Harley-Davidson Announces Second Quarter 2019 Results

MILWAUKEE, July 23, 2019 /PRNewswire/ -- Harley-Davidson, Inc. (NYSE:HOG) today reported second quarter 2019 results. The company made progress towards its plan to build more riders through its More Roads to Harley-Davidson accelerated plan for growth and expects to substantially mitigate incremental EU and China tariffs early in the second quarter of 2020.

Second Quarter 2019 Highlights

    --  Delivered GAAP diluted EPS of $1.23 per share
    --  Repurchased $42.9 million of shares; paid dividends of $0.375 per share
    --  Obtained regulatory approvals required to mitigate the majority of
        incremental EU tariffs
    --  Completed key milestones in its manufacturing optimization initiative
    --  Reduced U.S. retail motorcycle inventory, believe positioned well for
        cutover to model year 2020
    --  Drove year-over-year retail sales growth of 77 percent in its ASEAN
        markets through Thailand manufacturing strategy
    --  Confirmed highest ever Harley-Davidson U.S. ridership; over 3 million
        riders in 2018
    --  Announced a broader access initiative for Asia with a small displacement
        motorcycle planned for 2020

Second quarter 2019 GAAP diluted EPS was $1.23. Year-ago GAAP diluted EPS was $1.45. Excluding restructuring plan costs and the impact of incremental tariffs, second quarter 2019 diluted EPS was $1.46 compared to $1.52 in the second quarter of 2018. Second quarter 2019 net income was $195.6 million on consolidated revenue of $1.63 billion versus net income of $242.3 million on consolidated revenue of $1.71 billion in 2018.

Harley-Davidson worldwide retail sales decreased 8.4 percent in the second quarter. U.S. retail sales were down 8.0 percent in the quarter driven largely by continued weak industry sales. Harley-Davidson international retail sales were down 8.9 percent driven by weakness in developed international markets on the lapping of strong initial sales of new models introduced last year.

"In the second quarter we achieved significant advancements under our More Roads plan and we continued to lay a solid foundation for future growth," said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. "The decisions and investments we're making, within a highly dynamic and competitive global marketplace, demonstrate our intense focus to build the next generation of riders and maximize shareholder value."

Strategy to Build the Next Generation of Riders

Building riders
Harley-Davidson continues to inspire diverse, new riders around the globe. Harley-Davidson ridership in the U.S. has been up each year since 2001 and was at an all-time high of over 3 million riders in 2018. The company increased its reach and impact in the second quarter and delivered the following:

    --  More, younger riders - U.S. rider training participation was up, with
        the greatest increase among 18-34 year-olds
    --  Of total U.S. new retail sales in Q2, the mix of 18-34 year-olds was up
        2.7 percentage points
    --  Emerging market year-over-year retail sales growth of 7.6 percent was
        aided by more accessible pricing from local manufacturing in Thailand

More Roads to Harley-Davidson accelerated plan for growth
Harley-Davidson's strategic objectives through 2027 are 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.

The More Roads to Harley-Davidson accelerated plan for growth drives the company's strategy to deliver sustainable growth and build the next generation of riders by delivering exciting products in existing and new spaces, broader access to Harley-Davidson and an optimized customer experience through an even stronger dealer network. The company plans to maintain its investment and return profile and capital allocation strategy, while it funds strategic opportunities expected to drive revenue growth and expand operating margin through 2022.

During the second quarter, Harley-Davidson made further progress on its More Roads plan, most notably announcing a collaboration that joins Harley-Davidson's global motorcycle leadership with the capabilities of Qianjiang Motorcycle Company Limited to launch a smaller, more accessible Harley-Davidson motorcycle planned for China in 2020 with additional Asian markets to follow. This move is intended to expand access to the Harley-Davidson brand to more riders in Asia. During the second quarter, the company's efforts to increase access in emerging Asian markets, including through its Thailand manufacturing strategy, drove sales increases of 77 percent in its ASEAN (Association of Southeast Asian Nations) markets.

Harley-Davidson also strengthened its leadership in the electrification of motorcycling. Company and dealer preparations continued for the targeted September retail delivery of LiveWire(TM), the company's first electric motorcycle. Harley-Davidson's commitment includes helping to enable a strong global charging network. Dealers are installing public DC fast charging stations and the company is working with global partners to support charging infrastructure development.

