HARLEY-DAVIDSON, INC. 2017 FOURTH QUARTER UPDATE · harley-davidson, inc. Cash & marketable...
Transcript of HARLEY-DAVIDSON, INC. 2017 FOURTH QUARTER UPDATE · harley-davidson, inc. Cash & marketable...
January 30, 2018 | Conference Call Slide Presentation
HARLEY-DAVIDSON, INC.
2017 FOURTH QUARTER UPDATE
JANUARY 2018
January 30, 2018 | Conference Call Slide Presentation
2017 FOURTH QUARTER UPDATE
▪ Introduction Amy Giuffre, Director, Investor Relations
▪ Business Perspectives Matt Levatich, President and CEO
▪ Financial Results John Olin, Senior Vice President and CFO
▪ Q&A All
CONFERENCE CALL AGENDA
2
This presentation includes forward-looking statements that are subject to risks that could cause actual results to be
materially different. Those risks include, among others, matters we have noted in our latest earnings presentation and
filings with the SEC. Harley-Davidson disclaims any obligation to update information in this presentation. Additional
information and risk factors are included at the end of this presentation.
THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL
January 30, 2018 | Conference Call Slide Presentation
OBJECTIVES AND STRATEGY THROUGH 2027
3
January 30, 2018 | Conference Call Slide Presentation
BUSINESS PERSPECTIVESMATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC.
January 30, 2018 | Conference Call Slide Presentation
2017 SNAPSHOT
5
Decisive actions
Did NOT compromise value or damage brand for short-term gains
▪ Disciplined supply management
– Lower year-end U.S. retail inventory; improved model-year mix
– Used bike prices improved
▪ Improved cost structure
– SG&A down $41 million yr./yr.
January 30, 2018 | Conference Call Slide Presentation
2017 RIDERSHIP
6
▪ Finished 2017 with over 32,000(1) more Harley-
Davidson riders in the U.S. than one year ago
– Leveraged our capabilities:
• Inclusive brand promise
• Improved Riding Academy conversion
• Increased access through initiatives like our EagleRider partnership
• High impact products
We build riders
(1) IHS Markit Motorcycles in Operation (MIO) data for On-Highway and Dual purpose bikes in the US as of Jan 1, 2018 compared to previous years of MIO"
January 30, 2018 | Conference Call Slide Presentation
2018
7
Outlook
▪ Shipment guidance reflects international retail growth, ongoing
U.S. industry challenges and disciplined supply management
▪ Will intensify resource allocation and cost management
– Manufacturing Optimization Initiative
▪ Leverage learnings, capabilities and benefit from tax reform
– Invest more aggressively in electric motorcycle technology
January 30, 2018 | Conference Call Slide Presentation
PRODUCT DEVELOPMENT
8
Project LiveWire™ Electric Harley-Davidson Motorcycle
January 30, 2018 | Conference Call Slide Presentation
FINANCIAL RESULTSJOHN OLIN, SENIOR VICE PRESIDENT & CFO, HARLEY-DAVIDSON, INC.
January 30, 2018 | Conference Call Slide Presentation
Q4 2017 VS. Q4 2016 RESULTS
▪ Motorcycles Segment operating income up $28.6 million
Revenue up 12.2% on 11.3% higher shipments
Gross margin percent 30.9%, up 0.2 pts.
SG&A up slightly; includes the charge for a voluntary product recall
Operating margin of 3.6%, up 2.6 pts.
