Harley-Davidson, Inc. ( HOG)

Q3 2010 Earnings Call Transcript

October 19, 2010 9:00 am ET

Executives

Amy Giuffre – Director, IR

Keith Wandell – President and CEO

John Olin – CFO and SVP

Lawrence Hund – President and COO, Harley-Davidson Financial Services

Analysts

Edward Aaron – RBC Capital Markets

Rod Lache – Deutsche Bank

Sharon Zackfia – William Blair

Timothy Conder – Wells Fargo Securities

Craig Kennison – Robert W. Baird

Himanshu Patel – JPMorgan

James Hardiman – Longbow Research

Robin Farley – UBS

Patrick Archambault – Goldman Sachs

Presentation

Operator

Good morning. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2010 earnings 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.

Ms. Giuffre, you may begin your conference.

Amy Giuffre

Thank you, Simon. Welcome to Harley-Davidson's third quarter 2010 earnings conference call. Today's call is being webcast live on harley-davidson.com, where you will 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 in this call.

This morning, Harley-Davidson's CEO, Keith Wandell will share his thoughts on the progress to date against our strategy. CFO, John Olin and President of Harley-Davidson Financial Services, Larry Hund, will provide comments on the quarter. At the close of prepared comments, we will open the call for your questions. We ask that each caller ask only one question, and I appreciate your cooperation with that. So let us get started.

Keith Wandell

Thank you, Amy; and good morning and thanks everyone for joining us on the call today. As I look at where Harley-Davidson stands today, it is clear to me that we are making solid progress against our goal, which is to transform our business at all levels so that we can succeed not only at today's volumes, but more importantly, grow and restore greater profitability over the long term.

Without question, a lot of hard work lies ahead, along with many challenges. The economy is yet to turn around in a convincing way, and many consumers remain on the sidelines. However, as I look at all we have accomplished since we announced our new strategy to deliver results through focus, one year ago almost to this day, I am proud of everyone in our organization. Through the outstanding efforts of our entire team, we are bringing our strategy of focus on the Harley-Davidson brand to life.

So let me start off with a thank you to all of our employees. You are showing that as one company, one team, working in one direction, we have accomplished a lot. Also, I want to thank our dealers, who in most of our global markets have faced the toughest business climate in their lifetimes. But our market share gains demonstrate that working together, Harley-Davidson and its dealers continue to provide a great lifetime experience for our customers.

What we set out to do one year ago was nothing short of transforming our company and our business and there is no aspect of our business that is going untouched or unchallenged. In this process, we believe we are positioning Harley-Davidson for future prosperity.

Let me review some of what we have accomplished. We have begun to implement a new operating structure at our York plant, enabled by a new labor agreement. This new continuous improvement production system focuses on greater flexibility or surges to meet seasonal and other volume needs, and enhance stability to vary product mix in line with customer expectations and greater production efficiency overall.

Again, special recognition goes out to our York employees. In addition to our management team, both the local and international union officials have shown tremendous leadership. I was in York a couple of weeks ago, where I walked the factory floor and it was a great opportunity to talk with our employees, and I have to tell you just how impressed I was with the new operating model that is coming to life there, thanks to the best thinking of all of our employees. But more than that, I was especially impressed by the attitude of the York work force in the face of all the changes. They truly get why this work is so important and what a difference it makes, now that they are implementing it and living it.

At Harley-Davidson Financial Services, we have seen great improvement through our strategic focus on the performance of our Financial Services business and have delivered strong profitability in the past three quarters.

We have completed the divestiture of MV Agusta and exited the Buell business in order to focus our resources and energies on growth through the Harley-Davidson brand. We are seeing Harley-Davidson strengthen its lead in the U.S. in new motorcycle sales to young adults, not just in the heavyweight category, but across all sizes of on-road motorcycles.

In 2008, we became the overall market leader to young adults, defined as customers 18 to 34 years old, and in 2009, we expanded that lead. In fact, we sell more new Harley-Davidson motorcycles to today's generation of young adults than we did to the boomers when they were young adults. Our brand has great appeal to these consumers and we have a great opportunity with this customer base.

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