| Author | Message | ||
     Hughlysses |
Just out, includes a link to the full report: http://www.gurufocus.com/news.php?id=73037 Lots of data here; hopefully some of our more financially astute members can synopsize for the rest of us. | ||
| Chuck22b |
The only thing that matters to us: Net Revenue for the first 9 months to September 27, 2009 Harley-Davidson motorcycles 2009 compared to 2008 $ 2,622,774 $ 3,229,085 $ (606,311 ) (18.8 )% Buell & MV motorcycles 2009 compared to 2008 92,999 89,704 3,295 3.7% 2,715,773 3,318,789 (603,016 ) (18.2 ) Buell/MV sales grew from last year by 3.7% YTD, compared to Harley's core loss of -18.8%. Who said Buell's didn't sell? Buell's contribution to net revenues increased from 2.7% of total sales to 3.4% of total sales. Enough said. While other Motor Cos lost money, BMC still made more than the same time last year - in spite of fewer dealers carrying or supporting Buell in the last few months. And the other thing to note: 111 million loss in the financial services segement for the first 9 months, with over 149 million reserved for loan charge offs. "Changes in the allowance for finance credit losses on finance receivables held for investment were as follows (in millions)" increased from 114 mil in the last quarter to 148 million this quarter. Harley's looking forward to a rough road ahead and preping for it. Buell was just a scape ghoat. -chuck22b | ||
| Black |
+1 Chuck! As I went through the financial report today it occurred to me that Harley probably considers shutting down Buell, the equivalent of ceasing production of purple 883s with tassels on their handle bars. They must simply think they are just reducing the number of models, and reducing the models that sell the fewest (when compared to Harley as a whole.) That would explain some of Mr. Sweeney's statements. However, I still don't understand how they could get rid of ANY profitable section in the current financial environment. | ||
| Transmaniacon_mc |
I do not believe they sold more Buell motorcycles this 2009 Q's as much as it is they added both Buell and MV motorcycle sales together so the number is a plus because of the adding MV production of motorcycles which they did not have in 2008. Sales of Motorcycles are down for all motorcycle companies by big negative percentage. H-D is like GM was bleeding money and like GM did they are cutting off complete production lines, Saturn, Pontiac, or selling what they could Hummer, Opal which is what H-D did with Buell shutting down MV selling. It was just business when you look at the numbers as to what H-D did closing Buell. Bankruptcy or federal government aid or both I believe is what H-D may be setting up for in the future. Just as a new Erik Buell designed H-D motorcycle may be in the future if Erik stays to work for H-D in the future | ||
| Jwnsc |
I still don't understand how they could get rid of ANY profitable section in the current financial environment. Hugh and I have had this conversation before, so as a public service, I'll help you guys out here. First, until you can separate the figures for Buell from MV Agusta, you can't say anything definitive about either. How many Blasts would you have to sell to equal the revenue from the sale of one high-end MV Agusta? Second, an increase in sales does not mean a company is profitable. Suppose a company produces 100 bikes a year. The company's CFO figures out that they need to sell 80 bikes a year to turn a profit. The first year they only sell 70 bikes. Clearly no profit. The second year they sell 75 bikes. OMG, a 7% increase in sales over last year! Is the company profitable? You can also see how even if a company is profitable one year, overall it might not be, depending on the losses in preceeding years, tax write-offs, etc. Buell was closed because it was not profitable, ("The business [Buell] loses money for us year in and year out," said Keith Wandell, Harley-Davidson Inc.'s chief executive officer.” “...the brand lost $18 million in 2008 and $27 million so far in 2009... he said.”) and, for recession-racked Harley, there was no other reason to continue carrying it, e.g. not enough Buell riders trading for or buying Harleys to justify the red ink. | ||
| Toecutter |
"The Company expects previously announced restructuring activities, together with costs associated with winding down the Buell product line, to result in one-time restructuring and impairment charges of $215 million to $245 million over 2009 and 2010, or an increase of $55 million from the estimate provided July 16, 2009. The Company estimates annual savings from these restructuring activities, measured against 2008 spending (cost of sales and operating expenses), are as follows:" • 2009 - $75 million to $90 million; • 2010 - $100 million to $130 million; and • 2011 and beyond - $140 million to $150 million. M'kay... good luck with that. | ||
| Hughlysses |
