HARLEY-DAVIDSON SETS RECORDS FOR QUARTERLY REVENUE AND EARNI

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HARLEY-DAVIDSON SETS RECORDS FOR QUARTERLY REVENUE AND EARNINGS
October 17, 2006 - Harley-Davidson Press Release





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.


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

Three months ended Nine months ended
Sept 24, Sept 25, Sept 24, Sept 25,
2006 2005 2006 2005

Net revenue $1,635,916 $1,431,151 $4,298,053 $3,999,879
Gross profit 652,255 561,272 1,661,795 1,525,989
Operating expenses 218,243 194,270 590,503 540,780
Operating income from motorcycles & related products 434,012 367,002 1,071,292 985,209

Financial services income 97,344 81,444 291,812 255,558
Financial services expense 42,154 33,869 128,734 103,403
Operating income from financial services 55,190 47,575 163,078 152,155

Corporate expenses 5,215 3,715 16,723 18,001
Total operating income 483,987 410,862 1,217,647 1,119,363
Investment income and other, net 4,659 (79) 17,861 11,739
Income before provision for income taxes 488,646 410,783 1,235,508 1,131,102
Provision for income taxes 175,912 145,829 444,781 401,542
Net income $312,734 $264,954 $790,727 $729,560

Earnings per common share:
Basic $1.20 $0.97 $2.96 $2.58
Diluted $1.20 $0.96 $2.96 $2.57

Weighted-average common shares:
Basic 260,270 274,415 266,772 282,519
Diluted 261,229 275,460 267,525 283,406

Cash dividends per common share $0.21 $0.16 $0.60 $0.445


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


(Unaudited) (Unaudited)
Sept 24, Dec.31, Sept 25,
2006 2005 2005

ASSETS
Current Assets:
Cash and cash equivalents $506,139 $140,975 $437,007
Marketable securities 446,543 905,197 580,826
Accounts receivable, net 149,951 122,087 139,759
Finance receivables held for sale 100,109 299,373 223,758
Finance receivables held for investment, net 1,273,841 1,342,393 1,135,001
Inventories 281,536 221,418 232,240
Other current assets 124,837 113,794 114,568
Total current assets 2,882,956 3,145,237 2,863,159

Finance receivables held for investment, net 706,695 600,831 587,315
Other long-term assets 1,443,411 1,509,141 1,243,994
$5,033,062 $5,255,209 $4,694,468

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $880,294 $668,139 $863,210
Current portion of finance debt 96,374 204,973 0
Total current liabilities 976,668 873,112 863,210

Finance debt 900,000 1,000,000 776,626
Postretirement healthcare benefits 70,571 60,975 57,732
Other long-term liabilities 239,452 237,517 134,786

Total shareholders' equity 2,846,371 3,083,605 2,862,114
$5,033,062 $5,255,209 $4,694,468


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

Nine months ended
Sept 24, Sept 25,
2006 2005

Net cash provided by operating activities $1,286,474 $1,186,903

Cash flows from investing activities:
Capital expenditures (137,468) (122,128)
Finance receivables held for investment, net (75,710) (112,398)
Collection of retained securitization interests 73,974 84,766
Net change in marketable securities 464,641 755,268
Other, net 2,512 (10,586)
Net cash provided by investing activities 327,949 594,922

Cash flows from financing acitivies:
Net decrease in finance-credit facilities and
commercial paper (208,996) (510,720)
Dividends (158,738) (124,330)
Purchase of common stock for treasury (910,957) (1,014,645)
Excess tax benefits from share-based payments 3,550 5,319
Issuance of common stock under employee
stock option plans 25,882 24,399
Net cash used by financing activities (1,249,259) (1,619,977)

Net increase in cash and cash equivalents 365,164 161,848

Cash and cash equivalents:
At beginning of period 140,975 275,159
At end of period $506,139 $437,007


Net Revenue and Motorcycle
Shipment Data
(unaudited)


Three Months Ended Nine Months Ended
September 24, September 25, September 24, September 25,
2006 2005 2006 2005
NET REVENUE (in thousands)
Harley-Davidson¨ motorcycles $1,293,358 $1,110,173 $3,329,700 $3,095,229
Buell¨ motorcycles 21,423 25,267 74,826 71,241
Parts & Accessories 248,448 231,161 683,100 645,819
General Merchandise 71,251 64,506 206,873 187,375
Other 1,436 44 3,554 215
$1,635,916 $1,431,151 $4,298,053 $3,999,879


HARLEY-DAVIDSON UNITS
Motorcycle shipments:
United States 80,398 72,249 198,720 192,124
Export 16,648 15,336 57,628 49,305
Total 97,046 87,585 256,348 241,429


Motorcycle product mix:
Touring 36,041 29,492 90,914 81,103
Custom 44,096 40,730 116,604 110,376
Sportster¨ 16,909 17,363 48,830 49,950
Total 97,046 87,585 256,348 241,429

BUELL UNITS
Motorcycle shipments:
Buell 2,529 2,914 9,105 8,450


Retail Sales of Harley-Davidson Motorcycles
Year to Date (September 30, 2006)


2006 2005

United States 225,623 210,790
Europe* 28,131 25,172
Japan 9,707 8,428
Canada 12,195 10,700
All other markets 10,989 8,177

Total Retail Sales of Harley-Davidson Motorcycles 286,645 263,267

Data Source (subject to update)
Data source for all 2005 and 2006 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 retail sales, and this information is subject to revision.

*Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom

Only Harley-Davidson¨ motorcycles are included in the Harley-Davidson Motorcycle Sales data.




Heavyweight (651+ cc) Market DataData
Through Month Indicated

2006 2005

United States (September) 463,940 437,575
Europe* (August) 306,334 290,239

Data Source
United States: Motorcycle Industry Council

Europe: Giral S.A.

*Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom