DEFA14A: Harley-Davidson Defends Board Amidst H Partners' Activist Campaign, Highlights Strong Performance and Shareholder Returns

Harley-Davidson is actively defending its board and strategic direction against an activist campaign by H Partners, emphasizing its strong financial performance, shareholder returns, and ongoing CEO search.

Summary

• Harley-Davidson has issued a statement defending its board and governance structure against actions by H Partners, an activist investor.
• The company highlights its strong performance, including operating margins of 13% and free cash flow as a percent of EBITDA of 70% from 2022-2024, outperforming its peers.
• Harley-Davidson has returned over $1.4 billion to shareholders in the form of share repurchases and dividends, reducing the share count by 25% over the last three years.
• The board is conducting a comprehensive CEO search and board refreshment process.
• The company believes H Partners' actions jeopardize the execution of its strategic plan and the board's progress on key initiatives.
• Harley-Davidson is managing through a challenging macroeconomic environment, including high financing costs and declining consumer confidence.
• The company's Hardwire strategic plan has delivered $257 million in productivity savings and has returned the U.S. Touring category to growth.
• Harley-Davidson emphasizes that its board is fit-for-purpose and critical to developing effective strategies that deliver shareholder value.

Sentiment

Score: 7

Explanation: The document conveys a mixed sentiment. While it highlights strong financial performance and shareholder returns, it also addresses challenges related to macroeconomic conditions and an activist investor campaign. The company is actively defending its position and emphasizing its strategic direction, which suggests a proactive and confident approach.

Positives

• Harley-Davidson has outperformed its peers in operating margins and free cash flow generation.
• The company has prioritized returning excess capital to shareholders through share repurchases and dividends.
• Analysts remain highly supportive of Harley-Davidson, with current valuation levels implying significant upside.
• The Hardwire strategic plan has delivered significant productivity savings and growth in key categories.
• Harley-Davidson has achieved its lowest voluntary employee turnover in the company's recorded history in 2024.
• The company has reached its highest employee engagement since the survey began in 2021.

Negatives

• The company is operating in a challenging macroeconomic environment with high financing costs and declining consumer confidence.
• H Partners' actions jeopardize the execution of the company's strategic plan and the board's progress on key initiatives.
• The start of 2025 was awful for the domestic market (US), showing a fast-declining consumer demand Motorcycles Data, March 2025.

Risks

• The company's ability to execute its business plans and strategies, including the Hardwire strategic plan, is subject to risks and uncertainties.
• Managing supply chain and logistics issues poses a risk to the company's operations.
• The impact of new, reinstated, or adjusted tariffs on the company's business is uncertain.
• The company faces risks related to changing market conditions, interest rates, and geopolitical environments.
• Maintaining and enhancing the value of the Harley-Davidson brand is crucial for the company's success.
• The company must manage through changes in general economic and business conditions.
• Developing and successfully introducing new products, services, and experiences is essential for growth.
• Retaining and attracting talented employees and leadership is critical for the company's performance.
• Uncertainties regarding actions that have been taken and may in the future be taken by H Partners Management LLC in furtherance of its campaign relating to the Company's 2025 annual meeting of shareholders and potential costs and management distraction attendant thereto.

Future Outlook

The company expects to reach $357 million in productivity savings by 2025 and $457 million by 2026, exceeding the target by approximately 15%.

Management Comments

• The strength of our Board and governance structure is demonstrated by the comprehensiveness of our ongoing CEO search, the quality of our Directors, and the framework and procedures in place that promote accountability and strong oversight.
• Our Board refreshment ensures Directors possess the critical skills needed to drive future growth and hold management accountable.
• Dourdeville's actions disregard good corporate governance.
• H Partners actions jeopardize the execution of our strategic plan as well as the Boards progress on several initiatives at a critical moment in the Companys history, including the ongoing CEO search process and ongoing Board refreshment.

Industry Context

Harley-Davidson competes with similarly-sized leisure companies, including those in powersports and boats, which are also exposed to macroeconomic challenges like rising interest rates and shifts in consumer spending.

Comparison to Industry Standards

• Harley-Davidson's operating margins of 13% are approximately 400 basis points above the peer median.
• The company's free cash flow as a percent of EBITDA of 70% is more than 2x the peer median.
• The peer group includes BRP Inc., Brunswick Corp, Polaris Inc., Thor Industries, Inc. and Winnebago Industries, Inc.

Stakeholder Impact

• The Board believes H Partners public campaign undermines our ability to: Recruit a highly-qualified and talented CEO candidate, Effectively recruit future Directors as part of the Boards regular refreshment program, Execute strategic actions and plans that we believe would create shareholder value.

Key Dates

Keywords

Harley-Davidson, Board of Directors, Shareholder Value, H Partners, CEO Search, Strategic Plan, Financial Performance, Shareholder Returns, Corporate Governance, Motorcycles