Financial Analysis Project

Brett Webster
ACCT 2410
October 20, 2015
US$k*

Harley-Davidson, Inc. is an American motorcycle manufacturer

founded in Milwaukee, WI in 1903. (Wiki, 2015) Harley-Davidson, Inc. is

a publicly traded company in the New York Stock Exchange under HOG
(Harley Owners Group). Harley-Davidson, Inc. is a company rich in
American history. As one of the two surviving American motorcycle manufacturers, HarleyDavidson, Inc. has continued to rival competitors at the highest levels for over a century.
!

In this analysis I will highlight financial aspects of Harley-Davidson, Inc. and give a

recommendation of whether to invest in the companys debts or its equity. First off, I will cover
the Liquidity of Harley-Davidson, Inc. and evaluate the companys ability to pay its current
liabilities. Second, I will overview the companys efficiency and its ability to sell its
merchandise and collect its receivables. I will highlight the companys solvency and its ability
to pay its long-term debt. I will evaluate the companys profitability and touch on information
important to its stockholders. Lastly focus on the investment potential of the company and
evaluate its stock as an investment.

Liquidity
!

Harley-Davidson, Inc. has a working capital of $1,558,809*. Given the amount of

working capital Harley-Davidson, Inc. would have no issue in meeting and exceeding its shortterm obligations by liquidating its current assets.
!

Current assets in 2014 were $3,948,095* and current liabilities were $2,389,286* which

gives Harley-Davidson, Inc. a current ratio of 1.65.

Cash and cash equivalents totaled

US$k*

$906,680* in 2014 and given its current liabilities, Harley-Davidson, Inc.

has a cash ratio of 0.38.
!

Given the cash ratio, Harley-Davidson, Inc. would not, however, be

able to pay its current liabilities with its cash and cash equivalents solely.

Efficiency
!

Harley-Davidson, Inc. cost of goods sold totaled $3,542,601*, and had an average

merchandise inventory of $448,871*, giving them an inventory turnover rate of 7.89. With that
in mind, we can calculate Harley-Davidson, Inc. days sales in inventory at 46.26.
!

Harley-Davidson, Inc. an American motorcycle manufacturer as it is, also sells a variety

of name brand products. These include ride gear such as helmets, leathers, boots, etc. They also
carry a full clothing line representing the name brand. These calculated ratios have all of the
above considered.
!

Harley-Davidson, Inc. has gross profit showing $2,025,080* and net sales revenue at

$5,567,681*, calculating their gross profit percentage at 0.36. Simply put, Harley-Davdson, Inc.
makes $1.36 for every dollar towards cost of goods sold.

Solvency
!

Harley-Davidson, Inc. in 2014 had total liabilities at $6,618,811* and total assets at

$9,528,097*, giving Harley-Davidson, Inc. a total debt ratio of 0.69. This is the percentage of
assets financed with debt. Given the amount of total liabilities, total equity in 2014 was reported

US$k*

at $2,909,286* which in turn calculates our debt to equity ratio. This tells
us the proportion of liabilities relative to equity.
!

Harley-Davidson, Inc. in 2014 had net income totaling $844,611*,

their income tax expense totaled $9,147* and they had an interest expense
of $4,162. Their times-interest-earned ratio shows 201.74, in turn showing they would have to
issue in paying their interest expense.

Profitability
!

With a net income of $844,611* and interest expense of $4,162, average total assets at

$9,528,097* we are able to find the rate of return on total assets (0.09). This number shows us
the success Harley-Davidson, Inc. has had in using its assets to earn income. Preferred dividends
in 2014 totaled $238,300* and with the average common stockholders equity at $2,011,378* this
gives us our rate of return on common stockholders equity (0.30) and the relationship between
the net income available to stockholders and their average common equity invested in the
company.
!

The average number of shares outstanding in 2014 totaled 217,706, giving us an earnings

per share of 2.79 and the amount of net income (loss) for each share of its outstanding common
stock.

