Harley-Davidson(HOG) - 2025 Q2 - Quarterly Report

Part I – Financial Information This section presents the unaudited consolidated financial statements for Q2 2025 and 2024, detailing financial performance, position, and cash flows, alongside notes on segment operations and a key HDFS transaction Financial Statements This section provides the unaudited consolidated financial statements for Q2 2025 and 2024, covering operations, balance sheets, cash flows, and equity, with detailed accounting notes Consolidated Statements of Operations This statement details the company's revenues, operating income, and net income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Highlights (Unaudited) | Metric (in millions, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,307.1 | $1,618.9 | $2,636.3 | $3,348.5 | | Operating Income | $112.4 | $241.1 | $272.9 | $504.2 | | Net Income Attributable to Harley-Davidson, Inc. | $107.6 | $218.3 | $240.7 | $453.2 | | Diluted Earnings Per Share | $0.88 | $1.63 | $1.95 | $3.34 | Consolidated Balance Sheets This statement presents the company's assets, liabilities, and equity as of June 30, 2025, December 31, 2024, and June 30, 2024 Consolidated Balance Sheet Highlights (Unaudited) | Metric (in billions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $12.05 | $11.88 | $12.76 | | Total Liabilities | $8.74 | $8.72 | $9.33 | | Total Equity | $3.31 | $3.16 | $3.43 | Consolidated Statements of Cash Flows This statement outlines the cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Cash Flow Highlights (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $509.5 | $577.6 | | Net Cash Used by Investing Activities | ($89.9) | ($397.0) | | Net Cash (Used) Provided by Financing Activities | ($416.5) | $182.0 | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $15.5 | $351.8 | Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, segment performance, revenue breakdown, and significant subsequent events - The company operates in three reportable segments: Harley-Davidson Motor Company (HDMC), LiveWire, and Harley-Davidson Financial Services (HDFS)[25] Disaggregated Revenue by Major Source (Six Months Ended June 30) | Revenue Source (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | HDMC Motorcycles | $1,641.9 | $2,290.2 | | HDMC Parts and accessories | $330.3 | $360.1 | | LiveWire | $8.8 | $11.2 | | HDFS Interest income | $424.5 | $433.9 | - The company's effective income tax rate for the six months ended June 30, 2025, was 23.2%, an increase from 19.3% for the same period in 2024[39] - On July 30, 2025, the company entered into a significant transaction involving its HDFS segment, including the sale of the majority of existing retail finance receivables and a portion of future originations, along with equity investments in HDFS by two counterparties. The transaction is expected to close in the second half of 2025[137][139] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q2 2025 net income decline, driven by lower HDMC operating income and retail sales, and outlines key impacts, revised HDFS guidance, and planned share repurchases Overview This section provides a high-level summary of the company's Q2 2025 financial performance, highlighting key drivers of income changes and retail sales trends Q2 2025 Financial Highlights vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income Attributable to Harley-Davidson, Inc. | $107.6 million | $218.3 million | | Diluted EPS | $0.88 | $1.63 | - The decrease in operating income was primarily driven by the HDMC segment, which saw income fall by $136.6 million due to a planned decrease in motorcycle shipments and softer than expected retail demand[144] - Worldwide retail sales of new Harley-Davidson motorcycles declined by 15.5% in Q2 2025 compared to Q2 2024, with North America down 17.0%[145] Key Factors Impacting the Company This section details significant external and internal factors influencing the company's operations, including tariffs, interest rates, and strategic transactions - The company incurred approximately $17 million in tariff-related costs in the first six months of 2025 and estimates the potential full-year impact to be between $50 million and $85 million[146] - A significant transaction for the HDFS segment is expected to close in H2 2025, involving the sale of over $5 billion in existing retail finance receivables and a reduction of over $4 billion in HDFS debt[148] - The company plans to introduce new models, including a small displacement motorcycle priced below $6,000, and shift its annual new model year launch from January to the preceding fall[153] Guidance This section presents the company's revised financial outlook for 2025, including segment operating income expectations and planned capital allocation - The company revised its 2025 guidance for the HDFS segment, now expecting operating income of approximately $525 million to $550 million, which includes a benefit of $275 million to $300 million from