This summary is based on the third quarter fiscal 2007 earnings call conducted by Harley-Davidson Inc. (HOG: chart) on October 19, 2007.

Management:

CEO, President: Jim Ziemer
CFO: Tom Bergmann
CFO, Harley-Davidson Financial Services: Larry Hund
IR: Mark Van Genderen

Key Investors Issues

- EPS were $1.07 a share compared to $1.20 a share last year.
- Net income fell 15% to $265 million from $312.7 million a year earlier
- Revenue fell 6% to $1.54 billion from $1.64 billion a year earlier.

Second Quarter Highlights

Revenue was $1.54 billion, down 5.8% compared to the year-ago quarter.

- Net income was $265 million, a decrease of 15.3%.
- Earnings per share were $1.07, or down 10.8%.
- The company bought back a significant number of shares. Specifically, the company repurchased 9.7 million shares of common stock at a cost of $509 million. In addition, the company increased the quarterly dividend rate for the second time this year from 25 cents per share to 30 cents per share.

Wholesale Harley-Davidson motorcycle shipments were 86,535 units, a decrease of 10.8%.

Domestic shipments of 65,756 units were down 18.2% from the third quarter of 2006. This shipment volume represented 76% of the total volume shipped to dealers, down from 82.8% from a year ago.
International shipments of 20,779 units were up 24.8% compared to the same quarter last year. This international shipment mix represented 24% of total third quarter shipment volumes compared to 17.2% in the third quarter 2006.

Touring volume was 32.9%, compared to 37.1% in the third quarter of 2006.

Third quarter 2007 custom shipment volume, representing Softail, Dyna, and VRSC motorcycles, was 45.6% compared to 45.4% for the third quarter 2006. Sportster motorcycle mix was 21.5% of the total mix, compared to 17.4% during the third quarter of last year.

Over the long term, product mix is ultimately driven by consumer demand. However, changes in mix can vary from quarter to quarter, and one factor that can impact mix is startup production for new models. The company was limited in the number of touring motorcycles it could ship due to a slower than anticipated production ramp up.

Revenue from Harley-Davidson Motorcycles was $1.18 billion, or down 8.6% compared to last year's third quarter.

Average revenue per unit increased by $339 or 2.5% from the year-ago period. Although the touring mix was down, the impact on average revenue per unit was offset by model year pricing, including 2008 anniversary models, and favorable currency impact.

Parts and accessories and general merchandise both delivered positive results.

- Parts and accessories revenue was $251.5 million, which is up 1.2% over the year-ago quarter.
- General merchandise revenue was $83.2 million, an increase of 16.7% or $11.9 million.
- General merchandise group continues to do an excellent job of enhancing the Harley-Davidson experience for current riders and enthusiasts by delivering authentic, custom designed and high-quality functional riding gear, apparel and accessories.

Gross margin was 38.4%, a decrease from 39.9% in the third quarter of 2006.

Gross margin was negatively impacted by fixed costs being spread over lower volumes, manufacturing inefficiencies associated with the new model launch, and higher raw material costs. This was partially offset by increased pricing and favorable currency.

- Operating margin decreased 26.5% in the third quarter of 2006 to 23.2% in the third quarter 2007. This was a result of lower gross margin and increased operating expenses, combined with lower year-over-year revenue.
- Effective income tax rate was 35.5% compared to 36% in the same quarter last year. This decrease primarily reflects the reinstatement of the Federal Research and Development Tax Credit.