Harley-Davidson, Inc. (NYSE:HOG) announced today that President and Chief Executive Officer James L. Ziemer has informed the Board of Directors that he intends to retire in 2009, capping a 40-year career with the Company. The Board of Directors has formed a search committee to review both internal and external candidates. Ziemer will remain in his current role until a new CEO is in place.
“Jim Ziemer has dedicated his entire professional career to Harley-Davidson and has been a great advocate for the Company,” commented Board Chairman Jeffrey L. Bleustein. “All of us who have worked with Jim throughout the years have benefited from his leadership, his selfless commitment to the Company and his contributions to making the brand one of the most admired and successful brands in the world. As an avid and lifelong motorcyclist, Jim also exemplifies the great legacy and spirit of Harley-Davidson.”
Ziemer is a native Milwaukeean who grew up in the neighborhood next to Harley-Davidson’s original Milwaukee factory location on the city’s west side. He started with the Company in 1969 as a freight elevator operator while attending the University of Wisconsin-Milwaukee. Upon earning his undergraduate degree in accounting at UWM, he joined the accounting department where he spent the majority of his career. He was named the Company’s Chief Financial Officer in 1990. In 2005, he was named President and Chief Executive Officer of Harley-Davidson, Inc. Ziemer also serves on the Board of Directors of Textron, Inc.
“Working at Harley-Davidson has been an honor and privilege and has fulfilled a life-long dream for me,” said Ziemer. “I am extremely proud of what our outstanding team of employees and dealers has accomplished together. There is always new and exciting work to be done on Harley-Davidson’s epic journey, and I have great confidence that the powerful combination of our employees, customers and dealers around the world and their passion will continue to fuel the strength of the brand. I am delighted to be able to spend more time with my family and am enthusiastic about the Company’s tremendous opportunities and its prospects for success in the years to come.”
Why maybe the “Car Czar”? Unlike the US auto makers like Ford (F) and GM (GM), Harley Davidson has had a very successful labor union relationship. That is not to say it has been all roses, union relationships never are, but it is to say that both side have profited handsomely from the arrangement, unlike the auto manufacturers.
That fact alone makes Ziemer the perfect person for the post. He will have little patience for management that turns out inferior products (and way too many lines of them) and the same intolerance for labor unions that want to enrich membership at the expense of shareholders and the company’s viability.
Because of his success at Harley Davidson, either side would be hard pressed to object to his appointment unlike GE’s (GE) former CEO Jack Welch, who’s name has been tossed in the ring but would face strong union objections because of his stance on them. Personally I think Welch would be great but realities just will not allow it.
Harley Davidson (HOG) files it 10-Q and in it are shipment details that show an interesting story
Here is the applicable portion.
Now, the bad news is obviously sales have fallen. The good news is that the two areas the company is targeting for growth, international and sport are doing just that, growing.
While it won’t cure what ails the company now, it does mean that the strategy for the future is indeed working. When the US does recover, and it eventually will, HOG will be that much further ahead that where it was when this all started.
Sherwin Williams (SHW) beat “analyst” expectations by 23 cents a share or 18%.
– Sales increased 3.3% to a record $2.269 billion in 3Q08 and 2.1% to a record $6.280 billion in first nine months – EPS was $1.50 in 3Q08; $.05 above the 3Q08 guidance range of $1.20 to $1.45 – Net operating cash in the first nine months was $592.6 million; an improvement of $28.8 million over the first nine months last year – EPS guidance range of $.40 to $.60 for 4Q08 and raising full year guidance range to $3.97 to $4.17
All segments experienced sales increases: * Net sales in the Paint Stores Group increased $9.5 million, or 0.7%, to $1.410 billion in the quarter and decreased $20.6 million, or 0.5%, to $3.797 billion in the first nine months. The sales increase in the quarter was due primarily to increased sales from acquisitions of 1.5% and selling price increases that were partly offset by sales volume reduction * Net sales of the Consumer Group increased $6.2 million, or 1.8%, to $355.7 million in the quarter and decreased $20.8 million, or 2.0%, to $1.026 billion in the first nine months. The sales increase in the quarter was due primarily to selling price increases and an increase in sales of 0.4% related to a 2007 acquisition. * The Global Finishes Group’s net sales stated in U.S. dollars increased $55.8 million, or 12.5%, to $500.8 million in the quarter and $170.1 million, or 13.3%, to $1.452 billion in the first nine months due primarily to volume gains, selling price increases, favorable currency translation rate changes and acquisitions.
