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Harley-Davidson Reports Record First Quarter

Moderates 2005 Motorcycle Shipment Growth Forecast

MILWAUKEE, April 13 -- Harley-Davidson, Inc. today announced record revenue and earnings for its first quarter ended March 27, 2005. Revenue for the quarter was $1.24 billion compared with $1.17 billion in the year-ago quarter, a 6.0 percent increase. First quarter diluted earnings per share (EPS) were 77 cents, a 13.2 percent increase compared with last year's 68 cents.

"As I prepare to take on the role of Chief Executive at Harley-Davidson, I am pleased that the Company is on a strong footing, having achieved another record quarter," said Jim Ziemer, Chief Financial Officer and CEO Elect, Harley-Davidson, Inc. "Looking ahead, we expect Harley-Davidson's business to continue to grow and 2005 to be our 20th consecutive record year."

"At the same time, U.S. retail sales of Harley-Davidson motorcycles during the first quarter of 2005 have been relatively flat with the same period last year-falling short of our expectations. Despite our continued optimism for the year, we feel it is prudent to limit short-term production growth, maintaining demand in excess of supply. This action will result in a change to our previous guidance for both shipments and earnings growth for 2005. Our shipments are now planned to increase from last year's 317,000 units to a target of 329,000 units compared to our original target of 339,000 units. Our 2005 earnings are expected to grow by approximately 5-8 percent in 2005 compared to our previous forecast of mid-teens earnings growth."

"While this volume adjustment may prevent us from attaining our previous goal of 400,000 units in 2007, we see no reason to change our long-term unit growth projection of 7-9 percent annually based on just three winter months of sales data. Similarly, we are not changing our projection of mid-teens earnings growth other than for this year," Ziemer added.

"For nineteen consecutive years, this management team has delivered record results, and I have the utmost confidence that the actions we are taking are appropriate and in our stakeholders' long-term interests," said Jeff Bleustein, Chairman and Chief Executive Officer of Harley-Davidson, Inc.

Motorcycles and Related Products Segment

First quarter revenue from Harley-Davidson(R) motorcycles was $979.0 million, an increase of 6.5 percent over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 76,716 units, up 2,626 units or 3.5 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 $176.9 million, a 4.6 percent increase over the year-ago quarter. 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 revenue, which consists of MotorClothes(R) apparel and collectibles, was $59.5 million in the first quarter, up 9.3 percent over the same period last year. For the longer term, the Company expects General Merchandise revenue to grow at a rate lower than the motorcycle unit growth rate.

First quarter gross margin for the Motorcycles and Related Products Segment was 37.6 percent of revenue, approximately the same as the year-ago quarter of 37.8 percent. Gross margin was negatively impacted by higher material costs, primarily metal surcharges; it benefited from favorable foreign currency exchange. Operating margin grew to 24.2 percent from 22.9 percent due to lower operating expenses.

Motorcycle Retail Sales Data

In the United States through March, Harley-Davidson retail motorcycle sales finished down approximately one percent compared to 2004. Similarly, the U. S. heavyweight motorcycle market declined 0.4 percent in the first quarter.

Worldwide retail sales of Harley-Davidson motorcycles grew 2.8 percent for the quarter, driven by strong performance in Europe and Japan, which increased 20.6 and 10.6 percent respectively. On an industry-wide basis through February 2005, the 651+cc segment grew slightly in Europe, while the heavyweight market in Japan was down for the same period. Data is listed in the accompanying tables.

Financial Services Segment

Harley-Davidson Financial Services (HDFS) reported operating income of $53.6 million, up $3.3 million or 6.5 percent compared to the year-ago quarter. HDFS continued to experience strong customer acceptance of its financial products.

During the quarter, HDFS sold $730 million in retail motorcycle loans and recorded a gain of $19.2 million. This compares with a gain of $25.2 million on $625 million of loans securitized during the first quarter of 2004. The gain of 2.6 percent as a percentage of loans sold is slightly above management's guidance which is now 1.7 to 2.5 percent in the current interest rate environment.

