Cost of Capital Calculation

Levered Unlevered
Long-term government bond yield 3.81% 3.81%
Market equity premium 3.50% 3.50%
Beta coefficient 2.3000
HD cost of equity 11.86% #NAME?
Cost of debt 0.00%
Effective Tax Rate 35.80%
Debt ratio 35.00%
WACC 7.71%
HD- Income Statement

(In thousands, except per share amounts)

2007 2008 2009
Revenue:
Motorcycles and related products 5,726,848.0 5,578,414.0 4,287,130.0
Financial services 416,196.0 376,970.0 494,779.0

Total revenue 6,143,044.0 5,955,384.0 4,781,909.0

Costs and expenses:

Motorcycles and related products COGS 3,612,748.0 3,647,270.0 2,900,934.0
Financial services interest expense 81,475.0 136,763.0 283,634.0
Financial services provision for credit losses 11,252.0 39,555.0 169,206.0
Selling, administrative and engineering
expense 1,012,008.0 1,060,154.0 979,384.0
Restructuring expense and asset impairment - 12,475.0 224,278.0
Goodwill impairment - - 28,387.0

Total costs and expenses 4,717,483.0 4,896,217.0 4,585,823.0

Operating income 1,425,561.0 1,059,167.0 196,086.0

Investment income 22,258.0 11,296.0 4,254.0
Interest expense - 4,542.0 21,680.0

Income before provision for income taxes 1,447,819.0 1,065,921.0 178,660.0

Provision for income taxes 513,976.0 381,686.0 108,019.0
Income from continuing operations 933,843.0 684,235.0 70,641.0
Loss from discontinued operations, net of tax - (29,517.0) (125,757.0)

Net (loss) income 933,843.0 654,718.0 (55,116.0)

Earnings per common share from continuing operations:

Basic 3.75 2.92 0.30

Diluted 3.74 2.92 0.30

Loss per common share from discontinued operations:

Basic - 0.13 0.54

Diluted - 0.13 0.54
(Loss) earnings per common share:
Basic 3.75 2.80 0.24
Diluted 3.74 2.79 0.24

Cash dividends per common share 1.06 1.29 0.40

Tax rate 35.50% 35.80% 60.50%

Income Taxes
Provision for income taxes for the years ended December 31 consists of the following (in thousands):
2007 2008 2009
Current:
Federal $ 510,299 $ 376,796 $ 94,984
State 27,076 21,174 5201
Foreign 35,229 29,044 1395
572,604 427,014 101,580
Deferred:
Federal -51,903 -36,368 -10,665
State -5,089 -2,225 22,690
Foreign -1,636 -6,735 -5,586
-58,628 -45,328 6439
Total $ 513,976 $ 381,686 $ 108,019
The components of income before income taxes for the years ended December 31 were as follows (in thousands):
2007 2008 2009
Domestic $1,340,617 $992,796 $ 185,435
Foreign 107202 73125 -6,775
$1,447,819 $1,065,921 $ 178,660
The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate
due to the following items for the years ended December 31:
2007 2008 2009
Provision at statutory rate 35.% 35.% 35.%
State taxes, net of federal benefit 1.5 1.5 2.7
Domestic manufacturing deduction -1.3 -1 —
Research and development credit -0.4 -0.5 -1.7
Unrecognized tax benefits including interest and penalties 0.6 1.1 2.3
Valuation allowance adjustments — — 12.4
Goodwill impairment — — 5.6
Other 0.1 -0.3 4.2
Provision for income taxes 35.5% 35.8% 60.5%
08,019

85,435

78,660
U.S. corporate income tax rate
HARLEY-DAVIDSON, INC.
Comparative Consolidated Balance sheets

ASSETS 2007 2008

Current assets:
Cash and cash equivalents 402,854 568,894
Marketable securities 2,475 -
Accounts receivable, net 181,217 265,319
Finance receivables, net (1986-2003) - -
Finance receivables held for sale (2004-2008) 781,280 2,443,965
Finance receivables held for investment, net (2004-2009) 1,575,283 1,378,461
Inventories 349,697 379,141
Deferred income taxes 103,278 123,327
Prepaid expenses 71,230 128,730
Net assets from discontinued op's - 238,715
Total current assets 3,467,314 5,526,552

Finance receivables, net 845,044 817,102

Property, plant and equipment, net 1,060,590 1,056,928
Deferred income taxes (54,376 ) (288,240 )
Goodwill 61,401 60,131
Other assets (incl. Prepaid pension costs) 167,881 79,672
Net assets from discontinued op's

5,656,606 7,828,625

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable - -
Accounts payable 300,188 303,277
Accrued & other liabilities 484,936 503,466
Liabilities of discontinued operations - 77,941
Short-term debt - 1,738,649
Current portion of long-term debt 1,119,955 -
Total current liabilities 1,905,079 2,623,333

Long-term debt 980,000 2,176,238

Pension liability (51,551 ) (484,003 )
Post-retirement healthcare liability 192,531 274,408
Other long-term liabilities 151,954 155,040

