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Posts Tagged ‘Profit’

Northwest Riding Season's

As I sit down and write this post, it is 45 degrees with rain and wind.  I spent the last week at NAMM in Anaheim, CA where it was sunny.  Today is one of those gray winter days that make me wonder what I’m doing here.

Then I remember driving in L.A. traffic during rush hour and thinking this is nuts. Or rolling through Furnace Creek on Hwy 190 last April watching it approach 90 degrees and thinking that’s nuts.  Or even a couple summers ago rolling across Alberta where it was super flat and you’d ride 20+ miles between curves in the road.  That’s when I remember why I’m here…

The northwest has some of the best riding roads in the country and we actually have seasons.

And speaking of seasons, it’s earning’s ‘season’ and Harley-Davidson announced a profit versus a year ago loss.  Harley’s sales of motorcycle and related products grew 13% in 2011 and the recent quarter marked its third-straight increase in U.S. sales.  The result is remarkable given that most financial analysts see a continuing “trough” in the U.S. economy, which is beset by a weak recovery and a jobless rate that is likely to remain in the 8% range for 2012.

Harley’s motorcycle and related product revenue rose 12% to $1.03B.  Retail sales of new motorcycles grew 11% worldwide and included a 12% increase in the U.S.  International sales rose 9.7% and included a 5.8% increase in Europe, even though consumer confidence has been shaken by the current economic crisis.  The motor company shipped 50,730 motorcycles to dealers and distributors during the quarter, compared with 44,481 in the same quarter last year. For the full year, shipments rose 11% to 233,117 bikes.  Even Harley’s financial services division got a boost from improved credit conditions. New motorcycle loans jumped 14% to $349.5 million and represented about half of the company’s retail sales.

Keith Wandell (H-D CEO and President) credited the Q4 sales jump to improved consumer confidence in the U.S., along with key growth investments overseas.  However, in Europe, the Euro-zone is facing its own, even larger, economic crisis and Mr. Wandell reminded the  analysts with, “We will continue to keep a close watch on the marketplace and remain cautious in our expectations of retail given the degree of continued economic uncertainty including regions like the Euro zone.”

For all of 2011, Harley reported net income of $599.1 million, or $2.33 per share, up from $146.5 million, or $1.11 per share, in 2010.  Motorcycle and related product revenue increased to $4.66B from $4.18B.

Photo taken by author.

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H-D Advertising in India

In spite of continued high unemployment numbers, homebuilder confidence at a 15-month low and very tight credit,  Harley-Davidson Inc. (HOG) reported that its second-quarter 2010 net income rose to $71.16 million or $0.30 per share, from $19.75 million or $0.08 per share in the same quarter last year. The biggest money-maker was in the Financial Services Segment as it became profitable to lend money for motorcycle purchases once again.

Income from continuing operations were $139.3 million, or $0.59 per share, compared to income of $33.4 million and earnings per share of $0.14 from continuing operations in the year-ago quarter. In the second-quarter the financing arm returned to the black and posted a profit of $60.8 million, after posting a loss of $90.5 million during the same period a year ago.

Net revenue from motorcycles and related products were basically flat at $1.135 billion, compared to $1.136 billion in the year ago quarter.  The company expects to ship 53,000 to 58,000 motorcycles in the third quarter and reiterated its expectation to ship 201,000 to 212,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2010, a reduction of five to ten percent from 2009.

Harley-Davidson now expects gross margin to be between 32.5% and 34.0% for the full year, versus the prior estimate of 32.0% to 33.5%. The Company continues to expect full-year capital expenditures of between $235 million and $255 million, including $95 million to $110 million to support restructuring activities.

At the press briefing Keith Wandell, President and CEO of H-D stated:

“Harley-Davidson is making steady progress at executing its strategy to deliver results through focus,” he continued with “We are seeing the benefits of our restructuring and continuous improvement activities reflected in our earnings performance.”

Clearly declining motorcycle sales are the biggest reason for Harley’s struggles and the company’s solid Q2 is not all that reassuring when you remove the “bank” profitability a.k.a. financial services.  New products launch on July 27th which holds some promise along with the international expansion into India.

Updated: July 20, 2010 — John Olin (H-D CFO)  stated during the conference call with investors today that many strapped Harley customers wound up selling their motorcycles during the recession. This has created a glut of used bikes on the market, causing the ratio of used-to-new bike sales to rise to two-to-one in 2009 from one-to-one in 2007.

Photo courtesy of H-D.

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That was the key take away in today’s Q1’10 earning’s call as the stock price soared.

CEO, Keith Wandell stated:

“We are seeing directional improvements in our dealers’ retail motorcycle sales as we enter the key selling season.  At the same time, given the global economic uncertainty that still exists, we believe conditions will remain challenging throughout the year, and we continue to factor that into how we manage the business.”

Net revenues for the quarter declined to $1.04B from $1.29B in the same quarter last year.  Net income was $33.33M or $0.14 per share, sharply lower than $117.35 million or $0.50 per share in the prior-year quarter.  The company noted that Q1 earnings included operating income from H-D Financial Services of $26.7 million, marking a return to profitability for the company’s financial subsidiary.

Under the motorcycles and related products, revenues for H-D motorcycles were $808.81M, down 20% from $1.01B in the year-ago quarter. Shipments of H-D motorcycles totaled 53,674 units, a decline from 74,670 units last year. Domestic shipments dropped to 35,668 units from 52,710 units in the prior-year quarter, while exports fell to 18,006 units from 21,960 units in the same quarter of last year.

Using an analogy from Iceland’s Eyjafjallajokull volcano, I’d like to see less ash and more lava coming from Harley, but it was a stable quarter!

Photo courtesy of Masternewmedia.org

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chapelA good riding buddy of mine lost his father recently.

Coping is difficult for family and for friends it’s can be challenging to know what to say or not say that might remind the person about something they don’t want to remember.  But close friends know how not to say a word and yet provide comfort.

Frank served in the U.S. Army and was a Korean War veteran which meant he always had a sense of purpose to what ever it was he was doing.  I first met him back in the early ‘80s when he ran his own company selling electronic components.  I worked at a medical instrumentation company which purchased his parts and I’ll never forget his deep vocabulary of “one-liners.” A salesman of high integrity to the very core and one that would make Glengarry Glen Ross “ABCs” proud.   I remember on more than one occasion “chasing” him out of the manufacturing assembly area for chatting up the “common people” not because he had a talent of figuring out what his clients were always up to, but was the kind of guy who made people laugh and truly enjoyed learning more about the folks he worked with.  Chatting/laughing and killing time in manufacturing = fewer widgets thus the need for chasing him off.

I was a privilage to know Frank and I was thinking about his — “Trust No One” — saying while I wrote this post.  How prophetic that the biggest story of the week is the insane profits at Goldman Sachs.  If you’d rather get your news from “Rolling Stone”, Matt Taibbi weighs in HERE.  Clearly Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.  In addition, it spotlights that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis.

Frank passed away peacefully surrounded by the love of his family and friends.  Small as it may be, I wanted to provide a shout out of remembrance and re-commit to memory his one-liner as I sit in front of the TV screen, anesthetized by “talking heads” hoping our future doesn’t go down the drain as banking insiders believe it’s business as usual.

Photo taken at Chapel of the Holy Cross in Sedona, Az.

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