Harley-Davidson Announces Third Quarter Results

MILWAUKEE, October 23, 2018 – Harley-Davidson, Inc. (NYSE:HOG) today reported third quarter 2018 results. During the quarter, earnings per share was up year-over-year and the company made progress on the initiatives included in its More Roads to Harley-Davidson accelerated plan for growth.

Third Quarter 2018

  • More Roads accelerated plan for growth unveiled and progress made
  • EPS $0.68, up vs prior year ($0.78 excluding manufacturing optimization costs)
  • HDFS earnings up year-over-year on improved loss performance
  • Repurchased 1.9 million shares; paid $0.37 per share dividend, up 1.4 percent versus prior year quarter
  • International retail sales growth accelerated
  • Manufacturing optimization initiative on track, reduced total cost estimate
  • Confirmed full-year shipment and operating margin guidance
  • 2019 motorcycle innovation enhances product leadership in Touring and Cruiser segments
  • 115th anniversary celebrations demonstrated power of iconic global brand

Third quarter 2018 GAAP diluted EPS was $0.68, up 70.0 percent.  Excluding manufacturing optimization costs, diluted EPS was $0.78. Year ago GAAP diluted EPS was $0.40. Third quarter 2018 net income was $113.9 million on consolidated revenue of $1.32 billion versus net income of $68.2 million on consolidated revenue of $1.15 billion in 2017.

Harley-Davidson international retail motorcycle sales were up 2.6 percent in the third quarter of 2018 compared to 2017 and U.S. retail sales were down 13.3 percent. Worldwide retail sales decreased 7.8 percent.

"Third quarter progress tracked to our plans with numerous highlights including another quarter of improved international retail sales growth and increased year-over-year earnings per share.  We unveiled our More Roads to Harley-Davidson accelerated plan for growth, and made strong progress already through September,” said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. “As we manage our business with resilience in a challenging time in our history, we are leveraging our strengths for a more promising road ahead. We are investing to build the next generation of Harley-Davidson riders and we are optimizing our business to drive profitability and cash flow. Through September, cash flow was very strong and revenue was up over 3 percent despite lower motorcycle shipments.”

Strategy Acceleration

During the quarter, Harley-Davidson made progress on the initiatives included in its More Roads to Harley-Davidson accelerated plan for growth to build the next generation of riders globally. Leveraging core strengths in the business, brand and dealer network, the company is investing in opportunities that inspire increased ridership sooner and deliver sustainable growth for the future. Harley-Davidson’s More Roads plan supports the company’s strategy and 2027 objectives to: build 2 million new riders in the U.S., grow international business to 50 percent of annual volume, launch 100 new high impact motorcycles and do so profitably and sustainably.

Through 2022, the Company’s More Roads to Harley-Davidson plan will deliver:

  • New products – Keep current riders engaged and inspire a new generation of Harley-Davidson riders
  • Broader access – Meet customers where they are and how they want to engage with a multi-channel retail experience
  • Stronger dealers – Drive a performance framework to improve dealer financial strength and the Harley-Davidson customer experience

The company believes its accelerated plan will drive revenue growth and expand operating margins. The company expects to fund strategic opportunities while maintaining its current investment and return profile and capital allocation strategy.

“In the third quarter, we delivered new products and innovations with our model year 2019 motorcycles and engaged our dealers to support bringing the LiveWire™ electric motorcycle to market in 2019. Our brand and select products are now also accessible through a Harley-Davidson branded Amazon storefront in the U.S and significant support programs and dealer incentives were implemented to strengthen the dealer network – the hub of our customer experience,” said Levatich.

Building Riders

As Harley-Davidson continues to build the next generation of riders globally, the company increased its reach and impact through the third quarter and delivered a wide range of results including:

  • 260,000 visitors to 115th anniversary celebrations in Milwaukee and Prague
  • 43 million social video views and over 200 million media impressions from #FindYourFreedom intern content
  • Expanded access to Harley-Davidson through an Amazon storefront, new international dealers and new urban apparel stores in Asia


Manufacturing Optimization

To further improve its manufacturing operations and cost structure, in the first quarter of 2018 the Company commenced its 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 has reduced the cost outlook for this initiative and now expects to incur restructuring and other consolidation costs of $155 million to $185 million compared to the previous expectation of $170 million to $200 million through 2019. The company continues to expect capital investment of approximately $75 million through 2019 and ongoing annual cash savings of $65 million to $75 million after 2020.  In the third quarter of 2018, costs related to the manufacturing optimization were $21.0 million and year-to-date were $83.4 million.


Harley-Davidson Retail Motorcycle Sales



3rd  Quarter

9 months





















Asia Pacific







Latin America














International Total







Worldwide Total







The U.S. 601+cc industry was down 9.8 percent in the third quarter compared to 2017. Harley-Davidson’s third quarter U.S. market share was 50.9 percent.  Harley-Davidson’s Europe market share was up 0.8 percentage point to 10.4 percent through September.


Motorcycles and Related Products Segment Results


$ in thousands

3rd Quarter

9 months







Motorcycle Shipments (vehicles)





















   Parts & Accessories







   General Merchandise







Gross Margin



2.4 pts.



(0.5) pts.

Operating Income







Operating Margin



4.0 pts.



(2.8) pts.

Third quarter revenue from the Motorcycles and Related Products segment (Motorcycles segment) was up versus the prior year. Operating margin as a percent of revenue increased in the quarter compared to 2017 due to higher gross margin and lower SG&A as a percent of revenue.