▪ Financial Services segment operating income up 5.9%
▪ 91% effective tax rate driven by write-down of net deferred tax assets
Earnings impacted by:
10
Consolid
ate
d –
Moto
rcycle
s a
nd R
ela
ted P
roducts
and F
inancia
l S
erv
ices S
egm
ents
REVENUE NET INCOME EPS
$1.23 $8.3 $0.05Billion Million
10.7% (82.4)% (81.5)%
January 30, 2018 | Conference Call Slide Presentation
WORLDWIDE RETAIL SALES
▪ U.S. new retail sales down in Q4
– Ongoing industry new motorcycle sales weakness
– Soft market share
▪ International new retail sales soft across most markets
▪ Positive response to new Softail motorcycles
11
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
Source: Dealer reported data
Vs. prior year Vs. prior year
Q4 Motorcycles Q4 ‘17 FY Motorcycles FY ‘17
Worldwide 42,142 (9.6)% 242,788 (6.7)%
U.S. 23,195 (11.1)% 147,972 (8.5)%
International 18,947 (7.7)% 94,816 (3.9)%
January 30, 2018 | Conference Call Slide Presentation
Q4 '16 Q4 '17 FY '16 FY '17
53.4%50.8% 51.2% 50.7%
Q4 '16 Q4 '17 FY '16 FY '17
26.1 23.2
161.7148.0
Mo
torc
ycle
s (t
ho
usa
nd
s)U.S. RETAIL SALES
12
H-D U.S. NEW 601+CC RETAIL MARKET SHARE**H-D U.S. NEW RETAIL MOTORCYCLE SALES
RET
AIL
SA
LES
SH
AR
EIN
VEN
TO
RY
▪ Q4 retail sales impacted by:
Weak industry
– Soft used bike prices
Market share softness
– Lapped strong Q4 ‘16 2.0 pt. gain
– Constrained availability
+ Strong demand for Cruisers
▪ YTD* used H-D bike sales & Q4 used H-D
pricing up vs. prior year
▪ FY market share down slightly on lapping last year’s
1.0 pt. share gain and also constrained availability
▪ Dealer inventory down approximately 3,000
motorcycles vs. prior year
▪ Aggressive supply management delivering intended
results
▪ Committed to aggressively manage supply in line with
demand. Expect 2018 year-end U.S. retail inventory
will be flat to year-end 2017
+2.0 pts.
+0.1% (11.1)%
H-D U.S. NEW RETAIL MOTORCYCLE INVENTORY
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
** Source: Motorcycle Industry Council
+1.0 pts.(3.9)% (8.5)% (2.6) pts.
(0.5) pts.
* YTD through Nov.
January 30, 2018 | Conference Call Slide Presentation
Strategy: Grow reach and impact
- Expand dealer network - Plan to add 150 to 200 new dealerships between 2016-2020
- 57 opened in 2017, 40 in 2016
- Target competitive riders; focus on conversion
- Brand awareness through apparel
- Thailand operations to lower pricing in certain markets (reduce tariffs)
FY '16 FY '17
10.8% 9.8%vs. prior year
Q4 FY
International (7.7)% (3.9)%
- EMEA (5.5)% (2.0)%
Soft across most of Northern Europe,
partially offset by growth in Southern
Europe
- Asia Pacific (11.8)% (7.7)%
Continued softness in Japan and
Australia
- Latin America (7.1)% (2.6)%
Brazil and Mexico down
- Canada 4.9% (1.2)%
INTERNATIONAL RETAIL SALES
13
INTERNATIONAL GROWTH
H-D EUROPE 601+CC MARKET SHARE*
RET
AIL
SA
LES
OP
PO
RT
UN
ITY
SH
AR
E
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
H-D INTERNATIONAL NEW RETAIL
MOTORCYCLE SALES
* Source: Association des Constructeurs Europeens de Motocycles (ACEM)
Objective: Grow international business to 50% of annual volume by 2027
January 30, 2018 | Conference Call Slide Presentation
Q4 vs. PY FY vs. PY
Total 47,198 11.3% 241,498 (7.9)%
Touring 41.0% (1.3) pts. 41.3% 0.3 pts.
Cruiser* 41.6% 6.6 pts. 36.2% 0.6 pts.
Street /
Sportster®
17.4%
100.0%
(5.3) pts. 22.5%
100.0%
(0.9) pts.
