-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KYMWCApG94hyC6qk3gQLx+FjmYl0pXkCEmQUl55XDGAXJw6XkiE4HjRalukaJb8W zgY5MMKIrcKY4ONcNVxNng== 0000897069-08-000831.txt : 20080501 0000897069-08-000831.hdr.sgml : 20080501 20080501172535 ACCESSION NUMBER: 0000897069-08-000831 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080330 FILED AS OF DATE: 20080501 DATE AS OF CHANGE: 20080501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARLEY DAVIDSON INC CENTRAL INDEX KEY: 0000793952 STANDARD INDUSTRIAL CLASSIFICATION: MOTORCYCLES, BICYCLES & PARTS [3751] IRS NUMBER: 391382325 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09183 FILM NUMBER: 08795763 BUSINESS ADDRESS: STREET 1: 3700 W JUNEAU AVE CITY: MILWAUKEE STATE: WI ZIP: 53208 BUSINESS PHONE: 4143424680 10-Q 1 cmw3519.htm QUARTERLY REPORT

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(X)	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 30, 2008

( )	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______________________ to ______________________

Commission File Number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)

Wisconsin	39-1382325
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
3700 West Juneau Avenue, Milwaukee, Wisconsin	53208
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code) (414) 342-4680

None
(Former name, former address and former
fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer (X)	Accelerated filer ( )
Non-accelerated filer ( )	Smaller reporting company ( )

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

Common Stock Outstanding as of April 25, 2008: 236,555,729 shares

HARLEY-DAVIDSON, INC.

Form 10-Q Index
For the Quarter Ended March 30, 2008

		Page
Part I	Financial Information
Item 1.	Consolidated Financial Statements
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
Part II	Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signature		33

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended
	March 30, 2008		April 1, 2007
Net revenue	$	1,306,313	$	1,178,875
Cost of goods sold		830,176		755,829

Gross profit		476,137		423,046
Financial services income		93,289		109,163
Financial services expense		58,382		50,226

Operating income from financial services		34,907		58,937
Selling, administrative and engineering expense		219,991		192,742

Income from operations		291,053		289,241
Investment income, net		2,042		8,915

Income before provision for income taxes		293,095		298,156
Provision for income taxes		105,514		105,846

Net income	$	187,581	$	192,310

Earnings per common share:
Basic	$	0.79	$	0.75
Diluted	$	0.79	$	0.74
Cash dividends per common share	$	0.30	$	0.21

The accompanying notes are an integral part of the consolidated financial statements.

Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

	(Unaudited) March 30, 2008		December 31, 2007		(Unaudited) April 1, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	332,639	$	402,854	$	310,010
Marketable securities		524		2,475		618,502
Accounts receivable, net		330,147		181,217		147,732
Finance receivables held for sale		729,814		781,280		297,885
Finance receivables held for investment, net		1,565,022		1,575,283		1,550,001
Inventories		441,205		349,697		369,418
Prepaid expenses and other current assets		187,436		174,508		122,627

Total current assets		3,586,787		3,467,314		3,416,175
Finance receivables held for investment, net		937,495		845,044		767,529
Property, plant and equipment, net		1,056,076		1,060,590		1,013,104
Prepaid pension costs		82,500		89,881		51,532
Goodwill		63,204		61,401		59,035
Other long-term assets		138,337		132,376		139,123

	$	5,864,399	$	5,656,606	$	5,446,498

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	345,807	$	300,188	$	373,368
Accrued liabilities		579,207		484,936		481,096
Current portion of finance debt		1,111,036		1,119,955		463,530

Total current liabilities		2,036,050		1,905,079		1,317,994
Finance debt		980,000		980,000		890,000
Pension liability		59,852		51,551		52,122
Postretirement healthcare benefits		199,978		192,531		203,514
Other long-term liabilities		157,094		151,954		147,381
Commitments and contingencies (Note 10)
Total shareholders’ equity		2,431,425		2,375,491		2,835,487

	$	5,864,399	$	5,656,606	$	5,446,498

The accompanying notes are an integral part of the consolidated financial statements.

Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	Three Months Ended
	March 30, 2008			April 1, 2007
Net cash provided by operating activities (Note 3)	$	146,778		$	519,624
Cash flows from investing activities:
Capital expenditures		(43,239	)		(40,775	)
Origination of finance receivables held for investment		(128,174	)		(103,889	)
Collections on finance receivables held for investment		103,439			90,949
Collection of retained securitization interests		10,796			14,493
Purchase of marketable securities		--			(117,075	)
Sales and redemptions of marketable securities		2,019			157,697
Other, net		1,511			4,545

Net cash (used by) provided by investing activities		(53,648	)		5,945
Cash flows from financing activities:
Net decrease in finance-credit facilities
and commercial paper		(9,392	)		(353,540	)
Dividends		(71,023	)		(54,103	)
Purchase of common stock for treasury		(100,096	)		(61,251	)
Excess tax benefits from share-based payments		312			1,157
Issuance of common stock under employee
stock option plans		584			12,953

Net cash used by financing activities		(179,615	)		(454,784	)
Effect of exchange rate changes on cash
and cash equivalents		16,270			828
Net (decrease) increase in cash and cash equivalents		(70,215	)		71,613
Cash and cash equivalents:
At beginning of period		402,854			238,397

At end of period	$	332,639		$	310,010

The accompanying notes are an integral part of the consolidated financial statements.

HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation and Use of Estimates

The condensed interim consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by Harley-Davidson, Inc. (the “Company”) without audit. Certain information and footnote disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission and U.S. generally accepted accounting principles for interim financial information. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of Company management, necessary to present fairly the condensed consolidated balance sheets as of March 30, 2008 and April 1, 2007, the condensed consolidated statements of income for the three-month periods then ended and the condensed consolidated statements of cash flows for the three-month periods then ended. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation.

2. New Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS No. 158 requires employers that sponsor defined benefit pension and postretirement benefit plans to recognize previously unrecognized actuarial losses and prior service costs in the statement of financial position and to recognize future changes in these amounts in the year in which changes occur through comprehensive income. Additionally, employers are required to measure the funded status of a plan as of the date of their year-end statements of financial position. The Company adopted SFAS No. 158, as it relates to recognizing the funded status of its defined benefit pension and postretirement benefit plans, and the related disclosure requirements, as of December 31, 2006. The requirement to measure the funded status as of the date of the year-end statement of financial position was adopted on January 1, 2008. Upon adoption, the Company recorded a reduction to retained earnings of $18.1 million ($11.2 million, net of tax) and an increase to accumulated other comprehensive income of $4.2 million ($2.6 million, net of tax).

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS No. 157 applies to fair value measurements required by existing accounting pronouncements and does not require any new fair value measurements. The Company adopted SFAS No. 157 on January 1, 2008; see Note 4 for disclosures required under SFAS No. 157. The Company has not adopted SFAS No. 157 for non-financial assets and liabilities as permitted by FASB Staff Position No. FAS 157-2, which provided a deferral of such provisions until 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.” SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities. Entities will be required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedge items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedge items affect an entity’s financial position, financial performance and cash flows. The Company is required to adopt SFAS No. 161 beginning in fiscal year 2009. The Company is currently evaluating the impact the new disclosure requirements will have on its consolidated financial statements and notes thereto.

3. Additional Balance Sheet and Cash Flow Information

Inventories are valued at the lower of cost or market. Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist of the following (in thousands):

	March 30, 2008		December 31, 2007		April 1, 2007
Components at the lower of FIFO cost or market
Raw materials and work in process	$	148,743	$	149,954	$	132,784
Motorcycle finished goods		192,268		107,768		157,427
Parts and accessories and general merchandise		133,760		124,109		110,003

Inventory at lower of FIFO cost or market		474,771		381,831		400,214
Excess of FIFO over LIFO cost		33,566		32,134		30,796

	$	441,205	$	349,697	$	369,418

The reconciliation of net income to net cash provided by operating activities is as follows (in thousands):

	Three Months Ended
	March 30, 2008			April 1, 2007
Cash flows from operating activities:
Net income	$	187,581		$	192,310
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		49,722			51,464
Provision for employee long-term benefits		18,194			19,345
Stock compensation expense		5,404			4,828
Loss (gain) on current year securitizations		5,370			(13,039	)
Net change in wholesale finance receivables		(76,915	)		(7,370	)
Origination of retail finance receivables held for sale		(560,120	)		(603,125	)
Collections on retail finance receivables held for sale		49,913			19,548
Proceeds from securitization of retail finance receivables		467,722			796,859
Contributions to pension and postretirement plans		(4,562	)		(3,202	)
Foreign currency adjustments		(11,864	)		(1,778	)
Other, net		9,094			15,663
Changes in current assets and liabilities:
Accounts receivable, net		(50,596	)		(3,141	)
Finance receivables - accrued interest and other		3,914			(2,210	)
Inventories		(80,030	)		(79,814	)
Accounts payable and accrued liabilities		134,573			132,791
Other		(622	)		495

Total adjustments		(40,803	)		327,314

Net cash provided by operating activities	$	146,778		$	519,624

4. Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 30, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

	Balance as of March 30, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash Equivalents and Marketable Securities	$	126,586	$	126,062	$	524		--
Derivatives		12,485		--		12,485		--
Investment in Retained Securitization Interests		496,511		--		--	$	496,511

	$	635,582	$	126,062	$	13,009	$	496,511

Liabilities:
Derivatives	$	40,144		--	$	40,144		--

The following table presents additional information about the Company’s Investment in Retained Securitization Interests which is measured at fair value on a recurring basis using Significant Unobservable Inputs (Level 3). The Investment in Retained Securitization Interests are valued using pricing models and discounted cash flow methodologies incorporating assumptions that, in management’s judgment, reflect the assumptions a marketplace participant would use at March 30, 2008. Refer to “Critical Accounting Estimates” under Item 7 and Note 3 of Notes to the Consolidated Financial Statements under Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for further discussion regarding the assumptions used to value the Investment in Retained Securitization Interests.

(in thousands)	Investment in Retained Securitization Interests
Balance, beginning of period	$	407,742
Total gains or losses (realized/unrealized):
Included in Financial Services income		15,158
Included in other comprehensive income		12,394
Sales, repurchases and settlements, net		61,217

Balance, end of period	$	496,511

5. Product Warranty and Safety Recall Campaigns

The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company provides a standard three-year limited warranty on all new motorcycles sold. The warranty coverage for the retail customer includes parts and labor and begins when the motorcycle is sold to a retail customer. The Company maintains reserves for future warranty claims using an estimated cost per unit sold, which is based primarily on historical Company claim information. Additionally, the Company has from time to time initiated certain voluntary safety recall campaigns. The Company reserves for all estimated costs associated with safety recalls in the period that the safety recalls are announced. Changes in the Company’s warranty and safety recall liability were as follows (in thousands):

	Three Months Ended
	March 30, 2008			April 1, 2007
Balance, beginning of period	$	70,523		$	66,385
Warranties issued during the period		11,999			9,808
Settlements made during the period		(14,001	)		(14,304	)
Recalls and changes to pre-existing
warranty liabilities		8,687			4,274

Balance, end of period	$	77,208		$	66,163

The liability for safety recall campaigns was $3.5 million and $4.5 million as of March 30, 2008 and April 1, 2007, respectively.

6. Business Segments

The Company operates in two business segments: Motorcycles & Related Products (Motorcycles) and Financial Services (Financial Services). The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately based on the fundamental differences in their operations. Selected segment information is set forth below (in thousands):

	Three Months Ended
	March 30, 2008		April 1, 2007
Motorcycles net revenue	$	1,306,313	$	1,178,875
Gross profit		476,137		423,046
Operating expenses		214,533		187,803

Operating income from Motorcycles		261,604		235,243
Financial Services income		93,289		109,163
Financial Services expense		58,382		50,226

Operating income from Financial Services		34,907		58,937
Corporate expenses		5,458		4,939

Income from operations	$	291,053	$	289,241

7. Earnings Per Share

The following table sets forth the computation for basic and diluted earnings per share (in thousands, except per share amounts):

	Three months ended
	March 30, 2008		April 1, 2007
Numerator:
Net income used in computing basic and
diluted earnings per share	$	187,581	$	192,310

Denominator:
Denominator for basic earnings per share-
weighted-average common shares		237,078		257,326
Effect of dilutive securities - employee
stock compensation plan		172		832

Denominator for diluted earnings per share-
adjusted weighted-average shares outstanding		237,250		258,158

Basic earnings per share	$	0.79	$	0.75
Diluted earnings per share	$	0.79	$	0.74

Outstanding options to purchase 4.7 million and 0.4 million shares of common stock for the three months ended March 30, 2008 and April 1, 2007, respectively, were not included in the Company’s computation of dilutive securities because the exercise price was greater than the market price and therefore the effect would have been anti-dilutive.

