Harley Davidson 2013 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2013
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9183
Harley-Davidson, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1382325
(State of organization) (I.R.S. Employer Identification No.)
3700 West Juneau Avenue
Milwaukee, Wisconsin 53208
(Address of principal executive offices) (Zip code)
Registrants telephone number: (414) 342-4680
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $.01 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such requirements for the past 90 days. Yes No
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company as defined in Rule 12b-2 of the Exchange Act (check one).
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes No
Aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2013: $12,137,937,572
Number of shares of the registrant’s common stock outstanding at January 31, 2014: 220,051,960 shares
Documents Incorporated by Reference
Part III of this report incorporates information by reference from registrant’s Proxy Statement for the annual meeting of its shareholders
to be held on April 26, 2014.

Table of contents

  • Page 1
    ... 2013: $12,137,937,572 Number of shares of the registrant's common stock outstanding at January 31, 2014: 220,051,960 shares Documents Incorporated by Reference Part III of this report incorporates information by reference from registrant's Proxy Statement for the annual meeting of its shareholders...

  • Page 2
    ... of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Consolidated Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on...

  • Page 3
    ... insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada. See Note 20 of Notes to Consolidated Financial Statements for financial information related to the Company's business segments. Motorcycles...

  • Page 4
    ... dual purpose models and three-wheeled vehicles) in terms of new units registered. The following chart includes U.S. retail registration data for Harley-Davidson motorcycles for the years 2011 through 2013: U.S. Motorcycle Registration Data(a)(b) 601+cc (Units in thousands) 2013 2012 2011 Total new...

  • Page 5
    ...in Motorcycles segment net revenue, were $58.9 million, $49.1 million and $43.2 million in 2013, 2012 and 2011, respectively. Harley-Davidson Museum - The Company operates the Harley-Davidson Museum (Museum) in Milwaukee, Wisconsin. The Museum is a unique destination that the Company believes builds...

  • Page 6
    ... success of this strategy by monitoring market shares (where available) across its various customer definitions, as well as monitoring brand health in various markets. U.S. retail purchasers of new Harley-Davidson motorcycles include both core and outreach customers and are diverse in terms of age...

  • Page 7
    ... system can affect the number of units of particular models that dealers are able to order and the timing of shipments to dealers. In Canada, the Company sells its motorcycles and related products at wholesale to a single independent distributor, Deeley Harley-Davidson Canada/Fred Deeley Imports...

  • Page 8
    ...of 2014, the Company began implementing flexible production capabilities at its motorcycle manufacturing facility in Kansas City, Missouri. To support the Company's international growth initiatives, the Company operates two CKD (Complete Knock Down) assembly plants. A CKD plant assembles motorcycles...

  • Page 9
    .... Research and Development - In 2011, Harley-Davidson commenced executing a strategy to transform product development, with the objective of ensuring that the Company delivers relevant products for an increasingly diverse customer base while reducing cost and time to market. The key objectives of...

  • Page 10
    ... of new and used Harley-Davidson motorcycles. HDFS' retail financial services are available through most HarleyDavidson dealers in the United States and Canada. HDFS' retail finance operations are principally located in Carson City, Nevada and Plano, Texas. Insurance Services - HDFS operates as...

  • Page 11
    ... and earnings. Unfavorable changes in the political, regulatory and business climate could have a material adverse effect on the Company's net sales, financial condition, profitability or cash flows. The Company sells its products at wholesale and must rely on a network of independent dealers and...

  • Page 12
    ... to develop and successfully introduce new, innovative and compliant products. The motorcycle market continues to change in terms of styling preferences and advances in new technology and, at the same time, be subject to increasing regulations related to safety and emissions. The Company must...

  • Page 13
    ... dealers and their retail customers, and dilution to existing share value through the use of alternative sources of capital. The Company's financial services operations are highly dependent on accessing capital markets to fund their operations at competitive interest rates, the Company's access...

  • Page 14
    ... affect household incomes, as well as contract terms, customer credit profiles and the new and used motorcycle market. Negative changes in general business, economic or market factors may have an additional adverse impact on the Company's financial services credit losses and future earnings. While...

