Harley-Davidson (HOG) has reported a loss of $147.2 million or 63 cents per share in the fourth quarter of 2009, compared to an income of $91.9 million or 40 cents per share in the comparable period a year ago.
Compared to the Zacks Consensus Estimate of a loss of 34 cents per share, this loss is pronounced. According to Harley-Davidson, a difficult economy and the planned actions that resulted in huge restructuring charges ($224 million) are the key factors behind the loss.
Revenue plummeted 40% to $764.5 million. Revenue from Harley-Davidson motorcycles went down 46% to $552 million. The company shipped 35,938 motorcycles to dealers and distributors worldwide, down 53% from the year-ago level but in line with the previous guidance of 35,000 units–40,000 units. Revenue from Parts and Accessories totaled $144.6 million during the quarter, down 5%, and revenue from General Merchandise declined 3% to $66.8 million.
Retail sales of Harley-Davidson motorcycles decreased 21% worldwide, 28% in the U.S. and 10% in international markets. Industry-wide U.S. retail heavyweight (651cc+) motorcycle sales declined 21% during the quarter.
Harley-Davidson Financial Services (HDFS) recorded an operating loss of $7.1 million in the quarter, compared to an operating loss of $24.9 million in the fourth quarter of 2008. This was attributable to a decrease in impairments on retained securitization interests and a decrease in fair value write-downs on held-for-sale receivables, partially offset by an increase in the provision for retail loan losses.
Annual Results
In 2009, Harley-Davidson showed a profit of $70.6 million compared to $684.2 million in 2008, a decrease of 90%. Earnings per share decreased to 30 cents from $2.92 in 2008. This was lower than the Zacks Consensus Estimate of 37 cents per share. The results reflected lower motorcycle shipments, restructuring expenses and Buell product line exit costs, besides non-cash charges related to HDFS.
Revenue in the year dipped 23% to $4.29 billion. Revenue from Harley-Davidson motorcycles went down 25% to $3.17 billion on shipments of 223,023 units. Revenue from Parts and Accessories slipped 11% to $767.3 million in 2009, while revenue from General Merchandise decreased 10% to $282.2 million.
Retail sales of Harley-Davidson motorcycles decreased 23% worldwide, 26% in the U.S. and 15% in international markets. Industry-wide U.S. retail heavyweight motorcycle sales declined 37%. HDFS reported an operating loss of $118 million, compared to an operating income of $82.8 million in 2008.
Financial Position
Cash and cash equivalents totaled $1.6 billion as of December 31, 2009. Long-term debt amounted to $4.1 billion as of the above period. The long-term debt-to-capitalization ratio was as high as 72%.
In 2009, operating cash flow was $609 million, in sharp contrast to an outflow of $608 million in the prior year. Meanwhile, capital expenditures reduced to $117 million in the period under review from $229 million in 2008. The company expects capital expenditures of between $235 million–$255 million in 2010, including $95 million–$110 million to support restructuring activities.
Looking Ahead
Harley-Davidson expects to ship 52,000 to 57,000 motorcycles in the first quarter of 2010. For 2010, the company anticipates to ship 201,000 to 212,000 motorcycles to dealers and distributors worldwide, a reduction of 5%–10% from 2009.
Harley-Davidson expects restructuring, began in 2009, to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. The company continues to anticipate annual ongoing total savings from restructuring of $240 million to $260 million upon the completion of all announced restructuring activities, including anticipated savings of $135 million to $155 million in 2010.
Affected by the depressed results, stock price decreased 9% to $23.32 in the afternoon compared to $25.58 after the market closed on January 21, 2010.
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