HARLEY-DAVIDSON COMPANY

Harley-Davidson Company

Harley- Davidson Company

Introduction

Harley-Davidson is the parent company for Harley-Davidson Motor Co. (HDMC), Buell Motorcycle Co. (Buell) and Harley-Davidson Financial Services (HDFS).

The Motorcycles & Related Products (Motorcycles) segment includes the group of companies doing business as Harley-Davidson Motor Company (Motor Company) and the group of companies doing business as Buell Motorcycle Company (BMC). The Motorcycles segment designs, manufactures and sells at wholesale primarily heavyweight (engine displacement of 651+cc) touring, custom and performance motorcycles as well as a complete line of motorcycle parts, accessories, clothing and collectibles.

The Motor Company's Harley-Davidson branded motorcycle products emphasize traditional styling, design simplicity, durability and quality. The Motor Company manufactures five families of motorcycles: Sportster®, Dyna™, Softail®, Touring and VRSC™. The first four of these motorcycle families are powered by an air-cooled, twin-cylinder engine with a 45-degree “V” configuration. The VRSC family is powered by a liquid-cooled, twin-cylinder engine with a 60-degree “V” configuration. The Motor Company's Harley-Davidson engines range in size from 883cc's to 1690cc's.

Through HDMC, Co. produces heavyweight motorcycles that comprise five families of motorcycles: Touring, Dyna· Softail, Sportster and VRSC· Through Buell, Co. produces sport motorcycles, including eight twin-cylinder XB models, a liquid-cooled engine motorcycle and the single-cylinder Buell? Blast. HDFS provides wholesale and retail financing and insurance programs mainly to Harley-Davidson/Buell dealers and customers.

Co. also provides a line of related motorcycle parts, accessories, apparel and general merchandise within HDMC and Buell.Harley-Davidson operates in two business segments: Motorcycles and Related Products and Financial Services.

The Financial Services (Financial Services) segment includes the group of companies doing business as Harley-Davidson Financial Services (HDFS). HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson and Buell dealers and their retail customers. HDFS conducts business in the United States, Canada and Europe. Wholesale financial services include floorplan and open account financing of motorcycles and motorcycle parts and accessories, real estate loans, computer loans and showroom remodeling loans. HDFS offers wholesale financial services to Harley-Davidson dealers.

Financial Highlights (In USD as of 12/31/2007)

Total Revenue

6,143,044,000

EBITDA

1,629,733,000

Operating Income

1,425,561,000

Net Income

933,843,000

Total Assets

5,656,606,000

Current Assets

3,467,314,000

Total Liabilities

3,281,115,000

Current Liabilities

1,905,079,000

Long Term Debt

980,000,000

Stockholders' Equity

2,375,491,000

Ratio analysis

Company's Working Capital Management

Investing activities utilized around $67.0 million and net cash provided by financing activities amount to $4.5 million. The Motorcycles and Related Products segment was responsible for virtually all of the change in consolidated revenue as the result of increases in both motorcycle unit shipments and Parts and Accessories sales. Year end data indicate that the domestic motorcycle market continued to grow throughout 2007 and demand for the company's motorcycles continues to exceed supply. Basically, it is an enhancement of the Motorcycle division's ability to increase capacity, adjust to changes in the marketplace and improve quality while reducing costs. The company anticipates funding all capital expenditures with internally generated funds.

Harley-Davidson values inventories at the lower of cost or market. Motorcycles and new transportation vehicle inventories located in the United States are valued using the LIFO method.

The company accounts for its investment in Eagle using the equity method. Upon completion of its capitalization, Eagle purchased all of Holiday ...