Jim- One thing Court has reiterated in the last week or so I had forgotten, and it makes the question of Buell's profitability a little more complicated. As I understand it, Buell Motorcycle Company was operated as a completely independent operation by HDI. BMC built and sold motorcycles to HDI, who marketed them, distributed them to dealerships, and earned revenue from their sale to us. As far as its budget, BMC did operate at a profit. OTOH HDI evidently was not able to make a profit from their sales of Buell motorcycles (at least for the last two years). As inept as they were at marketing them and finding dealers who had a clue how to sell them, that's not hard to believe. If this is in fact how Buell worked, it would seemingly improve the possibility of finding investors for a new Buell company. | ||
| Black |
Thanks JWNSC, Interesting post. (Message edited by black on November 01, 2009) | ||
| Jwnsc |
Hugh, so Court is saying HDI was under contract to buy every bike BMC produced at a pre-arranged price regardless of what the actual sales in the dealerships were? Wow, Buell had a monopoly then - it didn't have to compete with any other sport bike company to sell bikes to Harley. That's a sweet deal as long as Harley orders enough bikes for Buell to be profitable and if you don't mine putting the fate of your sport bike company into the hands of a heavy cruiser sales force. If that's true, saying Buell was profitable in this context really has no relevance, since they weren't subject to the same market forces as a stand-alone company, they just filled production orders. I did notice Wandell didn't say "we" lost millions, he said "the brand" or "the business" lost millions. (It was their fault, not ours.) As far as anyone investing to put Buell back in production on the scale comparable to what they have been doing, (as opposed to a small, boutique outfit) the financial analysts seem to agree that in this market, if Buell was separated from Harley, it would have little or no value to a potential buyer. On the practical side, Harley knows they need to get a younger customer base, so why would they enable a competitor for possible future sales with their own assets? | ||
| Jwnsc |
Black - the thing about investor relations data is what they don't show. How many Buells were sold? How much revenue was needed for Buell to be profitable? Also, you have to be precise in the use of terminology. On the Adv Rider website a guy saw in the HDI investor relations that Buell shipped 13,000+ motorcycles in 2008, a 14% increase over 2007, and said that Buell sold 13,000+ motorcycles and sales were up 14%. The actual figure for Buells sold through dealerships in 2008 was somewhere north of 6000, according to the Motorcycle Industry Council. But referring to Hugh's post above, the guy might have been right (Buell sold all 13K bikes to Harley). If so, which number do you think had more significance for Buell's future, the number of bikes shipped, or actually sold at dealerships? (Message edited by jwnsc on November 01, 2009) | ||
| Hughlysses |
Jim- I believe bikes were built to order for HDI, HDI didn't just have to buy every bike Buell produced regardless of how many that was. Maybe Buell would not have been "profitable" if they'd produced only the number of bikes that HDI could sell. OTOH, if HDI had managed the sales end better, perhaps they could have sold every Buell produced. It's hard to imagine why there'd be such a disconnect between supply and demand. Whatever the case, it certainly seems to indicate gross incompetence by HDI. | ||
| Reepicheep |
Jwnsc... it's not a good deal if you are only allowed to sell to one customer, and that customer (more often then not) does not understand how to sell your brand or how to reach your customers. Like say, for example, Apple computer had a contract where there computers could *only* be sold through Dell. What if BMW motorcycles could only be sold through Harley Davidson dealerships. Do you think the BMW Motorcycle Marquis would be better or worse for it? | ||
| Davegess |
so Court is saying HDI was under contract to buy every bike BMC produced at a pre-arranged price regardless of what the actual sales in the dealerships were? Not exactly correct. Buell distribution ordered bikes form Buell. They ordered mostly based on what they thought could be sold not exactly what Buell could make. You are correct that bikes shipped and bikes sold to customers are different things. The MIC numbers on sales are likely good BUT only have US sales and I have heard (I believe this to be correct but have no real knowledge of it) that they sell as many over seas as in the US. A second issue is that HDs numbers now lump MV with Buell. Do those shipped numbers include both? Then you would need to figure out how many were MV's Third wrinkle is Blasts. almost every Blast shipped was sold to a dealer not at retail so those sales don't show up in the MIC numbers. Pretty many blasts were made each year. HD has made it difficult if not impossible to figure out exactly how much money Buell was making or losing. I wonder why? | ||
| Oddball |
What a mess. Why do corporate operations have to be so convoluted? | ||
| Court |
