Good morning. My name is Alicia and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2012 Earnings Conference Call. [Operator Instructions] Thank you. Amy Giuffre, Director of Investor Relations, you may begin your conference.

Thank you, Beth, and welcome to Harley-Davidson's First Quarter 2012 Earnings Conference Call. The audio for today's call is being webcast live on www.harley-davidson.com. The supporting [Audio Gap] can be accessed by clicking on Company, Investor Relations, then Events and Presentations. Our comments today 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. This morning, you'll hear from Harley-Davidson's CEO, Keith Wandell; CFO, John Olin; and President of Harley-Davidson Financial Services, Larry Hund. Then we'll open the call -- and then we'll open the call for your questions so let's get started. Keith?

Thank you, Amy, and good morning and thanks to everyone for joining us on today's call. As we noted in the press release, we're pleased by the strong start to the year and I want to begin with a thanks to all of our employees, our dealers and our suppliers. They're really the frontline in our progress and they continue to do a great job at bringing the Harley-Davidson experience to our customers throughout the world. When I came to Harley-Davidson 3 years ago, I knew that the company had tremendous untapped potential and incredible opportunities and that's never been more true than today. It's through our strategy of transformation that we believe we will exceed the ever-increasing expectations of our customers, we will create opportunities for growth and we will build a sustainable business for the future. We continue to see the evidence of our progress in the numbers that we reported today. We believe the first quarter retail results and indeed the trend of the past several quarters reflect the outstanding appeal of our products and the efforts of our employees and the more than 1,400 dealers in 79 countries around the world along with the improving macroeconomic conditions in the U.S. Over the past few years, we have continued to bring out great products that are hitting the mark with our customers. The latest of these are the Seventy-Two and the Softail Slim, both of which were introduced just a couple of months ago. The Seventy-Two is inspired by the early chopper era taking its cues from the custom culture that still exists today along Whittier Boulevard in East LA, also known as Route 72. No one but Harley-Davidson could do a factory custom motorcycle like the Seventy-Two with its unique, big metal flake paint which requires…

Thanks, Keith, and good morning, everyone. I'll review the financial results for the first quarter starting on Slide 11. During the quarter, Harley-Davidson, Inc. consolidated revenue was up 16.7% behind the 19.4% increase in shipments of Harley-Davidson motorcycles. Our first quarter income from continuing operations improved to $172 million, an increase of $52.8 million. Similarly, diluted earnings per share rose to $0.74 per share, up from $0.51 a share in the year-ago quarter, a 45.1% increase. Operating income from the motorcycle business was $208.1 million, up $83 million or 66.4% compared to last year's first quarter. The strong increase in the motorcycle business was driven by increased motorcycle shipments, higher gross margin and favorable restructuring spending as compared to last year, partially offset by higher SG&A. Operating income at Harley-Davidson Financial Services was strong during the quarter, but down slightly compared to last year's first quarter when HDFS's results were favorably impacted by a retail credit loss release of $12.7 million. We're off to a great start this year, delivering strong results as we make progress against our growth strategies and the transformation of our business. Now let's take a look at retail sales on Slide 12. Overall, worldwide retail sales of new Harley -- of new motorcycles were up over 20% in the first quarter. This represents 11 consecutive quarters of largely improving results as we continue to invest in sustainable growth opportunities around the world. The growth trend in retail sales reflects the strong global brand and product appeal as well as the worldwide dealer efforts Keith just mentioned. Moving on to Slide 13. Retail sales in the U.S. exceeded our expectations. During the quarter, sales in the U.S. were up 25.5% supported by momentum from the strong affinity for the Harley-Davidson brand, appealing 2012 motorcycles and improving…

