EXPERIENCEBUSINESS - Harley-Davidson

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HARLEY- DAVIDSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. HARLEY-DAVIDSON FINANCIAL SERVICES, INC. (CONTINUED) The allowance for credit losses pertaining to revolving charge receivables sold during 2000 was reversed and included in the calculation of gain on the sale. During 2000, 1999 and 1998, the Company sold $724.0 million, $575.0 million and $450.0 million, respectively, of its retail motorcycle installment loans through securitization transactions. The Company retains servicing rights and has limited recourse in the sale transactions. In conjunction with these sales, HDFS has recorded an asset of $100.4 million representing its retained securitization interests. The Company also receives annual servicing fees approximating one percent of the outstanding balance. HDFS serviced with limited recourse $1.1 billion and $.8 billion of retail installment loans as of December 31, 2000 and 1999, respectively. The value of the retained interest is subject to credit, prepayment, and interest rate risks on the $1.1 billion of securitized retail installment loans. Key assumptions used in measuring the fair value of the retained interests as of December 31, 2000, which were consistent with those used during the year, were as follows: Prepayment speed (Single Monthly Mortality) 2.50% Weighted-average life (in years) 1.93 Expected cumulative net credit loss rate 1.89% Residual cash flows discount rate 12.00% The change in the current fair value of the retained interests, relative to an immediate 10 percent and 20 percent adverse or favorable change in the key assumptions, would not be material to the Company’s financial statements. As of December 31, 2000, the $1.2 billion of managed motorcycle retail installment loans, of which $1.1 billion are securitized, includes approximately $19.4 million which were 60 days or more past due. Approximately $8.7 million of net credit losses have been recognized on these loans during the year ended December 31, 2000. Loans 60 days or more past due are based on end of period total managed motorcycle loans, excluding those loans reclassified as repossessed inventory. Net credit losses are charge-offs net of recoveries and are based on managed motorcycle loans outstanding. HDFS’ debt as of December 31, consisted of the following: (In thousands) 2000 1999 Commercial paper $346,703 $373,212 Revolving credit facility 67,806 57,951 Senior subordinated notes 30,000 30,000 Total finance debt $444,509 $461,163 HDFS may issue commercial paper of up to $700 million. Maturities may range up to 270 days from the issuance date. Outstanding commercial paper may not exceed the liquidity support provided by the unused portion of the Credit Facilities noted below. The weighted average interest rate on outstanding commercial paper balances was 6.57% and 6.01% at December 31, 2000 and 1999, respectively. 50
HARLEY- DAVIDSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. HARLEY-DAVIDSON FINANCIAL SERVICES, INC. (CONTINUED) Prior to December 31, 2000, HDFS entered into agreements with a group of financial institutions providing bank credit facilities (Credit Facilities) of $700 million. The Credit Facilities consist of a $350 million, 364-day revolving loan due September 2001 and a $350 million, five-year revolving loan due September 2005. At December 31, 1999, HDFS had Credit Facilities of $600 million. The primary uses of the Credit Facilities are to provide liquidity to the unsecured commercial paper program and to fund foreign business operations. Subject to certain limitations, HDFS has the option to borrow in various currencies. Interest is based on London interbank offered rates (LIBOR) or other short-term rate indices, depending on the type of advance. At December 31, 2000 and 1999, HDFS had $30 million of 6.79% Senior Subordinated Notes (Notes) outstanding due in 2007. The Notes provide for semi-annual interest payments, and principal at maturity. HDFS has met various operating and financial covenants and remains in compliance at December 31, 2000. During 2000, HDFS entered into a $50 million uncommitted credit facility at market rates of interest. HDFS did not borrow under this facility in 2000. Long-term finance debt included on the balance sheet at December 31, 2000 consists of $325 million of commercial paper borrowings and the $30 million senior subordinated notes. The $325 million of commercial paper borrowings has been excluded from current liabilities (under the ability provided by the Credit Facilities) because the Company intends that at least that amount would remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date. At December 31, 1999, long-term finance debt consisted of $250 million of commercial paper borrowings and the $30 million senior subordinated notes. The Company and HDFS have entered into a support agreement wherein, if required, the Company agrees to provide HDFS certain financial support to maintain certain financial covenants. Support may be provided either as capital contributions or loans at the Company’s option. 5. NOTES PAYABLE AND LETTERS OF CREDIT As of December 31, 2000 and 1999, the Company had unsecured lines of credit totaling approximately $45.0 million and $41.3 million, respectively, of which approximately $36.9 million and $41.2 million, respectively, remained available. At December 31, 2000 and 1999, the Company had outstanding letters of credit of $5.2 million and $7.5 million, respectively. The letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. 51
Page 1 and 2: EXPERIENCEBUSINESS Harley-Davidson,
Page 3 and 4: W hether it’s the excitement of a
Page 5 and 6: CHAIRMAN’S LETTER We fulfill drea
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Page 10 and 11: The shifting of gears may seem like
Page 13 and 14: THE FAMILY MILWAUKEE, WISCONSIN Sat
Page 15: H.O.G. ® Nobody understands the Ha
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Page 23 and 24: 3 4 otorcycle seems to be a solitar
Page 25 and 26: TABLE OF CONTENTS Performance Chart
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