8. Comprehensive Income

The following table sets forth the reconciliation of net income to comprehensive income (in thousands):

	Three months ended
	March 30, 2008		April 1, 2007
Net income	$	187,581	$	192,310
Foreign currency translation adjustment		21,470		3,411
Changes in net unrealized gains and (losses), net of tax:
Retained securitization interest		7,920		(9,172	)
Derivative financial instruments		543		(570	)
Marketable securities		68		613
Unrecognized pension and postretirement benefit plan liabilities		2,623		3,742

	$	220,205	$	190,334

9. Employee Benefit Plans

The Company has several defined benefit pension plans and postretirement healthcare benefit plans (Retirement Plans), which cover substantially all employees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993. Components of net periodic benefit costs were as follows (in thousands):

	Three months ended
	March 30, 2008			April 1, 2007
Pension and SERPA Benefits
Service cost	$	12,841		$	12,912
Interest cost		17,148			14,941
Expected return on plan assets		(22,015	)		(20,209	)
Amortization of unrecognized:
Prior service cost		1,540			1,673
Net loss		1,604			2,919

Net periodic benefit cost	$	11,118		$	12,236

Postretirement Healthcare Benefits
Service cost	$	3,270		$	3,191
Interest cost		5,410			4,895
Expected return on plan assets		(2,808	)		(2,496	)
Amortization of unrecognized:
Prior service credit		(281	)		(281	)
Net loss		1,375			1,734

Net periodic benefit cost	$	6,966		$	7,043

The Company does not expect to make additional contributions to further fund its pension and postretirement healthcare plans during the remainder of 2008 beyond the amount of current benefit payments for SERPA and postretirement healthcare plans. During the remainder of 2008, the Company expects to continue its practice of funding the SERPA and postretirement healthcare plans in amounts equal to benefits paid during the year.

10. Commitments and Contingencies

The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining required reserves related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The required reserves are monitored on an ongoing basis and are updated based on new developments or new information in each matter.

Shareholder Lawsuits:

A number of shareholder class action lawsuits were filed between May 18, 2005 and July 1, 2005 in the United States District Court for the Eastern District of Wisconsin. On February 14, 2006, the court consolidated all of the actions into a single case, captioned In re Harley-Davidson, Inc. Securities Litigation, and appointed Lead Plaintiffs and Co-Lead Plaintiffs’ Counsel. Pursuant to the schedule set by the court, on October 2, 2006, the Lead Plaintiffs filed a Consolidated Class Action Complaint, which names the Company and Jeffrey L. Bleustein, James L. Ziemer, and James M. Brostowitz, who are current or former Company officers, as defendants. The Consolidated Complaint alleges securities law violations and seeks unspecified damages relating generally to the Company’s April 13, 2005 announcement that it was reducing short-term production growth and planned increases of motorcycle shipments from 317,000 units in 2004 to a new 2005 target of 329,000 units (compared to its original target of 339,000 units). On December 18, 2006, the defendants filed a motion to dismiss the Consolidated Complaint in its entirety. Briefing of the motion to dismiss was completed in April 2007.

Three shareholder derivative lawsuits were filed in the United States District Court for the Eastern District of Wisconsin on June 3, 2005, October 25, 2005 (this lawsuit was later voluntarily dismissed) and December 2, 2005 and two shareholder derivative lawsuits were filed in Milwaukee County Circuit Court on July 22, 2005 and November 16, 2005 against some or all of the following current or former directors and officers of the Company: Jeffrey L. Bleustein, James L. Ziemer, James M. Brostowitz, Barry K. Allen, Richard I. Beattie, George H. Conrades, Judson C. Green, Donald A. James, Sara L. Levinson, George L. Miles, Jr., James A. Norling, James A. McCaslin, Donna F. Zarcone, Jon R. Flickinger, Gail A. Lione, Ronald M. Hutchinson, W. Kenneth Sutton, Jr. and John A. Hevey. The lawsuits also name the Company as a nominal defendant. In general, the shareholder derivative complaints include factual allegations similar to those in the class action complaints and allegations that officers and directors breached their fiduciary duties to the Company. On February 14, 2006, the state court consolidated the two state court derivative actions and appointed Lead Plaintiffs and Lead Plaintiffs’ counsel, and on April 24, 2006, the state court ordered that the consolidated state court derivative action be stayed until after motions to dismiss the federal securities class action are decided. On February 15, 2006, the federal court consolidated the federal derivative lawsuits with the securities and ERISA (see below) actions for administrative purposes. On February 1, 2007, the federal court appointed Lead Plaintiff and Co-Lead Plaintiffs’ Counsel in the consolidated federal derivative action.

On August 25, 2005, a class action lawsuit alleging violations of the Employee Retirement Income Security Act (ERISA) was filed in the United States District Court for the Eastern District of Wisconsin. As noted above, on February 15, 2006, the court ordered the ERISA action consolidated with the federal derivative and securities actions for administrative purposes. Pursuant to the schedule set by the court, on October 2, 2006, the ERISA plaintiff filed an Amended Class Action Complaint, which named the Company, the Harley-Davidson Motor Company Retirement Plans Committee, the Company’s Leadership and Strategy Council, Harold A. Scott, James L. Ziemer, James M. Brostowitz, Gail A. Lione, Joanne M. Bischmann, Karl M. Eberle, Jon R. Flickinger, Ronald M. Hutchinson, James A. McCaslin, W. Kenneth Sutton, Jr., and Donna F. Zarcone, who are current or former Company officers or employees, as defendants. In general, the ERISA complaint includes factual allegations similar to those in the shareholder class action lawsuits and alleges on behalf of participants in certain Harley-Davidson retirement savings plans that the plan fiduciaries breached their ERISA fiduciary duties. On December 18, 2006, the defendants filed a motion to dismiss the ERISA complaint in its entirety. Briefing of the motion to dismiss was completed in April 2007.

The Company believes the allegations against all of the defendants in the lawsuits against the Company are without merit and it intends to vigorously defend against them. Since all of these matters are in the preliminary stages, the Company is unable to predict the scope or outcome or quantify their eventual impact, if any, on the Company. At this time, the Company is also unable to estimate associated expenses or possible losses. The Company maintains insurance that may limit its financial exposure for defense costs and liability for an unfavorable outcome, should it not prevail, for claims covered by the insurance coverage.

Security Breach Lawsuit:

On January 22, 2007, a purported class action lawsuit was filed in the Supreme Court of the State of New York against Harley-Davidson, Inc. and the Harley Owners Group. The complaint alleges that the Company was negligent in failing to properly safeguard, protect and keep confidential the personal “Customer Identifiable Information” that was stored on a Company laptop computer that was lost on or about August 14, 2006. The complaint also alleges that Harley-Davidson breached fiduciary duties and made false and fraudulent representations and warranties to its customers that it would keep confidential and safeguard and protect the personal customer information in its possession. The complaint seeks unspecified damages. On February 23, 2007, this matter was removed to the United States District Court Southern District of New York. On April 5, 2007, the Company filed a motion to dismiss the complaint. On March 20, 2008, the United States District Court Southern District of New York granted the Company’s motion to dismiss the lawsuit.

Environmental Matters:

The Company is involved with government agencies and groups of potentially responsible parties in various environmental matters, including a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. Although the Company is not certain as to the full extent of the environmental contamination at the York facility, it has been working with the Pennsylvania Department of Environmental Protection (PADEP) since 1986 in undertaking environmental investigation and remediation activities, including an ongoing site-wide remedial investigation/feasibility study (RI/FS). In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy. The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of future costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.

In February 2002, the Company was advised by the U.S. Environmental Protection Agency (EPA) that it considers some of the Company’s remediation activities at the York facility to be subject to the EPA’s corrective action program under the Resource Conservation and Recovery Act (RCRA) and offered the Company the option of addressing corrective action under a RCRA facility lead agreement. In July 2005, the York facility was designated as the first site in Pennsylvania to be addressed under the “One Cleanup Program.” The program provides a more streamlined and efficient oversight of voluntary remediation by both PADEP and EPA and will be carried out consistent with the Agreement with the Navy. As a result, the RCRA facility lead agreement has been superseded.

Although the RI/FS is still under way and substantial uncertainty exists concerning the nature and scope of the additional environmental investigation and remediation that will ultimately be required at the York facility, the Company estimates that its share of the future Response Costs at the York facility will be approximately $7.2 million. The Company has established reserves for this amount, which are included in Accrued Liabilities in the Condensed Consolidated Balance Sheets.

The estimate of the Company’s future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date and the estimated costs to complete the necessary investigation and remediation activities. Response Costs related to the remediation of soil are expected to be incurred over a period of several years ending in 2012. Response Costs related to ground water remediation may continue for some time beyond 2012. However, these Response Costs are expected to be much lower than those related to the remediation of soil.

Under the terms of the sale of the Commercial Vehicles Division in 1996, the Company has agreed to indemnify Utilimaster Corporation, until December 2008, for certain claims related to environmental contamination present at the date of sale, up to $20.0 million. Based on the environmental studies performed, the Company does not expect to incur any material expenditures under this indemnification.

Product Liability Matters:

Additionally, the Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability will not have a material adverse effect on the Company’s consolidated financial statements.

11. Subsequent Event

In response to U.S. retail trends and uncertainty regarding the future of the economy, the Company announced plans on April 17, 2008 to ship fewer motorcycles to its worldwide dealer network in 2008 than it shipped in 2007. The Company intends to achieve the shipment reduction through temporary plant shutdowns and adjusted daily production rates. Those changes will in turn result in a reduction of its workforce by approximately 370 unionized production employees. The Company also plans to reduce its non-production workforce by approximately 360 workers. The planned workforce reductions represent approximately 6.5% of the Company’s North American unionized production employees and approximately 10% of the Company’s North American non-production workers. The Company expects to complete the workforce reductions in 2008.

The Company anticipates that it will record pre-tax charges of approximately $20 million to $25 million during the second quarter of 2008 in connection with the workforce reductions, all of which involve severance benefits (one-time termination benefits). The Company believes substantially all of such charges will result in cash expenditures, although the timing of the expenditures will vary.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (Buell) and Harley-Davidson Financial Services (HDFS). HDMC produces heavyweight motorcycles and offers a line of motorcycle parts, accessories, general merchandise and related services. HDMC manufactures five families of motorcycles: Touring, Dyna^®, Softail^®, Sportster^® and VRSC™. Buell produces premium sport performance motorcycles and offers a line of motorcycle parts, accessories and apparel. HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson and Buell dealers and customers.

The “% Change” figures included in this section have been calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented.

Overview and Outlook⁽¹⁾

The Company’s 2008 first quarter net revenue of $1.31 billion was up 10.8% compared to the first quarter of 2007 driven by a 6.1% increase in shipments of Harley-Davidson^® motorcycles over the same quarter last year, favorability resulting from changes in foreign currency exchange rates and product mix. However, lower operating income from Financial Services combined with a decrease in investment income resulted in a 2.5% decrease in net income for the first quarter of 2008 compared to the first quarter of 2007. Despite lower net income, diluted earnings per share in the first quarter of 2008 were up 6.8% over the same quarter last year driven by the positive impact of fewer weighted-average shares outstanding. Diluted weighted-average shares outstanding were 20.9 million lower in the first quarter of 2008 compared to the first quarter of 2007 primarily due to the Company’s repurchases of common stock occurring over the last twelve months.

Worldwide retail sales of Harley-Davidson motorcycles at the Company’s independent dealers declined 5.6% during the first quarter of 2008 when compared to the same period last year. In the U.S., retail sales of Harley-Davidson motorcycles decreased 12.8% during the first quarter of 2008 while the heavyweight motorcycle industry in the U.S. decreased 14.0% during the same period. Lower retail sales of Harley-Davidson motorcycles in the U.S. were partially offset by higher retail sales in international markets where sales of Harley-Davidson motorcycles increased 16.8% during the first quarter of 2008 compared to the first quarter of 2007.

The Company monitors the motorcycle retail sales environment closely and regularly assesses its wholesale shipment plans. In addition, the Company remains committed to shipping fewer Harley-Davidson motorcycles to its worldwide dealer network than it expects they will sell in 2008. Therefore, in view of U.S. retail trends and uncertainty about the future of the economy, the Company now plans to ship 23,000 to 27,000 fewer Harley-Davidson motorcycles in 2008 than were shipped in 2007, resulting in total planned shipments for 2008 of 303,500 to 307,500 units. The Company expects to ship between 76,000 and 80,000 Harley-Davidson motorcycles in the second quarter of 2008.

This shipment reduction of Harley-Davidson motorcycles will be achieved through temporary plant shutdowns and adjustments to daily production rates. This will result in a decrease of about 370 unionized employees. The Company and its union leaders will work together to implement this reduction. The Company will also be reducing its non-production workforce by about 360 jobs. Based on current assumptions, the Company anticipates that it will record pre-tax charges in the range of $20.0 million to $25.0 million during the second quarter of 2008 in connection with this workforce reduction. The Company believes these actions will better position it for a business environment that it expects will continue to be challenging.

⁽¹⁾Note Regarding Forward-Looking Statements

The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” or “estimates” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption “Cautionary Statements” included in this report, and in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date of the filing of this report (May 1, 2008), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

In light of these actions, the Company now expects 2008 diluted earnings per share to decrease between 15% and 20% from 2007, resulting in expected annual diluted earnings per share of $3.00 to $3.18 for 2008. This supersedes all previous guidance on earnings per share and other measures.

The Company believes it is fortunate to be dealing with the current economic environment from a position of financial strength and with the benefit of an exceptionally powerful brand. The Company is optimistic about its long-term business prospects and plans to continue to invest in marketing, product development and its international business to drive future growth. The Company expects it will continue to utilize free cash flow to return value to shareholders through share repurchases and dividends.

