Harley-Davidson, Inc.
Q3 2018 Earnings Call Transcript

Published: 23 Oct 2018

[Operator:]

Good morning. My name is Heidi, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. Amy Giuffre, Director of Investor Relations, you may begin your conference.

[Amy Giuffre:]

Thanks, Heidi, and good morning, everyone. You can access the slides supporting this call at investor.Harley-Davidson.com. Click the Earnings Materials box in the center of the page. Adjacent to that link, you can find our More Roads to Harley-Davidson plan support materials. Our comments 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. Joining me this morning, are President and CEO Matt Levatich and CFO John Olin. Matt let’s get started.

[Matt Levatich:]

Thanks, Amy and good morning, everyone. Our third quarter results were in line with our plans, and we delivered the numerous highlights noted in our release including another quarter of improved international retail sales growth and increased year-over-year earnings per share. We are managing our business with resilience in a challenging time in our history; taking stock of our strengths and better leveraging them for a more promising road ahead. Throughout this year, we have been focused on the following

[John Olin:]

Thanks, Matt. Our third quarter financial results were in line with our plans. In the face of ongoing retail sales headwinds in the U.S., we remained focused on reducing U.S. retail inventory, reducing costs and investing in our strategy to drive value for our riders, dealers and shareholders. The summary of our Q3 results is on slide 11. In the third quarter, revenue was up behind increased shipments. Compared to last year, we shipped more bikes during the quarter as we continued to balance the timing of shipments throughout the year which resulted in lower overall retail inventory and a significantly improved level of current model year motorcycles. Motorcycle operating income was up as a result of higher shipments and favorable mix, partially offset by a $14.8 million restructuring charge, increased SG&A and the impact of higher year-over-year tariffs. Financial Services operating income was up 8.7%. Consolidated net income was up 66.9% due to higher operating income and the benefit of a considerably lower tax rate. EPS for the quarter was $0.68, which was up 70.0% versus the prior year. When excluding manufacturing optimization costs, EPS was $0.78. We remain focused on delivering strong margins and strong returns over the long-term, despite near-term headwinds. On Slide 12, worldwide retail sales of new Harley-Davidson motorcycles in Q3 were down 7.8 percent versus prior year. International retail sales were up behind strong sales in Europe and our emerging markets. In the U.S., Q3 retail sales were down versus prior year driven by steep industry declines in the U.S. and lower market share. Through nine months, worldwide retail sales were down 5.9% driven by the U.S. industry decline of 8.7%. Despite the very weak U.S. industry performance, we continue to expect to meet our full-year shipment guidance; however, we now believe we will likely finish toward the low end of our guidance range. Let’s take a closer look at the U.S. on Slide 13. U.S. retail sales were down 13.3% in the third quarter against strong headwinds from the weak U.S. industry which was down 9.8%. We believe the industry sales of new motorcycles continued to be adversely impacted by soft used bike prices, partially offset by less severe hurricane impacts compared to Q3 2017. We believe hurricane Florence had a nominal impact on our Q3 retail sales. Looking at used bikes -- prices remain at historically low levels compared to new, however, we are encouraged as we continue to see positive momentum in used bike pricing. During Q3, used Harley-Davidson prices at auction were up versus prior year. We continued to see pricing services such as NADA and Black Book publish higher values for Harley-Davidson motorcycles in the third quarter. Additionally, for the fifth consecutive quarter, we saw rising prices of used Harley-Davidson bikes in our dealer network. Used Harley-Davidson motorcycle sales were up through August. And, our share of combined new and used motorcycle registrations was up through August 2018 after having been up for the last 9 consecutive full years. We believe used sales are a strong indicator of our healthy brand fundamentals and provide prospects for future new bikes sales. Our share of new bike registrations in Q3 was 50.9%, down 2.2 percentage points. Our U.S. market share reflects the adverse impact of relatively strong growth in segments in which we do not currently compete. In the segments which we compete -- the Touring and Cruiser segments -- which represent approximately 70% of the 601+cc market -- our market share was up slightly during the quarter and was up 1.0 percentage points on a year-to-date basis. We continued to carefully manage the flow of new bikes into the channel which resulted in Q3 quarter-end retail inventory in the U.S. decreasing approximately 2,200 motorcycles over the prior year. Combined with last year’s Q3 reduction of 12,200 motorcycles, retail inventory at the end of Q3 has been reduced over 14,400 units over the last two years. The performance of the overall 601+cc industry continued to be disappointing. We expect the U.S. industry to remain challenged into 2019 and we will continue to proactively address the weak U.S. industry

[Amy Giuffre:]

This is Amy before we take questions I understand there has been audio technical difficulty during the call. We will post a PDF of these prepared remarks on our website following this call, so you can have all of the clear words. Also during Q&A analysts if you can’t hear us if the audio cuts out we’ll leave the mike open so you can ask for clarification. Apologize for the difficulty and let’s continue with questions. Thank you.

