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Apr-18-2008

A Downshift for Harley-Davidson

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CONTENTS:

With a piece of good news, Chief Executive Jim Ziemer noted the company outperformed the U.S. heavyweight motorcycle market, which saw sales drop 14 percent in the quarter. (More...)
Most analysts remain skeptical on Harley and see little reason to derive too much hope from Polaris. (More...)
Looking forward, the new allocation system we introduced last year to the dealer network is an important tool that in time will ultimately provide more flexibility and enable us to do a better job of having the right motorcycles in the right market at the right time. (More...)
Currently, about one quarter of Harley-Davidson's motorbikes are sold overseas, but the company official believe the proportion will grow. (More...)
For Harley, the few bright spots remain in the international market. (More...)
As I mentioned earlier HDFS had already completed a first quarter securitization transaction. (More...)
During that quarter, overseas shipments accounted for almost one-third of Harley's total shipments. (More...)
All of those older guys who bought in the 80's and 90's are now much older and selling their low mileage bikes. (More...)
The Milwaukee-based motorcycle manufacturer also reported that it expects full-year per-share earnings to drop as much as 20 percent. (More...)
"We are cutting our '08 EPS estimates to $3.06 from $3.91, and reducing our 12-month target price to $32 from $37," wrote S&P; analyst Erik Kolb in an Apr. 17 note. (S&P;, like BusinessWeek, is a unit of the McGraw-Hill Cos.) (More...)

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With a piece of good news, Chief Executive Jim Ziemer noted the company outperformed the U.S. heavyweight motorcycle market, which saw sales drop 14 percent in the quarter. Ziemer said the company would cut shipments to dealers so they wouldn't be stuck with unsold bikes. Harley plans to cut this year's shipments by between 23,000 and 27,000 units. That means the company expects to ship between 303,500 and 307,500 units for the full year, at least 7 percent below last year's 330,619. As a result of lowered expectations and reduced shipments, Harley-Davidson will cut its workforce by about 8 percent and curtail shipments of its motorcycles for 2008. [1] Harley-Davidson has been smart in pushing business overseas, said Robin Diedrich, senior consumer analyst for Edward Jones. Americans have grown leery about job losses and the declining value of homes, particularly in California and Florida, which happen to be big Harley markets, she said. While the income of most Harley buyers, men between 40 and 55, is above the national average, even they are not immune to economic jitters, Diedrich said. "A $20,000 motorcycle is something people are going to think twice about, or just hold on to their current bike for a little bit longer and just kind of wait until they feel a little more confident about the economy," she said. Ziemer said the company would cut shipments to dealers so they wouldn't be stuck with unsold bikes. Harley plans to cut this year's shipments by between 23,000 and 27,000 units. That means the company expects to ship between 303,500 and 307,500 units for the full year, at least 7 percent below last year.[2]

The shutdowns will probably occur before July, Klein said. Harley is slashing jobs because it expects to make fewer motorcycles this year. The company reduced its production goals in light of U.S. retail trends and uncertainty about the future of the economy, Chief Executive Officer Jim Ziemer said in a written statement. Harley said it expects 2008 motorcycle shipments of between 303,500 and 307,500, which would be down at least 23,000 from its 2007 shipments. The company also slashed its 2008 earnings guidance to between $3 and $3.18 per share, which would fall below 2007 earnings and far below analyst expectations.[3]

A poll by Thomson financial has analysts expecting a profit of 77 cents per share on revenue of $1.23 billion. Worldwide retail sales of Harley-Davidson motorcycles were down 5.6 percent in the quarter, and 12.8 percent in the U.S. The company says it will ship up to 27,000 fewer bikes this year.[4] "With growing weakness in the economy, U.S. retail sales of Harley-Davidson motorcycles were down 12.8 percent in the first quarter," company CEO Jim Ziemer said in a release. "We've said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year."[5]

Looking forward, it expects the market to remain tough and plans to produce up to 27,000 fewer bikes than last year. Harley said it was "optimistic" about its long-term prospects because of its strong brand identity. Its U.S. sales during the past quarter had been "disappointing", Harley admitted, but the company said it had outperformed the market as a whole. Overseas sales remained strong, rising 17% over the period, but this was not sufficient to stop the firm's profits from falling 2.5% to $192.3m ('97m). Harley is preparing itself for a tough period ahead by cutting 730 jobs, both on the shop floor and in support functions. It will also temporarily shut some of its plants to reflect the slower rate of production. "We believe these actions will better position the company for a business environment that we expect to continue to be challenging," said chief executive Jim Ziemer. He added: "Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength."[6] Kennison explained that in years past, small production runs led dedicated consumers often to purchase the cruisers for prices well above the manufacturer suggested retail price. By cutting production, Harley reduces the level of dealer inventory, helping the brand regain its scarcity value, he added, which is critical for a premium brand like Harley-Davidson. Kennison pointed out that demand for discretionary consumer durables, such as boats, recreational vehicles and all-terrain vehicles has slowed, but Harley has been surprisingly resilient, attributable to a supply/demand imbalance driven by production limitations. Harley-Davidson reported profits of $187.6 million, or 79 cents per diluted share, on $1.3 billion sales in its first quarter, down 2.4% from profits of $192.3 million, or 75 cents per diluted share on $1.2 billion sales in the first quarter last year.[7]

In light of our actions and the uncertain environment going forward the company now expects full year 2008 EPS to decline 15 to 20% compared to last year resulting in an EPS between $3.00 and $3.18. This guidance includes a charge of $20 to $25 million to implement the workforce reduction. Beginning in 2009 we expect an ongoing annual benefit of $35 to $40 million as a result of this workforce reduction. This supersedes all prior guidance on earnings per share and other measures. These decisions on shipments and workforce reductions weren'''t easy to make by any stretch of the imagination especially since the employees who will be affected are valued members of the Harley-Davidson family. I believe these decisions are the right ones for the long term interest of all our stakeholders during what we expect to be a continued tough retail environment in the U.S. throughout 2008.[8] The earnings beat the expectations of analysts, who were looking for a profit of 77 cents per share on revenue of $1.23 billion, according to a poll by Thomson Financial. Harley-Davidson doesn't expect the market to get better anytime soon, the company projects earnings to fall between 15 percent and 20 percent, compared to its own previous predictions of expected moderate revenue and earnings per share growth of between 4 percent and 7 percent in 2008.[1]

MILWAUKEE (AP) - Harley-Davidson Inc. (nyse: HOG - news - people ) will cut its work force by about 8 percent and curtail shipments of its iconic motorcycles this year after reporting a decline in first-quarter profits Thursday, with domestic sales tumbling nearly 13 percent. HARTFORD, Conn. (AP) - United Technologies Corp. (nyse: UTX - news - people ), which makes Otis elevators, Sikorsky helicopters and Carrier air conditioners, said Thursday its first-quarter earnings rose 26 percent as the weak dollar boosted profits throughout the business. SAN JOSE, Calif. (AP) - Chip maker Cypress Semiconductor Corp. (nyse: CY - news - people ) said Thursday its first-quarter loss widened on higher costs and restructuring charges. CLEVELAND (AP) - American Greetings Corp. (nyse: AM - news - people ), the nation's second-largest greetings card company, said Thursday it swung to a profit in its fourth quarter because it was no longer weighed down by costs that cut into last year's quarter. NEW YORK (AP) - Financial services firm CIT Group Inc. (nyse: CIT - news - people ) said Thursday it swung to a loss during the first quarter due to losses in its home and consumer lending divisions. MILWAUKEE (AP) - A.O. Smith Corp. (otcbb: SAOSA.OB - news - people ) said Thursday its first-quarter earnings rose 12 percent as the electrical and water products maker passed along higher raw materials costs to offset slightly weaker sales.[9] MILWAUKEE (AP) — Harley-Davidson Inc., which has been slowing down for the past few years, has hit a serious rough patch as even its upwardly mobile customer base thinks twice about dropping thousands of dollars on a classic motorcycle. The maker of one of America's most iconic rides said Thursday that it will cut its work force by 8 percent and trim bike shipments by the thousands with domestic sales falling nearly 13 percent in the first quarter.[2]

Shipments overseas represented about one-third of the company's total shipments in the most recent quarter. Ziemer said the company has been monitoring sales and would cut shipments to dealers so they wouldn't be stuck with unsold bikes. Harley plans to cut this year's shipments by between 23,000 and 27,000 units. That means the company expects to ship between 303,500 and 307,500 units for the full year, at least 7 percent below last year's 330,619.[10] JOHN C. WHITEHEAD/The Patriot-News A Harley Davidson truck heads heads into the York plant around 3PM Thursday, April 17, 2008. According to The Associated Press, Harley Davidson might have to layoff as much as 300 employees at their York plant. Harley-Davidson will cut about 300 jobs from its York-area plant over the next few months, according to an Associated Press article today quoting Jim Ziemer, CEO of the Milwaukee-based motorcycle maker. Harley-Davidson plans to reduce its workforce by 730 employees because of "growing weakness in the economy" affecting U.S. retail sales, Ziemer said in a statement released by the company today.[11] In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units," Ziemer stated. As a result of declining profits and reduced shipments, Harley-Davidson is planning to trim its non-production workforce by about 370 jobs. Though The Motor Company didn't state specifically where those cuts would be, the Milwaukee Journal Sentinel reported that approximately 300 of the 370 unionized jobs on the chopping block will be from the company's Springettsbury Township plant.[12]

