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Harley-Davidson Reports Another Record First Quarter

MILWAUKEE, April 16 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 30, 2003. Revenue for the quarter was $1.1 billion compared with $927.8 million in the year-ago quarter, a 20.0 percent increase. First quarter diluted earnings per share (EPS) were 61 cents, a 56.4 percent increase compared with last year's 39 cents.

"We are pleased with our outstanding results for the first quarter of 2003 as we continue to execute our long-term Plan for Sustainable Growth," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "While the long winter experienced by much of our nation has delayed some retail sales, dealer confidence and other measures that we use to track Harley-Davidson motorcycle demand remain strong."

"With these indicators in mind and with construction of our new factory in York, Pennsylvania proceeding to plan, we are raising our shipment target for 2003 from 289,000 to 290,000 Harley-Davidson motorcycles," added Bleustein. The Company's new target is a 10% increase over 2002.

Motorcycles and Related Products Segment

First quarter revenue from Harley-Davidson motorcycles was $876.5 million, an increase of 17.2 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 70,608 units, up 5,939 units or 9.2 percent over last year.

First quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts(TM) and Genuine Motor Accessories(TM), totaled $159.8 million, a 21.9 percent increase over the year-ago quarter. Total P&A revenue includes $13.9 million from sales of 100th Anniversary P&A products sold during the quarter. Shipments of 100th Anniversary P&A products will continue through the second quarter. For the second half of 2003, the Company expects P&A revenues to grow at a rate slightly faster than the motorcycle unit growth rate.

General Merchandise, which consists of MotorClothes(R) apparel and collectibles, had first quarter revenue of $56.5 million, up 33.6 percent over the same period last year, with revenue from 100th Anniversary General Merchandise products accounting for $8.3 million. Shipments of 100th Anniversary products in this product line are now essentially complete, and therefore General Merchandise revenue for the remainder of the year is expected to be lower than in 2002.

First quarter gross margin for the Motorcycles and Related Products Segment was 36.2 percent of revenue compared to 34.0 percent in the first quarter of last year. First quarter gross margin was favorably impacted by wholesale motorcycle price increases and a richer product mix that were associated with 100th Anniversary product lines. Additional favorability was realized from foreign currency exchange rates. Consistent with the higher gross margin, operating margin increased from 18.7 percent in 2002 to 21.5 percent in 2003.

Retail Sales Data

Harley-Davidson retail motorcycle sales for the quarter were down 3.2 percent in the U.S., but up 15.7 percent in Europe and up 12.9 percent in Japan compared to the same period last year. "While retail sales for the United States were lower in the first three months of the year, we and our independent dealer network believe that many customers have delayed purchasing their motorcycles until the weather improves. We look forward to the spring riding season kicking into gear," said Bleustein. Data is listed in the accompanying tables.

Financial Services Segment

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley- Davidson, Inc., reported operating income of $43.4 million, up $31.2 million compared to the year-ago quarter. The subsidiary benefited from its previously announced plan to securitize retail installment loans for Harley- Davidson motorcycles in the first quarter of 2003.

HDFS sold $550 million in motorcycle loans during the quarter and recorded a gain of $26.4 million. The subsidiary realized a larger than expected gain on this sale due to a favorable interest rate environment and a larger transaction size. This compares with a gain of $5.0 million on $93 million of loans securitized during the first quarter of 2002, which was the remaining portion of the fourth quarter 2001 securitization.

Based on anticipated interest rates and the competitive financial services environment, the Company expects HDFS' full year 2003 operating income to be approximately 25 percent higher than in 2002. Over the longer term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.

Cash Flow

Operations generated cash of more than $311 million. The Company invested $41.8 million in capital expenditures and paid a dividend of $10.6 million.

Share Repurchase

During the quarter, the Company repurchased 500,000 shares of its common stock.

Company Background

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. 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 provides wholesale and retail financing and insurance 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 generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets or goals are also forward-looking statements. 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 meet the targets and expectations noted depends upon, among other factors, the Company's ability to (i) continue to realize production efficiencies at its production facilities through the implementation of innovative manufacturing techniques and other means, (ii) successfully implement production capacity increases in its facilities, (iii) successfully introduce new products and services, (iv) avoid unexpected P&A /general merchandise supplier backorders, (v) sell all of the Harley-Davidson motorcycles it plans to produce, (vi) continue to develop the capacity of its distributor and dealer network, (vii) avoid unexpected changes in the regulatory environment for its products, (viii) successfully adjust to foreign currency exchange rate fluctuations, (ix) successfully adjust to interest rate fluctuations, and (x) successfully manage changes in the credit quality of HDFS's loan portfolio.

