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T H E O N LY M A G A Z I N E F O R T H E W O R L D W I D E V- T W I N PA R T S , A C C E S S O RY A N D P E R F O R M A N C E I N D U S T RY
Harley to fund additional share buy-back program with $750m of new debt N a June 17 Securities and Exchange Commission 8-K filing in the United States (SEC) Harley-Davidson announced that its board had authorized the extension of its share buy-back program announced in February. The plan is for Harley to acquire and retire a further 15 million shares of its common stock - some 7.2 percent of its outstanding common stock. This new repurchase authorization is in addition to the buy-back launched by Harley-Davidson's board in February 2014 - one which saw the company bid for 20 million of its shares last year. However, what wasn't revealed in February was that Harley-Davidson is to issue $750 million of long-term debt in the third quarter this year to fund the repurchase. From trading at around $54.50 the day before the announcement, HarleyDavidson common stock saw some upward momentum by around 4
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percent, to the $59.00 a share mark the day afterwards. As this edition of AMD Magazine went to press though, a week later, the share price had started to soften again - trading in the region
improving value to fend off raiders? of $57.85 and appearing to be headed south again; though at this stage analysts are still marking Harley's prospects as "stable" (Fitch responded with an 'F1' Issuer Default Rating) and as a stock "buy". There are several reasons why a company will launch share buy-back programs and one of the primary ones is as a tax efficient way of returning cash and value to shareholders. However, share buy-backs are also used to signal that management regard
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JULY 2015 ISSUE #192
NEWS
the share price as undervalued - if that was in Harley management's thinking then, so far, it would appear that the investor community needs more convincing. Buy-backs undertaken at a time when it transpires that the share price was actually over-valued destroys shareholder value, especially where debt has been used. Another reason for share buy-backs can be because a company may take the view that of all the options it has for use of available resources, investing in its own shares is a better bet than acquisitions, R&D or new activity investments. In Harley's case, given the needs of their dealers to see the sluggish performance of key product areas reenergized, given where their sales and market share numbers have been headed recently (especially domestically), that clearly cannot be one of the factors in their thinking. Sometimes buy-backs are used to Continued on page 14 >>>
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For the first time in the history of the AMD World Championship of Custom Bike Building the event saw a motorcycle entered that used a Nimbus engine, with the bike built by TMT Moto winning the Retro Mod class
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