Thanks, John, and good morning. During the first quarter, HDFS retail motorcycle loan originations increased 22.1%, or $100 million compared to the same period last year. The increase was driven by higher new motorcycle loan originations partially offset by a 0.4 percentage point decrease in retail market share of new Harley-Davidson motorcycle financing. Additionally, used motorcycle loan originations increased during the quarter. Total finance receivables outstanding decreased 3% compared to a year ago, as runoff of older retail loans exceeded new originations. HDFS has focused on prudently increasing credit application approval rates for near prime and subprime customers over the last several quarters. The objective is to use our analytics from 20 years of motorcycle lending to approve more credit applications in well-structured loans. Our goal is to have a portfolio that continues to perform well over time and delivers an appropriate return on equity. We are very pleased with the improved retail delinquency rate and retail credit losses compared to last year, which you will see on Slide 23. The 30-day delinquency rate for retail motorcycle loans at the end of the first quarter 2012 was 2.56% or 112 basis points better than the same date last year. Annualized retail credit losses improved by 58 basis points to 1% for the first quarter compared to last year, primarily driven by our continued strong underwriting, collection and loss mitigation efforts, as well as improving consumer credit behavior and macroeconomic conditions in the U.S. While we [Audio Gap] disciplined in how we manage the loan portfolio and the overall business, we have no assurance that current consumer behavior will continue. At some point, shifting consumer behavior may temper the strong credit performance we have experienced. We are pleased with the continued progress at HDFS. We remain focused on enabling sales of Harley-Davidson motorcycles while providing an attractive return to Harley-Davidson Inc. Now, I'll turn it back to John.

Thanks, Larry. Now let's take a look at cash and liquidity on Slide 24. You will see at the end of the quarter, we had $1.4 billion of cash and marketable securities. During the quarter, HDFS completed a $400 million medium-term note issuance at a rate of 2.7% and we contributed $200 million to our qualified pension plans. Also, as we noted on the last call, HDFS paid a $225 million dividend to Harley-Davidson Inc. In addition, HDFS had $1.1 billion of available liquidity through bank, credit and conduit facilities. We currently have and intend to continue to maintain a minimum of 12 months of projected liquidity, these in cash and/or credit facilities. During the first quarter, we increased the quarterly dividend of $0.125 a share to $0.155 a share, a 24% increase. In addition, we repurchased approximately 254,000 shares of Harley-Davidson stock for $11.3 million during the quarter. Our first quarter repurchase activity was lower than we had planned. Due to uncertainty around the timing of our ERP launch, we believe that it was prudent to suspend share repurchase activity until we determine the new launch timing and communicated the plan to all stakeholders. We anticipate reinitiating share repurchase activity during the second quarter. As we have stated, returning value to our shareholders through dividends and share repurchases is a top priority. We will continue to evaluate opportunities to enhance value for our shareholders. Now, I'll review the remaining HDFS, Inc. Financials on Slide 25. I would like to highlight one item on this slide. With regards to continuing operations, the company used operating cash of $74 million during the first quarter, compared to $105 million used in 2011. The Motorcycle business generated operating cash of $21 million during the first quarter, even after a $200 million contribution to…

[Operator Instructions] And your first question comes from the line of Ed Aaron from RBC Capital Markets.

You mentioned in your prepared remarks that the industry is still working off used inventory and I was hoping you could maybe just give us some color on where you are with your used situation versus your competitors. Because it does seem like your used inventory has really dried up, and I'm wondering if you having a cleaner inventory mix out there might have driven some of the market share gain in the quarter. So, I was hoping you could also maybe comment on how your used growth compares to your new bike growth for Q1.

When we look at Harley-Davidson in particular, in the quarter, we saw basically pricing flat or stable versus prior year and we also saw that in the fourth quarter. So we saw a lot of gains prior to that, probably 4 or 5 straight quarters and a much more flat performance in the fourth quarter and the first quarter here. When we look at overall used bike sales or kind of the growth between used and new, we did see -- would look to be an inflection point in the fourth quarter of last year where we saw, actually, new start to exceed the growth of used. And in the fourth quarter, new was up about 12% and used was up by just shy of 6%. Last year total demand for new and used was up 81.1%. And as we look in the first 2 months of this year, our data is on a month lag, so through February, total demand for Harley-Davidson motorcycles was up 22.5%. With new slightly exceeding the used growth rate, so we're pretty pleased with that and the used to new ratio was flat on a year-over-year basis.

