EXPERIENCEBUSINESS - Harley-Davidson

HARLEY- DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
The Company enters into forward foreign currency
exchange contracts to hedge against sales transactions denominated
in European currencies and Japanese yen. At December
31, 2000, the Company had forward foreign exchange
contracts that required it to convert these foreign currencies,
at a variety of rates, into U.S. dollars. These contracts represented
a combined U.S. dollar equivalent commitment of
approximately $117.5 million and $4.0 million at December
31, 2000 and 1999, respectively. All current contracts have
maturities of less than one year. Unrealized gains and losses on
these forward foreign exchange contracts, which were not
material at December 31, 2000 or 1999, are deferred and
recognized at the time the hedged transaction is settled.
HDFS has utilized interest rate swap and treasury rate lock
agreements to reduce the impact of fluctuations in interest rates.
At December 31, 2000, HDFS had no interest rate swaps or
treasury rate locks outstanding. At December 31, 1999, HDFS
had approximately $28 million of interest rate swaps outstanding.
The fair value of the swaps at December 31, 1999, if
HDFS would have terminated the agreements, would not have
been material.
12. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
(a) Business Segments
The Company operates in two business segments: Motorcycles
and Related Products and Financial Services. 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 and Related Products (Motorcycles)
segment consists primarily of the Company’s wholly-owned
subsidiary, H-D Michigan, Inc., its wholly-owned subsidiaries
doing business as Harley-Davidson Motor Company
and Buell Motorcycle Company. The Motorcycles segment
designs, manufactures and sells primarily heavyweight
(engine displacement of 651+cc) touring, custom and sport
motorcycles and a broad range of related products which
include motorcycle parts and accessories and riding apparel.
The Company, which is the only major American motorcycle
manufacturer, has held the largest share of the United States
heavyweight motorcycle market since 1986. The Company
holds a smaller market share in the European market, which
is a larger market than the United States, and in the Japanese
market, which is a smaller market than the United States.
The Financial Services segment consists of the
Company’s wholly owned subsidiary, Harley-Davidson
Financial Services, Inc. HDFS is engaged in the business of
financing and servicing wholesale inventory receivables, consumer
retail installment sales contracts (primarily motorcycles)
and revolving charge receivables. Additionally, HDFS is
an agency for certain unaffiliated insurance carriers providing
property/casualty insurance and extended service contracts to
motorcycle owners. HDFS conducts business in the United
States, Canada and Europe.
Information by industry segment is set forth below:
(In thousands)
2000 1999 1998
Net sales:
Motorcycles and
Related Products $2,906,365 $2,452,939 $2,063,956
Financial Services (1) n/a n/a n/a
$2,906,365 $2,452,939 $2,063,956
Income from operations:
Motorcycles and
Related Products $ 487,485 $ 397,601 $ 324,448
Financial Services (1) 37,178 27,685 20,211
General corporate expenses (9,691) (9,427) (11,043)
$ 514,972 $ 415,859 $ 333,616
(1)The results of operations for the financial services subsidiary
are included as operating income from financial services in the statements
of operations. See Note 4.
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