Good morning. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to Harley-Davidson's Second Quarter 2012 Earnings Conference Call. [Operator Instructions] I'll now introduce and turn the call over to Ms. Amy Giuffre, Director of Investor Relations. You may begin your conference.

Thank you, Tracy. Good morning, everyone. The audio for today's call is being webcast live on harley-davidson.com. The supporting slides 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 for your questions. So let's get started. Keith?

Thanks, Amy. Good morning, and thanks, everyone, for joining us on the call. We appreciate your spending this time with us today and for your interest in Harley-Davidson. As you saw on this morning's earnings release, Harley-Davidson reported continued strong performance, including EPS growth of 32% for the second quarter and retail sales that exceeded our expectations through the first 6 months. We believe these results are a reflection of the effective implementation of our business strategy, combined with strong dealer execution at retail. Our strategy provides the roadmap for success over the long term through exceptional product development, manufacturing and retail capabilities. And I want to recognize all the continued outstanding work by our employees, our dealers and suppliers who are making such a difference. Together, we're doing great things working as one team moving in one direction to deliver for our customers. Among the many initiatives underway as part of Harley-Davidson's strategy is the installation of our ERP system at our vehicle operations in York. The migration of data from legacy systems to the new ERP system in early July went extremely well. This has been followed by a ramp up of production under the new ERP system in York, which also is going according to plan. You don't have to look any further than this truly outstanding job to understand the passion and the dedication of our employees. The implementation of the ERP at York supports our efforts to introduce greater flexibility in manufacturing. In the years to come, we expect to have much greater ability to produce any bike on any line, anywhere. Among the other benefits, ERP enhances our ability to expand Harley-Davidson's leadership in factory customization over time. It's a win for the company, for our shareholders and our dealers and a big win…

Thanks, Keith, and good morning, everyone. I'll review the financial results for the second quarter starting on Slide 9. During the quarter, Harley-Davidson, Inc. consolidated revenue was up 14.9% behind the 25% increase in motorcycle shipments. Our second quarter income from continuing operations improved to $247.3 million, an increase of $56.7 million. Similarly, diluted earnings per share rose to $1.07 per share, up from $0.81 in the year-ago quarter, a 32.1% increase. Operating income for the Motorcycle business was $309.6 million, up 40.8% compared to last year's second 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 flat compared to last year's second quarter. Now let's take a look at retail sales on Slide 10. Overall, worldwide retail sales of new motorcycles were up 2.8% in the second quarter and 9.3% year-to-date. Retail sales reflect our strong global brand and product appeal, but also reflect very challenging economic environments in many worldwide markets. Moving on to Slide 11. As we expected, retail sales growth in the U.S. in the second quarter moderated from the first quarter, which benefited from an early and unusually warm spring, which pulled forward some sales from the second quarter. Sales in the U.S. were up 4.0% during the second quarter and 12.0% on a year-to-date basis. U.S. market share strengthened by 1.2 percentage points to 55.1% in the second quarter versus prior year. Year-to-date, U.S. market share was up 2.3 percentage points to 56.1%, which is our highest June year-to-date market share on record. During the second quarter, we shipped all of the model year 2012 product from our company inventory in the U.S. as we…

Thanks, John, and good morning. During the second quarter, HDFS retail motorcycle loan originations increased 6.4% or $49.6 million compared to the same period last year. The increase was driven by growth in used motorcycle loan originations and higher new motorcycle retail sales compared to last year, partially offset by 1 percentage point decrease in retail market share of new Harley-Davidson motorcycle financing. Total finance receivables outstanding increased 0.4% compared to a year ago, driven by higher wholesale receivables due to higher shipments in the quarter. HDFS is focused on prudently increasing credit application approval rates for near prime and sub-prime customers over the last several quarters. Our goal is to maintain 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 we'll see on Slide 21. The 30-day delinquency rate for retail motorcycle loans at the end of the second quarter 2012 was 2.68% or 85 basis points better than the same date last year. Annualized retail credit losses are at their lowest level in over 10 years. For the first six months, retail credit losses came in at 58 basis points, considerably lower than prior year of 106 basis points. Credit loss performance was driven by our continued strong underwriting, collection and loss mitigation efforts, as well as consumer credit behavior in the U.S. While we continue to be 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 we expect shifting consumer behavior will temper the extremely 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, let me turn it back to John.

