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Harley-Davidson Announces 20th Record Year

Revenue, Earnings and Retail Motorcycle Sales reach all time highs

Select financial data reported in the text of this press release is presented on the basis described in the Stock Option Accounting section below.

MILWAUKEE, Jan. 19 -- Harley-Davidson, Inc. today announced record revenue and earnings for its fourth quarter and year ended December 31, 2005. Revenue for the quarter was $1.34 billion compared with $1.22 billion in the year-ago quarter, a 9.9 percent increase. Net income for the quarter was $230.0 million compared to $209.0 million, an increase of 10.1 percent over 2004. Fourth quarter diluted earnings per share (EPS) were 84 cents, an 18.3 percent increase compared with last year's 71 cents.

Revenue for the full year was $5.34 billion, compared with $5.02 billion in 2004, a 6.5 percent increase. Net income for the year was $959.6 million, a 7.8 percent increase versus last year's $889.8 million, while diluted EPS for the full year were $3.41, a 13.7 percent increase compared with $3.00 in 2004.

"Today Harley-Davidson is celebrating an exciting milestone of twenty consecutive years of record revenue, earnings and retail motorcycle sales," said Jim Ziemer, Chief Executive Officer. "As we reflect on our performance in 2005, we had many accomplishments. We shipped 329,000 motorcycles, which is a 3.7 percent increase over the previous year. Worldwide retail sales of Harley-Davidson(R) motorcycles increased 6.2 percent during 2005. Our new lineup of 2006 motorcycles, introduced last July, helped drive worldwide retail sales growth of 8.3 percent in the second half of the year. During 2005, our international motorcycle sales grew significantly and motorcycle sales to women continued to increase, demonstrating that our strategies in these areas are beginning to take hold," said Ziemer.

"We believe the prospects for retail growth remain strong and support a wholesale unit growth rate in the range of 5 to 9 percent annually and an annual EPS growth rate of 11 to 17 percent," said Ziemer. "Our Harley-Davidson motorcycle shipment target for 2006 remains in the range of 348,000 to 352,000 units, with planned wholesale shipments of 79,000 motorcycles during the first quarter," he said.

Motorcycles and Related Products Segment -- Fourth Quarter Results

Revenue from Harley-Davidson(R) motorcycles was $1.09 billion, an increase of $95.7 million, or 9.6 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 87,588 units, an increase of 7,001 units, or 8.7 percent over last year's fourth quarter.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $169.9 million, an increase of $12.0 million, or 7.6 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $60.5 million, an increase of $5.6 million, or 10.2 percent.

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 growth rate is expected to be lower than the motorcycle unit growth rate.

Gross margin for the fourth quarter of 2005 was 38.3 percent of revenue, up from 37.8 percent for the same period in 2004. Consistent with the higher gross margin, operating margin increased from 23.0 percent in 2004 to 23.4 percent in 2005.

Motorcycle Retail Sales Data

Worldwide retail sales of Harley-Davidson motorcycles increased 3.0 percent for the fourth quarter of 2005 compared to the same period in 2004. For the full year, worldwide retail sales increased 6.2 percent compared to 2004.

U.S. retail sales of Harley-Davidson motorcycles increased 0.7 percent in the fourth quarter and 4.2 percent for the full year. For the second six months of the year, U.S. retail sales grew 7.3 percent compared to 1.9 percent for the first six months of 2005.

"We are pleased with retail sales growth in the U.S. market during the second half of the year. The extensive enhancements made to existing models, along with several brand new motorcycles for the 2006 model year, are certainly generating excitement," said Ziemer.

Internationally, retail sales of Harley-Davidson motorcycles grew 13.0 percent in the fourth quarter and 15.0 percent for the full year compared with 2004. Total retail sales for 2005 increased in all of the Company's major international markets.

  Data is listed in the accompanying tables.

  Financial Services Segment

Harley-Davidson Financial Services (HDFS) reported fourth quarter operating income of $39.5 million, up 0.7 percent compared to the year-ago quarter.

A fourth quarter securitization of $325 million in motorcycle retail loans resulted in a gain of $4.2 million. The 1.3 percent gain on the securitization as a percentage of loans sold is consistent with management's prior guidance of 1.0 to 1.4 percent. Gains in the first quarter of 2006 are also expected to continue in that range. Given the relatively small percentage of HDI operating income that is generated by securitization gains, the Company is not providing guidance for periods beyond the first quarter of 2006. Income related to securitizations will continue to be reported in the Company's annual report and SEC filings.

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

Harley-Davidson, Inc. -- Twelve Month Results

For the fiscal year ended 2005, total Harley-Davidson motorcycle shipments were 329,017 units compared with 317,289 units in 2004, a 3.7 percent increase. Harley-Davidson motorcycle revenue was $4.18 billion, an increase of $255.3 million, or 6.5 percent.

