2009 Annual Report

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Courage. You can call it character. You can call it determination. Or you can just call it guts. But courage changes everything. Ask any rider. It’s the stuff that gives you the confidence to power forward, seize the road and live your dream. And it’s at the heart of every hard decision. 2009 was a year that called on Harley-Davidson to focus our direction, move boldly and do the right things to fuel our future. After all, there’s a reason we’ve been around 107 years. We know what it takes to succeed.

HARLEY- DAVIDSON, INC. 2009 ANNUAL REPORT

HD_AR_2009_final.indd 1 3/3/4/104/10 4:59 PM CONTINUOUS IMPROVEMENT ONE COMPANY, ONE TEAM, ONE DIRECTION moving with appropriate urgency and mak- We also believe we have signifi cant oppor- When my journey here at Harley-Davidson ing great progress toward our goal to do tunity to run our business more effec- began last May, it was obvious that people just that. We appreciate the trust you have COURAGE, FOCUS tively and effi ciently through continuous were passionate about the brand. As I have placed in us to move this company forward. improvement in manufacturing, product had the opportunity to get to know our cus- While there is still plenty of hard work AND DIRECTION. development and business operations. tomers, dealers and employees, join them at ahead, I could not feel better about the Our focus on continuous improvement rallies and events and ride with them, it is progress we have made and the path we goes beyond simply reducing costs. It clear the passion is far stronger and deeper have chosen. extends to our ability to deliver the right than anything I could ever have imagined. DEAR FELLOW SHAREHOLDERS: In the worst economic downturn in decades, 2009 was a year bikes to the right markets at the right All of us at Harley-Davidson are fully Sincerely, that required Harley-Davidson to respond with tough, courageous decisions. time, an essential capability when it comes committed—as one company, working as to customer satisfaction and effectively one team and pulling in one direction—to We had two key priorities. First, we executed on our strategy to manage the business managing supply in line with demand. doing the right things for this company effectively in the near term and address the immediate challenges. But we needed to The transformation currently underway and for the collective future of all stake- at our vehicle operations in York, Pa., dem- holders. By aligning the organization KEITHTH E E.. WANDELLWANDELL PRESIDENTSIDENT AND do more than simply persevere. We needed to establish a bold, clear strategic direction onstrates our commitment to reshaping behind a clear strategic direction, we are CHIEF EXECUTIVE OFFICER that would maximize our opportunities going forward and restore the Company as a the face of Harley-Davidson manufacturing, strong business that could consistently grow over the long haul. We set that direction, with much greater fl exibility and signifi cant savings from a more effi cient operation. and the word that best describes our new strategy is “focus.” Just as important is the transformation under way in Harley-Davidson product development. Our work focuses on product We wasted no time in bringing this strategy to 2008. Managing supply in line with HIGH-POTENTIAL BRAND selection, cost reduction and time compres- to life, moving quickly to focus our resourc- demand remains a top priority as a key The heart of our strategy is our strong sion, to reduce time to market and consis- es behind the unique strengths and growth underpinning of brand strength. belief that focusing our investment behind tently deliver on customer expectations. potential of the Harley-Davidson brand. We embarked on a major consolidation the powerful Harley-Davidson brand pro- These actions represent important early In light of the 2009 landscape and the and restructuring of our production vides a superior path to tapping the full steps in what will be an ongoing journey actions we took, our 2009 fi nancial results operations to get our cost structure right potential of the brand and to sustained in continuous improvement. were not surprising. Income from con- at lower volumes. long-term growth. The Harley-Davidson tinuing operations of $70.6 million, or We also succeeded in obtaining the fund- brand consistently ranks among the stron- THE ROAD AHEAD $0.30 per share, decreased 89.7 percent ing needed to support the lending activities gest globally, across many demographic 2009 was indeed a year that tested our from the prior year, on a 23.1 percent of Harley-Davidson Financial Services— groups. Even in today’s more practical, company, but it was also a year of genuine drop in revenue from motorcycles and another priority for us in 2009. Our ability cautious consumer environment, people achievement as we embarked on a new related products to $4.29 billion. These to fund motorcycle loans for customers was of all ages and backgrounds still dream course. It was a year in which we took results primarily refl ect the impact of re- a key strategic advantage in 2009 and was about the Harley-Davidson experience. many courageous actions to position duced motorcycle shipments, restructuring one of the reasons for our market share We see great potential to drive growth Harley-Davidson for the future. and Buell exit costs, and non-cash charges growth during the year. As a result of our globally and in the U.S. through unique Our accomplishments were possible only related to Harley-Davidson Financial Ser- actions, HDFS is on much stronger footing, products and experiences, both through through the hard work, unwavering spirit vices. When the loss from MV Agusta and we believe we have provided for its outreach to new customers and our com- and dedication of our employees, dealers discontinued operations is included, the anticipated funding needs for 2010. mitment to core customers. and suppliers, who focus every day on Company reported a full-year net loss of Our strategy is multi-generational and delivering an outstanding experience for $55.1 million. At the same time, even with STRATEGIC FOCUS multi-cultural. It calls for us to grow sales our customers. I thank all the members the decrease in profitability due to the Looking out across a longer horizon, in to our core customers, while growing sales of our team for their many contributions. reduction in motorcycle shipments and October we unveiled our long-term “Deliv- to outreach customers at a faster rate. As we execute on our strategy, we do not restructuring spending, the Company’s ering Results Through Focus” business Our Dark Custom products, including promise easy solutions. Consumers will continuing operations generated $609 mil- strategy, with its four pillars: growth, the Iron 883, are a strong draw for young likely continue to be cautious in an economic lion in cash fl ow from operating activities continuous improvement, leadership de- adults, and motorcycles like the Street environment that remains challenging. in 2009. This speaks well for the ability velopment and sustainability. As part of Glide, Tri Glide and Electra Glide Ultra However, we believe our strategy and to generate cash, even in a challenging this strategy to focus our efforts, we Limited have earned the ongoing com- the performance measures we have laid out business environment. announced we would exit from the Buell mitment of core riders. are based on an appropriate and prudent product line and sell MV Agusta, focusing In international markets we plan to add approach to the market. Delivering on our ADDRESSING THE IMMEDIATE CHALLENGES our resources on the Harley-Davidson 100 to 150 dealer points through 2014, plans will take discipline, determination and To address the immediate challenges of brand, which includes continuing to and in the same period increase inter- intense focus, but we are confi dent we can 2009 and the deep recession, we decreased expand the brand globally. national retail unit sales to more than 40 achieve our goals through our strategy. Harley-Davidson motorcycle shipments to percent of total retail unit sales, up from dealers by nearly 27 percent compared about 33 percent in 2009.