Thanks, Larry. Now let's take a look at cash and liquidity on Slide 22. You will see that at the end of the quarter, we had $1.21 billion of cash and marketable securities. In addition, HDFS had $0.96 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 needs in cash and/or committed credit facilities. During the second quarter, we repurchased 3.1 million shares of Harley-Davidson stock for $150 million. As we have stated, returning value to our shareholders through increasing dividends and share repurchases is a top priority. We will continue to evaluate opportunities to enhance value for our shareholders. Early in the third quarter, HDFS completed a $675 million asset-backed securitization transaction at a weighted average interest rate of 0.81%. Now I'd like to highlight one item on Slide 23, which provides the remaining Harley-Davidson, Inc. financials. The company provided operating cash of $288 million during the first six months compared to $473 million provided in 2011. The decrease in cash flows was primarily driven by an increase in HDFS wholesale lending activities driven by an over 20% increase in shipments during the period. The Motorcycle business generated operating cash of $220 million during the second quarter. On Slide 24, you will see that for 2012, we continue to expect motorcycle shipments to be between 245,000 and 250,000 motorcycles on a worldwide basis, up 5% to 7% from 2011. We continue to be committed to aggressively managing the supply of new motorcycles in line with demand. In the U.S., we expect our dealers to retail more units than they shipped in 2012, thereby lowering year-end retail inventories in the U.S. as we expect our flexible manufacturing capability at York will be…

[Operator Instructions] Your first question comes from the line of Tim Conder with Wells Fargo Securities.

Keith and John, you mentioned that the year-to-date retail sales are a little bit ahead of your expectations, yet clearly they were slowing during the second quarter. And yet you did not change your annual guidance for shipments. Could you just maybe comment on your comfort level with the U.S. channel inventories, in prior 2, you'd commented that those were a little bit low, and you said you kept more in the U.S. versus international this quarter due to that fact. So just in light of all that, comment where U.S. channel inventories are, and in light of your cautionary comments also looking forward with retail.

Okay, Tim. First start with overall retail sales. We're very pleased with retail sales growth in the first half of 2012, but we do remain cautious on the U.S. economic recovery. As we expected in the second quarter, retail sales moderated from the first quarter levels and they did. Our dealer sales were up 12% despite the slow economic growth in the U.S. We gained 2.3 points of market share, which we feel great about as well. And finally, sales to outreach customers outpaced that of our core customers, which is one of our core objectives. So we're feeling very good about the first half. Again, cautious on the second half as we move into some more uncertain economic times. But when we look at the overall channel inventories, as we have been discussing, we shipped out as much as we could into the second quarter, which were all the model year 2012 motorcycles that we had in inventory in the U.S. That pushed our quarter-end retail inventories in the field, up about 6,800 units. And we're looking for that to bridge us to when we shipped the new model year 2013 product, which is the time of the dealer show in about the 3rd week of August. So what we believe is that given the fact that production was down after that and we've got such above 7 weeks until we ship again, is that we expect third quarter inventories to be below year-ago levels, even though they're starting out on a 6,800 units higher, we would expect them to dip below year-ago levels until we start replenishing with the model year 2013 motorcycles. The good news is that our dealers and customers typically experience this model year cutover at the same point during this year. Just a little bit longer of a bridge.

Okay. So in general then, John, in light of all that, are you guys comfortable with the U.S. channel inventories at this level? And given everything you know at this point about the trajectory of retail, would you term them a little bit still under ideal levels where you would want? And again, I know that surge is coming for next spring, but just in the context of everything.

Yes, we would still characterize them as a little bit under where we would like them to be. Certainly, we exited the first quarter very light. The second quarter again, we built it up, but that's going to deplete very quickly, and we would like to add a little bit more in the third quarter as well. As we've discussed, though, we feel -- I'm very comfortable with the third quarter, and actually, expect those to come down a bit.

Your next question comes from the line of Craig Kennison with Robert Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Just following up on a topic from your analyst meeting in New York. Do you expect the year-end dealer inventory to fall in 2013, next year?

Yes. Yes, so let's take a look at overall -- our objective is pretty simple: We want to produce and deliver our products that customer’s want, when they want them and where they want them. And so what we're doing is changing historical patterns that we've seen up in the past when we're at level production. So as we gain a capability that produce more when customers want them, we then have the ability to produce less when customers don't want them. And that's what the previous question was all about. It's in the fourth quarter, we would expect those inventories to be down this year, because now for products produced at our York facility, we'll be able to do more in the springtime when the customers are looking for them, so we don't need as much inventory to sit in the dealer network in December. Now when we look at 2013, the same thing is going to happen. It's just that, that capability of flexible manufacturing or our ability to surge production at Kansas City takes place in the first half of 2014. Whereas the exact same reason is we don't need to make as many new products out of Kansas City and put them in dealer inventory in the fourth quarter, because we'll now be able to do it in the spring selling season. So, yes, we would expect both the fourth quarter retail inventory to be down slightly in 2013 and 2014.