US$k*

Investment Potential
!

The average low of market price per share of common stock over

the last four years calculates to $59.69 anDd the average high of market
price per share of common stock over the last four years calculates to $71.31 giving us an
average of $65.50. $65.50 divided by the earnings per share of 3.88 gives us a price/earnings
ratio of $16.88 which is the value NYSE places on a dollar of Harley-Davidson, Inc. earnings.
!

Harley-Davidson, Inc. has a dividend yield of 1.10 which is the percentage of NYSE

value that is returned annually as dividends to stockholders. In 2014 Harley-Davidson, Inc. had
a dividend payout of $238.3m

Competitive Landscape
!

In 2014 a competitive landscape including Harley-Davidson, Inc. and other various

motorcycle manufacturers including Triumph Motorcycles, a long-lasting and extremely popular

British motorcycle manufacturing company, shows just how dominant Harley-Davidson, Inc. is
in the motorcycle manufacturing industry.
!

Annual Sales for Harley-Davidson totaled $6.23B in 2014, whereas Triumph totaled

$512.39M. Harley-Davidson, Inc. gross profit margin in 2014 was 39.53%. Industry median
was 22.99% and the market median was 39.35%, showing that Harley-Davidson, Inc. is setting
the bar.
!

Harley-Davidson, Inc. fell short to Ultra Motorcycle, a custom motorcycle manufacturer

located in Glendale, AZ that was the first company to ship custom V-Twin motorcycles into

US$k*

Canada. With Harley-Davidson, Inc. return on equity at 24.86% and Ultra

Motorcycles at 28.67% they are still extremely competitive. The industry
median was as low as .22% and the market median was as low as 5.93%,
showing Harley-Davidson, Inc. is still way beyond average.

Conclusion
!

Harley-Davidson, Inc. is a company that refuses to die. The company has survived

numerous ownership arrangements, subsidiary arrangements, periods of poor economic health

and product quality. (Wiki, 2015) Given everything that Harley-Davidson has overcome in the
100+ years of motorcycle manufacturing and its current financial status, I would highly
recommend investing in its equity.
!

Through the Great Depression Harley-Davidson, Inc. was able to survive by

manufacturing industrial powerplants based on their motorcycle engines. (Wiki, 2015) and even
introduced a new line of motorcycles in 1934. The American Machine and Foundry (AMF)
bought the company in 1969 and in 1981 sold it back to investors. During those 12 years
Harley-Davidson motorcycles lost almost all its credibility and earned a few infamous
nicknames such as, Harldy Abelson and Hogly Ferguson which in turn is why people call
them Hogs. (Wiki, 2015)
!

Harley-Davidson, Inc. is not something that will simply go away, its a way of life, Live

to ride, ride to live. The brand demands respect and its customers will let you know it!
Whatever you ride, anything else is simply not a Harley.

US$k*

Works Cited
"Harley-Davidson." Wikipedia. Wikimedia Foundation. Web. 21 Oct. 2015.
<https://www.wikipedia.org/>.
Spiceland, J. David, and James F. Sepe. Intermediate Accounting. 7th ed. New York: McGrawHill/Irwin, 2013. Print.

ePortfolio
http://brettwebstereportfolio.weebly.com/accounting---2410.html

US$k*

HARLEY-DAVIDSON,INC.
CONSOLIDATEDBALANCESHEETS
December31,2014and2013
(Inthousands,exceptshareamounts)
2014

ASSETS
Currentassets:
Cashandcashequivalents
Marketablesecurities
Accountsreceivable,net
Financereceivables,net
Inventories
Restrictedcash
Deferredincometaxes
Othercurrentassets
Totalcurrentassets

