Harley-Davidson, Inc Fourth Quarter Update January 29, 2013

Transcription

1 Mon. 4/19 AM Harley-Davidson, Inc Fourth Quarter Update January 29, CVO TM Breakout TM

2 Introduction Amy Giuffre, Director, Investor Relations Opening Remarks Keith Wandell, CEO H-D, Inc. Financial Results John Olin, CFO H-D, Inc. HDFS Results Larry Hund, President, HDFS Q&A 2012 Fourth Quarter Update These slides support the material discussed in the corresponding conference call. Please see complete transcript for more details. Conference call participants: 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 Perspectives Keith Wandell, Chairman, President & CEO; H-D, Inc.

4 Perspectives 2012 Achievements EPS Up 16.7% Retail Motorcycle Sales Up 6.2% ERP Launch Share Price Up 25% 4

5 Perspectives Restructured Operations ERP Seasonal Surge 5

6 Perspectives U.S. Retail Motorcycle Sales Up 6.6% 57.2% Market Share (651+cc) Outreach Sales Grew Faster Than Core 6

7 Perspectives International Retail 31 New Dealerships Latin America Up 39.2% Asia Pacific Up 14.3% 7

8 Perspectives 2013: Build on our Strategy Exceptional Products Flexible Manufacturing Personal, Customized Retail Experiences Grow outreach and international 2013 Road King 110 th Anniversary Harley-Davidson Fulfills Dreams of Personal Freedom 8

9 Q4 and FY 2012 Financial Results John Olin, Senior Vice President & CFO, H-D, Inc. Larry Hund, President & COO, HDFS

10 Harley-Davidson, Inc. Results Q Vs. Q Results Continuing Operations Revenue Income EPS $1.17 Billion $70.6 $0.31 Million 1.1% 29.3% 29.2% Earnings impacted by: Motorcycles Segment operating income increased 49.4% 1.5% decrease in revenue (7.2% decrease in motorcycle shipments) Higher gross margin percentage Favorable restructuring spending, partially offset by increased SG&A Financial Services Segment operating income up 10.9% Consolidated Motorcycles and Related Products and Financial Services Segments 10

11 Motorcycle Retail Sales - Worldwide Worldwide Harley-Davidson motorcycle retail sales were 43,405, up 3,046 units during Q4 compared to last year. Full year retail sales were 249,849, up 14,661 units during 2012 Worldwide Harley-Davidson Retail Sales Q4 12 FY 12 WW 7.5% 6.2% US 8.4% 6.6% International 6.3% 5.6% 2012 retail sales impacted by: Strength of Harley-Davidson brand Appeal of 2012 and 2013 MY products Worldwide dealer efforts and international expansion Motorcycles and Related Products Segment 11

12 Motorcycle Retail Sales - U.S. U.S. H-D Retail Sales H-D U.S. New Retail Motorcycle Sales (Units) Harley-Davidson share of US 651+CC retail market +1.5 pts Industry +4.0% H-D +6.6% H-D U.S. New Retail Motorcycle Inventory (Units) U.S. Retail Inventory Slightly improved availability during most of the quarter. As expected, inventory finished the year down 1,200 units compared to last year Motorcycles and Related Products Segment 12

13 Motorcycle Retail Sales - International International H-D Retail Sales Q4 12 FY 12 International 6.3% 5.6% - Canada -13.8% 0.7% - EMEA Region -3.3% -3.0% - Asia Pacific Region 14.8% 14.3% - Latin America Region 23.5% 39.2% Brazil dealer network momentum continued Asia Pacific emerging mkt growth; Japan up 5.9% in Q4 Europe sales remain under pressure from macro economic concerns Europe 651+CC Industry Retail Sales H-D share of Europe 651+CC retail market International Growth Progress Goal: Add Intl. dealers % 13.3% Nov. YTD 2011 Nov. YTD Industry retail sales down 7.8% (Nov. 12) H-D market share down 0.3% (Nov. 12) 93 new dealers as of end of 2012 Opened 15 dealers in 12 countries in Q4 Motorcycles and Related Products Segment 13

14 Shipment & Mix Motorcycle shipments were down 3,663 units, or 7.2%, in Q4 and up 14,508 units, or 6.2%, in 2012 compared to prior year Harley-Davidson Motorcycle Shipments Q Vs. PY FY 2012 Vs. PY Total Units Shipped 47, % 247, % Touring 46.0% +3.4 pts. 40.2% +0.7 pts. Custom 38.2% -1.1 pts. 38.9% -0.3 pts. Sportster 15.8% 100.0% -2.3 pts. 20.9% 100.0% -0.4 pts. In 2012, 35.2% of shipments were international compared to 34.7% in 2011 Motorcycles and Related Products Segment 14

15 Revenue Motorcycle Segment revenue was down $15.9 million, or 1.5% in Q4 and up $280.3 million, or 6.0%, in 2012 compared to prior year Motorcycle Segment - Revenue ($ Millions) Q % change FY 2012 % change Motorcycle $ % $3, % P&A % % General Merchandise % % Other % % Total Revenue $1, % $4, % FY 2012 average motorcycle revenue per unit decreased $44 compared to 2011 Motorcycles and Related Products Segment 15