Results of Operations for the Three Months Ended March 30, 2008
Compared to the Three Months Ended April 1, 2007

Overall

For the three months ended March 30, 2008, net revenue totaled $1.31 billion, a $127.4 million or 10.8% increase from the same period last year. Net income was $187.6 million, a decrease of $4.7 million, or 2.5%. Diluted earnings per share were $0.79, an increase of $0.05, or 6.8%. Diluted earnings per share during the first quarter of 2008 were positively impacted by a decrease in the weighted-average shares outstanding, which were 237.3 million in the first quarter of 2008 compared to 258.2 million in the first quarter of 2007. The decrease in weighted-average shares outstanding was driven by the Company’s repurchases of common stock over the last year. The Company’s first quarter 2008 share repurchases are discussed in further detail under “Liquidity and Capital Resources.”

Motorcycle Unit Shipments & Net Revenue

The following table includes wholesale motorcycle unit shipments and net revenue for the Motorcycles & Related Products segment (dollars in millions):

	Three months ended
	March 30, 2008		April 1, 2007		(Decrease) Increase			% Change
Motorcycle Unit Shipments
United States		47,826		48,740		(914	)		(1.9	%)
International		24,042		19,021		5,021			26.4

Harley-Davidson motorcycle units		71,868		67,761		4,107			6.1

Touring motorcycle units		26,435		21,802		4,633			21.3
Custom motorcycle units*		29,072		30,768		(1,696	)		(5.5	)
Sportster motorcycle units		16,361		15,191		1,170			7.7

Harley-Davidson motorcycle units		71,868		67,761		4,107			6.1

Buell motorcycle units		2,392		2,558		(166	)		(6.5	%)

Net Revenue
Harley-Davidson motorcycles	$	1,017.2	$	891.5	$	125.7			14.1	%
Buell motorcycles		22.1		21.7		0.4			1.9

Total motorcycles		1,039.3		913.2		126.1			13.8
Parts & Accessories		181.9		188.2		(6.3	)		(3.3	)
General Merchandise		84.0		76.1		7.9			10.4
Other		1.1		1.4		(0.3	)		N/M

Net revenue	$	1,306.3	$	1,178.9	$	127.4			10.8	%

* Custom motorcycle units, as used in this table, include Dyna, Softail, VRSC and CVO models.

During the first quarter of 2008, the Company shipped 71,868 Harley-Davidson motorcycles, an increase of 4,107 motorcycles, or 6.1%, from the same quarter last year. Shipments during the first quarter of 2007 were directly impacted by a strike at the Company’s assembly plant in York, Pennsylvania that resulted in approximately four weeks of lost production. International shipments grew 26.4% during the first quarter of 2008, which is consistent with the Company’s expectation of continued international growth.(1) However, the international shipment increase was partially offset by a 1.9% decline in domestic shipments.

Motorcycles segment net revenue increased $127.4 million, or 10.8%. Net revenue was higher as a result of favorability resulting from changes in foreign currency exchange rates of approximately $46 million. Higher sales volumes for Harley-Davidson motorcycles and General Merchandise combined with lower sales volumes for Parts and Accessories had a net positive impact on revenue of approximately $44 million. Wholesale price increases on Harley-Davidson motorcycles contributed approximately $7 million to revenue. Product mix changes, occurring within and between the motorcycle families, also increased revenue by approximately $31 million.

Product mix is ultimately driven by retail demand, but can vary due to a variety of factors. For example, the first quarter of 2008 year over year mix changes were affected by the strike during the first quarter of 2007, which led to a lower percentage of Touring motorcycle shipments in the first quarter of 2007. Touring models comprised 36.8% and 32.2% of total shipments for the three months ended March 30, 2008 and April 1, 2007, respectively. Custom model unit shipments decreased as a percentage of total shipments while Sportster model unit shipments increased as a percentage of total shipments for the first three months of 2008 compared to the first three months of 2007.

Harley-Davidson Motorcycle Retail Sales

The Company sells its motorcycles at wholesale to an independent network of distributors and dealers who in turn sell the Company’s products at retail. Worldwide retail sales of Harley-Davidson motorcycles decreased 5.6% during the first three months of 2008 relative to the same period last year. Retail sales of Harley-Davidson motorcycles decreased 12.8% in the United States while growing 16.8% internationally. On an industry-wide basis, the heavyweight (651+cc) portion of the market was down 14.0% in the United States (through March) while growing 20.1% in Europe (through February) when compared to the same periods in 2007. The following table includes retail unit sales of Harley-Davidson motorcycles:

Harley-Davidson Motorcycle Retail Sales^(a)
Heavyweight (651+cc)

	Three months ended
	March 30, 2008		April 1, 2007		(Decrease) Increase			% Change
North America Region
United States		46,572		53,426		(6,854	)		(12.8	%)
Canada		2,683		2,047		636			31.1

Total North America Region		49,255		55,473		(6,218	)		(11.2	)
Europe Region (Includes Middle East and Africa)
Europe^(b)		9,075		8,686		389			4.5
Other		1,074		729		345			47.3

Total Europe Region		10,149		9,415		734			7.8
Asia Pacific Region
Japan		2,738		2,292		446			19.5
Other		2,562		2,142		420			19.6

Total Asia Pacific Region		5,300		4,434		866			19.5
Latin America Region		1,857		1,211		646			53.3

Total Worldwide Retail Sales		66,561		70,533		(3,972	)		(5.6	%)

(a)

Data source for retail sales figures shown above is sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning retail sales and this information is subject to revision. Only Harley-Davidson motorcycles are included in the Harley-Davidson Motorcycle Retail Sales data.

(b)	Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

The following table includes industry retail motorcycle registration data through the month indicated:

Motorcycle Industry Retail Registrations
Heavyweight (651+cc)

	2008		2007		(Decrease) Increase			% Change
United States (March)^(a)		93,155		108,337		(15,182	)		(14.0	%)
Europe (February)^(b)		47,764		39,785		7,979			20.1	%

(a)	U.S. industry data includes 651+cc models derived from submission of motorcycle retail sales by each major manufacturer to an independent third party.

(b)

Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Industry retail motorcycle registration data includes 651+cc models derived from information provided by Giral S.A., an independent agency.

Cost of Goods Sold

Cost of goods sold was $830.2 million for the Motorcycles segment in the first quarter of 2008, an increase of $74.3 million or 9.8% versus the corresponding period last year. The increased cost was led by higher shipment volumes which had an impact of approximately $31 million. Cost of goods sold also increased by approximately $20 million resulting from changes in foreign currency exchange rates and approximately $10 million related to changes in product mix. Cost of goods sold was also impacted by higher manufacturing costs of approximately $13 million. Higher manufacturing costs were largely the result of increased product content, such as new features and options in the Company’s motorcycles. Raw material surcharges were flat when compared to the prior year first quarter.

Gross Profit

Gross profit was $476.1 million for the Motorcycles segment for the first quarter 2008, an increase of $53.1 million or 12.5% versus the same period last year. Gross margin for the first quarter of 2008 was 36.4% compared to 35.9% for the first quarter of 2007. The factors impacting the change in gross margin are detailed under “Motorcycle Unit Shipments and Net Revenue” and “Cost of Goods Sold” above.

Financial Services

The following table includes the condensed statements of operations for the Financial Services segment (in millions):

	Three months ended
	March 30, 2008		April 1, 2007		Increase (Decrease)			% Change
Interest income	$	55.3	$	50.7	$	4.6			9.0	%
Income from securitizations		10.2		29.2		(19.0	)		(65.1	)
Other income		27.8		29.3		(1.5	)		(4.9	)

Financial services income		93.3		109.2		(15.9	)		(14.5	)
Interest expense		24.6		21.1		3.5			16.7
Operating expenses		33.8		29.2		4.6			15.9

Financial services expense		58.4		50.3		8.1			16.2

Operating income from financial services	$	34.9	$	58.9		($24.0	)		(40.8	%)

During the first quarter of 2008, interest income benefited from higher average retail outstanding receivables, partially offset by lower retail and wholesale lending rates. The decrease in other income was primarily due to a decrease in insurance commission income partially offset by an increase in credit card licensing income and securitization servicing income. Interest expense was higher in the first quarter of 2008 due to increased borrowings to support growth in outstanding receivables, partially offset by lower borrowing costs as compared to 2007.

During the first quarter of 2008, HDFS sold $540.0 million in retail motorcycle loans through a securitization transaction and recognized a loss of $5.4 million. This compares to an $800.0 million securitization transaction with a gain of $13.0 million during the first quarter of 2007. Due to increased volatility in the debt capital markets the Company’s first quarter 2008 securitization transaction was smaller than in the same quarter last year. As part of the first quarter 2008 securitization transaction, HDFS retained $54.0 million of the subordinated securities issued by the securitization trust. The subordinated securities that were retained have been included in the investment in retained securitization interests (a component of finance receivables held for investment) in the Condensed Consolidated Balance Sheets. The cash proceeds from this securitization transaction are net of the cost of the retained subordinated securities.

Income from securitizations in the first quarter of 2008 decreased as compared to the first quarter of 2007 due primarily to the loss on the first quarter 2008 securitization transaction. The 2008 loss as a percentage of loans sold was 0.99% as compared to a gain as a percentage of loans sold of 1.63% for 2007. The loss in 2008 was driven by increased securitization funding costs due to capital market volatility and higher projected credit losses.

Annualized losses on HDFS’ managed retail motorcycle loans were 2.71% during the first quarter of 2008 compared to 2.28% during the first quarter of 2007. The 30-day delinquency rate for managed retail motorcycle loans at March 30, 2008 increased to 4.78% from 4.08% at April 1, 2007. Managed retail loans include loans held by HDFS as well as those sold through securitization transactions. The increase in losses was primarily due to a higher incidence of loss resulting from an increase in delinquent accounts. The Company expects that HDFS will experience higher delinquencies and credit losses as a percentage of managed retail motorcycle loans in 2008 as compared to 2007.⁽¹⁾

Changes in the allowance for finance credit losses on finance receivables held for investment were as follows (in millions):

	Three months ended
	March 30, 2008			April 1, 2007
Balance, beginning of period	$	30.3		$	27.3
Provision for finance credit losses		6.0			2.4
Charge-offs, net of recoveries		(6.2	)		(2.3	)

Balance, end of period	$	30.1		$	27.4

HDFS’ periodic evaluation of the adequacy of the allowance for credit losses is generally based on HDFS’ past loan loss experience, known and inherent risks in the portfolio, and current economic conditions. HDFS believes the allowance is adequate to cover estimated losses of principal in the existing portfolio.

Operating Expenses

The following table includes operating expenses for the Motorcycles segment and Corporate (in millions):

	Three months ended
	March 30, 2008		April 1, 2007		Increase (Decrease)			% Change
Motorcycles and Related Products
Selling & Administrative	$	175.0	$	146.7	$	28.3			19.3	%
Engineering		39.5		41.1		(1.6	)		(4.0	)
Corporate		5.5		4.9		0.6			10.5

Total operating expenses	$	220.0	$	192.7	$	27.3			14.1	%

Total operating expenses, which include selling, administrative and engineering expenses, were 16.8% and 16.3% of net revenue for the first quarters of 2008 and 2007, respectively. Selling and administrative expenses were higher due primarily to increased warranty expense and higher international operating costs associated with the Company’s international growth and unfavorable changes in foreign currency exchange rates.

Provision for Income Taxes

The Company’s effective income tax rate for the first quarter of 2008 was 36.0% compared to 35.5% in the same quarter last year. The increase was due to the expiration of the federal research and development tax credit as of December 31, 2007. Assuming the retroactive reinstatement of this tax credit, the Company expects its full year effective tax rate for 2008 will be 35.5%.⁽¹⁾

Other Matters

Accounting Changes

Commitments and Contingencies

Shareholder Lawsuits:

Security Breach Lawsuit:

Environmental Matters:

Product Liability Matters:

Liquidity and Capital Resources as of March 30, 2008

The Company expects that its business model will continue to generate cash that will allow it to invest in the business, fund future growth opportunities and return value to shareholders.⁽¹⁾ The Company also has a securitization program, a commercial paper program, credit facilities and debt instruments in place to support the ongoing cash requirements of its Financial Services business. The Company regularly assesses its long-term capital market strategy, which includes diversifying funding sources in the capital markets to provide the Company with the appropriate level of flexibility to fund the business and to adjust to market conditions as necessary.

Cash Flow Activity

The following table summarizes the operating, investing and financing cash flow activity for the periods indicated (in thousands):

	Three months ended
	March 30, 2008			April 1, 2007
Net cash provided by operating activities	$	146,778		$	519,624
Net cash (used by) provided by investing activities		(53,648	)		5,945
Net cash used by financing activities		(179,615	)		(454,784	)

Total		($ 86,485	)	$	70,785

Operating Activities

The decrease in operating cash flow from the first quarter of 2007 to the first quarter of 2008 was due primarily to a smaller first quarter securitization transaction in 2008. Proceeds from the sale of retail finance receivables resulted in cash inflows of $467.7 million and $796.9 million during the first three months of 2008 and 2007, respectively.

Investing Activities

The Company’s investing activities consist primarily of capital expenditures, net changes in finance receivables held for investment and short-term investment activity.