SHIPMENTS & MIX
▪ Q4 shipments up 4,784 motorcycles yr./yr.; in line with guidance
SHIPMENTS MOTORCYCLES SEGMENT
14
* FY Includes Dyna, Softail, V-Rod and CVO platforms
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
January 30, 2018 | Conference Call Slide Presentation
REVENUE
▪ Motorcycles Segment revenue up 12.2% in Q4 behind an 11.3% increase in motorcycle shipments
▪ Average motorcycle revenue per unit yr./yr. increased $835 in Q4 behind higher pricing and favorable currency exchange, partially offset by unfavorable mix
REVENUEMOTORCYCLES SEGMENT
($ millions)
15
Q4 vs. PY FY vs. PY
Motorcycle $801.7 17.0% $3,825.2 (7.2)%
P&A 168.1 (0.8) 804.4 (4.5)
General Merchandise 71.2 (2.3) 262.8 (7.7)
Other 6.0 6.1 22.6 2.9
Total Revenue $1,047.0 12.2% $4,915.0 (6.8)%
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
January 30, 2018 | Conference Call Slide Presentation
GROSS MARGIN
Q4 FY
2016 Gross Margin $286.8 $1,851.7
% of revenue 30.7% 35.1%
- Volume 30.7 (171.1)
- Pricing net of cost 22.3 61.2
- Mix (11.0) (36.8)
- Currency 13.4 15.9
- Raw materials (4.2) (17.0)
- Manufacturing / other (14.7) (50.6)
2017 Gross Margin $323.3 $1,653.3
% of revenue 30.9% 33.6%
GROSS MARGINMOTORCYCLES SEGMENT
($ millions)
16
▪ Q4 Motorcycles segment gross margin % of revenue impacted by:
- Mix – unfavorable P&A/GM and motorcycle model mix
- Currency – favorable due to weaker U.S. dollar
- Raw materials – unfavorable on higher steel and aluminum costs
- Manufacturing expense – higher depreciation, LIFO and plant costs
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
January 30, 2018 | Conference Call Slide Presentation
OPERATING MARGIN
Q4 FY
2016 Operating Income $9.3 $773.4
% of revenue 1.0% 14.7%
- Gross Margin 36.4 (198.3)
- SG&A (7.9) 40.9
2017 Operating Income $37.8 $616.0
% of revenue 3.6% 12.5%
OPERATING MARGINMOTORCYCLES SEGMENT
($ millions)
17
▪ Q4 Motorcycles segment operating margin was up 2.6 pts. compared to prior year
- Q4 SG&A up slightly as aggressive cost management was offset by a $29.4 million charge to implement a voluntary product recall
Moto
rcycle
s a
nd R
ela
ted P
roducts
Segm
ent
January 30, 2018 | Conference Call Slide Presentation 18
Fin
ancia
l S
erv
ices S
egm
ent
HDFS
▪ Financial Services Q4 operating income was higher
primarily due to a lower provision for retail loan losses
OPERATING INCOMEFINANCIAL SERVICES SEGMENT
($ millions)
Q4 FY
2016 Operating Income $60.2 $275.5
- Net interest income (1.7) (1.8)
- Gain on full securitization (Q2 2016) - (9.3)
- Provision for retail motorcycle loan losses 7.1 6.5
- Provision for wholesale loan losses (0.5) (1.0)
- Operating expenses (2.9) (5.1)
- All other 1.5 10.5
2017 Operating Income $63.7 $275.3
18
January 30, 2018 | Conference Call Slide Presentation 19
Fin
ancia
l S
erv
ices S
egm
ent
HDFS
2017 FINANCIAL SERVICES SEGMENT
LIQUIDITY(Millions)
Year End
Cash & equivalents $349.3
Availability
Bank Credit Facilities $266.5
Asset-Backed Conduits 620.5
Total Availability $887.0
OPERATIONS
Originations
New and used H-D retail motorcycle loans
Q4 $495.1M (0.3)% vs. Q4 ‘16
FY $3.01B (2.8)% vs. FY ’16
YTD approximately 80% prime
Market share
U.S. H-D new retail motorcycle sales financed
Q4 59.9% 0.3 pts. vs. Q4 ‘16
FY 61.2% (0.5) pts. vs. FY ’16
Finance receivables outstanding
End of Year
Retail $6.14B
Wholesale 1.02B
Total $7.16B 2.1% vs. FY ’16
19
January 30, 2018 | Conference Call Slide Presentation
2.11%
1.20%
0.79%
1.09% 1.22%1.42%
1.83% 1.90%
0%
1%
2%
3%
2010 2011 2012 2013 2014 2015 2016 2017
1.86%∆
5.07%
3.85% 3.94%
3.71% 3.61%3.78%
4.25%4.21%
2%
3%
4%
5%
6%
2010 2011 2012 2013 2014 2015 2016 2017
HDFS
20
30+ Day Delinquencies - December 31
Fin
ancia
l S
erv
ices S
egm
ent
20
RETAIL MOTORCYCLE LOAN PERFORMANCE 201730+ day delinquency4.21% on-balance
sheet receivables
4.15% on a managed basis (Including receivables sold in the Q2 ‘16 full securitization)
2017Annual loss rate
1.90% on-balance sheet receivables
1.86% on a managed basis (Including receivables sold in the Q2 ’16 full securitization)
Annual Loss Experience
4.15%∆
∆
4.12%
1.80%
∆
January 30, 2018 | Conference Call Slide Presentation
Consolid
ate
d –
Moto
rcycle
s a
nd R
ela
ted P
roducts
and F
inancia
l S
erv
ices S
egm
ents
HARLEY-DAVIDSON, INC.
