Proprietors of an Elm Mott bar that a local man patronized before he was found beaten nearby are pushing back against law enforcement officials’ statement that the bar is known to be frequented by members of the Cossacks motorcycle group.
Ginger Gregory, daughter of the owner of MacDaddy’s Pub in Elm Mott, said the 45-year-old man, who was found injured off the bar’s property, was drinking at the bar and had left on foot. Law enforcement officials have said the man was wearing a Bandidos support group T-shirt and that a rivalry between the Bandidos and Cossacks may have led to his assault.
However, Gregory said the bar does not allow motorcycle club members, and she does not believe the incident was connected to the establishment.
“The only club members that come to the bar are from the VFW 121, and the other people that come in there that ride motorcycles are just people that ride motorcycles,” Gregory said. “They are not affiliated with anyone, and my dad owns the bar and I think it is an understanding that my dad will not put up with any motorcycle club.”
Deputies were called to an intersection near Leroy Parkway and East Long Street shortly before midnight June 9, where the 45-year-old man was found beaten. A McLennan County Sheriff’s Office incident report states the man suffered several lacerations and injuries to his head. He was taken to a local hospital while authorities continued to investigate the reported assault.
Deputies went to MacDaddy’s Pub, where the owner of the bar allowed officers to review surveillance video. The videos showed no evidence of a disturbance at the bar or outside when the man left the area on foot, the report states.
At the hospital, the man told deputies he did not know the people who attacked him, but he “believed that it could have been the Cossacks,” according to the report.
He said two men approached him when he was walking on East Long Street and attacked him, the report states.
During the assault, the man saw a pair of headlights pull up and at least two other men get out of a vehicle. The two other men joined in on the assault, kicking an punching him, the report states.
“(The man) stated that he believes the reason he was attacked was he was wearing a Bandidos support club T-shirt,” the report states.
Gregory said witnesses watched the man leave the bar and walk across the parking lot.
“There were two people standing outside when the victim left the bar and they were out there as he walked across the parking lot and were there for a good five minutes after he crossed the parking lot,” Gregory said. “My personal opinion is that he fell in the ditch, because nobody saw anything.
“When those two people came back into the bar, four other people were leaving. They got into a car and drove in the direction where he was found.”
Gregory said the assault has no connection to the bar and the bar is not considered a “biker hangout.”
McLennan County Sheriff’s Office Chief Deputy David Kilcrease said the exact location where the assault took place is not known. He said investigators continue to look for suspects in the aggravated assault.
“The victim said he was at the bar and there were people known to him as members affiliated with the Cossacks,” Kilcrease said. “That is what was reported to us, and it is a part of our investigation.”
Anyone with information about the assault is asked to call the Waco Crime Stoppers at 753-HELP.
A patched Tribal motorcycle gang member shot his steroid supplier in the face as a way to ingratiate himself to the Hells Angels after the dealer got on the bad side of the notorious outlaw biker gang, a judge ruled Friday.
Jason Neilson, 45, was found guilty of attempted murder and several firearms charges after Court of Queen’s Bench Justice Douglas Mah rejected his argument that it was self-defence when he shot Adam Abumeita on Aug. 19, 2016.
During the trial, Abumeita, 24, testified he and Neilson arranged to meet at Shenanigans Pub and Grill to do a deal for steroids and “Superman pills” — an illicit combination of Viagra and Cialis. But once in the busy parking lot, he said Neilson directed him to follow him, and they each drove to an alley behind the Clareview Bottle Depot. Abumeita said Neilson came over to his car, and opened the passenger-side door. Neilson was wearing blue rubber gloves as he put a handgun to Abumeita’s temple and fired, Abumeita said.
The bullet went into Abumeita’s jaw, shattering his teeth. He said Neilson tried to fire again, but the gun jammed. Abumeita managed to get out of the car and run to a nearby business where staff called for help. He nearly went into cardiac arrest and underwent surgery for his wounds, but survived.
He still experiences neck pain and has numbness in his tongue, he wrote in a victim impact statement.
Mah rejected Neilson’s evidence that it was Abumeita who redirected the meeting to the alley, and that Neilson only fired when Abumeita pulled out his own gun and tried to shoot him first.
Mah said he had to weigh the credibility of the two men, who had each aspired to join the Hells Angels at one time.