Capital expenditures were $43.2 million and $40.8 million during the first quarter of 2008 and 2007, respectively. In response to the current business environment, the Company has adjusted its estimate for planned capital spending for 2008 to be in the range of $235.0 million to $250.0 million, down from the previous estimate of $240.0 million to $260.0 million.⁽¹⁾ The Company anticipates it will have the ability to fund all capital expenditures in 2008 with internally generated funds.⁽¹⁾

Sales and redemptions of marketable securities (net of purchases) in the first three months of 2008 resulted in cash inflow of $2.0 million compared to $40.6 million in the first three months of 2007. The year over year decline in cash inflow from marketable securities is a result of the Company reducing its investment in marketable securities over the previous twelve months, generally for the purpose of funding share repurchases.

Financing Activities

The Company’s financing activities consist primarily of share repurchases, stock issuances, dividend payments and finance debt activity. During the first quarter of 2008, the Company repurchased 2.6 million shares of its common stock at a total cost of $100.1 million. The Company repurchased these shares under a general authorization provided by the Company’s Board of Directors in October 2006 to buy back 20.0 million shares. As of March 30, 2008, a total of 0.5 million shares remained under this authorization. Please see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” for additional details regarding the Company’s share repurchase activity and authorizations.

The Company paid dividends of $0.30 per share at a total cost of $71.0 million during the first quarter of 2008, compared to dividends of $0.21 per share at a total cost of $54.1 million during the same period last year.

In addition to operating cash flows and proceeds from asset-backed securitizations, HDFS currently is financed by the issuance of commercial paper, borrowings under revolving credit facilities, medium-term notes and borrowings from the Company. During the period ended March 30, 2008, finance debt increased by $737.5 million which was driven by higher finance receivables outstanding and lower proceeds from the first quarter 2008 securitization transaction when compared to the first quarter ended 2007. HDFS’ outstanding debt consisted of the following as of March 30, 2008 and April 1, 2007 (in millions):

	Three months ended
	March 30, 2008		April 1, 2007
Commercial paper	$	863.9	$	543.0
Credit facilities		216.0		191.1

		1,079.9		734.1
Medium-term notes		1,011.1		589.4
Senior subordinated notes		--		30.0

Total finance debt	$	2,091.0	$	1,353.5

Credit Facilities – In February 2008, HDFS entered into a $300.0 million credit facility in addition to its existing $1.40 billion credit facility (collectively, Global Credit Facilities). Under the Global Credit Facilities, subject to certain limitations, HDFS has the option to borrow in various currencies. Interest is based on London interbank offered rates (LIBOR), European interbank offered rates or other short-term indices, depending on the type of advance. The Global Credit Facilities are committed facilities. The $1.40 billion facility is due in September 2009. The $300.0 million facility is due on the earlier of December 15, 2008 or the date HDFS refinances its $1.40 billion credit facility. HDFS pays a fee for the availability of the Global Credit Facilities.

Commercial Paper – Subject to limitations, HDFS may issue up to $1.70 billion of short-term commercial paper with maturities up to 365 days. Outstanding commercial paper may not exceed the unused portion of the Global Credit Facilities. As a result, the combined total of commercial paper and borrowings under the Global Credit Facilities was limited to $1.70 billion as of March 30, 2008.

Medium-Term Notes – In December 2007, HDFS issued $400.0 million of 5.25% medium-term notes due in December 2012. HDFS also has $400.0 million of 3.63% medium-term notes outstanding which are due in December 2008 and $200.0 million of 5.00% medium-term notes due in December 2010 (all three issuances are collectively referred to as “Notes”). The Notes provide for semi-annual interest payments and principal due at maturity. As of March 30, 2008 and April 1, 2007, the Notes included a fair value adjustment increasing the balance by $11.6 million and reducing the balance by $10.6 million, respectively, due to interest rate swap agreements designated as fair value hedges. The effect of the interest rate swap agreements is to convert the interest rate on the Notes from a fixed to a floating rate, which is based on 3-month LIBOR.

Senior Subordinated Debt – At April 1, 2007, HDFS had $30.0 million of 6.79% senior subordinated notes outstanding which were due in December 2007. In December 2007, the notes matured and the principal and accrued interest was paid in full.

Intercompany Borrowing – HDFS has a revolving credit line with the Company whereby HDFS may borrow up to $210.0 million from the Company at a market interest rate. As of March 30, 2008 and April 1, 2007, HDFS had no outstanding borrowings owed to the Company under this agreement.

The Company has a support agreement with HDFS whereby, if required, the Company agrees to provide HDFS with financial support in order to maintain certain financial covenants. Support may be provided at the Company’s option as capital contributions or loans. Accordingly, certain debt covenants may restrict the Company’s ability to withdraw funds from HDFS outside the normal course of business. No amount has ever been provided to HDFS under the support agreement.

Operating and Financial Covenants – HDFS is subject to various operating and financial covenants related to the Global Credit Facilities and Notes. The more significant covenants are described below.

The covenants limit HDFS’ ability to:

•

incur certain additional indebtedness;

•

assume or incur certain liens;

•

participate in a merger, consolidation, liquidation or dissolution; and

•

purchase or hold margin stock.

Under the Global Credit Facilities financial covenants, the debt to equity ratio of HDFS and its consolidated subsidiaries cannot exceed 9.0 to 1.0 and HDFS must maintain a minimum consolidated tangible net worth of $300.0 million. No financial covenants are required under the Notes.

At March 30, 2008, HDFS remained in compliance with all of these covenants.

The Company expects that future activities of HDFS will be financed from funds internally generated by HDFS, the sale of loans through securitization programs, issuance of commercial paper and medium-term notes, borrowings under revolving credit facilities and advances or loans from the Company.⁽¹⁾ The Company will continue to evaluate various funding alternatives, and will adjust as necessary, based on market conditions.⁽¹⁾

Cautionary Statements

The Company’s ability to meet the targets and expectations noted in this Form 10-Q depends upon, among other factors, the Company’s ability to (i) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead; (ii) manage production capacity and production changes; (iii) manage supply chain issues; (iv) provide products, services and experiences that are successful in the marketplace; (v) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace; (vi) sell all of its motorcycles and related products and services to its independent dealers; (vii) continue to develop the capabilities of its distributor and dealer network; (viii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (ix) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (x) manage access to reliable sources of capital and adjust to fluctuations in the cost of capital; (xi) adjust to regional and worldwide demographic trends and economic and political conditions, including healthcare inflation, pension reform and tax changes; (xii) anticipate consumer confidence in the economy; (xiii) manage the credit quality, the loan servicing and the recovery rates of HDFS’ loan portfolio; (xiv) retain and attract talented employees; (xv) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation; and (xvi) implement and manage enterprise-wide information technology solutions and secure data contained in those systems. In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. These risks, potential delays and uncertainties regarding the costs could also adversely impact the Company’s capital expenditure estimates (see “Liquidity and Capital Resources” section).

In addition, see “Risk Factors” under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 which includes a discussion of additional factors and a more complete discussion of some of the cautionary statements noted above.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for a complete discussion of the Company’s market risk. There have been no material changes to the market risk information included in the Company’s Annual Report on Form 10-K for the year December 31, 2007.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Controls

There was no change in the Company’s internal control over financial reporting during the quarter ended March 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

Shareholder Lawsuits:

Security Breach Lawsuit:

Environmental Matters:

Product Liability Matters:

Item 1A. Risk Factors

Refer to Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion regarding risk factors relating to the Company. There have been no material changes to the risk factors included in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table contains detail related to the repurchase of common stock based on the date of trade during the quarter ended March 30, 2008:

2008 Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to
February 3		--		--		--		27,212,759
February 4 to
March 2		2,568,302	$	39		2,568,302		25,031,636
March 3 to
March 30		1,409		37		--		25,032,232

Total		2,569,711	$	39		2,568,302

The Company has an authorization (originally adopted in December 1997) by its Board of Directors to repurchase shares of its outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options or grants of nonvested stock occurring on or after January 1, 2004 plus (2) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split. The Company did not repurchase any shares under this authorization during the quarter ended March 30, 2008.

The shares repurchased during the first quarter of 2008 were completed under an authorization granted by the Company’s Board of Directors during October 2006, which separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date. As of March 30, 2008, a total of 0.5 million shares remained under this authorization.

In December 2007, the Company’s Board of Directors separately authorized the Company to buy back up to 20.0 million of its common stock with no dollar limit or expiration date. No shares had been repurchased under this authorization as of March 30, 2008.

The Harley-Davidson, Inc. 2004 Incentive Stock Plan permits participants to satisfy all or a portion of the federal, state and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award; (b) tender back shares received in connection with such award; or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. The Company acquired 1,409 shares under this plan during the quarter ended March 30, 2008.

Item 5. Other Information

On April 25, 2008, the Human Resources Committee of the Board of Directors of the Company approved an amended and restated form of the Harley-Davidson, Inc. Severance Benefits Agreement (the “Amended and Restated Severance Agreement”) for executive officers of the Company, including the Company’s named executive officers. The Amended and Restated Severance Agreement amends and restates an agreement that the Company has had in place for a number of years, which the Company has previously disclosed and summarized in its proxy statement. The changes to the form of agreement principally include various provisions intended to comply with the requirements of Internal Revenue Code Section 409A. The principal provisions of the existing agreement have not been changed. The Amended and Restated Severance Agreement provides for up to one year’s salary and up to one year of certain employee benefits if the Company terminates an executive’s employment other than for cause or in connection with the executive’s death or disability.

On April 25, 2008, the Human Resources Committee of the Board of Directors of the Company also approved an amended and restated form of Transition Agreement (the “Amended and Restated Transition Agreement”). The Amended and Restated Transition Agreement amends and restates an agreement that the Company has had in place with certain of its executive officers since 1996, which the Company has previously disclosed and summarized in its proxy statement. The changes to the form of agreement include various provisions intended to comply with the requirements of Internal Revenue Code Section 409A. Many of the principal provisions of the existing agreement have not been changed. The Amended and Restated Transition Agreement provides severance and other benefits for certain executive officers of the Company, including the Company’s named executive officers, upon a change of control of the Company, as defined in the Amended and Restated Transition Agreement. The Amended and Restated Transition Agreement provides that an executive will receive a lump sum cash payment and certain other benefits under the following circumstances: (i) the Company terminates the executive’s employment during the two-year period following the change in control other than for cause, as defined in the Termination Agreement; (ii) the executive, at any time during the two-year period following the change in control, voluntarily terminates employment with good reason, as defined in the Termination Agreement; (iii) during the 30-day period beginning on the first anniversary of the change in control, the executive voluntarily terminates employment; or (iv) the executive dies during continued employment after the change in control but on or before the date that is 30 days following the first anniversary of the change in control. The lump sum cash payment, the amount of which has not been changed, will be equal to the product of three times an amount based on the executive’s salary, bonus and perquisite payment. In addition, the Amended and Restated Transition Agreement provides that, upon a termination following a change in control, an executive is entitled to receive certain other benefits, including certain coverage in the company’s health and welfare benefit programs, and retirement benefits calculated assuming that the executive’s employment had continued for three additional years. To the extent that the executive would have an obligation to pay excise taxes under Section 280G of the Internal Revenue Code, the amount needed to gross up such payments has not changed.

An executive may not receive benefits under both the Amended and Restated Severance Agreement and the Amended and Restated Transition Agreement. The terms of the Amended and Restated Transition Agreement determine an executive's termination benefits in the event the executive’s employment terminates during the two years following a change of control of the Company.

Item 6. Exhibits

Refer to the Exhibit Index on page 34 of this report.

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HARLEY-DAVIDSON, INC.
Date: May 1, 2008	/s/ Thomas E. Bergmann
	Thomas E. Bergmann
	Executive Vice President and Chief Financial Officer
	(Principal financial and accounting officer)

HARLEY-DAVIDSON, INC.

Exhibit Index to Form 10-Q

Exhibit No.

Description

10.1	Form of Amended and Restated Severance Benefits Agreement as amended through April 25, 2008

10.2	Form of Amended and Restated Transition Agreement as amended through April 25, 2008

31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a)

31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a)

32.1	Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C.ss.1350

EX-10.1 2 cmw3519d.htm FORM OF SEVERANCE BENEFITS AGREEMENT

Exhibit 10.1

AMENDED AND RESTATED
SEVERANCE BENEFITS AGREEMENT

THIS AGREEMENT, entered into as of the ___ day of ____________, ___ by and between HARLEY-DAVIDSON, INC. OR SUBSIDIARY COMPANY, a ___________ corporation (“Employer”), and NAME OF EXECUTIVE (“Executive”).

WHEREAS, Employer desires to continue to attract and retain skilled and dedicated management employees;

WHEREAS, Executive is currently employed by Employer in an executive capacity and has unique skills and abilities that are of benefit to Employer; and

WHEREAS, Employer desires to provide Executive certain assurances regarding severance pay and other benefits in the event of a Covered Termination (as defined below); and

WHEREAS, to comply with Internal Revenue Code Section 409A and to make certain other clarifying changes, Executive and Employer desire to amend and restate the Severance Benefits Agreement currently in effect between Executive and Employer;

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereby agree as follows:

1. Not an Employment Agreement. This Agreement is not an employment agreement and shall not change the employment relationship between Employer and Executive. Except as expressly provided herein, this Agreement shall not amend or alter the terms of, or limit the benefits to Executive under, any existing or future employment, transition, change of control or other agreement between Executive and Employer; provided that any predecessor Severance Benefits Agreement between Executive and Employer is superseded. This Agreement shall not be amended by any such future agreement unless such future agreement specifically provides that the terms of this Agreement shall be amended. Anything in this Agreement to the contrary notwithstanding and subject to any existing or future employment or other agreement between Employer and Executive, (a) Executive may terminate Executive’s employment with Employer at any time and for any reason and (b) Employer may terminate Executive’s employment with Employer at any time and for any reason.

