Harley-Davidson Reports 2009 Results
 |
MILWAUKEE, Jan. 22, 2010; Harley-Davidson, Inc. reported full-year 2009 revenue of $4.29 billion and income of $70.6 million, or $0.30 per share, from continuing operations. In the fourth quarter, the Company reported revenue of $764.5 million and a loss of $147.2 million, or $0.63 per share, from continuing operations. Affecting fourth-quarter results were a previously announced 53.1 percent reduction in Harley-Davidson® motorcycle shipments from the year-ago period and $167.1 million in restructuring and Buell® product line exit costs.
Including MV Agusta discontinued operations, the Company reported a full-year net loss of $55.1 million, or $0.24 per share, and a fourth-quarter net loss of $218.7 million, or $0.94 per share.
"Our full-year 2009 results were affected by the difficult economy, as well as the planned actions we took that resulted in restructuring charges of $224 million. We believe these actions are critical to restoring greater profitability and long-term growth to Harley-Davidson," said Keith Wandell, Harley-Davidson, Inc. President and Chief Executive Officer. "We are confident we have made the right decisions for our future, and we are executing our strategy with focused intensity."
Full-Year and Fourth-Quarter Results
For the full-year from continuing operations: revenue was $4.29 billion in 2009 compared to $5.58 billion in 2008, a 23.1 percent decrease; income was $70.6 million in 2009 compared to $684.2 million in 2008, a decrease of 89.7 percent; and earnings per share decreased 89.7 percent to $0.30 in 2009, compared to $2.92 in 2008. Full-year results from continuing operations primarily reflect the effects of lower motorcycle shipments, restructuring and Buell product line exit costs, and non-cash charges related to Harley-Davidson Financial Services.
In the fourth-quarter of 2009, the Company reported revenue of $764.5 million compared to $1.28 billion in the year-ago quarter, a 40.2 percent decrease, and a loss of $147.2 million, or $0.63 per share, compared to income of $91.9 million, or $0.40 per share in 2008, from continuing operations.
2010 Guidance
For 2010, the Company expects to ship 201,000 to 212,000 Harley-Davidson motorcycles to dealers and distributors worldwide, a reduction of five to ten percent from 2009. "We believe 2010 will continue to be a challenging year," Wandell noted. In the first quarter of 2010, Harley-Davidson expects to ship 52,000 to 57,000 motorcycles. Gross margin is expected to be between 32.0 percent and 33.5 percent for the full year. The Company expects full-year capital expenditures of between $235 million and $255 million, including $95 million to $110 million to support restructuring activities.
"Delivering Results Through Focus" Strategy
During the fourth quarter, the Company moved forward with the execution of its business strategy, unveiled in October 2009, to deliver results by focusing on Harley-Davidson products and experiences, global expansion, demographic outreach and commitment to core customers. Additionally, the Company will continue to expand its initiative to enhance profitability through continuous improvement in manufacturing, product development and business operations.
"Focusing our investment behind the uniquely strong Harley-Davidson brand provides the most attractive path to sustained, long-term growth," Wandell said. "We also expect to achieve substantial gains in the efficiency of our operations through continuous improvement."
Motorcycles and Related Products Segment
Fourth Quarter. Revenue from Harley-Davidson motorcycles during the fourth quarter of 2009 was $552.0 million, down 45.6 percent compared to the year-ago period. The Company shipped 35,938 Harley-Davidson motorcycles to dealers and distributors worldwide, down 53.1 percent from the fourth quarter of 2008 but in line with previous guidance of 35,000 to 40,000 units. Revenue from Parts and Accessories totaled $144.6 million during the quarter, down 4.9 percent, and revenue from General Merchandise, which includes MotorClothes® apparel, was $66.8 million during the quarter, down 3.2 percent compared to the year-ago period.
Gross margin percent was down during the quarter from the year-ago period, primarily as a result of fixed costs being spread over fewer units and the impact of exiting the Buell product line. Operating loss was $221.8 million compared to an operating income of $162.2 million in the fourth quarter of 2008. Operating margin was negatively affected by lower gross margin and restructuring charges incurred during the quarter.