Annualized credit losses on a managed portfolio basis increased during the quarter to 1.07 percent in 2005 from 0.77 percent in 2004 due to the combination of a higher incidence of losses and lower recovery rates. HDFS is maintaining its credit loss target of 1 percent or less of managed receivables.

In 2005, HDFS operating income is expected to be slightly lower than that achieved in 2004 primarily due to a highly competitive marketplace and an increasing interest rate environment. 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.

Stock Option Accounting

On January 1, 2005 the Company adopted new accounting rules requiring it to recognize expense related to the fair value of its employee stock option awards. Total stock compensation expense recognized by the Company during the first quarter of 2005 was $7.0 million.

Cash Flow

Operations generated cash of $51.7 million during the first quarter of 2005 compared to $161.2 million during last year's first quarter. During the first quarter of 2005, the Company made a voluntary cash contribution of $102.3 million to post-retirement health care trusts to pre-fund retiree benefits. This contribution allows the investment earnings to grow tax free within the trusts.

Stock Repurchase

The Company repurchased 2.9 million shares of its common stock at a cost of $175.8 million during the first quarter of 2005.

Shipment Guidance

Harley-Davidson is revising its previous guidance and now plans to ship 329,000 Harley-Davidson motorcycles in 2005. This 329,000 unit target represents a 3.7 percent growth rate over 2004 shipments. The Company believes that this 10,000 unit reduction will occur almost entirely in the second quarter and will involve reducing planned production of 2005 Model Year motorcycles. Revised quarterly shipments are expected to be as follows: 77,000 units in the second quarter, 87,500 units in the third quarter and 87,500 units in the fourth quarter.

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.

                              TABLES FOLLOW

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

                                                    Three Months Ended
                                                March 27,         March 28,
                                                   2005              2004

   Net revenue                                 $1,235,464        $1,165,701
   Gross profit                                   464,283           440,129
   Operating expenses                             165,426           173,031
     Operating income from
      motorcycles & related products              298,857           267,098

   Financial services income                       88,812            80,494
   Financial services expense                      35,253            30,181
     Operating income from financial
      services                                     53,559            50,313

   Corporate expenses                               7,274             4,489
   Total operating income                         345,142           312,922
   Interest income and other, net                   7,129             4,257
   Income before provision for taxes              352,271           317,179
   Provision for income taxes                     125,056           112,599
   Net income                                    $227,215          $204,580

   Earnings per common share:
     Basic                                          $0.78             $0.69
     Diluted                                        $0.77             $0.68

   Weighted-average common shares:
     Basic                                        293,148           297,832
     Diluted                                      294,161           299,932

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

                                         (Unaudited)             (Unaudited)
                                          March 27,    Dec. 31,   March 28,
                                             2005        2004        2004

      Current assets:
        Cash and cash equivalents           $200,379    $275,159    $254,288
        Marketable securities              1,184,148   1,336,909     848,399
        Accounts receivable, net             146,199     121,333     132,270
        Finance receivables, net           1,412,923   1,207,124   1,172,532
        Inventories                          246,875     226,893     222,811
        Other current assets                  93,216      98,854      76,975
      Total current assets                 3,283,740   3,266,272   2,707,275
        Finance receivables, net             727,794     905,176     558,737
        Other long-term assets             1,294,239   1,311,845   1,423,958

   Total assets                           $5,305,773  $5,483,293  $4,689,970

    Current liabilities:
     Accounts payable & accrued expenses    $801,525    $677,255    $699,958
     Current portion of finance debt         264,360     495,441     195,703
    Total current liabilities              1,065,885   1,172,696     895,661
    Finance debt                             800,000     800,000     670,000
    Other long-term liabilities              117,754     142,278     223,018
    Postretirement health care benefits       51,297     149,848     134,091
    Shareholders' equity                   3,270,837   3,218,471   2,767,200

   Total liabilities and shareholders'
    equity                                $5,305,773  $5,483,293  $4,689,970

   Note:  Certain prior year amounts have been reclassified to conform to
          the current year presentation.

