Harley-Davidson, Inc. (HOG)
Q2 2009 Earnings Call Transcript
July 16, 2009 9:00 a.m. ET

Executives

Amy Giuffre – Director of Investor Relations
Keith E. Wandell - President, Chief Executive Officer, Director
John Olin - Interim Chief Financial Officer; Vice President and Controller of Harley-Davidson Motor Company
Lawrence G. Hund - President and Chief Operating Officer of HDFS

Analysts

Timothy Conder - Wells Fargo
Craig Kennison - Robert W. Baird
Robin Farley - UBS
Felicia Hendrix - Barclays Capital
James Hardiman - FTN Equity Capital Market
Edward Aaron - RBC Capital Markets
Patrick Archambault - Goldman Sachs
Rod Lache - Deutsche Bank

Presentation

Operator

Good morning. My name is Patrick and I will be your conference operator today. At this time, I would like to welcome everyone to the Harley-Davidson second quarter 2009 earnings conference call. (Operator Instructions) All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. If you’d to ask a question during this time simply press *, then the number 1 on your telephone keypad. If you’d like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to the Director of Investor Relations, Amy Giuffre.

Amy Giuffre – Director of Investor Relations

Thanks, Patrick and good morning, everyone. Welcome to Harley-Davidson''s second quarter 2009 earnings conference call. Today Harley-Davidson''s President and CEO, Keith Wandell, will provide comments on our business. Harley-Davidson''s Interim CFO and Controller, John Olin, will share the financial results for the second quarter and Larry Hund, President of Harley-Davidson Financial Services, will share details from that segment. At the close of our prepared comments, we will open the call for your questions.

Before we begin, please note that this call is being webcast live on harleydavidson.com and will be available for replay throughout the next several weeks. It can also be accessed until July 23rd by calling 706-645-9291, or 800-642-1687 in the U.S. The PIN number is 15669305#.

Our comments today will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings, with the SEC. Harley-Davidson disclaims any obligation to update the information in this call.

Now I’ll turn the call over to Keith.

Keith E. Wandell – Chief Executive Officer

Well, thank you, Amy and good morning everyone and thank you for joining today’s call. It’s good to have this time with you today to talk about our second quarter results. Before I get started, I wanted to use this opportunity to thank our employees and our dealers for the great professionalism that they continue to demonstrate and for staying highly focused during these tough times. Since May 1st, we have focused on two clear priorities. The first priority is to ensure a long-term strategy that will align all of our resources on relentlessly driving sustainable, profitable growth for all of our stakeholders and to align our suppliers, our dealers, our employees, and our leadership as one team with clarity of purpose and to continue to build the iconic Harley-Davidson brand with an intense customer focus. The second priority is to make sure that we are doing the right things to guide us through the current economic downturn and that our team is properly aligned to execute on these actions.

While our current challenges are substantial, so are our unique strengths and if those strengths are properly put to work through the right long-term strategy, we have a strong conviction that we can indeed operate as a competitive, growing business as the economy strengthens. With that said, given the urgency of our current situation, we really wanted to focus today on our immediate challenges and the key actions we are taking to work through them. By now you’ve all seen our second quarter results in this morning’s press release but let me quickly call out just a couple of key points. Overall, sales of Harley-Davidson motorcycles at retail in the U.S. declined significantly in the second quarter, with the back drop of unemployment at 25-year highs and consumer confidence at near-record lows and while our company did take actions earlier in the year to modify our cost structure, we are committed to making the additional tough decisions required to balance supply in line with our current demand and to emerge from this recession positioned to move ahead with strength.

The further declines at retail have led to an intensified imbalance in our supply and demand in the last few months and as most of you know when it comes to protecting and enhancing the brand, managing supply in line with that demand is one of the most important things that we can do. So we are taking more aggressive action by reducing our 2009 shipment plan by 25% to 30%. As a result, we are taking the corresponding actions to bring our cost structure in line with the volume reductions. Overall, we’re reducing the size of our hourly production work force by approximately 700 positions beyond the reductions that were announced earlier this year. And in addition to that, we believe there’s a tremendous opportunity for improved efficiencies and cost effectiveness at our Touring and Softail facility in York, Pennsylvania. We’ve undertaken a study along two parallel paths. One path is to look at how we restructure those operations and the other path is to potentially relocate those operations to another U.S. location. We expect to make a decision on the best path forward later this year.

We also announced today that we are making further reductions in the size of the non-production, primarily salaried work force, about 200 positions on the motorcycle side and about 100 more at Harley-Davidson Financial Services. Let me assure you we are not taking these actions lightly. We are taking these actions because we feel a strong sense of accountability to make the tough calls that are required to ensure the long-term viability and success of Harley-Davidson. And with respect to Harley-Davidson Financial Services, even though these are challenging times, the ability of HDFS to provide retail financing is a key strategic advantage for us and our dealers. So, the progress that we have made in recent months with HDFS, have been critical. As you know, we believe we’ve obtained the needed funding for HDFS into 2010 and we continue to work diligently on the future liquidity needs of that business.

There’s one final action I wanted to share with you immensely. We recently realigned our senior management team into a simple unified structure with clear lines of accountability. It’s extremely important that we work through this challenging period by managing Harley-Davidson as one company working as one team that is pulling in one direction. Our new structure puts us in a much better position to operate with speed, clarity, decisiveness, and the accountability that we need.

Now with that, let me turn it over to John Olin, who will go through more details with you on the financials for the quarter. John.