American Motorcycle Dealer AMD 210 January 2017

JAN 2017

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T H E # 1 B U S I N E S S M A G A Z I N E F O R T H E A M E R I C A N V- T W I N A N D C U S T O M M O T O R C Y C L E PA RT S I N D U S T RY

Harley-Davidson share price recovers strongly in final quarter and posts impressive 58 percent gain for 2016

Having been as high as $ 62.07 at the start of December 2016 , Harley- Davidson ’ s share price staged a remarkable rally in the final three months of 2016 . From being seemingly moribund and vulnerable at $ 49.70 on October 17th , around the time that Harley ’ s third quarter 2016 fiscals were due for release , it closed out 2016 at just under the $ 60.00 mark to post a 20 percent recovery in the final quarter of 2016 , and a remarkable 58 percent recovery from its 2016 low last January of $ 37.23 . Speculation continues to swirl connecting the share price recovery to the activities and intentions of any one of a number of hostile riders whose names have been connected with making a move on Harley , not least ( despite denials ) with Kohlberg Kravis and Roberts ( KKR ), who are believed in some quarters to have the Milwaukee based manufacturer locked into their cross-hairs as a long-term “ target of opportunity .” Specializing in leveraged buyouts and headquartered in New York , KKR was founded by a group of Bear Stearns alumni in 1976 . Early pioneers of the leveraged buy-out concept while at the now defunct Wall Street investment bank , KKR is best known for deals such as the 1989 RJR Nabisco buy-out in 1989 ( at that time the largest such transaction ever seen ). Since that time KKR has had considerable media and high tech involvements , not least $

2016

making a sizeable investment in Sun Microsystems around 10 years ago . However , whether or not KKR ’ s fingerprints are on the 2016 Harley share price recovery is a moot point , because regardless of whether or not it is being driven by one particular investor or general sentiment , the performance out-performs the market , even in the post-election weeks , by a considerable margin and points to Harley ’ s assiduous attention to investor welfare as having been money well spent , even if some of the effort has had workforce number implications . In fact , in cycle terms , Harley ’ s share price performance in 2016 follows that of other powersports industry businesses such as Polaris , Yamaha and Kawasaki quite closely – the primary difference being though that those others are diversified enterprises – Harley remains a “ one trick pony ”. There remain those who think that going private may not actually be such a bad thing for Harley-Davidson . However , Harley has played a smart game . Adding debt to fund its share buy-backs has reduced the headroom for an LBO , and having managed expectations by lowering guidance three times since the end of 2014 , the better than anticipated October earnings data has rewarded the company ’ s conservatism . Contrary to what many have been thinking , the signals are that the company is after all successfully positioning itself to be able to fend off any unwanted suitors – or to
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JAN 2017

ISSUE # 210

FREE WITH THIS ISSUE

2016 SHOW REVIEW
INTERMOT
Michael Naumann ' s ' Simple Iron ' - second place in the Freestyle class at the 2016 AMD World Championship of Custom Bike Building - see pages 32-33