I would like to welcome everyone to the Harley-Davidson conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Mark Van Genderen, Director of Investor Relations. Sir, you may begin your conference. Mark Van Genderen: Good morning. Welcome to Harley-Davidson second quarter 2007 conference call. Over the course of the next hour, we will comment on our second quarter financial performance, Harley-Davidson motorcycle retail sales, the introduction of the 2008 model year motorcycles and other thoughts about our business. Harley-Davidson's CEO, Jim Ziemer, will speak to you in a moment, followed by CFO Tom Bergmann, who will share the financial highlights of the quarter and the outlook for the rest of the year. Tom will be followed by Larry Hund, CFO of Harley-Davidson Financial Services, who will talk about the performance of that business unit. Jim Ziemer will wrap up our prepared comments, sharing his thoughts on our outlook for the future. We will then open up the phone lines for questions. Before we begin, I would like to remind you that this call is being recorded and a replay will be available after 11 am Central Time this morning. Please dial 973-341-3080 and enter PIN number 8942410, followed by the pound sign. The recording will be available through July 26th. It is also being webcast live on Harley-Davidson.com. The webcast will be available for replay throughout the next several weeks before being archived on the Investor Relations section of the Harley-Davidson website. Our comments today will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update information in this call. Now I would like to turn the call over to the CEO and President of Harley-Davidson, Inc., Jim Ziemer.

Good morning and welcome to our second quarter conference call. Tom, Larry and I returned just last week from Nashville, having spent four days at our summer dealer meeting with approximately 5,000 representatives from our worldwide dealer network. There is no doubt that they are fired up about the new 2008 model year motorcycles we introduced to the marketplace a week ago Monday. Before I get ahead of myself and tell you about the additions and enhancements to our motorcycle line up, I would like to turn the call over to Tom, who will share in more detail the financial and retail performance of the quarter.

Thanks, Jim. Good morning, everyone. We are very pleased with the financial results of the quarter and the retail sales at our dealerships in the international markets. As you can imagine, we are disappointed in the retail sales performance in the United States, which I will touch on shortly. Revenue for the quarter was $1.62 billion, or up 17.7% compared to the year-ago quarter. Net income was also up at $290.5 million, an increase of 19.3%. Earnings per share were $1.14 or up 25.3% and during the quarter, the company bought back 6.7 million shares of our common stock at a cost of $430 million. Now turning to the second quarter of 2007 results for the motorcycles and related products segment compared to the second quarter of 2006, wholesale Harley-Davidson motorcycle shipments were 95,117 units, an increase of 19.2%. Looking at shipment mix in the second quarter; touring volume was 36.5% for the second quarter of 2007, compared to 34.3% in the second quarter of 2006. Second quarter 2007 custom shipment volume, representing our Softail, Dyna and VRSC motorcycles, was 41.3% compared to 46.0% for the second quarter of 2006. Sportster motorcycle mix was 22.2% of the total mix for the quarter, compared to 19.7% during the second quarter of last year. Domestic shipments of 67,951 units for the quarter were up 17.1% from the second quarter of 2006. This shipment volume represented 71.4% of the total volume shipped to dealers, down from 72.8% from a year ago. International shipments of 27,166 units were up 24.9% compared to the same quarter last year. These international shipments represent 28.6% of our total second quarter shipment volume, compared to 27.2% in the second quarter of 2006. As we have previously stated, we expect that on annual basis our international shipment growth rate…

Thanks, Tom. Harley-Davidson Financial Services delivered second quarter operating income of $65.2 million, an increase of $9 million or 15.9% compared to last year's second quarter. This increase is primarily due to a higher securitization gain, increased wholesale and retail net interest income, and an increase in fee income from securitization servicing and credit card licensing fees. For the first six months of 2007, HDFS originated $1.7 billion in retail motorcycle loans, an increase of 9% over the same period in the prior year. Our retail market share in the United States related to new Harley-Davidson motorcycles, grew to approximately 53% for the first six months of 2007, compared to 48% for the first six months of 2006. Our dealer loyalty program, called Performance Network, which rewards dealers for doing more business with HDFS in our wholesale, retail and insurance products continues to be very popular and was a significant factor in driving this market-share growth. In addition, increase promotional activity during the month of June also contributed to the higher market share. In the second quarter of 2007, HDFS sold $950 million of retail motorcycle loans through securitization and realized a gain of $19.5 million. This gain is $8.6 million higher than the gain recorded on the securitization of $800 million of retail motorcycle loans in the second quarter of 2006. The gain as a percentage of loans sold increased to 2.05% for the second quarter 2007 securitization from 1.36% for the second quarter 2006 securitization. The higher gain percentage is due to increases in lending rates and a more favorable market interest rate environment. Looking ahead to our third quarter securitization, we expect a lower gain as a percentage of receivables sold than we realized in our first two securitizations in 2007. Market interest rates have increased since…

