The "% Change" figures included in the Results of Operations sections were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. Certain "% Change" deemed not meaningful (NM) have been excluded.
(1) Note Regarding Forward-Looking Statements
The Company intends that certain matters discussed in this report 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 by
reference to this footnote or because the context of the statement will include
words such as the Company "believes," "anticipates," "expects," "plans," "may,"
"will," "estimates," "targets," "intends," "is on-track," "forecasting," or
words of similar meaning. Similarly, statements that describe or refer to future
expectations, 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 report. Certain of such risks and
uncertainties are described in close proximity to such statements or elsewhere
in this report, including under the caption "Cautionary Statements" in this Item
2, as well as in Item 1A. Risk Factors, as well as in Item 1A. Risk Factors of
the Company's Annual Report on Form 10-K for the year ended
Overview
The Company's net income was
Retail sales of new Harley-Davidson motorcycles in the first quarter of 2022
were up 2.1% compared to the first quarter of 2021. The increase in retail sales
was driven by higher retail sales in international markets, partially offset by
lower retail sales in the
Key Factors Impacting the Company(1)
Supply Chain Challenges - During the first quarter of 2022, the Company continued to experience disruption and increased costs related to global supply chain challenges. As a result of these challenges, the Company experienced higher costs as well as supply constraints related to certain components including those impacted by the continued global semiconductor chip shortages. In the first quarter of 2022, the Company's production was lower than what the Company had planned due to the lack of availability of certain components. The Company expects that year-over-year inflation rates for logistics and manufacturing costs, excluding raw materials and components, will improve in the second half of 2022 from the peak levels of inflation experienced in 2021 and that the supply of semiconductor chips will stabilize in the second half of 2022. However, given the macro global factors influencing raw materials, the Company now believes that raw materials and component cost inflation will continue for the remainder of 2022 at rates similar to those experienced by the Company in the first quarter of 2022.
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Suspension of Additional European Union Tariffs - In
To date, the Company continues to pursue its appeals of the revocation of the
BOIs and the denial of its application for temporary extended reliance on the 6%
tariff rate (for motorcycles produced in
COVID-19 Pandemic - The Company continues to manage through the impacts of the COVID-19 pandemic and its associated variants by keeping safety and community well-being a priority. The Company continues to proactively follow protocols to keep workers safe in its manufacturing facilities. The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic including associated variants, the success of vaccination programs, the consequences of vaccine requirements, and its impact on the Company's customers, dealers, distributors, and suppliers. Future impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products.
LiveWire Transaction - On
The transaction, which has been approved by the boards of directors of both the Company and ABIC, is expected to close mid-2022. The consummation of the business combination is subject to the approval of ABIC's shareholders as well as other conditions and regulatory approvals. Upon closing of the transaction, the Company will retain a controlling financial interest in LiveWire. The expectation is that, upon closing of the transaction, the Company will retain an equity interest in the separate public company of approximately 74%. As the controlling shareholder following the transaction, the Company will continue to consolidate LiveWire's results, with additional adjustments to recognize non-controlling shareholder interests.
Guidance(1)
On
The Company continues to expect Motorcycles segment revenue growth, compared to
2021, between 5% and 10%. This revenue growth guidance incorporates the
Company's information and expectations as of
The Company continues to expect Motorcycles segment operating margin as a percent of revenue of 11% to 12%. The Company believes the anticipated positive impacts from higher motorcycle volume, product mix and pricing, combined with expected growth in revenue from higher-margin parts and accessories and apparel, will more than offset the expected cost inflation across the supply chain. Also, the suspension of the additional EU tariffs is expected to contribute over a percentage point of margin growth.
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Given the Company's estimated production cadence and the expected timing of supply chain stabilization, the Company expects the Motorcycles segment revenue growth rate in 2022, compared to 2021, to be in the mid-single digits for the first half of 2022 and in the high-single digits for the second half of 2022. In addition, given the expected seasonality of the business, the Company expects Motorcycles segment operating income margin percent to be in the mid-teens for the first half of 2022 and in the mid-to-high single digits for the second half of 2022.
The Company continues to expect Financial Services operating income to decline 20% to 25% in 2022 compared to 2021. This decline is largely a result of the favorable credit loss allowance reductions and lower actual credit losses in 2021 that are not expected to repeat in 2022.
The Company continues to expect capital investments between
The Company's capital allocation priorities are to fund growth through The
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