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GROWTH Harley-Davidson is not only one of the strongest brands in the world, it is also, we believe, a brand with tremendous untapped potential. We have chosen to focus our investments behind the Harley-Davidson brand because we believe it provides a superior means for realizing the substantial long- term opportunities of the global motorcycle industry.

CONTINUOUS IMPROVEMENT We do many things very well at Harley-Davidson. But the reality is that there is tremendous opportunity to do many things even better—in our product development, our business processes and our manufacturing operations. Continuous improvement is about much more than reducing costs. We are driving out unnecessary steps and complexity and building in greater ﬂ exibility and efﬁ ciency in a product’s path from design to dealership. It’s how we get better at managing supply and demand, continuously improving quality, and responding faster and more effectively to the needs of our markets and the desires of riders.

LEADERSHIP DEVELOPMENT The third pillar of our strategy is leadership development, the foundation for our ability to compete and win for decades to come. We will only succeed with great people—individuals who will challenge the The future is calling. And it’s asking more At a high level, we will expand our strength WE BELIEVE OUR STRATEGY WILL status quo, and who are creative, collaborative and accountable. To fulﬁ ll our from us than ever before. In 2009, we as one of the most customer-centered EXPAND OUR STRENGTH AS ONE OF brand and business potential, we must prepare strong, committed leaders answered the call with Harley-Davidson’s brands in the world, anchor our leader- THE MOST CUSTOMER-CENTERED go-forward business strategy to “Deliver ship of the custom touring and cruiser BRANDS IN THE WORLD. who live our values and deliver every day. Results Through Focus.” motorcycle segments, and develop rel- These are fundamental points on a strate- evant products to attract customers in ’ gic agenda that we must execute in order WE RE MOVING ON FOUR FRONTS new demographic segments. We’ll expand - to maximize our potential and take full TO POSITION HARLEY DAVIDSON our global presence by accelerating our , , advantage of our opportunities. In short, FOR SUSTAINED MEANINGFUL reach into key international markets. - . our strategy to deliver results through LONG TERM RESULTS And, of course, we remain highly committed focus is about delivering the full Harley- Based on four pillars—growth, continuous to our core customers. From product Davidson experience in a harder-working, improvement, leadership development and development to manufacturing to our SUSTAINABILITY The stature of our company— and the visibility of our brand in smarter and more effective way. sustainability— our strategy has a single- dealer network, we are concentrating on society—gives Harley-Davidson a particular obligation to seize the opportunities minded focus on the unique strengths of motorcycles and market activities that the Harley-Davidson brand, coupled with create new demand for our motorcycles of sustainability and giving back. We are continually expanding the ways in an unprecedented commitment of efforts and related products. which we incorporate social and environmental responsibility in our work, our and resources to enhance productivity, proﬁ tability and value. manufacturing processes and our products.

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MACHINES THAT FIT THE MINDSET.

Everyone has a vision of what a Harley- Tri Glide™ and motorcycles from Custom Davidson® motorcycle should be. And as Vehicle Operations™ deliver a premium we build on our position as the leader of experience for our core customers, giving two-wheeled authenticity, we’re looking them reasons to trade up and ways to deep into the dreams of new riders, long- extend the ride. And through customiza- time customers and young customers alike tion and MotorClothes® riding gear, each to develop motorcycles that ﬁ t individual riding experience can truly be individu- lives and lifestyles. alized to ﬁ t the owner’s mindset. There’s a powerful reason for this approach: it works. Motorcycles are all THE DISCIPLINE OF PRODUCT DEVELOPMENT about emotion, and no motorcycles inspire The best companies do more than move as much of it as ours. the market; they move ahead of it. To further strengthen our effectiveness at THE RIDE COMES FIRST delivering twist-of-the-throttle emotion More than ever, we’re developing prod- to diverse customers, we are transforming ucts that appeal across generations and product development in ways that sharpen cultures. Dark Custom™ bikes like the Iron our focus on what riders want, deliver 883™ and the new Forty-Eight,™ with relevant products in each global market, their stripped-down, rebellious attitude, improve speed to market and grow our are drawing in young adult riders. Prod- family of riders. ucts like the Electra Glide® Ultra Limited,

TOP & BOTTOM Inspiration comes in many shapes and colors; the 2010 CVO™ Ultra Classic® Electra Glide motorcycle in Scarlet Red Pearl with Dark Slate ﬂ ames for an ultimate custom touring ride, and the Iron 883 motorcycle, with its blacked-out street smarts.

