Thursday, Motorcycle manufacturer Harley-Davidson Inc. (HOG) posted a steep decline in second-quarter profit, largely impacted by lower motorcycle shipments and charges related to HDFS. The company also said it would further slash workforce, while lowering its 2009 shipment expectations for Harley-Davidson motorcycles.
Q2 Results
The Milwaukee, Wisconsin-based company's second-quarter net income plunged to $19.8 million or $0.08 per share from $222.8 million or $0.95 per share in the prior year quarter.
On average, 13 analysts polled by Thomson Reuters expected the company to post earnings of $0.24 per share. Analysts' estimates typically exclude special items.
The company noted that the latest quarter results were primarily affected by the planned 27.6% reduction in motorcycle shipments as well as by the one-time reclassification of finance receivables from held-for-sale to held-for-investment and the related $72.7 million non-cash provision to establish the related initial credit loss allowance.
Additionally, the company recorded a $28.4 million non-cash, one-time impairment charge to write off the goodwill recorded in connection with the 1995 purchase of HDFS, due to Harley-Davidson's lower shipment volume projections.
Quarterly net revenues dropped to $1.15 billion from the previous year's revenue of $1.57 billion, falling short of thirteen Wall Street analysts' consensus revenue estimate of $1.18 billion for the quarter.
Business Segments
On a segmental basis, the company's worldwide retail unit sales of new Harley-Davidson motorcycles descended 30.1% from last year, while retail new Harley-Davidson motorcycle sales in the U.S. declined 35.1% and were down 18.2% in international markets versus the previous year. Industry-wide retail sales of heavyweight motorcycles in the U.S. decreased 48.1% for the same period.
The company shipped 58,179 Harley-Davidson motorcycles in the second quarter of 2009, compared to 80,326 motorcycles shipped in the year-earlier quarter and within the company's guidance for the first quarter.
The motorcycles segment generated second-quarter revenue of $808.7 million, down 31.7% from last year's revenue of $1.18 billion, while the financial services segment incurred an operating loss of $62.1 million versus operating income of $37.1 million earned a year ago.
Year-To-Date Highlights
For the six-month period, the company reported net income of $137.1 million or $0.59 per share, compared to $410.4 million or $1.74 per share in the same period of last year.
Year-to-date net revenues fell to $2.44 billion from $2.88 billion reported in the comparable period of the previous year.
Road Ahead
Amid the downturn in the retail motorcycle sales, the company lowered its 2009 shipment expectations for Harley-Davidson motorcycles to between 212,000 and 228,000, reflecting 25%-30% lesser than the 303,479 shipped in 2008. Previously, the company had expected to ship 264,000 - 273,000 motorcycles. Further, the company said it expects to ship 52,000 - 57,000 Harley-Davidson motorcycles in the third quarter.
Citing lowered shipment volume, the company said it would implement a further reduction of about 700 positions in the hourly production workforce in 2009. Harley-Davidson will also reduce the non-production, primarily salaried headcount by an about 300 additional positions, including a reduction at HDFS.
Harley-Davidson plans to offer a voluntary separation incentive package to eligible salaried employees. Recently, the company had announced workforce reductions totaling about 1,400 - 1,500 hourly production positions in 2009 and 2010 and about 300 non-production, primarily salaried positions.
Also, the company now expects the volume reductions and restructuring activities to result in one-time charges of about $160 million - $190 million over the course of 2009 and 2010, an increase of $40 million from earlier estimates, including $50.0 million incurred during the first half of 2009. Harley-Davidson now estimates ongoing annual savings of about $140 million - $150 million, or $70 million greater than previously estimated, upon completion of the announced restructuring actions. Savings in 2009 are now estimated to be $70 million - $85 million.
Stock Performance
Harley-Davidson shares, which have been trading between $7.99 and $48.05 in the past 52 weeks, closed Wednesday's trading session at $17.49.
For comments and feedback: editorial@rttnews.com