2. Definitions.

a. Affiliate. “Affiliate” shall mean, except as set forth in Section 11, any parent, subsidiary or other affiliate of Employer.

b. Base Salary Amount. “Base Salary Amount” shall mean (1) the amount of Executive’s average monthly base salary during either (i) if Executive has been employed by Employer for twelve (12) or more consecutive months immediately prior to the Termination Date, the twelve (12) consecutive months immediately prior to the Termination Date or (ii) if Executive has been employed by Employer for less than twelve (12) consecutive months immediately prior to the Termination Date, the consecutive months of Executive’s employment with Employer immediately prior to the Termination Date, multiplied by (2) either (i) if Executive has been employed by Employer for twenty four (24) or more consecutive months immediately prior to the Termination Date, twelve (12) or (ii) if Executive has been employed by Employer for less than twenty four (24) consecutive months immediately prior to the Termination Date, six (6).

c. Benefit Period. “Benefit Period” shall mean (1) if Executive has been employed by Employer for twenty four (24) or more consecutive months immediately prior to the Termination Date, the twelve (12) consecutive months immediately following the Termination Date or (2) if Executive has been employed by Employer for less than twenty four (24) consecutive months immediately prior to the Termination Date, the six (6) consecutive months immediately following the Termination Date.

d. Cause. “Cause” shall mean:

(1) the conviction of Executive of a felony or a crime involving moral turpitude, theft or fraud; or

(2) Executive’s refusal to perform duties as directed in good faith by Executive’s supervisor, which failure is not cured within 10 days after written notice thereof from Employer to Executive; or

(3) Executive’s engaging in sexual harassment or any act involving theft or fraud with respect to Employer or any of its parents, subsidiaries or other affiliates, as determined by the Chief Executive Officer of Employer; or

(4) Executive’s reckless conduct or willful misconduct which results in substantial harm (in relation to Executive’s annual compensation), as determined by the Chief Executive Office of Employer, whether financial, reputational or otherwise, to Employer or any of its parents, subsidiaries or other affiliates.

e. Covered Termination. “Covered Termination” shall mean Employer’s involuntary termination of Executive’s employment with Employer other than (1) for Cause, or (2) in connection with the death or Disability of Executive. Notwithstanding the foregoing, the transfer of Executive’s employment to any Affiliate shall not be a Covered Termination.

f. Disability. “Disability” shall have the meaning assigned to it in the long-term disability insurance policy then provided or made available to Executive by or through Employer. If there is then no such policy or such term is not defined therein, then “Disability” shall mean Executive’s incapacity due to physical or mental illness causing Executive to be absent from the full-time performance of Executive’s duties with Employer for sixty (60) consecutive days.

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g. Stock Plans. “Stock Plans” shall mean the Harley-Davidson, Inc. 2004 Incentive Stock Plan, the Harley-Davidson, Inc. 1995 Stock Option Plan, and any other existing or future plans for the issuance of stock options, stock appreciation rights, restricted stock or restricted stock units.

h. Termination Date. “Termination Date” shall mean the date on which a Covered Termination is effective, which date shall not be less than twenty-five (25) days after the date the Termination Notice is delivered to Executive.

i. Termination Notice Date. “Termination Notice Date” shall mean the date on which written notice is delivered by Employer to Executive stating that Executive’s employment is being terminated pursuant to a Covered Termination and setting forth the Termination Date.

3. Severance Benefits. In the event of a Covered Termination and in lieu of any benefits or other amounts that would otherwise be payable by Employer to Executive as a result of, arising out of or following such Covered Termination, Executive shall be entitled to all of the following:

a. a lump sum payment, payable within thirty (30) days following the Termination Date, equal to the Base Salary Amount.

b. during the Benefit Period or the period beginning on the Termination Date and ending on the date Executive becomes employed on a substantially full-time basis, whichever is shorter, Employer shall make available to Executive coverage under Employer’s medical, dental and life insurance (but not short or long term disability) plans on the same terms as such plans are made available to Employer’s salaried employees generally; provided that any period of continued medical and dental coverage pursuant to this provision shall be credited against (reduce) the maximum period of continuation coverage that Executive (or any other qualified beneficiary with respect to Executive) is permitted to elect in accordance with COBRA, or any successor provision thereto;

c. during the Benefit Period or the period beginning on the Termination Date and ending on the date Executive becomes employed on a substantially full-time basis, whichever is shorter, Employer shall maintain any life insurance on Executive’s life owned by Employer;

d. any other benefits payable pursuant to the terms of the Stock Plans (and applicable agreements thereunder) and any incentive compensation (including STIP), pension, 401(k), retirement, savings or deferred compensation plans earned up to Termination Date.

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e. reimbursement of any expenses incurred by Executive in the ordinary course of employment prior to the Termination Date consistent with Employer’s then existing expense reimbursement policy.

Notwithstanding Sections 3b and c above, with respect to the first six months following Executive’s “separation from service” (as defined in Section 11) during which Executive’s life insurance coverage is extended or potentially extended in accordance with Section 3b and 3c above, if the premiums paid by Employer for coverage during such period under Section 3b, and the portion of the premiums paid by Employer under Section 3c that are attributable to current life insurance protection (as determined in accordance with Internal Revenue Service requirements) during such period, in the aggregate (the “Life Insurance Coverage Value”), exceeds the amount of the “limited payments” exemption set forth in Section 1.409A-1(b)(9)(v)(B) of the Income Tax Regulations (or any successor thereto), then, to the extent required in order to comply with Internal Revenue Code Section 409A, Executive, in advance, shall pay to Employer an amount equal to the Life Insurance Coverage Value, and promptly following the six month anniversary of Executive’s “separation from service”, Employer shall make a cash payment to Executive equal to the amount paid to Employer by Executive.

4. No Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Section 3 hereof by seeking other employment or otherwise, nor will the amount provided for in Section 3(a) hereof be reduced by any compensation earned by Executive as a result of employment by another employer after the Termination Date.

5. Exclusivity.

a. The benefits provided for herein are intended to constitute a minimum, but noncumulative, benefit package for Executive in the event of a Covered Termination. If Executive has or claims to have any Claims (as defined below), Executive may elect to assert such Claims. If, however, Executive does formally assert one or more Claims in a writing submitted to Employer, or an appropriate body to determine such Claims, for the legal enforcement of such Claims, such writing shall constitute an irrevocable waiver and disclaimer of Executive’s benefits and rights under this Agreement.

b. As a condition of receiving the benefits provided for herein, Executive shall be required to execute, prior to receiving any benefits hereunder, a release in a form reasonably satisfactory to Employer, of any and all claims that Executive has or may have against Employer or an Affiliate arising out of Executive’s employment or termination of Executive’s employment (the “Claims”), including but not limited to any and all claims arising out of contract (written, oral, or implied in law or in fact), tort (including negligent and intentional acts), or state, federal or local law (including discrimination on any basis whatsoever). In addition, Executive shall be required to execute, prior to receiving any benefits hereunder, in a form reasonably satisfactory to Employer: a reaffirmation of Executive’s confidentiality agreement; an agreement regarding non-solicitation of other employees; and a non-compete agreement effective during the Benefit Period.

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c. If Executive has received benefits under this Agreement for a Covered Termination and thereafter asserts any Claims, Executive shall, notwithstanding any other agreement to the contrary, return to Employer all benefits received hereunder as a condition of being allowed to assert any such Claims. If for any reason Executive cannot legally be compelled to return such benefits, Employer shall be given, to the extent allowed by law, credit for all amounts received by Executive under this Agreement against any other amounts otherwise due to Executive arising out of any such Claims. Notwithstanding the foregoing, this Section 5(c) shall not be construed to limit or otherwise modify the terms of any release executed by Executive pursuant to Section 5(b) hereof or otherwise.

6. Other Termination. In the event Executive’s employment with Employer terminates other than pursuant to a Covered Termination, including without limitation, a termination for Cause, termination by reason of Executive’s death, Disability or retirement or a voluntary termination by Executive, Executive shall be entitled to no benefits or rights under this Agreement. Notwithstanding anything herein to the contrary, an otherwise involuntary termination of Executive’s employment will not be treated as a voluntary termination or as a voluntary retirement solely because Executive’s termination is characterized as a voluntary resignation or retirement in connection with any public announcement concerning Executive’s departure or because the Executive receives retirement benefits.

7. Amendment, Termination and Assignment. This Agreement may be amended, terminated or superseded only by a written instrument signed by Executive and Employer. This Agreement may not be assigned by Executive. Notwithstanding anything in this Agreement to the contrary, Employer may unilaterally amend this Agreement to make changes that Employer reasonably determines are necessary or appropriate for purposes of causing this Agreement to comply with the requirements of Section 409A of the Internal Revenue Code and regulations proposed or promulgated thereunder, so long as Employer makes the same changes to corresponding agreements to which other Employer executives are parties.

8. Transfer of Employment. If Executive’s employment is transferred to any Affiliate, such Affiliate shall assume Employer’s obligations hereunder and following such transfer such Affiliate shall be deemed the “Employer” for purposes of this Agreement.

9. Headings. Headings used herein are for convenience only and shall not constitute a part of or affect the meaning or interpretation of this Agreement.

10. Governing Law; Venue. This Agreement shall be deemed to have been made and executed in the State of Wisconsin and the validity, interpretation and enforcement hereof shall be governed by the internal laws of the State of Wisconsin. In the event of any dispute arising from or in connection with this Agreement, Executive consents and agrees to in personam jurisdiction and to venue exclusively in either the Circuit Court for Milwaukee County, Wisconsin, or the United States District Court for the Eastern District of Wisconsin, located in Milwaukee, Wisconsin.

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11. Section 409A Compliance.

a. The Agreement is intended to satisfy the requirements of Internal Revenue Code Section 409A or be exempt from those requirements. In particular, (1) the lump sum severance benefit in Section 3a is intended to constitute a “short-term deferral” that is exempt from Section 409A in accordance with Section 1.409A-1(b)(4) of the Income Tax Regulations (or any successor thereto), and (2) the medical and dental continuation under Section 3b is intended to be exempt from Section 409A in accordance with Section 1.409A-1(b)(9)(v)(B) of the Income Tax Regulations (or any successor thereto). In the event that a payment or benefit that is intended to be exempt from Internal Revenue Code Section 409A is determined to be subject to Section 409A, any payment that would otherwise be made on a date prior to six months following Executive’s “separation from service” instead will be made on the first business day of the month following the month in which occurs the six month anniversary of Executive’s “separation from service”.

b. For purposes of this Agreement, Executive will incur a “separation from service” on the date on which Executive separates from service (within the meaning of Code Section 409A) from Employer and its affiliates. A “separation from service” occurs when Employer and Executive reasonably anticipate that no further services will be performed by Executive for Employer and its affiliates after that date or that the level of bona fide services Executive will perform after such date as an employee of Employer or its affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed by Executive (whether as an employee or independent contractor) for Employer and its affiliates over the immediately preceding 36-month period (or such lesser period of services). An Executive is not considered to have incurred a Separation from Service if Executive is absent from active employment due to military leave, sick leave or other bona fide reason if the period of such leave does not exceed the greater of (i) six months, or (ii) the period during which Executive’s right to reemployment by Employer or its affiliates is provided either by statute or by contract; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six months, where such impairment causes Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended for up to 29 months without causing Executive to have incurred a “separation from service”. When used in connection with the definition of “separation from service, the term “affiliate” means a corporation, trade or business that, with Employer, constitutes a controlled group of corporations or a group of trades or businesses under common control within the meaning of Internal Revenue Code Section 414(b) and (c); provided that Internal Revenue Code Section 414(b) and (c) shall be applied by substituting “at least fifty percent (50%)” for “at least eighty percent (80%)” each place it appears therein.

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c. Any amount the payment of which is deferred for six (6) months following Executive’s “separation from service” to comply with Internal Revenue Code Section 409A shall, when paid, include interest, calculated at the reference rate or the prime rate, as the case may be, of US Bank Milwaukee, National Association, Milwaukee, Wisconsin as in effect from time to time during the period beginning on the date on which the amount would otherwise have been paid to the date on which payment is actually made; provided that with respect to the Life Insurance Coverage Value, the interest period will begin on the date on which Executive pays the Life Insurance Coverage Value to Employer.

IN WITNESS WHEREOF, the parties have executed this Agreement at Milwaukee, Wisconsin as of the date first above written.

EXECUTIVE:	EMPLOYER:
NAME OF EXECUTIVE	HARLEY-DAVIDSON, INC.
	OR SUBSIDIARY COMPANY
_______________________________________	By:_________________________________________
	Name:_______________________________________
	Title: ________________________________________

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EX-10.2 3 cmw3519e.htm FORM OF TRANSITION AGREEMENT

Exhibit 10.2

AMENDED AND RESTATED

TRANSITION AGREEMENT

AGREEMENT dated the _____day of _______, _______ between Harley-Davidson, Inc., a Wisconsin corporation (the “Corporation”), and ______________ (the “Executive”). Unless otherwise indicated, terms used herein and defined in Schedule A shall have the meanings assigned to them in Schedule A.

