H-D Reports $96m Q4 Net Loss; Full-Year Shipments -32%, With Year-End Dealer Inventory Slashed by 59%
Harley-Davidson chairman, CEO and president Jochen Zeitz knew the job wasn't going to be an easy one when he took it - but nobody could have anticipated just what a 'Year of Years' 2020 would turn out to be.
"2020 was an extraordinary year in many ways and our team navigated many challenges. We managed COVID-19 impacts, kept our community well-being at the forefront, protected liquidity and delivered $250m in cash savings [compared to planned 2020 full-year spending].
"We also successfully overhauled the entire company through The Rewire, building a strong foundation to successfully implement our new 5-year strategic plan, The Hardwire. The entire Harley-Davidson team put forth tremendous effort in 2020, and we now have the right organization, structure and strategy in place to make step changes in our performance and enhance our position as the most desirable motorcycle brand in the world."
Only time will tell whether Zeitz is now setting the company on the right track, whether it will prove to be too little too late, or whether, to channel Donald Rumsfeld, the "unknown unknowns" are still likely to bite Harley's ankles.
The $96m net loss translates to 63 cents a share, from net income of $13m, or 9 cents a share, in the year-ago period. Excluding nonrecurring items, the company scored an adjusted per-share loss of 44 cents from a profit of 20 cents, compared with an analyst community consensus for earnings per share of 21 cents.
Q4 revenue dropped 32% to $725m, as motorcycle revenue fell 39% to $531m; motorcycle gross margin fell to 21.6% from 25.2%.
The H-D stock price had improved by some +21.5% over a prior three months during which the S&P 500 gained 14.0%. However, the announcement of a loss sent Harley's shares into reverse (initially at least).
"Q4 motorcycle revenue -39% to $531m"
Harley delivered full year diluted EPS of $0.01 and adjusted diluted EPS of $0.77. The company says it maintained sufficient cash and liquidity and that the overhaul and reset of the cost structure of the business through The Rewire actions has effectively lowered their cost base by approximately $115m.
Cash and cash equivalents were $3.3bn at the end of the year, compared to $834m at the end of 2019. Harley-Davidson generated $1.2bn of cash from operating activities in 2020 compared to $868m in 2019.
Consolidated revenue was down 32% in the fourth quarter and down 24% for the full year over 2019. "Bottom-line results reflect a loss for the quarter and nominal net income for the full year with Financial Services segment operating income offsetting Motorcycles and Related Products segment operating losses for the year.
"Revenue from the Motorcycles and Related Products segment was down during the fourth quarter primarily due to lower wholesale shipments versus prior year as the company continued its aggressive approach to supply and inventory management and reset the timing of delivery of new model year motorcycles. Fourth quarter global retail motorcycle sales also reflected the impact of tight inventory and the model year shift."
Fourth quarter gross margin was down 3.7 percentage points to prior year, while fourth quarter operating margin finished below prior year due to the impact of volume deleverage and restructuring charges.
Financial Services segment operating income was up 31% over prior year in the fourth quarter, primarily driven by a decrease in the provision for loan losses. Full year operating income was down due to increases in the provision for loan losses taken earlier in 2020.