Thanks, Larry. No one argues that these are challenges times in consumer lending and for the U.S. economy in general. I appreciate the great results that HDFS has delivered for the company this quarter. Over the years, Harley-Davidson has distinguished itself as a premium brand, the ultimate choice in motorcycling; the only choice that includes a complete lifestyle experience. The Harley-Davidson brand is admired the world over. It's a very strong position to be in. This morning I would like to talk with you about three things that underpin the strength of our brand and why they are so important. First, balancing supply and demand; which includes having the right product in the right place at the right time. Second, achieving retail excellence, which is the entire experience our dealers offer. Third, ensuring that our motorcycles lead and define the heavyweight motorcycle industry. All of these dynamics contribute to our strong brand position. First regarding worldwide supply and demand, I have made a commitment to our worldwide dealer network related to the motorcycle shipments we make to them. I have assured our dealer network that we will not ship more Harley-Davidson motorcycles than we expect that we will sell this year. I believe this to be critical in helping them better manage the business, maintain industry-leading profitability and create strong demand for our products. We are also taking steps to improve our ability to get our motorcycles into the right places at the right time. Market demand for Harley-Davidson motorcycles has always fluctuated around the globe at any given time, region by region and also within region, and from market to market. Those differences have been amplified this year, as many of our U.S. dealers face a tough economic environment. We found ourselves with dealers who had way too many…

(Operator Instructions) Your first question comes from Hakan Ipekci - Merrill Lynch.

With respect to your second half guidance, do you need to see improvements in the market relative to the first half to be able to achieve it, or is status quo sufficient? Can you give us an update on your negotiations at the Kansas City union? Thank you. Jim Ziemer: In terms of the second half of the year, there's no doubt that we are looking for improved retail sales in the U.S. market. As I just went over, all of the things that we have introduced, coupled with the 105th anniversary, the events, the excitement around the events that dealers can start planning for the 105th. I think with the retail experience and the products, we have great confidence that retail activity will pick up. But, again, we will focus on the reality of the current market, and continue to reevaluate what is going on. As for the question on negotiations in Kansas City, our Kansas City contract expires August 1st, next month. We are in negotiations and can't comment on those negotiations, but we look forward that they continue to go to a good outcome and not have an interruption in any production.

Our next question comes from Craig Kennison - Robert W. Baird. Craig Kennison - Robert W. Baird: Dealers are telling us that some bikes are beginning to sell below MSRP as their inventory builds. What does your internal data show? Jim Ziemer: As I mentioned in my part of the conference call, there's no doubt that with the changing market, that some areas of the market have more inventory and other areas have none, or virtually none. There is an imbalance market to market, dealer to dealer and with this new allocation system, we hope to go after that. With imbalances, there will be different selling practices from dealers. But as we monitor this, on average, our motorcycles are selling at MSRP which means if there are any bikes selling below, there are some bikes selling above. Obviously, that's mathematical. So again, there are some imbalances at the dealer, and we hope to work our way out of that with the new allocation system. That will take some time. Craig Kennison - Robert W. Baird: With respect to your retail demand; can you attribute the weakness to anything in particular? In particular, is there any more pronounced weakness with less affluent customers or customers with weaker credit? Jim Ziemer: As we look at retail demand, I mean, there's no doubt we started the year out soft in the first quarter, and we attribute some of that to weather. We're not going to do that for the second quarter. As we look at it, there's no doubt that we look at things that drive the economy, whether they be gas prices or interest rates or consumer confidence. Those certainly have had some implications on the market and we'll continue to watch those things. Those are things, obviously, out of our control. We'll monitor those things. Again, as for information consumer by consumer, we don't have that at the moment but we do measure that, and we'll measure it as we go along.