The Company acquired 793,135 shares of its common stock through open market purchases during the quarter and 7.0 million shares during the first nine months. The Company had remaining authorization at September 30, 2008 to purchase 20.0 million shares.
CEO Christopher Connor said, “During the fourth quarter of 2008, we anticipate consolidated net sales growth, in percentage terms, will be plus or minus in the low single digits from last year’s fourth quarter. We expect diluted net income per common share for the fourth quarter will be in the range of $.40 to $.60 per share compared to $.80 per share last year. For the full year 2008, we anticipate consolidated net sales will be slightly higher than 2007. At that sales level, we are raising our expectations for diluted net income per common share for full year 2008 to a range of $3.97 to $4.17 per share compared to $4.70 per share earned in 2007.”
Would I be a buyer of Sherwin shares here? No. Not because they are not a great company or their shares are not undervalued, it is just that I think there are some extreme values out there currently and Sherwin is not an extreme value. The dividend yield at 2.8% is good, but again, far below the 7% at Dow Chemical (DOW), 6% at GE (GE) and 5.8% at Harley Davidson (HOG). Now, should share dip into the mid 40’s ($45) then I would have to take a close look.
Also, despite the title of the post, Sherwin is tied to housing and that is not going anywhere but flat or down for at least a year, maybe more. That being said, Sherwin’s results will remain stable due to fantastic management and it’s brilliantly timed international expansion so the downside from here is limited. Should shares be sitting here at these levels 6 months to a year from now, perhaps they then warrant a buy.
There are just to many truly magnificent bargains out there now…
On average, analysts were expecting Harley Davidson (HOG) to record a 79 cents per share on revenue of $1.42 billion. HOG had exceeded analysts’ profit estimates in three of the last four quarters.
Shipments are down are credit has further tightened.
Milwaukee, Wis., October 16, 2008 — Harley-Davidson, Inc. (NYSE: HOG) today announced its results for the third quarter ended September 28, 2008. Revenue for the quarter was $1.42 billion compared to $1.54 billion in the year ago quarter, a 7.7 percent decrease. Net income for the quarter was $166.5 million compared to $265.0 million in the third quarter 2007, a decrease of 37.1 percent. Third quarter diluted earnings per share were $0.71, a 33.6 percent decrease compared to last year’s $1.07.
“In the U.S., dealer retail sales of new Harley-Davidson motorcycles in the quarter were in line with our expectations,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. “Although Harley-Davidson retail motorcycle sales in international markets overall continued to grow double digits in the quarter, unit sales in several European countries slowed more than we anticipated during September as a result of deteriorating economic conditions. We continue to carefully monitor all markets in light of the potential impact of the current economic realities.”
For the full year 2008, the Company has narrowed its shipment expectations to 303,500 to 306,000 Harley-Davidson motorcycles. The Company has narrowed its expectations for diluted earnings per share for the full year to $3.00 to $3.10 from the prior range of $3.00 to $3.18.
“We also have been able to maintain Harley-Davidson Financial Services’ position as a stable, consistent source of financing for dealers and retail customers during these turbulent conditions in the credit markets,” Ziemer said. “Prudent management and customer access to credit will continue to be priorities at HDFS.”
“During the third quarter, we completed our acquisition of Italian motorcycle maker MV Agusta Group, expanding our opportunities in Europe. Our 105th Anniversary Celebration at the end of August drew tremendous, highly enthusiastic crowds. And we opened the Harley-Davidson MuseumTM, with its broad appeal to riders and non-riders alike. So even in the midst of economic uncertainty, we continue to broaden our appeal, plant seeds for the future and give people unparalleled experiences and reasons to ride,” Ziemer said.
