HD 2012 ChairmansLetter

7/28/2019 HD 2012 ChairmansLetter

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CHAIRMANS LETTER2012 ANNUAL REVIEW

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W E A R E U N I F I E D I N P U R P O S E

Every ve years, the global Harley-Davidson world

comes together to celebrate the companys anniversary

with a force and energy youll experience with no other

brand. As we celebrate 110 years of Harley-Davidson

motorcycles in 2013, our entire team takes pride in all

that has been accomplished over the past several years

to build an enduring company and brand, not just for

today but for generations of riders far into the future.

2012 was a pivotal year for Harley-Davidson, marked by solid

growth in earnings and retail new motorcycle sales, and the

achievement of key milestones in our ambitious strategy to

improve operating efciency, exibility and responsiveness toour customers.

Among the performance and operational highlights:

These are just some of the proof points of the many improvements

in operations and performance we are realizing through Harley-

Davidsons strategy to implement world-class manufacturing and

Earnings per share increased 16.7 percent compared to 2011

Worldwide retail sales of new Harley-Davidson motorcycles grew 6.2

percent year-over-year

We largely completed the transformational restructuring of our

manufacturing and product development operations

Sales to outreach customers in the U.S. grew faster than sales to our core

customers for the rst time, and we continued our international growth,including strong gains in emerging markets

Shareholder value grew, as the share price of Harley-Davidson stock rose

more than 25 percent in 2012, dividends increased more than 30 percent

compared to the prior year and we repurchased six-and-a-half million

shares of the companys stock

To Our Stakeholders

Motorcycle and RelatedProducts Revenue

6.0

+

%TOTAL REVENUE GROWTHYEAR-OVER-YEAR

Keith Wandell, Chairman, President and

Chief Executive Ofcer, Harley-Davidson,Inc., shares his thoughts on 2012s

company milestones.

WATCH VIDEO
http://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDshttp://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDshttp://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDshttp://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDshttp://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDshttp://www.youtube.com/watch%3Ffeature%3Dplayer_embedded%26v%3DwtvFv4TFiDs


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product development capabilities, enrich the retail experience and

grow our reach among new groups of customers globally.

At its core, our strategy is all about doing the best possible job

for customers.

Since our beginnings in 1903, Harley-Davidsons bold and unique

purpose has been to fulll dreams of personal freedom for people

around the world the kind of freedom a person experiences

when he or she throws a leg over the seat, heads down the road

and leaves the routines of everyday life behind.

Throughout our 110 years as a company, we have been a central

part of customers lives a way for people to express their

individuality and experience the liberation that comes only with the

Harley-Davidson experience.

Today, Harley-Davidson is leaner, more agile and more responsive

to our customers and the changing marketplace than ever. And

we continue to move aggressively to raise our performance to

new levels.

In manufacturing, the ambitious restructuring of our operations

was largely behind us as we exited 2012. The changes we have

implemented improve the responsiveness of our production and

deliver greater operating efciency in the process.

Our advanced manufacturing system provides the exibility toproduce closer to customer demand, allowing us to increasingly

deliver the right motorcycle to the right customer at the right

time. We are implementing surge manufacturing and are able

to take production volumes up and down to better match retail

seasonality. We also are signicantly more nimble at adjusting

the mix of models coming off the line to better align with market

demand; our goal is to be able to build any bike on any line,

any time.

As with manufacturing, we have revamped our approach to

developing new products to reduce time to market and grow ourleadership for bringing exceptional products to market.

Our 2012 and 2013 model-year motorcycles again hit the mark

with bigger power, bolder paint, the 110th Anniversary limited

edition motorcycles, the CVO Breakout custom cruiser, expanded

H-D1 Factory Customization and more. And there are more

high-impact products in the pipeline.

Outstanding products are a key reason together with the efforts

of our dealers for the growth in retail Harley-Davidson motorcycle

Everything we do is

driven by a passion for

continuous improvement

in all of the ways we

fulll dreams.

280$

M.In 2012, Harley-Davidson realized

$280 million in annual savings fromrestructuring. In 2013, the company

expects savings of $305 million

from restructuring activities initiatedsince 2009, rising to annual ongoing

savings of approximately $320

million beginning in 2014.


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sales among both new customers and our extraordinarily loyal

repeat customers.