Great, that's helpful. And then just one quick follow-up and then I'll pass it on. But the change in the timing of the ERP roll out, did that affect how many bikes you kind of prebuilt in the first quarter versus what you might have expected to prebuild previously?

Not the changing of the ERP. In the first quarter, let's kind of take a step back in the conference call. We talked about we entered the quarter with 7,000 excess units. And at that time, we had intended to build our company-owned inventory in anticipation of the ERP launch and we also expected to build retail inventories a little bit. Moving the ERP launch did not have any impact but as we dialed forward 3 months, what we did see is that we were able to maintain the excess inventory that we had built in the fourth quarter of 2011. We still have approximately 7,000 units of excess inventory. However, our company inventory fell by 4,400 units but the movement of the ERP did not affect that. What it does affect is our ability to continue to produce throughout the second quarter in the height of the selling season, so as we looked at inventories while they're down coming into it, we have the excess inventory that we would expect to release in the quarter and feel that pretty much for the second quarter we'll be at year ago inventory levels.

And your next question comes from the line of Sharon Zackfia from William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: I had a couple of questions on cadence. I think, John, you mentioned that shipments would be down in the fourth quarter year-over-year as you prepare for surge capacity in 2013. So does that still imply that you expect shipments to be positive in the third quarter with ERP? And then just secondarily on gross margin, should we assume peak gross margins then in the second quarter as well given the shipments to cadence in the second quarter?

Okay, Sharon. So, kind of let's talk about the cadence driven by the ERP move. So, we had first anticipated that production would fall in the second quarter as we implemented the ERP system. Now we'll move that to July and so we would expect production to kind of continue throughout the second quarter. But that production will be down a little bit in the second quarter versus the first quarter. What we've done now is push that kind of the production out, the production reduction to July. And in doing that, we're also syncing it up with our model year 2013 product. So, when we look at the second quarter, we will have very healthy shipments into the trade. We're looking to ship in 79,000 to 84,000 units which well exceeds our year ago second quarter which was 64,000 and a lot of that is coming from inventory. So as we proceed through the second quarter, which we're starting out at very low levels of inventory, we'll ship in the vast majority of the excess 7,000 units and we'll ship out most all of the remaining 2012 product prior to July. The reason being is that, we have the new model year coming right behind ERP launch, so what we want to do is get that out into the trade. Now, the nice thing about moving the ERP system back is this is a time when dealers are typically used to having inventories that run low in anticipation of the new model year. So we've got -- we have pretty strong production in the first quarter, will be slightly down in the second quarter, it will be down in the third quarter and the fourth quarter, down in the third quarter because of the ERP launch and in the fourth quarter, because of the ability to surge up capacity at York in the first half of 2013. Sharon Zackfia - William Blair & Company L.L.C., Research Division: And then on gross margins?

Your question on gross margin was we would expect gross margin to be better in the second quarter than the third quarter because of the shift in the production. When you look quarter-over-quarter, production is down slightly from first quarter to second quarter, so gross margin would probably be pretty much in line with what we saw in the first quarter.

Your next question comes from the line of Craig Kennison from Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: John, what's the motivation to further de-stock your dealers? Is it to drive up residual values of your used bikes and if so, are you seeing the trade-in customer come back now that his bike is worth a little bit more?

Craig, we are not motivated to further de-stock the retail trade. It certainly went down in the second quarter because of the very high retail sales in the first quarter and actually that's why we shipped a little bit over our first quarter guidance. That volume came from the fact that we're expecting to put more in inventory in anticipation of the ERP. We shipped that instead. As we said last year, we felt that as we looked at the end of the quarters 1, 2 and 3, inventories were lower than we would like on an ongoing basis and in the first quarter, we stated we like to increase inventories a bit. That was just the strong retail sales that brought retail inventories down. We do expect to have inventories tight but it is not our expectation to further de-stock the trade in the United States. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: So just to be clear, on a full-year basis, you think retail and wholesale in the U.S. will be close to 1-1?

