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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the fiscal year ended: DECEMBER 31, 1995
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
_______________ to ________________
Commission file number 1-9183
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HARLEY-DAVIDSON, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1382325
(State of organization) (I.R.S. Employer Identification No.)
3700 WEST JUNEAU AVENUE,
MILWAUKEE, WISCONSIN 53208
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (414) 342-4680
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
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COMMON STOCK, $.01 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such requirements for the
past 90 days. Yes X No .
___ ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 22, 1996: $2,853,020,520.
Number of shares of the registrant's common stock outstanding at March 22, 1996:
75,395,375 shares.
Part III of this report incorporates information by reference from registrant's
Proxy Statement for the annual meeting of its shareholders to be held on May 4,
1996.
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<PAGE>
PART I
ITEM 1. BUSINESS
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SUMMARY
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Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the
Harley-Davidson Motorcycle Business from AMF Incorporated (currently doing
business as Minstar) in a management buyout. In 1986, Harley-Davidson, Inc.
became publicly held. Unless the context otherwise requires, Harley-Davidson,
Inc. (the "Company") includes all of its subsidiaries and other wholly owned
affiliates. The Company operates in two segments (excluding discontinued
operations): Motorcycles and Related Products, and Financial Services.
The Motorcycles and Related Products ("Motorcycles") segment consists primarily
of its wholly-owned subsidiary Harley-Davidson Motor Company (the "Motor
Company"). The Motorcycles segment designs, manufactures and sells primarily
heavyweight (engine displacement of 751cc or above) touring and custom
motorcycles and a broad range of related products which include motorcycle parts
and accessories and riding apparel. The Company, which is the only major
American motorcycle manufacturer, has held the largest share of the United
States heavyweight motorcycle market since 1986. While definitive market share
information (engine displacement of 751cc or above) is not available in many
foreign countries, the Company believes it holds an approximate 11% market share
in the European markets in which it competes and a 22% market share in the
Pacific Rim (Japan and Australia).
The Financial Services segment consists of the Company's majority-owned
subsidiary, Eaglemark Financial Services, Inc.("Eaglemark"). Eaglemark provides
motorcycle floor planning and parts and accessories financing to the Company's
participating North American dealers. Eaglemark also offers retail financing
opportunities to the Company's domestic motorcycle customers. In addition,
Eaglemark has established a proprietary credit card for use in the Company's
independent dealerships. Eaglemark also provides property and casualty insurance
for motorcycles as well as extended warranty contracts. A smaller portion of its
customers are in other leisure products businesses.
In January, 1996, the Company announced its strategic decision to discontinue
the operations of its Transportation Vehicles segment in order to concentrate
its financial and human resources on its core motorcycle business. On March 6,
1996, the Company completed the sale of substantially all of the assets of its
Holiday Rambler Recreational Vehicle Division (the "RV Division") to Monaco
Coach Corporation ("Monaco"). Monaco acquired the RV Division's manufacturing
operations located in Wakarusa, Indiana and 10 of its 14 Holiday World
Recreational Vehicle Dealerships. The sale of the remainder of the
Transportation Vehicles segment is expected to be finalized during 1996. The
Company does not anticipate a loss on the discontinuance of the Transportation
Vehicles segment. The results of the Transportation Vehicles segment have been
reported separately as discontinued operations. Prior year financial information
has been restated to present the Transportation Vehicles segment as a
discontinued operation. See Note 3 to the 1995 consolidated financial statements
for further information.
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Revenue, operating income (loss) and identifiable assets attributable to each of
the Company's segments are as follows (in thousands):
<TABLE>
<CAPTION>
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Motorcycles
and Related Transportation Financial
Products Vehicles(1) Services(2) Corporate
----------- ----------------- ------------ ----------
<S> <C> <C> <C> <C>
1995
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Revenue $1,350,466 $ n/a $ n/a $ -
Operating income (loss) 184,475 n/a 3,620 (7,299)
Identifiable assets 595,118 111,556 269,461 24,535
1994
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Revenue $1,158,887 $ n/a $ n/a $ -
Operating income (loss) 163,510 n/a n/a (9,948)
Identifiable assets 494,362 110,886 n/a 71,415
1993
----
Revenue $ 933,262 $ n/a $ n/a $ -
Operating income (loss) 136,217 n/a n/a (6,878)
Identifiable assets 367,794 79,372 n/a 80,792
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</TABLE>
(1) The Transportation Vehicles segment was reported as discontinued operations
in 1995. Prior year results have been reclassified in order to conform to this
presentation. See note 3 to the 1995 consolidated financial statements for
further information.
(2) The Financial Services segment's 1995 results of operations are included in
operating income. During 1994 and 1993, the equity in earnings of the Financial
Services subsidiary was included in other income. See note 4 to the 1995
consolidated financial statements for further information.
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The domestic heavyweight motorcycle market continued to expand in 1995.
Worldwide quarterly revenue and operating income (loss) (in thousands), by
segment, and motorcycle shipment information, are as follows:
<TABLE>
<CAPTION>
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First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
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<S> <C> <C> <C> <C> <C>
1995
Revenue by segment:
Motorcycles and Related Products $294,886 $355,631 $327,096 $372,853 $1,350,466
Financial Services n/a n/a n/a n/a n/a
-------- -------- -------- -------- ----------
$294,886 $355,631 $327,096 $372,853 $1,350,466
Operating income (loss) by segment:
Motorcycles and Related Products $ 40,473 $ 53,732 $ 38,421 $ 51,849 $ 184,475
Financial Services 651 1,001 771 1,197 3,620
Corporate (1,867) (1,330) (2,210) (1,892) (7,299)
-------- -------- -------- -------- ----------
$ 39,257 $ 53,403 $ 36,982 $ 51,154 $ 180,796
Units:
Harley-Davidson Motorcycles 23,651 28,167 25,012 28,274 105,104
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1994
Revenue by segment:
Motorcycles and Related Products $258,607 $296,843 $291,927 $311,510 $1,158,887
Financial Services n/a n/a n/a n/a n/a
-------- -------- -------- -------- ----------
$258,607 $296,843 $291,927 $311,510 $1,158,887
Operating income (loss) by segment:
Motorcycles and Related Products $ 34,984 $ 47,134 $ 37,832 $ 43,560 $ 163,510
Financial Services n/a n/a n/a n/a n/a
Corporate (2,086) (3,217) (2,128) (2,517) (9,948)
-------- -------- -------- -------- ----------
$ 32,898 $ 43,917 $ 35,704 $ 41,043 $ 153,562
Units:
Harley-Davidson Motorcycles 23,056 25,006 22,503 25,246 95,811
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1993
Revenue by segment:
Motorcycles and Related Products $205,328 $256,870 $220,778 $250,286 $ 933,262
Financial Services n/a n/a n/a n/a n/a
-------- -------- -------- -------- ----------
$205,328 $256,870 $220,778 $250,286 $ 933,262
Operating income (loss) by segment:
Motorcycles and Related Products $ 27,505 $ 41,604 $ 31,175 $ 35,933 $ 136,217
Financial Services n/a n/a n/a n/a n/a
Corporate (1,746) (1,840) (1,183) (2,109) (6,878)
-------- -------- -------- -------- ----------
$ 25,759 $ 39,764 $ 29,992 $ 33,824 $ 129,339
Units:
Harley-Davidson Motorcycles 19,502 22,951 17,963 21,280 81,696
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</TABLE>
4
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MOTORCYCLES AND RELATED PRODUCTS
The primary business of the Motorcycles segment is to produce and sell premium
heavyweight motorcycles. The Company's motorcycle products emphasize traditional
styling, design simplicity, durability, ease of service and evolutionary change.
Studies by the Company indicate that the typical U.S. Harley-Davidson(R)
motorcycle owner is a male in his early forties, with a household income of
approximately $66,000, who purchases a motorcycle for recreational purposes
rather than to provide transportation and who is an experienced motorcycle
rider. Over two-thirds of the Company's sales are to buyers with at least one
year of higher education beyond high school, and 34% of the buyers have college
degrees. Approximately 9% of the Company's U.S. retail sales are to female
buyers.
The heavyweight class of motorcycles is comprised of four types: standard, which
emphasizes simplicity and cost; performance, which emphasizes handling and
speed; touring, which emphasizes comfort and amenities for long-distance travel;
and custom, which emphasizes styling and individual owner customization. Touring
and custom models are the primary classes of heavyweight motorcycles the Company
manufactures. The Company presently manufactures and sells 23 models of touring
and custom heavyweight motorcycles, with suggested retail prices ranging from
approximately $5,100 to $18,200. The touring segment of the heavyweight market
was pioneered by the Company and includes motorcycles equipped for long-distance
touring with fairings, windshields, saddlebags and Tour Paks(R). The custom
segment of the market includes motorcycles featuring the distinctive styling
associated with certain classic Harley-Davidson motorcycles. These motorcycles
are highly customized through the use of trim and accessories. The Company's
motorcycles are based on variations of four basic chassis designs and are
powered by one of three air cooled, twin cylinder engines of "V" configuration
which have displacements of 883cc, 1200cc and 1340cc. The Company manufactures
its own engines and frames.
During 1993, the Company acquired a 49 percent interest in Buell Motorcycle
Company ("Buell"), a manufacturer of performance motorcycles. This investment in
Buell offers the Company the possibility of gradually gaining entry into select
niches within the performance motorcycle market. Buell began distribution of a
limited number of Buell motorcycles during 1994 to select domestic Harley-
Davidson dealers.
Although there are some accessory differences between the Company's top-of-the
line touring motorcycles and those of its competitors', suggested retail prices
are generally comparable. The top of the Company's custom product line is
typically priced as much as 50% more than its competitors' custom motorcycles.
The custom portion of the product line represents the Company's highest unit
volumes and continues to command a premium price because of its features,
styling and high resale value. The Company's smallest displacement custom
motorcycle (the 883cc Sportster(R)) is directly price competitive with
competitors' comparable motorcycles. The Company's surveys of retail purchasers
indicate that, historically, over three-quarters of the purchasers of its
Sportster model have come from competitive-brand motorcycles, are people
completely new to the sport of motorcycling or have not participated in the
sport for at least five years. Since 1988, the Company's research has
consistently shown a repurchase intent in excess of 92% on the part of
purchasers of its motorcycles, and the Company expects to see sales of its 883cc
Sportster model partially translated into sales of its higher-priced products in
the normal two to three year ownership cycle. Domestic motorcycle sales
generated 49.3%, 50.3% and 51.4% of revenues in the Motorcycles segment during
1995, 1994 and 1993, respectively.
The major product categories for the Parts and Accessories business are
replacement parts (Genuine Motor Parts(TM)), mechanical accessories (Genuine
Motor Accessories(TM)), rider accessories
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(MotorClothes(R) clothing and collectibles) and specially formulated oil and
other lubricants. Domestic motorcycle Parts and Accessories sales comprised
17.4%, 17.8% and 17.4% of net sales in the Motorcycles segment in 1995, 1994 and
1993, respectively. Net sales from domestic motorcycle Parts and Accessories
have grown 86.6% over the last three years (since 1992).
The Company also provides a variety of services to its dealers and retail
customers including service training schools, delivery of its motorcycles,
motorcycling vacations, memberships in an owners club and customized software
packages for dealers. The Company has had success under a program emphasizing
modern store design and display techniques in the merchandising of parts and
accessories by its dealers. Currently, 425 domestic and 130 international
dealerships have completed store design renovation projects.
Licensing. In recent years, the Company has endeavored to create an awareness of
the brand among the non-riding public and provide a wide range of product for
enthusiasts by licensing its trademark "Harley-Davidson(R)" and numerous
related trademarks owned by the Company. The Company currently has licensed the
production and sale of a broad range of consumer items, including t-shirts and
other clothing, jewelry, small leather goods and numerous other products and is
expanding its licensing activity in the toy category. In 1993, the licensed
Harley-Davidson Cafe opened in Manhattan, New York. In 1995, the Company entered
into an agreement for licensing three additional restaurants with the Cafe
owners. Although the majority of licensing activity occurs in the U.S., the
Company has expanded into international markets in coordination with
international marketing efforts.
This licensing activity provides the Company with a valuable source of
advertising and goodwill. Licensing also has proven to be an effective means for
enhancing the Company's image with consumers and provides an important tool for
policing the unauthorized use of the Company's trademarks, thereby protecting
the brand and its use. Royalty revenues from licensing were approximately $24
million, $22 million and $14 million during 1995, 1994 and 1993, respectively.
While royalty revenues from licensing activities are relatively small, the
profitability of this business is relatively high.
Marketing and Distribution. The Company's basic channel of United States
distribution for its motorcycles and related products consists of approximately
600 independently owned full-service dealerships to whom the Company sells
direct. With respect to sales of new motorcycles, approximately 75% of the
dealerships sell Harley-Davidson motorcycles exclusively. All dealerships carry
Genuine Harley-Davidson replacement parts and aftermarket accessories and
perform servicing of Harley-Davidson motorcycle products.
The Company's marketing efforts are divided among dealer promotions, customer
events, magazine and direct mail advertising, public relations, and cooperative
programs with Harley-Davidson dealers. The Company also sponsors racing
activities and special promotional events and participates in all major
motorcycle consumer shows and rallies. In an effort to encourage Harley-Davidson
owners to become more actively involved in the sport of motorcycling, the
Company formed a riders club in 1983. The Harley Owners Group(R), or
"HOG(R)", currently has approximately 292,000 members worldwide and is the
industry's largest company-sponsored motorcycle enthusiast organization. The
Company's expenditures on domestic marketing and advertising were approximately
$71.5 million, $65.6 million and $53.8 million during 1995, 1994 and 1993,
respectively.
Retail Customer and Dealer Financing. Among the factors affecting the volume of
the Motor Company's parts and accessory, and to a lesser extent motorcycle,
sales are the availability and cost
6
<PAGE>
of credit to both retail purchasers and Harley-Davidson dealers. The Motor
Company believes that Eaglemark and other financial services companies provide
adequate retail and wholesale financing to the Motor Company's dealers and
customers. In addition, to encourage its dealers to carry sufficient parts and
accessories inventories and to counteract the seasonality of the parts and
accessories business, the Motor Company from time to time offers its domestic
dealers quarterly special discounts and/or 120 day delayed billing terms through
Eaglemark.
International Sales. International sales were $395 million, $331 million and
$263 million, accounting for approximately 29%, 29% and 28% of net sales of the
Motorcycles segment, during 1995, 1994 and 1993, respectively. The Company
believes the international heavyweight market is growing and is significantly
larger than the U.S. heavyweight market. The Company estimates, using data
reasonably available to the Company, that it holds an approximate 11% market
share in the European markets in which it competes and an approximate 22% market
share in the Pacific Rim (Japan and Australia).
The Company has three wholly owned foreign subsidiaries located in Germany,
Japan and the United Kingdom. The German subsidiary also serves Austria, France,
Denmark, Czech Republic, Hungary and Poland. The combined foreign subsidiaries
have a network of 133 dealers of which approximately one-half sell the Company's
motorcycles exclusively. Distribution through these subsidiaries allows the
Company flexibility in responding to changing economic conditions in a variety
of foreign markets. The Company is represented throughout the rest of the world
by an independent network of distributors and direct sales dealers. At the end
of 1995, this network included 15 distributors serving 17 country markets with
approximately 275 dealers. The remainder of the network includes 19 direct sales
dealers serving 17 country markets. Germany, Japan, Canada and Australia, in
that order, represent the Company's largest export markets and account for
approximately 60% of export sales. See Note 12 to the consolidated financial
statements for additional information regarding foreign operations.
During 1994, the Company established its European Distribution Centre in
Rotterdam which consolidated the motorcycle and Parts and Accessories
distribution. In 1995, the Company established the Harley-Davidson European
headquarters in the United Kingdom which created an in-country management team
dedicated to improving the relationships between the Company and its
distributors, dealers and customers. The focus in 1996 will be on gradual
expansion of the dealer network, improved management information systems, better
product availability and development of new markets.
In the Asia/Pacific region, the findings of an intensive market study that the
Company conducted, the early stages of which were completed in 1995, show that
short-term growth opportunities will come from existing markets, led by Japan
and Australia, with long-term growth coming from developing new markets. The
focus of 1996 is to ensure consistency among our dealer network with special
emphasis on increasing technical service competencies.
Competition. The U.S. and international heavyweight motorcycle markets are
highly competitive. The Company's major competitors generally have financial and
marketing resources which are substantially greater than those of the Company.
The Company's principal competitors have larger overall sales volumes and are
more diversified than the Company. The Company believes that the heavyweight
motorcycle market is the most profitable segment of the U.S. motorcycle market.
During 1995, the heavyweight segment represented approximately 36% of the total
U.S. motorcycle market in terms of new units registered.
7
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The Company first began to experience significant competition in the domestic
heavyweight motorcycle market from Japanese manufacturers in the early 1970's,
and prior to 1984, the Company's U.S. market share declined almost continuously.
