Harley-Davidson to Execute The Hardwire Strategic Plan After $96 million Loss

Harley-Davidson, Inc. (“Harley-Davidson”) (NYSE:HOG) today reported fourth quarter and full-year 2020 results.

“2020 was an extraordinary year in many ways and our team navigated many challenges. We managed COVID-19 impacts, kept our community well-being at the forefront, protected liquidity and delivered $250 million in cash savings. We also successfully overhauled the entire company through The Rewire, building a strong foundation to successfully implement our new 5-year strategic plan, The Hardwire,” said Jochen Zeitz, chairman, president and CEO, Harley-Davidson. “The entire Harley-Davidson team put forth tremendous effort in 2020 and we now have the right organization, structure and strategy in place to make step changes in our performance and enhance our position as the most desirable motorcycle brand in the world.”

2020 Highlights and Results

• Delivered full year diluted EPS of $0.01 and adjusted diluted EPS of $0.77
• Executed COVID-19 response:
  • prioritized employee well-being
  • provided support to our customers and dealers
  • maintained sufficient cash and liquidity
  • achieved $250 million of cash savings versus planned spending in 2020
• Increased cash flow from operations $310 million from 2019 to $1.2 billion
• Paid dividends of $0.44 per share for the full year
• Overhauled and reset the cost structure of the business through The Rewire actions; effectively lowering our cost base by approximately $115 million
• Delivered additional The Rewire results:
  • Streamlined product portfolio reducing planned number of models by 30 percent
  • Re-set motorcycle model year launch timing to align with seasonality
  • Exited 39 markets to sharpen focus on the approximately 50 highest-potential markets
  • Optimized dealer network, reducing total network by approximately 160 net global dealers in 2020
  • Dealer year-end inventory reduced 59 percent, driving improvements in motorcycle transaction prices and enhancing motorcycle value

The company continues its H-D#1 culture evolution to drive a high-performing and winning organization guided by its vision and mission.

The Rewire and H-D#1 efforts set the company on a new course and provide a solid foundation to execute its long-term strategic plan, The Hardwire, through 2025.

Harley-Davidson, Inc. Consolidated Financial Results

 

Consolidated Revenue was down 32 percent in the fourth quarter and down 24 percent for the full year over 2019. Bottom-line results reflect a loss for the quarter and nominal net income for the full year with Financial Services segment operating income offsetting Motorcycles and Related Products segment operating losses for the year.

Motorcycles and Related Products Segment Results

$ in millions	4th quarter			Full-Year
	2020	2019	Change	2020	2019	Change
Motorcycle Shipments (thousands)	20.9	40.5	(48)%	145.2	213.9	(32)%
Revenue	$531	$874	(39)%	$3,264	$4,573	(29)%
Gross Margin	21.6%	25.2%	(3.7) pts.	25.4%	29.4%	(4.0) pts.
Operating Income / (Loss)	($196)	($46)	nm	($186)	$290	nm
Operating Margin	-37.0%	-5.3%	(31.7) pts.	-5.7%	6.3%	(12.0) pts.
Dealer Retail Motorcycle Unit Sales (thousands)	33.3	38.8	(14)%	180.2	218.3	(17)%

 

Revenue from the Motorcycles and Related Products segment was down during the fourth quarter primarily due to lower wholesale shipments versus prior year as the company continued its aggressive approach to supply and inventory management and reset the timing of delivery of new model year motorcycles. Fourth quarter global retail motorcycle sales also reflected the impact of tight inventory and the model year shift.

Fourth quarter gross margin was down 3.7 percentage points to prior year while fourth quarter operating margin finished below prior year due to the impact of volume deleverage and restructuring charges.

Financial Services Segment Results

$ in millions	4th quarter			Full-Year
	2020	2019	Change	2020	2019	Change
Revenue	$194	$198	(2)%	$790	$789	0%
Operating Income	$77	$59	31%	$196	$266	(26)%

 

Financial Services segment operating income was up 31 percent over prior year in the fourth quarter, primarily driven by a decrease in the provision for loan losses. Full year operating income was down due to increases in the provision for loan losses taken earlier in 2020.

Other Results

Cash – Cash and cash equivalents were $3.3 billion at the end of the year, compared to $834 million at the end of 2019. Harley-Davidson generated $1.2 billion of cash from operating activities in 2020 compared to $868 million in 2019.

Tax Rate – The company recorded an income tax benefit during 2020 driven by a pre-tax loss and favorable discrete income tax benefits recorded during the year.

Dividends– The company paid cash dividends of $0.44 per share on a full-year basis in 2020.

Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Our vision: Building our legend and leading our industry through innovation, evolution and emotion. Our mission: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul. Our ambition is to maintain our place as the most desirable motorcycle brand in the world. Since 1903, Harley-Davidson has defined motorcycle culture by delivering a motorcycle lifestyle with distinctive and customizable motorcycles, experiences, motorcycle accessories, riding gear and apparel. Harley-Davidson Financial Services provides financing, insurance and other programs to help get riders on the road. www.harley-davidson.com.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)
		(Unaudited)		(Unaudited)		(Unaudited)
		Three months ended				Twelve months ended
		December 31,		December 31,		December 31,		December 31,
		2020		2019		2020		2019
Motorcycles and Related Products revenue		$       530,963		$       874,095		$    3,264,054		$    4,572,678
Gross profit		114,528		220,639		828,309		1,342,880
Selling, administrative and engineering expense		276,409		266,428		895,321		1,020,907
Restructuring expense		34,524		671		119,110		32,353
Operating (loss) income from Motorcycles and Related Products		(196,405)		(46,460)		(186,122)		289,620
Financial Services revenue		194,259		198,176		790,323		789,111
Financial Services expense		107,852		139,321		583,623		523,123
Financial Services restructuring expense		9,621		–		10,899		–
Operating income from Financial Services		76,786		58,855		195,801		265,988
Operating (loss) income		(119,619)		12,395		9,679		555,608
Non-operating (expense) income, net		(5,650)		1,284		(25,409)		1,807
(Loss) income before income taxes		(125,269)		13,679		(15,730)		557,415
Income tax (benefit) provision		(28,871)		183		(17,028)		133,780
Net (loss) income		$        (96,398)		$         13,496		$            1,298		$       423,635
(Net loss) earnings per share:
Basic		$            (0.63)		$              0.09		$              0.01		$              2.70
Diluted		$            (0.63)		$              0.09		$              0.01		$              2.68
Weighted-average shares:
Basic		153,281		153,947		153,186		157,054
Diluted		153,281		154,913		153,908		157,804
Cash dividends per share:		$           0.020		$           0.375		$            0.440		$           1.500
Harley-Davidson, Inc.
Reconciliation of GAAP Amounts to Non-GAAP Amounts
(In thousands, except per share amounts)
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
		Three months ended				Twelve months ended
		December 31,		December 31,		December 31,		December 31,
		2020		2019		2020		2019
Net (loss) income excluding restructuring plan costs and the impact of tariffs
Net (loss) income (GAAP)		$        (96,398)		$         13,496		$            1,298		$       423,635
Restructuring plan costs		44,145		973		130,009		42,688
Impact of incremental tariffs		2,055		20,881		24,452		97,852
Tax effect of adjustments(a)		(17,585)		(4,568)		(37,071)		(33,729)
Adjustments net of tax		28,615		17,286		117,390		106,811
Adjusted net (loss) income (non-GAAP)		$        (67,783)		$         30,782		$       118,688		$       530,446
Diluted EPS excluding restructuring plan costs and the impact of tariffs
Diluted EPS (GAAP)		$            (0.63)		$              0.09		$              0.01		$              2.68
Adjustments net of tax, per share		0.19		0.11		0.76		0.68
Adjusted diluted EPS (non-GAAP)		$            (0.44)		$              0.20		$              0.77		$              3.36
(a) The income tax effect has been computed using the estimated income tax rate for these adjustments
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
						(Unaudited)
						December 31,		December 31,
						2020		2019
ASSETS
Current assets:
Cash and cash equivalents						$    3,257,203		$       833,868
Accounts receivable, net						143,082		259,334
Finance receivables, net						1,509,539		2,272,522
Inventories, net						523,497		603,571
Restricted cash						131,642		64,554
Other current assets						280,470		168,974
						5,845,433		4,202,823
Finance receivables, net						4,933,469		5,101,844
Other long-term assets						1,231,699		1,223,492
						$  12,010,601		$ 10,528,159
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities						$       848,118		$       876,668
Deposits						79,965		–
Short-term debt						1,014,274		571,995
Current portion of long-term debt, net						2,039,597		1,748,109
						3,981,954		3,196,772
Long-term debt, net						5,932,933		5,124,826
Other long-term liabilities						372,929		402,562
Shareholders’ equity						1,722,785		1,803,999
						$  12,010,601		$ 10,528,159
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
						(Unaudited)
						Twelve months ended
						December 31,		December 31,
						2020		2019
Net cash provided by operating activities						$    1,177,890		$       868,272
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