"There are more riders on Harleys in the U.S. than at any point in our history, and the number of young riders continues to grow. The strength of the Harley-Davidson brand, and bare knuckle grit of this company and our global dealers, will continue to be leveraged and sharpened to make riding matter to more people," said Levatich.

Manufacturing Optimization
Key milestones of the company's multi-year manufacturing optimization initiative, designed to further improve its manufacturing operations and cost structure, were completed during the quarter. Starting in the first quarter of 2018 the company began work to close its wheel manufacturing facility in Australia and consolidate its motorcycle assembly plant in Kansas City, Mo. into its plant in York, Pa. Full year savings of $25 million to $30 million for 2019 and ongoing annual cash savings of $65 million to $75 million after 2020 are still expected. In the second quarter 2019, costs related to the manufacturing optimization were $14.4 million. For the full year, the company now expects to incur $40 million to $50 million of operating expense for this initiative, $10 million less than previously expected.



        
              Harley-Davidson Retail Motorcycle Sales


                               Vehicles                         2nd Quarter              
          
              6 months

                                    ---

        
            
              2019                2018                        Change        2019        2018               Change

                   ---

                    U.S.                      42,762       46,490       (8.0)%      70,853      75,799               (6.5)%

    ---


        EMEA                                 15,619       17,844      (12.5)%      26,416      28,706               (8.0)%

    ---

         Asia Pacific                          7,670        7,718       (0.6)%      13,744      14,047               (2.2)%

    ---

         Latin America                         2,516        2,569       (2.1)%       4,757       5,075               (6.3)%

    ---


        Canada                                3,279        3,807      (13.9)%       5,227       5,887              (11.2)%

    ---

                    International Total       29,084       31,938       (8.9)%      50,144      53,715               (6.6)%

    ---

                    Worldwide Total           71,846       78,428       (8.4)%     120,997     129,514               (6.6)%

    ---

The U.S. 601+cc industry was down 4.9 percent in the second quarter compared to the same period in 2018. Harley-Davidson's second quarter U.S. market share was 46.6 percent. Harley-Davidson's year-to-date Europe market share was 8.8 percent through June.



         
                Motorcycles and Related Products Segment Results



         
                $ in thousands           
              
                2nd Quarter                  
          
                6 months

                                  ---

        
          
                2019                  2018                               Change         2019         2018                        Change

                 ---

          Motorcycle
           Shipments
           (vehicles)                           68,757           72,593                   (5.3)%    127,648      136,537                        (6.5)%

    ---

          Revenue                           $1,434,004       $1,525,121                   (6.0)% $2,629,641   $2,889,068                        (9.0)%

    ---

             Motorcycles                    $1,128,063       $1,201,453                   (6.1)% $2,092,638   $2,323,126                        (9.9)%

    ---

             Parts &
              Accessories                     $221,258         $231,014                   (4.2)%   $380,961     $400,089                        (4.8)%

    ---

             General
              Merchandise                      $64,644          $68,653                   (5.8)%   $120,045     $125,254                        (4.2)%

    ---

          Gross Margin                           31.7%           34.9%   
              (3.2) pts.      30.5%       34.8%   
             (4.3) pts.

    ---

          Operating Income                    $180,728         $243,406                  (25.8)%   $289,109     $416,244                       (30.5)%

    ---

          Operating Margin                       12.6%           16.0%   
              (3.4) pts.      11.0%       14.4%   
             (3.4) pts.

    ---

Revenue from the Motorcycles segment was down in the second quarter behind lower shipments. Operating income decreased primarily due to lower revenues and increased tariff costs, partially offset by lower SG&A.



         
              Financial Services Segment Results



         
              $ in thousands                            2nd Quarter                
             
              6 months

                                ---

        
           
              2019               2018                           Change         2019          2018                Change

                 ---

          Revenue                         $198,615      $188,102         5.6%      $387,358      $366,276                 5.8%

    ---

          Operating
           Income                          $75,529       $80,541       (6.2)%      $134,260      $144,120               (6.8)%

    ---

Financial Services segment second quarter operating income of $75.5 million was down 6.2 percent.