  • Page 15
    ... and the legal systems of foreign courts or tribunals. These laws and policies governing operations of foreign-based companies may result in increased costs or restrictions on the ability of the Company to sell its products in certain countries. The Company's international sales operations may also...

  • Page 16
    ... to capital, limit the number of loans eligible for HDFS securitization programs and have a material adverse effect on HDFS' business and results of operations. U.S. Public Company - In addition, the Company is also subject to policies and actions of the SEC and New York Stock Exchange (NYSE). Many...

  • Page 17
    ... consumer or employee personal data may adversely affect the Company's reputation, revenue and earnings. The Company and certain of its third-party vendors receive and store digital personal information in connection with its human resources operations, financial services operations, the Harley...

  • Page 18
    ... the Company as of December 31, 2013: Motorcycles & Related Products Segment Type of Facility Corporate Office Museum Manufacturing Product Development Center Manufacturing (2) (1) Location Milwaukee, WI Milwaukee, WI Wauwatosa, WI Wauwatosa, WI Menomonee Falls, WI Tomahawk, WI Kansas City, MO York...

  • Page 19
    ... Lease expiring 2025 Owned The Financial Services segment has three office facilities: Chicago, Illinois (corporate headquarters); Plano, Texas (wholesale and retail operations); and Carson City, Nevada (retail and insurance operations). Item 3. Legal Proceedings The Company is subject to lawsuits...

  • Page 20
    ... shareholders of record of Harley-Davidson, Inc. common stock. The following table contains detail related to the repurchase of common stock based on the date of trade during the quarter ended December 31, 2013: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum...

  • Page 21
    ..., trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors. The repurchase authority has no expiration date but may be suspended, modified or discontinued at any time. The Harley-Davidson, Inc. 2009 Incentive Stock Plan...

  • Page 22
    2008 ($) 2009 ($) 2010 ($) 2011 ($) 2012 ($) 2013 ($) Harley-Davidson, Inc. Standard & Poor's MidCap 400 Index Standard & Poor's 500 Index 100 100 100 152 137 127 212 174 146 241 171 149 307 202 172 441 265 228 22

  • Page 23
    ...Selected Financial Data 2013 2012 2011 2010(1) 2009(2) (In thousands, except per share amounts) Statement of operations data: Revenue: Motorcycles & Related Products Financial Services Total revenue Income from continuing operations Income (loss) from discontinued operations, net of tax Net income...

  • Page 24
    ...and retail financing and insurance programs primarily to Harley-Davidson dealers and customers. The Company operates in two business segments: Motorcycles & Related Products (Motorcycles) and Financial Services (Financial Services). The Company's reportable segments are strategic business units that...

  • Page 25
    ... operating income for the Financial Services segment to be down modestly in 2014 as compared to 2013. Going forward, the Company continues to expect pressure on Financial Services operating income as a result of modestly higher credit losses and tightening net interest margins due to increasing...

  • Page 26
    ...leaving approximately 100 remaining employees to support the ongoing operations. The original plan would have resulted in a workforce reduction of approximately 200 employees. In February 2011, the Company's unionized employees at its facility in Kansas City, Missouri ratified a new seven-year labor...

  • Page 27
    ...the Financial Services segment. Results of Operations 2013 Compared to 2012 Consolidated Results (in thousands, except earnings per share) 2013 2012 Increase (Decrease) % Change Operating income from motorcycles & related products Operating income from financial services Operating income Investment...

  • Page 28
    Harley-Davidson Motorcycle Retail Sales(a) The following table includes retail unit sales of Harley-Davidson motorcycles: 2013 2012 Increase (Decrease) % Change North America Region United States Canada Total North America Region Europe, Middle East and Africa Region (EMEA) Europe(b) Other Total ...

  • Page 29
    ... motorcycle units, as used in this table, include Dyna®, Softail®, V-Rod® and CVO models. During 2013, wholesale shipments of Harley-Davidson motorcycles were up 5.2% compared to the prior year and within the Company's expected shipment range of 259,000 to 264,000 motorcycles. International...

  • Page 30
    ...the comparability of net revenue, cost of goods sold and gross profit from 2012 to 2013: • • Volume increases were driven by the increase in wholesale shipments of motorcycle units as well as higher sales volumes for Parts & Accessories partially offset by lower General Merchandise sales volumes...