“Going forward, we expect the global economy and consumer concerns to continue to create challenges for Harley-Davidson through the end of the year and in 2009. I remain confident about our future as we continue to manage and reinvest in the business,” said Ziemer.
Motorcycles and Related Products Segment – Third Quarter Results
Revenue from Harley-Davidson motorcycles was $1.05 billion, a decrease of $131.7 million or 11.1 percent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 74,704 units, a decrease of 11,831 units or 13.7 percent compared to last year’s third quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $259.0 million, an increase of $7.5 million or 3.0 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes® apparel and collectibles, totaled $84.0 million, an increase of $0.8 million or 1.0 percent over the year-ago quarter.
Gross margin for the third quarter of 2008 was 34.0 percent of revenue compared to 38.4 percent for the third quarter last year. This decrease is primarily due to higher product costs and the allocation of fixed costs over fewer units than last year’s third quarter. Third quarter operating margin decreased to 16.4 percent from 23.2 percent in the third quarter of 2007. Operating margin for the third quarter of 2008 includes the impact of a one-time $16.6 million expense related to the value of acquired in-process research and development at MV Agusta Group.
Motorcycle Retail Sales Data
During the third quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 9.6 percent compared to the third quarter of 2007. U.S. retail sales of Harley-Davidson motorcycles decreased 15.5 percent for the quarter. The heavyweight motorcycle market in the U.S. decreased 3.1 percent for the same period.
Retail sales of Harley-Davidson motorcycles grew 11.3 percent in the Company’s international markets during the third quarter of 2008 compared to the third quarter of 2007. Third quarter retail sales increased 12.4 percent in Canada; the Europe Region was up 2.9 percent; the Asia Pacific Region was up 17.5 percent; and the Latin America Region was up 41.6 percent.
During the first nine months of 2008, worldwide retail sales of Harley-Davidson motorcycles decreased 6.0 percent compared to the prior year. In the U.S., Harley-Davidson motorcycle retail sales decreased 11.9 percent for the first nine months of the year while the U.S. heavyweight market was down 4.0 percent for the same period. International retail sales increased by 12.6 percent for the first nine months of 2008.
Third quarter and year-to-date data are listed in the accompanying tables.
MV Agusta
On August 8, 2008, the Company completed the purchase of the privately-held Italian motorcycle maker MV Agusta Group. The Company acquired 100 percent of MV Agusta Group shares for total consideration of 68.3 million euros ($105.1 million), which includes the satisfaction of existing bank debt for 47.5 million euros ($73.2 million). As a result of the acquisition, the Company recorded $87.9 million of goodwill and the $16.6 million one-time expense related to the value of acquired in-process research and development. These results are included in the quarterly financial data.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) operating income for the third quarter was $35.6 million, a decrease of $13.9 million or 28.0 percent compared to the year-ago quarter. The decrease is primarily due to a $9.4 million write-down of finance receivables held for sale to fair value. In addition, last year’s third quarter included a $3.5 million securitization gain compared to no securitization transaction during the third quarter of 2008.
Income Tax Rate
The Company’s third quarter effective income tax rate was 38.2 percent compared to 35.5 percent in the same quarter last year. The third quarter increase was due primarily to a non-deductible in-process research and development charge for MV Agusta Group and the expiration of the federal research and development tax credit as of December 31, 2007. In October 2008, the federal research and development tax credit was reinstated for two years retroactive to January 1, 2008 continuing through December 31, 2009. The Company expects its full year effective income tax rate in 2008 will be approximately 35.5 percent.
Harley-Davidson, Inc. — Nine Month Results
For the first nine months of 2008, revenue totaled $4.30 billion, a 0.9 percent decrease from the year-ago period. Diluted earnings per share were $2.45, a decrease of 16.9 percent compared to the same period last year.
Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 226,898 units, a 9.0 percent decrease compared to last year’s 249,413 units. Harley-Davidson motorcycle revenue was $3.26 billion, which is down 2.2 percent compared to last year’s $3.33 billion. P&A revenue totaled $706.6 million, a 0.5 percent increase over last year’s $703.1 million. General Merchandise revenue totaled $244.8 million, a 5.5 percent increase compared to $232.0 million during the same period in 2007.