Full-Year. For the full year 2009, revenue from Harley-Davidson motorcycles was $3.17 billion compared to $4.24 billion in 2008 on shipments of 223,023 Harley-Davidson motorcycles, compared to 303,479 motorcycles in 2008. Revenue from Parts and Accessories totaled $767.3 million in 2009, down 10.7 percent, and revenue from General Merchandise was $282.2 million, down 10.1 percent compared to 2008.
Full-year 2009 gross margin was 32.3 percent compared to 34.6 percent in 2008, and operating margin was 7.3 percent compared to 17.5 percent in 2008.
Retail Motorcycle Sales. During the fourth quarter, retail sales of Harley-Davidson motorcycles decreased 21.4 percent worldwide, 27.9 percent in the U.S. and 10.3 percent in international markets, compared to the prior-year quarter. Industry-wide U.S. retail heavyweight (651cc+) motorcycle sales declined 20.9 percent during the quarter, compared to the year-ago period.
For the full year 2009 compared to 2008, retail sales of Harley-Davidson motorcycles decreased 22.7 percent worldwide, 25.8 percent in the U.S. and 15.4 percent in international markets. Industry-wide U.S. retail heavyweight motorcycle sales declined 36.7 percent in 2009, compared to 2008.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) recorded an operating loss of $7.1 million for the fourth quarter of 2009, compared to an operating loss of $24.9 million in the fourth quarter of 2008. Key drivers of reduced operating loss versus the year-ago quarter include a decrease in impairments on retained securitization interests and a decrease in fair value writedowns on held-for-sale receivables, partially offset by an increase in the provision for retail loan losses.
For the full year 2009, HDFS reported an operating loss of $118.0 million, compared to operating income of $82.8 million in 2008.
HDFS continued to access the capital markets during the quarter, raising $1.76 billion through the unsecured debt and term asset-backed securitization markets. Through its 2009 funding actions, HDFS expects to meet its 2010 anticipated funding requirements.
Restructuring
The Company now expects previously announced restructuring activities that began in 2009 to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. The Company continues to anticipate annual ongoing total savings from restructuring of approximately $240 million to $260 million upon completion of all announced restructuring activities, including savings of approximately $135 million to $155 million anticipated in 2010.
In December, Harley-Davidson announced that, as a result of the ratification of a new seven-year labor agreement at its York, Pa. motorcycle production operations, the Company is restructuring those facilities to focus on the core operations of motorcycle assembly, metal fabrication and paint. "When the restructuring is completed, we will have completely changed the face of how we build motorcycles in York and we expect significantly greater manufacturing flexibility and significant annual cost savings from a more efficient operation. It is a tribute to our employees at York that they understood we could not continue on the course we were on, and they worked with us to find a better way," said Wandell.
During the fourth quarter, the Company made the decision to consolidate its vehicle test facilities from three locations, in Alabama, Arizona and Florida, into one location in Arizona.
Income Tax Rate
The Company's full-year effective tax rate from continuing operations was 60.5 percent compared to 35.8 percent from the prior year. The increase was due primarily to the previously reported one-time charge for the Wisconsin tax law change and the non-deductible goodwill write-off for Harley-Davidson Financial Services, as well as the impact of reduced earnings. In 2010, the Company expects its full-year effective tax rate to be approximately 36.5 percent from continuing operations.
Cash Flow
Cash and marketable securities totaled $1.67 billion as of Dec. 31, 2009, compared to $568.9 million at year end 2008. Cash provided by operating activities for continuing operations was $609.0 million and capital expenditures were $116.7 million in 2009. In the fourth quarter, Harley-Davidson Motor Company made a $215 million contribution to fund Company pension plans.
Discontinued Operations
The Company continues to move forward with the sale of MV Agusta and is in the process of identifying potential buyers, following Harley-Davidson's decision in the fourth quarter of 2009 to divest the subsidiary. MV Agusta is now presented as a discontinued operation for all periods. For the full year of 2009, Harley-Davidson, Inc. incurred a $125.8 million loss from discontinued operations, or a loss of $0.54 per share, comprised of operating losses as well as a fair value adjustment.
Company Background
Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Harley-Davidson Financial Services (HDFS), Buell Motorcycle Company (Buell), and MV Agusta.
