DEFA14A: Harley-Davidson Board Refutes Claims by H Partners, Defends CEO Search Process

Harley-Davidson's board of directors has issued a statement refuting claims made by H Partners Management, LLC regarding the company's CEO search and corporate governance, asserting that H Partners is acting against the best interests of all shareholders.

Summary

• Harley-Davidson has released a presentation to address what it considers to be disingenuous and harmful claims made by H Partners Management, LLC regarding the company's CEO search and board governance.
• The company asserts that H Partners is prioritizing its own interests over those of all shareholders.
• Harley-Davidson defends its CEO search process as rigorous and comprehensive, stating that it accommodated H Partners' demands to consider their preferred candidate.
• The board claims that H Partners' representative, Jared Dourdeville, supported the company's strategy and executive compensation program until recently.
• Harley-Davidson highlights its outperformance compared to peers despite a challenging macroeconomic environment.
• The company emphasizes the success of its Hardwire strategic plan and the positive feedback received on its MY24 Touring lineup.
• Harley-Davidson states that H Partners' campaign is not about accountability but rather puts at risk the progress made and the value of shareholder investment.

Sentiment

Score: 6

Explanation: The document conveys a defensive tone as Harley-Davidson addresses criticisms from H Partners. While highlighting positive achievements, the overall sentiment is neutral due to the ongoing dispute.

Positives

• Harley-Davidson has demonstrated strong execution of its Hardwire strategic plan.
• The company has maintained premium margins and higher cash conversion rates compared to its peers.
• Harley-Davidson has shown resilience in earnings forecasts despite macroeconomic challenges.
• The launch of the MY24 Touring lineup has been highly successful, driving growth and increasing market share.
• Employee engagement in 2024 is the highest on record for the company.

Negatives

• H Partners' campaign is seen as a distraction from the company's strategic goals.
• The company faces potential costs and management distraction due to H Partners' actions.
• The macroeconomic environment continues to pose challenges to consumer demand.
• H Partners is publicly disclosing the identity of a potential CEO candidate.

Risks

• The company faces risks related to executing its business plans and strategies, including the Hardwire strategic plan.
• Managing supply chain and logistics issues remains a challenge.
• The company must navigate the impact of tariffs and changing market conditions.
• Retaining and attracting talented employees and leadership is crucial.
• Uncertainties exist regarding actions that may be taken by H Partners in the future.

Future Outlook

The company expects the macroeconomic issues that impacted its second quarter performance to persist throughout the year, resulting in subdued consumer demand for powersports and a cautious dealer network. Harley-Davidson is working to navigate these trends and emerge stronger when retail demand returns.

Management Comments

• Michael Speetzen, CEO, stated that the company is expecting the same macro issues that impacted their second quarter performance to persist throughout the year, resulting in subdued consumer demand for powersports and a cautious dealer network.
• Jos Boisjoli, CEO, stated that the macroeconomic environment and high interest rate continue to put pressure on consumer demand and that they have decided to further adjust their production schedule for the year.
• Ryan Gwillim, CFO, stated that the macro environment has been challenging and their peers are observing and navigating the same challenges.

Industry Context

The announcement highlights the challenges faced by the powersports industry due to macroeconomic conditions, including high interest rates and inflation. Harley-Davidson's response to H Partners' campaign reflects a broader trend of activist investors challenging corporate strategies and governance.

Comparison to Industry Standards

• Harley-Davidson compares its performance to peers such as BRP Inc., Brunswick Corp, Polaris Inc., Thor Industries, Inc. and Winnebago Industries, Inc.
• The company highlights its outperformance in operating margin, cash conversion, and earnings forecast resilience compared to the peer median.
• H Partners' reference benchmark (S&P 400 Consumer Discretionary Index) is criticized for including a diverse mix of companies with no business comparability and much different size and scale to Harley-Davidson.

Stakeholder Impact

• The dispute with H Partners could impact shareholder confidence.
• The CEO search process affects employees and the future direction of the company.
• Dealers and customers are indirectly affected by the uncertainty surrounding the company's leadership.

Next Steps

• The company will continue its CEO search process.
• Shareholders will vote on the election of directors at the 2025 Annual Meeting of Shareholders.

Key Dates

Keywords

Harley-Davidson, H Partners, CEO search, Board, Corporate governance, Shareholders, Hardwire strategy, Executive compensation, Motorcycles