Harley-Davidson Earnings Still Rising

Brent Avis
by Brent Avis
On Tuesday, Harley-Davidson, Inc. announced record sales and earnings for its third quarterended September 23, 2001. The Company's third quarter sales were $850.8million, an increase of 19.1 percent over the third quarter last year.Diluted earnings per share were 36 cents, a 34.9 percent increasecompared with last year.

"For the first few days following the tragedies of September 11,many of our U.S. Harley-Davidson dealers reported a slowdown in retailactivities," said Jeffrey L. Bleustein, chairman and chief executiveofficer of Harley-Davidson, Inc. "This was particularly noticeable inareas around New York City and Washington D.C. As time progressed,however, it appears as if aggregate retail activity has returned toexpected levels for this time of year."

"We remain confident in the continued long-term growth ofHarley-Davidson," said Bleustein...

"In fact, we are increasing our 2001production target for Harley-Davidson® motorcycles from 231,000 to232,500. At the same time, we continue to carefully watch our internaland external indicators as well as world events so that we can bestmanage our business through these challenging times." As previouslyreported, the Company has a 2002 goal of 256,000 Harley-Davidson unitswhich represents a 10.1 percent increase over the new 2001 goal.

Motorcycles and Related Products Segment - Third Quarter Results

Third quarter sales of Harley-Davidson motorcycles were $638.2million, an increase of 20.8 percent over the third quarter last year.Shipments totaled 56,611 units, up 8,534 units or 17.8 percent over thesame period.

Sales of Parts and Accessories (P&A), which consist of Genuine MotorParts and Genuine Motor Accessories, totaled $150.2 million, a 12.6percent increase from the year-ago quarter. Third quarter sales ofGeneral Merchandise, which consist of MotorClothesO apparel andcollectibles, totaled $44.1 million, a 7.0 percent increase over the sameperiod last year. On a longer-term basis, the Company expects the growthrate for P&A revenues to be slightly higher than Harley-Davidson'smotorcycle unit growth rate. The General Merchandise growth rate isexpected to be lower than the motorcycle unit growth rate over the longterm.

Third quarter gross margin was 35.5 percent of revenue, up from 33.6percent of revenue for the same period last year. Gross margin improvedprimarily due to favorable product mix, worldwide price increases and ahigher percentage of U.S. shipments.

Third quarter operating margin for the Motorcycles and RelatedProducts Segment was 18.3 percent of revenue, an improvement on lastyear's third quarter margin of 16.3 percent. The increase in grossmargin drove the corresponding increase in operating margin.

Harley-Davidson Motorcycle Retail Data

Harley-Davidson retail sales through September grew in the U.S. and inJapan, up 14.9 and 7.5 percent, respectively compared to the same periodlast year. Harley-Davidson retail sales in Europe are down 4.3 percentthrough September compared with the year ago period. The Companybelieves the strong U.S. dollar is contributing to slower Harley-Davidsonsales in Europe. "While our retail sales in Europe lagged behind theheavyweight motorcycle industry through August, we are confident that ourimproving distribution, new product offerings and brand developmentactivities will have a positive impact on our longer term success in thismarket," said Bleustein.

Industry data through September is not yet available;

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