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three months ended
December December
31, 31,
2009 2008
---- ----
Net revenue $764,499 $1,278,043
Gross profit 154,821 408,281
Selling, administrative and
engineering expense 256,387 246,046
Restructuring expense and other
impairments 120,238 -
------- ---
Operating (loss) income from
motorcycles & related products (221,804) 162,235
Financial services income 129,152 64,875
Financial services expense 134,178 89,797
Restructuring expense 2,098 -
Goodwill impairment - -
--- ---
Operating (loss) income from
financial services (7,124) (24,922)
------ -------
(Loss) income from operations (228,928) 137,313
Investment income 1,037 4,041
Interest expense 10,212 3,316
------ -----
(Loss) income before income
taxes (238,103) 138,038
(Benefit from) provision for
income taxes (90,933) 46,094
------- ------
(Loss) income from continuing
operations (147,170) 91,944
Loss from discontinued
operations, net of tax (71,526) (14,135)
------- -------
Net (loss) income $(218,696) $77,809
========= =======
(Loss) earnings per common
share from continuing
operations:
Basic $(0.63) $0.40
Diluted $(0.63) $0.40
Loss per common share from
discontinued operations:
Basic $(0.31) $(0.06)
Diluted $(0.31) $(0.06)
(Loss) earnings per common
share:
Basic $(0.94) $0.34
Diluted $(0.94) $0.34
Weighted-average common shares:
Basic 232,720 231,786
Diluted 232,720 232,037
Cash dividends per common share $0.10 $0.33
(Unaudited)
Twelve months ended
December December
31, 31,
2009 2008
---- ----
Net revenue $4,287,130 $5,578,414
Gross profit 1,386,196 1,931,144
Selling, administrative and
engineering expense 851,165 942,267
Restructuring expense and other
impairments 220,976 12,475
------- ------
Operating (loss) income from
motorcycles & related products 314,055 976,402
Financial services income 494,779 376,970
Financial services expense 581,059 294,205
Restructuring expense 3,302 -
Goodwill impairment 28,387 -
------ ---
Operating (loss) income from
financial services (117,969) 82,765
-------- ------
(Loss) income from operations 196,086 1,059,167
Investment income 4,254 11,296
Interest expense 21,680 4,542
------ -----
(Loss) income before income
taxes 178,660 1,065,921
(Benefit from) provision for
income taxes 108,019 381,686
------- -------
(Loss) income from continuing
operations 70,641 684,235
Loss from discontinued
operations, net of tax (125,757) (29,517)
-------- -------
Net (loss) income $(55,116) $654,718
======== ========
(Loss) earnings per common
share from continuing
operations:
Basic $0.30 $2.92
Diluted $0.30 $2.92
Loss per common share from
discontinued operations:
Basic $(0.54) $(0.13)
Diluted $(0.54) $(0.13)
(Loss) earnings per common
share:
Basic $(0.24) $2.80
Diluted $(0.24) $2.79
Weighted-average common shares:
Basic 232,577 234,225
Diluted 233,573 234,477
Cash dividends per common share $0.40 $1.29
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2009 2008
---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $1,630,433 $568,894
Marketable securities 39,685 -
Accounts receivable, net 269,371 265,319
Finance receivables held for sale (1) - 2,443,965
Finance receivables held for
investment, net 1,436,114 1,378,461
Inventories 323,029 379,141
Assets of discontinued operations 181,211 238,715
Other current assets 462,106 252,057
------- -------
Total current assets 4,341,949 5,526,552
Finance receivables held for
investment, net 3,621,048 817,102
Other long-term assets 1,192,521 1,484,971
--------- ---------
9,155,518 7,828,625
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable & accrued
liabilities 676,600 806,743
Liabilities of discontinued
operations 69,535 77,941
Short-term debt 189,999 1,738,649
Current portion of long-term debt 1,332,091 -
--------- ---
Total current liabilities 2,268,225 2,623,333
Long-term debt 4,114,039 2,176,238
Pension liability and postretirement
healthcare benefits 509,804 758,411
Other long-term liabilities 155,332 155,040
Total shareholders' equity 2,108,118 2,115,603
--------- ---------
$9,155,518 $7,828,625
========== ==========
(1) During the second quarter of 2009, the Company reclassified
its finance receivables held for sale to finance receivables
held for investment, net due to a change in the Company's
intent to structure future securitization transactions in a
manner that does not qualify for accounting sale treatment
under the provisions of Accounting Standards Codification Topic
860, "Transfers and Servicing."
