This summary is based on the second quarter fiscal 2008 earnings call conducted by Harley-Davidson Inc. (HOG) on July 17, 2008.
Management:
President, CEO and Director: James L Ziemer
President, Harley-Davidson Financial Services: Saiyid T Naqvi
VP, Treasurer and Acting HDFS CFO: Perry Glassgow
VP and Controller: John A Olin
Director, IR: Amy Guiffre
Key Investor Issues:
- Quarter-to-quarter revenues dipped from $1.62 billion to $1.57 billion.
- Q2 EPS increased 16.7% to 95 cents from $1.14 in the year ago quarter.
- The company repurchased 1.3 million shares for $50 million in Q2.
Half Year Fiscal 2008 Results:
- Total revenues increased 2.9% to $2.88 billion from the year ago period.
- The EPS were $1.74, an increase of 7.9% from the same period last year.
- The shipments of Harley-Davidson motorcycles were 152,194 units. This represents a decrease of 6.6% from last year’s 162,878 units.
- Harley-Davidson motorcycle revenue firmed 2.7% to $2.20 billion from $2.15 billion in the last year period.
- The Parts & Accessories (P&A) revenue totaled $447.6 million, a 0.9% decrease from $451.6 million last year.
- The General Merchandise revenue rose 8% to $160.8 million compared with $148.8 million during the same period in fiscal 2007.
- HDFS operating income decrease 42% to $72.1 million from last year’s $124.1 million.
The cash and marketable securities totaled $803.9 million as of June 29, 2008.
- The cash used by operations was $39 million during the first six months of 2008 versus $1.06 billion of cash provided during the first half of 2007.
- The decrease in cash flows from operations was a result of net proceeds from securitization being $1.27 billion less than the same period in 2007.
- During the first half of 2007, HDFS funded a greater percentage of its business with proceeds from commercial paper and medium term notes than in the same period last year.
- The CapEx were $99.6 million during the first six months of 2008.
Second-Quarter Financial Highlights:
During the quarter, the company shipped 80,326 Harley-Davidson motorcycles to dealers and distributors around the world.
- While the result exceeds the guidance range of 76,000 to 80,000 units for the quarter, it represents a decrease of 15.6% from the year-ago period.
- The decrease reflects the impact of the shipment reduction announced on April 17 in response to ongoing weakness in the U.S. economy.
The management announced the planned acquisition of the MV Agusta Group.
- The company also celebrated the grand opening of the Harley-Davidson Museum.
- The company also looks forward to introducing the exciting new 2009 motorcycles.
- A month from now, the company will commence its 105th Anniversary Celebration with the launch of the first of 105 motorcycle rides to Milwaukee from around the U.S.
Segment Analysis:
Motorcycles and Related Products:
- The total revenue decreased by $67 million or 5.3% to $1.19 billion compared with the same period in 2007.
- The shipments of Harley-Davidson motorcycles totaled 80,326 units, a decrease of 14,791 units or 15.6% compared with last year’s Q2.
- The revenues from Parts and Accessories (P&A) totaled $265.7 million, an increase of $2.3 million or 0.9% from the year ago quarter.
- According to management, P&A consists of Genuine Motor Parts and Genuine Motor Accessories.
- The revenue from General Merchandise, which consists of MotorClothes apparel and collectibles, totaled $76.8 million.
- This represents an increase of $4.1 million or 5.6% compared with the same period last year.
- The gross margin for Q2 was 35.7% of revenue versus 37.4% for Q2 last year.
- The Q2 operating margin decreased to 20.1% from 23.9% in Q2 of 2007.
- The company’s gross and operating margins were adversely impacted by the shipment volume reduction.
