From a press release issued by Harley-Davidson:

HARLEY-DAVIDSON REPORTS RECORD FOURTH QUARTER AND 17th CONSECUTIVE RECORD YEAR

Net Income of $580 million on Revenue of $4.1 billion

Milwaukee, Wis., January 21, 2003 — Harley-Davidson, Inc. (NYSE: HDI) today announced record revenue and earnings for its fourth quarter and year ended December 31, 2002. Revenue for the quarter was $1.03 billion compared with $905.9 million in the year-ago quarter, a 13.3 percent increase. Net income for the quarter was $150.9 million, an increase of 27.5 percent over the year ago quarter. Fourth quarter diluted earnings per share (EPS) were 49 cents, a 25.6 percent increase compared with last year’s 39 cents. Revenue for the full year was $4.1 billion, compared with $3.4 billion in 2001, a 20.1 percent increase. Net income for the year was $580.2 million, a 32.5 percent increase versus last year’s $437.7 million, while diluted EPS for the full year were $1.90, a 32.9 percent increase compared with $1.43 in 2001.

“The year 2002 was our 17th consecutive year of record revenue and net income,” said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. “Worldwide retail sales of Harley-Davidson® motorcycles were strong in 2002 with 15.9 percent unit growth over the prior year. Strong demand for our products gives us confidence in maintaining our production goal of 289,000 Harley-Davidson motorcycles for 2003.

“We believe that the excitement surrounding our 100th Anniversary celebration combined with the strength of the underlying fundamentals of our motorcycle business are helping us continue to grow – even in the face of a weak global economy. We are fulfilling the dreams of many new customers as we welcome them into the Harley-Davidson family,” said Bleustein.

Motorcycles and Related Products Segment – Fourth Quarter Results

Revenue from Harley-Davidson motorcycles was $820.3 million, an increase of $86.1 million or 11.7 percent over the same period last year. Fourth quarter shipments of Harley-Davidson motorcycles totaled 65,970 units. The Company had four fewer workdays in the fourth quarter of 2002 compared with 2001, yet shipped 2,435 more units, or 3.8 percent more than the same period last year.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $129.9 million, an increase of $18.5 million, or 16.6 percent over the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothesä apparel and collectibles, totaled $54.8 million, an increase of $7.3 million or 15.4 percent. Revenue from 100th Anniversary P&A products was $12.7 million and revenue from General Merchandise associated with the 100th Anniversary was $12.5 million. “We are very pleased with sales of our 100th Anniversary products, but we realize that not all of these were incremental because some substitution from standard offerings to commemorative anniversary products did occur,” said Bleustein.

Fourth quarter gross margin was 36.1 percent of revenue, up from 34.5 percent last year. Gross margin improved primarily due to wholesale motorcycle price increases, favorable product mix and foreign exchange effects.

Fourth quarter operating margin for the Motorcycles and Related Products Segment was 20.7 percent of revenue, which was better than last year’s fourth quarter operating margin of 18.6 percent. The increase in operating margin was driven primarily by the increase in gross margin.

Retail Sales Data

Harley-Davidson retail motorcycle sales for the year grew in the U.S. (18.3 percent), Europe (7.6 percent) and Japan (5.9 percent) compared to the same period last year.


Financial Services Segment – Fourth Quarter Results

Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported fourth quarter operating income of $25.4 million, up $8.4 million or 49 percent compared to the year-ago quarter.

“Harley-Davidson Financial Services had a fantastic quarter and year, both in financial performance and in helping to make the dream of owning a Harley-Davidson motorcycle a reality,” said Bleustein. The subsidiary benefited from the increase in Harley-Davidson’s U.S. motorcycle sales, growing acceptance of its consumer financing program and decreased cost of funds due to lower market interest rates.

Pension Plan Activities

During the quarter, the Company contributed $100 million to its various pension plans, which brought the total year contribution to $154 million, compared with a contribution of $19 million in 2001. The Company also responded to current market conditions by lowering its pension plan discount rate from 8.0 to 7.25 percent.

Cash Flow

Operations generated cash of more than $779 million in 2002, providing the Company the ability to invest $324 million in capital expenditures, repurchase 1.1 million shares of company stock for $57 million, pay $41 million in dividends and contribute $154 million to the Company’s pension plans, even as the Company increased cash and marketable securities by $160 million.

Twelve Month Results

For the fiscal year ended 2002, total Harley-Davidson motorcycle shipments were 263,653 units compared with 234,461 units in 2001, a 12.5 percent increase. Harley-Davidson motorcycle revenue was $3.16 billion, an increase of $489.7 million or 18.3 percent.

P&A revenue totaled $629.2 million, a 23.5 percent increase, while General Merchandise revenue totaled $231.5 million, a 41.2 percent increase compared with 2001.

On a longer-term basis, the Company expects the growth rate for P&A revenues to be slightly higher than the Harley-Davidson motorcycle unit growth rate. The General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate over the long term.

Full year operating income for HDFS was $104.2 million, an increase of $43.0 million or 70.1 percent compared to 2001. The Company expects 2003 HDFS operating income to grow approximately 20 percent over 2002 performance.

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, Inc. 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 and sport-touring motorcycles. Harley-Davidson Financial Services, Inc. provides wholesale and retail financing and insurance programs to Harley-Davidson 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” or “estimates” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets 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 undertakes no 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 through the implementation of innovative manufacturing techniques and other means, (ii) successfully implement production capacity increases in its facilities, (iii) successfully introduce new products and services, (iv) avoid unexpected P&A /general merchandise supplier backorders, (v) sell all of the motorcycles it has the capacity to produce, (vi) continue to develop the capacity of its distributor and dealer network, (vii) avoid unexpected changes in the regulatory environment for its products, (viii) successfully adjust to foreign currency exchange rate fluctuations, (ix) successfully adjust to interest rate fluctuations, and (x) successfully manage changes in the credit quality of HDFS’s loan portfolio.

In addition, the Company could experience delays in the operation of manufacturing facilities as a result of work stoppages, difficulty with suppliers, natural causes or other factors. Risk factors are also disclosed in documents previously filed by the Company with the Securities and Exchange Commission.