CHICAGO (Standard & Poor's) April 18, 2008--Standard & Poor's Ratings Services
today said it placed its ratings, including the 'A' corporate credit rating,
on motorcycle manufacturer Harley-Davidson Inc. on CreditWatch with negative
implications.
"Today's action is based on the deteriorating outlook for the motorcycle
market in the U.S.," explained Standard & Poor's credit analyst Andy Liu.
Total debt outstanding as of March 30, 2008, was about $2.1 billion.
Harley-Davidson registered revenue growth of 10.8% during the first
quarter of 2008 due in large part to a strike at its plant in the first
quarter of 2007 that reduced the number of motorcycles shipped to dealers.
U.S. retail sales of Harley-Davidson motorcycles were actually down 12.8%
during the quarter. A 16.8% increase in international sales was insufficient
to offset the decline in domestic retail. As a result, Harley-Davidson reduced
its full-year 2008 earnings guidance and announced several actions to deal
with the difficult market environment. These actions include the elimination
of 730 personnel, representing 7.8% of its total staff, and a decrease in
motorcycle shipments of 7.0%-8.2% from 2007. While we are encouraged by
management's steps to address difficult market conditions, there is a strong
possibility demand could fall further before improving and that further
cost-cutting measures will be needed. With the securitization market still in
flux, Harley-Davidson Financial Services, the company's captive finance
subsidiary, is examining other potential funding options in addition to
securitization.
In resolving the CreditWatch listing, Standard & Poor's will meet with
management and evaluate the company's contingent plans for dealing with
potentially worsening demand and the effect on credit quality.
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ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings
affected by this rating action can be found on Standard & Poor's public Web
site at www.standardandpoors.com; select your preferred country or region,
then Ratings in the left navigation bar, followed by Credit Ratings Search.
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