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Taking Stock (or not) of HOG

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By RaptorD
September 26, 2007

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Drat, HOG stock is up 10% from the recent low. Those of use who are Harley fans should maybe update our due diligence quickly, eh? Personally I have a lot of data on HOG, but probably you do too (hey, you should!) and today's assignment should maybe be to get a quick snapshot just to update our files. If that fair?

As an experiment, let's quickly break down the HOG balance sheets to see if we can spot any important trends. Instead of using amounts, which tell us nothing in the way of trends, we could calculate the changes in percent. Let's use 2006 for the comparison since it's the last full year of operation. And what if we also use 2003 as the base year for the start of our comparison. This will give us 4 years for comparison. Sure, more would be better, but what can we say, these are the years in front of us right now. :)

Let's say "2006" represents the change from 2005 in percent, and "AVG 4YR" represents the average change from 2003 to 2006 in percent. This should give us a quick, down and dirty mini-glimpse of recent trends.

Hey, I know, let's tally up the balance sheet items, which are "good for us" and which are bad, ok? Let's call them "POS" and "NEG." Gosh, we're geniuses. Now let's break out some balance sheet items:

Assets                                         2006    AVG 4YR POS     NEG
Cash & Equivalents......................      68.8%   -3.8%   x      
Total Receivables, Net..................      27.2%   33.2%   x      
Invent. - Finished Goods................      27.0%   16.2%          x
Invent. - Work In Progress..............      23.8%   0.8%           x
Invent. - Raw Materials.................      35.2%   12.5%          x
Total Inventory.........................      30.3%   8.0%           x
Total Current Assets....................      12.9%   17.9%          x
Total Assets............................      5.3%    10.8%          x
Liabilities                          
Accounts Payable........................      4.4%    6.2%    x      
Accrued Expenses........................      20.6%   6.6%           x
Curr. Port. LT Dbt/Cap Ls...............      305.9%  29.3%          x
Total Current Liabilities...............      82.8%   15.3%          x
Total Long Term Debt....................      -13.0%  32.2%   x      
Total Debt..............................      41.2%   30.8%          x
Pension Benefits - Underfunded..........      176.7%  34.3%          x
Total Liabilities.......................      27.8%   17.6%          x
Shareholder Equity                           
Ret. Earn.(Accum. Deficit)..............      17.9%   32.6%          x
Treasury Stock - Common.................      48.2%   144.5%         x
Other Equity, Total.....................      -450.8% 87.5%          x
Total Equity............................      -10.6%  5.9%           x
Total Liabilities & Shareholders? Equity      5.3%    10.8%          x 


Hopefully that helps us see what's going on a little better. Corrections and conclusions I will leave up to you with the exception of one editorial comment:

These were great years, fellow investors. They were the gravy of world economy and growth, gravy investing years and they are (or if you disagree, feel free to insert here "should have been") gravy years for Harley-Davidson. Hopefully we have an idea of where we've been and which way our handlebars are pointed. Now we have to ask ourselves where these trends are going in 2007, and which way they will be heading in 2008 and beyond. Harley management has given us some hints recently. We should probably keep in mind past trends of management's tendency to announce information which is advantageous to management (and the stock) vs. how much has been advantageous strictly for owners and investors. The annual reports and press releases are all still out there on the net, but we have each digested this for ourselves, right?

Following up these trends with 2007 Q1/Q2 data and calculating a "run-rate" for all of 2007 would maybe lend us some insight to the current trends. Then again, we've been following HOG all along and maybe we are at the beginning of a new trend. Do we need more data to glimpse near-term future trends? Would the first half of '07 tell us anything new, or reveal a shift in the prospects of HOG? It's early in the year and perhaps, just perhaps, today's economic winds are shifting a bit too much to give us a reliable view of Q1-Q2 to see new trends. HOG management seems to be saying this is the case--that a shift is afoot--but again maybe it's best that opinions should be made individually.

Hope that helps some of us HOG enthusiasts (or detractors, or ... heck, any of us.) I love this group-think. Meeting adjourned, back to work.

Dan