Shareholders' equity:
Common stock 3,352 3,357
Additional paid in capital 812,224 846,796
Retained earnings 6,117,567 6,458,778
 Accumulated other comprehensive income/(loss) 137,258 522,526
Treasury stock 4,420,394 4,670,802
Unearned compensation
Total shareholders' equity 2,375,491 2,115,603

Total liabilities and shareholders' equity 5,656,606 7,828,625

2 Additional Balance Sheet and Cash Flow Information

Balance Sheet Information:

Inventories, net (in thousands):
2008
Components at the lower of FIFO cost or market
Raw materials and work in process 140,854
Motorcycle finished goods ( 175,438 )
Parts and accessories and general merchandise ( 102,983 )
Inventory at lower of FIFO cost or market ( 419,275 )
Excess of FIFO over LIFO cost 40,134
379,141
Inventory obsolescence reserves deducted from FIFO cost were $34.7 million and $24.1 million as of December 31, 2009 and 2008,
respectively.
Property, plant and equipment, at cost (in thousands):

2008
Land and related improvements 59,603
Buildings and related improvements 469,580
Machinery and equipment 2,277,593
Construction in progress 131,257
2,938,033
Less: accumulated depreciation 1,881,105
1,056,928
Accrued liabilities (in thousands):
2008
Payroll, performance incentives and related expenses 158,128
Restructuring reserves 2,149
Warranty and recalls 64,543
Sales incentive programs 84,683
Income taxes 10,770
Fair value of derivative financial instruments 23,503
Other 159,690
503,466
 Components of accumulated other comprehensive loss, net of tax (in thousands):
2008
Cumulative foreign currency translation adjustment ($ 15,171 )
Unrealized loss on investment in retained securitization interest 2,671
Unrealized net loss on derivative financial instruments 7,701
Unrecognized pension and postretirement benefit plan liabilities 527,325
522,526

Comparative data
ASSETS 2009 2008 2007 2005
Current assets:
Cash and cash equivalents
$1,630,433 $568,894 $402,854 $140,975
Marketable securities 39685 2475 905197
Accounts receivable, net
269371 265319 181217 122087
Finance receivables, net (1986-2003)
Finance receivables held for sale (2004-2008)
2443965 781280 299373
Finance receivables held
1436114
for investment,1378461
net (2004-2009) 1575283 1342393
Inventories 323029 379141 349697 221418
Deferred income taxes179685 123327 103278 61285
Prepaid expenses 282421 128730 71230 52509
181,211
Net assets from discontinued op's 238715 - - ----------
Total current assets 4341949 5526552 3467314 3145237
Finance receivables, net
3621048 817102 845044 600831
Property, plant and equipment,
906906 net 1056928 1060590 1011612
Deferred income taxes177,504 288,240 54,376
Goodwill 31400 60131 61401 56563
Other assets (incl. Prepaid
76711pension costs)
79672 167881 440966

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable
Accounts payable 162515 303277 300188 270614
Accrued & other liabilities
514084 503466 484936 397525
Liabilities of discontinued
69535
operations 77941 - - --------------------
Short-term debt 189,999 1738649 - - --------------------
Current portion of long-term
1332091debt 1119955 204973
Total current liabilities
2268224 2623333 1905079 873112
Long-term debt 4114039 2176238 980000 1000000
Pension liability 245,332 484,003 51,551 28678
Post-retirement healthcare
264472
liability 274408 192531 60975
Other long-term liabilities
155333 155040 151954 208839
Shareholders' equity:
Common stock 3368 3357 3352 3310
Additional paid in capital
871100 846796 812224 596239
Retained earnings 6324268 6458778 6117567 4630390
Accumulated other comprehensive
-417898 income/(loss)
-522526 -137258 58653
Treasury stock (4,672,720) (4,670,802) (4,420,394) (3,266,955) (2,204,987) (1,150,372)
Unearned compensation
Total shareholders' equity
2108118 2115603 2375491 3083605
Total liabilities and shareholders'
$9,155,518equity
$7,828,625 $5,656,606 $5,532,150 $5,255,209

Debt with a contractual term greater than one year is generally classified as long-term debt and consisted of the following as of
December 31 (in thousands):
2008
Unsecured commercial paper $177,800
Bank borrowings
Credit facilities 390932
Secured debt
On-balance sheet securitization debt —
Unsecured notes
5.00% Medium-term notes due in 2010 ($200.0 million par value) 209684
5.25% Medium-term notes due in 2012 ($400.0 million par value) 399643
5.75% Medium-term notes due in 2014 ($500.0 million par value) —
6.80% Medium-term notes due in 2018 ($1,000.0 million par value) 998179
15.00% senior unsecured notes due in 2014 ($600.0 million par value) —
Gross long-term debt 2176238
Less: current portion of long-term debt —
Long-term debt $2,176,238
2009 Delta 08-07Delta 09-08