  • Page 31
    ... for credit losses on finance receivables is generally based on HDFS' past loan loss experience, known and inherent risks in the portfolio, current economic conditions and the estimated value of any underlying collateral. Please refer to Note 6 of Notes to Consolidated Financial Statements for...

  • Page 32
    ... of Operations 2012 Compared to 2011 Consolidated Results (in thousands, except earnings per share) 2012 2011 Increase (Decrease) % Change Operating income from motorcycles & related products Operating income from financial services Operating income Investment income Interest expense Income before...

  • Page 33
    Harley-Davidson Motorcycle Retail Sales(a) The following table includes retail unit sales of Harley-Davidson motorcycles: 2012 2011 Increase (Decrease) % Change North America Region United States Canada Total North America Region Europe, Middle East and Africa Region (EMEA) Europe(b) Other Total ...

  • Page 34
    ...Related Products Segment Motorcycle Unit Shipments The following table includes wholesale motorcycle unit shipments for the Motorcycles segment: 2012 Units Mix % Units 2011 Mix % Unit Increase Unit % Change United States International Harley-Davidson motorcycle units Touring motorcycle units Custom...

  • Page 35
    ... comparability of net revenue, cost of goods sold and gross profit from 2011 to 2012 Volume increases were driven by the increase in wholesale shipments of motorcycle units as well as higher sales volumes for Parts & Accessories and General Merchandise. On average, wholesale prices on the Company...

  • Page 36
    ... for credit losses on finance receivables is generally based on HDFS' past loan loss experience, known and inherent risks in the portfolio, current economic conditions and the estimated value of any underlying collateral. Please refer to Note 6 of Notes to Consolidated Financial Statements for...

  • Page 37
    ... borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan's original interest rate or the fair value of the collateral, if the...

  • Page 38
    .... The Company estimates the fair value of option awards as of the grant date using a lattice-based option valuation model which utilizes ranges of assumptions over the expected term of the options, including stock price volatility, dividend yield and risk-free interest rate. The valuation model uses...

  • Page 39
    ...in 2014.(1) Also, the Company expects it will continue to make on-going contributions related to current benefit payments for SERPA and postretirement healthcare plans.(1) The Company's expected future contributions to these plans are provided in Note 14 of Notes to Consolidated Financial Statements...

  • Page 40
    ...'s consolidated financial statements. Liquidity and Capital Resources as of December 31, 2013 Over the long-term, the Company expects that its business model will continue to generate cash that will allow it to invest in the business, fund future growth opportunities and return value to shareholders...

  • Page 41
    ... current benefit payments for SERPA and postretirement healthcare plans. The Company's expected future contributions to these plans are provided in Note 14 of Notes to Consolidated Financial Statements. The decrease in operating cash flow in 2012 compared to 2011 was due primarily to working capital...

  • Page 42
    ... during 2013. Net cash flows from finance receivables for 2012, which consisted primarily of retail finance receivables, were $228.7 million lower than in 2011 as a result of an increase in retail motorcycle loan originations during 2012. Changes in the Company's investment in marketable securities...

  • Page 43
    ... commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1) Medium-Term Notes - The Company has the following medium-term notes (collectively, the Notes) issued and outstanding at December 31, 2013 (in thousands): Principal Amount Rate Issue Date Maturity Date...

  • Page 44
    ...2013. The term loans provide for monthly interest based on the prevailing commercial paper rates and principal due at maturity or upon demand by the Company. The term loan balances and related interest are eliminated in the Company's consolidated financial statements. Support Agreement - The Company...

  • Page 45
    ... marketing, operations and sales, manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, continue to manage the relationships and agreements that it has with its labor unions to help drive long-term competitiveness, manage supply...

  • Page 46
    ... dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company...

  • Page 47
    ...Internal Control over Financial Reporting 48 49 50 Report of Independent Registered Public Accounting Firm Consolidated statements of operations Consolidated statements of comprehensive income Consolidated balance sheets Consolidated statements of cash flows Consolidated statements of shareholders...

  • Page 48
    ...management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2013. Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part...

