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Harley-Davidson Reports Record Fourth Quarter and 16th Consecutive Record Year

MILWAUKEE, Jan. 17 /PRNewswire-FirstCall/ --

Harley-Davidson, Inc. (NYSE: HDI - news) today announced record sales and earnings for its fourth quarter and year ended December 31, 2001. Revenue for the quarter was $894.4 million compared with $756.2 million in the year-ago quarter, an 18.3 percent increase. Fourth quarter diluted earnings per share (EPS) were 39 cents, a 26.8 percent increase compared with last year's 31 cents. Revenue for the full year was $3.36 billion, compared with $2.91 billion in 2000, a 15.7 percent increase. Net income for the year was $437.7 million, a 25.9 percent increase versus last year's $347.7 million, while diluted EPS for the full year were $1.43, a 26.4 percent increase compared with $1.13 in 2000.

``The year 2001 was our 16th consecutive year of record revenue and income, in spite of the weaker global economy,'' said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. ``Worldwide retail sales of Harley-Davidson® motorcycles in the fourth quarter were strong with 12.9 percent unit growth over last year.

``In addition to strong demand for our traditional products, we also successfully launched our new performance cruiser, the V-Rod(TM). In late November, we began shipping V-Rod motorcycles to our dealer network. Dealers and customers alike were anxiously awaiting this innovative new product which has received acclaim from industry experts worldwide.

``Even though the world is experiencing difficult economic conditions, fourth quarter retail sales of Harley-Davidson motorcycles and progress in expanding our motorcycle capacity have given us the confidence to increase our production target to 258,000 Harley-Davidson motorcycles for 2002,'' said Bleustein. ``We will continue to manage our business for the long-term while carefully monitoring the motorcycle market and other near-term indicators.''

Motorcycles and Related Products Segment -- Fourth Quarter Results

Fourth quarter shipments of Harley-Davidson motorcycles totaled 63,535 units, up 9,406 units or 17.4 percent over the same period last year. Included in the 2001 figures are 1,703 V-Rod motorcycles. Revenue from Harley-Davidson motorcycles was $723.3 million, an increase of $117.2 million or 19.3 percent.

Sales of Parts and Accessories (P&A), which consist of Genuine Motor Parts and Genuine Motor Accessories, totaled $110.8 million, an increase of $12.3 million, or 12.5 percent from the year-ago quarter. Sales of General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $47.5 million, an increase of $6.8 million or 16.8 percent.

Fourth quarter gross margin was 35.7 percent of revenue, up from 34.7 percent last year. Gross margin improved primarily due to a higher percentage of U.S. shipments, favorable product mix and wholesale motorcycle price increases.

Fourth quarter operating margin for the Motorcycles and Related Products Segment was 18.8 percent of revenue, which was better than last year's fourth quarter operating margin of 17.3 percent. The increase in operating margin was driven primarily by the increase in gross margin.

Financial Services Segment -- Fourth Quarter Results

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported fourth quarter operating income of $17.0 million, up $4.0 million or 31 percent compared to the year-ago quarter.

``Harley-Davidson Financial Services continues to help make the dream of owning a new Harley-Davidson motorcycle a reality,'' said Bleustein. The subsidiary benefited from the increase in Harley-Davidson's U.S. motorcycle sales, strong acceptance of its improved consumer financing program and decreasing cost of funds due to lower market interest rates.

HDFS also entered into an agreement to sell $315 million of asset-backed securitizations during the quarter. The Company expects HDFS's full year 2002 operating income growth rate to be slightly higher than the Harley-Davidson motorcycle unit growth rate.

Harley-Davidson Motorcycle Retail Data

Harley-Davidson retail sales for 2001 grew in the U.S. and in Japan, up 14.4 and 10.7 percent, respectively, compared to last year. Harley-Davidson retail sales in Europe were down 2.0 percent compared with 2000. The Company believes the strong U.S. dollar and weak European economies are contributing to slower Harley-Davidson sales in Europe. ``While complete data is not available, we expect to grow worldwide market share for heavyweight motorcycles in 2001,'' said Bleustein.

The most recent market data is listed in the accompanying table.

Share Repurchase

During the year, Harley-Davidson repurchased approximately 2.4 million shares of its common stock, of which 0.2 million shares were repurchased during the fourth quarter.

Twelve Month Results

For the fiscal year ended 2001, total Harley-Davidson motorcycle shipments were 234,461 units compared with 204,592 units in 2000, a 14.6 percent increase. Harley-Davidson motorcycle revenue was $2.63 billion, an increase of $383.7 million or 17.1 percent.

P&A revenue totaled $507.3 million, a 13.3 percent increase, while General Merchandise revenue totaled $163.9 million, an 8.2 percent increase compared with 2000.

On a longer-term basis, the Company expects the growth rate for P&A revenues to be slightly higher than the Harley-Davidson motorcycle unit growth rate. The General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate over the long term.

Full year operating income for HDFS was $61.3 million, an increase of $24.1 million or 64.8 percent compared to 2000.

Diluted earnings per share were $1.43, an increase of 26.4 percent. If the sale of the Harley-Davidson® Chrome VISA® card in 2000 is excluded, diluted earnings per share increased 28.9 percent.

Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company, Buell Motorcycle Company and Harley-Davidson Financial Services, Inc. Harley-Davidson Motor Company, the only major U.S.-based motorcycle manufacturer, produces heavyweight motorcycles and offers a complete line of motorcycle parts, accessories, apparel, and general merchandise. Buell Motorcycle Company produces sport and sport-touring motorcycles. Harley-Davidson Financial Services, Inc. provides wholesale and retail financing, insurance and credit card programs to Harley-Davidson dealers and customers.