Other Results
Cash and cash equivalents were $924.6 million at the end of the second quarter of 2019, compared to $978.7 million in 2018. Harley-Davidson generated $496.2 million of cash from operating activities in the first half of 2019 compared to $735.9 million in the first half of 2018. The company paid a cash dividend of $0.375 per share in the second quarter of 2019. On a discretionary basis, Harley-Davidson repurchased 1.2 million shares of its common stock during the quarter for $42.9 million. During the quarter, there were approximately 159.4 million weighted-average diluted common shares outstanding. At the end of the quarter, 13.7 million shares remained on a board-approved share repurchase authorization.

Harley-Davidson's year-to-date effective tax rate was 24.1 percent, flat to 2018.

2019 Outlook
Harley-Davidson recently obtained regulatory approvals confirming that motorcycles shipped from the company's Thailand operations to the EU would receive more favorable tariff treatment than if they were shipped from the U.S. However, the approval process took considerably longer than the company had planned.

As a result of the timing of these approvals and softer than expected European retail sales as key drivers, the company has adjusted its 2019 outlook and now expects:

    --  Motorcycle shipments to be approximately 212,000 to 217,000 for the full
        year. In the third quarter, the company expects to ship approximately
        43,000 to 48,000 motorcycles
    --  Motorcycles segment operating margin as a percent of revenue to be
        approximately 6 to 7 percent for the full year

For the full-year 2019, the company continues to expect:

    --  Financial Services segment operating income to be down year-over-year
    --  Effective tax rate of approximately 24 to 25 percent
    --  Capital expenditures of approximately $225 million to $245 million
        including $20 million to support manufacturing optimization

Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Since 1903, Harley-Davidson has fulfilled dreams of personal freedom by leading the innovation of two-wheeled mobility. The company offers an expanding range of leading-edge, distinctive and customizable motorcycles and brings the brand to life through Harley-Davidson riding experiences and exceptional motorcycle parts, accessories, riding gear and apparel. Harley-Davidson Financial Services provides financing, insurance and other programs to help get Harley-Davidson riders on the road. Learn more about how Harley-Davidson is Building the Next Generation of Riders at www.harley-davidson.com.

Webcast Presentation
Harley-Davidson will discuss second quarter results on an audio 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 restructuring plan costs and the impact of incremental tariffs and net income excluding restructuring plan costs and the impact of incremental tariffs. Restructuring plan costs include restructuring expenses as presented in the consolidated statements of income and costs associated with temporary inefficiencies incurred in connection with the manufacturing optimization plan included in Motorcycles and related products cost of goods sold. The impact of incremental tariffs include incremental European Union and China tariffs imposed on the company's products shipped from the U.S., as well as incremental U.S. tariffs on certain items imported from certain international markets. Incremental tariff costs exclude incremental metals cost resulting from the U.S. steel and aluminum tariffs. These adjustments are consistent with adjustments used to determine financial objectives under the company's incentive compensation plans. 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," "strategy," "future," "may," "goals," "will," "estimates," or words of similar meaning. Similarly, statements that describe future plans, strategies, objectives, outlooks, targets, guidance, commitments, 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 plan for growth that the company disclosed on July 30, 2018, and strengthen its existing business while enabling growth, (ii) manage and predict the impact that new or adjusted tariffs may have on our ability to sell product internationally, and the cost of raw materials and components, (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) successfully launch a smaller displacement motorcycle in India, (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 will depend in part on the building of necessary infrastructure, (x) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the 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) successfully determine, implement on a timely basis, and maintain a manner in which to sell motorcycles in the European Union, China, and ASEAN countries that does not subject its motorcycles to incremental tariffs, (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, (xxviii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, (xxix) manage its Thailand corporate and manufacturing operation in a manner that allows the company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets, (xxx) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness, (xxxi) accurately predict the margins of its Motorcycles & Related Products segment in light of, among other things, tariffs, the cost associated with the More Roads to Harley-Davidson plan, the company's manufacturing optimization plan, and our complex global supply chain, and (xxxii) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner.

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, 2018 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.

### (HOG-F)


                                                                
              Harley-Davidson, Inc.


