Harley-Davidson, Inc First Quarter Update April 25, 2012

Transcription

1 Mon. 4/19 AM Harley-Davidson, Inc First Quarter Update April 25, Harley-Davidson Seventy-Two

2 Agenda 2012 First Quarter Update Introduction - Amy Giuffre, Director, Investor Relations Opening Remarks Keith Wandell, CEO Financial Results John Olin, CFO HDFS Business Results Larry Hund, President, HDFS Q&A This presentation will include 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. Risk factors are included at the end of this presentation. 2

3 Q Perspectives Keith Wandell, Chairman, President & CEO

4 Perspectives Continued Strong Performance Great Progress Untapped Potential Opportunities 4

5 Perspectives Winning Products Seventy-Two Softail Slim 5

6 Perspectives Winning Products Forty-Eight Night Rod Special SuperLow 6

7 Perspectives 2011 U.S. Market Leader Young Adults Women Hispanics African Americans Core U.S. market share position, on-road motorcycles, all sizes, in the respective demographic segments. Young adults are ages Core is Caucasian men ages 35-plus. Source: R.L. Polk & Co. motorcycle registration data. 7

8 Perspectives International Markets Europe Two-thirds+ buyers new to H-D in 2011 No. 2 market position (651cc+) in 2011 Latin America Strong Q gains Brazil investments Asia Pacific Up 25.4% in Q1 Japan improvement and strong emerging markets growth Europe market position source: Association des Constructeurs Europeens de Motocycles, The Motorcycle Industry in Europe; includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom 8

9 Perspectives Looking Ahead Growth Opportunities Exciting Products Continued Manufacturing Improvements Focus on Retail Excellence 9

10 Q Financial Results John Olin, Senior Vice President & CFO

11 Harley-Davidson, Inc. Results Q Vs. Q Results Continuing Operations Revenue Income EPS $1.43 Billion $172.0 $0.74 Million 16.7% 44.3% 45.1% Earnings impacted by: Motorcycles Segment operating income up 66.4% 19.8% increase in revenue (19.4% increase in motorcycle shipments) Higher gross margin percentage Favorable restructuring spending Increased SG&A Financial Services Segment operating income down slightly Consolidated Motorcycles and Related Products and Financial Services Segments 11

12 Motorcycle Retail Sales - Worldwide Worldwide Harley-Davidson motorcycle retail sales were 59,677 units during Q1 driven by strong sales in the U.S. Worldwide Harley-Davidson Retail Sales Q1 12 WW US International 20.3% 25.5% 11.2% 25% 15% 5% -5% -15% -25% -35% Worldwide H-D yr/yr retail sales by quarter 20.3% 3.5% 5.6% 5.1% 10.9% -5.5% -7.7% -1.0% -21.3% -18.2% -21.4% -30.1% Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Motorcycles and Related Products Segment 12

13 Motorcycle Retail Sales - U.S. 45,000 35,000 25,000 15,000 5,000-5,000 U.S. H-D Retail Sales (Units) 39,762 31, % +25.5% Q1 '11 Q1 '12 U.S. H-D Retail Sales Stronger than expected retail sales Momentum from strong brand, 2012 product Unusually mild Q1 weather may have pulled forward some sales Harley-Davidson share of US 651+CC retail market First Quarter U.S. Dealer New Retail Inventory First Quarter U.S. Dealer Inventory* 60.0% 40.0% 20.0% 54.9% 55.7% 53.4% 57.4% 0.0% FY 2010 FY 2011 Q Q H-D share up 4.0 pts. in Q Industry up 17.5% in Q Q Q Q Q Q Q Q Yr./Yr. retail inventory down in Q Retail inventory up slightly from Q4 11 Motorcycles and Related Products Segment 13