Your next question comes from the line of Sharon Zackfia with William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: I just have a few questions. I think first on the ERP implementation. Can you help us understand how that might impact the mix of bikes that you're shipping this quarter? And then secondarily, given what's going on in Europe there may be some more global uncertainty, how are you can kind of thinking about your potential for price in the 2013 models?

The ERP, again, we couldn't be more pleased with the ERP launch. Everything is on plan. We feel great about where we're at. Having said that, we are producing all models on a single combined line using the new system. So we don't expect any big changes or dramatic changes to the mix that our customers want in the third quarter. I think the next question, Sharon, was with regards to 2013 pricing. We don't provide anything on 2013 or the next model year pricing until we deliver it to our dealers. So what we will do is announce pricing of our motorcycles in the U.S. and around the world on August 20 at our worldwide dealer meeting here in Milwaukee. Sharon Zackfia - William Blair & Company L.L.C., Research Division: Okay. And maybe just a follow-up on that. Given the currency pressure, can you help us understand kind of where you're coming out on currency versus raw materials as you look forward? Because I would expect perhaps raw materials are partial offset at least to the currency pressure.

Okay. Well let's talk about currency first. During the quarter, it's certainly a tough quarter when we look at foreign currency. If you look at a year-ago second quarter versus this on quarter, it devalued by 8%. The euro was down 11%, I think, and the real was down 19% over that period of time. That had a very unfavorable impact on revenue of about $33.2 million. Some of our hedging activities, we got about $18 million of it back, so for the quarter, it was unfavorable by $15.6 million. So that was certainly more than we had anticipated and the foreign currencies within the quarter devalued by 3%. So very unfavorable, however, we did see some favorability in our raw materials. First time in 10 quarters that we've seen the year-over-year improvement in raw materials, and certainly, they came in pretty strong at $4.7 million. Of that, most of that was metals about $4.2 million metals and the other was fuel. So in the third and the second quarter, the 2 certainly did not offset one another. As we look forward, overall raw materials we expect to be flat on a year-over-year basis, but we are seeing a pretty good trend or a pretty good number here in the second quarter. Currency, we are pretty certain that it is going to be unfavorable as we move forward. So when we look at the third quarter, the euro a year ago was at $1.42 exchange rate and as we close the markets yesterday, it was at $1.23, and that's a 14% difference between quarters. So we would expect pressure on revenue from foreign currency exchange, and that will be somewhat mitigated by some of our hedges. But we would expect currency to be unfavorable in the third and fourth quarters. So we do not expect that raw materials can cover what we're seeing in currency.

Your next question comes from the line of Ed Aaron with RBC Capital Markets.

I just wanted to ask a question on the gross margin. It sounds like your expectations for mix has shifted more positively from last quarters. Is that accurate? And if so was that a driver of kind of some positive earnings in the gross margin in the second quarter? And then can you also speak to why the mix is -- mix might be moving more positive?

Well, yes. So last quarter, we were expecting mix to be slightly unfavorable, because as we took our volumes, most of that was coming out of Kansas City, which typically has a lower mix. But as we got through this quarter and everything is going so well on the ERP implementation, in the prior question, we're able to build all the products that we are looking for out of York, the proper mix of product that we now feel that our product mix will be slightly favorable as we end the year. So through the first half, mix is largely flat, up by $0.5 million, was up $1 million in the second quarter, but we would expect it to be somewhat favorable as we end the year.

Your next question comes from the line of Patrick Archambault with Goldman Sachs.

I just wanted to follow up on one of the earlier questions. I guess you said that inventory was not quite where you wanted it to be. You ended up year-on-year this past quarter, but you were going to deplete it obviously, a lot of that is what happened through August. Can you just maybe tell us what -- how the September quarter or the September period is tracking? Are you fully up to levels where you're able to produce at the volumes that you want to, or there are still remaining testing measures that need to be taken at York just as a final stage before you really get up to volumes that you would like to be at?

