Quarter and Nine-Month Results Company Reaches Restructuring Milestone with ERP Launch at York PR Newswire MILWAUKEE, Oct. 23, 2012 MILWAUKEE, Oct. 23, 2012 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE: HOG) reported earnings per share of $0.59 for the third quarter of 2012, in line with Company expectations. Earnings were lower than the year-ago period due to a previously announced plan for lower third-quarter motorcycle shipments during the launch of an ERP production system at the Company's largest assembly plant. For the full year 2012, Harley-Davidson continues to forecast a five-to seven-percent increase in motorcycle shipments compared to 2011. Third-quarter income from continuing operations was $134.0 million on consolidated revenue of $1.25 billion, compared to income from continuing operations of $183.6 million, or $0.78 per share, on consolidated revenue of $1.40 billion in the year-ago quarter. Through nine months, Harley-Davidson income from continuing operations increased 12.1 percent year-over-year to $553.3 million, or $2.40 per share, on consolidated revenue of $4.41 billion, compared to income from continuing operations of $493.4 million, or $2.09 per share, on consolidated revenue of $4.13 billion in the year-ago period. "The third quarter marked a pivotal milestone in Harley-Davidson's transformation. With the launch of the ERP production system at York, a major piece of our restructuring work is behind us. We are now focused on optimizing the system and look forward to the start of seasonal surge production early next year," said Keith Wandell, Chairman, President and Chief Executive Officer. "From our market leadership in U.S. outreach segments to our global expansion to the effective launch of ERP at York, we continued to see the evidence of the successful execution of our strategic plan," said Wandell. "We believe Harley-Davidson is on track to deliver growth through our strategy, with investments in new markets, new products, and improved manufacturing and retail capabilities. Our entire team of employees, dealers and suppliers has done a great job of delivering on the many changes throughout the business that are important to Harley-Davidson's long-term success." Retail Harley-Davidson Motorcycle Sales Through nine months, retail sales of new Harley-Davidson motorcycles grew 6.0 percent overall, 6.2 percent in the U.S. and 5.4 percent internationally compared to the year-ago period. In the third quarter, retail sales of new Harley-Davidson motorcycles decreased 1.3 percent worldwide compared to the prior-year period, with unit sales down 5.2 percent in the U.S. and up 7.6 percent in international markets. "We believe our U.S. dealers' third-quarter new motorcycle sales were adversely affected by a limited availability of new motorcycles in July, August and early September resulting from the ERP implementation at York combined with the move of Harley-Davidson's annual new model launch to late August from late July. As U.S. dealer inventory returned to more appropriate levels and the new 2013 motorcycles became more available, retail sales responded positively and gained momentum as we exited the quarter," Wandell said. "Harley-Davidson had a lot of exciting news for customers in the third quarter, with the launch of the 110^th Anniversary year and Anniversary Edition motorcycles, and the rollout of our exciting full line of 2013 bikes. While we see great untapped opportunity at retail, we continue to temper our expectations in light of continued softness in the global economy," said Wandell. On a worldwide basis, dealers sold 61,053 new Harley-Davidson motorcycles in the third quarter of 2012 compared to 61,838 motorcycles sold in the year-ago period. Dealers sold 40,402 new Harley-Davidson motorcycles in the U.S. compared to sales of 42,640 units in last year's third quarter. In international markets, dealers sold 20,651 new Harley-Davidson motorcycles during the third quarter compared to sales of 19,198 units in the year-ago period. During the quarter, retail unit sales increased 32.3 percent in the Latin America region, 9.8 percent in the Asia Pacific region and 1.8 percent in the EMEA region and decreased 4.7 percent in North America (U.S. and Canada) compared to last year's third quarter. Through nine months, dealers sold 206,444 new Harley-Davidson motorcycles worldwide, with retail unit sales up 47.5 percent in the Latin America region, 14.1 percent in the Asia Pacific region and 6.0 percent in North America and down 2.9 percent in the EMEA region compared to the year-ago period. Industry-wide U.S. heavyweight new motorcycle (651cc-plus) retail unit sales increased 3.8 percent through nine months of 2012 compared to the prior-year period. Third-quarter and nine-month data