14 Motorcycle Retail Sales - International International - Canada - EMEA Region - Asia Pacific Region - Latin America Region International H-D Retail Sales Q % 1.5% -1.1% 25.4% 85.2% Brazil dealer network gaining momentum Asia Pacific growth across entire region including Japan Europe growth in Germany, France and Switzerland; Softness in UK and southern countries Europe 651+CC Industry Retail Sales International Growth Progress Harley-Davidson share of Europe 651+CC retail market Goal: Add Intl dealers % 13.7% 12.1% 13.5% FY 2010 FY 2011 Jan/Feb '11 Jan/Feb '12 H-D share increased 1.4 pts. through Feb. 12 Industry down 12.3% through Feb new dealers as of end of Q1 Opened dealers in Croatia, Russia, India, China and France in Q1 Motorcycles and Related Products Segment 14

15 Shipment & Mix Harley-Davidson motorcycle shipments were up 10,436 units during the first quarter compared to last year Harley-Davidson Motorcycle Shipments Total Units Shipped Q ,263 Vs. PY 19.4% Touring Custom Sportster 42.3% 38.2% 19.5% 100.0% 0.5 pts. (0.2) pts. (0.3) pts. In Q1 2012, 35.7% of shipments were international compared to 35.2% in Q Motorcycles and Related Products Segment 15

16 Revenue Motorcycle Segment revenue was up $210.3 million, or 19.8%, in Q1 versus prior year Motorcycle Segment - Revenue ($ Millions) Motorcycle P&A General Merchandise Other Total Revenue Q $ $1,273.4 % Change 19.5% 21.1% 19.2% 43.8% 19.8% Q average motorcycle revenue per unit increased $12 compared to Q Motorcycles and Related Products Segment 16

17 Restructuring 2012 Restructuring Expectations Q1 Q2 Q3 Q4 Australia Wheel Manufacturing Exit Implement Kansas City Contract Activities GM/P&A Distribution consolidation Implement WI Contract York ERP Implementation York Flex. Mfg Prep 2012 Total Temporary Inefficiencies (Millions) $7 Actual $6-9 $9-14 $5-8 $32 Approx. Motorcycle and Related Products Segment 17

18 Restructuring Motorcycle Segment Restructuring Summary as of 4/25/12 $ Millions Total Cost $221 Actual $164 Actual $68 Actual $50-$60 Estimated $0-$5 Estimated $500-$520 Estimated % Cash 65% 52% 93% Approx. 80% Approx. 50% Approx. 65% Annual Savings $91 Actual $172 Actual $217 Actual $275-$295 Estimated $300-$320 Estimated $315-$335 Estimated % SG&A 91% 64% 51% 35-45% 30-40% 30-40% All costs and savings within expected ranges Q1 actual restructuring expense of $11.5 million vs. $23.0 million Q Motorcycle and Related Products Segment 18

19 Gross Margin Q1 gross margin improvement was driven by strong volumes, manufacturing including restructuring savings and favorable currency exchange Motorcycle Segment Gross Margin ($ Millions) 2011 Gross Margin - Volume - Motorcycle Pricing - Mix - Currency - Raw Materials - Manufacturing 2012 Gross Margin % of revenue % of revenue Q1 $ % (0.4) 10.9 (1.6) 19.3 $ % Motorcycle and Related Products Segment 19

20 Operating Income Q1 operating margin was up 4.5 pts. behind higher gross margin and favorable restructuring costs, partially offset by higher SG&A Motorcycle Segment Operating Income ($ Millions) 2011 Operating Income - Gross Margin Impact - Restructuring - SG&A Operating Margin (% of revenue) Q1 $ % (33.1) 2012 Operating Income Operating Margin (% of revenue) $ % Motorcycle and Related Products Segment 20

21 HDFS Operating Income Financial Services Segment (HDFS) operating income was down slightly behind lower yr/yr credit loss reserve releases HDFS - Operating Income ($ Millions) Q Operating Income $ Net interest Provision for retail motorcycle loan losses (6.6) - Provision for wholesale loan losses Operating expenses All other Operating Income $67.4 Financial Services Segment 21