Domestically, the Company competes in the touring and custom segments of the
heavyweight motorcycle market, which together accounted for 78%, 76% and 75% of
total heavyweight retail unit sales in the U.S. during 1995, 1994 and 1993,
respectively. The custom and touring motorcycles are generally the most
expensive and most profitable vehicles in the market.
For the last 10 years, the Company has led the industry in domestic sales of
heavyweight motorcycles. The Company's share of the heavyweight market was 55.8%
in 1995; down slightly from 56.1% in 1994. This is primarily a result of the
Company's constrained production capacity in a growing market. The Company is
currently reviewing alternative sites for the construction of a new
manufacturing facility to enable it to achieve its long-term goal of nearly
doubling motorcycle production capacity by 2003. The Company currently estimates
it will have the capacity to produce at least 115,000 units in 1996, 125,000-
130,000 units in 1997 and 145,000-150,000 units in 1998.
<TABLE>
<CAPTION>
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Shares of U.S. Heavyweight Motorcycle Market*
(Engine Displacement of 751cc or Above)
Year Ended December 31,
--------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
New U.S. Registrations (thousands of units):
Total new registrations 129.3 116.2 101.4 86.4 74.3
Harley-Davidson new registrations 72.1 65.2 59.3 52.2 45.1
Percentage Market Share:
Harley-Davidson 55.8% 56.1% 58.4% 60.4% 60.7%
Honda 17.6 19.1 17.7 16.4 17.3
Suzuki 7.9 8.7 9.4 9.4 7.6
Kawasaki 8.5 7.1 6.2 5.6 6.4
Yamaha 3.6 3.9 4.4 4.1 4.7
Other 6.6 5.1 3.9 4.1 3.3
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Total 100.0% 100.0% 100.0% 100.0% 100.0%
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</TABLE>
* Information in this report regarding motorcycle registrations and market
shares has been derived from data published by R.L. Polk & Co.
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8
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On a worldwide basis, the Company measures its market share using the
heavyweight classification. Although definitive market share information does
not exist for many of the smaller foreign markets, the Company estimates its
worldwide competitive position, using data reasonably available to the Company,
to be as follows:
<TABLE>
<CAPTION>
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Worldwide Heavyweight Motorcycle Registration Data
(Engine Displacement of 751cc or Above)
(Units in Thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
North America/(1)/:
Total registrations 140.3 124.9 109.5
Harley-Davidson registrations 77.0 69.5 63.4
Harley-Davidson market share percentage 54.9% 55.7% 57.9%
Europe/(2)/:
Total registrations 139.9 128.7 129.8
Harley-Davidson registrations 15.3 14.2 13.1
Harley-Davidson market share percentage 10.9% 11.0% 10.1%
Japan/Australia:
Total registrations 35.5 34.0 31.8
Harley-Davidson registrations 7.9 7.6 6.6
Harley-Davidson market share percentage 22.3% 22.3% 20.9%
</TABLE>
(1) Includes the United States and Canada
(2) Includes Austria, Belgium, France, Germany, Italy,
Netherlands, Spain, Switzerland and United Kingdom.
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Competition in the heavyweight motorcycle market is based upon a number of
factors, including price, quality, reliability, styling, product features and
warranties. The Company emphasizes quality, reliability and styling in its
products and offers warranties which are generally comparable to those of its
competitors. In general, resale prices of Harley-Davidson motorcycles, as a
percentage of price when new, are significantly higher than resale prices of
motorcycles sold by the Company's competitors.
Domestic heavyweight registrations increased 11% and 15% during 1995 and 1994,
respectively. The Company believes its ability to maintain its current market
share will depend primarily on its ability to increase its annual production
capacity as discussed below.
To enhance international growth, the Company completed, in 1994, a study of
Europe, the world's largest heavyweight motorcycle market, and began
implementation of new strategies to improve the quality of its distribution
systems, dealer network and customer support activities there. In addition, the
Company has begun a similar study of its current and future potential in the
Asia/Pacific region, to determine the levels of commitment required to
adequately serve the needs of motorcycle customers in this region.
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Motorcycle Manufacturing. In an effort to achieve cost and quality parity with
its competitors, the Company has incorporated manufacturing techniques to
continuously improve its operations. These techniques, which include employee
involvement, just-in-time inventory principles and statistical process control,
have significantly improved quality, productivity and asset utilization.
The Company's use of just-in-time inventory principles allows it to minimize its
inventories of raw materials and work in process, as well as scrap and rework
costs. This system also allows quicker reaction to engineering design changes,
quality improvements and market demands. The Company has trained the majority of
its manufacturing employees in problem solving and statistical methods.
The Company is in the process of completing a comprehensive motorcycle
manufacturing strategy designed to, among other things, enable further increases
in annual motorcycle production in order to nearly double its production
capacity by 2003. "Plan 2003" calls for the enhancement of the Motorcycles
segment's ability to increase capacity, adjust to changes in the market place
and further improve quality while reducing costs. The strategy calls for the
achievement of the increased capacity (up to 150,000 units) at the existing
facilities (with some additions) and construction of a new assembly plant. The
Company expects to begin implementing Plan 2003 in 1996 and estimates that it
will reach the production goal of at least 115,000 units in 1996. In addition,
the Company currently estimates it will have the capacity to produce 125,000-
130,000 units in 1997 and 145,000-150,000 units in 1998.
Raw Material and Purchased Components. The Company has endeavored to
establish with its suppliers long-term informal "partnership" relationships,
directly assisting them in the implementation of the manufacturing techniques
employed by the Company through training sessions and plant evaluations. In
furtherance of the Company's "partnership" philosophy, the Company reduced the
number of its manufacturing suppliers in recent years and is conducting more
business with suppliers that have implemented these same manufacturing
techniques in their manufacturing operations.
The Company purchases all of its raw material, principally steel and aluminum
castings, forgings, sheets and bars, and certain motorcycle components,
including carburetors, batteries, tires, seats, electrical components and
instruments. Certain of these components are secured from one of a limited
number of suppliers. Interruptions from certain of these suppliers could
adversely affect the Company's production pending the establishment of
substitute supply arrangements. The Company anticipates no significant
difficulties in obtaining raw materials or components for which it relies upon a
limited source of supply.
Research and Development. The Company believes that research and development
are significant factors in the Company's ability to continuously improve its
competitive position. As a result, the Company began construction of a new
200,000 square foot Product Development Center in 1995. The cost is estimated at
approximately $25 million, and construction is scheduled to be completed in
December, 1996. The Motorcycles segment incurred research and development
expenses of approximately $27.2 million, $22.1 million and $19.2 million during
1995, 1994 and 1993, respectively.
Patents and Trademarks. The Company owns certain patents which relate to its
motorcycles and related products and processes for their production. The Company
believes that the loss of any of its patents would not have a material effect
upon its business.
Trademarks are important to the Company's motorcycle business and licensing
activities. The Company has a vigorous global program of trademark registration
and enforcement to strengthen the value of its trademarks, prevent the
unauthorized use of its trademarks and improve its image and
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customer goodwill. The Company believes that its "Harley-Davidson(R)"
trademark is highly recognizable by the general public and one of its most
valuable assets. The Company's Bar and Shield design trademark is also highly
recognizable by the general public. Additionally, the Company has numerous
trademarks, trade names and logos, registered both in the United States and
abroad. The Company has continuously used the "Harley-Davidson" trademark since
1903 and the Bar and Shield trademark since 1910.
Seasonality. The Company, in general, does not experience significant
seasonal fluctuations in motorcycle production. This is primarily the result
of a strong demand for the Company's motorcycles and related products, as well
as the availability of floor plan financing arrangements for its North
American independent dealers. Floor plan financing allows dealers to build
their inventory levels in anticipation of the spring and summer selling
seasons.
Regulation. Both federal and state authorities have various environmental
control requirements relating to air, water and noise pollution which affect
the business and operations of the Company. The Company endeavors to ensure
that its facilities and products comply with all applicable environmental
regulations and standards.
To ensure compliance with lower European Union noise standards (80dba), which
took effect in calendar year 1994, the Company began a product development
program during late 1990. The design changes were implemented in July 1994 (1995
model year start-up) after European Union Certification procedures were
completed. Near the end of the decade there may be a further reduction of
European Union noise standards (to 77dba). Accordingly, the Company anticipates
that it will continue to incur some level of research and development costs
related to this matter over the next several years.
The Company's motorcycles are subject to certification by the U.S.
Environmental Protection Agency (EPA) for compliance with applicable emissions
and noise standards and by the State of California Air Resources Board (ARB)
with respect to the ARB's more stringent emissions standards. The Company's
motorcycles are subjected to the additional ARB tailpipe and evaporative
emissions standards that require the Company to build unique vehicles for sale
exclusively in California. The Company's motorcycle products have been
certified to comply fully with all such applicable standards.
The Company, as a manufacturer of motorcycle products, is subject to the
National Traffic and Motor Vehicle Safety Act (Safety Act), which is
administered by the National Highway Traffic Safety Administration (NHTSA).
The Company has acknowledged to NHTSA that its motorcycle products comply
fully with all applicable federal motor vehicle safety standards and related
regulations.
In accordance with NHTSA policies, the Company has from time to time initiated
certain voluntary recalls. During the last three years, the Company has
initiated 6 voluntary recalls at a total cost of approximately $3.1 million.
The Company fully reserves for all estimated costs associated with recalls in
the period that they are announced.
Federal, state, and local authorities have adopted various control standards
relating to air, water, and noise pollution which affect the business and
operations of the Motorcycles segment. Management does not anticipate that
any of these standards will have a materially adverse impact on its capital
expenditures, earnings, or competitive position.
11
<PAGE>
Employees. As of December 31, 1995, the Motorcycles segment had approximately
4,800 employees. Production workers at the motorcycle manufacturing
facilities in Wauwatosa and Tomahawk, Wisconsin, are represented principally
by the United Paperworkers International Union (UPIU) of the AFL-CIO, as well
as the International Association of Machinist and Aerospace Workers (IAM).
Production workers at the motorcycle manufacturing facility in York,
Pennsylvania, are represented principally by the IAM. The collective
bargaining agreement with the UPIU and the Wisconsin-IAM will expire on April
14, 2001, and the collective bargaining agreement with the Pennsylvania-IAM
will expire on February 2, 1997.
FINANCIAL SERVICES
Eaglemark Financial Services, Inc. provides private label financial services
programs to leisure product manufacturers, their dealers and customers in the
United States and Canada. The Company acquired a 49% interest in Eaglemark in
1993 and acquired substantially all of the remaining shares in 1995.
Eaglemark commenced doing business in 1993 with the purchase of the Harley-
Davidson wholesale financing portfolio from ITT Commercial Finance
Corporation.
Harley-Davidson. Eaglemark's largest division provides both wholesale and
retail financial services to Harley-Davidson dealers and customers and operates
under the trade names Harley-Davidson(R) Credit and Harley-Davidson(R)
Insurance. Wholesale financial services include floorplan financing of
motorcycles, trade acceptance financing of motorcycle parts and accessories,
computer loans, showroom remodeling loans and the brokerage of a range of
commercial insurance products, including property and casualty, general
liability and special events insurance policies. Eaglemark's wholesale financial
services are offered to all Harley-Davidson dealers in the United States and
Canada and during 1995 were utilized one or more times by approximately 90% of
such dealers. Eaglemark's wholesale finance operations are located in Plano,
Texas.
Retail financial services include installment lending for new and used Harley-
Davidson motorcycles, the Harley Card(TM), an exclusive credit card for use only
in Harley-Davidson dealerships, and the brokerage of a range of motorcycle
insurance products, including liability, casualty, and credit life and
disability insurance policies, and extended warranty agreements. Eaglemark's
retail financial services are available through virtually all Harley-Davidson
dealers in the United States and Canada. Eaglemark's retail finance operations
are located in Carson City, Nevada.
Other Manufacturers. Eaglemark also provides private label wholesale and retail
financial services (other than extended warranty agreements) through
manufacturer participation programs to Holiday Rambler(R), Boston Whaler(R),
Skeeter(R), Mastercraft(TM) and WetJet(TM) dealers and customers. These programs
are similar to the Harley-Davidson program described above.
Funding. Eaglemark's growth has been funded through a combination of capital
contributions from the Company, commercial paper borrowings, revolving credit
facility borrowings and securitization of its retail installment loans. Future
growth is expected to be financed by using similar sources as well as internally
generated funds. Eaglemark acts only as an insurance agent and does not assume
any underwriting risk with regard to the various insurance policies and extended
warranty agreements that it sells.
Competition. Eaglemark believes that its ability to offer a package of
wholesale and retail financial services utilizing the name of the manufacturer
provides a significant competitive advantage over its competitors. Its
competitors compete for business based largely on price and, to a lesser extent,
service. Eaglemark competes based on convenience, service and, to a lesser
extent, price.
12
<PAGE>
The only significant national retail financing competitor for Harley-Davidson
motorcycle installment loans is Greentree Financial. Greentree Financial does
not offer insurance products, extended warranty, or the private-label credit
card and focuses on high volume Harley-Davidson dealers. In contrast,
competition to provide retail financial services to recreational vehicle and
watercraft dealers is substantial, with many competitors being much larger than
Eaglemark. These competitors include The CIT Group, Ganis Credit Corp, BankOne
and Key Bank USA. Credit unions, banks, other financial institutions and
insurance agencies also compete for retail financial services business in their
local markets.
Eaglemark faces little national competition for the Harley-Davidson wholesale
finance business. Competitors are primarily banks and other financial
institutions who provide wholesale financing to Harley-Davidson dealers in their
local markets. In contrast, competition to provide wholesale financial services
to recreational vehicle and watercraft dealers is substantial, with many
competitors being much larger than Eaglemark. These competitors include Deutsche
Financial, NationsCredit, Bombardier and Transamerica. They typically offer
manufacturer sponsored programs similar to Eaglemark's programs.
Patents and Trademarks. Eaglemark has applied for federal trademark
registrations for the name "Eaglemark" and the Eaglemark logo. All the other
trademarks or trade names used by Eaglemark, such as Harley-Davidson Credit and
MasterCraft Credit, are licensed from the manufacturer.
Seasonality. The leisure products for which Eaglemark currently provides
financial services are primarily used only during the warmer months of the year
in the northern United States and Canada, generally March through August. As a
result, the business experiences significant seasonal variations. From September
until mid-March dealer inventories build and turn more slowly, increasing
wholesale financing volume substantially. During this same time there is a
corresponding decrease in the retail financing volume. Customers typically do
not buy motorcycles, watercraft and recreational vehicles until they can use
them. From about mid-March through August retail financing volume increases and
wholesale financing volume decreases.
Employees. As of December 31, 1995, the Financial Services segment had
approximately 180 employees. None of Eaglemark's personnel are represented by
labor unions.
13
<PAGE>
TRANSPORTATION VEHICLES (DISCONTINUED OPERATIONS)
As previously discussed, on January 22, 1996, the Company announced its
strategic decision to discontinue the operations of the Transportation Vehicles
segment in order to concentrate its financial and human resources on its core
motorcycle business. The Transportation Vehicles segment is comprised of the
Commercial Vehicles division and B & B Molders, a manufacturer of custom or
standard tooling and injection molded plastic pieces and formerly included the
Recreational Vehicles division. The Company does not anticipate a loss on the
discontinuance of the Transportation Vehicles segment, which is expected to be
finalized during 1996. The results of the Transportation Vehicles segment have
been reported separately as discontinued operations. Prior year financial
information has been restated to present the Transportation Vehicles segment as
a discontinued operation.
COMMERCIAL VEHICLES
- -------------------
The Company, through its Utilimaster division, builds a variety of commercial
body configurations for special uses. Sales of the Commercial Vehicles division
accounted for 29.7%, 24.8% and 27.8% of the Transportation Vehicles segment's
revenues in 1995, 1994 and 1993, respectively.
Utilimaster currently installs its bodies on chassis of various sizes supplied
by third parties. The Company's products are offered in aluminum or fiberglass
reinforced plywood (FRP) construction and are available in lengths of 9 to 28
feet. The Company's products (excluding chassis) range in price from $2,800 to
$16,000 although special service vehicles can sell as high as $80,000.
The principal types of commercial bodies are as follows:
Parcel Delivery Vans - Aluminum or FRP parcel delivery van bodies are
installed on chopped van chassis supplied by the major Detroit truck
manufacturers. These parcel delivery van bodies range in length from 10 to
16 feet and are primarily used for local delivery of parcels, freight and
perishables.
Walk-In Vans - Utilimaster manufactures its walk-in vans (step-vans) on a
truck chassis supplied with engine and drive train components, but without
a cab. The Company fabricates the driver's compartment and body using
aluminum panels. Uses for these vans include the distribution of food
products and small packages.
