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Harley-Davidson Sees Declines in 3Q Income and Sales, Drops Buell and MV Agusta

Harley-Davidson Inc. reported an 84.1 percent decline in net income in the third quarter, compared to the year-ago period, which reflected lower motorcycle shipments and the effects of the economy on retail and wholesale loan performance at Harley-Davidson Financial Services (HDFS).

by Staff
October 15, 2009
3 min to read


MILWAUKEE — Harley-Davidson Inc. reported an 84.1 percent decline in net income in the third quarter, compared to the year-ago period, which reflected lower motorcycle shipments and the effects of the economy on retail and wholesale loan performance at Harley-Davidson Financial Services (HDFS).

The company also announced that it would cease production of its Buell motorcycles and sell its MV Agusta unit based in Varese, Italy, in order to focus resources on its namesake brand.

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Harley-Davidson reported net income of $26.5 million for the third quarter, compared to $166.5 million in the third quarter of 2008, on revenue of $1.12 billion, compared to $1.42 billion in the year-ago period. Through nine months, the company reported net income of $163.6 million, down 71.6 percent from the year-ago period. Revenue through nine months was $3.57 billion, down 17.1 percent from the same period last year.

During the third quarter, retail sales of Harley-Davidson motorcycles decreased 21.3 percent worldwide, 24.3 percent in the U.S. and 13.1 percent in international markets, compared to the prior-year quarter. Retail sales of Harley-Davidson motorcycles in the first nine months of 2009 decreased 22.9 percent worldwide, 25.5 percent in the U.S. and 16.5 percent in international markets, compared to the year-ago period. Industry-wide U.S. retail heavyweight motorcycle sales declined 38.7 percent year to date in 2009, compared to 2008.

HDFS recorded an operating loss of $31.5 million for the third quarter 2009, compared to an operating profit of $35.6 million in the year-ago period. This decrease of $67.2 million was due to a higher provision for credit losses in both the retail and wholesale portfolios as well as increased interest expense.

Year-to-date through the third quarter, HDFS reported an operating loss of $110.8 million, compared to operating income of $107.7 million for the prior year period. The nine-month operating loss includes two non-cash charges recorded in the second quarter of 2009: a $72.7 million credit loss provision for a one-time reclassification of motorcycle loan receivables; and a one-time $28.4 million charge to write off goodwill associated with HDFS.

HDFS continues to successfully access the credit markets to fund its lending activities. On October 9, HDFS completed a $700 million term securitization transaction with a weighted average interest rate of 1.2 percent.

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"While the environment remains challenging for us, we are mildly encouraged by the moderation in the decline of dealer retail Harley-Davidson motorcycle sales," said Keith Wandell, CEO of Harley-Davidson Inc. "And moving forward, our strategy is designed to strengthen Harley-Davidson for long-term growth and deliver results through increased focus.

As part of the company’s strategy, it will discontinue production of Buell motorcycles and sell its MV Agusta unit, which is based in Varese, Italy. In the third quarter, Harley-Davidson Inc. recorded a one-time fixed-asset impairment charge of $14.2 million related to Buell and a goodwill impairment charge of $18.9 million related to MV Agusta.

Harley-Davidson’s decision to end production of Buell motorcycles will result in one-time costs of $125 million to the company, and a reduction of about 180 hourly and salaried positions at Buell by Dec. 18. Remaining inventories of Buell motorcycles, accessories and apparel, while they last, will continue to be sold through authorized dealerships. Warranty coverage will continue as normal for Buell motorcycles and the company will provide replacement parts and service through dealerships.

"Buell and MV Agusta are great companies, with proud brands, high-quality exciting products and passionate enthusiasm for the motorcycle business. Buell has introduced many innovative advancements in motorcycle design and technology over the years and MV Agusta is known in Europe for its premium, high-performance sport motorcycles. However, our strategy to focus on the Harley-Davidson brand reflects the fact that we believe our investments in that brand are a better utilization of overall company resources," said Wandell.

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