Financereceivables,net
Property,plantandequipment,net
Prepaidpensioncosts
Goodwill
Deferredincometaxes
Otherlong-termassets
$
LIABILITIESANDSHAREHOLDERSEQUITY
Currentliabilities:
Accountspayable
Accruedliabilities
Short-termdebt
Currentportionoflong-termdebt
Totalcurrentliabilities
Long-termdebt
Pensionliability
Postretirementhealthcareliability
Deferredincometaxes
Otherlong-termliabilities
Commitmentsandcontingencies(Note15)
Shareholdersequity:
Preferredstock,noneissued
Commonstock,344,174,653and343,157,231sharesissued,respectively
Additionalpaid-in-capital
Retainedearnings
Accumulatedothercomprehensiveloss
Treasurystock(132,297,840and123,197,976shares,respectively),atcost
Totalshareholdersequity

53

906,680
57,325
247,621
1,916,635
448,871
98,627
89,916
182,420
3,948,095
4,516,246
883,077

27,752
77,835
75,092
9,528,097

196,868
449,317
731,786
1,011,315
2,389,286
3,761,528
76,186
203,006

188,805

2013

3,442
1,265,257
8,459,040
(514,943)
(6,303,510)
2,909,286
9,528,097 $

1,066,612
99,009
261,065
1,773,686
424,507
144,807
103,625
115,492
3,988,803
4,225,877
842,477
244,871
30,452
3,339
69,221
9,405,040

239,794
427,335
666,317
1,176,140
2,509,586
3,416,713
36,371
216,165
49,499
167,220

3,432
1,175,052
7,852,729
(332,676)
(5,689,051)
3,009,486
9,405,040

HARLEY-DAVIDSON,INC.
CONSOLIDATEDBALANCESHEETS(continued)
December31,2014and2013
(Inthousands,exceptshareamounts)
2014

Balancesheldbyconsolidatedvariableinterestentities(Note6)
Currentfinancereceivables,net
Otherassets
Non-currentfinancereceivables,net
Restrictedcash-currentandnon-current
Currentportionoflong-termdebt
Long-termdebt

$
$
$
$
$
$

312,645
3,409
1,113,801
110,017
366,889
904,644

Theaccompanyingnotesareanintegralpartoftheconsolidatedfinancialstatements.

54

2013

$
$
$
$
$
$

352,899
4,149
1,184,441
133,053
334,630
922,002

HARLEY-DAVIDSON,INC.
CONSOLIDATEDSTATEMENTSOFINCOME
YearsendedDecember31,2014,2013and2012
(Inthousands,exceptpershareamounts)

2014

Revenue:
MotorcyclesandRelatedProducts
FinancialServices
Totalrevenue
Costsandexpenses:
MotorcyclesandRelatedProductscostofgoodssold
FinancialServicesinterestexpense
FinancialServicesprovisionforcreditlosses
Selling,administrativeandengineeringexpense
Restructuring(benefit)expense
Totalcostsandexpenses
Operatingincome
Investmentincome
Interestexpense
Incomebeforeprovisionforincometaxes
Provisionforincometaxes
Netincome
Earningspercommonshare:
Basic
Diluted
Cashdividendspercommonshare

2013

5,567,681
660,827
6,228,508

3,542,601
164,476
80,946
1,159,502

4,947,525
1,280,983
6,499
4,162
1,283,320
438,709
844,611

$
$
$

3.90
3.88
1.10

$
$
$

2012

5,258,290
641,582
5,899,872

4,942,582
637,924
5,580,506

3,395,918
165,491
60,008
1,126,884
(2,131)
4,746,170
1,153,702
5,859
45,256
1,114,305
380,312
733,993 $

3,222,394
195,990
22,239
1,111,232
28,475
4,580,330
1,000,176
7,369
46,033
961,512
337,587
623,925

3.30
3.28
0.84

Theaccompanyingnotesareanintegralpartoftheconsolidatedfinancialstatements.

