EXPERIENCEBUSINESS - Harley-Davidson

HARLEY- DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. CAPITAL STOCK (CONTINUED)
As is permitted under Statement of Financial Accounting
Standards (SFAS) 123, “Accounting for Stock-Based
Compensation” the Company elected to continue to account
for employee stock compensation (e.g., nonvested stock and
stock options) in accordance with APB Opinion 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. SFAS 123
calculates the total compensation expense to be recognized as
the fair value of the award at the date of grant for effectively
all employee awards.
For purposes of pro forma disclosures under SFAS 123,
the estimated fair value of the options is amortized to expense
over the options’ vesting period. The Company’s pro forma
information is as follows:
(In thousands, except per share amounts) 2000 1999 1998
Pro forma net income $338,457 $260,459 $207,857
Pro forma earnings per share:
Basic $ 1.12 $ .85 $ .68
Diluted $ 1.10 $ .84 $ .67
In determining the effect of SFAS 123, the Black-
Scholes option pricing model was used with the following
weighted-average assumptions for 2000, 1999 and 1998:
risk-free interest rate of approximately 7%, 6% and 6%,
respectively; dividend yield of .3%, .3% and .5%, respectively;
expected common stock market volatility factor of .4;
and a weighted-average expected life of the options of two
years from the vesting date. Forfeitures are recognized as they
occur. These pro forma calculations only include the effects
of grants made in 1995 and thereafter.
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
(In thousands, except per share amounts)
Year Ended December 31, 2000 1999 1998
NUMERATOR
Net income used in computing basic
and diluted earnings per share $347,713 $267,201 $213,500
DENOMINATOR
Denominator for basic earnings
per share - weighted-average
common shares 302,691 304,748 304,454
Effect of dilutive securities -
employee stock options
and nonvested stock 4,779 4,966 4,952
Denominator for diluted
earnings per share - adjusted
weighted-average shares 307,470 309,714 309,406
Basic earnings per share $ 1.15 $ .88 $ .70
Diluted earnings per share $ 1.13 $ .86 $ .69
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist primarily of
cash and cash equivalents, trade receivables, finance receivables,
debt, interest rate swaps, treasury rate locks and forward
foreign exchange contracts. The book values of cash and
cash equivalents, trade receivables and finance receivables are
considered to approximate their respective fair values.
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.
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