>>> the financial analysts seem to agree that in this market, if Buell was separated from Harley, it would have little or no value to a potential buyer. I've had the opportunity to talk to several stock analysts in the last two weeks. I have not heard the view you say "the financial analysts agree". Where did you source that? I'd like to read two or three of the opinions you allude to since it's in conflict with the financial industry publications (such as Seeking Alpha) I've gotten to see. For the number of bikes sold by dealers the only accurate (it weeds out straw sales where dealers sell bikes to employees to fudge numbers) is vehicle registrations from county clerks offices. Dave's above explanation is accurate. Nearly no useful (if a person were planning or intending to invest) information can be gleaned. HDI is smart enough to divulge what they are required to and not a molecule more. | ||
| Davegess |
Public corps want to give the stockholders as little info as possible. They want to spin it as much as possible. The management team does not want people second guessing what they are doing. It usually works out OK but can lead to some pretty amazing corporate messes. Enron comes to mind. Corporate governance is an ever evolving thing with the stockholders need to know what they are buying sometimes in conflict with running the company. Sometimes the desire to keep the share price up, which keeps stockholders happy and out of your hair, leads management to makes very short term decisions that are not good for the long term of the company. The whole public ownership of corporations is very much as double edged sword. | ||
| Alchemy |
Quote: "HD has made it difficult if not impossible to figure out exactly how much money Buell was making or losing. I wonder why?" 2 years from now HD may plan to announce that the XR1200 is outselling Buell. No one will be able to dispute that. | ||
| Jwnsc |
Where did you source that? I'd like to read two or three of the opinions you allude to Here's three that I read around 10/15/09. "According to CFO John Olin, the Buell brand is not accounted for separately on the Harley-Davidson books, and therefore the company has chosen to kill it rather than sell it off. Another explanation might be that the brand has little to no value." Daily Finance "The choice to kill Buell instead of selling it like MV Agusta is also a simple one for Harley-Davidson. Considering how intertwined the two brands are in their supply chains, financing, and branding, it would be impossible to excise the sportbike company from its parent, and leave something worthwhile to a prospective buyer." Asphalt & Rubber "But in financial circles, analysts have said Buell Motorcycle Co. was not much more than a "rounding error" on Harley's ledger." Milwaukee Journal Sentinel Online So Court what are your sources saying Buell is worth in this economy when separated from HD? And what specific items would the sale consist of? | ||
| Oddball |
I'd figure that would be closed door info at the moment Jwnsc. First opinion sounds like speculation from trying to read into the CFO's words. Second sounds like mere regurgitation of the Moco's public statement. Third one you'd have to trust the knowledge and credibility of the writer. A very broad statement he makes. Doubt he has any of those analysts on record with that opinion. | ||
| Jwnsc |
I'd figure that would be closed door info at the moment Jwnsc. Why? I don't mean info from someone who is currently involved in negotiations. Just an opinion from an outside analyst posted or published that ascribes a value to Buell if separated from HD and sold. I can't seem to find one, while the contrary view is there for anyone to see. Also, how many MV Augusta employees were fired? Wouldn't a motorcycle company be more valuable if it included the experienced and dedicated employees that actually designed and built the bikes? | ||
| J2blue |
I don't see any point in trying to value Buell based on any of the Harley managed years whether it is a simple or difficult task. Looking at the books to do so would just tell you more about HD as a bike maker than it would Buell. If I had "capital" I would consider what I might could do with the hard assets and intellectual property as part of an attempt to start a new company without any HD legacy. Is there a market for an American sport bike independent of anything to do with Harley? If I thought there was a market, then I might come up with a package price and offer it to Harley. With the pressure on HD to turn the ship around they may become very interested in any cash offers for anything sitting in their closet. What Harley thinks Buell might have been worth has nothing to do with the question of the viability of building sport bikes in the short and long term. The short term prospects are obviously bleak, so anyone looking to start up a bike company would have to have confidence in a long term market view. If the prospect that demand would continue to grow enough to support a business that could break even and continue to profit then why not build one on the Buell brand? Buell is dead Long live Buell! ps: I will start the make-believe bidding on the Buell scraps at 50 million dollars. pps: I'm basically full of $#!t | ||
| Court |
>>>>Here's three that I read around 10/15/09. Good. That answers my question. It was not "financial analysts" but rather.
