Company Marks Continued Progress on Transformation Strategy

Company Repurchases Shares

MILWAUKEE, Oct. 18, 2011 — Harley-Davidson, Inc. (NYSE: HOG) reported continued strong improvement in earnings and dealer retail sales in the third quarter of 2011 and through nine months, compared to 2010.

Income from continuing operations in the third-quarter 2011 rose 95.9 percent to $183.6 million, or $0.78 per share, compared to income of $93.7 million, or $0.40 per share from continuing operations in the year-ago quarter. Third-quarter operating income from Motorcycles and Related Products grew 78.0 percent on higher shipment volume and operating margin improvement, while operating income from Financial Services grew 21.9 percent on continued improvement in credit performance, compared to the third quarter of 2010.    

Retail sales of new Harley-Davidson motorcycles grew 5.1 percent worldwide in the third quarter compared to the prior-year period, led by a 5.4 percent rise in the U.S.

For the first nine months of 2011, Harley-Davidson income from continuing operations was up 63.5 percent compared to the year-ago period to $493.4 million, or $2.09 per share. Retail sales of new Harley-Davidson motorcycles through nine months grew 4.9 percent worldwide compared to the year-ago period.


“We are pleased with our sustained progress and we continue to realize strong momentum in the transformation our business,” said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc.


“Two years ago we embarked on our strategy to focus solely on the Harley-Davidson brand, provide the flexibility required in today’s market and make Harley-Davidson lean, agile and more effective than ever at delivering remarkable products and extraordinary customer experiences. Today, we continue to see the positive results of the course we have charted,” Wandell said. “The changes underway in manufacturing, product development and retail capability will increasingly enable Harley-Davidson to be customer-led like never before.


“Harley-Davidson’s transformation involves a tremendous amount of highly complex, challenging work across every part of the organization. While much remains to be done, we are well down the road and everyone involved deserves much credit for bringing these changes to life,” Wandell said. “I continue to be impressed by the willingness of all employees, including the union leadership, to do the necessary things to transform our business to be a world class, sustainable operation.” 

Retail Harley-Davidson Motorcycle Sales

On a worldwide basis, third-quarter retail Harley-Davidson new motorcycle sales grew 5.1 percent compared to last year’s third quarter to 61,838 units. Dealers sold 42,640 new Harley-Davidson motorcycles in the U.S., a 5.4 percent increase compared to last year’s third quarter. In international markets, dealers sold 19,198 new Harley-Davidson motorcycles during the third quarter, an increase of 4.4 percent compared to the year-ago period.

Through nine months, worldwide retail sales of new Harley-Davidson motorcycles increased 4.9 percent compared to the prior-year period to 194,829 units. U.S. retail sales of new Harley-Davidson motorcycles increased 4.7 percent to 127,930 units through three quarters compared to the year-ago period. In international markets, retail sales of new Harley-Davidson motorcycles increased 5.2 percent to 66,899 units for the first nine months of 2011 compared to 2010. Through nine months, industry-wide U.S. heavyweight new motorcycle (651cc-plus) retail unit sales increased 3.7 percent, compared to the year-ago period.


Third-quarter and nine-month data are listed in the accompanying tables.


Harley-Davidson Motorcycles and Related Products Segment Financial Results

Third-Quarter Segment Results: Revenue from Harley-Davidson Motorcycles during the third quarter of 2011 of $922.3 million was up 15.5 percent compared to the year-ago period. The Company shipped 61,745 Harley-Davidson motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 53,293 motorcycles in the third quarter of 2010.

Revenue from Motorcycle Parts and Accessories (P&A) totaled $235.7 million during the quarter, up 7.6 percent, and revenue from General Merchandise, which includes MotorClothes® Apparel and Accessories, was $69.3 million, up 8.2 percent compared to the year-ago period.

Gross margin was 33.7 percent in the third quarter of 2011, compared to 34.9 percent in the third quarter of 2010. Third-quarter operating margin was 14.7 percent, compared to 9.3 percent in the third quarter of 2010.

Nine-Month Segment Results: Through the first nine months of 2011, the Company shipped 182,387 Harley-Davidson motorcycles to dealers and distributors, a 9.9 percent increase compared to last year’s 166,013 units for the period.

Revenue from Harley-Davidson Motorcycles through nine months was $2.76 billion, a 13.2 percent increase compared to the year-ago period. Nine-month P&A revenue was $655.4 million, a 9.3 percent increase from the first nine months of 2010. General Merchandise revenue was $204.8 million, a 3.6 percent increase compared to the same period in 2010.

Gross margin through nine months was 34.0 percent and operating margin was 14.5 percent, compared to 35.5 percent and 11.8 percent respectively through nine months last year.