[Operator:]

Your first question comes from the line of Craig Kennison with Robert Baird. Please go ahead.

[Craig Kennison:]

I am sure there’ll be questions on retail and tariffs, but I wanted to ask about cash flow and the buyback. John, I think you spent $85 million in Q3 to buy back stock and have spent just under $200 million to repurchase back year-to-date. I think at this time last year, you would've spent over 450 million. So I am just wondering what prevents Harley from really backing up the truck, the buy back at current levels?

[John Olin:]

You’re absolutely right. On a year-to-date basis, we bought back 188 million versus prior year of 456 million, two things driving that. Number one, is if you recall More Roads plan that we introduced in April, we shutdown the window for the Company to repurchase shares and that remained closed for four months. So over the assuming five months, we’re catching up on that window shutdown. The second piece is when you look at last year's share repurchases of $456 million that was through three quarters. We did not buy any shares in the fourth quarter of last year. So we would expect this gap to close somewhat as we move forward through the fourth quarter.

[Operator:]

[Operator Instructions] And your next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.

[Sharon Zackfia:]

Actually, I guess one question and then just one quick clarification. So I am just curious how you reconcile the improving trends and used by prices with the retail performance in the U.S. And then when should we expect a firm announcement on the manufacturing plans related to tariff?

[Matt Levatich:]

With regards to improving trends, we have seen on the trends improve at retail on our dealer network to used by prices for the last quarter -- last five quarters. And prior to that, they had the declined for the previous 13 quarter. And Sharon, at this point, while they are improving, they still got a fair way to go to make up for what they had fallen in the previous 13 quarters. So when you look at the overall price gaps while improving, they are still at historical high levels. And a lot of customers are moving and buying used bikes in lieu of new at times. And we're certainly thrilled with the fact that we continue to gain market share and total demand of new and used. But we are very focused on doing everything we can to help close that price gap between new and used, largely through aggressive management of our supply of new motorcycles. The second question was with regards to more information on the tariffs and the mitigating opportunities that we have as we move forward. Right now, Sharon, we are looking at all the things that we need to do to move the production of our EU volumes to plants outside the United States. We initially said it was going to take 12 to 18 months. This is something that we never contemplated on doing. We never imagined moving production for our European customer out of the United States, and here we are. So we're going through understanding all the cost profile, the logistics, how to move the supply chain. And when we have that information in that plan, we will share that it our stakeholders likely in the first part of next year.

[Operator:]

And your next question comes from the line of Tim Conder with Wells Fargo Securities. Please go ahead.

[Tim Conder:]

I wanted to clarify also on the on the tariffs, John. So you said $43 million to $48 million here in 2018, granted list 3 just came on. Can you just if we annualize that then and then looking into '19, should we at least double this amount for full year '19 run rate or could be a little bit higher than that given that the China partner's on? And then the other question would be related to LiveWire profitability. You all said that would be profitable when launched. How long do you think to take that to get up to company -- close to company margins, granted that it probably won’t be there or from an ROIC return perspective on LiveWire?

[John Olin:]

The first question with regards to tariffs, yes, we expect $43 million to $48 million this year. And that’s made up of the three component pieces that I mentioned, which are metals costs, EU tariffs and now China tariffs. As we looked at an annualized view of that, we expect in EU those tariffs on an annualized view unmitigated to be $90 million to $100 million. With the new China tariffs, we look for those to be on the $10 million to $12 million range on an annualized basis. Both of which we will look to mitigate those as we figure out the production.

[Matt Levatich:]

With regards to LiveWire profitability, we absolutely expect that we will be profitable as we come out LiveWire. And it is not going to be at the full company margin, but they will be at margins that exceed a fair amount of our overall product line up. So we’re very happy with where we’re at in terms of the margin. And as electric continues to grow as a part of our overall portfolio, we feel that it will not bring down overall margins at any great extent.