Buell was, they are correct, not much more than a rounding error. But, and I'm not dissing on you, there are no credible opinions from financial analysts, supporting the elimination of Buell. Buell was the ONLY, among Harley-Davidson, Victory and Buell, American Motorcycle Company continuing to show growth. In addition, a number of the costs they purport to eliminate were not within Buell MOTORCYCLE Company, but rather within Buell DISTRIBUTION Corporation . . . and were the various marketing, media, event, publicity, customer service and dealer support costs. Be mindful that ALL those costs, as I pointed out the other day, continue. With Buell now gone I doubt Paul James' salary, with him no longer burdened with Buell, will be cut proportionately. No reflection on Paul, who is a true pro, but simply a statement that MOST of the costs HD associates and assigns to Buell occur within the doors of Juneau, not East Troy. What, as example, would happen if they'd eliminate the 6 folks who attend IMS shows and never appear at the show but just party the weekend away . . . . Hmmmmmm. All I am saying is that much, including the nature and content of various contracts, rights to intellectual property, finances and so forth that is being cast as fact is in fact no more than mere speculation. Just keepin' it real . . . . Court | ||
| Black |
Thanks Court! | ||
| Jwnsc |
Court, you challenged me to produce sources and I did. If you have any sources that counter those opinions, I'm sure those of us who have an interest in this issue and think for ourselves would love to see them to judge their credibility. If my corporate financial analyst son is to be believed, an outside analyst would pay dearly to know what the CFO of a company knows. Unlike you, me or an outside financial analyst, a CFO is under a fiduciary (legal) duty to be straight up with the shareholders and potential investors. Failure to do is constructive fraud and leaves you open to shareholder suits and felony indictments. If anyone knows whether a subsidiary is more valuable if sold as an asset or closed as a tax write-off, it is the CFO, regardless of whether your company sells cheese or motorcycles. Numbers are numbers. Any pronouncement of Buell's growth needs an asterik beside it with the qualification, (according to you) that Buell was merely filling production orders from Harley and was disconnected from the important work of selling the bikes, which we all agree was poorly done and was a major factor in Buell's demise. After first summarily dismissing the Milwaukee Journal Sentinel quote (written by a business reporter covering HD/Buell) you later seem to agree with it, so I guess that's progress. My hope is Harley sets up a SVO unit like Ford and Erik plays a big part in that. Don't know too many Buell riders who could afford a $20,000+ boutique bike. | ||
| Court |
Another little clarification . . . I didn't "challenge" you, I asked. I think anybody who read the Milwaukee Journal Sentinel piece today (the one that detailed HD buying Buell a year ago for $108M) has a sense of how reliable newspaper facts are. I've been reading lots of OPINIONS, based on pure speculation, that are being cast in the vein of "I know" or "reliable sources" who turn out to be dealers' mechanics about everything from personnel contracts, to laws requiring manufacturers to support discontinued products (there are none) to use, ownership and rights to intellectual properties. You post was well written I simply wanted to ask the sources when you referred to "financial analysts" which of course neither magazine editors, the CFO or the Milwaukee newspaper are. I think the current CFO, even though he has just come on board, is certainly telling it straight. No one at HD, even those with questionable personal agendas, and there are several, is foolhardy enough to intentionally misrepresent material facts. They are however (I think, I am not sure") co-mingling the terms Buell MOTORCYCLE Company and Buell DISTRIBUTION Corporation. Buell Motorcycle has evolved to the pinnacle of production and design efficiency. That's a given. Buell Distribution, part of the costs that appear to be attributed to Buell in the 3Q conference call, has been known to spend like a drunken sailor in the past. Recent example . . . . any of you who went to the