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Harley-Davidson Roars Into Its Second Century With Another Record Quarter

MILWAUKEE, April 14 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 28, 2004. Revenue for the quarter was $1.17 billion compared with $1.11 billion in the year-ago quarter, a 4.7 percent increase. First quarter diluted earnings per share (EPS) was 68 cents, an 11.5 percent increase compared with last year's 61 cents.

"Harley-Davidson's first quarter performance clearly demonstrates that the Company is on track to deliver both the short and long-term performance objectives which we established earlier this year," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc.

"By almost any measure, we are off to a very strong start in 2004 continuing the momentum of our 100th Anniversary. We delivered solid financial performance this quarter, and our U.S. dealer network posted the highest first quarter retail sales for Harley-Davidson motorcycles in its history -- 13 percent ahead of last year. In addition, we achieved our first quarter motorcycle production target, setting the pace to reach our goal of 317,000 Harley-Davidson motorcycles by year-end."

"The Company's continuing strong performance supports our longer-range objectives to satisfy demand for 400,000 Harley-Davidson motorcycles in 2007 and to deliver an annual earnings growth rate in the mid-teens. Harley- Davidson's Board of Directors demonstrated their confidence in our stated direction by approving the repurchase of 7.8 million shares of stock during the quarter," said Bleustein.

Motorcycles and Related Products Segment

First quarter revenue from Harley-Davidson(R) motorcycles was $919 million, an increase of 4.8 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 74,090, up 3,482 units or 4.9 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 $169 million, a 5.8 percent increase over the year-ago quarter. When revenue from 100th Anniversary P&A products sold during the first quarter of 2003 is excluded, P&A revenue would have been up 15.9 percent. For the longer term, the Company expects P&A revenue 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 $54 million, down 3.7 percent over the same period last year. When revenue from 100th Anniversary General Merchandise products shipped in the first quarter of 2003 is excluded, General Merchandise revenue would have been up 12.7 percent. For the longer term, the Company expects General Merchandise to grow at a rate lower than the motorcycle unit growth rate.

First quarter gross margin for the Motorcycles and Related Products Segment was 37.8 percent of revenue compared to 36.2 percent in the first quarter of last year. First quarter gross margin was favorably impacted primarily by foreign currency exchange rates and to a lesser extent by operating efficiencies. Consistent with the higher gross margin, operating margin increased from 21.5 percent in 2003 to 22.9 percent in 2004.

Motorcycle Retail Sales Data

Harley-Davidson retail motorcycle sales for the quarter were up 11.6 percent worldwide driven by strong performance in the U.S. which was up 13.0 percent. 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 $50 million, up $7 million compared to the year-ago quarter, or 16.0 percent. The subsidiary continued to experience strong customer acceptance of its finance and insurance products.

HDFS sold $625 million in retail motorcycle loans during the quarter and recorded a gain of $25.2 million. This compares with a gain of $26.4 million on $550 million of loans securitized during the first quarter of 2003. The gain as a percentage of loans sold is within management's expectations of 3 to 4 percent in the current interest rate environment.

Annualized credit losses on a managed portfolio basis decreased during the quarter from 0.84 percent in 2003 to 0.77 percent in 2004.

For the longer term, the Company expects the HDFS operating income growth rate to be slightly higher than the Company's motorcycle unit growth rate.

Cash Flow

Operations generated cash of more than $350 million during the quarter. The Company invested $31 million in capital expenditures, paid a dividend of $24 million and repurchased 7.8 million shares of its common stock for a total cost of $404 million.

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 motorcycles. Harley- Davidson Financial Services provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.

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 28,         March 30,
                                                 2004              2003

  Net revenue                                 $1,165,701        $1,113,691
  Gross profit                                   440,129           403,032
  Operating expenses                             173,031           163,407
    Operating income from
     motorcycles & related products              267,098           239,625

  Financial services income                       80,494            70,769
  Financial services expense                      30,181            27,412
    Operating income from financial services      50,313            43,357

  Corporate expenses                               4,489             4,473
  Total operating income                         312,922           278,509
  Interest income, net                             4,970             5,957
  Other income (expense), net                       (713)             (216)
  Income before provision for taxes              317,179           284,250
  Provision for income taxes                     112,599            98,066
  Net income                                    $204,580          $186,184

  Earnings per common share:
    Basic                                          $0.69             $0.62
    Diluted                                        $0.68             $0.61