[Operator:]

And your next question comes from the line of James Hardiman with Wedbush Securities. Please go ahead.

[James Hardiman:]

I guess a clarification and a question. If memory serves, there might be some timing differences that prevent us from doing the math on inventory numbers. But I struggle little bit to get your 2,200 bike reduction, I get about 135 bike shipped and 135 bikes registered over the past four quarters. So maybe a clarification on that. And then I guess as we sit here, year-to-date U.S. retail down 10% and yet we’re talking about flattish inventories. I would think that on turns basis to keep things healthy, we would need to see a significant reduction in shipments this year. Why is flat inventory the right course of action just given how bad retail has been so far this year? Thanks.

[Matt Levatich:]

With regards to the year-over-year inventory, all is I can tell you it is down 2,200 units on a year-over-year basis. As we talked in the past, we got to be little bit careful in the period of time that retail sales ended on a calendar basis versus reported on a calendar basis and on fiscal basis for shipments. So there’s typically a little bit of an adjustment there. But you can call back and we can talk you through it but inventory is down 2,200 units and that’s on top of significant reduction the previous year. Secondly is with regards to the U.S. being down, we’re down on a year-to-date basis 10.2 percentage mentioned and we’re looking for inventories to be flat. The main reason for that is that we’ve got a selling season to get over and the spring season to get over. And from a production standpoint, we happen to have enough inventory to make it through that high part of the selling season. So our strategy has been is to limit the amount of inventory in the system throughout the selling season. And we have been down quite considerably throughout the first nine months and continue to be down during the fourth quarter. As we exit the year, we would expect inventories to be flat. And as the selling season starts, we will continue to constrain inventories and I am judicious that we'll manage that supply. But it's more a function of our ability to produce the inventories that we need for selling season, James.

[Operator:]

And your next question comes from the line of Gerrick Johnson with BMO Capital Markets. Please go ahead.

[Gerrick Johnson:]

I'll stick with one clarification and one question. So on Tim’s question about tariffs, you talked about Europe and China. But what about the annualized impact of the 232 steel aluminum. That’s the clarification. And my question is, you mentioned the aging urban dwellers. So I was curious about your dealer base and if you have the dealer base footprint in urban markets to accomplish that, and what does your dealer footprint in urban markets look like compared to the competition? Thank you.

[John Olin:]

Gerrick, I’ll take the first part of that question. With regards to the metals and aluminum, we expect the impact of that to be $15 million to $20 million, we still expect that. When we look forward, we're going to stop talking about metals and aluminum. The market -- those costs are baked in unless something dramatically changes, aluminum and steel prices are just going to be higher. So we’re not looking at another year of increases in that. And again, it's now up to the market as to what it does. But we will continue to report out on as the actual tariffs from the countries that we have in this point in the EU and China.

[Matt Levatich:]

Gerrick, it's Matt, on your question about urban dwellers. The answer actually rest in the comment I made in my opening remarks about how the three catalysts of More Roads; so, new products, broader access, stronger dealers, are all interrelated. And we will be bringing forward products that will appeal more significantly to young adults, will appeal and more meaningful to young adults in urban areas. And with that, we will need to amplify and accentuate the broader access components to make them aware, as well as the dealer component so that they have access through retail channel. So part of the reason why more roads was necessary to be so transparent for coming about what plans are is because we're shifting the nature and profile of the Company for all the reasons that we mentioned, the need to arrest the trends in the U.S. market and build the next generation of riders and people need to prepare. The dealers need to prepare, we need to prepare, we need to raise our game on how we show up differently as a brand in these urban markets, for example, with different kinds of products, with different kinds of marketing and different forms of distribution. So we'll be working with our dealer network, doing pilots on urban formats over the coming years to validate the business model and the approach that will work for those target customers. So thanks for the question.

[Operator:]

Your next question comes from the line of Joe Altobello with Raymond James. Please go ahead.

[Joe Altobello:]

I guess, first for you, John, just to make sure I heard this correct because the audio wasn’t great. I think you said sales of new and used Harley's were up through August. Is that for July and August or year-to-date or both?

