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Harley-Davidson Reports Record Fourth Quarter and 18th Consecutive Record Year

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Company Sets Goal of 400,000 Motorcycles for 2007

MILWAUKEE, Jan. 21 -- Harley-Davidson, Inc. today announced record revenue and earnings for its fourth quarter and year ended December 31, 2003. Revenue for the quarter was $1.16 billion compared with $1.03 billion in the year-ago quarter, a 12.8 percent increase. Net income for the quarter was $182.4 million compared to $150.9 million, an increase of 20.9 percent over the year ago quarter. Fourth quarter diluted earnings per share (EPS) was 60 cents, a 22.4 percent increase compared with last year's 49 cents.

Revenue for the full year was $4.62 billion, compared with $4.09 billion in 2002, a 13.0 percent increase. Net income for the year was $760.9 million, a 31.1 percent increase versus last year's $580.2 million, while diluted EPS for the full year was $2.50, a 31.6 percent increase compared with $1.90 in 2002.

"This is the 18th consecutive year that Harley-Davidson has achieved records for both revenue and net income," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "We had a phenomenal year full of memorable once-in-a-lifetime experiences surrounding our 100th Anniversary. Introducing the Harley-Davidson brand to hundreds of thousands of potential customers has undoubtedly sparked the dream of ownership and created new excitement for our products."

"As we begin our 101st year, we expect to grow the business further with our proven ability to deliver a continuous stream of exciting new motorcycles, related products and services. We have set a new goal for the Company to be able to satisfy a yearly demand of 400,000 Harley-Davidson motorcycles in 2007. By offering innovative products and services, and by driving productivity gains in all facets of our business, we are confident that we can deliver an earnings growth rate in the mid-teens for the foreseeable future," said Bleustein.

Motorcycles and Related Products Segment -- Fourth Quarter Results

Revenue from Harley-Davidson(R) motorcycles was $945.3 million, an increase of $125.0 million or 15.2 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 77,056 units, an increase of 11,086 units or 16.8 percent over last year's fourth quarter. The Company's shipment target remains 317,000 Harley-Davidson motorcycles for 2004.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $141.0 million, an increase of $11.1 million, or 8.5 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $50.7 million, a decrease of $4.1 million or 7.4 percent. Excluding revenue from 100th Anniversary products in 2002's fourth quarter, the P&A growth rate would have been 20.3 percent over last year's fourth quarter and the General Merchandise growth rate would have been 20.0 percent over the same period.

Gross margin was 35.9 percent of revenue, down slightly from the prior year's 36.1 percent. Gross margin was negatively impacted by a higher proportion of Sportster(R) motorcycle shipments and higher manufacturing costs, but partially offset by favorable foreign currency exchange. Fourth quarter operating margin improved to 21.5 percent in 2003 from 20.7 percent in 2002.

Motorcycle Retail Sales Data

Retail sales of Harley-Davidson(R) motorcycles for the year 2003 grew 8.8 percent in the U.S., 6.7 percent in Europe, and 9.0 percent in Japan compared to 2002. Based on the information currently available, Harley-Davidson's full year market share for the 651cc and up segment is expected to grow in all of the Company's major markets. "Given the economic climate during the past year, we are pleased with our retail growth," said Bleustein.

"Although our U.S. dealer network experienced a modest decline in motorcycle sales in the fourth quarter as compared to last year's fourth quarter, we believe it is difficult to draw meaningful conclusions from this comparison. The urgency to buy a 100th Anniversary motorcycle prior to the celebrations, along with an unusually late shipment plan for '04 motorcycles, created two very different selling environments. We are confident that 2004 will be another strong year for Harley-Davidson due to current dealer confidence, momentum from the 100th Anniversary and improving economic indicators," Bleustein added.

  For more motorcycle retail data, see the attached tables.

  Financial Services Segment

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported fourth quarter operating income of $33.8 million, up $8.5 million or 33.4 percent compared to the year-ago quarter.

"Harley-Davidson Financial Services had another strong quarter in both financial performance and in helping to make the dream of owning a Harley-Davidson motorcycle a reality," said Bleustein. The segment's performance was driven by continued strong marketplace acceptance of its finance and insurance products.

The Company's fourth quarter securitization of $300 million of motorcycle retail loans resulted in a gain of $11.4 million, which represents 3.8 percent of loans sold.

Annualized credit losses on a managed portfolio basis increased during the year from 0.72 percent in 2002 to 0.85 percent in 2003, which is within the 5-year historical range of credit losses of 0.72 to 0.90 percent.

Tax Rate

During the quarter, the Company's tax rate was 35.5 percent, up from 34.5 percent in the first nine months of the year. The Company expects to maintain a rate of 35.5 percent throughout 2004.

Share Repurchase

During the fourth quarter, the Company invested $73.3 million in repurchasing 1.6 million shares of its stock.

Harley-Davidson, Inc. -- Twelve Month Results

For the fiscal year ended 2003, total Harley-Davidson motorcycle shipments were 291,147 units compared with 263,653 units in 2002, a 10.4 percent increase. Harley-Davidson motorcycle revenue was $3.62 billion, an increase of $460.4 million or 14.6 percent.

P&A revenue totaled $712.8 million, a 13.3 percent increase, while General Merchandise revenue totaled $211.4 million, an 8.7 percent decrease compared with 2002. Excluding revenue from 100th Anniversary products for both 2002 and 2003, the P&A growth rate would have been 14.4 percent and the General Merchandise growth rate would have been 12.7 percent.

Full year operating income for HDFS was $167.9 million, an increase of $63.6 million or 61.1 percent compared to 2002.

Cash Flow -- Twelve Month Results

Operations generated cash of $935.6 million in 2003, even after a $192.0 million contribution to the Company's pension plans. This cash provided the Company the ability to invest $227.2 million in capital expenditures, to repurchase 2.3 million shares of Company stock for $103.9 million, to pay $59.0 million in dividends and to increase cash and marketable securities by $526.9 million.

2004 and Beyond

In addition to the previously stated motorcycle unit goal, the Company plans on growth in all of its product lines. Harley-Davidson expects the growth rate for P&A revenues to be slightly higher than the motorcycle unit growth rate, and the General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate. The Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.

Company Description

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 and insurance programs to Harley-Davidson dealers and customers.

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

                               Three Months Ended     Twelve Months Ended
                              Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
                                2003        2002        2003        2002

  Net revenue                $1,158,070  $1,026,532  $4,624,274  $4,090,970
  Gross profit                  416,026     370,626   1,665,566   1,417,841
  Operating expenses            167,488     157,768     668,677     626,720
    Operating income from
     motorcycles & related
     products                   248,538     212,858     996,889     791,121

  Financial services income      62,743      53,991     279,458     211,500
  Financial services
   operating expense             28,906      28,634     111,585     107,273
    Operating income from
     financial services          33,837      25,357     167,873     104,227

  Corporate expenses              3,475       3,027      15,498      12,646
  Total operating income        278,900     235,188   1,149,264     882,702
  Interest income, net            5,103       4,986      23,088      16,541
  Other income (expense),
   net                           (1,167)     (9,852)     (6,317)    (13,416)
  Income before provision
   for taxes                    282,836     230,322   1,166,035     885,827
  Provision for income taxes    100,406      79,461     405,107     305,610
  Net income                   $182,430    $150,861    $760,928    $580,217

  Earnings per common share:
    Basic                         $0.60       $0.50       $2.52       $1.92
    Diluted                       $0.60       $0.49       $2.50       $1.90

  Weighted-average common
    Basic                       302,244     302,395     302,271     302,297
    Diluted                     304,404     305,037     304,470     305,158

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

                                                Dec. 31,           Dec. 31,
                                                  2003              2002
     Current assets:
       Cash and cash equivalents                $812,449          $280,928
       Marketable securities                     510,211           514,800
       Accounts receivable, net                  112,406           108,694
       Finance receivables, net                1,001,990           855,771
       Inventories                               207,726           218,156
       Other current assets                       84,345            88,237
     Total current assets                      2,729,127         2,066,586
       Finance receivables, net                  735,859           589,809
       Other long-term assets                  1,458,102         1,204,822