races . . likely know that Buell, the motorcycle company, was operating on a shoe string budget (I mean like REALLY thin). Some of you saw the new $200,000 "Buell Customer Appreciation Comfortable Sitting in Trailer" at the races. Why, given how vacant the thing was the times I saw it, that money was spent is outside the bounds of parsimonious judgement, in my personal opinion. We'l likely never know the facts. My wife and I both, like your son, have accounting degrees. She's a CPA, a CFO for Hedge Funds and has been on Wall Street for 25 years working with individuals who are worth much more than Harley-Davidson. The last 3 "kids" she worked for were all billionaires under 40. She has also been called on by the S.E.C. on a number of occasions to go to California and Chicago to sort out complex securities transactions gone awry and forensic accounting. She's printed 10 years of HD 10-K's and 10-Q and has full Bloomberg access here at the house to all the stuff you and I can't get (unless you want to ante up the $75K for a terminal) and she hasn't got it sorted out. My point is that we're ALL (you and I GUESSING) at this point. I do have good numbers, straight from the Harley-Davidson annual reports and the Victory annual reports for motorcycles built by the only 3 (roughly defined as revenue >$100M and in business for >10 years) American motorcycle companies. It's interesting. Nope . . . I wasn't challenging you a bit. Just making certain we distinguish between fact and opinion. For the record, everything I am "GUESSING" is pure personal opinion. Interesting stuff to be certain. . . . | ||
| Greatnorthrider |
Court: "Buell was the ONLY, among Harley-Davidson, Victory and Buell, American Motorcycle Company continuing to show growth." Do you know anything about how Indian is doing? I guess we still have 3 American motorcycle companies still in business as long as Indian can hold on. | ||
| Court |
>>>Do you know anything about how Indian is doing? ________________________________________ I don't. The criteria I used for a presentation was: • Revenues >$100M • In continuous operation >10 years There is nothing hard and fast about the metric other than I wanted to differentiate going concerns from "hobby" motorcycle companies. Unless Michael Cysz can hook a transmission to his ego companies like that are stranded alongside the byways of commerce and muddy the waters of a meaningful comparison. I can not attest that the information is factual. I can tell you that it is the audited information that each of the companies provided on various public filings. What becomes obvious, as I had 3 folks much smarted and more fluent in these things gather, compile and analyze data, is that the "we closed Buell for business reasons" holds water about as well as a chain link fence. I don't have any information on Indian since they closed the Gilroy, CA operation. One thing that has become very obvious is that with the current market there is no shortage of investment money. I had two "just tell me how much" calls on the Thursday the Buell announcement was made. I'm having a difficult time, I guess it's my "book learning" as an accountant, reconciling the "Buell has no value, so we're wading up the IP and closing it down." While I appreciate the public consumability of the "Buell is too integrated" logic I'd also be quick, as an investor to say . . . "here, I'll write a check and I never want any access to your dealer network, your AS400, h-dnet, or anything. The 1125R, the won that won the AMA last year that HD alleges has "no value and no intent to produce" could be build in Phoenix, AZ or Adelaide, AUS in short order using no parts that have ever been used or sourced from Harley-Davidson or any of their vendors. Dave and I were contacted at 1:15 that Thursday with a "start writing" order. The research I have done to date only seems to widen the chasm between fact and fancy. Fully aware that my personal opinions are far too biased and colored I've withheld, as I did on the B.O.B and "cubing" of the BLAST (items not unrelated to HD's subsequent action) personal comment. By the way. . . with the exception of my personal documents from the last 23 years and my personal work product while a Buell employee . . I have relied entirely on publically available information. It's taken some digging but it's there. If I were doing my M.B.A. and wanted to build a case for starting a motorcycle company with "parts of pieces" I'd need very little that HD has and think I could tender a proposal that would have investment bankers salivating. Just fun to play with. Court | ||