51

$
$
$

2.75
2.72
0.62

HARLEY-DAVIDSON,INC.
CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME
YearsendedDecember31,2014,2013and2012
(Inthousands)
2014

Netincome
Othercomprehensive(loss)income,netoftax
Foreigncurrencytranslationadjustment
Derivativefinancialinstruments
Marketablesecurities
Pensionandpostretirementbenefitplans
Totalothercomprehensive(loss)income,netoftax
Comprehensiveincome

844,611

2013

(36,808)
20,722
(424)
(165,757)
(182,267)
662,344 $

733,993

(18,009)
2,157
(953)
291,807
275,002
1,008,995 $

Theaccompanyingnotesareanintegralpartoftheconsolidatedfinancialstatements.

52

2012

623,925
1,400
(10,144)
350
(122,551)
(130,945)
492,980

HARLEY-DAVIDSON,INC.
CONSOLIDATEDSTATEMENTSOFSHAREHOLDERSEQUITY
YearsendedDecember31,2014,2013and2012
(Inthousands,exceptshareamounts)
CommonStock
Issued
Shares
BalanceDecember31,2011

Balance

339,107,230

3,391

Additional
paid-in
capital
968,392

Accumulated
Other
comprehensive
income(loss)

Retained
Earnings
$

6,824,180

(476,733)

Treasury
Balance
$

Total

(4,898,974)

2,420,256

NetIncome

623,925

Totalothercomprehensiveloss,netoftax
(Note10)

Dividends

Repurchaseofcommonstock

Share-basedcompensationand401(k)match
madewithTreasuryshares

42,056

42,058

535,807

1,622,801

16

45,957

45,973

9,670

9,670

Issuanceofnonvestedstock
Exerciseofstockoptions
Taxbenefitofstockoptionsandnonvested
stock
BalanceDecember31,2012

341,265,838

3,413

1,066,069

(130,945)

(141,681)

(6)

7,306,424

(607,678)

623,925

(130,945)

(141,681)

(311,632)

(5,210,604)

NetIncome

Totalothercomprehensiveincome,netoftax
(Note10)

Dividends

Repurchaseofcommonstock

Share-basedcompensationand401(k)match
madewithTreasuryshares

40,724

784

Issuanceofnonvestedstock
Exerciseofstockoptions
Taxbenefitofstockoptionsandnonvested
stock
BalanceDecember31,2013

275,002

275,002

(187,688)

41,508

50,553

50,567

17,711

17,711

3,432

1,175,052

7,852,729

(332,676)

844,611

Dividends

Repurchaseofcommonstock

BalanceDecember31,2014

(479,231)

Taxbenefitofstockoptionsandnonvested
stock

(479,231)

14

Totalothercomprehensiveloss,netoftax
(Note10)

Exerciseofstockoptions

733,993

492,755

NetIncome

Issuanceofnonvestedstock

2,557,624

1,398,638

343,157,231

Share-basedcompensationand401(k)match
madewithTreasuryshares

733,993

(187,688)

(5)

(311,632)

(5,689,051)

(182,267)

(238,300)

3,009,486

844,611

(182,267)

(238,300)

(615,602)

(615,602)

40,848

1,143

41,991

15,891

1,001,531

10

37,775

37,785

11,582

11,582

344,174,653

3,442

1,265,257

8,459,040

(514,943)

(6,303,510)

Theaccompanyingnotesareanintegralpartoftheconsolidatedfinancialstatements.

56

2,909,286

HARLEY-DAVIDSON,INC.
CONSOLIDATEDSTATEMENTSOFCASHFLOWS
YearsendedDecember31,2014,2013and2012
(Inthousands)

2014

2013

2012

Netcashprovidedbyoperatingactivities(Note2)
Cashflowsfrominvestingactivities:
Capitalexpenditures
Originationoffinancereceivables
Collectionsonfinancereceivables
Purchasesofmarketablesecurities
Salesandredemptionsofmarketablesecurities
Other
Netcashusedbyinvestingactivities
Cashflowsfromfinancingactivities:
Proceedsfromissuanceofmedium-termnotes

