Heavyweight motorcycle maker Harley-Davidson, Inc. (HOG) Friday reported its first quarterly loss since 1993 for the fourth quarter from a profit last year.
The loss primarily reflects sluggish demand and sharply lower revenues on a previously announced 53.1% reduction in Harley-Davidson motorcycle shipments from the previous year, as well as a one-time restructuring and Buell product line exit costs.
For the fourth quarter, the Milwaukee, Wisconsin-based company's net loss was $218.70 million or $0.94 per share, compared with a profit of $77.81 million or $0.34 per share in the prior-year period.
Harley-Davidson's profit has declined for nine straight quarters on a year-over-year basis, before reporting a loss in the latest quarter.
On average, 12 analysts polled by Thomson Reuters expected Harley-Davidson to report a loss of $0.32 per share for the quarter. Analysts' estimates typically exclude special items.
Loss from continuing operations was $147.17 million or $0.63 per share versus a profit of $91.94 million or $0.40 per share a year earlier.
Loss from discontinued operations widened to $71.53 million or $0.31 per share from a loss of $14.14 million or $0.06 per share in the same quarter last year. Discontinued operations for the period include operations of its subsidiary MV Agusta, which Harley-Davidson intends to sell.
Net revenues for the period slumped 40.2% to $764.50 million from $1.28 billion in the fourth quarter of fiscal year 2008. Analysts expected the company to generate revenues of $764.39 million for the quarter.
Harley-Davidson's gross profit for the quarter plummeted to $154.82 million from $408.28 million in the comparable period prior year. Gross margin percent decreased during the quarter, mainly due to fixed costs being spread over fewer units and the impact of exiting the Buell product line.
On a segmental basis, revenues from Harley-Davidson motorcycles plummeted 45.6% to $552.04 million from $1.02 billion last year, Parts & Accessories revenues were $144.63 million versus $152.03 million in the year-earlier quarter. Revenues from General Merchandise, including revenues from MotorClothes apparel, dropped to $66.75 million from $68.97 million in the fiscal 2008-year period. Buell motorcycles reported negative revenues of $3.96 million compared to positive revenues of $33.38 million in the prior year, and other revenues declined to $5.05 million from $8.15 million a year ago.
During the three-month period, total worldwide retail sales of Harley-Davidson motorcycles declined to 36,754 from 46,755 last year. Total retail sales from North America region was 22,314 versus 31,452 a year earlier, and Asia Pacific region retail sales was 5,514 compared to 6,025 in the 2008-year period. Total retail sales from Latin America Region dropped to 1,607 from 2,003 a year ago, whereas European region retail sales, including Middle East and Africa, rose to 7,319 from 7,275 in the same quarter last year.
Retail sales of Harley-Davidson motorcycles during the quarter fell 21.4% worldwide, 27.9% in the US and 10.3% in international markets, compared to the previous-year quarter. Industry-wide US retail heavyweight motorcycle sales decreased 20.9% during the quarter compared to last year.
Harley-Davidson's selling, administrative and engineering expenses for the period rose to $256.39 million from $246.05 million in the previous year, and interest expenses were $10.21 million versus $3.32 million in the corresponding period last year. In the fourth quarter, the company incurred a one-time cost of $167.1 million with regard to restructuring and Buell product line exit costs.
Financial service expenses for the period increased to $134.18 million from $89.80 million in the 2008-year period. Income from financial services were up to $129.15 million from $64.88 million a year earlier.
During the fourth quarter, the company had an income tax benefit of $90.93 million, compared with a provision of $46.09 million in the prior year. Investment income was $1.04 million compared to $4.04 million last year.
In the three-month period, Harley-Davidson incurred an operating loss of $221.80 million from motorcycles & related products as compared with an income of $162.24 million in the fiscal 2008. The company noted that operating margin was negatively impacted by lower gross margin and restructuring charges incurred during the quarter.
In the preceding third quarter, the company's net income was $26.5 million, a decline of 84.1% from the previous year's $166.5 million. On a per share basis, earnings plummeted 84.5% to $0.11 from $0.71 earned in the year-ago quarter. Third-quarter net revenues dropped to $1.12 billion from $1.42 billion reported last year.
For full year 2009, Harley-Davidson's net loss was $55.12 million or $0.24 per share versus a profit of $654.72 million or $2.79 per share in the comparable period prior year, reflecting a one-time goodwill impairment charge of $28.39 million for the year. Income from continuing operations plunged 89.7% to $70.64 million or $0.30 per share from $684.24 million or $2.92 per share last year, reflecting effects of lower motorcycle shipments, restructuring and Buell product line exit costs, and non-cash charges related to Harley-Davidson Financial Services.
The company's loss from discontinued operations for the year widened to $125.76 million or $0.54 per share from a loss of $29.52 million or $0.13 per share in fiscal 2008-year period. Full-year revenues were $4.29 billion, down 23.1% from $5.58 billion in the previous year. Analysts expected the company to report earnings of $0.36 per share on revenues of $4.32 billion for the year.
Commenting on the results, president and chief executive officer Keith Wandell said, "Our full-year 2009 results were affected by the difficult economy, as well as the planned actions we took that resulted in restructuring charges of $224 million. We believe these actions are critical to restoring greater profitability and long-term growth to Harley-Davidson."
Looking ahead, Harley-Davidson said it currently anticipates previously announced restructuring activities that began in 2009 to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. The company also added that it continues to expect annual ongoing total savings from restructuring of nearly $240 million to $260 million upon completion of all announced restructuring activities, including savings of about $135 million to $155 million expected in 2010.
The company expects to ship 201 thousand to 212 thousand Harley-Davidson motorcycles in 2010 to dealers and distributors worldwide, which is a reduction of 5% to 10% from 2009. In the first quarter of 2010, Harley-Davidson expects to ship 52 thousand to 57 thousand motorcycles.
For the full year, Harley-Davidson estimates gross margin to be in a range of 32.0% to 33.5%, and capital expenditures to be between $235 million and $255 million, including $95 million to $110 million to support restructuring activities. "We believe 2010 will continue to be a challenging year," Wandell added.
HOG is currently trading on the New York Stock Exchange at $23.95, down $1.63 or 6.37%, on a volume of 6.66 million shares. In the past 52-week period, the stock trended in a range of $7.99 to $30.00.
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