The York ERP implementation, we said at the last conference call that we've started on July 2 and it would largely be behind us as we exited the month of July, and I'm happy to say that we're there. So we had a wrap of a grand plan that had us returning the pre-ERP implementation line speeds in just 4 weeks. And that's at the end of this week. And so, right now, we're exactly where we want to be on plan and over the next couple of shifts, we will be producing at pre-ERP launch line rates. So there is not an issue in terms of production coming out of York at all with regards to overall inventory or mix.

Okay. So basically, I mean, the drawdown was exactly as expected, it's just that you would have liked to have gone into the quarter maybe with just a little bit more padding?

Yes. As you know, and again, it kind of goes back to the fact that retail sales are over -- or exceeded our expectations for the first half. So originally, we would have expected a little bit more going in, in retail inventory, but we're up 6800 units, and that will have to do over the next several weeks until we launch the new product.

Your next question comes from the line of Rod Lache with Deutsche Bank.

I was hoping you could just be a little bit more explicit on what you expect for the rest of this year for FX based on where your hedges are at, assuming spot rates stay where they are now, and if they did stay where they are now, what would be the headwind for 2013?

Rod, we don't provide a forward look at currency, and the reason is there are so many factors that come in. There's so many currencies that play, that compared to year ago movements within the quarter mix of products and sales. So we don't provide that if we're here, this is where we're going to end up. But suffice to say that revenue is going to be impacted quite significantly if rates stay where they're at in the third and the fourth quarter. We do have hedges on, that were put on over the last 4 quarters. So those are put on at more favorable rates than we're experiencing right now. And that will mitigate some of the impact that we're seeing in revenue. But overall, we expect both revenue and gross profit to be hurt by the currency exchange and the devaluation of the currencies that we have. But there are so many factors that came in, if I gave out a number, tomorrow, it would be wrong.

Okay. Then maybe if you could just comment on your -- the production guidance for Q4 looks like it's slightly lower than Q3 despite the ERP implementation issues in the third quarter. Is there some aspect of this that's rolling into the fourth quarter, or are you just looking to keep production pretty close to where sales are coming in this year?

Well, we're looking to match our customer demand. So we have firepower in the fourth quarter to produce more. But production will be down versus year-ago levels because of the fact that now we can produce them in the first half closer to demand, and we much rather do that than produce them and put them in inventory in the fourth quarter. The other things that are going to have production down year-over-year is the fact that, again, a year ago, we were building excess inventory for the ERP launch, and we've got 5 fewer days for production. So we do have the capability to produce more product out of both Kansas City and York in the fourth quarter. But at this time, we feel comfortable with our estimate of shipments being up 5% to 7% and taking inventories down in the fourth quarter and moving that production to the first half of next year.

Your next question comes from the line of James Hardiman with Longbow Research.

You mentioned that there was some demand pulled forward into the first quarter due to the weather that seems to make all the sense in the world. I don't think that anybody thought that the 20% first quarter growth was remotely sustainable. I guess my question is when you look at the third -- I'm sorry, the 3% growth rate in 2Q, if we were to strip away any of that weather impact, I know that's hard to do, but do you think that the underlying momentum of your business is any better than that, or do you think that, that's about the run rate we should expect going forward?

James, there is absolutely no way for us to tell how much sales was pulled forward. There's certainly every indication that a fair amount was pulled into the first quarter, with the first quarter weather, I think, although the third quarter was the best in 100 years. But we would not speculate on the split between what the quarter should have been. What we do know is that the first half was up 12%, and we feel very good about that, especially given the soft economic environment in the United States, and we're up 9.3% on a worldwide basis. And again, that's done in an environment that we've got a deepening recession in Europe. So we feel very good about overall first half, but there is absolutely no way, and we don't know how many were in the first quarter versus second quarter.

Let me ask the question this way. I mean given your guidance for the back half of the year, it's hard to ask the question, because I know you guys don't want to give any retail guidance. But built into that lower production guidance for the back half, are you assuming a retail that's generally about where we are right now?

I can't provide that. That would be giving retail guidance, James. We feel good about our shipment guidance of 5% to 7%. If retail sales are awarded, we can produce a little bit more in the fourth quarter, but at this point, our preference would be to make it closer to the customers' demands in the spring of 2013.

Your next question comes from the line of Greg Badishkanian with Citigroup.

Just kind of looking at the retail inventory levels for 2013, I know you'd like to bring those down by design, which is favorable, make the supply chain more efficient. Let's say retail demand is robust, what level of production can you achieve though, given the Kansas City facility switchover? Can you really kind of step up demand if you need to, or are you constrained by supply?

