Milwaukee, Wis., Apr. 24—Harley-Davidson, Inc. (NYSE:HOG) today reported first quarter 2018 results and confirmed its 2018 outlook. The company also announced it is accelerating its strategy for growth, anchored by its objective to build the next generation of riders globally.

First Quarter 2018

  • EPS of $1.03 ($1.24 excluding manufacturing optimization costs)
  • Consolidated revenue up 2.7%
  • HDFS operating income up 20.8%, year-over-year credit losses down
  • Increased dividend 1.4%, repurchased 1.4 million shares
  • Growth in international retail sales
  • Manufacturing optimization initiative on-track
  • Confirmed full-year shipment guidance
  • Strategy enhancement and acceleration planned

First quarter 2018 GAAP diluted EPS was $1.03.  Excluding manufacturing optimization costs, diluted EPS was $1.24. First quarter 2017 GAAP diluted EPS was $1.05. First quarter 2018 net income was $174.8 million on consolidated revenue of $1.54 billion versus net income of $186.4 million on consolidated revenue of $1.50 billion in the first quarter of 2017.

Harley-Davidson international retail motorcycle sales were up 0.2 percent in the first quarter of 2018 compared to 2017 and U.S. retail sales were down 12.0 percent. Worldwide retail sales decreased 7.2 percent.

“We are pleased to deliver revenue growth on the heels of our recent product investments in Softail and Touring. This, plus solid financial services segment performance and strong cash returns during the first quarter underscore our commitment to drive shareholder value,” said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc.  “Our international markets returned to retail sales growth supporting our long-term objective to increase international sales to build the next generation of riders globally.”

Strategy to Build Riders Globally

During the first quarter, the company continued progress on its 2027 objectives: build 2 million new riders in the U.S., grow its international business to 50 percent of annual volume, launch 100 new high impact motorcycles and do so profitably and sustainably.

Considering prolonged softness in the U.S. industry and given what the company believes is untapped potential in international markets and in certain high-growth spaces globally, the company is crafting strategy accelerants to deliver significant value through 2022. Harley-Davidson plans to leverage its core business more fully and expand in new directions to accelerate value creation as it pursues its long-term objectives.

“Our view of the highly competitive global motorcycle market is grounded in a realistic assessment of risks, opportunities and capabilities needed to inspire ridership and grow our business.  Our data-driven insights compel us to enhance and accelerate our strategies to ensure we deliver on our long-term objectives as we build the next generation of Harley-Davidson riders,” stated Levatich.

The company is currently refining its plans and this summer intends to reveal significant additional steps to improve performance and value creation through 2022.

Building Riders

As Harley-Davidson continues to make progress building the next generation of riders, the company increased its reach and impact during the first quarter through a wide range of efforts including:

  • Added to the long legacy of its Sportster motorcycle line with the introduction of the Iron 1200 and Forty-Eight Special The latest in a line of 100 high-impact motorcycles the company expects to introduce by 2027, these new Sportsters combine throw-back styling trends from the custom-bike scene with the solid foundation of the Sportster platform and the punchy performance of the Evolution 1200 V-Twin engine. The U.S. MSRP of the new models start at $9,999 and $11,299 respectively.
  • Continued to grow the appeal of motorcycling by debuting Harley-Davidson Snow Hill Climb at X Games Aspen alongside ski, snowboard and other action-sports competitions.
  • Increased brand access by adding new international dealers and new apparel and lifestyle boutiques in popular shopping areas in China and India.
  • Welcomed riders and non-riders to celebrate freedom as the company recognizes 115 years of continuous motorcycle manufacturing in 2018. Fans were invited to join the global freedom movement on social media using #HD115 and join celebrations in Prague in July and Milwaukee over Labor Day weekend.
  • Invested in a collaborative agreement with Alta Motors, an innovator in lightweight electric vehicles, supporting Harley-Davidson’s commitment to lead in the electrification of the sport of motorcycling to reach new customers in new spaces.

Manufacturing Optimization

To further improve its manufacturing operations and cost structure, in the first quarter of 2018 the company commenced its previously announced multi-year manufacturing optimization initiative anchored by the consolidation of its motorcycle assembly plant in Kansas City, Mo. into its plant in York, Pa. The company continues to expect to incur restructuring and other consolidation costs of $170 million to $200 million and capital investment of approximately $75 million through 2019 and expects ongoing annual cash savings of $65 million to $75 million after 2020.  In the first quarter, costs related to the manufacturing optimization were $47.6 million.

Harley-Davidson Retail Motorcycle Sales



1st Quarter
2018 2017 Change
U.S. 29,309 33,316 (12.0)%
EMEA 10,862 10,167 6.8%
Asia Pacific 6,329 6,863 (7.8)%
Latin America 2,506 2,342 7.0%
Canada 2,080 2,361 (11.9)%
International Total 21,777 21,733 0.2%
Worldwide Total 51,086 55,049 (7.2)%

The U.S. 601+cc industry was down 11.1 percent in the first quarter compared to 2017. Harley-Davidson’s first quarter market share was 50.4 percent in the U.S. The 601+cc industry in Europe was down 7.3 percent in the first quarter compared to 2017.  Harley-Davidson’s first quarter market share was up 1.3 percentage points to 10.4 percent in Europe.

Motorcycles and Related Products Segment Results

  1st Quarter
2018 2017 Change
Motorcycle Shipments (vehicles) 63,944 70,831 (9.7)%
Revenue  $ in thousands      
   Motorcycles $1,121,673 $1,083,639 3.5%
   Parts & Accessories $169,075 $168,023 0.6%
   General Merchandise $56,601 $55,836 1.4%
Gross Margin 34.7% 35.7% (1.0)pts
Operating Income $172,838 $236,546 (26.9)%
Operating Margin 12.7% 17.8% (5.1)pts

First quarter revenue from motorcycles and related products was up versus the prior year. Operating margin as a percent of revenue decreased in the quarter compared to 2017 primarily due to costs associated with our manufacturing optimization initiative.

Financial Services Segment Results


$ in thousands

1st Quarter
2018 2017 Change
Revenue $178,174 $173,221 2.9%
Operating Income $63,579 $52,636 20.8%

Financial services operating income increased 20.8 percent in the first quarter compared to 2017.

Income Tax Rate

Harley-Davidson’s first quarter effective tax rate was 24.1 percent compared to 34.5 percent in 2017. The decreased tax rate was due to the favorable impact of the 2017 Tax Cuts and Jobs Act.

Other Results

Cash and marketable securities were $753.5 million at the end of Q1 2018, compared to $844.7 million in 2017. Harley-Davidson generated $191.6 million of cash from operating activities in 2018 compared to $159.9 million in 2017. The company paid a cash dividend of $0.37 per share for the first quarter, an increase of 1.4 percent compared to the prior year. On a discretionary basis, Harley-Davidson repurchased 1.4 million shares of its common stock during the first quarter for $65.1 million. During the quarter, there were approximately 169.2 million weighted-average diluted common shares outstanding.  At the end of the quarter, 24.2 million shares remained on board-approved share repurchase authorizations.

2018 Outlook

The company continues to expect the following for the full-year 2018:

Motorcycle shipments to be approximately 231,000 to 236,000 motorcycles. In the second quarter, the company expects to ship approximately 67,500 to 72,500 motorcycles.

Operating margin as a percent of revenue to be approximately 9.5 to 10.5 percent including manufacturing optimization costs of $120 million to $140 million.

Capital expenditures of $250 million to $270 million including approximately $50 million to support manufacturing optimization.

Effective tax rate of approximately 23.5 to 25.0 percent.

The company now expects Harley-Davidson Financial Services operating income to be flat to down modestly.



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