Abumeita became interested in the gang when he was 18, and socialized with members up until about three months before he was shot, when he lost interest, court heard.
The relationship soured. Abumeita had a fist fight with a Hells Angel member, and also engaged in bitter insults via text with another. He threatened to kill members of the gang at an upcoming biker meetup, and took credit for damaging a member’s truck, although he later denied doing this.
In reaction, a directive came down for all Hells Angels associates to stop talking to Abumeita because he was a “rat.”
But Neilson, who Abumeita considered a “bro,” kept in touch with him because he was his supplier.
Neilson, a one-time Hells Angels “prospect,” was a patched member of Tribal, a Hells Angels support club.
Mah made no finding as to whether the shooting was on Neilson’s own initiative or an order from elsewhere, but said the action would have furthered Neilson’s ambitions within the outlaw biker gang community.
Crown prosecutor Richard Tchir argued Neilson should be sentenced to life in prison for the offence, arguing that there were a number of aggravating factors in the case.
“Nothing could be closer to an execution-style shooting,” he said.
But Neilson’s lawyer, Paul Moreau, argued a 10-year sentence would be suitable when considered in context with other sentences for attempted murder cases in Canada.
If Neilson is sentenced to life, he will be eligible to apply for parole seven years from the day of his arrest, which was Aug. 25, 2016.
Mah reserved his decision on sentencing and said he will deliver it June 21.
Harley-Davidson’s motorcycle and related products sales have faced considerable pressure in recent years.
The company is working hard to connect with the next-generation consumer, but millennials may not believe Harleys are cool anymore or even affordable.
A growing dependence on its Financial Services arm and a large net debt position are two major threats to its long-term dividend health.
The market seems to have the Harley-Davidson “story” right. We value shares about where they are currently trading.
By The Valuentum Team
Harley-Davidson (HOG) is more a lifestyle company than a motorcycle manufacturer. The company’s brand is about as well-recognized as any other in the auto-making business, and its motorcycles offer a unique experience that unites people through the idea of freedom and self-expression. Harley owners are generally adventure-seeking and come from a variety of diverse backgrounds, holding the common desire for being on the “open road.” The idea of personal freedom is something Harley takes seriously, and we think the concept may be inseparable from the brand, itself. People don’t own a Harley; they live the Harley lifestyle.
But millennials and the coming generation may not be easy customers. Harley is working hard to continue to further their interest in riding, and while the company plans to “build” 2 million new riders in the US by 2027, we think it has its work cut out for it. Its core demographic is aging, and believe it or not, many millennials no longer think Harleys are cool. As much as many love the sound of a Harley’s roar, there are some that think it’s just too loud, and others just don’t have the cash to invest in the brand. The coming generation seems to want smaller and cheaper “bikes,” too, and that plays into the hands of Harley’s competition. The Milwaukee icon established in 1903 won’t go away anytime soon, but its glory days may very well be behind it.
Harley-Davidson At A Glance
• Harley-Davidson makes wholesale heavyweight motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. The firm also has financial services operations. It was founded in 1903 and is headquartered in Milwaukee, Wisconsin. The US accounts for about two thirds of sales. One of the biggest strengths of Harley-Davidson, besides its iconic lifestyle brand, is that it has more than 1,400 independently-owned Harley dealerships in ~100 countries. Its network to reach the customer is vast.
• The company’s support of the motorcycle lifestyle has created a loyal consumer base and a sustainable competitive advantage. The appeal of its products and the Harley-Davidson experience once spanned demographics, but it could face an uphill battle in generating excitement among millennials. Though Harleys on the open road may still speak of excitement, it may be an aging view. Millennials are different than their parents, and the company won’t find it easy navigating changing consumer preferences.
• According to estimates, the worldwide demand for motorcycles is expected to grow at a mid-single-digit annual pace through 2018. Rising disposable incomes across the globe, sales of electric bikes, government incentives to reduce pollution, and market advances in key countries are the main drivers for such expansion. Harley hopes to have a 50/50 domestic/international split in annual volumes in the next 10 years. The company has an opportunity to grow in countries where the Harley brand is well-recognized and build brand awareness in others.
