HERE WE GO………

In the Beginning…
•It all started in Milwaukee, Wisconsin in 1903 when William,
Walter, and Arthur Davidson, along with William S. Harley,
created the first Harley-Davidson in their family shed.
• In 1907, the Harley-Davidson Motor Company was Incorporated.
•Both WWI & WWII spurred growth for the company due to
the militaries demand for HD’s economical motorcycles.
• After WWII, the improved American economy, and higher
demands for Harley-Davidson bikes encouraged the company to
expand its efforts and purchase additional manufacturing capacity.
• In 1969, after over sixty years of success and growth, Harley-
Davidson merged with the American Machine and Foundry Company
(AMF).
 Still Growing…
• As the 1970’s roll around,
the company responds to
the “Customizing Craze”
by introducing new
models.
• In 1984, Harley-Davidson
goes public, and by 1987,
is listed on the NYSE.
• By the end of the 1990’s,
Harley-Davidson buys up
Buell Motorcycle •Currently, Harley-Davidson
Company, and expands its
business. continues to experience growth in
all areas of sales and production.
The Business
• “Harley-Davidson, Inc. is an
action-oriented, international NYSE: HDI
company, a leader in its
commitment to continuously • Manufacturer of
improve our mutually motorcycles and motorcycle
beneficial relationships with
stakeholders. Harley- parts and accessories.
accessories
Davidson believes the key to • 8,900 Employees
success is to balance
stakeholders’ interests through
the empowerment of all
employees to focus on value-
added activities.”
- Harley-Davidson
“Vision”
• Motorcycles
– Wide range of bikes, including the popular
Road King & the new 2006 Sportster
– Genuine motor accessories for customization
– Engines, including the Harley-Davidson V-Twin Engine
• Apparel & Accessories
– Everything from leather chaps to children's sticker books

Harley-Davidson’s diverse
product line, and franchise
product gives the company a
competitive edge, and is the
driving factor behind the
company’s growth

Product Line
 Growth
Harley-Davidson has experienced substantial growth
since going public in 1984.
5 year average Cash Flow growth rate 37% 
NET INCOME This is an

 average increase
1,200

1,000
Millions of Dollars 959
890
N e t Inc om e (M illions of D olla rs )

761
of 24% per year
800

600
580
438
400

214
267
348
over the past 7
years.
200

’98 ’99 ’00 ’01 ’02 ’03 ’04 ‘05

 LET’S COMPARE
Competition HARLEY-DAVIDSON
with
2005 POLARIS INDUSTRIES
The Harley-Davidson company
Company Polaris Harley-
manufactures a franchise product. It is hard
Industries Davidson
to find a public company that is in direct
Sales with1,908
competition it. While 5,674 Million
Million Polaris

Industries produces recreational vehicles,

Net Income 111 Million 959 Million
including the Victory motorcycle, it does
notProfit Margin
produce 7.51%The mere
a “Harley”. 16.91%size of
ROE
Harley-Davidson Inc.
on Polaris.
33%casts a huge 31% shadow
 A Look at the Balance Sheet
2005
____________________________________
Current Assets 3,145 million
Fixed Assets 2,110 million
 Total Assets = 5,255
million

Current Liabilities 873 million

Non-Current Liabilities 1,298 million
 Total Liabilities
A 7% Increase
DEBT/EQUITY
= 2,171 million
32%2004
from
**LTD/EQUITY**
** **
 A Look at the Income Statement
2005
______________________________________

Total Sales
 = 5,674 million

Net Profit After Taxes

 = 959 million

Net Profit Margin

 = 16.9%
Now, lets look at Harley-Davidson's ROE
 Du Pont Analysis

ROE
2003

2004
25.73%
2% Increase


2005
27.62%
3% Increase

 31.10%
 Annualized ROE based on
projections for a 10 year period ROE
High P/E: 36.5

 Annualized ROE: 34.84%

Low P/E: 15.2

 Annualized ROE: 23.99%

The Buffet Model
Projected ACRR as Equity Bond
Projected EPS in 10 Years: $22.38
Projected Share Price in 10 Years: $573.88
ACRR @ Current Price ($50): 27.64%

Projected ACRR using Average EPS

Projected Share Price in 10 Years: $618.96

ACRR @ Current Price ($50): 28.61%

 Intrinsic Valuation
Harley-Davidson, Inc.

Based on the decision

Pessimistic criteria
Optimistic to
Most Likely
accept
10 Year a company
20% whose
30% value
30%per
Growth Rate
share/market exceeds 1.50, even
Intrinsic
1.8972 3.7024 2.6532
given
Value per
Share/Market
the pessimistic scenario
(1.8972),
Intrinsic would185.12
we94.86 accept 132.66
Harley-
Value Per
Davidson, Inc. as a potential
Share
investment opportunity.
 The Road Ahead
With brand new models introduced for 2006, Harley-Davidson
expects continued success throughout the coming year.

There are several economical concerns that the company will

continue to keep in mind:
•Rising fuel prices that may impact sales
•Rising interest rates
•Lowered consumer confidence

However, based on the growth that Harley-Davidson has

experienced over the past decade, as well as the intrinsic
valuation and ROE analysis, it is clear that this company is in it
for the long haul.
 I would highly
recommend
Harley-Davidson Inc.

RECOMMENDATION
THANK YOU