1,630,433
39,685
269,371 (84,102) (4,052)
- - -
- (1,662,685) 2,443,965
1,436,114 196,822 (57,653)
323,029 (29,444) 56,112
179,685 (20,049) (56,358)
282,421 (57,500) (153,691)
(181,211 ) (238,715) 57,504
4,341,949

3,621,048
906,906
(177,504 )
31,400
76,711

9,155,518

- - -
162,515 (3,089) 140,762
514,084 (18,530) (10,618)
69,535 (77,941) 8,406
189,999 (1,738,649) 1,548,650
1,332,091 1,119,955 (1,332,091)
2,268,224

4,114,039
(245,332 )
264,472
155,333

3,368
871,100
6,324,268
 417,898
4,672,720

2,108,118

9,155,518

2009

104,641
( 168,002 )
( 84,823 )
( 357,466 )
34,437
323,029
ber 31, 2009 and 2008,

2009
59,922
474,891
2,311,779
112,498
2,959,090
2,052,184
906,906

2009
137,523
67,711
68,044
62,206
16,038
16,293
146,269
514,084
 2009
($ 46,103 )
3,484
8,940
451,577
417,898

2003 2006 2004 2000

$329,329 $238,397 $275,159 $419,736

993331 658133 1336909
112406 143049 121333 98311
1001990 530859
547106 456516
1554260 1167522
207726 287798 226893 191931
51156 73389 60517 28280
33189 48501 38337 28147

2729127 3550633 3683186 1297264

735859 725957 488262 234091
1046310 1024469 1024665 754115
42986 --------
53678 58800 59456 54331
358114 129305 227724 96603

223902 283477 244202 169844

407566 479709 433053 238390

324305 832491 495441 89509

955773 1595677 1172696 497743
670000 870000 800000 355000
------------------- 47916
127444 201126 149848 80666
212179 60694 142278 97340

3266 3343 3300

419455 766382 533068 285390
3074037 5460629 3844571 1431017
 47174 -206662 -12096
-586240 -313994

2957692 2756737 3218471 1405655

$4,923,088 $5,483,293

he following as of
PAR (in M$)int rate
2009
$ 135,100

448049

2,159,585

206065 200 5.0% 0%

399734 400 5.3% 1%
499222 500 5.8% 1%
998375 1000 6.8% 3%
600000 600 15.0% 3%
5,446,130 2700 8.06%
(1,332,091 )
$ 4,114,039
 FORECA

($000) Historical
2009 2010
Sales 4287130 4106642
Cost of Sales 2900934 2683718
Gross Profit 1386196 1422923
Sales, General & Administrative Expenses 979384 814766
EBITDA 406812 608157
Depreciation 246344 212111
EBIT 160468 396046
Interest Expense 21680 343122
Interest Income 43043
Pretax Income 95967
Current Income Tax 59,953,653,749
Net Income -59953557783

($000) Historical
2009 2010
Assets
Current:
Cash and Marketable Securities 1670118 -59953647248
Accounts Receivable 1705485 1993313
Inventories 323029 279768
Other Current Assets 2079431 2210933
Total Current Assets 5778063 4456159

Property, Plant & Equipment 906906 779073

Less: Depreciation 246344 212111
Net Property, Plant & Equipment 660562 566962

Other Noncurrent Assets: 3621048 3621048

Total Assets 10059673 8644169

Liabilities
Current:
Short-term Debt & Current Portion of LTD 1522090 1575127
Accounts Payable 162,515 140674
Accrued Expenses & Other Liabilities 514084 403606
Total Current Liabilities 2198689 2119407
Long-term Debt 4114039 2681973
Total Liabilities 6312728 4801380
Common Stock and Retained Earnings 3746945 -59949810838
Total Liabilities and Net Worth 10059673 -59945009458

59953653626

($000) Historical
2009 2010
Funds from Operating Activities
Net Income #NAME? -59953557783
Depreciation 246344 212111
Decrease (Increase) in Current Assets -376069
Increase (Decrease) in Current Liabilities except debt -132319
Decrease (Increase) in Net Working Capital -508388
Funds From Operations -59953854060

Funds for Investment

Capital Expenditures 84278

Funds to (from) Financing

Decrease (Increase) in Debt 1379029
Dividends
Total Funds to (from) Financing 1379029
Increase (Decrease) in Cash -59955317366
End-of-Year Cash & Marketable Securities 1670118 -59953647248

Actual
Required cash balance ………………...…… 1670118 687816
Excess cash ………………………………….. -59954335064
Increase in Net Debt 59953938337
Net debt 3040713
528571 3569284

Debt ratio 1.5

Enterprise Value

($000)
Year-end 2009 2010

Net Income -59953557783

Net Interest after Tax -187470016825
NOPLAT -247423574608
Depreciation 212111
Change in Net Working Capital -508388
Capital Expenditures 84278
Free cash flow -211999