are listed in the accompanying tables. Harley-Davidson Motorcycles and Related Products Segment Results Third-Quarter Results: Third-quarter operating income from motorcycles and related products was $144.8 million, a 19.9 percent decrease compared to operating income of $180.7 million in the year-ago period. Revenue from motorcycles during the third quarter of 2012 of $774.0 million was down 16.1 percent compared to the year-ago period. The Company shipped 52,793 motorcycles to dealers and distributors worldwide during the quarter, down 14.5 percent and in line with prior guidance, compared to shipments of 61,745 motorcycles in the third quarter of 2011. Revenue from motorcycle parts and accessories totaled $233.7 million during the quarter, down 0.8 percent, and revenue from general merchandise, which includes MotorClothes® apparel and accessories, was $75.6 million, up 9.1 percent compared to the year-ago period. Gross margin was 34.7 percent in the third quarter of 2012, compared to 33.7 percent in the third quarter of 2011. Third-quarter operating margin from motorcycles and related products was 13.3 percent, compared to operating margin of 14.7 percent in last year's third quarter. Nine-Month Results: Through the first nine months of 2012 the Company shipped 200,558 motorcycles to dealers and distributors, a 10.0 percent increase compared to the year-ago period. Through nine months, revenue from motorcycles grew 8.4 percent to $2.99 billion, revenue from parts and accessories grew 6.6 percent to $698.4 million and revenue from general merchandise grew 10.0 percent to $225.4 million, compared to the year-ago period. Gross margin through nine months was 35.6 percent and operating margin was 16.8 percent, compared to 34.0 percent and 14.5 percent respectively through nine months last year. Financial Services Segment Results Operating income from financial services was $72.4 million in the third quarter of 2012, compared to operating income of $62.0 million in last year's third quarter. Through nine months, operating income from financial services was $221.7 million, compared to operating income of $212.0 million in the year-ago period. Results for the third quarter and the first nine months of 2012 reflect continued improvement in credit performance year over year and lower interest expense.During the same periods in 2011, financial services results benefited from the release of significant credit loss reserves. Guidance Harley-Davidson continues to expect to ship 245,000 to 250,000 motorcycles to dealers and distributors worldwide in 2012, a five-to seven-percent increase from 2011. In the fourth quarter of 2012, the Company expects to ship 44,500 to 49,500 motorcycles, a two-to twelve-percent decrease from the year-ago period. This is consistent with the Company's previously announced plans for lower shipments in the fourth quarter of 2012 related to the implementation of surge production at York in the first half of 2013. The Company believes surge production provides the flexibility to produce more motorcycles in the first half of 2013, closer to customer demand during the prime selling season. The Company continues to expect full-year 2012 gross margin of 34.75 percent to 35.75 percent. The Company also continues to expect capital expenditures of between $190 million and $210 million in 2012. Restructuring Update In the third quarter of 2012, the Company incurred restructuring charges of $9.2 million. The Company now expects to incur full-year 2012 restructuring costs of $35 million to $45 million, a reduction of $5 million from the range previously provided. Upon the anticipated completion of restructuring in 2013, Harley-Davidson continues to expect restructuring activities initiated since 2009 to result in one-time overall costs of $490 million to $510 million through 2013. The Company continues to expect cumulative savings of $275 million to $295 million in 2012 from restructuring activities initiated since 2009, rising to cumulative annual ongoing savings of $315 million to $335 million beginning in 2014. Income Tax Rate Through nine months, the Company's effective tax rate was 35.3 percent compared to 30.4 percent in the year-ago period.The 2011 effective tax rate was favorably impacted by a settlement of an IRS audit as well as a change in the Wisconsin income tax law associated with certain net operating losses. The Company continues to expect its full-year 2012 effective tax rate from continuing operations will be approximately 35.5 percent. Cash Flow Cash and marketable securities totaled $1.93 billion at the end of the third quarter, compared to $1.61 billion at the end of last year's third quarter. During the first nine months of 2012, Harley-Davidson generated $712.5 million of cash provided by operating activities of continuing operations, compared to $901.6 million in the year-ago period. On a discretionary basis, the Company repurchased 1.9 million shares of Harley-Davidson, Inc. common stock during the third quarter of 2012 at a cost of $84.9 million. At the end of the quarter, there were approximately 225 million shares of Harley-Davidson common stock outstanding and 15.3 million shares remaining 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. 