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The devotion of our most loyal custom- EXPANDING THE COMMUNITY with them. The Harley Owners Group,® A BOND THAT HAS ers has brought us a long way. Their We’re highly committed to keeping the now with more than a million members passion will continue to be a powerful Harley-Davidson experience rich and re- in 1,458 chapters globally, is a compelling NO BOUNDARIES. force. We see it in the motorcycles they warding for our current riders and extend- connection with riders wherever our mo- ride, the individuality they express and ing their journey. We’re also focused on torcycles travel. H.O.G.® riding events like their dedication to the ultimate riding bringing in more riders like them. In fact, Million Mile Monday and the Pony Express experience. When you have such an about a third of new Harley-Davidson Ride, and rallies from China to South expansive and devoted global community motorcycle purchasers in the core rider Carolina, keep our most passionate cus- of riders, it’s more than a business ad- segment are either new to motorcycling tomers riding more. We’re also staying vantage; it’s an obligation we take very or coming to us from other brands. close to customers at major events like seriously to exceed expectations. Naturally, our motorcycles are key to Daytona and Sturgis, where we’re dial-

LEFT Dave Grohl of the band Foo Fighters with his CENTER Many customer journeys lead to Milwaukee. FAR RIGHT Harley Owners Group members in China, attracting these riders, and so are the ing up our focus to deliver a custom rally customized 2009 Tri Glide™ Ultra Classic,® his Randy Haase stops at Harley-Davidson’s Juneau taking it to the streets at the country’s second great rides, rallies and events that go experience like never before. latest motorcycle acquisition—one of ﬁ ve Harley- Avenue headquarters. annual H.O.G. rally in Huangshan, Anhui province. Davidson motorcycles in his personal collection.

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OPPORTUNITY IS FOUND ON MANY ROADS.

For those who dream about their first Our Rider’s Edge® New Rider Course is Harley-Davidson motorcycle, there’s a instrumental in growing new relation- moment when desire turns into ownership. ships, helping more than 200,000 students Bringing those moments closer within take to the streets with conﬁ dence since reach for young adults,women and diverse 2000. Thirty-three percent of them are riders everywhere is one of the things under age 35 and 37 percent are women. we and our dealers enjoy the most. We continue to introduce ourselves to prospective owners through venues like NEW CUSTOMERS FOR LIFE the South By Southwest® music and Young adults—those under age 35—hold culture festival, online communities, and our brand in virtually the same high es- Garage Party™ events just for women. teem as long-time customers. For this new And to help new customers feel confi- generation, we’ve created motorcycles, dent on the machine of their dreams, we experiences and entire communities— developed the Harley-Davidson Fit Shop, both real-world and virtual—to immerse which enables dealers to outﬁ t most any them in the brand, expand our universe of bike for any rider. enthusiasts and make them customers In short, we live by the belief that “every for life. customer is a custom.” Every customer Bikes like the Iron 883, one of our fast- deserves an individualized experience in est-selling motorcycles in 2009, have done every aspect of ownership, whether they’re exceedingly well among young adults. a long-time rider or just getting started.

TOP Rising country music artist and devoted BOTTOM LEFT The Forty-Eight motorcycle with its Harley-Davidson enthusiast Krista Marie, peanut tank, fat front tire and no-frills Dark aboard her V-Rod Muscle® motorcycle at Custom appeal. a 2009 Women’s Ride for MDA. BOTTOM RIGHT Chontell Brown, Michael Rawls and John Roberts of New Jersey take in the Daytona Bike Week scene.

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Harley-Davidson is crossing borders like we’re fueling demand in more mature a primary role in deﬁ ning the emerging OVER OUR never before. Our brand has remarkable international motorcycle markets. Today, leisure riding market. We’ve studied the global strength and we’re translating that we’re a major player in Europe, climb- market in depth, laid the groundwork HANDLEBARS, appeal in ways that speak powerfully to ing into the number three spot in the and will start selling this summer. And local enthusiasts. Our motorcycles now heavyweight segment in 2009 with a consumer enthusiasm is greater than we WE CAN SEE roll out of dealerships in more than 70 market share that’s double what it was ever imagined. We see long-term oppor- countries on six continents. By 2014, our a decade ago. We did it through strong tunities in India, as disposable incomes THE WHOLE WORLD. plans call for international retail sales execution on the basics of product selec- and aspirations rise. Over time, when of Harley-Davidson motorcycles to exceed tion, distribution, effective marketing and riders look to hit the roads, we believe we 40 percent of our total retail unit sales. retail execution, and above all, outstand- will be at the leading edge of the market. ing customer experiences. BUILDING SUCCESS, MARKET BY MARKET A disciplined, systematic approach is LEFT The XR1200X™ motorcycle, with its race- CENTER Anoop Prakash, Managing Director of RIGHT More leisure time, enthusiasm for the brand inspired riding position and hard-hitting Harley-Davidson India, with media at the and rising disposable income equal opportunity in Europe continues to be a prime Harley- also key to growing our global family in style, is part of the product appeal behind our Delhi Auto Expo, introducing 12 Harley-Davidson India for Harley-Davidson as the ultimate symbol Davidson destination—an example of how places like India, where we are taking market share growth in Europe. motorcycle models destined for the India of freedom of the open road. market in 2010.