▪ Cash & marketable securities - $687.5 million vs. $765.5 million (Q4 quarter end)
▪ Operating cash flow - $1.01 billion vs. $1.17 billion (FY)
▪ Capital spending - $206.3 million vs. $256.3 million (FY)
▪ Depreciation/amortization expense - $222.2 million vs. $209.6 million (FY)
▪ Tax rate - 39.6% vs. 32.4% (FY)
– Impact of new tax legislation
2017 HARLEY-DAVIDSON, INC.VS. PY
21
January 30, 2018 | Conference Call Slide Presentation
FY 2017 VS. FY 2016 RESULTS
▪ Motorcycles Segment operating income down $157.4 million
Revenue down 6.8% on 7.9% lower shipments
Gross margin percent of 33.6%, down 1.5 pts.
SG&A lower by $40.9 million
Operating margin of 12.5%, down 2.2 pts.
▪ Financial Services segment operating income flat to prior year
▪ Higher effective tax rate driven by Q4 write-down of net deferred tax assets
Earnings impacted by:
22
Consolid
ate
d –
Moto
rcycle
s a
nd R
ela
ted P
roducts
and F
inancia
l S
erv
ices S
egm
ents
REVENUE NET INCOME EPS
$5.65 $521.8 $3.02Billion Million
(5.8)% (24.6)% (21.1)%
January 30, 2018 | Conference Call Slide Presentation 23
CASH GENERATION
Harley-Davidson leads in cash generation across multiple industries
3-Yr. Avg. Free Cash Flow Conversion(1)Operating Cash Flow vs. Net Income ($M)
3-Yr. Avg. Free Cash Flow Margin(1)
(1)Charts include an average sample of key competitors in respective industries or segments. 2015-2017 averages calculated using CY ‘15 and ‘16, and last 12 months ended September 2017 Source: Company filings, Bloomberg. Note: Free Cash Flow Margin defined as net cash provided by operating activities– capital expenditures divided by revenue. Free Cash Flow Conversion defined as net cash provided by operating activities– capital expenditures divided by net income (benchmark companies’ income adjusted as appropriate for comparability). Free Cash Flow is a non-GAAP measure, see slide 28 for reconciliation of GAAP/non-GAAP amounts
0
200
400
600
800
1000
1200
2013 2014 2015 2016 2017
977
1,147 1,1001,174
1,005
734845
752692
522
Net cash provided by operating activities Net Income
January 30, 2018 | Conference Call Slide Presentation
$0
$500
$1,000
$1,500
$2,000
2011 2012 2013 2014 2015 2016 2017
$218 $300$456
$604
$1,526
$459 $456
Mill
ion
s
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
2011 2012 2013 2014 2015 2016 2017
$0.475$0.62
$0.84
$1.10$1.24
$1.40 $1.46
24
SHAREHOLDER RETURNS
CAGR 21%
Harley-Davidson has consistently returned cash to our shareholders
Discretionary Share RepurchasesDividends Per Share
Funded by $750 million HDI debt issuance
3-Yr. Avg. Cumulative Capital Return/
Market Capitalization(1)(3)
28%
Funded by $750 million HDI debt issuance
3-Yr. Avg. ROIC and ROE(1)
ROE(2)ROIC(2)
(1) 2015-2017 median of the averages of key competitors in respective industries or segments. Source: Company filings and Bloomberg. (2) 2015-2017 median of the averages calculated using CY ‘15 and ‘16, and last 12 months ended September 2017. ROIC defined as EBIT after tax / (debt + book value of equity). EBIT after tax for HDMC is equivalent to HDMC net operating profit after tax (non-GAAP). Assumes tax rate of 35%. ROE defined as FinCo operating income after tax / book value of equity. FinCo operating income after tax is equivalent to HDFS operating income after tax (non-GAAP). Assumes tax rate of 35% (3) Calculated using CY ‘15 and ‘16, and last 12 months ended September 2017 total dividends paid plus share repurchases divided by market capitalization as of Dec. 31, 2017. See slide 28 for reconciliation of GAAP/non-GAAP amounts.
January 30, 2018 | Conference Call Slide Presentation 25
Manufacturing Optimization Summary as of 1/30/18
$ Millions (Estimated)
Annual Cash
Savings- $25-30 $45-$50 $65-$75
Temporary
Inefficiencies$20-$25 $15-$20 - $35-$45
Restructuring $100-$115 $35-$40 - $135-$155
Total Costs $120-$140 $50-$60 - $170-$200
% Cash Approx. 70% Approx. 75% NA Approx. 70%
2018 2019 2020 Total
Annual 2018 2019 2020 Ongoing
Moto
rcycle
and R
ela
ted P
roducts
Segm
ent
MANUFACTURING OPTIMIZATION
January 30, 2018 | Conference Call Slide Presentation
Motorcycles and Related Products
segment
Motorcycle shipments 231,000 to 236,000Q1: 60,000 to 65,000
Gross margin % Down yr./yr. (~flat excluding mfg optimization)
SG&AUp yr./yr.(~flat as a percent of revenue)
Operating margin %9.5% to 10.5% (~flat excluding mfg optimization)
Financial Services segment
HDFS operating income Down yr./yr.