  Weighted-average common shares:
    Basic                                        297,832           302,364
    Diluted                                      299,932           304,560

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

                                         (Unaudited)             (Unaudited)
                                          March 28,    Dec. 31,   March 30,
                                            2004        2003        2003

     Current assets:
       Cash and cash equivalents           $590,643    $812,449    $395,943
       Marketable securities                512,044     510,211     494,742
       Accounts receivable, net             132,270     112,406     117,907
       Finance receivables, net           1,172,532   1,001,990   1,050,330
       Inventories                          222,811     207,726     214,419
       Other current assets                  76,975      84,345      75,851
     Total current assets                 2,707,275   2,729,127   2,349,192
       Finance receivables, net             558,737     735,859     451,973
       Other long-term assets             1,423,958   1,458,102   1,198,609

  Total assets                           $4,689,970  $4,923,088  $3,999,774

     Current liabilities:
       Accounts payable & accrued
        expenses                           $699,958    $631,468    $654,343
       Current portion of finance debt      195,703     324,305     300,060
     Total current liabilities              895,661     955,773     954,403
     Finance debt                           670,000     670,000     380,000
     Other long-term liabilities            223,018     212,179     157,194
     Postretirement health care benefits    134,091     127,444     110,761
     Shareholders' equity                 2,767,200   2,957,692   2,397,416

  Total liabilities and shareholders'
   equity                                $4,689,970  $4,923,088  $3,999,774

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

                                                   Three Months Ended
                                               March 28,         March 30,
                                                 2004               2003
  Cash flows from operating activities:
    Net income                                  $204,580          $186,184
    Adjustments to reconcile net income
     to net cash provided by operating
       Depreciation                               50,947            45,877
       Non cash expenses                          30,576            18,233
       Current year gain on securitizations      (25,240)          (26,423)
       Collection of retained securitization
        interests                                 30,942            18,558
       Contributions to the pension plans            -                 -
       Other operating cash flows                  9,108             1,978
       Net changes in current assets and
        current liabilities                       49,977            47,690
  Net cash provided by operating activities      350,890           292,097

  Cash flows from investing activities:
    Capital expenditures                         (30,990)          (41,796)
    Finance receivables, net                      11,955           (32,268)
    Net increase in marketable securities           (971)           19,601
    Other, net                                      (266)           (1,759)
  Net cash used in investing activities          (20,272)          (56,222)

  Cash flows from financing activities:
    Net (decrease) increase in finance debt     (140,522)          (91,193)
    Dividends paid                               (23,587)          (10,610)
    Purchase of common stock for treasury       (403,519)          (20,164)
    Issuance of common stock under
     employee stock plans                         15,204             1,107
  Net cash used in financing activities         (552,424)         (120,860)

  Net (decrease) increase in cash and
   cash equivalents                             (221,806)          115,015

  Cash and cash equivalents:
    At beginning of period                       812,449           280,928
    At end of period                            $590,643          $395,943

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

                                                   Three Months Ended
                                                March 28,         March 30,
                                                  2004              2003
  NET REVENUE (in thousands)
  Harley-Davidson(R) motorcycles                $918,806          $876,507
  Buell(R) motorcycles                            22,083            20,498
  Parts & Accessories                            169,188           159,844
  General Merchandise                             54,408            56,475
  Other                                            1,216               367
  Total net sales                             $1,165,701        $1,113,691

  Motorcycle shipments:
    United States                                 59,744            56,952
    Export                                        14,346            13,656
  Total                                           74,090            70,608

  Motorcycle product mix:
    Touring                                       21,404            18,488
    Custom                                        34,039            34,313
    VRSC                                           2,825             4,659
    Sportster(R)                                  15,822            13,148
  Total                                           74,090            70,608

  Motorcycle shipments:
    Buell (excluding Blast)                        2,186             2,356
    Buell Blast                                      417               585
                                                   2,603             2,941

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

                                               2004        2003     % change
  United States
  - H-D (March)                              54,216      47,992       13.0%
  - Industry (March)                        102,407      94,170        8.7%

  - H-D (March)                               5,376       5,367        0.2%
  - Industry (February)                      32,202      33,852       -4.9%

  - H-D (March)                               1,929       2,137       -9.7%
  - Industry (February)                       4,350       5,284      -17.7%

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

  Industry data for Europe includes sales in Austria, Belgium, Denmark,
  Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal,
  Spain, Sweden, Switzerland and the United Kingdom.

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