16 Restructuring Motorcycle Segment Restructuring Summary (1/29/13) $ Millions Total Cost $221 Actual $164 Actual $68 Actual $28 Actual $13 Estimated $495 Estimated % Cash 65% 52% 93% 70% Approx. 80% Approx. 65% Annual Savings $91 Actual $172 Actual $217 Actual $280 Actual $305 Estimated $320 Estimated % SG&A 91% 64% 51% 42% Approx. 40% Approx. 35% Achieved all costs/savings targets Restructuring cost in 2012: Q1 - $11.5 million vs. $23.0 million Q Q2 - $ 6.2 million vs. $13.6 million Q Q3 - $ 9.2 million vs. $12.4 million Q Q4 - $ 1.6 million vs. $19.0 million Q Motorcycle and Related Products Segment 16

17 Gross Margin Gross margin was up $1.5 million for Q4 and up $164.2 million for 2012 Motorcycle Segment Gross Margin ($ Millions) Q4 FY 2011 Gross Margin $320.5 $1,556.0 % of revenue 31.2% 33.4% - Volume (9.8) Motorcycle Pricing Mix Currency (13.5) (17.0) - Raw Materials Manufacturing Gross Margin $322.0 $1,720.2 % of revenue 31.8% 34.8% Motorcycle and Related Products Segment 17

18 Operating Income Operating income was up $17.5 million for Q4 and up $154.3 million for 2012 Motorcycle Segment Operating Income ($ Millions) Q4 FY 2011 Operating Income $ 35.6 $561.2 Operating Margin (% of revenue) 3.5% 12.0% - Gross Margin Restructuring SG&A (1.3) (49.4) 2012 Operating Income $53.1 $715.5 Operating Margin (% of revenue) 5.3% 14.5% Motorcycle and Related Products Segment 18

19 HDFS Operating Income Financial Services Segment operating income benefited from greater net interest as a result of lower interest expense. HDFS - Operating Income ($ Millions) Q4 YTD 2011 Operating Income $56.8 $ Net interest Provision for retail motorcycle loan losses (0.5) (6.6) - Provision for wholesale loan losses 2.6 (3.0) - Operating expenses (2.0) (0.9) - All other Operating Income $63.0 $284.7 Financial Services Segment 19

20 HDFS Results 2012 HDFS Originated $2.43 billion in new/used retail motorcycle loans (+10.3% yr/yr) Q4 $411.0 million (+17.6%) 50.9% share of U.S. Harley-Davidson new retail motorcycle sales (-0.1 pt. yr/yr) Q4 52.3% (+2.8 pts.) $5.89 billion in finance receivables outstanding (-0.4% yr/yr) $5.07 billion retail $816.4 million wholesale FY U.S. retail motorcycle originations approximately 80% prime Financial Services Segment 20

21 HDFS Results 7% 6% 5% 6.15% Retail 30+ Day Delinquencies December % Managed Retail Motorcycle Loans 6.51% 5.07% 4% 3.85% 3.94% 3% % 2% 1.91% 2.30% Annual Loss Experience Managed Retail Motorcycle Loans 2.86% 2.11% 1% 1.20% 0.79% 0% Financial Services Segment 21

22 Harley-Davidson, Inc. Cash Cash/Liquidity Position At YE 2012 ($ Billions) Cash & Marketable Securities H-D, Inc. $0.86 HDFS $0.34 Total $1.20 Availability Bank Credit Facilities $1.06 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 1.2M shares for $53.4M Repayment of HDFS $400M MTN Q $185M dividend from HDFS to H-D, Inc. $175M pension contribution Consolidated Motorcycles and Related Products and Financial Services Segments 22

23 Harley-Davidson, Inc Harley-Davidson, Inc. Continuing Operations Cash & Marketable Securities end of $1.20 billion vs. $1.68 billion as of YE 2011 Operating cash flow $793.1 million vs. $885.3 million in 2011 $200.0 million voluntary cash contribution to pension plans in Q and Q Capital spending $189.0 million vs. $189.0 million in 2011 Depreciation expense $169.0 million vs. $180.4 million in 2011 Continuing operations tax rate % vs. 30.9% in 2011 Consolidated Motorcycles and Related Products and Financial Services Segments 23

24 Harley-Davidson, Inc. Results FY 2012 Vs. FY 2011 Results Continuing Operations Revenue Income EPS $5.58 Billion $623.9 $2.72 Million 5.1% 13.8% 16.7% Earnings impacted by: Motorcycles Segment operating income up 27.5% 6.0% increase in revenue (6.2% increase in motorcycle shipments) Higher gross margin percentage Lower restructuring spending, offset by increased SG&A Financial Services Segment operating income up 5.9% Higher yr/yr tax rate Consolidated Motorcycles and Related Products and Financial Services Segments 24

25 Guidance 2013 Guidance (as of January 29, 2013) Ship 259,000 to 264,000 Motorcycles (Q ,000 to 76,000) Gross Margin of 35.25% to 36.25% Capital Expenditures of $200 to $220 million Sportster Seventy-Two TM Consolidated Motorcycles and Related Products and Financial Services Segments 25

26 Harley-Davidson, Inc. We are focused on delivering results and returning value to shareholders Harley-Davidson Delivers Strong Margins/Strong Returns 26

27 Forward-Looking Statements The Company intends that certain matters discussed in this release 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 release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forwardlooking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. (cont.) 27

28 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) implement and manage enterprisewide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (v) anticipate the level of consumer confidence in the economy, (vi) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (vii) manage production capacity and production changes, (viii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (ix) provide products, services and experiences that are successful in the marketplace, (x) manage risks that arise through expanding international operations and sales, (xi) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS loan portfolio, (xii) successfully implement with its labor unions the agreements that it has executed with them that it believes will provide flexibility and cost-effectiveness to accomplish restructuring goals and long-term competitiveness, (xiii) effectively execute the Company s restructuring plans within expected costs and timing, (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, (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.) 28

29 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. 29