Valuation
WACC 7.71%
PV{FCF} @ WACC 366,506
Continuation growth rate 4.00%
Continuation value
PV{Continuation value} @ WACC (701,528)
Enterprise value (335,023)
Debt value 4,304,038
Equity Value (4,639,061)
N of shares 234,304,383
Price per share (0.02)
 FORECASTS

Forecasts
2011 2012 2013 2014 2015 2016 2017
4102946 4226034 4570456 5131251 5760855 6467712 7261301
2761742 2844594 2922607 3078751 3456513 3880627 4356780
1341204 1381440 1647849 2052500 2304342 2587085 2904520
773331 756705 777457 872851 979950 1100190 1235183
567872 624735 870391 1179649 1324392 1486895 1669337
212846 160895 174008 195358 219329 246241 276454
355026 463840 696384 984291 1105063 1240654 1392883
320394 352476 491075 665558 747222 838906 941840
### ### ### ### ### ### 68813
### ### ### ### ### 459804 519856
### ### ### ### ### ### ###
### 66959 130158 218004 260875 ### ###

Forecasts
2011 2012 2013 2014 2015 2016 2017

### ### ### ### ### 2670050 3140059

1991519 2051265 2218443 2490646 2796248 3139348 3524545
279516 287901 311365 349570 392462 440617 494681
2208943 2275211 2460641 2762562 3101528 3482085 3909337
4205748 4514612 5798948 7484890 8542894 9732100 11068622

778371 801723 867063 973452 1092894 1226992 1377544

212846 160895 174008 195358 219329 246241 276454
565526 640828 693055 778093 873565 980752 1101090

3621048 3621048 3621048 3621048 3621048 3621048 3621048

8392322 8776488 10113052 11884031 13037507 14333900 15790760

1470790 1618064 2254313 3055291 3430176 3851058 4323583

150145 107832 140959 148490 166709 187165 210130
403242 415340 449190 504305 566184 635654 713649
2024177 2141235 2844462 3708086 4163068 4673877 5247362
2504317 2755082 3838426 5202253 5840569 6557207 7361776
4528495 4896317 6682888 8910339 10003638 11231084 12609138
 ### ### ### ### ### 3102713 3211733
8358823 8691039 10040715 11833046 ### 14333797 15820871

33498 85449 72336 50986

Forecasts
2011 2012 2013 2014 2015 2016 2017

### 66959 130158 218004 260875 295194 333747

212846 160895 174008 195358 219329 246241 276454
4036 -134399 -376072 -612328 -687461 -771812 -866514
9108 -30216 66977 62646 80098 89926 100960
13143 -164616 -309095 -549682 -607363 -681886 -765554
### 63238 -4929 -136320 -127159 -140451 -155352

212145 184246 239348 301747 338771 380339 427006

281994 -398039 -1719593 -2164805 -1013201 -1137520 -1277094

### 102566 567052 653125 176727 199336 224728
### -295473 -1152542 -1511680 -836473 -938185 -1052367
### 174465 908264 1073614 370543 417394 470008
### ### ### ### ### 2670050 3140059

687197 707813 765500 859427 964879 1083269 1216187

-961427 -807578 42999 1022686 1287777 1586781 1923872
### 223574 811329 1091191 642658 720126 807086
-2232304 96442 645540 769697 349530 392418 440568
1336980 1433422 2078962 2848659 3198190 3590608 4031175

2011 2012 2013 2014 2015 2016 2017

21773 66959 130158 218004 260875 295194 333747

### ### ### ### ### ### ###
### 297786 447078 631915 709451 796500 894231
212846 160895 174008 195358 219329 246241 276454
13143 -164616 -309095 -549682 -607363 -681886 -765554
212145 184246 239348 301747 338771 380339 427006
438134 180525 104261 (52,576.1) (49,262.4) (55,306.9) (62,093.1)
 2018 2019 2020
8152262 9152545 10275562
4891357 5491527 6165337
3260905 3661018 4110225
1386740 1556893 1747924
1874165 2104125 2362301
310375 348458 391214
1563789 1755666 1971087
1057404 1187147 1332810
80926 94562 109908
587312 663081 748184
### ### ###
### ### ###

2018 2019 2020

3669151 4264590 4934532

3957007 4442532 4987631
555378 623523 700030
4389013 4927545 5532155
12570549 14258190 16154346

1546569 1736333 1949381

310375 348458 391214
1236194 1387875 1558167

3621048 3621048 3621048

17427791 19267113 21333561

4854087 5449683 6118359

235913 264859 297357
801214 899523 1009894
5891213 6614065 7425611
8265066 9279190 10417746
14156279 15893255 17843357
 3335543 3475972 3635074
17491822 19369227 21478431

2018 2019 2020

377054 425698 480334

310375 348458 391214
-972835 -1092202 -1226215
113348 127255 142870
-859487 -964946 -1083345
-172058 -190790 -211797

479400 538222 604262

-1433794 -1609720 -1807233

253244 285269 321232 assumed payout ratio of 40% (historical average)
-1180550 -1324451 -1486000
529092 595439 669942
3669151 4264590 4934532

