nts in excess of 751cc) is not available in many foreigncountries, the Company believes it holds an approximate 11% market share inthe European markets in which it competes and a 22% market share in the PacificRim. During 1995, the Parts and Accessories business generated $292.3 millionin revenues, an increase of 14.0% over 1994. The rate of increase is lowerthan experienced in recent years, however, management believes the 1995 increaseis more indicative of the long-term growth potential of the Parts and Accessoriesbusiness. The Motorclothes business, which accounted for approximately $100million of Parts and Accessories sales in 1995, is expected to remain stablein 1996, while the Motor Parts and Motor Accessories businesses are expectedto increase. The Parts and Accessories business is expected to grow at an annualrate similar to the annual growth rate in motorcycle shipments. The Companyis developing an improved system to better monitor domestic dealer inventoriesand retail traffic. In addition, the Company initiated several promotionalprograms in the fourth quarter of 1995 to increase dealer floor traffic andplans to continue this promotional strategy in 1996. To further strengthenits ability to process and fill orders for the Parts and Accessories business,the Company plans to construct a new distribution center (at an approximatecost of $17 million).Construction is scheduled to begin in the second quarterof 1996, and the facility should be fully operational by the first quarterof 1997. Gross ProfitGross profit increased $53.1 million, or 14.8%, in1995 as compared with 1994 primarily due to an increase in volume. The grossprofit margin was 30.5% in 1995 as compared with 30.9% in 1994. The gross profitmargin was negatively affected by the overtime incurred to produce additionalmotorcycle units and make up for production time lost because production employeeswere involved in numerous strategic planning sessions during 1995.Internal&...