MILWAUKEE (AP) -- Motorcycle maker Harley-Davidson Inc. is cutting 8% of its work force and says jobs will be lost at its headquarters in Milwaukee and at its largest plant, in York, Pa. Chief Executive Jim Ziemer says he hopes employees will take retirement packages. He says there will be 370 union production jobs cut in the next few months. That's because the company is reducing bike shipments due to sales declines in the weakening U.S. economy. Ziemer says 80% of those cuts will be in York.[13] MILWAUKEE (AP) — Harley-Davidson Inc. says its first-quarter profit fell 2.5 percent with U.S. motorcycle sales tumbling nearly 13 percent. The motorcycle maker said Thursday it'll cut back on bike production this year, idle plants and cut 730 jobs.[4]

Harley-Davidson Inc. will significantly cut shipments of motorcycles to dealers and trim more than 700 jobs this year as it confronts a steep reduction in U.S. sales. The Milwaukee-based maker of iconic, high-end motorcycles -- which early Thursday reported a 2.5% decline in first-quarter profit -- also scaled back its earnings expectations for the remainder of the year amid a challenging economic scenario.[14] MILWAUKEE (AP) — Harley-Davidson Inc. will cut its workforce by about 8 percent and curtail shipments of its iconic motorcycles this year after reporting a decline in first-quarter profits Thursday, with domestic sales tumbling nearly 13 percent. The motorcycle maker also cropped its guidance for 2008, saying it expects earnings to fall between 15 percent and 20 percent.[10]

In the first quarter the impact of the economic slowdown was felt most acutely at retail as our U.S. dealers''' new motorcycle sales declined 12.8% compared to a year ago and the rest of the declined even more and from my vantage point it is unclear when the U.S. economy will recover. We'''ve taken important steps to significantly reduce our shipments for the rest of this calendar year and reduce our workforce.[8] The company blamed the cuts on a downturn in the U.S. economy, particularly a 12.8 percent drop in the sale of new motorcycles in the United States in the first quarter of 2008.[15]

As Jim mentioned retail sales of new Harley-Davidson motorcycles in the U.S. decreased 12.8% in the first quarter of 2008 compared to the same period in 2007.[8] During the first quarter, worldwide retail sales of Harley-Davidson motorcycles decreased 5.6 percent compared to the prior year quarter.[16] Retail sales of Harley-Davidson motorcycles increased 16.8 percent in international markets during the first quarter of 2008 compared to the first quarter of 2007.[16] U.S. retail sales of Harley-Davidson motorcycles were down 12.8 percent in the first quarter.[17] Worldwide retail sales of Harley-Davidson motorcycles fell as well, down 5.6 percent in the quarter, compared to 12.8 percent in the U.S. But Chief Executive Jim Ziemer noted the company outperformed the U.S. heavyweight motorcycle market, which saw sales drop 14 percent in the quarter.[10]

Revenue from parts and accessories was $181.9 million for the quarter which was down 3.3% over the year ago quarter. This decline is primarily attributable to the decrease in new motorcycle retail sales in the U.S. To help support P&A; demand a website tool that allows customers to select accessories and install them on a virtual motorcycle was updated this quarter to include all available Harley-Davidson models.[8]

HDFS originated $518 million in retail motorcycle loans in the first quarter of 2008 compared to $630 million in the first quarter of 2007. HDFS maintained its retail market share on new motorcycles sold in the U.S. at 51.4% for the first quarter of 2008 compared to 51.3% for the first quarter of 2007.[8] Turning to our share repurchases for the quarter, the company repurchased 2.6 million shares for $100.1 million compared to 870,000 shares for $61.3 million in the first quarter of last year.[8] First quarter diluted earnings per share (EPS) were $0.79, a 6.8 percent increase compared to last year's $0.74.[18] The Milwaukee, Wisconsin-based maker of heavyweight and sport motorcycles as well as accessories said first quarter net income declined 2.5% to $187.58 million from $192.31 million in the prior-year quarter, while on a per share basis, earnings grew 6.8% to $0.79 from $0.74 in the year-ago quarter.[19]

Harley recorded a 2.5% drop in profit in the first quarter and cut earnings guidance for the year from $3.18 to $3 a share.[20]

The company also reported Thursday that earnings for the quarter that ended March 30 were $187.6 million, or 79 cents a share, down 2.5 percent from $192.3 million, or 74 cents a share, last year.[5] Harley-Davidson reported first-quarter earnings of $187.6 million, or 79 cents per diluted share, compared with $192.3 million, or 74 cents, last year.[21] Net income for the quarter ended March 30 was down 2.5 percent to $187.6 million, or 79 cents per share, compared with a profit of $192.3 million, or 74 cents per share, a year ago.[2] Net income in the latest quarter was $187.6 million, or 79 cents a share, compared with $192.3 million, or 74 cents, a year earlier, Harley said today in a statement.[22]

Profit for the quarter was only $187.6 million, compared with $192.3 million in the same quarter of 2007. Harley says its bikes sold better in the U.S. market during the period than the average of all companies' heavyweight motorcycle sales.[23] U.S. retail sales of Harley motorcycles fell 13 percent in the quarter, Ziemer said on conference call. Harley is reducing shipments to dealers because of "U.S. retail trends and uncertainty about the future of the economy,'' he said.[22] Motorcycles produced for sale abroad grew to a record 33.5 percent of total shipments last quarter, up from 26.4 percent a year ago, Ziemer said. "Growth in international markets will continue to outpace the U.S. for the foreseeable future,'' he said.[22]

The broader motorcycle market saw a decline of 14% in U.S. sales in the first three months of the year. The pain is expected to continue: Total motorcycle shipments this year will be cut by 23,000 to 27,000, the company said.[21]

About 80 percent of the assembly worker jobs to be eliminated will occur at the York factory. Harley will reduce shipments to dealers by as many as 27,000 motorcycles this year. The company said it expects to deliver 76,000 to 80,000 bikes this quarter.[22] Harley plans to ship 23,000 to 27,000 fewer motorcycles in 2008 than in 2007, resulting in total planned 2008 shipments of between 303,500 and 307,500 units. "We've said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans and remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year," Ziemer said.[17] By now, you're probably tired of hearing me rail against Harley's rising inventories, right? Well, you're in luck. After badly missing estimates last quarter, selling fewer choppers and earning fewer profits, management has finally come around and decided to take action to chop its inventory levels. CEO Jim Ziemer assured us that: "For 2008, the company once again plans to ship fewer Harley-Davidson motorcycles than it expects its worldwide dealer network to sell." Whether you like the idea or not, it's hard to argue that what Harley's been doing has worked. At every level of the income statement, rolling gross, operating margins, and net margins continue their 18-month-long slide.[24]

As it is gets ready to celebrate its 105th birthday, Harley-Davidson ( HOG ) is poised for a bumpy ride in the months ahead. The Milwaukee-based outfit, which produces and sells the iconic Harley-Davidson motorcycles, said on Apr. 17 that it will reduce production for the year and cut its workforce, as the U.S. economy and business environment continue to be "challenging", with "no signs when things will turn around", as CEO Jim Ziemer put it in an Apr. 17 conference call with analysts.[21] Sometimes that means we have to make a tough call for today based on what'''s good for the business longer term. Protecting the brand is why we committed back in January to ship fewer Harley-Davidson motorcycles to our dealers this year and then we expect they will sell at retail on a worldwide basis. It is why we'''re acting now early in the year to make good on that commitment as we continue to experience a difficult U.S. economy.[8]

Good morning and thank you for calling in today. As you'''ve read in our press release Harley-Davidson has made some significant changes to our outlook for 2008 and I want to open the call today by talking about them. I believe there are four key things that underlay these actions: first, the economic slowdown has affected Harley-Davidson along with many other businesses and sectors and there'''s no sign of when things may turnaround; second, in light of a disappointing trend at retail in the U.S. and certainly about the future of the economy we'''re moving to position the company for a business environment that we expect to continue to be challenging; third, Harley-Davidson remains profitable and is fortunate to be dealing with the current economic environment from a position of financial strength; and fourth and perhaps the most important, Harley-Davidson has always managed the business for the long term and we will continue to do so. Let me talk about the first two of these, the challenging environment and our actions.[8]

"The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging. The release says that Harley actually increased its first-quarter revenues by $125,700,000 compared to the same period of 2007, but its net income in this part of the year is $5,000,000 less than last year.[25] In the wake of lower first-quarter earnings despite higher revenue compared with last year, Harley-Davidson Inc. said Thursday that it will temporarily close some plants, reduce daily production and cut about 730 jobs.[5] About 80 percent, or around 300, of the 370 unionized jobs Harley-Davidson plans to eliminate nationwide because of dropping sales will be from the company's Springettsbury Township plant, Klein said. Harley said its management would work with union leaders on the plan for job cuts. Tom Boger, the business representative for the union that represents about 3,000 Harley workers in Springettsbury, said he didn't know what role the union would play because it hasn't heard from Harley.[15] The company, which said it plans temporary plant shutdowns, did not say where it would cut the more than 700 jobs. Harley employs about 3,200 people at its Springettsbury plant. It is also cutting about 360 non-production employees, or about 10 percent of its North American non-production workforce.[26]