Truck Bodies - Utilimaster's truck bodies are typically fabricated up to 28
feet in length with prepainted aluminum or FRP panels, aerodynamic front
and side corners, hardwood floors, and various door configurations to
accommodate end-user loading and unloading requirements. These products
are used for diversified dry freight transportation. The Company installs
its truck bodies on chassis supplied with a finished cab.
Mobile Rescue and Special Use Emergency Vehicles - Utilimaster builds a
variety of high cube and walk-in specialty use vehicles for the fire and
rescue industry. These vehicles range in lengths from 10 to 22 feet and
usually require extensive customization to meet the needs of the local
emergency agencies.
14
<PAGE>
RECREATIONAL VEHICLES
- ---------------------
On March 6, 1996, the Company completed the sale of substantially all of the
assets of its Holiday Rambler Recreational Vehicles Division to Monaco Coach
Corporation ("Monaco"). Monaco acquired the Recreational Vehicles division's
manufacturing operations located in Wakarusa, Indiana and 10 of its 14 Holiday
World Recreational Vehicle Dealerships. The Company is in the process of
disposing of the remaining 4 dealerships.
Principal types of recreational vehicles produced by the Recreational Vehicles
division included Class A or "conventional" motorhomes, fifth wheel travel
trailers and conventional travel trailers. Recreational vehicle classifications
are based upon standards established by the Recreation Vehicle Industry
Association. The Recreational Vehicles division marketed its recreational
vehicle products through a network of over 115 dealers located throughout the
continental United States, including fourteen company-owned Holiday World
dealerships.
The Recreational Vehicles division's sales (including retail, wholesale and
other sales) were $304.1 million, $274.5 million and $192.7 million in 1995,
1994 and 1993, respectively. Sales of the Recreational Vehicles division
accounted for 68.5%, 71.7% and 67.8% of the Transportation Vehicles segment's
revenues for the years ended December 31, 1995, 1994 and 1993, respectively.
OTHER PRODUCTS
- --------------
The Transportation Vehicles segment's B & B Molders division designs and
manufactures a diverse range of custom or standard tooling and injection molded
plastic pieces. The Transportation Vehicles segment's Creative Dimensions
division produced a broad line of contemporary office furniture. The Creative
Dimensions division was sold in the second quarter of 1995.
Other products accounted for 1.8%, 3.5% and 4.4% of the Transportation Vehicles
segment revenues for the years ended December 31, 1995, 1994 and 1993,
respectively.
ALL DIVISIONS
- -------------
Production - Holiday Rambler's products are built utilizing an assembly line
process. Holiday Rambler has designed and built its own fabricating and assembly
equipment for the majority of its manufacturing processes. In addition to
assembling its products and installing various options and accessories, Holiday
Rambler manufactures a majority of its plastic components and other installed
products, such as draperies, bathtubs, holding tanks, wheel covers, and wiring
harnesses.
Production Materials. The principal raw materials and other components used in
the production of commercial vehicles are purchased from third parties. With the
exception of the chassis, these materials, including aluminum, plywood, lumber,
plastic and fiberglass, are generally available from numerous sources. In
general, Holiday Rambler has not experienced any substantial shortages of raw
materials or components. However, the industry has occasionally experienced
short-term chassis shortages.
Patents and Trademarks. The Transportation Vehicles segment owns various patents
and know-how which relate to its recreational vehicles and other products and
the processes for their production. The Company believes that the loss of any of
these patents would not have a material effect upon its business.
15
<PAGE>
Trademarks are important to the Transportation Vehicles segment's commercial
vehicle business. The Transportation Vehicles segment has several valuable
registered trademarks, trade names, and logos used in its business.
Regulation. The manufacture, distribution, and sale of the Transportation
Vehicles segment's vehicles are subject to governmental regulations in the
United States at the federal, state, and local levels. The most extensive
regulations are promulgated under the Safety Act which, among other things,
enables the NHTSA to require a manufacturer to remedy vehicles containing
"defects related to motor vehicle safety" or vehicles which fail to conform to
all applicable federal motor vehicle safety standards. Pursuant to the Safety
Act and related regulations, the Transportation Vehicles segment from time to
time has initiated voluntary recalls of its recreational and commercial
vehicles. Since the beginning of 1993, recalls by the Transportation Vehicles
segment initiated under the Safety Act, all of which have been voluntary, have
involved an aggregate cost to the Company of approximately $1.0 million.
Federal, state, and local authorities have adopted various control standards
relating to air, water, and noise pollution which affect the business and
operations of the Transportation Vehicles segment. Management does not
anticipate that any of these standards will have a materially adverse impact on
its capital expenditures, earnings, or competitive position.
Employees. As of December 31, 1995, the Transportation Vehicles segment had
approximately 2,400 employees. None of the segment's personnel are represented
by labor unions.
16
<PAGE>
Item 2. Properties
- ------- ----------
The following is a summary of the principal properties of the Company as of
March 22, 1996.
Motorcycles and Related Products Segment
- ----------------------------------------
<TABLE>
<CAPTION>
Type of Facility Location Square Feet Status
- ---------------- -------- ----------- ------
<S> <C> <C> <C>
Executive Offices,
Engineering & Warehouse Milwaukee, WI 512,100 Owned
Manufacturing Wauwatosa, WI 443,000 Owned
Manufacturing Tomahawk, WI 90,744 Owned
Manufacturing York, PA 998,185 Owned
Motorcycle Testing Talladega, AL 23,500 Leases expiring
1998-1999
Office Mukwanago, WI 4,800 Lease expiring
1998
Office Ann Arbor, MI 800 Lease expiring
1997
Office and Warehouse Morfelden-Walldorf, 50,859 Lease expiring
Germany 2001
Office Tokyo, Japan 7,145 Lease expiring
1997
Warehouse Yokohama, Japan 7,460 Lease expiring
1997
Office Brackley, England 2,845 Lease expiring
2005
Warehouse Brackley, England 1,122 Lease expiring
2005
</TABLE>
The Motorcycles segment has three facilities that perform manufacturing
operations: Wauwatosa, Wisconsin, a suburb of Milwaukee (motorcycle power train
production); Tomahawk, Wisconsin (fiberglass parts production and painting); and
York, Pennsylvania (motorcycle parts fabrication, painting and assembly).
The Company estimates that generally the size of the existing facilities, with
some additions, would be adequate to meet its current goal of being able to
produce 145,000-150,000 motorcycles annually by 1998. The Company is currently
reviewing alternative sites for the construction of a new manufacturing facility
to enable it to achieve its long-term goal of nearly doubling motorcycle
production capacity by 2003.
17
<PAGE>
Financial Services Segment
- ----------------------------
<TABLE>
<CAPTION>
Type of Facility Location Square Feet Status
- ---------------- -------- ----------- ------
<S> <C> <C> <C>
Office Chicago, IL 4,825 Lease expiring
1996
Office Carson City, Nevada 18,500 Lease expiring
1996
Office Plano,TX 7,164 Lease expiring
1996
</TABLE>
The Financial Services segment has three office facilities: Chicago, Illinois,
(corporate headquarters); Carson City, Nevada, (retail and insurance
operations); and Plano, Texas (wholesale operations).
Transportation Vehicles Segment
- -------------------------------
<TABLE>
<CAPTION>
Type of Facility Location Square Feet Status
- ---------------- -------- ----------- ------
<S> <C> <C> <C>
Executive Offices Wakarusa, IN 54,528 Owned
Manufacturing and Warehouse Wakarusa, IN 510,341 Owned
Manufacturing and Warehouse Wakarusa, IN 82,000 Leased
Factory Service Center Wakarusa, IN 24,374 Owned
Manufacturing Mishawaka, IN 43,853 Owned
Retail Dealership Facilities Various 17,600 Owned
Retail Dealership Facilities Various 25,036 Leased
</TABLE>
The above table does not reflect property sold to Monaco Coach Corporation on
March 6, 1996. The Transportation Vehicles segment's units are manufactured in
approximately 17 separate buildings. Additionally, the Segment owns 9 buildings
used for administrative, storage, and other purposes. Substantially all of the
facilities are located on three sites at or near the Transportation Vehicles
segment's corporate headquarters in Wakarusa, Indiana. Because commercial
vehicles are produced largely through a labor-intensive assembly process, the
facilities do not house extensive capital equipment. The Transportation Vehicles
segment's present facilities are generally adequate for their current intended
use.
Item 3. Legal proceedings
- ------- -----------------
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at its
York, Pennsylvania facility (the Facility). The Facility was formerly used by
the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company
purchased the facility from AMF in 1981. Although the Company is not certain as
to the extent of the environmental contamination at the Facility, it is working
with the Pennsylvania Department of Environmental Resources in undertaking
certain investigation and remediation activities. In March 1995, the Company
entered into a settlement agreement (the Agreement) with the Navy. The Agreement
calls for the Navy and the Company to contribute amounts into a trust equal to
53% and 47%, respectively, of future costs associated with investigation and
remediation activities at the Facility (response costs). The trust will
administer the payment of the future response costs at the Facility as covered
by the Agreement. In addition, in March 1991 the Company entered into a
settlement agreement with Minstar related to certain indemnification obligations
assumed by Minstar in connection with the Company's purchase of the Facility.
Pursuant to this settlement,
18
<PAGE>
Minstar is obligated to reimburse the Company for a portion of its response
costs at the Facility. Although substantial uncertainty exists concerning the
nature and scope of the environmental remediation that will ultimately be
required at the Facility, based on preliminary information currently available
to the Company and taking into account the Company's settlement agreement with
the Navy and the settlement agreement with Minstar, the Company estimates that
it will incur approximately $5 million of net additional response costs at the
Facility. The Company has established reserves for this amount. The Company has
also put certain of its insurance carriers on notice that it intends to make
claims relating to the environmental contamination at the Facility. However, the
Company is currently unable to determine the probable amount of recovery
available, if any, under insurance policies.
In the fourth quarter of 1995, the Company settled its trademark license dispute
with Motorcycle Equities, Inc. ("MEI") by agreeing to extend MEI licenses for
three additional restaurants. The lawsuit, including all counterclaims asserted
by MEI, was dismissed. The settlement does not involve the payment of
compensatory amounts.
19
<PAGE>
Item 4. Submission of matters to a vote of security holders
- ------- ---------------------------------------------------
No matters were submitted to a vote of shareholders of the Company in the fourth
quarter of 1995.
Executive officers of the registrant
------------------------------------
The following sets forth, as of March 22, 1996, the name, age and business
experience for the last five years of each of the executive officers of Harley-
Davidson.
Executive Officers
------------------
<TABLE>
<CAPTION>
Name Age
---- ---
<S> <C>
Richard F. Teerlink 59
President and Chief Executive Officer
Jeffrey L. Bleustein 56
President and Chief Operating Officer -
Motor Company
James M. Brostowitz 44
Vice President, Controller and Treasurer
Thomas A. Gelb 60
Vice President, Continuous Improvement
C. William Gray 54
Vice President, Human Resources
Timothy K. Hoelter 49
Vice President, General Counsel and
Secretary
Martin R. Snoey 52
President & Chief Operating Officer,
Holiday Rambler
James L. Ziemer 46
Vice President, Chief Financial Officer and
Assistant Treasurer
</TABLE>
All of these individuals have been employed by the Company in an executive
capacity for more than five years, except Martin R. Snoey. Mr. Snoey has been
President and Chief Operating Officer of Holiday Rambler since joining the
Company in January 1993. Prior to that time, he held, from January 1992 to
December 1992, a general management consulting assignment with Precision
Castparts Corporation, a specialty manufacturer supplying the transportation
industry. From July 1989 to March 1991, he was the President and CEO of Geostar
Corporation, an entrepreneurial, global satellite communications company,
serving the transportation industry.
20
<PAGE>
PART II
-------
Item 5. Market for Harley-Davidson, Inc. common stock and related shareholder
- ------- ---------------------------------------------------------------------
matters
-------
Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange.
The high and low market prices for the common stock, reported as New York
Stock Exchange Composite Transactions, were as follows:
<TABLE>
<CAPTION>
1995 Low High
---- ------- -------
<S> <C> <C>
First quarter $22 $28
Second quarter 22-3/4 26-3/4
Third quarter 23 30-1/8
Fourth quarter 24 28-7/8
1994 Low High
---- ------- --------
First quarter $21-5/8 $25-1/16
Second quarter 21-7/8 25-1/2
Third quarter 22-9/16 29-7/8
Fourth quarter 24-1/2 28-3/8
</TABLE>
The Company paid the following dividends:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
First quarter $.04 $.03 $ -
Second quarter .04 .03 -
Third quarter .05 .04 .03
Fourth quarter .05 .04 .03
</TABLE>
Prior to the declaration of its first quarterly dividends during 1993, the
Company had not paid cash dividends on its common stock.
The Company has continuing authorization from its Board of Directors to
repurchase up to 4 million shares of the Company's outstanding common stock. The
repurchases are authorized to be made from time to time in the open market or in
privately negotiated transactions. During 1995, the Company repurchased
1,650,000 shares of its common stock.
As of March 22, 1996, there were approximately 36,170 shareholders of record
of Harley-Davidson, Inc. common stock.
21
<PAGE>
Item 6. Selected financial data
- -------------------------------
<TABLE>
<CAPTION> 1995 1994 1993 1992 1991
---------- ---------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income statement data:
Net sales $1,350,466 $1,158,887 $ 933,262 $ 822,929 $ 701,969
Cost of goods sold 939,067 800,548 641,248 572,927 500,715
---------- ---------- --------- --------- ---------
Gross profit 411,399 358,339 292,014 250,002 201,254
Operating income from financial services 3,620 - - - -
Selling, administrative and engineering (234,223) (204,777) (162,675) (154,942) (119,182)
---------- ---------- --------- --------- ---------
Income from operations 180,796 153,562 129,339 95,060 82,072
Interest income (expense), net 96 1,682 994 (2,259) (3,381)
Other income (expense), net (4,903) 1,196 (3,249) (1,611) (1,355)
---------- ---------- --------- --------- ---------
Income from continuing operations before
provision for income taxes, extraordinary
items and accounting changes 175,989 156,440 127,084 91,190 77,336
Provision for income taxes 64,939 60,219 50,765 34,530 29,045
---------- ---------- --------- --------- ---------
Income from continuing operations before
extraordinary items and accounting changes 111,050 96,221 76,319 56,660 48,291
Income (loss) from discontinued
operations, net of tax* 1,430 8,051 (57,904) (2,487) (11,319)
---------- ---------- --------- --------- ---------
Income before extraordinary items
and accounting changes 112,480 104,272 18,415 54,173 36,972
Extraordinary items, net of tax - - - (388) -
---------- ---------- --------- --------- ---------
Income before accounting changes 112,480 104,272 18,415 53,785 36,972
Cumulative effect of accounting changes,
net of tax** - - (30,300) - -
---------- ---------- --------- --------- ---------
Net income (loss) $ 112,480 $ 104,272 $ (11,885) $ 53,785 $ 36,972
========== ========== ========= ========= =========
Weighted average common
shares assuming no dilution 75,085 76,198 75,900 71,778 71,160
========== ========== ========= ========= =========
Per common share:
Income from continuing operations before
extraordinary items and accounting changes $ 1.48 $ 1.26 $ 1.00 $ .79 $ .68
Income (loss) from discontinued
operations, net of tax .02 .11 (.76) (.03) (.16)
Extraordinary items, net of tax - - - (.01) -
Accounting changes, net of tax - - (.40) - -
---------- ---------- --------- --------- ---------
Net income (loss) $ 1.50 $ 1.37 $ (.16) $ .75 $ .52
========== ========== ========= ========= =========
Dividends paid $ .18 $ .14 $ .06 $ - $ -
========== ========== ========= ========= =========
Balance sheet data:
Working capital $ 104,028 $ 189,358 $ 142,996 $ 96,232 $ 64,212
Finance receivables, net 213,444 - - - -
Total assets 1,000,670 676,663 527,958 475,026 424,045
Short-term debt, including current
maturities of long-term debt 2,691 1,431 4,190 912 29,062
Long-term debt, less current maturities 18,207 9,021 2,919 1,453 38,130
Finance debt 164,330 - - - -
---------- ---------- --------- --------- ---------
Total debt 185,228 10,452 7,109 2,365 67,192
Shareholders' equity 494,569 433,232 324,912 335,380 238,000
</TABLE>
*1993 includes a $57.0 million charge related primarily to the write-off of
goodwill at Holiday Rambler.
**During 1993, the Company adopted accounting standards related to
postretirement health care benefits and income taxes.
22
<PAGE>
Item 7. Management's discussion and analysis of financial condition and
- ------- ---------------------------------------------------------------
results of operations
---------------------
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
OVERALL
Net sales for 1995 of $1.4 billion were $191.6 million, or 16.5%, higher than
net sales for 1994. Net income and earnings per share from continuing
operations were $111.1 million and $1.48, respectively, for 1995 as compared
with $96.2 million and $1.26, respectively, for 1994. Net income and earnings
per share from discontinued operations were $1.4 million and $.02,
respectively, for 1995 as compared with $8.0 million and $.11, respectively,
for 1994, which included a $4.6 million, or $.06 per share, one-time tax
benefit related to the legal reorganization of Holiday Rambler.
