Harley-Davidson Reports First Quarter 2010 Results

Company Generates Earnings Per Share of $0.29 from Continuing Operations Harley-Davidson Financial Services Returns to Profitability Retail Harley-Davidson(R) Motorcycle Sales Decline Moderates

MILWAUKEE, April 20 -- Harley-Davidson, Inc. reported first-quarter 2010 income from continuing operations of $68.7 million, or $0.29 per share. First quarter earnings included operating income from Financial Services of $26.7 million, marking a return to profitability for the Company's Harley-Davidson Financial Services (HDFS) subsidiary. Revenue from Motorcycles and Related Products was $1.04 billion in the first quarter.

Worldwide retail sales of new Harley-Davidson® motorcycles declined 18.2 percent in the quarter compared to the first quarter of 2009, an improvement in the rate of decline from the prior three quarters. In the U.S., retail Harley-Davidson motorcycle sales were down 24.3 percent and in international markets, retail sales declined 2.8 percent, compared to last year's first quarter.

"We are encouraged by our progress in the first quarter," said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc. "We are seeing directional improvement in our dealers' retail motorcycle sales as we enter the key selling season. At the same time, given the global economic uncertainty that still exists, we believe conditions will remain challenging throughout this year, and we will continue to factor that into how we manage the business.

"Our entire team is moving with great purpose and speed as we implement our go-forward business strategy, with its focus on global growth through market and demographic outreach, commitment to core customers, and developing motorcycles that inspire and fulfill dreams. We also continue to be intensely focused on continuous improvement, looking at all opportunities to drive cost-competitiveness and efficiency throughout our operations," Wandell said.

Harley-Davidson Motorcycles and Related Products Segment

Revenue from Harley-Davidson motorcycles during the first quarter of 2010 of $808.8 million was down 20.0 percent compared to the year-ago period. In line with guidance, the Company shipped 53,674 Harley-Davidson motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 74,670 motorcycles in the first quarter of 2009.

Revenue from Parts and Accessories totaled $149.1 million during the quarter, down 12.1 percent, and revenue from General Merchandise, which includes MotorClothes® apparel, was $66.3 million, down 11.9 percent compared to the year-ago period.

Gross margin was 36.6 percent in the first quarter, compared to 37.1 percent in the year-ago period. First-quarter operating margin decreased to 12.2 percent from 18.1 percent in the first quarter of 2009, driven by higher restructuring costs and the impact of lower revenue in the first quarter of 2010 compared to the year-ago period.

Motorcycle Retail Sales Data

During the first quarter of 2010, worldwide dealer retail sales of new Harley-Davidson motorcycles decreased 18.2 percent compared to the prior-year quarter. In the U.S., retail sales of new Harley-Davidson motorcycles declined 24.3 percent for the quarter and industry-wide heavyweight motorcycle (651cc-plus) retail unit sales declined 21.4 percent.

International retail sales of new Harley-Davidson motorcycles decreased 2.8 percent during the quarter, compared to the year-ago period, after double-digit declines in each of the prior four quarters. In the first quarter of 2010, the Europe region was up 1.2 percent, Canada was up 1.5 percent, the Asia Pacific region was down 9.8 percent and the Latin America region was down 7.8 percent, compared to the year-ago period.

Guidance

The Company reiterated its expectation to ship 201,000 to 212,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2010, a reduction of five to ten percent from 2009. In the second quarter of 2010, the Company expects to ship 55,000 to 60,000 Harley-Davidson motorcycles. The Company continues to expect gross margin to be between 32.0 percent and 33.5 percent for the full year. The Company also continues to expect full-year capital expenditures of between $235 million and $255 million, including $95 million to $110 million to support restructuring activities.

Financial Services Segment

First-quarter operating income from Financial Services was $26.7 million, an increase of $15.5 million compared to the year-ago quarter. The return to profitability for HDFS after three consecutive quarters of operating losses was primarily driven by improved credit performance in the retail motorcycle loan portfolio and by a lower cost of funds.

Restructuring Update

Previously announced restructuring activities that began in 2009 are proceeding on schedule and on budget. The Company continues to expect those activities to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. In 2010, the Company continues to expect savings of $135 million to $155 million from previously announced restructuring activities, increasing to expected annual ongoing savings of approximately $240 million to $260 million upon completion of the restructuring.

"During the first quarter, we implemented the new labor agreement at our York facility and are on track with our restructuring of York for best-in-class production capability. I have been impressed by the efforts of our York employees to move forward together with this important transformation," said Wandell.

