HarleyDavidson Inc. Reports Operating Results (10-Q)
Harley-Davidson is an American motorcycle manufacturer. The company operates in two segments: Motorcycles and Related Products and Financial Services. The Motorcycles segment designs manufactures and sells heavyweight touring custom and performance motorcycles as well as a complete line of motorcycle parts accessories and general merchandise. The Financial Services is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (primarily motorcycles). HarleyDavidson Inc. has a market cap of $5.3 billion; its shares were traded at around $22.6 with a P/E ratio of 12.5 and P/S ratio of 0.9. The dividend yield of HarleyDavidson Inc. stocks is 1.7%. HarleyDavidson Inc. had an annual average earning growth of 20.6% over the past 10 years. GuruFocus rated HarleyDavidson Inc. the business predictability rank of 4-star. Highlight of Business Operations: The Companys financial results continue to be impacted by the difficult economic environment. Net income and diluted earnings per share for the second quarter of 2009 were down 91.1% and 91.6%, respectively, compared to the second quarter of 2008. Net income during the second quarter was affected by the 27.6% reduction in wholesale shipments of Harley-Davidson motorcycles compared to last years second quarter and by charges related to HDFS, including a $72.7 million credit loss provision related to a one-time reclassification of finance receivables held for sale to finance receivables held for investment and a $28.4 million goodwill impairment charge to write off goodwill related to the Financial Services segment.
Also on July 16, 2009, the Company revised its expected capital expenditures for 2009 to approximately $145 million to $175 million including approximately $20 million to $30 million for capital expenditures made in connection with its restructuring activities in 2009. In the aggregate, this represents an approximately $77 million to $107 million decrease from the Companys 2008 capital expenditures. The Company anticipates it will have the ability to fund all capital expenditures in 2009 with internally generated funds.(1)
On a combined basis, the Company now expects the volume reductions and restructuring activities to result in one-time restructuring charges of approximately $160 million to $190 million over the course of 2009 and 2010, an increase of $40 million from previous estimates, including $50.0 million incurred during the first half of 2009. The Company now estimates ongoing annual savings of approximately $140 million to $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 to $85 million.
The effective income tax rate for the second quarter of 2009 was 71.6% compared to 36.0% for the second quarter of 2008. The increase was primarily due to the $28.4 million goodwill impairment charge which was non-deductible, as well as tax implications associated with MV. The Company expects its full-year 2009 effective tax rate to be approximately 55% due to the items listed above as well as the previously reported one-time tax charge of $22.5 million in the first quarter of 2009 and the implications of reduced shipments on earnings for the remainder of the year .(1)
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