On January 22, 1996, the Company announced its strategic decision to
discontinue the operations of the Transportation Vehicles segment in order to
concentrate its financial and human resources on its core motorcycle business.
The Company does not anticipate a loss on the discontinuance of the
Transportation Vehicles segment. The results of the Transportation Vehicles
segment have been reported separately as discontinued operations for each year
presented.
On November 14, 1995, the Company acquired substantially all of the common
stock and common stock equivalents of Eaglemark Financial Services, Inc.
(Eaglemark) that it did not already own. The purchase price was approximately
$45 million, which was paid from internally generated funds and short-term
borrowings. The Company has included the results of operations of the
Financial Services segment ($3.6 million) in its statement of operations for
the year ended December 31, 1995 as though it had been acquired at the
beginning of the year and deducted the preacquisition earnings as part of non-
operating expense.
The Company increased its quarterly dividend in September from $.04 per share
to $.05 per share which resulted in a total year payout of $.18 per share.
MOTORCYCLE UNIT SHIPMENTS AND NET SALES
<TABLE>
<CAPTION>
Increase/
1995 1994 (Decrease) %Change
------- -------- ---------- -------
<S> <C> <C> <C> <C>
Motorcycle units (excluding Buell) 105,104 95,811 9,293 9.7%
======== ======== ====== =====
Net sales (in millions):
Motorcycles $1,038.3 $ 890.6 $147.7 16.6%
Motorcycle Parts and Accessories 292.3 256.3 36.0 14.0
Other 19.9 12.0 7.9 65.0
-------- -------- ------ -----
Total Motorcycles and Related Products $1,350.5 $1,158.9 $191.6 16.5%
======== ======== ====== =====
</TABLE>
The Motorcycles and Related Products (Motorcycles) segment's net sales
increased 16.5% over 1994 primarily due to a 9,293 unit (9.7%) increase in
motorcycle shipments, as well as a 14.0% increase in its Parts and Accessories
business. The increase in motorcycle shipments is the result of ongoing
implementation of the Company's manufacturing strategy and efforts to satisfy
demand. The manufacturing strategy is designed to increase capacity, adjust to
changes in the market place and further improve product quality while reducing
costs.
Sales of Buell motorcycles (which are distributed through select Harley-
Davidson dealers) increased to $14 million in 1995 as compared to $6 million
in 1994. (Included in "Other" in the above table.)
23
<PAGE>
The Company began 1995 at a scheduled motorcycle production rate of 395
units per day. As the implementation of the manufacturing strategy continued,
the rate increased to 470 units per day by the end of the year. The Company
exceeded its production goal of 100,000 units in 1995 and anticipates 1996
production will reach at least 115,000 units. The Company is currently
reviewing alternative sites for the construction of a new manufacturing
facility to enable it to achieve its long-term goal of doubling motorcycle
production by 2003.
Year-end data indicates that the domestic (United States) motorcycle market
continued to grow throughout 1995. Compared to 1994, industry registrations
of domestic heavyweight (engine displacements in excess of 751cc) motorcycles
were up 11.3% (data provided by R.L. Polk). The Company ended 1995 with a
domestic market share of 55.8% compared to 56.1% in 1994. This decrease is a
reflection of the Company's constrained production capacity in a growing
heavyweight motorcycle market. Demand for the Company's motorcycles continues
to exceed supply with nearly all of the Company's independent domestic dealers
reporting retail orders on all of their remaining 1996 model year motorcycle
allocations (production through June, 1996).
Export revenues totaled $394.8 million during 1995, an increase of
approximately $63.6 million (19.2%) over 1994. The Company has exported
approximately 30% of its motorcycle unit shipments since 1990 and expects to
maintain approximately the same percentage during 1996. The Company
distributes approximately one-half of its exported units through its wholly
owned subsidiaries in Germany, Japan and the United Kingdom, which allows the
Company flexibility in responding to changing economic conditions in a variety
of foreign markets. While definitive market share information (engine
displacements in excess of 751cc) is not available in many foreign countries,
the Company believes it holds an approximate 11% market share in the European
markets in which it competes and a 22% market share in the Pacific Rim (Japan
and Australia).
During 1995, the Parts and Accessories business generated $292.3 million in
revenues, an increase of 14.0% over 1994. The rate of increase is lower than
experienced in recent years, however, management believes the 1995 increase is
more indicative of the long-term growth potential of the Parts and Accessories
business. The Motorclothes business, which accounted for approximately $100
million of Parts and Accessories sales in 1995, is expected to remain stable
in 1996, while the Motor Parts and Motor Accessories businesses are expected
to increase. The Parts and Accessories business is expected to grow at an
annual rate similar to the annual growth rate in motorcycle shipments.
The Company is developing an improved system to better monitor domestic dealer
inventories and retail traffic. In addition, the Company initiated several
promotional programs in the fourth quarter of 1995 to increase dealer floor
traffic and plans to continue this promotional strategy in 1996. To further
strengthen its ability to process and fill orders for the Parts and
Accessories business, the Company plans to construct a new distribution center
(at an approximate cost of $17 million). Construction is scheduled to begin
in the second quarter of 1996, and the facility should be fully operational by
the first quarter of 1997.
24
<PAGE>
GROSS PROFIT
Gross profit increased $53.1 million, or 14.8%, in 1995 as compared with 1994
primarily due to an increase in volume. The gross profit margin was 30.5% in
1995 as compared with 30.9% in 1994. The gross profit margin was negatively
affected by the overtime incurred to produce additional motorcycle units and
make up for production time lost because production employees were involved in
numerous strategic planning sessions during 1995.
OPERATING EXPENSES
(Dollars in Millions)
<TABLE>
<CAPTION>
Increase/
1995 1994 (Decrease) % Change
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Motorcycles and Related Products $226.9 $194.8 $32.1 16.5%
Corporate 7.3 10.0 (2.7) (27.0)
------ ------ ----- -----
Total operating expenses 234.2 $204.8 $29.4 14.4%
====== ====== ===== =====
</TABLE>
Operating expenses for 1995 increased $29.4 million, or 14.4%, over 1994. The
increase was primarily volume related. Engineering, information services and
international operations were other principal areas of increased spending. The
decrease in the Corporate charges is primarily due to a one-time charge in 1994
related to the legal reorganization of Harley-Davidson, Inc. and its Holiday
Rambler subsidiaries.
OPERATING INCOME FROM FINANCIAL SERVICES
The results of operations of the Financial Services segment for the year ended
December 31, 1995 of $3.6 million have been included in operating profit and the
preacquisition earnings have been deducted as part of non-operating expense.
Prior to 1995, the Company accounted for its investment in Eaglemark using the
equity method and included its share of earnings in other income.
OTHER EXPENSE
Other expense for 1995 of $4.9 million is primarily comprised of Eaglemark
preacquisition earnings of $1.9 million, charitable donations of $1.9 million
and loss on sale of machinery and equipment due to the ongoing manufacturing
reorganization of $1.2 million.
CONSOLIDATED INCOME TAXES
The Company's effective tax rate decreased in 1995 to 37.0% from 38.5% in 1994.
The decrease is attributable primarily to the full year effect of a 1994
corporate restructuring.
DISCONTINUED OPERATIONS
The operations for the Transportation Vehicles segment have been classified as
discontinued operations. The results of operations, net of applicable income
taxes, were net income of $1.4 million and $8.0 million in 1995 and 1994,
respectively. 1994 included a one-time tax benefit of $4.6 million related to
the legal reorganization of the Transportation Vehicles segment. The sale of the
Recreational Vehicles division and ten of the fourteen Holiday World stores was
completed in the first quarter of 1996 (the remaining four stores will be
disposed of by the Company in due course). The disposition of the remaining
businesses (Commercial Vehicles division and B&B Molders) is expected to be
finalized during 1996.
25
<PAGE>
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
OVERALL
Net sales for 1994 of $1.2 billion were $225.6 million, or 24.2%, higher than
net sales for 1993. Net income and earnings per share from continuing operations
were $96.2 million and $1.26, respectively, for 1994 as compared with $76.3
million and $1.00, respectively, for 1993, excluding the $30.3 million (after
tax) one-time charge for accounting changes in 1993. Net income and earnings per
share form discontinued operations were $8.0 million and $.11, respectively, for
1994 as compared with a net loss of $57.9 million and loss per share of $.76 for
1993 ($53.5 million, $.70 per share, of the 1993 loss was due to the write-off
of goodwill).
The Company increased its quarterly dividend in September, 1994 from $.03 per
share to $.04 per share which resulted in a total year payout of $.14 per share.
MOTORCYCLE UNIT SHIPMENTS AND NET SALES
<TABLE>
<CAPTION>
Increase/
1994 1993 (Decrease) % Change
-------- ------ ---------- --------
<S> <C> <C> <C> <C>
Motorcycle units (excluding Buell) 95,811 81,696 14,115 17.3%
======== ====== ====== =====
Net sales (in millions):
Motorcycles $ 890.6 $729.2 $161.4 22.1%
Motorcycle Parts and Accessories 256.3 199.0 57.3 28.8
Other 12.0 5.1 6.9 135.3
-------- ------ ------ -----
Total Motorcycles and Related Products $1,158.9 $933.3 $225.6 24.2%
======== ====== ====== =====
</TABLE>
The Motorcycles and Related Products (Motorcycles) segment's net sales increased
24.2% over 1993 due to a 14,115 unit (17.3%) increase in motorcycle shipments,
as well as a 28.8% increase in its Parts and Accessories business. The increase
in motorcycle shipments was the result of ongoing implementation of the
Company's manufacturing strategy to increase capacity, adjust to changes in the
market place and further improve product quality while reducing costs.
The Company began 1994 at a scheduled motorcycle production rate of 365 units
per day. As the implementation of the manufacturing strategy continued, the rate
increased to 395 units per day by the end of the year.
Year-end data indicates that the domestic (United States) motorcycle market
continued to grow throughout 1994. Compared to 1993, industry registrations of
domestic heavyweight motorcycles were up 14.5%. The Company ended 1994 with a
domestic market share of 56.1% compared to 58.4% in 1993. This decrease is a
reflection of the Company's constrained production capacity in a growing
heavyweight motorcycle market.
Overall, international demand remained strong. Export revenues totaled $331.2
million during 1994, an increase of approximately $68.4 million (26.0%) over
1993. The Company has exported approximately 30% of its motorcycle unit
shipments since 1990. The Company distributed approximately one-half of its
exported units through its wholly owned subsidiaries.
26
<PAGE>
During 1994, the Parts and Accessories business generated $256.3 million in
revenues, an increase of 28.8% over 1993. The MotorClothes line increased 32.6%
due in part to the introduction of the Biker Blues denim clothing line which
contributed an incremental $3.7 million. Sales of Genuine Parts and Accessories,
which outpaced aftermarket competitors, increased 26.8% over 1993.
GROSS PROFIT
Gross profit increased $66.4 million, or 23% in 1994 as compared with 1993
primarily due to an increase in volume. The gross profit margin was 30.9% in
1994 as compared with 31.3% in 1993. The gross profit margin was negatively
affected by the continued investment (approximately $10 million) in the
manufacturing strategy designed to increase capacity, improve quality, and
reduce costs. In addition, approximately 28% of 1994 unit shipments were lower-
margin Sportster models compared to approximately 27% in 1993.
OPERATING EXPENSES
(Dollars in Millions)
<TABLE>
<CAPTION>
Increase/
1994 1993 (Decrease) % Change
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Motorcycles and Related Products $194.8 $155.8 $39.0 25.1%
Corporate 10.0 6.9 3.1 44.6
------ ------ ----- ----
Total operating expenses $204.8 $162.7 $42.1 25.9%
====== ====== ===== ====
</TABLE>
Operating expenses for 1994 increased $42.1 million, or 25.9%, over 1993. The
increase was primarily volume related. MotorClothes advertising costs and
product liability were other areas of increased spending. The increase in the
Corporate charges is primarily due to a one-time charge related to the legal
reorganization of Harley-Davidson, Inc. and its Holiday Rambler subsidiaries.
OTHER EXPENSE
Other expense for 1994 decreased $4.4 million as compared to 1993 due primarily
to a $2.0 million contribution in 1993 for the initial funding of the Harley-
Davidson Foundation which administers the Company's charitable contributions.
CONSOLIDATED INCOME TAXES
The Company's effective tax rate decreased in 1994 to 38.5% from 39.5% in 1993.
DISCONTINUED OPERATIONS
The operations for the Transportation Vehicles segment have been classified as
discontinued operations to conform to the 1995 presentation. The results of
operations, net of applicable income taxes, were a net income of $8.0 million
and a net loss of $57.9 million in 1994 and 1993, respectively. 1994 included a
one-time tax benefit of $4.6 million related to the legal reorganization of the
Transportation Vehicles segment. 1993 included a $53.5 million charge to
operations resulting from the write-off of the remaining goodwill associated
with the Transportation Vehicles segment.
27
<PAGE>
OTHER MATTERS
ACCOUNTING CHANGES
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS No. 123,
"Accounting for Stock-Based Compensation," which become effective January 1,
1996. Adopting SFAS No. 121 will have no effect. As is permitted under SFAS No.
123, the Company has decided to continue accounting for employee stock
compensation under the APB 25 rules, but will disclose pro forma results using
the new standard's alternative accounting treatment.
On January 1, 1993, the Company adopted the provisions of Statements of
Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and No. 109 "Accounting for Income
Taxes." The adoption of SFAS No. 106 resulted in the recognition of a $32.1
million charge (net of tax) representing the cumulative effect of adopting the
standard. The adoption of SFAS No. 109 resulted in the recognition of a
cumulative effect adjustment of $1.8 million. The adoption of these standards
had no impact on cash flows.
NET DEFERRED TAX ASSET
The Company had a net deferred tax asset of approximately $42 million and $33
million at December 31, 1995 and 1994, respectively. In considering the
necessity of establishing a valuation allowance on deferred tax assets,
management considered: the levels of taxes paid in prior years that would be
available for carryback; its ability to offset reversing deferred tax assets
against reversing deferred tax liabilities; and, the Company's prospects for
future earnings. Accordingly, it is the opinion of management that it is more
likely than not that the gross deferred tax assets included in the consolidated
balance sheet at December 31, 1995 will be realized in their entirety.
Management evaluates the realizability of deferred tax assets on a quarterly
basis.
FOREIGN CURRENCY
As discussed in Note 11 of the notes to the consolidated financial statements,
the Company attempts to limit its foreign currency exposure (primarily against
German Deutsche Marks and Canadian Dollars) by entering into forward exchange
contracts.
ENVIRONMENTAL MATTERS
The Company's policy is to comply with all applicable environmental laws and
regulations and, the Company has a compliance program in place to monitor, and
report on, environmental issues. The Company has reached settlement agreements
with its former parent (Minstar, successor to AMF Incorporated) and the U.S.
Navy regarding groundwater remediation at the Company's manufacturing facility
in York, Pennsylvania and currently estimates that it will incur approximately
$5 million of net additional costs related to the remediation effort. The
Company has established reserves for this amount.
Recurring costs associated with managing hazardous substances and pollution in
ongoing operations are not material.
The Company regularly invests in equipment to support and improve its various
manufacturing processes. While the Company considers environmental matters in
capital expenditure decisions, and while some capital expenditures also act to
improve environmental compliance, only a small portion of the Company's annual
capital expenditures relate to equipment which has the sole purpose of meeting
environmental compliance obligations. During 1995, the Company spent
approximately $1 million on equipment used to limit hazardous
substances/pollutants and anticipates approximately the
28
<PAGE>
same level of spending in 1996. The Company does not expect that these
expenditures related to environmental matters will have a material effect on
future operating results or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
The Company recorded cash flows from operating activities of $169.1 million in
1995 compared to $83.0 million during 1994. Working capital items increased cash
by approximately $12.1 million in 1995 as compared to decreasing cash by
approximately $37 million in 1994. A 15.4% increase in accounts receivable in
1995 when compared to 1994, was primarily the result of accelerated
international shipments in the fourth quarter and the associated extended winter
terms on international receivables. Depreciation and amortization also increased
approximately $10 million from continued investment in the manufacturing
strategy.
Capital expenditures amounted to $113 million and $89 million during 1995 and
1994, respectively. The Company anticipates 1996 capital expenditures will
approximate $150-$175 million. The Company currently estimates it will have the
capacity to produce at least 115,000 units in 1996, 125,000-130,000 units in
1997 and 145,000-150,000 units in 1998. Although the Company does not know the
exact range of capital it will incur to implement the program, it estimates the
capital required in 1997 and 1998 will be in the range of $175-$225 million per
year. The Company anticipates it will have the ability to fund all capital
expenditures with internally generated funds and short-term financing.