The efforts include cutting short term production and shipment, maintaining inventory levels to keep the necessary supply and demand balance for a premium brand, and continued heavy investment in marketing and product development. The company will cut unionized employees by 370 at its production units this year and lay off 360 non-production staffers, totaling about 10% of its workforce in North America. The charges related to workforce reduction will be reported the second quarter this year, said company officials. Standard & Poor'''s Equity Research maintained its "sell" opinion on the shares.[21] Harley-Davidson will be making fewer bikes this year and cutting 730 jobs. The company says it'll cut jobs at its headquarters in Milwaukee, and in Pennsylvania. It says 80 percent of the cuts will be in Pennsylvania. It's not clear how many jobs will be lost in Wisconsin. Executives say they hope employees will take retirement packages. They go on to say the company will cut 370 union production jobs and 360 non-production jobs.[27]

In the U.S., H-D motorcycle sales fell 12.8 per cent in the quarter, and worldwide sales were down 5.6 per cent. The company will cut 730 jobs, about half of them in production.[23] The slowing U.S. economy has hurt sales of Harley-Davidson motorbikes and forced the iconic company to reduce production and cut jobs.[6]

Of that number, 370 will be unionized production workers. The AP quotes Ziemer saying that 80 percent of these 370 jobs will be cut from the Harley-Davidson plant in Springettsbury Twp.[11] To achieve the cuts, Harley will temporarily idle plants and change daily production rates, Ziemer said. These changes will result in the loss of about 370 unionized employees over the next several months, he said. About 80 percent of those cuts will be at the company's largest plant, in York, Pa., which has more than 2,770 hourly workers.[2] Harley expects to ship between 76,000 and 80,000 motorcycles in the second quarter. "We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates," he said. "This will result in a decrease of about 370 unionized employees over the next several months.[20] A reduction of shipments of new Harley-Davidson will force "temporary plant shutdowns and adjustments to daily production rates," says Ziemer in a news release. "This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction."[25] In order to achieve the shipment reduction, the company plans temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months.[19]

Harley's chief executive, Jim Ziemer, said the company would temporarily shut plants to achieve adjusted production rates. It now plans to ship up to 27,000 fewer motorcycles in 2008 than last year, resulting in up to 307,500 units, 7.0% less than the 330,619 units shipped in 2007.[7]

Shipments of Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units or 6.1 percent compared to last year'''s first quarter.[16] Harley-Davidson Financial Services delivered first quarter operating income of $34.9 million a decrease of $24 million or 40.8% compared to last year'''s first quarter. This decrease is primarily due in a reduction in income from securitization.[8] Under the Financial Services segment, Harley-Davidson Financial Services or HDFS, reported first-quarter operating income of $38.9 million, sharply down 40.8% from $58.94 million in the year-ago quarter, mainly due to a reduction in income from securitization. During the first quarter, Harley-Davidson repurchased 2.6 million shares of its common stock at a cost of $100.1 million.[19]

Harley repurchased 2.6 million common shares at a cost of $100.1 million during the first quarter, the company said.[22]

In the first quarter of 2007 HDFS sold $540 million of retail motorcycle loans. As part of the transaction HDFS retained $54 million of the subordinated securities on its balance sheet and recognized a loss totaling $5.4 million. This compares to an $800 million securitization transaction with a gain of $13 million during last year'''s first quarter.[8] Revenue for the first quarter was claimed to be $1.31 billion, up 10.8% from last year's $1.18 billion figures, but net income for the quarter was $187.6 million, down from to last year's $192.3 million figure, a 2.5% decrease.[12] All in all net income was $187.6 million in the first quarter down 2.5% or $4.7 million from the same period last year.[8]

Outside of the U.S. our dealers growth continued as first quarter retail sales increased 16.8% compared to the same quarter last year.[8] Whenever you come out with the introduction of a new product certainly that has an impact on the retail sales of our motorcycles. As we look at it we just came to market in the first quarter with the Rocker C and the Crossbones, definitely they were hits and they are moving quite quickly when they hit the dealer floor and, our Dyna family has responded very well. I think as I look at the products those are probably the fastest movers off the dealers''' showroom in the U.S. right now.[8]

On a worldwide basis retail sales of Harley-Davidson motorcycles by our dealers were down 5.6% for the quarter compared to a year ago.[8] In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for the quarter while the heavyweight motorcycle industry in the U.S. decreased 14.0 percent.[16] Worldwide retail sales of Harley-Davidson motorcycles fell 5.6 percent in the quarter.[2]

International retail sales of Harley motorcycles increased 16.8%, making up 26.0% of total motorcycle sales, compared to 21.4% of total sales last year. Latin American sales soared 53.3% since last year, though it remains the smallest market for Harley, with 1,857 bikes sold this quarter.[7] Harley's motorcycle retail sales in the United States decreased 12.8% in the quarter, the company reported but beat the 14.0% decline in the overall heavyweight motorcycle segment.[7]

The U.S. heavyweight motorcycle market, of which Harley has about a 50 percent share, saw sales drop 14 percent in the quarter.[2] Skepticism remains high about the near-term outlook for Harley, even though the shares have gained in the past few days following positive results from another maker of recreational vehicles. Polaris Industries Inc (PII.N: Quote, Profile, Research ), which makes Victory motorcycles, reported better-than-expected earnings and increased its full-year guidance, raising hopes in some quarters that the pullback in consumer spending that has hammered powersports sales might be waning.[28] Earnings per share for 2008 is expected to be 15% to 20% lower than 2007, which was already down from 2006. As a company that sells what many would consider luxury goods, who knows when their sales numbers will rebound. They have also been hit by the credit crunch, and with few consumers with available equity in their homes, that is not a good sign for Harley's numbers either. I'm hoping that this American icon can hold on and weather the current economic storm. Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.[29] Harley-Davidson HOG is feeling the pinch of the strapped U.S. biker as the company sees 2008 earnings per share falling between 15% to 20% on declining sales.[20]

"For 2008, the Company now expects earnings per share to decrease between 15 and 20 percent compared to 2007 resulting in expected earnings per share of $3.00 to $3.18," said Ziemer. This supersedes all previous guidance on earnings per share and other measures.[18] The company, whose shares fell more than 7 percent in pre-market trading, expects earnings to fall 15 percent to 20 percent in 2008, resulting in earnings of $3.00 to $3.18 per share. It previously forecast growth of 4 percent to 7 percent in 2008, which translated into $3.89 to $4.00 per share.[30]

For fiscal 2008, Harley-Davidson now expects earnings per share in the range of $3.00 to $3.18, down 15% to 20% from last year.[19] Earlier, the company said it expects 2008 earnings per share to grow at a rate of 4% to 7% compared to last year.[19]

CHICAGO (Reuters) - Is the HOG still stuck in the mud? Iconic motorcycle maker Harley-Davidson Inc (HOG.N: Quote, Profile, Research ) is slated to report first-quarter earnings on Thursday, and analysts and investors are keen to see if the company -- whose ubiquitous motorcycles are known as "Hogs" -- can turn itself around and get its shares moving back in the right direction after falling more than 40 percent over the past year.[28]

Revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of $125.7 million or 14.1 percent versus the same period last year.[16] Now, turning to revenue, revenue from Harley-Davidson motorcycles was $1.02 billion up 14.1% from the first quarter of 2007.[8] On a segmental basis, under the Motorcycles and Related Products segment, revenues from Harley-Davidson motorcycles was $1.02 billion, 14.1% higher than $0.89 billion in the year-ago quarter.[19]

Average revenue per Harley-Davidson unit increased $997 or 7.6% from the year ago quarter. This increase can be primarily attributed to favorable mix and favorable foreign exchange rate.[8]

Harley-Davidson Financial Services (HDFS) reported first quarter operating income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared to the year-ago quarter.[16] The Company's first quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2008 will be 35.5 percent.[16] Gross margin for the first quarter of 2008 was 36.4 percent of revenue compared to 35.9 percent for the first quarter last year.[16]

Consistent with seasonal trends over the past several years''' delinquencies declined from the fourth quarter of 2007 to the first quarter of 2008 and credit losses on managed retail motorcycle loans were 2.71% for the first quarter of 2008 compared to 2.28% for the same period last year.[8] Custom shipment volume representing our soft-tail, Dyna and BRSC motorcycles was 40.5% in the first quarter of 2008 compared to 45.4% for the first quarter of 2007 and Sportser motorcycle mix was 22.8% of the total mix for the first quarter of 2008 compared to 22.4% during the first quarter last year.[8]

