2012 Harley-Davidson Financial Report
Harley-Davidson released its first-quarter financial report Wednesday, The Motor Company reports that retail sales of new motorcycles were up 20.3 percent worldwide over the same quarter of 2011. These numbers were lead by US sales, which were up 25.5 percent in Q1.
Harley says 59,677 motorcycles were sold worldwide in Q1, compared to 49,595 in the same period of 2011. Most of these sales were stateside, with dealers selling 39,762 motorcycles in the US. In international markets, dealers sold 19,915 motorcycles, an increase of 11.2 percent over the same period in 2011.
Harley also says H-D was the leading motorcycle seller in the U.S. for the fourth consecutive year. The leading buyers were young adults between the ages of 18 and 34, women, African American and Hispanic riders. Also, more than one-third of U.S. sales in 2011 were riders new to the brand.
Keith Wandell (Harley-Davidson Chairman, President & CEO) says: “Harley-Davidson’s market leadership among its demographic outreach targets we believe demonstrates the powerful and growing appeal of the brand to new generations and diverse groups of riders.
“We also continued to expand the reach of Harley-Davidson to customers around the world. Our employees and dealers are more dedicated than ever to making customers’ dreams a reality through remarkable products and extraordinary experiences.”
As for financials, Harley says. earnings per share rose 45.1 percent to $0.74 (HOG). Income from continuing operations was $172.0 million, or $0.74 per share, on consolidated revenue of $1.43 billion for the quarter, compared to income from continuing operations of $119.3 million, or $0.51, on consolidated revenue of $1.22 billion in the year-ago quarter.
Keith Wandell says: “We continue to be encouraged by the strong trend at retail and in earnings over the past several quarters. Our first quarter performance reflects the outstanding appeal of our products, the ongoing results of our transformation strategy, the efforts of our dealers and employees, and improving macro-economic conditions in the U.S.
“While we are obviously pleased by our strong start to the year, we are more focused than ever on the ongoing implementation of our business strategy and tapping the many opportunities we see globally. Through Harley-Davidson’s transformation to world-class manufacturing, product development and retail capabilities, we are positioning the Company to serve our customers even better and help ensure the strength of the business long term.”.
Following are further reports from Harley-Davidson:
Harley-Davidson Motorcycles and Related Products Segment Financial Results
First-quarter operating income from Motorcycles and Related Products grew 66.4 percent to $208.1 million on higher shipment volume and operating margin improvement, compared to the year-ago period.
Revenue from Motorcycles during the first quarter of 2012 of $995.9 million was up 19.5 percent compared to the year-ago period. The Company shipped 64,263 motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 53,827 motorcycles in the first quarter of 2011. First-quarter 2012 shipments were higher than the Company’s shipment guidance of 58,000 to 63,000 motorcycles for the quarter.
Revenue from Motorcycle Parts and Accessories (P&A) totaled $199.1 million during the quarter, up 21.1 percent, and revenue from General Merchandise, which includes MotorClothes Apparel and Accessories, was $74.6 million, up 19.2 percent compared to the year-ago period.
Gross margin was 35.9 percent in the first quarter of 2012, compared to 33.1 percent in the first quarter of 2011. First-quarter operating margin from motorcycles and related products was 16.3 percent on operating income of $208.1 million, compared to operating income of $125.1 million and operating margin of 11.8 percent in last year’s first quarter.
Financial Services Segment
The Financial Services segment recorded operating income of $67.4 million in the first quarter of 2012, compared to operating income of $67.9 million in last year’s first quarter. Segment results reflect continued improvement in loan portfolio credit performance and increased net interest margin at Harley-Davidson Financial Services in the first quarter of 2012. In the year-ago period, Financial Services segment results benefited from the release of significant credit loss reserves.
Harley-Davidson is increasing its full-year shipment guidance and expects to ship 245,000 to 250,000 motorcycles to dealers and distributors worldwide in 2012, compared to prior shipment guidance of 240,000 to 245,000 motorcycles. The new shipment guidance reflects consumer demand and the Company’s limited ability to produce additional motorcycles in 2012. In the second quarter of 2012, the Company expects to ship 79,000 to 84,000 motorcycles.
The Company continues to expect full-year gross margin to be between 34.75 percent and 35.75 percent. The Company also continues to expect capital expenditures of between $190 million and $210 million in 2012. While the Company is maintaining guidance for overall capital spending, it is increasing the portion of capital expenditures dedicated to support restructuring activities to approximately $35 million for the full year, compared to the previous estimate of approximately $25 million.
In the first quarter of 2012, the Company incurred restructuring charges of $11.5 million. Upon, completion, Harley-Davidson continues to expect restructuring activities initiated since 2009 to result in one-time overall costs of $500 million to $520 million through 2013, including costs of $50 million to $60 million in 2012. 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
For the first quarter of 2012, the Company’s effective income tax rate from continuing operations was 35.3 percent, compared to 34.8 percent in the first quarter of 2011. The Company continues to expect its full-year 2012 effective tax rate from continuing operations to be approximately 35.5 percent.
Cash and marketable securities totaled $1.41 billion at the end of the first quarter, compared to $1.05 billion at the end of last year’s first quarter. During the first quarter of 2012, Harley-Davidson experienced a cash outflow from operating activities of continuing operations of $73.6 million, compared to an outflow of $104.9 million in the year-ago quarter. Cash flow was affected by a $200 million company contribution to its pension plans in both the first quarter of 2012 and the year-ago period.