  • Page 49
    ... requirements of the New York Stock Exchange, Inc. The Audit Committee of the Board of Directors has reviewed and discussed with management its assessment of the effectiveness of the Company's internal control system over financial reporting as of December 31, 2013. Management has concluded that...

  • Page 50
    ... the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows for each of the...

  • Page 51
    ... REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Harley-Davidson, Inc.: We have audited the accompanying consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income...

  • Page 52
    HARLEY-DAVIDSON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2013, 2012 and 2011 (In thousands, except per share amounts) 2013 2012 2011 Revenue: Motorcycles and related products Financial services Total revenue Costs and expenses: Motorcycles and related products cost of ...

  • Page 53
    HARLEY-DAVIDSON, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended December 31, 2013, 2012 and 2011 (In thousands) 2013 2012 2011 Net income Other comprehensive income, net of tax Foreign currency translation adjustment Derivative financial instruments Marketable securities Pension ...

  • Page 54
    HARLEY-DAVIDSON, INC. CONSOLIDATED BALANCE SHEETS December 31, 2013 and 2012 (In thousands, except share amounts) 2013 2012 ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Finance receivables, net Inventories Restricted cash Deferred income taxes ...

  • Page 55
    ... BALANCE SHEETS (continued) December 31, 2013 and 2012 (In thousands, except share amounts) 2013 2012 Balances held by consolidated variable interest entities (Note 7) Current finance receivables, net Other assets Non-current finance receivables, net Restricted cash Current portion of long-term...

  • Page 56
    ... commercial paper Net change in restricted cash Dividends paid Purchase of common stock for treasury Excess tax benefits from share-based payments Issuance of common stock under employee stock option plans Net cash used by financing activities of continuing operations Effect of exchange rate...

  • Page 57
    HARLEY-DAVIDSON, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years ended December 31, 2013, 2012 and 2011 (In thousands, except share amounts) Common Stock Issued Shares Balance December 31, 2010 Net Income Total other comprehensive loss, net of tax (Note 11) Dividends Repurchase of common ...

  • Page 58
    ... at fair value with gains and losses recorded in net income and investments are included in other long-term assets on the consolidated balance sheets. Accounts Receivable - The Company's motorcycles and related products are sold to independent dealers and distributors outside the U.S. and Canada...

  • Page 59
    ... borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan's original interest rate or the fair value of the collateral, if the...

  • Page 60
    ... three-year limited warranty on all new motorcycles sold. In addition, the Company started offering a one-year warranty for Parts & Accessories (P&A) in 2012. The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company maintains reserves...

  • Page 61
    ... and engineering expenses in the consolidated statement of operations. Research and development expenses were $152.2 million, $137.3 million and $145.4 million for 2013, 2012 and 2011, respectively. Advertising Costs - The Company expenses the production cost of advertising the first time the...

  • Page 62
    ... and the statements of cash flows for the years ended December 31. Balance Sheet Information: Inventories, net (in thousands): 2013 2012 Components at the lower of FIFO cost or market Raw materials and work in process Motorcycle finished goods Parts and accessories and general merchandise Inventory...

  • Page 63
    Accrued liabilities (in thousands): 2013 2012 Payroll, employee benefits and related expenses Restructuring reserves Warranty and recalls Sales incentive programs Tax-related accruals Fair value of derivative financial instruments Other $ $ 166,346 2,181 46,571 42,541 21,970 3,925 143,801 427,...

  • Page 64
    ... Discontinued Operations In 2009, the Company unveiled a new business strategy to drive growth through a focus of efforts and resources on the unique strengths of the Harley-Davidson brand and to enhance productivity and profitability through continuous improvement. The Company's Board of Directors...

  • Page 65
    ... a benefit related to restructuring reserves released in the second quarter of 2013 in connection with the decision to retain a limited operation at the New Castalloy facility, as described above. In February 2011, the Company's unionized employees at its facility in Kansas City, Missouri ratified...

  • Page 66
    ...following table summarizes the Motorcycles segment's 2011 Kansas City Restructuring Plan and 2011 New Castalloy Restructuring Plan reserve activity and balances as recorded in accrued liabilities for the year ended December 31 (in thousands): 2013 Kansas City Employee Severance and Termination Costs...

