Harley-Davidson builds cash position in response to weak economy

By Jennifer Lanning Drey

Portland, Ore., April 20 - Harley-Davidson, Inc. increased cash and marketable securities to $1.48 billion at March 28, a level the company believes is appropriate based on the current economy, John Olin, its chief financial officer, said Tuesday during Harley-Davidson's first-quarter earnings conference call.

The figure was up from $884.6 million at the end of the first quarter of 2009.

Harley-Davidson also had about $900 million of available liquidity through its bank credit and asset-backed conduit facilities at quarter-end, Olin said.

The company looks to maintain a minimum of 12 months of projected liquidity in cash and/or other committed credit facilities, he said.

The CFO also noted that Harley-Davidson's financial services segment, HDFS, is in the process of negotiating its bank credit facility and asset-backed conduit facility and expects negotiations to be complete by the end of April.

HDFS returned to profitability during the first quarter, posting operating income of $26.7 million for the period. The segment had posted operating losses for the previous three quarters.

Meanwhile, Harley-Davidson reported an 18% decline in worldwide retail sales of new motorcycles for the first quarter, as compared to the same period of 2009.

Despite the decline, Olin said the company has made progress on the retail front. Specifically, he said on a sequential basis, the company saw improvements in the rate of retail sales declines in the United States and international markets.

The Europe region posted a sales increase for the second consecutive quarter, he said.

Revenue from Harley-Davidson motorcycles during the first quarter was $808.8 million, down 20% from the comparable year-ago period.

With retail sales, shipments and revenues down, Harley-Davidson remains focused on improving its cost structure and positioning the business to be stronger and more profitable in the future, Olin said.

Harley-Davidson generated cash from operating activities of continuing operations of $200.8 million in the first quarter.

Harley-Davidson is a Milwaukee-based manufacturer of motorcycles.

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