The Company (excluding Eaglemark) currently has nominal levels of long-term debt
and has available lines of credit of approximately $46 million, of which
approximately $29 million remained available at year-end.
On November 14, 1995, the Company acquired substantially all of the common stock
and common stock equivalents of Eaglemark Financial Services, Inc. that it did
not already own. The purchase price was approximately $45 million, which was
paid from internally generated funds and short-term borrowings.
Eaglemark finances its business, without guarantees from the Parent Company
(Harley-Davidson, Inc.), through commercial paper, a revolving credit facility
and by securitizing its retail installment loans. Eaglemark issues short-term
commercial paper secured by wholesale finance receivables with maximum issuance
available of $155 million of which $132 million was outstanding at year-end.
Maturities of commercial paper issued range from 1 to 60 days. Eaglemark has in
place a $60 million revolving credit facility provided by a syndicate of banks
to fund primarily the United States and Canadian retail loan originations of
which $32.5 million was outstanding at December 31, 1995. Borrowings under the
facility are secured by and limited to a percentage of eligible receivables
ranging from 75% to 95% of the outstanding loan balances. The amount of net
eligible receivables at December 31, 1995 was approximately $80.5 million.
During 1995, Eaglemark securitized and sold $154 million of its retail
installment loans to investors with limited recourse, with servicing rights
being retained by Eaglemark. The Company expects the future growth of Eaglemark
will be financed from additional capital contributions from the Parent Company
and a continuation of its programs of commercial paper and securitizations.
The Company has continuing authorization from its Board of Directors to
repurchase up to 4 million shares of the Company's outstanding common stock.
During 1995, the Company repurchased 1,650,000 shares of its common stock with
cash on hand and short-term borrowings of $40 million.
The Company's Board of Directors declared quarterly cash dividends during 1995
and 1994 totaling $.18 and $.14 per share, respectively.
29
<PAGE>
Item 8. Consolidated financial statements and supplementary data
- ------- --------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, independent auditors 31
Report of Arthur Andersen LLP, independent public accountants 32
Consolidated statements of operations 33
Consolidated balance sheets 34
Consolidated statements of cash flows 35
Consolidated statements of shareholders' equity 36
Notes to consolidated financial statements 37
Supplementary data
Quarterly financial data (unaudited) 52
</TABLE>
30
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and
Shareholders
Harley-Davidson, Inc.
We have audited the accompanying consolidated balance sheets of Harley-Davidson,
Inc. as of December 31, 1995 and 1994, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1995. Our audits also included the financial
statement schedule listed in the index at item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the 1995 financial statements of
Eaglemark Financial Services, Inc. (Eagle), a majority-owned subsidiary
effective November 14, 1995, which statements reflect total assets of $227.3
million at December 31, 1995, and operating income of $3.6 million for the year
then ended. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to data included
for Eagle, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and, for 1995, the report of other auditors, provide
a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1995, the report of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Harley-Davidson, Inc.
at December 31, 1995 and 1994, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in notes 6 and 9 to the consolidated financial statements,
effective January 1, 1993, the Company changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
January 20, 1996
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Eaglemark Financial Services, Inc.:
We have audited the accompanying consolidated balance sheet of EAGLEMARK
FINANCIAL SERVICES, INC. (a Delaware corporation) and Subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of Eaglemark Financial Services, Inc. and Subsidiaries as
of December 31, 1993, were audited by other auditors whose report dated January
21, 1994, expresses an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eaglemark Financial
Services, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 19, 1996
32
<PAGE>
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Net sales $1,350,466 $1,158,887 $ 933,262
Cost of goods sold 939,067 800,548 641,248
---------- ---------- ---------
Gross profit 411,399 358,339 292,014
Operating income from financial services 3,620 - -
Selling, administrative and engineering (234,223) (204,777) (162,675)
---------- ---------- ---------
Income from operations 180,796 153,562 129,339
Interest income 1,446 2,363 1,393
Interest expense (1,350) (681) (399)
Other - net (4,903) 1,196 (3,249)
---------- ---------- ---------
Income from continuing operations before provision
for income taxes and accounting changes 175,989 156,440 127,084
Provision for income taxes 64,939 60,219 50,765
---------- ---------- ---------
Income from continuing operations before
accounting changes 111,050 96,221 76,319
Discontinued operations (Note 3):
Income (loss) from operations, net of applicable
income taxes 1,430 8,051 (57,904)
---------- ---------- ---------
Income before accounting changes 112,480 104,272 18,415
Cumulative effect of accounting changes:
Postretirement health care benefits, net of tax - - (32,096)
Income taxes - - 1,796
---------- ---------- ---------
Net income (loss) $ 112,480 $ 104,272 $ (11,885)
========== ========== =========
Earnings (loss) per common share:
Income from continuing operations before
accounting changes $ 1.48 $ 1.26 $ 1.00
Income (loss) from discontinued operations .02 .11 (.76)
---------- ---------- ---------
Income before accounting changes 1.50 1.37 .24
Accounting changes - - (.40)
---------- ---------- ---------
Net income (loss) $ 1.50 $ 1.37 $ (.16)
========== ========== =========
Cash dividends per common share $ .18 $ .14 $ .06
========== ========== =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
33
<PAGE>
HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,462 $ 57,884
Accounts receivable, net 134,210 116,261
Inventories 84,427 89,880
Deferred income taxes 19,805 14,347
Prepaid expenses 10,786 8,499
Net assets from discontinued operations 56,548 57,256
---------- --------
Total current assets 337,238 344,127
Finance receivables, net 213,444 -
Property, plant, and equipment, net 284,775 214,038
Deferred income taxes 22,415 19,054
Goodwill 43,256 -
Other assets 44,534 45,814
Net assets from discontinued operations 55,008 53,630
---------- --------
$1,000,670 $676,663
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 2,327 $ 1,086
Accounts payable 102,563 48,828
Accrued expenses and other 127,956 104,510
Current maturities of long-term debt 364 345
---------- --------
Total current liabilities 233,210 154,769
Finance debt 164,330 -
Long-term liabilities 44,991 28,379
Postretirement health care benefits 63,570 60,283
Commitments and contingencies (Note 7)
Shareholders' equity:
Series A Junior Participating preferred stock, none issued - -
Common stock, 77,356,688 and 77,156,252 shares issued
in 1995 and 1994, respectively 773 772
Additional paid-in capital 154,533 150,728
Retained earnings 381,897 283,010
Cumulative foreign currency translation adjustment 593 1,174
---------- --------
537,796 435,684
Less:
Treasury stock (2,472,304 and 836,328 shares in 1995
and 1994, respectively), at cost (41,903) (1,581)
Unearned compensation (1,324) (871)
---------- --------
Total shareholders' equity 494,569 433,232
---------- --------
$1,000,670 $676,663
========== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
34
<PAGE>
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 112,480 $104,272 $(11,885)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 42,329 32,863 27,459
Deferred income taxes (6,284) (4,689) (23,289)
Long-term employee benefits 4,201 11,993 57,386
Loss on disposal of long-term assets 1,413 611 570
Equity in net (income) loss of joint ventures 276 (56) 1,427
Net change in discontinued operations 2,525 (25,025) 52,574
Net changes in other current assets and current liabilities 12,132 (37,006) (7,996)
--------- -------- --------
Total adjustments 56,592 (21,309) 108,131
--------- -------- --------
Net cash provided by operating activities 169,072 82,963 96,246
Cash flows from investing activities:
Net capital expenditures (112,985) (88,666) (52,436)
Investment in joint ventures (44,113) - (10,350)
Finance receivables, net (17,922) - -
Net change in discontinued operations (8,449) (6,055) (3,134)
Other - net (1,547) (1,856) (1,116)
--------- -------- --------
Net cash used in investing activities (185,016) (96,577) (67,036)
Cash flows from financing activities:
Net increase (decrease) in notes payable 1,241 (2,510) 3,596
Net increase in Finance debt 33,267 - -
Payments on long-term debt (731) (1,227) (861)
Dividends paid (13,593) (10,672) (4,555)
Stock repurchases (39,972) - -
Issuance of stock under employee stock plans 2,716 12,202 5,542
Net change in discontinued operations 6,594 (434) 729
--------- -------- --------
Net cash provided by (used in) financing activities (10,478) (2,641) 4,451
--------- -------- --------
Net increase (decrease) in cash and cash equivalents (26,422) (16,255) 33,661
Cash and cash equivalents:
At beginning of year 57,884 74,139 40,478
--------- -------- --------
At end of year $ 31,462 $ 57,884 $ 74,139
========= ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
35
<PAGE>
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Cumulative
Common Stock foreign
------------------- Additional currency
Issued paid-in Retained translation Treasury Unearned
shares Balance capital earnings adjustment stock compensation
---------- ------- ----------- --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 38,452,490 $385 $131,053 $205,850 $ 757 $ (1,028) $(1,637)
Net loss - - - (11,885) - - -
Dividends - - - (4,555) - - -
Amortization of unearned compensation,
net of cancellations - - - - - (566) 1,001
Exercise of stock options - - 2,044 - - 11 -
Tax benefit of restricted shares and
stock options - - 4,053 - - - -
Foreign currency translation
adjustment - - - - (571) - -
---------- ---- -------- -------- ----- -------- ------
Balance December 31, 1993 38,452,490 385 137,150 189,410 186 (1,583) (636)
Two-for-one common stock split 38,452,490 385 (385) - - - -
Net income - - - 104,272 - - -
Dividends - - - (10,672) - - -
Restricted stock issuance - - 1,763 - - 2 (1,765)
Amortization of unearned compensation - - - - - - 1,530
Exercise of stock options 251,272 2 1,870 - - - -
Tax benefit of restricted shares and
stock options - - 10,330 - - - -
Foreign currency translation
adjustment - - - - 988 - -
---------- ---- -------- -------- ------ -------- ------
Balance December 31, 1994 77,156,252 772 150,728 283,010 1,174 (1,581) (871)
Net income - - - 112,480 - - -
Dividends - - - (13,593) - - -
Restricted stock issuance - - 740 - - 1 (741)
Stock repurchase - - - - - (39,972) -
Amortization of unearned compensation,
net of cancellations - - - - - (351) 288
Exercise of stock options 200,436 1 1,715 - - - -
Tax benefit of restricted shares and
stock options - - 1,350 - - - -
Foreign currency translation
adjustment - - - - (581) - -
---------- ---- -------- -------- ------ -------- -------
Balance December 31, 1995 77,356,688 $773 $154,533 $381,897 $ 593 $(41,903) $(1,324)
========== ==== ======== ======== ====== ======== =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
36
<PAGE>
HARLEY-DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 1995
1. Summary of significant accounting policies
------------------------------------------
Principles of consolidation and basis of presentation - The consolidated
financial statements include the accounts of Harley-Davidson, Inc. and all
of its wholly owned subsidiaries (the Company), including the accounts of
Harley-Davidson Motor Company (HDMC), Holiday Rambler LLC (Holiday Rambler)
and Eaglemark Financial Services, Inc. (Eagle). All significant intercompany
accounts and transactions are eliminated. As disclosed in Note 3, the
operations of Holiday Rambler are classified as discontinued operations. As
such, certain prior-year balances have been reclassified in order to conform
to current-year presentation.
The Company has an investment which is accounted for using the equity
method. Accordingly, the Company's share of the net earnings (losses) of
this entity is included in consolidated net income (loss).
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and cash equivalents - The Company considers all highly liquid
investments purchased with an original maturity of three months or less and
restricted cash balances held in connection with commercial paper programs
to be cash equivalents. At December 31, 1995, the Company had $1.1 million
in restricted cash balances. No similar balances existed at December 31,
1994.
Finance receivables income recognition - Interest income on finance
receivables is recorded as earned and is based on the average outstanding
daily balance for wholesale and retail receivables. Accrued interest is
classified with finance receivables. Certain loan origination costs are
deferred and amortized over the estimated life of the related receivable as
a reduction in financing revenue.
Finance receivables credit losses - The provision for credit losses on
finance receivables is charged to income in amounts sufficient to maintain
the allowance for uncollectible accounts at a level considered adequate to
cover the losses of principal and interest in the existing portfolio. The
Company's wholesale loan charge-off policy is based on a loan-by-loan
review. Retail revolving charge receivables are charged off at the earlier
of 180 days contractually past due or when otherwise deemed to be
uncollectible. Retail installment receivables are generally charged off upon
repossession and sale of the underlying collateral or at 120 days
contractually past due.
Retail installment loans sold with limited recourse; securitization and
servicing income - During 1995, Eagle securitized and sold $154 million of
its retail installment loans to investors with limited recourse, with
servicing rights being retained by Eagle. These transactions were treated as
sales. As such, the receivables are removed from the balance sheet upon sale
and a gain is recognized for the difference between the carrying value of
the receivables and the adjusted sales price. The adjusted sales price is
determined based on a present value estimate of future cash flows on each
loan pool sold.
Inventories - Inventories are valued at the lower of cost or market.
Inventories located in the United States are valued using the last-in,
first-out (LIFO) method. Other inventories, $16.9 million in 1995 and $19.4
million in 1994, are valued at the lower of cost or market using the first-
in, first-out (FIFO) method.
Depreciation - Depreciation of plant and equipment is determined on the
straight-line basis over the estimated useful lives of the assets.
Accelerated methods are used for income tax purposes.
37
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Product warranty - Product warranty costs are charged to operations based
upon the estimated warranty cost per unit sold.
Research and development expenses - Research and development expenses from
continuing operations were approximately $27.2 million, $22.1 million and
$19.2 million for 1995, 1994 and 1993, respectively.
Environmental - The Company accrues for environmental loss contingencies
when it is probable that a liability has been incurred and the amount can
be reasonably estimated. The Company does not use discounting in
determining its environmental liabilities. See Note 7.
Earnings (loss) per share - Earnings (loss) per common share assuming no
dilution is calculated by dividing elements of net income (loss) by the
weighted average number of common shares outstanding during the period. The
weighted average number of common shares outstanding during 1995, 1994 and
1993 were 75.1 million, 76.2 million, and 75.9 million, respectively. Stock
options were not materially dilutive during 1995, 1994 or 1993.
Stock compensation - The Company accounts for employee stock compensation
(e.g., restricted stock and stock options) in accordance with APB Opinion
No. 25 (APB 25), "Accounting for Stock Issued to Employees." Under APB 25,
the total compensation expense recognized is equal to the difference
between the award's exercise price and the underlying stock's market price
at the measurement date.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," is effective January 1, 1996. As is permitted
under SFAS No. 123, the Company has decided to continue accounting for
employee stock compensation under the APB 25 rules, but will disclose pro
forma results using the new standard's alternative accounting treatment,
which calculates the total compensation expense to be recognized as the
fair value of the award at the date of grant for effectively all awards.
Impairment - The Company is required to adopt SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," effective January 1, 1996. Adopting SFAS No. 121 will have
no effect.
2. Additional balance sheet and cash flows information
---------------------------------------------------
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31
------------------
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Motorcycles and Related Products segment:
Domestic $ 58,876 $ 58,107
Foreign 75,334 58,154
-------- --------
$134,210 $116,261
======== ========
</TABLE>
Domestic motorcycle sales are generally floor planned by the purchasing
dealers. Foreign motorcycle sales are sold on open account except for sales
to European distributors, which are typically backed by letters of credit.
The allowance for doubtful accounts deducted from accounts receivable was
$1.5 million and $1.8 million at December 31, 1995 and 1994, respectively.