  • Page 67
    ... and exiting the Buell product line. In addition, the Company completed projects under this plan involving the outsourcing of select information technology activities and the consolidation of an administrative office in Michigan into its corporate headquarters in Milwaukee, Wisconsin. The 2009...

  • Page 68
    ... table summarizes the Motorcycles segment's 2009 Restructuring Plan reserve activity and balances as recorded in accrued liabilities for the following years ended December 31 (in thousands): 2013 Employee Severance and Termination Costs Accelerated Depreciation Other Total Balance, beginning of...

  • Page 69
    ... unfunded retail finance loans totaled $149.8 million and $137.7 million at December 31, 2013 and 2012, respectively. Wholesale finance receivables are related primarily to motorcycles and related parts and accessories sales to independent Harley-Davidson dealers and are generally contractually due...

  • Page 70
    .... Changes in the allowance for credit losses on finance receivables by portfolio for the year ended December 31 were as follows (in thousands): Retail 2013 Wholesale Total Balance, beginning of period Provision for credit losses Charge-offs Recoveries Balance, end of period $ $ 101,442 $ 61...

  • Page 71
    ... will not be able to make full payment of the contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan's original interest rate and the fair value of the collateral, if the...

  • Page 72
    ... internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis. The recorded investment of wholesale finance receivables, by internal credit quality...

  • Page 73
    ... related to the Company's asset-backed financings that were included in its financial statements at December 31 (in thousands): 2013 Finance receivables On-balance sheet assets and liabilities Consolidated VIEs Term asset-backed securitizations Asset-backed U.S. commercial paper conduit facility...

  • Page 74
    ...maturities ranging from January 2019 to April 2019. Outstanding balances related to the following secured notes were included in the Company's consolidated balance sheet at December 31, 2012 (in thousands) and the Company completed repayment of those balances during 2013: Principal Amount at Date of...

  • Page 75
    ... yield curves. The Company uses the market approach to derive the fair value for its level 2 fair value measurements. Foreign currency exchange contracts are valued using publicly quoted spot and forward prices; commodity contracts are valued using publicly quoted prices, where available, or dealer...

  • Page 76
    ... 298,239 7,920 $ $ $ - - - - - 9. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, marketable securities, trade receivables, finance receivables, net, trade payables, debt, foreign currency contracts and interest rate swaps...

  • Page 77
    ... Level 2 inputs. Finance Receivables, Net - The carrying value of retail and wholesale finance receivables in the financial statements is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an...

  • Page 78
    ... qualify for hedge accounting are recorded at fair value and any changes in fair value are recorded in current period earnings. The Company sells its products internationally and in most markets those sales are made in the foreign country's local currency. As a result, the Company's earnings can be...

  • Page 79
    ... other comprehensive loss (AOCL) to income is included in cost of goods sold. (b) Gain/(loss) reclassified from AOCL to income is included in financial services interest expense. For the years ended December 31, 2013 and 2012, the cash flow hedges were highly effective and, as a result, the...

  • Page 80
    ...) for the years ended December 31 (in thousands): 2013 Foreign currency translation adjustments Marketable securities Derivative financial instruments Pension and postretirement benefit plans Total Beginning balance Other comprehensive (loss) income before reclassifications Income tax Net other...

  • Page 81
    ... losses Total before tax Income tax expense (benefit) Net reclassifications Other comprehensive income (loss) Ending Balance Foreign currency translation adjustments Marketable securities Derivative financial instruments Pension and postretirement benefit plans Total Beginning balance Other...

  • Page 82
    ...in motorcycles and related products cost of goods sold. Amounts reclassified to net income are presented in financial services interest expense. Amounts reclassified are included in the computation of net periodic period cost. See note 14 for information related to pension and postretirement benefit...

  • Page 83
    ... hold margin stock. Under the financial covenants of the Global Credit Facilities, the consolidated debt to equity ratio of HDFS cannot exceed 10.0 to 1.0. In addition, the Company must maintain a minimum interest coverage ratio of at least 2.25 to 1.0 for each fiscal quarter through June 2013 and...