$ 1,146,677

Repaymentsofmedium-termnotes
Repaymentofseniorunsecurednotes
Proceedsfromsecuritizationdebt
Repaymentsofsecuritizationdebt
Borrowingsofasset-backedcommercialpaper
Repaymentsofasset-backedcommercialpaper
Netincrease(decrease)increditfacilitiesandunsecuredcommercialpaper
Netchangeinrestrictedcash
Dividendspaid
Purchaseofcommonstockfortreasury
Excesstaxbenefitsfromshare-basedpayments
Issuanceofcommonstockunderemployeestockoptionplans
Netcashusedbyfinancingactivities
Effectofexchangeratechangesoncashandcashequivalents
Netdecreaseincashandcashequivalents

(526,431)
(303,000)
847,126
(834,856)
84,907
(77,800)
63,945
22,755
(238,300)
(615,602)
11,540
37,785
(536,096)
(25,863)
$ (159,932) $

Cashandcashequivalents:
Cashandcashequivalentsbeginningofperiod
Netdecreaseincashandcashequivalents
Cashandcashequivalentsendofperiod

$ 1,066,612 $ 1,068,138 $ 1,526,950

(159,932)
(1,526)
(458,812)
$ 906,680 $ 1,066,612 $ 1,068,138

(232,319)
(3,568,423)
3,013,245

41,010
1,837
(744,650)

977,093
(208,321)
(3,244,005)
2,831,994
(4,998)
40,108
16,355
(568,867)

991,835

801,458
(189,002)
(2,858,701)
2,768,089
(4,993)
23,296

(261,311)
993,737

(27,858)
(420,870)

647,516
763,895
(840,387) (1,405,599)
88,456
200,417
(78,765)
(24,301)
371,085
(744,724)
43,201
41,647
(187,688)
(141,681)
(479,231)
(311,632)
19,895
13,065
50,567
45,973
(393,209)
(990,073)
(16,543)
(8,886)
(1,526) $ (458,812)

Theaccompanyingnotesareanintegralpartoftheconsolidatedfinancialstatements.

55

Appendix B
Liquidity
2014
US$k
Working Capital:!

3,948,095 2,389,286 = 1,558,809

Current Ratio:!3,948,095 / 2,389,286 = 1.65

Cash Ratio:!

906,680 / 2,389,286 = 0.38

Efficiency
2014
US$k
Inventory Turnover:! 3,542,601 / 448,871 = 7.89
Days Sales in Inventory:!

365 / 7.89 = 46.26

Gross Profit Percentage:!

2,025,080 / 5,567,681 = 0.36

Solvency
2014
US$k
Debt Ratio:!

6,618,811 / 9,528,097 = 0.69

Debt to Equity Ratio:! 6,618,811 / 2,909,286 = 2.28

Times-Interest-Earned Ratio:!(844,611 - 9,147 + 4,162) / 4,162 = 201.74

Profitability
2014
US$k
Profit Margin Ratio:! 844,611 + 4,162 / 2,996,380 = 0.28
Rate of Return on Total Assets:!

846,611 + 4,162 / 9,528,097 = 0.28

Rate of Return on Common Stockholders Equity:! 846,611 - 238,300 / 2,011,378 = 0.30

Earnings Per Share:! 846,611 - 238,300 / 217,706 = 2.79

Investment Potential
2014
US$k
Price/Earnings Ratio:! 59.69 + 71.31 / 2 = 65.50 / 3.88 = 16.88
Dividend Yield:!

1.10 (pg. 41)

Dividend Payout:!

$238.3m (pg. 41)

HARLEY-DAVIDSON, INC.
Milwaukee, WI United States NYSE HOG other stock tickers
Also trades as: Buenos Aires: HOG; Dusseldorf: HAR; German: HAR; Munich: HAR; NYSE: HOG; NYSE Arca: HOG; XETRA: HAR;
This company is covered by Adam Anderson.