Many of you ask me about inventory levels at Harley-Davidson dealerships in the U.S. At the end of the first quarter 2008 our U.S. dealers had lower inventory than one year ago and we believe we are taking the right steps to carefully manage the supply of motorcycles to our dealers.[8] Harley-Davidson says it will reduce shipments of new motorcycles by 27,000 in 2008, following a first quarter drop in profit of 2.5 per cent.[23] Now looking at wholesale shipments for the quarter, worldwide Harley-Davidson motorcycle shipments were 71,868 units an increase of 6.1% over the first quarter of 2007.[8] For the second quarter of 2008 we expect to ship between 76,000 and 80,000 Harley-Davidson motorcycles. This is approximately 15,000 to 19,000 units fewer than the second quarter of 2007 as we begin to implement the shipment reduction we announced this morning.[8]

Losses from the company'''s consumer financing subsidiary, have also hurt Harley-Davidson's bottom line. As credit-market turmoil continues and investor interest in securitized consumer loans shrinks, the company has to keep more loans on its books instead of selling them to investors. This has driven down the quarter's operating income at the finance unit by 40%. Concerns surrounding the finance unit also point to the troubled division's ability to help consumers getting needed financing to purchase their coveted Harley-Davidson motorcycles, which could further hurt sales.[21] While sales dipped here statewide, Harley-Davidson's international retail sales continue to be strong, showing a 16.8% increase in the first quarter.[12] The Milwaukee chopper maker, which saw a double-digit decline in motorcyle retail sales in the first quarter, will also cut more than 700 jobs as demand falls.[20] Chief Executive Officer Jim Ziemer states that on the tail end of a first quarter where sales dropped 12.8%, it has to cut 730 jobs.[25]

Overseas sales were up 16.8 percent in the first quarter, but that represents only about a third of all Harley shipments.[2] First quarter retail sales increased 31.1 percent in Canada; the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5 percent; and the Latin America Region was up 53.3 percent.[16]

Sales during the quarter rose 10.8 percent to $1.31 billion. Harley's results were also pulled down by its in-house financing arm, where operating income plunged nearly 41 percent because the turmoil in credit markets reduced income from the loans the unit securitizes.[30] Revenue for the quarter was $1.31 billion, up 10.8 percent from $1.79 billion last year.[5] Revenue rose 11 percent to $1.31 billion. "This was worse than we expected given the comparison for last year,'' said analyst Robin Diedrich at Edward Jones & Co. in St. Louis. She has a "hold'' recommendation on the shares and doesn't own any.[22]

Harley fell 70 cents, or 1.9 percent, to $36.09 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 23 percent this year. "They are at the epicenter of a perfect storm: higher energy prices, weak consumer spending and unfavorable credit conditions for consumers,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland. Harley's product "is a discretionary item,'' he said.[22] The stock hit a 52-week low of $34.10 during Thursday's trading. It did rebound quickly in the morning, but things still aren't looking so hot. Harley plans to cut shipments of motorcycles between 23,000 and 27,000 this year, which would mean total shipments for the year would be 7% or more below last year's total shipments of 330,619.[29]

Temporary shutdowns of partial operations will affect all of the company's plants, Klein said. Some temporary shutdowns of entire plants also could occur, he said. The company said the actions are intended to reduce shipments by 23,000 to 27,000 motorcycles in 2008 compared with 2007, bringing shipments to between 303,500 and 307,500 units this year.[5] Motorcycle shipments in the quarter totaled 71,868 units in the quarter, up 6.1 percent from a year ago, the company said.[22]

Harley-Davidson's planned reduction of its workforce by 730 workers is expected to happen in the second quarter of 2008, which runs through June, the company said this morning. Harley-Davidson's planned reduction of its workforce by 730 workers is expected to happen in the second quarter of 2008, which runs through June, the company said this morning. Harley-Davidson is reducing its workforce by about 370 unionized employees, or about 6.5 percent of its North American unionized workforce.[26] Ziemer said the company is one of many fighting tough economic conditions. Harley-Davidson's planned reduction of its workforce by 730 workers is expected to happen in the second quarter of 2008 for non-production employees. The second quarter runs through June.[15]

'''The Company will also be reducing the non-production workforce by about 360 jobs. We believe these actions will better position the Company for a business environment that we expect to continue to be challenging,''' Ziemer said.[16] Ziemer said the adjusted production rates will lead to layoffs of 370 unionized Harley employees over the next several months, and 360 nonproduction workers in order to better position the company for a business environment that we expect to continue to be challenging.[7]

Harley-Davidson has about 5,600 production workers and 3,560 non-production workers, spokesman Bob Klein said. "I believe these decisions are the right ones for the longterm interest of all of our stakeholders during what we expect to be a continued tough retail environment in the U.S. throughout 2008," Ziemer told analysts on a conference call.[10] Well Pat, what I can tell you is that we don'''t give specific retail sales forecast for the year but clearly the action we'''ve taken today I think reflects that we don'''t have a strong outlook for the U.S. economic environment here in the U.S. By taking out the production units that we have and combining that with our commitment to ship less than we retail on a worldwide basis I think you can make a pretty good approximation or you can estimate pretty well what our outlook is for the full year.[8] Worldwide retail sales of Harley-Davidson motorcycles decreased 5.6% year-over-year, with a 12.8% fall in U.S. retail sales.[19] Retail sales of Harley-Davidson motorcycles in Canada were up 31.1%, the Europe region was up 7.8%, the Asia Pacific region was up 19.5% and the Latin America region was up 53.3%.[8] In the international markets, the retail sales of Harley-Davidson motorcycles grew 16.8%, with Canadian sales jumping 31.1% and European sales rising 7.8%.[19]

In view of U.S. retail trends and uncertainty about the future of the economy, we now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units," Ziemer said.[18]

The Milwaukee-based manufacturer also said it will eliminate jobs and close plants temporarily to reduce shipments to dealers. The 105-year-old motorcycle company is grappling with a slowdown in consumer spending amid tighter credit and a faltering economy, which has eroded demand for its premium bikes that can sell for more than $30,000 when customized with chrome and leather accessories.[22] The Milwaukee-based motorcycle manufacturer (NYSE: HOG) didn't say which plants it would close or where it will cut jobs. The company has about 1,000 employees at its Kansas City plant and ranks No. 43 on the Kansas City Business Journal's list of area private-sector employers.[5] The company has plants throughout Wisconsin and in Kansas City, though spokesman Bob Klein said it appeared Kansas City wouldn't be affected. The company will cut about 360 non-production jobs — the bulk of those will most likely be at Harley-Davidson headquarters in Milwaukee.[2]

Milwaukee-based Harley today also announced plans to eliminate 360 non-production jobs amid weakening sales. The company has not yet said where those cuts will take place, Klein said.[3] Harley's last significant job reductions were in the early- to mid-1980s, Klein said. Decisions about where to cut jobs this time were based heavily on the types of motorcycles made at different facilities, Klein said.[3] The York County plant builds the Touring and Softail models. Harley expects no job cuts at its plant in Kansas City, which makes the Sportster and Dyna models, Klein said.[3] About 70 additional production jobs will be cut at Harley plants in Wisconsin.[3]

Harley cuts outlook, to slash output : U.S. Business said on Thursday it would report full-year earnings well below its forecast, slash production and lay off hundreds of workers as the U.S. economic slowdown crimps demand for its iconic motorcycles[31] CHICAGO (Reuters) - Harley-Davidson Inc (HOG.N: Quote, Profile, Research ) said on Thursday it would report full-year earnings well below its forecast, slash production and lay off hundreds of workers as the U.S. economic slowdown crimps demand for its iconic motorcycles.[30]

April 17 (Bloomberg) -- Harley-Davidson Inc., the biggest U.S. motorcycle maker, said first-quarter profit fell 2.5 percent and predicted full-year earnings will decline as much as 20 percent as U.S. sales drop.[22] Harley-Davidson said its domestic sales are down nearly 13 percent and expects earnings to be down 15 to 20 percent.[32]

Expectations for the rest of the year are not good. The Milwaukee-based company cut its guidance for 2008, saying it expects earnings to decline by 15 percent to 20 percent.[2] Previously, the Milwaukee-based company had said it expected moderate revenue and earnings per share growth of between 4 percent and 7 percent.[10] On average, sixteen analysts polled by First Call/Thomson Financial expected earnings of $0.77 per share in the quarter.[19] Earnings per share in the quarter were 79 cents, a 6.8 percent increase compared with 74 cents for the year-ago period.[17] Harley previously said earnings would grow enough to achieve at least $3.89 cents per share in 2008.[3] Diluted earnings per share were 79 cents, up from 74 cents in the same period of 2007, Harley announced.[3]

On a per share basis, earnings rose 6.8% and beat analysts' estimate by two cents.[19] On average, seventeen Wall Street analysts estimate earnings of $3.62 per share for fiscal 2008.[19]

As of the end of the quarter, there were 20.5 million shares remaining on two board-approved share repurchase authorizations. In its fourth quarter, Harley-Davidson's net income fell to $186.08 million or $0.78 per share from $252.43 million or $0.97 per share in the prior-year quarter.[19]