WHEREAS, the HDI Group desires to continue to attract and retain skilled and dedicated management employees, consistent with achieving the best possible price for its stockholders in any transition period or change in ownership and control of the Corporation; and

WHEREAS, the Executive has specific duties and unique talents which are of benefit to the HDI Group both presently and in any transition period; and

WHEREAS, the HDI Group and the Executive desire that the Executive be free of any conflict of interest with regard to the performance of the Executive’s duties in evaluating any proposed change in ownership or control; and

WHEREAS, to comply with Internal Revenue Code Section 409A and to make certain other changes, the Executive and the Corporation desire to amend and restate the Transition Agreement currently in effect between the Executive and the Corporation.

NOW, THEREFORE, it is agreed as follows

1. The HDI Group currently employs the Executive as __________________________, Harley-Davidson, Inc. upon the terms and conditions currently reflected in the Executive’s personnel file or in various minutes of the Board.

2. This Agreement shall become effective on the date hereof and shall terminate on the second anniversary of the occurrence of a Change of Control Event; provided, however, that no benefits shall be payable or accrue pursuant to this Agreement prior to the occurrence of a Change of Control Event. This Agreement supersedes any predecessor Transition Agreement in effect between the Executive and the Corporation.

3. During the two year period following a Change of Control Event, so long as the Executive remains employed by the HDI Group, the Executive shall devote his or her full time, attention, and energies to the business of the HDI Group and shall not engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage; but this shall not be construed as preventing the Executive from (a) investing the Executive’s assets in such form or manner as will not materially affect the Executive’s ability to perform his or her duties and obligations to the HDI Group; or (b) continuing to serve as a director of any corporation of which he or she was a director immediately prior to the Change of Control Event. The Executive agrees that once a Change of Control Event occurs he or she will not voluntarily terminate his or her employment with the HDI Group until ten days after such Change of Control Event has occurred.

4. The HDI Group agrees that following a Change of Control Event no termination of the Executive’s employment with the HDI Group will be effective, unless it provides the Executive ten days prior written notice of such termination; provided, however, that the Executive shall provide the HDI Group Employer with ten days prior written notice of any termination by the Executive of the Executive’s employment with the HDI Group. The Executive may waive the notice requirement for the HDI Group.

5. The Executive recognizes and acknowledges that the list of the HDI Group’s customers, its product plans, forecasts and financial information, as well as other confidential information, as it may exist from time to time, is valuable, special, and unique asset of the HDI Group’s business. The Executive shall not, except for the benefit of HDI Group or as otherwise expressly authorized by the HDI Group, during or at any time within five (5) years after the termination of the Executive’s employment, disclose any such information or any part thereof to any person, firm, corporation, association, or other entity, or use such information or any part thereof for any reason or purpose whatsoever, in either case under any circumstances in which such disclosure or use is reasonably likely to affect adversely the interests of the HDI Group in any country of the world in which the HDI Group then distributes its products. This section is not intended to limit in any way the Executive’s independent obligation to preserve and not to misappropriate trade secrets of the HDI Group. In the event of a breach or threatened breach by the Executive of the provisions of this section, the HDI Group shall be entitled to an injunction restraining the Executive from disclosing or using, in whole or in part, this information. The HDI Group will be free to pursue any other remedies as may in its discretion be deemed appropriate under the circumstances.

6. Upon the happening of a Change of Control Event, the HDI Group agrees, while the Executive is employed hereunder, the Executive shall be compensated at a level that is at least comparable in the aggregate to the Executive’s highest level of Compensation in effect during the 180-day period immediately prior to the Change in Control Event and in a manner that satisfies each of the following:

(a) The Executive shall receive an annual base salary in cash equivalent of not less than the Executive’s highest annual base salary as in effect during the 180-day period immediately prior to the Change in Control Event, subject to any deferral election then in effect.

(b) The Executive (and with respect to medical, dental and vision coverage, the Executive’s eligible dependents) shall be included in any and all employee benefit or fringe benefit plans, practices, policies or programs providing benefits for the HDI Group’s salaried employees in general, including but not limited to retirement, savings, group life insurance, hospitalization, medical, dental, profit sharing and 401(k) plans, and in all plans, practices, policies or programs providing additional benefits to executives of the HDI Group of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, pension restoration, stock option, stock appreciation, stock bonus and similar or comparable programs; provided, however, that, in no event shall the aggregate level of benefits under such plans, practices, policies or programs in which the Executive is included be less than the aggregate level of benefits under plans, policies, practices and programs of the HDI Group in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control Event.

(c) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the number of paid holidays to which the Executive was entitled annually at any time during the 180-day period immediately prior to the Change in Control Event or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the HDI Group of comparable status and position to the Executive.

(d) The Executive shall be included in any annual or long-term or other bonus plan of the HDI Group which shall satisfy the standards described below (any such plan, the “Bonus Plan”). Bonuses under any such Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the HDI Group as the HDI Group shall establish (the “Goals”), all of which Goals shall be attainable, prior to the second anniversary of the date of the Change in Control Event, with approximately the same degree of probability as the goals under any bonus plan or plans of the HDI Group as in effect at any time during the 180-day period immediately prior to the Change in Control Event (whether one or more, the “Prior Bonus Plan”). The amount of the bonus (the “Bonus Amount”) that the Executive is eligible to earn under any such Bonus Plan shall be no less than the amount of the Executive’s target award provided in such Prior Bonus Plan, and in the event the Goals are not achieved such that the entire target award is not payable, any such Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the target award reasonably related to that portion of the Goals which were achieved.

7. Benefits Following an Eligible Termination.

In the event of Termination, the Executive shall be entitled to the following benefits:

(a) Lump Sum Severance Payment.

The Executive shall be entitled to receive, in cash or cash equivalent on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination, a lump-sum payment equal to the product of three multiplied by the sum of:

(i) the Executive’s highest annual rate of salary during the five year period preceding the Executive’s termination of employment with the HDI Group;

(ii) the higher of (A) the Executive’s bonus opportunity (at target) for the year in which occurs the Change in Control Event, or (B) the highest annual bonus paid to or accrued for the benefit of the Executive during the five year period immediately preceding the Executive’s termination of employment with the HDI Group under any bonus plan, program, or arrangement of the HDI Group which the HDI Group Employer maintains or has adopted; and

(iii) the product of four times the last quarterly payment, prior to the Change of Control Event, paid to the Executive by the HDI Group, to the extent such payment was paid by the HDI Group in lieu of providing the Executive with various fringe benefits (the “Perquisite Payment”).

(b) Payment in Lieu of Post-Retirement Life Insurance.

In addition, if the Executive has attained age 55 and completed at least five years of service with the HDI Group prior to the date of Termination, the Executive shall receive an additional amount, in lieu of any post-retirement life insurance, equal to one times the Executive’s annual base salary, at his or her then current rate (the “Retiree Insurance Payment”), plus an additional amount such that the net amount retained by the Executive, after deduction for federal and state income taxes and FICA and Medicare employment taxes on the Retiree Insurance Payment, and any federal and state income taxes and FICA and Medicare employment taxes on the additional payment, shall equal the Retiree Insurance Payment. For purposes of determining the amount of the additional payment, the Executive shall be deemed to pay federal and state income taxes at the highest marginal rate of federal and state income taxation in the calendar year in which the additional payment is to be made. The payment in lieu of post-retirement life insurance shall not duplicate any other program of the HDI Group under which the Executive may be entitled to a payment in lieu of post-retirement life insurance The payment shall be made to the Executive in cash or cash equivalent on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination.

At the time the ten days written notice prior to Termination is given:

(i) the Executive will be fully and immediately vested in his or her accrued benefit and any minimum years of service requirement for vesting will be deemed to have been satisfied under any qualified or nonqualified pension, savings or other retirement programs that are maintained by the HDI Group and in which the Executive was entitled to participate at the time of the Change of Control Event or at any time prior to Termination, with the benefits under each such plan in which the Executive participates being distributed in accordance with the terms of the relevant plan; provided, however, that if the HDI Group reasonably concludes that it is unable to take the actions contemplated under this subparagraph (i) with respect to any plan that is intended to be qualified under Code Section 401(a) without violating the requirements of Code Section 401(a)(4) or any similar provision, then the Executive shall be entitled to receive, with respect to any such plan, a single sum payment equal to the account balance that the Executive forfeits under any defined contribution plan or the actuarial present value (determined using the interest and mortality assumption in effect under Code Section 417(e)(3), or any successor to such provision, on the date of Termination) of any accrued benefit that the Executive forfeits under any defined benefit plan as a result of not being fully vested at the time of Termination, with such payment to be made on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination;

(ii) all restricted stock awards made to the Executive pursuant to the Harley-Davidson, Inc. 2004 Incentive Stock Plan, as amended, or made pursuant to any successor or predecessor plan, including, without limitation, any plan of the HDI Group that is in effect following the date of the Change in Control Event, will be fully and immediately vested to the extent not already vested;

(iii) all stock options granted pursuant to the Harley-Davidson, Inc. 2004 Incentive Stock Plan, as amended, or granted pursuant to any successor or predecessor plan, including, without limitation, any plan of the HDI Group that is in effect following the date of the Change in Control Event, will be fully vested and to become immediately exercisable to the extent not already vested and exercisable;

(iv) all performance or other awards granted to the Executive pursuant to any HDI long-term incentive plan, or granted pursuant to any successor plan, including, without limitation, any plan of the HDI Group that is in effect following the date of the Change in Control Event, if not already vested pursuant to the terms of such long-term incentive plan, will be fully and immediately vested, as if all performance requirements have been satisfied at the target level of performance, and with payment to the Executive to be made on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination; and

(v) the HDI Group Employer will pay to the Executive, on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination, an amount in respect of any bonus under a short-term incentive or other annual bonus plan of the HDI Group equal to the higher of (1) the Executive’s target bonus for the fiscal year in which the date of Termination falls, or (2) the bonus the Executive received for the year prior to the Change of Control Event, which amount shall be pro-rated by a fraction, the numerator of which is the number of days elapsed in the HDI Group’s fiscal year on the date of Termination and the denominator of which is 365.

(d) Retirement Benefits.

If the Executive participates in the Retirement Annuity Plan for Salaried Employees of Harley-Davidson (the “Salaried Retirement Plan”), then the Executive will be entitled to additional benefits under (i) the Harley-Davidson, Inc. Pension Benefit Restoration Plan (the “Benefit Restoration Plan”) and (ii) any other supplemental retirement plan of the HDI Group in which the Executive participates or any other agreement between the HDI Group and the Executive providing retirement benefits for the Executive, or any successors to such plans, based on the most favorable benefit provisions of such plans in effect at any time during the 180-day period prior to the date of the Change of Control Event (the Pension Restoration Plan and such other programs are collectively referred to as the “Retirement Plans”). The amount of such additional pension benefits payable under each such Retirement Plan will be paid in accordance with the terms of the applicable Retirement Plan and shall equal to the difference between (i) the amount the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse or other beneficiary) is actually entitled to receive upon retirement or termination under the terms and conditions of the applicable Retirement Plan, and (ii) the amount the Executive (or such surviving spouse or beneficiary) would have been entitled to receive under such terms and conditions if (A) the Executive’s benefits under the applicable Retirement Plan had been fully vested on the date of Termination, (B) the Executive had continued to work until the earlier of the Executive’s 65^th birthday or the third anniversary of the date of Termination, and (C) the Executive had continued to receive compensation (both base salary and, to the extent relevant under a Retirement Plan, bonuses or other compensation) during the period of assumed employment at the highest rate and at the same time as such compensation was paid to the Executive during the calendar year immediately preceding the date on which occurs the Change of Control Event or the calendar year immediately preceding the year in which occurs the date of Termination, whichever is more beneficial to the Executive.

(e) Welfare Benefits.

