MILWAUKEE, July 22, 2014 – Harley-Davidson, Inc. (NYSE: HOG) second-quarter 2014 diluted earnings per share of $1.62 grew 33.9 percent on higher motorcycle shipments and continued improvement in operating efficiencies, compared to the year-ago period. Second-quarter net income was $354.2 million on consolidated revenue of $2.00 billion, compared to net income of $271.7 million in the year-ago period on consolidated revenue of $1.79 billion.
Through six months, Harley-Davidson 2014 net income was $620.1 million on consolidated revenue of $3.73 billion, compared to six-month 2013 net income of $495.9 million on consolidated revenue of $3.37 billion. Six-month 2014 diluted earnings per share were $2.82, up 28.2 percent from EPS of $2.20 in the year-ago period.
“Harley-Davidson’s second-quarter results reflect the financial strength of the Company and brand, including the benefits of continuous improvement throughout our operation,” said Harley-Davidson, Inc. Chairman, President and Chief Executive Officer Keith Wandell. “As a customer-led organization, our employees, dealers in 90 countries and suppliers are focused every day on providing outstanding products and experiences for customers around the world.”
Retail Harley-Davidson Motorcycle Sales
Dealers worldwide sold 90,218 new Harley-Davidson motorcycles in the second quarter of 2014 compared to 90,193 motorcycles in the year-ago quarter. In the U.S., dealers sold 58,225 new Harley-Davidson motorcycles in the quarter, compared to sales of 58,241 motorcycles in the year-ago period. The Company believes second-quarter U.S. retail sales were adversely affected by prolonged poor weather across parts of the U.S. and soft Sportster motorcycle sales ahead of the highly anticipated arrival of Street motorcycles in dealer showrooms.
In international markets, dealers sold 31,993 new Harley-Davidson motorcycles during the second quarter, compared to 31,952 motorcycles in the year-ago period, with sales up 7.0 percent in the EMEA Region and 1.5 percent in the Asia Pacific Region, and down 10.4 percent in the Latin America Region and 18.0 percent in Canada.
“U.S. retail Harley-Davidson sales fell short of our expectations in the second quarter,” said Wandell. “Because we are committed to managing supply in line with demand, we are reducing our full-year shipment plan and now expect shipment growth of approximately 3-1/2 to 5-1/2 percent over last year.” The Company previously had forecast full-year shipment growth of approximately 7 to 9 percent.
“We believe the underlying demand fundamentals of the business remain intact,” said Wandell. “We continue to see a strong response to the new Rushmore models as well as great interest in the Harley-Davidson Street 750 and 500, which began to hit dealer showrooms in late June.”
Through the first six months of 2014, dealers sold 147,633 new Harley-Davidson motorcycles worldwide, compared to 144,447 motorcycles in the year-ago period, with retail unit sales up 1.1 percent in the U.S., 10.1 percent in the Asia Pacific Region and 7.5 percent in the EMEA Region, and down 2.1 percent in the Latin America Region and 13.5 percent in Canada, compared to the year-ago period.
Harley-Davidson Motorcycles and Related Products Segment Results
Second-Quarter Results: Operating income from motorcycles and related products grew 32.3 percent to $473.3 million, compared to operating income of $357.7 million in the year-ago period. Operating income in the quarter benefited from higher motorcycle shipments and higher gross margin compared to the prior-year period.
Revenue from motorcycles grew 16.2 percent to $1.48 billion, compared to revenue of $1.27 billion in the year-ago period. The Company shipped 92,217 motorcycles to dealers and distributors worldwide during the quarter, in line with guidance and a 9.0 percent increase compared to shipments of 84,606 motorcycles in the year-ago period.
Revenue from motorcycle parts and accessories was $271.6 million during the quarter, up 0.7 percent, and revenue from general merchandise, which includes MotorClothes® apparel and accessories, was $76.4 million, down 6.5 percent, compared to the year-ago period.
Gross margin was 39.5 percent in the second quarter of 2014, compared to 36.9 percent in the second quarter of 2013. Second-quarter operating margin from motorcycles and related products was 25.8 percent, compared to operating margin of 21.9 percent in last year’s second quarter.
Six-Month Results: Through six months the Company shipped 172,899 motorcycles to dealers and distributors worldwide, an 8.2 percent increase compared to the year-ago period. Six-month revenue from motorcycles grew 14.7 percent to $2.79 billion, revenue from parts and accessories increased 3.5 percent to $469.7 million and revenue from general merchandise decreased 8.7 percent to $140.5 million, compared to the first six months of 2013. Gross margin through six months was 38.6 percent and operating margin was 24.1 percent, compared to 36.8 percent and 20.8 percent respectively in the year-ago period.
Financial Services Segment Results
Operating income from financial services was $74.4 million in the second quarter of 2014, a 0.4 percent increase compared to operating income of $74.2 million in last year’s second quarter. Second-quarter financial services results reflect improved net interest income, partially offset by a higher provision for credit losses. Through six months, operating income from financial services was $137.6 million, compared to operating income of $145.7 million through six months of 2013.
Guidance
Harley-Davidson is revising its full-year guidance for new motorcycle shipments, reflecting its commitment to manage supply in line with demand, and now expects to ship 270,000 to 275,000 motorcycles to dealers and distributors worldwide in 2014, an approximate 3-1/2 percent to 5-1/2 percent increase from 2013. The Company previously had provided full-year shipment guidance of 279,000 to 284,000 motorcycles. In the third quarter of 2014, the Company expects to ship 49,000 to 54,000 motorcycles, compared to shipments of 54,025 motorcycles in the year-ago period. The Company continues to expect full-year 2014 operating margin of 17.5 percent to 18.5 percent in the Motorcycles segment. The Company also continues to expect capital expenditures of $215 million to $235 million in 2014.
Income Tax Rate
Through six months, the Company’s effective income tax rate was 35.3 percent compared to 34.8 percent in the year-ago period. The higher 2014 rate primarily reflects the absence of the Research and Development Tax Credit, which expired at the end of 2013. The Company continues to expect its full-year 2014 effective tax rate to be approximately 35.5 percent.
Cash Flow
Cash and marketable securities totaled $1.06 billion at the end of the second quarter, compared to $1.43 billion at the end of last year’s second quarter. During the first six months of 2014, Harley-Davidson generated cash from operating activities of $570.6 million, compared to $389.7 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 second quarter of 2014 at a cost of $135.7 million. In the second quarter of 2014, there were approximately 219.2 million weighted-average diluted common shares outstanding. At the end of the second quarter of 2014, 26.6 million shares remained 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 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 second-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 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 through Aug. 5, 2014 by calling 404-537-3406 or toll-free in the U.S. at 855-859-2056, pin number 64897481 #.
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