PowerSports Business

November 6, 2017

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FINANCE 12 • November 6, 2017 • Powersports Business www.PowersportsBusiness.com U.S. sales drop 8.1 percent; overall bike market also down Harley-Davidson reported its third quarter results with worldwide retail motorcycle sales down 6.9 percent in the third quarter com- pared to the same period in 2016. The company's third quarter 2017 diluted EPS decreased to $0.40 from $0.64 in the third quarter of 2016. Third quarter net income was $68.2 million on consolidated revenue of $1.15 billion versus net income of $114.1 million on consolidated revenue of $1.27 billion in the third quarter of 2016. "The continued weakness in the U.S. motor- cycle industry only heightens our resolve and the intensity we are bringing to the quest to build the next generation of Harley-Davidson riders," said Matt Levatich, president and CEO, Harley-Davidson, Inc. "Launching 100 new high-impact motorcycles is a critical part of our 10-year journey, and the all-new Softail lineup is a significant statement of our commitment." H a r l e y - D a v i d s o n U.S. retail motorcycle sales were down 8.1 percent compared to the year-ago quarter, with the overall U.S. indus- try down 9.2 percent for the same period. Harley- Davidson's U.S. market share for the quarter was 53.1 percent in the 601cc-plus segment, up compared to the same quarter in 2016. Harley- Davidson's international retail motorcycle sales decreased 4.6 percent compared to the third quarter in 2016. "As the motorcycle industry leader — with dealer strength and rider passion and loyalty like no other — we believe we are uniquely positioned to build ridership and strengthen the sport of motorcycling. Not just in the U.S. but around the world. Our investments in new product and marketing are targeted to drive ridership growth. We have the strategies, plans and people to make it happen," said Levatich. Through nine months, Harley-Davidson 2017 diluted EPS was $2.95, down 16.9 per- cent from $3.55 in the year-ago period. Har- ley-Davidson 2017 net income was $513.4 million on consolidated revenue of $4.42 bil- lion compared to nine-month 2016 net income of $645.0 million on consolidated revenue of $4.89 billion. For the first nine months, world- wide retail motorcycle sales were down 6.1 percent compared to the same period in 2016. OTHER RESULTS Cash and marketable securities totaled $683.1 million at the end of the third quar- ter, compared to $795.3 million a year ago. During the first nine months of 2017, Harley- Davidson generated $949.1 million of cash from operating activities compared to $927.8 million for the first nine months of 2016. The company paid a cash dividend of $0.365 per share for the third quarter of 2017 and a cumulative total of $1.095 per share for the first nine months of 2017. On a discretionary basis, the company repur- chased 4.5 million shares of its common stock during the third quarter of 2017 for $222 mil- lion. In the third quarter of 2017, there were 170.7 million weighted-average diluted com- mon shares outstanding, compared to 179.3 million shares in the same period a year ago. GUIDANCE Harley-Davidson continues to expect to ship 241,000 to 246,000 motorcycles to dealers worldwide in 2017, which is down approximately 6 percent to 8 percent from 2016. In the fourth quarter, the company expects to ship 46,700 to 51,700 motor- cycles compared to 42,414 motorcycles shipped in the year-ago period. The company continues to expect full- year 2017 operating margin to be down approximately 1 percentage point com- pared to 2016. The company continues to expect 2017 capital expenditures to be $200 million to $220 million. PSB H-D worldwide retail sales down 6.9 percent in Q3 Stock Price Percent Company Ticker 10/13/17 Change ArvinMeritor ARM $25.78 24.8% Intl. Speedway Corp. Cl. A ISCA $39.30 13.4% TCF Financial Corporation TCB $16.99 12.7% Brunswick Corp. BC $57.51 9.8% CDK Global CDK $64.91 3.9% Carlisle Companies CSL $99.56 3.8% Spy Inc. XSPY $0.06 1.7% Harley-Davidson, Inc. HOG $46.62 -1.6% General Electric Co. GE $22.98 -3.5% Universal Technical Institute UTI $3.25 -8.5% POWERSPORTS BUSINESS WINNERS AND LOSERS MARKET WATCH Change 10/13/17 from 9/8 % Change Powersports Business Index 309.896 41.10 15.29% Dow Jones Index 198.934 9.33 4.92% S&P 500 Index 173.774 6.27 3.75% Source: Wells Fargo Securities LLC NORTHWEST -7.1% Parts Department 1.6% Service Department 3.4% Major Units 1.8% Overall WEST -0.1% Parts Department -4.2% Service Department 5.8% Major Units 3.4% Overall MIDWEST -0.6% Parts Department 0.7% Service Department 1.1% Major Units 0.9% Overall NORTHEAST -5.6% Parts Department -2.6% Service Department -1.2% Major Units -2.6% Overall SOUTH -5.6% Parts Department -8.7% Service Department -3.5% Major Units -4% Overall UNITED STATES -3.2% Parts Department -3.8% Service Department 0.3% Major Units -0.7% Overall DEALER FINANCIAL SNAPSHOT STOCK MARKET WATCH SEPTEMBER 2017 Same Store Sales for 1,665 CDK Global Recre- ation dealers were down 0.7 percent overall in September, in comparison to the same period in 2016. The Northwest, Midwest and West all experienced increases overall and in major unit sales. The West increased 5.8 percent in major units, and the Northwest was up 1.6 percent in the service department. Both the South and Northeast decreased in all four categories. PARTS SALES In parts, 724 dealers were up, and 941 were down. SERVICE SALES 740 dealers were up in service and 871 down. MAJOR UNIT SALES Major unit sales saw 736 dealers up and 755 down. FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: cdkrecreation.com/dataservices 0 50 100 150 200 250 300 350 1/20/17 2/22/17 3/10/17 4/7/17 5/4/17 5/19/17 6/16/17 7/21/17 8/11/17 9/8/17 10/13/17 PSB INDEXED DOW JONES INDEXED S&P 500 INDEXED STOCK MARKET ACTIVITY MATT LEVATICH " " Our investments in new product and marketing are targeted to drive ridership growth. We have the strategies, plans and people to make it happen. – Matt Levatich, president and CEO, Harley-Davidson

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