Mon. 4/19 AM Harley-Davidson, Inc Fourth Quarter Update

Transcription

1 Mon. 4/19 AM Harley-Davidson, Inc Fourth Quarter Update January 30, 2014

2 2013 Fourth Quarter Update These slides are intended to support the material discussed in the corresponding conference call. Conference call participants: Introduction Amy Giuffre, Director, Investor Relations Opening Remarks Keith Wandell, President and CEO, H-D, Inc. Financial Results John Olin, Senior Vice President and CFO, H-D, Inc. HDFS Results Larry Hund, President & COO, HDFS Q&A This presentation includes forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update information in this presentation. Additional information and risk factors are included at the end of this presentation. 2

3 Q Business Perspectives Keith Wandell, Chairman, President & CEO

4 Perspectives 2013 Achievements New Products Flexible Manufacturing Operations Retail Gains Diverse Customers Shareholder Returns 40%+ 4

5 Perspectives Surge Manufacturing 5

6 Perspectives Project Rushmore Harley-Davidson Street Street Glide with Color Shop Custom Paint Street 750 6

7 Perspectives Broadening Our Reach U.S. #1 Outreach Market Share Outreach Sales Growth Rate Twice That of Core Growth Rate 7

8 Perspectives Broadening Our Reach Brazil - #1 Market Share* Europe - #2 Market Share* Asia-Pacific Best Sales Year Ever Strong Emerging Market Growth *601cc+ 8

9 Perspectives OUTSTANDING YEAR 9

10 Q Financial Results John Olin, Senior Vice President & CFO, H-D, Inc. Larry Hund, President & COO, HDFS

11 Harley-Davidson, Inc. Results Q Vs. Q Results Revenue Net Income EPS $1.19 Billion $75.4 $0.34 Million 1.7% 6.8% Earnings impacted by: Motorcycles Segment operating income increased 14.3% 2.1% increase in revenue (1.0% decrease in motorcycle shipments) Slightly lower gross margin percent Lower yr/yr SG&A spending Lower yr/yr restructuring costs Financial Services Segment operating income decreased 2.6% 9.7% Consolidated Motorcycles and Related Products and Financial Services Segments 11

12 Motorcycle Retail Sales - Worldwide Worldwide Harley-Davidson motorcycle retail sales were 45,875, up 2,470 motorcycles during Q4 compared to last year. Full year retail sales were 260,839, up 10,990 motorcycles during Worldwide Harley-Davidson Retail Sales Q4 13 FY 13 WW 5.7% 4.4% US 6.3% 4.4% International 4.7% 4.3% Both U.S. and International retail sales growth yr/yr Continued positive response to MY 2014 motorcycles Worldwide retail sales within Company expectations Motorcycles and Related Products Segment 12

13 INVENTORY SALES Thousands SHARE Motorcycle Retail Sales U.S. Harley-Davidson H-D U.S. New Retail Motorcycle Sales (Units) H-D share of US 601+CC retail market % 58.0% 55.0% 53.9% 54.9% -3.0 pts pts % Q4 '12 Q4 '13 FY '12 FY '13 U.S. industry growth encouraging; Q4 up 11.7% FY H-D share up 1.0%; record high Q4 '12 Q4 '13 FY '12 FY '13 H-D U.S. New Retail Motorcycle Inventory* (Units) * At period end 2H up 14.8% behind Rushmore Q4 growth decelerated from Q3 levels as expected Tougher Q4 comps Impact of temporarily discontinuing Road Glide models U.S. retail inventory down 1,850 motorcycles as we prepared for surge mfg. in Kansas City Motorcycles and Related Products Segment 13

14 SALES OPPORTUNITY SHARE Motorcycle Retail Sales International Harley-Davidson Vs. PY Q4 13 FY 13 Harley-Davidson share of Europe 601+CC retail market International 4.7% 4.3% - Canada 13.3% 4.6% - EMEA Region 5.5% -1.0% - Asia Pacific Region 6.1% 9.8% - Latin America Region -2.8% 13.1% EMEA strong rebound Driven by strength in northern Europe led by Germany and France Macro economic conditions remain challenging Asia Pacific strength continues Emerging markets up double-digits Latin America down slightly Slow motorcycle homologation process in Brazil H-D #2 in Europe market share Industry retail sales down 6.2% International Growth Progress Goal: Add Intl. dealers new dealers added in 2013 (8 in Q4) 118 total new international dealers added Motorcycles and Related Products Segment 14