The Executive will also receive:

(i) until December 31 of the second calendar year following the calendar year in which occurs the date of Termination, use of professional outplacement services by qualified consultants retained at the expense of the HDI Group Employer; provided, however, that this subparagraph (i) shall not apply following the Executive’s death; and

(ii) for three years from the date of Termination, continued coverage under HDI Group hospital, medical, dental, vision, life, disability insurance and other welfare benefit plans; provided, however, that any period of continued hospital, medical, dental or vision coverage pursuant to this provision shall be credited against (reduce) the maximum period of continuation coverage that the Executive (or any other qualified beneficiary with respect to the Executive) is permitted to elect in accordance with COBRA, or any successor provision thereto; and provided further, that in the event of the Participant’s death either (A) after Termination or (B) prior to Termination but during the period beginning on the date of the Change in Control Event and ending on the date that is thirty (30) days after the first anniversary of the date of the Change in Control Event, then for a period of one year following the Executive’s date of death (but in no event more than three years following the date of Termination), the HDI Group shall provide continued coverage under HDI Group hospital, medical, dental and vision plans, but all other welfare benefit plan coverage shall cease. For purposes of this subparagraph (ii), if hospital, medical, dental, or vision coverage or benefits are provided under a plan that is subject to Code Section 105(h), then, for any period of coverage following the end of the COBRA continuation period, the benefits payable under such plan shall comply with the requirements of Sections 1.409A-3(i)(1)(A) and (B) of the Treasury regulations and, if and to the extent necessary, the HDI Group shall amend such plan to comply therewith. Also, with respect to the first six months following the Termination during which the Executive’s life insurance coverage is extended under this subparagraph (ii), if the premiums payable by the HDI Group for group life insurance coverage during such period and the portion of the premiums payable during such period that represents current life insurance protection (as determined in accordance with Internal Revenue Service requirements) for the Executive under a split-dollar insurance arrangement, in the aggregate (the “Life Insurance Coverage Value”) exceed the amount of the “limited payments” exemption set forth in Section 1.409A-1(b)(9)(v)(B) of the Income Tax Regulations (or any successor thereto), then, to the extent required to comply with Internal Revenue Code Section 409A, the Executive, in advance, shall pay the HDI Group an amount equal to the Life Insurance Coverage Value, and promptly following the end of such six month period, the HDI Group Employer shall make a cash payment to the Executive equal to the amount paid to the HDI Group by the Executive. Thereafter such life coverage shall be provided at the expense of the HDI Group for the remainder of the period specified above.

(f) Payment in Lieu of Automobile, Association and Similar Fees.

Unless the Perquisite Payment was substituted for the following, the Executive shall also receive a cash lump sum payment, calculated so as to equal the fair market value of three years of benefits and paid to the Executive on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination, for:

(i) automobiles and vehicles (or allowance in respect thereof) to which he was entitled either prior to the Change of Control Event or prior to Termination; and

(ii) all amounts in respect of club, association or similar fees and dues covering the Executive to which he was entitled either prior to the Change of Control Event or prior to Termination.

(g) Payment of Accrued Compensation.

The Executive shall also be entitled to all amounts earned or accrued through the date of Termination but not paid as of such date, including base salary, reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the HDI Group during the period ending on the date of Termination, vacation pay, and sick leave (collectively, “Accrued Compensation”). All Accrued Compensation shall be paid to the Executive within 10 days following Termination.

(h) Continuation of Section 409A Elections.

Notwithstanding anything in subsections (a) through (g) to the contrary, Termination does not affect deferral or distribution elections that the Executive may have in place with respect to the payment of any benefits that are subject to Code Section 409A, and payment of such amounts will be made pursuant to the terms of the applicable plan or program under which the deferral election was made.

(i) Death of the Executive.

If the Executive dies prior to the payments of amounts due to the Executive under this Agreement (including, without limitation, in the case of Termination resulting from the Executive’s death during the period beginning on the date of the Change in Control Event and ending on the date that is thirty (30) days after the first anniversary of the date of the Change in Control Event), then the amounts that otherwise would have been paid to (or in the event of death, on behalf of) the Executive (including any Gross-Up Payment and Tax Adjustment Amount under Section 8) will be paid, as soon as practicable following the Executive’s death, to the Executive’s estate.

(j) Agreement Not a Guarantee of Employment.

Nothing in this Agreement shall be construed to prevent the HDI Group Employer or the Board from terminating the Executive’s employment under this Agreement either for Cause or without Cause or to prevent the Executive from terminating the Executive’s employment under this Agreement either for Good Reason or without Good Reason. A termination by the HDI Group Employer for Cause or a termination by the Executive without Good Reason shall relieve the HDI Group of its obligation to make any other payments under this Agreement, except those that may be payable under then existing employee benefit programs. For the Executive to be terminated for Cause, the existence of Cause must be determined by a written resolution adopted by the affirmative vote of not less than two-thirds of all the Continuing Directors, excluding for this purpose the Executive, or in the event there are no Continuing Directors, by a unanimous vote of all the Directors, at a meeting duly called and held for that purpose after reasonable notice to the Executive and opportunity for the Executive and his or her counsel to be heard. Any such determination shall require that the Continuing Directors (or the entire Board) find that in their reasonable good faith judgment the conduct which was the basis for the hearing in fact occurred and is sufficient to warrant a termination for Cause.

8. Protection Against Certain Taxes.

(a) Taxes Attributable to Excess Parachute Payments.

If the Executive receives any payments under this Agreement or otherwise from the HDI Group which are “excess parachute payments” taxed under Section 4999 of the Code, the HDI Group Employer will pay, pursuant to subsection (b) below, an amount sufficient to offset such tax effects.

(b) Calculation and Payment of Gross-Up Payment.

(i) In the event that the Executive becomes entitled to payments in connection with a Change of Control Event under this Agreement or otherwise (“the Payments”), if any of the Payments will be subject to the tax imposed by Section 4999 of the Code (the “Excise Tax”) (or any similar tax that may hereafter be imposed), the HDI Group Employer shall pay to the Executive (or remit to the Internal Revenue Service on behalf of the Executive) an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Payments and any federal and state income or other taxes and Excise Tax upon Gross-Up Payments provided for by this section, shall be equal to the Payments.

(ii) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) any other payments or benefits received or to be received by the Executive in connection with a Change of Control Event shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the HDI Group’s independent auditors, and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or such “excess parachute payments” (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (B) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Payments or (2) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (A), above), and (C) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the HDI Group’s independent auditors in accordance with the principles of Section 280G(b)(3) and (4) of the Code.

(iii) For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal and state income taxes at the highest marginal rate of federal and state income taxation in the calendar year in which the Gross-Up Payment is to be made.

(iv) A Gross-Up Payment and Tax Adjustment Amount, if any, under subsection (v) shall be paid on the first day of the month following the month in which occurs the six month anniversary of the date of Termination. Notwithstanding the foregoing, if the Executive is required to remit the Excise Tax under Code Section 4999 to the Internal Revenue Service prior to the first day of the month following the month in which occurs the six month anniversary of the date of Termination, then upon written notice by the Executive to the Corporation, the HDI Group Employer will reimburse the Executive for the Excise Tax so paid (and for any additional taxes paid by the Executive on the reimbursement), and such reimbursement or reimbursements will be credited against and reduce the Gross-Up Payment made on the first day of the month following the month in which occurs the six month anniversary of the date of Termination.

In addition to the Gross-Up Payments under this Section 8, the HDI Group Employer shall pay to the Executive an additional amount (the “Tax Adjustment Amount”) in the event any portion of the Payments are taxed (for state or federal income tax purposes) at income tax rates higher than the highest marginal federal and state income tax rates otherwise applicable to the Executive without considering the Payments (which shall not include any addition to income tax or income tax rates in the nature of an additional income tax or penalty for failure to comply with applicable requirements for taxation at a lower rate (“Base Income Tax Rates”), such that the net amount retained by the Executive, after deduction of state and federal income taxes at their respective actual rates and any state and federal income taxes upon the Tax Adjustment Amount provided by this subsection (c), shall be equal to the Payments less state and federal income taxes thereon calculated at the Base Income Tax Rates. In the event any payments are required under this subsection (c), they shall be included as “Payments” under subsection (b) of this Section 8.

(d) Additional Excise Tax Assessments.

(i) The Executive shall notify the HDI Group in writing of any claim by the Internal Revenue Service for an Excise Tax that, if successful, would require the payment by the HDI Group of a Gross-Up Payment that would be in addition to the Gross-Payment (if any) made to the Executive pursuant to Section 8(b). Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the HDI Group of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30 day period following the date on which the Executive gives such notice to the HDI Group (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the HDI Group notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(A) give the HDI Group any information reasonably requested by the HDI Group relating to such claim;

(B) take such action in connection with contesting such claim as the HDI Group shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the HDI Group and reasonably satisfactory to the Executive;

(D) permit the HDI Group to participate in any proceedings related to such claim;

provided, however, that the HDI Group shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.

(ii) The HDI Group shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, or to pay the tax on the Executive’s behalf directly to the Internal Revenue Service and direct the Executive to sue for a refund or context the claim in any permissible manner), and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the HDI Group shall determine; provided, however, that if the HDI Group directs the Executive to pay such claim and sue for a refund, the HDI Group shall immediately reimburse the Executive for the amount so paid, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect thereto) imposed with respect to such reimbursement or with respect to any imputed income with respect to such reimbursement (such additional payment to indemnify and hold harmless the Executive to be completed as soon as administratively possible after the date on which the Executive pays the tax). Notwithstanding anything to the contrary, to comply with Internal Revenue Code Section 409A, the Executive must timely submit the Executive’s claim for reimbursement of the tax paid, so that it can be reimbursed no later than the end of the Executive’s taxable year following the taxable year in which the taxes that are the subject of the Internal Revenue Service’s claim are remitted to the Internal Revenue Service), and no reimbursement can be made after that time; and provided further, however, that if the Executive is required to extend the statute of limitations to enable the HDI Group to contest such claim, the Executive may limit this extension solely to such contested amount. The HDI Group’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the HDI Group without the Executive’s consent if such position or resolution could reasonably be expected to adversely affect the Executive (including any other tax position of the Executive unrelated to the matters covered hereby).

(iii) In the event that the HDI Group exhausts its remedies and the Executive thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax (“Underpayment”), the HDI Group Employer shall make a supplemental payment to reimburse the Executive for any such Underpayment and to reimburse the Executive for any federal and state income taxes, Excise Tax or employment taxes incurred by the Executive with respect to the amount of any reimbursements under this provision. Such reimbursement shall be made as soon as practical after the date on which the Executive pays the tax and provides notice to the Corporation of the payment of such tax or taxes, but no later than the end of the Executive’s taxable year following the taxable year in which the taxes are remitted. Alternatively, the HDI Group Employer may remit such additional taxes directly to the Internal Revenue Service on the Executive’s behalf.

(iv) If, after the receipt by the Executive of an amount reimbursed by the HDI Group in connection with the contest of the Excise Tax claim, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly pay to the HDI Group the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).

9. Any amount under Section 7 or Section 8 the payment of which is to be made on the first business day of the month following the month in which occurs the six month anniversary of the date of Termination, when paid, shall include interest, calculated at the reference rate or the prime rate, as the case may be, of US Bank Milwaukee, National Association, Milwaukee, Wisconsin as in effect from time to time during the period beginning on the date ten days following the Termination and ending on the date on which payment is actually made; provided, however, that with respect to any life insurance reimbursement that the Executive is entitled to pursuant to Section 7(e), the interest period will begin on the date on which the Executive pays the Life Insurance Coverage Value to the HDI Group.

10. The Executive agrees that, during the term of his or her employment under this Agreement, he shall not, directly or indirectly, engage or participate in any business activity that is directly competitive with and likely to have a material adverse effect on the business of the HDI Group without prior written approval of the Board. In the event that, while employed by the HDI Group, the Executive engages in practices that are directly competitive and that are likely to have a material adverse effect on the HDI Group and the Executive fails to cease such competitive practices within 30 days after written notice is received from the Board, then the Executive shall be treated for purposes of this Agreement as terminated for Cause as of such 30th day.

11. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Milwaukee, Wisconsin or, at the option of the Executive, in the county where the Executive resides, in accordance with the Rules of the American Arbitration Association then in effect; provided, however, that if the Executive institutes an action relating to this Agreement, then the Executive may, at his or her option, bring such action in a court of competent jurisdiction. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

12. The HDI Group shall pay or reimburse all costs and expenses, including attorneys’ fees and disbursements, of the HDI Group and, at least monthly, the Executive in connection with any legal services or proceedings (including, but not limited to, arbitration), whether or not instituted by the HDI Group or the Executive, relating to the interpretation or enforcement of any provision of this Agreement. The HDI Group also agrees to pay prejudgment interest on any money judgment obtained by the Executive as a result of such proceedings, calculated at the reference rate or prime rate, as the case may be, of US Bank Milwaukee, National Association, Milwaukee, Wisconsin as in effect from time to time from the date that payment should have been made to the Executive under this Agreement. Notwithstanding anything to the contrary, to comply with Internal Revenue Code Section 409A, the Executive must timely submit any such cost of expense for reimbursement so that it can be reimbursed no later than the end of the calendar year following the calendar year in which the expense was incurred; no reimbursement can be made after that time.

13. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the HDI Group and the Executive and their respective heirs, legal representatives, successors and assigns. If the HDI Group or any member of the HDI Group shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The HDI Group will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the HDI Group or any member of the HDI Group, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the HDI Group would be required to perform it if no such succession had taken place. The provisions of this Section 12 shall continue to apply to each subsequent employer of the Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. From and after the date of any such purchase, merger, consolidation, transfer of assets or other transaction, the term HDI Group as used in this Agreement shall also include any such person or entity that is the successor or subsequent employer for purposes of this Section 13, or which otherwise becomes bound by the terms and provisions of this Agreement by operation of law.

14. The HDI Group Employer will indemnify the Executive against expenses (including attorney’s fees), amounts paid in settlement (whether with or without court approval), judgments and fines actually and reasonably incurred by him in connection with a threatened or actual action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the HDI Group, and with respect to any criminal action or proceeding, if he had no reasonable cause to believe that his or her conduct was unlawful, (and the HDI Group Employer will advance expenses for the Executive) if he becomes a party or is threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigation (if not by or in the right of the HDI Group Employer) by reason of the fact that he is or was a director, officer, employee or agent of the HDI Group or is or was serving at the request of the HDI Group as a director, officer, employee or agent or in any other capacity or in another corporation, or a partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or not taken by him while acting in any such capacity, to the fullest extent permitted by the HDI Group Employer’s Articles of Incorporation and By-Laws. Notwithstanding anything to the contrary, to comply with Internal Revenue Code Section 409A, the Executive must timely submit any such cost or expense for reimbursement so that it can be reimbursed no later than the end of the calendar year following the calendar year in which the item was incurred; no reimbursement can be made after that time.