No. We will retail more than we ship. But that will happen in the fourth quarter as we get ready for the surge and our capability for flexible manufacturing in the first half of next year. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Okay, got it. And then just on the international side if I may, you're at 67 dealers, your plan was 100 to 150 over a period of time. How many more do you think you can do in 2012? And do you ultimately think you'll be closer to that 100 or that 150 number?

Craig, at this point, we're just providing guidance that will be between about 100-150. We're right on plan with what we set up a couple of years ago. And we're putting up dealers every quarter but we feel great about where we're at.

And your next question comes from the line of Tim Conder from Wells Fargo Securities.

First of all, John, any color you can give us on the level of overtime that you've worked in the first quarter? And then, would that -- I would anticipate that that would continue in the second quarter versus what you would view as a normalized rate?

We were working overtime in the first quarter. What I would characterize it was would be not full out, but we were working a fair amount of overtime. We don't believe that that's sustainable for long periods of times. We will expect to work a little bit of overtime in the second quarter as well.

Any quantification on that that you can give us, John, just a sort of on an ongoing basis to look at it? What -- was it kind of more of a normal rate, or how much it cost you, so to speak?

No. Again, it was a moderate amount of overtime and we don't expect to do that on an ongoing basis but given the tight inventories, we're able to work it. Beyond that, not really prepared to give much more, Tim.

Okay, and then back to this growing gap or below where you have the -- where you would desire the U.S. channel inventories. As you alluded to earlier, you entered 2011 saying, hey we're a little bit below our ideal levels. We want to have shipments exceed retail on '11. Well, that didn't happen because of the stronger retail. The same thing you wanted to do this year, as you've already said, well, that's not going to happen now given the strength of retail. Any quantification or guidance as to where -- are you 5,000 units or so under where you ideally would like to be, whatever the base level is in the U.S. channel?

Well I think overall, we're going to continue to aggressively manage supply in line with demand. So a year ago, we felt we were a little bit light and we wanted to put some more in. And, I would say a moderate amount. We're going to continue to be very prudent in what we put in the trade. But last year, it was low. Now, in the first quarter, we're 4,400 lower than we were at that point. So we would expect a fair amount to be put in. I did not say that we felt we would be done on the year. I did say that we would be tight for the remainder of the year. When we look at the second quarter which is the height of our selling season, we do have the 7,000 excess inventory. We would expect to put it into the trade in the second quarter. And I would expect most of the second quarter to be in line with year ago inventories and as we end the quarter, the second quarter, I would expect retail inventories to be higher as we ship out everything and the cadence of the timing of our model year launch is pushed back a couple of month or a couple of weeks this year. So I think we'll end the second quarter with higher inventories and that will ready us for the ERP launch and the model year switch over.

Okay, and so being down, retailing more than shipped, that was within a fourth quarter comment?

Yes, on a full-year basis, because of the inventory, the retail inventories that we'll take down in the fourth quarter, we would expect to have our dealers retail more than we ship. That is in the fourth quarter where we don't have the pressure on sales and we'll have the fire power coming out of York given our new search capability to make the units closer to customer demand.

Okay, and then lastly, any type of pickup rate once you get everything implemented here? What type pick up rate that you could see on incremental sales on a go-forward basis once we see everything implemented here, say by the end of '12? Pickup rate to the operating margin, gross margin, however you want to characterize it.

Well, look on the -- the Slide 12, I believe, is we would expect additional restructuring savings coming in. We're expecting restructuring savings of $58 million to $78 million incremental this year and then another $20-or so million next year. So we would expect those savings to come in according to plan as well as our spending on restructuring which is $50 million to $60 million this year, dropping off in 2013. So that should both widen gross margins as well as operating margins.

And your next question comes from the line of Rod Lache from Deutsche Bank.