Financial Services Segment

The Financial Services segment recorded operating income of $62.0 million in the third quarter, compared to operating income of $50.9 million in the year-ago quarter. The increase in year-over-year operating income was largely the result of continued improvement in credit performance at Harley-Davidson Financial Services. Through nine months, operating income from financial services was $212.0 million, compared to operating income of $138.4 million in the first three quarters of 2010.


Harley-Davidson continues to expect to ship 228,000 to 235,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2011, including 45,500 to 52,500 motorcycles in the fourth quarter.

For the full year, Harley-Davidson now expects gross margin to be between 33.5 percent and 34.5 percent, compared to previous guidance of 34.0 percent to 35.0 percent.  The Company continues to expect 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 lowered cost estimates related to the restructuring of its production operations and now expects all previously announced company-wide restructuring activities to result in one-time charges of $480 million to $495 million, including 2011 charges of $70 million to $80 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 nine months of 2011, the Company incurred restructuring charges of $49.0 million, including $12.4 million in the third quarter. During the third quarter, Harley-Davidson completed the consolidation of final assembly operations at York,Pa. Final assembly of all Touring, Softail, Trike and Custom Vehicle Operations (CVO) motorcycles now occurs on a single assembly line.

Income Tax Rate

Through nine months, the Company’s effective tax rate was 30.4 percent, compared to 34.0 percent in the year-ago period. The 2011 effective tax rate through the third quarter was favorably impacted by a settlement of an IRS audit, as well as a change in the Wisconsin income tax law associated with certain net operating losses. In 2011, the Company now expects its full-year effective tax rate from continuing operations to be approximately 31 percent.

Cash Flow

Cash and marketable securities totaled $1.61 billion at the end of the quarter, compared to $1.55 billion at the end of last year’s third quarter. During the first nine months of 2011, Harley-Davidson generated $901.6 million of cash from operating activities. In the first nine months of 2010, the Company generated $1.17 billion of cash from operating activities. Capital expenditures through the first nine months of 2011 were $106.1 million.

Share Repurchase

The Company repurchased 2.5 million shares of Harley-Davidson, Inc. common stock at a cost of $90.8 million during the third quarter of 2011. At the end of the third quarter, there were approximately 232 million shares of Harley-Davidson common stock outstanding and 22.4 million shares remaining on board-approved share repurchase authorizations.

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.

Conference Call and Webcast Presentation

Harley-Davidson will discuss third-quarter results on a Webcast at 8:00 a.m. CT today. The Webcast presentation will be posted prior to the call and can be accessed at http://investor.harley-davidson.com/. Click “Events and Presentations” under “Resources.”

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) execute its business strategy, (ii) effectively execute the Company’s restructuring plans within expected costs and timing, (iii) implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities, and secure data contained in those systems, (iv) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices,  (v) anticipate the level of consumer confidence in the economy, (vi) manage through inconsistent economic conditions, including changing capital, credit and retail markets, (vii) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (viii) successfully implement with our labor unions the agreements that we have executed with them that we believe will provide flexibility and cost-effectiveness to accomplish restructuring goals and long-term competitiveness, (ix) manage supply chain issues, including the ability of several Company suppliers to execute short-term and long-term contingency plans for maintaining supply, or obtaining alternate supply, of certain components and sub-components currently manufactured in Japan, (x) manage production capacity and production changes, (xi) provide products, services and experiences that are successful in the marketplace, (xii) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (xiii) manage the risks that our independent dealers may have difficulty obtaining capital and managing through unfavorable economic conditions and consumer demand, (xiv) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (xv) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS’ loan portfolio, (xvi) sell all of its motorcycles and related products and services to its independent dealers, (xvii) continue to develop the capabilities of its distributor and dealer network, (xviii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xix) adjust to healthcare inflation and reform, pension reform and tax changes, (xx) retain and attract talented employees, and (xxi) detect any issues with our motorcycles or manufacturing processes to avoid 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 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 operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

# # #

New Study: Motorcycle Deaths Decline Slightly But Concerns Develop

Fatalities decline overall by at least 2% but increase later in year

WASHINGTON, April 19, 2011 / — A report released today by the Governors Highway Safety Association (GHSA) reveals that motorcycle fatalities declined in 2010 by at least 2 percent. Based upon preliminary data, GHSA projects that motorcycle fatalities declined from 4,465 in 2009 to 4,376 or less in 2010. The projection is based upon data from 50 states and the District of Columbia. The decline comes on the heels of a dramatic 16 percent drop in 2009, which followed 11 straight years of steady increases in motorcycle deaths.

The new report—the first state-by-state look at motorcycle fatalities in 2010—was completed by Dr. James Hedlund of Highway Safety North. Dr. Hedlund surveyed GHSA members, who reported fatality numbers for every state and D.C. While data are still preliminary, most states have reasonably complete fatality counts for at least the first nine months of 2010, enabling GHSA to confidently forecast that deaths will be at least 2 percent lower for the full year. Dr. Hedlund completed a similar projection for GHSA a year ago, noting a 16 percent decline in the first nine months of 2009, just one tenth of a percentage point off the final number of 15.9 percent.

GHSA is projecting declines in approximately half of the states, with notable declines in many. In Texas, for example, based upon data for the first nine months of 2010, motorcycle deaths are expected to be down 16 percent, while Oregon and Oklahoma are down 27 and 30 percent, respectively. In Oregon, GHSA Vice Chairman Troy Costales credits his state’s progress to a strong training program and a new law strengthening penalties for riders who do not have a motorcycle-specific license. Costales adds, “Oregon has worked successfully with our motorcycle clubs, who are effective advocates for riding safe and sober.”

While on the surface the national decline is good news, deeper analysis of the data reveals some areas for concern. First, 2010’s decrease of at least 2 percent is far less than 2009’s dramatic 16 percent decrease. Second, the 2010 decrease was concentrated in the early months of the year, with fatalities actually increasing by about 3 percent in the third quarter compared with the same quarter in 2009. Additionally, with the improving economy and surging gas prices, motorcycle travel is expected to increase, thus increasing exposure to risk. Finally, motorcycle helmet use dropped alarmingly from 67 percent in 2009 to 54 percent in 2010.

As part of the report, GHSA members were asked to suggest factors that may be influencing fatality changes in their state. GHSA Chairman Vernon Betkey, director of Maryland’s highway safety program, noted, “In my state, we suspect motorcycle fatalities increased 3 percent largely because of an unusual spike in crashes in one of our more rural counties. We are working closely with law enforcement agencies and highway safety partners in this area to address the issue. Additionally, Maryland has stepped up efforts in work zones to ensure motorcycle riders are as safe as possible, is placing more emphasis on training and licensure, and is increasing investment in the state’s public information and education campaign.”

GHSA’s Member in New York, the Governor’s Traffic Safety Committee, attributes the increase in fatal motorcycle crashes in that state to a rise in motorcycle registrations and a longer and more favorable riding season. J. David Sampson, Executive Deputy Commissioner for the state’s Department of Motor Vehicles said, “There was an extended riding season in 2010 due to less rain and warmer temperatures which led to an increased exposure to crashes. In addition, motorcycle registrations continue to rise as the baby boom generation rediscovers their passion for riding a motorcycle. New York State’s Motorcycle Safety Program is working to combat the rise in fatal crashes by continuing to increase the availability of Motorcycle Safety Foundation (MSF) training sites throughout the state.”

In reviewing the national data, Chairman Betkey said, “While there is a lot of good news in this report, the increase in fatalities toward the end of year is a clear red flag. Just like with overall traffic deaths, a strengthening economy presents us with the potential for more tragedy on our roads. We are going to be very aggressive in targeting our programs where they are needed the most. Additionally, we will continue to remind all roadway users that motorcycles are a legal and legitimate way of transportation and we all need to safely share the road.”

To continue progress in reducing crashes, injuries and fatalities on the nation’s roadways, the report urges states to focus their motorcycle safety efforts on:

  • Increasing Helmet Use: Helmets are proven to be 37 percent effective at preventing fatal injuries to motorcycle operators and passengers.  Helmet laws are the only motorcycle safety strategy to receive a five-star effectiveness rating in NHTSA’sCountermeasures that Work guidebook for states. Alarmingly, helmet use declined dramatically in 2010, and 30 states still lack helmet laws for all riders.
  • Reduce Alcohol Impairment: States should conduct high visible drunk driving enforcement that includes motorcyclists as well as implement training efforts to help police identify drunken motorcyclists.
  • Reduce Speeding: According to the most recent data, 35 percent of motorcycle riders involved in fatal crashes were speeding. More than half of speed-related fatal motorcycle crashes did not involve another vehicle.
  • Provide Motorcycle Operator Training to All Who Need or Seek It: While all states currently conduct training courses, some areas may not provide enough course openings at the locations and times convenient for riders.


All data in the report are preliminary, especially for the last few months of 2010. The report presents data through September. The counts are reasonably complete for 48 states and the District of Columbia that reported monthly data for this period. Arizona and California reported data for a shorter period.

The Governors Highway Safety Association (GHSA) is a nonprofit association representing the highway safety offices of states, territories, the District of Columbia and Puerto Rico. GHSA provides leadership and representation for the states and territories to improve traffic safety, influence national policy and enhance program management. Its members are appointed by their Governors to administer federal and state highway safety funds and implement state highway safety plans. Contact GHSA at 202-789-0942 or visitwww.ghsa.org. Find us on Facebook at www.facebook.com/GHSAhq.