                                                             
      Condensed Consolidated Statements of Income


                                                              
      (In thousands, except per share amounts)




                                   
          (Unaudited)                 
              (Unaudited)                
      (Unaudited)          
       (Unaudited)


                                 
        Three months ended           
              Six months ended


                                    
          June 30,                     
              July 1,                   
      June 30,              
       July 1,


                                                        2019                                    2018                           2019                      2018





      Motorcycles and Related
       Products revenue                           $1,434,004                              $1,525,121                     $2,629,641                $2,889,068



     Gross profit                                   454,738                                 532,085                        802,177                 1,005,858


      Selling, administrative
       and engineering expense                       263,587                                 276,309                        489,015                   530,402


      Restructuring expense                           10,423                                  12,370                         24,053                    59,212


        Operating income from
         Motorcycles and Related
         Products                                    180,728                                 243,406                        289,109                   416,244




      Financial Services revenue                     198,615                                 188,102                        387,358                   366,276


      Financial Services expense                     123,086                                 107,561                        253,098                   222,156


        Operating income from
         Financial Services                           75,529                                  80,541                        134,260                   144,120





      Operating income                               256,257                                 323,947                        423,369                   560,364


      Other income (expense),
       net                                             4,037                                     645                          8,697                       865


      Investment income                                3,571                                   2,533                          9,929                     3,736


      Interest expense                                 7,784                                   7,728                         15,515                    15,418


      Income before income taxes                     256,081                                 319,397                        426,480                   549,547


      Provision for income taxes                      60,450                                  77,059                        102,904                   132,446



     Net income                                    $195,631                                $242,338                       $323,576                  $417,101





      Earnings per common share:



       Basic                                          $1.23                                   $1.45                          $2.03                     $2.49



       Diluted                                        $1.23                                   $1.45                          $2.03                     $2.48




      Weighted-average common
       shares:



       Basic                                        158,813                                 166,589                        159,061                   167,364



       Diluted                                      159,425                                 167,204                        159,724                   168,189




      Cash dividends per common
       share                                          $0.375                                  $0.370                         $0.750                    $0.740


                                                                                                   
              Harley-Davidson, Inc.


                                                                                    
              Reconciliation of GAAP amounts to Non-GAAP amounts


                                                                                         
              (In thousands, except per share amounts)




                                                              
              (Unaudited)                             
              (Unaudited)                
       (Unaudited)           
       (Unaudited)


                                                           
              Three months ended                       
              Six months ended


                                                                
              June 30,                                
              July 1,                    
       June 30,              
       July 1,


                                                                                        2019                                                2018                            2019                       2018





                     Net income excluding
                      restructuring plan costs and
                      the impact of incremental
                      tariffs

    ---


       Net income (GAAP)                                                           $195,631                                            $242,338                        $323,576                   $417,101


        Restructuring plan costs                                                      14,414                                              14,758                          31,624                     62,332


        Impact of incremental tariffs                                                 34,400                                                                             55,377


        Tax effect of adjustments(1)                                                (11,837)                                            (3,579)                       (21,097)                  (15,116)



        Adjustments net of tax                                                        36,977                                              11,179                          65,904                     47,216


        Adjusted net income (Non-GAAP)                                              $232,608                                            $253,517                        $389,480                   $464,317





                     Diluted earnings per share excluding restructuring plan costs and the impact
                      of incremental tariffs

    ---

        Diluted earnings per share
         (GAAP)                                                                        $1.23                                               $1.45                           $2.03                      $2.48


        Adjustments net of tax, per
         share                                                                          0.23                                                0.07                            0.41                       0.28


        Adjusted diluted earnings per
         share (Non-GAAP)                                                              $1.46                                               $1.52                           $2.44                      $2.76






       
                (1)The income tax effect of adjustments has been computed using the company's effective income tax rate excluding discrete items.


                                                               
              Harley-Davidson, Inc.


