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Harley-Davidson Sets Records for Quarterly Revenue and Earnings


U.S. Retail Sales of Harley-Davidson Motorcycles Climb 12.1% during the Quarter

MILWAUKEE, Oct. 12 -- Harley-Davidson, Inc. today announced record earnings for its third quarter ended September 25, 2005. Third quarter diluted earnings per share (EPS) were 96 cents, a 24.7 percent increase compared with 77 cents last year. Net income for the quarter was $265.0 million, up $36.0 million or 15.7 percent. Revenue for the quarter was $1.43 billion compared to $1.30 billion in the year-ago quarter.

"Harley-Davidson had a great third quarter," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. "Our motorcycles sold at a brisk pace in all of our worldwide markets. In the U.S., retail sales of Harley- Davidson(R) motorcycles rose 12 percent during the quarter, and in Europe and Japan, retail sales were up 11.5 percent and 13 percent, respectively. Year- to-date, Harley-Davidson worldwide retail sales were up approximately 7 percent."

"We are pleased with these third quarter retail sales results and the positive response to our exciting line of 2006 motorcycles," said Ziemer. "We introduced six brand new models and made significant enhancements to each of our motorcycle families this year, and the changes have been very well received by our dealers, the motorcycle press and our retail customers. Our third quarter results keep us on track with our previously disclosed guidance for 2005 and move us closer to achieving the Company's 20th consecutive year of record revenue and earnings," said Ziemer.

"Harley-Davidson's current performance is outstanding and we have great new products and customer experiences planned for next year. However, as we look ahead we are watching the economy carefully. Given the uncertainty related to consumer confidence, increasing fuel prices and rising interest rates, we are setting a shipment target range of 348,000 to 352,000 Harley- Davidson motorcycles for 2006. Consistent with this more conservative outlook, we are also broadening our long-term guidance on wholesale unit growth to 5 to 9 percent annually. This will support an annual earnings per share growth target in the range of 11 to 17 percent," said Ziemer.

Motorcycles and Related Products Segment - Third Quarter Results

Third quarter revenue from Harley-Davidson motorcycles was $1.11 billion, an increase of $113.6 million or 11.4 percent over last year. Worldwide wholesale shipments of Harley-Davidson motorcycles in the third quarter totaled 87,585 units, up 8.7 percent from the year-ago period. The Company's 2005 shipment target for Harley-Davidson motorcycles remains at 329,000 units.

Third quarter revenue from Parts & Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $231.2 million. This is a 3.0 percent increase, or $6.8 million more than the same quarter a year-ago.

Third quarter revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $64.5 million, up 5.1 percent or $3.2 million over the same period last year.

Growth rates for P&A and General Merchandise fluctuate from quarter to quarter. However, for the long term the Company expects the growth rate for P&A revenue to be slightly higher than Harley-Davidson's motorcycle unit growth rate, and the General Merchandise revenue growth rate is expected to be lower than the motorcycle unit growth rate.

Third quarter gross margin improved to 39.2 percent of revenue in 2005 compared to 38.0 percent of revenue in 2004. The increase in margin was primarily driven by a favorable motorcycle product mix. Consistent with the higher gross margin, operating margin increased to 25.6 percent in 2005 from 23.6 percent in 2004.

Motorcycle Retail Data

During the third quarter, worldwide retail sales of Harley-Davidson motorcycles grew 12.1 percent. Sales of Harley-Davidson motorcycles outpaced the total industry in each of the Company's major markets. Data are listed in the accompanying tables.

On a year-to-date basis, Harley-Davidson motorcycle sales were up 5.0 percent in the U.S., 19.3 percent in Europe, and 11.4 percent in Japan.

Industry-wide sales in the 651+cc segment in the U.S. were up 4.3 percent year to date. Through August, retail sales in Europe were down 1.4 percent and in Japan, they were down 1.5 percent.

Financial Services Segment

Harley-Davidson Financial Services (HDFS) reported third quarter operating income of $47.6 million, down 5.0 percent from $50.1 million in the year-ago quarter. This decrease was primarily driven by a lower securitization gain versus the third quarter of 2004.

The third quarter securitization of $650 million in motorcycle retail loans resulted in a gain of $9.2 million, which is $4.6 million less than the gain in the third quarter of 2004. The 1.4 percent gain on the securitization as a percentage of loans securitized is consistent with management's prior guidance. In the current competitive market and interest rate environment, HDFS expects fourth quarter securitization gains in the range of 1.0 to 1.4 percent.

Annualized credit losses on a managed portfolio basis increased during the first nine months of 2005 to 0.97 percent from 0.69 percent in 2004. The increase is due to lower recovery rates and a higher incidence of loss.

For the full year 2005, HDFS expects operating income to be approximately equal to that achieved in 2004. Over the long term, the Company expects the HDFS growth rate in operating income to be slightly higher than the Company's motorcycle unit growth rate.

Harley-Davidson, Inc. - Nine Month Results

For the first nine months of 2005, revenue totaled $4.00 billion, a 5.4 percent increase over the year-ago period. Diluted earnings per share were $2.57, an increase of 12.2 percent compared to the same period last year. Net income for the nine months was $729.6 million, up $48.8 million or 7.2 percent.

Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 241,429 units, a 2.0 percent increase over last year's 236,702 units. Harley-Davidson motorcycle revenue was $3.10 billion, a 5.4 percent increase over $2.94 billion in revenue in 2004. P&A revenue totaled $645.8 million, a 3.5 percent increase over last year's $623.7 million. General Merchandise revenue totaled $187.4 million, an 11.0 percent increase compared with $168.8 million during the same period in 2004.

HDFS operating income was $152.2 million, a 1.8 percent increase compared with $149.4 million during the first nine months of 2004.

Cash Flow - Nine Month Results

Operations generated almost $1 billion of cash during the first nine months of 2005. This cash flow along with prior cash reserves enabled the Company to make a $102 million contribution to the post-retirement health care trusts, invest $122 million in capital expenditures, pay $124 million in dividends and repurchase $1 billion of common stock. The Company repurchased 20.6 million shares of its common stock at an average cost of $49 per share during the first and second quarters of 2005.

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.

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

                                   (Unaudited)             (Unaudited)
                                Three Months Ended      Nine Months Ended
                                Sep 25,     Sep 26,     Sep 25,     Sep 26,
                                 2005        2004        2005        2004

   Net revenue               $1,431,151  $1,300,684  $3,999,879  $3,794,193
   Gross profit                 561,272     494,568   1,525,989   1,438,113
   Operating expenses           194,270     187,980     540,780     529,344
   Operating income from
    motorcycles & related
    products                    367,002     306,588     985,209     908,769

   Financial services income     81,444      77,484     255,558     239,038
   Financial services
    expense                      33,869      27,410     103,403      89,644
   Operating income from
    financial services           47,575      50,074     152,155     149,394

   Corporate expenses             3,715       3,348      18,001      12,871
   Total operating income       410,862     353,314   1,119,363   1,045,292
   Investment income and
    other, net                      (79)      1,699      11,739      10,220
   Income before provision
    for taxes                   410,783     355,013   1,131,102   1,055,512
   Provision for income
    taxes                       145,829     126,030     401,542     374,708
   Net income                  $264,954    $228,983    $729,560    $680,804

  Earnings per common share:
    Basic                         $0.97       $0.78       $2.58       $2.30
    Diluted                       $0.96       $0.77       $2.57       $2.29

  Weighted-average common
    Basic                       274,415     294,031     282,519     295,362
    Diluted                     275,460     295,824     283,406     297,357

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

                                         (Unaudited)             (Unaudited)
                                            Sep 25,    Dec. 31,     Sep 26,
                                             2005        2004        2004

  Current assets:
    Cash and cash equivalents              $437,007    $275,159    $484,578
    Marketable securities                   580,826   1,336,909   1,043,758
    Accounts receivable, net                139,759     121,333     139,022
    Finance receivables, net              1,161,289   1,207,124     998,114
    Inventories                             232,240     226,893     234,728
    Other current assets                    114,568      98,854      84,155
  Total current assets                    2,665,689   3,266,272   2,984,355
  Finance receivables, net                  784,785     905,176     581,296
  Other long-term assets                  1,243,994   1,311,845   1,364,723

  Total assets                           $4,694,468  $5,483,293  $4,930,374

  Current liabilities:
    Accounts payable & accrued expenses    $863,210    $677,255    $693,073
    Current portion of finance debt               -     495,441     109,179
  Total current liabilities                 863,210   1,172,696     802,252
  Finance debt                              776,626     800,000     670,000
  Other long-term liabilities               134,786     142,278     220,461
  Postretirement healthcare benefits         57,732     149,848     144,917
  Shareholders' equity                    2,862,114   3,218,471   3,092,744