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REVVING UP STREET-LEVEL PASSION.

Dealers are the local heartbeat of Harley- connected with customers and manage Davidson. In cities and towns far and near, their businesses more effectively. they are the vital connection between rider and machine, fulﬁ lling dreams and build- MANY POINTS OF CONNECTION ing lifelong relationships. Because customers come into the family in all kinds of ways, dealers understand THE HIGHER ROAD that every part of their dealership is an Dealerships are destinations that bring important opportunity to connect. Top the entire Harley-Davidson experience to caliber sales and service teams are a key the world. And dealers are more focused to customer engagement; so are test rides than ever on exceeding customer expec- and Authorized Rentals, which fuel dreams tations every day. They and their teams and inspire new bike purchases. And pre- understand the importance of personal- owned motorcycles are just the ticket izing every customer interaction, from in for some riders, starting a lifetime of sales, service and customization to great ownership and customization. rides and events. They are dedicated to There’s a reason Harley-Davidson deal- continuous improvement— learning best ers are the best in the industry. To them, practices from one another and through Harley-Davidson is much more than a Harley-Davidson University. And, with business; it’s a way of life and a personal the adoption of advanced technology passion which shows at the street level solutions, they are able to stay better in destinations around the world.

TOP LEFT Great service is a point of differentiation TOP RIGHT Sharing passion for the brand and for Harley-Davidson dealers, including Harley- business experience at a recent Harley-David- Davidson of North Texas in Carrollton and techni- son dealer convention are dealers (from left): cian Tom Talamantez. Joaquín R. Trejos, San José, Costa Rica; Irv Fossaen, Onalaska, Wis.; Ferdinand Fischer, BOTTOM Harley-Davidson Borie, the oldest Harley- Vienna, Austria; Tan Lin Lin, Qingdao, China; and Davidson dealership in France, in its new store Tommie Loos, Johannesburg, South Africa. just outside Paris. Through great execution of all the details, Harley-Davidson new motorcycle retail sales rose in France in 2009.

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To succeed as a manufacturer in today’s manufacturing environment that maxi- the fl exibility to produce multiple product WE’RE BUILDING global economy takes a lot more than the mizes fl exibility and effi ciency, enhances families on the same assembly line every latest factory equipment or the right quality at every step and delivers value for day. The work that’s under way at York THE BEST thickness of steel to form into motorcycle our customers. At the heart of these efforts will greatly improve our ability to build fenders and gas tanks. It takes a relentless is a major restructuring of our production the right bikes at the right time to meet BIKES BETTER. commitment to customers and quality, a operations that began in 2009. the needs of our customers. skilled and engaged workforce, the agility Of course, the restructuring of our to fl ex with the needs of the marketplace TRANSFORMATION IN PROGRESS production operations is about more than and a drive to continually improve. The biggest transformation is under way effi ciency; it refl ects our commitment to at our factory in York, Pa., and by 2012, build the best bikes better every day FOCUS ON QUALITY, FLEXIBILITY AND EFFICIENCY we will have completely revamped how and deliver quality and value with each

LEFT Harley-Davidson’s Kansas City operations RIGHT Attention to quality in every detail remains Today, Harley-Davidson is focused like we build motorcycles there. This restruc- Harley-Davidson motorcycle we make. now build V-Rod® and Sportster® motorcycles on a top priority at our York facility, where never before on achieving a best-in-class turing will reduce complexity and create the same line for greater ﬂ exibility and efﬁ ciency. we are transforming our operations for best-in- class capability.

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WHEN YOU RIDE WITH US, WE SHARE A PURPOSE.

The Harley-Davidson family shares a employees and suppliers, has raised more powerful purpose: giving back. It’s as than $70 million for patient services and ingrained in our nature as sharing an research through rides and events. open stretch of road. RESPECT CHAMPIONING A CAUSE A shared purpose goes beyond philan- In 2007, through The Harley-Davidson thropy. Every day, we look for ways to Foundation’s $1 million gift, we teamed incorporate sustainable practices into up with the nonprofi t Disabled American our business, our manufacturing opera- Veterans to fund a fl eet of offi ces on wheels tions and our products, to minimize the that help veterans get the government impact we have on the environment. For benefi ts to which they’re entitled. At more example, as noted in our 2009 Sustain- than 1,700 stops over the last three years, ability Report, we have reduced green- including many at Harley-Davidson deal- house gas emissions through changes to erships, DAV advisers helped some 48,000 our heat-treating operations and saved veterans obtain $540 million in benefi ts. enough natural gas to heat 1,312 homes a Giving back is also behind a remarkable year. And the Harley-Davidson Museum— thirty-year partnership with the Muscular our newest facility— has been highly Dystrophy Association. Since 1980, Harley- awarded for transforming a brownfi eld Davidson and MDA have shared the road site into an environmentally sustainable in the battle against neuromuscular dis- community resource. It all adds up to ease. As a national MDA sponsor, Harley- respect— for our environment, our com- Davidson, together with riders, dealers, munities and our future.