[John Olin:]

Joe, that’s through year-to-date August that information comes on a lag basis that is all registrations in the United States. And when we look at the combined new and used, which we refer to as total demand overall market share was up through year-to-date August.

[Joe Altobello:]

And then if there is a tariff impact, I guess you laid out you do the math, you got $115 million to $132 million of impact next year. I assume that’s a gross number. How much do you think you can offset that through pricing under counter measures?

[John Olin:]

Well, that’s what we're working on, Joe, is we expect to offset the vast majority of it. And right now we're putting the plans together to do that.

[Joe Altobello:]

Well, you look pretty confident?

[John Olin:]

Yes, and we will provide more information on the timing and how we will do that as soon as we have those plans developed.

[Operator:]

And your next question comes from the line of Felicia Hendrix with Barclays. Please go ahead.

[Felicia Hendrix:]

Matt, I have one question but it has a few parts. So at the beginning of your prepared remarks, you said the quarter results were on plan and I completely know what you meant, you explained that well. But just in the near-term, the U.S. retail registrations, the clients did accelerate in the quarter, which I’m sure wasn’t on your plan. So you've addressed the bigger picture problem that you’re improving that. But can your More Roads program stem the declines in the very linear term? Or maybe asked another way, according to your roadmap, when do you expect to see a sustainable improvement in the U.S. retail registrations? And then also, should we interpret John’s comments that the U.S. will remain challenged in 2019? Is that you’re going to continue to expect U.S. shipments to decline next year?

[Matt Levatich:]

Felicia, there’s a lot in there, some of it I addressed, maybe some not as clearly. The U.S. industry, the challenge is a fundamental one with the level of rider ship and it's not an easily fixed short-term issue. We believe that More Roads is absolutely targeting the right things to do for the industry long-term. And as I mentioned, we’re leading in that effort. And more and more of the industry is joining in that effort, because the U.S. is a great motorcycle market for all the players. So there's a lot of work going on within the Company on a couple levels; one is the data we need to drive the focus in our action. We've talked a lot about the data and the analysis around the rider ship, migration database, how we better leverage that. We spent 2018 doing a lot of experimentation, very targeted focus, maybe on a regional basis or half a dozen or a dozen dealers, doing trials to determine, for example, how we better improve the conversion rate of riding academy graduates, actually create riders, not just trained riders. So there’s a lot of really good core work going with the company that is both in line with what we’re trying to long-term, but also addressing the near-term headwind that we face, because absolutely this is a significant issue for the business and we have a tough couple of years to get through until some of these products and distribution and so forth start to be tailwinds for the Company. So there's a lot going on. I think it’s difficult to cover everything within this meeting. But when I mentioned that we’re showing up differently as a company, it’s for things like that about how we look at the industry and we how drive the industry, not just for the long term but for the immediate term. And John, I don’t know if you want to share anything or…

[John Olin:]

So, Felicia, you had asked about my comment about being challenged into 2019. The price tags are still there. They’re closing. But they’re not closing fast enough. So we do expect continuing challenge in the U.S. industry next year. We will not provide guidance on that until we get into January. But I will tell you that we are doing everything that we can to make up for this trough in the U.S. industry. And I tell you what, the resilience of Harley-Davidson, both brand and company, is just extraordinary. And we've talked about the brand and the fact that for 10 straight years, we’ve gained market share in terms of total demand for our product. We haven’t talked about as much about the resiliency of us as a company. And when you look at the year that we’re having this year, one of the most challenging years that we've had in 40 years, we've got shipments down on a year-to-date basis by 4.7%. However, revenue was up by 3.7%, a pretty solid delivery of revenue and extraordinary -- and a year-over-year main driver of revenue was down 4.7%. And as we continue to follow through that and if you look at operating income through nine months and you take out the one-time items that we’re spending in terms of our manufacturing optimization and the tariffs that we look to mitigate, operating income is up. When you look at HDFS, the core driver of HDFS growth is retail sales in the United States, with that being down 10.2%, yet HDFS’s revenue was up 1.4%. And when you pull it all together, earnings per share, up 7.5% despite the $100 million or $93 million of onetime items; cash flow of $173.5 million up an 18.3%. The unbelievable resilience of Harley-Davidson, it just never stops, ceases to surprise me. And we’re going to continue to do what we need to do over the near-term until More Roads does take hold and we get into that more rapid growth that we're expecting, which is $1 billion to $1.5 billion of revenue growth over the next five years. But in the meantime, we will be very diligent in how we manage this very resilient company.