  Total liabilities and shareholders'
   equity                                $4,694,468  $5,483,293  $4,930,374

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

                                                     Nine months ended
                                                  Sep 25,          Sep 26,
                                                   2005             2004
  Cash flows from operating activities:
    Net income                                   $729,560         $680,804
    Adjustments to reconcile net income
     to net cash provided by operating
       Depreciation                               159,773          160,765
       Provision for long-term employee
        benefits                                   62,224           47,143
       Gain on current year securitizations       (42,355)         (58,302)
       Net change in wholesale finance
        receivables                                17,529           23,811
       Contributions to pension &
        postretirement plans                     (109,000)               -
       Tax benefit from the exercise of
        stock options                                   -           42,919
       Other                                       18,438           25,788
       Net changes in current assets and
        current liabilities                       144,369           20,055
    Total adjustments                             250,978          262,179
  Net cash provided by operating
   activities                                     980,538          942,983

  Cash flows from investing activities:
    Capital expenditures                         (122,128)        (109,874)
    Finance receivables, net                       93,967           99,344
    Collection of retained securitization
     interests                                     84,766           97,494
    Net change in marketable securities           755,268          (53,594)
    Other, net                                    (10,586)          (8,868)
  Net cash provided by investing
   activities                                     801,287           24,502

  Cash flows from financing activities:
    Net decrease in finance debt                 (510,720)        (214,290)
    Dividends                                    (124,330)         (82,411)
    Purchase of common stock for treasury      (1,014,645)        (564,132)
    Excess tax benefits from share based
     payments                                       5,319                -
    Issuance of common stock under
     employee stock plans                          24,399           48,597
  Net cash used in financing activities        (1,619,977)        (812,236)

  Net increase in cash and cash
   equivalents                                    161,848          155,249

  Cash and cash equivalents:
    At beginning of period                        275,159          329,329
    At end of period                             $437,007         $484,578

  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      Nine Months Ended
                                Sep 25,     Sep 26,     Sep 25,     Sep 26,
                                 2005        2004        2005        2004
  NET REVENUE (in thousands)
   motorcycles               $1,110,173    $996,552  $3,095,229  $2,935,621
  Buell(R) motorcycles           25,267      18,318      71,241      63,510
  Parts & Accessories           231,161     224,381     645,819     623,715
  General Merchandise            64,506      61,352     187,375     168,828
  Other                              44          81         215       2,519
                             $1,431,151  $1,300,684  $3,999,879  $3,794,193

  Motorcycle shipments:
    United States                72,249      66,859     192,124     191,705
    Export                       15,336      13,719      49,305      44,997
  Total                          87,585      80,578     241,429     236,702

  Motorcycle product mix:
    Touring                      29,492      21,818      81,103      68,253
    Custom                       40,730      39,857     110,376     116,128
    Sportster(R)                 17,363      18,903      49,950      52,321
  Total                          87,585      80,578     241,429     236,702

  Motorcycle shipments:
    Buell                         2,914       2,472       8,450       7,793

               Retail Sales of Harley-Davidson Motorcycles

                          Three Months ended 9/30     Nine Months ended 9/30
                             2005        2004           2005          2004

  United States             67,107      59,888        210,790       200,826
  Europe*                    6,819       6,118         25,172        21,096
  Japan                      3,070       2,714          8,428         7,563
  Canada                     2,725       2,689         10,700         9,978
  All other markets          2,647       2,089          8,177         6,829

  Total                     82,368      73,498        263,267       246,292

  Data Source (subject to update)
    Data source for all 2005 retail sales figures shown above is sales
    warranty and registration information provided by Harley-Davidson
    dealers and compiled by the Company.  The Company must rely on
    information that its dealers supply concerning retail sales and this
    information is subject to revision.  2004 retail sales figures shown
    above conform to sales warranty and registration information as of
    September 30, 2004 and vary from previously published Motorcycle
    Industry Council data.

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

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

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

                                                  2005              2004

  United States (September)                      437,102           419,267
  Europe* (August)                               281,978           285,821
  Japan (August)                                  30,704            31,175

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

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