April 6, 2017
This year, we are embarking on a journey to build the next generation of Harley-Davidson riders globally. This is a bold and important goal, but as stewards of the most powerful motorcycle brand in the world, we are called to grow our sport by engaging and inspiring new riders just as our founders did 114 years ago.
We are excited about the strategies we have in place to accomplish our goal. We live by the mantra “Plan our work, and work our plan.” As a team – company and dealers alike – we’re already working our plan, and since so many of us are in this business because we love riding, it’s not hard to bring our own personal passion to the effort of inspiring the next generation of riders.
Over the past few years I’ve had the opportunity to personally guide new riders into our sport; two of which were my teenage sons. On their own initiative, my boys signed up for Riding Academy. They acquired important skills and perspectives from the instructors and “graduated” ready to ride on the open road. What transpired next, however, was a surprising and gratifying discovery for me: They wanted my guidance and help, and together we began the journey of turning their new skills into shared experiences. They began to discover a new form of their own personal freedom on Harley-Davidson motorcycles just as I had years ago, and we were doing it together.
Riding is uniquely solitary and communal.
Personal freedom can be even better when it’s shared with other like-minded souls. This is just one example of why we are relentless in our commitment to help our riders pursue their dreams of personal freedom – however they define it.
The passion of our freedom-seeking customers is what has made our brand and company successful for so long.
2017 Road King® Special delivers all-new style and attitude powered by the Milwaukee-Eight™ engine
We have more than 1,400 independently owned Harley-Davidson dealerships in 97 countries. They are on the front lines, and I’ve seen our dealers’ commitment first-hand. Every day they deliver an unrivaled experience for our amazing customers, and they are always looking to raise the bar, challenging themselves to do better than they did the day before.
Our employees are equally passionate. Many of them are riders, too. The lift we all get from working at this iconic company stimulates our best thinking. We are so fortunate to have the best people in the industry. Our employees exhibit the focus, alignment and commitment that is essential to taking this company into the future. They are steadfast and determined to continue this company’s legacy of building motorcycles and a global community of riders united in personal freedom.
2017 Street Rod™
MATT LEVATICH, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HARLEY-DAVIDSON, INC.
We set out to drive demand in 2016 by leveraging the capabilities we’ve built since the recession to solidify our leadership position and attract new riders around the world to our great sport and brand.
While overall U.S. industry performance was soft and macro-economic trends proved difficult to predict, I’m pleased with how we successfully drove demand and adapted throughout the year. When compared to 2015, for 2016:
While our 2016 results did not meet our expectations, we worked to continue to deliver strong value to our shareholders. We repurchased 9.7 million shares for $459.1 million and increased our dividend by 13 percent, resulting in a dividend payout ratio of 36.6 percent. Guided by our focused strategies, we will continue to invest wisely in our business and return excess cash to you, our shareholders.
In our pivot to drive demand, there were many important wins along the way that give us confidence in our focus going forward. Here are just a few highlights from the past year:
We believe our ability to drive demand and deepen foundational strengths set us up for long-term success. Now we can turn the page and focus on the next chapter of our company’s great history. Now more than ever, our business focus goes beyond our commitment to building unmatched, unmistakable motorcycles, accessories and apparel – we are committed to building riders.
Designed for riders craving performance and power, while being quick and nimble when navigating city streets, the new Street Rod™ turns heads with its more aggressive, dark custom style.
HARLEY-DAVIDSON MOTORCYCLES SHIPMENTS
DILUTED EARNINGS PER SHARE
Our 10-year strategy is all about building the next generation of Harley-Davidson riders worldwide and it has specific near- and long-term actions to: build riders; increase access to our products; enhance the impact of our products; grow market share; and generate profits to invest back into the business and return to you, our shareholders. Our plans leverage our growing capability to drive demand for our sport and brand.
We have a clear path with long-term objectives and focused strategies to cement our future by building the next generation of Harley-Davidson riders. By 2027, we plan to:
To achieve these objectives, in the U.S. market we will focus on growing ridership. In international markets, we will focus on growing reach and impact. And globally, we will focus on growing share and profit.
As a leader in the industry, we have an obligation to secure the long-term vitality of our sport and we know there are specific customer opportunities to do so. Based on our analysis of the motorcycle registration data from IHS Markit, in 2015, 2.8 percent of the U.S. adult population owned at least one on-highway motorcycle and 1.2 percent of the U.S. adult population owned at least one Harley-Davidson motorcycle. We also know through our proprietary company research there are nearly 20 million competitive and non-owners in the U.S. who have interest in owning a Harley-Davidson motorcycle.
This is not a new generation of riders. It’s the next generation of riders. We intend to build riders in new and established markets around the globe. We want to attract experienced and competitive riders, intenders and dreamers. We want to attract women, millennials, current customers and generations yet to come. By building these riders, we believe we will grow our sport for the long-term.
We plan to launch 100 new, high-impact motorcycles over the next 10 years. 100 is a big number, but the key here is “high impact.” We aim to reinvent the product segments where we have established strength and make our presence known in adjacent segments. Our new products will be designed to bridge the desires of riders of different ages, genders and cultures, offering unrivaled customization opportunities – one of our hallmarks.
We also plan to grow our international business to 50 percent of our annual volume. The strength of our brand in international markets rivals the incredible strength within the U.S. We believe we have a strong opportunity for growth across developed markets in Europe and Asia, as well as developing markets in these regions. By deepening the reach and relevance of our products and experiences, and expanding our international dealer network, we will continue to tap into this growth opportunity. We foresee adding 150 to 200 international dealer points between 2016 and 2020. With 40 new dealers added in 2016, we are well on our way.
We intend to deliver this next chapter in our legacy with superior financial returns. Through focused strategies and discipline in our investments and work, we expect to continue to deliver return on invested capital for Harley-Davidson Motor Company in the top 25 percent of the S&P.
Finally, we aim to grow our business without growing our environmental impact. We will take on a broader sense of responsibility to our environment and the societies in which we ride, live and work. We expect the focus we place on reducing the environmental impact of our products and our operations will lead to new levels of innovation that will benefit current and future Harley-Davidson customers, alike.
This long-term strategy is the next chapter in our company’s incredible history. We have exceptional dealers, employees and suppliers who are committed to delivering dreams of personal freedom for all those who desire to join us, and who are geared up to inspire even more people to do so!
We are confident our focused strategy, powerful brand and commitment to excellence will position us well for the challenges of today’s dynamic marketplace.
We have set high expectations for ourselves over the next 10 years. Results will not happen overnight, but we are in this for the long-haul. Thank you for riding with us.
President and Chief Executive Officer
NEW RIDERS IN THE U.S.
NEW HIGH-IMPACT H-D MOTORCYCLES
OF ANNUAL VOLUME FROM INTERNATIONAL BUSINESS
SUPERIOR RETURN ON INVESTED CAPITAL FOR HDMC
FROM GROWING OUR BUSINESS