  • Page 84
    ... the statutory U.S. corporate income tax rate due to the following items for the years ended December 31: 2013 2012 2011 Provision at statutory rate State taxes, net of federal benefit Domestic manufacturing deduction Research and development credit Unrecognized tax benefits including interest and...

  • Page 85
    ... state net operating loss carry-forwards expiring in 2031. At December 31, 2013 the Company also had Wisconsin research and development credit carryforwards of $10.4 million expiring in 2026. The Company had a deferred tax asset of $28.5 million as of December 31, 2013 for the benefit of these...

  • Page 86
    ... paid Fair value of plan assets, end of period Funded status of the plans, December 31 Amounts recognized in the Consolidated Balance Sheets, December 31,: Prepaid benefit costs (long-term assets) Accrued benefit liability (current liabilities) Accrued benefit liability (long-term liabilities) Net...

  • Page 87
    ... of net periodic benefit costs for the years ended December 31 (in thousands): Pension and SERPA Benefits 2013 2012 2011 2013 Postretirement Healthcare Benefits 2012 2011 Service cost Interest cost Expected return on plan assets Amortization of unrecognized: Prior service cost (credit) Net loss Net...

  • Page 88
    ...: Pension and SERPA Benefits 2013 2012 2011 2013 Postretirement Healthcare Benefits 2012 2011 Assumptions for benefit obligations: Discount rate Rate of compensation Assumptions for net periodic benefit cost: Discount rate Expected return on plan assets Rate of compensation increase 5.08% 4.00...

  • Page 89
    ... In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews. The following tables present the fair values of the plan assets...

  • Page 90
    ... Foreign companies Harley-Davidson common stock Pooled equity funds Limited partnership interests Other Total equity holdings Fixed-income holdings: U.S. Treasuries Federal agencies Corporate bonds Pooled fixed income funds Foreign bonds Municipal bonds Total fixed-income holdings Total pension plan...

  • Page 91
    ... of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2012 (in thousands): Total Limited Partnership Interests Other Balance, beginning of period Actual return on plan assets: Relating to assets still held at the reporting date Purchases, sales and...

  • Page 92
    ...,047 30,644 29,817 28,785 147,623 $ $ $ $ $ $ 1,507 1,716 1,988 2,224 2,466 16,125 The Company has various defined contribution benefit plans that in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective...

  • Page 93
    ... consolidated financial statements. 17. Capital Stock Common Stock: The Company is authorized to issue 800,000,000 shares of common stock of $0.01 par value. There were 220.0 million and 226.1 million common shares outstanding as of December 31, 2013 and 2012, respectively. During 2013, the Company...

  • Page 94
    ... at the time of grant. Assumptions used in calculating the lattice-based fair value of options granted during 2013, 2012 and 2011 were as follows: 2013 2012 2011 Expected average term (in years) Expected volatility Weighted average volatility Expected dividend yield Risk-free interest rate 6.1 27...

  • Page 95
    ... Company's consolidated balance sheets as a liability until the date of exercise. The fair value of each SAR award is estimated using a lattice-based valuation model. In accordance with ASC Topic 718, "Stock Compensation", the fair value of each SAR award is recalculated at the end of each reporting...

  • Page 96
    ... weighted-average fair value of SARs granted during the years ended December 31, 2013, 2012 and 2011 was $12, $14 and $15, respectively. Restricted (Nonvested) Stock: The fair value of restricted stock is determined based on the market price of the Company's shares on the grant date. The following...

  • Page 97
    ... 601+cc cruiser and touring motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. The Financial Services segment provides wholesale and retail financing and provides insurance and insurance-related programs primarily to Harley-Davidson dealers and...

  • Page 98
    ... in the consolidated financial statements are the following amounts relating to geographic locations for the years ended December 31 (in thousands): 2013 2012 2011 Revenue from Motorcycles(a): United States EMEA region Japan Canada Australia Other foreign countries Revenue from Financial Services...

  • Page 99
    ...services Total revenue Costs and expenses: Motorcycles and related products cost of goods sold Financial services interest expense Financial services provision for credit losses Selling, administrative and engineering expense Restructuring benefit Total costs and expenses Operating income Investment...