Financial Services Segment Results


$ in thousands

3rd Quarter

9 months














Operating Income







Financial Services segment operating income increased 8.7 percent in the third quarter compared to 2017.

Income Tax Rate

Harley-Davidson's year-to-date effective tax rate was 23.1 percent compared to 33.2 percent in 2017. The decreased tax rate was primarily due to the favorable impact of the 2017 Tax Cuts and Jobs Act.


Other Results

Cash and marketable securities were $937.0 million at the end of the third quarter 2018 compared to $683.1 million in 2017. Through September, Harley-Davidson generated $1.12 billion of cash from operating activities in 2018 compared to $949.1 million in 2017. The company paid a cash dividend of $0.37 per share for the third quarter, and a cumulative total of $1.11 per share for the first nine months of 2018. On a discretionary basis, Harley-Davidson repurchased 1.9 million shares of its common stock during the third quarter for $84.5 million. During the quarter, there were approximately 166.7 million weighted-average diluted common shares outstanding.  At the end of the quarter, 21.3 million shares remained on board-approved share repurchase authorizations.

2018 Outlook

For the full-year 2018, the company continues to expect the following:

  • Motorcycle shipments to be approximately 231,000 to 236,000 motorcycles. In the fourth quarter, the company expects to ship approximately 45,800 to 50,800 motorcycles
  • Motorcycles segment operating margin as a percent of revenue to be approximately 9 to 10 percent


The company has adjusted certain expectations and now expects the following:

  • Financial Services segment operating income to be up versus its previous expectation of flat to up slightly
  • Effective tax rate of approximately 22.5 to 24.0 percent versus its previous expectation of 23.5 to 25.0 percent
  • Capital expenditures of $230 million to $250 million including approximately $50 million to support manufacturing optimization, compared to its previous expectation of $250 million to $270 million


Company Background

Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Since 1903, Harley-Davidson Motor Company has fulfilled dreams of personal freedom with custom, cruiser and touring motorcycles, riding experiences and events and a complete line of Harley-Davidson motorcycle parts, accessories, general merchandise, riding gear and apparel. Harley-Davidson Financial Services provides wholesale and retail financing, insurance, extended service and other protection plans and credit card programs to Harley-Davidson dealers and riders in the U.S., Canada and other select international markets. For more information, visit Harley-Davidson's Web site at www.harley-davidson.com.

Webcast Presentation

Harley-Davidson will discuss third quarter 2018 results on a webcast at 8:00 a.m. CT today. The webcast login and supporting slides can be accessed at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio replay will be available by approximately 10:00 a.m. CT.


Non-GAAP Measures

This press release includes financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP) and are therefore referred to as non-GAAP financial measures.  The non-GAAP measures described below are intended to be considered by users as supplemental information to the equivalent GAAP measures, to aid investors in better understanding the Company’s financial results. The Company believes that these non-GAAP measures provide useful perspective on underlying business results and trends, and a means to assess period-over-period results. These non-GAAP measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as similarly titled measures used by other companies due to possible differences in method and in items or events being adjusted.

The non-GAAP measures included in this press release are diluted EPS excluding manufacturing optimization costs and net income excluding manufacturing optimization costs. Manufacturing optimization costs include restructuring expenses and costs associated with temporary inefficiencies incurred in connection with the manufacturing optimization initiative. A reconciliation of these non-GAAP measures to the comparable GAAP measure is included later in this press release.

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 1995. 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, strategies, 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, unfavorably or favorably, 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 forward-looking 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.

The company's ability to meet the targets and expectations noted above depends upon, among other factors, the company's ability to (i) execute its business plans and strategies, including the elements of the More Roads to Harley-Davidson strategy for growth that the company disclosed on July 30, 2018, and strengthen its existing business while enabling growth, (ii) manage the impact that new or adjusted tariffs may have on the cost of raw materials and components and our ability to sell product internationally, (iii) execute its strategy of growing ridership, globally, (iv) effectively execute the company’s manufacturing optimization initiative within expected costs and timing and successfully carry out its global manufacturing and assembly operations, (v) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests, (vi) negotiate and successfully implement a strategic alliance relationship with a local partner in Asia, (vii) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the company to generate desired sales levels and that provide the desired financial returns, (viii) perform in a manner that enables the company to benefit from market opportunities while competing against existing and new competitors, (ix) realize expectations concerning market demand for electric models, which may depend in part on the building of necessary infrastructure, (x) prevent, detect, and remediate any issues with its motorcycles or any issues associated manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing, (xi) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xii) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (xiii) reduce other costs to offset costs of the More Roads to Harley-Davidson plan and redirect capital without adversely affecting its existing business, (xiv) balance production volumes for its new motorcycles with consumer demand, (xv) manage risks that arise through expanding international manufacturing, operations and sales, (xvi) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (xvii) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness, (xviii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xix) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xx) retain and attract talented employees, (xxi) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (xxii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xxiii) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the company’s business, (xxiv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xxv) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xxvi) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xxvii) manage its exposure to product liability claims and commercial or contractual disputes, and (xxviii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations.

The Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Further, actual foreign currency exchange rates may vary from underlying assumptions. Other factors are described in risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.

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 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. In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actions that the Company has taken and could take that impact motorcycle values. Refer to “Risk Factors” under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.