22 HDFS Results Q HDFS Originated $553.8 million in retail motorcycle loans (+ 22.1% yr/yr) 47.0% share of U.S. Harley-Davidson new retail sales $6.00 billion in finance receivables outstanding (-3.0% yr/yr) $5.04 billion retail $956.3 million wholesale Q originations approximately 80% prime Financial Services Segment 22

23 HDFS Results 5% 4.78% Retail 30+ Day Delinquencies Managed Retail Motorcycle Loans 4.89% 4.57% 4% 4.08% 3.68% 3% 2.56% 2% 4% Q Q Q Q Q Q Annualized Loss Experience Managed Retail Motorcycle Loans 3.41% 3% 2.28% 2.71% 2.83% 2% 1.58% 1% 1.00% 0% Financial Services Segment Q Q Q Q Q Q

24 Harley-Davidson, Inc. Cash Cash/Liquidity Position As of the end of Q1, 2012 ($ Billions) Cash & Marketable Securities H-D, Inc. $1.06 HDFS $0.35 Total $1.41 Availability Bank Credit Facilities $0.54 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) Q Transactions $400 million 5 yr. medium-term note at 2.7% $200 million pension contribution $225 million dividend paid from HDFS to H-D, Inc. Increased dividend 24% to $0.155/share $11.3 million share repurchase Consolidated Motorcycles and Related Products and Financial Services Segments 24

25 Harley-Davidson, Inc. Q Harley-Davidson, Inc. Continuing Operations Cash & Marketable Securities as of 4/1/12 - $1.41 billion vs. $1.05 billion as of 3/27/11 Operating cash flow - $73.6 million used vs. $104.9 million used in 2011 Motorcycles & Related Products operating cash provided of $20.8 million vs. $103.2 million used in 2011 $200.0 million voluntary cash contribution to pension plans (Also is Q1 2011) Capital spending $24.7 million vs. $27.7 million in 2011 Depreciation expense $43.2 million vs. $42.9 million in 2011 Continuing operations tax rate 35.3% vs. 34.8% in 2011 FY 2012 tax rate expected to be approximately 35.5% Consolidated Motorcycles and Related Products and Financial Services Segments 25

26 Guidance 2012 Guidance (as of April 25, 2012) Ship 245,000 to 250,000 Motorcycles in 2012 (Q ,000 to 84,000) Gross Margin between 34.75% and 35.75% Capital Expenditures between $190 to $210 million Includes approximately $35 million capital expenditures for restructuring activities 2012 Harley-Davidson Dyna Wide Glide Consolidated Motorcycles and Related Products and Financial Services Segments 26

27 Harley-Davidson, Inc. Progress made along journey to growth with continued focus on the future Delivering results Strong Margins / Strong Returns Returning value to shareholders E Pluribus Unum Young Adults Outreach Campaign (#stereotypicalharley) 27

28 Forward-Looking Statements The Company intends that certain matters discussed in this presentation are forward-looking 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) effectively execute the Company s restructuring plans within expected costs and timing, (iii) implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (iv) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (v) anticipate the level of consumer confidence in the economy, (vi) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (vii) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (viii) successfully implement with our labor unions the agreements that we have executed with them that we believe will provide flexibility and cost-effectiveness to accomplish restructuring goals and long-term competitiveness, (ix) manage risks that arise through expanding international operations and sales, (x) manage supply chain issues, including any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xi) manage production capacity and production changes, (xii) provide products, services and experiences that are successful in the marketplace, (xiii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiv) manage the risks that our independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xv) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xvi) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS loan portfolio, (xvii) sell all of its motorcycles and related products and services to its independent dealers, (xviii) continue to develop the capabilities of its distributor and dealer network, (xix) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xx) adjust to healthcare inflation and reform, pension reform and tax changes, (xxi) retain and attract talented employees, and (xxii) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation. 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