To Our Stakeholders
Every five years, the global Harley-Davidson world comes together to celebrate the company’s anniversary with a force and energy you’ll experience with no other brand. As we celebrate 110 years of Harley-Davidson® motorcycles in 2013, our entire team takes pride in all that has been accomplished over the past several years to build an enduring company and brand, not just for today but for generations of riders far into the future.
2012 was a pivotal year for Harley-Davidson, marked by solid growth in earnings and retail new motorcycle sales, and the achievement of key milestones in our ambitious strategy to improve operating efficiency, flexibility and responsiveness to our customers.
Among the performance and operational highlights:
Motorcycle and Related
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- Earnings per share increased 16.7 percent compared to 2011
- Worldwide retail sales of new Harley-Davidson motorcycles grew 6.2 percent year-over-year
- We largely completed the transformational restructuring of our manufacturing and product development operations
- Sales to outreach customers in the U.S. grew faster than sales to our core customers for the first time, and we continued our international growth, including strong gains in emerging markets
- Shareholder value grew, as the share price of Harley-Davidson stock rose more than 25 percent in 2012, dividends increased more than 30 percent compared to the prior year and we repurchased six-and-a-half million shares of the company’s stock
These are just some of the proof points of the many improvements in operations and performance we are realizing through Harley-Davidson’s strategy to implement world-class manufacturing and product development capabilities, enrich the retail experience and grow our reach among new groups of customers globally.
At its core, our strategy is all about doing the best possible job for customers.
Since our beginnings in 1903, Harley-Davidson’s bold and unique purpose has been to fulfill dreams of personal freedom for people around the world – the kind of freedom a person experiences when he or she throws a leg over the seat, heads down the road and leaves the routines of everyday life behind.
Throughout our 110 years as a company, we have been a central part of customers’ lives — a way for people to express their individuality and experience the liberation that comes only with the Harley-Davidson experience.
Today, Harley-Davidson is leaner, more agile and more responsive to our customers and the changing marketplace than ever. And we continue to move aggressively to raise our performance to new levels.
In manufacturing, the ambitious restructuring of our operations was largely behind us as we exited 2012. The changes we have implemented improve the responsiveness of our production and deliver greater operating efficiency in the process.
Our advanced manufacturing system provides the flexibility to produce closer to customer demand, allowing us to increasingly deliver the right motorcycle to the right customer at the right time. We are implementing surge manufacturing and are able to take production volumes up and down to better match retail seasonality. We also are significantly more nimble at adjusting the mix of models coming off the line to better align with market demand; our goal is to be able to build any bike on any line, any time.
As with manufacturing, we have revamped our approach to developing new products to reduce time to market and grow our leadership for bringing exceptional products to market.
Our 2012 and 2013 model-year motorcycles again hit the mark with bigger power, bolder paint, the 110th Anniversary limited edition motorcycles, the CVO™ Breakout custom cruiser, expanded H-D1™ Factory Customization and more. And there are more high-impact products in the pipeline.
Outstanding products are a key reason – together with the efforts of our dealers — for the growth in retail Harley-Davidson motorcycle sales among both new customers and our extraordinarily loyal repeat customers.
In the U.S., our largest market, dealer sales of new Harley-Davidson motorcycles were up 6.6 percent from 2011 and Harley-Davidson’s share of the heavyweight (651cc+) motorcycles market grew to a record 57.2 percent.
In 2012, we achieved our goal to grow U.S. sales to outreach customers – young adults 18-34, females, African American riders and Hispanic riders – faster than to our traditional core customers. Sales to U.S. outreach customers grew at twice the rate of core in 2012. This milestone reflects the success of our strategy to introduce Harley-Davidson to new generations of riders. In fact, Harley-Davidson is the U.S. market share leader among each of these demographic segments.
International retail new Harley-Davidson motorcycle sales grew 5.6 percent compared to 2011, in large part the result of strong product appeal and numerous improvements in our operations and distribution network over the last few years. This includes our prudent investment in emerging markets, where retail Harley-Davidson motorcycle sales grew nearly 30 percent year over year, helping offset softness in the macro-economic environment in Europe.
Worldwide Retail Sales of
We opened 31 dealerships in 18 countries in 2012, including Malaysia, Russia, Turkey, India, China, Bolivia, Croatia and Taiwan. We continue to see great opportunity in international markets and expect international new Harley-Davidson motorcycle sales to grow faster than sales in the U.S. through 2014. OUTREACH AND INTERNATIONAL GROWTH STORIES
We also continue to work with our dealers to further increase Harley-Davidson leadership at retail. Our retail strategy is all about strengthening retail support systems, dealer capabilities and distribution channels to ensure that customers have a distinctly personal and custom experience whenever and wherever they touch the brand – whether in store or online.
One of the ways we enable customers to fulfill their dreams is through financing and insurance from Harley-Davidson Financial Services. HDFS provides a strategic competitive advantage for Harley-Davidson, our U.S. and Canadian dealers and increasingly to our international dealers through affiliate relationships. In 2012, HDFS financed more than half of all new Harley-Davidson motorcycles sold in the U.S. HDFS also generated nearly $285 million in operating income – a record that speaks to the strength of the business.
It goes without saying that all of Harley-Davidson’s achievements are possible only through the efforts and dedication of our employees, dealers and suppliers. Our entire team takes great pride in these achievements. They are doing a truly outstanding job, working as one team and moving in one direction to deliver for our customers and all stakeholders.
While we are pleased by our achievements in 2012 and over the last several years, more important is the road ahead. Harley-Davidson’s strategy provides the road map for how we will continue to deliver exceptional product and brand experiences that foster deep emotional connections with customers and create opportunities for growth.
When I came to Harley-Davidson four years ago, I knew this company had tremendous untapped potential and incredible opportunities. That has never been more true than today. To be sure, there continue to be concerns over the macro-economic environment. But, when I look at all we have achieved and all the great things yet to come through our strategic focus, I believe Harley-Davidson has never been better positioned than we are today to deliver on the promise of fulfilling dreams of personal freedom.
2013 is shaping up to be an exciting year for Harley-Davidson, especially with our year-long global 110th Anniversary celebrations. Hundreds of thousands of customers participate in our anniversaries and every one of them has their own unique story of dreams fulfilled. We invite everyone to join in the celebration and enjoy the ride.
Keith E. Wandell
Chairman, President and Chief Executive Officer
Statements regarding expected savings from restructuring and international sales growth are forward‑looking statements that are subject to risks that could cause actual results to be materially different. Those risks include matters we have noted in our latest earnings release and filings with the U.S. SEC. Unless otherwise noted, the information presented, including all forward‑looking statements, speaks only as of January 29, 2013 and does not reflect subsequent developments. Inclusion of such statements also does not constitute a reaffirmation of such statements as of any later date.