[Matt Levatich:]

John thanks. I’m going to just tag on to that a little bit, because we're out talking to stakeholders, including investors, your-selves, our dealers and so forth. And we hear seems often with a skeptical tone and to be honest, we apply that tone to ourselves in how we think about the work we need to do. No one in this Company is satisfied with the trends as they are today and we're digging hard every day. But it seems like we’re not attracting new and younger riders, we don't have the right products, so we’re losing market share to the competition. So, I just want to take a second to provide a little color, because the data that just doesn’t really support those simplistic conclusions. So for example, we see tremendous interest among young people. Our marketing efforts, combined recent product launches, particularly to refresh Softails, are drawing in younger writers, both new to the sport and new to brand. Our marketing efforts have increased relevance and engagement with young adults. Over half are social media followers are 18 to 34, and that mix is growing. Just a little bit of color on that to find your freedom intern program. We finished this summer with our eight interns garnering over 200 million media impressions and more than 43 million social video views, bringing Harley-Davidson to new generation from a generation on their turf and on their terms. And think even more important than that was the value those interns brought to us in us seeing through their eyes how our products and our brand and experiences mean -- what they mean and how they matter to that generation. So we were able to really see through their eyes how to focus our efforts. Mark, when it comes to products, current and future offerings include a much wider variety of style, function, power price. Therefore, riders across demographics and generations, our pricing stars $6,899 today and we offer seven Sportster models under 12 brands. And in our brand new Softail platform, nine of the 13 models are selling to riders who are younger than previous Softail and Dyna buyers, which is a fantastic piece of data that says some of the things we're doing here are moving the needle. We've been very transparent, as I mentioned earlier; about future products, products than span an even wider spectrum of power, style, you name it; in segments that were not in today, like adventure touring and Streetfighter; and with EV products to take Harley-Davidson even further; all of which have a stronger appeal with younger riders to earlier comments urban dwellers, et cetera. And John mentioned these points since we’re saying it again. When we look at market share, we know the biggest challenge is not our relative competitiveness, but the ongoing overall decline in the U.S industry. It's something the whole industry faces. In the third quarters, our share of combined new and used was up year-to-date, which speaks to the power we bring our share of new bike registrations was very strong 50.9. And yes, we lost a couple of points of market share but it's largely due to a gradual shift toward heavy weight segments we’re not in, about 30% of the heavy weight market. Where we do compete, as John said, touring and cruiser, our share was actually up in the third quarter. And again, the products that we have in the hopper will absolutely appeal to those customers outside our traditional spaces. So we’re dialed in. We’re executing the initiatives under the long-term strategy. And we’re already making headway. We’ve laid this out as a 10-year plan, because resurrection of an industry will not happen overnight and it will require others to join the effort. We carry with pride our leadership position in this quest and we’re digging into drive it. The More Roads plan will take courage, it will take capability, it will take conviction from employees, from dealers and suppliers. And I can say with confidence that everybody associated with this company and brand is fired up about our plans to move the needle on the industry.

[Operator:]

Your next question comes from the line of David Beckel with Bernstein Research. Please go ahead.

[David Beckel:]

On a brighter note, I suppose I wanted to ask a little about the LiveWire bike. And specifically, if you could shed any light or detail on what you’re hearing from dealers as they interact with customers about the new product. And from some of our surveys, they seem to suggest that there were orders being taken. Is that correct or is that -- is it too premature for that?

[Matt Levatich:]

