Investors have been anticipating big things from Harley-Davidson
The company was pleased to announce, and investors should be happy to note, that in-store traffic was, in CEO Jeffrey L. Bleustein's words, "brisk," driving an 18.8% increase in U.S. retail sales. The redesigned Sportster model posted the biggest increase in volume, while Buell Motorcycles -- the torqued-out line that competes with Honda
Profit margins are a key focus for any company, and investors need to keep an eye on the amount of income contributed by automakers' highly volatile, low-margin financing operations. General Motors
If we take off the rose-colored glasses for a moment, we'll notice that not all is perfect in Hog heaven. As Alyce Lomax pointed out, Harley's free cash flow barely budged for the first six months, despite lower capital expenditures and strong profit growth. It's possible the cash flow situation is related to the timing of payables and receivables, as working capital (the cash contributed or used by current assets and liabilities) swung from generating $93 million in the second quarter 2003 to using $25 million this year, a $118 million drop.
Despite the lower operating cash flows, Harley-Davidson is cruising into its second century stronger than ever. Insatiable domestic demand, and a hard charge into China, should keep things rolling at this American icon.
Motley Fool contributor Chris Mallon plans to someday buy a Harley-Davidson motorcycle, and he owns shares of Harley-Davidson and Honda Motors through his private investment partnership.