1365413 1532949 1721042

2303738 2731641 3213490
904702 1014281 1137291
494625 555316 623453
4525800 5081116 5704569

2018 2019 2020

377054 425698 480334

### ### ###
1003953 1127138 1265438
 310375 348458 391214
-859487 -964946 -1083345
479400 538222 604262
(69,711.9) (78,265.6) (87,868.8)

-1,474,230
CONSOLIDATED STATEMENTS OF CASH FLOWS

2007
Net cash provided by (used by) operating activities of continuing
operations (Note 2) ($ 798,146 )

Cash flows from investing activities of continuing operations:

Capital expenditures (242,113)
Origination of finance receivables held for investment (514,359)
Collections on finance receivables held for investment 368,978
Collection of retained securitization interests 118,175
Purchases of marketable securities (467,609)
Sales and redemptions of marketable securities ( 1,125,344 )
Other, net 2,789

Net cash (used by) provided by investing activities of continuing operations 391,205

Cash flows from financing activities of continuing operations:

Proceeds from issuance of medium term notes 398,144
Repayment of medium term notes (- )
Proceeds from issuance of senior unsecured notes (- )
Proceeds from securitization debt (- )
Repayments of securitization debt (- )
Net (decrease) increase in credit facilities and unsecured commercial
paper (16,247)
Net (repayments) borrowings of asset-backed commercial paper (- )
Repayment of senior subordinated debt (30,000)
Net change in restricted cash (- )
Dividends (260,805)
Purchase of common stock for treasury (1,153,439)
Excess tax benefits from share-based payments 3,066
Issuance of common stock under employee stock option plans 21,478
Net cash provided by (used by) financing activities of continuing
operations (1,037,803)

Effect of exchange rate changes on cash and cash equivalents of continuing

operations 12,909

Net increase in cash and cash equivalents of continuing operations 164,457

Cash flows from discontinued operations:

Cash flows from operating activities of discontinued operations (- )
Cash flows from investing activities of discontinued operations (- )
Effect of exchange rate changes on cash and cash equivalents of
discontinued operations
(- )
(- )
Net increase in cash and cash equivalents 164,457

Cash and cash equivalents:

Cash and cash equivalents – beginning of period ($ 238,397 )
Cash and cash equivalents of discontinued operations – beginning of period (- )
Net increase in cash and cash equivalents 164,457
Less: Cash and cash equivalents of discontinued operations – end of period (- )
Cash and cash equivalents – end of period ($ 402,854 )

Year-end 2007

Net Income 933,843.00

Net Interest after Tax -
Unlevered net income 933,843.00
Change in deferred taxes (58,628.00)
NOPLAT 875,215.00
Depreciation 204,172.00
Provisions (= )
Change in Net Working Capital (55,407.00)
Capital Expenditures (538,805.00)
Free cash flow 485,175.00

Cash Flow Information:

The reconciliation of net (loss) income to net cash provided by (used by) operating activities of continuing operations is as follows (in
thousands):
2007
Cash flows from operating activities:
Net (loss) income $ 933,843
Loss from discontinued operations (29,517 )
Income from continuing operations 933843
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 204,172
Provision for employee long-term benefits 75,683
Contributions to pension and postretirement plans (19,517)
Stock compensation expense 20,974
Loss (gain) on off-balance sheet securitizations (36,033)
Net change in wholesale finance receivables 22,816
Origination of retail finance receivables held for sale (2,919,937)
Collections on retail finance receivables held for sale 110,756
Proceeds from securitization of retail finance receivables ( 2,486,780 )
Impairment of retained securitization interests 9,932
 Lower of cost or fair market value adjustment on finance receivables
held for sale (— )
Goodwill and other impairments (— )
Pension and postretirement healthcare plan curtailment and settlement
expense (— )
Provision for credit losses 11,252
Deferred income taxes (60,779)
Foreign currency adjustments (14,581)
Other, net 23,977
Changes in current assets and liabilities:
Accounts receivable, net (26,399)
Finance receivables – accrued interest and other (19,680)
Inventories (48,019)
Accounts payable and accrued liabilities 41,210
Restructuring reserves (— )
Derivative instruments 3,492
Other (6,011)
(55,407)
Total adjustments (135,697)
Net cash provided by (used by) operating activities of continuing operations 798,146
Cash paid during the period for interest and income taxes (in thousands):

Interest 81,474
Income taxes 568,815
 2008 2009

(608,029) ($ 609,010 )

(228,959) (116,748)
(608,621) (1,378,226)
( 448,990 ) 607,168
93,747 61,170
(- ) (39,685)
2,543 (- )
(2,575) 2,834

(294,875) (863,487)

( 993,550 ) 496,514
(400,000) (- )
(- ) 595,026
(- ) 2,413,192.00
(- ) (263,083)

