Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the
Harley-Davidson® motorcycle business from AMF Incorporated in a management buyout.
In 1986, Harley-Davidson, Inc. became publicly held. The Company operates in two
segments: the Motorcycles & Related Products segment and the Financial Services
segment. The Company’s reportable segments are strategic business units that offer
different products and services. They are managed separately based on the fundamental
differences in their operations.
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),
all of which are subsidiaries of H-D Michigan, Inc. and the Company. The Motorcycles
segment designs, manufactures and sells 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 Company,
which is the only major American motorcycle manufacturer, has held the largest
share of the United States heavyweight (651+cc) motorcycle market since 1986
and ended 2003 with a domestic market share of 49.5% (Harley-Davidson models
only) (Data provided by the Motorcycle Industry Council).
The Financial Services (Financial Services) segment consists of the Company’s
subsidiary, Harley-Davidson Financial Services, Inc. and its subsidiaries (HDFS).
HDFS is engaged in the business of financing and servicing wholesale inventory
receivables and retail loans, primarily for the purchase of motorcycles. Additionally,
HDFS is an agency for certain unaffiliated insurance carriers providing property/casualty
insurance and extended service contracts to motorcycle owners. Prior to the
sale of the Harley-Davidson Chrome Visa ® Card business in March 2000, HDFS
was engaged in the business of financing and servicing revolving charge receivables.
HDFS conducts business in the United States, Canada and Europe.
The Company’s basic channel of distribution in the United States for its motorcycles
and related products consists of approximately 648 independently-owned full-service
Harley-Davidson dealerships to whom the Company sells directly. This includes
439 combined Harley-Davidson® and Buell® dealerships. There are no Buell-only
dealerships. With respect to sales of new motorcycles, approximately 81% of
the U.S. dealerships sell the Company’s motorcycles exclusively.
All dealerships stock and sell the Company’s genuine replacement parts, accessories,
and MotorClothes™ apparel and collectibles, and perform service for the Company’s
motorcycles. The Company also sells a smaller portion of its parts and accessories
and general merchandise through “non-traditional” retail outlets. The “non-traditional”
outlets, which are extensions of the main dealership, consist of Secondary Retail
Locations (SRLs), Alternate Retail Outlets (AROs), and Seasonal Retail Outlets
(SROs). SRLs, also known as Harley Shops, are satellites of the main dealership
and are developed to meet the service needs of the Company’s riding customers.
Harley Shops also provide replacement parts and accessories and MotorClothes
apparel and collectibles and are authorized to sell new motorcycles. AROs are
located primarily in high traffic areas such as malls, airports or popular vacation
destinations and focus on selling the Company’s MotorClothes apparel and collectibles
and licensed products. SROs are located in similar high traffic areas, but operate
on a seasonal basis out of temporary locations such as vendor kiosks. AROs and
SROs are not authorized to sell new motorcycles. There are approximately 85
SRLs, 55 AROs, and 10 SROs located in the United States.
The Company’s European management team is based out of a subsidiary located
in the United Kingdom and is responsible for all sales, marketing and distribution
activities in the European region (Europe/Middle East/Africa). The United Kingdom
operation is further supported by six subsidiaries in France, Germany, Italy,
the Netherlands, Spain, Switzerland and eight independent distributors throughout
the region. In the European region, there are approximately 383 independent
Harley-Davidson dealerships serving 32 country markets. This includes 247 combined
Harley-Davidson and Buell dealerships. Buell is further represented by 10 dealerships
that do not sell Harley-Davidson motorcycles.
The heavyweight (651+cc) motorcycle market is highly competitive. The Company’s
major competitors are based outside the U.S. and generally have financial and
marketing resources that are substantially greater than those of the Company.
They also have larger worldwide revenue and are more diversified than the Company.
In addition to these larger, established competitors, the Company has competitors
headquartered in the U.S. The U.S. competitors generally offer heavyweight motorcycles
with traditional styling that compete directly with many of the Company’s products.
These competitors currently have production and sales volumes that are lower
than the Company’s and do not hold a significant market share.