                                                             
        Condensed Consolidated Balance Sheets


                                                                  
              (In thousands)




                                                          
        (Unaudited)                                                   
       (Unaudited)


                                                            
        June 30,                             
     December 31,           
       July 1,


                                                                              2019                                      2018                     2018






       
                ASSETS

    ---


       Current assets:


            Cash and cash equivalents                                     $924,638                                $1,203,766                 $978,749



           Marketable securities                                                                                    10,007


            Accounts receivable, net                                       325,306                                   306,474                  335,594


            Finance receivables, net                                     2,362,125                                 2,214,424                2,252,956



           Inventories                                                    470,610                                   556,128                  465,373



           Restricted cash                                                 82,248                                    49,275                   44,386



           Other current assets                                           147,234                                   144,368                  166,362



       Total current assets                                             4,312,161                                 4,484,442                4,243,420





       Finance receivables, net                                         5,232,280                                 5,007,507                5,060,246



       Other long-term assets                                           1,195,875                                 1,173,715                1,242,356


                                                                       $10,740,316                               $10,665,664              $10,546,022





                     LIABILITIES AND SHAREHOLDERS' EQUITY

    ---


       Current liabilities:


            Accounts payable and accrued
             liabilities                                                  $940,369                                  $885,991                 $859,654



           Short-term debt                                                405,695                                 1,135,810                1,327,307


            Current portion of long-term debt,
             net                                                         2,396,188                                 1,575,799                  945,463



       Total current liabilities                                        3,742,252                                 3,597,600                3,132,424





       Long-term debt, net                                              4,650,176                                 4,887,667                4,868,346


        Pension and postretirement healthcare
         liabilities                                                       185,289                                   202,229                  169,283


        Other long-term liabilities                                        251,958                                   204,219                  214,443





       Total shareholders' equity                                       1,910,641                                 1,773,949                2,161,526


                                                                       $10,740,316                               $10,665,664              $10,546,022


                                                       
              Harley-Davidson, Inc.


                                          
              Condensed Consolidated Statements of Cash Flows


                                                          
               (In thousands)




                                                 
              (Unaudited)                             
       (Unaudited)


                                               
              Six months ended


                                                   
              June 30,                                
       July 1,


                                                                           2019                                         2018





      Net cash provided by
       operating activities                                            $496,232                                     $735,859




      Cash flows from investing
       activities:


        Capital expenditures                                           (83,229)                                    (69,293)


        Finance receivables, net                                      (296,070)                                   (286,902)


        Acquisition of business                                         (7,000)



       Other                                                            21,724                                     (11,758)


      Net cash used by investing
       activities                                                     (364,575)                                   (367,953)




      Cash flows from financing
       activities:


        Proceeds from issuance of
         medium-term notes                                              546,655                                    1,144,018


        Repayments of medium-term
         notes                                                        (750,000)                                   (877,488)


        Proceeds from
         securitization debt                                          1,021,353


        Repayments of
         securitization debt                                          (113,806)                                   (183,453)


        Net (decrease) increase in
         credit facilities and
         unsecured commercial paper                                   (728,606)                                      56,280


        Borrowings of asset-backed
         commercial paper                                                23,373                                      120,903


        Repayments of asset-backed
         commercial paper                                             (155,286)                                   (100,660)



       Dividends paid                                                (120,841)                                   (124,680)


        Purchase of common stock
         for treasury                                                 (104,621)                                   (111,227)


        Issuance of common stock
         under employee stock
         option plans                                                       833                                        1,965


      Net cash used by financing
       activities                                                     (380,946)                                    (74,342)




      Effect of exchange rate
       changes on cash, cash
       equivalents and restricted
       cash                                                               3,439                                     (10,091)




      Net (decrease) increase in
       cash, cash equivalents and
       restricted cash                                               $(245,850)                                    $283,473






     Cash, cash equivalents and restricted cash:


        Cash, cash equivalents and
         restricted cash -
         beginning of period                                         $1,259,748                                     $746,210


        Net (decrease) increase in
         cash, cash equivalents and
         restricted cash                                              (245,850)                                     283,473


        Cash, cash equivalents and
         restricted cash -end of
         period                                                      $1,013,898                                   $1,029,683





      Reconciliation of cash,
       cash equivalents and
       restricted cash to the
       Consolidated Balance
       Sheet:


      Cash and cash equivalents                                        $924,638                                     $978,749



     Restricted cash                                                    82,248                                       44,386


      Restricted cash included in
       other long-term assets                                             7,012                                        6,548


      Total cash, cash
       equivalents and restricted
       cash shown in the
       Statement of Cash Flows                                       $1,013,898                                   $1,029,683


                     Adoption of New Accounting
                      Standards

    ---

        On January 1, 2019, the Company adopted accounting standards update
         (ASU) 2016-02 Leases using the modified retrospective method. As a
         result, the Company recorded a right-of-use lease asset of
         approximately $60 million and a corresponding lease liability.