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 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 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 hoursafter the conclusion of the call for one year. The audio may also be accessed until Nov. 6, 2012 by calling 404-537-3406 or 855-859-2056 in the US, pin number 32462414#. 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) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (iv) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (v)implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (vi) anticipate the level of consumer confidence in the economy, (vii) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (viii) manage production capacity and production changes, (ix) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (x) 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, (xi) manage risks that arise through expanding international operations and sales, (xii) manage supply chain issues, including any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xiii) provide products, services and experiences that are successful in the marketplace, (xiv) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xv) manage the risks that our independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xvi) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xvii)manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xviii) sell all of its motorcycles and related products and services to its independent dealers, (xix) continue to develop the capabilities of its distributor and dealer network, (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. Harley-Davidson, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three months ended Nine months ended September 30, September September September 25, 30, 25, 2012 2011 2012 2011 Motorcycles and related $ $ $ $ products revenue 1,089,268 1,232,699 3,931,684 3,635,487 Gross profit 377,904 415,391 1,398,231 1,235,525 Selling, administrative 223,982 222,258 709,015 660,890 and engineering expense Restructuring expense 9,170 12,429 26,841 49,022 Operating income from motorcycles & related 144,752 180,704 662,375 525,613 products Financial services 161,027 164,557 477,962 492,296 revenue Financial services 88,677 102,573 256,264 280,322 expense Operating income from 72,350 61,984 221,698 211,974 financial services Operating income 217,102 242,688 884,073 737,587 Investment income 1,447 2,479 5,611 5,625 Interest expense 11,438 11,270 34,528 34,101 Income before income 207,111 233,897 855,156 709,111 taxes Provision for income 73,110 50,303 301,870 215,677 taxes Income from continuing 134,001 183,594 553,286 493,434 operations Loss from discontinued - - - - operations, net of tax Net income $ $ $ $ 134,001 183,594 553,286 493,434 Earnings per common share from continuing operations: Basic $ $ $ $ 0.59 0.79 2.43 2.11 Diluted $ $ $ $ 0.59 0.78 2.40 2.09 Earnings per common share from discontinued operations: Basic $ $ $ $ - - - - Diluted $ $ $ $ - - - - Earnings per common share: Basic $ $ $ $ 0.59 0.79 2.43 2.11 Diluted $ $ $ $ 0.59 0.78 2.40 2.09 Weighted-average common shares: Basic 226,020 233,800 227,953 233,989 Diluted 227,989 235,861 230,070 235,981 Cash dividends per $ $ $ $ common share 0.155 0.125 0.465 0.350 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) September 30, December 31, September 25, 2012 2011 2011 ASSETS Current assets: Cash and cash $ 1,795,141 $ $ 1,428,753 equivalents 1,526,950 Marketable securities 136,376 153,380 179,285 Accounts receivable, 256,193 219,039 285,332 net Finance receivables, 1,212,977 1,168,603 1,104,056 net Restricted finance receivables held by 513,084 591,864 586,144 variable interest entities, net Inventories 379,129 418,006 345,963 Restricted cash held by 217,400 229,655 238,208 variable interest entities Other current assets 237,396 234,709 217,445 Total current assets 4,747,696 4,542,206 4,385,186 Finance receivables, net 2,285,309 1,754,441 2,095,839 Restricted finance receivables held by 1,904,297 2,271,773 2,119,789 variable interest entities, net Other long-term assets 1,077,881 1,105,744 1,103,545 $ 10,015,183 $ $ 9,704,359 9,674,164 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & $ 899,788 $ $ 1,021,433 accrued liabilities 819,885 Short-term debt 404,693 838,486 774,971 Current portion of 