Harley-Davidson Financials Improve for 2010 Operations

Report quotes rebound at financial services and progress at retail sales

MILWAUKEE, Jan. 25, 2011 -- Harley-Davidson, Inc. (NYSE: HOG) reported that its full-year 2010 income from continuing operations was $259.7 million, or $1.11 per share; that's up significantly, compared to income of $70.6 million in 2009. For the fourth quarter of 2010, Harley-Davidson recorded a loss from continuing operations of $42.1 million.

Retail sales of new Harley-Davidson motorcycles in the fourth quarter, on the other hand, were nearly level with the year-ago period, decreasing just 1.0 percent worldwide and 0.2 percent in the U.S.

The Company’s financial services unit, Harley-Davidson Financial Services, was a key contributor to 2010 earnings, with operating income of $181.9 million for the full year, including $43.5 million in the fourth quarter. Operating income from motorcycles and related products was $378.8 million for the full year, including an operating loss of $6.8 million in the fourth quarter.

“We feel good about our 2010 results,” said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc. “Through the hard work of a lot of very dedicated and talented employees and dealers, we have made strong progress at transforming our business to be leaner and even more effective at delivering great products and customer experiences.

“In 2010, we expanded our international footprint, saw improvement in our motorcycle segment results driven by the restructuring of our operations and returned HDFS to solid profitability. While we remain cautious in our outlook, I am confident that we are positioning Harley-Davidson to succeed for all our stakeholders into the future,” Wandell said.

2010 Retail Harley-Davidson Motorcycle Sales

Fourth Quarter: During the fourth quarter of 2010, retail sales of new Harley-Davidson motorcycles decreased 1.0 percent worldwide, down 0.2 percent in the U.S. and down 2.1 percent in international markets, compared to the prior-year quarter. Industry-wide U.S. heavyweight motorcycle (651cc-plus) retail unit sales decreased 14.8 percent in the fourth quarter compared to the year-ago period.

Full Year: For the full year 2010, worldwide retail sales of Harley-Davidson motorcycles decreased 8.5 percent compared to 2009. U.S. retail sales of Harley-Davidson motorcycles decreased 11.7 percent for the full year, while the U.S. heavyweight market segment was down 14.6 percent, compared to 2009. In international markets, retail sales of new Harley-Davidson motorcycles decreased 1.9 percent for the full year compared to 2009.

“In the U.S., we are the market share leader in new on-road motorcycle sales, not only to Boomers but to young adults, women, African-American and Hispanic riders. In Europe, we moved into the number two market share spot for heavyweight motorcycles in 2010. ” said Wandell.

Harley-Davidson Motorcycles and Related Products Segment Financial Results

Fourth Quarter: Revenue from Harley-Davidson motorcycles in the fourth quarter of 2010 was $697.8 million, up 26.4 percent compared to the year-ago period.

Full Year: In 2010, shipments of motorcycles were 5.6 percent lower than 2009. Revenue from Harley-Davidson motorcycles registered a 1.2 percent decrease compared to 2009.

** Financial Services Segment**

Fourth Quarter: The financial services segment recorded operating income of $43.5 million in the quarter, compared to an operating loss of $7.1 million in the year-ago quarter. The improvement in year-over-year operating income is largely the result of higher net interest income and lower provision for credit losses.

Full Year: For the full year 2010, operating income from financial services was $181.9 million, compared to an operating loss of $118.0 million in 2009.

** Guidance**

In 2011, the Company expects to ship approximately five percent to eight percent more Harley-Davidson motorcycles to dealers and distributors worldwide, compared to 2010.

The Company and the unions representing its production employees in Kansas City, Mo. are scheduled to begin negotiations this week on a new labor agreement to replace the current contract which is set to expire in July 2012. The Company has advised the unions that the Kansas City operations must become more competitive and flexible if those operations are to remain viable. The Company expects to make a decision on the future of the Kansas City operations in early March 2011, and will provide any updated cost and savings information.

** Discontinued Operations**
In the third quarter, the Company completed the divesture of its MV Agusta subsidiary. For the full year, Harley-Davidson incurred a $113.1 million loss, net of tax, from discontinued operations, comprised of operating losses as well as fair value adjustments.

Company Background
Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Company (HDMC), Harley-Davidson Financial Services (HDFS) and Buell Motorcycle Company (Buell).