15 Shipment & Mix Motorcycle shipments were down 449 motorcycles, or 1.0%, in Q4 and up 12,846 motorcycles, or 5.2%, in 2013 compared to 2012 Harley-Davidson Motorcycle Shipments Q Vs. PY FY 2013 Vs. PY Total 46, % 260, % Touring 43.9% -2.1 pts. 41.2% 1.0 pts. Custom 39.1% 0.9 pts. 39.5% 0.6 pts. Sportster 17.0% 100.0% 1.2 pts. 19.3% 100.0% -1.6 pts. In 2013, 35.9% of motorcycle shipments were international compared to 35.2% in 2012 Motorcycles and Related Products Segment 15

16 Revenue Motorcycle Segment revenue was up $21.4 million, or 2.1%, in Q4 and up $315.7 million, or 6.4%, in 2013 compared to last year Motorcycle Segment - Revenue ($ Millions) Q % change FY 2013 % change Motorcycle $ % $4, % P&A % % General Merchandise % % Other % % Total Revenue $1, % $5, % Average motorcycle revenue per unit increased $412 in 2013 compared to 2012 Motorcycles and Related Products Segment 16

17 Restructuring Motorcycle Segment Restructuring Summary (1/30/14) $ Millions Total Cost $221 Actual $164 Actual $68 Actual $28 Actual $(2) Actual $479 Actual % Cash 65% 52% 93% 70% N/M 63% Annual Savings $91 Actual $172 Actual $217 Actual $280 Actual $310 Actual $320 Estimated % SG&A 91% 64% 51% 42% 39% Approx. 37% Quarterly 2013 restructuring expense/(benefit): (millions) Q1 $ 2.9 vs. $11.5 in 2012 Q2 $(5.3) vs. $6.2 in 2012 Q3 $ 0.6 vs. $9.2 in 2012 Q4 $(0.4) vs. $1.6 in 2012 Restructuring complete, ~$10 million additional savings expected in 2014 Fixed costs of 15-20% of motorcycle manufacturing costs result in gross margin ~47% on incremental volume Motorcycles and Related Products Segment 17

18 Gross Margin Gross margin was up $2.8 million for Q4 and up $142.2 million for 2013 compared to last year Motorcycle Segment Gross Margin ($ Millions) Q4 FY 2012 Gross Margin $322.0 $1,720.2 % of revenue 31.8% 34.8% - Volume Motorcycle pricing net of cost Mix (10.7) Currency (6.4) (38.8) - Raw materials Manufacturing (1.9) Gross Margin $324.7 $1,862.4 % of revenue 31.5% 35.4% Motorcycles and Related Products Segment 18

19 Operating Income Motorcycle Segment operating income was up $7.6 million, or 14.3%, for Q4 and up $155.1 million, or 21.7%, in 2013 compared to last year Motorcycle Segment Operating Income ($ Millions) Q4 FY 2012 Operating Income $ 53.1 $715.5 Operating Margin (% of revenue) 5.3% 14.5% - Gross Margin Restructuring SG&A 2.8 (17.7) 2013 Operating Income $60.7 $870.6 Operating Margin (% of revenue) 5.9% 16.6% Motorcycles and Related Products Segment 19

20 HDFS Operating Income Financial Services Segment operating income was impacted by increased provision for credit losses partially offset by favorable net interest income HDFS - Operating Income ($ Millions) Q4 FY 2012 Operating Income $63.0 $ Net interest Provision for retail motorcycle loan losses (13.0) (36.8) - Provision for wholesale loan losses 0.4 (1.4) - Operating expenses All other Operating Income $61.3 $283.1 Financial Services Segment 20