From advertising and airlines to television to stang, Adam Anderson has covered a wide variety of industries at
Hoover's since 2004.
Competitive Landscape
This page shows Financial Comparisons between this company, up to three competitors and Industry Medians. You can use the
button at the right to select dierent competitors to compare with this company.
2014 Annual Sales

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2014 Net Profit Margin

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2014 Key Numbers
Harley-Davidson

Ultra Motorcycle

Triumph Motorcycles

Viper Motorcycle

Annual Sales

$6.23B

$5.40M

$512.39M

$2.45M

Employees

6,500

--

--

--

Market Cap

$13.96B

--

--

--

2014 Profitability
HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

Gross Profit Margin

39.53%

18.52%

--

--

22.99%

39.35%

Pre-Tax Profit
Margin

20.02%

0.92%

--

--

0.08%

6.76%

Net Profit Margin

13.24%

1.76%

--

--

3.39%

5.68%

Return on Equity

24.86%

28.67%

--

--

0.22%

5.93%

Return on Assets

7.70%

4.21%

--

--

0.06%

1.85%

Return on Invested
Cap

--

--

--

--

0.54%

4.96%

2014 Valuation
HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

Price/Sales Ratio

1.97

--

--

--

0.80

1.67

Price/Earnings

15.06

3.10

--

--

14.10

20.59

Ratio
Price/Book Ratio

3.88

0.82

--

--

2.28

1.96

Price/Cash Flow
Ratio

9.93

--

--

--

12.43

12.60

2014 Operations
HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

Days of Sales Outstanding

158.76

16.65

--

--

7.88

49.22

Inventory Turnover

15.65

6.79

--

--

0.72

9.22

Days Cost of Goods Sold in

Inventory

38.57

65.96

--

--

13.37

61.96

Asset Turnover

0.58

2.39

--

--

0.93

0.54

Net Receivables Turnover

Flow

2.32

16.29

--

--

7.02

7.29

Eective Tax Rate

33.86%

--

--

--

30.86%

30.68%

2014 Financial
HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

Current Ratio

1.86

0.72

--

--

1.26

1.90

Quick Ratio

--

--

--

--

0.78

1.31

Leverage Ratio

1.51

0.05

--

--

0.22

0.57

Total
Debt/Equity

2.02

2.75

--

--

0.04

0.54

Interest
Coverage

10,864.00

0.41

--

--

8.33

5.92

2014 Per Share Data

HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

Revenue Per Share

$28.89

$2.83

--

--

$3.66

$10.52

Dividend Per Share

$1.17

--

--

--

$1.10

$0.80

Cash Flow Per Share

$5.73

($0.05)

--

--

$0.10

$1.38

Working Capital Per

Share

$10.55

($0.22)

--

--

$0.15

$1.78

Long-Term Debt Per

Share

$22.14

$<0.01

--

--

$0.04

$6.23

Book Value Per Share

$14.68

$0.19

--

--

$1.24

$9.25

Total Assets Per

Share

$51.29

$1.00

--

--

$3.13

$21.90

2014 Growth
HarleyDavidson

Ultra
Motorcycle

Triumph
Motorcycles

Viper
Motorcycle

Industry
Median

Market
Median1

12-Month Revenue
Growth

(4.20%)

24.88%

--

--

6.69%

5.67%

12-Month Net Income

Growthh

(7.48%)

--

--

--

15.95%

7.45%

12-Month EPS Growth

(3.57%)

--

--

--

13.10%

6.66%

12-Month Dividend
Growth

20.62%

--

--

--

14.29%

8.79%

36-Month Revenue
Growth

1.48%

14.75%

--

--

2.49%

4.38%

36-Month Net Income

Growth

3.89%

--

--

--

(2.38%)

6.69%

36-Month EPS Growth

7.06%

--

--

--

(10.47%)

6.03%

36-Month Dividend
Growth

27.84%

--

--

--

28.73%

8.17%

1 Public companies trading on the New York Stock Exchange, the American Stock Exchange, and the NASDAQ National Market.
20152015 Mergent, Inc. Financial Data provided by

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