Harley Davidson 2014 Annual Report Download - page 25

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Outlook(1)
On January€29, 2015 the Company announced the following expectations for 2015.
The Company expects to ship 282,000 to 287,000 Harley-Davidson motorcycles during 2015, up approximately 4% to
6% over 2014. This includes 79,000 to 84,000 Harley-Davidson motorcycles that it expects to ship in the first quarter of 2015,
down approximately 2% at the low end of the range to up 4% at the high end of the range over the first quarter of 2014. The
Company believes the underlying worldwide demand fundamentals for Harley-Davidson motorcycles are strong and expects
that motorcycle shipment growth in 2015 will be driven by:
• The strong appeal of the Harley-Davidson brand
• Great model-year 2015 and 2016 motorcycles
• Full-year Road Glide availability
• Improving availability and expanding distribution of the new Street motorcycles
• Continuing outreach momentum in the United States
• International expansion
The Company expects the 2015 operating margin percent for the Motorcycles segment to be between 18% and 19%
compared to 18% in 2014. The Company believes the operating margin percent will benefit from a modest increase in gross
margin, as well as lower selling, administrative and engineering expenses as a percent of revenue. The Company expects that
the 2015 gross margin percent will be up modestly, benefited by motorcycle pricing, incremental margin driven by higher
motorcycle production and strong productivity gains. The Company also expects these positive impacts to be offset by
unfavorable foreign currency exchange, increased pension expense and unfavorable product mix. If foreign currency exchange
rates on January 28, 2015 remained constant throughout 2015, the Company estimates the adverse impact to its expected
Motorcycle segment revenue from currency exchange in 2015 would be approximately 3.25%. Although the Company has a
significant portion of its 2015 foreign currency exposure hedged at favorable rates, it expects that about half of the unfavorable
revenue impact would translate into lower gross profit. The Company's 2015 pension expense will increase as a result of a
lower discount rate and changes in mortality assumptions. The Company believes changes in product mix will adversely impact
gross profit as Street continues to increase as a percent of total shipments. The Company expects selling, administrative and
engineering expenses to increase in 2015 as it continues to invest in future growth opportunities, but will decrease as a percent
of revenue as the Company leverages its current spending.
The Company expects operating income for the Financial Services segment to be down modestly in 2015 as compared to
2014. Going forward, the Company continues to expect pressure on Financial Services operating income as a result of higher
credit losses, and tightening net interest margins due to increasing competition and higher borrowing costs.
The Company’s capital expenditure estimates for 2015 are between $240 million and $260 million. The Company
anticipates it will have the ability to fund all capital expenditures in 2015 with cash flows generated by operations.
The Company also announced on January€29, 2015 that it expects the full year 2015 effective income tax rate to be
approximately 35.5%, which does not include the U.S. Federal Research and Development tax credits as it expired at the end of
2014. This guidance excludes the effect of any potential future adjustments such as changes in tax legislation or audit
settlements which are recorded as discrete items in the period in which they are settled.
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