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MILWAUKEE (April 20, 2010) - Harley-Davidson, Inc. (NYSE: HOG) reported first-quarter 2010 income from continuing operations of $68.7 million, or $0.29 per share. First quarter earnings included operating income from Financial Services of $26.7 million, marking a return to profitability for the Company’s Harley-Davidson Financial Services (HDFS) subsidiary. Revenue from Motorcycles and Related Products was $1.04 billion in the first quarter.
Worldwide retail sales of new Harley-Davidson® motorcycles declined 18.2 percent in the quarter compared to the first quarter of 2009, an improvement in the rate of decline from the prior three quarters. In the U.S., retail Harley-Davidson motorcycle sales were down 24.3 percent and in international markets, retail sales declined 2.8 percent, compared to last year’s first quarter.

“We are encouraged by our progress in the first quarter,” said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc. “We are seeing directional improvement in our dealers’ retail motorcycle sales as we enter the key selling season. At the same time, given the global economic uncertainty that still exists, we believe conditions will remain challenging throughout this year, and we will continue to factor that into how we manage the business.

“Our entire team is moving with great purpose and speed as we implement our go-forward business strategy, with its focus on global growth through market and demographic outreach, commitment to core customers, and developing motorcycles that inspire and fulfill dreams. We also continue to be intensely focused on continuous improvement, looking at all opportunities to drive cost-competitiveness and efficiency throughout our operations,” Wandell said.

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Harley-Davidson Motorcycles and Related Products Segment
Revenue from Harley-Davidson motorcycles during the first quarter of 2010 of $808.8 million was down 20.0 percent compared to the year-ago period. In line with guidance, the Company shipped 53,674 Harley-Davidson motorcycles to dealers and distributors worldwide during the quarter, compared to shipments of 74,670 motorcycles in the first quarter of 2009.

Revenue from Parts and Accessories totaled $149.1 million during the quarter, down 12.1 percent, and revenue from General Merchandise, which includes MotorClothes® apparel, was $66.3 million, down 11.9 percent compared to the year-ago period.

Gross margin was 36.6 percent in the first quarter, compared to 37.1 percent in the year-ago period.  First-quarter operating margin decreased to 12.2 percent from 18.1 percent in the first quarter of 2009, driven by higher restructuring costs and the impact of lower revenue in the first quarter of 2010 compared to the year-ago period.

Motorcycle Retail Sales Data
During the first quarter of 2010, worldwide dealer retail sales of new Harley-Davidson motorcycles decreased 18.2 percent compared to the prior-year quarter. In the U.S., retail sales of new Harley-Davidson motorcycles declined 24.3 percent for the quarter and industry-wide heavyweight motorcycle (651cc-plus) retail unit sales declined 21.4 percent.

International retail sales of new Harley-Davidson motorcycles decreased 2.8 percent during the quarter, compared to the year-ago period, after double-digit declines in each of the prior four quarters. In the first quarter of 2010, the Europe region was up 1.2 percent, Canada was up 1.5 percent, the Asia Pacific region was down 9.8 percent and the Latin America region was down 7.8 percent, compared to the year-ago period.

Guidance
The Company reiterated its expectation to ship 201,000 to 212,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2010, a reduction of five to ten percent from 2009. In the second quarter of 2010, the Company expects to ship 55,000 to 60,000 Harley-Davidson motorcycles. The Company continues to expect gross margin to be between 32.0 percent and 33.5 percent for the full year. The Company also continues to expect full-year capital expenditures of between $235 million and $255 million, including $95 million to $110 million to support restructuring activities. 

Financial Services Segment
First-quarter operating income from Financial Services was $26.7 million, an increase of $15.5 million compared to the year-ago quarter. The return to profitability for HDFS after three consecutive quarters of operating losses was primarily driven by improved credit performance in the retail motorcycle loan portfolio and by a lower cost of funds.

Restructuring Update
Previously announced restructuring activities that began in 2009 are proceeding on schedule and on budget. The Company continues to expect those activities to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. In 2010, the Company continues to expect savings of $135 million to $155 million from previously announced restructuring activities, increasing to expected annual ongoing savings of approximately $240 million to $260 million upon completion of the restructuring.

“During the first quarter, we implemented the new labor agreement at our York facility and are on track with our restructuring of York for best-in-class production capability. I have been impressed by the efforts of our York employees to move forward together with this important transformation,” said Wandell.