I'm sorry, that was in 2013?

Yes, I'm thinking -- looking at 2013 and '14.

As we've discussed, we'll be able to surge capacity in York in the first half, and we feel comfortable with meeting any demand out of our York facility. With Kansas City, Kansas City capacity is not an issue in the short-term. We want to do is to be able to make units closer to customer demand, so we will not experience the same type of capacity constraints at our Kansas City facility as we did in York. Remember York was completely transformed, everything was moved down to a single line. We don't have those same things happening at Kansas City, and again, overall, we have plenty of capacity at Kansas City. But what we want to do is better utilize and more efficiently make units out of Kansas City, and again, using the surge capability to get closer to customer demand. So overall, in 2013, we do not have any -- we don't foresee any capacity constraints.

Our next question comes from the line of Robin Farley with UBS Securities.

I have a question on your gross margin guidance, because you originally said you thought Q2 will be in line with Q1, and then kind of in late June at your analyst day, you said it would fall below Q1 levels. And it seems like last minute, it came in, in line. And I don't know if you can give us any color on that, if that was just some last-minute shipment mix that shifted that, or FX not being negative an impact? Did you saw it, or kind of what was of such a last-minute nature to change gross margin? And then I don't know if -- you would normally give out a comment about used bike prices or recall values or something, and you didn't comment on used bike prices, I don't know if you have any color there to share.

Okay, Robin, with regards to the gross margin, yes, gross margin came in a little bit higher than we expected in the second quarter, which we're very pleased with. There's nothing that happened at the last minute. And we didn't -- or don't update guidance between and within the quarter. But what happened is, in why we came in a little bit more favorable to what we had anticipated, is largely driven by raw materials. Raw materials were $4.7 million favorable. In the first quarter, they were unfavorable by, I believe, it was $1.6 million or in that neighborhood. So that was really what pushed us over where we thought we would be, which again was below the first quarter gross margin, which was 35.9%, again, we came in even and certainly pleased with that. With regards to used bikes. So used bikes over the last 3 quarters, the gap, or the pricing gap between new and used, or the value gap, has remained very constant. As we have discussed in the fourth quarter of 2011, it was really the inflection point where we saw new grow faster than used, and that was after a period of many quarters where used was growing faster than new. And we have kept that for the last 3 quarters, as new has grown slightly faster than our used bike sales over the last 3 quarters. And we really take that to mean that the gap between new and used is at probably where it's going to be going into the future. We can grow both new and used bikes at the price levels that we have, so we feel pretty comfortable, and we do not expect huge movements in the price gap between new and used moving forward.

Your next question comes from Jamie Katz with MorningStar.

Can you guys maybe offer us some insight on how kind of European demand was overall, because it's a little bit hard to parse out currency versus price per unit of the bike, and I'm curious if maybe the promotional cadence had updated or there were some additional incentives to get units out the door over there?

Jamie, there was no price discounts going on in Europe. When we look at the overall price per bike that we've mentioned, $410 of that was driven by currency. There was a little bit of offset because of the favorable pricing that we took a year ago, but that is currency. And again, that's the 8% devaluation across all our international currencies. When we look specifically at Europe, Europe held up very well last year. Actually Europe, our core sales in Europe were up over 5% last year, and we saw a little bit of weakness in the first quarter, and that certainly continued into the second quarter. I think we're down 3.1% in the first quarter and down 9.1%. And what's really happening in Europe is a kind of a tale of 2 markets, the South started deep declines in the third quarter of 2011 and will start to lap those coming up in this quarter. And the North has largely been growing quite robustly. And over the last couple of quarters, we've seen the North, while still growing, fall a little bit. And really the story in Europe is with regards to the recession and consumer confidence, the financial crisis that's happening there. Again, we're going to focus on what we can control and continue to build the brand and the distribution network.

Your next question comes from Ed Aaron with RBC Capital Markets.

I just wanted to clarify something from your earlier comments. I think you'd indicated that dealer inventories would end lower in 2013 and 2014 just because of the seasonal change in your kind of production model. And I can understand the step down in '13 because you have the KC surge coming into effect, but why would there be an incremental change in 2014 as well?

If I said that, I apologize. We expect inventory to be lower this year, 2012, because of our ability to surge capacity at York in 2013. We expect 2013 retail inventory to be down slightly given our ability to surge Kansas City production in 2014. I did not intend to make any comments with regards to retail inventory at the end of 2014. So if I did, I apologize. We expect to be down in 2013 and 2014.