( 761,065 ) (1,083,331)
( 490,000 ) (513,168)
(- ) (- )
(- ) (167,667)
(302,314) (93,807)
(250,410) (1,920)
320 170
1,179 11

( 1,293,390 )( 1,381,937 )

(20,352) 6,789

( 370,134 ) ( 1,134,249 )

(75,028) (71,298)
(99,963) (18,805)

(4,439) (1,208)
(179,430) (91,311)
 ($ 190,704 ) ($ 1,042,938 )

($ 402,854 ) ($ 568,894 )
(- ) 24,664
190,704 ( 1,042,938 )
(24,664) (6,063)
($ 568,894 ) ($ 1,630,433 )

2008 2009

654,718.00 (55,116.00)
- -
652,300.07 (55,116.00)
(45,328.00) 6,439.00
606,972.07 (42,438.49)
220,755.00 246,344.00

(14,372.00) (47,266.00)
(217,093.00) (96,322.00)
596,262.07 60,317.51

g operations is as follows (in

2008 2009

$ 654,718 (55,116 )
(125,757 )
684235 70641

220,755 246,344
76,426 118,201
(15,302) (233,224)
24,473 17,576
5,370 (— )
99,373 332,167
(2,788,463) (1,180,467)
507,106 919,201
467,722 (— )
41,403 45,370
 37,764 5,895
(— ) 46,410

(— ) 37,814
39,555 169,206
(46,729) 6,931
2,892 (22,234)
53,978 76,445

2,710 8,809
(7,149) (3,360)
(42,263) 85,472
45,998 (239,009)
2,149 65,988
(11,962) 4,711
(3,855) 30,123
(14,372) (47,266)
(1,292,264) 538,369
(608,029) 609,010

128,006 336,453
413,998 123,232
 HD motorbikes financial analysis and forecasts
($000) Historical
2007
Operations:
Unit Sales Growth -5.3%
Price grows with
inflation
Inflation rates from Price Growth 2.9%
www.inflationdata.co
m Growth Rate of Sales -2.6%

Cost of Sales (Excl. Dep. & Amort.) as % of Sales 63.1%

SGA & Engeneering as % of Sales 17.7%
EBITDA as % of Sales 19.2%
Growth Rate 8.5%

Capital Expenditures and Depreciation:

CAPEX 538,805
Net Property, Plant & Equipment (PP&E) 1,060,590
% of Sales 19%
Depreciation 204,172
% of Net PP&E 19%

Working Capital:
Cash balance as % of Sales 6.598%
Accounts Receivable as % of Sales 41.3%
Inventories as % of Cost of Sales 6.1%
Other Current Assets as % of Sales 44.20%

Accounts Payable as % of Cost of Sales 5.2%

Accrued Expenses & Others as % of Sales 8.47%

Debt, Interest, Dividends and Taxes:

Short-term Debt & Curr. Portion of LTD as % of Total Debt 114.28%
EBITDA Interest coverage -
Interest rate on debt 0.00%
Interest rate on cash and marketable securities 5.49%
Historical Forecast
2008 2009 2010 2011 2012 2013 2014 2015 2016

-8.2% -26.5% -7.0% -3.0% 0.0% 5.0% 9.0% 9.0% 9.0%

3.9% -0.3% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

-4.7% -26.8% -4.2% -0.1% 3.0% 8.2% 12.3% 12.3% 12.3%

65.4% 67.7% 65.4% 67.3% 67.3% 63.9% 60.0% 60.0% 60.0%

19.0% 22.8% 19.8% 18.8% 17.9% 17.0% 17.0% 17.0% 17.0%
15.6% 9.5% 14.8% 13.8% 14.8% 19.0% 23.0% 23.0% 23.0%
8.5% 8.5% -26.3% -6.6% 10.0% 39.3% 35.5% 12.3% 12.3%

217,093 96,322 84,278 212,145 184,246 239,348 301,747 338,771 380,339

1,056,928 906,906 779,073 778,371 801,723 867,063 973,452 1,092,894 1,226,992
19% 21% 20% 20% 20% 20% 20% 20% 20%
220,755 246,344 212,111 212,846 160,895 174,008 195,358 219,329 246,241
21% 27% 20% 20% 20% 20% 20% 20% 20%

9.553% 34.096% 16.7% 16.7% 16.7% 16.7% 16.7% 16.7% 16.7%

68.6% 35.7% 48.5% 48.5% 48.5% 48.5% 48.5% 48.5% 48.5%
6.8% 7.5% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8%
73.04% 44.28% 53.8% 53.84% 53.84% 53.84% 53.84% 53.84% 53.84%

5.4% 3.8% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%

9.03% 11.99% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%

79.89% 37.00% 37.0% 37.00% 37.00% 37.00% 37.00% 37.00% 37.00%

233 9 7.00 7.00 7.00 7.00 7.00 7.00 7.00
0.12% 0.50% 8.06% 8.06% 8.06% 8.06% 8.06% 8.06% 8.06%
1.99% 0.25% 2.6% 2.58% 2.58% 2.58% 2.58% 2.58% 2.58%
 The company has experienced a peak of ship
2017 2018 2019 2020 2009 have never been worst since 2001. The
economyc cycle, therefore we would expect a
9.0% 9.0% 9.0% 9.0% with the exit from the recession period of the
of the recession the company would converge
3.0% 3.0% 3.0% 3.0% historical growth average of 9%

