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 second quarter of 2022
were down 22.7% compared to the second quarter of 2021, including declines of
28.9% in the
Key Factors Impacting the Company(1)
Supply Chain Challenges - During the second quarter of 2022, the Company continued to experience disruption and increased costs related to global supply chain challenges including the continued global semiconductor chip shortages. As a result of these challenges, the Company experienced higher costs in the second quarter of 2022, although the rate of supply chain inflation experienced during the quarter declined as compared to the rate experienced during the first quarter of 2022. The decline in the inflation rate was primarily a result of normalization in logistics costs. While logistics costs continue to remain higher than a year ago, the Company did not experience volatile pricing and reduced its reliance on expedited shipping during the second quarter of 2022. The Company expects that inflation rates for logistics and materials costs will continue to improve during the balance of 2022. In the aggregate, the Company expects supply chain costs to continue to be inflationary during the second half of 2022, but the Company believes it will move beyond the peak levels of inflation experienced in 2021. Further, the Company expects year-over-year favorability for certain costs of raw materials as inflation in raw material markets decelerates.
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In addition, during the second quarter of 2022, the Company received information from a third-party supplier concerning a regulatory compliance matter relating to the supplier's component part. As a result, out of an abundance of caution, the Company suspended all vehicle assembly and shipments (excluding LiveWire models) for approximately two weeks during the second quarter of 2022. The Company continues to work through the regulatory compliance matter with its relevant suppliers and at this time does not expect that this matter will result in additional costs or recall expenses that are material. The Company expects that in the second half of 2022 it will make up production and shipments lost as a result of the suspension of production and shipments during the second quarter.
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 employees, 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 now expected to close at the beginning of the Company's 2022 fourth fiscal quarter. The consummation of the business combination is subject to the approval of ABIC's shareholders and other conditions. Upon closing of the transaction, the Company will retain a controlling financial interest in LiveWire. 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 forecast incorporates the expectation that the
Company will make up production and wholesale shipments lost as a result of the
temporary suspension of production and shipments during the second quarter. In
addition, this guidance incorporates the Company's information and expectations
as of
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second half of 2022. The Company continues to expect revenue in 2022 to be positively impacted by global pricing as the Company works to offset cost headwinds across its supply chain.
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 pricing 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.
Given the Company's plan to make up shipment volume lost as a result of the approximate two-week suspension of production and shipments during the second quarter, it now expects the Motorcycles segment revenue growth rate in the second half of 2022, compared to 2021, to be in the low- to mid-double digits. In addition, the Company now expects Motorcycles segment operating income margin percent to be 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 remain to fund growth through The
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