In the U.S., our largest market, dealer sales of new Harley-

Davidson motorcycles were up 6.6 percent from 2011 and Harley-Davidsons share of the heavyweight (651cc+) motorcycles market

grew to a record 57.2 percent.

In 2012, we achieved our goal to grow U.S. sales to outreach

customers young adults 18-34, females, African American

riders and Hispanic riders faster than to our traditional core

customers. Sales to U.S. outreach customers grew at twice the

rate of core in 2012. This milestone reects the success of our

strategy to introduce Harley-Davidson to new generations of

riders. In fact, Harley-Davidson is the U.S. market share leader

among each of these demographic segments.

International retail new Harley-Davidson motorcycle sales grew

5.6 percent compared to 2011, in large part the result of strong

product appeal and numerous improvements in our operations

and distribution network over the last few years. This includes

our prudent investment in emerging markets, where retail

Harley-Davidson motorcycle sales grew nearly 30 percent

year over year, helping offset softness in the macro-economic

environment in Europe.

We opened 31 dealerships in 18 countries in 2012, including

Malaysia, Russia, Turkey, India, China, Bolivia, Croatia and

Taiwan. We continue to see great opportunity in international

markets and expect international new Harley-Davidson motorcycle

sales to grow faster than sales in the U.S. through 2014.

We also continue to work with our dealers to further increase

Harley-Davidson leadership at retail. Our retail strategy is all about

strengthening retail support systems, dealer capabilities and

distribution channels to ensure that customers have a distinctly

personal and custom experience whenever and wherever theytouch the brand whether in store or online.

One of the ways we enable customers to fulll their dreams is

through nancing and insurance from Harley-Davidson Financial

Services. HDFS provides a strategic competitive advantage for

Harley-Davidson, our U.S. and Canadian dealers and increasingly

to our international dealers through afliate relationships. In

2012, HDFS nanced more than half of all new Harley-Davidson

motorcycles sold in the U.S. HDFS also generated nearly $285

Worldwide Retail Sales ofHarley-Davidson Motorcycles

6.2

39.2

3.0

14.3

+

+

--

+

%

%

%

%

NORTH AMERICA

LATIN AMERICA

EUROPE, MIDDLE

EAST & AFRICA

ASI A PACIF IC

OUTREACH AND INTERNATIONAL GROWTH STORIES
http://ar.harley-davidson.com/manufacturing.phphttp://ar.harley-davidson.com/manufacturing.php


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million in operating income a record that speaks to the strength

of the business.

It goes without saying that all of Harley-Davidsons achievements

are possible only through the efforts and dedication of ouremployees, dealers and suppliers. Our entire team takes great

pride in these achievements. They are doing a truly outstanding

job, working as one team and moving in one direction to deliver for

our customers and all stakeholders.

While we are pleased by our achievements in 2012 and over the

last several years, more important is the road ahead. Harley-

Davidsons strategy provides the road map for how we will

continue to deliver exceptional product and brand experiences

that foster deep emotional connections with customers and create

opportunities for growth.

When I came to Harley-Davidson four years ago, I knew this

company had tremendous untapped potential and incredible

opportunities. That has never been more true than today.

To be sure, there continue to be concerns over the macro-

economic environment. But, when I look at all we have achieved

and all the great things yet to come through our strategic focus,

I believe Harley-Davidson has never been better positioned

than we are today to deliver on the promise of fullling dreams of

personal freedom.

2013 is shaping up to be an exciting year for Harley-Davidson,

especially with our year-long global 110th Anniversary

celebrations. Hundreds of thousands of customers participate

in our anniversaries and every one of them has their own

unique story of dreams fullled. We invite everyone to join in the

celebration and enjoy the ride.

Keith WandellChairman, President and Chief Executive Officer,Harley-Davidson, Inc.

Statements regarding expected savings from restructuring and international sales growthare forward-looking statements that are subject to risks that could cause actual results to

be materially different. Those risks include matters we have noted in our latest earnings

release and lings with the U.S. SEC. Unless otherwise noted, the information presented,

including all forward-looking statements, speaks only as of January 29, 2013 and does notreect subsequent developments. Inclusion of such statements also does not constitute a

reafrmation of such statements as of any later date.

Documents

HD 2012 ChairmansLetter