Harley-Davidson Sets Record For Quarterly Revenue And Earnings

Worldwide Retail Sales of Motorcycles Climb 8.9 Percent

New Share Repurchase Program Authorized

Milwaukee, Wis., October 12, 2006 -- Harley-Davidson, Inc. (NYSE: HOG) today announced record revenue and earnings per share for its third quarter ended September 24, 2006. Revenue for the quarter was $1.64 billion compared to $1.43 billion in the year-ago quarter, a 14.3 percent increase. Net income for the quarter was $312.7 million compared to $265.0 million, an increase of 18.0 percent over the third quarter of 2005. Third quarter diluted earnings per share (EPS) were $1.20, a 25.0 percent increase compared to last year's $0.96.

"Harley-Davidson delivered record results for both revenue and earnings per share during the third quarter," said Jim Ziemer, Chief Executive Officer, Harley-Davidson, Inc. "In addition, worldwide retail sales of Harley-Davidson^® motorcycles grew 8.9 percent during the quarter. With four new models and an all-new Twin Cam 96TM engine with 6-speed transmission on Big Twin motorcycles, the 2007 model line has been a big hit with customers," he said.

For the first nine months of 2006, the Company's worldwide wholesale shipments were 256,348 Harley-Davidson motorcycles. For the full year, the Company now expects to ship between 349,000 and 351,000 units.

During the first nine months of 2006, the Company repurchased 17.2 million shares of its common stock at a cost of $911.0 million. On October 11, 2006, the board of directors of Harley-Davidson, Inc. authorized a new share repurchase program for up to 20 million additional shares.

"As we look to the future, the Company believes it will continue to deliver EPS growth in the range of 11 – 17 % annually through 2009. We expect earnings growth to be driven by solid revenue growth, margin improvement and the benefits of strong free cash flow," said Ziemer.

Motorcycles and Related Products Segment – Third Quarter Results

Revenue from Harley-Davidson motorcycles was $1.29 billion, an increase of $183.2 million or 16.5 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 97,046 units, an increase of 9,461 units or 10.8 percent over last year's third quarter.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $248.4 million, an increase of $17.3 million or 7.5 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes^® apparel and collectibles, totaled $71.3 million, an increase of $6.7 million or 10.5 percent over the year-ago quarter.

Gross margin for the third quarter of 2006 was 39.9 percent of revenue compared to 39.2 percent gross margin for the third quarter last year. Third quarter operating margin increased to 26.5 percent from 25.6 percent in the third quarter of 2005.

Motorcycle Retail Sales Data

During the third quarter, worldwide retail sales of Harley-Davidson motorcycles increased 8.9 percent over the prior year quarter. In the U.S., retail sales of Harley-Davidson motorcycles increased 6.7 percent for the quarter. The heavyweight motorcycle industry in the U.S. increased 0.2 percent for the same period.

Retail sales of Harley-Davidson motorcycles grew 18.7 percent in international markets during the third quarter of 2006 compared to the third quarter of 2005. Third quarter retail sales increased 13.7 percent in Japan; Europe was up 9.9 percent; Canada was up 30.2 percent and all other international markets combined were up 35.4 percent.

During the first nine months of 2006, worldwide retail sales of Harley-Davidson motorcycles increased 8.9 percent compared to the same period in 2005.

Data is listed in the accompanying tables.

Financial Services Segment

Harley-Davidson Financial Services (HDFS) reported third quarter operating income of $55.2 million, an increase of $7.6 million or 16.0 percent compared to the year-ago quarter. The increase is primarily due to higher net interest income and a higher securitization gain compared to the prior year.

Income Tax Rate

The Company's third quarter effective income tax rate was 36.0 percent compared to 35.5 percent in the same quarter last year. This increase was due to the expiration of the federal research and development tax credit as of December 31, 2005. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate in 2006 will be 35.5 percent.

Harley-Davidson, Inc. - Nine Month Results

For the first nine months of 2006, revenue totaled $4.30 billion, a 7.5 percent increase over the year-ago period. EPS were $2.96, an increase of 15.2 percent compared to the same period last year.

Through the first nine months of this year, shipments of Harley-Davidson motorcycles were 256,348 units, a 6.2 percent increase compared to last year's 241,429 units. Harley-Davidson motorcycle revenue was $3.33 billion, up 7.6 percent compared to last year's $3.10 billion. P&A revenue totaled $683.1 million, a 5.8 percent increase over last year's $645.8 million. General Merchandise revenue totaled $206.9 million, a 10.4 percent increase compared to $187.4 million during the same period in 2005.

HDFS operating income was $163.1 million, a 7.2 percent increase over last year's $152.2 million.

Cash Flow

Cash and marketable securities totaled $952.7 million as of September 24, 2006. Cash flow from operations was $1.29 billion and capital expenditures were $137.5 million during the first nine months of 2006.

Stock Repurchase

The Company repurchased 7.4 million shares of its common stock at a cost of $411.4 million during the third quarter of 2006. For the first nine months of 2006, the Company has repurchased 17.2 million shares of its common stock at a cost of $911.0 million. On October 11, 2006, the board of directors authorized a new share repurchase program for up to 20 million shares, in addition to the 2.8 million shares outstanding under the previous authorization.

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.

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) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (ii) manage production capacity and production changes, (iii) manage supply chain issues, (iv) provide products, services and experiences that are successful in the marketplace, (v) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (vi) sell all of its motorcycles and related products and services to its independent dealers and distributors, (vii) continue to develop the capacity of its distributor and dealer network, (viii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (ix) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (x) adjust to worldwide economic and political conditions, including changes in fuel prices, (xi) manage the credit quality and recovery rates of HDFS's loan portfolio, (xii) retain and attract talented employees and (xiii) detect any defects in our motorcycles to minimize delays in new model launches, recall campaigns, increased warranty costs or litigation. 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.

The Company's ability to sell all of its motorcycles and related products and services also depends on the ability of the Company's independent dealer network to sell them to retail customers. The Company depends on the capability 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 selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.