Harley-Davidson, Inc. (NYSE:HOG) first quarter 2017 diluted EPS decreased 22.8 percent to $1.05 compared to $1.36 in the same period of 2016. First quarter net income was $186.4 million on consolidated revenue of $1.50 billion versus net income of $250.5 million on consolidated revenue of $1.75 billion in the first quarter of last year.
“First quarter U.S. retail sales were in line with our projections and we remain confident in our full-year plan despite international retail sales being down in the first quarter,” said Matt Levatich, CEO, Harley-Davidson. “We are very pleased with our continued growth in U.S. market share and the progress our U.S. dealers made in reducing their inventory of 2016 motorcycles in the quarter.”
First quarter worldwide Harley-Davidson retail motorcycle sales were down 4.2 percent compared to the same period in 2016. In line with the company’s expectations, Harley-Davidson retail motorcycle sales in the U.S. were down 5.7 percent compared to the year-ago quarter, with the overall U.S. industry down for the same period. Harley-Davidson’s U.S. market share for the quarter was 51.3 percent in the 601cc-plus segment, up compared to the first quarter in 2016. Harley-Davidson’s international retail sales decreased 1.8 percent compared to the same quarter in 2016.
“We recently announced our plan to build the next generation of Harley-Davidson riders globally. We are energized by our focused strategy, and we believe our powerful brand and commitment to excellence will position us to drive demand for our products and grow our sport,” concluded Levatich.
The company’s long-term strategy through 2027 is focused on five objectives to:
- Build two million new Harley-Davidson riders in the U.S.;
- Grow international business to 50 percent of annual volume;
- Launch 100 new, high-impact motorcycles;
- Deliver superior return on invested capital for Harley-Davidson Motor Company (S&P 500 top 25%); and
- Grow the business without growing its environmental impact.
Harley-Davidson Retail Motorcycle Sales
First quarter worldwide retail sales of new Harley-Davidson motorcycles were down driven by lower sales in the U.S. As we expected, U.S. sales were adversely impacted by soft industry sales and the company’s decision to reduce shipments of model year 2017 motorcycles. This decision helped dealers focus on selling down their model year 2016 retail inventory. International retail sales were down behind weak sales in Asia Pacific, partially offset by strong growth in Latin America. Retail sales in EMEA and Canada were both down as they compared against strong prior year growth of 8.8 percent and 16.3 percent, respectively.
Motorcycles and Related Products Segment Results
|$ in thousands||1st Quarter|
|Motorcycle Shipments (vehicles)||70,831||83,036||-14.7%|
|Parts & Accessories||$169,025||$183,705||-8.0%|
|Gross Margin Percent||35.9%||37.4%||-1.5 pts|
|Operating Margin Percent||18.0%||21.1%||-3.1 pts|
In the first quarter, revenue from the Motorcycles and Related Products segment was down versus the first quarter of 2016 on lower shipments.
Financial Services Segment Results
|$ in thousands||1st Quarter|
The Financial Services segment operating income was down 6.6 percent year-over-year due to a higher provision for credit losses.
Income Tax Rate
For the first quarter of 2017, Harley-Davidson’s effective tax rate was flat compared to the prior year at 34.5 percent. The company continues to expect its full-year 2017 effective tax rate will be approximately 34.5 percent.
At the end of the first quarter of 2017, cash and marketable securities totaled $844.7 million, compared to $739.1 million in 2016. Harley-Davidson generated $159.9 million of cash from operating activities in the first quarter of 2017 compared to $41.1 million in the same period of 2016. The company paid a cash dividend of $0.365 per share for the first quarter of 2017, an increase of 4.3 percent compared to the first quarter of 2016. On a discretionary basis, the company repurchased 1.2 million shares of its common stock during the first quarter of 2017 for $70.9 million. There were approximately 177.1 million weighted-average diluted common shares outstanding in the first quarter of 2017, compared to 184.2 million shares in the first quarter of 2016. At the end of the first quarter, 18.0 million shares remained on a board-approved share repurchase authorization.
For 2017, Harley-Davidson continues to anticipate full-year motorcycle shipments to be flat to down modestly in comparison to 2016. In the second quarter of 2017, the company expects to ship approximately 80,000 to 85,000 motorcycles.
Harley-Davidson continues to expect full-year 2017 operating and gross margin as a percent of revenue to be approximately in line with 2016.
The company continues to expect that full-year 2017 capital expenditures will be $200 million to $220 million.