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Harley-Davidson, Inc.
HDI 1Q05 Numbers

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By dcanfiel
April 25, 2005

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Lets cut to the short and discuss the "bad" things first. Q-over-Q revenue growth is 6%. It had slowed to single digits, except for 3Q04, anyway. In 2003 it was around 20%. So revenue has, indeed, slowed, but the majority of the slowdown came during 2004. The 6% for 1Q05 is old news.

The Cash King Margin is an abysmal 1% for the Q. Because of the standards changes in cash flows, a TTM calculation and comparison are not possible. In 4Q04, the CKM was -10% (Q only). That means Harley has gone from negative operating cash flow last quarter to positive operating cash flow this quarter, using the newer standards. Harley had been in the 10% range using the old standards, and I suspect they would still be at that had the standards not changed. For 4Q03 CKM was -26%, and 4Q02 -32%. Those calculations are suspect since I had to change so many numbers from prior years and I could have made a mistake, but a cursory look shows improvements. Remember that this is a Q-only calculation, so it fluctuates wildly. A TTM calculation is better, but I can't make a valid one yet.

I don't calculate EPS growth since a) I don't have EPS in the spreadsheet, and b) it's so easily gotten from other sources. I may it in future editions, though.

LT debt increased to 800,000 from 670,000.

OK, that's it for the "negative." Not so big a deal, huh? From the press releases you'd think they had gone bankrupt. The future market and growth remains a question, of course, but that will play out through the year.

The Flowie is 2.37, which is within the range it has been in the past. At 4Q04 it was 2.44. In 2004 it varied from 2.1 to 2.44.

Inventory turnover is 7.8%, which is right down the line. It was 7.2% in 4Q04. Margins are consistent at 37.8% TTM gross, and 17.9% TTM net. 4Q04 they were 37.9% and 17.7% respectively. Receivables are 2.8% of TTM revenues, consistent with 4Q04 of 2.4%. Payables were 9.2% of TTM COGS, up slightly from 7.8% in 4Q04, which is a positive trend (though they were 10% in 1Q04).

Long-term debt-to-equity is 24.5%, consistent with 4Q04's 24.9%. The increase in LT debt indicates and equal increase in equity. Total debt-to-equity is 32.5% compare to 4Q04's 40.2%.

Conclusion: The ONLY thing I can see is the slower revenue growth, which we already knew about from last year, and the cash flow, which despite the standards changes is on a positive trend. The standard bugaboos of inventory, receivables, debt, and margins show NO dangerous trends, at least yet. We should stand watch, but the market has over-reacted, IMHO. But the stock may be penalized for some time. I'll bet you can find some other hard manufacturers with similar growth numbers as Harley's current ones, and higher valuations (of course, I haven't looked).

In spite of some analysts attempt to pump the marketing change from not-meeting demand to meeting, it's old news, as I previously posted. There is a 10K production reduction for 2Q05, but the remaining Qs have not changed, and the overall production target is above 2004.

A calculation I have not done would be to take the present price of the stock see when that was "valid" for sales and profits. In other words, sales and profits have increased since that time, but the stock price has returned to that time.

As I read through the 10K and Annual Report (when I get one - Ameritrade snuck in an email notification on me and I had to call for a report - sorry, I hate reading annual reports in Adobe) I'll give post any important thoughts I have (not that y'all need 'em from me).

dcanfiel


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