Harley Davidson

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is the largest market share holder of motorcycles over 750cc in the United States. After the expansion of our production and distribution capacity, we will be in the position to meet the increasing demand for our motorcycles and other products.

Growth potential appears very good especially in the overseas market. Gaining a larger market share in these area may require a further increase in production and distribution capacities. We must plan for expansion now and continue to grow as a company.

In Milwaukee,
William Harley, 21, and Arthur Davidson, 20, began experiments on taking the work out of bicycling. They were soon joined by Arthur's brothers, Walter and William. Many changes were made to the engine design before its builders were satisfied. After the new looped from was finalized, they were ready to begin production. In 1903 they produced three motorcycles. Harley-Davidson erected its first building the current Juneau avenue site in 1906 and incorporated in 1907. In 1907 Harley-Davidson produced 150 motorcycles.

motorcycle market over 750cc has been increasing over the last five years. The Harley-Davidson 1996 model year production line, sold though a world wide network of more than 1,000 dealers, includes 20 cruiser, factory custom and touring motorcycles, as well as police motorcycles. Harley-Davidson benefits form having one of the world's most recognized and respected brand names and our motorcycle model names are among the best known in the industry: The

Competition and Market share
This chart shows the competition and market
share for 1995 in the United States:

Current Market Situation
sales for 1995 of $1.4 billion were $191.6 million, or 16.5%, higher than net sales for 1994. Net income and earnings per
share from continuing operations
were $111.1 million and $1.48, for 1995 as compared with $96.2 million and $1.26, for 1994. Net income and earnings per share from discontinued operations were $1.4 million and $.02, for 1995 as compared with $8.0 million and $.11, for 1994, which included a $4.6 million, or $.06 per-share, one-time tax benefit related to the legal reorganization of Holiday Rambler. On January 22, 1996, the Company announced its strategic decision to discontinue the operations of the Transportation Vehicles segment in order to concentrate its financial and human resources on its core motorcycle business. The Company does not anticipate a loss on the discontinuance of the Transportation Vehicles segment. The results of the Transportation Vehicles segment have been reported separately as discontinued

operations for each year presented. On November 14, 1995, the Company acquired substantially all of the common stock and common stock equivalents of Eaglemark Financial Services, Inc. that it did not already own. The purchase price was approximately $45 million, which was paid from internally generated funds and short-term borrowings. The Company has included the results of operations of the Financial Services segment ($3.6 million) in its statement of operations for the year ended December 31, 1995 as though it had been acquired at the beginning of the year and deducted the preacquisition earnings as part of non-operating expense. The Company increased its quarterly dividend in September from $.04 per share to $.05 per share which resulted in a total year pay out of $.18 per share.

Units Shipped and Net Sales
The Motorcycles and Related Products
(Motorcycles) segment's net sales increased 16.5% over 1994 due primarily to a 9,293 unit (9.7%) increase in motorcycle shipments, as well as a 14.0% increase in its Parts and Accessories business. The increase in motorcycle shipments is the result of ongoing implementation of the Company's manufacturing strategy and efforts to

satisfy demand. The manufacturing strategy is designed to
increase capacity, adjust to changes in...
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