21 HDFS Results 2013 HDFS Originated $2.72 billion in new & used retail motorcycle loans (+11.8% yr/yr) Q4 $469.2 million (+14.2% yr/yr) 54.5% share of U.S. Harley-Davidson new retail motorcycle sales (+3.6 pts. yr/yr) Q4 56.6% (+4.3 pts. yr/yr) $6.11 billion in finance receivables outstanding (+3.7% yr/yr) $5.27 billion retail $845.2 million wholesale FY U.S. retail motorcycle originations approximately 75% - 80% prime Financial Services Segment 21

22 HDFS Results 7% 6% 5% 6.29% Retail 30+ Day Delinquencies December % Managed Retail Motorcycle Loans 5.07% 4% 3.85% 3.94% 3.71% 3% % 2% 2.30% Annual Loss Experience Managed Retail Motorcycle Loans 2.86% 2.11% 1% 1.20% 0.79% 1.09% 0% Financial Services Segment 22

23 Harley-Davidson, Inc. Cash Cash/Liquidity Position As of YE 2013 ($ Billions) Cash & Marketable Securities H-D, Inc. $0.82 HDFS $0.35 Total $1.17 Availability Bank Credit Facilities $0.68 Asset-Backed Conduit $0.60 Total Availability $ Liquidity Strategy Maintain a minimum of 12 months of projected liquidity in cash and/or committed credit facilities Obtain cost-effective funding through diversified sources Balance long-term and short-term funding vehicles Balance unsecured and secured funding Extension of debt maturities (MTNs) Recent Transactions Q Repurchased 2.7 M shares for $176.3 M Q $303M high interest H-D, Inc. debt will be retired $120M dividend from HDFS to H-D, Inc. Consolidated Motorcycles and Related Products and Financial Services Segments 23

24 Harley-Davidson, Inc Harley-Davidson, Inc. Cash & Marketable Securities YE $1.17 billion vs. $1.20 billion at YE 2012 Operating cash flow $977.1 million vs. $801.5 million in 2012 Increase of $175.6 million primarily driven by increased earnings $175 million voluntary cash contribution to pension plans in Q Capital spending $208.3 million vs. $189.0 million in 2012 Depreciation expense $167.1 million vs. $169.0 million in 2012 Tax rate % vs. 35.1% in 2012 Consolidated Motorcycles and Related Products and Financial Services Segments 24

25 Harley-Davidson, Inc. Results FY 2013 Vs. FY 2012 Results Revenue Net Income EPS $5.90 Billion $734.0 $3.28 Million 5.7% 17.6% 20.6% Earnings impacted by: Motorcycles Segment operating income increased 21.7% 6.4% increase in revenue (5.2% increase in motorcycle shipments) Higher gross margin Higher yr/yr SG&A spending Lower yr/yr restructuring costs Financial Services Segment operating income decreased 0.6% Consolidated Motorcycles and Related Products and Financial Services Segments 25

26 Guidance 2014 Expectations as of January 30, 2014 Motorcycles and related products segment Motorcycle shipments Gross margin SG&A 279, ,000 (Q1 76,500 81,500) Up modestly year/year Up year/year, down as % of revenue Operating margin % Financial services segment HDFS operating income Down modestly year/year Harley-Davidson, Inc. Capital expenditures $215 - $235 million Effective tax rate Approximately 35.5% 26

27 Harley-Davidson, Inc. We are focused on delivering results and returning value to shareholders Harley-Davidson Delivers Strong Margins/Strong Returns 27

28 Forward-Looking Statements The Company intends that certain matters discussed in this presentation are forwardlooking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 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 presentation. 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 presentation are only made as of the date of this presentation, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. (cont.) 28

29 Forward-Looking Statements (cont.) 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) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (iii) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (iv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (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) provide products, services and experiences that are successful in the marketplace, (xi) manage risks that arise through expanding international manufacturing, operations and sales, (xii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS loan portfolio, (xiii) continue to manage the relationships and agreements that it has with its labor unions to help drive long-term competitiveness, (xiv) manage supply chain issues, including any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xv) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xvi) adjust to healthcare inflation and reform, pension reform and tax changes, (xvii) retain and attract talented employees, (xviii) manage the risks that our independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xix) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xx) continue to develop the capabilities of its distributor and dealer network, and (xxi) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation. (cont.) 29

30 Forward-Looking Statements (cont.) 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. # # # 30