Forward-Looking Statements

The Company intends that certain matters discussed in this release are ``forward-looking statements'' intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be statements that describe the Company's future plans, objectives, targets, estimates, beliefs or goals. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

The Company's ability to reach targeted production objectives and growth targets depends upon, among other factors, (i) continued realization of production efficiencies at its manufacturing facilities; (ii) successful implementation of production capacity increases in its facilities; (iii) the sale of all motorcycles the Company has the capacity to produce; (iv) product availability; (v) continued development of its distributor and dealer network; (vi) successful introduction of new products; (vii) changes in political conditions; and (viii) interest rate fluctuations and successful adjustment to foreign currency exchange rates. In addition, the Company could experience delays in the operation of manufacturing facilities, work stoppages, difficulty with suppliers, natural causes or other factors. Risk factors are also disclosed in securities documents previously filed by the Company with the Securities and Exchange Commission.

                            Harley-Davidson, Inc.
                 Condensed Consolidated Statements of Income
                   (In thousands, except per share amounts)

                            Three Months Ended         Twelve Months Ended
                                December 31,               December 31,
                              2001        2000          2001          2000
                          (unaudited)  (unaudited)

    Net sales               $894,401    $756,160    $3,363,414    $2,906,365
    Gross profit             319,628     262,753     1,180,005       990,818
    Operating income
      Motorcycles and
       related products      168,426     131,179       613,311       487,485
      Financial services      16,970      12,955        61,273        37,178
      Corporate expenses      (2,944)     (2,409)      (12,083)       (9,691)
    Total operating income   182,452     141,725       662,501       514,972
    Gain on sale of credit
     card business                --          --            --        18,915
    Interest income, net       3,386       5,964        17,478        17,583
    Other income, net         (3,762)     (2,166)       (6,524)       (2,914)
    Income before provision
     for taxes               182,076     145,523       673,455       548,556
    Provision for income
     taxes                    63,726      51,662       235,709       200,843
    Net income              $118,350     $93,861      $437,746      $347,713

    Earnings per common
      Basic                     $.39        $.31         $1.45         $1.15
      Diluted                   $.39        $.31         $1.43         $1.13

     common shares:
      Basic                  302,343     302,560       302,506       302,691
      Diluted                305,512     307,158       306,248       307,470

                            Harley-Davidson, Inc.
                    Condensed Consolidated Balance Sheets
                                (In thousands)

                                                           December 31,
                                                        2001          2000

    Current assets:
      Cash and cash equivalents                       $439,438      $419,736
      Marketable securities                            196,011            --
      Accounts receivable, net                         118,843        98,311
      Finance receivables, net                         656,421       530,859
      Inventories                                      181,115       191,931
      Other current assets                              73,436        56,427
    Total current assets                             1,665,264     1,297,264

    Finance receivables, net                           379,335       234,091
    Other long-term assets                           1,073,896       905,049

    Total assets                                    $3,118,495    $2,436,404

    Current liabilities:
      Accounts payable and accrued expenses           $499,059      $408,234
      Current portion of finance debt                  242,051        89,509
    Total current liabilities                          741,110       497,743

    Finance debt                                       355,000       355,000
    Other long-term liabilities                        176,190        97,340
    Postretirement health care benefits                 89,912        80,666
    Total shareholders' equity                       1,756,283     1,405,655

    Total liabilities and shareholders' equity      $3,118,495    $2,436,404

                            Harley-Davidson, Inc.
                           Net Sales and Motorcycle
                                Shipment Data

                                   Three Months Ended    Twelve Months Ended
                                      December 31,           December 31,
                                     2001      2000       2001        2000
    NET SALES (in thousands)
    Harley-Davidson(R) motorcycles $723,304  $606,076  $2,630,099  $2,246,403
    Buell(R) motorcycles             12,716    10,661      61,876      58,053
    Parts & Accessories             110,805    98,473     507,263     447,846
    General Merchandise              47,474    40,660     163,909     151,438
    Other                               102       290         267       2,625
    Total net sales                $894,401  $756,160  $3,363,414  $2,906,365

    Motorcycle shipments:
      United States                  53,616    44,035     186,915     158,817
      Export                          9,919    10,094      47,546      45,775
    Total                            63,535    54,129     234,461     204,592

    Motorcycle product mix:
      Touring                          27.6%     27.5%       27.9%       28.0%
      Custom                           50.9      49.3        50.4        49.4
      Sportster                        21.5      23.2        21.7        22.6
    Total                             100.0%    100.0%      100.0%      100.0%

      Buell (excluding Blast)         1,208     1,014       6,436       5,043
      Blast                             963       926       3,489       5,146
    Total                             2,171     1,940       9,925      10,189

                   2001 Year-to-date Heavyweight (651+ cc)
                   Motorcycle Retail Registrations (Units),
                        data through month indicated.

                                      2001            2000        % change
    United States
    - H-D (December)                177,414         155,081         +14.4
    - Industry (December)           394,294         339,997         +16.0

    - H-D (December)                 23,547          24,020          -2.0
    - Industry (November)           287,399         286,574          +0.3

    - H-D (December)                  8,990           8,120         +10.7
    - Industry (November)            45,470          46,426          -2.1

    Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
     (H-D) data.

    Data Sources:  United States - Motorcycle Industry Council; Europe -
     Company reports and Giral S.A.; Japan - Company reports and JAMA.