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Harley-Davidson's Second Century Momentum Builds With Another Record Quarter

MILWAUKEE, July 14 -- Harley-Davidson, Inc. today announced record revenue and earnings for its second quarter ended June 27, 2004. Revenue for the quarter was $1.33 billion compared with $1.22 billion in the year-ago quarter, an 8.9 percent increase. Second quarter diluted earnings per share (EPS) were 83 cents, a 25.8 percent increase compared with last year's 66 cents.

"We are pleased to report another excellent quarter for Harley-Davidson," said Jeffrey L. Bleustein, Chairman and Chief Executive Officer of Harley- Davidson, Inc. "The record results we have delivered through the first six months of this year are in line with the Company's previously stated long-term direction of sustainable growth."

U.S. retail sales of Harley-Davidson(R) motorcycles were 18.8 percent ahead of last year for the quarter and up 16.5 percent for the first six months. "Our dealers report that floor traffic is brisk, driven by keen interest in the entire Harley-Davidson experience and in particular, the Sportster(R) motorcycle family which was completely redesigned for the 2004 model year. The redesign, which was intended to broaden the appeal of that product line, is clearly achieving its purpose. Tomorrow we will bring even more excitement to our customers when the 2005 model year motorcycles and related new products will be unveiled to our worldwide dealer network at our summer dealer meeting in San Diego," said Bleustein.

Motorcycles and Related Products Segment - Second Quarter Results

Second quarter revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of 6.8 percent over last year. Worldwide shipments of Harley- Davidson motorcycles in the second quarter totaled 82,034 units, up 6,009 units or 7.9 percent over last year. The Company's shipment target remains 317,000 Harley-Davidson motorcycles for 2004.

Second quarter revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $230.1 million, a 12.7 percent increase or $25.9 million more than the year-ago quarter. Over the long term, the Company expects P&A revenue to grow at a rate slightly faster than the motorcycle unit growth rate.

Second quarter revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $53.1 million, up 21.5 percent or $9.4 million over the same period last year. Over the long term, the Company expects General Merchandise to grow at a rate lower than the motorcycle unit growth rate.

Second quarter gross margin for the Motorcycles and Related Products Segment was 37.9 percent of revenue compared to 36.4 percent in the second quarter of last year. Favorable gross margin was primarily impacted by plant efficiencies, including those that generally occur at the end of the model year. Some of these efficiencies are not expected to be maintained in the second half of the year due to new model year startup.

Operating margin increased from 21.9 percent in 2003 to 25.2 percent in 2004 due primarily to higher gross margin and a change in the timing of marketing related costs in 2003 when compared with 2004. In 2003, operating expenses were higher in the first half of the year to support the 100th Anniversary activities and programs. In 2004, operating expenses will be higher in the second half of the year, which is more typical of the Company's operations.

Motorcycle Retail Data - Six Month Results

Retail sales of Harley-Davidson motorcycles in the United States were up 16.5 percent, or nearly 20,000 units for the period January through June 2004, when compared to the same period last year. Harley-Davidson retail sales were up approximately 100 units in Europe or 0.7 percent and down approximately 380 units in Japan or 7.3 percent, respectively, when compared with 2003. Harley-Davidson retail sales changes in Europe and Japan are generally tracking with motorcycle sales in the heavyweight markets in those locations.

Financial Services Segment - Second Quarter Results

Harley-Davidson Financial Services, Inc. (HDFS) reported second quarter operating income of $49.0 million, up $4.5 million or 10.2 percent from the year-ago quarter. The Company's second quarter securitization of $626 million in motorcycle retail loans resulted in a gain of $19.3 million, which compares to a securitization of $425 million and a gain of $22.2 million during the second quarter of 2003. The gain as a percentage of the amount of loans securitized was lower when compared with last year's gain due to the costs of a new enhanced dealer participation program and rising market interest rates. Based on the current competitive market and interest rate environment, the Company believes the full impact of these changes will result in future securitization gains in the range of 2.0 to 2.5 percent.

Annualized credit losses on a managed portfolio basis as of the end of the second quarter were lower at 0.63 percent in 2004, down from 0.75 percent in 2003.

Over the long term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.

Share Repurchase

During the quarter, the Company repurchased approximately 1.3 million shares of its common stock. This brings share repurchases to 9.1 million shares on a year-to-date basis.

Cash Flow - Six Month Results

During the first six months, operations generated cash of $609 million. The Company invested $64 million in capital expenditures, paid dividends of $53 million and repurchased shares at a cost of $474 million.

Harley-Davidson, Inc. - Six Month Results

For the six month period, revenue was $2.49 billion compared with $2.33 billion, a 6.9 percent increase over the year ago period. Diluted earnings per share were $1.52, compared with $1.28, an increase of 18.8 percent compared to the same period last year.

Through the first six months of this year, shipments of Harley-Davidson motorcycle units were 156,124, a 6.5 percent increase over last year's 146,633. Harley-Davidson motorcycle revenue was $1.94 billion, a 5.8 percent increase over $1.83 billion in revenue in 2003. P&A revenue totaled $399.3 million, a 9.7 percent increase over last year's $364.0 million. General Merchandise revenue totaled $107.5 million, a 7.3 percent increase compared with $100.1 million during the same period in 2003.

During the same period, HDFS operating income was $99.3 million, a 13.1 percent increase over last year's $87.8 million during the first six months.

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.

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.