38
<PAGE>
<TABLE>
<CAPTION>
2. Additional balance sheet and cash flows information (continued)
December 31
-------------------
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Inventories:
Components at the lower of FIFO cost or market:
Raw materials and work in process $ 32,284 $ 31,613
Finished goods 19,290 26,307
Parts and accessories 52,182 49,346
-------- --------
103,756 107,266
Excess of FIFO over LIFO inventories 19,329 17,386
-------- --------
$ 84,427 $ 89,880
======== ========
Property, plant and equipment, at cost:
Land and land improvements $ 2,139 $ 813
Buildings and improvements 84,150 59,773
Machinery and equipment 381,722 299,394
-------- --------
468,011 359,980
Less accumulated depreciation 183,236 145,942
-------- --------
$284,775 $214,038
======== ========
Accrued expenses and other:
Payroll, bonuses, and related expenses $ 47,001 $ 43,094
Warranty/recalls 12,058 12,396
Dealer incentive programs 16,153 12,892
Product liability 8,338 8,129
Income taxes payable 8,978 12,267
Eagle acquisition cost 9,400 -
Other 26,028 15,732
-------- --------
$127,956 $104,510
======== ========
Supplemental cash flow information is as follows:
1995 1994 1993
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Net changes in other current assets and current liabilities:
Accounts receivable $(38,428) $(41,721) $ 4,783
Inventories 5,453 (13,137) (22,356)
Prepaid expenses (2,287) 481 83
Accounts payable and accrued expenses 47,394 17,371 9,494
-------- -------- --------
$ 12,132 $(37,006) $ (7,996)
======== ======== ========
Cash paid during the period for interest and income taxes is as follows:
<S> <C> <C> <C>
Interest $ 1,143 $ 702 $ 469
======== ======== ========
Income taxes $ 60,444 $ 47,612 $ 53,277
======== ======== ========
</TABLE>
39
<PAGE>
3. Discontinued operations
-----------------------
On January 22, 1996, the Company announced its strategic decision to
discontinue the operations of the Transportation Vehicles segment in order
to concentrate its financial and human resources on its core motorcycle
business. The Transportation Vehicles segment is comprised of the
Recreational Vehicles division, the Commercial Vehicles division and B & B
Molders, a manufacturer of custom or standard tooling and injection molded
plastic pieces. The Company also announced on January 22, 1996, the
proposed sale of the manufacturing operations of the Recreational Vehicles
division as well as the sale of ten of the division's fourteen Holiday
World RV dealerships to Monaco Coach Corporation. The purchase price for
the division will be approximately $50 million, consisting of cash, a new
series of Monaco preferred stock and a note. Monaco will also assume
certain liabilities. The sale is subject to antitrust clearance and
Monaco's securing of financing. The transaction is expected to close by the
end of March, 1996. The sale of the remaining operations comprising the
Transportation Vehicles segment is expected to be completed by the end of
June, 1996. The Company does not anticipate a loss on the discontinuance of
the Transportation Vehicles segment. The results of the Transportation
Vehicles segment have been reported separately as discontinued operations.
Prior year consolidated financial statements have been restated to present
the Transportation Vehicles segment as a discontinued operation.
The components of net assets of discontinued operations included in the
balance sheets at December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current assets (mainly trade
receivables and inventory) $105,459 $118,765
Accounts payable, accrued
expenses and other (48,911) (61,509)
-------- --------
Net current assets $ 56,548 $ 57,256
======== ========
Property, plant and equipment, net $ 51,982 $ 48,749
Other non-current assets 3,026 5,924
Non-current liabilities - (1,043)
-------- --------
Net long-term assets $ 55,008 $ 53,630
======== ========
</TABLE>
The condensed statement of operations relating to the discontinued
operations for the years ended December 31, are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales $443,950 $382,805 $284,166
Costs and expenses 441,388 377,176 344,763
-------- -------- --------
Income (loss) before income taxes 2,562 5,629 (60,597)
Provision (benefit) for income
taxes 1,132 (2,422) (2,693)
-------- -------- --------
Net income (loss) $ 1,430 $ 8,051 $(57,904)
======== ======== ========
</TABLE>
In 1994, the Company's tax provision includes a one-time benefit of $4.6
million related to the legal reorganization of the Transportation Vehicles
segment. In 1993, the Company recorded a $53.5 million charge to operations
resulting from the write-off of the remaining goodwill associated with the
Transportation Vehicles segment.
It is the Company's policy to allocate interest on debt (to be assumed by
the buyer) to discontinued operations, which was approximately $2.5 million,
$1.6 million, and $1.3 million for 1995, 1994 and 1993, respectively.
40
<PAGE>
4. Eaglemark Financial Services, Inc.
----------------------------------
On January 5, 1993, the Company invested $10.0 million for a 49% interest in
Eaglemark Financial Services, Inc., formerly Eagle Credit Corporation, (Eagle).
Eagle was formed to provide wholesale and retail financing to the Company's
dealer networks and customers.
On November 14, 1995, the Company acquired substantially all of the common stock
and common stock equivalents of Eagle that it did not already own. The
transaction was accounted for as a step acquisition under the purchase method.
The purchase price for the shares and equivalents was approximately $45 million,
which was paid from internally generated funds and short-term borrowings. The
excess of the acquisition cost over the fair value of the net assets purchased
resulted in approximately $43 million of goodwill which is being amortized on a
straight-line basis over twenty years.
The Company has included the results of operations of Eagle in its statement of
operations for the year ended December 31, 1995 as though it had been acquired
at the beginning of the year and deducted the preacquisition earnings as part of
non-operating expense. Prior to 1995, the Company accounted for its investment
in Eagle using the equity method. The carrying value of its investment in Eagle
was approximately $9.5 million and is included in other assets at December 31,
1994. The results of operations for 1995 and 1994 on a pro forma basis, would
not have been materially different from the reported amounts for 1995 or 1994 if
the acquisition were assumed to have taken place at the beginning of 1994.
Finance receivables originated or purchased by Eagle were as follows at December
31, 1995 (in thousands):
<TABLE>
<S> <C>
Wholesale $119,817
Retail 84,574
Other 12,412
--------
216,803
Allowance for credit losses 3,359
--------
$213,444
========
</TABLE>
Eagle's finance receivables include wholesale loans to dealers for the purpose
of inventory financing and retail loans to consumers in the form of installment
sales contracts and revolving charge receivables. The Company holds titles to
vehicles financed, and certain revolving charge receivables are
cross-collateralized when the customer also has an installment contract. The
Company generates finance receivables in the United States and Canada and has a
geographically diversified loan portfolio.
Wholesale finance receivables are primarily motorcycles and related parts and
accessories which are contractually due within one year. Retail finance
receivables are primarily motorcycles and revolving credit card balances. On
December 31, 1995, contractual maturities of finance receivables were as follows
(in thousands):
<TABLE>
<S> <C>
1996 $142,689
1997 16,225
1998 14,590
1999 14,562
2000 15,119
Thereafter 13,618
--------
Total $216,803
========
</TABLE>
41
<PAGE>
4. Eaglemark Financial Services, Inc. (continued)
----------------------------------------------
The allowance for credit losses is comprised of individual components relating
to wholesale and retail finance receivables. Changes in the allowance for
credit losses for the year ended December 31, 1995, is as follows (in
thousands):
<TABLE>
<CAPTION>
1995
------
Wholesale Retail Total
--------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year $882 $1,756 $2,638
Provision 97 1,178 1,275
Charge-offs (4) (550) (554)
---- ------ ------
Balance at end of year $975 $2,384 $3,359
==== ====== ======
</TABLE>
Eagle serviced with limited recourse $160.2 million of retail installment loans
as of December 31, 1995.
Eagle's debt as of December 31, consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Commercial paper $131,830
Revolving credit facility 32,500
--------
Total finance debt $164,330
========
</TABLE>
As of December 31, 1995, Eagle has in place a $60 million revolving credit
facility provided by a syndicate of banks to fund primarily the United States
and Canadian retail loan originations. This facility expires on October 31,
1996. Borrowings under the facility are secured by and limited to a percentage
of eligible receivables ranging from 75% to 95% of the outstanding loan
balances. The amount of net eligible receivables at December 31, 1995 was
approximately $80.5 million.
Eagle also issues short-term commercial paper secured by wholesale finance
receivables with maximum issuance available of $155 million. Maturities of
commercial paper issued range from 1 to 60 days, and the current commercial
paper program expires in December, 1996. The weighted average interest rate on
outstanding commercial paper balances was 5.81% at December 31, 1995.
5. Notes payable
-------------
As of December 31, 1995, the Company had unsecured lines of credit totaling
approximately $49.9 million, of which approximately $26.9 million remained
available after consideration of borrowings and outstanding letters of
credit.
42
<PAGE>
6. Income taxes
------------
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". The
Company adopted this standard on a prospective basis effective January 1, 1993.
The adoption resulted in additional income of $1.8 million.
Details of income from continuing operations before provision for income taxes
and accounting changes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Income from continuing operations before
taxes and accounting changes:
Domestic $159,046 $142,009 $116,278
Foreign 16,943 14,431 10,806
Accounting changes - - (52,661)
-------- -------- --------
$175,989 $156,440 $ 74,423
======== ======== ========
</TABLE>
Provision for income taxes consists of the following:
<TABLE>
<S> <C> <C> <C>
Income tax (benefit) applicable to:
Income from continuing operations before
taxes and accounting changes $64,939 $60,219 $ 50,765
Accounting changes - - (22,361)
------- ------- --------
$64,939 $60,219 $ 28,404
======= ======= ========
Provision for income taxes:
Current:
Federal $56,384 $46,442 $ 38,916
State 7,308 10,682 8,516
Foreign 8,279 7,124 4,262
------- ------- --------
71,971 64,248 51,694
Deferred:
Federal (5,895) (3,275) (2,080)
State (780) (440) (280)
Foreign (357) (314) 1,431
------- ------- --------
(7,032) (4,029) (929)
------- ------- --------
Total $64,939 $60,219 $ 50,765
======= ======= ========
</TABLE>
The provision for income taxes differs from the amount which would be provided
by applying the statutory U.S. corporate income tax rate due to the following
items:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Provision at statutory rate 35.0% 35.0% 35.0%
Foreign income taxes 1.2 1.0 1.2
Foreign tax credits (1.2) (1.0) (.9)
State taxes, net of federal benefit 2.6 4.0 4.0
Foreign sales corporation (.8) (1.0) (1.1)
Other .2 .5 1.3
---- ---- ----
Provision for income taxes 37.0% 38.5% 39.5%
==== ==== ====
</TABLE>
43
<PAGE>
6. Income taxes (continued)
------------------------
Deferred income taxes result from temporary differences between the recognition
of revenues and expenses for financial statements and income tax returns. The
principal components of the Company's deferred tax assets and liabilities as of
December 31 include the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Accruals not yet tax deductible $ 25,409 $ 21,066
Postretirement health care benefit obligation 25,935 23,932
Other, net 6,116 1,508
-------- --------
57,460 46,506
Deferred tax liabilities:
Depreciation, tax in excess of book (10,665) (8,784)
Inventory adjustments (2,808) (3,292)
Pension obligation (1,767) (1,029)
-------- --------
(15,240) (13,105)
-------- --------
Net deferred tax asset $ 42,220 $ 33,401
======== ========
</TABLE>
7. Commitments and contingencies
-----------------------------
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at its
York, Pennsylvania facility (the Facility). The Facility was formerly used by
the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company
purchased the Facility from AMF in 1981. Although the Company is not certain as
to the extent of the environmental contamination at the Facility, it is working
with the Pennsylvania Department of Environmental Resources in undertaking
certain investigation and remediation activities. In March 1995, the Company
entered into a settlement agreement (the Agreement) with the Navy. The
Agreement calls for the Navy and the Company to contribute amounts into a trust
equal to 53% and 47%, respectively, of future costs associated with
investigation and remediation activities at the Facility (response costs). The
trust will administer the payment of the future response costs at the Facility
as covered by the Agreement. In addition, in March 1991 the Company entered
into a settlement agreement with Minstar related to certain indemnification
obligations assumed by Minstar in connection with the Company's purchase of the
Facility. Pursuant to this settlement, Minstar is obligated to reimburse the
Company for a portion of its response costs at the Facility. Although
substantial uncertainty exists concerning the nature and scope of the
environmental remediation that will ultimately be required at the Facility,
based on preliminary information currently available to the Company and taking
into account the Company's settlement agreement with the Navy and the settlement
agreement with Minstar, the Company estimates that it will incur approximately
$5 million of net additional response costs at the Facility. The Company has
established reserves for this amount. The Company has also put certain of its
insurance carriers on notice that it intends to make claims relating to the
environmental contamination at the Facility. However, the Company is currently
unable to determine the probable amount of recovery available, if any, under
insurance policies.
The Company self-insures its product liability losses in the United States up to
$3 million (catastrophic coverage is maintained for individual claims in excess
of $3 million up to $25 million). Outside the United States, the Company is
insured for product liability up to $25 million per individual claim and in the
aggregate. The Company accrues for claim exposures which are probable of
occurrence and can be reasonably estimated.
44
<PAGE>
7. Commitments and contingencies (continued)
-----------------------------------------
At December 31, 1995, the Company was contingently liable for $23.0 million
related to letters of credit. The letters of credit typically act as a
guarantee of payment to certain third parties in accordance with specified
terms and conditions.
8. Employee benefit plans
----------------------
The Company has several noncontributory defined benefit pension plans
covering substantially all employees of the Motorcycles segment. Benefits
are based primarily on years of service and, for certain plans, levels of
compensation. The Company's policy with respect to the pension plans is to
fund pension benefits to the extent contributions are deductible for tax
purposes.
The following data is provided for the pension plans for the years
indicated (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Components of net periodic pension cost:
Service cost - benefits earned during the year $ 5,184 $ 5,324 $ 3,384
Interest cost on projected benefit obligations 11,237 10,284 8,188
Actual return on plan assets (16,547) (2,028) (7,327)
Net amortization and deferral 7,523 (5,208) (606)
-------- -------- --------
Net periodic pension cost $ 7,397 $ 8,372 $ 3,639
======== ======== ========
</TABLE>
Reconciliation of funded status:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------------- -------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 38,648 $ 69,003 $ 34,790 $ 59,562
Nonvested benefit obligation 5,706 7,071 4,622 6,050
-------- -------- -------- --------
Accumulated benefit obligation $ 44,354 $ 76,074 $ 39,412 $ 65,612
======== ======== ======== ========
Projected benefit obligations for service rendered to date $ 63,611 $ 90,010 $ 56,214 $ 81,271
Plan assets at fair value, consisting primarily of debt
securities, bank common trust funds, common stock,
and an immediate participation guarantee contract 46,899 68,012 40,427 52,825
-------- -------- -------- --------
Projected benefit obligation in excess of plan assets 16,712 21,998 15,787 28,446
Unrecognized net loss from past experience different
from that assumed and changes in assumptions (13,033) (13,711) (14,062) (16,724)
Unrecognized prior service cost (5,327) (6,999) (5,783) (7,675)
Unrecognized transition asset 619 894 743 1,119
Additional minimum liability - 5,880 - 7,620
-------- -------- -------- --------
Accrued (prepaid) pension cost, September 30 (1,029) 8,062 (3,315) 12,786
Fourth quarter contribution - (510) (482) (222)
-------- -------- -------- --------
Accrued (prepaid) pension cost, December 31 $ (1,029) $ 7,552 $ (3,797) $ 12,564
======== ======== ======== ========
</TABLE>
In 1993, the Company elected to change the measurement date for pension
plan assets and liabilities from December 31 to September 30. The change in
measurement date had no effect on 1993, or prior years', pension expense.
45
<PAGE>
8. Employee benefit plans (continued)
----------------------------------
The provisions of Financial Accounting Standards Board Statement No. 87,
"Employers' Accounting for Pensions," require the recognition of an
additional minimum liability and related intangible asset to the extent
that accumulated benefits exceed plan assets. At December 31, 1995, the
adjustment required to reflect the Company's minimum pension liability was
$5.9 million. The Company has recorded an intangible asset in the same
amount.
The assumptions used in determining pension expense (for the following
year) and funded status information shown above were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Discount rate 8.3% 8.3% 7.8%
Rate of increase in future compensation levels 5.0% 5.0% 5.0%
Assumed long-term rate of return on plan assets 10.3% 10.3% 10.3%
</TABLE>
Certain of the Company's plans relating to hourly employees have been
amended to increase the scheduled benefits. The Company's plan relating to
salaried employees was also amended to increase the scheduled benefits.
The Company has various defined contribution benefit plans which in total
cover substantially all full-time employees. Employees can make voluntary
contributions in accordance with the provisions of their respective plan,
which includes a 401(k) tax deferral option. The Company accrued $1.5, $1.4
and $1.2 million for matching contributions during 1995, 1994 and 1993,
respectively.
9. Postretirement health care benefits
-----------------------------------
The Company has several postretirement health care benefit plans covering
substantially all employees of the Motorcycles segment. Employees are
eligible to receive benefits upon attaining age 55 after rendering at least
10 years of service to the Company.
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires companies to accrue the cost
of postretirement benefits during the employees' active service period. The
Company elected to immediately recognize the accumulated postretirement
benefit obligation upon adoption of SFAS 106. The Company recorded a
cumulative effect adjustment of $32.1 million, net of tax, related to the
transition obligation. In prior years, the Company accounted for
postretirement benefits on a cash basis.
The Company uses September 30 as the measurement date for valuing its
postretirement health care obligation.