I was wondering, just a couple of questions still on the inventory and production and sales. At what point do you believe inventories would actually start to constrain sales or market share? And then on the production, you've produced above the high end of your expected range this quarter. Can you just kind of give us what some of the gating factors would be that would allow you to get more units out over the next couple of quarters? Is there potential to get more out if the ERP implementation goes as planned? And just lastly on the production, you've mentioned before that you won't have full flex capacity throughout the network until 2014. Can you give us a sense of where your network's capacity will be at in 2013?

Can you repeat the first question?

Well, the first question was just when does the inventory situation start to constrain sales? Are you getting close to that point or are you still far away from it?

Rod, we are -- the inventories are tight and customers coming in at this time may have to wait for a particular color or for a particular model our dealers are trading out there. We do not think that it's costing us lost sales, but in some cases, it's delaying the sale to our customers, something that we don't want on an ongoing basis, but that's where it's at. So when you say constrained sales, I don't think that we're at that point. There is inventory in the system and the dealers are working diligently to get the customer the model and the color that they want. So overall, I don't think that we're in that area, but the customers are having to wait and we don't think that they're switching brands because of that wait. And again, we're working as diligently as we can to get more production and to meet that demand, which leads me to your second question is in terms of production. We were able to exceed the guidance for the quarter, but that did not come necessarily from a lot of production, more production than we expected. We eked out a little bit more in York, but we're talking hundreds of units. Most of that came from -- we were expecting to build an excess and put it in inventory in anticipation of the ERP launch and instead, we shipped that out. So production is very tight. If the ERP implementation goes better than expectation, we could see a little bit of the capacity freed up at that time. And then, the next opportunity for production coming out of York is not until late in the fourth quarter. We do have capacity at Kansas City and as we raised our overall shipment guidance from 3% to 5% to 5% to 7%, the vast majority of that additional volume is coming out of Kansas City. So we are very constrained at York until the fourth quarter of this year.

And what's the trajectory of your capacity growth? We've -- you've talked about getting to your historical peak if you look out to 2014, but is it sort of the midpoint between that and where you are this year is what you would expect to be at for 2013?

Well, in terms of capacity in 2013, the constraint is at York. And in the first half we'll be able to flex production so we will be able to meet the demand of what we have in sales in 2013 through the ability to flex our production at York. We're not concerned about production or capacity in 2013.

So you -- there isn't really the limitation in 2013? You're going to be at your full flex capacity in that timeframe?

Well, we are looking to surge at York only. We still have the other plants to do it. But right now, capacity, there's plenty of capacity at Kansas City. So again, we will have the capacity to meet the needs of 2013.

Okay, and then just last 2 things, are you still expecting this decline in HDFS. You had a $48 million decline in this releases expected, or are those expectations changing now given what you see happening in losses? And have you done any -- you're sort of modeling about just the overall weather impact maybe just by looking at the warmer states where whether is less of a factor?

Rod, this is Larry. Let me take the HDFS question. I would say, we had a, as John talked about, a modest decrease in reserves here in the first quarter compared to last year. We have a very disciplined process we go through every quarter and we'll continue to evaluate that. Obviously, I think as we stated previously, we expect any reserve reductions this year to be significantly lower than the nearly $40 million that we realized last year.

This is Amy. [Operator Instructions].

And your next question comes from the line of Felicia Hendrix from Barclays.

Just getting another question on your flex capacity, but more from an inventory perspective. As we think about your getting to that point where you can flex your capacity at York, just wondering on a going forward basis, how we should think about inventory levels. Obviously we can't look at history to help us model this so I was just wondering if you could give us any color because your manufacturing is going to be very different now.

Yes, as far as overall inventory levels, it doesn't affect really company inventory too much. But what it does affect is really trade inventory levels in the fourth quarter. So, historically, Felicia, we would start building in October, on a level basis, and a trajectory and what we would do is put that inventory in the trade and our dealers would hold it until it was alleviated in the springtime. Now, what we'll be able to do is to bring those levels down and produce when the customer wants it. And we'll be able to start surging in the beginning of the next model year. And so we'll just produce closer to demand. So the biggest change in terms of retail inventory is less inventory in the field in the fourth quarter.