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve months ended
December December
31, 31,
2009 2008
---- ----
Net cash provided by (used by)
operating activities
of continuing operations $609,010 $(608,029)
Cash flows from investing activities
of continuing operations:
Capital expenditures (116,748) (228,959)
Finance receivables held for
investment, net (771,058) (159,631)
Collection of retained securitization
interests 61,170 93,747
Net change in marketable securities (39,685) 2,543
Other, net 2,834 (2,575)
----- ------
Net cash (used by) provided by
investing activities of continuing
operations (863,487) (294,875)
Cash flows from financing activities
of continuing operations:
Proceeds from issuance of medium term
notes 496,514 993,550
Repayment of medium term notes - (400,000)
Proceeds from issuance of senior
unsecured notes 595,026 -
Net borrowings of securitization debt 2,150,109 -
Net (decrease) increase in credit
facilities and unsecured commercial
paper (1,083,331) 761,065
Net borrowings and repayments of
asset-backed commercial paper (513,168) 490,000
Repayment of senior subordinated debt - -
Net change in restricted cash (167,667) -
Dividends (93,807) (302,314)
Purchase of common stock for treasury (1,920) (250,410)
Excess tax benefits from share-based
payments 170 320
Issuance of common stock under
employee stock option plans 11 1,179
--- -----
Net cash provided by (used by)
financing activities of continuing
operations 1,381,937 1,293,390
Effect of exchange rate changes on
cash and cash equivalents
of continuing operations 6,789 (20,352)
Net increase in cash and cash
equivalents of continuing operations 1,134,249 370,134
Cash flows from discontinued
operations:
Cash flows from operating activities
of discontinued operations (71,298) (75,028)
Cash flows from investing activities
of discontinued operations (18,805) (99,963)
Effect of exchange rate changes on
cash and cash equivalents
of discontinued operations (1,208) (4,439)
------ ------
(91,311) (179,430)
------- --------
Net increase in cash and cash
equivalents $1,042,938 $190,704
========== ========
Cash and cash equivalents:
Cash and cash equivalents -beginning
of period $568,894 $402,854
Cash and cash equivalents of
discontinued operations -beginning
of period 24,664 -
Net increase in cash and cash
equivalents 1,042,938 190,704
Less: Cash and cash equivalents of
discontinued operations -end of
period (6,063) (24,664)
------ -------
Cash and cash equivalents -end of
period $1,630,433 $568,894
========== ========
Twelve months ended
December
31,
2007
----
Net cash provided by (used by) operating
activities
of continuing operations $798,146
Cash flows from investing activities of
continuing operations:
Capital expenditures (242,113)
Finance receivables held for investment, net (145,381)
Collection of retained securitization interests 118,175
Net change in marketable securities 657,735
Other, net 2,789
-----
Net cash (used by) provided by investing
activities of continuing operations 391,205
Cash flows from financing activities of
continuing operations:
Proceeds from issuance of medium term notes 398,144
Repayment of medium term notes -
Proceeds from issuance of senior unsecured notes -
Net borrowings of securitization debt -
Net (decrease) increase in credit facilities and
unsecured commercial paper (16,247)
Net borrowings and repayments of asset-backed
commercial paper -
Repayment of senior subordinated debt (30,000)
Net change in restricted cash -
Dividends (260,805)
Purchase of common stock for treasury (1,153,439)
Excess tax benefits from share-based payments 3,066
Issuance of common stock under employee stock
option plans 21,478
------
Net cash provided by (used by) financing
activities of continuing operations (1,037,803)
Effect of exchange rate changes on cash and cash
equivalents
of continuing operations 12,909
Net increase in cash and cash equivalents of
continuing operations 164,457
Cash flows from discontinued operations:
Cash flows from operating activities of
discontinued operations -
Cash flows from investing activities of
discontinued operations -
Effect of exchange rate changes on cash and cash
equivalents
