HDI Harley Davidson

Worldwide Retail Motorcycle Sales Up 10 Percent MILWAUKEE, July 17 /PRNewswire-FirstCall/ -- Harley-Davidson, Inc. (NYSE:HDI) today 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. Data is listed in the accompanying tables. 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. 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 Six months ended June 25, June 26, June 25, June 26, 2006 2005 2006 2005 Net revenue $1,377,047 $1,333,264 $2,662,137 $2,568,728 Gross profit 516,326 500,434 1,009,540 964,717 Operating expenses 191,358 181,084 372,260 346,510 Operating income from motorcycles & related products 324,968 319,350 637,280 618,207 Financial services income 98,567 85,302 194,468 174,114 Financial services expense 42,310 34,281 86,580 69,534 Operating income from financial services 56,257 51,021 107,888 104,580 Corporate expenses 6,751 7,012 11,508 14,286 Total operating income 374,474 363,359 733,660 708,501 Investment income and other, net 5,885 4,689 13,202 11,818 Income before provision for income taxes 380,359 368,048 746,862 720,319 Provision for income taxes 136,929 130,657 268,869 255,713 Net income $243,430 $237,391 $477,993 $464,606 Earnings per common share: Basic $0.91 $0.85 $1.77 $1.62 Diluted $0.91 $0.84 $1.77 $1.62 Weighted-average common shares: Basic 267,487 280,577 270,133 286,685 Diluted 268,130 281,181 270,783 287,493 Cash dividends per common share $0.21 $0.16 $0.39 $0.285 Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) (Unaudited) June 25, December 31, June 26, 2006 2005 2005 ASSETS Current Assets: Cash and cash equivalents $391,967 $140,975 $319,720 Marketable securities 612,508 905,197 416,202 Accounts receivable, net 150,526 122,087 138,413 Finance receivables held for sale 233,167 299,373 212,836 Finance receivables held for investment, net 1,101,587 1,342,393 1,021,490 Inventories 292,757 221,418 225,778 Other current assets 114,613 113,794 102,578 Total current assets 2,897,125 3,145,237 2,437,017 Finance receivables held for investment, net 678,938 600,831 564,526 Other long-term assets 1,467,266 1,509,141 1,264,515 $5,043,329 $5,255,209 $4,266,058 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable & accrued expenses $739,510 $668,139 $628,695 Current portion of finance debt 34,605 204,973 7,994 Total current liabilities 774,115 873,112 636,689 Finance debt 1,000,000 1,000,000 800,000 Postretirement healthcare benefits 67,801 60,975 54,652 Other long-term liabilities 233,580 237,517 140,433 Total shareholders' equity 2,967,833 3,083,605 2,634,284 $5,043,329 $5,255,209 $4,266,058 Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six months ended June 25, June 26, 2006 2005 Net cash provided by operating activities $828,783 $785,350 Cash flows from investing activities: Capital expenditures (89,124) (75,430) Finance receivables held for investment, net (54,485) (77,074) Collection of retained securitization interests 26,227 53,751 Net change in marketable securities 293,623 920,539 Other, net 1,719 (9,934) Net cash provided by investing activities 177,960 811,852 Cash flows from financing activities: Net decrease in finance-credit facilities and commercial paper (161,437) (485,085) Dividends paid (104,494) (80,486) Purchase of common stock for treasury (499,543) (1,014,645) Excess tax benefits from share-based payments 1,547 6,171 Issuance of common stock under employee stock option plans 8,176 21,404 Net cash used by financing activities (755,751) (1,552,641) Net increase in cash and cash equivalents 250,992 44,561 Cash and cash equivalents: At beginning of period 140,975 275,159 At end of period $391,967 $319,720 Net Revenue and Motorcycle Shipment Data (unaudited) Three Months Ended Six Months Ended June 25, June 26, June 25, June 26, 2006 2005 2006 2005 NET REVENUE (in thousands) Harley-Davidson(R) motorcycles $1,027,800 $1,006,105 $2,036,342 $1,985,056 Buell(R) motorcycles 29,347 25,925 53,403 45,974 Parts & Accessories 251,703 237,754 434,652 414,658 General Merchandise 67,071 63,406 135,622 122,869 Other 1,126 74 2,118 171 $1,377,047 $1,333,264 $2,662,137 $2,568,728 HARLEY-DAVIDSON UNITS Motorcycle shipments: United States 58,052 58,997 118,322 119,875 Export 21,744 18,131 40,980 33,969 Total 79,796 77,128 159,302 153,844 Motorcycle product mix: Touring 27,336 26,519 54,873 51,590 Custom 36,714 35,371 72,508 69,657 Sportster(R) 15,746 15,238 31,921 32,597 Total 79,796 77,128 159,302 153,844 BUELL UNITS Motorcycle shipments: Buell 3,539 3,067 6,576 5,536 Retail Sales of Harley-Davidson Motorcycles Year to Date (June) 2006 2005 United States 154,041 143,683 Europe* 20,635 18,353 Japan 6,217 5,358 Canada 8,646 7,975 All other markets 7,406 5,530 Total Retail Sales of Harley-Davidson Motorcycles 196,945 180,899 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(R) motorcycles are included in the Harley-Davidson Motorcycle Sales data. Heavyweight (651+ cc) Market Data Data Through Month Indicated 2006 2005 United States (June) 321,839 295,702 Europe* (May) 195,528 183,439 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 DATASOURCE: Harley-Davidson, Inc. CONTACT: Financial Contact: Mark Van Genderen, +1-414-343-8002, or Media Contact: Bob Klein, +1-414-343-4433, both for Harley-Davidson, Inc. Web site: http://www.harley-davidson.com/

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