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Harley-Davidson Inc  (NYSE:HOG) Operating Income: $941 Mil (TTM As of Jun. 2017)

Harley-Davidson Inc's Operating Income for the three months ended in Jun. 2017 was $402 Mil. ts operating income for the trailing twelve months (TTM) ended in Jun. 2017 was $941 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. Harley-Davidson Inc's Operating Income for the three months ended in Jun. 2017 was $402 Mil. Harley-Davidson Inc's Revenue for the three months ended in Jun. 2017 was $1,765 Mil. Therefore, Harley-Davidson Inc's Operating Margin % for the quarter that ended in Jun. 2017 was 22.75%.

Good Sign:

Harley-Davidson Inc operating margin is expanding. Margin expansion is usually a good sign.

Harley-Davidson Inc's 5-Year average Growth Rate for Operating Margin % was 2.40% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. Harley-Davidson Inc's annualized ROC % for the quarter that ended in Jun. 2017 was 12.90%. Harley-Davidson Inc's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2017 was 47.44%.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Harley-Davidson Inc Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 1,000.18 1,153.70 1,280.98 1,155.70 1,048.94

Harley-Davidson Inc Quarterly Data

Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 178.38 69.41 291.48 401.58 96.71

Calculation

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Harley-Davidson Inc's Operating Income for the fiscal year that ended in Dec. 2016 is calculated as

Operating Income(A: Dec. 2016 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=5996.458-3593.466-1217.439
-Research & Development-Depreciation, Depletion and Amortization-Others
-0-209.555--72.938
=1,049

Harley-Davidson Inc's Operating Income for the quarter that ended in is calculated as

Operating Income(Q: Jun. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=1765.169-1045.92-291.45
-Research & Development-Depreciation, Depletion and Amortization-Others (1)
-0-52.678--26.461
=402

Operating Income(Q: Jun. 2017 )
=EBITDA-Depreciation, Depletion and Amortization-Others (2)
=454.837-52.678-0.577
=402

Operating Income for the trailing twelve months (TTM) ended in Jun. 2017 was 178.376 (Sep. 2016 ) + 69.41 (Dec. 2016 ) + 291.478 (Mar. 2017 ) + 401.582 (Jun. 2017 ) = $941 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

Harley-Davidson Inc's annualized ROC % for the quarter that ended in Jun. 2017 is calculated as:

ROC %(Q: Jun. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Mar. 2017 ) + Invested Capital (Q: Jun. 2017 ))/2)
=1606.328 * ( 1 - 34.37% )/( (8119.92 + 8230.044)/2)
=1054.2330664/8174.982
=12.90 %

where

Invested Capital(Q: Mar. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=5320.797 + 1650.418 + 1993.409 - 844.704
=8119.92

Invested Capital(Q: Jun. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=4678.35 + 2494.003 + 2046.167 - 988.476
=8230.044

Note: The Operating Income data used here is four times the quarterly (Jun. 2017) operating income data.

2. Joel Greenblatt's definition of Return on Capital:

Harley-Davidson Inc's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2017 is calculated as:

ROC (Joel Greenblatt's)(Q: Jun. 2017 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Property, Plant and Equipment+Net Working Capital)
     Q: Mar. 2017  Q: Jun. 2017
=EBIT/( ( (Property, Plant and Equipment + Net Working Capital) + (Property, Plant and Equipment + Net Working Capital) )/2 )
=1608.636/( ( (953.044 + max(2486.895, 0)) + (946.326 + max(2395.368, 0)) )/2 )
=1608.636/( ( 3439.939 + 3341.694 )/2 )
=1608.636/3390.8165
=47.44 %

where Working Capital is:

Working Capital(Q: Mar. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(335.578 + 485.476 + 2572.162) - (906.321 + 0 + 1.13686837722E-13)
=2486.895

Working Capital(Q: Jun. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(330.933 + 372.012 + 2553.181) - (860.758 + 0 + -2.27373675443E-13)
=2395.368

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Jun. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin:

Harley-Davidson Inc's Operating Margin % for the quarter that ended in Jun. 2017 is calculated as:

Operating Margin %=Operating Income (Q: Jun. 2017 )/Revenue (Q: Jun. 2017 )
=401.582/1765.169
=22.75 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the operating income growth rate using operating income per share data.


Be Aware

Compared with a company's EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company's revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia's Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms


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