Harley-Davidson, Inc Fourth Quarter Update January 22, VRSCF V-Rod Muscle

Transcription

1 Harley-Davidson, Inc Fourth Quarter Update January 22, VRSCF V-Rod Muscle

2 Agenda 2009 Fourth 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. 1

3 Opening Remarks Keith Wandell, President & CEO

4 Harley-Davidson, Inc Results Reflect Effects of economic climate Company s actions 3

5 Harley-Davidson, Inc. Key Priorities 1. Execute on strategy for current environment 2. Develop comprehensive strategy for growth and profitability 4

6 Harley-Davidson, Inc. Actions Reduced shipments to align inventory Restructuring Fund HDFS 5

7 Harley-Davidson, Inc. Delivering results through focus: Four Strategic Pillars Growth Continuous Improvement Leadership Development Sustainability 6

8 Harley-Davidson, Inc Outlook Challenging year Continue to execute on strategic plan Products including Forty-Eight International Forty-Eight Dark Custom 7

9 Harley-Davidson, Inc. Summary Results reflect economic climate and company actions 2010 will be challenging Exceptional brand strength Focused strategy 8

10 Financial Results John Olin, CFO

11 Harley-Davidson, Inc. Results Q Results Continuing Operations Revenue Loss EPS $764.5 Million $(147.2) $(0.63) Million $236 million from 53% planned reduction in shipments $122 million of total restructuring charges $45 million of Buell exit costs impacting gross margin 10

12 Retail Sales Q4 Worldwide heavyweight motorcycle retail sales down 2009 Worldwide Harley-Davidson Retail Sales WW H-D retail motorcycle sales Q4, FY (21.4)% (22.7)% US (27.9)% (25.8)% Intl (10.3)% (15.4)% Canada (47.2)% (30.9)% Europe Region 0.6% (11.2)% Asia Pacific Region (8.5)% (9.0)% Latin America Region (19.8)% (27.2)% 2009 U.S. 651+CC Industry Q4 down 20.9% 2009 FY down 36.7% 0.00% -5.00% % % % % % % 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -12.0% -21.3% % -30.1% Q1 Q2 Q3 Q4 U.S. 651+CC Motorcycle Market Share 55.0% 50.2% 45.5% 53.4% Q Q FY 2008 FY

13 U.S. Harley-Davidson Dealer Health Year End U.S. Dealer Inventory Year-end U.S. dealer inventory down Year-end dealer inventories down approximately 22,000 units in 2006, 2007 and year end dealer inventory down approximately 18,000 units from 2008 Overall dealer network remains profitable Dealers actively managing their expense structures Dealers feeling pressure of tough economy U.S. Dealer Network Activity 2009 Expect dealer network will continue to contract 28 Dealer points closed in 2009 Dealerships SRL Total Q3 YTD Q dealer points expected to close in next three months Closed Operational Dealerships SRLs Total

14 Shipment & Mix Harley-Davidson motorcycle shipments were 35,938, down 40,643 units, or 53.1% during the fourth quarter Harley-Davidson Motorcycle Shipments Total Units Shipped , ,023 Touring Custom Sportster 33.6% 46.4% 20.0% 100.0% 37.7% 41.1% 21.2% 100.0% In % of shipments were international compared to 32% in

15 Revenue Harley-Davidson revenue was down $513.5 million, or 40.2% in Q4 versus prior year Harley-Davidson Revenue ($ Millions) Q4 09 % Change Full Year 09 % Change H-D Motorcycle $552.0 (45.6)% $3,174.8 (25.2)% Buell Motorcycle (4.0) NM 46.5 (62.2)% P&A (4.9)% (10.7)% General Merchandise 66.8 (3.2)% (10.1)% Other 5.1 (38.1)% 16.3 (57.2)% Total Revenue (continuing) $764.5 (40.2)% $4,287.1 (23.1)% Full-year 2009 average revenue per unit up $249 compared to

16 Restructuring Summary Restructuring Activities* Reduce administrative costs Eliminate approximately 820 non-production positions through 2011 Reduce SG&A spending Eliminate excess capacity Consolidate operations (at Milwaukee powertrain and York operations) Reduce hourly workforce by approx. 2,700-2,900 ( ) Consolidate vehicle test facilities Exit non-core operations Source non-core York manufacturing operations through suppliers Consolidate Parts and Accessories and General Merchandise distribution through a third party Discontinue domestic transportation fleet operation Discontinue Buell product line Divest MV Agusta * Includes 12/3/09 York Operations Restructuring announcement 15

17 Exit Non-Core Operations Exit Buell Product Line Wind-down of Buell on-track Production operation shut down Sell-through of inventory will continue through 2010 Service dealers appointed 2009 financial performance reflects $115.6 million of estimated $125.0 million in exit costs $70.8 million restructuring and impairment charges $44.8 million gross margin impact Expect approximately $10 million of wind down costs in

18 Restructuring Summary as of 1/22/10 Motorcycle Segment Restructuring Summary $ Millions Cost Total $221 Actual $175-$195 Estimated $30-$40 Estimated $5-$10 Estimated $430-$460 Estimated % Cash 65% Approx. 70% Approx. 10% Approx. 100% Approx. 70% Annual Annual Savings $91 Actual $135-$155 Estimated $220-$240 Estimated $230-$250 Estimated $240-$260 Estimated % SG&A 91% 70% to 80% 45% to 55% 40% to 50% 40% to 50% 17

19 Gross Margin Gross margin was adversely impacted by reduced shipment volume and the resulting allocation of fixed costs over fewer units, and the impact of Buell exit costs Motorcycle Segment Gross Margin ($ Millions) Q4 Full year 2008 Gross Margin $408.3 $1,931.1 % of revenue 31.9% 34.6% Volume (236.1) (502.9) Buell Exit Costs (44.8) (44.8) Currency 2.2 (27.3) Mix Price -- (1.7) Raw Materials Manufacturing (15.0) (46.6) - Productivity - Product Features & Benefits - Lost Absorption 2009 Gross Margin $154.8 $1,386.2 % of revenue 20.3% 32.3% 18

20 Operating Margin Operating margin was adversely impacted by lower gross margin and restructuring expenses Motorcycle Segment Operating Margin ($ Millions) Q4 Full Year 2008 Operating Margin $162.2 $976.4 % of revenue 12.7% 17.5% Gross margin impact (253.5) (544.9) Restructuring and asset impairments (120.2) (208.5) Operating expense (SG&A) (10.3) Operating Margin $(221.8) $314.1 % of revenue (29.0)% 7.3% 19

21 HDFS Operating Income HDFS - Operating Income ($ Millions) Q4 Full year 2008 Operating Income (Loss) ($24.9) $82.8 Held for sale receivables re-classification - (72.7) Goodwill impairment - (28.4) Net interest 1.5 (2.8) Securitizations 18.1 (27.1) Provision for retail motorcycle loan losses (19.9) (51.8) Provision for wholesale loan losses 7.0 (2.1) All other 11.1 (15.9) 2009 Operating Loss $(7.1) $(118.0) 20

22 HDFS Results 2009 HDFS Originated $2.04 billion in retail motorcycle loans 48.8% Market Share of U.S. Harley-Davidson retail sales $4.82 billion in finance receivables Held for Investment (12/31/09) $3.96 billion retail $863 million wholesale New originations 80%-85% prime 21

23 HDFS Results 8% Retail 30+ Day Delinquencies Managed Retail Motorcycle Loans 7% 6.15% 6.29% 6.51% 6% 5% 5.18% 4% 3% % Annualized Loss Experience Managed Retail Motorcycle Loans 3% 2.86% 2.30% 2% 1.92% 1.41% 1%

24 Harley-Davidson, Inc. Funding 2009 Funding Activities Q1 H-D, Inc. Issued $600 million senior unsecured 5-yr notes Reduced Q1 H-D, Inc. dividend rate to $0.10 per share from $0.33 (Maintained through 2009) HDFS Exited non-core originations (i.e. aircraft) Q2/Q3 HDFS Increased $500 million conduit to $1.2 billion HDFS Renewed $625 million of $950 million, 364-day credit facility HDFS Issued $500 million and $700 million term assetbacked securitizations Q4 HDFS Issued $700 million and $560 million term asset-backed securitizations HDFS Issued $500 million unsecured 5-yr notes 23

25 Harley-Davidson, Inc. Cash Cash/Liquidity Position As of December 31, 2009 (billions) Cash & Marketable Securities H-D, Inc. $1.18 HDFS $0.49 Total $1.67 Availability Bank Credit Facilities $0.80 Asset-Backed Conduit $1.20 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 Less reliance on ABS market Extension of debt maturities (MTNs) Anticipated 2010 funding needs have been met through 2009 funding activities 24

26 Harley-Davidson, Inc. Results 2009 Results Continuing Operations Revenue Income EPS $4.29 Billion $70.6 $0.30 Million $224 million restructuring charges (includes $3 million HDFS restructuring) $73 million loss provision for one-time reclass of HDFS receivables $45 million Buell exit costs impacting gross margin $29 million goodwill write-off at HDFS 25

27 Harley-Davidson, Inc Harley-Davidson, Inc. (Continuing Operations) Cash & Marketable Securities 12/31/09 - $1.67 billion vs. $568.9 million in 2008 Operating cash flow $609.0 million provided vs. $608.0 million used in 2008 Capital Spending 2009 $116.7 million vs. $229.0 million in 2008 Depreciation Expense 2009 $246.3 million vs. $220.8 million in 2008 Continuing Operations Tax Rate % vs. 35.8% in Expected to be approximately 36.5% for continuing operations in

28 Discontinued Operations Discontinued Operations MV Agusta Moving forward with sale of business Q4 fair value adjustment of $52.5 million net of taxes Q4 loss from discontinued operations of $71.5 million, or $0.31 per share Full year loss from discontinued operations of $125.8 million, or $0.54 per share 27

29 Financial Reporting Upcoming Changes in Financial Reporting FAS 166/167 Adoption Details $1.89 billion of receivables/debt back on balance sheet Establish allowance for credit loss provision on receivables Eliminate retained securitization interests Expect small adjustment to retained earnings Expect to remain in compliance with all debt covenants upon adoption HDMC/HDFS separate financials To better serve our stakeholders 10-K and 10-Qs will present separate financial statements for the Motorcycle and Financial Services businesses as a footnote 28

30 2010 Guidance 2010 Guidance (as of Jan. 22, 2010) Ship 201,000 to 212,000 H-D Motorcycles in 2010 (Q1, ,000 57,000) Gross Margins between 32.0% and 33.5% Capital Expenditures between $235 to $255 million Includes $95 - $110 million capital expenditures expected for restructuring activities 29

31 Harley-Davidson, Inc. Very challenging external environment Strong Company Strong Brand Prudently managing the Company Managing supply in line with demand Aggressive restructuring Continue to focus and invest in our future Forty-Eight Dark Custom 30

32 Risk Factors 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 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. 31

33 Risk Factors The Company s ability to meet the targets and expectations noted depends upon, among other factors, the Company s ability to: (i) execute its strategy and successfully exit certain product lines and divest certain company assets, (ii) effectively execute the Company s restructuring plans within expected costs and timing, (iii) successfully achieve with our labor unions flexible and cost-effective agreements to accomplish restructuring goals and long-term competitiveness, (iv) manage the risks that our independent dealers may have difficulty obtaining capital, and adjusting to the recession and slowdown in consumer demand, (v) manage supply chain issues, (vi) anticipate the level of consumer confidence in the economy, (vii) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (viii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS loan portfolio, (ix) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (x) manage production capacity and production changes, 32

34 Risk Factors The Company s ability to meet the targets and expectations noted depends upon, among other factors, the Company's ability to: (cont.) (xi) provide products, services and experiences that are successful in the marketplace, (xii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiii) sell all of its motorcycles and related products and services to its independent dealers, (xiv) continue to develop the capabilities of its distributor and dealer network, (xv) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xvi) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xvii) adjust to healthcare inflation, pension reform and tax changes, (xviii) retain and attract talented employees, (xix) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation, and (xx) implement and manage enterprise-wide information technology solutions and secure data contained in those systems. 33

35 Risk Factors (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. Many of these risk factors are impacted by the current turbulent capital, credit and retail markets and our ability to adjust to the recession. 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. # # # 34