                              TABLES FOLLOW

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

                               Three Months Ended       Six Months Ended
                              June 27,    June 29,    June 27,    June 29,
                                2004        2003        2004        2003

  Net revenue                $1,327,808  $1,218,872  $2,493,509  $2,332,563
  Gross profit                  503,416     443,218     943,545     846,250
  Operating expenses            168,333     176,465     341,364     339,872
   Operating income from
    motorcycles and
    related products            335,083     266,753     602,181     506,378

  Financial services income      81,060      71,287     161,554     142,056
  Financial services expense     32,053      26,821      62,234      54,233
   Operating income from
    financial services           49,007      44,466      99,320      87,823

  Corporate expenses              5,034       4,183       9,523       8,656
  Total operating income        379,056     307,036     691,978     585,545
  Investment income and
   other, net                     4,264       1,729       8,521       7,470
  Income before provision
   for taxes                    383,320     308,765     700,499     593,015
  Provision for income taxes    136,079     106,523     248,678     204,589
  Net income                   $247,241    $202,242    $451,821    $388,426

  Earnings per common share:
    Basic                         $0.84       $0.67       $1.53       $1.29
    Diluted                       $0.83       $0.66       $1.52       $1.28

  Weighted-average common shares:
    Basic                       294,304     302,164     296,039     302,263
    Diluted                     296,396     304,339     298,135     304,448

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

                                          June 27,    Dec. 31,    June 29,
                                            2004        2003        2003
                                        (Unaudited)             (Unaudited)
     Current assets:
       Cash and cash equivalents           $798,542    $812,449    $691,459
       Marketable securities                514,462     510,211     500,669
       Accounts receivable, net             130,606     112,406     113,025
       Finance receivables, net             954,918   1,001,990     910,963
       Inventories                          217,711     207,726     206,574
       Other current assets                  81,814      84,345      73,169
     Total current assets                 2,698,053   2,729,127   2,495,859
       Finance receivables, net             633,450     735,859     606,619
       Other long-term assets             1,393,237   1,458,102   1,194,636

  Total assets                           $4,724,740  $4,923,088  $4,297,114

     Current liabilities:
       Accounts payable and accrued
        expenses                           $654,477    $631,468    $696,753
       Current portion of finance debt       96,977     324,305     343,331
     Total current liabilities              751,454     955,773   1,040,084
     Finance debt                           670,000     670,000     380,000
     Other long-term liabilities            219,261     212,179     219,789
     Postretirement health care benefits    139,909     127,444     116,487
     Shareholders' equity                 2,944,116   2,957,692   2,540,754

  Total liabilities and shareholders'
   equity                                $4,724,740  $4,923,088  $4,297,114

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

                                                     Six months ended
                                                 June 27,          June 29,
                                                   2004              2003
  Cash flows from operating activities:
   Net income                                    $451,821          $388,426
   Adjustments to reconcile net income
    to net cash provided by operating
     Depreciation                                 104,864            95,262
     Provision for long-term employee benefits     33,978            39,007
     Provision for finance credit losses            1,678             1,963
     Gain on current year securitizations         (44,498)          (48,587)
     Collection of retained securitization
      interests                                    60,603            44,177
     Contributions to pension plans                   -             (12,000)
     Tax benefit of stock options                  11,860             3,575
     Other operating cash flows                    13,196             5,741
     Net changes in current assets and
      current liabilities                         (24,908)           92,300
   Total adjustments                              156,773           221,438
  Net cash provided by operating activities       608,594           609,864

  Cash flows from investing activities:
   Capital expenditures                           (64,205)          (82,649)
   Finance receivables, net                       164,994           (34,032)
   Net change in marketable securities             (8,018)           13,267
   Other, net                                      (9,618)            1,212
   Net cash provided by (used in) investing
    activities                                     83,153          (102,202)

  Cash flows from financing activities:
   Net decrease in finance debt                  (218,100)          (47,922)
   Dividends paid                                 (53,010)          (22,739)
   Purchase of common stock for treasury         (473,468)          (30,563)
   Issuance of common stock under employee
    stock plans                                    38,924             4,093
  Net cash used in financing activities          (705,654)          (97,131)

  Net (decrease) increase in cash and
   cash equivalents                              (13,907)          410,531

  Cash and cash equivalents:
   At beginning of period                         812,449           280,928
   At end of period                              $798,542          $691,459

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

                                Three Months Ended       Six Months Ended
                               June 27,    June 29,    June 27,    June 29,
                                 2004        2003        2004        2003
  NET REVENUE (in thousands)
   motorcycles               $1,020,263    $955,425  $1,939,069  $1,831,932
  Buell(R) motorcycles           23,109      15,016      45,192      35,514
  Parts & Accessories           230,146     204,199     399,334     364,043
  General Merchandise            53,068      43,663     107,476     100,138
  Other                           1,222         569       2,438         936
                             $1,327,808  $1,218,872  $2,493,509  $2,332,563

  Motorcycle shipments:
    United States                65,102      61,931     124,846     118,883
    Export                       16,932      14,094      31,278      27,750
  Total                          82,034      76,025     156,124     146,633

  Motorcycle product mix:
    Touring                      25,031      20,912      46,435      39,400
    Custom                       39,407      41,276      76,271      80,248
    Sportster(R)                 17,596      13,837      33,418      26,985
  Total                          82,034      76,025     156,124     146,633

  Motorcycle shipments:
    Buell                         2,718       1,942       5,321       4,883

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

                                              2004         2003     % change
  United States
  - H-D (June)                              141,407      121,414      16.5%
  - Industry (June)                         287,528      257,929      11.5%

  - H-D (June)                               14,978       14,875       0.7%
  - Industry (May)                          183,938      181,133       1.5%

  - H-D (June)                                4,849        5,232      -7.3%
  - Industry (May)                           18,287       19,611      -6.8%

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

  Data for Europe includes registrations in Austria, Belgium, Denmark,
  Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal,
  Spain, Sweden, 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