Income Tax Rate

The Company's first quarter effective income tax rate from continuing operations was 47.2 percent compared to 45.4 percent in the same quarter last year. The rate increase was generally due to the tax impact of the recently enacted federal healthcare reform legislation and the expiration of the federal research and development tax credit, partially offset by the non-recurrence of a one-time tax charge related to a change in Wisconsin tax law in the first quarter of 2009. Relative to the tax impact of healthcare reform, the Company incurred a one-time tax charge of $13.3 million in the first quarter of 2010 associated with the taxation of Medicare Part D retiree prescription drug reimbursements. The Company now expects its 2010 full-year effective tax rate from continuing operations to be approximately 40.5 percent.

Cash Flow

Cash and marketable securities totaled $1.48 billion as of March 28, 2010, compared to $884.6 million at the end of last year's first quarter. Cash provided by operating activities of continuing operations was $200.8 million and capital expenditures were $14.6 million during the first quarter of 2010.

Discontinued Operations

The Company is in discussions with potential buyers regarding its previously announced intention to sell MV Agusta. For the first quarter of 2010, Harley-Davidson, Inc. incurred a $35.4 million loss from discontinued operations, comprised of operating losses as well as a fair value adjustment of $28.6 million net of taxes. Including discontinued operations, the Company reported earnings per share of $0.14.

Company Background

Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Harley-Davidson Financial Services (HDFS), Buell Motorcycle Company (Buell), and MV Agusta.

Conference Call and Webcast Presentation

Harley-Davidson will discuss first-quarter results on a Webcast at 8:00 a.m. CT today. The Webcast presentation will be posted prior to the call and can be accessed at http://investor.harley-davidson.com/. Click "Events and Presentations" under "Resources."

Forward-Looking Statements

The Company intends that certain matters discussed in this release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects," "plans," or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this release are only made as of the date of this release, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

The Company's ability to meet the targets and expectations noted depends upon, among other factors, the Company's ability to (i) execute its business strategy and successfully exit certain product lines and divest certain company assets, (ii) effectively execute the Company's restructuring plans within expected costs and timing, (iii) successfully achieve with our labor unions flexible and cost-effective agreements to accomplish restructuring goals and long-term competitiveness, (iv) manage the risks that our independent dealers may have difficulty obtaining capital, and adjusting to the recession and slowdown in consumer demand, (v) manage supply chain issues, (vi) anticipate the level of consumer confidence in the economy, (vii) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (viii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (ix) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (x) manage production capacity and production changes, (xi) provide products, services and experiences that are successful in the marketplace, (xii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiii) sell all of its motorcycles and related products and services to its independent dealers, (xiv) continue to develop the capabilities of its distributor and dealer network, (xv) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xvi) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xvii) adjust to healthcare inflation and reform, pension reform and tax changes, (xviii) retain and attract talented employees, (xix) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation, and (xx) implement and manage enterprise-wide information technology solutions and secure data contained in those systems.

In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission. Many of these risk factors are impacted by the current turbulent capital, credit and retail markets and our ability to adjust to the recession.

The Company's ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company's independent dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company's independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

  TABLES FOLLOW

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

                                                  Three months ended
                                             March 28,         March 29,
                                                   2010              2009
                                                   ----              ----

  Net revenue from motorcycles and related
   products                                  $1,037,335        $1,278,432
  Gross profit                                  379,547           474,046
  Selling, administrative and engineering
   expense                                      205,204           208,171
  Restructuring expense                          48,236            34,862
    Operating income from motorcycles &
     related products                           126,107           231,013

  Financial services revenue                    169,837           104,667
  Financial services expense                    143,155            93,462
    Operating income from financial services     26,682            11,205
                                                 ------            ------

  Operating income                              152,789           242,218
  Investment income                                 876             1,953
  Interest expense                               23,455             9,746
  Income before income taxes                    130,210           234,425
  Provision for income taxes                     61,469           106,372
  Income from continuing operations              68,741           128,053
  Loss from discontinued operations, net
   of tax                                       (35,416)          (10,706)
                                                -------           -------
  Net income                                    $33,325          $117,347
                                                =======          ========

  Earnings per common share from
   continuing operations:
    Basic                                         $0.30             $0.55
    Diluted                                       $0.29             $0.55

  Loss per common share from discontinued
   operations:
    Basic                                        $(0.15)           $(0.05)
    Diluted                                      $(0.15)           $(0.05)

  Earnings per common share:
    Basic                                         $0.14             $0.51
    Diluted                                       $0.14             $0.50

  Weighted-average common shares:
    Basic                                       232,864           232,263
    Diluted                                     234,228           232,650