TOP Harley’s Heroes™ DAV Mobile Service RIGHT Abbey Umali, Muscular Dystrophy Ofﬁ ce staff counsel veterans at Ft. Washington Association National Goodwill Ambassador, Harley-Davidson during the Rolling Thunder rally and Bill Davidson, Harley-Davidson Vice in Washington, D.C. President, Core Customer Marketing, share a moment at the National H.O.G. Rally in BOTTOM Since opening in 2008, the Harley-Davidson Oklahoma City. Museum in Milwaukee has been recognized for its environmental sensitivity, including a 2009 GREENGUARD Indoor Air Quality Certiﬁ cation.

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FINANCIAL HIGHLIGHTS FINANCIAL PERFORMANCE SUMMARY

In thousands, except per-share amounts 2009 2008 2007 In 2009, Harley-Davidson’s revenue from administrative costs and exiting non-core motorcycles in our international markets STATEMENT OF OPERATIONS DATA: motorcycles and related products on a business operations. Consequently, 2009 decreased 15.4 percent compared to 2008. Motorcycles and related products revenue $ 4,287,130 $ 5,578,414 $ 5,726,848 continuing basis decreased 23.1 percent results were significantly affected by For the same period, retail sales of Harley- Gross profit 1,386,196 1,931,144 2,114,100 to $4.29 billion compared to 2008 and non-recurring charges. Harley-Davidson Davidson motorcycles decreased 11.2 per- Selling, administrative and engineering expense 851,165 942,267 900,708 income from continuing operations de- expects restructuring activities announced cent in the Europe Region, 27.2 percent Restructuring expense and other impairments 220,976 12,475 – creased 89.7 percent from the prior year in 2009 to deliver between $240 million in the Latin America Region, 30.9 percent Operating income from motorcycles and related products 314,055 976,402 1,213,392 to $70.6 million. These results refl ect the and $260 million in annual ongoing sav- in Canada and 9.0 percent in the Asia performance of the Company’s motorcycle ings upon completion of those restruc- Pacifi c Region. Financial services revenue 494,779 376,970 416,196 business, operating losses at Harley- turing activities. In 2009, the Company shipped 223,023 Financial services expense 581,059 294,205 204,027 Davidson Financial Services and the impact Harley-Davidson’s share price increased Harley-Davidson motorcycles worldwide, Restructuring expense 3,302 – – of restructuring charges. 48.5 percent during 2009 and the Company compared to 303,479 in 2008. In 2009, Goodwill impairment 28,387 – – Revenue from sales of Harley-Davidson paid out dividends of $0.40 per share in 35 percent of the Harley-Davidson mo- Operating (loss) income from fi nancial services (117,969) 82,765 212,169 motorcycles decreased to $3.17 billion in 2009. Harley-Davidson has paid a dividend torcycles shipped went to international 2009, a decline of 25.2 percent from 2008, every year since 1993. markets compared to 32 percent in 2008. Operating income 196,086 1,059,167 1,425,561 on a 26.5 percent reduction in shipments Investment income 4,254 11,296 22,258 of Harley-Davidson motorcycles. Revenue HARLEY-DAVIDSON MOTORCYCLES HARLEY-DAVIDSON FINANCIAL SERVICES Interest expense 21,680 4,542 – from Genuine Parts and Accessories in Worldwide retail sales of Harley-Davidson Financial Services incurred an operating Income before income taxes 178,660 1,065,921 1,447,819 2009 totaled $767.3 million, a 10.7 per- motorcycles declined 22.7 percent in 2009 loss of $118.0 million in 2009 compared to Provision for income taxes 108,019 381,686 513,976 cent decrease from the previous year, and compared to 2008. operating income of $82.8 million in 2008, Income from continuing operations 70,641 684,235 933,843 General Merchandise revenue was $282.2 In the United States, 2009 retail sales largely due to a $72.7 million credit loss Loss from discontinued operations, net of tax (125,757) (29,517) – million, a decrease of 10.1 percent com- of 162,385 Harley-Davidson motorcycles provision for a one time reclassifi cation Net (loss) income $ (55,116) $ 654,718 $ 933,843 pared to 2008. decreased 25.8 percent from 2008 and of Held for Sale receivables to Held for During 2009, Harley-Davidson took overall U.S. heavyweight market regis- Investment and a $28.4 million good- Earnings per common share from continuing operations: actions to lower its cost structure through trations declined 36.6 percent. For the full will impairment charge. Basic $ 0.30 $ 2.92 $ 3.75 eliminating excess capacity, reducing year 2009, retail sales of Harley-Davidson Diluted $ 0.30 $ 2.92 $ 3.74 Loss per common share from discontinued operations: Basic $ (0.54) $ (0.13) $ – Diluted $ (0.54) $ (0.13) $ – (Loss) earnings per common share: Basic $ (0.24) $ 2.80 $ 3.75 Diluted $ (0.24) $ 2.79 $ 3.74 Weighted-average common shares: Basic 232,577 234,225 249,205 Diluted 233,573 234,477 249,882 HARLEY-DAVIDSON, INC. VS. STANDARD & POOR’S 500 COMPOSITE INDEX In dollars Cash dividends per common share $ 0.40 $ 1.29 $ 1.06

