Form 10-K (NYSE: HOG)

We all like to browse through Harley-Davidson brochures and catalogues, letting our imagination run wild with us on new Road King or Fat Boy, or dressed in the latest (of course tight) leathers. Its all about living the dream, revealing true colours.

Having spend a great part of my life in the investment industry, I sickly enjoy browsing through a quite different brochure. It has no colourful pictures, is printed in plain black and white, mostly in small fonts so it is hard to read. Its called: the FORM 10-K.

Listed companies in the US has to disclose this set of financial information, so does Harley-Davidson, Inc., which in 2006 had its NYSE ticker symbol changed from HDI to HOG. In the 10-K its not just about the balance sheet numbers or P&L, but it is also about assets and liabilities in a wider sense: what did they achieve, how did they achieve this, and what are potential problems facing the future. The 10-K may not be as heavy as the Genuine Motor Parts and Accessories Catalogue with over 825 pages, but still, the 2012 edition of the 10-K for 2011 has 144 pages, and some interesting facts are hidden here.

Every Thing You Always Wanted to Know About Harley-Davidson * But Were Afraid to Ask

In this and some future posts, I will look at some of the numbers and facts disclosed, and being openly opinionated, add my 2 cents to them.

How many motorbikes does Harley-Davidson sell? Worldwide? In Europe? What’s the Market share, is it increasing or dying away? Already on page 5 you find the first answers. Note that some graphs are rearranged screenshots, other self generated, and footnotes have been removed. But they are all based on numbers from the 10-K, a report not generated by any marketing department, but the accounting and legal department, as false, incomplete or misleading statements in a 10-K can prove very costly.

Now this all looks reassuring, Harley-Davidson could increase its market share year by year, and increase units sold in Europe above 2009 level. But how good is good? How did it look in 2005? All you need is have a look in the 10-K’s of these year!

The answer: in the US the motorcycle market (and Harley-Davidson) peaked in 2006, with the biggest crash in 2009, more then halving until 2010 throughout the crisis! But in nearly every year, Harley could increase its market share.

In Europe the peak was reached 2 year later, in 2008, but then the market crashed in 2009. Also interesting to see in the 10-K that more Buell’s were sold in Europe then the US, but never really reaching 10.000 units worldwide. Buell’s market share stayed neglectable and was no match to other sporty brands, so it was ditched.

In the last 5 years we saw a very difficult global market environment, crashing in 2009, specially in the US. But throughout, the brand was robust, and Harley-Davidson kept increasing its market share.

The authors of a 10-K do not always make it easy to read it, maybe its intentional, to discourage the “real consumer” to dig to deep to easily, as he should just enjoy the ride. For many of us Harley-Davidson is a bike and a lifestyle, and our attention is focused on 3 segments: the motorcycles, the chrome (parts and accessories) and the clothing (merchandise). I always wanted to know how much each of these 3 segments contribute to the HD revenues.

Found spread over 3 pages, this is the contribution of each of the sectors in 2011 to Total Revenues of Harley-Davidson

I thought it would be less blue and more red & green, but this feeling must be marketing induced. It also shows that we buy the original motorcycle, but do we always by the original HD Parts and Accessories? Maybe not, as some of the more expensive additional parts you buy for your bike, like your pipes from Vance & Hines or SatNav from Garmin, will keep the dealership alive, but do not add to the revenues of Harley-Davidson Inc.

To be continued…

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