Harley-Davidson, Inc. Reports Record Third Quarter


Remains Confident of Long-Term Growth

Milwaukee, Wis., October 9, 2001 -- Harley-Davidson, Inc. (NYSE: HDI) today announced record sales and earnings for its third quarter ended September 23, 2001. The Company's third quarter sales were $850.8 million, an increase of 19.1 percent over the third quarter last year. Diluted earnings per share were 36 cents, a 34.9 percent increase compared with last year.

"For the first few days following the tragedies of September 11, many of our U.S. Harley-Davidson dealers reported a slowdown in retail activities," said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. "This was particularly noticeable in areas around New York City and Washington D.C. As time progressed, however, it appears as if aggregate retail activity has returned to expected levels for this time of year."

"We remain confident in the continued long-term growth of Harley-Davidson," said Bleustein. "In fact, we are increasing our 2001 production target for Harley-Davidson® motorcycles from 231,000 to 232,500. At the same time, we continue to carefully watch our internal and external indicators as well as world events so that we can best manage our business through these challenging times." As previously reported, the Company has a 2002 goal of 256,000 Harley-Davidson units which represents a 10.1 percent increase over the new 2001 goal.

Motorcycles and Related Products Segment - Third Quarter Results

Third quarter sales of Harley-Davidson motorcycles were $638.2 million, an increase of 20.8 percent over the third quarter last year. Shipments totaled 56,611 units, up 8,534 units or 17.8 percent over the same period.

Sales of Parts and Accessories (P&A), which consist of Genuine Motor Parts and Genuine Motor Accessories, totaled $150.2 million, a 12.6 percent increase from the year-ago quarter. Third quarter sales of General Merchandise, which consist of MotorClothes apparel and collectibles, totaled $44.1 million, a 7.0 percent increase over the same period last year. On a longer-term basis, the Company expects the growth rate for P&A revenues to be slightly higher than Harley-Davidson's motorcycle unit growth rate. The General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate over the long term.

Third quarter gross margin was 35.5 percent of revenue, up from 33.6 percent of revenue for the same period last year. Gross margin improved primarily due to favorable product mix, worldwide price increases and a higher percentage of U.S. shipments.

Third quarter operating margin for the Motorcycles and Related Products Segment was 18.3 percent of revenue, an improvement on last year's third quarter margin of 16.3 percent. The increase in gross margin drove the corresponding increase in operating margin.

Harley-Davidson Motorcycle Retail Data

Harley-Davidson retail sales through September grew in the U.S. and in Japan, up 14.9 and 7.5 percent, respectively compared to the same period last year. Harley-Davidson retail sales in Europe are down 4.3 percent through September compared with the year ago period. The Company believes the strong U.S. dollar is contributing to slower Harley-Davidson sales in Europe. "While our retail sales in Europe lagged behind the heavyweight motorcycle industry through August, we are confident that our improving distribution, new product offerings and brand development activities will have a positive impact on our longer term success in this market," said Bleustein.

Industry data through September is not yet available; the most recent market data is listed in the accompanying table.

Financial Services Segment - Third Quarter Results

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported third quarter operating income of $16.2 million, a $6.6 million increase compared to the year-ago quarter. The subsidiary continues to benefit from the increase in Harley-Davidson's U.S. motorcycle sales, strong acceptance of its improved consumer financing program and decreasing cost of funds due to lower interest rates. HDFS also completed a $400 million asset-backed securitization during the quarter. The Company expects HDFS's full year 2001 operating income to be approximately 60 percent higher than 2000 performance.

Harley-Davidson Share Repurchase

During the third quarter, Harley-Davidson repurchased approximately 2.2 million shares of its common stock.

Harley-Davidson, Inc. - Nine Month Results

For the nine month period ended September 23, 2001, sales totaled $2.47 billion, a 14.8 percent increase over the year-ago period. Diluted earnings per share were $1.04, an increase of 26.4 percent. When the sale of the Harley-Davidson® Chrome VISA® card in first quarter 2000 is excluded, diluted earnings per share increased 29.9 percent.

Through the first nine months of this year, Harley-Davidson® motorcycle revenue was $1.91 billion, a 16.2 percent increase.

For the first nine months of the year, shipments of Harley-Davidson motorcycles were 170,926, a 13.6 percent increase.

For the first nine months of 2001, P&A revenue totaled $396.5 million, a 13.5 percent increase compared with the same period in 2000, while General Merchandise revenue totaled $116.4 million, a 5.1 percent increase.

Through the first nine months of 2001, HDFS operating income was $44.3 million, an 82.9 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 selected financial services to Harley-Davidson dealers and 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 be statements that describe the Company's future plans, objectives, targets, estimates, beliefs or goals. 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 undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

The Company's ability to reach targeted production objectives and growth targets depends upon, among other factors, (i) continued realization of production efficiencies at its manufacturing facilities; (ii) successful implementation of production capacity increases in its facilities; (iii) the sale of all motorcycles the Company has the capacity to produce; (iv) product availability; (v) continued development of its distributor and dealer network; (vi) successful introduction of new products; (vii) changes in political conditions; and (viii) successful adjustment to foreign currency exchange rate and interest rate fluctuations. In addition, the Company could experience delays in the operation of manufacturing facilities, work stoppages, difficulty with suppliers, natural causes or other factors. Risk factors are also disclosed in securities documents previously filed by the Company with the Securities and Exchange Commission.