HDFS operating income was $107.7 million, a 38.0 percent decrease from last year’s $173.6 million.
Cash Flow
Cash and marketable securities totaled $504.9 million as of September 28, 2008. Cash used by operations was $221.2 million, and capital expenditures were $153.7 million during the first nine months of 2008. For the full year of 2008, capital expenditures are still expected to be between $235 million and $250 million.
Stock Repurchase
The Company repurchased 2.5 million shares of its common stock at a cost of $100.1 million during the third quarter of 2008. On September 28, 2008, the Company had 232.8 million shares of common stock outstanding.
As of September 28, 2008, there were 16.7 million shares remaining on a board-approved share repurchase authorization. An additional board-approved share repurchase authorization is in place to offset option exercises.
So, the bottom line is that if you are selling anything that requires credit to purchase it, things are going to be tough. The question then is, what is management doing to position the company for the inevitable improvement? CEO Zimmer is buying back shares at depressed prices, making international acquisitions at reduced prices and expanding the company’s product line.
All these are great moves while the company remains solidly profitable. Merchandise and parts revenue continue to grow. International sales are growing double digits. The drag is US domestic sales and HDFS. Eventually we get an improvement here. Even if 2009 just manages to be stagnant in the US, the other segments will propel EPS growth for the year.
Another point, at current levels ($24 and change), the shares carry with them a 5.38% yield that is very safe. The company will spend roughly $310 million next year on dividends and are buying back about $400 million a year of stock. The buybacks will be stopped before the dividend is threatened. Let’s not forget they also trade at 8 times earnings…8….
Harley Davidson (HOG) talked to its customers and discovered that many would rather be on three-wheelers than two-wheelers. So, they responded..
Called the Tri Glide Ultra Classic, it is an answer for bikers seeking more comfort and stability on the road. Harley-Davidson research indicates more baby boomers and women are interested in touring bikes, but they don’t want an 800-pound two-wheeler to get the best of them.
Here is a video of the news bike. The video is a little rough but gives god detail on the bike.
This is a great move. It instantly expands their market as the boomers age, still love riding but felt unsure about being able to handle their bikes. With things slowing Harley has responded by producing more Sportsters, smaller more fuel efficient models under $10,000 and now the 3 wheeled bike to expand its older demographic.
Is it a magic pill for slumping sales? No. Will it help? Most definitely. Study after study has shown that riders, once they begin riding Harley Davidson, do not switch to other brands. The cheaper Sportster will reduce the barrier to entry for younger riders and the three wheeler will keep them riding longer. Both are positive trends.
Headed back to New Hampshire next week. Last years trip was a profitable one in that it enabled me to avoid making a mistake in buying Harley Davidson (HOG) shares back then.
I was considering a purchase of HOG shares when I stopped into a huge dealership in Laconia, NH last August. It is either Laconia or Meredith, I’m not sure where the border actually lies…
I wrote after that trip: “One thing immediately struck me. Evey single bike in the store, almost 100 had the same tag on it “Priced Below MSRP”.
I casually asked a salesperson, “What is going on, why is everything on sale”? He replied “can’t move ’em and the new models are coming out”. HMMMM
When I asked why he though they were not selling he replied that most people had been upgrading the last few years with two things, house money (home equity) or Harley financing which is now getting harder to get and much more expensive. He said that because of this people are either sticking with the bikes they have much longer and those who are buying, are buying cheaper, lower margin bikes. For instance, a bike that was selling for $10,000 last year was being offered below $8,000 yesterday. Both of these are very bad for Harley.
When I asked what would happen if he can’t move the old models when the new ones come out, he said that they will just cut back the new model orders. Even worse for Harley.
Earlier this year when shares were at $70 I recommended waiting until they reached the mid $50’s to buy. Based on my weekend visit, they may go lower still. This is a great company that makes a one of a kind product, but, people are not buying it now and that will hurt. I think we may see share prices in the $40’s before the year is out.