| Davegess |
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| Jwnsc |
Court, thanks for your clarification - yes they are all opinions and I could only find the ones I posted, thus my interest in any contrary ones, especially ones that deal in specifics, like what's for sale and how much. I think we are all in agreement that 1) the market for discretionary recreational vehicles is bad and will be so for a while, (http://www.chicagotribune.com/business/chi-tc-biz-cycles-1029-1030-nov02,0,6284551.story) and, 2) Harley is interested in attracting as many young customers as they can in the coming years. I don't know how they plan to do that with their current line-up, (maybe Erik has an idea or two) Is it reasonable to think, should somebody actually put their millions where their mouth is in this economy, that Harley would want to enable a competitor for those younger riders by selling its (formerly Buell) own assets? There seem to be more than a few people who are only interested in riding something made in America. Of course there's also the CYA theory why Harley will never sell Buell. If closing Buell was not based on sound business reasons and involved some animus on the part of Harley's officers and board, then their worst nightmare is to sell Buell and have someone make it successful. Time will tell and I guess it creates an interesting problem for you - when to update your book -before the Resurrection or after? How long do you wait? (Message edited by jwnsc on November 03, 2009) | ||
| Court |
>>>How long do you wait? We aren't. We got a call shortly after lunch on the Thursday the announcement was made to write the "last chapter". We refused. We agreed to write the "next chapter." I spent 3 days in Milwaukee visiting with various folks and learning more. The more I learned the less I knew. I have written the final page . . but nothing else at this point. This was fun in 1987, it's fun in 2009. Hehehehe . . "an idea or two?".  You just don't know what name to search patents under. There is a reason it was a 200 Year Plan, not a 26 Year Plan. | ||
| J2blue |
Where do I go to place my bid for MV Augusta? I'm going to offer HD a flat price for that brand and Buell. But I think I will wait until after Christmas to make it. | ||
| Reepicheep |
That was my thought. Take a month to get anything and everything you think is HD corporate or proprietary information out of the East Troy facility. Take what you want. Leave the tools, the people, the rights to partial Buell designs, and grant non exclusive royalty free rights to use any patent that any Buell employee was involved in. HD still has the rights to sell them, but the "new Buell" company always has the rights to use them royalty free. Buell agrees to a 20 year commitment to never build a bike that weighs more then 500 pounds or that has a wheel base longer then 6 feet (or some other reasonable non compete). Easy Peasy. As an investor, I called BS the moment I heard that "can't decouple" baloney. Its not that they can't, its that they won't try, which is a cop out to me as an investor, and outrage to me as a Buell enthusiast, and an offense to me as an American. We put the poster up over Jacks bed tonight Court, and he said "tell that guy thanks a thousand times!". Thanks a thousand times Court!  | ||
| Stevewauk |
I think this is just an unfortunate side effect of the economic doldrums. To my mind, this was an expedient decision made from mostly a financial and securities market perspective. In this economy, I don't see much likelihood a separate BMC could survive without some VERY patient and deep pocket investors. That said, if HD is smart, they would be well advised to do some quick cherry-picking of the great engineering and leadership talent and experience Erik has succeeded in assembling in East Troy. If HD comes up with a rebranded Uly or 1125 in a few years when the economy is on the mend, I would take a look at it. We all know what a great riding experience these are, no matter what logo is applied to the tank. |