12.3% 12.3% 12.3% 12.3%

60.0% 60.0% 60.0% 60.0% Company cost grew in the last three years becau
17.0% 17.0% 17.0% 17.0%
23.0% 23.0% 23.0% 23.0% Company's SGAEs increased because of lower sa
12.3% 12.3% 12.3% 12.3%

427,006 479,400 538,222 604,262

1,377,544 1,546,569 1,736,333 1,949,381
20% 20% 20% 20%
276,454 310,375 348,458 391,214
20% 20% 20% 20% Divestures in 2009 affect the depreciation ratio,

16.7% 16.7% 16.7% 16.7%

48.5% 48.5% 48.5% 48.5%
6.8% 6.8% 6.8% 6.8%
53.84% 53.84% 53.84% 53.84%

4.8% 4.8% 4.8% 4.8%

9.8% 9.8% 9.8% 9.8%

37.00% 37.00% 37.00% 37.00%

7.00 7.00 7.00 7.00 the EBITDA ratio of the last year is clearly overstated due t
8.06% 8.06% 8.06% 8.06% interest paid on debt are calculated from the information g
2.58% 2.58% 2.58% 2.58%
s experienced a peak of shipments in 2006. The data from
been worst since 2001. The company is exposed to the
therefore we would expect a return to growth in 2 years,
m the recession period of the major economies. At the end
he company would converge in 3 years toward the
average of 9%

in the last three years because of the lower volumes. However the company is investing in technology and effic

creased because of lower sales, but we would expect them to revert to the historical average value of 17%

ffect the depreciation ratio, therefore we will consider the average on the previous years.

ar is clearly overstated due to the low EBITDA. We would assume a ratio in line with the actual credit rating (BBB
lated from the information given in note 13.
technology and efficiency, and we expect this to lead to COGS of 60% once sales will start growing again

ge value of 17%

ual credit rating (BBB)

growing again
 HD financials financial analysis and forecasts
($000) Historical
2007
Operations:
Financial services as % of Motorcycles sales 7.3%
Price grows with
inflation
Inflation rates from Price Growth 2.9%
www.inflationdata.co
m Growth Rate of Sales 10.3%

Cost of Sales (Excl. Dep. & Amort.) as % of Sales 63.1%

SGA & Engeneering as % of Sales 17.7%
EBITDA as % of Sales 19.2%
Growth Rate 8.5%

Capital Expenditures and Depreciation:

CAPEX 538,805
Net Property, Plant & Equipment (PP&E) 1,060,590
% of Sales 19%
Depreciation 204,172
% of Net PP&E 19%

Working Capital:
Cash balance as % of Sales 6.6%
Accounts Receivable as % of Sales 2.9%
Inventories as % of Cost of Sales 6.1%
Other Current Assets as % of Sales 44.20%

Accounts Payable as % of Cost of Sales 5.2%

Accrued Expenses & Others as % of Sales 8.47%

Debt, Interest, Dividends and Taxes:

Short-term Debt & Curr. Portion of LTD as % of Total Debt 114.28%
EBITDA Interest coverage -
Interest rate on debt 0.00%
Interest rate on cash and marketable securities 5.49%
 Historical Historical Forecast
2008 2009 2010 2011 2012 2013 2014 2015 2016

6.8% 11.5% 12.1% 12.7% 13.4% 14.0% 14.7% 15.5% 15.5%

3.9% -0.3% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

10.9% 11.2% 15.5% 16.1% 16.8% 17.4% 18.2% 18.9% 18.9%

65.4% 67.7% 65.4% 57.0% 49.4% 42.5% 36.2% 60.0% 60.0%

19.0% 22.8% 19.8% 18.8% 17.9% 17.0% 17.0% 17.0% 17.0%
15.6% 9.5% 14.8% 24.1% 32.7% 40.5% 46.8% 23.0% 23.0%
8.5% 8.5% -11.1% 89.1% 58.2% 45.6% 36.4% -41.5% 18.9%

217,093 96,322 84,278 -566,227 0 0 0 0 0

1,056,928 906,906 779,073 0 0 0 0 0 0
19% 21% 20% 20% 20% 20% 20% 20% 20%
220,755 246,344 212,111 212,846 0 0 0 0 0
21% 27% 20% 20% 20% 20% 20% 20% 20%

9.6% 34.1% 16.7% 16.7% 16.7% 16.7% 16.7% 16.7% 16.7%

4.5% 5.6% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%
6.8% 7.5% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8%
73.04% 44.28% 53.8% 53.84% 53.84% 53.84% 53.84% 53.84% 53.84%