Okay. Just one more quick one if I could. Can you comment on your -- what you saw competitively in Japan that you flagged in your prepared remarks?

Yes. Japan, one, is the economy is slow as well. But, two, there's more price competition in Japan, in particular, by Honda. So we lost a little bit of share in the second quarter, and the team is addressing that, but it was a little bit lower than we had anticipated. So we'll work through that.

Your next question comes from Tim Conder with Wells Fargo Securities.

John, any color you can give here on the channel inventories in Europe? You mentioned again that you tilted shipments in the second quarter to the U.S. because it was so strong, and then clearly you've cited a couple of Kansas cases what's going on in Europe, but any color you can give us on those channels inventories in Europe?

Yes. We feel fine with the inventory in Europe, given the sales were down. So we did shift that production into the growing market, which is the U.S. in the second quarter. But remember, Europe inventory is handled a little bit different than in the U.S., that's somewhat we call a pipeline method. So every all dealers have kind of floor stack, and when they sell one, they get one out of the warehouse, which allows smaller dealerships utilize less working capital. That's been incredibly beneficial as we've seen the South volumes decline and the North accelerate. It allows us to get product where we want it, when we need it. So by moving a couple of thousand units out of that which has been in a consolidated warehouse, given their sales were lower in the United States, we don't have any concerns with that, and we feel very good about our inventories in Europe as well as in Asia and Latin America.

Your next question comes from Patrick Archambault, Goldman Sachs.

I just actually wanted to ask one on HDFS. I think you had cited, I guess 2 questions. Number one, in terms of borrowing costs, I think you had said that borrowing costs were favorable this year, or this quarter, excuse me. What's the outlook for that? I mean is there anymore diversification in funding away from shorter term to medium-term notes that you need to do, and could that be a potential headwind from a borrowing cost perspective going forward? And then also, can you just give us the math on where reserves or provisions should end the year? I think it sounds like you took down provisions a little bit as well this quarter, if I heard that correctly.

Okay. Patrick, I'll take the first part of the question, then I'll let Larry answer the second. We're very pleased with borrowing costs. As we discussed, we're adjusting the market and did a securitization for $675 million at 0.81%. And in the first quarter, we run the medium-term note market and did the lowest MTN for a five-year period that we've ever done at 2.7%. So we feel fantastic about our borrowing cost. To answer your question with regards to diversification, we also feel very comfortable where we're at today. As you may all recall, is that -- over the last couple of years, we've been looking to more diversify our funding move more into a more balanced approach between term notes as well as the securitization and CP. So we feel great about where we're at in terms of the overall diversification. We're not looking to make any major changes. So that should not have an impact on borrowing cost as we go forward. I'll let Larry answer the second question.

Sure, thanks, John. Regarding the allowance, we had an allowance at the beginning of the period of $122.5 million, our provision for the quarter was actually a credit of $5.3 million. That was driven, as John said, by the allowance release of $9.7 million in our retail portfolio. Net charge-offs for the quarter were $3 million, and that left us with a provision at the end of the quarter of $114.2 million. We are not going to give any guidance regarding where we expect to end the year regarding our allowance or what provisions in the third or fourth quarter. I'll just continue to reinforce my remarks, which were credit conditions remain favorable right now. I think we've done a lot of good things in underwriting, but also there's some unfavorable consumer behavior trends, which are driving our relatively low delinquency and loss levels at the present time.

Your last question comes from the line of Greg Badishkanian with Citigroup.

Without discussing anything real specific to front run yourself at the dealer day, but what level of innovation do you expect, or are you planning to maybe hit different demographics or different segments, or is it just going to be kind of really innovative new products? What -- maybe some color versus even historical levels of innovations coming out of your new products would be helpful?

Greg, we're not going to provide any look to what you might see in the next couple of weeks at the dealer show. What I would say broadly is we're making great progress on our product development transformation and the ability to move product through there quicker and to better target product toward our outreach groups in the U.S. and around the world. And as we've said before, we would expect to start to see kind of the fruits of that restructuring and transformation in next year's product, model year '14 product. But with regards to this model year, I'm not going to provide anything. We'll have it out in about 4 weeks here, or 3 weeks.

At this time, there are no further questions in queue. I'll turn the call back over to the presenters.

I want to thank you for your time this morning. We appreciate your investment in Harley-Davidson.

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