CONSOLIDATED BALANCE SHEET DATA (AT DECEMBER 31): 25,000

Total assets $ 9,155,518 $ 7,828,625 $ 5,656,606 23,191 Total debt $ 5,636,129 $ 3,914,887 $ 2,099,955

19,476 20,000 Total equity $ 2,108,118 $ 2,115,603 $ 2,375,491 17,169 16,709 15,687 15,133 14,645 15,000 12,544 WORLDWIDE WORLDWIDE

2009 MOTORCYCLES AND RELATED PRODUCTS REVENUE BY PRODUCT LINE 2009 MOTORCYCLES AND RELATED PRODUCTS REVENUE BY REGION 10,084

9,061 10,000 Dollars in millions Dollars in millions 7,434 74.1 % H-D Motorcycles . . . . .$3,174.8 67.9 % United States ...... $2,910.1 5,956 17.9 % Parts & Accessories . . . . .767.3 . 16.3 % Europe ...... 700.9 4,257 5,000 6.6 % General Merchandise . . . 282.2 6.0 % Japan ...... 255.9 3,650 2,224 2,152 1,686 ...... 1,433

1.1 % Buell Motorcycles 46.5 981 4.1 % Canada ...... 175.9 930 860 852 803 782 766 782 710 690 689 618 553 537 414 367 337 242 245 220 204 ...... 156 0.3 % Other 16.3 3.2 % Australia...... 137.6 0 2.5 % Rest of World ...... 106.7 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Total Net Revenue $4,287.1 Total Net Revenue $4,287.1 S&P 500 H-D COMPARISON OF YEAR-END VALUE OF $100 INVESTED DEC. 31, 1986 (20 YEARS SHOWN). ASSUMES FOR BOTH HARLEY-DAVIDSON AND S&P THAT ALL DIVIDENDS ARE REINVESTED.

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CAPITAL EXPENDITURESONCONTINUINGOPERATIONS Units inthousands HARLEY Dollars inmillions

HARLEY Shares outstanding,inmillions 20 COMMON SHARESOUTSTANDING HARLEY 99 99 99 UNITED STATES UNITED STATES 302.7 165.8 177.2 INTERNATIONAL INTERNATIONAL

00 00

302.1 203.6 204.6 HARLEY 01 01 01 - - DAVIDSON 302.7 290.4 - 234.55 DAVIDSON DAVIDSON 02 02 02

302.7 323.9 263.763.7 - DAVIDSON, INC. 03 03 03 301.5 227.2 291.1291.1 04 04 04

294.3 , 213.6 317.3317.3 INC , MOTORCYCLE 05 05 05 INC 274.0 198.4 329.0329.0 INC.

. 06 06 06 258.1 219.6 . 349.2349.2 2009 ANNUAL REPORT 07 07 238.5 07 242.1 330.6330.6 08 08 232.8 229.0 08 303.5303.5 09 09 234.3 09 116.7 223.0

0 50 100 150 200 250 300 350 50 50 0 100 150 200 250 300 350 0 100 150 200 250 300 300 350 350 In Dollars inmillions MOTORCYCLES ANDRELATEDPRODUCTSREVENUE HARLEY

YEAR-END STOCKPRICES HARLEY In dollars HARLEY DILUTED EARNINGSPERSHAREFROMCONTINUINGOPERATIONS 99 99 99

32.03 dollars,adjustedforsplits 0.86 2,453 00 00 39.75 00 1.13 2,943 01 01 01 - 54.31 - 1.43 - 3,407 DAVIDSON DAVIDSON DAVIDSON 02 02 46.20 02 1.90 4,091 03 03 47.53 03 2.50 4,624 04 04 60.75 04 3.00 5,015 , , , 05 05 05 INC 51.49 INC 3.41 INC 5,342 06 06 06 . . 70.47 . 3.93 5,801 07 07 46.71 07 3.74 5,727 08 08 16.97 08 2.92 5,594 09 09 25.20 09 0.30 4,287 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 0 0 1,000 2,000 3,000 4,000 5,000 6,000

0 10 20 30 40 50 60 70 80

identiﬁ this document. Davidson disclaimsanyobligationtoupdateinformationin copy ofwhichisincludedasaseparateenclosure.Harley- in ourﬁ capital marketsuncertaintiesandmatterswehavenoted that wemaynotbeabletoexecuteourlong-termstrategy, be materiallydifferent.Thoserisksinclude,amongothers, that aresubjecttoriskscouldcauseactualresults tions andobjectivesotherforward-lookingstatements This documentcontainsstatementsofourbeliefs,expecta- In dollars,adjustedforsplits HARLEY DIVIDENDS PERSHARE HARLEY Dollars inmillions Dollars inmillions INCOME 99 0.088 99 267 00 00

ed inourAnnualReportonForm 0.098 348 lings withthe FROMCONTINUINGOPERATIONS 01 01

