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(1)
During the third quarter of 2022, the Company's shipments were up 19% compared
to the same quarter last year as it recovered a majority of the volume lost as a
result of a suspension of production and shipments for approximately two weeks
during the second quarter of 2022. Year to date, through the end of the third
quarter, shipments were up 0.4% compared to the same period last year. The
Company plans to make up the remaining volume lost as a result of the second
quarter suspension during the fourth quarter of 2022. The Company's net income
was
In the third quarter of 2022, Motorcycles segment operating income was
Retail sales of new Harley-Davidson motorcycles in the third quarter of 2022
were down 2.3% compared to the third quarter of 2021, including a decline of
5.4% in the
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Key Factors Impacting the Company(1)
Supply Chain Challenges - During the third 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 third quarter of 2022, although the rate of year over year inflation moderated during the quarter relative to inflation rates experienced in the first two quarters of 2022. The moderation in inflation experienced during the third quarter resulted primarily from the normalization of logistics inflation which started to decline during the quarter and to a lesser extent raw materials inflation which slowed as metal markets improved. In addition, the Company continued to reduce its reliance on expedited shipping during the third quarter of 2022. The Company expects inflation rates for supply chain costs during the fourth quarter of 2022 to be similar to the third quarter of 2022 with continued improvement in logistics and material costs through the balance of the year.
Supply Matter - 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 the regulatory agency. Given the uncertainties related to this matter, the Company is currently unable to reasonably estimate any potential additional costs or recall expenses it may incur. While at this time the Company does not expect that this matter will result in additional costs or recall expenses that are material, it is possible that the Company could incur additional costs or recall expenses that are material.
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
At the LiveWire transaction close, LiveWire received net proceeds of
approximately
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Guidance(1)
On
The Company continues to expect Motorcycles segment revenue growth in 2022, compared to 2021, between 5% and 10%. This forecast incorporates the expectation that the Company will make up the remaining production and wholesale shipments lost as a result of the temporary suspension of production and shipments during the second quarter. 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 Company expects the suspension of the additional EU tariffs to contribute over a percentage point of margin growth.
Given the model year 2023 planned production cut-over in the fourth quarter, the Company expects 2022 fourth quarter Motorcycles segment operating margin to be impacted by lower wholesale shipments and higher operating expenses relative to the first three quarters of 2022. The Company expects operating and capital expense to be higher in the fourth quarter, as compared to the first three quarters of 2022, related to product development, marketing and other model year launch support activities.
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.
The Company expects capital investments between
The Company's capital allocation priorities remain to fund growth through The
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