  Total assets                                $4,923,088        $3,861,217

     Current liabilities:
       Accounts payable & accrued expenses      $631,468          $607,473
       Current portion of finance debt           324,305           382,579
     Total current liabilities                   955,773           990,052
     Finance debt                                670,000           380,000
     Other long-term liabilities                 212,179           152,831
     Postretirement health care
      benefits                                   127,444           105,419
     Shareholders' equity                      2,957,692         2,232,915

  Total liabilities and shareholders'
   equity                                     $4,923,088        $3,861,217

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

                                               Dec. 31,           Dec. 31,
                                                 2003              2002
  Cash flows from operating activities:
    Net income                                 $760,928           $580,217
    Adjustments to reconcile net income
     to net cash provided by operating
      Depreciation                              196,918            175,778
      Non cash expenses                          96,579             70,348
      Deferred taxes                             42,105             38,560
      Current year gain on securitizations      (82,221)           (56,139)
      Collection of retained securitization
       interests                                118,113             89,970
      Contributions to the pension plans       (192,000)          (153,636)
      Other operating cash flows                 13,775             14,452
      Net changes in current assets and
       current liabilities                      (18,644)            16,089
  Net cash provided by operating
   activities                                   935,553            775,639

  Cash flows from investing activities:
    Capital expenditures                       (227,230)          (323,866)
    Finance receivables, net                   (268,224)          (394,861)
    Net decrease (increase) in marketable
     securities                                   1,102           (318,171)
    Other, net                                    9,690             22,813
  Net cash used in investing activities        (484,662)        (1,014,085)

  Cash flows from financing activities:
      Net increase in finance debt              224,118            165,528
      Dividends paid                            (58,986)           (41,457)
    Purchase of common stock for treasury      (103,880)           (56,814)
    Issuance of common stock under
     employee stock plans                        19,378             12,679
  Net cash used in financing activities          80,630             79,936

  Net (decrease) increase in cash and
   cash equivalents                             531,521           (158,510)

  Cash and cash equivalents:
    At beginning of period                      280,928            439,438
    At end of period                           $812,449           $280,928

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

                               Three Months Ended     Twelve Months Ended
                               Dec. 31,    Dec. 31,   Dec. 31,    Dec. 31,
                                 2003        2002       2003        2002
  NET REVENUE (in thousands)
   motorcycles                 $945,292    $820,287  $3,621,488  $3,161,046
  Buell(R) motorcycles           20,079      21,523      76,064      66,949
  Parts & Accessories           141,020     129,929     712,829     629,202
  General Merchandise            50,730      54,788     211,388     231,503
  Other                             949           5       2,505       2,270
  Total net sales            $1,158,070  $1,026,532  $4,624,274  $4,090,970

  Motorcycle shipments:
    United States                63,944      54,235     237,656     212,833
    Export                       13,112      11,735      53,491      50,820
  Total                          77,056      65,970     291,147     263,653

  Motorcycle product mix:
    Touring                      22,106      17,911      82,577      70,713
    Custom                       34,954      30,753     135,954     123,761
    VRSC                          3,192       4,760      15,451      18,008
    Sportster(R)                 16,804      12,546      57,165      51,171
  Total                          77,056      65,970     291,147     263,653

  Motorcycle shipments:
    Buell (excluding Blast)       2,231       2,519       8,784       6,887
    Buell Blast                     379         612       1,190       4,056
                                  2,610       3,131       9,974      10,943

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

                                              2003         2002     % change
  United States
  - H-D (December)                          228,393      209,944       8.8%
  - Industry (December)                     461,154      442,326       4.3%

  - H-D * (December)                         25,966       24,339       6.7%
  - Industry (November)                     286,192      296,667      -3.5%

  - H-D (December)                           11,802       10,902       8.3%
  - Industry (December)                      44,322       47,857      -7.4%

   Only Harley-Davidson(R) 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: (Data subject to update)
   United States: Motorcycle Industry Council,
   Europe: Company reports, Giral S.A.
   Japan: Company reports, Industry sources