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Nov. 15, 2004 – Finance Digest

November 17, 2004
Filed under Features

Harley 3Q Earnings Increase
Harley-Davidson, Inc., Milwaukee, reported net earnings of $228.9 million, or 77 cents per diluted share, for the third quarter ended Sept. 26, 2004. That compares with earnings in the same quarter last year of $190.1 million, or 62 cents per diluted share. Sales in the third quarter were $1.3 billion, up from $1.1 billion last year.
For the nine-month period, the company reported net income of $608.8 million, or $2.29 per diluted share, on revenues of $3.8 billion. In the same nine-month period last year, the company earned $578.5 million, or $1.90 per diluted share, on sales of $3.5 billion.
On the motorcycle side, sales of Harley-Davidson motorcycles generated third quarter revenues of $996.6 million, up from $844.3 million in the same period last year. For the nine months, revenues were $2.9 billion, up from $2.7 billion last year.
In other Harley-Davidson news, a survey of 20 H-D dealers by Piper Jaffray, a Minneapolis, Minn., research firm, suggests that Harley dealers are dropping price premiums and moving closer to MSRP. In an Oct. 6, 2004, report, Anthony Gikas notes that 13 of 20 dealers contacted are selling at MSRP, while seven are selling some models at a premium. On a three-month basis, 34 of 50 dealers said they were selling at MSRP. “Our survey suggests that 65%-70% of dealerships are now selling bikes at MSRP, compared to 50% one year ago,” he writes. The 20 dealers represent only about 3% of the U.S. dealers.
The survey also notes that 61% of new bike purchasers are using Harley-Davidson Financial Services to finance a new bike. That’s up from 54% in July, but down from 64% in August.
However, look for Harley-Davidson soon to offer incentives to dealers and consumers in the southeast and Atlantic regions of the United States. The move, aimed at eight states, is in response to recent weather problems that hurt sales. The states affected will be Florida, Georgia, Alabama, Mississippi, North and South Carolina, Virginia and Pennsylvania, which account for about 21% of Harley’s annual U.S. sales.
Tim Conder, analyst with AG Edwards, sees this as a “prudent short-term response to an extraordinary short-term issue.” He doesn’t see the program being expanded to other states.
On Oct. 14, Conder said he was maintaining his BUY rating on Harley; he sees the common stock price moving to $71 over the next 12-18 months. Harley closed Oct. 14 at $58.19.

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GE CONSUMER FINANCE FORMS SPECIALTY RETAIL GROUP
GE Consumer Finance-Americas says it established the Specialty Retail Group to support the needs of growing, mid-size retailers.
The new business unit is part of GE Consumer Finance’s Retail Consumer Finance division, which provides retail credit card services to major retailers in the United States and Canada. The Specialty Retail Group will focus exclusively on providing private label and co-branded credit programs to apparel and accessory, home goods and other growing specialty retailers with portfolios of up to $200 million.
GE recently renewed a consumer finance contract with KTM, as well as with Honda Motorcycles in October, Ducati North America in August, and Yamaha Motor Corp., USA in July.


NEW FACILITY FOR BMW FINANCIAL
BMW Financial Services NA, LLC is building a multi-million dollar international customer service center in Hilliard, Ohio. A ground-breaking ceremony took place Oct. 14.
With more than $15 billion in managed assets and nearly 500,000 customers, BMW FS leases or finances more than half of the new BMW vehicles sold in the United States.
BMW says it has experienced a 190% increase in managed assets and a 123% increase of on-site employment since its inception in Ohio in 1996.


BONEV JOINS BOARD OF SPECTRE GAMING
Robert Bonev, Vice President Sales/Marketing with Minnesota-based Arctic Cat Inc., has been appointed to the Board of Directors of Spectre Gaming, Inc., a California-based provider of proprietary interactive electronic games to the Native American and charitable gaming markets.


ORBITAL CHANGES NAME, REVIEWS FINANCIALS
Shareholders of Orbital Engine Corp. Limited, known as Orbital Corp. Ltd. as of Oct. 27, have been told their company may slip back into the red this half because of a weak market for motor scooters and the timing of new engine development contracts.
After two years of restructuring under new management led by CEO Peter Cook, Orbital reported a A$5.3 million turnaround to post a A$3.4 million profit for 2003-04. This included a A$2.7 million contribution from its Synerject manufacturing joint venture with Siemens and A$2.8 million from its powertrain engineering operations. Synerject supplies fuel injection systems to marine engine and motorcycle manufacturers.
Orbital’s license and royalty income from motorcycle and marine engine groups using its technology slipped in the year to A$3.2 million, from A$3.9 million in 2002-03, because of a rising Australian dollar and a weak scooter market in Europe. Orbital’s first scooter licensee, Aprilia, has suffered financial problems and has been taken over by rival Piaggio, which also uses Orbital technology. Other scooter licensees include Kymco and Bajaj.


SPARTA NAMES TROTTER COO
Sparta Commercial Services, the New York-based financial services company specializing in the powersports industry, has named Richard P. Trotter to the position of chief operating officer.
Trotter has more than 30 years of experience in the financial services industry, including more than 20 years in automotive lending, servicing, and collections. In his last position as president and chief credit officer for American Finance Company, Inc., he developed automobile financing programs and oversaw the purchase of automobile retail installment sales contracts from independent automobile dealers nationwide.
Sparta Commercial Services (http://www.spartacommercial.com/) offers consumer leasing and retail installment contract financing exclusively to the powersports industry through a nationwide authorized dealer network. Sparta has concentrated its private-label underwriting scooter and ATV brands and offers private-label financing programs to companies such as Malaguti USA, Kymco, E-Ton America, and CMSI.


BOATVENTURES CHANGES NAME
Channel Blade Technologies, formerly BoatVentures, has announced the adoption of its new name to better describe the scope of the company’s business after a management buy-out from The Reynolds and Reynolds Company, which operated it since 2002. Financial terms were not disclosed.
Based in Virginia Beach, Va., Channel Blade Technologies serves the marine, powersports, and RV industries, connecting customers directly to manufacturers and dealers through what it calls “branded-flow Web site development and customer relationship management tools.”

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