of discontinued operations -
---
-
---
Net increase in cash and cash equivalents $164,457
========
Cash and cash equivalents:
Cash and cash equivalents -beginning of period $238,397
Cash and cash equivalents of discontinued
operations -beginning of period -
Net increase in cash and cash equivalents 164,457
Less: Cash and cash equivalents of discontinued
operations -end of period -
---
Cash and cash equivalents - end of period $402,854
========
Net Revenue and Motorcycle
Shipment Data
(Unaudited) (Unaudited)
Three months ended
December
31, December 31,
2009 2008
---- ----
NET REVENUE (in
thousands)
Harley-Davidson ( R )
motorcycles $552,036 $1,015,507
Buell ( R ) motorcycles (3,962) 33,381
Parts & Accessories 144,626 152,028
General Merchandise 66,752 68,973
Other 5,047 8,154
----- -----
$764,499 $1,278,043
======== ==========
MOTORCYCLE SHIPMENTS:
Harley-Davidson
United States 20,036 57,081
International 15,902 19,500
------ ------
Total Harley-Davidson 35,938 76,581
====== ======
Buell 3,026 3,895
===== =====
MOTORCYCLE PRODUCT MIX:
Harley-Davidson
Touring 14,780 26,196
Custom 16,517 35,592
Sportster ( R ) 4,641 14,793
----- ------
Total Harley-Davidson 35,938 76,581
====== ======
(Unaudited)
Twelve months ended
December December
31, 31,
2009 2008
---- ----
NET REVENUE (in
thousands)
Harley-Davidson ( R )
motorcycles $3,174,810 $4,244,587
Buell ( R ) motorcycles 46,514 123,085
Parts & Accessories 767,275 858,748
General Merchandise 282,210 313,838
Other 16,321 38,156
------ ------
$4,287,130 $5,578,414
========== ==========
MOTORCYCLE SHIPMENTS:
Harley-Davidson
United States 144,464 206,309
International 78,559 97,170
------ ------
Total Harley-Davidson 223,023 303,479
======= =======
Buell 9,572 13,119
===== ======
MOTORCYCLE PRODUCT MIX:
Harley-Davidson
Touring 84,104 101,887
Custom 91,650 140,908
Sportster ( R ) 47,269 60,684
------ ------
Total Harley-Davidson 223,023 303,479
======= =======
Retail Sales of Harley-Davidson Motorcycles
Three months ended
December December
31, 31,
2009 2008
---- ----
North America Region
United States 21,284 29,502
Canada 1,030 1,950
----- -----
Total North America Region 22,314 31,452
Europe Region (Includes Middle
East and Africa)
Europe* 6,322 6,441
Other 997 834
--- ---
Total Europe Region 7,319 7,275
Asia Pacific Region
Japan 2,865 3,152
Other 2,649 2,873
----- -----
Total Asia Pacific Region 5,514 6,025
Latin America Region 1,607 2,003
----- -----
Total Worldwide Retail Sales 36,754 46,755
====== ======
Twelve months ended
December December
31, 31,
2009 2008
---- ----
North America Region
United States 162,385 218,939
Canada 11,406 16,502
------ ------
Total North America Region 173,791 235,441
Europe Region (Includes Middle
East and Africa)
Europe* 36,444 40,725
Other 3,560 4,317
----- -----
Total Europe Region 40,004 45,042
Asia Pacific Region
Japan 13,105 14,654
Other 9,884 10,595
----- ------
Total Asia Pacific Region 22,989 25,249
Latin America Region 5,850 8,037
----- -----
Total Worldwide Retail Sales 242,634 313,769
======= =======
Data Source (subject to update)
Data source for all 2008 and 2009 retail sales figures shown above is
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 retail sales, and
this information is subject to revision.
Only Harley-Davidson ( R ) motorcycles are included in the Harley-
Davidson Motorcycle Sales data.
* Data for Europe include Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, and the United Kingdom.
Heavyweight Market Data
Twelve months ended
December 31, December 31,
2009 2008
---- ----
United States(1) 303,182 479,274
Eleven months ended
November 30, November 30,
2009 2008
---- ----
Europe(2) 304,670 376,096
(1) United States industry data includes 651+cc models, derived
from submission of motorcycle retail sales by each major
manufacturer to an independent third party. This data is
subject to revision and update. As of the second quarter 2009,
industry data includes three-wheeled vehicles retroactive to
2008.
(2) 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 Giral S.A., an independent
agency. Europe market data is reported on a one-month lag.
This data is subject to revision and update.