Okay, yes, that was specifically what I was asking. And so, I mean, should we think about it as having just a slight cushion built upon what we would estimate for your production? Or is it as someone said before more one-to-one?

We're going to ease into this capability, so we would expect the inventories to come down a little bit in the fourth quarter, not anything huge and we'll continue to work on it. We won't be fully capable until 2014 across all of our plants. But we would expect to step down inventory in the fourth quarter and produce closer to sales in the first half.

Okay. And just a different question than what's been asked so far. You've been getting market share. It's been very nice and very impressive. Just give if you're seeing anything from your competitors that might skew the sustainability of these market share gains?

Well, I don't think we would expect to hold on to a four-point game for the entire year. We're very pleased in what we see. We know that the brand appeal is very strong. We also know that the model year 2012 product is being very well received and the 103 engine is certainly working to close that value gap between new and used. So we're going to continue to work on our side of it and develop great products and the market shall take care of itself.

And your next question comes from the line of Gerrick Johnson from BMO Capital Markets.

Latin America, other Asia, very big numbers there. Can you discuss maybe in a little bit more granularity the number of dealers that you have in those geographies now compared to say a year ago? And also, if you expect this kind of growth to continue or sort of moderate through the year?

Well in terms of -- again, we're very pleased with what we're seeing in Asia Pacific, up 25% versus down on a year ago period, Japan is popping back after obviously the tragic events there. And then our growth in emerging markets, India and China, were up over double. When we look at the overall dealership, the incremental dealerships, Gerrick, we put in probably 30 dealers last year on a year-over-year basis. 2/3 of them are in emerging markets so they are in places like China and India, Indonesia and some in Latin America. Those, are not included, the ones in Brazil because those were replacement dealerships. So they are ending up in those areas, they're driving great growth, our emerging growth markets -- or emerging growth markets are growing at a much faster rate than the rest of Europe, easy for me to say so, and they are partially driven by the incremental dealerships.

And your next question comes from the line of Patrick Archambault from Goldman Sachs.

I just wanted one clarification in terms of the decision to move the York, the SAP implementation at York. I mean, the 3 reasons you outlined seem highly logical. Was it just kind of opportunistic to do it at a better time? Or were there any other issues where you thought that maybe the preparedness wasn't where you needed it to be to do it in Q2 that also led to that decision? And then, I guess just on the back of that, in terms of Q3, can you help us think a little bit about how -- I mean you've said something already on it, but I think you were talking about one month that was going to be down 40% at York previously at the peak of the implementation, is that still the kind of production cadence we should be thinking about for Q3 now?

Great, Patrick. With regards to the ERP launch, no, it was driven by the testing that we were doing. We do all kinds of tests and one of the tests that we do is the shop floor test. And basically what we do is disconnect all the old systems, put the new system in and they are able to test that system along with the operational processes. And what we discovered is that in the parts and handling area, we had basically more complexity than we needed. And that complexity didn't come with the commensurate benefit. So as we said before, we are not launching this thing until absolutely ready. So we stepped back and took the time to change a few things in the design, which will take complexity out and therefore, de-risk it a little bit. And given that, we've pushed it back and then we talked about the 3 or so benefits that are associated with that, one being more confidence in our launch and less time to ramp it up. So we will reach that a little bit more on production coming out. And that leads to your next question is in the third quarter, it's still in the 40% range. I mean, we're hoping to get a little bit more capacity out because we've got an improved solution, but we are still in the range of 40% of one month's production being down because of the ERP implementation.

And your next question comes from the line of James Hardiman from Longbow Research.

My question is surrounding the guidance. I think the similar question was asked coming out of the fourth quarter when 245,000 units was the high end of your guidance and the question was asked to the extent that you need to go above that, would you be able to -- does that represent the upper ceiling or could you get beyond that. And the answer at that time was that maybe, come the fourth quarter, once things are behind us, you could get above that 245,000. Fast forward to today, the upper end is 250,000 and at the same time, you've pushed back the SAP implementation. But ultimately, the same question, if retail is such that you're exceedingly low in terms of retail level inventories in the fourth quarter, is there still an opportunity to do some catch-up and is there still potentially some upside to that 250 based on how retail trends play out?