P&A revenue totaled $815.7 million, a $34.1 million, or a 4.4 percent increase, while General Merchandise revenue totaled $247.9 million, a $24.1 million or a 10.8 percent increase, compared with 2004.

Full year operating income for HDFS was $191.6 million, an increase of $3.0 million or 1.6 percent compared to 2004.

Cash Flow -- Twelve Month Results

As of December 31, 2005, cash and marketable securities were $1.05 billion, down from $1.61 billion at December 31, 2004. During the year the Company invested $198.4 million in capital expenditures, repurchased 21.4 million shares of Company stock for $1.05 billion, paid $173.8 million in dividends and contributed $296.8 million to its retirement plans.

Stock Option Accounting

On January 1, 2005, the Company began recognizing expense related to its employee stock option awards before the required implementation date of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123 as revised in 2004. The Company accounted for these stock options as equity instruments. However, SFAS No. 123 (revised 2004) requires that stock options that may be settled for cash instead of stock at the election of the holder upon the occurrence of a change in control event be accounted for as a liability regardless of the probability of the change in control event occurring.

The Company recently became aware of the applicability of the contingent cash settlement feature of SFAS No. 123 (revised 2004) to its employee stock compensation plans. Had the Company used the liability method to account for stock option awards during 2005, operating income would have increased by $37.8 million. Accordingly, income before accounting changes net of tax would have been $983.0 million for the year, an increase of $23.4 million compared to the Company's reported amount of $959.6 million. In addition, on the January 1, 2005 adoption date of this accounting method, the Company would have recorded a cumulative charge to income of $120.9 million or $74.8 million net of tax for its adoption of the liability method.

On January 11, 2006, FASB voted to seek public comment on a proposed FASB Staff Position (FSP) to require companies to classify employee stock options with contingent cash settlement features as equity awards provided the contingent event, such as a change in control event, is not considered probable of occurring. This classification would be consistent with the amounts reported with respect to outstanding stock options in connection with the Company's original adoption of SFAS No. 123 (revised 2004) on January 1, 2005, and in subsequent interim periods.

The Company believes that the proposed FSP is a strong indication that classification of its stock option awards as equity instruments will be appropriate upon finalization of the FSP. As a result, all financial data reported in this press release is presented on a U.S. GAAP basis adjusted for the anticipated ratification of the proposed FSP. In the event the FSP is not finalized as expected, the Company will reflect such effects on the year and the quarters in its annual report and 10-K filing for the year ended December 31, 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 their retail customers.

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

                               Three Months Ended     Twelve Months Ended
                            (Unaudited) (Unaudited)        (Unaudited)

                                 Dec 31,     Dec 31,     Dec 31,     Dec 31,
                                   2005        2004        2005        2004

   Net revenue               $1,342,335  $1,220,997  $5,342,214  $5,015,190
   Gross profit                 514,510     461,422   2,040,499   1,899,535
   Operating expenses           199,854     180,672     740,634     710,016
   Operating income from
    motorcycles & related
    products                    314,656     280,750   1,299,865   1,189,519

   Financial services income     76,060      66,224     331,618     305,262
   Financial services
    expense                      36,595      27,018     139,998     116,662
   Operating income from
    financial services           39,465      39,206     191,620     188,600

   Corporate expenses             3,473       3,757      21,474      16,628
   Total operating income       350,648     316,199   1,470,011   1,361,491
   Investment income and
    other, net                    6,009       7,775      17,748      17,995
   Income before provision
    for taxes                   356,657     323,974   1,487,759   1,379,486
   Provision for income
    taxes                       126,613     115,012     528,155     489,720
   Net income                $  230,044  $  208,962  $  959,604  $  889,766

  Earnings per common share:
    Basic                         $0.84       $0.71       $3.42       $3.02
    Diluted                       $0.84       $0.71       $3.41       $3.00

  Weighted-average common
    Basic                       274,182     294,014     280,303     295,008
    Diluted                     274,837     295,406     281,035     296,852

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

                                                  Dec 31,           Dec 31,
                                                    2005              2004

  Current assets:
    Cash and cash equivalents                 $  140,975        $  275,159
    Marketable securities                        905,197         1,336,909
    Accounts receivable, net                     122,087           121,333
    Finance receivables, net                   1,641,766         1,624,038
    Inventories                                  221,418           226,893
    Other current assets                         122,319            98,854
  Total current assets                         3,153,762         3,683,186
  Finance receivables, net                       600,831           488,262
  Other long-term assets                       1,509,141         1,311,845

  Total assets                                $5,263,734        $5,483,293

  Current liabilities:
    Accounts payable & accrued expenses       $  668,139        $  677,255
    Current portion of finance debt              204,973           495,441
  Total current liabilities                      873,112         1,172,696
  Finance debt                                 1,000,000           800,000
  Other long-term liabilities                    246,042           142,278
  Postretirement health care benefits             60,975           149,848
  Shareholders' equity                         3,083,605         3,218,471

  Total liabilities and shareholders'
   equity                                     $5,263,734        $5,483,293

   Note: Certain prior year balances have been reclassified in order to
         conform with the current year presentation.