15. Any provision of this Agreement which is held to be unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it in unenforceable or invalid without affecting the remaining provisions hereof, which shall continue in full force and effect. The unenforceability or invalidity of a provision of this Agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

16. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin applicable to contracts made and to be performed therein, without regard to conflict of law principles.

17. This instrument contains the entire agreement of the parties, and supersedes any earlier agreement between them, relative to a transition period or termination in the event of a Change of Control Event. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. Notwithstanding anything in this Agreement to the contrary, the Corporation may unilaterally amend this Agreement prior to the occurrence of a Change of Control Event to make changes that the Corporation reasonably determines are necessary or appropriate for purposes of causing this Agreement to comply with the requirements of Section 409A of the Internal Revenue Code and regulations proposed or promulgated thereunder, so long as the Corporation makes the same changes to corresponding agreements to which other Corporation executives are parties.

18. The Executive shall not be required to mitigate damages or the amount of any payment to the Executive provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as a result of employment by another employer after Termination.

19. If the Executive is also a party to a Severance Benefits Agreement (or any similar agreement) with the Corporation (or an Affiliate), upon the occurrence of a Change in Control Event (whether such Severance Benefits Agreement or similar agreement was entered into or amended prior to or after the date of this Agreement), then the Executive’s rights and obligations upon a termination of Executive’s employment during the term of this Agreement will be governed by this Agreement rather than the Severance Benefits Agreement or similar agreement.

20. The HDI Group shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. In addition, if prior to the date of payment of the benefits hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the HDI Group may provide for an immediate payment of the amount needed to pay the Executive’s portion of such tax (plus an amount equal to the income taxes that will be due on such amount) and the Executive’s remaining benefits under this Agreement shall be reduced accordingly. The HDI Group shall be entitled to rely on an opinion of nationally recognized tax counsel if any question as to the amount or requirement of any such withholding shall arise.

21. In the event that neither the Corporation nor any Affiliate has outstanding any stock which is publicly traded on an established securities market or otherwise, any references in this Agreement to distribution being made on the first day of the month following the month in which occurs the six month anniversary of the date of Termination shall automatically be modified to provide for distribution within ten days following the date of Termination.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	HARLEY-DAVIDSON, INC.
	By:____________________________________________
	ATTEST:
	__________________________________________________
	EXECUTIVE:
	__________________________________________________

Schedule A

CERTAIN DEFINITIONS

As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“AFFILIATE” means each corporation, trade or business that, with the Corporation, constitutes a controlled group of corporations or group of trades or businesses under common control within the meaning of Code Sections 414(b) or (c), applied by substituting “at least 50 percent” for “at least 80 percent” each place it appears.

“BASE INCOME TAX RATES” shall have the meaning ascribed to it in Section 8(c) of the Agreement.

“BENEFIT RESTORATION PLAN” has the meaning ascribed to it in Section 7(d) of the Agreement.

“BOARD” means the Corporation’s board of directors.

“CAUSE” means the commission by the Executive of one or more acts for which the Executive is convicted of a felony under United States federal, state or local criminal law, or willful and gross misconduct on the part of the Executive that is materially and demonstrably detrimental to the HDI Group taken as a whole.

“CHANGE OF CONTROL EVENT” means any one of the following: (a) Continuing Directors no longer constitute at least 2/3 of the Directors; (b) any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, become the beneficial owner, directly or indirectly, of 20% or more of the Corporation’s then outstanding Common Stock or 20% of more of the voting power of the Corporation’s then outstanding securities entitled generally to vote for the election of the Corporation’s Directors; (c) the consummation of the merger or consolidation of the Corporation with any other corporation, the sale of substantially all of the assets of the Corporation or the liquidation or dissolution, of the Corporation, unless, in the case of a merger or consolidation, the then Continuing Directors in office immediately prior to such merger or consolidation will constitute at least 2/3 of the Directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation; or (d) at least 2/3 of the then Continuing Directors in office immediately prior to any other action proposed to be taken by the Corporation’s stockholders or by the Board determines that such proposed action, if taken, would constitute a change of control of the Corporation and such action is taken.

“CODE” means the Internal Revenue Code of 1986, as amended.

“COMPENSATION” means the sum of all remuneration to which the Executive is entitled, including, but not limited to salary, participation in HDI Group bonus and benefit plans, programs or arrangements and awards under any HDI Group bonus plans, long-term incentive compensation plans, stock option plans, restricted stock plans or any other deferred compensation plans that the HDI Group Employer maintained or adopted prior to the Change of Control Event, the value to the Executive of the use of professional outplacement services by qualified consultants and use of automobiles or vehicles (or allowances in respect thereof), and all amounts in respect of club, association or similar fees and dues covering such Executive. In the event that the HDI Group cannot provide the Executive with one or more benefits which it is obligated to provide to the Executive, pursuant to this Agreement, under its employee benefit plans, programs or arrangements then the HDI Group shall provide the Executive with equivalent benefits at the expense of the HDI Group Employer.

“CONTINUING DIRECTOR” means any individual who is either (i) a member of the Board on the date hereof or (ii) a member of the Board whose election or nomination to the Board was approved by a vote of at least two-thirds of the Continuing Directors (other than a person whose election was as a result of an actual or threatened proxy or other control contest).

“CORPORATION” means Harley-Davidson, Inc., a Wisconsin corporation.

“EXCISE TAX” has the meaning ascribed to it in Section 8(b)(i) of the Agreement.

“GOOD REASON” means the occurrence of any one of the following events, as determined by the Executive in good faith:

(a) any breach of this Agreement by the Corporation, including specifically any breach by the Corporation of its agreement contained in Section 6, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Corporation remedies promptly after receipt of notice thereof given by the Executive;

(b) any reduction in the Executive’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the Executive in effect at any time during the 180-day period prior to the Change of Control Event or, to the extent more favorable to the Executive, those in effect after the Change of Control Event;

(c) a material adverse change, without the Executive’s prior written consent, in the Executive’s working conditions or status with the Corporation or the HDI Group Employer from such working conditions or status in effect during the 180-day period prior to the Change of Control Event or, to the extent more favorable to the Executive, those in effect after the Change of Control Event, including but not limited to (1) a material change in the nature or scope of the Executive’s titles, authority, powers, functions, duties, reporting requirements or responsibilities, or (2) a material reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Corporation remedies promptly after receipt of notice thereof given by the Executive;

(d) the relocation of the Executive’s principal place of employment to a location more than 50 miles from the Executive’s principal place of employment on the date 180 days prior to the Change of Control Event;

(e) the HDI Group Employer requires the Executive to travel on Employer business to a materially greater extent than was required during the 180-day period prior to the Change of Control Event;

(f) failure by the Corporation to obtain the agreement referred to in Section 13 as provided therein; or

(g) any voluntary termination of employment by the Executive where the written notice of such termination is delivered during the 30 days following the first anniversary of the Change of Control Event;

Provided, however, that any such event occurs following the Change of Control Event. In the event of a dispute regarding whether the Executive terminated the Executive’s employment for “Good Reason” in accordance with this Agreement, no claim by the Corporation that such termination does not constitute a Termination shall be given effect unless the Corporation establishes by clear and convincing evidence that such termination does not constitute a Termination. Any election by the Executive to terminate the Executive’s employment for Good Reason shall not be deemed a voluntary termination of employment by the Executive for purposes of any other employee benefit or other plan.

“GROSS-UP PAYMENT” has the meaning ascribed to it in Section 8(b)(i) of the Agreement.

“HDI GROUP” means Harley-Davidson, Inc. and its Affiliates.

“HDI GROUP EMPLOYER” means the member of the HDI Group that employed the Executive immediately prior to the Change of Control Event.

“RETIREMENT PLAN” has the meaning ascribed to it in Section 7(d) of the Agreement.

“SALARIED RETIREMENT PLAN” has the meaning ascribed to it in Section 7(d) of the Agreement.

“SEPARATION FROM SERVICE” means the date on which the Executive separates from service (within the meaning of Code Section 409A) from the HDI Group. A Separation from Service occurs when the HDI Group and the Executive reasonably anticipate that no further services will be performed by the Executive for the HDI Group after that date or that the level of bona fide services the Executive will perform after such date as an employee of the HDI Group will permanently decrease to no more than 20% of the average level of bona fide services performed by the Executive (whether as an employee or independent contractor) for the HDI Group over the immediately preceding 36-month period (or such lesser period of services). The Executive is not considered to have incurred a Separation from Service if the Executive is absent from active employment due to military leave, sick leave or other bona fide reason if the period of such leave does not exceed the greater of (i) six months, or (ii) the period during which the Executive’s right to reemployment by the HDI Group is provided either by statute or by contract; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended for up to 29 months without causing the Executive to have incurred a Separation from Service.

“TAX ADJUSTMENT AMOUNT” has the meaning ascribed to it in Section 8(c) of the Agreement.

“TERMINATION” means a termination of the Executive’s employment with the HDI Group while this Agreement is in effect, if such termination constitutes a Separation from Service and such termination satisfies one of Paragraphs (a), (b) or (c) below:

(a) any termination by the HDI Group of the Executive’s employment following the occurrence of any Change of Control Event, other than termination of the Executive’s employment for Cause or as a result of the death of the Executive;

(b) any termination by the Executive of the Executive’s employment for Good Reason following the occurrence of a Change in Control Event; or

(c) any termination of the Executive’s employment caused by the death of the Executive during the period beginning on the date of the Change in Control Event and ending on the date that is thirty (30) days after the first anniversary of the date of the Change in Control Event.

“UNDERPAYMENT” has the meaning ascribed to it in Section 8(d)(iii) of the Agreement.

EX-31.1 4 cmw3519a.htm CERTIFICATION

Exhibit 31.1

Chief Executive Officer Certification
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, James L. Ziemer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Harley-Davidson, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2008	/s/ James L. Ziemer
	James L. Ziemer
	President and Chief Executive Officer

EX-31.2 5 cmw3519b.htm CERTIFICATION

Exhibit 31.2

Chief Financial Officer Certification
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, Thomas E. Bergmann, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Harley-Davidson, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2008	/s/ Thomas E. Bergmann
	Thomas E. Bergmann
	Executive Vice President and
	Chief Financial Officer

EX-32.1 6 cmw3519c.htm CERTIFICATION

Exhibit 32.1

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. sec. 1350

Solely for the purpose of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer of Harley-Davidson, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 30, 2008 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 1, 2008	/s/ James L. Ziemer
	James L. Ziemer
	President and Chief Executive Officer
	/s/ Thomas E. Bergmann
	Thomas E. Bergmann
	Executive Vice President and
	Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form 10-Q

HARLEY-DAVIDSON, INC.

Form 10-Q Index For the Quarter Ended March 30, 2008

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Harley-Davidson, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)

Harley-Davidson, Inc. Condensed Consolidated Balance Sheets (In thousands)

Harley-Davidson, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

HARLEY-DAVIDSON, INC. Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Use of Estimates

2. New Accounting Standards

3. Additional Balance Sheet and Cash Flow Information

4. Fair Value Measurements

5. Product Warranty and Safety Recall Campaigns

6. Business Segments

7. Earnings Per Share

8. Comprehensive Income

9. Employee Benefit Plans

10. Commitments and Contingencies

11. Subsequent Event

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Outlook(1)

(1) Note Regarding Forward-Looking Statements

Results of Operations for the Three Months Ended March 30, 2008 Compared to the Three Months Ended April 1, 2007

Overall

Motorcycle Unit Shipments & Net Revenue

Harley-Davidson Motorcycle Retail Sales

Harley-Davidson Motorcycle Retail Sales(a) Heavyweight (651+cc)

Motorcycle Industry Retail Registrations Heavyweight (651+cc)

Cost of Goods Sold

Gross Profit

Financial Services

Operating Expenses

Provision for Income Taxes

Other Matters

Accounting Changes

Commitments and Contingencies

Liquidity and Capital Resources as of March 30, 2008

Cash Flow Activity

Operating Activities

Investing Activities

Financing Activities

Cautionary Statements

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Changes in Internal Controls

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 5. Other Information

SIGNATURE

AMENDED AND RESTATEDSEVERANCE BENEFITS AGREEMENT

AMENDED AND RESTATED

TRANSITION AGREEMENT

Schedule A

CERTAIN DEFINITIONS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q Index
For the Quarter Ended March 30, 2008

Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

HARLEY-DAVIDSON, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Overview and Outlook⁽¹⁾

⁽¹⁾Note Regarding Forward-Looking Statements

Results of Operations for the Three Months Ended March 30, 2008
Compared to the Three Months Ended April 1, 2007

Harley-Davidson Motorcycle Retail Sales^(a)
Heavyweight (651+cc)

Motorcycle Industry Retail Registrations
Heavyweight (651+cc)

AMENDED AND RESTATED
SEVERANCE BENEFITS AGREEMENT