This is Matt, I’ll just comment. First of all, if you look at the images of LiveWire by itself that one we're coming to market with, it looks -- it’s a nicely updated version of the look and feel of project LiveWire. In fact, it’s a way better motorcycle from a power delivery, ride and handling range, which was very important feedback that we got when we took project LiveWire out. We did over 12,000 demo rides around the world and we got really meaningful customer input that allowed us to dial in the product. So, we feel very good about the product. I had the opportunity to ride it during the 115th parade in Milwaukee. The only problem I had was that I had to ride in a parade and I couldn’t open it up like I was inclined to do. It’s a fantastic motorcycle. It is unlike any other powered vehicle I've ever experienced. And I think it is going to turn people's heads about what electric motorcycles can be and what our Harley-Davidson can be. So, we’re clearly excited about the product. The dealers as I mentioned are fired up the initial EV dealers that we’ve lined up at the U.S. They are and some dealers who are not in the initial wave of EV dealers, are taking customer requests, down payments, et cetera, because people are fired up about the motorcycle. We are working on a facility to take preorders as we begin next year, so that we can use that as a way to focus the interest and attention, and also focus our awareness before launch on where the demand is. So we make sure we do the best job of getting the products to where the demand is once we launch, because these will be in relative constrained supply certainly in the early days of production. So we’re excited about it. We’re excited a lot about what it says about what this company can do and what this brand can be. And it will be, if you will, the tip of the spear, the halo product in our EV investment that puts the flag in the ground that say, you need to come to Harley-Davidson to look for advanced technology like this.

[Operator:]

And your next question comes from the line of Jaime Katz with Morningstar. Please go ahead.

[Jaime Katz:]

You guys offered 9% to 10% motorcycle operating margins I think that’s with tariffs but without restructuring. And your competitor argued yesterday that they were being disproportionately impacted by tariffs given that there aren’t that many manufacturers that are native to the United States, I guess. So, can you talk about any exemptions you guys might be seeking or attempting to participate and through lobbying to mitigate some of those tariff expenses? Thanks.

[John Olin:]

So Jamie, you'd mentioned about the margin about 9% to 10%, a slight correction. That is inclusive of both our manufacturing optimization, which we expect to be -- there's $100 million range this year, as well as on the tariffs, which we talked about $43 million to $48 million. So that number is inclusive of both to those. With regards to the tariffs, we are doing everything we can in very avenue to make sure we minimize the impact of those tariffs to our customers, our profitability as we go forward. And that includes working with government and trade officials, as well as supply basis and again production where we produce.

[Operator:]

Your final question comes from the line of Joseph Spak with RBC Capital Markets. Please go ahead.

[Joseph Spak:]

I guess, just wanted to touch base on the lower manufacturing optimization cost. You lowered it by almost 10%. Is that just as you went through the process, you realized some efficiency, or was it some potentially just conservative guidance to start, because you didn't -- took that first crack at? And should we have any read through that so there are potentially being any change to the $450 million to $500 million associated with the More Roads program?

[John Olin:]

With regards to manufacturing optimization, this has nothing to do with the More Roads. More Roads, we’re looking at an investment of $450 million to $550 million that will drive ultimate profitability and increase some profitability of $200 million to $250 million over the next five years, and that’s all intact and going very well. With what I talked about is with regards to the manufacturing optimization, and this is where we're moving. We’re reloading our K.C. facility into our York facility. Things are moving on track as we had planned in terms of timing, and just favorable in terms of overall cost. And when you get into these, we estimate the best we can and we drive to that plan. And in this situation, our execution has been very good on time. We've moved all the Sportsters out of K. C. and now being produced in York, and we moved Street and Sportster out over the next six months. But overall, the costs are lower and we expect it to be $15 million lower, which we'd mentioned in the 8% range, and $20 million of that this year and then $5 million of it getting pushed out. But overall, this is going very well from a cost perspective and an execution perspective.

[Joseph Spak:]

I guess what I was wondering is with the cost associated with More Roads, given that a lot of its further out. Do you think that was potentially conservative first crack like we saw with the manufacturing decision?

[John Olin:]

No, Joe. We spent an incredible amount of time on the More Roads plan. We’ve got it line itemed out in tremendous detail. And we are driving to that and we fully expect it to be $450 million to $550 million. And again hopefully noticed in the upfront part of the presentation all of the accomplishments that we have in a very short period of time. This organization couldn’t be more dialed-in and focused on our future and More Roads. And we will spend the investment and we will garner the benefits of that as we move into the future.

[Amy Giuffre:]

Thank you, John. Thank you, Matt. And thanks to everyone for your time today. There’s a number of questions remaining in the queue and I will follow-up with all of the analysts that we didn’t get to. The audio and slides for today’s call will be available at harley-davidson.com, or for the audio, call 855-859-2056 or 404-537-3406, until November 6th. The ID is 2262819#. We appreciate your investment in Harley-Davidson. Have a good day.

[Operator:]

This concludes today’s conference call. You may now disconnect.