In to that guidance we also have the workforce reduction charge that I just referred to of $20 to $25 million that is in there as well as well as some negative mix that we expect throughout the year so there are a number of things that are going in that drive that lower EPS guidance. The final one is really anticipated lower share repurchase activity given the expected lower cash flow from operations this year while we'''re still anticipating share repurchase activity with excess free cash flow it is obviously lower than what we initially anticipated going in to the year.[8] No specific areas have been given with cuts coming from a workforce of 5,600 production workers and 3,560 non-production workers. All this economic news resulted in shares falling 5.4 percent, or $1.99, to $34.80 in premarket trading.[1] The production cuts amount to about 10 percent of the hourly workforce of 2,770 at the plant in Springettsbury Township.[3] LANCASTER, Pa. -- Harley-Davidson said it is cutting its workforce by about 8 percent following a drop in first-quarter profits, and many of those cuts will be made at its York County plant.[32]

The Associated Press reported today that Harley-Davidson will be reducing its workforce by about eight percent after suffering a dip in profits during the first quarter.[12] The maker of heavyweight bikes is trimming production as a cost-cutting measure. For its first quarter, Harley-Davidson (nyse: HOG - news - people ), one of America's Best Big Companies, reported Thursday that its revenues increased by double-digit percentages, but profit dropped.[7] Shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson'''s production plants in York, Pa., that resulted in approximately four weeks of lost production at the facilities.[16] Please note that shipments in the first quarter of 2007 were affected by a strike at Harley-Davidson manufacturing facilities in York Pennsylvania that resulted in approximately four weeks of loss production.[8]

A strike at the York, Pennsylvania, plant in 2007's first quarter trimmed earnings in the year-earlier period by eliminating four weeks of production of Fat Boy and other pricey cruisers.[22]

Following predictions from analysts throughout the week, the Milwaukee motorcycle manufacturer announced reduced production, job eliminations and lowering its stock guidance on the heels of a weak first quarter.[1]

In terms of credit performance the 30 plus day delinquency rate for managed retail motorcycle loans was 4.78% at the end of the first quarter of 2008 compared to 4.08% at the end of the first quarter of 2007.[8] With that, let me now turn to the first quarter of 2008 and the results for the motorcycles and the related product segments compared to the first quarter of 2007.[8] The results for the first quarter were calculated on 237.25 million outstanding shares, compared to 258.16 million outstanding shares in the year-ago quarter.[19] In the first quarter our operating cash flow was $146.8 million. This compares to $519.6 million in the first quarter of 2007. This decrease was primarily driven by HDFS''' smaller first quarter securitization transaction in 2008 compared to 2007 I referred to earlier.[8] On the FX front, first on a revenue basis we had a currency benefit of about $45 million during the first quarter and on an operating income or EBIT basis right about $19 million. That quantifies for you the FX benefit during the quarter.[8] HDFS entered in to a new $300 million short term committed credit facility during the first quarter to provide additional liquidity for it on secured commercial paper program.[8] Income from operations for the first quarter marginally edged up to $291.05 million from $289.24 million in the year-ago quarter, while total operating expenses rose to $214.53 million from $187.80 million in the prior-year quarter.[19] For the first quarter of 2008 depreciation was $49.7 million and capital expenditures were $43.2 million.[8]

Parts and Accessories revenues totaled $181.94 million, 3.3% lower than $188.24 million in the prior-year quarter, while revenues from General Merchandise rose 10.4% to $84.01 million from $76.11 million in the comparable quarter last year.[19] Revenue from Parts and Accessories (P&A;), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of $6.3 million or 3.3 percent versus the year-ago quarter.[16] Revenue from General Merchandise, which consists of MotorClothes'' apparel and collectibles, totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the year-ago quarter.[16]

Revenue for the quarter was $1.31 billion, compared to $1.18 billion in the year-ago quarter, a 10.8 percent increase.[17] Revenue for the quarter rose 10.8% to $1.31 billion from $1.18 billion in the prior year quarter.[33] Revenue for the quarter was $1.31 billion vs. $1.18 billion a year ago.[20]

Revenue increased 10.8 percent to $1.31 billion from $1.18 billion a year ago.[1]

First-quarter net income for Harley-Davidson (NYSE: HOG) slid 2.5 percent to $187.6 million compared with $192.3 million for the same period a year ago.[17] The news came as Harley reported a first-quarter net profit of $187.6 million compared with $192.3 million last year.[30]

Harley-Davidson reported first-quarter net income of $187.6 million, compared to $192.3 million in the year-ago quarter.[33]

If you look at our on balance sheet inventory a lot of that increase is due to supporting that strong international growth. The change in receivables that you mentioned is actually due to part of a process we went through at looking at ways to streamline our operations and improve some of them and at the beginning of the year we ended up transferring in the neighborhood of $100 million of receivables from Harley-Davidson Financial Services in Europe to Harley-Davidson Motor Company In Europe. Those are wholesale receivables from our European dealers and we'''re now going to manage those receivables out of the motor company organization in Europe. Those use to be reported on a different line in the balance sheet so it'''s really just a switching of lines in the balance sheet causing that receivable increase.[8] The company earned $3.74 a share in 2007. "The real silver lining is that the things affecting the company are related to the economy, not its business,'' said fund manager Jeffrey Malcom at Towson, Maryland-based Horan Capital Management LLC. Horan holds 383,948 Harley shares as part of a $500 million equity portfolio.[22] Some analysts are more pessimistic still. U.S. sales were down in the high teens in the past six weeks, Citigroup analyst Greg Badishkanian wrote in a research note, and he said the drop in Harley's guidance may not be low enough. Shares fell rapidly to a 52-week low at one point of $34.10 early Thursday, and were down 70 cents to close at $36.09, still well off the $66 that Harley fetched within those same 52 weeks.[2] I mean, if I look at it again, I mean kind of wrapping up, we'''re growing internationally double digits, we'''ve been doing that for years. U.S. market and in a very difficult economic client we'''ve gained market share, we'''re tracking our used bike sales, they'''re at an all time high.[8]

The company is reducing bike shipments because of sales declines in the weakening U.S. economy.[27] We expect for the foreseeable future to grow our international sales faster than our domestic sales. Depending on how long this U.S. economy stays where it'''s at will kind of dictate what our mix between shipments between our different markets.[8]

The company expects fewer shipments in 2008 as it expects the softness in U.S. economy to continue in 2008.[19] Going ahead, Harley-Davidson said it expects the U.S. economy to continue to be very challenging in 2008.[19]

I will get in to the numbers in a moment but first I want to reiterate Jim'''s comments that the tough U.S. economic environment continues to be a challenge for Harley-Davidson. The actions we announced this morning are necessary steps to ensure we are protecting our premium brand and maintaining our strong financial position for the long term. It wasn'''t all bad news for the quarter.[8] During the first quarter economic conditions continued to be challenging for all consumer lenders including Harley-Davidson Financial Services.[8]

My name is Ray and I will be your conference operator today. At this time I would like to welcome everyone to the Harley-Davidson first quarter 2008 earnings conference call.[8] Harley-Davidson, Inc. (NYSE: HOG) today announced its results for the first quarter ended March 30, 2008.[18]

Domestic shipments of 47,826 units for the quarter were down 1.9% from the first quarter of 2007. This shipment volume represented 66.5% of the total volume shipped to worldwide dealers down from 71.9% a year ago.[8] Operating margin remained unchanged at 20.0 percent in the first quarter of 2008 compared to the prior year.[16] Margins in the first quarter of 2007 were affected by the York strike last year and margin benefits were partially offset by additional product and manufacturing costs.[8] With the recent spike up in aluminum and steel and many of the precious metals we still are anticipating that we will have a negative impact from commodity prices for the full year of 2008 but, for the first quarter really minimal impact.[8]

Chief Executive Jim Ziemer said Harley-Davidson has had temporary production cuts over the past four years, but the hundreds layoffs announced Thursday are the first of that magnitude in two decades.[2] Robert W. Baird analyst Craig Kennison said the production cut will help protect the brand because dealers won't be flooded with bikes. "It represents an effort to protect the scarcity value of the Harley-Davidson brand, which was diminished, in our view," he wrote in a research note, saying that more bikes were selling below suggested retail prices.[10] The willingness of Harley-Davidson's management to cut short-term production to preserve the brand'''s integrity, growing international demand, and the company's "unlevered operating company balance sheet" and "strong cash generation" remain positive aspects, wrote Wachovia ( WB ) analyst Timothy Conder in an earlier note. (Wachovia Capital Markets provides investment banking services to Harley-Davidson.) Harley-Davidson is reaching out to customer groups that traditionally are not its hardcore fans -- women, young people, and minorities.[21]

Harley-Davidson spokesman Bob Klein said in an interview that none of the roughly 370 unionized production jobs slated for cuts are in Kansas City. It's too early to know whether any of the roughly 360 nonproduction job cuts will affect Kansas City, he said. The "vast majority" of those jobs are in Milwaukee, he said.[5] Harley-Davidson Inc. will cut some 300 production jobs at its York County factory, spokesman Bob Klein said today.[3]