Be patient and you may get a fantastic buy, later… “
So I waited…and waited until January and picked up shares at $37.96 which, unless they drop again is at levels not seen since 2003. They sit at $42 and change now for a 13% return (including dividends).
The story here is not a savvy pick but a mistake avoided by doing a little extra homework and asking a few questions of folks and the middle of the situation. Had I purchased shares then I would be sitting on a 20% loss.
Harley Davidson is still a one of a kind company with a one of a kind product. They are growing almost 20% internationally and are diversifying into the sport bike market. There isn’t anything not to like.
I will visit the dealership again next week. My hope is bikes are moving and are not marked down. If that is true then my decision is whether to buy more now. If they aren’t moving and are significantly discounted, we may see another dip in shares. In that instance, I may pick up more later. Selling shares after getting them at purchase price I got is not in the cards for a very long time…….
I am entering this fray because it involves on of my holdings, Harley Davidson (HOG) A new Obama ad said: “The ad featured McCain appearing at the recent Sturgis motorbike rally in South Dakota where he proclaimed to cheering bikers: “Not long ago a couple hundred thousand Berliners made a lot of noise for my opponent.
“I will take the roar of 50,000 Harleys any day!”
With the noise of a motorcycle engine throbbing in the background, the Obama ad’s narrator says: “It’s time to hear the roar of a strong American economy again, and stop John McCain from shipping our jobs overseas.”
Rick Gray, an avid biker who is mayor of Lancaster in Pennsylvania, not far from York, said in an Obama campaign statement that McCain was guilty of hypocrisy.
“John McCain should be ashamed of himself, not just for voting against protecting an American company like Harley-Davidson, but then for going in front of a group of motorcyclists in Sturgis and pretending to be one of them,” he said.
The statement noted that the local Harley factory was shedding 300 workers, as McCain came to York to press home his message to blue-collar workers that Obama is a dangerous risk for the presidency. “
The jobs lost at the Harley Davidson plant have nothing to do with “jobs going overseas”. In fact, not a single Harley Davidson motorcycle is made anywhere but in the US and to the best of my knowledge no local government or the Feds use anything other than Harley’s (mainly police work) . The job losses are simply from the current decline in bike sales due to the economy and tighter credit markets. Simple
I know these ads use populist rhetoric to convey a message in 30 seconds, but, ought they not contain a glimmer of truth?
Some interesting items from the 10-Q released by Harley Davidson (HOG).
HDFS (Harley Davidson Financial Services) Income from securitizations during the first six months of 2008 was lower as compared to 2007 due primarily to the loss on the first quarter 2008 securitization transaction and the absence of a second quarter securitization transaction. This compares to two securitization transactions completed in the first six months of 2007.
During the first six months of 2008, HDFS sold $540.0 million in retail motorcycle loans in a securitization transaction and recognized a loss of $5.4 million, or 0.99% as a percentage of loans sold. This compares to a gain as a percentage of loans sold of 1.9%, or $32.5 million, on $1.75 billion of loans securitized in the first six months of 2007. The loss in 2008 was driven by increased securitization funding costs due to capital market volatility and higher projected credit losses. During the first six months of 2008, HDFS retained $54.0 million of the subordinated securities issued by the securitization trust. The subordinated securities that were retained have been included in the investment in retained securitization interests (a component of finance receivables held for investment) in the Condensed Consolidated Balance Sheets. The cash proceeds from the 2008 securitization transaction are net of the cost of the retained subordinated securities.
Additionally, income from securitizations was negatively impacted during the first six months of 2008 by a $6.3 million write down of certain retained securitization interests. The write down, which occurred in the second quarter of 2008 and is considered a permanent impairment, resulted from a decline in the fair value of certain retained securitization interests due to higher actual and anticipated credit losses on those securitization portfolios. This compares to an impairment charge of $3.5 million incurred during the first six months of 2007.
Annualized losses on HDFS’ managed retail motorcycle loans were 2.14% during the first six months of 2008 compared to 1.63% during the first six months of 2007. The 30-day delinquency rate for managed retail motorcycle loans at June 29, 2008 increased to 4.65% from 4.36% at July 1, 2007. Managed retail loans include loans held by HDFS as well as those sold through securitization transactions. The increase in losses was primarily due to a higher incidence of loss resulting from an increase in delinquent accounts. The Company expects that HDFS will continue to experience higher delinquencies and credit losses as a percentage of managed retail motorcycle loans in 2008 as compared to 2007.