  Cash dividends per common share                 $0.10             $0.10

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

                                      (Unaudited)               (Unaudited)
                                        March 28,  December 31,   March 29,
                                              2010         2009         2009
                                              ----         ----         ----

  ASSETS
  ------
  Current assets:
    Cash and cash equivalents           $1,442,798   $1,630,433     $884,623
    Marketable securities                   39,416       39,685            -
    Accounts receivable, net               286,518      269,371      284,853
    Finance receivables held for sale
     (1)                                         -            -    2,086,920
    Finance receivables held for
     investment, net                     1,252,420    1,436,114    1,677,355
    Restricted finance receivables
     held by variable interest             809,779            -            -
      entities, net (2)
    Inventories                            322,238      323,029      421,577
    Assets of discontinued operations      151,175      181,211      231,421
    Restricted cash held by variable
     interest entities (2)                 401,275            -            -
    Other current assets                   315,890      462,106      243,054
  Total current assets                   5,021,509    4,341,949    5,829,803

  Finance receivables held for sale
   (1)                                           -            -      580,736
  Finance receivables held for
   investment, net                       1,274,734    3,621,048      796,732
  Restricted finance receivables
   held by variable interest             3,299,070            -            -
    entities, net (2)
  Other long-term assets                 1,107,590    1,192,521    1,412,323
                                         ---------    ---------    ---------
                                       $10,702,903   $9,155,518   $8,619,594
                                       ===========   ==========   ==========

  LIABILITIES AND SHAREHOLDERS'
   EQUITY
  -----------------------------
  Current liabilities:
    Accounts payable & accrued
     liabilities                          $865,725     $676,599     $932,049
    Liabilities of discontinued
     operations                             61,726       69,535       74,488
    Short-term debt                        160,837      189,999    1,724,375
    Current portion of long-term
     debt                                  396,169    1,332,091            -
    Current portion of long-term
     debt held by variable interest      1,792,389            -            -
      entities (2)
  Total current liabilities              3,276,846    2,268,224    2,730,912

  Long-term debt                         2,862,725    4,114,039    2,757,185
  Long-term debt held by variable
   interest entities (2)                 1,814,294            -            -
  Pension liability and
   postretirement healthcare
   benefits                                504,562      509,804      744,459
  Other long-term liabilities              157,077      155,333      154,225

  Total shareholders' equity (2)         2,087,399    2,108,118    2,232,813
                                         ---------    ---------    ---------
                                       $10,702,903   $9,155,518   $8,619,594
                                       ===========   ==========   ==========

  (1)  During the second quarter of 2009, the Company reclassified its
  finance receivables held for sale to finance receivables held for
  investment, net due to a change in the Company's intent to structure
  future securitization transactions in a manner that does not qualify
  for accounting sale treatment under the provisions of Accounting
  Standards Codification (ASC)  Topic 860, "Transfers and Servicing."

  (2)  On January 1, 2010, the Company adopted Statement of Financial
  Accounting Standard  (SFAS) No. 166, "Accounting for Transfers of
  Financial Assets, an amendment of FASB Statement No. 140,"
  (codified within  ASC Topic 860) and SFAS No. 167, "Amendments to
  FASB Interpretation No. 46( R )" (codified in ASC Topic 810,
  "Consolidations"). In accordance with ASC Topic 810, the Company
  determined that it is the primary beneficiary of its formerly
  unconsolidated variable interest entities.  Accordingly, the Company
  began consolidating the variable interest entities on January 1,
  2010. As a result of the consolidation, the Company recorded a
  reduction to retained earnings of $40.6 million net of tax.

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

                                                    Three months ended
                                               March 28,         March 29,
                                                     2010              2009
                                                     ----              ----

  Net cash provided by (used by) operating
   activities of                                 $200,842         $(227,026)
     continuing operations

  Cash flows from investing activities of
   continuing operations:
    Capital expenditures                          (14,558)          (20,009)
    Finance receivables held for investment,
     net                                          198,104            11,661
    Collection of retained securitization
     interests                                          -             1,358
  Net cash provided by (used by) investing
   activities of continuing operations            183,546            (6,990)

  Cash flows from financing activities of
   continuing operations:
    Proceeds from issuance of senior unsecured
     notes                                              -           595,731
    Repayments of securitization debt            (445,215)                -
    Net (decrease) increase in credit
     facilities and unsecured                     (50,703)           48,442
       commercial paper
    Repayments of asset-backed commercial
     paper                                              -           (67,194)
    Net change in restricted cash                 (34,734)                -
    Dividends                                     (23,488)          (23,455)
    Purchase of common stock for treasury          (1,191)                -
    Excess tax benefits from share-based
     payments                                          34               147
    Issuance of common stock under employee
     stock option plans                             1,101                10
  Net cash (used by) provided by financing
   activities of continuing operations           (554,196)          553,681