The job cuts include 370 union positions (mostly in Pennsylvania) and 360 non-production jobs (mostly in Wisconsin), on a total current workforce of 5,600 production workers and 3,560 non-production employees. That makes for a total reduction of about 8%.[29] The company did not provide any further details on the plant shutdowns. About 370 hourly production workers and 360 non-production employees will lose their jobs over the next several months as a result, Ziemer said.[17] Harley also has plants in Kansas City and Wisconsin. Ziemer said it's not clear how many jobs will be lost in those places. Ziemer said he hopes employees will take retirement packages. News 8 contacted union representatives for workers in York County, but they did not want to comment.[32]

Harley said it will implement temporary plant closings, in addition to shedding 370 unionized workers. The motorcycle maker also plans to eliminate 360 non-production jobs, or about 10 percent of non-union staff in its North American operations, Chief Financial Officer Thomas Bergmann said in a conference call today.[22] Harley expects to ship 23,000 to 27,000 fewer bikes in 2008 than it did in 2007 and would temporarily shut down some plants in the coming months. It said 370 unionized employees and 360 non-factory employees would lose their jobs.[30] By temporarily idling plants and changing daily production rates, the workforce will be reduced by about 370 unionized employees over the next several months and 360 non-production jobs.[1] "We will achieve the shipment reduction through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees over the next several months. Our management group and union leaders will work together to implement this reduction."[18] The shipment reduction will be achieved through temporary plant shutdowns and adjusted daily production rates resulting in a decrease of about 370 unionized employees.[8]

Ziemer said the shipment reduction will occur through temporary plant shutdowns and adjustments to daily production rates.[17]

Results for the prior-year quarter were pulled down by a strike at the company'''s biggest plant that stopped production for a month.[21]

The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.[16] The company plans to ship fewer Harley-Davidson motorcycles in 2008 than it expects the worldwide dealer network to sell.[19] We now plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than we did in 2007. This action supports our commitment to ship fewer Harley-Davidson motorcycles to our worldwide dealer network then we expect them to sell at retail.[8]

The Company'''s independent dealers and distributors may experience difficulties in selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.[16] Jim Ziemer, Harley-Davidson's CEO called the results "disappointing," but said that Harley-Davidson's U.S. dealers outperformed the heavyweight motorcycle industry, which was down 14 percent.[17]

There'''s all other factors not even to mention how you treat the trade in value of a vehicle. All in all overall we still feel that while we don'''t make a blanket statement about selling prices we do believe that many of our motorcycles out there in the dealer network are selling at or above MSRP. But, clearly because of this lack of clarity in to some of the transactions there probably are some that are selling out there below. It obviously varies by dealer and by location but overall we think our dealers are doing a nice job of managing through this environment and really doing the right outreach activities and marketing activities to maintain the premium status of the overall Harley-Davidson brand.[8] There'''s no indication we have of trading down. Clearly, I think what happens in this macroeconomic environment is we'''ve seen strong used bike sales so I think more of customers moving in to used bikes in this economic environment instead of new which is actually over the long run good news because once we get them in to the Harley-Davidson family they'''ll drive additional parts and accessory sales, general merchandise sales and we'''ll come out with that new design and new technology that they'''ll ultimately trade up in to a new motorcycle.[8] Looking ahead to the summer excitement continues to build for the opening of the Harley-Davidson museum and for our 105 th anniversary celebration when we expect thousands of motorcycles to ride to Milwaukee. Ticket sales for the 105 th have been strong and this past Monday, an hour after the tickets to Bruce Springsteen and the E Street Band concert during the 105 th went on sale we had sold 20,000 tickets.[8]

Harley-Davidson has drops in sales and net revenue to start the year, so it's cutting jobs.[25] Consistent with the shift, Harley-Davidson's operating expense ratio has been on the rise and the trend is estimated to continue for the year despite lower sales expectation, the report by Credit Suisse noted. (Credit Suisse acts as a market maker or liquidity provider in Harley-Davidson's equity securities.)[21] As you'''ve already heard retail sales internationally continue to be a bright spot for Harley-Davidson.[8] International retail sales rose 17 percent, led by gains in Canada, Asia-Pacific markets and Latin America, the company said.[22] Retail sales increased in all regions the company serves except North America.[5]

As we said in our January press release we wanted to closely watch the quarter so we continued to monitor it through January and February and then when we continued to watch it in to March and saw the increased decline in retail sales that'''s when we got together and decided on the actions that we announced today.[8] I'''ll start by looking at our dealers''' worldwide retail performance. Before I begin please note that in the retail sales tables included in the release this morning we are providing a new format that more closely reflects our sales organization and strategic plan.[8] By comparison, international retail sales rose to 19,989 from 17,107 a year ago.[22] A few highlights include international retail sales continued strong growth up nearly 17%.[8] While Asia Pacific region posted a 19.5% upside in retail sales, the Latin America Region recorded 53.3% growth.[19]

Most analysts remain skeptical on Harley and see little reason to derive too much hope from Polaris. They said the market in which Minneapolis-based Polaris is doing well -- side-by-side, off-road vehicles -- is one where Milwaukee-based Harley doesn't play. "This doesn't make me change my view," said Robert Simonson, an analyst at William Blair & Co, who worries that Harley's twin goals of protecting brand while increasing sales and earnings may be incompatible while U.S. economic weakness crimps demand. [28] After five straight quarters of squeaking past analyst estimates, the hogmeister finally wiped out last quarter, "missing earnings" by nearly a nickel. Will it pick itself up, dust off its chaps, and get back in the saddle in fiscal 2008? We'll get our first clue when Harley reports first-quarter earnings Thursday morning.[24] The average earnings estimate for 2008 was $3.62, according to Thomson Financial data reported by Yahoo! Finance. Harley also announced first-quarter earnings today, and those beat the expectations of stock analysts.[3]

Okay. Clearly, at these values and given the prospects we have for the business we continue to view the shares as undervalued but we do take a conservative philosophy to the balance sheet and making sure we maintain significant liquidity and financial flexibility which really shows through times like this. We'''re targeting still to maintain a cash positive balance sheet at an ink level so basically somewhere in the neighborhood of $300 million plus or minus a $100 million or so for seasonal working capital needs. But, the great thing is even the strength of this business model will still produce some excess free cash flow and as we do that we'''ll have the opportunity to buy shares back.[8] Shares of Harley-Davidson were down 70 cents on the day's news, or 1.9%, to close at $36.09.[7] Shares of Harley-Davidson were down 52 cents at $36.27 in afternoon trading Thursday.[17] Share of HOG were recently trading down 71 cents, or 1.9%, to $36.06 in NYSE trading.[20]

Harley shares were trading down $2.79, or about 7 percent, at $34.50 ahead of the opening bell.[31] In January, Harley forecast profit per share for the year to rise as much as 7 percent.[22] Earnings per share rose to 79 cents a share from 74 cents a share, due to a lower outstanding share count.[30] Analysts had expected 77 cents per share on average, according to Yahoo! Finance.[3]

Harley was expected to earn 77 cents a share, the average of 17 analyst estimates compiled by Bloomberg.[22] "People sensed some opportunity," Wachovia Securities analyst Tim Conder said of the mini rally in Harley shares.[28]

Harley shares were down more than 2 percent, to 35.89, at 1:23, according to Yahoo! Finance.[3]

Harley plans to cut the unionized workforce "over the next several months," Klein said. The 370 unionized employees being let go comprise about 6.5 percent of its North American unionized workforce.[15] Harley employs about 3,200 people in Springettsbury, where it manufactures Softail and Touring motorcycles. Klein said the company's strategic plan calls for making fewer of these types of motorcycles, causing Springettsbury to be disproportionately hit by the unionized workforce reductions. He said those plans don't necessarily mean the motorcycles made in Springettsbury Township are not selling as well as others.[15]

The majority of the planned 360 job cuts in the non-production workforce will be in Milwaukee, where the company is headquartered. Klein said he could not immediately say how many would be in York County.[15] Ziemer, Chief Executive Officer of Harley-Davidson, said, 'The Company will also be reducing the non-production workforce by about 360 jobs.[33] The company will also eliminate about 360 non-production jobs. Chief Executive Jim Ziemer said many of those will be at its headquarters in Milwaukee.[32]

Harley-Davidson Chief Executive Officer Jim Ziemer said the company is one of many fighting tough economic conditions.[26] Commenting on the future, chief executive officer of Harley-Davidson, Jim Ziemer said, "Harley-Davidson is fortunate to be dealing with the current economic environment from a position of financial strength.[19] Chief Executive Officer Jim Ziemer said during a conference call with analysts that there's "no sign of when things will turn around" for the economy, adding that the retail environment in the U.S. will remain tough throughout.[14] The allocation system that we have for North America is designed to respond to what'''s going on in a market-by-market and dealer-by-dealer basis. Depending on what'''s going on within those regions that allocation system will respond to the retail activity and within the regions and market of the U.S. The differences between now and obviously we are currently reducing our shipment forecast but that'''s in line with retail and then our allocation system would tell us that we need to be shipping less units and depending on how the economy goes that allocation system by dealer will give us an indication of how distribute out that product.[8]

