Harley Sales Slip A Little In 2016
Company states its goal is “to build the next generation of Harley-Davidson riders worldwide.” No duh! If H-D makes a street legal version of its recently announced liquid-cooled flat tracker, XG750R, that bike will certainly help the Motor Company attain its goal.
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Harley-Davidson Reports Fourth Quarter, Full-Year 2016 Results
Market Share Gains in the U.S. While Industry Sales Decline
MILWAUKEE, Jan. 31, 2017 – 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™ 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.
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