Harley-Davidson, Inc. Capital expenditures
$250 million - $270 million(Including $50 million of mfg optimization)
Effective tax rate 23.5% to 25.0%
as of January 30,2018
26
GUIDANCE
2018 EXPECTATIONS
January 30, 2018 | Conference Call Slide Presentation 27
Focused investments,
strong returns
to sustain the company for the long-term
HARLEY-DAVIDSON, INC.
BUILDING THE NEXT GENERATION OF HARLEY-DAVIDSON RIDERS GLOBALLY
Disciplined to our strategies
January 30, 2018 | Conference Call Slide Presentation 28
NON-GAAP MEASURES
RECONCILIATION OF GAAP AMOUNTS TO NON-GAAP AMOUNTS USED IN PERFORMANCE MEASURES
This presentation contains performance measures calculated using non-GAAP amounts as inputs. These performance measures include: "3-yr.Avg. Free Cash Flow Conversion", "3-yr. Avg. Free Cash Flow Margin“, “3-Yr. Avg. ROIC/ROE”. Reconciliations of non-GAAP amounts toreported GAAP amounts are included below.
In thousands Nine-months Twelve-months Nine-months Twelve-months
Ended Ended Ended Ended
9/24/2017 12/31/2016 9/25/2016 12/31/2015
Free cash flow
Net cash provided by operating activities (GAAP) 949,075$ 1,174,339$ 927,809$ 1,100,118$
Less: Capital expenditures (GAAP) 114,022 256,263 162,726 259,974
Free cash flow (Non-GAAP) 835,053$ 918,076$ 765,083$ 840,144$
HDMC Net operating profit after tax
HDMC operating income (GAAP) 584,538$ 781,625$ 770,531$ 884,041$
Less: Income taxes(1)204,588 273,569 269,686 309,414
Net operating profit after tax (Non-GAAP) 379,950$ 508,056$ 500,845$ 574,627$
HDFS Net operating profit after tax
HDFS operating income (GAAP) 205,831$ 267,206$ 209,234$ 271,654$
Less: Income taxes(1)
72,041 93,522 73,232 95,079
Net operating profit after tax (Non-GAAP) 133,790$ 173,684$ 136,002$ 176,575$
(1) Income taxes calculated using a 35% rate, consistent with assumption for industry calculations.
January 30, 2018 | Conference Call Slide Presentation
FORWARD-LOOKING STATEMENTS
29
The company intends that certain matters discussed in this release 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 because the context of the statement will include words such as the company "believes," "anticipates," "expects," "plans," or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks anduncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
The company's ability to meet the targets and expectations noted depends upon, among other factors, the company's ability to (i) execute its business strategy, (ii) execute its strategy of growing ridership, globally, (iii) effectively execute its manufacturing optimization initiative within expected costs and timing, (iv) develop and introduce products, services and experiences that are successful in the marketplace, (v) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (vi) balance production volumes for its new motorcycles with consumer demand, including in circumstances where competitors may be supplying new motorcycles to the market in excess of demand at reduced prices, (vii) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (viii) manage risks that arise through expanding international manufacturing, operations and sales, (ix) successfully execute the company’s manufacturing strategy, including its flexible production strategy, (x) prevent and detect any issues with its motorcycles or any associated manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing, (xi) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness, (xii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices,
cont.
January 30, 2018 | Conference Call Slide Presentation
FORWARD-LOOKING STATEMENTS
30
(xiii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xiv) retain and attract talented employees, (xv) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, orcompany data and respond to evolving regulatory requirements regarding data security, (xvi) continue to develop the capabilities of its distributors and dealers and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xvii) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the company’s business, (xviii) manage through theeffects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xix) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xx) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xxi) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xxii) manage its exposure to product liability claims and commercial or contractual disputes, , and (xxiii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations.
In addition, the company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed with the Securities and Exchange Commission.
The company's ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the company's independent dealers to sell its motorcycles and related products and services to retail customers. The company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase fromthe company. In addition, the company's independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.