The financial papers trumpeted the dire news:
Harley-Davidson Recalls 111,569 Motorcycles:
http://www.motorcycle-usa.com/568/5266/Motorcycle-Article/Harley-Davi ...
"The recall comes at an inopportune time for The Motor Company.
Harley
recently reported an 84% drop in third quarter profits and
discontinued its Buell Motorcycle line. For a company that needs to
meticulously track every nickel and dime, the recall s announcement
means more unexpected expenditures."
Is this a company in trouble? Should you sell your Hawg and your
"MoCo" stock? Will it be all 2009 model Suzukis for American
motorcycle consumers from here on out?
Well, consider a few other numbers from Harley's third quarter report:
"For 2009 compared to 2008 through nine months, retail sales of Harley-
Davidson motorcycles decreased 22.9 percent worldwide, 25.5 percent in
the U.S. and 16.5 percent in international markets. Industry-wide U.S.
retail heavyweight motorcycle sales declined 38.7 percent year to date
in 2009, compared to 2008."
Huh. Harley's U.S. sales dropped 25.5% and INDUSTRYWIDE U.S.
heavyweight motorcycle sales dropped 38.7%.
"Through nine months, revenue from Harley-Davidson motorcycles was
$2.62 billion compared to $3.23 billion in 2008 on shipments of
187,085 Harley-Davidson motorcycles, compared to 226,898 motorcycles
in 2008. Revenue from Parts and Accessories totaled $623.1 million
during the first nine months, down 11.8 percent and revenue from
General Merchandise was $215.5 million during the nine-month period,
down 12.0 percent compared to the year-ago period. Gross margin was
34.6 percent and operating margin was 14.1 percent, compared to 35.4
percent and 18.9 percent respectively in the year-ago period."
"Hardley" sounds like a company on the road to bankruptcy, does it?
But wait, those are nine month figures, and they're overall revenues,
not earnings, right? It's here in the third quarter where everything
came crashing down, right?
"Net income for the third quarter was $26.5 million, compared to
$166.5 million in the third quarter of 2008, on revenue of $1.12
billion, compared to $1.42 billion in the year-ago period. Diluted
earnings per share were $0.11 for the third quarter of 2009 and $0.71
in the year-ago period.
Through nine months, Harley-Davidson, Inc. reported net income of
$163.6 million, down 71.6 percent and diluted earnings per share of
$0.70, down 71.4 percent from the year-ago period. Revenue through
nine months was $3.57 billion, down 17.1 percent from the same period
last year."
Well, there you go, they're in the dumper!!!
Except....
"Harley-Davidson, Inc. expects to incur approximately $125 million in
one-time costs related to the discontinuation of the Buell product
line. The Company expects to incur approximately $115 million of that
amount this year.
In the third quarter, Harley-Davidson, Inc. recorded a one-time fixed-
asset impairment charge of $14.2 million related to Buell and a
goodwill impairment charge of $18.9 million related to MV Agusta."
Ah, so maybe they're losing money on something OTHER than their core
business, and maybe they're working hard to shed those losses and
concentrate on their core business?
"Harley-Davidson Financial Services recorded an operating loss of
$31.5 million for the third quarter of 2009 compared to an operating
profit of $35.6 million in the third quarter of 2008. This decrease
of $67.2 million was due to a higher provision for credit losses in
both the retail and wholesale portfolios as well as increased interest
expense. Year to date through the third quarter, HDFS reported an
operating loss of $110.8 million, compared to operating income of
$107.7 million for the prior year period. The nine-month operating
loss includes two non-cash charges recorded in the second quarter of
2009: a $72.7 million credit loss provision for a one-time
reclassification of motorcycle loan receivables; and a one-time $28.4
million charge to write off goodwill associated with HDFS."
Well, now we see where those profits are going, don't we? Do we
think those "one time charges" will continue ad infinitum?
Well, at least they won't be taxed on that tiny little profit, right?
"The Company's third-quarter effective income tax rate was 61.8
percent compared to 38.2 percent in the same quarter last year. This
increase was due primarily to the tax implications of MV Agusta,
including the non-deductible write down of goodwill, and the impact of
reduced Company earnings. The Company expects its full-year 2009
effective tax rate on continuing operations, excluding MV Agusta, to
be approximately 59 percent due to the previously reported one-time
charges for the Wisconsin tax law change and the non-deductible
goodwill write-off for Harley-Davidson Financial Services, as well as
the impact of reduced earnings for the remainder of the year."
Well, with all those taxes and all those income reductions, and all
those Hawg buyers not repaying their loans, shirley the MoCo is
running out of cash, right?
"Cash and cash equivalents totaled $1.52 billion as of Sept. 27, 2009,
compared to $504.4 million at the end of the year-ago period. Cash
provided by operations was $511.1 million and capital expenditures
were $89.4 million during the first nine months of 2009. For the full
year, capital expenditures are now expected to be $125 million to $145
million, including $15 million to $25 million related to restructuring
activities."
The sky is falling.....
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