437,938 399,916 - long-term debt Current portion of long-term debt held by 559,256 640,331 644,779 variable interest entities Total current liabilities 2,301,675 2,698,618 2,441,183 Long-term debt 3,339,604 2,396,871 2,804,605 Long-term debt held by 1,132,809 1,447,015 1,350,294 variable interest entities Pension and postretirement 387,228 571,065 368,891 healthcare liabilities Other long-term liabilities 150,504 140,339 138,126 Total shareholders' equity 2,703,363 2,420,256 2,601,260 $ 10,015,183 $ $ 9,704,359 9,674,164 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine months ended September 30, September 25, 2012 2011 Net cash provided by operating activities of continuing operations $ 712,498 $ 901,601 Cash flows from investing activities of continuing operations: Capital expenditures (95,329) (106,115) Finance receivables, net (197,628) (33,775) Net change in marketable securities 18,053 (37,678) Net cash used by investing activities (274,904) (177,568) of continuing operations Cash flows from financing activities of continuing operations: Proceeds from issuance of 993,737 394,277 medium-term notes Proceeds from securitization debt 763,895 571,276 Repayments of securitization debt (1,161,592) (1,333,541) Net (decrease) increase in credit facilities and unsecured commercial (634,874) 182,058 paper Net borrowings of asset-backed 182,131 (483) commercial paper Net repayments of asset-backed (6,538) - commercial paper Net change in restricted cash 12,255 50,679 Dividends (106,560) (82,557) Purchase of common stock for (257,981) (97,456) treasury Excess tax benefits from 16,390 2,702 share-based payments Issuance of common stock under 36,342 7,763 employee stock option plans Net cash used by financing activities (162,795) (305,282) of continuing operations Effect of exchange rate changes on cash and cash equivalents of continuing operations (6,608) (11,857) Net increase in cash and cash 268,191 406,894 equivalents of continuing operations Cash flows from operating activities - (74) of discontinued operations Net increase in cash and cash $ 268,191 $ 406,820 equivalents Cash and cash equivalents: Cash and cash equivalents - $ 1,526,950 $ 1,021,933 beginning of period Cash and cash equivalents of discontinued operations - beginning - - of period Net increase in cash and cash 268,191 406,820 equivalents Less: Cash and cash equivalents of discontinued operations - end of - - period Cash and cash equivalents - end of $ 1,795,141 $ 1,428,753 period Motorcycles and Related Products Revenue and Motorcycle Shipment Data (Unaudited) Three months ended Nine months ended September 30, September September September 25, 25, 30, 2012 2011 2012 2011 MOTORCYCLES AND RELATED PRODUCTS REVENUE (in thousands) Motorcycles $ $ $ $ 773,979 922,469 2,993,657 2,762,563 Parts & Accessories 233,749 235,676 698,381 655,387 General Merchandise 75,632 69,333 225,375 204,809 Other 5,908 5,221 14,271 12,728 $ $ $ $ 1,089,268 1,232,699 3,931,684 3,635,487 MOTORCYCLE SHIPMENTS: United States 33,152 41,066 131,119 118,555 International 19,641 20,679 69,439 63,832 Total 52,793 61,745 200,558 182,387 MOTORCYCLE PRODUCT MIX: Touring 18,483 22,357 77,859 70,410 Custom 20,719 25,638 78,430 71,526 Sportster® 13,591 13,750 44,269 40,451 Total 52,793 61,745 200,558 182,387 Worldwide Retail Sales of Harley-Davidson Motorcycles Three months ended Nine months ended September September September September 30, 30, 30, 30, 2012 2011 2012 2011 North America Region United States 40,402 42,640 135,925 127,930 Canada 2,578 2,458 9,526 9,288 Total North 42,980 45,098 145,451 137,218 America Region Europe, Middle East and Africa Region (EMEA) Europe* 8,146 8,064 31,667 33,337 Other 1,330 1,243 4,539 3,947 Total EMEA 9,476 9,307 36,206 37,284 Region Asia Pacific Region Japan 2,941 2,868 7,915 7,827 Other 3,083 2,620 9,859 7,745 Total Asia 6,024 5,488 17,774 15,572 Pacific Region Latin America 2,573 1,945 7,013 4,755 Region Total Worldwide Retail 61,053 61,838 206,444 194,829 Sales Data Source 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. * 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) Nine months ended September 30, September 30, 2012 2011 United States^2 239,940 231,125 Eight months ended August 31, August 31, 2012 2011 Europe^3 223,860 241,498 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. 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 independent agency. Europe market data is reported on a one-month lag. This third-party data is subject to revision and update. SOURCE Harley-Davidson, Inc. Website: http://www.harley-davidson.com Contact: Media; Bob Klein, +1-414-343-8664, Financial Contact; Amy Giuffre, +1-414-343-8002
Harley-Davidson Reports Third-Quarter and Nine-Month Results
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