Harley Davidson 2015 Annual Report Download - page 7

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The Company distributes its motorcycles and related products to a network of independent dealers located in over 95
countries worldwide. The following table includes the number of worldwide Harley-Davidson independent dealerships by
geographic region as of December 31, 2015:
Americas Region EMEA
Region Asia-Pacific Region Total
United States Canada Latin America
Dealerships 696 68 61 378 232 1,435
Retail Customer and Dealer Financing – The Company believes that HDFS, as well as other financial services
companies, provide adequate financing to Harley-Davidson dealers and their retail customers. HDFS provides financing to
Harley-Davidson independent dealers and the retail customers of those dealers in the U.S. and Canada. The Company’s
independent dealers and their retail customers in EMEA, Asia-Pacific and Latin America are not directly financed by HDFS,
but have access to financing through other established financial services companies, some of which have licensing or branding
agreements with the Company.
Seasonality – The timing of retail sales made by the Company’s independent dealers tracks closely with regional riding
seasons. The seasonality of the Company’s wholesale motorcycle shipments primarily correlates with the timing of retail sales.
The Company utilizes its flexible or surge manufacturing capabilities to help align the production and wholesale shipments of
its motorcycles with the retail selling season. This allows the Company to minimize inventory levels in the Americas region. In
the EMEA and Asia Pacific regions, the Company utilizes a distribution process whereby Company-owned inventory is
maintained locally at a level sufficient to fulfill dealer orders as needed.
Motorcycle Manufacturing – The Company has a flexible manufacturing process designed to help ensure it is well-
positioned to meet customer demand in a timely and cost-effective manner.(1) This flexible or surge manufacturing capability
allows the Company to increase the production of motorcycles ahead of and during the peak retail selling season to more
closely correlate the timing of production and wholesale shipments to the retail selling season.
Most of the Company's manufacturing facilities are located in the U.S. Internationally, the Company operates a CKD
(Complete Knock Down) assembly facility in Brazil, which assembles motorcycles sold in Brazil from component kits sourced
from the Company’s U.S. plants and its suppliers. The Company also operates a manufacturing facility in India, which includes
both CKD assembly of certain motorcycles for sale in India and production of the Company’s Street motorcycles for
distribution to markets outside of North America. Like its U.S. manufacturing facilities, the Company’s Brazil and India
operations are focused on driving world-class performance with flexible or surge production processes to meet customer
demands at reduced lead times. The Company also operates a manufacturing facility in Australia for the purpose of producing
certain complex, high-finish wheels for its motorcycles.
Raw Materials and Purchased Components – The Company continues to establish and reinforce long-term, mutually
beneficial relationships with its suppliers. Through these collaborative relationships, the Company gains access to technical and
commercial resources for application directly to product design, development and manufacturing initiatives. In addition,
through a continued focus on collaboration and strong supplier relationships, the Company believes it will be positioned to
achieve strategic objectives and deliver cost and quality improvement over the long-term(1).
The Company's principal raw materials that are purchased include steel and aluminum castings, forgings, steel sheets,
coils and bars. The Company also purchases certain motorcycle components, including, but not limited to, electronic fuel
injection systems, batteries, certain wheels, tires, seats, electrical components and instruments. The Company closely monitors
the overall viability of its supply base. At this time, the Company does not anticipate difficulties in obtaining raw materials or
components(1).
Research and Development – The Company incurred research and development expenses of $161.2 million, $138.3
million and $152.2 million during 2015, 2014 and 2013, respectively.
Regulation – International, federal, state and local authorities have various environmental control requirements relating to
air, water and noise that affect the business and operations of the Company. The Company strives to ensure that its facilities and
products comply with all applicable environmental regulations and standards.
The Company’s motorcycles that are sold in the United States are subject to certification by the U.S. Environmental
Protection Agency (EPA) and the California Air Resources Board (CARB) for compliance with applicable emissions and noise
standards. Harley-Davidson motorcycle products are designed to comply with EPA and CARB standards and the Company
believes it will comply with future requirements when they go into effect(1). Additionally, the Company’s motorcycle products
must comply with the motorcycle emissions, noise and safety standards of Canada, the European Union, Japan, Brazil and
certain other foreign markets where they are sold, and the Company believes its products currently comply with those