Our next question comes from Tim Conder - A.G. Edwards. Tim Conder - AG Edwards: Tom, if you could just give us a little bit of color, you said foreign currency benefited the quarter; whether you want to give that on a sales, EBIT basis, or whatever, just a little bit of color there. Also as it relates to any material surcharge on a year-over-year basis in the quarter? Jim, you alluded to it and we have heard from dealers coming out of Nashville that in your presentations to them you mentioned two things: that you are going to help them enhance the scarcity factor, and I think you alluded that's going to be new products. And then also you said that the promotions, you will not go towards the automotive model, and that those are going to end. Just a little bit of added color on that, if you would. Tom Bergmann: On the currency impact during the quarter, if you look at the currency impact on motorcycle revenue, it's about $18 million on the revenue line and on the EBIT line, it's probably about $12 million or so. Raw material surcharges in the second quarter were just over $7 million compared to a year ago. Jim Ziemer: As to some of the other questions you directed to me. On the topic of scarcity, another way to look at it number one, I did talk about it in the preamble here; the 105th anniversary editions of our motorcycles. In 100th anniversary, virtually most if not all of our bikes were anniversary editions; we have chosen to take a different approach whereas approximately 10% of our models will be anniversary editions. We hope to get those all out before the end of the year so that this drives traffic. Undoubtedly,…

Our next question comes from Felicia Hendrix - Lehman Brothers. Felicia Hendrix - Lehman Brothers: I wanted to see if you could elaborate a little bit more on your new allocation program? We also talked to some dealers after the show and they were very excited about this, actually. They felt really empowered. Jim, I was wondering if you could give some more color than you already provided us to that, maybe some specifics? What in your experience would be a realistic expectation of the time it would take for this new program to have a noticeable effect on the dealer network? Finally, my second question is on gross margins. With the promotions pulling back, can we expect to see perhaps a gross margin increase year-over-year in the second half of the year? Tom Bergmann: On the allocation system, as Jim mentioned, we're very excited about it, and the dealers have given us very good feedback when we rolled it out here in Nashville last week. So really what the allocation system is focused on is providing us more flexibility and helping us make sure we get the right motorcycles in the market at the right time and in the right places, and give us more flexibility. Inventory allocation, as we have balanced supply and demand, is becoming more and more important to us so we really think is a big step forward. Our team internally here has done a lot of work on it, and has done a very nice job rolling it out to our dealer network. Really what it will do is give us that flexibility. It is probably more forward -looking than our prior allocation system and it will be more customized, as well, for each of the markets, as we can take local market conditions…

Our next question comes from Robin Farley - UBS. Robin Farley - UBS: I wonder if you could help us manage our expectations about your concerns about retail sales and what it may mean for production? In terms of do you need see growth in third quarter retail sales in the U.S.? Or in other words, it is not going to decline for the third quarter or would it be just a lower growth rate? Also, would any change in production mean a change in your earnings guidance? Since you give us full-year earnings guidance, not full-year production guidance, but in terms of what your internal expectations are. If those change, does that impact your full year EPS guidance? Jim Ziemer: There's no doubt , on the first part of the question on retail sales growth, we're looking for a year-over-year improvement in the second half of the year on retail sales in the U.S. With everything we're coming out with, at this point in time we are highly confident in the models we put out there, the timing, the programs, the allocation system. I think we have got everything in place to give us great comfort on the guidance we're currently giving. We're not going to speculate if there is a change. We have had great confidence in our guidance, but we need to be realistic in what is going on in the first six months, and we were disappointed in retail sales in the U.S. in the first six months. Balancing those two things out, we have given the guidance, we have given the reasons why and also said that we will continue to monitor the market, because we didn't meet our expectations in the first six months. So we're being cautiously optimistic and letting everybody know that we will monitor the situation, and that's the basis from where we're going. We would not do a “what if” forecast on if something happens. Right now from what we see, what we have, the dealer feedback we've got, we are confident in the current guidance. Robin Farley - UBS: Would you say there are several different ways for you to get to the EPS guidance that you have given for the year? Jim Ziemer: In running any business, there's always many different ways to get to the bottom line. We'll run this business for the long term, and our biggest guiding light is running it for the long term.

Our next question comes from Ed Aaron - RBC Capital Markets. Ed Aaron - RBC Capital Markets: I would like to actually get your thoughts on your business cycle from a little bit of a longer-term perspective. It seems likely that heavy weight sales in the U.S. will probably be down this year, I guess for the first time since the '90/'91 recession. It seems like it is hard to have confidence there would be one down year after a 16 or 17-year growth cycle. Curious to get your thoughts on that long-term outlook for your cycle. Jim Ziemer: I'll go back to my previous answer to the last question from Robin Farley. I mean, we're expecting retail sales for Harley-Davidson to be up for the year. I can't comment on the industry, but what we have and the dealer network programs, support and everything else, we're expecting an up year. I'm not going to comment on the industry, but I think what we have in place, we're going to do quite well. Tom Bergmann: Ed, I would just add to Jim's comments. From a long-term perspective and health of the overall industry; we think there's a lot of potential left in the sport of motorcycling and in the heavyweight industry. So we look at it long term and do all of our strategic analysis and work, and look at the number of people, the youth still coming into dirt biking and performance biking and the migrations they'll actually make over time into the heavyweight industry. All of those trends still remain very positive. If you look at it overall, the enrollments in safety courses and so forth, those continue to trend positively. If you look at some of the early feeders into the sport of motorcycling and how those…

Our next question comes from Bob Simonson - William Blair. Bob Simonson - William Blair : Larry, a couple of questions on Harley Finance, if you can. On the third quarter, I think you said you have an estimated gain. Can you share a number on that? Or at least remind us what it was last year? Larry Hund: I don't have that number in front of me. But the gain in the third quarter I think was about 125, 130, somewhere in there. We can get back to you with a specific number. We aren't giving out a specific number here for the third quarter this year, other than to tell you that directionally there are a couple of factors that are going to impact that gain based on the gains we realized in the first quarter and the second quarter of this year. Bob Simonson - William Blair : Am I to take that it's going to be lower? Larry Hund: Yes. I mean, if you think about it, since we did the second quarter transaction, market interest rates have moved up 25 to 30 basis points from the benchmarks that we use. In addition with the recent promotional activity, it's driving a lot of activity on shorter-term contracts. Those, if you think about it over the life of the contract, just generate less interest income. Also, a lot of those are to very attractive borrowers that are at more attractive financing rates. Bob Simonson - William Blair : Second question, same area though. There's a lot of moving parts with what you are doing with your dealer system. How critical is it to you to improve the delinquencies and the credit losses, those ratios? If they don't, because of the economy, let's say don’t get better, would…

Our final question comes from Tony Gikas - Piper Jaffray. Tony Gikas - Piper Jaffray: You have made a handful of cautious comments today, and for the first time in years, I think you have had some cautious comments in the press release talking about sales didn't meet expectations and you are monitoring retail and you are going to assess shipments going forward. Could you just tell us what were your expectations for the quarter? Were you expecting growth at retail? Trying to figure out where you would make a change. Last year in the September quarter, retail sales were up 7% on what was, in my view, a more significant change to the product line than we saw this year. So does it take one quarter of continued declines or is this something that probably takes a little bit longer to assess? Can you just shift more of the business to international, where you are really seeing some terrific growth there? Jim Ziemer: In response to your first statement, really not a question; but this is really not the first time that we've brought some reality to what we're doing versus what is going on. I think if I reflect back in the last couple of years, there have been times when we were cautiously optimistic or whatever. I think we try to, over many years, to put some realism into every one of our conference calls. We don't do a forecast on expectations or even on backward forecasts on what our expectations were. As we pointed out, we were disappointed. I can guarantee you we are not looking for a negative comparison on retail sales. Our expectations were certainly not in the negative territory for the second quarter. Going forward, we will always monitor everything of what is going on. There's a lot of dynamics, but again I'll stick to the commitment that at the end of the day retail sales need to exceed our wholesale shipments for this year on a worldwide basis. Thanks, Tony. With that, I want to thank everybody for your time this morning. I appreciate your interest and your investment in Harley-Davidson. Now I would like to turn it back over to Mark for some final logistics.

Thanks, Jim. Remember that a taped replay of this conference call can be heard by calling 973-341-3080 and entering PIN number 8942410 followed by the pound sign, until July 26 or by accessing it on the Harley-Davidson website. If you have any questions, please contact me at Harley-Davidson's Office of Investor Relations at 414-343-8002. Thanks and have a great day.