I would have though that these might have been worse than reported. The 30 day delinquency was essentially flat and portfolio losses were only .6% higher despite the credit market conditions. Harley Davidson’s lending arm is doing markedly better that either auto or credit card lenders are currently. With some visibility returning to credit markets, these might be the highest these ratios get a nd we could see additions to earnings from here on out.
Financing Activities
The Company’s financing activities consist primarily of share repurchases, stock issuances, dividend payments and finance debt activity. During the first half of 2008, the Company repurchased 3.8 million shares of its common stock at a total cost of $150.1 million. The Company repurchased 3.1 million of these shares under a general authorization provided by the Company’s Board of Directors in October 2006 to buy back 20.0 million shares. As of June 29, 2008, no shares remained under this authorization.
The remaining 0.7 million shares were repurchased under an authorization granted by the Company’s Board of Directors in December 2007, which separately authorized the Company to buy back up to 20.0 million shares of its common stock. In addition, the Company also has an authorization from the Company’s Board of Directors that is designed to provide the Company with continuing authority to repurchase shares to offset dilution caused by the exercise of stock options and the issuance of nonvested stock. Please see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” for additional details regarding the Company’s share repurchase activity and authorizations.
From the Release: JPMorgan (JPM) today reported 2008 second-quarter net income of $2.0 billion, compared with net income of $4.2 billion in the second quarter of 2007. Earnings per share of $0.54 were down 55%, compared with earnings per share of $1.20 in the second quarter of 2007. Current-quarter results include the effect of merger-related items amounting to a net loss of $540 million (after-tax) related to the acquisition of The Bear Stearns Companies Inc., which closed on May 30, 2008. Excluding these items, net income would have been $2.5 billion.
Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “Our earnings were down significantly due to the unfavorable credit environment and market conditions. The Investment Bank took additional markdowns on leveraged loans and mortgage-related positions. Retail Financial Services experienced further deterioration in its home lending portfolio, which resulted in higher charge-offs and an increase in the allowance for credit losses. However, the firm overall continued to maintain solid underlying business momentum. We had market share gains in Investment Banking fees and key product areas. Retail Financial Services posted organic revenue growth of 15%, and all of our major businesses produced growth in accounts, balances and volumes. Further positive results in the quarter included record performance from both Commercial Banking and Treasury & Securities Services.”
Mr. Dimon added, “We also completed the highly complex Bear Stearns acquisition as planned. Through the truly remarkable partnership and efforts of our people in extremely difficult times, we made great progress towards full integration, while also significantly reducing our combined risk positions. We now have an expanded platform to better serve our institutional clients – one which we fully expect will make our franchise stronger over time.”
Mr. Dimon further remarked, “I am pleased with the strength of our balance sheet and capital positions, particularly in the context of the market challenges we have faced during the past year. During the quarter, we added $1.3 billion to our allowance for credit losses (which now totals $13.9 billion) and maintained strong capital ratios.”
Discussing the firm’s outlook, Dimon said, “Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer. However, the firm has delivered underlying growth across most of our businesses, and with our substantial capital base we can continue to invest for the future. In spite of the environment, we are confident that we are building an increasingly strong and profitable company.”
Dick Bove said:
Bove is right, Dimon is tempering expectations as there is still some ambiguity out there. Rather than thump his chest and make flashy predictions, Dimon reminds people it is tough out there.
Now here is the good part for shareholders. Because of his superior management ability, like Sherwin Williams (SHW) and Harley Davidson (HOG) earlier today results were not nearly as bad as expected. Poor operating environments will inevitably lead to earnings decline but superior management will soften the losses compared to peers while positioning the company to take advantage of the eventual economic rebounds.
Meanwhile people over0react to the operating environment forgetting the superior management and thus “value” investing opportunities are created….