                                                                 
       Motorcycles and Related Products Revenue and


                                                                   
               Motorcycle Shipment Data




                                         
          (Unaudited)                    
              (Unaudited)             
      (Unaudited)          
       (Unaudited)


                                       
        Three months ended              
              Six months ended


                                          
          June 30,                        
              July 1,                
      June 30,              
       July 1,


                                                              2019                                       2018                        2019                      2018



      MOTORCYCLES AND RELATED PRODUCTS
       REVENUE (in thousands)



       Motorcycles                                     $1,128,063                                 $1,201,453                  $2,092,638                $2,323,126



       Parts & Accessories                                221,258                                    231,014                     380,961                   400,089



       General Merchandise                                 64,644                                     68,653                     120,045                   125,254



       Licensing                                            9,911                                     10,407                      18,488                    18,765



       Other                                               10,128                                     13,594                      17,509                    21,834


                                                        $1,434,004                                 $1,525,121                  $2,629,641                $2,889,068






     MOTORCYCLE SHIPMENTS:



         United States                                     41,404                                     43,047                      75,909                    81,844



         International                                     27,353                                     29,546                      51,739                    54,693



           Total                                           68,757                                     72,593                     127,648                   136,537





      MOTORCYCLE PRODUCT MIX:



         Touring                                           30,923                                     31,064                      55,966                    61,921



         Cruiser                                           22,691                                     24,348                      43,142                    45,902


          Sportster(R)/Street                               15,143                                     17,181                      28,540                    28,714



           Total                                           68,757                                     72,593                     127,648                   136,537


                        
          Worldwide Retail Sales of Harley-Davidson Motorcycles(1)




                           Three months ended                       Six months ended


                         
          June 30,                     
              June 30,        
     June 30,     
     June 30,


                                         2019                                    2018             2019           2018





      United States                    42,762                                  46,490           70,853         75,799




      Europe(2)                        13,703                                  16,012           23,211         25,728


      EMEA -Other                       1,916                                   1,832            3,205          2,978


        Total EMEA                     15,619                                  17,844           26,416         28,706




      Asia Pacific(3)                   4,544                                   5,096            8,330          9,548


      Asia Pacific -
       Other                            3,126                                   2,622            5,414          4,499


        Total Asia
         Pacific                        7,670                                   7,718           13,744         14,047




      Latin America                     2,516                                   2,569            4,757          5,075



     Canada                            3,279                                   3,807            5,227          5,887



        Total
         International
         Retail Sales                  29,084                                  31,938           50,144         53,715


        Total Worldwide
         Retail Sales                  71,846                                  78,428          120,997        129,514




     (1)  Data source for retail sales figures shown above is new
      sales warranty and registration information provided by
      Harley-Davidson dealers and compiled by the Company. The
      Company must rely on information that its dealers supply
      concerning new retail sales, and the Company does not
      regularly verify the information that its dealers supply.
      This information is subject to revision.




     (2)   Europe data includes Austria, Belgium, Denmark,
      Finland, France, Germany, Greece, Italy, Luxembourg,
      Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
      and the United Kingdom.




     (3)Asia Pacific data includes Japan,
      Australia, New Zealand and Korea.




                      
     Motorcycle Registration Data(1)




                                                    Six months ended


                                             
              June 30,     
     June 30,


                                                                2019          2018



     United States(2)                                        144,623       151,989


     Europe(3)                                               267,212       252,698




     (1)  Data includes on-road 601+cc models. On-road 601+cc
      models include dual purpose models, three-wheeled
      motorcycles and autocycles.




     (2)United States data is derived from information provided
      by Motorcycle Industry Council (MIC). This third-party
      data is subject to revision and update.




     (3) Europe data includes Austria, Belgium, Denmark, Finland,
      France, Germany, Greece, Italy, Luxembourg, Netherlands,
      Norway, Portugal, Spain, Sweden, Switzerland, and the
      United Kingdom. Industry retail motorcycle registration
      data includes 601+cc models derived from information
      provided by Association des Constructeurs Europeens de
      Motocycles (ACEM), an independent agency. This third-party
      data is subject to revision and update.

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SOURCE Harley-Davidson, Inc.