0.115 - 438 - DAVIDSON DAVIDSON 02 0.135 02 580 03 0.195 03 761

04 04 SEC 0.405 890 , , , includingriskfactorsthatwe 05 05 INC 0.625 INC 960 06 06 . 0.810 1,043,043 . 07 1.060 07 934

08 08

10-K 1.290 684 09 09

for 0.40 71 0 100 200 300 400 500 600 700 800 900 1,000 00 1,1 0 0.100 0.300 0.500 0.700 0.900 1.100 1.300 2009 , a

3/3/5/10 5/10 9:14PM 9:14PM HD_AR_2009_final.indd 23 (1) H-D 651+ CC MOTORCYCLEREGISTRATIONS UNITED STATES

timing ofdatasubmissionstotheindependent sources. differences arenotsigniﬁ Harley-Davidson dealersascompiledbythe Company. The this reportissalesandwarrantyregistrations provided by source forretailsalespresentedelsewherein The Company’s Davidson retailsalesdatapresentedelsewhere inthisreport. presented inthesetablesmaydifferslightly from the Harley- Europe industrydataincludesthree-wheeledvehicles. agency. This thirdpartydataissubjecttorevisionandupdate. from informationprovided byGiralS.A.,anindependent Kingdom. TheCompanyderivesitsEurope industrydata Norway, Portugal, Spain,Sweden,Switzerland,andtheUnited Denmark, Finland, France,Germany, Greece,Italy, Netherlands, registrations weresigniﬁ until 2008anddoesnotbelievethree-wheeledvehicleretail vehicles. TheCompanydidnotshipthree-wheeledvehicles update. 2009and2008U.S.industrydataincludesthree-wheeled third party. Thisthirdpartydataissubjecttorevision and retail salesbyeachmajormanufacturertoanindependent U.S. industrydataisderivedfrom submissionsofmotorcycle H-D

651+ CC MOTORCYCLEREGISTRATIONS EUROPE 48.8 99 The Europe dataincludesregistrationsinAustria, Belgium, 6 99 . H-D MOTORCYCLES 17

H-D MOTORCYCLES 275.6 335.4 vs.Industry,unitsinthousands vs.Industry,unitsinthousands retailregistrationdataforHarley-Davidson motorcycles 45.6 00 00 . 322.7 27 340.0 45.0 01 01 . 18 321.3 (1) 394.3 47.5 02 7 02 . 333.3 1 442.3 49.5 03 03 . 323.9 1 461.2 (1) 49.2 cant intheU.S.for2007andprior. 04 REST OFINDUSTRY 7 04 REST OFINDUSTRY . 7 494.0 cant andgenerallyrelate tothe 336.7 49.0 05 8 05 . 333.2 9 517.6 49.3 06 9 06 . 361.3 5 543.0 48.7 10.0 07

07 387.9 516.1 45.5 08 10 08

. 479.8 389.7 6 53.3 MARKET SHARE MARKET SHARE 09 12.0 09 313.6 304.0 200 0 100 300 400 500 600 % % 0 50 100 150 200 250 300 350 400 450

* CORPORATE Akamai Technologies, Inc. LLC Allen Enterprises, Corporate Ofﬁ JOHN A. OLIN* JOCHEN ZEITZ JAMES A. NORLING JUDSON Women’s Group ofRodale, Inc.

Vice President, Vice President,Treasurer Vice President, Vice Chairman, (now knownas the Board, Chairman of Chief Financial Offi Communications Chief ExecutiveOffi Chairman andChief Operating Offi Chairman, Simpson GlobalFoundries, Inc.) Chief ExecutiveOffi General Counsel, Secretary Offi Offi A. GAIL GEORGE L. MILES, JR. GEORGE Puma Fred DeeleyImportsLtd. Harley-Davidson Canada/ Manufacturing Equity Partners, Human Resources Executive Offi Thacher &BartlettLLP President and Executive Vice President, Harley-Davidson, Inc. Executive Offi President andChief President and Executive Chief President and Chief Operating Former Presidentofthe Executive Chairman, Former PresidentandChief Former E.KEITH WANDELL* PERRY A. M. TONIT CALAWAY E.KEITH MARTHA F. BROOKS RICHARD I. BARRY K. DONALD A. the Board,Chartered Semiconductor Senior Vice President and Senior Advisor,Providence and Controller and ChiefComplianceOffi N. SUSAN K. HENDERSON SARA LEADERSHIP HARLEY HARLEY BOARD OFDIRECTORS LINEBARGER THOMAS cer, cer, Cummins, Inc. L. AG Chairman of LIONE* - WQED - C. GREEN LEVINSON DAVIDSON, DAVIDSON INC. H. WANDELL GLASSGOW* ALLEN JAMES BEATTIE CONRADES cer, NovelisInc. cer cer, Deeley cer, Multimedia

