Harley-Davidson, Inc. Reports Record Third Quarter

MILWAUKEE, Oct. 15, 2002 Harley-Davidson announced record revenue and earnings for its third quarter ended September 29, 2002. The Company's third quarter revenue was $1.14 billion, an increase of 31.8 percent over the third quarter last year. Diluted earnings per share were 54 cents, a 50 percent increase compared with last year.

"As we began our year-long 100th Anniversary Celebration, we achieved our biggest quarter ever, setting new records in revenue and earnings," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "The commemorative products for our 100th Anniversary Celebration were a major driver for our exceptional third quarter performance and are a great springboard for growing demand for the future.

"Our global dealer network sold nearly 18 percent more new motorcycles over the past nine months. This, together with better than expected accessories and MotorClothes sales in a difficult economy, gives us confidence in the robust demand for our products," said Bleustein. "In response, we are increasing our 2002 production target for Harley-Davidson® motorcycles from 262,000 to 263,000, and for 2003 our target is being set at 289,000, a ten percent increase over 2002."

Motorcycles and Related Products Segment -- Third Quarter Results

Third quarter revenue from Harley-Davidson motorcycles was $832.7 million, an increase of 28.4 percent over the third quarter last year. Shipments totaled 67,474 units, up 10,863 units or 19.2 percent over the same period last year.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $199.3 million, a 32.3 percent increase from the year-ago quarter. Third quarter revenue from General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $83.1 million, an 88.5 percent increase over the same period last year.

The Company's 100th Anniversary commemorative products drove the performance of both product lines. Revenue from 100th Anniversary P&A products was $21 million and revenue from General Merchandise associated with the 100th Anniversary was $25 million. "We expected P&A revenues during this anniversary year to be strong, and General Merchandise revenues to be even stronger," said Bleustein, "but these third quarter results have exceeded even our expectations." For the longer term, the Company expects the growth rate for P&A revenues 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.

Third quarter gross margin was 34.9 percent of revenue, up from 34.5 percent of revenue for the same period last year. Gross margin improved primarily due to Parts & Accessories' margin contribution, a higher percentage of U.S. motorcycle shipments and worldwide price increases on the 2003 model year motorcycles.

Third quarter operating margin for the Motorcycles and Related Products Segment was 19.6 percent of revenue, an improvement on last year's third quarter margin of 18.0 percent. The increase in gross margin was the primary contributor to the increase in operating margin.

Retail Sales Data

Harley-Davidson retail motorcycle sales through September grew in the U.S. (19.1 percent), Europe (8.0 percent) and Japan (13.9 percent) compared to the same period last year. Industry data is available through August. Harley- Davidson retail sales resulted in market share gains in all major heavyweight motorcycle markets.

Financial Services Segment -- Third Quarter Results

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley- Davidson, Inc., reported third quarter operating income of $29.7 million, a $13.4 million increase compared to the year-ago quarter. The subsidiary continues to benefit from the increase in Harley-Davidson's U.S. motorcycle sales, growing acceptance of its consumer financing program and decreased cost of funds due to lower interest rates.

HDFS sold approximately $390 million of a previously announced $600 million securitization during the third quarter. The subsidiary completed the sale of the remaining $210 million securitization in the fourth quarter. HDFS recorded a gain of $17.0 million on the loans sold during the third quarter. This compares with a gain of $13.1 million on a $302 million securitization during the third quarter of 2001.

The Company expects HDFS' full year 2002 operating income to be approximately 55-60 percent higher than in 2001. The Company expects HDFS' full year 2003 operating income to be approximately 20 percent higher than 2002 expectations. Over the longer term, the Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.

Cash Flow -- Nine Month Results

Operations generated cash of more than $734 million during the first nine months of 2002 providing the Company the ability to invest $183 million in capital expenditures, repurchase 1.1 million shares of company stock, pay $30 million in dividends and contribute $50 million to the Company's pension plans. Even with these investments, the Company's cash increased by more than $200 million.

Harley-Davidson, Inc. -- Nine Month Results

For the nine month period ended September 29, 2002, revenues totaled $3.06 billion, a 22.5 percent increase over the year-ago period. Diluted earnings per share were $1.41, an increase of 35.0 percent.

Through the first nine months of this year, Harley-Davidson® motorcycle revenue was $2.34 billion, a 20.8 percent increase compared with the same period in 2001 and shipments of Harley-Davidson motorcycles were 197,683, a 15.7 percent increase.

For the first nine months of 2002, P&A revenue totaled $499.3 million, a 25.4 percent increase compared with the same period in 2001, while General Merchandise revenue totaled $176.7 million, a 51.8 percent increase.

Through the first nine months of 2002, HDFS operating income was $78.9 million, a 78.0 percent increase over last year.

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, Inc. 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, Inc. provides wholesale and retail financing and insurance programs to Harley-Davidson dealers and customers.