  • Page 100
    ...services Total revenue Costs and expenses: Motorcycles and related products cost of goods sold Financial services interest expense Financial services provision for credit losses Selling, administrative and engineering expense Restructuring expense Total costs and expenses Operating income Investment...

  • Page 101
    December 31, 2013 Motorcycles & Related Products Operations Financial Services Operations Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Finance receivables, net Inventories Restricted cash Deferred income taxes Other ...

  • Page 102
    December 31, 2012 Motorcycles & Related Products Operations Financial Services Operations Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Finance receivables, net Inventories Restricted cash Deferred income taxes Other ...

  • Page 103
    ...Excess tax benefits from share-based payments Issuance of common stock under employee stock option plans Net cash (used by) provided by financing activities of continuing operations Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents from...

  • Page 104
    ... cash Dividends paid Purchase of common stock for treasury, net of issuances Excess tax benefits from share based payments Issuance of common stock under employee stock option plans Net cash used by financing activities of continuing operations Effect of exchange rate changes on cash and cash...

  • Page 105
    ... Excess tax benefits from share based payments Issuance of common stock under employee stock option plans Net cash used by financing activities of continuing operations Effect of exchange rate changes on cash and cash equivalents of continuing operations Net increase in cash and cash equivalents of...

  • Page 106
    ... 1, 2012 st 2 nd Quarter July 1, 2012 3 rd Quarter Sep 30, 2012 4 Quarter Dec 31, 2013 Dec 31, 2012 th June 30, 2013 Sep 29, 2013 Motorcycles: Revenue Operating income(a) Financial Services: Revenue Operating income Consolidated: Income before taxes Net income Earnings per common share...

  • Page 107
    ... in Internal Controls There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 107

  • Page 108
    ... Number of securities to be issued upon the exercise of outstanding options Equity compensation plans approved by shareholders: Management employees Equity compensation plans not approved by shareholders: Union employees: Kansas City, MO York, PA Non employees: Board of Directors Total all plans...

  • Page 109
    ...the share units are payable at that time in actual shares of common stock. The Director Compensation Policy also provides that a non-employee Director may elect to receive 50% or 100% of the annual retainer to be paid in each calendar year in the form of common stock based upon the fair market value...

  • Page 110
    ... income for each of the three years in the period ended December 31, 2013 Consolidated balance sheets at December 31, 2013 and December 31, 2012 Consolidated statements of cash flows for each of the three years in the period ended December 31, 2013 Consolidated statements of shareholders' equity...

  • Page 111
    ...II HARLEY-DAVIDSON, INC. CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2013, 2012 and 2011 (In thousands) 2013 2012 2011 Accounts receivable - allowance for doubtful accounts Balance at beginning of period Provision charged to expense Reserve adjustments Write-offs, net of...

  • Page 112
    ...(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 20, 2014. HARLEY-DAVIDSON, INC. By: /S/ Keith E. Wandell Keith E. Wandell Chairman, President and Chief Executive Officer 112

  • Page 113
    ...Chairman, President and Chief Executive Officer (Principal executive officer) Senior Vice President and Chief Financial Officer (Principal financial officer) Chief Accounting Officer (Principal accounting officer) Director Director Presiding Director Director Martha F. Brooks /S/ Michael J. Cave...

  • Page 114
    ..., among Harley-Davidson Financial Services, Inc., Issuer, Harley-Davidson Credit Corp., Guarantor, and Bank of New York Mellon Trust Company, N.A., Trustee (incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated March 1, 2011 (File No. 1-9183)) Officers...

  • Page 115
    ...'s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 (File No. 1-9183)) Harley-Davidson, Inc. Employee Incentive Plan (incorporated herein by reference to Appendix B to the Company's definitive proxy statement on Schedule 14A for the Company's Annual Meeting of Shareholders held...

  • Page 116
    ... of Restricted Stock Units and Restricted Stock Unit Agreement (International) of HarleyDavidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28, 2010...

  • Page 117
    ... statements from the annual report on Form 10-K of Harley-Davidson, Inc. for the year ended December 31, 2013, filed on February 20, 2014 formatted in XBRL: (i) the Consolidated Statements of Operations; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets...