Slide 1: 2018 Fourth Quarter Update
HARLEY-DAVIDSON, INC. 2018 FOURTH QUARTER UPDATE January 29, 2019 | Conference Call Slide Presentation JANUARY 29, 2019
Slide 2: Conference Call Agenda
2018 FOURTH QUARTER UPDATE THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL CONFERENCE CALL AGENDA ▪ Introduction Shannon Burns, Director, Investor Relations ▪ Business Perspectives Matt Levatich, President and CEO ▪ Financial Results John Olin, Senior Vice President and CFO ▪ Q&A All This prese
Slide 3: Strategy
STRATEGY January 29, 2019 | Conference Call Slide Presentation 3
Slide 4: Business Perspectives
BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC. January 29, 2019 | Conference Call Slide Presentation
Slide 5: 2018 Snapshot
2018 SNAPSHOT Decisive actions ▪ – ▪ – – Highlights VS. Prior year ▪ ▪ ▪ ▪ ▪ ▪ Invested in our future and delivered strong cash to shareholders January 29, 2019 | Conference Call Slide Presentation 5
Slide 6: More Roads Plan – Q4 Progress
MORE ROADS PLAN – Q4 PROGRESS • • • • • • • • • • • • • • • • • • • • January 29, 2019 | Conference Call Slide Presentation 6
Slide 7: More Roads Plan – 2018 Milestones
MORE ROADS PLAN – 2018 MILESTONES January 29, 2019 | Conference Call Slide Presentation 7
Slide 8: 2018 Ridership: We Build Riders
2018 RIDERSHIP We Build Riders • – • – – – • – • – – (1) IHS Markit Motorcycles in Operation (MIO) data for On-Highway and Dual purpose bikes in the U.S. as of Jan 1, 2019 compared to previous years of MIO back to 2002. January 29, 2019 | Conference Call Slide Presentation 8
Slide 9: Financial Results
FINANCIAL RESULTS JOHN OLIN, SENIOR VICE PRESIDENT & CFO, HARLEY-DAVIDSON, INC. January 29, 2019 | Conference Call Slide Presentation
Slide 10: Q4 2018 vs. Q4 2017 Results
Q4 2018 VS. Q4 2017 RESULTS REVENUE NET INCOME EPS $1.15 $0.5 $0.00 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments (6.8)% $(7.8) million $(0.05) Earnings impacted by: ▪ Motorcycles Segment operating income* down $95.1 million ̶ Revenue down 8.7% on 7.
Slide 11: Worldwide Retail Sales
WORLDWIDE RETAIL SALES Q4 '18 FY '18 Motorcycles vs. PY Motorcycles vs. PY Worldwide 39,311 (6.7)% 228,051 (6.1)% U.S. 20,849 (10.1)% 132,868 (10.2)% International 18,462 (2.6)% 95,183 0.4% Source: Dealer reported data ▪ Q4 worldwide retail sales down 6.7% ▪ U.S. retail sales down – Ongoing industry
Slide 12: U.S. Retail Sales and Inventory
U.S. RETAIL SALES H-D U.S. NEW RETAIL MOTORCYCLE SALES H-D U.S. NEW 601+CC RETAIL MARKET SHARE* (8.5)% (2.6) (0.5) (1.3) (1.0) (10.2)% pts. pts. pts. pts. SHARE RETAIL SALES (11.1)% (10.1)% ▪ 2018 market share down vs. prior year due to relative stronger performance of non-H-D segments. H-D FY ▪ Q4
Slide 13: International Retail Sales
INTERNATIONAL RETAIL SALES H-D INTERNATIONAL NEW RETAIL H-D EUROPE NEW 601+CC MARKET SHARE* MOTORCYCLE SALES Vs. prior year Q4 FY SHARE International (2.6)% 0.4% - EMEA (1.4)% 3.7% Lapping initial MY2018 Softail success; weak consumer confidence in France ▪ Market share gain behind strong Softail sa
Slide 14: Shipments & Mix
SHIPMENTS & MIX SHIPMENTS MOTORCYCLES SEGMENT Q4 '18 vs. PY FY '18 vs. PY Total 43,489 (7.9)% 228,665 (5.3)% Touring 41.0% - pts. 44.6% 3.3 pts. Cruiser* 38.1% (3.5) pts. 34.3% (1.9) pts. Street / 20.9% 3.5 pts. 21.1% (1.4) pts. Sportster® 100.0% 100.0% * Includes Softail and CVO, PY includes Softai
Slide 15: Motorcycles Segment Revenue
REVENUE REVENUE* MOTORCYCLES SEGMENT ($ millions) Q4 '18 vs. PY FY '18 vs. PY Motorcycle $738.2 (6.6)% $3,883.0 3.1% P&A 142.2 (15.0) 754.7 (5.7) General Merchandise 58.4 (18.0) 242.0 (7.9) Licensing 9.2 (7.2) 38.7 (1.3) Other 7.6 (12.6) 50.2 7.8 Total Revenue $955.6 (8.7)% $4,968.6 1.1% Motorcycles
Slide 16: Gross Margin
GROSS MARGIN GROSS MARGIN MOTORCYCLES SEGMENT ($ millions) Q4 FY 2017 Gross Margin $320.6 $1,642.7 % of revenue 30.6% 33.4% - Volume (45.5) (122.3) - Pricing net of cost 12.0 53.5 - Mix (3.7) 93.3 - Currency 4.0 12.3 - Raw materials (4.5) (17.7) - Manufacturing /other* (19.3) (44.9) 2018 Gross Margi
Slide 17: Operating Margin
OPERATING MARGIN OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Q4 FY 2017 Operating Income $35.5 $606.8 % of revenue 3.4% 12.3% - Gross Margin (56.9) (25.8) - SG&A (18.7) (65.2) - Restructuring (19.4) (93.4) 2018 Operating Income ($59.5) $422.4 % of revenue (6.2)% 8.5% Motorcycles and Related Pr
Slide 18: Financial Services Operating Income
FINANCIAL SERVICES OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Q4 FY 2017 Operating Income $63.7 $275.3 - Net interest income 4.4 (0.1) - Provision for retail motorcycle loan losses (0.3) 27.1 - Provision for wholesale loan losses (1.2) (1.9) - Operating expenses (5.9) (12.8) - All othe
Slide 19: HDFS Operations and Liquidity
HDFS 2018 FINANCIAL SERVICES SEGMENT OPERATIONS LIQUIDITY (Millions) Originations Year End New and used H-D retail motorcycle loans Cash & equivalents $659.2 Q4 $535.0M + 8.0% vs. Q4 ’17 FY $3.14B + 4.3% vs. FY ’17 Availability FY approximately 80%-85% prime Bank Credit Facilities $409.2 Market shar
Slide 20: HDFS Retail Motorcycle Loan Performance
HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 6% 5.07% 5% 4.25% 4.21% 4.12% 3.85% 3.94% 4% 3.71% 3.78% 3.61% 3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 3% 2.11% 1.83% 1.90% 2% 1.76% 1.42% 1.20% 1.09% 1.22% Financial Services Segment 1% 0.79% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 January 29,
Slide 21: Harley-Davidson, Inc. 2018 vs. PY
HARLEY-DAVIDSON, INC. 2018 HARLEY-DAVIDSON, INC. VS. PY ▪ Cash & marketable securities - $1.21 billion vs. $687.5 million (Q4 quarter end) ▪ Operating cash flow - $1.21 billion vs. $1.01 billion (FY) Consolidated – Motorcycles and Related Products and Financial Services Segments ▪ Capital spending -
Slide 22: FY 2018 vs. FY 2017 Results
FY 2018 VS. FY 2017 RESULTS REVENUE NET INCOME EPS $5.72 $531.5 $3.19 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments 1.2% 1.9% 5.6% Earnings impacted by: ▪ Motorcycles Segment operating income* down $184.4 million ̶ Revenue up 1.1% on 5.3% lower shipm
Slide 23: Cash Generation/Returns
CASH GENERATION/RETURNS Harley-Davidson leads in cash generation and consistently returned cash to shareholders (2015-2017) 3-Yr. Avg. Free Cash Flow Conversion(1)(2) 3-Yr. Avg. Free Cash Flow Margin(1)(2) 3-Yr. Avg. ROIC and ROE(1)(3) 3-Yr. Avg. Cumulative Capital Return / Market Capitalization(1)(
Slide 24: Shareholder Returns
SHAREHOLDER RETURNS Harley-Davidson has consistently returned cash to shareholders Dividends Per Share Discretionary Share Repurchases Year- over- year * CAGR 18% Multi- Year *Funded by $750 million HDI debt issuance January 29, 2019 | Conference Call Slide Presentation 24
Slide 25: Manufacturing Optimization
MANUFACTURING OPTIMIZATION Manufacturing Optimization Summary as of January 29, 2019 $ Millions 2018 2019 2020 Actual Estimate Estimate Total Temporary Inefficiencies $12.9 $10-$15 - $23-$28 Restructuring $89.5 $40-$45 - $129-$134 Total Costs $102.4 $50-$60 - $152-$162 % cash ~70% ~70% NA ~70% 2018
Slide 26: Guidance: 2019 Expectations
GUIDANCE 2019 EXPECTATIONS as of January 29, 2019 217,000 to 222,000 Motorcycle shipments (Q1: 53,000 to 58,000) Gross margin % Down yr./yr. Motorcycles and Related Products segment Lower yr./yr. SG&A (Lower as a percent of revenue) 8.0% to 9.0% Operating margin % (~flat versus 2018 excluding restru
Slide 27: Building the Next Generation of Riders Globally
HARLEY-DAVIDSON, INC. BUILDING THE NEXT GENERATION OF HARLEY-DAVIDSON RIDERS GLOBALLY Focused investments, strong returns to grow the company for the long-term January 29, 2019 | Conference Call Slide Presentation 27
Slide 28: Non-GAAP Measures
NON-GAAP MEASURES This presentation 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 listed below are intended to be considered by use
Slide 29: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to net income and diluted earnings per share that exclude restructuring plan costs and the impact of tariffs. Reconciliations of non-GAAP amounts to reported GAAP amounts are included below. Three Twelve
Slide 30: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to Motorcycles segment operating margin that exclude restructuring plan costs and the impact of tariffs. Reconciliations of non-GAAP amounts to reported GAAP amounts are included below. Twelve months In t
Slide 31: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains performance measures calculated using non-GAAP amounts as inputs. These performance measures include: "3-yr. Avg. Free Cash Flow Conversion", "3-yr. Avg. Free Cash Flow Margin“, “3-Yr. Avg. ROIC and ROE”. Reconciliations of non-GA
Slide 32: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS The company intends that certain matters discussed in this presentation 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 general