HARLEY-DAVIDSON SECOND QUARTER RESULTS
July 18 2006.
Worldwide Retail Motorcycle Sales Up 10 Percent
Harley-Davidson, Inc. has announced record revenue and earnings per share for its second quarter ended June 25, 2006. Revenue for the quarter was $1.38 billion compared to $1.33 billion in the year-ago quarter, a 3.3 percent increase. Net income for the quarter was $243.4 million compared to $237.4 million, an increase of 2.5 percent over the second quarter of 2005. Second quarter diluted earnings per share (EPS) were $0.91, an 8.3 percent increase compared to last year's $0.84.
Harley-Davidson's worldwide dealer network sold more than 125,000 motorcycles during the second quarter, an increase of 10.0 percent over the prior year. U.S. retail motorcycle sales for the second quarter grew by 8.1 percent and international sales increased by 17.3 percent. "I am very pleased with our retail performance during the quarter," said Jim Ziemer, President and Chief Executive Officer, Harley-Davidson, Inc. "And looking back over the past 12 months, worldwide retail sales of our motorcycles have grown 8.6 percent. This momentum demonstrates the continued strong appeal of our products and the Harley-Davidson experience," he said.
"I am equally pleased with our prospects for the future, given the exciting new products and services we are bringing to market. Last week we introduced our 2007 models to nearly 5,000 dealership employees and owners during our Summer Dealer Meeting in San Diego. The highlight of the meeting was the dramatic unveiling of an all new, state-of-the-art engine, the Twin Cam 96(TM). This outstanding new engine, mated with our recently-introduced six-speed transmission, is featured in the 2007 Dyna(TM), Softail(R), and Touring models," said Ziemer.
"Looking ahead to the remainder of 2006, the Company's wholesale shipment target for the calendar year remains between 348,000 and 352,000 Harley-Davidson(R) motorcycles," said Ziemer. "Our motorcycle shipment plan for the third quarter is 97,000 motorcycles. This includes approximately 12,500 Harley-Davidson motorcycles that were produced in the second quarter to prepare for the new model introduction."
"The Company believes that worldwide retail sales of Harley-Davidson motorcycles will support a wholesale unit growth rate in the range of 5 to 9 percent annually and an annual EPS growth rate of 11 to 17 percent," said Ziemer.

Motorcycles and Related Products Segment - Second Quarter Results
Revenue from Harley-Davidson motorcycles was $1.03 billion, an increase of $21.7 million, or 2.2 percent over the same period last year. Shipments of Harley-Davidson motorcycles totaled 79,796 units, an increase of 2,668 units, or 3.5 percent over last year's second quarter.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $251.7 million, an increase of $13.9 million, or 5.9 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(TM) apparel and collectibles, totaled $67.1 million, an increase of $3.7 million, or 5.8 percent.
For the long term, the Company expects the growth rate for P&A revenue to be slightly higher than Harley-Davidson's motorcycle shipment growth rate, and the General Merchandise growth rate is expected to be lower than the motorcycle shipment growth rate.
Gross margin for the second quarter of 2006 was 37.5 percent of revenue, equal to the margin for the same period in 2005. Operating margin decreased to 23.6 percent in the second quarter of 2006 from 24.0 percent in the second quarter of 2005.
Motorcycle Retail Sales Data
Worldwide retail sales of Harley-Davidson motorcycles increased 10.0 percent for the second quarter of 2006 compared to the same period in 2005. In the U.S., retail sales of Harley-Davidson motorcycles increased 8.1 percent for the quarter. The heavyweight motorcycle market in the U.S. increased 9.9 percent for the same period.
Retail sales of Harley-Davidson motorcycles grew 17.3 percent in international markets during the second quarter of 2006 compared to the second quarter of 2005. Second quarter retail sales increased 15.8 percent in Japan; Europe was up 15.6 percent; Canada was up 13.4 percent and all other international markets combined were up 33.5 percent.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported second quarter operating income of $56.3 million, an increase of $5.2 million, or 10.3 percent compared to the year-ago quarter. This increase was primarily due to higher net interest income and insurance revenues. For the long term, the Company expects the HDFS operating income growth rate to be slightly higher than the growth rate of Harley-Davidson motorcycle shipments.
Income Tax Rate
The Company's second 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. The Company expects its full year effective tax rate in 2006 to be 35.5 percent, assuming the retroactive reinstatement of this tax credit.
Harley-Davidson, Inc. - Six Month Results
For the first six months of 2006, revenue totaled $2.66 billion, a 3.6 percent increase over the year-ago period. Earnings per share were $1.77, an increase of 9.3 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson motorcycles were 159,302 units, a 3.5 percent increase compared to last year's 153,844 units. Harley-Davidson motorcycle revenue was $2.04 billion, up 2.6 percent compared to last year's $1.99 billion. P&A revenue totaled $434.7 million, a 4.8 percent increase over last year's $414.7 million. General Merchandise revenue totaled $135.6 million, a 10.4 percent increase compared to $122.9 million during the same period in 2005.
HDFS operating income was $107.9 million, a 3.2 percent increase over last year's $104.6 million.
Cash Flow
Cash and marketable securities totaled $1.00 billion as of June 25, 2006, a decrease of $41.7 million during the first half of 2006. Cash flow from operations was $828.8 million and capital expenditures were $89.1 million during the first half of 2006.
Stock Repurchase
The Company repurchased 7.8 million shares of its common stock at a cost of $392.5 million during the second quarter of 2006. For the first six months, the Company has repurchased 9.9 million shares of its common stock at a cost of $499.5 million. These shares were repurchased under an authorization from the Company's Board of Directors to buy back 20 million shares. A total of approximately 10 million shares remain under this authorization.