Disclosure (“none” means no position):Long WFC, SHW, HOG, None
Harley-Davidson (HOG) reported Q2 EPS of $0.95 this morning, 19 cents better than estimates. Revenue for the quarter was $1.57 billion vs. consensus of $1.4 billion.
“During the second quarter we shipped 80,326 Harley-Davidson® motorcycles to our dealers and distributors around the world. While this result exceeds our guidance range of 76,000 to 80,000 units for the quarter, it is a decrease of 15.6 percent from the year-ago period. This decrease reflects the impact of the shipment reduction we announced April 17th in response to ongoing weakness in the U.S. economy,” said Jim Ziemer, CEO.
For the first six months of 2008, revenue totaled $2.88 billion, a 2.9 percent increase over the year-ago period. Earnings per share were $1.74, a decrease of 7.9 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson motorcycles were 152,194 units, a 6.6 percent decrease compared to last year’s 162,878 units.
The Company expects to ship between 74,000 and 78,000 Harley-Davidson motorcycles during the third quarter of 2008. For the full year of 2008, Harley-Davidson still plans to ship between 303,500 and 307,500 units. The Company continues to expect full-year EPS of $3.00 to $3.18.
The Company repurchased 1.3 million shares of its common stock at a cost of $50.0 million during the second quarter of 2008. On June 29, 2008, the Company had 235.3 million shares of common stock outstanding. As of June 29, 2008, there were 19.3 million shares remaining on a board- approved share repurchase authorization.
When one consider the current economic environment and credit conditions out there, these results really are fantastic. Far from a “luxury item”, it would seem motorcycles, especially Harley are becoming the alternative of choice for gas pained consumers.
Here is the kicker, when credit conditions improve, sales ought to increase even further. One really ought not expect oil and gas prices to fall very far anytime soon so motorcycles as an alternative will remain while becoming more affordable.
International sales, the current growth of the company grew 11%. What will be interesting and I hope it is asked on the earnings call is what contribution can be expected from the recent acquisition. Also, can someone ask is the double digit growth these is expected to continue for a while?
Harley Davidson (HOG) is expanding its footprint overseas. With International sales increasing 16%-20% even in the current environment, the move makes perfect sense.
“Harley-Davidson, Inc. (HOG) today announced the signing of a definitive agreement to purchase the Italian motorcycle maker MV Agusta Group (MVAG). Under the agreement, Harley-Davidson will acquire 100 percent of MV Agusta Group shares for total consideration of approximately 70 million euros ($109 million), which includes the satisfaction of existing bank debt for approximately 45 million euros ($70 million). In addition, the agreement provides for a contingent payment to Claudio Castiglioni in 2016, if certain financial targets are met. MV Agusta Group is privately held, with the Castiglioni family owning 95 percent of MVAG shares.
The acquisition is expected to close in several weeks, pending the satisfaction of contingencies and receipt of regulatory approvals. Harley-Davidson intends to fund the transaction primarily through euro-denominated debt.
MV Agusta Group has two families of motorcycles: a line of exclusive, premium, high-performance sport motorcycles sold under the MV Agusta brand; and a line of lightweight motorcycles sold under the Cagiva brand. MV Agusta’s F4-R motorcycle, powered by a 1078cc in-line four-cylinder liquid cooled engine, is rated at 190 hp. The company sells its products through about 500 dealers worldwide, the vast majority of them in Europe. In 2007, MVAG shipped 5,819 motorcycles. During 2008 MVAG has significantly slowed production due to financial difficulties.
“Motorcycles are the heart, soul and passion of Harley-Davidson, Buell and MV Agusta,” said Harley-Davidson, Inc. Chief Executive Officer Jim Ziemer. “Both have great products and close connections with incredibly devoted customers. The MV Agusta and Cagiva brands are well-known and highly regarded in Europe. They are synonymous with beautiful, premium, Italian performance motorcycles,” Ziemer said.
Harley-Davidson, Inc. plans to continue to operate MV Agusta Group from its headquarters based in Varese, Italy. Following closing, the first priority will be to appoint a leadership team to include a new Managing Director and to resume the manufacture of current models.”
