H-D Posts Big 2Q Gains

Harley-Davidson Reports Broad Performance Improvement In Second Quarter

Earnings Climb to $0.81 Per Share on Motorcycle Shipment
Growth, Improved Operating Margin for Motorcycles and Financial Services

Worldwide Harley-Davidson® Retail New Motorcycle Sales Rise,
Driven by 7.5 Percent Growth in US

Company Raises Guidance for Motorcycle Shipments

 

MILWAUKEE, July 19, 2011 — Harley-Davidson, Inc. (NYSE:
HOG) generated broad performance improvements in the second quarter of 2011,
with strong earnings growth, increased shipments and growth in its dealers’ new
motorcycle sales both in the U.S. and globally.

Income from continuing operations in the second-quarter 2011
rose 36.8 percent to $190.6 million, or $0.81 per share, compared to income of
$139.3 million, or $0.59 per share from continuing operations in the year-ago
quarter. Second-quarter 2011 earnings results were led by operating income from
the Motorcycles and Related Products, which grew 39.2 percent to $219.8 million
on higher shipment volume and operating margin improvement. Operating income
from the Financial Services grew 34.9 percent, compared to the second quarter
of 2010.

Retail sales of new Harley-Davidson motorcycles grew 7.5
percent in the U.S. and 5.6 percent worldwide in the second quarter.

The Company raised its shipment forecast for 2011 and now
expects to ship between 228,000 and 235,000 new Harley-Davidson motorcycles to
dealers and distributors worldwide, an increase of 8 percent to 12 percent
compared to 2010 shipments.

For the first six months of 2011, Harley-Davidson income
from continuing operations was up 48.9 percent compared to the year-ago period
to $309.8 million, or $1.31 per share.

 

“Harley-Davidson continues to make great progress as we
transform our business and take our iconic brand to the many roads of the
world,” said Keith Wandell, President and Chief Executive Officer of
Harley-Davidson, Inc.

 

“While we are pleased by Harley-Davidson’s second-quarter
results, including the strong jump at retail in the U.S., our focus remains
squarely on sustaining this progress through the ongoing implementation of our
business strategy.

“Through the transformation to best-in-class manufacturing,
product development and retail capabilities, we are positioning Harley-Davidson
to be customer-led in all we do. Our employees, dealers and suppliers deserve
tremendous credit for their dedication to making customers’ dreams a reality by
delivering remarkable products and extraordinary customer experiences,” Wandell
said.

“We also believe the continued improvement in our results in
the face of ongoing consumer and economic uncertainty speaks to the power of
the Harley-Davidson brand globally,” Wandell said.

Retail Harley-Davidson Motorcycle Sales

On a worldwide basis, second-quarter retail Harley-Davidson
new motorcycle sales grew 5.6 percent compared to last year’s second quarter.
Dealers sold 53,599 new Harley-Davidson motorcycles in the U.S., a 7.5 percent
increase compared to last year’s second quarter and the first year-over-year
quarterly rise in U.S. Harley-Davidson new motorcycles sales since the fourth
quarter of 2006. Retail sales of 29,797 new motorcycles in international
markets in the second quarter marked an increase of 2.4 percent compared to the
year-ago period. Industry-wide U.S. heavyweight new motorcycle (651cc-plus)
retail unit sales increased 4.2 percent in the second quarter of 2011 compared
to the year-ago period.

Through six months, worldwide retail sales of new Harley-Davidson
motorcycles increased 4.8 percent to 132,991 units compared to the prior-year
period. U.S. retail sales of new Harley-Davidson motorcycles increased 4.4
percent to 85,290 units for the first half of the year compared to the year-ago
period. In international markets, retail sales of new Harley-Davidson
motorcycles increased 5.6 percent to 47,701 units for the first six months of
2011 compared to 2010. Through six months, industry-wide U.S. heavyweight new
motorcycle (651cc-plus) retail unit sales increased 3.8 percent, compared to
the year-ago period.

 

Second-quarter and first-half data are listed in the
accompanying tables.

 

Harley-Davidson Motorcycles and Related Products Segment
Financial Results

Second-Quarter Segment Results: Revenue from Harley-Davidson
Motorcycles during the second quarter of 2011 of $1.01 billion was up 20.9
percent compared to the year-ago period. The Company shipped 66,815
Harley-Davidson motorcycles to dealers and distributors worldwide during the
quarter, compared to shipments of 59,046 motorcycles in the second quarter of
2010.

