Harley-Davidson, Inc. (HOG)
Q2 2010 Earnings Call Transcript
July 20, 2010 9:00 am ET
Amy Giuffre – Director, IR
Keith Wandell – CEO
John Olin – CFO
Larry Hund – President, Harley-Davidson Financial Services
Tim Conder – Wells Fargo
Sharon Zackfia – William Blair
Rod Lache – Deutsche Bank
Craig Kennison – Robert W. Baird
Ed Aaron – RBC Capital Markets
Patrick Archambault – Goldman Sachs
James Hardiman – Longbow Research
Robin Farley -UBS
Himanshu Patel – J.P. Morgan
Previous Statements by HOG
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Good morning. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2010 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I will now turn the call over to Amy Giuffre, Director of Investor Relations. You may go ahead.
Welcome to Harley-Davidson's second quarter 2010 call. Today's call is being webcast live on harley-davidson.com where you can also find slides containing supporting details. The slides can be accessed by clicking on Investor Relations, then Events and Announcements.
Our comments today will include forward-looking statements that are subject to risks that could cause actual results to be materially different. 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 information on this call.
This morning, you will hear from Harley-Davidson's CEO, Keith Wandell; CFO, John Olin; and, President of Harley-Davidson Financial Services, Larry Hund. At the close of prepared comments, we're opening the call for your questions. We ask that each caller ask only one question. We appreciate your cooperation. So let's get started.
Thanks, Amy. And thanks, everyone, for joining us on the second quarter call, and good morning. Harley-Davidson continues to make good progress at executing our strategy through delivering results through focus. And we are seeing the benefits of that progress in our earnings performance. Harley-Davidson's first half earnings from continuing operations were $0.89 a share. We saw continued improvement at HDFS and there was a further moderation in the retail sales decline for new Harley-Davidson motorcycle sales in the second quarter.
Over the past year-and-a-half, we've taken many actions, from an operations standpoint, in marketing and product development at HDFS and in every aspect of our business to deal with the economy and focus our resources on long-term goals and priorities.
So let me thank our employees for the outstanding work they do each and every day. I continue to be impressed by the dedication they show to the company and to executing our strategy. I'd also like to recognize our dealers for their commitment to Harley-Davidson customers and delivering a premium Harley-Davidson experience to local markets around the world. It has been a challenging time for them. And they are doing a lot of great work.
But while we still have a lot of hard work ahead when it comes to driving competitiveness and effective execution at every level of the organization, we believe that we're on the right path. We are very purposefully transforming our entire company to be more flexible and customer-responsive.
In operations, the transformation at York is continuing on pace. So we are seeing remarkable changes in how people come to work everyday, engaged, and ready to do a great job for our customers. Last month, we started up with production of Trikes at York, the first product line to fully utilize the new operating system there.
Later this week, we will formally sit down with our Wisconsin unions to begin negotiations on agreements for a similar transformation of our Milwaukee area and Tomahawk production operations. Our goal and our preference is to find a way to close the large cost gaps and create a flexible operation in Wisconsin that enables us to produce closer to demand. At the same time, we have indicated that we will take whatever actions necessary to ensure a cost-effective and flexible operation.
We are also making great progress with changes to our product development approach and processes, which we expect to result in shorter lead times, greater cost-effectiveness, and most importantly, even more product wow for our customers. After all, that's what it's all about, is bringing great products and experiences to our current customers and new customers alike.
We continue to expand our reach to new customers all around the globe. Retail, new Harley-Davidson motorcycle sales grew for the first straight quarter in Europe, which is our largest market region outside the US. Over the past two weeks, three Harley-Davidson dealerships opened in India, in Hyderabad, Chandigarh, and New Delhi. We have established a subsidiary operation in China to improve sales and marketing capabilities, dealer support, and distribution effectiveness, providing an enhanced customer experience. We expect four new dealerships to open in China this year for a total of eight. And in the US, no one is reaching new customers better than Harley-Davidson.
Based on recently provided poll data, we have been the heavy weight motorcycle category market leader in new motorcycle sales to young adult men and women ages 18 to 34 since at least 2006. We have also been the heavyweight market leader since at least 2006 in new motorcycle sales to women riders, Hispanic riders, and African-American riders ages 35 and over. And of course, we're also the market leader among Caucasian men ages 35 and over. And when it comes to new motorcycle sales to young adults, in all sizes, among road motorcycles, Harley-Davidson has been the US market share leader since 2008.