5.4% 3.8% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%

9.03% 11.99% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%

79.89% 37.00% 77.1% 77.06% 77.06% 77.06% 77.06% 77.06% 77.06%

233 9 0.00 0.00 0.00 0.00 0.00 0.00
0.12% 0.50% 8.06% 8.06% 8.06% 8.06% 8.06% 8.06% 8.06%
1.99% 0.25% 2.6% 2.58% 2.58% 2.58% 2.58% 2.58% 2.58%
 2017 2018 2019 2020

15.5% 15.5% 15.5% 15.5% Financial services to customers and dealers are e

3.0% 3.0% 3.0% 3.0%

18.9% 18.9% 18.9% 18.9%

60.0% 60.0% 60.0% 60.0% Company cost grew in the last three years becau
17.0% 17.0% 17.0% 17.0%
23.0% 23.0% 23.0% 23.0% Company's SGAEs increased because of lower sa
18.9% 18.9% 18.9% 18.9%

0 0 0 0
0 0 0 0
20% 20% 20% 20%
0 0 0 0
20% 20% 20% 20% Divestures in 2009 affect the depreciation ratio,

16.7% 16.7% 16.7% 16.7%

4.3% 4.3% 4.3% 4.3%
6.8% 6.8% 6.8% 6.8%
53.84% 53.84% 53.84% 53.84%

4.8% 4.8% 4.8% 4.8%

9.8% 9.8% 9.8% 9.8%

77.06% 77.06% 77.06% 77.06%

0.00 0.00 0.00 0.00 the EBITDA ratio of the last year is clearly overstated due t
8.06% 8.06% 8.06% 8.06% interest paid on debt are calculated from the information g
2.58% 2.58% 2.58% 2.58%
customers and dealers are expected to grow in value compared to the motorcycle business, as buying with cre

in the last three years because of the lower volumes. However the company is investing in technology and effic

creased because of lower sales, but we would expect them to revert to the historical average value of 17%

ffect the depreciation ratio, therefore we will consider the average on the previous years.

ar is clearly overstated due to the low EBITDA. We would assume a ratio in line with the actual credit rating (BBB
lated from the information given in note 13.
s, as buying with credit financing is increasingly popular.

technology and efficiency, and we expect this to lead to COGS of 60% once sales will start growing again

ge value of 17%

ual credit rating (BBB)

growing again
SHIPMENTS
1986 1987 1988 1989 1990
Sportster® 11,959 14,249 17,491 17,838 16,119
Custom 18,398 20,865 23,232 27,461 34,579
Touring 6378 8201 9794 13,626 11,760
36,735 43,315 50,517 58,925 62,458

Domestic 29,910 34,729 38,941 43,637 43,138

International 6825 8586 11,576 15,288 19,320
36,735 43,315 50,517 58,925 62,458
BUELL®

18% 17% 17% 6%

17% 13% 11%
9.22% 7.94% 7.95% -2.69%
 1991 1992 1993 1994 1995 1996 1997 1998 1999
18,735 17,623 22,247 26,466 29625 31173 31453 33892 41870
39,550 48,177 49,004 52,046 54456 63198 70724 77434 87806
10,341 10,695 10,445 17,299 21023 24400 30108 39492 47511
68,626 76,495 81,696 95,811 105,104 118,771 132,285 150,818 177,187

46,993 53,242 57,183 66,498 73028 84114 96216 110,902 135,614

21,633 23,253 24,513 29,313 32076 34657 36069 39916 41573
68,626 76,495 81,696 95,811 105,104 118,771 132,285 150,818 177,187
1407 2762 4415 6,334 7767

10% 11% 7% 17% 10% 13% 11% 14% 17%

9% 9% 12% 11% 13% 11% 13% 14% 16%
1.18% 2.78% -1.89% 8.59% 1.01% 4.31% 2.69% 5.32% 8.79%
2000 2001 2002 2003 2004 2005 2006 2007 2008
46213 50814 51171 57165 69821 70215 64557 72036 60684
100,875 118,303 141,769 151,405 154,163 148,609 161,195 144,507 140,908
57504 65344 70713 82577 93305 110,193 123,444 114,076 101,887
204,592 234,461 263,653 291,147 317,289 329,017 349,196 330,619 303,479

158,817 186,915 212,833 237,656 260,607 266,507 273,212 241,539 206,309

45775 47546 50820 53491 56682 62510 75984 89080 97170
204,592 234,461 263,653 291,147 317,289 329,017 349,196 330,619 303,479
10189 9925 10,943 9,974 9857 11166 12460 11,513 13119

15% 15% 12% 10% 9% 4% 6% -5% -8%

16% 14% 12% 11% 8% 6% 2% -2% -13%
6.78% 5.91% 3.76% 1.74% 0.29% -4.99% -2.56% -14.01% -16.90%
 2009
47269
91,650
84,104
223,023

144,464
78559
223,023
9,572

-27% 9%
-9%
-35.20%