Harley Davidson 2012 Annual Report Download - page 33

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Results of Operations 2011 Compared to 2010
Consolidated Results
(in thousands, except earnings per share) 2011 2010 Increase
(Decrease) % Change
Operating income from motorcycles & related products $ 561,176 $ 378,758 $ 182,418 48.2 %
Operating income from financial services 268,791 181,873 86,918 47.8
Operating income 829,967 560,631 269,336 48.0
Investment income 7,963 5,442 2,521 46.3
Interest expense 45,266 90,357 (45,091) (49.9)
Loss on debt extinguishment — 85,247 (85,247) NM
Income before income taxes 792,664 390,469 402,195 103.0
Provision for income taxes 244,586 130,800 113,786 87.0
Income from continuing operations 548,078 259,669 288,409 111.1
Income (loss) from discontinued operations, net of taxes 51,036 (113,124) 164,160 (145.1)
Net income $ 599,114 $ 146,545 $ 452,569 308.8 %
Diluted earnings per share from continuing operations $ 2.33 $ 1.11 $ 1.22 109.9 %
Diluted earnings (loss) per share from discontinued operations $ 0.22 $ (0.48) $ 0.70 (145.8)%
Diluted earnings per share $ 2.55 $ 0.62 $ 1.93 311.3 %
Operating income for the Motorcycles segment during 2011 improved by $182.4 million compared to 2010 primarily due
to increased motorcycle shipments and lower spending on the Company’s ongoing restructuring activities. Operating income
for the Financial Services segment improved by $86.9 million during 2011 primarily due to improved credit performance in the
retail motorcycle finance receivable portfolio. Please refer to the “Motorcycles and Related Products Segment” and “Financial
Services Segment” discussions following for a more detailed discussion of the factors affecting operating income.
Interest expense for 2011 related to the Company’s senior unsecured notes, was approximately $45 million lower than in
2010. The decrease in interest expense on the senior unsecured notes is due to the Company’s repurchase of $297.0 million of
the $600.0 million senior unsecured notes during the fourth quarter of 2010.
During the fourth quarter of 2010, the Company repurchased $297.0 million of the $600.0 million senior unsecured notes
at a price of $380.8 million. As a result of the transaction, the Company incurred a loss on debt extinguishment of $85.2 million
which also includes $1.4 million of capitalized debt issuance costs that were written-off. The Company used cash on hand for
the repurchase and the repurchased notes were canceled.
The effective income tax rate for 2011 was 30.9% compared to 33.5% for 2010. The lower 2011 effective tax rate was
mainly driven by a change in the 2011 Wisconsin income tax law associated with certain net operating losses and a one-time
tax charge in 2010 associated with the federal healthcare legislation.
In 2011, the Company recognized a $51.0 million benefit on income from discontinued operations, driven by the
reversal of tax amounts reserved in prior years related to the divestiture of the Company’s MV Agusta subsidiaries. The
amounts had been reserved pending an agreement that was reached by the Company and the IRS on the tax treatment of the
transaction in December 2011. This compares to a $113.1 million loss from discontinued operations in 2010 due primarily to
impairment charges related to a decrease in the fair value of MV Agusta.
Motorcycles and Related Products Segment
Harley-Davidson Motorcycle Retail Sales
Worldwide independent dealer retail sales of Harley-Davidson motorcycles increased 5.9% during 2011 compared to
2010. Retail sales of Harley-Davidson motorcycles increased 5.8% in the United States and 6.1% internationally in 2011. The
following table includes retail unit sales of Harley-Davidson motorcycles: