Harley-Davidson Reports First Quarter Results

Company Reduces Full Year Shipments and Revises Guidance

MILWAUKEE, April 17 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc.
(NYSE: HOG) today announced its results for the first quarter ended March 30,
2008. Revenue for the quarter was $1.31 billion compared to $1.18 billion in
the year-ago quarter, a 10.8 percent increase. Net income for the quarter was
$187.6 million compared to $192.3 million, a decrease of 2.5 percent compared
to the first quarter of 2007. First quarter diluted earnings per share (EPS)
were $0.79, a 6.8 percent increase compared to last year's $0.74.
"With growing weakness in the economy, U.S. retail sales of
Harley-Davidson(R) motorcycles were down 12.8 percent in the first quarter.
Although these retail results are disappointing, Harley-Davidson's U.S.
dealers outperformed the heavyweight motorcycle industry, which was down 14.0
percent," said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.
"We've said on a number of occasions that we would closely monitor the
retail environment and regularly assess our wholesale shipment plans, and we
remain committed to shipping fewer Harley-Davidson motorcycles to our
worldwide dealer network than we expect they will sell this year. In view of
U.S. retail trends and uncertainty about the future of the economy, we now
plan to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than
we shipped in 2007, resulting in total planned 2008 shipments between 303,500
and 307,500 units," Ziemer said.
"We will achieve the shipment reduction through temporary plant shutdowns
and adjustments to daily production rates. This will result in a decrease of
about 370 unionized employees over the next several months. Our management
group and union leaders will work together to implement this reduction."
"The Company will also be reducing the non-production workforce by about
360 jobs. We believe these actions will better position the Company for a
business environment that we expect to continue to be challenging," Ziemer
said.
"Harley-Davidson is fortunate to be dealing with the current economic
environment from a position of financial strength. We are a great company
with an exceptionally powerful brand. We are optimistic about our long term
business prospects and we will continue to invest in marketing, product
development and our international business to drive future growth."
"For 2008, the Company now expects earnings per share to decrease between
15 and 20 percent compared to 2007 resulting in expected earnings per share of
$3.00 to $3.18," said Ziemer. This supersedes all previous guidance on
earnings per share and other measures.
The Company expects to ship between 76,000 and 80,000 Harley-Davidson
motorcycles in the second quarter of 2008.
Motorcycles and Related Products Segment - First Quarter Results
Revenue from Harley-Davidson motorcycles was $1.02 billion, an increase of
$125.7 million or 14.1 percent versus the same period last year. Shipments of
Harley-Davidson motorcycles totaled 71,868 units, an increase of 4,107 units
or 6.1 percent compared to last year's first quarter. Shipments in the first
quarter of 2007 were affected by a strike at Harley-Davidson's production
plants in York, Pa., that resulted in approximately four weeks of lost
production at the facilities.
Revenue from Parts and Accessories (P&A), which consists of Genuine Motor
Parts and Genuine Motor Accessories, totaled $181.9 million, a decrease of
$6.3 million or 3.3 percent versus the year-ago quarter. Revenue from General
Merchandise, which consists of MotorClothes(R) apparel and collectibles,
totaled $84.0 million, an increase of $7.9 million or 10.4 percent over the
year-ago quarter.
Gross margin for the first quarter of 2008 was 36.4 percent of revenue
compared to 35.9 percent for the first quarter last year. Operating margin
remained unchanged at 20.0 percent in the first quarter of 2008 compared to
the prior year.
Motorcycle Retail Sales Data
During the first quarter, worldwide retail sales of Harley-Davidson
motorcycles decreased 5.6 percent compared to the prior year quarter. In the
U.S., retail sales of Harley-Davidson motorcycles decreased 12.8 percent for
the quarter while the heavyweight motorcycle industry in the U.S. decreased
14.0 percent.
Retail sales of Harley-Davidson motorcycles increased 16.8 percent in
international markets during the first quarter of 2008 compared to the first
quarter of 2007. First quarter retail sales increased 31.1 percent in Canada;
the Europe Region was up 7.8 percent; the Asia Pacific Region was up 19.5
percent; and the Latin America Region was up 53.3 percent.
Data is listed in the accompanying tables.
Financial Services Segment
Harley-Davidson Financial Services (HDFS) reported first quarter operating
income of $34.9 million, a decrease of $24.0 million or 40.8 percent compared
to the year-ago quarter. The decrease is primarily due to a reduction in
income from securitization.
Income Tax Rate
The Company's first 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, 2007. Assuming the retroactive reinstatement of this tax credit,
the Company expects its full year effective tax rate in 2008 will be
35.5 percent.
Cash Flow
Cash and marketable securities totaled $333.2 million as of March 30,
2008. Cash flow from operations was $146.8 million and capital expenditures
were $43.2 million during the first quarter of 2008. For the full year of
2008, capital expenditures are now expected to be between $235 million and
$250 million.
Stock Repurchase
The Company repurchased 2.6 million shares of its common stock at a cost
of $100.1 million during the first quarter of 2008. On March 30, 2008, the
Company had 236.5 million shares of common stock outstanding.
As of March 30, 2008, there were 20.5 million shares remaining on two
board-approved share repurchase authorizations. An additional board-approved
share repurchase authorization is in place to offset option exercises.
Company Background
Harley-Davidson, Inc. is the parent company for the group of companies
doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle
Company (Buell) and Harley-Davidson Financial Services (HDFS).
Harley-Davidson Motor Company produces heavyweight motorcycles and offers a
line of motorcycle parts, accessories, general merchandise and related
services. HDMC manufactures five families of motorcycles: Touring, Dyna(R),
Softail (R), Sportster (R) and VRSC(TM). Buell produces premium sport
performance motorcycles and offers a line of motorcycle parts, accessories,
and apparel. HDFS provides wholesale and retail financing and insurance
programs primarily to Harley-Davidson and Buell 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 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, (vii) continue to develop the
capabilities 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) manage
access to reliable sources of capital and adjust to fluctuations in the cost
of capital, (xi) adjust to regional and worldwide demographic trends and
economic and political conditions, including healthcare inflation, pension
reform and tax changes, (xii) anticipate consumer confidence in the economy,
(xiii) manage the credit quality, the loan servicing and collection
activities, and the recovery rates of HDFS' loan portfolio, (xiv) retain and
attract talented employees, (xv) detect any issues with our motorcycles or
manufacturing processes to avoid delays in new model launches, recall
campaigns, increased warranty costs or litigation and (xvi) implement and
manage enterprise-wide information technology solutions and secure data
contained in those systems.
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 its motorcycles and related products and
services and to meet its financial expectations also depends on the ability of
the Company's independent dealers to sell its motorcycles and related products
and services to retail customers. The Company depends on the capability and
financial capacity 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.

Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

Three months ended
March 30, April 1,
2008 2007

Net revenue $1,306,313 $1,178,875
Gross profit 476,137 423,046
Operating expenses 214,533 187,803
Operating income from motorcycles &
related products 261,604 235,243

Financial services income 93,289 109,163
Financial services expense 58,382 50,226
Operating income from financial services 34,907 58,937

Corporate expenses 5,458 4,939
Income from operations 291,053 289,241
Investment income, net 2,042 8,915
Income before provision for income taxes 293,095 298,156
Provision for income taxes 105,514 105,846
Net income $187,581 $192,310

Earnings per common share:
Basic $0.79 $0.75
Diluted $0.79 $0.74

Weighted-average common shares:
Basic 237,078 257,326
Diluted 237,250 258,158

Cash dividends per common share $0.30 $0.21

Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

(Unaudited) (Unaudited)
March 30, December 31, April 1,
2008 2007 2007
ASSETS
Current Assets:
Cash and cash equivalents $332,639 $402,854 $310,010
Marketable securities 524 2,475 618,502
Accounts receivable, net 330,147 181,217 147,732
Finance receivables held for sale 729,814 781,280 297,885
Finance receivables held for
investment, net 1,565,022 1,575,283 1,550,001
Inventories 441,205 349,697 369,418
Other current assets 187,436 174,508 122,627
Total current assets 3,586,787 3,467,314 3,416,175

Finance receivables held for
investment, net 937,495 845,044 767,529
Other long-term assets 1,340,117 1,344,248 1,262,794
$5,864,399 $5,656,606 $5,446,498

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
liabilities $925,014 $785,124 $854,464
Current portion of finance debt 1,111,036 1,119,955 463,530
Total current liabilities 2,036,050 1,905,079 1,317,994

Finance debt 980,000 980,000 890,000
Postretirement healthcare benefits 199,978 192,531 203,514
Other long-term liabilities 216,946 203,505 199,503

Total shareholders' equity 2,431,425 2,375,491 2,835,487
$5,864,399 $5,656,606 $5,446,498

Note: On January 1, 2008 the Company recorded a reduction to shareholders'
equity of $18.1 million ($11.2 million, net of tax) to adopt provisions of
Statement of Financial Accounting Standard No. 158, "Employers" Accounting
for Defined Benefit Pension and Other Postretirement Plans, an amendment
of FASB Statements No. 87, 88, 106 and 132( R )" that require sponsors of
defined benefit pension and postretirement plans to measure the funded
status of those plans as of the date of the year-end statement of
financial position.

Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three months ended
March 30, April 1,
2008 2007

Net cash provided by operating activities $146,778 $519,624

Cash flows from investing activities:
Capital expenditures (43,239) (40,775)
Finance receivables held for investment, net (24,735) (12,940)
Collection of retained securitization interests 10,796 14,493
Net change in marketable securities 2,019 40,622
Other, net 1,511 4,545
Net cash (used by) provided by investing activities (53,648) 5,945

Cash flows from financing activities:
Net decrease in finance-credit facilities and
commercial paper (9,392) (353,540)
Dividends (71,023) (54,103)
Purchase of common stock for treasury (100,096) (61,251)
Excess tax benefits from share-based payments 312 1,157
Issuance of common stock under employee stock
option plans 584 12,953
Net cash used by financing activities (179,615) (454,784)

Effect of exchange rate changes on cash and cash
equivalents 16,270 828

Net (decrease) increase in cash and cash
equivalents (70,215) 71,613

Cash and cash equivalents:
At beginning of period 402,854 238,397
At end of period $332,639 $310,010

Net Revenue and Motorcycle
Shipment Data

(Unaudited) (Unaudited)
Three months ended
March 30, April 1,
2008 2007
NET REVENUE (in thousands)
Harley-Davidson(R) motorcycles $1,017,218 $891,518
Buell(R) motorcycles 22,075 21,655
Parts & Accessories 181,942 188,235
General Merchandise 84,006 76,112
Other 1,072 1,355
$1,306,313 $1,178,875

HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 47,826 48,740
Export 24,042 19,021
Total 71,868 67,761

Motorcycle product mix:
Touring 26,435 21,802
Custom 29,072 30,768
Sportster(R) 16,361 15,191
Total 71,868 67,761

BUELL UNITS
Motorcycle shipments:
Buell 2,392 2,558

Retail Sales of Harley-Davidson Motorcycles
Year to Date March

2008 2007
Total Worldwide Retail Sales of
Harley-Davidson Motorcycles 66,561 70,533

North America Region 49,255 55,473
United States 46,572 53,426
Canada 2,683 2,047

Europe Region (Includes Middle
East and Africa) 10,149 9,415
Europe* 9,075 8,686
Other 1,074 729

Asia Pacific Region 5,300 4,434
Japan 2,738 2,292
Other 2,562 2,142

Latin America Region 1,857 1,211

Data Source (subject to update)
Data source for all 2007 and 2008 retail sales figures shown above is
sales warranty and registration information provided by Harley-Davidson
dealers and compiled by the Company. The Company must rely on
information that its dealers supply concerning ret

Only Harley-Davidson(R) motorcycles are included in the Harley-Davidson
Motorcycle Sales data.

* Europe data includes Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom.

Heavyweight Market Data
Data Through Month Indicated

2008 2007

United States (1) (March) 93,155 108,337
Europe (2) (February) 47,764 39,785

(1) - United States industry data includes 651+cc models, derived from
submission of motorcycle retail sales by each major manufacturer to
an independent third party.

(2) - Europe data includes Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, and the United Kingdom. Industry retail
motorcycle registration data includes 651+cc models, derived from
information provided by Giral S.A., an independent agency.

SOURCE Harley-Davidson, Inc.

Financial, Amy Giuffre, +1-414-343-8002, or Media, Bob Klein +1-414-343-4433,
both of Harley-Davidson, Inc.