DEFA14A: Harley-Davidson Defends Board and Strategy Against H Partners' Claims Ahead of Annual Meeting

Harley-Davidson refutes claims made by H Partners, highlighting the board's strong governance and the success of its 'Hardwire' strategic plan.

Summary

• Harley-Davidson has released presentations to counter what it describes as misleading claims by H Partners regarding the company's strategic plan and board governance.
• The company emphasizes that its board is acting in the best interests of all shareholders by overseeing the execution of the 'Hardwire' strategic plan and leading a comprehensive CEO search.
• Harley-Davidson claims H Partners abruptly launched a disruptive campaign despite previously supporting the company's leadership and strategy.
• The company urges shareholders to vote for all of Harley-Davidson's director nominees using the WHITE proxy card.
• Harley-Davidson defends its CEO search process, stating that it accommodated H Partners' demands but their preferred candidate lacked the necessary skills.
• The company highlights its strong performance relative to peers, including operating margins of 13% (2022-2024), free cash flow as a percent of EBITDA of 70% (2022-2024), and relative total shareholder return (TSR) of approximately 10 percentage points higher than its peer median during CEO Jochen Zeitz's tenure.
• Harley-Davidson has returned over $1.4 billion of capital to shareholders via share repurchases and dividends since 2022, representing 78% of its free cash flow.
• The company accuses H Partners of undermining the board's ability to attract the best CEO and future director candidates.
• Harley-Davidson believes H Partners' campaign is an attempt to engineer the CEO outcome they desire and contains numerous inaccuracies and misleading assertions.

Sentiment

Score: 6

Explanation: The document conveys a defensive tone as Harley-Davidson addresses a challenge from an activist investor. While highlighting positive financial metrics, the conflict introduces uncertainty.

Positives

• Harley-Davidson's board is actively overseeing the execution of an ambitious strategic plan.
• The company has demonstrated strong performance relative to industry peers.
• Harley-Davidson has shown operating discipline and robust cash flow generation.
• The company has reduced share count and increased dividends.
• Harley-Davidson has returned a significant amount of capital to shareholders.

Negatives

• H Partners has launched a disruptive campaign against Harley-Davidson's board and strategy.
• H Partners' preferred CEO candidate failed to earn majority board support.
• The company accuses H Partners of undermining the board's ability to attract the best CEO and future director candidates.
• Harley-Davidson believes H Partners' campaign contains numerous inaccuracies and misleading assertions.

Risks

• The campaign by H Partners could potentially distract management and create uncertainty.
• The company faces the risk of not being able to attract the best CEO and future director candidates due to H Partners' actions.
• There is a risk that H Partners' actions could undermine the progress Harley-Davidson has made and the value of shareholders' investments.
• Macroeconomic conditions and challenges in the leisure/powersports sectors could impact the company's performance.

Future Outlook

The company's future outlook is tied to its ability to execute its 'Hardwire' strategic plan and navigate challenging macroeconomic conditions. The outcome of the proxy fight with H Partners could also impact the company's future direction.

Management Comments

• Harley-Davidson believes H Partners' campaign is destructive to the interests of all shareholders.
• The company urges shareholders to protect their investment by voting FOR ALL of Harley-Davidson's highly qualified Directors.
• Harley-Davidson states that H Partners' campaign offers no constructive solutions and is solely focused on attacking company performance and the board.

Industry Context

The announcement comes amid a challenging operating environment for discretionary products in the leisure/powersports sectors. Harley-Davidson is positioning itself as outperforming its peers despite these challenges.

Comparison to Industry Standards

• Harley-Davidson compares itself to peers including BRP Inc., Brunswick Corp, Polaris Inc., Thor Industries, Inc. and Winnebago Industries, Inc.
• The company claims its operating margins are ~4 percentage points above the peer median.
• Harley-Davidson states its free cash flow (FCF) as a percent of EBITDA is over twice the peer median.
• The company reports its relative total shareholder return (TSR) is ~10 percentage points higher than its peer median during CEO Jochen Zeitz's tenure.

Stakeholder Impact

• The proxy fight could impact shareholder value and the company's strategic direction.
• The outcome of the CEO search will affect the company's leadership and future performance.
• The company's performance impacts employees, customers, and other stakeholders.

Next Steps

• Shareholders are urged to vote on the director nominees using the WHITE proxy card.
• The company will hold its Annual Meeting of Shareholders on May 14, 2025.
• The board will continue its CEO search process.

Key Dates

Keywords

Harley-Davidson, H Partners, Board of Directors, Strategic Plan, Shareholders, CEO Search, Corporate Governance, Proxy Fight, Annual Meeting, Hardwire