* Q2 profits tops estimates but guidance is unchanged
* Dollar strength versus yen cuts into results
* CEO says consumer signs in U.S. still mixed
By James B. Kelleher
CHICAGO, July 25 Harley-Davidson Inc
reported a higher quarterly profit on Thursday, helped by a
modest rebound in demand for its motorcycles in the United
States, its No. 1 market.
The Milwaukee-based company stuck by its forecast for annual
motorcycle shipments, suggesting would-be buyers remained
cautious and that it does not anticipate a surge in demand in
the third quarter, the tail end of its traditional selling
Harley-Davidson continues to expect to ship 259,000 to
264,000 motorcycles to dealers worldwide in 2013, up from
247,625 in 2012.
The company's annual worldwide motorcycle shipment levels
peaked at about 350,000 units in 2006, right before the U.S.
housing bubble burst and consumer demand for its bikes - which
are priced from $8,000 to more than $30,000 - plummeted along
with the broader economy.
Keith Wandell, Harley-Davidson's chairman and chief
executive, said on a call with analysts that he remains
"cautiously optimistic" that the rebound in demand for the
company's bikes would continue to build.
Although Wandell said recent signs of a recovery in the U.S.
housing market were "encouraging," he noted factors that
indicate uncertainty about the path for consumer spending.
"I still question whether home-equity values have risen to
the point where they were before, which is something that
certainly affects us in the United States," he said.
"Unemployment, underemployment, you know, are still rather high.
So we think there's still somewhat of a drag in the economy."
Harley-Davidson's second-quarter profit rose to $271.7
million, or $1.21 a share, from $247.3 million, or $1.07 a
share, a year ago.
Analysts, on average, expected a profit of $1.18 per share,
according to Reuters Estimates.
Revenue rose 3.4 percent to $1.79 billion.
In afternoon trading, Harley-Davidson shares were little
changed, up 37 cents, or less than 1 percent, at $56.24.
Although both earnings and revenue beat analysts' average
forecasts, at least one analyst was unimpressed by the results.
Robin Farley, an analyst at UBS, said the earnings beat was
driven by a one-time item, the reversal of a restructuring
charge, and not by an improvement in Harley-Davidson's business.
The company said the reversal of the restructuring charge
reflected a decision to keep a wheel-making plant in Australia
open rather than close it and move the operation to China. As a
result, the company booked a benefit of $5.3 million in the
second quarter, compared with a restructuring expense of $6.2
million in the year-ago quarter.
One big drag on Harley-Davidson's results came in Japan, its
No. 1 market outside the U.S. and Canada, where the yen's fall
against the U.S. dollar had what CFO John Olin said was a
"significant financial impact" on the company's bottom line.
In all, Olin estimated the dollar's strength during the
quarter reduced Harley-Davidson's second-quarter gross margin by
$13.4 million and shaved 4 cents from its reported earnings per
share. He warned the headwinds were likely to continue in the
second half of the year.
"We do not expect it to be at the same magnitude that we've
seen in the first half," Olin said, "but again, things are
certainly always very dynamic and changing in the world of
Harley-Davidson said its independent dealers sold 90,193 new
motorcycles in the second quarter, up from 85,714 bikes in the
same period a year ago.
Sales in the United States, where the company sells more
than half its products, were up 4.4 percent.
Gross margins rose to 36.9 percent in the second quarter
from 35.9 percent a year earlier.
The operating margin in the sales of motorcycles and parts
jumped to 21.9 percent, compared with 19.7 percent last year.
The gains reflected the company's four-year-long effort to
lower manufacturing costs though flexible work deals with its
unions and other changes in the way it makes its bikes.
Harley-Davidson said when its restructuring program, which
is expected to cost a total of $485 million, is completed at the
end of this year, it will save the company $320 million a year.