the HDFS transaction[156] - LiveWire segment's expected operating loss for 2025 is revised to approximately $59 million to $69 million[158] - The company plans to execute $500 million of discretionary share repurchases in the second half of 2025, assuming the HDFS transaction successfully closes[161] Results of Operations This section provides a detailed analysis of the financial performance for each operating segment, including revenue and operating income drivers HDMC Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating Income | $61.3 million | $197.9 million | | Operating Margin | 5.9% | 14.7% | | Motorcycle Shipments | 35,837 units | 49,660 units | HDFS Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating Income | $69.8 million | $71.4 million | | Provision for Credit Losses | $49.7 million | $56.0 million | - For the first six months of 2025, worldwide retail sales of new Harley-Davidson motorcycles were down 18.1% compared to the prior year, driven by declines in North America (-20.1%) and Asia Pacific (-24.5%)[193][194] Liquidity and Capital Resources This section discusses the company's cash position, available liquidity, and cash flow activities from operations, investing, and financing - As of June 30, 2025, the company had $1.59 billion in cash and cash equivalents and total available liquidity of $3.60 billion[220] - Net cash provided by operating activities for the first six months of 2025 was $509.5 million, a decrease from $577.6 million in the same period of 2024, primarily due to lower net income and negative changes in working capital[224][225] - Cash outflows for share repurchases were $93.1 million in the first half of 2025, compared to $209.7 million in the same period last year[229] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from foreign currency, commodity prices, and interest rates using derivatives, with no material changes since 2024 - The company is exposed to market risks from fluctuations in foreign currency exchange rates, commodity prices, and interest rates, and uses derivative financial instruments to mitigate these risks[256] - The HDMC segment's most significant foreign currency exposures relate to the Euro, Australian dollar, Japanese yen, and Canadian dollar, among others[257] - The HDFS segment is affected by changes in interest rates on its financial receivables and debt, and uses interest rate caps and cross-currency swaps to manage these risks[260][262] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2025)[264] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[265] Part II – Other Information This section provides additional information on legal proceedings, updated risk factors, equity security sales, and other relevant disclosures Legal Proceedings This section details ongoing legal matters, including a Japan FTC investigation into Harley-Davidson Japan KK regarding alleged improper sales quotas - The Japan Fair Trade Commission (Japan FTC) is investigating the company's subsidiary, Harley-Davidson Japan KK, for alleged improper activity, including setting excessive sales quotas for dealers[268] - The company is cooperating with the Japan FTC's investigation and does not expect the matter to result in material costs[268][269] Risk Factors This section updates risk factors, emphasizing global tariff impacts and the critical dependency on attracting and retaining skilled employees, especially during CEO transition - The global tariff landscape, with new tariffs from the U.S. and retaliatory tariffs from other countries, poses a significant risk that could negatively impact the company's ability to sell products at current prices and increase the cost of raw materials[270][271] - The company's future success is highly dependent on attracting and retaining skilled personnel, and any perceived uncertainties related to the search for a new CEO and the subsequent transition could adversely affect operations[272][273] Unregistered Sales of Equity Securities and Use of Proceeds This section details equity share acquisitions for tax withholding, reports no discretionary repurchases in Q2 2025, and notes new share repurchase authorizations - The company did not repurchase any shares on a discretionary basis during the quarter ended June 30, 2025[275] - In July 2025, the Board of Directors authorized a new plan to repurchase up to 15.0 million shares of common stock[275] - During Q2 2025, the company acquired 1,873 shares from employees to satisfy withholding tax obligations related to vested stock awards[279] Other Information This section confirms no director or Section 16 officer adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[280] Exhibits This section lists exhibits filed with the Form 10-Q, including the Term Loan Agreement, CEO/CFO certifications, and XBRL data files - The exhibits filed with this report include a Term Loan Agreement dated July 1, 2025, CEO/CFO certifications (Rule 13a-14(a) and 18 U.S.C. §1350), and XBRL data files[283]