Revenue from Motorcycle Parts and Accessories (P&A)
totaled $255.4 million during the quarter, up 10.2 percent, and revenue from
General Merchandise, which includes MotorClothes® Apparel and Accessories, was
$72.9 million, up 8.2 percent compared to the year-ago period.

Gross margin was 35.0 percent in the second quarter, flat to
the year-ago period.  Second-quarter
operating margin was 16.4 percent, compared to 13.9 percent in the second
quarter of 2010.

Six-Month Segment Results: Through the first six months of
2011, the Company shipped 120,642 new Harley-Davidson motorcycles to dealers
and distributors, a 7.0 percent increase compared to last year’s 112,720 units
for the period. Revenue from Harley-Davidson Motorcycles through six months was
$1.84 billion, a 12.1 percent increase compared to the year-ago period.
Six-month P&A revenue was $419.7 million, a 10.2 percent increase from the
first half of 2010. General Merchandise revenue was $135.5 million, a 1.4
percent increase compared to the same period in 2010. Gross margin through six
months was 34.1 percent and operating margin was 14.4 percent, compared to 35.7
percent and 13.1 percent respectively in last year’s first half.

Financial Services Segment

The Financial Services segment recorded operating income of
$82.0 million in the second quarter, compared to operating income of $60.8
million in the year-ago quarter. The increase in year-over-year operating
income was largely the result of continued improvement in credit performance.
Through six months, operating income from financial services was $150.0
million, compared to operating income of $87.5 million in the first half of
2010.

Guidance

The Company raised shipment guidance for 2011 and now expects
to ship 228,000 to 235,000 Harley-Davidson motorcycles to dealers and
distributors worldwide, compared to guidance provided April 19, 2011 of 215,000
to 228,000 motorcycles. In the third quarter of 2011, the Company expects to
ship 60,000 to 65,000 motorcycles. For all of 2010, the Company shipped 210,494
motorcycles.

The change in shipment guidance reflects ongoing efforts to
manage supply in line with demand following strong second-quarter retail sales,
as well as the Company’s increased confidence in its ability to minimize the
impact of potential supply chain interruptions resulting from the March
earthquake in Japan.

Harley-Davidson now expects gross margin to be between 34.0
percent and 35.0 percent for the full year, versus the prior estimate of 33.5
percent to 35.0 percent. The Company continues to expect full-year capital
expenditures of between $210 million and $230 million, which includes $70
million to $85 million to support restructuring activities.

Restructuring Update

Harley-Davidson
has reduced the cost estimates for restructuring activities and now expects all
previously announced company-wide restructuring activities to result in
one-time charges of $490 million to $505 million, including 2011 charges of $80
million to $90 million. The Company continues to expect to realize savings on a
cumulative basis in 2011 of $210 million to $230 million from restructuring
activities initiated since early 2009, and annual ongoing savings of $305
million to $325 million when the restructuring is fully implemented. Through
the first six months of 2011, the Company incurred restructuring charges of
$36.6 million, including $13.6 million in the second quarter.

Income Tax Rate

Through six months, the Company’s effective tax rate was
34.8 percent, compared to 36.4 percent in the year-ago period. The 2010
effective tax rate through the second quarter was negatively impacted by the
healthcare reform legislation offset by a favorable settlement of an IRS
audit.  In 2011, the Company expects its
full-year effective tax rate from continuing operations to be approximately
35.0 percent.

Cash Flow

Cash and marketable securities totaled $1.22 billion as of
June 26, 2011, compared to $1.50 billion at the end of last year’s second
quarter. During the first six months of 2011, Harley-Davidson generated $473.0
million of cash from operating activities, which included a $200.0 million
contribution to company pension plans. In the first half of 2010, the Company
generated $726.0 million of cash from operating activities. Capital
expenditures were $69.3 million for the six months ended in June 2011.

Company Background

Harley-Davidson, Inc. is the parent company of
Harley-Davidson Motor Company and Harley-Davidson Financial Services.
Harley-Davidson Motor Company produces heavyweight custom, cruiser and touring
motorcycles and offers a complete line of Harley-Davidson motorcycle parts,
accessories, riding gear and apparel, and general merchandise. Harley-Davidson
Financial Services provides wholesale and retail financing, insurance, extended
service and other protection plans and credit card programs to Harley-Davidson
dealers and riders in the U.S., Canada and select European countries. For more
information, visit Harley-Davidson’s Web site at www.harley-davidson.com.

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