Yes, so let's talk about getting to the 250,000. So we boosted couple of percentage points of about 5,000 units. The vast majority of that is coming from Kansas City products. And we couldn't be more thrilled that the demand for those products, which are largely directed at outreach customers are doing very well and so we got strong demand. So we are taking the volume up, but the vast majority of it is coming from Kansas City. As I said we're eking out a little bit more production out of York. We do have more capacity in DC. So that's not an issue. And when we looked at York, we are running very tight and we'll continue to do so into the fourth quarter. However, in the fourth quarter, we do have some down days planned that we could run and we could generate capacity in the fourth quarter. The question at that time is, really looking at the overall trade because we'll have the capacity -- the capability to flex our production up even closer to when of those units are going to want to be consumed in the spring given our surge capability at York and we'll evaluate that at that time.

And your next question comes from the line of Greg Badishkanian from Citigroup.

Just in terms of, I mean, the retail was so strong in the first quarter. I know you pulled forward some demand but I'm guessing that there's still some strength underlying fundamental strength. Any way to kind of break that out and quantify that at all?

Well, we think it's clearly an extension of what we've been seeing on the improving retail sales trends. And it was largely driven by incredible feel for the brand. Again our share was up, we're up 25.5% in the U.S. and the industry was up 17.5%, that means all of our competition was up just over 8%. So a lot of it, it's been driven by again a strong brand. We talked about the new model year, the 103 engine is pulling a lot and then the improving underlying macroeconomic trends in the U.S. We do believe that some of it, to a lesser extent, was driven by the very favorable weather conditions and spring started a little bit early. We've done the analysis of looking at northern states versus southern states and we do see a slight improvement in growth rate in the northern states. I don't think it's anything huge, but there is a weather effect that we saw in the first quarter. And so, we would expect retail sales to moderate a little bit as we move into the spring selling season.

And your final question comes from the line of Robin Farley from UBS.

I wanted to ask a question about HDFS and something related to the change in prime versus subprime versus the last couple of quarters you reported. But I also wanted to clarify your comments about the production that you're doing in advance and holding onto and not shipping because during the call, you said that you maintained that excess of 7,000 bikes in inventory. But then you also made a comment that company inventory fell by 4,400 units so I just wanted to clarify kind of which of those things -- just to get a sense of where that bikes built but not shipped stands cumulatively from both Q4 and Q1 at this point. And then also just to sort of understand how, although you can hold those and ship them later, if you're doing that ahead of Q3 but your new model year starts in July, you'll be shipping old model year bikes after the new model year starts? Or you'll be delaying the new model year start? Just trying to understand how the bikes built in previous quarters can be held over once the new model year starts?

Robin, the 7,000 units we brought into the year, we held through the first quarter and we still have them. What I referred to is that retail inventory, the field inventory fell by 4,400 units. Our company inventory is still up. I also said that given the fact that we now moved the ERP to July and we synced that up with the model year 2013 new product launch that we will release those 7,000 prior to the third quarter, we will release them in the second quarter and that's what's driving some of our shipment in the second quarter so high is they're coming out of inventory. So in the U.S., we will ship as much as we can of model year 2012 product out in the second quarter versus the third quarter because when we cut the system over, we will begin making 2013 product and we want to get everything out so that the dealers can sell them down in anticipation of the new model year.

And regarding the HDFS mix, I'd say what we saw this quarter was a slight shift towards more subprime in our mix. We have in previous quarters talked about it being 80% to 85% prime. This quarter was more around 80%. And 2 things going on there, the first is as we've talked about is our efforts to improve our analytical modeling to be able to approve more new prime and subprime customers and then we continue to see increasing competition in the prime lending space.

Thank you for your time this morning. We appreciate your investment in Harley-Davidson.

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And this concludes today's conference call. You may now disconnect.