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Harley-Davidson Achieves 18 Years of Record Earnings

Harley-Davidson Achieves 18 Years of Record Earnings

Release Date: 6/4/2004

Milwaukee, Wis.; (MCNW) Harley-Davidson, Inc. announced record revenue and earnings for its fourth quarter and year ended December 31, 2003. Revenue for the quarter was $1.16 billion compared with $1.03 billion in the year-ago quarter, a 12.8 percent increase. Net income for the quarter was $182.4 million compared to $150.9 million, an increase of 20.9 percent over the year ago quarter. Fourth quarter diluted earnings per share (EPS) was 60 cents, a 22.4 percent increase compared with last year's 49 cents.

Revenue for the full year was $4.62 billion, compared with $4.09 billion in 2002, a 13.0 percent increase. Net income for the year was $760.9 million, a 31.1 percent increase versus last year's $580.2 million, while diluted EPS for the full year was $2.50, a 31.6 percent increase compared with $1.90 in 2002.

"This is the 18th consecutive year that Harley-Davidson has achieved records for both revenue and net income," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "We had a phenomenal year full of memorable once-in-a-lifetime experiences surrounding our 100th Anniversary. Introducing the Harley-Davidson brand to hundreds of thousands of potential customers has undoubtedly sparked the dream of ownership and created new excitement for our products."

"As we begin our 101st year, we expect to grow the business further with our proven ability to deliver a continuous stream of exciting new motorcycles, related products and services. We have set a new goal for the Company to be able to satisfy a yearly demand of 400,000 Harley-Davidson motorcycles in 2007. By offering innovative products and services, and by driving productivity gains in all facets of our business, we are confident that we can deliver an earnings growth rate in the mid-teens for the foreseeable future," said Bleustein.

Motorcycles and Related Products Segment - Fourth Quarter Results Revenue from Harley-Davidson® motorcycles was $945.3 million, an increase of $125.0 million or 15.2 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 77,056 units, an increase of 11,086 units or 16.8 percent over last year's fourth quarter. The Company's shipment target remains 317,000 Harley-Davidson motorcycles for 2004.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $141.0 million, an increase of $11.1 million, or 8.5 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothesä apparel and collectibles, totaled $50.7 million, a decrease of $4.1 million or 7.4 percent. Excluding revenue from 100th Anniversary products in 2002's fourth quarter, the P&A growth rate would have been 20.3 percent over last year's fourth quarter and the General Merchandise growth rate would have been 20.0 percent over the same period.

Gross margin was 35.9 percent of revenue, down slightly from the prior year's 36.1 percent. Gross margin was negatively impacted by a higher proportion of Sportster® motorcycle shipments and higher manufacturing costs, but partially offset by favorable foreign currency exchange. Fourth quarter operating margin improved to 21.5 percent in 2003 from 20.7 percent in 2002.

Motorcycle Retail Sales Data Retail sales of Harley-Davidson® motorcycles for the year 2003 grew 8.8 percent in the U.S., 6.7 percent in Europe, and 9.0 percent in Japan compared to 2002. Based on the information currently available, Harley-Davidson's full year market share for the 651cc and up segment is expected to grow in all of the Company's major markets. "Given the economic climate during the past year, we are pleased with our retail growth," said Bleustein.

"Although our U.S. dealer network experienced a modest decline in motorcycle sales in the fourth quarter as compared to last year's fourth quarter, we believe it is difficult to draw meaningful conclusions from this comparison. The urgency to buy a 100th Anniversary motorcycle prior to the celebrations, along with an unusually late shipment plan for '04 motorcycles, created two very different selling environments. We are confident that 2004 will be another strong year for Harley-Davidson due to current dealer confidence, momentum from the 100th Anniversary and improving economic indicators," Bleustein added. For more motorcycle retail data, see the attached tables.

Financial Services Segment Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported fourth quarter operating income of $33.8 million, up $8.5 million or 33.4 percent compared to the year-ago quarter.

"Harley-Davidson Financial Services had another strong quarter in both financial performance and in helping to make the dream of owning a Harley-Davidson motorcycle a reality," said Bleustein. The segment's performance was driven by continued strong marketplace acceptance of its finance and insurance products.

The Company's fourth quarter securitization of $300 million of motorcycle retail loans resulted in a gain of $11.4 million, which represents 3.8 percent of loans sold.

Annualized credit losses on a managed portfolio basis increased during the year from 0.72 percent in 2002 to 0.85 percent in 2003, which is within the 5-year historical range of credit losses of 0.72 to 0.90 percent.

Share Repurchase During the fourth quarter, the Company invested $73.3 million in repurchasing 1.6 million shares of its stock.

Harley-Davidson, Inc. - Twelve Month Results For the fiscal year ended 2003, total Harley-Davidson motorcycle shipments were 291,147 units compared with 263,653 units in 2002, a 10.4 percent increase. Harley-Davidson motorcycle revenue was $3.62 billion, an increase of $460.4 million or 14.6 percent.,/p>

P&A revenue totaled $712.8 million, a 13.3 percent increase, while General Merchandise revenue totaled $211.4 million, an 8.7 percent decrease compared with 2002. Excluding revenue from 100th Anniversary products for both 2002 and 2003, the P&A growth rate would have been 14.4 percent and the General Merchandise growth rate would have been 12.7 percent. Full year operating income for HDFS was $167.9 million, an increase of $63.6 million or 61.1 percent compared to 2002.

Cash Flow - Twelve Month Results Operations generated cash of $935.6 million in 2003, even after a $192.0 million contribution to the Company's pension plans. This cash provided the Company the ability to invest $227.2 million in capital expenditures, to repurchase 2.3 million shares of Company stock for $103.9 million, to pay $59.0 million in dividends and to increase cash and marketable securities by $526.9 million.

2004 and Beyond In addition to the previously stated motorcycle unit goal, the Company plans on growth in all of its product lines. Harley-Davidson expects the growth rate for P&A revenues to be slightly higher than the motorcycle unit growth rate, and the General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate. The Company expects the HDFS growth rate to be slightly higher than the Company's motorcycle unit growth rate.

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