46
<PAGE>
9. Postretirement health care benefits (continued)
-----------------------------------------------
The Company's postretirement health care plans are currently funded as
claims are submitted ($1.8 million in 1995 and $1.6 million in 1994). Some
of the plans require employee contributions to offset benefit costs. The
status of the plans was as follows:
<TABLE>
<CAPTION>
September 30
----------------------
1995 1994
------- -------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $15,317 $16,759
Fully eligible active plan participants 7,501 8,501
Other active plan participants 21,746 22,580
------- -------
44,564 47,840
Unrecognized net gain 16,843 10,033
Unrecognized prior service cost 2,621 2,860
Fourth quarter contribution (458) (450)
------- -------
Accrued postretirement benefit liability, December 31 $63,570 $60,283
======= =======
</TABLE>
The net periodic postretirement benefit cost includes the following:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1995 1994
------ ------
(In thousands)
<S> <C> <C>
Service cost - benefits earned during the year $1,751 $2,384
Interest cost on projected benefit obligation 3,290 4,504
------ ------
Net periodic postretirement benefit cost $5,041 $6,888
====== ======
</TABLE>
The weighted average health care cost trend rate used in determining the
accumulated postretirement benefit obligation of the health care plans was
10% in 1995. The per capita health care cost trend rate is assumed to
decrease gradually to 6% for 1999 and remain at that level thereafter. This
assumption can have a significant effect on the amounts reported. If the
weighted average health care cost trend rate were to increase by 1%, the
accumulated postretirement benefit obligation as of September 30, 1995 and
the aggregate of service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1996 would
increase by $3.7 million and $.5 million, respectively. The weighted
average discount rate used to determine the accumulated postretirement
benefit obligation of the health care plans as of September 30, 1995 and
1994 was 8.25%. The Company used a weighted average discount rate of 8.5%
in establishing the transition obligation at January 1, 1993.
10. Capital stock
-------------
The Company has 200 million authorized shares of $.01 par value common
stock.
The Company has continuing authorization from its Board of Directors to
repurchase up to 4 million shares of the Company's outstanding common
stock. During 1995, the Company repurchased 1,650,000 shares of its common
stock with cash on hand and short-term borrowings.
The Company has designated .5 million of the authorized shares of preferred
stock as Series A Junior Participating preferred stock (Preferred Stock).
The Preferred Stock has a par value of $1 per share. Each share of
Preferred Stock, none of which is outstanding, is entitled to 400 votes per
share (subject to adjustment) and other rights such that the value of a one
one-hundredth interest in a share of Preferred Stock should approximate the
value of four shares of common stock.
47
<PAGE>
10. Capital stock (continued)
-------------------------
The Preferred Stock is reserved for issuance in connection with the
Company's outstanding Preferred Stock purchase rights (Rights). Each
outstanding share of common stock entitles its holder to one-quarter Right.
Under certain conditions, each Right entitles the holder to purchase one
one-hundredth of a share of Preferred Stock at an exercise price of $300,
subject to adjustment. The Rights are only exercisable if a person or group
has acquired 15% or more of the outstanding common stock or has announced
an intention to acquire 25% or more of the outstanding common stock. If
there is a 15% acquiring party, each holder of a Right, other than the
acquiring party, will be entitled to purchase, at the exercise price,
common stock having a market value of two times the exercise price.
The Company has a restricted stock plan in which plan participants are
entitled to cash dividends and voting rights on their respective shares.
Restrictions generally limit the sale or transfer of shares during a
restricted period, not exceeding ten years. Participants may vest in
certain amounts of the restricted stock upon death, disability or
retirement as described in the plan.
Unearned compensation was charged for the market value of the restricted
shares on the date of grant and is being amortized over the restricted
period. The unamortized unearned compensation value is shown as a reduction
of shareholders' equity in the accompanying consolidated balance sheets.
Information with respect to restricted stock outstanding is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year at
$4.46 to $5.05 per share 34,200 966,074 1,424,568
Restricted shares granted at
$23.0625 to $26.94 67,500 - -
Restricted shares vested at
$4.46 to $5.05 per share - (931,874) (341,822)
Restricted shares cancelled at
$4.65 to $5.03 per share - - (116,672)
------- -------- ---------
Total shares outstanding at end of year at
$4.73 to $26.94 per share 101,700 34,200 966,074
======= ======== =========
</TABLE>
Expense in 1995, 1994 and 1993 associated with this restricted stock plan
was $.3 million, $.7 million and $.4 million, respectively.
The Company has Stock Option Plans under which the Board of Directors may
grant to employees nonqualified stock options with or without appreciation
rights. The options may be exercised one year after the date of grant, not
to exceed 25 percent of the shares in the first year with an additional 25
percent to be exercisable in each of the three following years. The options
expire ten years from the date of grant. The maximum number of shares of
common stock available for grants under such plans were 9.3 million and 6.0
million at December 31, 1995 and 1994, respectively, of which 3.8 million
and 1.2 million shares remained available for future grants at those dates,
respectively. The exercise price of outstanding options at December 31,
1995 ranged from $1.48 to $26.94. A summary of option activity is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning of year 3,018,058 2,583,482 3,021,780
Options granted 805,360 728,410 16,000
Options exercised or cancelled (273,335) (293,834) (454,298)
--------- --------- ---------
Options outstanding at end of year 3,550,083 3,018,058 2,583,482
========= ========= =========
Number of options exercisable at end of year 2,104,240 1,806,038 1,468,712
========= ========= =========
</TABLE>
48
<PAGE>
11. Fair value of financial instruments
-----------------------------------
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, finance receivables, receivables from
retail installment loan sales, debt and foreign currency exchange
contracts. The book values of cash and cash equivalents, trade receivables
and finance receivables are considered to approximate their respective fair
values.
The book value of receivables from retail installment loan sales is $12.4
million and is included with finance receivables on the balance sheet. The
fair value of these receivables is estimated to be $13.5 million based on
discounting future excess cash flows associated with these transactions.
None of the Company's debt instruments have readily ascertainable market
values; however, the carrying values are considered to approximate their
respective fair values. See Note 4, for the terms and carrying values of
the Company's various debt instruments.
The Company enters into forward exchange contracts to hedge against sales
transactions denominated principally in European currencies. The purpose of
the Company's foreign currency hedging activities is to protect the Company
from the risk that the eventual dollar cash flows resulting from the sale
of products to foreign subsidiaries will be adversely affected by changes
in exchange rates. At December 31, 1995, the Company had forward exchange
contracts that required it to convert these foreign currencies, at a
variety of rates, into U.S. Dollars or German Deutsche Marks. These
contracts represent a combined U.S. dollar equivalent commitment of
approximately $29.4 million and $59.2 million at December 31, 1995 and
1994, respectively. Eagle has also entered into Canadian forward contracts
to hedge the Canadian dollar in connection with their wholesale finance
program. At December 31, 1995, Eagle had $17.4 million of Canadian forward
contracts outstanding. The current contracts mature at various dates
through May, 1996. Unrealized gains and losses on these forward exchange
contracts, which were not material at December 31, 1995 or 1994, are
deferred and recognized at the time the hedged transaction is settled. The
fair value of these contracts at December 31, 1995 and 1994 is not
significant, and is estimated as the net unrealized gain or loss.
Eagle has interest rate cap agreements to reduce the impact of fluctuations
in interest rates on its floating rate debt. At December 31, 1995, Eagle
had approximately $20 million in interest rate caps outstanding. At
December 31, 1995, the amount Eagle would receive to terminate the interest
rate cap agreements is approximately $.2 million.
12. Business segments and foreign operations
----------------------------------------
(a) BUSINESS SEGMENTS
The Company operates in two business segments (excluding discontinued
operations): Motorcycles and Related Products and Financial Services.
The Motorcycles and Related Products ("Motorcycles") segment consists
primarily of the Company's wholly-owned subsidiary H-D Michigan, Inc. and
its wholly owned subsidiary Harley-Davidson Motor Company. The Motorcycles
segment designs, manufactures and sells primarily heavyweight (engine
displacement of 751cc or above) touring and custom motorcycles and a broad
range of related products which include motorcycle parts and accessories
and riding apparel. The Company, which is the only major American
motorcycle manufacturer, has held the largest share of the United States
heavyweight motorcycle market since 1986. The Company holds a smaller
market share in the European market, which is a larger market than the
United States.
49
<PAGE>
12. Business segments and foreign operations (continued)
----------------------------------------------------
The Financial Services ("Eagle") segment consists of the Company's
majority-owned subsidiary, Eaglemark Financial Services, Inc. Eagle
provides motorcycle floor planning and parts and accessories financing
arrangements to the Company's U.S. Dealers. Eagle also offers retail
financing opportunities to the Company's domestic motorcycle customers. In
addition, Eagle has established a proprietary credit card for use in the
Company's independent dealerships. Eagle also provides property and
casualty insurance for motorcycles as well as extended warranty contracts.
A smaller portion of their customers are in other leisure products
businesses. Prior to 1995, Eagle carried on business only in the United
States. In 1995, Eagle expanded its operations to include Canada.
Information by industry segment is set forth below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales:
Motorcycles and Related Products $1,350,466 $1,158,887 $933,262
Financial Services (1) n/a n/a n/a
---------- ---------- --------
$1,350,466 $1,158,887 $933,262
========== ========== ========
Income (loss) from operations:
Motorcycles and Related Products $ 184,475 $ 163,510 $136,217
Financial Services 3,620 - -
General corporate expenses (7,299) (9,948) (6,878)
---------- ---------- --------
$ 180,796 $ 153,562 $129,339
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Motorcycles
and Related Transportation Financial
Products Vehicles (2) Services(1) Corporate Consolidated
----------- -------------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Identifiable assets $595,118 $111,556 $269,461 $24,535 $1,000,670
Depreciation and amortization 41,754 n/a 320 255 42,329
Net capital expenditures 112,579 n/a 221 185 112,985
1994
- ----
Identifiable assets $494,362 $110,886 n/a $71,415 $ 676,663
Depreciation and amortization 32,617 n/a n/a 246 32,863
Net capital expenditures 88,542 n/a n/a 124 88,666
1993
- ----
Identifiable assets $367,794 $ 79,372 n/a $80,792 $ 527,958
Depreciation and amortization 27,225 n/a n/a 234 27,459
Net capital expenditures 52,324 n/a n/a 112 52,436
</TABLE>
(1) During 1995, the results of operations for the majority-owned financial
services subsidiary are included in Income from operations in the
statements of operations. During 1994 and 1993, the equity in earnings
of the financial services subsidiary was included in other income. See
Note 4.
(2) The results of operations for the Transportation Vehicles segment are
classified as discontinued operations in the statements of operations.
Prior year results have been reclassified in order to conform to current
year presentation. See Note 3.
There were no sales between business segments for the years ended December 31,
1995, 1994 or 1993.
50
<PAGE>
12. Business segments and foreign operations (continued)
----------------------------------------------------
(b) FOREIGN OPERATIONS
Included in the consolidated financial statements are the following amounts
relating to foreign affiliates:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Assets $ 66,658 $ 57,626 $ 49,109
Net sales 221,193 176,521 144,639
Net income 9,021 7,621 5,113
</TABLE>
Export sales of domestic subsidiaries to nonaffiliated customers were
$172.9 million, $155.2 million and $117.6 million in 1995, 1994 and 1993,
respectively.
51
<PAGE>
SUPPLEMENTARY DATA
- ------------------
Quarterly financial data (unaudited)
- ------------------------------------
(In millions, except per share data)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
--------------- -------------- -------------- --------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $294.9 $258.6 $355.6 $296.9 $327.1 $291.9 $372.9 $311.5
Gross profit 90.4 76.8 109.7 93.6 96.8 90.3 114.5 97.6
Income from continuing operations 23.8 21.0 33.2 27.5 23.5 22.5 30.6 25.3
Income (loss) from discontinued
operations, net of tax (a) (.2) - .2 7.1 .2 1.1 1.2 (.2)
Net income 23.6 21.0 33.4 34.6 23.7 23.6 31.8 25.1
Earnings per common share:
Income from continuing operations .31 .27 .45 .36 .32 .30 .40 .33
Income from discontinued
operations, net of tax (a) - - - .10 - .01 .02 -
Net income .31 .27 .45 .46 .32 .31 .42 .33
</TABLE>
Note: Amounts previously reported have been restated to reflect the
Transportation Vehicles segment as discontinued operations.
(a) 1994 second quarter results include a one-time benefit of $4.6 million
related to the legal reorganization of the Transportation Vehicles segment.
52
<PAGE>
Item 9. Changes in and disagreements with accountants on accounting and
- ------- ---------------------------------------------------------------
financial disclosure
--------------------
None.
53
<PAGE>
PART III
--------
Item 10. Directors and executive officers of the registrant
- ------- --------------------------------------------------
Information with respect to the Directors of the registrant will be included in
the Company's definitive proxy statement for the 1996 annual meeting of
shareholders (the "Proxy Statement"), which will be filed within 120 days after
the close of the Company's fiscal year ended December 31, 1995, and is hereby
incorporated by reference to such Proxy Statement.
Item 11. Executive compensation
- ------- ----------------------
The information required by this section will be included in the Proxy
Statement, which will be filed within 120 days after the close of the Company's
fiscal year ended December 31, 1995, and is hereby incorporated by reference to
such Proxy Statement.
Item 12. Security ownership of certain beneficial owners and management
- ------- --------------------------------------------------------------
The information required by this section will be included in the Proxy
Statement, which will be filed within 120 days after the close of the Company's
fiscal year ended December 31, 1995, and is hereby incorporated by reference to
such Proxy Statement.
Item 13. Certain relationships and related transactions
- ------- ----------------------------------------------
The information required by this section will be included in the Proxy
Statement, which will be filed within 120 days after the close of the Company's
fiscal year ended December 31, 1995, and is hereby incorporated by reference to
such Proxy Statement.
Item 14. Exhibits, financial statement schedules, and reports on Form 8-K
- ------- ----------------------------------------------------------------
(A) 1. Financial statements - The financial statements listed in the
accompanying Index to Consolidated Financial Statements and
Financial Statement Schedules are filed as part of this annual
report and such Index to Consolidated Financial Statements and
Financial Statement Schedules is incorporated herein by reference.
2. Financial statement schedules - The financial statement schedule
listed in the accompanying Index to Consolidated Financial
Statements and Financial Statement Schedules is filed as part of
this annual report and such Index to Consolidated Financial
Statements and Financial Statement Schedules is incorporated
herein by reference.
3. Exhibits - The exhibits listed on the accompanying List of
Exhibits are filed as part of this annual report and such List of
Exhibits is incorporated herein by reference.
54
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND FINANCIAL STATEMENT SCHEDULES
---------------------------------
[Item 14(a) 1 and 2]
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated statements of operations for each of the three years in the period ended
December 31, 1995 33
Consolidated balance sheets at December 31, 1995 and 1994 34
Consolidated statements of cash flows for each of the three years in the period ended
December 31, 1995 35
Consolidated statements of shareholders' equity for each of the three years
in the period ended December 31, 1995 36
Notes to consolidated financial statements 37
Consolidated financial statement schedules for each of the three years in the period
ended December 31, 1995
II - Valuation and qualifying accounts 58
</TABLE>
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules.
55
<PAGE>
LIST OF EXHIBITS
----------------
[Items 14(a)(3) and 14(c)]
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated as of March 4, 1996, among
Harley-Davidson, Inc., Holiday Holding Corp., Holiday World, Inc.
(California), Holiday World, Inc. (Texas), Holiday World, Inc.
(Florida), Holiday World, Inc. (Oregon), Holiday World, Inc.
(Indiana), Holiday World, Inc. (Washington), Holiday World, Inc.
(New Mexico), Monaco Coach Corporation, and MCC Acquisition
Corporation.
2.2 Asset Purchase Agreement, dated as of January 21, 1996, among
Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties
L.P., and Monaco Coach Corporation.
2.3 Amendment No. 1 dated as of March 4, 1996 to Asset Purchase
Agreement, dated as of January 21, 1996 among Harley-Davidson,
Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco
Coach Corporation.
2.4 Subordinated Promissory Note, dated March 4, 1996 between MCC
Acquisition Corporation and Holiday Holding Corp.
3.1 Restated Articles of Incorporation
3.2 By-Laws
4.1 Form of Rights Agreement between the Registrant and Firstar Trust
Company
4.2 Amendment to Rights Agreement dated as of June 21,1991
4.3 Amendment to Rights Agreement dated as of August 23, 1995
10.1* Form of Employment Agreement between the Registrant and each of
Messrs. Bleustein, Gelb, Hoelter and Teerlink
10.2* 1986 Stock Option Plan
10.3* 1988 Stock Option Plan
10.4* 1990 Stock Option Plan
10.5* 1995 Stock Option Plan
10.6* Consulting Agreement between the Registrant and Mr. Beals
56
<PAGE>
LIST OF EXHIBITS
----------------
[Items 14(a)(3)and 14(c)]
Exhibit No. Description
- ----------- -----------
10.7* Restated Long-Term Incentive Plan II, as amended
10.8* Form of Growth Unit Cancellation Agreement between the Registrant
and Mr. Brostowitz
10.9* Form of Transition Agreement between the Registrant and each of
Messrs. Bleustein, Gelb, Hoelter, Snoey and Ziemer
10.10* Transition Agreement between the Registrant and Mr. Teerlink
10.11* Deferred Compensation Plan
10.12* Description of supplemental executive retirement benefits
10.13* Form of Life Insurance Agreement between the Registrant and each
of Messrs. Bleustein, Brostowitz, Gelb, Gray, Hoelter, Teerlink
and Ziemer
10.14* Form of Restricted Stock Agreement between the Registrant and
each of Messrs. Bleustein, Gelb and Gray
10.15* Form of Severance Benefits Agreement between the Registrant and
each of Messrs. Bleustein, Brostowitz, Gelb, Gray, Hoelter,
Snoey, Teerlink and Ziemer
10.16* Harley-Davidson, Inc. Corporate Short Term Incentive Plan
11 Computation of Primary and Fully Diluted Earnings Per Share
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Independent Accountants
27 Financial Data Schedule for 1995
27 Restated Financial Data Schedule for 1994
* Represents a management contract or compensatory plan, contract or arrangement
in which a director or named executive officer of the Company participated.