U.S. shipments marginally declined to 47,826 units from 48,740 units in the previous-year quarter, while export rose to 24,042 units from 19,021 units in the same quarter of last year.[19] International shipments of 24,042 units were up 26.4% compared to the same quarter last year.[8]

Just one final question, in terms of your guidance for the year I think you said the reduction in shipments year-over-year is going to be anywhere between 23 and 27,000 shipments lower than last year. 15 to 19 of that is coming out of the second quarter so it seems like the vast majority is going to be in the second quarter.[8]

The amount that we'''ve included in our full year guidance is a charge of approximately $20 to $25 million and at this point I anticipate recording that in the second quarter.[8] Gross profit for the quarter was $476.14 million, up from $423.05 million in the comparable quarter a year ago.[19]

For the full year of 2008 we now expect capital expenditures in the range of $235 million to $250 million compared to our previous guidance of $240 million to $260 million.[8] Net income was $187.6 million compared to $192.3 million a year ago, a decrease of 2.5%.[20]

For the full year of 2008, capital expenditures are now expected to be between $235 million and $250 million.[16] As you look at pluses and minuses on cash flow throughout the year with different seasonal needs that number can vary $100 million or so up or down but that'''s kind of a targeted consolidated cash number.[8]

Looking forward, the new allocation system we introduced last year to the dealer network is an important tool that in time will ultimately provide more flexibility and enable us to do a better job of having the right motorcycles in the right market at the right time. [8] While we still do expect growth in the overall European marketplace we don'''t think it will be as significant as it was in the first couple of months for a variety of factors. The good news is that I think we continue to feel well positioned and, you'''re right, we have for over three years now had strong double digit growth in the European marketplace but given what Michael van der Sande and the team are doing over there we feel good that through the product changes we'''re making and the other dealer activities and the marketing programs that we'''re still well positioned to have strong growth in Europe this year.[8]

Dealers have reported that the company's finance arm, in an effort to tighten up credit standards and ease concerns on Wall Street, has lowered the amount of money it will lend buyers to just 100 percent of the cost of a new bike. In the past, it was willing to give loans that were 130 percent of the cost of the bike, which gave customers money to customize their bikes with saddlebags, extra chrome and other high-margin add-ons.[31]

About 14 percent of the cuts will be at plants in Milwaukee, the company said. It's not clear where the remainder will be.[2] The dip came after the company reported a decline in first-quarter net income, a rise in earnings and cut its 2008 fiscal year earnings outlook.[33] The advance came after the company raised its first-quarter and 2008 fiscal year revenue and earnings guidance above consensus.[34] A 3.3-percent decline in parts and accessories revenue also weighed on the company earnings.[31]

The company also anticipates cutting a total of 730 jobs in 2008. In view of the shipment reduction, the company slashed its earnings forecast for 2008.[19] The Milwaukee, Wis. -based company said it would commence cost-cutting efforts to offset a growing weakness in the economy, including job layoffs and decreased production.[7] The company is now reducing bike shipments. "It's no secret that we're in a very uncertain economy. The purchase of a motorcycle for the average consumer is a discretionary item," said John Lloyd of Mantec, which is the industrial resource center that serves manufacturers in south, central Pennsylvania and helps them optimize their businesses.[32] Harley-Davidson is feeling the effects of a tight economy and will cut back on shipments and enact layoffs as a result of dwindling profits.[12] We have strong fundamentals and I believe continued growth opportunities once the economy gets back on track which brings me to all the great things going on at Harley-Davidson. A lot of things are already underway this year with a lot more to look forward to.[8] "Harley-Davidson has enjoyed very strong growth over a number of years for many reasons," including a quality product and brand loyalty, Lloyd said. The diversity of the local economy means other industries could pull the region up even as Harley struggles, he said.[3]

Our ability to generate cash enables us to reinvest in the business as well as return value to shareholders through share repurchases and dividends. New products are the life blood of this business. Regardless of the economy customers expect, no they require, a constant stream of exciting new products such as the Rocker C and the Crossbones.[8] Could you provide a little bit more direction or guidance on the changes with gross margin with Harley-Davidson Financial Services? If you gave that guidance I missed it, I apologize. The impact from potential changes to share repurchases that you'''re factoring in to that guidance? Then, as a part of that do you feel like you have enough long term visibility on the business to be buying back significant levels of stock at this point? Then, a short follow up.[8] Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (Buell) and Harley-Davidson Financial Services (HDFS).[16] It was really an opportunity for us, as we look at some of our operational excellence initiatives and continuous improvement in looking at ways to make sure we have an efficient cost structure we really saw that we had a duplication of efforts in our European markets where we had similar activities going on within Harley-Davidson Financial Services Europe and Harley-Davidson Motor Company Europe. This was an opportunity for us to move some of those activities and put them with an existing workforce and actually end up with SG&A; and costs savings as a result of doing that.[8]

Now, I'''ll turn and I'''ll review our financial services segment results for the first quarter.[8] Overall, the U.S. 651 plus CC motorcycle market decreased 14.0% in the first quarter.[8] For the first quarter I would tell you that the majority of the decrease in demand at the retail levels really is just due to macroeconomic conditions in the U.S. and the issue that we see around consumer confidence and home equity.[8]

International shipments increased to 33.5% of our total worldwide first quarter shipment volume compared to 28.1% in the first quarter of 2007.[8] The loss in the first quarter of 2008 was driven by increased securitization funding costs due to capital market volatility and expectation of higher credit losses compared to historical trends.[8] Touring volume was 36.8% in the first quarter of 2008 compared to 32.2% in 2007.[8]

Gross margin in the quarter was 36.4% of revenue up from 35.9% in the first quarter of 2007. This increase can be primarily attributed to favorable mix and favorable foreign exchange rates.[8] Revenues for the quarter declined 7.7% to $1.39 billion from $1.50 billion in the year-ago quarter.[19] Revenue increased 10.8 percent to $1.31 billion from $1.18 billion.[4] Twelve Wall Street analysts had a consensus revenue estimate of $1.23 billion.[19]

General merchandise revenue was strong at $84 million an increase of 10.4% or $7.9 million.[8]

In Thursday's regular trading session, HOG is trading at $36.22, down $0.57 or 1.55% on a volume of 2.46 million shares.[19] Shares quickly dipped to a 52-week low of $34.10, but were trading at $35.62 by midmorning, still down 3 percent from Wednesday's closing price.[10]

Jim Ziemer will share some closing thoughts and open the phone line for questions. Before we begin please note that this call is being webcast live on www.Harley-Davidson.com ]] www.Harley-Davidson.com and will be available for replay throughout the next several weeks before being archived. It can also be accessed until April 24 th by calling 706-645-9291, pin number 39966333#. 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.[8] Over the next hour Harley-Davidson'''s CEO Jim Ziemer will speak to you about actions we are taking to address the U.S. economic environment and the outlook for our business.[8] Harley-Davidson remains profitable and it is fortunate to be dealing with the current economic environment from a position of financial strength and perhaps most important Harley-Davidson has always managed the business for the long term and we will continue to do so.[8] We will also be reducing the non-production workforce by about 360 jobs. These actions are critical to position our business for an environment we expect will continue to be challenging.[8] I'''ll come back at the end of the call to cover the other two points. The U.S. economy continues to make this a very challenging environment for us as it does for many other business and sectors.[8] The slowing U.S. economy had a big impact. Company officials said the dismal performance was mainly driven by declining sales in the U.S. market and losses at its in-house consumer loan division.[21] Sales have been down, and losses in Harley's in-house consumer loan division have hit the company hard.[29]

Taking the plunge: Opportunity knocked and this entrepreneur rushed in. He didn't change his sales strategy. He changed his client strategy. Charles Myers bootstrapped his company after staggering losses on a business deal gutted the company'''s capital.[5]

Currently, about one quarter of Harley-Davidson's motorbikes are sold overseas, but the company official believe the proportion will grow. [21] Harley-Davidson Motor Company produces heavyweight motorcycles and offers a line of motorcycle parts, accessories, general merchandise and related services.[16] Harley-Davidson now plans to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than shipped in 2007, resulting in total planned 2008 shipments between 303,500 and 307,500 units.[33] Sportster customers are extremely brand loyal as over 90% who plan to purchase another motorcycle aspire to purchase another Harley-Davidson motorcycle.[8]

Add scarcity to the throaty roar and classic chrome appeal of Harley-Davidson motorcycles.[7]

For Harley, the few bright spots remain in the international market. While pinched U.S. consumers are not spending as much on Harley-Davidson's premium motorbikes, which can run $20,000 or more, customers in other countries revved up their spending. [21] Harley sold 14% fewer bikes in the U.S. in the first three months of the year than in the same period in 2007.[6] Today, based on the retail outlook for the U.S. we made the difficult decision to reduce wholesale shipments. This action is intended to strike a balance between the need for our dealers to have appropriate inventory levels to meet retail demand as they enter the busiest selling part of the year while at the same time ensuring the exit the model year with an appropriate amount of carryover inventory.[8] As I said before, gauging the right level of shipments is not an exact science but we are working together with our dealers to continually improve our balance between supply and customer demand. As we begin to implement the shipping reduction here in the second quarter we realize this may result in some inconvenience to our dealers and customers and we are working to minimize any possible reduction.[8] Jim will be followed by CFO Tom Bergmann who will share the financial results for the quarter.[8]