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York Vehicle Operations Advanced Manufacturing JEFFREY A. MERTEN JAMES A. E. JAMES HANEY JOANNE Vice Presidentand Vice Presidentand Vice Presidentand Vice Presidentand Vice President, Vice President, Vice PresidentandGeneral Vice Presidentand Vice President,Global Vice Presidentand Vice President, Vice President, Licensing Vice President, J.WILLIAM DAVIDSON G. WILLIAM DAVIDSON Chief MarketingOffi Chief StylingOffi General Manager, General Manager, General Manager, General Counsel Government Affairs Operations, Pilgrim Road Chief InformationOffi General Manager, Core CustomerMarketing Corporate Product Planning Chief OperatingOffi OE CHARLES R. BAKER Sales North American Manufacturing national Sales,Marketing Parts andAccessories Managing Director, Europe Materials Management Manager, Powertrain Executive Vice President, President and RICHER MARK-HANS ROBERT N. MATTHEW S. LEVATICH MICHELLE A. KUMBIER EDWARD M. TIMOTHY P.MICHAEL HEERHOLD DONALD M.GOGAN FRED C. GATES KARL M. RODNEY Senior Vice President and Senior Vice President, Senior Vice Presidentand and BusinessDevelopment Senior Vice President,Inter- and SpecialEvents SCOTT C.MILLER LEADERSHIP MOTOR HARLEY Engineering

COMPANY - M. BISCHMANN EBERLE J. DAVIDSON McCASLIN K. COPES LINDLEY KRISHOK HOELTER cer

cer cer cer SUMMARY 414-343-4680 400 York, JON R. V-ROD, ELECTRAGLIDE, Vice PresidentandChief Vice PresidentandManaging Vice Presidentand 3700 www.h-dmuseum.com www.mvagusta.com www.buell.com www.harley-davidson.com Internet Addresses: 877-883-1450 877-436-8738 General Merchandise General Manager, Chairman, Chief OperatingOfﬁ CLAUDIO CASTIGLIONI GROUP, H.O.G., SPORTSTER, exception of Milwaukee, used since Davidson Financial Services Financial Ofﬁ Director, LatinAmerica Harley-Davidson Museum Milwaukee, Director, MVAgusta President andManaging Financial Services President, Harley-Davidson President and Kansas City, The followingareamong Buell MotorcycleCompany DAVIDSON BUELL PARTY, EAGLE SCREAMIN’ FORTY-EIGHT, GARAGE TRI GLIDE,DARK CUSTOM, EDGE, HARLEYOWNERS MOTORCLOTHES, RIDER’S HARLEY-DAVIDSON, HARLEY . O P. ENRICO D’ONOFRIO LAWRENCE G. HUND MARK VAN GENDEREN PATRICK SMITH the Bar&ShieldLogo, trademarks, substantially the BarandShieldtrademark trademarks: the Company’s been usedsince1903 and since at COMPANY GROUP LEADERSHIP COMPANY LEADERSHIP STREET GLIDE,IRON883, STEVEN E. CUNNINGHAM LEADERSHIP FINANCIAL SERVICES TOUR PLANT MUSEUM INFORMATION: HARLEY AGUSTA MV HARLEY BUELL MOTORCYCLE INFORMATION Box Canal Street BUELL West JuneauAvenue PA FLICKINGER trademark hasbeen least - - motorcycles 653 DAVIDSON, DAVIDSON 1984.With the trademark has . the MV The WI WI

MO INFORMATION: cer, Harley- 1910.The

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10:30 414-343-4782 400 © 2010 @harley-davidson.com April Annual Report,as A copyoftheCompany 3700 www.harley-davidson.com, we maintainanethics which alsomanagesthe www.computershare.com 250 via our Commission onForm 877- 866-360-5339 Conduct, whichisavailable trademarkstrategy Company’s Computershare Company without Company’s Website. Communication withthe Canton, Corporate Governance AND DIVIDEND ANNUAL SHAREHOLDERS owned by or e-mail:investor.relations or 312-360-5339 including our in eightlanguages.Inaddition, Milwaukee, Dividend ReinvestmentPlan, Direct StockPurchase and To obtaininformationonour may beobtainedfromthe The AnnualMeetingof Harley-Davidson, Inc. Board c/otheSecretaryof Milwaukee, Harley-Davidson Museum, materials maybeobtained hotline at Mail Stop1 Peter Turnley, various Photography: EricPerry, Paper: SappiSomerset Printing: LakeCountyPress Design: VSAPartners,Inc. .O. O P. trademarks areowned the shareholdersor trademarksare the Company’s by Securities andExchange and portfolio. MVAgusta The a subsidiaryoftheCompany, and transferagent: please contactourregistrar Shareholders CONTACT INVESTOR SEC FORM10 PLAN REINVESTMENT DIRECT STOCK REPURCHASE MEETING RELATIONS INFORMATION SHAREHOLDER MV Box CanalStreet, Royall Street, HDSTOCK a.m., West JuneauAvenue 24 Agusta Motor Harley-Davidson,Inc. Web siteat , MA 653 2010, 800-688-2316 H-D CT

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10% 9:14PM OUR VISION We fulfill dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality.

HARLEY- DAVIDSON, INC. 3700 West Juneau Avenue P.O. Box 653 Milwaukee, Wisconsin 53201-0653

www.harley-davidson.com

HD_AR_2009_final.indd 24 3/3/4/104/10 5:01 PM