In addition, the Company could experience delays in the operation of manufacturing facilities as a result of work stoppages, difficulty with suppliers, natural causes, terrorism or other factors. Risk factors are also disclosed in 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
                                          March 30,   March 31,
                                             2003        2002

  Net revenue                            $1,113,691    $927,845
  Gross profit                              403,032     315,277
  Operating expenses                        163,407     142,150
    Operating income from
     motorcycles & related products         239,625     173,127

  Financial services income                  70,769      41,691
  Financial services operating expense       27,412      29,540
    Operating income from financial
     services                                43,357      12,151

  Corporate expenses                          4,473       3,555
  Total operating income                    278,509     181,723
  Interest income, net                        5,957       2,246
  Other income (expense), net                  (216)       (765)
  Income before provision for taxes         284,250     183,204
  Provision for income taxes                 98,066      63,206
  Net income                               $186,184    $119,998

  Earnings per common share:
    Basic                                     $0.62       $0.40
    Diluted                                   $0.61       $0.39

  Weighted-average common shares:
    Basic                                   302,364     302,475
    Diluted                                 304,560     305,618

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

                                           March 30,   Dec. 31,   March 31,
                                             2003        2002        2002

     Current assets:
       Cash and cash equivalents           $242,712    $280,928    $378,535
       Marketable securities                647,973     514,800     201,193
       Accounts receivable, net             117,907     108,694     152,083
       Finance receivables, net           1,050,330     855,771     738,396
       Inventories                          214,419     218,156     183,632
       Other current assets                  75,851      88,237      78,475
     Total current assets                 2,349,192   2,066,586   1,732,314
       Finance receivables, net             451,973     589,809     582,366
       Other long-term assets             1,198,609   1,204,822   1,084,624

  Total assets                           $3,999,774  $3,861,217  $3,399,304

     Current liabilities:
       Accounts payable & accrued
        expenses                           $654,343    $607,473    $532,183
       Current portion of finance debt      300,060     382,579     366,286
     Total current liabilities              954,403     990,052     898,469
     Finance debt                           380,000     380,000     380,000
     Other long-term liabilities            157,194     152,831     179,068
     Postretirement health care benefits    110,761     105,419      94,744
     Shareholders' equity                 2,397,416   2,232,915   1,847,023

  Total liabilities and shareholders'
   equity                                $3,999,774  $3,861,217  $3,399,304

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

                                                       March 30,   March 31,
                                                          2003        2002
  Cash flows from operating activities:
    Net income                                         $186,184    $119,998
    Adjustments to reconcile net income to
     net cash provided by operating
      Depreciation                                       45,877      42,601
      Non cash expenses                                  20,211      13,009
      Contributions to the pension plans                     -           -
      Net changes in current assets and
       current liabilities                               59,239      (6,723)
  Net cash provided by operating
   activities                                           311,511     168,885

  Cash flows from investing activities:
     Capital expenditures                               (41,796)    (53,358)
     Finance receivables, net                           (51,682)   (285,568)
     Net increase in marketable securities             (133,630)     (5,182)
     Other, net                                          (1,759)        722
  Net cash used in investing activities                (228,867)   (343,386)

  Cash flows from financing activities:
     Net (decrease) increase in finance debt            (91,193)    149,235
     Dividends paid                                     (10,610)     (9,238)
     Purchase of common stock for treasury              (20,164)    (29,620)
     Issuance of common stock under
      employee stock plans                                1,107       3,221
  Net cash used in financing activities                (120,860)    113,598

  Net (decrease) increase in cash and
   cash equivalents                                     (38,216)    (60,903)

  Cash and cash equivalents:
     At beginning of period                             280,928     439,438
     At end of period                                  $242,712    $378,535

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

                                           Three Months Ended
                                          March 30,   March 31,
                                             2003        2002
  NET REVENUE (in thousands)
  Harley-Davidson(R) motorcycles           $876,507    $747,926
  Buell(R) motorcycles                       20,498       6,309
  Parts & Accessories                       159,844     131,143
  General Merchandise                        56,475      42,269
  Other                                         367         198
  Total net sales                        $1,113,691    $927,845

  Motorcycle shipments:
    United States                            56,952      51,363
    Export                                   13,656      13,306
  Total                                      70,608      64,669

  Motorcycle product mix:
    Touring                                  18,488      17,318
    Custom                                   34,313      31,863
    VRSC                                      4,659       3,160
    Sportster(R)                             13,148      12,328
  Total                                      70,608      64,669

  Motorcycle shipments:
    Buell (excluding Blast)                   2,356         429
    Buell Blast                                 585         901
                                              2,941       1,330

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

                                              2003        2002     % change
  United States
  - H-D (March)                              47,929      49,507       -3.2%
  - Industry (March)                         94,170     100,782       -6.6%

  - H-D * (March)                             5,380       4,651       15.7%
  - Industry (February)                      31,874      37,159      -14.2%

  - H-D (March)                               2,137       1,892       12.9%
  - Industry (February)                       5,284       5,402       -2.2%

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

   H-D * Includes Harley-Davidson sales in all European countries.
   Industry data for Europe includes sales only in Austria, Belgium, France,
   Germany, Italy,
   Netherlands, Spain, Switzerland and United Kingdom.

   Data Sources: (subject to update)
   United States: Motorcycle Industry Council,
   Europe: Company reports, Giral S.A.
   Japan: Company reports, Industry sources