  Effect of exchange rate changes on cash
   and cash equivalents                              (606)            6,253
    of continuing operations

  Net (decrease) increase in cash and cash
   equivalents of                                (170,414)          325,918
     continuing operations

  Cash flows from discontinued operations:
    Cash flows from operating activities of
     discontinued operations                      (13,723)          (18,294)
    Cash flows from investing activities of
     discontinued operations                         (393)           (4,433)
    Effect of exchange rate changes on cash
     and cash equivalents
       of discontinued operations                    (635)            2,549
                                                  (14,751)          (20,178)
                                                  -------           -------

  Net (decrease) increase in cash and cash
   equivalents                                  $(185,165)         $305,740
                                                =========          ========

  Cash and cash equivalents:
    Cash and cash equivalents -beginning of
     period                                    $1,630,433          $568,894
    Cash and cash equivalents of discontinued
     operations                                     6,063            24,664
       - beginning of period
    Net (decrease) increase in cash and cash
     equivalents                                 (185,165)          305,740
    Less: Cash and cash equivalents of
     discontinued operations                       (8,533)          (14,675)
       - end of period                             ------           -------
    Cash and cash equivalents -end of period   $1,442,798          $884,623
                                               ==========          ========

              Net Revenue and Motorcycle
                     Shipment Data

                                    (Unaudited)      (Unaudited)
                                           Three months ended
                                      March 28,        March 29,
                                            2010             2009
                                            ----             ----
  NET REVENUE (in
   thousands)
  Harley-Davidson( R )
   motorcycles                          $808,806       $1,010,809
  Buell( R ) motorcycles                  10,790           19,144
  Parts & Accessories                    149,086          169,662
  General Merchandise                     66,255           75,190
  Other                                    2,398            3,627
                                           -----            -----
                                      $1,037,335       $1,278,432
                                      ==========       ==========

  MOTORCYCLE SHIPMENTS:
    Harley-Davidson
    ---------------
        United States                     35,668           52,710
        International                     18,006           21,960
                                          ------           ------
          Total Harley-Davidson           53,674           74,670
                                          ======           ======

    Buell                                  1,774            2,441
    -----                                  =====            =====

  MOTORCYCLE PRODUCT
   MIX:
    Harley-Davidson
    ---------------
        Touring                           22,885           25,975
        Custom                            22,572           31,919
        Sportster( R )                     8,217           16,776
                                           -----           ------
          Total Harley-Davidson           53,674           74,670
                                          ======           ======

         Retail Sales of Harley-Davidson Motorcycles

                                           Three months ended
                                      March 31,      March 31,
                                            2010           2009
                                            ----           ----
  North America Region
  --------------------
      United States                       31,845         42,041
      Canada                               1,895          1,867
        Total North America Region        33,740         43,908

  Europe Region (Includes Middle
   East and Africa)
  ------------------------------
      Europe*                              7,558          7,567
      Other                                  931            821
        Total Europe Region                8,489          8,388

  Asia Pacific Region
  -------------------
      Japan                                2,018          2,270
      Other                                2,416          2,648
        Total Asia Pacific Region          4,434          4,918

  Latin America Region                     1,262          1,369
  --------------------                     -----          -----

        Total Worldwide Retail Sales      47,925         58,583
                                          ======         ======

  Data Source (subject to update)
  -------------------------------

  Data source for all 2009 and 2010 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.

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

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

               Heavyweight Market Data

                                  Three months ended
                             March 31,        March 31,
                                   2010             2009
                                   ----             ----
  United
   States(1)                     57,007           72,572

                                   Two months ended
                           February 28,     February 28,
                                   2010             2009
                                   ----             ----
  Europe(2)                      27,763           31,268

  1 - United States industry data includes 651+cc models, derived from
  submission of motorcycle retail sales by each major manufacturer to
  an independent third party.  This data is subject to revision and
  update.  Industry data includes three-wheeled vehicles.

  2 - Europe data includes Austria, Belgium, Denmark, Finland, France,
  Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain,
  Sweden, Switzerland, and the United Kingdom.  Industry retail
  motorcycle registration data includes 651+cc models, derived from
  information provided by Giral S.A., an independent agency.  Europe
  market data is reported on a one-month lag.  This data is subject
  to revision and update.  Industry data includes three-wheeled
  vehicles.