On March 30, 2008, the Company had 236.5 million shares of common stock outstanding.[16] Last year the full year number was higher than 51.4% driven largely by the stick it to the man promotion in the summer. We think that our share will probably not be as high this year in spite of the fact that some of the competition has gone down in the last few months.[8] Just real quick, in terms of the market share I think you said it was 51%, I guess that'''s flat year-over-year but I think that'''s down a little bit from I think it was 55% for the full year last year.[8]

Looking at mix, the mix between motorcycles and within motorcycle families is ultimately driven by customer demand and in the short term mix can vary widely by quarter due to a variety of factors. This quarter is no exception and year-over-year mix changes were affected by last year'''s strike in York Pennsylvania where our touring and soft-tail motorcycles are assembled.[8] The heavyweight motorcycle market in the U.S. was down 14% during the quarter.[19]

Harley plans total 2008 motorcycle deliveries of 303,500 to 307,500, the company said.[22] The plan to eliminate a combined 730 jobs represents the biggest employment reduction since Harley first sold stock to the public in 1986.[22] Harley also has plants in Kansas City and Wisconsin. Ziemer says it's not clear how many jobs will be lost in those places.[13] Besides slowing production overall, Harley reported it would also have more temporary plant shutdowns like the one that idled the local factory during the week after Thanksgiving in 2007.[3] The contract ended a strike that halted motorcycle production at the plant for three weeks.[11]

A couple of questions on the guidance change you'''re taking the EPS for the year towards the $3 level now and we know what the change is to production.[8] Please go ahead. First of all gentlemen we'''re hearing things from the dealers that your new allocation program plus what you'''re doing on restraining production while painful in near term they do appreciate it and it is the right thing to do.[8] Diedrich said slower production will protect the brand and help dealers avoid sales promotions just to clear inventory.[2]

"We view the production cut favorably," the Baird analysts wrote. "It represents an effort to protect the scarcity value of the Harley-Davidson brand. It also provides investors with more realistic guidance."[3] Production cuts are favorable, Kennison said, and represent an effort to protect the scarcity value of the Harley-Davidson brand. He added that it also provides investors with more realistic guidance, helping to deflate the negative investor sentiments that had been accumulating.[7]

The production cuts will occur over the next several months in consultation with union leaders, according to Harley.[3] As the international markets pick up it mitigates some of the ''' what happens is the output of taking some of the cuts in the U.S. production.[8] We'''re not going to go through the quarter-by-quarter production cuts but I can give you some insights. Dynamics between the U.S. market and the international market kind of cause some of those.[8]

Management took a bold step in electing to cut production aggressively, said Robert W. Baird analyst Craig R. Kennison.[7]

Robin Farley, an analyst at UBS, characterized the forecast revision as a "massive guidance cut." The company blamed the shortfall on economic difficulties in the United States, its biggest and most important market, where a housing market slump and a related tightening in credit markets have forced U.S. consumers to rein in spending.[30] Los Angeles, California. Boger said he found out about the job cuts this morning, which is when the company issued a news release. "Nothing surprise me with this company," Boger said.[15] Our general merchandise group has done a great job of enhancing the Harley-Davidson experience for new customer groups particularly for women and international riders.[8]

Nearly three quarters of Sportster owners are new to the Harley-Davidson brand.[8]

As I mentioned earlier HDFS had already completed a first quarter securitization transaction. [8] As part of our normal process we go through and look at it every quarter and make sure that it'''s within an appropriate or acceptable range. In the first quarter it was no exception, we went through the normal exercise and we went through the range and determined that the 12% discount rate we used is well within that range and there was no need to change it at this point in time.[8] As most of you are aware the first quarter was a challenging time in the securitization markets.[8] On the material surcharge front we'''re virtually flat on raw material surcharges, so no significant impact during the first quarter.[8] Operating margin for the first quarter of 2008 held steady at 20% the same as the first quarter of 2007.[8]

During that quarter, overseas shipments accounted for almost one-third of Harley's total shipments. [12] In the years I've been writing about Harley, I've received more emails than I can count telling me that I don't "get" the company and its consumers.[24] "I'm comfortable that three, four, five years down the road the U.S. economy will have rebounded, which will benefit the company.''[22]

All of those older guys who bought in the 80's and 90's are now much older and selling their low mileage bikes. Why buy new? This glut was projected by analysts years ago. [29] U.S. sales were down in the high teens in the past six weeks, Citigroup analyst Greg Badishkanian wrote in a research note. Given those trends, he said the drop in Harley's guidance may not be low enough.[10] First-quarter international sales were up 18% from last year, as domestic sales plunged by 12.8%.[21]

The Milwaukee-based motorcycle manufacturer also reported that it expects full-year per-share earnings to drop as much as 20 percent. [17] The motorcycle maker has said about 370 unionized employees will be cut. About 80 percent of those cuts will happen at the Springettsbury Township facility.[32]

The company expects to ship between 23,000 and 27,000 fewer motorcycles in 2008 compared to 2007, or between 303,500 and 307,500 motorcycles.[26] We continue to manage mix carefully and balance shipments between our major motorcycle families based on forecasts in customer demand. Our product investments in touring continue to be market leading and our latest introductions in the custom segment Rocker C and Crossbones are hot sellers as customers are eager to ride these new models this spring.[8] With the new facility HDFS can now issue up to $1.7 billion for on secured commercial paper.[8] The $300 million is really a targeted cash balance on a consolidated financial basis to maintain a cash positive balance sheet.[8] Saiyid Naqvi, President of Harley-Davidson Financial Services will talk about the performance of that business unit.[8] HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson and Buell dealers and customers.[16]

"We are cutting our '08 EPS estimates to $3.06 from $3.91, and reducing our 12-month target price to $32 from $37," wrote S&P; analyst Erik Kolb in an Apr. 17 note. (S&P;, like BusinessWeek, is a unit of the McGraw-Hill Cos.) [21]

SOURCES

1. Motorcycle News - Harley faces lower profits, reduces motorcycle production and cuts jobs - Clutch and Chrome
2. The Associated Press: Harley-Davidson cuts shipments, jobs at 1Q profit skids
3. Business News for the Central Pennsylvania region including the Harrisburg, York and Lancaster areas - CentralPennBusiness.com
4. The Associated Press: Harley-Davidson cuts shipments, jobs as 1Q profit skids
5. Harley will idle plants, lay off 730 - Kansas City Business Journal:
6. BBC NEWS | Business | Uneasy ride for Harley-Davidson
7. Harley To Play Hard To Get - Forbes.com
8. Harley-Davidson, Inc. Q1 2008 Earnings Call Transcript - Seeking Alpha
9. Earnings roundup: Harley-Davidson, United Technologies - Forbes.com
10. The Associated Press: Earns Harley Davidson
11. York Harley-Davidson plant could cut 300 jobs - Midstate PA Local News, Weather, Sports & Entertainment - PennLive.com
12. Harley-Davidson to Cut Shipments, Jobs - MotorcycleUSA.com
13. Harley-Davidson hogtied, cuts 8% of work force - Apr. 17, 2008
14. Free Preview - WSJ.com
15. Harley-Davidson looking for retirements first
16. Harley-Davidson Retail Sales Down In First Quarter Of 2008 News Article // RoadracingWorld.com
17. Harley-Davidson to cut jobs, ship fewer motorcycles - The Business Journal of Milwaukee:
18. SunHerald.com : /C O R R E C T I O N -- Harley-Davidson, Inc./
19. Harley-Davidson Q1 Profit Declines On Weak U.S. Sales; Revenues Up 10.8%; EPS Up, Beats Estimate; Slashes FY08 EPS Outlook - Update [HOG] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
20. Harley Outlook Low on the Hog | Retail | HOG - TheStreet.com
21. A Downshift for Harley-Davidson
22. Bloomberg.com: Worldwide
23. CMGonline.com - Harley cutting jobs as profits drop
24. Foolish Forecast: Harley-Davidson Tunes Its Inventory
25. Harley To Cut 730 Jobs | Newsradio 620 - Milwaukee, Wisconsin News, Talk, Sports, Weather | Local Headlines
26. Harley Davidson to cut 730 jobs - Evening Sun
27. Harley-Davidson Cutting Hundreds of Jobs
28. Harley hoping to break out of its year-long slog | Special Coverage | Reuters
29. Harley-Davidson announces job cuts and idle plants - BloggingStocks
30. Harley cuts outlook, to slash output | Reuters
31. Harley cuts outlook, to slash output : US Business
32. Harley-Davidson To Cut Hundreds Of Jobs In York County - Pennsylvania News Story - WGAL Lancaster
33. RTTNews - Global financial news, Hot Stocks, Stock Splits, Long Term Stocks.
34. RTTNews - Global financial news, Hot Stocks, Stock Splits, Long Term Stocks.

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A Downshift for Harley-Davidson

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