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

                                                    Three Months Ended
                                                March 27,         March 28,
                                                   2005              2004
   Cash flows from operating activities:
    Net income                                   $227,215          $204,580
    Adjustments to reconcile net income
     to net cash provided by operating
       Depreciation                                53,325            50,947
       Provision for long-term employee
        benefits                                   19,132            17,581
       Gain on current year securitizations       (19,201)          (25,240)
       Net change in wholesale finance
        receivables                              (191,108)         (169,808)
       Contributions to pension &
        postretirement plans                     (109,000)              -
       Tax benefit from the exercise of
        stock options                                 -               9,108
       Other                                       (2,787)           14,363
       Net changes in current assets and
        current liabilities                        74,098            59,661
    Total adjustments                            (175,541)          (43,388)
   Net cash provided by operating
    activities                                     51,674           161,192

   Cash flows from investing activities:
     Capital expenditures                         (39,025)          (30,990)
     Finance receivables, net                     148,838           170,710
     Collection of retained securitization
      interests                                    26,330            30,942
     Net change in marketable securities          149,845           145,794
     Other, net                                    (2,365)             (265)
   Net cash used in investing activities          283,623           316,191

   Cash flows from financing activities:
     Net decrease in finance debt                (222,642)         (140,522)
     Dividends                                    (36,541)          (23,587)
     Purchase of common stock for treasury       (175,796)         (403,519)
     Excess tax benefits from share based
      payments                                      5,699               -
     Issuance of common stock under
      employee stock plans                         19,203            15,204
   Net cash used in financing activities         (410,077)         (552,424)

   Net decrease in cash and cash
    equivalents                                   (74,780)          (75,041)

   Cash and cash equivalents:
     At beginning of period                       275,159           329,329
     At end of period                            $200,379          $254,288

   Note:  Certain prior year amounts have been reclassified to conform to
          the current year presentation.

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

                                                      Three Months Ended
                                                  March 27,        March 28,
                                                     2005              2004
   NET REVENUE (in thousands)
   Harley-Davidson(R) motorcycles                 $978,951          $918,806
   Buell(R) motorcycles                             20,049            22,083
   Parts & Accessories                             176,904           169,188
   General Merchandise                              59,463            54,408
   Other                                                97             1,216
   Total net sales                              $1,235,464        $1,165,701

   Motorcycle shipments:
     United States                                  60,878            59,744
     Export                                         15,838            14,346
   Total                                            76,716            74,090

   Motorcycle product mix:
     Touring                                        25,071            21,404
     Custom                                         34,286            36,864
     Sportster(R)                                   17,359            15,822
   Total                                            76,716            74,090

   Motorcycle shipments:
     Buell                                           2,469             2,603

               Retail Sales of Harley-Davidson Motorcycles
                            First Quarter 2005

                                                     2005              2004

   United States                                   53,707            54,216
   Europe*                                          6,485             5,376
   Japan                                            2,134             1,929
   Canada                                           1,934             1,781
   All other markets                                2,601             1,767

   Total Harley-Davidson Sales                     66,861            65,069

   Data Source: (subject to update)

   Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
   Motorcycle Sales data.

   *Data for Europe includes Austria, Belgium, Denmark, Finland, France,
   Germany, Greece, Italy, Netherlands, Norway, Portugal Spain, Sweden,
   Switzerland, and the United Kingdom

                    Heavyweight (651+ cc) Market Data
                       Data Through Month Indicated

                                                     2005              2004

   United States (March)                          102,046           102,407
   Europe* (February)                              32,639            32,202
   Japan (February)                                 3,857             4,350

   Data Source: (subject to update)
   United States: Motorcycle Industry Council
   Europe: Giral S.A.
   Japan:  JAIA

   Data for remaining markets not available on a monthly basis

   *Data for Europe includes Austria, Belgium, Denmark, Finland, France,
   Germany, Greece, Italy, Netherlands, Norway, Portugal Spain, Sweden,
   Switzerland, and the United Kingdom