• The company’s US retail sales haven’t been that great in recent quarters, and it now plans to aggressively manage supply and its cost structure moving forward. Management stated that its entire 2018 model line up is targeted at inspiring the next generation of Harley Davidson riders in an effort to boost its brand’s appeal to younger consumers. Most millennials may still not be able to afford Harley’s price point, however.
• The firm’s Financial Services operations should be watched very closely, especially in times of tight credit. The division, in our view, was largely responsible for Harley’s dividend cut during the Financial Crisis. The company is relying more and more on this segment, too. Revenue and operating income in its Financial Services segment advanced ~3% and ~21%, respectively, in the first quarter of 2018. Concerns over retaliatory measures from the White House’s plans to implement tariffs could hurt Harley. If the European Union wants to make a big deal of Trump’s foreign trade policies, Harley could be caught in the crossfire.
• Let’s further provide context about the magnitude of the challenges Harley is facing. Although international retail motorcycle sales advanced 0.2% in the first quarter of 2018, US retail sales fell 12%. The company has plans to “launch 100 new impact motorcycles,” which sounds exciting, but it seems more like a “Hail Mary” strategy to find out what bikes to build for millennials. The move may be necessary to tap into changing consumer preferences, however, and then to capitalize on them with scale.
Harley’s troubles are evident in the image above. Motorcycle and related products revenue has faced significant pressure since peaking in 2014, and the company has become more dependent in its Financial Services operations. Net income has also faced considerable weakness during the past few years–all the while debt has increased. Obviously, this is not a good combination.
Harley has to reinvent itself, and it is struggling to do so. The company’s motorcycle sales in the US are declining at a relatively concerning pace, and its international marketing efforts are bearing fruit, but capturing the heart of coming generations in the US will be its biggest hurdle. We’re also a bit concerned about the risk that the growth of its financial arm poses to the health of the dividend, and its total debt stood at $5.15 billion versus cash and cash equivalents of ~$750 million.
Not only does a huge net debt position weigh on the company’s valuation but it also impacts Harley’s Dividend Cushion ratio, which stands at 1.2 thanks in part to offsetting robust free cash flow. During the past three years, Harley generated free cash flow of ~$850 million, well in excess of annual run-rate cash dividends paid of ~$250 million. Despite the free cash flow coverage, we’re cautious on its dividend given changing consumer preferences, a shrinking core customer base, its historical dividend track record, its growing and risky Financial Services arm, and its total debt load. Here’s an excerpt from the Dividend Report:
Harley-Davidson’s dividend cut in 2009 is now history. The company’s payout is approaching those pre-cut levels, and we think management has learned its lesson about overstretching for growth. We’re fans of Harley-Davidson, its brand, and the lifestyle it has created for the consumer, but as investors, we can’t forget the hazards that come with a capital-intensive manufacturing operation that retains the very financing arm that brought the dividend trouble during the Financial Crisis. Harley-Davidson’s dividend may face challenges during the next economic downturn, the timing the only uncertainty. A recent softening of demand in the US and weak interest from millennials do not bode well for long-term expansion efforts.
Harley-Davidson makes motorcycles as much as it has defined a lifestyle brand. Marketing and product development spending remain par for the course, and while the company continues to make progress increasing ridership, performance in its bread-and-butter US market has been challenging due primarily to competitive discounting. Income investors should note the potential for a higher provision for retail credit loan losses as consumer debt levels rise and the impact such a scenario can have on the financing arm’s operating income. Exposure to the largest financier of motorcycles makes us quite nervous, and we believe its pace of dividend growth has likely peaked for this cycle.
We think the market has a good handle on the Harley-Davidson “story,” and we think shares are generally fairly valued, though we continue to emphasize that while things look okay today, in the coming years, if it is unable to connect with the new generation, millennials especially, Harley-Davidson could experience one of the most difficult times in its long and storied history. A growing Financial Services arm coupled with a large net debt position doesn’t help its case, and while we like its free cash flow generation, we generally prefer entities that don’t face the risk of a fickle consumer, have nice net cash positions on the balance sheet, as well as generate strong free cash flow (not to mention are undervalued and have a margin of safety). We’d like to see Harley deleverage but that may not be possible as it tries to figure out how to capture the hearts of the coming generations. Our fair value estimate stands at ~$45. Shares yield ~3.3% at the time of this writing.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.