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

                                                  Twelve months ended
                                             Dec 31,     Dec 31,     Dec 31,
                                               2005        2004        2003
  Cash flows from operating activities:
    Net income                           $  959,604  $  889,766  $  760,928
    Adjustments to reconcile net income
     to net cash provided by operating
      Depreciation                          205,705     214,112     196,918
      Provision for long-term employee
       benefits                              94,328      62,806      76,422
      Gain on current year
       securitizations                      (46,581)    (58,302)    (82,221)
      Proceeds from securitizations       2,450,920   1,847,895   1,724,060
      Finance receivables (held for sale)
       acquired or originated            (2,447,320) (2,069,713) (1,897,719)
      Finance receivables (held for sale)
       collected                            124,462      84,310     107,510
      Net change in wholesale finance
       receivables                         (161,342)   (154,124)   (154,788)
      Contributions to pension &
       postretirement plans                (296,859)          -    (192,000)
      Tax benefit from the exercise of
       stock options                              -      51,476      13,805
      Other                                  82,678     (11,142)     62,232
      Net changes in current assets and
       current liabilities                   (5,085)    (24,866)    (18,644)
    Total adjustments                           906     (57,548)   (164,425)
  Net cash provided by operating
   activities                               960,510     832,218     596,503

  Cash flows from investing activities:
    Capital expenditures                   (198,389)   (213,550)   (227,230)
    Finance receivables, net               (156,438)   (134,571)    (47,287)
    Collection of retained securitization
     interests                              115,346     125,732     118,113
    Net change in marketable securities     431,075    (349,042)   (393,548)
    Other, net                              (14,497)      1,189       9,690
  Net cash provided by (used in)
   investing activities                     177,097    (570,242)   (540,262)

  Cash flows from financing activities:
    Net increase in finance debt            (80,720)    305,047     224,118
    Dividends                              (173,785)   (119,232)    (58,986)
    Purchase of common stock for
     treasury                            (1,054,615)   (564,132)   (103,880)
    Excess tax benefits from share based
     payments                                 6,065
    Issuance of common stock under
     employee stock plans                    31,264      62,171      19,378
  Net cash used in financing activities  (1,271,791)   (316,146)     80,630

  Net increase in cash and cash
   equivalents                             (134,184)    (54,170)    136,871

  Cash and cash equivalents:
    At beginning of period                  275,159     329,329     192,458
    At end of period                     $  140,975  $  275,159  $  329,329

     Note:  Certain prior year balances have been reclassified in order to
            conform with the current year presentation.

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

                                 Three Months Ended      Twelve Months Ended
                                 Dec 31,     Dec 31,     Dec 31,     Dec 31,
                                   2005        2004        2005        2004
  NET REVENUE (in thousands)
   motorcycles               $1,088,286  $  992,611  $4,183,515  $3,928,232
  Buell(R) motorcycles           21,828      15,519      93,069      79,029
  Parts & Accessories           169,859     157,906     815,678     781,621
  General Merchandise            60,486      54,884     247,861     223,712
  Other                           1,876          77       2,091       2,596
                             $1,342,335  $1,220,997  $5,342,214  $5,015,190

  Motorcycle shipments:
    United States                74,383      68,902     266,507     260,607
    Export                       13,205      11,685      62,510      56,682
  Total                          87,588      80,587     329,017     317,289

  Motorcycle product mix:
    Touring                      29,090      25,052     110,193      93,305
    Custom                       38,233      38,035     148,609     154,163
    Sportster(R)                 20,265      17,500      70,215      69,821
  Total                          87,588      80,587     329,017     317,289

  Motorcycle shipments:
    Buell                         2,716       2,064      11,166       9,857

                          Retail Sales of Harley-Davidson Motorcycles
                                         Full Year 2005

                                                    2005              2004

  United States                                  253,414           243,160
  Europe*                                         29,482            24,594
  Japan                                           11,420            10,283
  Canada                                          11,660            11,200
  All other markets                               11,193             9,373

  Total Harley-Davidson Sales                    317,169           298,610

  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

  * 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 (December)                       517,562           494,045
  Europe* (November)                             330,726           332,706

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

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