57
<PAGE>
Schedule II
-----------
HARLEY-DAVIDSON, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
beginning charged to at end
Classification of year expense Deductions/(1)/ of year
- -------------- ---------- ---------- --------------- -------
<S> <C> <C> <C> <C>
Accounts receivable -
Allowance for doubtful accounts:
1995 $1,750 $ (123) $ (86) $1,541
====== ====== ======= ======
1994 $1,532 $ 253 $ (35) $1,750
====== ====== ======= ======
1993 $1,234 $ 291 $ 7 $1,532
====== ====== ======= ======
Finance receivables -
Allowance for doubtful accounts:
1995 $2,638 $1,275 $ (554) $3,359
====== ====== ======= ======
Inventories -
Allowance for obsolescence
and loss (2):
1995 $1,961 $1,857 $(1,586) $2,232
====== ====== ======= ======
1994 $2,783 $ 830 $(1,652) $1,961
====== ====== ======= ======
1993 $2,736 $2,095 $(2,048) $2,783
====== ====== ======= ======
</TABLE>
(1) Represents amounts written off to the reserve, net of recoveries.
(2) Stated in last-in, first-out (LIFO) cost.
58
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13, or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 28, 1996.
HARLEY-DAVIDSON, INC.
By: /S/ Richard F. Teerlink
------------------------------
Richard F. Teerlink
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 28, 1996.
Name Title
---- -----
/S/ Richard F. Teerlink President, Chief Executive Officer
--------------------------------
Richard F. Teerlink (Principal executive officer) and Director
/S/ James L. Ziemer Vice-President and Chief Financial Officer
--------------------------------
James L. Ziemer (Principal financial officer)
/S/ James M. Brostowitz Vice-President/Controller (Principal
--------------------------------
James M. Brostowitz accounting officer) and Treasurer
/S/ Vaughn L. Beals Chairman and Director
--------------------------------
Vaughn L. Beals, Jr.
/S/ Barry K. Allen Director
--------------------------------
Barry K. Allen
/S/ William F. Andrews Director
--------------------------------
William F. Andrews
/S/ Richard J. Hermon-Taylor Director
--------------------------------
Richard J. Hermon-Taylor
/S/ Donald A. James Director
--------------------------------
Donald A. James
/S/ Richard G. LeFauve Director
--------------------------------
Richard G. LeFauve
/S/ Sara L. Levinson Director
--------------------------------
Sara L. Levinson
/S/ James A. Norling Director
--------------------------------
James A. Norling
59
<PAGE>
INDEX TO EXHIBITS
-----------------
[Items 14(a)(3) and 14(c)]
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated as of March 4, 1996, among
Harley-Davidson, Inc., Holiday Holding Corp., Holiday World, Inc.
(California), Holiday World, Inc. (Texas), Holiday World, Inc.
(Florida), Holiday World, Inc. (Oregon), Holiday World, Inc.
(Indiana), Holiday World, Inc. (Washington), Holiday World, Inc.
(New Mexico), Monaco Coach Corporation, and MCC Acquisition
Corporation (incorporated herein by reference to Exhibit 2.1 to
the Registrants's Current Report on Form 8-K dated March 6, 1996
(File No. 1-9183)).
2.2 Asset Purchase Agreement, dated as of January 21, 1996, among
Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties
L.P., and Monaco Coach Corporation (incorporated herein by
reference to Exhibit 2.2 to the Registrants's Current Report on
Form 8-K dated March 6, 1996 (File No. 1-9183)).
2.3 Amendment No. 1 dated as of March 4, 1996 to Asset Purchase
Agreement, dated as of January 21, 1996 among Harley-Davidson,
Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco
Coach Corporation (incorporated herein by reference to Exhibit
2.3 to the Registrants's Current Report on Form 8-K dated March
6, 1996 (File No. 1-9183)).
2.4 Subordinated Promissory Note, dated March 4, 1996 between MCC
Acquisition Corporation and Holiday Holding Corp. (incorporated
herein by reference to Exhibit 2.4 to the Registrants's Current
Report on Form 8-K dated March 6, 1996 (File No. 1-9183)).
3.1 Restated Articles of Incorporation (incorporated herein by
reference to Exhibit 3.1 to the Registrants' Annual Report on
Form 10-K for the year ended December 31, 1994 (File No.
1-9183)).
3.2 By-Laws (incorporated herein by reference to Exhibit 3.2 to the
Registrants' Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-9183)).
4.1 Form of Rights Agreement between the Registrant and Firstar Trust
Company (incorporated herein by reference to Exhibit 4.6 to the
Registrants' Quarterly Report on Form 10-Q for the period ended
September 30, 1990 (File No. 1-9183)).
4.2 Amendment to Rights Agreement dated as of June 21,
1991(incorporated herein by reference to Exhibit 4.8 to the
Registrants's Registration Statement on Form 8-B dated June 24,
1991 (File No. 1-9183 (the "Form 8-B")).
* Represents a management contract or compensatory plan, contract or
arrangement in which a director or named executive officer of the Company
participated.
60
<PAGE>
INDEX TO EXHIBITS
-----------------
[Items 14(a)(3) and 14(c)]
Exhibit No. Description
- ----------- -----------
4.3 Amendment to Rights Agreement dated as of August 23, 1995
(incorporated herein by reference to Exhibit 4 to the
Registrants' Quarterly Report on Form 10-Q for the period ended
September 24, 1995 (File No. 1-9183)).
10.1* Form of Employment Agreement between the Registrant and each of
Messrs. Bleustein, Gelb, Hoelter and Teerlink (incorporated by
reference from Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 (File No. 33-5871)).
10.2* Harley-Davidson, Inc. 1986 Stock Option Plan (incorporated herein
by reference to Exhibit 10.2 to the Registrants' Annual Report on
Form 10-K for the year ended December 31, 1994 (File No.
1-9183)).
10.3* Harley-Davidson, Inc. 1988 Stock Option Plan (incorporated herein
by reference to Exhibit 10.3 to the Registrants' Annual Report on
Form 10-K for the year ended December 31, 1994 (File No.
1-9183)).
10.4* Harley-Davidson, Inc. 1990 Stock Option Plan (incorporated herein
by reference to Exhibit 10.4 to the Registrants' Annual Report on
Form 10-K for the year ended December 31, 1994 (File No.
1-9183)).
10.5* Harley-Davidson, Inc. 1995 Stock Option Plan (incorporated herein
by reference to Exhibit A of the Company's Proxy Statement dated
March 31, 1995 (File No. 1-9183))
10.6* Consulting Agreement between the Registrant and Mr. Beals
(incorporated herein by reference from Exhibit 10.2 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989 (File No. 1-9183)).
10.7* Restated Long-Term Incentive Plan II, as amended (incorporated
herein by reference from Exhibit 10.2 to the Registrants' Annual
Report on Form 10-K for the year ended December 31, 1989 (File
No. 1-9183)).
10.8* Growth Unit Cancellation Agreement between the Registrant and Mr.
Brostowitz (incorporated herein by reference from Exhibit 10.2 to
the Registrants' Annual Report on Form 10-K for the year ended
December 31, 1989 (File No. 1-9183)).
10.9* Form of Transition Agreement between the Registrant and each of
Messrs. Bleustein, Gelb, Hoelter, Snoey and Ziemer (incorporated
herein by reference from Exhibit 10.2 to the Registrants' Annual
Report on Form 10-K for the year ended December 31, 1989 (File
No. 1-9183)).
* Represents a management contract or compensatory plan, contract or
arrangement in which a director or named executive officer of the Company
participated.
61
<PAGE>
INDEX TO EXHIBITS
-----------------
[Items 14(a)(3) and 14(c)]
Exhibit No. Description
- ----------- -----------
10.10* Transition Agreement between the Registrant and Mr. Teerlink
(incorporated herein by reference from Exhibit 10.2 to the
Registrants' Annual Report on Form 10-K for the year ended
December 31, 1989 (File No. 1-9183)).
10.11* Deferred Compensation Plan (incorporated herein by reference from
Exhibit 10.8 to the Registrants' Annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 1-9183)).
10.12* Description of supplemental executive retirement benefits
(incorporated herein by reference from Exhibit 10.9 to the
Registrants' Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-9183)).
10.13* Form of Life Insurance Agreement between the Registrant and each
of Messrs. Bleustein, Brostowitz, Gelb, Gray, Hoelter, Teerlink
and Ziemer (incorporated herein by reference from Exhibit 10.10
to the Registrants' Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-9183)).
10.14* Form of Restricted Stock Agreement between the Registrant and
each of Messrs. Bleustein, Gelb and Gray.
10.15* Form of Severance Benefits Agreement between the Registrant
and each of Messrs. Bleustein, Brostowitz, Gelb, Gray, Hoelter,
Snoey, Teerlink and Ziemer.
10.16* Harley-Davidson, Inc. Corporate Short Term Incentive Plan
(incorporated herein by reference from Exhibit A to the
Registrants' 1993 Proxy Statement for the May 14, 1994 Annual
Meeting of Shareholders)
11 Computation of Primary and Fully Diluted Earnings Per Share.
21 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Independent Public Accountants.
27 Financial Data Schedule for 1995.
27 Restated Financial Data Schedule for 1994.
* Represents a management contract or compensatory plan, contract or
arrangement in which a director or named executive officer of the Company
participated.
62
<PAGE>
Exhibit 11
HARLEY-DAVIDSON, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
ASSUMING NO DILUTION
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------- -------- --------
Computation of net income (loss)
- --------------------------------
<S> <C> <C> <C>
Income from continuing operations before accounting changes $111,050 $ 96,221 $ 76,319
Income (loss) from discontinued operations 1,430 8,051 (57,904)
Accounting changes, net of tax -- -- (30,300)
-------- -------- --------
Net income (loss) used in computing earnings per common
share assuming no dilution $112,480 $104,272 $(11,885)
======== ======== ========
Weighted average common shares outstanding and shares used in
computing earnings (loss) per common share assuming no dilution 75,085 76,198 75,900
======== ======== ========
Earnings (loss) per common share assuming no dilution:
Income from continuing operations before accounting changes $ 1.48 $ 1.26 $ 1.00
Income (loss) from discontinued operations .02 .11 (.76)
Accounting changes, net of tax -- -- (.40)
-------- -------- --------
Net income (loss) $ 1.50 $ 1.37 $ (.16)
======== ======== ========
</TABLE>
<PAGE>
HARLEY-DAVIDSON, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Computation of net income (loss)
- --------------------------------
Income from continuing operations before accounting changes $111,050 $ 96,221 $ 76,319
Income (loss) from discontinued operations 1,430 8,051 (57,904)
Accounting changes, net of tax -- -- (30,300)
-------- -------- --------
Net income (loss) used in computing earnings per common
share assuming full dilution $112,480 $104,272 $(11,885)
======== ======== ========
Computation of shares
- ---------------------
Weighted average common shares outstanding 75,085 76,198 75,900
Incremental shares created assuming exercise at the beginning of
the period of stock options outstanding at the end of the
period using period-end market price when higher than average 1,017 1,025 --*
-------- -------- --------
Shares used in computing earnings (loss) per common share
assuming full dilution 76,102 77,223 75,900
======== ======== ========
Earnings (loss) per common share assuming full dilution:
Income from continuing operations before accounting changes $ 1.46 $ 1.25 $ 1.00
Income (loss) from discontinued operations .02 .10 (.76)
Accounting changes, net of tax -- -- (.40)
-------- -------- --------
Net income (loss) $ 1.48 $ 1.35 $ (.16)
======== ======== ========
</TABLE>
* Earnings (loss) per common share assuming full dilution generally
includes the dilutive effect of outstanding stock options. During 1993,
the effect of stock options had an antidilutive effect and, accordingly,
was excluded from the calculations.
<PAGE>
Exhibit 21
----------
HARLEY-DAVIDSON, INC.
SUBSIDIARIES
State/Country
of
Name Incorporation
---- -------------
H-D Michigan, Inc. Michigan
Harley-Davidson Motor Company Wisconsin
Harley-Davidson Transportation Co., Inc. Delaware
Harley-Davidson Foreign Sales Corporation Barbados
Cycom Business Systems, Inc. Ohio
Harley-Davidson Holding Co., Inc. Delaware
Harley-Davidson GmbH Germany
Harley-Davidson Japan, KK Japan
Harley-Davidson Europe Limited England
Buell Distribution Corporation Wisconsin
Renovation Realty Investment Services, Inc. Wisconsin
Trihawk, Inc. Wisconsin
Highland Insurance Service, Inc. Wisconsin
Holiday Rambler LLC Indiana
HR Holding Corporation Wisconsin
HR Leasing Corporation Wisconsin
State Road Properties L.P. Delaware
Holiday Holding Corporation Texas
Holiday World, Inc. Indiana
Holiday World, Inc. Washington
Holiday World, Inc. Texas
Holiday World, Inc. Florida
Holiday World, Inc. New Mexico
Holiday World, Inc. Oregon
Holiday World, Inc. California
RV Holiday World, Inc. Massachusetts
Eaglemark Financial Services, Inc. Nevada
Eaglemark Insurance Services, Inc. Nevada
Harley-Davidson Dealer Funding Corporation-I Nevada
Eagle Customer Funding Corporation-I Nevada
Eagle Motorcycle Guaranty Corporation Nevada
Eaglemark Customer Funding Corporation-II Nevada
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-33449, No. 33-35311, and No. 33-48581) pertaining to (a) the
Harley-Davidson, Inc. 1986 Stock Option Plan and the Harley-Davidson, Inc. 1988
Stock Option Plan; (b) the Harley-Davidson Retirement Savings Plan for Salaried
Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and
Tomahawk Hourly Bargaining Unit Employees, and the Holiday Rambler LLC Employees
Retirement Plan; and (c) the Harley-Davidson, Inc. 1990 Stock Option Plan of our
report dated January 20, 1996, with respect to the consolidated financial
statements and schedules of Harley-Davidson, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 28, 1996
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 19, 1996 on the consolidated financial
statements of Eaglemark Financial Services, Inc. in this Form 10-K, into the
Company's previously filed Registration Statements No. 33-33449, No. 33-35311
and No. 33-48581.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 28, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARLEY-DAVIDSON, INC. AS OF AND
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 31,462
<SECURITIES> 0
<RECEIVABLES> 132,751
<ALLOWANCES> 1,541
<INVENTORY> 84,427
<CURRENT-ASSETS> 337,238
<PP&E> 468,011
<DEPRECIATION> 183,236
<TOTAL-ASSETS> 1,000,670
<CURRENT-LIABILITIES> 233,210
<BONDS> 0
<COMMON> 773
0
0
<OTHER-SE> 493,796
<TOTAL-LIABILITY-AND-EQUITY> 1,000,670
<SALES> 1,350,466
<TOTAL-REVENUES> 1,350,466
<CGS> 939,067
<TOTAL-COSTS> 939,067
<OTHER-EXPENSES> 235,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (96)
<INCOME-PRETAX> 175,989
<INCOME-TAX> 64,939
<INCOME-CONTINUING> 111,050
<DISCONTINUED> 1,430
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,480
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.48
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARLEY-DAVIDSON, INC. AS
OF AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 57,884
<SECURITIES> 0
<RECEIVABLES> 118,011
<ALLOWANCES> 1,750
<INVENTORY> 89,880
<CURRENT-ASSETS> 344,127
<PP&E> 359,980
<DEPRECIATION> 145,942
<TOTAL-ASSETS> 676,663
<CURRENT-LIABILITIES> 154,769
<BONDS> 0
<COMMON> 772
0
0
<OTHER-SE> 432,460
<TOTAL-LIABILITY-AND-EQUITY> 676,663
<SALES> 1,158,887
<TOTAL-REVENUES> 1,158,887
<CGS> 800,548
<TOTAL-COSTS> 800,548
<OTHER-EXPENSES> 203,581
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,682)
<INCOME-PRETAX> 156,440
<INCOME-TAX> 60,219
<INCOME-CONTINUING> 96,221
<DISCONTINUED> 8,051
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,272
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.35
</TABLE>
